ITEM 1. BUSINESS
The Company was incorporated on July 28, 2008 under the name “S.A. Recover Corp.”. In connection with the consummation of a triangular reorganization transaction on June 13, 2012 with Truli Media Group, LLC, a Delaware corporation (“Truli LLC”) formed on October 19, 2011 (date of inception), the Company changed its name to “Truli Media Group, Inc.” The historical financial statements of the Company are those of Truli LLC, the accounting acquirer, immediately following the consummation of the reverse merger.
The Company, headquartered in Beverly Hills, California, is a development stage company that is in 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.
Merger and Corporate Restructure
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, all of Truli’s LLC member interests were exchanged for 44,400,000
[1]
shares of the Company’s common stock, or approximately 74% of the fully diluted issued and outstanding common stock of the Company.
Pursuant to the Reorganization Agreement, as part of the transaction the members of and other designees of Truli LLC acquired a controlling interest in the Company. The Company was a publicly registered corporation with nominal operations immediately prior to the merger. For accounting purposes, Truli LLC was the surviving entity. The transaction is accounted for as a recapitalization of Truli LLC pursuant to which Truli LLC is treated as the surviving and continuing entity although the Company is the legal acquirer rather than a reverse acquisition. Accordingly, the Company’s historical financial statements are those of Truli LLC immediately following the consummation of the reverse acquisition.
Pursuant to the Reorganization Agreement the Company has, (1) cancelled 58,976,400
[1]
shares of its common stock, (2) issued 44,400,000
[1]
shares of its common stock in exchange for acquisition of all of Truli LLC member interests; and (3) eliminated the Company’s accumulated deficit, including forgiveness of related party debt and record recapitalization of the Company.
All references to common stock, share and per share amounts have been retroactively restated to reflect the reverse acquisition as if the transaction had taken place as of the beginning of the earliest period presented.
[1]
All share and per share data presented herein reflect the impact of stock dividend in form (forward stock split in substance) of
1:1 effective August 10, 2012
and 1.2:1 effective March 13, 2013.
Business of the Company
Truli serves as a collaborative, social networking site for members of the Christian community worldwide, allowing them to share and deepen their faith together. Truli will invite ministries from various Christian denominations to upload their messages to the Truli platform, at no cost. These sermons will be categorized into different subject matters and sub-topics for quick and easy user search. Our goal is to set Truli apart with the depth of the library from these participating ministries, centralizing, serving and extending the Christian message to a greater audience than has been done before. The Truli site also caters to those who are looking for family-friendly, family-safe programming.
Truli consumers will have free access to the interactive digital platform. This platform is intended to deliver all types of media content to IP accessible TVs, computers and an assortment of digital mobile devices such as tablets and smart phones. The Truli site will allow its users to easily access the vast library of Christian and family-friendly television, sermons, concerts, movies, e-books, educational seminars, music and music videos. Faith based merchandise will also be available through our SHOP TRULI function.
Truli aims to sign up as many ministries as possible throughout the United States and abroad. Truli is affiliated with over one hundred ministries and churches, and has entered into agreements with them to deliver their content through the Truli platform. We believe that these agreements will not only provide viewers with a wide variety of recognizable content, but will also attract many more ministries by recognizing the financial and credibility advantages Truli can offer. Beyond those benefits, Truli also provides direct access to a much larger outreach potential for smaller ministries.
The Truli Proposition
|
●
|
Expanded, global outreach potential for church ministries of any size, budget or location;
|
|
●
|
Direct user feedback and comment to ministry messages;
|
|
●
|
Social interface for sharing and discussing issues of faith and Christian life;
|
|
●
|
No airtime cost for member ministries;
|
|
●
|
A simple upload interface and submission page allows ministries to quickly upload and tag content to relevance and even Bible references;
|
|
●
|
Churches need not quality check and administrate their uploaded content;
|
|
●
|
A consumer tailored, individual customized experience;
|
|
●
|
Continuously updated content, added daily, and easily distributed on a variety of media streaming devices, dedicated to the Christian world; and
|
|
●
|
A vital technological augmentation for growth in today’s Christian faith.
|
Revenue Model
Truli expects to generate revenue initially in four ways:
|
1.
|
Advertising on the website;
|
|
2.
|
Sale of Premium and Pay-per-View Content;
|
|
3.
