Business context and reporting period
The supplied filing is NTN Buzztime, Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2014. This does not match the request metadata identifying Ernexa Therapeutics Inc.; verify the intended company before relying on this summary.
NTN Buzztime provides interactive entertainment and marketing services to hospitality venues, including subscriptions, equipment leases, trivia events and advertising. It reported 3,103 subscriber venues at June 30, 2014. The company was transitioning venues from its Classic system to its BEOND tablet platform and expected to introduce paid consumer products during 2014.
Key financial results
Amounts below are in U.S. dollars; financial statement figures are rounded to millions unless otherwise noted.
| Metric | Q2 2014 | Q2 2013 | Six months 2014 | Six months 2013 |
|---|---|---|---|---|
| Revenue | $6.873 million | $5.532 million | $13.291 million | $11.648 million |
| Gross margin | $4.067 million; 59% | $4.047 million; 73% | $7.955 million; 60% | $8.163 million; 70% |
| Operating loss | $1.300 million | $0.115 million | $1.954 million | $0.481 million |
| Net loss | $1.348 million | $0.099 million | $1.997 million | $0.468 million |
| EBITDA, non-GAAP | $(0.621) million | $0.605 million | $(0.551) million | $1.040 million |
For the six months, operating cash flow was negative $1.990 million, investing cash flow was negative $0.780 million, and financing cash flow was positive $8.478 million. Cash increased to $11.164 million from $5.455 million at December 31, 2013. Working capital was $10.081 million.
At June 30, notes payable totaled approximately $3.719 million, including $1.454 million current and $2.265 million long-term; capital lease obligations totaled $0.071 million. The company had drawn approximately $4.622 million of a $5.7 million equipment credit facility, leaving approximately $1.078 million of stated borrowing capacity. Total liabilities were $8.860 million.
Material changes versus comparable periods
- Q2 revenue rose 24% year over year and first-half revenue rose 14%, primarily from BEOND equipment leases. Subscription revenue fell $0.404 million in Q2 and $0.952 million for the first half, associated with fewer average subscriber venues.
- Lower-margin equipment lease revenue reduced gross margin percentage to 59% in Q2 from 73%, and to 60% for the first half from 70%. First-half gross profit fell despite higher revenue.
- Net loss widened to $1.348 million in Q2 and $1.997 million for the first half. First-half operating cash flow shifted from positive $0.311 million to negative $1.990 million.
- The company completed an April public offering of 12.765 million shares for approximately $6.369 million net proceeds. Shares outstanding increased to 91.663 million at June 30 from 78.649 million at year-end; the filing reported 91.722 million outstanding as of August 11.
- Subscriber venues declined to 3,103 from 3,352 a year earlier. Buffalo Wild Wings company-owned and franchised venues generated approximately $3.1 million of Q2 revenue and $5.746 million in the first half.
Outlook, risks and unusual items
- Management stated that cash, offering proceeds and remaining credit-facility availability should fund operating needs and debt obligations for at least the next 12 months. It cautioned that additional financing might be needed if cash proves insufficient, and that acceptable financing may not be available.
- Management expected equipment lease revenue and related one-time equipment costs to fluctuate as venues convert to BEOND and to decrease thereafter. The filing did not provide numerical revenue or earnings guidance.
- The company recorded software impairment charges of $0.639 million in Q2 and $0.661 million for the first half after abandoning projects judged no longer strategically suitable or less marketable.
- Customer concentration is material: Buffalo Wild Wings-related venues accounted for about 45% of Q2 revenue and 43% of first-half revenue, based on the filing’s reported amounts.
- Key equipment depends on unaffiliated suppliers, and the company disclosed no alternative sources for BEOND tablets, tablet playmaker equipment or Classic playmakers. Sales-tax inquiries were ongoing; a $27,000 net liability was recorded, with payment considered reasonably possible.
- The company cited foreign-exchange exposure and said it does not hedge. It reported no material changes to previously disclosed risk factors. Management concluded disclosure controls were effective; no material change in internal control over financial reporting was reported.
Important facts for investors to verify
- Confirm the filing’s issuer is NTN Buzztime, Inc., not Ernexa Therapeutics Inc., and confirm the intended reporting period.
- Review the composition, timing and repeatability of BEOND equipment-lease revenue, its associated costs, and the expected trend after venue conversions.
- Assess whether subscription declines, lower gross margins and operating cash outflows continue, and whether management’s 12-month liquidity expectation remains supportable.
- Verify credit-facility terms, collateral and repayment requirements, remaining availability, and the effect of additional borrowing or equity issuance on shareholders.
- Monitor Buffalo Wild Wings customer concentration, equipment-supplier availability, software impairment exposure and resolution of sales-tax inquiries.