Filing summary
Entity identification: The request metadata names Ernexa Therapeutics Inc., but the supplied Form 10-Q is for NTN Buzztime, Inc. This summary reflects the filing provided. The quarter ended September 30, 2017; the report was signed November 8, 2017. Financial statement amounts below are in millions of dollars unless stated otherwise.
Business context and reporting period
NTN Buzztime provides interactive entertainment and dining technology to bars and restaurants in North America. Revenue comes primarily from subscriptions, equipment leases, hosted events, advertising, and games. Its BEOND tablet platform supports entertainment and digital dining functions; it also continues to support its Classic product. Approximately 55% of network subscriber venues were affiliated with national or regional restaurant brands.
Financial performance and position
| Metric | Q3 2017 | Q3 2016 | Nine months 2017 | Nine months 2016 |
|---|---|---|---|---|
| Revenue | $5.198 | $5.443 | $15.978 | $16.332 |
| Gross margin | $3.659 (70%) | $3.696 (68%) | $10.965 (69%) | $10.709 (66%) |
| Operating loss | $(0.053) | $(0.414) | $(0.913) | $(1.978) |
| Net loss | $(0.184) | $(0.573) | $(0.438) | $(2.464) |
| Net loss per share | $(0.07) | $(0.31) | $(0.18) | $(1.34) |
- Q3 revenue declined 4.5% year over year; nine-month revenue declined 2.2%. Subscription revenue fell 2.3% in Q3 and 2.8% for the nine-month period, primarily due to lower average site counts. Subscriber venues decreased to 2,734 from 2,848 a year earlier.
- For nine months, sales-type lease revenue declined 37.5%, while other revenue rose 13.9%. Management attributed the latter increase to professional services, premium games, and hosted events.
- Gross margin improved year over year, helped by lower depreciation, equipment costs, and service-provider fees, partly offset by higher freight expense. Selling, general and administrative expense also declined.
- Nine-month other income included a one-time supplier payment resolving a supply-chain matter; management said it did not expect a similar payment again.
- Nine-month operating cash flow was $1.056, versus cash use of $0.028 in 2016. Investing used $1.118 and financing used $1.230. Cash declined $1.222 to $4.464 from year-end 2016.
- At September 30, cash was $4.464 and current assets were $10.745 versus current liabilities of $10.937, resulting in negative working capital of $0.192. Total liabilities were $11.505 and shareholders’ equity was $6.058.
- Debt included $4.450 outstanding under the East West Bank facility and $0.804 under equipment financing. The balance sheet classified $5.162 of long-term debt as current and reported $0.092 as long-term. The EWB advances were due January 15, 2018; only about $0.084 was available to borrow under the facility at quarter-end.
Material changes, outlook, and risks
- Q3 net loss narrowed to $0.184 from $0.573; nine-month net loss narrowed to $0.438 from $2.464. EBITDA, a non-GAAP measure, was $0.517 for Q3 and $1.687 for nine months, compared with $0.288 and $0.188 in the comparable 2016 periods.
- The company received $1.773 net proceeds from common-stock offerings in March and April 2017. It also reported a Buffalo Wild Wings prepayment for equipment and future services, contributing to increased deferred revenue and equipment inventory.
- Management expected full-year 2017 SG&A to be just under $16.0 million. It expected to begin rolling out an improved tablet platform with digital menu, ordering, and payment functionality at selected Buffalo Wild Wings locations in Q1 2018, followed by a broader rollout if the initial deployment proceeded smoothly. No revenue or earnings guidance was provided.
- Management stated it believed cash would cover operating requirements and debt obligations for at least 12 months from the financial statements’ issuance date, while continuing to evaluate equity and debt financing. It warned that additional financing might not be available on acceptable terms and that spending cuts could prove insufficient if cash fell short.
- Liquidity and refinancing are significant concerns: EWB advances were due in January 2018, borrowing availability was limited, and the company said it did not expect further equipment-lender financing. It reported covenant compliance at September 30, 2017.
- Buffalo Wild Wings and its franchisees accounted for about 39% of Q3 revenue and 41% of nine-month revenue. The company also depended on a single unaffiliated supplier for BEOND tablets, cases, and charging trays, with no identified alternative supplier.
- Additional risks included competition and technology changes, execution of the BEOND rollout and growth strategy, and NYSE American listing compliance. The company said it had regained listing compliance but could face truncated procedures or delisting proceedings if it again fell below standards within 12 months of May 12, 2017.
- The filing reported no legal proceedings, no defaults upon senior securities, and no material changes in internal control over financial reporting. Management concluded disclosure controls were effective.
Important facts for investors to verify
- Confirm the correct issuer: the supplied filing is NTN Buzztime, Inc., not Ernexa Therapeutics Inc.
- Check whether the January 15, 2018 EWB debt maturity was repaid, refinanced, or amended, and whether the facility’s cash-deposit covenant affected usable liquidity.
- Assess whether Buffalo Wild Wings’ prepayment and equipment purchases translated into the expected rollout, recurring revenue, and cash generation.
- Monitor subscription revenue, venue counts, customer concentration, and access to alternative tablet suppliers.
- Review subsequent disclosures on financing needs, NYSE American listing status, and progress against management’s operating outlook.