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Table of Contents



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2024

 

OR

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from ______________to _______________.

 

Commission File Number 001-40447

 

NEXTPLAT CORP

(Exact name of registrant as specified in its charter)

 

Nevada

 

65-0783722

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

   

3250 Mary St., Suite 410, Coconut Grove, FL

 

33133

(Address of principal executive offices)

 

(Zip Code)

 

(305)-560-5355

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

Common Stock, par value $0.0001

 

NXPL

 

The Nasdaq Stock Market Inc.

Warrants

 

NXPLW

 

The Nasdaq Stock Market Inc.

 

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. Yes ☒ No ☐

 

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). Yes ☒ No ☐

 

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 ☐

Non-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 No ☒

 

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 August 9, 2024 

Common Stock, $0.0001 par value

 

18,973,146

 



 

 

 

 

FORM 10-Q

 

INDEX

 

 

Page

   

PART I: FINANCIAL INFORMATION

   

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2

   

CONDENSED CONSOLIDATED BALANCE SHEETS

2

   

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

3

   

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

4

   

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

5

   

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6

   

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

33

   

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

47

   

ITEM 4. CONTROLS AND PROCEDURES

47

   

PART II. OTHER INFORMATION

   

ITEM 1. LEGAL PROCEEDINGS

48

   
ITEM 1A. RISK FACTORS 48
   

ITEM 5. OTHER INFORMATION

48

   

ITEM 6. EXHIBITS

49

   

SIGNATURES

50

 

i

 

Part I Financial Information

 

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 six months ended June 30, 2024 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

(In thousands, except shares and par data)

  

June 30, 2024

  

December 31, 2023

 
  

(Unaudited)

  

(Audited)

 

ASSETS

        

Current Assets

        

Cash

 $24,877  $26,307 

Accounts receivable, net

  10,369   8,923 

Receivables - other, net

  1,013   1,846 

Inventories, net

  4,701   5,135 

Unbilled revenue

  206   189 

VAT receivable

  333   342 

Prepaid expenses

  273   640 

Notes receivable due from related party

  265   256 

Total Current Assets

  42,037   43,638 
         

Property and equipment, net

  3,694   3,989 
         

Goodwill

  156   731 

Intangible assets, net

  4,564   14,423 

Operating right of use assets, net

  887   1,566 

Finance right-of-use assets, net

  18   22 

Deposits

  39   39 

Prepaid expenses, net of current portion

  66   61 

Total Other Assets

  5,730   16,842 

Total Assets

 $51,461  $64,469 
         

LIABILITIES AND EQUITY

        
         

Current Liabilities

        

Accounts payable and accrued expenses

 $11,894  $13,176 

Contract liabilities

  142   42 

Notes payable

  205   312 

Due to related party

  23   18 

Operating lease liabilities

  380   532 

Finance lease liabilities

  13   18 

Income taxes payable

  93   139 

Total Current Liabilities

  12,750   14,237 
         

Long Term Liabilities:

        

Notes payable, net of current portion

  1,120   1,211 

Operating lease liabilities, net of current portion

  619   929 

Finance lease liabilities, net of current portion

  -   5 

Total Liabilities

  14,489   16,382 
         

Commitments and Contingencies

  -    -  
         

Equity

        

Preferred stock ($0.0001 par value; 3,333,333 shares authorized)

  -   - 

Common stock ($0.0001 par value; 50,000,000 shares authorized, 18,973,146 and 18,724,596 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively)

  2   2 

Additional paid-in capital

  68,348   67,170 

Accumulated deficit

  (41,717)  (34,925)

Accumulated other comprehensive loss

  (99)  (63)

Equity attributable to NextPlat Corp stockholders

  26,534   32,184 

Equity attributable to non-controlling interests

  10,438   15,903 

Total Equity

  36,972   48,087 
         

Total Liabilities and Equity

 $51,461  $64,469 

 

See accompanying notes to condensed consolidated financial statements.

