What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2024-04-11 compared with 2023-03-31 · 355 added, 27 removed, 2 unchanged (99% of the section changed)

Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

shares have been listed on the Nasdaq Capital Market since May 28, 2021.

Our common stock and warrants have been trading on the Nasdaq

Capital Market under the symbols “NXPL” and “NXPLW,” respectively, since January 21, 2022.

of Common Equity

of March 30, we had 14,441,025 shares of our common stock issued and outstanding held by approximately 495 stockholders of

have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock in the foreseeable

Market Information

Our shares have been listed on the Nasdaq Capital Market since May 28, 2021.

Our common stock and warrants have been trading on the Nasdaq Capital Market under the symbols “NXPL” and “NXPLW,” respectively, since January 21, 2022.

Holders of Common Equity

As of March 26, 2024, we had 18,724,596 shares of our common stock issued and outstanding held by approximately 491 stockholders of record.

Dividend Policy

We have never paid any cash dividends on our capital stock and do not anticipate paying any cash dividends on our common stock in the foreseeable future.

We intend to retain future earnings to fund ongoing operations and future capital requirements.

Any future decision to pay cash

dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations,

capital requirements and such other factors as the Board of Directors deems relevant.

Purchases of Equity Securities

Compensation Plan Information

Part III, Item 12 to this Annual Report on Form 10-K for information relating to securities authorized for issuance under our equity

compensation plans.

following table summarizes information, as of December 31, 2022, relating to equity compensation plans of the Company under which the

Company’s common stock is authorized for issuance.

Plan category

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted- average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans

Equity compensation plans approved by security holders:

Equity compensation plans

2020 Incentive Plan

Equity compensation plans

2021 Incentive Plan

Equity compensation plans not approved by security holders:

2018 Incentive Plan

Equity compensation issued pursuant to individual compensation arrangements

Any future decision to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

Issuer Purchases of Equity Securities

Equity Compensation Plan Information

See Part III, Item 12 to this Annual Report on Form 10-K for information relating to securities authorized for issuance under our equity compensation plans.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Notice Regarding Forward Looking Statements

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including those relating to our liquidity, our belief that we will not have sufficient cash and borrowing capacity to meet our working capital needs for the next 12 months without further financing, our expectations regarding acquisitions and new lines of business, gross profit, gross margins and capital expenditures.

Additionally, words such as “expects,” “anticipates,” “intends,” “believes,” “will,” “would,” “plan,” “vision” and similar words are used to identify forward-looking statements.

Some or all the results anticipated by these forward-looking statements may not occur.

Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include, but are not limited to, the Risk Factors which appear in our filings and reports made with the Securities and Exchange Commission (the “SEC”), our lack of working capital, the value of our securities, the impact of competition, the continuation or worsening of current economic conditions, technology and technological changes, a potential decrease in consumer spending and the condition of the domestic and global credit and capital markets.

Additionally, these forward-looking statements are presented as of the date this Form 10-K is filed with the SEC.

We do not intend to update any of these forward-looking statements.

This discussion should be read in conjunction with the other sections of this Report, including “ Risk Factors, ” “ Description of Business ” and the Financial Statements attached hereto pursuant and the related exhibits.

The various sections of this discussion contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Report.

The following discussion provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition.

The discussion should be read along with our financial statements and notes thereto contained elsewhere in this annual report.

The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties.

Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.

Business acquisition of Progressive Care, Inc.

On August 30, 2022, NextPlat entered into a Securities Purchase Agreement (the “SPA”) between NextPlat and Progressive Care, under which NextPlat, its Executive Chairman and Chief Executive Officer, Charles M.

Fernandez, board member, Rodney Barreto, and certain other investors invested an aggregate of $8.3 million into Progressive Care.

In connection with the SPA, NextPlat purchased 3,000 newly issued Units of Progressive Care valued at $6 million, with each Unit comprised of one share of Progressive Care’s Series B Convertible Preferred Stock, $0.001 par value, and one Investor Warrant to purchase a share of Series B Convertible Preferred Stock at an exercise price of $2,000 The Investor Warrants may also be exercised, in whole or in part, by means of a cashless exercise.

The Convertible Preferred Stock has a stated value of $2,000 per share and each Preferred Stock share has the equivalent voting rights of 500 common stock shares (after giving effect to the Reverse Stock Split described below).

