UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT |
For the transition period from ______________to _______________.
Commission File Number
NEXTPLAT CORP
(Exact name of registrant as specified in its charter)
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| | | |
| (Address of principal executive offices) | (Zip Code) |
(
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | The | ||
| | | The |
Indicate by check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.
| Class | Outstanding at November 8, 2023 | |
| Common Stock, $0.0001 par value | |
FORM 10-Q
Item 1. Condensed Consolidated Financial Statements
The unaudited condensed consolidated financial statements of NextPlat Corp, (“NextPlat,” the “Company,” “we,” or “our”), for the three and nine months ended September 30, 2023 and for comparable periods in the prior year are included below. The financial statements should be read in conjunction with the notes to financial statements that follow.
NEXTPLAT CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Receivables - other, net | ||||||||
| Inventory, net | ||||||||
| Unbilled revenue | ||||||||
| VAT receivable | ||||||||
| Prepaid expenses | ||||||||
| Notes receivable | ||||||||
| Total Current Assets | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Intangible assets, net | ||||||||
| Operating right of use assets, net | ||||||||
| Finance right-of-use assets, net | ||||||||
| Equity method investment | ||||||||
| Deposits | ||||||||
| Prepaid expenses, net of current portion | ||||||||
| Total Other Assets | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Contract liabilities | ||||||||
| Notes payable | ||||||||
| Due to related party | ||||||||
| Operating lease liabilities | ||||||||
| Finance lease liabilities | ||||||||
| Income taxes payable | ||||||||
| Liabilities from discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities: | ||||||||
| Notes payable, net of current portion | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Finance lease liabilities, net of current portion | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies | - | - | ||||||
| Equity | ||||||||
| Preferred stock ($ par value; shares authorized) | ||||||||
| Common stock ($ par value; shares authorized, and shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Equity attributable to NextPlat Corp stockholders | ||||||||
| Equity attributable to noncontrolling interests | ||||||||
| Total Equity | ||||||||
| Total Liabilities and Equity | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
NEXTPLAT CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| Three Months Ended |
Three Months Ended |
Nine Months Ended |
Nine Months Ended |
|||||||||||||
| September 30, 2023 |
September 30, 2022 |
September 30, 2023 |
September 30, 2022 |
|||||||||||||
| (Unaudited) |
(Unaudited) |
(Unaudited) |
(Unaudited) |
|||||||||||||
| Sales of products, net |
$ | $ | $ | $ | ||||||||||||
| Revenues from services |
||||||||||||||||
| Revenue, net |
||||||||||||||||
| Cost of products |
||||||||||||||||
| Cost of services |
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| Cost of revenue |
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| Gross profit |
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| Operating expenses: |
||||||||||||||||
| Selling, general and administrative |
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| Salaries, wages and payroll taxes |
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| Professional fees |
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| Depreciation and amortization |
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| Total operating expenses |
||||||||||||||||
| Loss before other (income) expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other (income) expense: |
||||||||||||||||
| Interest expense |
||||||||||||||||
| Interest earned |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Other income |
( |
) | ||||||||||||||
| Foreign currency exchange rate variance |
||||||||||||||||
| Total other (income) expense |
( |
) | ||||||||||||||
| Loss before income taxes and equity in net loss of affiliate |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Income taxes |
( |
) | ( |
) | ||||||||||||
| Loss before equity in net loss of affiliate |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Gain on remeasurement of fair value of equity interest in affiliate prior to acquisition |
||||||||||||||||
| Equity in net loss of affiliate |
( |
) | ( |
) | ( |
) | ||||||||||
| Net income (loss) |
( |
) | ( |
) | ( |
) | ||||||||||
| Net loss attributable to noncontrolling interest |
||||||||||||||||
| Net income (loss) attributable to NextPlat Corp |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Comprehensive income (loss): |
||||||||||||||||
| Net income (loss) |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Foreign currency gain (loss) |
( |
) | ( |
) | ( |
) | ||||||||||
| Comprehensive income (loss) |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Weighted number of common shares outstanding – basic |
||||||||||||||||
| Weighted number of common shares outstanding – diluted |
||||||||||||||||
| Basic earnings (loss) per share |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Diluted earnings (loss) per share |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
See the accompanying notes to condensed consolidated financial statements.
