UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
☒ QUARTERLY
REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended: September 30, 2014
☐ TRANSITION
REPORT UNDER SECTION 13 0R 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from:
Commission
file number: 000-53641
|
TRULI
MEDIA GROUP, INC |
|
|
(Exact
name of registrant as specified in its charter) |
|
Oklahoma |
|
26-3090646 |
(State
or other jurisdiction of
incorporation or organization) |
|
(I.R.S.
Employer
Identification No.) |
|
|
|
515
Chalette Drive, Beverly Hills, CA |
|
90210 |
(Address
of principal executive offices) |
|
(Zip
Code) |
Issuer’s
telephone number (310) 274-0224
|
(Former
name, former address and former fiscal year, if changed since last report) |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period than the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filed,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer ☐ |
|
Accelerated
filer ☐ |
|
|
|
Non-accelerated
filer ☐
(Do
not check if a smaller reporting company) |
|
Smaller
reporting company ☒ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of November
14, 2014 the number of shares of the registrant’s common stock outstanding was 127,682,295.
TABLE
OF CONTENTS
|
|
|
Page |
|
|
|
number |
Part
I - |
|
Financial
Information |
|
Item
1. |
|
Financial
Statements (Unaudited) |
3 |
|
|
Condensed
Consolidated Balance Sheets as of September 30, 2014 (unaudited) and March 31, 2014 |
3 |
|
|
Unaudited
Condensed Consolidated Statements of Operations for the three months ended September 30, 2014 and 2013 and for the six months
ended September 30, 2014 and 2013 |
4 |
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows for the six months ended September 30, 2014 and 2013 |
5 |
|
|
Notes
to Unaudited Condensed Consolidated Financial Statements |
6 |
|
|
Forward-Looking
Statements |
|
Item
2. |
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations |
14 |
Item
3. |
|
Quantitative
and Qualitative Disclosures About Market Risk |
19 |
Item
4. |
|
Controls
and Procedures |
19 |
|
|
|
|
Part
II - |
|
Other
Information |
|
Item
1. |
|
Legal
Proceedings |
19 |
Item
2. |
|
Unregistered
Sales of Equity Securities and Use of Proceeds |
28 |
Item
3. |
|
Defaults
Upon Senior Securities |
28 |
Item
4. |
|
Mine
Safety Disclosures |
28 |
Item
5. |
|
Other
Information |
28 |
Item
6. |
|
Exhibits |
29 |
ITEM
1. FINANCIAL STATEMENTS
Truli
Media Group, Inc. |
Condensed
Consolidated Balance Sheets
(Unaudited) |
| |
| | |
| |
| |
September
30, 2014 | | |
March
31, 2014 | |
Assets | |
(Unaudited) | | |
| |
Current
Assets | |
| | |
| |
Cash
and cash equivalents | |
$ | 1,195 | | |
$ | 4,249 | |
Total
Current Assets | |
| 1,195 | | |
| 4,249 | |
| |
| | | |
| | |
Total
Assets | |
$ | 1,195 | | |
$ | 4,249 | |
| |
| | | |
| | |
Liabilities
and Stockholders’ Deficit | |
| | | |
| | |
Current
Liabilities: | |
| | | |
| | |
Accounts
payable and accrued liabilities | |
$ | 322,004 | | |
$ | 311,089 | |
Accrued
interest, related party | |
| 66,463 | | |
| 49,123 | |
Notes
payable - officers | |
| 1,157,609 | | |
| 673,609 | |
Notes
payable, other | |
| 82,975 | | |
| 82,975 | |
Convertible
note, net of unamortized debt discount of $0 and $38,881 | |
| 92,500 | | |
| 780,625 | |
Debt
settlement payable | |
| 90,000 | | |
| - | |
Derivative
liability | |
| 209,513
| | |
| 2,075,434 | |
Total
Current Liabilities | |
| 2,021,064
| | |
| 3,972,855 | |
Long-Term
Liabilities: | |
| | | |
| | |
Debt
settlement payable | |
| 90,000 | | |
| - | |
Total
Liabilities | |
| 2,111,064
| | |
| 3,972,855 | |
Commitments
and Contingencies | |
| | | |
| | |
Stockholders’
Deficit: | |
| | | |
| | |
Preferred
stock, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding as of September 30, 2014 and March
31, 2014 | |
| - | | |
| - | |
Common
stock, $0.001 par value; 495,000,000 shares authorized; 127,652,295 and 94,151,666 shares issued and outstanding as of September
30, 2014 and March 31, 2014, respectively | |
| 127,653 | | |
| 94,152 | |
Additional
paid in capital | |
| 2,424,144 | | |
| 2,034,949 | |
Common
stock to be issued | |
| 16,280 | | |
| 16,250 | |
Accumulated
deficit | |
| (4,677,946
| ) | |
| (6,113,957 | ) |
Total
stockholders’ deficit | |
| (2,109,869
| ) | |
| (3,968,606 | ) |
Total
Liabilities and Stockholders’ Deficit | |
$ | 1,195 | | |
$ | 4,249 | |
The accompanying
notes are an integral part of these unaudited condensed consolidated financial statements.
Truli
Media Group, Inc.
Condensed
Consolidated Statements of Operations
(Unaudited)
| |
Three Months ended September 30, | | |
Three Months ended September 30, | | |
Six Months ended September 30, | | |
Six Months ended September 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
| | |
(Restated) | | |
| | |
(Restated) | |
Operating expenses: | |
| | |
| | |
| | |
| |
Selling, general and administrative | |
$ | 134,725 | | |
$ | 618,197 | | |
$ | 177,431 | | |
$ | 732,551 | |
Total operating expenses | |
| 134,725 | | |
| 618,197 | | |
| 177,431 | | |
| 732,551 | |
Loss from operations | |
| (134,725 | ) | |
| (618,197 | ) | |
| (177,431 | ) | |
| (732,551 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other income (expenses): | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (207,485 | ) | |
| (2,096,627 | ) | |
| (276,102 | ) | |
| (2,102,788 | ) |
Gain on change in fair value of derivative liability | |
| 206,000 | | |
| 229,594 | | |
| 1,139,415 | | |
| 229,594 | |
Gain on extinguishment of debt | |
| 751,250 | | |
| - | | |
| 751,250 | | |
| - | |
Loss on default | |
| | | |
| (250,669 | ) | |
| | | |
| (250,669 | ) |
Loss on debt conversion | |
| - | | |
| - | | |
| (1,121 | ) | |
| - | |
Total other income (expenses) | |
| 749,765 | | |
| (2,117,702 | ) | |
| 1,613,442 | | |
| (2,123,863 | ) |
| |
| | | |
| | | |
| | | |
| | |
Income (loss) from operations before income taxes | |
| 615,040 | | |
| (2,735,899 | ) | |
| 1,436,011 | | |
| (2,856,414 | ) |
Provision for income taxes | |
| - | | |
| - | | |
| - | | |
| - | |
Net income (loss) | |
$ | 615,040 | | |
$ | (2,735,899 | ) | |
$ | 1,436,011 | | |
$ | (2,856,414 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) per share – basic and diluted | |
$ | 0.01 | | |
$ | (0.03 | ) | |
$ | 0.01 | | |
$ | (0.03 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares – basic and diluted | |
| 115,001,499 | | |
| 86,272,145 | | |
| 105,322,074 | | |
| 85,066,247 | |
The accompanying
notes are an integral part of these unaudited condensed consolidated financial statements.
Truli
Media Group, Inc.
Condensed
Consolidated Statements of Cash Flows
(Unaudited)
| |
Six
Months ended September 30, | | |
Six
Months ended September 30, | |
| |
2014 | | |
2013 | |
| |
| | |
(Restated)
| |
Cash Flows
from Operating Activities | |
| | |
| |
Net
income (loss) | |
$ | 1,436,011
| | |
$ | (2,856,414 | ) |
Adjustments
to reconcile net income (loss) to net cash used in operating activities | |
| | | |
| | |
Operating
expenses incurred by related party on behalf of the Company | |
| - | | |
| 24,903 | |
Amortization
of discount on convertible debt | |
| 37,246 | | |
| 606,437 | |
Equity
based compensation expense | |
| 7,815 | | |
| 255,998 | |
Change
in fair market value of derivative liability | |
| (1,139,415
| ) | |
| (229,594 | ) |
Loss
on excess fair value of derivative liability at inception | |
| 125,996
| | |
| 1,464,271 | |
Loss
on debt conversion | |
| 1,121 | | |
| - | |
Loss
on default on convertible debt | |
| - | | |
| 250,669 | |
Gain
on extinguishment of debt | |
| (751,250 | ) | |
| - | |
Gain
on forgiveness of default penalty | |
| (6,000 | ) | |
| - | |
Changes
in operating assets and liabilities: | |
| | | |
| | |
Changes
in operating assets and liabilities: | |
| | | |
| | |
Decrease
in prepaid expenses | |
| - | | |
| (34,726 | ) |
Increase
in accounts payable and accrued liabilities | |
| 142,759 | | |
| 126,280 | |
Net
cash used in operating activities | |
| (145,717 | ) | |
| (392,176 | ) |
| |
| | | |
| | |
Cash
Flows from Investing Activities | |
| - | | |
| - | |
| |
| | | |
| | |
Cash
Flows from Financing Activities | |
| | | |
| | |
Proceeds
from notes payable, related party | |
| 484,000 | | |
| 32,162 | |
Proceeds
from convertible notes | |
| - | | |
| 543,837 | |
Repayments
of convertible notes | |
| (341,337 | ) | |
| - | |
Net
cash provided by financing activities | |
| 142,663 | | |
| 575,999 | |
| |
| | | |
| | |
Net
(decrease) increase in cash and cash equivalents | |
| (3,054 | ) | |
| 183,823 | |
| |
| | | |
| | |
Cash
and Cash Equivalents, beginning of period | |
| 4,249 | | |
| 1,296 | |
| |
| | | |
| | |
Cash
and Cash Equivalents, end of period | |
$ | 1,195 | | |
$ | 185,119 | |
| |
| | | |
| | |
Supplemental
disclosures of cash flow information: | |
| | | |
| | |
Cash
paid during the period for interest | |
$ | - | | |
$ | - | |
Cash
paid during the period for income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
Supplemental
schedule of non-cash investing and financing activities: | |
| | | |
| | |
Extinguished
derivative liability | |
$ | 852,501 | | |
$ | 155,502 | |
Common
stock issued upon conversion of debt | |
$ | 24,000 | | |
$ | - | |
Debt
converted to common stock | |
$ | 15,000 | | |
$ | - | |
Derivative
liability at inception | |
$ | 125,996
| | |
$ | 2,187,755
| |
Common
stock issued for cancellation of warrants | |
$ | 360,529 | | |
$ | - | |
Common
stock issued for prepaid services | |
$ | - | | |
$ | 34,554 | |
The accompanying
notes are an integral part of these unaudited condensed consolidated financial statements.
TRULI
MEDIA GROUP, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2014
(Unaudited)
NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Truli
Media Group, Inc., a publicly traded Oklahoma Corporation formerly known as SA Recovery Corp., was incorporated on July 28, 2008
in the State of Oklahoma. In connection with the consummation of a triangular reorganization transaction on June 13, 2012 with
Truli Media Group, LLC, a Delaware corporation (“Truli LLC”) formed on October 19, 2011 (date of inception), the accounting
acquirer (see below), Truli Inc. changed its name to Truli Media Group, Inc. The historical financial statements are those of
Truli LLC, the accounting acquirer, immediately following the consummation of the reverse merger. All references that refer to
(the “Company” or “Truli Inc.” or “we” or “us” or “our”) are to Truli
Media Group, Inc., the Registrant and its wholly owned subsidiaries unless otherwise differentiated.
