Filing summary
Entity and period: The supplied filing is Truli Media Group, Inc.’s Form 10-K for the fiscal year ended March 31, 2014—not a filing identified as Nixxy, Inc. or for calendar 2013 Q4. The audited financial statements compare fiscal 2014 with fiscal 2013.
Business context
Truli operated a digital platform aggregating faith-based and family-friendly media. It reported about 5,000 content items and affiliations with more than 200 ministries and churches. The company had not generated revenue and described itself as pre-revenue and dependent on outside financing. Planned revenue sources included pay-per-view, advertising, merchandise, and a share of donations; these had not produced reported revenue.
Financial performance and liquidity
| Metric | FY ended March 31, 2014 | FY ended March 31, 2013 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $1,420,086 | $1,054,286 |
| Net loss | $3,943,247 | $1,114,423 |
| Net loss per share | $0.04 | $0.02 |
| Cash used in operating activities | $612,551 | $237,179 |
| Cash at year-end | $4,249 | $1,296 |
FY2014 SG&A rose 35%, primarily due to marketing, investor relations, professional and consulting fees, and travel; stock-based compensation included in SG&A was approximately $479,000, versus $269,000 in FY2013. Interest expense was $3,848,094, compared with $60,137. Other income and expense also included a $1,576,393 gain from changes in derivative fair value and a $250,669 loss on default. Debt discounts and derivative valuations substantially affected reported results; the filing does not present an operating margin based on revenue because revenue was zero.
At March 31, 2014, total assets were $4,249, total liabilities were $3,972,855, and stockholders’ deficit was $3,968,606. The working-capital deficit was $3,968,606. Accumulated deficit reached $6,113,957, compared with $2,170,710 a year earlier. Financing activities provided $615,504 during FY2014, versus $238,475 in FY2013.
Material changes, debt, and unusual items
- Liabilities increased from $720,975 to $3,972,855, principally reflecting convertible financing, default-related amounts, and derivative liabilities. The balance sheet included $2,075,434 of derivative liabilities.
- The 12% senior convertible debentures issued in September 2013 were accelerated and in default following incorrect statements or omissions in transaction documents. The filing describes a 150% increase to the principal and accrued-interest balance and an interest-rate increase to 18%. It reports repayments of $40,000 by March 31, 2014, with a further $40,000 paid in April and May 2014; $6,000 of penalty was forgiven.
- The company also reported $722,732 of principal and interest on an unsecured 4% CEO advance note, and an $82,975 outstanding line of credit. The CEO was not being paid and provided working-capital support.
- Convertible notes and warrants had variable conversion prices and reset provisions, creating potentially substantial dilution. The filing reported 144,854,722 common-share equivalents at March 31, 2014, compared with 3,738,000 a year earlier. Common shares outstanding were 94,151,666 at fiscal year-end and 96,151,666 as of July 9, 2014.
Outlook, risks, and controls
Management said the company needed additional debt or equity funding and had no firm commitments for future financing. It warned that without timely funding it might curtail operations, delay or stop development and marketing, cease operations, or file for bankruptcy. The independent auditor’s report included a going-concern paragraph citing no revenue, recurring losses, and negative working capital, and stated that the statements included no adjustments for a possible failure to continue as a going concern. No quantified financial guidance was provided.
Key risks include inability to raise capital or generate revenue, defaulted debt and dilution, limited website traffic and marketing capacity, strong competition, non-exclusive content, and dependence on an unpaid CEO and consultants. The company reported no commercial or directors-and-officers insurance. Management concluded that disclosure controls and internal control over financial reporting were ineffective because of material weaknesses, including insufficient accounting personnel and no audit committee. The auditor did not attest to internal-control effectiveness. The company also disclosed that it had not filed prior-year tax returns and was working to bring filings current.
Important facts for investors to verify
- Confirm the issuer and reporting period: this text names Truli Media Group, Inc. and covers the fiscal year ended March 31, 2014, despite the request metadata naming Nixxy, Inc. and 2013 Q4.
- Reconcile the filing’s descriptions of the defaulted 12% debentures: it cites $461,337 of principal in one section, $501,337 of original gross proceeds, a $752,006 post-default amount, and $712,006 after a reported $40,000 repayment.
- Review the convertible-debt and warrant agreements, including reset terms, default provisions, derivative valuations, and resulting potential dilution.
- Assess the company’s ability to fund near-term operations, the status of subsequent repayments and conversions, and whether any financing commitments were obtained after the filing.
- Confirm progress in remediating the disclosed control weaknesses and bringing tax filings current.