NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial statements and do not include all the information and footnotes required
by accounting principles generally accepted in the United States for complete financial statements. The information furnished reflects
all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial
statements not misleading. The unaudited financial statements for the three and nine months ending September 30, 2022, are not necessarily
indicative of the results for the remainder of the fiscal year. The consolidated financial statements as of December 31, 2021, have been
audited by an independent registered public accounting firm. The accounting policies and procedures employed in the preparation of these
condensed consolidated financial statements have been derived from the audited financial statements of the “Company” for
the year ended December 31, 2021, which are contained in the Company’s annual report on Form 10-K as filed with the Securities
and Exchange Commission (the “SEC”) on March 31, 2022. The consolidated balance sheet as of December 31, 2021 was derived
from those financial statements.
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, Global Telesat Communications Ltd and NextPlat B.V. All material intercompany balances and transactions have been
eliminated in consolidation.
.
Description
of Business
Overview
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 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.
Online
Storefronts and E-Commerce Platforms
We
operate two e-commerce websites offering a range of MSS products and solutions through our subsidiaries, Orbital Satcom, which targets
customers in North and South America, and GTC which targets customers in the UK, EU, Middle East, Asia and rest of the world. These websites
produce sales and attract enquiries from customers and potential customers from all around the world. Over the long term, we plan to
develop additional country-specific websites to target customers in South America, Asia and Europe where we anticipate there will be
substantial further demand for our products.
In
addition to our two main e-commerce websites, we make portable satellite voice, data and tracking solutions easier to find and buy online
through our various third-party e-commerce storefronts such as Alibaba, Amazon and Walmart. We currently operate 25 storefronts across
various countries in 5 continents. We have invested in personnel to translate our listings correctly in the different countries we are
represented in and intend to regularly improve and increase our listings on all e-commerce sites. We currently have more than 9,000 product
listings on all third-party sites and invest significantly in inventory to hold at Amazon’s various fulfillment centers around
the world to ensure that orders are shipped to customers as quickly as possible. The products include handheld satellite phones, personal
and asset tracking devices, portable high-speed broadband terminals, and satellite Wi-Fi hotspots. Our Amazon Marketplaces represented
approximately 52.3%
and 64.0%
of the Company’s revenues during the nine months ended September 30, 2022 and 2021, respectively. For the years ended December
31, 2021 and 2020, Amazon online marketplaces represented approximately 63.6%
and 73.3%
of total sales, respectively. We anticipate that these marketplaces will continue to represent a significant portion of our sales for
the foreseeable future. Our e-commerce storefronts enable us to attract a significantly diversified level of sales from all over the
world, ensuring we are not overly reliant on any single market or sector for our sales revenue. Furthermore, many products we sell require
subscription-based services which allow us to increase our recurring revenue airtime sales.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Communications
Services
Through
our Global Telesat Communications Ltd and Orbital Satcom Corp business units, we provide Mobile Satellite Services (“MSS”)
solutions to fulfill the growing global demand for satellite-enabled voice, data, personnel and asset tracking, Machine-to-Machine (M2M)
and Internet of Things (IoT) connectivity services. We provide these solutions for businesses, governments, military, humanitarian organizations,
and individual users, enabling them to communicate, connect to the internet, track and monitor remote assets and lone workers, or request
SOS assistance via satellite from almost anywhere in the world, even in the most remote and hostile of environments.
We
provide voice, data communications, IoT and M2M services via Geostationary and Low Earth Orbit (“LEO”) satellite constellations
and offer reliable connectivity in areas where terrestrial wireless or wireline networks do not exist or are limited, including remote
land areas, open ocean, airways, the polar regions and regions where terrestrial networks are not operational, for example due to political
conflicts and natural or man-made disasters.
We
have expertise and long-term experience in providing tracking and monitoring services via satellite, specifically through the Globalstar
Low Earth Orbit satellite network. We own unique network infrastructure devices, known as appliqués, which are located in various
Globalstar ground stations around the world and provide the signal receipt and processing technology that enables and powers the Globalstar
simplex data service. Our ownership of these appliqués provides us with competitive access to the global simplex data service
which addresses the market demand for a small and cost-effective solution for sending data, such as geographic coordinates, from assets
or individuals in remote locations to a central monitoring station and is used in numerous applications such as tracking vehicles, asset
shipments, livestock, and monitoring unattended remote assets. In addition, we also provide tracking and monitoring solutions using Automatic
Identification System (AIS), 2G-5G, Push-to-Talk and two-way radio technology.
We
generate revenue from both the provision of services and the sale of equipment. Higher margin recurring service revenue from the sale
of monthly, annual, and prepaid airtime or messaging plans has historically represented an increasing proportion of our revenue, and
we expect that trend to continue as we introduce new products requiring associated airtime or messaging plans.
We
provide our products and services directly to end users and reseller networks located both in the United States and internationally through
our subsidiaries, U.S. based Orbital Satcom Corp (“Orbital Satcom”) and U.K. based Global Telesat Communications Limited
(“GTC”). We have a physical presence in the United States and the United Kingdom, as well as an ecommerce storefront presence
in 16 countries across 5 continents. We have a diverse geographical customer base having provided solutions to more than 50,000 customers
located in more than 165 countries across most every continent in the world.
MSS
Products
Our
MSS products rely on satellite networks for voice, data and tracking connectivity and thus are not reliant on cell towers or other local
infrastructure. As a result, our MSS solutions are suitable for recreational travelers and adventurers, government and military users,
and corporations and individuals wishing to communicate or connect to the internet from remote locations, or in the event of an emergency
such as a power outage, following a hurricane or other natural disaster during which regular cell phone, telephone and internet service
may not be available.
Our
satellite communications products enable users to make voice calls, send and receive text messages and emails, and transmit GPS location
coordinates from virtually anywhere on the planet, no matter how remote the location and regardless of the availability of local communication
infrastructure. Our range of satellite data products allow users around the world to connect to the internet, stream live video, and
communicate via voice and data applications.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
We
are a provider of GPS enabled emergency locator distress beacons that can save lives, on land and at sea. Our distress beacons enable
essential communication between our customers and search and rescue organizations during emergency situations and pinpoint locational
information to Search and Rescue services, essential during an emergency.
We
provide a wide range of satellite tracking devices used to monitor the location, movements, and history of almost anything that moves.
We specialize in offering satellite tracking services through the Globalstar satellite network and have supplied tens of thousands of
tracking devices which are used around the world to locate lone workers, track shipping containers, livestock, vehicles, and vessels
along with many other types of assets.
The
first product launched by the Company, SolarTrack, is a compact, lightweight, IoT tracking device powered by the sun and operating on
one of the most modern satellite networks in the world. It is designed for tracking and monitoring anything that moves, or any remote
asset used outdoors, almost anywhere in the world and we anticipate strong demand from customers looking for a low cost, low maintenance
tracking device to monitor remote assets.
Mapping
and Tracking Portal
Our
advanced subscription-based mapping and tracking portal, GTCTrack, is available for use by registered customers who pay a monthly fee
to access it. This mapping portal provides a universal and hardware-agnostic, cloud-based data visualization and management platform
that allows managers to track, command, and control assets in near-real-time. Asset location reports including position, speed, altitude,
heading and past location and movement history reports for a wide range of tracking devices and other products sold by us are available
through GTCTrack.
Organizational
History
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.
A
wholly owned subsidiary, Orbital Satcom Corp. (“Orbital Satcom”), 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.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 subsequently approved a 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
January 18, 2022, the Company filed a Certificate of Amendment of the Amended and Restated Articles of Incorporation of the Company with
the Secretary of State of the State of Nevada in order to change the Company’s corporate name from Orbsat Corp to NextPlat Corp.
This name change was effective as of January 21, 2022. The name change was approved by the Company’s stockholders at the 2021 annual
meeting of stockholders held on December 16, 2021.
