Galaxy Next Generation, Inc.

Thank you John, and good afternoon everyone. As we always we appreciate joining our call today to discuss our second quarter financial and business results, of course, the quarter ended on December 31.

I will take a moment for those of you that are new to the call to give a brief overview of who Galaxy Next Generation is. We are in the educational technology segment.

We provide products anywhere from interactive flat panel displays to intercom paging, visual alerts. We took an opportunity in an unknown world and launched a Cov-Shield line of products for protective gear for students in the classroom, and really have just kind of created an entire product offering to spend classroom school and enhancing the learning environment, while keeping our student safe.

We do primarily sell into the school market the K-12 higher end market, but we do have customers in other verticals that we will provide equipment to. It’s obviously not our major focus and takes up a small percent of our current market share.

While we did experience several challenges in our second quarter. There was an election going on in our country.

COVID had additional lockdown measures in place. We are proud to present that we actually did have an increase in revenue on the six months that were represented at December 31.

Several key business highlights that I’d like to go through before we dive too far into the financial side. Of course, in that report period we did close the acquisition of Classroom Technology Solutions.

We enhanced our relationship with our first OEM partner by actually shipping off of their purchase order into us quite a bit. We added new resellers and territories that we had not sold into historically.

We added Cov-Shield customers everywhere from Pennsylvania to California, Texas and several in between. We did expand our relationship with Technology Core, who is a distributor in the Australian market.

We made a partnership with Strand4Kind, which is a non-profit and high bullying coalition. Again, just reiterating our message that our total business strategy is to protect our customers, which we see as the end user of the students.

We’ve launched several products both in the quarter and [announce soon] Adjust-A-Mount line of carts and mounts to make the accessibilities of our product easier for students in the classroom. We also announced our visual alerts product, which is basically a visual text message that can be sent to any device within the school district, whether it’s interactive panels, simple windows, tablets, PCs, iPads, the list goes on that product has been a key feature also in our safety line not just our technology line as it’s a quick way to get it.

Emergency response messaging out into the school district in case of the need to do so. So again, lots of things going on.

As historically this quarter has been our hardest quarter, just giving kind of the seasonal rotation of revenues from school districts. In November we have Thanksgiving, in December we have Christmas.

This year kind of posed even additional challenges, but we seem to have overcome them and have continued to grow in both a positive revenue stature and also a positive operational and debt stature. So I will take the time now to kind of dive into the financial results themselves.

So in terms of revenue, we did increase about 32% from the six months reported last year at this time to today. We also still reported a deferred revenue of $1 million.

Our deferred revenue is typically considered installs that are not 100% complete or product that is waiting on the school to be open in order to install. So it is sold revenue that has not been considered to be a receivable yet.

Products gross margin still maintained 50%. We’ve seen a little bit of an [inflow] from a logistic side in terms of freight cost.

COVID has called a little shortage in truck drivers and in shipping opportunities. So even maintaining the increase on our freight in the U.S.

here. Our gross margins are still about 34%.

So giving us a little bit of flexibility and in terms of growing and adding new people to the company. So having said that it’s kind of a direct reflection on our reduction and quarterly operating loss.

We did have an increase in revenue and a reduction in loss. So with the addition of two offices, this six months we added an office in Jacksonville, we added an office in Arizona.

We added five new full-time employees, three consultants, and still we’re able to show that decrease in loss and the increase in revenue. So I think it’s truly a testament the kind of the evolution that we’ve seen ourselves in and turning the corner and making sure that both of those worlds eventually meet in the middle in order to show that profit.

If we kind of look at the breakdown between the first half of this year, which again is our fiscal year 2021 and the first half of our fiscal year 2020. We didn’t see a major increase from 2019 to 2020.

In fact we were pretty flat, but that increase from that same time period to this time period, we did see that increase of 32%. So as we continue to evolve into this quarter and next quarter, which typically are more historic revenues for us.

