Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 000-53601

TRUNITY HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)

Delaware	87-0496850
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification Number)

1 New Hampshire Avenue, Suite 125, Portsmouth, NH 03801	03801
(Address of principal executive offices)	(Zip Code)

(866) 723-4114

(Registrant’s telephone number, including area code)

230 Commerce Way, Portsmouth, New Hampshire

(Former address of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer	o	Accelerated filer	o
	Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

Class		Outstanding at November 25, 2014
Common Stock, $.0001 par value per share		54,665,631

DOCUMENTS INCORPORATED BY REFERENCE: None

TABLE OF CONTENTS

	PART I — FINANCIAL INFORMATION	Page

Item 1.	Financial Statements	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results Of Operations	20

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27

Item 4.	Controls and Procedures	27

	PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	28

Item 1A.	Risk Factors	28

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	28

Item 3.	Defaults upon Senior Securities	29

Item 4.	Mine Safety Disclosures	29

Item 5.	Other Information	29

Item 6.	Exhibits	30

Signatures		31

Exhibit Index		32

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Balance Sheets

	September 30, 2014			December 31, 2013
	(Unaudited)
ASSETS
Current assets
Cash	$	9,089		$	812,064
Accounts receivable		24,082			2,729
Prepaid expenses and other assets		127,721			41,636
Total current assets		160,892			856,429

Property and equipment
Fixtures and equipment		210,172			210,172
Less accumulated depreciation		(184,190	)		(164,226	)
Total property and equipment, net		25,982			45,946

Capitalized software development costs
Costs incurred		4,125,801			3,634,029
Less accumulated amortization		(3,319,069	)		(2,917,866	)
Total capitalized software development costs, net		806,732			716,163

Other assets
Debt issuance costs and other assets		12,895			32,022

TOTAL ASSETS	$	1,006,501		$	1,650,560

LIABILITIES
Current liabilities
Accounts payable	$	879,119		$	394,325
Accrued interest and other liabilities		314,384			279,465
Debentures Series A, B, C, and D, carrying value		1,357,516			991,501
Notes payable – related parties		4,062			252
Convertible note payable, carrying value		41,402			—
Deferred revenue		281,883			315,850
Total current liabilities		2,878,366			1,981,393

Long-term liabilities
Deferred rent, long-term portion		—			2,515
Total long-term liabilities		—			2,515

Total liabilities		2,878,366			1,983,908

Commitments and Contingencies

STOCKHOLDERS’ (DEFICIT) EQUITY
Preferred stock, $0.0001 par value - 50,000,000 shares authorized; None issued and outstanding		—			—
Common stock, $0.0001 par value - 200,000,000 shares authorized; 54,665,631 and 46,697,891 shares issued and outstanding, respectively		5,467			4,670
Additional paid-in capital		13,727,747			12,396,355
Other comprehensive loss		11,656			3,649
Accumulated deficit		(15,616,735	)		(12,738,022	)
Total stockholders’ deficit		(1,871,865	)		(333,348	)

TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	1,006,501		$	1,650,560

The accompanying Notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net sales	$	110,219		$	67,899		$	195,539		$	152,400
Cost of sales		82,398			23,465			151,332			67,153
Gross Profit		27,821			44,434			44,207			85,247

Operating expenses:
Research and development		222,934			191,378			666,217			593,979
Selling, general and administrative		526,535			583,023			1,915,052			1,625,476
Total operating expenses		749,469			774,401			2,581,269			2,219,455

Loss from operations		(721,648	)		(729,967	)		(2,537,062	)		(2,134,208	)

Other Expense:
Interest expense, net		(84,097	)		(95,236	)		(275,782	)		(300,545	)
Loss on debt extinguishment		(65,869	)		—			(65,869	)		—

Net Loss		(871,614	)		(825,203	)		(2,878,713	)		(2,434,753	)

Other Comprehensive Gain, Net of Tax:
Foreign currency translation adjustments		126			3,251			8,007			10,033
Comprehensive Loss	$	(871,488	)	$	(821,952	)	$	(2,870,706	)	$	(2,424,720	)

Net Loss per Share - Basic and Diluted	$	(0.02	)	$	(0.02	)	$	(0.06	)	$	(0.06	)

Weighted Average Number of Shares - Basic and Diluted		50,856,901			46,591,469			48,895,940			41,483,924

The accompanying Notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statement of Changes in Stockholders’ Deficit

(Unaudited)

	Common Stock				Additional Paid-in		Accumulated Other Comprehensive		Retained			Total Stockholders’
	Shares		Amount		Capital		Gain		Earnings			(Deficit) Equity
Balance as of December 31, 2013		46,697,891	$	4,670	$	12,396,355	$	3,649	$	(12,738,022	)	$	(333,348	)

Sale of common stock, net of issuance costs and treasury repurchase		3,861,679		386		658,314		—		—			658,700

Shares issued for services		3,500,000		350		69,650		—		—			70,000

Warrants issued for services		—		—		20,752		—		—			20,752

Common stock issued upon conversion of notes payable		606,061		61		99,939		—		—			100,000

Employee stock-based compensation		—		—		372,181		—		—			372,181

Discount on convertible debt for beneficial conversion feature and detachable warrants		—		—		44,687		—		—			44,687

Loss on debt extinguishment		—		—		65,869		—		—			65,869

Foreign currency translation gain		—		—		—		8,007		—			8,007

Net loss		—		—		—		—		(2,878,713	)		(2,878,713	)
Balance as of September 30, 2014		54,665,631	$	5,467	$	13,727,747	$	11,656	$	(15,616,735	)	$	(1,871,865	)

The accompanying Notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	September 30,
	2014			2013
Cash Flows from Operating Activities:
Net Loss	$	(2,878,713	)	$	(2,434,753	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		421,167			367,167
Stock compensation expense		372,181			98,006
Accretion for debt discounts and issuance costs		202,690			202,725
Shares issued in exchange for services		70,000			—
Loss on debt extinguishment		65,869			—
Warrants issued in exchange for services		20,752			31,144
Shares issued as a conversion of payables		—			57,500
Changes in operating assets and liabilities:
Accounts receivable		(21,353	)		(1,789	)
Prepaid expenses and other assets		(86,085	)		(12,700	)
Accounts payable		484,797			(167,864	)
Accrued interest and other liabilities		86,860			(51	)
Deferred revenue		(33,967	)		306,833
Deposits		(2,895	)		—
Deferred rent		(2,515	)		(5,287	)
Net Cash Used in Operating Activities		(1,301,212	)		(1,559,069	)

Cash Flows from Investing Activities:
Purchase of fixed assets, net of disposal		—			(26,488	)
Payment of patent application		—			(5,000	)
Payment of platform development costs		(491,772	)		(378,330	)
Net Cash Used in Investing Activities		(491,772	)		(409,818	)

Cash Flows from Financing Activities:
Proceeds from issuance of debenture		175,000			—
Proceeds from notes payable related parties		4,061			122,204
Repayments on notes payable related parties		(252	)		(192,965	)
Payment of convertible note, net of proceeds		—			(20,106	)
Proceeds from issuance of convertible note payable		152,500			—
Proceeds from exercise of stock options		—			38,532
Sale of common stock, net of issuance costs		658,700			3,573,100
Net Cash Provided by Financing Activities		990,009			3,520,765

Net (Decrease) Increase in Cash and Cash Equivalents		(802,975	)		1,551,878
Cash and Cash Equivalents, Beginning of Period		812,064			13,724
Cash and Cash Equivalents, End of Period	$	9,089		$	1,565,602

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest	$	9,603		$	22,141

Supplemental Disclosure of Non-Cash Flow Information:
Discount cost related to issuance of debentures and warrants	$	110,557		$	—

Conversion of debt to common stock shares	$	100,000		$	32,006

The accompanying Notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND NATURE OF OPERATIONS

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission (the “Commission”) for interim financial information. Accordingly, they do not include all of the information required by accounting principles generally accepted in the United States of America for complete financial statement presentation and should be read in conjunction with the audited consolidated financial statements and related footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the “2013 Annual Report”), filed with the Commission on April 15, 2014. It is management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation.

The accompanying consolidated financial statements include the accounts of Trunity Holdings, Inc. (“Trunity” or the “Company”) and its wholly owned subsidiary Trunity, Inc. (“Trunity, Inc.” or the “Company”), as of September 30, 2014 and December 31, 2013 and for the three and nine months ended September 30, 2014 and 2013. All intercompany accounts have been eliminated in the consolidation. Certain amounts reported in prior periods have been reclassified to conform to the current presentation.

The Company is a Delaware corporation headquartered in Portsmouth, New Hampshire. The Company was formed on July 28, 2009 through the acquisition of certain intellectual property by its three founders to develop a cloud-based knowledge-sharing platform that focuses on e-learning, virtual textbooks, customer experience and the education marketplace. It has developed a collaborative knowledge management, publishing and education delivery platform which provides an end-to-end solution for the rapidly growing e-textbook, e-learning, enterprise training, and education marketplaces. As a result of the platform’s innovative multi-tenant cloud-based architecture, Trunity enables a unique integration of academic content with learning management systems. All content powered by Trunity is seamlessly integrated with learning management, social collaboration, standards and measurement tagging, real-time analytics and royalty tracking functionality. The content is available to be purchased or shared via the Trunity Knowledge Exchange or within private communities powered by the Trunity eLearning Platform.

On January 24, 2012, Trunity Holdings, Inc., Trunity, Inc. and Trunity Acquisition Corporation (“TAC”), a wholly-owned subsidiary of Trunity Holdings, Inc., all Delaware corporations, entered into an Agreement and Plan of Merger (the “Merger Agreement”). Pursuant to the terms of the Merger Agreement, on January 24, 2012, TAC merged with and into Trunity, Inc., with Trunity, Inc. remaining as the surviving corporation and a wholly-owned subsidiary of Trunity (the “Merger”). In order to facilitate the reverse merger transaction, immediately prior to execution of the Merger Agreement, Trunity acquired a 90.1% interest in Brain Tree International, Inc., a Utah corporation (“BTI”). As part of the transaction, on January 24, 2012, immediately prior to the Merger, BTI reincorporated in Delaware and changed its name from Brain Tree International, Inc. to Trunity Holdings, Inc.

On March 20, 2013, the Company executed a five-year licensing agreement with the Ukraine Government’s Open World National Project to use the Trunity eLearning Platform in exchange for a license fee of $400,000. Upon signing, the initial payment of $100,000 was received and the remaining payment of $300,000 was received in April 2013. The impact of this transaction was a $400,000 payment that was reflected in the Company’s 2013 Annual Report on Form 10-K for the period ended December 31, 2013 as deferred revenue of $315,850 for the portion representing the remaining professional hours and license term on the agreement.

On June 5, 2013, the Company entered into a Memorandum of Understanding (“MOU”) with its new institutional investor, Pan-African Investment Company, LLC (“PIC”), whereby PIC will assist with the introduction and marketing of the Trunity eLearning Platform in African nations seeking to improve the quality of education for their citizens. Pursuant to the terms and conditions of the MOU, PIC has been granted a seven-year exclusive right to introduce Trunity’s products and services to the governments of each of the countries on the African continent with a goal of improving, modernizing and providing these countries with a sustainable education platform.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION, BASIS OF PRESENTATION AND NATURE OF OPERATIONS – Continued

On January 21, 2014, the Company entered into a Memorandum of Understanding (“MOU”) with Houghton Mifflin Harcourt (NASDAQ:HMHC) (HMH), a global education leader to offer select HMH digital content via the Trunity Knowledge Exchange to Pre-K-12 schools, as well as to government agencies and entities responsible for the selection or purchase of educational materials. The MOU was followed by a non-exclusive license and distribution agreement executed on July 21, 2014 that resulted in the Company’s first sale of 6,610 units of HMH’s Holt McDougal Chemistry & Physics ©2012 Online Interactive Content via the Trunity eLearning Platform resulting in revenue of $17,582 over a 4 year subscription period. As of September 30, 2014, the remaining deferred revenue for this transaction represented $17,033.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting -The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). 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. The Company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of financial statements.

Development Stage Operations - The Company had operated as a development stage enterprise since its inception by devoting substantially all of its efforts to business development. The Company emerged from development stage operations during the first quarter of 2013.

Going Concern - The financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred net losses and had negative operating cash flow since its inception. To the extent the Company experiences negative cash flows in the future, it will continue to require additional capital to fund operations. The Company has historically obtained additional capital investments under various debt and common stock issuances. Although management continues to pursue its financing plans, there is no assurance that the Company will be successful in generating sufficient revenues to provide positive cash flow or that financing at acceptable terms, if at all. In addition, the Company has defaulted on lease and debt obligations as of September 30, 2014. Although the Company is currently in negotiations related to these defaults, there is no assurance that any negotiations will be successful in reducing the Company’s liabilities under default. Based on these factors, the Company may be unable to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts or classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Website Development –The Company has adopted the provisions of FASB Accounting Standards Codification No. 350 Intangible-Goodwill and Other. Research and development costs incurred in the planning stage of a website are expensed, while development costs of the website to be sold, leased, or otherwise marketed are subject are capitalized and amortized over the estimated three year life of the asset. Development costs of computer software to be sold, leased, or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. In most instances, the Company’s products are released soon after technological feasibility has been established. Therefore, costs incurred subsequent to achievement of technological feasibility are usually not significant, and generally most software development costs have been expensed as incurred. For the three months and nine months ended September 30, 2014, the Company incurred and capitalized $163,053 and $491,773, respectively, in platform development costs as compared to the three and nine months ended September 30, 2013, of $114,531 and $378,330, respectively. Amortization for these costs recorded during the three and nine months ended September 30, 2014 was $129,961 and $401,204, respectively. In the comparable prior periods as of September 30, 2013, amortization expense was $104,455 and $338,280, respectively.

Revenue Recognition – The Company’s revenue model consists of Software as a Service (SaaS) licensing and hosting revenue, as well as revenues generated from consulting, revenue sharing with our authors, publishers and advertising. All SaaS revenue is recognized ratably over the contract period.

Consulting revenues are earned for web site development services and are recognized on a time and materials basis, billed in accordance with contractual milestones negotiated with the customer. Revenues are recognized as the services are performed and amounts are earned in accordance with FASB ASC Topic 605 Revenue Recognition. We consider amounts to be earned once evidence of an arrangement has been obtained, services are delivered, fees are fixed or determinable, and collectability is probable. In certain contracts, revenue is earned upon achievement of certain milestones indicated in the client agreements.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

Services under these contracts are typically provided in less than a year and represent the contractual milestones or output measure, which reflect the earnings pattern.

Digital content book revenues are earned and recognized as transactions are entered on the Trunity eLearning Platform by customers purchasing digital content through the Trunity Knowledge Exchange website.

Advertising revenue is earned from search engine providers based on search activity for sites hosted by the Company.

Billings in excess of revenues recognized are recorded as Deferred Revenue (a liability) until revenue recognition criteria are met. Client prepayments are deferred and recognized over future periods as services are delivered or performed.

Derivative Financial Instruments – The Company assesses whether it has embedded derivatives in accordance with ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities. The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value.

For derivative instruments that hedge the exposure to changes in the fair value of an asset or a liability and that are designated as fair value hedges, both the net gain or loss on the derivative instrument, as well as the offsetting gain or loss on the hedged item attributable to the hedged risk, are recognized in earnings in the current period. Derivatives that do not qualify as hedges must be adjusted to fair value through current income. The Company currently does not engage in fair value hedges.

Stock-Based Compensation – We recognize compensation costs to employees under ASC Topic 718, Compensation – Stock Compensation. Under ASC 718, companies are required to measure 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 is estimated at the grant date based on each option’s 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. As such, compensation cost is measured on the date of grant at their fair value. 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, as required by ASC Topic 505, Equity Based Payments to Non-Employees. 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 as defined in the FASB Accounting Standards Codification.

Common Stock Purchase Warrants – The Company accounts for common stock purchase warrants in accordance with ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities. As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for warrants is estimated at the grant date based on each option’s fair-value as calculated by the BSM option-pricing model value method for valuing the impact of the expense associated with these warrants.

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:

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – Continued

	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.

The use of observable and unobservable inputs and their significance in measuring fair value are reflected in our hierarchy assessment. The carrying amount of cash, trade receivables and other assets 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 values of all other financial instruments, including debt, approximate their book values as the instruments are short-term in nature or contain market rates of interest. Because there is no ready market or observable transactions, management classifies all other financial instruments as Level 3.

Reclassifications – Certain reclassifications have been made to the prior period presentation to conform to the current period presentation.

Recent Accounting Pronouncements– In June 2014, the Financial Accounting Standards Board (“FASB”) issued new guidance related to stock compensation. The new standard requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015 and can be applied either prospectively or retrospectively to all awards outstanding as of the beginning of the earliest annual period presented as an adjustment to opening retained earnings. Early adoption is permitted. The Company does not believe the adoption of this new accounting standard will impact the consolidated financial statements.

In May 2014, the FASB issued new accounting guidance related to revenue recognition. This new standard will replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. This guidance will be effective beginning January 1, 2017 and can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of adopting this new accounting standard to its consolidated financial statements.

In April 2014, the FASB issued new guidance related to reporting discontinued operations. This new standard raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The new standard is effective for fiscal years beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued. The Company is in the process of evaluating the impact, if any, of adopting this new accounting standard on its consolidated financial statements.

