NextPlat Corp 10-K

ITEM 9A. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures. Based on management’s evaluation (with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO)), as of the end of the period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15I and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. (b) Inherent Limitation on Controls. Management, including the CEO and CFO, does not expect that our disclosure controls and procedures will prevent or detect all errors and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to errors or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. (c) Management ’ s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting includes policies and procedures that: (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of assets; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and (c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. Our internal control over financial reporting is a process designed with the participation of our principal executive officer and principal financial officer or persons performing similar functions to provide reasonable assurance to our management and board of directors regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Material Weakness in Internal Control Over Financial Reporting Our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2024 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework (2013). Based on this evaluation, management concluded that the Company’s internal control over financial reporting was not effective at the reasonable assurance level as of December 31, 2024 because of the material weakness described below. A material weakness is a deficiency or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim consolidated financial statements will not be prevented or detected on a timely basis. In connection with our preparation of the consolidated financial statements, we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting as of December 31, 2024, related to the valuation of our inventories. The Company did not have sufficient controls in place to assess whether inventory was recorded at the lower of cost or net realizable value (“NRV”), as required by U.S. GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. 76 Table of Contents Remediation Management is committed to improving its internal control over financial reporting and remediating the material weakness described above as quickly as possible. Management has outlined a remediation plan to ensure that the control deficiency is remediated. Management’s remediation plan includes the following: a.) implementing formalized policies and procedures to perform comprehensive NRV assessments for inventory at each reporting period; b.) establishing a review process requiring senior management oversight to ensure NRV calculations are accurate and appropriately documented; and c.) enhancing the accuracy of pricing and cost data used in NRV calculations by integrating reliable internal tracking mechanisms. We believe that the foregoing measures will remediate the identified material weakness, although management is continuing to assess the need for any additional steps to remediate the underlying causes that gave rise to the material weakness. The material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time. There is no assurance that additional remedial steps will not be necessary. We anticipate the remediation of the material weakness will be fully implemented and validated by the end of the second quarter of 2025. Notwithstanding the conclusion by our management that our controls and procedures as of December 31, 2024 were not effective, as described above with respect to inventory valuation, management believes that the consolidated financial statements and related financial information included in this Annual Report on Form 10-K fairly present in all material respects our financial position, results of operations and cash flows as of and for the years then ended, in conformity with U.S. GAAP. This Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules from the SEC that permit us to provide only management’s report in this annual report. (d) Changes in Internal Control Over Financial Reporting. There has been no change in our internal control over financial reporting during our fourth fiscal quarter ended December 31, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ITEM 9B. OTHER INFORMATION Rule 10b5 - 1 Trading Arrangement During the three months ended December 31, 2024 , no director or officer of the Company adopted or terminated any “Rule 10b5 - 1 trading arrangement” or “non-Rule 10b5 - 1 trading arrangement,” as each term is defined in Item 408 (a) of Regulation S-K. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICATIONS THAT PREVENT INSPECTIONS Not applicable. 77 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICES AND CORPORATE GOVERNANCE The information required by this item is incorporated by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2024. Our Board of Directors has adopted a written Code of Conduct and Ethics applicable to all officers, directors and employees, which is available on our website (www.nextplat.com) under “Governance Documents” within the “Corporate Governance” section. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding amendment to, or waiver from, a provision of this Code and by posting such information on the website address and location specified above. ITEM 11. EXECUTIVE COMPENSATION The information required by this item is incorporated by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2024. ITEM 12. SECURTIY OWENERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTER The information in Item 5 of this report regarding our Equity Compensation Plans is herein by reference. The remainder of the information required by this item is incorporated by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2024. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by this item is incorporated by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2024. ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES The information required by this item is incorporated by reference to our Proxy Statement for the 2025 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission within 120 days of the fiscal year ended December 31, 2024. PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Documents filed as part of this report. (1) Financial Statements. See Index to Consolidated Financial Statements, which appears on page F-1 hereof. The financial statements listed in the accompanying Index to Consolidated Financial Statements are filed herewith in response to this Item. (2) Financial Statements Schedules. None. (3) Exhibits 78 Table of Contents Exhibit No. Description 1.1 Placement Agency Agreement dated December 9, 2022, by and between the Company and Dawson James Securities, Inc. (incorporated by reference to Exhibit 1.1 to the Company’ s Current Report on Form 8-K filed with the Commission on December 13, 2022). 2.1 Merger Agreement and Plan of Reorganization by and among NextPlat Corp., Progressive Care LLC, and Progressive Care Inc., dated April 12, 2024 (incorporated by reference from Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on April 17, 2024). 3.1 Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2014). 3.2 Certificate of Amendment to Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.3 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2014). 3.3 Certificate of Amendment to Amended and Restated Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 8, 2016). 3.4 Certificate of Change to the Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.7 to the Company’ s Current Report on Form 8-K filed with the SEC on May 28, 2021). 3.5 Certificate of Amendment of the Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company’ s Current Report on Form 8-K filed with the SEC on January 20, 2022). 3.6 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Company’ s Current Report on Form 8-K filed with the SEC on January 20, 2022). 4.1 Description of NextPlat Corp’ s Securities Registered Under Section 12 of the Exchange Act. (Incorporated by reference to Exhibit 4.1 to the Company ’ s Annual Report on Form 10-K filed with the SEC on March 31, 2022). 4.2 Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 4.1 to the Company’ s Registration Statement on Form S-1/A filed with the SEC on April 7, 2021). 4.3 Form of Warrant Agent Agreement (incorporated by reference to Exhibit 4.2 to the Company’ s Registration Statement on Form S-1/A filed with the SEC on April 7, 2021). 4.4 Form of Underwriter’ s Warrant (incorporated by reference to Exhibit 4.3 to the Company ’ s Registration Statement on Form S-1/A filed with the SEC on April 7, 2021). 4.5 Form of Warrant Agreement issued in offering (incorporated by reference to Exhibit 4.1 to the Company’ s Current Report on Form 8-K filed with the Commission on December 13, 2022) 4.6 Form of Placement Agent Warrant Agreement issued in offering (incorporated by reference to Exhibit 4.2 to the Company’ s Current Report on Form 8-K filed with the Commission on December 13, 2022) 10.1 + David Phipps Employment Agreement (Incorporated by reference from the Current Report on Form 8-K filed with the SEC on March 11, 2021). 10.2 + 2020 Equity Incentive Plan (Incorporated by reference from the Current Report on Form 8-K filed with the SEC on December 31, 2021). 10.3 Debenture by and among Global Telesat Communications LTD and HSBC UK BANK PLC, dated July 16, 2020 (Incorporated by reference from the Company’ s Current Report on Form 8-K filed on July 21, 2020). 10.4 Coronavirus Business Interruption Loan Agreement by and among Global Telesat Communications LTD and HSBC UK BANK PLC, dated July 16, 2020 (Incorporated by reference from the Company’ s Current Report on Form 8-K filed on July 21, 2020). 10.5 + David Phipps Employment Agreement (incorporated by reference to Exhibit 10.3 to the Company’ s Current Report on Form 8-K filed with the SEC on March 11, 2021). 79 Table of Contents 10.6 + Form Fernandez Restricted Stock Agreement (incorporated by reference to Exhibit 10.19 to Amendment No.4 to the Company’ s registration statement on Form S-1 filed with the SEC on May 25, 2021, File No. 333-253027). 10.7 + Fernandez Employment Agreement, dated May 23, 2021 (incorporated by reference to Exhibit 10.20 to Amendment No.4 to the Company’ s Registration Statement on Form S-1 filed with the SEC on May 25, 2021, File No. 333-253027). 10.8 + Fernandez Employment Agreement, dated June 2, 2021 (incorporated by reference to Exhibit 10.3 to the Company’ s Quarterly Report filed with the SEC on August 17, 2021). 10.9 + Form of Director Offer Letter (incorporated by reference to Exhibit 10.17 to the Company’ s Registration Statement on Form S-1/A filed with the SEC on April 7, 2021). 10.10 + Hector Delgado Independent Director Agreement (incorporated by reference to Exhibit 10.21 to the Company’ s Current Report on Form 8-K filed with the SEC on June 7, 2021). 10.11 + Louis Cusimano Independent Director Agreement (incorporated by reference to Exhibit 10.22 to the Company’ s Current Report on Form 8-K filed with the SEC on June 7, 2021). 10.12 + David Phipps Employment Agreement (incorporated by reference to Exhibit 10.25 to the Company’ s Current Report on Form 8-K filed with the SEC on June 7, 2021). 10.13 Alibaba.com Supplemental Services Agreement (incorporated by reference to Exhibit 10.29 to the Company’ s Current Report on Form 8-K filed with the SEC on July 13, 2021). 10.14 Alibaba.com Transaction Services Agreement (incorporated by reference to Exhibit 10.30 to the Company’ s Current Report on Form 8-K filed with the SEC on July 13, 2021). 10.15 Alibaba.com Terms of Use (incorporated by reference to Exhibit 10.31 to the Company’ s Current Report on Form 8-K filed with the SEC on July 13, 2021). 10.16 + Amended and Restated 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to the Company’ s Current Report on Form 8-K filed with the SEC on October 1, 2021). 10.17 + Director Services Agreement, dated January 11, 2022, between Orbsat Corp and Rodney Barreto (incorporated by reference to Exhibit 10.1 to the Company’ s Current Report on Form 8-K filed with the SEC on January 11, 2022). 10.18 + Orbsat Corp Amended and Restated 2020 Equity Incentive Plan (incorporated by reference to Exhibit 10.1 to the Company’ s Current Report on Form 8-K filed with the SEC on December 22, 2021). 10.19 + Orbsat Corp 2021 Incentive Award Plan (incorporated by reference to Exhibit 10.2 to the Company’ s Current Report on Form 8-K filed with the SEC on December 22, 2021). 10.20 + Form of Stock Option Grant Notice and Agreement between Orbsat Corp and each of Charles M. Fernandez (75,000 shares), Paul R Thomson (10,000 shares) and Theresa Carlise (15,000 shares), entered into in December 2021 (incorporated by reference to Exhibit 10.68 to the Company’ s Current Report on Form 10-K filed with the SEC on March 31, 2022). 10.21 + Stock Option Agreement, dated July 1, 2022, by and between NextPlat Corp and Charles M. Fernandez (incorporated by reference to Exhibit 10.2 to the Company’ s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2022). 10.22 Employment Agreement, dated as of November 7, 2022, by and between the Company and Robert Bedwell (incorporated by reference to Exhibit 10.6 the Company’ s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2022). 10.23 Employment Agreement, dated as of November 14, 2022, by and between the Company and Cecile Munnik (incorporated by reference to Exhibit 10.8 the Company’ s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2022). 10.24 + Stock Option Agreement dated December 5, 2022, and effective as of November 7, 2022, by and between the Company and Robert Bedwell (incorporated by reference to Exhibit 10.1 to the Company’ s Current Report on Form 8-K Filed on December 5, 2022). 80 Table of Contents 10.25 + Stock Option Agreement dated December 5, 2022, and effective as of November 14, 2022, by and between the Company and Cecile Munnik (incorporated by reference to Exhibit 10.2 to the Company’ s Current Report on Form 8-K Filed on December 5, 2022). 