Form 10-Q LegacyXChange, Inc. For: Dec 31


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UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION

Washington,
D.C. 20549

 

FORM
10-Q

 

(Mark
One)

 


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For
the quarterly period ended December 31, 2016

 


TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For
the transition period from __________ to __________

 

COMMISSION
FILE NUMBER: 333-148925

 

LEGACYXCHANGE,
INC.

(Exact
name of Registrant as specified in its charter)

 

Nevada   20-8628868
(State
or other jurisdiction of incorporation or organization)
  (I.R.S.
Employer Identification No.)
     

301
Yamato Rd., Suite 1240, Boca Raton, FL 33431

  (800)
630-4190
(Address
of principal executive offices and zip code)
  (Registrant’s
telephone number, including area code)

 

Securities
registered pursuant to Section 12(b) of the Act:

 

Title
of Each Class
  Trading
Symbol
  Name
of each Exchange on which registered
N/A   N/A   N/A

 

Indicate
by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company Emerging growth company
         

  

If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐

 

Indicate
the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 62,570,659
shares as of December 15, 2020.

 

 

 

LEGACYXCHANGE, INC.

Form
10-Q

December
31, 2016

 

TABLE
OF CONTENTS

 

 

 

PART
I – FINANCIAL INFORMATION

 

ITEM
1. FINANCIAL STATEMENTS

 

LEGACYXCHANGE, INC.

CONSOLIDATED BALANCE SHEETS

 

    December 31,
2016
    March 31,
2016
 
    (Unaudited)          
ASSETS                
CURRENT ASSETS:                
Cash   $     $ 4,209  
Prepaid expenses           61,047  
Inventory           570  
                 
Total Current Assets           65,826  
                 
TOTAL ASSETS   $     $ 65,826  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
CURRENT LIABILITIES:                
Accounts payable   $ 130,878     $ 105,376  
Accrued liabilities     245,410       120,157  
Bank overdraft     70        
Loans payable     143,924       132,769  
Convertible notes, net of debt discount     332,161       207,442  
Derivative liabilities     93,902       800,973  
                 
Total Current Liabilities     946,345       1,366,717  
                 
TOTAL LIABILITIES     946,345       1,366,717  
                 
COMMITMENTS AND CONTINGENCIES                
                 
STOCKHOLDERS’ DEFICIT:                
Preferred stock: $0.001 par value; 10,000,000 shares authorized; No share issued or outstanding at December 31, 2016 and March 31, 2016            
Common stock: $0.001 par value; 190,000,000 shares authorized; 62,570,659 shares issued and outstanding at December 31, 2016 and March 31, 2016     62,571       62,571  
Additional paid-in capital     9,182,575       9,182,575  
Accumulated deficit     (10,191,491 )     (10,546,037 )
                 
TOTAL STOCKHOLDERS’ DEFICIT     (946,345 )     (1,300,891 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $     $ 65,826  

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

 

 

LEGACYXCHANGE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

 

    For the Three Months Ended     For the Nine Months Ended  
    December 31,     December 31,  
    2016     2015     2016     2015  
REVENUE, NET   $     $     $     $  
                                 
OPERATING EXPENSES                                
Compensation and related taxes     30,000       72,540       91,036       140,306  
Professional and consulting fees     808       64,015       78,490       280,104  
Other selling, general and administrative     (475 )     11,459       10,629       37,030  
                                 
TOTAL OPERATING EXPENSES     30,333       148,014       180,155       457,440  
                                 
LOSS FROM OPERATIONS     (30,333 )     (148,014 )     (180,155 )     (457,440 )
                                 
OTHER INCOME (EXPENSE)                                
Interest expense     (57,536 )     (56,366 )     (172,370 )     (219,990 )
Initial derivative expense           (35,486 )           (202,323 )
Gain from change in fair value of derivative liabilities     93,029       766,240       707,071       1,022,446  
                                 
TOTAL OTHER INCOME, NET     35,493       674,388       534,701       600,133  
                                 
NET INCOME   $ 5,160     $ 526,374     $ 354,546     $ 142,693  
                                 
NET INCOME (LOSS) PER COMMON SHARE                                
Basic   $ 0.00     $ 0.01     $ 0.01     $ 0.00  
Diluted   $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )
                                 
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:                                
Basic     62,570,659       45,597,447       62,570,659       42,167,788  
Diluted     119,864,293       95,398,915       119,864,293       92,198,662  

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

 

 

LEGACYXCHANGE, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIT

For the Three and Nine Months Ended December 31, 2016 and 2015

(UNAUDITED)

 

    Preferred Stock     Common Stock     Additional           Total  
    Number of
Shares
    Amount     Number of
Shares
    Amount     Paid-in
Capital
    Accumulated
Deficit
    Stockholders’
Deficit
 
Balance at March 31, 2016         $       62,570,659     $ 62,571     $ 9,182,575     $ (10,546,037 )   $ (1,300,891 )
                                                         
Net income                                   342,073       342,073  
                                                         
Balance at June 30, 2016                 62,570,659       62,571       9,182,575       (10,203,964 )     (958,818 )
                                                         
Net income                                   7,313       7,313  
                                                         
Balance at September 30, 2016                 62,570,659       62,571       9,182,575       (10,196,651 )     (951,505 )
                                                         
Net income                                   5,160       5,160  
                                                         
Balance at December 31, 2016         $       62,570,659     $ 62,571     $ 9,182,575     $ (10,191,491 )   $ (946,345 )

 

 

    Preferred Stock     Common Stock     Additional           Total  
    Number of
Shares
    Amount     Number of
Shares
    Amount     Paid-in
Capital
    Accumulated
Deficit
    Stockholders’
Deficit
 
Balance at March 31, 2015         $       36,951,165     $ 36,951     $ 8,332,206     $ (9,615,963 )   $ (1,246,806 )
                                                         
Common stock issued for services                 705,000       705       38,285             38,990  
                                                         
Common stock issued for services – former related party                 726,989       727       25,940             26,667  
                                                         
Net loss                                   (66,307 )     (66,307 )
                                                         
Balance at June 30, 2015                 38,383,154       38,383       8,396,431       (9,682,270 )     (1,247,456 )
                                                         
Common stock issued for services                 1,025,000       1,025       41,975             43,000  
                                                         
Common stock issued for services – former related party                 181,818       182       9,818             10,000  
                                                         
Common stock issued for notes conversion                 4,425,500       4,425       84,085             88,510  
                                                         
Common stock issued for conversion of accrued interest                 539,584       540       10,252             10,792  
                                                         
Stock issued for loan fees                 75,000       75       3,525             3,600  
                                                         
Reclassification of derivative liabilities upon notes conversion                             188,327             188,327  
                                                         
Net loss                                   (317,374 )     (317,374 )
                                                         
Balance at September 30, 2015                 44,630,056       44,630       8,734,413       (9,999,644 )     (1,220,601 )
                                                         
Common stock issued for services                 5,343,182       4,500       47,725             52,225  
                                                         
Net income                                   526,374       526,374  
                                                         
Balance at December 31, 2015         $       49,973,238     $ 49,130     $ 8,782,138     $ (9,473,270 )   $ (642,002 )

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

 

 

LEGACYXCHANGE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

    For the Nine Months Ended  
    December 31,  
    2016     2015  
CASH FLOWS FROM OPERATING ACTIVITIES                
Net income   $ 354,546     $ 142,693  
Adjustments to reconcile net income to net cash used in operating activities:                
Stock-based compensation expenses           124,233  
Common stock issued for loan fees           3,600  
Amortization of debt discount     124,719       178,751  
Initial fair value expense of derivative liabilities           202,323  
(Gain) from change in fair value of derivative liabilities     (707,071 )     (1,022,446 )
Write-off of obsolete inventory     570        
Amortization of prepaid consulting fees     11,047       11,354  
Changes in operating assets and liabilities:                
Prepaid expenses and other current assets     50,000       (1,970 )
Accounts payable     25,502       106,752  
Accrued and other liabilities     125,323       14,100  
                 