On
June 22, 2022, the Company formed NextPlat B.V., a Netherlands limited liability company, as a wholly-owned subsidiary. At present, NextPlat
B.V., has no 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 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 100,000 votes per share. Likewise,
each share of Series B Preferred Stock is convertible into 100,000 shares of Progressive 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
$2.79 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. 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 $0.02
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 21,000,000 shares of its common stock to the purchasers of the Note, of which NextPlat,
Charles Fernandez and Rodney Barreto, received 9,130,435, 3,652,174, and 3,652,174 shares, respectively.
All
information presented in this Quarterly Report on Form 10-Q other than in Company’s consolidated financial statements and the
notes thereto assumes a 1-for-5 reverse stock split of Company’s outstanding shares of common stock effective May 28, 2021 and
unless otherwise indicated, all such amounts and corresponding conversion price or exercise price data set forth in this Quarterly
Report on Form 10-Q have been adjusted to give effect to such assumed reverse stock split.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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, derivative liabilities and common stock issued for services.
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 account at this institution is insured
by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000.
All cash amounts in excess of $250,000,
($11,884,437 at September 30, 2022), are
unsecured. 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.
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 September 30, 2022, and December 31, 2021, there were no allowances
for doubtful accounts.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 amounted to $109,765 and $146,935, at September 30, 2022 and December 31, 2021, respectively. Prepaid expenses include prepayments
in cash for rent, insurance and software license fees which are being amortized over the terms of the respective agreement. 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 condensed 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 condensed 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 investees as of September 30, 2022 and determined that the
Company’s proportionate economic interest in the investees 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, GTCL, 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 three and nine months ended September 30, 2022, closing rate at 1.1150 US$: GBP, quarterly
average rate at 1.176596 US$: GBP and yearly average rate at 1.258384444 US$: GBP, for the three and nine months ended September 30,
2021 closing rate at 1.342642 US$: GBP, quarterly average rate at 1.3784972 US$: GBP and yearly average rate at 1.3853499 US$: GBP, for
the year ended 2021 closing rate at 1.353372 US$: GBP, yearly average rate at 1.375083 US$: GBP.
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.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 is shown separately in the unaudited condensed consolidated balance sheets as current liabilities. At September 30, 2022
and December 31, 2021, we had contract liabilities of approximately $35,009 and $36,765, respectively.
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.
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.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Property
and equipment
Property
and equipment are carried at historical cost less accumulated depreciation. Depreciation is based on the estimated service lives of the
depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets
are capitalized. Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they
are removed from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and
related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance
are expensed as incurred. Leasehold improvements have an estimated service life of the term of the respective lease.
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 |
Leasehold improvements | |
5 |
Appliques | |
10 |
Website development | |
2 |
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 periods
ended September 30, 2022 and September 30, 2021, respectively.
Accounting
for Derivative 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 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, and accrued
expenses approximate their estimated fair market value based on the short-term maturity of the instruments.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
The
Company records stock-based payments made to non-employees in accordance with Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock
Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which aligns accounting for share-based
payments issued to non-employees to that of employees under the existing guidance of Topic 718, with certain exceptions.
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.
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.
At
September 30, 2022 and December 31, 2021, the Company had aggregated current and long-term operating lease liabilities of $863,294
and $19,763,
respectively, and right of use assets of $865,115
and $22,643,
respectively.
The
Company continues to account for leases in the prior period financial statements under ASC Topic 840.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 nine months ended September 30, 2022 and the
September 30, 2021, there were no expenditures on research and development.
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
| |
| | |
| |
| |
September 30, 2022 | | |
September 30, 2021 | |
| |
| | |
| |
Stock Options | |
| 1,149,701 | | |
| 854,892 | |
Stock Warrants | |
| 2,530,092 | | |
| 2,530,092 | |
Total | |
| 3,679,793 | | |
| 3,384,984 | |
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 12).
Recent
Accounting Pronouncements
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 is currently evaluating the impact that this standard will have on its consolidated financial statements.
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.
Other
accounting standards 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. The Company does not discuss recent pronouncements that are
not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
2 - INVENTORY
At
September 30, 2022 and December 31, 2021, inventories consisted of the following:
SCHEDULE OF INVENTORIES
| |
| | |
| |
| |
September 30, 2022 | | |
December 31, 2021 | |
Finished goods | |
$ | 1,138,290 | | |
$ | 1,019,696 | |
Less reserve for obsolete inventory | |
| - | | |
| - | |
Total | |
$ | 1,138,290 | | |
$ | 1,019,696 | |
For
the nine months ended September 30, 2022 and the year ended December 31, 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 nine months ended September 30, 2022 and the year ended December 31, 2021, the Company recorded
a receivable in the amount of $355,118 and $491,417, respectively, for amounts available to reclaim against the tax liability from UK
and EU countries.
NOTE
4 – PREPAID EXPENSES
Prepaid
expenses amounted to $109,765 and $146,935, at September 30, 2022 and December 31, 2021, respectively. Prepaid expenses include prepayments
in cash for rent, insurance and software license fees which are being amortized over the terms of the respective agreement. The current
portion consists of costs paid for future services which will occur within a year.
NOTE
5 – PROPERTY AND EQUIPMENT
At
September 30, 2022 and December 31, 2021, property and equipment, net of fully depreciated assets, consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
| |
| | |
| |
| |
September 30, 2022 | | |
December 31, 2021 | |
Office furniture and fixtures | |
$ | 94,644 | | |
$ | 16,969 | |
Computer equipment | |
| 72,374 | | |
| 67,458 | |
Rental equipment | |
| 43,909 | | |
| 53,296 | |
Leasehold improvements | |
| 39,693 | | |
| - | |
Appliques | |
| 2,160,096 | | |
| 2,160,096 | |
Website development | |
| 578,343 | | |
| 247,541 | |
| |
| | | |
| | |
Less accumulated depreciation | |
| (1,802,960 | ) | |
| (1,502,501 | ) |
| |
| | | |
| | |
Total | |
$ | 1,186,099 | | |
$ | 1,042,859 | |
Depreciation
expense was $329,272 and $206,654 for the nine months ended September 30, 2022 and 2021, respectively. For the year ended December 31,
2021, depreciation expense was $292,102.
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.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
6 – INTANGIBLE ASSETS (continued)
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 nine months ended September 30, 2022 and 2021, the Company
amortized $18,750 and $18,750, respectively. Future amortization of intangible assets is as follows:
SCHEDULE OF FUTURE AMORTIZATION OF INTANGIBLE ASSETS
| |
| | |
2022 | |
$ | 6,250 | |
2023 | |
| 25,000 | |
2024 | |
| 25,000 | |
Total | |
$ | 56,250 | |
For
the nine months ended September 30, 2022 and 2021, there were no additional expenditures on research and development.
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 100,000 Progressive votes per share, and each share of
Series B Preferred Stock will be convertible into 100,000 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 9,130,435 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 $0.02 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 33.28%. The board seats, combined with the Company’s ownership interest of 33.28% 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 September 30, 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 $11.7 million at September 30, 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 condensed consolidated balance sheets as “Equity method investment”. The Company reported its aggregate earnings
from its investment as one line item on the condensed consolidated statement of operations as “Equity in net loss of affiliate”.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
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 condensed 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 income from Progressive Care, Inc. and Subsidiaries | |
| (3,453,172 | ) |
Depreciation
expense due to cost basis difference (1) | |
| (8,258 | ) |
Interest
earned from convertible note receivable | |
| 5,056 | |
Interest
earned from amortization of premium on convertible note receivable | |
| 3,621 | |
Elimination
of intercompany interest earned | |
| (1,683 | ) |
September
30, 2022, carrying amount | |
| 3,545,564 | |
Equity
method investment – short term | |
| (5,056 | ) |
Equity
method investment – long term | |
$ | 3,540,508 | |
The
following summarizes the Company’s condensed consolidated statements of operations and comprehensive loss description equity in
net loss of affiliate for the three and nine months ended September 30, 2022 as follows:
| |
For
the Three and Nine Months Ended
September
30, 2022 | |
Equity
in net loss of affiliate | |
$ | (3,453,172 | ) |
| |
| | |
Depreciation
expense due to cost basis difference (1) | |
| (8,258 | ) |
Interest
earned from convertible note receivable | |
| 5,056 | |
Interest
earned from amortization of premium on convertible note receivable | |
| 3,621 | |
Elimination
of intercompany interest earned | |
| (1,683 | ) |
Equity
in net loss of affiliate | |
$ | (3,454,436 | ) |
| (1) | NextPlat
records depreciation expense on its estimated cost basis difference which is subject to change |
The
Company did not have any equity in net loss of affiliate for the three and nine months ended September 30, 2021.
