Filing summary
Entity and period: The supplied filing is bBooth, Inc.’s Form 10-K for the fiscal year ended December 31, 2016, filed March 31, 2017. It does not identify TON Strategy Co and is an annual report, not a standalone 2016 Q4 filing; confirm that this is the intended filing.
Business context
bBooth described a transition from mall-based recording kiosks and mobile apps to bNotifi, a cloud-based interactive-video SaaS platform for CRM, lead generation, marketing and social engagement. The company reported no sales revenue in either 2016 or 2015; its proposed revenue sources included enterprise licenses, subscriptions, premium features and lead-generation/data fees.
Financial performance and liquidity
| Metric | 2016 | 2015 |
|---|---|---|
| Net sales | $0 | $0 |
| Research and development | $257,803 | $241,637 |
| General and administrative expense | $2,873,185 | $5,174,515 |
| Operating loss | $3,130,988 | $6,803,252 |
| Net loss | $4,274,105 | $6,955,228 |
| Cash used in operating activities | $1,604,013 | $2,866,411 |
| Cash, year-end | $16,762 | $103,019 |
No revenue-based margin can be calculated from the reported sales figures. 2016 other income was $52,898, attributed to booth rentals. The reported 2016 net loss per share was $0.05, compared with $0.11 in 2015.
At December 31, 2016, total assets were $104,203, total liabilities $3,572,426 and stockholders’ deficit $3,468,223. Current assets were $36,101 and current liabilities $3,572,426. The balance sheet lists $177,358 of notes payable net of discount, $1,964,985 of related-party notes and a $680,268 convertible note, in addition to accrued obligations. Most debt was classified as current.
Changes, outlook and risks
- Net loss and operating cash use declined year over year. Management attributed lower general and administrative expense primarily to the SaaS business-model shift, including reduced labor and operating costs, lower amortization and lower share-based compensation.
- 2015 included a $1,387,100 impairment charge for intangible assets and booth-related equipment; no impairment charge was recorded in 2016.
- 2016 other expense included interest and debt-discount amortization, as well as a $455,975 charge related to debt extensions. Interest expense and debt-extension costs increased the financing burden.
- The auditor and management cited substantial doubt about the company’s ability to continue as a going concern. Management said it needed additional debt or equity financing, estimated operating expenses would exceed revenue, and stated that funds on hand were expected to support operations only through April 2017.
- The company reported raising $300,000 through a Series A preferred-stock financing in February 2017. The filing describes redemption in five weekly payments beginning approximately 180 days after closing; all but one could be paid in cash or common shares at the company’s option, while one payment must be in common shares.
- Key risks include no operating revenue, limited cash, reliance on additional financing, potential dilution, substantial related-party debt, and dependence on third-party vendors and key personnel. Management reported ineffective disclosure controls and material weaknesses involving segregation of duties, risk assessment, staffing and review procedures.
- A pending lawsuit seeks approximately $157,000 plus interest and costs over alleged unpaid application-development services. The company denied the claims, intends to defend the action and recorded no reserve.
- The filing gives no quantified revenue or profitability guidance. Management described a potential sales pipeline, but prospects were at different stages of testing, due diligence and negotiation.
Important facts for investors to verify
- Confirm the issuer and period: the document is bBooth, Inc.’s 2016 annual 10-K, not a TON Strategy Co filing or a Q4-only report.
- Reconcile reported liquidity figures. The filing describes a $3,468,223 working-capital deficit, but the balance-sheet current assets and current liabilities imply a deficit of $3,536,325. The stated deficit equals stockholders’ deficit, so the working-capital disclosure warrants verification.
- Reconcile financial-statement and MD&A figures: the MD&A reports 2016 other expense of $1,195,149, while the statement of operations reports total other expense, net, of $1,142,251. The cash-flow narrative also gives financing cash of $1,520,229, compared with $1,520,250 in the cash-flow statement.
- Assess the timing, terms and sufficiency of post-year-end financing, including preferred-stock redemptions, debt maturities and any further funding needs.
- Review dilution exposure from shares issued for services and financing, warrants, options, and potential conversion of related-party debt; outstanding common shares were 95,504,065 as of March 20, 2017.
- Monitor going-concern risk, control remediation, the litigation, and whether the bNotifi pipeline converts into paying customers and recurring revenue.