NextPlat Corp 10-K

Item 9A. Controls and Procedures. Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures 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. Inherent Limitations 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. 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. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on this assessment our management believes that, as of December 31, 2022, our internal control over financial reporting is effective under those criteria. 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, 2022, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 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. 53 Item 9B. Other Information. None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. PART III. Item 10. Directors, Executive Officers and Corporate Governance. The information required by this Item will be included in the Company’s definitive proxy statement to be filed with the SEC within 120 days after December 31, 2022, in connection with the solicitation of proxies for the Company’s 2023 annual meeting of shareholders (the “2023 Proxy Statement”) and is incorporated herein by reference. Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until their earlier resignation or removal from office in accordance with our bylaws. The Board of Directors shall not appoint any new members or vote to increase its size in the absence of the written consent of Mr. Phipps. The Board of Directors appoints officers who serve their terms of office at the discretion of the Board of Directors. No director is related to any other director or executive officer of our Company or our subsidiaries, and there are no arrangements or understandings between a director and any other person pursuant to which such person was elected as director. Item 11. Executive Compensation The information required by this Item will be included in the 2023 Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information required by this Item will be included in the 2023 Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information required by this Item will be included in the 2023 Proxy Statement and is incorporated herein by reference. Item 14. Principal Accountant Fees and Services. The information required by this Item will be included in the 2023 Proxy Statement and is incorporated herein by reference. PART IV Item 15. Exhibits, 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. 54 (3) Exhibits 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). 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 Form 7% Convertible Promissory Note (Incorporated by reference from the Current Report on Form 8-K filed with the SEC on March 11, 2021). 10.2 Form Note Purchase Agreement (Incorporated by reference from the Current Report on Form 8-K filed with the SEC on March 11, 2021). 10.3 + David Phipps Employment Agreement (Incorporated by reference from the Current Report on Form 8-K filed with the SEC on March 11, 2021). 10.4 + Thomas Seifert Employment Agreement (Incorporated by reference from the Current Report on Form 8-K filed with the SEC on March 11, 2021). 10.5 + 2020 Equity Incentive Plan (Incorporated by reference from the Current Report on Form 8-K filed with the SEC on December 31, 2021). 10.6 Form Note Purchase Agreement (Incorporated by reference from the Current Report on Form 8-K filed with the SEC on December 4, 2020). 10.7 Form 6% Convertible Promissory Note (Incorporated by reference from the Current Report on Form 8-K filed with the SEC on December 4, 2020). 10.8 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). 10.9 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). 10.10 Note Purchase Agreement by and among the Company and the lenders set forth on the lender schedule to the Note Purchase Agreement dated August 21, 2020 (incorporated by reference from the Current Report on Form 8-K filed with the SEC on August 27, 2020). 55 Exhibit No. Description 10.11 Form of Option Agreement (Incorporated by reference to Form 10-K, filed with the Securities and Exchange Commission on March 29, 2019) 10.12 Convertible Promissory Note by and between Orbital Tracking Corp. and Power Up Ltd., dated January 14, 2019. (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 17, 2019). 10.13 Form of Share Note Exchange Agreement by and between Orbital Tracking Corp and certain holders of the Company’s preferred stock. (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 6, 2019). 10.14 Form of 6% Promissory Note dated April 30, 2019, by and between Orbital Tracking Corp and certain holders of the Company’s preferred stock. (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 6, 2019). 10.15 Note Purchase Agreement by and among the Company and the lenders set forth on the lender schedule to the Note Purchase Agreement dated May 13, 2019. (Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2019). 10.16 Amendment to Note Purchase Agreement by and among the Company and the lenders set forth on the lender schedule to the Note Purchase Agreement dated May 13, 2019. (Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on May 15, 2019). 10.17 Form 7% Convertible Promissory Note (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 11, 2021). 10.18 Form Note Purchase Agreement (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on March 11, 2021). 10.19 + 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). 10.20 + Thomas Seifert Employment Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on March 11, 2021). 10.21 + 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). 10.22 + 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). 10.23 + 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). 10.24 + 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). 10.25 Form of Maxim Lockup Agreement (incorporated by reference to Exhibit A to Underwriting Agreement filed as Exhibit 1.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 28, 2021). 10.26 + 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). 10.27 + 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). 10.28 + John E. Miller Independent Director Agreement (incorporated by reference to Exhibit 10.23 to the Company’s Current Report on Form 8-K filed with the SEC on June 7, 2021). 10.29 + Kendall W. Carpenter Independent Director Agreement (incorporated by reference to Exhibit 10.24 to the Company’s Current Report on Form 8-K filed with the SEC on June 7, 2021). 56 Exhibit No. Description 10.30 + 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). 10.31 + Thomas Seifert Employment Agreement (incorporated by reference to Exhibit 10.26 to the Company’s Current Report on Form 8-K filed with the SEC on June 7, 2021). 10.32 + Sarwar Uddin Employment Agreement (incorporated by reference to Exhibit 10.27 to the Company’s Current Report on Form 8-K filed with the SEC on June 23, 2021). 10.33 + Theresa Carlise Employment Agreement (incorporated by reference to Exhibit 10.28 to the Company’s Current Report on Form 8-K filed with the SEC on June 23, 2021). 10.34 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). 10.35 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). 10.36 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). 10.37 + Amendment No. 1 Employment Agreement, dated August 7, 2021, by and between Orbsat Corp and Charles M. Fernandez (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on August 12, 2021). 10.38 + Amendment No. 1 Employment Agreement, dated August 7, 2021, by and between Orbsat Corp and David Phipps (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 12, 2021). 10.39 + Amendment No. 1 Employment Agreement, dated August 7, 2021, by and between Orbsat Corp and Sarwar Uddin (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on August 12, 2021). 10.40 + Amendment No. 1 Employment Agreement, dated August 7, 2021, by and between Orbsat Corp and Theresa Carlise (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on August 12, 2021). 10.41 + Employment Agreement, dated August 24, 2021, by and between Orbsat Corp and Douglas S. Ellenoff (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on January 27, 2022). 10.42 + Employment Agreement, dated August 24, 2021, by and between Orbsat Corp and Paul R. Thomson (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on August 30, 2021). 10.43 + Stock Option Agreement, dated August 24, 2021, by and between Orbsat Corp and Douglas Ellenoff (incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report filed with the SEC on November 15, 2021). 57 Exhibit No. Description 10.44 + Restricted Stock Award Agreement, dated August 24, 2021, by and between Orbsat Corp and Douglas Ellenoff (incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report filed with the SEC on November 15, 2021). 10.45 + Stock Option Agreement, dated August 24, 2021, by and between Orbsat Corp and Paul R. Thomson (incorporated by reference to Exhibit 10.12 to the Company’s Quarterly Report filed with the SEC on November 15, 2021). 10.46 + Restricted Stock Award Agreement, dated August 24, 2021, by and between Orbsat Corp and Paul R. Thomson (incorporated by reference to Exhibit 10.13 to the Company’s Quarterly Report filed with the SEC on November 15, 2021). 10.47 + 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). 10.48 + Amendment No. 1 Employment Agreement, dated October 8, 2021, by and between Orbsat Corp and Paul R. Thomson (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 8, 2021). 10.49 + Employment Agreement, dated October 8, 2021, by and between Orbsat Corp and Andrew Cohen (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 8, 2021). 10.50 + Restricted Stock Award Agreement, dated October 8, 2021, by and between Orbsat Corp and Andrew Cohen (incorporated by reference to Exhibit 10.50 to the Company’s Current Report on Form 10-K filed with the SEC on March 31, 2022). 10.51 + Stock Option Agreement, dated October 8, 2021, by and between Orbsat Corp and Andrew Cohen (incorporated by reference to Exhibit 10.51 to the Company’s Current Report on Form 10-K filed with the SEC on March 31, 2022). 10.52 + Amendment No. 2 Employment Agreement, dated October 8, 2021, by and between Orbsat Corp and Theresa Carlise (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on October 8, 2021). 10.53 + 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). 10.54 Form of Securities Purchase Agreement dated as of December 31, 2021, by and among Orbsat Corp and the Investors (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 5, 2022). 10.55 Form of Registration Rights Agreement dated as of December 31, 2021, by and among Orbsat Corp and the Investors (incorporated by reference to Exhibit A of Exhibit 10.54 to this Annual Report on Form 10-K). 10.56 + 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). 10.57 + 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). 10.58 + Employment Agreement, dated October 8, 2021, by and between Orbsat Corp and Andrew Cohen. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 8, 2021). 10.59 + Amendment No. 1 Employment Agreement, dated October 8, 2021, by and between Orbsat Corp and Paul R. Thomson (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 8, 2021). 10.60 + Amendment No. 2 Employment Agreement, dated October 8, 2021, by and between Orbsat Corp and Theresa Carlise. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on October 8, 2021). 58 Exhibit No. Description 10.61 + Form of Indemnity Agreement, , by and between Orbsat Corp and Douglas Ellenoff entered into on November 18, 2021 (incorporated by reference to Exhibit B of Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on January 27, 2022). 10.62 + Form of Registration Rights Agreement by and between Orbsat Corp and Douglas Ellenoff entered into on November 18, 2021 (incorporated by reference to Exhibit A of Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on January 27, 2022).. 10.63 + Restricted Stock Award Agreement, dated December 18, 2021, by and between Orbsat Corp and Charles M. Fernandez (275,000 shares of restricted stock) (incorporated by reference to Exhibit 10.63 to the Company’s Current Report on Form 10-K filed with the SEC on March 31, 2022). 10.64 + Restricted Stock Award Agreement, dated December 18, 2021, by and between Orbsat Corp and Charles M. Fernandez (101,000 shares of restricted stock) (incorporated by reference to Exhibit 10.64 to the Company’s Current Report on Form 10-K filed with the SEC on March 31, 2022). 10.65 + Restricted Stock Award Agreement, dated December 18, 2021, by and between Orbsat Corp and David Phipps (incorporated by reference to Exhibit 10.65 to the Company’s Current Report on Form 10-K filed with the SEC on March 31, 2022). 10.66 + Form of Restricted Stock Award Agreement between the Company and each of Paul R Thomson (10,000 shares) and Theresa Carlise (15,000 shares), entered into in December 2021 (incorporated by reference to Exhibit 10.66 to the Company’s Current Report on Form 10-K filed with the SEC on March 31, 2022). 