NOTE
8 - ACCOUNTS PAYABLE AND ACCRUED OTHER LIABILITIES
Accounts
payable and accrued other liabilities consisted of the following:
SCHEDULE OF ACCOUNTS PAYABLE AND ACCRUED OTHER LIABILITIES
| |
| | |
| |
| |
September 30, 2022 | | |
December 31, 2021 | |
Accounts payable | |
$ | 867,458 | | |
$ | 846,380 | |
Rental deposits | |
| 4,181 | | |
| 2,030 | |
Customer deposits payable | |
| 58,182 | | |
| 59,733 | |
Accrued wages & payroll liabilities | |
| 22,930 | | |
| 20,107 | |
VAT liability & sales tax payable | |
| 30,644 | | |
| 6,203 | |
Pre-merger accrued other liabilities | |
| 88,448 | | |
| 88,448 | |
Accrued interest | |
| 314 | | |
| 138 | |
Accrued other liabilities | |
| 14,887 | | |
| 40,305 | |
Total | |
$ | 1,087,044 | | |
$ | 1,063,344 | |
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
9 - CORONAVIRUS LOANS
On
April 20, 2020, the Board of Directors the Company (the “Board”), 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 are 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, 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 September 30, 2022, and December 31, 2021,
the Company has recorded $55,750 and $56,391 as current portion of notes payable and $157,958 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.
NOTE
10 - STOCKHOLDERS’ EQUITY
Capital
Structure
On
March 28, 2014, in connection with the Reincorporation (see Note 1), all share and per share values for all periods presented in the
accompanying condensed consolidated financial statements are retroactively restated for the effect of the Reincorporation.
On
March 5, 2016, the Company shareholders voted in favor of an amendment to its Articles of Incorporation to increase the total number
of shares of authorized capital stock to 800,000,000 shares consisting of (i) 750,000,000 shares of common stock and (ii) 50,000,000
shares of preferred stock from 220,000,000 shares consisting of (i) 200,000,000 shares of common stock and (ii) 20,000,000 shares of
preferred stock.
Effective
March 8, 2018, we conducted a reverse split of our common stock at a ratio of 1 for 150. All share and per share information in the accompanying
condensed consolidated financial statements and footnotes has been retroactively restated to reflect the reverse split.
On
July 24, 2019, the Company filed a Certificate of Change (the “Certificate of Change”) with the Nevada Secretary of State.
The Certificate of Change provides for (i) a 1-for-15 reverse split (the “Reverse Split”) of the Company’s common stock,
$0.0001 par value per share, and the Company’s preferred stock, $0.0001 par value per share, (ii) a reduction in the number of
authorized shares of common stock in direct proportion to the Reverse Split (i.e. from 750,000,000 shares to 50,000,000 shares), and
(iii) a reduction in the number of authorized shares of preferred stock in direct proportion to the Reverse Split (i.e. from 50,000,000
shares to 3,333,333 shares). No fractional shares will be issued in connection with the Reverse Split. Stockholders who otherwise would
be entitled to receive fractional shares of common stock or preferred stock, as the case may be, will have the number of post-Reverse
Split shares to which they are entitled rounded up to the nearest whole number of shares. No stockholders will receive cash in lieu of
fractional shares. The Reverse Split was approved by FINRA on August 19, 2019.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
10 - STOCKHOLDERS’ EQUITY (continued)
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 will be adjusted accordingly. All information presented in this Quarterly Report on Form 10-Q,
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 in this Quarterly Report on Form 10-Q 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.
The
authorized capital of the Company consists of 50,000,000 shares of common stock, par value $0.0001 per share and 3,333,333 shares of
preferred stock, par value $0.0001 per share. As of September 30, 2022, and December 31, 2021, there were 9,649,096 and 7,053,146
shares of common stock and 0 shares of preferred stock issued and outstanding, respectively.
Preferred
Stock
As
of September 30, 2022, there were 3,333,333 shares of Preferred Stock authorized.
As
of September 30, 2022, there were no shares of Series A, B, C, D, E, F, G, H, I, J, K and L convertible preferred stock authorized, and
no shares issued and outstanding.
Warrants
As
of September 30, 2022, there were 3,312,000 registered warrants to purchase common stock authorized of which 2,386,092 registered warrants
were issued and outstanding, at an exercise price of $5.00 and unregistered underwriter warrants of 144,000 issued and outstanding, at
an exercise price of $5.50. The warrants expire in June of 2026.
A
summary of the status of the Company’s total outstanding warrants and changes during the year ended December 31, 2021 and the nine
months ended September 30, 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 | | |
| 5.00 | | |
| - | |
Exercised | |
| (925,908 | ) | |
| 5.00 | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | |
Cancelled | |
| (800 | ) | |
| 300.00 | | |
| - | |
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 | |
| - | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | |
Forfeited | |
| - | | |
| - | | |
| - | |
Cancelled | |
| - | | |
| - | | |
| - | |
Balance outstanding and exercisable at September 30, 2022 | |
| 2,530,092 | | |
$ | 5.00 | | |
| 3.67 | |
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
10 - STOCKHOLDERS’ EQUITY (continued)
Common
Stock
As
of September 30, 2022, there were 50,000,000 shares of common stock authorized and 9,649,096 shares issued and outstanding.
January
2022 Private Placement of Common Stock
On
December 31, 2021, after markets closed, a securities purchase agreement (the “Purchase Agreement”) was circulated to, and
signatures were received from, certain institutional and accredited investors (the “December Investors”) in connection with
the sale in a private placement by the Company of 2,229,950 shares of the Company’s common stock (the “December Offering”).
On January 2, 2022, the Company delivered to December Investors a fully executed Purchase Agreement, which was dated December 31, 2021.
The purchase price for the common stock sold in the December Offering was $3.24 per share, the closing transaction price reported by
Nasdaq on December 31, 2021.
The
closing of the December Offering occurred on January 5, 2022. The Company received gross proceeds from the sale of the common stock in
the December Offering of approximately $7.2 million. The Company intends to use the proceeds from
the December Offering for general corporate purposes, including potential acquisitions and joint ventures. Approximately 73% of
funds raised in the December Offering were secured from existing shareholders and from the members of the Company’s senior management
and Board of Directors.
In
connection with the December Offering, the Company entered into a registration rights agreement with the December Investors (the “Registration
Rights Agreement”), pursuant to which, among other things, the Company agreed to prepare and file with the SEC a registration statement
to register for resale the shares of the Company’s common stock sold in the Offering.
The
shares of common stock offered and sold in the December Offering were sold in reliance on the exemption from registration provided by
Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated under the Securities Act and corresponding provisions
of state securities or “blue sky” laws.
The
terms of the transaction disclosed above, including the provisions of the Purchase Agreement and Registration Rights Agreement, were
approved by the Board of Directors; and because some of the securities were offered and sold to officers and directors of the Company,
such terms were separately reviewed and approved by the Audit Committee of the Board of Directors.
