GORDON Swaby, CEO of educational technology firm EduFocal, the Jamaica Stock Exchange (JSE)-listed firm which trades under the ticker symbol LEARN, said the suspension of trading in the stock for two weeks earlier this month left a bad taste in his mouth, adding that changes which have been made since then should ensure that the company is not placed in a similar situation in the future. Still, instead of focusing on the past Swaby, in a wide-ranging interview with the Jamaica Observer earlier this week, trained his sights on the future of the company, including returning it to profitability in the short term and setting a timeline for the company to pay its first dividend since listing in March 2022.

Trading in EduFocal shares was suspended on June 4 due to the company failing to submit on time its audited financials for its 2023 financial year. EduFocal’s financial year coincides with the calendar year and runs from January 1 to December 31 each year.

However, the company, taking advantage of JSE rules which allow entities to skip the publication of interim financials for the fourth quarter of their financial year — the publication of fourth quarter results are normally due within 45 days of the end of the quarter — has instead been opting to publish its audited financials within 60 days. Electing to do so, the company should have published its full-year 2023 results by February 29, 2024 but hit a snag with publishing it on time.

Failing to meet that deadline, EduFocal on March 1 had a notice published on the JSE website acknowledging that its 2023 results were late and said it hoped they would be submitted by April 22. But again, that timeline was not met and seven days later, on April 29, it again advised that there was a further delay in the publication of the audited financial statements for the year ended December 31, 2023, and gave a revised date for the submission of the financial statements by or before May 19.

This deadline was missed also, and on May 24 the company said it was working to have the financials out by June 28, but four days later on May 28 it revised that schedule to say the financials should be out by May 31.

However, when those commitments were not honoured JSE stepped in and suspended the trading of the company’s stocks on June 4.

“The Jamaica Stock Exchange (JSE) wishes to advise that in keeping with JSE’s Junior Market Rule Appendix 2, part 4 (2), it has taken the decision to immediately suspend trading in the shares of EduFocal Limited, pending the submission of its 2023 audited financial statements,” a note from JSE late on June 4 read.

Swaby explains what led to the situation, one which he said he regrets.

“I think when people think about junior market companies they think that [we have] finance departments [with] 10, 15, 20 people. EduFocal is still, relatively, a small company. Our finance department, in particular, up until the end of 2023 had three people. We had a new CFO and we had two other people in the department. Our CFO went on maternity leave in November, the other person that was there who was senior had just joined the company, so we were effectively left in a position where you are dealing with your audit — which you only have 60 days to produce, which means we have to produce our financials by February 29, 2024 — and our CFO was out,” he said.

Swaby said he took on some of the responsibilities, along with the CFO helping remotely “as best as she could”, but things did not move as fast as they should have, which led to the delay and ultimately, the suspension.

“I have heard a lot of speculation as to why we were late,” Swaby said but declined to go into them, adding that, “At the end of the day, we were suspended because our financials were late. I know that sometimes Jamaicans will come up with all sorts of creative reasons [to explain a suspension] but it was just because our financials were late — and the rules say if you are late, after grace periods, you will be suspended.”

“It’s an unfortunate thing; I take full responsibility for it. It is not one of our proudest moments, and since that suspension we resumed trading within two weeks — so we resumed trading very quickly — and I am proud of all those who helped us to do so,” he added.

EduFocal finally submitted its financials on June 20, and trading resumed in the stock a day later on June 21, one week ago, but the price of the stock has since been in free fall. On June 4, the day it was suspended, EduFocal shares were trading at $0.81. When it resumed trading on June 21 it closed the day at $0.63, and yesterday, June 27, its price fell to $0.53. Overall it is down 64.12 per cent since the start of the year when its price was $1.49. Just earlier this week the company’s shares hit an all-time low of $0.52. It’s all-time high is $4.06 which it attained on March 21, 2022, just days after its March 15 listing in that same year.

But having seen how the stock’s price has performed since listing and taking note of the sentiments that surround the suspension of trading, Swaby said he will ensure that the company is not placed in that position again.

“I don’t want to say it will never happen again but I want to almost say that I am fairly sure, fairly confident, that this last financials — which is our Q1, which is late — is going to be the last that will be late,” Swaby said.

The financials for EduFocal’s first quarter — the period from January 1 to March 31, 2024 — should have been submitted to Jamaica Stock Exchange by mid-May, 45 days after the end of the quarter. Swaby told the Business Week that the financials will be submitted between Wednesday and Thursday to avoid getting another suspension. If it wasn’t submitted by today, June 28, the company’s stocks will be suspended from trading again — for a second time in one month.

Focused on growth

Yet, those issues aside, Swaby said he is fully focused on the future of EduFocal and has been making changes to the company to secure its profitability, cut its costs, improve capacity building, improve both top- and bottom-line growth, improve transparency, improve corporate governance, and enhance operational efficiency.