10.67 + Form of Restricted Stock Award Agreement between the Company and each of Kendall Carpenter, Louis Cusimano, Hector Delgado and John E. Miller, entered into in December 2021 (incorporated by reference to Exhibit 10.67 to the Company’s Current Report on Form 10-K filed with the SEC on March 31, 2022). 10.68 + 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). 10.69 + Restricted Stock Award Agreement, dated December 20, 2021, by and between Orbsat Corp and Rodney Barreto (incorporated by reference to Exhibit 10.69 to the Company’s Current Report on Form 10-K filed with the SEC on March 31, 2022). 10.70 + Amendment No. 1 Employment Agreement, dated May 2, 2022, by and between NextPlat Corp and Andrew Cohen (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2022). 10.71 + 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). 10.72 + Restricted Stock Agreement, dated July 22, 2022, by and between NextPlat Corp and Charles M. Fernandez (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2022). 10.73 Securities Purchase Agreement, dated August 30, 2022, by and between NextPlat and Progressive Care Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 1, 2022) 10.74 Confidential Note Purchase and Release Agreement, dated August 30, 2022, by and between the Company, Progressive Care, Iliad Research and Trading, L.P., PharmCo, L.L.C., Charles Fernandez, Rodney Barreto, Daniyel Erdberg, and Sixth Borough Capital LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 1, 2022). 10.75 Debt Modification Agreement dated August 30, 2022, by and between the Company, Progressive Care, Charles Fernandez, Rodney Barreto, Daniyel Erdberg, and Sixth Borough Capital LLC (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 1, 2022). 59 Exhibit No. Description 10.76 + Director Services Agreement dated as of September 28, 2022, by and between the Company and M. Cristina Fernandez (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K/A filed with the SEC on October 5, 2022). 10.77 + Stock Option Agreement, dated as of October 1, 2022, by and between the Company and M. Cristina Fernandez (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K/A filed with the SEC on October 5, 2022). 10.78 Securities Purchase Agreement dated November 16, 2022, by and between NextPlat and Progressive Care Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2022). 10.79 Form of Debenture (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2022). 10.80 Security Agreement, dated as of November 16, 2022, by Progressive Care, Inc., Touchpoint RX, LLC, Family Physicians RX, Inc., and ClearMetrX Inc. in favor of NextPlat Corp (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2022). 10.81 Form of Registration Rights Agreement (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on November 18, 2022). 10.82 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). 10.83 Employment Agreement, dated as of November 14, 2022, by and between the Company and Paul Thomson (incorporated by reference to Exhibit 10.7 the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2022). 10.84 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). 10.85 + 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). 10.86 + 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). 10.87 Form of Securities Purchase Agreement dated December 9, 2022, by and among the Company and the Investors (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Commission on December 13, 2022). 10.88 Form of Registration Rights Agreement dated December 9, 2022, by and among the Company and the Investors (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the Commission on December 13, 2022). 21.1 * Subsidiaries of NextPlat Corp 23.1 * Consent of RBSM LLP 31.1 * Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2* Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 * Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 101.ins* Inline XBRL Instance Document 101.sch* Inline XBRL Taxonomy Schema Document 101.cal* Inline XBRL Taxonomy Calculation Document 101.def* Inline XBRL Taxonomy Linkbase Document 101.lab* Inline XBRL Taxonomy Label Linkbase Document 101.pre* Inline XBRL Taxonomy Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) (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. * Filed herewith. + Management contract or compensatory plan or arrangement. Item 16. Form 10-K Summary None. 60 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 31, 2023 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 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 31, 2023 Charles M. Fernandez (Principal Executive Officer) /s/ Cecile Munnik Chief Financial Officer (Principal Financial Officer) March 31, 2023 Cecile Munnik /s/ David Phipps President and Chief Executive Officer of Global Operations March 31, 2023 David Phipps /s/ Paul R Thomson Senior Vice President – Mergers, Acquisitions and Special Projects March 31, 2023 Paul R Thomson /s/ Theresa Carlise Chief Accounting Officer, Secretary and Treasurer March 31, 2023 Theresa Carlise (Principal Accounting Officer) /s/ Robert Bedwell Chief Compliance Officer March 31, 2023 Robert Bedwell /s/ Douglas S. Ellenoff Vice Chairman and Chief Business Development Strategist March 31, 2023 Douglas Ellenoff /s/ Hector Delgado Director March 31, 2023 Hector Delgado /s/ Kendall W. Carpenter Director March 31, 2023 Kendall Carpenter /s/ Louis Cusimano Director March 31, 2023 Louis Cusimano /s/ John E. Miller Director March 31, 2023 John E. Miller /s/ Rodney Barreto Director March 31, 2023 Rodney Barreto /s/ Maria Cristina Fernandez Director March 31, 2023 Maria Cristina Fernandez 61 NEXTPLAT CORP AND SUBSIDIARIES Report of Independent Registered Public Accounting Firm RBSM LLP , New York, NY , (PCAOB ID. 587 ) F-2 Consolidated Financial Statements Consolidated Balance Sheets as of December 31, 2022 and 2021 F-4 Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2022 and 2021 F-5 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022 and 2021 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 F-8 Notes to Consolidated Financial Statements F-9 F- 1 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, 2022 and 2021, and the related consolidated statements of comprehensive loss, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, 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. 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. Equity Method Investment – Refer to Notes 7 to the consolidated financial statements Critical Audit Matter Description As described in Note 7, on August 30, 2022 the Company entered into a Securities Purchase Agreement (the “SPA”) with Progressive Care, Inc. (“Progressive”), which subsequently closed on September 2, 2022. As a result of the SPA and related transactions, the Company paid an aggregate of $7,000,000 for an economic and voting interest in Progressive of 32.47%. F- 2 Subsequent to September 2, 2022, the Company’s ownership interest decreased to 31.89% and as of December 31, 2022, the board seats, combined with the Company’s ownership interest of 33.47% provide the Company with significant influence over Progressive, but not a controlling interest. Since Progressive does not depend on the Company for continuing financial support to maintain operations as of December 31, 2022, the Company has determined that Progressive is not a variable interest entity, and therefore, the Company is not required to determine the primary beneficiary of Progressive for potential consolidation. 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 accounting treatment of the investment; (ii) and testing the completeness and accuracy of the underlying data used to record the investment and recognize a gain or loss on the investment. ● Evaluating, testing and relying on Progressive’s financial data from the date of the investment to December 31, 2022. ● Professionals with specialized skill and knowledge were used to assist in evaluating the appropriate accounting treatment of the investment. /s/ RBSM LLP We have served as the Company’s auditor since 2014. New York, NY March 31, 2023 PCAOB ID Number 587 F- 3 NEXTPLAT CORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2022 2021 ASSETS Current Assets Cash $ 18,891,232 $ 17,267,978 Accounts receivable, net 383,786 349,836 Inventory 1,286,612 1,019,696 Unbilled revenue 141,702 100,422 VAT receivable 432,769 491,417 Prepaid expenses – current portion 45,679 97,068 Other current assets - 48,539 Total Current Assets 21,181,780 19,374,956 Property and equipment, net 1,245,802 1,042,859 Right of use assets, net 854,862 22,643 Intangible assets, net 50,001 75,000 Equity method investment 5,260,525 - Prepaid expenses – long term portion 49,078 49,867 Total Other Assets 6,214,466 147,510 Total Assets $ 28,642,048 $ 20,565,325 LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities Accounts payable and accrued expenses $ 1,518,095 $ 1,063,344 Contract liabilities 36,415 36,765 Note payable Coronavirus loans– current portion 60,490 56,391 Due to related party 28,467 35,308 Operating lease liabilities - current 208,660 19,763 Income taxes payable 94,244 56,781 Stock subscription payable - 1,400,000 Liabilities from discontinued operations 112,397 112,397 Total Current Liabilities 2,058,768 2,780,749 Long Term Liabilities: Notes payable Coronavirus – long term 156,266 253,757 Operating lease liabilities – long term 649,895 - Total Liabilities 2,864,929 3,034,506 Commitments and Contingencies - - Stockholders’ Equity Preferred stock, ($ 0.0001 par value; 3,333,333 shares authorized) - - Common stock, ($ 0.0001 par value; 50,000,000 shares authorized, 14,402,025 and 7,053,146 shares issued and outstanding as of December 31, 2022, and 2021, respectively) 1,440 705 Additional paid-in capital 56,963,200 39,513,093 Accumulated deficit ( 31,146,804 ) ( 21,986,215 ) Accumulated other comprehensive (loss) income ( 40,717 ) 3,236 Total Stockholders’ Equity 25,777,119 17,530,819 Total Liabilities and Stockholders’ Equity $ 28,642,048 $ 20,565,325 See accompanying notes to consolidated financial statements. F- 4 NEXTPLAT CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS For the Years Ended December 31, 2022 2021 Net sales $ 11,710,142 $ 7,739,910 Cost of sales 9,221,294 5,880,187 Gross profit 2,488,848 1,859,723 Operating expenses: Selling, general and administrative 5,083,724 5,128,360 Salaries, wages and payroll taxes 2,564,655 1,838,531 Professional fees 1,552,193 1,198,063 Depreciation and amortization 490,059 317,102 Total operating expenses 9,690,631 8,482,056 Loss from operations ( 7,201,783 ) ( 6,622,333 ) Other (income) expense: Interest earned ( 20,814 ) ( 6,876 ) Interest expense 24,497 1,467,300 Foreign currency exchange rate variance 128,648 45,737 Gain on debt extinguishment - ( 20,832 ) Total other expense 132,331 1,485,329 Loss before provision for income taxes ( 7,334,114 ) ( 8,107,662 ) Provision for income taxes 87,000 - Loss before equity in net loss of affiliate ( 7,421,114 ) ( 8,107,662 ) Equity in net loss of affiliate ( 1,739,475 ) - Net loss ( 9,160,589 ) ( 8,107,662 ) Comprehensive loss: Foreign currency translation adjustments ( 43,953 ) 46,068 Comprehensive loss $ ( 9,204,542 ) $ ( 8,061,594 ) NET LOSS ATTRIBUTABLE TO STOCKHOLDERS Weighted average number of common shares outstanding – basic & diluted 9,629,589 4,080,833 Basic and diluted net (loss) per share $ ( 0.95 ) $ ( 1.98 ) See accompanying notes to consolidated financial statements. F- 5 NEXTPLAT CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 Common Stock Additional $0.0001 Par Value Paid in Accumulated Shares Amount Capital Deficit Balance, January 1, 2021 817,450 $ 82 $ 14,486,492 $ ( 13,878,553 ) Issuance of common stock from convertible debt 1,345,468 135 1,644,132 - Beneficial conversion feature of convertible debt - - 340,420 - Issuance of common stock for options exercised 17,437 2 4,998 - Issuance of common stock from exercise of warrant 925,908 92 4,629,448 - Issuance of common stock related to June offering 2,880,000 288 12,661,696 - Issuance of common for over-allotment 432,000 43 1,983,226 - Issuance of warrants for over-allotment - - 4,320 - Stock-based compensation in connection with options granted - - 1,277,353 - Stock-based compensation in connection with restricted stock awards 634,883 63 2,481,008 - Comprehensive gain - - - - Net loss - - - ( 8,107,662 ) Balance, December 31, 2021 7,053,146 $ 705 $ 39,513,093 $ ( 21,986,215 ) Issuance of common stock related to January offering 2,229,950 223 7,004,815 - Issuance of common stock related to December offering 4,575,429 458 7,472,112 - Stock-based compensation in connection with restricted stock awards 543,500 54 2,150,609 - Stock-based compensation in connection with options granted - - 822,571 - Comprehensive loss - - - - Net loss - - - ( 9,160,589 ) Balance, December 31, 2022 14,402,025 1,440 56,963,200 ( 31,146,804 ) See accompanying notes to consolidated financial statements. F- 6 NEXTPLAT CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021 Comprehensive Stockholders’ Income (Loss) Equity Balance, January 1, 2021 $ ( 42,832 ) $ 565,189 Issuance of common stock from convertible debt - 1,644,267 Beneficial conversion feature of convertible debt - 340,420 Issuance of common stock for options