On
January 5, 2022, the Company issued 2,229,950 shares of common stock pursuant to a private placement offering at a per share price of
$3.24, resulting in gross proceeds 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.
Restricted
Stock Awards
On
January 21, 2022, the Company issued 10,000
shares of common stock to Mr. Rodney Barreto, pursuant to a restricted stock award, “RSA,” granted on January 7, 2022
and effective on January 20, 2022. The award is for 20,000
restricted shares of common, which vest in two equal installments, the first on the effective date and the remaining on the one year
anniversary of the effective date, with a fair market value of $3.48
per share, on the date of issuance. All shares were fully vested and upon issuance resulted in stock-based compensation of $34,800.
Shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as
amended, as there was no general solicitation, and the transaction did not involve a public offering.
On
May 23, 2021, the Company entered a three (3) year Employment Agreement (the “May Agreement”) with Mr. Charles M. Fernandez
to serve as Chairman of the Board. However, two weeks later on June 2, 2021, the Company entered into a new employment agreement (the
“June Agreement”) with Mr. Fernandez, which superseded and replaced “the May Agreement.” The June Agreement has
an initial term of 5 years effective on May 28, 2021. Mr. Fernandez received the award of restricted stock with a grant date fair value
equal to $3,000,000 determined at the per unit offering price in the June Offering ($5 per Unit) (the “RSA”), which RSA will
vest 1/3 at each of the three anniversaries of the grant date. The Grant Date for the RSA is May 28, 2021, as determined pursuant to
the June Agreement. Notwithstanding the vesting schedule, full vesting will occur upon a Change in Control, as that term is defined in
the Restricted Stock Agreement pursuant to which the RSA was made (the “June Restricted Stock Agreement”). If Mr. Fernandez’s
employment is terminated for any reason at any time by the Company prior to the full vesting of the RSA without “Cause” (as
that term is defined in the June Agreement), the RSA will vest and Mr. Fernandez will receive all right, title and interest in the balance
of the securities granted to him in the RSA, in regard to the restricted stock award. The Company at its sole expense is obligated to
register for reoffer and resale by Mr. Fernandez the securities granted to him pursuant to the May Restricted Stock Agreement.
On
July 22, 2022, pursuant to Mr. Fernandez employment agreement, the “June Agreement”, see Note 13, the Company issued 200,000
restricted shares and recorded stock-based compensation in the amount of $805,246 to eAperion Partners LLC, of which Mr. Fernandez is
managing director. This amount is valued from the date of the award May 28, 2021 to September 30, 2022. The value of the award for the
year ended December 31, 2021 was $356,712 and for the nine months ended September 30, 2022, $448,534. The award is valued over the service
period of the June Agreement, five years from the date of grant, May 28, 2021. On June 2, 2022, 200,000 of the RSA or one third of the
award, became vested and issuable.
On
August 4, 2022, the Company issued 15,000 restricted shares to Andrew Cohen, pursuant to a restricted stock award which became fully
vested upon his resignation, see Note 13. The award resulted in stock based compensation of $76,950 and was valued as of the date of
the award on October 8, 2021.
On
September 20, 2022, the Company issued 116,000 restricted shares of common stock to eAperion Partners LLC, of which Charles M. Fernandez
is managing partner, pursuant to a restricted stock award, “RSA,” under the Company’s 2020 Equity Incentive Plan. The
shares were fully vested upon issuance. The shares were valued at the market close of issuance date of $2.52 per share, resulting in
stock-based compensation of $292,320.
On
September 28, 2022, the Company issued 20,000 restricted shares to Douglas Ellenoff, pursuant to such award as granted on August 24,
2021, using the fair market value as of date of the award of $5.37 per share, resulting in stock-based compensation of $107,400.
Also
on September 28, 2022, the Company issued 5,000 restricted shares to Paul Thomson, pursuant to such award as granted on August 24, 2021,
using the fair market value as of date of the award of $5.37 per share, resulting in stock-based compensation of $26,850.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
10 - STOCKHOLDERS’ EQUITY (continued)
Stock
Options
A
summary of the status of the Company’s outstanding stock options and changes during the nine months ended September 30, 2022 is
as follows:
SCHEDULE OF OUTSTANDING STOCK OPTIONS ACTIVITIES
| |
Number of Options | | |
Weighted
Average Exercise Price | | |
Weighted Average Remaining Contractual Life (Years) | |
Balance at January 1, 2021 | |
| 600,009 | | |
$ | 2.35 | | |
| 9.91 | |
Granted | |
| 400,000 | | |
| - | | |
| - | |
Exercised | |
| (19,200 | ) | |
| - | | |
| - | |
Forfeited | |
| (917 | ) | |
| - | | |
| - | |
Cancelled | |
| (50,000 | ) | |
| - | | |
| - | |
Balance outstanding and exercisable at December 31, 2021 | |
| 929,892 | | |
$ | 3.53 | | |
| 7.36 | |
| |
| | | |
| | | |
| | |
Balance at January 1, 2022 | |
| 929,892 | | |
$ | 3.53 | | |
| 7.36 | |
Granted | |
| 220,000 | | |
| - | | |
| - | |
Exercised | |
| - | | |
| - | | |
| - | |
Forfeited | |
| (191 | ) | |
| - | | |
| - | |
Cancelled | |
| - | | |
| - | | |
| - | |
Balance outstanding and exercisable at September 30, 2022 | |
| 1,149,701 | | |
$ | 3.59 | | |
| 6.45 | |
NOTE
11 - STOCK SUBSCRIPTION PAYABLE
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.
For
the nine months ended September 30, 2022 and for the year ended December 31, 2021, the Company had a stock subscription payable of $0
and $1,400,000, respectively. 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
12 - RELATED PARTY TRANSACTIONS
As
of September 30, 2022, total related party payments due as of September 30, 2022, and December 31, 2021, were $15,692 and $35,308, respectively.
The payments due were accrued salary. These related party payables were non-interest bearing.
The
Company’s UK subsidiary, GTC had an over-advance line of credit with HSBC, for working capital needs, which was not renewed by
the Company on December 31, 2021. The over-advance limit was £25,000 or $33,834 at an exchange rate of GBP:USD 1.353372, with interest
at 5.50% over Bank of England’s base rate or current rate of 6.25% variable. The advance was guaranteed by David Phipps, the Company’s
President and Chief Executive Officer of Global Operations. 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.
The
Company employs three individuals who are related to Mr. Phipps. These three individuals earned gross wages totaling $99,965 and $107,042
for the nine months ended September 30, 2022 and 2021, 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.
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 21,000,000
shares of its common stock to the purchasers of the Note, of which NextPlat, Charles Fernandez and Rodney Barreto, received 9,130,435, 3,652,174,
and 3,652,174
shares, respectively.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
13 - COMMITMENTS AND CONTINGENCIES
COVID-19
The
impact of the COVID-19 pandemic has rapidly evolved around the globe, causing disruption in the U.S. and global economies. Although the
global economy continued reopening in early 2022 and robust economic activity has supported a continued recovery, certain geographies,
most notably China, have experienced setbacks.
The
uncertainty surrounding the COVID-19 pandemic, including uncertainty regarding new variants of COVID-19 that have emerged and other factors
have and may continue to contribute to significant volatility in the global markets. While vaccine availability and uptake has increased,
the longer-term macro-economic effects on global supply chains, inflation, labor shortages and wage increases continue to impact many
industries. COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other
areas present uncertainty and risk with respect to our performance, financial condition, and results of operations.
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 the nine months ended September 30, 2022 and for the years ended December 31, 2021 and December 31, 2020, 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.
