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, 2015June 30, 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)

301 Yamato Road

Boca Raton, FL 33431

(AddressSecurities registered pursuant to Section 12(b) of principal executive offices)

(800) 630-4190

(Registrant’s telephone number, including area code)the Act:

True 2 Beauty, Inc.

(Former name, former address and former fiscal, if changed since last report)

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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     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 of Regulation S-T (§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 registrantRegistrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act.Act:

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. 51,230,056date: 62,570,659 shares of common stock are issued and outstanding as of February 22, 2016.December 15, 2020.

LEGACYXCHANGE, INC.

FORMForm 10-Q

December 31, 2015June 30, 2016

TABLE OF CONTENTS

PART 1I - FINANCIAL INFORMATION

ItemITEM 1. Financial Statements.FINANCIAL STATEMENTS

LEGACYXCHANGE, INC.

(FORMERLY TRUE 2 BEAUTY, INC.)

CONSOLIDATED BALANCE SHEETS

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

LEGACYXCHANGE, INC.

(FORMERLY TRUE 2 BEAUTY, INC.)

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

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

LEGACYXCHANGE, INC.

(FORMERLY TRUE 2 BEAUTY, INC.)

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS'STOCKHOLDERS’ DEFICIT

For the NineThree Months Ended December 31,June 30, 2016 and 2015

(UNAUDITED)

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

LEGACYXCHANGE, INC.

(FORMERLY TRUE 2 BEAUTY, INC.)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

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, 2015JUNE 30, 2016

NOTE 1 –ORGANIZATION AND NATURE OF OPERATIONS

LegacyXChange,LegacyXchange, Inc. (formerly, 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. to better reflect its new business focus.

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,LegacyXchange, Inc. (“LegacyXChange”LegacyXchange”) in December 2014. The Company continued to sell existing inventory of beauty products through May 2013 when the final inventory was sold. LegacyXChange plans to operateLegacyXchange 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 packedaction-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, Inc.LegacyXchange (formerly True2Bid, Inc.) to allow for the change in name of its parent company, True 2 Beauty, Inc., to LegacyXChange,LegacyXchange, Inc.

The Company plans on launchingis currently inactive due to lack of working capital to fund its website, LegacyXChange.com, for the trading of collectibles and memorabilia across numerous product categories. Following secure chain of custody protocols that guarantee authenticity from origination, and utilizing unique proprietary DNA “Marks” that cannot be counterfeited, the Company’s anticipated inventory of collectibles will be permanently marked with DNA, which can only be verified through DNA analysis. The Company’s goal is to provide the ongoing ability to guarantee authenticity of items with 100% surety. The Company will track ownership for all Original items, and only the Company can verify authenticity. The Company will work with athletes and celebrities as they create high valued new collectibles, items that will differentiate from those already in the marketplace. The site will also allow non-“Marked” third party collectible items to be listed and sold. However, any third party items, which claim to have authentic signatures, will have to provide documentation of authenticity from a Company-approved expert authentication company. The site will offer sellers multiple opportunities to advertise and promote the sale of items.operations.

NOTE 2 –BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICITESPOLICIES

PrinciplesBasis of consolidationPresentation and Principals of Consolidation

The Company’s unaudited consolidated financial statements for the three and nine months ended December 31, 2014June 30, 2015 include the financial statement of the Company and 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, 2015June 30, 2016 are no longer consolidated. All intercompany accounts and transactions have been eliminated in consolidation for the 2014 amounts.

Basis of presentationconsolidation.

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 consolidated financial position and the consolidated 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 or omitted from these 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 yearsyear ended March 31, 2015 and 20142016 of the Company which were included in the Company’s annual report on Form 10-K.10-K as filed with the Securities and Exchange Commission on December 4, 2020.

Going concernConcern

TheseThe unaudited consolidated financial statements have been prepared assuming that the Company will continue ason a going concern basis, which contemplates among other things, the realization of assets and the satisfactionsettlement of liabilities and commitments in the normal course of business.

As reflected in theour accompanying unaudited consolidated financial statements, the Company had a loss from operations of $457,440 and $425,765 for the nine months ended December 31, 2015 and 2014, respectively,net income and net cash used in operationsoperating activities of $240,610$342,073 and $332,409$15,364, respectively, for the ninethree months ended December 31, 2015 and 2014, respectively, and anJune 30, 2016. The net income was primarily attributed to the gain from the change in far value of derivative liabilities. The Company had accumulated deficit, a stockholders’ deficit and a working capital deficit of $9,473,270, $642,002$10,203,964, $958,818 and $481,674,$958,818, respectively, at December 31, 2015, did not generate any revenueJune 30, 2016. The Company had no revenues for the ninethree months ended December 31, 2015June 30, 2016, and had a gross loss for the nine months ended December 31, 2014. Thesewe defaulted on our loans. Management believes that these matters raise substantial doubt about the Company’s ability to continue as a going concern.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 ability ofCompany 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
JUNE 30, 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 as a going concernto do so. If the Company is dependent on the Company’s abilityunable to raise additional capital implement its business plan, and generate significant revenues. Theor 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 ifshould the Company isbe unable to continue as a going concern. The Company plans on raising capital through the sale of equity or debt instruments to implement its business plan. There is no assurance these plans will be realized.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015

NOTE 2 –BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICITES (continued)

Use of estimatesEstimates

The preparation of the unaudited consolidated financial statements in conformity with generally accepted accounting principles in the United States of AmericaU.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 three and nine months ended December 31, 2015 and 2014June 30, 2016 include assumptions used in the valuation of deferred tax assets, valuation of derivative liabilities and the valuation of stock-based compensation and fees.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 June 30, 2016. Accordingly, the estimates presented in these 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 fair value measurementsthe lowest priority to unobservable inputs (Level 3 measurement).