exercised - 5,000 Issuance of common stock from exercise of warrant - 4,629,540 Issuance of common stock related to June offering - 12,661,984 Issuance of common for over-allotment - 1,983,269 Issuance of warrants for over-allotment - 4,320 Stock-based compensation in connection with options granted - 1,277,353 Stock-based compensation in connection with restricted stock awards - 2,481,071 Comprehensive gain 46,068 46,068 Net loss - ( 8,107,662 ) Balance, December 31, 2021 $ 3,236 $ 17,530,819 Issuance of common stock related to January offering - 7,005,038 Issuance of common stock related to December offering - 7,472,570 Stock-based compensation in connection with restricted stock awards - 2,150,663 Stock-based compensation in connection with options granted - 822,571 Comprehensive loss ( 43,953 ) ( 43,953 ) Net loss - ( 9,160,589 ) Balance, December 31, 2022 $ ( 40,717 ) $ 25,777,119 See accompanying notes to consolidated financial statements F- 7 NEXTPLAT CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 9,160,589 ) $ ( 8,107,662 ) Adjustments to reconcile net loss to net cash (used in) operating activities: Depreciation expense 465,059 292,102 Amortization of intangible asset 25,000 25,000 Amortization of right of use asset 105,642 32,963 Write-off of website development cost 43,064 - Amortization of debt discount, net - 1,425,365 Share of loss from equity method investment 1,739,475 - Stock-based compensation in connection with restricted stock awards 2,150,663 2,481,071 Stock-based compensation in connection with options granted 822,571 1,277,353 Gain on debt extinguishment - ( 20,832 ) Changes in operating assets and liabilities: Accounts receivable ( 33,950 ) ( 172,805 ) Inventory ( 266,916 ) ( 658,274 ) Unbilled revenue ( 41,280 ) ( 24,866 ) Prepaid expense 52,178 ( 145,151 ) VAT receivable 58,648 ( 491,417 ) Other current assets 48,539 ( 20,627 ) Operating lease liabilities ( 101,471 ) ( 32,936 ) Accounts payable and accrued expenses 454,752 10,741 Provision for income taxes 37,463 37,824 Contract liabilities ( 350 ) 61 Net cash used in operating activities ( 3,601,502 ) ( 4,092,090 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 715,591 ) ( 229,307 ) Purchase of equity method investment ( 7,000,000 ) - Purchase of Netherlands subsidiary ( 1 ) - Net cash used in investing activities ( 7,715,592 ) ( 229,307 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from (repayments to) related party, net ( 6,841 ) ( 66,752 ) Proceeds from (repayments to) note payable Coronavirus loans ( 60,490 ) ( 28,195 ) Proceeds from exercise of options - 5,000 Proceeds from common stock offering - 12,661,984 Proceeds from common over-allotment - 1,983,269 Proceeds from warrants over-allotment - 4,320 Proceeds from exercise of warrant - 4,629,539 Gross proceeds from common stock offering January 2022 5,825,038 1,400,000 Gross proceeds from common stock offering December 2022 8,006,900 - (Payment) of stock issuance costs ( 754,331 ) Proceeds from (repayments to) convertible notes payable - 350,000 (Repayments to) proceeds from line of credit - ( 121,848 ) Net cash provided by financing activities 13,010,276 20,817,317 Effect of exchange rate on cash ( 69,928 ) 43,296 Net increase in cash 1,623,254 16,539,216 Cash beginning of year 17,267,978 728,762 Cash end of year $ 18,891,232 $ 17,267,978 SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the year for Interest $ 10,842 $ 143,234 Income tax $ 10,069 $ 38,615 NON-CASH FINANCING AND INVESTING ACTIVITIES DURING THE YEAR Beneficial conversion feature on convertible debt $ - $ 340,420 Issuance of common stock from convertible debt $ - $ 1,644,267 See accompanying notes to consolidated financial statements F- 8 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principals of Consolidation These consolidated financial statements have been prepared by management in accordance with general accepted accounting principles in the United States of America (“U.S. GAAP”) and this basis assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. Organization and Description of Business NextPlat Corp (the “Company”) was formerly Orbsat Corp (“NextPlat”), a Nevada corporation. Leveraging the e-commerce experience of the Company’s management team and the Company’s existing e-commerce platforms, the Company has embarked upon the rollout of a state-of-the-art e-commerce platform to collaborate with businesses to optimize their ability to sell their goods online, domestically, and internationally, and enabling customers and partners to optimize their e-commerce presence and revenue, which we expect will become the focus of the Company’s business in the future. Historically, the business of NextPlat has been, the provision of a comprehensive array of Satellite Industry communication services, and related equipment sales. As detailed in Online Storefronts and E-Commerce Platforms below, the Company operates two main e-commerce websites as well as 25 third-party e-commerce storefronts 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 comprehensive systems upgrade to support this initiative. The Company has also begun the design and development of a next generation platform for digital assets built for Web3 (an internet service built using decentralized blockchains). This new platform (“NextPlat Digital”) is currently in the design and development phase and will enable the use of a range of digital assets, such as non-fungible tokens (“NFTs”), in e-commerce and in community-building activities. The Company was originally incorporated in 1997 in Florida. On April 21, 2010, the Company merged with and into a wholly-owned subsidiary for the purpose of changing its state of incorporation to Delaware, effecting a 2:1 forward split of its common stock, and changing its name to EClips Media Technologies, Inc. On April 25, 2011, the Company changed its name to Silver Horn Mining Ltd. pursuant to a merger with a 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 GTC became a wholly owned subsidiary of ours. On March 28, 2014, we merged with a newly-formed wholly-owned subsidiary of ours solely for the purpose of changing our state of incorporation to Nevada from Delaware, effecting a 1:150 reverse split of our common stock, and changing our name to Great West Resources, Inc. in connection with the plans to enter into the business of potash mining and exploration. During late 2014, we abandoned our efforts to enter the potash business. Orbital Satcom Corp, a Nevada corporation was formed on November 14, 2014. On January 22, 2015, we changed our name to “Orbital Tracking Corp” from “Great West Resources, Inc.” pursuant to a merger with a newly formed wholly owned subsidiary. Effective March 8, 2018, following the approval of a majority of our shareholders, we effected a reverse split of our common stock at a ratio of 1 for 150 . On August 19, 2019, we effected a reverse split of our common stock at a ratio of 1 for 15 . As a result of the reverse split, our common stock now has the CUSIP number: 68557F100. All share and per share information in the accompanying consolidated financial statements and footnotes has been retroactively restated to reflect these reverse splits. Also, on August 19, 2019, we changed our name to “Orbsat Corp” from “Orbital Tracking Corp.” pursuant to a merger with a newly formed wholly owned subsidiary. F- 9 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) On March 24, 2021, the Company’s shareholders via majority shareholder consent authorized a stock split not to exceed 1-for-5 reverse stock split. A definitive Information Statement relating to the shareholder consent was filed with the SEC on March 13, 2021. The Company’s Board of Directors (the “Board”) subsequently approved the 1-for-5 reverse stock split. The Company filed a Certificate of Change to its Amended and Restated Articles of Incorporation to effect a reverse stock split of its issued and outstanding common stock, at a ratio of 1-for-5 . The effective time of the reverse stock split was 12:01 a.m. ET on May 28, 2021. The Company’s common stock began trading on a split-adjusted basis commencing upon market open on May 28, 2021. The common stock has been assigned a new CUSIP number, 68557F 209. The warrants were assigned the CUSIP number, 68557F 118. No fractional shares of common stock were issued as a result of the reverse stock split. Stockholders of record who would otherwise be entitled to receive a fractional share received a whole share. On December 16, 2021, at the Annual Meeting of Stockholders (the “Annual Meeting”) of the Company the stockholders approved certificate of amendment to the Company’s Amended and Restated Articles of Incorporation changing the Company’s name to NextPlat Corp. The Name Change Amendment was filed on January 18, 2022, and the Company’s name change from Orbsat Corp to NextPlat Corp was effective as of January 21, 2022. Effective January 21, 2022, the trading symbol for the Company’s common stock, par value $ 0.0001 per share (the “Common Stock”) on the NASDAQ Capital Market will be “NXPL” and the trading symbol for the Company’s Warrants (the “Warrants”) on the NASDAQ Capital Market will be “NXPLW.” The CUSIP number for our Common Stock (68557F209) and our Warrants (68557F118) remain unchanged. Prior to January 21, 2022, our common stock and warrants were traded on the Nasdaq Capital Market under the symbols “OSAT” and “OSATW,” respectively. On June 22, 2022, NextPlat B.V. (“NXPLBV”) was formed in Amsterdam, Netherlands, as a wholly owned subsidiary of NextPlat Corp. Presently, NXPLBV does not have any active operations. On September 2, 2022, the Company closed a transaction with Progressive Care Inc. (OTCQB: RXMD) (“Progressive Care”), pursuant to which we purchased 3,000 newly issued units of securities from Progressive Care (the “Units”) at a price per Unit of $ 2,000 for an aggregate purchase price of $ 6.0 million (the “Unit Purchase”). Each Unit consists of one share of Series B Convertible Preferred Stock of Progressive Care (“Series B Preferred Stock”) and one warrant to purchase a share of Series B Preferred Stock (“RXMD Warrants”). Each share of Series B Preferred Stock votes as a class with the common stock of Progressive Care, and has 500 votes per share. Likewise, each share of Series B Preferred Stock is convertible into 500 shares of Progressive Care common stock. In addition, the Series B Preferred Stock has a liquidation and dividend preference. The RXMD Warrants have a five-year term, and are immediately exercisable, in whole or in part, and contain cashless exercise provisions. Each Warrant is exercisable at $ 2,000 per share of Series B Preferred Stock. Following the consummation of the Unit Purchase, 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 to serve as the Chief Executive Officer of Progressive Care. In addition, on September 2, 2022, NextPlat, Charles Fernandez, Rodney 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. Pursuant to the Debt Modification Agreement, the interest rate under the Note was reduced from 10 % to 5 % per annum and the maturity date was extended to May 31, 2027. In addition, the conversion price under the note was changed to $ 4.00 per share of Common Stock. Pursuant to the Debt Modification Agreement, NextPlat, Messrs. Fernandez and Barreto and the other purchasers of the Note have the right, exercisable at any time, to redeem all or any portion of the Note. The Debt Modification Agreement also provides that the Note will automatically convert upon the later to occur of: (a) the completion by Progressive Care of a reverse stock split, and (b) the listing of Progressive Care’s common stock on a national exchange. 