Appointment
of Director; Compensatory Arrangements of Director
On
September 13, 2022, the Board appointed Maria Cristina Fernandez as a new director to the Board. In addition, the Board approved a rotation
in the membership of the Company’s audit committee, compensation committee and nominating committee. The membership of each such
committee is now as follows:
|
● |
Audit Committee: Rodney Barreto (Committee Chair),
Cristina Fernandez, and Lou Cusimano |
|
● |
Compensation Committee: Hector Delgado (Committee Chair),
Lou Cusimano, and John Miller |
|
● |
Nominating Committee: Cristina Fernandez (Committee
Chair), Lou Cusimano and Rodney Barreto |
In
connection with Ms. Fernandez’s appointment to the Company’s Board of Directors, the Company entered into a Director Services
Agreement with Ms. Fernandez on September 28, 2022. The agreement has a two-year term (subject to the director’s nomination and
election) and provides for a cash retainer of $30,000 per year plus meeting fees of $3,000 for every Board meeting attended and $500
for each committee meeting attended (to the extent such committee meetings do not occur on the same day as a board meeting). The agreement
also contains customary confidentiality and indemnification provisions and require the Company to maintain a specified amount of director
and officer insurance. The Company also entered into a Stock Option Agreement with Ms. Fernandez on October 1, 2022, granting Ms. Fernandez
options to purchase 20,000 shares of the Company’s common stock, subject to the vesting and other conditions set forth in the Stock
Option Agreement. Under the vesting provisions in the Stock Option Agreement, the first half of the options were fully vested on day
one, with the remaining half vesting on the first anniversary of the grant date. The options granted under the Stock Option Agreement
were made outside of the Company’s existing equity incentive plans and were approved by the Company’s independent directors.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
13 - COMMITMENTS AND CONTINGENCIES (continued)
Employment
Agreements
2021
Phipps Employment Agreement
On
June 5, 2021, the Company entered into a three year employment agreement with Mr. Phipps that was effective as of June 2, 2021, (the
“2021 Phipps Employment Agreement”). Under the terms of the 2021 Phipps Employment Agreement, Mr. Phipps serves as the President of the Company and Chief Executive Officer of Global Operations. The term will be automatically extended for additional
one-year terms thereafter unless terminated by the Company or Mr. Phipps by written notice. Mr. Phipps’ annual base compensation
under the 2021 Phipps Employment Agreement is an aggregate of $350,000. The Company may increase (but not decrease) his compensation
during its term. In addition, Mr. Phipps is entitled to receive an annual cash bonus if the Company meets or exceeds criteria adopted
by the Compensation Committee of the Board of Directors (the “Compensation Committee”). Mr. Phipps is also entitled to participate
in any other executive compensation plans adopted by the Board of Directors, and is eligible for such grants of awards under stock option
or other equity incentive plans as the Compensation Committee may from time to time determine (the “Share Awards”). Share
Awards will be subject to the applicable Plan terms and conditions, provided, however, that Share Awards will be subject to any additional
terms and conditions as are provided in the granting documents or in any award certificate(s), which shall supersede any conflicting
provisions governing Share Awards provided under the equity incentive plan. The Company is required to pay or to reimburse Mr. Phipps
for all reasonable out-of-pocket expenses actually incurred or paid by Mr. Phipps in the course of his employment, consistent with the
Company’s policy. Mr. Phipps will be entitled to participate in such pension, profit sharing, group insurance, hospitalization,
and group health and benefit plans and all other benefits and plans, including perquisites, if any, as the Company provides to its senior
employees. The 2021 Phipps Employment Agreement may be terminated based on death or disability of Mr. Phipps, for cause or without good
reason, for cause or with good reason, and as a result of the change of control of the Company. The 2021 Phipps Employment Agreement
also contains certain provisions that are customary for agreements of this nature, including, without limitation, non-competition and
non-solicitation covenants, indemnification provisions, etc. On August 7, 2021, the 2021 Phipps Employment Agreement was amended in order
to, among other things, (i) increase Mr. Phipps’ compensation to include a car allowance of $1,000 a month and (ii) clarify Mr.
Phipps position to be President of NextPlat Corp and the Chief Executive Officer of Global Operations.
Fernandez
Employment Agreements
On
May 23, 2021, the Company entered into a three (3) year Employment Agreement (the “May Agreement”) with Mr. Charles M. Fernandez
to serve as Chairman of the Board.
However,
two weeks later on June 2, 2021, the Company entered into a new employment agreement (the “June Agreement”) with Mr. Fernandez,
which superseded and replaced “the May Agreement.” The June Agreement has an initial term of 5 years effective on May 28,
2021. Under the June Agreement, Mr. Fernandez will serve as the Chairman and Chief Executive Officer of the Company. The June Agreement
will be automatically extended for additional one-year terms unless terminated by the Company or Mr. Fernandez by written notice. Mr.
Fernandez’s annual base compensation under the June Agreement is $350,000 per year. The Company may increase (but not decrease)
his compensation during the June Agreement’s term. In addition, Mr. Fernandez is entitled to receive an annual cash bonus if the
Company meets or exceeds criteria adopted by the Compensation Committee. Mr. Fernandez is also entitled to participate in any other executive
compensation plans adopted by the Board and is eligible for such grants of Share Awards. Share Awards will be subject to the applicable
Plan terms and conditions, provided, however, that Share Awards will be subject to any additional terms and conditions as are provided
therein or in any award certificate(s), which will supersede any conflicting provisions governing Share Awards provided under the equity
incentive plan. The Company is required to pay or to reimburse Mr. Fernandez for all reasonable out-of-pocket expenses actually incurred
or paid by Mr. Fernandez in the course of his employment, consistent with the Company’s policy.
Mr.
Fernandez is entitled to participate in such pension, profit sharing, group insurance, hospitalization, and group health and benefit
plans and all other benefits and plans, including perquisites, if any, as the Company provides to its senior employees. The June Agreement
may be terminated based on death or disability of Mr. Fernandez, for cause or without good reason, for cause or with good reason, as
a result of the change of control of the Company and at the option of Mr. Fernandez with or without cause. The June Agreement also contains
certain provisions that are customary for agreements of this nature, including, without limitation, non-competition and non-solicitation
covenants, indemnification provisions, etc.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE
13 - COMMITMENTS AND CONTINGENCIES (continued)
The
Company will also reimburse Mr. Fernandez for any and all premium payments made by him to obtain and continue personal catastrophe and
disability insurance coverages for himself, which policy will have policy limits not to exceed one hundred percent (100%) of his base
salary per annum at any given time. In addition, the Company will pay for any and all travel-related expenses incurred by Mr. Fernandez
and/or his immediate family members, not to exceed $10,000 per fiscal year, regardless of whether or not such expenses are incurred by
Mr. Fernandez in connection with services or duties to be performed by him as an employee of the Company. The Company will also pay for
any and all fees and costs incurred by Mr. Fernandez in connection with professional services provided to him, not to exceed $10,000
per year, including, without limitation, services provided to the Company by attorneys, accountants, financial planners and the like,
regardless of whether or not such services are provided to Mr. Fernandez in connection with his employment with the Company.
In
addition, the June Agreement (which repeats, but not duplicates, a grant of restricted stock made under the May Agreement), Mr. Fernandez
received an award of restricted stock with a grant date fair value equal to $3,000,000 determined at the per unit offering price in the
June Offering ($5 per Unit) (the “RSA”), which RSA will vest 1/3 at each of the three anniversaries of the grant date. The
Grant Date for the RSA is May 28, 2021, as determined pursuant to the May Agreement. Notwithstanding the vesting schedule, full vesting
will occur upon a Change in Control, as that term is defined in the Restricted Stock Agreement pursuant to which the RSA was made (the
“May Restricted Stock Agreement”). The Company at its sole expense is obligated to register for reoffer and resale by Mr.
Fernandez the securities granted to him pursuant to the May Restricted Stock Agreement.
If
Mr. Fernandez’s employment is terminated for any reason at any time by the Company prior to the full vesting of the RSA without
“Cause” (as that term is defined in the June Agreement), the RSA will vest and Mr. Fernandez will receive all right, title
and interest in the balance of the securities granted to him in the RSA.
