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Friday, December 2, 2022

GEX Consulting Inc (OTCMKTS: GXXM) Breaking Out Northbound as Accumulation Grows, Dilution Slows & Equity Investments Balloon

GEX Consulting Inc (OTCMKTS: GXXM) has been moving steadily northbound in recent weeks since reversing off $0.014 lows. The stock has runner in its blood skyrocketing from current levels to $0.18 per share this time last year. Currently under accumulation GXXM has made several timely investments which are paying off for the Company. They own 9 million GOATX tokens worth close to nothing. They own 1 million shares of DLYP (OTC: $0.97 per share) valued at $970,000 and 10 million shares of MMM currently valued at $2.4 million up from $1 million two weeks ago. 

GXXM is an SEC filer but has fallen behind in their filings late on both their 10Q and 10K. The Company has also not updated their website and their security features is oudated GXXM last quarterly report was filed on November 22, 2021. This has resulted in a “pink limited” “Delinquent SEC Reporting” designation from OTCMarkets. While GXXM may be a little behind in their filings we have seen 10 times worse, at least they are an SEC filer and they formed a NT-10Q Notification of late filing on May 16, 2022. According to their last filing GXXM is currently receiving a minimum of $100,000/month for technology support.  

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GEX Consulting Inc (OTCMKTS: GXXM) operating out of Dallas, Texas is a Professional Services, Staffing and licensed Professional Employer Organization (PEO) Company providing strategy consulting, staffing and comprehensive back office and PEO services to clients in a variety of industries. GEX Management services include Staffing, HR, Payroll, Risk & Compliance, and Strategy Consulting, and provides progressive and complete solutions for employee management and operational needs.  

GEX Management initially began operations as a Professional Services Company providing back-office support to third-party clients. In 2016 GEX Management revised its business model to provide staffing and back-office services to a wide variety of industries in order to expand the Company’s footprint, thereby building on the previous 12-year history of exceptional client service. Over the next few years, GEX Management experienced tremendous growth in sales and customer pipeline – staffing business grew by over 1600%+ from 2016 to 2017 with the firm being named among the “fastest growing public companies in the North Texas region” by the Dallas Morning News, while also significantly expanding its client footprints across multiple staffing, business consulting and PEO opportunities. 

In 2019, the current management of GEX under the guidance of the current CEO, Sri Vanamali, set strategic goals to revise the business model to expand into areas of higher margin and growth particularly in the area of Technology and Strategy Consulting Services. As a result of management efforts, GEX Management was invited in February 2019 to be a Preferred Supplier to Insight Global one of the world’s largest Managed Service Providers (MSPs) to Fortune 100 Companies in the Enterprise Technology Consulting space. The first consultant that GEX hired through this Preferred Supplier initiative was successfully placed at a large PA based financial services firm to provide Business and Quality Analysis professional services to the client. Subsequently, GEX placed its second enterprise consultant at the world’s leading Fortune 100 CRM Company at its headquarters in San Francisco and subsequently several more highly skilled Enterprise Technology Consultants at leading Fortune 500 retail, healthcare, manufacturing and technology clients across the country. As a direct result of the high market demand for experienced technology consultants via its multiple supplier programs, the GEX team has interviewed and is in the process of procuring 45 highly experienced enterprise technology consultants with expertise across a wide array of functions (Enterprise Architects, Project Managers, Systems Integration Developers, Quality Assurance Specialists and Business Systems Analysts) who have been identified for various short to long term projects and are expected to be fully staffed by its corporate clients by Q4 2021. Additionally, GEX plans to hire and place more than 100 enterprise consultants over the next 18 – 24 month period to satisfy its growing pipeline of future contracts. As a result of these market initiatives, GEX forecasts to potentially achieve approximately $20- $25M in gross billings over the next 18-24 month period, assuming all projected contracts are fully placed on projects that have been currently identified by the GEX supplier program pipeline and businesses begin to re-open as the pandemic related restrictions are removed. 