10.26 Merchant Sourcing Agreement, dated as of April 20, 2023, by and between the Company and Alibaba.com Singapore E-Commerce Private Limited, a company organized under the laws of Singapore* (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 26, 2023) 10.27 Promissory Note, dated July 7, 2023, in the original principal amount of $250,000 made by Next Borough Capital Management to the order of NextPlat Corp. (incorporated by reference from Exhibit 10.9 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2023) . 10.28 First Amendment to Employment Agreement, dated as of June 29, 2023, by and between NextPlat Corp and Cecile Munnik (incorporated by reference from Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2023) . 10.29 Distribution Agreement, dated as of October 12, 2023, by and between OPKO Health Spain, S.L.U. and NextPlat Corp (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 18, 2023) . 10.30 Stock Purchase Agreement, dated as of March 25, 2024, by and between NextPlat Corp and James T. McKinley (incorporated by reference from Exhibit 10.1 to the Company’s Current Report filed on March 29, 2024) 10.31 Form of Lock-Up Agreement (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 17, 2024). 10.32+ Employment Agreement, dated as of August 11, 2024, by and between the Company and David Phipps (incorporated by reference from Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q filed on August 14, 2024). 10.33+ Elizabeth Alcaine Independent Director Agreement (incorporated by reference from Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on October 4, 2024). 10.34+ Amended Director Agreement, dated as of October 1, 2024, by and between the Company and Louis Cusimano. 10.35+ Independent Director Agreement, dated as of October 1, 2024, by and between the Company and Jervis Hough. 10.36+ Amended Director Agreement, dated as of October 1, 2024, by and between the Company and Hector Delgado. 10.37+ Independent Director Agreement, dated as of October 1, 2024, by and between the Company and Douglas Ellenoff. 10.38+ Independent Director Agreement, dated as of October 1, 2024, by and between the Company and Anthony Armas. 21.1 Subsidiaries of NextPlat Corp . 23.1 Consent of RBSM LLP . 31.1 Certification of Principal Executive Officer, pursuant to Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 . 31.2 Certification of Principal Financial Officer, pursuant to Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 . 32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 . 97.1 Policy Relating to Recovery of Erroneously Awarded Compensation (incorporated by reference from Exhibit 97.1 to the Company’s Annual Report on Form 10-K filed on April 11, 2024). 101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101 The following financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2024, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive (Loss) Income, (iii) Consolidated Statements of Equity, (iv) Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). (1) Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however that the Company may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any schedule or exhibit so furnished. + Management contract or compensatory plan or arrangement. 81 Table of Contents ITEM 16. FORM 10-K SUMMARY None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 21, 2025 NEXTPLAT CORP By: /s/ Charles M. Fernandez Charles M. Fernandez Title: Executive Chairman and Chief Executive Officer (Principal Executive Officer) By: /s/ Cecile Munnik Cecile Munnik Title: Chief Financial Officer, (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Charles M. Fernandez Chief Executive Officer and Executive Chairman March 21, 2025 Charles M. Fernandez (Principal Executive Officer) /s/ Cecile Munnik Chief Financial Officer March 21, 2025 Cecile Munnik (Principal Financial and Accounting Officer) /s/ David Phipps President and Chief Executive Officer of Global Operations and Director March 21, 2025 David Phipps /s/ Douglas S. Ellenoff Vice Chairman and Chief Business Development Strategist and Director March 21, 2025 Douglas Ellenoff /s/ Hector Delgado Director March 21, 2025 Hector Delgado /s/ Elizabeth Alcaine Director March 21, 2025 Elizabeth Alcaine /s/ Louis Cusimano Director March 21, 2025 Louis Cusimano /s/ Jervis Bennett Hough Director March 21, 2025 Jervis Bennett Hough /s/ Rodney Barreto Director March 21, 2025 Rodney Barreto /s/ Anthony Armas Director March 21, 2025 Anthony Armas 82 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES Report of Independent Registered Public Accounting Firm RBSM LLP, New York, NY, (PCAOB ID. 587) F-2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F-4 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2024 and 2023 F-5 Consolidated Statements of Equity for the Years Ended December 31, 2024 and 2023 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 F-7 Notes to Consolidated Financial Statements F-8 F-1 Table of Contents New York Office: 805 Third Avenue New York, NY 10022 212.838-5100 www.rbsmllp.com REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of NextPlat Corp and Subsidiaries Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of NextPlat Corp and Subsidiaries (the “Company”) as of December 31, 2024 and 2023, and the related consolidated statements of comprehensive loss, equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. F-2 Table of Contents Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Business Acquisition – Refer to Note 4 to the consolidated financial statements Critical Audit Matter Description On April 1, 2024, the Company closed the purchase of Outfitter Satellite, Inc. (“Outfitter”). Total purchase consideration was $1.1 million. The purchase price was allocated to identifiable assets and liabilities, as well as intangible assets of $.185 million to trade names, $.415 million to customer records and $.301 to goodwill, less a deferred tax effect of $.145 million. The principal considerations for our determination that performing procedures relating to the business acquisition is a critical audit matter are as follows; (i) the Company used Level 3 inputs when determining the fair value of the intangible assets; (ii) the high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating the significant assumptions used in management’s fair value estimates; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge including a valuation expert. How the Critical Audit Matter Was Addressed in the Audit Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. ● These procedures included, among others, (i) testing management’s process for determining the fair value estimates; (ii) testing the completeness and accuracy of the underlying data used in the fair value approach; and (iii) evaluating the reasonableness of the significant assumptions used by management. ● Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the fair value approaches and (ii) the reasonableness of significant assumptions of relevant financial matrices for concluding the fair value of reporting unit and future levels of revenue growth. /s/ RBSM LLP We have served as the Company’s auditor since 2014. New York, NY March 21, 2025 PCAOB ID Number 587 F-3 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except shares and par data) December 31, 2024 December 31, 2023 ASSETS Current Assets Cash $ 19,960 $ 26,307 Accounts receivable, net 4,895 8,923 Receivables - other, net 732 1,846 Inventory, net 4,881 5,135 Unbilled revenue 237 189 VAT receivable 371 342 Prepaid expenses 404 640 Notes receivable due from related party — 256 Total Current Assets 31,480 43,638 Property and equipment, net 3,407 3,989 Goodwill 156 731 Intangible assets, net 524 14,423 Operating right-of-use assets, net 812 1,566 Finance right-of-use assets, net 5 22 Deposits 94 39 Prepaid expenses, net of current portion — 61 Total Other Assets 1,591 16,842 Total Assets $ 36,478 $ 64,469 LIABILITIES AND EQUITY Current Liabilities Accounts payable and accrued expenses $ 7,230 $ 13,176 Contract liabilities 89 42 Notes payable 380 312 Due to related party 48 18 Operating lease liabilities 404 532 Finance lease liabilities 5 18 Income taxes payable 54 139 Total Current Liabilities 8,210 14,237 Long Term Liabilities Notes payable, net of current portion 1,032 1,211 Operating lease liabilities, net of current portion 438 929 Finance lease liabilities, net of current portion — 5 Total Liabilities 9,680 16,382 Commitments and Contingencies — — Equity Common stock ($ 0.0001 par value; 50,000,000 shares authorized; 25,963,051 and 18,724,596 shares issued and outstanding as of December 31, 2024 and 2023, respectively) 3 2 Additional paid-in capital 75,697 67,170 Accumulated deficit ( 48,950 ) ( 34,925 ) Accumulated other comprehensive loss ( 66 ) ( 63 ) Equity attributable to NextPlat Corp stockholders 26,684 32,184 Equity attributable to noncontrolling interests 114 15,903 Total Equity 26,798 48,087 Total Liabilities and Equity $ 36,478 $ 64,469 See accompanying notes to consolidated financial statements. F-4 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands, except per shares data) Years Ended December 31, 2024 2023 Sales of products, net $ 54,941 $ 32,389 Revenues from services 10,542 5,367 Revenue, net 65,483 37,756 Cost of products 49,033 26,313 Cost of services 221 132 Cost of revenue 49,254 26,445 Gross profit 16,229 11,311 Operating expenses: Selling, general and administrative 7,860 9,910 Salaries, wages and payroll taxes 11,441 6,643 Impairment loss 13,653 13,895 Professional fees 4,401 1,981 Depreciation and amortization 2,498 2,110 Total operating expenses 39,853 34,539 Loss before other (income) expense ( 23,624 ) ( 23,228 ) Other (income) expense: Gain on sale or disposal of property and equipment ( 94 ) — Interest expense 81 79 Interest earned ( 731 ) ( 620 ) Asset write-off 111 28 Other income ( 2 ) ( 317 ) Foreign currency exchange rate variance 65 ( 107 ) Total other (income) expense ( 570 ) ( 937 ) Loss before income taxes ( 23,054 ) ( 22,291 ) Income taxes ( 71 ) ( 28 ) Loss before equity in net loss of affiliate ( 23,125 ) ( 22,319 ) Gain on remeasurement of fair value of equity interest in affiliate prior to acquisition — 11,352 Equity in net loss of affiliate — ( 1,440 ) Net loss ( 23,125 ) ( 12,407 ) Net loss attributable to non-controlling interest 9,100 8,629 Net loss attributable to NextPlat Corp $ ( 14,025 ) $ ( 3,778 ) Comprehensive loss: Net loss $ ( 23,125 ) $ ( 12,407 ) Foreign currency loss ( 3 ) ( 22 ) Comprehensive loss $ ( 23,128 ) $ ( 12,429 ) NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $ ( 14,025 ) $ ( 3,778 ) Weighted number of common shares outstanding – basic and diluted 20,614 17,494 Basic and diluted loss per share $ ( 0.68 ) $ ( 0.22 ) See accompanying notes to consolidated financial statements. F-5 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUI TY YEARS ENDED December 31, 2024 AND 2023 (In thousands ) Accumulated Common Stock Additional Other Stockholders’ $0.0001 Par Value Paid-in Accumulated Comprehensive Equity Noncontrolling Total Shares Amount Capital Deficit Income (Loss) NextPlat Corp Interests Equity Balance, December 31, 2022 14,402 $ 1 $ 56,963 $ ( 31,147 ) $ ( 41 ) $ 25,776 $ — $ 25,776 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 789 — 2,468 — — 2,468 300 2,768 Stock-based compensation in connection with options granted — — 1,524 — — 1,524 1,052 2,576 Stock-based compensation in connection with warrants granted — — 32 — — 32 — 32 Acquisition of subsidiary and noncontrolling interests — — — — — — 23,180 23,180 Comprehensive loss — — — — ( 22 ) ( 22 ) — ( 22 ) Net loss — — — ( 3,778 ) — ( 3,778 ) ( 8,629 ) ( 12,407 ) Balance, December 31, 2023 18,725 2 67,170 ( 34,925 ) ( 63 ) 32,184 15,903 48,087 Stock-based compensation in connection with options granted — — 455 — — 455 — 455 Stock-based compensation in connection with restricted stock awards 220 — 772 — — 772 405 1,177 Capital contribution of noncontrolling interests — — — — — — 122 122 Issuance of common stock related to exercise of warrants 48 — 85 — — 85 — 85 Issuance of common stock related to Progressive Care Merger 6,970 1 7,215 — — 7,216 ( 7,216 ) — Comprehensive loss — — — — ( 3 ) ( 3 ) — ( 3 ) Net loss — — — ( 14,025 ) — ( 14,025 ) ( 9,100 ) ( 23,125 ) Balance, December 31, 2024 25,963 $ 3 $ 75,697 $ ( 48,950 ) $ ( 66 ) $ 26,684 $ 114 $ 26,798 See accompanying notes to consolidated financial statements. F-6 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands ) Years Ended December 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from e-Commerce Operations revenue $ 13,544 $ 10,736 Cash received from Healthcare Operations revenue 57,282 16,338 Cash received from interest income 987 620 Cash received from other sources 94 317 Cash paid for inventory purchases and other costs of revenue ( 48,863 ) ( 5,219 ) Cash paid for salaries and related expenses ( 11,441 ) ( 6,643 ) Cash paid for other recurring operating expenses ( 13,412 ) ( 19,638 ) Cash paid for interest expense ( 81 ) ( 79 ) Cash paid for income taxes ( 156 ) ( 28 ) Cash paid for merger costs and other non-recurring expenses ( 3,418 ) — Net cash used in operating activities ( 5,464 ) ( 3,596 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 189 ) ( 647 ) Capital contributions to equity method investee — ( 1,506 ) Proceeds from sale or disposal of property and equipment 94 — 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 ( 953 ) 5,199 CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of note payable, related party, net — ( 10 ) Issuance of common stock for PIPE transaction — 6,000 Proceeds from exercise of warrants 85 184 Capital contribution of non-controlling interest 122 — Payments on finance lease liabilities ( 24 ) ( 15 ) Repayments of notes payable ( 111 ) ( 299 ) Net cash provided by financing activities 72 5,860 Effect of exchange rate on cash ( 2 ) ( 47 ) Net (decrease) increase in cash ( 6,347 ) 7,416 Cash beginning of year 26,307 18,891 Cash end of year $ 19,960 $ 26,307 Reconciliation of net loss to cash flow used by operating activities Net loss $ ( 23,125 ) $ ( 12,407 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation expense 768 758 Change in allowance for credit losses ( 131 ) 47 Change in inventory reserve 379 — Amortization of intangible assets 1,709 1,337 Amortization of right-of-use assets - operating leases 325 417 Amortization of right-of-use assets - finance leases 20 15 Write-off of right-of-use asset 111 28 Gain on remeasurement of fair value of equity interest in affiliate prior to acquisition — ( 11,352 ) Impairment loss 13,653 13,895 Equity in net loss of affiliate — 1,440 Stock-based compensation 1,632 5,376 Gain on sale or disposal of property and equipment ( 94 ) — Change in operating assets and liabilities: Accounts receivable 5,344 ( 3,449 ) Inventories 12 ( 2,217 ) Unbilled revenue ( 48 ) ( 47 ) Prepaid expense 309 22 Notes receivable — ( 256 ) Other assets 256 — Deposits ( 55 ) — VAT receivable ( 29 ) 91 Accounts payable and accrued expenses ( 6,035 ) 3,231 Operating lease liabilities ( 427 ) ( 464 ) Income taxes payable ( 85 ) 45 Contract liabilities 47 6 Liabilities from discontinued operations — ( 112 ) Net cash used in operating activities $ ( 5,464 ) $ ( 3,596 ) See accompanying notes to consolidated financial statements F-7 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Organization and Nature of Operations. Unless the context requires otherwise, references to the “Company”, “we”, “us”, “our”, “our Company”, or “our business” refer to NextPlat Corp and its subsidiaries. NextPlat Corp: NextPlat Corp, a Nevada corporation, formerly Orbsat Corp was incorporated in 1997. The Company operates two main e-commerce websites as well as 25 third -party e-commerce storefronts on platforms such as Alibaba, Amazon and Walmart. These e-commerce venues form an effective global network serving thousands of consumers, enterprises, and governments. NextPlat has announced its intention to broaden its e-commerce platform and is implementing a comprehensive system upgrade to support this initiative. 