Description of Revenues Sources

Trunity derives the majority of its revenue from four sources: license revenue; professional services; transaction revenue from the sale of virtual textbooks and related content; and advertising within the Trunity domain.

—

Licensing Revenue – Trunity charges a ~~subscription based~~per user subscription-based license fee for the use of our ~~Trunity Connect~~cloud-based software solutions, and ~~Trunity Learn cloud-based software. Trunity charges on~~collects a per ~~user basis between $5/user in~~transaction fee on any content sold to the ~~K-12 marketplace to $15/user in~~licensees end-users via the ~~higher education marketplace.~~Trunity eLearning Platform. We charge a ~~flat~~licensing fee on a monthly basis in the commercial enterprise sector ~~ranging from $1,000 - $5,000/month~~ depending on the number of users and other factors, including bandwidth and storage requirements. We typically enter into a minimum of a one-year contract with both our educational and commercial enterprise customers.

—

Transaction Revenue – Trunity sells ~~virtual textbooks,~~vBooks, lesson plans and other related content through our on-line Trunity Knowledge Exchange content store. We do not own the content; however, we make a margin of 30 30%–50% on all content sold through the Trunity Knowledge Exchange store. ~~Trunity expects~~We expect this source of revenue to be a significant source of ~~future~~ growth for the Company going forward.


—	Professional Services – Trunity provides specialized services and consulting to its customers. These services including data migration, creative and engineering services required to utilize our software products effectively. We charge ~~between $85 to $200/hour~~a competitive hourly rate based on the ~~skill set~~skillset and time commitment required by the customer.


—	Advertising Revenue – We have over 1,000,000 page views per month on knowledge collection sites hosted on the Trunity ~~platform.~~eLearning Platform. Some of these sites are publicly available and host advertising provided ~~currently by Google Adwords. This generates approximately $1,000/month in revenue.~~through a well-known online search engine site.

Current and Potential Customers

Our customers include the authors who author on or sell their content via the Trunity eLearning Platform, Ukraine ~~Government’s~~government’s Open World National Project, ~~University of New Hampshire, Boston University,~~ National Council for Science and the Environment, ~~Westfield Bank of Massachusetts,~~Climate Adaptation and Mitigation E-Learning, numerous universities, colleges and high schools, internet providers,. among several others. We are aggressively pursuing new business opportunities, as we will need to substantially increase revenues in order to achieve and sustain profitability.

We have recently hired internal marketing and sales staff to accelerate our pursuit of new ~~opportunities. Additionally, we hired BrandAid,~~opportunities, and have engaged The Wavesense Group, LLC, a management consulting firm highly specialized in creating and executing sales, marketing and ~~marketing firm, to help us market ourselves and secure business in the pharmaceutical industry.~~go-to-market strategies for young, high growth companies. We are also pursuing a reseller relationship with several significant systems integrators and resellers in the markets that we have targeted. We intend to work with large resellers to leverage their market presence and ~~install~~current customer bases.

Research and Development

~~The Company is~~With the launch of the Trunity eLearning Platform 2.0 in 2013, we have made the transition from development stage ~~and it is presently undertaking research and development of its platform.~~to full commercial operations. Trunity has spent approximately ~~$1,833,714~~$1,700,000 on research and development during the last two fiscal years. ~~Based on our current state of development we anticipate exiting the development stage in the beginning of 2013.~~

Intellectual Property

Trunity relies on a combination of patent, copyright, trademark and trade secret laws, as well as confidentiality and invention agreements with its employees, independent contractors and clients to protect information which the Company believes is proprietary or constitute trade secrets.

In addition, Trunity has filed two patent applications (comprising eight unique concepts), which in 2012 were converted from provisional to full patent applications:

●

System and Method for Virtual Textbook Creation and Remuneration: United States Patent Application #13585948; filed August 15, 2012; inventors are Kevin H. Eaton, Halldor F. Utne, Joakim F. Lindblom; assigned to Trunity, Inc.


●	System and Method for Dynamic Cross Publishing of Content Across Multiple Sites: United States Patent Application # 13679007; filed November 16, 2012; inventor is Joakim F. Lindblom; assigned to Trunity, Inc.

We are working on ~~four~~ additional patent applications which we expect to file in ~~2013.~~2014. There can be no assurance that any of these patents will ultimately be issued.

Competition

Trunity faces substantial competition from numerous other companies, most of whom have financial and other resources substantially greater than ours. Trunity’s principal competitors consist of educational publishing companies and open source platforms such as ~~Houghton Mifflin Harcourt,~~ Pearson, McGraw-Hill, Blackboard, Inc., and Moodle. These and other competitors may prove more successful in offering similar products and/or may offer alternative products that prove superior in performance and/or more popular with potential customers than ~~the~~ our products. Trunity’s ability to commercialize its products and grow and achieve profitability in accordance with its business plan will depend on its ability to satisfy its customers and withstand increasing competition by providing high-quality products at reasonable prices. There can be no assurance that we will be able to achieve or maintain a successful competitive position.

Employees

As of ~~April 8, 2013,~~March 31, 2014, Trunity ~~has 10~~had 12 employees, of which all are full-time employees. None of our employees are represented by a labor union or subject to a collective bargaining agreement.

Consultants

In an effort to contain our initial operating expenses while gaining access to the specialized services we need to rapidly grow our ~~company,~~Company, we expect to rely heavily on outside consultants to provide us with a wide range of expertise. Our current consulting arrangements include:

●

Hanover|Elite, which we engaged in mid-2013 to serve as our investor and public relations counsel of record;

~~In March 2012,~~●

The Wavesense Group, LLC, which we ~~entered into a consulting agreement with RCM Financial Consulting, principally owned by Nicole Fernandez-McGovern,~~engaged in 2013 to ~~provide a variety of services~~help us develop and further refine new business development, key messaging and customer relationship management solutions that will allow us to optimize our promising growth potential in the ~~Company, including general accounting compliance, internal~~global education technology market place; and external financial reporting requirements, and treasury and management consulting. As compensation for these services, Trunity paid the firm approximately $93,000 based on hourly billings for services performed. ~~Ms. Fernandez-McGovern became the Company’s Chief Financial Officer in April 2013. We will continue to use her firm’s services on an as needed basis for accounting personnel other than her.~~


·●	~~In 2012,~~ Neueon, which we engaged in 2013 to conduct an errors and omission assessment of the Trunity ~~Inc. entered into a consulting agreement~~eLearning Platform and provide Fractional-CTO services with ~~Magdiel Rodriguez to provide a variety~~the appropriate level of services as Chief Enterprise Risk Officer. Mr. Rodriguez is responsible for establishing the organizational structure for risk management, leading and overseeing the implementation of programs, regulatory compliance and market requirements for Trunity’s e-commerce business and providing leadershiptechnical guidance and oversight ~~of the overall security infrastructure of the Company~~for early stage and evolving organizations.

·	~~In 2012, Trunity entered into a consulting agreement with Peter Banks, to provide a variety of services as Senior Vice-President of Education. Dr. Banks extensive background as an educator~~ ~~will aid the Company in driving recruitment of new authors on the Trunity platform, thereby growing the content on the Trunity Knowledge Exchange.~~

·In 2012, Trunity entered into a consulting agreement with American Capital Ventures to assist in their investor relations and financial marketing efforts, which we see as an imperative campaign given the Company’s recent entry into the public markets.

Management

Trunity’s management consists of experienced finance, sales, marketing and engineering professionals from the networking, technology and software industry. Biographical and other information on our executive officers and directors is set forth in “Item 10. Directors, Executive Officers and Corporate Governance” of this Report.

Impact of JOBS Act

On April 5, 2012, the Jumpstart Our Business Startup Act of 2012 (the “JOBS Act”) was enacted into law. Under the JOBS Act, Congress established a new statutorily defined category of registrant referred to as an “emerging growth company” (“EGC”) which, among other things, affords such registrants with relief from certain disclosure requirements under the Securities Exchange Act of 1934 (the “Exchange Act”) for so long as they continue to qualify as an EGC.

A registrant qualifies as an EGC if it has total annual gross revenues of less than $1 billion as of the end of its most recent completed fiscal year and has not filed for its initial public offering of common equity securities under the Securities Act of 1933 (the “Securities Act”) prior to December 9, 2011. Under this definition, we qualify as an EGC.

For so long as we qualify as an EGC:

—●

We will not be required to comply with the auditor attestation over internal control requirements under §404(b) of the Sarbanes-Oxley Act of 2002 (“SOX”).


	—●	We may elect to comply with the following scaled-back executive compensation disclosure requirements (“Reduced Executive Compensation Disclosures”): (a) EGCs are not required to comply with the annual “say on pay” and “say on golden parachute” advisory voting requirements and rules promulgated under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), (b) EGCs are not required to include the disclosures that will be required under future rules to be promulgated under the Dodd-Frank Act as to the relationship between executive compensation and company performance, and the ratio of CEO pay to median employee pay, and (c) EGCs may elect to provide the same level of executive compensation disclosures as required by Smaller Reporting Companies (as defined under Rule 12b-2 promulgated under the Exchange Act and referred to herein as “SRCs”), which includes, among other things, the omission of Compensation Disclosure and Analysis discussion, inclusion of fewer tables, and disclosure of compensation for only the CEO and the two next highest paid officers.


	—●	We may elect on a one-time basis not to comply with new or revised accounting principles that apply to public companies, as long as we comply once the rules become applicable for private companies. We are required to make an irrevocable election which will continue for so long as we retain our status as an EGC status.


	—●	We will not be required to comply with any Public Company Accounting Oversight Board rules regarding mandatory audit firm rotation and auditor discussion and analysis should such rules be adopted.

As an EGC, we are not required to take advantage of all of the benefits made available to us under the JOBS Act described above, but may instead opt-in to certain of those scaled-back disclosures and phased-in requirements as we so desire. However, as discussed above, we are not permitted to selectively opt-in with respect to compliance with new or revised accounting rules or pronouncements. Accordingly, we have irrevocably elected to opt out of compliance with any new or revised accounting principles until any such rules become applicable to private companies.

Under the JOBS Act, we will retain our status as an EGC until the earliest of: (1) the last day of the fiscal year during which we have total annual gross revenues of $1,000,000,000 (as may be adjusted under the JOBS Act) or more; (2) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common equity securities pursuant to an effective registration statement under the Securities Act; (3) the date on which we have, during the previous 3-year period, issued more than $1,000,000,000 in non-convertible debt; or (4) the date on which we are deemed to be a “large accelerated filer” under Rule 12b-2 promulgated under the Exchange Act.

It should be noted that we also currently qualify as a ~~SRC.~~SRCs. As a result, in the event that we are no longer an EGC, we will continue to be exempt from the auditor attestation requirements of SOX and eligible to comply with the Reduced Executive Compensation Disclosures for so long as we qualify as a ~~SRC.~~SRCs. We also may elect to provide other scaled-back disclosures applicable to SRCs (not just those relating to Reduced Executive Compensation Disclosures).

Where You Can Find Additional Information

The Company is subject to the reporting requirements under the Exchange Act. The Company files with, or furnishes to, the SEC quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports and will furnish its proxy statement. These filings are available free of charge on the Company’s website, http://www.trunity.com, shortly after they are filed with, or furnished to, the SEC.

The SEC maintains an Internet website, http://www.sec.gov, ~~that~~ which contains reports, proxy and information statements and other information regarding issuers.

ITEM 1A. RISK FACTORS

Investing in our common stock is speculative and involves a high degree of risk. Prospective investors should carefully consider the following risks and uncertainties and all other information contained or referred to in this Annual Report before investing in our common stock. We believe that the risks and uncertainties described below are all of the material risks we face; however, additional risks and uncertainties that we are unaware of, or that we currently deem immaterial, also may become important factors that affect us. Our business, financial condition or results of operations could be materially and adversely affected by some or all of the matters described below or other currently unknown factors. In that case, the value of our Common Stock could decline, and investors could lose all of their investment.

Risks Related to Our Business

General; We Have Limited Operating History.

Trunity was formed in 2009 and has a limited operating history with substantial operating losses. The Company has yet to generate any significant revenues, and the commercial value of its products and services is uncertain. There can be no assurance that the Company will ever be profitable. Further, the Company is subject to all the risks inherent in a new business including, but not limited to: intense competition, lack of sufficient capital, loss of protection of proprietary technology and trade secrets, difficulties in commercializing its products, managing growth and hiring and retaining key employees; adverse changes in costs and general business and economic conditions; and the need to achieve product acceptance, to enter and develop new markets and to develop and maintain successful relationships with customers.

Intellectual Property.

The Company relies primarily on a combination of trade secrets, patents, copyright and trademark laws, and confidentiality procedures to protect its proprietary technology, which is its principal asset.

The Company’s ability to compete effectively will depend to a large extent on its success in protecting its proprietary technology, both in the United States and abroad. There can be no assurance that (i) any patent that the Company applies for will be issued, (ii) any patents issued will not be challenged, invalidated, or circumvented, (iii) that the Company will have the financial resources to enforce its patents or ~~(iv)the~~(iv )the patent rights granted will provide any competitive advantage. The Company could incur substantial costs in defending any patent infringement suits or in asserting its patent rights, including those granted by third parties, and the Company might not be able to afford such expenditures.

Although the Company has entered into confidentiality and invention agreements with its key personnel, there can be no assurance that these agreements will be honored or that the Company will be able to protect its rights to its non-patented trade secrets and know-how effectively. There can be no assurance that competitors will not independently develop substantially equivalent or superior proprietary information and techniques or otherwise gain access to the Company’s trade secrets and know-how. In addition, the Company may be required to obtain licenses to patents or other proprietary rights from third parties. If the Company does not obtain required licenses, it could encounter delays in product development or find that the development, manufacture or sale of products requiring these licenses could be foreclosed.

Need for Additional Funds.

We currently have enough cash on hand or commitments from investors to fund operations for approximately the next two months. Consequently, we are in the process of raising substantial additional funds. Without such additional funds, we may have to cease operations. The Company will require substantial additional funding for its contemplated research and development activities, commercialization of its products and services and ordinary operating expenses. Adequate funds for these purposes may not be available when needed or on terms acceptable to the Company. Insufficient funds may require the Company to delay or scale back its activities or to cease operations.

Going Concern.

The financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred net losses and negative operating cash flow since its inception. To the extent the Company may have negative cash flows in the future, it will continue to require additional capital to fund operations. The Company obtained additional capital investments under various debt and common stock issues. Although management continues to pursue its financing plans, there is no assurance that the Company will be successful in obtaining sufficient revenues to generate positive cash flow. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

Competition.

The Company faces substantial competition from numerous other companies, most of whom have financial and other resources substantially greater than those of the Company. The Company’s principal competitors consist of educational publishing companies and open source platforms such as ~~Houghton Mifflin Harcourt,~~ Pearson, Blackboard, Inc., and Moodle. These and other competitors may prove more successful in offering similar products and/or may offer alternative products that prove superior in performance and/or more popular with potential customers than the Company’s products. The Company’s ability to commercialize its products and grow and achieve profitability in accordance with its business plan will depend on its ability to satisfy its customers and withstand increasing competition by providing high-quality products at reasonable prices. There can be no assurance that the Company will be able to achieve or maintain a successful competitive position.

Operational failures in our network infrastructure could disrupt our remote hosting and application services, could cause us to lose clients, sales to potential clients and could result in increased expenses and reduced revenues.

Unanticipated problems affecting our network systems could cause interruptions or delays in the delivery of the hosting services and other application services we provide to some of our clients. We provide remote hosting and other application services through computer hardware that is currently located in third-party co-location facilities in various locations in the United States. We do not control the operation of these co-location facilities. Lengthy interruptions in our hosting service or other application services could be caused by the occurrence of a natural disaster, power loss, vandalism or other telecommunications problems at the co-location facilities or if these co-location facilities were to close without adequate notice. Although we have developed redundancies in some of our systems, we are exposed to the risk of network failures in the future. We currently do not have adequate computer hardware and systems to provide alternative service for most of our hosting or application service clients in the event of an extended loss of service at the co-location facilities. Though some of our co-location facilities are served by data backup redundancy at other facilities, they are not equipped to provide full disaster recovery to all of our hosting and application services clients. If there are operational failures in our network infrastructure that cause interruptions, slower response times, loss of data or extended loss of service for our hosting and application services clients, we may be required to issue credits or pay penalties, current clients may terminate their contracts or elect not to renew them, and we may lose sales to potential clients. If we determine that we need additional hardware and systems, we may be required to make further investments in our network infrastructure, reducing our operating margins and diverting capital from other efforts.

Because we generally recognize revenues ratably over the term of our contract with a client, downturns or upturns in sales will not be fully reflected in our operating results until future periods.

When our products are fully launched we will recognize most of our revenues from clients monthly over the terms of their agreements, which are expected to be 12 months. As a result, much of the revenue we will report in each quarter is attributable to agreements entered into during previous quarters. Consequently, a decline in sales, client renewals, or market acceptance of our products in any one quarter would not necessarily be fully reflected in the revenues in that quarter, and would negatively affect our revenues and profitability in future quarters. This ratable revenue recognition also makes it difficult for us to rapidly increase our revenues through additional sales in any period, as revenues from new clients generally are recognized over the applicable agreement term.

Governmental Incentives.

The Company’s business plan relies to some extent on the availability of federal and state incentives for ~~K12~~K-12 schools to implement online course offerings. There can be no assurance that some or all of these incentives will not be substantially reduced or eliminated, nor can there be any assurance that any currently proposed incentives will actually take effect.

Government regulation of the Internet and ~~eCommerce~~ecommerce is evolving and unfavorable changes could substantially harm our business and results of operations.

As Internet commerce continues to evolve, increasing regulation by federal, state or foreign agencies becomes more likely. Existing and future laws and regulations may impede the growth and use of the Internet or other online services. These regulation and laws may address pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services, broadband residential Internet access and the characteristics and quality of products and services. It is not clear how existing laws governing issues such as property ownership, sales, and other taxes, libel and personal privacy apply to the Internet and ~~e-Commerce.~~ecommerce. Unfavorable resolution of these issues could have a material adverse effect on the Company’s business, results of the operations and financial condition.

Management and Dependence on Key Personnel.

The success of the Company will depend in large part upon the skill and efforts of its ~~founders and~~ executive officers, ~~Terry B. Anderton and~~Nicole Fernandez-McGovern, Joakim Lindblom, Cutler Cleveland and other key personnel, including those who may be hired. Loss of any such personnel, whether due to resignation, death, and disability or otherwise, could have a material adverse effect on the Company. In addition, as we seek to expand our organization, the hiring of qualified sales, technical and support personnel could be difficult due to the limited number of qualified professionals. Failure to attract, integrate and retain key personnel would result in disruptions to our operations, including adversely affecting the timeliness of product releases, the successful implementation and completion of company initiatives and the results of our operations.

Our current principal shareholders and management own a significant percentage of our stock and will be able to exercise significant influence over our affairs.

Our ~~founders, including our~~ executive officers and directors, as of ~~April 16, 2013,~~March 31, 2014, beneficially own approximately ~~16.9%~~8.5% of the issued and outstanding Common Stock. Consequently, these shareholders may be able to determine the composition of the Board of Directors, retain the voting power to approve matters requiring shareholder approval and continue to have control over the Company’s operations. The interests of these shareholders may be different from the interests of other shareholders on these matters. The concentration of ownership could also have the effect of delaying or preventing a change in control or otherwise discourage a potential acquirer from attempting to obtain control of the Company.

Calamities.

Although the Company maintains insurance which it considers prudent, there can be no assurance that such insurance will prove adequate in the event of actual casualty losses or broader calamities such as terrorist attacks, earthquakes, financial crises, economic depressions or other catastrophic events, which are either uninsurable or not economically insurable. Any such losses could have a material adverse effect on the Company.

If our products contain errors, new product releases are delayed or our services are disrupted, we could lose new sales and be subject to significant liability claims.

Because our software products are complex, they may contain undetected errors or defects, known as bugs. Bugs can be detected at any point in a product’s life cycle, but are more common when a new product is introduced or when new versions are released. We have frequent new product and functionality releases, and those releases may be delayed from their scheduled date due to a wide range of factors. Finally, our service offerings may be disrupted causing delays or interruptions in the services provided to our clients. In the past, we have encountered defects in our product releases, product development delays and interruptions in our service offerings. Despite our product testing, planning and other quality control efforts, we anticipate that our products and services may encounter undetected defects, release delays and service interruptions in the future. Significant errors in our products, delays in product releases or disruptions in the provision of our services could lead to:

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delays in or loss of market acceptance of our products;


●	diversion of our resources;


●	a lower rate of license renewals or upgrades;


●	injury to our reputation; and


●	increased service expenses or payment of damages.

