Filing summary
Registrant and period: The supplied filing is NTN Buzztime, Inc.’s Form 10-K for the fiscal year ended December 31, 2020, filed March 11, 2021. It is not a filing for Ernexa Therapeutics Inc.; the filing describes a proposed merger with Brooklyn Immunotherapeutics LLC.
Business context and strategic transactions
NTN operated an interactive entertainment network, principally serving bars and restaurants through subscriptions, hardware, advertising, content licensing and related services. COVID-19 sharply curtailed venue activity. The company reported 1,036 subscribers at year-end 2020, down 28% from 1,440 a year earlier; monthly gameplay fell from more than 1 million hours before the pandemic to about 100,000 hours after March 2020.
- NTN had agreed to merge with Brooklyn Immunotherapeutics, with Brooklyn members expected to own approximately 94.08%–96.74% of the combined company on a fully diluted basis. The combined company was expected to focus on Brooklyn’s cytokine-based cancer-therapy business and change its name to Brooklyn ImmunoTherapeutics, Inc.
- NTN had also agreed to sell substantially all assets of its existing business to eGames.com Holdings LLC for $2.0 million, with eGames.com assuming specified liabilities. The sale and merger were subject to approvals and other closing conditions; the company expected both to close in mid-to-late March 2021.
Financial performance and liquidity
Amounts below are in U.S. dollars; financial-statement figures are generally presented in thousands.
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $5.800 million | $19.806 million |
| Gross profit / margin | $2.893 million / 49.9% | $12.323 million / 62.2% |
| Operating loss | $6.309 million | $1.762 million |
| Net loss | $4.415 million | $2.047 million |
| Net loss per common share | $1.51 | $0.72 |
| Cash used in / provided by operating activities | $(3.894) million | $2.744 million |
- Revenue fell 70.7%. Subscription revenue declined 65.8% to $4.882 million; hardware revenue declined 81.9% to $426,000; other revenue declined 84.5% to $492,000. Management attributed the deterioration to COVID-19, fewer subscribers and lower average revenue per site, as well as the loss of Buffalo Wild Wings locations after their agreements ended in November 2019.
- SG&A decreased to $8.091 million from $13.175 million, primarily reflecting lower payroll and marketing costs, partly offset by $739,000 in transaction-related expenses. Operating costs nevertheless substantially exceeded revenue.
- Other income included a $1.225 million gain on the sale of live-trivia assets and a $1.093 million gain from forgiveness of part of the PPP loan. These items helped limit the increase in net loss despite the larger operating loss.
- Year-end cash and cash equivalents were $777,000, versus $3.209 million at year-end 2019; working capital was negative $636,000. Total liabilities were $2.894 million and shareholders’ equity was $851,000.
- Debt at year-end included $1.5 million of bridge loans and approximately $532,000 remaining on the PPP loan. The Avidbank term loan was repaid in full on December 31, 2020. An additional $200,000 bridge loan was received in January 2021, bringing bridge-loan principal to $1.7 million; principal and interest were to be applied against the asset-sale price if that sale closed.
Changes, outlook and material risks
- COVID-19 caused material declines in subscription and advertising revenue and operating cash flow. At the peak, about 70% of customers had suspended subscriptions; about 19% remained suspended at December 31, 2020 (the filing separately reported about 11% as of March 9, 2021).
- NTN sold its Stump! Trivia and OpinioNation assets in January 2020 for approximately $1.36 million gross proceeds and recorded a $1.225 million gain. It also terminated its headquarters lease, reducing future cash obligations by approximately $3.4 million, and substantially curtailed capital projects and staffing.
- Management said available cash was expected to fund forecast outlays only through mid-March 2021, assuming continued management of vendor-payment timing. If the transactions were delayed or failed, NTN said it needed additional capital but had no arrangements for it; failure to complete a transaction or raise funds could lead to curtailed operations, restructuring, bankruptcy or liquidation. The auditor’s report highlights substantial doubt about the company’s ability to continue as a going concern.
- The asset sale was central to the merger’s financing and structure. If it did not close, NTN could owe the bridge loans and could fail the merger’s condition limiting its net-cash deficit. The merger also required, among other things, stockholder approvals, Brooklyn having at least $10 million in cash and no more than $750,000 of borrowed debt, and continued NYSE American listing.
- NTN was out of compliance with NYSE American stockholders’ equity listing standards and had a plan period through September 27, 2021 to regain compliance. The combined company’s continued listing also depended on meeting initial listing standards and approval of its application.
- Ten stockholder suits challenged merger disclosures. After supplemental disclosures, six plaintiffs had dismissed their cases by the filing date; remaining claims and possible mootness fees were unresolved. A separate Delaware action alleged NTN had failed to hold an annual meeting within the required period.
- Management reported disclosure controls and internal control over financial reporting were ineffective because a material weakness arose from insufficient personnel and resources for internal-control assessment. Management planned to use external specialists to help address it.
No formal financial guidance is provided. The outlook in the filing is conditional on the transactions, pandemic conditions and access to cash.
Important facts for investors to verify
- Whether the asset sale and merger closed, the final cash and debt balances used in the merger-share formula, and the resulting ownership dilution.
- Whether Brooklyn met the closing cash and debt conditions, and whether NTN or the combined company satisfied NYSE American listing requirements.
- NTN’s liquidity, payment obligations and funding arrangements if either transaction was delayed or did not close; confirm how bridge loans and the PPP balance were settled.
- Post-year-end subscriber, revenue and cash-flow trends, including the effects of venue reopenings and subscription suspensions.
- Resolution of merger-related litigation and the Delaware annual-meeting action, and progress in remediating the disclosed material weakness.
- The registrant identity: this 10-K is filed by NTN Buzztime, Inc.; it does not report Ernexa Therapeutics Inc.’s financial results.