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 November 16, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with Progressive Care, pursuant to which the Company has agreed to purchase, from time to time during the three year term of the SPA, up to an aggregate of $ 10.0 million of secured convertible debentures from Progressive Care (the “Debentures”). Pursuant to the SPA, all purchases of the Debentures will be made at the Company’s sole election and the proceeds from each purchase will be used by Progressive Care only as approved by the Company’s Board of Directors. Until used, the proceeds from each purchase of Debentures will be deposited in a controlled account. If and when the Company elects to purchase Debentures under the SPA, the minimum principal amount that can be purchased at any time is $ 1.0 million. No debentures were purchased under the SPA for the year ended December 31, 2022. In addition, at the closing of each purchase under the SPA, the Company and Progressive will enter into a Registration Rights Agreement (each, a “Registration Rights Agreement”) pursuant to which Progressive Care will agree to register the shares of Progressive common stock issuable upon conversion in full of the Debentures purchased by the Company at such closing. In accordance with the form of Debenture to be used for each purchase under the SPA, each Debenture will be convertible at any time, upon the Company’s election, to shares of Progressive Care’s common stock at a conversion price of $ 6.0 per share ( on a post-split bases and may be further adjusted from time to time for share dividends, share splits, reverse share splits, etc.). In addition, each Debenture will mature on the third anniversary of its issuance and bear interest at 5.0% per annum, payable quarterly. At the Company’s election, interest can be paid in cash, shares of Progressive Care’s common stock, or some combination thereof. Progressive Care has the right to prepay the Debenture at any time provided that it gives the Company seven (7) business days advance written notice, during which time the Company could elect to convert the Debenture to Progressive Care’s common stock. Upon the prepayment of a Debenture, Progressive Care will pay the Company an amount equal to the sum of: (i) all outstanding principal under such Debenture, plus (ii) all accrued and unpaid interest under such Debenture through the prepayment date, multiplied by (iii) 110%. While amounts are outstanding under a Debenture, Progressive Care will be subject to certain restrictive covenants, including with respect to the incurrence of indebtedness, the imposition of liens on Progressive Care’s assets, changes to the Progressive Care’s organization documents, etc. In connection with the SPA, on November 16, 2022, the Company entered into a Security Agreement (the “Security Agreement”) with Progressive Care and its subsidiaries, Touchpoint RX, LLC, a Florida limited liability company (“Touchpoint”), Family Physicians RX, Inc., a Florida corporation (“FPRX”), and ClearMetrX Inc., a Florida corporation (“ClearMetrX” and collectively with Progressive, Touchpoint and FPRX, the “Borrower Parties”). Pursuant to the Security Agreement, the Borrower Parties granted the Company a security interest in all of their respective assets to secure Progressive Care’s obligations under the Debentures. F- 10 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Discontinued Operations The Company’s former operations were developing and manufacturing products and services, which reduce fuel costs, save power and energy and protect the environment. The products and services were made available for sale into markets in the public and private sectors. In December 2009, the Company discontinued these operations and disposed of certain of its subsidiaries. The remaining liabilities for discontinued operations are presented in the consolidated balance sheets under the caption “Liabilities from discontinued operation” and relates to the discontinued operations of developing and manufacturing of energy saving and fuel-efficient products and services. The carrying amounts of the major classes of these liabilities as of December 31, 2022, and 2021 are summarized as follows: SUMMARY OF CARRYING AMOUNT OF MAJOR CLASSES OF LIABILITIES December 31, 2022 December 31, 2021 Assets of discontinued operations $ - $ - Liabilities Accounts payables and accrued expenses $ ( 112,397 ) $ ( 112,397 ) Liabilities from discontinued operations $ ( 112,397 ) $ ( 112,397 ) Basis of Presentation and Principles of Consolidation The consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The consolidated financial statements of the Company include the Company and its wholly owned subsidiaries, Orbital Satcom Corp, (“Orbital Satcom”), Global Telesat Communications Limited, (“GTC”) and NextPlat B.V. (“NXPLBV”). All material intercompany balances and transactions have been eliminated in consolidation. Liquidity June 2021 Public Offering As an early-stage growth company, NextPlat’s ability to access capital is critical. On June 2, 2021, through an upsized underwritten public offering of 2,880,000 units at a price to the public of $ 5.00 per unit, the Company received gross proceeds of $ 14,404,666 (the “June Offering”). See Note 12, Stockholders’ Equity, for more information regarding the June Offering. In connection with closing of the June Offering, the Underwriter partially exercised its overallotment option and purchased an additional 432,000 warrants at $ 0.01 per warrant, which had an exercise price of $ 5.00 per share and a 5 year term, for additional gross proceeds to the Company of $ 4,320 . On June 28, 2021, the Underwriter, upon the exercise in full of the balance of its over-allotment option, purchased 432,000 additional shares of the common stock for additional gross proceeds of $ 2,155,680 from the sale of the Shares. January 2022 Private Placement of Common Stock On December 31, 2021, after markets closed, a securities purchase agreement (the “Purchase Agreement”) was circulated to, and signatures were received from, certain institutional and accredited investors (the “December Investors”) in connection with the sale in a private placement by the Company of 2,229,950 shares of the Company’s common stock (the “December Offering”). On January 2, 2022, the Company delivered to December Investors a fully executed Purchase Agreement, which was dated December 31, 2021. The purchase price for the common stock sold in the December Offering was $ 3.24 per share, the closing transaction price reported by Nasdaq on December 31, 2021. The closing of the December Offering occurred on January 5, 2022. The Company received gross proceeds from the sale of the common stock in the December Offering of approximately $ 7.2 million. December 2022 Private Placement of Common Stock On December 9, 2022, the Company entered into a securities purchase agreement with certain institutional and accredited investors for the sale by the Company in a private placement of 4,575,429 units, each unit comprising (i) one share of the Company’s common stock, and (ii) one warrant to purchase one share of common stock. The offering price of the units was $ 1.75 per unit. The warrants included in the units are exercisable at a price of $ 1.75 per share and expire three years from the date of issuance. On December 9, 2022, the Company entered into placement agency agreement (the “Placement Agency Agreement”) with Dawson James Securities, Inc. (“Dawson James”). The Company has agreed to pay Dawson James a placement agent fee of 6 % of the gross proceeds received in the private placement and 3 % on all proceeds from officers and directors including any directed orders from the Company. As additional compensation under the Placement Agency Agreement, the Company will issue Dawson James warrants (the “Placement Agent Warrants”) to purchase up to 549,051 shares of Common Stock with an exercise price of $ 1.75 per share. 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. The Company reimbursed Dawson for up to $ 100,000 for its legal and due diligence expenses. The offering closed on December 14, 2022, and the Company received gross proceeds of approximately $ 8.0 million for the units. 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. 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, the assumptions used to calculate stock-based compensation, and common stock and options issued for services, receivables, the useful lives of property and equipment, and intangible assets, the estimate of the fair value of the lease liability and related right of use assets and the estimates of the valuation allowance on deferred tax assets. 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. Cash and Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The Company places its cash with a high credit quality financial institution. The Company’s accounts at this institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 . All cash amounts in excess of $ 250,000 , $ 18,290,725 , are unsecured at December 31, 2022. To reduce its risk associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which it holds deposits. F- 11 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Accounts Receivable and Allowance for Doubtful Accounts The Company has a policy of reserving for 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. As of December 31, 2022, and 2021, there is an allowance for doubtful accounts of $ 0 and $ 0 , respectively. Inventories 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 goods sold. Prepaid Expenses Prepaid expenses current and long term amounted to $ 45,679 and $ 49,078 , respectively for the year ended December 31, 2022, as compared to $ 97,068 and $ 49,867 for the year ended December 31, 2021. Prepaid expenses include prepayments in cash for accounting fees, prepayments in equity instruments, 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. 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 7 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. Management reviewed the underlying net assets of the investee as of December 31, 2022 and determined that the Company’s proportionate economic interest in the investee indicate that the investments were not impaired. Foreign Currency Translation The Company’s reporting currency is U.S. Dollars. The accounts of one of the Company’s subsidiaries, GTC, is maintained using the appropriate local currency, Great British Pound, as the functional currency. All assets and liabilities are translated into U.S. Dollars at balance sheet date, shareholders’ equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are reported as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of operations. The relevant translation rates are as follows: for the year ended December 31, 2022, closing rate at 1.2098 US$: GBP, yearly average rate at 1.2369 US$: GBP, for the year ended December 31, 2021 closing rate at 1.353372 US$: GBP, yearly average rate at 1.375083 US$: GBP. F- 12 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Revenue Recognition and Unearned Revenue The Company recognizes revenue from satellite services when earned, as services are rendered or delivered to customers. Equipment sales revenue is recognized when the equipment is delivered to and accepted by the customer. Only equipment sales are subject to warranty. Historically, the Company has not incurred significant expenses for warranties. Equipment sales which have been prepaid, before the goods are shipped are recorded as contract liabilities and once shipped is recognized as revenue. The Company also records as contract liabilities, certain annual plans for airtime, which are paid in advance. Once airtime services are incurred, they are recognized as revenue. Unbilled revenue is recognized for airtime plans whereby the customer is invoiced for its data usage the following month after services are incurred. The Company’s customers generally purchase a combination of our products and services as part of a multiple element arrangement. The Company’s assessment of which revenue recognition guidance is appropriate to account for each element in an arrangement can involve significant judgment. This assessment has a significant impact on the amount and timing of revenue recognition. The Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. The five-step model is applied to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services transferred to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. We then recognize revenue in the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. In accordance with ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedient , which is to (1) clarify the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the accounting change for the period of adoption. The amendments of this ASU are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. There was no impact as a result of adopting this ASU on the financial statements and related disclosures. Based on the terms and conditions of the product arrangements, the Company believes that its products and services can be accounted for separately as its products and services have value to the Company’s customers on a stand-alone basis. When a transaction involves more than one product or service, revenue is allocated to each deliverable based on its relative fair value; otherwise, revenue is recognized as products are delivered or as services are provided over the term of the customer contract. Contract liabilities are shown separately in the consolidated balance sheets as current liabilities. At December 31, 2022, we had contract liabilities of $ 36,415 . At December 31, 2021, we had contract liabilities of $ 36,765 . F- 13 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (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 operations 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 $ 92,549 and $ 61,922 for the years ended December 31, 2022 and 2021, respectively. Intangible Assets Intangible assets include customer contracts purchased and recorded based on the cost to acquire them. These assets 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. 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: SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT Years Office furniture and fixtures 4 Computer equipment 4 Rental equipment 4 Appliques 10 Website development 2 F- 14 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Depreciation expense for the years ended December 31, 2022, and 2021 was $ 465,059 and $ 292,102 , respectively. Impairment of Long-lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the years ended December 31, 2022 and December 31, 2021, respectively. 