Net cash used in operating activities     (15,364 )     (240,610 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES                
Proceeds from loan payable     11,155       25,000  
Proceeds from convertible notes, net of issuance cost           211,250  
                 
Net cash provided by financing activities     11,155       236,250  
                 
Net decrease in cash     (4,209 )     (4,360 )
Cash – Beginning of period     4,209       4,362  
Cash – End of the period   $     $ 2  
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
Cash paid for:                
Interest   $     $  
Income taxes   $     $  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES:                
Common stock issued for future services   $     $ 45,825  
Issuance of common stock for convertible debt and interest   $     $ 99,302  
Initial debt discount recorded on convertible notes           $ 211,250  
Common stock issued for accrued liabilities   $     $ 36,667  
Reclassification of derivative liability upon note conversion   $     $ 188,327  

 

The accompanying condensed notes are an integral part of these unaudited consolidated financial statements.

 

 

LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

  

NOTE
1 – ORGANIZATION AND NATURE OF OPERATIONS

 

LegacyXchange,
Inc., formerly known as True 2 Beauty, Inc. (the “Company”) was originally incorporated as Burrow Mining, Inc., a
Nevada corporation, on December 11, 2006. In February 2010, the Company amended its Articles of Incorporation and changed its
name to True 2 Beauty, Inc.

 

On
July 10, 2012, the Company formed a new wholly owned subsidiary True2Bid, Inc. (“True2Bid”) which was incorporated
in the state of Nevada. This subsidiary’s name was changed to LegacyXchange, Inc. (“LegacyXchange”) in December
2014. The Company continued to sell existing inventory of beauty products through May 2013 when the final inventory was sold.
LegacyXchange operates an online e-commerce platform focused on delivering users a wide array of sports and entertainment related
products that can be won in an action-packed environment of a live auction.

 

On
July 2, 2015, pursuant to a Certificate of Dissolution filing with the Nevada Secretary of State, the Company dissolved LegacyXchange
(formerly True2Bid, Inc.) to allow for the change in name of its parent company, True 2 Beauty, Inc., to LegacyXchange, Inc.

 

The
Company is currently inactive due to lack of working capital to fund its operations.

 

NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis
of Presentation

 

The
Company’s unaudited consolidated financial statements up to the period ending June 30, 2015 include the financial statement
of its wholly-owned subsidiary, True2Bid, Inc. With the dissolution of this subsidiary in July 2, 2015, the financial statements
for the three and nine months ended December 31, 2016 are no longer consolidated. All intercompany accounts and transactions have
been eliminated in consolidation.

 

Management
acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect
all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial
position and the results of its operations for the periods presented. The accompanying unaudited consolidated financial statements
of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America
(the “U.S. GAAP”) for interim financial information and with the instructions Article 8-03 of Regulation S-X. Operating
results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. Certain
information and note disclosure normally included in financial statements prepared in accordance with U.S. GAAP has been omitted
from these financial statements pursuant to such accounting principles and, accordingly, they do not include all the information
and notes necessary for comprehensive financial statements. These unaudited consolidated financial statements should be read in
conjunction with the summary of significant accounting policies and notes to the consolidated financial statements for the year
ended March 31, 2016 of the Company which were included in the Company’s annual report on Form 10-K as filed with the Securities
and Exchange Commission on December 4, 2020.

  

Going
Concern

 

The
unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of business. As reflected in our accompanying unaudited
consolidated financial statements, the Company had net income and net cash used in operating activities of $354,546 and $15,364,
respectively, for the nine months ended December 31, 2016. The net income was primarily attributed to the gain from the change
in far value of derivative liabilities. The Company had accumulated deficit, stockholders’ deficit and working capital deficit
of $10,191,491, $946,345 and $946,345, respectively, at December 31, 2016. The Company had no revenues for the nine months ended
December 31, 2016, and we defaulted on our loans. Management believes that these matters raise substantial doubt about the Company’s
ability to continue as a going concern for twelve months from the issuance date of this report.

 

Management
cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive, or raise additional
debt and/or equity capital. Management believes that our capital resources are not currently adequate to continue operating and
maintaining its business strategy for a period of twelve months from the issuance date of this report. The Company will seek to
raise capital through additional debt and/or equity financings to fund its operations in the future.

 

 

LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

  

Although
the Company has historically raised capital from sales of equity and from the issuance of promissory notes, there is no assurance
that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in
the near future, management expects that the Company will need to curtail or cease operations. These unaudited consolidated financial
statements do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Use
of Estimates

 

The
preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates. Significant estimates during the nine months ended December 31, 2016
include assumptions used in the valuation of derivative liabilities.

 

Fair
Value of Financial Instruments and Fair Value Measurements

 

FASB
ASC 820 – Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires
disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures
about the fair value of financial instruments are based on pertinent information available to the Company on December 31, 2016.
Accordingly, the estimates presented in these consolidated financial statements are not necessarily indicative of the amounts
that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques
based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data
obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority
to unadjusted quoted prices in
active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority
to unobservable inputs (Level 3 measurement).

 

The
three levels of the fair value hierarchy are as follows:

 

  Level 1—Inputs
are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
   
  Level 2—Inputs
are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived
from or corroborated by observable market data.
   
  Level 3—Inputs
are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available information.

 

The
carrying amounts reported in the balance sheets for cash, due from and to related parties, prepaid expenses, accounts payable
and accrued liabilities approximate their fair market value based on the short-term maturity of these instruments.

 

Assets
or liabilities measured at fair value on a recurring basis included conversion options in convertible notes and warrants with
their exercise price containing a down-round provision (see Note 6) and were as follows at December 31, 2016 and March 31, 2016:

 

   

At
December 31, 2016

(Unaudited)

    At March 31, 2016  
Description   Level 1     Level 2     Level 3     Level 1     Level 2     Level 3  
Derivative liabilities               $ 93,902                 $ 800,973  

 

A
roll forward of the level 3 valuation financial instruments is as follows:

 

    Derivative Liabilities  
Balance at March 31, 2016   $ 800,973  
Initial valuation of derivative liabilities included in debt discount      
Initial valuation of derivative liabilities expensed      
Reclassification of derivative liabilities to gain (loss) on debt extinguishment upon conversion of debt      
Gain from change in fair value of derivative liabilities     (707,071 )
Balance at December 31, 2016   $ 93,902  

 

 

LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

  

ASC
825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities
at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable,
unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that
instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value
option to any outstanding financial instruments.

 

Cash
and Cash Equivalents

 

For
purposes of the unaudited statements of cash flows, the Company considers all highly liquid instruments with a maturity of three
months or less at the purchase date and money market accounts to be cash equivalents. At December 31, 2016 and March 31, 2016,
the Company did not have any cash equivalents.

 

The
Company maintains its cash in bank and financial institution deposits that at times may exceed federally insured limits. There
were no balances in excess of FDIC insured levels as of December 31, 2016 and March 31, 2016. The Company has not experienced
any losses in such accounts through December 31, 2016.

 

Inventory

 

Inventories
are stated at the lower of cost or market value. Cost is determined using the cost to acquire inventory and is valued using the
first-in, first-out method. During the nine months ended December 31, 2016, the Company determined that the inventory of $570
was impaired and was written off. As of December 31, 2016 and March 31, 2016, the Company’s inventory was not significant
as the Company was inactive during the nine months ended December 31, 2016.

