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
annual 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 June 29, 2016 on our consolidated financial statements for the year ended March 31, 2016 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 uncertainty.
We have a significant amount of debt which
could impact our ability to continue to implement our business plan.
We have incurred liabilities
of $2,437,804 (including $2,193,747 in unsecured notes and accrued interest due to our chief executive officer) as of June 30,
2016. Unless we are able to restructure some or all of this outstanding debt, and raise sufficient capital to fund our continued
development, we will be unable to pay these obligations as our current operations do not generate any revenue.
We currently are subject to financial
obligations of a settlement agreement regarding the cancellation of our previously issued 12% convertible 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% convertible debentures whereby we paid an initial
payment of $301,337. We additionally owed another $180,000 to be paid over 24 monthly payments beginning on October 10, 2014. We
have currently not missed any payments. In the event we default on any payment under this settlement agreement, we would be subject
to substantial penalties and interest, which will have a material adverse effect on our business and financial condition.
Our chief executive officer, vice-president,
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, our vice-president, and certain of 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 and to grow our business. 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 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 will be available on terms deemed to be acceptable by us,
and in our stockholders’ 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.
Our ability to keep our
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), we 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 our ability to keep our operations running efficiently. If a malfunction results in a wider or sustained
disruption to its business, this could have a material adverse effect on our 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:
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occasional scheduled maintenance;
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equipment failure;
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traffic volume to our websites that exceed our infrastructure’s capacity; and
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natural disasters, telecommunications failures, power failures, other system failures, maintenance, viruses, hacking or other events outside of our control.
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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.
If additional Shares are issued in the
future, an investor’s ownership interest will be diluted.
We may elect to issue additional
shares of common stock in the future including, without limitation, in connection with an additional capital raise. If we issue
additional shares in the future, an investor’s ownership interest 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 future 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 decreases, 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 future 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 June 30 2016, owns approximately 52% of the issued and outstanding equity of Truli. Additionally,
as of June 30, 2016, Mr. Solomon is owed an aggregate of $2,001,590 in principal and accrued interest pursuant to a 4% unsecured,
convertible promissory note which can be converted into our common stock at a price per share of $0.02. In the event that Mr. Solomon’s
convertible note were converted in full, he would own approximately 99% of the issued and outstanding stock of the Truli. 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 Truli 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 us. 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 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 CEO, Michael
Solomon has forgone payment for the last three fiscal years given our financial condition. 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 OTC PINK tier of the OTC Markets Group 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) 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; (ii) changes in financial estimates by us or
by any securities analysts who might cover our stock; (iii) speculation about our business in the press or the investment community;
(iv) significant developments relating to our relationships with our licensees and our advisors; (v) stock market price and volume
fluctuations of other publicly traded companies and, in particular, those that are in our industry; (vi) our potential inability
to pay back outstanding notes or debentures, or contractual obligations related to the cancellation thereof; (vii) investor perceptions
of our industry in general and our company in particular; (viii) the operating and stock performance of comparable companies; (ix)
general economic conditions and trends; (x) major catastrophic events; (xi) announcements by us or our competitors of new products,
significant acquisitions, strategic partnerships or divestitures; (xii) changes in accounting standards, policies, guidance, interpretation
or principles; (xiii) sales of our common stock, including sales by our directors, officers or significant stockholders; and (xiv)
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 (including those in default) 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, 50,134 common stock purchase warrants
issued as compensation to placement agents in connection with our previously cancelled 12% convertible debentures have increased
to 6,266,715 warrants and the exercise price has been reduced from $2.50 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. Because of our limited resources,
management has concluded that our internal control over financial reporting may not be effective in providing reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles. Furthermore, 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 of 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.
As a result of conducting 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.
We conduct business in overseas
markets and are therefore subject to risks inherent in the international distribution of media content, many of which are beyond
our 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 our 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.