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 balance sheet for cash, accounts payable, accrued expenses, and notes payable approximate their estimated fair market values based on the short-term maturity of the instruments. Stock-based Compensation Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. F- 15 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation. (Topic 718). This update is intended to reduce cost and complexity and to improve financial reporting for share-based payments issued to non-employees (for example, service providers, external legal counsel, suppliers, etc.). The ADU expands the scope of ASC 718, Compensation - Stock Compensation, which currently only includes share-based payments issued to employees, also includes share-based payments issued to non-employees for goods and services. Consequently, the accounting for share-based payment to non-employees and employees will be substantially aligned. This standard will be effective for the financial statements issues by public companies for the annual and interim periods beginning after December 15, 2018. Early adoption of the standard is permitted. The standard will be applied in a retrospective approach for each period presented. Management adopted this standard on January 1, 2019. The Company estimated the fair value of stock options granted using the Black-Scholes option-pricing formula. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The Company’s determination of the fair value using the option-pricing model is affected by the stock price as well as assumptions regarding the number of highly subjective variables. Income Taxes The Company accounts for income taxes pursuant to the provision of ASC 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 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 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. Leases Effective January 1, 2019, the Company accounts for its leases under ASC 842, Leases . Under this guidance, 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. F- 16 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. Research and Development The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. For the years ended December 31, 2022 and 2021, there were no expenditures on research and development. Accumulated Other Comprehensive Income (Loss) Comprehensive income (loss) is comprised of net income (loss) and all changes to the statements of stockholders’ equity. For the Company, comprehensive income (loss) for the years ended December 31, 2022 and 2021 included net income (loss) and unrealized income (losses) from foreign currency translation adjustments. Earnings per Common 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. In periods where the Company has a net loss, all dilutive securities are excluded. The following are dilutive common stock equivalents during the year ended: SCHEDULE OF DILUTIVE COMMON STOCK EQUIVALENTS December 31, 2022 December 31, 2021 Stock Options 1,259,701 929,892 Stock Warrants 7,654,572 2,530,092 Total 8,914,273 3,459,984 F- 17 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 17). Recent Accounting Pronouncements Accounting Pronouncements Recently Adopted In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). ASU 2021-04 clarifies and reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The ASU provides guidance to clarify whether an issuer should account for a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as (1) an adjustment to equity and, if so, the related earnings per share effects, if any, or (2) an expense and, if so, the manner and pattern of recognition. ASU 2021-04 is effective for annual beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The Company adopted the statement on its effective date and it had no impact on the Company’s financial results for the year ended December 31, 2022. In October 2021, the FASB issued guidance which requires companies to apply Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination. Public entities must adopt the new guidance for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact and timing of adoption of this guidance. 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. F- 18 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 2 – INVENTORIES At December 31, 2022 and 2021, inventories consisted of the following: SCHEDULE OF INVENTORIES December 31, 2022 December 31, 2021 Finished goods $ 1,286,612 $ 1,019,696 Less reserve for obsolete inventory - - Total $ 1,286,612 $ 1,019,696 For the years ended December 31, 2022 and 2021, the Company did not make any change for reserve for obsolete inventory. NOTE 3 – VAT RECEIVABLE On January 1, 2021, VAT rules relating to imports and exports between the UK and EU changed as a result, of the UK’s departure from the EU, (“BREXIT”). For the years ending December 31, 2022 and 2021, the Company recorded a receivable in the amount of $ 432,769 and $ 491,417 , respectively, for amounts available to reclaim against the tax liability from UK and EU countries. Subsequently to December 31, 2022 and 2021, the Company has received a total of £ 80,570 or $ 96,740 , using an exchange rate close of 1.20069 GBP:USD and £ 70,756 or $ 95,759 , using an exchange rate close of 1.3533720 GBP:USD, in regard to this receivable. NOTE 4 – PREPAID EXPENSES Prepaid expenses current and long term amounted to $ 45,679 and $ 49,078 , respectively for the year ended December 31, 2022, as compared to $ 97,068 and $ 49,867 for the year ended December 31, 2021. Prepaid expenses include prepayments in cash for accounting fees, prepayments in equity instruments, 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. NOTE 5 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following: SCHEDULE OF PROPERTY AND EQUIPMENT December 31, 2022 December 31, 2021 Office furniture and fixtures $ 128,252 $ 16,969 Computer equipment 72,345 67,458 Rental equipment 37,531 53,296 Appliques 2,160,096 2,160,096 Leasehold improvements 47,792 - Website development (1) 665,030 247,541 Property and equipment gross 3,111,046 2,545,360 Less accumulated depreciation ( 1,865,244 ) ( 1,502,501 ) Total $ 1,245,802 $ 1,042,859 (1) The increase in website development is directly related to the Company’s investment in its enterprise resource planning “ERP” system. For the year ended December 31, 2022, 19.2 % or approximately $ 86,000 of the cost was expensed in the period incurred to SG&A and 80.8 % or approximately $ 362,000 was capitalized and depreciated over its useful life. On January 1, 2023, the Company completed its implementation process. Depreciation expenses were $ 465,059 and $ 292,102 for the year ended December 31, 2022 and 2021, respectively. Total property and equipment were reduced by approximately $ 133,000 for assets still in service. These assets had a net book value of $ 0 as of December 31, 2022. F- 19 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 6 – INTANGIBLE ASSETS On December 10, 2014, the Company entered the satellite voice and data equipment sales and service business through the purchase of certain contracts from Global Telesat Corp., (“GTC”). These contracts permit the Company to utilize the Globalstar, Inc. and Globalstar LLC (collectively, “Globalstar”) mobile satellite voice and data network. The purchase price for the contracts of $ 250,000 was paid by the Company under an asset purchase agreement by and among the Company, its wholly-owned subsidiary Orbital Satcom, GTC and World Surveillance Group, Inc. Included in the purchased assets are: (i) the rights and benefits granted to GTC under each of the Globalstar Contracts, subject to certain exclusions, (ii) account and online access to the Globalstar Cody Simplex activation system, (iii) GTC’s existing customers who are serviced pursuant to the Globalstar Contracts (only as to their business directly and exclusively related to the Globalstar Contracts), and (iv) all of GTC’s rights and benefits directly and exclusively related to the Globalstar Contracts. Amortization of customer contracts are included in depreciation and amortization. For the year ended December 31, 2022, the Company amortized $ 25,000 . Future amortization of intangible assets is as follows: SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS 2023 $ 25,000 2024 25,000 Total $ 50,000 For the years ended December 31, 2022 and 2021, there were no additional expenditures on research and development. On June 22, 2022, the Company formed its Netherlands subsidiary, NextPlat B.V. with $ 1.00 . NOTE 7 – EQUITY METHOD INVESTMENT IN PROGRESSIVE CARE, INC. AND SUBSIDIARIES Progressive Care, Inc. (a publicly traded company) is a personalized healthcare services and technology company that provides prescription pharmaceuticals and risk and data management services to healthcare organization and providers. On August 30, 2022 the Company entered into a Securities Purchase Agreement (the “SPA”) with Progressive Care, Inc. (“Progressive”), which subsequently closed on September 2, 2022, pursuant to which the Company purchased 3,000 newly issued units of securities from Progressive at a price per unit of $ 2,000 , for an aggregate purchase price of $ 6,000,000 . Each unit consists of one share of Progressive Series B Convertible Preferred Stock (“Series B Preferred Stock”) and one warrant to purchase a share of Progressive Series B Preferred Stock (“Warrants”). Each share of Series B Preferred Stock will vote as a class with the common stock of Progressive, and will have 500 Progressive votes per share, and each share of Series B Preferred Stock will be convertible into 500 shares of Progressive’s common stock. The Warrants are exercisable at a price of $ 2,000 per share of Series B Preferred Stock have a five-year term, and are immediately exercisable, in whole or in part, and contain cashless exercise provisions. The Company determined the Series B Preferred Stock is in-substance common stock because the Series B Preferred Stock has similar risk and reward characteristics to common stock. Pursuant to the SPA, NextPlat’s Chairman and Chief Executive Officer, Charles M. Fernandez and board member, Rodney Barreto, were appointed to Progressive’s Board of Directors as Chairman of the Company’s Board of Directors and Vice Chairman, respectively. On November 11, 2022, the Progressive Care board of directors elected Mr. Fernandez to serve as the Chief Executive Officer of Progressive Care. In addition, on September 2, 2022, NextPlat, entered into a Confidential Purchase and Release Agreement (the “NPA”) with a third-party lender to Progressive pursuant to which NextPlat agreed to purchase $ 1,000,000 of Progressive’s principal convertible debt from the third-party (the “Note Purchase”) and was issued 45,652 of Progressive common stock. NextPlat paid an aggregate of $ 1,000,000 for the Note Purchase and common stock. The convertible note receivable has a principal balance of $ 1,213,429 , carries a simple interest rate of 5 %, is convertible at $ 4.00 per share of common stock, and matures on August 31, 2027 . As a result of the SPA and related transactions, the Company paid an aggregate of $ 7,000,000 for an economic and voting interest in Progressive of 32.47 %. Subsequent to September 2, 2022, the Company’s ownership interest decreased to 31.89 %. As of December 31, 2022, the board seats, combined with the Company’s ownership interest of 33.47 % provide the Company with significant influence over Progressive, but not a controlling interest. Since Progressive does not depend on the Company for continuing financial support to maintain operations as of December 31, 2022, the Company has determined that Progressive is not a variable interest entity, and therefore, the Company is not required to determine the primary beneficiary of Progressive for potential consolidation. Based on quoted market prices, the market value of the Company’s ownership interest in Progressive was approximately $ 10.05 million at December 31, 2022. The Company combined its investment in the Series B Preferred Stock, common stock, warrants, and convertible note receivable into one line item on the consolidated balance sheets as “Equity method investment”. The Company reported its aggregate earnings from its investment as one line item on the consolidated statement of operations as “Equity in net loss of affiliate”. F- 20 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 7 – EQUITY METHOD INVESTMENT IN PROGRESSIVE CARE, INC. AND SUBSIDIARIES (continued) The following summarizes the Company’s consolidated balance sheet description equity method investment as follows: SCHEDULE OF DESCRIPTION EQUITY METHOD INVESTMENT Carrying Amount August 30, 2022, beginning balance $ 7,000,000 Portion of loss from Progressive Care, Inc. and Subsidiaries ( 1,734,576 ) Depreciation expense due to cost basis difference (1) ( 33,032 ) Interest earned from convertible note receivable 20,445 Interest earned from amortization of premium on convertible note receivable 14,368 Elimination of intercompany