The Company adoptedthree levels of the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair valueare as follows:

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

CertainAssets 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 June 30, 2016 and March 31, 2016:

A roll forward of the level 3 valuation financial instruments suchis as certain accrued liabilities, embody obligations that require (or permit at the Company’s discretion) settlement by issuance of a variable number of the Company’s common shares that have a value equal to a fixed monetary amount. The number of shares required to be issued to settle that unconditional obligation is variable, because that number of common shares will be determined by the fair value of the Company’s common shares on the date of settlement or over a stated period of time, such as the average over the last 30 days before settlement, or the beginning of the quarter. Pursuant to ASC 480-10-25-14(a), the financial instruments are classified as a liability at the fixed monetary amount with a charge to expense to increase the obligation to the fixed monetary amount. Upon issuance of the shares to settle the obligation, equity is increased by the amount of the liability and no gain or loss is recognized for the difference between the settlement date or average market price and the ending market price.follows:

The following table reflects changes for the nine months ended December 31, 2015 for all financial assets and liabilities categorized as Level 3: 

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015JUNE 30, 2016

NOTE 2 –BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICITES (continued)

Fair value of financial instruments and fair value measurements (continued)

ASC 825-10 “Financial Instruments”“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

Cash and cash equivalents consistCash Equivalents

For purposes of the consolidated statements of cash and short-termflows, the Company considers all highly liquid investments purchasedinstruments with original maturitiesa maturity of three months or less.less at the purchase date and money market accounts to be cash equivalents. At June 30, 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 cash equivalents at December 31, 2015balances in excess of FDIC insured levels as of June 30, 2016 and March 31, 2015.2016. The Company has not experienced any losses in such accounts through June 30, 2016.

Inventories and cost of revenueInventory

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. AnyDuring the three months ended June 30, 2016, the Company determined that the inventory adjustments are based upon management’s review of inventories on hand compared to estimated future usage$570 was impaired and sales. Inventorieswas written off. As of finished goods totaled $570 and $0 at December 31, 2015June 30, 2016 and March 31, 2015, respectively. 2016, the Company’s inventory was not significant as the Company was inactive during the three months ended June 30, 2016.

Revenue recognitionDerivative Liabilities

The Company recognizeshas 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 consolidated 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 when persuasive evidencearising 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 arrangement exists, delivery has occurredentity 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 been rendered,a material impact on the purchase price is fixed or determinableprocess for, timing of, and collectability is reasonably assured. The Company’s specificpresentation and disclosure of revenue recognition policies are as follows:from customers. The Company did not have revenues from operations for the three months ended June 30, 2016.

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016

Stock-based compensationStock-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.

PursuantIn 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 three months ended June 30, 2016. The adoption of ASU 2014-12 did not have any material impact on the Company’s consolidated financial statements.

Through March 31, 2018, pursuant to ASC 505-50 for- Equity-Based Payments to Non-Employees, all share-based payments to consultants and other third parties,non-employees, including grants of stock options, were recognized in the consolidated financial statements as compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Untilconsulting arrangement or until performance conditions are expected to be met. Using a Black Scholes valuation model, the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based onperiodically reassessed the fair value of non-employee options until service conditions are met, which generally aligns with the award atvesting period of the reporting date.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 consolidated financial statements.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015Income Taxes

NOTE 2 –BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICITES (continued)

Income taxes

DeferredThe Company accounts for income tax assets and liabilities arise from temporary differences associated with differences betweenusing the financial statements and tax basis of assets and liabilities, as measuredliability method prescribed by the enacted tax rates, which are expected to be in effect when these differences reverse. DeferredASC 740 - Income Taxes. Under this method, deferred tax assets and liabilities are classified as current or non-current, depending upondetermined based on the classificationdifference between the financial reporting and tax bases of the asset or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current depending onusing enacted tax rates that will be in effect in the periodsyear in which the temporary differences are expected to reverse. Valuation allowances are established when necessaryThe Company records a valuation allowance to reduceoffset net deferred tax assets toif based on the amount expected toweight 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 FASB ASC 740-10 “Uncertainty in 740 “Income Taxes” (ASC 740-10)Taxes”. Certain recognition thresholds mustUsing that guidance, tax positions initially need to be met before a tax position is recognized in the financial statements. An entity may only recognize or continue to recognizestatements when it is more likely than not the position will be sustained upon examination by the tax positions that meet a “more-likely-than-not” threshold.authorities. As of December 31, 2015June 30, 2016 and March 31, 2015,2016, the Company does not believe it has anyhad no uncertain tax positions that would requirequalify for either recognition or disclosure in the accompanying unaudited consolidated financial statements. The Company recognizes and accrues for tax related interest and penalties when assessed. Asrelated to uncertain income tax positions in other expense. However, no such interest and penalties were recorded as of December 31 and March 31, 2015, the Company has not been assessed any interest or penalties.June 30, 2016.

Shipping costsCosts

Shipping costs are included in other selling, general and administrative expense and totaled $0 and $27were not significant for the three months ended December 31, 2015June 30, 2016 and 2014, respectively. Shipping costs totaled $2 and $142 for the nine months ended December 31, 2015 and 2014, respectively.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 the three and nine months ended December 31, 2015June 30, 2016 and 2014.2015.

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016

Research and development

Expenditures for research and product development costs are expensed as incurred. The Company did not incur any research and development expense during the three and nine months ended December 31, 2015 and 2014.

