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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 September 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 November 8, 2024 

Common Stock, $0.0001 par value

 

25,963,051

 



 

 

 

 

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) INCOME

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

32

   

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

46

   

ITEM 4. CONTROLS AND PROCEDURES

46

   

PART II. OTHER INFORMATION

   

ITEM 1. LEGAL PROCEEDINGS

47

   
ITEM 1A. RISK FACTORS 47
   

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

47
   
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 47
   
ITEM 4. MINE SAFETY DISCLOSURES 47
   

ITEM 5. OTHER INFORMATION

47

   

ITEM 6. EXHIBITS

48

   

SIGNATURES

49

 

i

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This quarterly report and other documents that we file with the Securities and Exchange Commission (“SEC”) contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, our business, our beliefs and our management’s assumptions. Statements that are not historical facts are forward-looking statements, including forward-looking information concerning sales trends, gross margins, number and location of new store openings, outcomes of litigation, the level of capital expenditures, industry trends, demographic trends, growth strategies, financial results, cost reduction initiatives, acquisition synergies, regulatory approvals, and competitive strengths. Words such as “expect,” “outlook,” “forecast,” “would,” “could,” “should,” “project,” “intend,” “plan,” “continue,” “sustain,” “on track,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “assume,” and variations of such words and similar expressions are often used to identify such forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, but not limited to, those described in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on April 11, 2024 (“2023 Form 10-K”), this quarterly report on Form 10-Q for the three and nine months ended September 30, 2024, and our other reports that we file or furnish with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, we undertake no obligation to update publicly any forward-looking statements after the date they are made, whether as a result of new information, future events, changes in assumptions or otherwise.

 

ii

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

The accompanying Unaudited Condensed Consolidated Financial Statements of NextPlat Corp, (“NextPlat,” the “Company,” “we,” or “our”), for the three and nine months ended September 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)

(Unaudited)

 

  

September 30, 2024

  

December 31, 2023

 

ASSETS

        

Current Assets

        

Cash

 $20,360  $26,307 

Accounts receivable, net

  6,575   8,923 

Receivables - other, net

  1,235   1,846 

Inventories, net

  6,362   5,135 

Unbilled revenue

  219   189 

VAT receivable

  350   342 

Prepaid expenses

  484   640 

Notes receivable due from related party, net of allowances of $63 and $0 at September 30, 2024 and December 31, 2023, respectively

  206   256 

Total Current Assets

  35,791   43,638 
         

Property and equipment, net

  3,595   3,989 
         

Goodwill

  156   731 

Intangible assets, net

  555   14,423 

Operating right of use assets, net

  898   1,566 

Finance right-of-use assets, net

  10   22 

Deposits

  94   39 

Prepaid expenses, net of current portion

     61 

Total Other Assets

  1,713   16,842 

Total Assets

 $41,099  $64,469 
         

LIABILITIES AND EQUITY

        
         

Current Liabilities

        

Accounts payable and accrued expenses

 $8,531  $13,176 

Contract liabilities

  104   42 

Notes payable

  461   312 

Due to related party

  24   18 

Operating lease liabilities

  381   532 

Finance lease liabilities

  10   18 

Income taxes payable

  162   139 

Total Current Liabilities

  9,673   14,237 
         

Long Term Liabilities:

        

Notes payable, net of current portion

  1,080   1,211 

Operating lease liabilities, net of current portion

  553   929 

Finance lease liabilities, net of current portion

     5 

Total Liabilities

  11,306   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, 18,993,146 and 18,724,596 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively)

  2   2 

Additional paid-in capital

  68,487   67,170 

Accumulated deficit

  (45,933)  (34,925)

Accumulated other comprehensive loss

  (93)  (63)

Equity attributable to NextPlat Corp stockholders

  22,463   32,184 

Equity attributable to non-controlling interests

  7,330   15,903 

Total Equity

  29,793   48,087 
         

Total Liabilities and Equity

 $41,099  $64,469 

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

 

2

 

 

NEXTPLAT CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(In thousands, except per share data)

(Unaudited)

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2024

   

2023

   

2024

   

2023

 

Sales of products, net

  $ 12,865     $ 12,789     $ 41,015     $ 18,622  

Revenues from services

    2,502       2,501       8,834       2,501  

Revenue, net

    15,367       15,290       49,849       21,123  
                                 

Cost of products

    11,799       10,634       35,539       15,003  

Cost of services

    48       71       174       71  

Cost of revenue

    11,847       10,705       35,713       15,074  
                                 

Gross profit

    3,520       4,585       14,136       6,049  
                                 

Operating expenses:

