NextPlat Corp

Note1. Organization and Nature of Operations.

The term “Company” refers to NextPlat Corp and its wholly, majority owned and controlled subsidiaries, except where the context requires otherwise or where otherwise indicated.

NextPlat Corp:

NextPlat Corp, a Nevada corporation (the “Company”, “NextPlat”, “we”), formerly Orbsat Corp was incorporated in1997. The Company operatestwo main e-commerce websites as well as25 third-party e-commerce storefronts on platforms such as Alibaba, Amazon and Walmart. These e-commerce venues form an effective global network serving thousands of consumers, enterprises, and governments. NextPlat has announced its intention to broaden its e-commerce platform and is implementing a comprehensive system upgrade to support this initiative. The Company has also begun the design and development of a next generation platform for digital assets built forWeb3 (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. In addition, we provide a comprehensive array of Satellite Industry communication services and related equipment sales.

Our wholly-owned subsidiary, Global Telesat Communications Limited (“GTC”), was formed under the laws of England and Wales in2008. On* February 19, 2015,*we entered into a share exchange agreement with GTC and all of the holders of the outstanding equity of GTC pursuant to which we acquired all of the outstanding equity in GTC.

Our wholly-owned subsidiary, Orbital Satcom Corp. (“Orbital Satcom”), a Nevada corporation, was formed on* November 14, 2014.*

On* June 22, 2022,NextPlat B.V. (“NXPLBV”) was formed in Amsterdam, Netherlands, as a wholly owned subsidiary of NextPlat Corp. Presently, NXPLBV doesnot* have any active operations

Progressive Care Inc.:

Progressive Care Inc. (“Progressive Care”) was incorporated under the laws of the state of Delaware on* October 31, 2006.*

Progressive, through its wholly-owned subsidiaries, Pharmco, LLC (“Pharmco901”), Touchpoint RX, LLC doing business as Pharmco Rx1002, LLC (“Pharmco1002”), Family Physicians RX, Inc. doing business as PharmcoRx1103 and PharmcoRx1204 (“FPRX” or “Pharmco1103” and “Pharmco1204”) (pharmacy subsidiaries collectively referred to as “Pharmco”), and ClearMetrX Inc. (“ClearMetrX”) is a personalized healthcare services and technology company that provides prescription pharmaceuticals and risk and data management services to healthcare organizations and providers.

Pharmco901 was formed on* November 29, 2005as a Florida Limited Liability Company and is a 100% owned subsidiary of Progressive Care. Pharmco901* was acquired by Progressive on* October 21, 2010.Progressive currently delivers prescriptions to Florida’s diverse population and ships medications to patients in states where they hold non-resident pharmacy licenses as well. Progressive currently holds Florida Community Pharmacy Permits at all Florida pharmacy locations and the Pharmco901* location is licensed as a non-resident pharmacy in the following states: Arizona, Colorado, Connecticut, Georgia, Illinois, Minnesota, Nevada, New Jersey, New York, Pennsylvania, Texas, and Utah. Progressive is able to dispense to patients in the state of Massachusetts without a non-resident pharmacy license because Massachusetts doesnot require such a license for these activities.

Pharmco1103 is a pharmacy with locations in North Miami Beach and Orlando, Florida that provides Pharmco’s pharmacy services to Miami-Dade County, Broward County, the Orlando/Tampa corridor, and the Treasure Coast of Florida. Progressive acquired all the ownership interests in Pharmco1103 in a purchase agreement entered into on* June 1, 2019.*

Pharmco1002 is a pharmacy located in Palm Springs, Florida that provides Pharmco’s pharmacy services to Palm Beach, St. Lucie and Martin Counties, Florida. Progressive acquired all the ownership interests in Pharmco1002 in a purchase agreement entered into on* July 1, 2018.*

ClearMetrX was formed on* June 10, 2020and providesthird*-party administration (“TPA”) services to340B covered entities. ClearMetrX also provides data analytics and reporting services to support and improve care management for health care organizations.

RXMD Therapeutics was formed on* October 1, 2019.RXMD Therapeutics has hadno* operating activity to date.

Florida Sunshine Brands, LLC:

Florida Sunshine Brands, LLC (“Florida Sunshine”) is a Florida limited liability company and incorporated* December 6, 2023.*Florida Sunshine operates under an operating agreement between Nextplat, with a 51% ownership, and Outer Brands FS, LLC, with a 49% ownership. Florida Sunshine's main objective is to source and sell vitamins and nutritional supplements.