During
the term of the June Agreement and so long as Mr. Fernandez is employed by the Company, he may nominate two directors to the Company’s
Board of Directors. The appointment of these directors to the Board is subject to approval by the Board of Directors.
On
August 7, 2021, the June Agreement was amended in order to, among other things, increase Mr. Fernandez’s compensation by (i) providing
for medical plan coverage for Mr. Fernandez and his family at the expense of the Company, and (ii) providing for an auto allowance $1,000
per month.
Ellenoff
Employment Agreement
On
August 24, 2021, Douglas S. Ellenoff was appointed to the positions of Chief Business Development Strategist of the “Company”
and Vice Chairman of the Board of Directors of the Company. The appointment was made on the approval and recommendation of the Nominating
Committee of the Board. Mr. Ellenoff was not appointed to any committees of the Board.
In
connection with Mr. Ellenoff’s appointment to the position of Chief Business Development Strategist of the Company, Mr. Ellenoff
and the Company entered into a three year Employment Agreement, dated August 24, 2021 (the “Ellenoff Agreement”). Mr. Ellenoff
will be nominated and renominated to serve on the Board during the term of the agreement. Under the terms of the Ellenoff Agreement,
Mr. Ellenoff will receive, in lieu of cash compensation: (i) a restricted stock award of 100,000 shares of Common Stock of the Company,
40,000 were issued within 5 business days of the execution of the Ellenoff Employment Agreement and vest immediately, and the remaining
60,000 of which will be issued and vest at the rate of 20,000 shares at the end of each of the next three annual anniversaries of his
employment, provided that Mr. Ellenoff serves on the Board at any time during such year; and (ii) options to purchase a total of 1,500,000
shares of the Company’s Common Stock, 300,000 of which were within 5 business days of the execution of the Ellenoff Employment
Agreement and vested immediately, 150,000 of which will vest on each of the next three annual anniversaries of the commencement of his
employment, and the remaining 750,000 of which will vest at the rate of 250,000 per year on each of the first three anniversaries of
the commencement of his employment if during each such year Mr. Ellenoff introduces the Company to twelve (12) or more potential Business
Transactions (as defined in the Ellenoff Agreement and which transactions need not be consummated); provided that the Company’s
Chief Executive Officer may, in his sole discretion, waive the vesting requirement in any given year. Such options have an exercise price
of $5.35 per share and will terminate 5 years after they vest. These equity awards to Mr. Ellenoff were material to induce Mr. Ellenoff
to enter into the Ellenoff Agreement and were issued outside of a shareholder approved stock or option plan pursuant to the Nasdaq “inducement
grant” exception (Nasdaq Listing Rule 5635(c)(4)).
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE
13 - COMMITMENTS AND CONTINGENCIES (continued)
Carlise
Employment Agreement
On
June 22, 2021, the Company appointed Theresa Carlise as Controller, Treasurer and Secretary. In connection with Ms. Carlise’s appointment,
Ms. Carlise and the Company entered into an employment agreement (the “Carlise Agreement”) with an initial term of one year
The term of the Carlise Agreement will be automatically extended for additional one-year terms unless terminated by the Company or Ms.
Carlise by written notice. Ms. Carlise’s annual base compensation is $180,000. The Carlise Agreement provides for medical plan
coverage and an auto allowance. The Company may increase (but not decrease) her compensation during its term. In addition, Ms. Carlise
will be entitled to receive an annual cash bonus if the Company meets or exceeds criteria adopted by the Compensation Committee of the
Board of Directors. Ms. Carlise is also entitled to participate in any other executive compensation plans adopted by the Board of Directors
and is eligible for such grants of awards under stock option or other equity incentive plans as the Compensation Committee of the Company
may from time to time determine. The Company is required to pay or to reimburse Ms. Carlise for all reasonable out-of-pocket expenses
actually incurred or paid by Ms. Carlise in the course of her employment, consistent with the Company’s policy. Ms. Carlise shall
be entitled to participate in such pension, profit sharing, group insurance, hospitalization, and group health and benefit plans and
all other benefits and plans, including perquisites, if any, as the Company provides to its senior Employees. The Carlise Agreement may
be terminated based on death or disability of the executive, for cause or without good reason, for cause or with good reason, and as
a result of the change of control of the Company. The Carlise Agreement also contains certain provisions that are customary for agreements
of this nature, including, without limitation, non-competition and non-solicitation covenants, indemnification provisions, etc. On August
7, 2021, on the approval and recommendation of the Compensation Committee, the Company entered into the Carlise Agreement to, among other
things, change Ms. Carlise’s title to “Chief Accounting Officer, Secretary and Treasurer. On October 8, 2021, on the approval
and recommendation of the Compensation Committee, and following the subsequent approval of the Board, the Company entered into an amendment
to Carlise, the Company’s Chief Accounting Officer, Treasurer and Secretary, to extend the initial term of her employment agreement
from 1 year to 3 years (the “Carlise Amendment”).
Thomson
Employment Agreement
On
August 24, 2021, Paul R. Thomson was appointed to the position of Executive Vice President of the Company. Mr. Thomson’s appointment
as Executive Vice President was effective on August 24, 2021, the date of that certain Employment Agreement between Mr. Thomson and the
Company (the “Thomson Agreement”). The Thomson Agreement has an initial term of three (3) years and will be automatically
extended for additional 1-year term unless terminated by the Company or Mr. Thomson by written notice. Mr. Thomson’s annual base
compensation is $250,000. The Company may increase (but not decrease) his compensation during its term. In addition, Mr. Thomson will
be entitled to receive an annual cash bonus if the Company meets or exceeds criteria adopted by the Compensation Committee of the Board.
Mr. Thomson is also entitled to participate in any other executive compensation plans adopted by the Board and is eligible for such grants
of awards under stock option or other equity incentive plans as the Compensation Committee of the Company may from time to time determine
(the “Share Awards”).
In
connection with Mr. Thomson’s employment, and as a material inducement to enter into the Thomson Agreements, Mr. Thomson received
(i) immediately vested options to purchase 25,000 shares of Common Stock at a per share price of $5.35, and having a term of 5 years;
and (ii) a restricted stock grant of 25,000 shares of Common Stock, 10,000 of which vest immediately, and the remaining 15,000 of which
will vest at the rate of 5,000 shares at the end of each of the next three annual anniversaries of his employment. These equity awards
to Mr. Thomson were issued outside of a shareholder approved stock or option plan pursuant to the Nasdaq “inducement grant”
exception (Nasdaq Listing Rule 5635(c)(4)). On October 7, 2021, the Board of Directors of the Company (the “Board”) appointed
Paul R. Thomson, the Executive Vice President of the Company, to the additional position of Chief Financial Officer of the Company effective
October 9, 2021. As Chief Financial Officer, Mr. Thomson became the Company’s principal financial officer, effective October 9,
2021. On October 8, 2021, on the approval and recommendation of the Compensation Committee of the Board (the “Compensation Committee”),
and following subsequent approval of the Board, the Company entered into an amendment to the Company’s current employment agreement
with Mr. Thomson to reflect his new title of “Executive Vice President and Chief Financial Officer” effective October 9,
2021 (the “Thomson Amendment”).
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE
13 - COMMITMENTS AND CONTINGENCIES (continued)
Cohen
Employment Agreement
On
October 7, 2021, the Board appointed Andrew Cohen as Senior Vice President of Operations of the Company, effective October 8, 2021. In
connection with Mr. Cohen’s appointment, the Company entered into an employment agreement, dated October 8, 2021 (the “Cohen
Agreement”), that sets forth the terms of his employment.
