LEGACYXCHANGE, INC. Overview
LegacyXchange, Inc. , formerly known asTrue 2 Beauty, Inc. (the "Company") was originally incorporated asBurrow Mining, Inc. , aNevada corporation, onDecember 11, 2006 . InFebruary 2010 , the Company shifted its focus to the beauty industry and later amended its Articles of Incorporation and changed its name toTrue 2 Beauty, Inc. , to better reflect its new business focus. OnJuly 10, 2012 , the Company formed a new wholly owned subsidiaryTrue2Bid, Inc. ("True2Bid") which was incorporated in the state ofNevada . This subsidiary's name was changed toLegacyXchange, Inc. ("LegacyXchange") inDecember 2014 . The Company continued to sell existing inventory of beauty products throughMay 2013 when the final inventory was sold.LegacyXchange operates an online e-commerce platform focused on delivering users a wide array of sports and entertainment related products that can be won in an action-packed environment of a live auction. The Company has ceased all operations related toLegacyXchange . Currently, management is seeking other business opportunities.
The Company's articles authorize the Company to issue 190,000,000 shares of
common stock and 10,000,000 shares of preferred stock, both at a par value of
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The following table summarizes the results of operations for the years ended
March 31, 2019 and 2018 and is based primarily on the comparative audited
financial statements, footnotes and related information for the periods
identified and should be read in conjunction with the financial statements and
the notes to those statements that are included elsewhere in this annual report.
For the Years Ended
March 31,
2019 2018
Loss from operations $ (63,425 ) $ (78,425 )
Other expense, net (79,285 ) (74,000 )
Net loss $ (142,710 ) $ (152,425 )
Revenue and gross loss:
We did not generate any revenues from operations for the during the years ended
Operating expenses: For the years endedMarch 31, 2019 and 2018, operating expenses amounted to$63,425 and$78,425 , respectively, a decrease of$15,000 or 19%. For the years endedMarch 31, 2019 and 2018, operating expenses consisted of the following: For the Years Ended March 31, 2019 2018 Executive compensation$ 60,000 $ 75,000 Professional and consulting fees 2,550 2,550 Other selling, general and administrative 875 875 Total$ 63,425 $ 78,425 ? Executive compensation: For the years endedMarch 31, 2019 and 2018, executive compensation amounted to$60,000 and$75,000 , respectively, a decrease of$15,000 or 20%. The decrease resulted from the reduction of the CEO's annual compensation effectiveJuly 2017 . ? Professional and consulting fees:
For the years ended
? Other selling, general and administrative:
For the years ended
Loss from operations:
For the years endedMarch 31, 2019 and 2018, loss from operations amounted to$63,425 and$78,425 , respectively, a decrease of$15,000 or 19%. The decrease was a result of the changes in operating expenses as discussed above. Other income (expense):
Other income (expense) includes interest expense, gain from the change in fair value of derivative liabilities and gain from extinguishment of account payable.
For the year endedMarch 31, 2019 , total other expense, net, amounted to$79,285 as compared to$74,000 for the year endedMarch 31, 2018 , an increase of$5,285 or 7%. The increase in other expense, net, was attributable to a decrease in interest expense of$63,708 , or 43%, a decrease in gain from change in fair value of derivative liabilities of$71,543 or 96% offset by an increase from gain from extinguishment of debt of$2,550 or 100%. Net loss: For the year endedMarch 31, 2019 , net loss amounted to$142,710 , or per common share loss of$(0.00) (basic and diluted) as compared to$152,425 net loss, or per common share loss of$(0.00) (basic and diluted) for the year endedMarch 31, 2018 , a decrease of$9,715 , or 6%. The decrease was a result of the changes in operating expenses and other income (expense) as discussed above. 4
Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital deficit of$1,317,838 and$0 of cash as ofMarch 31, 2019 and working capital deficit of$1,175,128 and$0 of cash as ofMarch 31, 2018 . Percentage March 31, 2019 March 31, 2018 Change Change
Working capital deficit: Total current assets $ - $ - $ - - % Total current liabilities (1,317,838 ) (1,175,128 ) (142,710 ) 12 % Working capital deficit:$ (1,317,838 ) $ (1,175,128 ) $ (142,710 ) 12 %
The increase in working capital deficit was primarily attributable to an
increase in current liabilities of
Cash Flow
Net cash used in operating activities:
Net cash flow used in operating activities was
? Net cash flow used in operating activities for the year ended March 31,
2019 primarily reflected our net loss of $142,710 adjusted for the
add-back on non-cash items such amortization of debt discount of
gain from change in fair value of derivative liabilities of
from extinguishment of debt of
and liabilities primarily consisting of an increase in accounts payable of
$3,425 and an increase in accrued liabilities of$123,334 . ? Net cash flow used in operating activities for the year endedMarch 31, 2018 primarily reflected our net loss of$152,425 adjusted for the
add-back on non-cash items such amortization of debt discount of
gain from change in fair value of derivative liabilities of
the changes in operating assets and liabilities primarily consisting of an
increase in accounts payable of $3,425 and an increase in accrued
liabilities of $138,334 .
