Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10Q
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(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period end September 30, 2013
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from __________ to ___________
Commission file number: 000-50294
LEGACY TECHNOLOGY HOLDINGS, INC.
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(Exact name of registrant as specified in its charter)
Colorado 84-1426725
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(State of Incorporation) (IRS Employer ID Number)
7609 Ralston Road, Arvada, Colorado 80002
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(Address of principal executive offices)
303-422-8127
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(Registrant's Telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to the filing requirements for
the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 for Regulation S-T (ss.232.405
of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes [ ] No []
Indicate by check mark whether the registrant is a large accelerated file, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ]
Smaller reporting company [X] (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of share outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of March 13, 2013, there were 5,731,732 shares of the registrant's common
stock issued and outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
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Balance Sheets -September 30, 2013 and
December 31, 2012 (Audited) 1
Statements of Operations -
Three and Nine months ended September 30, 2013 and 2012 and
From May 8, 2008 (Inception) to September 30, 2013 2
Statements of Changes in Shareholders' Deficit -
From May 8, 2008 (Inception) to September 30, 2013 3
Statements of Cash Flows -
Nine months ended September 30, 2013 and 2012 and
From May 8, 2008 (Inception) to September 30, 2013 4 - 5
Notes to the Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- Not Applicable 18
Item 4. Controls and Procedures 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings -Not Applicable 19
Item 1A. Risk Factors - Not Applicable 19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 20
-Not Applicable
Item 3. Defaults Upon Senior Securities - Not Applicable 20
Item 4. Mine and Safety Disclosures 20
Item 5. Other Information - Not Applicable 20
Item 6. Exhibits 21
SIGNATURES 22
PART I
ITEM 1. FINANCIAL STATEMENTS
LEGACY TECHNOLOGY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2013 2012
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Assets
Current Assets
Cash $ 1,883 $ 70
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Total Assets All Current Assets $ 1,883 $ 70
================= =================
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ 329,203 $ 325,229
Accrued expenses 894,997 802,269
Advances payable 50,004 68,956
Notes payable 31,632 31,632
Convertible notes payable 699,000 630,000
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Total Current Liabilities 2,004,836 1,858,086
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Convertible notes payable, long term 14,075 -
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Total Liabilities 2,018,911 1,858,086
Stockholders' Deficit
Common stock, $0.0001 par value; 100,000,000 shares 2,826 373
authorized; 28,258,860 shares issued and 5,731,772 shares issued
issued and outstanding at September 30, 2013 and
3,731,772 shares issued and outstanding at December 31, 2012
Additional paid-in capital 3,082,583 (1,163,027)
Common shares in Escrow (3,379,063) -
Deficit accumulated during the development stage (1,723,374) (695,362)
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Total Stockholders' Deficit (2,017,028) (1,858,016)
----------------- -----------------
Total Liabilities and Stockholders' Deficit $ 1,883 $ 70
================= =================
See the accompanying notes to these consolidated financial statements.
1
LEGACY TECHNOLOGY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Nine Months Ended May 8, 2008
September 30, September 30, (Inception) to
2013 2012 2013 2012 September 30, 2013
--------------------------- --------------------------- ------------------
Revenue:
Sales $ - $ - $ - $ - $ -
--------------------------- --------------------------- ------------------
Operational expenses:
General and administrative 842,514 14,675 868,209 50,259 1,131,146
--------------------------- --------------------------- ------------------
Total operational expenses 842,514 14,675 868,209 50,259 1,131,146
--------------------------- --------------------------- ------------------
Loss from operations (842,514) (14,675) (868,209) (50,259) (1,131,146)
--------------------------- --------------------------- ------------------
Other income (expense):
Gain on debt relief - - - - 68,005
Finance cost of convertible notes (14,075) - (73,075) - (73,075)
Interest expense (29,437) (28,316) (86,728) (84,140) (587,158)
--------------------------- --------------------------- ------------------
Total other expense (43,512) (28,316) (159,803) (84,140) (592,228)
--------------------------- --------------------------- ------------------
Net Loss $ (886,026) $ (42,991) $(1,028,012) $ (134,399) $ (1,723,374)
=========================== =========================== ==================
Per share information
Net (loss) per common share
Basic $ (0.04) $ (0.01) $ (0.09) $ (0.03)
Fully diluted (0.04) (0.01) (0.09) (0.03)
--------------------------- ---------------------------
Weighted average number of common
stock outstanding 4,956,070 3,731,772 4,144,356 3,731,772
=========================== ===========================
See the accompanying notes to these consolidated financial statements.