NOTE 3 – INTANGIBLE ASSETS

Intangible assets are recorded at cost and consist of the Trunity eLearning Platform software development costs. Amortization is computed using the straight-line method over three years. We annually assess intangible and other long-lived assets for impairment. There was no impairment loss for the nine months ended September 30, 2014 and 2013. Intangible assets were comprised of the following at September 30, 2014:

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – INTANGIBLE ASSETS – Continued

Trunity eLearning Platform	Estimated Life	Gross Cost		Accumulated Amortization			Net Book Value
Assets acquired from Trunity, LLC	3 years	$	1,775,000	$	(1,775,000	)	$	—

Internal costs capitalized for period from July 28, 2009 (inception) to December 31, 2009	3 years		121,820		(121,820	)		—

Internal costs capitalized for the twelve months ended December 31, 2010	3 years		342,345		(342,345	)		—

Internal costs capitalized for the twelve months ended December 31, 2011	3 years		327,100		(327,100	)		—

Internal costs capitalized for the twelve months ended December 31, 2012	3 years		548,031		(437,375	)		110,656

Internal costs capitalized for the twelve months ended December 31, 2013	3 years		519,733		(235,684	)		284,049

Internal costs capitalized for the nine months ended September 30, 2014	3 years		491,772		(79,745	)	$	412,027
Carrying value as of September 30, 2014							$	806,732

Estimated future amortization expense is as follows for the following periods:

Remainder of 2014	$	129,961
2015		402,155
2016		231,418
2017		43,198
Total future amortization expense	$	806,732

The Trunity eLearning Platform technology was acquired from a related company, Trunity, LLC, and was valued at management’s best estimate of its value at that time of the transaction. Trunity, LLC was wholly owned by the three founders of the Company. Subsequent internal costs capitalized consist of direct labor, including taxes and benefits related to the continual development and enhancements of the platform for version 3.0 and mobile apps. Amortization of three years is based on management’s best estimate of useful life of current technology in this industry.

NOTE 4 – SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

The Company’s three founders, Terry Anderton, Les Anderton and Joakim Lindblom and Officers have a number of transactions that warrant disclosure per ASC 850, Related Party Disclosures.

Credit Agreements – The Company has credit agreements with Terry Anderton and Les Anderton that allow the Company to borrow up to $0.9 million, as needed, to fund working capital needs. These agreements carry an interest rate of 10% and have been amended with board consent until December 31, 2014 subsequent to the initial expiration date. As of September 30, 2014, Terry Anderton and Les Anderton have shareholder receivables/loans that are comprised of $0 balances.

Transactions with Officers –The Company’s current Interim CEO and CFO, Nicole Fernandez-McGovern, is one of the managing principals of both RCM Financial and Premier Financial Filings, companies that have provided contracted financial services to Trunity. For the nine months ended September 30, 2014, RCM Financial Inc., a financial consulting firm, provided outside accounting and tax professional services that resulted in accrued fees of $17,886. Premier Financial Filings, a full service financial printer, was accrued $9,021 in fees related to services for the nine months ended September 30, 2014.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES – Continued

The Company’s current Interim CEO and CFO, Nicole Fernandez-McGovern has also invested in the Company’s recent equity private placement by investing $24,000 resulting in 153,110 shares and 40,298 warrants at $0.50. In addition, Mrs. Fernandez-McGovern also was issued, in exchange for $35,000 of consideration, a Series D Convertible Debenture and in exchange for $7,500 of consideration a July 2014 Convertible Note (See Note 5 for further detail of terms of debenture and promissory note).

The Company’s Chief Education Officer Cutler Cleveland currently authors on the Trunity platform. In his capacity as an author, he has accrued royalties for the nine months ended September 30, 2014 based on sale transactions for the books he authors of $25,986.

Transactions with Board Members –In addition, two Directors made the following investments: 159,490 shares which were purchased by Les and Debra Anderton for a total consideration of $25,000 and 303,030 shares were purchased by the Maytiv Foundation, of which Ivan Berkowitz is the president, for a total consideration of $50,000. Each investor also received a five-year warrant to purchase one share of common stock for every four shares purchased at an exercise price of $0.50 per share.

NOTE 5 – CONVERTIBLE DEBT

July 2012 Convertible Debentures (Series A) – In July 2012, the Company issued convertible debentures (“July Notes”) with an aggregate face value of $215,300 Canadian Dollars ($197,344 as of June 30, 2014). The July Notes matured in July 2014, bear interest at an annual rate of 10% through July 2014 and 12% thereafter, and are convertible at the option of the holders into Units, each consisting of a) one share of common stock and b) one warrant to purchase one share of common stock at 0.40 Canadian Dollars per share (“Unit”). The number of Units issuable upon conversion of the July Notes is determined by dividing the then outstanding principal and accrued but unpaid interest by a) 0.35 Canadian Dollars if a Liquidity Event, as defined in the debenture agreements, occurs within six months of the closing of the offering of the notes, or b) 0.32 Canadian Dollars if a Liquidity Event does not occur within six months of the closing of the offering of the July Notes. In July 2014, the holder of a July Note exchanged the July Note with a face value of $25,000 Canadian Dollars ($23,360 US),and accrued interest of $3,336 Canadian Dollars ($3,117 US) for a Series D Convertible Debenture with a face amount of $26,477(US). The Company recorded a loss on early extinguishment of debt of $6,728, primarily related to fair value of the warrants in relation to the debt (relative fair value) on the debt exchange transaction.

In 2012, the Company recorded a beneficial conversion feature based on the intrinsic value of the conversion feature equal to the excess of the fair value of one Unit over the conversion rate of 0.32 Canadian Dollars. The fair value of one Unit was estimated based on the most recent sale of common stock in a private placement immediately preceding the issuance of the July Notes and, for the warrant contained in one Unit, using a Black-Scholes valuation model and the following assumptions: volatility – 50.50%, risk free rate – 0.22%, dividend rate – 0.00%. The Company recorded a discount against the debt for the beneficial conversion feature totaling $84,788, which is being amortized into interest expense through the maturity dates of the July Notes. For the three and nine months ended September 30, 2014, the Company recorded amortization of the discount of $3,533 and $24,730, respectively. As of September 30, 2014, the net carrying value of the July Notes totaled $173,858, and no unamortized discount remains. For the three and nine months ended September 30, 2014, interest expense on the July Notes of $5,192 and $15,009, respectively, was recorded. For the three and nine months ended September 30, 2013, interest expense on the July Notes of $5,179 and $15,883, respectively, was recorded.

In connection with the issuance of the July Notes, the Company paid transactions fees to brokers consisting of cash of $85,237, and warrants to purchase 43,497 shares of common stock over a two-year period at an exercise price of 0.40 Canadian Dollars. The Company estimated the fair value of the warrants using a Black-Scholes valuation model and the following assumptions: volatility – 50.49%, risk free rate – 0.22%, dividend rate – 0.00%.

The Company allocated a portion of the fair value of the consideration totaling $52,869 to debt issuance costs, which was capitalized and is being amortized into interest expense over the two-year terms of the July Notes. The remaining portion of the fair value of the transactions costs, totaling $36,126, was allocated to equity, treated as equity issuance costs, and recorded against additional paid-in capital. Amortization of debt issuance costs on the July Notes of $6,609 was recorded for both the three months ended September 30, 2014 and 2013, respectively. For the nine months ended September 30, 2014 and 2013 amortization of debt issuance costs on the July Notes of $15,420 and $19,826 was recorded, respectively.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – CONVERTIBLE DEBT – Continued

August and September 2012 Convertible Debentures (Series B) – In August and September 2012, the Company issued convertible debentures (“August and September Notes”) with an aggregate face value of $330,900. The August and September Notes matured in August and September 2014, bore interest at an annual rate of 10%, and were convertible at the option of the holders into Units, each consisting of a) one share of common stock and b) one warrant to purchase one share of common stock at $0.40 per share (“Unit”). The number of units issuable upon conversion of the August and September Notes was determined by dividing the then outstanding principal and accrued but unpaid interest by a) $0.35 if a Liquidity Event, as defined in the debenture agreements, occurs within six months of the closing of the offering of the August and September Notes, or b) $0.32 if a Liquidity Event does not occur within six months of the closing of the offering of the August and September Notes. In September 2014, all of the holders of the August and September Notes exchanged the August and September Notes with an aggregate face value of $330,900 and accrued interest of $66,000 for Series D convertible debentures with an aggregate face value of $397,080. The Company recorded a loss on early extinguishment of debt of $59,041, primarily related to fair value of the warrants in relation to the debt (relative fair value) on the debt exchange transaction.

In 2012, the Company recorded a beneficial conversion feature based on the intrinsic value of the conversion feature equal to the excess of the fair value of one Unit over the conversion rate of $0.32. The fair value of one Unit was estimated based on the most recent sale of common stock in a private placement immediately preceding the issuance of the August and September Notes and, for the warrant contained in one Unit, using a Black-Scholes valuation model and the following assumptions: volatility – 50.50%, risk free rate – 0.22%, dividend rate – 0.00%. The Company recorded a discount against the debt for the beneficial conversion feature totaling $115,712, which was being amortized into interest expense through the maturity dates of the August and September Notes. For the three and nine months ended September 30, 2014, the Company recorded amortization of the discount of $9,643 and $38,571, respectively. For the three and nine months ended September 30, 2013, the Company recorded amortization of the discount of $14,464 and $43,392, respectively.

As of September 30, 2014, there was no remaining balance outstanding on the August and September Notes.

In connection with the issuance of the August and September Notes, the Company paid cash transactions fees to brokers totaling $30,456. The Company allocated a portion of the transaction fees totaling $19,806, to debt issuance costs, which was capitalized and is being amortized into interest expense over the two-year terms of the August and September Notes. The remaining portion of the fair value of the transactions costs, totaling $10,650 was allocated to equity, treated as equity issuance costs, and recorded against additional paid-in capital. Amortization of debt issuance costs on the August and September Notes of $1,650 and 2,476 was recorded for the three months ended September 30, 2014 and 2013, respectively. For the nine months ended September 30, 2014 and 2013 amortization of debt issuance costs on the July Notes of $7,427 and $6,602 was recorded, respectively.

October and November 2012 Convertible Debentures (Series B) – In October and November 2012, the Company issued convertible debentures (“October and November Notes”) with an aggregate face value of $624,372 of which $565,372 represented a conversion of notes payable-related parties to the Founders. In 2013, two of the founders sold a portion of their debenture totaling $141,800 of their aggregate face to third parties. The October and November Notes mature in October and November 2014, bear interest at an annual rate of 10%, and are convertible at the option of the holders into Units, each consisting of a) one share of common stock and b) one warrant to purchase one share of common stock at $0.40 per share (“Unit”). The number of Units issuable upon conversion of the October and November Notes is determined by dividing the then outstanding principal and accrued but unpaid interest by a) $0.35 if a Liquidity Event, as defined in the debenture agreements, occurs within six months of the closing of the offering of the October and November Notes, or b) $0.32 if a Liquidity Event does not occur within six months of the closing of the offering of the October and November Notes.

The Company recorded a beneficial conversion feature based on the intrinsic value of the conversion feature equal to the excess of the fair value of one Unit over the conversion rate of $0.32. The fair value of one Unit was estimated based on the most recent sale of common stock in a private placement immediately preceding the issuance of the October and November Notes and, for the warrant contained in one Unit, using a Black-Scholes valuation model and the following assumptions: volatility – 50.50%, risk free rate – 0.22%, dividend rate – 0.00%. The Company recorded a discount against the debt for the beneficial conversion feature totaling $254,004, which is being amortized into interest expense through the maturity dates of the October and November Notes. For the three months ended September 30, 2014 and 2013, the Company recorded amortization of the discount of $28,867 and $31,750, respectively. For the nine months ended September 30, 2014 and 2013, the Company recorded amortization of the discount of $92,368 and $95,251, respectively. As of September 30, 2014, the net carrying value of the October and November Notes totaled $611,047, net of unamortized discount of $13,326. For both the three months and nine ended September 30, 2014 and 2013, interest expense on the October and November Notes of $15,609 and $46,828, respectively, was recorded. In connection with the issuance of the October and November Notes, the Company paid no cash transactions fees to brokers.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – CONVERTIBLE DEBT – Continued

August 2014 Convertible Debentures (Series C) – In August 2014, the Company issued Series C convertible debentures with an aggregate face value of $240,000 in exchange for the cancellation of Series B convertible debenture with outstanding principal and accrued interest of $240,000. The Series C convertible debentures accrue interest at an annual rate of 10%, mature on July 31, 2015, and are convertible into the Company’s common stock at a conversion rate of $0.20 per share. The holders of the Series C convertible debt also received warrants to acquire 1,000,000 shares of common stock for an exercise price of $0.20 per share, exercisable over 5 years. The Company allocated the face value of the Series C convertible debentures to the warrants and the debentures based on their relative fair values, and allocated $35,016 to the warrants, which was recorded as a discount against the Series C convertible debentures, with offsetting entry to additional paid in capital. The fair value of the warrants using a Black-Scholes valuation model and the following assumptions: volatility – 43.99% to 44.08%, risk free rate – 1.60 to 1.74% %, dividend rate – 0.00%. The discount is being amortized into interest expense over the term of the Series C convertible dentures. During the three and nine months ended September 30, 2014, the Company recorded debt extinguishment costs related to the Series C Debentures of $35,016. As of September 30, 2014, the carrying value of the Series C convertible debentures is $240,000. For both the three months and nine ended September 30, 2014, interest expense of $5,772 was recorded for the Series C convertible debentures.

September 2014 Convertible Debentures (Series D) – During the three months ended September 30, 2014, the Company issued Series D convertible debentures with an aggregate face value of $360,275 in exchange for $176,718 of cash ($35,000 was provided by the interim CEO and CFO), in settlement of a Series A convertible debenture with outstanding principal and accrued interest of $26,477, and in settlement of Series B convertible debentures with aggregate outstanding principal and accrued interest of $157,080 of which $35,000 represented a conversion of notes payable-related parties to the Founders. The Series D convertible debentures accrue interest at an annual rate of 12%, mature on August 31, 2015, and are convertible into the Company’s common stock at a conversion rate of $0.165 per share. The holders of the Series D convertible debt also received warrants to acquire 1,519,800 shares of common stock for an exercise price of $0.20 per share, exercisable over 5 years. The Company allocated the face value of the Series D convertible debentures to the warrants and the debentures based on their relative fair values, allocated $52,212 to the warrants, and determined that there were aggregate beneficial conversion features of $8,699. The fair value of the warrants using a Black-Scholes valuation model and the following assumptions: volatility – 43.99% to 44.08%, risk free rate – 1.60 to 1.74% %, dividend rate – 0.00%. The amount allocated to the warrants and beneficial conversion features totaling $60,911 was recorded as a discount against the Series D convertible debentures, with offsetting entry to additional paid in capital. The discounts are being amortized into interest expense over the term of the Series D convertible dentures. During the three and nine months ended September 30, 2014, the Company recorded amortization of the discount related to the Series D Notes of $2,395. As of September 30, 2014, the carrying value of the Series D convertible notes is $332,612, net of unamortized discounts of $30,058. For both the three months and nine ended September 30, 2014, interest expense of $3,441 was recorded for the Series D convertible debenture.

July 2014 Convertible Notes – In July 2014, the Company issued convertible notes with an aggregate face value of $52,500 for cash ($27,500 was provided by the interim CEO and CFO and two board members). The convertible notes accrue interest at an annual rate of 10%, mature in July 2015, and are convertible into the Company’s common stock at a conversion rate of $0.165 per share. The holders of the convertible notes also received warrants to acquire 318,182 shares of common stock for an exercise price of $0.50 per share, exercisable over 5 years. The Company allocated the proceeds from the convertible notes to the warrants and the notes based on their relative fair values, allocated $6,117 to the warrants, and determined that there were aggregate beneficial conversion features of $8,512. The fair value of the warrants using a Black-Scholes valuation model and the following assumptions: volatility – 43.99% to 44.08%, risk free rate – 1.60 to 1.74% %, dividend rate – 0.00%. The amount allocated to the warrants and beneficial conversion features; totaling $14,629 was recorded as a discount against the convertible notes, with offsetting entry to additional paid in capital. The discounts are being amortized into interest expense over the term of the convertible notes. For the three and nine months ended September 30, 2014, the Company recorded amortization of the discount of $3,531. During the three and nine months ended September 30, 2014, the Company recorded interest expense of $1,260. As of September 30, 2014, the carrying value of the convertible notes is $41,402, net of unamortized discounts of $11,098.

See “Note 11– Subsequent Events” for current status of Debentures.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – CONVERTIBLE DEBT – Continued

Convertible Promissory Note – In March 2014, the Company borrowed $100,000 from an accredited investor pursuant to a six-month convertible promissory note (the “Note”) bearing interest at 10% per year. The Note is convertible at $.165 per share. The Company incurred $5,000 of debt issuance costs representing commission paid to broker-dealers who assisted this transaction. The entire principal balance of this Note, together with all unpaid interest accrued thereon, and shall be due and payable on September 24, 2014 (the “Maturity Date”). Upon payment in full of all principal and interest payable hereunder, this Note shall be surrendered to the Company for cancellation. The principal amount of this Note may be converted in increments of $10,000 into common stock of the Company at a price of $.165 per share (the “Conversion Shares”). Upon conversion, the Holder shall receive, in addition to certificates for the Conversion Shares, a five-year warrant to purchase at $.50 per share an amount of shares of common stock equal to 25% of the number of Conversion Shares. For the three and nine months ended September 30, 2014, interest expense on the Note of $2,685 was recorded. The note was converted effective July 1, 2014 to 606,061 shares of common stock and 500,000 warrants that were issued to the holder.

