Business context and reporting period
This is Truli Technologies, Inc.’s unaudited Form 10-Q for the three and six months ended September 30, 2018, the company’s fiscal second quarter and first half of fiscal 2019 (fiscal year ending March 31). The filing identifies the registrant as Truli Technologies, Inc.; it does not identify Nixxy, Inc. as the filer. Truli had shifted from its former media business to VocaWorks, a planned online staffing and talent-acquisition platform licensed from Recruiter.com. The filing says the platform was in final delivery stages and expected to be completed during calendar 2018.
Key financial metrics
| Metric | Period / date | Reported value |
|---|---|---|
| Revenue | Three and six months ended September 30, 2018 | $0 |
| Operating expenses | Three months / six months ended September 30, 2018 | $235,127 / $515,730 |
| Net loss before preferred dividends | Three months / six months ended September 30, 2018 | $235,127 / $515,730 |
| Preferred dividends and deemed dividends | Three months / six months ended September 30, 2018 | $436,456 / $8,514,056 |
| Net loss attributable to common shareholders | Three months / six months ended September 30, 2018 | $671,583 / $9,029,786 |
| Basic and diluted loss per common share | Three months / six months ended September 30, 2018 | $0.01 / $0.07 |
| Cash and cash equivalents | September 30, 2018 | $83,627 |
| Current assets / current liabilities | September 30, 2018 | $94,060 / $83,946 |
| Total assets | September 30, 2018 | $799,560 |
| Stockholders’ deficit | September 30, 2018 | $1,297,798 |
| Operating / investing / financing cash flow | Six months ended September 30, 2018 | $(406,973) / $(23,000) / $300,000 |
The company reported no debt or derivative liabilities at September 30, 2018. Redeemable preferred stock is classified as temporary equity and may carry redemption obligations. The filing reports an accumulated deficit of $6,746,937.
Material changes versus the prior comparable period
- Revenue remained zero. Operating expenses increased 111% for the quarter and 134% for the six-month period, primarily due to higher compensation (including stock-based compensation), professional fees, and other costs.
- Quarterly net loss before preferred dividends was approximately flat year over year ($235,127 versus $236,565); six-month net loss increased to $515,730 from $339,317.
- Prior-year interest and derivative-related expenses did not recur: the company said debt was settled and it had no debt or derivative liabilities in the 2018 periods.
- Cash fell from $213,600 at March 31, 2018 to $83,627 at September 30, 2018. Operating cash use rose to $406,973 from $131,416 in the prior-year first half.
- The company raised $300,000 from preferred-stock sales in the first half. Common shares outstanding increased to 138,954,197 from 131,554,197, including 7.4 million shares issued on conversion of Series C preferred stock.
Outlook, risks and unusual items
- Going concern: Management stated that substantial doubt exists about the company’s ability to continue as a going concern. Cash was insufficient for anticipated operations over the next 12 months, and additional financing was required. Without funding, the company could delay or curtail development or cease operations.
- Recruiter transaction and financing: A September 2018 letter of intent proposed acquiring Recruiter in exchange for new preferred stock convertible into 775 million common shares. The filing says the transaction was not assured and required at least $1.5 million of new equity as a condition to closing. If the acquisition and financing were not completed, management said cessation of operations was likely.
- Dilution and preferred claims: The company anticipated issuing equity and/or debt to fund operations, which could dilute existing holders. Series A and A-1 preferred stock carry 10% dividends; preferred securities include conversion and redemption features. The filing lists 496,970,729 potential common equivalents as excluded from diluted EPS as anti-dilutive.
- Unusual noncash charges: Six-month preferred dividends and deemed dividends totaled $8,514,056, including a substantial beneficial-conversion-feature charge. These items drove common-shareholder loss well above net loss and were not equivalent to operating cash expenditure.
- Controls and contingencies: The CEO, also serving 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.
- Outlook: No quantitative financial guidance was provided. Management expected continued operating losses; platform completion was expected by year-end 2018, but timing and commercial launch were uncertain.
Important facts for investors to verify
- Whether the Recruiter acquisition and required $1.5 million equity financing closed, and the final terms and dilution from the proposed preferred issuance.
- Current cash runway, subsequent financing, and whether the company can fund operations and platform development.
- Platform completion, launch, customer traction, and first revenue, including whether conditions for Recruiter’s Series B shares were met.
- Preferred-stock dividend, conversion, and redemption obligations, plus the impact of warrants and other potential share issuance on existing holders.
- Remediation of the disclosed control weaknesses and confirmation that the filing applies to the intended company, given the request metadata names Nixxy, Inc. while the filing names Truli Technologies, Inc.