Q3 2020 Boxlight Corp Earnings Call

The ladies and gentlemen, thank you for your patience. Please remain on the line while we got the additional participants again, we do appreciate your patience. Please remain on the line your conference will begin momentarily. Thank you.

[music].

Thank you and welcome to the box light third quarter Twenty-twenty earnings conference call by now everyone should have access to the third quarter of 2020 press release the issue. This morning.

This call is being webcast and is available for replay.

The remarks today will include forward looking statement.

Excuse me of the remarks today will include statements that are considered forward looking within the meaning of of securities law, including forward looking statements about future of results of the operations business strategies and plans customer relationships market trends and potential growth the opportunities in.

In addition management and they make additional forward looking statements in response to your questions.

Forward looking statements are based on management's current knowledge and expectations as of today and our subject of certain risks and uncertainties and may cause of the actual results to differ materially from the forward looking statements of detailed discussion of such risks and uncertainties are contained in the company's most of <unk>.

<unk> for them 10-Q form 10-K, and other reports filed with the S. E C. The company undertakes no obligation to update any forward looking statements.

On this call management will refer to non-GAAP measures that wouldn't Houston combination with GAAP results provide additional analytical tools to understand the company's operations. The company has provided reconciliations to the most directly comparable GAAP financial measures and the earnings press release, which will be posted on on the investor really.

Actions section of the company's website at investors Dot box flight dot com and with that I'll hand, the call over the box flights Chairman and Chief Executive Officer, Michael Pope Sir the floor of shores.

Good afternoon, everyone and thank you for joining the call our progress during the third quarter was the most significant in our history and included fund raising of over 60 million threaten equity the acquisition of Sahara presentation systems, a leading interactive solution provider with significant penetration and the EMIR region. The addition of tremendous talent towards.

Leadership are formalized partnership with Samsung enhancements to our product offering any drastically improved balance sheet and financial outlook.

Although our revenue of 9.5 million of gross profit of 21 per cent lagger expectations in Q3 do the several factors, including the effects of the COVID-19, we're seeing increase the man in the fourth quarter and we were executing on a strong sales pipeline.

With the addition of this of her operations in consideration.

And considering our quarter to date results and current pipeline, we expect the generate greater than 27 million in revenue and positive adjusted EBITDA for the fourth quarter.

[noise] during the third quarter, we had several new wins with interactive flat panel of displays, including Bennington public schools and or the public schools in Nebraska Granite School District of Utah, and Ohio County School District in West Virginia. We also began deployments of our mimeo clarity classroom audio solution in to school district of Michigan installing over 300 units.

We continue the deliver on key contract such as San Diego Unified in California, Harford County, public schools of Maryland tangent the whole a pair of school system in Louisiana, and Highland Park Klein West Orange code and all of an independent school districts on Texas.

Outside of the U S or Latin American businesses growing through key partnerships in Puerto Rico, Peru, and Costa Rica, and Europe, we delivered more than 500 interactive displays to the academies Enterprise Trust in the U K and are seeing significant opportunities in Germany, Belgium, France, and the Netherlands.

We continue to win business with strong partner such as trucks C. D. W. Howard technology solutions Central technologies tyranny information and data networks supplies interactive concepts abacus computers G V multimedia and digital age technologies.

During the third quarter be closed the $34.5 million secondary offerings and received the 22 million dollar investment from the link partners. Additionally, we the entered into a 6 million dollar asset base lending agreement with Sally poor commercial finance that provide substantially better terms in our previous factoring and Peel finance facilities.

On September 24th using the proceeds from recent financings, we completed the acquisition of Sahar presentation systems are most significant transaction today with a purchase price of of approximately $80 million in cash in preferred stock.

Headquartered in the United Kingdom, Sahara as a leader in providing audio visual solutions for education in corporate environments, including its multi award winning touch screens and digital scientists products under the brand clever touch.

For heart is an ideal strategic fit with the significant penetration and then the of market.

And tremendous management talent, including Mark Snarky of C. E O patchouli of CFO, and Sean Mark Lewis C O O.

In September we had the two seasons sales leaders for America sales organization, namely Scott will it as vice President of sales and Dan team as Vice President of sales over platforms of the services, both scotton, Dan bring tremendous experience in the industry for companies such as Apple Promethean, Dell and Panasonic and we'll manage our sales organization of.

America's.

In August we formerly announced our strategic partnership with Samsung Electronics America to provide their displays bottle with box life software and professional development, we of dedicating substantial resources for the Samsung partnership and we expect the beginning of delivering sales this quarter with substantial growth in 2021.