The following is a summary of convertible debentures outstanding as of September 30, 2014:

	Face Value		Initial Discount			Accumulated Amortization		Carrying Value
July Notes (Series A)	$	173,858	$	(84,788	)	$	84,788	$	173,858
October and November Notes (Series B)		624,372		(254,004	)		240,678		611,046
August Notes (Series C)		240,000		—			—		240,000
September Notes (Series D)		360,275		(30,058	)		2,395		332,612
July 2014 Convertible Notes		52,500		(14,629	)		3,531		41,402
Total	$	1,451,005	$	(383,479	)	$	331,392	$	1,398,918

NOTE 6 – DERIVATIVES

The Company’s convertible debt issued in November 2012 with a face value of $42,500 provides for conversion of the note into the Company’s common stock at a conversion rate equal to the average of the lowest three trading prices during the ten trading days immediately preceding the conversion date. Because of the uncertainty regarding the number of common shares that may be issuable upon the conversion of the convertible debt, the embedded conversion option is required to be accounted for separately and presented as a derivative liability on the Company’s balance sheet, with subsequent changes in fair value reported in the Company’s statement of operations. The Company determined the fair value of derivative liabilities using Monte Carlo simulations. The Company used the following assumptions in estimating the fair value of the derivative liabilities on the issuance date through the conversion dates of the debt.

	Issuance Date			December 31, 2012			March 30, 2013			May 22, 2013			June 19, 2013
Expected Volatility		51	%		52.67	%		40.55	%		38.46	%		25.09	%
Expected Term		0.75 Years			0.6 Years			0.3 Years			0.16 Years			0.1 Years
Risk Free Interest Rate		0.20	%		0.16	%		0.07	%		0.04	%		0.05	%
Dividend Rate		0	%		0	%		0	%		0	%		0	%

The Company recorded an initial derivative liability of $32,622 with an offsetting discount against the convertible debt to be amortized into interest expense through the maturity of the convertible debt. From the date of issuance to the date of conversion into 166,744 shares of common stock, the fair value of the derivative liability changed to $32,007, resulting in expense of $616 and a reclassification to additional paid-in capital of $31,990 during the three months ended June 30, 2013, the period the transaction settled.

The Company’s convertible debt issued in January 2013 with a face value of $37,500 provides for conversion of the note into the Company’s common stock at a conversion rate equal to the average of the lowest three trading prices during the ten trading days immediately preceding the conversion date. Because of the uncertainty regarding the number of common shares that may be issuable upon the conversion of the convertible debt, the embedded conversion option is required to be accounted for separately and presented as a derivative liability on the Company’s balance sheet, with subsequent changes in fair value reported in the Company’s statement of operations. The Company determined the assumptions in estimating the fair value of the derivative liabilities on the issuance date and as of June 24, 2013.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – DERIVATIVES – Continued

	Issuance Date			March 31, 2013			June 24, 2013
Expected Volatility		51	%		49.82	%		29.43	%
Expected Term		0.75 Years			0.45 Years			0.16 Years
Risk Free Interest Rate		0.11	%		0.11	%		0.06	%
Dividend Rate		0	%		0	%		0	%

The Company recorded an initial derivative liability of $28,603 with an offsetting discount against the convertible debt to be amortized into interest expense through the maturity of the convertible debt. From the date of issuance until the full payment of $57,606 was made, the fair value of the derivative liability changed to $18,733 resulting in derivative income of $9,870 that was recorded during the three months ended June 30, 2013, the period the transaction settled.

NOTE 7 – STOCK-BASED COMPENSATION

In 2009, the Company approved the 2009 Employee, Director and Consultant Stock Option Plan (the “2009 Plan”) and authorized an option pool of 5,500,000 shares that was subject to a 3-for-1 reverse stock split, resulting in an authorized option pool of 1,833,333. Stock options typically vest over a three-year period and have a life of ten years from the date granted. In 2009, the Company accelerated the option vesting of certain employees who terminated their employment, but agreed to work in a consulting capacity. In exchange for the accelerated vesting, the employees agreed to shorter expiration periods for their options. As of September 30, 2014 there were 239,567 shares available for awards under this plan.

In 2012, the Company approved the 2012 Employee, Director and Consultant Stock Option Plan (the “2012 Plan”) and authorized an option pool of 7,500,000 shares. Stock options typically vest over a three year period and have a life of ten years from the date granted. As of September 30, 2014, there were 4,617,703 shares available for awards under this plan.

During the nine months ended September 30, 2014 and 2013, the Company granted 1,329,000 and 960,000 options, respectively, to acquire shares of common stock to employees, directors or consultants.

On February 12, 2014, Arol Buntzman resigned from his positions as Chairman, Director and Chief Executive Officer (CEO) of the Company. The Company’s Board of Directors has commenced a search for a permanent CEO and has appointed Nicole Fernandez-McGovern, the Company’s Chief Financial Officer, as interim CEO to serve until a permanent CEO is hired.

As a result of Mr. Buntzman’s resignation pursuant to the December 2013 non-qualified stock option agreement between him and the Company, which granted to him options to purchase up to 4,000,000 shares of common stock outside of the Company’s 2009 and 2012 stock option plans (the “Option Agreement”), options to purchase 1,500,000 shares of stock were automatically cancelled. These options covered the tranches of 500,000 shares each at an exercise price of $0.40, $0.60 and $0.70, respectively. The Company believes that some or all of the remaining options under the Option Agreement, representing 1,500,000 shares in three tranches of 500,000 shares each at exercise prices of $0.40, $0.60 and $0.70, respectively, should be cancelled based on the circumstances of Mr. Buntzman’ s resignation. Mr. Buntzman disputes the Company’s position. If the dispute is not settled, the matter is subject to binding arbitration. No demand for arbitration has been filed by either party.

The grant-date fair value of options is estimated using the Black-Scholes option pricing model. The per share weighted average fair value of stock options granted during the period ended September 30, 2014 was $0.15, $0.23 and $0.30 and was determined using the following assumptions: expected price volatility ranging between 46.7% to 50.3%, risk-free interest rate ranging from 1.38% to 2.23%, zero expected dividend yield, and six to ten years expected life of options. The expected term of options granted is based on the simplified method in accordance with Securities and Exchange Commission Staff Accounting Bulletin 107, and represents the period of time that options granted are expected to be outstanding. The Company makes assumptions with respect to expected stock price volatility based on the average historical volatility of peers with similar attributes. In addition, the Company determines the risk free rate by selecting the U.S. Treasury with maturities similar to the expected terms of grants, quoted on an investment basis in effect at the time of grant for that business day.

In August 2014, the Company’s board of directors approved the modification of outstanding options to acquire 3,206,666 shares, reducing the then-applicable exercise prices ranging from $0.23 to $0.35 per share, to $0.11 per share. The Company compared the fair value of the options immediately prior to the modification to their fair value immediately after the modification and determined that the option holders received incremental compensation of $93,630, of which $26,237 was related to fully vested options and recognized as expense on the date of modification, and $67,939 will be recognized as stock based compensation expense over remaining vesting periods through April 2017.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – STOCK-BASED COMPENSATION – Continued

As of September 30, 2014, there was approximately $262,377 of total unrecognized stock compensation expense, related to unvested stock options under the both Plans. This expense is expected to be recognized over the remaining weighted average vesting periods of the outstanding options of 1.02 years.

A summary of options issued, exercised and cancelled for the nine months ended September 30, 2014 are as follows:

	Shares			Weighted- Average Exercise Price ($)		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value ($)
Outstanding at December 31, 2013		8,315,958		$	0.42		9.09		—
Granted		1,329,000			0.25		9.24		—
Exercised		—			—		—		—
Cancelled		(2,668,895	)		0.47		—		—

Outstanding at September 30, 2014		6,976,063		$	0.26		8.34		—

Exercisable at September 30, 2014		5,968,002		$	0.36		8.58		—

NOTE 8 – WARRANTS TO PURCHASE COMMON STOCK

During the quarter ended September 30, 2014, the Company issued, in connection with restructuring of debentures and private placement offerings for the sale of common stock, warrants to purchase 2,837,982 shares of the Company’s common stock at exercise prices of $0.20 and $0.50. During the quarter ended June 30, 2014, the Company issued, in connection with private placement offerings for the sale of common stock, warrants to purchase 1,596,361 shares of the Company’s common stock at exercise prices of $0.50 and $0.90. All warrants outstanding as of September 30, 2014 are scheduled to expire at various dates through 2019. A summary of warrants issued, exercised and expired for the nine months ended September 30, 2014 follows:

	Shares			Weighted- Average Exercise Price ($)		Weighted-Average Remaining Contractual Term
Outstanding at December 31, 2013		10,486,066		$	0.98		0.83
Granted		4,434,343			0.40		4.73
Exercised		—			—		—
Expired		(61,397	)		3.00		—

Outstanding at September 30, 2014		14,859,012		$	0.80		1.84

Exercisable at September 30, 2014		14,859,012		$	0.80		1.84

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – STOCKHOLDER’S EQUITY

During the nine months ended September 30, 2014, the Company raised gross proceeds of $661,025 through the sale of 7,967,740 shares of its Common Stock to accredited investors in private placement transactions at a price of $0.165 per share. Each investor also received a five-year warrant to purchase one share of common stock for every four shares purchased at an exercise price of $0.50 per share. In addition, in March 2014, the Company borrowed $100,000 from an accredited investor pursuant to a six-month convertible promissory note bearing interest at 10% per year. This note was converted effective July 1, 2015 for 606,061 common shares at $.165 per share with the same warrant consideration as for the shares privately sold as set forth above. Also in September 2014, the Company raised gross proceeds of $100,000 through the sale of 606,061 shares of its Common Stock to an accredited investor under the same terms as those set forth above. The Company incurred $25,451 of securities and debt issuance costs and issued 127,256 warrants representing commissions paid to broker-dealers who assisted with these transactions and repurchased 768,712 shares of common stock for $76,871 from the former CEO in connection with these transactions.

NOTE 10 – LEGAL PROCEEDINGS

In February 2012, Trunity and the Company’s former CEO Terry Anderton were served with a complaint filed by an ex-Trunity, employee, William Horn, in the Nashua, New Hampshire, Superior Court. The plaintiff served as Executive Vice President of Marketing & Business Development from March until August 2011 at an annual salary of $100,000. He asserted whistleblower status and alleged that he was wrongfully terminated because of his allegations that the Company had violated securities, tax and employment laws. The complaint sought unspecified damages under the New Hampshire Whistleblower Act and common law, including reinstatement, back pay and attorney’s fees and costs. In May 2012, the Company responded to the complaint by denying all material allegations and filing a counterclaim against the plaintiff for breach of contract, tortious interference with contractual and business relations, breach of fiduciary duty and violation of the Uniform Trade Secrets Act. Substantial discovery was taken.

On June 13, 2013, the Court granted the Company Motion to Dismiss Terry Anderton, in his individual capacity, from the case. Therefore, Trunity remained the sole defendant in this matter.

Trial of the case was scheduled for the weeks of June 16 and June 23, 2014.

On April 14, 2014, the parties mediated the case and settlement terms reached. On May 8, 2014, following mediation, Mr. Horn signed a Confidential Settlement Agreement and General Release, which became effective on the eighth day following his signature. The case was settled based on Trunity’s agreement to pay $60,000 to Mr. Horn, less applicable withholding and taxes, as well as confidentiality provisions, non-disparagement, and the parties exchanging mutual releases. The settlement payment was made by the insurance company, which has paid all costs of the litigation above the $50,000 deductible. The parties filed Docket Markings bringing the case to conclusion.

NOTE 11 – SUBSEQUENT EVENTS

The Company has defaulted on its obligation to pay the October and November Notes of $624,372 principal amount of debentures due October and November 2014. The total amount due on these debentures, including interest, is $749,246. The Company has negotiated restructured terms with the majority of the debenture holders and is attempting to complete the formal restructuring of these debt obligations.

On October 24, 2014, the Company signed a Hosted API License Agreement (the “Agreement”) with Visual Collaboration Innovations, Inc. (“VCI”) of Phoenix, Arizona to grant a limited, nonexclusive, nontransferable and renewable license for a two year-term to utilize the Trunity Application Programming Interfaces (APIs) documentation and Trunity Backend APIs hosted by the Company to manage and deliver VCI’s content to end users in the healthcare market. The Company received an upfront license fee of $65,000 upon execution of the Agreement. The Agreement is renewable for up to two-years provided VCI reaches its revenue described within the agreement.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – SUBSEQUENT EVENTS– Continued

On November 6, 2014, the Company entered into a Securities Purchase Agreement with Peak One Opportunity Fund, L.P. (“Peak”) pursuant to which the Company sold to Peak for $112,500 a convertible debenture (the “Peak Debenture”) in the principal amount of $125,000. (the “Principal Amount”) due on November 6, 2017 (the “Maturity Date”). Pursuant to the Peak Debenture, the Company agreed to pay interest on the Principal Amount outstanding from time to time in arrears (i) upon conversion or (ii) on the Maturity Date, at the rate of 5% per annum. The Company has the option to redeem the Peak Debenture prior to the Maturity Date at any time or from time to time by paying the Principal Amount plus accrued interest. Beginning 91 days after the issue date, Peak may convert the principal and accrued interest (the “Conversion Amount”) into shares of Common Stock, at a conversion price for each share of Common Stock (the “Conversion Price”) equal to 65% of the lowest closing bid price (as reported by Bloomberg LP) of Common Stock for the 20)trading days immediately preceding the date of conversion of the Debenture (subject to equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar events). In connection with the Peak Agreement the Company paid issuance costs of $10,000 and issued 137,500 shares of Restricted Stock to cover the expenses incurred and analysis performed by Peak in connection with the transaction.

In October and November 2014, the Company borrowed from accredited investors and related parties $110,000, pursuant to an Unsecured Redeemable Debenture that will pay interest during the Debenture term in the amount of 15% of the principal amount. The Company will issue to the Investor a four-year warrant to purchase common shares of the Company’s Common Stock (one Initial Warrant Share for every dollar of the Investment Amount) at a price of $0.15 per share resulting 110,000 warrants. In addition, the Company will issue to Investor a warrant (the “2015 Warrant”) to purchase shares 110,000 warrants (the “2015 Warrant Shares”) of the Company’s common stock at a price per 2015 Warrant Share to be determined. The Company incurred no commission costs in connection with these transactions.

In August 2013, the Company executed a lease for 8,713 square feet for its former corporate offices located in Portsmouth, New Hampshire. The lease commenced on August 9, 2013 and had a five-year term ending on September 8, 2018. The monthly rental payments for the first year were $10,165 per month and were scheduled to increase on each anniversary at a rate of 3% per annum. The Company was required to pay its proportionate share of the building’s common area maintenance (“CAM”), real estate taxes, utilities serving the premises and the cost of premises janitorial service estimated to be $5,210 on a monthly basis.

On August 11, 2014, the landlord of our former corporate offices in Portsmouth, NH declared the Company in default based on its failure to pay rent and other charges due since July 2014. The Company vacated the premises on August 22, 2014, and moved its office to smaller, less expensive premises in the neighboring area. Past due amounts owed on the lease through the date of surrender of the premises total approximately $51,000. Total payments from surrender through the end of the lease would be approximately $900,000. The Company is attempting to negotiate a settlement of the lease with the landlord based on an offset for the fair market rental value of the premises and a discount to present value, as well as a discount based on the Company’s precarious financial condition, No legal demands have been filed by either party. The Company has recorded total liability of $100,000 to cover its exposure based on the lease, an amount equal to its pending settlement offer to the landlord. There can be no assurance that settlement of this lease will not have a material adverse effect on the Company.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This discussion should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and related notes contained in this quarterly report and the Consolidated Financial Statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing in our Annual Report on Form 10-K for the year ended December 31, 2013. The results of operations for an interim period may not give a true indication of results for future interim periods or the year. In the following discussion, all comparisons are with the corresponding items in the prior or year period.

Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results

The following discussion of our financial condition and results of operations for three and nine months ended September 30, 2014 and 2013 should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Item 1.01. “Risk Factors,” “Forward-Looking Statements” and “Business” in our Current Report on Form 10-K dated December 31, 2013. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Overview

Trunity Holdings, Inc. (“Trunity,” “Company,” “we,” “us”, or “our”) is a Delaware corporation headquartered in Portsmouth, New Hampshire. The Company’s wholly-owned subsidiary, Trunity, Inc., a Delaware corporation (“Trunity, Inc.”), also based in Portsmouth, New Hampshire, has pioneered a collaborative knowledge management, publishing and education delivery platform – the Trunity eLearning Platform – which provides an end-to-end solution for the rapidly growing digital Textbook, eLearning and enterprise training market places.

As a result of the Platform’s innovative multi-tenant cloud-based architecture, Trunity has enabled transformational classroom learning, allowing content from multiple sources to be assembled by instructors into customized living digital textbooks and courseware and delivered with real-time updates directly to the student on any Internet-enabled computer or mobile device.

The Trunity eLearning Platform has four unique features:

1)	Modular Digital Content: It converts text and rich media content into discrete, coherent packages of information. This “modularization” enables every piece of content to be utilized in a customized fashion by an unlimited number of instructors and course developers.

