Galaxy Next Generation

Good day, everyone, and welcome to Galaxy Next Generation's fourth quarter and fiscal year and June 30, 2021 conference call. This call is being webcast and is available for replay. In our remarks today, we will include statements that are considered forward-looking within the meanings of the security laws, including forward-looking statements about future results of operations, business strategies and plans, our relationships with our customers, market potential growth opportunities. In addition, management may take additional forward-looking statements in response to your questions. Forward-looking statements are based on management's current knowledge and expectations as of today and are subject to risks and uncertainties and may cause the actual results to differ materially from the forward-looking statements. A detailed discussion of such risks and uncertainties are contained in our most recent Form 10-Q, Form 10-K, and other reports filed with the SEC. The company undertakes no obligation to update any forward-looking statements. To supplement the company's financial statements presented on GAAP basis, Galaxy provides adjusted EBITDA as a supplemental measurement of its performance. To provide investors with additional insights and allow for more comprehensive understanding of the information used by management in its financial and decision-making surrounding pro forma operations, Galaxy supplements its consolidated financial statements presented on a basis consistent with the U.S. generally accepted accounting principles or GAAP, adjusted EBITDA as a non-GAAP financial measures of earnings. Adjusted EBITDA represents EBITDA plus stock-based compensation and change in fair value of derivative liabilities. Galaxy Management adjusts EBITDA as financial measures to evaluate the profitability and efficiency of the business model. The company uses the non-GAAP financial measures to assess the strength of the underlying operations of the business. These adjustments and the non-GAAP financial measures that are derived from them provide supplemental information to analyze its operations between periods over time. Galaxy finds this especially useful when reviewing the pro forma results of operations, which include non-cash amortizations of intangible assets from acquisitions and stock-based compensation. Investors should consider its non-GAAP financial measures in addition to and not substitute for financial measures prepared in accordance with GAAP. And with that, I will now hand the floor over to Galaxy Next Generation's Chief Executive Officer, Gary LaCroix.

Thank you, Matthew. And welcome everyone to Galaxy's year-end June 30th annual earnings call. As mentioned, I'm Gary LaCroix, CEO and president, and proud to be sharing with you some of the highlights of our past year before turning it over to Megan McGehee, our CFO, to share with you with the improvements in our year-end financials. This past year, despite the challenges we've experienced as a nation with COVID, Galaxy made tremendous strides in both business development and brand recognition. Starting with our launch of our code shield, Student Death Protector, and ending with our launch into school safety and security. We were able to not only extend our product offering but also our sales and marketing team by bringing on some new hires that have already proven their ability to increase revenues and to contribute to Galaxy's overall goals. We have been awarded several new contracts and bids as outlined in previous press releases and have started to see those efforts turn into orders. Our position in the ed tech market is stronger than ever as we now have such a diversified product offering and a multitude of customer types that we are really able to capitalize on all areas of the market. Our direct-to-end user and or reseller model continues to grow as we have developed relationships with businesses outside our southeast geographical territory, as well as our OEM division as we continue to seek companies even outside the U.S. to rebrand our amazing audio amplification products. Our manufacturing facility in Arizona, also new this year, has been key in the ramping up of our OEM channel and product line. We're excited to see how that continues to grow into 2022. With so many changes within the company's operations and the company's financials over the past year, I think it is best that I turn it over to Megan at this time as we can address more specific questions towards the end of the call. Megan?

