PROGRESSIVE CARE INC. – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the attached
unaudited Condensed Consolidated Financial Statements and notes thereto. In
addition to historical information, the following discussion contains
forward-looking statements that involve risks, uncertainties and assumptions.
Where possible, we have tried to identify these forward-looking statements by
using words such as "anticipate," "believe," "intends" or similar expressions.
We strongly encourage investors to carefully read the section entitled "Risk
Factors" in our Form 10-12G filed April 7, 2022 for a description of certain
risks that could, among other things, cause actual results to differ from these
forward-looking statements. We assume no responsibility to update the
forward-looking statements contained in this quarterly report on Form 10-Q. The
following should also be read in conjunction with the unaudited Condensed
Consolidated Financial Statements and notes thereto that appear elsewhere in
this report.



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. Progressive, through its wholly-owned subsidiaries,
PharmCo, LLC (referred to as "PharmCo 901"), Touchpoint RX, LLC doing business
as PharmCo Rx 1002, LLC (referred to as "PharmCo 1002"), Family Physicians RX,
Inc. doing business as PharmCoRx 1103 and PharmCoRx 1204 (referred to as "FPRX"
historically or "PharmCo 1103" and "PharmCo 1204" currently) (pharmacy
subsidiaries collectively referred to as "PharmCo"), ClearMetrX Inc., and RXMD
Therapeutics, Inc (collectively with all entities referred to as the "Company"
or "we") is a personalized healthcare services and technology company which
provides prescription pharmaceutical and risk and data management services to
healthcare organizations and providers.



We provide Third Party Administration ("TPA"), data management, COVID-19 related
diagnostics and vaccinations, prescription pharmaceuticals, compounded
medications, tele-pharmacy 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 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 innovative 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.

We currently own and operate four pharmacies, which generate most of our
revenues.

Our pharmacy revenue is derived from customized care management programs and
Medication Therapy Management ("MTM") services we deliver to our patients,
including the dispensing of their medications. We also provide patient health
risk reviews and free same-day delivery.



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 our expanding breadth of 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 expect expanded revenue growth through the signing of new
contract pharmacy service and data management contracts with 340B Covered
Entities, expansion of data management and analytics services to healthcare
organizations, and through potential acquisitions.



ClearMetrX



We formed ClearMetrX in June 2020, the Company's first wholly-owned data
management company with services designed to support health care organizations
across the country. We believe Artificial Intelligence ("AI") will improve
preventive healthcare by helping physicians make informed decisions in the
medication therapy management process. According to data from Berkeley Research
Group Industry Roundtable Report, 340B gross sales across the program is
expected to grow from $116 billion in 2021 to $280 billion in 2026.ClearMetrX
includes data management and Third Party Administration ("TPA") services for
340B Covered Entities, pharmacy analytics, and programs to manage HEDIS Quality
Measures including Medication Adherence. These offerings cater to the glaring
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 also deliver 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 and contract
pharmacies, patient eligibility with regard to the 340B drug program,
development and review of 340B policies and procedures, and management of
receivables.



During September 2022, we launched our 340Metrx Platform to help 340B covered
entities increase the number of 340B qualified claims and program savings while
supporting compliance efforts. The 340MetrX platform is a software product
developed by the Company's wholly owned subsidiary ClearMetrX that 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 software analyzes
claim records and provides a complete overview of the financial health of the
entity while diminishing the number of ineligible claims through the 340MetrX
automated review process. The 340MetrX software enhances the existing
third-party administration services ClearMetrX is currently providing to
entities by complementing in-house 340B experts with a robust reporting platform
aiming to maximize the limited resources in the 340B space through
identification and validation of missing claims, increasing the covered entity's
revenue. 340MetrX allows our data analytics processes to be significantly more
productive, giving our team an ability to seamlessly manage data for a much
greater number of 340B Covered Entities in Florida, with potential to be scaled
nationwide. We intend to take full advantage of the momentum this sector
presents and are excited to now offer customers in every part of our country a
solution that allows them to reduce efforts related to compliance and risk
mitigation, strengthen the potential to capture more revenue, and simplify

the
whole 340B process.



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Through ClearMetrX, third party administrative and data management fees for the
three months ended September 30, 2022 and 2021, was approximately $0.4 million
and $0.2 million, respectively. Third party administrative and data management
fees for the nine months ended September 30, 2022 and 2021, was approximately
$0.7 million for both periods. These fees have gross margins significantly
greater than those generated from our pharmacy operations.

Results of Operations - Three Month and Nine Month Comparisons

Our prescriptions revenues were 93% and 83% of total revenues for the three
months ended September 30, 2022 and 2021, respectively. Our prescriptions
revenues were 90% and 86% of total revenues for the nine months ended September
30, 2022 and 2021, respectively.

For the three months ended September 30, 2022 and 2021, we recognized overall
revenue from operations of approximately $10.1 million and $9.8 million,
respectively. Prescription revenue for the three months ended September 30, 2022
was approximately $9.4 million when compared to $8.1 million the same period in
2021, a 16% period over period increase. We have filled approximately 117,000
and 106,000 prescriptions during the three months ended September 30, 2022, and
2021, respectively, a 10% period over period increase in the number of
prescriptions filled. Revenue from COVID-19 testing was approximately $0.2
million and $1.3 million for the three months ended September 30, 2022, and
2021, respectively. The decrease was primarily due to lower COVID-19 testing
sales. As the COVID-19 pandemic faded worldwide, the need for testing has
decreased as it relates to travel and business continuity. However, despite the
downturn in COVID-19 testing needs, we have generated approximately $0.2 million
in COVID-19 testing revenue for the three months ended September 30, 2022. It is
difficult to predict whether these conditions will be recurring given recent
COVID-19 pandemic conditions in Florida. We are well positioned to react if
another COVID-19 outbreak occurs as we have built a reputation of being a
reliable partner for COVID-19 testing solutions. We have built reputable
relationships with well-known media productions companies and these
relationships provide us with recurring COVID-19 testing revenue.