 

 

2

 

 

NEXTPLAT CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share data)

  

  

Three Months Ended

  

Three Months Ended

  

Six Months Ended

  

Six Months Ended

 
  

June 30, 2024

  

June 30, 2023

  

June 30, 2024

  

June 30, 2023

 
  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

  

(Unaudited)

 
                 

Sales of products, net

 $14,030  $2,957  $28,150  $5,834 

Revenues from services

  2,959   -   6,332   - 

Revenue, net

  16,989   2,957   34,482   5,834 
                 

Cost of products

  11,120   2,113   23,741   4,369 

Cost of services

  63   -   126   - 

Cost of revenue

  11,183   2,113   23,867   4,369 
                 

Gross profit

  5,806   844   10,615   1,465 
                 

Operating expenses:

                

Selling, general and administrative

  2,218   2,519   4,220   3,308 

Salaries, wages and payroll taxes

  2,785   968   5,409   1,556 

Impairment loss

  9,792   -   9,924   - 

Professional fees

  1,004   544   1,989   865 

Depreciation and amortization

  903   168   1,810   330 

Total operating expenses

  16,702   4,199   23,352   6,059 
                 

Loss before other (income) expense

  (10,896)  (3,355)  (12,737)  (4,594)
                 

Other (income) expense:

                

Gain on sale or disposal of property and equipment

  -   -   (1)  - 

Interest expense

  19   5   41   10 

Interest earned

  (197)  (172)  (412)  (183)

Other income

  -   (266)  -   (316)

Foreign currency exchange rate variance

  5   (40)  31   (69)

Total other income

  (173)  (473)  (341)  (558)
                 

Loss before income taxes and equity in net loss of affiliate

  (10,723)  (2,882)  (12,396)  (4,036)
                 

Income taxes

  (20)  (52)  (47)  (52)

Loss before equity in net loss of affiliate

  (10,743)  (2,934)  (12,443)  (4,088)
                 

Equity in net loss of affiliate

  -   (1,407)  -   (1,440)

Net loss

  (10,743)  (4,341)  (12,443)  (5,528)
                 

Net loss attributable to non-controlling interest

  5,432   -   5,652   - 

Net loss attributable to NextPlat Corp

 $(5,311) $(4,341) $(6,791) $(5,528)
                 

Comprehensive loss:

                

Net loss

 $(10,743) $(4,341) $(12,443) $(5,528)

Foreign currency loss

  (27)  (12)  (9)  (35)

Comprehensive loss

 $(10,770) $(4,353) $(12,452) $(5,563)
                 

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS

 $(5,311) $(4,341) $(6,791) $(5,528)

Weighted number of common shares outstanding – basic and diluted

  18,824   18,072   18,774   16,254 
                 

Loss per share - basic and diluted

 $(0.28) $(0.24) $(0.36) $(0.34)

 

See the accompanying notes to condensed consolidated financial statements.

 

3

 

 

NEXTPLAT CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except per share data)

(Unaudited)

 

For the Three and Six Months Ended June 30, 2024

 

  

Common Stock

  

Additional

                     
  

$0.0001 Par Value

  

Paid in

  

Accumulated

  

Comprehensive

  

Stockholders’

  

Non-controlling

  

Total

 
  

Shares

  

Amount

  

Capital

  

Deficit

  

Loss

  

Equity

  

Interests

  

Equity

 

Balance, December 31, 2023

  18,725  $2  $67,170  $(34,925) $(63) $32,184  $15,903  $48,087 

Stock-based compensation in connection with options granted

  -   -   160   -   -   160   -   160 

Stock-based compensation in connection with restricted stock awards

  -   -   387   -   -   387   65   452 

Capital contribution of non-controlling interests

  -   -   -   -   -   -   122   122 

Comprehensive loss

  -   -   -   -   (27)  (27)  -   (27)

Net Loss

  -   -   -   (1,481)  -   (1,481)  (220)  (1,701)

Balance, March 31, 2024

  18,725  $2  $67,717  $(36,406) $(90) $31,223  $15,870  $47,093 

Stock-based compensation in connection with options granted

  -   -   159   -   -   159   -   159 

Issuance of common stock related to restricted stock award

  200   -   387   -   -   387   -   387 

Issuance of common stock related to exercise of warrants

  48   -   85   -   -   85   -   85 

Comprehensive loss

  -   -   -   -   (9)  (9)  -   (9)

Net loss

  -   -   -   (5,311)  -   (5,311)  (5,432)  (10,743)

Balance, June 30, 2024

  18,973  $2  $68,348  $(41,717) $(99) $26,534  $10,438  $36,972 

  

For the Three and Six Months Ended June 30, 2023

 

   

Common Stock

   

Additional

                                         
   

$0.0001 Par Value

   

Paid in

   

Accumulated

   

Comprehensive

   

Stockholders’

   

Non-controlling

   

