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Nextech AR Solutions Corp. Reports Record Q3 Sequential Growth As 3D Modeling Revenue Surges +192% and Gross Profit Margin Improves To +60%

  • Q3 technology services revenue up +66% from Q2 2022 hitting approximately $920K
  • Q3 3D modeling revenue surges over +192% versus Q2 2022
  • Q3 3D model production increased +110% versus Q2 2022
  • Q3 technology services gross profit margin improves to +60% versus 37% reported in Q2 2022
  • Q3 gross profit was approximately $555K on 920K in Q3 technology revenue with a gross profit margin of 60%

Nextech AR Solutions Corp. (“Nextech” or the “Company”) (OTCQB: NEXCF) (CSE: NTAR) (FSE: EP2), a Metaverse Company and leading provider of augmented reality (“AR”) wayfinding technologies, and 3D model services for the largest prime ecommerce platform, reports its financial and operating results for the third quarter 2022 ended September 30, 2022. Please join Evan Gappelberg, Chief Executive Officer and Andrew Chan, Chief Financial Officer today after the close November 17, 2022 at 5:00 P.M where Nextech will host a conference call to discuss Q3 results.

CEO Commentary:

“Q3 was a transformational quarter for Nextech AR, as demand, production and our revenue from 3D modeling has significantly ramped up. This is evident with our sequential production of 3D models up by over +110% and our sequential revenue of 3D models up by over +192% over Q2. Our Q3 figures are showing that our 3D modeling revenue is now growing exponentially. He continued, “With the announcement of a $700,000 3D model order to be delivered in Q4, we are confident that Q4 will be another record quarter for Nextech. As it is still quite early in Q4, we do expect to announce additional significant orders in the coming weeks as demand and our production capabilities will only continue to increase into Q4, 2023 and beyond.”

2022 Q3: 3D Model and Technology Services Financial Highlights

  • Q3 technology services revenue up +66% from Q2 2022 hitting approximately $920K
  • Q3 3D modeling revenue surges over +192% versus Q2 2022
  • Q3 3D model production increased +110% versus Q2 2022
  • Q3 technology services gross profit margin improves to +60% versus 37% in Q2 2022
  • Q3 gross profit was approximately $555K on 920K in Q3 technology revenue with a gross profit margin of 60%

2022 Q3: Legacy E-commerce Business Results

  • E-commerce generated over $2 million of revenue during the wind-down this quarter, bringing in over $800K of cash in Q3, and in Q4 to date has brought in additional cash achieving the Company’s set goal of bringing in $1 million to $2 million in cash
  • The Company expects to be fully out of the legacy e-commerce business in Q4, 2022

2022 Q3 Totals

  • Total revenue for the quarter was $3 million
  • Total gross profit for the quarter was approximately $1.34 million

2022 Q4 Outlook

  • $700,000 3D model order to be delivered in Q4, 2022
  • Several quotes have been issued for large RFPs, which could close in Q4 2022
  • Ramp up of 3D model production to meet the growing demand from the largest Prime ecommerce marketplace as well as re-orders, sets the stage for a substantial increase in 3D model production in Q4, 2022 and continuing in 2023

ARway

  • Trading in ARway began on October 26, 2022. With a current market price of approximately $2 per share, Nextech’s 13 million share ownership is valued at about $26 million dollars.

Condensed Consolidated Statements of Financial Position

As at
September 30, 2022 December 31, 2021
Assets
 
Current assets
Cash & cash equivalents

$

5,278,516

 

$

7,237,296

 

Receivables (Note 4)

 

624,694

 

 

1,081,164

 

Deferred asset (Note 7)

 

260,639

 

 

-

 

Contract asset (Note 14)

 

261,692

 

 

386,202

 

Prepaid expenses (Note 5)

 

472,442

 

 

749,474

 

Inventory (Note 6)

 

640,852

 

 

3,389,098

 

Non-current assets held for sale (Note 17)

 

534,664

 

 

-

 

 

8,073,499

 

 

12,843,234

 

Non-current assets
Equipment (Note 8)

 

354,527

 

 

377,242

 

Right-of-use asset (Note 9)

 

919,096

 

 

1,079,319

 

Intangible assets (Note 10)

