QIS Update #14 - 2018 - Newlox Gold Ventures and NTG Clarity Networks release financial results while Deer Horn Capital completes financing - September 4th 2018
Included in this update:
- - Newlox Gold reports Q1 financial results
- - NTG Clarity releases Q2 financial and operating results
- - Deer Horn Capital completes financing
We hope everyone enjoyed their labour day long weekend. Now it's back to work and hopefully back to more active markets as the summer doldrums definitely impacted small-cap markets again this year.
We have been closely watching financial results as they have been announced over the last two weeks. Unfortunately we have been disappointed with the vast majority of financial results for the small-cap companies we follow. We were hoping to see some revenue numbers from Newlox Gold but after discussion with management is was explained that accounting rules limit what Newlox can show as revenue until the company completes its testing phase and commences commercial production. This likely means another 6 months or so until we start to get some subjective numbers from the company. Based on our discussions with management, we like the progress and outlook, but the commercial viability of production remains unproven at this time. Nonetheless, with a market capitalization of just $3.6 million, the story is intriguing if they can get some meaningful production.
Please feel free to email us anytime at firstname.lastname@example.org or call us at (250) 377-1182. We look forward to your comments, questions, and feedback.
NTG Clarity Networks Inc. (NCI:TSX-V)
Current Price: $0.04 (coverage commenced Feb. 4/10 - $0.045)
NTG Clarity Networks Inc. had revenues for the first half of 2018 of $6,656,899 compared with $7,156,886 during the first half of 2017, a decline of 7 per cent. Second quarter 2018 revenues were $2,607,838, as compared with $4,148,957 during the same period in 2017.
Second quarter revenues were lighter in 2018 due mainly to the completion of a contract in Kuwait and delayed renewals/new projects in Saudi Arabia.
The corporation's operating expenses for the three and six months ended June 30, 2018, were $905,865 and $1,959,323 compared with $1,087,171 and $2,415,095 for the same periods last year, a 19-per-cent reduction. The company has aggressively reduced staff, salary, general and administrative expenses, and travel costs to bring expenses more in line with revenue.
During the second quarter of 2018, NTG Clarity reported positive income from operations of $325,768 compared with $199,081 during the same quarter in 2017. Year-to-date 2018 cash flow provided by operations was $377,888 compared with a loss of $344,063 during the same period last year.
For the second quarter of 2018, NTG Clarity recorded a net income of $16,369 compared with a net loss of $85,539 for the same period in 2017. For the six months ended June 30, 2018, the corporation recorded a net income of $176,851 compared with a net loss of $838,118 in 2017. This is a substantial improvement as the company continues to work to reduce selling and G&A costs, and to optimize cost of sales for the company's current revenue.
Though a significant improvement over the same period in 2017, factors contributing to challenges continue to include end of service (severance) salary costs due to reductions of selling and G&A staff as well as rental expense obligations.
Gross margin for the second quarter of 2018 was $1,231,633 or 47 per cent, compared with $1,286,252 or 31 per cent for the same period in 2017. For the six months ended June 30, 2018, gross margin was $2,779,464 or 42 per cent, compared with $1,870,322 or 26 per cent for the same period in 2017. The company is pleased with its continued recovery of gross margin percentage as it works to bring its margins back in line with historical averages.
Overall financial results continued the positive trend started in late 2017. Revenues were lower in the second quarter due to the completion of a larger contract and the delay in starting new projects; however, the company was able to post positive cash flow and net income due to cost cutting measures and higher margins.
As a result of actively marketing the company's IoT (Internet of things) solutions, in June, 2018, the company received a new PO in Toronto, Canada, for manufacturing tracking. This new project commenced in the third quarter and is expected to open new opportunities with manufacturing customers. This and a small amount of work being done with another Canadian customer set the path for a return to stable revenues in North America.
In Egypt, as many international companies are reluctant to do business in the local currency and have left the marketplace, the service gap continues to provide significant growth opportunities for NTG. In the second quarter of 2018, the company added a new customer, one of the largest retail store chains in Egypt. The company is also in discussions with a mult-million-pound CR (change request) for an existing regulatory authority customer.
In Saudi Arabia (KSA), the economy has rebounded with the increase in the price of oil. The company looks forward to increasing its work as organizations and government departments start awarding new projects in September. The recent political developments between Canada and KSA have had no impact on the company's operations.
Finally, in the second quarter of 2018, the company continued work for its customer in Oman, which is using its NTS network inventory and project management modules. Work includes change requests, continuing maintenance/support and new user licences. The company anticipates additional work in the form of requests for new systems and modules and customer support in mobility.
Subsequent to quarter-end, in August 2018, RBC Royal Bank extended the due date for the non-revolving credit facility 4 to March 1, 2019, and continues to require NTG to pay down $60,000 per month against the outstanding principal.
QIS CAPITAL: While revenue and net income numbers were a little lower in the second quarter, NTG Clarity continued to post significant year-over-year increases in margins, cash flow and profitability. Investors have recently cited the expiry of the RBC credit facility as a major concern but this has now been extended to March 2019 and the company has fulfilled all of its obligations in keeping this facility in good standing. NTG Clarity historically has shown a stronger third quarter. We also hope to see some new sales announcements in the next few months as has been the case in previous years. Should the company be able to match results from the first half of 2018, NTG Clarity would be trading at just 0.15 times annual sales and at approximately 5 times earnings.
Deer Horn Capital Inc. (DHC:CSE)
Current Price: $0.30 (coverage commenced Apr. 10/18 - $0.17)
DEER HORN ANNOUNCES 3RD AND FINAL TRANCHE CLOSING OF PRIVATE PLACEMENT
Deer Horn Capital Inc. has now completed a third and final tranche closing of its previously announced private placement and has issued a further 82,000 units for gross proceeds of $41,000. No finder's fee was paid with respect to this closing. The total amount raised to date under this private placement is $241,000.
QIS CAPITAL: It's been a pretty slow August in the market for Deer Horn Resources. The stock fell from its support level at $0.50 back to $0.30 following an impressive run from about $0.15 to $0.58. All of the stock from the previous financing round at $0.10 is now free trading. The latest round which raised $241,000 was completed at $0.50 - a significant premium to the current share price. Management has a number of initiatives it is currently working on and now that we are into September we expect to see some additional news flow from the company. Tellurium was mentioned a number of times throughout the summer as offering exciting new opportunities in technology and we will continue to report on new developments for Deer Horn as they become available.