Q2 2021 Slinger Bag Inc Earnings Call

Greetings and welcome to sling or second quarter of fiscal 2020. One earnings results conference call. At this time, all participants are in a listen only mode.

Question and answer session will follow the formal presentation, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Brian Seagull Managing director. Thank you you may begin.

Good morning, everyone welcome to our second quarter of fiscal 2021 financial results and strategic update call.

Hosting the call today are singer CEO, Mike Boulardii and CFO, Jason Seaford Act.

After their prepared remarks, we will take questions investors can submit questions throughout the webcast via the webcast portal and we will do our best to answer as many as we can after the prepared remarks.

Before beginning I would like to remind everyone that except for historical information. The matters discussed in the presentation are forward looking statements that involve a number of risks and uncertainties words like believe expect anticipate mean that these are our best estimates at this time, but that there can be no assurances that expected or anticipated results or event.

This will take place so our factual results could differ significantly from those statements and factors that could cause or contribute to such differences include but are not limited to our ability to maintain our competitive advantages acceptance of existing and new products by our customers. The general economics of our end markets our ability to finance.

Growth our ability to continue to attract and retain highly qualified employees and our ability to identify close and integrate acquisitions.

Further information on our risk factors is contained in our quarterly and annual reports filed with the U F. C C.

With that said I would like to turn over the call to Mike Boulardii Sanger CEO Mike.

Thank you Brian.

Good morning, and thank you all for joining us today.

Welcome to our first investor call as a public company.

Mike Bilotti C E O sling a bag.

And with me is our Chief Financial Officer, Jason Seafood, Jason will speak first then I will review, our second quarter fiscal 2021 results and provide our outlook for the remainder of the fiscal year.

Following I will provide an update on our corporate vision and our business transformation, including all watch play learn strategy and the remainder of fiscal 2021 and beyond then.

Then we will be happy to take your questions.

Jason over to you.

Thanks, Mike first I'd like to welcome everyone to our first quarterly earnings call I'm.

I'm going to take you through the quarter and then after a business update from Mike will open the floor for questions.

Before I begin I want to remind everyone that our fiscal year ends on April 30, and our second quarter ended on October 31.

I'm very happy to say that our underlying operating results were very strong.

Revenue for Q2 increased 106% year over year to $5 $4 million.

The vast majority of that was related to sales of display or bag into the global tennis market and particularly our largest market the United States.

Where sales and marketing activities are now in full swing.

Gross profit increased to $2 $1 million up from $1 million last year.

However, gross margin was down 109 basis points to 38, 6%.

Going forward, our equipment gross margins to generally be in the range of 35% to 40%.

As we scale this part of our business and continue to expand our distributor network.

Moving to our operating expenses operating losses, net loss and loss per share.

Both GAAP and non-GAAP measures.

For non-GAAP measures, we exclude noncash nonoperating items, including share based compensation cost.

Costs associated with financing transactions.

Conversion from debt extinguishment amortization of both intangibles in Butler County, and acquisition related expenses.

GAAP operating expenses for the quarter were $37 $2 million, leading to a GAAP operating loss of $35 $1 million.

As compared to $200000 in the prior year.

This quarter's operating loss included noncash acquisition related expenses of $34 $3 million.

The vast majority of these came from a onetime noncash expense for share based compensation of $32 $4 million.

The remainder included $1 million in acquisition related expenses.

$100000 and share based compensation per equity issued in exchange for services.

And $100000 for the amortization of intangibles.

Excluding all of these items non-GAAP operating loss.

It was $800000 in Q2, 'twenty, one as compared to $100000 in Q2 'twenty.

Moving to other income and expenses this quarter, we saw several noncash some transactional expenses, including $2 $6 million for amortization of debt discount.

A $2 million loss related to the extinguishment of debt.

A $4 8 million dollar gain mark to market gain related to derivatives, which was primarily related to the cancellation of make whole provisions on warrants previously issued.

And a $3 $7 million loss on the issuance of convertible notes.

We excluded all of these items from our non-GAAP net loss and EPS numbers.