 

4,200,687

 

 

6,419,934

 

Goodwill (Note 10)

 

7,061,970

 

 

8,790,529

 

Total assets

$

20,609,779

 

$

29,510,258

 

 
Liabilities and Shareholders' Equity
 
Current liabilities
Accounts payable and accrued liabilities (Note 11)

$

2,309,942

 

$

2,759,017

 

Deferred revenue (Note 14)

 

471,835

 

 

609,001

 

Lease liability (Note 9)

 

259,348

 

 

290,357

 

 

3,041,125

 

 

3,658,375

 

Non-current liabilities
Lease liability (Note 9)

 

644,420

 

 

786,755

 

Deferred income tax liability

 

399,962

 

 

712,215

 

Loan payable

 

-

 

 

90,896

 

Total liabilities

 

4,085,507

 

 

5,248,241

 

 
Shareholders' Equity
Share capital (Note 12)

 

82,185,705

 

 

70,570,760

 

Reserves

 

12,608,012

 

 

10,671,525

 

Accumulated other comprehensive income

 

1,790,153

 

 

1,978,469

 

Deficit

 

(80,059,598

)

 

(58,958,737

)

 

16,524,272

 

 

24,262,017

 

Total liabilities and shareholders' equity

$

20,609,779

 

$

29,510,258

 

Condensed Consolidated Statements of Comprehensive Loss

Three months ended Three months ended Nine months ended Nine months ended
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
 
Revenue (Note 14)

$

3,012,440

 

$

5,524,902

 

$

8,755,637

 

$

18,885,741

 

Cost of sales (Note 15)

 

(1,668,490

)

 

(3,895,320

)

 

(5,159,245

)

 

(11,961,736

)

Gross profit

 

1,343,950

 

 

1,629,582

 

 

3,596,392

 

 

6,924,005

 

 
Operating expenses:
Sales and marketing (Note 15)

 

1,702,695

 

 

4,187,583

 

 

6,022,831

 

 

12,837,426

 

General and administrative (Note 15)

 

2,592,343

 

 

3,704,359

 

 

10,903,087

 

 

9,746,546

 

Research and development (Note 15)

 

1,157,408

 

 

1,863,709

 

 

3,064,874

 

 

5,386,473

 

 

5,452,446

 

 

9,755,651

 

 

19,990,792

 

 

27,970,445

 

 
Other expense (income)
Stock-based compensation (Note 12)

 

311,301

 

 

(574,131

)

 

1,768,392

 

 

2,384,912

 

Amortization (Note 10)

 

597,354

 

 

682,889

 

 

2,076,161

 

 

1,276,798

 

Right of use amortization (Note 9)

 

77,624

 

 

64,735

 

 

204,476

 

 

144,057

 

Gain on short-term investments

 

(90,744

)

 

-

 

 

(90,744

)

 

(219,321

)

Gain on contingent consideration

 

-

 

 

102,400

 

 

-

 

 

(1,413,648

)

Depreciation (Note 8)

 

36,941

 

 

37,286

 

 

111,182

 

 

97,321

 

Impairment of intangible assets (Note 10)

 

-

 

 

-

 

 

2,702,313

 

 

-

 

Foreign exchange gain

 

(566,648

)

 

(252,992

)

 

(965,988

)

 

(371,369

)

 

365,828

 

 

60,187

 

 

5,805,792

 

 

1,898,750

 

 
Loss before income taxes

 

(4,474,324

)

 

(8,186,256

)

 

(22,200,192

)

 

(22,945,190

)

Current income tax expense

 

(7,128

)

 

-

 

 

(21,384

)

 

-

 

Deferred income tax recovery

 

126,777

 

 

-

 

 

387,562

 

 

-

 

Net loss from operations

$

(4,354,675

)

$

(8,186,256

)

$

(21,834,014

)

$

(22,945,190

)

 
Income (loss) from discontinued operations (Note 17)

$

(49,090

)

$

(30,418

)

$

733,153

 

$

(343,250

)

 
Other comprehensive loss
Exchange differences on translating foreign operations, continuing operations

 

(183,470

)

 

410,785

 

 

(205,569

)

 

293,753

 

Exchange differences on translating foreign operations, discontinued operations (Note 17)

