UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ______
Commission File Number 333-107179 & 000-51210
LEGACY VENTURES INTERNATIONAL, INC
(Exact name of registrant as specified in its charter)
| Nevada | 30-0826318 | |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
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27 Baycliffe Rd. Markham, ON, L3R 7T9 (Address of principal executive offices) (Zip Code) | ||
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647-969-7383 (Registrant's telephone number, including area code) | ||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [_]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or, an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and "emerging growth company", in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [_] | Accelerated filer [_] | |
| Non-accelerated filer [_] | Smaller reporting company [X] | |
| (Do not check if smaller reporting company) | Emerging growth company [_] |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [_] No [X]
As of May 15, 2020, there were 315,064 outstanding shares of the registrant's common stock, $0.0001 par value per share
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TABLE OF CONTENTS
| Page No. | ||
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PART I – FINANCIAL INFORMATION |
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| Item 1. Financial Statements | 4 | |
| Item 2. Management's Discussion and Analysis | 13 | |
| Item 3. Quantitative and Qualitative Disclosures About Market Risk | 14 | |
| Item 4. Controls and Procedures | 14 | |
| PART II – OTHER INFORMATION | ||
| Item 1. Legal Proceedings | 15 | |
| Item 1A. Risk Factors | 15 | |
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 15 | |
| Item 3. Defaults Upon Senior Securities | 15 | |
| Item 4. Mine Safety Disclosures | 15 | |
| Item 5. Other Information | 15 | |
| Item 6. Exhibits | 16 |
| 2 |
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS REQUIRED BY FORM 10-Q
The Interim Condensed Financial Statements of the Company are prepared as of March 31, 2020
| CONTENTS | |
| Interim Condensed Balance Sheets | 4 |
| Interim Condensed Statements of Operations and Comprehensive Loss (Income) | 5 |
| Interim Condensed Statements of Stockholders’ Deficiency | 6 |
| Interim Condensed Statements of Cash Flows | 7 |
| Notes to the Interim Condensed Financial Statements | 8 |
| 3 |
LEGACY VENTURES INTERNATIONAL, INC.
INTERIM CONDENSED BALANCE SHEETS (unaudited)
(Expressed in US dollars)
| March 31, | June 30, | |||||||||||
| ASSETS | Note | 2020 | 2019 | |||||||||
| Current assets | ||||||||||||
| Cash | $ | 19,267 | $ | 12,745 | ||||||||
| Total assets | $ | 19,267 | $ | 12,745 | ||||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||||||||||||
| Current liabilities | ||||||||||||
| Accounts payable and accrued liabilities | $ | 76,001 | $ | 82,764 | ||||||||
| Secured promissory notes | 4 | 100,000 | 50,000 | |||||||||
| Convertible notes | 4 | 20,000 | 20,000 | |||||||||
| Interest payable | 4 | 8,797 | 3,651 | |||||||||
| Advances from third parties | 5 | 22,925 | 22,925 | |||||||||
| Total liabilities | 227,723 | 179,340 | ||||||||||
| Stockholders' deficiency | ||||||||||||
| Preferred Stock, $0.0001 par value; 10,000,000 shares authorized: | ||||||||||||
| Preferred Stock - no shares issued and outstanding March 31, 2020 and June 30, 2019 | 6 | $ | — | $ | — | |||||||
| Common Stock, $0.0001 par value; 100,000,000 shares authorized: | ||||||||||||
| Common Stock - 315,064 shares issued and outstanding March 31, 2020 and June 30, 2019 | 6 | 32 | 32 | |||||||||
| Additional paid in capital | 4 | 6,394,771 | 6,394,771 | |||||||||
| Accumulated deficit | (6,603,259 | ) | (6,561,398 | ) | ||||||||
| Total liabilities and stockholders' deficiency | (208,456 | ) | (166,595 | ) | ||||||||
| $ | 19,267 | $ | 12,745 | |||||||||
| Going concern | 2 | |||||||||||
See accompanying notes to the unaudited interim condensed financial statements
| 4 |
LEGACY VENTURES INTERNATIONAL, INC.
INTERIM CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(unaudited)
(Expressed in US dollars)
| For the three months ended March 31, | For the nine months ended March 31, | |||||||||||||||||||
| Note | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Professional fees | $ | 9,750 | $ | 15,850 | $ | 31,350 | $ | 37,100 | ||||||||||||
| Other general and administration | 372 | 833 | 3,570 | 6,014 | ||||||||||||||||
| Loss from operations | (10,122 | ) | (16,683 | ) | (34,920 | ) | (43,114 | ) | ||||||||||||
| Other (expenses) income | ||||||||||||||||||||
| Gain on cancellation of convertible note | 4 | — | — | — | 545,580 | |||||||||||||||
| Interest expense - Convertible and Secured notes | 4 | (3,091 | ) | (712 | ) | (5,146 | ) | (30,899 | ) | |||||||||||
| Accretion expense - Convertible notes | 4 | — | — | — | (467,575 | ) | ||||||||||||||
| Bank charges and other | (1,795 | ) | — | (1,795 | ) | (30 | ) | |||||||||||||
| Total other (expenses) income | (4,886 | ) | (712 | ) | (6,941 | ) | 47,076 | |||||||||||||
| (Loss) Income before taxes | (15,008 | ) | (17,395 | ) | (41,861 | ) | 3,962 | |||||||||||||
| Net (loss) income and comprehensive (loss) income | $ | (15,008 | ) | $ | (17,395 | ) | $ | (41,861 | ) | $ | 3,962 | |||||||||
| Net (loss) income per share - basic | $ | (0.05 | ) | $ | (0.06 | ) | $ | (0.13 | ) | $ | 0.01 | |||||||||
| Net (loss) income per share - diluted | $ | (0.05 | ) | $ | (0.06 | ) | $ | (0.13 | ) | $ | 0.01 | |||||||||
| Weighted average number of common shares outstanding - basic | 315,064 | 315,064 | 315,064 | 315,064 | ||||||||||||||||
| Weighted average number of common shares outstanding - diluted | 315,064 | 315,064 | 315,064 | 341,731 | ||||||||||||||||
See accompanying notes to the unaudited interim condensed financial statements
| 5 |
LEGACY VENTURES INTERNATIONAL, INC.
INTERIM CONDENSED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY
(unaudited)
(Expressed in US dollars)
| Common Stock | |||||||||||||||||||||
| Note | Number of Shares | Amount | Additional paid in capital | Deficit | Total | ||||||||||||||||
| June 30, 2018 | 315,064 | $ | 32 | $ | 6,394,771 | $ | (6,536,554 | ) | $ | (141,751 | ) | ||||||||||
| Net income | — | — | — | 3,962 | 3,962 | ||||||||||||||||
| March 31, 2019 | 315,064 | 32 | 6,394,771 | (6,532,592 | ) | (137,789 | ) | ||||||||||||||
| Net loss | — | — | — | (28,806 | ) | (28,806 | ) | ||||||||||||||
| June 30, 2019 | 315,064 | $ | 32 | $ | 6,394,771 | $ | (6,561,398 | ) | $ | (166,595 | ) | ||||||||||
| Net loss | — | — | (41,861 | ) | (41,861 | ) | |||||||||||||||
| March 31, 2020 | 315,064 | $ | 32 | $ | 6,394,771 | $ | (6,603,259 | ) | $ | (208,456 | ) | ||||||||||
See accompanying notes to the unaudited interim condensed financial statements
| 6 |
LEGACY VENTURES INTERNATIONAL, INC.
INTERIM CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)
(Expressed in US dollars)
| For the nine months ended March 31, | ||||||||
| 2020 | 2019 | |||||||
| Cash used in operating activities | ||||||||
| Net (loss) income | $ | (41,861 | ) | $ | 3,962 | |||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| Gain on cancellation of convertible note | — | (545,580 | ) | |||||
| Accretion expense - Debt discount on convertible promissory note | — | 467,575 | ||||||
| Changes in non-cash operating assets and liabilities | ||||||||
| Interest payable - Convertible notes | 5,146 | 30,899 | ||||||
| Accounts payable and accrued liabilities | (6,763 | ) | 25,349 | |||||
| Net cash used in operating activities | (43,478 | ) | (17,795 | ) | ||||
| Cash flow from financing activity | ||||||||
| Proceeds from secured convertible note | 50,000 | 50,000 | ||||||
| Net cash provided by financing activity | 50,000 | 50,000 | ||||||
| Increase in cash | 6,522 | 32,205 | ||||||
| Cash, beginning of period | 12,745 | 30 | ||||||
| Cash, end of period | $ | 19,267 | $ | 32,235 | ||||
| Cash payments for: | ||||||||
| Interest | $ | — | $ | — | ||||
| Income taxes | $ | — | $ | — | ||||
See accompanying notes to the unaudited interim condensed financial statements
| 7 |
LEGACY VENTURES INTERNATIONAL, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Legacy Ventures International, Inc. (“Legacy” or the “Company”), was incorporated on March 4, 2014 under the laws of the State of Nevada The Company currently has no ongoing operations except for the incurring of general and administrative expenditures. Previously, since September 15, 2015, the Company operated through a wholly-owned subsidiary RM Fresh Brands Inc. (“RM Fresh”). On August 31, 2016, in order to fund the ongoing operation and further development of RM, the Company consented to new third party investments into RM in the approximate total amount of $175,000, made in the form of cash and retirement of indebtedness owed by RM. As result of these new investments into RM, the Company’s ownership percentage of the RM Fresh was reduced to twenty percent (20%). The Company entered into a mutual Release agreement with RM. Under the Release, the Company released and discharged all liabilities owed to the Company by RM (with the exception of the Demand Promissory Note). RM in turn released the Company of all liabilities owing to RM and released the Company all ongoing contractual and financial responsibilities to RM, including the Company’s contractual obligation to further fund management fees or other expenses to be incurred by RM. The carrying value of the investment in RM Fresh was previously written down to $nil.
On June 28, 2017, Randall Letcavage entered into a stock purchase agreement for the acquisition of an aggregate of 286,720 shares of Common Stock of the Company, representing approximately 91% of the issued and outstanding shares of Common Stock of the Company as of such date, from Rehan Saeed, the previous majority shareholder of the Company (the “Purchase Agreement”). The Purchase Agreements were fully executed and delivered, and the transaction consummated as of and at July 7, 2017. Consequently, Mr. Letcavage was able to unilaterally control the election the Company’s Board of Directors, all matters upon which shareholder approval is required and, ultimately, the direction of the Company.
In addition, on June 28, 2017, Rehan Saeed submitted his resignation from all executive officer positions with the Company, including Chief Executive Officer and President, effective on the 10th day following the filing of a Schedule 14f-1 with the U.S. Securities and Exchange Commission. On June 28, 2017, Randall Letcavage was appointed as Chief Executive Officer, Chief Financial Officer, Director, effective immediately.
On June 28, 2017, the Company entered into a non-binding letter of intent to enter into a business combination with Nexalin Technology, Inc., a Nevada corporation (“Nexalin”).
On June 6, 2018, the Company reported that Matthew Milonas entered into an agreement for the acquisition of an aggregate of 286,720 shares of Common Stock of the Company, representing approximately 91% of the issued and outstanding shares of Common Stock of the Company (the “Shares”) as of such date, from Randall Letcavage, the majority shareholder of the Company (the “Agreement”). However, Mr. Milonas claims that he did not fully execute and deliver the Agreement and has disclaimed ownership of the subject shares. Mr. Letcavage will not contest Mr. Milonas’ claims and as a result, Mr. Letcavage’s ownership of the shares did not change as disclosed.
On August 9, 2018, Mr. Letcavage, as the holder of 91% of the outstanding shares of common stock of the Company, approved the appointment of Peter Sohn as the Chief Executive Officer and Chief Financial Officer and Director of the Company. Effective December 17, 2018, Mr. Sohn accepted the appointments as Chief Executive Officer and Chief Financial Officer and Director of the Company.
On December 17, 2018, Mr. Letcavage delivered to Peter Sohn an agreement for the acquisition by Mr. Sohn of the Shares from Mr. Letcavage, which agreement is dated August 9, 2018, but was delivered and deemed effective on December 17, 2018 (the “Agreement”). As a result, Mr. Sohn is now able to unilaterally control the election of our Board of Directors, all matters upon which shareholder approval is required and, ultimately, the direction of the Company.
| 8 |
LEGACY VENTURES INTERNATIONAL, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS (Continued)
Share Exchange Agreement and Subscriptions
Effective September 11, 2017 (the “Closing Date”), the Company entered into a Share Exchange Agreement (the “Share Exchange Agreement”), dated as of September 1, 2017, by and among the Company, Nexalin and shareholders of Nexalin holding a majority of the issued and outstanding shares of Nexalin common stock (the “Nexalin Shareholders”). Pursuant to the Share Exchange Agreement, the Company agreed to exchange the outstanding equity stock of Nexalin held by the Nexalin Shareholders for units (the “Units”) consisting of an aggregate of approximately 25,000,000 newly issued shares of the Common Stock, $0.001 par value, and warrants (the “Warrants”) to purchase an aggregate of approximately 25,000,000 newly issued shares of the Common Stock, $0.001 par value, of the Company. The warrants are two-year warrants exercisable at the end of the first year for exercise prices between $1.50 and $1.75 per share, payable in cash. The warrants must be promptly exercised, and subject to forfeiture if not so exercised, if the Company’s shares achieve a trading price of $3.00 or more for 30 consecutive days. At the Closing Date, the Company approved the issuance of approximately 15,500,000 shares of common stock to the Nexalin shareholders, together with warrants for the purchase of an additional 15,500,000 shares and reserved approximately 9,500,000 additional shares, together with the related warrants, for the issuance to remaining Nexalin shareholders who are expected to execute and deliver the Share Exchange Agreement, including approximately 1,100,000 shares and related warrants issuable immediately to consultants in connection with the transactions contemplated by the Share Exchange Agreement. On September 15, 2017, the Company, filed a Current Report on Form 8-K (the “09/15/17 Form 8K”) announcing that effective September 11, 2017 (the “Closing Date”), the Company, and Nexalin, and shareholders of Nexalin holding a majority of the issued and outstanding shares of Nexalin common stock (the “Nexalin Shareholders”), on the other hand, entered into a Share Exchange Agreement (the “Share Exchange Agreement”), dated as of September 1, 2017.
On November 29, 2017, the Company filed an amendment to its 09/15/17 Form 8-K (the “11/29/17 Amended Form 8K”) announcing that the “Closing Date” as defined in the Share Exchange Agreement was September 30, 2017, and, further, as of the date of November 29, 2017, Amended Form 8K, the holders of approximately 90% of the equity securities of Nexalin had exchanged their shares into shares of the Company’s Common Stock.
On December 26, 2017, the Company filed a Current Report on Form 8K (the “12/26/17 Form 8K”) announcing that on December 21, 2017, the Company’s sole officer and director, Randy Letcavage, who was at the time Nexalin’s sole officer and director, resigned all officer and director positions with the Company and Nexalin. It was also announced that Mark White was appointed as the Interim Chief Executive Officer and Interim Chief Financial Officer of both the Company and Nexalin. Finally, it was announced that Rick Morad was appointed as the sole director of the Company and Nexalin.
On February 1, 2018, the Company filed a Current Report on Form 8K (the “02/01/18 Form 8K”) announcing that Mark White was appointed as a Company director.
| 9 |
LEGACY VENTURES INTERNATIONAL, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited)
NOTE 2 – GOING CONCERN AND BASIS OF PRESENTATION
The Company’s interim condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the current year, the Company has incurred recurring losses from operations and as at March 31, 2020, has a working capital deficiency of $208,456, and an accumulated deficit of $6,603,259. The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. There can be no assurance that the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company, in which case the Company may be unable to meet its obligations. Should the Company be unable to realize its assets and discharge its liabilities in the normal course of business, the net realizable value of its assets may be materially less than the amounts recorded in the unaudited interim condensed financial statements. The unaudited interim condensed financial statements do not include any adjustments relating to the recoverability of recorded asset amounts that might be necessary should the Company be unable to continue in existence.
The unaudited interim condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in the Company's annual report filed with the SEC on Form 10-K for the year ended June 30, 2019. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. Operating results for the three and nine months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending June 30, 2020. Notes to the interim condensed financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the year ended June 30, 2019, as reported in Form 10-K, have been omitted.
NOTE 3 – SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
SIGNIFICANT ACCOUNTING POLICIES
The Company's significant accounting policies have not changed from the year ended June 30, 2019.
BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
The Company follows ASC Topic 260 to account for the loss per share. Basic earnings (loss) per common share ("EPS") calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents (if dilutive) outstanding. All dilutive common share equivalents were anti-dilutive for the three and nine months ended March 31, 2020 and the three months ended March 31, 2019.. Diluted earnings per share and weighted average common shares outstanding – diluted, for the nine months ended March 31, 2019, reflects the conversion of the Unsecured Promissory Notes
| 10 |
LEGACY VENTURES INTERNATIONAL, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited)
NOTE 4 – SECURED PROMISSORY AND CONVERTIBLE NOTES
CONVERTIBLE PROMISSORY NOTE
On September 11, 2017, the Company issued a Convertible Promissory Note ("Convertible Note") to an accredited investor. The Convertible Note has an aggregate principal amount of $500,000, and was payable on September 11, 2018 (the "Maturity Date"), and bears an interest rate of 4% per annum, with an interest rate of 18% per annum if the Convertible Note was not repaid by the Maturity Date. The holder may convert the Convertible Note at any time up to the Maturity Date into shares of the Company's common stock, par value $0.001 per share, at a conversion price equal to $1.00 per share. The Company could prepay the Convertible Note prior to the Maturity Date and/or the date of conversion without penalty upon receiving the written consent of the holder. Interest expense for the three and nine months ended March 31, 2020, was $nil. Interest expense for the three months ended March 31, 2019 was $nil and $29,580, for the nine months ended March 31, 2019.
The Convertible Note payable contained a beneficial conversion feature. As a result, the Company recognized a nominal value for the Convertible note, at the September 11, 2017 issuance date, the balance of which was accreted to the face value at the effective interest rate. Accretion expense for the nine months ended March 31, 2020 and 2019 was $nil and $467,575, respectively. The difference between the nominal value ascribe to the Convertible Note on issuance and the face value was recorded in the Additional Paid In Capital.
As a result of the series of events discussed previously on Note 1, on April 11, 2018, the Company wrote-off the value of the Convertible Note as well as the accrued interest receivable thereon. The Convertible Note was assigned to an accredited arm’s length third party, in exchange for the waiver of the promissory note payable pursuant to the terms of the Assignment Agreement.
On September 11, 2017, the Company received a Promissory Note ("Promissory Note") from Nexalin Technology, Inc. The Promissory Note has an aggregate principal amount of $500,000 and is payable on December 31, 2017 (the "Maturity Date") and bears an interest rate of 4% per annum.
On December 18, 2018, the Company entered into an assignment agreement (“Assignment Agreement”) with the holder of the Convertible Note, whereby, the Promissory Note was assigned to the Convertible Note holder in exchange for the waiver and cancellation of the Convertible Note. As a result, the Company recognized a gain of $545,580 for the year ended June 30, 2019, which was the carrying value of the Convertible Note and the accrued interest payable thereon at the time the assignment agreement was entered into.
SECURED PROMISSORY NOTES
On December 2, 2018, the Company issued a Secured Promissory Note ("Secured Notes") to an accredited investor. The Secured Note has an aggregate principal amount of $50,000, and is payable on December 2, 2019 (the "Maturity Date"), and bears an interest rate of 4% per annum and reverts to 18% after the Maturity Date. The amount owing under the Secured Note is secured by the assets of the Company. The note may be converted, the terms of which are to be negotiated between the Company and the note holder. The principal and interest was not paid at the maturity date as the Company continues to negotiate a settlement with the Secured Note holder. The Company has incurred interest expense of $2,365 and $493 for the three months ended March 31, 2020 and 2019, respectively, and incurred interest expense of $3,675 and $652 for the nine months ended March 31, 2020 and 2019, respectively.
On September 6, 2019, the Company issued a Secured Promissory Note ("Secured Notes") to an accredited investor. The Secured Note has an aggregate principal amount of $50,000, and is payable on September 6, 2020 (the "Maturity Date"), and bears an interest rate of 4% per annum. The amount owing under the Secured Note is secured by the assets of the Company. The note may be converted, the terms of which are to be negotiated between the Company and the note holder. The Company recorded interest expense of $495 for the three months ended March 31, 2020 and $781 for the nine months ended March 31, 2020.