Each share of Series B Convertible Preferred Stock is convertible at any time at the option of the holder into shares of Progressive Care Common Stock shares determined by dividing the stated value by the conversion price which is $4.00 (after giving effect to the Reverse Stock Split described below).

Also, pursuant to the SPA, Messrs.

Fernandez and Barreto were nominated for election to Progressive Care’s Board of Directors

In addition, on August 30, 2022, NextPlat Corp, Messrs.

Fernandez and Barreto, and certain other investors (collectively, the “NextPlat Investors”) purchased from Iliad Research a Secured Convertible Promissory Note, dated March 6, 2019, made by Progressive Care to Iliad (the “Note”).

The accrued and unpaid principal and interest under the note at the time of the purchase was approximately $2.8 million.

Upon the completion the purchase of the Note, the NextPlat Investors and Progressive Care entered into a Modification Agreement pursuant to which the Note was amended and restated with modified terms, including a modified conversion price of $4.00 per share of common stock (after giving effect to the Reverse Stock Split described below), and a mandatory conversion upon the later to occur of (a) the completion of the Progressive Care’s reverse stock split, and (b) the listing of Progressive Care’s common stock on a national exchange, including the Nasdaq Capital Market, the Nasdaq Global Market, or the New York Stock Exchange (the “A&R Note”).

As consideration for their entry into the Debt Modification Agreement, Progressive Care issued 105,000 shares of its common stock to the NextPlat Investors, of which NextPlat, Messrs.

Fernandez and Barreto, received 45,653, 18,261, and 18,261 shares, respectively.

On September 13, 2022, the Progressive Care Board of Directors appointed Charles M.

Fernandez as Chairman of the Board of Directors and Rodney Barreto as the Vice Chairman of the Board of Directors.

In connection with these appointments, Alan Jay Weisberg, Progressive Care’s current Chairman and Chief Executive Officer, was appointed to serve as a Vice Chairman.

On September 12, 2022, two of Progressive Care’s Directors, Birute Norkute and Oleg Firer, resigned as Directors.

On October 7, 2022, the Progressive Care Board of Directors unanimously voted to approve the appointment of Pedro Rodriguez, MD to the Board.

Rodriguez was nominated to the Progressive Care Board by NextPlat.

On November 11, 2022, Mr.

Weisberg resigned from his positions as Progressive Care’s Chief Executive Officer and co-Vice-Chairman of the Board of Directors.

On the same date, the Board appointed Mr.

Fernandez to serve as the new Chief Executive Officer immediately.

On December 29, 2022, Progressive Care filed a Certificate of Amendment to Articles of Incorporation (the “Amendment to Articles”) with the Secretary of State of the State of Delaware.

Pursuant to the Amendment to Articles, each 200 shares of Progressive Care’s common stock outstanding was converted into one share of common stock (the “Reverse Stock Split”) and the number of shares of common stock that Progressive Care is authorized to issue was reduced to 100 million (the “Reduction in Authorized Stock”).

The Reverse Stock Split and the Reduction in Authorized Stock were approved by the Progressive Care Board of Directors and the shareholders.

On May 5, 2023, NextPlat entered into a Securities Purchase Agreement (the “SPA”) with Progressive Care, pursuant to which NextPlat purchased 455,000 newly issued units of securities from Progressive Care (the “Units”) at a price per Unit of $2.20 for an aggregate purchase price of $1 million (the “Unit Purchase”).

Each Unit consisted of one share of common stock, par value $0.0001 per share, of Progressive Care and one warrant to purchase a share of common stock (the “PIPE Warrants”).

The PIPE Warrants have a three-year term and are immediately exercisable.

Each PIPE Warrant is exercisable at $2.20 per share of common stock.

On May 9, 2023, the Companies closed the transactions contemplated in the SPA.

Progressive Care received cash proceeds of $880,000, net of placement agent commission of $70,000 and legal fees of $50,000.

Simultaneous with the closing of the Unit Purchase on May 9, 2023, Progressive Care entered into a Debt Conversion Agreement (the “DCA”) with the NextPlat Investors relating to the A&R Note.

Pursuant to the DCA, the NextPlat Investors agreed to convert the total approximately $2.9 million of outstanding principal and accrued and unpaid interest under the A&R Note to Proogressive Care common stock at a conversion price of $2.20 per share (the “Debt Conversion”).

Of the total 1,312,379 shares of Progressive Care common stock issued pursuant to the Debt Conversion, NextPlat received 570,599 shares, Charles M.