As a result of a recent fund raising as well as our acquisition of Sahara, We close the third quarter with a healthy balance sheet, including cash and cash equivalents of 10 million inventory of 22 million working capital of 25 million and stockholders equity of 44 million.

We were recently selected the finalists in five categories for the 2020, a V awards, including for impact plus display as visual technology of of the year are you ex pro is collaboration technology of of the year and clever touch if the manufacturer of of the year. We were also nominated under the age of the inaction category for our COVID-19 reaction strategy.

We're committed to providing best of class interactive technology solutions that improve engagement and communication and diverse business and education environment and we are proud of our progress during the third quarter to enhance our solution sweet.

We recently launched both are clever touch the technology is non interactive C. M series with embedded digital signage and are clever test technologies people five which is R. Compaq, Yeah 40 feature digital signage player.

On October 1st we are used our links whiteboard software, which was completely redesigned for touch screens with dragon drop pinch the zoom and easy swiped menus.

Whiteboard runs across multiple platforms on an array of devices and it's available for download and all major app stores, where think positive interest her subscription based on the male connect software platform designed for blended learning, which will be announced in June of this year and we are demonstrating of testing the platform of several districts. We added various enhances during the quote.

For including monitoring of student engagement with teacher visibility and one on one text cozy.

We're also completing development to provide compatibility with samsung's ties in operating system.

Or maybe the clarity of audio solution is being piloted in several district of Michigan, and Michigan and hybrid learning environments in the mail clarity allows teachers the amplify the voices, while wearing masks the both students.

In the classroom and those learning virtually the.

Clarity is also available with the care Hawks system, providing functionality for bells public announcements emergency notices class from the classroom communications as well as classroom to administrative communications.

We have also on a hamster the box light unplug screen mirroring software to allow for nine simultaneous students share devices and have developed it teacher control center, which allows the teacher the highlights students screens control all share it screens for teacher feedback and control student collaboration functions.

As you can see we're fully committed to providing industry solutions that create engaging in collaborative experiences and diverse environments. Specifically are feature rich solution bundle for.

Provide integrated hardware and software partnered with professional development and training resources to drive it option.

With our tremendous foundation of talented management and the outstanding solutions, we are fully committed to delivering strong financial performance on the fourth quarter and showing continued improvement in future quarters with a specific focus on revenue growth increased gross profit margins and positive earnings with that I will now turn the call over to our CFO.

True to Keisha Brown.

Thanks, Michael at Michael noted the company acquired 100 per cent of the outstanding shares of for her on September 24 of 2020 include.

Included in that three month, the nine month period. The 2020 as will be discussed are Sahara operating results for the period from September 20th day of through September 30th the.

Contributed approximately 1.1 million in revenue and approximately 0.1 million in gross profit the highest total operating expenses for 0.3 million and they incur the net loss of approximately zero 3 million the heart.

It's gross profit.

And net loss with negatively impacted by the purpose of counting impact of 0.2 million as the result of marking the inventory up the fair value acquisition day.

Alan now with you or third quarter of 2020 consolidate of adult.

Revenue for the three months and it September 30th 2020, with nine 5 million a decrease of 1.8 million are 16 per cent compared to 11.3 million for the three months ended September 30th 2019.

The decrease in revenue the 20th 20, it's related to the reduction in sales panel.

Off the air Sam primarily attributable to the school closures at the result of the ongoing COVID-19 pandemic.

Gross profit for the three months and the September 30th 2020, with 2 million a decrease of 1.2 million compared to 3.2 million for the three months and it September 30th 2019.

The resulting gross margin with 21 point for for that but the three months ended September 30th 2020 compare the 28.6% for the three months ended September 30th 2019. The decrease in gross margin from the 29 per cent of 21 per cent with related to changes in the company's product mix with.

The reduction in higher March on products such of software in Sam 833 per cent increase.

And distributors fail compared to 2019 and of 0.2 million purchase the county, and pack of Mark and that's the horror inventory up the fair value at acquisition day.

General and administrative expenses for the three months and the September 30th 2020, with 3.3 million compared to 4.2 million, but the the <unk> September 30th 2019, the decrease merely driven by reductions in compensation and benefits of 0.7 million traveling the entertainment of your appointment to me.

<unk> and stop compensation of 0.2 million.

Research and development expenses, but the three months and the September 30th 2020 was 0.5 million compared to 0.4 million for the three months and the September 30th 2019, the change on research and development expand is primarily driven by an increase in contract service day, it's related to stop on.

Or a consultant.

Operating loss for the three months and the September 30th 2020, with 1.8 million a decrease of 0.4 million or 30 per cent compared to the 1.4 million for the three my standard September 30th 2019.