Basic and diluted earnings per shareDiluted Income (Loss) Per Share

Pursuant to ASC 260-10-45, basic earningsincome (loss) per common share is computed by dividing net income (loss) allocable to common shareholders 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 (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during eachthe period. Diluted income (loss) per share reflects the potential dilution that could occur if securities were exercised or converted into common stock or other contracts to issue common stock resulting in the issuance of common stock that would then share in the Company’s income (loss) subject to anti-dilution limitations. For the three and nine months ended December 31, 2015, potentiallyPotentially dilutive common shares consist of common stock issuable for stock options and warrants (using the treasury stock method), convertible notes and common shares issuable uponstock issuable. These common stock equivalents may be dilutive in the conversion of convertible debt (using the if-converted method). For the three and nine months ended December 31, 2014, allfuture. The following potentially dilutive equity securities are excluded fromoutstanding as of June 30, 2016 and 2015 were not included in the computation of diluted weighted average number of shares ofdilutive income (loss) per common stock outstanding as theyshare because the effect would have had an anti-dilutive impact.been anti-dilutive:

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015

NOTE 2 –BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICITES (continued)

BasicThe following is a reconciliation of the numerator and denominator used in the basic and diluted earnings per share (continued)calculations for the three months ended June 30, 2016:

The following table presents a reconciliation of basic and diluted net income (loss) per share:

The Company’s aggregate common stock equivalents at December 31, 2015 and 2014 included the following:

Related partiesParties

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 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 Company discloses all related party transactions. All transactions are recorded at fair valuecore principle of theASU 2014-09 is to recognize revenues when promised goods or services exchanged.

Recent accounting pronouncements

Accounting standardsare transferred to customers in an amount that have been issuedreflects the consideration to which an entity expects to be entitled for those goods or proposed by FASB that doservices. 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 requirepermitted. The adoption until a future date areof this guidance is not expected to have a material impact on the Company’s consolidated financial statements.

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Presentation of Financial Statements – Going Concern (Subtopic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern (ASU 2014-15). The guidance in ASU 2014-15 sets forth management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern as well as required disclosures. ASU 2014-15 indicates that, when preparing financial statements upon adoption.for interim and annual financial statements, management should evaluate whether conditions or events, in the aggregate, raise substantial doubt about the entity’s ability to continue as a going concern for one year from the date the financial statements are issued or are available to be issued. This evaluation should include consideration of conditions and events that are either known or are reasonably knowable at the date the financial statements are issued or are available to be issued, as well as whether it is probable that management’s plans to address the substantial doubt will be implemented and, if so, whether it is probable that the plans will alleviate the substantial doubt. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods and annual periods thereafter. Early application is permitted. The Company early adopted ASU 2014-15 during the three months ended June 30, 2016. The adoption of ASU 2014-15 did not have any material impact on the Company’s consolidated 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 discuss recent pronouncements that are not anticipated tobelieve this will have ana material impact on or are unrelated to itsthe Company’s consolidated financial condition, results of operations, cash flows or disclosures.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 consolidated financial statements.

NOTE 3 –PREPAID EXPENSES

At December 31, 2015June 30, 2016 and March 31, 2015,2016, prepaid expenses consisted of the following:

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015

NOTE 4 –ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

At December 31, 2015June 30, 2016 and March 31, 2015, accounts payable and2016, accrued liabilities consisted of the following:

NOTE 5 –ACCRUED OFFICER SALARY AND DIRECTOR FEESLOANS PAYABLE

In connection with the employment of a board of directors member, the Company has agreed to compensate him as follows: an initial payment of $1,500 and quarterly payments of $1,500 during the term which he serves as a director of the Company. At December 31,Between July 2015 andthrough March 31, 2015, the amount due to this director was $4,750 and was included in accrued officer salary and director fees in the accompanying consolidated balance sheets.

At December 31, 2015 and March 31, 2015, the accrued and unpaid CEO’s salary was $17,400 and $3,300, respectively, and was included in accrued officer salary and director fees in the accompanying consolidated balance sheets.

At December 31, 2015 and March 31, 2015, accrued officer salary and director fees consisted of the following: 

NOTE 6 –LOAN PAYABLE

On July 7, 2015,2016, the Company entered into aindividual loan agreement, providing foragreements with various investors in the issuance of a loan in theaggregate principal amount of $25,000. The term$132,769. These loans bear an interest rate of 10% and were due and payable on the first anniversary of the loan is for a perioddate of 60 days from the executionissuance of the agreement with a twenty-day grace period. The annual interest rate for the loan is 10%. The Company paid the lender additional considerationloans. As of 75,000 shares of common stock valued at $3,600 and recorded as interest expense. The Company defaulted to repay the loan as of DecemberMarch 31, 2015. At December 31, 2015, the2016, these loans had outstanding principal balanceand accrued interest of the loan$132,769 and related accrued and unpaid interest for the loan was $25,000 and $1,219,$2,751, respectively.

NOTE 7 –RELATED PARTY TRANSACTIONS

Effective November 1, 2014, the Company entered into a service agreement with CFO Oncall Inc., a company majority owned by the Company’s Chief Financial Officer. In accordance with the service agreement, the service fee is $5,000 per month, which is payable as $3,000 in cash payable in advance on the 1^st of each month, and $2,000 payable at the Company’s option in cash or the Company’s common stock. On June 1, 2015 and August 5, 2015, the Company issued 726,989 and 181,818 restricted shares of common stock to CFO Oncall, Inc. pursuant to the service agreement, respectively, (See Note 9). At December 31, 2015 and March 31, 2015, amounts due to CFO Oncall amounted to $28,000 and $22,667, respectively, which are included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015JUNE 30, 2016

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 June 30, 2016, these loans were in default and had outstanding principal and accrued interest of $143,924 and $6,324, respectively. During the three months ended June 30, 2016, the Company recorded interest expense of $3,572 on these loans.

NOTE 86 –CONVERTIBLE NOTES PAYABLE

At June 30, 2016 and March 31, 2016, convertible notes consisted of the following:

Fiscal 2015 Convertible NotesFinancing

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 7 investorswere 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 June 30, 2016, the Fiscal 2015 Convertible Notes had outstanding principal and accrued interest of $269,490 and $47,009, respectively.

