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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024.

	or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ☐ to ☐

Commission File Number: 000-52684

Progressive Care Inc.

(Exact name of registrant as specified in its charter)

Delaware

32-0186005

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

400 Ansin Blvd., Suite A, Hallandale Beach, FL	33009
(Address of principal executive offices)	(Zip Code)

(305) 760-2053

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None.

Title of each class		Trading Symbol		Name of each exchange on which registered
N/A		N/A		N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of May 10, 2024 was 6,240,731.

Table of Contents

PROGRESSIVE CARE INC. AND SUBSIDIARIES

INDEX

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	F-1

	Condensed Consolidated Balance Sheets	F-1

	Condensed Consolidated Statements of Operations	F-2

	Condensed Consolidated Statements of Stockholders’ Equity	F-3

	Condensed Consolidated Statements of Cash Flows	F-4

	Notes to the Condensed Consolidated Financial Statements	F-5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	9

Item 4.	Controls and Procedures	9

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	10

Item 1A.	Risk Factors	10

Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	10

Item 3.	Defaults Upon Senior Securities	10

Item 4.	Mine Safety Disclosures	10

Item 5.	Other Information	10

Item 6.	Exhibits	11

	Signatures	12

Table of Contents

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report and other documents that we file with the Securities and Exchange Commission contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, our business, our beliefs and our management’s assumptions. Statements that are not historical facts are forward-looking statements, including forward-looking information concerning pharmacy sales trends, prescription margins, number and location of new store openings, outcomes of litigation, the level of capital expenditures, industry trends, demographic trends, growth strategies, financial results, cost reduction initiatives, acquisition synergies, regulatory approvals, and competitive strengths. Words such as “expect,” “outlook,” “forecast,” “would,” “could,” “should,” “project,” “intend,” “plan,” “continue,” “sustain,” “on track,” “believe,” “seek,” “estimate,” “anticipate,” “may,” “assume,” and variations of such words and similar expressions are often used to identify such forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, but not limited to, those described in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities and Exchange Commission (“SEC”) on April 11, 2024 (“2023 Form 10-K”), this quarterly report on Form 10-Q for the three months ended March 31, 2024, and our other reports that we file or furnish with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, we undertake no obligation to update publicly any forward-looking statements after the date they are made, whether as a result of new information, future events, changes in assumptions or otherwise.

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

PROGRESSIVE CARE INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except shares and par data)

(Unaudited)

	*Successor*
	*March 31, 2024*			*December 31, 2023*
Assets
Current Assets
Cash	$	5,544		$	7,895
Accounts receivable – trade, net		12,253			8,339
Receivables - other, net		2,068			1,846
Inventory, net		3,385			3,069
Prepaid expenses		185			334
Total Current Assets		23,435			21,483
Property and equipment, net		3,220			3,284
Other Assets
Goodwill		731			731
Intangible assets, net		13,706			14,398
Operating right-of-use assets, net		249			427
Finance right-of-use assets, net		18			22
Deposits		39			39
Total Other Assets		14,743			15,617
Total Assets	$	41,398		$	40,384
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable and accrued liabilities	$	13,555		$	12,158
Notes payable		144			145
Operating lease liabilities		159			170
Finance lease liabilities		20			18
Total Current Liabilities		13,878			12,491
Long-term Liabilities
Notes payable, net of current portion		1,081			1,110
Operating lease liabilities, net of current portion		182			214
Finance lease liabilities, net of current portion		—			5
Total Liabilities		15,141			13,820

Commitments and Contingencies		—			—

Stockholders’ Equity
Preferred Stock, Series A ($0.001 par value, 51 shares authorized and designated; 0 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively)		—			—
Preferred Stock, Series B ($0.0001 par value, 100,000 shares authorized and designated; 3,000 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively)		—			—
Common stock ($0.0001 par value, 100,000,000 shares authorized; 6,240,731 and 6,222,781 issued and outstanding as of March 31, 2024 and December 31, 2023, respectively)		67			67
Additional paid-in capital		60,951			60,886
Accumulated deficit		(34,761	)		(34,389	)
Total Stockholders’ Equity		26,257			26,564
Total Liabilities and Stockholders’ Equity	$	41,398		$	40,384

See accompanying notes to the unaudited condensed consolidated financial statements.

F-1

Table of Contents

PROGRESSIVE CARE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	*Successor*			*Predecessor*
	*Three Months Ended March 31, 2024*			*Three Months Ended March 31, 2023*
Sales of products, net	$	11,255		$	9,794
Revenues from services		3,373			1,598
Revenues, net		14,628			11,392

Costs of products		10,560			8,196
Costs of services		63			49
Costs of revenue		10,623			8,245

Gross profit		4,005			3,147

Operating expenses
Salaries and wages		2,116			1,598
Professional fees		478			774
Depreciation and amortization		776			64
Selling, general, and administrative		900			697
Impairment loss		132			—
Total operating expenses		4,402			3,133

(Loss) income from operations		(397	)		14

Other income (expense):
Gain on sale or disposal of property and equipment		1			—
Interest income		40			6
Interest expense		(16	)		(150	)
Total other income (expense)		25			(144	)
Loss before income taxes		(372	)		(130	)
Provision for income taxes		-			—
Net loss attributable to common shareholders	$	(372	)	$	(130	)

Basic and diluted weighted average loss per common share	$	(0.06	)	$	(0.04	)

Weighted average number of common shares outstanding during the period – basic and diluted		6,240			3,356

See accompanying notes to the unaudited condensed consolidated financial statements.

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PROGRESSIVE CARE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

	*Preferred Stock, Series A*				*Preferred Stock, Series B*				*Common Stock*				*Additional*					*Total*
	*$0.001 Par Value*				*$0.0001 Par Value*				*$0.0001 Par Value*				*Paid-in*		*Accumulated*			*Stockholders’*
	*Shares*		*Amount*		*Shares*		*Amount*		*Shares*		*Amount*		*Capital*		*Deficit*			*Equity*
Balance at December 31, 2023 (Successor)		—	$	—		3	$	—		6,223	$	67	$	60,886	$	(34,389	)	$	26,564
Stock-based compensation		—		—		—		—		18		—		65		—			65
Net loss for the three months ended March 31, 2024		—		—		—		—		—		—		—		(372	)		(372	)
Balance at March 31, 2024 (Successor)		—	$	—		3	$	—		6,241	$	67	$	60,951	$	(34,761	)	$	26,257

	*Preferred Stock, Series A*				*Preferred Stock, Series B*				*Common Stock*				*Additional*					*Total*
	*$0.001 Par Value*				*$0.0001 Par Value*				*$0.0001 Par Value*				*Paid-in*		*Accumulated*			*Stockholders’*
	*Shares*		*Amount*		*Shares*		*Amount*		*Shares*		*Amount*		*Capital*		*Deficit*			*Equity*
Balance December 31, 2022 (Predecessor)		—	$	—		3	$	—		3,347	$	67	$	22,525	$	(14,974	)	$	7,618
Stock-based compensation		—		—		—		—		11		—		50		—			50
Net loss for the three months ended March 31, 2023		—		—		—		—		—		—		—		(130	)		(130	)
Balance March 31, 2023 (Predecessor)		—	$	—		3	$	—		3,358	$	67	$	22,575	$	(15,104	)	$	7,538

See accompanying notes to the unaudited condensed consolidated financial statements.

