As filed
with the Securities and Exchange Commission on April 7, 2015
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
Amendment No. 3
To
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
True 2 Beauty,
Inc.
(Exact name of Registrant as specified in its
charter)
Nevada |
|
5961 |
|
46-1515670 |
State or other jurisdiction |
|
Primary Standard Industrial |
|
(I.R.S. Employer |
Incorporation or organization |
|
Classification Code Number) |
|
Identification Number) |
301 Yamato Road, Suite 1240
Boca Raton, Florida 33431
(800) 630-4190
(Address and Telephone
Number of Registrant’s Principal
Executive Offices and Principal Place of Business)
Empire Stock Transfer
1859 Whitney Mesa Drive
Henderson, Nevada 89014
702-818-5898
(Name, address,
including zip code, and telephone number, including area code, of agent for service)
Communication Copies
to
Frederick M. Lehrer
Attorney and Counselor
at Law
285 Uptown Blvd, 402
Altamonte Springs, Florida 32701
flehrer@securitiesattorney1.com
(321) 972-8060
Approximate date of proposed sale to the public:
As soon as practicable and from time to time after the effective date of this Registration Statement.
If any of the securities being registered
on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the
following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration statement number of the earlier effective registration statement
for the same offering.
If this Form is a post-effective amendment filed pursuant to rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment
filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer |
☐ |
Accelerated filer |
☐ |
Non-accelerated filer |
☐ |
Smaller reporting company |
☒ |
(Do not check if a smaller reporting company) |
CALCULATION OF REGISTRATION FEE
Title
of Each
Class of
Securities to be
Registered |
Amount
to be
Registered (1) |
Proposed
Maximum
Offering Price
Per Share (2) |
Proposed
Maximum
Aggregate
Offering Price (2) |
Registration
Fee |
Shares
of Common Stock, par value $0.001 |
26,000,000 |
$0.02 |
$520,000 |
$60.42 |
|
(1) |
Covers the
resale by seven selling security holders of a maximum of 26,000,000 common stock shares reflecting their conversion rights
of 26,000,000 shares pursuant to seven convertible promissory notes, 20,000,000 shares of which correspond to the aggregate
principal loan amount of $400,000 and 6,000,000 shares that correspond to interest accrued should the notes be carried to
maturity. |
|
(2) |
The offering price has been estimated
solely for the purpose of computing the amount of the registration fee in accordance with Rule 457(c) under the Securities
Act of 1933. |
The Registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment
which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the registration statement shall become effective on such date as the Commission, acting pursuant
to such Section 8(a), may determine.
PRELIMINARY PROSPECTUS
True 2 Beauty, Inc.
(A Nevada Corporation)
26,000,000 COMMON STOCK SHARES
The seven selling security holders
named in this prospectus are offering 26,000,000 common shares reflecting their conversion rights of 26,000,000 shares pursuant
to seven convertible promissory notes, 20,000,000 shares of which correspond to the aggregate principal loan amount of $400,000
and 6,000,000 shares that correspond to interest accrued should the notes be carried to maturity. We will not receive any proceeds
from the sale of shares being sold by selling security holders.
The prices at which the selling security
holders may sell their shares will be at a fixed price of $0.02 per share until such time as the shares of our common stock are
traded on the OTCQB operated by OTC Markets Group, Inc. The selling security holders have not engaged any underwriter in connection
with the sale of their shares of Common Stock. Although we intend to apply for quotation of our common stock on the OTCQB through
a market maker, public trading of our common stock may never materialize. If our common stock becomes traded on the OTCQB, then
the sale price to the public will vary according to prevailing market prices or privately negotiated prices by the selling shareholders.
Our common
stock is quoted on the OTC Pinks operated by OTC Markets Group, Inc. under the symbol “TRTB.” On April 6, 2015, the
last reported sale price of our common stock as reported on the OTC Pinks was $0.0575 per share. There is not an active trading
market for our stock.
We intend to apply to have our common
stock quoted on the OTC Markets (“OTCQB”) OTC MARKETS (“OTCQB”). There can be no assurance that a market
maker will agree to file the necessary documents with the Financial Industry Regulatory Authority (“FINRA”) to facilitate
such quotation, nor can there be any assurance that such an application for quotation will be approved. We have agreed to bear
the expenses relating to the registration of the shares of the Selling Security Holder. Further, there is no assurance that we
will be able to develop an active market on the OTCQB.
We are an “emerging growth company”
under the Jumpstart Our Business Startups Act (“JOBS Act”) and are eligible for reduced public company reporting requirements.
We do not consider ourselves a shell
company or a blank check company. We have no plans or intentions to be acquired by or to merge with an operating company,
nor do we, nor any of our shareholders, have plans to enter into a change of control or similar transaction or to change our management.
We have made no written communications
as defined under Rule 405 of the Securities Act to prospective investors or investors.
The purchase of the securities offered
through this prospectus involves a high degree of risk. You should carefully read and consider the section of this prospectus
titled “Risk Factors” on page 6 before buying any common shares.
Neither the SEC nor any state securities
commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation
to the contrary is a criminal offense.
This Prospectus
is dated _________, 2015
TABLE OF CONTENTS
Please read this prospectus carefully. It
describes our business, our financial condition and results of operations. We have prepared this prospectus so that you will have
the information necessary to make an informed investment decision.
You should rely only on the information that
we have provided in this prospectus. We have not authorized anyone to provide you with different information and you must not
rely on any unauthorized information or representation. We are not making an offer to sell these securities in any jurisdiction
where an offer or sale is not permitted. This document may only be used where it is legal to sell these securities. You should
assume that the information appearing in this prospectus is accurate only as of the date on the front of this prospectus, regardless
of the time of delivery of this prospectus, or any sale of our common stock. Our business, financial condition and results of
operations may have changed since the date on the front of this prospectus. We urge you to carefully read this prospectus before
deciding whether to invest in any of the common stock being offered.
PROSPECTUS
SUMMARY
This summary highlights material information
appearing elsewhere in this prospectus and is qualified in its entirety by the more detailed information and financial statements
included elsewhere in this prospectus. This summary may not contain all the information you should consider before investing in
our common stock. You should carefully read this prospectus in its entirety before investing in our common stock, including the
sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Unless
the context otherwise requires, we use the terms “we”, “us” and “our” in this prospectus to
refer to True 2 Beauty, Inc., a Nevada incorporated entity, and, where appropriate, our consolidated subsidiary.
Going Concern
Auditor Opinion; Status of Operations; Funding Needs
Because our independent registered
public accounting firm has issued a going concern opinion, which raises substantial doubt that we will continue operations, you
could lose your investment.
We have been actively implementing
our current business plan for the past 15 months, but have not generated any substantial revenues during this period.
We will require additional capital to conduct
our operations and support business growth, which may have adverse consequences to our shareholders and which may be unavailable
or not be available on acceptable terms to us. At an operating burn rate of $40,000 per month for total expenses of $480,000 with
available cash of only $80,000, we presently have the ability to conduct our operations for only 2 months. We may be unable to
obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on
terms satisfactory to us, when we require it, our ability to continue to support our business growth and to respond to business
challenges will be negatively affected, including that we may have to reduce or even cease our operations. Accordingly, investors
should consider our shares to be a high-risk and illiquid investment.
Corporate Background
We
were incorporated as Burrow Mining, Inc. in Nevada on December 11, 2006. Our fiscal year end was October 31. On March 20, 2014
we changed our fiscal year end to March 31.
On
February 14, 2008, we filed a Form SB-2 Registration Statement with the SEC, which was declared effective on January 29, 2009,
at which time we became an SEC Reporting Company. On September 27, 2010, we suspended our duty to file SEC reports by filing a
Form 15. On May 10, 2010, we changed our name to True 2 Beauty, Inc. to focus our business in the health and beauty sector.
In
May 2012, we changed our business plan to operate an online retail/e-commerce auction site, True2Bid.com (“True2Bid”),
through our wholly owned subsidiary, True2Bid, Inc., a Nevada corporation incorporated on July 10, 2012.
We developed and operated True2Bid as a beta test site, but terminated the site in April 2014 because the underlying platform
was not scalable for its needs. We decided to purchase another technology platform that was more robust in its ability to scale
and which would provide comprehensive data to our management to determine the performance of the site. This new platform became
operational on June 23, 2014 under the name BetUGetit.com. Similar to True2Bid, it offered an auction format to win products,
however, it was focused on sports related items, as opposed to general merchandise. BetuGetit.com, which was launched on June
23, 2014, was discontinued on November 10, 2014 because management determined that the site was too limited in its concept.
In November 2014,
we began development of a new online site, combining an online platform that sells collectibles and memorabilia with authentication
technology provided by a third party. On December 17, 2014, we changed our wholly owned subsidiary name from True2Bid, Inc. to
LegacyXChange, Inc. (“LegacyXChange”) to reflect our new business model, which will operate our future online
site, LegacyXChange.com.
Our common stock has been quoted on the “Pink
Sheets” under the symbol “TRTB” since May 10, 2010.
Business
We are an e-commerce business under development,
planning to operate under the website, LegacyXChange.com, by May 2015. Our platform will be focused on offering sellers and buyers
the ability to trade a wide range of collectibles and memorabilia, primarily consisting of sports
related items, celebrity related items and pop culture items (the “Items’). All of the Items for sale on the
site will be given a unique “Mark” identifier that will provide the basis for tracking ownership and providing verification
the item has been marked with our unique identifier.
Where
You Can Find Us.
Our principal executive office and mailing
address is 301 Yamato Road, Suite 1240, Boca Raton, Florida 33431. Our telephone number is (800) 630-4190.
Our Website
Our Internet address will be www.LegacyXChange.com.
No information contained on our website will be part of this prospectus.
Implications of Being an Emerging Growth Company
We qualify as an emerging growth company as
that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens
that are otherwise applicable generally to public companies. These provisions include:
• |
A requirement to have only two years of audited
financial statements and only two years of related MD&A; |
• |
Exemption from the auditor attestation requirement
in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the
Sarbanes-Oxley Act of 2002; |
• |
Reduced disclosure about the emerging growth company’s
executive compensation arrangements; and |
• |
No non-binding advisory votes on executive compensation
or golden parachute arrangements. |
We have already taken advantage of these reduced
reporting burdens in this prospectus, which are also available to us as a smaller reporting company as defined under Rule 12b-2
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
In addition, Section 107 of the JOBS Act also
provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of
the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards.
We have elected to use the extended transition period provided above and therefore our consolidated financial statements may not
be comparable to companies that comply with public company effective dates.
We could remain an emerging growth company
for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed
$1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act,
which would occur if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the last business
day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible
debt during the preceding three year period.
For more details regarding this exemption,
see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting
Policies.”
THE OFFERING
Common Stock offered by selling security holders |
|
26,000,000 shares of Common Stock. |
|
|
|
Common Stock outstanding before the offering |
|
36,951,165 shares of Common Stock |
|
|
|
Terms of the Offering |
|
The prices at which the selling security holders may sell their
shares will be at a fixed price of $0.02 per share until such time as the shares of our common stock are traded on the OTCQB
operated by OTC Markets Group, Inc. The selling security holders have not engaged any underwriter in connection with the sale
of their shares of Common Stock. Although we intend to apply for quotation of our common stock on the OTCQB through
a market maker, public trading of our common stock may never materialize. If our common stock becomes traded on the OTCQB,
then the sale price to the public will vary according to prevailing market prices or privately negotiated prices by the selling
shareholders. |
|
|
|
Trading Market |
|
We currently trade on the OTC Market Pinks under the symbol
“TRTB”. We intend to apply for quotation on the OTC Markets OTCQB. We will require the assistance of a market
maker to apply for quotation and there is no guarantee that a market maker will agree to assist us. |
|
|
|
Use of proceeds |
|
We are not selling any shares of the Common Stock covered by
this prospectus. As such, we will not receive any of the offering proceeds from the registration of the shares of Common Stock
covered by this prospectus. |
|
|
|
Risk Factors |
|
The Common Stock offered hereby involves a high degree of risk
and should not be purchased by investors who cannot afford the loss of their entire investment. See “Risk Factors”
beginning on page 6. |
SUMMARY OF FINANCIAL
INFORMATION
The following summary financial data should
be read in conjunction with “Management’s Discussion and Analysis,” “Plan of Operation” and the
Financial Statements and Notes thereto, included elsewhere in this prospectus. The consolidated balance sheet data at March 31,
2014 and 2013 and consolidated statements of operations for the years ended March 31, 2014 and 2013, are derived from our audited
consolidated financial statements. The consolidated balance at December 31, 2014 and the consolidated statements of operations
for the nine months ended at December 31, 2014 and 2013 are derived from our unaudited consolidated financial statements. The
data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition
and Results of Operations”, our consolidated financial statements and the related notes included in this prospectus.
