UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| (Mark One) | ||
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended | |
| 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:
Progressive Care Inc.
(Exact name of registrant as specified in its charter)
| | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | |
| (Address of principal executive offices) | (Zip Code) |
(
(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.
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).
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 ☐ |
| | 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
The number of shares of the registrant’s common stock outstanding as of August 9, 2024 was
PROGRESSIVE CARE INC. AND SUBSIDIARIES
INDEX
| Page |
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| PART I. |
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| Item 1. |
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| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
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| Item 4. |
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| PART II. |
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| Item 1. |
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| Item 1A. |
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| Item 2. |
Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
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| Item 3. |
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| Item 4. |
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| Item 5. |
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| Item 6. |
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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 and six months ended June 30, 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.
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 | |||||||
| June 30, 2024 | December 31, 2023 | ||||||
| Assets | |||||||
| Current Assets | |||||||
| Cash | $ | $ | |||||
| Accounts receivable – trade, net | |||||||
| Receivables - other, net | |||||||
| Inventory, net | |||||||
| Prepaid expenses | |||||||
| Total Current Assets | |||||||
| Property and equipment, net | |||||||
| Other Assets | |||||||
| Goodwill | |||||||
| Intangible assets, net | |||||||
| Operating right-of-use assets, net | |||||||
| Finance right-of-use assets, net | |||||||
| Deposits | |||||||
| Total Other Assets | |||||||
| Total Assets | $ | $ | |||||
| Liabilities and Stockholders’ Equity | |||||||
| Current Liabilities | |||||||
| Accounts payable and accrued liabilities | $ | $ | |||||
| Notes payable | |||||||
| Operating lease liabilities | |||||||
| Finance lease liabilities | |||||||
| Total Current Liabilities | |||||||
| Long-term Liabilities | |||||||
| Notes payable, net of current portion | |||||||
| Operating lease liabilities, net of current portion | |||||||
| Finance lease liabilities, net of current portion | |||||||
| Total Liabilities | |||||||
| Commitments and Contingencies | — | — | |||||
| Stockholders’ Equity | |||||||
| Preferred Stock, Series A ($ par value, shares authorized and designated; shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively) | |||||||
| Preferred Stock, Series B ($ par value, shares authorized and designated; issued and outstanding as of June 30, 2024 and December 31, 2023, respectively) | |||||||
| Common stock ($ par value, shares authorized; and issued and outstanding as of June 30, 2024 and December 31, 2023, respectively) | |||||||
| Additional paid-in capital | |||||||
| Accumulated deficit | ( | ) | ( | ) | |||
| Total Stockholders’ Equity | |||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | |||||
See accompanying notes to the unaudited condensed consolidated financial statements.
PROGRESSIVE CARE INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
| Successor |
Predecessor |
Successor |
Predecessor |
|||||||||||||
| Three Months Ended June 30, 2024 |
Three Months Ended June 30, 2023 |
Six Months Ended June 30, 2024 |
Six Months Ended June 30, 2023 |
|||||||||||||
| Sales of products, net |
$ | $ | $ | $ | ||||||||||||
| Revenues from services |
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| Revenues, net |
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| Costs of products |
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| Costs of services |
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| Costs of revenue |
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| Gross profit |
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| Operating expenses |
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| Salaries and wages |
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| Professional fees |
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| Depreciation and amortization |
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| Selling, general, and administrative |
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| Impairment loss |
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| Total operating expenses |
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| (Loss) income from operations |
( |
) | ( |
) | ||||||||||||
| Other income (expense): |
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| Debt conversion expense |
( |
) | ( |
) | ||||||||||||
| Gain on sale or disposal of property and equipment |
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| Interest income |
||||||||||||||||
| Interest expense |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Total other income (expense) |
( |
) | ( |
) | ||||||||||||
| Loss before income taxes |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| Provision for income taxes |
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| Net loss attributable to common shareholders |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Basic and diluted weighted average loss per common share |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average number of common shares outstanding during the period – basic and diluted |
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See accompanying notes to the unaudited condensed consolidated financial statements.
