NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT
JUNE 30, 2013
(unaudited)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Truli Media Group, Inc., a publicly traded Oklahoma Corporation formerly known as SA Recovery Corp., was incorporated on July 28, 2008 in the State of Oklahoma. In connection with the consummation of a triangular reorganization transaction on June 13, 2012 with Truli Media Group, LLC, a Delaware corporation (“Truli LLC”) formed on October 19, 2011 (date of inception), the accounting acquirer (see below), Truli Inc. changed its name to Truli Media Group, Inc. The historical financial statements are those of Truli LLC, the accounting acquirer, immediately following the consummation of the reverse merger. All references that refer to (the “Company” or “Truli Inc.” or “we” or “us” or “our”) are to Truli Media Group, Inc., the Registrant and its wholly owned subsidiaries unless otherwise differentiated.
Truli Media Group, Inc. (“Truli”), 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.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance accounting principles generally accepted in the United States of America for interim financial information and Rule 8-03 of Regulation S-X and with the instructions to Form 10-Q, and therefore, do not include all the information necessary for a fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Accordingly the operating results for the three months ended June 30, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2014. The unaudited condensed consolidated financial statements should be read in conjunction with the March 31, 2013 consolidated financial statements and footnotes.
Merger and Corporate Restructure
On June 13, 2012, Truli Media Group, Inc., an Oklahoma Corporation (Truli Inc. – formerly known as SA Recovery Corp) 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 Truli Inc.’s common stock, or approximately 74 % of the fully diluted issued and outstanding common stock of Truli Inc.
Pursuant to the Reorganization Agreement, as part of the transaction the members of and other designees of Truli LLC acquired a controlling interest in Truli Inc. Truli Inc. 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 Truli LLC is the legal acquirer rather than a reverse acquisition. Accordingly, the Registrant’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 Truli Inc. common stock, (2) issued 44,400,000
[1]
shares of Truli Inc common stock in exchange for acquisition of all of Truli LLC member interests; and (3) eliminated the prior Registrant’s accumulated deficit, including forgiveness of related party debt and record recapitalization of Registrant.
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.
The total consideration paid was $-0- and the significant components of the transaction are as follows:
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Assets:
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$
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-
|
|
|
Liabilities:
|
|
|
|
|
|
Net liabilities assumed
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|
$
|
-
|
|
|
Total consideration:
|
|
$
|
-
|
|
[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.
Change in Fiscal Year
Effective June 13, 2012, the Company changed its fiscal year end from February 28th to March 31st as a result of the Merger to conform its fiscal year to that of Truli Media Group, LLC.
Name Change
As a result of the Reorganization, the name of the Company was changed from SA Recovery Corp to Truli Media Group, Inc.
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 June 30, 2013, the Company has accumulated losses from operations of $2,291,225.
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 June 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 1,056,000 and nil outstanding common share equivalents at June 30, 2013 and 2012, respectively.
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.
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.
Stock-based compensation expense related to vested options was $13,196 and $nil during the three months ended June 30, 2013 and 2012, respectively. For the period from October 19, 2011 (date of inception) through June 30, 2013, the Company charged to operations stock based compensation expense related to vested options of $176,857.
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.
Recent Updates
On April 26, 2013, Jon Garfield resigned from the Board of Directors of the Company.
Reclassifications
Certain reclassifications have been made to conform the prior period data to the current presentations. These reclassifications had no effect on the reported results.
Recently Accounting Pronouncements
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not expect the future adoption of any such pronouncements to have a significant impact on its results of operations, financial condition or cash flow.
NOTE 2 — NOTES PAYABLE, RELATED PARTY
The Company’s Founder and Chief Executive Officer has advanced the Company the sum of $591,446 in the form of an unsecured term note payable as of June 30, 2013. The note, which may be increased as additional funds may be advanced to the Company by the Company Chief Executive Officer, bears interest at 4% per annum commencing from September 30, 2012. As per ASC 835-30 “Imputation of Interest’, the Company has imputed interest at 4% p.a. on the average balance of the notes payable and recorded $34,203 as interest expense and credit additional paid in capital till September 29, 2012. Since, the interest at 4% per annum commenced from September 30, 2012, the Company charged to operations interest expense of $25,401 for the fiscal year ended March 31, 2013, and $5,625 for the three months ended June 30, 2013, and credited to the accrued interest, related party.