Fernandez received 228,240 shares, and Rodney Barreto received 228,240 shares.

In addition, each of the NextPlat Investors also received a warrant to purchase one share of Progressive Care common stock for each share of Progressive Care common stock they received upon conversion of the A&R Note (the “Conversion Warrants”).

The Conversion Warrants have a three-year term and were immediately exercisable.

Each Conversion Warrant is exercisable at $2.20 per share of Common Stock.

In addition, Progressive Care issued 330,000 warrants to certain existing Progressive Care investors to induce them to approve the Unit Purchase (the “Inducement Warrants”).

Fernandez and Rodney Barreto received Inducement Warrants to purchase 190,000 and 30,000 shares of Common Stock, respectively.

The Inducement Warrants have a three-year term and were immediately exercisable.

Each Inducement Warrant is exercisable at $2.20 per share of Progressive Care common stock.

On July 1, 2023, NextPlat, along with Messrs.

Fernandez and Barreto, exercised certain common stock purchase warrants issued by Progressive Care (the “RXMD Warrants”) and were issued shares of Progressive Care common stock.

NextPlat exercised RXMD Warrants on a cashless basis and was issued 402,269 shares of Progressive Care common stock.

NextPlat also exercised RXMD Warrants on a cash basis and paid consideration in the amount of $506,000 and was issued 230,000 shares of Progressive Care common stock.

Fernandez exercised RXMD Warrants on a cashless basis and was issued 211,470 shares of Progressive Care common stock.

Barreto exercised RXMD Warrants on a cashless basis and was issued 130,571 shares of Progressive Care common stock.

At the time of exercise, all of the above RXMD Warrants were in-the-money.

After the exercise of the RXMD Warrants, NextPlat and Messrs.

Fernandez and Barreto collectively owned approximately 53% of Progressive Care’s voting common stock.

Also, on July 1, 2023, NextPlat and entered into a voting agreement with Messrs.

Fernandez and Barreto whereby at any annual or special shareholders meeting of Progressive Care’s stockholders, and whenever the holders of Progressive Care’s common stock act by written consent, Messrs.

Fernandez and Barreto agreed to vote all of the shares of 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 Progressive Care common stock) that they own, directly or indirectly, in the same manner that NextPlat votes its shares of Progressive Care common stock.

The voting agreement is irrevocable and perpetual in term.

As a result of the common stock purchase warrant exercises and the entry into the voting agreement, NextPlat concluded that there was a change in control of Progressive Care.

As of July 1, 2023, NextPlat has the right to control more than 50 percent of the voting interests in Progressive Care through the concurrent common stock purchase warrant exercises and voting agreement noted above.

Beginning on July 1, 2023, the Company changed the accounting method for its investment in Progressive Care, which prior to July 1, 2023 had been accounted for as an equity method investment to consolidation under the voting interest model in FASB ASC Topic 805.

Starting on July 1, 2023, Progressive Care became a consolidated subsidiary of the Company.

e-Commerce Operations:

Leveraging the e-commerce experience of the Company’s management team and the Company’s existing e-commerce platforms, the Company has embarked upon the rollout of a state-of-the-art e-commerce platform to collaborate with businesses to optimize their ability to sell their goods online, domestically, and internationally, and enabling customers and partners to optimize their e-commerce presence and revenue, which we expect will become the focus of the Company’s business in the future.

Historically, the business of NextPlat has been the provision of a comprehensive array of Satellite Industry communication services, and related equipment sales.

The Company operates two main e-commerce websites as well as 25 third-party e-commerce storefronts 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 comprehensive systems upgrades to support this initiative.

e-Commerce transaction volumes at the Company’s owned and operated websites in the UK and Unites States continued to grow throughout the third quarter setting monthly performance records.

Healthcare Operations:

Progressive Care, through its wholly owned subsidiaries, currently owns and operates five pharmacies, which generate most of its pharmacy revenues, which is derived from dispensing medications to their patients.

Progressive Care also provides patient health risk reviews and free same-day delivery.

Progressive Care provides TPA ("Third Party Administration"), data management, COVID-19 related diagnostics and vaccinations, prescription pharmaceuticals, compounded medications, telepharmacy services, anti-retroviral medications, medication therapy management, the supply of prescription medications to long-term care facilities, medication adherence packaging, contracted pharmacy services for 340B covered entities under the 340B Drug Discount Pricing Program, and health practice risk management.

