Filing identity and reporting period
Important identity discrepancy: The request identifies Nixxy, Inc., but the supplied Form 10-Q is for Truli Media Group, Inc. (ticker TRLI). The filing covers the unaudited three months ended June 30, 2015, Truli’s fiscal first quarter; it was signed August 14, 2015. The summary below reflects the supplied filing, not a Nixxy filing.
Business context
Truli operated a digital platform aggregating faith-based and family-friendly media. It reported roughly 10,000 items in its main library, about 4,000 Spanish-language items, and affiliations with more than 250 ministries and churches. It had not generated revenue since inception and remained dependent on financing to develop and operate the platform.
Financial results and liquidity
| Metric | Three months ended June 30, 2015 | Three months ended June 30, 2014 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating expenses | $72,965 | $42,706 |
| Operating loss | $72,965 | $42,706 |
| Interest expense | $39,947 | $68,617 |
| Derivative fair-value loss / gain | Loss of $12,924 | Gain of $933,415 |
| Net loss / income | Loss of $125,836 | Income of $820,971 |
| Net cash used in operations | $114,734 | $55,239 |
| Net cash provided by financing | $117,500 | $54,000 |
Margins are not meaningful because the company reported no revenue. Basic and diluted loss per share was $0.05 in 2015, versus income per share of $0.43 in 2014; weighted-average shares were 2,553,990 and 1,910,726, respectively.
At June 30, 2015, cash was $16,159 and total assets were $16,159. Current liabilities were $2,560,467, total liabilities were $2,582,967, and stockholders’ deficit was $2,566,808. The working-capital deficit was $2,544,308. The balance sheet included $1,568,609 in notes payable to officers, $107,371 in related-party accrued interest, $92,500 in convertible notes, $82,975 in other notes, and $311,031 in derivative liabilities. Accumulated deficit was $5,136,652.
Changes versus prior comparable period
- Operating expenses increased 71%, primarily from higher marketing and consulting costs.
- Net results swung from $820,971 income to a $125,836 loss. The comparison is heavily affected by the prior-year $933,415 derivative fair-value gain; the 2015 period recorded a $12,924 derivative loss.
- Cash used in operations more than doubled, while financing inflows increased, principally from CEO advances. Cash rose from $13,393 at March 31 to $16,159 at June 30.
- Liabilities increased from $2,454,365 at March 31 to $2,582,967 at June 30, mainly due to working-capital advances from the CEO.
Outlook, risks, and unusual items
- Management reported no formal revenue or earnings guidance, expected no revenue for the foreseeable future, and anticipated continued operating losses. It said existing cash was insufficient to fund near-term operations and that it was uncertain whether funds would last until fiscal year-end.
- The filing states that recurring losses, no revenue, a large working-capital deficit, and reliance on additional financing raise substantial doubt about the company’s ability to continue as a going concern. No assurance of financing was provided; failure to obtain funds could force curtailment or cessation of operations or bankruptcy.
- The CEO had advanced funds under an unsecured note bearing 4% interest; the filing says no repayments had been made. The CEO and certain consultants were working without pay. Management identified the company’s reliance on CEO advances as a funding risk.
- The $92,500 of 8% convertible notes were in default. The filing describes penalties of 50% of principal and accrued interest, aggregating $49,664, and an increase in the interest rate to 22%. The company also reported $82,975 of other notes in default.
- A July 23, 2015 lawsuit by Asher Enterprises alleged breach of promissory notes and breach of fiduciary duty by CEO Michael Solomon; the plaintiff sought damages exceeding $150,000, plus fees, interest, and costs. The company said it had accrued for the related liabilities.
- Derivative liabilities were valued using Level 3 inputs, including extremely high volatility assumptions. The fair-value estimates and their effect on reported earnings are therefore important areas of judgment.
- Management concluded disclosure controls and procedures were ineffective because of material weaknesses in internal control over financial reporting. It reported no material changes to internal control during the quarter.
- Business risks included competition, limited marketing capacity, dependence on additional capital, potential dilution from variable conversion terms and price resets, and operational, content-rights, cybersecurity, and service-continuity risks.
Most important facts for investors to verify
- Confirm the issuer: the supplied filing is Truli Media Group, Inc., not Nixxy, Inc.; verify the intended company and reporting period before relying on these figures.
- Reconcile debt and default disclosures. The filing cites aggregate debt principal and interest of $2,061,139, while balance-sheet liabilities total $2,582,967; it also gives different figures for the 8% notes in different sections. Confirm the balances, penalties, interest rates, maturity status, and settlement payments.
- Review the Asher lawsuit, accrued amounts, and any subsequent developments or resolution.
- Assess available cash, CEO financing dependence, and whether any financing commitments were obtained after the reporting date.
- Evaluate the going-concern disclosure, material weaknesses in controls, and the assumptions underlying Level 3 derivative valuations and potential share dilution.