The
Cohen Agreement has an initial term of three (3) years and will be automatically extended for additional 1-year terms unless terminated
by the Company or Mr. Cohen by written notice. Mr. Cohen’s annual base compensation is $250,000. The Company may increase (but
not decrease) his compensation during its term. In addition, Mr. Cohen will be entitled to receive an annual cash bonus if the Company
meets or exceeds criteria adopted by the Compensation Committee of the Board. Mr. Cohen is also entitled to participate in any other
executive compensation plans adopted by the Board and is eligible for such grants of awards under stock option or other equity incentive
plans as the Compensation Committee may from time to time determine. The Company is required to pay or to reimburse Mr. Cohen for all
reasonable out-of-pocket expenses actually incurred or paid by Mr. Cohen in the course of his employment, consistent with the Company’s
policy. Mr. Cohen will be entitled to participate in such pension, profit sharing, group insurance, hospitalization, and group health
and benefit plans and all other benefits and plans, including perquisites, if any, as the Company provides to its senior employees. The
Cohen Agreement may be terminated based on, among other things, the death or disability of Mr. Cohen, for cause, for good reason, and
as a result of the change of control of the Company. The Cohen Agreement also contains certain provisions that are customary for agreements
of this nature, including, without limitation, non-competition and non-solicitation covenants.
In
connection with Mr. Cohen’s employment, and as a material inducement to enter into the Cohen Agreement, Mr. Cohen received (i)
immediately vested options to purchase 25,000 shares of Common Stock at a per share price of $5.35, and having a term of 5 years; and
(ii) a restricted stock grant of 25,000 shares of Common Stock, 10,000 of which vest immediately, and the remaining 15,000 of which will
vest at the rate of 5,000 shares at the end of each of the next three annual anniversaries of his employment. These equity awards to
Mr. Cohen were issued outside of a shareholder approved stock or option plan pursuant to the Nasdaq “inducement grant” exception
(Nasdaq Listing Rule 5635(c)(4)).
On
May 2, 2022, the Company amended the Cohen Agreement, “Amendment No.1 Cohen”, as follows: Section 4(a) of the Agreement shall
be deleted and replaced to read as follows; the Corporation shall pay the Employee as compensation for his services hereunder, in monthly
installments during the Term, the sum of $125,000 (the “Annual Base Salary”), less such deductions as shall be required
to be withheld by applicable law and regulations, and monthly advances against the salary, if any. The Corporation shall review the Base
Salary on an annual basis and has the right, but not the obligation, to increase it, but such salary shall not be decreased during the
Term. In addition, Section 6(c) of the Agreement shall be deleted and replaced to read as follows: upon termination of the Employee’s
employment pursuant to Section 5(a)(v) or other than pursuant to Section 5(a)(i), 5(a)(ii), 5(a)(iii), 5(a)(iv), or 5(a)(vi) (i.e., without
“Cause”), in addition to the accrued but unpaid compensation and vacation pay through the end of the Term, or any then applicable
extension of the Term, and any other benefits accrued to him under any Benefit Plans outstanding at such time and the reimbursement of
documented, unreimbursed expenses incurred prior to such date, the Employee shall be entitled to the following severance benefits: (i)
a cash payment equal to $75,000, to be paid in a single lump sum payment not later than sixty (60) days following such termination, less
withholding of all applicable taxes; (ii) continued provision for a period of twelve (12) months after the date of termination of the
benefits under Benefits Plans extended from time to time by the Corporation to its senior Employees; and (iii) payment on a pro-rated
basis of any bonus or other payments earned in connection with any bonus plan to which the Employee was a participant as of the date
of the Employee’s termination of Employment. In addition, any options or restricted stock shall be immediately vested upon termination
of Employee’s employment pursuant to Section 5(a)(v) or by the Corporation without “Cause.”
On
July 12, 2022, the Company entered into a mutual release and separation agreement with Mr. Cohen in regard to his employment with the
Company and accepted his resignation as of July 29, 2022. Per the terms of the agreement Mr. Cohen was entitled to $75,000 severance
and the remaining 15,000 restricted stock award became fully vested and was issued on August 4, 2022, resulting in stock-based compensation
of $76,950.
Lease
Agreements
On
December 2, 2021, the Company entered a 62-month lease for its corporate headquarters for 4,141
square feet of office space for $186,345
annually, in Coconut Grove, FL. The rent increases 3%
annually. The lease commenced on June 13, 2022 and will expire on August 31, 2027.
Effective
July 24, 2019, a three-year lease was signed for 2,660 square feet for £25,536 annually, for our facilities in Poole, England,
“UK lease”, for £2,128 per month, or USD $2,765 per month at the yearly average conversion rate of 1.299279. The Poole
lease expired July 23, 2022 and the Company is continuing to lease the facility on a month-to-month basis. On October 6, 2022, the UK
lease was renewed effective November 1, 2022 to October 31, 2023 for £2,500, or USD $3,146 per month at the yearly average conversion
rate of 1.25838. This renewal is not representative in the table future minimum lease payments, for the nine months ended September 30,
2022.
The
leases do 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.
Future
minimum lease payments under these leases are as follows:
SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS
Years Ending December 31, | |
Minimum
Lease
Payment | |
2022 | |
$ | 42,424 | |
2023 | |
| 180,815 | |
2024 | |
| 194,814 | |
2025 | |
| 200,659 | |
2026 | |
| 206,679 | |
2027 | |
| 122,869 | |
Total undiscounted future non-cancelable minimum lease payments | |
| 948,260 | |
Less: Imputed interest | |
| (84,965 | ) |
Present value of lease liabilities | |
$ | 863,294 | |
Weighted average remaining term | |
| 4.92 | |
Amortization
expenses for the nine months ended September 30, 2022, and 2021 were $58,284 and $24,948, respectively.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
13 - COMMITMENTS AND CONTINGENCIES (continued)
At
September 30, 2022, the Company had current and long-term operating lease liabilities of $863,294 and right of use assets of $865,115.
Net
rent expense for the nine months ended September 30, 2022 and 2021 were $70,717 and $36,055, respectively.
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 compensation payable under his June 2, 2021 employment agreement.
The Company’s position is that Mr. Seifert is not 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, but not limited to, breach of the employment agreement, breach of the fiduciary, fraud in the inducement
in connection with the employment agreement, fraudulent misrepresentation, and constructive fraud. The Company does not expect to seek
substantial monetary relief in the litigation. This dispute is pending before the District Court for the Southern District of Florida
under Case No. 1:21-cv-22436-DPG.
On
June 24, 2021, Seifert submitted an online whistleblower complaint to the Occupational Safety and Health Administration (OSHA) alleging
that NextPlat engaged in retaliatory employment practices in violation of the Sarbanes-Oxley Act. NextPlat responded by moving to dismiss
Seifert’s complaint, citing Seifert’s failure to make a prima facie showing that a protected activity contributed
to the adverse action alleged in the complaint. On July 21, 2022, following an investigation by the Regional Administrator for OSHA,
Region IV, the Secretary of Labor issued its findings, dismissing Seifert’s complaint on the grounds that the OSHA investigator
found that the evidence did not support Seifert’s claims. On September 8, 2022, we received notice from the U.S. Department of
Labor that Thomas Seifert had withdrawn his Complaint. Pursuant to applicable Federal Regulations, the matter was closed and the Secretary’s
Findings were rescinded.
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.
NOTE
14 - CONCENTRATIONS
Customers:
Amazon
accounted for 52.3%
and 64.0%
of the Company’s revenues during the nine months ended September 30, 2022 and 2021, respectively. For the three months ended
September 30, 2022 and 2021, Amazon accounted for 59.2%
and
64.8%, respectively. No other customer accounted for 10%
or more of the Company’s revenues for either period.
NEXTPLAT
CORP AND SUBSIDIARIES
FKA:
ORBSAT CORP
NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
14 – CONCENTRATIONS (continued)
Suppliers:
The
following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchases for the nine
months ended September 30, 2022 and 2021.