|
Revenue Share on the Sale of Merchandise; and
|
|
4.
|
Commission paid on Donations submitted through our Website.
|
Although we have not generated revenue as of March 31, 2013, subsequent to the fiscal year ended March 31, 2013 we announced three agreements that we believe could have an impact in our ability to generate significant revenue. We signed an agreement with AdColony, a leading mobile video advertising and monetization platform whose proprietary Instant-Play™ HD video ad technology serves video ads instantly on the most popular apps in the world across Apple's iOS and Google's Android platforms. AdColony works with premium mobile app publishers like Truli to monetize their content with HD video ads, and with Fortune 500 advertisers to deliver campaigns to mobile audiences.
Also, we signed an agreement with YuMe, a leading independent provider of digital video brand advertising solutions. YuMe delivers intelligent digital video advertising solutions across multiple screens for major brands. YuMe also offers multi-screen compatibility across computers, tablets, mobile devices and connected TVs. Last, we signed an agreement with Auckland-based Pushpay, which allows users to make direct payments to registered companies and organizations on their smartphones. Pushpay has partnered with large non-profits across the USA, Australia and New Zealand to boost their donations through mobile payments, while decreasing the administrative costs of receiving donations. We expect to incorporate Pushpay's mobile payment solutions into our donation platform in the near future.
Searching and Browsing the Truli Media Library
Searching and browsing the Truli media library is designed to be simple and intuitive through an interface empowering users with multiple ways to find the content for which they are searching. Advanced Search and Content functions are designed to allow the user to refine the results to further detail. By typing a keyword, for instance “Marriage”, the subscriber will have relevant suggestions and access to content contained in sermons, lectures, music, books, movies and products that are relevant to the subject searched.
Apart from keyword search, Truli employs an easy to use “Browse Topics” function to help guide seekers to relevant content and answers to issues of Christian life and faith. Categories include subjects such as: Inspiration, Wisdom, The Gospel, Guidance, Piety, Forgiveness, The Resurrection, Revelations, Family, Biblical History, Marriage, Children, Depression, Anxiety, Challenges to Faith and God’s work, to name a few.
This enhanced experience provides for more readily available access to relevant faith-based content, activities and a stronger education, all delivered seamlessly through the Truli Network.
Marketing
Truli’s marketing campaign includes press exposure, brand building at various seminars, viral and social strategies as well as utilizing networks, bloggers, newsletters, direct calling and radio. Because of the substantial potential benefits to a congregation, Truli’s marketing efforts are also expected to focus on announcements in church bulletins and membership newsletters when churches become involved in the program. Specific marketing efforts will include:
|
●
|
Direct to Ministries.
Truli’s initial marketing effort is likely to focus on the thousands of ministries located throughout the United States as well as the international market. Truli offers churches and ministries a means to expand the reach of their ministries and share their sermons, educational series, music and worship services not only throughout the United States, but globally, thus offering an attractive opportunity for ministries to reach new followers and expand the church body.
|
|
●
|
Trade Shows
.
Truli plans to cultivate and maintain a presence at two major national Christian conferences which we believe present our Company in a community that is consistent with our goals. The NRB (
National Religious Broadcasters
) Convention is an international event that networks thousands of Christian communicators, from program producers to authors, pastors to engineers, directors to vendors. And the ICRS (International Christian Retailers Show) is the largest gathering of Christian retailers and suppliers in the world.
|
|
●
|
The Christian media network flourishes in effective church congregation such as friend-to-friend recommendations, local church community groups, home churches, church sports leagues and pastoral relationships. Truli’s involvement in such activities is intended to inspire national, regional and local churches to engage and expand the culture through media, and by using social platforms to enhance the Truli brand.
|
|
●
|
Viral Marketing.
The word-of-mouth spreading of Truli's features and benefits is hoped to result in consistent, powerful exposure to church messages and social interaction with Truli as the hub for messenger and impetus for dialog. Through the website and the social network, Truli plans to allow both new ministries and well established organizations to deliver the message of the Gospel, literally, from church to church, from house to house, and person to person. Truli serves to help local and regional ministries bring a greater amount of quality content, message and value to their members, while creating a unified global community.
|
Social Networking
Truli is developing social network connections throughout the Christian community. We believe Truli’s social strategy and unique platform is unlike any other Christian media outlet. Truli will encourage people to connect with church friends, stimulate debate and thought, foster community group participation, provide new avenues to missionaries and much more.
