NextPlat Corp — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. NextPlat, formerly Orbsat Corp, sells satellite communications equipment and services and operates e-commerce storefronts. It is also developing a Web3/digital-asset platform.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | $3.58 million | $1.46 million; up 144.8% |
| Gross profit / margin | $801,093 / 22.4% | $437,517 / 29.9% |
| Operating expenses | $1.64 million | $736,446; up 122.1% |
| Net loss | $850,083; $0.09 per diluted share | $803,142; $0.82 per diluted share |
| Operating cash flow | $(868,558) | $(459,764) |
- Revenue growth was attributed to new product lines, increased inventory, and additional e-commerce storefronts. Sales increased at both subsidiaries: Global Telesat Communications Ltd. rose 156.1%, and Orbital Satcom Corp. rose 119.2%.
- Gross margin declined because a smaller proportion of sales came from higher-margin products. SG&A and payroll costs rose with marketing, insurance, recruiting, and increased personnel.
- At March 31, cash was $21.91 million, working capital was $22.77 million, total assets were $25.63 million, and stockholders’ equity was $23.71 million. Cash increased from $17.27 million at year-end, principally reflecting the stock offering.
- Total liabilities were $1.93 million, including approximately $284,657 of Coronavirus loan debt. Current liabilities were $1.71 million. The filing reports no material off-balance-sheet arrangements.
- Investing cash outflow was $67,997; financing cash inflow was $5.61 million, primarily from the common-stock offering. Cash increased by $4.64 million during the quarter.
Material changes and notable items
- The January private placement issued 2,229,950 shares at $3.24 per share for $7.23 million gross proceeds and $7.01 million net proceeds. Shares outstanding rose from 7.05 million at December 31 to 9.29 million at March 31. The company also issued 10,000 fully vested restricted shares.
- Amazon accounted for 45.9% of Q1 revenue, down from 53.6% a year earlier. Europe contributed 81.0% of revenue, versus 69.0%. Supplier Cygnus Telecom represented 31.7% of purchases, compared with 9.5% a year earlier.
- Management says available cash and borrowing capacity are sufficient for planned operations for at least 12 months after the financial statements’ issuance. It expects expenses to continue increasing as operations expand but provides no quantified forecast.
- NextPlat Digital was in design and development; management anticipated substantial completion within six to nine months. The ERP system went live on April 1, 2022, after quarter-end.
- The company reported significant deficiencies in internal controls, citing limited internal-audit resources and insufficient segregation of accounting duties; controls were not effective as of March 31. Management described remediation steps.
- COVID-19-related supply shortages, demand uncertainty, and operational disruptions remain risks. The company also highlights regulatory uncertainty around NFTs and other digital assets, including potential securities, broker-dealer, money-transmission, AML, and licensing obligations.
- Litigation continues with former CFO Thomas Seifert over his termination and compensation claims. The company says it believes it has adequate defenses; no clear potential financial exposure is provided. The filing reports no other proceedings expected to have a material adverse effect.
Investor facts to verify
- Reconcile the investing-cash-flow disclosure: the cash-flow statement reports $67,997 of property and equipment purchases, while MD&A says purchases were $0 for Q1 2022.
- Assess the sustainability and margins of revenue growth, including Amazon dependence, regional concentration, and the reliance on particular suppliers.
- Track cash burn and whether the stated 12-month liquidity outlook remains supported as operating expenses and expansion spending rise.
- Monitor control-deficiency remediation, the Seifert litigation, and regulatory developments affecting the planned digital-asset platform.
- Consider potential dilution from outstanding options and warrants; the filing lists 2,530,092 registered warrants at $5.00 and 144,000 underwriter warrants at $5.50, in addition to options.
- Note that $21.66 million of cash exceeded the stated $250,000 FDIC insurance limit at the institution holding the deposits.