So far a new audit committee chairman in the person of Durval Williams, who currently serves as head of internal audit at Supreme Ventures, has been appointed following the resignation of Kevin Donaldson from the position to focus more on his business ventures which span quick-service restaurant the Mother’s Group; Medical Associates, a private hospital; Summit Kingston (formerly Knutsford Court hotel); his other investments in entities such as Amazing Concrete Limited and QuickPlate; as well ass appointments to the boards of Caribbean Assurance Brokers and Elite Diagnostics. Swaby was quick to point out that Donaldson stepping down from the post of chairman of EduFocal’s audit committee was done voluntarily and that there was no dispute, pointing out he still remains as a director of EduFocal. Donaldson is the seventh-largest shareholder in EduFocal, owning 13.2 million shares through Roots Financial Group.

But changes at the board level are not the only thing happening at EduFocal.

The company which closed 2023 with 40 full-time employees has since slimmed down. Swaby said only 15 remain now but shared that the lower headcount will not impact the company’s ability to generate revenues and return it to being profitable. Some of the jobs, he said, have been lost to artificial intelligence.

Leading the way for growth of the entity is a new propriety learning management system (LMS) called Amigo. Swaby said the company has spent $60 million on the software so far to build it out, and is ready to launch it soon.

“We believe that Amigo is the future of EduFocal — and what I mean by that is, it is the foundation of everything that we want to do,” Swaby outlined.

He said the software will be able to help the company’s two divisions — the learning and corporate departments — to grow.

He outlined how it will work in the learning division.

“With Amigo, teachers can mark papers, mostly multiple-choice, quickly. We piloted Amigo about two weeks ago at St Andrew Prep and we marked 156 papers for them in four minutes. This would normally take the teachers three days. This is not a theory thing — that is something that we have actually done.”

He said the software is downloaded on smartphones which the teachers use to take a picture, and that is marked in milliseconds and produces a report for the students, schools and ministry.

Swaby said he eventually wants to move from using it to mark only multiple-choice papers to also grading essay questions…and so far, in all cases it has produced 100 per cent accurate reports.

“I want you to understand the implications of what Amigo can achieve. Food handler’s permit, to get one you have to take a multiple-choice test; to get your driver’s licence you have to take a multiple-choice test. Psychometric tests for organisations, we could help in that. Our goal is to have 100 organisations/schools using Amigo before September 2024. The cost to use it is US$130 per month, the margin is 60 per cent, and our goal by the end of October is to have 400 organisations using it.”

He said this software will help the company move away from depending on large, one-off contracts with revenues that are difficult to collect — something which had led it to rack up a huge receivables on its balance sheet, forcing it to write off $75 million worth as bad debt.

It also wants to diversify its revenue stream. Loss-making entities such as its academy has been shuttered and new business is being sought. Just recently it announced that it signed a three-year deal with National Commercial Bank to produce content for a national financial literacy programme. Other deals have been signed, he said, including with Supreme Ventures for just under $10 million per year and another entity which will generate $80 million in revenues.

But, it is the LMS software which he said the company is betting on, with an eye on rolling it out in Lagos, Nigeria, where the company has set up operations. Getting that software into schools in Nigeria’s largest city, with an estimated population of 12 million, would bring tremendous benefits to EduFocal.

He estimates that it could help swell revenues at EduFocal to US$5 million ($775 million), significantly more than the $263 million the company reported last year.

“Our model is very simple: We charge you a subscription fee of about $20,000 a month, and it is automatically charged each month. It’s the same software for everybody and it creates a lot of opportunities for us in terms of recurring cashflow, easier to predict, less expenses, and so. It goes back to my point: We have been sowing and it is time to reap.

We are going to focus less on top line; we are going to focus less on revenues and more on profits and cashflow, because we are shifting our focus now on executing the things that we have been developing over the last two years.”

With that, he said the company should be able to start paying a dividend within “two to two and a half years”.

The company also plans to come to market later this year to raise between $250 million and $300 million, to help recapitalise its balance sheet after it was flagged as “a going concern” with liabilities exceeding assets by $40 million. Swaby said a change in the company’s accounting policy should help to bring $100 million to the balance sheet to help eliminate the concern as well, while how it values its intellectual property should also change.

“We are currently in talks with professional valuators to value what we have built…if it turns out that they are more valuable than the value we are carrying them at on our books then that would improve our current asset value,” he said, adding that the going concern issue should be resolved in two months.

Otherwise, he said his partner Mayberry Investments, which is the second-largest shareholder in EduFocal through a company called Widebase, is helping him to explore opportunities to remedy the cash situation the company faces.