Business Context and Reporting Period
The provided filing is a Form 10-Q for Brick Top Productions, Inc., not Fubotv Inc. It covers the quarter and six months ended June 30, 2013, and was filed August 14, 2013. Brick Top was a Florida-incorporated development-stage company focused on producing and commercializing film content, including the “Doorman” pilot, through its 60%-owned subsidiary York Productions, LLC.
The filing states that the interim financial statements are unaudited and prepared under U.S. GAAP. The company had 29,827,000 common shares outstanding as of August 8, 2013.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2013 | Six Months Ended June 30, 2013 | Comparable 2012 Period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $42,716 | $64,291 | $38,816 and $49,350, respectively |
| Net loss attributable to company shareholders | $42,692 | $65,259 | $38,816 and $49,350, respectively |
| Net loss per basic and diluted share | $0.00 loss | $0.00 loss | $0.00 loss |
| Net cash used in operating activities | Not separately provided | $90,447 | $39,744 |
| Net cash provided by financing activities | Not separately provided | $135,800 | $(202) |
- Cash increased to $48,507 at June 30, 2013, from $3,154 at December 31, 2012.
- Total assets were $347,474, including $292,931 of capitalized pilot costs, $48,507 of cash, and $3,822 of net computer equipment.
- Total liabilities were $221,530, consisting primarily of $159,933 in accrued expenses and $61,597 in advances from stockholders.
- Stockholders’ equity was $125,997; total equity including non-controlling interest was $125,944.
- The accumulated deficit during the development stage was $1,033,118.
- No debt facilities or third-party financing commitments were disclosed. Stockholder advances were unsecured, non-interest bearing, and due on demand.
- No income tax expense, interest paid, or income taxes paid were reported for the six months.
Material Changes Versus the Prior Comparable Period
- Revenue remained at zero in both the quarter and six-month period.
- Six-month operating expenses increased to $64,291 from $49,350, while the reported net loss increased to $65,259 from $49,350.
- Quarterly operating expenses increased to $42,716 from $38,816, while the reported net loss increased to $42,692 from $38,816.
- Operating cash use increased materially to $90,447 from $39,744.
- Financing shifted from a $202 cash outflow in the prior-year six-month period to $135,800 of cash inflow, primarily from $135,000 of common-stock proceeds and $800 of stockholder advances.
- Common shares outstanding increased from 29,692,000 at December 31, 2012, to 29,827,000 at June 30, 2013. The company sold 135,000 shares for $135,000 during the first six months and 50,000 shares for $50,000 during the second quarter.
- General and administrative expenses increased, which management attributed to efforts to enhance corporate visibility in the film industry.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
- Management stated that future revenue depends on successfully marketing the “Doorman” pilot and completing new viable acquisitions of film rights. No quantified revenue or earnings guidance was provided.
- The company reported substantial doubt about its ability to continue as a going concern because of recurring losses, accumulated deficit, negative operating cash flow, and insufficient cash to support daily operations.
- Management expects to seek additional capital through equity offerings and loan transactions, but stated that no third-party financing was currently available and that officers and shareholders had made no commitment to provide additional funding.
- The company had $292,931 of capitalized pilot costs related to “The Doorman.” Amortization is expected to begin when the film is released and revenue is recognized. The recoverability of these costs is a significant risk.
- The CEO had a contractual annual salary of $150,000 but waived future base salary beginning October 1, 2011, until further notice. Previously unpaid salary had been accrued until operations generated revenue or additional capital was raised.
- Management stated that there were no legal proceedings, no off-balance-sheet arrangements, and no reportable subsequent events.
- Disclosure controls and procedures were determined to be not effective as of June 30, 2013. The filing reports no other material change in internal control over financial reporting during the quarter.
- The filing contains numerical inconsistencies between the financial statements and the Management’s Discussion and Analysis. For example, MD&A reports six-month operating expenses of $47,926, total liabilities of $204,153, and cumulative operating cash use of $808,088, while the financial statements report $64,291, $221,530, and $858,087, respectively. The filing text does not clearly reconcile these differences.
Most Important Facts for Investors to Verify
- Verify the issuer identity: the supplied filing is for Brick Top Productions, Inc., not Fubotv Inc.
- Reconcile the conflicting financial figures between the audited-format financial statements and MD&A, particularly expenses, liabilities, losses, working capital, and cumulative cash flows.
- Assess the company’s going-concern risk, near-term cash runway, and ability to raise additional capital.
- Evaluate the recoverability and commercial prospects of the $292,931 capitalized “Doorman” pilot costs, given that the company had generated no revenue.
- Review the $159,933 accrued expenses and $61,597 stockholder advances, including payment terms and whether additional related-party funding is available.
- Investigate the stated ineffectiveness of disclosure controls and any remediation undertaken after the reporting date.