Business context and reporting period
The supplied filing is bBooth, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2016, filed August 15, 2016. This does not match the request metadata naming TON Strategy Co.; verify the issuer and filing identity before relying on this summary.
bBooth describes a shift from mall-based recording kiosks and a talent-discovery app to bNotifi, a cloud-based enterprise platform for interactive audio/video messaging, content distribution, lead generation, and customer engagement.
Financial results and position
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | 2016: $31,593; 2015: $0 | 2016: $31,593; 2015: $0 |
| Operating expenses | 2016: $1,131,015; 2015: $966,252 | 2016: $1,676,355; 2015: $2,540,725 |
| Operating loss | 2016: $1,099,422; 2015: $966,252 | 2016: $1,644,762; 2015: $2,540,725 |
| Interest expense, net | 2016: $188,231; 2015: $39,605 | 2016: $340,171; 2015: $43,014 |
| Net loss | 2016: $1,287,653; 2015: $1,005,857 | 2016: $1,984,933; 2015: $2,583,739 |
| Basic and diluted loss per share | 2016: $0.02; 2015: $0.02 | 2016: $0.03; 2015: $0.04 |
Gross profit and gross margin are not separately presented, so a clear margin value is not available. The company reported no income tax provision. Six-month operating cash use was $895,675, versus $1,922,618 in 2015; investing cash use was zero, and financing provided $835,200. Cash declined from $103,019 at year-end 2015 to $42,544 at June 30, 2016.
At June 30, 2016, current assets were $181,270 and current liabilities were $2,386,141, a working capital deficit of approximately $2.20 million. Total liabilities were $2,851,342; total assets were $244,034; stockholders’ deficit was $2,607,308. The balance sheet lists $125,000 of notes payable, $1,259,932 of related-party notes payable net of discount, and $913,565 of convertible notes payable net of discount. Substantial liabilities also include accounts payable and accrued expenses.
Changes versus prior comparable periods
- Revenue began to appear in 2016, totaling $31,593 in both the quarter and six-month period; the comparable 2015 periods reported none.
- Quarterly net loss increased by about $282,000, while six-month net loss narrowed by about $599,000. The six-month improvement reflected lower operating expenses, particularly general and administrative costs, which management attributed to fewer employees and reduced consulting activity.
- Interest expense rose sharply in both 2016 periods, which management attributed to increased borrowings. Six-month share-based compensation was $714,274, versus $253,041 in 2015.
- Cash used in operations decreased year over year, but cash on hand remained very low. Financing shifted to stock subscriptions and additional CEO lending; the company also repurchased shares for $166,226.
Outlook, risks, and unusual items
- Management estimated operating expenses over the next six months could continue to exceed revenue and said additional debt or equity financing may be needed. There is no quantified revenue or earnings guidance.
- The filing states that recurring losses, negative operating cash flow, and an accumulated deficit of $18,984,228 create substantial dependence on additional financing to continue as a going concern. Management also said it may consider mergers or acquisitions; profitability is not assured.
- Significant financing and dilution risks include notes bearing 12% interest, amounts due on demand or within the next 12 months, and convertible instruments with $0.07 conversion or exercise prices. The CEO is a lender and holds a senior security interest in substantially all current and future company assets under one related-party note.
- Equity issuances and potential dilution were substantial: 20,422,222 shares were issued from subscriptions during the six months, and the company reported 11.6 million options and 16.45 million warrants outstanding at June 30. Common shares outstanding were 78,654,896 at quarter-end and 80,404,896 as of August 12.
- Disclosure controls and procedures were concluded to be ineffective as of June 30, 2016. Management reported no material change in internal control over financial reporting during the quarter.
- Subsequent events included a July 11 private placement of 1.65 million shares for gross proceeds of $74,250 and the July 15 appointment of a CFO, who agreed to nominal cash salary until the company generates sufficient cash flow and received an option allocation.
- The filing reports no material pending legal proceedings and no defaults upon senior securities. It identifies risks including technology and cybersecurity failures, competition, reliance on third parties, inability to raise capital, penny-stock trading limitations, and concentrated insider ownership.
Important facts for investors to verify
- Confirm the issuer: the supplied 10-Q is for bBooth, Inc., not TON Strategy Co.
- Verify current cash needs, financing availability, and the status and terms of obligations due on demand or in 2016, including the Oceanside convertible note due December 4, 2016.
- Review the related-party debt balances, security interests, conversion rights, and warrants, and reconcile the filing’s debt and classification disclosures.
- Assess revenue traction and commercialization of bNotifi, given the limited reported revenue and management’s expectation that costs may continue to exceed revenue.
- Review the ineffective disclosure-controls conclusion and any remediation or subsequent developments.
- Confirm post-quarter share issuances, option and warrant overhang, and resulting dilution using subsequent filings.