 

10,286

 

 

2,769

 

 

17,253

 

 

2,343

 

Total comprehensive loss

$

(4,576,949

)

$

(7,803,120

)

$

(21,289,177

)

$

(22,992,344

)

 
Income (loss) per common share
Basic and diluted loss per common share, continuing operations

 

(0.05

)

 

(0.09

)

 

(0.22

)

 

(0.28

)

Basic and diluted loss per common share, discontinued operations

 

-

 

 

-

 

 

0.01

 

 

-

 

Weighted average number of common shares outstanding

 

Basic and diluted

98,641,286

86,125,077

99,201,669

82,002,671

 

Condensed Consolidated Statements of Cash Flows

Three months ended Three months ended Nine months ended Nine months ended
September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021
Cashflows from operating activities
Net loss

$

(4,354,675

)

$

(8,186,256

)

$

(21,834,014

)

$

(22,945,190

)

Discontinued operations

 

(49,090

)

 

(30,418

)

 

733,153

 

 

(343,250

)

 
Items not affecting cash
Amortization of intangible assets

 

597,354

 

 

682,889

 

 

2,076,161

 

 

1,276,798

 

Impairment of intangible assets and goodwill

 

-

 

 

-

 

 

2,702,313

 

 

-

 

Deferred income tax recovery

 

(126,777

)

 

-

 

 

(387,562

)

 

-

 

Amortization of right to use asset

 

77,624

 

 

13,466

 

 

204,476

 

 

92,788

 

Depreciation of property and equipment

 

36,941

 

 

37,286

 

 

111,182

 

 

97,321

 

Gain on digital assets

 

-

 

 

-

 

 

-

 

 

(219,321

)

Gain on short-term investment

 

(90,744

)

 

-

 

 

(90,744

)

 

-

 

Gain on contingent consideration

 

-

 

 

102,400

 

 

-

 

 

(1,413,648

)

Shares for services

 

581,286

 

 

78,535

 

 

1,446,852

 

 

1,378,382

 

Stock-based compensation

 

311,301

 

 

(574,131

)

 

1,768,392

 

 

2,384,912

 

 
Changes in non-cash working capital balances
Receivables

 

(223,510

)

 

(797,207

)

 

438,862

 

 

(582,729

)

Deferred asset

 

(107,454

)

 

-

 

 

(260,639

)

 

-

 

Contract asset

 

(68,057

)

 

69,342

 

 

124,510

 

 

(23,387

)

Prepaid expenses

 

59,727

 

 

411,727

 

 

277,032

 

 

459,252

 

Inventory

 

1,228,785

 

 

(514,123

)

 

2,251,124

 

 

(1,369,957

)

Accounts payable and accrued liabilities

 

(342,533

)

 

1,399,775

 

 

(451,613

)

 

1,305,476

 

Deferred revenue

 

49,695

 

 

133,360

 

 

(137,166

)

 

1,190,248

 

Cashflows from operating activities, continuing operations

$

(2,716,519

)

$

(6,804,199

)

$

(11,248,643

)

$

(18,288,269

)

Cashflows from operating activities, discontinued operations

 

296,392

 

 

(369,156

)

 

220,962

 

 

(424,036

)

 
Cashflows from investing activities
Purchase of equipment

 

(15,951

)

 

(27,653

)

 

(83,606

)

 

(138,572

)

Proceeds from sale of digital assets

 

-

 

 

-

 

 

-

 

 

2,765,356

 

Interest on lease liability

 

(8,441

)

 

-

 

 

(22,043

)

 

-

 

Net cash provided by (used in) investing activities, continuing operations

$

(24,392

)

$

(27,653

)

$

(105,649

)

$

2,626,784

 

 
Cashflows from financing activities
Repayment of loan

 

(90,896

)

 

-

 

 

(90,896

)

 

-

 

Proceeds from exercise of options and warrants

 

-

 

 

123,986

 

 

-

 

 

1,416,934

 

Proceeds from Employee Pay Program

 

1,488,526

 

 

-

 

 

1,488,526

 

 

-

 

Proceeds from private placement, net of issuance costs

 

-

 

 

-

 

 

8,938,406

 

 

-

 