Total

 
   

Shares

   

Amount

   

Capital

   

Deficit

   

Loss

   

Equity

   

Interests

   

Equity

 

Balance, December 31, 2022

    14,402     $ 1     $ 56,963.00     $ (31,147 )   $ (41 )   $ 25,776     $ -     $ 25,776  

Issuance of common related to restricted stock award

    39       -       61       -       -       61       -       61  

Comprehensive loss

    -       -       -       -       (23 )     (23 )     -       (23 )

Net loss

    -       -       -       (1,187 )     -       (1,187 )     -       (1,187 )

Balance, March 31, 2023

    14,441     $ 1     $ 57,024     $ (32,334 )   $ (64 )   $ 24,627     $ -     $ 24,627  

Issuance of common stock related to April offering

    3,429       1       5,999       -       -       6,000       -       6,000  

Issuance of common stock related to exercise of warrants

    105       -       184       -       -       184       -       184  

Issuance of common stock related to restricted stock award

    725       -       1,183       -       -       1,183       -       1,183  

Stock-based compensation in connection with options granted

    -       -       781       -       -       781       -       781  

Comprehensive loss

    -       -       -       -       (12 )     (12 )     -       (12 )

Net loss

    -       -       -       (4,341 )     -       (4,341 )     -       (4,341 )

Balance, June 30, 2023

    18,700     $ 2     $ 65,171     $ (36,675 )   $ (76 )   $ 28,422     $ -     $ 28,422  

  

See accompanying notes to condensed consolidated financial statements.

 

4

 

 

NEXTPLAT CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

(In thousands)

 

  

June 30, 2024

  

June 30, 2023

 
  

(Unaudited)

  

(Unaudited)

 

CASH FLOWS FROM OPERATING ACTIVITIES:

        

Net loss

 $(12,443) $(5,528)

Adjustments to reconcile net loss to net cash used in operating activities:

        

Depreciation expense

  399   317 

Change in provision for doubtful accounts

  (54)  - 

Amortization of intangible assets

  1,398   13 

Amortization of right-of-use assets - operating leases

  244   98 

Amortization of right-of-use assets - finance leases

  13   - 

Write-off of right of use asset

  111   - 

Equity in net loss of affiliate

  -   1,440 

Stock-based compensation

  1,158   2,025 

Impairment loss

  9,924   - 

Gain on sale or disposal of property and equipment

  (1)  - 

Change in operating assets and liabilities:

        

Accounts receivable

  (513)  (205)

Inventories

  571   (780)

Unbilled revenue

  (17)  (34)

Prepaid expense

  374   (302)

Notes receivable

  16   - 

VAT receivable

  9   - 

Accounts payable and accrued expenses

  (1,349)  (234)

Operating lease liabilities

  (273)  (87)

Income taxes payable

  (46)  67 

Contract liabilities

  100   22 

Liabilities from discontinued operations

  -   (112)

Net cash used in operating activities

 $(379) $(3,300)
         

CASH FLOWS FROM INVESTING ACTIVITIES:

        

Purchase of property and equipment

  (124)  (103)

Capital contributions to equity method investee

  -   (1,000)

Proceeds from sale or disposal of property and equipment

  1   - 

Cash acquired in acquisition of Outfitter Satellite subsidiary

  236   - 

Cash paid in acquisition of Outfitter Satellite subsidiary

  (1,094)  - 

Net cash used in investing activities

 $(981) $(1,103)
         

CASH FLOWS FROM FINANCING ACTIVITIES:

        

Repayments of note payable, related party, net

  -   (9)

Proceeds from common stock offering

  -   6,000 

Proceeds from exercise of warrants

  85   184 

Capital contribution of non-controlling interest

  122   - 

Payments on finance lease liabilities

  (13)  - 

Repayments of notes payable

  (228)  (22)

Net cash (used in) provided by financing activities

 $(34) $6,153 
         

Effect of exchange rate on cash

  (36)  (35)
         

Net decrease in cash

  (1,430)  1,715 

Cash beginning of period

  26,307   18,891 

Cash end of period

 $24,877  $20,606 
         

SUPPLEMENTAL CASH FLOW INFORMATION

        

Cash paid during the period for

        

Interest

 $371  $173 

Income taxes

 $74  $- 

 

See the accompanying notes to condensed consolidated financial statements.

  

 

 
5

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 

 

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-owned, 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.