Consolidated Statement of Operations:
|
|
For the Nine Months Ended |
|
For the Year Ended |
|
|
December
31, |
|
March 31, |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
|
(unaudited) |
|
(unaudited) |
|
|
|
|
Revenues |
|
$ |
437 |
|
|
$ |
35,960 |
|
|
$ |
35,240 |
|
|
$ |
79,498 |
|
Gross (loss) |
|
$ |
(1,789 |
) |
|
$ |
2,022 |
|
|
$ |
1,072 |
|
|
$ |
(21,709 |
) |
Operating expenses |
|
$ |
423,976 |
|
|
$ |
274,812 |
|
|
$ |
392,085 |
|
|
$ |
801,736 |
|
Net loss |
|
$ |
(1,047,128 |
) |
|
$ |
(277,545 |
) |
|
$ |
(363,929 |
) |
|
$ |
(823,445 |
) |
Net loss per common share - basic and diluted |
|
$ |
(0.03 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.04 |
) |
Weighted average number of
common shares outstanding - basic and diluted |
|
|
35,879,354 |
|
|
|
29,204,473 |
|
|
|
29,745,802 |
|
|
|
21,466,635 |
|
Balance Sheet Data: |
|
December 31,
2014 |
|
March 31,
2014 |
|
|
(unaudited) |
|
|
Total Assets |
|
$ |
171,829 |
|
|
$ |
28,206 |
|
Total Current Liabilities |
|
$ |
1,055,241 |
|
|
$ |
197,403 |
|
Total Liabilities |
|
$ |
1,093,401 |
|
|
$ |
197,403 |
|
Total Stockholders’ Deficit |
|
$ |
(921,572 |
) |
|
$ |
(169,197 |
) |
Total Liabilities and Stockholders’ Deficit |
|
$ |
171,829 |
|
|
$ |
28,206 |
|
CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS
The information contained in this report,
including in the documents incorporated by reference into this report, includes some statements that are not purely historical
and that are “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements
regarding our and their management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including
our financial condition, results of operations. In addition, any statements that refer to projections, forecasts or other characterizations
of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,”
“believes,” “continue,” “could,” “estimates,” “expects,” “intends,”
“may,” “might,” “plans,” “possible,” “potential,” “predicts,”
“projects,” “seeks,” “should,” “would” and similar expressions, or the negatives
of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in
this report are based on current expectations and beliefs concerning future developments and the potential effects on the parties
and the transaction. There can be no assurance that future developments actually affecting us will be those anticipated. These
that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking
statements, including the following forward-looking statements involve a number of risks, uncertainties (some of which are beyond
the parties’ control) or other assumptions.
RISK FACTORS
The shares of our common stock being issued
in the offering are highly speculative and should be purchased only by persons who can afford to lose the entire amount invested
in the common stock. Before purchasing any of the shares of common stock, you should carefully consider the following factors
relating to our business and prospects. If any of the following risks occur, our business, financial condition or operating results
could be materially adversely affected. In such case, you may lose all or part of our investment. You should carefully consider
the risks described below and the other information in this prospectus before in investing in our common stock.
RISKS RELATED TO OUR BUSINESS
Our independent registered public accounting
firm has issued a going concern opinion. There is substantial uncertainty that we will continue operations in which case you could
lose your investment.
In their report-dated January
30, 2015, our independent registered public accounting firm, Salberg & Company, P.A., stated that our consolidated financial
statements for the years ended March 31, 2014 and 2013, were prepared assuming the Company will continue as a going concern but
there is substantial doubt that we can continue as an ongoing business. For the years ended March 31, 2014 and 2013, our net loss
was $363,929 and $823,445. Additionally, we had net cash used in operations of $161,801 and $288,456 for the years ended March
31, 2014 and 2013, respectively, and an accumulated deficit and stockholders’ deficit of $8,243,601 and $169,197, respectively,
at March 31, 2014. We will need to generate significant revenue in order to achieve profitability and we may never become profitable.
The going concern explanatory paragraph in the report of the independent registered public accounting firm emphasizes the uncertainty
related to our business as well as the level of risk associated with an investment in our common stock. To implement our plan
of operations we require a minimum funding of $1,380,000 for the next twelve months.
We have a limited operating history and our business prospects
are difficult to evaluate.
We have a limited operating history in our
current business plan. As such, there is little information to evaluate our business and its prospects that you can rely on to
make an investment decision. Our prospects must be considered due to our limited history, our high working capital needs, exposure
to operating losses and the uncertainties and difficulties that are common with companies that are implementing new business models
in the online shopping arena. Some of the principal risks and difficulties we expect to encounter include our ability to:
· |
Increase product mix and user base of our website; |
· |
Further develop our software; |
· |
Expand the site’s functionality; |
· |
Develop management tools within the software application to manage data;
|
· |
Raise sufficient capital to finance further development and expansion
of our website; and |
· |
Develop and adapt to competitive pressures by efficiently
executing our business plan and developing techniques to compete with our competitors. |
Should we fail to achieve the above goals,
our revenues, results of operations and brand name will be negatively affected, which may result in the loss of your entire investment.
We expect to incur losses in the
future.
Based upon our current plans, we expect
to incur operating losses in future periods due to $480,000 of expenses during our 12-month plan of operations. Our revenue levels
and financing to fund our plan of operations are uncertain. Should we fail to generate sufficient revenues and/or obtain financing
to sustain our operations, you will lose your entire investment.
Our operating results may fluctuate
and/or be negatively affected due to various factors
Our operating results are likely to fluctuate
and/or be negatively affected due to:
· |
The level of acceptance of the online shopping community
of our website and buying and selling collectibles and memorabilia; |
· |
Fluctuations in the demand for our services and
products; |
· |
Amount and timing of operating costs and capital
expenditures relating to expansion of our operations; |
· |
Competition from large online shopping platforms
such as eBay and Amazon as well as new and existing online shopping companies; |
· |
Competition from new forms of authentication processes
that may require less capital and human resources; |
· |
Our ability to enhance the attractiveness and functionality
of our website and improve and increase our products and services mix; |
· |
Changing customer preferences; and |
· |
General economic conditions. |
Any one or a combination of the above factors
could negatively affect our operations, revenues and operating results.
If we do not attract users who purchase
or sell products on our site on a cost effective basis, our results of operations will be negatively affected.
To succeed, we must develop a user base and
continue to attract and retain a large number of users, as sellers and buyers on a cost-effective basis. We will rely on a variety
of methods to attract new users, including search engine optimization, advertising banners, advertising by key search words, affiliate
marketing and email that direct potential users to our website. If we are unable to effectively use our future marketing initiatives
or the cost of such initiatives were to significantly increase or our platform does not satisfy our existing users, we may be
unable to attract new customers or retain existing customers on a cost-effective basis and our revenues and results of operations
will be negatively affected.
If our expenditure estimates are erroneous,
our business may fail and you will lose your entire investment.
Our success is dependent upon the accuracy
of our management’s estimates of expenditures to complete the development, launch, and customer acquisition necessary to
sustain the business. If such estimates are erroneous or inaccurate we may be unable to successfully carry out our business plan,
which may result in the failure of our business and loss of your entire investment.
Our business model may be insufficient
to ensure our success in our intended market.
Our survival is currently dependent upon the
success of our efforts to gain market acceptance of our online website model, which is limited to collectibles and memorabilia
in sports, entertainment, and pop culture and represents a small segment in the overall collectible and memorabilia markets. Should
our target market not be responsive to our products and services, we may not have alternate services or products that we can offer
to ensure our survival.
The markets that we will serve are subject
to changing customer requirements, and new product/services introductions. If we are unable to enhance our existing services,
it could adversely impact our ability to attract and retain customers. As a result, competitors could erode our market position
through advancements. Broad acceptance of our services by customers will be critical to our future success, as will our ability
to perform services on a timely basis that meet changing customer needs. We may experience difficulties that could delay or prevent
enhancement of our website and successful marketing of our products and services.
We have engaged in
several businesses, all of which have been unsuccessful.
As
indicated on page 1 of this prospectus, we have engaged in several businesses, including the health and beauty sector, male and
female enhancement products, a female hair product, an online retail/e-commerce auction site and another online retail/e-commerce
site selling sports related items. Should we be unsuccessful with our new business model, you will lose your entire investment.
Our online shopping site that only sells
items that have been marked for authentication and or tracking purposes for collectibles and memorabilia is a new online website
experience and has inherent marketing risks.
Our online site that concentrates on sports,
entertainment, and pop culture related items and authentication services is a new service introduction to the online retail marketing
market and has not achieved market acceptance. There is no assurance that we will successfully promote this new online concept,
establish sufficient user activity, or overcome intense competitive pressures from major online competitors, such as eBay or Amazon.
Our prospects must be considered in light of the problems, delays, expenses and difficulties encountered by a new online site
for selling and buying of collectibles, a business model with limited operations, including problems relating to further development
of our software, marketing and obtaining financing for our operational plan. Any one or a combination of these factors could negatively
affect our results of operations and have a material adverse effect on our business.
We will have limited items for auction
or purchase on our website, most of which will be sports, entertainment and pop culture related.
Upon our website going live, we will have
a limited number of items for auction for sale on our website. If we fail to develop a robust diversified product mix, our revenues
and results of operations will be negatively impacted.
Should
we fail to secure a permanent agreement with Applied DNA Sciences or another authentication company, we will have to curtail our
business plan and our revenues and results of operation will be negatively impacted.
Our subsidiary, LegacyXChange, Inc., has an agreement with Applied DNA Sciences to provide a
“Mark” using their technology and work cooperatively to develop the logistical procedures to mark, follow chain
of custody, and authenticate “Marks” for a wide range of product surfaces, which agreement expires on April 30,
2015. Although it is our intent to negotiate and conclude a formal written contractual relationship to establish permanent
exclusivity with respect to Applied DNA’s plant DNA on an ongoing revenue share basis, there is no assurance that we
will secure such agreement. If we fail to conclude a permanent agreement with Applied DNA or secure an agreement with another
authentication service that will provide comparable services, we will be forced to limit our business plan to collectibles
and memorabilia, primarily consisting of sports, celebrity and pop culture related
items, without the benefit of offering marking and authentication services. This will result in significant curtailment of
our business plan, which will result in our revenues and results of operation being negatively affected and we may
even be forced to cease our business, in which case you will lose your entire investment.
There may be other companies that create
technology similar or better than the third party authentication technology we currently use for marking products.
Other companies may develop authentication
technologies that are more efficient in application and less costly to administer and manage. This may result in more intense
competition, which could have an effect on our revenue and competitiveness and cause our proposed business operations to fail.
If our third party authentication technology
provider terminates its business or it is sold or such provider terminates our relationship with it, our results of operations
will be negatively impacted.
If our third party provider of the technology
that we use for creating our “Marks”, advises us on how to apply these marks, and offer services to verify these marks,
goes out of business, discontinues providing these types of services, be sold, or we terminate our business relationship with
such third party provider for unforeseen reasons, which would have an immediate and adverse impact on our business operations
and may cause our business to fail.
Because our Chief Executive Officer has
limited experience managing an SEC Reporting Company that is publicly traded this could adversely impact our ability to comply
with the reporting requirements of US securities laws.
Our Chief Executive Officer has limited experience
managing an SEC Reporting Company that is publicly traded, which could impair our ability to comply with legal and regulatory
requirements such as those imposed by Sarbanes-Oxley Act of 2002. Such responsibilities include complying with federal securities
laws and making required disclosures on a timely basis. Any such reporting deficiencies, weaknesses or lack of compliance could
have a materially adverse effect on our ability to comply with Exchange Act reporting requirements. If we were to fail to fulfill
those obligations, our ability to continue as a public company would be in jeopardy and you could lose your entire investment.
Adam Wasserman, our chief financial officer,
does not dedicate 100% of his time to our business.
Adam Wasserman, our Chief Financial
Officer, provides services to us under an employment agreement, which permits him to provide services to other companies simultaneously.
Mr. Wasserman is Chief Executive Officer of CFO Oncall, Inc. and CFO Oncall Asia, Inc. (collectively “CFO Oncall”),
where he owns 80% and 100% of such businesses, respectively. All compensation paid to Mr. Wasserman is paid to CFO Oncall, Inc.
CFO Oncall provides chief financial officer services to various companies. Mr. Wasserman also serves as Chief Financial Officer
of Cleantech Solutions International, Inc. since December 2012, Pen Inc. since January 2015, Wally World Media, Inc. since November
2012, and other companies from time to time. Mr. Wasserman dedicates approximately 12% of his business time to us. In addition
to Mr. Wasserman’s time, CFO Oncall has full-time dedicated, professional employees that also assist Mr. Wasserman with
our financial matters and communication needs. Mr. Wasserman’s other projects may detract from the time he can spend on
our business.
If we are unable to attract new users and
retain existing users on a cost-effective basis, our business and results of operations will be adversely affected.
To succeed we must develop a user base and
continue to attract and retain a large number of users on a cost-effective basis. We will rely on a variety of methods to attract
new members, such as search engines, advertising banners, affiliate marketing and email that directs potential users to our website.
