Ernexa Therapeutics Inc 10-Q for FY2020 Q2

Ernexa Therapeutics Inc. (ERNA)

10-Q 2020-08-07 For: 2020-06-30

Added on April 06, 2026

About this 10-Q

Ernexa Therapeutics Inc filed this 10-Q on August 7, 2020, covering the quarter ended June 30, 2020 (FY2020 Q2).

Headline figures

Quarter ended June 30, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $754K; down 85.6% from $5.23M a year earlier
Net loss: $2.02M; compared with a net loss of $90K a year earlier

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DELAWARE		31-1103425
(State of incorporation)		(I.R.S. Employer Identification No.)

6965 EL CAMINO REAL, SUITE 105-BOX 517, CARLSBAD, CALIFORNIA		92008
(Address of principal executive offices)		(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock		NTN		NYSE American

Large accelerated filer	[ ]	Accelerated filer	[ ]

Non-accelerated filer	[X]	Smaller reporting company	[X]

		Emerging growth company	[ ]

Item		Page
PART I – FINANCIAL INFORMATION

1.	Financial Statements

	Condensed Consolidated Balance Sheets as of June 30, 2020 (unaudited) and December 31, 2019	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2020 and 2019 (unaudited)	4

	Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2020 and 2019 (unaudited)	5

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (unaudited)	6

	Notes to Condensed Consolidated Financial Statements (unaudited)	7

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20

3.	Quantitative and Qualitative Disclosures About Market Risk	32

4.	Controls and Procedures	32

PART II – OTHER INFORMATION

1.	Legal Proceedings	33

1A.	Risk Factors	33

2.	Unregistered Sales of Equity Securities and Use of Proceeds	35

3.	Defaults Upon Senior Securities	35

4.	Mine Safety Disclosures	35

5.	Other Information	35

6.	Exhibits	36

	Signatures	37

	June 30, 2020			December 31, 2019
ASSETS
Current Assets:
Cash and cash equivalents	$	2,234		$	3,209
Restricted cash		201			50
Accounts receivable, net of allowances of $866 and $354, respectively		186			1,195
Site equipment to be installed		1,132			1,090
Prepaid expenses and other current assets		336			526
Total current assets		4,089			6,070
Restricted cash, long-term		-			150
Operating lease right-of-use assets		44			2,101
Fixed assets, net		928			2,822
Software development costs, net of accumulated amortization of $2,878 and $3,341, respectively		1,515			1,915
Deferred costs		152			274
Goodwill		-			696
Other assets		62			97
Total assets	$	6,790		$	14,125

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	397		$	835
Accrued compensation		116			588
Accrued expenses		385			490
Sales taxes payable		-			131
Income taxes payable		15			3
Current portion of long-term debt, net		1,620			2,739
Current portion of obligations under operating leases		28			409
Current portion of obligations under finance leases		24			21
Current portion of deferred revenue		377			460
Other current liabilities		233			419
Total current liabilities		3,195			6,095
Long-term debt		1,625			-
Long-term obligations under operating leases		18			2,891
Long-term obligations under finance leases		9			20
Long-term obligations under finance leases		1			2
Other liabilities		11			26
Total liabilities		4,859			9,034

Shareholders’ Equity
Series A 10% cumulative convertible preferred stock, $0.005 par value, $156 liquidation preference, 156 shares authorized, issued and outstanding at June 30, 2020 and December 31, 2019		1			1
Common stock, $0.005 par value, 15,000 shares authorized at June 30, 2020 and December 31, 2019; 2,938 and 2,901 shares issued at June 30, 2020 and December 31, 2019, respectively		15			14
Treasury stock, at cost, 10 shares at June 30, 2020 and December 31, 2019		(456	)		(456	)
Additional paid-in capital		136,837			136,721
Accumulated deficit		(134,706	)		(131,457	)
Accumulated other comprehensive income		240			268
Total shareholders’ equity		1,931			5,091