The Company is obligated to repay the principal balance of the note along with accrued and unpaid interest payable over 36 months beginning in September 2012.
Effective February 5, 2013, the Company and its founder settled total of $1,200,000 in outstanding of this Note Payable together with accrued interest into 22,153,847 (post- forward stock split) shares of common stock at $0.054 per share.
NOTE 3 — NOTES PAYABLE, LONG TERM
On December 1, 2012, the Company entered into Unsecured Line of Credit agreement with an investor. Pursuant to the terms of the agreement, the Company promised to pay the sum up to $500,000, or the total sums advanced, together with accrued interest at the rate of 5% per annum from the date of the advance to the maturity date, which is December 31, 2014. During the period ending June 30, 2013, the Company issued seven 5% promissory notes to the investor in total amount of $42,975. As of June 30, 2013 and March 31, 2013, the Company had balance outstanding in the note payable of $42,975.
During the three months ended June 30, 2013 and 2012, the Company recorded an interest expense of $536 and $nil, respectively. For the period from October 19, 2011 (date of inception) through June 30, 2013, the Company recorded interest expense of $1,069. As of June 30, 2013 and March 31, 2013, the Company had accrued interest of $1,069 and $533, respectively.
NOTE 4 — 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 is a development stage entity and has not established any sources of revenue to cover its operating expenses. As shown in the accompanying unaudited condensed consolidation financial statements, the Company has not generated any revenue for the period from October 19, 2011 (date of inception) through June 30, 2013. The Company has a recurring net loss, and total deficit accumulated during its development stage of $2,291,225 and a working capital deficit (current liabilities exceeded current assets) at June 30, 2013 of $689,590. Additionally, current economic conditions in the United States and globally create significant challenges attaining sufficient funding.
The Company’s ability to continue existence is dependent upon commencing its planned operations, management’s ability to develop and achieve profitable operations and/or upon obtaining additional financing to carry out its planned business. The Company intends to fund its business development, acquisition endeavors and operations through equity and debt financing arrangements. The Company is dependent upon its Managing Member and Founder to provide financing for working capital purposes. However, there can be no assurance that these arrangements will be sufficient to fund its ongoing capital expenditures, working capital, and other cash requirements. The outcome of these matters cannot be predicted at this time.
These matters raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might necessary should the Company be unable to continue as a going concern.
NOTE 5- SHAREHOLDERS EQUITY AND CONTROL
Common stock
The Company is authorized to issue 495,000,000 shares of $0.001 par value common stock. As of June 30, 2013 and March 31, 2013 the Company had 84,051,493 and 83,651,493 shares of common stock issued and outstanding, respectively.
Effective August 10, 2012 the Company completed a one share for each existing share stock dividend of its common stock, Per Para 25-3 of "ASC 505-20 Stock Dividend and Stock Split", since the issuance of additional shares on account of 1:1 stock dividend is at least 20% or 25% of the number of previously outstanding shares, transaction has been accounted for as a "Forward Stock Split of 1:1".
Effective March 13, 2013, the Company completed a 1.2 share for each existing share stock dividend of its common stock, Per Para 25-3 of "ASC 505-20 Stock Dividend and Stock Split", since the issuance of additional shares on account of 1.2:1 stock dividend is at least 20% or 25% of the number of previously outstanding shares, transaction has been accounted for as a "Forward Stock Split of 1.2:1".
All references in the accompanying unaudited condensed consolidated financial statements and notes thereto have been retroactively restated to reflect the August 10, 2012 and March 13, 2013 stock dividend in substance as a stock split.
During the three months ended June 30, 2013, the Company issued 400,000 shares of its common stock for services valued at $17,400.
Preferred stock
The Company is authorized to issue 5,000,000 shares of $0.0001 par value common stock. As of June 30, 2013 and March 31, 2013 the Company has no shares of preferred stock issued and outstanding.