February 5th and income, but the three months and the September 30th 2020, with an expert of 2.5 million an increase of 3.4 million of 381 per cent compared to income of 0.9 million for the three months and the September 30th 2019 the.

Increase in other expenses related to of change and fair value of of the ribbons liabilities of 1.6 million.

And I lost from settlement of mandate of 1.7 million.

Net loss for the three months ended September 30th 2020, with for 2 million compared to 0.5 million for the three months and the September 30th 2019, the inquiry and the net loss was primarily driven by decrease of gross profit.

An increase in other expenses offset by decreased and operating expenses.

The resulting EPS lock, but the three months ended September 30th 2020, with 10 cents per diluted share compared to four cents per diluted chair for the three months in the September 30th 2019.

Adjusted EBITDA locked for the three months and it's September 30th 2020 was 0.9 million an increase of 0.4 million or 66 per cent compared to 0.5 million for the three months and it's September 30th 2019.

Our financial results for nine months and date September 30th 2020 or S follow.

Revenue for the nine months September 30th 2020, with 23 million a decrease the for 1 million or 15 per cent compared to 27.1 million for the nine months ended September 30th 2019. The decrease in revenue in 2020 is related to the reduction in sales of panel.

Projectors software them, primarily attributable to school closures at the result of the ongoing COVID-19 pandemic.

Gross profit for the nine months and of September 30th 2020, with 6.3 million a decrease of 1.6 million compared to 7.9 million for the nine months and it September 30th 2019, the resulting gross margin with 27.4 million 27 point for for fit for the nine months.

And the September 30th 2020, compared to 20 911 for that for the nine months and the September 30th 2019.

The growth March of decrease for 29 per cent to 27 per cent with related to changes in the company's product snake with the reduction in higher margin products to just suffering Sam 815 per cent increase and distributors fail compared to 2019 and of 0.2 million purchase of counting and pack of market.

The Sahara inventory update their value of the acquisition date.

General and administrative expenses for the nine months and it's September 30th 2020, with 10 point for a million a decrease of 1.5 million of 12%.

Impair to 11.9 million for the nine months ended September 30th 2019. The decrease was driven primarily by reductions in trade shows of your appoint 3 million contract services of 0.6 million compensation and benefits of your appointment for a million and traveling the entertainment of 0.4 million.

Research and development expenses for the nine months and the September 30th 2020, with 1.1 million an increase of 18 per cent compared to 0.9 million for the nine months ended September 30th 2019, the inquiry and research and development expense was driven primarily by an increase in contract services for software for.

<unk>.

Operating loss for the nine months and it September 30th 2020, with 5.2 million compared to 4.9 million for the nine months ended September 30th 2019.

Other expense for the nine months and it September 30th 2020, with an expense of 2.4 million an increase of 0.8 million of 49 per cent compared to expense of 1.6 million for the three months and it September 30th 2019, the increase in the other expense with relate it to Ah Lok.

On the settlement of land debt of 2.3 million angry interest expense of 0.3 million.

All set by a gain on settlement of E. D. I accounts payable of 1.7 million and a decrease in change of fair value of derivative liabilities of 0.3 million.

Net loss for the nine months and it September 30th 2020, with 7.6 million an increase of 1.1 million are 17 per cent compared to 6.5 million for the nine months and it September 30th 2019, the resulting EPS loss for the nine months and the September 30th 2020, with 31 cents per diluted.

Chair compared to 62 cents per diluted chair for the nine months and it's September 30th 2019.

The increase in the net losses, primarily driven by a decrease in gross profit and.

Can increase the other expense of that by decrease in operating expense.

Adjusted EBITDA loss for the nine months and it September 30th 2020, with 1.6 million a decrease of 1.5 million 50 per cent compared to 3.1 million for the nine months and it September 30th 2019 with that will open up the call for questions.

Ladies and gentlemen, the floor is open for questions. If you do have a question. Please press Star then one on your telephone keypad to join the queue, if you're using a speaker phone. Please pick up your handset to provide the best sound quality again, ladies and gentlemen, if you do have a question or comment. Please first star then one on your telephone keypad at the <unk>.

Time.

And first of all go to John No Bill with the Tag Glitch Brothers. Please go ahead.

Alright, good afternoon, the make and the tissue. Thanks for taking my questions.

Are you my first question actually I have a lot of the the Sahara I know that the hell of a portion of the sales or to the corporate market on.

Was hoping you could kind of break out what percentage of Sahara sales on to the education market.

