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NTG Clarity Networks Inc
Symbol NCI
Shares Issued 100,102,355
Close 2020-06-12 C$ 0.035
Market Cap C$ 3,503,582
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NTG Clarity loses $9.18-million in 2019

2020-06-12 17:28 ET - News Release

Ms. Kristine Lewis reports

NTG CLARITY NETWORKS ANNOUNCES 2019 YEAR-END FINANCIAL RESULTS

NTG Clarity Networks Inc. has released its year-end results for the fiscal year ended Dec. 31, 2019.

Despite management's efforts to raise funds and obtain short-term loans, reduced cash flow continued to significantly affect NTG's ability to finance its continuing work, which caused a slowdown of projects during 2019. These issues resulted in lost revenue over the year. Further to this, management was focused almost entirely on its credit facilities during the second half of the year, and while the company was able to emerge from the formal bank demand for payment and avoid receivership, management's focus on these issues did not allow for regular operations or new sales, which resulted in drastically lower revenue. On a positive note, the debt assignment announced in December, 2019, resolved the company from any principal instalment repayments until the end of August, 2020. This has allowed management to again focus on operations and sales. In the latter part of the fourth quarter, several projects picked up, resulting in a 55-per-cent increase in fourth quarter revenue compared with the same quarter last year.

Sales for the year ended Dec. 31, 2019, were $8,626,429, representing a 26-per-cent decline from the $11,706,467 recorded in the prior year. The gross margin in 2019 was 26 per cent, compared with 44 per cent in 2018. Realistic margins are anticipated to be between 30 and 40 per cent, based on the product mix. The company posted a net loss of $9.2-million for the year, including a number of write-offs and one-time payments, compared with a net loss of $400,000 in the previous year.

NTG's operating expenses were $6,896,496 in 2019, compared with $4,211,666 in the prior fiscal year. This is primarily because of a one-time end-of-service provision for executives and a substantial foreign exchange loss.

                      HIGHLIGHTS FOR 2019 AND 2018

                               Year ended Dec. 31,    Year ended Dec. 31,
                                             2019                   2018

Revenue                             $   8,626,429          $  11,706,467
Cost of sales                           6,373,463              6,571,900
Gross profit                            2,252,966              5,134,567
Operating expenses                      6,896,496              4,211,666
Other expenses                          4,168,205              1,276,374
Net income (loss)                      (9,184,109)              (366,044)
Per share (basic)                           (0.16)                 (0.01)
Per share (fully diluted)                   (0.15)                 (0.01)


                                    As at Dec. 31,         As at Dec. 31,
                                             2019                   2018

Current assets                      $   2,588,976          $   6,369,085
Current liabilities                     7,079,859             10,302,739
Long-term debt                          7,100,712                      -
Shareholders' equity                  (12,102,151)            (3,330,273)

Egypt

Egypt continues to be a challenging place to do business, with continuing restrictions on using foreign currency for business operations and on moving funds out of the country. NTG mitigates much of the risk of doing business in the country, as its expenses and the majority of its contracts in Egypt are both in the local currency. In September, 2019, NTG discontinued the EDC Foreign Funds (Risk) Insurance due to cash flow. NTG Egypt's revenue contribution continues to be strong. In 2019, the subsidiary contributed 33 per cent of the corporation's revenue (2018 -- 24 per cent).

Kingdom of Saudi Arabia (KSA)

NTG has been doing business in KSA for over 14 years, and continuing initiatives continue to show returns, with 62 per cent of NTG's professional service work and 49 per cent of its revenue being from KSA (2018 -- 44 per cent and 36 per cent, respectively). NTG has developed good brand recognition and a solid record over the years, which is an asset to its work in the region.

The government policies first implemented in 2018 have increased the cost of doing business in the country and have restricted Canadian companies from doing work with the Saudi government. Despite this, NTG's KSA revenue has remained similar to last year ($4.2-million). Additionally, NTG has new customers in the banking sector and new customers that work for public sectors, and the company looks forward to winning new projects accordingly.

Kuwait

Kuwait contributed 8 per cent to NTG's revenue in 2019 (2018 -- 28 per cent), substantially most of which was in the first half of 2019. As of Dec. 31, 2019, there was no significant revenue generated in Kuwait and no potential replacement of the lost revenue. As a result, management is reviewing legal options to close the business unit.

Oman

In 2019, NTG continued work for its customer in Oman, which is using the NTS network inventory and project management modules. The product sales have assisted with recurring revenues from maintenance and support, as well as extra licences, and provided new opportunities through change requests and new module implementation. Oman contributed 9 per cent to NTG's revenue in 2019 (2018 -- 11 per cent).

Outlook

In 2019, management's efforts were focused on resolving issues with the bank and with the cash flow shortfall. Though the bank is no longer an issue going forward, legacy debt and repayment of short-term loans remain a challenge. All agreements, terms and conditions that applied to the bank now apply to the numbered company, which assumed the bank's indebtedness and security. This company has agreed not to ask for principal repayments until the end of August, 2020. This has provided some cash flow relief; however, interest continues to accrue.

In December, 2019, the presence of coronavirus was reported in Wuhan, China. After year-end, the World Health Organization (WHO) declared a public health emergency and, on March 11, 2020, declared COVID-19 to be a global pandemic. As a result, countries restricted travel, closed schools and non-essential businesses, and asked that people stay home. Countries such as KSA and Egypt, where NTG does most of its work, enforced strict curfews.

As NTG is not designated an essential service, all of its offices were closed and staff were asked to work from home. Sales activities and collections have slowed. Existing projects are continuing at a slower pace, and acceptance of deliverables by customers is therefore slower. Revenue and cash flow have already been impacted. Though the Canadian government has made a wage subsidy available to qualifying businesses, the majority of NTG's staff is located in Egypt, KSA and Oman, and the wage subsidies are not available to NTG. NTG has taken advantage of the reporting deadline extension for TSX Venture Exchange-listed public companies for both this annual report and for its first quarter 2020 report, which NTG anticipates will be published on or about July 8, 2020.

At the time of the publishing of this report, it is uncertain how long these COVID-19 conditions will last and what economic impact they will have on NTG's business, its continuing cash flows and its ability to continue as a going concern.

About NTG Clarity Networks Inc.

NTG's vision is to be a global leader in providing networking solutions. As a Canadian company established in 1992, NTG has delivered networking, IT (information technology) and network-enabled application software solutions to network service providers and large enterprises. More than 300 network professionals provide design, engineering, implementation, software development and security expertise to the industry's leading network service providers and enterprises.

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