https://youtu.be/Evo0L5YS_1Q
Many of you have voiced concern that after AITX’ recent quarterly report, and glowing revenue improvement. But you were confused over why the stock still immediately took a big hit in price.
I’ll share why this stock slide occurred, and do a deep dive into AITX’s quarterly numbers. Later in this video, I’ll also share if I’m still feeling good about AITX’ long-term prospects.
So, let’s dig into the details, and discover what all of the quarterly report numbers mean.
This is Lynn, and welcome back! In the past I worked with Fortune 500 CFOs and financial consulting teams, to help companies determine where they were making money. Now I use this knowledge to dig into HCMC’s details.
So let’s go and review today’s hot stock!
As most of you are aware Artificial Intelligence Technology Solutions Inc. focuses on the delivery of artificial intelligence and robotic solutions for operational, security, and monitoring needs.
Let’s first take a quick look at AITX one month, 60-minute chart. When AITX quarterly report came out on July 14th, the stock closed at .0539 price level.
AITX recent quarterly report was covering the quarter ending May 31, 2021. You can see here that their revenues of $560,000 from revenues of 63,000 from May, 31 2021. Note that all the numbers you will see today are in thousands, so add three zeros. Their gross profits increased from 54,000 in the May 31 quarter, last year, to $440,000 this year. Obviously, this is great progress!
AITX also realized an excellent improvement in the revenue realized from customer contracts for the 2021 versus 2020 May quarter. There was a 785% overall improvement quarter-over-quarter for both Device rental activities and Direct sales of good and services.
And remember, this is not financial advice but for entertainment only.
Now back to AITX’ quarterly report. As I’ve explained before, related to their improvement of revenues, there are many ways that a company can massage the numbers on an income statement, according to approved financial reporting guidelines. But they can’t massage the cash numbers raised from their own operations. Most important are the Free Cash Flow, which is cash that a company generates subtracting money spent on capital expenditures.
Capital expenditures are funds used by a company to acquire, upgrade, and maintain physical assets like property, plants, buildings, technology, or equipment. It is also often used to undertake new projects or investments. These financial outlays are made by companies to increase the scope of their operations or add economic benefits. Obviously with AITX revitalized growth plans, they are spending significant money in all of these areas and it shows in their Free Cash Flow results.
You can see on this Yahoo Finance Screenshot that the Free cash flow was a negative 276,000 in May of 2020 versus an even lower negative three Million, fifty-six thousand for May of 2021. This alone would give short sellers reason to pound hard on this stock.
AITX stated in this quarterly report, their increased costs which impacted their results, including the approximate increases in production supplies by $196,000, professional fees by $489,000, wages and salaries $349,000, subcontractor fees $142,000, and stock-based compensation $69,000. Also, there were additional $211,000 of expenditures for freight, office expenses, travel and advertising.
AITX explains these increases, due to the large ramp up in costs during this quarter to operate the new manufacturing facility, the hiring of 18 additional full-time employees and the termination costs of the former director. In addition, the expenses of the prior year. These are all really good moves.
In my opinion these expenses are to be expected if AITX is to grow and increase their market share.
AITX also states that they are still projecting that 2022 fiscal year’s revenues will be between 5 and 15 times greater than the 2021 fiscal year’s revenues. This growth would come from an anticipated significant increase orders, their ability to make timely deliveries; and a significant improvement in the Company’s ability to support many more devices than this it could support during the 2021’s fiscal year.
In this recent quarterly report, AITX also made a great move in renegotiating a repayment from an investor to a lower rate.
Over the past three years, AITX entered into agreement with this investor for payments up to $1,925,000. This payment would be in exchange for a perpetual rate payment on AITX’ quarterly revenue from operations. On March 1, 2021 this investor agreed to revise the related payments and dispositions as follows:
| 1) | The rate payment was reduced from 14.25 % to 9.65 % |
This was also a big positive for AITX!
Some of the other highlights in the Quarterly financial report referred to Common Stock Warrant Activity of 619,523,492 shares that can be exercised at an average price of $0.0295. Fortunately, these shares appear to be owned by individuals who are invested in AITX future, and therefore not yet selling.
A detail that you should be aware of are the following, that AITX plan to address the Company’s financial situation, and poor Free Cash flow, to support the business as follows:
In the near term, management plans to raise an additional $ 15 million to $ 50 million before the end of the fiscal year. The management hopes to add either non-dilutive funds or minimally dilutive funds.
Clearly, AITX’ cash burn will continue as they grow, especially due to their plans to hire more employees and to finish the next fiscal year with between 75 to 125 employees. There are many other projected AITX improvements that were covered in detailed during my previous videos, that you can find in the AITX playlist here: https://www.youtube.com/playlist?list=PLTbXqXZ6UW5GAfVojlGZmeiQ82WYtFL4d