Business context and reporting period
This is bBooth, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2016. The filing identifies the registrant as bBooth, Inc.; it does not identify TON Strategy Co. The company was shifting from mall-based recording kiosks and talent-discovery apps toward NOTIFI, a cloud-based enterprise messaging and communications platform. The filing reports no revenue in either comparative quarter.
Key financial metrics
| Metric | Q1 2016 | Q1 2015 / prior date |
|---|---|---|
| Revenue | $0 | $0 |
| Operating loss | $545,340 | $1,574,473 |
| Net loss | $697,280 | $1,577,882 |
| Basic and diluted loss per share | $0.01 | $0.03 |
| Cash used in operating activities | $275,972 | $1,386,415 |
| Cash at period end | $41,973 | $103,019 at Dec. 31, 2015 |
| Total assets | $133,896 | $239,814 at Dec. 31, 2015 |
| Total liabilities | $2,873,913 | $2,582,204 at Dec. 31, 2015 |
| Stockholders’ deficit | $2,740,017 | $2,342,390 at Dec. 31, 2015 |
Margins are not meaningful because the company had no revenue. At March 31, current assets were $68,849 and current liabilities were $1,360,905; management reported a $1,292,056 working capital deficit. Notes payable included $725,000 classified as current and $1,513,008 of related-party notes, net of discount. Most third-party notes were due on demand or expected to mature within 12 months. Related-party notes carried 12% interest; the CEO held a senior security interest over substantially all company assets under a secured note.
Material changes versus the prior comparable period
- Net loss narrowed by $880,602, and operating loss narrowed by $1,029,133, primarily as general and administrative expense fell by $955,295 and research and development expense fell by $73,838.
- Management attributed lower expenses to reduced headcount and activity and the move away from displaying kiosks in malls and other locations. General and administrative expense was $545,340, versus $1,500,635 in Q1 2015.
- Interest expense rose to $151,940 from $3,409, reflecting higher outstanding debt and $79,370 of amortization of the discount on related-party notes.
- Operating cash use improved by $1,110,443 year over year. Financing provided $214,926, including $132,480 in stock subscriptions and $82,446 of additional CEO borrowing; cash nevertheless declined by $61,046 during the quarter.
- Compared with Dec. 31, 2015, cash fell by $61,046, total liabilities increased by $291,709, and related-party notes, net, increased by about $161,816.
Outlook, risks, contingencies and unusual items
- Funding and going concern: Management expected operating expenses to exceed revenue over the next 12 months and said additional debt or equity financing was needed to continue operations. It cautioned there was no assurance of financing or future profitability. The statements were prepared on a going-concern basis.
- Subsequent financing: On April 4, 2016, the company sold 5,722,222 shares at $0.045 for $257,500 gross proceeds. On that date it also issued related-party and lender notes, including a $291,271 secured convertible note to CEO Rory Cutaia and a $680,268 unsecured convertible note to Oceanside Strategies; these carried 12% interest and included conversion rights and warrants. The company also issued a $121,875 convertible note for the CEO’s unpaid salary.
- Other subsequent equity: The company issued 500,000 shares to a director for services on April 4, and reported grants of 600,000 shares each to two advisory-board members on May 2. Common shares outstanding were 63,859,000 at March 31 and 71,281,222 as of May 16, 2016.
- Controls: Management concluded disclosure controls and procedures were not effective as of March 31, 2016. It reported no material change in internal control over financial reporting during the quarter.
- Other risks: The filing highlights financing and dilution risk, technology and product acceptance, cybersecurity and system reliability, third-party dependence, intellectual-property claims, volatile and limited OTC trading, and concentrated insider ownership. No material legal proceedings were reported.
- Guidance: The filing provides no quantified revenue, earnings or cash-flow guidance. Management’s stated near-term outlook was that expenses would continue to exceed any revenue generated.
Important facts for investors to verify
- Confirm the correct issuer: this filing is for bBooth, Inc., notwithstanding the request metadata naming TON Strategy Co.
- Review the company’s ability to secure funding, near-term note maturities, and the terms, collateral, conversion rights and warrants attached to the April 2016 financings.
- Assess whether NOTIFI can be launched and generate revenue; the filing reports zero revenue in both quarters and no quantified launch or sales targets.
- Follow remediation of ineffective disclosure controls and the company’s financial reporting capabilities.
- Reconcile share counts and potential dilution from the April and May share issuances, subscriptions, options, warrants and convertible debt.