Nextplat Corp. (filing registrant: Orbital Tracking Corp.) — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; unaudited, with comparisons to Q1 2017. The filing describes a satellite communications hardware, airtime, and services business. The company-name difference between the request metadata and the filing should be verified.
Financial performance and position
| Metric | Q1 2018 | Q1 2017 / prior balance date |
|---|---|---|
| Net sales | $1,667,938 | $1,382,330 in the statements; MD&A says $1,382,332 |
| Gross profit / margin | $379,096 / 22.7% | $314,578 / 22.8% |
| Operating expenses | $520,177 | $533,042 |
| Net loss | $145,458 | $219,262 |
| Operating cash flow | Used $28,456 | Provided $87,124 |
| Cash, at period end | $216,532 | $233,326 at Dec. 31, 2017 |
| Current assets / current liabilities | $1,002,820 / $1,198,709 | $1,080,898 / $1,203,532 at Dec. 31, 2017 |
| Total assets / stockholders’ equity | $2,917,893 / $1,719,184 | $3,063,098 / $1,859,566 at Dec. 31, 2017 |
Sales increased 20.7% year over year. Management attributed growth to recurring airtime customers, more tracking-device sales, and favorable currency translation, partly offset by lower phone and accessory sales. GTCL represented 68.2% of sales; management said the exchange-rate change increased reported sales, and estimated sales would have been $319,282 lower at the prior-year average exchange rate. Gross margin was essentially stable, while the net loss narrowed by about $74,000.
Accounts payable and accrued liabilities were $997,834; deferred revenue was $54,211. The company reported negative working capital of approximately $195,889. It disclosed a $5,768 related-party note payable, extended to February 19, 2019, and $21,333 total amounts payable to CEO David Phipps. The filing does not provide a clear total debt figure beyond the disclosed liabilities and note.
Changes, outlook, and risks
- Operating cash flow swung from $87,124 provided to $28,456 used, including a $161,778 decrease in deferred revenue. Investing cash outflow was $5,558; financing provided $14,335, described as related-party funding.
- Management expects cost of revenue and operating expenses to rise as the business expands, but said it could not estimate the amounts. No specific revenue or earnings guidance was provided.
- The filing states that accumulated deficit was $8,686,173 and that negative working capital, quarterly losses, and capital needs raise substantial doubt about the company’s ability to continue as a going concern. Management intends to seek additional capital, but gives no assurance it can do so.
- After quarter-end, the company issued Series J preferred stock for $200,000 on May 10 and sold Series L units for $300,000 on May 14. The May 11 Series L designation authorizes 100,000 shares; disclosed conversion and warrant terms could result in dilution.
- On March 8, 2018, the company effected a 1-for-150 reverse split of common stock. It reported 936,519 common shares outstanding as of May 15, 2018.
- Disclosure controls were found ineffective because of limited internal audit capability and insufficient levels of transaction review. Management was pursuing accounting-software and process improvements, with no assurance of timely or adequate remediation.
- Supplier concentration is notable: Network Innovations represented 57.1% of Q1 purchases; Globalstar Europe, Garmin, and Cygnus Telecom also each exceeded 10%. No customer represented 10% or more of revenue. The company reported no pending material litigation and no material off-balance-sheet arrangements.
Key facts for investors to verify
- Confirm the correct issuer identity: the filing is for Orbital Tracking Corp., not Nextplat Corp.
- Reconcile the Q1 2017 revenue discrepancy ($1,382,330 in the statements versus $1,382,332 in MD&A).
- Assess near-term liquidity, the going-concern uncertainty, and the company’s ability to raise capital beyond the post-quarter $500,000 proceeds disclosed.
- Review potential dilution from outstanding preferred stock, conversion rights, warrants, and the post-quarter securities issuances.
- Monitor the concentration of supplier purchases, foreign-exchange sensitivity, and remediation of ineffective disclosure controls.