For the nine months ended September 30, 2022 and 2021, we recognized overall
revenue from operations of approximately $30.2 million and $29.0 million,
respectively, a 4% period over period increase. Prescription revenue for the
nine months ended September 30, 2022 was approximately $27.3 million when
compared to $24.9 million the same period in 2021, a 9% period over period
increase. We have filled approximately 346,000 and 330,000 prescriptions during
the nine months ended September 30, 2022, and 2021, respectively, a 5% period
over period increase in the number of prescriptions filled. We believe this
trend will continue through the remainder of the year as the medication
adherence measures begin to impact providers performance and their future
potential monetary incentives, which are tied to their patient's adherence
measures. Revenue from COVID-19 testing was approximately $1.9 million and $2.9
million for the nine months ended September 30, 2022, and 2021, respectively. We
have recognized record COVID-19 testing revenue in January 2022 as the country
was dealing with the Delta and Omicron outbreak during that period. Since
January 2022 the demand for COVID-19 testing has slowed down as the need for
testing has decreased as it relates to travel and business continuity. It is
difficult to predict whether these conditions will be recurring given recent
COVID-19 pandemic conditions in Florida. We are well positioned to react if
another COVID-19 outbreak occurs as we have built a reputation of being a
reliable partner for COVID-19 testing solutions. We have built reputable
relationships with well-known media production companies and these relationships
provide us with recurring COVID-19 testing revenue.



During 2022 we have experienced significant decreases in the reimbursement rates
for uninsured patients enrolled in the Gilead PREP program that became effective
beginning the first quarter of 2022 that had an overall unfavorable impact on
our 340B contract revenue. Dispensing fee and third-party administration revenue
earned on our 340B contracts for the three months ended September 30, 2022 and
2021 were approximately $1.2 million and $0.7 million, respectively. Dispensing
fee and third-party administration revenue earned on our 340B contracts for the
nine months ended September 30, 2022, and 2021 were approximately $2.2 million
and $2.1 million, respectively. As a result of a decrease in reimbursement rates
from the Gilead PREP program, we experienced an unfavorable impact on our 340B
contract revenue in the amount of approximately $0.1 million for the three
months ended September 30, 2022, and an unfavorable impact of approximately $0.4
million for the nine months ended September 30, 2022. Since the beginning of the
year, 340B covered entities significantly increased patient enrollment in
alternative programs and insurance plans that provide greater reimbursements. We
are continuing to strengthen our knowledge and expertise in the 340B arena and
working towards diversifying our 340B business as well as expanding it
nationwide through the offering of our ClearMetrX software.



We continue to experience an overall reduction in the gross profit per drug
prescribed predominantly in high cost brand drugs where in many cases
reimbursements are at or below dispensed drug costs. Our gross profit per
prescription continued to be eroded through increases in contractual rate
adjustments such as generic and brand effective rates. We continue to promote
the health and well-being of the community through ensuring necessary
medications are received by the patient regardless of cost to us, and we are
working with physicians and patients alike to optimize medication practices to
dispense drugs that do not result in losses. Our pharmacy staff is trained to
recognize all opportunities to recommend and dispense less expensive generic
drug alternatives to minimize the risk of loss and potentially decrease profit
erosion. We believe this approach will benefit our pharmacy operations and
attract new business from value-based providers and health care organizations
with a focus on minimizing drug spending.



Management expects that future growth will be driven by new data management and
virtual healthcare service lines; expansion of 340B Covered Entities Third Party
Administrative services; market penetration in existing geographies; development
of enhanced healthcare B2B services; development of cash based products and
services; and continued implementation of MTM protocols.



Additionally, profitability and cash flow might be positively impacted by the
elimination of non-recurring expenses and diversification to revenue streams
outside of the third-party insurance payor model.



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NextPlat Investment and Debt Restructuring

During August 2022, we entered into a Confidential Note Purchase and Release
Agreement ("Agreement") for a recapitalization of our current debt and a
strategic investment by NextPlat Corp. (NASDAQ: NXPL, NXPLW) ("NextPlat").

Under the Agreement, the Company received an aggregate proceeds of approximately
$6.0 million from NextPlat in exchange for the issuance to NextPlat of 3,000
units of Series B Preferred Stock as well as warrants to purchase up to 3,000
shares of Series B Preferred Stock at an exercise price of $2,000 per share. In
addition, pursuant to a Securities Purchase Agreement, NextPlat's Executive
Chairman and CEO, Charles M. Fernandez, a board member, Rodney Barreto, and
certain other investors ("NextPlat investors") purchased approximately $2.8
million of the Iliad Research debt in the Company at an agreed fixed conversion
price of $0.02 per share. The Company and NextPlat investors agreed to reduce
the interest rate on the purchased debt from 10% to 5% per annum and extend the
maturity date through August 30, 2027. Dawson James Securities Inc. served as
the placement agent. The Company intends to utilize a portion of the capital
raise proceeds to further fund the deployment of its digital platforms and the
development and sale of new health, fitness, and beauty products.



On September 13, 2022, Mr. Fernandez was appointed as Chairman of the Company's
Board of Directors (the "Board") replacing Alan Jay Weisberg who has stepped
down from this position to assume the new role of Vice Chairman, remaining on
the Board, while also continuing to serve as the Company's CEO. Mr. Barreto was
appointed to the Board as Vice Chairman. We believe NextPlat's management team
and select members of its Board of Directors will contribute to the Company by
providing market-proven experience in healthcare and digital technology
including the development of new healthcare and lifestyle products to be sold
via NextPlat's global e-commerce marketplaces. On October 7, 2022, Pedro
Rodriguez, MD was appointed to the Board.



Charles M. Fernandez

Over the past 30 years, Mr. Fernandez, age 60, has successfully identified
profitable start-up and dislocation opportunities, and built significant
shareholder value, executing both private and public exits. Mr. Fernandez's
expertise in technology and healthcare includes co-founding Lakeview Health
Systems (acquired by a private equity firm for approximately $70 million) and
Continucare Corporation (acquired by Metropolitan Health Networks, Inc. for
approximately $400 million) where he served as chairman, president and CEO. He
also served as an investor, director, and Chairman of the Audit Committee of
IVAX Corporation for nearly a decade prior to its purchase by Teva
Pharmaceuticals for $8.7 billion.