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. NXPLBV was liquidated on December 28, 2023. 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 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. F- 8 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 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. 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. F- 9 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 2. Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission. The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned and majority owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Business acquisition of Progressive Care, LLC (formerly 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 issued by Progressive Care (the “RXMD Warrants”) and were issued shares of Progressive Care common stock. After the exercise of the RXMD Warrants, the Company and Messrs. Fernandez and Barreto collectively owned 53 % of Progressive Care’s voting common stock. At the time of exercise, all of the above RXMD Warrants were in-the-money. Also on July 1, 2023, the Company 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 their shares of Progressive Care common stock (including any new shares of Progressive Care common stock 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 Progressive Care 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. 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 Merger 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 Outfitter 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. F- 10 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 3. Summary of Significant Accounting Policies The significant accounting policies of the Company are described below. Progressive Care became a consolidated subsidiary of the Company on July 1, 2023 and as a result the Company has incorporated certain significant accounting policies of Progressive Care for the year ended December 31, 2024 . 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 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. Reclassification Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. During 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 Consolidated Statements of Cash Flows and related disclosures for the year ended December 31, 2023, to conform to the direct presentation method in the current period. April 2023 Private Placement of Common Stock On April 5, 2023, the Company entered into a securities purchase agreement (the “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. 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 Company’s existing financial resources are sufficient to continue operating activities for at least one year past the issuance date of the financial statements. Segment Reporting The Company evaluated segment reporting in accordance with ASC Topic 280, Segment Reporting , and concluded that the Company is comprised of two operating segments. This conclusion is based on the discrete operating results regularly reviewed by the chief operating decision maker (“CODM”) to assess the performance of the business and to make resource allocations. These two operating segments also represent our two reportable segments: (i) e-Commerce Operations and (ii) Healthcare Operations. F- 11 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Business acquisitions The Company records business acquisitions using the acquisition method of accounting. All of the assets acquired, liabilities assumed, and contractual contingencies are recognized at their fair value on the acquisition date. The application of the acquisition method of accounting for business combinations requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in order to properly allocate purchase price consideration between assets that are depreciated and amortized and goodwill. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Acquisition-related expenses and restructuring costs are recognized separately from the business combination and are expensed as incurred. The Company uses a measurement period following the acquisition date to gather information that existed as of the acquisition date that is needed to determine the fair value of the assets acquired, liabilities assumed and equity interests. The measurement period ends once all information is obtained, but no later than one year from the acquisition date. Cash and Cash Equivalents The Company places its cash with high credit quality financial institutions. The Company’s accounts 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 $ 2.4 million, are unsecured. The Company has a deposit placement agreement for Insured Cash Sweep Service (“ICS”). This service is a secure and convenient way to access FDIC protection on large deposits, earn a return, and enjoy flexibility. The Company believes that the ICS agreement will mitigate its credit risk as it relates to uninsured FDIC amounts in excess of $250,000. Accounts Receivable and Allowance for Doubtful Accounts The Company has a policy of reserving questionable accounts based on its best estimate of the amount of probable credit losses in its existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are offset against sales and relieved from accounts receivable, after all means of collection have been exhausted and the potential for recovery is considered remote. Progressive Care trade accounts receivable is stated at the invoiced amount. Trade accounts receivable primarily include amounts from third -party PBMs and insurance providers and are based on contracted prices. Trade accounts receivable is unsecured and require no collateral. Progressive Care records an allowance for doubtful accounts for estimated differences between the expected and actual payment of accounts receivable. These reductions were made based upon reasonable and reliable estimates that were determined by reference to historical experience, contractual terms, and current conditions. Each quarter, Progressive Care reevaluates its estimates to assess the adequacy of its allowance and adjusts the amounts as necessary. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. Inventory Inventories are valued at the lower of cost or net realizable value, using the first -in first -out cost method. The Company assesses the valuation of its inventories and reduces the carrying value of those inventories that are obsolete or in excess of the Company’s forecasted usage to their estimated net realizable value. The Company estimates the net realizable value of such inventories based on analysis and assumptions including, but not limited to, historical usage, expected future demand and market requirements. A change to the carrying value of inventories is recorded to cost of products. Prepaid Expenses Prepaid expenses include prepayments in cash for accounting fees, which are being amortized over the terms of their respective agreements, as well as cost associated with certain contract liabilities. The current portion consists of costs paid for future services which will occur within a year. F- 12 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Investments The Company applies the equity method of accounting to investments when it has significant influence, but not controlling interest, in the investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions. The carrying value of our equity method investment is reported as “equity method investment” on the consolidated balance sheets. The Company’s equity method investment is reported at cost and adjusted each period for the Company’s share of the investee’s income or loss and dividend paid, if any. The Company’s proportionate share of the net loss resulting from these investments is reported under the line item captioned “equity in net loss of affiliate” in the consolidated statements of operations and comprehensive loss. Note 13 contains additional information on the equity method investment. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. Foreign Currency Translation The Company’s reporting currency is U.S. Dollars. The accounts of one of the Company’s subsidiaries, GTC, are 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 consolidated statements of comprehensive loss. The relevant translation rates are as follows: for the year ended December 31, 2024 , closing rate at $ 1.26 US$: GBP, yearly average rate at $ 1.28 US$: GBP, for the year ended December 31, 2023 closing rate at $ 1.27 US$: GBP, yearly average rate at $ 1.24 US$: GBP. 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 and delivered 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 Topic 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. Contract liabilities are shown separately in the consolidated balance sheets as current liabilities. At December 31, 2024 , we had contract liabilities of approximately $ 89,000 . At December 31, 2023 , we had contract liabilities of approximately $ 42,000 . F- 13 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Healthcare Operations: The Company provides prescription pharmaceuticals, virus related diagnostics and vaccinations, TPA services, and contracted pharmacy services for 340B covered entities under the 340B Drug Discount Pricing Program. Under the terms of the contracted pharmacy services for 340B covered entities, the Company acts 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. The Company recognizes 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. Each prescription claim is considered an arrangement with the customer and is a separate performance obligation. Payments are received directly from the customer at the point of sale, or the customers’ insurance provider is billed electronically. For third -party medical insurance and other claims, authorization is obtained to ensure payment from the customer’s insurance provider before the medication is dispensed to the customer. Authorization is obtained for these sales electronically and a corresponding authorization number is issued by the customer’s insurance provider. The Company is the agent in all of the 340B pharmacy dispensing service agreements transactions with 340B covered entities and not the principal in the transactions. Thus, the Company only recognizes its net fee for the prescription dispensing transactions and not the gross billing and cost of goods sold for the drugs dispensed. PBM fees, including direct and indirect remuneration (“DIR”) fees, are assessed by payers and charged at the time of the settlement of a pharmacy claim. DIR fees are fees charged by PBMs to pharmacies for network participation as well as periodic reimbursement reconciliations. Through December 31, 2023, the Company accrued 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. Billings for most prescription orders are with third -party payers, including Medicare, Medicaid, and insurance carriers. Customer returns are nominal. The Company recognizes revenue from TPA services as it satisfies the performance obligations 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. The covered entity simultaneously receives and consumes benefits as the Company performs services under the TPA contract. These services are capable of being distinct from one another, e.g., the covered entity may receive benefit from each separate service, but in the context of a TPA contract, the services are not distinct with the context of the TPA contract. Instead, the Company provides a significant service of integrating the services into a combined output that benefits the covered entity. Therefore, the Company considers the combined services to be a single performance obligation in each TPA contract. As stated in the TPA agreements, the Company receives a fixed percentage which is applied to the gross pharmacy service billings over the contract period. The gross pharmacy service billings are estimated based on the number of prescriptions filled by the Pharmacy Service contractor multiplied by the reimbursement rates set by the insurance providers. The Company invoices the covered entities for TPA services on a semi-monthly basis and collections are within 24 - 45 days of invoicing. ASC Topic 606 provides a practical expedient wherein an entity may recognize revenue in the amount to which it has a right to invoice a customer if the entity has a right to consideration from the customer in an amount that corresponds directly with the value to the customer of the entity’s performance completed to date. This expedient could be available, for example, for a service contract in which an entity bills a fixed amount for each hour of service provided. The Company believes that this practical expedient applies to its TPA contracts and we have elected this method in measuring revenue over the TPA contract term. F- 14 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Cost of Product Sales and Services Cost of sales consists primarily of materials, airtime and overhead costs incurred internally and amounts incurred to contract manufacturers to produce our products, airtime and other implementation costs incurred to install our products and train customer personnel, and customer service and third -party original equipment manufacturer costs to provide continuing support to our customers. There are certain costs which are deferred and recorded as prepaids, until such revenue is recognized. Refer to revenue recognition above as to what constitutes deferred revenue. Shipping and handling costs are included as a component of costs of product sales in the Company’s consolidated statements of comprehensive loss because the Company includes in revenue the related costs that the Company bills its customers. Advertising Costs incurred for producing and communicating advertising for the Company are charged to operations as incurred. Advertising expense was approximately $ 0.2 million and $ 0.2 million for the years ended December 31, 2024 and 2023 , respectively. Goodwill Goodwill represents the excess of the purchase price over the value assigned to net tangible and identifiable intangible assets. 