Because our clients use our products to store, retrieve and utilize critical information, we may be subject to significant liability claims if our products do not work properly or if the provision of our services is disrupted. Such claims could result in significant expenses, disrupt sales and affect our reputation and that of our products. We cannot be certain that the limitations of liability set forth in our licenses and agreements would be enforceable or would otherwise protect us from liability, and our insurance may not cover all or any of the claims. A material liability claim against us, regardless of its merit or its outcome, could result in substantial costs, significantly harm our business reputation and divert management’s attention from our operations.

If we fail to keep pace with rapid technological changes, our competitive position will suffer.

The eLearning industry is characterized by rapid technological change. Failure to respond to technological advances could make our business less efficient, or cause our products to be of a lesser quality than those of our competitors. These advances could also allow competitors to provide higher quality services at lower costs than we can provide. Thus, if we are unable to adopt or incorporate technological advances, our services will become uncompetitive.

We could lose revenues if there are changes in the spending policies or budget priorities for government funding of research institutions, foundations, universities and other education providers.

Most of our customers and potential customers are research institutions, foundations, universities and other education providers who depend substantially on government funding. Accordingly, any general decrease, delay or change in federal, state or local funding for colleges, universities, schools and other education providers could cause our current and potential customers to reduce their purchases of our products and services, or to decide not to renew service contracts, either of which could cause us to lose revenues. In addition, a specific reduction in governmental funding support for products such as ours would also cause us to lose revenues. The severe economic downturn experienced in the U.S. and globally has caused many of our clients to experience severe budgetary pressures, which has and will likely continue to have a negative impact on sales of our products. Continuing unfavorable economic conditions may result in further budget cuts and lead to lower overall spending, including information technology spending, by our current and potential clients, which may cause our revenues to decrease.

Security Breaches Could Damage Our Business.

Concerns over the security of transactions conducted on the Internet and the privacy of users may inhibit the growth of the Internet, social networking sites, online services and online commerce. Failure to successfully prevent security breaches could significantly harm the Company’s business and expose the Company to litigation. Anyone who is able to circumvent the Company’s security measures could misappropriate proprietary information, including personal data, cause interruptions in the Company’s operations or damage its brand and reputation. The Company cannot assure the investors that its financial systems and other technological resources are completely secure from security breaches or sabotage. The Company may have to incur significant costs to protect against security breaches or to alleviate problems caused by breaches. Further, any well-publicized compromise of the Company’s security or the security of any other Internet provider could deter people from using the Company’s services or the Internet to conduct transactions that involve transmitting confidential information or downloading sensitive materials. The occurrence of one or more of these events could have a material adverse effect on the Company’s business, results of operations and financial condition.

2221

Risks Related to our Foreign Business

We are currently doing business or attempting to do business in several foreign countries, including ~~India and~~ Ukraine, and we plan to expand our operations into many more countries, mostly in the Third World. While we believe that these international operations have a substantial profit potential, these operations are subject to significant additional risks not faced in our domestic operations, including, but not limited to, risks relating to political instability, armed conflict (specially in Ukraine), legal systems which may not adequately protect contract and intellectual property rights, as well as risks relating to potential financial crises and currency exchange controls. There can be no assurance that these international risks will not materially adversely affect our business.

Risks Related to our Common Stock; Liquidity Risks

Volatility of Stock Price.

The market prices for securities of emerging and development stage companies such as the Company have historically been highly volatile. Difficulty in raising capital as well as future announcements concerning the Company or its competitors, including the results of testing, technological innovations or new commercial products, government regulations, developments concerning proprietary rights, litigation or public concern as to safety of potential products developed by the Company or others, may have a significant adverse impact on the market price of the Company’s stock.

We Have No Intention to Pay Dividends on Our Common Stock.

For the near-term, we intend to retain any remaining future earnings, if any, to finance our operations and do not anticipate paying any cash dividends with respect to our Common Stock.

Our Common Stock is Quoted on the OTC Bulletin Board (“OTCBB”) and the OTCQB, and There is Minimal Liquidity in the Trading Market for Our Common Stock.

Our Common Stock is quoted on the OTCBB and the OTCQB under the symbol “TNTY” ~~(which was changed from “BNTE” in February 2012 as a result of the Merger)~~. There has been only minimal trading of our common stock, ~~since the Merger,~~ and no assurance can be given as to when, if ever, an active trading market will develop or, if developed, that it will be sustained. As a result, investors may be unable to sell their shares of our Common Stock.

Possible Depressive Effect on Price of Securities of Future Sales of Common Stock.

As a result of the Merger, the Company has issued to the former Trunity shareholders 33,231,037 shares of the Company’s Common Stock. These shares are no longer restricted securities subject to Rule 144. The sale or availability for sale of substantial amounts of Common Stock in the public market under Rule 144 or otherwise could materially adversely affect the prevailing market prices of the Company’s Common Stock and could impair the Company’s ability to raise additional capital through the sale of its equity securities.

Possible Adverse Effects of Authorization and Issuance of Preferred Stock.

The Company’s Board of Directors is authorized to issue up to 50,000,000 shares of preferred stock. The Board of Directors has the power to establish the dividend rates, liquidation preferences, voting rights, redemption and conversion terms and privileges with respect to any series of preferred stock. The issuance of any series of preferred stock having rights superior to those of the Common Stock may result in a decrease in the value or market price of the Common Stock and could further be used by the Board as a device to prevent a change in control favorable to the Company. Holders of preferred stock to be issued in the future may have the right to receive dividends and certain preferences in liquidation and conversion rights. The issuance of such preferred stock could make the possible takeover of the Company or the removal of management of the Company more difficult, and adversely affect the voting and other rights of the holder of the Common Stock, or depress the market price of the Common Stock.

Disclosures Relating to Low Priced Stocks; Restrictions on Resale of Low Price Stocks and on Broker-Dealer Sale; Possible Adverse Effect of “Penny Stock” Rules on Liquidity for the Company’s Securities.

Since the Company has net tangible assets of less than $1,000,000, transactions in the Company’s securities are subject to Rule 15g-9 under the Exchange Act which imposes additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together with their spouses). For transactions covered by this Rule, a broker-dealer must make a special suitability determination for the purchaser and shall receive the purchaser’s written consent to the transaction prior to the sale. Consequently, this Rule may affect the ability of broker-dealers to sell the Company’s securities, and may affect the ability of shareholders to sell any of the Company’s securities in the secondary market.

The Commission has adopted regulations which generally define a “penny stock” to be any non-NASDAQ equity security of a small company that has a market price (as therein defined) less than $5.00 per share, or with an exercise price of less than $5.00 per share subject to certain exceptions, and which is not traded on any exchange or quoted on NASDAQ. For any transaction by broker-dealers involving a penny stock (unless exempt), the rules require delivery, prior to a transaction in a penny stock, of a risk disclosure document relating to the penny stock market. Disclosure is also required to be made about compensation payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in an account and information on the limited market in penny stocks.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

The Company does not own any real property. In August ~~2010,~~2013, the Company ~~entered into~~executed a lease ~~agreement~~ for ~~6,400~~8,713 square feet for its corporate offices located in Portsmouth, New Hampshire. The lease commenced on August 9, 2013 and has a five-year term ending on September 8, 2018. The monthly rental payments for the first year are $10,165 per month and will increase on each anniversary at a rate of 3% per annum. Also the Company is required to pay its proportionate share of the building’s common area maintenance (“CAM”), and real estate taxes serving the premises and the cost of premises janitorial service. These additional items are estimated to total $5,900 on a monthly basis.

In September 2013, the Company executed a lease for office space located in Palo Alto, California. The lease commenced on September 1, 2013 with monthly payments of ~~its headquarters located at 15 Green Street, Newburyport, Massachusetts. This lease is effective~~$600 per month and has a twelve month term ending on August 31, 2014. The Company has sublet partial space of the office in Palo Alto for $300 a month through ~~July 2013 at a~~the end of the rental ~~rate of $7,600 per month. We are under current negotiations for a new facility that we believe will be adequate to serve our needs for the foreseeable future.~~term ending on August 31, 2014.

ITEM 3. LEGAL PROCEEDINGS

In February 2012, Trunity and our 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 asserts whistleblower status and alleges that he was wrongfully terminated because of his allegations that the Company had violated securities, tax and employment laws. The complaint seeks unspecified damages under the New Hampshire Whistleblower Act and common law, including reinstatement, back pay and attorney’s fees and costs. In May 2012, we 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. Discovery has begun; a deposition of Mr. Horn was conducted on March 25, 2013. No expert has been disclosed by Mr. Horn for liability or damages.

On June 13, 2013, the Court granted our Motion to Dismiss Terry Anderton, in his individual capacity, from the case. Therefore, Trunity remains the sole defendant in this matter. We continue to proceed with discovery and may schedule a second deposition of the plaintiff based upon the additional documents and information produced by the plaintiff pursuant to the Court’s Order. As discovery continues, third party depositions are expected to be scheduled.

Trial of the case is now scheduled for ~~September 2013.~~the weeks of June 16 and June 23, 2014. Pretrial materials are due May 23, 2014 and a trial conference has been scheduled for June 6, 2014. Based on the preliminary information available to us, we believe that the complaint is without merit and intend to vigorously defend the case and prosecute the counterclaim.

Mediation is mandatory in New Hampshire. A half-day mediation has been scheduled for April 14, 2014. To date, there has not been a settlement demand from Plaintiff. Moreover, at this point in the litigation, Trunity has paid in full the deductible under the applicable insurance policy and the insurance company is paying for the defense of this case.

There are no other material pending legal proceedings to which we are a party or to which any of our property is subject and, to the best of our knowledge, no such actions against us are contemplated or threatened.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

~~None.~~PART II

~~PART II~~

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our Common Stock is quoted on the Over-the-Counter Bulletin Board (“OTCBB”) and the OTCQB under the symbol “TNTY” (which was changed from “BNTE” in February 2012 as a result of the Merger). There has been no material trading in our stock.

The following table ~~sets forth, for~~shows the ~~period indicated, the quarterly~~ high and low ~~per share sales~~closing prices for the ~~common stock.~~periods indicated:

Quarter ended	High		Low
March 31, 2014	$	0.23	$	0.23
June 30, 2014( through April 11, 2014)	$	0.23	$	0.23

Fiscal Year 2012 High Low

First quarter $ 5.00 $ 5.00
Second quarter $ 5.00 $ 3.00
Third quarter $ 3.00 $ 3.00
Fourth quarter $ 3.00 $ 0.29

Quarter ended	High		Low
March 31, 2013	$	0.85	$	0.80
June 30, 2013	$	0.59	$	0.50
September 30, 2013	$	0.37	$	0.33
December 31, 2013	$	0.30	$	0.30

Quarter ended	High		Low
March 31, 2012	$	5.00	$	5.00
June 30, 2012	$	3.00	$	3.00
September 30, 2012	$	3.00	$	3.00
December 31, 2012	$	0.40	$	0.40

The above information was obtained from Yahoo! Finance. Because these are over the counter market quotations, these quotations reflect inter-dealer prices, without retail mark-up, markdown or commissions and may not represent actual transactions. There is currently no public trading market for our preferred stock.

The last sale price of our common stock as reported on the OTC Bulletin Board and OTCQB on April ~~12, 2013~~11, 2014 was ~~$0.90.~~$0.23. As of ~~April 9, 2013,~~March 31, 2014, there were ~~379~~381 record holders of the Company’s Common Stock.

Dividends

The Company has never declared or paid any cash dividends on its common stock. We have never paid cash dividends on our common stock. Under Delaware law, we may declare and pay dividends on our capital stock either out of our surplus, as defined in the relevant Delaware statutes, or if there is no such surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. If, however, the capital of our ~~company,~~Company, computed in accordance with the relevant Delaware statutes, has been diminished by depreciation in the value of our property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets, we are prohibited from declaring and paying out of such net profits and dividends upon any shares of our capital stock until the deficiency in the amount of capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets shall have been repaired. The Company does not intend to declare or pay any cash dividends on its common stock in the foreseeable future. The holders of the Company’s common stock are entitled to receive only such dividends (cash or otherwise) as may be declared by the Company’s Board of Directors.

Equity Compensation Plans

For information on the Company’s equity compensation plans, see “Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”

~~Recent~~

Sales of Unregistered Securities

Early 2014 Private Placements

From March 1, 2014 to April 11, 2014, the Company raised gross proceeds of $53,000 through the sale of 353,333 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 we borrowed $100,000 from an accredited investor pursuant to a six month convertible promissory note bearing interest at 10% per year. The note is convertible at $.165 per share with the same warrant coverage as for the shares privately sold as set forth above. The Company incurred $5,000 of securities issuance costs representing commissions paid to broker-dealers who assisted these transactions.

Early 2013 Private Placement

From January through May 2013, the Company raised gross proceeds of $275,000 through the sale of 687,500 shares of its Common Stock to accredited investors in private placement transactions at a price of $0.40 per share. Each investor also received a two year warrant to purchase one share of common stock at an exercise price of $1.00 per share for each $1.00 invested. The Company incurred stock issuance costs of approximately $8,000 consisting chiefly of commissions paid to broker-dealers who assisted with the offering.

June 2013 Private Placement

On June 5, 2013, the Company completed the closing of a private placement (the “Private Placement”) with 35 accredited investors (the “Investors”), pursuant to which the Company sold to the Investors an aggregate of 8,936,470 shares of our common stock (the “Common Stock”) at a purchase price of $0.40 per share, resulting in gross offering proceeds of $3,574,588. In addition, the Investors received two-year warrants to purchase an aggregate of 8,936,470 shares of Common Stock at an exercise price of $1.00 per share (the “Investor Warrants”). The Company received net proceeds of approximately $3.3 million after payment of placement agent fees and costs relating to the Private Placement. The net proceeds from the Private Placement have been and will be used to fund the Company’s ongoing operations and to provide working capital.

In consideration for services rendered as the exclusive placement agent in the Private Placement, the Company paid ACGM, Inc., New York, New York (the “Placement Agent”) cash commissions totaling $178,729 (5% of the gross offering proceeds). In addition, as consideration for services rendered in connection with the Private Placement, the Company issued to the Placement Agent 357,459 restricted shares of our Common Stock, representing 8% of the gross proceeds of the Private Placement at a price of $0.80 per share to determine the number of shares issued to the Placement Agent.

The lead investor in the Private Placement was Pan-African Investment Company, LLC (“PIC”), a New York City-based private investment firm which invested $1,000,000 and purchased 2,500,000 shares of Common Stock and received an Investor Warrant to purchase 2,500,000 shares. In connection with PIC’s lead investment the Company, its major shareholders and PIC agreed to appoint a PIC representative to the Trunity Board of Directors and to nominate that designee for reelection by the shareholders at each annual meeting held while PIC owns at least 2% of the Company’s issued and outstanding Common Stock. In addition, the Company and PIC entered into a Memorandum of Understanding to structure a formal business relationship whereby PIC will have the exclusive right to introduce the Trunity eLearning Platform to African countries seeking to improve the quality of education for their citizens.

On September 9, 2013, we filed a Registration Statement on Form S-1 with the U.S. Securities and Exchange Commission (“SEC”) relating to the resale of (i) 8,936,470 shares of common stock, and (ii) 8,936,470 shares of common stock issuable upon exercise of warrants, sold to the Investors in the Private Placement. On September 30, 2013, the Registration Statement was declared effective by the SEC.

2012 Private Placements

During 2012, ~~the Company~~we raised gross proceeds of approximately $875,000 through the sale of 2,462,211 shares of ~~its~~our common stock to ~~accredited~~ investors ~~in a private placement~~ at an average price of ~~$.35~~$0.35 per share. These sales of shares occurred at various times throughout 2012. The Company incurred stock issuance costs of approximately $45,000 consisting chiefly of commissions paid to broker-dealers who assisted with the ~~offering.~~offering

~~During the beginning of 2013,~~July 2012 Convertible Debentures

In July 2012, the Company ~~raised gross proceeds~~issued convertible debentures (“July Notes”) with an aggregate face value of ~~approximately $275,000 through~~$215,300 Canadian Dollars ($205,224 as of December 31, 2013). The July Notes mature in July 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 Canadian Dollars per share (“Unit”). The number of Units issuable upon conversion of the 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.

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 ~~687,500 shares of its~~ common stock ~~to accredited investors~~ in a private placement atimmediately 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 twelve months ended December 31, 2013, the Company recorded amortization of the discount of $42,394. As of December 31, 2013, the net carrying value of the July Notes totaled $180,494, net of unamortized discount of $24,730. For the twelve months ended December 31, 2013, interest expense on the July Notes of $20,910 was recorded.

In connection with the issuance of the July Notes, the Company paid transactions fees to brokers consisting of cash of $85,237, and warrants to purchase 43,497 shares over a two-year period for an ~~average~~exercise price of ~~$.40 per share.~~0.40 Canadian Dollars. The Company ~~incurred stock~~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 ~~approximately $8,000 consisting chiefly~~the July Notes. The remaining portion of ~~commissions~~the fair value of the transactions costs, totaling $36,126 was allocated to equity, treated as equity issuance costs, and recorded against additional paid ~~to broker-dealers who assisted with~~in capital. Amortization of debt issuance costs on the ~~offering.~~July Notes of $26,435 was recorded for twelve months ended December 31, 2013.

These private placement offerings were conducted under the exemption from registration provided by Section 4(2)of the Securities Act of 1933. The net offering proceeds were used for working capital purposes.

~~Purchases by Issuer and Its Affiliates~~

~~None.~~

September 2012 Convertible Debentures

In September 2012, the Company issued convertible debentures (“September Notes”) with an aggregate face value of $330,900. The September Notes mature in September 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 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 notes, or b) $0.32 if a Liquidity Event does not occur within six months of the closing of the offering of the September 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 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 is being amortized into interest expense through the maturity dates of the September Notes. For the 12 months ended December 31, 2013, the Company recorded amortization of the discount of $57,856. As of December 31, 2013, the net carrying value of the September Notes totaled $292,329, net of unamortized discount of $38,571. For the twelve months ended December 31, 2013 interest expense on the September Notes of $33,090 was recorded.

In connection with the issuance of the 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 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 September Notes of $9,903 was recorded for the twelve months ended December 31, 2013.

October and November 2012 Convertible Debentures

In October and November 2012, the Company issued convertible debentures (“October and November Notes”) with an aggregate face value of $624,372 of which $313,440 represented a conversion of notes payable related parties to the Founders. 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 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 twelve months ended December 31, 2013, the Company recorded amortization of the discount of $127,193. As of December 31, 2013 the net carrying value of the October and November Notes totaled $518,678 net of unamortized discount of $105,694. For the twelve months ended December 31, 2013 interest expense on the October and November Notes of $61,437 was recorded.

In connection with the issuance of the October and November Notes, the Company paid no cash transactions fees to brokers.

Purchases by Issuer and Its Affiliates

None.

ITEM 6. SELECTED FINANCIAL DATA

This Item is not required for Smaller Reporting Companies.

ITEM 7. ~~MANAGEMENT~~’SMANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the financial statements and notes thereto appearing elsewhere herein.

Overview

Trunity Holdings, Inc. (“Trunity,” “Company,” “we,” “us”, or “our”) is a Delaware corporation ~~with its principal office~~headquartered in ~~Newburyport, Massachusetts. It was formed on July 28, 2009 to develop~~Portsmouth, New Hampshire. The Company’s wholly-owned subsidiary, Trunity, Inc., a ~~cloud-based knowledge-sharing~~Delaware corporation (“Trunity, Inc.”), also based in Portsmouth, New Hampshire, has pioneered a collaborative knowledge management, publishing and education delivery platform ~~that focuses on e-learning, virtual textbooks,~~– the Trunity eLearning Platform (the “Platform”) – which provides an end-to-end solution for the rapidly growing eTextbook, 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 (“vBooks™”) 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 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. Trunity has recently entered an agreement with the National Council of Science and the ~~education marketplace.~~Environment (NCSE), a not-for-profit organization that engages scientists, educators, policy-makers, environmental managers, government agencies, conservationists and business leaders in programs that foster collaboration between diverse institutions and individuals creating and using environmental knowledge to make science useful to policies and decisions on critical environmental issues. Both Trunity and NCSE will be co-marketing the Trunity eLearning Platform to the over 2,500 authors currently accessing the Encyclopedia of the Earth. The ~~Company was formed though~~Encyclopedia of the ~~acquisition~~Earth is an award-winning, open source collection of ~~certain intellectual property~~peer-reviewed content contributed by ~~its three founders. The Company is~~several thousand content experts made up of many of the world’s top scientists and educators.

