Notes
to the Financial Statements
As
at June 30, 2017
1.
NATURE OF OPERATIONS
Legacy
Ventures International, Inc. (the “Company”) is a Management Company incorporated on March 4, 2014 in the State of
Nevada. Upon its acquisition of RM Fresh Brands Inc. (formerly Influx Global Media Inc.) [“RM Fresh”], it was engaged
in the food and beverage distribution business whose principal place of business is located at 2215-B Renaissance Drive, Las Vegas,
Nevada, 89119 USA.
On
September 30, 2015 (the “Closing”), the Company entered into a Share Exchange Agreement (the “Agreement”)
with and among RM Fresh and its stockholders. Pursuant to the Agreement, the Company acquired 100% of the issued and outstanding
shares of RM Fresh in exchange for the issuance of 2,000,000 of the Company’s common stock. As a result of this transaction,
RM Fresh became a wholly owned subsidiary of the Company and the former stockholders of RM Fresh owned approximately 7% of the
Company’s common stock. RM Fresh was incorporated on July 29, 2008 under the laws of the Province of Ontario, Canada and
is engaged in the business of trading and distribution of food, beverages and body care products.
On
August 31, 2016, the Company entered into a group of transactions related to RM Fresh. In order to fund the ongoing operation
and further development of RM Fresh, the Company consented to new third party investments into RM Fresh in the approximate total
amount of $175,000, made in the form of cash and retirement of indebtedness owed to it. As a result of these new investments,
the Company’s ownership percentage of RM Fresh has been reduced to twenty percent (20%). In addition, the Company entered
into a new Shareholder Agreement with RM Fresh, under which the Company’s shares in RM Fresh are subject to certain restrictions
on transfer until such time as the Company declares a stockholder dividend of its RM Fresh shares following a going public transaction
by RM Fresh, or in the alternative, for one (1) year after RM Fresh completes a going public transaction.
2.
GOING CONCERN
The
Company’s 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 June 30, 2017 has a working capital deficiency of $16,452, and accumulated deficit of $5,911,256
which has primarily arisen from a non-cash goodwill impairment charge during the year ended June 30, 2016. 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. 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 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.
LEGACY
VENTURES INTERNATIONAL INC.
Notes
to the Financial Statements
As
at June 30, 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation and Consolidation
The
financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America and are expressed in United States dollars (“USD”).
The
Company’s fiscal year-end is June 30. The parent Company’s functional currency is US dollar and the Company’s
reporting currency is U.S. dollar.
The
financial statements of the Company as at, June 30, 2017, do not include the assets and liabilities of RM Fresh, which is no longer
a wholly-owned subsidiary effective August 31, 2016, as described in Note 4.
Cash
Cash
includes cash on hand and balances with banks.
Inventories
Inventories
which comprise of finished goods, is valued at the lower of cost and market value, with cost being determined on a first-in, first-out
basis. The cost of finished goods consists of purchase price, freight, custom duties and other delivery expenses. Net realizable
value is the estimated selling price in the ordinary course of business, less any applicable selling costs. The Company evaluate
the carrying value of inventory on a regular basis, taking into account such factors as historical and anticipated future sales
compared with quantities on hand and the price the Company expects to obtain for products in market compared with historical cost.
Revenue
Recognition
The
Company recognizes revenues when they are earned, specifically when all of the following conditions are met:
|
●
|
ownership
of the goods have been transferred to the customers. Ownership of the goods is transferred
to the customers when the good are transferred to a designated carrier in accordance
with shipping terms agreed with the customer.
|
|
●
|
there
is persuasive evidence that an arrangement exists;
|
|
●
|
there
are no significant obligations remaining;
|
|
●
|
amounts
are fixed or can be determined; and
|
|
●
|
the
ability to collect is reasonably assured.
|
Accounts
Receivable
Accounts
receivable are stated at outstanding balances, net of an allowance for doubtful accounts. The allowance for doubtful accounts
is established through provisions charged against income. Accounts deemed to be uncollectible are charged against the allowance
and subsequent recoveries, if any, are credited to the allowance. Management’s periodic evaluation of the adequacy of the
allowance is based on past experience, ageing of the receivables, adverse situations that may affect a customer’s ability
to pay, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires estimates
that may
be susceptible to significant change. Unpaid balances
remaining after the stated payment terms are considered past due. The Company routinely assesses the financial strength of its
customers and, therefore, believes that its accounts receivable credit risk exposure is limited.
