Filing Overview
Issuer and period: The submitted Form 10-K is for Brick Top Productions, Inc., not Fubotv Inc. It covers the fiscal year ended December 31, 2013, with comparative figures for 2012. The filing was signed April 15, 2014.
The company finances, produces and distributes television and film content. In December 2013, it acquired a 75% interest in S&G Holdings, Inc., doing business as High Five Entertainment, an Emmy Award-winning television production company.
Financial Performance and Position
| Metric | 2013 | 2012 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $428.7 million | $141.4 million |
| Loss from operations | $428.7 million | $141.4 million |
| Net loss before non-controlling interest | $430.0 million | $141.4 million |
| Net loss attributable to Brick Top stockholders | $428.7 million | $141.4 million |
| Basic and diluted loss per share | $0.01 | $0.00 |
| Net cash used in operating activities | $131.4 million | $103.7 million |
| Net cash used in investing activities | $206.2 million | $0.8 million |
| Net cash provided by financing activities | $470.1 million | $53.3 million |
| Cash at year-end | $135.6 million | $3.2 million |
Note: The filing presents these amounts with dollar signs and appears to state actual dollar amounts; the source text contains formatting inconsistencies. The figures above preserve the filing’s stated values without scaling.
- Total assets were $475.8 million, including $319.2 million of goodwill and no remaining capitalized pilot costs.
- Total liabilities were reported as $407.9 million, including $149.0 million of accrued payroll, $60.8 million of advances from related parties, a $50.0 million S&G acquisition payable and a $55.3 million note payable.
- Working capital was negative $257.5 million.
- Stockholders’ equity attributable to Brick Top was $97.6 million; total equity, including non-controlling interests, was $68.2 million.
- No income tax provision was recorded. Federal net operating loss carryforwards were approximately $1.4 million, with a full valuation allowance against the related deferred tax asset.
Material Changes Versus 2012
- Revenue remained zero, while operating expenses increased substantially, primarily because of a $292.9 million impairment charge related to the “Nick The Doorman” pilot.
- Net loss attributable to Brick Top stockholders increased from $141.4 million to $428.7 million.
- Operating cash usage increased from $103.7 million to $131.4 million, while investing cash usage increased materially because of the High Five acquisition and related investment.
- Financing cash inflows increased to $470.1 million, principally from the sale of 422,500 common shares for $422.5 million and a $47.5 million capital contribution.
- The December 2013 acquisition added $319.2 million of goodwill and introduced non-controlling interests associated with the 25% of High Five not owned by Brick Top.
- Capitalized pilot costs of approximately $292.9 million were fully impaired at year-end.
Outlook, Risks and Unusual Items
- Management stated that additional capital is required to implement its business plan. The company had no third-party financing commitments and no agreement from officers or shareholders to provide additional funding.
- The acquisition agreement requires additional capital contributions of $365,000 to High Five during the first nine months of 2014. Failure to make the contributions could require the company to return certain acquired shares.
- The company’s independent accountant included a going-concern emphasis, stating that recurring losses, accumulated deficit and negative operating cash flow raise substantial doubt about the company’s ability to continue as a going concern.
- Management’s ability to continue depends on generating revenue and raising additional capital. The filing states that no assurance exists that financing can be obtained on acceptable terms.
- High Five’s president, Martin Fischer, received a five-year employment agreement with an initial annual salary of $144,000, potential annual bonus of up to $100,000, a $500 monthly automobile allowance and an option to purchase approximately 1.49 million shares.
- Subsequent to year-end, the CEO loaned the company $150,000 under a 5% promissory note maturing October 1, 2015.
- Disclosure controls and internal control over financial reporting were reported as ineffective, primarily because the company had only two employees and lacked segregation of duties.
- The company faces substantial competition from major television networks and film studios with significantly greater financial resources.
- The filing does not provide a formal revenue or earnings guidance range.
Investor Verification Priorities
- Verify the issuer identity: the supplied filing is for Brick Top Productions, Inc., not Fubotv Inc.
- Confirm the units and formatting of the reported financial statements, particularly the apparently inconsistent presentation of dollar amounts.
- Review the $292.9 million pilot-cost impairment and the valuation support for $319.2 million of goodwill recorded in the High Five acquisition.
- Assess available liquidity against the required $365,000 High Five capital contributions, accrued payroll, related-party advances and other current liabilities.
- Determine whether the company obtained additional financing after the filing date and whether it generated any operating revenue.
- Review the going-concern uncertainty and the remediation status of ineffective disclosure and internal controls.
- Evaluate dilution from the 2014 incentive plan, Fischer’s approximately 1.49 million share option and other potential equity issuances.