Our GAAP net loss was three point $38 $8 million and our loss per share was <unk> 95 cents for the quarter.

Adjusting for all the nonoperating and other expense line items I just mentioned.

Q2, 'twenty, one non-GAAP net loss and loss per share were $1 $1 million or three cents per share.

Compared to $200000 or <unk> per share last year.

Moving on to the balance sheet, we finished the quarter with cash and cash equivalents of over $1 $7 million.

We have invested a lot of our cash this year on inventory and now believe we have enough finished goods on hand to meet demand for the remainder of the fiscal year.

Answer the Chinese new year shutdowns of our suppliers.

As we look to the rest of fiscal 2020, one I will comment on our current expectations for the player business and then discuss at a high level, what we expect post acquisition.

For fiscal 2021 we expect revenue to be in a range of $17 million to $18 million or an increase of 57% to 67% over last year's $10 $8 million.

The vast majority of this revenue will be from our sales of the slinger bag and sort of tennis market.

We also believe our non-GAAP operating income run rate will be near breakeven as we exit the year.

As we close our translate transformational game things AI and play site acquisition.

Which Michael will discuss in more detail in a minute we will update our guidance to include these businesses and our expectations and provide some additional details related to the combined business.

However, I will comment that as we look out over the next few years, we are targeting total company revenue over $100 million with recurring software service and content revenue, making up over 60% of the mix.

This should lead to attractive adjusted EBITDA margins in the mid 20% range.

Yeah.

With that I want to thank everyone for attending our first earnings call and look forward to speaking with you again at the end of our third fiscal quarter.

Back to you Mike.

Thank you Jason.

I will take you on a journey of hustling I will go from being.

Along a one product company that we are today.

<unk> sales are sort of a single sales sports equipment companies. We are today to a multi product subscription and recurring revenue base integrated technology platform that I believe will drive significant revenue and profit growth.

With that enterprise and shareholder value and you used to come.

For those of you who are new to the story I think there was a sports equipment brand currently operates within the global tennis market.

We aim to reach the 100 plus million actively playing players across the globe.

Today Slinger is focused on selling our core products. The sling a bag a disruptive product offering tennis players of high performance tennis ball launcher built into a typical roller trolley, but this provides an easy to transport versatile and affordable piece of attendants equipment that facilitates play anytime anywhere.

Across players of all ages and abilities.

Since the end of July 2020, when we shipped our first linger bag to a paying consumer the.

The slinger bag has been actively disrupting the traditional Chinese market and establishing itself as a well recognized and respected brand in the global tenants market.

In addition, we have built strong strategic partnerships with key tennis brands, such as Dunlop and Wilson and supported multiple governing bodies, such as the U S T E and making tenants more accessible more often.

During the first half of fiscal 2020, one we delivered 149% in revenue growth and we are well on track to hit our full year number that was mentioned by Jason of $17 million to $18 million.

The sling a bag is sold through our online direct to consumer web store in the U S and Canada and globally through a network of distribution partners.

In North America, we are engaged with one of the world's leading digital media agencies.

Through their activity, we have seen 12 straight months of Tenex, who or greater returns on our advertising spend.

So called the rollout.

Writing stone strong consumer awareness unimportant 11, new drugs.

Outside of North America, we utilize a network of more than 55 highly sophisticated.

Respected experienced an exclusive sporting goods distribute is.

Crossed markets, such as Australasia Asia, China.

Japan, the middle East the Indian subcontinent, and throughout all major eastern and Western European market.

This group of distribution partners has collectively committed to achieving a cumulative five year retail sales of the sling a bag of in excess of $250 million.

Over the past 24 months and so brand launch by a very successful Kickstarted campaign.

The sling a bag has cultivated passionate and evangelical following across cool social media platform.

These followers support our brand by producing copious amounts of media content that influence others to consider purchasing a swing of about <unk>.

Additionally, these followers are supplemented by a core group of ambassadors, consisting of former tennis professionals and talked to our coaches.