LEGACY
VENTURES INTERNATIONAL INC.
Notes
to the Financial Statements
As
at June 30, 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Segment
Reporting
The
Company operates in one operating and geographical segment based on the activities for the Company in accordance with ASC Topic
280-10. Operating segments are defined as components of an enterprise for which separate financial information is available
that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources
and in assessing performance. All the sales of the Company are in Canada.
Goodwill
and Identifiable Intangible Assets
Goodwill
and other identifiable intangible assets with indefinite lives that are not being amortized, such as trade names, are tested at
least annually for impairment and are written down if impaired. Identifiable intangible assets with finite lives are amortized
over their estimated useful lives and are reviewed for impairment whenever facts and circumstances indicate that their carrying
values may not be fully recoverable. The intangible assets with definite lives are being amortized over its estimated useful lives
of 5 years using the straight-line method.
Earnings
(Loss) Per Share
The
Company has adopted the Financial Accounting Standards Board’s (“FASB”) Topic 260-10 which provides for calculation
of “basic” and “diluted” earnings per share. Basic earnings per share includes no dilution and is computed
by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding for
the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity.
Diluted earnings per share exclude all potentially dilutive shares if their effect is anti-dilutive. There were no potentially
dilutive shares outstanding as at June 30, 2017 and June 30, 2016.
Foreign
Currency Translation
The
Company’s functional currency is US dollar and subsidiary’s functional currency is Canadian (“CDN”) dollar.
The Company’s reporting currency is U.S. dollar. Transactions denominated in currencies other than the functional currency
are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets
and liabilities denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date.
Non-monetary assets and liabilities are translated using the historical rate on the date of the transaction. All exchange gains
or losses arising from translation of these foreign currency transactions are included in net income (loss) for the year. In translating
the financial statements of the Company’s subsidiary from their functional currency into the Company’s reporting currency
of US dollars, balance sheet accounts are translated using the closing exchange rate in effect at the balance sheet date for monetary
items and using the historical rate on the date of the transaction for non-monetary items, and income and expense accounts are
translated using an average exchange rate prevailing during the reporting period. The translation gains and losses resulting from
the changes in exchange rates are reported in accumulated other comprehensive gain (loss).
LEGACY
VENTURES INTERNATIONAL INC.
Notes
to the Financial Statements
As
at June 30, 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Shipping
and Handling Costs
The
Company accounts for shipping and handling fees in accordance with FASB ASC Topic 705 “Cost of Sales and Services”.
Costs related to raw materials purchased, are included in inventory or cost of goods sold, as appropriate. While amounts charged
to customers for shipping product are included in revenues, the related outbound freight costs are included in expenses as incurred.
Fair
Value of Financial Instruments
ASC
Topic 820 “
Fair Value Measurements and Disclosures
” defines fair value, establishes a framework for measuring
fair value and expands required disclosure about fair value measurements of assets and liabilities. ASC 820-10 defines fair value
as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
ASC 820-10 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize
the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure
fair value:
Level
1 -
|
Valuation
based on quoted market prices in active markets for identical assets or liabilities.
|
Level
2 -
|
Valuation
based on quoted market prices for similar assets and liabilities in active markets.
|
Level
3 -
|
Valuation
based on unobservable inputs that are supported by little or no market activity, therefore requiring management’s best
estimate of what market participants would use as fair value.
|
In
instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy,
the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input
that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular
input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
Fair
value estimates discussed herein are based upon certain market assumptions and pertinent information available to management.
The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term
nature of these instruments or interest rates that are comparable to market rates. These financial instruments include due from
a shareholder, accounts receivable, accounts payable, accrued expenses, due to related parties/stockholders and note payable.