Proceeds from public offering, net of issuance costs

 

-

 

 

-

 

 

-

 

 

12,632,937

 

Payment of lease obligations

 

(90,934

)

 

(13,145

)

 

(238,701

)

 

(148,923

)

Payment of contingent consideration

 

-

 

 

(18,902

)

 

-

 

 

(18,902

)

Net cash provided by (used in) financing activities, continuing operations

$

1,306,696

 

$

91,939

 

$

10,097,335

 

$

13,882,047

 

 
Change in cash during the period

 

(1,137,823

)

 

(7,109,069

)

 

(1,035,995

)

 

(2,203,474

)

Cash, beginning of period

 

7,063,268

 

 

15,395,005

 

 

7,237,296

 

 

10,684,952

 

Effects of foreign exchange on cash

 

(634,979

)

 

(27,373

)

 

(910,835

)

 

(222,914

)

 
Cash, end of period, continuing operations

 

5,278,516

 

 

8,258,563

 

 

5,278,516

 

 

8,258,563

 

Cash, end of period, discontinued operations

 

11,950

 

 

-

 

 

11,950

 

 

-

 

Cash, end of period

$

5,290,466

 

$

8,258,563

 

$

5,290,466

 

$

8,258,563

 

 
Supplemental cash flow information
Taxes paid

 

220

 

 

(224

)

 

21,790

 

 

8,743

 

Interest paid

 

5,600

 

 

9,022

 

 

23,457

 

 

16,298

 

Interest received

 

34,392

 

 

11,956

 

 

73,721

 

 

33,426

 

Conference Call Details:

Title: Nextech AR Solutions Corp. Announces Third Quarter 2022 Earnings & Conference

Call Date: Thursday November 17, 2022.

Time: 05:00 PM (GMT-04:00) Eastern Time (US and Canada)

Toll Free Dial-In Number: 1 (888) 330-2024

International Dial-In Number: 1 (646) 960-0187

Conference ID: 7778367

Webcast Link: https://events.q4inc.com/attendee/348498012

For those unable to join the live event, a recording of the presentation will be posted on the Company's investor relations website.

To learn more, please follow us on Twitter, YouTube, Instagram, LinkedIn, and Facebook, or visit our website: https://www.Nextechar.com.

On behalf of the Board of Nextech AR Solutions Corp.

Evan Gappelberg

CEO and Director

866-ARITIZE (274-8493)

About Nextech AR

Nextech AR Solutions is the engine accelerating the growth of the Metaverse. Using breakthrough AI, Nextech AR is able to quickly, easily and affordably ARitize (transform) vast quantities and varieties of existing assets at scale making products, people and places ready for interactive 3D use, giving creators at every level all the essential tools they need to build out their digital AR vision in the Metaverse. Our platform agnostic tools allow brands, educators, students, manufacturers, creators, and technologists to create immersive, interactive and the most photo-realistic 3D assets and digital environments, compose AR experiences, and publish them omnichannel. With a full suite of end-to-end AR solutions in 3D Commerce, Education, Events, and Industrial Manufacturing, Nextech AR is in a unique position to meet the needs of the world’s biggest brands.

On October 26, 2022 Nextech AR spun out its spatial computing platform, “ARway” as a stand alone public Company. Nextech AR retained a control ownership in ARway Corp. with 13 million shares, or a 50% stake. ARway is currently listed on the Canadian Securities Exchange (CSNX:ARWY), in USA on the (OTC: ARWYF) and Internationally on the Frankfurt Stock Exchange (FSE: E65). ARway Corp. is disrupting the augmented reality wayfinding market with a no-code, no beacon spatial computing platform enabled by visual marker tracking.

To learn more about ARway, visit https://www.arway.ai/.

Forward-looking Statements

The CSE has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.

Certain information contained herein may constitute “forward-looking information” under Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as, “will be” or variations of such words and phrases or statements that certain actions, events or results “will” occur. Forward-looking statements regarding the completion of the transaction are subject to known and unknown risks, uncertainties and other factors. There can be no assurance that such statements will prove to be accurate, as future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements and forward-looking information. Nextech will not update any forward-looking statements or forward-looking information that are incorporated by reference herein, except as required by applicable securities laws.

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