TGIFF 1933 Industries Inc (PK)

ITEM 1A. – RISK FACTORS

We have described below a number of uncertainties and risks which, in addition to uncertainties and risks presented elsewhere in this Quarterly Report, may adversely affect our business, operating results and financial condition.  The uncertainties and risks enumerated below as well as those presented elsewhere in this Quarterly Report should be considered carefully in evaluating us, our business and the value of our securities. The following important factors, among others, could cause our actual business, financial condition and future results to differ materially from those contained in forward-looking statements made in this Quarterly Report or presented elsewhere by management from time to time. 

Risks Related To Our Financial Condition.

We were formed on October 19, 2011 and have a limited operating history and accordingly may not be able to effectively operate our business .

We are still in the early stages of company development and accordingly, there is only a limited basis upon which to evaluate our prospects for achieving our intended business objectives. There can be no assurance that we will ever achieve positive cash flow or profitability, or that if either is achieved, that it will be at the levels estimated by management.

Prior to the date of this Quarterly Report, we have not yet generated any revenue. Our failure to generate significant revenues would seriously harm our business. Even if we are able to access capital, we anticipate that we will experience operating losses and incur significant and increasing losses in the future due to growth, expansion, development and marketing. In the event that we are able to raise adequate capital, we expect to significantly increase our sales and marketing and general and administrative expenses. As a result of these additional expenses, we would need to generate substantial revenues to become profitable. We expect to incur significant operating losses for at least the next several years.

Our independent auditors have expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

The report of our independent auditors dated July 14, 2014 on our consolidated financial statements for the year ended March 31, 2014 included an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern. Our auditors’ doubts are based on our incurring significant losses from operations and our working capital deficit position. Our ability to continue as a going concern will be determined by our ability to obtain additional funding in the short term to enable us to realize the commercialization of our planned business operations. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertain.

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

We have incurred indebtedness of convertible notes and debentures currently totaling in principal and interest $957,858 as of June 30, 2014. Subsequently on August 7, 2014, our 12% debentures, with an aggregate principal and interest balance of $780,513, were cancelled pursuant to a settlement agreement with the holders.   Unless we are able to restructure some or all of the remaining debt, and raise sufficient capital to fund our continued development, our current operations do not generate any revenue to pay these obligations.  Accordingly, there can be no assurances that we will be able to pay these or other obligations which we may incur in the future and it is unlikely we will be able to continue as a going concern.

We currently are subject to financial obligations of a settlement agreement regarding the cancellation our previously issued 12% debentures and our failure to meet payments or obligations as they become due may materially harm our financial condition.

We entered into a settlement agreement and release of claims on August 7, 2014 with the holders of our 12% debentures whereby we paid an initial payment of $301,337. We additionally owe another $180,000 to be paid over 24 monthly payments beginning on October 10, 2014. In the event we default on any payment under this settlement agreement, we would be subject to substantial penalties and interest, which could have a material adverse effect on the Company’s business and financial condition.

Our chief executive officer, as well as consultants, are currently working without pay and there can be no assurances that they will continue to provide services to us.

Currently, our chief executive officer, as well as our consultants, are not being paid for their services provided to the company due to a shortage of company funds.  In the event that we are unable to secure additional financing to begin paying employees and consultants, they may quit, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

Risks Related to the Company

There is no assurance that we will be able to attract and retain consumers to our website or generate revenues.

Our success depends upon our ability to obtain and retain consumers and potentially generate income from advertisers, future merchandise sales, donations to our subscriber ministries, as well as Pay-per-View content on our website. There is no assurance that we will be able to attract prospective consumers to our website, that we will be able to retain consumers that we attract, or that we will be able to generate revenue sufficient to continue our operations.

We will require additional capital to implement our business plan and marketing strategies which we may be unable to secure.