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PROGRESSIVE CARE INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

	*Successor*			*Predecessor*
	*Three Months Ended March 31, 2024*			*Three Months Ended March 31, 2023*
Cash flows from operating activities:
Net loss	$	(372	)	$	(130	)

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation		79			44
Change in provision for doubtful accounts		2			9
Amortization of debt issuance costs and debt discounts		—			96
Stock-based compensation		65			60
Amortization of right-of-use assets - finance leases		5			8
Amortization of right-of-use assets - operating leases		44			36
Change in accrued interest on notes payable		—			34
Amortization of intangible assets		692			12
Gain on sale or disposal of property and equipment		(1	)		—
Impairment loss		132			—
Changes in operating assets and liabilities:
Accounts receivable		(4,138	)		(378	)
Grant receivable		—			(277	)
Inventory		(316	)		(550	)
Prepaid expenses		149			19
Deposits		—			(1	)
Accounts payable and accrued liabilities		1,423			1,885
Operating lease liabilities		(41	)		(40	)
Net cash (used in) provided by operating activities		(2,277	)		827

Cash flows from investing activities:
Purchase of property and equipment		(24	)		(17	)
Proceeds from sale or disposal of property and equipment		1			—
Net cash used in investing activities		(23	)		(17	)

Cash flows from financing activities:
Payments on notes payable		(46	)		(91	)
Payments on finance lease liabilities		(5	)		(10	)
Net cash used in financing activities		(51	)		(101	)

(Decrease) increase in cash		(2,351	)		709
Cash at beginning of period		7,895			6,743
Cash at end of period	$	5,544		$	7,452

Supplemental disclosures of cash flow information:
Cash paid for interest	$	16		$	19
Cash paid for income taxes	$	—		$	—

See accompanying notes to the unaudited condensed consolidated financial statements.

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PROGRESSIVE CARE INC. AND SUBSIDIARIES

Notes to the Condensed Consolidated Financial Statements

March 31, 2024

(Unaudited)

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “our Company,” or “our business” refer to Progressive Care Inc. and its subsidiaries.

Note 1. Organization and Nature of Operations

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

Progressive, through its wholly-owned subsidiaries, Pharmco, LLC (“Pharmco 901”), Touchpoint RX, LLC doing business as Pharmco Rx 1002, LLC (“Pharmco 1002”), Family Physicians RX, Inc. doing business as PharmcoRx 1103 and PharmcoRx 1204 (“FPRX” or “Pharmco 1103” and “Pharmco 1204”) (pharmacy subsidiaries collectively referred to as “Pharmco”), and ClearMetrX Inc. (“ClearMetrX”) is a personalized healthcare services company that provides prescription pharmaceuticals and risk and data management services to healthcare organizations and providers.

Pharmco 901 was formed on November 29, 2005 as a Florida Limited Liability Company and is a 100% owned subsidiary of Progressive. Pharmco 901 was acquired by Progressive on October 21, 2010. We currently deliver prescriptions to Florida’s diverse population and ship medications to patients in states where we hold non-resident pharmacy licenses as well. We currently hold Florida Community Pharmacy Permits at all Florida pharmacy locations and our Pharmco 901 location is licensed as a non-resident pharmacy in the following states: Arizona, Colorado, Connecticut, Georgia, Illinois, Minnesota, Nevada, New Jersey, New York, Pennsylvania, Texas, and Utah. We are able to dispense to patients in the state of Massachusetts without a non-resident pharmacy license because Massachusetts does not require such a license for these activities.

Pharmco 1103 is a pharmacy with locations in North Miami Beach and Orlando, Florida that provides Pharmco’s pharmacy services to Miami-Dade County, Broward County, the Orlando/Tampa corridor, and the Treasure Coast of Florida. Progressive acquired all the ownership interests in Pharmco 1103 in a purchase agreement entered into on June 1, 2019.

Pharmco 1002 is a pharmacy located in Palm Springs, Florida that provides Pharmco’s pharmacy services to Palm Beach, St. Lucie and Martin Counties, Florida. Progressive acquired all the ownership interests in Pharmco 1002 in a purchase agreement entered into on July 1, 2018.

ClearMetrX was formed on June 10, 2020 and provides third-party administration (“TPA”) services to 340B covered entities. ClearMetrX also provides data analytics and reporting services to support and improve care management for health care organizations.

RXMD Therapeutics was formed on October 1, 2019. RXMD Therapeutics has had no operating activity to date.

We have organized our operations into two reportable segments: Pharmacy Operations and TPA. See “Note 15. Reportable Segments.”

On June 30, 2023, NextPlat Corp (“NextPlat”), Charles M. Fernandez, Chairman and Chief Executive Officer of the Company, and Rodney Barreto, Vice-Chairman of the Company, entered into a voting agreement whereby at any annual or special shareholders meeting of the Company’s stockholders Messrs. Fernandez and Barreto agreed to vote all of the common stock shares that they own in the same manner that NextPlat votes its Common Stock and equivalents. On July 1, 2023, NextPlat and Messrs. Fernandez and Barreto exercised common stock purchase warrants and were issued 632,269, 211,470, and 130,571 common stock shares, respectively, by the Company. After the exercise of the common stock purchase warrants, NextPlat and Messrs. Fernandez and Barreto collectively owned 53% of the Company’s voting common stock. Collectively, the exercise of the common stock purchase warrants and the entry into the voting agreement constituted a change in control in Progressive Care. As a result of the change in control, NextPlat was deemed the accounting acquirer in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations and elected to apply push-down accounting. The application of push-down accounting created a new basis of accounting for all assets and liabilities based on their fair value at the date of acquisition, with few exceptions permissible under GAAP. As a result, the Company’s financial position, results of operations, and cash flows subsequent to the acquisition on July 1, 2023 have been segregated to indicate pre-acquisition and post-acquisition periods. The pre-acquisition period through June 30, 2023 is referred to as the “Predecessor Company”. The post-acquisition period, July 1, 2023 and forward, includes the impact of push-down accounting and is referred to as the “Successor Company”.

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Note 2. Basis of Presentation and Principles of Consolidation

The accompanying Unaudited Condensed Consolidated Financial Statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) on a basis consistent with reporting interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission. The year-end balance sheet data presented for comparative purposes was derived from audited consolidated financial statements.

Interim results are not necessarily indicative of the results that may be expected for the full year. Accordingly, they do not include all information and footnotes normally included in annual consolidated financial statements and should be read in conjunction with the consolidated financial statements and notes thereto included in the 2023 Form 10-K. In the opinion of management, the Unaudited Condensed Consolidated Financial Statements contain all adjustments (consisting principally of normal recurring accruals) necessary for a fair presentation of the condensed consolidated balance sheets, statements of operations, statements of stockholders’ equity and statements of cash flows for such interim periods presented.

The accompanying Unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. Certain 2023 financial information has been reclassified to conform to the 2024 presentation. Such reclassifications do not impact the Company’s previously reported financial position or net income (loss). On the Condensed Consolidated Statements of Operations, Revenues, net, Costs of revenue, and Operating expenses have been disaggregated for the three months ended March 31, 2023.

Note 3. Summary of Significant Accounting Policies

The significant accounting policies of the Company were described in Note 3 to the Audited Consolidated Financial Statements included in the Company’s Form 10-K for the fiscal year ended December 31, 2023. There have been no material changes to the Company’s significant accounting policies for the three months ended March 31, 2024.

Cash

The Company maintains its cash in bank deposit accounts at several financial institutions, which are insured by the Federal Deposit Insurance Corporation (“FDIC”) and at times may exceed federally insured limits of $250,000. The Company had approximately $0.5 million that was uninsured as of March 31, 2024. In July 2023, the Company entered into a deposit placement agreement for Insured Cash Sweep Services (“ICS”). This service is a secure and convenient way to access FDIC protection on large deposits, earn a return, and enjoy flexibility. The Company believes that the ICS agreement will mitigate its credit risk as it relates to uninsured FDIC amounts in excess of $250,000.