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. Intangible Assets Acquired intangible assets with finite lives other than goodwill are amortized over their useful lives. For intangible assets acquired in a business combination, the estimated fair values of the assets received are used to establish their recorded values. Acquired intangible assets other than goodwill are amortized over their useful lives unless the lives are determined to be indefinite. Valuation techniques consistent with the market approach, income approach, and/or cost approach are used to measure fair value. Intangible assets subject to amortization represent the fair value of tradenames and customer contracts acquired. In valuing these assets, the Company makes assumptions regarding useful lives and projected growth rates, and significant judgment is required. The Company periodically reviews its identifiable intangible assets for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. If the carrying amounts of those assets exceed their respective fair values, additional impairment tests are performed to measure the amount of the impairment losses, if any. Tradenames and customer contracts are amortized over 10 years. Useful lives of intangible assets are periodically evaluated for reasonableness and the assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may no longer be recoverable. F- 15 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Property and Equipment Property and equipment are carried at historical cost less accumulated depreciation. Depreciation is based on the estimated service lives of the depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets are capitalized. Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they are removed from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance are expensed as incurred. The estimated useful lives of property and equipment are generally as follows: Years Building 40 Building improvements Remaining life of the building Leasehold improvements Lessor of the estimated useful life or life of the lease Office furniture and fixtures 4 - 5 Computer equipment 3 - 4 Rental equipment 4 Vehicles 3 - 5 Appliques 10 Website development 2 Depreciation expense for the years ended December 31, 2024 , and 2023 was approximately $ 0.8 million and $ 0.8 million, respectively. Impairment of Long-lived Assets The Company reviews its long-lived assets, comprised of property and equipment, right-of-use assets, and intangible assets, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and consider market participants in accordance with ASC Topic 360 - 10, Accounting for the Impairment or Disposal of Long-Lived Assets . The Company evaluates the long-lived assets of the reporting units for impairment at the lowest asset group level for which individual cash flows can be identified. When evaluating long-lived assets for potential impairment, the carrying amount of the asset group is compared to the estimated future undiscounted cash flows. The impairment loss calculation compares the carrying amount of the assets to the fair value based on estimated discounted future cash flows. If required, an impairment loss is recorded for that portion of the asset’s carrying value in excess of fair value. As of December 31, 2024 , there were no indications that the carrying amounts of our long-lived assets exceeded their respective fair values. The Company recorded an impairment loss on long-lived assets for the Healthcare Operations segment, related to intangible assets, in the amount of approximately $ 12.8 million for the year ended December 31, 2024 - see Note 12. Fair Value of Financial Instruments Derivatives are required to be recorded on the balance sheet at fair value. These derivatives, including embedded derivatives in the Company’s structured borrowings, are separately valued and accounted for on the Company’s balance sheet. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market-based pricing models incorporating readily observable market data and requiring judgment and estimates. The Company did not identify any other assets or liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with the accounting guidance. The carrying amounts reported in the consolidated balance sheets for cash, accounts payable, accrued expenses, and notes payable approximate their estimated fair market values based on the short-term maturity of the instruments. F- 16 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Stock-based Compensation Stock-based compensation is accounted for based on the requirements of ASC Topic 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. 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. Income Taxes The Company accounts for income taxes pursuant to the provision of ASC Topic 740 - 10, “Accounting for Income Taxes” (“ASC 740 - 10” ) which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach require the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized. The Company follows the provision of ASC Topic 740 - 10 related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740 - 10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold is measured at the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefit associated with tax positions taken that exceed the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded a liability for uncertain tax benefits. The Company has adopted ASC Topic 740 - 10 - 25, “Definition of Settlement,” which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities, generally for three years after they are filed. F- 17 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Leases Effective January 1, 2019, the Company accounts for its leases under ASC Topic 842, Leases. Under this guidance, we determine if an arrangement contains a lease at inception based on whether or not the Company has the right to control the asset during the contract period and other facts and circumstances. Arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term. For finance leases, interest on the lease liability and the amortization of the right of use asset results in front-loaded expense over the lease term. Variable lease expenses are recorded when incurred. In calculating the right of use asset and lease liability, the Company has elected to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election and recognizes rent expense on a straight-line basis over the lease term. Accumulated Other Comprehensive Income (Loss) Comprehensive income (loss) includes net income (loss) for the period and unrealized income (losses) from foreign currency translation adjustments. Earnings per Common Share Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. In periods where the Company has a net loss, all dilutive securities are excluded. See Note 7 for more information on the computation of earnings per share. Related Party Transactions A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party - see Note 23. F- 18 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Recent Accounting Pronouncements Accounting Pronouncements Recently Adopted In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023 - 07, “Segment Reporting (Topic 280 ) - Improvements to Reportable Segment Disclosures” (“ASU 2023 - 07” ), which requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), an amount for other segment items with a description of the composition, and disclosure of the title and position of the CODM. ASU 2023 - 07 is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. The Company adopted the provisions of this ASU in the fourth quarter of 2024 and applied the provisions retrospectively to each period presented in the consolidated financial statements. Adoption of the new standard did not have a material impact on our consolidated financial statements. In August 2023, the FASB issued ASU 2023 - 04, “Liabilities (Topic 405 ) - Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 121”, to amend and add various SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Bulletin No. 121. In July 2023, the FASB issued ASU 2023 - 03, “Presentation of Financial Statement (Topic 205 ), Income Statement - Reporting Comprehensive Income (Topic 220 ), Distinguishing Liabilities from Equity (Topic 480 ), Equity (Topic 505 ), and Compensation - Stock Compensation (Topic 718 )”, to amend various SEC paragraphs in the Accounting Standards Codification to reflect the issuance of SEC Staff Accounting Bulletin No. 120, among other things. The Company adopted this conforming guidance upon issuance and the adoption had no material impact on our consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU 2016 - 13, “Financial Instruments – Credit Losses (Topic 326 ) Measurement of Credit Losses on Financial Instruments” (“ASU 2016 - 13” ), which introduces an impairment model based on expected, rather than incurred, losses. Additionally, it requires expanded disclosures regarding (a) credit risk inherent in a portfolio and how management monitors the portfolio’s credit quality; (b) management’s estimate of expected credit losses; and (c) changes in estimates of expected credit losses that have taken place during the period. In November 2018, the FASB issued ASU 2018 - 19, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses.” This ASU clarifies receivables from operating leases are accounted for using the lease guidance and not as financial instruments. In April 2019, the FASB issued ASU 2019 - 04, “Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” This ASU clarifies various scoping and other issues arising from ASU 2016 - 13. In March 2020, the FASB issued ASU 2020 - 03, “Codification Improvements to Financial Instruments.” This ASU improves the Codification and amends the interaction of Topic 842 and Topic 326. ASU 2016 - 13 and related amendments are effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted this guidance effective January 1, 2023 and the adoption had no material impact on our consolidated financial statements and related disclosures. Any new accounting standards, not disclosed above, that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption. Accounting Pronouncements Issued but not yet Adopted In November 2024, the FASB issued ASU 2024 - 03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220 - 40 ): Disaggregation of Income Statement Expenses”, (“ASU 2024 - 03” ), which is intended to enhance transparency into the nature and function of expenses. The new accounting rules require that on an annual and interim basis, entities disclose disaggregated operating expense information about specific categories, including purchases of inventory, employee compensation, depreciation, amortization and selling expense. The new accounting rules will be effective for the Company beginning with the annual period of 2027 and interim periods beginning in 2028. Early adoption is permitted. This ASU can be adopted either (i) prospectively to financial statements issued for reporting periods after the effective date of the ASU or (ii) retrospectively to any or all prior reporting periods presented in the financial statements. While the new accounting rules will not have any impact on the Company’s financial condition, results of operations or cash flows, the adoption of the new accounting rules may result in additional disclosures. The Company is currently assessing the impact of this guidance on our 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. Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on the Company’s consolidated financial statements. F- 19 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 4. 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 Outfitter. 