Under our business plan, we intend to build and expand our operations substantially over the next several years. Our cash on hand is insufficient for our operational needs. We therefore need additional financing for working capital purposes. 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 or halt our anticipated expansion plans and our business and results of operations could be materially, adversely affected. There can be no assurance that additional financing, if required or sought, would be available on terms deemed to be acceptable by us, and in our best interests.

Given our lack of capital, we may be unable to build, or continue to build, awareness of our brand, which could negatively impact our business, our ability to generate revenues, and/or cause our revenues to decline.

Our ability to build   and maintain brand recognition is critical to attracting and expanding our online user base. In order to promote our brand, in response to competitive pressures or otherwise, we may find it necessary to increase our marketing budget,   hire additional marketing and public relations personnel or otherwise increase our financial commitment to creating   and maintaining brand loyalty among our clients. Given our insufficient funds, we are currently unable to promote our brand as necessary without raising additional capital. If we fail to promote and maintain our brand effectively, or incur   excessive expenses attempting to promote and maintain our brands, our business and financial results may suffer.

The Company relies on the proper and efficient functioning of its computer and database systems, and a malfunction could result in disruptions to 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 prospects of revenues as the   attractiveness of our sites to users and advertisers decreases. Further, we do not have multiple site capacity for all of our services in the event of any such occurrence. We may experience service disruptions for the following reasons:

Our networks and websites must accommodate a high volume of traffic and deliver frequently updated information. They may experience slow response times or decreased traffic for a variety of reasons. There may be instances where our online networks as a whole, or our websites individually, will be inaccessible. Also, slower response times can result from general Internet problems, routing and equipment problems involving third party Internet access providers, problems with third party advertising servers, increased traffic to our servers, viruses and other security breaches, many of which problems are out of our control. In addition, our users depend on Internet service providers and online service providers for access to our online networks or websites. Such providers have experienced outages and delays in the past, and may experience outages or delays in the future. Moreover, our Internet infrastructure might not be able to support continued growth of our online networks or websites. Any of these problems could result in less traffic to our networks or websites or harm the perception of our networks or websites as reliable sources of information. Less traffic on our networks and websites or periodic interruptions in service could have the effect of reducing demand for both users and for advertisers on our networks or websites, thereby harming our financial condition and operations.

Our networks may be vulnerable to unauthorized persons accessing our systems, viruses and other disruptions, which could result in the theft of our proprietary information and/or disrupt our Internet operations making our websites less attractive and reliable for our users and advertisers .

Internet usage could   decline if any compromise of security occurs. “Hacking” involves efforts to gain unauthorized access to information   or systems or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer   equipment. Hackers, if successful, could misappropriate proprietary information or cause disruptions in our service.

We may be required to expend capital and other resources to protect our websites against hackers. Our online networks could also be affected by computer viruses or other similar disruptive problems, and we could inadvertently transmit viruses across our networks to our users or other third parties. Any of these occurrences could harm our business or give rise to a cause of action against us. Providing unimpeded access to our online networks is critical to servicing our customers and providing superior customer service. Our inability to provide continuous access to our online networks could cause some of our customers to discontinue purchasing advertising programs and services and/or prevent or deter our users from accessing our networks. Our activities and the activities of third party contractors involve the storage and transmission of proprietary and personal information. Accordingly, security breaches could expose us to a risk of loss or litigation and possible liability. We cannot assure that contractual provisions attempting to limit our liability in these areas will be successful or enforceable, or that other parties will accept such contractual provisions as part of our agreements.

Our business, which is dependent on centrally located communications and computer hardware systems, is vulnerable to natural disasters, telecommunication and systems failures, terrorism and other problems, which could reduce traffic on our networks or websites and result in decreased capacity for advertising space .