NEXTPLAT CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
For the Three and Nine Months Ended September 30, 2023
| Common Stock |
Additional |
|||||||||||||||||||||||||||
| $0.0001 Par Value |
Paid in |
Accumulated |
Comprehensive |
Stockholders’ |
Noncontrolling |
|||||||||||||||||||||||
| Shares |
Amount |
Capital |
Deficit |
Income (Loss) |
Equity NextPlat Corp |
Interests |
||||||||||||||||||||||
| Balance, December 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
| Issuance of common stock related to restricted stock award |
||||||||||||||||||||||||||||
| Comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Net Loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, March 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
| Issuance of common stock related to April offering |
||||||||||||||||||||||||||||
| Issuance of common stock related to exercise of warrants |
||||||||||||||||||||||||||||
| Issuance of common stock related to restricted stock award |
||||||||||||||||||||||||||||
| Stock-based compensation in connection with options granted |
- | |||||||||||||||||||||||||||
| Comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Balance, June 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
| Acquisition of subsidiary and noncontrolling interests |
- | ( |
) | ( |
) | |||||||||||||||||||||||
| Issuance of common stock related to restricted stock award |
||||||||||||||||||||||||||||
| Stock-based compensation in connection with options granted |
- | |||||||||||||||||||||||||||
| Comprehensive income |
- | |||||||||||||||||||||||||||
| Net income (loss) |
- | ( |
) | |||||||||||||||||||||||||
| Balance, September 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ||||||||||||||||||
For the Three and Nine Months Ended September 30, 2022
| Common Stock |
Additional |
|||||||||||||||||||||||
| $0.0001 Par Value |
Paid in |
Accumulated |
Comprehensive |
Stockholders’ |
||||||||||||||||||||
| Shares |
Amount |
Capital |
Deficit |
Income (Loss) |
Equity NextPlat Corp |
|||||||||||||||||||
| Balance, December 31, 2021 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Issuance of common stock related to offering |
||||||||||||||||||||||||
| Issuance of common stock related to restricted stock award |
||||||||||||||||||||||||
| Comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Balance, March 31, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| Stock based compensation in relation to restricted stock award |
- | |||||||||||||||||||||||
| Comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Balance, June 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| Stock based compensation in relation to restricted stock award |
||||||||||||||||||||||||
| Stock based compensation in relation to options granted |
- | |||||||||||||||||||||||
| Comprehensive loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Net loss |
- | ( |
) | ( |
) | |||||||||||||||||||
| Balance, September 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
See accompanying notes to condensed consolidated financial statements.
NEXTPLAT CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
| September 30, 2023 |
September 30, 2022 |
|||||||
| (Unaudited) |
(Unaudited) |
|||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation expense |
||||||||
| Change in provision for doubtful accounts |
||||||||
| Amortization of intangible assets |
||||||||
| Amortization of right-of-use assets - operating leases |
||||||||
| Amortization of right-of-use assets - finance leases |
||||||||
| Gain on remeasurement of fair value of equity interest in affiliate prior to acquisition |
( |
) | ||||||
| Equity in net loss of affiliate |
||||||||
| Stock-based compensation |
||||||||
| Fair value of option granted |
||||||||
| Change in operating assets and liabilities: |
- | - | ||||||
| Accounts receivable |
( |
) | ( |
) | ||||
| Inventory |
( |
) | ( |
) | ||||
| Unbilled revenue |
( |
) | ( |
) | ||||
| Prepaid expense |
( |
) | ||||||
| Notes receivable |
( |
) | ||||||
| Other assets |
||||||||
| VAT receivable |
||||||||
| Accounts payable and accrued expenses |
||||||||
| Operating lease liabilities |
( |
) | ( |
) | ||||
| Income taxes payable |
( |
) | ||||||
| Contract liabilities |
( |
) | ( |
) | ||||
| Liabilities from discontinued operations |
( |
) | ||||||
| Net cash used in operating activities |
( |
) | ( |
) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
| Purchase of property and equipment |
( |
) | ( |
) | ||||
| Cash acquired in acquisition of subsidiary |
||||||||
| Capital contributions to equity method investee |
( |
) | ( |
) | ||||
| Net cash provided by (used in) investing activities |
( |
) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||
| Repayments of note payable, related party, net |
( |
) | ( |
) | ||||
| Issuance of common stock for PIPE transaction |
||||||||
| Proceeds from exercise of warrants |
||||||||
| Payments on finance lease liabilities |
( |
) | ||||||
| Repayments of notes payable |
( |
) | ( |
) | ||||
| Net cash provided by financing activities |
||||||||
| Effect of exchange rate on cash |
( |
) | ( |
) | ||||
| Net increase (decrease) in cash |
( |
) | ||||||
| Cash beginning of period |
||||||||
| Cash end of period |
$ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION |
||||||||
| Cash paid during the period for |
||||||||
| Interest |
$ | $ | ||||||
| Income tax |
$ | $ | ||||||
| Supplemental schedule of non-cash investing and financing activities: |
||||||||
| Recognition of operating lease liability |
$ | $ | ||||||
See the accompanying notes to condensed consolidated financial statements.
