DELAWARE
|
31-1103425
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(State
of incorporation)
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(I.R.S.
Employer Identification No.)
|
5966
LA PLACE COURT, CARLSBAD, CALIFORNIA
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92008
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large accelerated filer
|
¨
|
Accelerated
filer
|
¨
|
Non-accelerated
filer
|
¨ (Do not check if
a smaller reporting company)
|
Smaller reporting company
|
x
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Item
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Page
|
|
PART
I
|
||
1.
|
Financial
Statements
|
1
|
Condensed
Consolidated Balance Sheets as of March 31, 2009 (unaudited)
and December 31, 2008
|
1
|
|
Condensed
Consolidated Statements of Operations for the three months ended March 31,
2009 and 2008 (unaudited)
|
2
|
|
Condensed
Consolidated Statements of Comprehensive Loss for the three months ended
March 31, 2009 and 2008 (unaudited)
|
3
|
|
Condensed
Consolidated Statements of Cash Flows for the three months ended March 31,
2009 and 2008 (unaudited)
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4
|
|
Notes
to Condensed Consolidated Financial Statements
|
5
|
|
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
13
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3.
|
Quantitative
and Qualitative Disclosures About Market Risk
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21
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4.
|
Controls
and Procedures
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21
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PART II
|
||
1.
|
Legal
Proceedings
|
22
|
1A.
|
Risk
Factors
|
22
|
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
22
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3.
|
Defaults
Upon Senior Securities
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24
|
4.
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Submission
of Matters to a Vote of Security Holders
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24
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5.
|
Other
Information
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24
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6.
|
Exhibits
|
24
|
Signatures
|
24
|
ITEM 1.
|
Financial
Statements.
|
March 31,
2009
|
December 31,
2008
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 3,311 | $ | 3,362 | ||||
Accounts
receivable, net of allowances of $401 and $298,
respectively
|
614 | 636 | ||||||
Investments
available-for-sale (Note 5)
|
76 | 58 | ||||||
Prepaid
expenses and other current assets
|
695 | 611 | ||||||
Total
current assets
|
4,696 | 4,667 | ||||||
Broadcast
equipment and fixed assets, net
|
3,375 | 3,428 | ||||||
Software
development costs, net
|
949 | 860 | ||||||
Deferred
costs
|
1,346 | 1,383 | ||||||
Goodwill
(Note 4)
|
1,009 | 1,032 | ||||||
Intangible
assets, net
|
171 | 185 | ||||||
Other
assets
|
112 | 107 | ||||||
Total
assets
|
$ | 11,658 | $ | 11,662 | ||||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 482 | $ | 219 | ||||
Accrued
expenses
|
1,232 | 1,169 | ||||||
Sales
tax payable
|
676 | 958 | ||||||
Accrued
salaries
|
325 | 383 | ||||||
Accrued
vacation
|
336 | 381 | ||||||
Income
tax payable
|
5 | 18 | ||||||
Obligations
under capital lease
|
77 | 8 | ||||||
Deferred
revenue
|
675 | 657 | ||||||
Total
current liabilities
|
3,808 | 3,793 | ||||||
Sales
tax payable, excluding current portion
|
225 | — | ||||||
Obligations
under capital lease, excluding current portion
|
103 | 32 | ||||||