Truli
Media Group, Inc. (“Truli” or the “Company”), headquartered in Beverly Hills, California, is focused on
the on-demand media and social networking markets. Truli, with a website and multi-screen platform, has commenced operations as
an aggregator of family-friendly, faith-based content, media, music and Internet Protocol Television (“IPTV”) programming.
From its inception (October 19, 2011) through the date of these unaudited condensed consolidated financial statements, the Company
has not generated any revenues and has incurred significant expenses. The Company is in the process of raising additional debt
or equity capital to support the completion of its development activities. Consequently, its operations are subject to all the
risks and uncertainties inherent in the establishment of a new business enterprise, including failing to secure additional funding
to operationalize the Company’s current technology.
Basis
of Presentation
The
accompanying condensed consolidated financial statements are unaudited. The unaudited interim financial statements have been prepared
in accordance with accounting principles generally accepted in the United States ("GAAP") and pursuant to the rules
and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures
normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted
pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information
not misleading.
These
interim financial statements as of and for the three and six months ended September 30, 2014 and 2013 are unaudited; however,
in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to present
fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for
the three and six months ended September 30, 2014 are not necessarily indicative of the results to be expected for the year
ending March 31, 2015 or for any future period. All references to September 30, 2014 and 2013 in these footnotes are unaudited.
These
unaudited condensed consolidated financial statements should be read in conjunction with our audited financial statements
and the notes thereto for the year ended March 31, 2014, included in the Company’s annual report on Form 10-K filed
with the SEC on July 15, 2014.
The
condensed consolidated balance sheet as of March 31, 2014 has been derived from the audited consolidated financial statements
at that date but does not include all disclosures required by the accounting principles generally accepted in the United States
of America.
Cash
and Cash Equivalents
The
Company considers all short-term highly liquid investments with a remaining maturity at the date of purchase of three months or
less to be cash equivalents.
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Income
Taxes
The
Company follows Accounting Standards Codification subtopic 740-10, Income Taxes (“ASC 740-10”) for recording the provision
for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and
income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability
is expected to be realized or settled. Deferred income tax expense or benefit are based on the changes in the asset or liability
during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax
assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely
than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in
the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported
for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending
on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are
not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary
differences are expected to reverse and relate primarily to stock based compensation basis differences.
Earnings
(Loss) Per Share
The Company follows ASC 260, “Earnings
Per Share” for calculating the basic and diluted earnings (loss) per share. Basic earnings (loss) per share are computed
by dividing earnings (loss) available to common shareholders by the weighted-average number of common shares outstanding. Diluted
earnings (loss) per share is computed similar to basic loss per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the potential common shares had been issued and if the
additional common shares were dilutive. Common share equivalents are excluded from the diluted earnings (loss) per share computation
if their effect is anti-dilutive. There were 73,050,417 and 71,060,239 outstanding common share equivalents at September 30, 2014
and 2013, respectively.
| |
September 30, | | |
September 30, | |
| |
2014 | | |
2013 | |
Options | |
| 4,538,000 | | |
| 3,738,000 | |
Warrants | |
| 17,910,257
| | |
| 27,573,535 | |
Convertible notes
payable | |
| 50,602,160 | | |
| 39,748,704 | |
| |
| 73,050,417
| | |
| 71,060,239 | |
Dilutive
common stock equivalents consist of shares issuable upon conversion of debt and the exercise of our stock warrants. In accordance
with ASC 260-45-20, common stock equivalents derived from shares issuable through the exercise of our debt and warrants subject
to derivative accounting are not considered in the calculation of the weighted average number of common shares outstanding because
the adjustments in computing income available to common stockholders would result in a loss. Accordingly, the diluted EPS
would be computed in the same manner as basic earnings per share.
Fair
Value
Accounting
Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value
of certain financial instruments. The carrying amount reported in the consolidated balance sheet for accounts payable and accrued
expenses and notes payable approximates fair value because of the immediate or short-term maturity of these financial instruments.
Convertible
Instruments
The
Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional
standards for “Accounting for Derivative Instruments and Hedging Activities”.
Professional
standards generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments
and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the
economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics
and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host
contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in
fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule
when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of “Conventional
Convertible Debt Instrument”.
The
Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated
from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with
Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.”
Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options
embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment
date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements
are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary
deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between
the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price
embedded in the note.
ASC
815-40 provides that, among other things, generally, if an event is not within the entity’s control could or require net
cash settlement, then the contract shall be classified as an asset or a liability.
Stock-Based
Compensation
The
Company utilizes the Black-Scholes option-pricing model to determine fair value of options and warrants granted as stock-based
compensation, which requires us to make judgments relating to the inputs required to be included in the model. In this regard,
the expected volatility is based on the historical price volatility of the Company’s common stock. The dividend yield represents
the Company’s anticipated cash dividend on common stock over the expected life of the stock options. The U.S. Treasury bill
rate for the expected life of the stock options is utilized to determine the risk-free interest rate. The expected term of stock
options represents the period of time the stock options granted are expected to be outstanding.
Reclassifications
Certain
reclassifications have been made to conform the prior period data to the current presentations. These reclassifications had no
effect on the reported results.
Recently
Issued Accounting Pronouncements
The
FASB has issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When
the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires
that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a
performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the
award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that
the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the
requisite service has already been rendered.. The amendments in this ASU are effective for annual periods and interim periods
within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company has not yet determined
the effect of the adoption of this standard.
The
FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supercedes the revenue recognition requirements
in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification.
The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This
ASU is effective on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively
with the cumulative effect of initially applying the ASU recognized at the date of initial application. The Company has not yet
determined the effect of the adoption of this standard and it is not expected to have a material impact on the Company’s
condensed consolidated financial position and results of operations.
In
August 2014, the FASB issued a new accounting standard which requires management to evaluate whether there is substantial doubt
about an entity’s ability to continue as a going concern for each annual and interim reporting period. If substantial doubt
exists, additional disclosure is required. This new standard will be effective for the Company for annual and interim periods
beginning after December 15, 2016. Early adoption is permitted. The Company expects to adopt this new standard for the fiscal
year ending March 31, 2015 and the Company will continue to assess the impact on its consolidated financial statements.
The
Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not expect the future adoption
of any such pronouncements to have a significant impact on its results of operations, financial condition or cash flow.
NOTE
2 - NOTES PAYABLE, RELATED PARTY
The
Company’s Founder and Chief Executive Officer has advanced funds to the Company in the form of an unsecured term note, aggregating
$1,157,609 and $673,609 payable as of September 30, 2014 and March 31, 2014, respectively. The note, which may be increased as
additional funds are advanced to the Company by the Company’s Chief Executive Officer, bears interest at 4% per annum. The
Company recorded interest expense of $10,134 and $5,975 for the three months ended September 30, 2014 and 2013, respectively,
and $17,341 and $11,601 for the six months ended September 30, 2014 and 2013, respectively. Accrued interest payable is $66,463
and $49,123 at September 30, 2014 and March 31, 2014, respectively.
The
Company is obligated to repay the principal balance of the note along with accrued and unpaid interest payable over 36 months
beginning in September 2012. No payments have been made.
NOTE
3 - CONVERTIBLE NOTES AND DEBENTURES
At September
30, 2014 and March 31, 2014 convertible notes and debentures consisted of the following:
| |
September 30,
2014 | | |
March
31,
2014 | |
Convertible notes payable | |
$ | 92,500 | | |
$ | 819,506 | |
Unamortized debt
discount | |
| - | | |
| (38,881 | ) |
Carrying amount | |
$ | 92,500 | | |
$ | 780,625 | |
Note
issued on August 28, 2013:
On
August 28, 2013, the Company issued an 8% convertible promissory note in the aggregate principal amount of $42,500 to an accredited
investor. The note has a maturity date of May 30, 2014. The note is convertible into shares of our common stock at a conversion
price of 55% of the average of the three (3) lowest per share market values during the ten (10) trading days immediately preceding
a conversion date. We are currently in default on this convertible note. This note is in default and accordingly the Company charged
to operations penalty at 50% of unpaid principal and accrued interest on the date of default of $9,886 during the three and six
months ended September 30, 2014. The Company is recording interest at 22% from the date of default.
During
April 2014 $15,000 principal was converted into 2,000,000 shares of common stock, with a value of $24,000. The Company recorded
a loss on conversion of $1,121 during the six months ended September 30, 2014.
During
the three and six months ended September 30, 2014, the Company recorded amortization of debt discount of $0 and $5,454, respectively
as interest expense.
Debentures
issued on September 10, 2013:
On
September 10, 2013, the Company entered into securities purchase agreements with accredited investors pursuant to which the investors
purchased 12% convertible debentures for aggregate gross proceeds of $501,337, which consisted of $400,000 of cash and the exchange
and cancellation of an 8% convertible debenture (bearing principal and interest totaling $101,337. The debentures bear interest
at a rate of 12% per annum and their principal amounts are due on September 10, 2014. The 12% debentures are payable upon any
principal being converted on any voluntary conversion date (as to that principal amount then being converted). The Company may
pay interest due either in cash or, at its option, through an increase in the principal amount of the 12% debentures then outstanding
by an amount equal to the interest then due and payable. The 12% debentures are convertible at the option of the investor at any
time into shares of the Company’s common stock at a conversion price equal to (i) $0.02, on any conversion date through
the date that is one hundred eighty (180) days from September 10, 2013, subject to adjustment and (ii) beginning one hundred eighty
one (181) days after September 10, 2013, it shall be equal to the lower of (A) the initial conversion price or (B) 65% of the
average of the lowest three closing bid prices of the common stock for the ten trading days immediately prior to a conversion
date, subject to adjustment.
In
connection with the securities purchase agreements, the investors collectively received warrants to purchase an aggregate of 25,066,850
shares of common stock. The warrants are exercisable for a period of three years from the date of issuance at an exercise price
of $0.05 per share, subject to adjustment. The investors may exercise the warrants on a cashless basis at any time after the date
of issuance. In the event the investors exercise the warrants on a cashless basis we will not receive any proceeds.
In
connection with the above $501,337 of 12% debentures, the Company made certain statements or omissions in the transaction documents
that were incorrect as of the date made. Such statements or omissions resulted in an event of default under the terms of the transaction
documents and the 12% debentures. Upon such event of default: (i) the principal and accrued interest balance on the 12% debentures
increased to 150% of original face value, (ii) the interest rate increased to 18% (commencing 5 days after the event of default),
and (iii) the amounts due under the 12% debentures were accelerated and became immediately due and payable. Accordingly, the Company
charged to operations loss on default of convertible note of $250,669 during the year ended March 31, 2014 and increased the principal
amount of the 12% debentures to $752,006. During March 2014, the Company repaid $40,000 of principal to the note holders.
During
April and May of 2014, the Company repaid $40,000 of principal to the 12% debenture holders. Additionally, $6,000 of penalty was
forgiven by the 12% debenture holders.
On
August 7, 2014 we entered into a settlement agreement and release of claims with the holders of our 12% debentures, with an aggregate
outstanding amount of $780,513, whereby we paid an initial payment of $301,337. We additionally owe another $180,000 to be paid
over 24 monthly payments beginning on October 10, 2014. In the event we default on any payment under this settlement agreement,
we would be subject to substantial penalties and interest, which could have a material adverse effect on the Company’s business
and financial condition. We have also extinguished the derivative liability associated with the debentures of $452,075. We have
recorded a gain of $751,250 as a result of the debt extinguishment during the three and six months ended September 30, 2014.