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: 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 liability (3) ( 145 ) Net assets acquired $ 793 Goodwill $ 301 ( 1 ) 10 -year amortization period ( 2 ) 5 -year amortization period ( 3 ) Under federal tax law, previously unidentified finite lived intangible assets recognized from a business combination have no tax basis and therefore are not amortized for tax purposes. This tax position created a book/tax basis difference at April 1, 2024, the date of the business combination transaction. Therefore, an approximate $ 0.1 million deferred tax liability was recorded at April 1, 2024 as a result of the book/tax basis difference for the finite lived intangible assets. The goodwill is attributable to the workforce of the acquired business and the significant synergies expected to arise after NextPlat’s acquisition of Outfitter. The goodwill is not deductible for tax purposes. The initial recognition of Outfitter's identifiable intangible assets, resulting from the acquisition on April 1, 2024, were measured using Level 3 inputs. The fair value at the date of acquisition was approximately $ 0.6 million and were estimated by applying an income approach. The fair value estimates for the identifiable intangible assets are based on ( 1 ) an assumed discount rate of 37.3 % ( 2 ) an assumed capitalization rate of 34.3 % ( 3 ) assumed long-term growth rate of 3.0 % ( 4 ) an assumed royalty rate of 1.8 % ( 5 ) an assumed tax rate of 26.3 % ( 6 ) an assumed risk free rate of 4.5 % ( 7 ) an assumed equity risk premium of 6.5 % ( 8 ) an assumed company specific risk premium rate of 22.5 % ( 9 ) an assumed beta of 0.82 . F- 20 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 5. Fair Value Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the following three levels of inputs that may be used to measure fair value: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments: ● Cash, accounts receivable, and accounts payable and accrued liabilities: The amounts reported in the accompanying 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. F- 21 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 6. Revenue The following table disaggregates net revenues by categories (in thousands): Year Ended December 31, 2024 e-Commerce Operations Healthcare Operations Total Sales of products, net e-Commerce revenue $ 13,791 $ — $ 13,791 Pharmacy prescription and other revenue, net of PBM fees — 41,308 41,308 Subtotal 13,791 41,308 55,099 Revenues from services: Pharmacy 340B contract revenue — 10,384 10,384 Revenues, net $ 13,791 $ 51,692 $ 65,483 Year Ended December 31, 2023 e-Commerce Operations Healthcare Operations Total Sales of products, net e-Commerce revenue $ 10,977 $ — $ 10,977 Pharmacy prescription and other revenue, net of PBM fees — 21,412 21,412 Subtotal 10,977 21,412 32,389 Revenues from services: Pharmacy 340B contract revenue — 5,367 5,367 Revenues, net $ 10,977 $ 26,779 $ 37,756 F- 22 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 7. Earnings (Loss) per Share Net income (loss) per common share is calculated in accordance with ASC Topic 260: Earnings per Share (“ASC 260” ). Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding as they would be anti-dilutive. The components of basic and diluted EPS were as follows (in thousands, except per share data). For all periods presented, the Company incurred a net loss causing inclusion of any potentially dilutive securities to have an anti-dilutive effect, resulting in diluted loss per common share and basic loss per common share being equivalent. Years Ended December 31, 2024 2023 Net loss attributable to NextPlat Corp common shareholders $ ( 14,025 ) $ ( 3,778 ) Basic weighted average common shares outstanding 20,614 17,494 Potentially dilutive common shares — — Diluted weighted average common shares outstanding 20,614 17,494 Basic weighted average loss per common share $ ( 0.68 ) $ ( 0.22 ) Diluted weighted average loss per common share $ ( 0.68 ) $ ( 0.22 ) Potentially dilutive common shares excluded from the calculation of diluted weighted average loss per common share: Stock options 13 136 Common stock purchase warrants — 675 13 811 F- 23 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 8. Accounts Receivable At December 31, 2024 and 2023 , accounts receivable consisted of the following (in thousands): December 31, 2024 December 31, 2023 Gross accounts receivable – trade $ 5,036 $ 9,195 Less: allowance for credit losses ( 141 ) ( 272 ) Accounts receivable – trade, net $ 4,895 $ 8,923 The Company decreased the allowance for credit losses in the amount of approximately $ 0.1 million and $ 47,000 for the year ended December 31, 2024 and 2023, respectively. Accounts receivable - trade, net for the Company as of January 1, 2023 was approximately $ 0.4 million. Note 9. Receivables - Other, net At December 31, 2024 and 2023 , receivables - other, net consisted of the following (in thousands): December 31, 2024 December 31, 2023 Performance bonuses $ 588 $ 1,602 Customers 115 192 Other 29 52 $ 732 $ 1,846 Performance bonuses, paid annually by PBMs, are estimated based on historical pharmacy performance and prior payments received. F- 24 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 10. Inventory At December 31, 2024 and 2023 , inventories consisted of the following (in thousands): December 31, 2024 December 31, 2023 Finished goods $ 5,320 $ 5,195 Less reserve for obsolete inventory ( 439 ) ( 60 ) Total $ 4,881 $ 5,135 During the year ended December 31, 2024, the Company increased the inventory reserve by approximately $ 0.4 million. Note 11. Property and Equipment, net Property and equipment consisted of the following (in thousands): December 31, 2024 December 31, 2023 Appliques 2,160 2,160 Building 2,116 2,116 Vehicles 645 595 Website development 615 587 Office furniture and fixtures 564 527 Land 184 184 Leasehold improvements 177 124 Computer equipment 119 117 Rental equipment 87 60 Construction in progress — 22 Property and equipment gross 6,667 6,492 Less: accumulated depreciation ( 3,260 ) ( 2,503 ) Property and equipment, net $ 3,407 $ 3,989 Depreciation expense was approximately $ 0.8 million and $ 0.8 million for the years ended December 31, 2024 and 2023 , respectively. F- 25 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 12. Goodwill and Intangible Assets, net Goodwill During the year ended December 31, 2024, the Company concluded that the carrying amount of the Healthcare Operations reporting segment exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charge of approximately $ 0.7 million. Interim impairment assessments were considered necessary as a result of the sustained decline in the Healthcare Operations stock price and related market capitalization. The goodwill impairment charge is reflected in Impairment loss in the Consolidated Statements of Comprehensive Loss. With the assistance of a third -party valuation firm, the fair value of the Healthcare Operations reporting segment was determined using an income approach whereby the fair value was calculated utilizing discounted estimated future cash flows (level 3 nonrecurring fair value measurement). The income approach requires several assumptions including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for the business, estimation of the useful life over which cash flows will occur, and determination of the weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit. The long-term growth rate used in the impairment was 3.0 % and the weighted average cost of capital used in the impairment was 13.5 %. The following table reflects changes in the carrying amount of goodwill during the periods presented by reportable segments (in thousands): e-Commerce Operations Healthcare Operations Total Goodwill, net as of December 31, 2022 $ — $ — $ — Changes in Goodwill during the year ended December 31, 2023: Goodwill acquired — 14,626 14,626 Impairment losses — ( 13,895 ) ( 13,895 ) Balances as of December 31, 2023 Goodwill — 14,626 14,626 Accumulated impairment losses — ( 13,895 ) ( 13,895 ) Goodwill, net as of December 31, 2023 — 731 731 Changes in Goodwill during the year ended December 31, 2024: Goodwill acquired - Outfitter acquisition 301 — 301 Deferred tax effect of intangible basis difference (1) ( 145 ) — Impairment losses — ( 731 ) ( 731 ) Balances as of December 31, 2024 Goodwill 156 14,626 14,782 Accumulated impairment losses — ( 14,626 ) ( 14,626 ) Goodwill, net as of December 31, 2024 $ 156 $ — $ 156 ( 1 ) Decrease related to book tax difference of intangible assets arising for the business acquisition of Outfitter. F- 26 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Intangible Assets During the year ended December 31, 2024, the Company performed an impairment assessment of long-lived assets as it relates to the Healthcare Operations reporting segment due to the decline in future projected revenues and cash flows. As a result, the Company completed a recoverability test and concluded that the asset groups were not fully recoverable as the undiscounted expected future cash flows did not exceed their carrying amounts. The Company, with the assistance of a third -party valuation firm, determined the fair value of the asset groups using an income approach utilizing undiscounted estimated future cash flows (level 3 nonrecurring fair value measurement). The income approach requires several assumptions including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, and estimation of the useful life over which cash flows will occur. The carrying amount of certain assets in the asset group exceeded the fair value, resulting in the recognition of a non-cash impairment charge to intangible assets of approximately $ 12.8 million for the year ended December 31, 2024 ( reflected in Impairment loss in the Consolidated Statements of Comprehensive Loss). Intangible assets, net consisted of the following (in thousands): December 31, 2024 Gross amount Accumulated amortization Net Amount Customer Contracts 665 ( 312 ) 353 Trade names 185 ( 14 ) 171 Total intangible assets $ 850 $ ( 326 ) $ 524 December 31, 2023 Gross amount Accumulated amortization Net Amount Pharmacy records $ 8,130 $ ( 807 ) $ 7,323 Trade names 4,700 ( 224 ) 4,476 Developed technology 2,880 ( 281 ) 2,599 Customer Contracts 250 ( 225 ) 25 Total intangible assets $ 15,960 $ ( 1,537 ) $ 14,423 F- 27 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) A summary of the changes to the gross carrying amount, accumulated amortization, and net book value of total intangible assets by reporting unit during the year ended December 31, 2024 is as follows (in thousands): e-Commerce Operations Healthcare Operations Total Balances as December 31, 2023: Gross amount $ 250 $ 15,710 $ 15,960 Accumulated amortization ( 225 ) ( 1,312 ) ( 1,537 ) Net amount 25 14,398 14,423 Changes during the year ended December 31, 2024: Outfitter acquisition 600 — 600 Accumulated amortization expense ( 101 ) ( 1,608 ) ( 1,709 ) Impairment - gross amount — ( 15,710 ) ( 15,710 ) Impairment - accumulated amortization — 2,920 2,920 Net amount 499 ( 14,398 ) ( 13,899 ) Balances at December 31, 2024: Gross amount 850 — 850 Accumulated amortization ( 326 ) — ( 326 ) Net amount $ 524 $ — $ 524 For the year ended December 31, 2024 and 2023, the Company recognized amortization expense of approximately $ 1.7 million and $ 1.3 million, respectively. The following table represents the total estimate for future amortization of intangible assets for the five succeeding years and thereafter as of December 31, 2024 ( in thousands): Year Amount 2025 $ 102 2026 102 2027 102 2028 102 2029 39 Thereafter 77 Total $ 524 F- 28 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 13. Equity Method Investment On August 30, 2022, NextPlat entered into a Securities Purchase Agreement (the “SPA”) between NextPlat and Progressive Care, under which NextPlat, its Executive Chairman and Chief Executive Officer, Charles M. Fernandez, board member, Rodney Barreto, and certain other investors invested an aggregate of $ 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 Progressive Care 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 Progressive Care Series B Convertible Preferred Stock has a stated value of $ 2,000 per share and each share has the equivalent voting rights of 500 shares of Progressive Care common stock (after giving effect to the Reverse Stock Split described below). Each share of Progressive Care Series B Convertible Preferred Stock is convertible at any time at the option of the holder into shares of Progressive Care common stock 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”) entered into a Modification Agreement wherein the terms were modified for an existing Secured Convertible Promissory Note (the “Note”) originally held by a third party note holder and sold to the NextPlat Investors. The NextPlat Investors purchased the Note as part of a Confidential Note Purchase and Release Agreement between the former note holder and the NextPlat Investors. As of the date of the SPA, the aggregate amount of principal and interest outstanding on the Note was approximately $ 2.8 million. As part of the Modification Agreement, various terms of the Note were modified, among them, the Conversion Price for the Note was modified to a fixed price of $ 4.00 per share of common stock (after giving effect to the Reverse Stock Split described below). In addition, the Note was modified to provide for mandatory conversion upon the later to occur of (a) the completion of the Company’s reverse stock split, and (b) the listing of the Company’s common stock on a national exchange, including the Nasdaq Capital Market, the Nasdaq Global Market, or the New York Stock Exchange. On September 13, 2022, the Progressive Care Board of Directors appointed Charles M. Fernandez as Chairman of the Board of Directors and Rodney Barreto as the Vice Chairman of the Board of Directors. In connection with these appointments, Alan Jay Weisberg, Progressive Care’s current Chairman and Chief Executive Officer, was appointed to serve as a Vice Chairman. On September 12, 2022, two of Progressive Care’s Directors, Birute Norkute and Oleg Firer, resigned as Directors. On October 7, 2022, the Progressive Care Board of Directors unanimously voted to approve the appointment of Pedro Rodriguez, MD to the Board. Dr. Rodriguez was nominated to the Progressive Care Board by NextPlat. On November 11, 2022, Mr. Weisberg resigned from his positions as Progressive Care’s Chief Executive Officer and co-Vice-Chairman of the Board of Directors. On the same date, the Board appointed Mr. Fernandez to serve as the new Chief Executive Officer immediately. On December 29, 2022, Progressive Care filed a Certificate of Amendment to Articles of Incorporation (the “Amendment to Articles”) with the Secretary of State of the State of Delaware. Pursuant to the Amendment to Articles, each 200 shares of Progressive Care’s common stock outstanding were 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 the Company 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 (“Common Stock”) 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 at $ 2.20 per share of Common Stock. On May 9, 2023, NextPlat and Progressive Care closed the transactions contemplated in the SPA. F- 29 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Simultaneous with the closing of the Unit Purchase on May 9, 2023, Progressive Care entered into a Debt Conversion Agreement (the “DCA”) with NextPlat and the other holders (the “Holders”) of that certain Amended and