Strength in Deferred Revenue and Backlog Driven by Increased Budgetary Spending at U.S. K-12 Schools

Conference Call Scheduled for Today at 4:30 pm ET

TOCCOA, GA / ACCESSWIRE / February 16, 2021 / Galaxy Next Generation, Inc. (OTCQB:GAXY), a provider of interactive learning technology solutions, today announced the Company's operating and financial results for the fiscal second quarter and six months ended December 31, 2020.

Key Financial Highlights for Six Months Ended December 31, 2020

  • Revenue increased 32% to $2.0 million
  • Deferred revenue of $1.0 million
  • Product Gross Margin of 50%
  • Gross Margin of 34% after freight and transit
  • Reduction in quarterly operating loss to $0.9 million (for the three months ended December 31, 2020)
  • Total Assets increased to $5.6 million
  • Backlog increased to $2.0 million
  • Hired Consultant to monitor operations and growth, Now COO
  • Eliminated all convertible debt

Key Business Highlights for Six Months Ended December 31, 2020

  • Closed acquisition of Classroom Technology Solutions, Inc. ("CTS")
  • Fulfilled $1.5 million purchase order under its supply agreement from an OEM customer
  • Awarded Cov-Shield contract from a diocese in Western Pennsylvania
  • Partnered with Mid States Audio and Video for entrance into South Dakota
  • Expanded into California with initial Cov-Shield purchase order from Keyes Union School District
  • Launched G2 Adjust-A-Mount line of mounts and carts
  • Partnered with Strand4Kind, a non-profit anti-bullying coalition
  • Expanded into Missouri with initial Cov-Shield purchase order from school district in Southwest Missouri
  • Expanded to Australia with new distribution partnership with Technology Core, Inc.
  • Received commitment for up to $600,000 in Cov-Shield products from school district in Southern Texas
  • Awarded new $172,000 contract from Thompson County School District in Colorado
  • Added production and sales capabilities in Arizona
  • Added warehouses and sales offices in Jacksonville
  • Hired 4 new full-time employees

Summary Snapshot of 6 Months Financials

 

1st Half 2021

1st Half 2020

Revenue

$1,977,006

$1,501,426

Year-Over-Year Revenue Growth

32%

1%

Gross Profit

$672,766

$515,642

Adjusted Net Loss*

$(1,977,379)

$(2,088,886)

Management Commentary

"We continue to successfully build upon our solid start to our year, with 32% revenue growth through the first half of our fiscal year 2021, led by interactive panels, G2 communication software(s), and Cov-Shield protective products," commented Gary LeCroy, Galaxy's Chief Executive Officer. Despite the three months ended December 31, 2020 being traditionally our slowest time of year with schools being closed for the holidays, we greatly reduced our quarterly operating loss to $0.9 million. We continued to execute on our product and solutions strategy and closed on an asset purchase of Classroom Technology Solutions, a designer, manufacturer, importer, and integrator of audio-visual products, with headquarters in Jacksonville, Florida. Galaxy is gaining access to not only years of customer support to the CTS brands but also years of buying power from the CTS president, Cy Marshall. Cy joined the Galaxy team as part of the acquisition, along with 2 other full-time employees. His relationships with global vendors have already proven to be helpful to Galaxy's import activity by decreasing Galaxy's cost of goods, by an average of 50%, on several products sold under the G2 brands.

LeCroy concluded, "We believe this is just the beginning of a major technology turnover cycle in the K-12 education market, as increased school budgeting is now being spurred by additional federal monies. President Biden's 200-page National Strategy for the Covid-19 Response and Pandemic Preparedness published on January 21, 2021 enables schools ability to tap disaster relief funds from the Federal Emergency Management Agency ("FEMA") for Covid-related expenses, such as sanitation, improved ventilation, reconfigured classrooms, and upgraded technology. President Biden also called on Congress to provide at least $130 billion in dedicated funding to schools and $350 billion in state and local relief funds to help school districts close budget gaps and provide additional resources for reopening. This commitment at the federal level to get schools safely reopened and the availability of funding should lead to increased opportunities for our in-classroom technology solutions and protective plexiglass Cov-Shields. The way our students learn continues to evolve, and we look forward to being a major participant in it."

Galaxy's Chief Financial Officer, Magen McGahee, stated, "We continue to experience strong demand for our products and services. As Gary mentioned, Q2 is historically our slowest quarter and our lowest report financially. This year had additional challenges with the election in November and the school closures happening again in December. However, we remain confident in our strategy, and we are executing against our innovation roadmap. We believe our understanding of high-performance interactive technology products positions us to effectively capitalize on the industry transition to remote classrooms. Our education customers have prioritized their traditional budgets, along with their new Stimulus budgets, towards IT spending, creating a more robust customer demand for remote enablement."

