Recruiter.com Group, Inc. - Quarter Report: 2016 September (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: September 30, 2016

☐ 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

TRULI MEDIA GROUP, INC

(Exact name of registrant as specified in its charter) 

Issuer’s telephone number (201) 608-5101

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 November 14, 2016 the number of shares of the registrant’s common stock outstanding was 2,554,197.

TABLE OF CONTENTS

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

SEPTEMBER 30, 2016

(Unaudited)

Note 1 — Organization and Summary of Significant Accounting Policies

General 

Truli Media Group, Inc., a Delaware corporation initially incorporated on July 28, 2008 (the “Company”) is a holding company based in Englewood Cliffs, New Jersey. In October, 2016, the Company transferred all of its assets to a newly formed, wholly-owned subsidiary, Truly Media Corp., a California corporation (“TMC”) headquartered in Beverly Hills, California. TMC is operated by the Company’s founder, Mr. Michael J. Solomon, who is responsible for day-to-day operations. Mr. Solomon has agreed to pay all operating liabilities of the Company, excluding its outstanding Convertible Notes and public company expenses. For further information see Note 2. Prior to the transfer of its operating assets to TMC, the Company was, and TMC is, focused on the on-demand media and social networking markets. TMC, 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. “Truli”, “our”, “us”, “we” or the “Company” refer to Truli Media Group, Inc. and its subsidiary, TMC. In discussing the business of the Company, we refer to the business now operated by TMC except as otherwise made clear from the context.

From commencement of its current business operations through a merger with Truli Media Group, LLC on October 19, 2011 through the date of these unaudited condensed consolidated financial statements, the Company has not generated any revenues and has incurred significant expenses. The Company is in the process of seeking an acquisition of an unrelated business, which likely would result in a change of control of the Company and dilution to current shareholders. In order to accomplish this goal, the Company must locate an acquisition target and raise additional debt or equity capital to support the operations of the target and completion of TMC’s development activities. Consequently, the Company’s 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 six months ended September 30, 2016 and 2015 are unaudited; however, in the opinion of management, such statements include all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods presented. The results for the three and six months ended September 30, 2016 are not necessarily indicative of the results to be expected for the year ending March 31, 2017 or for any future period. All references to September 30, 2016 and 2015 in these footnotes are unaudited. 

These unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto for the year ended March 31, 2016, included in the Company’s annual report on Form 10-K filed with the SEC on June 29, 2016. 

The condensed consolidated balance sheet as of March 31, 2016 has been derived from the audited consolidated financial statements at that date but does not include all disclosures required by the accounting principles generally accepted in the United States of America.

Cash and Cash Equivalents 

The Company considers all short-term highly liquid investments with a remaining maturity at the date of purchase of three months or less to be cash equivalents. 

Use of Estimates 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.  Actual results could differ from those estimates. Included in these estimates are judgements about assumptions used to calculate beneficial conversion of convertible notes payable, deferred income tax asset valuation allowances, and valuation of derivative liabilities.  

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 101,258,540 and 451,245 outstanding common share equivalents at September 30, 2016 and 2015, respectively.

Fair Value of Financial Instruments

Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments. The carrying amount reported in the consolidated balance sheet for accounts payable and accrued expenses and notes payable approximates fair value because of the immediate or short-term maturity of these financial instruments.

Convertible Instruments 

The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for “Accounting for Derivative Instruments and Hedging Activities”. 

Professional standards generally provides three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.  Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument”.  

The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards when “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. 

ASC 815-40 provides that, among other things, generally, if an event is not within the entity’s control could or require net cash settlement, then the contract shall be classified as an asset or a liability.

Stock-Based Compensation 

The Company utilizes the Black-Scholes option-pricing model to determine fair value of options and warrants granted as stock-based compensation, which requires us to make judgments relating to the inputs required to be included in the model. In this regard, the expected volatility is based on the historical price volatility of the Company’s common stock. The dividend yield represents the Company’s anticipated cash dividend on common stock over the expected life of the stock options. The U.S. Treasury bill rate for the expected life of the stock options is utilized to determine the risk-free interest rate. The expected term of stock options represents the period of time the stock options granted are expected to be outstanding. 

Recently Issued Accounting Pronouncements 

Management does not believe that any recent changes in accounting pronouncements and Accounting Standards Updates (ASU) issued by the Financial Accounting Standards Board (FASB) are of significance or potential significance to the Company.

