The accompanying notes are an integral part of the Consolidated Financial Statements.
The accompanying notes are an integral part of the Consolidated Financial Statements.
The accompanying notes are an integral part of the Consolidated Financial Statements.
The accompanying notes are an integral part of the Consolidated Financial Statements.
Notes
To Consolidated Financial Statements
December 31, 201
8
Note 1 – Organization, Basis of Presentation and Nature of Operations
True Nature Holding, Inc. (the “Company” or “True Nature”), previously known as Trunity Holdings, Inc., became a publicly-traded company through a reverse merger with Brain Tree International, Inc., a Utah corporation (“BTI”). BTI was incorporated on July 26, 1983 to specialize in the development of high technology products or applications including, but not limited to, electronics, computerized technology, new technological product fields, and precious metals. Trunity Holdings, Inc. was the parent company of the prior educational business, named Trunity, Inc., which was formed on July 28, 2009 through the acquisition of certain intellectual property by its three founders.
True Nature Holding, Inc. is a corporation organized under the laws of the state of Delaware with principal offices located in Atlanta, Georgia. On January 16, 2016, the Company effected a reverse split of 1 for 101, such that all holders of 101 shares of common stock issued and outstanding prior to the effective date of the reverse split would own 1 share of common stock upon the effect date of the reverse split. In addition, the Company amended its Articles of Incorporation (i) to increase its authorized capital stock to 510,000,000 shares which consists of 500,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share and (ii) to change its name from Trunity Holdings, Inc. to True Nature Holding, Inc. (there was no change in the stock symbol “TNTY”).
The accompanying consolidated financial statements include the accounts of True Nature Holding, Inc. as December 31, 2018 and 2017.
Note 2 – Summary of Significant Accounting Policies
Basis of Accounting
– The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
Use of Estimates -
The preparation of these financial statements requires our management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and related notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment.
Cash -
All highly liquid investments with a maturity date of three months or less at the date of purchase are considered to be cash equivalents.
Revenue Recognition –
On January 1, 2018, we adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (Topic 605). Results for reporting periods beginning after January 1, 2018 are presented under Topic 606. The impact of adopting the new revenue standard was not material to our financial statements and there was no adjustment to beginning retained earnings on January 1, 2018.
Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
We determine revenue recognition through the following steps:
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identification of the contract, or contracts, with a customer;
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identification of the performance obligations in the contract;
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determination of the transaction price;
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allocation of the transaction price to the performance obligations in the contract; and
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recognition of revenue when, or as, we satisfy a performance obligation.
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Stock-Based Compensation
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We recognize the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation cost for stock options 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. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.
Equity instruments issued to other than employees are recorded on the basis of the fair value of the instruments. In general, the measurement date is when either a (a) performance commitment, as defined, is reached or (b) the earlier of (i) the non-employee performance is complete or (ii) the instruments are vested. The measured value related to the instruments is recognized over a period based on the facts and circumstances of each particular grant.
Convertible Instruments
– The Company reviews the terms of convertible debt and equity instruments to determine whether there are conversion features or embedded derivative instruments including embedded conversion options that are required to be bifurcated and accounted for separately as a derivative financial instrument. In circumstances where the convertible instrument contains more than one embedded derivative instrument, including conversion options that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single compound instrument. Also, in connection with the sale of convertible debt and equity instruments, the Company may issue free standing warrants that may, depending on their terms, be accounted for as derivative instrument liabilities, rather than as equity. When convertible debt or equity instruments contain embedded derivative instruments that are to be bifurcated and accounted for separately, the total proceeds allocated to the convertible host instruments are first allocated to the fair value of the bifurcated derivative instrument. The remaining proceeds, if any, are then allocated to the convertible instruments themselves, usually resulting in those instruments being recorded at a discount from their face amount. When the Company issues debt securities, which bear interest at rates that are lower than market rates, the Company recognizes a discount, which is offset against the carrying value of the debt. Such discount from the face value of the debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to income. In addition, certain conversion features are recognized as beneficial conversion features to the extent the conversion price as defined in the convertible note is less than the closing stock price on the issuance of the convertible notes.
Common Stock Purchase Warrants –
The Company accounts for common stock purchase warrants in accordance with FASB ASC Topic 815, Accounting for Derivative Instruments and Hedging Activities (“ASC 815”). As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock warrants is estimated at the grant date based on each warrant’s fair-value as calculated by the Black-Scholes-Merton (“BSM”) option-pricing model value method for valuing the impact of the expense associated with these warrants.
Stockholders
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Equity –
Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of the service or assets received in exchange. Common stock share and per share amounts in these financial statements have been adjusted for the effects of a 1 for 101 reverse stock split that occurred in January 2016.
Per Share Data –
Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the year. Diluted loss per share is computed by dividing net loss by the weighted average number of common shares outstanding plus common stock equivalents (if dilutive) related to warrants, options and convertible instruments.