McGahee, concluded, "Our deferred revenue, backlog, and assets continue to increase and remain strong, a good indicator of future revenue trends. Our capital structure has greatly improved these past few months as we have eliminated all convertible debt. Any remaining debt is associated with related parties (i.e., executives, officers, insiders, or family members of executives/officers) or traditional banking forms such as our business line of credit or our accounts receivable financing. Our new equity investor is truly a "partner" in helping finance our Company's organic and potential acquisitive growth. Their structure aligns with all shareholders in that it is equity and allows us to better control the timing and pricing. We remain on plan to reach our goal of up-listing to a national U.S. exchange in the year 2021."

Shareholder Conference Call

Date: Tuesday, February 16, 2021
Time: 4:30 PM ET
Dial-in: 1-888-506-0062 (Domestic)
1-973-528-0011 (International)
Webcast: https://www.webcaster4.com/Webcast/Page/2559/39988

For those unable to participate during the live broadcast, a replay of the call will also be available through March 2, 2020 by dialing 1-877-481-4010 (domestic) and 1-919-882-2331 (international) and referencing the replay pin number: 39988.

Financial Results for the Six Months Ended December 31, 2020:

Revenue for the six months ended December 31, 2020 was $2.0 million, an increase of $0.5 million or 32%, as compared to $1.5 million for the six months ended December 31, 2019. Additionally, deferred revenue amounted to $1.0 million as of December 31, 2020. Revenues increased due to the increase in the customer base for interactive panels and related products, as well as additional revenues from OEM customers and Covid related new products.

Gross profit for the six months ended December 31, 2020 was $0.7 million, an increase of $0.2 million or 30%, as compared to $0.5 million for the six months ended December 31, 2019. The resulting gross margin was 34% for the three months ended September 30, 2020, compared to 34% for the three months ended September 30, 2019.

General and administrative expenses for the six months ended December 31, 2020 were $5.4 million, an increase of $0.8 million or 28%, compared to $4.6 million for the six months ended December 31, 2019. Of note, $2.8 million represent consulting fees and employee compensation paid through the issuance of stock, which did not impact cash, for the six months ended December 31, 2020.

Operating loss for the six months ended December 31, 2020 was $4.8 million, an increase of $0.7 million, or 16%, compared to $4.1 million for the six months ended December 31, 2019. Operating loss for the six months ended December 31, 2020 included $2.8 million of non-cash stock-based compensation.

Other expenses for the six months ended December 31, 2020 were $16.1 million, an increase of $15.4 million, compared to $0.7 million for the six months ended December 31, 2019. For the six months ended December 31, 2020, this was comprised of $3.5 million negative change in fair value of derivative liability, $0.8 million interest accretion, and $11.9 million interest expense. Interest expense was due to sales of our common stock to investors under the Put Purchase Agreement and attributed to the increase in our debt. These were all non-cash expenses and recorded due to GAAP accounting.

Net loss for the six months ended December 31, 2020 was $20.9 million, an increase of $16.1 million, or 332%, compared to $4.8 million for the six months ended December 31, 2019. The resulting loss per share for the six months ended December 31, 2020 was ($0.011) per diluted share, compared to ($0.331) per diluted share for the six months ended December 31, 2019.

Non-cash contributing factors for the net loss incurred for the six months ended December 30, 2020 is as follows:

  1. $2.8 million and $2.0 million represent consulting fees and employee compensation paid through the issuance of stock for the six months ended December 31, 2020 and 2019, respectively;
  2. amortization of intangible assets for the six months ended December 31, 2020 totaling $0.2 million;
  3. change in fair value of the derivative liability related to convertible notes payable of $3.5 million and $2.0 million for the six months ended December 31, 2020 and 2019;
  4. Interest accretion of $11.9 million and $2.0 million related to convertible notes payable and equity purchase agreement for the six months ended December 31, 2020 and 2019.

About Galaxy Next Generation, Inc.

Galaxy Next Generation (OTCQB:GAXY) is a provider of interactive learning technology solutions that allows the presenter and participant to engage in a fully collaborative instructional environment. Galaxy's products include Galaxy's own private-label interactive touch screen panel as well as numerous other national and international branded peripheral and communication devices. Galaxy's distribution channel consists of 22+ resellers across the U.S. who primarily sell the Company's products within the commercial and educational market. Galaxy does not control where resellers focus their resell efforts, although generally, the K-12 education market is the largest customer base for Galaxy products - comprising nearly 90% of Galaxy's sales.

For additional information, please visit our website at www.galaxynext.us

Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on the current plans and expectations of management and are subject to a number of uncertainties and risks that could significantly affect the company's current plans and expectations, as well as future results of operations and financial condition. A more extensive listing of risks and factors that may affect the company's business prospects and cause actual results to differ materially from those described in the forward-looking statements can be found in the reports and other documents filed by the company with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Investors Contact:
IR@GalaxyNext.us
888-859-1274

SOURCE: Galaxy Next Generation, Inc.



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