Our operations are dependent on our communications systems and computer hardware, all of   which are located in data centers operated by third parties. These systems could be damaged by fire, floods, earthquakes, power loss, telecommunication failures and other similar events and natural disasters. We currently have no insurance   policies to cover for loss or damages in these events. In addition, terrorist acts or acts of war may cause harm to our employees or damage our   facilities, our clients, our clients’ customers and vendors, or cause us to postpone or cancel, or result in dramatically   reduced attendance at, our events, which could adversely impact our revenues, costs and expenses and financial   position. We are predominantly uninsured for losses and interruptions to our systems or cancellations of events   caused by terrorist acts and acts of war.

We currently have no insurance and we cannot be sure that adequate insurance coverage will be available in the future on acceptable terms, if at all, or that, if available, we will be able to maintain any such insurance at sufficient levels of coverage or that any such insurance will provide adequate protection against potential liabilities.

We currently have no director and officer insurance and no commercial insurance policies. Due to our lack of insurance, numerous events or claims against us would have a material adverse effect on our business, financial condition and results of operations. Insurance availability, coverage terms and pricing continue to vary with market conditions. If we are able to obtain adequate capital, we plan to obtain appropriate insurance coverage for insurable risks that we identify, however, we may fail to correctly anticipate or quantify insurable risks, may not be able to obtain appropriate insurance coverage. We have observed rapidly changing conditions in the insurance markets relating to nearly all areas of traditional corporate insurance. Such conditions, in the future may result in higher than anticipated premium costs, higher policy deductibles, and lower coverage limits. Even if we are able to maintain insurance, for some risks we may ever be able to obtain insurance coverage because of cost or availability.

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 investor’s ownership interest in the Company will be diluted and such dilution may be substantial.

If Internet users do not interact with www.truli.com frequently or if we fail to attract new users to the site, our business and financial results will suffer.

The success of www.truli.com is largely dependent upon users constantly visiting the site for content. We need to attract users to visit our website frequently and spend increasing amounts of time on the website when they visit. If we are unable to encourage users to interact more frequently with truli.com and to increase the amount of user generated content they provide, our ability to attract new users to our website and increase the number of loyal users will be diminished and adversely affected. As a result, our business and financial results will suffer, and we will not be able to grow our business as planned.

We intend to generate substantial portions of our revenue through advertising 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 from being seen by our users, which could harm our financial results.

Technologies have been developed, and are likely to continue to be developed, that can block the display of Internet ads. Ad-blocking technology may cause a decrease in the number of ads that we can display on our website, which could adversely affect our ad revenues and our financial results.

If we fail to enhance awareness of our website and provide updated content, we will be unable to generate sufficient website traffic and our business and financial condition will suffer.

In order to generate traffic to our website, we believe that we need to enhance awareness of our website and consistently provide updated content. We also believe that the importance of brand recognition will increase due to the relatively low barriers to entry in our market.  We believe we currently have low traffic on our website due to a lack of content, and our inability to adequately market the website given our insufficient capital. Increasing awareness and traffic will require us to spend increasing amounts of money on, and devote greater resources to, advertising, marketing and other brand-building efforts, and these investments may not be successful. Given our insufficient capital, even if these efforts are successful, they may not be cost-effective. If we are unable to enhance our website, our traffic may not increase and we may fail to attract advertisers, which could in turn result in lost revenues and adversely affect our business and financial results.

Risks related to management

Our Chief Executive Officer, by virtue of his ownership of our securities, is currently able to control the company .

Our founder and Chief Executive Officer, Michael Jay Solomon, as of August 6, 2014, beneficially owns 68.1% 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, which, if required, could result in significant company expenditures.

Should our officers and/or directors require us to contribute to their defense, we may be required to spend significant amounts of our capital. Our articles of incorporation and bylaws also provide for the indemnification of our directors, officers, employees, and agents, under certain circumstances, against attorney's fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of 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.

Given our financial situation, we may be unable to implement growth and expansion strategies.