Note2. Basis of Presentation and Principles of Consolidation

The accompanying Condensed Consolidated Financial Statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), consistent in all material respects with those applied in the2023 Form10-K, for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, they donot include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the2023 Form10-K. In the opinion of management, the Condensed Consolidated Financial Statements contain all adjustments (consisting principally of normal recurring accruals) necessary for a fair presentation of the condensed consolidated balance sheets, statements of comprehensive loss, statements of stockholders’ equity and statements of cash flows for such interim periods presented. Additionally, operating results for interim periods arenot necessarily indicative of the results that can be expected for a full year.

Business acquisition of Progressive Care, Inc.

On* July 1, 2023,the Company, Charles M. Fernandez, Executive Chairman and Chief Executive Officer of the Company, and Rodney Barreto, Director of the Company, exercised common stock purchase warrants and were issued common stock shares by Progressive Care. After the exercise of the common stock purchase warrants, the Company and Messrs. Fernandez and Barreto collectively owned 53% of Progressive Care’s voting common stock. At the time of exercise, all of the above common stock purchase warrants were in-the-money. Also on July 1, 2023,*the Company and Messrs. Fernandez and Barreto entered into a voting agreement whereby at any annual or special shareholders meeting of Progressive Care’s stockholders, and whenever the holders of Progressive Care’s common stock act by written consent, Messrs. Fernandez and Barreto agreed to vote all of the common stock shares (including any new shares acquired after the date of the voting agreement or acquired through the conversion of securities convertible into Common Stock) that they own, directly or indirectly, in the same manner that NextPlat votes its common stock and equivalents. The voting agreement is irrevocable and perpetual in term.

The exercise of the stock options, along with the entry into the voting agreement, resulted in a change in control of Progressive Care under the voting interest model in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic805, Business Combination, and was accounted for as a business acquisition. Therefore, Progressive Care became a consolidated subsidiary of the Company on* July 1, 2023.*The Company previously accounted for its equity interest in Progressive Care as an equity method investment.

The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.

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* maydiffer significantly from those estimates. Significant estimates made by management include, but arenot* limited to, assumptions used to calculate stock-based compensation, fair value of net assets acquired in the business combination with Progressive Care. common stock and options issued for services, net realizable value of accounts receivables and other receivables, the useful lives of property and equipment and intangible assets, the estimate of the fair value of the lease liability and related right of use assets, pharmacy benefit manager ("PBM") fee estimates, and the estimates of the valuation allowance on deferred tax assets.

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Note3. Summary of Significant Accounting Policies

The significant accounting policies of the Company were described in Note1 to the Audited Consolidated Financial Statements included in the Company’s Form10-K for the fiscal year ended* December 31, 2023*. There have beenno material changes to the Company’s significant accounting policies for thethree months ended* March 31, 2024.*

Cash

The Company places its cash with high credit quality financial institutions. The Company’s account at these institutions are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. All cash amounts in excess of $250,000, approximately $1.0 million, are unsecured. The Company has a deposit placement agreement for Insured Cash Sweep Service (“ICS”). This service is a secure, and convenient way to access FDIC protection on large deposits, earn a return, and enjoy flexibility. The Company believes that the ICS agreement will mitigate its credit risk as it relates to uninsured FDIC amounts in excess of*$250,000.*

Foreign Currency Translation

The Company’s reporting currency is U.S. Dollars. The accounts ofone of the Company’s subsidiaries, GTC, is maintained using the appropriate local currency, Great British Pound, as the functional currency. All assets and liabilities are translated into U.S. Dollars at balance sheet date, shareholders’ equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are reported as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the condensed consolidated statements of comprehensive loss.

The relevant translation rates are as follows: for thethree months ended* March 31, 2024*, closing rate at $1.28 US$: GBP, quarterly average rate at $1.27 US$: GBP, for thethree months ended* March 31, 2023*, closing rate at $1.23 US$: GBP, quarterly average rate at $1.22 US$: GBP, for the year ended* December 31, 2023* closing rate at 1.27 US$: GBP, yearly average rate at 1.24 US$: GBP.

Unearned Revenue

Contract liabilities are shown separately in the condensed consolidated balance sheets as current liabilities. At* March 31, 2024* and* December 31, 2023*, we had contract liabilities of approximately $140,000 and $42,000, respectively.