We have customers both domestically and internationally, as we have won a significant national project in the ~~development stage~~Ukraine. In addition, we host the collection on Climate Adaptation and ~~it is presently undertaking research~~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 ~~development of its platform.~~matched and purchased in whole or in part. Our core products ~~Knowledge, Learn and Connect,~~ are in ~~full~~ production and ~~fully~~ 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 ~~described in “Business” above~~ 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 ~~ever~~ achieve ~~profitability.~~profitability at any time in the foreseeable future.

Except as specifically noted to the contrary, the following discussion relates only to Trunity since, as a result of the Merger, the only historical financial statements presented for the Company in periods following the merger with BTI will be those of the operating entity, Trunity, Inc.

Critical Accounting Policies

Basis of Accounting

The financial statements of the Company 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. We believe the following critical accounting policies affect its more significant judgments and estimates used in the preparation of financial statements.

Transition from Development Stage to Full Commercial Operations

~~Development Stage Operations~~

The Company has operated as a development stage enterprise since its inception by devoting substantially all of its efforts to business development. ~~Based on our current plan we anticipate exiting~~In the first quarter of 2013, the Company began its transition from development stage into full commercial operations and is now largely focused on actively marketing the ~~beginning of 2013.~~Trunity eLearning Platform to prospective customers, strategic business partners and users worldwide.

Going Concern

The financial statements have been prepared assuming the Company will continue as a going concern. The Company has incurred net losses and negative operating cash flow since its inception. To the extent the Company may have negative cash flows in the future; it will continue to require additional capital to fund operations. The Company obtained additional capital investments under various debt and common stock issues. Although management continues to pursue financing plans, there iscan be no assurance that the Company will be successful in obtaining additional funding on commercially acceptable terms or at all, or sufficient revenues to generate positive cash flow. The financial statements do not include any adjustments that might result from the outcome of these uncertainties. We may not be able to obtain financing or capital on commercially acceptable terms or at all.

Revenue Recognition

The Company’s revenue model consists of Software as a Service (SaaS) licensing and hosting revenue, for sites using the Company’s platform, as well as consulting, and advertising revenue. 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. 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.

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

Revenues recognized in excess of billings are recorded as Unbilled Revenue (an asset). 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.

Accounts Receivable

We estimate credit loss reserves for accounts receivable on an individual receivable basis. A specific impairment allowance reserve is established based on expected future cash flows and the financial condition of the debtor. We charge off customer balances in part or in full when it is more likely than not that we will not collect that amount of the balance due. We consider any balance unpaid after the contract payment period to be past due. We believe all accounts receivable due at December 31, ~~2012~~2013 and ~~2011~~2012 to be collectible.

Accounting for Uncertainty in Income Taxes

Income taxes are accounted for in accordance with FASB ~~ASC~~Accounting Standards Codification (“ASC”) Topic 740, “Income Taxes” (“ASC 740”). Under ASC 740, income taxes are recognized for the amount of taxes payable for the current year and deferred tax assets and liabilities for the future tax consequence of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using statutory tax rates and are adjusted for tax rate changes. We consider accounting for income taxes critical to our operations because management is required to make significant subjective judgments in developing our provision for income taxes, including the determination of deferred tax assets and liabilities, and any valuation allowances that may be required against deferred tax assets.

ASC 740 clarifies the accounting for uncertainty in income tax recognized in an entity’s financial statements and requires companies to determine whether it is “more likely than not” that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financial statements. For those tax positions where it is not “more likely than not” that a tax benefit will be sustained, no tax benefit is recognized. Where applicable, associated interest and penalties are also recorded. This interpretation also provides guidance on de-recognition, classification, accounting in interim periods, and expanded disclosure requirements.

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Our evaluation was performed for the tax period from July 28, 2009 (inception) to December 31, ~~2012.~~2013. We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments are expected to be minimal and immaterial to our financial results. In the event we have received an assessment for interest and/or penalties, it would be classified in the financial statements as selling, general and administrative expense. The tax years ~~2009,~~2010 through ~~2012~~2013 are subject to examination by federal and state taxing authorities.

Taxes on Revenue Producing Transactions

The Company earns revenues through various services. Service revenue is taxable in some jurisdictions throughout the United States, and ~~The~~the Company could be responsible for collecting those taxes subject to state or local requirements. The Company is not aware of any transactions which would necessitate the fiduciary responsibility of collecting and remitting sales based taxes.

Website Development

We have adopted the provisions of FASB ~~Accounting Standards Codification~~ASC Topic 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~~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~~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. During the ~~period July 28, 2009 (Inception) to~~twelve months ended December 31, 2013 and 2012, we incurred and capitalized ~~$1,516,669~~$519,733 and $548,031, respectively in ~~website~~platform development costs. Amortization for these costs recorded during the ~~period July 28, 2009 (Inception) to~~twelve months ended December 31, 2013 and 2012, was ~~$688,347.~~$105,751 and $182,677, respectively.

Stock-Based Compensation

We recognize compensation costs to employees under FASB ~~Accounting Standards Codification No. 718,~~ASC “Topic 718”, Compensation – Stock ~~Compensation.~~Compensation (“ASC 718”). Under FASB ~~Accounting Standards Codification No.~~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~~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 FASB ~~Accounting Standards Codification No.~~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.~~

ASC.

Derivative Financial Instruments

The Company assesses whether it has embedded derivatives in accordance with FASB ASC Topic 815, ~~“Accounting~~(“ASC 815”) Accounting for Derivative Instruments and Hedging ~~Activities”.~~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 does not have any derivatives that qualify as hedges.

~~Common Stock Purchase~~ Warrants

The Company accounts for common stock purchase warrants in accordance with ASC ~~815, “Accounting for Derivative Instruments and Hedging Activities”.~~815. As is consistent with its handling of stock compensation and embedded derivative instruments, the Company’s cost for stock ~~options~~warrants is estimated at the grant date based on each ~~option's~~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.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

Stockholders’ Equity

Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of the service or assets received in exchange.

3233

Results of Operations

Years ended December 31, ~~2012~~2013 and ~~2011~~2012

~~During 2012 and 2011, we focused on~~Net sales for the ~~development of our platform technology and bringing that platform~~twelve months ended December 31, 2013 increased 10.7% to ~~our target markets. Revenues decreased 47% from $299,074 in 2011~~$176,437 compared to $159,359 for the twelve month period in ~~2012. A decline~~the prior year. Revenues in ~~our service revenue in comparison~~2013 stemmed largely from licensing fees paid to the ~~prior year made up~~Company by EDUCOM, the ~~majority of this decrease as we continued to focus on~~joint venture company formed in connection with the ~~development of platform and strategic partner relationships.~~Ukraine Government’s Open World National Project, originally signed by the Company in March 2013. We believe that our revenue will increase during ~~2013~~2014 based upon ~~our~~ revenue recognition from licensing revenue, from new and existing relationships, specific marketing ~~efforts~~initiatives and “word of mouth” from satisfied users of our platform; however, there can be no assurance that this expected revenue increase will occur.

Our total operating expenses for ~~2012~~2013 were $3,106,956, a 30.1% increase from total operating expenses of $2,387,390 ~~increased 12~~.~~7% from 2011, primarily as a result of an~~reported for the twelve months ended December 31, 2012. The increase ~~in marketing and sales expenses due to the Company’s increased efforts to enhance brand awareness in the educational market in order to generate new sales~~, offset by a decrease in research and development and administrative costs. Salary expenses included in operating expenses for 2012 of $1,068,565 represents an increase of 38.3% over the comparable period in 2011 duewas attributed to the increase in ~~the number of employees as the Company continues to grow and develop the platform’s content. Research and development~~selling, general and administrative (SG&A) expenses, ~~declined~~which increased 51.9% to ~~$894,157~~$2,268,031 from ~~$939,557 as the Company concentrated its development efforts~~$1,493,233 on ~~the marketing~~a comparable year-over-year basis. SG&A expenses included non-cash stock compensation expense of ~~its products. Amortization and depreciation expenses for 2012 were $667,127 and $50,257, respectively,~~$227,129 in 2013 which compared to ~~$800,904 and $44,736 for~~non-cash stock compensation expense of $122,107 in the prior year, ~~period. The decrease~~accretion for debt discounts and issuance costs of $320,979 in ~~amortization~~2013 in comparison to $79,461 in the prior year. In addition, non-cash expense ~~is as a result of the initial investment cost~~ for ~~the platform being fully amortized as of the end of the second quarter~~, ~~offset by an increase for the debentures~~shares issued in conversion of payables and services which totaled $57,500 and shares issued in exchange for services which totaled $31,144 were also booked as SG&A expenses in 2013, which compared to $0 and $0, respectively, in 2012. We also expanded our executive and sales and marketing teams with direct hires and paid consultants in 2013 and invested in several marketing initiatives, including participation in industry conferences, travel to international market places to pursue business development opportunities, and the ~~third~~development of a new web site and ~~fourth quarter which generated discount costs. We expect that our general~~marketing collateral materials.

In 2013, we continued to invest heavily in the ongoing development and ~~administrative expenses will continue~~enhancements to ~~increase~~the Trunity eLearning Platform. Consequently, research and development costs remained relatively flat on a year-over-year basis, decreasing a modest 6.2% to $838,925 from $894,157 in ~~future periods as our business expands.~~ 2013 and 2012, respectively.

As a result of ~~the increase in operating~~increased SG&A expenses ~~and~~partially offset by the decline in ~~sales,~~R&D expenses, the ~~Company experienced~~loss from operations for the twelve months ended December 31, 2013 increased 31.6% to $3,008,877 compared to a loss from operations ~~that was approximately $2.3 million~~of $2,428,483 reported for 2012.

After including interest expense of $392,645, the 2013 net loss increased to $3,401,522 compared to a net loss of $2,428,483 in 2012, ~~and $1.9 million~~which included interest expense of $141,930. The increase in ~~2011.~~

~~Interest~~interest expense on a comparable year-over-year basis was ~~$141,930 in 2012 and $466,345 in 2011. The decrease was mainly due~~attributable to ~~the Company’s long-term debt~~our debentures being outstanding ~~from 2010 through mid-2011 being converted into equity in mid-2011, offset by working capital loans from related parties and the newly issued debentures interest recorded~~ during the ~~current~~full year ~~period. Included~~ in ~~the 2011~~2013 as opposed to part of 2012 which resulted in increased interest ~~expense was a one-time $293,092 non-cash expense related to the early retirement of this~~payments as well as an increase in accretion for debt ~~recorded in 2011.~~discounts and issuance costs.

Net losses remained consistent in 2012 and 2011 at approximately $2.4 million in each year. As research and development costs are expected to continue into 2013 at the historical levels, the Company will generate substantial net losses until we are able to successfully penetrate our markets with our products, as to which there can be no assurance.

Liquidity and Capital Resources

We have financed our operations since inception through the sale of debt and equity securities. As of December 31, ~~2012~~2013 and ~~2011~~2012 we had working capital deficits of $1,124,965 and $891,160, ~~and $497,760,~~ respectively. Our increase of negative working capital of approximately ~~79%~~26.2% is primarily attributable to decreases in cash and increases in accrued expenses and debt to generate cash for operations.

Our current assets at ~~2012,~~December 31, 2013, included cash and accounts receivable, net. Our current liabilities at the end of ~~2012,~~2013, included accounts payables, notes payable of related parties, convertible ~~note~~notes payable, accrued expenses representing accrued interest, professional fees and vacation expense and amounts owed to shareholders for working capital loans and deferred revenue.

Net cash used in operating activities was ~~$1,448,425~~$2,108,952 for ~~2012,~~2013, as compared to ~~$1,373,915~~$1,448,425 for ~~2011 and $5,758,562 for the period from July 28, 2009 (inception) to December 31,~~ 2012. Working capital changes utilized cash of ~~$61,106~~$220,195 in the current period as compared to ~~$222,919~~$61,106 for ~~2011~~2012 due to ~~the conversion of working capital loans from related parties.~~increase in deferred revenue and accrued expense and interest offset by decrease in accounts payable. In addition,, net ~~income~~loss was adjusted for non-cash items by an increase of ~~$126,648~~$153,423 in the current year as compared to ~~2011~~2012 due to additional stock compensation expense as a result of more issuances of options to employees and directors of the Company and accretion for debt discount and issuance costs,, offset by a reduction in amortization as of a result of the initial platform costs being fully expensed. The increase in cash used for operating activities for the period from July 28, 2009 (inception) to December 31, 2012 is as a result of continued working capital requirements resulting in a use of cash of $780,083 and adjustments to non-cash items of $2,797,856 for stock compensation expense, accretion costs for debt discounts and depreciation and amortization expenses all related to the development of our Company.

Net cash used in investing activities was approximately ~~$564,372~~$561,558 for ~~2012,~~2013, as compared to net cash used of ~~$397,903~~$564,372 for ~~2011 and $3,292,642 for the period from July 28, 2009 (inception) to December 31,~~ 2012, which primarily reflects our ~~website~~platform development investments, ~~acquisition~~filing costs of our ~~subsidiary~~patents and purchase of additional equipment.

Net cash provided by financing activities for ~~2012~~2013 was ~~approximately $1,903,386~~$3,468,850 as compared to the ~~$1,892,209~~$1,903,386 for ~~2011.~~2012. This reflects proceeds from the private sale of our securities, ~~issuance of our convertible debentures and~~ proceeds from ~~notes payable~~exercise of common stock options offset by repayment to related parties. Net cash provided by financing activities for the period from July 28, 2009 (inception) to December 31, 2012, was approximately $7,905,217 and proceeds from the private sale of our securities, issuance of our convertible debentures and proceeds from notes ~~payable~~ to related parties.

During ~~2012,~~2013, we raised gross proceeds of ~~approximately $875,000~~$3,849,588 through the sale of ~~2,462,211~~9,623,970 shares of our common stock to accredited investors at ~~an average price of $0.35~~$0.40 per share. These sales of shares occurred at various times throughout ~~2012.~~2013. The Company incurred stock issuance costs of ~~approximately $45,000~~$186,729 consisting chiefly of commissions paid to broker-dealers who assisted with the offering. In addition, as consideration for services rendered in connection with the Private Placement, the Company issued to the Placement Agent 357,459 restricted shares of our Common Stock, representing 8% of the gross proceeds of the Private Placement at a price of $0.80 per share to determine the number of shares issued to the Placement Agent. Working capital was also raised from loans made to the Company by its founders, which were ~~approximately $505,000~~$122,456 in ~~2012.~~2013.

During ~~2011,~~2014 through April 11, we raised gross proceeds of ~~$1,769,576~~$53,000 through the sale of ~~6,857,538~~353,333 shares of ~~our~~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 ~~to investors~~for every four shares purchased at an ~~average~~exercise price of ~~$0.26~~$0.50 per share. ~~These sales~~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. The note is convertible at $.165 per share with the same warrant coverage as for the shares privately sold as set forth above. We incurred $5,000 of ~~shares occurred at various times throughout 2011. The Company incurred stock~~securities issuance costs ~~of approximately $112,000 consisting chiefly of~~representing commissions paid to broker-dealers who assisted ~~with~~these transactions.

We are actively seeking more funding from private debt and equity investors, as we will need to raise substantial additional capital in order to finance our plan of operations. Our cash position as of December 31, 2013 was $812,064, which will not be adequate to support operations for the ~~offering. These funds were used~~remainder of 2014. As of the date of this report we have cash and commitments sufficient to fund operations for the next two months. There can be no assurance that we will be able to raise the necessary funds. If we do not raise the necessary funds, we will be forced to cease operations.

Plan of Operation

We have developed a collaborative knowledge management, publishing and ~~to cover~~education delivery platform which provides an end-to-end solution for the ~~balance~~rapidly growing digital content books, e-learning, enterprise training and education marketplaces. As a result of the ~~cash needed~~Trunity eLearning Platform’s innovative multi-tenant cloud-based architecture, this enables a unique integration of academic content with learning management systems. It allows content from multiple sources to ~~close the Merger. Working capital was also raised from loans made~~be assembled into customized living textbooks and courseware and delivered with real-time updates directly to the ~~Company~~student on any Internet-enabled computer or smart mobile device. All content powered by ~~its founders,~~us 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 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. Our Platform currently hosts a growing community of several thousand expert contributors made up of many of the world’s top scientists and educators, who create peer-reviewed educational content. We have customers both domestically and internationally, as we have won a significant national project in Ukraine. 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 the Earth (EoE) and Climate Adaptation and Mitigation E-Learning (CAMEL), all of which ~~were $117,620~~serve as core content contributors to the Trunity Knowledge Exchange. In addition, we completed a significant project for The National Academy of Sciences to develop and deploy an online collaboration workspace for scientists to exchange and publish scientific findings from the investigation of declassified satellite earth imagery.

Our current market penetration strategies are focused on optimizing prevailing opportunities within three key channels: K-12, Higher Education and International Initiatives which include national education ministries and private schools. These efforts are expected to yield notable revenue growth for Trunity in ~~2011. In 2011,~~2014, and represent what we believe is the beginning of a positive, upward trend. Moreover, our go-to-market strategy is expected to continue attracting significant new revenue opportunities for the Company, ~~converted $4,063,811~~serving to further validate our technology and vision. As progress is made in this regard, we expect to play a meaningful role in transforming the publishing industry and improving the quality of ~~its long-term debt~~content being delivered to ~~common stock, thereby reducing interest expense and future principal obligations.~~students worldwide.

In 2013 to date, the Company has privately sold 687,500 shares of common stock raising $275,000 at a price of $0.40 per share. The Company incurred stock issuance costs of approximately $8,000 consisting chiefly of commissions paid to broker-dealers who assisted with the offering.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This Item is not required for a Smaller Reporting Company.

TRUNITY HOLDINGS, INC.

CONTENTS

PAGE	38	REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

PAGE	39	BALANCE SHEETS AS OF DECEMBER 31, 2013 AND DECEMBER 31, 2012

PAGE	40	CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2013 AND DECEMBER 31, 2012

PAGE	41	CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) FOR THE PERIOD FROM DECEMBER 31, 2011 TO DECEMBER 31, 2013

PAGE	42	CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012

PAGES	43	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Trunity Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Trunity Holdings, Inc. and its subsidiary as of December 31, 2013 and 2012, and the related statements of operations and comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2013 and 2012. Trunity Holdings, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Trunity Holdings, Inc. and its subsidiary as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America.

