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ATRN > SEC Filings for ATRN > Form 10-Q on 6-Feb-2015 All Recent SEC Filings
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Form 10-Q for ATRINSIC, INC.
6-Feb-2015
Quarterly Report
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation
Historical Background
We were originally incorporated under the name Millbrook Acquisition Corp., on or about February 3, 1994. In May 2007, we changed our name to New Motion, Inc. In February 2008, we merged with Traffix, Inc., pursuant to which Traffix, Inc. became a wholly-owned subsidiary of ours. In June 2009, we changed our name to Atrinsic, Inc. Prior to our bankruptcy filing in 2012, we were a marketer of direct-to-consumer subscription products and an Internet search-marketing agency. We sold entertainment and lifestyle subscription products directly to consumers, which we marketed through the Internet. We also sold Internet marketing services to our corporate and advertising clients. However, by early 2012, we had suspended all operation of these businesses. In addition, until March 30, 2012, we were a reporting company under the Securities Exchange Act of 1934, as amended (the "Exchange Act") and filed periodic reports with the SEC. On March 30, 2012, we filed a Form 15 with the SEC, terminating our obligation to file periodic reports under Sections 13 and 15(d) of the Exchange Act.
On June 15, 2012, we filed for protection under Chapter 11 of the U.S. Bankruptcy Code and terminated all remaining employees. Since then we have been managed by several outside legal and financial professionals. In June 2013, the United States Bankruptcy Court, Southern District of New York confirmed our Plan of Reorganization (the "Plan of Reorganization") subject to our acquisition of a 51% controlling equity interest in Momspot, which was completed on July 12, 2013. Pursuant to the terms of a Membership Interest Purchase Agreement, we acquired a 51% equity interest in Momspot in exchange for our commitment to contribute up to $165,000 of working capital to Momspot over a two-year period to fund its business development and operations. Simultaneous with the acquisition, we became a party to the Momspot Operating Agreement and the manager thereunder. Momspot is a development stage company whose goal is to be the premier specialty retail affiliate marketing company targeting women between the ages of 24 and 45 who are either mothers or expecting their first child. Momspot currently constitutes our only business operation.
Pursuant to the Plan of Reorganization, all outstanding debt was converted to equity with the secured creditors receiving 4,600,000,000 shares, $0.000001 par value per share, of our Series A Convertible Preferred Stock, general unsecured creditors receiving an aggregate of 300,000,000 shares of our Common Stock, par value $0.000001 per share ("Common Stock"), and pre-bankruptcy petition common stockholders having their pre-bankruptcy shares exchanged for an aggregate of 100,000,000 shares of Common Stock.
Results of Operations
Factors Affecting Comparability
We adopted fresh start accounting and reporting effective July 12, 2013 (the "Fresh Start Reporting Date"). The financial statements as of the Fresh Start Reporting Date report the results of the Successor Company with no beginning retained earnings or accumulated deficit. Any financial statement presentation of the Successor Company represents the financial position and results of operations of a new reporting entity and is not comparable to prior periods presented by the Predecessor Company. The financial statements for periods ended prior to the Fresh Start Reporting Date do not include the effect of any changes in the Predecessor Company's capital structure or changes in the fair value of assets and liabilities as a result of fresh start accounting. Accordingly, the financial statements on or prior to July 12, 2013 are not comparable with the financial statements for periods after July 12, 2013. Operating activities between July 1, 2013 and July 11, 2013 were insignificant.
Three months ended December 31, 2014 compared to the three months ended December 31, 2013 (dollars in thousands)
During the three months ended December 31, 2014, we incurred a loss from operations of approximately $137 as compared to $242 for three months ended December 31, 2013. The decrease in loss from operations can be primarily attributed to a decrease of $94 in professional expenses related to legal services, consulting services and accounting services, and a decrease of $10 in research and development expenses related to web design and development. During the three months ended December 31, 2014, we recorded approximately $6 of net loss attributable to non-controlling interest as compared to $12 for three months ended December 31, 2013.
Six months ended December 31, 2014 compared to the period from July 12, 2013 to December 31, 2013 (dollars in thousands)
During the six months ended December 31, 2014, we incurred a loss from operations of approximately $256 as compared to $447 for the period from July 12, 2013 to December 31, 2013. The decrease in loss from operations can be primarily attributed to a decrease of $147 in professional expenses related to legal services, consulting services and accounting services, and a decrease of $21 in research and development expenses related to web design and development. During the period from July 12, 2013 to December 31, 2013, we recorded $204 of reorganization expenses related to a post confirmation liquidation plan. During the six months ended December 31, 2014, we recorded approximately $13 of net loss attributable to non-controlling interest as compared to $24 for the period from July 12, 2013 to December 31, 2013.
Liquidity and Going Concern (dollars in thousands)
We continually project anticipated cash requirements, which may include business combinations, capital expenditures, and working capital requirements. As of June 30, 2014, we had cash of approximately $101 and working capital of approximately $104. As of December 31, 2014, we had cash of approximately $150 and working capital deficit of approximately $329.
Our existing liquidity is not sufficient to fund our operations, anticipated capital expenditures and working capital for the foreseeable future. Absent generation of sufficient revenue from the execution of our business plan, we will need to obtain additional debt or equity financing.
Operating activities used $191 and $587 in cash for the six months ended December 31, 2014 and the period from July 12, 2013 to December 31, 2013, respectively. The sources of cash from operating activities during the six months ended December 31, 2014, primarily comprised of $245 net loss and a $26 increase of accounts payable, which included payments to legal and accounting professionals, payments to consultants to develop our website, insurance, and other administrative expenses.
Our financing activities provided cash of $240 for the six months ended December 31, 2014. On August 15, 2014, we raised gross proceeds, in a debt financing transaction, of $90 from our two principal stockholders, and issued secured promissory notes in the principal amount of $45 to each of them. On December 18, 2014, we raised gross proceeds, in a debt financing transaction, of $150 from our two principal stockholders, and issued secured promissory notes in the principal amount of $75 to each of them. The notes are secured by all of our assets.
Our financial statements for the six months ended December 31, 2014 indicate there is substantial doubt about our ability to continue as a going concern as we are dependent on our ability to obtain short-term financing and ultimately to generate sufficient cash flow to meet our obligations on a timely basis in order to attain profitability, as well as successfully obtain financing on favorable terms to fund our long-term plans. We need to raise additional capital to cover our operating and capital expenditures. If the capital raising efforts are not successful, we might not be able to continue as a going concern.
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