Unless the context requires otherwise, references to the “Company”, “we”, “us”, “our”, “our Company”, or “our business” refer to Nextplat Corp and its subsidiaries.
Note 1. Organization and Nature of Operations.
The term “Company” refers to NextPlat Corp and its wholly, majority owned and controlled subsidiaries, except where the context requires otherwise or where otherwise indicated.
NextPlat Corp:
NextPlat Corp, a Nevada corporation (the “Company”, “NextPlat”, “we”), formerly Orbsat Corp was incorporated in 1997. The Company operates two main e-commerce websites as well as 25 third-party e-commerce storefronts on platforms such as Alibaba, Amazon and Walmart. These e-commerce venues form an effective global network serving thousands of consumers, enterprises, and governments. NextPlat has announced its intention to broaden its e-commerce platform and is implementing a comprehensive system upgrade to support this initiative. The Company has also begun the design and development of a next generation platform for digital assets built for Web3 (an internet service built using decentralized blockchains). This new platform (“NextPlat Digital”) is currently in the design and development phase and will enable the use of a range of digital assets, such as non-fungible tokens (“NFTs”), in e-commerce and in community-building activities. In addition, we provide a comprehensive array of Satellite Industry communication services and related equipment sales.
Our wholly-owned subsidiary, Global Telesat Communications Limited (“GTC”), was formed under the laws of England and Wales in 2008. On February 19, 2015, we entered into a share exchange agreement with GTC and all of the holders of the outstanding equity of GTC pursuant to which we acquired all of the outstanding equity in GTC.
Our wholly-owned subsidiary, Orbital Satcom Corp. (“Orbital Satcom”), a Nevada corporation, was formed on November 14, 2014.
On June 22, 2022, NextPlat B.V. (“NXPLBV”) was formed in Amsterdam, Netherlands, as a wholly owned subsidiary of NextPlat Corp. Presently, NXPLBV does not have any active operations
Progressive Care Inc.:
Progressive Care Inc. (“Progressive Care”) was incorporated under the laws of the state of Delaware on October 31, 2006.
Progressive, through its wholly-owned subsidiaries, Pharmco, LLC (“Pharmco 901”), Touchpoint RX, LLC doing business as Pharmco Rx 1002, LLC (“Pharmco 1002”), Family Physicians RX, Inc. doing business as PharmcoRx 1103 and PharmcoRx 1204 (“FPRX” or “Pharmco 1103” and “Pharmco 1204”) (pharmacy subsidiaries collectively referred to as “Pharmco”), and ClearMetrX Inc. (“ClearMetrX”) is a personalized healthcare services and technology company that provides prescription pharmaceuticals and risk and data management services to healthcare organizations and providers.
Pharmco 901 was formed on November 29, 2005 as a Florida Limited Liability Company and is a
Pharmco 1103 is a pharmacy with locations in North Miami Beach and Orlando, Florida that provides Pharmco’s pharmacy services to Miami-Dade County, Broward County, the Orlando/Tampa corridor, and the Treasure Coast of Florida. Progressive acquired all the ownership interests in Pharmco 1103 in a purchase agreement entered into on June 1, 2019.
Pharmco 1002 is a pharmacy located in Palm Springs, Florida that provides Pharmco’s pharmacy services to Palm Beach, St. Lucie and Martin Counties, Florida. Progressive acquired all the ownership interests in Pharmco 1002 in a purchase agreement entered into on July 1, 2018.
ClearMetrX was formed on June 10, 2020 and provides third-party administration (“TPA”) services to 340B covered entities. ClearMetrX also provides data analytics and reporting services to support and improve care management for health care organizations.
RXMD Therapeutics was formed on October 1, 2019. RXMD Therapeutics has had no operating activity to date.
Note 2. Basis of Presentation and Principles of Consolidation
The accompanying Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), consistent in all material respects with those applied in the 2022 Form 10-K, for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the 2022 Form 10-K. In the opinion of management, the Condensed Consolidated Financial Statements contain all adjustments (consisting principally of normal recurring accruals) necessary for a fair presentation of the condensed consolidated balance sheets, statements of comprehensive loss, statements of stockholders’ equity and statements of cash flows for such interim periods presented. Additionally, operating results for interim periods are not necessarily indicative of the results that can be expected for a full year.
Business acquisition of Progressive Care, Inc.