Total liabilities and shareholders’ equity	$	6,790		$	14,125

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019

Revenue from contracts with customers
Subscription revenue	$	727		$	3,800		$	2,726		$	7,633
Sales-type lease revenue Hardware revenue		26			595			42			800
Other revenue		1			831			380			1,625
Total revenue from contracts with customers		754			5,226			3,148			10,058
Operating expenses:
Direct operating costs (includes depreciation and amortization of $433 and $618 for the three months ended June 30, 2020 and 2019, respectively, and $895 and $1,269 for the six months ended June 30, 2020 and 2019, respectively)		613			1,717			1,563			3,201
Selling, general and administrative		1,595			3,422			4,675			6,890
Impairment of capitalized software		100			-			238			1
Impairment of goodwill		-			-			662			-
Depreciation and amortization (excluding depreciation and amortization included in direct operating costs)		78			89			163			185
Total operating expenses		2,386			5,228			7,301			10,277
Operating loss		(1,632	)		(2	)		(4,153	)		(219	)
Other (expense) income, net		(376	)		(88	)		908			(173	)
Loss before income taxes		(2,008	)		(90	)		(3,245	)		(392	)
(Provision) benefit for income taxes		(15	)		-			4			(11	)
Net loss		(2,023	)		(90	)		(3,241	)		(403	)

Series A preferred stock dividend		(8	)		(8	)		(8	)		(8	)

Net loss attributable to common shareholders	$	(2,031	)	$	(98	)	$	(3,249	)	$	(411	)

Net loss per common share - basic and diluted	$	(0.69	)	$	(0.03	)	$	(1.12	)	$	(0.11	)

Weighted average shares outstanding - basic and diluted		2,925			2,870			2,913			3,868

Comprehensive loss
Net loss	$	(2,023	)	$	(90	)	$	(3,241	)	$	(403	)
Foreign currency translation adjustment		76			32			(28	)		65
Total comprehensive loss	$	(1,947	)	$	(58	)	$	(3,269	)	$	(338	)

	Series A Cumulative Convertible Preferred Stock				Common Stock				Treasury			Additional Paid-in			Accumulated			Accumulated Other Comprehensive
	Shares		Amount		Shares		Amount		Stock			Capital			Deficit			Income			Total

Balances at April 1, 2020		156	$	1		2,926	$	15	$	(456	)	$	136,800		$	(132,675	)	$	164		$	3,849
Foreign currency translation adjustment		-		-		-		-		-			-			-			76			76
Net loss		-		-		-		-		-			-			(2,023	)		-			(2,023	)
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes	-		-		12		-		-			(6	)		-			-			(6	)
Non-cash stock based compensation		-		-		-		-		-			43			-			-			43
Cash paid to Series A preferred stockholders for semi-annual dividend		-		-		-		-		-			-			(8	)		-			(8	)
Balances at June 30, 2020		156	$	1		2,938	$	15	$	(456	)	$	136,837		$	(134,706	)	$	240		$	1,931

Balances at January 1, 2020		156	$	1		2,901	$	14	$	(456	)	$	136,721		$	(131,457	)	$	268		$	5,091
Foreign currency translation adjustment		-		-		-		-		-			-			-			(28	)		(28	)
Net loss		-		-		-		-		-			-			(3,241	)		-			(3,241	)
Issuance of common stock upon vesting of restricted stock units, net of shares withheld for payroll taxes		-		-		14		-		-			(9	)		-			-			(9	)
Issuance of common stock in lieu of cash compensation, net of shares withheld for payroll taxes		-		-		23		1		-			43			-			-			44
Non-cash stock based compensation		-		-		-		-		-			82			-			-			82
Cash paid to Series A preferred stockholders for semi-annual dividend		-		-		-		-		-			-			(8	)		-			(8	)
Balances at June 30, 2020		156	$	1		2,938	$	15	$	(456	)	$	136,837		$	(134,706	)	$	240		$	1,931

