Business context and reporting period
The supplied filing is a Form 10-Q for Truli Technologies, Inc., not Nixxy, Inc. It covers the quarter and nine months ended December 31, 2018; the company’s fiscal year ends March 31. Truli had shifted from media activities to developing VocaWorks, a staffing and talent-acquisition software platform licensed from Recruiter.com. The filing says the platform’s first version was complete and being prepared for public use, but the software assets had not yet been placed in service.
Financial performance and position
| Metric | Three months ended Dec. 31, 2018 | Nine months ended Dec. 31, 2018 | Comparable 2017 period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $307,836 | $823,566 | $64,867 / $284,875 |
| Net income (loss) before preferred dividends | $(310,048) | $(825,778) | $22,066 / $(317,251) |
| Preferred dividends, including deemed dividends | $606,612 | $9,120,668 | $35,573,626 in each period |
| Net loss attributable to common shareholders | $(916,660) | $(9,946,446) | $(35,551,560) / $(35,890,877) |
There was no revenue, so gross margin and operating margin are not meaningful. Basic and diluted loss per common share was $0.01 for the quarter and $0.07 for the nine months, compared with $0.40 and $1.15, respectively, in 2017.
- At December 31, cash was $984, down from $213,600 at March 31. Current assets were $15,867 and current liabilities were $286,974, a working capital deficit of $271,107.
- Total assets were $742,387; accounts payable and accrued liabilities were $235,030. A note payable was carried at $51,944 net of discount; its stated principal was $55,000.
- Redeemable preferred stock classified as temporary equity was $2,059,764. Stockholders’ deficit was $1,604,351, and accumulated deficit was $7,056,985.
- Nine-month operating cash use was $518,596, investing cash use was $44,020, and financing cash inflow was $350,000. Cash declined by $212,616 to $984.
Changes versus the prior comparable period
Operating expenses increased 375% for the quarter and 189% for the nine months, primarily due to higher compensation, including stock-based compensation, professional fees, and other costs; management also noted there was no reversal of payables in 2018, unlike 2017. Nine-month net loss before preferred dividends increased to $825,778 from $317,251. The much smaller common-shareholder loss versus 2017 primarily reflects lower preferred deemed dividends, not revenue or operating improvement. Common shares outstanding rose to 138,954,197 from 131,554,197 at March 31, 2018.
Outlook, risks, and notable items
- Going concern: Management stated that substantial doubt exists about the company’s ability to continue as a going concern. Available cash was not expected to fund the next 12 months; without additional financing, the company may scale back or stop development or cease operations. Management said it could not guarantee when or whether positive cash flow would begin.
- Financing and proposed transactions: The company was seeking up to $1 million through a Series D private placement in connection with proposed Recruiter and Genesys transactions. Both acquisitions and the financing were uncertain, and management said the financing was a condition to closing the pending acquisitions. Failure to complete the Recruiter transaction and financing could result in cessation of operations.
- Dilution and obligations: The proposed Recruiter consideration was preferred stock convertible into 775 million common shares; proposed Genesys consideration was preferred stock convertible into 200 million common shares. These were proposals, not completed transactions. Existing preferred securities also accrue dividends and include potential redemption rights. The company had issued 60 million warrants with the June 2018 Series A-1 financing, exercisable at $0.01 per share.
- Subsequent events: On February 8, 2019, the company received $50,000 and issued a $60,000 original-issue-discount note, with 6 million warrants at an initial $0.02 exercise price. On February 11, it issued 876,109 restricted shares for services related to the Recruiter transaction.
- Controls and litigation: The CEO, who also served as CFO, concluded disclosure controls were ineffective due to material weaknesses in internal control over financial reporting. The company reported no material pending legal proceedings and no off-balance-sheet arrangements.
- Other unusual items: The license was recorded at $625,000 for 125 million common shares issued. Software development costs of $101,520 were capitalized but were not yet in service. The filing reported no derivative liability in the 2018 periods, unlike 2017.
Important facts for investors to verify
- Confirm the issuer identity: the supplied filing names Truli Technologies, Inc., while the request metadata names Nixxy, Inc.
- Check whether the Recruiter and Genesys transactions and the proposed $1 million financing closed, and review their final terms and resulting dilution.
- Verify current cash, near-term debt maturities, preferred-stock dividend and redemption exposure, and the company’s ability to fund operations.
- Assess progress toward launching VocaWorks, generating revenue, and placing capitalized software assets into service.
- Review subsequent financing and equity issuances and whether the disclosed material weaknesses in controls have been remediated.