Pedro Rodriguez



Dr. Rodriguez, age 74, is a medical professional with over 40 years of
experience in the psychiatry field. Currently, Dr. Rodriguez is the Chairman and
Medical Director of the Department of Psychiatry at Mount Sinai Medical Center
in Miami Beach, FL. Previously, Dr. Rodriguez was the Chairman and Medical
Director of the Department of Psychiatry at Cedar's Medical Center in Miami, FL
from 1993-2003. Dr. Rodriguez is a Diplomat in the Specialty of Psychiatry in
the American Board of Psychiatry and Neurology and is a member of the State of
Florida Board of Medical Examiners. Dr. Rodriguez has been the recipient of
numerous awards and recognized in the Miami community as one of the Community's
most eminent physicians. Dr. Rodriguez received his doctorate degree from the
University of Salamanca School of Medicine and an MBA from the University of
Miami Herbert Business School.



Rodney Barreto



Mr. Barreto, age 64, has extensive leadership and entrepreneurial experience.
Mr. Barreto has served on the Board of Directors of NextPlat Corp since January
20, 2022. Mr. Barreto is President and CEO of the Barreto Group and of Barreto
Hospitality since their founding. The Barreto Group, which was founded in 1988,
is a diversified company specializing in corporate and public affairs
consulting, real estate investment, and development. Barreto Hospitality, which
was founded in 2020, is the food, beverage, and hospitality arm of Barreto
Group, boasting a wide array of dining and entertainment venues across South
Florida. Mr. Barreto is also the founding partner of Floridian Partners, LLC.
Floridian Partners LLC, which was founded in 2000, is a consulting firm that
develops and manages effective corporate and public affairs strategies designed
to achieve specific business results. Mr. Barreto has also served as the CEO of
Barreto Capital, LLC, a private money lender, since November 2018. Mr. Barreto
has chaired the Super Bowl Host Committee a record three (3) times, in the

years
2007, 2010 and 2020

Events subsequent to September 30, 2022

Stock Option Agreements

On September 13, 2022, we agreed to issue options to Charles Fernandez. On
October 7, 2022, the Company and Mr. Fernandez entered into a stock option
agreement (the "Fernandez Option Agreement"), pursuant to which Mr. Fernandez
was granted the right to purchase additional shares in accordance with the
following vesting percentages: 2% of the Company's issued stock, which will vest
immediately, 1% of the Company's shares outstanding upon the Company's market
capitalization reaching $50 million for five consecutive trading days, 1% of the
Company's shares outstanding upon the Company's market capitalization reaching
$100 million for five consecutive trading days, and 1% of the Company's shares
outstanding upon the Company's market capitalization reaching $200 million for
five consecutive trading days, as detailed in his employment stock option
agreement.



On September 13, 2022, the Company agreed to issue options to Rodney Barreto On
October 7, 2022, the Company and Mr. Barreto entered into a stock option
agreement (the "Fernandez Option Agreement"), pursuant to which Mr. Barreto was
granted the right to purchase additional shares in accordance with the following
vesting percentages: 1% of the Company's issued stock, which will vest
immediately, 1% of the Company's shares outstanding upon the Company's market
capitalization reaching $50 million for five consecutive trading days, 1% of the
Company's shares outstanding upon the Company's market capitalization reaching
$100 million for five consecutive trading days, and 1% of the Company's shares
outstanding upon the Company's market capitalization reaching $200 million for
five consecutive trading days, as detailed in his employment stock option
agreement.

Amendments to Officer Employment Agreements

On October 7, 2022, the Board approved the acceleration of vesting for certain
Restricted Stock Units ("RSU's") previously awarded to Alan Jay Weisberg, the
Company's Chief Executive Officer and co-Vice Chairman and Birute Norkute, the
Company's Chief Operating Officer and entered into amendments to the Company's
respective employment agreements with Mr. Weisberg and Ms. Norkute (the
"Amendment to Amended and Restated Employment Agreement"). Pursuant to the
Amendment to Amended and Restated Employment Agreement, 15,000,000 RSUs and
5,000,000 RSUs vested and were awarded to Alan Jay Weisberg and Birute Norkute,
respectively, as of the date of Amendment to Amended and Restated Employment
Agreement



COVID-19 Update



The impact of the COVID-19 pandemic has rapidly evolved around the globe,
causing disruption in the U.S. and global economies. Although the global economy
continued reopening in 2022 and robust economic activity has supported a
continued recovery, certain geographies, most notably China, have experienced
setbacks.



The uncertainty surrounding the COVID-19 pandemic, including uncertainty
regarding new variants of COVID-19 that have emerged and other factors have and
may continue to contribute to significant volatility in the global markets.
While vaccine availability and uptake has increased, the longer-term
macro-economic effects on global supply chains, inflation, labor shortages and
wage increases continue to impact many industries. COVID-19 and the current
financial, economic and capital markets environment, and future developments in
these and other areas present uncertainty and risk with respect to our
performance, financial condition, and results of operations.



The ultimate magnitude of COVID-19, including the full extent of the material
negative impact on our financial and operational results, will depend on future
developments, such as the duration and severity of the pandemic, the extent of
any additional increases in cases across the United States, and the related
length of its impact on the global economy, as well as the timing and
availability of effective medical treatments and vaccines, which remain
uncertain and cannot be predicted at this time. The resumption of our normal
business operations may be delayed or constrained by lingering effects of
COVID-19 on our customers, suppliers and/or third-party service providers.
Furthermore, the extent to which our mitigation efforts are successful, if at
all, is not currently ascertainable. Due to the daily evolution of the COVID-19
pandemic and the responses to curb its spread, we cannot predict the full impact
of the COVID-19 pandemic on our business and results of operations, but our
business, financial condition, results of operations and cash flows have already
been materially adversely impacted, and we anticipate they will continue to be
adversely affected by the COVID-19 pandemic and its negative effects on global
economic conditions. Any recovery from the COVID-19 pandemic and related
economic impact may also be slowed or reversed by a variety of factors, such as
any increase in COVID-19 infections. Even after the COVID-19 pandemic has
subsided, we may continue to experience adverse impacts to our business as a
result of its national and, to some extent, global economic impact, including
the current recession and any recession that may occur in the future.