2
LEGACY TECHNOLOGY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Unaudited)
Additional
Common Stock paid-in
Number of shares Amount Capital
------------------------------------ -----------------
Balances at December 31, 2006* - $ - $ -
Net income (loss) for the year - - -
------------------- ------------- -----------------
Balances at December 31, 2007* - - -
Issuance of Founders common stock - cash 4,800,000 480 5,120
Issuance of Founders common stock - services 4,200,000 420 3,780
Stock issued for Net Liabilities - reverse merger 1,007,003 101 (1,197,555)
Capital contribution - related party - - 25,000
Net income (loss) for the year - - -
------------------- ------------- -----------------
Balance as of December 31, 2008* 10,007,003 1,001 (1,163,655)
------------------- ----------------------------------
Cancellation of shares (6,275,231) (628) 628
Net income (loss) for the year - - -
------------------- ------------- -----------------
Balance as of December 31, 2009 3,731,772 373 (1,163,027)
------------------- ------------- -----------------
Net income (loss) for the year - - -
------------------- ------------- -----------------
Balance as of December 31, 2010 3,731,772 373 (1,163,027)
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Net income (loss) for the year - - -
------------------- ------------- -----------------
Balance as of December 31, 2011 3,731,772 373 (1,163,027)
------------------- ------------- -----------------
Net income (loss) for the year - - -
------------------- ------------- -----------------
Balance as of December 31, 2012 3,731,772 373 (1,163,027)
------------------- ------------- -----------------
Issuance of shares for services 2,000,000 200 799,800
Issuance of common shares for acquisition in escrow 22,527,088 2,253 3,376,810
Convertible Promissory Note Discount - - 69,000
Net income (loss) for the period - - -
------------------- ------------- -----------------
Balance as of September 30, 2013 28,258,860 $ 2,826 $ 3,082,583
=================== ============= =================
* As restated for reverse merger on July 18, 2008
See the accompanying notes to these consolidated financial statements.
3
(continued)
LEGACY TECHNOLOGY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(Unaudited)
Deficit accum
Common Shares During
in Development
Escrow Stage Totals
----------------- ---------------- ----------------
Balances at December 31, 2006* $ - $ - $ -
Net income (loss) for the year - - -
----------------- ---------------- ----------------
Balances at December 31, 2007* - - -
Issuance of Founders common stock - cash - - 5,600
Issuance of Founders common stock - services - - 4,200
Stock issued for Net Liabilities - reverse merger - - (1,197,454)
Capital contribution - related party - - 25,000
Net income (loss) for the year - (98,782) (98,782)
----------------- ---------------- ----------------
Balance as of December 31, 2008* - (98,782) (1,261,436)
----------------- ---------------- ----------------
Cancellation of shares - - -
Net income (loss) for the year - (155,673) (155,673)
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Balance as of December 31, 2009 - (254,455) (1,417,109)
----------------- ---------------- ----------------
-
Net income (loss) for the year - (125,970) (125,970)
----------------- ---------------- ----------------
Balance as of December 31, 2010 - (380,425) (1,543,079)
----------------- ---------------- ----------------
Net income (loss) for the year - (137,719) (137,719)
----------------- ---------------- ----------------
Balance as of December 31, 2011 - (518,144) (1,680,798)
----------------- ---------------- ----------------
Net income (loss) for the year - (177,218) (177,218)
----------------- ---------------- ----------------
Balance as of December 31, 2012 - (695,362) (1,858,016)
----------------- ---------------- ----------------
Issuance of shares for services - - 800,000
Issuance of common shares for acquisition in escrow (3,379,063) - -
Convertible Promissory Note Discount - - 69,000
Net income (loss) for the period - (1,028,012) (1,028,012)
----------------- ---------------- ----------------
Balance as of September 30, 2013 $(3,379,063) $ (1,723,374) $ (2,017,028)
================= ================ ================
* As restated for reverse merger on July 18, 2008
See the accompanying notes to these consolidated financial statements.
4
LEGACY TECHNOLOGY HOLDINGS, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
May 8, 2008
For the Nine Months Ended (Inception) to
September 30, September 30,
2013 2012 2013
--------------- --------------- ---------------
Cash Flows from Operating Activities:
Net Loss $ (1,028,012) $ (134,399) $ (1,723,374)
Adjustment to net loss for non-cash items:
Finance cost of convertible promissory notes 73,075 - 73,075
Stock issued for services 800,000 - 800,000
Gain on debt relief - - (68,005)
Compensatory Stock issuance - - 4,200
Adjustments to reconcile net loss to net cash used
in operating activities from
continuing operations:
Changes in operating assets and liabilities:
Increase in Accounts Payable and Accrued Liabilities 91,505 128,619 746,687
--------------- --------------- ---------------
Net Cash Provided (Used) by Operating Activities (63,432) (5,780) (167,417)
--------------- --------------- ---------------
Cash Flows from Investing Activities:
Net Cash Provided by Investing Activities - - -
--------------- --------------- ---------------
Cash Flows from Financing Activities:
Capital contribution for related parties - - 25,000
Sale of common stock - - 5,600
Funds from convertible promissory notes 54,000 54,000
Proceeds from advance payables 11,175 5,850 80,131
--------------- --------------- ---------------
Net Cash Provided (used) by Financing Activities 65,175 5,850 164,731
--------------- --------------- ---------------
Net Increase in Cash 1,743 70 (2,686)
Cash and Cash Equivalents - Beginning of Period 70 - 4,499
--------------- --------------- ---------------
Cash and Cash Equivalents - End of Period $ 1,813 $ - $ 1,813
=============== =============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest expense $ - - -
=============== =============== ===============
Cash paid for income taxes $ - - -
=============== =============== ===============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Common shares issued for services $ 800,000 - -
=============== =============== ===============
Common shares issued in reverse merger $ - $ - $ (1,197,454)
=============== =============== ===============
See the accompanying notes to these consolidated financial statements.