NOTE 6 - STOCK OPTIONS
On December 17, 2012, the Company granted 3,738,000 options with an exercise price of $0.17 per share under the Truli Media Group 2012 Directors, Officers, Employees and Consultants Stock Option Plan.
The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to employees and consultants under a stock option plan at June 30, 2013:
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Options Outstanding
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Options Exercisable
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Exercise
Prices (S)
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Number
Outstanding
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Weighted
Average
Remaining
Contractual Life
(Years)
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Weighted
Average
Exercise
Price (S)
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Number
Exercisable
|
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Weighted
Average
Exercise
Price
|
|
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$
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0.17
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3,738,000
|
|
4.35
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$
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0.17
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1,056,000
|
|
$
|
0.17
|
|
The stock option activity for the three months ended June 30, 2013 is as follows:
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Options Outstanding
|
|
|
Weighted Average Exercise Price
|
|
|
Outstanding at March 31, 2013
|
|
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3,738,000
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|
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$
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0.17
|
|
|
Granted
|
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|
-
|
|
|
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-
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Exercised
|
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|
-
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|
|
-
|
|
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Expired or canceled
|
|
|
-
|
|
|
|
-
|
|
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Outstanding at June 30, 2013
|
|
|
3,738,000
|
|
|
$
|
0.17
|
|
Stock-based compensation expense related to vested options was $13,196 during the three months ended June 30, 2013. The company determined the value of share-based compensation using the Black-Scholes fair value option-pricing model with weighted average assumptions for options granted during the three months ended June 30, 2013, including risk-free interest rates of 1.41%, volatility of 285%, expected lives of 2 to 5 years, and dividend yield of 0%.
NOTE 7 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of June 30, 2013 and March 31, 2013, accounts payable and accrued liabilities for the period ending are comprised of the following:
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June 30,
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March 31,
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2013
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|
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2013
|
|
|
|
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(Unaudited)
|
|
|
|
|
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Accrued legal fees
|
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$
|
69,116
|
|
|
$
|
78,074
|
|
|
Accrued consulting fees
|
|
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38,700
|
|
|
|
10,200
|
|
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Accrued advertising and promotion
|
|
|
-
|
|
|
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13,926
|
|
|
Accrued interest
|
|
|
1,069
|
|
|
|
532
|
|
|
Other
|
|
|
16,050
|
|
|
|
13,325
|
|
|
|
|
$
|
124,935
|
|
|
$
|
116,057
|
|
NOTE 8 – SUBSEQUENT EVENTS
On July 25, 2013, the Company issued 200,000 shares of its common stock for services valued at $8,000.
On July 26, 2013, the Company entered into a securities purchase agreement (the "Agreement") with an accredited investor (the "Investor") pursuant to which the Investor purchased an 8% Convertible Debenture for an aggregate purchase price of $100,000 (the "Debenture"). The Debenture bears interest at a rate of 8% per annum and is payable upon any principal being converted on any voluntary conversion date (as to that principal amount then being converted) and the earlier of (i) July 26, 2014 or (ii) one (1) business day after the consummation of a Subsequent Financing (as defined and described in the Agreement). The Company may pay interest due either in cash or, at its option, through an increase in the principal amount of the Debenture then outstanding by an amount equal to the interest then due and payable. The Debenture will be convertible at the option of the Investor at any time into shares of the Company's common stock, par value $0.0001 per share (the "Common Stock") at a conversion price equal to sixty-five percent (65%) of the average of the lowest three closing bid prices of the Company's Common Stock for the ten trading days immediately prior to a voluntary conversion date, subject to adjustment.
In connection with the Agreement, the Investor received a warrant to purchase five hundred thousand (500,000) shares of Common Stock (the "Warrant"). The Warrant is exercisable for a period of three years from the date of issuance at exercise price of $0.04, subject to adjustment. The Investor may exercise the Warrant on a cashless basis at any time after the date of issuance. In the event the Investor exercises the Warrant on a cashless basis we will not receive any proceeds.