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 2024 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 2024 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. 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.  

Reclassifications

Beginning in the third quarter of 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 March 31, 2024, to conform to the direct presentation method in the current period.

Effective January 1, 2025, the Company early adopted Accounting Standards Update (“ASU”) 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”, on a retrospective basis, which resulted in reclassifications of certain expenses in the prior year period to conform to the current year presentation within cost of services, selling, general and administrative, salaries, wages and payroll taxes, and depreciation and amortization on the Condensed Consolidated Statements of Comprehensive Loss. The recast of these certain expenses did not impact net income for the prior year period.

Progressive Acquisition and Merger Update

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, on July 1, 2023, we acquired a controlling voting interest in Progressive Care Inc. (“Progressive Care”) through the exercise of in-the-money warrants and the execution of a voting agreement with two of our directors. This transaction resulted in a change in control under ASC 805 and Progressive Care became a consolidated subsidiary of the Company, having previously been accounted for under the equity method.

Subsequently, on October 1, 2024, following shareholder approvals, Progressive Care completed a merger with and into a wholly owned subsidiary of NextPlat, becoming a wholly owned subsidiary of the Company. In connection with the merger, each outstanding share of Progressive Care common stock was converted into 1.4865 shares of NextPlat common stock, and outstanding Progressive Care warrants were converted into equivalent NextPlat warrants.

Users of the financial statements are encouraged to refer to our 2024 Form 10-K for a more detailed discussion of the acquisition and subsequent merger.

Business Acquisition of Outfitter Satellite, Inc.

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 business combinations, common stock, warrants and options issued for services, net realizable value of accounts receivables and other receivables, the useful lives of property and equipment and intangible assets, determining the potential impairment of long-lived assets and goodwill, the estimate of the fair value of the lease liability and related right-of-use assets, pharmacy benefit manager (“PBM”) fee estimates, inventory reserve estimates, and the estimates of the valuation allowance on deferred tax assets and corporate income taxes.