Galaxy Next Generation Reports Second Quarter Fiscal Year 2020 Results

Reiterates Revenue Growth Guidance of At Least 400% (25% Pro-Forma) for the FY Ended June 2020

TOCCOA, GA / ACCESSWIRE / February 14, 2020 / Galaxy Next Generation, Inc. (OTCQB:GAXY), a provider of interactive learning technology solutions, today announced the Company's operating and financial results for the fiscal second quarter ended December 31, 2019.

Key Financial Highlights for Q2 FY 2020

• Revenue of $0.9 million, representing overall growth of 147% in technology interactive panels, related products and interactive learning technology solutions
• Gross Margin of 44%
• Closed $1.4 million equity financing from existing shareholders and reduced $1.8 million of outstanding convertible notes by a combination of principal payments and conversion to equity.

Management Commentary

"While the last three months of the calendar year are a traditionally slow period for our business, we were busy integrating the recently closed acquisition of Interlock Concepts and Ehlert Solutions Group (Concepts and Solutions) and planning and budgeting for our more active time of April to September," commented, Gary LeCroy, Galaxy's Chief Executive Officer. "Our suite of innovative audio products have been highlighted at various tradeshows and are receiving alot of interest from distributors, existing clients and prospective clients as a complement to a more robust and complete total classroom solution."

LeCroy concluded, "We are confident that Concepts and Solutions will enable us to accelerate our revenue growth. Our sales pipeline of opportunities we have identified and are competing for is as robust as ever. With that said, we expect to generate revenue growth of at least 325% or $8 million in consolidated revenue for our fiscal year ended June 30, 2020."

Financial Results for the Three Months Ended December 31, 2019:

Revenue for the three months ended December 31, 2019 was $0.9 million, an increase of $0.2 million or 35%, as compared to $0.6 million for the three months ended December 31, 2018. Of note, revenue associated with the entertainment theater ticket sales and concessions was $0.3 million for the three months ended December 31, 2018. Without such, the revenue growth for the three months ended December 31, 2019 over the comparable three months ended December 31, 2018 would have been 147%. Additionally, deferred revenue amounted to $0.6 million, as compared to $0.2 million for the year ended June 30, 2019. Deferred revenues increased due to the increases in the customer base for interactive panels and related products as well as additional deferred revenues of Concepts and Solutions, acquired in September 2019.

Gross profit for the three months ended December 31, 2019 was $0.4 million, an increase of $0.1 million or 55%, as compared to $0.2 million for the three months ended December 31, 2018. The resulting gross margin was 44% for the three months ended December 31, 2019, compared to 38% for the three months ended December 31, 2018.

General and administrative expenses for the three months ended December 31, 2019 were $2.5 million, an increase of $1.0 million or 65%, compared to $1.5 million for the three months ended December 31, 2018. The increase primarily related to Company growth and the addition of Concepts and Solutions, which were acquired in September 2019. Of note, $0.7 million of general and administration expenses was non-cash stock compensation and stock issued for consulting fees during the three months ended December 31, 2019, as compared to $0 for the three months ended December 31, 2018.

Other income and expenses for the three months ended December 31, 2019 were a net $0.7 million, an increase of $0.7 million, compared to $178 for the three months ended December 31, 2018. For the three months ended December 31, 2019, this net expense is comprised of $1.2 million positive change in fair value of derivative liability, offset by $0.6 million interest accretion and $1.4 million of interest expense. For the three months ended December 31, 2018, this was comprised of $13,374 of other income, offset by $13,552 of interest expense.

Operating loss for the three months ended December 31, 2019 was $2.8 million, an increase of $1.6 million, or 125%, compared to $1.3 million for the three months ended December 31, 2018. Operating loss for the three months ended December 31, 2019 included $0.7 million of non-cash stock compensation and stock issued for services compared to $0 non-cash stock compensation and stock issued for services, for the three months ended December 31, 2018.

Net loss for the three months ended December 31, 2019 was $2.8 million, an increase of $1.5 million, or 125%, compared to $1.3 million for the three months ended December 31, 2018. The resulting loss per share for the three months ended December 31, 2019 was ($0.16) per share, compared to ($0.13) per share for the three months ended December 31, 2018.

Adjusted EBITDA loss, after adding back non-cash operating expenses and change in fair value of derivative liabilities, for the three months ended December 31, 2019 was $0.6 million , an decrease of $0.6 million, or 49%, compared to $1.3 million for the three months ended December 31, 2018.

