Notes to the Interim Condensed Financial Statements (Unaudited)
As at December 31, 2016
1.
NATURE OF OPERATIONS
Legacy Ventures International, Inc. (the “Company”)
is a Management Company incorporated on March 4, 2014 whose principal place of business is located at 2215-B Renaissance Drive,
Las Vegas, Nevada, 89119 USA. Upon its acquisition of RM Fresh Brands Inc. [“RM Fresh”], it was engaged in the food
and beverage distribution.
On September 30, 2015, 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 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 condensed financial statements have been prepared on a going concern basis, which contemplates the realization
of assets and satisfaction of liabilities in the normal course of business. During the current period, the Company has incurred
recurring losses from operations and as at December 31, 2016 has a working capital deficiency of $53,516 and accumulated deficit
of $4,178,320. 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 Interim Condensed Financial Statements (Unaudited)
As at December 31, 2016
3.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The unaudited condensed interim financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”)
for interim financial information and the rules and regulations of the SEC and are expressed in US dollars. Accordingly, the unaudited
condensed interim financial statements do not include all information and footnotes required by US GAAP for complete annual financial
statements. The unaudited condensed interim financial statements reflect all adjustments, consisting of only normal recurring
adjustments, considered necessary for a fair presentation. Interim operating results are not necessarily indicative of results
that may be expected for the year ending June 30, 2017 or for any other interim period. The unaudited condensed interim financial
statements should be read in conjunction with the audited consolidated financial statements of the Company and the notes thereto
as of and for the year ended June 30, 2016.
The
condensed 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, as described in Note 4. The comparative financial statements
included the results of operations and financial position of the wholly owned subsidiary RM Fresh.
Use
of Estimates
The
preparation of the unaudited condensed interim financial statements in conformity with US 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 condensed financial statements and the reported amounts of revenues and expenses during the reporting
periods. Estimates may include those pertaining to accruals. Actual results could materially differ from those estimates.
Recently
Issued Accounting Standards
The
Company evaluated all recent accounting pronouncements issued and determined that the adoption of these pronouncements would not
have a material effect on the financial position, results of operations or cash flows of the Company.
4.
LOSS OF CONTROL IN SUBSIDIARY COMPANY
On
September 30, 2015, the Company entered into a Share Exchange Agreement with and among RM Fresh and its shareholders, pursuant
to which, 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.
LEGACY
VENTURES INTERNATIONAL INC.
Notes to the Interim Condensed Financial Statements (Unaudited)
As at December 31, 2016
4.
LOSS OF CONTROL IN SUBSIDIARY COMPANY
(continued)
Subsequently, 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 condensed 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 consolidated and contains the assets, liabilities
and results of operations of RM Fresh. The condensed 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 $84,021 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
|
|
|
|
|
|
|
Adjustment of cumulative translation reserve
|
|
|
22,867
|
|
|
|
|
84,021
|
|
Purchase consideration value of investments
in RM Fresh shares on date of acquisition
|
|
|
2,180,000
|
|
Impairment
recorded until August 31, 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 RM Fresh
|
|
|
84,021
|
|
Management
has concluded that the entire available for sale investment in RM Fresh is impaired and hence the investment is written off.
5.
ACCOUNTS AND OTHER RECEIVABLES
Accounts and other receivables as at December
31, 2016 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 RM Fresh. All these balances related to RM Fresh.
6.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities as at December 31, 2016
include accrued liabilities amounting to $16,993 ($20,574 as at June 30, 2016).
LEGACY
VENTURES INTERNATIONAL INC.
Notes to the Interim Condensed Financial Statements (Unaudited)
As at December 31, 2016
7.
DUE TO STOCKHOLDER
Amount
due to stockholder is unsecured, interest free and is repayable on demand.
8.
NOTES PAYABLE
Outstanding
note 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. These notes are no longer
reported in the balance sheet as they pertained to RM Fresh, as explained in Note 4.
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 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 9).
9.
STOCKHOLDERS’ DEFICIENCY
COMMON
STOCK - AUTHORIZED
As
at December 31, 2016, 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 (7,400
post reverse split, as explained below) shares prior to the Forward Split to 51,800,000 (51,800 post reverse split) shares following
the Forward Split. Prior year numbers have been adjusted 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.
LEGACY
VENTURES INTERNATIONAL INC.
Notes to the Interim Condensed Financial Statements (Unaudited)
As at December 31, 2016
9.
STOCKHOLDERS’ EQUITY (DEFICIENCY)
(continued)
COMMON
STOCK - ISSUED AND OUTSTANDING (continued)
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
June 30, 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.
On
January 8, 2016 and March 31, 2016, the Company issued 250,000 (250 post reverse split) shares of common stock each 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 June 30, 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 June 30, 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 quarter ended June 30, 2016.
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 numbers have
been adjusted from the earliest period presented, to reflect the effect of the reverse split.
LEGACY
VENTURES INTERNATIONAL INC.
Notes to the Interim Condensed Financial Statements (Unaudited)
As at December 31, 2016
9.
STOCKHOLDERS’ EQUITY (DEFICIENCY)
(continued)
COMMON
STOCK - ISSUED AND OUTSTANDING (continued)
At
December 31, 2016, there were 65,064 shares of common stock issued and outstanding of which 50,247 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.
10. 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.
As detailed in Note 4, the Company acquired
control in RM Fresh, giving rise to goodwill and intangible assets.
Goodwill
The Company tests for impairment of goodwill
at the reporting unit level. In assessing whether goodwill is impaired, the Company utilizes 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.
Goodwill amounting to $1,394,135 was immediately
impaired based on the implied fair value of goodwill determined based on the enterprise value of the acquiree.
Intangible assets
Amortization expense of $23,450 on these intangible
assets were recorded for the six months ended December 31, 2015.
11. 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 six months ended December 31, 2015 the related party agreed to forgive the loan in favor of the Company
12.
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 condensed financial statements, the other related party transactions are:
Shares of common stock issued 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 as explained in Note 9.
Management
fees of $13,824 charged by entities owned by the stockholders of the Company for providing warehousing and other logistic services
up to August 31, 2016, the date of disposal of RM Fresh (quarter ended September 30, 2015: $nil). These were recorded at fair
value. Amounts owed to entities owned by the stockholders in respect of these services as at December 31, 2016 was $nil due to
de-consolidation of RM Fresh ($60,145 as at June 30, 2016).
13.
SUBSEQUENT EVENTS
The
Company’s management has evaluated subsequent events up to February 8, 2017, the date the condensed financial statements
were issued, pursuant to the requirements of ASC Topic 855 and has determined that there is no significant subsequent event to
report.