If we are unable to effectively use our future marketing initiatives or the cost of such initiatives were to significantly increase
or such initiatives or our efforts to satisfy our existing users are unsuccessful, we may be unable to attract new users or retain
existing users on a cost-effective basis and our revenues and results of operations will be negatively affected.
We will require additional capital to conduct
our operations and support business growth, which may have adverse consequences to our shareholders and which may be unavailable
or not be available on acceptable terms to us.
We anticipate that the minimum additional
capital necessary to fund our 12 month plan of operations will be approximately $1,380,000, including $480,000 for operating expenses
to be used for software and website development, general administrative expenses, business development, marketing costs, payments
due to Applied DNA pursuant to an a agreement, and public reporting company costs and includes $900,000 that we plan on spending
for items in our Plan of Operations as outlined below. Our planned expenses are contingent upon generating adequate revenues and
obtaining financing. At an operating burn rate of $40,000 per month for total expenses of $480,000 with available cash of only
$80,000, we presently have the ability to conduct our operations for only 2 months.
We will need to engage in equity or debt financings
to secure additional funds for those business purposes, which may have any one or all of the following consequences:
· |
If we raise additional funds through issuances of
equity or convertible debt securities, our existing stockholders could suffer significant dilution; |
· |
Any new securities, such as preferred shares, that
we issue could have rights, preferences and privileges superior to those of holders of our common stock; and |
· |
Any debt financing could include restrictive covenants
relating to our financial and operational matters, or related to any intellectual property rights, which may make it more
difficult to procure additional capital. |
We may be unable to obtain additional financing
on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when
we require it, our ability to continue to support our business growth and to respond to business challenges will be negatively
affected. Furthermore, if the amount of capital we are able to raise from financing activities, together with our revenues from
operations, is insufficient to satisfy our capital needs, we may have to reduce or even cease our operations. In either event,
your investment in our common stock will be adversely affected, and you could lose part or all of your investment.
Should we fail to establish, maintain and
increase our brand name recognition, our results of operations will be negatively affected.
We have little brand name recognition in the
e-commerce collectible and memorabilia industry. If we fail to attain, maintain and increase our brand name recognition, our results
of operations will be negatively affected.
Our processing, storage, use and disclosure
of personal data will expose us to risks of internal or external security breaches and could give rise to liabilities as a result
of governmental regulation, conflicting legal requirements or differing views of personal privacy rights.
The security of data when engaging in electronic
commerce is essential in maintaining consumer and supplier confidence in our services. Substantial or ongoing security breaches
whether instigated internally or externally on our systems or other Internet based systems could significantly harm our future
business. It is possible that advances in computer circumvention capabilities, new discoveries or other developments, including
our own acts or omissions, could result in a compromise or breach of customer transaction data.
Our website may experience slower response
times or interruptions as a result of increased traffic or other reasons. These delays and interruptions resulting from failure
to maintain Internet service connections to our site could frustrate visitors and reduce our future web site traffic.
We will manage our
website and e-commerce platform internally and as a result any compromise of our security or misappropriation of proprietary information
could have a material adverse effect on our business, financial condition and results of operations. We rely on encryption and
authentication technology licensed from third parties to provide the security and authentication necessary to effect secure Internet
transmission of confidential information, such as credit and other proprietary information. Advances in computer capabilities,
new discoveries in the field of cryptography or other events or developments may result in a compromise or breach of the technology
used by us to protect client transaction data. Anyone who is able to circumvent our security measures could misappropriate proprietary
information or cause material interruptions in our operations. We may be required to expend significant capital and other resources
to protect against security breaches or to minimize problems caused by security breaches. To the extent that our activities or
the activities of others involve the storage and transmission of proprietary information, security breaches could damage our reputation
and expose us to a risk of loss and/or litigation.
We cannot guarantee that our security measures
will prevent security breaches or attacks. A party (whether internal, external, an affiliate or unrelated third party) that is
able to circumvent our security systems could steal customer information or transaction data, proprietary information or cause
significant interruptions in our operations. For instance, from time to time, companies have experienced “denial-of-service”
type attacks that have made portions of websites slow or unavailable for periods of time. We may need to expend significant resources
to protect against security breaches or to address problems caused by breaches, and reductions in website availability and response
time could cause loss of substantial business volumes during the occurrence of any such incident. Security breaches could result
in negative publicity, damage our reputation, expose us to risk of loss or litigation and possible liability and subject us to
regulatory penalties and sanctions. Security breaches could also cause customers and potential customers to lose confidence in
our security, which would have a negative effect on the value of our brand.
We also face risks associated with security
breaches affecting third parties conducting business over the Internet. Consumers generally are concerned with security and privacy
on the Internet, and any publicized security problems could inhibit the growth of the Internet and, therefore, our services as
a means of conducting commercial transactions. Additionally, security breaches at third parties such as supplier or distributor
systems upon which we may rely could result in negative publicity, damage our reputation, expose us to risk of loss or litigation
and possible liability and subject us to regulatory penalties and sanctions.
In our processing transactions, we will receive
and store a large volume of personally identifiable data. We could be adversely affected if legislation or regulations are expanded
to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations
in ways that negatively affect our business, results of operations and financial condition.
We may be unable to keep pace with technologies
that impact our e-commerce industry
The markets in which we will compete are characterized
by rapidly changing technology, evolving industry standards, consolidation, frequent new service announcements, introductions
and enhancements and changing consumer demands. We may not be able to keep up with these rapid changes. In addition, these market
characteristics are heightened by the emerging nature of the Internet. As a result, our future success will depend on our ability
to adapt to rapidly changing technologies, to adapt our services to evolving industry standards and to continually improve the
performance, features and reliability of our service in response to competitive service offerings and the evolving demands of
the marketplace. In addition, the widespread adoption of new internet, networking or telecommunications technologies or other
technological changes could require us to incur substantial expenditures to modify or adapt our services or infrastructure.
We may have issues related to “Marks”
we have applied to items, as well as have problems identifying these “Marks”.
The technology, protocols, and procedures
used in creating, applying, and verifying the Marks may not prevent damage to the marks in creation, application, or verification,
which may cause financial and/or brand name recognition to be negatively impacted, which may result in negatively affecting our
business, and you may lose all of your investment.
Users that sell or buy on our site may
act fraudulently to profit from a transaction, or we may suffer considerable financial losses if too many items sold on the site
are returned.
A seller or a buyer
may attempt to manipulate our processes for making a transaction and thereby profit by:
· |
listing items for sale that are registered in our
system, but not shipping the same item to a buyer; |
· |
by claiming to have shipped an item that hasn’t
shipped and receiving payments for such erroneous shipments; |
· |
buyers claiming to not have received shipments that
have been received, or having payments rescinded by their credit cards or banks after payments are made; |
· |
sellers selling items that are counterfeit; and |
· |
a variety of other unforeseen ways either party
can attempt to defraud us and the other party to the transaction. |
Further, we will
be guaranteeing the authenticity of items sold on the site with a 100% money back guarantee; however, we may experience a large
amount of returned items, which require us to be reimbursed from payments made to the sellers of these items, which may be difficult.
Any one or a combination of the above could adversely affect our brand, financial results and ability to continue our operations.
We will depend on search engines to attract
a significant percentage of our customers, and if those search engines change their listings or our relationship with them deteriorates
or terminates, we may be unable to attract new customers, which would adversely affect our business and results of operations.
Many of our customers locate our website by
clicking through on search results displayed by search engines such as Google, which typically provide two types of search results,
algorithmic and purchased listings. Algorithmic listings cannot be purchased, and instead are determined and displayed solely
by a set of formulas designed by the search engine. Purchased listings can be purchased by advertisers in order to attract users
to their website. We rely on both algorithmic and purchased listings to attract a significant percentage of the customers we serve
to our website. Search engines revise their algorithms from time to time in an attempt to optimize their search result listings.
If search engines on which we rely for algorithmic listings modify their algorithms, this could result in fewer customers clicking
through to our website, requiring us to resort to other costly resources to replace this traffic, which, in turn, could reduce
our revenue and negatively impact our operating results, harming our business. If one or more search engines on which we rely
for purchased listings modifies or terminates its relationship with us, our expenses could rise, or our revenue could decline
and our business may suffer. The cost of purchased search listing advertising fluctuates and may increase as demand for these
channels grows, and any such increases could negatively affect our financial results. Search engines may choose to limit our advertising
due to changes in their policies, which may adversely affect our financial results.
If we are unable to replace credit card
payment processors and merchant accounts that have terminated our relationship with them, our results of operations will be negatively
impacted.
We will be accepting credit cards as a means
of payment for the sale of our products. If we are unable to find suitable credit card providers or an alternative method of payment
for our customers, our cash flow will be constrained and our sales may be effected which may have a material adverse effect on
our performance, financial condition and results of operations.
We may be unable to protect our
proprietary software.
Our business will be dependent upon our ability
to protect our proprietary software technologies and processes. Despite our efforts to protect our proprietary rights, unauthorized
parties may attempt to obtain and use proprietary information. Our efforts to protect our future proprietary software technologies
and processes are subject to significant risks, including that others may independently develop equivalent proprietary information
and techniques, gain access to our proprietary information, our proprietary information being improperly disclosed, or that we
may ineffectively protect our rights to unpatented trade secrets or other proprietary information.
There is no assurance that our future software
and technology systems will be able to handle increased traffic or implementation of changes to our website.
The satisfactory performance, reliability
and availability of our Website, transaction processing systems and network infrastructure are critical to our reputation and
our ability to attract and retain customers, as well as maintain adequate customer service levels. Our net sales depend on the
number of visitors who buy and sell on our Website and the volume of listings and sales we can handle. Unavailability of our website,
due from our server provider, or an inability to process listings and sales in real time could also adversely affect consumer
perception of our brand name. We may experience periodic system interruptions from time to time. If there is a substantial increase
in the volume of traffic on our Website or the number of listings or sales placed by customers, we will be required to expand
and upgrade further our technology, transaction processing systems and network infrastructure. There can be no assurance that
we will be able to accurately project the rate or timing of increases, if any, in the use of our Website or expand and upgrade
our systems and infrastructure to accommodate such increases on a timely basis. In order to remain competitive, we must continue
to enhance and improve the responsiveness, functionality and features of our Website, which is particularly challenging given
the rapid rate at which new technologies, customer preferences and expectations and industry standards and practices are evolving
in the online commerce industry. Accordingly, we redesign and enhance various functions on our Website on a regular basis, and
we may experience instability and performance issues as a result of these changes.
Because we are small and we have limited
capital, our operations may be negatively impacted, which will increase the risks in investing in our common stock.
Because we are small and have limited capital,
our operations may be negatively impacted, as follows:
· |
We may have to limit our marketing and advertising
activities; and |
· |
We may have to limit our business development, which
may require us to restrict the variety and amount of products offered for sale on our site. |
An investment in our common stock is characterized
by a high degree of risk. Investors should take caution when considering our limited revenues, lack of earnings, and lengthy plans
for business development and expansion.
We may incur substantial losses in the
future as we expand our operations and invest in our website
We will incur costs related to advertising
our website and offering new product categories for sale. When making investments to grow our user base and to expand our website’s
capabilities, it is likely that we will incur costs for a prolonged period prior to generating revenues, if any. The foregoing
costs and expenses will likely give rise to substantial near-term operating losses and may prevent us from achieving profitability
for an extended period of time. We expect to rely on equity and debt financing to fund potential operating losses and other cash
requirements until we are able to generate larger profits from operations. We may experience negative cash flow, which will hamper
current operations and prevent our planned expansion. We may be unable to attain, sustain or increase profitability on a quarterly
or annual basis in the future, which could require us to scale back or terminate our operations.
In the event that key management personnel
leave us, our operations and results of operations could be negatively impacted.
Because we are almost entirely dependent on
the efforts of our sole officer and director, William Bollander, and 3 other individuals working on designing and coding the website,
and developing business relationships, their departures could have a material adverse effect on our business We do not maintain
key man life insurance on William Bollander.
We may be subject to charge-backs, credit
limits, and other unanticipated credit interruptions with credit card processors and online payment processors.
In the event that we sell products on our
website to customers that are either dissatisfied with purchases, deny the charges, are victimized by fraud, or otherwise dispute
purchases with credit providers, we may not receive payment from credit card and online payment processors. In addition, we may
be subject to credit limits, credit interruptions, minimum deposits, or other limitations imposed by credit card processors and
online payment providers. Charge-backs, credit limits, credit interruptions, minimum deposits, or other credit limitations will
adversely affect our cash flow and profitability. In addition, it may cause operational disruptions or cause us to cease operations
entirely. In the event that we are faced with the aforementioned credit issues from credit card processors and online payment
processors, you could lose your investment. Credit card processors may change policies and not offer their services for online
platforms that allow users to offer items for sale for others to buy in a direct purchase sites, or substantially increase rates
charged per transaction, which may adversely affect our business model.
A reduction in spending due to economic
downturns could result in a decrease in demand for our products.
