Notes to the Consolidated
Financial Statements
As
at June 30, 2016
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 recent acquisition of RM Fresh Brands Inc. (formerly Influx Global Media Inc.) [“RM Fresh”], it is
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.
As
explained in Note 5, 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.
RM
Fresh was incorporated on July 29, 2008 under the laws of the Province of Ontario, Canada. RM Fresh is engaged in the business
of trading and distribution of food, beverages and body care products.
2.
GOING CONCERN
The Company’s consolidated 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, 2016 has a working capital deficiency of $87,035 and accumulated deficit of $3,879,336 which has primarily arisen from
a non-cash goodwill impairment charge in the current period. Further, as explained in Note 12, 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.
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation and Consolidation
The
consolidated 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 for subsidiary Canadian
(“CDN”) dollar. The Company’s reporting currency is U.S. dollar.
The
consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary RM Fresh, Inc. All inter-company
transactions and balances have been eliminated in preparing the consolidated financial statements.
LEGACY VENTURES
INTERNATIONAL, INC.
Notes to the Consolidated
Financial Statements
As
at June 30, 2016
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
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 Consolidated
Financial Statements
As
at June 30, 2016
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, 2016 and June 30, 2015.
Foreign
Currency Translation
The
parent 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 Consolidated
Financial Statements
As
at June 30, 2016
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 Consolidated
Financial Statements
As
at June 30, 2016
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 has determined
that there is an impairment of intangible assets amounting to $2,101,785 as explained in Note 5.
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
March 2016, the Company adopted the accounting pronouncement issued by the Financial Accounting Standards Board ("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 income statement when the awards vest or are settled
and changes the presentation of excess tax benefits on the statement of cash flows.
LEGACY VENTURES
INTERNATIONAL, INC.
Notes to the Consolidated
Financial Statements
As
at June 30, 2016
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Recently
Issued Accounting Pronouncements
(continued)
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
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.
In
November 2015, an accounting pronouncement was issued by the FASB to simplify the presentation of deferred income taxes within
the balance sheet. This pronouncement eliminates the requirement that deferred tax assets and liabilities are presented as current
or noncurrent based on the nature of the underlying assets and liabilities. Instead, the pronouncement requires all deferred tax
assets and liabilities, including valuation allowances, be classified as noncurrent. This pronouncement is effective for fiscal
years beginning after December 15, 2016, with early adoption permitted. The Company intends to adopt this pronouncement on January
1, 2017, and the adoption will not have a material impact on the financial position and/or results of operations.
LEGACY VENTURES
INTERNATIONAL, INC.
Notes to the Consolidated
Financial Statements
As
at June 30, 2016
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Recently
Issued Accounting Pronouncements
(continued)
In
May 2014, an accounting pronouncement was issued by the FASB to clarify existing guidance on revenue recognition. This guidance
includes the required steps to achieve the core principle that a company should recognize revenue when it transfers promised goods
or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange
for those goods or services. This pronouncement is effective for fiscal years and interim periods beginning after December 15,
2017, with early adoption permitted. The guidance permits the use of one of two retrospective transition methods. The Company
has not yet selected a transition method nor has the Company determined the effect that the adoption of the pronouncement may
have on the financial position and/or results of operations.
4.
DUE TO STOCKHOLDERS
Amount
due to stockholders are unsecured, interest free and is repayable on demand.
5.
GOODWILL AND INTANGIBLE ASSETS
Business
Acquisition
ASC
Topic 805, “Business Combinations” requires that all business combinations be accounted for using the acquisition
method and that certain identifiable intangible assets acquired in a business combination be recognized as assets apart from goodwill.
ASC Topic 350, “Intangibles-Goodwill and Other” (“ASC 350”) requires goodwill and other identifiable intangible
assets with indefinite useful lives not be amortized, such as trade names, but instead tested at least annually for impairment
(which the Company tests each year end, absent any impairment indicators) and be written down if impaired. ASC 350 requires that
goodwill be allocated to its respective reporting unit and that identifiable intangible assets with finite lives be amortized
over their useful lives.