We are not able to expand our product and service offerings, our client base and markets, or implement the other features of our business strategy given our insufficient capital and need for additional financing. If we are unable to successfully manage our future growth, establish and continue to upgrade our operating and financial control systems, recruit and hire necessary personnel or effectively manage unexpected expansion difficulties, our financial condition and results of operations could be materially and adversely affected.

Additional financing will be necessary for the implementation of our growth strategy.

We will require additional debt and/or equity financing to pursue our growth strategy.  Given our limited operating history and existing losses, there can be no assurance that additional financing will be available, or, if available, that the terms will be acceptable to us.  Lack of additional funding would force us to curtail substantially or even totally, our business and growth plans.

Furthermore, given our financial condition, future financing may involve restrictive covenants that could impose limitations on our operating flexibility.  Our failure to successfully obtain additional future funding on terms sufficient to us will seriously jeopardize our ability to continue our business and operations.

We depend on Michael Jay Solomon, our Chief Executive Officer, to manage and drive the execution of our business plans and operations; the loss of Mr. Solomon would materially and adversely affect our business.

Currently, our Chief Executive Officer, Michael Jay Solomon is our only employee and given our financial condition, he has forgone payment for the last two fiscal years. There can be no assurance that we will be   successful in retaining Mr. Solomon.  A voluntary or involuntary termination of Mr. Solomon would have a materially adverse effect on our business. 

Risks Related to Investment in our Company

The market for our common stock has been illiquid so the price of our common stock could be volatile and could decline when you want to sell your holdings.

Our common stock trades with limited volume on the OTCQB under the symbol TRLI. Although a limited public market for our common stock exists, it is still relatively illiquid compared to that of a seasoned issuer. Any prospective investor in our securities should consider the limited market of our common stock when making an investment decision. No assurances can be given that the trading volume of our common stock will increase or that a liquid public market for our securities will ever materialize. Numerous factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. These factors include but are not limited to: (i) expiration of lock-up agreements; (ii) 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 investor; (iii) changes in financial estimates by us or by any securities analysts who might cover our stock; (iv) speculation about our business in the press or the investment community; (v) significant developments relating to our relationships with our licensees and our advisors; (vi) stock market price and volume fluctuations of other publicly traded companies and, in particular, those that are in our industry; (vii) our potential inability to pay back outstanding notes or debentures, or contractual obligations related to the cancellation thereof; (viii) investor perceptions of our industry in general and our company in particular; (ix) the operating and stock performance of comparable companies; (x) general economic conditions and trends; (xi) major catastrophic events; (xii) announcements by us or our competitors of new products, significant acquisitions, strategic partnerships or divestitures; (xiii) changes in accounting standards, policies, guidance, interpretation or principles; (xiv) sales of our common stock, including sales by our directors, officers or significant stockholders; and (xv) additions or departures of key personnel.

Moreover, securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in our company at a time when you want to sell your interest in us.

Our common stock 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 (i) that a broker or dealer approve a person's account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person's account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the Commission relating to the penny stock market, which, in highlight form (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

The regulations applicable to penny stocks may severely affect the market liquidity for our common stock and could limit an investor’s ability to sell our common stock in the secondary market.

As an issuer of “penny stock,” the protection provided by the federal securities laws relating to forward-looking statements does not apply to us.

Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.

We are subject to price reset provisions, variable conversion prices and adjustments related to certain of our convertible notes and our common stock purchase warrants which could cause significant dilution to stockholders and adversely impact the price of our common stock.

Certain of our securities are subject to price reset provisions, variable conversion prices and adjustments.  As a result, future sales of common stock or common stock equivalents may result in significant dilution to our shareholders.  For instance, our 8% convertible notes issued in August, October, and November of 2013 are convertible into common shares at a discount to market and have price reset features.  

Additionally, 2,506,685 common stock purchase warrants issued as compensation to placement agents in connection with our recently cancelled 12% debentures have increased to 6,266,713 warrants and the exercise price has been reduced from   $0.05 to $0.02 as a result of subsequent debt issuances.