I'll stable of professionals includes Tommy Haas, who was formerly number two in the world, Mike and Bob Brian a K, a the Bryan brothers and Genie Bouchard of form a top five female player and others, including some that have yet to be announced.

Our ambassadors also include top two approaches such as Patrick <unk>, who is Serena Williams coach Nick policy Arie, who has coached 10 number one players.

And Darren Cahill, who formerly coach Simona Hello, another form of number one player.

In calendar 2022, we plan to introduce a new pickle ball and pedal launches to the market.

<unk> currently has 5 million players in the United States and is the fastest growing of all records sport.

In contrast had all tenants or is already well established in Europe, and South America and is now growing new fans and participants across many new markets.

With our deep understanding of the racquet sports consumer mindset.

About six months ago, we commenced the development of this thing up with the aim to enhance our value proposition to our target customer base.

The underlying premise of this thing up would be in providing artificial intelligence.

More commonly as AI.

Inspired performance analytics linked to training and practice drills with or without the sleeping bag.

In addition, the App will include a subscription service that will consist of performance analytics, some of which have never see been seen before in tennis.

And all the associated improvement based training and practice drills.

As well as excess the high level E coaching recommendation supported by our ambassador team.

This app is on track for release in the spring of 2022, and we believe it will quickly become a must have product for all pool tennis players.

As we set out to design the App, we engaged an Australian company called game face AI as a preferred technology partner.

Getting face had award winning AI technology that is already seeing great success in cricket.

It was also in high demand from leading professional soccer baseball and basketball teams amongst other sports.

With the sales of the sleeping bag ramping and the Slinger I've been development, we began looking for ways to further expand our position within the tennis sports Tech ecosystem.

Last June I met Charlie ready, the founder and visionary behind the company called Foundation tennis.

After several discussions we saw an opportunity to expand both businesses within the tennis ecosystem and sling a quickly acquired foundation tennis in July of 2021.

Foundation tenants provides a specialized software as a service or a fast platform.

That uniquely addresses the needs of membership base facilities, such as tennis clubs, whether they be private or public.

I believe it is by far the most robust offering targeted for these types of clubs in the market today and I believe foundation tenants, there's an amazing unique asset.

Hello, This thing about group.

This platform provides facility managers with a one stop shop for critical business management tools, including website and App template.

Men, but community features such as chat bookings schedulers and as an affiliate partner of square for P. O S integrated payment option.

Foundation tennis will play two roles within our portfolio.

But today there are 17000 tenants facilities in the U S market.

Currently only 400 use the foundation tenants platform.

So there is a huge market penetration opportunity to expand the SaaS business, which we believe is also a viable for other facilities, such as golf clubs health fitness and others in the future <unk>.

Additionally foundation tenants will bring both recurring revenues and transactional based revenue for us each of financial models.

Second these 400 facilities currently have over 1 million users on the foundation tenants platform that we can directly access.

This number will continue to grow as more facilities and members use the SaaS platform with.

With a compelling product portfolio and direct access.

<unk> goal is to convert these members from users to subscribers of our new connected company services.

I believe will be a significant conversion rate.

Next in parallel to working with game face AI and starting this thinking about development I also open discussions with the chairman of play site interactive about the potential of a strategic combination.

Play site is a global leader in pioneer and video technology, mainly using specialized Iot cameras placed around the pool that enable live streaming data capture and automated video production.

Technology is used at most elite levels of tennis and in many other professional sports across the U S and some key EU markets.

After months of discussion in October 2021, we signed the definitive acquisition agreement and we hope to close this deal in January of 2022.

As we worked on the single App with getting face AI. We also learned a great deal about them and it became very obvious that there could be a significant synergy between game face play site and selling it.

As a result of this collaboration and shared vision for performance AI based analytics in sports. We also propose a deal to acquire gain in phase II as we believed believed it made sense to own the IP and envision them as the Intel inside for a connected sports technology platform.

We are currently in the final process of closing this acquisition, which we also now expect to happen in early January 2022.