By connecting groups, churches and individuals, Truli could become a vital and unifying social platform. Aspects of this concept are presently available in other companies and ministries, but none offer Truli’s extensive sharing and unifying capabilities, which cater to all the needs of the Christian community.
We believe that Truli will be especially attractive to Christian youth, who want to share their thoughts, music and views in a fun, safe environment. With Truli, our social networking features will give us an opportunity to achieve global online participation, offering encouragement, fresh ideas and joy to young believers of today and tomorrow.
Lumen
Lumen (formerly DOXA Media) is a division of Truli whose mission is to provide enrichment, entertainment and interaction around three impulses that capture the rising generation of Christians – humor, social good and spirituality. One of our main goals is to reach youth and youth focused ministries. Technologically proficient, these early adopters will bring
Lumen
's great spiritual energy and innovation, as well as early market conversion. We anticipate that
Lumen
will prominently feature various youth ministries in its lineup; youth ministries that are dynamic, focused, and have large platforms will be our target
Lumen
will be directed to young people between the ages of 16 and 30.
Additionally, programming with Christian music content and events will be showcased. We believe that the popularity of young music and media artists and the synchronous rise of the youth ministry movement suggests that
Lumen
is positioned to appeal to next generation Christians. In this space our goal is that
Lumen
can help to redefine the boundaries of what Christian programming can be, and how it can impact people’s lives.
Technology
Truli is not a technology company, but rather a company who has integrated some of the best in class technology. The Truli website, www.truli.net, is built on more than a decade of video portal design experience. There are several key parts to the Truli infrastructure:
Website
. The main website is built on top of a web Content Management System (CMS) / Content Management Framework (CMF) called Drupal. Drupal is well established, and, at more than 10 years old, very mature. Drupal is currently used as a back-end system by more than a million websites worldwide and powers such large sites as the White House, all of the NBC television shows, Warner Brothers Music, Symantec, Twitter, and many more. Drupal allows us to manage all of the website content, including images, text, and news. This software is open source, meaning it is not only free, but the source code is available to anybody that wants to make changes or additions. By starting with Drupal, we get a website that should power us through millions of users with many features already developed. Features such as user management, forgot password, menus, text editing, search engine optimization, multi-language support, and many more, which have already been developed. Essentially we currently get them at no cost. Utilizing Drupal should give us the ability to focus on features related to the core of our website.
Video
. Truli has recently partnered with a major provider of online video services to provide us with our video management, encoding, and delivery. This vendor is a well-recognized provider and is one of the top Content Delivery Networks (CDN) in the world. Utilizing this network for our live and on demand content delivery should provide us with the ability to reach most devices (e.g. PC, Mac, iOS, and Android) with ease. In addition, they have the ability to automatically scale to handle all the traffic Truli can demand. We will receive the following services to Truli:
|
●
|
Encoding – Truli content partners simply upload a high- quality media file and automatically creates High, Medium, and Low bandwidth versions that will work on most connected devices.
|
|
●
|
Player – the player sends a signal to the server designating which type of content to deliver to help make sure that all devices can see video.
|
|
●
|
Backup / Redundancy – The CDN handles backup & redundancy so that Truli doesn’t have to.
|
|
●
|
Video Management – The CDN provides a Video Management Platform (VMP) for Truli providing full video management and reporting.
|
|
●
|
Bandwidth – The CDN has the bandwidth to handle all of Truli’s peak delivery times with ease.
|
|
●
|
Live – The CDN provides support for live webcasting.
|
|
●
|
Search Inside – The CDN also provides a fairly unique feature called Search Inside. This feature uses voice recognition technology to allow users to search for certain words inside a video.
|
Web Hosting.