5
LEGACY TECHNOLOGY HOLDINGS, INC. AND SUBSIDIARY
(A Development Stage Enterprises)
Notes to the Consolidated Financial Statements
For the Nine Months Ended September 30, 2013
(Unaudited)
NOTE 1. Business, Basis of Presentation and Significant Accounting Policies:
Business:
Legacy Technology Holdings, Inc. (the "Company" and/or "Legacy") was
incorporated in Colorado in January, 1997. The Company was originally named Life
USA, Inc. On May 20, 2008, the Company changed its name to Legacy Technology
Holdings, Inc. by filing an amendment to its Article of Incorporation. The
Company was organized to engage in any activity or business not in conflict with
the laws of the State of Colorado or of the United States of America. As a
result of the name change, the Company's trading symbol on the Over-the-Counter
Bulletin Board was changed to "LTHO".
Neuro Nutrition, the Company's wholly owned subsidiary, was incorporated on July
23, 2004 in the State of Colorado, and has no operational activities.
World Peace, the Company's wholly owned subsidiary was incorporated in the State
of Colorado on May 8, 2008 and has had no operational activities during the nine
months ended September 30, 2013 nor during the year ended December 31, 2012.
Reorganization and Share Exchange:
On April 4, 2013, the Company entered into a Plan and Agreement of
Reorganization and Share Exchange Agreement ("the Agreement") with Genomic
Integrated Wellness Systems, Inc. ("GIWS") and GIWS's sole shareholder, Charles
Youngren. On November 21, 2013, the Agreement was amended to include GIWS's
additional shareholder.
The amended Agreement provides for the Company to issue 22,527,088 shares of its
restricted common stock to be exchanged for 100% of the issued and outstanding
equity of GIWS, making the Company the sole shareholder of GIWS. As a result of
the issuance, the majority shareholder of GIWS, Charles Youngren, will hold
74.76% of the issued and outstanding common stock of the Company,
post-acquisition.
Closing of the acquisition is contingent upon the delivery of audited financial
statements by GIWS. At the time of this filing, the transaction has not been
closed. On September 28, 2013, the Company did issue the 22,527,088 shares of
common stock in connection with the merger. The Company holds these shares in
escrow until the closing of the acquisition and therefor does not count them in
their issued and outstanding shares of common stock at September 30, 2013.
The Company received audit financial statements on March 31, 2013 and has closed
the transaction at that time.
6
Basis of Presentation:
Development Stage Enterprise
The Company has not earned any significant revenues from its limited operations.
Accordingly, the Company's activities have been accounted for as those of a
"Development Stage Enterprise" Among the disclosures required by are that the
Company's financial statements be identified as those of a development stage
company, and that the statements of operation, stockholders' equity (deficit)
and cash flows disclose activity since the date of the Company's inception.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Legacy and its wholly-owned subsidiaries, Neuro Nutrition, Inc. and Legacy
Technology Holdings (formerly World Peace Technologies, Inc.) All significant
inter-company balances and transactions have been eliminated in consolidation.
Significant Accounting Policies:
Cash and Cash Equivalents
The Company maintains the majority of its cash accounts at a commercial bank.
The total cash balance is insured by the Federal Deposit Insurance Corporation
("FDIC") up to $250,000 per commercial bank. As of September 30, 2013 and
December 31, 2012, the Company had zero amounts in excess of the FDIC insured
limits. For purposes of the statement of cash flows, the Company considers all
cash and highly liquid investments with initial maturities of three months or
less to be cash equivalents.
Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affects the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Such estimates may be materially different from actual financial
results. Significant estimates include the recoverability of long-lived assets
and the collectability of accounts receivable.
Revenue Recognition
Revenue Recognition is recognized when earned. Sales revenue is recognized at
the date of shipment to customers when a formal arrangement exists, the price is
fixed or determinable, the delivery is completed, no other significant
obligations of the Company exist and collectability is reasonably assured.
Payments received before all of the relevant criteria for revenue recognition
are satisfied are recorded as unearned revenue.
7
Net Loss per Share
Basic net loss per common share is calculated by dividing the net loss
applicable to common shares by the weighted average number of common and common
equivalent shares outstanding during the period. For the nine and three months
ended September 30, 2013 and 2012, there were no potential common equivalent
shares used in the calculation of weighted average common shares outstanding as
the effect would be anti-dilutive because of the net loss.
Stock-Based Compensation
The Company adopted the provisions of and accounts for stock-based compensation
using an estimate of value in accordance with the fair value method. Under the
fair value recognition provisions of this statement, stock-based compensation
cost is measured at the grant date based on the fair value of the award and is
recognized as expense on a straight-line basis over the requisite service
period, which generally is the vesting period. The Company elected the
modified-prospective method, under which prior periods are not revised for
comparative purposes. The valuation method applies to new grants and to grants
that were outstanding as of the effective date and are subsequently modified.
Fair Value of Financial Instruments
The carrying amount of accounts payable, accrued expenses, convertible
promissory notes are considered to be representative of their respective fair
values because of the short-term nature of these financial instruments.
Other Comprehensive Income
The Company has no material components of other comprehensive income (loss) and
accordingly, net loss is equal to comprehensive loss in all periods.
Income Taxes
Provision for income taxes represents actual or estimated amounts payable on tax
return filings each year. Deferred tax assets and liabilities are recorded for
the estimated future tax effects of temporary differences between the tax basis
of assets and liabilities and amounts reported in the accompanying balance
sheets, and for operating loss and tax credit carry forwards. The change in
deferred tax assets and liabilities for the period measures the deferred tax
provision or benefit for the period. Effects of changes in enacted tax laws on
deferred tax assets and liabilities are reflected as adjustment to the tax
provision or benefit in the period of enactment.
Recent Accounting Pronouncements
There were various other accounting standards and interpretations issued during
the nine months ended September 30, 2013, none of which are expected to have a
material impact on the Company's financial position, operations or cash flows.
8
NOTE 2. Going Concern:
The Company's financial statements for the nine months ended September 30, 2013
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. The Company reported a net loss of $1,028,012 for the nine months
ended September 30, 2013, and an accumulated deficit of $1,723,374 as of
September 30, 2013. At September 30, 2013, the Company had a working capital
deficit of $2,002,953.
The future success of the Company is likely dependent on its ability to attain
additional capital, or to find an acquisition to add value to its present
shareholders and ultimately, upon its ability to attain future profitable
operations. There can be no assurance that the Company will be successful in
obtaining such financing, or that it will attain positive cash flow from
operations. Management believes that actions presently being taken to revise the
Company's operating and financial requirements provide the opportunity for the
Company to continue as a going concern.
NOTE 3. Notes Payable:
The Company's outstanding non-convertible notes payable on September
30, 2013 and December 31, 2012, consisted of:
$ 15,080 Note Payable issued to an investor. Due upon demand.
Interest rate is 8%
10,353 Note payable, issued to vendor. Due upon demand
6,199 Other notes payable
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$ 31,632 Total notes payable outstanding on September 30, 2013
and December 31, 2012.
=====
NOTE 4. Convertible Notes Payable:
Convertible notes payable as of September 30, 2013 and December 31, 2012
consisted of the following:
$ 50,000 Note payable 1, convertible into 151,515 shares with
conversion feature expiring in May 2008,
due September 30, 2006, incurring interest at 25%,
attached to the note are 151,515 warrants exercisable
at $0.625 per share, which expired in 2008. The note
is secured by a subordinated pledge of inventory and
accounts receivable.
$ 25,000 Note payable 2, convertible into 50,000 shares of Neuro
Nutrition, Inc. with conversion feature expiring at
end 2007, due September 7, 2006, incurring interest
at 10%.
$ 50,000 Note payable 1, convertible into 151,515 shares with
conversion feature expiring in May 2008,
due September 30, 2006, incurring interest at 25%,
attached to the note are 151,515 warrants exercisable
at $0.625 per share, which expired in 2008. The note
is secured by a subordinated pledge of inventory and
accounts receivable.
9
$ 75,000 Note payable 4, convertible into 227,273 shares with
conversion feature expiring in May 2008,
due September 30, 2006, incurring interest at 25%,
attached to the note are 227,273 warrants exercisable
at $0.625 per share, which expired in 2008. The note
is secured by a subordinated pledge of inventory and
accounts receivable.
$ 20,000 Note payable 5, convertible into 40,000 shares of Neuro
Nutrition, Inc. anytime at Holder's option, due
February 28, 2007, incurring interest at 20%,attached
to the note are 40,000 warrants for Neuro
Nutrition, Inc. common stock exercisable at
$0.65 per share.
$ 50,000 Note payable 6, convertible into 100,000 shares of
Neuro Nutrition, Inc. anytime at Holder's option, due
February 28, 2007, incurring interest at 20%, attached
to the note are 100,000 warrants for Neuro Nutrition,
Inc. common stock exercisable at $0.65 per share.
$ 75,000 Note payable 7, convertible into 150,000 shares of
Neuro Nutrition, Inc. with conversion feature
expiring in May 2008, due May 27, 2006, incurring
interest at 10%, attached to the note are 150,000
warrants for Neuro Nutrition, Inc. exercisable at $0.625
per share, which expired in 2008.
$ 50,000 Note payable 8, convertible into 100,000 shares with
conversion feature expiring in November 2008, due
November 11, 2006, incurring interest at 10%, attached to
the note are 200,000 warrants exercisable at $0.625 per
share, which expired in 2008.
$ 50,000 Note payable 8, convertible into 100,000 shares with
conversion feature expiring in November 2008, due
November 11, 2006, incurring interest at 10%, attached to
the note are 200,000 warrants exercisable at $0.625 per
share, which expired in 2008.
$ 5,000 Note payable 10, convertible into 10,000 shares with
conversion feature expiring in November 2008, due
November 11, 2006, incurring interest at 10%, attached to
the note are 20,000 warrants exercisable at $0.625 per
share, which expired in 2008.
$ 50,000 Note payable 11, convertible into 100,000 shares anytime
at Holder's option, due December 7, 2006, incurring
interest at 10%, attached to the note are 200,000
warrants exercisable at $0.625 per share, which
expired in 2008.