Deferred
revenue, excluding current portion
|
92 | 91 | ||||||
Total
liabilities
|
4,228 | 3,916 | ||||||
Commitments
and contingencies (Note 9)
|
||||||||
Shareholders’
equity:
|
||||||||
Series
A 10% cumulative convertible preferred stock, $.005 par value, $161
liquidation preference, 5,000,000 shares authorized; 161,000 shares issued
and outstanding at March 31, 2009 and December 31,
2008
|
1 | 1 | ||||||
Common
stock, $.005 par value, 84,000,000 shares authorized; 55,727,000 shares
issued and outstanding at March 31, 2009 and December 31, 2008,
respectively
|
277 | 277 | ||||||
Treasury
stock, at cost, 503,000 shares at March 31, 2009 and
December 31, 2008
|
(456 | ) | (456 | ) | ||||
Additional
paid-in capital
|
113,306 | 113,267 | ||||||
Accumulated
deficit
|
(105,606 | ) | (105,351 | ) | ||||
Accumulated
other comprehensive (loss) income (Note 10)
|
(92 | ) | 8 | |||||
Total
shareholders’ equity
|
7,430 | 7,746 | ||||||
Total
shareholders’ equity and liabilities
|
$ | 11,658 | $ | 11,662 |
Three months
ended
|
||||||||
March 31,
2009
|
March 31,
2008
|
|||||||
Revenues
|
$ | 6,196 | $ | 7,182 | ||||
Operating
expenses:
|
||||||||
Direct
operating costs (includes depreciation and amortization of $493 and $719
for the three months ended March 31, 2009 and 2008,
respectively)
|
1,502 | 2,096 | ||||||
Selling,
general and administrative
|
4,832 | 7,265 | ||||||
Depreciation
and amortization (excluding depreciation and amortization included in
direct operating costs)
|
127 | 122 | ||||||
Total
operating expenses
|
6,461 | 9,483 | ||||||
Operating
loss
|
(265 | ) | (2,301 | ) | ||||
Other
income (expense):
|
||||||||
Interest
income
|
43 | 59 | ||||||
Interest
expense
|
(2 | ) | — | |||||
Total
other income
|
41 | 59 | ||||||
Loss
from continuing operations before income taxes
|
(224 | ) | (2,242 | ) | ||||
Provision
for income taxes
|
31 | 41 | ||||||
Loss
from continuing operations
|
(255 | ) | (2,283 | ) | ||||
Loss
from discontinued operations
|
— | (291 | ) | |||||
Net
loss
|
(255 | ) | (2,574 | ) | ||||
Net
loss per common share
|
||||||||
Loss
from continuing operations, basic and diluted
|
(0.00 | ) | (0.04 | ) | ||||
Loss
from discontinued operations, basic and diluted
|
— | (0.01 | ) | |||||
Net
loss
|
$ | (0.00 | ) | $ | (0.05 | ) | ||
Weighted
average shares outstanding
|
||||||||
Basic
and diluted
|
55,224 | 55,187 |
Three months ended
|
||||||||
March
31,
2009
|
March 31,
2008
|
|||||||
Net
loss
|
$ | (255 | ) | $ | (2,574 | ) | ||
Other
comprehensive loss, net of tax:
|
||||||||
Foreign
currency translation adjustment
|
(118 | ) | (367 | ) | ||||
Unrealized
holding gain (loss) on investment available-for-sale
|
18 | (125 | ) | |||||
Other
comprehensive loss
|
$ | (100 | ) | $ | (492 | ) | ||
Comprehensive
loss
|
$ | (355 | ) | $ | (3,066 | ) |
Three months
ended
|
||||||||
March 31,
2009
|
March 31,
2008
|
|||||||
Cash
flows provided by (used in) operating
activities:
|
||||||||
Net
loss
|
$ | (255 | ) | $ | (2,574 | ) | ||
Loss
from discontinued operations, net of tax
|
— | 291 | ||||||
Loss
from continuing operations
|
$ | (255 | ) | $ | (2,283 | ) | ||
Adjustments
to reconcile net loss to net cash provided by (used in) operating
activities
|
||||||||
Depreciation
and amortization
|
620 | 841 | ||||||
Provision
for doubtful accounts
|
31 | 180 | ||||||
Stock-based
compensation
|
39 | 122 | ||||||
Loss
from disposition of equipment and capitalized software
|
39 | 231 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(12 | ) | 68 | |||||
Prepaid
expenses and other assets
|
(91 | ) | 80 | |||||
Accounts
payable and accrued expenses
