Business context and reporting period
The supplied filing is Orbital Tracking Corp.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2017—not a filing identified as Nextplat Corp. Orbital Tracking distributes and develops satellite communications hardware, airtime, tracking products and related services through U.S. and U.K. subsidiaries.
Financial performance and condition
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | 2017: $1.588 million; 2016: $1.299 million | 2017: $4.547 million; 2016: $3.783 million |
| Gross profit / margin | 2017: $348,000 / 21.9%; 2016: $264,000 / 20.3% | 2017: $958,000 / 21.1%; 2016: $848,000 / 22.4% |
| Operating expenses | 2017: $575,000; 2016: $572,000 | 2017: $2.227 million; 2016: $2.058 million |
| Net loss | 2017: $266,000; 2016: $339,000 | 2017: $3.609 million; 2016: $1.452 million |
| Operating cash flow | Nine-month 2017: $(356,000); 2016: $(773,000) |
At September 30, 2017, cash was $268,000, current assets $1.451 million, current liabilities $1.289 million, and working capital approximately $162,000. Total assets were $3.479 million and stockholders’ equity $2.190 million. The balance sheet shows no long-term debt line; it reports $67,891 due to related parties, including a $15,004 CEO note. Cash increased $153,000 during the nine months, including $500,000 proceeds from preferred stock financing. Capital expenditures were $21,000.
Material changes and notable items
- Nine-month revenue grew 20.2%; management attributed growth to recurring-revenue customers and new product lines. The U.K. subsidiary generated 67.4% of sales. Management estimated unfavorable exchange rates reduced nine-month sales by $287,576; comparable GTCL sales in pounds increased 21%.
- Nine-month net loss widened substantially, chiefly due to $2.309 million of expense associated with Series J preferred financing price-protection issuances and $600,000 of stock-based compensation for options granted in May 2017. Professional fees fell 51% year over year.
- Common shares outstanding rose from 57.3 million at December 31, 2016 to 75.0 million at September 30, 2017. The filing lists 409.1 million potentially dilutive common equivalents, including preferred stock and options; these were excluded from diluted loss per share as antidilutive.
- After quarter-end, shareholders approved a proposed 1-for-300 to 1-for-800 reverse split, with the final ratio and date left to the board.
Outlook, risks and contingencies
Management said operating costs and cost of revenue were expected to increase as the business expands, but gave no quantified forecast. It cited currency effects and lower-margin reseller sales as pressure on gross margins. The filing states that the accumulated deficit was $8.211 million and the nine-month loss was $3.609 million, raising substantial doubt about the company’s ability to continue as a going concern. Management intended to seek additional capital, with no assurance of success. The company reported no pending material litigation and no material off-balance-sheet arrangements.
Management concluded disclosure controls were ineffective because of limited internal audit capacity and insufficient levels of transaction review; it was pursuing accounting-software and process improvements without assurance of timely or effective remediation. Supplier concentration was significant: Network Innovations represented 39.8% of nine-month purchases. No customer accounted for 10% or more of quarterly revenue.
Important facts for investors to verify
- Confirm issuer identity: the provided filing names Orbital Tracking Corp., while the request metadata names Nextplat Corp.
- Reconcile the balance sheet’s “Total Liabilities” line, shown as a dash despite current liabilities of $1.289 million and total assets and equity that imply liabilities of approximately that amount.
- Review the going-concern funding requirement, financing terms, preferred-stock conversion and anti-dilution provisions, and potential dilution from the disclosed common equivalents.
- Confirm the reverse-split ratio and effective date, and assess the disclosed control deficiencies and remediation progress.
- Check the filing’s inconsistent exchange-rate figures across sections; the source text does not provide a single clearly consistent set of rates.