Progressive Care are focused on improving the lives of patients with complex chronic diseases through a patient and provider engagement and their partnerships with payors, pharmaceutical manufacturers, and distributors.

Progressive Care offer a broad range of solutions to address the dispensing, delivery, dosing, and reimbursement of clinically intensive, high-cost drugs.

Progressive Care’s pharmacies also provides contracted pharmacy services for 340B covered entities under the 340B Drug Discount Pricing Program.

Under the terms of these agreements, Progressive Care’s pharmacies act as a pass-through for reimbursements on prescription claims adjudicated on behalf of the 340B covered entities in exchange for a dispensing fee per prescription.

These fees vary by the covered entity and the level of services provided by Progressive Care.

Progressive Care’s focus is on complex chronic diseases that generally require multiyear or lifelong therapy, which drives recurring revenue and sustainable growth.

Progressive Care’s pharmacy services revenue growth is from expanding their services, new drugs coming to market, new indications for existing drugs, volume growth with current clients, and additions of new customers due to their focus on higher patient engagement, benefit of free delivery to the patient, and clinical expertise.

The pharmacies also expanded revenue growth through the signing of new contract pharmacy service and data management contracts with 340B covered entities.

Progressive Care provides data management and TPA services for 340B covered entities, pharmacy analytics, and programs to manage HEDIS Quality Measures including Medication Adherence.

These offerings cater to the need for frontline providers to understand best practices, patient behaviors, care management processes, and the financial mechanisms behind these decisions.

ClearMetrX provides data access, and actionable insights that providers and support organizations can use to improve their practice and patient care.

ClearMetrX's TPA services include management of wholesale accounts, patient eligibility with regard to the 340B drug program, development and review of 340B policies and procedures, and management of receivables.

Distribution of Our Products Through Alibaba

On July 13, 2021, we announced that our Global Telesat Communications (“GTC”) unit entered into an agreement with Alibaba.com, the B2B (Business-to-Business) e-commerce website owned and operated by Alibaba Group Holding Limited, also known as Alibaba Group (NYSE:

9988), a Chinese multinational technology company specializing in e-commerce, retail, internet, and technology.

GTC is a Gold-level Supplier on Alibaba.com, the world’s largest Business-to-Business (B2B) e-commerce website.

Under the agreement, GTC significantly expanded its 24/7/365 e-commerce presence with the launch of its latest global storefront on Alibaba.com on which it offers a range of satellite IoT and connectivity products.

These include our specialized satellite tracking products, some of which operate using the Company’s many ground station-based network processors and can be used to track and monitor the location of cars, trucks, trailers, boats, containers, animals, and other remote assets.

Although we currently have a limited range of products available through the Alibaba storefront due to supply chain constrictions, we plan to ultimately have up to 500 products and connectivity services available on Alibaba.com.

The agreement will continue on a year-to-year basis.

Critical Accounting Policies and Estimates

Our consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States.

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, estimated asset lives, impairments and bad debts.

These estimates and assumptions are affected by management’s applications of accounting policies.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies, grouped by our activities, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

For additional information, see Item 8 of Part II, “Financial Statements and Supplementary Data – Note 3 – Summary of Significant Accounting Policies.”

Revenue Recognition and Unearned Revenue

e-Commerce Operations:

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 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.

The Company’s customers generally purchase a combination of our products and services as part of a multiple element arrangement.

The Company’s assessment of which revenue recognition guidance is appropriate to account for each element in an arrangement can involve significant judgment.

This assessment has a significant impact on the amount and timing of revenue recognition.

The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, we perform the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) we satisfy a performance obligation.

The five-step model is applied to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services transferred to the customer.

At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct.

We then recognize revenue in the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Healthcare Operations:

We recognize product sales from prescriptions dispensed to patients (customers) at the time the drugs are physically delivered to a customer or when a customer picks up their prescription, which is the point in time when control transfers to the customer.

340B dispensing fees are a component of 340B contract revenue, which are recognized at the time the drugs are received by the patient, by either delivery or customer pick up.

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 customer’s insurance provider.

We accrue an estimate of PBM fees, including direct and indirect remuneration (“DIR”) fees, which are assessed or expected to be assessed by payers at some point after adjudication of a claim, as a reduction of 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.

We record unearned revenue for prescriptions that are filled but not yet delivered at period-end.

Billings for most prescription orders are with third-party payers, including Medicare, Medicaid, and insurance carriers.

Customer returns are nominal.