Fiscal 2016 Financing

In May and June 2015, the Company entered into a subscription agreement with various purchasers (the “Investors”“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 June 30, 2016, the Fiscal 2016 Notes I had outstanding principal and accrued interest of $115,000 and $12,981, 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 promissory note agreements, providingnotes and warrants. Pursuant to the issuanceFiscal 2016 Agreements II, the Company issued to the purchasers for an aggregate subscription amount of 10%$96,250: (i) convertible promissory notes (the “Convertible Notes”) with anin the aggregate principal amount of $400,000.$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 ConvertibleCompany received proceeds equal to the principal amount. The Fiscal 2016 Notes areII bear an interest rate of 10% per year and were due and payable on the third anniversary of the date of issuance through October 2017.August through September 2018. The Investorspurchasers are entitled, at their option, at any time after the issuance of these Convertiblethe Fiscal 2016 Notes II, to convert all or any lesser portion of the outstanding principal amount and accrued butand 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 each shareissuances of common stock equalat a purchase price of less than the then-effective conversion price. During the fiscal year 2016, the conversion price was ratcheted down to $0.02. In$0.01. As of March 31, 2016, the event a registration statement is not filed by eitherFiscal 2016 Notes II had outstanding principal and accrued interest of $96,250 and $5,203, respectively. As of June 30, 2016, the Fiscal 2016 Notes II had outstanding principal and accrued interest of $96,250 and $7,635, respectively.

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016

During the three months ended June 30, 2016 and 2015, the Company within 60 days following the completionrecorded interest expense of this Offering, or the full amount of Conversion Shares are not included in the first registration statement filed by either entity, or if such registration statement including the Conversion Shares is not declared effective within 180 days following the completion of the Offering, the Convertible$12,153 and $11,382, respectively, on these convertible notes.

Derivative Liabilities Pursuant to Notes shall then be convertible at the option of the Holder into shares of the common stock, par value $.001 per share, of the Company at a conversion price equal to the lesser of $0.02 per share or a 25% discount to the average closing bid price of the Parent Company’s stock for the five days immediately prior to the day upon which the Company receives a written conversion notice from the Holder for any portion of the Notes. The Penalty Conversion shall remain in effect until such time as the Company’s registration statement, including the Conversion Shares is declared effective by the SEC. and Warrants

In connection with the issuance of these Convertiblethe Notes above,and Warrants, the Company determined that the terms of the Convertible Notes includeand 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. 

inception and included various other terms such as default provisions that caused derivative treatment. Accordingly, under the provisions of FASB ASC Topic No. 815-40 “Derivatives–Derivatives and Hedging – Contracts in an Entity’s Own Stock”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 wasand warrant derivatives were determined using the Binomial Option Pricing Model. Onvaluation 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.

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 valuevalues of the embedded conversion option derivative and warrants derivative of $419,000$403,401 was recorded as a derivative liabilityliabilities and was allocated as a debt discount up to the proceeds of the notes $383,125$211,250 with the remainder $35,875 charged to current period operationsremaining $192,151 recorded as derivative expense.

At June 30, 2016 and 2015, the Company revalued the conversion option and warrant derivative liabilities. In connection with these revaluations and the initial derivative expense. Any gains and lossesexpense, the Company recorded from changes in thegain on change on fair value of derivative liabilities of $517,001 and $259,500 for the liability for derivative contract was recorded as a component of other income/(expense) in the accompanying consolidated statements of operations.three months ended June 30, 2016 and 2015, respectively.

In July 2015, the principal amount of $88,510 of this Fiscal 2015 Convertible Notes was converted into 4,425,500 shares of the Company’s common stock at the contractual conversion price of $0.02 per share. At December 31, 2015, the principal amount due under this Fiscal 2015 Convertible Notes was $311,490.

During the nine months ended December 31, 2015,June 30, 2016, the fair value of the derivative liabilities werewas estimated using the Binomial option-pricingvaluation model with the following assumptions:

At each reporting date and on the conversion dates of this Fiscal 2015 Convertible Notes, the Company valued the embedded conversion option derivative liabilities resulting in a gain and a loss from change in fair value of derivative liabilities of $444,127 and $551,000 for the three months ended December 31, 2015 and 2014, respectively. The Company valued the embedded conversion option derivative liabilities resulting in a gain and a loss from change in fair value of derivative liabilities of $723,598 and $551,000 for the nine months ended December 31, 2015 and 2014, respectively. For the three and nine months ended December 31, 2015, the embedded conversion option derivative liabilities of $188,327 were reclassified to additional paid-in capital upon the related notes conversion.

For the three months ended December 31,June 30, 2016 and 2015, and 2014, amortization of debt discounts related to thesethe convertible notes amounted to $24,862$41,572 and $21,285,$35,122, respectively, which has been included in interest expense on the accompanying consolidated statements of operations. For the nine months ended December 31, 2015 and 2014, amortization of debt discounts related to these convertible notes amounted to $147,588 and $21,285, respectively, which has been included in interest expense on the accompanyingunaudited consolidated statements of operations.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015

NOTE 8 –CONVERTIBLE NOTES PAYABLE (continued)

Fiscal 2015 Convertible Notes (continued)

At December 31, 2015 and March 31, 2015, fiscal 2015 convertible promissory notes consisted of the following:

Fiscal 2016 Convertible Notes

Fiscal 2016 Convertible Notes with principal amount of $115,000

On May 19, 2015 and June 1, 2015 and June 23, 2015, the Company and 5 investors (the “Investors”) entered into convertible promissory note agreements, providing the issuance of 10% convertible promissory notes (the “Fiscal 2016 Convertible Notes”) with an aggregate principal amount of $115,000. These convertible notes are due and payable on the third anniversary of the date of May 19, 2018 and June 1, 2018 and June 23, 2018. The Investors are entitled, at their option, at any time after the issuance of these convertible notes, to convert all or any lesser portion of the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price for each share of common stock equal to $0.05. The conversion price of the convertible notes shall be subject to adjustment for issuances of common stock at a purchase price of less than the then-effective conversion price. On August 31, 2015, the conversion price of $0.05 per share was amended to $0.035 per share since the Company issued additional convertible notes with conversion price of $0.035 (see Fiscal 2016 Convertible Notes with principal amount of $96,250).

