Company: AHRO
Filing Date: 2025-04-16
Form Type: 10-K
Source: 0001477932-25-002774
Chunk: 183

Company: Authentic Holdings, Inc.
Filing Date: 2025-04-16
Form: 10-K
Item: Item 12
Chunk 183
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 Notes Payable, and Note 5, Derivative Liabilities, to the consolidated financial statements, the Company had convertible note payable that required accounting considerations and significant estimates.

The Company determined that variable conversion features issued in connection with certain convertible debentures required derivative liability classification in accordance with ASC 815, Derivatives and Hedging. These variable conversion features were initially measured at fair value and subsequently have been remeasured to fair value at each reporting period. The Company determined the fair value of the embedded derivatives related to the convertible notes’ payable was $1,137,119 as of December 31, 2024. 

We identified the accounting considerations and related valuations, including the related fair value determinations of the embedded derivative liabilities of such as a critical audit matter. The principal considerations for our determination were: (1) the accounting consideration in determining the nature of the various features (2) the evaluation of the potential derivatives and potential bifurcation in the instruments, and (3) considerations related to the determination of the fair value of the various debt and equity instruments and (4) the conversion features that include valuation models and assumptions utilized by management. 

Our audit procedures related to management’s conclusion on the evaluation and related valuation of embedded derivatives, included the following, among others: (1) evaluating the relevant terms and conditions of the various financings, and (2) assessing the reasonableness of the judgments made by the Company with respect to the accounting for the convertible debt, and (3) the assessment and accounting for potential derivatives and assessment of management’s conclusions.

Intangible Assets

As described in Note 6, Acquisitions, to the consolidated financial statements, the Company entered into separate transactions to acquire a Company and complete license agreement with another company. Both companies in the transactions with Authentic Holdings, Inc. are owned by the same individual. The Company considered both transactions inseparable, therefore effectively one transaction and recorded intangible assets based on value of the preferred stock (if converted) issued as purchase consideration on the transaction date. The value of the intangible assets, net of amortization was $4,284,185 as of December 31, 2024.

We identified the accounting considerations, subjectivity of the related fair value of the intangible assets, and the presence of an impairment event  as a critical audit matter. The principal considerations for our determination were: (1) determining the valuation method (2) subjective and uncertain nature of the valuation models as it relies on assumptions and forecasts, (3