10
$ 25,000 Note payable 12, convertible into 50,000 shares anytime
at Holder's option, due February 20, 2007, incurring
interest at 10%, attached to the note are 100,000
warrants exercisable at $0.75 per share, which
expired in 2008.
$ 5,000 Note payable 13, convertible into 10,000 shares anytime
at Holder's option, due February 28, 2007, incurring
interest at 10%, attached to the note are 20,000
warrants exercisable at $0.75 per share, which
expired in 2008.
$ 50,000 Note payable 14, convertible into 125,000 shares
anytime at Holder's option, due September 12, 2006,
incurring interest at 25%, attached to the note are
250,000 warrants exercisable at $0.75 per share,
which expired in 2008. This note is secured by
inventory and accounts receivable.
$ 50,000 Note payable 15, convertible into 125,000 shares anytime
at Holder's option, due September 12, 2006,
incurring interest at 25%, attached to the
note are 250,000 warrants exercisable at
$0.75 per share, which expired in 2008. This
note is secured by inventory and accounts receivable.
--------
$630,000 Total Convertible notes payable. All these notes, with
======== the exception of notes 1, 3, 4, 14 and 15 are unsecured.
As of September 30, 2013, all of the convertible notes described above are in
default.
In March 2013, the Company issued an unsecured convertible promissory note in
exchange for cash of $44,000. In addition, the Company issued an unsecured
convertible promissory note in exchange for already outstanding advances of
$25,000. The convertible promissory notes have a term of 1 year, an interest
rate of 8% per annum and provides for the conversion of the note into shares of
the Company's common stock at $0.07 per share. The Company has recognized a
finance cost of $69,000 in connection with the convertible promissory notes.
NOTE 5. Convertible Note Payable, Long Term
In September 30, 2013, the Company issued an unsecured convertible promissory
note in exchange for cash of $10,000. The convertible promissory note has a term
of 3 years, an interest rate of 8% per annum and provides for the conversion of
the note into shares of the Company's common stock at $0.40 per share. The
Company has recognized a finance cost of $14,075 in connection with the
convertible promissory notes.
NOTE 6. Stockholders' Equity (Deficit):
Common Stock:
In September 2013, the Company issued a total of 2,000,000 shares of its
restricted common stock to existing shareholders and its sole officer and
director for services. The shares were valued at a price of $0.40, the then
market per share for an expense of $800,000.
11
On April 4, 2013, the Company entered into a Plan and Agreement of
Reorganization and Share Exchange Agreement ("the Agreement") with Genomic
Integrated Wellness Systems, Inc. ("GIWS") and GIWS's sole shareholder, Charles
Youngren. On November 21, 2013, the Agreement was amended to provide to include
GIWS's additional shareholder.
The Amended Agreement provides for the Company to issue 22,527,088 shares of its
restricted common stock to be exchanged for 100% of the issued and outstanding
equity of GIWS, making the Company the sole shareholder of GIWS. Closing of the
acquisition is contingent upon the delivery of audited financial statements by
GIWS.
On September 28, 2013, the Company did issue the 22,527,088 shares of common
stock in connection with the anticipated closing of the merger. The Company
holds these shares in escrow until the closing of the acquisition and therefor
does not count them in their issued and outstanding shares of common stock at
September 30, 2013. The shares at this time have booked at a price of $0.15 per
share based upon the closing market price of April 30, 2013, the date of the
Agreement.
The Company received audit financial statements on March 31, 2014 and has closed
the transaction at that time.
Stock Options and Warrants:
At September 30, 2013, the Company had stock option and warrant activity as
described below.
Non-employee stock options
The Company accounts for non-employee stock options under ASC 718, whereby
option costs are recorded based on the fair value of the consideration received
or the fair value of the equity instruments issued, whichever is more reliably
measurable. Unless otherwise provided for, the Company covers option exercises
by issuing new shares.
The Company's subsidiary Neuro Nutrition, Inc. at the beginning of 2010 had
140,000 common stock purchase warrants outstanding. The warrants are to be
effectively granted for exercise upon conversion by the warrant holder of an
accompanying note payable into common stock, which said note the holder can
convert anytime at his option. The warrant holder has two years after effective
grant date to exercise the warrants, at a price of $.625 per share. No Neuro
Nutrition, Inc. warrants were exercised or expired during the three months
ended, leaving a balance of 140,000 warrants at September 30, 2013.
Employee stock options
The Company accounts for employee stock options under ASC 718. Unless otherwise
provided for, the Company covers option exercises by issuing new shares. There
were no employee stock options issued or outstanding at September 30, 2013.
NOTE 7. Taxes:
The Company is subject to foreign and domestic income taxes. The Company has had
no income, and therefore has paid no income tax.
12
Deferred income taxes arise from temporary timing differences in the recognition
of income and expenses for financial reporting and tax purposes. The Company's
deferred tax assets consist entirely of the benefit from net operating loss
(NOL) carry-forwards. The NOL carry forwards expire in various years through
2030. The Company's deferred tax assets are offset by a valuation allowance due
to the uncertainty of the realization of the NOL carry-forwards. NOL
carry-forwards may be further limited by a change in company ownership and other
provisions of the tax laws.
