QIS Update #14 - 2017 - Third quarter results from NTG Clarity Networks and QIS discontinues coverage on Blue River Resources - November 16th 2017
Included in this update:
- - NTG Clarity releases third quarter financial and operating results
- - QIS Capital discontinues coverage of Blue River Resources
QIS Capital is discontinuing coverage of Blue River Resources Ltd. based on the company's recent announcement that it is canceling its Banlung option with Angkor and is looking for new opportunities outside of the mining industry. While we have seen some huge gains with companies redefining themselves, there is no corporate focus at the current time and no reason at this time to continue coverage. For the sake of shareholders we hope that management is able to identify some attractive opportunities to increase shareholder value.
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NTG Clarity Networks Inc. (NCI:TSX-V)
Current Price: $0.045 (coverage commenced Feb. 4/10 - $0.045)
NTG Clarity Networks Inc. has reported its financial and operating results for the reported third quarter of 2017. After an aggressive cost reduction process, management has successfully returned the company to profitability in the third quarter.
Consolidated revenue for the three months ended September 30, 2017 increased to $3,309,135 compared to $3,262,742 for the same period in 2016 and is made up of product-related revenue, professional services and a small amount for hardware. Year to date revenues are down slightly to $10,466,021 compared to $10,773,204 in 2016 (All amounts in Canadian dollars).
For the first nine months of 2017, the gross margin was $3,721,078 or 36%, compared to $4,329,645 or 40% for the same period in 2016.
Year to date, selling expenses decreased by 21% to $1,578,237, compared to $2,008,689 in 2016. This decrease was due to restrictions implemented for travel and marketing expenses, as well as some salary reductions.
General and administration (G&A) continued to fall in the third quarter of 2017 to $901,181, compared to $1,072,884 during the same period in 2016. For the first three quarters of 2017, general and administrative costs decreased to $2,351,057 from $3,850,572 during the same period in 2016. This 39% decrease was due mainly to the continued reduction of staff/salaries and consulting costs, lower occupancy costs in Canada and Kuwait, and the reduction of research activities related to the company's new software product StageEM.
For Q3 2017, the corporation recorded a net income of $131,308, compared to a net loss of ($881,497) for the same period in 2016. For the nine months ended September 30, 2017, NTG Clarity recorded a net loss of ($706,810) compared to a net loss of ($3,877,251) in 2016, an 82% improvement. Though a significant improvement over the same period in 2016, factors contributing to the year to date net loss continue to include end of service (severance) salary costs due to reductions of selling and G&A staff and rental expense obligations for offices/accommodations. Management continues to work to reduce salary costs and other expenses and anticipate this effort to continue going forward.
At the end of 2016 and throughout 2017, NTG Clarity has focused efforts on reducing costs and bringing expenses in line with revenues, as the Middle East continues to grapple with a depressed economy due mainly to lower oil prices. Management can see the effects of these measures in Q3 2017 as the company was able to return to profitability. Management will continue these efforts going forward.
Subsequent to the end of the third quarter, the company has announced new contracts totaling $4.8 million which is expected to have an immediate impact on financial and operating results for the succeeding quarters. Management continues to work on potential new contracts and is looking to capitalize on the economic improvement that is now becoming apparent in the Middle East as oil prices stabilize.
In an unrelated matter, the company announced that 100,000 share options will be issued for Mr. Nick Hamilton-Piercy, a member of the Board of Directors. Each option will be exercisable at a price of $0.10 per share and will be to replace expired options.
QIS Capital: The third quarter was another quarter of improvement for NTG Clarity and management was successful in bringing the corporation back to a profitable position. Revenues and earnings now appear to be back in line with quarterly historical results. Based on current costs, recently announced contracts, and work on hand, Q4 results should continue this positive trend. The focus now will be on improved revenue numbers as profitability drastically improves when quarterly revenues trend above $3.5 million. The balance sheet still requires some correction but this will come with time or if alternative financing methods become available. The company has been making its required monthly debt payments and debt covenants should continue to improve with better financial performance. It's no doubt been a very challenging year for NTG Clarity but the company appears to have performed admirably despite the difficult circumstances. Based on Q3/17 earnings, NTG Clarity is currently trading at less than 3X annualized income.
Disclaimer: This article is for informational purposes only. The information contained within this article should not be construed as offering investment advice. Those seeking direct investment advice should consult a qualified, registered, investment professional. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The company profiled assumes no liability for the information presented. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock. The author(s) owns directly or indirectly 765,000 shares of Blue River Resources Ltd. and 1850,214 shares of NTG Clarity Networks Inc. QIS Capital may have a financial relationship with these companies and may trade in the stocks mentioned. No stock exchange has approved or disapproved of the information contained herein. Copyright © 2003 - 2017 QIS Capital Corporation.