Direct and Indirect Remuneration (“DIR”) Fees

Progressive Care reports DIR fees as a reduction of revenue on the accompanying Consolidated Statements of Operations. DIR fees are fees charged by PBMs to pharmacies for network participation as well as periodic reimbursement reconciliations. The Company accrues an estimate of PBM fees, including DIR fees, which are assessed or expected to be assessed by payers at some point after adjudication of a claim, as a reduction of prescription revenue at the time revenue is recognized. Changes in the estimate of such fees are recorded as an adjustment to revenue when the change becomes known. Through* December 31, 2023,for some PBMs, DIR fees were charged at the time of the settlement of a pharmacy claim. Other PBMs donot* determine DIR fees at the claim settlement date, and therefore DIR fees are collected from pharmacies after claim settlement, often as clawbacks of reimbursements based on factors that vary from plan to plan. For example,two PBMs calculate DIR fees on a trimester basis and charge the Company for these fees as reductions of reimbursements paid to the Companytwo tothree months after the end of the trimester (e.g., DIR fees for* January –** April20xx* claims were clawback by these PBMs in* July – August**20xx*). As of* December 31, 2023,DIR fees that werenot* collected at the time of claim settlement, the Company recorded an accrued liability for estimated DIR fees that are expected to be collected by the PBMs by the end of thesecond quarter of2024. The estimated liability for these fees is highly subjective and the actual amount collected* maydiffer from the accrued liability. The uncertainty of management’s estimates is due to inadequate disclosure to the Company by the PBMs as to exactly how these fees are calculated either at the time the DIR fees are actually assessed and reported to the Company. The detail level of the disclosure of assessed DIR fees varies based on the information provided by the PBM. Effective January 1, 2024,*all PBMs began charging DIR fees at the time of the settlement of a pharmacy claim.

Recent Accounting Pronouncements

Accounting Pronouncements Issued butnot yet Adopted**

In* November 2023,the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)2023-07, “Segment Reporting (Topic280*) - Improvements to Reportable Segment Disclosures” (“ASU2023-07”), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. ASU2023-07 is required to be adopted for annual periods beginning after* December 15, 2023,and interim period within fiscal years beginning after December 15, 2024,with early adoption permitted. The Company will adopt the standard in its interim reporting beginning withQ1*-2025, and the Company will adopt the standard in its annual reporting for the year ending* December 31, 2024.The Company expects that the adoption of the standard willnot* have a material impact on our consolidated financial statements but will enhance our current disclosures.

In* December 2023,the FASB issued ASU2023*-09, “Income Taxes (Topic740)—Improvements to Income Tax Disclosure” (“ASU2023-09”), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. ASU2023-09 is required to be adopted for annual periods beginning after* December 15, 2024,with early adoption permitted. The Company will adopt this accounting standard update effective January 1, 2025.The Company expects that the adoption of the standard willnot* have a material impact on our consolidated financial statements.

Other accounting standards that have been issued or proposed by FASB that donot require adoption until a future date arenot expected to be relevant or have a material impact on the condensed consolidated financial statements upon adoption.

Subsequent Events

The Company has evaluated subsequent events through* May [ ],*2024, the date the condensed consolidated financial statements were available to be issued. See Note21 for subsequent events that require disclosure in the condensed consolidated financial statements.

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Note4. Fair Value

Accounting standards define fair value as the price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Accounting standards establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value and also establishes the followingthree levels of inputs that* may*be used to measure fair value:

Level1: Quoted prices in active markets for identical assets or liabilities.

Level2: Inputs other than Level1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that arenot active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level3: Unobservable inputs that are supported by little orno market activity and that are significant to the fair value of the assets and liabilities.

The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments:

Identifiable Intangible Assets

The initial recognition of the Progressive Care's identifiable intangible assets, resulting from the acquisition on* July 1, 2023and the application of push-down accounting, were measured using Level3* inputs. The fair value at the date of acquisition was approximately $14.7 million.

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Note5. Revenue

e-Commercerevenue:**

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 hasnot incurred significant expenses for warranties. Equipment sales which have been prepaid, before the goods are shipped are recorded as contract liabilities and once shipped and accepted by the customer 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.

Healthcare revenue:

The Company recognizes pharmacy revenue and340B contract revenue from dispensing prescription drugs at the time the drugs are physically delivered to a customer or when a customer picks up their prescription or purchases merchandise at the store, which is the point in time when control transfers to the customer. Each prescription claim is considered an arrangement with the customer and is a separate performance obligation. Payments are received directly from the customer at the point of sale, or the customers’ insurance provider is billed electronically. Forthird-party medical insurance and other claims, authorization is obtained to ensure payment from the customer’s insurance provider before the medication is dispensed to the customer. Authorization is obtained for these sales electronically and a corresponding authorization number is issued by the customers’ insurance provider.