 

On April 1, 2024, NextPlat acquired 100% of the ownership interest of Outfitter Satellite, Inc., a Tennessee corporation ("Outfitter") in a stock purchase transaction. Outfitter is a wholly-owned subsidiary of NextPlat Corp.

 

Progressive Care Inc.:

 

Our controlled subsidiary, 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.

 

6

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

Pharmco 901 was formed on November 29, 2005 as a Florida Limited Liability Company and is a 100% owned subsidiary of Progressive Care. Pharmco 901 was acquired by Progressive on October 21, 2010. Progressive currently delivers prescriptions to Florida’s diverse population and ships medications to patients in states where they hold non-resident pharmacy licenses as well. Progressive currently holds Florida Community Pharmacy Permits at all Florida pharmacy locations and the Pharmco 901 location is licensed as a non-resident pharmacy in the following states: Arizona, Colorado, Connecticut, Georgia, Illinois, Minnesota, Nevada, New Jersey, New York, Pennsylvania, Texas, and Utah. Progressive is able to dispense to patients in the state of Massachusetts without a non-resident pharmacy license because Massachusetts does not require such a license for these activities.

 

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.

 

Florida Sunshine Brands, LLC:

 

Florida Sunshine Brands, LLC (“Florida Sunshine”) is a Florida limited liability company and incorporated December 6, 2023. Florida Sunshine operates under an operating agreement between NextPlat, with a 51% ownership, and Outer Brands FS, LLC, with a 49% ownership.  Florida Sunshine's main objective is to source and sell vitamins and nutritional supplements.

 

Plan of Reorganization - Progressive Care Merger:

 

On April 12, 2024, the Company entered into a Merger Agreement and Plan of Reorganization (the “Merger Agreement”) with Progressive Care, and Progressive Care LLC, a Nevada limited liability company and a direct, wholly owned subsidiary of the Company (“Merger Sub”). Pursuant to the terms of the Merger Agreement and subject to the approval of the shareholders of NextPlat and Progressive Care, the Company, Progressive Care and Merger Sub will enter into a business combination transaction pursuant to which Progressive Care will merge with and into Merger Sub (the “Merger”), with Merger Sub being the surviving entity of the Merger. Following the Merger, Progressive Care will be a wholly-owned subsidiary of NextPlat.

 

The Merger Agreement and the transactions contemplated thereby were negotiated and approved by a Special Committee comprised of three of the Company’s independent directors. The Merger Agreement was also approved by the entirety of the Company's board of directors.

 

The Company’s shareholders will consider a proposal to approve the Merger at the Company’s annual meeting which is set to occur on September 13, 2024. Shareholders of record on July 29, 2024 will be entitled to vote at the Company’s annual meeting.

 

7

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

 

 

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 2023 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 2023 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 changes in 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 shares of Progressive Care common stock. After the exercise of the common stock purchase warrants, the Company and Messrs. Fernandez and Barreto collectively owned 53% of Progressive Care’s voting stock. At the time of exercise, all of the above common stock purchase warrants were in-the-money. Also on July 1, 2023, the Company and 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 common stock act by written consent, Messrs. Fernandez and Barreto agreed to vote all of the Progressive Care common stock (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 NextPlat votes its common stock and equivalents. The voting agreement is irrevocable and perpetual in term. 

 

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. 

 

Business acquisition of Outfitter Satellite, Inc.

 

On March 25, 2024, the Company entered into a Stock Purchase Agreement with James T. McKinley, pursuant to which the Company agreed to purchase all of the issued and outstanding shares of common stock of Out fitter Satellite, Inc. (“Outfitter”). The closing of the transaction occurred on  April 1, 2024.  Outfitter is a wholly-owned subsidiary of NextPlat Corp.

 

Outfitter provides consumers, commercial and government customers, with advanced satellite-based connectivity solutions from leading brands, including Iridium, Inmarsat and Globalstar. 

 

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. 

 

8

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

Use of Estimates

 

In preparing the 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 and Outfitter common stock and options issued for services, net realizable value of accounts receivables and other 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, pharmacy benefit manager ("PBM") fee estimates, and the estimates of the valuation allowance on deferred tax assets.