                               

Selling, general and administrative

    2,293       4,187       6,516       7,496  

Salaries, wages and payroll taxes

    2,875       2,483       8,284       4,039  

Impairment loss

    3,729             13,653        

Professional fees

    2,144       521       4,133       1,385  

Depreciation and amortization

    478       871       2,287       1,201  

Total operating expenses

    11,519       8,062       34,873       14,121  
                                 

Loss before other (income) expense

    (7,999 )     (3,477 )     (20,737 )     (8,072 )
                                 

Other (income) expense:

                               

Gain on sale or disposal of property and equipment

    (98 )           (98 )      

Interest expense

    22       46       62       56  

Interest earned

    (183 )     (210 )     (596 )     (393 )

Other income

    (2 )           (2 )     (316 )

Foreign currency exchange rate variance

    (119 )     165       (87 )     95  

Total other (income) expense

    (380 )     1       (721 )     (558 )
                                 

Loss before income taxes and equity in net loss of affiliate

    (7,619 )     (3,478 )     (20,016 )     (7,514 )
                                 

Income taxes

    (45 )     (23 )     (92 )     (75 )

Loss before equity in net loss of affiliate

    (7,664 )     (3,501 )     (20,108 )     (7,589 )
                                 

Gain on remeasurement of fair value of equity interest in affiliate prior to acquisition

          6,138             6,138  

Equity in net loss of affiliate

                      (1,440 )

Net (loss) income

    (7,664 )     2,637       (20,108 )     (2,891 )
                                 

Net loss attributable to non-controlling interest

    3,448       811       9,100       811  

Net (loss) income attributable to NextPlat Corp

  $ (4,216 )   $ 3,448     $ (11,008 )   $ (2,080 )
                                 

Comprehensive (loss) income:

                               

Net (loss) income

  $ (7,664 )   $ 2,637     $ (20,108 )   $ (2,891 )

Foreign currency (loss) gain

    6       19       (30 )     (16 )

Comprehensive (loss) income

  $ (7,658 )   $ 2,656     $ (20,138 )   $ (2,907 )
                                 

NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS

  $ (4,216 )   $ 3,448     $ (11,008 )   $ (2,080 )

Weighted number of common shares outstanding – basic

    18,982       18,703       18,844       17,079  

Weighted number of common shares outstanding – diluted

    18,982       20,310       18,844       17,079  
                                 

Basic (loss) earnings per share

  $ (0.22 )   $ 0.18     $ (0.58 )   $ (0.12 )

Diluted (loss) earnings per share

  $ (0.22 )   $ 0.17     $ (0.58 )   $ (0.12 )

 

See accompanying notes to unaudited condensed consolidated financial statements.

 

3

 

 

NEXTPLAT CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands)

(Unaudited)

 

For the Three and Nine Months Ended September 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 at 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 at 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 at June 30, 2024

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

Stock-based compensation in connection with options granted

                115                   115             115  

Issuance of common stock related to restricted stock award

    20             24                   24       340       364  

Comprehensive loss

                            6       6             6  

Net loss

                      (4,216 )           (4,216 )     (3,448 )     (7,664 )

Balance at September 30, 2024

    18,993     $ 2     $ 68,487     $ (45,933 )   $ (93 )   $ 22,463     $ 7,330     $ 29,793  

  

For the Three and Nine Months Ended September 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 at December 31, 2022

    14,402     $ 1     $ 56,963     $ (31,147 )   $ (41 )   $ 25,776     $     $ 25,776  

Issuance of common stock related to restricted stock award

    39             61                   61             61  

Comprehensive loss

                            (23 )     (23 )           (23 )

Net loss

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

Balance at 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 at June 30, 2023

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

Acquisition of subsidiary and noncontrolling interests

                (35 )                 (35 )     15,957       15,922  

Issuance of common stock related to restricted stock award

    25             837                   837       150       987  

Stock-based compensation in connection with options granted

                497                   497       1,052       1,549  

Comprehensive income

                            19       19             19  

Net income (loss)

                      3,448             3,448       (811 )     2,637  

Balance at September 30, 2023

    18,725     $ 2     $ 66,470     $ (33,227 )   $ (57 )   $ 33,188     $ 16,348     $ 49,536  

  

See accompanying notes to unaudited condensed consolidated financial statements.