|
169 | 10 | ||||||
Income
taxes payable
|
(14 | ) | 22 | |||||
Deferred
costs
|
33 | 21 | ||||||
Deferred
revenue
|
19 | (170 | ) | |||||
Net
cash provided by (used in) operating activities from continuing
operations
|
578 | (878 | ) | |||||
Discontinued
operations
|
— | (360 | ) | |||||
Net
cash provided by (used in) operating activities
|
578 | (1,238 | ) | |||||
Cash
flows (used in) provided by investing activities:
|
||||||||
Purchases
of broadcast equipment and fixed assets
|
(338 | ) | (778 | ) | ||||
Software
development expenditures
|
(200 | ) | (218 | ) | ||||
Proceeds
from sale of equipment and other assets
|
— | 78 | ||||||
Restricted
cash
|
— | 16 | ||||||
Net
cash used in investing activities
|
(538 | ) | (902 | ) | ||||
Cash
flows used in financing activities:
|
||||||||
Principal
payments on capital lease
|
(9 | ) | (2 | ) | ||||
Net
cash used in financing activities
|
(9 | ) | (2 | ) | ||||
Net increase
(decrease) in cash and cash equivalents
|
31 | (2,142 | ) | |||||
Effect
of exchange rate on cash
|
(82 | ) | (277 | ) | ||||
Cash
and cash equivalents at beginning of period
|
3,362 | 10,273 | ||||||
Cash
and cash equivalents at end of period
|
$ | 3,311 | $ | 7,854 | ||||
Supplemental
disclosures of cash flow information:
|
||||||||
Cash
paid during the period for:
|
||||||||
Interest
|
$ | 1 | $ | — | ||||
Income
taxes
|
$ | 90 | $ | 21 | ||||
Supplemental
disclosure of non-cash investing and financing activities:
|
||||||||
Unrealized
holding gain(loss) on investments available-for-sale
|
$ | 18 | $ | (125 | ) | |||
Equipment
acquired under capital leases
|
$ | 149 | $ | — |
Shares
|
Weighted average
exercise
price
|
|||||||
Outstanding as of
December 31, 2008
|
5,249,000 | $ | 1.22 | |||||
Granted
|
1,892,000 | |||||||
Exercised
|
— | |||||||
Forfeited
or expired
|
(1,019,000 | ) | ||||||
Outstanding
as of March 31, 2009
|
6,122,000 | $ | 0.86 |
Three
months ended
March 31,
|
||||||||||
2009
|
2008
|
|||||||||
Weighted
average risk-free interest rate
|
1.52% | 3.00% | ||||||||
Weighted
average volatility
|
86.85% | 57.00% | ||||||||
Forfeiture
rate
|
17.63% | 4.58% | ||||||||
Expected
life
|
3.97
years
|
4.8 years
|
||||||||
Dividend
yield
|
0.00% | 0.00% |
Three months
ended
|
||||||||
March 31,
2009
|
March 31,
2008
|
|||||||
Beginning
balance
|
$ | 8,000 | $ | 1,662,000 | ||||
Foreign
currency translation adjustment
|
(118,000 | ) | (367,000 | ) | ||||
Unrealized
gain (loss) during period in investment
available-for-sale
|
18,000 | (125,000 | ) | |||||
Ending
balance
|
$ | (92,000 | ) | $ | 1,170,000 |
●
|
FSP
FAS 157-4, “Determining
Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly,” provides guidelines for making fair value
measurements more consistent with the principles presented in FASB
Statement No. 157, “Fair
Value Measurements.” FSP FAS 157-4 must be applied prospectively
and retrospective application is not permitted. FSP FAS 157-4 is effective
for interim and annual periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. An entity
early adopting FSP FAS 157-4 must also early adopt FSP FAS 115-2 and FAS 124-2.
|
●
|
FSP
FAS 107-1 and APB 28-1, “Interim Disclosures about
Fair Value of Financial Instruments,” enhances consistency in
financial reporting by increasing the frequency of fair value disclosures.
FSP 107-1 and APB 28-1 is effective for interim periods ending after
June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. However, an entity may early adopt these interim fair
value disclosure requirements only if it also elects to early adopt FSP
FAS 157-4 and FSP FAS 115-2 and
FAS 124-2.