In the event of further price resets or conversion price modifications, dilution may be substantial and our stock price may be negatively impacted.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and operating results and stockholders could lose confidence in our financial reporting.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. Failure to achieve and maintain an effective internal control environment, regardless of whether we are required to maintain such controls, could also cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price. 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 became a public company in June 2012 and subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act. Prior to June 2012, we had not operated as a public company and the requirements of these rules and regulations have and will likely continue to increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls for financial reporting. For example, Section 404 of the Sarbanes-Oxley Act of 2002 requires that our management report on, and our independent auditors attest to, the effectiveness of our internal controls structure and procedures for financial reporting. Section 404 compliance may divert internal resources and will take a significant amount of time and effort to complete. We may not be able to successfully complete the procedures and certification and attestation requirements of Section 404 by the time we will be required to do so. If we fail to do so, or if in the future our chief executive officer, chief financial officer or independent registered public accounting firm determines that our internal controls over financial reporting are not effective as defined under Section 404, we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Furthermore, investor perceptions of our company may suffer, and this could cause a decline in the market price of our common stock. Irrespective of compliance with Section 404, any failure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. If we are unable to implement these changes effectively or efficiently, it could harm our operations, financial reporting or financial results and could result in an adverse opinion on internal controls from our independent auditors. We may need to hire a number of additional employees with public accounting and disclosure experience in order to meet our ongoing obligations as a public company, which will increase costs. Our management team and other personnel will need to devote a substantial amount of time to new compliance initiatives and to meeting the obligations that are associated with being a public company, which may divert attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations. In addition, because our management team has limited experience managing a public company, we may not successfully or efficiently manage our transition into a public company. 

Future sales of our equity securities could result in downward selling pressure on our securities, and may adversely affect the stock price.

In the event that our equity securities are sold, there is a risk downward pressure may result, making it difficult for an investor to sell his or her securities at any reasonable price, if at all. Future sales of substantial amounts of our equity securities in the public market, or the perception that such sales could occur, could put downward selling pressure on our securities, and adversely affect the market price of our common stock. 

Risks Related to the Industry

The affinity-based content aggregation and ecommerce industry is highly competitive .

We will be in competition with other current or potential regional, national and international companies that may offer similar services to ours. Our current competitors include Sky Angel, HopeTV, Harvest-TV, Streaming Faith, Hulu, YouTube, Pandora, Rhapsody as well as thousands of small Christian-focused web sites. Additionally, ministries providing content to the Company may also distribute their content through other mediums such as cable TV, similar online companies, their own web site, YouTube and others. It is possible that additional online media content competitors who do not directly compete with us will elect to compete in our field or emerge in the future, some of which may be larger and have greater financial and operating resources than we do. There can be no assurance that we will be able to compete against such other competitors in light of the rapidly evolving, highly competitive marketplace for these services. Our failure to maintain and enhance our competitive position could reduce our market share, decrease our profit margin and cause our revenues to grow more slowly than anticipated or not at all.

Online piracy of media content on our website could result in reduced revenues and increased expenditures which could materially harm our financial condition.

Online media content piracy is extensive in many parts of the world and is made easier by technological advances. This trend facilitates the creation, transmission and sharing of high quality unauthorized copies of online video content. The proliferation of unauthorized copies of these products will likely continue, and if it does, could have an adverse effect on 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.

Our contracts with content providers are “non-exclusive” which may affect our ability to compete, resulting in potential adverse effects to our operations and financial condition.

Our contracts with content providers are “non-exclusive.” As a result, content providers are able to deliver and distribute content which is available on the Truli website, through other websites including, without limitation, our direct competitors. In addition, certain of the content available on the Truli website is also available generally to the public on cable television, YouTube.com or other file sharing websites, among others. The lack of exclusive content on our website may be harmful to our ability to compete in the marketplace which could adversely affect our results of operations and financial condition.