Prescription revenues exceeded 80% of total revenue for all periods presented.

We recognize revenue from TPA services as we satisfy the services under the TPA contract with a 340B covered entity.

TPA services provided to covered entities include consulting services, accounting and reconciliation of contract pharmacy billings, and various compliance services.

We recognize 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.

Billings for most prescription orders are with third-party payers, including Medicare, Medicaid, and insurance carriers.

Customer returns are nominal.

Stock-Based Compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period).

The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation.

This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issues to non-employees (for example, service providers, external legal counsel, suppliers, etc.).

The ASU expanded the scope of ASC 718, Compensation - Stock Compensation, which previously only included share-based payments issued to employees, to also includes share-based payments issues to non-employees for goods and services.

Consequently, the accounting for share-based payment to non-employees and employees will be substantially aligned.

This standard became effective for the financial statements issues by public companies for the annual and interim periods beginning after December 15, 2018.

Management adopted this standard on January 1, 2019.

The Company estimated the fair value of stock options granted using the Black-Scholes option-pricing formula.

This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

The Company’s determination of the fair value using the option-pricing model is affected by the stock price as well as assumptions regarding the number of highly subjective variables.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price of over the value assigned to net tangible and identifiable intangible assets.

Progressive Care, which is our Healthcare Operations, is considered to be the reporting unit for goodwill.

We perform the required annual impairment tests of goodwill at the end of each fiscal year on our reporting unit.

To determine the fair value of the reporting unit, we use a discounted cash flow model with market-based support as our valuation technique to measure the fair value for our reporting unit.

The discounted cash flow model uses five-to-ten-year forecasted cash flows plus a terminal value based on a multiple of earnings or by capitalizing the last period’s cash flows using a perpetual growth rate.

Our significant assumptions in the discounted cash flow models include, but are not limited to:

the weighted average cost of capital (“WACC”), revenue growth rates, including perpetual revenue growth rates, and operating margin percentages of the reporting unit's business.

We consider the current market conditions when determining assumptions.

The total forecasted cash flows are discounted based on ranges included in assumptions regarding our WACC.

Lastly, we reconcile the aggregate fair values of our reporting units to our market capitalization, which include a reasonable control premium based on market conditions.

The use of estimates and the development of assumptions results in uncertainties around forecasted cash flows.

A change in any of these estimates and assumptions used in the annual test, a degradation in the overall markets served by these reporting units, among other factors, could have a negative material impact to the fair value of the reporting units and could result in a future impairment charge.

There can be no assurance that our future goodwill impairment testing will not result in a charge to earnings.

This impairment charge could have a negative material impact on our results of operations.

Acquired intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite.

For intangible assets purchased in a business combination, the estimated fair values of the assets received are used to establish their recorded values.

Valuation techniques consistent with the market approach, income approach, and/or cost approach are used to measure fair value.

Goodwill and other indefinite-lived intangible assets are assessed annually for impairment in the fourth fiscal quarter and in interim periods if events or changes in circumstances indicate that the assets may be impaired.

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 Inc.

common stock and options issued for services, net realizable value of accounts receivables the useful lives of property and equipment and intangible assets, the estimate of the fair value of the lease liability and related right of use assets, PBM fee estimates, and the estimates of the valuation allowance on deferred tax assets and corporate income taxes.

Effect of Exchange Rate on Results

The Company’s reporting currency is U.S.

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 statements of operations.

The results of operations for the year ended December 31, 2023 include results of operations for the Progressive Care subsidiary for the period from the date of acquisition, July 1, 2023, to December 31, 2023.

Results of Operations

Our revenues were as follows (in thousands):

Year Ended December 31,

Cost of revenue

Operating expenses

Loss before other (income) expense

Other expense

Loss before income taxes and equity in net loss of affiliate

Loss before equity in net loss of affiliate

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

Equity in net loss of affiliate

Net loss attributable to noncontrolling interest

Net loss attributable to NextPlat Corp

nm = not meaningful

For the twelve months ended December 31, 2023 and 2022, we recognized overall revenue from operations of approximately $37.8 million and $11.7 million, respectively, an overall increase of approximately $26.0 million for the twelve months ended December 31, 2023, when compared to the same period in 2022.

The increase in revenue was primarily attributable and increase in healthcare operations of approximately $26.8 million as a result of the Progressive Care acquisition on July 1, 2023, and offset by a decrease in e-Commerce revenue of approximately $0.7 million.