 

Derivative
Liabilities

 

The
Company has certain financial instruments that are embedded derivatives associated with capital raises and certain warrants. The
Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those
contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10 – Derivative and Hedging
– Contract in Entity’s Own Equity
. This accounting treatment requires that the carrying amount of any derivatives
be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded
as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income
or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion,
repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or
loss on debt extinguishment.

 

In
July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives
and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify
the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round
feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification.
The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

 

Revenue
Recognition

 

In
May 2014, FASB issued an update Accounting Standards Update, ASU 2014-09, establishing ASC 606 – Revenue from Contracts with Customers.
ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting
for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard,
which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity
to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures.
adoption of this guidance is not expected to have a material impact on the process for, timing of, and presentation and disclosure
of revenue recognition from customers. The Company did not have revenues from operations for the three and nine months ended December
31, 2016.

 

 

LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

  

Stock-Based
Compensation

 

Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition
in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments
over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting
period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based
on the grant-date fair value of the award.

 

In
June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation — Stock Compensation (Topic 718), Accounting
for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service
Period (a consensus of the FASB Emerging Issues Task Force) (ASU 2014-12). The guidance applies to all reporting entities that
grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting
could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and
that could be achieved after the requisite service period is treated as a performance condition. For all entities, the amendments
in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015.
Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities. The Company
early adopted ASU 2014-12 during the period ending June 30, 2016. The adoption of ASU 2014-12 did not have any material impact
on the Company’s financial statements.

 

Pursuant
to ASC 505-50 – Equity-Based Payments to Non-Employees, all share-based payments to non-employees, including grants of stock options,
were recognized in the financial statements as compensation expense over the service period of the consulting arrangement or until
performance conditions are expected to be met. Using a Black Scholes valuation model, the Company periodically reassessed the
fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options,
and the Company adjusts the expense recognized in the consolidated financial statements accordingly. In June 2018, the FASB issued
ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting
for nonemployee share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to
include share-based payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for
annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted,
but entities may not adopt prior to adopting the new revenue recognition guidance in ASC 606. The adoption of this guidance is
not expected to have a material impact on the Company’s financial statements.

 

Income
Taxes

 

The
Company accounts for income tax using the liability method prescribed by ASC 740 – Income Taxes. Under this method, deferred tax
assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities
using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records
a valuation allowance to offset net deferred tax assets if based on the weight of available evidence, it is more-likely-than-not
that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates
is recognized as income or loss in the period that includes the enactment date.

 

The
Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”.
Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not
the position will be sustained upon examination by the tax authorities. As of December 31, 2016 and March 31, 2016, the Company
had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company recognizes
interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties were
recorded as of December 31, 2016.

 

Shipping
Costs

 

Shipping
costs are included in other selling, general and administrative expense and totaled were not significant for the three and nine
months ended December 31, 2016 and 2015.

 

Advertising

 

Advertising
is expensed as incurred and is included in other selling, general and administrative expense. The Company did not incur any advertising
expense for three and nine months ended December 31, 2016 and 2015.

 

 

LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

  

Basic
and Diluted Income (Loss) Per Share

 

Pursuant
to ASC 260-10-45, basic income (loss) per common share is computed by dividing net income (loss) by the weighted average number
of shares of common stock outstanding for the periods presented. Diluted income (loss) per share is computed by dividing net income
by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding
during the period. Potentially dilutive common shares consist of common stock issuable for stock options and warrants (using the
treasury stock method), convertible notes and common stock issuable. These common stock equivalents may be dilutive in the future.
The following potentially dilutive equity securities outstanding as of December 31, 2016 and 2015 were not included in the computation
of dilutive income (loss) per common share because the effect would have been anti-dilutive:

 

    December 31,  
    2016     2015  
Stock warrants     5,273,315       5,273,315  
Total     5,273,315       5,273,315  

 

The
following is a reconciliation of the numerator and denominator used in the basic and diluted earnings per share calculations for
the three and nine period ended December 31, 2016 and 2015:

 

    Three Months Ended     Nine Months Ended  
    December 31,     December 31,  
    2016     2015     2016     2015  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Numerator:                        
Net income   $ 5,160     $ 526,374     $ 354,546     $ 142,693  
Add: Interest expense     57,536       56,366       172,370       219,990  
Add: Initial derivative expense           35,486             202,323  
Less: Gain from change in fair value of derivative liabilities     (93,029 )     (766,240 )     (707,071 )     (1,022,446 )
Adjusted net income (loss)   $ (30,333 )   $ 148,014     $ (180,155 )   $ 457,440  
                                 
Denominator:                                
Weighted-average shares of common stock     62,570,659       67,095,860       62,570,659       63895,607  
Dilutive effect of convertible notes     57,293,634       28,303,055       57,293,634       28,303,055  
Diluted weighted-average of common stock     119,864,293       95,398,915       119,864,293       92,198,662  
                                 
Net income (loss) per common share:                                
Basic   $ 0.00     $ 0.01     $ 0.01     $ 0.00  
Diluted   $ (0.00 )   $ (0.00 )   $ (0.00 )   $ (0.00 )

 

Related
Parties

 

Parties
are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control,
are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company,
its management, members of the immediate families of principal owners of the Company and its management and other parties with
which the Company may deal with if one party controls or can significantly influence the management or operating policies of the
other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

 

Recent
Accounting Pronouncements

 

In
August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure
Requirements for Fair Value Measurement
, to modify the disclosure requirements on fair value measurements in Topic 820, Fair
Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments
in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2019. The Company does not believe this will have a material impact on the Company’s financial statements.

 

Management
does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material
effect on the Company’s financial statements.

 

 

LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

  

NOTE
3 – PREPAID EXPENSES

 

At
December 31, 2016 and March 31, 2016, prepaid expenses consisted of the following:

 

    December 31,
2016
    March 31,
2016
 
    (Unaudited)          
Prepaid consulting fees   $     $ 3,792  
Prepaid stock-based consulting fee           7,255  
Advance for investor relations fee           50,000  
Total   $     $ 61,047  

 

NOTE
4 – ACCRUED LIABILITIES

 

At
December 31, 2016 and March 31, 2016, accrued liabilities consisted of the following:

 

    December 31,
2016
    March 31,
2016
 
    (Unaudited)          
Accrued interest   $ 105,876     $ 58,225  
Accrued professional fees     2,634       2,522  
Accrued payroll taxes     29,727       28,690  
Accrued executive and director compensation     107,173       30,720  
Total   $ 245,410     $ 120,157  

 

NOTE
5 – LOANS PAYABLE

 

Between
July 2015 through March 2016, the Company entered into individual loan agreements with various investors in the aggregate principal
amount of $132,769. These loans bear an interest rate of 10% and were due and payable on the first anniversary of the date of
issuance of the loans. As of March 31, 2016, these loans had outstanding principal and accrued interest of $132,769 and $2,751,
respectively.

 

In
April and May 2016, the Company entered into individual loan agreements with various investors in the aggregate principal amount
of $11,155. These loans bear an interest rate of 10% and were due and payable on the first anniversary of the date of issuance
of the loans.

 

As
of December 31, 2016, these loans were in default and had outstanding principal and accrued interest of $143,924 and $13,680,
respectively. During the three and nine months ended December 31, 2016, the Company recorded interest expense of $3,678 and $10,928,
respectively, on these loans. During the three and nine months ended December 31, 2015, the Company recorded interest expense
of $630 and $4,819, respectively, on these loans.