Note 2 — Notes Payable, Related Party

Note Payable 

The Company’s founder and former Chief Executive Officer (the “Founder”) has advanced funds to the Company, evidenced by an unsecured term note (the “Note”), with an outstanding principal amount of $332,000 and $105,000 on September 30, 2016 and March 31, 2016, respectively. The Note bears interest at 4% per annum. The Company recorded interest expense of $2,601 and $16,374 for the three months ended September 30, 2016 and 2015, respectively, and $4,060 and $31,432 for the six months ended September 30, 2016 and 2015, respectively. Accrued interest payable is $4,758 and $698 at September 30, 2016 and March 31, 2016, respectively. As discussed below, the Founder has agreed to pay this Note.

Convertible Note Payable 

On December 1, 2015, the Company issued an unsecured, convertible promissory note (the “Convertible Note”) to the Founder with a 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 and related accrued interest is convertible into shares of the Company’s common stock at the rate of $0.02 per share, subject to certain restrictions of beneficial ownership. The Company recorded interest expense of $19,720 and $39,226 for the three and six months ended September 30, 2016, respectively. Accrued interest payable is $65,376 and $26,150 at September 30, 2016 and March 31, 2016, respectively.  

Effective September 21, 2016, the Company, the Founder and two institutional investors entered into a Note Purchase Agreement (the “NPA”) pursuant to which the Founder sold the Convertible Note with a principal amount of $1,955,934 previously issued by the Company to the Founder to the institutional investors in equal amounts in exchange of $102,500 from each investor, each of whom acquired a separate interest in the Convertible Note. The NPA included a provision under which the Founder has an option to purchase all of the Company’s current operating assets for $5,000. The option is exercisable through March 23, 2017 with the consent of one of the investors, and thereafter through September 23, 2017 without the consent of the investors. Subsequent to September 30, 2016, Truli transferred the Company’s operating assets to its newly-formed, wholly-owned subsidiary, TMC. Under the NPA, the Company agreed with the Founder that it will be an Event of Default under the Convertible Note if the Founder does not pay all operating costs of the Company, which essentially are the operating expenses of TMC. The NPA clearly indicates that public company compliance costs, including accounting, auditing and legal fees relating to securities matters are not operating costs. In addition, the Founder agreed to assume and pay all of the Company’s liabilities arising prior to the date of the NPA, except for the Convertible Notes and pay operating liabilities thereafter. The Purchasers of the Convertible Notes agreed to pay all of the public company costs for a period of one year following the date of the NPA. The Founder remains Chairman of the Board of Directors and no changes were made to the Board of Directors prior to or following the execution of the NPA.

Note 3 — 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.   

Compensation Warrants

On September 10, 2013, the Company issued 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 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. 

During the year ended March 31, 2016, the warrants were adjusted due to subsequent issuance of debt. The number of warrants was increased to a total of 6,266,715 and the exercise price was reduced to $0.02. 

During the three months ended September 30, 2016 and 2015, the Company recorded income of $1,478 and expense of $369, respectively, related to the change in the fair value of the derivative. During the six months ended September 30, 2016 and 2015, the Company recorded income of $336 and $21,801, respectively, related to the change in the fair value of the derivative. The warrants expired unexercised on September 10, 2016.

Note 4 — Fair Value of Financial Instruments 

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:  

Level 1 - Quoted prices in active markets for identical assets or liabilities.   

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities. 

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.  

Items recorded or measured at fair value on a recurring basis in the accompanying unaudited condensed consolidated financial statements consisted of the following items as of September 30, 2016:

The debt derivative liabilities are 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 six months ended September 30, 2016:

Note 5 — 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 September 30, 2016. The Company has recurring net losses, an accumulated deficit of $5,511,800 and a working capital deficit (current liabilities exceeded current assets) at September 30, 2016 of $571,691. 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 identify an attractive acquisition target, obtain additional financing to close the acquisition as well as fund the future operating results of the target, develop and achieve profitable operations and obtain 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. There can be no assurance that the Company will be successful in obtaining additional funding 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 be necessary should the Company be unable to continue as a going concern. 

Note 6 — Shareholders Equity and Control 

As a consequence of the issuance of the Convertible Note described in Note 2, on December 16, 2015, 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 (the “Restated Certificate”). The Restated Certificate increased the number of 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 filed the Restated Certificate on December 17, 2015. The Restated Certificate did not in any way affect any issued or outstanding shares of the Company’s common stock or its authorized preferred stock. 

