SEC Filing Summary
Filing and entity: The supplied filing is Recruiter.com Group, Inc.’s unaudited Form 10-Q, filed under its former name, Truli Technologies, Inc., for the quarter ended March 31, 2019. This does not match the request metadata naming Nixxy, Inc.; verify the issuer and filing before relying on this summary. The company changed its name to Recruiter.com Group on May 9, 2019.
Business context and reporting period
The March 31 merger with Recruiter.com, Inc. was accounted for as a reverse recapitalization, with Recruiter.com, Inc. treated as the historical issuer. The company also acquired certain Genesys Talent assets on March 31 for $8.6 million of Series F preferred stock. Consequently, Genesys contributed no operating results to the reported quarter; the filing provides unaudited pro forma results assuming the acquisition had occurred at the start of each period. The company changed its fiscal year-end from March 31 to December 31.
Key financial metrics
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $163,302 | $244,947; down $81,645, or 33% |
| Operating expenses (SG&A) | $469,682 | $472,200 |
| Operating loss | $(306,380) | $(227,253) |
| Net loss | $(382,322) | $(306,203) total net loss; $(294,077) attributable to common shareholders |
| Net cash used in operations | $(45,532) | $(144,687) |
| Cash at period end | $436,534 | $249,222 at March 31, 2018 |
Revenue fell mainly while management focused on completing the merger and Genesys asset acquisition. The filing does not report a gross margin or a clear gross-profit figure; it presents SG&A as operating expenses. Interest expense was $67,025 versus $35,217, while the unrealized loss on securities was $8,917 versus $46,833. No income tax provision was recorded.
At March 31, 2019, current assets were $1.31 million and current liabilities were $1.58 million, a working-capital deficit of approximately $268,000. Total liabilities were $1.87 million. Loans payable totaled $208,246, including $110,926 current; lease liabilities totaled $269,054. A $691,780 warrant derivative liability was also recorded. Cash flow from investing was $(11,500); financing provided $479,414, including preferred-stock proceeds and note proceeds. Cash increased by $422,382 during the quarter.
Material changes and unusual items
- The Genesys asset acquisition added $731,488 of accounts receivable and $7,868,512 of provisional intangible assets, funded with 200,000 Series F preferred shares valued at $8.6 million. Purchase accounting and valuations remained provisional.
- The Recruiter.com merger and recapitalization substantially changed the capital structure. The company reported 139,830,306 common shares outstanding at March 31 and 144,830,306 as of May 15. Series E and F preferred shares were convertible into 775 million and 200 million common shares, respectively, subject to stated terms and ownership limits. Dilution is a material consideration.
- Debt and accrued interest were cancelled or exchanged in connection with the transactions; the filing reports $706,501 of notes and accrued interest cancelled pursuant to the merger. Earlier debt and redeemable preferred interests were also exchanged for preferred stock.
- The company adopted lease accounting and recorded a $269,054 right-of-use asset and corresponding lease liability for its headquarters sublease, which runs through November 2022.
- For the Genesys acquisition, unaudited pro forma revenue was $1,503,807 and net loss was $(1,017,924) for Q1 2019, compared with pro forma revenue of $2,359,785 and net loss of $(1,079,406) for Q1 2018. These figures are not reported actual results and are not necessarily indicative of future performance.
Outlook, risks, and controls
Management stated that substantial doubt existed about the company’s ability to continue as a going concern: available cash was not expected to fund anticipated operations for the next 12 months, and additional financing was needed for the remainder of fiscal 2019. Management warned that failure to obtain capital could force the company to delay, reduce, or eliminate development activities or cease operations. It expected to seek debt and/or equity financing; future securities sales could dilute existing shareholders. The company gave no quantified operating guidance and said it could not guarantee when, or whether, it would generate positive cash flow.
Management reported that disclosure controls and procedures were not effective because of material weaknesses in internal control over financial reporting. It reported no material change in internal control during the quarter. The filing says there were no material pending legal proceedings; the CEO personally guaranteed the disclosed loans. The new warrant instruments are liability-classified derivatives and may create non-cash earnings volatility as their fair value changes.
Subsequent events disclosed include additional Series D unit sales, a May conversion of Series D preferred stock into 5 million common shares, and May equity and option awards to the executive chairman. The filing states that it sold 4,125 additional Series D units for $75,000 and that the former Recruiter.com CEO purchased 13,750 units for $250,000, partly using other-company stock.
Important facts for investors to verify
- Confirm the filing’s issuer and reporting history, given the mismatch between the request metadata (Nixxy, Inc.) and the filing (Recruiter.com Group/Truli Technologies).
- Review the going-concern disclosure, cash runway, financing needs, and financing completed after quarter-end.
- Check the preferred-stock conversion terms, warrants, potential share issuance, and actual share count; reported common shares do not capture all potential dilution.
- Assess the provisional Genesys purchase-price allocation, acquired-client and contract assets, and the difference between reported and pro forma results.
- Review remediation of the disclosed material weaknesses in disclosure controls and internal control over financial reporting.