The Company accrues an estimate of pharmacy benefit manager (“PBM”) fees, including direct and indirect remuneration (“DIR”) fees, which are assessed or expected to be assessed by payers at some point after adjudication of a claim, as a reduction of revenue at the time revenue is recognized. Changes in the estimate of such fees are recorded as an adjustment to revenue when the change becomes known.

The Company recognizes COVID-19 testing revenue when the tests are performed and results are delivered to the customer. Each test is considered an arrangement with the customer and is a separate performance obligation. Payment is generally received in advance from the customer.

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

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Note6. Loss per Share

Net income (loss) per common share is calculated in accordance with Accounting Standards Codification (“ASC”) Topic260: Earnings per Share (“ASC260”). 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 doesnot 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 components of basic and diluted EPS were as follows (in thousands, except per share data).

Note7. Accounts Receivable

At* March 31, 2024* and* December 31, 2023*, accounts receivable consisted of the following (in thousands):

The Company increased the allowance for credit losses in the amount of approximately $2,000 and $0 for thethree months ended* March 31, 2024and2023*, respectively.

Accounts receivable – trade, net for the Company as of* January 1, 2023and March 31, 2023* were approximately $0.4 million and $1.0 million, respectively.

Note8. Inventory

At* March 31, 2024* and* December 31, 2023*, inventory consisted of the following (in thousands):

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Note9. 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. As of March 31, 2024* and* December 31, 2023*, the Company recorded a receivable in the amount of approximately $357,000 and $342,000, respectively, for amounts available to reclaim against the tax liability from UK and EU countries.

Note10. Prepaid Expenses

Prepaid expenses current and long term amounted to approximately $404,000 and $61,000, respectively at* March 31, 2024*, as compared to $640,000 and $61,000, respectively at* December 31, 2023*. Prepaid expenses include prepayments in cash for accounting fees, public company expenses, insurance, 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.

Note11. Property and Equipment, net

Property and equipment, net consisted of the following (in thousands):

Depreciation expense was approximately $203,000 and $155,000 for thethree months ended* March 31, 2024and2023*, respectively.

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Note12. Intangible Assets, net

Intangible assets, net consisted of the following (in thousands):

Amortization of customer contracts is included in depreciation and amortization in the accompanying Condensed Consolidated Statements of Comprehensive Income (Loss). For thethree months ended* March 31, 2024and2023*, the Company recognized amortization expense of approximately $0.7 million and $0.01 million, respectively. Future amortization of intangible assets is as follows:

Note13. Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of the following (in thousands):

Note14. Notes Payable

Notes payable consisted of the following (in thousands):

(A) Mortgage Note Payable – collateralized

In2018, Progressive Care closed on the purchase of land and building located at400 Ansin Boulevard, Hallandale Beach, Florida. The purchase price was financed in part through a mortgage note and security agreement entered into with a commercial lender in the amount of $1,530,000. The promissory note is collateralized by the land and building, bears interest at a fixed rate of 4.75% per annum, matures on* December 14, 2028and is subject to a prepayment penalty. Principal and interest will be repaid through 119 regular payments of $11,901 that began in January 2019,with the final payment of all principal and accrued interestnot* yet paid on* December 14, 2028.*Note repayment is guaranteed by Progressive Care Inc.

(B) Note Payable – Uncollateralized

As of* March 31, 2024* the uncollateralized note payable represents a non-interest-bearing loan that is due on demand from an investor.

(C) Notes Payable – Collateralized

On* July 16, 2020 (the “Issue Date”), GTC, entered into a Coronavirus Interruption Loan Agreement (“Debenture”) by and among the Company and HSBC UK Bank PLC (the “Lender”) for an amount of£250,000, or USD $338,343 at an exchange rate of GBP: USD of 1.3533720. The Debenture bears interest beginning July 16, 2021,at a rate of 4.0% per annum over the Bank of England Base Rate (0.1% as of July 16, 2020),payable monthly on the outstanding principal amount of the Debenture. The Debenture has a term of 6 years from the date of drawdown, July 15, 2026,the “Maturity Date”. Thefirst* repayment of£4,166.67 (exclusive of interest) was made13 month(s) after* July 16, 2020.Voluntary prepayments are allowed with5* business days’ written notice and the amount of the prepayment is equal to 10% or more of the limit or, if less, the balance of the debenture. The Debenture is secured by all GTC’s assets as well as a guarantee by the UK government. The proceeds from the Debenture were 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.