Concentrations

Suppliers:

The Company had significant concentrations with one vendor. The purchases from this significant vendor were 98% and 96% of total vendor purchases for the three months ended March 31, 2024 (Successor period) and the three months ended March 31, 2023 (Predecessor period), respectively.

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Customers:

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

	*Successor*			*Predecessor*
	*Three Months Ended March 31, 2024*			*Three Months Ended March 31, 2023*
A		33	%		—
B		21	%		1	%
C		16	%		53	%

Direct and Indirect Remuneration (“DIR”) Fees

DIR fees are fees charged by PBMs to pharmacies for network participation as well as periodic reimbursement reconciliations. The Company accrues an estimate of PBM fees, including DIR fees, which are assessed or expected to be assessed by payers at some point after adjudication of a claim, as a reduction of prescription revenue at the time revenue is recognized. Changes in the estimate of such fees are recorded as an adjustment to revenue when the change becomes known. Through December 31, 2023, for some PBMs, DIR fees were charged at the time of the settlement of a pharmacy claim. Other PBMs do not determine DIR fees at the claim settlement date, and therefore DIR fees are collected from pharmacies after claim settlement, often as clawbacks of reimbursements based on factors that vary from plan to plan. For example, two PBMs calculate DIR fees on a trimester basis and charge the Company for these fees as reductions of reimbursements paid to the Company two to three months after the end of the trimester (e.g., DIR fees for January – April 20xx claims were clawback by these PBMs in July – August 20xx). As of December 31, 2023, DIR fees that were not collected at the time of claim settlement, the Company recorded an accrued liability for estimated DIR fees that are expected to be collected by the PBMs by the end of the second quarter of 2024. The estimated liability for these fees is highly subjective and the actual amount collected may differ from the accrued liability. The uncertainty of management’s estimates is due to inadequate disclosure to the Company by the PBMs as to exactly how these fees are calculated either at the time the DIR fees are actually assessed and reported to the Company. The detail level of the disclosure of assessed DIR fees varies based on the information provided by the PBM. Effective January 1, 2024, all PBMs began charging DIR fees at the time of the settlement of a pharmacy claim.

Recently Adopted Accounting Standards

None.

Accounting Pronouncements Issued but not yet Adopted

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant expenses. ASU 2023-07 is required to be adopted for annual periods beginning after December 15, 2023, and interim period within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company will adopt the standard in its interim reporting beginning with Q1-2025, and the Company will adopt the standard in its annual reporting for the year ending December 31, 2024. The Company expects that the adoption of the standard will not have a material impact on our consolidated financial statements but will enhance our current disclosures.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740)—Improvements to Income Tax Disclosure” (“ASU 2023-09”), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements. ASU 2023-09 is required to be adopted for annual periods beginning after December 15, 2024, with early adoption permitted. The Company will adopt this accounting standard update effective January 1, 2025. The Company expects that the adoption of the standard will not have a material impact on our consolidated financial statements.

Subsequent Events

Merger Agreement

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

The Merger Agreement and the transactions contemplated thereby were negotiated and approved by a Special Committee comprised of three of the Company’s independent directors, each of whom does not have an interest in such transaction. The Merger Agreement was also approved by a special committee of Parent’s board of directors, which was affirmed by the entirety of Parent’s board of directors, as well as the sole member of Merger Sub.

Lock-Up Agreements

On April 9, 2024, the Company entered into lock-up agreements with each of its directors and executive officers (the “Company Lock-Up Agreements”). Additionally, separate lock-up agreements were established between the Company and the directors and executive officers of Parent (the “Parent Lock-Up Agreements”). Notably, individuals serving roles in both the Company and Parent, such as Charles M. Fernandez, Cecile Munnik, and Rodney Barreto, were covered by a single lock-up agreement with the Company relating to each of their shares in both the Company and Parent (the “Hybrid Lock-Up Agreements”, together with the Company Lock-Up Agreements and Parent Lock-Up Agreements, the “Lock-Up Agreements”). All Lock-Up Agreements prohibit the aforementioned stockholders from selling, transferring, acquiring or purchasing any of the securities of either the Company or Parent during the Interim Period. Notwithstanding the Lock-Up Agreements, the directors of the Company will continue to receive shares of the Company common stock payable to such director as compensation pursuant to the terms of his or her director services agreement.

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Note 4. Fair Value Measurements

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

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.

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

●

Cash, accounts receivable, and accounts payable and accrued liabilities: The amounts reported in the accompanying Condensed Consolidated Balance Sheets approximate fair value due to their short-term nature.

●

Notes payable and lease liabilities: The carrying amount of notes payable approximated fair value due to variable interest rates at customary terms and rates the Company could obtain in current financing. The carrying value of lease liabilities approximated fair value due to the implicit rate in the lease in relation to the Company’s borrowing rate and the duration of the leases (Level 2 inputs).

Fair Value Measurement on a Nonrecurring Basis

Common Stock Purchase Warrants

As of March 31, 2024, the Company had common stock purchase warrants classified as Level 3 equity instruments. The fair value of the common stock purchase warrants on the date of issuance was approximately $4.6 million. The Company used the Monte Carlo simulation model for valuation of the common stock purchase warrants. Key inputs into the Monte Carlo simulation model were as follows at the valuation date: risk-free interest rate: 3.5%-3.7%; expected term: 3-5.6 years; expected volatility: 93%-102%; exercise price: $2.20. For additional information on the initial issuance and subsequent exercise of the common stock purchase warrants, see also “Note 13. Stockholder’s Equity, Common Stock and Common Stock Purchase Warrants.”

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Note 5. Revenue

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

	*Successor*		*Predecessor*
	*Three Months Ended March 31, 2024*		*Three Months Ended March 31, 2023*
Sales of products, net
Prescription revenue, net of PBM fees	$	11,324	$	9,771
COVID-19 testing revenue		—		45
Subtotal		11,324		9,816
Revenues from services:
340B contract revenue		3,304		1,576
Revenues, net	$	14,628	$	11,392

Note 6. Earnings (Loss) per Share

Basic earnings per share is computed by dividing net (loss) income available to common shareholders by the weighted average number of common shares outstanding during the year, excluding the effects of any potentially dilutive securities. Diluted earnings per share gives effect to all potentially dilutive shares of common stock outstanding during the year including common stock purchase warrants and stock options, using the treasury stock method, and convertible debt, using the if converted method. Diluted earnings per share excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.

The components of basic and diluted EPS were as follows (in thousands, except per share data). For all periods presented, the Company incurred a net loss causing inclusion of any potentially dilutive securities to have an anti-dilutive effect, resulting in diluted loss per common share and basic loss per common share being equivalent.

	*Successor*			*Predecessor*
	*Three Months Ended March 31, 2024*			*Three Months Ended March 31, 2023*
Net loss attributable to common shareholders	$	(372	)	$	(130	)

Basic weighted average common shares outstanding		6,240			3,356
Potentially dilutive common shares		—			—
Diluted weighted average common shares outstanding		6,240			3,356

Basic weighted average loss per common share	$	(0.06	)	$	(0.04	)
Diluted weighted average loss per common share	$	(0.06	)	$	(0.04	)

Potentially dilutive common shares excluded from the calculation of diluted weighted average loss per common share:
Common stock purchase warrants		102,468			60,152
Stock options		59,623			151,937
		162,091			212,089

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Note 7. Accounts Receivable – Trade, net

Accounts receivable consisted of the following (in thousands):

	*Successor*
	*March 31, 2024*			*December 31, 2023*
Gross accounts receivable – trade	$	12,527		$	8,611
Less: allowance for credit losses		(274	)		(272	)
Accounts receivable – trade, net	$	12,253		$	8,339

The Successor Company increased the allowance for credit losses in the amount of approximately $2,000 for the three months ended March 31, 2024. The Predecessor Company increased the allowance of credit losses in the amount of approximately $9,000 for the three months ended March 31, 2023.