Yeah of jumping for Joy me of the call and Great question. So we're still we're still going through the Sahara of financial statements and we're actually working on can have of your their financial slotted in preparation for filing alright today in early December which will include there a standalone historical as well as of course, the pro form of combined statements with box line, but historically there there.

Corporate over recent quarters their corporate businesses went about 15 per cent of the total sales about 85 per cent has been education. So it's kind of a rough rough number for you. It's a little higher in the U K and then it's a little lower throughout the other parts of.

Of your of the day showing too.

Okay. So so well the bulk obviously education, but the 15th of Saint corporate market I'm I'm, just curious <unk>, you're really focused in on the education market, if you'd be looking to grow the the corporate of the non education, Walter the service business or you're looking really the just focus on the.

<unk>.

Right now our focus primarily as education, but we do expect of grow the corporate market as well, we felt pretty closely of resource called future for <unk>. They put together some research on on the Iraq of flat panel of interactive display market and we for all that pretty closely and we're seeing an uptrend an interactive displays being told into the <unk>.

Corporate market Uhm Whereabout in line with that with with the Sahara Group, where we're at the about 15 per cent of of the total mark of today, but future sources projecting that to increase pretty dramatically over the next two years. In fact I believe by 2024 was supposed to be upwards of almost 30 per cent of of of total value of north of 20 per cent of units.

And so you know I I would expect you know it for 15 per cent of the day approximately within that group I think we're gonna start to see that increase over the next to the next few years, but again overwhelmingly our business will be education.

Okay, I just want to make sure I understand that the.

Going forward. The you had mentioned what was it the looking at the the growing to like 30 per cent is that of of of total sales of my getting this correct Oh, yeah for Sahara.

Whereas the Sahara today is about is about 15% is where they are of their total sales I do think that'll stir can increase over future quarters. Because it is of focus of cars yeah. The the the 30 per cent number was from choose your source about the total interactive display the market, which still as long as the education, but they're projecting the by two.

The 20 for that Uhm of total sales the the corporate market will make up of of almost 30 per cent of the total market. So I would think that we had a trend at a minimum we had a trend with that I think within within that vertical.

Okay, and actually you put the Keisha I was hoping the.

To get an idea of what the the blended gross margins would be with the hair of going forward now you're gonna have a complete fourth call. The wood Sahara. So I know that typically well you had some some other things in this quarter, but we were looking at <unk> not high 20th for 30 per cent force margins.

Before the acquisition so now what's the horror.

What what would be a good ballpark for you to kind of for your for gross margins.

The the first thing from an adjusted perspective, we probably have a range of 25 to 30 per cent, but one of the adjustment that I spoke about in my discussion today with the latest to the the Mark up of the inventories of fair market value as a part of the purchase accounting, we had a mock up of of about $4 million to.

Tori and only about 200 of that turned in the last six days of the quarter. So if we just take that run great. We have it and hit the pay it about 3 million of that to reverse out during the fourth quarter, which is kind of have a significant impact on our margin for the border. So I'd I'd just it it could be on the range from 15 to 20 per cent.

With you on that that's just kind of it yeah. That's for Q, Yeah, that's for cat for only and that's the that's the right account or did you.

And I wanted to make sure on for cute for 2015 to 20 per cent, but after this inventory mark if we could just kind of figure out for 2021.

If you could give of ballpark figure for what the gross margins would be once this is finished.

Yeah, and I think that's gonna be that original adjusted range that I've talked about of the 25 for 30 for 45 for 30 per cent.

Yeah of course, you said the 31st the end of it.

Okay. So it's not that far off from for.

<unk> acquisition. The margins then that is correct because if you think about it the the the largest the majority of the heart is going to be the handles right, which is kind of in line with what it is that we've been experiencing that last line mhm.

Oh, Okay, Oh of great. Thank you for that I just have one final question General question. If you could just kind of talk about the synergies that you expect from this acquisition of Sahara.

I think the the most significant synergies are gonna be around top line opportunity. So so by combining of the companies were bringing in some more talented management, which is helpful of course, we're opening it up to our opening up our our opportunities in other markets, but also were able to combine the product sweets to really come up with best in class solutions.

And we're seeing improvements on both sides of improvements for the product suite. So I'll think of them. The other day, we're gonna start to see more revenue top line opportunity and both of Europe as well as in the U S. As a result of combining of the complex.

For <unk>, obviously, you of you're going to be some good cross selling opportunities with the.

That's right Yeah I'm in just a couple of quick examples you know.

In Europe, and Sarah No has been been selling no great solution sweep of but they haven't had a karate of solution do we have one of course of mimeo clarity. That's on we're gonna look at potentially sewing over you know into into into of me on the flip side you know, there's some great assets, including on interactive flat panel.