Note
issued on October 2, 2013:
On
October 2, 2013, the Company issued an 8% convertible promissory note in the aggregate principal amounts of $32,500 to an accredited
investor. The note has a maturity date of July 5, 2014. The note is convertible into shares of common stock at a conversion price
of 55% of the average of the three (3) lowest per share market values during the ten (10) trading days immediately preceding a
conversion date. We are currently in default on this convertible note. This note is in default and accordingly the Company charged
to operations penalty at 50% of unpaid principal and accrued interest on the date of default of $17,233 during the three and six
months ended September 30, 2014. The Company is recording interest at 22% from the date of default.
During
the three and six months ended September 30, 2014, the Company amortized debt discount of $589 and $11,305, respectively, to current
period operations as interest expense.
Note
issued on November 7, 2013:
On
November 7, 2013, the Company issued an 8% convertible promissory note in the aggregate principal amount of $42,500 to an accredited
investor. The note has a maturity date of August 12, 2014. The note is convertible into shares of our common stock at a conversion
price of 55% of the average of the three (3) lowest per share market values during the ten (10) trading days immediately preceding
a conversion date. We are currently in default on this convertible note. This note is in default and accordingly the Company charged
to operations penalty at 50% of unpaid principal and accrued interest on the date of default of $22,545 during the three and six
months ended September 30, 2014. The Company is recording interest at 22% from the date of default.
During
the three and six months ended September 30, 2014, the Company amortized debt discount of $6,574 and $20,486, respectively, to
current period operations as interest expense.
NOTE
4 - DERIVATIVES
The
Company has identified certain embedded derivatives related to its convertible notes, debentures and common stock purchase warrants. Since
certain of the notes and debentures are convertible into a variable number of shares or have a price reset feature, the conversion
features of those debentures are recorded as derivative liabilities. Since the warrants have a price reset feature, they are recorded
as derivative liabilities. The accounting treatment of derivative financial instruments requires that the Company record fair
value of the derivatives as of the inception date and to adjust to fair value as of each subsequent balance sheet date.
Note
issued on August 28, 2013:
The
Company identified embedded derivatives related to the convertible promissory notes entered into on August 28, 2013. These
embedded derivatives included certain conversion features.
During
April 2014 $15,000 of principal was converted into 2,000,000 shares of common stock. The derivative liability was reduced by $9,515
as a result of this conversion.
During
the six months ended September 30, 2014 we recorded additions to our derivative conversion liabilities related to the conversion
feature attributable to interest and penalties accrued during the period. These additions aggregated $10,302 and $10,815 for the
three and six months ended September 30, 2014, respectively, which has been charged to interest expense.
During
the three and six months ended September 30, 2014, the Company recorded $7,410 and $11,892 of income, respectively, related to
the change in the fair value of the derivative.
The
fair value of the remaining embedded derivative was $25,597 at September 30, 2014, determined using the Black Scholes Model with
the following assumptions: (1) risk free interest rate of 0.015%; (2) dividend yield of 0%; (3) volatility factor of the expected
market price of our common stock of 78%; and (4) an expected life of three months.
Debentures
issued on September 10, 2013:
The
Company identified embedded derivatives related to the 12% debentures, resulting from the price reset features of these instruments.
During
April and May 2014, the Company repaid $40,000 of principal to the 12% debenture holders. As a result, $30,382 of derivative liability
was reclassified to paid-in capital. On August 7, 2014 we entered into a settlement agreement with the debenture holders and the
convertible debentures were extinguished. As a result, $452,075 of derivative liability was also extinguished.
During
the three and six months ended September 30, 2014, the Company recorded $85,111 and $315,860 of income, respectively, related
to the change in the fair value of the derivative.
Debenture
Warrants issued on September 10, 2013:
The
Company issued 25,066,850 warrants in conjunction with debt related to the 12% debentures incurred in September 2013. The warrants
had an initial exercise price of $0.05 per shares and a term of three years. The Company identified embedded derivatives related
to these 25,066,850 warrants, resulting from the price reset features of these instruments. As a result, we have classified
these instruments as derivative liabilities in the financial statements.
The
warrants issued with the 12% debentures have been adjusted due to the subsequent issuance of debt. As a result, those warrants
totaled 62,667,125 with an exercise price of $0.02. On August 7, 2014 the warrants were cancelled, in exchange for the issuance
of 31,530,629 shares of our common stock. As a result, $360,529 of derivative liability was reclassified to paid-in capital.
During
the three and six months ended September 30, 2014, the Company recorded $52,331 and $679,141 of income, respectively, related
to the change in the fair value of the derivative.
Compensation
Warrants issued on September 10, 2013:
During
September 2013 the Company granted 2,506,685 warrants as compensation for consulting services. The warrants had an initial exercise
price of $0.05 per shares and a term of three years. The Company identified embedded derivatives related to these 2,506,685 compensation
warrants, resulting from the price reset features of these instruments. As a result, we have classified these instruments
as derivative liabilities in the financial statements.
The compensation warrants had been adjusted
due to the subsequent issuance of debt. As a result, those warrants totaled 6,266,713 with an exercise price of $0.02. During
the three months ended September 30, 2014 the Company recorded a further adjustment due to the issuance of equity instruments
at a price below the exercise price of the warrants. As a result, those warrants now total 17,904,857 with an exercise price of
$0.007. The Company has recorded an expense of $74,485 due to the increase in the fair value of the warrants as a result of the
modifications.
During the three and six months ended
September 30, 2014, the Company recorded $33,803 and $96,484 of income related to the change in the fair value of the derivative.
The fair value of the embedded derivative
was $81,968 at September 30, 2014, determined using the Black Scholes Model with the following assumptions: (1) risk free interest
rate of 0.50%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 207%; and (4)
an expected life of 1.94 years.
Note
issued on October 2, 2013:
The
Company identified embedded derivatives related to the convertible promissory notes entered into on October 2, 2013. These
embedded derivatives included certain conversion features.
During
the six months ended September 30, 2014 we recorded additions to our derivative conversion liabilities related to the conversion
feature attributable to interest and penalties accrued during the period. These additions aggregated $18,028 and $18,770 for the
three and six months ended September 30, 2014, respectively, which has been charged to interest expense.
During
the three and six months ended September 30, 2014, the Company recorded $12,885 and $12,883 of income, respectively, related to
the change in the fair value of the derivative.
The
fair value of the described embedded derivative of $44,444 at September 30, 2014 was determined using the Black Scholes Model
with the following assumptions: (1) risk free interest rate of 0.015%; (2) dividend yield of 0%; (3) volatility factor of the
expected market price of our common stock of 78%; and (4) an expected life of three months.
Note
issued on November 7, 2013:
The
Company identified embedded derivatives related to the convertible promissory notes entered into on November 7, 2013. These
embedded derivatives included certain conversion features.
During
the six months ended September 30, 2014 we recorded additions to our derivative conversion liabilities related to the conversion
feature attributable to interest and penalties accrued during the period. These additions aggregated $20,955 and $21,925 for the
three and six months ended September 30, 2014, respectively, which has been charged to interest expense.
During
the three and six months ended September 30, 2014, the Company recorded $14,459 and $23,154 of income, respectively, related to
the change in the fair value of the derivative.
The
fair value of the described embedded derivative of $57,506 at September 30, 2014 was determined using the Black Scholes Model
with the following assumptions: (1) risk free interest rate of 0.015%; (2) dividend yield of 0%; (3) volatility factor of the
expected market price of our common stock of 78%; and (4) an expected life of three months.
NOTE
5 - FAIR VALUE OF FINANCIAL INSTRUMENTS
ASC
825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities
required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it
would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent
risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity
to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes
three levels of inputs that may be used to measure fair value:
Level 1
- Quoted prices in active markets for identical assets or liabilities.
Level
2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets
with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant
inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full
term of the assets or liabilities.
Level
3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To
the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination
of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of
the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair
value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.
Items
recorded or measured at fair value on a recurring basis in the accompanying unaudited condensed consolidated financial statements
consisted of the following items as of September 30, 2014:
| |
| | |
Fair Value Measurements at
September 30, 2014 using: | |
| |
September 30,
2014 | | |
Quoted Prices
in Active Markets for Identical Assets (Level 1) | | |
Significant
Other Observable Inputs (Level 2) | | |
Significant
Unobservable Inputs (Level 3) | |
Liabilities: | |
| | |
| | |
| | |
| |
Debt
and Warrant Derivative Liabilities | |
$ | 209,513
| | |
| - | | |
| - | | |
$ | 209,513
| |
The
debt derivative liabilities is measured at fair value using quoted market prices and estimated volatility factors based on
historical prices for the Company’s common stock and are classified within Level 3 of the valuation hierarchy.
The
following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of September
30, 2014:
| |
Debt Derivative Liability | |
Balance, March 31, 2014 | |
$ | 2,075,434 | |
Additions | |
| 125,995 | |
Extinguished derivative liability | |
| (852,501 | ) |
Change in fair value of derivative liabilities | |
| (1,139,415 | ) |
Balance, September 30, 2014 | |
$ | 209,513 | |
NOTE
6 - GOING CONCERN
The accompanying unaudited condensed consolidated
financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has not yet established any sources of revenue to cover its operating
expenses. As shown in the accompanying unaudited condensed consolidated financial statements, the Company has not generated any
revenue for the period from October 19, 2011 (date of inception) through September 30, 2014. The Company has recurring net losses,
an accumulated deficit of $4,677,946 and a working capital deficit (current liabilities exceeded current assets) at September
30, 2014 of $2,019,869. Additionally, current economic conditions in the United States and globally create significant challenges
attaining sufficient funding.
The
Company’s ability to continue existence is dependent upon commencing its planned operations, management’s ability
to develop and achieve profitable operations and/or upon obtaining additional financing to carry out its planned business. The
Company intends to fund its business development, acquisition endeavors and operations through equity and debt financing arrangements.
The Company is dependent upon its Managing Member and Founder to provide financing for working capital purposes. However, there
can be no assurance that these arrangements will be sufficient to fund its ongoing capital expenditures, working capital, and
other cash requirements. The outcome of these matters cannot be predicted at this time. These matters raise substantial doubt
about the Company’s ability to continue as a going concern. The accompanying unaudited condensed consolidated financial
statements do not include any adjustments that might necessary should the Company be unable to continue as a going concern.
NOTE
7 - SHAREHOLDERS EQUITY
Common
stock
The
Company is authorized to issue 495,000,000 shares of common stock, par value $0.001 per share. As of September 30, 2014 and March
31, 2014 the Company had 127,652,295 and 94,151,666 shares of common stock issued and outstanding, respectively.
During
April 2014 $15,000 of principal of the promissory note issued on August 28, 2013 was converted into 2,000,000 shares of common
stock valued at $24,000.
On
August 7, 2014 we agreed to issue 31,530,629 shares of our common stock in exchange for the cancellation of the 62,667,125 debenture
warrants described in Note 4. As a result, $360,529 of derivative liability was reclassified to paid-in capital. A total of 31,500,629
shares have been issued and 30,000 shares remain to be issued.
Preferred
stock
The
Company is authorized to issue 5,000,000 shares of $0.0001 par value preferred stock. As of September 30, 2014 and March 31, 2014,
the Company has no shares of preferred stock issued and outstanding.
Stock
Options
During
August and September 2014 we granted a total of 800,000 stock options to two consultants and a director. Of these grants, 550,000
options vested upon grant and 250,000 vested over a six week period. The options have a weighted average exercise price of $0.008
and a weighted average life of 3.52 years. We have recorded an expense of $5,010 related to these options determined using the
Black Scholes Model with the following weighted average assumptions: (1) risk free interest rate of 0.875-1.625%; (2) dividend
yield of 0%; (3) volatility factor of the expected market price of our common stock of 184-210%; and (4) an expected life of 3.52
years.
