NexTech AR (NEXCF)

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NexTech AR got a nice review by Motley Fool Canada yesterday in a free article: https://www.fool.ca/2020/07/14/forget-shopify-tsxshop-canada…

I’m increasing my speculative position by a bit. Someone had posted they don’t trust the CEO who seems more like a stock promoter. I disagree. I’ve been watching his videos and he seems like a CEO that wants to create a powerhouse in the AR space. He has purchased over $1M in open market purchases this year using his own money to support the company, not being given options or warrants.

Here is a screen cap I took from a recent video why he says people should invest in the company:
https://ibb.co/b7JvvXn

I tried to find competitors but I couldn’t. Most AR competitors are focused on business, not consumer side like NexTech. There are rumors that a big deal will be announced soon with Samsung or Sony. I really like the fact that they are partnered with Fastly. Nasdaq uplisting will allow institutions to invest and that should occur in the next 6 weeks according to the CEO.

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I’m not sure why a new thread with the same title was started, but I’ll reply to this one.

It’s true that most companies are focused on selling their AR product to businesses, but there’s a reason for this. There aren’t many practical reasons for consumers to use AR/VR other than gaming (think Pokemon Go and Oculus Rift), but there are many more reasons for businesses to use it. There’s an article from TechCrunch earlier this month that explains why “AR 1.0” failed and what needs to be done to make this industry profitable and not just a pipe dream (https://techcrunch.com/2020/07/01/ar-1-0-is-dead-heres-what-…(I) think its behind a paywall unfortunately). It basically talks about how third-party companies don’t understand what AR can really be commercially used for. Nobody understands at this point. They need the platform itself to show them the way and give them examples on use cases, like the Apple Watch did.

The problem with NEXCF, as I said before, was that there was no evidence that their technology is special in any way. If any of these bigger companies thought there was a commercial opportunity in the consumer market, they would take their likely superior technology and absolutely crush NexTech.

Also, I’m always skeptical of “partnerships”. It seems like NexTech just became a client of Fastly, which hundreds of companies are doing. I read the press release that both companies had quotes in, but there were no details about how they would work together, other than the typical customer relationship. NexTech has also hyped their integrations with Shopify, Magento, etc as far back as 2018, but the relationships aren’t anything material and means nothing if the end user isn’t buying your product.

I’d be more than happy to be proven wrong in any of those points, but the evidence I’ve seen so far says that NexTech doesn’t have a sustainable competitive advantage versus anyone. I actually do think their stock will take off when they uplist, but it’ll be for the same reason Nikola and Virgin Galatic did, mainly traders and investors getting overly excited about a trend without actually understanding the industry (think 3D printing). Until NexTech can tell or show me through their financials or some sort of presentation why their product won’t get beaten by the big boys when the time comes, it’s a hard pass from me.

CloudAtlas

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I mistyped in my last post. I meant Nextech’s competitors seem to be in the B2B space whereas Nextech is in the business to consumer space. You got to a website like Walther and you are more apt to buy a gun because NexTech’s AR tech made you spend more time there. Here is an article about this type of shopping experience, the article mentions a competitor of NEXCF called Vertebrae: https://searchengineland.com/augmented-reality-starts-drivin…. It is a highly speculative investment, but if NEXCF executes well they can get a good lead in the AR space. BTW, another rumor is that they won the NATO contract for videoconferencing over Zoom because of security concerns.

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BTW, another rumor is that they won the NATO contract for videoconferencing over Zoom because of security concerns.

I’m sorry, but this board isn’t for promoting rumors, we invest based on facts and figures. Also, why would a NATO videoconferencing contract (that has nothing to do with AR/VR) be given to a company making less than $8MM a year and has no international presence outside of Canada and the US over Zoom competitors such as BlueJeans and Skype?

Please don’t promote unsubstantiated rumors on this board.

CloudAtlas

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This company has been talked about a bit on the Motley Fool Stock Advisor CANADA board. It is not a recommendation, so I can post freely what I came up with when I took my deep dive. Short of it there are some VERY questionable transactions. This is a hard pass, and OT for this wonderful board (my first post here - I am bit afraid to do this lol).

NextTech AR

So I looked this company up as it has popped the last week or so, and combined with the press release mentioning Fastly, I was curious. It has also been mentioned on these forums in the past. I perused their website, and read their latest reports, retrieved from SEDAR, and then googled them.