/s/ Cherry Bekaert LLP

Fort Lauderdale, Florida

April 15, 2014

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

~~TRUNITY, INC.~~

~~CONTENTS~~

	~~Page~~

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~	36

~~BALANCE SHEETS AS OF DECEMBER 31, 2012 AND DECEMBER 31, 2011~~	37

~~CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 AND FOR THE PERIOD FROM JULY 28, 2009 (INCEPTION) TO DECEMBER 31, 2012~~	38

~~CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIENCY) FOR THE PERIOD FROM JULY 28, 2009 (INCEPTION) TO DECEMBER 31, 2012~~	39

~~CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011 AND CUMULATIVE FROM INCEPTION (JULY 28, 2009) TO DECEMBER 31, 201~~2	40

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~	41

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~

~~To the Board of Directors and~~

~~Stockholders of Trunity Holdings, Inc.~~

We have audited the accompanying balance sheets of Trunity Holdings, Inc. (a development stage company) as of December 31, 2012 and 2011, and the related statements of operations and comprehensive loss, stockholders’ (deficit) equity, and cash flows for each of the years in the two-year period ended December 31, 2012 and the period from inception on July 28, 2009 to December 31, 2012. Trunity Holdings, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Trunity Holdings, Inc. as of December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2012 and the period from inception on July 28, 2009 to December 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

~~/s/ Cherry Bekaert LLP Fort Lauderdale, Florida~~

~~April 16, 2013~~

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

~~(A Development Stage Company)~~

Consolidated Balance Sheets

December 31,
2012 2011
ASSETS

Current assets
Cash $ 13,724 $ 123,135
Accounts receivable 1,615 2,800
Prepaid expenses and other current assets - 6,460
Deposits - 175,000
Total current assets 15,339 307,395

Property and equipment
Fixtures and equipment 178,348 162,006
Less accumulated depreciation (125,621 ) (75,365 )
52,727 86,641
Capitalized software development costs
Costs incurred 3,114,295 2,566,264
Less accumulated amortization (2,463,347 ) (1,796,220 )
650,948 770,044
Other assets
Debt issuance costs 60,305 -

TOTAL ASSETS $ 779,319 $ 1,164,080

LIABILITIES
Current liabilities
Accounts payable $ 619,304 $ 473,848
Accrued interest and other liabilities 133,235 210,348
Notes payable-related party 70,761 85,825
Convertible note payable 49,024 -
Deferred revenue 28,267 -
Stock subscribed - 25,000
Deferred rent, current portion 5,907 10,134
Total current liabilities 906,498 805,155

Long-term liabilities
Deferred rent, long term portion - 5,914
Debentures Series A and B, carrying value 776,007 -
Total long-term liabilities 776,007 5,914

Total Liabilities 1,682,505 811,069

Commitments and Contingencies

STOCKHOLDERS' (DEFICIT) EQUITY
Common stock, $0.001 par value - 50,000,000 share authorized, 36,131,432 and 32,641,953 shares issued and outstanding at December 31, 2012 and December 31, 2011, respectively.
36,131 32,642
Additional paid-in-capital 8,405,482 7,228,386
Other comprehensive loss (8,299 ) -
Deficit accumulated during development stage (9,336,500 ) (6,908,017 )

Total Stockholders' (Deficit) Equity (903,186 ) 353,011

TOTAL LIABILTIES AND STOCKHOLDERS' (DEFICIT) EQUITY $ 779,319 $ 1,164,080

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

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~Consolidated Statement of Operations and Comprehensive Loss~~

Years Ended December 31, For the Period
From July 28, 2009
(Inception) to
December 31,

2012 2011 2012

Net Sales $ 159,359 $ 299,074 $ 648,866
Cost of sales 58,522 104,236 242,627
Gross Profit 100,837 194,838 406,239

Operating Expenses:
Research and development 894,157 939,557 4,442,197
Selling, general and administrative 1,493,233 1,178,075 4,130,950
2,387,390 2,117,632 8,573,147

Loss From Operations (2,286,553 ) (1,922,794 ) (8,166,908 )

Other Income (Expense):
Interest expense (141,930 ) (466,345 ) (1,169,592 )

Net Loss (2,428,483 ) (2,389,139 ) (9,336,500 )

Other Comprehensive loss:
Foreign currency translation loss (8,299 ) - (8,299 )
Total Other Comprehensive Loss $ (8,299 ) $ - $ (8,299 )
Comprehensive Loss $ (2,436,782 ) $ (2,389,139 ) $ (9,344,799 )
Net Loss per Share - Basic and Diluted $ (0.07 ) $ (0.08 )

Comprehensive Loss
Weighted Average Number of Shares Outstanding During the Period - Basic and Diluted 35,051,373 31,200,285

	December 31,			December 31,
	2013			2012

ASSETS
Current assets
Cash	$	812,064		$	13,724
Accounts receivable		2,729			1,615
Prepaid expenses and other current assets		41,636			—
Total current assets		856,429			15,339

Property and equipment
Fixtures and equipment		210,172			178,348
Less accumulated depreciation		(164,226	)		(125,621	)
		45,946			52,727
Capitalized software development costs
Costs incurred		3,634,029			3,114,295
Less accumulated amortization		(2,917,866	)		(2,463,347	)
		716,163			650,948
Other assets
Debt issuance costs and other assets		32,022			60,305

TOTAL ASSETS	$	1,650,560		$	779,319

LIABILITIES
Current liabilities

Accounts payable	$	394,325		$	619,304
Accrued interest and other liabilities		279,465			133,235
Notes payable-related party		252			70,761
Debentures Series A and B, carrying value		991,501			—
Convertible note payable		—			49,024
Deferred revenue		315,850			28,267
Deferred rent, current portion		—			5,907
Total current liabilities		1,981,393			906,498

Long-term liabilities
Deferred rent, long term portion		2,515			—
Debentures Series A and B, carrying value		—			776,007
Total long-term liabilities		2,515			776,007

Total Liabilities		1,983,908			1,682,505

Commitments and Contingencies

STOCKHOLDERS’ (DEFICIT) EQUITY
Common stock, $0.0001 par value - 50,000,000 share authorized, 46,697,891 and 36,131,432 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively.		4,670			3,613
Additional paid-in-capital		12,396,355			8,438,000
Other comprehensive loss		3,649			(8,299	)
Accumulated Deficit		(12,738,022	)		(9,336,500	)

Total Stockholders’ (Deficit) Equity		(333,348	)		(903,186	)

TOTAL LIABILTIES AND STOCKHOLDERS’ (DEFICIT) EQUITY	$	1,650,560		$	779,319

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

3839

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

~~(A Development Stage Company)~~Consolidated Statement of Operations and Comprehensive Loss

	For the Year Ended			For the Year Ended
	Dec 31,			Dec 31,
	2013			2012

Net Sales	$	176,437		$	159,359

Cost of sales		78,358			58,522

Gross Profit		98,079			100,837

Operating Expenses:
Research and development		838,925			894,157
Selling, general and administrative		2,268,031			1,493,233
		3,106,956			2,387,390

Loss From Operations		(3,008,877	)		(2,286,553	)

Other Income (Expense):
Interest expense		(392,645	)		(141,930	)

Net Loss		(3,401,522	)		(2,428,483	)

Other Comprehensive Gain (Loss):
Foreign currency translation gain (loss)		11,948			(8,299	)
Total Other Comprehensive Gain (Loss)	$	11,948		$	(8,299	)

Comprehensive Loss	$	(3,389,574	)	$	(2,436,782	)

Net Loss per Share - Basic and Diluted	$	(0.08	)	$	(0.07	)

Weighted Average Number of Shares Outstanding During the Period - Basic and Diluted		42,811,746			35,051,373

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

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Consolidated Statement of Changes in ~~Stockholders'~~Stockholders’ Equity ~~(Deficiency)~~ (Deficit)

~~Period From July 28, 2009 (Date of Inception) to December 31, 2012~~

Deficit
Accumulated Total
Par $ .001 Stock Accumulated during the Stockholders'
Common Common Paid in Subscription Comprehensive Development Equity
Shares* Stock Capital Receivable Loss Stage (Deficiency)
Balance at July 28, 2009 (date of inception) - $ - $ - $ - $ - $ - $ -
Issuance of founders' stock 7,300,667 7,301 (5,901 ) - - - 1,400
Sale of common stock 880,000 880 459,120 (50,000 ) - - 410,000
Stock issuance costs - - (40,825 ) - - - (40,825 )
Common stock issued to investors in a debt offering
822,000 822 410,260 - - - 411,082
Shares issued for stock offering services 33,333 33 30,792 - - - 30,825
Employee stock based compensation - - 64,941 - - - 64,941
Net loss - - - - - (2,015,490 ) (2,015,490 )
Balance at December 31, 2009 9,036,000 $ 9,036 $ 918,387 $ (50,000 ) $ - $ (2,015,490 ) $ (1,138,067 )
Sale of common stock 1,282,005 1,282 655,218 50,000 - - 706,500
Stock issuance costs - - (12,160 ) - - - (12,160 )
Employee stock based compensation - - 40,990 - - - 40,990
Net loss - - - - - (2,503,388 ) (2,503,388 )
Balance at December 31, 2010 10,318,005 �� $ 10,318 $ 1,602,435 $ - $ - $ (4,518,878 ) $ (2,906,125 )
Sale of common stock 6,857,538 6,858 1,742,717 - 1,749,575
Shares issued for stock offering services 1,698,318 1,698 (1,698 ) - - - -
Stock issuance costs - - (111,775 ) - - - (111,775 )
Common stock issued for accrued interest conversion of 8% convertible promissory notes
64,009 64 76,747 - - - 76,811
Common stock issued upon conversion of 8% convertible promissory notes
513,750 514 615,986 - - - 616,500
Common stock issued upon conversion of 9% convertible promissory notes
1,458,333 1,458 436,042 - - - 437,500
Common stock issued for accrued interest upon conversion of note sold to an outside investor
160,000 160 39,840 - - - 40,000
Common stock issued upon conversion of a note sold to an outside investor
400,000 400 99,600 - - - 100,000
Common stock issued to founders upon conversion of Trunity, LLC note
7,200,000 7,200 1,792,800 - - - 1,800,000
Common stock issued upon conversion of lines of credit with founders
3,972,000 3,972 989,028 - - - 993,000
Employee stock based compensation (benefit) - - (53,336 ) - - - (53,336 )
Net loss - - - - - (2,389,139 ) (2,389,139 )
Balance at December 31, 2011 32,641,953 $ 32,642 $ 7,228,386 $ - $ - $ (6,908,017 ) $ 353,011
Sale of common stock 3,164,479 3,164 943,157 - �� - - 946,321
Reverse recapitalization related to acquisition 325,000 325 (325,325 ) - - - (325,000 )
Employee stock based compensation - - 226,807 - - - 226,807
Warrants issued for services - - 37,453 - - - 37,453
Debt beneficial conversion feature, net of issuance costs
- - 295,004 - - - 295,004
Foreign currency translation loss - - - - (8,299 ) - (8,299 )
Net loss - - - - - (2,428,483 ) (2,428,483 )
Balance at December 31, 2012 36,131,432 $ 36,131 $ 8,405,482 $ - $ (8,299 ) $ (9,336,500 ) $ (903,186 )

	Par $ .0001 Common Shares*		Common Stock			Paid in Capital			Accumulated Comprehensive Loss			Accumulated Deficit			Total Stockholders’ Equity (Deficit)
Balance at December 31, 2011		32,641,953	$	32,642		$	7,228,386		$	—		$	(6,908,017	)	$	353,011
Sale of common stock, net of issuance costs		3,164,479		3,164			943,157			—			—			946,321
Reverse recapitalization related to acquisition		325,000		325			(325,325	)		—			—			(325,000	)
Reclass for Recapitalization of Stock Entry		—		(32,518	)		32,518			—			—			—
Employee stock based compensation		—		—			226,807			—			—			226,807
Warrants issued for services		—		—			37,453			—			—			37,453
Debt beneficial conversion feature, net of issuance costs		—		—			295,004			—			—			295,004
Foreign currency translation loss		—		—			—			(8,299	)		—			(8,299	)
Net loss		—		—			—			—			(2,428,483	)		(2,428,483	)
Balance at December 31, 2012		36,131,432	$	3,613		$	8,438,000		$	(8,299	)	$	(9,336,500	)	$	(903,186	)
Sale of common stock, net of issuance costs		10,192,617		10,193			3,594,914			—			—			3,605,107
Common stock issued upon conversion of trade payable		143,750		144			57,356			—			—			57,500
Shares issued for services		120,000		120			31,024			—			—			31,144
Exercise of common stock options		110,092		11			38,521									38,532
Reclass for recapitalization of stock entry		—		(9,411	)		9,411			—			—			—
Stock compensation period costs		—		—			227,129			—			—			227,129
Foreign currency translation gain		—		—			—			11,948			—			11,948
Net loss		—		—			—			—			(3,401,522	)		(3,401,522	)
Balance at December 31, 2013		46,697,891	$	4,670		$	12,396,355		$	3,649		$	(12,738,022	)	$	(333,348	)

* As adjusted for a 1 for 3 reverse stock split that occurred in 2011 - see Note 7.

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

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~Consolidated Statement of Cash Flows~~

Cumulative from
Inception
(July 28, 2009 ) to
December 31,
2012

Years Ended
December 31,
2012 2011
Cash Flows from Operating Activities:
Net Loss $ (2,428,483 ) $ (2,389,139 ) $ (9,336,500 )
Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 717,384 845,640 2,588,968
Stock compensation expense 122,107 (53,336 ) 129,427
Accretion for debt discounts and issuance costs 79,461 - 79,461
Changes in operating assets and liabilities:
Accounts receivable 1,185 2,198 (1,615 )
Prepaid expenses and other assets 6,460 30,310 4
Deposits (150,000 ) (175,000 ) (325,000 )
Other long-term assets - 19,632 -
Accounts payable 145,456 169,825 595,108
Accrued interest and other liabilities 39,876 201,158 477,411
Deferred revenue 28,267 (78,703 ) 28,267
Deferred rent (10,138 ) - 5,907
Accrued interest included in notes payable - 53,500 -
Net Cash Used In Operating Activities (1,448,425 ) (1,373,915 ) (5,758,562 )
Cash Flows From Investing Activities:
Purchase of fixed assets (16,342 ) (70,804 ) (178,348 )
Payment of platform development costs (548,030 ) (327,099 ) (3,114,294 )
Net Cash Used In Investing Activities (564,372 ) (397,903 ) (3,292,642 )
Cash Flows From Financing Activities
Net advances on line of credit related parties - 56,367 (105,987 )
Proceeds from notes payable related parties 505,526 178,041 3,443,720
Repayments on notes payable related parties (177,500 ) - (177,500 )
Proceeds from issuance of debenture, net issuances cost 523,081 - 523,081
Sale of common stock 1,323,534 1,769,576 4,657,918
Stock issuance costs (271,255 ) (111,775 ) (436,015 )
Net Cash Provided By Financing Activities 1,903,386 1,892,209 7,905,217
Net Decrease in Cash and Cash Equivalents (109,411 ) 120,391 (1,145,987 )
Cash, Beginning of Period 123,135 2,744 -
Cash, End of Period $ 13,724 $ 123,135 $ 13,724

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest $ - $ 160,000 $ 405,904

Non-cash Investing and Financing Transactions:
Conversion of debt to common stock shares $ - $ 4,063,811 $ 4,063,811
Issuance of stock in acquisition of subsidiary $ 325 $ - $ 325

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

4041

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

~~(A Development Stage Company)~~Consolidated Statement of Cash Flows

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

	For the Year Ended			For the Year Ended
	December 31,			December 31,
	2013			2012
Cash Flows from Operating Activities:
Net Loss	$	(3,401,522	)	$	(2,428,483	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		493,123			717,384
Stock compensation expense		227,129			122,107
Accretion for debt discounts and issuance costs		320,979			79,461
Shares issued in exchange for services		31,144			—
Changes in operating assets and liabilities:
Accounts receivable		(1,114	)		1,185
Prepaid expenses and other assets		(41,636	)		6,460
Accounts payable, net of conversion to shares		(167,476	)		145,456
Deposits		—			(150,000	)
Accrued interest and other liabilities		146,230			39,876
Deferred revenue		287,583			28,267
Deferred rent		(3,392	)		(10,138	)
Net Cash Used In Operating Activities	$	(2,108,952	)	$	(1,448,425	)
Cash Flows From Investing Activities:
Purchase of fixed assets		(31,824	)		(16,342	)
Payment for patent application		(10,000	)		—
Payment of platform development costs		(519,734	)		(548,030	)
Net Cash Used In Investing Activities	$	(561,558	)	$	(564,372	)
Cash Flows From Financing Activities
Proceeds from notes payable related parties		122,456			505,526
Repayments on notes payable and interest on convertible debt to related parties		(245,131	)		(177,500	)
Repayment ofof convertible note		(20,106	)		—
Proceeds from exercise of common stock options		38,531			—
Proceeds from debentures, net of issuance costs		—			523,081
Sale of common stock, net of issuance costs		3,573,100			1,052,279
Net Cash Provided By Financing Activities	$	3,468,850		$	1,903,386
Net Increase (Decrease) in Cash and Cash Equivalents		798,340			(109,411	)
Cash, Beginning of Period		13,724			123,135
Cash, End of Period	$	812,064		$	13,724

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest	$	27,696		$	—

Non-cash Investing and Financing Transactions:
Conversion of convertible note to common stock shares	$	32,006		$	—
Issuance of stock in acquisition of subsidiary	$	—		$	325

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, ~~2012~~2013

Note 1 – Organization, Basis Ofof Presentation ~~And~~and Nature Ofof Operations

The accompanying audited 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 for financial information.

The accompanying consolidated financial statements include the accounts of Trunity Holdings, Inc. and its wholly owned subsidiary Trunity, Inc., for the ~~year~~years ended December 31, ~~2012, the prior year period~~2013 and ~~for the period from July 28, 2009 (inception) to December 31,~~ 2012. All intercompany accounts have been eliminated in the consolidation.

Trunity, Inc. (“the Company”) is a “C” Corporation organized under the Laws of Delaware with principal offices in ~~Newburyport, Massachusetts.~~Portsmouth, New Hampshire. It was formed on July 28, 2009 to develop a cloud-based knowledge sharing platform that focuses on e-learning, virtual textbooks, customer experience and education ~~marketplace.~~market place. The Company was formed though the acquisition of certain intellectual property by its three founders.

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 ~~Company is~~impact of this transaction was a $400,000 payment that was reflected in the ~~development stage~~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 it is presently undertaking research and development of its platform. The Company’s core products, Knowledge, Learn and Connect, are in production and operational, and are currently in use by a limited number of paying customers; however, our revenues are well belowlicense term on the ~~level needed for profitability.~~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 Consolidated Financial Statements

December 31, 2013

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.

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. We believe the following critical accounting policies affect its more significant judgments and estimates used in the preparation of financial statements.

Development Stage Operations - The Company has operated as a development stage enterprise since its inception by devoting substantially all of its efforts to business development. We ~~currently anticipate exiting from~~exited the development stage ~~during~~in the ~~beginning~~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 negative operating cash flow since its inception. To the extent the Company may have negative cash flows in the future; it will continue to require additional capital to fund operations. The Company obtained additional capital investments under various debt and common stock issues. Although management continues to pursue its financing plans, there is no assurance that the Company will be successful in obtaining sufficient revenues to generate positive cash flow. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.

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

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2012~~

~~Note 2 – Summary of Significant Accounting Policies-~~ ~~Continued~~

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 Financial Accounting Standards Board (“FASB”) ASC Accounting Standards Codification (“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 such contracts, revenue is earned upon achievement of certain milestones indicated in the client agreements. 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.

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

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

Cash and Cash Equivalents - Cash and cash equivalents may include highly liquid investments that are readily convertible to known amounts of cash, and which are subject to an insignificant risk of changes in value due to interest rate, market price, or penalty on withdrawal. Amounts on deposit and available upon demand, or negotiated to provide for daily liquidity without penalty, are classified as Cash and cash equivalents.

The Company places its cash and cash equivalents on deposit with financial institutions in the United States. Beginning December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts were fully insured by the Federal Deposit Insurance Company ('FDIC'), regardless of the balance of the account, at all FDIC-insured institutions. However, this provision expired on December 31, 2012 and beginning January 1, 2013 noninterest-bearing deposits now receive the same $250,000 insurance coverage provided to a depositor's other deposit accounts held at an FDIC-insured institution.

Accounts Receivable - We estimate credit loss reserves for accounts receivable on an individual receivable basis. A specific impairment allowance reserve is established based on expected future cash flows and the financial condition of the debtor. We charge off customer balances in part or in full when it is more likely than not that we will not collect that amount of the balance due. We consider any balance unpaid after the contract payment period to be past due. We believe all accounts receivable due at December 31, ~~2021~~2013 and ~~2011~~2012 to be collectible.

Property and Equipment - Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets (generally three to seven years). Expenditures for major betterments and additions are capitalized, while replacement, maintenance and repairs, which do not extend the lives of the respective assets, are expensed as incurred.

~~Deposits~~ - In April 2011, the Company signed a letter of intent to purchase a majority ownership stake in another company. The terms of this agreement call for certain actions to be undertaken by both parties. In 2011, the Company has made deposits of $175,000 pursuant to this agreement. In 2012, the Company has made deposits of $150,000 pursuant to this agreement These deposits are not refundable in the event that either party does not or cannot fulfill its required actions.

Accounting for Uncertainty in Income Taxes - Income taxes are accounted for in accordance with FASB ASC Topic 740, “Income Taxes” (“ASC 740”). Under ASC 740, income taxes are recognized for the amount of taxes payable for the current year and deferred tax assets and liabilities for the future tax consequence of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using statutory tax rates and are adjusted for tax rate changes. We consider accounting for income taxes critical to our operations because management is required to make significant subjective judgments in developing our provision for income taxes, including the determination of deferred tax assets and liabilities, and any valuation allowances that may be required against deferred tax assets.

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2012~~

~~Note 2 – Summary of Significant Accounting Policies-~~ ~~Continued~~

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. Our evaluation was performed for the tax period from July 28, 2009 (inception) to December 31, ~~2012.~~2013. We may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments are expected to be minimal and immaterial to our financial results. In the event we have received an assessment for interest and/or penalties, it would be classified in the financial statements as selling, general and administrative expense. The tax years ~~2009~~2010 through ~~2012~~2013 are subject to examination by federal and state taxing authorities.

Taxes on Revenue Producing Transactions – The Company earns revenues through various services. Service revenue is taxable in some jurisdictions throughout the United States and The Company could be responsible for collecting those taxes subject to state or local requirements. The Company is not aware of any transactions which would necessitate the fiduciary responsibility of collecting and remitting sales based taxes.