The Company's deferred tax assets, valuation allowance, and change in valuation
allowance are as follows:
Estimated NOL
Carry-forward Valuation Net Tax
Period Ending benefit Allowance Benefit
September 30, 2013 $347,421 $(347,421) -
December 31, 2012 $139,072 $(139,072) -
NOTE 8 - Legal Proceedings:
In May 2008 a complaint was filed in the District Court for the County of
Boulder, Colorado by product suppliers of the Company (the "Plaintiffs") seeking
collection of trade accounts due in the approximate amount of $127,000 plus
collection costs. Research of the account by Plaintiff's counsel effectively
reduced this amount to approximately $64,000, which is included in the Company's
balance sheet liabilities. The case is ongoing at the present time.
NOTE 9 - Subsequent Events:
Reorganization and Share Exchange:
On April 4, 2013, the Company entered into a Plan and Agreement of
Reorganization and Share Exchange Agreement ("the Agreement") with Genomic
Integrated Wellness Systems, Inc. ("GIWS") and GIWS's sole shareholder, Charles
Youngren. On November 21, 2013, the Agreement was amended to include GIWS's
additional shareholder.
The amended Agreement provides for the Company to issue 22,527,088 shares of its
restricted common stock to be exchanged for 100% of the issued and outstanding
equity of GIWS, making the Company the sole shareholder of GIWS. As a result of
the issuance, the majority shareholder of GIWS, Charles Youngren, will hold
74.76% of the issued and outstanding common stock of the Company,
post-acquisition.
Closing of the acquisition is contingent upon the delivery of audited financial
statements by GIWS.
On September 28, 2013, the Company did issue the 22,527,088 shares of common
stock in connection with the anticipated closing of the merger. The Company
holds these shares in escrow until the closing of the acquisition and therefor
does not count them in their issued and outstanding shares of common stock at
September 30, 2013. The shares at this time have booked at a price of $0.15 per
share based upon the closing market price of April 30, 2013, the date of the
Agreement.
13
The Company received audit financial statements on March 31, 2013 and has closed
the transaction at that time.
The Company has evaluated it activities subsequent to September 30, 2013 and
through the issuance of the financial statements and found no other reportable
subsequent events.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with our unaudited
financial statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward-looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward-looking statements.
The independent registered public accounting firm's report on the Company's
financial statements as of December 31, 2012, and for each of the years in the
two-year period then ended, includes a "going concern" explanatory paragraph,
that describes substantial doubt about the Company's ability to continue as a
going concern.
PLAN OF OPERATIONS
------------------
We had we had no revenues during the nine months ended September 30, 2013. We
have minimal capital, minimal cash, and only our intangible assets consisting of
our business plan, relationships and contacts. We are illiquid and need cash
infusions from investors or shareholders to provide capital, or loans from any
sources.
The Company has focused its efforts, since July of 2009, has focused its efforts
on the completion of its past due audits and the filing of its financial reports
with the Securities and Exchange Commission (SEC). As we have come closer to the
completion of such efforts, the Company has begun to focus its efforts on the
development of operations through an acquisition.
On April 4, 2013, the Company entered into a Plan and Agreement of
Reorganization and Share Exchange Agreement ("the Agreement") with Genomic
Integrated Wellness Systems, Inc. ("GIWS") and GIWS's sole shareholder, Charles
Youngren. On November 21, 2013, the Agreement was amended to include GIWS's
additional shareholder.
The amended Agreement provides for the Company to issue 22,527,088 shares of its
restricted common stock to be exchanged for 100% of the issued and outstanding
equity of GIWS, making the Company the sole shareholder of GIWS. As a result of
the issuance, the majority shareholder of GIWS, Charles Youngren, will hold
74.76% of the issued and outstanding common stock of the Company,
post-acquisition.
At the time of this filing, the transaction has not been closed.
On September 25, 2013, the Company did issue the 22,527,088 shares of common
stock in connection with the anticipated closing of the merger. The Company
holds these shares in escrow until the closing of the acquisition and therefor
does not count them in their issued and outstanding shares of common stock at
September 30, 2013. The shares at this time have booked at a price of $0.15 per
share based upon the closing market price of April 30, 2013, the date of the
Agreement.
15
The Company received audit financial statements on March 31, 2013 and has closed
the transaction at that time.
In addition, at closing, the existing officers of the Company will resign and
new officers will be appointed by GIWS's sole shareholder. Mr. Youngren will be
appointed the Chief Operating Officer and a director of the Company. In
addition, as, the sole shareholder of GIWS, Mr. Youngren will have the ability
to appoint two new directors to the Company's Board of Directors.
GIWS was incorporated on November 15, 2012 in the state of Colorado, but has
operations in Hawaii. GIWS was formed in order to develop and commercialize a
web-based genomic preventative medicine solution using sophisticated and
proprietary algorithms to analyze data, on individual patient lifestyle factors
such as biometrics, diet, pharmaceuticals, endocrine and blood tests, and
genetic markers. The aggregation of this Patient data in a Data Warehouse will
facilitate analysis via a variety of Machine Learning Algorithms. Discovery of
Genetic Marker patterns, endocrine and blood analysis detected trends, and
associations with individual Patient factors can facilitate customized
Individual Patient Preventative Medicine solutions by health professionals to
mitigate the expression of undesirable Genetic characteristics and to enhance
the expression of desirable Genetic characteristics.
We will need substantial additional capital to support our proposed business
acquisition. We have no revenues. We have no committed source for any funds as
of date here. No representation is made that any funds will be available when
needed. In the event funds cannot be raised when needed, we may not be able to
carry out our business plan, may never achieve sales or royalty income, and
could fail in business as a result of these uncertainties.
RESULTS OF OPERATIONS
---------------------
For the Three Months Ended September 30, 2013 Compared to the Three Months Ended
September 30, 2012
During the three months ended September 30, 2013 and 2012, we did not recognize
any revenues from our operations. We do not expect to recognize revenues in the
near future, as we work to complete our proposed acquisition with GIWS,
discussed above.
During the three months ended September 30, 2013, we incurred general and
administrative expenses of $842,514 compared to $14,675 during the nine months
ended September 30, 2012. The increase of $827,839 was a result of an increase
of $815,250 in consulting expenses combined with a $12,619 in legal expenses.
These increases were a result of increased administrative activity in connection
with the GIWS acquisition, including a $8000,000 non-cash expense for a total of
2,000,000 shares of common stock issued to shareholders and the Company's sole
officer and director in connection with their acquisition efforts.
During the three months ended September 30, 2013, we incurred a net loss of
$886,026, compared to $42,991 during the three months ended September 30, 2012.
The increase of $843,035 is a result of the $815,250 increase in general and
administrative expenses, combined with the $14,075 increase in finance costs and
the $1,121 increase in interest expenses resulting from the $79,000 increase in
convertible promissory notes during the nine months ended September 30, 2013.
16
For the Nine Months Ended September 30, 2013 Compared to the Nine Months Ended
September 30, 2012
During the nine months ended September 30, 2013 and 2012, we did not recognize
any revenues from our operations. We do not expect to recognize revenues in the
near future, as we work to complete our proposed acquisition with GIWS,
discussed above.
During the nine months ended September 30, 2013, we incurred general and
administrative expenses of $868,209 compared to $50,259 during the nine months
ended September 30, 2012. The increase of $151,950 was a result of increase of
$163,250 in consulting expenses, offset by an $11,511 in professional fees. The
increase of $829,250 increase in consulting expenses was a result of activities
in connection with the GIWS acquisition, including a $8000,000 non-cash expense
for a total of 2,000,000 shares of common stock issued to shareholders and the
Company's sole officer and director in connection with their acquisition
efforts.
During the nine months ended September 30, 2013, we incurred a net loss of
$1,028,012, compared to $134,399 during the nine months ended September 30,
2012. The increase of $893,613 is a result of the $868,209 increase in general
and administrative expenses combined with a $75,663 increase in other income
(expense) resulting from the $73,075 finance cost recognized in connection with
$79,000 in convertible promissory notes issued by the Company during the nine
months ended September 30, 2013 and an increase of $2,588 in interest expense
resulting from the increase in convertible promissory notes.
LIQUIDITY
---------
We have nominal cash of $1,883 and no other liquid assets at September 30, 2013,
and we will be reliant upon shareholder loans or private placements of equity to
fund any kind of operations. We have secured no sources of loans or private
placements at this time. At September 30, 2013, we had total current liabilities
$2,004,836, consisting of $392,203 in accounts payable, $894,997 in accrued
expense, $50,004 in advances payable, $31,632 notes payable and $699,000 in
convertible notes payable.
During the nine months ended September 30, 2013, we used funds of $63,432 in our
operational activities. During the nine months ended September 30, 2013, we
recognized a net loss of $1,028,012, which was adjusted for the $73,075 finance
cost incurred in connection with the Company's issuance of $79,000 in
convertible promissory notes during the nine months ended September 30, 2013 and
a $800,000 non-cash expense related to the issuance of 2,000,000 shares of
common stock for services.
During the nine months ended September 30, 2012, we did used cash of $5,780 in
our operational activities. During the nine months ended September 30, 2012, we
recognized a net loss of $134,399 and did not have any non-cash adjustments to
net losses.
During the nine months ended September 30, 2013 and 2012, we did not use or
receive any funds from investment activities.
During the nine months ended September 30, 2013, we received funds of $65,175
from our financing activities. During the nine months ended September 30, 2012,
we received funds of $5,850 from our financing activities.
In March 2013, the Company issued an unsecured convertible promissory note in
exchange for cash of $44,000. In addition, the Company issued an unsecured
convertible promissory note in exchange for already outstanding advances of
$25,000. The convertible promissory notes have a term of 1 year, an interest
rate of 8% per annum and provides for the conversion of the note into shares of
the Company's common stock at $0.07 per share. The Company has recognized a
finance cost of $69,000 in connection with the convertible promissory notes.