6







For the nine months ended September 30, 2022 and 2021, we earned approximately
$1.9 million and $2.9 million, respectively from COVID-19 testing. We recognized
record COVID-19 testing revenue in January 2022 as the country was dealing with
the Delta and Omicron outbreak during that period. Since January 2022 the cases
of COVID-19 infections and demand for COVID-19 testing have slowed down. It is
difficult to predict whether these conditions will be recurring given recent
COVID-19 pandemic conditions in Florida. We are well positioned to react if
another COVID-19 outbreak occurs as we have built a reputation of being a highly
reliable partner for COVID-19 testing solutions. We have built reputable
relationships with well-known media productions companies and these
relationships provide us with recurring COVID-19 testing revenue.



With the FDA's recent revision of the drug's emergency use authorization, as of
July 7, 2022 our Pharmacists here at PharmCo, with some limitations, can now
prescribe Paxlovid, COVID-19 antiviral pill, directly to patients who face high
risks for severe COVID-19. Pharmco has Paxlovid and Molnupiravir (COVID positive
therapies) in stock and are able to dispense immediately to patients when
prescribed to treat and minimize or reduce the symptoms of COVID. Paxlovid is
authorized to treat mild to moderate COVID-19 in adults and in kids ages 12 and
older who weigh at least 88 pounds. Patients who report a positive test are
eligible for Paxlovid under the FDA authorization.

Products and Services and their Markets

Pharmacy operations



We provide prescription pharmaceuticals, compounded medications, tele-pharmacy
services, anti-retroviral medications, medication therapy management, the supply
of prescription medications to long term care facilities, contracted pharmacy
services for 340B Covered Entities under the 340B Drug Discount Pricing Program,
and health practice risk management. We improve the lives of patients with
complex chronic diseases through our partnerships with patients, payors,
pharmaceutical manufacturers and distributors, and physicians. We offer a broad
range of innovative solutions to address the dispensing, delivery, dosing, and
reimbursement of clinically intensive, high-cost drugs. We also provide patient
health risk reviews and free same-day delivery. On a trailing twelve months
basis, we fill on average approximately 38,000 prescriptions per month. We
believe we are well positioned to continue expanding our market share in the
pharmacy industry.



We offer a variety of value-added services for no additional charge that further
encourage satisfaction across all medication stake holders and enhance loyalty
and key performance metrics. These services include language support for broad
demographics, prior authorization assistance, same-day home-medication delivery,
on site provider consultation services, reporting and analytics, customized
medication adherence packaging solutions, and patient advocacy. Our pharmacies
accept most major insurance plans and provide access to co-pay assistance
programs, discount and manufacturer coupons, and competitive cash payment
options. We sell common blood pressure, statin and other common drugs, and
dispense either brand name or generic drugs according to the doctor's
prescription. We also offer e-commerce of over-the-counter products, certain
disease testing, and vaccinations.



We enhance patient adherence to complex drug regimens, collect and report data,
and ensure effective dispensing of medications to support the needs of patients,
providers, and payors. Our patient and provider support services ensure
appropriate drug initiation, facilitate patient compliance and persistence, and
capture important information regarding safety and effectiveness of the
medications that we dispense.



7

We provide contracted pharmacy services for 340B Covered Entities under the 340B
Drug Discount Pricing Program. The drugs are owned by the 340B Covered Entity up
until sale, so we do not incur out of pocket costs for this drug inventory.
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 and
receive a dispensing fee per prescription. These fees vary by the covered entity
and the level of service we provide.



For our Long-Term Care customers, we provide purchasing, custom packaging and
dispensing of both prescription and non-prescription pharmaceutical products. We
utilize a best practice unit-of-dose packaging system as opposed to the
traditional vials, using the same robotic packaging systems currently used by
chain, mail order, and large-scale pharmacies. We also provide computerized
maintenance of patient prescription histories, third party billing and
consultant pharmacist services. Our consultant pharmacy services consist
primarily of evaluation of monthly patient drug therapy, as well as monitoring
the institution's drug distribution system.



We have isolated and prioritized key marketing methods which have yielded the
lowest cost of customer acquisition and the most opportunity for growth. Social
media, website maintenance, and thought leadership are being optimized to
promote brand awareness and recognition, which increases the likelihood of
securing physician referrals and customer loyalty.



We currently deliver prescriptions to Florida's diverse population and ship
compounded 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.



Data Management Services



Global healthcare systems have been taxed in recent years with aging populations
seeking care in greater numbers. Big data and analytics have seen large
increases in the market as healthcare stakeholders seek to use information to
increase efficiency, lower costs, improve patient outcomes, and innovate.
Frontline and independent providers have benefitted from improvements to their
digital systems, but data insights are a rare commodity. Regardless of size,
digitization of healthcare as global trend will encourage the usage of data
analytics to improve care and allow us to compete in an intense healthcare
market. Per Fortune Business Insights Report on the Healthcare Analytics Market,
the healthcare analytics market size is projected to reach $80.2 billion by
2026, exhibiting a compound annual growth rate of 27.5%.



Through our wholly owned subsidiary, ClearMetrX, we offer data management and
reporting services to support health care organizations. Our 340MetrX offering
includes data management and TPA services for 340B Covered Entities, pharmacy
analytics, and programs to manage HEDIS Quality Measures including medication
adherence. These offerings address the glaring need for frontline providers to
understand best practices, patient behaviors, care management processes, and the
financial mechanisms driving decisions. We deliver data access and actionable
insights that providers and support organizations can use to improve their

practice and patient care.



8







Remote Patient Monitoring

According to new research from MarketsandMarkets, the global Remote Patient
Monitoring ("RPM") market is projected to reach $175.2 billion by 2027, growing
at a robust 27% compound annual growth rate over the next 5 years. The National
Center for Biotechnology Information estimates that approximately 67% of
Medicare beneficiaries have two or more chronic conditions accounting for 94% of
Medicare spending. Chronic conditions have a significant impact on healthcare
spending as well as hospital readmissions. Due to this burden, the Centers for
Medicare and Medicaid Services (CMS) developed the Remote Patient Monitoring
(RPM) program to mitigate spending and provide clinicians with the digital data
to implement more informed treatment plans for patients enrolled in the service.