If national retail sales levels decrease due
to a broader economic downturn, discretionary spending and as a result, the demand for our services and products would likely
decline. This decrease could reduce our opportunity for growth, increase our marketing and sales costs, and reduce our sales volume
and force us to receive lower fees for our services, which could reduce our revenue and operating results.
Because our business operates in the retail
industry, primarily in collectible and memorabilia items, we are subject to changes in industry trends and customer preferences,
which may adversely affect our results of operations.
Changes in customer preferences for products
may make the products that we offer for sale less desirable to potential buyers. If customers lose interest in the products that
are offered on our site, we will receive less bidding activity and therefore lower fees, also, if customer trends put a lower
value on these collectibles and memorabilia, our revenue fees will by lower, and as a result, may adversely affect our revenues,
cash flow, balance sheet and results of operations.
Competition from new and existing competitors
within our industry could have an adverse effect on our results of operations.
The electronic sports, entertainment, and
pop culture commerce industry and the online shopping industry generally are highly competitive. Our principal competitors include
local and international companies capable of competing effectively in our markets; most of which possess substantially greater
financial and other resources than we do, such as eBay, Amazon, and Steiner Sports Memorabilia, which have substantially more
resources with which to operate. In addition to online retailers, we also face intense competition from conventional brick-and-mortar
retailers selling collectibles and memorabilia, and other retailers that sell sports and entertainment products. Brick-and-mortar
retailers may pose a substantial risk to our business by potentially offering lower prices, more convenience and better customer
service. Additionally, our larger competitors may be able to devote greater resources to developing, promoting and selling their
products and services. We may also face increased competition due to the entry of new competitors offering authentication processes
for collectibles and memorabilia. As a result of this competition, our sales and revenues may be adversely affected or force us
to curtail or abandon our business plan, in which case you would lose your entire investment in our common stock.
Our success depends on the continued growth
and acceptance of email as a communications tool and the related expansion and reliability of the Internet infrastructure. If
consumers do not continue to use email or alternative communications tools gain popularity, demand for our email marketing products
may decline.
The future success of our business depends
on the continued and widespread adoption of email as a primary means of communication. Security problems such as “viruses,”
“worms” and other malicious programs or reliability issues arising from outages and damage to the Internet infrastructure
could create the perception that email is not a safe and reliable means of communication, which would discourage businesses and
consumers from using email. Use of email by businesses and consumers also depends on the ability of ISPs to prevent unsolicited
bulk email, or “spam,” from overwhelming consumers’ inboxes. In recent years, ISPs have developed new technologies
to filter unwanted messages before they reach users’ inboxes. In response, spammers have employed more sophisticated techniques
to reach consumers’ inboxes. Although companies in the anti-spam industry have started to address the techniques used by
spammers, if security problems become widespread or frequent or if ISPs cannot effectively control spam, the use of email as a
means of communication may decline as consumers find alternative ways to communicate. In addition, if alternative communications
tools, such as those available on social networking sites, gain widespread acceptance, the need for email may lessen. Any decrease
in the use of email would reduce demand for our email-marketing product and harm our business.
Our long-term financial condition is dependent
on the continued and secure use of the Internet.
Our business is dependent upon the continued
availability of the Internet to users in a secure environment. Should the infrastructure that provides the essential functions
necessary for the operation of the Internet experience temporary or prolonged failure, our business will not be able to operate.
Furthermore, should the security of making online purchases become compromised, consumer confidence in making online transactions
could decrease, and as a result, our business operations and financial condition could be adversely affected.
RISKS RELATED TO OUR STATUS AS AN EMERGING
GROWTH COMPANY AND IF THIS REGISTRATION STATEMENT IS DECLARED EFFECTIVE, AN SEC REPORTING ISSUER
Reporting requirements under the Exchange
Act and compliance with the Sarbanes-Oxley act of 2002, including establishing and maintaining acceptable internal controls over
financial reporting, are costly and may increase substantially.
The rules and regulations of the SEC require
a public company to prepare and file periodic reports under the Exchange Act, which will require that the Company engage legal,
accounting, auditing and other professional services. The engagement of such services is costly. Additionally, the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that we design, implement and maintain adequate
internal controls and procedures over financial reporting. The costs of complying with the Sarbanes-Oxley Act and the limited
technically qualified personnel we have may make it difficult for us to design, implement and maintain adequate internal controls
over financial reporting. In the event that we fail to maintain an effective system of internal controls or discover material
weaknesses in our internal controls, we may not be able to produce reliable financial reports or report fraud, which may harm
our overall financial condition and result in loss of investor confidence and a decline in our share price.
As a public company, we will be subject to
the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act of 2010 and other applicable securities
rules and regulations. Despite recent reforms made possible by the JOBS Act, compliance with these rules and regulations will
nonetheless increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and
increase demand on our systems and resources, particularly after we are no longer an “emerging growth company.” The
Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and
operating results.
We are working with our legal, accounting
and financial advisors to identify those areas in which changes should be made to our financial and management control systems
to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, disclosure
controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these
and other areas. However, we anticipate that the expenses that will be required in order to adequately prepare for being a public
company could be material. We estimate that the aggregate cost of increased legal services; accounting and audit functions; personnel,
such as a chief financial officer familiar with the obligations of public company reporting; consultants to design and implement
internal controls; and financial printing alone could be several hundred thousand dollars per year. In addition, if and when we
retain independent directors and/or add senior management, we may incur additional expenses related to director compensation and/or
premiums for directors’ and officers’ liability insurance, the costs of which we cannot estimate at this time. We
may also incur additional expenses associated with investor relations and similar functions, the cost of which we also cannot
estimate at this time. However, these additional expenses individually, or in the aggregate, may also be material.
In addition, being a public company could
make it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’
liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to
obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain
qualified persons to serve on our Board, our Board committees or as executive officers.
The increased costs associated with operating
as a public company may decrease our net income or increase our net loss, and may cause us to reduce costs in other areas of our
business or increase the prices of our products or services to offset the effect of such increased costs. Additionally, if these
requirements divert our management’s attention from other business concerns, they could have a material adverse effect on
our business, financial condition and results of operations.
We are an “emerging growth company,”
and any decision on our part to comply only with certain reduced disclosure requirements applicable to “emerging growth
companies” could make our common stock less attractive to investors.
We are an “emerging growth company,”
as defined in the JOBS Act, and, for as long as we continue to be an “emerging growth company,” we expect and fully
intend to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging
growth companies,” including, but not limited to, not being required to comply with the auditor attestation requirements
of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our
periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and shareholder approval of any golden parachute payments not previously approved. We could be an “emerging
growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our
annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined
in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates
exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date
on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
In addition, Section 107 of the JOBS Act also
provides that an “emerging growth company” can take advantage of the extended transition period provided in Section
7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth
company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We have elected to opt in to the extended transition period for complying with the revised accounting standards. We have elected
to rely on these exemptions and reduced disclosure requirements applicable to “emerging growth companies” and expect
to continue to do so.
Our internal control over financial reporting
does not currently meet the standards required by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain
effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a
material adverse effect on our business and stock price.
We previously have not been required to maintain
internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a)
of the Sarbanes-Oxley Act (“Section 404(a)”). Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in
accordance with GAAP. We are not currently in compliance with, and we cannot be certain when we will be able to implement the
requirements of Section 404(a). We may encounter problems or delays in implementing any changes necessary to make a favorable
assessment of our internal control over financial reporting. If we cannot favorably assess the effectiveness of our internal control
over financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified attestation
report on our internal controls, investors could lose confidence in our financial information and the price of our common stock
could decline.
Additionally, the existence of any material
weakness or significant deficiency would require management to devote significant time and incur significant expense to remediate
any such material weaknesses or significant deficiencies and management may not be able to remediate any such material weaknesses
or significant deficiencies in a timely manner. The existence of any material weakness in our internal control over financial
reporting could also result in errors in our financial statements that could require us to restate our financial statements causing
us to fail to meet our reporting obligations and cause stockholders to lose confidence in our reported financial information,
all of which could materially and adversely affect us.
RISKS RELATED TO OUR SECURITIES
We will issue additional shares of common
stock or derivative securities that will dilute the percentage ownership interest of our existing shareholders and may dilute
the book value per share of our common stock and adversely affect the terms on which we may obtain additional capital.
We will issue additional shares common stock
shares or derivative securities for any one or a combination of the following:
· |
Paying our officers, directors, consultants and
professionals; |
· |
Acquiring other companies that have compatible businesses; |
· |
Providing financing for our operations. |
Our authorized capital consists of 190,000,000
shares of common stock and 10,000,000 shares of preferred stock. Our Board of Directors has the authority, without action by or
vote of our shareholders, to issue all or part of the authorized shares of common stock for any corporate purpose, including for
the conversion or retirement of debt. We are likely to seek additional equity capital in the future as we develop our business
and expand our operations. Any issuance of additional shares of common stock or derivative securities, such as convertible promissory
notes, will dilute the percentage ownership interest of our shareholders and may dilute the book value per share of our common
stock. Additionally, the exercise or conversion of derivative securities could adversely affect the terms on which we can obtain
additional capital. Holders of derivative securities are most likely to voluntarily exercise or convert their derivative securities
when the exercise or conversion price is less than the market price for the underlying common stock. Holders of derivative securities
will have the opportunity to profit from any rise in the market value of our common stock or any increase in our net worth without
assuming the risks of ownership of the underlying shares of our common stock. It is possible that, due to additional share issuances,
you could lose a substantial amount, or all, of your investment.
Our Board of Directors may attempt to use
non-cash consideration to satisfy obligations, which would likely consist of restricted shares of our common stock. Our Board
of Directors has authority, without action or vote of the shareholders, to issue all or part of the authorized but unissued shares
of common stock. In addition, if a trading market develops for our common stock, we may attempt to raise capital by selling shares
of our common stock, possibly at a discount to market. These actions will result in dilution of the ownership interests of existing
shareholders, may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to
enhance existing management’s ability to maintain control because the shares may be issued to parties or entities committed
to supporting existing management.
Our shareholders
will experience significant dilution deriving from the conversion of convertible debt instruments.
In October and November
2014, we entered into 10% convertible promissory note agreements with 7 investors with an aggregate principal amount
of $400,000. 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 our common stock at a conversion
price for each common stock share of $0.02, resulting in a maximum conversion of 26,000,000 shares. Additionally, in the event
we fail to file an S-1 registration statement within 60 days following the completion of the Convertible Note 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 Notes shall then be convertible at the option of the Convertible Note Holders into shares of our
common stock at a conversion price equal to the lesser of $0.02 per share or a 25% discount to our average
closing bid price of the Parent Company’s stock for the five days immediately prior to the day upon which we receive a written
conversion notice from the Holder for any portion of the Notes. We determine the completion of the offering to be January 1, 2015
as this was the date that we received the final completed and signed subscription agreement. The Penalty Conversion terms
remain in effect until such time as the S-1 registration statement Shares is declared effective by the SEC. Should the convertible
note investors convert the notes into 26,000,000 shares and should they receive penalty shares from breaches of the foregoing
terms, our shareholders will experience significant dilution of their common stock shares.
Our common stock is considered a penny
stock, which may be subject to restrictions on marketability, so you may be unable to sell your shares.
We may be subject now and in the future to
the SEC’s “penny stock” rules if our shares of Common Stock sell below $5.00 per share. Penny stocks generally
are equity securities with a price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized
risk disclosure document prepared by the SEC, which provides information about penny stocks and the nature and level of risks
in the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson, and monthly account statements showing the market value of each
penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation
information must be given to the customer orally or in writing prior to completing the transaction and must be given to the customer
in writing before or with the customer’s confirmation.
In addition, the penny stock rules require
that prior to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment
for the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome
and may reduce purchases of any offerings and reduce the trading activity for shares of our Common Stock. As long as our shares
of Common Stock are subject to the penny stock rules, the holders of such shares of Common Stock may find it more difficult to
sell their securities.
Because
we do not intend to pay any dividends on our common stock, investors seeking dividend income or liquidity should not purchase
shares of our common stock in this offering.
We do not
currently anticipate declaring and paying dividends to our stockholders in the foreseeable future. It is our current intention
to apply net earnings, if any, in the foreseeable future to increasing our working capital. Prospective investors seeking or needing
dividend income or liquidity should, therefore, not purchase our common stock. We currently have no material revenues and a history
of losses, so there can be no assurance that we will ever have sufficient earnings to declare and pay dividends to the holders
of shares of our common stock, and in any event, a decision to declare and pay dividends is at the sole discretion of our board
of directors, which currently do not intend to pay any dividends on shares of our common stock for the foreseeable future.
Shares of our stock may suffer from low
trading volume and wide fluctuations in market price.
Should FINRA approve of our common stock for
quotation on the OTCQB, the value of our common stock could be affected by actual or anticipated variations in our operating results,
changes in the market valuations of other similarly situated companies serving similar markets, announcements by us or our competitors
of significant acquisitions, strategic partnerships, collaborations, joint ventures or capital commitments; adoption of new accounting
standards affecting our industry; additions or departures of key personnel; introduction of new products or services by us or
our competitors; actual or expected sales of our common stock or other securities in the open market; conditions or trends in
the market in which we operate; and other events or factors, many of which are beyond our control.