SCHEDULE OF CONCENTRATION RISK
| |
| | | |
| | | |
| | | |
| | |
| |
September 30, 2022 | | |
| | |
September 30, 2021 | | |
| |
| |
| | |
| | |
| | |
| |
Satcom Global | |
$ | 523,688 | | |
| 8.6 | % | |
$ | 824,339 | | |
| 18.0 | % |
Globalstar Europe | |
$ | 396,222 | | |
| 6.5 | % | |
$ | 508,359 | | |
| 11.1 | % |
Garmin | |
$ | 1,168,532 | | |
| 19.2 | % | |
$ | 728,797 | | |
| 16.0 | % |
Network Innovations | |
$ | 718,597 | | |
| 11.8 | % | |
$ | 465,417 | | |
| 10.2 | % |
Cygnus Telecom | |
$ | 1,213,163 | | |
| 19.9 | % | |
$ | 554,998 | | |
| 12.2 | % |
The
following table sets forth information as to each supplier that accounted for 10% or more of the Company’s purchases for the three
months ended September 30, 2022 and 2021.
| |
| | | |
| | | |
| | | |
| | |
| |
September 30, 2022 | | |
| | |
September 30, 2021 | | |
| |
| |
| | |
| | |
| | |
| |
Satcom Global | |
$ | 131,239 | | |
| 8.0 | % | |
$ | 303,944 | | |
| 19.9 | % |
Globalstar Europe | |
$ | 109,409 | | |
| 6.7 | % | |
$ | 215,289 | | |
| 14.1 | % |
Garmin | |
$ | 281,028 | | |
| 17.1 | % | |
$ | 241,230 | | |
| 15.8 | % |
Network Innovations | |
$ | 252,238 | | |
| 15.4 | % | |
$ | 191,658 | | |
| 12.5 | % |
Cygnus Telecom | |
$ | 181,192 | | |
| 11.0 | % | |
$ | 165,889 | | |
| 10.8 | % |
Geographic:
The
following table sets forth revenue as to each geographic location, for the nine months ended September 30, 2022 and 2021:
SCHEDULE OF REVENUE FROM EACH GEOGRAPHIC LOCATION
| |
| | | |
| | | |
| | | |
| | |
| |
September 30, 2022 | | |
| | |
September 30, 2021 | | |
| |
| |
| | |
| | |
| | |
| |
Europe | |
$ | 7,019,811 | | |
| 77.3 | % | |
| 3,867,862 | | |
| 68.2 | % |
North America | |
| 1,342,636 | | |
| 14.8 | % | |
| 1,243,754 | | |
| 21.9 | % |
South America | |
| 32,578 | | |
| 0.4 | % | |
| 28,909 | | |
| 0.5 | % |
Asia & Pacific | |
| 592,847 | | |
| 6.5 | % | |
| 472,841 | | |
| 8.3 | % |
Africa | |
| 92,211 | | |
| 1.0 | % | |
| 54,600 | | |
| 1.0 | % |
Revenue | |
$ | 9,080,083 | | |
| | | |
| 5,667,966 | | |
| | |
The
following table sets forth revenue as to each geographic location, for the three months ended September 30, 2022 and 2021:
| |
| | | |
| | | |
| | | |
| | |
| |
September 30, 2022 | | |
| | |
September 30, 2021 | | |
| |
| |
| | |
| | |
| | |
| |
Europe | |
$ | 1,954,967 | | |
| 74.3 | % | |
$ | 1,469,172 | | |
| 65.3 | % |
North America | |
| 442,678 | | |
| 16.8 | % | |
| 571,603 | | |
| 25.4 | % |
South America | |
| 10,273 | | |
| 0.4 | % | |
| 13,035 | | |
| 0.6 | % |
Asia & Pacific | |
| 195,307 | | |
| 7.4 | % | |
| 182,001 | | |
| 8.1 | % |
Africa | |
| 27,601 | | |
| 1.0 | % | |
| 14,467 | | |
| 0.6 | % |
Revenue | |
$ | 2,630,826 | | |
| | | |
$ | 2,250,278 | | |
| | |
NOTE
15 - SUBSEQUENT EVENTS
On
October 1, 2022, the Company entered into a Stock Option Agreement with Ms. Maria Cristina Fernandez granting Ms. Fernandez options to
purchase 20,000 shares of the Company’s common stock, subject to the vesting and other conditions set forth in the Stock Option
Agreement. Under the vesting provisions in the Stock Option Agreement, the first half of the options were fully vested on day one, with
the remaining half vesting on the first anniversary of the grant date. The options granted under the Stock Option Agreement were made
outside of the Company’s existing equity incentive plans and were approved by the Company’s independent directors.
On
October 6, 2022, the UK lease was renewed for our facility in Poole, United Kingdom, effective November 1, 2022 to October 31, 2023,
for £2,500, or USD $3,146 per month at the yearly average conversion rate of 1.25838.
On
November 7, 2022, in connection with election of Mr. Robert Bedwell as the Chief Compliance Officer of the Company, the Company entered
into an employment agreement with Mr. Bedwell. Pursuant to this agreement, Mr. Bedwell will receive an annual base salary of $125,000
and will be eligible for grants of awards under the Company’s Incentive Award Plan as determined by the Compensation Committee
and our CEO from time to time with an initial reward under his employment agreement of stock options for 50,000 shares of the Company’s
common stock with a vesting schedule as follows: (1) options for 25,000 shares will become fully vested on the first anniversary of the
commencement of Mr. Bedwell’s employment with the Company; (2) options for 10,000 additional shares will become fully vested on
the second anniversary of the commencement of Mr. Bedwell’s employment with the Company; and (3) options for an additional 15,000
shares will become fully vested on the third anniversary of the commencement of Mr. Bedwell’s employment with the Company. As part
of Mr. Bedwell duties for NextPlat, he will continue monitoring the compliance of RXMD and PharmCoRx, accordingly Progressive Care will
pay for 20% of Mr. Bedwell’s annual base salary.
On
November 14, 2022, in connection with the transition of Mr. Paul Thomson from Executive Vice President and Chief Financial Officer of
the Company to his new role as Senior Vice President of Mergers, Acquisitions and Special Projects, the Company entered into a new employment
agreement with Mr. Thomson. This new agreement has an initial term of one year and may be extended by our CEO for additional terms of
one year each. Under this agreement, Mr. Thomson will be paid an annual base salary of $150,000 and will keep all his rights and interests
in and to the options set forth in his prior employment agreement with the Company, subject to the terms and conditions set forth in
such prior employment agreement.
On
November 14, 2022, in connection with the election of Ms. Cecile Munnik as Chief Financial Officer of the Company, the Company entered
into an employment agreement with Ms. Munnik. Pursuant to the agreement, until June 30, 2023, Ms. Munnik will devote 30% of her business
time to the Company and will devote the remaining 70% to Progressive Care. Starting on July 1, 2023, Ms. Munnik will devote all of her
full business time and effort to the performance of her duties as the Chief Financial Officer of the Company. Ms. Munnik will receive
an annual base salary of $67,500 from the commencement of her employment with the Company until June 30, 2023. Thereafter, commencing
on July 1, 2023, Ms. Munnik will receive an annual base salary of $225,000. In addition, Ms. Munnik will be eligible for grants of awards
under the Company’s Incentive Award Plan as determined by the Compensation Committee and our CEO from time to time with an initial
reward under her employment agreement of stock options for 50,000 shares of the Company’s common stock with a vesting schedule
as follows: (1) options for 25,000 shares will become fully vested on the first anniversary of the commencement of Ms. Munnik’s
employment with the Company; (2) options for 10,000 additional shares will become fully vested on the second anniversary of the commencement
of Ms. Munnik’s employment with the Company; and (3) options for an additional 15,000 shares will become fully vested on the third
anniversary of the commencement of Ms. Munnik’s employment with the Company.