NOTE
8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As
of September 30, 2014 and March 31, 2014, accounts payable and accrued liabilities for the period ending are comprised of the
following:
| |
September 30, | | |
March
31, | |
| |
2014 | | |
2014 | |
Legal and professional fees
payable | |
$ | 142,089 | | |
$ | 133,534 | |
Consulting fees payable | |
| 52,500 | | |
| 52,500 | |
Accrued interest | |
| 66,731 | | |
| 82,551 | |
Other payables | |
| 60,684 | | |
| 42,504 | |
| |
$ | 322,004 | | |
$ | 311,089 | |
NOTE
9 - COMMITMENTS AND CONTINGENCIES
The Company is subject to legal proceedings
and claims from time to time which arise in the ordinary course of its business. Although occasional adverse decisions or settlements
may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its unaudited
condensed consolidated financial position, results of operations or liquidity.
ITEM
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion of our financial condition and results of operations for the three and six month periods ended September
30, 2014 and 2013 should be read in conjunction with the unaudited condensed consolidated financial statements and the notes to
those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current
expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results
and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number
of factors, including those set forth under the Item 1A, Risk Factors, Cautionary Notice Regarding Forward-Looking Statements
and Business sections in our Annual Report on Form 10-K for the year ended March 31, 2014 filed on July 15, 2014 with the Securities
and Exchange Commission (“SEC”), this report, and our other filings with the SEC. We use words such as “anticipate,”
“estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,”
“believe,” “intend,” “may,” “will,” “should,” “could,”
and similar expressions to identify forward-looking statements. In addition, any statements that refer to projections of our future
financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances
are forward-looking statements. Such statements are based on our current expectations and could be affected by the uncertainties
and risk factors described throughout this report.
As
used in this report, the terms "Company", "we", "our", "us" and "Truli" refer
to Truli Media Group, Inc.
Our
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is provided
in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of
operations, financial condition, and cash flows. MD&A is organized as follows:
|
● |
Company
Overview — Discussion of our business plan and strategy in order to provide context for the remainder of MD&A. |
|
● |
Critical
Accounting Policies — Accounting policies that we believe are important to understanding the assumptions and judgments
incorporated in our reported financial results and forecasts. |
|
● |
Results
of Operations — Analysis of our financial results comparing the three and six month periods ended September 30, 2014
to the three and six month periods ended September 30, 2013. |
|
● |
Liquidity
and Capital Resources — Analysis of changes in our cash flows, and discussion of our financial condition and potential
sources of liquidity. |
|
|
|
The
various sections of this MD&A contain a number of forward-looking statements. Such statements are based on our current expectations
and could be affected by the uncertainties and risk factors described throughout this filing and particularly in the Risk Factors
section of this Quarterly Report. Our actual results may differ materially.
COMPANY
OVERVIEW
Business
Truli
serves as a collaborative digital platform for members of the faith and family community worldwide, allowing them to share and
deepen their faith and family values together. Truli invites ministries from various religious denominations to upload their messages
to the Truli platform, at no cost. Our goal is to have an ever expanding library from these participating ministries, centralizing,
serving and extending the Christian and family values message to a greater audience than previously done before. This platform
delivers all types of media content to Internet accessible devices such as TVs, computers and an assortment of digital mobile
devices such as tablets and smart phones. Currently, there are roughly 9,000 items in its library, with Christian content currently
representing roughly 40% of the Truli Platform with roughly 60% of the platform representing family entertainment such as feature
films “G” and “PG” rated, music videos focusing on family values, children’s programming, sports,
education, etc. The Truli platform is also available in the Spanish language on its website which includes roughly 3,000 items
in its library.
Strategy
Truli’s
goal is to sign up as many ministries as possible throughout the United States and abroad. Truli is affiliated with
over two hundred ministries and churches, and allows them to deliver their content through the Truli platform. We hope
to attract ministries to join our website by potentially providing benefits to them including (i) expanded dissemination of their
message regardless of size, budget or location, (ii) direct user feedback from our consumers, and (iii) organization of their
sermons and content as well as general technological advances to augment traditional places of worship.
Truli
consumers have access to free content as well as certain Pay-per-View content on the interactive digital platform from which we
hope to eventually derive revenue. In the event we are able to raise sufficient capital, and our website gains significant traffic,
we plan to sell advertising space on our website. We additionally plan to sell faith based merchandise through our
website once we are financially able to do so. We also have created a “donation” section of our website whereby we
will receive 15% of donations given to ministries and churches.
Truli
also will allow partners to monetize their content through our platform by letting them set purchase prices for their content,
and allowing them to receive money though the “donation” section of our website.
We
have currently not generated any revenue from these business strategies and there can be no assurances that we will do so in the
future.
Plan
of Operation
Truli
is currently focused on further developing its website and securing financing through which to increase our advertising and online
presence. Truli is additionally working toward increasing both the amount and diversity of its content through which
to attract more users as well as more churches and ministries.
Financial
To
date, we have devoted a substantial portion of our efforts and financial resources to creating and marketing our online platform.
As a result, since our inception in 2011, we have generated no revenue and have funded our operations principally through private
sales of debt and equity securities and through advances made by our Chief Executive Officer. We have never generated any revenue
and, as of September 30, 2014, we had an accumulated deficit of $4,677,946. We expect to continue to incur operating losses for
the foreseeable future and expect to generate no revenue for the foreseeable future.
Our
cash and cash equivalents balance at September 30, 2014 was $1,195, representing 100% of total assets. Based on our current expected
level of operating expenditures, we are currently uncertain if we will be able to fund our operations until our next year end.
This period could be shortened if there are any significant increases in spending that were not anticipated or other unforeseen
events. Currently we are dependent upon working capital advances provided by our Chief Executive Officer. We need to raise additional
cash through the private or public sales of equity or debt securities, collaborative arrangements, or a combination thereof, to
continue to fund operations and the development of our website and digital platform. There is no assurance that such financing
will be available to us when needed to allow us to continue our operations or if available, on terms acceptable to us. If we do
not raise sufficient funds in a timely manner, we may be forced to curtail operations, delay or stop developing or marketing our
products, or cease operations altogether, or file for bankruptcy. We currently do not have commitments for future funding of cash
from any source.
We have incurred
indebtedness in the aggregate of $1,646,278 in principal and interest as of September 30, 2014, which includes $92,500 principal
of our 8% convertible promissory notes, which are currently in default. As a result of the default, we recorded (i)
penalties of 50% of the outstanding principal and accrued interest aggregating $49,664, and (ii) an increase of the interest rate
to 22%. Unless we are able to restructure some or all of this debt, and raise sufficient capital to fund our continued development,
our current operations do not generate any revenue to pay these obligations. Accordingly, there can be no assurances
that we will be able to pay these or other obligations which we may incur in the future and it is unlikely we will be able to continue
as a going concern.
Our
Chief Executive Officer and consultants are currently not being paid. In the event financing is not obtained, we may
pursue further cost cutting measures. These events could have a material adverse effect on our business, results of
operations and financial condition.
The independent
registered public accounting firm’s report on our March 31, 2014 consolidated financial statements included in our Annual
Report states that our difficulty in generating sufficient cash flow to meet our obligations and sustain operations raise substantial
doubts about our ability to continue as a going concern. The consolidated financial statements do not include any adjustment
that might result should we be unable to continue as a going concern.
CRITICAL
ACCOUNTING POLICIES AND ESTIMATES
Our
consolidated financial statements and related public financial information are based on the application of accounting principles
generally accepted in the United States ("US GAAP"). US GAAP requires the use of estimates; assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts
reported. These estimates can also affect supplemental information contained in our external disclosures including information
regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere
to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different
assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
The following accounting policy is critical to understanding and evaluating our reported financial results:
Use
of Estimates
The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Convertible
Instruments
We
evaluate and account for conversion options embedded in its convertible instruments in accordance with professional standards
for “Accounting for Derivative Instruments and Hedging Activities.”
Professional
standards generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments
and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the
economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics
and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host
contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in
fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative
instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule
when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of “Conventional
Convertible Debt Instrument.”
We account for convertible
instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments)
in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,”
as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, we record, when necessary,
discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences
between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion
price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest
date of redemption. We also record when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred
shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction
and the effective conversion price embedded in the note.
ASC
815-40 provides that, among other things, generally, if an event is not within the entity’s control could or require net
cash settlement, then the contract shall be classified as an asset or a liability.
Stock-Based
Compensation
We utilize
the Black-Scholes option-pricing model to determine fair value of options and warrants granted as stock-based compensation, which
requires us to make judgments relating to the inputs required to be included in the model. In this regard, the expected volatility
is based on the historical price volatility of our common stock. The dividend yield represents our anticipated cash dividend on
common stock over the expected life of the stock options. The U.S. Treasury bill rate for the expected life of the stock options
is utilized to determine the risk-free interest rate. The expected term of stock options represents the period of time the stock
options granted are expected to be outstanding.
RESULTS
OF OPERATIONS
THREE
MONTHS ENDED SEPTEMBER 30, 2014 AS COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2013
We had no revenue
for the three month periods ended September 30, 2014 or 2013. Truli officially launched its website on July 10, 2012 but, has not
yet generated significant revenue. Prior to such time, we were principally involved in website development and research and
development activities. Net income of $615,040 and net loss of $2,735,899 for the three month periods ended September
30, 2014 and 2013, respectively, resulted from the operational activities described below.
Operating
Expenses
Operating
expenses totaled $134,725 and $618,197 during the three month periods ended September 30, 2014 and 2013, respectively. The
decrease in operating expenses is the result of the following factors.
We incurred selling,
general and administrative expenses of $134,725 for the three month period ended September 30, 2014, principally comprised of website
development costs, professional fees and consulting fees. The decrease of 78% for 2014 compared to 2013 was primarily
attributable to decreased spending on marketing, investor relations, professional and consulting fees, due to limited capital resources.
We do not anticipate that the reported expenses represent a reliable indicator of future performance because we are still in the
pre-revenue stage of development. Future costs are expected to be more heavily weighted towards marketing and promotion as our
website potentially gains traffic and sales.
Other
Income (Expense)
| |
Three Months Ended | | |
| |
| |
September 30, | | |
| |
| |
2014 | | |
2013 | | |
Change | |
| |
| | |
| | |
| |
Interest expense | |
$ | (207,485 | ) | |
$ | (2,096,627 | ) | |
$ | 1,889,142 | |
Gain on change in fair value of warrant derivative liability | |
| 206,000 | | |
| 229,594 | | |
| (23,594 | ) |
Gain on extinguishment of debt | |
| 751,250 | | |
| - | | |
| 751,250 | |
Loss on default | |
| - | | |
| (250,669 | ) | |
| 250,669 | |
Total other income (expense) | |
$ | 749,765 | | |
$ | (2,117,702 | ) | |
$ | 2,867,467 | |
We charged to operations
interest expense of $207,485 and $2,096,627 for the three month periods ended September 30, 2014 and 2013, respectively. The
decrease was primarily related to our derivative debt. Additionally, we had a gain of $206,000 and $229,594 for the
three month periods ended September 30, 2014 and 2013, respectively as a result of the change in fair value of the our derivative
instruments. We also had a gain on extinguishment of debt of $751,250 for the three month period ended September 30,
2014 with no comparable amount in the 2013 period, and a loss on default of $250,669 for the three month period ended September
30, 2013 with no comparable amount in the 2014 period. For more information on our 8% convertible promissory notes and derivative
liabilities, please refer to Notes 3 and 4 to the accompanying unaudited condensed consolidated financial statements.