In* April 2021,Progressive Care entered into a note obligation with a commercial lender, the proceeds from which were used to purchase pharmacy equipment in the amount of approximately $30,000. During September 2021,pharmacy equipment was returned since the installation was cancelled and the note was amended. The amended promissory note payable requires 46 monthly payments of $331, including interest at 6.9%. The balance outstanding as of March 31, 2024* and* December 31, 2023* on the note payable was approximately $5,000 and $6,500, respectively.

In* July 2022,Progressive Care entered into a note obligation with a commercial lender, the proceeds from which were used to purchase pharmacy equipment in the amount of approximately $90,000. The terms of the promissory note payable require 60 monthly payments of $1,859, including interest at 8.78% starting January 2023.The balance outstanding on the note payable was approximately $70,000 and $74,000 as of March 31, 2024* and* December 31, 2023*, respectively.

In* September 2022,Progressive Care entered into a note obligation with a commercial lender, the proceeds from which were used to purchase a vehicle in the amount of approximately $25,000. The terms of the promissory note payable require 24 monthly payments of $1,143, including interest at 8.29% starting October 2022.The balance outstanding on the note payable was approximately $7,000 and $10,000 as of March 31, 2024* and* December 31, 2023*, respectively.

Principal outstanding as of* March 31, 2024*, is expected to be repayable as follows (in thousands):

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**Note15. **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. As of* March 31, 2024*, there wereno shares of preferred stock issued and outstanding.

Common Stock

We have authorized 50,000,000 shares of $0.0001 par value common stock. As of* March 31, 2024*,18,724,596 shares of common stock were issued and outstanding.

Listing on the Nasdaq Capital Market

Our common stock and warrants have been trading on the Nasdaq Capital Market under the symbols “NXPL” and “NXPLW,” respectively, since* January 21, 2022.Prior to January 21, 2022,*our common stock and warrants were traded on the Nasdaq Capital Market under the symbols “OSAT” and “OSATW,” respectively.

**** April 2023Private Placement of Common Stock**

On* April 5, 2023,the Company entered into a securities purchase agreement (the “Purchase Agreement”) with an accredited investor (the “Investor”) for the sale by the Company in a private placement of 3,428,571 shares of the Company’s common stock, $0.0001 par value per share (the “Common Stock”). The offering price of the Common Stock was $1.75 per share, the closing price of the Common Stock on April 4, 2023.On April 11, 2023,the Private Placement closed. Upon the closing of the Private Placement, the Company received gross proceeds of approximately $6.0 million. The Company sold the Common Stock to the Investor in reliance on the exemption from registration afforded by Section4*(a)(2) of the Securities Act and Rule506 of Regulation D promulgated under the Securities Act and corresponding provisions of state securities or “blue sky” laws. The Investor represented that it is acquiring the Common Stock for investment only andnot with a view towards, or for resale in connection with, the public sale or distribution thereof. Accordingly, the Common Stock hasnot been registered under the Securities Act and* may**not* be offered or sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities laws.

For thethree months ended* March 31, 2024and2023*, stock-based compensation expense recognized in selling, general and administrative expenses was approximately $0.6 million and $0.2 million, respectively. There wereno income tax benefits recognized from stock-based compensation during thethree months ended* March 31, 2024and2023* due to cumulative losses and valuation allowances.

Note16. Related Party Transactions

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, withno* change to her salary. Previously Mrs. Fernandez was a consultant and earned compensation for her services of $10,995 for the year ended* December 31, 2022.In April 2023,*Mrs. Fernandez’s annual salary increased to $125,000, which was approved by the Board of Directors.