 

 

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, 2023. There have been no material changes to the Company’s significant accounting policies for the six months ended June 30, 2024

 

Cash

 

The Company places its cash with high credit quality financial institutions. The Company’s account at these institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. All cash amounts in excess of $250,000, approximately $4.4 million, are unsecured. The Company has a deposit placement agreement for Insured Cash Sweep Service (“ICS”). This service is a secure, and convenient way to access FDIC protection on large deposits, earn a return, and enjoy flexibility. The Company believes that the ICS agreement will mitigate its credit risk as it relates to uninsured FDIC amounts in excess of $250,000.

 

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 six months ended June 30, 2024, closing rate at $1.28 US$: GBP, quarterly average rate at $1.27 US$: GBP, for the six months ended June 30, 2023, closing rate at $1.23 US$: GBP, quarterly average rate at $1.22 US$: GBP, for the year ended  December 31, 2023 closing rate at 1.27 US$: GBP, yearly average rate at 1.24 US$: GBP.

 

Unearned Revenue

 

Contract liabilities are shown separately in the condensed consolidated balance sheets as current liabilities. At June 30, 2024 and December 31, 2023, we had contract liabilities of approximately $142,000 and $42,000, respectively.

 

9

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

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. The Company accrues an estimate of PBM fees, including DIR fees, which are assessed or expected to be assessed by payers at some point after adjudication of a claim, as a reduction of prescription 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. Through December 31, 2023, for some PBMs, DIR fees were 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 the Company for these fees as reductions of reimbursements paid to the Company two to three months after the end of the trimester (e.g., DIR fees for January – April 20xx claims were clawback by these PBMs in July – August 20xx). As of December 31, 2023, DIR fees that were not collected at the time of claim settlement, the Company recorded an accrued liability for estimated DIR fees that are expected to be collected by the PBMs by the end of the second quarter of 2024. 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 the Company by the PBMs as to exactly how these fees are calculated either at the time the DIR fees are actually assessed and reported to the Company. The detail level of the disclosure of assessed DIR fees varies based on the information provided by the PBM. Effective January 1, 2024, all PBMs began charging DIR fees at the time of the settlement of a pharmacy claim.

 

Recent Accounting Pronouncements

 

Accounting Pronouncements Issued but not yet Adopted

 

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. ASU 2023-07 is required to be adopted for annual periods beginning after December 15, 2023, and interim period within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company will adopt the standard in its interim reporting beginning with Q1-2025, and the Company will adopt the standard in its annual reporting for the year ending December 31, 2024. The Company expects that the adoption of the standard will not have a material impact on our consolidated financial statements but will enhance our current disclosures.

 

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740)—Improvements to Income Tax Disclosure” (“ASU 2023-09”), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. ASU 2023-09 is required to be adopted for annual periods beginning after December 15, 2024, with early adoption permitted. The Company will adopt this accounting standard update effective January 1, 2025. The Company expects that the adoption of the standard will not have a material impact on our consolidated financial statements.

 

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to be relevant or have a material impact on the condensed consolidated financial statements upon adoption. 

 

Subsequent Events

         

The Company has evaluated subsequent events through August 13, 2024, the date the condensed consolidated financial statements were available to be issued. 

  

10

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 

Note 4. 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 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 $14.7 million.

 

The initial recognition of the Outfitter identifiable intangible assets, resulting from the acquisition on April 1, 2024, were measured using Level 3 inputs. The fair value at the date of acquisition was approximately $0.6 million.

11

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 

 

Note 5. Business Acquisition - Provisional

 

On March 25, 2024, the Company entered into a Stock Purchase Agreement with James T. McKinley, pursuant to which the Company agreed to purchase all of the issued and outstanding shares of common stock of Out fitter. The closing of the transaction occurred on  April 1, 2024. 

 

Outfitter provides consumers, commercial and government customers, with advanced satellite-based connectivity solutions from leading brands, including Iridium, Inmarsat and Globalstar.

 

Final purchase accounting adjustments  may be materially different from the amount presented below in the purchase price allocation. 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. 