	For the six months ended June 30,
	2020			2019
Cash flows (used in) provided by operating activities:
Net loss	$	(3,241	)	$	(403	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		1,058			1,454
Provision for doubtful accounts		133			27
Amortization of operating lease right-of-use-assets		146			144
Common stock issued for compensation in lieu of cash payment		61			-
Transfer of fixed assets to sales-type lease		-			6
Stock-based compensation		82			109
Gain from the asset sale of Stump! Trivia and OpinioNation		(1,265	)		-
Gain from the termination of operating lease		(8	)		-
Loss from the sale or disposition of assets		502			19
Impairment of capitalized software		238			1
Impairment of goodwill		662			-
Amortization of debt issuance costs		9			5
Changes in assets and liabilities:
Accounts receivable		975			384
Site equipment to be installed		(286	)		465
Operating lease liabilities		(120	)		(58	)
Prepaid expenses and other assets		190			12
Accounts payable and accrued liabilities		(1,436	)		(20	)
Income taxes payable		13			(10	)
Deferred costs		122			47
Deferred revenue		(84	)		(866	)
Other liabilities		(201	)		23
Net cash (used in) provided by operating activities		(2,450	)		1,339
Cash flows used in investing activities:
Capital expenditures		(20	)		(79	)
Capitalized software development expenditures		(130	)		(639	)
Net cash used in investing activities		(150	)		(718	)
Cash flows provided by (used in) financing activities:
Net proceeds from the sale of Stump! Trivia		1,166			-
Proceeds from long-term debt		1,625			-
Payments on long-term debt		(1,125	)		(417	)
Debt issuance costs on long-term debt		(3	)		-
Principal payments on finance leases		(8	)		(30	)
Payment of preferred stockholders dividends		(8	)		(8	)
Payroll tax remitted on net share settlement of equity awards		(27	)		(13	)
Net cash provided by (used in) financing activities		1,620			(468	)
Effect of exchange rate on cash and cash equivalents		6			39
Net (decrease) increase in cash, cash equivalents and restricted cash		(974	)		192
Cash, cash equivalents and restricted cash at beginning of period		3,409			2,786
Cash, cash equivalents and restricted cash at end of period	$	2,435		$	2,978

Supplemental disclosures of cash flow information:
Cash paid during the period for:

Interest	$	69		$	116

Income taxes	$	10		$	24

Supplemental disclosure of non-cash investing and financing activities:

Site equipment transferred to fixed assets	$	67		$	381

Assets acquired under operating leases	$	28		$	53

Initial measurement of operating lease right-of-use assets and liabilities	$	-		$	3,458

Reconciliation of cash, cash equivalents and restricted cash at end of period:
Cash and cash equivalents	$	2,234		$	2,727
Restricted cash		201			51
Restricted cash, long-term		-			200
Total cash, cash equivalents and restricted cash at end of period	$	2,435		$	2,978

	1.	Identify the contract(s) with customers
	2.	Identify the performance obligations
	3.	Determine the transaction price
	4.	Allocate the transaction price to the performance obligations
	5.	Recognize revenue when the performance obligations have been satisfied

	Three months ended June 30,						Six months ended June 30,
	2020			2019			2020			2019
Buffalo Wild Wings revenue	$	49,000		$	2,279,000		$	151,000		$	4,215,000
Percent of total revenue		6	%		44	%		5	%		42	%

	Deferred Revenue
Balance at January 1, 2020	$	460,000
New performance obligations		184,000
Revenue recognized		(266,000	)
Balance at June 30, 2020		378,000
Less non-current portion		(1,000	)
Current portion at June 30, 2020	$	377,000

	Installation Costs			Sales Commissions			Total Deferred Costs
Balance at January 1, 2020	$	187,000		$	87,000		$	274,000
Incremental costs deferred		74,000			54,000			128,000
Deferred costs recognized		(157,000	)		(93,000	)		(250,000	)
Balance at June 30, 2020		104,000			48,000			152,000

	Operating lease right-of-use assets
Operating lease right-of use assets at January 1, 2020	$	2,101,000
Amortization of operating lease right-of-use assets		(146,000	)
Addition of operating lease right-of -use asset		28,000
Write-off of right-of-use asset related to January 2020 asset sale		(26,000	)
Write-off of right-of-use asset due to lease termination		(1,913,000	)
Operating lease right-of-use assets at June 30, 2020	$	44,000

	Operating lease liabilities
Operating lease liabilities at January 1, 2020	$	3,300,000
Principal payments on operating lease liabilities		(120,000	)
Addition of operating lease liability		28,000
Write-off of lease liability related to January 2020 asset sale		(27,000	)
Write-off of lease liability related to lease termination		(3,135,000	)
Operating lease liabilities at June 30, 2020		46,000
Less non-current portion		(28,000	)
Current portion at June 30, 2020	$	18,000