Progressive Care Inc. Following the consummation of the Company’s investment in Progressive Care Inc. on* September 2, 2022,our Chairman and Chief Executive Officer, Charles M. Fernandez, and our board member, Rodney Barreto, were appointed to Progressive Care’s Board of Directors, with Mr. Fernandez appointed to serve as Chairman of Progressive Care’s Board of Directors and Mr. Barreto appointed to serve as a Vice Chairman of Progressive Care’s Board of Directors. On November 11, 2022,the Progressive Care board of directors elected Mr. Fernandez as the Chief Executive Officer of Progressive Care. In addition, on September 2, 2022,NextPlat, Messrs. Fernandez and Barreto and certain other purchasers purchased from Iliad Research and Trading, L.P. (“Iliad”) a Secured Convertible Promissory Note, dated March 6, 2019,made by Progressive Care to Iliad (the “Note”). The accrued and unpaid principal and interest under the note at the time of the purchase was approximately $2.8 million. The aggregate purchase price paid to Iliad for the Note was $2.3 Million of which NextPlat contributed $1.0 million and Messrs. Fernandez and Barreto contributed $400,000 each (the “Note Purchase”). In connection with the Note Purchase, NextPlat, Messrs. Fernandez and Barreto and the other purchasers of the Note entered into a Debt Modification Agreement with Progressive Care. In consideration of the concessions in the Debt Modification Agreement, Progressive Care issued 105,000 shares of its common stock to the purchasers of the Note, of which NextPlat, Charles Fernandez and Rodney Barreto, received 45,653,18,261, and 18,261 shares, respectively, in each case after giving effect to a1*-for-200 reverse stock split enacted by Progressive Care on* December 30, 2022.*

On* February 1, 2023,the Company entered into a Management Services Agreement with Progressive Care Inc. (“Progressive Care”) to provide certain management and administrative services to Progressive Care for a $25,000 per month fee. During May 2023the management fee was reduced to $20,000 per month. During thethree* months ended* March 31, 2023*, the Company received approximately $50,000 from Progressive Care as management fees. The management fees in the amount of approximately $60,000 for thethree months ended* March 31, 2024* are eliminated as a result of the Progressive Care consolidation as of* July 1, 2023.*

On* May 5, 2023,the Company entered into an Securities Purchase Agreement ("SPA") with Progressive Care Inc., pursuant to which the Company agreed to purchase 455,000 newly issued Units of securities from Progressive Care at a price per Unit of $2.20 for an aggregate purchase price of $1.0 million (the “Unit Purchase”). Each Unit consists ofone* share of common stock, par value $0.0001 per share, Common Stock andone common stock purchase warrant to purchase a share of Common Stock (the “PIPE Warrants”)

On* May 9, 2023,pursuant to the Debt Conversion Agreement ("DCA"), the Company received 570,599 shares, Charles M. Fernandez received 228,240 shares, and Rodney Barreto received 228,240 shares. To induce the approval of the debt conversion pursuant to the DCA, Messrs. Fernandez and Barreto received Inducement Warrants to purchase 190,000 and 30,000 shares of Common Stock, respectively. In addition, the Company and Messrs. Fernandez and Barreto also received a common stock purchase warrant to purchaseone* share of Common Stock for each share of Common Stock they received upon conversion of the Note.

On* July 1, 2023,*the Company, Charles M. Fernandez, and Rodney Barreto exercised common stock purchase warrants and were issued common stock shares by Progressive Care (the "RXMD Warrants"). The Company exercised common stock purchase warrants on a cashless basis and was issued 402,269 common stock shares. The Company also exercised common stock purchase warrants on a cash basis and paid consideration in the amount of $506,000 and was issued 230,000 common stock shares. Mr. Fernandez exercised common stock purchase warrants on a cashless basis and was issued 211,470 common stock shares. Mr. Barreto exercised common stock purchase warrants on a cashless basis and was issued 130,571 common stock shares. After the exercise of the RXMD Warrants, NextPlat and Messrs. Fernandez and Barreto collectively owned approximately 53% of Progressive Care’s voting common stock.

Also, on* July 1, 2023,*NextPlat and Messrs. Fernandez and Barreto, entered into a voting agreement whereby at any annual or special shareholders meeting of Progressive Care’s stockholders, and whenever the holders of Progressive Care’s common stock act by written consent, Messrs. Fernandez and Barreto agreed to vote all of the shares of Progressive Care common stock (including any new shares acquired after the date of the voting agreement or acquired through the conversion of securities convertible into Progressive Care common stock) that they own, directly or indirectly, in the same manner that NextPlat votes its shares of Progressive Care common stock. The voting agreement is irrevocable and perpetual in term.

Next Borough Capital Fund, LP. On* July 7, 2023,the Company entered into an unsecured promissory note agreement with Next Borough Capital Management, LLC (“the Borrower”), whereby the Company loaned $250,000 to the Borrower. The note bears interest at an annual rate of 7%. The outstanding principal balance of the note plus all accrued unpaid interest is due and payable on July 7, 2024,the Maturity Date. Each of the Company, Charles M. Fernandez, Robert D. Keyser, Jr., eAperion Partners, LLC and a revocable trust of Rodney Barreto are members of the Borrower. The balance outstanding on the note as of March 31, 2024* and* December 31, 2023* was approximately $260,000 and $256,000, respectively. The note is recorded in Notes Receivable Due From Related Party on the Balance Sheets.