On July 1, 2023, the Company, Charles M. Fernandez, Executive Chairman and Chief Executive Officer of the Company, and Rodney Barreto, Director of the Company, exercised common stock purchase warrants and were issued common stock shares by Progressive Care. After the exercise of the common stock purchase warrants, the Company and Messrs. Fernandez and Barreto collectively owned
The exercise of the stock options, along with the entry into the voting agreement, resulted in a change in control of Progressive Care under the voting interest model in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combination, and was accounted for as a business acquisition. Therefore, Progressive Care became a consolidated subsidiary of the Company on July 1, 2023. The Company previously accounted for its equity interest in Progressive Care as an equity method investment.
The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Certain 2022 financial information has been reclassified to conform to the 2023 presentation. Such reclassifications do not impact the Company’s previously reported financial position or net income (loss).
Use of Estimates
In preparing the Condensed Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, and revenues and expenses for the years then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, assumptions used to calculate stock-based compensation, fair value of net assets acquired in the business combination with Progressive Care Inc. common stock and options issued for services, net realizable value of accounts receivables the useful lives of property and equipment and intangible assets, the estimate of the fair value of the lease liability and related right of use assets, and the estimates of the valuation allowance on deferred tax assets and corporate income taxes.
Note 3. Summary of Significant Accounting Policies
The significant accounting policies of the Company were described in Note 1 to the Audited Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended December 31, 2022. Progressive Care became a consolidated subsidiary of the Company on July 1, 2023 and as a result the Company has incorporated certain significant accounting policies of Progressive Care for the three months ended September 30, 2023.
Cash
The Company places its cash with high credit quality financial institutions. The Company’s account at this institution is insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $
Foreign Currency Translation
The Company’s reporting currency is U.S. Dollars. The accounts of one of the Company’s subsidiaries, GTC, is maintained using the appropriate local currency, Great British Pound, as the functional currency. All assets and liabilities are translated into U.S. Dollars at balance sheet date, shareholders’ equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are reported as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the condensed consolidated statements of comprehensive loss.
The relevant translation rates are as follows: for the nine months ended September 30, 2023, closing rate at $
Unearned Revenue
Contract liabilities are shown separately in the condensed consolidated balance sheets as current liabilities. At September 30, 2023 and December 31, 2022, we had contract liabilities of approximately $
Accounts Receivable and Allowance for Doubtful Accounts
Progressive Care trade accounts receivable are stated at the invoiced amount. Trade accounts receivable primarily include amounts from third-party pharmacy benefit managers (“PBMs”) and insurance providers and are based on contracted prices. Trade accounts receivable are unsecured and require no collateral. Progressive Care records an allowance for doubtful accounts for estimated differences between the expected and actual payment of accounts receivable. These reductions were made based upon reasonable and reliable estimates that were determined by reference to historical experience, contractual terms, and current conditions. Each quarter, the Progressive Care reevaluates its estimates to assess the adequacy of its allowance and adjusts the amounts as necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
Goodwill
Goodwill represents the excess of the purchase price of over the value assigned to net tangible and identifiable intangible assets. Progressive Care is considered to be the reporting unit for goodwill. Acquired intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite. For intangible assets purchased in a business combination, the estimated fair values of the assets received are used to establish their recorded values. Valuation techniques consistent with the market approach, income approach, and/or cost approach are used to measure fair value. Goodwill and other indefinite-lived intangible assets are assessed annually for impairment in the fourth fiscal quarter and in interim periods if events or changes in circumstances indicate that the assets may be impaired.
Direct and Indirect Remuneration ("DIR") Fees
Progressive Care reports DIR fees as a reduction of revenue on the accompanying Consolidated Statements of Operations. DIR fees are fees charged by PBMs to pharmacies for network participation as well as periodic reimbursement reconciliations. For some pharmacy benefit managers ("PBMs"), DIR fees are charged at the time of the settlement of a pharmacy claim. Other PBMs do not determine DIR fees at the claim settlement date, and therefore DIR fees are collected from pharmacies after claim settlement, often as clawbacks of reimbursements based on factors that vary from plan to plan. For example, two PBMs calculate DIR fees on a trimester basis and charge Progressive Care for these fees as reductions of reimbursements paid to Progressive Care two to three months after the end of the trimester (e.g., DIR fees for January – April 20xx claims were charged by these PBMs in July – August 20xx). For DIR fees that are not collected at the time of claim settlement, Progressive Care records an accrued liability at each reporting date for estimated DIR fees that are expected to be collected by the PBMs in a future period. The estimated liability for these fees is highly subjective and the actual amount collected may differ from the accrued liability. The uncertainty of management’s estimates is due to inadequate disclosure to Progressive Care by the PBMs as to exactly how these fees are calculated either at the time the DIR fees are actually assessed and reported to Progressive Care. The detail level of the disclosure of assessed DIR fees varies based on the information provided by the PBM.
Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”), which introduces an impairment model based on expected, rather than incurred, losses. Additionally, it requires expanded disclosures regarding (a) credit risk inherent in a portfolio and how management monitors the portfolio’s credit quality; (b) management’s estimate of expected credit losses; and (c) changes in estimates of expected credit losses that have taken place during the period. In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” This ASU clarifies receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In April 2019, the FASB issued ASU 2019-04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” This ASU clarifies various scoping and other issues arising from ASU 2016-13. In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments.” This ASU improves the Codification and amends the interaction of Topic 842 and Topic 326. ASU 2016-13 and related amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance effective January 1, 2023 and the adoption had no material impact on our condensed consolidated financial statements and related disclosures. On an ongoing basis, the Company will contemplate forward-looking economic conditions in recording lifetime expected credit losses for the Company’s financial assets measured at cost, such as the Company’s trade receivables.
Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the condensed consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
Subsequent Events
The Company has evaluated subsequent events through November [ ], 2023, the date the condensed consolidated financial statements were available to be issued. See Note [] for subsequent events that require disclosure in the condensed consolidated financial statements.
Note 4. Acquisition - Provisional
On July 1, 2023, the Company, along with Messrs. Fernandez and Barreto, exercised common stock purchase warrants and were issued common stock shares by Progressive Care. The Company exercised common stock purchase warrants on a cashless basis and was issued
Also, on July 1, 2023, the Company, along with Messrs. Fernandez and Barreto, entered into a voting agreement whereby at any annual or special shareholders meeting of Progressive Care’s stockholders, and whenever the holders of Progressive Care’s common stock act by written consent, Messrs. Fernandez and Barreto agreed to vote all of the common stock shares (including any new shares acquired after the date of the voting agreement or acquired through the conversion of securities convertible into Common Stock) that they own, directly or indirectly, in the same manner that the Company votes its common stock and equivalents. The voting agreement is irrevocable and perpetual in term.
As a result of the common stock purchase warrant exercises and the entry into the voting agreement, the Company concluded that there was a change in control in Progressive Care. As of July 1, 2023, NextPlat has the right to control more than 50 percent of the voting interests in Progressive Care through the concurrent common stock purchase warrant exercises and voting agreement noted above. Beginning on July 1, 2023, the Company changed the accounting method for its investment in Progressive Care, which prior to July 1, 2023 had been accounted for as an equity method investment to consolidation under the voting interest model in FASB ASC Topic 805. Therefore, Progressive Care became a consolidated subsidiary of the Company on July 1, 2023.
Final purchase accounting adjustments may be materially different from the pro forma adjustments presented in this document. Increases or decreases in the fair value of the net assets may change the amount of the purchase price allocated to goodwill and other assets and liabilities. Measurement period adjustments will be recognized prospectively. The measurement period is not to exceed 12 months from the respective dates of acquisition.
Progressive Care contributed revenues of approximately $
| For the Three Months Ended September 30, 2023 | For the Three Months Ended September 30, 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue | $ | $ | ||||||
| Earnings | $ | $ | ( | ) | ||||
| For the Nine Months Ended September 30, 2023 | For the Nine Months Ended September 30, 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Revenue | $ | $ | ||||||
| Earnings | $ | ( | ) | $ | ( | ) | ||
The Company did not have any material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings.
The following table summarizes the consideration transferred to acquire a controlling interest in Progressive Care and the amounts of identified assets acquired and liabilities assumed at the acquisition date, as well as the fair value of the noncontrolling interest in Progressive Care at the acquisition date:
| Purchase Price Allocation | ||||
| Total purchase consideration | $ | |||
| Fair value of non-controlling interest | ||||
| Total consideration | $ | |||
| Identifiable net assets acquired - Provisional: | ||||
| Cash | $ | |||
| Accounts receivable, net | ||||
| Accounts receivable, other | ||||
| Inventory | ||||
| Prepaid expenses | ||||
| Property and equipment, net | ||||
| Right of use assets, net | ||||
| Intangible assets, net: | ||||
| Trade name | ||||
| Development technology | ||||
| Pharmacy records | ||||
| Other | ||||
| Deposits | ||||
| Accounts payable and accrued expenses | ( | ) | ||
| Notes payable and accrued interest - current portion | ( | ) | ||
| Lease liabilities - current portion | ( | ) | ||
| Notes payable - long term | ( | ) | ||
| Lease liabilities - long term | ( | ) | ||
| Net assets acquired | $ | |||
| Goodwill | $ | |||
The total consideration is based on the fair value of Progressive Care’s common stock outstanding at July 1, 2023, which was
As a result of NextPlat obtaining control over Progressive Care, NextPlat’s previously held equity interest in Progressive Care was remeasured to fair value, resulting in a gain of approximately $
The fair value of the noncontrolling interest of approximately $
The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after NextPlat’s acquisition of a controlling interest in Progressive Care. The goodwill is not deductible for tax purposes.