SIX
MONTHS ENDED SEPTEMBER 30, 2014 AS COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 2013
We had no revenue
for the six month periods ended September 30, 2014 or 2013. Truli officially launched its website on July 10, 2012 but, has not
yet generated significant revenue. Prior to such time, we were principally involved in website development and research and
development activities. Net income of $1,436,011 and net loss of $2,856,414 for the six month periods ended September
30, 2014 and 2013, respectively, resulted from the operational activities described below.
Operating
Expenses
Operating
expenses totaled $177,431 and $732,551 during the six month periods ended September 30, 2014 and 2013, respectively. The
increase in operating expenses is the result of the following factors.
We incurred selling,
general and administrative expenses of $177,431 for the six month period ended September 30, 2014, principally comprised of website
development costs, professional fees and consulting fees. The decrease of 76% for 2014 compared to 2013 was primarily
attributable to decreased spending on marketing, investor relations, professional and consulting fees, due to limited capital resources.
We do not anticipate that the reported expenses represent a reliable indicator of future performance because we are still in the
pre-revenue stage of development. Future costs are expected to be more heavily weighted towards marketing and promotion as our
website potentially gains traffic and sales.
Other
Income (Expense)
| |
Six Months Ended | | |
| |
| |
September 30, | | |
| |
| |
2014 | | |
2013 | | |
Change | |
| |
| | |
| | |
| |
Interest expense | |
$ | (276,102 | ) | |
$ | (2,102,788 | ) | |
$ | 1,826,686 | |
Gain on change in fair value of warrant derivative liability | |
| 1,139,415 | | |
| 229,594 | | |
| 909,821 | |
Gain on extinguishment of debt | |
| 751,250 | | |
| - | | |
| 751,250 | |
Loss on default | |
| - | | |
| (250,669 | ) | |
| 250,669 | |
Loss on debt conversion | |
| (1,121 | ) | |
| - | | |
| (1,121 | ) |
Total other income (expense) | |
$ | 1,613,442 | | |
$ | (2,123,863 | ) | |
$ | 3,737,305 | |
We charged to operations
interest expense of $276,104 and $2,102,788 for the six month periods ended September 30, 2014 and 2013, respectively. The
decrease was primarily related to our derivative debt. Additionally, we had a gain of $1,139,415 and $229,594 for the
six month periods ended September 30, 2014 and 2013, respectively as a result of the change in fair value of our derivative instruments.
We also had a gain on extinguishment of debt of $751,250 for the six month period ended September 30, 2014 with no comparable amount
in the 2013 period, and a loss on default of $250,669 for the six month period ended September 30, 2013 with no comparable amount
in the 2014 period. We also had a loss on debt conversion of $1,121 compared to $0 for the six month periods ended September
30, 2014 and 2013, respectively. For more information on our 8% convertible promissory notes and derivative liabilities, please
refer to Notes 3 and 4 to the accompanying unaudited condensed consolidated financial statements.
LIQUIDITY
AND CAPITAL RESOURCES
| |
Six Months Ended | |
| |
Ended September 30, | |
| |
2014 | | |
2013 | |
| |
| |
Cash at beginning of period | |
$ | 4,249 | | |
$ | 1,296 | |
Net cash used in operating activities | |
| (145,717 | ) | |
| (392,176 | ) |
Net cash provided by financing activities | |
| 142,663 | | |
| 575,999 | |
Cash at end of period | |
$ | 1,195 | | |
$ | 185,119 | |
We had cash and
cash equivalents of $1,195 and $4,249 as of September 30, 2014 and March 31, 2014, respectively. Our capital requirements
arose principally from costs associated with website development, marketing and general administrative costs for both fiscal periods
ended September 30, 2014 and 2013. We have liabilities of $2,111,064 and $3,972,855 as of September 30, 2014 and March 31, 2014,
respectively. The decrease in liability is primarily attributable to the decrease in fair value of derivative liabilities
related to convertible debt and common stock purchase warrants with price reset provisions.
We owe principal
and interest of $1,224,072 pursuant to a 4% unsecured term note representing advances made by our Chief Executive Officer. We received
advances of $484,000 and $32,162 during the six month periods ended September 30, 2014 and 2013, respectively.
We additionally
have an unsecured line of credit with $82,975 outstanding as of September 30, 2014 and March 31, 2014.
We owe an aggregate
of $92,500 on three 8% convertible promissory notes issued on August 28, 2013, October 2, 2013, and November 7, 2013. During
April 2014, we issued 2,000,000 shares of common stock as a result of the conversion of $15,000 in principal of the 8% convertible
promissory notes at a conversion price of 55% of the average three (3) lowest per share market values during the ten trading days
preceding conversion. These notes are currently in default. As a result of the default, we recorded (i) penalties of
50% of the outstanding principal and accrued interest aggregating $49,664, and (ii) an increase of the interest rate to 22%.
We owe $180,000 in principal as a result of a debt settlement incurred with the extinguishment of our 12%
convertible debentures issued on September 10, 2013. This amount will be paid in monthly installments over a 24 month
period.
We spent in operating
activities, $145,717 and $392,176 respectively for the six month periods ended September 30, 2014 and 2013, respectively. The
increase is primarily attributable to a decrease in loss (after adjusting for non-cash items) of approximately $202,000.
Financing activities
provided $142,663 and $575,999 to us during the six month periods ended September 30, 2014 and 2013, respectively. We received
advances from our Chief Executive Officer of $484,000 and $32,162 during the six month periods ended September 30, 2014 and 2013,
respectively. We received proceeds from convertible notes of $543,837 during the six months ended September 30, 2013 and repaid
$341,337 during the six months ended September 30, 2014.
As
of September 30, 2014, we had an accumulated deficit of $4,677,946 compared to $6,113,957 as of March 31, 2014. The
decrease is attributable to the net income for the six month period ended September 30, 2014.
We do not currently
have sufficient capital in its accounts, nor sufficient firm commitments for capital to assure its ability to meet its current
obligations or to continue its planned operations. We are continuing to pursue working capital sources through the sale of our
debt or equity securities in order to carry out our planned operations. However, based on our current expected level of operating
expenditures, we do not believe we will be able to fund our operations in the short term without raising additional capital. There
is no assurance that any of the planned activities will be successful.
Off-Balance
Sheet Arrangements
We have no off-balance
sheet arrangements.
Recently
Issued Accounting Pronouncements
We have reviewed
all recently issued, but not yet effective, accounting pronouncements and do not expect the future adoption of any such pronouncements
to have a significant impact on our results of operations, financial condition or cash flow.
ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not
applicable as we are a smaller reporting company as defined by Rule 229.10(f)(1).
ITEM
4. CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
We
are required to maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the
Securities Exchange Act of 1934. Based on their evaluation as of the end of the period covered by this Quarterly Report on Form
10-Q, our Chief Executive Officer who also serves as our Chief Financial Officer, has concluded that our disclosure controls and
procedures were not effective to ensure that the information relating to our company, required to be disclosed in our Securities
and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules
and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, to allow timely
decisions regarding required disclosure as a result of material weaknesses in our internal control over financial reporting.
Changes
in Internal Control over Financial Reporting
There were no changes
in our internal control over financial reporting (as defined in Rule 13a-15f of the Exchange Act) that occurred during the six
months ended September 30, 2014 that has materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
PART
II: OTHER INFORMATION
ITEM
1 - LEGAL PROCEEDINGS
On
October 14, 2014, StoryCorp Consulting, a prior consultant of Truli, initiated an action against Truli with the American Arbitration
Association. The action alleges that Truli owes StoryCorp Consulting $33,000 as well as 596,920 shares of our common stock pursuant
to the terms of a consulting agreement entered into on December 14, 2012. The claim alleges that Truli defaulted on payments owed
between August 1, 2013 and February 1, 2014 pursuant to the terms of the consulting agreement. Given the nature of this proceeding,
we are unable to determine the outcome or its effect on Truli.
ITEM
1A. - RISK FACTORS
We
have described below a number of uncertainties and risks which, in addition to uncertainties and risks presented elsewhere in
this Quarterly Report, may adversely affect our business, operating results and financial condition. The uncertainties and
risks enumerated below as well as those presented elsewhere in this Quarterly Report should be considered carefully in evaluating
us, our business and the value of our securities. The following important factors, among others, could cause our actual business,
financial condition and future results to differ materially from those contained in forward-looking statements made in this Quarterly
Report or presented elsewhere by management from time to time.
Risks
Related To Our Financial Condition.
We
were formed on October 19, 2011 and have a limited operating history and accordingly may not be able to effectively operate our
business.
We
are still in the early stages of company development and accordingly, there is only a limited basis upon which to evaluate our
prospects for achieving our intended business objectives. There can be no assurance that we will ever achieve positive cash flow
or profitability, or that if either is achieved, that it will be at the levels estimated by management.
We
have not yet generated any revenue from the sale of our products or services. Our failure to generate significant revenues
will seriously harm our business. We anticipate that we will experience operating losses and incur significant and increasing
losses in the future due to growth, expansion, development and marketing. As a result of these additional expenses, we would need
to generate substantial revenues to become profitable. We expect to incur significant operating losses for at least the next several
years.
Our
independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability
to obtain future financing.
The
report of our independent auditors dated July 14, 2014 on our consolidated financial statements for the year ended March 31, 2014
included an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern.
Our auditors’ doubts are based on our incurring significant losses from operations and our working capital deficit position.
Our ability to continue as a going concern will be determined by our ability to obtain additional funding in the short term to
enable us to realize the commercialization of our planned business operations. Our consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
We
have a significant amount of debt which could impact our ability to continue to implement our business plan.
We have incurred
indebtedness of our outstanding 8% convertible promissory notes currently totaling in principal and interest $153,072 as of September
30, 2014. As of the date of this report, we have been informed by the holders that we are currently in default and we have made
no payments. Unless we are able to restructure some or all of the remaining debt, and raise sufficient capital to fund
our continued development, we will be unable to pay these obligations as our current operations do not generate any revenue.
We
currently are subject to financial obligations of a settlement agreement regarding the cancellation our previously issued 12%
convertible debentures and our failure to meet payments or obligations as they become due may materially harm our financial condition.
We entered into
a settlement agreement and release of claims on August 7, 2014 with the holders of our 12% convertible debentures whereby we paid
an initial payment of $301,337. We additionally owe another $180,000 to be paid over 24 monthly payments beginning on October 10,
2014. We have currently not missed any payments. In the event we default on any payment under this settlement agreement, we would
be subject to substantial penalties and interest, which will have a material adverse effect on our business and financial condition.
Our chief executive officer, as
well as consultants, are currently working without pay and there can be no assurances that they will continue to provide services
to us.
Currently, our chief
executive officer, as well as many of our consultants, are not being paid for their services provided to us due to a shortage of
company funds. In the event that we are unable to secure additional financing to begin paying employees and consultants,
they may quit, which could have a material adverse effect on the our business, financial condition and results of operations.
Risks
Related to the Company
There
is no assurance that we will be able to attract and retain consumers to our website or generate revenues.
Our
success depends upon our ability to obtain and retain consumers and potentially generate income from advertisers, future merchandise
sales, donations to our subscriber ministries, as well as Pay-per-View content on our website. There is no assurance that we will
be able to attract prospective consumers to our website, that we will be able to retain consumers that we attract, or that we
will be able to generate revenue sufficient to continue our operations.
We
will require additional capital to implement our business plan and marketing strategies which we may be unable to secure.
Under
our business plan, we intend to build and expand our operations substantially over the next several years. Our cash on hand is
insufficient for our operational needs. We therefore need additional financing for working capital purposes and to grow our business.
There is no assurance that additional financing will available on acceptable terms, or at all. If we fail to obtain additional
financing as needed, we may be required to reduce or halt our anticipated expansion plans and our business and results of operations
could be materially, adversely affected. There can be no assurance that additional financing will be available on terms deemed
to be acceptable by us, and in our stockholders’ interests.
