Truli Media Group, Inc. — Form 10-Q Summary
Filing identity: The supplied filing is for Truli Media Group, Inc., not Nixxy, Inc. It covers the unaudited quarter and six months ended September 30, 2014, and was signed November 19, 2014. Truli’s fiscal year ends March 31, making this its fiscal second quarter.
Business context and reporting period
Truli was developing an on-demand media and social-networking platform focused on faith- and family-oriented content. It reported a library of roughly 9,000 items, including about 3,000 Spanish-language items, and affiliations with more than 200 ministries and churches. The company said it had generated no revenue since inception in 2011. Its proposed revenue sources included advertising, pay-per-view content, merchandise and a share of donations to ministries.
Key financial metrics
| Metric | Three months ended September 30, 2014 | Six months ended September 30, 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $134,725 | $177,431 |
| Operating loss | $134,725 | $177,431 |
| Net income | $615,040 | $1,436,011 |
| Net income per share, basic and diluted | $0.01 | $0.01 |
- Reported net income was driven by non-operating items, including a $751,250 gain on extinguishment of debt and gains from changes in derivative fair value ($206,000 for the quarter; $1,139,415 for six months). The company remained loss-making from operations.
- Compared with the prior-year periods, operating expenses fell 78% for the quarter and 76% for six months. Net results improved from losses of $2,735,899 and $2,856,414, respectively, in the 2013 periods, which the filing marks as restated. The improvement reflects lower interest expense and the derivative and debt-extinguishment gains; it does not reflect revenue growth.
- Cash was $1,195 at September 30, 2014, down from $4,249 at March 31, 2014. Total assets were $1,195; total liabilities were $2,111,064. The working-capital deficit was $2,019,869, and stockholders’ deficit was $2,109,869.
- For the six months, operating activities used $145,717 of cash and financing activities provided $142,663; investing cash flow was zero. Cash declined by $3,054. No cash interest or income taxes were paid.
- Current liabilities included $1,157,609 owed to the CEO under an unsecured 4% note, $92,500 of convertible notes, $82,975 of other notes, and $90,000 of current debt-settlement payments. The filing also reports $90,000 of settlement payable as long-term. Management cited total principal and interest indebtedness of $1,646,278; debt amounts and categories should be reconciled against the notes.
- Gross margin and other revenue-based margins are not meaningful because the company reported no revenue.
Material changes, outlook and risks
- In August 2014 Truli settled with holders of its 12% debentures, paid an initial $301,337, and agreed to pay a further $180,000 in 24 monthly installments beginning October 10, 2014. The settlement extinguished related debt and derivatives and produced the reported $751,250 gain. Default could trigger substantial penalties and interest.
- Three 8% convertible notes with $92,500 principal remained in default. The filing describes 50% default penalties and a 22% default interest rate. Their discounted, variable conversion terms expose existing holders to dilution.
- The CEO advanced $484,000 during the six-month period. The company said it depended on his funding and had no firm commitments for future financing. Management warned it might not be able to fund operations in the short term and could curtail or cease operations, or enter bankruptcy, if it could not raise capital.
- The filing expressly states that substantial doubt exists about the company’s ability to continue as a going concern. Management expected continued operating losses and no revenue for the foreseeable future; it provided no quantified revenue or earnings guidance.
- Truli issued approximately 31.53 million shares in exchange for cancellation of 62.67 million debenture warrants. Shares outstanding were 127,652,295 at September 30; the filing separately reports 127,682,295 as of November 14.
- A consultant initiated arbitration on October 14, 2014, claiming $33,000 and 596,920 shares. The company said the outcome and effect could not be determined.
- Management concluded disclosure controls and procedures were ineffective due to material weaknesses in internal control over financial reporting. The filing also identifies limited cash, unpaid CEO and consultant services, lack of insurance, execution and user-growth challenges, competition, technology and content-related risks, and potential further dilution.
Important facts for investors to verify
- Confirm the issuer and reporting period: this document is Truli Media Group’s September 30, 2014 Form 10-Q, not a Nixxy, Inc. filing.
- Reconcile reported total indebtedness with the individual CEO note, defaulted convertible notes, other notes and settlement obligations, including accrued interest and penalties.
- Review the settlement payment schedule and subsequent payment status, and determine whether any default penalties were triggered.
- Assess cash runway, financing availability and the company’s ability to continue as a going concern; reported cash was only $1,195.
- Verify the share count, warrant and option terms, conversion provisions, and resulting dilution, including the discrepancy between September and November share figures.
- Review the arbitration claim and any subsequent developments, and investigate remediation of the disclosed control weaknesses.