Real-Time Content Creation: Content on the Platform can be updated in real-time; a change made to a base version of a chapter, lesson, or assignment is instantly “pushed” to all users. In addition to these attributes, the Platform is a cloud-based technology that is agnostic in regards to device and operating system.

3)	Customizable Content: Modular LiveCross™ published content creates an unprecedented ability for instructors and course developers to customize both the nature of the content they choose, and the sequence in which that content is presented to students.

4)	Collaborative Learning Environments: Trunity’s LiveCross™ publishing feature enables instructors and course developers to easily share and discover content on the Web or in the Trunity Knowledge Exchange, and to pull that content into their courses with a few simple clicks.

The Trunity eLearning Platform is unique in its approach in that it combines content creation, digital textbooks, and courseware in one fully- integrated system.

The Trunity Knowledge Exchange can deliver quality content from various sources, including traditional publishers, collaborative crowd-sourced communities, individual authors and teachers, as well as institutional repositories and content partners. The Trunity eLearning Platform currently hosts a growing community of textbook authors and instructors in higher education and K-12, who use the Platform to deliver their classes and content.

We have announced plans to unveil our next generation architecture for the Trunity eLearning Platform. This Generation 3.0 technology, which incorporates several new leading-edge technical frameworks enabling faster and more robust development, weds a new mobile app with a major enhancement of our content creation and courseware technology to bring to market a suite of leading edge experiences for teachers, students, authors and publishers. Generation 3 includes a new cutting edge user interface as well as broad range new features and functionality that further extend Trunity’s technical lead with the competition. We recently released our new mobile app, branded Trunity Mobile, available as a free download to current Trunity student and educator users from the Apple App Store for iOS mobile devices. We are expecting the Trunity app to be available for Android mobile devices from the Google Play Store by December 2014.

Trunity has released a beta of Version 3.0 of the Trunity eLearning Platform for general availability in the fall of 2014. Version 3.0 is designed to realize Trunity’s vision for an eLearning platform with no rivals: a single, web-based platform that seamlessly integrates content creation, digital textbooks and courseware. Version 3.0 includes a revamped and much more intuitive content authoring interface with extensive use of drag-and-drop, much more powerful assessment/grading functionality that includes assignments, question banks, quizzes, exams, self-assessments and flash cards, as well as student-to-student, teacher-to-student, and group-to-group sharing of messages, notes, annotations, content and bookmarks in real time, all within a single virtual classroom. As with previous generations, authors and instructors will be able to create their own content, upload content from publishers and from open source collections, such as YouTube and the Encyclopedia of Earth, and to selectively organize that content for use in multiple classrooms and/or textbooks.

We have customers both domestically and internationally, as we have won a significant national project in Ukraine. In addition, we host various collections, such as the aforementioned Encyclopedia of Earth, an award-winning, open source collection of peer-reviewed content contributed by several thousand content experts made up of many of the world’s top scientists and educators; and Climate Adaptation and Mitigation E-Learning (CAMEL), an open source educational project funded by the National Science Foundation, which also serves as core content contributors to the Trunity Knowledge Exchange. We believe that our cloud-based platform, which tightly integrates expert validated learning content with learning management, has the capability to disrupt the traditional education market place.

Content modularization capabilities allow our products to be mixed and matched and purchased in whole or in part. Our core products are in production and operational, and are currently in use by a growing number of paying customers; however, our revenues are well below the level needed for profitability. We believe that our focused marketing efforts as well as the impact of positive “word of mouth” from satisfied users will enable us to substantially increase revenues; however, there can be no assurance that we will achieve profitability at any time in the foreseeable future, if ever.

We encounter a variety of challenges that may affect our business and should be considered as described in Item 1A “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2013 and in the section of this quarterly report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations Cautionary Note Regarding Forward-Looking Information and Factors That May Affect Future Results.”

Critical Accounting Policies and Estimates

As disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses reported in those financial statements. We base our estimates on historical experience and other factors that we believe are most likely to occur. Changes in facts and circumstances may result in revised estimates, which are recorded in the period in which they become known. Our most critical accounting policies relate to revenue recognition, web development assets, derivative instruments, and share-based compensation. Since December 31, 2013, there have been no significant changes to the assumptions and estimates related to those critical accounting policies.

Recent Accounting Pronouncements

The recent accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

Results of Operations

Three and nine months ended September 30, 2014 and 2013

Revenue

For the three months ended September 30, 2014, net sales increased 62.3% to $110,219, compared to $67,899 reported for the same three months in 2013. Net sales for the nine months ended September 30, 2014 totaled $195,539, a 28.3% increase, compared to net sales of $152,400 for the first half of the prior year. Revenues for the current three and nine month reporting periods stemmed largely from sales of digital textbooks authored and/or published on the Trunity eLearning Platform that have been purchased by end users from the Trunity Knowledge Exchange, as well as, to a lesser degree, licensing agreements for the Platform and advertising offset by a decline in deferred revenue recognition in the prior year due to the Ukraine Licensing Project being delayed due to the country’s political instability. In addition, in connection with our non-exclusive License and Distribution Agreement with HMH, 6,610 units of HMH’s Holt McDougal Chemistry & Physics ©2012 Online Interactive Content have been sold and are now accessible to its students, anywhere, anytime and on any desktop or mobile computing device via the Trunity eLearning Platform.

We believe that our revenue will significantly increase during the remainder of 2014 and in 2015 due to a number of new digital textbooks being authored and/or published on the Platform and made available to students, teachers and school systems for the 2014-2015 school year, continued sales with HMH based on our distribution agreement, as well as anticipated revenue from our recently signed agreement with VCI for the licensing of the our API solution. We also continue to make additional investments to add books on our platform and globally marketing the digital textbooks and courseware authored and/or published on our Platform for the 2014-2015 school years. Included in the new content now being actively marketed and offered on the Platform is Trunity’s new MindBendersTM Educational Learning Series, a 25-episode video learning series developed by Trunity in collaboration with a world recognized educational expert, author, television host and stage edutainment performer and co-hosted by a team of reality-based science television celebrities.

Operating Expenses

Total operating expenses for the three months ended September 30, 2014 were $749,469, a 3.2% decrease from total operating expenses of $774,401 for the three months ended September 30, 2013. Costs related to research and development (“R&D”) increased 16.5% to $222,934 for the third quarter of 2014 from $191,378 for the same quarter in the prior year. Selling, general and administrative (“SG&A”) costs declined 9.7% to $526,535 from $583,023 on a comparable year-over-year basis. SG&A expenses for the three months ended September 30, 2014 included non-cash stock compensation of $113,287, which compared to $95,324 in non-cash stock compensation for the same three months in 2013. This 19% increase was primarily due to an increase in the number of options issued to the former CEO and revaluation for options for current employees and directors of the Company as compared to the prior period. Also included in SGA was expense of $70,000 related to the issuance of shares for services and additional $50,000 accrual for liability associated with a former lease for Portsmouth offices.

During the first nine months of 2014, total operating expenses were $2,581,269 up 16.3% from $2,219,455 for the first nine months of 2013. R&D costs increased 12.2% on a comparable year-over-year basis, rising to $666,217 from $593,979, respectively due to the upgrade of the platform to version 3.0, release of our iOS mobile app and current development of our Android app, which we are introducing to the market for the 2014-2015 school years. SG&A expenses for the nine months ended September 30, 2014 totaled $1,915,052, representing an 17.8% increase over SG&A expenses of $1,625,476 for the nine months ended September 30, 2013. This increase was partly attributable to non-cash stock compensation of $372,181 recorded for the first nine months of 2014, which compared to $98,006 for the first nine months of 2013as a result of an increase in the number of options issued to a former CEO, directors and consultants during the nine month period. Depreciation and amortization expense increased 14.7% to $421,167 in the first nine months of 2014 from $367,167 in comparison to the first nine months of 2013. Lastly included in SGA was expense of $70,000 related to the issuance of shares for services and additional $50,000 accrual for liability associated with a former lease for Portsmouth offices.

The decrease in SG&A expenses from the 2013 levels resulted from reduction of our executive and sales, marketing and development teams with paid consultants in the first nine months of 2014 partially offset by the increase in our product development teams, as well as our investment in several marketing initiatives, including participation in industry conferences, travel to international market places to pursue business development opportunities, and the development of a new web site and marketing collateral materials.

Loss from Operations

As a result of the increase in research and development costs, the loss from operations for the three months ended September 30, 2014 increased slightly to $721,648 compared to a loss from operations of $729,967 reported for the three months ended September 30, 2013. The loss from operations for the nine month period in 2014 was also impacted by the increase in expenses for R&D, resulting in a higher loss from operations which totaled $2,537,062 when compared to $2,134,208 in the prior year.

Net Loss

After including interest expense of $84,097 and debt extinguishment losses of $65,869 for the three months ended September 30, 2014, our net loss increased 5.6% to $871,614 compared to a net loss of $825,203 for the three months ended September 30, 2013, which included interest expense of $95,236. For the nine month reporting period, net loss increased 18.2% to $2,878,713 after including interest expense of $275,782 and debt extinguishment losses of $65,869, when compared to $2,434,753 for the same nine months in 2013 which included interest expense of $300,545.

The decrease in interest expense on a comparable year-over-year basis was attributable to certain of our convertible notes being subject to accrued interest in the current period offset by certain of our convertible notes being settled in the same three months in 2013.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for operations. At September 30 2014, we had negative working capital of $2,717,474 as compared to negative working capital of $1,124,964 at September 30, 2013. This negative working capital is due to our operating losses and inability to raise sufficient equity capital to cover accrued expenses and accounts payable in 2014.

Our current assets at September 30, 2014 and December 31, 2013 included cash and accounts receivable, net. Our current liabilities at September 30, 2014 and December 31, 2013 included accounts payables, notes payable – related parties, accrued interest, professional fees and vacation expense and amounts owed to shareholders for working capital loans, convertible note payables and deferred revenue.

Net cash used in operating activities was $1,301,212 for the nine months ended September 30, 2014, as compared to $1,559,069 for the nine months ended September 30, 2013. Working capital changes consumed cash of $424,841 in the current period as compared to prior period charges of $119,142 for the nine months ended September 30, 2013 due to the receipt of cash from the Ukraine licensing contract in 2013 that was not received in the current period and equity private placement proceeds for both periods. In addition, net income was impacted by non-cash items increasing expenses of $1,152,659 in the current year as compared to $756,543 for the nine months ended September 30, 2013. This increase was primarily due to accounting for higher depreciation and amortization costs, as well as additional stock compensation expense as a result of more issuances of options to a former CEO, employees, directors and consultants and debt extinguishment losses offset by a decrease in accretion expense for debt discount and issuance costs due to certain convertible notes being settled in the first and second quarter of 2013.

Net cash used in investing activities was $491,772 for the nine months ended September 30, 2014, as compared to net cash used of $409,816 for the nine months ended September 30, 2013. This increase was a result of the investment being made for the new version of the platform and iOS mobile app deployed in the fall of 2014.

Net cash provided by financing activities for the nine months ended September 30, 2014 was $990,009 as compared to $3,520,765 for the nine months ended September 30, 2013. This decrease is due mainly to less proceeds being raised from the private sale of our securities and proceeds from notes payable due to related parties.

We do not have any commitments for capital expenditures during the next 12 months nor do we have any committed external sources of capital. We believe our working capital plus existing equity commitments are sufficient to fund our operations and permit us to satisfy our obligations as they become due for only the next three months. We have continued to expand our business and our expenses are increasing despite our focused cost-control efforts. Even if we are successful in substantially increasing our revenues from expected sales, we will still need to raise substantial additional working capital. We do not have any firm commitments to provide the additional capital which is needed after the next three months and there are no assurances that we will be able to secure such capital on terms acceptable to us, if at all. Our ability to significantly increase our revenues and successfully raise additional working capital is key to our ability to continue as a going concern. If we are not successful in both of these efforts, we may be forced to significantly curtail or cease our operations.

Plan of Operation

We have developed a collaborative knowledge management, publishing and education delivery platform which provides an end-to-end solution for the rapidly growing digital content books, e-learning, enterprise training and education marketplaces. The platform’s innovative multi-tenant cloud-based architecture enables a unique integration of academic content with learning management systems. It allows content from multiple sources to be assembled into customized living textbooks and courseware and delivered with real-time updates directly to the student on any Internet-enabled computer or smart mobile device. All content powered seamlessly integrates learning management, social collaboration, standards and measurement tagging, real-time updates and royalty tracking functionality. The content is available to be purchased or shared via the Trunity Knowledge Exchange or within private communities powered by the platform. Content modularization capabilities allow products to be mixed and matched and purchased in whole or in part.

The Trunity Knowledge Exchange delivers quality content from various sources, such as traditional publishers, collaborative crowd-sourced communities, individual authors and teachers, as well as institutional repositories and content partners. In addition, we host many National Science Foundation (NSF) and NASA-funded projects, including The National Council for Science and the Environment (NCSE), Encyclopedia of Earth (EoE) and Climate Adaptation and Mitigation E-Learning (CAMEL), all of which also serve as core content contributors to the Trunity Knowledge Exchange Instructors from more than 50 colleges and high schools have used or will use content delivered on the Trunity eLearning Platform, and expert contributors from over 100 top U.S. universities and research institutions as well as over 70 countries internationally – comprising some of the world’s top scientists and educators – create peer-reviewed educational content for the Encyclopedia of Earth.

On March 20, 2013, we entered into a transaction pursuant to which the Trunity eLearning Platform was selected by the Ukraine Government’s Open World National Project to serve as the foundation for the country’s national educational network for public school students in grades five through nine, representing approximately 1,500,000 students. It is important to note that the political upheaval that has taken place in Ukraine since February 2014 resulting in the Ukrainian parliament voting to dismiss the country’s president, Victor Yanukovych, and the Russian annexation of Crimea, have created uncertainty as to the viability of the Ukraine government’s Open World National Project; which, in turn, may impact Trunity’s ability to complete the project implementation. We have on boarded content to the newly developed Ukrainian Knowledge Exchange however given the recent political climate in Ukraine; the launch of the Open World Project is currently on hold. Nonetheless Trunity is poised and ready to proceed with the initiative as soon as we are given approval to do so.

On June 5, 2013, we completed a $3.575M strategic funding led by Pan-African Investment Company (PIC), which was founded by Dick Parsons and Ronald Lauder. Parsons and Lauder formed PIC to identify, invest in and provide solutions that effect growth and development in Africa. In addition to the investment, we entered into an agreement appointing PIC as our exclusive sales agent in Africa. We anticipate a presence in Africa as part of our strategy to bring our platform to the African continent.

Our digital textbook and course solution has seen strong adoption since its initial launch in the Fall of 2012. The first digital textbook authored on the Trunity eLearning Platform was deployed in the first semester at Boston University and sold to 150+ students in a single class at $50 each, expanding to four universities and seven courses by the second semester. During the first nine months of 2014, this same textbook sold to 1,400 students and was adopted nationally in 27 courses at 17 colleges, universities and high schools. During 2014, an additional ten digital textbook titles were on boarded on the Trunity eLearning Platform, which have sold to another 1,200 students and were adopted in 34 courses at 21 colleges, universities and high schools. Following in these footsteps, are several new textbooks being authored entirely on our platform that are nearing completion and will be aggressively marketed for the winter 2015 semester.

In addition to the continued organic author sign-ups, we have launched a large scale author-teacher recruitment campaign that is specifically geared toward gathering premium content (full textbooks, chapters, courses, modules, videos, PowerPoint and other learning resources) to be sold on the Trunity Knowledge Exchange. The campaign is anchored by Trunity’s participation in a number of well attended industry conferences and trade shows, at which our Chief Education Officer, Dr. Cutler Cleveland, has and will continue to lead Trunity-sponsored seminars relating to “how-to-author” and the related benefits of authoring on the Trunity eLearning Platform.

In January 2014, we signed a Memorandum of Understanding with global education leader Houghton Mifflin Harcourt (“HMH”) to offer select HMH digital content via the Trunity Knowledge Exchange to Pre-K-12 schools, as well as to government agencies and entities responsible for the selection or purchase of educational materials. Among the world’s largest providers of pre-K-12 education solutions and longest-established publishing houses, HMH combines cutting-edge research, editorial excellence and technological innovation to improve teaching and learning environments and solve complex literacy and education challenges. HMH’s interactive, results-driven education solutions are utilized by more than 50 million students in over 150 countries, and it’s renowned and awarded novels, non-fiction, children’s books and reference works are enjoyed by readers throughout the world. On July 21, 2014, we entered into a non-exclusive and licensed distribution agreement with HMH whereby 6,610 units of HMH’s Holt McDougal Chemistry & Physics ©2012 Online Interactive Content have been sold and are now accessible to its students, anywhere, anytime and on any desktop or mobile computing device via the Trunity eLearning Platform. We continue to actively pursue sales opportunities with HMH in-line with their sales and marketing efforts.

As one of the world’s leading providers of research-based, technology-enabled education content and solutions, HMH will seek to leverage the robust scalability, rich multi-media, mobile capabilities, and intuitive cloud-based functionality of the Trunity eLearning Platform to provide increased access to its educational content in high growth international markets. Both companies hope to leverage our combined strengths to provide an enriching educational experience for both students and teachers anywhere, anytime and on any connected device. It is anticipated that the Trunity eLearning Platform will integrate HMH’s quality content to provide a vibrant, interactive learning vehicle capable of delivering modular, customizable, real-time learning solutions through the cloud.