|
March
31,
2008
|
||||
Operating
revenues
|
$ | 17,000 | ||
Operating
expenses
|
308,000 | |||
Operating
loss
|
$ | (291,000 | ) | |
Gain
on sale of assets
|
— | |||
Other
income (expense)
|
— | |||
Loss
before income taxes
|
$ | (291,000 | ) | |
Income
tax expense
|
- | |||
Loss
from discontinued operations, net of tax
|
$ | (291,000 | ) |
Three months
ended
|
||||||||
March
31,
2009
|
March
31,
2008
|
|||||||
Revenues
by geographical area:
|
||||||||
United
States
|
$ | 5,557,000 | $ | 6,119,000 | ||||
Canada
|
639,000 | 963,000 | ||||||
United
Kingdom
|
- | 100,000 | ||||||
Total
revenue
|
$ | 6,196,000 | $ | 7,182,000 |
March 31,
2009
|
December 31,
2008
|
|||||||
Assets
by geographical area:
|
||||||||
United
States
|
$ | 7,084,000 | $ | 6,936,000 | ||||
Canada
|
4,574,000 | 4,726,000 | ||||||
Total
assets
|
$ | 11,658,000 | $ | 11,662,000 |
Network subscribers
As of March 31,
|
||||||||
2009
|
2008
|
|||||||
United
States
|
3,446 | 3,415 | ||||||
Canada
|
318 | 316 | ||||||
United
Kingdom
|
- | 46 | ||||||
Total
|
3,764 | 3,777 |
Three
months ended
March 31,
|
||||||||
2009
|
2008
|
|||||||
Revenue
|
$ | 6,196,000 | $ | 7,182,000 | ||||
Direct
costs
|
1,502,000 | 2,096,000 | ||||||
Gross
margin
|
$ | 4,694,000 | $ | 5,086,000 | ||||
Gross
margin percentage
|
76% | 71% |
March
31,
2008
|
||||
Operating
revenues
|
$ | 17,000 | ||
Operating
expenses
|
308,000 | |||
Operating
loss
|
$ | (291,000 | ) | |
Other
|
— | |||
Loss
from discontinued operations, net of tax
|
$ | (291,000 | ) |
Three months
ended
|
||||||||
March
31,
2009
|
March
31,
2008
|
|||||||
Net
loss per GAAP
|
$ | (255,000 | ) | $ | (2,574,000 | ) | ||
Interest
income, net
|
(41,000 | ) | (59,000 | ) | ||||
Depreciation
and amortization
|
620,000 | 841,000 | ||||||
Income
taxes
|
31,000 | 41,000 | ||||||
EBITDA
|
$ | 355,000 | $ | (1,751,000 | ) |
Three months
ended March 31, 2009
|
||||||||||||
Entertainment
|
Discontinued
operations
|
Total
|
||||||||||
Net
loss per GAAP
|
$ | (255,000 | ) | $ | — | $ | (255,000 | ) | ||||
Interest
income, net
|
(41,000 | ) | — | (41,000 | ) | |||||||
Depreciation
and amortization
|
620,000 | — | 620,000 | |||||||||
Income
taxes
|
31,000 | — | 31,000 | |||||||||
EBITDA
|
$ | 355,000 | $ | — | $ | 355,000 |
Three months
ended March 31, 2008
|
||||||||||||
Entertainment
|
Discontinued
operations
|
Total
|
||||||||||
Net
loss per GAAP
|
$ | (2,283,000 | ) | $ | (291,000 | ) | $ | (2,574,000 | ) | |||
Interest
income, net
|
(59,000 | ) | — | (59,000 | ) | |||||||
Depreciation
and amortization
|
841,000 | — | 841,000 | |||||||||
Income
taxes
|
41,000 | — | 41,000 | |||||||||
EBITDA
|
$ | (1,460,000 | ) | $ | (291,000 | ) | $ | (1,751,000 | ) |
Working
Capital
Increase
(Decrease)
|
||||
(In
thousands)
|
||||
Working
capital as of December 31, 2008
|
$
|
874
|
||
Changes
in current assets:
|
||||
Cash
and cash equivalents
|
(51
|
)
|
||
Accounts
receivable, net of allowances
|
(22
|
)
|
||
Investment
available-for-sale
|
18
|
|||
Prepaid
expenses and other current assets
|
84
|
|||
Total
current assets
|
29
|
|||
Changes
in current liabilities:
|
||||
Accounts
payable
|
(263
|
)
|
||
Accrued
expenses
|
(63
|
)
|
||
Sales
tax payable
|
282
|
|||
Accrued
salaries
|
58
|
|||
Accrued
vacation
|
45
|
|||
Income
tax payable
|
13
|
|||
Obligations
under capital lease
|
(69
|
)
|
||
Deferred
revenue
|
(18
|
)
|
||
Total
current liabilities
|
(15
|
)
|
||
Net
change in working capital
|
14
|
|||
Working
capital as of March 31, 2009
|
$
|
888