Shareholders may experience wide fluctuations
in the market price of our securities. These fluctuations may have a negative effect on the market price of our securities and
may prevent a shareholder from obtaining a market price equal to the purchase price such shareholder paid when the shareholder
attempts to sell our securities in the open market. In these situations, the shareholder may be required either to sell our securities
at a market price, which is lower than the purchase price the shareholder paid, or to hold our securities for a longer period
of time than planned. An inactive market may also impair our ability to raise capital by selling shares of capital stock and may
impair our ability to acquire other companies by using common stock as consideration or to recruit and retain managers with equity-based
incentive plans.
FINRA sales practice requirements may limit
a stockholder’s ability to buy and sell our stock.
FINRA has adopted rules that require broker-dealers
to have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative
low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information
about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of
these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at
least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common
stock, which may have the effect of reducing the level of trading activity and liquidity of our common stock. Further, many brokers
charge higher transactional fees for penny stock transactions. As a result, fewer broker-dealers may be willing to make a market
in our common stock, which may limit your ability to buy shares of our common stock.
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares offered
by the selling shareholders.
DILUTION
Not applicable, as we are not offering any shares in this registration
statement. All shares are being offered on behalf of our selling shareholders.
Our shareholders
will experience significant dilution deriving from the conversion of convertible debt instruments by our seven selling security
holders as detailed in our Risk Factor Section at page 21.
SELLING SHAREHOLDERS
The Seven Convertible Promissory Notes
In
October and November 2014, we entered into convertible promissory note agreements with 7 investors (the “Investors”),
providing the issuance of a 10% convertible promissory notes (the “Convertible Notes”) with an aggregate principal
amount of $400,000. The Convertible Notes are due and payable on the third anniversary of the date of issuance through October
2017. 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 our common stock at a conversion price
for each share of common stock equal to $0.02. 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. In the event a registration statement
is not filed either by us within 60 days following the completion 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 Notes shall then be
convertible at the option of the Holder into shares of the Company’s common stock, par value $.001 per share at a conversion
price equal to the lesser of $0.02 per share or a 25% discount to the average closing bid price of our common stock for the five
days immediately prior to the day upon which we receive a written conversion notice from the Holder for any portion of the Notes.
The Penalty Conversion shall remain in effect until such time as a registration statement from us, including the Conversion Shares
is declared effective by the SEC. In connection with the issuance of these Convertible Notes above, we determined that the terms
of the Convertible Notes include a down-round provision under which the conversion price and exercise price could be affected
by future equity offerings that we undertake or contain terms that are not fixed monetary amounts at inception. To date, the fair
value of these derivative instruments of $419,000 was recorded as a liability which was adjusted to $970,000 for the increase
in fair value as of December 31, 2014. Any gains and losses recorded from changes in the fair value of the liability for derivative
contract was recorded as a component of other income/(expense) in the accompanying consolidated statements of operations. At March
19, 2015, the principal amount due under these convertible notes was $400,000.
The following table summarizes our transactions
with the convertible note holders who are our Selling Security Holders.
Date of Investment |
| Name |
| Amount
Loaned |
10 | /15/2014 | |
Ascendant Partners LLC | |
$ | 95,000 | |
10 | /21/2014 | |
Dina M Palermo/Jeffrey Smith JTWROS | |
$ | 75,000 | |
10 | /23/2014 | |
Eisenberg Family Foundation | |
$ | 150,000 | |
10 | /23/2014 | |
Plantation Partners LLC | |
$ | 25,000 | |
11 | /05/2014 | |
Gerald E Commissiong | |
$ | 5,000 | |
11 | /11/2014 | |
DTMFS LP | |
$ | 25,000 | |
11 | /19/2014 | |
David Stefansky | |
$ | 25,000 | |
| | |
| |
| | |
Total | | |
| |
$ | 400,000 | |
Selling Shareholders
The seven selling security holders named in
this prospectus are offering 26,000,000 common shares reflecting their conversion rights of 26,000,000 shares pursuant to seven
convertible promissory notes, 20,000,000 shares of which correspond to the aggregate principal loan amount of $400,000 and 6,000,000
shares that correspond to interest accrued should the notes be carried to maturity. We will not receive any proceeds from the
sale of shares being sold by selling security holders.
The number of shares underlying the convertible
notes represents the principal amount of the notes of $400,000 divided by the $0.02 conversion price of the convertible notes.
The number also includes interest of 10% on the notes mentioned in (ii) above through the notes’ maturity date of November
19, 2017 divided by the conversion price of the convertible notes.
The following table sets forth the names of
the selling security holders, the number of shares of Common Stock beneficially owned by each of the selling security holders
as of January 20, 2015 (the shares being offered hereby are being registered to permit public secondary trading, and the selling
security holders may offer all or part of the shares for resale from time to time. However, the selling security holders are under
no obligation to sell all or any portion of such shares nor are the selling security holders obligated to sell any shares immediately
upon effectiveness of this prospectus. The selling security holders have furnished all information with respect to share ownership.
|
|
Shares |
|
|
|
Amount |
|
Percent |
|
|
Beneficially |
|
|
|
Beneficially |
|
Beneficially |
|
|
Owned |
|
|
|
Owned |
|
Owned |
|
|
Prior to |
|
Shares to |
|
After |
|
After |
Name |
|
|
Offering |
|
|
|
be Offered (1) |
|
|
|
Offering(2) |
|
|
|
Offering(2) |
|
DTMFS, LP (3) |
|
|
0 |
|
|
|
1,625,000 |
|
|
|
0 |
|
|
|
0 |
% |
Eisenberg Family Foundation (4) |
|
|
0 |
|
|
|
9,750,000 |
|
|
|
0 |
|
|
|
0 |
% |
Gerald Commissiong |
|
|
0 |
|
|
|
325,000 |
|
|
|
0 |
|
|
|
0 |
% |
Ascendant Partners, LLC (5) |
|
|
0 |
|
|
|
6,175,000 |
|
|
|
0 |
|
|
|
0 |
% |
Plantation Partners LLC (6) |
|
|
0 |
|
|
|
1,625,000 |
|
|
|
0 |
|
|
|
0 |
% |
David Stefansky |
|
|
0 |
|
|
|
1,625,000 |
|
|
|
0 |
|
|
|
0 |
% |
Dina M. Palermo/Jeffrey Smith (Joint Tenants
with rights of survivorship |
|
|
0 |
|
|
|
4,875,000 |
|
|
|
0 |
|
|
|
0 |
% |
Total |
|
|
0 |
|
|
|
26,000,000 |
|
|
|
0 |
|
|
|
0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) This Registration Statement covers the
resale by seven selling security holders of a maximum of 26,000,000 common stock shares reflecting their conversion rights collectively
to 26,000,000 shares pursuant to seven convertible promissory notes. In the past 3 years, there have been no business or other
types of relationships between any of the seven selling security holders or their control persons and us. The conversion price
of the shares was negotiated with the Note Holders who are our selling security holders and said conversion price was within the
range of trading prices during the period of negotiation. None of the selling security shareholders or their control persons or
beneficial owners are broker-dealers or affiliated with broker-dealers.
(2) Assuming the sale of all shares registered
hereunder.
(3) DTMFS, LP’s principal is Brian Herman
who has sole voting and investment control over the shares.
(4) Eisenberg Family Foundation’s principal
is Solomon Eisenberg who has sole voting and investment control over the shares.
(5) Ascendant Partners, LLC’s principal
is Richard Galterio who has sole voting and investment control over the shares.
(6) Plantation Partners, LLC principal is
Frederic W. Sommer III who has sole voting and investment control over the shares.
PLAN OF DISTRIBUTION
Shares Offered by the Selling Stockholders
The selling security
holders may sell some or all of their shares up to 26,000,000 at a fixed price of $0.02 per share until our shares are quoted
on the OTC Markets and thereafter at prevailing market prices or privately negotiated prices. The 26,000,000 shares are to be
issued pursuant to seven convertible promissory notes with an aggregate principal balance of $400,000, incurring interest
at 10% per annum and are convertible into common shares at $0.02 per share.
Prior to being quoted on the OTCQB, shareholders
may sell their shares in private transactions to other individuals. Our common stock is currently quoted on OTC Pinks under the
symbol “TRTB”. We will be filing to obtain a quotation on the OTCQB. In order to be quoted on the OTC Markets, a market
maker must file an application and other necessary documents with the Financial Industry Regulatory Authority (“FINRA”)
on our behalf in order to make a market for our common stock. We have not yet engaged a market maker to file such application...
There cannot be any assurance that such an application for quotation will be approved. However, sales by selling security holder
must be made at the fixed price of $0.02 until a market develops for the stock.
Once a market has developed for our common
stock, the shares may be sold or distributed from time to time by the selling stockholders, who may be deemed to be underwriters,
directly to one or more purchasers or through brokers or dealers who act solely as agents, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices, at negotiated prices or at fixed prices, which may be changed.
The distribution of the shares may be effected in one or more of the following methods:
• |
ordinary brokers transactions, which may include
long or short sales, |
|
|
• |
transactions involving cross or block trades on any securities
or market where our common stock is trading, market where our common stock is trading, |
|
|
• |
through direct sales to purchasers or sales effected through
agents, |
|
|
• |
through transactions in options, swaps or other derivatives
(whether exchange listed of otherwise), or exchange listed or otherwise), or |
|
|
• |
any combination of the foregoing. |
In addition, the selling stockholders may
enter into hedging transactions with broker-dealers who may engage in short sales, if short sales were permitted, of shares in
the course of hedging the positions they assume with the selling stockholders. The selling stockholders may also enter into option
or other transactions with broker-dealers that require the delivery by such broker-dealers of the shares, which shares may be
resold thereafter pursuant to this prospectus. None of the selling security holders are broker-dealers or affiliates of broker
dealers.
We will advise the selling security holders
that the anti-manipulation rules of Regulation M under the Exchange Act may apply to sales of shares in the market and to the
activities of the selling security holders and their affiliates. In addition, we will make copies of this prospectus (as it may
be supplemented or amended from time to time) available to the selling security holders for the purpose of satisfying the prospectus
delivery requirements of the Securities Act. The selling security holders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities, including liabilities arising under the Securities
Act.
Brokers, dealers, or agents participating
in the distribution of the shares may receive compensation in the form of discounts, concessions or commissions from the selling
stockholders and/or the purchasers of shares for whom such broker-dealers may act as agent or to whom they may sell as principal,
or both (which compensation as to a particular broker-dealer may be in excess of customary commissions). Neither the selling stockholders
nor we can presently estimate the amount of such compensation. We know of no existing arrangements between the selling stockholders
and any other stockholder, broker, dealer or agent relating to the sale or distribution of the shares. We will not receive any
proceeds from the sale of the shares of the selling security holders pursuant to this prospectus.
DETERMINATION OF
OFFERING PRICE
We are not selling our shares directly to the public pursuant to
his registration statement. Only our Selling Security Holders will be selling their shares to the public.
Our Common Stock is quoted on the OTC Pinks. The offering
price of the shares of Common Stock offered by the Selling Security Holders was determined by the Conversion price of $0.02 provided
in the Convertible Note Agreements with the Selling Security Holders. The Note Agreements’ contract price was a negotiated
price between the Note Holders and us; however, the trading price of the shares on the OTC Pinks from September 2014 to October
2014 (from $0.01 to $0.04) was a factor in determining the Note Agreement contract price.
The offering price of the
shares of our Common Stock does not necessarily bear any relationship to our book value, assets, past operating results, financial
condition or any other established criteria of value. The facts considered in determining the offering price were our financial
condition and prospects, our limited operating history and the general condition of the securities market.
Although our Common Stock is not listed on a public exchange, we
will be filing to obtain a quotation on the OTCQB. In order to be quoted in the OTCQB marketplace, a market maker must file an
application on our behalf in order to make a market for our Common Stock. There can be no assurance that a market maker will agree
to file the necessary documents with FINRA, which regulates the OTCQB marketplace, nor can there be any assurance that such an
application for quotation will be approved.
In addition, there is no assurance that our Common Stock will trade
at market prices in excess of the initial offering price as prices for the Common Stock in any public market which may develop
will be determined in the marketplace and may be influenced by many factors.
INTEREST OF NAMED
EXPERTS
The legality of the shares offered under
this registration statement is being passed upon by Frederick M. Lehrer, Esquire, Attorney and Counselor at Law. Frederick M.
Lehrer, Esquire owns 200,000 restricted shares of our common stock.
The consolidated financial statements as of
March 31, 2014 and 2013 and for the years ended March 31, 2014 and 2013 included in this prospectus and the registration statement
have been audited by Salberg & Company P.A., an independent registered public accounting firm, to the extent and for the periods
set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance upon such
report given upon the authority of said firm as experts in auditing and accounting.