Website Development - –The Company has adopted the provisions of FASB ~~Accounting Standards Codification No.~~ASC Topic 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~~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~~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~~. During the period July 28, 2009 (Inception) to December 31, 2012, the Company incurred and capitalized $1,516,669 in website development costs. Amortization for these costs recorded during the period July 28, 2009 (Inception) to December 31, 2012 was $688,347.incurred.

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

Comprehensive Loss - The Company has adopted ASC Topic 220, ~~"Comprehensive~~“Comprehensive Income."” This statement establishes standards for reporting comprehensive income and its components in a financial statement. Comprehensive income as defined includes all changes in equity (net assets) during a period from non-owner sources. Items included in the Company’s comprehensive loss consist of unrealized ~~losses on available-for-sale securities.~~gain (losses).

~~Common Stock Purchase Warrants~~ - The Company accounts for common stock purchase warrants in accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities”. As is consistent with its handling of stock compensation and convertible debt, the Company has elected the intrinsic value method for valuing the impact of the expense associated with these warrants.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that of mark-to-market adjustments for the Canadian debentures, affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

Stockholders’ Equity - Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of the service or assets received in exchange.

Common stock share amounts in these financial statements have been retroactively adjusted for the effects of a 1 for 3 reverse stock split that occurred in 2011, as required by ASC Topic 505-20 (see Note 7)9).

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2012~~

~~Note 2 – Summary~~Common Stock Purchase of ~~Significant Accounting Policies-~~ ~~Continued~~

Warrants - The Company accounts for common stock purchase warrants in accordance with ASC 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 stock options is estimated at the grant date based on each ~~option's~~option’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. Amortization expense for the years ended December 31, ~~2012~~2013 and ~~2011~~2012 was approximately ~~$667,127~~$0 and ~~$800,904,~~$43,640, respectively. The Company has elected the intrinsic 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:

~~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.~~

	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 Company does not maintain any investments at 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.value.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

Note 3 –-- Recent Accounting Pronouncements

In ~~June 2011,~~July 2013, the ~~FASB issued~~Financial Accounting Standards ~~Update No. 2011-05, Presentation of Comprehensive~~Board (“FASB”) issued an update to Topic 740, Income ~~(“ASU 2011-05”), to require an entity~~Taxes. This update requires companies to present an unrecognized tax benefit (“UTB”) as a reduction to a deferred tax asset for a net operating loss carryforward, asimilar tax loss, or a tax credit carryforward in the ~~total~~applicable jurisdiction, to the extent such tax attributes are available to offset the additional tax liability that would result if the UTB were disallowed on the balance sheet date. Whether the settlement by use of ~~comprehensive income,~~carryforwards is available under the ~~components of net income,~~law would depend on facts and circumstances available on the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present the components of other comprehensive income as part of the statement of equity.balance sheet date. The ~~standard does not change the items which must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This standard~~new guidance is effective for ~~interim~~the Company beginning July 1, 2014, and ~~annual periods beginning after December 15, 2011 and~~adoption is not expected to be applied retrospectively. The FASB has deferred the requirement to present reclassification adjustments for each component of accumulated other comprehensive income in both net income and other comprehensive income. Companies are required to either present amounts reclassified out of other comprehensive income on the face of the financial statements or disclose those amounts in the notes to the financial statements. During the deferral period, there is no requirement to separately present or disclose the reclassification adjustments into net income. The effective date of this deferral will be consistent with the effective date of the ASU 2011-05. The implementation of ASU 2011-05 did not have a material ~~effect~~impact on the Company’s consolidated financial statements.

On July 1, 2012, the Company adopted the updated guidance to ASC Topic 220, Comprehensive Income, issued by the FASB. The update required companies to present comprehensive income in either one or two consecutive financial statements and eliminated the option that permits the presentation of other comprehensive income in the consolidated statement of shareholders’ equity. The Company adopted the method of presentation using one consecutive financial statement.

In July 2012, the FASB issued ~~authoritative~~an update to ASC Topic 350, Intangibles - Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment (“ASC 350”). The update simplifies the guidance ~~that~~for testing impairment of indefinite-lived intangible assets other than goodwill. Examples of intangible assets subject to the guidance include indefinite-lived trademarks, licenses, and distribution rights. The amendment allows ~~companies~~a company the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test. A company electing to perform a qualitative assessment is no longer required to ~~determine whether impairment testing~~calculate the fair value of an indefinite-lived intangible ~~assets is necessary. Under this guidance, an entity is required to perform a quantitative impairment test if~~asset unless the company determines, based on such qualitative ~~factors indicate~~assessment, that it is ~~more~~“more likely than ~~not~~not” that ~~indefinite-lived intangible assets are~~the asset is impaired. The ~~qualitative factors are consistent with~~changes to ASC 350 were effective for the Company beginning July 1, 2013, the guidance established for goodwill impairment testing and include identifying and assessing events and circumstances that would most significantly impact, individually or in aggregate, the carrying value of the indefinite-lived intangible assets. The implementation did is not have a material impact on the Company’s consolidated financial statements.

In January 2013, the FASB issued another update to the guidance in ASC Topic 220. This update does not change the requirements for reporting net income or other comprehensive income in financial statements, but rather improves the transparency of reporting reclassifications out of accumulated other comprehensive income. The new guidance was effective for the Company beginning July 1, 2013, and adoption did not have a material impact on the Company’s consolidated financial statements or disclosures.

Management has evaluated all other standards issued and to be effective and has determined their impact to the financials will not be material.

4448

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~Notes To Consolidated Financial Statements

December 31, ~~2012~~2013

Note 4 – Property and Equipment

A summary of property and equipment at December 31, ~~2012~~2013 and ~~2011~~2012 is as follows:

	2012			2011
December 31,							2013			2012

Furniture and fixtures	$	13,402		$	12,154		$	18,660		$	13,402
IT Equipment and software		164,946			149,852			191,512			164,946

Total Property and Equipment		178,348			162,006			210,172			178,348

Less: Accumulated depreciation		(125,621	)		(75,365	)		(164,226	)		(125,621	)

Net Property and Equipment	$	52,727		$	86,641		$	45,946		$	52,727

The amounts charged to operations for depreciation for the years ended December 31, ~~2012~~2013 and ~~2011~~2012 was approximately ~~$50,256~~$38,605 and ~~$44,735,~~$50,256, respectively.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

Note 5 – Intangible Assets

Intangible assets were comprised of the following at December 31, ~~2012~~2013 from Inception:

Trunity 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 (288,287 ) $ 57,057

Internal costs capitalized for the twelve months ended December 31, 2011 3 years 327,100 (163,550 ) $ 163,550

Internal costs capitalized for the twelve months ended December 31, 2012
3 years 540,030 (117,689 ) $ 430,341

Carrying value as of December 31, 2012 $ 650,948

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2012~~

~~Note 5 – Intangible Assets-Continued~~

Trunity 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		(272,583	)	$	54,517

Internal costs capitalized for the twelve months ended December 31, 2012	3 years		548,031		(300,367	)	$	247,664

Internal costs capitalized for the twelve months ended December 31, 2013	3 years		519,733		(105,751	)	$	413,982

Carrying value as of Dec 31, 2013							$	716,163

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

For the period ending December 31, 2012:
2013	$	348,768
For the period ending December 31, :
2014		237,194	$	410,438
2015		64,986		238,231
2016				67,494
Total future amortization expense	$	650,948	$	716,163

The ~~Company’s~~ 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. Amortization of three years is based on management’s best estimate of useful life of current technology in this industry.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

Note 6- Notes Payable

~~Note6- Notes Payable~~At December 31, 2013, outstanding notes payable was made up of the following:

Note Holder	Principal		Accrued Interest		Outstanding as of December 31, 2013
Notes Payable– Related Parties	$	252	$	—	$	252
Total notes payable – current liabilities					$	252

At December 31, 2012, outstanding notes payable was made up of the following:

Note Holder Principal Accrued Interest
Outstanding as of
December 31,
2012

Notes Payable– Related Parties $ 53,977 $ -- $ 53,977
Loan from investor 66,784 5,000 71,784
Total notes payable – current liabilities $ 125,761

~~At December 31, 2011, outstanding notes payable is made up of the following:~~

Note Holder Principal Accrued Interest
Outstanding as of
December 31,
2011

Trunity LLC $ -- $ 141,996 $ 141,996
Notes Payable to Founders 69,041 -- 69,041
Payable to Related Parties 211,037

Loan from investor 16,784 -- 16,784
Total notes payable – current liabilities $ 227,821

Note Holder	Principal		Accrued Interest		Outstanding as of December 31, 2012
Notes Payable– Related Parties	$	53,977	$	—	$	53,977
Loan from investors		66,784		5,000		71,784
Total notes payable – current liabilities					$	125,761

Notes Payable to Founders – In 2009, the Company entered into line of credit agreements with two of the founders to borrow up to $0.9 million, as needed, to fund working capital needs of the Company. These notes carried an interest rate of 10% and are to expire in September and December 2013. In July 2011, all principal and interest due on these notes was converted to shares of common stock in the Company.

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2012~~

~~Note6- Notes Payable-Continued~~

At December 31, ~~2011~~2013 and 2012, the notes payable to the founders ~~consists~~consisted of short-term loans with the three founders. Credit agreements exist 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% only and ~~were extended by the~~have been amended with board ~~indefinitely~~consent to remain in effect until December 31, 2014 subsequent to the initial expiration ~~date of December of 2012.~~date. The loans have no repayment terms but ~~are expected to be settled~~were repaid in the second quarter of 2013. As of December 31, 2013, Les Anderton has a shareholder loan of $252. As of December 31, 2012, Terry Anderton, Les Anderton, and Joakim Lindblom had shareholder loans that were comprised of the following balances: $28,401, $10,066 and $15,510, respectively.

~~Trunity, LLC Note~~ - Trunity, LLC was formed by the three founders of the Company to acquire the technology platform used by the Company. The assets of Trunity, LLC, which consisted chiefly of the rights to the technology platform, was sold to the Company for $1.8 million in the form of a Note bearing interest of 8% payable with 120 monthly installments, maturing in June 2019. In July 2011, all principal due on this note was converted to common shares of the Company and distributed to the three owners of Trunity, LLC. In 2011, the Company made $153,500 in interest payments to the three founders. In 2012, the Company converted the interest payable of $141,996 to the founders into debentures. See Note 8 for further discussion.

Short-term loan from ~~Investor~~Investors - In 2011, an investor in the Company made a short-term loan of $16,784 to the Company to cover its working capital needs. There are no documented terms for this loan. The Company has treated the loan as interest free and ~~it expects to repay~~ the loan was repaid in ~~a short period~~second quarter of ~~time.~~2013.

In 2012, an investor in the Company made a short-term loan of $50,000 to the Company to cover its working capital needs. There are no documented terms for this ~~loan~~loan; however the Company ~~has agree to pay by the end of~~repaid this loan during the second quarter of 2013 including accrued interest expense of $5,000.

~~Conversion of Notes to common shares of the Company~~ - During the year ended December 31, 2011, the Company converted all of its long-term outstanding debt, totaling $3.8 million, to its common shares. Of the amount converted, $2.8 million was debt held by the three founders. Outside investors converted the remaining $1 million of debt. The Company incurred non-cash expenses of approximately $293,000 to convert this debt. This charge is primarily the unamortized discount incurred with the issuance of the Company’s first debt offering in 2009.

In October 2010, the Company issued a single $100,000 promissory note to an investor. The note called for fixed interest of $5,000 per month. This note had a maturity of January 8, 2011. Additionally, 100,000 warrants to purchase shares of Company stock were issued to this investor. See note 9 below, for a description of these warrants. In August 2011, this note with accrued but unpaid interest was converted to common shares.

Interest expense recognized for the years ended December 31, 2013 and 2012 related to notes payable and ~~2011~~debentures was ~~$141,930~~$122,799 and ~~$173,253,~~$61,902, respectively.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

Note 7 – ~~Derivative~~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 this derivative ~~liabilities~~liability using Monte Carlo simulations. The Company used the following assumptions in estimating the fair value of the derivative liabilities on the issuance date ~~and as~~through the conversion dates of ~~December 31, 2012.~~

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2012~~

~~Note 7 – Derivative-Continued~~the debt.

	Issuance Date			December 31, 2012			Issuance Date			December 31, 2012			March 30, 2013			May 22, 2013			June 19, 2013
Expected Volatility		51.08	%		52.67	%		51.08	%		52.67	%		40.55	%		38.46	%		25.09	%
Expected Term	0.75 Years			0.6 Years			0.75 Years			0.6 Years			0.3 Years			0.16 Years			0.1 Years
Risk Free Interest Rate		0.19	%		0.16	%		0.19	%		0.16	%		0.07	%		0.04	%		0.05	%
Dividend Rate		0	%		0	%		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 ~~dates~~date of issuance to ~~December 31, 2012,~~the date of conversion into 166,744 shares of common stock, the fair value of the derivative liability ~~did not change~~changed to $32,007 resulting in expense of $616 and ~~no expense or income was recognized~~a reclass to additional paid in capital of $31,990 that 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 ~~change~~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 this derivative liability using Monte Carlo simulations. The Company determined the assumptions in estimating the fair value of the derivative ~~liability.~~liabilities on the issuance date and as of June 24, 2013.

	Issuance Date			March 31, 2013			June 24, 2013
Expected Volatility		50.77	%		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.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

Note 8-8 – Convertible Debt

July 2012 Convertible ~~Debentures-~~Debentures

In July 2012, the Company issued convertible debentures (“July Notes”) with an aggregate face value of $215,300 Canadian Dollars ($~~217,173~~205,224 as of December 31, ~~2012)~~2013). The ~~notes~~July Notes mature in July 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 Canadian Dollars per share (“Unit”). The number of ~~units~~Units issuable upon conversion of the 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 ~~notes.~~ July 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 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 ~~third and fourth quarter of 2012,~~twelve months ended December 31, 2013, the Company recorded amortization of the discount of ~~$17,664.~~$42,394. As of December 31, ~~2012,~~2013, the net carrying value of the July Notes totaled ~~$150,050,~~$180,494, net of unamortized discount of ~~$67,123. Total~~$24,730. For the twelve months ended December 31, 2013, interest expense on the July Notes ~~totaled $9,926 for the third and fourth quarter~~ of ~~2012.~~

$20,910 was recorded.

In connection with the issuance of the July ~~2012~~ Notes, the Company paid transactions fees to brokers consisting of cash of $85,237, and warrants to purchase 43,497 shares over a two-year period for 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 ~~notes.~~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 ~~totaled $11,015 third and fourth quarter~~on the July Notes of ~~2012.~~$26,435 was recorded for twelve months ended December 31, 2013.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

September 2012 Convertible ~~Debentures-~~Debentures

In September 2012, the Company issued convertible debentures (“September Notes”) with an aggregate face value of $330,900. The ~~notes~~September Notes mature in September 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 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 notes, or b) $0.32 if a Liquidity Event does not occur within six months of the closing of the offering of the ~~notes.~~ September 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 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 is being amortized into interest expense through the maturity dates of the September Notes. For the ~~third and fourth quarter of 2012,~~12 months ended December 31, 2013, the Company recorded amortization of the discount of ~~$19,285.~~$57,856. As of December 31, ~~2012,~~2013, the net carrying value of the September Notes totaled ~~$234,473,~~$292,329, net of unamortized discount of ~~$96,427. Total~~$38,571. For the twelve months ended December 31, 2013 interest expense on the September Notes ~~totaled $12,697 for third and fourth quarter~~ of ~~2012.~~$33,090 was recorded.

In connection with the issuance of the September ~~2012~~ 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 ~~notes.~~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 ~~totaled~~on the September Notes of $9,903 was recorded for the ~~third and fourth quarter of 2012 was $3,301 for 2012.~~

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

twelve months ended December 31, ~~2012~~

2013.

~~Note 8- Convertible Debt-~~ ~~Continued~~

October and November 2012 Convertible ~~Debentures-~~Debentures

In October and November 2012, the Company issued convertible debentures (“October and November Notes”) with an aggregate face value of $624,372 of which $313,440 represented a conversion of notes ~~payable-~~payable related parties to the Founders. The ~~notes~~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 ~~notes~~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 ~~notes,~~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 ~~notes.~~ October and November Notes.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

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 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%~~–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 ~~quarter~~twelve months ended December 31, ~~2012,~~2013, the Company recorded amortization of the discount of ~~$21,116 including $1,334 for notes payable -related parties.~~$127,193. As of December 31, ~~2012,~~2013 the net carrying value of the October and November Notes totaled ~~$391,484,~~$518,678 net of unamortized discount of ~~$232,887. Total~~$105,694. For the twelve months ended December 31, 2013 interest expense on the October and November Notes ~~for the fourth quarter~~ of ~~2012~~$62,437 was ~~$10,531, including $9,423 of interest expense for notes-related parties.~~recorded.

In connection with the issuance of the October and November ~~2012~~ Notes, the Company paid no cash transactions fees to brokers.

The following is a summary of convertible debentures outstanding as of December 31, ~~2012:~~2013:

	Face Value		Initial Discount			Amortization		Carrying Value		Face Value		Initial Discount			Amortization		Carrying Value
July 2012 Notes	$	217,173	$	(84,788	)	$	17,664	$	150,049	$	205,224	$	(84,788	)	$	60,058	$	180,494
September 2012 Notes		330,900		(115,712	)		19,285		234,473		330,900		(115,712	)		77,141		292,329
October & November Notes		59,000		(13,317	)		1,334		47,017		59,000		(13,317	)		7,909		53,592
November – Related Party Notes		565,372		(240,687	)		19,783		344,468
November – Related Party Notes*											565,372		(240,687	)		140,401		465,086
Total	$	1,172,445	$	(454,504	)	$	58,066	$	776,007	$	1,160,496	$	(454,504	)	$	285,509	$	991,501

* In November 2013, Terry Anderton sold $100,000 principal amount of his related party note to an unrelated third party at face value.

Note 9 – ~~Stockholders’~~Stockholders�� (Deficit) Equity

The Company has one class of stock, common, which has a par value of $0.001 per share. The Company has authorized up to 50,000,000 shares to be issued. During 2011, the Company implemented a 1 for 3 reverse share split of its shares. This transaction had the effect of reducing the number of outstanding shares from 38,874,291 to 12,958,135. The previous periods were adjusted to reflect the stock split.

Issuance of Founders’ Stock - Shortly after the formation of the Company in 2009, a total of 7,300,667 shares were issued to founders of the Company and others at the direction of the founders.

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2012~~

~~Note 9 – Stockholders’ Equity-Continued~~

Sales of Common Stock - During 2009, the Company raised gross proceeds of approximately $460,000 through the sale of 880,000 shares of its common stock to accredited investors at an average price of $0.52 per share. The sale of these shares took place throughout 2009. The Company incurred stock issuance costs in the period that totaled $40,825 of which $30,825 was from the issuance of 33,333 shares to brokers in exchange for services related to the share offering.

During 2010, the Company raised gross proceeds of approximately $653,000 through the sale of 1,282,005 shares of its common stock to accredited investors at an average price of $0.51 per share. The Company incurred stock issuance costs in the year that totaled $12,160.

During 2011, the Company raised gross proceeds of approximately $1.7 million through the sale of 6,857,538 shares of its common stock at an average price of $0.26 per share. These sales of shares occurred at various times throughout 2011. The Company incurred stock issuance costs of approximately $112,000 consisting chiefly of commissions paid to broker-dealers who assisted with the offering. In addition to the cash issuance costs 1,698,318 shares of the Company’s common stock were issued to the lead advisor as per a contractual arrangement.

During 2012, the Company raised gross proceeds of approximately $875,000 through the sale of ~~2,462,211 shares~~2,462,211shares of its common stock to accredited investors in a private placement at an average price of $.35 per share. The Company incurred stock issuance costs of approximately $45,000 consisting chiefly of commissions paid to broker-dealers who assisted with the offering.