During these acquisition discussions we crafted a new business vision around transforming swinging from a single product equipment company into a pioneering connected sports technology brand centered around watch play and learn activities.

Coupled with this vision is the rapid acceleration of sports fields pictures and surfaces, becoming smart bold enabled by five G. We believe we can position the new sling a group of companies at the center of a connected sports World and are planning to cool verticals of racket Sports baseball.

Softball.

And which is currently planned for 2023 and cricket the highest petition participation sport outside of the United States as well as several other boll sport categories.

Additionally, we believe there is potential to license, our data and content and the variety and a variety of areas beyond our core market.

One in particular is online gambling.

Play sites has already been working with sport radar and genius sports and we believe evaluating potential partnerships such as these that could provide us with upsides to our forecast.

As we look to the future. Many investors have asked important questions about the size of our opportunity to target growth rates over a sustained period and what a mature operating model will look like in three to five years.

While we are not yet in a position to provide this information in detail today, we are expecting to close game face in place eight deals over the next several weeks and we are already working behind the seals.

Behind the scenes to identify operating synergies and efficiencies.

With respect to our connected platform, we aim to have an offering for the Chinese market operational by the end of March 2022 and are looking at ways to further fuel rapid growth in our existing and new product portfolio that can yield outsized returns.

Today, our revenue is nearly 100% equipment base.

After we close these acquisitions it will have a significant recurring revenue mix of SaaS subscriptions and content, which we believe will also drive a significant improvement in our gross margins as a result.

We will bring these companies together in a disciplined fashion by managing our risks while also looking for future opportunities that can complement our consumer offering.

Moving.

Onto our planned integration of gang face play side and foundation tennis.

In fiscal 2021, sling and made great strides in progressing our company structure and organization.

I believe positions us well for continued success.

And acquiring these three companies. We are also adding some significant management and software talent.

We will wait to announce the combined leadership team until after both deals closed, but I will remain CEO, Jason will continue in his role as CFO, Paul Mchugh and will continue in his role in leading the integration process. Tom di will continue as C. O N G. The Huntington Huntington will remain CMO.

With this leadership team in place, we will implement a company wide matrix operating structure with shed teams across sales marketing supply chain operations finance and HR, while still allowing each brand to focus on its core competency.

So slinger bags. This means entering new sports verticals with its revolutionary launches.

Play site. This means driving its video technology capabilities into new markets and through licensees into new sports vertical well.

So again face AI. This means driving all sports performance analytics across the group and becoming the go to AI company for sports across multiple sports.

And for financial tenants. This means initially servicing the U S tennis facility market with its leading business software before expanding into the international market Arena.

Across our company this structure will improve efficiency drive revenue and enhance the customer user and service experiences.

With the foundation sets we are now in the process of ensuring that our new corporate vision is easily understood and demonstratable to both our current shareholders and future investors.

Let's say this we are in the process of creating a new corporate parent which will be in place by early 2022.

We will be a key part of our plan to uplift to a national exchange hopefully by the end of our fiscal 2021 year.

Having set the foundation for our long term vision I will now talk to our key strategic priorities for 2022 and beyond.

Our top priority is to integrate our newly acquired companies under the sling a bag umbrella over the next six months by identifying key key operating synergies, while it's constantly improving our customer user journey and experience.

This will involve implementing a new operating matrix building, a common sales marketing and supply chain teams and centralizing all finance legal and HR responsibilities within the corporate umbrella.

Next we will identify the parts of the business that require further investment.

This means an investment in a new baseball and softball launch planned for 2023.

So play site it means investment and securing the future market leadership in its video technology platform.

Well again face AI it means investment in engineers to facilitate the expansion into new sports project.

Investment in foundation tennis will focus on sales and marketing activity to drive awareness of this unique software platform and to facilitate sales pool pools to cool facilities across the United States.

As the next step in achieving our vision to create a connected platform based on watch play and learn activities.

And we are committed to identifying launching a marketing all subscription based suites of tennis player services, beginning with the swing around this spring.

We will then continue to innovate and look to create value added bundles like exclusive content and enhanced features and ultimately introduce a multi product subscription across all of our brands.