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LEGACY VENTURES INTERNATIONAL, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited)
UNSECURED CONVERTIBLE PROMISSORY NOTES
On June 28, 2017 the Company issued $20,000 of unsecured convertible promissory notes (“Notes”). The Notes matured on June, 27, 2018, and bear interest at a rate of 8% per annum. The Notes are convertible into the Common Stock of the Company at a fixed conversion rate of $0.75 per share at any time prior to the maturity date. The Company evaluated the terms and conditions of the Notes under the guidance of ASC 815, Derivatives and Hedging. The conversion feature met the definition of conventional convertible for purposes of applying the conventional convertible exemption. The definition of conventional contemplates a limitation on the number of shares issuable under the arrangement. The instrument was convertible into a fixed number of shares and there were no down round protection features contained in the contracts. The Company was required to consider whether the hybrid contracts embodied a beneficial conversion feature (“BCF”). The calculation of the effective conversion amount resulted in a BCF because the fair value of the conversion was greater than the Company’s stock price on the date of issuance and a BCF was recorded in the amount of $20,000 and accordingly the amount of $20,000 was credited to Additional Paid in Capital. The BCF which represents debt discount is accreted over the life of the loan using the effective interest rate. Accretion expense for the three and nine months ended March 31, 2020 and 2019 was $nil, respectively. Interest expense for the three months ended March 31, 2020 and 2019, was $231 and $219, respectively. Interest expense for the three months ended March 31, 2020 and 2019 was $231 and $219, respectively. Interest expense for the nine months ended March 31, 2020, and 2019, was $691 and $668, respectively. As at March 31, 2020, the carrying value of the notes were $20,000 (June 30, 2019 - $20,000).
No amounts of principal and interest for the above mentioned notes have been paid to date.
NOTE 5 – RELATED PARTY ADVANCES AND BALANCES, AND ADVANCES FROM THIRD PARTIES
During the three and nine months ended March 31, 2020 and 2019, the Company was advanced $nil, respectively, by a third party. The Company is currently in the process of negotiating with the third party with respect to settlement of the amount advanced. As at March 31, 2020 and June 30, 2019, the Advances from third parties was $22,925. The Company does not have any contractual maturity date nor interest obligations with respect to the Advances.
NOTE 6 - COMMON AND PREFERRED STOCK TRANSACTIONS
COMMON STOCK - AUTHORIZED
As at March 31, 2020, the Company was authorized to issue 10,000,000 of preferred stock, with a par value of $0.0001 and 100,000,000 of common stock, with a par value of $0.0001.
There were no common stock transactions in the period ended March 31, 2020 and year ended June 30, 2019.
| 12 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
This report contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. The Company’s actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons.
Plan of Operation
Legacy Ventures International, Inc. (“Legacy” or the “Company”), was incorporated on March 4, 2014 under the laws of the State of Nevada.
Liquidity and Capital Resources
As of March 31, 2020, the Company's primary source of liquidity consisted of $19,267 (June 30, 2019 - $12,745) in cash. The Company financed its operations through a combination of advances from third parties.
The Company has sustained net losses which have resulted in a total stockholders' deficiency at March 31, 2020, and is currently experiencing a shortfall in operating capital which raises substantial doubt about the Company's ability to continue as a going concern. The Company anticipates a net loss for the year ending June 30, 2020 and with the expected cash requirements for the coming months, without additional cash inflows from an corporate transaction, there is substantial doubt as to the Company's ability to continue operations.
We may seek to secure additional debt or equity capital to finance substantial business development initiatives. There is presently no agreement in place with any source of financing for the Company and there can be no assurance that the Company will be able to raise any additional funds, or that such funds will be available on acceptable terms. Funds raised through future equity financing will likely be substantially dilutive to current shareholders. Lack of additional funds will materially affect the Company and its business, and may cause the Company to cease operations. Consequently, shareholders could incur a loss of their entire investment in the Company.
Net Cash Used in Operating Activities
During the nine months ended March 31, 2020, cash used in operations was $43,478 and $17,795 for the nine months ended March 31, 2019, respectively. Cash used in operating activities was primarily the result of selling, general and administrative expenses and a decrease in accounts payable and accrued liabilities.
Net Cash Used in Investing Activities
There was no cash used in or provided from investing activities for the nine months ended March 31, 2020 and 2019.