~~Shares issued with the conversion of long-term debt in 2011- The Company converted all of its long-term debt to shares of its common stock. These conversions happened throughout 2011 and are summarized in the table below.~~

Note Holder Principal Accrued Interest
Debt Amounts
Converted in 2011

Shares of
Common Stock
Received
Price per Share

Trunity LLC $ 1,800,000 $ -- $ 1,800,000 7,200,000 $ 0.25
Note Payable to Founders 855,379 137,621 993,000 3,972,000 0.25
Notes payable -related parties $ 2,655,379 $ 137,621 $ 2,793,000 $ 11,172,000 $ 0.25

8% Convertible Notes 616,500 76,811 693,311 577,759 1.20
9% Convertible Notes 437,500 -- 437,500 1,458,333 0.30
Note held by outside investor 100,000 40,000 140,000 560,000 0.25
Notes payable to investors $ 1,154,000 $ 116,811 $ 1,270,811 $ 2,596,092 $ 0.49

Total Notes Payable $ 3,809,379 $ 254,432 $ 4,063,811 $ 13,768,092 $ 0.30

5055

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

~~(A Development Stage Company)~~Notes To Consolidated Financial Statements

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

December 31, ~~2012~~

2013

~~Note 9 –~~ ~~Stockholders’ (Deficit) Equity-Continued~~During 2013, the Company raised gross proceeds of $3,857,588 through the sale of 9,668,416 shares of our common stock to investors at a price of $0.40 per share. These sales of shares occurred at various times throughout 2013. The Company incurred stock issuance costs of $186,729 consisting chiefly of commissions paid to broker-dealers who assisted with the offering. In addition, as consideration for services rendered in connection with the Private Placement, the Company issued to the Placement Agent 357,459 restricted shares of our Common Stock, representing 8% of the gross proceeds of the Private Placement at a price of $0.80 per share to determine the number of shares issued to the Placement Agent.

Common stock committed not yet issued – On December 29, 2011, the Company entered into a payment agreement and mutual release with an investment-banking firm that had been hired to provide strategic guidance and secure investors in the Company. The settlement calls for the Company to pay the firm $25,000 upon the Company’s next capital raise, and to issue the firm 100,000 shares of common stock. The Company valued the shares at $0.25 and has reflected this $50,000 total settlement as an administrative expense in the statement of operations. The Company issued these shares to the investment firm in early 2012.

Reverse Merger Transaction - Trunity acquired a 90.1% interest in Brain Tree International, Inc., a Utah corporation (“BTI”), pursuant to a Stock Purchase Agreement with the three principal shareholders of Trunity Holdings, Inc., 961,974 of BTI shares were purchased for the price of $325,000 plus 325,000 shares of Trunity common stock. 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. Pursuant to the reincorporation, 105,064 minority shares of BTI automatically converted into the same number of shares of THI. As a result of the reverse merger the par amount for shares was reduced from $.001 to $.0001 and subsequently an entry was recorded in 2013 to reflect this reclassification.

Warrants for Services - During the year ended December 31, 2012, in connection with services rendered, the Company issued warrants to purchase 250,000 and 25,000 shares of the Company’s common stock at an exercise price of $0.50 and $0.25 per share, respectively. The Company recognized expense of $37,453 related to warrants granted for services rendered during the 12-month period, ended December 31, 2012 and valued them at the grant date using the Black Scholes valuation model.

Shares for Services – During the year ended December 31, 2013, in connection with services rendered, the Company issued 120,000 shares of the Company’s common stock at a strike price of $0.40 per share in exchange for sales and brokerage services conducted on behalf of the Company.

Shares in exchange for conversion of trade payable – During the year ended December 31, 2013, in connection with services rendered, the Company issued 143,750 shares of the Company’s common stock at a strike price of $0.40 per share in exchange for settlement of an outstanding payable due to RCM Financial Consulting of $57,500.

Note 10 – ~~Stock Based~~Stock-Based Compensation

In 2009, the Company approved the 2009 Employee, Director and Consultant Stock Option Plan (The Plan) and authorized an option pool of 5,500,000 shares. Stock options typically vest over a 3 year period and have a life of 10 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 December 31, ~~2012,~~2013, there were ~~63,333~~16,233 shares available for awards under this plan.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

In 2012, the Company approved the 2012 Employee, Director and Consultant Stock Option Plan (The Plan) and authorized an option pool of 7,500,000 shares. Stock options typically vest over a 3 year period and have a life of 10 years from the date granted. As of December 31, ~~2012,~~2013, there were ~~2,900,000~~5,046,141 shares available for awards under this plan.

During the year ended December 31, ~~2012,~~2013, the Company issued options to acquire ~~5,570,000~~4,970,000 shares of common stock at exercise ~~prices~~price(s) of ~~$0.30 and $0.25~~$0.35-$0.70 per share to employees, directors, and consultants. During the year ended December 31, ~~2011,~~2012, the Company issued options to acquire ~~610,277~~5,830,000 shares of common stock at exercise ~~prices~~price of $0.35 per share to employees, directors, and consultants.

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 ~~2012~~2013 was ~~$.19 and $.17~~$0.36 and was determined using the following assumptions: expected price volatility ~~57% and~~ranging between 51% to 53%, risk-free interest rate ranging from ~~1.04%~~.76% to ~~1.61%~~1.68%, zero expected dividend yield, and six years expected life of options. The per share weighted average fair value of stock options granted during ~~2011~~2012 was $.13 and was determined using the following assumptions: expected price volatility ~~57%~~ranging between 51% to 52%, risk-free interest rates ranging from ~~1.4%~~0.61% to ~~2.9%~~0.86%, zero expected dividend yield, and six 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.

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2012~~

~~Note 10 – Stock Based Compensation-~~ ~~Continued~~

As of December 31, ~~2012,~~2013, there was approximately ~~$162,399~~$532,395 of total unrecognized stock compensation expense, related to unvested stock options under the Plan. This expense is expected to be recognized over the remaining weighted average vesting periods of the outstanding options of ~~2.07~~1.8 years.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

A summary of options issued, exercised and cancelled for the years ended December 31, ~~2012~~2013 and ~~2011~~2012 are as follows (shares have been retroactively adjusted for the 1 for 3 reverse stock split in 2011):

	Shares		Weighted-Average Exercise Price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2011	1,210,000		$	0.33		3.22	-
Granted	885,000		$	0.28		8.56
Cancelled	(311,667)
Outstanding at December 31, 2011	1,783,333		$	0.32		6.08	-		1,783,333		$	0.32		6.08		—
Granted	5,830,000		$	0.35		9.6			5,830,000		$	0.35		9.60		—
Cancelled	(228,715	)							(228,715	)	$	0.32		—		—
Outstanding at December 31, 2012	7,384,618		$	0.34		8.30			7,384,618		$	0.34		8.30		—
Exercisable at December 31, 2012	1,285,848		$	0.33		4.35	-
Granted									4,970,000		$	0.48		9.87		—
Exercised									(110,092	)	$	0.35		—		—
Cancelled									(3,928,568	)	$	0.35		—		—
Outstanding at December 31, 2013									8,315,958		$	0.42		9.09		—

Note 11 – Warrants to Purchase Common Stock

During the years ended December 31, ~~2012~~2013 and ~~2011,~~2012, in connection with services rendered, the issuance of convertible debt, and the sale of common stock the Company issued warrants to purchase ~~80,997~~9,887,169 and ~~17,900~~580,997 shares of the Company’s common stock at exercise prices of $1.00 and ~~$3.00~~$0.25 to $1.00 per share, respectively. The Company recognized expense of ~~$37,453~~$0 in 2013 and $41,015 in 2012 related to warrants granted for services rendered during the period and valued them at the grant date using the Black Scholes valuation model. In connection with the issuance of the July 2012 Notes “(See Note 7)”, the Company issued warrants to purchase 43,497 shares over a two-year period for an exercise price of $0.40 Canadian Dollars. The Company recorded expense of $3,758 related to the issuance of the Notes as debt issuance costs. All warrants are still outstanding as of December 31, ~~2012~~2013 and expire at various dates through 2016.

A summary of warrants issued, exercised and expired for the years ended December 31, 2013 and 2012 ~~and 2011~~ follows:

	Shares			Weighted-Average ExercisePrice		Weighted-Average Remaining Contractual Term
Outstanding at December 31, 2011		80,950		$	3.00		0.75
Granted		580,997		$	0.70		1.35
Outstanding at December 31, 2012		661,947		$	0.80		1.31
Granted		9,887,169		$	1.00		1.36
Expired		(63,050	)	$	3.00		—
Outstanding at December 31, 2013		10,486,066		$	1.00		1.36
Exercisable at December 31, 2013		10,486,066		$	1.00		1.36

Shares

Weighted-Average
ExercisePrice

Weighted-
Average
Remaining
Contractual Term

Outstanding at January 1, 2011 63,050 $ 3.00 0.63
Granted 17,900 $ 3.00 1.14
Outstanding at December 31, 2011 80,950 $ 3.00 0.75
Granted 580,997 $ 1.00 2.35
Outstanding at December 31, 2012 661,947 $ 1.25 2.15
Exercisable at December 31, 2012 661,947 $ 1.25 2.15

5258

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

~~(A Development Stage Company)~~Notes To Consolidated Financial Statements

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

December 31, ~~2012~~

2013

Note 12 – Income Taxes

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 tax purposes plus operating loss carryforwards. The tax effects of significant items comprising the Company’s net deferred tax assets and liabilities are as follows:

As of December 31,
2012 2011

Deferred Tax Assets:
Net operating loss carryforward $ 3,594,979 $ 2,660,673
Charitable contributions carryforward 5,028 5,010
Deferred Revenue 11,103 -
Interest accrued but unpaid - 55,578
Deferred Tax Assets $ 3,611,110 $ 2,721,261

Deferred Tax Liabilities
Property and Equipment $ (6,956 ) $ -
Stock-based compensation (17,489 ) (22,043 )
Deferred Tax Liabilities $ (24,445 ) $ (22,043 )

Valuation Allowances (3,586,667 ) (2,699,218 )
Total Net deferred tax assets $ - $ -

	As of December 31,
	2013			2012
Deferred Tax Assets:
Net operating loss carryforward	$	4,627,565		$	3,594,979
Charitable contributions carryforward		5,070			5,028
Deferred Revenue		125,108			11,103
Property and Equipment		9,015			—
Stock-based compensation		67,898			—
Deferred Tax Assets	$	4,834,656		$	3,611,110

Deferred Tax Liabilities
Property and Equipment	$	—		$	(6,956	)
Stock-based compensation		—			(17,489	)
Convertible Stock		(67,015	)		—
Deferred Tax Liabilities	$	(67,015	)	$	(24,445	)

Valuation Allowances		(4,767,641	)		(3,586,665	)
Total Net deferred tax assets	$	—		$	—

At December 31, ~~2012~~2013 the Company has ~~gross deferred~~ tax ~~assets~~operating losses of ~~$9.13~~$12 million (tax effected ~~$3.6~~$4.7 million). The Company is in a domestic cumulative taxable loss position for the three year period ended December 31, ~~2012,~~2013, which is considered significant evidence that the Company may not be able to realize some portion or all of these deferred ~~taxes~~tax assets in the future. The Company has decided that based on all available evidence that a full valuation allowance should be taken against the entire ~~gross~~ deferred tax assets of ~~$9.13 million (tax effected $3.6 million).~~$4.7 million.

The Company has federal operating loss ~~carryforwards~~carried forward of ~~$9.15~~$11.6 million that can be ~~carryforward~~carried forward for twenty years. The operating losses will begin to expire in 2029 through ~~2033.~~2034. The ~~company’s~~Company’s ability to utilize the net operating losses is contingent on generating sufficient future taxable income prior to their expiration. As a result, an equivalent amount of taxable income would need to be generated in order to fully realize the net deferred tax assets. However due to the Company’s limited operating history and uncertainty of achieving sufficient profits to utilize the net operating loss carryforwards the Company has recorded a valuation allowance of ~~$9.13~~$4.7 million ~~(tax effected $3.6 million)~~ related to the net deferred tax assets.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

The Company will continue to monitor and update its assumptions and forecasts of future taxable income to determine if a valuation allowance will continue to be needed.

The Company’s effective income tax rate is lower than what would be expected if the federal statutory rate were applied to the loss from operations primarily because of the effect of the state tax benefit, net of federal benefit, and the change in the valuation allowance provided against deferred tax assets. The change in the valuation allowance for the year ended December 31, ~~2012~~2013 was ~~$887,448.~~

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2012~~

~~Note 12 – Income Taxes -~~ ~~Continued~~$1,180,976.

Uncertain Tax Positions

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount 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 in income. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized. Management has evaluated the effect of the guidance provided by ~~U S Generally Accepted Accounting Principles~~GAAP on Accounting for Uncertainty in Income Taxes. Management has evaluated all other tax positions that could have a significant effect on the financial statements and determined the Company had no uncertain income tax positions at December 31, ~~2012.~~2013.

Note 13 – Related Parties

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

~~Loans~~ - The Trunity, LLC Note with the Company is beneficially owned by the three founders of the Company. The loan balance at December 31, 2011 was approximately $142,000, consisting entirely of accrued but unpaid interest. Terms of the loan were disclosed in Note 6.

Stock Options- In 2011, Mr. Lindblom was granted additional options to purchase an additional 333,333 and 60,000 shares at strike prices of $0.30 and $0.25, respectively. All share amounts have been adjusted for the 1 for 3 reverse stock split that occurred in 2011.

In 2012, Mr. Lindblom was granted additional options to purchase additional 250,000 and 800,000 shares both at a strike price of $0.35. Mr. Terry Anderton was granted options to purchase additional 400,000 and 2,400,000 shares both at a strike of price of $0.35. Mr. Les Anderton was granted options to purchase additional 70,000 and 400,000 shares both at a strike of price of $0.35.

Corporate Rental - ~~The company pays~~Through September 2013, the Company paid monthly rent to ~~Mr.~~Terry Anderton for his guest house used by corporate employees who work for extended periods of time at the corporate offices located in New Hampshire but reside elsewhere.

Credit Agreements – ~~The Company has credit~~At December 31, 2013 and 2012, the notes payable to the founders consisted of short-term loans with the three founders. Credit agreements exist 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 ~~will expire in September and December of 2012 however these agreements~~ have been ~~extended~~amended with board consent ~~indefinitely. At~~to remain in effect until December 31, ~~2011, Terry Anderton,~~2014 subsequent to the initial expiration date. The loans have no repayment terms but were repaid in the second quarter of 2013. As of December 31, 2013 only Les Anderton ~~and Joakim Lindblom have advanced the Company loans~~has a shareholder loan of ~~$22,041, $25,000 and $22,000, respectively. During~~$252. As of December 31, 2012, Terry Anderton, Les Anderton, and Joakim Lindblom ~~have advanced~~had shareholder loans that were comprised of the ~~Company 10% interest loans of~~following balances: $28,401, $10,066 ~~$28,401~~ and $15,510, ~~respectively, which all remain outstanding at the end of the period.~~respectively.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

Founder Stock Transactions - Upon forming the Company in 2009, 3,333,333 shares were issued to both Terry Anderton and Les Anderton for a total of 6,666,667 shares (as adjusted for a 1 for 3 reverse stock split in 2011). At December 31, ~~2012:~~2013, Terry Anderton directly owned and controlled 4,550,412 shares; Les Anderton directly and indirectly, with his wife, controlled 4,907,683 shares; and Joakim Lindblom directly owned and controlled 467,000 shares.

I~~n 2011, various notes~~Transactions with Officers— Transactions with Officers-The Company’s current Interim CEO and CFO, Nicole Fernandez-McGovern, is one of the ~~founders were converted~~managing principals of both RCM Financial and Premier Financial Filings, companies that have provided contracted financial services to ~~shares~~Trunity during 2013 and 2012. In 2013, RCM Financial Inc., a financial consulting firm providing interim CFO services, and accounting and tax professional services was paid total fees of ~~common stock~~$42,630 by the Company; and Premier Financial Filings, a full service financial printer, was compensated $2,163. In 2012, RCM Financial received $93,000 in total fees from the Company. ~~The following shares (after~~Ms. Fernandez-McGovern’s services as CFO in a consulting capacity were paid through April 2013 as part of RCM Financial until she became the ~~1 for 3 reverse split of its common shares) were issued to the founders upon conversion of the Trunity, LLC note payable and notes payable to the founders.~~Company’s full-time CFO.

Shares Issued Upon Conversion

Trunity,
LLC Note
Notes Payable to Founders
Terry Anderton 3,200,000 856,000
Les Anderton 3,200,000 3,116,000
Joakim Lindblom 800,000 --
Total 7,200,000 3,972,000

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31,~~The Company’s Chief Education Officer Cutler Cleveland, prior to his full-time employment was a consultant for the company and currently authors on the platform. In his capacity as an author and consultant he received royalty payments based on his transaction sales for his vbook and a monthly consultant fee. In 2013 and 2012

~~Note 13 – Related Parties -~~ ~~Continued~~

he received $33,458 and $11,097 respectively. As a result of his full-time employment with Trunity the company has discontinued payment of his consulting fees on a go forward basis.

In 2012, various notes with the founders were converted to debentures with the Company.

Conversion to Debentures
	Notes Payable to Founders		Notes Payable to Founders
Terry Anderton	$	261,932	$	261,932
Les Anderton		222,170		222,170
Joakim Linblom		81,270
Joakim Lindblom				81,270
Total	$	565,372	$	565,372

Note 14 – Commitments and Contingencies

Leases

In 2010, the Company entered into a lease agreement for 6,400 square feet of office space located in Newburyport, Massachusetts. This lease iswas effective from August 2010 through July 2013. This agreement provided a free rent period of the first four months of the term.

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

In August 2013, the Company executed a lease for 8,713 square feet for its corporate offices located in Portsmouth, New Hampshire. The lease commenced on August 9, 2013 and has a five-year term ending on September 8, 2018. The monthly rental payments for the first year are $10,165 per month and will increase on each anniversary at a rate of 3% per annum. The Company is 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. These additional items are estimated to be $5,900 on a monthly basis.

In September 2013, the Company executed a lease for office space located in Palo Alto, California. The lease commenced on September 1, 2013 with monthly payments of $600 per month and has a twelve month term ending on August 31, 2014. The Company has sublet partial space of the office in Palo Alto for $300 a month through the end of the rental term ending on August 31, 2014.

The minimum lease payments payable over the remaining life of ~~that agreement~~the agreements are:

2013 Total
Remaining lease payments by year $ 53,203 $ 53,203

		2014				2015				2016				2017				2018
Remaining lease payments by year		$	128,602			$	128,890			$	130,695			$	134,646			$	91,454

For the years ending December 31, ~~2012~~2013 and ~~2011,~~2012, the Company recognized approximately ~~$89,000~~$98,000 and ~~$87,000,~~$89,000 respectively in rent expense.

Legal

TRUNITY HOLDINGS, INC. AND SUBSIDIARY

Notes To Consolidated Financial Statements

December 31, 2013

~~TRUNITY HOLDINGS, INC. AND SUBSIDIARY~~

~~(A Development Stage Company)~~

~~NOTES TO CONSOLIDATED FINANCIAL STATEMENTS~~

~~December 31, 2012~~

Note 15 – Subsequent Events

~~During~~On February 12, 2014, Arol Buntzman resigned from his positions as Chairman, Director and Chief Executive Officer (CEO) of the ~~beginning~~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 $.40, $.60 and $.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 $.40, $.60 and $.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. See Note 10 Stock-Based Compensation.

On January 21, 2014, Jude Blake resigned as a Director of the Company.

From March 1, 2014 to April 11, 2014, the Company raised gross proceeds of ~~$275,000~~$53,000 through the sale of ~~687,500~~353,333 shares of its ~~common stock~~Common Stock to accredited investors in a private placement transactions at a price of $0.165 per share. Each investor also received a five-year warrant to purchase one share of common stock for every four shares purchased at an ~~average~~exercise price of ~~$.40~~$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. The note is convertible at $.165 per share with the same warrant coverage as for the shares privately sold as set forth above. The Company incurred ~~stock~~$5,000 of securities issuance costs ~~of approximately $8,000 consisting chiefly of~~representing commissions paid to broker-dealers who assisted ~~with the offering.~~

On March 20, 2013, Trunity Holdings, Inc.’s wholly-owned subsidiary Trunity, Inc. (“Trunity”) entered into a transaction pursuant to which the Trunity 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.

In connection with the transaction, Trunity entered into a share purchase agreement and a project agreement providing it with a 15% stake in EDUCOM, a Ukrainian limited liability company (the “JV Company”), and the JV Company entered into a license agreement with Trunity providing the JV Company with a five-year renewable license to use the Trunity Platform in exchange for a license fee of $400,000, of which $100,000 was paid upon signing and the $300,000 balance is expected in April 2013. Trunity expects to generate substantial revenue from the Ukrainian joint venture, above and beyond the initial license fee, through the sale of content from the Trunity Knowledge Exchange and from the Ukrainian Knowledge Exchange to be established by Trunity in connection with the venture.these transactions.

5663

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

~~Previous Independent Accountants~~

On January 24, 2012, upon closing of the Merger, the Board of Directors of the Company approved changing the Company’s independent registered public accounting firm from Madsen & Associates CPAs, Inc., Murray, Utah (“Madsen”) to Cherry, Bekaert LLP, formerly Cherry, Bekaert & Holland, L.L.P., Fort Lauderdale, Florida (“CBH”). The dismissal of Madsen, as approved by the Company’s Board of Directors, was effective immediately.