interest earned ( 6,680 ) December 31, 2022, carrying amount 5,260,525 The following summarizes the Company’s consolidated statements of operations and comprehensive loss description equity in net loss of affiliate for the year ended December 31, 2022 as follows: For the Year Ended December 31, 2022 Equity in net loss of affiliate $ ( 1,734,576 ) Depreciation expense due to cost basis difference (1) ( 33,032 ) Interest earned from convertible note receivable 20,445 Interest earned from amortization of premium on convertible note receivable 14,368 Elimination of intercompany interest earned ( 6,680 ) Equity in net loss of affiliate $ ( 1,739,475 ) (1) NextPlat records depreciation expense on its estimated cost basis difference which is subject to change NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED OTHER LIABILITIES Accounts payable and accrued expenses consisted of the following: SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED OTHER LIABILITIES December 31, 2022 December 31, 2021 Accounts payable $ 1,194,067 $ 846,380 Rental deposits 4,325 2,030 Customer deposits payable 86,462 59,733 Accrued wages & payroll liabilities 23,040 20,107 VAT liability & sales tax payable 5,685 6,203 U.K. income tax payable 23,771 - Accrued legal fees 84,685 - Pre-merger accrued other liabilities 88,448 88,448 Accrued interest 356 138 Accrued other liabilities 7,256 40,305 Total $ 1,518,095 $ 1,063,344 F- 21 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 9 – CONVERTIBLE NOTES PAYABLE August 2020 Notes Notes On August 21, 2020, the Company entered into a Note Purchase Agreement by and among the Company and certain lenders where the Company sold an aggregate principal amount of $ 933,000 of its convertible promissory notes (the “August 2020 Notes”). The August 2020 Note holders had an optional right of conversion such that a Noteholder may elect to convert his August 2020 Note, in whole or in part, outstanding as of such time, into the number of fully paid and non-assessable shares of the Company’s common stock as determined by dividing the outstanding indebtedness by $ 0.20 , subject to certain adjustments. December 2020 Notes On December 1, 2020, the Company entered into a Note Purchase Agreement by and among the Company and certain lenders where the Company sold an aggregate principal amount of $ 244,000 of its convertible promissory notes (the “December 2020 Notes”). The December 2020 Note holders had an optional right of conversion such that a Noteholder may elect to convert his December 2020 Note, in whole or in part, outstanding as of such time, into the number of fully paid and non-assessable shares of the Company’s common stock as determined by dividing the outstanding indebtedness by $ 0.25 , subject to certain adjustments. March 2021 NPA On March 5, 2021, the Company entered into a Note Purchase Agreement (the “March 2021 NPA”) with an individual accredited investor (as such term is defined in Rule 501(a) of Regulation D under the Securities Act. Pursuant to the terms of the March 2021 NPA, the Company sold a convertible promissory note with a principal amount of $ 350,000 (the “March 2021 Note”). The March 2021 Note was a general, unsecured obligation of the Company and bore simple interest at a rate of 7 % per annum, maturing on the third anniversary of the date of issuance. The Company’s issuance of the March 2021 Note was made pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. The Company used the offering proceeds for working capital and general corporate purposes. In April 2021 the Noteholder waived contractual pre-emptive rights set forth in the March 2021 NPA. On May 27, 2021, the Lender converted $ 350,000 of the March 2021 Note into 100,000 shares of common stock. For the year ended December 31, 2021, the Holders of the August 2020 Notes and the December 2020 Notes, converted a total of $ 1,644,267 of the convertible debt to 1,345,468 shares of common shares, resulting in the amortization of the debt discount, to interest expense $ 1,425,365 . For the years ended December 31, 2022 and 2021, the balances of the Company’s convertible note payable was $ 0 and $ 0 , respectively. F- 22 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 10 - STOCK SUBSCRIPTION PAYABLE For the years ended December 31, 2022 and 2021, the Company had a stock subscription payable of $ 0 and $ 1,400,000 , respectively. On December 31, 2021, after markets closed, a securities purchase agreement (the “Purchase Agreement”) was circulated to, and signatures were received from, certain institutional and accredited investors (the “December Investors”) in connection with the sale in a private placement by the Company of 2,229,950 shares of the Company’s common stock (the “December 2021 Offering”). On January 2, 2022, the Company delivered to December Investors a fully executed Purchase Agreement, which was dated December 31, 2021. The purchase price for the common stock sold in the December Offering was $ 3.24 per share, the closing transaction price reported by Nasdaq on December 31, 2021. For the year ended December 31, 2021, the Company received gross proceeds of $ 1,400,000 of the $ 7,225,038 , pursuant to the December 2021 Offering. On January 5, 2022, the Company received an additional $ 5,825,038 , resulting in the issuance of 2,229,950 shares of the Company’s common stock, eliminating the stock subscription payable as well as, the closing of the offering. NOTE 11 - CORONAVIRUS LOANS On April 20, 2020, the Board of Directors of the Company, approved for its wholly owned UK subsidiary, Global Telesat Communications LTD (“GTC”), to apply for a Coronavirus Interruption Loan, offered by the UK government, for an amount up to £ 250,000 . 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 6 years from the date of drawdown, July 15, 2026, the “Maturity Date”. The first repayment of £ 4,166.67 (exclusive of interest) was made 13 month(s) after July 16, 2020. Voluntary prepayments allowed with 5 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 and David Phipps, President, with the proceeds of the Debenture are to be used for general corporate and working capital purposes. 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. As of December 31, 2022, and 2021, the Company has recorded $ 60,490 and $ 56,391 as current portion of notes payable and $ 156,266 and $ 253,757 as notes payable long term, respectively. On May 8, 2020, NextPlat Corp was approved for the US funded Payroll Protection Program, (“PPP”) loan. The loan was for $ 20,832 and had a term of 2 years, of which the first 6 months are deferred at an interest rate of 1 %. On May 23, 2021, BlueVine, the Company’s SBA approved mortgage lender and originator, notified the Company, that the loan in the amount of $ 20,832 , had been forgiven. As of December 31, 2021, the Company has recorded $ 20,832 as forgiveness of debt. F- 23 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 12 - STOCKHOLDERS’ EQUITY Preferred Stock We have authorized 3,333,333 shares of $ 0.0001 par value of preferred stock. No preferred stock was outstanding for any year presented. Common Stock We have authorized 50,000,000 shares of $ 0.0001 par value common stock. As of December 31, 2022 and 2021, 14,402,025 and 7,053,146 shares, respectively, were issued and outstanding. Capital Structure On May 28, 2021, the Company effected a reverse stock split of its common stock at a ratio of 1-for-5 (the “Reverse Split”). No fractional shares of common stock were issued as a result of the Reverse Split. Stockholders of record who were otherwise entitled to receive a fractional share received a whole share. The conversion or exercise prices of Company’s issued and outstanding convertible securities, stock options and warrants were adjusted accordingly. All information presented, assumes a 1-for-5 reverse stock split of Company’s outstanding shares of common stock, and unless otherwise indicated, all such amounts and corresponding conversion price or exercise price data set forth have been adjusted to give effect to such assumed reverse stock split. 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. December 2022 Private Placement of Common Stock (“December Offering”) On December 9, 2022, the Company entered into a securities purchase agreement with certain institutional and accredited investors for the sale by the Company in a private placement of 4,575,429 units, each unit comprising (i) one share of the Company’s common stock, and (ii) one warrant to purchase one share of common stock. The offering price of the units was $ 1.75 per unit. The warrants included in the units are exercisable at a price of $ 1.75 per share and expire three years from the date of issuance. The offering closed on December 14, 2022, and the Company received gross proceeds of approximately $ 8.0 million for the units. The Company intends to use the proceeds from the offering for working capital needs, potential acquisitions, joint ventures, and ongoing business transition activities. On December 9, 2022, the Company entered into placement agency agreement (the “Placement Agency Agreement”) with Dawson James Securities, Inc. (“Dawson James”) pursuant to which Dawson James agreed to serve as lead or managing placement agent on a best efforts, agency basis in connection with the private placement of the Units. The Company has agreed to pay Dawson James a placement agent fee of 6 % of the gross proceeds received in the private placement and 3 % on all proceeds from officers and directors including any directed orders from the Company. As additional compensation under the Placement Agency Agreement, the Company will issue Dawson James warrants (the “Placement Agent Warrants”) to purchase up to 549,051 shares of Common Stock with an exercise price of $ 1.75 per share. 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. January 2022 Private Placement of Common Stock (“January Offering”) On January 2, 2022, the Company finalized and closed a securities purchase agreement (the “Purchase Agreement”) in connection with the sale in a private placement by the Company of 2,229,950 shares of the Company’s common stock The purchase price for the common stock sold in the offering was $ 3.24 per share. The Company received gross proceeds from the sale of the common stock of $ 7,225,038 . Legal and registration fees amounted to $ 220,000 , resulting in net proceeds of $ 7,005,038 . Prior to the private placement close, proceeds of $ 1,400,000 , were received and recorded as a stock subscription payable, for the year ended December 31, 2021. The Company intended to use the proceeds from the offering for general corporate purposes, including potential acquisitions and joint ventures. Approximately 73 % of funds raised were secured from existing shareholders and from the members of the Company’s senior management and Board of Directors. June 2021 Public Offering (“June Offering”) On June 2, 2021, through an upsized underwritten public offering of 2,880,000 units at a price to the public of $ 5.00 per unit, the Company received gross proceeds of $ 14,404,666 . In connection with closing of the offering, the underwriter partially exercised its overallotment option and purchased an additional 432,000 warrants, which had an exercise price of $ 5.0 0 per share and a term of 5 years, at $ 0.01 per warrant for additional gross proceeds to the Company of $ 4,320 . On June 28, 2021, the Underwriter, upon the exercise in full of the balance of its over-allotment option, purchased 432,000 additional shares of the common stock for additional gross proceeds of approximately $ 2.2 million from the sale of the Shares. F- 24 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 13 – WARRANTS Underwriter Warrants In addition to, but separate from, the registered warrants included in the units sold in the June Offering, the Company issued 144,000 warrants to Maxim Group LLC, the underwriter (the “Underwriter Warrants”) in connection with the 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. On December 9, 2022, pursuant to the December 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 . Placement Agent Warrants In addition to, but separate from, the unregistered warrants included in the units sold in the December 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, 2022 and 2021, there were 549,051 and 144,000 Underwriter 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, 2022 is as follows: SCHEDULE OF OUTSTANDING STOCK WARRANTS ACTIVITIES Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years) Balance at January 1, 2021 800 $ 300.00 1.37 Granted 3,456,000 - - Exercised ( 925,908 ) - - Forfeited - - - Cancelled ( 800 ) - - Balance outstanding and exercisable at December 31, 2021 2,530,092 $ 5.00 4.42 Balance at January 1, 2022 2,530,092 $ 5.00 4.42 Granted 5,124,480 1.75 3.05 Exercised - - - Forfeited - - - Cancelled - - - Balance outstanding and exercisable at December 31, 2022 7,654,572 $ 2.83 3.15 As of December 31, 2022, and December 31, 2021, there were 7,654,572 and 2,530,092 warrants outstanding, respectively. As of December 31, 2022, the Company had registered warrants of 2,386,092 of the 7,654,572 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- 25 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 14 – STOCK-BASED COMPENSATION For the years ended December 31, 2022 and 2021, stock-based compensation expense recognized in SG&A expenses was $ 2,973,234 and $ 3,758,424 , respectively. 