Gross profit margins increased from approximately 21.3% for the twelve months ended December 31, 2022, to 30.0%for the twelve months ended December 31, 2023.

The increase in gross profit margins during 2023 compared to 2022, was primarily attributable to the healthcare operations as a result of the Progressive Care acquisition on July 1, 2023.

Loss before other (income) expense increased by approximately $16.0 million for the twelve months ended December 31, 2023, when compared to the twelve months ended December 31, 2022 , as a result of the increase in gross profit of approximately $8.8 million, offset by the increase in operating expenses of approximately $24.8 million, which is mainly attributable to the goodwill impairment charge of approximately $13.9 million during 2023.

See detailed discussion below.

Our revenues were as follows (in thousands):

Year Ended December 31,

Sales of products, net:

Pharmacy prescription and other revenue, net of PBM fees

e-Commerce revenue

Revenues from services:

Pharmacy 340B contract revenue

Revenues, net

Sales for the twelve months ended December 31, 2023, consisted primarily of e-Commerce sales of satellite phones, tracking devices, accessories, airtime plans, and pharmacy prescription, and 340B contract revenues.

For the twelve months ended December 31, 2023, overall revenues were approximately $37.8 million compared to $11.7 million of revenues for the twelve months ended December 31, 2022, an increase in of approximately $26.0 million or 222.4%.

Total e-Commerce revenues were approximately $11.0 million for the twelve months ended December 31, 2023, as compared to $11.7 million for the twelve months ended December 31, 2022, a decrease of approximately $0.7 million or 6.3%.

The decrease was due to non-recurring revenue of approximately $1.2 million as a result of the war in the Ukraine in 2022 versus 2023, government imposed regulations in Germany resulting in delays selling products in the German market of approximately $1.5 million, and offset by growth in other markets of approximately $2.0 million.

Total pharmacy prescription and 304B contract revenues were approximately $26.8 million for the six months ended December 31, 2023 as a result of the Progressive Care acquisition on July 1, 2023.

The pharmacy filled approximately 251,000 prescriptions for the six months ended December 31, 2023

Operating Expenses .

Our operating expenses were as follows (in thousands):

Year Ended December 31,

Selling, general and administrative

Salaries, wages and payroll taxes

Goodwill impairment

Professional fees

Depreciation and amortization

Operating expenses

Total operating expenses for the twelve months ended December 31, 2023, were approximately $34.5 million, an increase of approximately $24.8 million on or 256.4%, from total operating expenses for the twelve months ended December 31, 2022, of approximately $9.7 million.

Factors contributing to the increase are described below.

Selling, general and administrative (“SG&A”) expenses were approximately $9.9 million and $5.1 million for twelve months ended December 31, 2023 and 2022, respectively, an increase of approximately $4.8 million or 94.9%.

The increase for the twelve months ended December 31, 2023, was mainly attributable to the increase in stock-based compensation of approximately $2.4 million, other operating expenses as it relates to the e-Commerce operations of approximately $0.5 million, and approximately $1.9 million as it relates to operating expenses of the healthcare operations as a result of the Progressive Care acquisition on July 1, 2023.

Salaries, wages and payroll taxes were approximately $6.6 million and $2.6 million for twelve months ended December 31, 2023 and 2022, respectively, an increase of approximately $4.1 million or 159.0%.

The increase was mainly attributable to the healthcare operations as a result of the Progressive Care acquisition as of July 1, 2023, of approximately $4.0 million and an increase in e-Commerce salaries and wages of approximately $0.1 million.

The company recorded a goodwill impairment charge of approximately $13.9 million for the twelve months ended December 31, 2023 .

We recorded goodwill of approximately $14.6 million as a result of the Progressive Care consolidation on July 1, 2023, net of the change in valuation allowance attributable to the business combination, and was assigned to our Pharmacy Operations segment.

On December 31, 2023, we performed our annual goodwill impairment test by reporting unit to evaluate the carrying amount of goodwill as compared to its fair value.

Based on the impairment test, it was determined the carrying amount of goodwill as of December 31, 2023 exceeded its fair value resulting in the Company recording an impairment charge of approximately $13.9 million for the year ended December 31, 2023, and was recorded to the Pharmacy Operations reporting segment.

The remaining carry amount of goodwill as of December 31, 2023 was approximately $0.7 million and was allocated to the Pharmacy Operations reporting segment.

See Note 14 - Goodwill and Intangible Assets, net.

