Filing summary
Entity note: The supplied filing is NTN Buzztime, Inc. and subsidiaries, not Ernexa Therapeutics Inc. It is a Form 10-Q for the quarter ended March 31, 2018, filed May 11, 2018. Financial figures below are in U.S. dollars; statement amounts are generally in thousands.
Business context and reporting period
NTN Buzztime provides interactive entertainment and dining technology to bars and restaurants, including trivia and games, digital menus, ordering, and payment. At quarter-end, 2,703 venues subscribed, down from 2,788 a year earlier; approximately 82% used the BEOND tablet platform.
Financial performance and liquidity
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Revenue | $5.761 million | $5.231 million; up 10.1% |
| Gross margin | $3.794 million; 65.9% | $3.388 million; 64.8% |
| Operating loss | $313,000 | $834,000 |
| Net loss | $409,000; $0.16 per share | $90,000; $0.04 per share |
| EBITDA (non-GAAP) | $325,000 | $654,000 |
| Operating cash flow | $(120,000) | $(466,000) |
| Cash and equivalents | $2.635 million at March 31 | $3.378 million at December 31, 2017 |
| Debt | $4.5 million East West Bank term loan outstanding, plus $442,000 equipment debt | $5.067 million total current and long-term debt at December 31, 2017, based on balance sheet classifications |
Subscription revenue declined 3.8% to $4.065 million, primarily due to a lower average venue count. Sales-type lease revenue rose to $679,000 from $185,000, reflecting more BEOND installations under lease arrangements; other revenue increased to $1.017 million, primarily from professional services. SG&A decreased 2.7% to $4.021 million, but other income swung from $750,000 to $94,000 of expense. The prior-year other income included a one-time supplier payment.
Investing cash outflow was $372,000, including $169,000 of capital expenditures and $203,000 of software development spending. Financing cash outflow was $226,000; Q1 2017 had $1.554 million of offering proceeds. Cash declined by $743,000 from year-end, including the effect of foreign exchange. Working capital was positive $1.389 million versus negative $1.109 million at year-end, mainly reflecting debt reclassification; current liabilities included $3.401 million of deferred revenue.
Material changes, outlook, and risks
- In March 2018, East West Bank waived the prior-quarter fixed-charge coverage covenant default and suspended that covenant through the quarter ending March 31, 2019. New minimum adjusted EBITDA requirements apply for the six-month periods ending in 2018: $600,000 at March 31, $1.2 million at June 30, $1.6 million at September 30, and $1.5 million at December 31. The company reported compliance with all covenants at March 31. No further borrowing was available under the bank facility.
- Management said it expects cash to cover operating needs and debt obligations for at least 12 months after issuance, but is evaluating additional financing, including equity and alternative debt. It warned that capital may not be available on acceptable terms and cost reductions may not be sufficient if cash needs exceed resources. No formal revenue or earnings guidance was provided.
- Buffalo Wild Wings and its franchisees accounted for approximately 49% of Q1 revenue, compared with 40% a year earlier. The rollout of expanded ordering and payment functionality had been paused following the chain’s acquisition; the company said work restarted and the service was live at 31 locations.
- The company relied on a single unaffiliated supplier for BEOND tablets, cases, and charging trays, with no identified alternative supplier or device. It also reported that its common stock was below NYSE American’s $6 million equity listing threshold and had losses in five recent fiscal years. The exchange accepted a compliance plan through March 20, 2019; failure to regain compliance could lead to delisting.
- Management reported no pending material legal proceedings, no material changes in internal control, and effective disclosure controls. Adoption of Topic 606 had no transition adjustment. The company continued analyzing the 2017 Tax Act.
Investor verification points
- Confirm the filing’s issuer identity: it names NTN Buzztime, Inc., which conflicts with the request metadata naming Ernexa Therapeutics Inc.
- Track cash usage, financing needs, and whether management’s 12-month liquidity assessment remains supportable.
- Check compliance with each East West Bank adjusted EBITDA threshold and all other loan covenants.
- Assess Buffalo Wild Wings concentration, venue-count trends, and the progress and commercial impact of the 31-location rollout.
- Monitor NYSE American compliance-plan milestones and the risk of delisting.
- Review the effect of the single-source equipment supply and the timing and profitability of lease installations.