The Company has excluded all common equivalent shares outstanding for warrants, options and convertible instruments to purchase common stock from the calculation of diluted net loss per share because all such securities are antidilutive for the periods presented. As of December 31, 2018, and 2017, the Company had 1,167,653 and 142,653 warrants outstanding. As of December 31, 2018 and 2017, the Company had 67,879 options outstanding.
Income Taxes –
The Company accounts for income taxes under the asset and liability method which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or tax returns. In estimating future tax consequences, the Company generally considers all expected future events other than possible enactments of changes in the tax laws or rates.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has determined that a valuation allowance is needed due to recent taxable net operating losses, the sale of profitable divisions and the limited taxable income in the carry back periods. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period that includes the enactment date. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and certain tax loss carryforwards, less any valuation allowance.
The Company accounts for uncertain tax positions as required in that a position taken or expected to be taken in a tax return is recognized in the consolidated financial statements when it is more likely than not (i.e., a likelihood of more than fifty percent) that the position would be sustained upon examination by tax authorities. A recognized tax position is then measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Company does not have any material unrecognized tax benefits. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as components of interest expense and other expense, respectively, in arriving at pretax income or loss. The Company does not have any interest and penalties accrued. The Company is generally no longer subject to U.S. federal, state, and local income tax examinations for the years before 2012.
Business Combinations –
The Company accounts for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples of critical estimates in valuing certain of the intangible assets we have acquired or may acquire in the future include but are not limited to:
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future expected cash flows from product sales, support agreements, consulting contracts, other customer contracts, and acquired developed technologies and patents; and
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discount rates utilized in valuation estimates.
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Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated financial position, statements of operations or cash flows in the period of the change in the estimate.
Impairment of Long – Lived Assets -
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material. No impairment losses have been realized for the periods presented.
Financial Instruments and Fair Values –
The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time, based upon relevant market information about the financial instrument. In determining fair value, we use various valuation methodologies and prioritize the use of observable inputs. We assess the inputs used to measure fair value using a three-tier hierarchy based on the extent to which inputs used in measuring fair value are observable in the market:
Level 1 – inputs include exchange quoted prices for identical instruments and are the most observable.
Level 2 – inputs include brokered and/or quoted prices for similar assets and observable inputs such as interest rates.
Level 3 – inputs include data not observable in the market and reflect management judgment about the assumptions market participants would use in pricing the asset or liability.
The use of observable and unobservable inputs and their significant in measuring fair value are reflected in our hierarchy assessment. The carrying amount of cash, prepaid assets, accounts payable and accrued liabilities approximates fair value due to the short-term maturities of these instruments. Because cash and cash equivalents are readily liquidated, management classifies these values as Level 1. The fair value of the debentures approximate their book value as the instruments are short-term in nature and contain market rates of interest. Because there is no ready market or observable transactions, management classifies the debentures as Level 3.
Recently Issued Accounting Standards
In August 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-15,
Statement of Cash Flows (Topic 230).
The update addresses eight specific cash flow issues and is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update will be effective for reporting periods beginning after December 15, 2017, including interim periods within the reporting period. Early adoption is permitted. The Company is currently evaluating the potential impact of the update on our financial statements.
In January 2017, the FASB issued ASU No. 2017-04,
Simplifying the Test for Goodwill Impairment
, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the amendments under this ASU require the goodwill impairment test to be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU becomes effective for us on January 1, 2020. The amendments in this ASU will be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed.
In May 2017, the FASB issued ASU No. 2017-09,
Stock Compensation - Scope of Modification Accounting
, which provides guidance on which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The ASU requires that an entity account for the effects of a modification unless the fair value (or calculated value or intrinsic value, if used), vesting conditions and classification (as equity or liability) of the modified award are all the same as for the original award immediately before the modification. The ASU becomes effective for us on January 1, 2018 and will be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in any interim period. The Company is currently assessing the impact that this standard will have on any awards that are modified once this standard is adopted.
There are various other updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s consolidated financial position, results of operations or cash flows.
Note
3
– Related Party Transactions
For the Year Ended December 31, 2017:
During the year ended December 31, 2017, the Company raised gross proceeds of $47,000 through the sale of 250,000 restricted shares of common stock to a new member of the Board of Directors at a price of $0.157 per share.
During the year ended December 31, 2017, the Company issued 1,533,571 restricted shares of the Company’s common stock valued at $179,024 in exchange for services conducted on behalf of the Company by related parties. The Company also has accrued liabilities to related parties in the amount of $147,894 representing accrued compensation, $91,066 due to related parties for services provided and a note payable to a related party in the amount of $75,000. Interest expense in the amount of $4,500 was imputed on this note payable during the year ended December 31, 2017 (see Note 5).
For the Year Ended December 31, 2018:
On January 29, 2018, the Company converted outstanding accounts payable due to an investor in the amount of $54,815 into 527,064 restricted shares of the Company’s common stock. The cost to the Company for this issuance is $54,815, based on the closing price on the date of issuance. As the conversion amount equals the share value, no gain or loss was recorded.
On January 29, 2018, the Company converted accrued officer compensation in the amount of $93,333 into 897,432 restricted shares of the Company’s common stock. The cost to the Company for this issuance is $93,333, based on the closing price on the date of issuance. As the conversion amount equals the share value, no gain or loss was recorded.
On April 23, 2018, the Company issued 600,000 shares of common stock with a value of $48,000 to an investor, and an additional 600,000 shares of common stock with a value of $48,000 to a not for profit entity at the request of the investor due to conversion of $96,000 of accounts payable, no gain or loss was recognized due to stock price matching the amount converted.
On April 23, 2018, the Company issued 500,000 shares of common stock to its President, subject to certain vesting conditions: (i) 100,000 shares vest when the President has been employed 90 days from the effective date of the employment agreement; (ii) 100,000 shares vest when the President has been employed one year from the effective date of the employment agreement; (iii) 100,000 shares vest when the President has been employed two years from the effective date of the employment agreement; (iv) 100,000 shares vest when the Company completes a capital raise of $2,000,000; (v) 100,000 shares vest when the Company reports $20,000,000 in gross revenue. The Company valued the shares at the fair market value of $0.10 per share, or a total value of $50,000. During the three months ended June 30, 2018, the total amount of $13,740 was charged to operations pursuant to the various vesting conditions. On September 18, 2018, the Company accepted the resignation of its President, and 400,000 of these shares were forfeited.
On June 13, 2018, the Company issued 100,000 shares of common stock with a fair value of $8,380 to its President as a bonus.
On June 14, 2018, the Company issued 100,000 shares of common stock with a fair value of $9,000 to its Chairman of the Board of Directors as a bonus. Also, on June 14, 2018, the Company issued 100,000 shares of common stock with a fair value of $9,000 to a board member as a bonus.
On June 14, 2018, the Company issued to an investor 1,100,000 shares of the Company’s common stock with a fair value of $95,700 for reimbursement of $60,000 of accrued expenses paid on behalf of the Company and for services provided. The Company recognized a loss on conversion of $35,700 due to share price exceeding the value of the stock granted.
The Company accrued officer’s compensation during the six months ended June 30, 2018 in the amount of $50,000 and imputed interest expense of $4,500 on a note payable to a related party in the amount of $75,000 (see note 5).
On July 24, 2018, the Company issued 312,499 shares of common stock with a fair value of $25,000 to its President for salary.
On July 24, 2018, the Company issued 369,500 shares of common stock with a fair value of $29,560 to its Chief Operating Officer for accrued salary.
On August 14, 2018, the Company issued to an investor 2,500,000 shares of the Company’s common stock with a fair value of $220,000 as compensation for consulting services provided. The Company also accrued $58,000 for additional consulting services provided by the investor.
On September 24, 2018, the Company issued 100,000 shares of common stock with a fair value of $12,850 to each of two board members for services provided (a total of 200,000 shares of common with an aggregate fair value of $25,700).
On October 3, 2018, the Company issued 100,000 shares of common stock with a fair value of $10,850 to a member of its advisory board.
On October 15, 2018, the Company issued 600,000 shares of common stock subject to certain vesting provisions to its President and acting Chief Financial Officer. The Company recognized $37,147 as compensation expense for the portion of the shares vested during the period.
On October 19, 2018, the Company committed to issued 100,000 shares of common stock with a fair value of $9,900 to a member of its advisory board. These shares were not issued at December 31, 2018, and the Company recorded the amount of $9,900 as stock subscribed.
On November 3, 2018, the Company issued 100,000 shares of common stock with a fair value of $9,740 to a member of its advisory board.
On November 26, 2018, the Company issued 84,420 shares of common stock with a fair value of $8,265 to a designee of an investor for consulting services.
On November 27, 2018, the Company issued 500,000 shares of common stock with a fair value of $48,950 to a designee of an investor for consulting services.
On November 27, 2018, the Company issued 100,000 shares of common stock with a fair value of $9,790 to a to a board member as compensation.
On November 27, 2018, the Company issued 500,000 shares of common stock with certain vesting provisions to its Chief Executive Officer. The Company recognized $13,884 as compensation expense for the portion of the shares vested during the period. Also on November 27, 2018, the Company issued an additional 100,000 shares of common stock with a fair value of $469 to its Chief Executive Officer for services as a member of the board of directors.
On December 19, 2018, the Company committed to issue 85,000 shares of common stock with a fair value of $2,513 to its board chairman in satisfaction of accrued compensation.
Note
4
– Debt
August 2014 Convertible Debentures (Series C)
As part of the restructuring, all debentures issued by Trunity Holdings, Inc., to fund the former, educational business, were eligible to participate in a debt conversion; however, one debenture holder that was issued a Series C Convertible Debenture (the “Series C Debenture”) in August 2014 with an aggregate face value of $100,000 in exchange for the cancellation of Series B Convertible Debentures with a carrying value of $110,833 did not convert such debenture. The Series C Debenture accrues interest at an annual rate of 10%, matured November 2015, and is convertible into our common stock at a conversion rate of $20.20 per share. The holders of the Series C Debenture also received five-year warrants to acquire up to 4,950 shares post-split of common stock for an exercise price of $20.20 per share. The former educational business allocated the face value of the Series C Debenture to the warrants and the debentures based on its relative fair values, and allocated to the warrants, which was recorded as a discount against the Series C Debenture, with an offsetting entry to additional paid-in capital. The discount was fully expensed upon execution of the new debentures as debt extinguishment costs within discontinued operations. During the years ended December 31, 2018 and 2017, the Company accrued interest in the amount of $11,083 and $11,083, respectively, on the Series C Debenture. As of December 31, 2018, and 2017, the carrying value of this Series C Debenture was $110,833 and accrued interest expense of $46,587 and $35,504, respectively. The Series C Debenture is currently in default.
November 2014 Convertible Debentures (Series D)
As part of the restructuring all debentures issued by Trunity Holdings, Inc., to fund the former, educational business were eligible to participate in a debt conversion; however, one debenture holder that was issued a Series D Convertible Debenture (the “Series D Debenture”) in November 2014 with an aggregate face value of $10,000 in exchange for the cancellation of Series B Convertible Debenture with a carrying value of $11,333 did not participate in the debt conversion restructuring. The Series D Debenture accrues interest at an annual rate of 12%, matured November 2015, and is convertible into our common stock at a conversion rate of $16.67 per share. The holders of the Series D Debenture also received five-year warrants to acquire up to 495 shares of common stock for an exercise price of $20.20 per share on a post-split basis. The former educational business allocated the face value of the Series D Debenture to the warrants and the debentures based on their relative fair values, and allocated to the warrants, which was recorded as a discount against the Series D Debenture, with an offsetting entry to additional paid-in capital. The discount was fully expensed upon execution of the new debentures as debt extinguishment costs within discontinued operations. During the years ended December 31, 2018 and 2017, the Company accrued interest in the amount of $1,360 and $1,360, respectively, on the Series C Debenture. As of December 31, 2018, and 2017, the carrying value of the Series D Debenture was $11,333 and accrued interest expense of $5,661 and $4,301, respectively. The Series D Debenture is currently in default.
March 2016 Convertible Note
On March 18, 2016, the Company issued a 12% Convertible Promissory Note (the “Convertible Note A”) in the principal amount of $60,000 and a due date of September 16, 2016 to a lender. Pursuant to the terms of Convertible Note A, the Company is obligated to pay monthly installments of not less than $1,000 the first of each month commencing the month following the execution of this note until its full maturity on September 16, 2016 at which time the Company is obligated to repay the full principal amount of the Convertible Note. Convertible Note A is convertible by the holder at any time into shares of the Company’s common stock at an effective conversion price of $1.00 and throughout the duration of the Convertible Note A the holder has the right to participate in any and other financing the Company may engage in with the same terms and option as all other investors. The Company allocated the face value of Convertible Note A to the shares and the note based on relative fair values, and the amount allocated to the shares of $16,364 was recorded as a discount against the note, with an offsetting entry to additional paid-in capital. The discount was amortized to interest expense during the year ended December 31, 2016. During the year ended December 31, 2017, the Company issued an aggregate 65,000 shares of common stock with a value of $10,773 to the note holder for an extension of the term of the note and accrued interest; during the year ended December 31, 2018, the Company issued 150,000 shares of common stock to the note holder for an extension of the term of the note and accrued interest. During the years ended December 31, 2018 and 2017, the Company accrued interest expense in the amount of $7,200 and $7,200, respectively, on the Convertible Note A. At December 31, 2018, accrued interest on Convertible Note A was $1,479 and $10,860, respectively.
Short term loan
As a result of the acquisition of P3 Compounding of Georgia, LLC (“P3”) the Company had a short-term convertible note with a loan agency in the principal amount of $52,000 for the purchase of future sales and credit card receivables of P3. Under the terms of the receivable purchase agreement, the Company purchased an advance of $50,000 plus $2,000 for origination costs with a 10.5% daily interest rate to be repaid over 160 days at a repayment amount of $451.75 per day. Upon maturity, the total repayment amount will be $72,280. As of December 31, 2018, and 2017 the carrying value of this short-term loan was $74,104. No interest expense was charged on this loan during the twelve months ended December 31, 2018 or 2017. At December 31, 2018 and 2017, there was no accrued interest on this loan. This loan is currently in default.
July 2017 Note
On July 10, 2017, the Company negotiated the reclassification of $75,000 in accounts payable to a related party to a loan payable (the “July 2017 Note”). The July 2017 Note is due no later than 90 days after the receipt of a minimum of $1,000,000 of funding. The July 2017 Note bears no interest; however, if it is not paid by the due date, interest will accrue at the rate of 12% per year. During the years ended December 31, 2018 and 2017, the Company recorded imputed interest expense to a related party in the amount of $9,000 and $9,000 on the July 2017 Note; these amounts were charged to additional paid-in capital
July 2018 RU Promissory Note
On July 26, 2018, the Company entered into an agreement with Resources Unlimited NW LLC (“RU”) pursuant to which RU provides business development services to the Company for a period of six months. As compensation for these services, the Company issued RU 250,000 shares of common stock with a fair value of $20,000 and a six month note payable in the amount of $30,000 (the “RU Note”). The RU Note bears interest at the rate of 12% per year; principal and interest are due on January 26, 2019. During the year ended December 31, 2018, the Company accrued interest in the amount of $1,568 on the RU Note.
Power Up Note 1
On July 5, 2018, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd. (“Power Up”) pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 1”) in the aggregate principal amount of $38,000. The Power Up Note entitles the holder to 12% interest per annum and matures on April 15, 2019. Under the Power Up Note 1, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 1 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 1, at a price equal to 61% of the average of the lowest two trading prices during the 15 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 1 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 1 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 1, then such redemption premium is 115%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 120%; and if such prepayment is made from the 91st to the 180th day after issuance, then such redemption premium is 125%. After the 180th day following the issuance of the Power Up Note 1, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 1; $923 was amortized to interest expense during the year ended December 31, 2018. During the year ended December 31, 2018, the Company paid principal and accrued interest in the amount of $27,764 and $2,236, respectively, on the Power Up Note 1. The Company accrued interest in the amount of $2,236 on the Power Up Note 1 during the year ended December 31, 2018.
Power Up Note 2
On August 10, 2018, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 2”) in the aggregate principal amount of $33,000. The Power Up Note 2 entitles the holder to 12% interest per annum and matures on May 14, 2019. Under the Power Up Note 2, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 2 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 2, at a price equal to 61% of the average of the lowest two trading prices during the 15 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 2 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 2 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 2, then such redemption premium is 115%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 120%; and if such prepayment is made from the 91st to the 180th day after issuance, then such redemption premium is 125%. After the 180th day following the issuance of the Power Up Note, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 2; $939 was amortized to interest expense during the year ended December 31, 2018. The Company accrued interest in the amount of $1,562 on the Power Up Note 2 during the three months ended September 30, 2018.
Power Up Note 3
On September 18, 2018, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 3”) in the aggregate principal amount of $38,000. The Power Up Note 3 entitles the holder to 12% interest per annum and matures on June 30, 2019. Under the Power Up Note 3, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 3 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 3, at a price equal to 61% of the average of the lowest two trading prices during the 15 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 3 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 3 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 3, then such redemption premium is 115%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 120%; and if such prepayment is made from the 91st to the 180th day after issuance, then such redemption premium is 125%. After the 180th day following the issuance of the Power Up Note 3, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 3; $968 was amortized to interest expense during the year ended December 31, 2018. The Company accrued interest in the amount of $1,299 on Power Up Note 3 during the year ended December 31, 2018.
Power Up Note 4
On November 9, 2018, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 4”) in the aggregate principal amount of $33,000. The Power Up Note 4 entitles the holder to 12% interest per annum and matures on August 31, 2019. Under the Power Up Note 4, Power Up may convert all or a portion of the outstanding principal of the Power Up Note 4 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Power Up Note 4, at a price equal to 61% of the average of the lowest two trading prices during the 15 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Power Up may not convert the Power Up Note 4 to the extent that such conversion would result in beneficial ownership by Power Up and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Power Up Note 4 within 30 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 110%; if such prepayment is made between the 31st day and the 60th day after the issuance of the Power Up Note 4, then such redemption premium is 115%; if such prepayment is made from the sixty first 61st to the 90th day after issuance, then such redemption premium is 120%; and if such prepayment is made from the 91st to the 180th day after issuance, then such redemption premium is 125%. After the 180th day following the issuance of the Power Up Note 4, there shall be no further right of prepayment. The Company recorded an original issue discount in the amount of $3,000 in connection with the Power Up Note 4; $531 was amortized to interest expense during the year ended December 31, 2018. The Company accrued interest in the amount of $564 on Power Up Note 4 during the year ended December 31, 2018.
Auctus Note
On November 26, 2018, the Company entered into a Securities Purchase Agreement with Auctus Fund, LLC (“Auctus”) pursuant to which Auctus agreed to purchase a convertible promissory note (the “Auctus Note”) in the principal amount of $125,000. The Auctus Note entitles the holder to 12% interest per annum and matures on August 26, 2019. Under the Auctus Note, Auctus may convert all or a portion of the outstanding principal of the Auctus Note into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Auctus Note, at a price equal to 55% of the lowest trading price during the 25 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Auctus may not convert the Auctus Note to the extent that such conversion would result in beneficial ownership by Auctus and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Auctus Note within 90 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 135%; if such prepayment is made between the 91st day and the 180th day after the issuance of the Auctus Note, then such redemption premium is 150%. After the 180th day following the issuance of the Auctus Note, there shall be no further right of prepayment. In connection with the Auctus Note, the Company issued five year warrants to purchase 625,000 shares of the Company’s common stock at a price of $0.10 per share. The Company valued these warrants at $33,716, and recorded this amount as a discount to the Auctus Note and a credit to additional paid-in capital; $4,323 of this amount was amortized to interest expense during the year ended December 31, 2018. The Company also recorded an original issue discount in the amount of $13,500 in connection with the Auctus Note; $1,731 was amortized to interest expense during the year ended December 31, 2018. The Company accrued interest in the amount of $1,500 on the Auctus Note during the year ended December 31, 2018.
Crown Bridge Note
1
On December 19, 2018, the Company entered into a Securities Purchase Agreement with Crown Bridge Partners, LLC (“Crown Bridge”) pursuant to which Crown Bridge agreed to purchase a convertible promissory note (the “Crown Bridge Note 1”) in the principal amount of $40,000. The Crown Bridge Note 1 entitles the holder to 12% interest per annum and matures on September 19, 2019. Under the Crown Bridge Note 1, Crown Bridge may convert all or a portion of the outstanding principal of the Crown Bridge Note 1 into shares of Common Stock beginning on the date which is 180 days from the issuance date of the Crown Bridge Note 1, at a price equal to 55% of the lowest trading price during the 25 trading day period ending on the last complete trading date prior to the date of conversion, provided, however, that Crown Bridge may not convert the Crown Bridge Note 1 to the extent that such conversion would result in beneficial ownership by Crown Bridge and its affiliates of more than 4.99% of the Company’s issued and outstanding Common Stock. If the Company prepays the Crown Bridge Note 1 within 90 days of its issuance, the Company must pay all of the principal at a cash redemption premium of 135%; if such prepayment is made between the 91st day and the 180th day after the issuance of the Crown Bridge Note 1, then such redemption premium is 150%. After the 180th day following the issuance of the Crown Bridge Note 1, there shall be no further right of prepayment. In connection with the Crown Bridge Note 1, the Company issued five year warrants to purchase 400,000 shares of the Company’s common stock at a price of $0.10 per share. The Company valued these warrants at $34,500, and recorded this amount as a discount to the Crown Bridge Note 1 and a credit to additional paid-in capital; $1,511 of this amount was amortized to interest expense during the year ended December 31, 2018. The Company also recorded an original issue discount in the amount of $5,500 in connection with the Crown Bridge Note 1; $241 was amortized to interest expense during the year ended December 31, 2018. The Company accrued interest in the amount of $160 on the Crown Bridge Note 1 during the year ended December 31, 2018.
Note Payable For Services
On December 31, 2018, the Company entered into a note payable agreement with an investor for consulting services performed on behalf of the Company in the amount of $65,000 (the “Consulting Services Note”). The Consulting Services Note matures on March 21, 2020, and bears interest at the rate of 12% per annum. The Company recorded $21 in interest on the Consulting Services Note during the year ended December 31, 2018.
Note Payable For
Payments Made
On December 31, 2018, the Company entered into a note payable agreement with an investor for payments of trade accounts payable made by the investor on behalf of the Company in the amount of $58,000 (the “Trade Payables Note”). The Trade Payables Note matures on March 21, , 2020, and bears interest at the rate of 12% per annum. The Company recorded $19 in interest on the Trade Payables Note during the year ended December 31, 2018.
Note
5
– Stockholders’ Deficit
Sale of Common Stock -
During the year ended December 31, 2017, the Company raised gross proceeds of $47,000 through the sale of 250,000 shares of common stock to a new member of the Board of Directors and a third-party investor at an average price of $0.188 per share.
During the year ended December 31, 2018, the Company had no sales of common stock for cash.
Shares
Issued
for Stock Based Compensation
- During the year ended December 31, 2017, the Company issued 2,113,637 restricted shares of the Company’s common stock valued at $261,534 in exchange for services conducted on behalf of the Company. The value of these shares was based on the closing market price on the respective date of grant.
During the year ended December 31, 2018, the Company issued 6,149,420 restricted shares of the Company’s common stock valued at $455,537 in exchange for services conducted on behalf of the Company. The value of these shares was based on the closing market price on the respective date of grant.
Shares Issued for Extension of Note Payable -
During the year ended December 31, 2017, The Company also issued 65,000 shares of common stock with a fair value of $10,773 for the extension of a note payable.
During the year ended December 31, 2018, The Company also issued 150,000 shares of common stock with a fair value of $14,250 for the extension of a note payable and accrued interest.
Shares issued for conversion of accounts payable
- During the fiscal year of 2017, the Company converted several accounts payable amounts to stock. The company issued 1,215,571 shares of common stock for the conversion of accounts payable in the amount of $108,986.
During the year ended December 31, 2018, the Company issued 4,913,511 shares of common stock for the conversion of accounts payable in the amount of $453,402.
Shares issued for accrued compensation -
During the year ended December 31, 2018, the Company issued 1,604,431 shares of common stock for accrued compensation in the amount of $156,435.
Stock returned for cancellation
– On August 10, 2017, the Company received for cancellation 2,150,000 shares held by its former Chief Executive Officer.
Imputed Interest
- The Company recorded imputed interest expense of $4,500 and $9,000 during the years ended December 31, 2017 and 2018, respectively, on a note payable to a related party in the amount of $75,000.
Discount to Note Payable –
The Company recorded discounts to notes payable in the aggregate amount of $74,095 and charged this amount to additional paid-in capital during the twelve months ended December 31, 2018.
Note
6
– Stock Options
As of December 31, 2018 and 2017, unrecognized stock compensation expense related to unvested stock options under all Plans was $0. Total stock compensation expense recorded to selling, general and administrative expenses on the consolidated statements of operations and comprehensive for the fiscal year ended December 31, 2018 and 2017 related to the all Plans and options that vested during the period was $0.
A summary of options issued, exercised and cancelled are as follows:
|
|
Shares
|
|
|
Weighted- Average
Exercise Price ($)
|
|
|
Weighted- Average
Remaining
Contractual Term
|
|
|
Aggregate Intrinsic
Value ($)
|
|
Outstanding at December 31, 2017
|
|
|
67,879
|
|
|
$
|
21.40
|
|
|
|
5.17
|
|
|
|
—
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
|
67,879
|
|
|
$
|
21.40
|
|
|
|
4.17
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2018
|
|
|
67,879
|
|
|
$
|
21.40
|
|
|
|
4.17
|
|
|
|
—
|
|
Note
7
– Stock Warrants
Subsequent to the restructuring of the Company and the spin-out, the Company had warrants to purchase common stock outstanding that were not terminated and have continued as part of the operations as detailed below. The warrants were adjusted for a 1 for 101 stock split due to the spin-out and restructuring plan as authorized. All warrants outstanding as of December 31, 2018 are scheduled to expire at various dates through 2019.
During the year ended December 31, 2018, the Company issued 1,025,000 five year warrants with an exercise price of $0.10 in connection with notes payable. The fair value of the warrants of $74,095 was recorded as a discount to the notes payable, and charged to additional paid-in capital during the year ended December 31, 2018.
A summary of warrants issued, exercised and expired are as follows:
|
|
Shares
|
|
|
Weighted- Average
Exercise Price ($)
|
|
|
Weighted- Average
Remaining
Contractual Term
|
|
Outstanding at December 31, 2016
|
|
|
142,653
|
|
|
$
|
17.42
|
|
|
|
2.25
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Outstanding at December 31, 2017
|
|
|
142,653
|
|
|
$
|
17.42
|
|
|
|
1.25
|
|
Granted
|
|
|
1,025,000
|
|
|
$
|
0.10
|
|
|
|
4.93
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2018
|
|
|
1,167,653
|
|
|
$
|
2.18
|
|
|
|
4.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2018
|
|
|
1,167,653
|
|
|
$
|
2.18
|
|
|
|
4.36
|
|
Note
8
– Income Taxes
The Company accounts for income taxes under standards issued by the FASB. Under those standards, deferred tax assets and liabilities are recognized for future tax benefits or consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be realized through future operations.
No provision for federal income taxes has been recorded due to the available net operating loss carry forwards of approximately $2,769,250 will expire in various years through 2035. Future tax benefits which may arise as a result of these losses have not been recognized in these financial statements, as their realization is determined not likely to occur and accordingly, the Company has recorded a valuation allowance for the future tax loss carry forwards.
The actual income tax provisions differ from the expected amounts calculated by applying the statutory income tax rate to the Company’s loss before income taxes. The components of these differences are as follows at December 31, 2018 and December 31, 2017:
|
|
2018
|
|
|
2017
|
|
Net tax loss carry-forwards
|
|
$
|
2,769,250
|
|
|
$
|
1,832,083
|
|
Statutory rate
|
|
|
21
|
%
|
|
|
21
|
%
|
Expected tax recovery
|
|
|
581,543
|
|
|
|
384,737
|
|
Change in valuation allowance
|
|
|
(581,543
|
)
|
|
|
(384,737
|
)
|
Income tax provision
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Components of deferred tax asset:
|
|
|
|
|
|
|
|
|
Non capital tax loss carry forwards
|
|
$
|
581,543
|
|
|
$
|
384,737
|
|
Less: valuation allowance
|
|
|
(581,543
|
)
|
|
|
(384,737
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
Note
9
– Commitments and Contingencies
Legal
National Council for Science and the Environment, Inc.
This action was filed on December 16, 2015 by the National Council for Science and the Environment, Inc. (“NCSE”) in the state court in the District of Columbia against Trunity Holdings, Inc. (“Trunity”) and alleges claims for breach of contract. Acknowledgement of indebtedness and settlement agreement and quantum meruit arising out of an agreement entered into between NCSE and Trunity in 2014. The complaint seeks damages in the amount of $177,270, inclusive of attorney’s fees, costs and accrued interest, continuing interest in the amount of 12% per annum and attorney’s fees and costs of collection relating to the case. The Company, in its answer dated January 27, 2016, denied the material allegations made by NCSE, asserted a number of affirmative defenses and filed a counterclaim alleging claims for fraud, negligent misrepresentation, breach of fiduciary duty, breach of contract and unjust enrichment. In its counterclaim, the Company sought actual and compensatory damages against NCSE that it believes exceed the amount sought by NCSE on its claims, pre-judgment interest, punitive damages and all costs and expenses, including attorney’s fees, incurred by the Company in bringing its claims against NCSE.
On September 23, 2016, the Company settled this obligation with an agreement to pay $48,500 to NCSE if paid by November 4, 2016, and $75,000 if paid later. The Company has not paid the amounts as of the date of this filing and has recorded the obligation at $75,000.
Carlton Fields Jorden Burt, P.A.
This action was filed on May 18, 2017 by a law firm that represented the Company prior to the spin-out of the educational software business in 2016 with the intent of collection past due invoices in the aggregate amount of $241,828. The Company believes it has strong defenses against any such action and anticipates a settlement upon completion of certain funding activities. The Company has recorded a liability in the amount of $241,828 on its balance sheet at December 31, 2018.
230 Commerce Way, LLC
A former landlord of the Company has filed an action in New Hampshire to collect on rent from a list that existed prior to 2013. In January 2018 this action was settled by the spin out, Trunity, Inc. for a cash payment of $65,000.
Trunity, Inc.
The spin-out that now owns the former educational software business has been informed that they owe the Company from the obligations of the NCSE settlement, and the costs of the legal action. We intend to take all actions available to us to collect on these amounts.
Randstad General Partner (US) LLC D/B/A Tatum
A former service provider of the Company has filed an action in Georgia to collect the amount of $44,365 for services provided to the Company. On October 18, 2018, the Superior Court of Fulton County, State of George issued an Order & Final Judgment against the Company in the amount of $44,365 plus an additional $11,001 of accrued interest. The Company has accrued the amount of $55,366 on its balance sheet at December 31. 2018 in connection with this claim.
Note
10
– Financial Condition and Going Concern
As of December 31, 2018, the Company had cash in the amount of $1,304, current liabilities of $1,534,740, and has incurred a loss from operations. True Nature Holding’s principal operation is the acquisition of compounding pharmacy companies. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding to execute its business plan.
As a result of these factors, there is substantial doubt about the ability of the Company to continue as a going concern. The Company’s continuance is dependent on raising capital and generating revenues sufficient to sustain operations. The Company believes that the necessary capital will be raised and has entered into discussions to do so with certain individuals and companies. However, as of the date of these consolidated financial statements, no formal agreement exists.
The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts classified as liabilities that might be necessary should the Company be forced to take any such actions.
Note 1
1
– Subsequent Events
Issuance of
Power Up Note 5
On January 2, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 5”) in the aggregate principal amount of $53,000.
Payment of Power Up Note 1
On January 7, 2019 the Company fully paid and satisfied Power Up Note 1 which was issued July 5, 2018 in favor of Power Up in the original principal amount of $38,000. Payment in the amount of $26,366 was delivered to Power Up in cash, and no shares of Common Stock were issued in connection with the pay-off of Power Up Note 1.
Cancellation of shares
On January 23, 2019, the Company cancelled 400,000 shares of common stock issued to its previous Chief Financial Officer.
Issuance of
Power Up Note
6
On February 11, 2019, the Company entered into a Securities Purchase Agreement with Power Up pursuant to which Power Up agreed to purchase a convertible promissory note (the “Power Up Note 6”) in the aggregate principal amount of $48,000.
Conversion of
Convertible
Note
s
On February 15, 2019, the Company issued 200,167 shares of common stock for the conversion of a note payable and accrued interest.
On February 25, 2019, the Company issued 250,209 shares of common stock for the conversion of a note payable and accrued interest.
On February 27, 2019, the Company issued 174,617 shares of common stock for the conversion of a note payable and accrued interest.
Stock Issued for Services
On March 1, 2019, the Company issued 100,000 shares of common stock to its President as compensation.
On March 1, 2019, the Company issued 100,000 shares of common stock to its board chairman as compensation.
Crown Bridge Note 2
On March 4, 2019, the Company entered into a Securities Purchase Agreement with Crown Bridge pursuant to which Crown Bridge agreed to purchase a convertible promissory note (the “Crown Bridge Note 2”) in the aggregate principal amount of $40,000.
Appointment and Resignation of Mr. Mark Williams
On January 4, 2019, the Board of Directors of the Company authorized, ratified and approved the appointment of Mr. Mark Williams as Chief Executive Officer of the Company, effective November 27, 2018. In March 2019, Mr. Williams resigned and is no longer in any position with the Company. Mr. James Crone, President, has assumed his responsibilities until further notice.
We evaluated subsequent events after the balance sheet date through the date the financial statements were issued. We did not identify any additional material events or transactions occurring during this subsequent event reporting period that required further recognition or disclosure in these financial statements.