Restated Secured Convertible Promissory Note, dated as of September 2, 2022, made by Progressive Care in the original face amount of approximately $ 2.8 million (the “Note”). Pursuant to the DCA, NextPlat and the other Holders agreed to convert the total approximately $ 2.9 million of outstanding principal and accrued and unpaid interest to Common Stock at a conversion price of $ 2.20 per share. NextPlat received 570,599 shares issued upon conversion of the Note. In addition, NextPlat received a warrant to purchase one share of Common Stock for each share of Common Stock they received upon conversion of the Note (the “Conversion Warrants”). The Conversion Warrants have a three -year term and are immediately exercisable at $ 2.20 per share of Common Stock. At the same time, Progressive Care and NextPlat entered into a First Amendment (the “Amendment”) to that certain Securities Purchase Agreement dated November 16, 2022 ( the “Debenture Purchase Agreement”). Under the Debenture Purchase Agreement, Progressive Care agreed to issue, and NextPlat Corp agreed to purchase, from time to time during the three -year term of the Debenture Purchase Agreement, up to an aggregate of $ 10 million of secured convertible debentures from Progressive Care (the “Debentures”). Pursuant to the Amendment, NextPlat and Progressive Care agreed to amend the Debenture Purchase Agreement and the form of Debenture to have a conversion price of $ 2.20 per share. At present, no Debentures have been purchased by NextPlat under the Debenture Purchase Agreement. As a result of the common stock purchase warrant exercises and the entry into the voting agreement as described in Note 4, NextPlat concluded that there was a change in control in Progressive Care. As of July 1, 2023, NextPlat has the right to control more than 50 percent of the voting interests in Progressive Care through the concurrent common stock purchase warrant exercises and voting agreement. Beginning on July 1, 2023, the Company changed the accounting method for its investment in Progressive Care, which prior to July 1, 2023 had been accounted for as an equity method investment, to consolidation under the voting interest model in FASB ASC Topic 805. Therefore, Progressive Care became a consolidated subsidiary of the Company on July 1, 2023. 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. F- 30 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following summarizes the Company’s consolidated balance sheet description equity method investment as follows as of December 31, 2023 ( in thousands): Carrying Amount December 31, 2022, beginning balance $ 5,261 Investment in Progressive Care Inc. and Subsidiaries 1,506 Gain on equity method investment 11,352 Portion of loss from Progressive Care, Inc. and Subsidiaries ( 1,604 ) Depreciation expense due to cost basis difference (1) ( 49 ) Interest earned from convertible note receivable 21 Interest earned from amortization of premium on convertible note receivable 199 Elimination of intercompany interest earned ( 7 ) Change in accounting method as of July 1, 2023 ( 16,679 ) December 31, 2023, carrying amount $ — The following summarizes the Company’s consolidated statements of comprehensive loss description Equity in net loss of affiliate for the year ended December 31, 2023 as follows (in thousands): For the Year Ended December 31, 2023 Portion of loss from Progressive Care, Inc. and Subsidiaries $ ( 1,604 ) Depreciation expense due to cost basis difference (1) ( 49 ) Interest earned from convertible note receivable 21 Interest earned from amortization of premium on convertible note receivable 199 Elimination of intercompany interest earned ( 7 ) Equity in net loss of affiliate $ ( 1,440 ) ( 1 ) NextPlat records depreciation expense on its estimated cost basis difference which is subject to change. F- 31 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 14. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of the following (in thousands): December 31, 2024 December 31, 2023 Accounts payable $ 6,596 $ 12,142 Accrued wages and payroll liabilities 269 200 Accrued other liabilities 269 187 Customer deposits payable 96 76 Accrued PBM fees — 571 Total $ 7,230 $ 13,176 Note 15. Notes Payable Notes payable consisted of the following (in thousands): December 31, 2024 December 31, 2023 A. Mortgage note payable - commercial bank - collateralized $ 1,050 $ 1,140 B. Note payable - uncollateralized 25 25 C. Notes payable - collateralized 234 255 Insurance premiums financing 103 103 Subtotal 1,412 1,523 Less: current portion of notes payable ( 380 ) ( 312 ) Long-term portion of notes payable $ 1,032 $ 1,211 (A) Mortgage Note Payable – collateralized In 2018, Pharmco closed on the purchase of land and building located at 400 Ansin Boulevard, Hallandale Beach, Florida. The purchase price was financed in part through a mortgage note and security agreement entered into with a commercial lender in the amount of $ 1,530,000 . The promissory note is collateralized by the land and building, bears interest at a fixed rate of 4.75 % per annum, matures on December 14, 2028 and is subject to a prepayment penalty. Principal and interest will be repaid through 119 regular payments of $ 11,901 that began in January 2019, with the final payment of all principal and accrued interest not yet paid on December 14, 2028. Note repayment is guaranteed by Progressive Care. F- 32 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (B) Note Payable – Uncollateralized As of December 31, 2024 , the uncollateralized note payable represents a non-interest-bearing loan that is due on demand from an investor. (C) Notes Payable – Collateralized On July 16, 2020 ( the “Issue Date”), GTC, entered into a Coronavirus Interruption Loan Agreement (“Debenture”) by and among the Company and HSBC UK Bank PLC (the “Lender”) for an amount of £250,000, or USD $ 338,343 at an exchange rate of GBP: USD of 1.3533720 . The Debenture bears interest beginning July 16, 2021, at a rate of 4.0 % per annum over the Bank of England Base Rate ( 0.1 % as of July 16, 2020), payable monthly on the outstanding principal amount of the Debenture. The Debenture has a term of six years from the date of drawdown, July 15, 2026, the “Maturity Date”. Voluntary prepayments are allowed with five business days’ written notice and the amount of the prepayment is equal to 10 % or more of the limit or, if less, the balance of the debenture. The Debenture is secured by all GTC’s assets as well as a guarantee by the UK government. The Debenture includes customary events of default, including, among others: (i) non-payment of amounts due thereunder, (ii) non-compliance with covenants thereunder, (iii) bankruptcy or insolvency (each, an “Event of Default”). Upon the occurrence of an Event of Default, the Debenture becomes payable upon demand. The balance outstanding as of December 31, 2024 on the note payable was approximately $ 132,000 . In April 2021, Progressive Care entered into a note obligation with a commercial lender, the proceeds from which were used to purchase pharmacy equipment in the amount of approximately $ 30,000 . During September 2021, pharmacy equipment was returned since the installation was cancelled and the note was amended. The amended promissory note payable requires 46 monthly payments of $ 331 , including interest at 6.9 %. The balance outstanding as of December 31, 2024 and 2023 on the note payable was approximately $ 2,000 and $ 6,000 , respectively. In July 2022, Progressive Care entered into a note obligation with a commercial lender, the proceeds from which were used to purchase pharmacy equipment in the amount of approximately $ 90,000 . The terms of the promissory note payable require 60 monthly payments of $ 1,859 , including interest at 8.78 % starting January 2023. The balance outstanding on the note payable was approximately $ 58,000 and $ 71,000 as of December 31, 2024 and 2023, respectively. In September 2022, Progressive Care entered into a note obligation with a commercial lender, the proceeds from which were used to purchase a vehicle in the amount of approximately $ 25,000 . The terms of the promissory note payable require 24 monthly payments of $ 1,143 , including interest at 8.29 % starting October 2022. The note was paid in full in September 2024. The balance outstanding on the note payable was approximately $ 10,000 as of December 31, 2023. Principal outstanding as of December 31, 2024 , is expected to be repayable as follows (in thousands): Year Amount 2025 $ 416 2026 119 2027 124 2028 753 2029 — Thereafter — Total $ 1,412 F- 33 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 16. Equity Common Stock We have authorized 50,000,000 shares of $ 0.0001 par value common stock. As of December 31, 2024 and 2023 , 25,963,051 and 18,724,596 shares, respectively, were issued and outstanding. On October 1, 2024, at 12:01 Eastern time, the Merger became effective and Progressive Care, Inc. merged with and into Progressive Care, LLC, 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. Listing on the Nasdaq Capital Market Our common stock and warrants have been trading on the Nasdaq Capital Market under the symbols “NXPL” and “NXPLW,” respectively, since January 21, 2022. Prior to January 21, 2022, our common stock and warrants were traded on the Nasdaq Capital Market under the symbols “OSAT” and “OSATW,” respectively. April 2023 Private Placement of Common Stock On April 5, 2023, the Company entered into a securities purchase agreement (the “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. F- 34 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 17. Warrants Underwriter Warrants In June 2021, the Company issued 144,000 warrants to Maxim Group LLC, the underwriter (the “Underwriter Warrants”) in connection with the June 2021 Public Offering ( “June Offering”). The Underwriter Warrants expire five years from the effective date of the June Offering and are exercisable at a per share price equal to $ 5.50 per share, or 110 % of the public offering price per unit in the June Offering. As of December 31, 2024 and 2023 , there were 144,000 and 144,000 Underwriter Warrants issued and outstanding, respectively. Placement Agent Warrants In December 2022, pursuant to the December 2021 Offering, the Company issued warrants to purchase 4,575,429 shares of common stock in an offering, at an exercise price of $ 1.75 and a term of 3 years. In addition to, but separate from, the unregistered warrants included in the units sold in the December 2021 Offering, the Company issued 549,051 warrants to purchase shares of Common Stock with an exercise price of $ 1.75 per share, to its Placement Agent Dawson James Securities Inc. The Placement Agent Warrants are exercisable at any time and from time to time during the three -year period commencing on the six -month anniversary of the closing date. As of December 31, 2024 and 2023 , there were 1,187,035 and 549,051 Placement Agent Warrants issued and outstanding, respectively. Progressive Care Merger W arrants On October 1, 2024, as a result of the Progressive Care merger with NextPlat, 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. F- 35 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Stock-Based Compensation Warrants There were no stock-based compensation warrants issued for the year ended December 31, 2024. For the year ended December 31, 2023, the Company granted warrants as stock-based compensations valued at approximately $ 1.60 per warrant, using a Black-Scholes option pricing model with the following assumptions: stock price of $ 1.60 per share (based on closing price of the Company’s common stock on the date of grant), volatility of 507 %, expected term of three years, and a risk free interest rate of 4.47 %. As of December 31, 2024 and 2023 , there were 20,000 and 20,000 Stock-Based Compensation Warrants issued and outstanding, respectively. A summary of the status of the Company’s total outstanding warrants and changes during the year ended December 31, 2024 is as follows: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Balance at January 1, 2023 7,654,572 $ 2.83 3.15 Granted 20,000 1.65 3.00 Exercised ( 105,000 ) 1.75 — Balance outstanding and exercisable at December 31, 2023 7,569,572 $ 2.85 2.15 Balance at January 1, 2024 7,569,572 $ 2.85 2.15 Granted (1) 1,288,498 2.01 1.93 Exercised ( 48,550 ) 1.75 — Balance outstanding and exercisable at December 31, 2024 8,809,520 $ 2.73 1.26 ( 1 ) Warrants issued related to the Progressive Care Merger on October 1, 2024. As of December 31, 2024 , and December 31, 2023 , there were 8,809,520 and 7,569,572 warrants outstanding, respectively. As of December 31, 2023 , the Company had registered warrants of 2,386,092 of the 7,569,572 warrants issued and outstanding. As of December 31, 2024 , the Company had registered warrants of 2,386,092 of the 8,809,520 warrants issued and outstanding. The Company determined that the warrants do not meet the definition of liability under FASB ASC Topic 480 and therefore classified the warrants as equity instruments. F- 36 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 18. Stock-Based compensation Stock-based compensation expense is recorded in selling, general and administrative expenses in the Consolidated Statements of Comprehensive Loss. For the years ended December 31, 2024 and 2023 , stock-based compensation expense was approximately $ 1.6 million and $ 5.4 million, respectively. There were no income tax benefits recognized from stock-based compensation during the years ended December 31, 2024 and 2023 due to cumulative losses and valuation allowances. Stock Award Plans The Company maintains stock incentive plans to attract, motivate and retain management, key employees, directors, and consultants. These plans provide for discretionary awards of, among others, stock options, stock awards, stock unit awards, and stock appreciation rights to participants (collectively, share-based awards). Restricted Stock Awards The following table summarizes our restricted stock awards activity: Number of Units Weighted Average Grant Date Fair Value Outstanding as of December 31, 2022 460,000 $ 4.32 Granted 559,000 1.65 Vested ( 794,000 ) 2.42 Outstanding as of December 31, 2023 225,000 4.33 Vested ( 220,000 ) 5.03 Forfeited ( 5,000 ) 5.37 Outstanding as of December 