In August 2022, we completed our web-based platform to provide services in this
rapidly growing multi-billion dollar RPM space. Our experience in medication and
therapy management and our active participation in data analytics would carry
over directly into the RPM marketplace. The implementation of patient-oriented
technologies such as wearables and 5 G-powered home devices to track
physiological data will enhance our capabilities to provide doctors with usable
insights into patients' overall health. Additionally, it will benefit our
existing physician base as well as provide a more complete suite of services for
future accounts. CMS authorizes pharmacies to work in collaboration with
providers, offering services as employees or contracted personnel and thereby
enabling the Company to bill providers and healthcare organizations for RPM
services. We believe the RPM space is set to be one of the most important growth
areas within the healthcare industry over coming years and our most logical next
step given our broad base of patients who have multiple chronic conditions. We
have differentiated ourselves from competitors in terms of commitment to
medication therapy management. Our reputation among healthcare professionals in
this domain is one of our strongest advantages.

Industry Overview and Market Opportunities

Pharmacy operations



The retail pharmacy and pharmaceutical wholesale industries are highly
competitive and dynamic and have experienced consolidation and an evolving
competitive landscape in recent years. Prescription drugs play a significant
role in healthcare, constituting a first line of treatment for many medical
conditions. New and innovative drugs will improve quality of life and control
healthcare costs.



The U.S. retail pharmacy industry relies significantly on private and
governmental third-party payors. Many private organizations throughout the
healthcare industry, including PBM companies and health insurance companies,
have consolidated in recent years to create larger healthcare enterprises with
greater bargaining power. Third-party payors, including the Medicare Part D
plans and the state-sponsored Medicaid and related managed care Medicaid
agencies in the United States, can change eligibility requirements or reduce
certain reimbursement rates.



Changes in law or regulation can also impact reimbursement rates and terms. The
Patient Protection and Affordable Care Act was enacted to help control federal
healthcare spending, including for prescription drugs. These changes at the
federal and state level are generally expected to reduce Medicaid reimbursements
in the U.S. When third-party payors or governmental authorities take actions
that restrict eligibility or reduce prices or reimbursement rates, sales and
margins in the retail pharmacy industry could be reduced. In some cases, these
possible adverse effects may be partially or entirely offset by controlling
inventory costs and other expenses, dispensing higher margin generics, finding
new revenue streams through pharmacy services or other offerings, dispensing a
greater volume of prescriptions or any combination of these actions.



Generic prescription drugs have continued to help lower overall costs for
customers and third-party payors. In the U.S. in general, generic versions of
drugs generate lower sales dollars per prescription, but higher gross profit
percentages, as compared with patent-protected brand name drugs. In general, in
the U.S., specialty prescription business is also growing and generates higher
sales dollars per prescription, but lower gross margin, as compared to generic
prescription drugs.



9

Pharmacists are on the frontlines of the healthcare delivery system, and we
believe rising healthcare costs and the limited supply of primary care
physicians present opportunities for pharmacists and retail pharmacies to play
an even greater role in driving positive outcomes for patients and payors
through expanded service offerings such as immunizations and other preventive
care, healthcare clinics, pharmacist-led medication therapy management and
chronic condition management.



Pharmaceuticals represent a significant and growing total addressable healthcare
market. The pharmaceutical market experienced significant growth in recent years
as complex chronic conditions, care coordination, technology-enabled patient
care, biotechnology research and outcomes-based healthcare have increased in
focus.



In light of accelerating usage of mail order and delivery-based services, both
before and after the global COVID-19 pandemic, we believe the market for
personalized and convenient care access is increasing. We have provided same-day
and next-day home delivery services over the past 15 years of our operations. We
are uniquely positioned in Florida to gain an increasing market share among a
broad demography of patients due to our high-performance scores and value-added
services. Additionally, we see value in the opportunity to create strategic
partnerships, acquire synergistic operations and expand current operations to
round out pharmacy capabilities which could include specialty medications,
sterile compounding, and mail-order.

Virtual healthcare services and healthcare technologies

Virtual healthcare services, or Telehealth, is a growing segment of the
healthcare sector. It involves remotely exchanging patient data between
locations for purposes of obtaining assistance in monitoring and diagnosing.
Telehealth allows the healthcare practitioner to easily offer their services on
consultation, care management, diagnosis, and self-management services using
information and communication technologies. These services are being offered
through various modes of delivery, such as on-premise, web-based, and
cloud-based delivery. A growing population over the age of 65, the increase in
the number of chronic diseases, and a rise in demand for home monitoring devices
are the major drivers which are likely to aid the growth of the telehealth
market.



In the U.S. and globally there has been a surge in interest in digital health
services as the COVID-19 pandemic upended the traditional practice of medicine.
The pandemic has encouraged accelerating adoption of digital and remote health
technologies by providers, and patients have seen the value in using virtual
care services for routine care and consultation. Increased usage of these
services has shown new methodologies for reducing healthcare spending and
increasing access to patients in both rural and urban settings. CMS has recently
adopted CPT codes to allow physicians to bill for virtual healthcare encounters.
While those codes are initially expected to be temporarily tied to the pandemic,
industry experts anticipate broader adoption of insurance acceptance of virtual
healthcare claims as the broader market seeks to use the services to perform
triage, lower backlogs, and increase access at lower costs than traditional
healthcare encounters.



Virtual healthcare today centers on singular health encounters on an as-needed
basis with limited integration into the overall care management plan of the
practice or the patient. We see a widening gulf between the intent of virtual
care services and actual application. Market opportunities exist for us to
leverage existing core competencies in remote patient monitoring and home-based
care management to enhance the quality of health services provided virtually,
increase connectivity and integration, and focus on the intrinsic value of the
relationship between physician and patient.



A growing trend involves the capturing of personal health data by smartphone
apps and wearable technology. A patient can easily mislead a care provider on a
questionnaire regarding what they ate or how much they exercised, but a wearable
device can track and transmit healthcare data in real time without being
manipulated. Getting access to personal health and fitness data could favorably
impact follow-up care, too, as medical professionals are better able to monitor
and communicate with patients after they are discharged from care. Patients may
be able to address follow-up care without having to go back to the doctor's
office or hospital, saving them time and saving the clinic or hospital money.
Better follow-up care is key to lowering hospital readmission rates.