Professional fees were approximately $2.0 million and $1.6 million for the twelve months ended December 31, 2023 and 2022, respectively, an increase of approximately $0.4 million or 27.6%.

The increase was mainly attributable to legal and consulting fees as it relates to the healthcare operations as a result of the Progressive Care acquisition as of July 1, 2023, of approximately $0.4 million.

Professional fees associated with our e-Commerce operations remained flat year over year.

Depreciation and amortization expenses were approximately $2.1 million and $0.5 million for the twelve months ended December 31, 2023 and 2022, respectively, an increase of approximately $1.6 million or 330.6%.

The increase was mainly attributable to depreciation and amortization as it relates to the healthcare operations from the Progressive Care acquisition on July 1, 2023, of approximately $1.4 million.

Total Other Expense .

Our total other expense increased by approximately $1.1 million for the twelve months ended December 31, 2023 when compared to same period in 2022, and was mainly due to interest received of approximately $599,000, favorable impact of fluctuations in foreign exchange rates of approximately $236,000, management fees earned of approximately $115,000, and write off of aged liabilities associated with discontinued operations of approximately $201,000

Equity Method Investment .

We recorded a net gain in equity of our affiliate, Progressive Care, of approximately $11.4 million for the twelve months ended December 31, 2023, as a result of a change in the accounting treatment from equity method to consolidation as of July 1, 2023.

For the six months ended June 30, 2023, we recorded a net loss in the equity of our affiliate, Progressive Care, of approximately $1.4 million which was accounted for as an equity method investment.

For the twelve months ended December 31, 2022 we recorded a net loss in the equity of our affiliate, Progressive Care, of approximately $1.7 million, accounted for an equity method investment.

See Note 15 – Equity Method Investment.

We recorded net losses of approximately $12.4 million and $9.2 million for the twelve months ended December 31, 2023 and 2022, respectively.

The increase was a result of the factors described above.

Comprehensive Income .

We recorded comprehensive (gains) losses for foreign currency translation adjustments of approximately ($107,000) and $129,000 for the twelve months ended December 31, 2023 and 2022, respectively.

The change was primarily attributed to exchange rate variances.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis.

As of December 31, 2023, we had a cash balance of approximately $26.3 million.

Our working capital was approximately $29.4 million at December 31, 2023.

Our current assets at December 31, 2023 increased 106.0% from December 31, 2022 primarily due to cash received during capital raise in April 2023 and Progressive Care consolidation as of July 1, 2023.

Our current liabilities at December 31, 2023 increased approximately $12.2 million from December 31, 2022 primarily due to Progressive Care consolidation as of July 1, 2023.

As of the date of this report, the Company’s existing cash resources and existing borrowing availability are sufficient to support planned operations for the next 12 months.

As a result, management believes that the existing financial resources are sufficient to continue operating activities for at least one year past the issuance date of the financial statements.

For the Year Ended December 31,

(in thousands)

Net change in cash from:

Operating activities

Investing activities

Financing activities

Effect of exchange rate on cash

Change in cash

Cash at end of period

Operating Activities

Net cash flows used by operating activities totaled approximately $3.6 million and $3.6 million for the twelve months ended December 31, 2023 and 2022, respectively, and changed by approximately $0.0 million period over period.

The unfavorable change of approximately $0.0 million was primarily attributable to the following:

- unfavorable change in net loss of approximately $3.3 million;

- favorable change in other non-cash items of approximately $6.6 million and include stock-based compensation, amortization, depreciation, loss in equity of equity method investment, and gain in equity method investment;

- unfavorable change in operating assets of approximately $5.7 million and mainly a result of increased accounts receivable and inventory due to the acquisitions of Progressive Care as of July 1, 2023;

- favorable change in operating liabilities of approximately $2.3 million and mainly a result of increased accounts payable due to the acquisition of Progressive Care as of July 1, 2023.

Investing Activities

Net cash flows provided by (used in) investing activities were approximately $5.2 million and ($7.7 million) for the twelve months ended December 31, 2023 and 2022, respectively, and changed by approximately $12.9 million period over period.

The favorable change of approximately $12.9 million was primarily attributable to the following:

- cash acquired in the acquisition of Progressive Care of approximately $7.4 million;

- non-recurring capital contributions of approximately $5.5 million to equity method investee, Progressive Care (approximately $1.5 million in 2023 vs.

$7.0 million in 2022);

- fixed asset additions of approximately $0.1 million.