On September 21, 2016, the Founder and an affiliate sold their holdings of 1,336,676 shares of the Company’s common stock to Mr. Elliot Maza for $6,000 and, immediately prior to that time, appointed Mr. Maza Chief Executive Officer and Chief Financial Officer, replacing the Founder, who remains Chairman of the Board of Directors.

Preferred stock 

The Company is authorized to issue 10,000,000 shares of $0.0001 par value preferred stock. As of September 30, 2016 and March 31, 2016, the Company has no shares of preferred stock issued and outstanding.

Common stock 

The Company is authorized to issue 250,000,000 shares of common stock, par value $0.0001 per share. As of September 30, 2016 and March 31, 2016 the Company had 2,553,990 shares of common stock issued and outstanding. 

Stock Options 

On April 13, 2016, the Company granted an option to purchase 100,000 shares of common stock as compensation pursuant to an employment agreement with our vice-president. The option has an exercise price of $0.02 per share, a term of five years and vests quarterly over a two year period from April 13, 2016. We valued the option at $754, by using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 0.875%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of our common stock of 327%; and (4) an expected life of 3 years. We have recorded compensation expense of $94 and $173 related to the option during the three and six months ended September 30, 2016, respectively. 

Note 7 — Accounts Payable and Accrued Liabilities

Accounts payable and accrued liabilities for the period ending September 30, 2016 and March 31, 2016, are comprised of the following:

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. 

Note 9 — Subsequent Events  

Management evaluated all activities of the Company through the issuance date of the Company’s interim unaudited condensed consolidated financial statements and concluded that no subsequent events have occurred that would require adjustments or disclosure into the interim unaudited condensed consolidated financial statements other than the following:

On November 8, 2016, the Company sold an aggregate of $50,000 principal amount of its convertible promissory notes (each, a “Note”) to certain accredited investors (the “Investors”) and received $50,000 in gross proceeds (the “Financing”).

The Notes are convertible, at the option of the holder, into shares of the Company’s common stock, par value $0.001 per share, at a per share price of $0.02 (the “Conversion Price”), subject to adjustment as provided in the Notes and subject to a total beneficial ownership limitation of 9.99% of the Company’s issued and outstanding common stock. Each Note has a maturity date (the “Maturity Date”) that is five months from the issue date. The Maturity Date may be accelerated, at the option of the holder, upon the occurrence of a Fundamental Transaction (as defined in the Note).

The Company intends to use the net proceeds from the Financing for general corporate purposes.

The Financing was conducted as a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder.

See Note 1 for information concerning TMC.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations for the three and six months ended September 30, 2016 and 2015 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, 2016 filed on June 29, 2016 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. and its subsidiary, TMC.

Corporate Development

Truli Media Group, Inc., an Oklahoma corporation, formerly known as SA Recovery Corp., was incorporated on July 28, 2008. 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”) formed on October 19, 2011, and SA Recovery Merger Subsidiary, Inc., pursuant to an agreement and plan of merger. Under the terms of the Reorganization Agreement and plan of merger, all of Truli LLC’s membership interests were exchanged for shares of the Truli Media Group, Inc. common stock, or, at the time, approximately 74% of the fully diluted issued and outstanding shares of common stock of Truli Media Group, Inc. Prior to the merger, the company was a publicly traded corporation with nominal operations. For accounting purposes, Truli LLC was the surviving entity.

On March 17, 2015, Truli reincorporated in Delaware. Concurrent with the reincorporation, the Company completed a 1-for-50 reverse stock split.

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.

On September 21, 2016, Michael J. Solomon, the founder and Chairman of the Board of the Company (the “Founder”) sold a convertible note with a principal amount of $1,955,934 previously issued by the Company to the Founder (the “Convertible Note”) to two institutional investors in equal amounts in exchange for payment of $102,500 from each investor. Under the terms of the Note Purchase Agreement (the “NPA”) it will be an Event of Default if the Founder does not pay all operating costs of the Company (other than specified public company costs and the Convertible Note. Additionally, the Founder has a one year option to acquire the Company’s current operating assets for $5,000. The NPA requires the Founder to pay all of the liabilities as of the date of the NPA other than the Convertible Note and public company expenses and continue to pay all operating liabilities other than the public company liabilities, which will be paid by the purchasers of the Convertible Note for one year. If the Founder fails to pay these liabilities, it will be an Event of Default under the Convertible Notes.