Truli uses Acquia for its site hosting. Acquia was founded by the original creator of Drupal as a top notch hosting provider for high-end Drupal sites. Acquia makes use of the Amazon Cloud for its customers. Acquia provides Truli with the following features:
|
●
|
Cloud Based Hosting – Truli should instantly scale to more servers to handle spikes in traffic and then scale back to normal levels. By utilizing the cloud, Truli does not currently have to purchase infrastructure to handle peak bandwidth usage.
|
|
●
|
Managed Search Engines – Acquia maintains an instance of Solr, widely noted as a top search engine. This is automatically integrated into Drupal by Acquia. Truli gets all of this functionality without having to pay for and manage it.
|
|
●
|
Monitoring Tools – Acquia has several monitoring applications available for use by Truli staff to manage errors, server utilization, etc.
|
|
●
|
Redundancy – Because this is based on Amazon’s cloud infrastructure, all of the hardware management is handled automatically.
|
|
●
|
Drupal configuration management – Because Acquia only handles Drupal hosting, they are experts at configuration, errors, optimization, etc. and perform all of these services for their customers.
|
Social Media Integration
. Truli utilizes services from Gigya for its social media integration. Gigya integrates with more than 25 social media companies. By utilizing Gigya, Truli should gain support for Facebook, Linked In, Twitter, Google Plus, and many more with just one integration. Gigya manages the relationships with the social companies directly. By taking advantage of the Gigya relationship, Truli does not currently have to manage relationships with each of these companies and does not have to update its codebase when a social company makes a change to theirs. Gigya provides Truli with the following features:
|
●
|
Social Login – allows users to log in with one of their existing social media logins instead of using a custom Truli login. This should increase logins significantly and Truli is still able to capture user information with this process.
|
|
●
|
Social Plugins – Support for ratings / reviews / comments
|
|
●
|
Gamification – Support for badges (similar to Foursquare)
|
|
●
|
Social Identity Management – Keeps users’ contact info up to date (if they are using Social Login).
|
|
●
|
Share Plugins – Allows users to comment on videos on Truli and have them also appear online
|
|
●
|
Social Analytics – Reporting
|
Traffic Management and Scalability.
Truli has outsourced all critical parts of the website allowing us to scale up and down as necessary. By doing so, we expect to be able to handle any level of traffic at any time, without having to purchase hardware and bandwidth to handle our peak levels. We believe we can handle almost any level of traffic almost instantly. Once the business stabilizes and we are able to predict traffic and growth, we may decide to provide some of these services in-house. Until then, we are able to remain lean by outsourcing these key components.
Company Infrastructure
. Truli is also utilizing many cloud based / Software-as-a-Service (SAAS) systems for its internal infrastructure. These include:
|
●
|
Email / Calendar – Google Apps for Your Domain
|
|
●
|
Sales Lead Management – HighRise
|
|
●
|
Company Intranet / Project Management – Basecamp
|
|
●
|
Bug / Feature Tracking – On Time
|
|
●
|
Bulk Email – Mail Chimp
|
Utilizing these services enables us to be able to work anywhere, without having to maintain a complex internal network. All Truli employees are able to work from any location as long as they have an Internet connection and a telephone.
Security
No business model is without its challenges and threats to commitment to provide secure, quality service. Identifying these challenges means empowerment to prevent them. Truli has addressed such threats by partnering with some of the most sophisticated vendors in the field, leveraging encryption technologies that are innovative and secure.
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 also 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.
Employees
As of March 31, 2013, we had one full-time employee, our Founder and Chief Executive Officer Michael Solomon. We have not experienced any work disruptions or stoppages and we consider our relationship with our employees to be strong. None of our employees are covered by a collective-bargaining agreement.
Our Website
Our website address is
www.truli.net.
Information found on our website is not incorporated by reference into this report. We make available free of charge through our website our SEC filings furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.
ITEM 1A. RISK FACTORS
The risk factors described below are not all-inclusive. All risk factors should be carefully considered when evaluating our business, results of operations, and financial position. We undertake no obligation to update forward looking statements or risk factors. There may be other risks and uncertainties not highlighted herein that may affect our financial condition and business operations.
Risks Related to the Company
We were formed on October 19, 2011 and have no operating history
.
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 Form 10-K, we have not yet generated substantial revenue. Our failure to generate significant revenues would seriously harm our business. We anticipate that we will experience operating losses and incur significant and increasing losses in the future due to growth, expansion, development and marketing. We expect to significantly increase our sales and marketing and general and administrative expenses. As a result of these additional expenses, we must significantly increase our 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 June 28, 2013 on our consolidated financial statements for the year ended March 31, 2013 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.