Last quarter really gave us an opportunity to take a step back and make some changes that would put us into a quicker advancement on that front. So we did bring on this past quarter, a Chief Operating Officer.

And I think that that will have the biggest influence on our bottom line. As he continues to build out the team.

We have three open requisitions for regional sales managers, one of which I believe we may have filled today. And the other two are still being interviewed and trying to find the best candidate for it.

So simple things on the balance sheet to look for in this quarter, accounts receivables were up to $1.2 million from our audited period of $700. So not quite doubling, but to be able to have accounts receivable and inventory of just under $3 million.

I think we're $2.7 million on both of those combined and in accounts payable only at $1.3 million. That yields a positive to the company in a reflection of these earnings of almost $1.4 million.

You also see several things listed on the earnings report in relation to convertible debt. I think we had previously announced and have also announced in our earnings report that we have eliminated all of that convertible debt.

A couple of things that will be important to note in this earnings report is you’ll still see reflection of that convertible debt on the balance sheet in terms of liability and stock issuances that are non-cash related. So when we really break down both the income statement and the balance sheet, we get to be mindful of the elimination of that debt moving forward and be proud that the net earnings will reflect obviously a true liability number based around those derivatives.

So a couple of other key highlights that I'll point out, we've also increased our assets once again this quarter, so we've added another $1.2 million in assets to the balance sheet. Our backlog currently fits at about $2 million and I will point out that our backlog is different than deferred revenue.

Our backlog is basically orders that we have received, but are not in process. So deferred means that they're in process.

We just haven't fulfilled them all to turn them into receivables. Backlog would be orders received that have not yet shipped.

So if we look at the big picture of where we're at December 31st and I'll talk a little bit about where we've come since then before we turn it over to questions. We have assets sitting hard assets of accounts receivable and inventory of over $3 million.

Removing the liabilities of the convertible debt and everything related to that, we do have accounts payable of 1.3 to long-term notes payable. So when we talk about the debt under that related left on the book, all of the debt that currently sits out there is either based around PPP loans of the company received or SBA loan during the COVID disaster that were received or they sit under that related party notes payable, which means that either an executive officer or affiliate onset that.

So the positioning of where we're at now is basically we know who owns the money and where the money is at and it's a true testament of kind of where our growth is able to go moving forward. In this past quarter, in terms of subsequent events, we also talk about the new financing that has come down the path.

So, hate the harp on it. But for us, the elimination of that convertible debt was extremely important.

And since then we have moved not only into new traditional banking, but also a higher level of institutional equity funds. And so what that means is that we now have a true bank line of credit in place that we use from an operational weekly salary type standpoint.

We have accounts receivable financing in place, which obviously is eligible for up to 1.2 at this point based on that. And now we also have this equity investor that really to Gary and I and to explain it kind of in layman terms has given us a cushion or a backstop for the company to be able to jump into a much larger producing company.

So that we don't have the financial constraints of having to rely on top that financing. So, as we move forward, we will use and rely on some of those traditional manners and also the equity lines.

And it's not our intention at this time or in the near future to bring on any additional convertible debt. So I think that kind of summarizes where we're at.

I'll answer some additional questions and probably we'll reflect back to some of the numbers in the financial statements for some of the other catalysts. But I think it’s pretty good summary at this point.

I don't want to rattle on forever to turn it back over to you, John, and we can open it up for Q&A.

Okay. Well, in summary, I just thank you, John, obviously for hosting the call.

We did exceed our expectations in quarter two as a company, both financially and catalyst that we wanted to hit to set ourselves up for future goals. I feel good about where we sit with this, a heavy investment for me personally.

And Gary and I co-founded this company several years back. We've taken it through many evolutions.

And I feel like the next few evolutions that we intend to go through are our greatest yet. And so we appreciate all the support obviously that we've had over the past few months, some of you over the past few years, so we'll continue to make sure that we're keeping our promises on our end and making them strive, that we need to strive.

And again, thank you guys for dialing in to the call today.