Business context and reporting period
Filing identity: The supplied metadata names Ernexa Therapeutics Inc., but this filing is for NTN Buzztime, Inc. (NYSE American: NTN). It is a Form 10-K for the fiscal year ended December 31, 2018—not a standalone fourth-quarter report. The filing provides annual results and does not give a clear separate Q4 income statement.
NTN Buzztime provides interactive games, entertainment, tablets, and related menu and payment technology, primarily to bars and restaurants. Revenue comes from subscriptions, equipment sales and leases, advertising, trivia events, content licensing, professional services, and pay-to-play games. At year-end, 2,639 venues subscribed, down from 2,730 a year earlier; approximately 84% used the tablet platform.
Financial performance and position
| Metric | FY 2018 | FY 2017 | Change |
|---|---|---|---|
| Revenue | $23.335 million | $21.274 million | +9.7% |
| Subscription revenue | $16.031 million | $16.949 million | -5.4% |
| Hardware revenue | $3.589 million | $0.770 million | +$2.819 million |
| Gross profit / margin | $15.265 million / 65.4% | $14.519 million / 68.2% | Margin down 2.8 points |
| Operating income (loss) | $0.203 million | $(1.402) million | Improved |
| Net loss | $(0.259) million | $(1.077) million | Loss narrowed |
| EBITDA (non-GAAP) | $2.830 million | $1.804 million | +$1.026 million |
| Operating cash flow | $1.365 million | $0.549 million | +$0.816 million |
Revenue growth reflected substantially higher equipment revenue, including sales-type leases and equipment sold for use in local jails; subscription revenue declined as average site count and revenue per site fell. Higher equipment and depreciation costs contributed to the lower gross margin. SG&A fell by $1.101 million, mainly due to lower payroll costs. Results included a $261,000 goodwill impairment and the absence of a one-time supplier payment received in 2017. The 2018 income-tax benefit was $64,000.
Cash, cash equivalents, and restricted cash totaled $2.786 million at year-end, versus $3.378 million in 2017. Investing cash use was $1.579 million and financing cash use was $0.303 million. The cash-flow statement reports a $0.517 million decrease before foreign-exchange effects; including the $0.075 million adverse exchange effect, cash and restricted cash decreased $0.592 million.
Working capital was positive $2.761 million, versus negative $1.109 million in 2017. Long-term debt outstanding was $3.750 million under the Avidbank term loan, with $1.000 million classified as current and $2.750 million as long-term before unamortized debt costs. The loan bears interest at prime plus 1.75%, requires monthly principal payments of about $83,000, and matures in 2022. It is secured by substantially all personal property; additional borrowing is generally restricted. The company reported compliance with its EBITDA and minimum unrestricted-cash covenants at year-end.
Material changes, outlook, and risks
- Buffalo Wild Wings concentration: It and its franchisees generated $10.180 million, or 44% of 2018 revenue, compared with $8.678 million, or 41%, in 2017. They represented approximately 46% of subscribed venues. Buffalo Wild Wings declined to roll out the expanded ordering, payment, and guest-insights functionality; existing agreements terminate in November 2019. Without an extension or replacement customers, management expects subscription revenue to decline materially starting in Q1 2020.
- Strategic alternatives: The board began an adviser-assisted review in December 2018, including possible sale of the company or its assets. There was no timetable or decision, and no assurance of a transaction. The process could consume resources, distract management, and affect employees, customers, partners, and the share price.
- Funding and liquidity: Management stated it expected available cash to cover operating needs and debt obligations for at least 12 months from financial-statement issuance, while continuing to evaluate equity and other financing. It warned additional financing may not be available on acceptable terms—or at all. The filing says substantially all existing facility availability was used.
- Product initiatives: SiteHub was being prepared for field testing in San Diego County in Q2 2019. Mobile live trivia and mobile network games were in development. The filing does not provide quantified revenue or profit guidance for these initiatives or for 2019 overall.
- Other risks and items: One unaffiliated manufacturer supplies the customized tablets, cases, and charging trays. The company faces competition, technology and execution risks, regulatory and cybersecurity exposure, and NYSE American listing risks. It reported no material litigation pending or threatened and no sales-tax liabilities recorded. Certain tablet and case useful lives were shortened, with about $160,000 of additional depreciation expected in 2019. Adoption of lease accounting was expected to add approximately $3.5 million of operating lease liabilities and $2.3 million of related right-of-use assets.
The audited financial statements received an unqualified opinion. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not audit the effectiveness of internal control.
Important facts for investors to verify
- Confirm the issuer: the filing is NTN Buzztime, Inc., not Ernexa Therapeutics Inc., and covers fiscal 2018 rather than Q4 alone.
- Track the Buffalo Wild Wings contract outcome and the company’s ability to replace the associated revenue before the November 2019 termination date.
- Review cash available under the Avidbank minimum-cash covenant, covenant EBITDA calculations, debt service, and access to additional capital.
- Assess how much 2018 revenue growth depended on equipment sales and leases, and whether subscription declines persist while gross margin recovers or weakens.
- Monitor the strategic-alternatives process, SiteHub and mobile product launch progress, and NYSE American listing compliance.