There is no assurance that we will be able to attract and retain consumers to our website.
Our success depends upon our ability to obtain and retain consumers and generate income from advertisers and video-on-demand (VOD). 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 the revenue sufficient to meet our projections.
We will require additional capital to implement our business plan and marketing strategies.
Under our business plan, we intend to build and expand our operations substantially over the next several years. Our cash on hand will likely prove insufficient for our operational needs. We may therefore need additional financing for working capital purposes and need to seek additional financing. 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 our anticipated expansion plans and our business and results of operations could be materially, adversely affected. There can be no assurance that additional financing, if required or sought, would be available on terms deemed to be acceptable by us, and in our best interests.
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. 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 its business.
The Company's ability to keep its 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), the Company 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 the Company's ability to keep its operations running efficiently. If a malfunction
results in a wider or sustained disruption to its business, this could have a material adverse effect on the Company's
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 revenues as the
attractiveness of our sites to users and advertisers decreases. Our insurance policies provide only limited coverage
for service interruptions and may not adequately compensate us for any losses that may occur due to any failures or
interruptions in our systems. Further, we do not have multiple site capacity for all of our services in the event of any
such occurrence. We may experience service disruptions for the following reasons:
|
●
|
occasional scheduled maintenance;
|
|
●
|
traffic volume to our websites that exceed our infrastructure’s capacity; and
|
|
●
|
natural disasters, telecommunications failures, power failures, other system failures, maintenance, viruses,
hacking or other events outside of our control.
|
Our networks and websites must accommodate a high volume of traffic and deliver frequently updated information. They may experience slow response times or decreased traffic for a variety of reasons. There may be instances where our online networks as a whole, or our websites individually, will be inaccessible. Also, slower response times can result from general Internet problems, routing and equipment problems involving third party Internet access providers, problems with third party advertising servers, increased traffic to our servers, viruses and other security breaches, many of which problems are out of our control. In addition, our users depend on Internet service providers and online service providers for access to our online networks or websites. Such providers have experienced outages and delays in the past, and may experience outages or delays in the future. Moreover, our Internet infrastructure might not be able to support continued growth of our online networks or websites. Any of these problems could result in less traffic to our networks or websites or harm the perception of our networks or websites as reliable sources of information. Less traffic on our networks and websites or periodic interruptions in service could have the effect of reducing demand for advertising on our networks or websites, thereby reducing our advertising revenues.
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. Our insurance
policies have limited coverage levels for loss or damages in these events and may not adequately compensate us for
any losses that may occur. 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, an investor’s ownership interest will be diluted.
The Company may elect to issue additional shares of common stock in the future including, without limitation, in connection with an additional capital raise. If the Company issues additional shares in the future, an Investors ownership interest in the Company will be diluted and such dilution may be substantial.
The failure to obtain or maintain patents, licensing agreements and other intellectual property could impact our ability to compete effectively.
To compete effectively, we need to develop and maintain a proprietary position with regard to our intellectual property, licensing agreements, product candidates and business. Legal standards relating to the validity and scope of claims are still evolving. Therefore, the degree of future protection for our proprietary rights in our products is also uncertain. The risks and uncertainties that we face with respect to our patents and other proprietary rights include the following:
|
●
|
we may be subject to interference proceedings;
|
|
●
|
we may be subject to opposition proceedings in foreign countries;
|
|
●
|
any patents that are issued may not provide meaningful protection;
|
|
●
|
other companies may challenge patents licensed or issued to us or our suppliers;
|
|
●
|
other companies may independently develop similar or alternative technologies, or duplicate our technologies;
|
|
●
|
other companies may design around technologies we have licensed; and
|
|
●
|
enforcement of patents is complex, uncertain and expensive.
|
We cannot be certain that patents will be issued as a result of any pending applications, and we cannot be certain that any issued patents, whether issued pursuant to our pending applications or license, will give us adequate protection from competing products. For example, issued patents, including the patents licensed from others, may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope. In addition, since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the first to make our inventions or to file patent applications covering those inventions.
It is also possible that others may obtain issued patents that could prevent us from commercializing our products or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those patents that we have licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement, and we may be unable to do so.
If Internet users do not interact with
www.truli.net
frequently or if
we fail to attract new users to the site, our business and financial results will
suffer.
