Form 10-Q for ATRINSIC, INC.
13-Nov-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 Securities and Exchange Commission ("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
Three months ended September 30, 2015 compared to the three months ended September 30, 2014 (dollars in thousands)
During the three months ended September 30, 2015, we incurred a loss from operations of approximately $130 as compared to $118 for three months ended September 30, 2014. The increase in loss from operations can be primarily attributed to an increase of $12 in professional expenses related to accounting, legal and other consulting expenses. During the three months ended September 30, 2015, we recorded approximately $5 of net loss attributable to non-controlling interest as compared to $7 for three months ended September 30, 2014.
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 September 30, 2015, we had cash of approximately $10 and working capital deficiency of approximately $708.
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 $102 and $80 in cash for the three months ended September 30, 2015 and 2014, respectively. The sources of cash from operating activities during the three months ended September 30, 2015, primarily comprised of $131 net loss, a $6 increase of accounts payable, which included payments to legal and accounting professionals, payments to consultants, and other administrative expenses, and a $21 decrease of prepaid insurance expenses.
We do not have investing activities for the three months ended September 30, 2015 and 2014.
Our financing activities provided cash of $50 for the three months ended September 30, 2015. On September 3, 2015, we raised gross proceeds, in a debt financing transaction, of $50 from our two principal stockholders, and issued secured convertible promissory notes in the principal amount of $25 to each of them. The notes are secured by all of our assets.
Our financial statements for the three months ended September 30, 2015 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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