Changes in technology may affect the profitability of online content and if we are unable to adapt to such technological changes, it may negatively impact our business and financial condition.

The online industry in general, continues to undergo significant changes, primarily due to technological developments. Due to rapid growth of technology and shifting consumer tastes, 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 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.

As a result of providing online media content, we may be subject to intellectual property infringement claims which could have a material adverse effect on our financial condition.

One of the risks of the online media content business is the possibility that others may claim that such content misappropriates or infringes the intellectual property rights of third parties with respect to their previously developed films, stories, characters, other entertainment or intellectual property. 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. We have no insurance to protect us against these claims. The filing of these claims may also damage our reputation as a high   quality provider of unbiased, timely analysis and result in client cancellations or overall decreased demand for our services.

As a distributor of media content, the Company may face potential liability for defamation, invasion of privacy, negligence, copyright or trademark infringement and other claims based on the nature and content of the materials distributed.

These types of claims have been brought, sometimes successfully, against distributors of media content. Any imposition of liability, given our lack of insurance coverage, could have a material adverse effect on the Company’s business, results of operations and financial condition.

In the event that we attempt to conduct business outside of the United States, we may be subjected to additional risks related to international trade which could have a material adverse effect on our financial condition.

The Company hopes to conduct business in overseas markets and will therefore be subject to risks inherent in the international distribution of media content, many of which are beyond the Company’s control. These risks include: (i) laws and policies affecting trade, investment and taxes, including laws and policies relating to the repatriation of funds and withholding taxes, and changes in these laws; (ii) differing cultural tastes and attitudes, including varied censorship laws; (iii) differing degrees of protection for intellectual property; (iv) financial instability and increased market concentration of buyers in foreign television markets, including in European pay television markets; (v) the instability of foreign economies and governments; (vi) fluctuating foreign exchange rates; and (vii) war and acts of terrorism.

Events or developments related to these and other risks associated with international trade could adversely affect our ability to do conduct business in non-U.S. sources, which could have a material adverse effect on the Company’s business, financial condition and results of operations.

Changes in laws and regulations, specifically those affecting the Internet could adversely affect our business and results of operations .

It is possible that new laws and regulations or new interpretations of existing laws and regulations in the United States and elsewhere will be adopted covering issues affecting our business, including (i) privacy, data security and use of personally identifiable information; (ii) copyrights, trademarks and domain names; and (iii) marketing practices, such as e-mail or direct marketing.

Increased government regulation, or the application of existing laws to online activities, could (i) decrease the growth rate of the Internet; (ii) reduce our revenues; (iii) increase our operating expenses; or (iv) expose us to significant liabilities.

Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is still evolving. Therefore, we might be unable to prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our trademarks and other proprietary rights. Any impairment in the value of these important assets could cause our stock price to decline. We cannot be sure what effect any future material noncompliance by us with these laws and regulations or any material changes in these laws and regulations could have on our business, operating results and financial condition.

Future government regulation may impair our ability to market and sell our services .

Our current and planned services are subject to federal, state, local and foreign laws and regulations governing virtually all aspects of our business and product offerings. As we offer existing products and services or introduce new ones commercially, it is possible that governmental authorities will adopt new regulations that will limit or curtail our ability to market and sell such products. We may also incur substantial costs or liabilities in complying with such new governmental regulations. Our potential customers and distributors, almost all of which operate in highly regulated industries, may also be required to comply with new laws and regulations applicable to products such as ours, which could adversely affect their interest in our products.

Our operating results are vulnerable to adverse conditions affecting southern California.

Our principal executive office is located in Beverly Hills, California. Thus, our operating results are vulnerable to natural disasters or other casualties and to negative economic, competitive, demographic and other conditions affecting southern California. We currently have no insurance coverage, and accordingly, will have no compensation for economic consequences of any loss. Should a loss occur, we could lose both our invested capital and anticipated profits from affected facilities.