The Company’s cash, which is carried at fair value, is classified as a Level 1 financial instruments. Bank accounts are
maintained with financial institutions of reputable credit, therefore, bear minimal credit risk.
LEGACY
VENTURES INTERNATIONAL INC.
Notes
to the Financial Statements
As
at June 30, 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Income
Taxes
The
Company accounts for under ASC Topic 740 Accounting for Income Taxes. The Company provides for federal and provincial income taxes
payable, as well as for those deferred because of the timing differences between reporting income and expenses for financial statement
purposes versus tax purposes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable
to differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be recoverable or settled. The effect of a change in
tax rates is recognized as income or expense in the period of the change. A valuation allowance is established, when necessary,
to reduce deferred income tax assets to the amount that is more likely than not to be realized.
Impairment
of Long-Lived Assets
In
accordance with ASC 360-10, the Company, on a regular basis, reviews the carrying amount of long-lived assets for the existence
of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount
of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In
the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset.
Fair value is determined based on appraised value of the assets or the anticipated cash flows from the use of the asset or asset
group, discounted at a rate commensurate with the risk involved. The Company has assessed its long-lived assets and as of June
30, 2016 has determined that there is an impairment of intangible assets amounting to $2,101,785 (June 30, 2017 – Nil) as
explained in Note 4.
Stock
Based Compensation
The
Company accounts for share-based payments in accordance with the provision of ASC 718, which requires that all share-based payments
issued to acquire goods or services, including grants of employee stock options, be recognized in the statement of operations
based on their fair values, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Compensation expense related to
share-based awards is recognized over the requisite service period, which is generally the vesting period. The Company accounts
for stock based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value
of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using
the guidelines in ASC 505-50. The Company issues compensatory shares for services including, but not limited to, executive, management,
accounting, operations, corporate communication, financial and administrative consulting services.
Recently
Issued Accounting Pronouncements
In
January 2017, an accounting pronouncement was issued by the Financial Accounting Standards Board (“FASB”) to simplify
the accounting for goodwill impairment. This guidance eliminates the requirement that an entity calculates the implied fair value
of goodwill when measuring an impairment charge. Instead, an entity would record an impairment charge based on the excess of a
reporting unit’s carrying amount over its fair value. This pronouncement is effective for fiscal years beginning after December
15, 2019, with early adoption permitted. The adoption is required to be applied on a prospective basis. The adoption of this pronouncement
did not have a material impact on the financial position and/or results of operations.
LEGACY
VENTURES INTERNATIONAL INC.
Notes
to the Financial Statements
As
at June 30, 2017
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Recently
Issued Accounting Pronouncements
(continued)
The
Company adopted the accounting pronouncement issued by the FASB to update
guidance on how companies account for certain aspects of share-based payments to employees. This pronouncement is effective for
fiscal years beginning after December 15, 2016, and interim periods within those years, with early adoption permitted. This guidance
requires all income tax effects of awards to be recognized in the statements of operations when the awards vest or are settled
and changes the presentation of excess tax benefits on the statement of cash flows. The Company adopted these provisions on a
prospective basis. In addition, this pronouncement changes guidance on: (a) accounting for forfeitures of share-based awards and
(b) employers’ accounting for an employee’s use of shares to satisfy the employer’s statutory income tax withholding
obligation. The adoption of this pronouncement did not have a material impact on the financial position and/or results of operations.
In
March 2016, the Company adopted the accounting pronouncement issued by the FASB to update guidance on how companies account for
certain aspects of share-based payments to employees. This pronouncement is effective for fiscal years beginning after December
15, 2016, and interim periods within those years, with early adoption permitted. This guidance requires all income tax effects
of awards to be recognized in the statements of operations when the awards vest or are settled and changes the presentation of
excess tax benefits on the statement of cash flows. The Company adopted these provisions on a prospective basis. In addition,
this pronouncement changes guidance on: (a) accounting for forfeitures of share-based awards and (b) employers’ accounting
for an employee’s use of shares to satisfy the employer’s statutory income tax withholding obligation. The adoption
of this pronouncement did not have a material impact on the Company’s financial position and/or results of operations
In
February 2016, an accounting pronouncement was issued by the FASB to replace existing lease accounting guidance. This pronouncement
is intended to provide enhanced transparency and comparability by requiring lessees to record right-of-use assets and corresponding
lease liabilities on the balance sheet for most leases. Expenses associated with leases will continue to be recognized in a manner
similar to current accounting guidance. This pronouncement is effective for annual and interim periods beginning after December
15, 2018, with early adoption permitted. The adoption is required to be applied on a modified retrospective basis for each prior
reporting period presented. The Company has not yet determined the effect that the adoption of this pronouncement may have on
the financial position and/or results of operations.
On
January 1, 2016, the Company adopted the accounting pronouncement issued by the FASB which eliminates the requirement that an
acquirer in a business combination account for measurement-period adjustments retrospectively. Instead, an acquirer will recognize
a measurement-period adjustment during the period in which it determines the amount of the adjustment. The adoption of this pronouncement
did not have a material impact on the financial position and/or results of operations.
On
January 1, 2016, the Company adopted the accounting pronouncement issued by the FASB to update the guidance related to the presentation
of debt issuance costs. This guidance requires debt issuance costs, related to a recognized debt liability, be presented in the
balance sheet as a direct deduction from the carrying amount of the related debt liability rather than being presented as an asset.
The Company adopted this pronouncement on a retrospective basis, and the adoption did not have a material impact on the financial
position and/or results of operations.
LEGACY
VENTURES INTERNATIONAL INC.
Notes
to the Financial Statements
As
at June 30, 2017
4.
BUSINESS ACQUISITION AND SUBSEQUENT LOSS OF CONTROL
Business
Acquisition:
On
September 30, 2015 (the “Closing”), the Company entered into a Share Exchange Agreement (the “Agreement”)
with and among RM Fresh and its shareholders. Pursuant to the Agreement, the Company acquired 100% of the issued and outstanding
shares of RM Fresh in exchange for the issuance of 2,000,000 shares of the Company’s common stock. As a result of this transaction,
RM Fresh became a wholly owned subsidiary of the Company and the former shareholders of RM Fresh owned approximately 7% of the
Company’s shares of common stock. This acquisition was accounted for using the acquisition method of accounting. The purchase
consideration of 2,000,000 shares of the Company’s common stock were fair valued at $2,180,000. Amortization expense of
$70,350 on acquired intangible assets were recorded for the year ended June 30, 2016. As at June 30, 2016, the remaining carrying
value of intangibles including goodwill amounting in total to $2,101,785 were impaired since the carrying value was less than
the fair value.
Loss
of Control:
On
August 31, 2016, the Company entered into a group of transactions related to RM Fresh. In order to fund the ongoing operation
and further development of RM Fresh, the Company consented to new third party investments into RM Fresh in the approximate total
amount of $175,000, made in the form of cash and retirement of indebtedness owed by RM Fresh, reducing the Company’s ownership
percentage of RM Fresh to twenty percent (20%) and is thus accounted for as an available for sale investment. As a result, the financial statements of the Company as at, December 31, 2016, do not include the assets and liabilities of RM Fresh,
which is no longer a wholly-owned subsidiary effective August 31, 2016, while the balance sheet as at June 30, 2016 is and contains
the accounts of RM Fresh. The statement of operations of the Company includes the results of the operations of RM Fresh
up to August 31, 2016, which is the effective date of change in control, due to loss of control in RM Fresh and consequent de-consolidation.
The fair value of the assets and liabilities as at August 31, 2016 and the carrying value of the investments, which resulted in
the Company recording a gain of $61,154 in the statement of operations, is as follows:
|
|
Fair
value
as at
August 31,
2016
|
|
Cash
|
|
|
12,720
|
|
Accounts receivable
|
|
|
250,203
|
|
Inventories
|
|
|
78,891
|
|
Harmonized
sales tax recoverable
|
|
|
24,071
|
|
Total
assets
|
|
|
365,885
|
|
|
|
|
|
|
Accounts payable
|
|
|
307,571
|
|
Due to stockholders
|
|
|
7,529
|
|
Due to related parties
|
|
|
60,145
|
|
Notes
payable
|
|
|
51,794
|
|
Total
liabilities
|
|
|
427,039
|
|
Net
liabilities
|
|
|
61,154
|
|
|
|
|
|
|
Purchase consideration value of investments
in RM Fresh shares on date of acquisition
|
|
|
2,180,000
|
|
Impairment recorded until June 30,
2016
|
|
|
(2,180,000
|
)
|
Carrying
value of investments in RM Fresh shares on date of change in control
|
|
|
-
|
|
Gain
on date of change in control due to deconsolidation of net liabilities of RM Fresh
|
|
|
61,154
|
|
The
Company recognized net gain due to loss of control of $84,021 comprising of $61,154 as explained above and $22,867 being translation
adjustment. Management has concluded that the entire available for sale investment in RM Fresh is impaired and hence the investment
is written off.
LEGACY
VENTURES INTERNATIONAL INC.
Notes
to the Financial Statements
As
at June 30, 2017
5.
ACCOUNTS AND OTHER RECEIVABLE
Accounts
and other receivables as at June 30, 2017 are nil. Accounts and other receivables as at June 30, 2016 represent trade accounts
receivable of $130,343, net of allowance of $48,943, and other receivable of $134,537. Other receivable relates to a distributor
listing fee recoverable from a supplier under an arrangement with the Company. All these balances related to RM Fresh.
6.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts
payable and accrued liabilities as at June 30, 2017 include accrued liabilities amounting to $13,000 ($264,875 as at June 30,
2016).
7.
DUE TO STOCKHOLDERS
Amount
due to stockholders were unsecured, interest free and were repayable on demand.
8.
NOTES PAYABLE
On
August 21, 2015 the Company issued $180,000 convertible notes payable bearing interest at 10% p.a. repayable on February 21, 2017.
The principal amount and accrued interest were convertible into common stock of the Company at the option of the holder at any
time from the date of issuance at $1. The Company concluded that there is no beneficial conversion feature determined in accordance
with the guidance provided in ASC 470. Accordingly, these notes were recognized as liability at the time of issuance. On September
30, 2015 all the Holders exercised their right to convert the outstanding principal amount of these notes, into the Company’s
common stock at a price of $1.00 per stock (Note 10).
Outstanding
notes payable of $51,794 on June 30, 2016 represents unsecured promissory notes amounting to $26,000 and $25,794 issued on April
1, 2015 and March 4, 2016, respectively bearing interest at 20% and 12% per annum, respectively, repayable within a year from
issuance date. Interest accrued on these notes during the year ended June 30, 2016 amounted to $6,218. As explained in Note 4,
as a result of loss of control, these notes were deconsolidated.
On
June 28, 2017 the Company issued $20,000 of unsecured convertible promissory notes (“Notes”) against the balance Due to Shareholders. The Notes mature
on February 28, 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. For the year ended June 30, 2017, the Company
recorded no interest expense related to debt discount.
LEGACY
VENTURES INTERNATIONAL INC.
Notes
to the Financial Statements
As
at June 30, 2017
9.
FORGIVENESS OF LOAN
During
year ended June 30, 2016, loan amounting to $17,974 provided by a related party to RM Fresh before acquisition to meet the working
capital requirements was forgiven in favour of the Company.
During
year ended June 30, 2017, a loan amounting to $22,987 provided by a shareholder to meet the working capital requirements was forgiven
in favour of the Company.
10.
STOCKHOLDERS’ DEFICIENCY
COMMON
STOCK - AUTHORIZED
As
at June 30, 2017, the Company authorized to issue 10,000,000 of preferred stock, with a par value of $0.0001 and 100,000,000 shares
of common stock, with a par value of $0.0001
COMMON
STOCK - ISSUED AND OUTSTANDING
On
September 9, 2015, the Board of Directors and stockholders of the Company approved a Certificate of Amendment to its Articles
of Incorporation to increase the par value of Company’s common stock and preferred stock from no par value to $0.0001 per
stock and approved a 1:7 forward split upon the increase of the par value. As a result, the issued and outstanding common stock
of the Company increased from 7,400,000 shares prior to the Forward Split to 51,800,000 shares following the Forward Split. Prior
year amounts were restated from the earliest period presented, to reflect the effect of the forward split.