In the current environment, healthcare information is increasingly fragmented
with numerous electronic healthcare record platforms, virtual care systems,
pharmacy software, and data silos and transmitters which lack fundamental
integration. Healthcare stakeholders are often at odds about proper care
techniques and this lack of alignment increases burdens on providers and
patients alike and is associated with decreasing satisfaction with healthcare
services and negative health outcomes. We believe our unique vision of pharmacy
enabled health technology will lead the way to independent and integrated health
systems.



10







Data Management Services



The latest trend in healthcare is to use data to improve patient outcomes and
quality of life - a practice known as "Applied Health Analytics". "Data
analytics" refers to the practice of aggregating large data sets and analyzing
them to draw important insights and recommendations. This process is
increasingly aided by new software and technology that facilitates the
examination of large volumes of data to detect hidden information.



In the context of the increasingly data-reliant health care system, data
management services can help derive insights on systemic wastes of resources,
track individual practitioner performance, and identify people within the
population that are most at risk for chronic diseases. With this information,
the healthcare system can more efficiently allocate resources to deliver
individualized patient care at lower costs, improve the health of the population
and maximize revenues and margin in the healthcare system.



Insurance companies and healthcare providers are also working to use medical
data to identify and better manage high-risk, high-cost patients. Insurance
companies and self-funded organizations want to identify these patients to
provide early interventions that could keep patients in better health and reduce
medical costs later. Another sophisticated use of this kind of healthcare data
could be to use algorithms with ICU patients to foresee who is more at risk for
readmission. Medical staff can then take different, proactive measures as
necessary to try to lower that risk of readmission, such as precise discharge
instructions, different prescriptions, or a specific follow-up visit schedule.



We have a different approach to data and how to incorporate it into business and
professional practice. The goal of all businesses with access to large data
collections should be to harness the most relevant data and use it for optimized
decision making. ClearMetrX focuses on using data-driven analytic tools to
identify insights targeting three key areas where we see the potential to
improve patient outcome and maximize revenue and margin for our clients:

1. Improving medication adherence. Increasing patients' adherence to medication

treatment plans means they will be healthier, reducing costly advanced

treatment claims for those patients. Third party payors will see lower claim

payments, and the physicians are rewarded with higher reimbursement under

managed care contracts with third party payors.

2. Improving patient engagement with their physicians. Reducing abandonment

while nurturing patients to comply with their therapy through education,

reminder, and medication synchronization will improve refill rates, resulting

     in healthier outcomes.

  3. Optimizing operational efficiency and costs.

As a result, the data provided to our physicians' practices will help doctors to
meet third party payor performance goals which will improve reimbursement
payments from third party payors.

RESULTS OF OPERATIONS

Results of Operations for three months ended September 30, 2022 and 2021.

The following table summarizes our results of operations:

                                                 For the Three Months Ended September 30,
                                          2022            2021           $ Change         % Change
Total revenues, net                   $ 10,143,881     $ 9,797,523     $     346,358               4 %
Total cost of revenue                    7,981,796       6,871,206         1,110,590              16 %
Total gross profit                       2,162,085       2,926,317          (764,232 )           -26 %
Operating expenses                       4,031,774       2,702,381         1,329,393              49 %
(Loss) income from operations           (1,869,689 )       223,936        (2,093,625 )          -935 %
Other (loss) income                     (7,092,939 )       302,543        (7,395,482 )         -2444 %
(Loss) income before income taxes       (8,962,628 )       526,479        (9,489,107 )         -1802 %
Income taxes                                     -           1,920            (1,920 )           100 %
Net (loss) income                       (8,962,628 )       528,399        (9,491,027 )         -1796 %
Series A Preferred Stock dividend
associated with induced conversion        (541,278 )             -          (541,278 )          -100 %
Net (loss) income attributable to
Common Shareholders                   $ (9,503,906 )   $   528,399     $ (10,032,305 )         -1899 %




For the three months ended September 30, 2022 and 2021, we recognized overall
revenue from operations of approximately $10.1 million and $9.8 million,
respectively. Net pharmacy revenues increased by approximately $0.3 million for
the three months ended September 30, 2022 when compared to the same period in
2021. For the three months ended September 30, 2022, the increase in revenue was
mainly attributable to an increase in pharmacy revenue of approximately $1.3
million and 340B contract revenue of approximately $0.5 million, which was
offset by a decrease in COVID-19 testing revenue of approximately $1.1 million
and an increase in PBM fees of approximately $0.4 million when compared to

the
same period in 2021.



Gross profit margins decreased from 30% for the three months ended September 30,
2021, to 21% when compared to the same period in 2022. The 9% period over period
decrease is mainly due to the decrease in COVID-19 testing revenues, which have
significantly higher margins than pharmacy operations.



The loss from operations increased by approximately $2.1 million for the three
months ended September 30, 2022, when compared to the same period in 2021, due
to the decrease in COVID-19 testing revenues and increase in operating expenses,
which was offset by an increase in prescription and 340B contract revenue.

Results of Operations for nine months ended September 30, 2022 and 2021.

The following table summarizes our results of operations:

                                                  For the Nine Months Ended September 30,
                                          2022              2021           $ Change         % Change
Total revenues, net                   $  30,168,460     $ 28,999,122     $   1,169,338               4 %
Total cost of revenue                    23,595,416       21,031,826         2,563,590              12 %
Total gross profit                        6,573,044        7,967,296        (1,394,252 )           -17 %
Operating expenses                        8,775,559        8,572,643           202,916               2 %
Loss from operations                     (2,202,515 )       (605,347 )      (1,597,168 )          -264 %
Other (loss) income                      (9,001,444 )        976,465        (9,977,909 )         -1022 %

(Loss) income before income taxes       (11,203,959 )        371,118      

(11,575,077 )         -3119 %
Income taxes                                   (866 )         (7,029 )           6,163              88 %
Net (loss) income                     $ (11,204,825 )   $    364,089     $ (11,568,914 )         -3177 %
Series A Preferred Stock dividend
associated with induced conversion         (541,278 )              -          (541,278 )          -100 %
Net (loss) income attributable to
Common Shareholders                   $ (11,746,103 )   $    364,089     $ (12,110,192 )         -3326 %




For the nine months ended September 30, 2022 and 2021, we recognized overall
revenue from operations of approximately $30.2 million and $29.0 million,
respectively. Net pharmacy revenues increased by approximately $1.2 million for
the nine months ended September 30, 2022 when compared to the same period in
2021. For the nine months ended September 30, 2022, the increase in revenue was
mainly attributable to an increase in pharmacy revenue of approximately $2.4
million and an increase in 340B contract revenue of approximately $0.1 million,
which was offset by a decrease in COVID-19 testing revenue of approximately $1.0
million and an increase in PBM fees of approximately $0.3 million, when compared
to the same period in 2021.