After looking at their website, I thought that the technology looked kind of cool. Maybe someone like wayfair would be interested. Basically you can see what a specific item might look like in your room. Or clothes, as mentioned in an interview on Yahoo Finance. Though I didn’t think The CEO came off well in this interview, I thought the idea seemed intriguing. He mostly talked about getting proper fit for clothes by having a picture of you, your actual size, and being able to put clothes on. I guess like an avatar in a game.

The reports, they had 2 year end reports, May 19 and Dec 19. YR end rev for may 19 was $2m, by Dec 19 had $4m, gross profit was 976k & 2.4m respectively. Decent gross margins of 48.8% & 60%, always nice to see this grow, particularly with Rev growth as well. They also went on something of a purchasing spree, and bought the following companies:

Infinite Pet life for 1.6m, which sells health supplements for pets
Hootview for a very small amount, they have something to do with Cameras
Vacuum cleaner market, an e-commerce website that sells vacuum supplies for 1.m as well, in the form of 2m shares

So now I am thinking, what the heck? Why did they buy those companies? They seemed completely unrelated.

I kept reading the reports, and they mentioned a $2.2M impairment charge. In the notes it was revealed that this was from Future Farm (cannabis company) & EdCetera, which they had purchased in march 18 & dec18 respectively. This impairment was recognized in dec19. Some of this impairment was due to “apps”, with no further explanation.

So I was thoroughly confused at this point, and googled the company and the CEO, Evan Gappalberg. Found that Mr. Gappalberg had some involvement with taking Take Two Interactive, but I couldn’t immediately find with what company he did that with. It was at this point that I came across short reportfrom Hindenburg research. It is VERY damning in my opinion. If you are thinking of investing in NextTechAR I highly recommend reading that report, however the coles notes are:

NextechAR pays for promotion, a lot of it. A press release every 2 days.
The companies purchased by NextechAR were actually owned by the CEO & COO of Nextech previously. Basically all of them. This includes the impairment charge of “apps” as well, they were from Mr. Gappalberg himself, and were essentially worthless, but he got paid a lot of money for them.

All in all, this company sounds really bad to me, and I would run not walk away from it. My $0.02. I hope it is ok to reply to this as I know its OT.

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I also thought it was unusual they bought the pet supplements and vacuum cleaner companies. The CEO said they did that in order to have a sandbox to test out their technologies live. Also, they were cash flow positive. The short report by “Hindenberg Research” was addressed by the CEO in this video I posted below. Hindenberg is a notorious short seller like Citron Research. NEXCF does have a convoluted past, but I don’t think Motley Fool Canada would be writing a positive review on the company if it didn’t think the future looks bright.

https://www.youtube.com/watch?v=xv0PmbLvrRw

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While its true that Hindenburg should be looked at with full understanding of who they are, that explanation of needing those for a sandbox isn’t very convincing IMO. How does a pet supplement company help you develop AR technology? Pretend to feed it to your pet, and watch how they get healthier? Particularly since they certainly over paid, and then immediately wrote them off.

Also, any of those free articles are generally worth exactly what you paid for them. Motley Fool Canada has no recommendations, paid for, the ones that actually mean something, for this company. In the realm of the free articles, that one is poor as well. The reason for the revenue growth was solely becuase of the purchases of, I believe, the pet supplement company.

Anyway, I really think this is OT for this board, so while I stand by my opinion, you are welcome to yours, but I won’t respond further because of the OT nature of this company.

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“but I don’t think Motley Fool Canada would be writing a positive review on the company if it didn’t think the future looks bright.”

I don’t believe the article was written by a Motley Fool Canada team member. There are many articles written by independent contract writers that don’t have much research time behind them.

FYI, I have zero trust for the CEO either, he seems sketchy at best.

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All in all, this company sounds really bad to me, and I would run not walk away from it. My $0.02. I hope it is ok to reply to this as I know its OT.

Good call. An extremely negative report came out today knocking the stock down. It slams the bloated compensation and asserts that most of its revenues are from vacuum sales - no kidding.

https://seekingalpha.com/article/4359283-nextech-ar-solution…

I just wanted to alert anybody here who might have bought some shares.

Dave

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