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 fair value of assets, liabilities and intangible
assets and the purchase price allocation as of September 30, 2015 was as follows:
The
purchase consideration of 2,000,000 shares of the Company’s common stock valued as detailed below:
|
|
$
|
|
Number of common Stock
|
|
|
2,000,000
|
|
Market
price on the date of issuance
|
|
|
1.09
|
|
Fair
value of common stock
|
|
|
2,180,000
|
|
LEGACY VENTURES
INTERNATIONAL, INC.
Notes to the Consolidated
Financial Statements
As
at June 30, 2016
5.
GOODWILL AND INTANGIBLE ASSETS
(continued)
Goodwill
The
Company tests for impairment of goodwill at the reporting unit level. In assessing whether goodwill is impaired, the Company utilize
the two-step process as prescribed by ASC 350. The first step of this test compares the fair value of the reporting unit, determined
based upon discounted estimated future cash flows, to the carrying amount, including goodwill. If the fair value exceeds the carrying
amount, no further work is required and no impairment loss is recognized. If the carrying amount of the reporting unit exceeds
the fair value, the goodwill of the reporting unit is potentially impaired and step two of the goodwill impairment test would
need to be performed to measure the amount of an impairment loss, if any. In the second step, the impairment is computed by comparing
the implied fair value of the reporting unit’s goodwill with the carrying amount of the goodwill. If the carrying amount
of the reporting unit’s goodwill is greater than the implied fair value of its goodwill, an impairment loss in the amount
of the excess is recognized and charged to statement of operations.
As
at June 30, 2016, the remaining carrying value of goodwill amounting to $1,703,135 was impaired since the carrying value was less
than the fair value.
Intangible
assets
Identifiable
intangible assets having gross values of $469,000 ($445,550 net of amortization charge of $23,450) comprise of gross fair values
of trade-name of $236,000 and customer base/distribution rights of $233,000. Relief from royalty approach was used to arrive at
the fair value of trade-name using major assumptions a) 2% royalty rate; b) 10 year life; c) cost to maintain trade name at $2,000
increasing 2.75% annually; and d) discount rate of 22%. Multi-Period Excess Earnings Method was used to arrive at the fair value
of customer base/distribution rights using major assumptions a) net sales base from years 2015 to 2025; b) retention rate of 85%
and c) discount rate of 22%.
Amortization
expense of $70,350 on these intangible assets were recorded for the year ended June 30, 2016.
As
at June 30, 2016, the remaining carrying value of intangibles amounting to $398,650 were impaired since the carrying value was
less than the fair value.
6.
ACCOUNTS AND OTHER RECEIVABLES
These 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.
7.
NOTES PAYABLE
Outstanding
note payable of $51,794 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 year ended June 30, 2016 amounted to $6,218 ($nil for year ended June 30, 2015).
LEGACY VENTURES
INTERNATIONAL, INC.
Notes to the Consolidated
Financial Statements
As
at June 30, 2016
7.
NOTES PAYABLE
(continued)
Further,
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 $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 shares of the
Company’s common stock at a price of $1.00 per share (Note 9).
8.
FORGIVENESS OF LOAN
Loan
amounting to $17,974 provided by a related party to RM Fresh before acquisition to meet the working capital requirements and was
unsecured, interest free and was repayable on demand. During year ended June 30, 2016, the related party agreed to forgive the
loan in favour of the Company.
9.
STOCKHOLDERS’ EQUITY (DEFICIENCY)
COMMON
STOCK - AUTHORIZED
As
at June 30, 2016, the Company authorized to issue 10,000,000 shares 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 Shareholders 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
share and approved a 1:7 forward split upon the increase of the par value. As a result, the issued and outstanding shares of 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.
On
September 30, 2015 the Company issued 2,000,000 shares of common stock to the former shareholders of RM Fresh pursuant to Share
Exchange Agreement as explained in Note 5. Further, the Principal shareholder of the Company agreed to cancel 25,800,000 shares
of common stock in accordance with the Cancellation Agreement.
