Filing identity and reporting period
Important identity discrepancy: The supplied filing is for Truli Media Group, Inc., not Nixxy, Inc. It is a Form 10-Q for the quarter ended December 31, 2015, with comparative results for the three and nine months ended December 31, 2014. Truli’s fiscal year ends March 31. The filing states 2,553,990 common shares were outstanding on February 10, 2016.
Business context and financial results
Truli operated a faith- and family-oriented digital media platform, reporting roughly 11,000 videos, eight Christian television channels, and more than 250 affiliated ministries. The company said it had generated no revenue from inception through December 31, 2015.
| Metric | Three months ended Dec. 31, 2015 | Three months ended Dec. 31, 2014 | Nine months ended Dec. 31, 2015 | Nine months ended Dec. 31, 2014 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $61,061 | $115,461 | $235,920 | $292,892 |
| Net income (loss) | $(79,240) | $(126,387) | $(225,094) | $1,309,624 |
| Basic and diluted earnings (loss) per share | $(0.03) | $(0.05) | $(0.09) | $0.58 |
Margins are not meaningful because there was no revenue. Nine-month 2015 operating expenses fell 19% year over year; quarterly expenses fell 47%, mainly reflecting lower professional and consulting costs. Nine-month 2015 results included a $115,981 gain on debt extinguishment and a $12,324 loss from derivative fair-value changes. The prior-year nine-month profit was substantially affected by derivative and debt-extinguishment gains, including a $1,164,628 derivative gain and $751,250 debt-extinguishment gain; it is not a straightforward indicator of recurring performance.
Cash flow, debt, and liquidity
- Cash was $2,848 at December 31, 2015, down from $13,393 at March 31, 2015. Total assets were also $2,848.
- For the nine months, operating cash use was $288,545, financing provided $278,000, and cash declined by $10,545. Investing cash flow was zero.
- Current liabilities were $298,822, producing a working-capital deficit of $295,974. Total liabilities were $2,254,756, versus $2,454,365 at March 31, 2015; stockholders’ deficit was $2,251,908.
- On December 1, 2015, the company exchanged $1,822,109 of CEO advances and $133,825 of accrued interest for a five-year, unsecured 4% convertible note of $1,955,934. It is convertible at $0.02 per share into 97,796,700 shares, subject to beneficial-ownership restrictions. The filing elsewhere describes issuance on December 16, so the date should be verified.
- Other financing included $415,500 of related-party advances. The company settled legacy convertible notes for $70,000 and reported a $115,981 extinguishment gain. A further $67,500 debt-settlement balance remained payable in monthly installments over 24 months. A stockholder also forgave $82,975 of notes and $11,172 of accrued interest.
Outlook, risks, and unusual matters
Management said additional financing was necessary and that available cash and firm funding commitments were insufficient to assure continued operations. The company expected continued operating losses and no revenue for the foreseeable future; it warned that without financing it might curtail or cease operations or seek bankruptcy protection. The financial statements identify substantial doubt about the company’s ability to continue as a going concern and contain no adjustments for a possible failure to continue.
Management’s plans included raising debt or equity, expanding platform traffic, and eventually pursuing advertising, pay-per-view, merchandise, and donations. These are plans, not quantified guidance, and the filing gives no revenue or profitability targets. Marketing was limited by lack of capital; the CEO and certain consultants were working without pay. The CEO held approximately 51% of outstanding equity, and full conversion of his note could raise his ownership to approximately 99%. The company also planned to increase authorized common shares from 100 million to 250 million.
Other notable risks include ineffective disclosure controls due to material weaknesses, minimal liquidity, dependence on CEO financing, potential dilution from convertible debt and reset-adjusted warrants, competition, and technology, content-rights, cybersecurity, and regulatory risks. The filing reports no legal proceedings, while noting ordinary-course claims that management did not expect to materially affect the company. It also states that 104,156,563 common-share equivalents were outstanding at December 31, 2015 and excluded from diluted loss per share as anti-dilutive.
Most important facts for investors to verify
- Confirm that this Truli Media Group filing is the intended filing; it does not identify Nixxy, Inc.
- Verify the CEO convertible note’s issuance date, outstanding principal and accrued interest, conversion terms, and potential control and dilution effects.
- Assess the company’s near-term funding needs and whether any financing commitments exist; the filing says none were firm.
- Reconcile reported debt and liabilities, including the CEO notes and remaining debt-settlement payments.
- Review the status of the planned increase in authorized common shares and the company’s ineffective disclosure controls.