Business Context and Reporting Period
The submitted Form 10-Q is for Brick Top Productions, Inc., not Fubotv Inc. It covers the quarter and nine months ended September 30, 2012, with comparative periods ended September 30, 2011. Brick Top was a development-stage company focused on producing motion pictures and had not commenced its planned principal operations. Its majority-owned subsidiary was York Productions, LLC, which held rights related to the “Doorman” pilot.
Financial Performance and Position
| Metric | Three Months Ended September 30, 2012 | Nine Months Ended September 30, 2012 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $58,865 | $108,215 |
| Net loss attributable to common stockholders | $58,865 | $108,215 |
| Net loss per basic and diluted share | $0.00 | $0.01 |
| Net cash used in operating activities | Not separately provided | $84,080 |
Revenue remained zero, so gross and operating margins are not meaningful. At September 30, 2012, cash was $4,277, total assets were $312,636, total liabilities were $236,743, and total equity was $75,893. Current assets were $11,881 compared with current liabilities of $236,743, resulting in negative working capital of approximately $224,862.
Assets included $292,931 of capitalized pilot costs, $5,610 of net computer equipment, and $7,604 of prepaid expenses. Liabilities consisted primarily of $180,946 of accrued expenses and $55,797 of unsecured, non-interest-bearing advances from the chairman, chief executive officer, and significant stockholder. The filing does not report conventional interest-bearing debt.
Investing cash use was $840 for the nine months, while financing activities provided $34,797, including $35,000 from the issuance of common stock and a $203 reduction in stockholder advances. Cash declined by $50,123 from December 31, 2011.
Material Changes Versus Prior Comparable Period
- Third-quarter net loss decreased to $58,865 from $90,358 in the prior-year quarter.
- Nine-month net loss decreased to $108,215 from $286,319 in the prior-year period.
- Nine-month operating cash use improved to $84,080 from $135,000.
- Nine-month operating expenses declined to $108,215 from $286,319, primarily reflecting no compensation expense in 2012 versus $200,000 in the prior-year nine-month period.
- Cash fell to $4,277 from $54,400 at December 31, 2011, despite the September 2012 equity issuance.
- Accrued expenses increased to $180,946 from $151,022, while total equity declined to $75,893 from $149,108.
- The company issued 35,000 common shares for $35,000 to two accredited investors during the quarter, increasing shares outstanding to 29,678,500.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
Management stated that future revenue depends on effectively marketing the “Doorman” pilot and acquiring additional viable film rights. No quantitative revenue or earnings guidance was provided.
The financial statements disclose substantial doubt about the company’s ability to continue as a going concern. Management indicated that available cash may not support daily operations and that continued operations depend on implementing the business plan, generating revenue, and raising additional capital. The company had no third-party financing commitments, and management stated that officers and shareholders had not committed to provide additional financing.
The company reported recurring operating losses and an accumulated development-stage deficit of $934,713. Capitalized pilot costs will not be amortized until the film is released and revenue is recognized; the carrying value remains subject to recoverability and impairment assessments.
The CEO waived future base salary beginning October 1, 2011, but previously unpaid salary had been accrued. A non-cancelable office lease beginning November 1, 2012 carried disclosed future minimum payments of $2,988 for 2013. Management reported no off-balance-sheet arrangements and no reportable subsequent events.
Disclosure controls and procedures were determined to be not effective as of September 30, 2012. The filing reported no applicable legal proceedings or risk-factor updates in Part II.
Important Facts for Investors to Verify
- Confirm the issuer identity: the filing text identifies Brick Top Productions, Inc., while the request metadata identifies Fubotv Inc.
- Assess the going-concern disclosure, including only $4,277 of cash, negative working capital, recurring losses, and dependence on additional financing.
- Evaluate the recoverability of the $292,931 capitalized “Doorman” pilot costs given the absence of revenue and the lack of commenced principal operations.
- Review the nature, aging, and settlement expectations of $180,946 in accrued expenses and $55,797 in related-party advances.
- Investigate the causes and remediation status of ineffective disclosure controls and procedures.
- Verify the September 2012 issuance of 35,000 shares under the Section 4(2) exemption and its effect on dilution and liquidity.