Given
our lack of capital, we may be unable to build, or continue to build, awareness of our brand, which could negatively impact our
business, our ability to generate revenues, and/or cause our revenues to decline.
Our
ability to build and maintain brand recognition is critical to attracting and expanding our online user base. In order
to promote our brand, in response to competitive pressures or otherwise, we may find it necessary to increase our marketing budget,
hire additional marketing and public relations personnel or otherwise increase our financial commitment to creating
and maintaining brand loyalty among our clients. Given our insufficient funds, we are currently unable to promote
our brand as necessary without raising additional capital. If we fail to promote and maintain our brand effectively, or incur
excessive expenses attempting to promote and maintain our brands, our business and financial results may suffer.
We rely on the proper and efficient
functioning of its computer and database systems, and a malfunction could result in disruptions to our business.
Our ability to keep
our business operating depends on the proper and efficient operation of its computer and database systems. Since computer
and database systems are susceptible to malfunctions and interruptions (including those due to equipment damage, power
outages, computer viruses and a range of other hardware, software and network problems), we cannot guarantee that it
will not experience such malfunctions or interruptions in the future. A significant or large-scale malfunction or interruption
of one or more of its computer or database systems could adversely affect our ability to keep our operations running efficiently.
If a malfunction results in a wider or sustained disruption to its business, this could have a material adverse effect on
our business, financial condition and results of operations.
Our
systems may be subject to slower response times and system disruptions that could adversely affect our revenues.
Our
ability to attract and maintain relationships with users, advertisers and strategic partners will depend on the
satisfactory performance, reliability and availability of our Internet infrastructure. System interruptions or delays that
result in the unavailability of Internet sites or slower response times for users would reduce the number of
advertising impressions and leads delivered. This could reduce our prospects of revenues as the attractiveness of our sites
to users and advertisers decreases. Further, we do not have multiple site capacity for all of our services in the event of
any such occurrence. We may experience service disruptions for the following reasons:
|
● |
occasional
scheduled maintenance; |
|
● |
equipment
failure; |
|
● |
traffic
volume to our websites that exceed our infrastructure’s capacity; and |
|
● |
natural
disasters, telecommunications failures, power failures, other system failures, maintenance, viruses, hacking or other events
outside of our control. |
Our
networks and websites must accommodate a high volume of traffic and deliver frequently updated information. They may experience
slow response times or decreased traffic for a variety of reasons. There may be instances where our online networks as a whole,
or our websites individually, will be inaccessible. Also, slower response times can result from general Internet problems, routing
and equipment problems involving third party Internet access providers, problems with third party advertising servers, increased
traffic to our servers, viruses and other security breaches, many of which problems are out of our control. In addition, our users
depend on Internet service providers and online service providers for access to our online networks or websites. Such providers
have experienced outages and delays in the past, and may experience outages or delays in the future. Moreover, our Internet infrastructure
might not be able to support continued growth of our online networks or websites. Any of these problems could result in less traffic
to our networks or websites or harm the perception of our networks or websites as reliable sources of information. Less traffic
on our networks and websites or periodic interruptions in service could have the effect of reducing demand for both users and
for advertisers on our networks or websites, thereby harming our financial condition and operations.
Our
networks may be vulnerable to unauthorized persons accessing our systems, viruses and other disruptions, which could result in
the theft of our proprietary information and/or disrupt our Internet operations making our websites less attractive and reliable
for our users and advertisers.
Internet
usage could decline if any compromise of security occurs. “Hacking” involves efforts to gain
unauthorized access to information or systems or to cause intentional malfunctions or loss or corruption of
data, software, hardware or other computer equipment. Hackers, if successful, could misappropriate proprietary information or
cause disruptions in our service.
We
may be required to expend capital and other resources to protect our websites against hackers. Our online networks could also
be affected by computer viruses or other similar disruptive problems, and we could inadvertently transmit viruses across our networks
to our users or other third parties. Any of these occurrences could harm our business or give rise to a cause of action against
us. Providing unimpeded access to our online networks is critical to servicing our customers and providing superior customer service.
Our inability to provide continuous access to our online networks could cause some of our customers to discontinue purchasing
advertising programs and services and/or prevent or deter our users from accessing our networks. Our activities and the activities
of third party contractors involve the storage and transmission of proprietary and personal information. Accordingly, security
breaches could expose us to a risk of loss or litigation and possible liability. We cannot assure that contractual provisions
attempting to limit our liability in these areas will be successful or enforceable, or that other parties will accept such contractual
provisions as part of our agreements.
Our
business, which is dependent on centrally located communications and computer hardware systems, is vulnerable to natural disasters,
telecommunication and systems failures, terrorism and other problems, which could reduce traffic on our networks or websites and
result in decreased capacity for advertising space.
Our
operations are dependent on our communications systems and computer hardware, all of which are located in data centers
operated by third parties. These systems could be damaged by fire, floods, earthquakes, power loss, telecommunication failures
and other similar events and natural disasters. We currently have no insurance policies to cover for loss or damages
in these events. In addition, terrorist acts or acts of war may cause harm to our employees or damage our facilities,
our clients, our clients’ customers and vendors, or cause us to postpone or cancel, or result in dramatically
reduced attendance at, our events, which could adversely impact our revenues, costs and expenses and financial
position. We are predominantly uninsured for losses and interruptions to our systems or cancellations of events
caused by terrorist acts and acts of war.
We
currently have no insurance and we cannot be sure that adequate insurance coverage will be available in the future on acceptable
terms, if at all, or that, if available, we will be able to maintain any such insurance at sufficient levels of coverage or that
any such insurance will provide adequate protection against potential liabilities.
We
currently have no director and officer insurance and no commercial insurance policies. Due to our lack of insurance, numerous
events or claims against us would have a material adverse effect on our business, financial condition and results of operations.
Insurance availability, coverage terms and pricing continue to vary with market conditions. If we are able to obtain adequate
capital, we plan to obtain appropriate insurance coverage for insurable risks that we identify, however, we may fail to correctly
anticipate or quantify insurable risks, may not be able to obtain appropriate insurance coverage. We have observed rapidly changing
conditions in the insurance markets relating to nearly all areas of traditional corporate insurance. Such conditions, in the future
may result in higher than anticipated premium costs, higher policy deductibles, and lower coverage limits. Even if we are able
to maintain insurance, for some risks we may ever be able to obtain insurance coverage because of cost or availability.
If
additional shares are issued in the future, our investor’s ownership interest will be diluted.
We may elect to
issue additional shares of common stock in the future including, without limitation, in connection with an additional capital raise.
If we issue additional shares in the future, an investor’s ownership interest will be diluted and such dilution may be substantial.
If
Internet users do not interact with www.truli.com frequently or if we fail to attract new users to the site, our business and
financial results will suffer.
The
future success of www.truli.com is largely dependent upon users constantly visiting the site for content. We need to attract
users to visit our website frequently and spend increasing amounts of time on the website when they visit. If we are unable to
encourage users to interact more frequently with truli.com and to increase the amount of user generated content they provide,
our ability to attract new users to our website and increase the number of loyal users will be diminished and adversely affected.
As a result, our business and financial results will suffer, and we will not be able to grow our business as planned.
We
intend to generate substantial portions of our revenue through advertising, and uncertainties in the Internet advertising market
and our failure to increase advertising inventory on our Web properties could adversely affect our ad revenues.
Although
worldwide online advertising spending is growing steadily, it represents only a small percentage of total advertising expenditures.
Advertisers will not do business with us if their investment in Internet advertising with us does not generate sales leads, and
ultimately customers, or if we do not deliver their advertisements in an appropriate and effective manner. If the Internet does
not continue to be as widely accepted as a medium for advertising and the rate of advertising on the Internet decreases, our ability
to generate increased revenues could be adversely affected. We believe that growth in ad revenues will also depend on our ability
to increase the number of pages on our website to provide more advertising inventory. If we fail to increase our advertising
inventory at a sufficient rate, our ad revenues could grow more slowly than we expect, which could have an adverse effect on our
financial results.
New
technologies could block Internet ads from being seen by our users, which could harm our financial results.
Technologies
have been developed, and are likely to continue to be developed, that can block the display of Internet ads. Ad-blocking technology
may cause a decrease in the number of ads that we can display on our website, which could adversely affect our future ad revenues
and our financial results.
If
we fail to enhance awareness of our website and provide updated content, we will be unable to generate sufficient website traffic
and our business and financial condition will suffer.
In
order to generate traffic to our website, we believe that we need to enhance awareness of our website and consistently provide
updated content. We also believe that the importance of brand recognition will increase due to the relatively low barriers to
entry in our market. We believe we currently have low traffic on our website due to a lack of content, and our inability
to adequately market the website given our insufficient capital. Increasing awareness and traffic will require us to spend increasing
amounts of money on, and devote greater resources to, advertising, marketing and other brand-building efforts, and these investments
may not be successful. Given our insufficient capital, even if these efforts are successful, they may not be cost-effective. If
we are unable to enhance our website, our traffic may not increase and we may fail to attract advertisers, which could in turn
result in lost revenues and adversely affect our business and financial results.
Risks
related to management
Our
Chief Executive Officer, by virtue of his ownership of our securities, is currently able to control the company.
Our founder and
Chief Executive Officer, Michael Jay Solomon, as of November 7, 2014, beneficially owns approximately 51% of the issued and outstanding
equity of Truli. Our non-management shareholders will have virtually no ability to control or direct our affairs. Management will
be in a position to control all of our decisions, and removal of such persons would be virtually impossible. Management will be
able to significantly influence all matters requiring shareholder approval, including the election of directors and approval of
significant corporate transactions, which could have an undesired or undesirable effect. No person should invest in in Truli unless
such investor is willing to place all aspects of the management of the company in the existing management.
We
are responsible for the indemnification of our officers and directors, which, if required, could result in significant company
expenditures.
Should our officers
and/or directors require us to contribute to their defense, we may be required to spend significant amounts of our capital. Our
articles of incorporation and bylaws also provide for the indemnification of our directors, officers, employees, and agents, under
certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party
arising from their association with or activities on behalf of us. This indemnification policy could result in substantial expenditures,
which we may be unable to recoup. If these expenditures are significant, or involve issues which result in significant liability
for our key personnel, we may be unable to continue operating as a going concern.
Given
our financial situation, we may be unable to implement growth and expansion strategies.
We
are not able to expand our product and service offerings, our client base and markets, or implement the other features of our
business strategy given our insufficient capital and need for additional financing. If we are unable to successfully manage our
future growth, establish and continue to upgrade our operating and financial control systems, recruit and hire necessary personnel
or effectively manage unexpected expansion difficulties, our financial condition and results of operations could be materially
and adversely affected.
Additional
financing will be necessary for the implementation of our growth strategy.
We
will require additional debt and/or equity financing to pursue our growth strategy. Given our limited operating history
and existing losses, there can be no assurance that additional financing will be available, or, if available, that the terms will
be acceptable to us. Lack of additional funding would force us to curtail substantially or even totally, our business
and growth plans.
Furthermore,
given our financial condition, future financing may involve restrictive covenants that could impose limitations on our operating
flexibility. Our failure to successfully obtain additional future funding on terms sufficient to us will seriously
jeopardize our ability to continue our business and operations.
We
depend on Michael Jay Solomon, our Chief Executive Officer, to manage and drive the execution of our business plans and operations;
the loss of Mr. Solomon would materially and adversely affect our business.
Currently,
our Chief Executive Officer, Michael Jay Solomon is our only employee and given our financial condition, he has forgone payment
for the last two fiscal years. There can be no assurance that we will be successful in retaining Mr. Solomon. A
voluntary or involuntary termination of Mr. Solomon would have a materially adverse effect on our business.
