Notes to Consolidated Financial Statements
(Unaudited)
Note 1 Description of Business
True Nature Holding, Inc. (the Company), previously known as Trunity Holdings, Inc., became a publicly-traded company through a reverse merger with Brain Tree International, Inc., a Utah corporation (BTI). BTI was incorporated on July 26, 1983 to specialize in the development of high technology products or applications including, but not limited to, electronics, computerized technology, new technological product fields, and precious metals. Trunity Holdings, Inc. was the parent company of the prior educational business, named Trunity, Inc., which was formed on July 28, 2009 through the acquisition of certain intellectual property by its three founders.
True Nature Holding, Inc. is a Corporation organized under the Laws of Delaware with principal offices located in Atlanta, Georgia. On January 16, 2016, the Company changed the equity structure that included a reverse split of 1 for 101, such that all holders of 101 shares of common stock would then have 1 share and modified the Articles of Incorporation such that the Company now has 500,000,000 shares of common stock authorized and 100,000,000 of preferred stock authorized, and e) a change in the name of Trunity Holdings, Inc. to True Nature Holding, Inc. (there was no change in the stock symbol TNTY).
Note 2 Summary of Significant Accounting Policies
Basis of Accounting
The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP).
Use of Estimates -
The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment.
Comprehensive Loss
Comprehensive income (loss) as defined includes all changes in equity during a period from non-owner sources. Items included in the Companys comprehensive loss consist of unrealized gains (losses) on securities.
Cash -
All highly liquid investments with a maturity date of three months or less at the date of purchase are cash equivalents.
Revenue Recognition-
The restructured entity of True Nature Holding, Inc. which is focused on acquiring a series of businesses which specialize in compounding pharmacy activities, has recognized no revenues through December 31, 2016. In fiscal 2017, the Company will recognize revenues when all of the following criteria have been met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured.
Stock-Based Compensation
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We recognize the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options are estimated at the grant date based on each options fair-value as calculated by the Black-Scholes-Merton (BSM) option-pricing model. Share-based compensation arrangements may include stock options, restricted share plans, performance based awards, share appreciation rights and employee share purchase plans. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant.
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Convertible Instruments
-The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of the bifurcated derivative instrument. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income. In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes.
Common Stock Purchase Warrants-
The Company accounts for common stock purchase warrants in accordance with FASB ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities (ASC 815). As is consistent with its handling of stock compensation and embedded derivative instruments, the Companys cost for stock warrants is estimated at the grant date based on each warrants fair-value as calculated by the Black-Scholes-Merton (BSM) option-pricing model value method for valuing the impact of the expense associated with these warrants.
Stockholders Equity-
Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of the service or assets received in exchange. Common stock share and per share amounts in these financial statements have been adjusted for the effects of a 1 for 101 reverse stock split that occurred in January 2016.
Per Share Data-
Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants, options and convertible instruments.
The Company has excluded all common equivalent shares outstanding for warrants, options and convertible instruments to purchase common stock from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented. As of December 31, 2016 and March 31, 2017, the Company had no outstanding warrants or options.
Income Taxes-
The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Companys consolidated financial statements or tax returns. In estimating future tax consequences,
the Company generally considers all expected future events other than possible enactments of changes in the tax laws or rates.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has determined that a valuation allowance is needed due to recent taxable net operating losses, the sale of profitable divisions and the limited taxable income in the carry back periods. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain tax loss carryforwards, less any valuation allowance.
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The Company accounts for uncertain tax positions as required in that a position taken or expected to be taken in a tax return is recognized in the consolidated financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company does not have any material unrecognized tax benefits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as components of interest expense and other expense, respectively, in arriving at pretax income or loss. The Company does not have any interest and penalties accrued. The Company is generally no longer subject to U.S. federal, state, and local income tax examinations for the years before 2012.
Business Combinations-
The Company accounts for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:
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future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents; and
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discount rates utilized in valuation estimates.