In connection with the issuance of these convertible notes, the Company issued five-year common stock purchase warrants (“Warrants”) exercisable at $0.07 per share. These investors received 20 Warrants for each dollar invested in the convertible notes. The exercise price of the Warrant shall be subject to adjustment for issuance of common stock at a consideration per share of less than the then-effective exercise price. On August 31, 2015, the exercise price of the Warrant of $0.07 per share was amended to $0.035 per share since the Company issued additional five-year common stock purchase warrants with exercise price of $0.035 (see Fiscal 2016 Convertible Notes with principal amount of $96,250).

In connection with the issuance of these convertible notes, the Company determined that the terms of the convertible notes and the 2,300,000 warrants include down-round provisions 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. Accordingly, under the provisions of FASB ASC Topic No. 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 a 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 warrants derivatives was determined using the Binomial Option Pricing Model. On the initial measurement date, the fair value of the embedded conversion option derivatives and warrants derivatives of $234,455 was recorded as a derivative liability and was allocated as a debt discount up to the proceeds of the notes $115,000 with the remainder $119,455 charged to current period operations as initial derivative expense. Any gains and losses recorded from changes in the fair value of the liability for derivative contract will be recorded as a component of other income/(expense) in the consolidated statements of operations.

Fiscal 2016 Convertible Notes with principal amount of $96,250

On August 31, 2015 and September 8, 2015 and September 25, 2015 and October 9, 2015, the Company and 5 investors (the “Investors”) entered into convertible promissory note agreements, providing the issuance of a 10% convertible promissory notes (the “Fiscal 2016 Convertible Notes”) with an aggregate principal amount of $96,250. These convertible notes are due and payable on the third anniversary of the date of August 31, 2018 and September 8, 2018 and September 25, 2018 and October 8, 2018. The Investors are entitled, at their option, at any time after the issuance of these convertible notes, to convert all or any lesser portion of the outstanding principal amount and accrued but unpaid interest into the Company’s common stock at a conversion price for each share of common stock equal to $0.035. The conversion price of the convertible notes shall be subject to adjustment for issuances of common stock at a purchase price of less than the then-effective conversion price.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015

NOTE 8 –CONVERTIBLE NOTES PAYABLE (continued)

Fiscal 2016 Convertible Notes

Fiscal 2016 Convertible Notes with principal amount of $96,250 (continued)

In connection with the issuance of these convertible notes, the Company issued five-year common stock purchase warrants (“Warrants”) exercisable at $0.035 per share. These investors received 20 Warrants for each dollar invested in the convertible notes. The exercise price of the Warrants shall be subject to adjustment for issuance of common stock at a consideration per share of less than the then-effective exercise price.

In connection with the issuance of these convertible notes, the Company determined that the terms of the convertible notes and the 1,925,000 warrants include down-round provisions 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. Accordingly, under the provisions of FASB ASC Topic No. 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 a 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 warrants derivatives was determined using the Binomial Option Pricing Model. On the initial measurement date, the fair value of the embedded conversion option derivatives and warrants derivatives of $179,118 was recorded as a derivative liability and was allocated as a debt discount up to the proceeds of the notes $96,250 with the remainder $82,868 charged to current period operations as initial derivative expense. Any gains and losses recorded from changes in the fair value of the liability for derivative contract will be recorded as a component of other income/(expense) in the consolidated statements of operations.

During the nine months ended December 31, 2015, the fair value of the derivative liabilities were estimated using the Binomial option-pricing model with the following assumptions:

At each reporting date and on the initial measurements of the derivative liabilities, the Company valued the embedded conversion option derivative liabilities and the warrants derivative liabilities resulting in a gain from change in fair value of derivative liabilities of $322,113 and $298,848, respectively, for the three and nine months ended December 31, 2015. For the three and nine months ended December 31, 2015, amortization of debt discounts related to these convertible notes amounted to $17,604 and $31,163, respectively, which has been included in interest expense on the accompanying consolidated statements of operations.

At December 31, 2015 and March 31, 2015, fiscal 2016 convertible promissory notes consisted of the following:

At December 31, 2015 and March 31, 2015, the total convertible promissory notes mentioned above consisted of the following:

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015

note 9NOTE 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 itspreferred stock at $0.001 per share par value preferred stock. value.

Preferred Stock

As of December 31, 2015June 30, 2016 and March 31, 2015, no shares were2016, the Company did not have any preferred stock issued and outstanding.

LEGACYXCHANGE, INC.
CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2016

The Company is authorized to issue 190,000,000 shares of its $0.001 par value common stock. As of December 31, 2015 and March 31, 2015, 49,130,056 and 36,951,165 shares of common stock were issued and outstanding, respectively.

Common Stock

Common stock issued for services

On April 27, 2015, the Company issued 100,000 restricted shares of common stock to an attorney for services rendered. The shares were valued at the fair market value of $0.06 per share based on the closing bid price on the grant date. The Company recorded stock-based legal fees of $6,000 for the nine months ended December 31, 2015.

On May 1, 2015, the Company issued 180,000 restricted shares of common stock to an attorney for services to be rendered. The shares were valued at the fair market value of $0.0549 per share based on the closing bid price on the grant date. The Company recorded stock-based legal fees of $6,589 for the nine months ended December 31, 2015 and had a remaining prepaid expense of $3,293 at December 31, 2015, which will be amortized over the remaining service period.

On May 1, 2015, the Company issued 175,000 vested shares of common stock to an attorney for services to be rendered. The shares were valued at the fair market value of $0.0549 per share on the grant date which is the measurement date based on the closing bid price on the grant date. The Company recorded stock-based legal fees of $6,400 for the nine months ended December 31, 2015 and had a remaining prepaid expense of $3,208 at December 31, 2015, which will be amortized over the remaining service period.

On June 1, 2015, the Company issued 726,989 restricted shares of common stock to a company controlled by the Company’s Chief Financial Officer for compensation and to settle accrued liabilities of $26,667 pursuant to the related service agreement (See Note 7). The shares were valued at $26,667 based on 60% of the closing bid price of the Company’s common stock on the last trading day of the previous quarter as defined in the service agreement. No gain or loss was recognized on this settlement.