The the Sahara ourselves they have a an Android app store, that's something that we have on hand, so that's something we're looking at adding to our our our displays you know under the name of your box of my branches. So there's a lot of things like that we're looking at of dozens of of potential opportunities around the solution sweet over the next couple of quarters will start to realize was benefits.

Okay, Great I appreciate the the input that's all I have thank you.

Thanks for calling Ya.

We go to the line of Brian can slinger, what's the why it's global partners. Please go ahead.

Hi, everyone. This Jacob on for Brian Thanks for taking my questions Uhm.

Uhm you talk for about the corporate market is there ultimately of software play on the.

Absolutely every every display that we sell we're including software on the display so on the corporate market. We have white 40 shop, where that can be used in in corporate environment, which is key we also the Sahara group. It had acquired of company by the name of of <unk>, which is digital signage company.

And is of great amount of software that we have within that group to through the digital signage acquisition and so there. There's a good amount of software we're offering yes as as part of the solution was telling you the the corporate market.

Okay and can you talk about the progress you're making on the Samsung partnership and have the started to sell the bundle. The it has this had any material impact on the results so far.

Yeah. So it sort of has not had a mirror material impact of this point in time, but <unk>, we expect to start seeing some business go through this quarter with with a real focus on 2021. So I would just tell you. The we we've invested a tremendous amount of resources into the relationship as of day and you know, we're just now to a point to where.

Where we can offer the solution and and actually ship the solution agreements finalized Uhm logistics is finalized and now we're turning our focus to sales and marketing and we have a pretty big target for 2021, but I expect in 2020 and in the fourth quarter now that we'll we'll see the handful of units, but nothing ultra substantial.

But again, you're going to see the the real uptick in 2021.

Okay and then the follow up on Samsung is your plan to ultimately Levered, Samsung partnership and use them as the supplier to Sahara as well.

You know that's something we look at it would be <unk> right now our agreement with Samsung is for the it's just for the United States. So our focus is on the west today on our focus is on the bundle, we're offering which includes their displays with our software as well as our training monitors that we're offering and so.

I think right now we're focused on Twenty-twenty wanted to start to see you know get good up took in until the units and it's something we can evaluate down the road, but right now again, our focus is just showing that that bundle on the U S and and we'll we'll see where that leads.

Okay and can we expect to continue seeing with the businesses combined some seasonality and the December on March quarters, and what what kind of levels of seasonality of do you think we would see.

Yeah. So so it's gonna be stabilized the little bit as we become more global because you know some school schools have different schedules internationally in some areas and then then they do here on the U S that being said, we still expect to see a lighter Q1, and then and then at the uptick a little bit and Q2, two three still gonna be the strongest quarter queue for.

Will be strong as well, but you gotta expect the C Q1, lighter uhm and we will provide some more guidance on that as we start to stabilize are are reporting eternally.

Okay and the last one for me what was the reason for the increase in distributor sales on something that you might see in the future course.

The increase in distributor sales was because we entered into a new distribution agreement with teenage distributing which is a large for and a half billion dollar distributor of here in the U S. They have multiple logistic centers throughout the U S and they sell a tremendous amount of education and we enter into that agreement for a couple of reasons one day <unk>.

Get it to carry inventory and their distribution centers and the number two they've committed of quick turnaround to ship if if our partners that we sell through if they place for just with teenage code there'll be a quick turnaround in inventories. So those one of those would admit the main reasons uhm beyond that also Dna's has a large network of channel partners some of the.

We don't sell through the day and education and we'd hope that we can start to gain access to some of those partners on I believe will start to see that happen more.

With that being said there is a cost of selling through teenagers distribution or through other distributions and on the average it's it's costing us from 2% to 5% depending on the orders of replace three of them and so we did see an uptick because we had a lot of our partners. The chose goodbye from day and age versus directly through us and we push on partners two day and age as.

The result of again provide any better service to to our part of the network, but we believe that over time, we can offset that a little bit with with with improving margins in other areas, but we did take a little bit of of hit two last quarter with the shifted that business for distribution.

Great. Thanks, that's all from it.

<unk> I apologize for the next we go to the line of the check the standard but some group. Please go ahead.

Great Hi, Hi, Michael like the Keisha Uhm, congrats on on the quarter and in the Sahara acquisition. Thanks for taking my questions.

Uhm, So Michael and your prepared remarks, you you mentioned that you're seeing increased demand in the fourth quarter and.

You expect to generate revenue of at least 27 million along with positive adjusted EBITDA of.