 

NOTE
6 – CONVERTIBLE NOTES PAYABLE

 

At
December 31, 2016 and March 31, 2016, convertible note consisted of the following:

 

    December 31,
2016
    March 31,
2016
 
    (Unaudited)          
Principal amount   $ 480,740     $ 480,740  
Less: unamortized debt discount     (148,579 )     (273,298 )
Convertible notes payable, net   $ 332,161     $ 207,442  

 

 

LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

  

Fiscal
2015 Financing

 

In
October and November 2014, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2015 Agreements”)
for the sale of the Company’s convertible notes. Pursuant to the Fiscal 2015 Agreements, the Company issued to these purchasers,
convertible promissory notes (the “Fiscal 2015 Convertible Notes”) for an aggregate principal amount of $400,000 with
the Company receiving proceeds equal to the principal amount. The Fiscal 2015 Convertible Notes bear an interest rate of 10% per
year and were due and payable on the third anniversary of the date of issuance through October and November 2017. The purchasers
are entitled, at their option, at any time after the issuance of the Fiscal 2015 Convertible Notes, to convert all or any lesser
portion of the outstanding principal amount and accrued and unpaid interest into the Company’s common stock at a conversion
price of $0.02 During the fiscal year 2016, the conversion price was ratcheted down to $0.01. During the fiscal year 2016, the
purchasers converted $130,510 and $10,792 of outstanding principal and accrued interest, respectively, into 7,065,084 shares of
the Company’s common stock. As of March 31, 2016, the Fiscal 2015 Convertible Notes had outstanding principal and accrued
interest of $269,490 and $40,197, respectively. As of December 31, 2016, the Fiscal 2015 Convertible Notes had outstanding principal
and accrued interest of $269,490 and $60,783, respectively.

 

Fiscal
2016 Financing

 

In
May and June 2015, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2016 Agreements
I”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Fiscal 2016 Agreements I, the Company
issued to the purchasers for an aggregate subscription amount of $115,000: (i) convertible promissory notes in the aggregate principal
amount of $115,000 (the “Fiscal 2016 Notes I”) and (ii) five-year warrants to purchase an aggregate of 2,300,000 (twenty
warrants for each dollar of the principal amount) shares Company’s common stock at an exercise price of $0.07 (the “Fiscal
2016 Warrants I”). The Company received proceeds equal to the principal amount. The Fiscal 2016 Notes I bear an interest
rate of 10% per year and were due and payable on the third anniversary of the date of issuance through May and June 2018. The
purchasers are entitled, at their option, at any time after the issuance of the Fiscal 2016 Notes I, to convert all or any lesser
portion of the outstanding principal amount and accrued and unpaid interest into the Company’s common stock at a conversion
price of $0.05. The conversion price of the Fiscal 2016 Notes I shall be subject to adjustment for issuances of common stock at
a purchase price of less than the then-effective conversion price. During the fiscal year 2016, the conversion price was ratcheted
down to $0.01. As of March 31, 2016, the Fiscal 2016 Notes I had outstanding principal and accrued interest of $115,000 and $10,074,
respectively. As of December 31, 2016, the Fiscal 2016 Notes I had outstanding principal and accrued interest of $115,000 and
$18,858, respectively.

 

During
August through September 2015, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2016
Agreements II”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Fiscal 2016 Agreements
II, the Company issued to the purchasers for an aggregate subscription amount of $96,250: (i) convertible promissory notes in
the aggregate principal amount of $96,250 (the “Fiscal 2016 Notes II”) and (ii) five-year warrants to purchase an
aggregate of 1,925,000 (twenty warrants for each dollar of the principal amount) shares Company’s common stock at an exercise
price of $0.07 (the “Fiscal 2016 Warrants II”). The Company received proceeds equal to the principal amount. The Fiscal
2016 Notes II bear an interest rate of 10% per year and were due and payable on the third anniversary of the date of issuance
through August through September 2018. The purchasers are entitled, at their option, at any time after the issuance of the Fiscal
2016 Notes II, to convert all or any lesser portion of the outstanding principal amount and accrued and unpaid interest into the
Company’s common stock at a conversion price of $0.05. The conversion price of the Fiscal 2016 Notes II shall be subject
to adjustment for issuances of common stock at a purchase price of less than the then-effective conversion price. During the fiscal
year 2016, the conversion price was ratcheted down to $0.01. As of March 31, 2016, the Fiscal 2016 Notes II had outstanding principal
and accrued interest of $96,250 and $5,203, respectively. As of December 31, 2016, the Fiscal 2016 Notes II had outstanding principal
and accrued interest of $96,250 and $12,555, respectively.

 

During
the three and nine months ended December 31, 2016, the Company recorded interest expense of $12,285 and $36,723 on these convertible
notes.

 

During
the three and nine months ended December 31, 2015, the Company recorded interest expense of $13,270 and $36,420 on these convertible
notes.

 

Derivative
Liabilities Pursuant to Notes and Warrants

 

In
connection with the issuance of the Notes and Warrants, the Company determined that the terms of the Notes and Warrants contain
terms that included a down-round provision under which the conversion price and exercise price could be affected by future equity
offerings undertaken by the Company or contain terms that are not fixed monetary amounts at inception and included various other
terms such as default provisions that caused derivative treatment. Accordingly, under the provisions of ASC 815-40 –Derivatives
and Hedging – Contracts in an Entity’s Own Stock
, the embedded conversion option contained in the convertible
instruments and the Warrants were accounted for as derivative liabilities at the date of issuance and shall be adjusted to fair
value through earnings at each reporting date. The fair value of the embedded conversion option derivatives and warrant derivatives
were determined using the Binomial valuation model. At the end of each period, on the date that debt was converted into common
shares, and on the date of a cashless exercise of warrants, the Company revalued the embedded conversion option and warrants derivative
liabilities.

 

 

LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

  

In
July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives
and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify
the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round
feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification.
The Company is currently evaluating the impact of ASU No. 2017-11 on its consolidated financial statements.

 

In
connection with the issuance of the Fiscal 2016 Financing Notes and related Warrants, during year ended March 31, 2016, on the
initial measurement date, the fair values of the conversion option derivative and warrants derivative of $403,401 was recorded
as derivative liabilities and was allocated as a debt discount of $211,250 with the remaining $192,151 recorded as derivative
expense.

 

At
December 31, 2016 and 2015, the Company revalued the conversion option and warrant derivative liabilities. In connection with
these revaluations and the initial derivative expense, the Company recorded gain on change on fair value of derivative liabilities
of $707,071 and $1,022,446 for the nine months ended December 31, 2016 and 2015, respectively.

 

At
December 31, 2016, the fair value of the derivative liabilities was estimated using the Binomial valuation model with the following
assumptions:

 

      December 31,
2016
 
Dividend rate     —%
Term (in years)     1.0 to 4.0 years  
Volatility     246% to 292%  
Risk—free interest rate     0.58% to 1.93%  

 

For
the three and nine months ended December 31, 2016, amortization of debt discounts related to the convertible notes amounted to
$41,573 and $124,719, respectively, which has been included in interest expense on the accompanying unaudited consolidated statements
of operations.

 

For
the three and nine months ended December 31, 2015, amortization of debt discounts related to the convertible notes amounted to
$42,466 and $178,751, respectively, which has been included in interest expense on the accompanying unaudited consolidated statements
of operations.

 

NOTE
7 – STOCKHOLDERS’ DEFICIT

 

Authorized
shares

 

The
Company is authorized to issue 200,000,000 consisting of 190,000,000 shares of common stock at $0.001 per share par value, and
10,000,000 shares of preferred stock at $0.001 per share par value.

 

Preferred
Stock

 

As
of December 31, 2016 and March 31, 2016, the Company did not have any preferred stock issued and outstanding.

 

Common
Stock

 

Common
stock issued for services

 

During
the nine months ended December 31, 2016, the Company did not issue any shares of its
common stock for services.

 

During
the nine months ended December 31, 2015, the Company issued 1,730,000 shares of its common
stock with and aggregate grant date value based on the closing bid price on the OTC of
$81,990 or approximately $0.05 average per share, in exchange for services, pursuant
to an agreement.