DESCRIPTION
OF BUSINESS
Industry
Background
Online
Shopping
The
collectible and memorabilia business is a multi-billion-dollar industry, ranging from sports related products to home, business
and personal goods. Many companies specialize in authenticating items of value, using expert opinions, holograms, videos, and
other means of guaranteeing items are real. We intend to enhance the existing market for authentic memorabilia utilizing anti-counterfeiting
technologies to enable each item sold on the site to have a “Mark” applied to either it’s surface or sealed
packaging around the item. These “ Marks” in most cases will be invisible unless a dye is added to ensure visibility
by the naked eye. “Marks” will either contain Plant DNA or Rare Earth Minerals, depending upon the particular items
surface. The “Marks” will be applied through the use of either ink or a small brush. These “Marks” will
adhere to surfaces through the lifespan of the item, and in most cases cannot be removed or counterfeited unless the item is destroyed.
These “Marks” will provide the basis for tracking ownership and ongoing verification to ensure the item has been “Marked
“ by LegacyXChange. Our site will offer 2 classifications of products for sale; Original and Secondary, products sold in
both classes will be “Marked”. Original are “Marked” before they are sold, Secondary are “Marked”
once they have been sold. Every item sold and “Marked” on our site will be registered in our database, assuring buyers
the ability to authenticate “Marks” and track repetitive sales of items on the site, to allow for a revenue share
program.
We will provide marking plus authentication
services for Original items only, which are those that we document as authentic when they are created. This includes following
a chain of custody for the “Mark”, marking the item, guaranteeing the creators identity is validated, and ownership
registered in the LegacyXChange database. Chain of custody requires control of the “Mark” throughout the creation
process, not allowing the “Mark” to be used for any other purpose than to “Mark” the specified items.
This includes our designated handler for the mark and a video of the handling of the “Mark”. Most of these items will
either already be in the possession of the Originator or will be supplied by LegacyXChange, such as rookie cards, photos, team
jerseys, and other sports related merchandise.
With respect to Secondary items, those
items that already exist in the marketplace, there is no forum under which we may witness the creation of such items to enable
us to authenticate such items. Accordingly, we will only provide marking services and not authentication services for secondary
items. We will mark secondary items for the first time when they are sold on our site, once a sale has been completed. The items
will be sent to our offices for marking, and once marked will be sent to the buyer. We reserve the right to terminate any transaction
for a secondary item if such item is deemed counterfeit, either through outside authentication services or through information
acquired that suggests an item may not be authentic. These items generally consist of memorabilia and collectibles associated
with the Originator, usually bearing their name, such as signed sports cards, autographed photos and clothing.
These “Marks” are easily applied
through ink in a pen or through use of a small applicator such as a swab or nail polish brush, invisible to the naked eye. The
“Marks” can be applied anywhere on an item. The cost of the “mark” application and the labor involved
is negligible, less than ten cents per application, and will be performed in seconds at either our own facility or in the field.
These marking costs will be offset by revenue generated from the sale of items sold on our site.
Ebay (eBay) currently
is the leading platform for selling memorabilia and collectibles items, but does not provide technology for ensuring authenticity
of an item. SportsMemorabilia.com is one of the leading online sites for selling authenticated merchandise, using many of the
available processes for guaranteeing authenticity, such as expert opinion, holograms, videos, signed affidavits.
Ebay (eBay) generated
$16 billion in net sales for fiscal 2013, with an estimated $110 billion in total value of items sold in fiscal 2014 in the US.
Numerous competitors have developed sites to compete with various portions of eBay’s overall marketplace, including ETSY,
Bonanza, Yard Sale, and Sell Simple. We will be focused primarily on sports, pop culture and celebrity related collectibles and
memorabilia.
SportsMemorabilia.com
has partnered with many of the leading sports collectible authentication companies, including Collectors Universe, Inc. (PSACard),
Steiner Sports Inc., Beckett Media LLC, and JSA, James Spence Authentication. Their primary methodology for ensuring authenticity
is holograms and first person witness, which are commonly used by industry leaders.
Authentication
Services
In the past
5 years, significant improvements have been made in the ability to utilize technology to affix a “Mark” to an item,
having the mark stay affixed for the life of the product. Applied DNA Sciences has entered into a Heads Of Agreement with our
subsidiary LegacyXChange, Inc. to provide a “Mark” using their technology and work cooperatively to develop the logistical
procedures to mark, follow chain of custody, and authenticate “Marks” for a wide range of product surfaces. The
significant difference between DNA and hologram technology, is that one cannot physically see DNA; it is incorporated
into the substrate, whereas one can see a hologram. With the availability of digital printing systems, counterfeiters are
able to re-create or replicate the “look of holograms”. The agreement provides LegacyXChange with the development
of a Mark by Applied DNA Sciences to be used by LegacyXChange on an ongoing basis. The Heads of Agreement expires in May 2015;
however, it is our intent to work with Applied DNA Sciences towards a formal written contractual relationship to establish permanent
exclusivity with respect to the plant DNA described below on an ongoing revenue share basis. As of the date of this registration
statement, the services to be performed pursuant to the agreement have not been met and we have not paid the installments due
pursuant to the agreement to Applied DNA Sciences and we believe that under the terms of the agreement that we do not have an
obligation to pay the installments until the services have been completed by Applied DNA Sciences. There is no assurance we will
be able complete a permanent agreement with Applied DNA Sciences.
Applied DNA’s development
efforts have yielded a flexible and durable marker with all the accuracy provided by nature. Their primary product, called
SigNature DNA is based on full, double stranded plant DNA, and provides forensic power and protection for a wide array of
applications. Highly secure, robust and durable, SigNature DNA markers are an ingredient that can be used to fortify brand
protection efforts; mark, track and convict criminals; and strengthen supply chain security. Custom DNA sequences can be
embedded into a wide range of host carriers including ink, varnish, thread, laminates and metal coatings. These items can then
be tested for the presence of SigNature DNA Markers through optical screening or a forensic level authentication. Hundreds
of millions of SigNature DNA marks now exist in the public domain on items ranging from consumer product packaging to microcircuits
to guitars.
We will also incorporate other authentication
technologies for “Marks”, including Rare Earth Minerals, which can be applied through visible or invisible ink, and
can be identified through a hand held scanner that only reads Rare Earth Mineral “Marks” when placed above the “Mark”
on an item.
We obtained
the foregoing information from sites for each of the following companies:
Business
Online
Shopping Platform
We intend to operate an e-commerce business
through an online shopping website at LegacyXChange.com. As of March 17, 2015, the
site is approximately 80% completed, including all of the underlying coding for the database structure, security, registration,
and many other key components, as well as the basic design, functionality, and content for the site.
The site will be
focused on selling items that can either be won through a conventional time specified bidding process or purchased at an
amount set by the seller and agreed to by the buyer. Some auctions will allow reserve pricing, which provides the seller the ability
to set a minimum amount for the auction to be won. We will potentially feature a wide variety of products for sale, including
collectibles and memorabilia of sports items, pop culture, entertainment, coins, music and movies, stamps, jewelry, home furnishings,
clothes, and business product equipment and parts.
The listing, selling,
and buying processes require a user to establish a User Account before engaging in any trading activity, and which requires name,
address, contact information, and credit card or banking information only when a transaction of money changing hands takes place.
Account Information will be automatically available through multiple touch points throughout the process, with little or no requirement
to duplicate information input. Users will be provided easy access to all merchandise, terms and policies, storefronts, and account
information.
Access to the site
will be worldwide, provided the domain is not restricted in any country. For the first year, Original products will primarily
be offered from sellers within the United States. Secondary items will be able to be listed for sale from anywhere in the world.
We intend to acquire
listings of products through the development of business relationships with entities already selling merchandise in other online
formats, regardless of whether they are using alternative counterfeiting measures, and which may include companies and individuals.
We are currently working to develop relationships with possible Originators of new memorabilia directly, from sports and entertainment
celebrities to leading brands.
The platform
will provide an ongoing revenue share model for sellers of an item being sold for the first time and buyers of an item that is
being sold for the first time, for the specific item, provided the product is traded again on our site. Our website is
planned to be operational and publicly available by approximately May 2015 or sooner.
Authentication and Verification Services
All marking, authentication
and verification services for the first year will be provided solely in the U.S.
We will provide marking and authentication
services for Original items only, which are those that we document as authentic when they are created. This includes following
a chain of custody for the “Mark”, marking the item, guaranteeing the creators identity is validated, and ownership
registered in the LegacyXChange database. Chain of custody requires control of the “Mark” throughout the creation
process, not allowing the “Mark” to be used for any other purpose than to “Mark” the specified items.
This includes a designated handler for the mark and a video of the handling of the “Mark”.
Secondary items, which are those that already
exist in the marketplace with no way for us to witness creation, will only be marked the first time they are sold on the site,
once a sale has been completed. The items will be sent to our offices for marking, and once marked will be sent to the buyer.
We reserves the right to terminate any transaction for a Secondary item if such item is deemed counterfeit, either through outside
authentication services or through information acquired that suggests an item may not be authentic.
The “Mark” will be placed either
on the item or on the packaging surrounding the item. If applied to the packaging, it will also be embedded in the ink used in
a tamper proof bar code attached to packaging over the item. All items sold on the site will be affixed
with a product identification number, which will allow for tracking of ownership. Identification numbers will be attached directly
to an item through placement of a bar code directly on the items packaging, as well as on documentation that we provide for each
item.
The site will also contain
a list of known counterfeiters in various product categories that are not allowed to post items for sale on the site. This list
has been created by other leading experts and information provided by competing online sites.
Categories of Items to be Sold
Original
An original item
is documented and marked at time of origin and also includes items which were created without our involvement at the time of origin,
but are in the possession of the person identified with the value creation of the item, and who will attest to the authenticity
of the item.
Secondary
Secondary items have
no way of proving their original authenticity. Secondary items will be marked once they have been sold on the site.
How our Website will Work at LegacyXChange.com
The site will provide multiple
formats for buying merchandise, including auctions, reserve pricing (reserve pricing allows the seller to indicate a minimum price
required for item to be sold), and fixed pricing. The platform will provide an ongoing revenue share model for sellers of the
first time an item is sold and buyers of an item the first time it is sold, for the specific item, provided the product is traded
on our site.
The site will offer
a guarantee that provides both sellers and buyers comfort that products offered for sale can be marked and verified easily, in
a cost effective manner, at no charge. All items sold on the site will be 100% guaranteed, if a buyer does not believe an item
is authentic, it can be returned to the seller for a complete 100% refund.
Markings on items will be done either on
our premises or in the case of creation of Original items, at a designated location that we agree upon. Verification of “Marks”
will take place either in our facilities or at Applied DNA Sciences, depending upon the type of “Mark” used. All items
will be accompanied with a bar code that can be read through a conventional bar code reader. The aforementioned bar code will
provide the buyer the preliminary knowledge that the item most probably has been marked by LegacyXChange.
Every item on the
site will receive a dedicated serial number, created by the company, which will enable the respective item to be marked, sold,
and tracked.
The site will provide
a format for listing auctions of merchandise, with features that specify type of auction, pricing, amount of time until the sale
closes, and search and marketing tools to enhance sales. A photo and a brief description of the item must accompany all items.
Buyers of products
on the site will have the ability to rate the sellers that sold them their item, creating a rating system for future buyers.
The site will guarantee
buyers only pay for items received, funds will be withheld to sellers until either proof of shipment or delivery has been received.
If a buyer receives an item that is determined to not be a marked item, buyer will receive a refund and seller will be charged
back the full value received for the item.
First time sellers (those that sell an item
the first time it is offered on LegacyXChange.com) and those that purchase an item the first time it is sold on the site, will
receive an ongoing revenue share every time the respective item is sold on the site after they have sold it. The ongoing revenue
share will range from 3% for Original items to 1% for Secondary items. For example, if someone is the first time seller of an
Original item on the site, anytime that item sells again on the site, the Original seller will receive 3% of the sale price, with
a maximum of $300 per item per time sold. If someone is the first time seller of a Secondary item on the site, they will receive
1% of all future sales, not to exceed $100 per item per time sold. Any person that purchases any item on the site the first time
it is sold, will receive 1% of all future sales of the item, with a maximum of $100 per item per time sold, once they sell the
item.
Selling
Sellers are required to either have items
marked prior to listing, if Original, or once they are sold if they are being sold for the first time as Secondary. The site provides
registration for any item, which includes a designated serial number unique to every item registered. Once an item is registered,
and marked, if Original, it can be listed for sale. If an item is Secondary and being sold for the first time, it can be registered
and listed for sale without being marked prior to listing. All auctions are allowed a maximum of 30 days for listing. Ownership
transference takes place each time an item is sold, with new owners creating their own account.
Payments for revenue share for any items sold
will be sent on the first day of the following month after the sale, payments will be made automatically to either a PayPal account
or some other form of secure transfer of funds. Their respective accounts will provide up to date information regarding serial
numbers of all items eligible for future revenue share.
Buying
Buyers are required to create an account prior
to bidding or purchasing any item. Purchasing an item requires payment via either a credit card or PayPal. Refunds are provided
if an item is never shipped or deemed counterfeit, or do not have a mark.
The
site will provide multiple formats for buying merchandise, including auctions, reserve pricing, and fixed pricing:
Auctions
generally offer Buyers the ability to increase offers in specified increments, with a specific ending time for the last bid. If
the Seller has not set a minimum bid for purchase, referred to as a Reserve Price, the last bidder wins the item. If the Seller
indicates a Reserved Price, the last offer must be equal to or greater than the Reserve price to win the item.
Many
items will be offered for a fixed price, with a timeframe to make the purchase, based upon inventory.
Payments for revenue share for any items sold
will be sent on the first day of the following month after the sale, payments will be made automatically to either a PayPal account
or some other form of secure transfer of funds. Their respective accounts will provide up to date information regarding serial
numbers of all items eligible for future revenue share.
Shipment of Products
Products will be primarily shipped directly
from the seller to the buyer, except in cases where the item must first be sent to us for marking, in which case the item will
be shipped to the buyer from us once it has been marked. . Seller customarily charges buyer for all freight.
Business Strategies
We intend to acquire
listings of products through the development of business relationships with entities already selling collectibles and memorabilia
merchandise in other online formats, through the general public offering items for sale, and with possible originators of new
memorabilia directly, from sports and entertainment celebrities to leading brands.
Our goal is to acquire
sellers that will list products for sale, the more products for sale, the more viable the site for potential buyers. We prefer
to have a wide variety of product categories, which can attract a wider audience, and at the same time developing strength in
a few categories, especially products of higher value.
Marketing Strategies
We will be targeting those that currently
engage in full time or part time participation in buying and selling memorabilia, as well as those that are in need of selling
something of value or interested in purchasing an item of potential personal or financial value.
Our marketing will include attracting potential
users through value driven offerings, including discounts to our basic cost structure, and access to upgraded features for selling.
It will include advertising in print and television, as well as attending numerous trade shows, advertising online, working with
leading brands and celebrities, and promoting items on the site of particular high value.
We plan to use the following marketing methods:
· |
Google Ad Words/other web search engines/social media sites |
· |
Recognition through the sports world by engaging professional athletes,
retired or active. |
· |
Attending and sponsoring events with celebrities. |
· |
Attending trade shows peculiar to specific product categories |
· |
Television and print advertising |
Target Market
Our target market is male and female between
the ages 18 and 65 that are currently engaged or are interested in selling and purchasing products of value online.
Brand Recognition and Characteristics
E-commerce websites are characterized by many
participants that offer very similar products. Most e-commerce websites focus on heavy marketing, brand recognition and quality
service for differentiation. However, despite these efforts, the industry remains highly commoditized. Therefore, our strategy
is to offer a buying/selling experience that is unique to e-commerce websites, with the ability to be assured of product authentication,
verification, and tracking, plus a revenue share for the sellers and buyers of items the first time they are sold or purchased
We believe that the combination of our marking and verification methods with Original merchandise from desired providers will
be a unique feature that is attractive to the online shopping community. Our goal is to establish and expand a customer base that
returns to our website on a regular basis to enter the selling and buying process.
Competition
The competition for all retail business as
well as e-commerce business is intense. While our most direct competition results from other e-commerce websites, we also compete
with conventional brick-and-mortar retail businesses, as well as companies that sell consumer products through catalogues. Although
we operate in a niche market with some esoteric components, many of our competitors have substantially more financial and operational
resources than us. For instance, eBay, and Amazon, have substantially more resources with which to operate.
We are competing against other e-commerce
retailers and conventional retailers from a position of extreme disadvantage due to capital constraints, lack of operating history,
limited brand recognition, very few barriers to entry for new participants, lack of contracts with sellers, and limited operational
and tangible assets with which to compete. The primary methods of competition in our industry include pricing tactics, offering
quality products, building brand name recognition through effective sales and marketing campaigns, and establishing customer loyalty
by providing superior customer service.
Revenue Generation
We will charge the following fees as the circumstances dictate:
a. We will charge fees for listing auctions,
with the first 50 auctions each month free, with a $0.30 charge thereafter, unless seller chooses to pay a flat monthly fee of
$24.99 for unlimited listings, listings for all original merchandise is free.
b. We will offer high volume and high value
item sellers the ability to create stores within our site, charging either monthly fees or yearly-prepaid fees at a discount to
monthly fees. Fees will range from $17.99 to $199.99 per month depending upon the commitment of the seller.
c. We will charge varying fees for
selling items on the site, ranging from 10% to 15% per item, depending upon whether items are sold as Original or Secondary.
d. We will offer sellers the ability to enhance
the visibility of their products through an advertising plan available for any item offered for sale on the site. This plan is
based upon page views of the product when it is placed on a particular page, allowing a seller to designate a total amount of
dollars to be spent advertising their product while it is for sale, and requiring choosing a specific dollar amount to be paid
per page view. Each time a page is viewed that contains the item advertised, the user will be charged the designated per page
view amount, reducing the total amount to be spent each time the page is viewed.
e. We will offer a Flash Sale section, which
allows any seller to discount the offer price of their item from the original price, provided they pay for posting their item
for sale into this section. Postings are paid based upon a pre-calculated value for a specific page view of the product when it
is placed on a particular page. The seller must designate a total amount of dollars to be spent placing their product while it
is for sale in the Flash Sale area, and requires choosing a specific dollar amount to be paid per page view. Each time a page
is viewed that contains the item advertised, the user will be charged the designated per page view amount, reducing the total
amount to be spent each time the page is viewed. LegacyXChange calculates the weighted value of each page based upon previous
users agreed upon fees and amount of times page is viewed.
Government Regulation
We are subject to general business regulations
and laws, as well as regulations and laws specifically governing the Internet, e-commerce, and electronic devices. Existing and
future laws and regulations may impede our growth. These regulations and laws may cover taxation, privacy, data protection, pricing,
content, copyrights, distribution, mobile communications, electronic device certification, electronic waste, electronic contracts
and other communications, competition, consumer protection, web services, the provision of online payment services, unencumbered
Internet access to our services, the design and operation of website, and the characteristics and quality of products and services.
It is not clear how existing laws governing issues such as property ownership, libel, and personal privacy apply to the Internet,
e-commerce, digital content, and web services. Jurisdictions may regulate consumer-to-consumer online businesses, including certain
aspects of our seller programs. Unfavorable regulations and laws could diminish the demand for our products and services and increase
our cost of doing business.
Environmental Issues
We do not believe that our business is subject to environmental
regulations or will otherwise be affected by environmental regulation.
Employees
We currently have 1 full time employee, William
Bollander, our Principal Executive Officer/Director. Additionally, we have a part time office associate and we employ our Chief
Financial Officer on a part-time basis. Subject to adequate funding and growth of our customer base and transactions on the
site, during the next 12 months, we plan to hire 10 additional employees on a full time basis, as follows: (a) 2 accounting
personnel; (b) 4 customer service personnel; (c) 2 business development personnel; (d) 1 programming personnel: and (e) 1 account
manager.
Seasonal Business
We do not anticipate
our business to be impacted by seasonal business throughout the year, with the exception for the Christmas holiday, highly visible
collectible events or specific offerings of extremely valuable memorabilia.
Research and Development
Since our inception,
we have had no research and development expenses.
Patents and
Intellectual Property/Trademarks/Licenses/Franchises
We do not currently
own any patents and have no intention of applying for patents. We currently have no trademarks. We are not a party to any license,
royalty or franchise agreements.
DESCRIPTION OF
PROPERTY
Our executive offices
are located at 301 Yamato Road, Suite 1240, Boca Raton, Florida. We have a sublease between TDL Centers, Inc., the Lessor, and
us as the Lessee. Our lease became effective on February 1, 2012. We pay rent of $600 per month and our lease is on a month-to-
month basis. We have access to a conference/meeting room for 8 hours per month. Our office space consists of 120 square feet and
is sufficient for our use. This also provides us with a receptionist to answer our calls Monday thru Friday from 9am to 5pm eastern.
LEGAL PROCEEDINGS
From time to time, we may become involved
in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our
business, financial condition or operating results.
MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Common Stock
We are authorized to issue 190,000,000 shares
of Common Stock, $0.001 par value per share. Currently we have 36,951,165 shares of Common Stock issued and outstanding.
Each share of Common Stock shall have one
(1) vote per share for all purposes. Our Common Stock does not provide preemptive, subscription or conversion rights and there
are no redemption or sinking fund provisions or rights. Our Common Stock holders are not entitled to cumulative voting for election
of the Board.
Preferred Stock
We are authorized to issue 10 million preferred
shares, no shares of which have been issued.
Warrants
There are 1,048,315
outstanding warrants to purchase our securities. Each Warrant entitles the Holder upon exercise to one Common Stock Share. The
Warrant Exercise Price is $0.40 with a 5-year term.
Options
There are no outstanding options to purchase
our securities.
Transfer Agent and Registrar
Our transfer agent is Empire Stock Transfer,
1859 Whitney Mesa Drive, Henderson, Nevada 89014.
Holders of Capital Stock:
As of the date of this Registration Statement,
we have 85 holders of our Common Stock.
Rule 144 Shares
As of the date of this Registration Statement,
we do not have any shares of our Common Stock that are currently available for sale to the public in accordance with the volume
and trading limitations of Rule 144.
Stock Option Grants
We do not have a stock option plan in place
and have not granted any stock options at this time.
Market Information
Our shares of common stock are quoted on the
Pink Sheets under the symbol “TRTB”. The following table sets forth the range of reported high and low closing bid
quotations for our common stock for the fiscal quarters indicated. These quotations reflect inter-dealer prices, without retail
markup, markdown or commission, and may not represent actual transactions. Consequently, the information provided below may not
be indicative of our common stock price under different conditions.
|
|
High |
|
Low |
Fiscal Year 2015
|
|
|
|
|
|
|
|
|
First Quarter Ended March 31, 2015 $0.08 $0.02 |
|
|
|
|
|
|
|
|
Fourth Quarter ended December 31, 2014 |
|
$ |
.09 |
|
|
$ |
.02 |
|
Third Quarter ended September 30, 2014 |
|
$ |
.04 |
|
|
$ |
.01 |
|
Second Quarter ended June 30, 2014 |
|
$ |
.05 |
|
|
$ |
.04 |
|
First Quarter ended March 31, 2014 |
|
$ |
.08 |
|
|
$ |
.07 |
|
Fiscal Year 2013 |
|
|
|
|
|
|
|
|
Fourth Quarter ended December 31, 2013 |
|
$ |
.08 |
|
|
$ |
.06 |
|
Third Quarter ended September 30, 2013 |
|
$ |
.08 |
|
|
$ |
.06 |
|
Second Quarter ended June 30, 2013 |
|
$ |
.19 |
|
|
$ |
.18 |
|
First Quarter ended March 31, 2013 |
|
$ |
.98 |
|
|
$ |
.98 |
|
Fiscal Year 2012 |
|
|
|
|
|
|
|
|
Fourth Quarter ended December 31, 2012 |
|
$ |
.42 |
|
|
$ |
.25 |
|
Third Quarter ended September 30, 2012 |
|
$ |
.49 |
|
|
$ |
.49 |
|
Second Quarter ended June 30, 2012 |
|
$ |
.55 |
|
|
$ |
.28 |
|
First Quarter ended March 31, 2012 |
|
$ |
.75 |
|
|
$ |
.51 |
|
DIVIDEND POLICY
We have not paid any cash dividends to our
shareholders. The declaration of any future cash dividends is at the discretion of our Board and depends upon our earnings, if
any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our
present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business
operations.
SHARES ELIGIBLE FOR
FUTURE SALE
As of March 18, 2015, we had 36,951,165 shares
of common stock outstanding. Of the 26,000,000 shares being registered by selling security holders, all such shares have not previously
been issued.
All shares sold in this offering will be freely
tradable without restriction or further registration under the Securities Act, unless they are purchased by our “affiliates,”
as that term is defined in Rule 144 promulgated under the Securities Act.
The outstanding shares of our common stock
not included in this prospectus will be available for sale in the public market as follows:
Public Float
There are 8,051,007 shares, which constitute
our public float.
Rule 144
In general, under Rule 144 as currently in
effect, once we have been subject to public company reporting requirements for 90 days, a person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who
has beneficially owned restricted securities within the meaning of Rule 144 for a least six months (including any period of consecutive
ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current
public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule
144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.
In general, under Rule 144 as currently in
effect, once we have been subject to public company reporting requirements for 90 days, our affiliates or persons selling shares
on behalf of our affiliates who own shares that were acquired from us or an affiliate of ours at least six months prior to the
proposed sale are entitled to sell upon expiration of the lock-up agreements described above, within any three-month period beginning
90 days after the date of this prospectus, a number of shares that does not exceed the greater of:
• |
1% of the number of shares
of common stock then outstanding, which will equal approximately shares immediately after this offering; or |
• |
the average weekly trading volume of the
common stock during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale. |
Sales under Rule 144 by our affiliates or
persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements
and to the availability of current public information about us.