Financing Activities

Net cash flows provided by financing activities were approximately $5.9 million and $13.0 million for the twelve months ended December 31, 2023 and 2022, respectively, and changed by approximately $7.2 million period over period.

The cash provided by financing activities during the twelve months ended December 31, 2023 and 2022 was primarily attributable to proceeds from capital raises during those periods offset by payments on loans.

Recent Financing Activities

January 2022 Private Placement of Common Stock

On December 31, 2021, after markets closed, a securities purchase agreement (the “Purchase Agreement”) was circulated to, and signatures were received from, certain institutional and accredited investors (the “December Investors”) in connection with the sale in a private placement by the Company of 2,229,950 shares of the Company’s common stock (the “December Offering”).

On January 2, 2022, the Company delivered to December Investors a fully executed Purchase Agreement, which was dated December 31, 2021.

The purchase price for the common stock sold in the December Offering was $3.24 per share, the closing transaction price reported by Nasdaq on December 31, 2021.

The closing of the December Offering occurred on January 5, 2022.

The Company received gross proceeds from the sale of the common stock in the December Offering of approximately $7.2 million.

The Company intends to use the proceeds from the December Offering for general corporate purposes, including potential acquisitions and joint ventures.

Approximately 73% of funds raised in the December Offering were secured from existing shareholders and from the members of the Company’s senior management and Board of Directors.

In connection with the December Offering, the Company entered into a registration rights agreement with the December Investors (the “Registration Rights Agreement”), pursuant to which, among other things, the Company prepared and filed with the SEC a registration statement to register for resale the shares of the Company’s common stock sold in the Offering.

The shares of common stock offered and sold in the December Offering were sold in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act and corresponding provisions of state securities or “blue sky” laws.

The terms of the transaction disclosed above, including the provisions of the Purchase Agreement and Registration Rights Agreement, were approved by the Board of Directors and because some of the securities were offered and sold to officers and directors of the Company, such terms were separately reviewed and approved by the Audit Committee of the Board of Directors.

December 2022 Private Placement of Common Stock

On December 9, 2022, the Company entered into a securities purchase agreement with certain institutional and accredited investors for the sale by the Company in a private placement of 4,575,429 units, each unit comprising (i) one share of the Company’s common stock, and (ii) one warrant to purchase one share of common stock.

The offering price of the units was $1.75 per unit.

The warrants included in the units are exercisable at a price of $1.75 per share and expire three years from the date of issuance.

The offering closed on December 14, 2022, and the Company received gross proceeds of approximately $8.0 million for the units.

The Company intends to use the proceeds from the offering for working capital needs, potential acquisitions, joint ventures, and ongoing business transition activities.

In connection with the offering, the Company entered into a registration rights agreement, pursuant to which, among other things, the Company prepared and filed with the Securities and Exchange Commission (the “SEC”) a registration statement to register for resale the shares of Common Stock sold in the offering and the shares of Common Stock underlying the Warrants.

The securities offered and sold in the December Offering were sold in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act and corresponding provisions of state securities or “blue sky” laws.

The terms of the transaction disclosed above, including the provisions of the securities purchase agreement and registration rights agreement, were approved by the Board of Directors and because some of the securities were offered and sold to officers and directors of the Company, such terms were separately reviewed and approved by the Audit Committee of the Board of Directors.

April 2023 Private Placement of Common Stock

On April 5, 2023, the Company entered into a securities purchase agreement with an accredited investor (the “Investor”) for the sale by the Company in a private placement of 3,428,571 shares of the Company’s common stock, $0.0001 par value per share (the “Common Stock”).

The offering price of the Common Stock was $1.75 per share, the closing price of the Common Stock on April 4, 2023.

On April 11, 2023, the Private Placement closed.

Upon the closing of the Private Placement, the Company received gross proceeds of approximately $6.0 million.

The Company sold the Common Stock to the Investor in reliance on the exemption from registration afforded by Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act and corresponding provisions of state securities or “blue sky” laws.

The Investor represented that it is acquiring the Common Stock for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof.

Accordingly, the Common Stock has not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

Acquisition of Progressive Care Inc.

See the section above entitled "- Overview - Business acquisition of Progressive Care, Inc."

Off-balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties.

We have not entered any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our consolidated financial statements.

Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

Quantitative and Qualitative Disclosures about Market Risk.

Consistent with the rules applicable to “Smaller Reporting Companies” we have omitted information required by this Item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity