Filing summary: bBooth, Inc. — Form 10-Q
Entity and period: The supplied filing is for bBooth, Inc., not TON Strategy Co. It covers the quarter and nine months ended September 30, 2016; the financial statements are unaudited.
Business context
bBooth describes a transition from mall-based recording-studio kiosks and related apps to bNotifi, a cloud-based SaaS platform for CRM, lead generation, messaging and social engagement. The filing reports very limited revenue and says the company is in the early stages of its business.
Financial results and liquidity
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue | 2016: $16,243; 2015: $0 | 2016: $47,836; 2015: $0 |
| Operating expenses | 2016: $921,564; 2015: $2,522,202 | 2016: $2,597,919; 2015: $5,062,927 |
| Operating loss | 2016: $905,321; 2015: $2,522,202 | 2016: $2,550,083; 2015: $5,062,927 |
| Interest expense, net | 2016: $185,145; 2015: $25,961 | 2016: $525,316; 2015: $68,975 |
| Net loss | 2016: $1,090,466; 2015: $2,548,163 | 2016: $3,075,399; 2015: $5,131,902 |
The filing does not present gross profit or a gross margin. For the nine months, operating cash use was $1,320,202, investing cash use was $2,494, and financing provided $1,381,070. Cash increased $58,374 to $161,393.
At September 30, 2016, current assets were $270,670 and current liabilities were $3,063,953, a working-capital deficit of approximately $2.79 million. Total liabilities were $3,063,953; stockholders’ deficit was $2,721,127. Current debt included $125,000 of notes payable, $1,340,174 of related-party notes net of discount, and $934,647 of convertible notes net of discount.
Changes versus prior comparable periods
- Revenue began to appear in 2016: $16,243 for the quarter and $47,836 year to date, versus none in 2015.
- Net loss narrowed year over year, alongside lower general and administrative expense and, for the quarter, lower research and development expense. The 2015 results included a $1,104,327 intangible-asset impairment charge; there was no such charge in 2016.
- Interest expense increased substantially, which management attributed to additional borrowings and amortization of debt discounts.
- Cash from operations improved year over year, but remained negative. Financing continued to rely on stock subscriptions and borrowing.
Outlook, risks and unusual items
- Going concern: Management says continued operations depend on obtaining additional debt or equity financing until cash flows become sufficient. It gives no assurance of future profitability or financing availability and says operating expenses may exceed revenue in the next three months.
- Debt and related parties: The CEO and majority shareholder provided or held significant 12% interest-bearing debt. Certain notes were secured by substantially all company assets, and debt instruments included conversion rights and warrants. A $680,268 Oceanside note was due December 4, 2016.
- Equity and dilution: The company issued 32,135,556 shares through stock subscriptions for net proceeds of $1,464,850 during the nine months and repurchased 8,311,324 shares for $166,226. It reported 92,644,899 shares outstanding at quarter-end and 92,819,899 as of November 12, 2016. Options and warrants may add substantial dilution.
- Controls: Management concluded disclosure controls and procedures were not effective as of September 30, 2016. It reported no material changes in internal control over financial reporting during the quarter.
- Other risks: The filing highlights capital needs, competition and changing consumer preferences, cybersecurity and technology-service disruptions, intellectual-property challenges, and volatile, thinly traded OTC shares. No material legal proceedings were reported.
- Subsequent event: On October 3, 2016, the company agreed to pay a consultant $2,500 and issue 175,000 restricted shares for services through December 31, 2016.
- Guidance: No specific revenue, earnings or cash-flow guidance is provided. Management discusses financing needs and business plans, including possible mergers or acquisitions.
Most important facts to verify
- Confirm the intended issuer: this filing is for bBooth, Inc., not TON Strategy Co.
- Assess near-term funding capacity, liquidity, and the status and repayment or refinancing of debt due on demand or in 2016–2017.
- Review the going-concern uncertainty and the company’s ability to convert its SaaS platform into meaningful recurring revenue.
- Examine related-party debt terms, collateral, conversion rights, warrants, and potential dilution from outstanding securities.
- Follow up on remediation of ineffective disclosure controls and procedures.