Accounts receivable – trade, net for the Predecessor Company as of January 1, 2023 and March 31, 2023 were approximately $3.4 million and $4.3 million, respectively.

Note 8. Receivables – Other, net

Receivables – Other, net consisted of the following (in thousands):

	*Successor*
	*March 31, 2024*		*December 31, 2023*
Performance bonuses	$	1,859	$	1,602
Customers		179		192
Other		30		52
	$	2,068	$	1,846

Performance bonuses, paid annually by PBMs, are estimated based on historical pharmacy performance and prior payments received. Other receivables are loans to employees.

Note 9. Property and Equipment, net

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

			Successor
	*Estimated Useful Life*		*March 31, 2024*			*December 31, 2023*
Building	40 years		$	2,116		$	2,116
Vehicles	3 - 5 years			585			595
Furniture and equipment	5 years			388			388
Land		---		184			184
Leasehold improvements and fixtures	Lesser of estimated useful life or life of lease			119			76
Computer equipment	3 years			39			39
Construction in progress		---		—			22
Total				3,431			3,420
Less: accumulated depreciation				(211	)		(136	)
Property and equipment, net			$	3,220		$	3,284

Depreciation expense for the Successor Company was approximately $79,000 for the three months ended March 31, 2024. Depreciation expense for the Predecessor Company was approximately $44,000 for the three months ended March 31, 2023.

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Note 10. Goodwill and Intangible Assets

Goodwill

Goodwill was approximately $0.7 million as of March 31, 2024 and December 31, 2023 (Successor periods), and was allocated to the TPA reporting segment. There were no changes in the carrying amount of goodwill during the three months ended March 31, 2024.

Intangible Assets

Intangible assets consisted of the following (in thousands):

	*Successor*
	*March 31, 2024*							*December 31, 2023*
	*Gross amount*		*Accumulated amortization*			*Net Amount*		*Gross amount*		*Accumulated amortization*			*Net Amount*
Pharmacy records	$	8,130	$	(1,219	)	$	6,911	$	8,130	$	(807	)	$	7,323
Tradenames		4,700		(353	)		4,347		4,700		(224	)		4,476
Developed technology		2,880		(432	)		2,448		2,880		(281	)		2,599
Total intangible assets	$	15,710	$	(2,004	)	$	13,706	$	15,710	$	(1,312	)	$	14,398

Amortization of intangible assets for the Successor Company was approximately $0.7 million for the three months ended March 31, 2024. Amortization of intangible assets for the Predecessor Company was approximately $12,000 for the three months ended March 31, 2023.

The following table represents the total estimated future amortization of intangible assets for the five succeeding years and thereafter as of March 31, 2024 (in thousands):

	*Successor*
Year	*Amount*
2024 (remaining nine months)	$	2,004
2025		2,672
2026		2,672
2027		2,672
2028		1,571
Thereafter		2,115
Total	$	13,706

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Note 11. Accounts Payable and Accrued Liabilities

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

	*Successor*
	*March 31, 2024*		*December 31, 2023*
Accounts payable – trade	$	12,752	$	11,256
Accrued payroll and payroll taxes		356		167
Accrued PBM fees		366		571
Other accrued liabilities		81		164
Total	$	13,555	$	12,158

Note 12. Notes Payable

Notes payable consisted of the following (in thousands):

	*Successor*
	*March 31, 2024*			*December 31, 2023*
A. Mortgage note payable - commercial bank - collateralized	$	1,118		$	1,140
B. Note payable - uncollateralized		25			25
C. Notes payable - collateralized		82			90
Subtotal		1,225			1,255
Less: current portion of notes payable		(144	)		(145	)
Long-term portion of notes payable	$	1,081		$	1,110

The corresponding notes payable above are more fully discussed below:

(A) Mortgage Note Payable – collateralized

In 2018, Pharmco 901 closed on the purchase of land and building located at 400 Ansin Boulevard, Hallandale Beach, Florida. The purchase price was financed in part through a mortgage note and security agreement entered into with a commercial lender in the amount of $1,530,000. The promissory note is collateralized by the land and building, bears interest at a fixed rate of 4.75% per annum, matures on December 14, 2028 and is subject to a prepayment penalty. Principal and interest will be repaid through 119 regular payments of $11,901 that began in January 2019, with the final payment of all principal and accrued interest not yet paid on December 14, 2028. Note repayment is guaranteed by Progressive Care Inc.

(B) Note Payable – Uncollateralized

As of March 31, 2024 and December 31, 2023, the uncollateralized note payable represents a noninterest-bearing loan that is due on demand from an investor.

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

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In July 2022, the Predecessor Company entered into a note obligation with a commercial lender, the proceeds from which were used to purchase pharmacy equipment in the amount of approximately $90,000. The terms of the promissory note payable require 60 monthly payments of $1,859, including interest at 8.78% starting January 2023. The balance outstanding on the note payable was approximately $70,000 and $74,000 as of March 31, 2024 and December 31, 2023, respectively. The promissory note is secured by equipment with a net book value of approximately $68,000 and $71,000 as of March 31, 2024 and December 31, 2023, respectively.

In September 2022, the Predecessor Company entered into a note obligation with a commercial lender, the proceeds from which were used to purchase a vehicle in the amount of approximately $25,000. The terms of the promissory note payable require 24 monthly payments of $1,143, including interest at 8.29% starting October 2022. The balance outstanding on the note payable was approximately $7,000 and $10,000 as of March 31, 2024 and December 31, 2023, respectively. The promissory note is secured by the vehicle with a net book value of approximately $17,000 and $18,000 as of March 31, 2024 and December 31, 2023, respectively.

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

	*Successor*
Year	*Amount*
2024 (remaining nine months)	$	115
2025		114
2026		119
2027		124
2028		753
Total	$	1,225

Interest expense on these notes payable for the Successor Company was approximately $16,000 for the three months ended March 31, 2024. Interest expense on notes payable, exclusive of debt discount and debt issue cost amortization, for the Predecessor Company was approximately $51,000 for the three months ended March 31, 2023.

Note 13. Stockholders’ Equity

Preferred Stock

The Company has 10,000,000 shares of preferred stock authorized. As of March 31, 2024 and December 31, 2023, 51 shares are designated as Series A Preferred Stock, par value $0.001 per share, 100,000 shares are designated as Series B Preferred Stock, par value $0.0001 per share, and 9,899,949 shares are undesignated preferred shares, par value $0.0001 per share.

Series A Preferred Stock - Predecessor Company

The Series A preferred stock is a non-dividend producing instrument that ranks superior to the Company’s common stock. Each one (1) share of the Series A Preferred Stock shall have voting rights equal to (x) 0.019607 multiplied by the total issued and outstanding common stock and Preferred Stock eligible to vote at the time of the respective vote (the “Numerator”), divided by (y) 0.49, minus (z) the Numerator.

With respect to all matters upon which stockholders are entitled to vote or to which shareholders are entitled to give consent, the holders of the outstanding shares of Series A Preferred Stock shall vote together with the holders of common stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Certificate of Incorporation or By-laws.

In July 2014, the board of directors approved the issuance of 51 shares of the Company’s Series A Preferred Stock to a certain employee of the Company, which is equal to 50.99% of the total voting power of all issued and outstanding voting capital of the Company in satisfaction of $20,000 in past due debt. In October 2020, the preferred shares were transferred to a trust whose beneficiary is related to the employee. In August 2022, the Company entered into a Share Exchange Agreement with the trust in which the 51 shares of the Company’s Series A Preferred Stock were acquired from the trust and cancelled in exchange for the issuance of 127,564 shares of the Company’s common stock.