Both companies teamed up to showcase HMH’s premium learning content through the Trunity eLearning Platform, co-exhibiting at the recent BETT 2014 conference held in London in January 2014 and QITCOM show in QATAR in May 2014. Both companies are planning on continuing to showcase at more events in 2015.

On July 1, 2014, we announced plans to unveil our next generation architecture for the Trunity eLearning Platform. Generation 3 technology, which incorporates several new leading-edge technical frameworks enabling faster and more robust development, weds a new mobile app with a major enhancement of our content creation and courseware technology to bring to market a suite of leading edge experiences for teachers, students, authors and publishers. Generation 3 includes a new cutting edge user interface as well as broad range new features and functionality that further extend Trunity’s technical lead with the competition. We recently released our new mobile app, branded Trunity Mobile, available as a free download to current Trunity student and educator users from the Apple App Store for iOS mobile devices. We are expecting the Trunity app to be available for Android mobile devices from the Google Play Store by December 2014.

Trunity released Version 3.0 of the Trunity eLearning Platform for general availability in the fall of 2014. Version 3.0 is designed to realize Trunity’s vision for an eLearning platform with no rivals: a single, web-based platform that seamlessly integrates content creation, digital textbooks and courseware. Version 3.0 includes a revamped and much more intuitive content authoring interface with extensive use of drag-and-drop, much more powerful assessment/grading functionality that includes assignments, question banks, quizzes, exams, self-assessments and flash cards, as well as enable student-to-student, teacher-to-student, and group-to-group sharing of messages, notes, annotations, content and bookmarks in real time, all within a single virtual classroom. As with previous generations, authors and instructors will be able to create their own content, upload content from publishers and from open source collections, such as YouTube and the Encyclopedia of Earth, and to selectively organize that content for use in multiple classrooms and/or textbooks.

Trunity’s LiveCross™ Publishing technology enables instructors and authors to easily update in real-time and share that content with their peers. With the upcoming version 3.1 release, Instructors will also be able to form and moderate virtual study groups or allow students to self-organize into groups. The result is the Web’s most powerful content customization platform for education. The Trunity eLearning Platform also will provide a more flexible core technology framework based on the latest technologies, allowing much broader coverage for functionality accessible via API, and increasing its development of new features and functionality. Courseware such as self-assessments, quizzes, assignments and gradebooks are elegantly integrated with the content to create a robust classroom experience.

We are currently engaged in advanced discussions with a number of authors and publishers in an effort to bring a large numbers of textbooks and other educational content to the Platform and make this content available through Trunity’s domestic and international distribution channels. Trunity’s API architecture enables us to import textbooks and other digital content from traditional publishers to our Platform.

In early July of this year, Trunity unveiled details relating to our new transformational learning platform, titled MindBenders™ Educational Learning Series, which will be available for purchase exclusively through the Trunity eLearning Platform. Developed by Trunity and directed by reality-based science television producer Brian Leckey, MindBenders™ is comprised of a 25-episode series of educational, reality-based shows created and hosted by learning expert Michael DiSpezio, MindBenders™’ Chief Scientist and noted educational author, television host and stage edutainment performer, and co-hosted by fellow MindBenders™ and internationally recognized science TV hosts Tory Belleci, Kari Byron and Grant Imahara. The series features an accompanying education classroom website where teachers and students can collaborate, MindBenders™ Lab Kits for in-classroom experiments and MindBenders™ Challenges. MindBenders™ is available exclusively through the Trunity eLearning Platform and Knowledge Exchange. Featuring professional production and broadcast quality coupled with special effects, animations and rich graphics, each MindBenders™ show instantly and effortlessly captures student attention with a motivating visual that sets the scene for further learning. From catapult launches to human glow sticks, these engaging hooks are delivered in terms of sophistication-appropriate coverage that has emerged from established grade level standards and are aligned with the vision of Common Core. Each MindBenders™ episode culminates with a hands-on project or minds-on application, called MindBenders™ Challenges, that extends the learning experience. Students may be challenged to construct devices, engineer solutions and apply what they have learned, or further enrich their understanding by assuming the role of scientist, mathematician or engineer.

MindBenders™ will offer students and educators across the globe the opportunity to actively engage and benefit from enhanced, reality-based learning experiences focused on science, technology, engineering and mathematics (STEM); and the series is designed to meet the Next Generation Science Standards (NGSS) in the United States. For established and fixed curriculums with insufficient coverage of NGSS or those programs that lack an adequate engineering module, MindBenders™ individual learning objects can be integrated into the current offering. There is no need for educators to invest in a complete new NGSS curriculum; instead by enriching class coursework with a collection of MindBenders™ all the requirements will be addressed with a more complete scope and sequence. In addition, teachers searching for more thorough coverage can address identified gaps by offering up an episode of MindBenders™ assembled around specific themes, subject disciplines or dimensions of learning. MindBenders™ also provides parents who choose to home school their children with a powerful set of home teaching resources that they need for properly teaching in the digital age, leveraging mobile devices and tablets to transform the home learning experience.

We are also working on our enterprise and training solution and based on the recent licensing agreement executed on with Visual Collaboration Innovations, Inc. (“VCI”) of Phoenix, Arizona to manage and deliver VCI’s content to end users in the healthcare market we are optimistic that our platform has the ability to continue to provide a competitive advantage to companies similar to VCI which are looking for platform with similar capabilities as ours.

As we continue to build the amount of content available on the platform along with the number of teachers and students requiring content to learn, we believe this growth will drive substantially increased revenues in the future.

With the advent of tablet computing, the entire industry is undergoing a massive market swing to electronic publishing. Even so, many of the dominant publishers still follow a traditional approach to authoring, editorial reviewing, production and distribution of content, delivering e-textbooks that are essentially only flat, electronic versions of the physical textbook. This conservative “status quo” approach does little to reduce costs and time-to-market, and does not take advantage of powerful capabilities that the new technology medium is able to offer, presenting a major market opportunity for our faster, less expensive, better integrated and much more powerful and dynamic solution.

Our entire model with its modular, customizable content is easily created and updated. In addition to disrupting the traditional publishing and distribution model (e.g. by crowdsourcing and peer-reviewing educational content from subject matter experts and allowing educators to create from this content custom virtual textbooks complete with learning management and collaboration functionality), our “publishing market place” approach also provides traditional publishers a neutral “publisher agnostic” channel to sell content into schools, whereby they can take advantage of the powerful functionality provided by the our Platform. Based on increasing demand by customers for functionality (e.g. mixing and matching content from different publishers into customized curriculum, etc.) that most current publishers are unable to meet, we believe this will be an increasingly attractive option for publishers as well as a significant added market opportunity for us.

Inflation

In the opinion of management, inflation has not had and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.

Off-Balance Sheet Arrangements

As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

This item is not required for a smaller reporting company.

Item 4(T). Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. We maintain “disclosure controls and procedures” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this by this quarterly report, our interim Chief Executive Officer and Chief Financial Officer has concluded that our disclosure controls and procedures were effective such that the information relating to our company, required to be disclosed in our Securities and Exchange Commission reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

	•	pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

	•	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

	•	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of the inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of September 30, 2014. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Management’s assessment included an evaluation of the design of our internal control over financial reporting. Based on this assessment, our management has concluded that as of September 30, 2014, our internal control over financial reporting was effective to provide 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.

Changes in Internal Control over Financial Reporting. Management has evaluated whether any change in our internal control over financial reporting occurred during the first nine months of fiscal 2014. Based on its evaluation, management, including the chief executive officer and principal accounting officer, has concluded that there has been no change in our internal control over financial reporting during the first nine months of fiscal 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on April 15, 2014.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the nine months ended September 30, 2014, we raised gross proceeds of $761,025 through the sale of 4,629,052 shares of our Common Stock to accredited investors in private placement transactions at a price of $0.165 per share. Of these shares, 153,110 were purchased by our interim CEO and CFO, Nicole Fernandez-McGovern for a total investment of $24,000. In addition, two Directors made the following investments: 159,490 shares which were purchased by Les and Debra Anderton for a total consideration of $25,000 and 303,030 shares were purchased by the Maytiv Foundation, of which Ivan Berkowitz is the president, for a total consideration of $50,000. Each investor also received a five-year warrant to purchase one share of common stock for every four shares purchased at an exercise price of $0.50 per share. In addition, in March 2014, we borrowed $100,000 from an accredited investor pursuant to a six-month convertible promissory note bearing interest at 10% per year. This note was converted effective July 1, 2015 for 606,061 common shares at $.165 per share with the same warrant consideration as for the shares privately sold as set forth above. We incurred $25,451 of securities and debt issuance costs and issued 127,256 warrants representing commissions paid to broker-dealers who assisted with these transactions and repurchased 768,712 shares of common stock for $76,871 ($.10) per share) from our former CEO in connection with these transactions. The net proceeds of this offering were used for working capital.

In July and August 2014, we borrowed from accredited investors and related parties $52,500, pursuant to six-month convertible promissory notes bearing interest at 14% per year. The notes are convertible at $.165 per share with the same warrant consideration as for the shares privately sold as set forth above. Of these notes, $7,500 of the principal amount were purchased by our interim CEO and CFO, Nicole Fernandez-McGovern, $10,000 by Director Les Anderton and $10,000 by Director Ivan Berkowitz. We incurred no commission costs in connection with these transactions. The net proceeds are being used for working capital purposes.

In September 2014, we raised gross proceeds of $100,000 through the sale of 606,061 shares of our Common Stock to accredited investors in private placement transactions at a price of $0.165 per share. We also raised $175,000 of proceeds, pursuant to the sale of Series D convertible debentures bearing interest at 10% per year. The notes are convertible at $.165 per share with the same warrant consideration as for the shares privately sold as set forth above. Of these notes, $35,000 of the principal amount were purchased by our interim CEO and CFO, Nicole Fernandez-McGovern. We incurred no commission costs in connection with these transactions. The net proceeds are being used for working capital purposes.

On November 6, 2014, we entered into a Securities Purchase Agreement with Peak One Opportunity Fund, L.P. (“Peak”) pursuant to which we sold to Peak for $112,500 a convertible debenture (the “Peak Debenture”) in the principal amount of $125,000. (the “Principal Amount”) due on November 6, 2017 (the “Maturity Date”). Pursuant to the Peak Debenture, we agreed to pay interest on the Principal Amount outstanding from time to time in arrears (i) upon conversion or (ii) on the Maturity Date, at the rate of 5% per annum. We have the option to redeem the Peak Debenture prior to the Maturity Date at any time or from time to time by paying the Principal Amount plus accrued interest. Beginning 91 days after the issue date, Peak may convert the principal and accrued interest (the “Conversion Amount”) into shares of Common Stock, at a conversion price for each share of Common Stock (the “Conversion Price”) equal to 65% of the lowest closing bid price (as reported by Bloomberg LP) of Common Stock for the 20) trading days immediately preceding the date of conversion of the Debenture (subject to equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar events). In connection with the Peak Agreement we paid issuance costs of $10,000 and issued 137,500 shares of Restricted Stock to cover the expenses incurred and analysis performed by Peak in connection with the transaction.

In October and November 2014, we borrowed from accredited investors and related parties $110,000 pursuant to the issuance of six-month Unsecured Redeemable Debentures that will pay interest during the Debenture term in the total amount of 15% of the principal amount. We issued to each investor a four-year warrant to purchase shares of the Company’s Common Stock (one warrant share for each dollar of the investment amount) at a price of $0.15 per share, resulting in the issuance of warrants to purchase 110,000 shares. In addition, we issued to each investor a warrant (the “2015 Warrant”) to purchase shares (one 2015 Warrant Share for each dollar of the investment amount) at a price to be determined equal to 50% of the price per share of a contemplated 2015 Company equity offering. We incurred no commission costs in connection with these transactions.

These issuances were made pursuant to an exemption from registration requirements under Regulation D and/or Section 4(2) of the Securities Act of 1933, as amended.

Item 3. Defaults upon Senior Securities

We have defaulted on our obligations to pay $215,300 Canadian (US$195,342) in convertible debentures due on July 25, 2014. The total amount due on these debentures, including accrued interest is $256,042 Canadian. In addition, we have defaulted on our obligations to pay $200,000 principal amount of debentures due August 15, 2014. The total amount due on these debentures, including accrued interest, is $240,000. We have also defaulted on our obligations to pay $624,372 principal amount of debentures due October and November 2014. The total amount due on these debentures, including interest, is $749,246. We have negotiated restructured terms with the majority of the debenture holders and are attempting to complete the formal restructuring of these debt obligations; however, there can be no assurance that these negotiations will be successful. Four of the five holders of Canadian debentures have not responded to the Company; hence their accrual has been increased to 12% default interest per the agreement for the time being. We believe that the negotiations will result in successful restructuring; however, if they are not successful, we could be materially adversely affected. See Note 5 of Notes to Unaudited Condensed Consolidated Financial Statements.

Item 4. Mine Safety Disclosures.

This Item is not applicable to our company’s operations.

Item 5. Other Information

On August 11, 2014, the landlord of our former corporate offices in Portsmouth, NH declared us in default based on our failure to pay rent and other charges due since July 2014. We vacated the premises on August 22, 2014, and moved our office to smaller, less expensive premises in the neighboring area. Past due amounts owed on the lease through the date of surrender of the premises total approximately $51,000. Total payments from surrender through the end of the lease would be approximately $900,000. We are attempting to negotiate a settlement of the lease with the landlord based on an offset for the fair market rental value of the premises and a discount to present value, as well as a discount based on the our precarious financial condition, No legal demands have been filed by either party. The Company has recorded total liability of $100,000 to cover its exposure based on the lease, an amount equal to its pending settlement offer to the landlord. There can be no assurance that settlement of this lease will not have a material adverse effect on us.

Item 6. Exhibits

Exhibit Number		Description
10.15		Securities Purchase Agreement dated as of November 6, 2014, between the Company and Peak One Opportunity Fund, L.P.

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **

31.2		Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

32.2		Certification of Principal Financial and Accounting Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

101.INS		XBRL INSTANCE DOCUMENT **

101.SCH		XBRL TAXONOMY EXTENSION SCHEMA **

101.CAL		XBRL TAXONOMY EXTENSION CALCULATION LINKBASE **

101.DEF		XBRL TAXONOMY EXTENSION DEFINITION LINKBASE **

101.LAB		XBRL TAXONOMY EXTENSION LABEL LINKBASE **

101.PRE		XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE **

** Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TRUNITY HOLDINGS, INC.

Date: November 25, 2014	By:	/s/ Nicole M. Fernandez-McGovern
		Nicole M. Fernandez-McGovern,
		Interim Chief Executive Officer and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number		Description
10.15		Securities Purchase Agreement dated as of November 6, 2014, between the Company and Peak One Opportunity Fund, L.P.

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **

31.2		Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

32.2		Certification of Principal Financial and Accounting Officer Pursuant to18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

101.INS		XBRL INSTANCE DOCUMENT **

101.SCH		XBRL TAXONOMY EXTENSION SCHEMA **

101.CAL		XBRL TAXONOMY EXTENSION CALCULATION LINKBASE **

101.DEF		XBRL TAXONOMY EXTENSION DEFINITION LINKBASE **

101.LAB		XBRL TAXONOMY EXTENSION LABEL LINKBASE **

101.PRE		XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE **

EXHIBIT 10.15

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of November 5, 2014, is entered into by and between TRUNITY HOLDINGS, INC., a Delaware corporation, (the “Company”) and PEAK ONE OPPORTUNITY FUND, L.P., a Delaware limited partnership (the “Buyer”).

WITNESSETH:

WHEREAS, the Company and the Buyer are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded, inter alia, by Rule 506 under Regulation D (“Regulation D”) as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”), and/or Section 4(2) of the 1933 Act; and

WHEREAS, the Buyer wishes to purchase from the Company, and the Company wishes to sell the Buyer, upon the terms and subject to the conditions of this Agreement, securities consisting of the Company’s Convertible Debentures due three years from the respective dates of issuance (the “Debentures”), each of which are in the form of Exhibit A hereto, which will be convertible into shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), in the aggregate principal amount of up to Three Hundred Seventy Five Thousand and 00/100 Dollars ($375,000.00), for an aggregate purchase price of up to Three Hundred Thirty Seven Thousand Five Hundred and 00/100 Dollars ($337,500.00), all upon the terms and subject to the conditions of this Agreement, the Debentures, and other related documents;

NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1. DEFINITIONS; AGREEMENT TO PURCHASE.

a. Certain Definitions. As used herein, each of the following terms has the meaning set forth below, unless the context otherwise requires:

(i) “Affiliate” means, with respect to a specific Person referred to in the relevant provision, another Person who or which controls or is controlled by or is under common control with such specified Person.

(ii) “Certificates” means the relevant Restricted Stock certificates duly executed on behalf of the Company and issued hereunder.

(iii) “Closing Date” means the date on which one of the three Closings are held, which are the Signing Closing Date, the Second Closing Date and the Third Closing Date.

(iv) “Collateral” means all accounts receivables now existing of the Company or hereafter arising or acquired by the Company.

(v) “Common Stock” shall have the meaning ascribed to such term in the Recitals.

(vi) “Conversion Price” means sixty five percent (65%) of the lowest closing bid price (as reported by Bloomberg LP) of Common Stock for the twenty (20) trading days immediately preceding the date of conversion of the Debentures (subject to equitable adjustments resulting from any stock splits, stock dividends, recapitalizations or similar events).

(vii) “Conversion Shares” means the shares of Common Stock issuable upon conversion of the Debentures.