Uhm I'm not sure. If you provide the serve you you feel comfortable providing the ship, but can you provide any more granularity on the 27 million plus revenue guide between maybe what you expect core box like versus Sarah to with that makes it would be.

Yeah at the bride, a little bit <unk>, let me just mention that the way we came to the 27 million dollar number was number one looking at of course orders of of shipped already during the quarter and the number two we look at our back orders of we believe we can fill on the number three we look at our weighted pipeline and look it realistically what what we believe that we can we can sell on.

Deliver from within our pipeline. So we feel really good about that 12 27 million dollar number I'm not in the position right now to try to break out what the historical box light was versus kind of what the Sahara <unk>.

We don't even track it like that anymore, we're really focusing on markets. So internally, we're tracking U S. As the market and then we we track of me as of market Uhm largely in of me, how we're gonna be sending the clever test brand and so a lot of the the partners in the past that were selling our mimeo branded solutions a lot of those will start to shipped over.

And then the you asked we're focused primarily on our Mimi Okay to 12 brand. There is some clever touches be sold in the U S and that's gonna continue but but our our key focus going forward is gonna be on the name of your branch of that being said I think I could give you kind of an idea of perhaps for the end of the quarter, but but generally it's gonna be market based as far as what we're seeing for the historical <unk>.

For box of my business, we're having a great quarter I'll just leave it at that the where we started off of really strong much stronger than where we started off last year and so we expect even that core business to be significantly stronger than it was the same chord of last year and I would just mention that the industry also seeing a strong increase the I mentioned some of the research for.

Two of your source, which is is is the research report that we track pretty closely but if you look at what day, what they say around the growth of an interactive displays are expecting queue for to be a really really good quarter. In fact, Q3 was actually strong quarter for the shelving of interactive displays were two three if you look at the globe, excluding China and I actually had a pretty good and.

Increase of about 11 per cent and then if you look at.

If you look at just the U S alone. The U S. Also had had had an increase that was about 11% over the same quarter of last year, and then EMEA how about at eight per cent increase sort of the same for the last year. So even though you know it it it's been of a strange environment with Covid in in in schools trying to figure out how to operate in the.

The new environment.

They're actually wasn't increase in sales of interactive flat panels last quarter over the same time last year now we actually got hit with some of our contracts where I don't know if that we saw that that broad impact, but now that we're a much larger more global company I'd say I expected to try the little closer to the market going forward and then if you look at your source of what they're <unk>.

Checking in future years, they're showing good grow of 2021 is gonna be higher than than 2020, and 2019 word 2019, 2020th of expect to be roughly flat, which shows of Q3 was good queue for should be strong and then if you're looking at growth over the next few years, they're showing good grow. So again I think we're we're gonna see good uptick in and both of the U S. A N.

And the on a go for basis.

Got it that's that's helpful Love added added clarity there I appreciate it.

And then maybe if if I look at the Sahara as 2019 financial statements and you know to just do a rough conversion of U S dollars. They're 2019 revenue looks like it was about 100 million USD can you provide just in the insight or any color on house of Harrah's revenue has tracked during 22.

<unk> relative to the 2019 numbers has revenue been up down flat you know give me a copay on everything I just haven't zero insight into that so I'm wondering if you could provide any clarity there.

Yeah. So so we're we're a little hesitant Jack to provide too much in the form of numbers just because again, we're still going through the on it uhm and once the is complete you know we're gonna provide the pro forma line statements. Both standalone input form of combine and that's gonna be first week of December. So it's just around the corner, but I would tell you that they are performing quite strongly and we had so they have.

Like the they've had a good year year to day, they had a tremendous October and we're expecting a really strong really shrunk you for so they have not seen a significant decline you know they they've been up taking the most markets that being said Tuesday of had strong stronger profit actually slightly stronger than the historical and so it works. That's why we're expecting to see if the case.

You mentioned combined gross profit of 25 to 30 points and possibly on the higher end of that has the that gross profit margin range.

Got it okay. That's that's helpful as well and then maybe if I just back to like box like core products can you provide maybe the status update on mimeo clarity on what your your business expectations are from from this product in terms of revenue cause I I believe earlier in the year a couple of quarters ago, you had initially per.

<unk> to be like a 10 per cent of revenue contributor before the launch was delayed because of COVID-19 related uhm issues, but any any of the update on the me of clarity sales and I don't know revenue attribution.

Yeah. So so so the delays on clarity, which we we did have substantial delays. The those were on the manufacturing side, where we had a lot of you know a lot of complications trying to get that the market. Those are essentially largely behind us and so so we have a finished product we're actually piloting the plot product and several school districts as we speak.