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In addition to these planned strategic growth initiatives which had started to build momentum in 2019 and are expected to gain significant traction in 2021 and beyond, management has been focusing on materially improving its balance sheet by significantly reducing or eliminating the debt or debt like instruments related to convertible notes and asset related liens introduced in 2018 while simultaneously exploring opportunities to reduce or eliminate the high interest MCA related toxic debt instruments that resulted in significant interest expenses to the company and a burden to operating capital. As part of this balance sheet “clean-up” initiative, on February 8 2019, GEXM and the G&C Family LLC executed a “Deed in Lieu of Foreclosure” agreement the terms of which would allow GEXM to release ownership of the Arkansas building under AMAST LLC to the G&C Family Group, LLC in return for cancellation of the $1,300,000 real estate lien note secured by the building along with any and all accrued interest payable on the note as of the date of the agreement. Additionally, on March 5, 2019, one of GEX’s promissory note holders proceeded to execute its rights to enforce the liens on the Setco property through a foreclosure process which resulted in the note holder taking possession of the Setco property resulting in the elimination of a $500,000 note and any accrued interest on the principal amount and the elimination of $1,125,000 Setco real estate lien note made to Setco along with any accrued interests from the Company books.  

Furthermore, GEX has been able to significantly reduce the overall debt and debt like instruments on the balance sheet through strategic conversions of convertible notes to common equity initiated by the convertible note issuers throughout 2019 and 2020 and settlement or elimination of certain MCA and debt like instruments. This focus on balance sheet cleanup and to stay significantly “asset-lite” is expected to achieve material results by Q4 2021, at which point GEX would be primed for its next phase of strategic growth initiatives by deploying equity and non-toxic debt instruments towards organic and inorganic opportunities. Finally, management believes that the material elimination of MCA and related debt like instruments will be a critical first step prior to rebuilding a robust revenue pipeline as this will require strong working capital and favorable leverage covenants to sustain operations in the long term as well as reduce liabilities related to attachment to future receivables. While management efforts to settle these instruments are aggressively underway, the inability or failure by the firm to completely address any toxic debt instruments could result in management pursuing a restructuring program or similar initiatives to bring the balance sheet within reasonable covenant parameters to allow the firm to continue operating efficiently in the coming years without exposing future customers to significant business risks associated with these toxic instruments. As part of this long-term strategy, management has already begin putting processes in place to protect the company via a robust internal restructuring program and will be announcing the outcome of these intra-company restructuring efforts that will protect the interests of investors and shareholders alike over the long term and also streamline the corporate structure to be synergistic with the management’s long-term vision for the company. 

The last press release from GXXM was on January 12, 2022 when the Company reported it signed a “white label” license with BCII Enterprises Inc. to enable that company to utilize GXXM’s DeFi Protocol technology. GXXM received 10 million common shares of BCII as compensation. 

Mr. Joseph Frontiere (CEO of GXXM), said “This is another example of how GXXM’s in house technology and team can become revenue generators. Recently the company received 10 million shares of Quad M Solutions Inc. (MMMM: OTCPK) and a minimum of $100,000/month for technology support. Earlier last year, GXXM also received 1 million common shares of Dais Corporation for providing funding and future technical aid. We anticipate closing several other deals over the near future. We expect these equity positions to continue to grow and add to our true underlying value. Presently they represent over $10 million of value. The Company also will benefit from the movement of nearly 9 million GOATX tokens when that utility token begins trading in the near term.” 

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Currently trading at a $5 million market valuation GXXM does have over $4 million in liabilities, some of them convertible and that has resulted in dilution with the OS close to doubling over the past few months – hence the drop in stock price from $0.18 to under a penny. That dilution may have lighted up as the stock is finding more buyers than sellers at current levels and has been moving up steadily recently moving over a penny. According to their last 10Q the Company did $970,000 in revenues for the 9 months ended, September 30, 2021 topping $280,000 in sales in their last quarter that was reported. As their equity position in MMMM has ballooned in recent weeks penny stock speculators have been picking up on GXXM and are accumulating at current levels.  We will be updating on GXXM when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with GXXM.

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Disclosure: we hold no position in GXXM either long or short and we have not been compensated for this article.

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