Business context and reporting period
Entity mismatch: The supplied filing is NTN Buzztime, Inc.’s Form 10-Q for the quarter ended March 31, 2013; it does not identify Ernexa Therapeutics Inc. Verify that this is the intended filing before relying on the summary.
NTN Buzztime provides interactive games and marketing services to hospitality venues, earning revenue mainly from subscriptions and advertising. Its games were available at 3,436 network subscriber locations at quarter-end, down from 3,868 a year earlier. The unaudited financial statements cover the three months ended March 31, 2013, with comparison to the same 2012 quarter.
Financial performance and liquidity
| Metric | Q1 2013 | Q1 2012 / prior date |
|---|---|---|
| Revenue | $6.116 million | $6.066 million |
| Gross profit / margin | $4.116 million / 67% | $4.449 million / 73% |
| Operating loss | $366,000 | $997,000 |
| Net loss | $369,000; $0.01 per share | $1.045 million; $0.02 per share |
| EBITDA, non-GAAP | $435,000 | $(293,000) |
| Operating cash flow | $166,000 | $255,000 |
| Investing cash flow | $(484,000) | $(712,000) |
| Cash and cash equivalents | $2.324 million | $2.721 million at Dec. 31, 2012 |
| Working capital | $809,000 | $841,000 at Dec. 31, 2012 |
Total assets were $11.832 million and total liabilities were $4.327 million at March 31, 2013. Current assets of $3.811 million compared with current liabilities of $3.002 million. The company reported approximately $119,000 of capital-lease obligations and $60,000 outstanding on an equipment note payable. Management said cash, operating funds and prior rights-offering proceeds should cover operating needs for at least 12 months, while cautioning that additional financing, if needed, may not be available on acceptable terms.
Material changes and management commentary
- Revenue increased 1%, reflecting sales-type lease and advertising revenue, partly offset by lower subscription revenue. Subscription revenue was affected by fewer average sites, despite higher average revenue per unit.
- Direct costs rose 24% to $2.0 million, attributed mainly to sales-type lease costs, license fees and higher depreciation and amortization. Gross margin declined six percentage points.
- Selling, general and administrative expense fell 19% to $4.283 million, primarily due to lower payroll, headcount and incentive compensation, as well as lower selling, marketing and travel costs.
- Operating and net losses narrowed substantially year over year. Other income also improved, partly due to foreign-exchange gains and lower interest expense.
- Cash declined $397,000 during the quarter. Operating cash generation was lower than in the prior-year quarter; investing outflows included $361,000 of software development expenditures and $123,000 of capital expenditures. The prior-year financing inflow included $2.310 million of rights-offering proceeds.
- The company acquired substantially all assets of Interactive Hospitality in December 2012 and described it as a digital marketing business serving hospitality clients. No specific Q1 contribution to results is quantified in the supplied text.
Outlook, risks and unusual items
- No specific revenue, earnings or margin guidance is provided. Management’s stated liquidity expectation is coverage of operating cash requirements for at least the next 12 months.
- The company recorded a $65,000 impairment loss after abandoning software projects deemed no longer strategically suitable or less marketable.
- Management considered goodwill impairment indicators and reported none at March 31, 2013. The filing also says adoption of a recent comprehensive-income accounting update had no material impact.
- Sales-tax inquiries were ongoing. The company recorded a net liability of $29,000, and management assessed the possibility of paying all or part of the assessments as reasonably possible.
- Buffalo Wild Wings and its franchisees accounted for approximately 24% of Q1 revenue, versus 22% a year earlier. The company also disclosed dependence on suppliers for Classic and Next-Gen playmakers and related equipment, with no current alternative sources; a supplier change could delay supply.
- Foreign-exchange movements may affect results; the company said it does not hedge these exposures. It reported no material change to previously disclosed risk factors, no legal proceedings, effective disclosure controls, and no material quarterly change in internal control over financial reporting.
Important facts to verify
- Confirm the filing issuer and period: this document is for NTN Buzztime, Inc., not Ernexa Therapeutics Inc.
- Review the source filing and notes for the sales-tax assessments, supplier arrangements, and any developments after March 31, 2013.
- Assess whether cash generation and available liquidity support the company’s stated 12-month operating-needs outlook, given the quarter’s cash decline and investment spending.
- Check the company’s subsequent filings for subscriber trends, the economics of the Interactive Hospitality acquisition, and progress on Next-Gen products and software development.