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Series B Convertible Preferred Stock - Predecessor Company

On August 30, 2022, the Company entered into a Securities Purchase Agreement with NextPlat wherein the Company sold 3,000 units, generating gross proceeds of $6.0 million. Each unit is made up of one share of Series B Convertible Preferred Stock, $0.0001 par value, and Investor Warrants. Each warrant entitles the holder to purchase one share of Series B Convertible Preferred Stock at an exercise price of $2,000. The Investor Warrants may also be exercised, in whole or in part, by means of a cashless exercise. The Series B Convertible Preferred Stock has a stated value of $2,000 per share and each Preferred Stock share has the equivalent voting rights of 500 common stock shares. Each share of Series B Convertible Preferred Stock is convertible at any time at the option of the holder into shares of the Company’s common stock determined by dividing the stated value by the conversion price which is $4.00. The Company incurred offering costs associated with the transaction of approximately $1.0 million.

The Series B Convertible Preferred Stock ranks senior to our common stock as to distribution of assets upon liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary. The shares of Series B Convertible Preferred Stock shall have a liquidation preference to all other classes of stock of the Company in the amount of $2,000 per share. Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of Series B Convertible Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company (i) $2,000 per share plus (ii) the same amount that a holder of common stock would receive if the Series B Convertible Preferred Stock were fully converted to common stock which amounts shall be paid pari passu with all holders of common stock.

With respect to all matters upon which stockholders are entitled to vote or to which shareholders are entitled to give consent, the holders of the outstanding shares of Preferred Stock shall vote together with the holders of common stock without regard to class, except as to those matters on which separate class voting is required by applicable law or the Certificate of Incorporation or By-laws.

Common Stock and Common Stock Purchase Warrants

On May 5, 2023, the Predecessor Company entered into a Securities Purchase Agreement with NextPlat, pursuant to which NextPlat agreed to purchase 455,000 newly issued units of securities from the Predecessor Company (the “Units”) at a price per Unit of $2.20 for an aggregate purchase price of $1.0 million (the “Unit Purchase”). Each Unit consists of one share of common stock, par value $0.0001 per share, of Progressive Care (“Common Stock”) and one common stock purchase warrant to purchase a share of Common Stock (the “PIPE Warrants”). The PIPE Warrants have a three-year term and will be immediately exercisable. Each PIPE Warrant is exercisable at $2.20 per share of Common Stock. The Predecessor Company received cash proceeds of $880,000, net of placement agent commission of $70,000 and legal fees of $50,000. The Company accounted for the PIPE Warrants in accordance with the guidance contained in ASC 480 and were classified as equity instruments. On the date of issuance, the fair value of the PIPE Warrants was approximately $1.0 million. On July 1, 2023, NextPlat exercised the PIPE Warrants on a cashless basis and was issued 230,056 common stock shares.

Also on May 5, 2023, the Predecessor Company entered into a Debt Conversion Agreement (“DCA”) with NextPlat and the other Holders of that certain Amended and Restated Secured Convertible Promissory Note, dated as of September 2, 2022, made by the Predecessor Company in the original face amount of approximately $2.8 million (the “Note”). Pursuant to the DCA, NextPlat and the other Holders agreed to modify and convert the total approximately $2.9 million of outstanding principal and accrued and unpaid interest to common stock at a conversion price of $2.20 per share (the “Debt Conversion”). Of the total 1,312,379 shares of common stock issued upon conversion of the Note pursuant to the DCA, NextPlat received 570,599 shares, Charles M. Fernandez, the Company’s Chairman and Chief Executive Officer, received 228,240 shares, and Rodney Barreto, the Company’s Vice-Chairman of the Board of Directors, received 228,240 shares. In addition, each of the Holders also received a common stock purchase warrant to purchase one share of common stock for each share of common stock they received upon conversion of the Note (the “Conversion Warrants”). The Conversion Warrants have a three-year term and will be immediately exercisable. Each Conversion Warrant is exercisable at $2.20 per share of Common Stock. The Company accounted for the Conversion Warrants in accordance with the guidance contained in ASC 480 and were classified as equity instruments. On the date of issuance, the fair value of the Conversion Warrants was approximately $2.7 million. On July 1, 2023, NextPlat and Messrs. Fernandez and Barreto exercised the Conversion Warrants. NextPlat exercised 230,000 Conversion Warrants on a cash basis and paid consideration in the amount of $506,000 and was issued 230,000 common stock shares. NextPlat exercised the remaining 340,599 Conversion Warrants on a cashless basis and was issued 172,213 common stock shares. Messrs. Fernandez and Barreto exercised the Conversion Warrants on a cashless basis and were each issued 115,402 common stock shares. As of March 31, 2024, the fair value of the remaining Conversion Warrants was approximately $0.6 million.

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At the same time as the SPA and DCA, the Predecessor Company and NextPlat entered into the Debenture Purchase Agreement. Under the Debenture Purchase Agreement, the Predecessor Company agreed to issue, and NextPlat agreed to purchase, from time to time during the three-year term of the Debenture Purchase Agreement, up to an aggregate of $10.0 million of Debentures to NextPlat. Pursuant to the Amendment, NextPlat and the Predecessor Company agreed to amend the Debenture Purchase Agreement and the form of Debenture to have a conversion price of $2.20 per share. As of March 31, 2024, no Debentures have been purchased by NextPlat under the Debenture Purchase Agreement.

Dawson James Securities, Inc. (the “Placement Agent”) served as placement agent for the Unit Purchase. In consideration for the Placement Agent’s services, the Predecessor Company issued to the Placement Agent and its affiliates warrants to purchase 91,000 shares of Common Stock (the “Placement Agent Warrants”). The Placement Agent Warrants have a five-year term and will be exercisable in December 2023. Each Placement Agent Warrant is exercisable at $2.20 per share of Common Stock. The Company accounted for the Placement Agent Warrants in accordance with the guidance contained in ASC 480 and were classified as equity instruments. On the date of issuance, the fair value of the Placement Agent Warrants was approximately $0.2 million.

In addition, the Predecessor Company issued 330,000 warrants to certain existing Progressive Care investors to induce them to approve the transaction contemplated by the SPA (the “Inducement Warrants”). Charles M. Fernandez and Rodney Barreto received Inducement Warrants to purchase 190,000 and 30,000 shares of Common Stock, respectively. The Inducement Warrants have a three-year term and will be immediately exercisable. Each Inducement Warrant is exercisable at $2.20 per share of Common Stock. The Company accounted for the Inducement Warrants in accordance with the guidance contained in ASC 480 and were classified as equity instruments. On the date of issuance, the fair value of the Inducement Warrants was approximately $0.7 million. On July 1, 2023, Messrs. Fernandez and Barreto exercised the Inducement Warrants on a cashless basis and were issued 96,068 and 15,169 common stock shares, respectively. As of March 31, 2024, the fair value of the remaining Inducement Warrants was approximately $0.2 million.

Note 14. Stock-Based Compensation

Stock-based compensation is recorded in selling, general, and administrative expenses in the Unaudited Condensed Consolidated Statement of Operations. The Successor Company recorded total stock-based compensation expense of approximately $65,000 for the three months ended March 31, 2024. The Predecessor Company recorded total stock-based compensation expense of approximately $60,000 for the three months ended March 31, 2023. There were no income tax benefits recognized from stock-based compensation during the respective periods due to cumulative losses and valuation allowances.

