LEGACYXCHANGE, INC. Overview
On
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
The following table summarizes the results of operations for the years ended
For the Years Ended
March 31,
2017 2016
Loss from operations $ (213,060 ) $ (745,943 )
Other income (expense), net 491,248 (184,131 )
Net income (loss) $ 278,188 $ (930,074 )
Revenue and gross loss:
We did not generate any revenues from operations during the years ended
Operating expenses:
For the years ended
For the Years Ended
March 31,
2017 2016
Compensation and related taxes $ 121,036 $ 283,500
Professional and consulting fees 80,290 413,543
Other selling, general and administrative 11,734 48,900 Total
$ 213,060 $ 745,943 ? Compensation and related taxes:
For the years ended
? Professional and consulting fees:
For the years ended
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? Other selling, general and administrative:
For the years ended
Loss from operations:
For the years ended
Other income (expense):
Other income (expense) includes interest expense, initial derivative expense, gain (loss) from change in fair value of derivative liabilities and loss on debt extinguishment.
For the year ended
Net income (loss):
For the year ended
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
March 31, March 31, Percentage
2017 2016 Change Change
Working capital deficit:
Total current assets $ - $ 65,826 $ (65,826 ) 100 %
Total current liabilities (1,022,703 ) (1,366,717 ) 344,014 25 %
Working capital deficit: $ (1,022,703 ) $ (1,300,891 ) $ 278,188 21 %
The decrease in working capital deficit was primarily attributable to decrease
in current assets of
Cash Flow
A summary of cash flow activities is summarized as follows:
Year Ended March 31,
2017 2016
Cash used in operating activities
$ (4,209 ) $ (153 ) 4
Net cash used in operating activities:
Net cash flow used in operating activities was
? Net cash flow used in operating activities for the year endedMarch 31, 2017 primarily reflected our net income of$278,188 adjusted for the add-back on non-cash items such amortization of debt discount of$166,292 , gain from change in fair value of derivative liabilities of$720,808 , write-off of obsolete inventory of$570 , amortization of prepaid consulting fees of$11,047 and the changes in operating assets and liabilities primarily consisting of a decrease in prepaid expenses and other current assets of$50,000 offset by an increase in accounts payable of$28,477 and an increase in accrued liabilities of$170,870 . ? Net cash flow used in operating activities for the year endedMarch 31, 2016 primarily reflected our net loss of$930,074 adjusted for the add-back on non-cash items such as stock-based compensation expense$163,500 , common stock issued for services and loan fees of$220,140 , loss on debt extinguishment of$87,363 , amortization of debt discount of$267,865 , initial fair value expense of derivative liabilities of$192,151 , gain from change in fair value of derivative liabilities of$426,829 , amortization of prepaid consulting fees of$18,104 and the changes in operating assets and liabilities primarily consisting of an increase in prepaid expenses and other current assets of$50,920 , an increase in accounts payable of$60,679 and an increase in accrued liabilities of$53,849 .
Cash provided by financing activities:
Net cash provided by financing activities was
? Net cash provided by financing activities for the year endedMarch 31, 2017 consisted of$11,155 of net proceeds from loan payable. ? Net cash provided by financing activities for the year endedMarch 31, 2016 consisted of$132,769 of net proceeds from loan payable and$211,250 of net proceeds from convertible debt, net of issuance cost. 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 consolidated 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 consolidated financial statements, the Company had net income
and net cash used in operating activities of
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 consolidated 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.
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Common Stock for Debt Conversion
During the year ended
During the year ended
Sales of Common Stock Pursuant to Subscription Agreements
During the year ended
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 consolidated financial statements in conformity with
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 on
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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.
The carrying amounts reported in the consolidated 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.
In
Revenue Recognition
In
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.
In
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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 consolidated financial statements accordingly. In
Recent Accounting Pronouncements
In
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, an entity
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 in other
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.
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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 on its 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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