Thank you, Gary, and I'm happy to have you join us on our earnings call today. As you alluded to, we're extremely pleased with our fourth quarter and fiscal year in June 30th, 2021 results as our team executed in surpassing our own internal forecast with three point million in revenue, annual revenue and five point million in annual orders. The past three months were specifically very rewarding and demonstrating our scalability as we reached our major milestone in generating positive non-gap adjusted EBITDA for quarter four. All of the announced contracts, awarded catalog bids, new partnerships, and new products have enabled us to accelerate our revenue growth and achieve that profitability. As we look to the actual financial statements, all of our key performance indicators continue to trend in the right direction. Our balance sheet has continued to strengthen. Several examples are the increase in cash on hand being over half a million at year end, Inventories was probably the largest increase, and that was due to us prepaying for a lot of in-transit inventory for orders that had already been received. Total assets climbed up to $7.3 million, and a lot of that was just due to the increase in our internal hard assets, inventory, AR, those type of things. We were able to decrease our liability year over year by almost $4 million. and some good news in terms of derivative liabilities because of the new adoption moving forward in Q1, which is the quarter we are in now, that $1.8 million in derivative liability will no longer need to be reported. Largest portions of our liability, the $3.4 million that is with related party notes is obviously a great thing to have them with the related parties. It gives us flexibility in terms of moving forward working with payoff and pay down of that debt. And probably the largest improvement was our ability to take our shareholders' deficit from almost $8 million down to only $1.4 million. And with the removal of the derivative liabilities coming up in Q1, we're obviously hopeful to share a positive shareholder equity at that time. Our profit and loss statements continue to trend upwards as well. They take a little bit more explanation to understand GAAP accounting in a public company, and how loss is reported and represented in terms of stock issuance. So I do plan to break down the P&L as well. But this is why we have non-GAAP reporting options and company discussions in order to shed more light on the true financial stability of our company. So if we look at the P&L itself, annual revenue as mentioned before, 3.8 million. Total orders, 5.7. Different there is we don't report revenue or it's not recognized as revenue until if an order has partially shipped or not arrived at the end user yet. So there's a gap in what was actually shipped at June 30 and what we recognize as revenue. This is an increase of 63% on the year and 117% on the quarter. So big revenue increase there. Gross profit also increased approximately 600%. K up to $1.7 million for the year. So that's just an indication, as we mentioned before, of our product margins getting better. Let's see. The total general and administration expenses actually did decrease this year by over $3 million. So we continue to hire new people, expand our footprint, hire marketing firms, and still we're able to decrease our G&A expenses. So it's directly reflective of how cost-conscious we've tried to be as we continue to grow in the emerging growth company factor. This does therefore reflect a decrease of $3.6 million in loss of operations, which was down to $6 million this year as reported. If we do the adjusted EBITDA number on our loss, the loss actually comes up to $3.4 million. So, you know, looking into fourth quarter, obviously being able to show that profit we've increased our ability to operate even more so since June 13. The GAAP reported net loss of $24 million annually. It should be noted that it is inclusive of over $18 million in interest expense, derivative liabilities, conversion rates, warrants, debt conversion, et cetera, that were all related to the debt conversion that took place prior to January in the early part of our fiscal year. Because of the way that that type of debt was eliminated in a non-cash manner, we still must record this as a loss as a public company. But changing this debt to equity in the early part of the year is part of what positioned us for the current profitability, also part of what positioned us to increase our shareholder equity. so much. And so we do understand the outstanding shares have increased. We've been very forthcoming with that and updated OTC as frequently as possible. But because of that increase and the elimination of the debt, there was a reported larger loss under GAAP than the reality of the 3.6 million loss, 3.4 million loss under the adjusted EBITDA. So just wanted to be clear on that part of the financial statement. With that debt now being eliminated though in Q4 showing an adjusted profitable EBITDA, we hope the reflection will cross over into the GAAP accounting in the coming Q. So this will paint a little bit more of a clearer picture. And this is all broken down and explained of course in the 10-K financial footnotes and the statement of cash flow and on the balance sheet itself. All right, so let's look into the most recent quarter, Q4. As our quarter falls out of our year end, we're not required to file separately for an earnings report. But because of the improvements that we're making in those operations and finances, we wanted to outline the numbers in the MD&A of the 10-K for you guys, our shareholders, to get a greater understanding of those improvements. As mentioned before and announced this morning, we have established our very first quarter as a profitable company with just over $60,000 in adjusted EBITDA. And even if you look at the net loss before the adjustment for Q4, it was 1.3 million just last quarter on March 31st, moved to only 139,000 in this quarter. The current quarter ending, which is coming up here at the end of the month, should also reflect that same impressive trend. This vast improvement in Q4 would do two things, both to an increase in revenue for the quarter to over a million, but also a decrease in operating expenses from 2.6 million this time last year to only $750,000 in this last quarter. So we believe that the increase in school budgets will continue to have this big impact on revenues in our upcoming reporting periods. We look to continue to successfully build upon the solid year with a diverse portfolio of products now, as Gary mentioned, led by our interactive panels, our bell paging and intercom product line, our G2 communicator software, and now our new G2 secure platform, and of course also our related OEM partnership. We are well positioned across the country with our corporate satellite warehouse and office space spread between Georgia, Colorado, Florida, and Arizona with now remote employees, and also Texas, Pennsylvania, and Utah. Several key business highlights associated and released over the past few months in relation to new partnerships, new bids, new contracts, new customers, new consultants, and even an extension of a contract with our OEM customer. So despite the difficulties that COVID seemed to bring to many businesses and especially education entities, we're striving and stronger than ever. Personally, I'm looking forward to our fiscal year 2022. Rounding out 2021 the way that we did has really positioned us to move forward with our plans to be a bigger, more respected company. And so with that, I'll conclude kind of our prepared remarks for today's call and move it back to the operator for questions.