Business context and reporting period
The supplied filing is Orbital Tracking Corp.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2019—not a filing identified as Nextplat Corp. The company distributes satellite communications equipment, airtime and related services, and develops tracking products. Investors should verify the issuer and filing match the intended company.
Financial performance and condition
| Metric | Three months ended June 30, 2019 | Six months ended June 30, 2019 | Comparable 2018 period |
|---|---|---|---|
| Revenue | $1.409 million | $2.707 million | $1.600 million; $3.268 million |
| Gross profit / margin | $274,109 / 19.5% | $520,038 / 19.2% | $356,073 / 22.3%; $735,169 / 22.5% |
| Operating expenses | $644,231 | $1.127 million | $469,115; $989,292 |
| Net loss | $387,624 | $695,247 | $123,620; $269,078 |
| Operating cash flow | Not separately presented for the quarter | $(393,784) | $(247,930) for six months |
Revenue declined 11.9% in Q2 and 17.1% year to date. Management attributed the decreases to larger contracts in the 2018 comparison period and inadequate inventory to support sales. For the six months, selling and administrative costs were broadly flat year over year, while professional fees nearly doubled to $321,343, mainly due to recapitalization and financing work. Interest expense and derivative-related items also affected results.
At June 30, cash was $330,451; current assets were $1.091 million and current liabilities were $1.221 million, resulting in negative working capital of approximately $130,497. Total assets were $2.697 million, liabilities $1.377 million, and stockholders’ equity $1.320 million. The balance sheet included $121,848 of long-term notes payable and $34,521 of convertible debt net of a $770,479 unamortized discount; the convertible notes’ stated principal was $805,000.
Six-month cash flows included $21,146 used in investing and $602,691 provided by financing, principally convertible-note proceeds. Cash increased by $187,563 from year-end to $330,451. The company reported no material off-balance-sheet arrangements.
Material changes, outlook and risks
- Management stated that the company’s accumulated deficit, operating losses and negative working capital raise substantial doubt about its ability to continue as a going concern. Continued operations depend on obtaining additional capital; management planned to seek financing but gave no assurance it would succeed.
- In May, the company issued $805,000 in unsecured convertible notes bearing 6% interest, maturing in three years and convertible at $0.10 per share, subject to terms and ownership limits. The financing creates potential dilution. Preferred shares were also exchanged for notes; $121,848 remained at June 30.
- The company repaid a separate $65,000 convertible note in May for $87,778, including a $20,257 prepayment penalty and accrued interest. Related derivative accounting was reversed, contributing a reported $134,677 gain on debt extinguishment.
- Amazon represented 51.0% of Q2 revenue and 48.8% of first-half revenue. Europe accounted for 76.7% of first-half sales. Supplier concentration was also material, with Network Innovations at 29.4% of first-half purchases.
- Management expected costs and expenses to increase as the business expands, but said it could not estimate the increases. No quantified revenue or earnings guidance was provided. Management cited lower phone sales and higher-margin product sales as factors in gross-margin performance.
- Disclosure controls and procedures were assessed as ineffective at June 30, 2019, due to limited internal audit capability and insufficient levels of transaction review. Management was working on improvements but gave no assurance of timely or adequate implementation.
- Subsequent events included preferred-stock conversion and cancellation actions, a proposed 1-for-15 reverse split and a proposed corporate name change to Orbsat Corp.; the reverse split and name change were subject to FINRA review. The filing reported no pending material litigation.
Investor verification points
- Confirm that this Orbital Tracking Corp. filing is the intended filing for the request naming Nextplat Corp.
- Reconcile reported EPS: the statements show basic and diluted loss per share of $(0.25) for Q2 and $(0.60) year to date, while the EPS note reports $(0.12) and $(0.43) after preferred-share redemption adjustments.
- Review the company’s near-term financing needs, going-concern disclosures, debt terms and potential conversion dilution.
- Assess the sustainability of revenue, gross margins, inventory availability and customer and supplier concentration.
- Track remediation of ineffective disclosure controls and the status and effective dates of the post-quarter corporate actions.