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) |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2024 |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Balance at March 31, 2024 (Successor) |
( |
) | ||||||||||||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2024 |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Balance at June 30, 2024 (Successor) |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| 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, 2022 (Predecessor) |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2023 |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Balance at March 31, 2023 (Predecessor) |
( |
) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for PIPE transaction |
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| Cost associated with issuance of common stock for PIPE transaction |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Issuance of common stock and common stock purchase warrants for debt conversion |
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| Net loss for the three months ended June 30, 2023 |
— | — | — | ( |
) | ( |
) | |||||||||||||||||||||||||||||
| Balance at June 30, 2023 (Predecessor) |
$ | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||||||||||||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
PROGRESSIVE CARE INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Successor |
Predecessor |
|||||||
| Six Months Ended June 30, 2024 |
Six Months Ended June 30, 2023 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
( |
) | $ | ( |
) | |||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
| Depreciation |
||||||||
| Change in provision for doubtful accounts |
( |
) | ||||||
| Amortization of debt issuance costs and debt discounts |
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| Stock-based compensation |
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| Debt conversion expense |
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| Amortization of right-of-use assets - finance leases |
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| Amortization of right-of-use assets - operating leases |
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| Change in accrued interest on notes payable |
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| Amortization of intangible assets |
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| Gain on sale or disposal of property and equipment |
( |
) | ( |
) | ||||
| Impairment loss |
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| Changes in operating assets and liabilities: |
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| Accounts receivable |
( |
) | ( |
) | ||||
| Grant receivable |
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| Inventory |
( |
) | ||||||
| Prepaid expenses |
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| Deposits |
( |
) | ||||||
| Accounts payable and accrued liabilities |
( |
) | ||||||
| Operating lease liabilities |
( |
) | ( |
) | ||||
| Net cash provided by operating activities |
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| Cash flows from investing activities: |
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| Purchase of property and equipment |
( |
) | ( |
) | ||||
| Proceeds from sale or disposal of property and equipment |
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| Net cash used in investing activities |
( |
) | ( |
) | ||||
| Cash flows from financing activities: |
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| Payments on notes payable |
( |
) | ( |
) | ||||
| Payments on finance lease liabilities |
( |
) | ( |
) | ||||
| Issuance of common stock for PIPE transaction |
||||||||
| Payment of stock issuance costs |
( |
) | ||||||
| Net cash (used in) provided by financing activities |
( |
) | ||||||
| Increase in cash |
||||||||
| Cash at beginning of period |
||||||||
| Cash at end of period |
$ | $ | ||||||
| Supplemental disclosures of cash flow information: |
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| Cash paid for interest |
$ | $ | ||||||
| Cash paid for income taxes |
$ | $ | ||||||
| Supplemental schedule of non-cash investing and financing activities: |
||||||||
| Debt conversion of long-term notes payable and accrued interest, net of unamortized debt discount and debt issuance costs |
$ | $ | ||||||
| Issuance of common stock and common stock purchase warrants for debt conversion |
$ | $ | ||||||
See accompanying notes to the unaudited condensed consolidated financial statements.
PROGRESSIVE CARE INC. AND SUBSIDIARIES
Notes to the Condensed Consolidated Financial Statements
June 30, 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
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 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
On April 12, 2024, the Company entered into a Merger Agreement and Plan of Reorganization (the “Merger Agreement”) with NextPlat (“Parent”) and Progressive Care LLC, 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. 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.
The Company’s shareholders will consider a proposal to approve the Merger at the Company’s annual meeting which is set to occur on September 13, 2024. Shareholders on record on July 29, 2024 will be entitled to vote at the Company’s annual meeting.
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 and six months ended June 30, 2023. Additionally. operating results for interim periods are not necessarily indicative of the results that can be expected for a full year.
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 six months ended June 30, 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 $
Concentrations
Suppliers:
The Company had significant concentrations with
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 | |||||||
| Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |||||||
| A | % | % | ||||||
| B | % | % | ||||||
| C | % | % | ||||||
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 September – December 2023 claims were clawed back by these PBMs in May – June 2024). As of December 31, 2023, DIR fees that were not collected at the time of claim settlement, the Company recorded an accrued liability for estimated DIR fees that were fully collected by the PBMs by the end of the second quarter of 2024. Effective January 1, 2024, all PBMs began charging DIR fees at the time of the settlement of a pharmacy claim.
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
The Company has evaluated subsequent events through August 13, 2024, the date the unaudited condensed consolidated financial statements were available to be issued.
