Recruiter.com Group, Inc. - Quarter Report: 2015 December (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: December 31, 2015

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:

Commission file number: 000-53641

Issuer’s telephone number (310) 274-0224

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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐     No ☒

As of February 10, 2016 the number of shares of the registrant’s common stock outstanding was 2,553,990.

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Truli Media Group, Inc.

Condensed Consolidated Balance Sheets

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Truli Media Group, Inc.

 Condensed Consolidated Statements of Operations

(Unaudited)

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)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

TRULI MEDIA GROUP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2015

(Unaudited)

NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Truli Media Group, Inc., 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 Christian content, media, music and Internet Protocol Television (“IPTV”) programming. From its inception (October 19, 2011) through the date of these consolidated financial statements, the Company has not generated any revenues and has incurred significant expenses. The Company is in the process of attempting to raise 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 carry out the Company’s business plan.

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 nine months ended December 31, 2015 and 2014 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 nine months ended December 31, 2015 are not necessarily indicative of the results to be expected for the year ending March 31, 2016 or for any future period. All references to December 31, 2015 and 2014 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, 2015, included in the Company’s annual report on Form 10-K filed with the SEC on July 14, 2015.

The condensed consolidated balance sheet as of March 31, 2015 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.

Merger and Reverse Stock Split

Truli Media Group, Inc. (“Truli OK”), formerly known as SA Recovery Corp., was incorporated on July 28, 2008 in the State of Oklahoma. On March 17, 2015 (“Effective Date”), Truli OK effected a merger with its newly formed wholly-owned subsidiary, Truli Media Group, Inc., a Delaware corporation (“TMG”, “Truli” or, the “Company”) for the purposes of changing its state of incorporation to Delaware (the “Merger”). On the Effective Date, Truli OK also completed a reverse stock split as described below. Prior to the Merger, Truli OK was the sole stockholder of TMG. Upon completion of the Merger, TMG will be the surviving entity. The Merger was effected through an agreement and plan of merger (“Merger Agreement”).

The Merger, including the Merger Agreement, was approved by the board of directors of the Company and a majority of the outstanding capital stock pursuant to a written consent of the stockholders.

A certificate of merger was filed with both the Oklahoma Secretary of State and the Delaware Secretary of State on February 27, 2015. As a result of the Merger, the Company is subject to the certificate of incorporation and bylaws of TMG and shall be further governed by the Delaware General Corporation Law.

On the Effective Date, every fifty shares of Truli OK’s issued and outstanding common stock (“Common Stock”) was converted into one share of TMG common stock (“TMG Stock”) (the “Stock Split”). Every option and right to acquire Truli OK’s Common Stock and every outstanding warrant or right outstanding to purchase Truli OK’s Common Stock was automatically converted into options, warrants and rights to purchase TMG Stock whereby each option, warrant or right to purchase fifty shares of Common Stock was converted into an option, warrant or right to purchase one share of TMG Stock at 5,000% of the applicable exercise, conversion or strike price of such converted securities. The stockholders of the Company received no fractional shares of TMG and instead had every fractional share, option, warrant or right to purchase TMG Stock rounded up to the next whole number. Additionally, all debts and obligations of Truli OK were assumed by TMG.

All references to common stock, share and per share amounts have been retroactively restated to reflect the 1:50 reverse stock split as if it had taken place as of the beginning of the earliest period presented.

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.

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 104,156,563 and 2,157,516 outstanding common share equivalents at December 31, 2015 and 2014, respectively.

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.

Recently Issued Accounting Pronouncements

The Company has reviewed 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

Note Payable:

The Company’s Founder and Chief Executive Officer has advanced funds to the Company in the form of an unsecured term note (the “Note”, aggregating $22,000 and $1,428,609 payable as of December 31, 2015 and March 31, 2015, respectively. The note, which may be increased as additional funds may be loaned to the Company by the Company’s Chief Executive Officer, bears interest at 4% per annum. The Company recorded interest expense of $10,133 and $12,293 for the three months ended December 31, 2015 and 2014, respectively, and $41,565 and $29,633 for the nine months ended December 31, 2015 and 2014, respectively. Accrued interest payable is $53 and $92,313 at December 31, 2015 and March 31, 2015, respectively.