	Three months ended June 30,
	2020					2019
	$		% of Total Revenue			$		% of Total Revenue			$ Change			% Change
Subscription revenue		727,000		96.4	%		3,800,000		73	%		(3,073,000	)		(80.9	)%
Hardware revenue		26,000		3.4	%		595,000		11	%		(569,000	)		(95.6	)%
Other revenue		1,000		0.1	%		831,000		16	%		(830,000	)		(99.9	)%
Total		754,000		100.0	%		5,226,000		100	%		(4,472,000	)		(85.6	)%

	As of
	June 30, 2020
2020	$	26,000
2021		8,000
2022		8,000
2023		8,000
Total operating lease payments		50,000
Less imputed interest		(4,000	)
Present value of operating lease liabilities	$	46,000

	Finance lease right-of-use assets
Finance lease right-of use assets at January 1, 2020	$	41,000
Depreciation of finance lease right-of-use assets		(10,000	)
Finance lease right-of-use assets at June 30, 2020	$	31,000

	Finace lease liabilities
Finance lease liabilities at January 1, 2020	$	41,000
Principal payments on finance lease liabilities as of June 30, 2020		(8,000	)
Finance lease liabilities at June 30, 2020		33,000
Less non-current portion		(9,000	)
Current portion at June 30, 2020	$	24,000

Goodwill balance at January 1, 2020	$	696,000
Activity for the three months ended March 31, 2020
Effects of foreign currency		(34,000	)
Goodwill impairment		(662,000	)
Goodwill balance at March 31, 2020		-
Goodwill balance at June 30, 2020	$	-

	●	Overview and Highlights. This section describes our business and significant events and transactions we believe are important in understanding our financial condition and results of operations.

	●	Critical Accounting Policies. This section lists our significant accounting policies, including any material changes in our critical accounting policies, estimates and judgments during the three and six months ended June 30, 2020 from those described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our 2019 10-K.

	●	Results of Operations. This section provides an analysis of our results of operations presented in the accompanying unaudited condensed consolidated statements of operations by comparing the results for the three and six months ended June 30, 2020 to the results for the three and six months ended June 30, 2019.

	●	Liquidity and Capital Resources. This section provides an analysis of our historical cash flows, and our future capital requirements.

	●	Recent Accounting Pronouncements. This section provides information related to new or updated accounting guidance that may impact our consolidated financial statements.

	●	Off-Balance Sheet Arrangements. This section provides information related to any off-balance sheet arrangement we may have that would affect our consolidated finance statements.

	●	We reduced our headcount (as of August 5, 2020, we have 19 employees, all of whom are currently working remotely, compared to 74 at December 31, 2019).

	●	Our chief executive officer agreed to defer payment of 45% of his base salary between May 1, 2020 and October 31, 2020 until the earlier of October 31, 2020 or such time as our board of directors determines in good faith that we are in the financial position to pay his accumulated deferred salary. As of June 30 2020, we have accrued approximately $21,000 related to our chief executive officer’s deferred compensation.

	●	We terminated the lease for our corporate headquarters, resulting in a reduction in our future cash obligations under the lease by approximately $3.4 million (see Note 9 to the unaudited condensed consolidated financial statements included herein).

	●	We substantially eliminated all capital projects and are aggressively managing our payables to limit further cash outlays and manage our working capital.