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 June 30, 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 $
Note 5. Revenue
The following table disaggregates net revenues by categories (in thousands):
| Successor | Predecessor | |||||||
| Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | |||||||
| Sales of products, net | ||||||||
| Prescription revenue, net of PBM fees | $ | $ | ||||||
| COVID-19 testing revenue | ||||||||
| Other revenue | ||||||||
| Subtotal | ||||||||
| Revenues from services: | ||||||||
| 340B contract revenue | ||||||||
| Revenues, net | $ | $ | ||||||
| Successor | Predecessor | |||||||
| Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |||||||
| Sales of products, net | ||||||||
| Prescription revenue, net of PBM fees | $ | $ | ||||||
| COVID-19 testing revenue | ||||||||
| Other revenue | ||||||||
| Subtotal | ||||||||
| Revenues from services: | ||||||||
| 340B contract revenue | ||||||||
| Revenues, net | $ | $ | ||||||
Note 6. Earnings (Loss) per Share
Basic earnings per share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period, 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 period 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 June 30, 2024 | Three Months Ended June 30, 2023 | |||||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Basic weighted average common shares outstanding | ||||||||
| Potentially dilutive common shares | ||||||||
| Diluted weighted average common shares outstanding | ||||||||
| Basic weighted average loss per common share | $ | ( | ) | $ | ( | ) | ||
| Diluted weighted average loss per common share | $ | ( | ) | $ | ( | ) | ||
| Potentially dilutive common shares excluded from the calculation of diluted weighted average loss per common share: | ||||||||
| Common stock purchase warrants | ||||||||
| Stock options | ||||||||
| Successor | Predecessor | |||||||
| Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | |||||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Basic weighted average common shares outstanding | ||||||||
| Potentially dilutive common shares | ||||||||
| Diluted weighted average common shares outstanding | ||||||||
| Basic weighted average loss per common share | $ | ( | ) | $ | ( | ) | ||
| Diluted weighted average loss per common share | $ | ( | ) | $ | ( | ) | ||
| Potentially dilutive common shares excluded from the calculation of diluted weighted average loss per common share: | ||||||||
| Common stock purchase warrants | ||||||||
| Stock options | ||||||||
Note 7. Accounts Receivable – Trade, net
Accounts receivable consisted of the following (in thousands):
| Successor | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Gross accounts receivable – trade | $ | $ | ||||||
| Less: allowance for credit losses | ( | ) | ( | ) | ||||
| Accounts receivable – trade, net | $ | $ | ||||||
The Successor Company decreased the allowance for credit losses in the amount of approximately $
Accounts receivable – trade, net for the Predecessor Company as of January 1, 2023 and June 30, 2023 were approximately $
Note 8. Receivables – Other, net
Receivables – Other, net consisted of the following (in thousands):
| Successor | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Performance bonuses | $ | $ | ||||||
| Customers | ||||||||
| Other | ||||||||
| $ | $ | |||||||
Performance bonuses, paid annually by PBMs, are estimated (accrued monthly) based on historical pharmacy performance and prior payments received. Other receivables are comprised of vendor credits and loans to employees.
Note 9. Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
| Successor | ||||||||||||
| Estimated Useful Life | June 30, 2024 | December 31, 2023 | ||||||||||
| Building |
| $ | $ | |||||||||
| Vehicles | 3 - 5 years | |||||||||||
| Furniture and equipment |
| |||||||||||
| Land | --- | |||||||||||
| Leasehold improvements and fixtures | Lesser of estimated useful life or life of lease | |||||||||||
| Computer equipment |
| |||||||||||
| Construction in progress | --- | |||||||||||
| Total | ||||||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||||||
| Property and equipment, net | $ | $ | ||||||||||
Depreciation expense for the Successor Company was approximately $
Note 10. Goodwill and Intangible Assets
Goodwill
During the three months ended June 30, 2024, the Company concluded that the carrying amount of the TPA reporting unit exceeded its fair value, resulting in the recognition of a non-cash goodwill impairment charge of approximately $
With the assistance of a third-party valuation firm, the fair value of the TPA reporting unit was determined using an income approach whereby the fair value was calculated utilizing discounted estimated future cash flows (level 3 nonrecurring fair value measurement). The income approach requires several assumptions including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, estimation of the long-term rate of growth for the business, estimation of the useful life over which cash flows will occur, and determination of the weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit. The long-term growth rate used in the impairment was
The changes in the carrying amount of goodwill by reporting segment during the six months ended June 30, 2024 were as follows (in thousands):
| Pharmacy Operations | Third-Party Administration | Total | ||||||||||
| Balance at December 31, 2023 | $ | $ | $ | |||||||||
| Goodwill impairment loss | ( | ) | ( | ) | ||||||||
| Balance at June 30, 2024 | $ | $ | $ | |||||||||
Intangible Assets