Jason has already issued our guidance for selling them on a standalone basis for fiscal 2021 of $17 million to $18 million in revenue and near breakeven run rate for the non-GAAP operating expense by the end of our fiscal year.

I would like I would now like to give you. Some idea of the what is what the combined company will look like as we are about to embark on the on the challenging six months.

Integrating three new companies executing on our synergy plans and continues through continuing to drive growth.

On a consolidated basis.

We will be driving towards fiscal 2022 revenues of approximately $40 million.

With up to 25% of these being recurring revenue.

They're delivering the efficiencies we believe exist at these levels.

The levels of revenue, we expect to deliver a breakeven adjusted EBITDA run rate by the end of fiscal 2022.

As we look out to the next three to five years, we see a pass through revenues exceeding $100 million with recurring SaaS related revenues growing to 60% of the total revenue base and with that a significant improvement in our gross margin and operating profitability.

In closing I would like to thank the <unk> team across the globe. So what has been an incredible 18 months. Its thing about we delivered on our first year plan in fiscal 2020 and are well on our way to doing the same for fiscal 2021.

That said, we have no intention of resting on our laurels and are working diligently to drive longer term growth and shareholder value.

Before taking questions I would like to thank you our investors for your continued support especially in the past six weeks when the entire market, especially in Microcap.

Being taking some heavy losses.

Spite these near term stock market driven challenges, we believe we have the right strategy assets and people to deliver strong returns over the next few years and I want to thank our outstanding team of talented people, who work at singer and who go above and beyond to execute our vision.

Yeah.

Now we will open up the meeting to questions operator.

Thank you if he would like to ask a question. Please press star one on your telephone keypad.

She can come on.

Your line is in the question queue.

You May press star two if he would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up the handset before pressing the therapies.

One moment, while we poll for questions.

Our first question is from Chris <unk> with Sandler O'neill. Please proceed.

Hey, Mike that's a great update.

As an avid tennis player I'm I'm eager to see some of these new products next year and that's an exciting story one one thing that you mentioned that I.

I would love.

For you to elaborate on a little bit is you mentioned the.

Potential longer term partnerships with companies like sport radar.

Can you talk a little bit more about your vision there about how how that those two things intersect and with.

With that partnership might look like.

Yeah, absolutely yeah. So.

Companies like sport radar and genius sports companies, who sits in between right holders. So for example, the U S. T E as a REIT holder they sit in between the rights holders in the betting world.

And as they sign up for the rights.

Go to live stream, a tennis events for example.

Of course, they need partners like play sites.

Or game face a pause it for the analytics to supervise the the video live streaming links that they need to put out into the market to the to the to the betting world.

And they also need the analytics real time analytics that the gameplay, you say I am team can provide them.

Play side as a company has been working already for a number of years with sport radar and genius sports on providing them. The live streaming capabilities that they look book more recently these companies have also been in contact and working with them game face because of the.

Key analytics that they can provide also one important point, which is one of the reasons, we actually acquired play side.

For the betting world, which of course, the bedroom World is opening up in North America at a rapid rate and it's going to become a significant business.

Sector in its own right.

But of course there are.

A lot of rules and regulations around the particularly on the live streaming and to do what they do the latency or the delay in the live feed you know so so the good news is that play side.

Has such a high quality and minimal latency of the live feed that you know this meets the requirements of the bedding industry.

To avoid any opportunity for.

Petroleum and betting of any kind. So that's one of the reasons that they want to work with a company like last night, but I see this as its not in our numbers today, but these are huge opportunities that this market opens up particularly in the United States.

I get it I got it yeah that if place I could open up.

The visibility and streaming and betting on that.

On the lower tier of tenants batches, all the way down to U S. T. A it would be I'd be phenomenal, but anyway. Thanks, a lot yeah.

Yeah, and you know nothing to your point, that's one of the one of the areas that we're in discussion with at the moment is the lower tiers of tenants yes.

Alright, Thanks, a lot Mike.

Thank you.