On June 1, 2015, the Company issued 250,000 vested shares of common stock to a consultant for marketing services to be rendered. The shares were valued at the fair market value of $0.054 per share on the grant date which is the measurement date based on the closing bid price on the grant date. The Company recorded stock-based marketing service fees of $7,875 for the nine months ended December 31, 2015 and had a remaining prepaid expense of $5,625 at December 31, 2015, which will be amortized over the remaining service period.

On July 1, 2015, the Company issued 100,000 vested shares of common stock to a consultant for web design services to be rendered. The shares were valued at the fair market value of $0.06 per share on the grant date which is the measurement date based on the closing bid price on the grant date. The Company recorded stock-based consulting fees of $3,000 for the nine months ended December 31, 2015 and had a remaining prepaid expense of $3,000 at December 31, 2015, which will be amortized over the remaining service period.

On August 5, 2015, the Company issued 181,818 restricted shares of common stock to a company controlled by the Company’s Chief Financial Officer for compensation and to settle accrued liabilities of $10,000 pursuant to the related service agreement (See Note 7). The shares were valued at $10,000 based on 60% of the closing bid price of the Company’s common stock on the last trading day of the previous quarter as defined in the service agreement. No gain or loss was recognized on this settlement.

On August 5, 2015, the Company issued 125,000 vested shares of common stock to two accounting consultants for services rendered and 800,000 vested shares of common stock to two IT professionals for services rendered. The shares were valued at the fair market value of $0.04 per share on the grant date which is the measurement date based on the closing bid price on the grant date. The Company recorded stock-based accounting fees of $5,000 and stock-based consulting fees of $32,000, respectively, for the nine months ended December 31, 2015.

On October 26, 2015, the Company issued 250,000 restricted shares of common stock to a consultant for services rendered and to be rendered. The shares were valued at the fair market value of $0.0389 per share based on the closing bid price on the grant date. The Company recorded stock-based consulting fees of $6,807 for the nine months ended December 31, 2015 and had a remaining prepaid expense of $2,918 at December 31, 2015, which will be amortized over the remaining service period.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015

note 9 –STOCKHOLDERS’ DEFICIT(continued)

Common stock issued to a former related party for services (continued)

On December 15, 2015, the Company issued 2,500,000 and 1,500,000 restricted shares of common stock to its officer and director, respectively, for services rendered. The shares were valued at the fair market value of $0.01 per share based on the closing bid price on the grant date. The Company recorded stock-based compensation of $40,000 for the nine months ended December 31, 2015.

On December 15, 2015, the Company issued 250,000 restricted shares of common stock to an attorney for services to be rendered. The shares were valued at the fair market value of $0.01 per share based on the closing bid price on the grant date. The Company recorded prepaid expenses of $2,500 which will be amortized over the service period.

Common stock issued for notes conversion and accrued interestWarrants

On July 9, 2015, $27,510 principal amount of the Company’s Fiscal 2015 Convertible Notes and $10,792 accrued interest were converted at $0.02 per share into 1,915,084 shares of the Company’s common stock.

On July 22, 2015, $36,000 principal amount of the Company’s Fiscal 2015 Convertible Notes was converted at $0.02 per share into 1,800,000 shares of the Company’s common stock.

On July 27, 2015, $25,000 principal amount of the Company’s Fiscal 2015 Convertible Notes was converted at $0.02 per share into 1,250,000 shares of the Company’s common stock.

Common stock issued for loan fees

On July 7, 2015, the Company issued 75,000 vested shares of common stock as additional consideration for a bridge loan. The shares were valued at the fair market value of $0.048 per share on the grant date which is the measurement date based on the closing bid price on the grant date. The Company recorded interest expense of $3,600 for the nine months ended December 31, 2015.

Reclassification of derivative liabilities upon notes conversion

During the nine months ended December 31, 2015, the Company reclassified $188,327 derivative liabilities to additional paid-in capital upon the conversion of Fiscal 2015 Convertible Notes with principal amount of $88,510.

Warrants issued pursuant to equity subscription agreements

The Company issued warrantsDuring fiscal years 2013 to 2015, in connection with the sale of common stock, during the nine months ended December 31, 2015. TheseCompany issued an aggregate of 1,048,315 five-year warrants haveto purchase common shares for an exercise price of $0.035$0.40 per common share to investors pursuant to unit subscription agreements. These warrants were accounted for as equity. As of June 30, 2016 and expire in 5 years from issuance dates. Warrant activities for the nine months ended DecemberMarch 31, 20152016, 1,048,315 were as follows:

There was no intrinsic value for the warrants at December 31, 2015.issued and outstanding for.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015

note 9 –STOCKHOLDERS’ DEFICIT(continued)Warrants issued in connection with the Fiscal 2016 Financing

Warrants (continued)

The following table summarizesDuring fiscal years 2016, pursuant to the sharesconvertible 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 Company’s common stock issuable upon exercise of warrants outstanding at December 31, 2015:

NOTE 10–CONCENTRATIONS AND COMMITMENTS

Concentrations

Customers

No customer accounted for 10% or more of the Company’s revenue during the three and nine months ended December 31, 2015 and 2014.

Suppliers

No supplier accounted for 10% or more of the Company’s inventory purchases during the three and nine months ended December 31, 2015 and 2014.