On
September 30, 2015, the Company issued 2,000,000 (2,000 post reverse split) shares of common stock to the former stockholders
of RM Fresh pursuant to Share Exchange Agreement. Further, the Principal stockholder of the Company agreed to cancel 25,800,000
(25,800 post reverse split) shares of common stock in accordance with the Cancellation Agreement.
As
explained in Note 8, on September 30, 2015 the holders of convertible notes payable exercised their option to convert the notes
payable including interest into shares at a price of $1 per stock with the resultant issuance of 180,000 (180 post reverse split)
shares.
During
October and December 2015, the Company issued 92,000 (92 post reverse split) shares of common stock to three investors at a price
of $1.25 per common stock and received gross proceeds of $115,000.
On
October 1, 2015, the Company issued 250,000 (250 post reverse split) shares of common stock to a director in connection with
joining the board of directors. These shares were fair valued at $337,500, determined based on the market price on the date
of issuance, and recorded as expense under professional fees in the statement of operations.
During
October and December 2015, the Company issued 335,000 (335 post reverse split) shares of common stock to various third parties
in connection with providing consulting services. These shares were fair valued at $452,350, and expensed during the year ended
March 31, 2016.
During
February 2016, the Company issued 70,000 (70 post reverse split) shares of common stock to one investor at a cash price of $0.50
per common stock and received gross proceeds of $35,000.
LEGACY
VENTURES INTERNATIONAL INC.
Notes
to the Financial Statements
As
at June 30, 2017
10.
STOCKHOLDERS’ EQUITY (DEFICIENCY)
(continued)
On
January 8, 2016 and March 31, 2016, the Company issued 250,000 (250 post reverse split) shares of common stock each (in
totality 500 post reverse split) to two directors in connection with joining the board of directors. These shares were fair
valued at $290,000 and $22,500 respectively, determined based on the market price on the date of issuance, and expensed
during the year ended March 31, 2016.
On
January 26, 2016, the Company issued 100,000 (100 post reverse split) shares of common stock to third parties in connection with
providing consulting services. These shares were fair valued at $89,000, determined based on the market price on the date of issuance,
and expensed during the year ended March 31, 2016.
On
October 28, 2016, the Company issued 35,537,000 (35,537 post reverse split) shares of common stock to the CEO, as consideration
for management services. These shares were fair valued at $355,370, determined based on the market price on the date of issuance,
and recorded in the statement of operations as management fees during the year ended June 30, 2017.
On
November 16, 2016, the Board of Directors and stockholders of the Company approved a 1:1000 reverse split. As a result, the issued
and outstanding common stock of the Company decreased from 65,064,000 shares prior to the reverse split to 65,064 shares following
the reverse split. Prior year amounts have been restated from the earliest period presented, to reflect the effect of the reverse
split.
On
May 9, 2017, the Company issued 250,000 shares (post reverse split shares) of common stock to the CEO, as consideration for
management services. These shares were fair valued at $1,750,000, determined based on the market price on the date of
issuance, and recorded in the statement of operations as management fees during the year ended June 30, 2017
At
June 30, 2017, there were 315,064 shares of common stock issued and outstanding of which 300,247 shares are restricted while 14,817
shares are unrestricted (June 30, 2016 – 29,527 shares of common stock - 15,247 shares restricted and 14,280 shares unrestricted).
The
restricted shares have been issued to various parties through private placements, as start-up capital or as consideration for
professional services. These restricted shares will be available for sale under Rule 144 of the Securities Act of 1933, as amended,
when the conditions of Rule 144 have been met.
11.
RELATED PARTY TRANSACTIONS AND BALANCES
The
Company’s transactions with related parties were, in the opinion of the management, carried out on normal commercial terms
and in the ordinary course of the Company’s business.
