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TRLI > SEC Filings for TRLI > Form 10-Q on 14-Nov-2013All Recent SEC Filings

Show all filings for TRULI MEDIA GROUP, INC.

Form 10-Q for TRULI MEDIA GROUP, INC.


14-Nov-2013

Quarterly Report


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

The following discussion should be read in conjunction with the information contained in the condensed consolidated financial statements of the Company and the notes thereto appearing elsewhere herein. As used in this report, the terms "Company", "we", "our", "us" and "Truli" refer to Truli Media Group, Inc.

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "Truli believes," "management believes" and similar language. The forward-looking statements are based on the current expectations of Truli and are subject to certain risks, uncertainties and assumptions, including those set forth in the discussion under "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this report. The actual results may differ materially from results anticipated in these forward-looking statements. We base the forward-looking statements on information currently available to us, and we assume no obligation to update them except as required by law.

Investors are also advised to refer to the information in our filings with the Securities and Exchange Commission, especially on Forms 10-K, 10-Q and 8-K, in which we discuss in more detail various important factors that could cause actual results to differ from expected or historic results. It is not possible to foresee or identify all such factors. As such, investors should not consider any list of such factors to be an exhaustive statement of all risks and uncertainties or potentially inaccurate assumptions.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our 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:

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.

Development Stage Entity

The Company is considered to be a development stage entity, as defined by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 915. From its inception (October 19, 2011) through the date of these unaudited condensed consolidated financial statements, the Company has not generated any revenues and has incurred significant expenses. Consequently, its operations are subject to all the risks inherent in the establishment of a new business enterprise. For the period from October 19, 2011 (date of inception) through September 30, 2013, the Company has accumulated losses from operations of $3,128,690.

Income Taxes

The Company follows Accounting Standards Codification subtopic 740-10, Income Taxes ("ASC 740-10") for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and relate primarily to stock based compensation basis differences. As of September 30, 2013, the Company has provided a 100% valuation against the deferred tax benefits.


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 30,783,389 and nil outstanding common share equivalents at September 30, 2013 and 2012, respectively.

                                                    September 30,       September 30,
                                                        2013                2012
                       Options                           1,056,000                   -
                       Warrants                          2,512,085                   -
                       Convertible notes payable        27,215,304                   -
                                                        30,783,389                   -

Web-site Development Costs

The Company has elected to expense web-site development costs as incurred.

Research and Development

The Company accounts for research and development costs in accordance with the Accounting Standards Codification subtopic 730-10, Research and Development ("ASC 730-10"). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and developments costs are expensed when the contracted work has been performed or as milestone results have been achieved. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.

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 unaudited condensed 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 instrument.

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 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 SEPTEMBER 30, 2013 AS COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2012

The Company had no revenues for the quarter ended September 30, 2013, for the quarter ended September 30, 2012, and for the period October 19, 2011 (date of inception) through September 30, 2013. Truli officially launched its website on July 10, 2012 but however, has not yet generated any revenue. Prior to such time, the Company was principally involved in website development and research and development activities.

The Company incurred selling, general and administrative expenses of $630,441 for the three months ended September 30, 2013, principally related to professional fees and marketing expenses, and $210,096 for the quarter ended September 30, 2012. The increase in selling, general and administrative was a result of increase in professional fees and other administrative costs.

During the three months ended September 30, 2013, the Company charged to operations interest expense of $226,517, which includes excess of fair value of derivative liability at inception of $82,490 as compared to $12,034 for the quarter ended September 30, 2012. During the three months ended September 30, 2013, the Company had a gain on fair value of derivative liability of $19,493 as compared to $nil for the three months ended September 30, 2012.

During the three months ended September 30, 2013, the Company incurred net loss of $837,465 as compared to $222,130 for the three months ended September 30, 2012. Increase in the net loss during the three months ended September 30, 2013 is due to the increase in operating expenses as described above.

RESULTS OF OPERATIONS -SIX MONTHS ENDED SEPTEMBER 30, 2013 AS COMPARED TO SIX MONTHS ENDED SEPTEMBER 30, 2012

The Company no revenues for the six months ended September 30, 2013, for the six months ended September 30, 2012, and for the period October 19, 2011 (date of inception) through September 30, 2013. Truli officially launched its website on July 10, 2012 but however, has not yet generated any revenue. Prior to such time, the Company was principally involved in website development and research and development activities.

The Company incurred selling, general and administrative expenses of $744,795 for the six months ended September 30, 2013, principally related to professional fees and marketing expenses, and $392,908 for the quarter ended September 30, 2012. The increase in selling, general and administrative was a result of increase in professional fees and other administrative costs.

During the six months ended September 30, 2013, the Company charged to operations interest expense of $232,678, which includes excess of fair value of derivative liability at inception of $82,490 as compared to $34,202 for the quarter ended September 30, 2012. During the six months ended September 30, 2013, the Company had a gain on fair value of derivative liability of $19,493 as compared to $nil for the six months ended September 30, 2012.

During the six months ended September 30, 2013, the Company incurred net loss of $957,980 as compared to $427,110 for the six months ended September 30, 2012. Increase in the net loss during the six months ended September 30, 2013 is due to the increase in operating expenses as described above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's capital requirements arise principally from costs associated with website development, marketing and general administrative costs. To date we have raised $593,609 pursuant to investments reflected by an unsecured note from its Founder and Chief Executive Officer, $42,975 from other long-term notes payable, and $543,837 from convertible notes. The note, which may be increased as additional funds may be advanced to Truli by its Chief Executive Officer, bears interest at 4% per annum commencing from September 30, 2012. Truli is obligated to repay the principal balance of the note along with accrued and unpaid interest payable over 36 months beginning in September 2012. However, no such payment was made during the period ended September 30, 2013.


Effective February 5, 2013, the Company and its Founder and Chief Executive Officer settled $1,200,000 of this Note Payable together with accrued interest into 22,153,847 (post- forward stock split) shares of common stock valued at $0.054 per share.

Financing activities provided $576,000 to the Company during the six months ended September 30, 2013. As of September 30, 2013, Truli had an accumulated deficit of $3,128,690.

We believe that we will require additional financing to carry out our intended objectives during the next twelve months. There is no guarantee that the Company can continue to raise enough capital or generate revenues to sustain its operations. These conditions raise a substantial doubt about the Company's ability to continue as a going concern. Furthermore, there can be no assurance, however, that such financing will be available or, if it is available, that we will be able to structure such financing on terms acceptable to us and that it will be sufficient to fund our cash requirements until we can reach a level of profitable operations and positive cash flows. If we are unable to obtain the financing necessary to support our operations, we may be unable to continue as a going concern. The Company currently has a non-binding commitment from a potential source of capital.

A downturn in the United States stock and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock or the debt securities may cause us to be subject to restrictive covenants. There is a risk of dilution whenever the Company sells securities to raise capital. If additional financing is not available or is not available on acceptable terms, we will have to curtail our operations.

Inflation

The Company believes that inflation has not had, and is not expected to have, a material effect on our operations.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Climate Change

We believe that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, any material effect on our operations.

Recently Issued Accounting Pronouncements

There are no recently issued accounting pronouncements that are expected to have a material impact on the unaudited condensed consolidated financial statements or notes thereto.

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