 

The following table summarizes the consideration transferred to acquire Outfitter and the amounts of identified assets acquired and liabilities assumed at the acquisition date (in thousands):

 

  

Purchase Price Allocation (in thousands)

 

Total purchase consideration

 $1,094 
     

Identifiable net assets acquired - Provisional:

    

Cash

 $236 

Accounts receivable, net

  73 

Inventory

  137 

Prepaid expenses

  11 

Property and equipment, net

  5 

Right of use assets, net

  109 

Intangible assets, net:

    

Trade name (1)

  185 

Customer records (2)

  415 

Accounts payable and accrued expenses

  (124)

Notes payable and accrued interest - current portion

  (53)

Lease liabilities - current portion

  (56)

Deferred tax liabilities (3)

  (145)

Net assets acquired

 $793 
     

Goodwill

 $301 

(1) 10 year amortization period

(2) 5 year amortization period

(3) Under federal tax law, previously unidentified finite lived intangible assets recognized from a business combination have no tax basis and therefore are not amortized for tax purposes. This tax position created a book/tax basis difference at April 1, 2024, the date of the business combination transaction. Therefore, an approximate $0.1 million deferred tax liability was recorded at April 1, 2024 as a result of the book/tax basis difference for the finite lived intangible assets. 

 

The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after NextPlat’s acquisition of Outfitter. The goodwill is not deductible for tax purposes. 

 

The initial recognition of Outfitter's identifiable intangible assets, resulting from the acquisition on April 1, 2024, were measured using Level 3 inputs. The fair value at the date of acquisition was approximately $0.6 million and were estimated by applying an income approach. The fair value estimates for the identifiable intangible assets are based on (1) an assumed discount rate of 37.3% (2) an assumed capitalization rate of 34.3% (3) assumed long-term growth rate of 3.0% (4) an assumed royalty rate of 1.8% (5) an assumed tax rate of 26.3% (6) an assumed risk free rate of 4.5% (7) an assumed equity risk premium of 6.5% (8) an assumed company specific risk premium rate of 22.5% (9) an assumed beta of 0.82.

 

12

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 

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.

 

All pharmacy benefit manager (“PBM”) fees, including direct and indirect remuneration (“DIR”) fees, are charged at the time of the settlement of a pharmacy claim. 

 

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.

 

13

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

The following table disaggregates net revenues by categories (in thousands):

 

  

Three Months Ended June 30,

 
  

2024

  

2023

 

Sales of products, net:

        

Pharmacy prescription and other revenue, net of PBM fees

 $10,521  $- 

e-Commerce revenue

  3,512   2,957 

Sub total

  14,033   2,957 

Revenues from services:

        

Pharmacy 340B contract revenue

  2,956   - 
         

Revenues, net

 $16,989  $2,957 

  

  

Six Months Ended June 30,

 
  

2024

  

2023

 

Sales of products, net:

        

Pharmacy prescription and other revenue, net of PBM fees

 $21,845  $- 

e-Commerce revenue

  6,377   5,834 

Sub total

  28,222   5,834 

Revenues from services:

        

Pharmacy 340B contract revenue

  6,260   - 
         

Revenues, net

 $34,482  $5,834 

 

 

 

14

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 

Note 7. 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.

 

The components of basic and diluted EPS were as follows (in thousands, except per share data). 

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 
  

2024

  

2023

  

2024

  

2023

 

Net loss attributable to NextPlat Corp common shareholders

 $(5,311) $(4,341) $(6,791) $(5,528)
                 

Basic weighted average common shares outstanding

  18,824   18,072   18,774   16,254 

Potentially dilutive common shares

  -   -   -   - 
                 

Diluted weighted average common shares outstanding

  18,824   18,072   18,774   16,254 
                 

Weighted average loss per common share - basic and diluted

 $(0.28) $(0.24) $(0.36) $(0.34)
                 
                 

Potentially dilutive common shares excluded from the calculation of diluted weighted average loss per common share:

                

Stock options

  9   240   60   175 

Common stock purchase warrants

  -   1,419   -   583 
   9   1,659   60   758 

 

 

Note 8. Accounts Receivable

 

At June 30, 2024 and December 31, 2023, accounts receivable consisted of the following (in thousands):

 

  

June 30, 2024

  

December 31, 2023

 
  

(Unaudited)

  

(Audited)

 

Gross accounts receivable – trade

 $10,587  $9,195 

Less: allowance for doubtful accounts

  (218)  (272)

Accounts receivable – trade, net

 $10,369  $8,923 

 

The Company decreased the allowance for credit losses in the amount of approximately $54,000 and $0 for the six months ended June 30, 2024 and 2023, respectively. 

 

Accounts receivable – trade, net for the Company as of January 1, 2023 and  June 30, 2023 were approximately $0.4 million and $0.6 million, respectively.

