NexTech (OTC:NEXCF) reported audited numbers ending December 31, 2019 as it transitions to a calendar year. These were in line with what had been announced previously but the top of investors’ concern is HOW IS BUSINESS NOW. NexTech’s business is currently still growing well on both the eCommerce side and the AR side and we believe it is accelerating due to the markets interest in focusing on improving online sales. In addition, while sales continue unaffected, with perhaps some hesitation on the signing of new business, the company is benefiting short term from lower travel expenses. Its imminent acquisition of Jolokia, a video conferencing live streaming SaaS business gives it a timely product sell while everyone is working remotely.
Today we are switching our model to a calendar year but since we have no historical information on that basis, we are also providing the historical income statement with fiscal quarters.
… And Reports its Seven-Month Stub of Calendar Year 2019…
On Friday NexTech reported its seven months income statement for the period ending December 31, 2019 along with the cash flow for that period and the balance sheet on that date. Revenues for that period were $4.0 million and EPS was a loss of $0.09 per share and a non-GAAP loss of $0.05. The company did not give a comparison to the year ago seven months, nor did it break revenues down by eCommerce and AR.
Gross margins were 58.6% and are climbing in Q1 as seen in the numbers already reported for January and February. This was expected as the company optimizes its product offerings to focus on higher margin parts and accessories in its eCommerce business. Also helping gross margin was that commission costs has been taken out of cost of goods and reallocated to sales and marketing and past periods were restated.
Operating expenses were $7.7 million including the $2.2 million impairment charge. The operating loss was $5.4 million. Without the impairment charge the loss would have been $3.2 million. The net loss was $5.3 million. Primary shares outstanding were 58.3 million for the period, but now stand at 62.8 million.
For Q4 2019, NexTech had revenues of $2.58 million and gross margin of $1.65 million or 58.6%. No other information was provided on the quarter. For the Christmas month of December, the company had revenues of $760,000. This compares with $700,000 for the month of November.
The company reached $6.0 million for calendar year 2019 ($4.3 million US.) Gross margin for the calendar year was 53% or $3.2 million.
NexTech ended the December quarter with $2.8 million in cash and working capital of $3.3 million. On November 22, NexTech closed on a non-brokered private placement of four million units priced at $0.75 per unit for gross proceeds of $3 million. Each unit comprised one common share and one share purchase warrant exercisable at $0.93 per share for a period of two years from issuance, subject to acceleration. All securities issued were subject to a four-month hold period from the date of issuance, expiring on March 23, 2020. Only existing investors and shareholders invested in this round.
For the stub period, the company had negative cash flow of $2.5 million and negative free cash flow of $3.0 million (including paying for acquisitions.) The company has been burning $150,000 per month, but that looks to be declining to about $100,000 per month.
Quarter Ending March 31, 2020
For January revenues were approximately $800,000 and gross margins were $528,000 (66.0%) For February revenues were $685,000 and gross margins were $450,000 (65.7%) Compared with the first two months of 2019, revenues increased 139% to $1.49 million versus $622,000 in 2019. Assuming March revenues of $750,000, Q1 revenues, (ending March 31, 2020) could be $2.1 million versus $881,000 in Q1 2019, up 141%.
Gross margin also expanded in the first two months of 2020. Margin was $978,000 versus $315,000, up 210% to 66% from 51%. We have no insight into the current quarterly expense rates but have taken a stab at forecasts based off the seven-month results. Expect revisions as we get a more quarters reported.
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