As
explained in Note 7, 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 share with the resultant issuance of 180,000 shares.
During
October and December 2015, the Company issued 92,000 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 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.
LEGACY VENTURES
INTERNATIONAL, INC.
Notes to the Consolidated
Financial Statements
As
at June 30, 2016
9.
STOCKHOLDERS’ EQUITY (DEFICIENCY)
(continued)
COMMON
STOCK - ISSUED AND OUTSTANDING (continued)
During
October and December 2015, the Company issued 335,000 shares of common stock to various third parties in connection with providing
consulting services. These shares were fair valued at $452,350, determined based on the market price on the date of issuance,
to be expensed over the term of the respective agreements. Accordingly, the amount of $452,350 was initially recorded as prepaid
expense and was subsequently expensed during the year ended June 30, 2016, and included in professional fees in the statement
of operations.
During February 2016, the Company issued 70,000
shares of common stock to one investor at a cash price of $0.50 per common stock and received gross proceeds of $35,000.
On
January 8, 2016 and March 31, 2016, the Company issued 250,000 shares and 250,000 shares respectively of common stock 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 recorded as expense under professional fees in the statement of operations.
On
January 26, 2016, the Company issued 100,000 shares of common stock to one 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, to be expensed
over the term of the respective agreements. Accordingly, the amount of $89,000 was initially recorded as prepaid expense and was
subsequently expensed during the year ended June 30, 2016, and included in professional fees in the statement of operations.
At
June 30, 2016, there were 29,527,000 shares of common stock issued and outstanding (June 30, 2015 – 51,800,000 shares of
common stock) of which 15,247,000 shares are restricted while 14,280,000 are 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.
10.
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 consolidated financial statements, the other related party transaction is management fees of $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 was $60,145 as at June 30, 2016 (June 30, 2015: $nil).
LEGACY VENTURES
INTERNATIONAL, INC.
Notes to the Consolidated
Financial Statements
As
at June 30, 2016
11.
INCOME TAXES
Income
taxes
The provision for income
taxes differs from that computed at the Canadian and US combined corporate tax rate of approximately 34% for the year ended June
30, 2016 (US corporate tax rate for the year ended June 30, 2015 - 39%) as follows:
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Net Loss for the year
|
|
$
|
3,771,563
|
|
|
$
|
104,142
|
|
Expected Income Tax recovery
|
|
|
1,274,906
|
|
|
|
40,615
|
|
Tax effect of expenses not deductible for income tax
|
|
|
(1,107,901
|
)
|
|
|
1,416
|
|
Change in valuation allowance
|
|
|
(167,005
|
)
|
|
|
(42,031
|
)
|
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:
|
|
2016
|
|
|
2015
|
|
Deferred Tax Assets – Non-current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax effect of NOL Carryover
|
|
$
|
209,036
|
|
|
$
|
42,031
|
|
Less valuation allowance
|
|
|
(209,036
|
)
|
|
|
(42,031
|
)
|
Deferred tax assets, net of valuation allowance
|
|
|
-
|
|
|
|
-
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At June 30, 2016 the Company had net operating
loss carry forwards of approximately $601,824 (June 30, 2015: $107,773) that may be offset against future taxable income from
the year 2017 to 2037. No tax benefit has been reported in the June 30, 2016 consolidated financial statements since the potential
tax benefit is offset by a valuation allowance of the same amount.
LEGACY VENTURES
INTERNATIONAL, INC.
Notes to the Consolidated
Financial Statements
As
at June 30, 2016
12.
SUBSEQUENT EVENTS
The
Company’s management has evaluated subsequent events up to October 13, 2016, the date the consolidated financial statements
were issued, pursuant to the requirements of ASC Topic 855 and has determined the following significant subsequent event to report:
On
August 31, 2016, the Company entered into a group of transactions related to the subsidiary company, RM Fresh. In order to fund
the ongoing operation and further development of RM, 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. As result of these
new investments into RM Fresh, 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 shareholder 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.