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Note17. Commitments and Contingencies

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 wasnot* for cause and that he is owed compensation payable under his* June 2, 2021employment agreement. The Company’s position is that Mr. Seifert isnot* owed any additional compensation relating to his prior service with the Company or arising under any employment agreement. The Company and Mr. Seifert are currently engaged in litigation over the matter of his employment and termination. The Company believes it has adequate defenses to Mr. Seifert’s claims and has asserted affirmative claims for relief against Mr. Seifert including, butnot limited to, breach of the employment agreement, breach of his fiduciary duties, fraud in the inducement in connection with the employment agreement, fraudulent misrepresentation, and constructive fraud. A detailed recitation of the Company’s factual allegations supporting these claims can be found in the Company’s Second Amended Complaint, filed* June 21, 2022.The Company doesnot* expect to seek substantial monetary relief in the litigation. This dispute is pending before the District Court for the Southern District of Florida under CaseNo. 1:21-cv-22436-DPG.

On* July 5, 2022,Mr. Seifert moved to dismiss NextPlat’s Second Amended Complaint, and filed a Counterclaim against the Company and its Chief Executive Officer, Charles M. Fernandez. In his Counterclaim, Mr. Seifert seeks legal remedies in connection with the Company’s June 22, 2021,*termination of his employment. Mr. Seifert also claims Retaliatory Discharge under Florida’s Private Whistleblower Act, Defamation, and Negligent Misrepresentation.

A jury trial is set to occur during the trial court'stwo-week trial calendar, starting* August 21, 2024.*

From time to time, the Company* maybecome involved in litigation relating to claims arising out of our operations in the normal course of business. The Company isnot* 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.

Note18. Leases

The Company has entered into a number of lease arrangements under which the Company is the lessee. These leases are classified as operating leases. In addition, the Company has elected the short-term lease practical expedient in ASC Topic842 related to real estate leases with terms ofone year. The following is a summary of the Company’s lease arrangements.

Finance Lease Agreements

In* May 2018,Progressive Care entered into a finance lease obligation to purchase pharmacy equipment with a cost of approximately $115,000. The terms of the lease agreement require monthly payments of $1,678 plus applicable tax over 84 months ending March 2025*including interest at the rate of 6%.

Operating Lease Agreements

Right of use ("ROU") assets for operating leases are periodically reduced by impairment losses. We use the long-lived assets impairment guidance in ASC Subtopic360-10, 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* March 31, 2024* and* December 31, 2023*, we have recognized impairment losses for ROU assets of approximately $132,000 and $0, respectively.

We monitor for events or changes in circumstances that require a reassessment ofone of our leases. When a reassessment results in the re-measurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in profit or loss.

On* December 2, 2021,Nextplat entered into a 62-month lease for 4,141 square feet of office space in Florida ("Florida lease"), 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.The Florida lease doesnot* 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.

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 1.24 GBP: USD. The Poole lease was renewed on* October 6, 2022,and expired October 31, 2023*and renewed for an additional twelve months.

Progressive Care entered into a lease agreement for its Orlando pharmacy in* August 2020.The term of the lease is 66 months with a termination date of February 2026.The lease agreement calls for monthly payments that began in February 2021,*of $4,310, with an escalating payment schedule each year thereafter.

Progressive Care leases its North Miami Beach pharmacy location under an operating lease agreement with a lease commencement date in* September 2021.The term of the lease is 60 months with a termination date in August 2026.*The lease calls for monthly payments of $5,237, with an escalating payment schedule each year thereafter.

Progressive Care also leases its Palm Beach County pharmacy locations under operating lease agreements expiring in* February 2025.*

Note19. Reportable Segments

The Company hastwo reportable segments: (i) e-Commerce Operations, which involves acquiring and leasing, primarily an e-commerce platform to collaborate with businesses to optimize their ability to sell their goods online, domestically, and internationally, and enabling customers and partners to optimize their e-commerce presence and revenue, and other related businesses and (ii) Healthcare Operations, which provides TPA, data management, COVID-19 related diagnostics and vaccinations, prescription pharmaceuticals, compounded medications, telepharmacy services, anti-retroviral medications, medication therapy management, the supply of prescription medications to long-term care facilities, medication adherence packaging, contracted pharmacy services for340B covered entities under the340B Drug Discount Pricing Program, and health practice risk management.

