Filing summary
Entity and period: The supplied filing is Truli Media Group, Inc.’s unaudited Form 10-Q for the quarter ended December 31, 2016 (the third quarter of its fiscal year ending March 31, 2017). It does not identify Nixxy, Inc.; investors should verify the issuer and filing attribution.
Business context
Truli operates a digital platform for faith-based and family-friendly media, with approximately 14,000 videos, eight Christian television channels, and a Spanish-language library of approximately 4,500 items. The company reported no revenue from inception through December 31, 2016. In October 2016, it transferred its operating assets to wholly owned subsidiary Truli Media Corp. Management also said it was seeking an acquisition of an unrelated business, potentially involving a change of control and dilution.
Financial results and position
| Metric | Three months ended Dec. 31, 2016 | Three months ended Dec. 31, 2015 | Nine months ended Dec. 31, 2016 | Nine months ended Dec. 31, 2015 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Operating expenses | $81,351 | $61,061 | $230,732 | $235,920 |
| Operating loss | $(81,351) | $(61,061) | $(230,732) | $(235,920) |
| Net loss | $(178,492) | $(79,240) | $(373,625) | $(225,094) |
| Basic and diluted loss per share | $(0.07) | $(0.03) | $(0.15) | $(0.09) |
With no revenue, gross margin and revenue-based operating margins are not meaningful. Nine-month operating expenses declined 2%, but net loss increased 66%, chiefly reflecting a larger derivative fair-value loss and the absence of the prior-year debt-extinguishment gain. Third-quarter SG&A increased 33%, primarily due to consulting fees. Interest expense for the nine-month period declined to $73,061 from $92,831.
- Cash and liquidity: Cash was $39,127 at December 31, 2016, versus $13,245 at March 31, 2016. Current assets were $39,127 and current liabilities $789,216; working-capital deficit was $750,089.
- Cash flow: Nine-month operating cash outflow was $269,408, compared with $288,545 in the prior-year period. Financing provided $295,290, including $296,500 in related-party note proceeds and $50,000 from convertible notes, offset by repayments. Ending cash increased by $25,882.
- Liabilities and equity: Total liabilities were $2,745,150, up from $2,345,910 at March 31, 2016. These included $395,290 of related-party notes, $49,429 of short-term convertible notes net of discount, $1,955,934 of long-term convertible notes, and a $72,186 derivative liability. Stockholders’ deficit was $2,706,023; accumulated deficit was $5,690,292.
- Potential dilution: 2,554,197 common shares were outstanding at December 31, 2016. The filing disclosed 104,782,090 common-share equivalents, principally from convertible notes; excluded from diluted loss per share as anti-dilutive.
Material changes and unusual items
- The Founder sold the $1,955,934 convertible note to two institutional investors in September 2016 for $205,000 in total, and the Founder and an affiliate sold their controlling share block to the new CEO/CFO for $6,000. The Founder remained board chair.
- The Founder agreed to pay operating costs and certain pre-agreement liabilities; the note purchasers agreed to cover public-company costs for one year. Failure by the Founder to pay specified operating costs would trigger an event of default under the convertible note. The Founder also received an option to acquire operating assets for $5,000, subject to the stated exercise period and consent terms.
- November 2016 investors purchased $50,000 of convertible notes, due five months after issuance, convertible at $0.02 per share subject to adjustments and a 9.99% beneficial-ownership limit. The holder may accelerate maturity upon a defined fundamental transaction.
- The company recorded a $69,832 nine-month loss from changes in derivative fair value, including a $70,168 third-quarter loss. The derivative liability was valued using Level 3 inputs, including estimated stock-price volatility.
Outlook, risks, and controls
Management provided no quantified forecast or firm revenue guidance. It expected continued operating losses and said future costs could shift toward marketing and promotion. Management stated that funding over the next 12 months was uncertain and that the company depended on the Founder’s operating-cost payments and loans from the note purchasers for public-company expenses. Such purchaser funding was described as an oral interim arrangement, not a binding commitment. The filing warns that insufficient funding could force the company to curtail or cease operations or seek bankruptcy protection.
The filing states that recurring losses, no revenue, the working-capital deficit, and funding needs raise substantial doubt about the company’s ability to continue as a going concern. The interim financial statements include no adjustments for a possible failure to continue as a going concern. Management also reported disclosure controls and procedures were ineffective because of material weaknesses in internal control over financial reporting; no material control changes occurred during the quarter. No material pending legal proceedings were reported.
Important facts for investors to verify
- Confirm that this Truli Media Group filing—not a Nixxy, Inc. filing—is the intended company and period.
- Verify whether the Founder and note purchasers are meeting their payment commitments, and whether any additional financing is available on binding terms.
- Review the convertible-note terms, maturity and acceleration provisions, derivative valuation, and potential dilution from the disclosed share equivalents.
- Assess the status and terms of the Founder’s asset-purchase option and management’s proposed acquisition strategy.
- Monitor cash runway, going-concern disclosures, and remediation of the reported material weaknesses in disclosure controls.