There are no more questions at this time.

Okay. So this is Brian we're going to go to a pre submitted questions.

The first one is do you expect interest in tennis to wane after we get through Covid.

Do you think growth will be impacted when the pandemic is over.

Thanks, Brian.

Well there are 20 million avid tennis players around the globe and you know throughout the last two years I would say that pretty much every tenant's market around the world as reported increased numbers of participants.

Playing on a on a weekly basis.

These are our core consumers and although we've seen a significant uptake of our products within this our consumer group to date.

Still we are only scratching the surface of this total addressable market.

We expect to be able to continue to deliver significant growth year on year for this receivable future. So yes of course, the Covid pandemic. It has helped a lot of companies, particularly fitness companies, including sling.

Over the last 18 months, but I think we know where it is.

Start of our journey in the market and tenants is.

Such a significant size, but I don't see any significant waning of.

Interest in either tenants over our products in the near future.

Alright, great.

Next question is can you break down domestic versus international sales.

In terms of percentages, maybe and then discuss maybe which countries are actually making sales currently.

Versus those that maybe haven't started yet.

Sure.

So as you.

You know as of the end of the quarter.

I would say the percentage of sales that we have is around 65% coming out of North America, and 35% coming out of our distributor market.

As I mentioned earlier, we have already signed up deals with you know 55, or so distributors all over the world.

Reality of the situation is that we made a conscious decision to service first and foremost the largest market in the world, which is North America and so we diverted the vast majority of our production that was available to the North American market.

At the same time, we allowed them around about I would say.

<unk> 20 of our distributors to actually stopped.

Selling actively.

You know the next largest market after the United States is Japan. So we have our Japanese distributor is fully operational the next largest market after Japan as the European market and so Dunlop who is our partner in Europe is very active across all of the core markets in Europe.

And then the next largest Tennessee markets are Australia.

As an example, and that's that.

They're already up and running.

Some of the bigger markets that have not yet started would be China. For example, you know they are about to start in January.

It would be South Africa, they're also going to be starting in the spring of next year.

And we have quite a number of eastern European countries, you know as you know.

In smaller countries, where tenants is very important but we also hope to start.

The business will be able to allow them to start their business in the spring of next year.

The focus has been very much on the largest market in.

In the World North America, Japan and Europe.

Okay great.

The next question is can you provide any financials or such as revenue or profitability information for game face Foundation tennis or and place right.

Well, we're in the final stages of closing both the game face on the play side acquisitions. Once these deals close we will evaluate how we're going to present the revenue breakdowns for our investors that said Ah.

We have no plans to break out specific revenue numbers for any of these three acquisitions, but we did say on today's call was for 'twenty for fiscal 2022, we're targeting.

<unk> revenue of around about $40 million.

With 25% of that revenue coming from SaaS recurring revenues, which today is coming from both the play site game face on the foundation tennis acquisition.

So.

And now we need a little bit more time to 222 past the breakdown you know.

In a in a way that's going to be applicable to the to provide.

Public information on Additionally, similar to swing at today at all three companies are in the early stages of growth.

You know I would even class foundation and game faces pre revenue, although they have some revenue today, but it typically pre revenue.

Whereas obviously play site is a company that's been operational for a number of years.

All three companies have been investing heavily in R&D, because they are software driven companies.

And play side has had some obviously some sales activity over a number of years.

But we plan to structure, the Cid and the sales marketing parts of the company generically across the group to provide a.

Our strong team of people in the field, who will be representing these brands on a go forward basis.

However, you know at the end of the day, our plan is very clear.

We need and we will achieve profitable adjusted EBITDA run rate by the end of our fiscal 2022.

Yeah.

Okay. Thank you.

Given the recent market turmoil, especially for market caps are has there been any potential headwinds to closing the place and game based deals.

No no.

No there's nothing there's nothing that's getting in a way.

To be honest behind the scenes the management teams of play site game face are already working very closely with US we have a.

Pretty much daily discussions.

About how we're going to restructure and reorganize and revamp.

The businesses.

