Business Context and Reporting Period
The filing is a Form 10-Q for the quarter ended March 31, 2013, filed May 15, 2013. The filing identifies the registrant as Brick Top Productions, Inc., not Fubotv Inc.; this issuer-name discrepancy should be verified. Brick Top was a Florida development-stage company focused on producing motion pictures and held a 60% interest in York Productions, LLC. The company had not commenced its planned principal operations of producing motion pictures.
The financial statements are unaudited and consolidate York Productions, LLC. The company’s primary project was the “Doorman” pilot, with $292,931 of capitalized pilot costs at March 31, 2013.
Key Financial Metrics
| Metric | Three Months Ended March 31, 2013 | Three Months Ended March 31, 2012 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $21,575 | $10,534 |
| Interest expense | $1,012 | $0 |
| Net loss attributable to stockholders | $22,567 | $10,534 |
| Net loss per common share | $0.00 loss, basic and diluted | $0.00 loss, basic and diluted |
| Net cash used in operating activities | $47,684 | $19,576 |
| Net cash provided by financing activities | $85,800 | $202 used |
| Ending cash | $41,270 | $34,622 |
No meaningful gross or operating margin was reported because the company generated no revenue. Total assets were $338,594 at March 31, 2013, including $292,931 of capitalized pilot costs and $41,270 of cash. Total liabilities were $219,934, consisting primarily of $158,337 of accrued expenses and $61,597 of advances from stockholders. Management reported negative working capital of $178,664.
Accumulated deficit during the development stage was $990,426. The company had no reported long-term debt, but stockholder advances were unsecured, non-interest-bearing and due on demand. No off-balance-sheet arrangements were reported.
Material Changes Versus the Prior Comparable Period
- Revenue remained at $0.
- Operating expenses increased to $21,575 from $10,534, primarily because professional fees increased to $17,479 from $5,350. General and administrative expense declined to $1,764 from $2,267, and rent declined to $2,332 from $2,917.
- Net loss attributable to stockholders increased to $22,567 from $10,534.
- Net cash used in operating activities increased to $47,684 from $19,576.
- Financing activities provided $85,800, including $85,000 from the sale of 85,000 common shares and $800 of additional stockholder advances.
- Cash increased by $38,116 during the quarter, from $3,154 to $41,270.
- Common shares outstanding increased from 29,692,000 at December 31, 2012 to 29,777,000 at March 31, 2013. The filing reported 29,827,000 shares outstanding as of May 7, 2013.
Outlook, Risks, Contingencies, and Unusual Items
Management stated that future revenue depends on effectively marketing the “Doorman” pilot and completing viable acquisitions of film rights. No quantitative revenue or earnings guidance was provided.
The company disclosed substantial doubt about its ability to continue as a going concern because of recurring losses, accumulated deficit, negative operating cash flow and limited cash. Management stated that it must generate revenue and raise additional capital, but there is no assurance that financing will be available on acceptable terms. The company reported that it had no third-party financing commitments and that its officers and shareholders had not agreed to provide additional financing.
The CEO had an employment agreement requiring a $150,000 annual salary, but waived future base salary beginning October 1, 2011. Previously unpaid salary had been accrued until the company generated operating revenue or raised additional capital.
Capitalized pilot costs will not be amortized until the related film is released and revenue is recognized. The carrying value may be exposed to impairment if the project is abandoned or its expected recoverability declines.
Management determined that disclosure controls and procedures were not effective as of March 31, 2013. A new director and vice president with accounting and finance experience joined on January 25, 2013, which management expected would improve segregation of duties.
In April 2013, after quarter-end, the company sold 50,000 common shares for $50,000. The company also disclosed no applicable legal proceedings, risk factors, defaults or market-risk disclosures in the reported sections.
Important Facts for Investors to Verify
- Verify the issuer identity: the supplied metadata names Fubotv Inc., while the filing names Brick Top Productions, Inc.
- Assess the going-concern disclosure, available cash of $41,270, negative working capital and dependence on additional equity financing.
- Review the recoverability and valuation of the $292,931 capitalized “Doorman” pilot costs, which had generated no revenue by March 31, 2013.
- Confirm the terms, dilution and exemption used for the 85,000 shares sold during the quarter and the additional 50,000 shares sold in April 2013.
- Investigate the accrued expenses, stockholder advances and any unpaid compensation obligations.
- Evaluate the implications of management’s conclusion that disclosure controls and procedures were ineffective.
- Confirm whether the “Doorman” pilot was subsequently marketed, released, impaired or monetized, and whether the company ever commenced principal operations.