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Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated financial position, statements of operations or cash flows in the period of the change in the estimate.
Impairment of Long-Lived Assets-
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material. No impairment losses have been realized for the periods presented.
Financial Instruments and Fair Values-
the fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. In determining fair value, we use various valuation methodologies and prioritize the use of observable inputs. We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:
Level 1 inputs include exchange quoted prices for identical instruments and are the most observable.
Level 2 inputs include brokered and/or quoted prices for similar assets and observable inputs such as interest rates.
Level 3 inputs include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the asset or liability.
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The use of observable and unobservable inputs and their significant in measuring fair value are reflected in our hierarchy assessment. The carrying amount of cash, prepaid assets, accounts payable and accrued liabilities approximates fair value due to the short-term maturities of these instruments. Because cash and cash equivalents are readily liquidated, management classifies these values as Level 1. The fair value of the debentures, approximate their book value as the instruments are short-term in nature and contain market rates of interest. Because there is no ready market or observable transactions, management classifies the debentures as Level 3.
Recently Issued Accounting Standards-
In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which relates to the financial statement presentation of debt issuance costs. This guidance requires debt issuance costs to be presented in the balance sheet as a reduction of the related debt liability rather than an asset. The guidance is effective for annual and interim periods beginning after December 15, 2015 and early adoption is permitted and will only result in a change in presentation of the costs on the balance sheet.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes. The guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as noncurrent on the balance sheet. The guidance becomes effective for annual reporting periods beginning after December 15, 2016 with early adoption permitted. The adoption of this guidance will only result in a change in the presentation of deferred taxes on the balance sheet.
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ote 3 Financial Condition and Going Concern
As of March 31, 2017, the Company had cash on hand of $55 and current liabilities of $1,116,966 and has incurred a loss from operations. True Nature Holdings principal operations is the acquisition of compounding pharmacy companies. The Companys activities are subject to significant risks and uncertainties, including failing to secure additional funding to execute its business plan.
As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern. The Companys continuance is dependent on raising capital and generating revenues sufficient to sustain operations. The Company believes that the necessary capital will be raised and has entered into discussions to do so with certain individuals and companies. However, as of the date of these consolidated financial statements, no formal agreement exists.
The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.
Note 4 Related Party Transactions
On January 25, 2016 two board members were each awarded 100,000 of shares of the Company in exchange for their services as board members. The shares were valued at $145,000 based on the closing market price on the date of grant.
On April 25, 2016 a board member was awarded 100,0000 shares of the Company in exchange for his services on the board and 1,000,000 non-qualified stock options for his position as CEO. The stock options were subsequently cancelled in conjunction with his resignation on September 23, 2016, and 100,000 shares of restricted common stock valued at $47,680, based on the closing market price on the date of grant, in conjunction with the cancellation of all amounts owed as of the date of his resignation.
On May 25, 2016, a board member was awarded 100,000 shares, valued at $235,000, based on the closing market price on the date of grant, from the Company in exchange for his services on the board.
On September 23, 2016, the Company appointed three (3) new directors to the Board of Directors, and each received 100,000 shares, each valued at $27,990, based on the closing market price on the date of grant, of restricted common stock in conjunction with their appointment.
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On September 27, 2016, the Company accepted the resignations of its former Chairman & CFO, and former CEO. the former CFO had a consulting agreement in the amount of $10,000 per month for professional fees. The Companys former CEO had an employment agreement effective June 7, 2016 that would have paid him a monthly salary in the amount of $12,500 per month for remainder of 2016, $17,500 per month for the calendar year of 2017, $22,500 per month for the calendar year of 2018 and $25,000 per month for the calendar year of 2019. No payments have been made to the former CEO. Both of these agreements were fully cancelled and the Company has no further obligation to either going forward. Further, the former CFO has agreed to return for cancellation 2,000,000 of his shares of restricted common stock, and to use 100,000 shares to settle an obligation to a former employee. The former CEO had been awarded options for the purchase of 1,000,000 shares of restricted common stock, which were all cancelled in conjunction with his resignation.