(viii) “Dollars” or “$” means United States Dollars.

(ix) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(x) “Material Adverse Effect” means a material adverse effect on the business, operations or condition (financial or otherwise), prospects or results of operation of the Company and its Subsidiaries taken as a whole, in the sole and absolute discretion of the Buyer, irrespective of any finding of fault, magnitude of liability (or lack of financial liability) or purported lack of materiality (it being understood that the mere finding of any such violation is in itself material and adverse). Without limiting the generality of the foregoing, the occurrence of any of the following, in the sole and absolute discretion of the Buyer, shall be considered a Material Adverse Effect: (i) any final money, judgment, writ or warrant of attachment, or similar process (including an arbitral determination) in excess of Fifty Thousand Dollars ($50,000) shall be entered or filed against the Company or any of its Subsidiaries (including, in any event, products liability claims against the Company or its Subsidiaries), (ii) the suspension or withdrawal of any governmental authority or permit pertaining to a material amount of the Company’s or any Subsidiary’s products or services, (iii) the loss of any material insurance coverage (including, in any case, comprehensive general liability coverage, products liability coverage or directors and officers coverage, in each case in effect at the time of execution and delivery of this Agreement), (iv) an action by a regulatory agency or governmental body affecting the Common Stock (including, without limitation, (1) the commencement of any regulatory investigation of which the Company is aware, the suspension of trading of the Common Stock by the Financial Industry Regulation Authority (“FINRA”), the SEC, the OTC Bulletin Board (“OTCBB”) or the OTC Markets Group, Inc., the failure of the Common Stock to be DTC eligible or the placing of the Common Stock on the DTC “chill list” or (2) the engaging in any market manipulation or other unlawful or improper trading or other activity by any Affiliate), (v) the Company’s independent registered accountants shall resign under circumstances where a disagreement exists between the Company, (vi) the Company shall fail to timely file any disclosure document as required by applicable federal or state securities laws and regulations or by the rules and regulations of any exchange, trading market or quotation system to which the Company or the Common Stock is subject, or (vii) the Chief Executive Officer of the Company or any other key director of the Company, shall, for any reason (including, without limitation, termination, resignation, retirement, death or disability) cease to act on behalf of the Company in the same role and to the same extent as his or her involvement as of the date of execution and delivery of this Agreement.

(xi) “Person” means any living person or any entity, such as, but not necessarily limited to, a corporation, partnership or trust.

(xii) “Purchase Price” means the price that the Buyer pays for the Debentures at each respective Closing, which are the Signing Purchase Price, the Second Purchase Price and the Third Purchase Price, as such are defined in Sections 6(a), 6(b) and 6(c), respectively.

(xiii) “Registration Rights Agreement” shall have the meaning ascribed to such term in Section 3(d).

(xiv) “Registration Statement” shall have the meaning ascribed to such term in Section 8(c).

(xv) “Restricted Stock” shall mean shares of Common Stock which are not freely trading shares.

(xvi) “Securities” means the Debentures, the Shares and the Restricted Stock issuance contemplated by Section 12(a).

(xvii) “Shares” means the Conversion Shares.

(xviii) “Second Closing Date” shall have the meaning ascribed to such term in Section 6(b).

(xix) “Second Debenture” means the second of the three (3) Debentures, in the principal amount of $125,000, which is issued by the Company to the Buyer on the Second Closing Date.

(xx) “Signing Closing Date” shall have the meaning ascribed to such term in Section 6(a).

(xxi) “Signing Debenture” means the first of the three Debentures, in the principal amount of $125,000, to be issued by the Company to the Buyer on the Signing Closing Date.

(xxii) “Subsidiary” shall have the meaning ascribed to such term in Section 3(b).

(xxiii) “Third Closing Date” shall have the meaning ascribed to such term in Section 6(c).

(xxiv) “Third Debenture” means the third of the three (3) Debentures, in the principal amount of $125,000, which is issued by the Company to the Buyer on the Third Closing Date.

(xxv) “Transaction Documents” means, collectively, this Agreement, the Debentures, the Registration Rights Agreement, the Transfer Agent Instruction Letter, and the other agreements, documents and instruments contemplated hereby or thereby.

(xxvi) “Transfer Agent” shall have the meaning ascribed to such term in Section 4(a).

(xxvii) “Transfer Agent Instruction Letter” shall have the meaning ascribed to such term in Section 5(a).

b. Purchase and Sale of Debentures.

(i) The Buyer agrees to purchase from the Company, and the Company agrees to sell to the Buyer, the Debentures on the terms and conditions set forth below in this Agreement and the other Transaction Documents.

(ii) Subject to the terms and conditions of this Agreement and the other Transaction Documents, the Buyer will purchase the Debentures at certain closings (each, a “Closing”) to be held on certain respective Closing Dates.

c. Security Interest

(i) In consideration of Buyer’s purchase of Debentures pursuant to the terms and conditions of this Agreement, the Company hereby grants to the Buyer, its successors and assigns, a continuing, first priority security interest in, and assignment, transference, mortgage, conveyance, pledge, hypothecation and set over to the Buyer, its successors and assigns, all of the Company’s right, title and interest in and to the Collateral, whether now owned or hereafter acquired, and all proceeds (including, without limitation, all insurance proceeds) and products of any of the Collateral (the “Security Interest”), which Security Interest shall remain in full force and effect until the third anniversary of the Debenture’s Closing Date (the “Maturity Date”) and until the Principal Amount of such Debenture is fully paid and satisfied.

(ii) At any time upon Buyer’s request, the Company shall execute and deliver to the Buyer any other documents, instruments or certificates requested by the Buyer for the purpose of properly documenting and perfecting the security interests of the Buyer in and to the Collateral granted hereunder, including any additional security agreements, mortgages, control agreements, and financing statements.

2. BUYER’S REPRESENTATIONS, WARRANTIES, ETC.

The Buyer represents and warrants to, and covenants and agrees with, the Company as follows:

a. Investment Purpose. Without limiting the Buyer’s right to sell the Shares pursuant to the Registration Statement, the Buyer is purchasing the Debentures, and will be acquiring the Conversion Shares, for its own account for investment only and not with a view towards the public sale or distribution thereof and not with a view to or for sale in connection with any distribution thereof.

b. Accredited Investor Status. Buyer is (i) an “accredited investor” as that term is defined in Rule 501 of the General Rules and Regulations under the 1933 Act by reason of Rule 501(a)(3), (ii) experienced in making investments of the kind described in this Agreement and the related documents, (iii) able, by reason of the business and financial experience of its officers (if an entity) and professional advisors (who are not affiliated with or compensated in any way by the Company or any of its affiliates or selling agents), to protect its own interests in connection with the transactions described in this Agreement, and the related documents, and (iv) able to afford the entire loss of its investment in the Securities.

c. Subsequent Offers and Sales. All subsequent offers and sales of the Securities by the Buyer shall be made pursuant to registration of the Shares under the 1933 Act or pursuant to an exemption from registration and compliance with applicable states’ securities laws.

d. Reliance on Exemptions. Buyer understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

e. Information. Buyer and its advisors have been furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer. Buyer and its advisors have been afforded the opportunity to ask questions of the Company and have received complete and satisfactory answers to any such inquiries. Without limiting the generality of the foregoing, Buyer has also had the opportunity to obtain and to review (1) the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2014, (2) the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014, and (3) the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (collectively, the “SEC Documents”).

f. Investment Risk. Buyer understands that its investment in the Securities involves a high degree of risk, including the risk of loss of the Buyer’s entire investment.

g. Governmental Review. Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities.

h. Organization; Authorization. Buyer is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. This Agreement and the other Transaction Documents have been duly and validly authorized, executed and delivered on behalf of the Buyer and create a valid and binding agreement of the Buyer enforceable in accordance with its terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors’ rights generally.

i. Residency. The state in which any offer to purchase shares hereunder was made to or accepted by Buyer is the state shown as the Buyer’s address contained herein.

3. COMPANY REPRESENTATIONS AND WARRANTIES, ETC.

The Company represents and warrants to the Buyer that:

a. Concerning the Debentures and the Shares. There are no preemptive rights of any stockholder of the Company to acquire the Debentures or the Shares.

b. Organization; Subsidiaries; Reporting Company Status. Attached hereto as Schedule 3(b) is an organizational chart describing all of the Company’s wholly-owned and majority-owned subsidiaries (the “Subsidiaries”) and the relationships among the Company and such Subsidiaries, including as to each Subsidiary its jurisdiction of organization and the percentage of ownership held by the Company, and the parent company of the Company, including the percentage of ownership of the Company held by it. The Company and each Subsidiary is a corporation or other form of businesses entity duly organized, validly existing and in good standing under the laws its respective jurisdiction of organization, and each of them has the requisite corporate or other power to own its properties and to carry on its business as now being conducted. The Company and each Subsidiary is duly qualified as a foreign corporation or other entity to do business and is in good standing in each jurisdiction where the nature of the business conducted or property owned by it makes such qualification necessary, other than those jurisdictions in which the failure to so qualify would not have a Material Adverse Effect. The Common Stock is listed and traded on the OTCQB Market of the OTC Markets Group, Inc. (trading symbol: TNTY). The Company has received no notice, either oral or written, from FINRA, the SEC, or any other organization, with respect to the continued eligibility of the Common Stock for such listing, and the Company has maintained all requirements for the continuation of such listing.

c. Authorized Shares. Schedule 3(c) sets forth all capital stock and derivative securities of the Company that are authorized for issuance and that are issued and outstanding. All issued and outstanding shares of Common Stock have been duly authorized and validly issued and are fully paid and nonassessable. The Company has sufficient authorized and unissued shares of Common Stock as may be necessary to effect the issuance of the Shares, assuming the prior issuance and exercise, exchange or conversion, as the case may be, of all derivative securities authorized, as indicated in Schedule 3(c). The Shares have been duly authorized and, when issued upon conversion of, or as interest on, the Debentures, the Shares will be duly and validly issued, fully paid and non-assessable and will not subject the holder thereof to personal liability by reason of being such holder. At all times, the Company shall keep available and reserved for issuance to the holders of the Debentures Common Stock duly authorized for issuance against the Debentures.

d. Authorization. This Agreement, the Registration Rights Agreement, dated as of the date hereof, between the Company and the Buyer, substantially in the form of Exhibit B annexed hereto (the “Registration Rights Agreement”) and the issuance of the Debentures (including without limitation the incurrence of indebtedness thereunder) and Restricted Stock and the other transactions contemplated by the Transaction Documents, have been duly and validly authorized by the Company, and this Agreement has been duly executed and delivered by the Company. Each of the Transaction Documents, when executed and delivered by the Company, are and will be, valid, legal and binding agreements of the Company, enforceable in accordance with their respective terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors’ rights generally.

e. Non-contravention. The execution and delivery of the Transaction Documents, the issuance of the Securities and the consummation by the Company of the other transactions contemplated by this Agreement, the Registration Rights Agreement and the Debentures (including without limitation the incurrence of indebtedness thereunder and the granting of the Security Interest) do not and will not conflict with or result in a breach by the Company of any of the terms or provisions of, or constitute a default under (i) the articles of incorporation or by-laws of the Company, each as currently in effect, (ii) any indenture, mortgage, deed of trust, or other material agreement or instrument to which the Company is a party or by which it or any of its properties or assets are bound, including any listing agreement for the Common Stock, except as herein set forth or an event which results in the creation of any lien, charge or encumbrance upon any assets of the Company or the triggering of any preemptive or anti-dilution rights or rights of first refusal or first offer on the part of holders of the Company’s securities, (iii) to its knowledge, any existing applicable law, rule, or regulation or any applicable decree, judgment, or order of any court, United States federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over the Company or any of its properties or assets, or (iv) the Company’s listing agreement for its Common Stock (if applicable), except such conflict, breach or default which would not have a Material Adverse Effect.

f. Approvals. No authorization, approval or consent of any court, governmental body, regulatory agency, self-regulatory organization, or stock exchange or market or the stockholders of the Company is required to be obtained by the Company for the entering into and performing this Agreement and the other Transaction Documents (including without limitation the issuance and sale of the Securities to the Buyer as contemplated by this Agreement) except such authorizations, approvals and consents that have been obtained, or such authorizations, approvals and consents, the failure of which to obtain would not have a Material Adverse Effect.

g. SEC Filings. None of the SEC Documents contained, at the time they were filed, any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements made therein in light of the circumstances under which they were made, not misleading. The Company timely filed all requisite forms, reports and exhibits thereto with the SEC as required. The Company is not aware of any event occurring on or prior to the execution and delivery of this Agreement that would require the filing of, or with respect to which the Company intends to file, a Form 8-K after such time.

h. Absence of Certain Changes. Since June 30, 2014, when viewed from the perspective of the Company and its Subsidiaries taken as a whole, there has been no material adverse change and no material adverse development in the business, properties, operations, condition (financial or otherwise), or results of operations of the Company and its Subsidiaries (including, without limitation, a change or development which constitutes, or with the passage of time is reasonably likely to become, a Material Adverse Effect), except as disclosed in the SEC Documents. Since December 31, 2013, except as provided in the SEC Documents, the Company has not (i) incurred or become subject to any material liabilities (absolute or contingent) except liabilities incurred in the ordinary course of business consistent with past practices; (ii) discharged or satisfied any material lien or encumbrance or paid any material obligation or liability (absolute or contingent), other than current liabilities paid in the ordinary course of business consistent with past practices; (iii) declared or made any payment or distribution of cash or other property to stockholders with respect to its capital stock, or purchased or redeemed, or made any agreements to purchase or redeem, any shares of its capital stock; (iv) sold, assigned or transferred any other tangible assets, or canceled any debts or claims, except in the ordinary course of business consistent with past practices; (v) suffered any substantial losses or waived any rights of material value, whether or not in the ordinary course of business, or suffered the loss of any material amount of existing business; (vi) made any changes in employee compensation, except in the ordinary course of business consistent with past practices; or (vii) experienced any material problems with labor or management in connection with the terms and conditions of their employment.

i. Full Disclosure. There is no fact known to the Company (other than general economic conditions known to the public generally or as disclosed in the SEC Documents) that has not been disclosed in writing to the Buyer that (i) would reasonably be expected to have a Material Adverse Effect, (ii) would reasonably be expected to materially and adversely affect the ability of the Company to perform its obligations pursuant to the Transaction Documents, or (iii) would reasonably be expected to materially and adversely affect the value of the rights granted to the Buyer in the Transaction Documents.

j. Absence of Litigation. Except as described in the SEC Documents, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, any of the Transaction Documents. The Company is not a party to or subject to the provisions of, any order, writ, injunction, judgment or decree of any court or government agency or instrumentality which could reasonably be expected to have a Material Adverse Effect.

k. Collateral Representations. No Person other than the Company, owns or has other rights in the Collateral, and the Collateral is free from any lien of any kind, other than the lien of Buyer.

1. Absence of Events of Default. No Event of Default (or its equivalent term), as defined in the respective agreement, indenture, mortgage, deed of trust or other instrument, to which the Company is a party, and no event which, with the giving of notice or the passage of time or both, would become an Event of Default (or its equivalent term) (as so defined in such document), has occurred and is continuing, which would have a Material Adverse Effect.

m. No Undisclosed Liabilities or Events. The Company has no liabilities or obligations other than those disclosed in the SEC Documents or those incurred in the ordinary course of the Company’s business since June 30, 2014, and which individually or in the aggregate, do not or would not have a Material Adverse Effect. No event or circumstances has occurred or exists with respect to the Company or its properties, business, condition (financial or otherwise), or results of operations, which, under applicable law, rule or regulation, requires public disclosure or announcement prior to the date hereof by the Company but which has not been so publicly announced or disclosed. There are no proposals currently under consideration or currently anticipated to be under consideration by the Board of Directors or the executive officers of the Company which proposal would (x) change the articles of incorporation, by-laws or any other charter document of the Company, each as currently in effect, with or without shareholder approval, which change would reduce or otherwise adversely affect the rights and powers of the shareholders of the Common Stock or (y) materially or substantially change the business, assets or capital of the Company.

n. No Integrated Offering. Neither the Company nor any of its affiliates nor any Person acting on its or their behalf has, directly or indirectly, at any time during the six month period immediately prior to the date of this Agreement made any offer or sales of any security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption from registration under Rule 506 of Regulation D in connection with the offer and sale of the Securities as contemplated hereby.

o. Dilution. The number of Shares issuable upon conversion of the Debentures may increase substantially in certain circumstances, including, but not necessarily limited to, the circumstance wherein the market price of the Common Stock declines prior to the conversion of the Debentures. The Company’s executive officers and directors have studied and fully understand the nature of the securities being sold hereby and recognize that they have a potential dilutive effect and further that the conversion of the Debentures and/or sale of the Conversion Shares may have an adverse effect on the market price of the Common Stock. The Board of Directors of the Company has concluded, in its good faith business judgment that such issuance is in the best interests of the Company. The Company specifically acknowledges that its obligation to issue the Conversion Shares upon conversion of the Debentures is binding upon the Company and enforceable regardless of the dilution such issuance may have on the ownership interests of other shareholders of the Company.

p. Regulatory Permits. The Company has all such permits, easements, consents, licenses, franchises and other governmental and regulatory authorizations from all appropriate federal, state, local or other public authorities (“Permits”) as are necessary to own and lease its properties and conduct its businesses in all material respects in the manner described in the SEC Documents and as currently being conducted. All such Permits are in full force and effect and the Company has fulfilled and performed all of its material obligations with respect to such Permits, and no event has occurred that allows, or after notice or lapse of time would allow, revocation or termination thereof or will result in any other material impairment of the rights of the holder of any such Permit, subject in each case to such qualification as may be disclosed in the SEC Documents. Such Permits contain no restrictions that would materially impair the ability of the Company to conduct businesses in the manner consistent with its past practices. The Company has not received notice or otherwise has knowledge of any proceeding or action relating to the revocation or modification of any such Permit.

q. Hazardous Materials. The Company is in compliance with all applicable Environmental Laws in all respects except where the failure to comply does not have and could not reasonably be expected to have a Material Adverse Effect. For purposes of the foregoing:

“Environmental Laws” means, collectively, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, the Resource Conservation and Recovery Act, the Toxic Substances Control Act, as amended, the Clean Air Act, as amended, the Clean Water Act, as amended, any other “Superfund” or “Superlien” law or any other applicable federal, state or local statute, law, ordinance, code, rule, regulation, order or decree regulating, relating to, or imposing liability or standards of conduct concerning, the environment or any Hazardous Material.

“Hazardous Material” means and includes any hazardous, toxic or dangerous waste, substance or material, the generation, handling, storage, disposal, treatment or emission of which is subject to any Environmental Law.

r. Independent Public Accountants. To the best knowledge of the Company, Cherry Bekaert LLP is an independent registered public accounting firm with respect to the Company, as required by the 1933 Act, the Exchange Act and the rules and regulations promulgated thereunder.

s. Internal Accounting Controls. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (1) transactions are executed in accordance with management’s general or specific authorization; (2) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (3) access to assets is permitted only in accordance with management’s general or specific authorization; and (4) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.

s. Brokers. No Person (other than the Buyer and its principals, employees and agents) is entitled to receive any consideration from the Company or the Buyer arising from any finder’s agreement, brokerage agreement or other agreement to which the Company is a party.

4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.

a. Transfer Restrictions. The parties acknowledge and agree that (1) the Debentures have not been registered under the provisions of the 1933 Act and, except as provided in the Registration Rights Agreement, the Shares have not been registered under the 1933 Act, and may not be transferred unless (A) subsequently registered thereunder or (B) the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; (2) any sale of the Securities made in reliance on Rule 144 promulgated under the 1933 Act (“Rule 144”) may be made only in accordance with the terms of Rule 144 and further, if Rule 144 is not applicable, any resale of such Securities under circumstances in which the seller, or the Person through whom the sale is made, may be deemed to be an underwriter, as that term is used in the 1933 Act, may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder, (3) at the request of the Buyer, the Company shall, from time to time, within two (2) business days of such request, at the sole cost and expense of the Company, either (i) deliver to its transfer agent and registrar for the Common Stock (the “Transfer Agent”) a written letter instructing and authorizing the Transfer Agent to process transfers of the Shares at such time as the Buyer has held the Securities for the minimum holding period permitted under Rule 144, subject to the Buyer’s providing to the Transfer Agent certain customary representations contemporaneously with any requested transfer, or (ii) at the Buyer’s option or if the Transfer Agent requires further confirmation of the availability of an exemption from registration, furnish to the Buyer an opinion of the Company’s counsel in favor of the Buyer (and, at the request of the Buyer, any agent of the Buyer, including but not limited to the Buyer’s broker or clearing firm) and the Transfer Agent, reasonably satisfactory in form, scope and substance to the Buyer and the Transfer Agent, to the effect that a contemporaneously requested transfer of shares does not require registration under the 1933 Act, pursuant to the 1933 Act, Rule 144 or other regulations promulgated under the 1933 Act and (4) neither the Company nor any other Person is under any obligation to register the Securities (other than pursuant to the Registration Rights Agreement) under the 1933 Act or to comply with the terms and conditions of any exemption thereunder.

b. Restrictive Legend. The Buyer acknowledges and agrees that the Debentures, and, until such time as the Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement and sold in accordance with an effective Registration Statement, certificates and other instruments representing any of the Securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of any such Securities):

THIS SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

c. Registration Rights Agreement. The parties hereto agree to enter into the Registration Rights Agreement concurrently with the execution and delivery of this Agreement.

d. Securities Filings. The Company undertakes and agrees to make all necessary filings (including, without limitation, a Form D) in connection with the sale of the Securities to the Buyer required under any United States laws and regulations applicable to the Company (including without limitation state “blue sky” laws), or by any domestic securities exchange or trading market, and to provide a copy thereof to the Buyer promptly after such filing.

e. Reporting Status; Public Trading Market; DTC Eligibility. So long as the Buyer beneficially owns any Securities and any Shares are outstanding, (i) the Company shall timely file, prior to or on the date when due, all reports that would be required to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange Act if the Company had securities registered under Section 12(b) or 12(g) of the Exchange Act; (ii) the Company shall not be operated as, or report, to the SEC or any other Person, that the Company is a “shell company” or indicate to the contrary to the SEC or any other Person; and (iii) the Company shall take all other action under its control necessary to ensure the availability of Rule 144 under the 1933 Act for the sale of Shares by the Buyer at the earliest possible date. Except as otherwise set forth in Transaction Documents, the Company shall take all action under its control necessary to obtain and to continue the listing and trading of its Common Stock (including, without limitation, all Registrable Securities) on the OTC Markets, Inc. (“OTCM”) at the mid-tier (“OTCQB”) or top- tier (“OTCQX”), and will comply in all material respects with the Company’s reporting, filing and other obligations under the by-laws or rules of the Financial Industry Regulatory Authority (“FINRA”). If, so long as the Buyer beneficially owns any of the Securities, the Company receives any written notice from the OTCM, FINRA, or the SEC with respect to either any alleged deficiency in the Company’s compliance with applicable rules and regulations (including without limitation any comments from the SEC on any of the Company’s documents filed (or the failure to have made any such filing) under the 1933 Act or the Exchange Act) (each, a “Regulatory Notice”), then the Company shall promptly, and in any event within two business days, provide copies of the Regulatory Notice to the Buyer, and shall promptly, and in any event within five (5) business days of receipt of the Regulatory Notice (a “Regulatory Response”), respond in writing to the OTCM, FIRNA and/or SEC (as the case may be), setting forth the Company’s explanation and/or response to the issues raised in the Regulatory Notice, with a view towards maintaining and/or regaining full compliance with the applicable rules and regulations of the OTCM, FIRNA and/or SEC and maintaining or regaining good standing of the Company with the OTCM, FINRA and/or SEC, as the case may be, the intent being to ensure that the Company maintain its reporting company status with the SEC and that its Common Stock be and remain available for trading on the OTCQB or OTCQX (for the avoidance of doubt, excluding the bottom-tier OTC Pink (or, “pink sheets”). Further, at all times when any portion of the Debentures are outstanding, the Common Stock shall be eligible for clearing through the Depository Trust Company (“DTC”) via the DTC’s “DWAC” system, and the Common Stock shall not be subject to any DTC “chill” designation or similar restriction on the clearing of the Common Stock through DTC.

f. Use of Proceeds. The Company will use the proceeds from the sale of the Signing Debenture, Second Debenture, and Third Debenture for working capital purposes only and will be subject to customary restrictions. Absent the prior written approval of a majority of the principal amount of the Debentures then outstanding, the Company shall not use any portion of the proceeds of the sale of the Debentures to (i) repay any indebtedness or other obligation of the Company incurred prior to the date of this Agreement outside the normal course of business, (ii) pay any dividends or redemption amount on any of the Company’s equity or equity equivalents or (iii) pay deferred compensation or any compensation to any of the directors or officers of the Company in excess of the rate or amount paid or accrued during the fiscal year ended December 31, 2013, other than modest increases consistent with prior practice that are approved by the Company’s Board of Directors.

g. Available Shares. Commencing on the date of execution and delivery of this Agreement, the Company shall have and maintain authorized and reserved for issuance, free from preemptive rights, that number of shares equal to three hundred percent (300%) of the number of shares of Common Stock (1) issuable based upon the Conversion Price of the then- outstanding Debentures (including accrued interest thereon) as may be required to satisfy the conversion rights of the Buyer pursuant to the terms and conditions of the Debenture and (2) issuable to the Buyer on future Closing Dates, based upon the lowest closing bid price per share of the Common Stock on the date before the most recent Closing Date (as reported by Bloomberg LP). The Company shall monitor its compliance with the foregoing requirements on an ongoing basis. If at any time the Company does not have available an amount of authorized and non-issued Shares required to be reserved pursuant to this Section, then the Company shall, without notice or demand by the Buyer, call within thirty (30) days of such occurrence and hold within sixty (60) days of such occurrence a special meeting of shareholders, for the sole purpose of increasing the number of shares authorized. Management of the Company shall recommend to shareholders to vote in favor of increasing the number of Common Stock authorized at the meeting. Members of the Company’s management shall also vote all of their own shares in favor of increasing the number of Common Stock authorized at the meeting. If the increase in authorized shares is approved by the stockholders at the meeting, the Company shall implement the increase in authorized shares within one (1) business day following approval at such meeting within ten (10) business days following approval at such meeting. Alternatively, to the extent permitted by applicable law, in lieu of calling and holding a meeting as described above, the Company may, within thirty (30) days of the date when the Company does not have available an amount of authorized and non-issued Shares required to be reserved as described above, procure the written consent of stockholders to increase the number of shares authorized, and provide the stockholders with notice thereof as may be required under applicable law (including without limitation Section 14(c) of the Exchange Act and Regulation 14C thereunder). Upon obtaining stockholder approval as aforesaid, the Company shall cause the appropriate increase in its authorized shares of Common Stock within one (1) business day (or as soon thereafter as permitted by applicable law). Company’s failure to comply with these provisions will be an Event of Default.

h. Reimbursement. If (i) Buyer becomes a party defendant in any capacity in any action or proceeding brought by any stockholder of the Company, in connection with or as a result of the consummation of the transactions contemplated by the Transaction Documents, or if the Buyer is impleaded in any such action, proceeding or investigation by any Person, or (ii) the Buyer, other than by reason of its gross negligence, willful misconduct or breach of law, becomes a party defendant in any capacity in any action or proceeding brought by the SEC against or involving the Company or in connection with or as a result of the consummation of the transactions contemplated by the Transaction Documents, or if the Buyer is impleaded in any such action, proceeding or investigation by any Person, then in any such case, the Company will reimburse the Buyer for its reasonable legal and other expenses (including the cost of any investigation and preparation) incurred in connection therewith. The reimbursement obligations of the Company under this paragraph shall be in addition to any liability which the Company may otherwise have, shall extend upon the same terms and conditions to any affiliates of the Buyer who are actually named in such action, proceeding or investigation, and partners, directors, agents, employees and controlling Persons (if any), as the case may be, of the Buyer and any such Affiliate, and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company, the Buyer and any such Affiliate and any such Person. Except as otherwise set forth in the Transaction Documents, the Company also agrees that neither any Buyer nor any such Affiliate, partners, directors, agents, employees or controlling Persons shall have any liability to the Company or any Person asserting claims on behalf of or in right of the Company in connection with or as a result of the consummation of the Transaction Documents except to the extent that any losses, claims, damages, liabilities or expenses incurred by the Company result from the gross negligence or willful misconduct of the Buyer or from a breach of the representations, covenants and conditions contained herein or from a breach of law.

i. No New Indebtedness or Liens. So long as any of the Debentures remain outstanding, the Company shall not, absent the prior written consent of the Buyer and (if any person other than the Buyer then holds any portion of the Debenture), the holders of all Debentures then outstanding, enter into, create, incur, assume or suffer to exist any indebtedness or liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom that is senior to the Company’s obligations under the Debentures, other than purchase money security interests granted to suppliers to the Company and any of the foregoing that are made in the ordinary course of business of the Company and its Subsidiaries.

j. No Payments to Affiliates or Related Parties. So long as any of the Debentures remain outstanding if the Debentures are in default, the Company shall not, absent the prior written consent of the holders of all Debentures then outstanding, make any payments to any of the Company’s or the Subsidiaries’ respective affiliates or related parties, including without limitation payments or prepayments of principal or interest accrued on any indebtedness or obligation in favor of affiliates or related parties. Notwithstanding anything to the contrary contained herein, the provisions of this Section 4(j) shall not apply to payments to the Subsidiaries made in the ordinary course of business.

k. Notice of Material Adverse Effect. The Company shall notify the Buyer (and any subsequent holder of the Debentures), as soon as practicable and in no event later than five (5) business days of the Company’s knowledge of any Material Adverse Effect on the Company. For purposes of the foregoing, “knowledge” means the earlier of the Company’s actual knowledge or the Company’s constructive knowledge upon due inquiry.

1. Public Disclosure. Except to the extent required by applicable law, absent the Buyer’s prior written consent, the Company shall not reference the name of the Buyer in any press release, securities disclosure, business plan, marketing or funding proposal.

m. Conversion Restriction. The parties agree that the Buyer shall not be entitled to convert any principal or interest of the Signing Debenture into Conversion Shares, pursuant to Section 2(a) of the Signing Debenture, prior to the ninety first (91st) day following the Signing Closing Date. The forgoing restriction shall be set forth in the Signing Debenture.

5. TRANSFER AGENT INSTRUCTIONS.

a. Transfer Agent Instruction Letter. The Company shall at all times while any Debentures are outstanding engage a Transfer Agent. As of the date of this Agreement, the Transfer Agent is VStock Transfer, LLC. On or before the Signing Closing Date and each subsequent Closing Date, the Company will irrevocably instruct its Transfer Agent in writing using the letter substantially in the form of Exhibit C annexed hereto, executed by the Company, the Buyer, and the Transfer Agent on each Closing Date (the “Transfer Agent Instruction Letter”), to (i) reserve that number of shares of Common Stock as is required under Section 4(g) hereof, and (ii) issue Common Stock from time to time upon conversion of the Debentures in such amounts as specified from time to time by the Company to the Transfer Agent, bearing the restrictive legend specified in Section 4(b) of this Agreement prior to registration of the Shares under the 1933 Act, registered in the name of the Buyer or its permitted assigns and in such denominations to be specified by the Buyer in connection with each conversion of the Debentures. The Transfer Agent shall not be restricted from issuing shares from only the allotment reserved for the Conversion Amount (as defined in the Debentures), but instead may, to the extent necessary to satisfy the amount of shares issuable upon conversion, issue shares above and beyond the amount reserved on account of the Conversion Amount, without any additional instructions or authorization from the Company, and the Company shall not provide the Transfer Agent with any instructions or documentation contrary to the foregoing. The Company shall continuously monitor its compliance with the share reservation requirements and, if and to the extent necessary to increase the number of reserved shares to remain and be at least three hundred percent (300%) of the Conversion Amount to account for any decrease in the market price of the Common Stock, the Company shall immediately (and in any event within two (2) business days) notify the Transfer Agent in writing of the reservation of such additional shares, provided that in the event that the number of shares reserved for conversion of the Debentures is less than three hundred percent (300%) of the Conversion Amount, the Buyer may also directly instruct the Transfer Agent to increase the reserved shares as necessary to satisfy the minimum reserved share requirement, and the Transfer Agent shall act accordingly, provided, further, that the Company shall within two (2) business days provide any written confirmation, assent or documentation thereof as the Transfer Agent may request to act upon a share increase instruction delivered by the Buyer. The Company shall provide the Buyer with a copy of all written instructions to the Company’s Transfer Agent with respect to the reservation of shares simultaneously with the issuance of such instructions to the Transfer Agent. The Company covenants that no instruction other than such instructions referred to in this Section 5 and stop transfer instructions to give effect to Section 4(a) hereof prior to registration and sale of the Conversion Shares under the 1933 Act will be given by the Company to the Transfer Agent and that the Conversion Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement, the Registration Rights Agreement, and applicable law. If the Buyer provides the Company and/or the Transfer Agent with an opinion of counsel reasonably satisfactory to the Company that registration of a resale by the Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a) of this Agreement is not required under the 1933 Act, the Company shall (except as provided in clause (2) of Section 4(a) of this Agreement) permit the de-legending or transfer of the Securities and, in the case of the Conversion Shares, instruct the Company’s Transfer Agent to issue one or more certificates for Common Stock without legend in such name and in such denominations as specified by the Buyer.

b. Conversion, (i) The Company will permit the Buyer to exercise the right to convert the Debentures by telecopying, emailing or delivering overnight an executed and completed Notice of Conversion to the Company and/or the Transfer Agent. If so requested by the Buyer, the Company will within one (1) business day respond with its endorsement so as to confirm the outstanding principal amount of any Debenture submitted for conversion or shall reconcile any difference with the Buyer promptly after receiving such Notice of Conversion.

(ii) The term “Conversion Date” means, with respect to any conversion elected by the holder of the Debentures, the date specified in the Notice of Conversion, provided the copy of the Notice of Conversion is given either via mail or facsimile to or otherwise delivered to the Transfer Agent and/or the Company in accordance with the provisions hereof so that it is received by the Transfer Agent and/or the Company on or before such specified date.

(iii) The Company will transmit (or will cause the Transfer Agent to transmit) the certificates representing the Conversion Shares issuable upon conversion of any Debentures (together, unless otherwise instructed by the Buyer, with Debentures not being so converted) to the Buyer at the address specified in the Notice of Conversion (which may be the Buyer’s address for notices as contemplated by Section 10 hereof or a different address) via express courier, by electronic transfer or otherwise, within two (2) business days (the “Delivery Date”) after (A) the business day on which the Company has received the Notice of Conversion (by facsimile or other delivery) or (B) the date on which payment of interest and principal on the Debentures, which the Company has elected to pay by the issuance of Common Stock, as contemplated by the Debentures, was due, as the case may be.

c. Failure to Timely Issue Conversion Shares. From and after the date on which the Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the failure to issue unrestricted, freely tradable Conversion Shares to the Buyer upon Conversion shall be considered a non-curable Event of Default, which, accordingly, shall entitle the Buyer(s) whose Debentures are being converted to demand that the Debentures held by the Buyer(s) be immediately redeemed in full by a cash payment equal to one hundred forty percent (140%) of the aggregate of the unpaid principal amount of and accrued interest on such Debentures (whether or not the terms of such Debentures expressly permit the redemption thereof). The Company acknowledges that its failure to honor a Notice of Conversion shall cause definable financial hardship on the Buyer(s).

d. Duties of Company; Authorization. The Company shall inform the Transfer Agent of the reservation of shares contemplated by Section 4(g) and this Section 5, and shall keep current in its payment obligations to the Transfer Agent such that the Transfer Agent will continue to process share transfers and the initial issuance of shares of Common Stock upon the conversion of Debentures. The Company hereby authorizes and agrees to authorize the Transfer Agent to correspond and otherwise communicate with the Buyer or their representatives in connection with the foregoing and other matters related to the Common Stock. Further, the Company hereby authorizes the Buyer or its representative to provide instructions to the Transfer Agent that are consistent with the foregoing and instructs the Transfer Agent to honor any such instructions. Should the Company fail for any reason to keep current in its payment obligations to the Transfer Agent, the Buyer may pay such amounts as are necessary to compensate the Transfer Agent for performing its duties with respect to share reservation and/or de-legending certificates representing Restricted Stock, and all amounts so paid shall be promptly reimbursed by the Company. If not so reimbursed within thirty (30) days, such amounts shall, at the option of the Buyer and without prior notice to or consent of the Company, be added to the principal amount due under the Debenture(s) held by the Buyer, whereupon interest will begin to accrue on such amounts at the rate specified in the Debentures.

e. Effect of Bankruptcy. The Buyer shall be entitled to exercise its conversion privilege with respect to the Debentures notwithstanding the commencement of any case under 11 U.S.C. §101 et seq. (the “Bankruptcy Code”). In the event the Company is a debtor under the Bankruptcy Code, the Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of the Buyer’s conversion privilege. The Company hereby waives, to the fullest extent permitted, any rights to relief it may have under 11 U.S.C. §362 in respect of the conversion of the Debentures. The Company agrees, without cost or expense to the Buyer, to take or to consent to any and all action necessary to effectuate relief under 11 U.S.C. §362.

6. CLOSINGS.

a. Signing Closing. Promptly upon the execution and delivery of this Agreement, the Registration Rights Agreement, the Signing Debenture, and all conditions in Sections 7 and 8 herein are met (the “Signing Closing Date”), (A) the Company shall deliver to the Buyer the following: (i) the Signing Debenture; (ii) the Company Legal Opinion; (iii) the Transfer Agent Instruction Letter; (iv) duly executed counterparts of the Transaction Documents; (v) an officer’s certificate of the Company confirming the accuracy of the Company’s representations and warranties contained herein; and (vi) fees and shares of Common Stock due under Section 12 of this Agreement; and (B) the Buyer shall deliver to the Company the following: (i) $112,500 (the “Signing Purchase Price”) and (ii) duly executed counterparts of the Transaction Documents (as applicable).

b. Second Closing. At any time sixty one (61) days following the Signing Closing Date, subject to the mutual agreement of the Buyer and the Company, for the “Second Closing Date” and subject to satisfaction of the conditions set forth in Sections 7 and 8, (A) the Company may deliver to the Buyer the following: (i) the Second Debenture; (ii) the Company Legal Opinion dated as of the Second Closing Date, provided that a Company Legal Opinion need not be delivered at the Second Closing Date if the Company has previously delivered to the Buyer a “blanket” legal opinion covering the Debentures to be issued at the Second Closing Date and the Company has not been notified by its counsel that such opinion has been withdrawn or modified; (iii) an amendment to the Transfer Agent Instruction Letter instructing the Transfer Agent to reserve that number of shares of Common Stock as is required under Section 4(g) hereof, if necessary; and (iv) an officer’s certificate of the Company confirming, as of the Second Closing Date, the accuracy of the Company’s representations and warranties contained herein and updating Schedule 3(c) to reflect the Company’s capitalization as of the Second Closing Date; and (B) the Buyer shall deliver to the Company the following: $112,500 (the “Second Purchase Price”).

c. Third Closing. At any time sixty one (61) days following the Second Closing Date, on a date determined upon mutual agreement of the Buyer and the Company for the “Third Closing Date” and subject to satisfaction of the conditions set forth in Sections 7 and 8, (A) the Company may deliver to the Buyer the following: (i) the Third Debenture; (ii) the Company Legal Opinion dated as of the Third Closing Date, provided that a Company Legal Opinion need not be delivered at the Third Closing Date if the Company has previously delivered to the Buyer a “blanket” legal opinion covering the Debentures to be issued at the Third Closing Date and the Company has not been notified by its counsel that such opinion has been withdrawn or modified; (iii) an amendment to the Transfer Agent Instruction Letter instructing the Transfer Agent to reserve that number of shares of Common Stock as is required under Section 4(h) hereof, if necessary; and (iv) an officer’s certificate of the Company confirming, as of the Third Closing Date, the accuracy of the Company’s representations and warranties contained herein and updating Schedule 3(c) to reflect the Company’s capitalization as of the Third Closing Date; and (B) the Buyer shall deliver to the Company the following: $112,500 (the “Third Purchase Price”).

d. Location and Time of Closings. Each Closing shall be deemed to occur on the related Closing Date at the office of the Buyer’s counsel and shall take place no later than 5:00 P.M., New York time, on such day or such other time as is mutually agreed upon by the Company and the Buyer.

7. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.

The Company’s obligation to sell the Debentures to the Buyer pursuant to this Agreement on each Closing Date is conditioned upon:

a. Purchase Price. Delivery to the Company of good funds as payment in full of the Purchase Price for the Debentures at each Closing in accordance with this Agreement;

b. Representations and Warranties; Covenants. The accuracy on the Closing Date of the representations and warranties of the Buyer contained in this Agreement, each as if made on such date, and the performance by the Buyer on or before such date of all covenants and agreements of the Buyer required to be performed on or before such date; and

c. Laws and Regulations; Consents and Approvals. There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained.

8. CONDITIONS TO THE BUYER’S OBLIGATION TO PURCHASE.

The Buyer’s obligation to purchase the Debentures at the Closing is conditioned upon:

a. Transaction Documents. The execution and delivery of this Agreement and the Registration Rights Agreement by the Company;

b. Debenture(s). Delivery by the Company to the Buyer of the Debentures to be purchased in accordance with this Agreement;

c. Piggy-back Registration Rights. If at any time on or after the date of this Agreement, the Company proposes to file a registration statement with the Commission in compliance with the Securities Act and the rules and regulations promulgated thereunder (a “Registration Statement”) with respect to an offering of equity securities or securities or other obligations exercisable, exchangeable for, or convertible into equity securities by the Company for its own account or by shareholders of the Company for their own account, then the Company shall register the sale of such number of Conversion Shares (collectively, the “Registrable Securities”) in accordance with the terms and conditions of the Registration Rights Agreement (a “Piggy-Back Registration”).

d. Section 4(2) Exemption. The Debentures and Restricted Stock pursuant to the Transaction Documents shall be exempt from registration under the Securities Act of 1933 (as amended), pursuant to Section 4(2) thereof, for which Company shall deliver opinions by Company’s legal counsel to that effect upon each Closing Date.

e. DWAC Eligibility. The Company shall maintain DWAC eligibility until the Maturity Date.

f. Opinion of Counsel. Delivery by the Company to the Buyer of an opinion of counsel to the Company, substantially in the form attached hereto as Exhibit D and dated as of the Closing Date (the “Company Legal Opinion”) or if such Company Legal Opinion is a “blanket” opinion covering the Debentures to be issued on such Closing Dale, a prior date;

g. Representations and Warranties; Covenants. The accuracy in all material respects on the Closing Date of the representations and warranties of the Company contained in this Agreement, each as if made on such date, and the performance by the Company on or before such date of all covenants and agreements of the Company required to be performed on or before such date;

h. Good-faith Opinion. It should be Buyer’s reasonable belief that (i) no Event of Default under the terms of any outstanding indebtedness of the Company will have occurred or would like occur with the passage of time and (ii) no material adverse change in the financial condition or business operations of the Company will have occurred.

i. Legal Proceedings. There shall be no litigation, criminal or civil, regulatory impairment or other legal and/or administrative proceedings challenging or seeking to limit the Company’s ability to issue the Securities or the Common Stock.

j. Perfection of Lien on Collateral. Company shall have duly authorized, executed and delivered any other related documentation necessary or advisable to perfect the lien on the Collateral in the state of Delaware, including, but not limited to, such UCC-1 Financing Statements filings and any and all documents necessary to complete any filings which the Buyer shall require in connection with this Agreement.

k. Corporate Resolutions. Delivery by the Company to the Buyer a copy of resolutions of the Company’s board of directors, approving and authorizing the execution, delivery and performance of the Transaction Documents and the transactions contemplated thereby in the form attached hereto as Exhibit E;

1. Officer’s Certificate. Delivery by the Company to the Buyer of a certificate of the Chief Executive Officer of the Company in the form attached hereto as Exhibit F;

m. Search Results. Copies of UCC search reports, issued by the Secretary of State of the state of incorporation of the Company, dated such a date as is reasonably acceptable to Buyer, listing all effective financing statements which name the Company, under its present name and any previous names, as debtors, together with copies of such financing statements;

n. Certificate of Good Standing. Copy of a certificate of good standing with respect to the Company, issued by the Secretary of State of the state of incorporation of the Company, dated such a date as is reasonably acceptable to Buyer, evidencing the good standing thereof;

o. Laws and Regulations; Consents and Approvals. There shall not be in effect any law, rule or regulation prohibiting or restricting the transactions contemplated hereby, or requiring any consent or approval which shall not have been obtained; and

p. Adverse Changes. From and after the date hereof to and including the Closing Date, (i) the trading of the Common Stock shall not have been suspended by the SEC, FINRA, or the NASD and trading in securities generally on OTCM shall not have been suspended or limited, nor shall minimum prices been established for securities traded on the OTCM; (ii) there shall not have occurred any outbreak or escalation of hostilities involving the

United States or any material adverse change in any financial market that in either case in the reasonable judgment of the Buyer makes it impracticable or inadvisable to purchase the Debentures.

9. GOVERNING LAW; MISCELLANEOUS.

a. MANDATORY FORUM SELECTION. ANY DISPUTE ARISING UNDER, RELATING TO, OR IN CONNECTION WITH THE AGREEMENT OR RELATED TO ANY MATTER WHICH IS THE SUBJECT OF OR INCIDENTAL TO THE AGREEMENT (WHETHER OR NOT SUCH CLAIM IS BASED UPON BREACH OF CONTRACT OR TORT) SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION AND VENUE OF THE STATE AND/OR FEDERAL COURTS LOCATED IN MIAMI-DADE COUNTY, FLORIDA. THIS PROVISION IS INTENDED TO BE A “MANDATORY” FORUM SELECTION CLAUSE AND GOVERNED BY AND INTERPRETED CONSISTENTLY WITH FLORIDA LAW.

b. Governing Law. Except in the case of the Mandatory Forum Selection clause above, this Agreement shall be delivered and accepted in and shall be deemed to be contracts made under and governed by the internal laws of the State of Nevada, and for all purposes shall be construed in accordance with the laws of the State of Nevada, without giving effect to the choice of law provisions. To the extent determined by the applicable court described above, the Company shall reimburse the Buyer for any reasonable legal fees and disbursements incurred by the Buyer in enforcement of or protection of any of its rights under any of the Transaction Documents.

c. Waivers. Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

d. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

e. Construction. All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

f. Facsimiles; E-mails. A facsimile or email transmission of this signed Agreement or a Notice of Conversion under the Debentures shall be legal and binding on all parties hereto. Facsimile signatures shall be the equivalent of original signatures.

g. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall be deemed an original.

h. Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement.

i. Enforceability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction.

j. Amendment. This Agreement may be amended only by the written consent of a majority in interest of the holders of the Debentures and an instrument in writing signed by the Company.

k. Entire Agreement. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof.

1. No Strict Construction. This Agreement shall be construed as if both Parties had equal say in its drafting, and thus shall not be construed against the drafter.

m. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

10. NOTICES.

Any notice required or permitted hereunder shall be given in writing (unless otherwise specified herein) and shall be deemed effectively given on the earliest of:

a. the date delivered, if delivered by personal delivery as against written receipt therefor or by confirmed facsimile transmission,

b. the seventh business day after deposit, postage prepaid, in the United States Postal Service by registered or certified mail, or

c. the third business day after mailing by next-day express courier, with delivery costs and fees prepaid, in each case, addressed to each of the other parties thereunto entitled at the following addresses (or at such other addresses as such party may designate by ten (10) days’ advance written notice similarly given to each of the other parties hereto):

COMPANY:	Trunity Holdings, Inc.
	1 New Hampshire Avenue, Suite 125, Portsmouth, NH 03801
	Attention: Nicole M. Fernandez-McGovern, Interim CEO, CFO and Secretary
	Email: nicole.fernandez@trunity.com

	With copies to (which shall not constitute notice):

BUYER:	Peak One Opportunity Fund, L.P.
	333 South Hibiscus Drive
	Miami Beach, FL 33139
	Attention: Jason Goldstein
	Email: jgoldstein@peakoneinvestments.com

	With copies to (which shall not constitute notice):

	Sichenzia Ross Friedman Ference LLP
	61 Broadway, 32nd Floor
	New York, NY 10006
	Attention: Gregory Sichenzia, Esq.
	Email: gsichenzia@srff.com

11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company’s representations and warranties herein shall survive for so long as any Debentures are outstanding, and shall inure to the benefit of the Buyer, its successors and assigns.

12. FEES; EXPENSES.

a. Commitment Fee. The Company shall pay to Peak One Investments, LLC a non-accountable fee (the “Commitment Fee”) of $5,000 and 137,500 shares of Restricted Stock to cover the expenses and analysis performed in connection with the analysis of the Company and the propriety of the Buyer’s making the contemplated investment.

b. Legal Fees. The Company will pay the legal fees of the Buyer’s counsel (the “Legal Fees”) in the amount of $5,000. The Company further agrees to pay in full the reasonable legal fees of the Buyer’s counsel incurred after the Signing Closing Date incurred in connection with the Transaction Documents (including enforcement of the Company’s obligations or the exercise of the Buyer’s remedies thereunder).

c. Payment of Fees and Expenses. The Company will pay the Commitment Fee, Legal Fees and issue the required number of shares of Restricted Stock on the Signing Closing Date. In furtherance of the foregoing, in that connection, the Company hereby authorizes the Buyer to deduct such amounts from the Purchase Price and transmit same to the respective payee. Notwithstanding the foregoing, if for any reason any such Closings do not occur, then the Company shall remain liable to pay the Commitment Fee and Legal Fees as provided in Sections 12(a) and (b) and shall remit payment to the Buyer within five (5) days after the Buyer delivers to the Company a notice and demand for payment thereof. The Company shall pay disbursements of the Buyer’s legal counsel and legal fees incurred after the Signing Closing Date within ten (10) days of invoice therefor.

[Signature Page Follows]

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.

COMPANY:

TRUNITY HOLDINGS, INC.

By:
	Name: Nicole M. Fernandez-McGovern
	Title: Interim CEO, CFO and Corporate Secretary

INVESTOR:

PEAK ONE OPPORTUNITY FUND, L.P.

By:	Peak One Investments, LLC, General Partner

	By:
		Jason Goldstein, Managing Member

[Signature Page to Registration Rights Agreement]

Exhibit 31.1

CERTIFICATIONS UNDER SECTION 302

I, Nicole Fernandez-McGovern, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Trunity Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	TRUNITY HOLDINGS, INC.

Dated: November 25, 2014	By:	/s/ Nicole Fernandez-McGovern
		Nicole Fernandez-McGovern
		Interim Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS UNDER SECTION 302

I, Nicole M. Fernandez-McGovern, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Trunity Holdings, Inc.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	TRUNITY HOLDINGS, INC.

Dated: November 25, 2014	By:	/s/ Nicole Fernandez-McGovern
		Nicole Fernandez-McGovern
		Chief Financial Officer

Exhibit 32.1

CERTIFICATIONS UNDER SECTION 906

In connection with the Quarterly Report of Trunity Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nicole Fernandez-McGovern, Interim Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	TRUNITY HOLDINGS, INC.

Dated: November 25, 2014	By:	/s/ Nicole Fernandez-McGovern
		Nicole Fernandez-McGovern
		Interim Chief Executive Officer
		(Principal Executive Officer)

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certifications are accompanying the Company’s Form 10-Q solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Form 10-Q or as a separate disclosure document.

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Trunity Holdings, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2014, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Nicole Fernandez-McGovern, Principal Financial and Accounting Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	TRUNITY HOLDINGS, INC.

Dated: November 25, 2014	By:	/s/ Nicole Fernandez-McGovern
		Nicole Fernandez-McGovern
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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