Gross profit margins decreased from 27% for the nine months ended September 30,
2021, to 22% when compared to the same period in 2022. The 6% period over period
decrease is mainly due to the decrease in COVID-19 testing revenues, which have
significantly higher margins than pharmacy operations.



The loss from operations increased by approximately $1.6 million for the nine
months ended September 30, 2022, when compared to the same period in 2021, due
to the decrease in COVID-19 testing revenue and increase in operating expenses,
which was offset by an increase in pharmacy revenue and 340B contract revenue.



11







Revenue



Our revenues were as follows:



                                     Three Months Ended September 30,
                                    2022                           2021
                                            % of                           % of                             %
                           Dollars         Revenue        Dollars         Revenue      $ Change          Change
Prescription revenue     $  9,397,483            93 %   $  8,125,854            83 %   $  1,271,629            16 %
340B contract revenue       1,154,166            11          670,880             7          483,286            72
Testing revenue               235,221             2        1,315,946            13       (1,080,725 )         -82
Rent and other revenue            903             -              250             -              653           261
                           10,787,773           106       10,112,930           103          674,843             7
PBM Fees                     (643,892 )          -6         (315,142 )          -3         (328,750 )        -104
Sales returns                       -             -             (265 )           -              265          -100

Revenues, net            $ 10,143,881           100 %   $  9,797,523       

   100 %   $    346,358             4 %




For the three months ended September 30, 2022 and 2021, we recognized overall
revenue from operations of approximately $10.1 million and $9.8 million,
respectively. Net pharmacy revenues increased by approximately $0.3 million for
the three months ended September 30, 2022 when compared to the same period in
2021. For the three months ended September 30, 2022, the increase in revenue was
mainly attributable to an increase in pharmacy revenue of approximately $1.3
million and 340B contract revenue of approximately $0.5 million, which was
offset by a decrease in COVID-19 testing revenue of approximately $1.1 million
and an increase in PBM fees of approximately $0.4 million when compared to

the
same period in 2021.

Prescription revenues represented 93% and 83% of all revenue for the three
months ended September 30, 2022 and 2021, respectively. Prescriptions revenues
as a percentage of total net revenues for the three months ended September 30,
2022, have increased when compared to the same period in 2021 due to the
increase in prescription revenue of approximately $1.3 million and a decrease in
revenue from COVID-19 testing of approximately $1.1 million when compared to the
same period in 2021. Revenue from 340B contracts is 11% and 7% as a percentage
of total net revenues for the three months ended September 30, 2022 and 2021,
respectively. Dispensing fee and third-party administration revenue earned on
our 340B contracts for the three months ended September 30, 2022, and 2021 were
approximately $1.2 million and $0.7 million, respectively.



We have filled approximately 117,000 and 106,000 prescriptions during the three
months ended September 30, 2022 and 2021, respectively, a 10% period over period
increase in the number of prescriptions filled.



During 2022 we have experienced significant decreases in the reimbursement rates
for uninsured patients enrolled in the Gilead PREP program that became effective
beginning the first quarter of 2022 that had an overall unfavorable impact on
our 340B contract revenue. Dispensing fee and third-party administration revenue
earned on our 340B contracts for the three months ended September 30, 2022, and
2021 were approximately $1.2 million and $0.7 million, respectively. As a result
of the decrease in reimbursement rates from Gilead PREP program, we experienced
an unfavorable impact on our 340B contract revenue in the amount of
approximately $0.1 million for the three months ended September 30, 2022, which
was offset by increase in our 340B contract revenue due to new business. Since
the beginning of the year, 340B covered entities significantly increased patient
enrollment in alternative programs and insurance plans that provide greater
reimbursements.



For the three months ended September 30, 2022 and 2021, we have earned
approximately $0.2 million and $1.3 million, respectively from COVID-19 testing.
The decrease was primarily due to lower COVID-19 testing sales. As the COVID-19
pandemic fading worldwide, the need for testing has decreased as it relates to
travel and business continuity. However, despite the downturn in COVID-19
testing needs, we have generated approximately $0.2 million in COVID-19 testing
revenue for the three months ended September 30, 2022 compared to approximately
$1.3 million for the same period in 2021. It is difficult to predict whether
these conditions will be recurring given recent COVID-19 pandemic conditions in
Florida. We are well positioned to react if another COVID-19 outbreak occurs as
we have built a reputation of being a reliable partner for COVID-19 testing
solutions. We have built reputable relationships with well-known media
production companies and these relationships provide us with recurring COVID-19
testing revenue.



                                      Nine Months Ended September 30,
                                    2022                           2021
                                            % of                           % of                             %
                           Dollars         Revenue        Dollars         Revenue      $ Change          Change
Prescription revenue     $ 27,279,141            90 %   $ 24,929,722            86 %   $  2,349,419             9 %
340B contract revenue       2,248,223             7        2,120,701             7          127,522             6
Testing revenue             1,894,434             6        2,926,452            10       (1,032,018 )         -35
Rent and other revenue          2,560             -            1,575       

     -              985            63
                           31,424,358           104       29,978,450           103        1,445,908             5
PBM Fees                   (1,255,898 )          -4         (976,127 )          -3         (279,772 )         -29

Sales returns                       -             -           (3,201 )           -            3,201          -100
Revenues, net            $ 30,168,460           100 %   $ 28,999,122       

   100 %   $  1,169,338             4 %




12







For the nine months ended September 30, 2022 and 2021, we recognized overall
revenue from operations of approximately $30.2 million and $29.0 million,
respectively. Net pharmacy revenues increased by approximately $1.2 million for
the nine months ended September 30, 2022 when compared to the same period in
2021. For the nine months ended September 30, 2022, the increase in revenue was
mainly attributable to an increase in pharmacy revenue of approximately $2.4
million and an increase in 340B contract revenue of approximately $0.1 million,
which was offset by a decrease in COVID-19 testing revenue of approximately $1.0
million and an increase in PBM fees of approximately $0.3 million, when compared
to the same period in 2021.



