Acquisition and Subsequent Deconsolidation of P3 Compounding

9 Months Ended

Sep. 30, 2016

Business Combinations [Abstract]

Acquisition and Subsequent Deconsolidation of P3 Compounding

Note 5 - Acquisition and Subsequent Deconsolidation of P3 Compounding

On April 29, 2016, the Company entered into definitive documents to acquire P3 Compounding of Georgia, LLC, (“P3”). P3 received Georgia Board of Pharmacy approval for the transaction at the end of June 2016 and the transaction closed effective June 30, 2016. However, during the following 90 days, as the Company did not gain effective control of the P3 business, we entered into an agreement on September 30, 2016, with the owners to deconsolidate the operations and return the assets and liabilities to the former owners. After the deconsolidation, the entity which holds the assets is not a related party of the Company.

The acquisition transaction was accounted for as a business combination and recorded as of June 30, 2016. Consideration for the transaction was structured as follows:

1)	An interest-free note for $150,000 with no interest to be paid in full via wire transfer on the maturity date of August 16, 2016. This note had not been satisfied at the time of the deconsolidation, and was cancelled.
2)	$425,000 convertible note with a term of 12 months and a 6% interest rate, with the first installment due June 1, 2016, and convertible into common stock of True Nature at a rate of $1.25 per share (which is 340,000 shares of common stock). This note was converted into 340,000 shares of restricted common stock valued at $1,183,200. These shares remain the property of the holders.
3)	A $425,000 convertible note with no interest, which automatically converted 340,000 shares of common stock with a fair value of $261,800 based on the closing price of the True Nature’s common stock on June 30, 2016. This note was cancelled.

In addition, Mr. Casey Gaetano, a former owner of P3, received an employment contract with True Nature for 3 years as VP of Corporate Development, at an annual salary of $125,000, plus normal benefits commensurate with other executives in the Company of equal stature. He also received in second quarter 2016, 125,000 shares valued at $435,000 based on the closing market price on the date of grant in exchange for becoming the Company’s VP of Corporate Development. No cash consideration was paid under this agreement, and it was fully cancelled without further obligation as a part of the deconsolidation transaction. The shares values at $435,000 were issued and will remain the property of Mr. Gaetano. As the company never attained full control of P3, in accordance with ASC 810 the business was deconsolidated from the company’s financials as of September 30, 2016.

Allocation of Consideration Transferred

The identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based on their estimated fair values as of June 30, 2016. The fair value of the transaction and related purchase price allocation was based on a third-party valuation obtained by the Company. The purchase includes all payables, receivables, cash on hand, inventory and all assets used in the operation of the business. The excess of the acquisition date fair value of consideration transferred over the estimated fair value of the net tangible assets and intangible assets acquired was recorded as goodwill. The estimated fair values of the assets acquired and liabilities assumed at the acquisition date based on a fair value acquisition price pertaining to the consideration provided above. The fair value of intangible assets related to customer relationships was $151,273 based on a useful life of 7 years and goodwill was valued at $561,340. As the Company did not obtain effective control, these assets and liabilities were deconsolidated effective September 30, 2016.

Loss from Deconsolidation

As the Company did not obtain effective control of the P3 business, the Company deconsolidated the business effective September 30, 2016 in accordance with ASC 810 and the disclosures herein were also made in accordance with ASC 810. As a result, the Company recorded a loss from deconsolidation of $1,724,200, based on the fair value of shares issued of $1,618,200 and liabilities retained from the transaction of $106,000; the loss from deconsolidation is included within selling, general and administrative expenses for the nine-month period ended September 30, 2016.