Cash Requirements
Our management does not believe that our current capital resources will be
adequate to continue operating our company and maintaining our business strategy
for more than 12 months from the date of this report. Accordingly, we will have
to raise additional capital in the near future to meet our working capital
requirements. There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, if and when it is needed, we will be forced to
scale down or perhaps even cease the operation of our business.
Going Concern
The financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in our accompanying financial statements, the Company had net loss of$142,710 for the year endedMarch 31, 2019 . The Company had accumulated deficit, stockholders' deficit and working capital deficit of$10,562,984 ,$1,317,838 and$1,317,838 , respectively, atMarch 31, 2019 . The Company had no revenues for the year endedMarch 31, 2019 , and we are currently in default on our loans and convertible notes. Management believes that these matters raise substantial doubt about the Company's ability to continue as a going concern for twelve months from the issuance date of this report. Management cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive, or raise additional debt and/or equity capital. Management believes that our capital resources are not currently adequate to continue operating and maintaining its business strategy for a period of twelve months from the issuance date of this report. The Company will seek to raise capital through additional debt and/or equity financings to fund its operations in the future. Although the Company has historically raised capital from sales of equity and from the issuance of promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail or cease operations. These financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. 5 Future Financings We will require additional financing to fund our planned operations. We currently do not have committed sources of additional financing and may not be able to obtain additional financing particularly, if the volatile conditions of the stock and financial markets persist. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to further delay or further scale down some or all of our activities or perhaps even cease the operations of
the business.
Since inception we have funded our operations primarily through equity and debt financings and we expect that we will continue to fund our operations through the equity and debt financing. If we are able to raise additional financing by issuing equity securities, our existing stockholders' ownership will be diluted. Obtaining commercial or other loans, assuming those loans would be available, will increase our liabilities and future cash commitments. There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his, her, or its investment in our common stock. Further, we may continue to be unprofitable.
Critical Accounting Policies
We have identified the following policies as critical to our business and results of operations. Our reported results are impacted by the application of the following accounting policies, certain of which require management to make subjective or complex judgments. These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies are described in the following paragraphs. Use of Estimates The preparation of the financial statements in conformity withU.S. GAAP requires management to make estimates and assumptions that affect the 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 revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates during the years endedMarch 31, 2019 and 2018 include assumptions used in estimation of deferred tax valuation allowances and the valuation of derivative liabilities.
Fair Value of Financial Instruments and Fair Value Measurements
FASB ASC 820 - Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company onMarch 31, 2019 . Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy are as follows:
Level 1-Inputs are unadjusted quoted prices in active markets for identical
assets or liabilities available at the measurement date.
Level 2-Inputs are unadjusted quoted prices for similar assets and
liabilities in active markets, quoted prices for identical or similar assets
and liabilities in markets that are not active, inputs other than quoted
prices that are observable, and inputs derived from or corroborated by
observable market data.
Level 3-Inputs are unobservable inputs which reflect the reporting entity's
own assumptions on what assumptions the market participants would use in
pricing the asset or liability based on the best available information.