	Network Subscribers as of June 30,
	2020		2019
United States		1,110		2,476
Canada		109		133
Total		1,219		2,609

	Increase (Decrease)
Working capital defecit as of December 31, 2019	$	(25,000	)
Changes in current assets:
Cash and cash equivalents		(975,000	)
Accounts receivable, net of allowance		(1,009,000	)
Site equipment to be installed		42,000
Prepaid expenses and other current assets		(190,000	)
Net decrease in current assets		(1,981,000	)
Changes in current liabilities:
Accounts payable		(438,000	)
Accrued compensation		(472,000	)
Accrued expenses		(105,000	)
Sales taxes payable		(131,000	)
Income taxes payable		12,000
Current portion of long-term debt		(1,119,000	)
Current portion of obligations under capital leases		(381,000	)
Deferred rent		(83,000	)
Other current liabilities		(186,000	)
Net decrease in current liabilities		(2,900,000	)
Net increase in working capital		919,000
Working capital as of June 30, 2020	$	894,000

	For the six months ended June 30,
	2020			2019			Change
Cash (used in) provided by:
Operating activities	$	(2,450,000	)	$	1,339,000		$	(3,789,000	)
Investing activities		(150,000	)		(718,000	)		568,000
Financing activities		1,620,000			(468,000	)		2,088,000
Effect of exchange rates		6,000			39,000			(33,000	)
Net (decrease) increase in cash, cash equivalents and restricted cash	$	(974,000	)	$	192,000		$	(1,166,000	)

Exhibit	Description	Incorporated by Reference
3.1(a)	Restated Certificate of Incorporation	Exhibit to Form 10-Q filed on August 14, 2013

3.1(b)	Certificate of Amendment to the Restated Certificate of Incorporation (reverse/forward split)	Exhibit to Form 8-K filed on June 17, 2016

3.1(c)	Certificate of Decrease of the Series A Convertible Preferred Stock	Exhibit to Form 8-K filed on April 12, 2017

3.1(d)	Certificate of Amendment to the Restated Certificate of Incorporation (decrease in authorized capital stock)	Exhibit to Form 8-K filed on June 9, 2017

3.2	Bylaws (as amended and restated and further amended through December 6, 2018).	Exhibit to Form 8-K filed on December 7, 2018

10.1(a)*	Second Amendment to Employment Agreement dated May 27, 2020 by and between NTN Buzztime, Inc. and Sandra Gurrola	Exhibit to Form 8-K filed on June 2, 2020

10.1(b)*	Retention Bonus and General Release of All Claims Agreement dated May 27, 2020 between NTN Buzztime, Inc. and Sandra Gurrola	Exhibit to Form 8-K filed on June 2, 2020

10.2*	NTN Buzztime, Inc. Executive Incentive Plan for Eligible Employees of NTN Buzztime, Inc. Fiscal Year 2020	Exhibit to Form 8-K filed on June 2, 2020

10.3	Lease Termination, Surrender and Buy-Out Agreement dated June 25, 2020 between NTN Buzztime, Inc. and Burke Aston Partners, LLC	Exhibit to Form 8-K filed on July 1, 2020

10.4(a)	Paycheck Protection Program Note dated April 18, 2020 issued by NTN Buzztime, Inc. in favor of Level One Bank.	Exhibit to Form 8-K filed on April 21, 2020

10.4(b)	Acknowledgment and Agreement Regarding Loan Forgiveness dated April 18, 2020.	Exhibit to Form 8-K filed on April 21, 2020

10.5	Second Amendment to Loan and Security Agreement dated June 1, 2020 between NTN Buzztime, Inc. and Avidbank.	Filed herewith

31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.1#	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith

32.2#	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Furnished herewith

101.INS	XBRL Instance Document	Filed herewith

101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith

*	Indicates management contract or compensatory plan.

#	This certification is being furnished solely to accompany this report pursuant to U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated herein by reference into any filing of the Company whether made before or after the date hereof, regardless of any general incorporation language in such filing.

	NTN BUZZTIME, INC.

Date: August 7, 2020	By:	/s/ Sandra M. Gurrola
		Sandra M. Gurrola
		Senior Vice President of Finance
		(on behalf of the Registrant, and as its Principal Financial Officer)

	BORROWER:

	NTN BUZZTIME, INC.

	By:	/s/ Sandra Gurrola
	Name:	Sandra Gurrola
	Title:	SVP of Finance

	BANK:

	AVIDBANK

	By:	/s/ Samantha Kim
	Name:	Samantha Kim
	Title:	VP

	(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 7, 2020	/s/ Allen Wolff
	Allen Wolff
	Chairman and Chief Executive Officer
	NTN Buzztime, Inc.

(1)	the Report, as filed with the Securities and Exchange Commission, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.