Filing Summary
Entity and period: The supplied filing is Truli Technologies, Inc.’s Form 10-K for the fiscal year ended March 31, 2018, filed June 29, 2018. This does not match the request metadata identifying Nixxy, Inc. and “2017 Q4”; the filing itself identifies Truli Technologies, Inc. and a full fiscal year.
Business context
In October 2017, Truli licensed Recruiter.com software and intellectual property for its newly formed VocaWorks subsidiary, shifting from faith-based media and social networking to online and mobile recruiting, initially focused on specialized technology talent. The former media subsidiary was sold to the founder for $5,000, and its operations are included through the transaction date. VocaWorks was still pre-revenue; the company announced an alpha launch in June 2018, after year-end.
Financial results and position
| Metric | FY ended March 31, 2018 | FY ended March 31, 2017 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $442,565 | $311,974 |
| Net loss before preferred dividends | $471,842 | $442,698 |
| Net loss attributable to common shareholders | $36,523,969 | $442,698 |
| Operating cash used | $357,716 | $369,063 |
- The much larger common-shareholder loss reflects a $36.1 million preferred-stock dividend, primarily a non-cash deemed dividend associated with beneficial conversion features; it does not represent the reported net operating loss.
- Other expense included $582,425 of non-cash derivative fair-value loss, partly offset by a $637,534 gain on extinguishment of debt. Interest expense was $84,386.
- At March 31, 2018, cash was $213,600; current assets were $235,246, including $21,646 of prepaid expenses. Current liabilities and total liabilities were each $93,885. Working capital was therefore $141,361. Stockholders’ deficit was $873,071.
- Redeemable preferred stock of $1,696,932 was presented as temporary equity, not included in total liabilities. The filing describes preferred-stock redemption obligations and significant potential conversion dilution.
- Investing cash use was $66,540, including $57,500 for software development and $9,040 transferred with the former subsidiary. Financing provided $635,873, including $471,373 from preferred stock and $114,500 of related-party note proceeds.
- The $625,000 software license and $57,500 software-development asset had not been placed in service at year-end. No operating margin was reported because the company had no revenue.
Changes, outlook, and risks
- Operating expenses increased about 42% year over year, while net loss before preferred dividends increased about 7%. Management attributed expense growth principally to compensation and professional fees, partly offset by lower marketing costs and a reversal of accrued liabilities.
- The company and its auditor reported substantial doubt about the company’s ability to continue as a going concern. Management said available cash was insufficient for the next 12 months and additional financing was needed; failure to obtain it could force cutbacks, delay development, or cessation of operations.
- Management planned further alpha and beta development and targeted a final platform launch by the end of fiscal 2019, but stated there was no assurance of launch, revenue, or successful fundraising. The company anticipated issuing debt or equity, which could dilute shareholders. It reported negotiations for another funding round in the first quarter of fiscal 2019.
- Key risks include pre-revenue status, limited capital and staff, competition, reliance on education and corporate partners to attract users, technology and cybersecurity risks, and dependence on mobile platforms. The company disclosed material weaknesses in financial-reporting controls, including inadequate segregation of duties and insufficient independent directors at year-end; disclosure controls were deemed ineffective.
- Recruiter received 125 million common shares for the license. The CEO had an interest in Recruiter, which controlled the company. The filing also reports 120 million warrants outstanding at March 31, 2018 and describes additional preferred-stock and warrant financing after year-end.
- Subsequent events included a June 2018 $300,000 Series A-1 preferred-stock financing with warrants for 60 million common shares. The filing also reports 131,554,197 common shares outstanding as of June 20, 2018.
Most important facts to verify
- Confirm the intended issuer and period: the supplied document is Truli Technologies’ FY2018 10-K, not a Nixxy, Inc. filing or a 2017 Q4 report.
- Review cash needs, subsequent financing proceeds and terms, preferred-stock redemption provisions, and the company’s ability to fund operations through the next 12 months.
- Reconcile the filing’s ownership disclosures: it says Recruiter held approximately 85% of voting power in one section, while the beneficial-ownership table reports 125 million shares, or 95%, based on 131,554,197 shares outstanding.
- Assess the fully diluted share count, including convertible preferred stock, warrants, options, and any price-adjustment features; the filing cites materially different potential share totals in different disclosures and periods.
- Check remediation of the disclosed internal-control weaknesses and the status of the platform’s launch, user adoption, and revenue generation.