Business context and reporting period
The supplied filing is NTN Buzztime, Inc.’s Form 10-K for the fiscal year ended December 31, 2014, filed March 27, 2015. It does not identify Ernexa Therapeutics Inc.; investors should verify the company and filing match their intended research. This is an annual report, not a standalone fourth-quarter report.
NTN Buzztime operated an interactive entertainment and marketing platform for hospitality venues, with its newer BEOND tablet platform and legacy Classic service. It reported approximately 2,956 subscribing venues at year-end, about 37% using BEOND. Buffalo Wild Wings and its franchisees accounted for 44% of 2014 revenue.
Financial results and liquidity
| Metric | FY 2014 | FY 2013 |
|---|---|---|
| Revenue | $26.046 million | $23.749 million |
| Gross profit / margin | $14.898 million / 57% | $16.063 million / 68% |
| Operating loss | $4.742 million | $1.119 million |
| Net loss | $5.030 million | $1.053 million |
| Net loss per share | $0.06 | $0.01 |
| Operating cash flow | $(6.385) million | $1.741 million |
| Investing cash flow | $(1.901) million | $(2.697) million |
| Financing cash flow | $10.081 million | $3.750 million |
- Revenue rose 10%, primarily due to sales-type equipment lease revenue, which increased $3.591 million. Subscription revenue fell $1.804 million to $18.003 million, mainly because average subscriber site count declined.
- Direct costs increased 45% to $11.148 million, largely from BEOND equipment costs. Gross margin fell 11 percentage points, reflecting the lower margins on equipment leases.
- SG&A increased 13% to $18.367 million, including higher payroll and related costs. Software impairment was $668,000, versus $230,000 in 2013.
- EBITDA, a company-presented non-GAAP measure, was a loss of $1.986 million, compared with positive EBITDA of $1.865 million in 2013.
- Cash and cash equivalents were $7.185 million at year-end, versus $5.455 million a year earlier; working capital was $7.779 million. Cash from financing included $6.369 million of net proceeds from an April 2014 public offering.
- Notes payable totaled $5.319 million, including $2.176 million current and $3.143 million long-term. The company also reported $58,000 of capital lease obligations.
Material changes and notable items
- Subscriber sites declined to 2,956 from 3,204: 350 installations were offset by 598 terminations. Subscription revenue likewise declined.
- BEOND tablet-case assembly problems delayed installations. Agreements affected by the backlog were valued at about $1.416 million at December 31, 2014 and $2.723 million as of March 24, 2015; these figures are agreement values, not recognized revenue. Management said it believed the issue was resolved and expected to eliminate the backlog during 2015.
- Buffalo Wild Wings-related revenue rose to $11.438 million from $7.648 million. The related year-end receivable was $1.558 million, which the company said was collected by February 2015.
- The April 2014 public offering issued 12.765 million common shares at $0.55 per share, generating approximately $6.369 million net proceeds.
- Management reported effective disclosure controls and internal control over financial reporting at year-end. The independent auditor issued an unqualified opinion on the financial statements.
Outlook, risks, and contingencies
- Management believed cash on hand and remaining credit-facility availability would cover operating requirements and debt obligations for at least the next 12 months, while also evaluating additional financing. Operating cash use of $6.385 million contrasts with that liquidity outlook.
- Management’s strategy centered on migrating Classic venues to BEOND, acquiring customers, growing player engagement and premium consumer products, and improving retention. The filing provides no quantified revenue, earnings, or margin guidance.
- Key risks include continued losses, cash needs and possible further dilution; customer concentration in Buffalo Wild Wings; declining subscriber counts; competition and rapid technology change; and dependence on single sources for BEOND tablets, equipment components, and case assembly.
- Sales-tax inquiries were ongoing. The company recorded a net liability of $17,000, describing payment of some or all assessments as reasonably possible. It also reported a $108,000 tax refund received in January 2015 and a $25,000 liability reversal.
- The company accrued $204,000 for probable repairs to BEOND cases and said additional repair costs could arise. It reported no material litigation pending or threatened.
- Federal and state net operating loss carryforwards were approximately $59.663 million and $25.461 million, respectively; substantially all related deferred tax assets had a valuation allowance. The company warned that expiration and ownership-change limitations could restrict use.
- Other material risks include NYSE MKT continued-listing requirements, potential dilution from outstanding options and warrants, cybersecurity, regulatory requirements for games and consumer payments, and management turnover.
Most important facts for investors to verify
- Confirm the filing’s registrant is NTN Buzztime, Inc. (ticker NTN), not Ernexa Therapeutics Inc.
- Assess whether BEOND installations and the reported backlog translated into active, paying sites and subscription growth during 2015.
- Track subscriber losses, Buffalo Wild Wings’ revenue share, and the concentration and collectability of related receivables.
- Review subsequent operating cash flow, financing availability, debt repayment capacity, and any additional equity issuance.
- Check whether equipment repair costs, sales-tax assessments, listing compliance, or other disclosed risks changed after year-end.