Note 15. Reportable Segments

The Company has two reportable segments: (i) Pharmacy Operations, which provides prescription pharmaceuticals, compounded medications, tele-pharmacy services, COVID-19 related diagnostics and vaccinations, anti-retroviral medications, medication therapy management, the supply of prescription medications to long-term care facilities, medication adherence packaging, and contracted pharmacy services for 340B covered entities under the 340B Drug Discount Pricing Program and (ii) Third-Party Administration, which provides data management and reporting services to support health care organizations. Operating expenses are reflected in the segment in which the costs are incurred.

Corporate includes certain assets and expenses related to corporate functions that are not specifically attributable to an individual reportable segment, such as legal, public company expenses, tax compliance and senior executive staff.

The Company evaluates the performance of each of the segments based on income (loss) from operations. While the Company believes there are synergies between the two business segments, the segments are managed separately because each requires different business strategies.

The accounting policies used to determine the results of the operating segments are the same as those utilized for the Consolidated Financial Statements as a whole. There are no inter-segment sales or transfers.

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

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	*Successor*
	*Three Months Ended March 31, 2024*
	*Pharmacy Operations*			*Third-Party Administration*		*Corporate*			*Total Consolidated*
Sales of products, net	$	11,255		$	—	$	—		$	11,255
Revenues from services		2,840			533		—			3,373
Revenues, net		14,095			533		—			14,628

Costs of products		10,560			—		—			10,560
Costs of services		—			63		—			63
Costs of revenue		10,560			63		—			10,623

Gross profit		3,535			470		—			4,005

Operating expenses:
Salaries and wages		1,901			33		182			2,116
Professional fees		4			81		393			478
Depreciation and amortization		615			156		5			776
Selling, general, and administrative		770			7		123			900
Impairment loss (1)		132			—		—			132
Total operating expenses		3,422			277		703			4,402
Income (loss) from operations		113			193		(703	)		(397	)
Other (expense) income		(14	)		—		39			25
Income (loss) before income taxes		99			193		(664	)		(372	)
Provision for income taxes		—			—		—			—
Net income (loss)	$	99		$	193	$	(664	)	$	(372	)

(1) Pharmacy Operations impairment losses during the three months ended March 31, 2024 was related to the write-down of a right-of-use asset as a result of taking the leased equipment out of service and not returning to service in the future.

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	Predecessor
	Three Months Ended March 31, 2023
	Pharmacy Operations			Third-Party Administration		Corporate			Total Consolidated
Sales of products, net	$	9,794		$	—	$	—		$	9,794
Revenues from services		1,081			517		—			1,598
Revenues, net		10,875			517		—			11,392

Costs of products		8,196			—		—			8,196
Costs of services		—			49		—			49
Costs of revenue		8,196			49		—			8,245

Gross profit		2,679			468		—			3,147

Operating expenses:
Salaries and wages		1,445			33		120			1,598
Professional fees		383			96		295			774
Depreciation and amortization		60			4		—			64
Selling, general, and administrative		588			4		105			697
Total operating expenses		2,476			137		520			3,133
Income (loss) from operations		203			331		(520	)		14
Other expense		(13	)		—		(132	)		(144	)
Income (loss) before income taxes		190			331		(652	)		(130	)
Provision for income taxes		—			—		—			—
Net income (loss)	$	190		$	331	$	(652	)	$	(130	)

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	*Pharmacy Operations*		*Third-Party Administration*		*Corporate*		*Eliminations (1)*			*Total Consolidated*
Total Assets as of March 31, 2024 (Successor)	$	39,439	$	4,733	$	—	$	(2,774	)	$	41,398
Total Assets as of December 31, 2023 (Successor)	$	38,516	$	4,573	$	69	$	(2,774	)	$	40,384

(1) Eliminations consist of investments in subsidiaries between the Pharmacy Operations segment and Corporate.

Capital expenditures for the Pharmacy Operations reporting segment were approximately $0.1 million for the three months ended March 31, 2024 (Successor period). Capital expenditures for the Pharmacy Operations reporting segment were approximately $17,000 for the three months ended March 31, 2023 (Predecessor period). There were no capital expenditures for the TPA reporting segment during the three months ended March 31, 2024 (Successor period) and the three months ended March 31, 2023 (Predecessor period).

Note 16. Related Party Transactions

Successor Company

During the three months ended March 31, 2024, the Successor Company paid $60,000 to NextPlat as management fees in accordance with the amended Management Services Agreement (the “Management Agreement”) dated May 1, 2023.

Predecessor Company

On February 1, 2023, the Predecessor Company entered into the Management Agreement with NextPlat Corp to provide certain management and administrative services to the Predecessor Company for $25,000 per month fee. On May 1, 2023, the Management Agreement was amended to update the fee to $20,000 per month. During the three months ended March 31, 2023, the Predecessor Company paid $50,000 to NextPlat as management fees.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included under Part I, Item I of this Quarterly Report on Form 10-Q. In addition, reference should be made to our audited Consolidated Financial Statements and notes thereto and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2023 Form 10-K. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs, including potential impacts on our business, results of operations and financial condition. Our actual results may differ materially from those contained in or implied by any forward-looking statements. The financial information included in this discussion and in our consolidated financial statements may not be indicative of our consolidated financial position, operating results, changes in equity and cash flows in the future. See “Special Note Regarding Forward-Looking Statements” included earlier in this report.

Note on Financial Presentation

In connection with the change in control on July 1, 2023, the application of push-down accounting created a new basis of accounting for all assets and liabilities based on their fair value at the date of acquisition. As a result, our financial position, results of operations, and cash flows subsequent to the acquisition on July 1, 2023 have been segregated to indicate pre-acquisition and post-acquisition periods. The pre-acquisition period through June 30, 2023 is referred to as the “Predecessor”. The post-acquisition period, July 1, 2023 and forward, includes the impact of push-down accounting and is referred to as the “Successor”.

The information contained below should be read in conjunction with our historical condensed consolidated financial statements and the related notes.

Overview

Progressive Care Inc. was incorporated under the laws of the state of Delaware on October 31, 2006 under the name Progressive Training, Inc. We changed our name to Progressive Care Inc. in connection with a merger with Progressive Care Inc. on November 23, 2010. We are a personalized healthcare services and technology company which provides prescription pharmaceutical and risk and data management services to healthcare organizations and providers.

We currently own and operate five pharmacies, which generate most of our pharmacy revenues, which is derived from dispensing medications to our patients. We also provide patient health risk reviews and free same-day delivery.

We provide TPA, data management, COVID-19 related diagnostics and vaccinations, prescription pharmaceuticals, compounded medications, telepharmacy services, anti-retroviral medications, medication therapy management, the supply of prescription medications to long-term care facilities, medication adherence packaging, contracted pharmacy services for 340B covered entities under the 340B Drug Discount Pricing Program, and health practice risk management. We are focused on improving the lives of patients with complex chronic diseases through a patient and provider engagement and our partnerships with payors, pharmaceutical manufacturers, and distributors. We offer a broad range of solutions to address the dispensing, delivery, dosing, and reimbursement of clinically intensive, high-cost drugs.

Pharmco provides contracted pharmacy services for 340B covered entities under the 340B Drug Discount Pricing Program. Under the terms of these agreements, we act as a pass-through for reimbursements on prescription claims adjudicated on behalf of the 340B covered entities in exchange for a dispensing fee per prescription. These fees vary by the covered entity and the level of service provided by us.

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Our focus is on complex chronic diseases that generally require multiyear or lifelong therapy, which drives recurring revenue and sustainable growth. Our pharmacy services revenue growth is from expanding our services, new drugs coming to market, new indications for existing drugs, volume growth with current clients, and addition of new customers due to our focus on higher patient engagement, benefit of free delivery to the patient, and clinical expertise. We also expanded revenue growth through the signing of new contract pharmacy service and data management contracts with 340B covered entities.

