Business Context and Reporting Period
Company: Truli Media Group, Inc. (formerly SA Recovery Corp.)
Reporting Period: Quarterly period ended December 31, 2012 (Nine months ended Dec 31, 2012; Inception Oct 19, 2011 through Dec 31, 2012)
Status: Development stage entity; no revenue generated to date.
Operations: Aggregator of family-friendly, faith-based Christian content, media, music, and IPTV programming. Website launched July 10, 2012.
Corporate Actions: Completed reverse merger/reorganization on June 13, 2012; changed fiscal year end to March 31; 1:1 forward stock split effective August 10, 2012.
Key Financial Metrics
| Metric | Value |
|---|---|
| Cash and Cash Equivalents | $2,491 (as of Dec 31, 2012) |
| Total Assets | $2,491 |
| Total Liabilities | $1,752,818 |
| Stockholders' Deficit | $(1,750,327) |
| Accumulated Deficit (Inception to Date) | $(1,974,494) |
| Revenue | $0 |
| Net Loss (3 months ended Dec 31, 2012) | $(491,096) |
| Net Loss (9 months ended Dec 31, 2012) | $(918,207) |
| Net Loss (Inception to Dec 31, 2012) | $(1,949,494) |
| Operating Expenses (9 months) | $869,138 |
| Interest Expense (9 months) | $49,069 |
| Net Cash Used in Operating Activities (9 months) | $(131,009) |
| Net Cash Provided by Financing Activities (9 months) | $133,500 |
| Working Capital Deficit | $(1,724,327) |
| Shares Outstanding | 49,997,938 (as of Dec 31, 2012) |
Material Changes vs. Prior Period
- Revenue: Remained at $0; company is pre-revenue.
- Expenses: Operating expenses for the nine months ended Dec 31, 2012 ($869,138) were higher than the period from inception through Dec 31, 2011 ($743,653), driven by website development and administrative costs.
- Debt: Significant increase in related party notes payable to $1,617,931 (from $943,074 at March 31, 2012) and new long-term notes of $26,000.
- Equity: Issuance of 49,997,938 shares of common stock following the reverse merger and stock split; elimination of prior accumulated deficit of the shell company.
- Cash Flow: Generated $2,491 in cash during the nine-month period, primarily from financing activities ($133,500) offset by operating cash burn ($131,009).
Guidance, Outlook, Risks, and Unusual Items
- Going Concern: The filing explicitly states substantial doubt about the company's ability to continue as a going concern. The company has no revenue, a significant accumulated deficit, and a working capital deficit. Continued existence depends on obtaining additional financing and commencing profitable operations.
- Financing Dependence: Heavily reliant on the Founder/CEO for funding. $1,617,931 is owed to the CEO on an unsecured note bearing 4% interest.
- Subsequent Events (Post-Dec 31, 2012):
- On Feb 5, 2013, $1,200,000 of related party debt was settled via issuance of 18,461,539 shares at $0.065/share.
- On Feb 5, 2013, 250,000 shares were issued for legal services.
- On Feb 8, 2013, agreement to issue 1,000,000 shares for consulting services.
- Internal Controls: Management identified two material weaknesses in internal controls over financial reporting: inadequate documentation of debt/equity transactions and insufficient personnel with financial reporting experience. Remediation efforts included engaging an outsourced accounting group.
- Stock Options: Granted 3,115,000 options at $0.20 exercise price in Dec 2012; 880,000 were exercisable as of Dec 31, 2012.
Investor Verification Checklist
- Capital Adequacy: Verify if the company has secured the additional financing required to meet obligations, given the explicit "Going Concern" warning and $1.7M working capital deficit.
- Debt Settlement: Confirm the impact of the Feb 2013 debt-for-equity swap ($1.2M debt converted to shares) on current debt levels and shareholder dilution.
- Revenue Generation: Assess the timeline and strategy for generating revenue, as the company has operated since Oct 2011 with zero revenue.
- Related Party Transactions: Review the terms of the remaining related party debt ($417,931 principal remaining after the Feb 2013 settlement) and the 4% interest accrual.
- Internal Controls: Evaluate the effectiveness of the new outsourced accounting procedures in preventing future material weaknesses in financial reporting.