|
(In
thousands)
For
the year ended
|
||||||||
March
31,
2009
|
March
31,
2008
|
|||||||
Cash
provided by (used in):
|
||||||||
Operating
activities
|
$
|
578
|
$
|
(1,238
|
)
|
|||
Investing
activities
|
(538
|
)
|
(902
|
)
|
||||
Financing
activities
|
(9
|
)
|
(2
|
)
|
||||
Effect
of exchange rates
|
(82
|
)
|
(277
|
)
|
||||
Net
decrease increase in cash and cash equivalents
|
$
|
(51
|
)
|
$
|
(2,419
|
)
|
●
|
Cash
used for capital expenditures decreased
$440,000,
|
●
|
Cash
used for software development initiatives decreased
$18,000,
|
●
|
Proceeds
from the sale of equipment and other assets in continuing operations
decreased $78,000, and
|
●
|
Restricted
cash associated with an office lease in Canada decreased $16,000 due to
the maturation of the agreement.
|
●
|
FSP
FAS 157-4, “Determining
Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That
Are Not Orderly,” provides guidelines for making fair value
measurements more consistent with the principles presented in FASB
Statement No. 157, “Fair
Value Measurements.” FSP FAS 157-4 must be applied prospectively
and retrospective application is not permitted. FSP FAS 157-4 is effective
for interim and annual periods ending after June 15, 2009, with early
adoption permitted for periods ending after March 15, 2009. An entity
early adopting FSP FAS 157-4 must also early adopt FSP FAS 115-2 and FAS
124-2.
|
●
|
FSP
FAS 115-2 and FAS 124-2. “Recognition and Presentation
of Other-Than-Temporary Impairments,” provides additional guidance
designed to create greater clarity and consistency in accounting for and
presenting impairment losses on debt securities. FSP FAS 115-2 and FAS
124-2 is effective for interim and annual periods ending after June 15,
2009, with early adoption permitted for periods ending after March 15,
2009. An entity may early adopt this FSP only if it also elects to early
adopt FSP FAS 157-4.
|
●
|
FSP
FAS 107-1 and APB 28-1, “Interim Disclosures about
Fair Value of Financial Instruments,” enhances consistency in
financial reporting by increasing the frequency of fair value disclosures.
FSP 107-1 and APB 28-1 is effective for interim periods ending after
June 15, 2009, with early adoption permitted for periods ending after
March 15, 2009. However, an entity may early adopt these interim fair
value disclosure requirements only if it also elects to early adopt FSP
FAS 157-4 and FSP FAS 115-2 and FAS
124-2.
|
Item 3.
|
Quantitative and Qualitative
Disclosures About Market
Risk.
|
Item 4.
|
Controls and
Procedures.
|
Item 1.
|
Legal
Proceedings.
|
Item 1A.
|
Risk
Factors.
|
Item 2.
|
Unregistered Sales of Equity
Securities and Use of
Proceeds.
|
Item 3.
|
Defaults Upon Senior
Securities.
|
Item 4.
|
Submission
of Matters to a Vote of Security Holders.
|
Item 5.
|
Other
Information.
|
Item 6.
|
Exhibits.
|
Exhibit No.
|
Description
|
31.1
|
Certification
of principal executive officer pursuant to Rule
13a-14(a)
|
31.2
|
Certification
of principal financial officer pursuant to Rule
13a-14(a)
|
32.1
|
Certification
of principal executive officer pursuant to Rule 13a-14(b) / 18 U.S.C.
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2
|
Certification
of principal financial officer pursuant to 13a-14(b) / 18 U.S.C. 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
NTN
BUZZTIME, INC.
|
||
Date:
May 15, 2009
|
By:
|
/s/
Kendra Berger
|
Kendra
Berger
|
||
Chief
Financial Officer
|
||
(on
behalf of the Registrant, and as its Principal Financial and Accounting
Officer)
|