31, 2024 — $ — As of December 31, 2023 , there was approximately $ 1.1 million of net unrecognized compensation cost related to unvested stock-based compensation to be recognized over the remaining weighted average period of 1.58 years. As of December 31, 2024 , there was no unrecognized compensation cost related to unvested stock-based compensation to be recognized as there were no outstanding awards. F- 37 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Stock Options Stock options outstanding at December 31, 2024 and 2023 , as disclosed in the below table, have approximately $ 3,000 and $ 0.2 million of intrinsic value, respectively. A summary of the status of the Company’s outstanding stock options and changes during the years ended December 31, 2024 and 2023 , is as follows: Number of Options Weighted Average Exercise Price Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Life (Years) Balance at January 1, 2023 2,119,701 $ 4.16 $ 2.25 5.23 Granted 395,000 2.37 2.37 4.06 Cancelled (266,284 ) 5.88 — — Expired (3,084 ) — — — Balance outstanding at December 31, 2023 2,245,333 $ 3.63 $ 2.88 4.26 Options exercisable at December 31, 2023 1,771,997 $ 3.31 $ 2.86 4.63 Balance at January 1, 2024 2,245,333 $ 3.63 $ 2.88 4.26 Granted (1) 480,088 1.78 1.30 7.60 Cancelled (250,000 ) 5.35 — — Balance outstanding at December 31, 2024 2,475,421 $ 3.10 $ 2.54 4.35 Options exercisable at December 31, 2024 2,453,752 $ 3.11 $ 2.55 4.36 ( 1 ) Stock options granted as a result of the Progressive Care Merger on October 1, 2024. On October 1, 2024, at 12:01 Eastern time, the Merger became effective and Progressive Care merged with and into Merger 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. For the year ended December 31, 2024 , the Company granted 480,088 stock options valued at approximately $ 1.30 per option, using a Black-Scholes option pricing model with the following assumptions: stock price of $ 1.30 per share (based on closing price of the Company’s common stock on the date of grant), volatility of 236 % - 240 %, expected term of 7 to 8 years and a risk free interest rate of 3.61 % to 3.64 %. As of December 31, 2024 , there was approximately $ 44,000 of net unrecognized compensation cost related to unvested stock options to be recognized over the remaining weighted average period of 3.27 years. For the year ended December 31, 2023 , the Company granted 395,000 stock options valued at approximately $ 1.98 - $ 2.64 per option, using a Black-Scholes option pricing model with the following assumptions: stock price of $ 1.98 - $ 2.64 per share (based on closing price of the Company’s common stock on the date of grant), volatility of 502 % - 504 %, expected term of 2 to 5 years and a risk free interest rate of 3.31 % to 3.71 %. As of December 31, 2023 , there was approximately $ 1.4 million of net unrecognized compensation cost related to unvested stock options to be recognized over the remaining weighted average period of 2.88 years. F- 38 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 19. Income Taxes The Company accounts for income taxes under ASC Topic 740: Income Taxes which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. ASC Topic 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. The components of earnings before income taxes for the years ended December 31, 2024 and 2023 were as follows (in thousands): Years Ended December 31, 2024 2023 Net loss after loss in equity method investment and before income taxes: Domestic $ ( 23,280 ) $ ( 12,672 ) Foreign 226 293 $ ( 23,054 ) $ ( 12,379 ) F- 39 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Income tax provision consisted of the following for the years ended December 31, 2024 and 2023 (in thousands): Years Ended December 31, 2024 2023 Income tax provision: Current Federal $ — $ ( 11 ) State — — Foreign 71 39 Total current 71 28 Deferred: Federal — — State — — Foreign — — Total deferred — — Total income tax provision $ 71 $ 28 The Company’s wholly owned subsidiary, GTC, is a United Kingdom (“UK”) Limited Company and files tax returns in the UK. Its estimated tax liability for December 31, 2024 and 2023 is approximately $ 56,000 and $ 60,000 , respectively. A reconciliation of the income tax provision (benefit) by applying the statutory United States federal income tax rate to income (loss) before income taxes is as follows (in thousands): Years Ended December 31, 2024 2023 Federal income tax provision at statutory rate $ ( 1,666 ) $ ( 2,655 ) Deferred state income taxes, net ( 293 ) — Provision true-up adjustments 72 ( 488 ) Foreign taxes at rate different than US Taxes 70 60 Net operating loss deduction — ( 310 ) Permanent differences 142 ( 22 ) Other true-ups 4 99 Change in valuation allowance 1,742 3,344 Income tax provision $ 71 $ 28 F- 40 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. Temporary differences, which give rise to a net deferred tax asset is as follows (in thousands): December 31, 2024 December 31, 2023 Deferred tax assets: Net operating loss carryforward $ 9,625 $ 8,016 Property plant and equipment and intangibles asset 280 327 Equity method investment loss 806 806 Accounts receivable 33 — Inventory 17 — Right-of-use assets 171 — Other tax carry-overs — 613 Reserves and allowances — 85 Stock-based compensation 4,177 3,861 Interest limitation 619 — Total deferred tax assets 15,728 13,708 Deferred tax liabilities: Book basis of intangible assets in excess of tax basis 150 3,650 Lease liabilities 181 — Total deferred tax liabilities 331 3,650 Net deferred tax asset before valuation allowance 15,397 10,058 Less: valuation allowance ( 15,397 ) ( 10,058 ) Net deferred tax asset $ — $ — Nextplat Corp’s net operating loss carryforward (“NOL carryforward”) increased from approximately $ 17.8 million at December 31, 2023 to $ 21.7 million at December 31, 2024 . Out of the approximately $ 21.7 million NOL carryforward, approximately $ 2.9 million will begin to expire in 2032 and approximately $ 18.8 million will have an indefinite life. Progressive Care, LLC has an NOL carryforward of approximately $ 16.4 million. However, the Company has not performed an IRC Section 382 analysis of the Progressive Care NOL carryforward, so it is not known as this time the amount of the NOL carryforward available to offset NextPlat future taxable income. IRC Section 382 imposes a limitation on a company to use historical NOLs and certain other tax attributes in the event of an ownership change. After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at December 31, 2024 and 2023 , due to the uncertainty of realizing the deferred income tax assets. The change in the valuation allowance for 2024 was an increase of approximately $ 5.4 million. The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. U.S. federal income tax returns for 2021 and after remain open to examination. Generally, foreign income tax returns after 2020 remain open to examination. No income tax returns are currently under examination. As of December 31, 2024 and 2023 , the Company does not have any unrecognized tax benefits, and continues to monitor its current and prior tax positions for any changes. The Company recognizes penalties and interest related to unrecognized tax benefits as income tax expense. For the years ended December 31, 2024 and 2023 , there were no penalties or interest recorded in income tax expense. F- 41 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 20. Leases The Company has entered into a number of lease arrangements under which the Company is the lessee. These leases are classified as operating leases. In addition, the Company has elected the short-term lease practical expedient in ASC Topic 842 related to real estate leases with terms of one year. The following is a summary of the Company’s lease arrangements. Finance Lease Agreements In May 2018, Progressive Care entered into a finance lease obligation to purchase pharmacy equipment with a cost of approximately $ 115,000 . The terms of the lease agreement require monthly payments of approximately $ 1,700 plus applicable tax over 84 months ending March 2025 including interest at the rate of 6 %. Operating Lease Agreements On December 2, 2021, Nextplat entered into a 62 -month lease for 4,141 square feet of office space in Florida (“Florida lease”), for approximately $ 186,000 annually. The rent increases 3 % annually. The lease commenced upon occupancy on June 13, 2022, and will expire on August 31, 2027. The Florida lease does not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. For our facilities in Poole, England, we rent office and warehouse space of approximately 2,660 square feet for £30,000 annually or approximately USD $ 37,100 , based on a yearly average exchange rate of 1.24 GBP: USD. The Poole lease was renewed on October 6, 2022, and expired October 31, 2023 and renewed for an additional twelve months. On August 1, 2024 we relocated from our previous location in Poole, England to a new facility in Poole and entered into a new lease for office and warehouse space. This is a three -year lease and expires on July 31, 2027. The annual rent is approximately £14,000 through July 31, 2025, approximately £30,000 through July 31, 2026, and approximately £26,000 through July 31, 2027. Outfitter rents office space at 2727 Old Elm Hill Pike, Nashville, Tennessee. The lease was entered into and commenced in April 2024 with an expiration date of April 2026. The lease agreement calls for monthly payments of approximately $ 4,800 . Progressive Care entered into a lease agreement for its Orlando pharmacy in August 2020. The term of the lease is 66 months with a termination date of February 2026. The lease agreement calls for monthly payments that began in February 2021, of $ 4,310 , with an escalating payment schedule each year thereafter. Progressive Care leases its North Miami Beach pharmacy location under an operating lease agreement with a lease commencement date in September 2021. The term of the lease is 60 months with a termination date in August 2026. The lease calls for monthly payments of $ 5,237 , with an escalating payment schedule each year thereafter. Progressive Care also leases its Palm Beach County pharmacy locations under operating lease agreements expiring in February 2025. During June 2023 Nextplat entered into a 36 -months lease to le ase twenty-five ( 25 ) hours in a Phenom 300 aircraft, for approximately $ 200,650 annually. The rent increases 3 % annually. The lease commenced on June 7, 2023. In June 2024, NextPlat terminated the lease and paid a lease termination fee in the amount of $ 0.1 million. The remaining carrying value, net of the ROU asset and liability in the amount of $ 0.1 million, was written off and recorded in asset write-off on the Consolidated Statements of Comprehensive Loss. F- 42 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Variable expenses generally represent the Company’s share of the landlord’s operating expenses. Right-of-use assets for operating leases are periodically reduced by impairment losses. We use the long-lived assets impairment guidance in ASC Subtopic 360 - 10, Property, Plant, and Equipment – Overall, to determine whether an ROU asset is impaired, and if so, the amount of the impairment loss to recognize. The Company recorded approximately $ 0.1 million of impairment loss related to the write-down of a right-of-use asset as a result of taking the leased equipment out of service and not returning to service in the future. This was recorded to the Healthcare Operations reporting segment for the year ended December 31, 2024. We monitor for events or changes in circumstances that require a reassessment of one of our leases. When a reassessment results in the re-measurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in profit or loss. We recognized lease costs associated with all leases as follows (in thousands): Years Ended December 31, 2024 2023 Operating lease cost: Fixed rent expense $ 603 $ 427 Variable rent expense 65 111 Finance lease cost: Amortization of right-of-use assets 20 15 Interest expense 1 1 Total Lease Costs $ 689 $ 554 F- 43 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Supplemental cash flow information related to leases was as follows (in thousands): Years Ended December 31, 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 427 $ 464 Financing cash flows from finance leases 24 15 Total cash paid for lease liabilities $ 451 $ 479 Supplemental balance sheet information related to leases was as follows (in thousands): December 31, 2024 December 31, 2023 Operating leases: Operating lease right-of-use assets, net $ 812 $ 1,566 Operating lease liabilities: Current portion 404 532 Long-term portion 438 929 $ 842 $ 1,461 Weighted average remaining lease term (years) 2.25 2.96 Weighted average discount rate 4.21 % 4.65 % Finance leases: Finance lease right-of-use assets, net $ 5 $ 22 Finance lease liabilities: Current portion 5 18 Long-term portion — 5 $ 5 $ 23 Weighted average remaining lease term (years) 0.24 1.25 Weighted average discount rate 6.00 % 6.00 % F- 44 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Future minimum lease payments are as follows (in thousands): Years Ending December 31, Finance Lease Operating Lease Total Future Lease Commitments 2025 $ 5 $ 431 $ 436 2026 — 314 314 2027 — 137 137 2028 — — — Total lease payments to be paid 5 882 887 Less: future interest expense — ( 40 ) ( 40 ) Lease liabilities 5 842 847 Less: current maturities ( 5 ) ( 404 ) ( 409 ) Long-term portion of lease liabilities $ — $ 438 $ 438 Note 21. Reportable Segments The Company has two reportable segments: (i) e-Commerce Operations, which involves acquiring and leasing, primarily an 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, and other related businesses and (ii) Healthcare Operations, which provides TPA, 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. This organizational structure aligns with how the Company’s CODMs manage the business, including resource allocation and performance assessment, and further aligns with the Company’s product categories and the key markets the Company serves. The CODMs include the Company’s Chief Executive Officer and Chief Financial Officer. Additionally, the e-Commerce Operations reportable segment CODM includes the President of Global Operations and the Healthcare