ClearMetrX includes data management and TPA services for 340B covered entities, pharmacy analytics, and programs to manage HEDIS Quality Measures including Medication Adherence. These offerings cater to the need for frontline providers to understand best practices, patient behaviors, care management processes, and the financial mechanisms behind these decisions. We provide data access, and actionable insights that providers and support organizations can use to improve their practice and patient care. The Company’s TPA services include management of wholesale accounts, patient eligibility with regard to the 340B drug program, development and review of 340B policies and procedures, and management of receivables.

Our 340MetrX platform provides 340B covered entities with data insights to effectively operate and maximize the benefits of the 340B program. The platform allows program administrators to manage, in real time, data related to revenue, virtual inventory, drug replenishment and reconciliation, detailed prescription history analysis, customized ordering data with major wholesalers, patient information, drug prescribing trends, and customized financial breakdowns. The 340MetrX software enhances services currently provided to 340B covered entities by complementing in-house 340B experts with a reporting platform aiming to maximize the limited resources in the 340B space through identification and validation of claims. 340MetrX allows our data analytics processes to be more efficient, giving our team the ability to seamlessly manage data for a much greater number of 340B covered entities in Florida, with potential to be scaled nationwide.

Critical Accounting Policies and Estimates

There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation included in our 2023 Form 10-K. The most recently adopted accounting pronouncements and accounting pronouncements to be adopted by the Company are described in Note 3 in the Notes to our Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Results of Operations

Three months ended March 31, 2024 compared to the three months ended March 31, 2023

The following table summarizes our results of operations (in thousands):

	Successor			Predecessor
	Three Months Ended March 31, 2024			Three Months Ended March 31, 2023			$ Change			% Change
Total revenues, net	$	14,628		$	11,392		$	3,236			28	%
Total cost of revenue		10,623			8,245			2,378			29	%
Total gross profit		4,005			3,147			858			27	%
Operating expenses		4,402			3,133			1,269			41	%
(Loss) income from operations		(397	)		14			(411	)		(2936	)%
Other income (expense)		25			(144	)		169			(117	)%
Loss before income taxes		(372	)		(130	)		(242	)		186	%
Provision for income taxes		—			—			—			—
Net loss attributable to common shareholders	$	(372	)	$	(130	)	$	(242	)		186	%

We recognized overall revenue from operations of approximately $14.6 million and $11.4 million during the three months ended March 31, 2024 and 2023, respectively, an overall increase of approximately $3.2 million, or 28%. The increase in revenue was primarily attributable to an increase in prescription revenue, net of PBM fees of approximately $1.6 million and an increase in 340B contract revenue of approximately $1.7 million, which was offset by a decrease in COVID-19 testing revenue of approximately $45,000, when compared to the prior year period.

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Overall gross profit margins decreased from 28% for the three months ended March 31, 2023 to 27% for the three months ended March 31, 2024. The increase in gross profit of approximately $0.9 million was primarily attributable to (i) a favorable increase in reimbursement rates per prescription of approximately $1.0 million, which was offset by the unfavorable increase in drug cost per prescription of approximately $1.9 million; (ii) a favorable increase in pharmacy prescription volume of approximately $0.1 million; and (iii) a favorable increase in 340B contract revenue of approximately $1.7 million. The unfavorable significant increase in drug cost per prescription, negatively impacted our overall gross profit margin.

Loss from operations was approximately $0.4 million for the three months ended March 31, 2024, compared to an income from operations of approximately $14,000 for the three months ended March 31, 2023, a decrease of approximately $0.4 million primarily attributable to the increase in operating expenses, partially offset by the increase in gross profits. See below for further explanation relating to the increase in operating expenses.

Revenue

Our revenues were as follows (in thousands):

	Successor				Predecessor
	Three Months Ended March 31, 2024				Three Months Ended March 31, 2023
	Dollars		% of Revenue		Dollars		% of Revenue		$ Change			% Change
Sales of products, net
Prescription revenue, net of PBM fees	$	11,324	77	%	$	9,771	86	%	$	1,553			16	%
COVID-19 testing revenue		—	—	%		45	—	%		(45	)		(100	)%
Subtotal		11,324	77	%		9,816	86	%		1,508			15	%
Revenues from services:
340B contract revenue		3,304	23	%		1,576	14	%		1,728			110	%
Revenues, net	$	14,628	100	%	$	11,392	100	%	$	3,236			28	%

We have filled approximately 134,000 and 120,000 prescriptions during the three months ended March 31, 2024 and 2023, respectively, resulting in a favorable impact on prescription revenue of approximately $0.6 million. Revenue per prescription filled was also favorably impacted by the increase of reimbursement rates per prescription of approximately $1.0 million, when compared to the prior year period.

Dispensing fees and TPA revenue earned on our 340B contracts for the three months ended March 31, 2024 and 2023 were approximately $3.3 million and $1.6 million, respectively, an increase of approximately $1.7 million. The increase in 340B contract revenue was attributable to an increase in our existing 340B contracts of approximately $0.8 million and an increase in new 340B contract revenue of approximately $0.9 million.

Operating Expenses

Our operating expenses increased by approximately $1.3 million, or 41%, for the three months ended March 31, 2024, as compared to the prior year period. The increase was primarily attributable to the following:

●	approximately $0.7 million increase in the amortization of newly identifiable intangible assets as a result of the push-down accounting;
●	approximately $0.5 million increase in salaries and wages due to a combination of performance-based salary adjustments and additional headcount, net of attrition due to normal employee turnover;
●	approximately $0.1 million of impairment loss related to the write-down of a right-of-use asset; and
●	approximately $0.1 million increase in computer expenses.

During the three months ended March 31, 2024, the right-of-use asset impairment was a result of taking the leased equipment out of service and not returning to service in the future.

Other Income (Expense)

Other income (expense) increased by approximately $0.2 million for the three months ended March 31, 2024, as compared to the prior year period, primarily attributable to the decrease in interest expense as a result of the decrease in notes payable.

Net Loss

We had a net loss of approximately $0.4 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively. The increase in net loss was primarily attributable to the decrease in operating income.

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Non-GAAP Financial Measures

We define Adjusted EBITDA as net income (loss) before interest expense, income taxes, depreciation and amortization, stock-based compensation, and certain other items that we do not consider indicative of our ongoing operating performance (which items are itemized below). Adjusted EBITDA is a non-GAAP financial measure.

We consider Adjusted EBITDA to be a supplemental measure of our operating performance. We present Adjusted EBITDA because it is used by our Board of Directors and management to evaluate our operating performance. It is also used as a factor in determining incentive compensation, for budgetary planning and forecasting overall financial and operational expectations, for identifying underlying trends, and for evaluating the effectiveness of our business strategies. Further, we believe it assists us, as well as investors, in comparing performance from period to period on a consistent basis. Adjusted EBITDA is not in accordance with, or an alternative to, measures prepared in accordance with U.S. GAAP. In addition, this non-GAAP measure is not based on any comprehensive set of accounting rules or principles.

As a non-GAAP measure, Adjusted EBITDA has limitations in that it does not reflect all the amounts associated with our results of operations as determined in accordance with U.S. GAAP and therefore you should not consider Adjusted EBITDA in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. You should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in the presentation, and we do not infer that our future results will be unaffected by unusual or non-recurring items. Adjusted EBITDA does not include:

●	depreciation expense from property and equipment or amortization expense from intangible assets (and although they are non-cash charges, the assets being depreciated/amortized will often have to be replaced in the future);
●	interest expense on our debt and capital leases or interest income we earn on cash;
●	the amounts we paid in taxes or other components of our tax provision (which reduces cash available to us);
●	change in fair value of derivatives;
●	certain expenses associated with our acquisition activities; or
●	the impact of stock-based compensation or other matters we do not consider to be indicative of our ongoing operations.