Note 5. Fair Value
Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.
The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:
| ● |
Cash, accounts receivable, and accounts payable and accrued liabilities: The amounts reported in the accompanying Condensed Consolidated Balance Sheets approximate fair value due to their short-term nature. |
| ● |
Notes payable and lease liabilities: The carrying amount of notes payable approximated fair value due to variable interest rates at customary terms and rates the Company could obtain in current financing. The carrying value of lease liabilities approximated fair value due to the implicit rate in the lease in relation to the Company’s borrowing rate and the duration of the leases (Level 2 inputs). |
Identifiable Intangible Assets
The initial recognition of the Progressive Care's identifiable intangible assets, resulting from the acquisition on July 1, 2023 and the application of push-down accounting, were measured using Level 3 inputs. The fair value at the date of acquisition was approximately $
Note 6. Revenue
e-Commerce revenue:
The Company recognizes revenue from satellite services when earned, as services are rendered or delivered to customers. Equipment sales revenue is recognized when the equipment is delivered to and accepted by the customer. Only equipment sales are subject to warranty. Historically, the Company has not incurred significant expenses for warranties. Equipment sales which have been prepaid, before the goods are shipped are recorded as contract liabilities and once shipped and accepted by the customer is recognized as revenue. The Company also records as contract liabilities, certain annual plans for airtime, which are paid in advance. Once airtime services are incurred, they are recognized as revenue. Unbilled revenue is recognized for airtime plans whereby the customer is invoiced for its data usage the following month after services are incurred.
Healthcare revenue:
The Company recognizes pharmacy revenue and 340B contract revenue from dispensing prescription drugs at the time the drugs are physically delivered to a customer or when a customer picks up their prescription or purchases merchandise at the store, which is the point in time when control transfers to the customer. Each prescription claim is considered an arrangement with the customer and is a separate performance obligation. Payments are received directly from the customer at the point of sale, or the customers’ insurance provider is billed electronically. For third-party medical insurance and other claims, authorization is obtained to ensure payment from the customer’s insurance provider before the medication is dispensed to the customer. Authorization is obtained for these sales electronically and a corresponding authorization number is issued by the customers’ insurance provider.
The Company accrues an estimate of pharmacy benefit manager (“PBM”) fees, including direct and indirect remuneration (“DIR”) fees, which are assessed or expected to be assessed by payers at some point after adjudication of a claim, as a reduction of revenue at the time revenue is recognized. Changes in the estimate of such fees are recorded as an adjustment to revenue when the change becomes known.
The Company recognizes COVID-19 testing revenue when the tests are performed and results are delivered to the customer. Each test is considered an arrangement with the customer and is a separate performance obligation. Payment is generally received in advance from the customer.
The following table disaggregates net revenues by categories:
| Three Months Ended September 30, |
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| 2023 |
2022 |
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| Sales of products, net: |
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| Pharmacy prescription and other revenue, net of PBM fees |
$ | $ | ||||||
| e-Commerce revenue |
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| Sub total |
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| Revenues from services: |
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| Pharmacy 340B contract revenue |
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| Revenues, net |
$ | $ | ||||||
| Nine Months Ended September 30, |
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| 2023 |
2022 |
|||||||
| Sales of products, net: |
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| Pharmacy prescription and other revenue, net of PBM fees |
$ | $ | ||||||
| e-Commerce revenue |
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| Sub total |
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| Revenues from services: |
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| Pharmacy 340B contract revenue |
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| Revenues, net |
$ | $ | ||||||
Note 7. Earnings (Loss) per Share
Net income (loss) per common share is calculated in accordance with Accounting Standards Codification (“ASC”) Topic 260: Earnings per Share (“ASC 260”). Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. In periods where the Company has a net loss, all dilutive securities are excluded.
