Filing summary
Issuer and period: The supplied filing is a Form 10-Q for Truli Media Group, Inc., not Nixxy, Inc. It covers the quarter and nine months ended December 31, 2014; December 31 is the company’s fiscal third-quarter end for the year ending March 31, 2015. Confirm the issuer and filing match the requested company.
Business context
Truli described itself as a pre-revenue digital platform for faith-based and family-friendly media, with approximately 9,000 items in its library and more than 250 affiliated ministries and churches. It reported no revenue from inception through December 31, 2014 and was developing its platform and seeking capital.
Financial performance and position
| Metric | Three months ended Dec. 31, 2014 | Nine months ended Dec. 31, 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $115,461 | $292,892 |
| Operating loss | $115,461 | $292,892 |
| Net income (loss) | $(126,387) | $1,309,624 |
| Net cash used in operations | Not separately reported | $240,102 |
There was no revenue base from which to calculate a meaningful operating margin. Nine-month net income was not generated by sales: it included a $1,164,628 noncash gain from changes in derivative fair value and a $751,250 gain on debt extinguishment, partly offset by $312,241 of interest expense. The three-month and nine-month 2013 comparative results were identified as restated.
At December 31, 2014, cash and total assets were $310; total liabilities were $2,234,799; and stockholders’ deficit was $2,234,489. Current liabilities of $2,167,299 exceeded current assets by $2,166,989. The filing reports no investing cash flows. Financing activities provided $236,163 in the nine-month period, including $600,000 of CEO advances, offset by debt repayments and settlement payments.
Key obligations included $1,273,609 of principal on an unsecured 4% CEO note, with $78,756 of related-party interest accrued; $92,500 principal of convertible notes reported in default; $82,975 of other notes payable; and $157,500 remaining under the settlement of the prior 12% debentures. Management separately reported aggregate debt principal and interest of $1,764,196. The filing does not provide a clear reconciliation of that figure to all balance-sheet liabilities.
Changes, outlook, and risks
- Operating expenses fell 73% for the quarter and 75% for the nine months versus 2013, principally because limited capital led to reduced marketing, investor-relations, professional, and consulting spending. Operating cash use declined from $632,494 to $240,102.
- The company reported nine-month net income versus a prior-year loss, chiefly reflecting lower interest expense, derivative fair-value gains, and the debt-extinguishment gain. These accounting gains do not indicate recurring operating profitability.
- Management said it expected continued operating losses and no revenue for the foreseeable future. It needed additional debt or equity financing, had no firm funding commitments, and said available cash might not fund operations through fiscal year-end. Failure to secure financing could force curtailment or cessation of operations.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern. It also discloses defaulted 8% convertible notes, penalty and default interest terms, and potential substantial penalties if the debt-settlement payments are missed.
- Management concluded disclosure controls and procedures were not effective because of material weaknesses in internal control over financial reporting. The CEO and consultants were working without pay.
- A former consultant sought $33,000 and 596,920 shares in arbitration. The parties reached an agreement in principle in January 2015, but it had not been signed, and completion was uncertain.
- After quarter-end, the board and majority stockholders approved a proposed reincorporation in Delaware, a 50-for-1 reverse split, and a 2014 equity compensation plan. The company anticipated these actions on or after February 20, 2015; they were not yet reported as completed.
Important facts for investors to verify
- Whether this Truli Media Group filing is the intended filing for Nixxy, Inc.; the names do not match.
- Current cash, financing availability, and ability to meet near-term operating costs and debt obligations.
- Status and terms of the defaulted convertible notes and remaining settlement payments, including any subsequent defaults or restructuring.
- Whether the arbitration agreement was signed and whether the proposed reincorporation and reverse split were completed.
- Progress in addressing the disclosed material weaknesses and improving disclosure controls.
- Potential dilution: common shares outstanding increased from 94,151,666 at March 31, 2014 to 127,682,295 at December 31, 2014; the filing also lists 107,875,815 common-share equivalents at period-end.