Eterna Therapeutics (ERNA) - 2019 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements This section presents NTN Buzztime, Inc.'s unaudited condensed consolidated financial statements for the period ended September 30, 2019 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,533 | $2,536 | | Total current assets | $5,547 | $6,785 | | Total assets | $14,919 | $14,864 | | Total current liabilities | $3,532 | $4,024 | | Total liabilities | $8,574 | $7,947 | | Total shareholders' equity | $6,345 | $6,917 | Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended Sep 30, 2019 | Three Months Ended Sep 30, 2018 | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $4,580 | $6,004 | $14,638 | $17,416 | | Operating (loss) income | $370 | N/A | $(535) | $30 | | Net (loss) income | $222 | N/A | $(754) | $(311) | | Net (loss) income per share | $0.08 | N/A | $(0.27) | $(0.12) | Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Nine Months Ended Sep 30, 2019 | Nine Months Ended Sep 30, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,761 | $528 | | Net cash used in investing activities | $(964) | $(981) | | Net cash (used in) provided by financing activities | $(826) | $181 | | Net decrease in cash | $(2) | $(300) | - The company delivers interactive entertainment and technology to venues such as bars, restaurants, and casinos. As of September 30, 2019, 2,565 venues subscribed to its network[24][26] - The company's relationship with Buffalo Wild Wings, which represented approximately 47% of venues, is set to terminate on November 15, 2019. Management believes it has sufficient cash for the next twelve months but is exploring financing alternatives[29][30][50] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, strategic initiatives, and liquidity, focusing on revenue decline and the impact of the Buffalo Wild Wings contract termination Overview and Highlights This section outlines the company's business model, key strategic initiatives for 2019, and the impending termination of the Buffalo Wild Wings relationship - The company's board is exploring strategic alternatives to maximize shareholder value[113] - Key strategic initiatives include: - Hardware: Signed a $3,000,000 follow-on order with a partner in the correctional facility industry - Buzztime Basic: A new lower-cost, entry-level product was field-tested and deployed in approximately 120 locations, with a target of 200 by year-end - Mobile App: An open beta version was released in May 2019 to complement the tablet platform - Advertising: A new, modernized ad platform was rolled out to all customers to improve monetization[114][118][120][121] - The company's agreements with Buffalo Wild Wings corporate and most franchisees are expected to terminate on November 15, 2019. The company is reducing operating expenses in anticipation of this[122] Results of Operations The company reported a wider net loss and a 16% revenue decline for the nine months ended September 30, 2019, primarily due to lower hardware and subscription sales Revenue by Type - Nine Months Ended September 30 (in thousands) | Revenue Type | 2019 | 2018 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Subscription revenue | $11,356 | $12,111 | $(755) | (6%) | | Hardware revenue | $811 | $2,427 | $(1,616) | (67%) | | Other revenue | $2,471 | $2,878 | $(407) | (14%) | | Total | $14,638 | $17,416 | $(2,778) | (16%) | - Subscription revenue decreased due to a lower average site count and lower average revenue per site. A material decrease is expected in Q1 2020 after the Buffalo Wild Wings contracts terminate[130] Gross Margin - Nine Months Ended September 30 (in thousands) | Metric | 2019 | 2018 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenues | $14,638 | $17,416 | $(2,778) | (16%) | | Direct Operating Costs | $4,545 | $6,019 | $(1,474) | (24%) | | Gross Margin | $10,093 | $11,397 | $(1,304) | (11%) | | Gross Margin Percentage | 69% | 65% | - | - | - Selling, general and administrative expenses for the nine months ended Sep 30, 2019 decreased by $768,000 (7%) compared to the prior year, mainly due to lower payroll and professional fees[138] Liquidity and Capital Resources The company's liquidity as of September 30, 2019, includes $2.78 million in cash and $3.0 million in debt, with management exploring financing alternatives - As of September 30, 2019, the company had cash, cash equivalents, and restricted cash of $2,784,000[146] - The company has a term loan with Avidbank with $3,000,000 outstanding as of September 30, 2019[148] - The company must comply with financial covenants, including maintaining at least $2,000,000 in unrestricted cash with Avidbank and achieving EBITDA of at least $1,000,000 for the trailing six-month period. The company was in compliance as of September 30, 2019[149][151][152] - Management believes it has sufficient cash for the next twelve months but is exploring financing alternatives due to the impending revenue loss from Buffalo Wild Wings and to fund its strategic plan[155][157] Cash Flow Summary - Nine Months Ended September 30 (in thousands) | Activity | 2019 | 2018 | | :--- | :--- | :--- | | Operating activities | $1,761 | $528 | | Investing activities | $(964) | $(981) | | Financing activities | $(826) | $181 | Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, NTN Buzztime, Inc. is not required to provide market risk disclosures - The company is a smaller reporting company and is not required to provide this information[171] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective with no material changes in internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[172] - No change in internal control over financial reporting occurred during the quarter that has materially affected, or is reasonably likely to materially affect, the company's internal controls[173] PART II – OTHER INFORMATION Legal Proceedings The company is not currently subject to any pending material legal proceedings that are expected to materially harm its financial position - The company is not currently subject to any pending material legal proceedings[175] Risk Factors Key risks include the impending termination of the Buffalo Wild Wings contract, potential inability to raise capital, and the risk of non-compliance with debt covenants - A significant portion of revenue (40% for the nine months ended Sep 30, 2019) comes from Buffalo Wild Wings, and the existing relationship will terminate on November 15, 2019. This is expected to materially decrease subscription revenue starting in Q1 2020[177][178][179] - The company may need to raise additional capital to execute its long-term plans, but such capital may not be available on acceptable terms, if at all, and could be dilutive to current stockholders[181][184] - Failure to comply with financial covenants with its lender, Avidbank, could result in a default, making all debt obligations immediately due and payable. Covenants include maintaining minimum EBITDA and a minimum cash balance[185][186][187] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities or use of proceeds during the period - None[190] Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - None[191] Mine Safety Disclosures This item is not applicable to the company's business - Not Applicable[192] Other Information The company reported no other information for this item - None[193] Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate governance documents, employment agreements, and required certifications - The report includes a list of filed exhibits, such as amendments to employment agreements, CEO and CFO certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and XBRL interactive data files[195][196]