Commitments

Service contracts

On October 29, 2014, the Company entered into a service agreement with CFO Oncall, effective on November 1, 2014. In accordance to the service agreement, the service fee is $5,000 per month which is payable as follows: $3,000 in cash payable in advance of the 1^st of each month, and $2,000 payable at the Company’s option in cash or the Company’s common stock at a 40% discount to quoted market prices. The $2,000 portion is accounted for as stock settled debt in accordance with ASC 480 resulting in a premium on each $2,000 payment amount of $1,333. The increase in premium in the nine months ended December 31, 2015 was $12,000 and the decrease in premium in the nine months ended December 31, 2015 was $14,667. The accumulated premium at December 31, 2015 and March 31, 2015 was $4,000 and $6,667, respectively, which were included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015

NOTE 10–CONCENTRATIONS AND COMMITMENTS (continued)

Commitments (continued)

Service contracts (continued)

On May 1, 2015, the Company entered into a one-year legal service agreement with an attorney who has agreed to provide corporate and securities related legal services to the Company. The agreement expires on April 30, 2016. In accordance to this legal service agreement, the Company pays (a) a flat cash fee of $1,000 per month; and (b) an annual stock fee of 175,000 restricted shares of the Company’s common stock. The Company issued the 175,000 restricted shares of common stock in June 2015 (See Note 9 – Common stock issued for service). The accrued service fees related to the service agreement at December 31, 2015 was $4,500, which was included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

On May 1, 2015, the Company entered into a one-year consulting agreement with an attorney who has agreed to provide consulting services to the Company. The agreement expires on April 30, 2016. In accordance to this consulting agreement, the Company pays this consultant (a) $6,000 in equal monthly installments; and (b) 180,000 shares of the Company’s common stock. The Company issued the 180,000 shares of common stock in June 2015 (See Note 9 – Common stock issued for services). The accrued service fees related to the service agreement at December 31, 2015 was $3,500, which was included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

On June 1, 2015, the Company entered into a one-year consulting agreement with a consultant who has agreed to provide consulting services to the Company. The agreement expires on May 31, 2016. In accordance to this consulting agreement, the Company pays the consultant (a) Per Tier 1 athlete/celebrity: (i) 2,500 restricted shares of the Company’s common stock; (ii) 4% of the advertising revenue generated from items offered for sale on the site related to the athlete/celebrity, which were not sold directly by the athlete/celebrity; (iii) 1% of the net item sales of any original merchandise sold by the athlete/celebrity; (b) For all other tiers, including collectible specialists, corporations: (i) 1,500 shares of the Company’s common stock; (ii) 3% of the advertising revenue generated from items offered for sale on the site related to the athlete/celebrity, which were not sold directly by the athlete/celebrity; (iii) 1% of the net item sales of any original merchandise sold by the athlete/celebrity or entity; (c) 250,000 shares of the Company’s common stock upon signing, plus $3,500 per month for the following services: (i) advisory services related to professional sports franchises; (ii) introduction to sports related industry leaders; (iii) assistance in athlete management; (iv) assistance in athlete promotions. For (a) and (b), the percentage of net sales and percentage of advertising revenue will be paid to the consultant as long as the athlete/celebrity/other remains a vendor for the Company, otherwise the consultant earns no commission or fees. The consultant will be paid any commission on the 10^th of each month for revenue generated in the preceding month, and the first of every month for the $3,500 monthly payment. The Company issued the 250,000 restricted shares of common stock in June 2015 (See Note 9 – Common stock issued for service). The accrued service fees related to the service agreement at December 31, 2015 was $17,500, which was included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

On September 1, 2015, the Company entered into a consulting agreement with a consultant who has agreed to provide consulting services to the Company. The agreement can be terminated at any time by either party. In accordance to this consulting agreement, the Company pays the consultant (a) 75,000 shares of the Company’s common stock upon both parties signing this agreement; (b) 25,000 shares of the Company’s common stock per month, commencing at September 1, 2015 and continuing each month thereafter until this agreement has been terminated; (c) $2,000 per month, due and payable on the first of every month, commencing September 1, 2015; (d) 1,500 restricted shares of the Company’s common stock for each athlete, celebrity, or company that agrees to participate with the Company during the course of this agreement; (e) 1% of the revenue generated from the sales of original merchandise from athletes or celebrities consultant has participate with the Company during the course of this agreement. The consultant will be paid any commissions on the 10^th of each month for revenue generated in the preceding month. The issuance of stock will occur every 90 days. The Company issued 250,000 shares of common stock in October 2015 (See Note 9 – Common stock issued for services). The accrued service fees related to the service agreement at December 31, 2015 was $8,000, which was included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

LEGACYXCHANGE, INC.

CONDENSED NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015

NOTE 10–CONCENTRATIONS AND COMMITMENTS (continued)

Commitments (continued)

Service contracts (continued)

On October 28, 2015, the Company entered into an exclusive two-year technology partnership with a licensed distributor of SelectaDNA, a provider of DNA-based anti-counterfeiting technology, exclusively for use in the sports collectibles and memorabilia markets, as well as other business verticals. The agreement expires on October 28, 2017. The agreement allows the Company to provide ongoing verification of the authenticity of certain collectibles and memorabilia sold exclusively through its online ecommerce platform, which is expected to launch soon. In exchange for the use of the DNA technology and the development of DNA autograph pens to be used for collectible signings, the Company will reference the authentication technology in all future national advertising and promotions. In addition, (i) the Company agrees to purchase a minimum of $25,000 of product for the first year of the contract; (ii) the Company agrees to purchase a minimum of $100,000 of product at a price of $250 per bottle, for the second year of the contract; (iii) the Company must escalate television advertisements within 6 months of launch, to include up to 20 – 30 ads per day on multiple networks nationally, and up to 200 per day regionally on multiple networks, guaranteeing 700 national advertisements per week.

NOTE 11 –SUBSEQUENT EVENT

In January 2016, the principal amount of $42,000 of Fiscal 2015 Convertible Notes was converted into 2,100,000amount) 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 $0.02 per share.June 30, 2016 and March 31, 2016, 4,225,000 warrants were issued and outstanding.

Warrant activity for the three months ended June 30, 2016 is summarized as follows

NOTE 8 – SUBSEQUENT EVENTS

LegacyXChange, Inc. is referredBetween October 2017 and November 2017, the Fiscal 2015 Convertible Notes defaulted due to herein as “we”, “our” or “us”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

We wereLegacyXchange, 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, wethe Company shifted ourits focus to the beauty industry and later amended ourits Articles of Incorporation and changed ourits name to True 2 Beauty, Inc., to better reflect our new business focus.

