Nextplat Corp — Filing Summary
Filing identity: The supplied filing is Orbsat Corp’s Form 10-K, filed March 30, 2020, for the fiscal year ended December 31, 2019—not a Nextplat Corp filing or a standalone 2019 fourth-quarter report. Orbsat was formerly Orbital Tracking Corp. Verify the issuer and period before relying on this summary.
Business context and reporting period
Orbsat sells satellite communications equipment, airtime and related services through its U.S. subsidiary Orbital Satcom and U.K. subsidiary Global Telesat Communications Limited (GTCL). Products and services include satellite phones, tracking devices, airtime plans, rentals and tracking portals. GTCL generated about 68% of company sales. The company’s common stock trades on the OTC Markets under OSAT. Share figures and prices in the filing reflect a 1-for-15 reverse split effective August 19, 2019, unless otherwise noted.
Financial results
| Metric | 2019 | 2018 | Change / context |
|---|---|---|---|
| Revenue | $5.870 million | $5.727 million | Up 2.5% |
| Gross profit | $1.223 million | $1.035 million | Up about 18.2% |
| Gross margin | 20.8% | 18.1% | Improved, attributed to higher-margin product lines |
| Operating expenses | $2.335 million | $2.164 million | Up 7.9% |
| Net loss | $1.380 million | $1.195 million | Loss widened about 15.5% |
| Cash used in operations | $659,203 | $590,185 | Cash outflow increased |
| Capital expenditures | $70,194 | $30,331 | Purchases of property and equipment |
Other key figures at December 31, 2019: cash of $75,362; current assets of $877,446; current liabilities of $1,444,468; negative working capital of approximately $567,022; total liabilities of $1.788 million; and stockholders’ equity of $639,709. Accumulated deficit was $11.115 million. Cash fell from $142,888 at year-end 2018. Financing activities provided $659,327, including $757,000 of convertible-debt proceeds, partly offset by debt repayments.
Debt and obligations included $169,667 of convertible debt reported net of a $635,333 unamortized discount, $121,848 of long-term notes payable, a $24,483 Amazon line-of-credit balance, and $80,857 of current and long-term lease liabilities. The $805,000 convertible notes bear 6% interest, mature in May 2022 and are convertible at $0.10 per share subject to terms and ownership limits. The filing identifies 8.05 million potential conversion shares before applying the 4.99% beneficial-ownership limitation.
Material changes versus 2018
- Revenue rose modestly, while gross profit and margin improved as cost of sales declined 1.0% despite higher revenue.
- Operating expenses increased, notably professional fees, which rose to $565,643 from $249,675, largely due to consulting, legal, investor-relations and accounting costs. SG&A also included a $50,000 impairment charge for the delayed dual-mode tracker design.
- Other expense rose to $267,681 from $56,536, driven mainly by interest expense and convertible-debt accounting, partly offset by a $134,677 gain on debt extinguishment.
- Amazon represented 56.9% of revenue, up from 37.3% in 2018. The filing attributes sales growth partly to Amazon sales and product selection.
- GTCL sales in pounds sterling increased 3.9%; management said the exchange-rate translation reduced 2019 reported revenue by $156,037 compared with using the prior-year average exchange rate.
- The company raised $805,000 through convertible notes, and the balance sheet showed higher liabilities and lower equity than in 2018. Cashless option exercises and preferred-stock conversions also increased common shares outstanding.
Outlook, risks and unusual items
- Going concern: The auditor’s report highlights substantial doubt about the company’s ability to continue as a going concern. Management said additional financing is necessary and that it may curtail operations, reduce headcount or temporarily cease operations if funding is unavailable. The financial statements include no adjustments for a possible failure to continue as a going concern.
- Outlook: Management expects cost of revenue and operating expenses to increase as the business expands, but did not provide quantified forecasts. A dual-mode cellular/satellite tracker was targeted for possible launch in 2021, subject to funding, testing and regulatory certifications; development and certification were estimated at less than $100,000.
- Concentration and supply risk: Amazon supplied 56.9% of 2019 revenue. Several suppliers each accounted for at least 10% of purchases, with Network Innovations the largest at 30.1%. Disruption or pricing changes could affect sales or margins.
- COVID-19: As of the filing, the company reported no direct adverse operational impact but warned that pandemic-related supply-chain disruption, financing constraints and working-capital demands could lead to cost cuts or operating reductions.
- Leadership: CEO David Phipps and CFO Theresa Carlise waived automatic employment-agreement extensions; their terms were set to end June 14, 2020. The filing describes both as important to operations.
- Controls and governance: Management concluded disclosure controls and internal control over financial reporting were not effective at year-end, citing limited internal-audit resources and inadequate segregation of accounting duties. Remediation was expected by the end of fiscal 2021, contingent on financing. The company had no audit, compensation or nominating committee.
- Other: The company reported no pending material litigation. It has not paid cash dividends and does not anticipate doing so in the foreseeable future. Its OTC-traded shares were described as thinly traded and potentially illiquid.
Most important facts for investors to verify
- Confirm the issuer: the supplied document is Orbsat Corp’s 10-K, notwithstanding the request metadata naming Nextplat Corp.
- Review the auditor’s going-concern discussion, financing plans and the company’s cash and working-capital position.
- Verify the convertible notes’ current outstanding balance, conversion terms and potential dilution, including the impact of post-year-end conversions.
- Reconcile share counts: 121,216 shares were outstanding at December 31, 2019, while 234,476 were reported at March 30, 2020 after subsequent conversions. Confirm the current fully diluted count.
- Assess Amazon’s 56.9% revenue concentration, supplier dependence and whether the tracker development plan has secured funding and approvals.
- Check the filing’s per-share loss disclosures: the statements show basic and diluted loss per share of $13.00, while a note reports loss applicable to common shareholders per share of $11.09.