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The carrying amounts reported in the balance sheets for cash, due from and to related parties, prepaid expenses, accounts payable and accrued liabilities approximate their fair market value based on the short-term maturity of these instruments. Derivative Liabilities
The Company has certain financial instruments that are embedded derivatives associated with capital raises and certain warrants. The Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10 - Derivative and Hedging - Contract in Entity's Own Equity. This accounting treatment requires that the carrying amount of any derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or loss on debt extinguishment. InJuly 2017 , FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The adoption of this guidance is not expected to have a material impact on the Company's financial statements. Revenue Recognition InMay 2014 , FASB issued an update Accounting Standards Update, ASU 2014-09, establishing ASC 606 - Revenue from Contracts with Customers. ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard, which is effective for interim and annual reporting periods in fiscal years that begin afterDecember 15, 2017 , requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. The Company adopted ASU 2014-09 during the three months endedJune 30, 2018 . The adoption of ASU 2014-09 did not have any material impact on the Company's financial statements. The Company did not have revenues for the years endedMarch 31, 2019 and 2018.
Stock-Based Compensation
Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date
fair value of the award. InJune 2014 , the FASB issued Accounting Standards Update No. 2014-12, Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of theFASB Emerging Issues Task Force ) (ASU 2014-12). The guidance applies to all reporting entities that grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period is treated as a performance condition. For all entities, the amendments in this Update are effective for annual periods and interim periods within those annual periods beginning afterDecember 15, 2015 . Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities. The Company early adopted ASU 2014-12 during the three months endedJune 30, 2016 . The adoption of ASU 2014-12 did not have any material impact on the Company's financial statements. Pursuant to ASC 505-50 - Equity-Based Payments to Non-Employees, all share-based payments to non-employees, including grants of stock options, were recognized in the financial statements as compensation expense over the service period of the consulting arrangement or until performance conditions are expected to be met. Using a Black Scholes valuation model, the Company periodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options, and the Company adjusts the expense recognized in the financial statements accordingly. InJune 2018 , the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning afterDecember 15, 2018 , including interim periods within those annual periods. The Company early adopted ASU No. 2018-07 during the three months endedMarch 31, 2018 . The adoption ASU No. 2018-07 did not have a material impact on the Company's financial statements. 7
Recent Accounting Pronouncements
InAugust 2018 , the FASB issued ASU 2018-13-Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure Requirements for Fair Value Measurement, to modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2019 . The Company does not believe this will have any material impact on the Company's financial statements.
Removals. The following disclosure requirements were removed from Topic 820:
1. The amount of and reasons for transfers between Level 1 and Level 2 of the
fair value hierarchy
2. The policy for timing of transfers between levels
3. The valuation processes for Level 3 fair value measurements
4. For nonpublic entities, the changes in unrealized gains and losses for the
period included in earnings for recurring Level 3 fair value measurements
held at the end of the reporting period.
Modifications. The following disclosure requirements were modified in Topic 820:
1. In lieu of a roll forward for Level 3 fair value measurements, a nonpublic
entity is required to disclose transfers into and out of Level 3 of the
fair value hierarchy and purchases and issues of Level 3 assets and
liabilities.
2. For investments in certain entities that calculate net asset value, anentity is required to disclose the timing of liquidation of an investee's
assets and the date when restrictions from redemption might lapse only if
the investee has communicated the timing to the entity or announced the
timing publicly.
3. The amendments clarify that the measurement uncertainty disclosure is to
communicate information about the uncertainty in measurement as of the
reporting date.
Additions. The following disclosure requirements were added to Topic 820; however, the disclosures are not required for nonpublic entities:
1. The changes in unrealized gains and losses for the period included inother comprehensive income for recurring Level 3 fair value measurements
held at the end of the reporting period.
2. The range and weighted average of significant unobservable inputs used to
develop Level 3 fair value measurements. For certain unobservable inputs,
an entity may disclose other quantitative information (such as the median
or arithmetic average) in lieu of the weighted average if the entity
determines that other quantitative information would be a more reasonable
and rational method to reflect the distribution of unobservable inputs
used to develop Level 3 fair value measurements.
In addition, the amendments eliminate at a minimum from the phrase an entity
shall disclose at a minimum to promote the appropriate exercise of discretion by
entities when considering fair value measurement disclosures and to clarify that
materiality is an appropriate consideration of entities and their auditors when
evaluating disclosure requirements. The Company is evaluating the impact of the
revised guidance and believes that it will not have a significant impact onits financial statements.
Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company's financial statements.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.
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