Risks
Related to Investment in our Company
The
market for our common stock has been illiquid so the price of our common stock could be volatile and could decline when you want
to sell your holdings.
Our
common stock trades with limited volume on the OTC Markets under the symbol TRLI. Although a limited public market for our common
stock exists, it is still relatively illiquid compared to that of a seasoned issuer. Any prospective investor in our securities
should consider the limited market of our common stock when making an investment decision. No assurances can be given that the
trading volume of our common stock will increase or that a liquid public market for our securities will ever materialize. Numerous
factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. These
factors include but are not limited to: (i) actual or anticipated changes in our earnings, fluctuations in our operating results
or our failure to meet the expectations of financial market analysts and investor; (ii) changes in financial estimates by us or
by any securities analysts who might cover our stock; (iii) speculation about our business in the press or the investment community;
(iv) significant developments relating to our relationships with our licensees and our advisors; (v) stock market price and volume
fluctuations of other publicly traded companies and, in particular, those that are in our industry; (vi) our potential inability
to pay back outstanding notes or debentures, or contractual obligations related to the cancellation thereof; (vii) investor perceptions
of our industry in general and our company in particular; (viii) the operating and stock performance of comparable companies;
(ix) general economic conditions and trends; (x) major catastrophic events; (xi) announcements by us or our competitors of new
products, significant acquisitions, strategic partnerships or divestitures; (xii) changes in accounting standards, policies, guidance,
interpretation or principles; (xiii) sales of our common stock, including sales by our directors, officers or significant stockholders;
and (xiv) additions or departures of key personnel.
Moreover,
securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to operating
performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other
interests in our company at a time when you want to sell your interest in us.
Our
common stock may be subject to the “penny stock” rules of the SEC, which may make it more difficult for stockholders
to sell our common stock.
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the
purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price
of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules
require (i) that a broker or dealer approve a person's account for transactions in penny stocks; and (ii) the broker or dealer
receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to
be purchased.
In
order to approve a person's account for transactions in penny stocks, the broker or dealer must (i) obtain financial information
and investment experience objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks
are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating
the risks of transactions in penny stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission
relating to the penny stock market, which, in highlight form (i) sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Disclosure
also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to
be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny
stocks.
The
regulations applicable to penny stocks may severely affect the market liquidity for our common stock and could limit an investor’s
ability to sell our common stock in the secondary market.
As
an issuer of “penny stock,” the protection provided by the federal securities laws relating to forward-looking statements
does not apply to us.
Although
federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under
the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit
of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained
a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary
to make the statements not misleading. Such an action could hurt our financial condition.
We
are subject to price reset provisions, variable conversion prices and adjustments related to certain of our convertible notes
and our common stock purchase warrants which could cause significant dilution to stockholders and adversely impact the price of
our common stock.
Certain
of our securities are subject to price reset provisions, variable conversion prices and adjustments. As a result, future
sales of common stock or common stock equivalents may result in significant dilution to our shareholders. For instance,
our 8% convertible promissory notes issued in August, October, and November of 2013 are convertible into common shares at a discount
to market and have price reset features.
Additionally,
2,506,685 common stock purchase warrants issued as compensation to placement agents in connection with our previously cancelled
12% convertible debentures have increased to 17,904,857 warrants and the exercise price has been reduced from $0.05
to $0.007 as a result of subsequent debt issuances.
In
the event of further price resets or conversion price modifications, dilution may be substantial and our stock price may be negatively
impacted.
Failure
to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse
effect on our business and operating results and stockholders could lose confidence in our financial reporting.
Effective
internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide
reliable financial reports or prevent fraud, our operating results could be harmed. Failure to achieve and maintain an effective
internal control environment, regardless of whether we are required to maintain such controls, could also cause investors to lose
confidence in our reported financial information, which could have a material adverse effect on our stock price. Although we are
not aware of anything that would impact our ability to maintain effective internal controls, we have not obtained an independent
audit of our internal controls and, as a result, we are not aware of any deficiencies which would result from such an audit. Further,
at such time as we are required to comply with the internal controls requirements of the Sarbanes-Oxley Act, we may incur significant
expenses in having our internal controls audited and in implementing any changes which are required.
We
have not paid dividends on our common stock in the past and do not expect to pay dividends on our common stock for the foreseeable
future. Any return on investment may be limited to the value of our common stock.
No
cash dividends have been paid on our common stock. We expect that any income received from operations will be devoted to our future
operations and growth. We do not expect to pay cash dividends on our common stock in the near future. Payment of dividends would
depend upon our profitability at the time, cash available for those dividends, and other factors as our board of directors may
consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on an investor’s investment
will only occur if our stock price appreciates.
The
requirements of being a public company may strain our resources, divert management’s attention and affect our ability to
attract and retain qualified board members.
We
became a public company in June 2012 and subject to the reporting requirements of the Securities Exchange Act of 1934, as amended,
the Sarbanes-Oxley Act. Prior to June 2012, we had not operated as a public company and the requirements of these rules and regulations
have and will likely continue to increase our legal and financial compliance costs, make some activities more difficult, time-consuming
or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual,
quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other
things, that we maintain effective disclosure controls and procedures and internal controls for financial reporting. For example,
Section 404 of the Sarbanes-Oxley Act of 2002 requires that our management report on, and our independent auditors attest
to, the effectiveness of our internal controls structure and procedures for financial reporting. Section 404 compliance may
divert internal resources and will take a significant amount of time and effort to complete. We may not be able to successfully
complete the procedures and certification and attestation requirements of Section 404 by the time we will be required to
do so. If we fail to do so, or if in the future our chief executive officer, chief financial officer or independent registered
public accounting firm determines that our internal controls over financial reporting are not effective as defined under Section 404,
we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Furthermore, investor perceptions
of our company may suffer, and this could cause a decline in the market price of our common stock. Irrespective of compliance
with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of operations
and harm our reputation. If we are unable to implement these changes effectively or efficiently, it could harm our operations,
financial reporting or financial results and could result in an adverse opinion on internal controls from our independent auditors.
We may need to hire a number of additional employees with public accounting and disclosure experience in order to meet our ongoing
obligations as a public company, which will increase costs. Our management team and other personnel will need to devote a substantial
amount of time to new compliance initiatives and to meeting the obligations that are associated with being a public company, which
may divert attention from other business concerns, which could have a material adverse effect on our business, financial condition
and results of operations. In addition, because our management team has limited experience managing a public company, we may not
successfully or efficiently manage our transition into a public company.
Future
sales of our equity securities could result in downward selling pressure on our securities, and may adversely affect the stock
price.
In
the event that our equity securities are sold, there is a risk downward pressure may result, making it difficult for an investor
to sell his or her securities at any reasonable price, if at all. Future sales of substantial amounts of our equity securities
in the public market, or the perception that such sales could occur, could put downward selling pressure on our securities, and
adversely affect the market price of our common stock.
Risks
Related to the Industry
The
affinity-based content aggregation and ecommerce industry is highly competitive.
We will be in competition
with other current or potential regional, national and international companies that may offer similar services to ours. Our current
competitors include Sky Angel, HopeTV, Harvest-TV, Streaming Faith, Hulu, YouTube, Pandora, Rhapsody as well as thousands of small
Christian-focused web sites. Additionally, ministries providing content to us may also distribute their content through other mediums
such as cable TV, similar online companies, their own web site, YouTube and others. It is possible that additional online media
content competitors who do not directly compete with us will elect to compete in our field or emerge in the future, some of which
may be larger and have greater financial and operating resources than we do. There can be no assurance that we will be able to
compete against such other competitors in light of the rapidly evolving, highly competitive marketplace for these services. Our
failure to maintain and enhance our competitive position could reduce our market share, decrease our profit margin and cause our
revenues to grow more slowly than anticipated or not at all.
Online
piracy of media content on our website could result in reduced revenues and increased expenditures which could materially harm
our financial condition.
Online media content
piracy is extensive in many parts of the world and is made easier by technological advances. This trend facilitates the creation,
transmission and sharing of high quality unauthorized copies of online video content. The proliferation of unauthorized copies
of these products will likely continue, and if it does, could have an adverse effect on our business, because these products could
reduce the revenue we receive from our products. Additionally, in order to contain this problem, we may have to implement elaborate
and costly security and anti-piracy measures, which could result in significant expenses and losses of revenue. There can be no
assurance that even the highest levels of security and anti-piracy measures will prevent piracy.
Our
contracts with content providers are “non-exclusive” which may affect our ability to compete, resulting in potential
adverse effects to our operations and financial condition.
Our
contracts with content providers are “non-exclusive.” As a result, content providers are able to deliver and distribute
content which is available on the Truli website, through other websites including, without limitation, our direct competitors.
In addition, certain of the content available on the Truli website is also available generally to the public on cable television,
YouTube.com or other file sharing websites, among others. The lack of exclusive content on our website may be harmful to our ability
to compete in the marketplace which could adversely affect our results of operations and financial condition.
Changes
in technology may affect the profitability of online content and if we are unable to adapt to such technological changes, it may
negatively impact our business and financial condition.
The online industry
in general, continues to undergo significant changes, primarily due to technological developments. Due to rapid growth of technology
and shifting consumer tastes, we cannot accurately predict the overall effect that technological growth or the availability of
alternative forms of entertainment may have on the profitability of its online content and/or our business in general. Examples
of such advances include downloading and streaming from the Internet onto cellular phone or other mobile devices. Other online
companies may have larger budgets to exploit these growing trends. We cannot predict how we or our business partners will financially
participate in the exploitation of our content through these emerging technologies or whether we or our business partners have
the right to do so for all of its content. If we or our business partners cannot successfully exploit these and other emerging
technologies, it could have a material adverse effect on our revenues and therefore on our business, financial condition and results
of operations.
As
a result of providing online media content, we may be subject to intellectual property infringement claims which could have a
material adverse effect on our financial condition.
One of the risks
of the online media content business is the possibility that others may claim that such content misappropriates or infringes the
intellectual property rights of third parties with respect to their previously developed films, stories, characters, other entertainment
or intellectual property. We are likely to receive in the future, claims of infringement or misappropriation of other parties’
proprietary rights. Any such assertions or claims may materially adversely affect our business, financial condition or results
of operations. Irrespective of the validity or the successful assertion of such claims, we could incur significant costs and diversion
of resources in defending against them, which could have a material adverse effect on our business, financial condition or results
of operations. If any claims or actions are asserted against us, we may seek to settle such claim by obtaining a license from the
plaintiff covering the disputed intellectual property rights. We cannot provide any assurances, however, that under such circumstances
a license, or any other form of settlement, would be available on reasonable terms or at all. Any of these occurrences could have
a material adverse effect on our revenues and therefore on the our business, financial condition and results of operations.
As
a distributor of content over the Internet, we face potential liability for legal claims based on the nature and content of the
materials that we distribute.
Due
to the nature of content published on our online network, including content placed on our online network by
third parties, and as a distributor of original content and research, we face potential liability based on a
variety of theories, including defamation, negligence, copyright or trademark infringement, or other legal theories
based on the nature, creation or distribution of this information. Such claims may also include, among others, claims that by
providing hypertext links to websites operated by third parties, we are liable for wrongful actions by those third
parties through these websites. Similar claims have been brought, and sometimes successfully asserted, against online
services. It is also possible that our users could make claims against us for losses incurred in reliance on
information provided on our networks.