Net Cash Provided by Financing Activities
There was cash provided from financing activities of $50,000 for the nine months ended March 31, 2020, and 2019.
| 13 |
Results of Operations
Operating expenses. Operating expenses for the three months ended March 31, 2020, was $10,122 compared with $16,683 for the three months ended March 31, 2019. Operating expenses for the nine months ended March 31, 2020, was $34,920 compared with $43,114 for the nine months ended March 31, 2019. Operating expenses consisted of accrued expenses for the Company’s auditors as well as other consulting and professional fees. Operating expenses were lower for the three and nine month periods ended March 31, 2020, compared with the prior year periods as a result of lower professional fees and general and administration costs.
Other (expenses) income. Other (expenses) income was higher for the three months ended March 31, 2020, compared with the three months ended March 31, 2019, primarily due to higher interest expense. For the nine months ended March 31, 2020, other expense was $6,941 compared with other income of $47,076 as the Company recorded a gain on the cancellation of a convertible note of $545,580 offset to some extent by accretion expenses on the convertible debt of $467,575.
Net (Loss) Income. Net loss for the three months ended March 31, 2020, was $15,008 compared with a net loss of $17,395 for the three months ended March 31, 2019. For the nine months ended March 31, 2020, the Company incurred a net loss of $41,861 compared with net income of $3,962 for the nine months ended March 31, 2019.
Off-Balance Sheet Arrangements
We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Personnel
The Company has no full-time employees, but utilizes other project-based contract personnel to carry out the Company’s business. We utilize contract personnel on a continuous basis, primarily in connection with the filing of reports with the Securities and Exchange Commission which require a high level of specialization for one or more of the service components offered.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Required.
Item 4. Controls and Procedures.
The Securities and Exchange Commission defines the term "disclosure controls and procedures" to mean a Company's controls and other procedures of an issuer that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. The Company maintains such a system of controls and procedures in an effort to ensure that all information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified under the SEC's rules and forms and that information required to be disclosed is accumulated and communicated to principal executive and principal financial officers to allow timely decisions regarding disclosure.
| 14 |
As of the end of the period covered by this Quarterly Report, the Company carried out an evaluation, under the supervision and with the participation of the Company’s chief executive officer and chief financial officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based upon this evaluation, the Company’s chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this Quarterly Report were ineffective due to a lack of segregation of duties, due to limited administrative and financial personnel and related resources and as the Company only has one director.
Changes in Internal Control over Financial Reporting
There have been no significant changes in the Company’s internal controls over financial reporting that occurred during the period ended March 31, 2020, that have materially or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently subject to any legal proceedings, and to the best of our knowledge, no such proceeding is threatened, the results of which would have a material impact on the Company’s properties, results of operations, or financial condition. Nor, to the best of our knowledge, are any of the Company’s officers or directors involved in any legal proceedings in which we are an adverse party.
Item 1A. Risk Factors
Since we are a smaller reporting company, we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On September 6, 2019, the Company issued a Secured Promissory Note ("Secured Note") to an accredited investor. The Secured Note has an aggregate principal amount of up to $50,000 and is payable on September 6, 2020 (the "Maturity Date"), and bears an interest rate of 4% per annum. The amount owing under the Secured Note is secured by the assets of the Company. The note may be converted, the terms of which are to be negotiated between the Company and the note holder.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures.
Not Applicable.
Item 5. Other Information.
None.
| 15 |
Item 6. Exhibits.
The following exhibits are filed with or incorporated by reference in this report:
| Item No. | Description |
| 31.1* | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Peter Sohn. |
| 32.1* | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Peter Sohn. |
| 101* | XBRL Report |
* filed herewith
| 16 |
|
LEGACY VENTURES INTERNATIONAL, INC. | |
|
Date: May 15, 2020 |
By: /s/ Peter Sohn Name: Peter Sohn Title: Chief Financial Officer and Principal Executive Officer |
| 17 |
Exhibit 31.1
CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter Sohn of LEGACY VENTURES INTERNATIONAL, INC. (the "Company"), certify that:
1. I have reviewed this 10-Q of the Company;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
4. As the Company's Principal Executive Officer and Principal Financial and Accounting Officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;
c. Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and
5. As the Company's Principal Executive Officer and Principal Financial and Accounting Officer I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.