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

On July 2,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 months ended June 30, 2016 and 2015 pursuant to a Certificate of Dissolution filingand 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 Nevada Secretaryfinancial statements and the notes to those statements that are included elsewhere in this report.

Revenue:

We did not generate any revenues from operations for the three months ended June 30, 2016 and 2015.

Operating expenses:

For the three months ended June 30, 2016 and 2015, operating expenses amounted to $117,631 and $159,848, respectively, a decrease of State, we dissolved LegacyXChange, Inc. (formerly True2Bid, Inc.), our then subsidiary,$42,217 or 26%. For the three months ended June 30, 2016 and 2015, operating expenses consisted of the following:

For the three months ended June 30, 2016 and 2015, compensation and related taxes amounted to allow for$31,036 and $33,971, respectively, a decrease of $2,935 or 9%. The decrease was primarily due to reduction in executive compensation.

For the three months ended June 30, 2016 and 2015, professional and consulting fees amounted to $77,107 and $110,599, respectively, a decrease of $33,492 or 30%. The decrease was primarily attributable to the reduce in operational activities in 2016 compared to 2015.

For the three months ended June 30, 2016 and 2015, other selling, general and administrative expenses amounted to $9,488 and $15,278, respectively, a decrease of $5,790, or 38%. The decrease was primarily attributable to the reduce in operational activities in 2016 compared to 2015.

Loss from operations:

For the three months ended June 30, 2016 and 2015, loss from operations amounted to $117,631 and $159,848, respectively, a decrease of $42,217, or 26%. 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 gains from the change in namefair value of derivative liabilities.

For the three months ended June 30, 2016, total other income, net, amounted to $459,704 as compared to $93,541 for the three months ended June 30, 2015, an increase of $366,163 or 391%. The increase was attributable to an increase in the gain from change in fair value of derivative liabilities of $257,501 or 99%, decrease in initial derivative expense of $119,455, or 100%, for a total increase in other income of $376,956 offset by an increase in interest expense of $10,793, or 23%.

Net income (loss):

For the three months ended June 30, 2016, net income amounted to $342,073, or net income per common share of $0.01 basic and $(0.00) diluted as compared to $(66,307) net (loss), or net (loss) per common share of $(0.00) (basic and diluted) for the three months ended June 30, 2015, a change of $408,380, or 616%. 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 $958,818 and $0 of cash as of June 30, 2016 and working capital deficit of $1,300,891 and $4,209 of cash as of March 31, 2016.

The decrease in working capital deficit was primarily attributable to a decrease in current assets of $64,576 and a decrease in current liabilities of $406,649.

Cash Flow

A summary of cash flow activities is summarized as follows:

Net cash used in operating activities:

Net cash flow used in operating activities was $15,364 for the three months ended June 30, 2016 as compared to $117,436 for three months ended June 30, 2015, a decrease of $102,072 or 87%.

Cash provided by financing activities:

Net cash provided by financing activities was $11,155 for the three months ended June 30, 2016 as compared to $115,000 for the three months ended June 30, 2015, a decrease of $103,845 or 90%.

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 parent company, True 2 Beauty, Inc.,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 consolidated financial statements, the Company had net income and net cash used in operating activities of $342,073 and $15,364, respectively, for the three months ended June 30, 2016. The net income was primarily attributed to LegacyXChange, Inc.the gain from the change in far value of derivative liabilities. The Company had accumulated deficit, stockholders’ deficit and working capital deficit of $10,203,964, $958,818 and $958,818, respectively, at June 30, 2016. The Company had no revenues for the three months ended June 30, 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 three months ended June 30, 2016 and 2015, the lenders did not convert any of the outstanding convertible notes.

Sales of Common Stock Pursuant to Subscription Agreements

During the three months ended June 30, 2016 and 2015, there were no sales of common stock.

Future Financings

We plan on launchingwill require additional financing to fund our website, LegacyXChange.com, forplanned operations. We currently do not have committed sources of additional financing and may not be able to obtain additional financing particularly, if the tradingvolatile conditions of collectiblesthe stock and memorabilia across numerous product categories. Following secure chain of custody protocolsfinancial markets persist.

There can be no assurance that guarantee authenticity from origination, and utilizing unique proprietary DNA “Marks” that cannot be counterfeited, our anticipated inventory of collectiblesadditional financing will be permanently marked with DNA, whichavailable to us when needed or, if available, that it can only be verifiedobtained 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 DNA analysis. Our goalequity 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 provide the ongoing abilitymaintain operations at a level sufficient for an investor to guarantee authenticity of items with 100% surety. We will track ownership for all Original items, and onlyobtain a return on his, her, or its investment in our common stock. Further, we can verify authenticity. We will work with athletes and celebrities as they create high valued new collectibles, items that will differentiate from those already in the marketplace. The site will also allow non-“Marked” third party collectible itemsmay continue to be listed and sold. However, any third party items, which claim to have authentic signatures, will have to provide documentation of authenticity from a Company-approved expert authentication company. The site will offer sellers multiple opportunities to advertise and promote the sale of items.unprofitable.

Critical accounting policies and estimatesAccounting Policies

Our discussion and analysis ofWe have identified the following policies as critical to our financial conditionbusiness and results of operationsoperations. Our reported results are based upon our unauditedimpacted 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 consolidated financial statements which have been prepared in accordanceconformity with accounting principles generally accepted in the United States. The preparation of these unaudited consolidated financial statementsU.S. GAAP requires usmanagement to make estimates and judgmentsassumptions that affect the reported amounts of assets and liabilities revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to income taxes,liabilities at the date of the consolidated financial statements and the valuation of equity transactions. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues and expenses assets and liabilities.during the reporting period. Actual results maycould differ from these estimates. Significant estimates under differentduring the three months ended June 30, 2016 include assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparationvaluation of the unaudited consolidated financial statements.derivative liabilities.