Madsen’s reports on the Company’s financial statements for the fiscal years ended June 30, 2010 and 2011, and for the period from July 26, 1983 (date of inception) to June 30, 2011 contained no adverse opinion or disclaimer of opinion, nor were such reports qualified or modified as to uncertainty, audit scope or accounting principle.None.

During the Company’s fiscal years ended June 30, 2010 and 2011 and through January 24, 2012, there were no disagreements between the Company and Madsen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Madsen, would have caused Madsen to make reference thereto in its report on the financial statements for such years.

~~During the Company’s fiscal years ended June 30, 2010 and 2011 and through January 24, 2012, there were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation S-K.~~

~~New Independent Accountants~~

~~On January 24, 2012, the Company engaged CB as its independent registered public accounting firm for the Company’s fiscal year ended June 30, 2012.~~

During the years ended June 30, 2010 and 2011 and the subsequent interim period through January 24, 2012, the Company did not consult with CB regarding either (i) the application of accounting principles to a specific completed or contemplated transaction, or the type of audit opinion that might be rendered on the Company’s financial statements or (ii) any matter that was either the subject of a disagreement or event identified in response to (a)(1)(iv) of Item 304 of Regulation S-K, or a reportable event as that term is used in Item 304(a)(1)(v) of Item 304 of Regulation S-K.

~~On May 18, 2012, our Board of Directors voted to change the fiscal year to end on December 31, 2012.~~

ITEM 9A. 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~~her evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Interim Chief Executive Officer and Chief Financial Officer have 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 Interim 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 December 31, ~~2012.~~2013. 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~~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 December 31, ~~2012,~~2013, 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. During the fourth quarter of ~~2012~~2013, there were no changes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

5865

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

In connection with the Merger, the prior officers and directors of Trunity, Terry B. Anderton and Dr. Joakim Lindblom, remained in such positions, and on January 24, 2012, the effective date of the Merger, Jude Blake, David Breukelman, and Chris Outwater were also appointed to the Board. On October 1, 2012, Peter M. Banks, Ph.D. and Richard H. Davis were appointed to the Board. In March 2013, Messrs. Outwater and Banks resigned from our Board. As a result, our Board of Directors currently consists of five members.

The following table ~~sets~~and biographical summaries set forth ~~the names, ages~~information, including principal occupation and ~~positions of~~business experience about our ~~current officers~~directors and ~~directors:~~executive officers:

Name	Age	~~Position(s)~~Position

~~Terry B. Anderton~~Nicole Fernandez-McGovern	5041	Interim Chief Executive Officer, ~~Chairman, President,~~ Chief Financial Officer, Treasurer ~~Director~~and Corporate Secretary

Dr. Joakim Lindblom	5152	Executive Vice President and Chief Technology Officer (and former Secretary ~~Director~~and Director)
~~Nicole Fernandez-McGovern~~	40
Dr. Cutler Cleveland	58	Chief ~~Financial~~Education Officer ~~and Treasurer~~
~~Jude Blake~~	56
Les Anderton	69	Director
~~David Breukelman~~	52
Ivan Berkowitz, PhD	66	Director

Richard H. Davis	56	Director

Dana M. Reed	42	Director

~~For each director of the Company, the following sets forth the name, age as of March 31, 2013, principal occupation for at least the past five years~~Nicole Fernandez-McGovern – Interim Chief Executive Officer, Chief Financial Officer, Treasurer and ~~the names of any other public companies for which the director served in directorship capacity in the last five years:~~Corporate Secretary

~~Terry B. Anderton. Mr. Anderton~~Ms. Fernandez-McGovern has ~~been Trunity’s~~served as our Company’s Chief ~~Executive~~Financial Officer since ~~founding~~April 2013 and as Interim-CEO since February 2014. From March 2012 to March 2013, she provided financial consulting services Trunity through RCM Financial Consulting, a firm she continues to serve as Managing Principal. RCM was a management consulting firm founded by Ms. Fernandez-McGovern that provided interim Chief Financial Officer services for numerous companies seeking to capitalize on her expertise in ~~2009. He has over 20 years~~SEC reporting, technical accounting, treasury and strategic cash flow management, audits, budgeting and financial planning. Ms. Fernandez-McGovern is also one of ~~executive experience~~the founders and Managing Principals of Premier Financial Filings, a full service financial printer providing SEC filing support services to publicly traded companies, including the Company since 2013.

She previously served in ~~technology companies. Previously, Mr. Anderton co-founded~~leadership roles in the private sector for such companies as Elizabeth Arden, Inc. and Ryder System, Inc., where she worked closely with senior management and was involved in all aspects of the SEC, treasury and financial reporting processes. Ms. Fernandez-McGovern began her professional career at KPMG in the audit and assurance practice where she managed a wide range of large scale engagements for both public and privately held companies. She has a Master of Business Administration with a concentration in Accounting and International Business, and a Bachelor of Business Administration with a concentration in accounting, both from the University of Miami. She is also a Certified Public Accountant in the State of Florida and is fluent in Spanish.

Joakim F. Lindblom, Ph.D. – Executive Vice President and CEO of NitroSecurity, Boston, Massachusetts, from June 2004 to October 2007. NitroSecurity was acquired by McAfee/Intel in 2011. Before founding NitroSecurity, Mr. Anderton served in executive positions with Imaging Automation, Xcert International, McAfee, NMI and Cabletron Systems. Mr. Anderton holds a B.S. in Business Administration from Daniel Webster College, Nashua, New Hampshire.Chief Technology Officer

~~Dr. Joakim Lindblom~~. Dr. Lindblom is a co-founder of Trunity and has been our Company’s Chief Technology Officer since ~~inception.~~its inception in July 2009. He ~~has over 20 years~~also served as a member of ~~experience~~the Board of Directors from inception through the fall of 2013. An innovator and pioneer in ~~computer systems development, systems architecture and emerging technologies.~~the field of education technology, Dr. Lindblom is responsible for ~~all technical aspects~~product development and operations at Trunity, and is the Chief Architect of ~~our software~~the Trunity eLearning Platform. He has over 20 years’ experience in Internet information architecture, global R&D, technology business management, space science instrumentation and ~~systems architecture.~~solar astrophysics. Previously, ~~Dr. Lindblom was VP for~~he served as Vice President of Platform ~~Development and~~ Strategy ~~for~~at ManyOne Networks, ~~from 2004 – 2009,~~Global R&D Management Consultant at Nokia and VP of Partner Development for that company from 2002 to 2004. Dr. Lindblom was a Business and Technology Consultant for Nokia Networks from 2000 to 2002. As part of Lindblom Consulting/Scientific during the years 1993 – 2000, Dr. Lindblom served as Technology, Scientific and Business Consultant for several dozen Silicon Valley and European technology and scientific companies. From 1990 to 1992, Dr. Lindblom was ProjectChief Scientist for NASA’s UHRXS Space Station project and MSSTA solar observatory at Stanford University. ~~Scientific instrumentation developed by~~ Dr. Lindblom at Stanford University formed the basis for several scientific missions flown on sounding rockets, the Space Shuttle and in deep space, including two missions that Dr. Lindblom himself directed. Dr. Lindblom received his B.S. in Physics from California Institute of Technology, Pasadena, California, and hishas a Ph.D. in Applied Physics and Astrophysics from Stanford University, ~~California.~~as well as a Bachelors of Science degree with honors in Physics from the California Institute of Technology.

Cutler J. Cleveland, Ph.D. – Chief Education Officer

Appointed to serve as Trunity’s Chief Education Officer in July 2013, Dr. Cleveland is also Professor of Earth and Environment at Boston University, where he serves on the faculty of the Center for Energy and Environmental Studies. Professor Cleveland is the co-author of Environmental Science, the web’s first entirely electronic introductory textbook on the subject, which was authored and published on the Trunity eLearning Platform. He is also Editor-in-Chief of the Encyclopedia of Energy (Elsevier, 2004), winner of an American Library Association award, the Dictionary of Energy (Elsevier, 2005), Handbook of Energy (Elsevier, forthcoming), and is the Founding Editor-in-Chief of the Encyclopedia of the Earth. He is the recipient of the Adelman-Frankel Award from the United States Association of Energy Economics for “unique and innovative contributions to the field of energy economics.”

Dr. Cleveland’s research has been funded by the Mellon Foundation, the National Science Foundation, the National Aeronautics and Space Administration, the Environmental Protection Agency, and the MacArthur Foundation. He has published his findings in journals such as Nature, Science, Ecological Modeling, Energy, The Energy Journal, The Annual Review of Energy, Resource and Energy Economics, the American Association of Petroleum Geologists Bulletin, the Canadian Journal of Forest Research and Ecological Economics. Professor Cleveland has been a consultant to numerous private and public organizations, including the Asian Development Bank, the United Nations Commission on Sustainable Development, Charles River Associates, the Energy Information Administration and the U.S. Environmental Protection Agency. He has won publication awards from the International Association of Energy Economics, the American Library Association and the National Wildlife Federation. Professor Cleveland holds a Bachelor of Science degree in Ecology from Cornell University, a Master of Science degree in Marine Science from Louisiana State University, and a Ph.D. in Geography from the University of Illinois at Urbana-Champaign.

5967

~~Jude Blake. Ms. Blake joined our Board immediately following~~Les Anderton – Director

Mr. Anderton was appointed as a new director in December 2013. As a original director and former Executive Vice President of Finance of Trunity, he has already played a significant role in the ~~Merger. She has more than 30 years of~~Company’s corporate structuring and previous capital formation activities. Mr. Anderton brings to Trunity over 40 years’ experience in ~~strategic~~sales, marketing, ~~leadership~~corporate finance and mergers and acquisitions. Les began his career with the Lever Brothers Company in New York, where he was Sales Plans Development Manager for the Personal Products Division. He left Lever Brothers after ten years to pursue a ~~variety of industries, including telecom/cable, beverages~~career on Wall Street. He earned distinction as an investment banker for, among others, John Hancock, Covey & Company, and ~~packaged goods. Since 2005, Ms. Blake~~currently Wilson-Davis & Company, Salt Lake City. Mr. Anderton has ~~served~~compiled significant financial analysis expertise in ~~advisory roles for~~ a broad range of ~~businesses, organizations~~industries, including technology, energy, healthcare and ~~start-up ventures, where she provides strategic direction on critical issues~~real estate, and ~~growth strategies. Ms. Blake was elected~~ as ~~Trustee~~an active individual investor and due diligence manager for Alternative Investments at Wilson-Davis. With professional designations of CLU and ChFC, he also holds several securities licenses, including Series 7, Series 24, Series 27 and Series 63. Les Anderton is the father of Terry Anderton.

Ivan Berkowitz, Ph.D. – Director

Dr. Berkowitz has served as an independent member of the ~~University System~~Board since his appointment in November 2013. Dr. Berkowitz is a corporate executive and advisor with 40 years of professional experience in the financial and real estate industries. He has acted as a corporate advisor on matters that pertain to corporate structure and governance, transfer pricing, EEC antitrust law, mergers and international syndication. In 2003, he co-founded and has since served as the Chairman of Great Court Capital, a global structured finance and traditional merchant banking firm based in New ~~Hampshire~~York City, active in ~~July~~identifying, investing and managing the investment process for a syndicate of ~~2008~~high net worth individuals, hedge funds and ~~serves on~~institutions.

Until its ~~Executive Committee. From 2001~~sale in 2003, Dr. Berkowitz served as senior managing partner of Avatar Associates, a New York-based institutional asset management firm managing $1.8 billion in assets. He has been a member of the boards of directors of both public and private companies, domestically and internationally. In addition to ~~2005, Ms. Blake was~~these activities, he is a Board member of the ~~Chief Marketing Officer~~Council for Economic Education, is a past board member of Yeshiva College and ~~Executive Vice-President, Consumer Markets for Cablecom GmbH,~~Cambridge in Zurich, Switzerland. Prior to joining Cablecom, Ms. Blake was Vice President of Marketing, Programming, Sales and Service for Ameritech New Media, the cable television subsidiary of SBC Communications, Inc. Previously, she served in executive marketing positions for General Mills, the Pepsi-Cola Company and the G. Heileman Brewing Company. Ms. BlakeAmerica, Dr. Berkowitz holds a BSPh.D. in International Law from ~~the Whittemore School of Business and Economics at~~Cambridge University, ~~of New Hampshire, and holds~~ an MBA in Finance (honors) from the Wharton School, University of Pennsylvania. We selected Ms. Blake to join our Board because she brings valuable experience in marketing and higher education. Our growth strategy requires focused marketing efforts, and higher education is one of our key target markets.

~~David Breukelman~~. Mr. Breukelman joined our Board immediately following the Merger. Since its founding in 1994, he has been the President of Business Arts Inc., Toronto, Canada, a company focused on creating and incubating world class companies in the imaging space. He is Lead Director of Gedex Inc., Mississauga, Canada, which owns a highly advanced resource and sub-surface discovery system. Mr. Breukelman is also the founder of Arius3D Inc., Mississauga, Ontario, a world leader in the field of three dimensional capture and communication. Mr. Breukelman and his family have helped found and build some of Canada’s most innovative technology companies including Sciex and IMAX. Early in his career, Mr. Breukelman held executive and management roles at The Bank of Nova Scotia and Bank of America. Mr. Breukelman graduated with an M.B.A. from The University of Western Ontario’s Richard Ivey SchoolBaruch College and a B.A. cum laude in Economics from ~~Victoria~~Brooklyn College. He has guest lectured at professional and academic forums that have included Young Presidents’ Organization, Cambridge University, Whittier College, atSchool of Law, and New York University’s Center for Law and Business. Over the ~~University of Toronto. He~~years, he has contributed to media, business, law and academic journals, including the Cambridge Law Journal and Juris Doctor.

Richard H. Davis − Director

Mr. Davis has served as ~~a director~~an independent member of a number of companies as well as Canada’s Royal Conservatory of Music. We believe that Mr. Breukelman’s experience in successfully managing and advising startup technology companies makes him a valuable addition to our Board. We also believe that he will help our efforts to penetrate the ~~Canadian market.~~

~~Richard H. Davis. Mr. Davis~~Board since 2012. He has over 30 years of experience in finance, investment banking and venture capital. ~~He received~~In February 2008, he became a ~~B.S. degree~~Director of PowerVerde Inc., a Phoenix, Arizona-based producer of emissions-free electric power generation systems. Since August 2011, he has also served as the part-time Chief Executive Officer of PowerVerde. Beginning in ~~economics from Florida State University in 1982. He joined~~1982, Mr. Davis worked for First Equity Corporation, ~~(“First Equity”) in Miami that same year. First Equity operated as~~ a regional full-service brokerage and investment bank. ~~Mr. Davis’~~While at First Equity, his duties included equity deal structure and brokerage-related activities. After First Equity was acquired in 2001, ~~Mr. Davis~~he joined the corporate finance department of William R. Hough & Company, ~~(“Hough”),~~ where he continued structuring equity finance and private acquisitions. Hough was acquired in 2004 by RBC Dain Rauscher, ~~(“Dain”),~~ a global investment banking firm. Dain consolidated Hough’s corporate finance activities into its New York ~~offices.~~offices, at which time Mr. Davis ~~elected to remain in Miami and~~ joined Martinez-Ayme Securities, assuming the newly-created position of ~~managing director~~Managing Director of ~~corporate finance. In February 2008, Mr. Davis became~~Corporate Finance. He received a ~~director~~Bachelor of PowerVerde Inc., a Phoenix, Arizona-based producer of emissions-free electric power generation systems. Since August 2011, Mr. Davis has also served on a part-time basis as Chief Executive Officer of PowerVerde. Mr. Davis’s demonstrated knowledge and experienceScience degree in ~~finance and investment banking make him a valued member of the Company’s Board.~~Economics from Florida State University in 1982.

6068

Dana M. Reed − Director

Ms. Reed was appointed as a member of the Board in June 2013. She is the Chief Executive Officer of PanAfrican Investment Co. (“PIC”) and is responsible for managing the business day-to-day, as well as overseeing all investment decisions. Prior to joining PIC, she served as Managing Director of UCM Partners, where her responsibilities included marketing, product development and strategic growth of the firm. She previously served as a Vice President of Institutional Equity Sales at Friedman Billings Ramsey, and she was in the Investment Banking Groups of JP Morgan and Goldman Sachs. Ms. Reed began her career as a Fellow at the Export-Import Bank of the U.S. She received a Bachelor of Business Administration in International Business with minors in Marketing and Spanish and a Masters of Business Administration from Howard University. She was appointed by New York Governor Paterson to serve as a Director of the Harlem Community Development Corp. and still serves in that role today. In addition to serving Trunity’s Board, Ms. Reed also serves on the Board of Directors of PrePex and Shea Yeleen.

Arrangements for Nomination as Directors and Changes in Procedures for Nomination; Election of Directors

No arrangement or understanding exists between any director or nominee and any other persons pursuant to which any individual was or is to be selected or serve as a director. No director has any family relationship with any other director or with any of the Company’s executive officers.

Our Chairman Terry Anderton is also the Chief Executive Officer, President, Chief Financial Officer and Treasurer of the Company. Our Director Joakim Lindblom is also the Executive Vice President, Chief Technology Officer and Secretary of the Company.

Holders of our Common Stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders, including the election of directors. Cumulative voting with respect to the election of directors is not permitted by our Certificate of Incorporation.

Our Board of Directors shall be elected at the annual meeting of the shareholders or at a special meeting called for that purpose. Each director shall hold office until the next annual meeting of shareholders and until the director’s successor is elected and qualified.

~~Committees~~Involvement in Certain Legal Proceedings

During the last ten years, none of our Directors, persons nominated to become Directors, or executive officers were subject to any of the following events material to an evaluation of the ability or integrity of any such person:

~~Our Board has established a compensation / stock option committee that is comprised of Jude Blake and David Breukelman. Our board intends to establish an audit committee in the near future.~~

~~Executive officers:~~

We have three executive officers: Terry Anderton, Chief Executive Officer; Joakim Lindblom, Chief Technology Officer; and Nicole Fernandez-McGovern, Chief Financial Officer. The biographies of Messrs. Anderton and Linblom are set forth above.

~~Nicole Fernandez-McGovern~~. Ms. Fernandez-McGovern became our Chief Financial Officer in April 2012. From March 2012 to March 2013, she provided financial consulting services to Trunity through her firm RCM Financial Consulting.

●

A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

Ms. Fernandez McGovern has over fifteen years of extensive accounting and finance experience in several publicly traded companies across multiple industries. Her expertise includes all aspects of SEC reporting, technical accounting, treasury and strategic cash flow management, audits, budgeting and financial planning. Ms. Fernandez is responsible for all aspects of our financials reporting, general accounting, treasury and investor relations aspects of the business. Ms. Fernandez-McGovern’s most recent experience includes being a principal at RCM Financial Consulting where she served as interim CFO for various companies by assisting them with the compliance of XBRL interactive data submissions, preparation of quarterly and annual SEC filings, including responses to SEC comment letters and completion of S1 filings, managing treasury process and activity, participated in compliance of Sarbanes-Oxley control requirements and assisted in presentation of board and bank reporting requirements. Nicole has worked for companies such as Elizabeth Arden, Inc., and Ryder System, Inc. where she was involved in all aspects of the SEC and financial reporting process. At both companies she worked closely with senior management in the preparation of board, bank and investor presentations and coordinated the audit process with outside international firms. Nicole’s career began with KPMG in the audit and assurance practice where she managed various large scale engagements for both public and privately held companies. Nicole has a Master of Business Administration with a concentration in Accounting and International Business and a Bachelor of Business Administration with a concentration in accounting, both from the University of Miami. She is also a Certified Public Accountant in the State of Florida and is fluent in Spanish.

6169

●

Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

●

Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

Engaging in any type of business practice; or

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

●

Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) Item 401 of Regulation S-K, or to be associated with persons engaged in any such activity;

●

Such person was found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission (the “Commission”) to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

●

Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

●

Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

Any Federal or State securities or commodities law or regulation; o

Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

●

Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.