The deals that we set for a set number of shares so.

That's already agreed in fixed and Oh, we have to do now is.

Get through to the close over the next couple of weeks.

Although as I say, we're already working together on our plans to build out this integrated platform.

Okay, great. Thank you.

Our next question is related to the 10-Q, there was an adjustment mentioned.

Related to the proposed acquisitions of games.

Gameplay someplace sites can you maybe discuss that in a little bit more detail.

Yeah. So typically with them you know with all the M&A transactions there are potential adjustments that can impact the value of the deal for.

For example.

You know at the end.

I think we'd be announced a while ago that we were ready.

<unk> made a loan to play side of $2 million to help with our with our cash flow.

And so you know that that $2 million will be adjusted in the final deal.

There's also an earn out opportunity for both game face and play side.

Over the next eight.

Months, which will also.

And is it as an adjustment.

These opportunities are based on.

Each company hitting such certain financial milestones revenue targets.

Our customer numbers things like that that will we will measure and benchmark over the course of the next 12 to 18 months following the close of each of the acquisitions.

Okay great.

Can you. Please explain how you had $32 million of share based comp in one quarter.

I'll pass that question over to Jason was obviously much closer to our to the financials.

Makeup of the of the <unk>.

Q.

Yes, yes, thanks, Mike Yeah. So so as we kind of sat on.

Any information during the call. It's a one time noncash item.

It's disclosed in the 10-Q, if you look at the operating notes, we have but it relates to some share grants that were issued during the quarter two executives of the management team.

And based on the accounting rules. They are valued on the date of the grants and then expensed over the vesting period, which which in this case they invested.

Immediately.

So the good news is they have no impact on future periods expense and were expense all at once.

Then kind of the last thing I would add in addition to that is is that because they were granted to executive management, they're restricted under SEC rules on the ability to sell in and.

You know sell those into the market going forward.

So I don't know, Mike if you have anything to add I'll pass it back.

Oh, that's good thanks, Jason.

Okay. Thank you Jason.

Can you along those lines can you just tell us how many shares and warrants are outstanding.

Yeah, I can take that too so so as of 10 31 as disclosed in the 10-Q, we had approximately $41 9 million shares outstanding.

And then warrants exercisable into 37 3 million shares of common stock.

Okay. Thanks, Jason.

Our next question.

Just on that also it's worth mentioning that there's a lot a lot of those shows Jason.

Management or affiliate, let's call it affiliate warrants again restricted into.

<unk> to be sold into the market.

Yes, that's correct Mike.

75% plus.

Okay.

Okay.

So next question.

What is your plan for ongoing capital to fuel overhead and growth plans.

Yes. Good question. So we plan to raise another $5 million in a bridge financing from our existing noteholders.

We are in current discussions with the note holders as we speak to complete that.

Hum.

That's going to help us integrate the three companies and get to the point over the next four months, where we will be in.

The best position possible to look at our uplifting to a national exchange.

Our goal is of course once the acquisition acquisitions closed is to quickly identify and identify and execute on all the cost synergies that we can.

To reduce the cash burn.

And based on that we'll be able to evaluate the future capital needs are that.

That time on a month to month basis.

Okay. Thanks, Mike.

The next question is is management receive tangible interest from any.

Sort of any investors I would like to buy shares but are waiting for an up listing to Nasdaq.

We don't know what investors intentions will be at the time of the up listing but in general uplifting to a national market increases liquidity and opens the door to a whole new set of investors that another permitted to by OTC stocks.

Through their investment policies.

Yeah. So you know obviously when we when we come to two the uplifts and I will be working with a number of them.

Highly experienced well known investment banks, and we will be looking at a significant capital raise that time too.

Yeah, and I would add that we're also constantly.

Constantly targeting investors and looking to do marketing in the meantime, as well. So we're not just waiting for an uplift to rollout.

Yep.

Alright.

Okay, and then that is all that I have in terms of questions.

For today, So I think we can turn it back over to the operator and close out the call.

Thank you. Thank you does conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.

Thank you operator.

[noise].