Concurrent with the sale of the Convertible Note to the two institutional investors, the Founder and an affiliate sold their controlling block of Company Common Stock to the Company’s new Chief Executive Officer and Chief Financial Officer for $6,000. Subsequent to the end of the quarter, in order to simplify accounting and the potential exercise of the option to acquire the Company’s current operating assets, the Company formed a California corporation, Truli Media Corp. (“TMC”) as a wholly-owned subsidiary of the Company, and thereafter the Company transferred its operating assets to TMC and the Founder assumed the operating liabilities other than the Convertible Notes and public company liabilities. In describing the business of the Company below, the description relates to its historical business since October 2011 as operated by the Company through October 2016 and thereafter by TMC. All references to TMC in this context give effect to the operations by Truli prior to the date of the transfer of the assets to TMC.

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 14,000 videos in its library, with faith-based content currently representing roughly 50% of the Truli Platform with roughly 50% of the platform representing family entertainment such as feature films “G” and “PG” rated, music videos, children’s programming, sports, education, blogs, 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.

Additionally, Truli continues to enter into licensing agreements with content providers for family entertainment such as G and PG rated feature films, documentaries, children’s programming, music videos and lifestyle programming, both in English and Spanish.

Truli offers access, though a recently added category, to blogs maintained by individual bloggers throughout the country.

All of the above activities are intended to grow Truli as a destination for those who want access to safe, clean, family appropriate content.

Truli consumers have access to free content as well as certain Pay-per-View content on the interactive digital platform from which Truli hopes to eventually derive revenue. In the event Truli is able to raise sufficient capital, and its platform gains significant traffic, Truli plans to sell advertising space on its website. Additionally Truli plans to sell faith based merchandise through its website once it is financially able to do so. Truli has created a “donation” section of its website whereby it will receive 15% of donations given to ministries and churches.

Truli will allow partners to monetize their content through its platform by letting them set purchase prices for their content, and allowing them to receive money though the “donation” section of Truli’s website.

Truli has not generated any revenue from these business strategies and there can be no assurances that we will do so in the future.

Results of Operations

Three Months Ended September 30, 2016 Compared to Three Months Ended September 30, 2015:  

The Company had no revenue for the three month periods ended September 30, 2016 or 2015. 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 $92,904 and $20,018 for the three month periods ended September 30, 2016 and 2015, respectively, resulted from the operational activities described below.

Operating expenses totaled $70,598 and $101,894 during the three month periods ended September 30, 2016 and 2015, respectively.  The decrease in operating expenses is the result of the following factors.

The Company incurred selling, general and administrative expenses of $70,598 and $101,894 for the three month periods ended September 30, 2016 and 2015, respectively, principally comprised of marketing, website development costs, professional fees and consulting fees.  The decrease of 31% in 2016 compared to 2015 was primarily attributable to decreased professional fees and insurance costs. 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 $23,784 and $34,020 for the three month periods ended September 30, 2016 and 2015, respectively.  The decrease was primarily related to a reduction in debt outstanding.  Additionally, the Company had a gain of $1,478 and a loss of $85 for the three month periods ended September 30, 2016 and 2015, respectively, as a result of the change in fair value of the Company’s derivative instruments. The Company recorded a gain of $115,981 on the extinguishment of debt during the 2015 period, with no comparable item in the current period. For more information on the Company’s convertible notes and derivative liabilities, please refer to Notes 3 and 4 to the accompanying unaudited condensed consolidated financial statements.

Six Months Ended September 30, 2016 Compared to Six Months Ended September 30, 2015:

The Company had no revenue for the six month periods ended September 30, 2016 or 2015. Net loss of $195,133 and $145,854 for the six month periods ended September 30, 2016 and 2015, respectively, resulted from the operational activities described below.

Operating expenses totaled $149,381 and $174,859 during the six month periods ended September 30, 2016 and 2015, respectively. The decrease in operating expenses is the result of the following factors.

The Company incurred selling, general and administrative expenses of $149,381 and $174,859 for the six month periods ended September 30, 2016 and 2015, respectively, principally comprised of marketing, website development costs, professional fees and consulting fees. The decrease of 15% in 2016 compared to 2015 was primarily attributable to decreased consulting fees and insurance costs.

Other Income (Expense)  

The Company charged to operations interest expense of $46,088 and $73,967 for the six month periods ended September 30, 2016 and 2015, respectively. The decrease was primarily related to a reduction in debt outstanding. Additionally, the Company had a gain of $336 and a loss of $13,009 for the six month periods ended September 30, 2016 and 2015, respectively, as a result of the change in fair value of the Company’s derivative instruments. The Company recorded a gain of $115,981 on the extinguishment of debt during the 2015 period, with no comparable item in the current period. For more information on the Company’s convertible notes and derivative liabilities, please refer to Notes 3 and 4 to the accompanying unaudited condensed consolidated financial statements.