 

 

LEGACYXCHANGE,
INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016

  

Common
stock issued to a former related party for services

 

During
the nine months ended December 31, 2015 the Company issued 908,807 shares of its common
stock with and aggregate grant date value based on the closing bid price on the OTC of
$36,667 or approximately $0.04 average per share, in exchange for services, pursuant
to an agreement.

 

Common
stock issued for payment of loan fees

 

During
the nine months ended December 31, 2015, the Company issued a total of 75,000 shares
of common stock with grant date fair value based on the closing bid price on the OTC
of $3,600 or approximately $0.05 per share, to a lender for loan fees.

 

Common
stock issued for debt conversion

 

During
the nine months ended December 31, 2015, the Company issued 4,965,084 shares of its common
stock upon the conversion of principal note balances of $88,510 and accrued interest
of $10,792.

 

Warrants

 

Warrants
issued pursuant to equity subscription agreements

 

During
fiscal years 2013 to 2015, in connection with the sale of common stock, the Company issued an aggregate of 1,048,315 five-year
warrants to purchase common shares for an exercise price of $0.40 per common share to investors pursuant to unit subscription
agreements. These warrants were accounted for as equity. As of December 31, 2016 and March 31, 2016, 1,048,315 warrants were issued
and outstanding.

 

Warrants
issued in connection with the Fiscal 2016 Financing

 

During
fiscal years 2016, pursuant to the convertible note agreements under the fiscal 2016 financing discussed in Note 6, the Company
issued five-year warrants to purchase an aggregate of 4,225,000 (twenty warrants for each dollar of the principal amount) shares
of the Company’s common stock at an exercise price of $0.07. The exercise price of these warrants shall be subject to adjustment
for issuances of common stock at a purchase price of less than the then-effective conversion price and were accounted for as derivative
liabilities. During the fiscal year 2016, the conversion price was ratcheted down to $0.01. As of December 31, 2016 and March
31, 2016, 4,225,000 warrants were issued and outstanding.

 

Warrant
activity for the nine months ended December 31, 2016 are summarized as follows

 

    Number of
Warrants
    Weighted
Average
Exercise Price
    Weighted
Average
Remaining
Contractual
Term (Years)
    Aggregate
Intrinsic Value
 
Balance Outstanding March 31, 2016     5,273,315     $ 0.09       3.9     $  
Granted/Cancelled/Expired                        
Balance Outstanding at December 31, 2016     5,273,315     $ 0.09       3.1     $  
Exercisable at December 31, 2016     5,273,315     $ 0.09       3.1     $  

 

NOTE
8 – SUBSEQUENT EVENTS

 

Between
October 2017 and November 2017, the Fiscal 2015 Convertible Notes defaulted due to non-payment at maturity date and between May
2018 and September 2018, the Fiscal 2016 Convertible Notes I and II defaulted due to non-payment at maturity date (see Note 6).

 

Between
November 2019 through June 2020, the Company entered into loan agreements with an investor in the aggregate principal amount of
$91,000. The loans bear interest rate of 6% and were due and payable two-years from the date of issuances.

 

 

ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Overview

 

LegacyXchange,
Inc., formerly known as True 2 Beauty, Inc. (the “Company”) was originally incorporated as Burrow Mining, Inc., a
Nevada corporation, on December 11, 2006. In February 2010, the Company shifted its focus to the beauty industry and later amended
its Articles of Incorporation and changed its name to True 2 Beauty, Inc.

 

On
July 10, 2012, the Company formed a new wholly owned subsidiary True2Bid, Inc. (“True2Bid”) which was incorporated
in the state of Nevada. This subsidiary’s name was changed to LegacyXchange, Inc. (“LegacyXchange”) in December
2014. The Company continued to sell existing inventory of beauty products through May 2013 when the final inventory was sold.
LegacyXchange operates an online e-commerce platform focused on delivering users a wide array of sports and entertainment related
products that can be won in an action-packed environment of a live auction. The Company is currently inactive and is seeking other
business opportunities.

 

The
Company’s articles authorize the Company to issue 190,000,000 shares of common stock and 10,000,000 shares of preferred
stock, both at a par value of $0.001 per share.

 

The
following table summarizes the results of operations for the three and nine months ended December 31, 2016 and 2015 and is based
primarily on the comparative unaudited financial statements, footnotes and related information for the periods identified and
should be read in conjunction with the financial statements and the notes to those statements that are included elsewhere in this
report.

 

   

Three
Months Ended

December
31,

   

Nine
Months Ended

December
31,

 
    2016     2015     2016     2015  
Loss
from operations
  $ (30,333 )   $ (148,014 )   $ (180,155 )   $ (457,440 )
Other
income, net
    35,493       674,388       534,701       600,133  
Net
income
  $ 5,160     $ 526,374     $ 354,546     $ 142,693  

 

Revenue:

 

We
did not generate any revenues from operations for the three and nine months ended December 31, 2016 and 2015.

 

Operating
expenses:

 

For
the three months ended December 31, 2016 and 2015, operating expenses amounted to $30,333 and $148,014, respectively, a decrease
of $117,681 or 80%. For the nine months ended December 31, 2016 and 2015, operating expenses amounted to $180,155 and $457,440,
respectively, a decrease of $277,285 or 61%. For the three and nine months ended December 31, 2016 and 2015, operating expenses
consisted of the following:

 

   

Three
Months Ended

December
31,

   

Nine
Months Ended

December
31,

 
    2016     2015     2016     2015  
Compensation
and related taxes
  $ 30,000     $ 72,540     $ 91,036     $ 140,306  
Professional
and consulting fees
    808       64,015       78,490       280,104  
Other
selling, general and administrative
    (475 )     11,459       10,629       37,030  
Total   $ 30,333     $ 148,014     $ 180,155     $ 457,440  

 

Compensation
and related taxes:

 

For
the three months ended December 31, 2016 and 2015, compensation and related taxes amounted to $30,000 and $72,540, respectively,
a decrease of $42,540 or 59%. The decrease was primarily due to stock-based compensation of $25,000 in 2015.

 

For
the nine months ended December 31, 2016 and 2015, compensation and related taxes amounted to $91,036 and $140,306, respectively,
a decrease of $49,270 or 35%. The decrease was primarily due to stock-based compensation of $25,000 in 2015.

 

 

Professional
and consulting fees:

 

For
the three months ended December 31, 2016 and 2015, professional and consulting fees amounted to $808 and $64,015, respectively,
a decrease of $63,207 or 99%. The decrease was primarily attributable to the reduce in operational activities in 2016 compared
to 2015.

 

For
the nine months ended December 31, 2016 and 2015, professional and consulting fees amounted to $78,490 and $280,104, respectively,
a decrease of $201,614 or 72%. The decrease was primarily attributable to the reduce in operational activities in 2016 compared
to 2015.

 

Other
selling, general and administrative:

 

For
the three months ended December 31, 2016 and 2015, other selling, general and administrative expenses amounted to $(475) and $11,459,
respectively, a decrease of $11,934, or 104%. The decrease was primarily attributable to the reduce in operational activities
in 2016 compared to 2015.

 

For
the nine months ended December 31, 2016 and 2015, other selling, general and administrative expenses amounted to $10,629 and $37,030,
respectively, a decrease of $26,401, or 71%. The decrease was primarily attributable to the reduce in operational activities in
2016 compared to 2015.

 

Loss
from operations:

 

For
the three months ended December 31, 2016 and 2015, loss from operations amounted to $30,333 and $148,014, respectively, a decrease
of $117,681, or 80%. The change was a result of the changes in operating expenses as discussed above.