 

4

 

 

NEXTPLAT CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

   

Nine Months Ended September 30,

 
    2024     2023  

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Cash received from e-Commerce Operations revenue

  $ 9,862     $ 8,308  

Cash received from Healthcare Operations revenue

    43,162       9,138  

Cash received from interest income

    646       394  

Cash received from other sources

    367       280  

Cash paid for inventory purchases and other costs of revenue

    (36,803 )     (12,963 )

Cash paid for salaries and related expenses

    (8,284 )     (4,039 )

Cash paid for other recurring operating expenses

    (10,410 )     (5,309 )

Cash paid for interest expense

    (41 )     (56 )

Cash paid for income taxes

    (69 )      

Cash paid for merger costs and other non-recurring expenses

    (3,418 )      

Net cash used in operating activities

    (4,988 )     (4,247 )
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Purchase of property and equipment

    (221 )     (458 )

Capital contributions to equity method investee

          (1,506 )

Proceeds from sale or disposal of property and equipment

    98        

Cash acquired in acquisition of Progressive Care subsidiary

          7,352  

Cash acquired in acquisition of Outfitter Satellite subsidiary

    236        

Cash paid in acquisition of Outfitter Satellite subsidiary

    (1,094 )      

Net cash (used in) provided by investing activities

    (981 )     5,388  
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Repayments of note payable, related party, net

          (3 )

Issuance of common stock for PIPE transaction

          6,000  

Proceeds from exercise of warrants

    85       690  

Capital contribution of non-controlling interest

    122        

Payments on finance lease liabilities

    (18 )     (9 )

Repayments of notes payable

    (139 )     (348 )

Net cash provided by financing activities

    50       6,330  
                 

Effect of exchange rate on cash

    (28 )     (16 )
                 

Net (decrease) increase in cash

    (5,947 )     7,455  

Cash beginning of period

    26,307       18,891  

Cash end of period

  $ 20,360     $ 26,346  
                 

Reconciliation of net loss to cash flow used by operating activities

               

Net loss

  $ (20,108 )   $ (2,891 )

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

               

Depreciation expense

    596       540  

Change in provision for doubtful accounts

    (50 )     12  

Amortization of intangible assets

    1,678       653  

Amortization of right-of-use assets - operating leases

    241       188  

Amortization of right-of-use assets - finance leases

    13       8  

Write-off of right-of-use asset

    111        

Gain on remeasurement of fair value of equity interest in affiliate prior to acquisition

          (6,138 )

Impairment loss

    13,653        

Equity in net loss of affiliate

          1,440  

Stock-based compensation

    1,637       4,561  

Gain on sale or disposal of property and equipment

    (98 )      

Accounts receivable

    3,055       (3,897 )

Inventories

    (1,090 )     (2,069 )

Unbilled revenue

    (30 )     (27 )

Prepaid expense

    229       (343 )

Notes receivable

    75       (251 )

Deposits

    (55 )      

VAT receivable

    (8 )     63  

Accounts payable and accrued expenses

    (4,645 )     4,118  

Operating lease liabilities

    (277 )     (179 )

Income taxes payable

    23       84  

Contract liabilities

    62       (7 )

Liabilities from discontinued operations

          (112 )

Net cash used in operating activities

  $ (4,988 )   $ (4,247 )

 

See accompanying notes to unaudited 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

 

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. Additionally, 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, LLC (formerly Progressive Care Inc.):

 

On April 12, 2024, the Company entered into a Merger Agreement and Plan of Reorganization (the “Merger Agreement”) with Progressive Care Inc. and Progressive Care LLC, a Nevada limited liability company and a direct, wholly owned subsidiary of the Company (“Progressive Care” or “Merger Sub”). On  October 1, 2024 and pursuant to the terms of the Merger Agreement, the Company, Progressive Care Inc. and Merger Sub entered into a business combination transaction pursuant to which Progressive Care Inc. merged with and into Merger Sub (the “Merger”), with Merger Sub being the surviving entity of the Merger. Following the Merger, Progressive Care LLC became be a wholly-owned subsidiary of NextPlat. Progressive Care Inc. previously became a controlled subsidiary of the Company on July 1, 2023, therefore the Merger had no financial impact to the Company.

 

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 approved the Merger at the Company’s annual meeting held on September 13, 2024. 

 

Progressive Care, 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.