During the three months ended June 30, 2024, the Company performed an impairment assessment of long-lived assets due to the decline in future projected revenues and cash flows. As a result, the Company completed a recoverability test by reporting unit and concluded that the asset groups were not fully recoverable as the undiscounted expected future cash flows did not exceed their carrying amounts. The Company, with the assistance of a third-party valuation firm, determined the fair value of the asset groups using an income approach utilizing undiscounted estimated future cash flows (level 3 nonrecurring fair value measurement). The income approach requires several assumptions including estimation of future cash flows, which is dependent on internally-developed forecasts of revenue and profitability, and estimation of the useful life over which cash flows will occur. The carrying amount of certain assets in the asset group exceeded the fair value, resulting in the recognition of a non-cash impairment charge to intangible assets of approximately $
The following table provides the gross carrying amount, accumulated amortization, and net book value for each major class of intangible assets (in thousands):
| Successor | ||||||||||||||||||||||
| June 30, 2024 | December 31, 2023 | |||||||||||||||||||||
| Gross amount | Accumulated amortization | Net Amount | Gross amount | Accumulated amortization | Net Amount | |||||||||||||||||
| Pharmacy records | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Tradenames | ( | ) | ||||||||||||||||||||
| Developed technology | ( | ) | ||||||||||||||||||||
| Total intangible assets | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||
A summary of the changes to the gross carrying amount, accumulated amortization, and net book value of total intangible assets by reporting unit during the six months ended June 30, 2024 were as follows:
| Pharmacy Operations | Third-Party Administration | Total | ||||||||||
| Balances at December 31, 2023: | ||||||||||||
| Gross amount | $ | $ | $ | |||||||||
| Accumulated amortization | ( | ) | ( | ) | ( | ) | ||||||
| Net amount | ||||||||||||
| Changes during the six months ended June 30, 2024: | ||||||||||||
| Accumulated amortization expense | ( | ) | ( | ) | ( | ) | ||||||
| Impairment - gross amount | ( | ) | ( | ) | ( | ) | ||||||
| Impairment - accumulated amortization | ||||||||||||
| Net amount | ( | ) | ( | ) | ( | ) | ||||||
| Balances at June 30, 2024: | ||||||||||||
| Gross amount | ||||||||||||
| Accumulated amortization | ||||||||||||
| Net amount | $ | $ | $ | |||||||||
Amortization expense of intangible assets for the Successor Company was approximately $
The following table represents the total estimated future amortization of intangible assets for the five succeeding years and thereafter as of June 30, 2024 (in thousands):
| Successor | ||||
| Year | Amount | |||
| 2024 (remaining six months) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
Note 11. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following (in thousands):
| Successor | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| Accounts payable – trade | $ | $ | ||||||
| Accrued payroll and payroll taxes | ||||||||
| Accrued PBM fees | ||||||||
| Other accrued liabilities | ||||||||
| Total | $ | $ | ||||||
Note 12. Notes Payable
Notes payable consisted of the following (in thousands):
| Successor | ||||||||
| June 30, 2024 | December 31, 2023 | |||||||
| A. Mortgage note payable - commercial bank - collateralized | $ | $ | ||||||
| B. Note payable - uncollateralized | ||||||||
| C. Notes payable - collateralized | ||||||||
| Subtotal | ||||||||
| Less: current portion of notes payable | ( | ) | ( | ) | ||||
| Long-term portion of notes payable | $ | $ | ||||||
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 $
(B) Note Payable – Uncollateralized
As of June 30, 2024 and December 31, 2023, the uncollateralized note payable represents a noninterest-bearing loan that is due on demand from an investor.
(C) Notes Payable – Collateralized
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 $
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 $
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 $
Principal outstanding as of June 30, 2024, is expected to be repayable as follows (in thousands):
| Successor | ||||
| Year | Amount | |||
| 2024 (remaining six months) | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Total | $ | |||
Interest expense on these notes payable for the Successor Company was approximately $
Note 13. Stockholders’ Equity
Preferred Stock
The Company has
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
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
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 $
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
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 $
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 -year term of the Debenture Purchase Agreement, up to an aggregate of $
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
In addition, the Predecessor Company issued
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 $
Note 15. Reportable Segments
The Company has 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):
| Successor | ||||||||||||||||
| Three Months Ended June 30, 2024 | ||||||||||||||||
| Pharmacy Operations | Third-Party Administration | Corporate | Total Consolidated | |||||||||||||
| Sales of products, net | $ | $ | $ | $ | ||||||||||||
| Revenues from services | ||||||||||||||||
| Revenues, net | ||||||||||||||||
| Costs of products | ||||||||||||||||
| Costs of services | ||||||||||||||||
| Costs of revenue | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||