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: SCHEDULE OF AGGREGATE RESTRICTED STOCK AWARDS AND RESTRICTED STOCK UNIT ACTIVITY Number of Units Weighted Average Grant-Date Fair Value Outstanding as of December 31, 2020 - - Granted 1,506,000 4.13 Vested ( 633,889 ) 3.94 Forfeited ( 4,611 ) 3.81 Outstanding as of December 31, 2021 867,500 4.20 Granted 136,000 2.72 Vested ( 543,500 ) 3.78 Forfeited - - Outstanding as of December 31, 2022 460,000 4.32 As of December 31, 2022, there was approximately $ 2.3 million of net unrecognized compensation cost related to unvested stock-based compensation to be recognized over the remaining weighted average period of 1.4 years. Stock Options Stock options outstanding at December 31, 2022 and 2021, as disclosed in the below table, have approximately ($ 6.1 ) million and ($ 2.8 ) 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, 2022 and 2021, is as follows: SCHEDULE OF STOCK BASED COMPENSATION Number of Options Weighted Average Exercise Price Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Life (Years) Balance at January 1, 2021 599,092 $ 2.35 $ - 9.91 Granted 1,650,000 $ 5.24 $ 3.23 5.31 Exercised ( 19,200 ) $ 1.00 $ - - Cancelled ( 50,000 ) $ 1.25 $ - - Expired - $ - $ - - Balance outstanding at December 31, 2021 2,179,892 $ 4.54 $ 2.44 5.93 Options exercisable at December 31, 2021 929,892 $ 3.53 $ 1.37 7.36 Balance at January 1, 2022 2,179,892 $ 4.54 $ 2.44 5.93 Granted 190,000 $ 1.92 $ 1.43 6.85 Exercised - $ - $ - - Cancelled ( 250,000 ) $ 5.35 $ - - Expired ( 191 ) $ - $ - - Balance outstanding at December 31, 2022 2,119,701 $ 4.16 $ 2.25 5.23 Options exercisable at December 31, 2022 1,259,701 $ 3.51 $ 1.68 6.25 For the year ended December 31, 2021, the Company granted 1,650,000 stock options valued at approximately $ 2.89 - $ 3.24 per option, using a Black-Scholes option pricing model with the following assumptions: stock price of $ 3.81 -$ 5.37 per share (based on closing price of the Company’s common stock on the date of grant), volatility of 75 % - 80 %, expected term of 5 - 10 years, and a risk free interest rate of 0.28 %. For the year ended December 31, 2022, the Company granted 190,000 stock options valued at approximately $ 1.10 - $ 1.92 per option, using a Black-Scholes option pricing model with the following assumptions: stock price of $ 1.71 - $ 2.20 per share (based on closing price of the Company’s common stock on the date of grant), volatility of 75 % - 100 %, expected term of 5 to 10 years and a risk free interest rate of 2.66 % to 4.39 %. As of December 31, 2022, there was approximately $ 2.7 million of net unrecognized compensation cost related to unvested stock options to be recognized over the remaining weighted average period of 3.73 years. F- 26 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 15 – 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 tax reform bill that Congress voted to approve December 20, 2017, also known as the “Tax Cuts and Jobs Act”, made sweeping modifications to the Internal Revenue Code, including a much lower corporate tax rate, changes to credits and deductions, and a move to a territorial system for corporations that have overseas earnings. The act replaced the prior-law graduated corporate tax rate, which taxed income over $ 10.0 million at 35 %, with a flat rate of 21 %. Due to the continuing loss position of the Company, such changes should not be material. For U.S. purposes, the Company has not completed its evaluation of NOL utilization limitations under Internal Revenue Code, as amended (the “Code”) Section 382, change of ownership rules. If the Company has had a change in ownership, the NOL’s would be limited as to the amount that could be utilized each year, or possibly eliminated, based on the Code. The Company has also, not completed its review of NOL’s pertaining to years the Company was known as “Silver Horn Mining Ltd.” and “Great West Resources, Inc.”, which may not be available due to IRC Section 382 and because of a change in business line that may eliminate NOL’s associated with ““Silver Horn Mining Ltd.” and “Great West Resources, Inc.” The company has also not reviewed the impact relating to “Recent Events” for its IRC Section 382 possible NOL’s limitation. The components of earnings before income taxes for the years ended December 31, 2022 and 2021 were as follows: SUMMARY OF COMPONENTS OF EARNINGS BEFORE INCOME TAXES 2022 2021 Year Ended December 31, 2022 2021 Net loss after loss in equity method investment and before income taxes: Domestic $ ( 9,449,000 ) $ ( 8,188,000 ) Foreign 362,000 80,000 Income (loss) before income taxes $ ( 9,087,000 ) $ ( 8,108,000 ) Income tax provision (benefit) consists of the following for the years ended December 31, 2022 and 2021: SUMMARY OF COMPONENTS OF INCOME TAX PROVISION (BENEFIT) 2022 2021 Year Ended December 31, 2022 2021 Income tax provision (benefit): Current Federal $ - $ - State - - Foreign 87,000 15,000 Total current 87,000 15,000 Deferred: Federal - - State - - Foreign - - Total deferred - - Total income tax provision (benefit) $ 87,000 $ 15,000 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, 2022 and 2021 is approximately $ 87,000 and $ 15,000 , respectively. F- 27 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 15 – INCOME TAXES (CONTINUED) 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: SUMMARY OF EFFECTIVE TAX RATE AND STATUTORY FEDERAL RATE Year Ended December 31, 2022 2021 $ $ Federal income tax provision (benefit) at statutory rate $ ( 1,984,000 ) $ 1,736,000 State tax expense net of federal tax benefit ( 411,000 ) 211,000 State tax expense federal impact 45,000 29,000 Non-deductible expenses - ( 320,000 ) State rate change adjustment ( 214,000 ) ( 138,000 ) Foreign taxes at rate different than US Taxes 87,000 ( 2,000 ) Other true-ups 106,000 188,000 Change in valuation allowance 2,458,000 ( 1,689,000 ) Income tax provision (benefit) $ 87,000 $ 15,000 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: SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES December 31, 2022 December 31, 2021 Deferred tax assets: Net operating loss carryforward $ 3,658,000 $ 2,455,000 Property plant and equipment and intangibles asset 130,000 132,000 Equity method investment loss 441,000 - Stock-based compensation 1,949,000 1,133,000 Total deferred tax assets $ 6,178,000 $ 3,720,000 Deferred tax liabilities: Book basis of property and equipment in excess of tax basis $ - $ - Total deferred tax liabilities $ - $ - Net deferred tax asset before valuation allowance $ 6,178,000 $ 3,720,000 Less: valuation allowance ( 6,178,000 ) ( 3,720,000 ) Net deferred tax asset $ - $ - The net operating loss carryforward increased from approximately $ 10.2 million at December 31, 2021 to $ 14.8 million at December 31, 2022. After consideration of all the evidence, both positive and negative, management has recorded a full valuation allowance at December 31, 2022 and 2021, due to the uncertainty of realizing the deferred income tax assets. The change in the valuation allowance for 2022 was approximately $ 2.5 million. Out of the approximately $ 14.8 million net operating losses carry forward, approximately $ 2.9 million will begin to expire in 2036 and approximately $ 11.9 million will have an indefinite life. F- 28 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 15 – INCOME TAXES (CONTINUED) The Internal Revenue Code includes a provision, referred to as Global Intangible Low-Taxed Income (“GILTI”), which provides for a 10.5 % tax on certain income of controlled foreign corporations. We have elected to account for GILTI as a period cost if and when occurred, rather than recognizing deferred taxes for basis differences expected to reverse. The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. U.S. federal income tax returns for 2018 and after remain open to examination. We and our subsidiaries are also subject to income tax in multiple states and foreign jurisdictions. Generally, foreign income tax returns after 2017 remain open to examination. No income tax returns are currently under examination. As of December 31, 2022 and 2021, 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, 2022 and 2021, there were no penalties or interest recorded in income tax expense. NOTE 16 - COMMITMENTS AND CONTINGENCIES COVID-19 In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) a global pandemic prompting government-imposed quarantines, suspension of in-person attendance of academic programs, and cessation of certain travel and business closures. The United States has entered a recession as a result of the COVID-19 pandemic, which may prolong and exacerbate the negative impact on us. Although we expect the availability of vaccines and various treatments with respect to COVID-19 to have an overall positive impact on business conditions in the aggregate over time, the exact timing of these positive developments is uncertain. In December 2020, the United States began distributing two vaccines that, in addition to other vaccines under development, are expected to help to reduce the spread of the coronavirus that causes COVID-19 once they are widely distributed. If the vaccines prove less effective than currently understood by the scientific community and the United States Food and Drug Administration, or if there are problems with the acceptance, availability, timing or other difficulties with widely distributing the vaccines, the pandemic may last longer, and could continue to impact our business for longer, than we currently expect. In response to COVID-19, governmental authorities have implemented numerous measures to try to contain the virus, such as travel bans and restrictions, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter in place orders and recommendations to practice social distancing. Although many governmental measures have had specific expiration dates, some of those measures have already been extended more than once, and there is considerable uncertainty regarding the duration of such measures and the implementation of any potential future measures, especially if cases increase again across the United States, with the potential for additional challenges resulting from the emergence of new variants of COVID-19, some of which may be more transmissible than the initial strain. Such measures have impacted, and may continue to affect, our workforce, operations, suppliers and customers. We reduced the size of our workforce following the onset of COVID-19 and may need to take additional actions to further reduce the size of our workforce in the future; such reductions incur costs, and we can provide no assurance that we will be able to rehire our workforce in the event our business experiences a subsequent recovery. We took steps to curtail our operating expenses and conserve cash. We may elect or need to take additional remedial measures in the future as the information available to us continues to develop, including with respect to our workforce, relationships with our third-party vendors, and our customers. There is no certainty that the remedial measures we have implemented to date, or any additional remedial steps we may take in the future, will be sufficient to mitigate the risks posed by COVID-19. Further, such measures could potentially materially adversely affect our business, financial condition and results of operations and create additional risks for us. Any escalation of COVID-19 cases across many of the markets we serve could have a negative impact on us. Specifically, we could be adversely impacted by limitations on our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring our stores to close or employees to remain at home; limitation of carriers to deliver our product to customers; product shortages; limitations on the ability of our customers to conduct their business and purchase our products and services; and limitations on the ability of our customers to pay us in a timely manner. These events could have a material, adverse effect on our results of operations, cash flows and liquidity. F- 29 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 16 - COMMITMENTS AND CONTINGENCIES (CONTINUED) The ultimate magnitude of COVID-19, including the full extent of the material negative impact on our financial and operational results, will depend on future developments. The resumption of our normal business operations may be delayed or constrained by lingering effects of COVID-19 on our customers, suppliers and/or third-party service providers. Furthermore, the extent to which our mitigation efforts are successful, if at all, is not currently ascertainable. Due to the daily evolution of the COVID-19 pandemic and the responses to curb its spread, we cannot predict the full impact of the COVID-19 pandemic on our business and results of operations, but our business, financial condition, results of operations and cash flows have already been materially adversely impacted, and we anticipate they will continue to be adversely affected by the COVID-19 pandemic and its negative effects on global economic conditions. Any recovery from the COVID-19 pandemic and related economic impact may also be slowed or reversed by a variety of factors, such as any increase in COVID-19 infections. Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of its national and, to some extent, global economic impact, including the current recession and any recession that may occur in the future. The success of our business depends on our global operations, including our supply chain and consumer demand, among other things. As a result of COVID-19, we have experienced shortages in inventory due to manufacturing issues, a reduction in the volume of sales in some parts of our business, such as rental sales and direct website sales, and a reduction in personnel due to lockdown related issues. Our results of operations for years ended December 31, 2022 and for the year ended December 31, 2021, reflect this impact; however, we expect that this trend may continue, and the full extent of the impact is unknown. In recent months, some governmental agencies in the US and Europe, where we produce the largest percentage of our sales, have lifted certain restrictions. However, if customer demand continues to be low, our future equipment sales, subscriber activations and sales margin will be impacted. Litigation On June 22, 2021, Thomas Seifert’s employment as the Company’s Chief Financial Officer was terminated for cause. Mr. Seifert asserts that the termination was not for cause and that he is owed all compensation payable under his employment agreement executed in June 2021. The Company’s position is that Mr. Seifert is not owed any additional consideration or compensation relating to his prior service with the Company or arising under any employment agreement. The Company believes it has adequate defenses to any such claims. The Company has determined to initiate litigation against Mr. Seifert asserting a number of claims including, but not limited to, rescission of the employment agreement, fraud in the inducement in connection with the execution of the employment agreement, and breach of the fiduciary duties of good faith and loyalty. The Company does not expect to seek substantial monetary relief in the litigation. 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. 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. F- 30 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 17 - LEASE OBLIGATIONS 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. Operating Lease Agreements On December 2, 2021, the Company entered into a 62-month lease for 4,141 square feet of office space in Florida, for $ 186,345 annually. The rent increases 3 % annually. The lease commenced upon occupancy on June 13, 2022, and will expire on August 31, 2027. 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 $ 37,107 , based on a yearly average exchange rate of 1.2369 GBP:USD. The Poole lease was renewed on October 6, 2022, and will expire October 31, 2023. This renewal is not representative in the table future minimum lease payments, for the year ended December 31, 2022. The Florida lease does not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company does not have any leases classified as financing leases. The rate implicit to the Florida lease is not readily determinable, and we therefore use our incremental borrowing rate to determine the present value of the lease payments. The weighted average incremental borrowing rate used to determine the initial value of right of use (ROU) assets and lease liabilities during the year ended December 31, 2022 was 3.75 %. 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. As of December 31, 2022, we have not recognized any impairment losses for our ROU assets. We monitor for events or changes in circumstances that require a reassessment of one of our leases. When a reassessment results in the remeasurement 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. F- 31 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 17 - LEASE OBLIGATIONS (CONTINUED) We recognized lease costs associated with all leases as follows: SCHEDULE OF LEASE COST 2022 2021 For the Year Ended December 31, 2022 2021 Operating lease cost: Fixed rent expense $ 100,818 $ 35,112 Total Lease Costs $ 100,818 $ 35,112 Supplemental cash flow information related to leases was as follows: SCHEDULE OF CASH FLOW INFORMATION RELATED TO LEASES 2022 2021 For the Year Ended December 31, 2022 2021 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 101,471 $ 32,936 Total cash paid for lease liabilities $ 101,471 $ 32,936 Supplemental balance sheet information related to leases was as follows: SCHEDULE OF BALANCE SHEET INFORMATION RELATED TO LEASES December 31, 2022 December 31, 2021 Operating leases: Operating lease right-of-use assets, net $ 854,862 $ 22,643 Operating lease liabilities: Current portion 208,660 19,763 Long-term portion 649,895 - $ 858,555 $ 19,763 Weighted average remaining lease term (years) 5.50 0.58 Weighted average discount rate 3.75 % 6.00 % Future minimum lease payments are as follows: SCHEDULE OF FUTURE MINIMUM LEASE PAYMENT Minimum Lease Years Ending December 31, Payment 2023 $ 211,059 2024 194,814 2025 200,659 2026 206,679 2027 122,870 Total undiscounted future non-cancelable minimum lease payments 936,081 Less: Imputed interest ( 77,526 ) Present value of lease liabilities $ 858,555 Weighted average remaining term 5.50 NOTE 18 – RELATED PARTY TRANSACTIONS As of December 31, 2022, the accounts payable due to related party includes $ 21,617 due to Charles Fernandez, $ 720 due to David Phipps and accounts payable due to Paul Thomson of $ 6,130 . Total related party payments due as of December 31, 2022 and December 31, 2021 are $ 28,467 and $ 35,308 , 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. F- 32 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 18 – RELATED PARTY TRANSACTIONS (CONTINUED) For the year ended December 31, 2022 and 2021, the Company employed five individuals related to Mr. Phipps who earned gross wages totaling $ 55,786 and $ 188,384 , respectively. On July 12, 2022, the Company hired Lauren Sturges Fernandez, the spouse of Mr. Fernandez, as Manager of Digital Assets. Mrs. Fernandez is an at-will employee with an annual salary of $ 95,000 . On September 22, 2022, Mrs. Fernandez’s title was changed to Chief of Staff and Special Assistant to the Chairman of the Board, her salary remains the same. Previously Mrs. Fernandez was a consultant and earned compensation for her services of $ 10,995 , for the year ended December 31, 2022. January Offering. The Company received gross proceeds from the sale of the Common Stock in the January Offering of approximately $ 7.2 million, which closed on January 5, 2022. Approximately 73 % of funds raised in the Offering were secured from existing shareholders, and from members of the Company’s senior management and Board of Directors. The following table represents the related party investment: SCHEDULE OF RELATED PARTY TRANSACTION INVESTMENT Investor Position held at NextPlat Shares of Common Stock Purchased Aggregate Purchase Price Charles M. Fernandez Executive Chairman and Chief Executive Officer 679,013 $ 2,200,002 David Phipps Director and President of Orbsat. Chief Executive Officer of Global Operations 46,297 $ 150,002 Douglas Ellenoff Shares are deemed to be indirectly beneficially owned through Sabrina Allan, Mr. Ellenoff’s wife. Mr. Ellenoff has the power to vote and dispose of the shares. Vice Chairman and Chief Business Development Strategist 46,297 $ 150,002 Louis Cusimano Director 15,433 $ 50,003 Paul R. Thomson Senior Vice President – Mergers, Acquisitions and Special Projects 15,433 $ 50,003 On January 20, 2022, the Company appointed Rodney Barreto, to its Board. Mr. Barreto was a participant of the January offering and purchased 370,701 shares of common stock for $ 3.24 per share or approximately $ 1.2 million. Mr. Barreto’s investment represented 17 % of the total. 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 $ 2.79 million. The aggregate purchase price paid to Iliad for the Note was $ 2.3 Million of which NextPlat contributed $ 1 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. Next Borough Capital Fund, LP. Mr. Charles M. Fernandez, the Chairman and Chief Executive Officer of the Company, and Mr. Rodney Barreto, a member of the Company’s Board of Directors (the “ Board ”) and Audit Committee Chairman, intend to participate in a newly formed fund – Next Borough Capital Fund, LP (“ Next Borough Fund ”) – with investors affiliated with Dawson James Securities, Inc., Robert Keyser and other groups and individuals that may have direct and indirect ownership interests in the Company. Next Borough Fund will be managed by Next Borough Capital Management, LLC (“ Next Borough Manager ”). eAperion Partners LLC, a company wholly owned by Mr. Fernandez, would own 33 % of Next Borough Manager and that Mr. Barreto would own 5 %. Mr. Fernandez would serve as the Chairman and Co-Portfolio Manager of Next Borough Manager and Mr. Barreto would serve as the Vice Chairman of Next Borough Manager. December Offering. On December 14, 2022, the Company closed a private placement for the sale of 4,575,429 units (each, a “Unit”), each Unit consisting of (i) one share of the Company’s common stock, $ 0.0001 par value per share (the “Common Stock”), and (ii) one warrant to purchase one share of Common Stock (each, a “Warrant”). The offering price of the Units was $ 1.75 per Unit. The Warrants included in the Units are exercisable at a price of $ 1.75 per share and expire three years from the date of issuance. Related party investment represented 48 %, of the approximately $ 8.0 million of the funds raised. Investor Position held at NextPlat Shares of Common Stock Purchased Warrants to purchase Common Stock Aggregate Purchase Price eAperion Partners LLC, principal Charles M. Fernandez Executive Chairman and Chief Executive Officer 1,085,714 1,085,714 $ 1,900,000 David Phipps Director and President of NextPlat. Chief Executive Officer of Global Operations 28,500 28,500 $ 49,875 RLB Market Investments LLC, principal, Rodney Barreto Director 1,085,714 1,085,714 $ 1,900,000 F- 33 NEXTPLAT CORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTE 19 - CONCENTRATIONS Customers: Amazon accounted for 54.3 % and 63.6 % of the Company’s revenues during the years ended December 31, 2022 and 2021, 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, 2022 and 2021. SCHEDULE OF CONCENTRATION RISK December 31, 2022 December 31, 2021 Network Innovations $ 979,884 11.2 % $ 658,642 10.6 % Garmin $ 1,821,158 20.9 % $ 1,102,230 17.7 % Globalstar Europe $ 635,053 7.3 % $ 725,315 11.6 % SatCom Global $ 743,883 8.5 % $ 973,652 15.6 % Cygnus Telecom $ 1,837,273 21.1 % $ 800,008 12.8 % Geographic : The following table sets forth revenue as to each geographic location, for the years ended December 31, 2022 and 2021: SCHEDULE OF REVENUE FROM EACH GEOGRAPHIC LOCATION Year Ended December 31, 2022 Year Ended December 31, 2021 Europe $ 8,617,880 73.7 % $ 5,146,336 66.5 % North America 2,150,742 18.3 % 1,776,288 22.9 % South America 45,027 0.4 % 37,139 0.5 % Asia & Pacific 760,447 6.5 % 695,770 9.0 % Africa 136,046 1.1 % 84,377 1.1 % Revenue $ 11,710,142 100 % $ 7,739,910 100 % NOTE 20 – SUBSEQUENT EVENTS On January 5, 2023, the Company received notice from The Nasdaq Stock Market, Inc. (“Nasdaq”) that we are out of compliance with the Nasdaq rules for continued listing (Listing Rules 5620(a) and 5810(c)(2)(G)) as a result of our failure to hold an annual meeting of shareholders within twelve months of the end of its fiscal year ended December 31, 2021. The Company submitted a plan of compliance in response to the notice, which Nasdaq accepted, and was granted an exception of up to May 31, 2023, to regain compliance. On January 27, 2023, the Company issued a press release (a copy of which is furnished herewith as exhibit 99.1) announcing that its 2023 Annual Meeting of Stockholders (“2023 Annual Meeting”) will be held on Wednesday, May 31, 2023. The 2023 Annual Meeting will be a completely virtual meeting conducted via webcast. The close of business on April 3, 2023, shall be the record date for the determination of stockholders entitled to notice of and to vote during the 2023 Annual Meeting and any adjournment thereof. On February 17, 2023 the Company entered into a master intercompany note with and between its subsidiaries, Orbital Satcom Corp. and Global Telesat Communications Limited (individually, “the Payor” or “the Payee”), under which all intercompany loans and advances are payable on demand. Each Payor promises also to pay interest, if any, on the unpaid principal amount of all such loans and advances in like money at said location from the date of such loans and advances until paid at such rate per annum as shall be agreed upon from time to time by such Payor and such Payee. F- 34