Business context and reporting period
Entity discrepancy: The supplied filing is NTN Buzztime, Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2014; it does not identify Ernexa Therapeutics Inc. Verify that this is the intended filing.
NTN Buzztime provides interactive entertainment and marketing services to hospitality venues through subscriptions, equipment leases, live trivia, and advertising. Its network served 3,145 venues at quarter-end, down from 3,436 a year earlier. The company was transitioning to its BEOND tablet platform while continuing to support its Classic product.
Key financial metrics
| Metric | Q1 2014 | Q1 2013 / prior date |
|---|---|---|
| Revenue | $6.418 million | $6.116 million |
| Gross margin | $3.888 million; 61% | $4.116 million; 67% |
| Operating loss | $654,000 | $366,000 |
| Net loss | $649,000; $0.01 per share | $369,000; $0.01 per share |
| EBITDA (non-GAAP) | $70,000 | $435,000 |
| Operating cash flow | $(204,000) | $166,000 |
| Investing cash flow | $(770,000) | $(484,000) |
| Cash and cash equivalents | $4.761 million | $5.455 million at Dec. 31, 2013 |
| Working capital | $3.256 million | $4.310 million at Dec. 31, 2013 |
| Notes payable | $1.918 million total, including current portion | $1.593 million at Dec. 31, 2013 |
Changes versus prior comparable period
- Revenue grew 5%, mainly due to a $722,000 increase in equipment lease revenue and higher advertising revenue; subscription revenue fell $432,000 as average subscriber site count declined.
- Direct costs rose 27% to $2.530 million, primarily from BEOND equipment, reducing gross margin from 67% to 61%.
- Net loss widened by $280,000. SG&A rose 2% to $4.390 million, while depreciation and amortization outside direct costs declined to $152,000.
- Operating cash flow moved from $166,000 provided to $204,000 used. Capital expenditures increased, and cash declined $694,000 from year-end.
- Revenue from Buffalo Wild Wings company-owned and franchised restaurants rose to $2.646 million from $1.489 million, about 41% of Q1 2014 revenue.
Outlook, risks and unusual items
- Management said cash, expected operating cash generation, remaining equipment-credit availability, and approximately $6.4 million of expected net proceeds from an April 2014 public offering should cover operating needs and debt obligations for at least 12 months. This is management’s assessment, not a guarantee.
- The April offering issued 12.765 million shares at $0.55 per share and generated $7.021 million gross proceeds. The expected net proceeds were approximately $6.4 million.
- Management expected to offer premium consumer products through BEOND during 2014. Equipment lease revenue is a one-time payment for a three-year lease and may fluctuate as venues convert to BEOND, then decrease thereafter.
- The company had borrowed approximately $2.371 million under an equipment facility capped at $3 million; $1.9 million remained outstanding at quarter-end. Tranches carry 8.32% interest. The filing does not state the remaining borrowing availability as a clear amount.
- Risks include dependence on a concentrated customer base, reliance on limited or sole equipment suppliers, and a commitment to purchase up to 30,000 tablets by year-end 2014. The company also disclosed a third-party patent-infringement allegation involving applications rejected to date in the United States, and ongoing state/provincial sales-tax inquiries; management recorded a $26,000 net liability and assessed payment as reasonably possible.
- Management reported no material change in previously disclosed risk factors aside from intellectual-property risks. It also reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the filing’s issuer: the document is for NTN Buzztime, not Ernexa Therapeutics.
- Review the April share offering’s final net proceeds, use of funds, and dilution alongside the 12.765 million shares issued.
- Track subscriber counts, subscription revenue, and the profitability and durability of BEOND equipment leasing.
- Assess cash burn, debt repayment terms, remaining credit availability, and whether management’s 12-month liquidity expectation remains supportable.
- Monitor Buffalo Wild Wings concentration, tablet supply commitments, patent allegations, and resolution of sales-tax inquiries.