And it's going quite well and we picked up our our for sales during the quarter of we sold about 300 units that were sold during the quarter I still think that 10% or even potentially something north of that is is very possible for that solution and of time margin and that's why I think you'll queue for is gonna be a good quarter for us to be able to give you. Another update after queue for of what we sold of that.

The <unk> solution, but we stand behind it I believe is the best in the market and we think that we're gonna have a really good attachment to the display. So we sell of some of it out of your solution as well.

Got it and then just just one more question for me can you talk about your your just as it relates your overall customer base in the what percentage you would say have already purchased the box like virtual hybrid learning solution from you what kind of I I believe would be considered your mimeo connect offering you know.

<unk>, Yeah, let's what would you say your overall penetration as of your existing customer base in.

What's left for remaining opportunity to sell the name of your connect offering.

Yeah. So so I would tell you first that we are very optimistic about the platform. It. It. It's it's fantastic I don't think there's a better plat from out there and and it was bill directly to address the need of today and these <unk>. These hybrid environments, but also virtual but also it's fantastic in a traditional environment. So this bill for all of environments that being said.

For early on to where you know we we lost the the the platform recently, we've been dabbling it showing it we don't have any large implementations that we can point for yet, but we we are we are having it used in several districts and we're expecting to start the see those in addition to that something that we're offering to districts the by panel.

<unk> the the that we're Gonna include me me I'll connect for for a trial period, and so that's gonna give them a chance to test it use it as well. So we're just now starting to launch of marketing efforts. So I think again I think queue for two one you're gonna start to see some good adoption, but to this point in time, we don't have any large deployment. She had of of connect I would say there are several potentially in the work.

Works, but none that we could announce at this point in time.

Okay, great. Thank you Michael I I appreciate the other color and look forward to what queue for on beyond brings to the box of that story. Okay for me. Thanks.

Thanks for <unk>.

Our next question or comment comes from the lineup Allen clean with the National Security. Please go ahead.

Hi, this this might be of definitional question, but you you're guarding to you know 27 million plus of revenue but.

<unk> you said your orders increased to 9.3 and your backlog is 9.7, those number sounds kind of low.

To be.

Estimated 27 million close of revenue maybe could could you explain that a little more.

With the order of figured <unk>, you're looking at the those are orders for last quarter alright. The those are two three orders. So that's not applicable to the guidance for providing for queue for now the back orders are that backward figure you can expect the vast majority of not all of that would be fulfilled with thank you for so so when were coming up with the queue for number the <unk>.

Ride towards number one it's those back orders right and we can even you know at this point, we know what has been fulfilled to this point in time for B, a large chunk of that number two we're looking at the new orders of come in during the quarter that we can fulfill and the number three we're looking at our Pipeliner sales pipeline and the combination of those of it allowed us the guy.

Did that twenty-seven now will say also we've done a lot of diligence on the <unk> historical pipeline debt sorry, his add as well as their performance to pipeline and also performance to their forecast and so we feel really confident the combination of where they are aware of they've been as well as what we have with the stroke box of my Bill.

This again, we feel really strong about the those figures, but the only relative to take care of of those two hours to be clear her she's gonna be it's gonna be the backlog that would be fulfilled in the queue for.

Okay. When would you know what your amortization expense run right in the.

Would be and depreciation going for it.

We have we're still working on some of the last thing the purchase accounting Uhm, we have of course.

Uhm, so long with the kind of find the laugh at since we closed the acquisition on September 24, So we have not yet finalized that uhm, but once we get that number of finalized once we get those balance of finalize will be better able to provide them an amortization amount from depreciation perspective, we have minimal P. P E.

Both back by and the hard so there's not gonna be much of a change the Arabs, but the bigger chain is gonna be related to the intangibles that have been identified for the <unk> application.

Okay. If if I look at the historical financials that are available on Sahara and I realized they're they're not GAAP. So you have to take him with the grain of salt, but is there any reason to think that those type of.

Bottom line numbers or somewhere in the range of kind of.

Where the run rate could be.

For for there Yeah, <unk> I think I think <unk> yeah. Thank you generally safe on that we're not making substantial changes to their business on so I think you're generally should have on it now the one thing though is you gotta be careful of you're trying to calculate net income number that you know there there could be some things in there from the purchase of accounting. So we're hesitant to speak to a net income number because we don't know what the amortization will be well.

There'll be of other implications from the purchase of counting or otherwise, but if you're looking at adjusted EBITDA number we feel very comfortable about adjusted EBITDA of number to be in line with what you would calculate with with their numbers you know generally historically.

Okay very good thank you so much.

Thanks Alan.