In addition, a shareholder of the Company had a consulting agreement in the amount of $10,000 per month for professional fees. The shareholder and the Company have agreed to terminate their agreement with the Company as of September 30, 2016. In consideration of all amounts owed, the Company has issued 966,666, valued at $290,000 based on the closing market price on the date of grant, restricted common stock, and the consultant has cancelled $290,000 in amounts owed. The amounts owed consist of a) $80,000 in advances to the Company, or obligations paid to the Company, b) $120,000 in consulting fees owed and c) reimbursement of $90,000 of costs related to the formation of Newco4pharmacy, LLC, which was acquired by the Company in December 2015.
On December 30, 2016, the Board of Directors of the Company issued 100,000 shares of restricted common stock to a consultant, who subsequently became the CEO and CFO of the Company as compensation for his contribution during the prior 90 days. This charge to earnings for this issuance was $19,080;
On December 30, 2016, the Board voted to issue to the existing Board of Directors members 100,000 shares each of restricted common stock as additional compensation for services during the prior 90 days. Each of the recipients abstained from the vote on their issuance so as not to be voting on their own issuance, and did vote for the issuance to their fellow Board members. The charge to earnings for this issuance was $19,080, for each of the three (3) directors, or a total of $57,240.
The Company had accounts payable from related party transactions of $106,866 a of December 31, 2016. The balance was made up of the following: a) two members of the Board of Directors were due $12,000 each for compensation expense that had not been paid; b) the former CEO and CFO of the Company were owed for reimbursable expenses that totaled $75,866; and c) a shareholder had paid for expenses of the Company directly to several vendors for a total of $7,000.
On January 24, 2017, the Board granted to a member of Board of Directors 25,000 shares of restricted common stock as consideration for services. The Member of the Board of Directors abstained from the vote as to not be voting on his own issuance. The value for the issuance was $2,500, based on the closing price on the date of the grant.
On January 25, 2017, the Board granted the newly appointed CEO and CFO 500,000 shares of restricted common shares as part of his employment compensation. The shares are subject to reverse vesting that requires him to stay with the company for three (3) years (1/3 per year) and achieve certain management objectives to keep all of the shares. The expense to the Company was $15,236 during the three months ended March 31, 2017.
On February 7, 2017, the Board appointed one (1) additional member to the Board of Directors. The appointed member shall receive the customary 100,000 shares of restricted common stock for their service. The cost to the Company for this issuance is $11,000, based on the closing price on the date of the grant. The same candidate offered to buy 200,000 shares of restricted common stock at the same time. The consideration for the sale was $22,000. The transaction has no impact on earnings as the shares were priced at the same cost as the closing price on the date of the purchase.
On February 14, 2017, the Board of Directors for True Nature Holding, Inc. authorized the issuance of restricted common stock to a shareholder for consulting services. This calculation is based on February 14, 2017 and at the market close of $0.14 per share; hereby converting the debts which are currently owed and equates to 258,637 shares, for a total cost to the Company of $36,210, based on the closing price on the date of the grant.
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On February 14, 2017, the Board of Directors for True Nature Holding, Inc. authorized the issuance of restricted common stock to convert amounts owed to a vendor. This calculation is based on February 14, 2017 and at the market close of $0.14 per share; hereby converting $20,000 of debt in outstanding legal fees and expenses which are currently owed as of January 31, 2017, to 142,857 shares, for a total cost to the Company of $20,000. As the conversion amount equals the share value, no gain or loss was recorded.
On February 14, 2017, the Board authorized the issuance of restricted shares to convert the last 3 months salary ($4,000 per month for a total owed of $12,000) of 2016 owed to a Director serving as its Interim President. The price per share used was the closing price of $0.14 per share which equates to 85,714 shares of TNTY. This action hereby settles all outstanding past debts owed to the Director by TNTY up to February 14, 2017. As the conversion amount equals the share value, no gain or loss was recorded.