 

For
the nine months ended December 31, 2016 and 2015, loss from operations amounted to $180,155 and $457,440, respectively, a decrease
of $277,285, or 61%. The change was a result of the changes in operating expenses as discussed above.

 

Other
income (expense):

 

Other
income (expense) includes interest expense, initial derivative expense and gain (loss) from change in fair value of derivative
liabilities.

 

For
the three months ended December 31, 2016, total other income, net, amounted to $35,493 as compared $674,388 for the three months
ended December 31, 2015, a decrease of $638,895 or 95%. The decrease was attributable to decrease in initial derivative expense
of $35,486, or 100%, decrease in the gain from change in fair value of derivative liabilities of $673,211 or 88% offset by an
increase in interest expense of $1,170, or 2%.

 

For
the nine months ended December 31, 2016, total other income, net, amounted to $534,701 as compared to $600,133 for the nine months
ended December 31, 2015, a decrease of $65,432 or 11%. The decrease was attributable to decrease in initial derivative expense
of $202,323, or 100%, decrease in interest expense of $47,620, or 22% for a total decrease in other (expense) of $ (249,943) offset
by decrease in the gain from change in fair value of derivative liabilities of $315,375 or 31%.

 

Net
income:

 

For
the three months ended December 31, 2016, net income amounted to $5,160, or per common share of $0.00 basic and $(0.00) diluted
as compared to $526,374 net income, or per common share of $0.01 basic and $(0.00) diluted for the three months ended December
31, 2015, a change of $521,214, or 99%. The change was a result of the changes in operating expenses and other income (expense)
as discussed above.

 

For
the nine months ended December 31, 2016, net income amounted to $354,546, or per common share of $0.01 basic and $(0.00) diluted
as compared to $142,693 net income, or per common share of $0.00 basic and $(0.00) diluted for the nine months ended December
31, 2015, a change of 211,853, or 148%. The change was a result of the changes in operating expenses and other income (expense)
as discussed above.

 

 

Liquidity
and Capital Resources

 

Liquidity
is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working
capital deficit of $946,345 and $0 of cash as of December 31, 2016 and working capital deficit of $1,300,891 and $4,209 of cash
as of March 31, 2016.

 

               

Nine
Months Ended

December
31, 2016

 
    December 31,
2016
    March
31,
2016
    Change     Percentage
Change
 
Working
capital deficit:
                               
Total
current assets
  $     $ 65,826     $ (65,826 )     100 %
Total
current liabilities
    (946,345 )     (1,366,717 )     420,372       31 %
Working
capital deficit:
  $ (946,345 )   $ (1,300,891 )   $ 354,546       27 %

 

The
decrease in working capital deficit was primarily attributable to a decrease in current assets of $65,826 and decrease in current
liabilities of $420,372.

 

Cash
Flow

 

A
summary of cash flow activities is summarized as follows:

 

   

Nine
Months Ended

December
31,

 
    2016     2015  
Cash
used in operating activities
  $ (15,364 )   $ (240,610 )
Cash
provided by financing activities
    11,155       236,250  
Net
decrease in cash
  $ (4,209 )   $ (4,362 )

 

Net
cash used in operating activities:

 

Net
cash flow used in operating activities was $15,364 for the nine months ended December 31, 2016 as compared to $240,610 for nine
months ended December 31, 2015, a decrease of $225,246 or 94%.

 

Net
cash flow used in operating activities for the nine months ended December 31, 2016 primarily
reflected our net income of $354,549 adjusted for the add-back on non-cash items such
as amortization of debt discount of $124,719, gain from change in fair value of derivative
liabilities of $707,071, write-off of obsolete inventory of $570, amortization of prepaid
consulting fees of $11,047 and the changes in operating assets and liabilities primarily
consisting of a decrease in prepaid expenses and other current assets of $50,000, an
increase in accounts payable of $25,502 and an increase in accrued liabilities of $125,323.

 

Net
cash flow used in operating activities for nine months ended December 31, 2015 primarily
reflected our net income $142,693 adjusted for the add-back on non-cash items such stock-based
compensation of $124,233, common stock issued for loan fees of $3,600, amortization of
debt discount of $178,751, initial derivative expense of $202,323, gain from change in
fair value of derivative liabilities of $1,022,446, amortization of prepaid consulting
fees of $11,354 and the changes in operating assets and liabilities primarily consisting
of an increase in prepaid expenses and current assets of $1,970, an increase in accounts
payable $106,752 and an increase in accrued liabilities of $14,100.

 

Cash
provided by financing activities:

 

Net
cash provided by financing activities was $11,155 for the nine months ended December 31, 2016 as compared to $236,250 for the
nine months ended December 31, 2015, a decrease of $225,095 or 95%.

 

Net
cash provided by financing activities for the nine months ended December 31, 2016 consisted of $11,155 of net proceeds from loan
payables.

 

Net
cash provided by financing activities for the nine months ended December 31, 2015 consisted of $211,250 of net proceeds from convertible
debt, net of issuance cost and $25,000 proceeds from loan payables.

 

 

Cash
Requirements

 

Our
management does not believe that our current capital resources will be adequate to continue operating our company and maintaining
our business strategy for more than 12 months from the date of this report. Accordingly, we will have to raise additional capital
in the near future to meet our working capital requirements. There can be no assurance that additional financing will be available
to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the
additional financing on a timely basis, if and when it is needed, we will be forced to scale down or perhaps even cease the operation
of our business.

 

Going
Concern

 

The
consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
the settlement of liabilities and commitments in the normal course of business. As reflected in our accompanying unaudited financial
statements, the Company had net income and net cash used in operating activities of $354,546 and $15,364, respectively, for the
nine months ended December 31, 2016. The net income was primarily attributed to the gain from the change in far value of derivative
liabilities. The Company had accumulated deficit, stockholders’ deficit and working capital deficit of $10,191,491, $946,345
and $946,345, respectively, at December 31, 2016. The Company had no revenues for the nine months ended December 31, 2016, and
we defaulted on our loans. Management believes that these matters raise substantial doubt about the Company’s ability to
continue as a going concern for twelve months from the issuance date of this report.

 

Management
cannot provide assurance that we will ultimately achieve profitable operations or become cash flow positive, or raise additional
debt and/or equity capital. Management believes that our capital resources are not currently adequate to continue operating and
maintaining its business strategy for a period of twelve months from the issuance date of this report. The Company will seek to
raise capital through additional debt and/or equity financings to fund its operations in the future.

 

Although
the Company has historically raised capital from sales of equity and from the issuance of promissory notes, there is no assurance
that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in
the near future, management expects that the Company will need to curtail or cease operations. These consolidated financial statements
do not include any adjustments related to the recoverability and classification of recorded asset amounts and classification of
liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Common
Stock for Debt Conversion

 

During
the nine months ended December 31, 2016, the lenders did not convert any of the outstanding convertible notes.

 

During
the nine months ended December 31, 2015, the Company issued 4,965,084 shares of its common stock upon the conversion of principal
note balances of $88,510 and accrued interest of $10,792.

 

Sales
of Common Stock Pursuant to Subscription Agreements

 

During
the nine months ended December 31, 2016 and 2015, there were no sales of common stock.

 

Future
Financings

 

We
will require additional financing to fund our planned operations. We currently do not have committed sources of additional financing
and may not be able to obtain additional financing particularly, if the volatile conditions of the stock and financial markets
persist.

 

There
can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, if and when it is needed,
we will be forced to further delay or further scale down some or all of our activities or perhaps even cease the operations of
the business.

 

Since
inception we have funded our operations primarily through equity and debt financings and we expect that we will continue to fund
our operations through the equity and debt financing. If we are able to raise additional financing by issuing equity securities,
our existing stockholders’ ownership will be diluted. Obtaining commercial or other loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.