The success of www.truli.net 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.net 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 our revenue almost entirely from advertising so 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 increase, 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, 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 ad revenues and our financial results.
Our operating results may fluctuate, which makes comparing our operating results on a period-to-period basis difficult and could cause our results to fall short of expectations.
Our operating results may fluctuate as a result of a number of factors, many outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our quarterly, year-to-date and annual expenses as a percentage of our revenues may differ significantly from our historical or projected rates. Our operating results in future quarters may fall below expectations.
If we fail to maintain and enhance awareness of our website, our business and
financial results could be adversely affected.
We believe that maintaining and enhancing awareness of our website is critical to achieving widespread acceptance of our services and to the success of our business. We also believe that the importance of brand recognition will increase due to the relatively low barriers to entry in our market. Maintaining and enhancing our website may 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. Further, even if these efforts are successful, they may not be cost-effective. If we are unable to continuously maintain and enhance our website, our traffic may decrease 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
We are under the control of our management
.
Our founder and CEO, Michael Jay Solomon, beneficially owns 77.9% of the issued and outstanding equity of the Company. 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 the Company 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.
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 our Company. 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.
We may be unable to manage our growth or implement our expansion strategy.
We may not be able to expand our product and service offerings, our client base and markets, or implement the other features of our business strategy at the rate or to the extent presently planned. Our projected growth will place a significant strain on our administrative, operational and financial resources. 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 may be necessary for the implementation of our growth strategy.
We may 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 could force us to curtail substantially our growth plans. Furthermore, the issuance by us of any additional securities pursuant to any future fundraising activities undertaken by us would dilute the ownership of existing shareholders and may reduce the price of our common stock.
Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on our operating flexibility. Our failure to successfully obtain additional future funding may jeopardize our ability to continue our business and operations.
Our success depends to a large extent upon the skill, experience, performance and abilities of our executive management and other key personnel.
The online affinity-based content aggregation and ecommerce
industry is highly competitive and our success is dependent upon our ability to attract, maintain and integrate qualified
development, acquisition, marketing, management and administrative personnel for which there is keen competition.
In addition, the cost of retaining such personnel could escalate over time. There can be no assurance that we will be
successful in attracting or retaining such personnel. New employees require extensive training and typically take
many months to achieve full productivity.
Risks Related to Investment in our Company
There has not been an active public market for our common stock so the price of our common stock could be volatile and could decline following this offering at a time when you want to sell your holdings.
Our common stock is traded on the OTCQB under the symbol TRLI. Our common stock is not actively traded and the price of our common stock may be volatile. Numerous factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. These factors include:
|
●
|
expiration of lock-up agreements;
|
|
|
|
|
●
|
our earnings releases, actual or anticipated changes in our earnings, fluctuations in our operating results or our failure to meet the expectations of financial market analysts and investors;
|
|
|
|
|
●
|
changes in financial estimates by us or by any securities analysts who might cover our stock;
|
|
|
|
|
●
|
speculation about our business in the press or the investment community;
|
|
|
|
|
●
|
significant developments relating to our relationships with our licensees and our advisors;
|
|
|
|
|
●
|
stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industry;
|
|
|
|
|
●
|
customer demand for our products;
|
|
|
|
|
●
|
investor perceptions of the our industry in general and our company in particular;
|
|
|
|
|
●
|
the operating and stock performance of comparable companies;
|
|
|
|
|
●
|
general economic conditions and trends;
|
|
|
|
|
●
|
major catastrophic events;
|
|
|
|
|
●
|
announcements by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures;
|
|
|
|
|
●
|
changes in accounting standards, policies, guidance, interpretation or principles;
|
|
|
|
|
●
|
sales of our common stock, including sales by our directors, officers or significant stockholders; and
|
|
|
|
|
●
|
additions or departures of key personnel.
|
Securities class action litigation is often instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs to us and divert our management’s attention and resources.
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 will 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:
|
●
|
that a broker or dealer approve a person's account for transactions in penny stocks; and
|
|
●
|
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:
|
●
|
obtain financial information and investment experience objectives of the person; and
|
|
●
|
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:
|
●
|
sets forth the basis on which the broker or dealer made the suitability determination; and
|
|
●
|
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.
Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and operating results and stockholders could lose confidence in our financial reporting.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. Failure to achieve and maintain an effective internal control environment, regardless of whether we are required to maintain such controls, could also cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price. Although we are not aware of anything that would impact our ability to maintain effective internal controls, we have not obtained an independent audit of our internal controls and, as a result, we are not aware of any deficiencies which would result from such an audit. Further, at such time as we are required to comply with the internal controls requirements of the Sarbanes-Oxley Act, we may incur significant expenses in having our internal controls audited and in implementing any changes which are required.
We have not paid dividends on our common stock in the past and do not expect to pay dividends on our common stock for the foreseeable future. Any return on investment may be limited to the value of our common stock.
No cash dividends have been paid on our common stock. We expect that any income received from operations will be devoted to our future operations and growth. We do not expect to pay cash dividends on our common stock in the near future. Payment of dividends would depend upon our profitability at the time, cash available for those dividends, and other factors as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on an investor’s investment will only occur if our stock price appreciates.
The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
We recently became a public company 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 will likely 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.
If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if we do obtain analyst coverage, if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
Future Sales Of Our Equity Securities Could Put Downward Selling Pressure On Our Securities, And Adversely Affect The Stock Price.
There is a risk that this downward pressure may make it impossible 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.
Piracy.
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 the Company’s business, because these products could reduce the revenue the Company receives from its products. Additionally, in order to contain this problem, the Company may have to implement elaborate and costly security and anti-piracy measures, which could result in significant expenses and losses of revenue. There can be no assurance that even the highest levels of security and anti-piracy measures will prevent piracy
Non-Exclusive Content.
Certain contracts with content providers are “non-exclusive”. As a result, content providers may be 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 could be harmful to our ability to compete in the marketplace which could adversely affect our results of operations.
Changes in technology.
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, the Company cannot accurately predict the overall effect that technological growth or the availability of alternative forms of entertainment may have on the profitability of the its online content and/or the Company’s 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. The Company cannot predict how it or its business partners will financially participate in the exploitation of its content through these emerging technologies or whether the Company or its business partners have the right to do so for all of its content. If the Company or its business partners cannot successfully exploit these and other emerging technologies, it could have a material adverse effect on the Company’s revenues and therefore on the Company’s business, financial condition and results of operations.
Intellectual property infringement claims.
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. The Company is 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 the Company’s business, financial condition or results of operations. Irrespective of the validity or the successful assertion of such claims, the Company could incur significant costs and diversion of resources in defending against them, which could have a material adverse effect on the Company’s business, financial condition or results of operations. If any claims or actions are asserted against the Company, the Company may seek to settle such claim by obtaining a license from the plaintiff covering the disputed intellectual property rights. The Company 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 the Company’s revenues and therefore on the Company’s 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. Our insurance may not
adequately 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, the Company may face potential liability for:
|
●
|
copyright or trademark infringement (as discussed above); 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 that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on the Company’s business, results of operations and financial condition.
International Risk.
The Company hopes to derive revenue from overseas markets and will therefore be subject to risks inherent in the international distribution of media content, all of which are beyond the Company’s control. These risks include:
|
●
|
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;
|
|
●
|
differing cultural tastes and attitudes, including varied censorship laws;
|
|
●
|
differing degrees of protection for intellectual property;
|
|
●
|
financial instability and increased market concentration of buyers in foreign television markets, including in European pay television markets;
|
|
●
|
the instability of foreign economies and governments;
|
|
●
|
fluctuating foreign exchange rates; and
|
|
●
|
war and acts of terrorism.
|
Events or developments related to these and other risks associated with international trade could adversely affect revenues from non-U.S. sources, which could have a material adverse effect on the Company’s business, financial condition and results of operations.
Changes in regulations 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:
|
●
|
privacy, data security and use of personally identifiable information;
|
|
●
|
copyrights, trademarks and domain names; and
|
|
●
|
marketing practices, such as e-mail or direct marketing.
|
Increased government regulation, or the application of existing laws to online activities, could:
|
●
|
decrease the growth rate of the Internet;
|
|
●
|
increase our operating expenses; or
|
|
●
|
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 believe that our insurance coverage is in accordance with industry standards. However, insurance proceeds may not adequately compensate for all economic consequences of any loss. Should a loss occur, we could lose both our invested capital and anticipated profits from affected facilities.