On December 1, 2015 the Company issued an unsecured, convertible promissory note (the “Convertible Note”) to its sole executive officer, in the original principal amount of $1,955,934, as satisfaction of $1,822,109 of principal and $133,825 of accrued interest outstanding under the Note.

Convertible Note Payable:

On December 1, 2015 the Company issued an unsecured, convertible promissory note (the “Convertible Note”) to its sole executive officer, in the original principal amount of $1,955,934, as satisfaction of $1,822,109 of principal and $133,825 of accrued interest outstanding under the Note described above. The Convertible Note, which carries interest at the rate of 4% per annum, matures on December 1, 2020. The Convertible Note is convertible into shares of the Company’s common stock at the rate of $0.02 per share or an aggregate of 97,796,700 shares, subject to certain restrictions of beneficial ownership. The Company recorded interest expense of $6,645 for the three and nine months ended December 31, 2015. Accrued interest payable is $6,645 at December 31, 2015.

NOTE 3 — CONVERTIBLE NOTES PAYABLE

The Company entered into three convertible notes in August, October and November 2013. These notes had an outstanding balance of $92,500. On August 31, 2015 the Company and the note holders reached an agreement to settle the outstanding balance of the notes and all related accrued and unpaid interest and penalties for a payment of $70,000. At the time of settlement, accrued interest and penalties aggregated $93,481. The Company has recorded a gain on extinguishment of debt of $115,981 during the nine months ended December 31, 2015.

As a result of the extinguishment of debt, the related derivatives described in Note 4 were also extinguished. An aggregate of $320,011 has been reclassified from derivative liability to additional paid in capital.

NOTE 4 — DERIVATIVES

The Company has identified certain embedded derivatives related to its convertible notes and common stock purchase warrants. Since certain of the notes 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. 

August 2013 Note (issued on August 28, 2013):

The Company identified embedded derivatives related to the August 2013 Note.  These embedded derivatives included certain conversion features.  The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the note and to adjust the fair value as of each subsequent balance sheet date. 

We have recorded additions to our derivative conversion liabilities related to the conversion feature attributable to interest and penalties accrued during the period. These additions aggregated $0 and $2,503 for the three months ended December 31, 2015 and 2014, respectively, and $4,708 and $13,318 for the nine months ended December 31, 2015 and 2014, respectively, which has been charged to interest expense.

During the three months ended December 31, 2015 and 2014, the Company recorded expense of $0 and $2,434, respectively, related to the change in the fair value of the derivative. During the nine months ended December 31, 2015 and 2014, the Company recorded expense of $7,096 and income of $9,458, respectively, related to the change in the fair value of the derivative.

The underlying debt was extinguished on August 31, 2015. The fair value of the remaining embedded derivative was $65,116 at August 31, 2015, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 0.097%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 717%; and (4) an expected life of three months. Upon extinguishment, the derivative value was reclassified to additional paid in capital. 

Compensation Warrants (issued on September 10, 2013):

During September 2013 the Company granted 50,134 warrants as compensation for consulting services. The warrants had an initial exercise price of $2.50 per shares and a term of three years. The Company identified embedded derivatives related to these 50,134 September 2013 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 have been adjusted due to the subsequent issuance of debt. As a result, those warrants total 6,266,715 with an exercise price of $0.02.

During the three months ended December 31, 2015 and 2014, the Company recorded income of $685 and $37,187, respectively, related to the change in the fair value of the derivative. During the nine months ended December 31, 2015 and 2014, the Company recorded income of $22,486 and $133,672, respectively, related to the change in the fair value of the derivative.

The fair value of the embedded derivative was $0 at December 31, 2015, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 0.685%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 101%; and (4) an expected life of 0.688 years. 

October 2013 Note (issued on October 2, 2013):

The Company identified embedded derivatives related to the October 2013 Note.  These embedded derivatives included certain conversion features.  The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the note and to adjust the fair value as of each subsequent balance sheet date.   

We have recorded additions to our derivative conversion liabilities related to the conversion feature attributable to interest and penalties accrued during the period. These additions aggregated $0 and $3,535 for the three months ended December 31, 2015 and 2014, respectively, and $8,208 and $22,305 for the nine months ended December 31, 2015 and 2014, respectively, which has been charged to interest expense.

During the three months ended December 31, 2015 and 2014, the Company recorded expense of $0 and $4,227, respectively, related to the change in the fair value of the derivative. During the nine months ended December 31, 2015 and 2014, the Company recorded expense of $12,142 and income of $8,657, respectively, related to the change in the fair value of the derivative.

The underlying debt was extinguished on August 31, 2015. The fair value of the remaining embedded derivative was $111,583 at August 31, 2015, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 0.097%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 717%; and (4) an expected life of three months. Upon extinguishment, the derivative value was reclassified to additional paid in capital. 

November 2013 Note (issued on November 7, 2013):

The Company identified embedded derivatives related to the November 2013 Note.  These embedded derivatives included certain conversion features.  The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the note and to adjust the fair value as of each subsequent balance sheet date.  

We have recorded additions to our derivative conversion liabilities related to the conversion feature attributable to interest and penalties accrued during the period. These additions aggregated $0 and $4,067 for the three months ended December 31, 2015 and 2014, respectively, and $10,738 and $25,992 for the nine months ended December 31, 2015 and 2014, respectively, which has been charged to interest expense.

During the three months ended December 31, 2015 and 2014, the Company recorded expense of $0 and $5,313, respectively, related to the change in the fair value of the derivative. During the nine months ended December 31, 2015 and 2014, the Company recorded expense of $15,572 and income of $17,841, respectively, related to the change in the fair value of the derivative.

The underlying debt was extinguished on August 31, 2015. The fair value of the remaining embedded derivative was $143,312 at August 31, 2015, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 0.097%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 717%; and (4) an expected life of three months. Upon extinguishment, the derivative value was reclassified to additional paid in capital. 

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 December 31, 2015:

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 derivative liabilities for the nine months ended December 31, 2015:

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. The Company has not generated any revenue for the period from October 19, 2011 (date of inception) through December 31, 2015. The Company has recurring net losses, an accumulated deficit of $5,235,910 and a working capital deficit (current liabilities exceeded current assets) at December 31, 2015 of $295,974. Additionally, the current development stage of the company and current economic conditions create significant challenges to attaining sufficient funding for the company to continue as a going concern.

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 majority shareholder 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

As a consequence of the issuance of the Convertible Note described in Note 2, the Company, pursuant to a written consent of the board of directors of the Company and a written consent of the majority of the stockholders, approved to increase its authorized common stock capital by amending and restating its Certificate of Incorporation on December 16, 2015 (the “Restated Certificate”). Such Restated Certificate will increase the number of the shares of the Company’s authorized common stock, par value $0.0001 per share, from 100,000,000 to 250,000,000 upon its filing. The Company plans to file the Restated Certificate on or about February 26, 2016. The Restated Certificate will not in any way affect any issued or outstanding shares of the Company’s common stock or its authorized preferred stock.

Preferred stock

The Company is authorized to issue 10,000,000 shares of $0.0001 par value preferred stock. As of December 31, 2015 and March 31, 2015 the Company has no shares of preferred stock issued and outstanding. Prior to merger with Truli Delaware on March 17, 2015, Truli OK was authorized to issue 5,000,000 shares of preferred stock, par value $0.0001 per share.

Common stock

The Company is authorized to issue 100,000,000 shares of common stock, par value $0.0001 per share. As of December 31, 2015 and March 31, 2015 the Company had 2,553,990 shares of common stock issued and outstanding. Prior to merger with Truli Delaware on March 17, 2015, Truli OK was authorized to issue 495,000,000 shares of common stock, par value $0.001 per share. 

On March 17, 2015, the Company completed a one-for-fifty reverse split of its common stock. All references to common stock, share and per share amounts have been retroactively restated to reflect the 1:50 reverse stock split as if it had taken place as of the beginning of the earliest period presented.

As a result of the extinguishment of convertible debt on August 31, 2015, extinguished derivative liability in the amount of $320,011 was reclassified to additional paid in capital.

On December 14, 2015 a stockholder, voluntarily and without consideration, forgave notes payable of $82,975 plus related accrued interest of $11,172. The aggregate amount of $94,147 has been credited to additional paid in capital.

NOTE 8 — 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 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 nine month periods ended December 31, 2015 and 2014 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, 2015 filed on July 14, 2015 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:

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

Corporate Development

Truli Media Group, Inc. (“Truli OK”), formerly known as SA Recovery Corp., was incorporated on July 28, 2008 in the State of Oklahoma. On June 13, 2012, the company entered into a Reorganization Agreement (the “Reorganization Agreement") with Truli Media Group, LLC, a Delaware Limited Liability Company (“Truli LLC”) and SA Recovery Merger Subsidiary, Inc., pursuant to an agreement and plan of merger. Under the terms of the agreement and plan of merger, all of Truli LLC’s membership interests were exchanged for shares of the Truli OK’s common stock, or, at the time, approximately 74% of the fully diluted issued and outstanding common stock of Truli OK.

Pursuant to the Reorganization Agreement, as part of the transaction the members of and other designees of Truli LLC acquired a controlling interest in Truli OK. The company was a publicly registered corporation with nominal operations immediately prior to the merger. For accounting purposes, Truli LLC was the surviving entity.

On March 17, 2015 (“Effective Date”), Truli OK effected a merger with its newly formed wholly-owned subsidiary, Truli Media Group, Inc., a Delaware corporation (“TMG”, “Truli” or, the “Company”) for the purposes of changing its state of incorporation to Delaware (the “Merger”). On the Effective Date, Truli OK also completed a reverse stock split as described below. Prior to the Merger, Truli OK was the sole stockholder of TMG. Upon completion of the Merger, Truli became the surviving entity. The Merger was effected through an agreement and plan of merger (“Merger Agreement”).

The Merger, including the Merger Agreement, was approved by the board of directors of the Truli OK and a majority of the outstanding capital stock pursuant to a written consent of the stockholders.

A certificate of merger was filed with both the Oklahoma Secretary of State and the Delaware Secretary of State on February 27, 2015. As a result of the Merger, the Company is subject to the certificate of incorporation and bylaws of TMG and shall be further governed by the Delaware General Corporation Law.

On the Effective Date, every fifty shares of Truli OK’s issued and outstanding common stock (“Common Stock”) was converted into one share of TMG common stock (“TMG Stock”) (the “Stock Split”). Every option and right to acquire Truli OK’s Common Stock and every outstanding warrant or right outstanding to purchase Truli OK’s Common Stock was automatically converted into options, warrants and rights to purchase TMG Stock whereby each option, warrant or right to purchase fifty shares of Common Stock was converted into an option, warrant or right to purchase one share of TMG Stock at 5,000% of the applicable exercise, conversion or strike price of such converted securities. The stockholders of the Company received no fractional shares of TMG and instead had every fractional share, option, warrant or right to purchase TMG Stock rounded up to the next whole number. Additionally, all debts and obligations of Truli OK were assumed by TMG.

All references to common stock, share and per share amounts have been retroactively restated to reflect the 1:50 reverse stock split as if it had taken place as of the beginning of the earliest period presented.

Business of the Company

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 computers and an assortment of digital mobile devices such as tablets and smart phones. Currently, there are roughly 11,000 videos in its library, with faith-based 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, children’s programming, sports, education, etc. Truli also currently streams 8 Christian Network Television channels on its website. The Truli platform is also available in the Spanish language on its platform which includes roughly 4,500 items in its library.

Strategy and Plan of Operation

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 fifty ministries and churches, and allows them to deliver their content through the Truli platform. We hope to attract ministries to join our platform 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 platform 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.

Marketing

Due to our current lack of capital, we have halted any current marketing. As a result we currently market in a very limited capacity, primarily through press releases. In the event that we are able to access capital in the future, we would create a marketing campaign including, (i) direct marketing to ministries outlining the benefits of our platform to their ministry, (ii) presence at trade shows and conferences including the National Religious Broadcasters Convention which networks thousands of Christian community members and business people and the international Christian Retailers Show which is the largest Christian retailer gathering in the world, and (iii) other types of marketing including but not limited to social media, press exposure, brand building at various seminars, viral and social strategies as well as the utilization of networks, bloggers, newsletters, direct calling and radio. If we are able to raise sufficient capital we also plan on developing technology to create mobile phone applications related to our content.

Competition

We face significant competition from integrated online media companies, social networking sites, traditional print and broadcast media, search engines, and various e-commerce sites. Our competitors include many well-known and fully funded news and information websites and content providers. Several of our competitors offer an integrated variety of Internet products, advertising services, technologies, online services and/or content that may compete for the attention of our users, advertisers, developers, and publishers. We may also in the future, more directly compete with these companies to obtain agreements with third parties to promote or distribute our services. In addition, we compete with social media and networking sites which are attracting an increasing share of users, users’ online time and online advertising dollars.

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 December 31, 2015, we had an accumulated deficit of $5,235,910. 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 December 31, 2015 was $2,848, 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 $1,984,632 in principal and interest as of December 31, 2015. 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 certain of our 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, 2015 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

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.

RESULTS OF OPERATIONS - THREE MONTHS ENDED DECEMBER 31, 2015 AS COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2014

The Company had no revenue for the three month periods ended December 31, 2015 or 2014. Truli officially launched its website on July 10, 2012 but, has not yet generated significant revenue. Prior to such time, the Company was principally involved in website development and research and development activities. Net loss of $79,240 and $126,387 for the three month periods ended December 31, 2015 and 2014, respectively, resulted from the operational activities described below.

Operating Expenses

Operating expenses totaled $61,061 and $115,461 during the three month periods ended December 31, 2015 and 2014, respectively, primarily comprised of website development costs, professional fees and consulting fees. The decrease of 47% for 2015 compared to 2014 was primarily attributable to decreases in professional fees and consulting expense. The Company does 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 derives revenue.

Other Income (Expense)

The Company charged to operations interest expense of $18,864 and $36,139 for the three month periods ended December 31, 2015 and 2014, respectively. The decrease was primarily related to a reduction in debt outstanding. Additionally, the Company had gains of $685 and $25,213 for the three month periods ended December 31, 2015 and 2014, respectively, as a result of the change in fair value of the Company’s derivative instruments. For more information on our convertible notes and derivative liabilities, please refer to Notes 3 and 4 to the accompanying unaudited condensed consolidated financial statements.

RESULTS OF OPERATIONS - NINE MONTHS ENDED DECEMBER 31, 2015 AS COMPARED TO THE NINE MONTHS ENDED DECEMBER 31, 2014

The Company had no revenue for the nine month periods ended December 31, 2015 or 2014. Truli officially launched its website on July 10, 2012 but, has not yet generated significant revenue. Prior to such time, the Company was principally involved in website development and research and development activities. Net loss of $225,094 and net income of $1,309,624 for the nine month periods ended December 31, 2015 and 2014, respectively, resulted from the operational activities described below.

Operating Expenses

Operating expenses totaled $235,920 and $292,892 during the nine month periods ended December 31, 2015 and 2014, respectively, primarily comprised of website development costs, professional fees and consulting fees. The decrease of 19% for 2015 compared to 2014 was attributable to decreases in professional fees and consulting expense. The Company does 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)

The Company charged to operations interest expense of $92,831 and $312,241 for the nine month periods ended December 31, 2015 and 2014, respectively. The decrease was primarily related to a reduction in debt outstanding. Additionally, the Company had a loss of $12,324 and a gain of $1,164,628 for the nine month periods ended December 31, 2015 and 2014, respectively, as a result of the change in fair value of the Company’s derivative instruments. The Company also had gains on extinguishment of debt of $115,981 and $751,250 for the nine month periods ended December 31, 2015 and 2014, respectively. The Company also had a loss on debt conversion of $1,121 for the nine month period ended December 31, 2014 with no comparable item in the 2015 period. For more information on our convertible notes and derivative liabilities, please refer to Notes 3 and 4 to the accompanying unaudited condensed consolidated financial statements.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash and cash equivalents of $2,848 and $13,393 as of December 31, 2015 and March 31, 2015, respectively. The Company’s capital requirements arose principally from costs associated with website development, marketing and general administrative costs for both fiscal periods ended December 31, 2015 and 2014. The Company has liabilities of $2,254,756 and $2,454,365 as of December 31, 2015 and March 31, 2015, respectively. The decrease in liabilities is primarily attributable to payments on debt and the voluntary extinguishment of debt during the period and the elimination of the derivative liability related to convertible notes, offset by working capital advances received from our Chief Executive Officer.