Date: May 15, 2020
/s/ Peter Sohn
Peter Sohn
Principal Executive Officer
and Principal Financial and Accounting Officer
Exhibit 32.1
CERTIFICATION
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Peter Sohn, Principal Executive Officer and Principal Financial and Accounting Officer of LEGACY VENTURES INTERNATIONAL, INC. (the "Company") certify that:
1. I have reviewed the quarterly report on Form 10-Q of the Company;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; and
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the period presented in this quarterly report.
Date: May 15, 2020
/s/ Peter Sohn
Peter Sohn
Principal Executive Officer
and Principal Financial and Accounting Officer
INTERIM CONDENSED STATEMENT OF CASH FLOWS (Unaudited) - USD ($) |
9 Months Ended | |
|---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
| Cash used in operating activities | ||
| Net (loss) income | $ (41,861) | $ 3,962 |
| Adjustments to reconcile net loss to net cash used by operating activities: | ||
| Gain on cancellation of convertible note | 0 | (545,580) |
| Accretion expense - Debt discount on convertible promissory note | 0 | 467,575 |
| Changes in non-cash operating assets and liabilities | ||
| Interest payable - Convertible notes | 5,146 | 30,899 |
| Accounts payable and accrued liabilities | (6,763) | 25,349 |
| Net cash used in operating activities | (43,478) | (17,795) |
| Cash flow from financing activities | ||
| Proceeds from secured convertible note | 50,000 | 50,000 |
| Net cash provided by financing activities | 50,000 | 50,000 |
| Increase in cash | 6,522 | 32,205 |
| Cash, beginning of period | 12,745 | 30 |
| Cash, end of period | 19,267 | 32,235 |
| Cash payments for Interest | 0 | 0 |
| Cash payments for Income taxes | $ 0 | $ 0 |
INTERIM CONDENSED BALANCE SHEETS (Unaudited) - USD ($) |
Mar. 31, 2020 |
Jun. 30, 2019 |
|---|---|---|
| Current assets | ||
| Cash | $ 19,267 | $ 12,745 |
| Total assets | 19,267 | 12,745 |
| Current liabilities | ||
| Accounts payable and accrued liabilities | 76,001 | 82,764 |
| Secured promissory notes | 100,000 | 50,000 |
| Convertible notes | 20,000 | 20,000 |
| Interest payable | 8,797 | 3,651 |
| Advances from third parties | 22,925 | 22,925 |
| Total liabilities | 227,723 | 179,340 |
| Stockholders' deficiency | ||
| Preferred Stock, $0.0001 par value; 10,000,000 shares authorized: Preferred Stock - no shares issued and outstanding March 31, 2020 and June 30, 2019 | 0 | 0 |
| Common Stock, $0.0001 par value; 100,000,000 shares authorized: 315,064 shares issued and outstanding September 30, 2019 and June 30, 2019 | 32 | 32 |
| Additional paid in capital | 6,394,771 | 6,394,771 |
| Accumulated deficit | (6,603,259) | (6,561,398) |
| Total stockholders' deficiency | (208,456) | (166,595) |
| Total liabilities and stockholders' deficiency | $ 19,267 | $ 12,745 |
GOING CONCERN AND BASIS OF PRESENTATION (Details Narrative) - USD ($) |
Mar. 31, 2020 |
Jun. 30, 2019 |
|---|---|---|
| Going Concern [Abstract] | ||
| Working capital deficiency | $ (208,456) | |
| Accumulated deficit | $ (6,603,259) | $ (6,561,398) |
RELATED PARTY ADVANCES AND BALANCES, AND ADVANCES FROM THIRD PARTIES |
9 Months Ended |
|---|---|
Mar. 31, 2020 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY ADVANCES AND BALANCES, AND ADVANCES FROM THIRD PARTIES | NOTE 5 – RELATED PARTY ADVANCES AND BALANCES, AND ADVANCES FROM THIRD PARTIES
During the three and nine months ended March 31, 2020 and 2019, the Company was advanced $nil, respectively, by a third party. The Company is currently in the process of negotiating with the third party with respect to settlement of the amount advanced. As at March 31, 2020 and June 30, 2019, the Advances from third parties was $22,925. The Company does not have any contractual maturity date nor interest obligations with respect to the Advances. |