Further, other companies in our industry may calculate Adjusted EBITDA differently than we do and these calculations may not be comparable to our Adjusted EBITDA metric. Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net loss attributable to us and our financial results presented in accordance with U.S. GAAP.

The table below presents a reconciliation of the most directly comparable U.S. GAAP measure, net loss attributable to us, to Adjusted EBITDA for the periods indicated below (in thousands):

	Successor			Predecessor
	Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
Net loss	$	(372	)	$	(130	)
Interest expense		16			150
Depreciation and amortization expense		776			64
Consolidated adjusted EBITDA	$	420		$	84

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Liquidity and Capital Resources

Cash Flows

The following table summarizes our cash flows:

	Successor			Predecessor
	Three Months Ended March 31, 2024			Three Months Ended March 31, 2023
Net change in cash from:
Operating activities	$	(2,277	)	$	827
Investing activities		(23	)		(17	)
Financing activities		(51	)		(101	)
Change in cash		(2,351	)		709
Cash at end of period	$	5,544		$	7,452

Net cash used in operating activities totaled approximately $2.3 million for the three months ended March 31, 2024, compared to net cash provided by operating activities of approximately $0.8 million for the same period in 2023. Operational cash flows decreased primarily due to the timing difference of accounts payable to our 340B covered entities and receiving the reimbursements related to those 340B claims. The payments that were due to the covered entities at the end of the first quarter of 2024 were paid on the last business day of the quarter, however the collections of reimbursements for the 340B claims were not received until the first business day of the second quarter of 2024.

Net cash used in investing activities was approximately $23,000 and $17,000 for the three months ended March 31, 2024 and 2023, respectively. The cash outflow in 2024 was attributable to the purchase of a new car for our fleet. The cash outflow in 2023 was attributable to the purchase of pharmacy equipment.

Net cash used in financing activities was approximately $0.1 million for both the three months ended March 31, 2024 and 2023, due to the payments made on notes payable and finance leases.

Liquidity and Capital Resources

We have an accumulated deficit of approximately $34.8 million and $34.4 million as of March 31, 2024 and December 31, 2023, respectively. We have spent, and expect to continue to spend, additional amounts in connection with implementing our business strategy.

For the three months ended March 31, 2024, we had a net loss of approximately $0.4 million and a decrease in net cash position of approximately $2.4 million. The Company’s cash position was approximately $5.5 million as of March 31, 2024.

On May 5, 2023, the Company and NextPlat entered into a First Amendment (the “Amendment”) to that certain Securities Purchase Agreement dated November 16, 2022 (the “Debenture Purchase Agreement”). Under the Debenture Purchase Agreement, we agreed to issue, and NextPlat agreed to purchase, from time to time during the three-year term of the Debenture Purchase Agreement, up to an aggregate of $10 million of secured convertible debentures from NextPlat (the “Debentures”). Pursuant to the Amendment, NextPlat and the Company agreed to amend the Debenture Purchase Agreement and the form of Debenture attached as an exhibit thereto to have a conversion price of $2.20 per share. As of the date these consolidated financial statements were issued, no Debentures have been purchased by NextPlat under the Debenture Purchase Agreement.

Management believes that the above transactions, along with our present cash position and the cash we expect to generate from operating activities, will allow us to operate and meet our obligations for at least 12 months from the issuance date of these consolidated financial statements.

Off-Balance Sheet Arrangements

As of March 31, 2024, we had no material off-balance sheet arrangements or obligations that have or are reasonably likely to have a current or future effect on our financial condition, change in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.

Recent Accounting Pronouncements

The most recently adopted accounting pronouncements and accounting pronouncements to be adopted by the Company are described in Note 3 in the Notes to our Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company, as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, for this reporting period and are not required to provide the information required under this Item.

ITEM 4.

CONTROLS AND PROCEDURES

(a) Evaluation of disclosure controls and procedures. Based on management’s evaluation (with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO)), as of the end of the period covered by this report, our CEO and CFO have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)), were not effective due to the material weakness described below to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Inherent Limitations on Controls. Management, including the CEO and CFO, does not expect that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Previously Reported Material Weakness in Internal Controls Over Financial Reporting

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis. As disclosed in Part II Item 9A. “Controls and Procedures” in our annual report on Form 10-K for the year ended December 31, 2023, during fiscal year 2023 we identified a material weakness in our internal control over financial reporting. The material weakness is related to the improper accounting for the change in deferred tax valuation allowances resulting from the July 1, 2023 business combination without transfer of consideration. This material weakness also arises from our lack of personnel with an appropriate level of knowledge and experience in accounting for complex or non-routine transactions. Subsequent to the identification of this material weakness, we conducted additional procedures and determined that there was no material misstatement in our consolidated financial statements for the year ended December 31, 2023.

Remediation of Previously Reported Material Weakness

During the three months ended March 31, 2024, we took the following measures as part of our previously disclosed remediation plan: a.) providing education and training to senior accounting staff as it relates to complex and non-routine transactions; and b.) consulting with accounting and tax experts to provide appropriate guidance with the accounting for complex and non-routine transactions.

We are committed to ensuring that our internal control over financial reporting is designed and operating effectively. We are continuing to test the design of the new and enhanced controls related to the previously reported material weakness over the review of complex or non-routine transactions. We believe that these new and enhanced controls will be fully implemented and validated by the end of the third quarter of 2024. However, the material weakness will not be considered remediated until the new and enhanced controls have been operating effectively for a sufficient period of time.

(c) Changes in internal controls over financial reporting. Other than as discussed above, there has been no change in our internal control over financial reporting during our fiscal quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

None.

ITEM 1A.

RISK FACTORS

Investors should carefully consider the risks in the “Risk Factors” in Part 1: Item 1A of our 2023 Form 10-K, and our other filings with the SEC. These risks are not the only ones facing the Company. Additional risks not currently known to us or that we currently believe are immaterial may also impair our business operations. Any of these risks could adversely affect our business, cash flows, financial condition, and results of operations. The trading price of our common stock could fluctuate due to any of these risks, and investors may lose all or part of their investment. In assessing these risks, investors should also refer to the other information contained or incorporated by reference in this Quarterly Report on Form 10-Q. There have been no material changes in our risk factors from those discussed in our 2023 Form 10-K.

ITEM 2.

UNREGISTERED SALE OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES

On January 2, 2024, the Company issued 15,923 shares of common stock valued at $49,998, or $3.14 per share, to Joseph Ziegler pursuant to a Directors Agreements dated December 9, 2021.

On January 25, 2024, the Company issued 2,027 shares of common stock valued at $15,000, or $7.40 per share, to an employee as stock-based compensation.

During the three months ended March 31, 2024, there were no repurchases of our common stock.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

Rule 10b5-1 Trading Arrangement

During the three months ended March 31, 2024, no director or officer of the Company adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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ITEM 6.

EXHIBITS

31.1	Certification of Chairman and Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chairman and Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its Inline XBRL tags are embedded within the Inline XBRL document.
101	The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Progressive Care Inc.

Date: May 15, 2024	By:	/s/ Charles M. Fernandez
		Charles M. Fernandez Chief Executive Officer
		(Principal Executive Officer)

Date: May 15, 2024	By:	/s/ Cecile Munnik
		Cecile Munnik Chief Financial Officer (Principal Financial and Accounting Officer)

Progressive Care Inc. 10-Q