The Interim Condensed Financial Statements
of the Company are prepared as of September 30, 2018.
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
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 company was reduced to twenty percent (20%). In addition, the Company entered
into a new Shareholder Agreement with RM, under which the shares in RM owned by the Company are subject to certain restrictions
on transfer until such time as the Company declare a shareholder dividend of the Company’s RM shares following a going public
transaction by RM, or in the alternative, for one (1) year after RM completes a going public transaction. Further, the Company
disposed of an inter-company liability owed to us by RM in the amount of CDN$166,961.70. The liability was documented under a Demand
Promissory Note issued to us by RM. The Company then assigned the note to an investor in RM in exchange for $3,000. Finally, the
Company entered into a mutual Release agreement with RM. Under the Release, the Company released and discharged all liabilities
owed to us by RM (with the exception of the Demand Promissory Note). RM in turn released the Company of all liabilities owing to
RM and released us 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.
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 company was reduced to twenty percent (20%). In addition, the Company entered
into a new Shareholder Agreement with RM, under which the shares in RM owned by the Company are subject to certain restrictions
on transfer until such time as the Company declares a shareholder dividend of the Company’s RM shares following a going public
transaction by RM, or in the alternative, for one (1) year after RM completes a going public transaction. Further, the Company
disposed of an inter-company liability owed to us by RM in the amount of CDN$166,961.70. The liability was documented under a Demand
Promissory Note issued to us by RM. The Company then assigned the note to an investor in RM in exchange for $3,000. Finally, the
Company entered into a mutual Release agreement with RM. Under the Release, the Company released and discharged all liabilities
owed to us by RM (with the exception of the Demand Promissory Note). RM in turn released the Company of all liabilities owing to
RM and released us 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.
LEGACY VENTURES INTERNATIONAL, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited)
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
of 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 the Company’s Board of Directors, all matters upon which shareholder approval is
required and, ultimately, the direction of the Company.
LEGACY VENTURES INTERNATIONAL, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited)
Share Exchange Agreement and Subscriptions
Effective September 11, 2017 (the “Closing
Date”), Legacy Ventures International, Inc., (the “Company”) entered into a certain 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, of the Company 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 one 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, Legacy Ventures International,
Inc., (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, on the one hand, and Nexalin Technology, Inc., a Nevada corporation
(“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. In the Share Exchange Agreement the Company agreed to issue units in exchange
for all the outstanding equity stock of Nexalin held by the Nexalin Shareholders. The “Units” were to consist of an
aggregate of approximately 25,000,000 newly issued shares of the Company’s Common Stock, $0.001 par value, and warrants (the
“Warrants”) to purchase an aggregate of approximately 25,000,000 newly issued shares of the Company’s Common
Stock, $0.001 par value.
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, that as of the date of the of the 11/29/17 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.
On February 28, 2018, the Company filed a Current Report on Form
8K (the “02/28/18 Form 8K”) wherein the Company filed (i) the Nexalin audited financial statements for the twelve months
ended June 30, 2017 and 2016; (ii) the Nexalin unaudited financial statements for the three months ended September 30, 2017 and
2016; and (iii) the Nexalin unaudited condensed pro forma financial statements for the Company for the twelve months ended June
30, 2017 and as of and for the three months ended September 30, 2017.
On March 30, 2018, the Company filed a Current Report on Form 8K
(the “03/30/18 Form 8K”) announcing the appointment of Dr. Benjamin V. Hue as a director of the Company.
LEGACY VENTURES INTERNATIONAL, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited)
Notwithstanding the disclosure made in the 09/15/17 Form 8K and
the11/29/17 Amended Form 8K, the consummation of the acquisition of Nexalin was subject to a number of contractual conditions and
legal requirements. These included:
|
(i)
|
all representations and warranties of the Company contained in the Share Exchange Agreement were to be true in all material respects;
|
|
(ii)
|
the Company was to have performed and complied in all material respects with all covenants and agreements required by the Share Purchase Agreement;
|
|
(iii)
|
the Company was to obtain all material consents, approvals and authorizations required to be obtained and make all filings required to be made by the Company for the authorization and consummation of the Share Purchase Agreement;
|
|
(iv)
|
Nexalin and the Nexalin Shareholders were to be given the opportunity to initiate and complete their legal, accounting and business due diligence of the Company and the results were to be satisfactory to Nexalin and the Nexalin Shareholders in their sole and absolute discretion;
|
|
(v)
|
the Units, which included the Company Common Stock and Warrants, were to be delivered to the Nexalin Shareholders within five (5) business days following the Closing of the Share Exchange Agreement. The Company was also required to take any and all action required under the various state securities laws in connection with the issuance of the Units.
|
Once new management and
a new Board of Directors were in place, they conducted a review of the Company and the steps taken and to be taken to consummate
the acquisition of Nexalin. After the due diligence review was performed, including legal, accounting and business investigations
of the Company, the new management and new Board of Directors became aware of a series of issues that put into question whether
there had been or could be completion of the acquisition transaction and that put into issue whether past actions by the Company
complied with applicable legal requirements and better business practice. After performing this due diligence review, the
new Board of Directors determined that many of the requirements of and pre-conditions to the Share Exchange Agreement were not
completed and condition of the Company was not satisfactory to accomplish the objectives of the Share Exchange Agreement.
After careful consideration, the current management and Board of
Directors believe that the previously announced share exchange, in fact, had not closed, and because of the many issues identified
in its due diligence review, some of which cannot ever be satisfied or adequately remedied, it considers that the Share Exchange
Agreement is null and void
ab initio
.
It is the opinion of current management and the current Board of
Directors, based on the nullity of the Share Exchange Agreement, that Nexalin never was and is not now a wholly owned subsidiary
of the Company.
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 unaudited 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 period, the Company has incurred recurring losses from operations
and as at September 30, 2018 an accumulated deficit. Further, as explained in Note 1, on August 31, 2016, the Company’s ownership
percentage of RM Fresh has been reduced to 20%. 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 interim condensed financial statements.
The 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 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, 2018.
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 months ended September 30, 2018 are not necessarily indicative of the results to be expected for the year
ending June 30, 2019. 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, 2018, 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, 2018 with the exception of the accounting change discussed below.
LEGACY VENTURES INTERNATIONAL, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited)
RECENTLY ADOPTED ACCOUNTING STANDARDS
In November 2015, the FASB issued ASU No. 2015-17,
"Balance Sheet Classification of Deferred Taxes," which requires that deferred tax liabilities and assets be classified
on the Company’s Balance Sheets as noncurrent based on an analysis of each taxpaying component within a jurisdiction. ASU
No. 2015-17 is effective for the fiscal year commencing after December 15, 2017. The adoption of this standard did not have any
impact on the balance sheet or results of operations from adopting this standard.
In January 2016, the FASB issued ASU 2016-01,
Financial Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial Assets and Financial Liabilities. This
ASU is effective for annual and interim reporting periods beginning after December 15, 2017. ASU 2016-01 enhances the reporting
model for financial instruments to provide users of financial statements with more decision-useful information. The adoption of
this standard did not have any impact on the balance sheet or results of operations from adopting this standard.
NOTE 4 - BASIC AND DILUTED NET 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 months ended September 30, 2018 and 2017.
NOTE 5 – PROMISSORY AND CONVERTIBLE NOTES
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 is 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 at a conversion price equal to $1.00 per share. The Company may 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.
As the conversion feature is not separable, it has been reflected on the balance sheet as at September 30, 2018. Interest expense
for the three months ended September 30, 2018 and 2017 was $8,872 and $1,041, respectively.
The Convertible Note payable contains 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 will be accreted to the face value at the effective interest rate. Accretion expense for the three months
ended September 30, 2018 and 2017 was $467,575 and $4, respectively. The difference between the nominal value ascribed to the Convertible
Note on issuance of $499,999 and the face value was recorded in Additional Paid In Capital. As at September 30, 2018, the carrying
value of the Convertible Note was $500,000 (June 30, 2018 - $32,425).
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. Interest income for the three months ended September 30, 2018 and 2017, was $nil and $1,041,
respectively. On April 11, 2018, the Company determined that the promissory note receivable and the accrued interest thereon was
impaired. The promissory note receivable was assigned to an arm’s length accredited third party, in exchange for the
waiver
of the Convertible Note pursuant to the
terms of an Assignment Agreement.
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 months ended September 30, 2018 and 2017, was $nil and
$792, respectively. Interest expense for the three months ended September 30, 2018 and 2017, was $226 and $412, respectively. As
at September 30, 2018, the carrying value of the notes were $20,000 (June 30, 2018 - $20,000).
No amounts of principal and interest for the
above mentioned notes have been paid to date.
LEGACY VENTURES INTERNATIONAL, INC.
NOTES TO THE UNAUDITED INTERIM CONDENSED
FINANCIAL STATEMENTS
(Expressed in US dollars)
(Unaudited)
NOTE 6 – RELATED PARTY ADVANCES AND BALANCES, AND ADVANCES
FROM THIRD PARTIES
During the three months ended September 30, 2018 and 2017, the Company
was advanced $nil and $6,500, respectively, by a third party. The funds were used to pay certain professional fees including auditors,
and accountants. The Company is currently in the process of negotiating with the third party with respect to settlement of the
amount advanced.
NOTE 7 - COMMON AND PREFERRED STOCK TRANSACTIONS
COMMON STOCK - AUTHORIZED
As at September 30, 2018, 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 periods ended September 30, 2018 and 2017.
NOTE 8 - SUBSEQUENT
EVENTS
On December 17, 2018, Mr. Letcavage the former
Chief Executive Officer of the Company 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 the Company’s Board of Directors, all matters upon
which shareholder approval is required and, ultimately, the direction of the Company’s Company.
Subsequent to September 30, 2018, the Company was advanced $50,000
by an arm’s length third party by way of a convertible promissory note.
Subsequent to September 30, 2018, the promissory note receivable
was assigned to an accredited arm’s length third party, in exchange for the waiver of the convertible promissory note payable
pursuant to the terms of the Assignment Agreement.