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2023 |
2022 |
2023 |
2022 |
|||||||||||||
| Net income (loss) attributable to NextPlat Corp common shareholders |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Basic weighted average common shares outstanding |
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| Potentially dilutive common shares |
||||||||||||||||
| Diluted weighted average common shares outstanding |
||||||||||||||||
| Basic weighted average earnings (loss) per common share |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Diluted weighted average earnings (loss) per common share |
$ | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||||
| Potentially dilutive common shares excluded from the calculation of diluted weighted average loss per common share: |
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| Stock options |
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| Common stock purchase warrants |
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Note 8. Accounts Receivable
At September 30, 2023 and December 31, 2022, accounts receivable consisted of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| Gross accounts receivable – trade | $ | $ | ||||||
| Less: allowance for doubtful accounts | ( | ) | ||||||
| Accounts receivable – trade, net | $ | $ | ||||||
Bad debt expense was approximately $
Accounts receivable – trade, net for the Company as of January 1, 2022 and September 30, 2022 were approximately $
Note 9. Inventory
At September 30, 2023 and December 31, 2022, inventory consisted of the following:
| September 30, 2023 |
December 31, 2022 |
|||||||
| (Unaudited) |
(Audited) |
|||||||
| Finished goods |
$ | $ | ||||||
| Less reserve for obsolete inventory |
( |
) | ||||||
| Total |
$ | $ | ||||||
The increase in inventory was attributable to the consolidation of Progressive Care as of July 1, 2023.
Note 10. VAT Receivable
On January 1, 2021, VAT rules relating to imports and exports between the UK and EU changed as a result of the UK’s departure from the EU. As of September 30, 2023 and December 31, 2022, the Company recorded a receivable in the amount of approximately and , respectively, for amounts available to reclaim against the tax liability from UK and EU countries.
Note 11. Prepaid Expenses
Prepaid expenses current and long term amounted to approximately and , respectively at September 30, 2023, as compared to and , respectively at December 31, 2022. Prepaid expenses include prepayments in cash for accounting fees, public company expenses, insurance, which are being amortized over the terms of their respective agreements, as well as cost associated with certain contract liabilities. The current portion consists of costs paid for future services which will occur within a year.
The increase in prepaid expenses was attributable to the consolidation of Progressive Care as of July 1, 2023.
Note 12. Property and Equipment, net
Property and equipment, net consisted of the following:
| September 30, 2023 |
December 31, 2022 |
|||||||
| (Unaudited) |
(Audited) |
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| Building |
$ | $ | ||||||
| Vehicles |
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| Office furniture and fixtures |
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| Land |
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| Leasehold improvements |
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| Computer equipment |
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| Rental equipment |
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| Appliques |
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| Website development |
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| Property and equipment gross |
||||||||
| Less: accumulated depreciation |
( |
) | ( |
) | ||||
| Property and equipment, net |
$ | $ | ||||||
Depreciation expense was approximately and for the nine months ended September 30, 2023 and 2022, respectively.
The increase in property and equipment was attributable to the consolidation of Progressive Care as of July 1, 2023.
Note 13. Intangible Assets, net - Provisional
Intangible assets, net consisted of the following:
| September 30, 2023 |
December 31, 2022 |
|||||||
| (Unaudited) |
(Audited) |
|||||||
| Pharmacy records |
$ | $ | ||||||
| Trade names |
||||||||
| Developed technology |
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| Customer Contracts |
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| Subtotal |
$ | $ | ||||||
| Less: accumulated amortization |
( |
) | ( |
) | ||||
| Net intangible assets |
$ | $ | ||||||
Amortization of customer contracts is included in depreciation and amortization in the accompanying Condensed Consolidated Statements of Comprehensive Income (Loss). For the nine months ended September 30, 2023 and 2022, the Company recognized amortization expense of approximately $
| Year |
Amount | |||
| 2023 (remaining three months) |
$ | |||
| 2024 |
||||
| 2025 |
||||
| 2026 |
||||
| 2027 |
||||
| Thereafter |
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| Total |
$ |
The increase in intangible assets was attributable to the consolidation of Progressive Care as of July 1, 2023.
Note 14. Equity Method Investment
On August 30, 2022, NextPlat entered into a Securities Purchase Agreement (the “SPA”) between NextPlat and Progressive Care, under which NextPlat, its Executive Chairman and Chief Executive Officer, Charles M. Fernandez, board member, Rodney Barreto, and certain other investors invested an aggregate of $
In addition, on August 30, 2022, NextPlat Corp, Messrs. Fernandez and Barreto, and certain other investors (collectively, the “NextPlat Investors”) entered into a Modification Agreement wherein the terms were modified for an existing Secured Convertible Promissory Note (the “Note”) originally held by a third party note holder and sold to the NextPlat Investors. The NextPlat Investors purchased the Note as part of a Confidential Note Purchase and Release Agreement between the former note holder and the NextPlat Investors. As of the date of the SPA, the aggregate amount of principal and interest outstanding on the Note was approximately $
On September 13, 2022, the Progressive Care Board of Directors appointed Charles M. Fernandez as Chairman of the Board of Directors and Rodney Barreto as the Vice Chairman of the Board of Directors. In connection with these appointments, Alan Jay Weisberg, Progressive Care’s current Chairman and Chief Executive Officer, was appointed to serve as a Vice Chairman. On September 12, 2022, two of Progressive Care’s Directors, Birute Norkute and Oleg Firer, resigned as Directors. On October 7, 2022, the Progressive Care Board of Directors unanimously voted to approve the appointment of Pedro Rodriguez, MD to the Board. Dr. Rodriguez was nominated to the Progressive Care Board by NextPlat.