The Company evaluates the performance of each of the segments based on profit or loss after general and administrative expenses. While the Company believes there are synergies between thetwo business segments, the segments are managed separately because each requires different business strategies.

The following tables present a summary of the reportable segments (in thousands):

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Note20. Concentrations

e-Commerce operations concentrations:

Customers:

Sales to customers through Amazon accounted for 39.9% and 57.2% of the Company’s revenues during thethree months ended* March 31, 2024and2023*, respectively.No other customer accounted for10% or more of the Company’s revenues for either period.

Suppliers:

The following table sets forth information as to each supplier that accounted for10% or more of the Company’s purchases for thethree months ended* March 31, 2024and2023* (in thousands, unaudited).

Geographic:

The following table sets forth revenue as to each geographic location, for the (in thousands, unaudited):

Healthcare operations concentrations:

Suppliers:

Progressive Care had significant concentrations withone vendor. The purchases from this significant vendor were 98% of total vendor purchases for thethree months ended* March 31, 2024*.

Customers:

Progressive Care s trade receivables are primarily from prescription medications billed to various insurance providers. Ultimately, the insured is responsible for payment should the insurance companynot reimburse Progressive Care.

Progressive Care derives a significant portion of sales from prescription drug sales reimbursed through prescription drug plans administered by pharmacy benefit managers (“PBM”) companies. Prescription reimbursements from ourthree most significant PBMs were as follows:

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Note21. Subsequent Events

Acquisition of Outfitter Satellite

On* March 25, 2024,*the Company entered into a Stock Purchase Agreement with James T. McKinley (“Seller”), pursuant to which the Company agreed to purchase all of the issued and outstanding shares of common stock of Outfitter Satellite, Inc. (“Outfitter”) in an all-cash transaction for an aggregate purchase price of $760,000.00, subject to certain adjustments (the “Aggregate Consideration”).

The closing of the transaction occurred on* April 1, 2024*

At the closing, $660,000.00 of the Aggregate Consideration was paid to Mr. McKinley with the remaining $100,000.00 to be paid upon delivery of Outfitter’s audited financial statements for the2022 and2023 fiscal years.

Outfitter provides consumers, commercial and government customers, with advanced satellite-based connectivity solutions from leading brands, including Iridium, Inmarsat and Globalstar.

RXMD Merger

On* April 12, 2024,*the Company entered into a Merger Agreement and Plan of Reorganization (the “Merger Agreement”) with Progressive Care, and Progressive Care LLC, a Nevada limited liability company and a direct, wholly owned subsidiary of the Company (“Merger Sub”). Pursuant to the terms of the Merger Agreement, The Company, Progressive Care and Merger Sub will enter into a business combination transaction pursuant to which Progressive Care will merge with and into Merger Sub (the “Merger”), with Merger Sub being the surviving entity of the Merger.

On* April 9, 2024,Progressive Care entered into lock-up agreements with each of its directors and executive officers: Pamela Roberts, Jervis Bennet Hough, Pedro Rodriguez, Joseph Ziegler, Anthony Armas, and Elizabeth Alcaine (the “Company Lock-Up Agreements”). Additionally, separate lock-up agreements were established between Progressive Care and the following directors and executive officers of NextPlat: David Phipps, Douglas Ellenoff, Robert Bedwell, Hector Delgado, Kendall Carpenter, Louis Cusimano, John E. Miller, and Maria Cristina Fernandez (the “Parent Lock-Up Agreements”). Notably, individuals serving roles in both the Progressive Care and NextPlat, such as Charles M. Fernandez, Cecile Munnik, and Rodney Barreto, were covered by a single lock-up agreement with Progressive Care relating to each of their shares in both Progressive Care and NextPlat (the “Hybrid Lock-Up Agreements”, together with the Company Lock-Up Agreements and Parent Lock-Up Agreements, the "Lock-Up Agreements"). All Lock-Up Agreements prohibit the aforementioned stockholders from selling, transferring, acquiring or purchasing any of the securities of either Progressive Care or NextPlat during the period between the signing of the Merger Agreement and the closing of the Merger. Notwithstanding the Lock-Up Agreements, the directors of Progressive Care will continue to receive any shares of Progressive Care Common Stock payable to such director as compensation pursuant to the terms of his or her director services agreement. There areno* family relationships between Maria Cristina Fernandez and Charles M. Fernandez.