The Company owes principal and interest of $22,000 pursuant to a 4% unsecured term note (“Note”) representing advances made by its Chief Executive Officer as well as $1,955,934 in principal and interest pursuant to a 4% unsecured, convertible promissory note (“Convertible Note”) issued on December 1, 2015 as satisfaction of $1,822,109 of principal and $133,825 of accrued interest outstanding under the Note. The Company received advances of $415,500 and $600,000 during the nine month periods ended December 31, 2015 and 2014, respectively.

The Company additionally has an unsecured line of credit with $82,975 that was outstanding as of March 31, 2015, that has been forgiven by the note holder during the nine month period ending December 31, 2015.

The Company owed $67,500 in principal at December 31, 2015 as a result of a debt settlement incurred with the extinguishment of debentures. This amount is being paid in monthly installments over a 24 month period. The balance at March 31, 2015 was $135,000.

The Company spent in operating activities $288,545 and $240,102, respectively for the nine month periods ended December 31, 2015 and 2014, respectively. The increase is primarily attributable to a decrease in accounts payable of approximately $171,500 partially offset by a decrease in loss (after adjusting for non-cash items) of approximately $123,000.

Financing activities provided $278,000 and $236,163 to the Company during the nine month periods ended December 31, 2015 and 2014, respectively. The increase is attributable to a decrease in payments on debt, net of stockholder working capital advances.

As of December 31, 2015, we had an accumulated deficit of $5,235,910 compared to $5,010,816 as of March 31, 2015. The increase is attributable to the net loss for the nine month period ended December 31, 2015.

The Company does 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. The Company is continuing to pursue working capital sources and additional revenue through the seeking of the capital it needs to carry on its planned operations. However, based on its 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.

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 nine months ended December 31, 2015 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

None

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.

Prior to the date of this annual report, we have not yet generated any revenue. Our failure to generate significant revenues would seriously harm our business. Even if we are able to access capital, we anticipate that we will experience operating losses and incur significant and increasing losses in the future due to growth, expansion, development and marketing. In the event that we are able to raise adequate capital, we expect to significantly increase our sales and marketing and general and administrative expenses. 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, 2015 on our consolidated financial statements for the year ended March 31, 2015 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 uncertain.

We have a significant amount of debt which could impact our ability to continue to implement our business plan.

We have incurred liabilities of $2,254,756 ($1,977,934 incurred in unsecured notes to our chief executive officer) as of December 31, 2015. Unless we are able to restructure some or all of this outstanding 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 owed 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 certain of our consultants, are not being paid for their services provided to the company 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 Company’s 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.

The Company relies 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:

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.

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 December 31, 2015, owns approximately 51% of the issued and outstanding equity of Truli. Additionally, as of December 31, 2015, Mr. Solomon is owed $1,955,934 pursuant to a 4% unsecured, convertible promissory note which can be converted into our common stock at a price per share of $0.02. In the event that Mr. Solomon’s convertible note were converted in full, he would own approximately 99% of the issued and outstanding stock of the 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 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 CEO, Michael Solomon has forgone payment for the last three fiscal years given our financial condition. 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 PINK tier of the OTC Markets Group 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 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, 50,134 common stock purchase warrants issued as compensation to placement agents in connection with our previously cancelled 12% convertible debentures have increased to 6,266,715 warrants and the exercise price has been reduced from $2.50 to $0.02 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. Because of our limited resources, management has concluded that our internal control over financial reporting may not be effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Furthermore, 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 the Company 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 potential revenue, if any, we would 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 potential future 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 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 December 16, 2015, the Company issued an unsecured, convertible promissory note to Michael Jay Solomon, our chief executive officer in the original principal amount of $1,955,934. The Convertible note carries interest at the rate of four (4%) percent per annum, and is convertible in shares of common stock at a rate of $0.02 per share. The convertible note was issued in exchange for a pre-existing promissory note owed to Mr. Solomon for the same amount (principal plus interest). The convertible note was issued pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended, or the Securities Act and the rules promulgated thereunder.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - MINE SAFETY DISCLOSURES

None.

ITEM 5 - OTHER INFORMATION

ITEM 6 - EXHIBITS

The following exhibits are filed as part of this quarterly report on Form 10-Q:

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.

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