Operations reportable segment CODM includes the Pharmacy Chief Operating Officer. The CODMs do not review segment assets and segment expenses at a level different than what is reported in the Company’s Consolidated Balance Sheets and Consolidated Statements of Comprehensive Loss. While the Company believes there are synergies between the two business segments, the segments are managed separately because each requires different business strategies. Accounting policies associated with our operating segments are generally the same as those described in Note 1. F- 45 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) The following tables provide information about the Company’s reportable segments (in thousands): Year Ended December 31, 2024 e-Commerce Operations Healthcare Operations Eliminations Total e-Commerce revenue $ 13,791 $ — $ — $ 13,791 Pharmacy prescription and other revenue, net of PBM fees — 41,308 — 41,308 Pharmacy 340B contract revenue — 10,384 — 10,384 Revenues, net 13,791 51,692 — 65,483 Expenses: Cost of revenue 10,356 38,898 — 49,254 Selling, general and administrative 4,134 3,726 — 7,860 Salaries, wages and payroll taxes 2,372 9,069 — 11,441 Impairment loss — 13,653 — 13,653 Professional fees 2,900 1,741 ( 240 ) 4,401 Depreciation and amortization 539 1,959 — 2,498 Total expenses 20,301 69,046 ( 240 ) 89,107 Operating loss ( 6,510 ) ( 17,354 ) 240 ( 23,624 ) Interest expense 13 68 — 81 Other (income) expense ( 647 ) ( 244 ) 240 ( 651 ) Loss before income taxes ( 5,876 ) ( 17,178 ) — ( 23,054 ) Income taxes ( 71 ) — — ( 71 ) Net loss $ ( 5,947 ) $ ( 17,178 ) $ — $ ( 23,125 ) Year Ended December 31, 2023 e-Commerce Operations Healthcare Operations Eliminations Total e-Commerce revenue $ 10,977 $ — $ — $ 10,977 Pharmacy prescription and other revenue, net of PBM fees — 21,412 — 21,412 Pharmacy 340B contract revenue — 5,367 — 5,367 Revenues, net 10,977 26,779 — 37,756 Expenses: Cost of revenue 8,122 18,323 — 26,445 Selling, general and administrative 6,633 3,277 — 9,910 Salaries, wages and payroll taxes 2,670 3,973 — 6,643 Impairment loss — 13,895 — 13,895 Professional fees 1,595 506 ( 120 ) 1,981 Depreciation and amortization 647 1,463 — 2,110 Total expenses 19,667 41,437 ( 120 ) 60,984 Operating loss ( 8,690 ) ( 14,658 ) 120 ( 23,228 ) Interest expense 25 54 — 79 Other (income) expense ( 1,072 ) ( 64 ) 120 ( 1,016 ) Loss before income taxes ( 7,643 ) ( 14,648 ) — ( 22,291 ) Income taxes ( 28 ) — — ( 28 ) Net loss $ ( 7,671 ) $ ( 14,648 ) $ — $ ( 22,319 ) e-Commerce Operations Healthcare Operations Eliminations Total Total assets as of December 31, 2024 $ 19,044 $ 17,434 $ — $ 36,478 Total assets as of December 31, 2023 $ 40,764 $ 40,384 $ ( 16,679 ) $ 64,469 Capital expenditures for the year ended December 31, 2024 were approximately $ 50,000 for e-Commerce Operations and $ 139,000 for Healthcare Operations. F- 46 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 22. Commitments and Contingencies Litigation On October 28, 2024, Alan Jay Weisberg, the former Chief Executive Officer and Chairman of Progressive Care Inc. (“RXMD”), filed a putative class action suit on behalf of himself and all other former RXMD stockholders against NextPlat, Charles M. Fernandez, the Chief Executive Officer and a director of NextPlat, and Rodney Barreto, a director of NextPlat. The complaint purports to allege a breach of fiduciary duty by NextPlat and Messrs. Fernandez and Barreto in connection with the merger of RXMD with and into a wholly-owned subsidiary of NextPlat (the “Merger”), which Merger was completed on October 1, 2024 following approval by the stockholders of each of NextPlat and RXMD in stockholder meetings held on September 13, 2024 by NextPlat and RXMD, respectively. Among other things, the complaint asserts that the consideration paid to Mr. Weisberg and the other RXMD stockholders in connection with the Merger was insufficient. The monetary relief requested in the complaint includes compensatory and rescissory damages in an unspecified dollar amount. The complaint is pending in the Court of Chancery of the State of Delaware. The caption is Alan Jay Weisberg v. Charles M. Fernandez, Rodney Barreto and Nextplat Corp., and the case number is C.A. No. 20. 24 - 1097 -MTZ. The Company’s management does not believe that the Weisberg’s claim is meritorious and plans to vigorously defend against the suit. The Company is in the process of preparing a response to the complaint and has filed a motion to dismiss the complaint. 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. On June 17, 2024, Progressive Care was notified of a potential claim that a former employee allegedly suffered a loss due to an alleged breach by Progressive Care of an employment contract with the former employee. Management believes, based on discussions with its legal counsel, that Progressive Care has meritorious defenses against the former employee’s claim. Since receipt of the notice of claim, Progressive Care filed a petition for arbitration against the former employee, asserting that it was the employee who breached the employment contract. Progressive Care will prosecute its claims and will defend any counterclaims vigorously as Progressive Care believes it will prevail on the merits. At this time, we cannot reasonably estimate the amount of the loss. From time to time, the Company may become involved in litigation relating to claims arising out of our operations in the normal course of business. Other than the matter described above, the Company is not currently involved in any pending legal proceeding or litigation, and to the best of our knowledge, no governmental authority is contemplating any proceeding to which the Company is a party or to which any of the Company’s properties is subject, which would reasonably be likely to have a material adverse effect on the Company’s business, financial condition and operating results. Note 23. Related Party Transactions As of December 31, 2024 , the accounts payable due to related party includes amounts due to David Phipps. Total related party payments due as of December 31, 2024 and December 31, 2023 were $ 18,000 and $ 8,000 , respectively. Those related party payables are non-interest bearing and due on demand. The Company uses an American Express account for Orbital Satcom Corp and an American Express account for GTC, both in the name of David Phipps who personally guarantees the balance owed. During the years ended December 31, 2024 and 2023 , the Company employed two individuals related to Mr. Phipps with gross wages totaling approximately $ 130,000 and $ 78,000 , respectively. During the years ended December 31, 2024 and 2023, the Company employed two individuals related to Dr. Pamela Roberts, Progressive Care’s Chief Operating Officer, with gross wages totaling approximately $ 89,000 and $ 72,000 , respectively. During the years ended December 31, 2024 and 2023, the Company paid an annual salary of $ 125,000 to Lauren Sturges Fernandez, the spouse of Mr. Fernandez, as Chief of Staff and Special Assistant to the Chairman of the Board. During the year ended December 31, 2024, the Company’s majority owned subsidiary, Florida Sunshine, paid approximately $ 28,000 for inventory to a vendor to which Anthony Armas, a Director of the Company, has an ownership interest. F- 47 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Progressive Care Inc . Following the consummation of the Company’s investment in Progressive Care Inc. on September 2, 2022, our Chairman and Chief Executive Officer, Charles M. Fernandez, and our board member, Rodney Barreto, were appointed to Progressive Care’s Board of Directors, with Mr. Fernandez appointed to serve as Chairman of Progressive Care’s Board of Directors and Mr. Barreto appointed to serve as a Vice Chairman of Progressive Care’s Board of Directors. On November 11, 2022, the Progressive Care board of directors elected Mr. Fernandez as the Chief Executive Officer of Progressive Care. In addition, on September 2, 2022, NextPlat, Messrs. Fernandez and Barreto and certain other purchasers purchased from Iliad Research and Trading, L.P. (“Iliad”) 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. The aggregate purchase price paid to Iliad for the Note was $ 2.3 Million of which NextPlat contributed $ 1.0 million and Messrs. Fernandez and Barreto contributed $ 400,000 each (the “Note Purchase”). In connection with the Note Purchase, NextPlat, Messrs. Fernandez and Barreto and the other purchasers of the Note entered into a Debt Modification Agreement with Progressive Care. In consideration of the concessions in the Debt Modification Agreement, Progressive Care issued 105,000 shares of its common stock to the purchasers of the Note, of which NextPlat, Charles Fernandez and Rodney Barreto, received 45,653 , 18,261 , and 18,261 shares, respectively, in each case after giving effect to a 1 -for- 200 reverse stock split enacted by Progressive Care on December 30, 2022. On February 1, 2023, the Company entered into a Management Services Agreement with Progressive Care to provide certain management and administrative services to Progressive Care for a $ 25,000 per month fee. During May 2023 the management fee was reduced to $ 20,000 per month. During the years ended December 31, 2024 and 2023, the Company received approximately $ 180,000 and $ 235,000 , respectively from Progressive Care as management fees. On May 5, 2023, the Company entered into an SPA with Progressive Care Inc., pursuant to which the Company agreed to purchase 455,000 newly issued Units of securities from Progressive Care at a price per Unit of $ 2.20 for an aggregate purchase price of $ 1.0 million (the “Unit Purchase”). Each Unit consists of one share of common stock, par value $ 0.0001 per share, Common Stock and one common stock purchase warrant to purchase a share of Common Stock (the “PIPE Warrants”). On May 9, 2023, pursuant to the DCA, the Company received 570,599 shares, Charles M. Fernandez received 228,240 shares, and Rodney Barreto received 228,240 shares. To induce the approval of the debt conversion pursuant to the DCA, Messrs. Fernandez and Barreto received Inducement Warrants to purchase 190,000 and 30,000 shares of Common Stock, respectively. In addition, the Company and Messrs. Fernandez and Barreto also received a common stock purchase warrant to purchase one share of Common Stock for each share of Common Stock they received upon conversion of the Note. On July 1, 2023, the Company, Charles M. Fernandez, and Rodney Barreto exercised common stock purchase warrants and were issued common stock shares by Progressive Care (the “RXMD Warrants”). The Company exercised common stock purchase warrants on a cashless basis and was issued 402,269 common stock shares. The Company also exercised common stock purchase warrants on a cash basis and paid consideration in the amount of $ 506,000 and was issued 230,000 common stock shares. Mr. Fernandez exercised common stock purchase warrants on a cashless basis and was issued 211,470 common stock shares. Mr. Barreto exercised common stock purchase warrants on a cashless basis and was issued 130,571 common stock shares. 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 Messrs. Fernandez and Barreto, entered into a voting agreement whereby at any annual or special shareholders meeting of Progressive Care’s stockholders, and whenever the holders of Progressive Care’s common stock act by written consent, Messrs. Fernandez and Barreto agreed to vote all of the 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. 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. Next Borough Capital Fund, LP. On July 7, 2023, the Company entered into an unsecured promissory note agreement with Next Borough Capital Management, LLC (“the Borrower”), whereby the Company loaned $ 250,000 to the Borrower. The note bears interest at an annual rate of 7 %. The outstanding principal balance of the note plus all accrued unpaid interest was due and payable on July 7, 2024, the Maturity Date. The Maturity Date was extended until November 8, 2024, which the note was paid in full at the net realizable value of approximately $ 206,000 , net of an allowance of approximately $ 63,000 . Each of the Company, Charles M. Fernandez, Robert D. Keyser, Jr., eAperion Partners, LLC and a revocable trust of Rodney Barreto are members of the Borrower. The note was recorded in Notes Receivable Due From Related Party on the Balance Sheets. F- 48 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Note 24. Concentrations e-Commerce Operations concentrations: Customers: Amazon accounted for 32.8 % and 51.6 % of the Company’s revenues during the years ended December 31, 2024 and 2023 , respectively. No other customer accounted for 10% or more of the Company’s revenues for either period. Suppliers: The following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchases for the years ended December 31, 2024 and 2023 (in thousands): For the Years Ended December 31, 2024 2023 Amount % of Total Purchases Amount % of Total Purchases Iridium Satellite $ 1,602 16.8 % $ 913 10.9 % Garmin $ 1,242 13.0 % $ 1,921 22.4 % Globalstar Europe $ 975 10.2 % $ 958 11.2 % Geographic : The following table sets forth revenue as to each geographic location, for the years ended December 31, 2024 and 2023 (in thousands): Years Ended December 31, 2024 2023 Amount % of Total Amount % of Total Europe $ 6,812 49.4 % $ 6,687 60.9 % North America 4,529 32.8 % 2,575 23.4 % Asia and Pacific 1,720 12.5 % 1,510 13.8 % Africa 683 5.0 % 143 1.3 % South America 47 0.3 % 62 0.6 % $ 13,791 100.0 % $ 10,977 100.0 % F- 49 Table of Contents NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Healthcare Operations concentrations: Suppliers: Progressive Care had significant concentrations with one vendor. The purchases from this significant vendor were approximately 98.0 % of total vendor purchases for the year ended December 31, 2024 . Customers: Progressive Care’s trade receivables are primarily from prescription medications billed to various insurance providers. Ultimately, the insured is responsible for payment should the insurance company not reimburse Progressive Care. Progressive Care generated reimbursements from three significant PBMs for the year ended December 31, 2024 : Year Ended December 31, 2024 A 29 % B 23 % C 20 % F-50