 

15

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
 

Note 9. Inventory

 

At June 30, 2024 and December 31, 2023, inventory consisted of the following (in thousands):

 

  

June 30, 2024

  

December 31, 2023

 
  

(Unaudited)

  

(Audited)

 

Finished goods

 $4,747  $5,195 

Less reserve for obsolete inventory

  (46)  (60)

Total

 $4,701  $5,135 

    

 

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 June 30, 2024 and December 31, 2023, the Company recorded a receivable in the amount of approximately $333,000 and $342,000, 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 $273,000 and $66,000, respectively at June 30, 2024, as compared to $640,000 and $61,000, respectively at December 31, 2023. 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.


NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 

 

Note 12. Property and Equipment, net

 

Property and equipment, net consisted of the following (in thousands):

 

  

June 30, 2024

  

December 31, 2023

 
  

(Unaudited)

  

(Audited)

 

Building

 $2,116  $2,116 

Vehicles

  603   595 

Office furniture and fixtures

  543   527 

Land

  184   184 

Leasehold improvements

  172   124 

Computer equipment

  117   117 

Rental equipment

  80   60 

Appliques

  2,160   2,160 

Website development

  615   587 

Construction in progress

  -   22 

Property and equipment gross

  6,590   6,492 

Less: accumulated depreciation

  (2,896)  (2,503)

Property and equipment, net

 $3,694  $3,989 

 

Depreciation expense was approximately $399,000 and $317,000 for the six months ended June 30, 2024 and 2023, respectively.

 

 

16

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

 

 

Note 13. Goodwill and Intangible Assets, net

 

Goodwill

 

During the three months ended June 30, 2024, the Company concluded that the carrying amount of the Healthcare Operations reporting segment exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charge of approximately $0.7 million. An interim impairment assessment was considered necessary as a result of the sustained decline in the Healthcare Operations stock price and related market capitalization. The goodwill impairment charge is reflected in the Impairment losses in the Condensed Consolidated Statements of Operations. With the assistance of a third-party valuation firm, the fair value of the Healthcare Operations reporting segment was determined using an income approach whereby the fair value was calculated utilizing discounted estimated future cash flows (level 3 nonrecurring fair value measurement). The income approach requires several assumptions including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for the business, estimation of the useful life over which cash flows will occur, and determination of the weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit. The long-term growth rate used in the impairment was 3.0% and the weighted average cost of capital used in the impairment was 13.5%.

 

The following table reflects changes in the carrying amount of goodwill during the periods presented by reportable segments (in thousands):

 

 

  

e-Commerce Operations

  

Healthcare Operations

  

Total

 

Goodwill, net as of December 31, 2023

 $-  $731  $731 
             

Changes in Goodwill during the year period ended June 30, 2024:

            

Goodwill acquired

  301   -   301 

Deferred tax effect of intangible basis difference (1)

  (145)  -   (145)

Impairment loss

  -   (731)  (731)

Goodwill, net as of June 30, 2024

 $156  $-  $156 

(1) Decrease related to book tax basis difference of intangible assets arising for the business acquisition of Outfitter.

 

17

NEXTPLAT CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

Intangibles

 

During the three months ended June 30, 2024, the Company performed an impairment assessment of long-lived assets as it relates to the Healthcare Operations reporting segment due to the decline in future projected revenues and cash flows. As a result, the Company completed a recoverability test and concluded that the asset groups were not fully recoverable as the undiscounted expected future cash flows did not exceed their carrying amounts. The Company, with the assistance of a third-party valuation firm, determined the fair value of the asset groups using an income approach utilizing undiscounted estimated future cash flows (level 3 nonrecurring fair value measurement). The income approach requires several assumptions including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, and estimation of the useful life over which cash flows will occur. The carrying amount of certain assets in the asset group exceeded the fair value, resulting in the recognition of a non-cash impairment charge to intangible assets of approximately $9.1 million for the three months ended June 30, 2024 (reflected in the Impairment losses in the Condensed Consolidated Statements of Operations). Furthermore, the Company reevaluated the useful lives of intangible assets and determined that the trade names decreased from a 10-year to a 5-year useful life, while the pharmacy records remained at a 5-year useful life. The net amount after impairment of the intangible assets will be amortized over the remaining useful lives of four years.

 

Intangible assets, net consisted of the following (in thousands):

 

  

June 30, 2024

 
  

(Unaudited)

 
  

Gross amount

  

Accumulated amortization

  

Net Amount

 

Pharmacy records

 $2,447  $  $2,447 

Trade names

  1,530      1,530 

Developed technology

        - 

Customer Contracts

  850   (263)