On February 14, 2017, the Board granted the newly appointed COO 500,000 shares of restricted common shares as part of his employment compensation. The shares are subject to reverse vesting that requires him to stay with the company for three (3) years (1/3 per year) and achieve certain management objectives in order to keep all of the shares. The expense to the Company was $11,088.
On March 8, 2017, the Board authorized the issuance of 100,000 restricted common stock to a newly appointed member of the non-executive Advisory Board. The stock was priced at the closing price of the stock at that date which was $0.30. The expense to the Company was $30,000.
Note 5 Debt
On March 18, 2016, the Company issued a 12% Convertible Promissory Note (the Convertible Note A) in the principal amount of $60,000 to the Lender. Pursuant to the terms of the Convertible Note, on the date thereof, the Company issued the Convertible Note to the Lender and, as consideration therefor, the Lender paid the Company in cash the full principal amount of the Convertible Note. Upon issuance, the lender was awarded 15,000 restricted common shares as an origination fee which will have piggy back registration rights. On September 19, 2016, the Company issued the lender an additional 15,000 restricted common shares at a price of $0.30 per share to extend the term of the loan agreement. The cost to the Company was $4,050 in Interest Expense. This note is currently in default. Accrued interest at March 31, 2017 and December 31, 2016, was $5,460 and $3,660, respectively.
Pursuant to the terms of the Convertible Note A, the Company is obligated to pay monthly installments of not less than $1,000 the first of each month commencing the month following the execution of this note until its full maturity on September 16, 2016 at which time the Company is obligated to repay the full principal amount of the Convertible Note A. The Convertible Note A is convertible by the holder at any time into shares of the Companys common stock at an effective conversion price of $1.00 and throughout the duration of this Convertible Note the holder has the right to participate in any and other financing the Company may engage in with the same terms and option as all other investors. The Company allocated the face value of the Convertible Note A to the shares and the note based on relative fair values, and the amount allocated to the shares of $18,750 was recorded as a discount against the note.
The beneficial conversion feature of $9,375 was recorded as a debt discount with an offsetting entry to additional paid-in capital decreasing the note payable and increasing debt discount. The debt discount is being amortized to interest expense over the term of the debt. For the year ended December 31, 2016, debt discount amortization related to the Convertible Note A was $28,125.
On May 19, 2016, the Company issued a 10% Convertible Promissory Note (the Convertible Note B) in the principal amount of $100,000 to the Lender. Pursuant to the terms of the Convertible Note B, on the date thereof, the Company issued the Convertible Note B to the Lender and, as consideration therefor, the Lender paid the Company in cash the full principal amount of the Convertible Note B. Upon issuance, the lender was awarded 66,666 warrants to purchase common stock of the Company at an exercise price of $2.50 for a term of twenty-four month. The warrants were valued at $103,086 with $100,000 as a debt discount; the additional $3,086 was expensed as additional interest expense. The debt discount was fully amortized during the year ended December 31, 2016. This obligation, including all warrants, penalties and interest due was cancelled as of September 30, 2016 in consideration of the issuance of 400,000 shares of restricted common stock valued at $120,000. At the time of conversion, the note about was $100,000 and total accrued interest was $3,671. Therefore, as a result of the conversion, a loss of $16,329 recognized in the year ended December 31, 2016.
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August 2014 Convertible Debentures (Series C)
As part of the restructuring all debentures issued by Trunity Holdings, Inc., to fund the former educational business were eligible to participate in a debt conversion however one debenture holder that was issued a Series C Convertible Debenture (the Series C Debenture) in August 2014 with an aggregate face value of $100,000 in exchange for the cancellation of Series B Convertible Debentures with a carrying value of $110,833 did not convert. The Series C Debenture accrues interest at an annual rate of 10%, matured November 2015, and is convertible into our common stock at a conversion rate of $20.20 per share. The holders of the Series C Debenture also received warrants to acquire 4,950 shares post-split of common stock for an exercise price of $20.20 per share, exercisable over five years. The former educational business allocated the face value of the Series C Debenture to the warrants and the debentures based on its relative fair values, and allocated to the warrants, which was recorded as a discount against the Series C Debenture, with an offsetting entry to additional paid-in capital. The discount was fully expensed upon execution of the new debentures as debt extinguishment costs within discontinued operations. As of March 31, 2017 and December 31, 2016, the carrying value of this Series C Debenture was $110,833 and accrued interest expense of $27,191 and $24,420, respectively. This note is currently in default.