Other
than disclosed elsewhere in the financial statements, the other related party transaction is management fees of $Nil for the year
ended June 30, 2017 (year ended 2016: $152,283) charged by entities owned by the shareholders of the Company for providing warehousing
and other logistic services. Amounts owed to entities owned by the stockholders in respect of these services were $Nil as at June
30, 2017 (June 30, 2016: $60,145). Further as explained in note 10, management fee for year ended June 30, 2017 include $2,105,370
representing issuance of 35,537,000 shares of common stock (pre reverse split) and 250,000 shares of common stock (post reverse
split) issued to the then CEO of the Company.
LEGACY
VENTURES INTERNATIONAL INC.
Notes
to the Financial Statements
As
at June 30, 2017
12.
INCOME TAXES
Income
taxes
The
provision for income taxes differs from that computed at the corporate tax rate of approximately 39% for the year ended June 30,
2017 (computed tax rate for the year ended June 30, 2016 - 34%) as follows:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Net
Loss for the year
|
|
$
|
2,031,920
|
|
|
$
|
3,771,563
|
|
Expected Income Tax recovery
|
|
|
792,831
|
|
|
|
1,274,906
|
|
Tax effect of expenses not deductible
for income tax
|
|
|
(779,737
|
)
|
|
|
(1,107,901
|
)
|
Change
in valuation allowance
|
|
|
(13,094
|
)
|
|
|
(167,005
|
)
|
Deferred
tax assets, net of valuation allowance
|
|
|
-
|
|
|
|
-
|
|
Deferred
tax assets
Deferred
taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating
loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences
are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Net
deferred tax assets consist of the following components as of June 30:
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Deferred Tax Assets – Non-current:
|
|
|
|
|
|
|
Tax effect of NOL Carryover
|
|
$
|
247,799
|
|
|
$
|
209,298
|
|
Less
valuation allowance
|
|
|
(247,799
|
)
|
|
|
(209,298
|
)
|
Deferred
tax assets, net of valuation allowance
|
|
|
-
|
|
|
|
-
|
|
At
June 30, 2017 the Company had net operating loss carry forwards of approximately $635,382 (June 30, 2016: $601,824) that may be
offset against future taxable income from the year 2018 to 2037. No tax benefit has been reported in the June 30, 2017 financial
statements since the potential tax benefit is offset by a valuation allowance of the same amount.
LEGACY
VENTURES INTERNATIONAL INC.
Notes
to the Financial Statements
As
at June 30, 2017
13.
SUBSEQUENT EVENTS
The
Company’s management has evaluated subsequent events up to October 13, 2017, the date the financial statements were issued,
pursuant to the requirements of ASC Topic 855 and has determined the following significant subsequent event to report:
Name
Change
On
September 5, 2017, the Board of Directors of the Company (the “Board”) approved, and recommended to the Majority Stockholders
that they approve the Name Change. On September 5, 2017, the Majority Stockholders approved the Action by written consent in lieu
of a meeting, in accordance with Nevada law.
The
Majority Stockholders authorized amending the Company’s Certificate of Incorporation, as amended, to change the name of
the Company from Legacy Ventures International, Inc. to Nexalin Technology, Inc. (the “Name Change”).
The Company is in the process of completing
legal formalities to amend the Certificate of Incorporation. The name change will take effect from the date these formalities.
Changes
in Control of Registrant.
Effective
from July 7, 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 was fully executed
and delivered, and the transaction consummated as of and at July 7, 2017. Consequently, Mr. Letcavage 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 our Company.
In
addition, on the Closing Date, Rehan Saeed resigned his positions as executive officers of the Company. On the Closing date, the
Board appointed Randall Letcavage as a director, effective immediately.
Entry
into a Material Definitive Agreement.
Effective
September 11, 2017 (the “Closing Date”), Legacy Ventures International, Inc., (the “Company”) entered
into that certain Share Exchange Agreement (the “Share Exchange Agreement”), dated as of September 1, 2017, by and
among the Company, 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”). 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 are 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.
As
a result of the Share Exchange Agreement and the other transactions contemplated thereunder, Nexalin is now a majority subsidiary
of the Company.