Prescription revenues represented 90% and 86% of all revenue for the nine months
ended September 30, 2022 and 2021, respectively. Prescriptions revenues as a
percentage of total net revenues for the nine months ended September 30, 2022,
have increased when compared to the same period in 2021 due to the increase in
prescription revenue of approximately $2.4 million and a decrease in COVID-19
testing revenue of approximately $1.0 million when compared to the same period
in 2021. 340B contract revenue is 7% as a percentage of total net revenues for
both nine month periods ended September 30, 2022 and 2021.



We have filled approximately 347,000 and 330,000 prescriptions during the nine
months ended September 30, 2022 and 2021, respectively, a 5% period over period
increase in the number of prescriptions filled.



During 2022 we have experienced significant decreases in the reimbursement rates
for uninsured patients enrolled in the Gilead PREP program that became effective
beginning the first quarter of 2022 that had an overall unfavorable impact on
our 340B contract revenue. Dispensing fee and third-party administration revenue
earned on our 340B contracts for the nine months ended September 30, 2022, and
2021 were approximately $2.2 million and $2.1 million, respectively. As a result
of the decrease in reimbursement rates from Gilead PREP program, we experienced
an unfavorable impact on our 340B contract revenue in the amount of
approximately $0.4 million for the nine months ended September 30, 2022, which
was offset by increase in our 340B contract revenue due to new business. Since
the beginning of the year, 340B covered entities significantly increased patient
enrollment in alternative programs and insurance plans that provide greater
reimbursements.



For the nine months ended September 30, 2022, and 2021, we have earned
approximately $1.9 million and $2.9 million, respectively from COVID-19 testing.
We have recorded record COVID-19 testing revenue in January 2022 as the country
was dealing with the Delta and Omicron outbreak during that period. Since
January 2022 the demand for COVID-19 testing have slowed down as the need for
testing has decreased as it relates to travel and business continuity. It is
difficult to predict whether these conditions will be recurring given recent
COVID-19 pandemic conditions in Florida. We are well positioned to react if
another COVID-19 outbreak occurs as we have built a reputation of being a
reliable partner for COVID-19 testing solutions. We have built reputable
relationships with well-known media productions companies and these
relationships may provide us with recurring COVID-19 testing revenue.



Operating Expenses

Our operating expenses decreased by approximately $0.2 million, or 2%, for the
nine months ended September 30, 2022 when compared to the same period in 2021.
The decrease was mainly attributable to the following:

? Decrease in salaries, wages and employee related expenses due to period over

period decrease in headcount, and less time invested in training on pharmacy

software when compared to 2021 in the amount of approximately $0.7 million;

? Increase in non-recurring consulting fees for assisting in calculating the

employee retention credit in the amount of approximately $0.1 million;

? Decrease in rent expense due to non-recurring leasehold improvement related

    expenses in the amount of approximately $0.2 million;

  ? Decrease in amortization expense due to intangible assets being fully
    amortized in the amount of approximately $0.2 million;

? Decrease in other operating expenses in the amount of approximately $0.1

million.

? Increase in non-cash share-based compensation due to accelerated vesting of

restricted stock units in the amount of approximately $0.8 million and vesting

    of stock options in the amount of approximately $0.5 million.




Other (Loss) Income



Other (loss) income increased by approximately $10.0 million for the nine months
ended September 30, 2022 when compared to the same period in 2021. The increase
was mainly attributable to the following:

? An adverse change in the fair value of derivative liability of approximately

$10.0 million due to the embedded derivative associated with the placement and

investor warrants, and NextPlat Convertible Note due to insufficient common

stock shares to settle these instruments;

? Increase in (loss) gain from debt extinguishment of approximately $0.4 million

due to the decrease from the forgiveness of the Paycheck Protection Program

("PPP") loans in the amount of approximately $0.8 million in 2021 and

non-recurring in 2022, a reduction in the Iliad Research and Chicago Venture

Partners notes from the excess sales of converted common stock in the amount

    of approximately $0.1 million, an increase in fees associated with the
    extension of the maturity date of the Iliad Research note in the amount of
    approximately $0.2 million, and an increase in debt extinguishment due to

modification of the Iliad Research note in the amount of approximately $1.0

million;

? Increase in other finance cost associated with the Iliad Research note in the

amount of approximately $0.1 million;

? Decrease in interest expense in the amount of approximately $0.3 million;

? Increase in grant revenue associated with employee retention credit in the

amount of approximately $2.1 million;

? Increase in costs associated with the abandoned offering in the amount of

approximately $0.6 million;

? Increase in costs associated with the day one loss on issuance of units of

approximately $1.0 million and debt modification of approximately $0.5 million

due to insufficient authorized common stock to settle these instruments.

13







Net (Loss) Income



We had a net loss of approximately $11.2 million for the nine months ended
September 30, 2022, compared to a net income of approximately $0.4 million for
the same period in 2021. As discussed above, the increase in net loss is mainly
attributable to non-operating items such as gain on debt settlement, grant
revenue, offset by other financing costs, non-cash stock-based compensation,
abandoned offering costs, loss from the adverse change in the fair value of the
derivative liability, and day one losses on issuance of units and debt
modification.

Non-GAAP Financial Measures

We define Adjusted EBITDA as net income (loss) before interest expense, income
taxes, depreciation and amortization, share-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 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 of 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

acquired 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 and cash equivalents;

? 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 share-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) income 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) income attributable to us, to Adjusted EBITDA for the
periods indicated below: