Filing identity and period
The supplied filing is a Form 10-Q for Truli Media Group, Inc., for the quarter and nine months ended December 31, 2017; it does not identify Nixxy, Inc. as the registrant. The company’s fiscal year ends March 31, making this its fiscal third quarter. Financial statements are unaudited.
Business context
The company exited its former faith-based media business when founder and former director Michael Solomon exercised an option to acquire subsidiary Truli Media Corp. for $5,000 on October 31, 2017. The company pivoted to VocaWorks, a planned online and mobile staffing and talent-acquisition platform, under a license from Recruiter.com. It issued Recruiter 125 million common shares, valued at $625,000, for the license. The platform was not yet in service, and the company had generated no revenue from either its former or new business.
Financial results and liquidity
| Metric | Three months ended Dec. 31, 2017 | Nine months ended Dec. 31, 2017 | Prior-year comparable period |
|---|---|---|---|
| Revenue | $0 | $0 | $0 |
| Operating expenses | $64,867 | $284,875 | $81,351 / $230,732 |
| Net income (loss), before preferred dividends | $22,066 | ($317,251) | ($178,492) / ($373,625) |
| Net loss attributable to common shareholders | ($35,551,560) | ($35,890,877) | ($178,492) / ($373,625) |
| Basic and diluted loss per common share | ($0.40) | ($1.15) | ($0.07) / ($0.15) |
| Net cash used in operating activities | Not stated for quarter | ($236,554) | ($269,408) for nine months |
Quarterly operating expenses fell about 20% year over year; nine-month expenses rose about 23%, which management attributed mainly to higher professional and consulting fees. No meaningful revenue margin is available because revenue was zero.
Quarterly results included a $634,435 gain on debt extinguishment, more than offset by a $532,788 derivative fair-value loss and $14,714 of interest expense. For the nine months, the corresponding amounts were a $634,435 gain, a $582,425 derivative loss, and $84,386 of interest expense. The company reported a $35.57 million preferred-stock dividend, making the loss attributable to common shareholders substantially larger than the underlying net loss; the filing attributes major deemed dividends to conversion features and warrants.
At December 31, cash was $363,512, compared with $1,983 at March 31, 2017. Total assets were $1.02 million and total liabilities were $64,121; the balance sheet showed $2.85 million of redeemable preferred stock classified outside stockholders’ equity and a $1.90 million stockholders’ deficit. No notes payable remained on the balance sheet after debt was exchanged for preferred stock. Nine-month financing cash flow was $635,873, including preferred-stock proceeds and related-party advances; investing cash use was $37,790. No financial margin, operating cash generation, or sustainable liquidity was demonstrated.
Material changes, outlook, and risks
- Business and ownership change: The media subsidiary and related assets and liabilities were transferred to Mr. Solomon. The filing recorded a $616,719 credit to additional paid-in capital for the net liabilities transferred.
- Financing and dilution: Investors purchased $600,000 of Series A preferred stock and warrants to buy 120 million common shares at $0.01 per share. Convertible debt was exchanged for Series C and C-1 preferred stock. The company reported 127,554,197 common shares outstanding at December 31 and 131,554,197 as of February 15, 2018. Preferred conversion features and warrants create substantial potential dilution.
- Redemption terms: Series C and C-1 holders had redemption rights. A February 13, 2018 amendment extended the redemption date to October 2022 and reduced the stated redemption amount from approximately $2 million to $1 million. The Series A preferred stock carries a 10% annual dividend.
- Development outlook: Management said an initial web-platform test launch was scheduled for the end of fiscal 2019 Q1, dependent on software development. The filing provides no revenue or earnings guidance and gives no assurance the platform will launch or generate sales.
- Going concern and funding: Management concluded substantial doubt existed about the company’s ability to continue as a going concern. Available cash was not expected to fund the next 12 months; additional financing was needed, and failure to obtain it could force the company to delay, reduce, or stop development or cease operations. Management was negotiating another financing round anticipated in fiscal Q4 2018, with no assurance of success. Further equity or debt financing could dilute shareholders.
- Controls and other risks: The CEO, who also served as CFO, concluded disclosure controls were not effective due to material weaknesses in internal control over financial reporting. The filing cites software development, competition, management conflicts of interest, and capital-market access as risks. It reports no material pending legal proceedings and no off-balance-sheet arrangements.
Key facts investors should verify
- Confirm the filing’s registrant: the supplied document names Truli Media Group, Inc., not Nixxy, Inc.
- Assess the status, terms, and actual proceeds of the proposed financing, and whether cash can support operations and the VocaWorks launch.
- Review preferred-stock redemption and dividend obligations, conversion prices, warrant adjustments, and resulting potential dilution.
- Verify the platform’s development and launch progress, and whether it has begun generating revenue.
- Reconcile the large preferred dividend, derivative fair-value losses, debt-extinguishment gain, and related-party subsidiary transfer with the underlying transaction documents.
- Track remediation of the disclosed material weaknesses in disclosure controls and internal control over financial reporting.