 

There
is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his, her,
or its investment in our common stock. Further, we may continue to be unprofitable.

 

 

Critical
Accounting Policies

 

We
have identified the following policies as critical to our business and results of operations. Our reported results are impacted
by the application of the following accounting policies, certain of which require management to make subjective or complex judgments.
These judgments involve making estimates about the effect of matters that are inherently uncertain and may significantly impact
quarterly or annual results of operations. For all of these policies, management cautions that future events rarely develop exactly
as expected, and the best estimates routinely require adjustment. Specific risks associated with these critical accounting policies
are described in the following paragraphs.

 

Use
of Estimates

 

The
preparation of the unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the unaudited consolidated financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates. Significant estimates during the nine months ended December 31, 2016
include assumptions used in the valuation of derivative liabilities.

 

Fair
Value of Financial Instruments and Fair Value Measurements

 

FASB
ASC 820 – Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires
disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures
about the fair value of financial instruments are based on pertinent information available to the Company on December 31, 2016.
Accordingly, the estimates presented in these consolidated financial statements are not necessarily indicative of the amounts
that could be realized on disposition of the financial instruments. FASB ASC 820 specifies a hierarchy of valuation techniques
based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data
obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority
to unobservable inputs (Level 3 measurement).

 

The
three levels of the fair value hierarchy are as follows:

 

  Level 1—Inputs
are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.
   
  Level 2—Inputs
are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar
assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived
from or corroborated by observable market data.
   
  Level 3—Inputs
are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants
would use in pricing the asset or liability based on the best available information.

 

The
carrying amounts reported in the balance sheets for cash, due from and to related parties, prepaid expenses, accounts payable
and accrued liabilities approximate their fair market value based on the short-term maturity of these instruments.

 

Derivative
Liabilities

 

The
Company has certain financial instruments that are embedded derivatives associated with capital raises and certain warrants. The
Company evaluates all its financial instruments to determine if those contracts or any potential embedded components of those
contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10 – Derivative and Hedging
– Contract in Entity’s Own Equity
. This accounting treatment requires that the carrying amount of any derivatives
be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the fair value is recorded
as a liability, as is the case with the Company, the change in the fair value during the period is recorded as either other income
or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at the conversion,
repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of gain or
loss on debt extinguishment.

 

In
July 2017, FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives
and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify
the accounting for certain financial instruments with down-round features. The amendments require companies to disregard the down-round
feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification.
The adoption of this guidance is not expected to have a material impact on the Company’s financial statements.

 

 

Revenue
Recognition

 

In
May 2014, FASB issued an update Accounting Standards Update, ASU 2014-09, establishing ASC 606 – Revenue from Contracts with Customers.
ASU 2014-09, as amended by subsequent ASUs on the topic, establishes a single comprehensive model for entities to use in accounting
for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard,
which is effective for interim and annual reporting periods in fiscal years that begin after December 15, 2017, requires an entity
to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures.
adoption of this guidance is not expected to have a material impact on the process for, timing of, and presentation and disclosure
of revenue recognition from customers. The Company did not have revenues from operations for the three and nine months ended December
31, 2016.

 

Stock-Based
Compensation

 

Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition
in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments
over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting
period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based
on the grant-date fair value of the award.

 

In
June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation — Stock Compensation (Topic 718), Accounting
for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service
Period (a consensus of the FASB Emerging Issues Task Force) (ASU 2014-12). The guidance applies to all reporting entities that
grant their employees share-based payments in which the terms of the award provide that a performance target that affects vesting
could be achieved after the requisite service period. The amendments require that a performance target that affects vesting and
that could be achieved after the requisite service period is treated as a performance condition. For all entities, the amendments
in this Update are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015.
Earlier adoption is permitted. The effective date is the same for both public business entities and all other entities. The Company
early adopted ASU 2014-12 during the period ending June 30, 2016. The adoption of ASU 2014-12 did not have any material impact
on the Company’s financial statements.

 

Pursuant
to ASC 505-50 – Equity-Based Payments to Non-Employees, all share-based payments to non-employees, including grants of stock options,
were recognized in the financial statements as compensation expense over the service period of the consulting arrangement or until
performance conditions are expected to be met. Using a Black Scholes valuation model, the Company periodically reassessed the
fair value of non-employee options until service conditions are met, which generally aligns with the vesting period of the options,
and the Company adjusts the expense recognized in the financial statements accordingly. In June 2018, the FASB issued ASU No.
2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which simplifies several aspects of the accounting for nonemployee
share-based payment transactions by expanding the scope of the stock-based compensation guidance in ASC 718 to include share-based
payment transactions for acquiring goods and services from non-employees. ASU No. 2018-07 is effective for annual periods beginning
after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted, but entities may
not adopt prior to adopting the new revenue recognition guidance in ASC 606. The adoption of this guidance is not expected to
have a material impact on the Company’s financial statements.

 

Recent
Accounting Pronouncements

 

In
May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which
supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize
revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an
entity expects to be entitled for those goods or services. ASU 2014-09 defines a five-step process to achieve this core principle
and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing
U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using
either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each
prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative
effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures).
Early adoption is not permitted. The adoption of this guidance is not expected to have a material impact on the Company’s
financial statements.

 

 

In
August 2018, the FASB issued ASU 2018-13—Fair Value Measurement (Topic 820): Disclosure Framework Changes to the Disclosure
Requirements for Fair Value Measurement
, to modify the disclosure requirements on fair value measurements in Topic 820, Fair
Value Measurement, based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments
in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2019. The Company does not believe this will have a material impact on the Company’s financial statements.

 

Management
does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material
effect on the accompanying financial statements.

 

Off-Balance
Sheet Arrangements

 

We
have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that is material to our stockholders.

 

ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not
applicable.

 

ITEM
4. CONTROLS AND PROCEDURES

 

Disclosure
Controls and Procedures

 

We
maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant
to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include
controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act
is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that
such information is accumulated and communicated to our management, including our principal executive officer and principal financial
officer to allow timely decisions regarding required disclosure. Our management, with the participation of our principal executive
officer and principal financial officer, evaluated our disclosure controls and procedures as of the end of the period covered
by this quarterly report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer
concluded that as of December 31, 2016, our disclosure controls and procedures were not effective.

 

Our
management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management, with
the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal
control over financial reporting as of December 31, 2016. Our management’s evaluation of our internal control over financial
reporting was based on the framework in Internal Control-Integrated Framework (2013), issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this evaluation, our management concluded that as of December 31, 2016, our internal control
over financial reporting was not effective.

 

The
ineffectiveness of our internal control over financial reporting was due to the following material weaknesses which we identified
in our internal control over financial reporting:

 

  (1) the lack of multiples
levels of management review on complex accounting and financial reporting issues, and business transactions,
     
  (2) a lack of adequate
segregation of duties and necessary corporate accounting resources in our financial reporting process and accounting function
as a result of our limited financial resources to support hiring of personnel and implementation of accounting systems, and
     
  (3) a lack of operational
controls and lack of controls over assets by the acquired subsidiaries.

 

 

We
expect to be materially dependent upon third parties to provide us with accounting consulting services related to accounting services
for the foreseeable future. We believe this will be sufficient to remediate the material weaknesses related to our accounting
discussed above. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no
assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures will not result
in errors in our financial statements which could lead to a restatement of those financial statements.

 

A
material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will
not be prevented or detected on a timely basis.

 

Changes
in Internal Control Over Financial Reporting

 

There
was no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of
the Securities Exchange Act of 1934) during the quarter ended December 31, 2016 that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial reporting.

