Galaxy Next Generation Reports Third Quarter Fiscal Year 2020 Results

Education Technology Revenue Growth of 64% Fiscal Year-To-Date Deferred Revenue Increased 350%

TOCCOA, GA / ACCESSWIRE / May 18, 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 third quarter ended March 31, 2020.

Key Financial Highlights for Q3 FY 2020

• Revenue of $349,247 for seasonally slowest quarter, representing overall growth of 32% in technology interactive panels, related products and interactive learning technology solutions
• Deferred revenue of $926,358, representing 275% increase since June 30, 2019
• Gross Margin of 63%

Key Business Highlights for Q3 FY 2020

• Awarded three additional purchase orders totaling $225,000 from Thompson County School District in Colorado
• Awarded additional purchase order from Newton County, Georgia
• Awarded additional purchase order from Stephens County, Georgia
• Garnered high praise for new products addressing intercomm, paging and security at the Future of Education Technology Conference
• Completed installation of additional interactive panels at Lamar County School District, Georgia

Management Commentary

"While the first three months of the calendar year are always our slowest time in regards implementations and revenue recogntion, our team was extremely active in the sales process in identifying and closing new business," commented, Gary LeCroy, Galaxy's Chief Executive Officer. "Our success is evident with our company record high of almost $1 million in deferred revenue and all the awarded purchase orders in the quarter and subsquequent to the end of the quarter."

LeCroy concluded, "Both existing clients and prospective new clients are highly interested in our suite of innovative audio products coupled with our interactive panels and accessories, as they seek a total classroom, school and district-wide solution. Our sales pipeline remains strong and we expect our fiscal year fourth quarter ended June 30, 2020 to be our best quarter in Company history."

Financial Results for the Three Months Ended March 31, 2020:

Revenue for the three months ended March 31, 2020 was $349,247, a slight increase as compared to $348,723 for the three months ended March 31, 2019. Of note, revenue associated with the entertainment theater ticket sales and concessions was $78,661 for the three months ended March 31, 2019. Without such, the revenue growth for the three months ended March 31, 2020 over the comparable three months ended March 31, 2019 would have been 32%. Additionally, deferred revenue amounted to $926,358, as compared to $247,007 at 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.

Revenues substantially consisted of revenues from sales of technology interactive panels and related products. Revenues increased primarily due to the increases in the customer base for interactive panels and related products as well as additional revenues received through Concepts and Solutions, which were acquired in September 2019, offset by the decrease in entertainment revenue resulting from the sale of FLCE in February 2019.

Gross profit for the three months ended March 31, 2020 was $218,633, an increase of $155,058 or 244%, as compared to $63,575 for the three months ended March 31, 2019. The resulting gross margin was 63% for the three months ended March 31, 2020, compared to 18% for the three months ended March 31, 2019.

General and administrative expenses for the three months ended March 31, 2020 were $1,662,359, a decrease of $380,822 or 19%, compared to $2,043,181 for the three months ended March 31, 2019. For the three months ended March 31, 2020, non-cash stock-based compensation of $48,034 and non-cash impairment charges of $2,000,287 were recorded. There was no stock-based compensation or impairment charges during the three months ended March 31, 2019.

Operating loss for the three months ended March 31, 2020 was $3,492,047, a decrease of $1,512,441, or 76%, compared to $1,979,606 for the three months ended March 31, 2019.

Other income and expenses for the three months ended March 31, 2020 was a net gain of $91,448, a decrease of $6,023, compared to $97,471 for the three months ended March 31, 2019. For the three months ended March 31, 2020, this gain was comprised of $695,300 positive change in fair value of derivative liability offset by $603,852 interest accretion.

Interest expense for the three months ended March 31, 2020 was $1,860,498, compared to $100,893 for the three months ended March 31, 2019. The increase in interest expense was due to the increase in our debt and pre-payment costs related to loans paid off in advance of maturity.

Net loss for the three months ended March 31, 2020 was $5,261,097, an increase of $3,278,069, or 165%, compared to $1,983,028 for the three months ended March 31, 2019. The resulting loss per share (EPS) for the three months ended March 31, 2020 was ($0.15) per share, compared to an EPS loss of ($0.20) per share for the three months ended March 31, 2019.

Adjusted EBITDA loss, after adding back non-cash operating expenses and change in fair value of derivative liabilities, for the three months ended March 31, 2020 was $972,069 a decrease of $878,060, or 47%, compared to $1,850,129 for the three months ended March 31, 2019.

Financial Results for the Nine Months Ended March 31, 2020:

Revenue for the nine months ended March 31, 2020 was $1,850,673, an increase of $133,320 or 8%, compared to $1,717,353 for the nine months ended March 31, 2019. Of note, revenue associated with the entertainment theater ticket sales and concessions was $589,705 for the nine months ended March 31, 2019. Without such, the revenue growth for the nine months ended March 31, 2020 would have been 64%.

Gross profit for the nine months ended March 31, 2020 was $734,275, an increase of $182,633 or 33%, as compared to $551,642 for the nine months ended March 31, 2019. The resulting gross margin was 40% for the nine months ended March 31, 2020, compared to 32% for the nine months ended March 31, 2019.

General and administrative expenses for the nine months ended March 31, 2020 was $4,263,887, an increase of $145,064 or 3%, compared to $4,408,951 for the nine months ended March 31, 2019. For the nine months ended March 31, 2020, non-cash stock-based compensation of $2,055,726 and non-cash impairment charges of $2,000,287 were recorded. There was no stock-based compensation or impairment charges during the nine months ended March 31, 2019.

Operating loss for the nine months ended March 31, 2020 was $7,585,625, an increase of $3,728,316, or 97%, compared to $3,857,309 for the nine months ended March 31, 2019.

Other income and expenses for the nine months ended March 31, 2020 were a gain of $1,307,901, an increase of $1,156,612, compared to $151,289 for the nine months ended March 31, 2019. For the nine months ended March 31, 2020, this gain was comprised of $2,717,557 positive change in fair value of derivative liability offset by $1,412,705 interest accretion.

Interest expense for the nine months ended March 31, 2020 was $3,822,927, compared to $163,258 for the nine months ended March 31, 2019. The increase in interest expense was due to the increase in our debt and pre-payment costs related to loans paid off in advance of maturity.

Net loss for the nine months ended March 31, 2020 was $10,100,651, an increase of $6,231,373, or 161%, compared to $3,869,278 for the nine months ended March 31, 2019. The resulting loss per share (EPS) for the nine months ended March 31, 2020 was ($0.47) per share, compared to an EPS loss of ($0.42) per share for the nine months ended March 31, 2019.

Adjusted EBITDA loss, after adding back non-cash operating expenses and change in fair value of derivative liabilities, for the nine months ended March 31, 2020 was $1,268,525, a decrease of $2,220,853, or 64%, compared to $3,489,378 for the nine months ended March 31, 2019.

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, impairment charges 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:

IR@GalaxyNext.us
P: 888-859-1274

SOURCE: Galaxy Next Generation, Inc.