17
In September 30, 2013, the Company issued an unsecured convertible promissory
note in exchange for cash of $10,000. The convertible promissory note has a term
of 3 years, an interest rate of 8% per annum and provides for the conversion of
the note into shares of the Company's common stock at $0.40 per share. The
Company has recognized a finance cost of $14,075 in connection with the
convertible promissory notes.
Short Term.
On a short-term basis, Legacy has not generated any revenue or revenues
sufficient to cover operations. For short term needs the Company will be
dependent on receipt, if any, of offering proceeds.
Capital Resources
The Company has only common stock as its capital resource.
Legacy has no material commitments for capital expenditures within the next
year, however if operations are commenced, substantial capital will be needed to
pay for participation, investigation, exploration, acquisition and working
capital.
Need for Additional Financing
Legacy does not have capital sufficient to meet its cash needs. The Company will
have to seek loans or equity placements to cover such cash needs. Once a
business acquisition is completed, the Company's needs for additional financing
is likely to increase substantially.
No commitments to provide additional funds have been made by the Company's
management or other stockholders. Accordingly, there can be no assurance that
any additional funds will be available to Legacy to allow it to cover the
Company's expenses as they may be incurred.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable
ITEM 4. CONTROLS AND PROCEDURES
The Company maintains a system of disclosure controls and procedures that are
designed for the purposes of ensuring that information required to be disclosed
in the Company's SEC reports is recorded, processed, summarized, and reported
within the time periods specified in the SEC rules and forms, and that such
information is accumulated and communicated to the Company's management,
including the Chief Executive Officer as appropriate to allow timely decisions
regarding required disclosure.
Management, after evaluating the effectiveness of the Company's disclosure
controls and procedures as defined in Exchange Act Rules 13a-14(c) as of
September 30, 2013 (the "Evaluation Date") concluded that as of the Evaluation
Date, the Company's disclosure controls and procedures were effective to ensure
that material information relating to the Company would be made known to them by
individuals within those entities, particularly during the period in which this
annual report was being prepared and that information required to be disclosed
in the Company's SEC reports is recorded, processed, summarized, and reported
within the time periods specified in the SEC's rules and forms.
18
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING.
Legacy's management is responsible for establishing and maintaining adequate
internal control over financial reporting for the company in accordance with as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's
internal control over financial reporting is designed 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. The Company's internal control over financial
reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of
the Company's assets;
(2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that the Company's
receipts and expenditures are being made only in accordance with
authorizations of Legacy's management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Company's assets
that could have a material effect on Legacy's financial statements.
Management's assessment of the effectiveness of the registrant's internal
control over financial reporting is as of September 30, 2013. The Company
believes that internal control over financial reporting is ineffective, due to a
lack of accounting staff. The Company does not have the financial ability to
hire additional accounting staff, at this time.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
This report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management's report
in this annual report.
There was no change in the Company's internal control over financial reporting
that occurred during the fiscal quarter ended September 30, 2012, that has
materially affected, or is reasonably likely to materially affect, its internal
control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
NONE.
ITEM 1A. RISK FACTORS
Not Applicable to Smaller Reporting Companies.
19
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the period of July 1, 2013 through September 30, 2013, the Company made
the following unregistered issuances of its equity securities.
DATE OF SALE TITLE OF SECURITIES NO. OF SHARES CONSIDERATION CLASS OF PURCHASER
------------------------------ ----------------------- ----------------- ------------------------- -----------------------
September 2013 Common Shares 100,000 Services Officer/Director
September 2013 Common Shares 566,666 Services Consultant
September 2013 Common Shares 541,666 Services Consultant
Exemption From Registration Claimed
All of the above sales by the Company of its unregistered securities were made
by the Company in reliance upon Section 4(2) of the Securities Act of 1933, as
amended (the "1933 Act"). All of the individuals and/or entities that purchased
the unregistered securities were primarily existing shareholders, known to the
Company and its management, through pre-existing business relationships, as long
standing business associates and existing shareholders. All purchasers were
provided access to all material information, which they requested, and all
information necessary to verify such information and were afforded access to
management of the Company in connection with their purchases. All purchasers of
the unregistered securities acquired such securities for investment and not with
a view toward distribution, acknowledging such intent to the Company. All
certificates or agreements representing such securities that were issued
contained restrictive legends, prohibiting further transfer of the certificates
or agreements representing such securities, without such securities either being
first registered or otherwise exempt from registration in any further resale or
disposition.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
NONE.
ITEM 4. MINE AND SAFETY DISCLOSURE
Not Applicable
ITEM 5. OTHER INFORMATION
NONE.
20
ITEM 6. EXHIBITS
Exhibits. The following is a complete list of exhibits filed as part of this
Form 10-Q. Exhibit numbers correspond to the numbers in the Exhibit Table of
Item 601 of Regulation S-K.
Exhibit 31.1 Certification of Chief Executive Officer and
Principal Accounting Officer pursuant to Section 302
of the Sarbanes-Oxley Act
Exhibit 32.1 Certification of Principal Executive and
Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act
21
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
LEGACY TECHNOLOGY HOLDINGS, INC.
(Registrant)
Dated: March __, 2014 By: /s/ Redgie Green
--------------------------------
Redgie Green (Principal Executive Officer,
President and Chief Executive Officer)