In
addition, we could be exposed to liability in connection with material posted to our Internet sites by third parties. For example,
many of our sites offer users an opportunity to post un-moderated comments and opinions. Some of this user-generated content
may infringe on third party intellectual property rights or privacy rights or may otherwise be subject to challenge under copyright
laws. Such claims, whether brought in the United States or abroad, could divert management time and attention away from our business
and result in significant cost to investigate and defend, regardless of the merit of these claims. In addition, if we become
subject to these types of claims and are not successful in our defense, we may be forced to pay substantial damages. We
have no insurance to protect us against these claims. The filing of these claims may also damage our reputation as a high quality
provider of unbiased, timely analysis and result in client cancellations or overall decreased demand for our services.
As a distributor
of media content, we may face potential liability for defamation, invasion of privacy, negligence, copyright or trademark infringement
and other claims based on the nature and content of the materials distributed.
These types of claims
have been brought, sometimes successfully, against distributors of media content. Any imposition of liability, given our lack of
insurance coverage, could have a material adverse effect on our business, results of operations and financial condition.
As
a result of conducting business outside of the United States, we may be subjected to additional risks related to international
trade which could have a material adverse effect on our financial condition.
We conduct business
in overseas markets and is therefore subject to risks inherent in the international distribution of media content, many of which
are beyond the our control. These risks include: (i) laws and policies affecting trade, investment and taxes, including laws and
policies relating to the repatriation of funds and withholding taxes, and changes in these laws; (ii) differing cultural tastes
and attitudes, including varied censorship laws; (iii) differing degrees of protection for intellectual property; (iv) financial
instability and increased market concentration of buyers in foreign television markets, including in European pay television markets;
(v) the instability of foreign economies and governments; (vi) fluctuating foreign exchange rates; and (vii) war and acts of terrorism.
Events or developments
related to these and other risks associated with international trade could adversely affect our ability to do conduct business
in non-U.S. sources, which could have a material adverse effect on our business, financial condition and results of operations.
Changes
in laws and regulations, specifically those affecting the Internet could adversely affect our business and results of operations.
It
is possible that new laws and regulations or new interpretations of existing laws and regulations in the United States and elsewhere
will be adopted covering issues affecting our business, including (i) privacy, data security and use of personally identifiable
information; (ii) copyrights, trademarks and domain names; and (iii) marketing practices, such as e-mail or direct marketing.
Increased
government regulation, or the application of existing laws to online activities, could (i) decrease the growth rate of the Internet;
(ii) reduce our revenues; (iii) increase our operating expenses; or (iv) expose us to significant liabilities.
Furthermore,
the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is still
evolving. Therefore, we might be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease
the value of our trademarks and other proprietary rights. Any impairment in the value of these important assets could cause our
stock price to decline. We cannot be sure what effect any future material noncompliance by us with these laws and regulations
or any material changes in these laws and regulations could have on our business, operating results and financial condition.
Future
government regulation may impair our ability to market and sell our services.
Our
current and planned services are subject to federal, state, local and foreign laws and regulations governing virtually all aspects
of our business and product offerings. As we offer existing products and services or introduce new ones commercially, it is possible
that governmental authorities will adopt new regulations that will limit or curtail our ability to market and sell such products.
We may also incur substantial costs or liabilities in complying with such new governmental regulations. Our potential customers
and distributors, almost all of which operate in highly regulated industries, may also be required to comply with new laws and
regulations applicable to products such as ours, which could adversely affect their interest in our products.
Our
operating results are vulnerable to adverse conditions affecting southern California.
Our
principal executive office is located in Beverly Hills, California. Thus, our operating results are vulnerable to natural disasters
or other casualties and to negative economic, competitive, demographic and other conditions affecting southern California. We
currently have no insurance coverage, and accordingly, will have no compensation for economic consequences of any loss. Should
a loss occur, we could lose both our invested capital and anticipated profits from affected facilities.
ITEM
2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On
September 19, 2014 we issued an option to purchase 250,000 common shares to a consultant as consideration for services. The option
has a term of three years, an exercise price of $0.01 per share, vests fully on the grant date, and allows for cashless exercise
at any time during the term. The option was issued pursuant to an exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended.
On
August 11, 2014 we issued an option to purchase 300,000 common shares to a member of our board of directors for board services.
The option has a term of three years, an exercise price of $0.007 per share, vests fully on the grant date, and allows for cashless
exercise at any time during the term. The option was issued pursuant to an exemption from registration under Section 4(2) of the
Securities Act of 1933, as amended.
On
August 7, 2014 we entered into a settlement agreement and general release of claims whereby certain common stock purchase warrants
issued to the holders of our previously issued 12% convertible debentures were cancelled. As partial consideration for the cancellation
of the 62,667,125 warrants, we issued an aggregate of 31,530,629 shares of common stock to such holders. The shares to be issued
will be exempt from registration under Section 4(2) and 3(9) of the Securities Act of 1933, as amended.
On
August 5, 2014 we issued an option to purchase 250,000 common shares to a consultant as consideration for services. The option
has a term of five years, an exercise price of $0.007 per share, vests in six equal installments over a six week period beginning
on the grant date and allows for cashless exercise at any time for any vested portion of the option. The option was issued pursuant
to an exemption from registration under Section 4(2) of the Securities Act of 1933, as amended.
During
the quarter ending June 30, 2014, holders of our 8% convertible promissory notes converted an aggregate of $15,000 into 2,000,000
shares of common stock at a price per share of $0.0075. The shares were issued pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933, as amended.
ITEM
3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM
4 - MINE SAFETY DISCLOSURES
None.
ITEM
5 - OTHER INFORMATION
On
August 7, 2014 we entered into a settlement agreement and general release of claims whereby we issued 31,530,629 shares of common
stock. For a further discussion of the transaction, refer to Part II, Item 2 of this Quarterly Report which is entitled “Unregistered
Sales of Equity Securities and Use of Proceeds.”
ITEM
6 - EXHIBITS
The
following exhibits are filed as part of this quarterly report on Form 10-Q:
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Incorporated
by Reference |
Exhibit
No. |
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Description |
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Filed/Furnished
Herewith |
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Form |
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Exhibit
No. |
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File
No. |
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Filing
Date |
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3.01 |
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Certificate
of Incorporation dated 6/13/12 |
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10-K |
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3.01 |
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000-53641 |
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7/15/14 |
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3.02 |
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Bylaws
of SA Recovery Corp |
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10-K |
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3.02 |
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000-53641 |
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7/15/14 |
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4.01 |
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Specimen
of Common Stock Certificate |
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10-Q |
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4.01 |
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000-53641 |
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9/3/14 |
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4.02 |
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Form
of 12% Convertible Debenture issued September 10, 2013 |
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8-K |
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4.01 |
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000-53641 |
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9/16/13 |
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4.03 |
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Form
of Common Stock Warrant issued to investors and placement agent September 10, 2013 |
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8-K |
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4.02 |
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000-53641 |
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9/16/13 |
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4.04 |
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Form
of Securities Purchase Agreement – September 10, 2013 |
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8-K |
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99.01 |
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000-53641 |
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9/16/13 |
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4.05 |
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Subsidiary
Guarantee – September 10, 2013 |
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8-K |
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9.02 |
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000-53641 |
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9/16/13 |
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4.06 |
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Form
of 8.0% convertible debenture issued to investors on August 28, 2013, October 2, 2013, November 7, 2013 |
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8-K |
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4.1 |
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000-53641 |
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11/27/13 |
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4.07 |
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Form
of Securities Purchase Agreement - August 28, 2013, October 2, 203, November 7, 2013 |
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8-K |
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4.2 |
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000-53641 |
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11/27/13 |
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10.01** |
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Employment
Agreement of Michael Jay Solomon |
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10-K |
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10.01 |
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000-53641 |
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7/15/14 |
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10.02 |
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Settlement
Agreement and General Release of Claims |
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8-K |
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10.01 |
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000-53641 |
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8/11/14 |
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21.01 |
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List
of Subsidiaries |
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10-K |
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21.01 |
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000-53641 |
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7/15/14 |
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31.1 |
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Certification
of the Principal Executive Officer of Truli Media Group, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule
13a-14(a) or Rule 15d-14(a)) |
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* |
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31.2 |
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Certification
of the Principal Financial Officer of Truli Media Group, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule
13a-14(a) or Rule 15d-14(a)) |
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* |
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32.1 |
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Certification
of the Principal Executive Officer of Truli Media Group, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. 1350) |
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* |
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32.2 |
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Certification
of the Principal Financial Officer of Truli Media Group, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. 1350) |
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* |
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101.INS |
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XBRL
Instance Document |
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*** |
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101.SCH |
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XBRL
Taxonomy Extension Schema |
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*** |
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101.CAL |
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XBRL
Taxonomy Extension Calculation Linkbase |
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*** |
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101.DEF |
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XBRL
Taxonomy Extension Definition Linkbase |
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101.LAB |
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XBRL
Taxonomy Extension Label Linkbase |
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101.PRE |
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XBRL
Taxonomy Extension Presentation Linkbase |
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* |
Filed
Herein |
** |
Management
contracts or compensation plans or arrangements in which directors or executive officers are eligible to participate. |
*** |
Furnished
herein |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Dated:
November 19, 2014 |
TRULI
MEDIA GROUP, INC. |
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By: |
/s/
Michael Solomon |
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Michael
Solomon |
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Chief
Executive Officer (Principal Executive and Financial Officer) |
30
Exhibit
31.1
CERTIFICATION
PURSUANT TO RULE 13A-14(a) OR 15D-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,
Michael Solomon, certify that:
1. |
I
have reviewed this report on Form 10-Q of Truli Media Group, Inc. for the period ending September 30, 2014; |
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2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report; |
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3. |
Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
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4. |
The
registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
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(a) |
designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting procedures; |
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(c) |
evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and |
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(d) |
disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the Company’s
most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and |
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5. |
The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors
(or persons performing the equivalent functions): |
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(a) |
all
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
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(b) |
any
fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s
internal control over financial reporting. |
Date:
November 19, 2014
/s/
Michael Solomon |
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Michael
Solomon |
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Principal
Executive Officer |
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Exhibit
31.2
CERTIFICATION
PURSUANT TO RULE 13A-14(a) OR 15D-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS
ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I,
Michael Solomon, certify that: |
|
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|
1. |
I
have reviewed this report on Form 10-Q of Truli Media Group, Inc. for the period ending September 30, 2014; |
|
|
2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report; |
|
|
3. |
Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
|
|
4. |
The
registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
|
|
|
(a) |
designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
(b) |
designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting procedures; |
|
|
|
|
(c) |
evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and |
|
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|
|
(d) |
disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the Company’s
most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and |
|
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|
5. |
The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors
(or persons performing the equivalent functions): |
|
|
|
|
(a) |
all
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
|
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|
|
(b) |
any
fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s
internal control over financial reporting. |
Date:
November 19, 2014
/s/
Michael Solomon |
|
Michael
Solomon |
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Prinicpal
Financial Officer |
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Exhibit 32.1
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Report of Truli Media Group, Inc. (the "Company") on Form 10-Q for the period ended September 30,
2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael Solomon, Principal
Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
/s/
Michael Solomon |
|
Michael
Solomon |
|
Principal
Executive Officer |
|
Date:
November 19, 2014
A
signed original of this written statement required by Section 906 has been provided to Truli Media Group and will be retained
by Truli Media Group and furnished to the Securities and Exchange Commission or its staff upon request.
Exhibit
32.2
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Report of Truli Media Group, Inc. (the "Company") on Form 10-Q for the period ended September 30,
2014, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Michael Solomon, Principal
Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 that:
1.
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
/s/
Michael Solomon |
|
Michael
Solomon |
|
Principal
Financial Officer |
|
Date:
November 19, 2014
A
signed original of this written statement required by Section 906 has been provided to Truli Media Group and will be retained
by Truli Media Group and furnished to the Securities and Exchange Commission or its staff upon request.
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