Business Context and Reporting Period
This Form 8-K is filed by bBooth, Inc. (referred to in metadata as TON Strategy Co) for the reporting period ending February 14, 2017. The company is incorporated in Nevada and headquartered in Los Angeles, California. The filing primarily addresses a material definitive agreement for financing and a change in the company's principal independent registered public accounting firm.
Key Financial Metrics and Obligations
- Financing Raised: The company closed the first tranche of a Securities Purchase Agreement for $300,000 in cash proceeds.
- Securities Issued: 315,000 shares of Series A Convertible Preferred Stock were issued with a stated value of $315,000 ($0.0001 par value).
- Debt Obligation: The preferred stock carries a mandatory redemption obligation of $300,000 plus accrued origination fees and dividends.
- Redemption Terms: Redemption payments are scheduled in five equal weekly installments commencing approximately 180 days after the closing date. The company has the option to pay four of the five installments in cash or common stock; one installment must be paid in common stock valued via a VWAP formula.
- Liquidity and Going Concern: The filing notes that the previous auditor issued reports for fiscal years 2014 and 2015 indicating substantial doubt about the company's ability to continue as a going concern due to operating losses and working capital deficiencies.
Material Changes Versus Prior Period
The filing does not provide comparative financial statements or revenue/profit metrics for the current period versus the prior period. The primary material changes reported are:
- Capital Structure: Authorization and issuance of a new class of equity (Series A Convertible Preferred Stock).
- Accounting Firm: Dismissal of Anton & Chia, LLP as the principal accountant and appointment of Weinberg & Company, P.A. on February 15, 2017.
Guidance, Outlook, and Risks
Management Commentary and Outlook: The company has secured immediate capital through the first tranche of the financing agreement. Future tranches may be closed at times and terms agreed upon by the purchaser and the company.
Risks and Contingencies:
- Going Concern Risk: The previous auditor's reports highlighted substantial operating losses and dependence on future financing to fund ongoing operations.
- Redemption Risk: The company faces a mandatory cash or stock outflow obligation starting approximately 180 days post-closing.
- Accounting Transition: The change in auditors occurred without any reported disagreements on accounting principles or practices during the relevant period.
Important Facts for Investor Verification
- Verify the full terms of the Securities Purchase Agreement (Exhibit 10.1) regarding the specific calculation of origination fees and dividends.
- Confirm the company's current cash position to assess its ability to meet the mandatory redemption payments starting in approximately 180 days.
- Review the letter from the former auditor, Anton & Chia, LLP (Exhibit 16.1), to ensure no undisclosed disagreements exist.
- Monitor the status of subsequent tranches under the Purchase Agreement to determine if additional capital will be raised.