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

230 Commerce Way Portsmouth, New Hampshire
~~15 Green Street, Newburyport~~ ~~Massachusetts 01950~~	~~01950~~03801
(Address of principal executive offices)		(Zip Code)

¨	¨LARGE ACCELERATED FILER	¨	ACCELERATED FILER
¨	¨NON-ACCELERATED FILER	x	SMALLER REPORTING COMPANY

SUMMARY COMPENSATION TABLE
Name and Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards($)			Option Awards($)	Non-Equity Incentive Plan Compensation($)		Non-Qualified Deferred Compensation Earnings ($)		All Other Compensation($)			Total ($)
Terry B. Anderton Chief Executive Officer, Chairman President(1)	2012	$	176,166		-0-		-0-	$	476,000		-0-		-0-		-0-	$	652,166

Dr. Joakim Lindblom Executive Vice President, Chief Technology Officer and Secretary (2)	2012	$	98,748		-0-		-0-	$	178,290		-0-		-0-		-0-	$	277,038

			PAGE
PART I

~~Item 1.~~	~~Business~~	3
Item 1.	Business		4
Item 1A.	Risk Factors		17
Item 1B.	Unresolved Staff Comments	25	23
Item 2.	Properties	25	23
Item 3.	Legal Proceedings	25	24
Item 4.	Mine Safety Disclosures	26	24

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	26	24
Item 6.	Selected Financial Data	28	29
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28	29
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	34	36
Item 8.	Financial Statements and Supplementary Data	34	39
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	57	64
~~Item 9A.~~	~~Controls and Procedures~~	58
Item 9B.	Other Information	58	65

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	59	66
Item 11.	Executive Compensation	63	73
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	65	76
Item 13.	Certain Relationships and Related Transactions, and Director Independence	67	78
Item 14.	Principal Accountant Fees and Services	69	81

PART IV

Item 15.	Exhibits	70	82

	1.	~~Content~~Trunity Author™: functionality for collaboratively gathering, organizing and publishing knowledge content, such as for encyclopedias, knowledge bases and e-textbooks.

	2.	~~Learning Management~~Trunity Reader™: functionality for teaching and learning management, such as assignments, quizzes, exams, grading and reporting.

	3.	~~Collaboration~~Trunity Classroom™: functionality for collaboration and online social interaction, such as messaging, forums, commenting, rating, tagging and ~~sharing.~~sharing, and allowing instructors to build customized, content-oriented virtual classrooms;.


·●	reducing time, environmental impact, and cost to produce and ~~deliver~~deliver;


·●	driving the shift to modularized content to broaden its application and ~~audience~~audience;

●
·	giving individual expert authors the tools and ~~marketplace~~market place to share their ~~knowledge~~knowledge;

●
·	~~give direct insight into how content is used,~~ enabling real-time ~~updates~~content updates; and


·●	providing authors a much higher percentage of the royalties from their ~~work~~work.

●
·	making content searchable by popular metrics and ~~standards~~

·	~~integrating social collaboration, networking and learning management with the content/courseware~~standards.

·	~~content, learning management and social collaboration/learning/networking in a single coherent fully integrated solution~~

·	~~flexible multi-tenant architecture allows easy integration across institutions, departments, classrooms, collections, libraries, etc.~~

·	~~single sign-on/dynamic content integration/exchange with 3~~rd ~~party platforms/solutions via well-defined modern APIs~~

·	~~streamlined feature set provides what’s needed for most deployments, avoiding the steep learning curve of bloated LMS’~~

·	~~cloud-based and on-demand, allowing fast deployments on an individual teacher, department, school or district level~~

·	~~many-to-many, one-to-many and peer-to-peer exchange of content modules, courseware, books, etc.~~

·	~~flexible remixing with automatic updating of content, plus usage stats and feedback to original content creators/owners~~

·	~~e-commerce system automatically tracks and distributes royalties to original content across multiple remixed generations of content~~

·	~~html5 content core, highly scalable schema-less database technology & API centric architecture provides future proofing~~

·	~~designed to support all major end-user devices, allowing deployment in heterogeneous “bring your own device” environments~~

●
·	providing equal opportunity access to learning resources from the best and brightest authors and ~~educators~~educators.

·	~~cost efficiency of crowd sourcing, with quality control and meta-tagging needed for educational standards~~

·	~~flexible workflow adaptable for teacher-to-teacher, expert content creation and other crowdsourcing applications~~

·	~~single user ID gives an integrated 360° view across all classes, schools, institutions and content that the user touches~~

·	~~personal life-long library allows each user life-long access to all learning materials, courses, class work, and social connections~~


·●	Virtual textbooks created by authors using the Trunity ~~platform~~eLearning Platform;


·●	Custom ~~content entered~~courseware integrated by professors and ~~instructors~~instructors; and


·●	Crowd-sourced content (e.g. from repositories such as ~~the~~ Encyclopedia of ~~Earth)~~the Earth).

Fiscal Year 2012	High		Low

First quarter	$	5.00	$	5.00
Second quarter	$	5.00	$	3.00
Third quarter	$	3.00	$	3.00
Fourth quarter	$	3.00	$	0.29

	Years Ended December 31,						For the Period From July 28, 2009 (Inception) to December 31,
	2012			2011			2012

Net Sales	$	159,359		$	299,074		$	648,866
Cost of sales		58,522			104,236			242,627
Gross Profit		100,837			194,838			406,239

Operating Expenses:
Research and development		894,157			939,557			4,442,197
Selling, general and administrative		1,493,233			1,178,075			4,130,950
		2,387,390			2,117,632			8,573,147

Loss From Operations		(2,286,553	)		(1,922,794	)		(8,166,908	)

Other Income (Expense):
Interest expense		(141,930	)		(466,345	)		(1,169,592	)

Net Loss		(2,428,483	)		(2,389,139	)		(9,336,500	)

Other Comprehensive loss:
Foreign currency translation loss		(8,299	)		-			(8,299	)
Total Other Comprehensive Loss	$	(8,299	)	$	-		$	(8,299	)
Comprehensive Loss	$	(2,436,782	)	$	(2,389,139	)	$	(9,344,799	)
Net Loss per Share - Basic and Diluted	$	(0.07	)	$	(0.08	)

Comprehensive Loss
Weighted Average Number of Shares Outstanding During the Period - Basic and Diluted		35,051,373			31,200,285

																Deficit
																Accumulated			Total
	Par $ .001								Stock				Accumulated			during the			Stockholders'
	Common			Common		Paid in			Subscription				Comprehensive			Development			Equity
	Shares*			Stock		Capital			Receivable				Loss			Stage			(Deficiency)
Balance at July 28, 2009 (date of inception)		-		$	-	$	-		$	-			$	-		$	-		$	-
Issuance of founders' stock		7,300,667			7,301		(5,901	)		-				-			-			1,400
Sale of common stock		880,000			880		459,120			(50,000	)			-			-			410,000
Stock issuance costs		-			-		(40,825	)		-				-			-			(40,825	)
Common stock issued to investors in a debt offering		822,000			822		410,260			-				-			-			411,082
Shares issued for stock offering services		33,333			33		30,792			-				-			-			30,825
Employee stock based compensation		-			-		64,941			-				-			-			64,941
Net loss		-			-		-			-				-			(2,015,490	)		(2,015,490	)
Balance at December 31, 2009		9,036,000		$	9,036	$	918,387		$	(50,000	)		$	-		$	(2,015,490	)	$	(1,138,067	)
Sale of common stock		1,282,005			1,282		655,218			50,000				-			-			706,500
Stock issuance costs		-			-		(12,160	)		-				-			-			(12,160	)
Employee stock based compensation		-			-		40,990			-				-			-			40,990
Net loss		-			-		-			-				-			(2,503,388	)		(2,503,388	)
Balance at December 31, 2010		10,318,005	��	$	10,318	$	1,602,435		$	-			$	-		$	(4,518,878	)	$	(2,906,125	)
Sale of common stock		6,857,538			6,858		1,742,717										-			1,749,575
Shares issued for stock offering services		1,698,318			1,698		(1,698	)		-				-			-			-
Stock issuance costs		-			-		(111,775	)		-				-			-			(111,775	)
Common stock issued for accrued interest conversion of 8% convertible promissory notes		64,009			64		76,747			-				-			-			76,811
Common stock issued upon conversion of 8% convertible promissory notes		513,750			514		615,986			-				-			-			616,500
Common stock issued upon conversion of 9% convertible promissory notes		1,458,333			1,458		436,042			-				-			-			437,500
Common stock issued for accrued interest upon conversion of note sold to an outside investor		160,000			160		39,840			-				-			-			40,000
Common stock issued upon conversion of a note sold to an outside investor		400,000			400		99,600			-				-			-			100,000
Common stock issued to founders upon conversion of Trunity, LLC note		7,200,000			7,200		1,792,800			-				-			-			1,800,000
Common stock issued upon conversion of lines of credit with founders		3,972,000			3,972		989,028			-				-			-			993,000
Employee stock based compensation (benefit)		-			-		(53,336	)		-				-			-			(53,336	)
Net loss		-			-		-			-				-			(2,389,139	)		(2,389,139	)
Balance at December 31, 2011		32,641,953		$	32,642	$	7,228,386		$	-			$	-		$	(6,908,017	)	$	353,011
Sale of common stock		3,164,479			3,164		943,157			-		��		-			-			946,321
Reverse recapitalization related to acquisition		325,000			325		(325,325	)		-				-			-			(325,000	)
Employee stock based compensation		-			-		226,807			-				-			-			226,807
Warrants issued for services		-			-		37,453			-				-			-			37,453
Debt beneficial conversion feature, net of issuance costs		-			-		295,004			-				-			-			295,004
Foreign currency translation loss		-			-		-			-				(8,299	)		-			(8,299	)
Net loss		-			-		-			-				-			(2,428,483	)		(2,428,483	)
Balance at December 31, 2012		36,131,432		$	36,131	$	8,405,482		$	-			$	(8,299	)	$	(9,336,500	)	$	(903,186	)


							Cumulative from Inception (July 28, 2009 ) to December 31, 2012
	Years Ended
	December 31,
	2012			2011
Cash Flows from Operating Activities:
Net Loss	$	(2,428,483	)	$	(2,389,139	)	$	(9,336,500	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		717,384			845,640			2,588,968
Stock compensation expense		122,107			(53,336	)		129,427
Accretion for debt discounts and issuance costs		79,461			-			79,461
Changes in operating assets and liabilities:
Accounts receivable		1,185			2,198			(1,615	)
Prepaid expenses and other assets		6,460			30,310			4
Deposits		(150,000	)		(175,000	)		(325,000	)
Other long-term assets		-			19,632			-
Accounts payable		145,456			169,825			595,108
Accrued interest and other liabilities		39,876			201,158			477,411
Deferred revenue		28,267			(78,703	)		28,267
Deferred rent		(10,138	)		-			5,907
Accrued interest included in notes payable		-			53,500			-
Net Cash Used In Operating Activities		(1,448,425	)		(1,373,915	)		(5,758,562	)
Cash Flows From Investing Activities:
Purchase of fixed assets		(16,342	)		(70,804	)		(178,348	)
Payment of platform development costs		(548,030	)		(327,099	)		(3,114,294	)
Net Cash Used In Investing Activities		(564,372	)		(397,903	)		(3,292,642	)
Cash Flows From Financing Activities
Net advances on line of credit related parties		-			56,367			(105,987	)
Proceeds from notes payable related parties		505,526			178,041			3,443,720
Repayments on notes payable related parties		(177,500	)		-			(177,500	)
Proceeds from issuance of debenture, net issuances cost		523,081			-			523,081
Sale of common stock		1,323,534			1,769,576			4,657,918
Stock issuance costs		(271,255	)		(111,775	)		(436,015	)
Net Cash Provided By Financing Activities		1,903,386			1,892,209			7,905,217
Net Decrease in Cash and Cash Equivalents		(109,411	)		120,391			(1,145,987	)
Cash, Beginning of Period		123,135			2,744			-
Cash, End of Period	$	13,724		$	123,135		$	13,724

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest	$	-		$	160,000		$	405,904

Non-cash Investing and Financing Transactions:
Conversion of debt to common stock shares	$	-		$	4,063,811		$	4,063,811
Issuance of stock in acquisition of subsidiary	$	325		$	-		$	325

	Shares	Weighted-Average ExercisePrice		Weighted- Average Remaining Contractual Term
Outstanding at January 1, 2011	63,050	$	3.00		0.63
Granted	17,900	$	3.00		1.14
Outstanding at December 31, 2011	80,950	$	3.00		0.75
Granted	580,997	$	1.00		2.35
Outstanding at December 31, 2012	661,947	$	1.25		2.15
Exercisable at December 31, 2012	661,947	$	1.25		2.15

Shares Issued Upon Conversion
	Trunity, LLC Note		Notes Payable to Founders
Terry Anderton		3,200,000		856,000
Les Anderton		3,200,000		3,116,000
Joakim Lindblom		800,000		--
Total		7,200,000		3,972,000

~~1 Mr. Anderton has served as our Chief Executive Officer, Chairman and President since its formation in July 28, 2009.~~

~~2 Mr. Lindblom served as our Chief Technology Officer since its formation in July 28, 2009.~~

Name and Position(s)	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Other ($)		Total Compensation ($)
Nicole Fernandez-McGovern	2013	$	108,750	$	15,000		-0-	$	105,538		-0-	$	229,288
Interim CEO and CFO	2012		-0-		-0-		-0-		-0-		-0-		—

Dr. Joakim Lindblom	2013	$	124,458	$	15,000		-0-		-0-		-0-	$	139,458
EVP and CTO	2012	$	98,748		-0-		-0-	$	178,290		-0-		277,038

Dr. Cutler Cleveland	2013	$	50,300		-0-		-0-		-0-		-0-	$	50,300
Chief Education Officer	2012		-0-		-0-		-0-		-0-		-0-		-0-

Terry B. Anderton (1)	2013	$	168,780	$	40,000		-0-		-0-		-0-	$	208,780
Former Chairman, President and CEO	2012		176,166		-0-		-0-	$	476,000		-0-	$	652,166

Arol Buntzman (2)	2013		-0-		-0-		-0-	$	376,784		-0-	$	376,784
Former Chairman and CEO	2012		-0-		-0-		-0-		-0-		-0-		-0-

Name	Number of Securities Underlying Unexercised Options (#) Exercisable			Number of Securities Underlying Unexercised Options (#) Unexercisable			Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date	Number of Securities Underlying Unexercised Options (#) Exercisable			Number of Securities Underlying Unexercised Options (#) Unexercisable			Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date
Terry B. Anderton		--			400,000	(1)		--	$	0.35	01/31/2022
Terry B. Anderton		--			2,400,000	(2)		--	$	0.35	10/2/2022
Nicole Fernandez-McGovern													—			500,000	(1)		—	$	0.40	04/01/2023
Dr. Cutler Cleveland													67,580	(2)		32,420	(2)		—	$	0.25	12/22/2021
Dr. Joakim Lindblom		333,333	(3)		--			--	$	0.33	08/01/2019		333,333	(3)		—			—	$	0.33	08/01/2019
Dr. Joakim Lindblom		33,333	(4)		66,667	(4)		--	$	0.33	03/02/2020		100,000	(4)		—			—	$	0.33	03/02/2020
Dr. Joakim Lindblom		185,692	(5)		147,641	(5)		--	$	0.25	05/01/2021		296,803	(5)		36,530	(5)		—	$	0.25	05/01/2021
Dr. Joakim Lindblom		28,384	(6)		31,616	(6)		--	$	0.25	08/01/2021		48,384	(6)		11,616	(6)		—	$	0.25	08/01/2021
Dr. Joakim Lindblom		--			250,000	(7)		--	$	0.35	01/31/2022		159,817	(7)		90,183	(7)		—	$	0.35	01/31/2022
Dr. Joakim Lindblom		--			800,000	(8)		--	$	0.35	10/02/2022		332,420	(8)		467,580	(8)		—	$	0.35	10/02/2022
Terry Anderton													222,100	(9)		—			—	$	0.35	10/15/2015
Dr. Arol Buntzman													1,000,000	(10)		—			—	$	0.30	12/22/2023
Dr. Arol Buntzman													—			1,000,000	(10)		—	$	0.40	12/22/2023
Dr. Arol Buntzman													—			1,000,000	(10)		—	$	0.60	12/22/2023
Dr. Arol Buntzman													—			1,000,000	(10)		—	$	0.70	12/22/2023

~~(1)~~		~~These options vest over a three year period with: (i) 133,699 vesting on January 31, 2013, and (ii) 266,301 vesting each month over a 24 month period from February 1, 2013 through January 31, 2015.~~

~~(2)~~		~~These options vest over a three year period with: (i) 800,000 vesting on October 2, 2013, and (ii) 1,600,000 vesting each month over a 24 month period from October 3, 2013 through October 2, 2016.~~

~~(3)~~		~~These options were fully vested on August 1, 2012.~~

~~(4)~~		~~These options vest over a three year period with: (i) 33,333 vesting on March 2, 2011, and (ii) 66,667 vesting each month over a 24 month period from March 3, 2012 through March 2, 2013.~~

~~(5)~~		~~These options vest over a three year period with: (i) 111,111 vesting on May 1, 2012, and (ii) 222,222 vesting each month over a 24 month period from May 2, 2012 through May 1, 2014.~~

~~(6)~~		~~These options vest over a three year period with: (i) 20,000 vesting on August 1, 2012, and (ii) 40,000 vesting each month over a 24 month period from August 2, 2012 through August 1, 2015.~~

~~(7)~~		~~These options vest over a three year period with: (i) 83,333 vesting on January 31, 2013, and (ii) 166,667 vesting each month over a 24 month period from February 1, 2013 through January 31, 2015.~~

~~(8)~~		~~These options vest over a three year period with: (i) 266,667 vesting on October 2, 2013, and (ii) 533,333 vesting each month over a 24 month period from October 3, 2013 through October 2, 2016.~~

Director Name	Fees Earned or Paid in Cash		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation		Nonqualified Deferred Compensation Earnings		All Other Compensation		Total
Les Anderton		-0-		-0-		-0-		-0-		-0-		-0-		-0-
Ivan Berkowitz, PhD		-0-		-0-		-0-		-0-		-0-		-0-		-0-
Richard H. Davis		-0-		-0-		-0-		-0-		-0-		-0-		-0-
Dana M. Reed		-0-		-0-		-0-		-0-		-0-		-0-		-0-
Jude Blake (1)		-0-		-0-		-0-		-0-		-0-		-0-		-0-
David Breukelman (2)		-0-		-0-		-0-		-0-		-0-		-0-		-0-

Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)		Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Peter M. Banks	$	-0-	$	-0-	$	84,940	$	-0-	$	-0-	$	-0-	$	84,940
Jude Blake	$	-0-	$	-0-	$	8,410	$	-0-	$	-0-	$	-0-	$	8,410
David Breukelman	$	-0-	$	-0-	$	16,820	$	-0-	$	-0-	$	-0-	$	16,820
Richard H. Davis	$	-0-	$	-0-	$	-0-	$	-0-	$	-0-	$	-0-	$	-0-
Chris Outwater	$	-0-	$	-0-	$	-0-	$	-0-	$	-0-	$	-0-	$	-0-

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership of Shares Owned			Percent of Class

Aureus Investments LC 4866 S. Viewmont St. Holladay, Utah 84117		4,907,683	(1)	13.3%

Global Social Ventures 15W621 Indian Hill Woods Naperville, IL 60563		2,462,584		6.7%

RRM Ventures LLC 4544 Holladay Blvd Salt Lake City, UT 84117		2,067,859		5.6%

Officers and Directors

Terry B. Anderton		4,711,143	(2)	12.7%

Dr. Joakim Lindblom		1,177,582	(3)	3.2%

Nicole Fernandez-McGovern		125,000		0.3%

David Breukelman		100,000	(4)	0.3%

Jude Blake		50,000	(5)	0.1%

Richard H. Davis		100,000		0.3%

All Directors and Executive Officers as a group (6 persons)		6,263,725		16.9%

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership of Shares Owned			Percent of Class
Debra Anderton
4866 S. Viewmont St.		5,599,351	(1)		11.9	%
Holladay, Utah 84117

Terry B. Anderton
51 Depot Road		6,291,108	(2)		13.1	%
Portsmouth, New Hampshire 03081

PanAfrican Investment Co., LLC					10.1	%
420 Lexington Ave, Suite 2650		5,000,000	(3)
New York, NY 10170

Executive Officers and Directors

Nicole Fernandez-McGovern, Interim CEO & CFO		544,566	(4)		1.1	%

Dr. Cutler Cleveland		77,078	(5)		0.2	%

Dr. Joakim Lindblom, EVP & CTO		2,356,262	(6)		4.8	%

Les Anderton		2,863,334	(1)(7)		5.9	%

Ivan Berkowitz, Director		-0-	(8)		0.0	%

Richard H. Davis, Director		500,000			1.1	%

Dana Reed, Director		-0-	(2)(8)(9)		0.0	%

All Directors and Executive Officers as a group (7 persons)		6,341,240	(10)		12.5	%