Liquidity and Capital Resources

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 founder and former Chief Executive Officer. We expect to continue to incur operating losses for the foreseeable future. As of September 30, 2016, we had an accumulated deficit of $5,511,800 compared to $5,316,667 as of March 31, 2016. The increase is attributable to the net loss for the six month period ended September 30, 2016. Our net cash used in operations was $188,038 and $207,530 for the six months ended September, 2016 and 2015, respectively. The decrease is primarily attributable to a decrease in loss (after adjusting for non-cash items) of approximately $30,000, partially offset by a decrease in accounts payable of approximately $10,000. Our working capital deficiency was $571,691 as of September 30, 2016.

The Company had cash and cash equivalents of $7,207 and $13,245 as of September 30, 2016 and March 31, 2016, respectively. The Company’s capital requirements arose principally from costs associated with website development, marketing general administrative costs and debt settlement costs for both fiscal periods ended September 30, 2016 and 2015. The Company has liabilities of $2,534,832 and $2,345,910 as of September 30, 2016 and March 31, 2016, respectively. The increase in liabilities is primarily attributable to working capital advances received from our founder and former Chief Executive Officer.

The Company repaid $45,000 in principal during the six months ended September 30, 2016 related to a debt settlement incurred with the extinguishment of debentures. The debt settlement has been fully satisfied at September 30, 2016.

As described elsewhere in this Report, the purchasers of the Convertible Note are responsible for public company expenses for one year. They have orally agreed to provide an interim loan to fund the necessary ongoing costs. Under the NPA, the Founder is responsible for ongoing operating costs. We expect that he will pay these costs, but the payments will continue to be recorded as payables of the Company. If the Founder fails to pay the ongoing costs, the NPA provides that such failure is an Event of Default under the Convertible Note, which would in turn require TMC to cease operations. The Company has nominal cash as of the date of this Report and is totally reliant upon receipt of loans from the purchasers of the Convertible Note to meet its public company expenses and payment by the Founder of TMC’s operating expenses. While we believe that the purchasers will fund our public company expenses, our future liquidity is based upon our ability to obtain an acquisition target and obtain sufficient funding. There are no assurances that we will be successful in either regard.

Based on our current expected level of operating expenditures, we are 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. We need to raise additional cash through 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 binding commitments for future funding of cash from any source other than the Founder’s payment obligations under the NPA.

The independent registered public accounting firm’s report on our March 31, 2016 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.

Off-Balance Sheet Arrangements

None

Critical Accounting Estimates and Recent Accounting Pronouncements

Critical Accounting 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. Included in these estimates are assumptions about inputs used to calculate beneficial conversion of convertible notes payable, deferred income tax asset valuation allowances, and valuation of derivative liabilities.

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. 

Recently Issued Accounting Pronouncements

Management does not believe that any recent changes in accounting pronouncements and Accounting Standards Updates (ASU) issued by the Financial Accounting Standards Board (FASB) are of significance or potential significance to the Company.

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 an 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 three months ended September 30, 2016 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

As of the date of this Quarterly Report, there are no material pending legal or governmental proceedings relating to our Company or properties to which we are a party, and, to our knowledge, there are no material proceedings to which any of our directors, executive officers or affiliates are a party adverse to us or which have a material interest adverse to us.

ITEM 1A. - RISK FACTORS

Not required as we are a smaller reporting company as defined by Rule 229.10(f) (1).

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4 - MINE SAFETY DISCLOSURES

Not applicable

ITEM 5 - OTHER INFORMATION

On November 8, 2016, the Company sold an aggregate of $50,000 principal amount of its convertible promissory notes (each, a “Note”) to certain accredited investors (the “Investors”) and received $50,000 in gross proceeds (the “Financing”).

The Notes are convertible, at the option of the holder, into shares of the Company’s common stock, par value $0.001 per share, at a per share price of $0.02 (the “Conversion Price”), subject to adjustment as provided in the Notes and subject to a total beneficial ownership limitation of 9.99% of the Company’s issued and outstanding common stock. Each Note has a maturity date (the “Maturity Date”) that is five months from the issue date. The Maturity Date may be accelerated, at the option of the holder, upon the occurrence of a Fundamental Transaction (as defined in the Note).

The Company intends to use the net proceeds from the Financing for general corporate purposes.

The Financing was conducted as a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506 of Regulation D promulgated thereunder.

ITEM 6 - EXHIBITS

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

EXHIBITS INDEX

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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