 

7

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

 

 

Note 2. Basis of Presentation and Principles of Consolidation

 

The accompanying Unaudited 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 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) income, 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. The year-end balance sheet data for comparative purposes was derived from audited consolidated financial statements.

 

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.  

 

In the period ended September 30, 2024, the Company changed its presentation method on the statements of cash flows from the indirect method to the direct method. The Company has recast the Condensed Consolidated Statements of Cash Flows and related disclosures for the period ended September 30, 2023, to conform to the direct presentation method in the current period.

 

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. The consolidated results of operations for the period ended September 30, 2024, include the full nine months results of operations attributable to Progressive Care compared to the consolidated nine months ended September 30, 2023 which include only the three months results of operations attributable to Progressive Care due to Progressive Care becoming a consolidated subsidiary of the Company on July 1, 2023.

 

On April 12, 2024, NextPlat entered into a Merger Agreement and Plan of Reorganization (the “Merger Agreement”) with Progressive Care Inc, and Progressive Care LLC, a Nevada limited liability company and a direct, wholly owned subsidiary of NextPlat (“Merger Sub”). Pursuant to the terms of the Merger Agreement, upon the approval of NextPlat's and Progressive Care's shareholders, Progressive Care would merge with and into Merger Sub (the “Merger”), with Merger Sub being the surviving entity of the Merger. The result of which being that Progressive Care would become a wholly-owned subsidiary of NextPlat.  

 

On September 13, 2024, the shareholders of each of NextPlat and Progressive Care approved the Merger Agreement and the transactions contemplated thereby. 

 

On October 1, 2024, at 12:01 Eastern time, the Merger became effective and Progressive Care merged with and into Mergers Sub and thereby became a wholly owned subsidiary of NextPlat. In connection with the Merger, each share of Progressive Care common stock that was issued and outstanding immediately prior to the effective time of the Merger was converted into 1.4865 shares of NextPlat common stock, and each warrant to purchase Progressive Care common stock that was outstanding and unexercised immediately prior to the effective time of the Merger automatically converted into a warrant to purchase shares of NextPlat common stock with each such warrant having and being subject to the same terms and conditions (including vesting and exercisability terms) as were applicable to such Progressive Care warrant immediately before the effective time. 

 

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. 

 

8

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

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 periods 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 nine months ended September 30, 2024. Selected accounting policy disclosures are provided below.

 

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 $1.0 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) income.

 

The relevant translation rates are as follows: for the nine months ended September 30, 2024, closing rate at $1.31 US$: GBP, quarterly average rate at $1.30 US$: GBP, for the nine months ended September 30, 2023, closing rate at $1.23 US$: GBP, quarterly average rate at $1.26 US$: 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 September 30, 2024 and December 31, 2023, we had contract liabilities of approximately $104,000 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 Condensed Consolidated Statements of Comprehensive (Loss) Income. 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 September - December 2023 claims were clawed back by these PBMs in May - June 2024). 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 were fully collected by the PBMs by the end of the second quarter of 2024. 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

         

On October 1, 2024, the Company completed the Merger of Progressive Care, which Progressive Care became a wholly-owned subsidiary of the Company. See “Note 2. Basis of Presentation and Principles of Consolidation” for more details of the transaction.

 

On October 15, 2024, the Company settled its ongoing lawsuit with Mr. Thomas Seifert, the Company’s former Chief Financial Officer. Under the terms of the settlement, the Company agreed to pay to Mr. Seifert $150,000 and to reimburse him for legal costs in the amount of $600,000. In exchange, the Company and Mr. Seifert each agreed to dismiss the lawsuit with prejudice and to release the other party from all claims.

 

The Company has evaluated subsequent events through the date of this filing, 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

 

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.

 

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

 

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 

(110-year amortization period

(25-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

 

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

 

  

Three Months Ended September 30,

 
  

2024

  

2023

 

Sales of products, net:

        

e-Commerce revenue

 $3,834  $2,931 

Pharmacy prescription and other revenue, net of PBM fees

  9,076   9,888 

Sub total

  12,910   12,819 

Revenues from services:

        

Pharmacy 340B contract revenue

  2,457   2,471 
         

Revenues, net

 $15,367  $15,290 

  

  

Nine Months Ended September 30,

 
  

2024

  

2023

 

Sales of products, net:

        

e-Commerce revenue

 $10,210  $8,764 

Pharmacy prescription and other revenue, net of PBM fees

  30,922