LEGACYXCHANGE, INC.
BALANCE SHEETS
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June 30,
2019
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March 31,
2019
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(Unaudited)
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ASSETS
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TOTAL ASSETS
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$
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-
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$
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-
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LIABILITIES AND STOCKHOLDERS’ DEFICIT
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CURRENT LIABILITIES:
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Accounts payable
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$
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138,153
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|
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$
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138,153
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Accrued liabilities
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583,485
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|
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552,695
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Loans payable
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143,924
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|
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143,924
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Convertible notes
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480,740
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480,740
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Derivative liabilities
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|
|
-
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2,326
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|
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Total Current Liabilities
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1,346,302
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1,317,838
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TOTAL LIABILITIES
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1,346,302
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|
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1,317,838
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COMMITMENTS AND CONTINGENCIES
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STOCKHOLDERS’ DEFICIT:
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Preferred stock: $0.001 par value; 10,000,000 shares authorized; No shares issued or outstanding at June 30, 2019 and March 31, 2019
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-
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-
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Common stock: $0.001 par value; 190,000,000 shares authorized; 62,570,659 shares issued and
outstanding at June 30, 2019 and March 31, 2019
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62,571
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62,571
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Additional paid-in capital
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9,182,575
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9,182,575
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Accumulated deficit
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(10,591,448
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)
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(10,562,984
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)
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TOTAL STOCKHOLDERS’ DEFICIT
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|
|
(1,346,302
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)
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|
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(1,317,838
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)
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|
|
|
|
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TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
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$
|
-
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|
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$
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-
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|
The accompanying condensed notes are an integral part of these unaudited financial statements.
LEGACYXCHANGE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
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For the Three Months Ended
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June 30,
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2019
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2018
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REVENUE, NET
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$
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-
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$
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-
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OPERATING EXPENSES
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Compensation
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15,000
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15,000
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TOTAL OPERATING EXPENSES
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15,000
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15,000
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LOSS FROM OPERATIONS
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(15,000
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)
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(15,000
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)
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OTHER INCOME (EXPENSE)
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Interest expense
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(15,790
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)
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(30,199
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)
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Loss from change in fair value of derivative liabilities
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-
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(6,470
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)
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TOTAL OTHER EXPENSE, NET
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(15,790
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)
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(36,669
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)
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NET LOSS
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$
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(30,790
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)
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$
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(51,669
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)
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NET LOSS PER COMMON SHARE
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Basic and diluted
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$
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(0.00
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)
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$
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(0.00
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)
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
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Basic and diluted
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62,570,659
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62,570,659
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|
The accompanying condensed notes are an integral part of these unaudited financial statements.
LEGACYXCHANGE, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Three Months Ended June 30, 2019 and 2018
(UNAUDITED)
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Preferred Stock
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Common Stock
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Additional
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Total
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Number of
Shares
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|
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Amount
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|
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Number of
Shares
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|
|
Amount
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|
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Deficit
|
|
Balance at March 31, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
62,570,659
|
|
|
$
|
62,571
|
|
|
$
|
9,182,575
|
|
|
$
|
(10,562,984
|
)
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|
$
|
(1,317,838
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)
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|
|
|
|
|
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|
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|
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|
|
|
|
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|
Cumulative effect adjustment of derivative liability related to adoption of ASU 2017-11
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|
-
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|
|
-
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|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,326
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|
|
|
2,326
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|
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|
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Net loss
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|
-
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|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(30,790
|
)
|
|
|
(30,790
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)
|
|
|
|
|
|
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|
|
|
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Balance at June 30, 2019
|
|
|
-
|
|
|
$
|
-
|
|
|
|
62,570,659
|
|
|
$
|
62,571
|
|
|
$
|
9,182,575
|
|
|
$
|
(10,591,448
|
)
|
|
$
|
(1,346,302
|
)
|
|
|
Preferred Stock
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Number of
Shares
|
|
|
Amount
|
|
|
Number of
Shares
|
|
|
Amount
|
|
|
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Stockholders’
Deficit
|
|
Balance at March 31, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
62,570,659
|
|
|
$
|
62,571
|
|
|
$
|
9,182,575
|
|
|
$
|
(10,420,274
|
)
|
|
$
|
(1,175,128
|
)
|
|
|
|
|
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|
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Net loss
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|
-
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|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(51,669
|
)
|
|
|
(51,669
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
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Balance at June 30, 2018
|
|
|
-
|
|
|
$
|
-
|
|
|
|
62,570,659
|
|
|
$
|
62,571
|
|
|
$
|
9,182,575
|
|
|
$
|
(10,471,943
|
)
|
|
$
|
(1,226,797
|
)
|
The accompanying condensed notes are an integral part of these unaudited financial statements.
LEGACYXCHANGE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
|
For the Three Months Ended
|
|
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(30,790
|
)
|
|
$
|
(51,669
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
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|
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Amortization of debt discount
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|
-
|
|
|
|
14,410
|
|
Loss from change in fair value of derivative liabilities
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|
|
-
|
|
|
|
6,470
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
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Accrued and other liabilities
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|
|
30,790
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|
|
|
30,789
|
|
|
|
|
|
|
|
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Net cash used in operating activities
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|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
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Net increase (decrease) in cash
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|
|
-
|
|
|
|
-
|
|
Cash - Beginning of period
|
|
|
-
|
|
|
|
-
|
|
Cash - End of the period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
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|
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|
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Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cumulative effect adjustment of derivative liability related to adoption of ASU 2017-11
|
|
$
|
2,326
|
|
|
$
|
-
|
|
The accompanying
condensed notes are an integral part of these unaudited financial statements.
LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2019
NOTE
1 – ORGANIZATION AND NATURE OF OPERATIONS
LegacyXchange,
Inc., formerly known as True 2 Beauty, Inc. (the “Company”) was originally incorporated as Burrow Mining, Inc., a
Nevada corporation, on December 11, 2006. In February 2010, the Company amended its Articles of Incorporation and changed its
name to True 2 Beauty, Inc.
On
July 10, 2012, the Company formed a new wholly owned subsidiary True2Bid, Inc. (“True2Bid”) which was incorporated
in the state of Nevada. This subsidiary’s name was changed to LegacyXchange, Inc. (“LegacyXchange”) in December
2014. The Company continued to sell existing inventory of beauty products through May 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.
On
July 2, 2015, pursuant to a Certificate of Dissolution filing with the Nevada Secretary of State, the Company dissolved LegacyXchange
(formerly True2Bid, Inc.) to allow for the change in name of its parent company, True 2 Beauty, Inc., to LegacyXchange, Inc.
The
Company is currently inactive due to lack of working capital to fund its operations.
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
Management
acknowledges its responsibility for the preparation of the accompanying unaudited financial statements which reflect all adjustments,
consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position
and the results of its operations for the periods presented. The accompanying unaudited financial statements of the Company have
been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”)
for interim financial information and with the instructions Article 8-03 of Regulation S-X. Operating results for interim periods
are not necessarily indicative of results that may be expected for the fiscal year as a whole. Certain information and note disclosure
normally included in financial statements prepared in accordance with U.S. GAAP has been omitted from these statements pursuant
to such accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive
financial statements. These unaudited financial statements should be read in conjunction with the summary of significant accounting
policies and notes to the financial statements for the year ended March 31, 2019 of the Company which were included in the Company’s
annual report on Form 10-K as filed with the Securities and Exchange Commission on January 19, 2021.
Going
Concern
The
unaudited 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 unaudited financial
statements, the Company had net loss of $30,790 for the three months ended June 30, 2019. The Company had accumulated deficit,
stockholders’ deficit and working capital deficit of $10,591,448, $1,346,302 and $1,346,302, respectively, at June 30, 2019.
The Company had no revenues for the three months ended June 30, 2019. The Company’s loans and convertible notes are currently
in default. 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 unaudited 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.
LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2019
Use
of Estimates
The
preparation of the unaudited financial statements in conformity with U.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 unaudited financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results
could differ from these estimates.
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 June 30, 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.
|
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.
Assets
or liabilities measured at fair value on a recurring basis included conversion options in convertible notes and warrants with
their exercise price containing a down-round provision (see Note 5) and were as follows at June 30, 2019 and March 31, 2019:
|
|
At June 30, 2019
(Unaudited)
|
|
|
At March 31, 2019
|
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Derivative liabilities
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
2,326
|
|
A
roll forward of the level 3 valuation financial instruments is as follows:
|
|
Derivative Liabilities
|
|
Balance at March 31, 2019
|
|
$
|
2,326
|
|
Cumulative effect adjustment of derivative liability related to adoption of ASU 2017-11
|
|
|
(2,326
|
)
|
Balance at June 30, 2019
|
|
$
|
—
|
|
ASC
825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities
at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable,
unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that
instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value
option to any outstanding financial instruments.
LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2019
Cash
The
Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. There
were no balances in excess of FDIC insured levels as of June 30, 2019 and March 31, 2019. The Company has not experienced any
losses in such accounts through June 30, 2019.
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
July 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 guidance was adopted as of April 1, 2019 and the Company elected to record the effect of this adoption retrospectively to
outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the balance sheet as
of June 30, 2019, the period which the amendment is effective. The Company adopted ASU No. 2017-11 in the period ended June 30,
2019, and the adoption resulted in a cumulative-effect adjustment of $2,326 on its financial statements and at June 30, 2019,
there was no derivative liability recorded.
Revenue
Recognition
In
May 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 after December 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 ended June 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 from operations for the three months ended
June 30, 2019.
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
June 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 the FASB 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 after December 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 ended June 30, 2016. The adoption of ASU 2014-12 did not have any material impact
on the Company’s financial statements.
LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2019
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. In June 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
after December 15, 2018, including interim periods within those annual periods. The Company early adopted ASU No. 2018-07 during
the three months ended March 31, 2018. The adoption ASU No. 2018-07 did not have a material impact on the Company’s financial
statements.
Income
Taxes
The
Company accounts for income tax using the liability method prescribed by ASC 740 - Income Taxes. Under this method, deferred tax
assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities
using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records
a valuation allowance to offset net deferred tax assets if based on the weight of available evidence, it is more-likely-than-not
that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates
is recognized as income or loss in the period that includes the enactment date.
The
Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”.
Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not
the position will be sustained upon examination by the tax authorities. As of June 30, 2019 and March 31, 2019, the Company had
no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes
interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties were
recorded as of June 30, 2019.
Basic
and Diluted Loss Per Share
Pursuant
to ASC 260-10-45, basic loss per common share is computed by dividing net loss by the weighted average number of shares of common
stock outstanding for the periods presented. Diluted loss per share is computed by dividing net loss by the weighted average number
of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. Potentially
dilutive common shares consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible
notes and common stock issuable. These common stock equivalents may be dilutive in the future. The following potentially dilutive
equity securities outstanding as of June 30, 2019 and 2018 were not included in the computation of dilutive loss per common share
because the effect would have been anti-dilutive:
|
|
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Stock warrants
|
|
|
4,226,875
|
|
|
|
4,539,706
|
|
Convertible notes
|
|
|
69,459,027
|
|
|
|
64,584,857
|
|
Total
|
|
|
73,685,902
|
|
|
|
69,124,563
|
|
Related
Parties
Parties
are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control,
are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company,
its management, members of the immediate families of principal owners of the Company and its management and other parties with
which the Company may deal with if one party controls or can significantly influence the management or operating policies of the
other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.
LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2019
Recent
Accounting Pronouncements
In
August 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 after
December 15, 2019. The Company does not believe this will have a material impact on the Company’s 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.
NOTE
3 – ACCRUED LIABILITIES
At
June 30, 2019 and March 31, 2019, accrued liabilities consisted of the following:
|
|
June 30,
2019
|
|
|
March 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Accrued interest
|
|
$
|
263,951
|
|
|
$
|
248,161
|
|
Accrued professional fees
|
|
|
2,634
|
|
|
|
2,634
|
|
Accrued payroll taxes
|
|
|
29,727
|
|
|
|
29,727
|
|
Accrued executive and director compensation
|
|
|
287,173
|
|
|
|
272,173
|
|
Total
|
|
$
|
583,485
|
|
|
$
|
552,695
|
|
NOTE
4 – LOANS PAYABLE
Between
July 2015 through March 2016, the Company entered into individual loan agreements with various investors in the aggregate principal
amount of $132,769. These loans bear an interest rate of 10% and were due and payable on the first anniversary of the date of
issuance of the loans.
In
April and May 2016, the Company entered into individual loan agreements with various investors in the aggregate principal amount
of $11,155. These loans bear an interest rate of 10% and were due and payable on the first anniversary of the date of issuance
of the loans.
As
of June 30, 2019, these loans were in default and had outstanding principal and accrued interest of $143,924 and $50,101, respectively.
As of March 31, 2019, these loans were in default and had outstanding principal and accrued interest of $143,924 and $46,463,
respectively.
During
the three months ended June 30, 2019 and 2018, the Company recorded interest expense of $3,638 and $3,637, respectively, on these
loans.
NOTE
5 – CONVERTIBLE NOTES PAYABLE
At
June 30, 2019 and March 31, 2019, convertible notes consisted of the following:
|
|
June 30,
2019
|
|
|
March 31,
2019
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Principal amount
|
|
$
|
480,740
|
|
|
$
|
480,740
|
|
Convertible notes payable, net
|
|
$
|
480,740
|
|
|
$
|
480,740
|
|
Fiscal
2015 Financing
In
October and November 2014, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2015 Agreements”)
for the sale of the Company’s convertible notes. Pursuant to the Fiscal 2015 Agreements, the Company issued to these purchasers,
convertible promissory notes (the “Fiscal 2015 Convertible Notes”) for an aggregate principal amount of $400,000 with
the Company receiving proceeds equal to the principal amount. The Fiscal 2015 Convertible Notes bear an interest rate of 10% per
year and were due and payable on the third anniversary of the date of issuance through October and November 2017. The purchasers
are entitled, at their option, at any time after the issuance of the Fiscal 2015 Convertible Notes, to convert all or any lesser
portion of the outstanding principal amount and accrued and unpaid interest into the Company’s common stock at a conversion
price of $0.02 During the fiscal year 2016, the conversion price was ratcheted down to $0.01. During the fiscal year 2016, the
purchasers converted $130,510 and $10,792 of outstanding principal and accrued interest, respectively, into 7,065,084 shares of
the Company’s common stock. As of March 31, 2019, the Fiscal 2015 Convertible Notes were in default and had outstanding
principal and accrued interest of $269,490 and $122,167, respectively. As of June 30, 2019, the Fiscal 2015 Convertible Notes
were in default had outstanding principal and accrued interest of $269,490 and $128,979, respectively.
LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2019
Fiscal
2016 Financing
In
May and June 2015, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2016 Agreements
I”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Fiscal 2016 Agreements I, the Company
issued to the purchasers for an aggregate subscription amount of $115,000: (i) convertible promissory notes in the aggregate principal
amount of $115,000 (the “Fiscal 2016 Notes I”) and (ii) five-year warrants to purchase an aggregate of 2,300,000 (twenty
warrants for each dollar of the principal amount) shares Company’s common stock at an exercise price of $0.07 (the “Fiscal
2016 Warrants I”). The Company received proceeds equal to the principal amount. The Fiscal 2016 Notes I bear an interest
rate of 10% per year and were due and payable on the third anniversary of the date of issuance through May and June 2018. The
purchasers are entitled, at their option, at any time after the issuance of the Fiscal 2016 Notes I, to convert all or any lesser
portion of the outstanding principal amount and accrued and unpaid interest into the Company’s common stock at a conversion
price of $0.05. The conversion price of the Fiscal 2016 Notes I shall be subject to adjustment for issuances of common stock at
a purchase price of less than the then-effective conversion price. During the fiscal year 2016, the conversion price was ratcheted
down to $0.01. As of March 31, 2019, the Fiscal 2016 Notes I were in default and had outstanding principal and accrued interest
of $115,000 and $45,053, respectively. As of June 30, 2019, the Fiscal 2016 Notes I were in default and had outstanding principal
and accrued interest of $115,000 and $47,960, respectively.
During
August through September 2015, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2016
Agreements II”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Fiscal 2016 Agreements
II, the Company issued to the purchasers for an aggregate subscription amount of $96,250: (i) convertible promissory notes in
the aggregate principal amount of $96,250 (the “Fiscal 2016 Notes II”) and (ii) five-year warrants to purchase an
aggregate of 1,925,000 (twenty warrants for each dollar of the principal amount) shares Company’s common stock at an exercise
price of $0.07 (the “Fiscal 2016 Warrants II”). The Company received proceeds equal to the principal amount. The Fiscal
2016 Notes II bear an interest rate of 10% per year and were due and payable on the third anniversary of the date of issuance
through August through September 2018. The purchasers are entitled, at their option, at any time after the issuance of the Fiscal
2016 Notes II, to convert all or any lesser portion of the outstanding principal amount and accrued and unpaid interest into the
Company’s common stock at a conversion price of $0.05. The conversion price of the Fiscal 2016 Notes II shall be subject
to adjustment for issuances of common stock at a purchase price of less than the then-effective conversion price. During the fiscal
year 2016, the conversion price was ratcheted down to $0.01. As of March 31, 2019, the Fiscal 2016 Notes II were in default and
had outstanding principal and accrued interest of $96,250 and $34,478, respectively. As of June 30, 2019, the Fiscal 2016 Notes
II were in default and had outstanding principal and accrued interest of $96,250 and $36,911, respectively.
During
the three months ended June 30, 2019 and 2018, the Company recorded interest expense of $12,152 and $12,152, respectively, on
these convertible notes.
Derivative
Liabilities Pursuant to Notes and Warrants
In
connection with the issuance of the Notes and Warrants, the Company determined that the terms of the Notes and Warrants contain
terms that included a down-round provision under which the conversion price and exercise price could be affected by future equity
offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception and included various other
terms such as default provisions that caused derivative treatment. Accordingly, under the provisions of ASC 815-40 –Derivatives
and Hedging – Contracts in an Entity’s Own Stock, the embedded conversion option contained in the convertible
instruments and the Warrants were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair
value through earnings at each reporting date. The fair value of the embedded conversion option derivatives and warrant derivatives
were determined using the Binomial valuation model. At the end of each period, on the date that debt was converted into common
shares, and on the date of a cashless exercise of warrants, the Company revalued the embedded conversion option and warrants derivative
liabilities.
In
July 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 guidance was adopted as of April 1, 2019 and the Company elected to record the effect of this adoption retrospectively to
outstanding financial instruments with a down round feature by means of a cumulative-effect adjustment to the balance sheet as
of June 30, 2019, the period which the amendment is effective. The Company adopted ASU No. 2017-11 in the period ended June 30,
2019, and the adoption resulted in a cumulative-effect adjustment of $2,326 on its financial statements and at June 30, 2019,
there was no derivative liability recorded.
LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 2019
At
June 30, 2018, the Company revalued the conversion option and warrant derivative liabilities. In connection with these revaluations
and the initial derivative expense, the Company recorded loss from change in fair value of derivative liabilities of $6,470 for
the three months ended June 30, 2018.
For
the three months ended June 30, 2019 and 2018, amortization of debt discounts related to the convertible notes amounted to $0
and $14,410, respectively, which has been included in interest expense on the accompanying unaudited statements of operations.
NOTE
6 – STOCKHOLDERS’ DEFICIT
Authorized
shares
The
Company is authorized to issue 200,000,000 consisting of 190,000,000 shares of common stock at $0.001 per share par value, and
10,000,000 shares of preferred stock at $0.001 per share par value.
Preferred
Stock
As
of June 30, 2019 and March 31, 2019, the Company did not have any preferred stock issued and outstanding.
Common
Stock
As
of June 30, 2019 and March 31, 2019, the Company had 62,570,659 shares of common stock issued and outstanding.
Warrants
Warrants
issued pursuant to equity subscription agreements
During
fiscal years 2013 to 2015, in connection with the sale of common stock, the Company issued an aggregate of 1,048,315 five-year
warrants to purchase common shares for an exercise price of $0.40 per common share to investors pursuant to unit subscription
agreements. These warrants were accounted for as equity. As of March 31, 2019, 314,706 warrants were issued and outstanding. During
the three months ended June 30, 2019, 312,831 of these warrants expired. As of June 30, 2019, 1,875 warrants were issued and outstanding.
Warrants
issued in connection with the Fiscal 2016 Financing
During
fiscal years 2016, pursuant to the convertible note agreements under the fiscal 2016 financing discussed in Note 5, the Company
issued five-year warrants to purchase an aggregate of 4,225,000 (twenty warrants for each dollar of the principal amount) shares
of the Company’s common stock at an exercise price of $0.07. The exercise price of these warrants shall be subject to adjustment
for issuances of common stock at a purchase price of less than the then-effective conversion price and were accounted for as derivative
liabilities. During the fiscal year 2016, the conversion price was ratcheted down to $0.01. As of June 30, 2019 and March 31,
2019, 4,225,000 warrants were issued and outstanding.
Warrant
activity for the three months ended June 30, 2019 is summarized as follows
|
|
Number of
Warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual
Term (Years)
|
|
|
Aggregate
Intrinsic Value
|
|
Balance Outstanding March 31, 2019
|
|
|
4,539,706
|
|
|
$
|
0.04
|
|
|
|
1.2
|
|
|
$
|
—
|
|
Expired
|
|
|
(312,831
|
)
|
|
$
|
0.40
|
|
|
|
—
|
|
|
$
|
—
|
|
Balance Outstanding at June 30, 2019
|
|
|
4,226,875
|
|
|
$
|
0.01
|
|
|
|
1.0
|
|
|
$
|
—
|
|
Exercisable at June 30, 2019
|
|
|
4,226,875
|
|
|
$
|
0.01
|
|
|
|
1.0
|
|
|
$
|
—
|
|
NOTE
7 – SUBSEQUENT EVENTS
Between
November 2019 through June 2020, the Company entered into loan agreements with an investor in the aggregate principal amount of
$91,000. The loans bear interest rate of 6% and were due and payable two-years from the date of issuances.