Ex we go to the line of Howard Schwartz with Microcap headlines the place to go ahead.

Hello, Michael and a loaf of Acacia I tip my hat to you for.

For the recent what I could should of blockbuster of the news announcements over the last several months.

Just want to start with that.

Uhm, Yeah, the Sahara acquisition, what would the terms of the preferred stock convertible correct [noise].

That's right Howard <unk>. So the prefer stock is convertible of the the price was set the day after the acquisition, which ended up being $1.66. So the all of the preferred stock is convertible on $1.66 now is redeemable, meaning of course the company could pay off the report suck at any point in time prior to the conversion and then there's only convertible after.

<unk> there there was 10 million pounds in theory C and 12 million pounds of series be convertible preferred the series B as convertible after 2024 and the series C. As convertible. After 2026. So my point is is we have a long time before that potentially could convert and then between now and then it's.

The redeemable if it is allowed to convert at some point in the future right. After those dates it's the Bucks Hershey six out of the conversion price and there is a leak out provision to where he couldn't hit the market all of the call at the same time.

Alright, but $1.66 is the usually absolute the set price.

Correct, that's right Oh excuse me six yeah.

Okay. So.

Currently the Proximately 50 million shares total outstanding does that fully diluted with taking into account the preferred stock converted or no.

Yeah. So there's there's about well so there's about yeah. The the if there's about 51 million shares outstanding yes, but it's it's only gonna take into account of portion of the preferred to kiss. She wants to be for that yeah. So so currently we have about 51.2 million shares outstanding Uhm. Then we also have the land of <unk>.

<unk>, which is about 24 million.

A million dollars on the balance sheet right now we ever thought of that lately over two years and we pay it utilizing stop uhm, there's a sock on a cast off let me pay it you can spot and there's a 10% of the account and of 20 day look back on that so we have that as well in addition to the preferred spot at more Bam Michael talked about previously.

<unk> <unk> <unk> <unk> <unk> 50, yeah. So you've got 51 million shares cracks me asking and he got about 20 for a million in the convertible knows the link partners and then you've got about 29 million of preferred stock. So uhm in the depending on how you look at that again, the convertible knows amortize over two years, where on the early end of that and so we.

Could elect to pay that off of cash we wanted to which in that case it wouldn't be dilutive or same thing with the preferred if we were deemed the preferred at some point you know we wouldn't be as dilutive or if we were to do an equity raised in the future and we have multiple years to address that perhaps not of dilutive, but you'll you'll have to kind of on your own calculations on that.

Right, but but absolutely of styles like there's no toxic provision would limp on the show on the preferred of course.

No. So so the the payments to lend partners like like we said is it's it's over two years monthly payments and those are of payable on in stock or cash at our option. So yeah. There. There's it's it's not I I don't believe it which fit the that toxic category and then all of it was convertible the premium the the the most recent 22 million we raised his convertible of $3 a true.

The sense, so of the stock where to run north of that yeah. We converted <unk> you know they could convert at 350, and then also I would mention that <unk>. The the cost of the capitalist really typically low and we had a low interest rate on that you know total cost was low teens. If you take the O I D plus the the a P R.

Right.

Alright, so I mean to me it looks like.

With the approximately 44 million and share all of those equity with what's total outstanding your book values about of 90 cents for sure. So.

So you're trading right now under two times book and.

Training on the one time revenue with the with the color of <unk>.

Price of of the stock I mean at $2 you would only be trading at one time revenue.

How are you interest you might go say I'm Gonna go with [laughter] that sounds like a good entry point, maybe yeah. It looks like we're we're believers you know we we've come a long way those of yeah, I'm Jewish and following of the last few months Yeah. We on one of my name is the name of the shock because of <unk>. The stock has been moving up over the last few days to go on.

Over $1.78 of the closest today died of $1.50 kind of baffling to me.

You know maybe whoever the shows where they don't fully understand his acquisition. The just looking at the third call a lot of taking into account that the <unk> you only picking up a fraction of of the revenue for the third quarter of two all gonna be on the fourth quarter.

Yeah. We're we're definitely sad is share the fourth quarter and start Sharon next year, because then you're gonna see the combined the combined financials of of both companies. So your <unk> your spot on.

Okay, great well, thanks again, thanks for the the answers the.

You haven't okay.

This concludes our question and the answer session. We returned of Michael Pope for closing remarks.

Thank you everyone for joining the call. Thanks for your support and we look forward to speaking with you again in March when we report our fourth quarter results.

Thank you. This does conclude today's teleconference. Sweet. Thank you for your participation you may disconnect. Your lines at this time have a great day.

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