Financial Results for the Six Months Ended December 31, 2019:

Revenue for the six months ended December 31, 2019 was $1.5 million, an increase of $0.1 million or 10%, compared to $1.4 million for the six months ended December 31, 2018.

Of note, revenue associated with the entertainment theater ticket sales and concessions comprised of $0.5 million for the six months ended December 31, 2018. Without such, the revenue growth for the six months ended December 31, 2019 would have been 75%.

Gross profit for the six months ended December 31, 2019 was $0.5 million, compared to $0.5 million for the six months ended December 31, 2018. The resulting gross margin was 34% for the six months ended December 31, 2019, compared to 36% for the three months ended December 31, 2018.

General and administrative expenses for the six months ended December 31, 2019 was $4.6 million, an increase of $2.2 million or 95%, compared to $2.4 million for the six months ended December 31, 2018. Of note, $2.0 million of general and administration expenses was non-cash stock compensation and stock issued for services for the six months ended December 31, 2019, as compared to $0 for the six months ended December 31, 2018.

Other expenses for the six months ended December 31, 2019 were $0.7 million, an increase of $0.7 million, compared to $8,547 for the six months ended December 31, 2018. For the six months ended December 31, 2019, this was comprised of $2.0 million positive change in fair value of derivative liability, offset by $0.8 million interest accretion and $2.0 million interest expense. For the six months ended December 31, 2018, this was comprised of $53,818 other income, offset by $62,365 interest expense.

Operating loss for the six months ended December 31, 2019 was $4.8 million, an increase of $2.9 million, or 157%, compared to $1.9 million for the six months ended December 31, 2018. Operating loss for the six months ended December 31, 2019 included $2.0 million of non-cash stock compensation and stock issued for services compared to $0 non-cash stock compensation and stock issued for services, for the six months ended December 31, 2018.

Net loss for the six months ended December 31, 2019 was $4.8 million, an increase of $2.9 million, or 157%, compared to $1.9 million for the six months ended December 31, 2018. The resulting loss per share for the six months ended December 31, 2019 was ($0.33) per share, compared to ($0.24) per share for the six months ended December 31, 2018.

Adjusted EBITDA loss, after adding back non-cash operating expenses and change in fair value of derivative liabilities, for the six months ended December 31, 2019 was $0.5 million, an decrease of $1.3 million, or 72%, compared to $1.9 million for the six months ended December 31, 2018.

Use of Non-GAAP Financial Measures

To supplement Galaxy's financial statements presented on a GAAP basis, Galaxy provides Adjusted EBITDA as a supplemental measure of its performance.

To provide investors with additional insight and allow for a more comprehensive understanding of the information used by management in its financial and decision-making surrounding pro forma operations, we supplement our consolidated financial statements presented on a basis consistent with U.S. generally accepted accounting principles, or GAAP, Adjusted EBITDA as a non-GAAP financial measures of earnings. Adjusted EBITDA represents EBITDA plus stock-based compensation and change in fair value of derivative liabilities. Our management uses Adjusted EBITDA, as financial measures to evaluate the profitability and efficiency of our business model. We use these non-GAAP financial measures to access the strength of the underlying operations of our business. These adjustments, and the non-GAAP financial measures that are derived from them, provide supplemental information to analyze our operations between periods and over time. We find this especially useful when reviewing pro forma results of operations, which include large non-cash amortizations of intangible assets from acquisitions and stock-based compensation. Investors should consider our non-GAAP financial measures in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP.

About Galaxy Next Generation, Inc.

Galaxy Next Generation (OTCQB:GAXY) is a provider of interactive learning technology solutions that allows the presenter and participant to engage in a fully collaborative instructional environment. Galaxy's products include Galaxy's own private-label interactive touch screen panel as well as numerous other national and international branded peripheral and communication devices. Galaxy's distribution channel consists of approximately 30 resellers across the U.S. who primarily sell the Company's products within the commercial and educational market. Galaxy does not control where resellers focus their resell efforts, although generally, the K-12 education market is the largest customer base for Galaxy products - comprising nearly 90% of Galaxy's sales.

For additional information, please visit our website at: www.galaxynext.us

Safe Harbor Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on the current plans and expectations of management and are subject to a number of uncertainties and risks that could significantly affect the company's current plans and expectations, as well as future results of operations and financial condition. A more extensive listing of risks and factors that may affect the company's business prospects and cause actual results to differ materially from those described in the forward-looking statements can be found in the reports and other documents filed by the company with the Securities and Exchange Commission. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Investors Contact:

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SOURCE: Galaxy Next Generation, Inc.