 

 

PART
II – OTHER INFORMATION

 

ITEM
1. LEGAL PROCEEDINGS

 

We
know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered
or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

ITEM
1A. RISK FACTORS

 

Not
applicable to smaller reporting companies.

 

ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

During
the three months ended December 31, 2016, there were no unregistered sales of our securities.

 

The
shares of common stock, notes and warrants referenced herein were issued in reliance upon the exemption from securities registration
afforded by the provisions of Section 4(a)(2) of the Securities Act of 1933, as amended, (“Securities Act”).

 

ITEM
3. DEFAULTS UPON SENIOR SECURITIES

 

Loans
Payable

 

Between
July 2015 through March 2016, the Company entered into individual loan agreements with various investors in the aggregate principal
amount of $132,769. These loans bear an interest rate of 10% and were due and payable on the first anniversary of the date of
issuance of the loans. As of March 31, 2016, these loans had outstanding principal and accrued interest of $132,769 and $2,751,
respectively.

 

In
April and May 2016, the Company entered into individual loan agreements with various investors in the aggregate principal amount
of $11,155. These loans bear an interest rate of 10% and were due and payable on the first anniversary of the date of issuance
of the loans.

 

As
of December 31, 2016, these loans were in default and had outstanding principal and accrued interest of $143,924 and $13,680,
respectively.

 

Fiscal
2015 Financing

 

In
October and November 2014, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2015 Agreements”)
for the sale of the Company’s convertible notes. Pursuant to the Fiscal 2015 Agreements, the Company issued to these purchasers,
convertible promissory notes (the “Fiscal 2015 Convertible Notes”) for an aggregate principal amount of $400,000 with
the Company receiving proceeds equal to the principal amount. The Fiscal 2015 Convertible Notes bear an interest rate of 10% per
year and were due and payable on the third anniversary of the date of issuance through October and November 2017. The purchasers
are entitled, at their option, at any time after the issuance of the Fiscal 2015 Convertible Notes, to convert all or any lesser
portion of the outstanding principal amount and accrued and unpaid interest into the Company’s common stock at a conversion
price of $0.02 During the fiscal year 2016, the conversion price was ratcheted down to $0.01. During the fiscal year 2016, the
purchasers converted $130,510 and $10,792 of outstanding principal and accrued interest, respectively, into 7,065,084 shares of
the Company’s common stock. As of March 31, 2016, the Fiscal 2015 Convertible Notes had outstanding principal and accrued
interest of $269,490 and $40,197, respectively. As of December 31, 2016, the Fiscal 2015 Convertible Notes had outstanding principal
and accrued interest of $269,490 and $60,783, respectively. Currently, such convertible notes are in default due to non-payment
at maturity date.

 

 

Fiscal
2016 Financing

 

In
May and June 2015, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2016 Agreements
I”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Fiscal 2016 Agreements I, the Company
issued to the purchasers for an aggregate subscription amount of $115,000: (i) convertible promissory notes in the aggregate principal
amount of $115,000 (the “Fiscal 2016 Notes I”) and (ii) five-year warrants to purchase an aggregate of 2,300,000 (twenty
warrants for each dollar of the principal amount) shares Company’s common stock at an exercise price of $0.07 (the “Fiscal
2016 Warrants I”). The Company received proceeds equal to the principal amount. The Fiscal 2016 Notes I bear an interest
rate of 10% per year and were due and payable on the third anniversary of the date of issuance through May and June 2018. The
purchasers are entitled, at their option, at any time after the issuance of the Fiscal 2016 Notes I, to convert all or any lesser
portion of the outstanding principal amount and accrued and unpaid interest into the Company’s common stock at a conversion
price of $0.05. The conversion price of the Fiscal 2016 Notes I shall be subject to adjustment for issuances of common stock at
a purchase price of less than the then-effective conversion price. During the fiscal year 2016, the conversion price was ratcheted
down to $0.01. As of March 31, 2016, the Fiscal 2016 Notes I had outstanding principal and accrued interest of $115,000 and $10,074,
respectively. As of December 31, 2016, the Fiscal 2016 Notes I had outstanding principal and accrued interest of $115,000 and
$18,858, respectively. Currently, such convertible notes are in default due to non-payment at maturity date.

 

During
August through September 2015, the Company entered into a subscription agreement with various purchasers (the “Fiscal 2016
Agreements II”) for the sale of the Company’s convertible notes and warrants. Pursuant to the Fiscal 2016 Agreements
II, the Company issued to the purchasers for an aggregate subscription amount of $96,250: (i) convertible promissory notes in
the aggregate principal amount of $96,250 (the “Fiscal 2016 Notes II”) and (ii) five-year warrants to purchase an
aggregate of 1,925,000 (twenty warrants for each dollar of the principal amount) shares Company’s common stock at an exercise
price of $0.07 (the “Fiscal 2016 Warrants II”). The Company received proceeds equal to the principal amount. The Fiscal
2016 Notes II bear an interest rate of 10% per year and were due and payable on the third anniversary of the date of issuance
through August through September 2018. The purchasers are entitled, at their option, at any time after the issuance of the Fiscal
2016 Notes II, to convert all or any lesser portion of the outstanding principal amount and accrued and unpaid interest into the
Company’s common stock at a conversion price of $0.05. The conversion price of the Fiscal 2016 Notes II shall be subject
to adjustment for issuances of common stock at a purchase price of less than the then-effective conversion price. During the fiscal
year 2016, the conversion price was ratcheted down to $0.01. As of March 31, 2016, the Fiscal 2016 Notes II had outstanding principal
and accrued interest of $96,250 and $5,203, respectively. As of December 31, 2016, the Fiscal 2016 Notes II had outstanding principal
and accrued interest of $96,250 and $12,555, respectively. Currently, such convertible notes are in default due to non-payment
at maturity date.

 

ITEM
4. MINE SAFETY DISCLOSURES

 

Not
applicable.

 

ITEM
5. OTHER INFORMATION

 

Not
applicable.

 

ITEM
6. EXHIBITS

 

 

 

 

SIGNATURES

 

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  LegacyXchange,
Inc.
Date:
December 16, 2020
   
  By: /s/
William Bollander
    William Bollander
    Chief Executive
Officer, Chief Financial Officer and President (Principal Executive, Financial and Accounting Officer)

 

Exhibit
31.1

 

CERTIFICATION
PURSUANT TO

SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002

 

I,
William Bollander, certify that:

 

1. I have reviewed
this quarterly report on Form 10-Q for the fiscal quarter ended December 31, 2016 of LegacyXchange, Inc. (the “registrant”);
   
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
   
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this
report;
   
4. I am responsible
for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant
and have:

 

  a. Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles;
     
  c. Evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this
report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and

 

5. I have disclosed,
based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the
audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant
deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
     
  b. Any fraud, whether
or not material, that involves management or other employees who have a significant role in the registrant’s internal
control over financial reporting.

 

 

LegacyXchange, Inc.

     
Date: December
16, 2020
By: /s/
William Bollander
    William Bollander
    Chief Executive Officer,
Chief Financial Officer and President (Principal Executive, Financial and Accounting Officer)

Exhibit 32.1

 

CERTIFICATION PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT
OF 2002

 

In connection with the Quarterly Report
of LegacyXchange, Inc. (the “Company”) on Form 10-Q for the period ended December 31, 2016, as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, William Bollander, Chief Executive Officer, Chief Financial
Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of my knowledge:

 

1. The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange
Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.

 

  LegacyXchange, Inc.
Date: December 16, 2020    
  By: /s/ William Bollander
    William Bollander
    Chief Executive Officer, Chief Financial Officer and President (Principal Executive, Financial and Accounting Officer)

 

A signed original of this written statement
required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed
form within the electronic version of this written statement has been provided to the Company and will be retained by the Company
and furnished to the Securities and Exchange Commission or its staff upon request.