On November 11, 2022, Mr. Weisberg resigned from his positions as Progressive Care’s Chief Executive Officer and co-Vice-Chairman of the Board of Directors. On the same date, the Board appointed Mr. Fernandez to serve as the new Chief Executive Officer immediately.
On December 29, 2022, Progressive Care filed a Certificate of Amendment to Articles of Incorporation (the “Amendment to Articles”) with the Secretary of State of the State of Delaware. Pursuant to the Amendment to Articles, each
On May 5, 2023, NextPlat entered into a Securities Purchase Agreement (the “SPA”) with Progressive Care, pursuant to which the Company purchased
Simultaneous with the closing, Progressive Care entered into a Debt Conversion Agreement (the “DCA”) with NextPlat and the other holders (the “Holders”) of that certain Amended and Restated Secured Convertible Promissory Note, dated as of September 2, 2022, made by Progressive Care in the original face amount of approximately $
At the same time, Progressive Care and NextPlat entered into a First Amendment (the “Amendment”) to that certain Securities Purchase Agreement dated November 16, 2022 (the “Debenture Purchase Agreement”). Under the Debenture Purchase Agreement, Progressive Care agreed to issue, and NextPlat Corp agreed to purchase, from time to time during the -year term of the Debenture Purchase Agreement, up to an aggregate of $
As a result of the common stock purchase warrant exercises and the entry into the voting agreement as described in Note 4, NextPlat concluded that there was a change in control in Progressive Care. As of July 1, 2023, NextPlat has the right to control more than 50 percent of the voting interests in Progressive Care through the concurrent common stock purchase warrant exercises and voting agreement. Beginning on July 1, 2023, the Company changed the accounting method for its investment in Progressive Care, which prior to July 1, 2023 had been accounted for as an equity method investment, to consolidation under the voting interest model in FASB ASC Topic 805. Therefore, Progressive Care became a consolidated subsidiary of the Company on July 1, 2023.
The following summarizes the Company’s consolidated balance sheet description equity method investment as follows as of September 30, 2023:
| Carrying Amount |
||||
| December 31, 2022, beginning balance |
$ | |||
| Investment in Progressive Care Inc. and Subsidiaries |
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| Gain on equity method investment |
||||
| Portion of loss from Progressive Care, Inc. and Subsidiaries |
( |
) | ||
| Depreciation expense due to cost basis difference (1) |
( |
) | ||
| Interest earned from convertible note receivable |
||||
| Interest earned from amortization of premium on convertible note receivable |
||||
| Elimination of intercompany interest earned |
( |
) | ||
| Change in accounting method as of July 1, 2023 |
( |
) | ||
| September 30, 2023, carrying amount |
$ | |||
The following summarizes the Company’s consolidated statements of operations and comprehensive loss description equity in net loss of affiliate for the six months ended June 30, 2023 as follows:
| For the six months ended June 30, 2023 |
||||
| Portion of loss from Progressive Care, Inc. and Subsidiaries |
$ | ( |
) | |
| Depreciation expense due to cost basis difference (1) |
( |
) | ||
| Interest earned from convertible note receivable |
||||
| Interest earned from amortization of premium on convertible note receivable |
||||
| Elimination of intercompany interest earned |
( |
) | ||
| Equity in net loss of affiliate |
$ | ( |
) | |
Note 15. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consisted of the following:
| September 30, 2023 |
December 31, 2022 |
|||||||
| (Unaudited) |
(Audited) |
|||||||
| Accounts payable |
$ | $ | ||||||
| Accrued wages and payroll liabilities |
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| Accrued PBM fees |
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| Rental deposits |
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| Customer deposits payable |
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| VAT liability & sales tax payable |
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| U.K. income tax payable |
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| Accrued legal fees |
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| Pre-merger accrued other liabilities |
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| Accrued interest |
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| Accrued other liabilities |
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| Total |
$ | $ | ||||||
The increase in accounts payable and accrued expenses was attributable to the consolidation of Progressive Care at July 1, 2023.
Note 16. Notes Payable