November 2014 Convertible Debentures (Series D)
As part of the restructuring all debentures issued by Trunity Holdings, Inc., to fund the former educational business were eligible to participate in a debt conversion however one debenture holder that was issued a Series D Convertible Debenture (the Series D Debenture) in November 2014 with an aggregate face value of $10,000 in exchange for the cancellation of Series B Convertible Debenture with a carrying value of $11,333 that did not participate in the debt conversion restructuring. The Series D Debenture accrues interest at an annual rate of 12%, matured November 2015, and is convertible into our common stock at a conversion rate of $16.67 per share. The holders of the Series D Debenture also received warrants to acquire 495 shares post-split of common stock for an exercise price of $20.20 per share, exercisable over five years. The former educational business allocated the face value of the Series D Debenture to the warrants and the debentures based on their relative fair values, and allocated to the warrants, which was recorded as a discount against the Series D Debenture, with an offsetting entry to additional paid-in capital. The discount was fully expensed upon execution of the new debentures as debt extinguishment costs within discontinued operations. As of March 31, 2017 and December 31, 2016, the carrying value of the Series D Debenture was $11,333 and accrued interest expense of $3,281 and $2,941, respectively. This note is currently in default.
Short term loan
As a result of the acquisition of P3 Compounding of Georgia, LLC the Company had a short-term convertible note with a loan agency for a principal amount of $52,000 for the purchase of future sales and credit card receivables of P3. Under the terms of the receivable purchase agreement, the Company purchased an advance of $50,000 plus $2,000 for origination costs with a 10.5% daily interest rate to be repaid over 160 days at a repayment amount of $451.75 per day. Upon maturity, the loan the total repayment amount will be $72,280. As of the fiscal year ending December 31, 2016 the carrying value of this short-term loan was $26,925. For year ending December 31, 2016, no interest expense related to this loan was recorded in the Companys consolidated financial statements as the effective date of acquisition was the last day of the quarter. The origination fee and interest were recorded as debt discount on the date of issuance in the amount of $22,280 and $22,280 was amortized during the year ending December 31, 2016. The note is currently in default.
On July 11, 2016, the Company entered into a short-term loan with a loan agency for the principal amount of $48,000. Under the terms of the loan, the Company will make daily payments of $434.38 for a term of 160 for a total repayment amount of $69,500. As of December 31, 2016, the carrying value of this loan was $45,175. The origination fee and interest were recorded as debt discount on the date of issuance in the amount of $21,500 and $21,500 was amortized during the year ending December 31, 2016. This note is currently in default.
The convertible notes are convertible into common shares as of October 3, 2016 due to the default provision which allows conversion after default into 85% of the average trading price in the prior five days. The beneficial conversion features of $25,146 and $32,541 for the May and July notes, respectively, were recorded as a debt discount with an offsetting entry to additional paid-in capital decreasing the note payable and increasing debt discount. The debt discounts were both fully amortized during the year ended December 31, 2016.
The convertible notes also included common stock payable amounts of $10,000 each, which were recorded as a debt discount and an increase to common stock payable. These two debt discounts were also fully amortized during the year ended December 31, 2016.
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Note 6 Stockholders Deficit
Sale of Common Stock
During the fiscal year of 2016, the Company raised gross proceeds of $60,000 through the sale of 120,000 shares of common stock to accredited investors in private placement transactions at a price of $0.50 per share. The Company incurred $9,000 of securities issuance costs representing commissions paid to broker-dealers who assisted with these transactions.
During the three months ending March 31, 2017, the Company raised gross proceeds of $22,000 through the sale of 200,000 shares of common stock to a new member of the Board of Directors at a price of $0.11 per share.
Shares for Stock Based Compensation
During the fiscal year of 2016, in connection with services rendered, the Company issued 4,070,000, restricted shares of the Companys common stock at valued $3,377,735 in exchange for services conducted on behalf of the Company. The value of these shares were based on the closing market price on the respective date of grant.
During the three months ending March 31, 2017, in connection with services rendered, the Company issued 583,637, restricted shares of the Companys common stock at valued $136,034 in exchange for services conducted on behalf of the Company. The value of these shares was based on the closing market price on the respective date of grant.
Shares issued for convertible note payable issuance
During fiscal year of 2016, in connection with conversion of a six-month convertible promissory note, the Company issued 15,000 shares of the Companys common stock with a fair value of $18,750 that was valued based on the closing market price on the date of the grant.
During the three months ending March 31, 2017, in connection with conversion of a six-month convertible promissory note, the Company issued 15,000 shares of the Companys common stock with a fair value of $2,100 that was valued based on the closing market price on the date of the grant..
Shares issued for conversion of accounts payable
- During the fiscal year of 2016, the Company converted several accounts payable amounts to stock. The company issued 1,066,666 shares valued at $580,000 to settle the outstanding accounts payable. As a result of the settlements, a loss of $190,000 was recorded due to the fair value of the shares exceeding the fair value of accounts payable settled.
During the three months ending March 31, 2017, the Company converted several accounts payable amounts to stock. The company issued 228,571 shares valued at $32,000 to settle the outstanding accounts payable.
Shares issued for conversion of debt
- On September 30, 2016, a member of the board of advisors elected to convert his loan to the company of $100,000 and accrued interest into 400,000 shares of the Company. At the time of conversion, the note about was $100,000 and total accrued interest was $3,671. Therefore, as a result of the conversion, there was a loss of $16,329 recognized in the fiscal year ended December 31, 2016.
During the three months ending March 31, 2017, no debts were converted into stock.
Debt beneficial conversion feature for convertible note payable
During the fiscal year ended December 31, 2016, the Company raised gross proceeds of $201,780 pursuant to a Convertible Notes Payable that allocated the face value of the Note to the shares and debt based on their relative fair values and, resulted in the recording of beneficial conversion features totaling $67,062 as a discount against the Notes, with an offsetting entry to additional paid-in
capital. The discount is being amortized into interest expense over the term of the Note
Stock payable for debt
-Two notes issued in fiscal 2016 contained $10,000 of stock payable each which remained outstanding as of March 31, 2017.
Note 7 Stock Options
The Company had two Employee, Director and Consultant Stock Option Plans that were not terminated as a result of the fiscal 2015 restructuring of the Company and spin-out and have continued as part of the operations as detailed below.
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In fiscal 2015, the option pool pertaining to the 2009 Employee, Director and Consultant Stock Option Plan (the 2009 Plan) was adjusted for a 1 for 101 stock split due to the spin-out and restructuring plan, resulting in an authorized option pool of 18,152. Stock options typically vest over a three-year period and have a life of ten years from the date granted. As of March 31, 2017, there were 3,610 shares available for future awards under this plan.
In fiscal 2015, the option pool pertaining to the 2012 Employee, Director and Consultant Stock Option Plan (the 2012 Plan) was adjusted for a 1 for 101 stock split due to the spin-out and restructuring plan, resulting in an authorized options pool of 74,257. Stock options typically vest over a three-year period and have a life of ten years from the date granted. As of March 31, 2017, there were 45,673 shares available for future awards under this plan.
In addition, there are approximately 24,753 in options outstanding that were issued to a former CEO of spin-out Company in fiscal 2014. These options issued are outside of the 2009 and 2012 Plans.
A summary of options issued, exercised and cancelled are as follows: