Ms. Kristine Lewis reports

NTG CLARITY NETWORKS ANNOUNCES SECOND QUARTER 2020 FINANCIAL RESULTS

NTG Clarity Networks Inc. has released its second quarter results for the period ended June 30, 2020 (all figures in Canadian dollars).

The continuing COVID-19 pandemic presents a significant source of economic uncertainty and there have been impacts on NTG sales activities and collections have slowed.

Toward the end of June, 2020, NTG's offices reopened, with the Egypt office starting a gradual return with enhanced health and safety protocols. Employees working at customer sites are following customers' protocols for working on site or remotely.

Consolidated revenue for the three and six months ended June 30, 2020, was $1,651,209 and $4,125,975, respectively, compared with $2,035,298 and $5,651,642, respectively, for the same periods in 2019, and is made up of product-related revenue and professional services.

Gross margin for Q2 2020 was $627,252, compared with $975,171 for Q2 2019. Gross margin percentage was 38 per cent, compared with 48 per cent for Q2 2019. For the six months ended June 30, 2020, gross margin was $1,514,660 or 37 per cent, compared with $2,559,130 or 45 per cent for the same period in 2019.

Selling and marketing expenses for the three and six months ended June 30, 2020, were $193,961 and $467,250, respectively, compared with $467,061 and $866,056, respectively, in the previous year. This 58-per-cent decrease in the selling and marketing expenses in the quarter (46 per cent year to date) was the direct result of customer and office closures as required by COVID-19. Travel, trade shows and customer visits were suspended, and salaries were reduced during the period.

General and administrative (G&A) expenses for the three and six months ended June 30, 2020, were $1,191,283 and $1,788,003, respectively, compared with $495,273 and $1,079,468 in the previous year. G&A costs have increased significantly in this period due to:

• End of service (severance) salary accruals in the amount of approximately $512,626;
• The retention of highly skilled personnel (considered to be the corporation's main assets) in anticipation of the restart of existing projects put on hold due to COVID-19. Salaries and consulting costs were booked into G&A expenses.

In Q2 2020, there were no salaries accrued or paid for employees and management in the Canadian office due to COVID-19.

Working capital as at June 30, 2020, was a deficit of $6,125,997, compared with a deficit of $4,490,883 at Dec. 31, 2019.

                                   INCOME STATEMENT HIGHLIGHTS                                    

                                                      Three months ended              Six months ended          
                                            June 30, 2020  June 30, 2019  June 30, 2020  June 30, 2019

Revenue                                       $ 1,651,209    $ 2,035,298    $ 4,125,975    $ 5,651,642
Cost of sales                                 $ 1,023,957    $ 1,060,127    $ 2,611,315    $ 3,092,512
Gross profit                                  $   627,252    $   975,171    $ 1,514,660    $ 2,559,130
Expenses                                      $ 1,747,782    $ 1,253,383    $ 2,688,882    $ 2,491,387
Foreign exchange loss (gain)                  $  (121,668)   $    30,283    $   223,162    $   178,974  
Net income before taxes                       $  (998,862)   $  (308,494)   $(1,397,384)   $  (111,231)
Other -- exchange (loss) gain on translation  $   (20,853)   $    19,325    $  (221,068)   $   126,780  
Net income after taxes                        $(1,019,715)   $  (289,170)   $(1,618,452)   $    15,549   
Per share                                     $     (0.01)   $    (0.005)   $     (0.02)   $      0.00     

           BALANCE SHEET HIGHLIGHTS 
                                     Six months ended
                     June 30, 2020      Dec. 31, 2019

Current assets        $  1,997,689       $  2,588,976   
Current liabilities   $  8,123,686       $  7,079,859   
Long-term debt        $  7,100,712       $  7,100,712   
Shareholder's equity  $(13,058,469)      $(12,102,151)

Outlook

The COVID-19 pandemic had a significant impact on NTG in Q2 2020, in the form of reduced revenue, delayed projects and slower collections.

As of the publishing of this report, existing projects have resumed and employees are working either on customer sites or remotely. It remains uncertain how long these COVID-19 conditions will continue, and what long-term impact they will have on the company's customers and its business and cash flows.

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, information technology and network enabled application software solutions to network service providers and large enterprises.

We seek Safe Harbor.