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF OUR RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS INCLUDED
ELSEWHERE IN THIS REGISTRATION STATEMENT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR
OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE
OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS
OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE RISKS AND OTHER FACTORS
INCLUDE, AMONG OTHERS, THOSE LISTED UNDER “FORWARD-LOOKING STATEMENTS” AND “RISK FACTORS” AND THOSE INCLUDED
ELSEWHERE IN THIS REGISTRATION STATEMENT.
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial
condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to income
taxes, 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, expenses, assets and liabilities. Actual results
may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies
affect our more significant judgments and estimates used in the preparation of the consolidated financial statements.
Revenue Recognition
We recognize revenue when persuasive evidence
of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and
collectability is reasonably assured. Our specific revenue recognition policies are as follows:
• |
Product sales from the sale of beauty products,
which ceased in May 2013, and sales of products through the subsidiary’s auction website are recognized when the product
is shipped to the customer and title is transferred. |
· |
Under the Company’s auction program, consumers are required
to purchase bid packages directly from the Company. Proceeds from the sales of bid packages are recorded as deferred revenue
until recognizable as discussed below. In connection with the sale of bid packages, the Company utilized the User-based
Revenue Model (“UBRM”). The UBRM is based on the presumption that the period of delivery for the bid package is
the estimated average user life, which was estimated by the Company to be 60 days. Consequently, revenue from the sale of
bid packages is recognized ratably over the estimated user life of 60 days. |
Stock-based compensation
Stock-based compensation is accounted for
based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of
the cost of employee and director services received in exchange for an award of equity instruments over the period the employee
or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires
measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value
of the award.
Pursuant to ASC Topic 505-50, for share-based
payments to consultants and other third parties, compensation expense is determined at the “measurement date” and
establishes that share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received
or the fair value of the equity instruments issued, whichever is more reliably measurable. During fiscal 2013 and 2014 and the
nine months ended December 31, 2014, we raised funds from the sale of our common stock at an average price of $.0551 per share
to all investors. In general, the number of shares to be issued to consultants and service providers were negotiated using $.0551
per common share, the same price as investors. Additionally, no other fair value was indicated by the respective consultant or
service provider through issuance of bills or time sheets and, on the date of the contract, no market conditions or performance
commitments existed. Accordingly, we concluded that the fair value of the equity instruments issued in a share-based payment transaction
was a more reliable fair value than the fair value of goods or services received. Additionally, we considered the volume and share
price of shares traded in the open market on the OTC market and concluded that an active market was not present for the Company’s
shares and the price paid by third party investors of $.0551 was a more reliable price that the quoted market price. The expense
is recognized over the service period of the award. The Company initially records compensation expense based on the fair value
of the award at the reporting date.
Convertible Promissory Notes and Related Embedded
Derivatives
We account for the embedded conversion option contained
in convertible instruments 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 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 was determined using the Binomial Option Pricing Model. On
the initial measurement date, the fair value of the embedded conversion option derivative was recorded as a derivative liability
and was allocated as a debt discount up to the proceeds of the notes with the remainder 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
was recorded as a component of other income/(expense) in the accompanying consolidated statements of operations.
Recent Accounting Pronouncements
In May 2014, the FASB issued Accounting Standards
Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all-existing revenue recognition
guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred
to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services.
ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, more judgment and estimates may be required
within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods
beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective
approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical
expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date
of adoption (which includes additional footnote disclosures). Early adoption is not permitted. The adoption of this guidance is
not expected to have a material impact on our consolidated financial statements.
In June 2014, the FASB issued Accounting Standards
Update No. 2014-12, Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of
an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging
Issues Task Force) (ASU 2014-12). The guidance applies to all reporting entities that grant their employees share-based payments
in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service
period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service
period is treated as a performance condition. For all entities, the amendments in this Update are effective for annual periods
and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective
date is the same for both public business entities and all other entities. The adoption of this guidance is not expected to have
a material impact on our consolidated financial statements.
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 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 adoption of this guidance is not expected to have a material impact on
our consolidated financial statements.
RESULTS OF OPERATIONS
Comparison of Results of Operations for
the Years Ended March 31, 2014 and 2013
Revenue and gross profit (loss)
For the years ended March 31, 2014 and 2013,
we generated limited revenue of $35,240 and $79,498, and gross profit (loss) of $1,072 and (21,769), respectively, which related
primarily to the sale of remaining inventory of beauty products.
Operating expenses
For the years ended March 31, 2014 and 2013,
operating expenses amounted to $535,564 and $753,134, respectively, a decrease of $217,570 or 28.9%. Operating expenses consisted
of the following:
|
|
For the Years
Ended March 31, |
|
|
2014 |
|
2013 |
Compensation and related taxes |
|
$ |
134,235 |
|
|
$ |
124,543 |
|
Professional fees |
|
|
200,797 |
|
|
|
376,891 |
|
Impairment loss |
|
|
— |
|
|
|
220,400 |
|
Other selling, general and administrative |
|
|
57,053 |
|
|
|
79,902 |
|
|
|
$ |
392,085 |
|
|
$ |
801,736 |
|
· |
For the years ended March 31, 2014 and 2013, compensation
and related taxes amounted to $134,235 and $124,543, respectively, an increase of $9,692 or 7.8%. The increase during the
year ended March 31, 2014 is mainly attributable to an increase in our CEO’s salary and related payroll taxes of approximately
$13,000 due to the increase in his annual salary from $100,000 to $120,000, which was effective on January 1, 2013,
offset by a decrease in compensation for our director, Chris Jarvis, of approximately $3,000. We expect administrative salaries
to increase in 2015 as we increase our operations. |
· |
For the years ended March 31, 2014 and 2013, professional
fees amounted to $200,797 and $376,891, respectively, a decrease of $176,094 or 46.7% primarily attributable to a decrease
in consulting and legal fees as operations slowed in the 2014 period due to a lack of working capital. We expect professional
fees to increase as we incur significant costs associated with our public company reporting requirements, costs associated
with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other
rules implemented by the Securities and Exchange Commission. |
· |
For the year ended March 31, 2013, we had an impairment
loss of $220,400 related to a write off of the fair value of common shares issued in connection with the acquisition of beauty
product intangible assets. We did not have corresponding expense in the year ended March 31, 2014. |
· |
For the years ended March 31, 2014 and 2013, other
selling, general and administrative expenses amounted to $57,053 and $79,902, respectively, a decrease of $22,829 or 28.6%.
The decrease is mainly attributable to a decrease in car expense of approximately $12,000 and a decrease in travel and entertainment
expense of approximately $17,000, offset by an increase in other miscellaneous items of approximately $7,000. |
Other income (expense)
For the year ended March 31, 2014, we recognized
a gain from settlement of legal service fee of $34,594. Pursuant to a settlement agreement, on December 13, 2013, we issued 750,000
shares of common stock to a law firm for the settlement of $75,919 of legal fees payable. The shares were valued at total fair
value of $41,325 by using the recent sale price of the common stock on the date of grant of $0.0551 per common share. We recognized
a gain from settlement of service fee of $34,594, which represented the difference between legal fees due of $75,919 and the fair
value of shares, issued of $41,325. For the year ended March 31, 2014, we recognized interest expense of $7,510 for our two outstanding
loans and we did not incur any interest expense for the year ended March 31, 2013.
Net loss
As a result of the factors described above,
our net loss for the years ended March 31, 2014 and 2013 was $363,929 and $823,445, respectively, or a net loss per
common share of $0.01 and $0.04 (basic and diluted), respectively.
Comparison
of Results of Operations for the Three and Nine Months Ended December 31, 2014 and 2013
Revenue and gross profit (loss)
For the three
months ended December 31, 2014 and 2013, we generated limited revenue of $79 and $135, and gross loss of $611 and $694,
respectively, which related primarily to the sale of remaining inventory of beauty products.
For the nine months ended December 31, 2014
and 2013, we generated limited revenue of $437 and $35,960, and gross (loss) profit of $(1,789) and $2,022, respectively, which
related primarily to the sale of remaining inventory of beauty products.
Operating expenses
For the three
months ended December 31, 2014 and 2013, operating expenses amounted to $220,439 and $75,714, respectively, an increase of $144,725
or 191.1%. For the nine months ended December 31, 2014 and 2013, operating expenses amounted to $423,976 and $274,812, respectively,
an increase of $149,164 or 54.3%. Operating expenses consisted of the following:
|
|
For
the Three Months Ended
December 31, |
|
For
the Nine Months Ended
December 31, |
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
Compensation and related taxes |
|
$ |
36,325 |
|
$ |
31,500 |
|
$ |
122,887 |
|
$ |
96,704 |
Professional fees |
|
|
149,887 |
|
|
33,297 |
|
|
244,151 |
|
|
138,362 |
Other selling, general and administration |
|
|
34,227 |
|
|
10,917 |
|
|
56,938 |
|
|
39,746 |
|
|
$ |
220,439
|
|
$ |
75,714
|
|
$ |
423,976
|
|
$ |
274,812
|
· | For
the three months ended December 31, 2014 and 2013, compensation and related taxes amounted
to $36,325 and $31,500, respectively, an increase of $4,825 or 15.3%. The increase during
the three months ended December 31, 2014 is mainly attributable to an increase in bonus
paid to our CEO of approximately $1,000 and an increase in payroll taxes of approximately
$4,000. For the nine months ended December 31, 2014 and 2013, compensation and related
taxes amounted to $122,887 and $96,704, respectively, an increase of $26,183 or 27.1%.
The increase during the nine months ended December 31, 2014 is mainly attributable to
an increase in stock-based salary paid to our director of approximately $18,000 and an
increase in payroll taxes of approximately $8,000. We expect administrative salaries
to increase in 2015 as we increase our operations. |
| |
· | For
the three months ended December 31, 2014 and 2013, professional fees amounted to $149,887
and $33,297, respectively, an increase of $116,590 or 350.2%. The increase during the
three months ended December 31, 2014 is primarily attributable to an increase in accounting
fees of approximately $50,000, an increase in consulting fees of approximately $58,000,
an increase in marketing expenses of approximately $14,000, offset by a decrease in other
miscellaneous items of approximately $5,000. For the nine months ended December 31, 2014
and 2013, professional fees amounted to $244,151 and $138,362, respectively, an increase
of $105,789 or 76.5%. The increase during the nine months ended December 31, 2014 is
mainly attributable to an increase in accounting fees of approximately $60,000, an increase
in legal fees of approximately $16,000, an increase in marketing expenses of approximately
$15,000 and an increase in other miscellaneous items of approximately $15,000. We expect
professional fees to increase as we incur significant costs associated with our public
company reporting requirements, and costs associated with newly applicable corporate
governance requirements, including requirements under the Sarbanes-Oxley Act of 2002
and other rules implemented by the Securities and Exchange Commission. |
· | For
the three months ended December 31, 2014 and 2013, other selling, general and administrative
expenses amounted to $34,227 and $10,917, respectively, an increase of $23,310 or 213.5%.
The increase during the three months ended December 31, 2014 is primarily attributable
to an increase in travel and entertainment expenses of approximately $17,000 and an increase
in other miscellaneous items of approximately $6,000. For the nine months ended December
31, 2014 and 2013, other selling, general and administrative expenses amounted to $56,938
and $39,746, respectively, an increase of $17,192, or 43.3%. The increase during the
nine months ended December 31, 2014 is mainly attributable to the increase in travel
and entertainment expenses of approximately $17,000. |
Other income (expense)
Other income (expense) includes
interest expense, initial derivative expense, loss from change in fair value of derivative liabilities and loss on settlement
of loans. For the three months ended December 31, 2014, total other expense amounted to $615,853 as compared to total other expense
$4,755 for the three months ended December 31, 2013, an increase of $611,098. For the nine months ended December 31, 2014, total
other expense amounted to $621,363 as compared to total other expense $4,755 for the nine months ended December 31, 2013, an increase
of $616,608. The increase in other expense for the three and nine months ended December 31, 2014 as compared to the three and
nine months ended December 31, 2013 was attributable to:
| • | an
increase in interest expense of approximately $24,000 and $24,000 respectively. mainly
due to the increase in interest from our convertible notes payable, and, |
| | |
| • | an
increase in initial derivative expense of approximately $36,000 and $36,000 related to
the embedded conversion option contained in our convertible notes payable, and an increase
in loss from change in fair value of derivative liabilities of approximately $551,000
and $551,000, respectively, for which we did not have any corresponding expense during
the three and nine months ended December 31, 2013. 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
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 was determined using the Binomial Option Pricing Model.
On the initial measurement date, the fair value of the embedded conversion option derivative
of $419,000 was recorded as a derivative liability and was allocated as a debt discount
up to the proceeds of the notes ($383,125) with the remainder ($35,875) charged to current
period operations as initial derivative expense. At December 31, 2014, and on the initial
measurements of the derivative liabilities, we valued the embedded conversion option
derivative liabilities resulting in a loss from change in fair value of derivative liabilities
of $551,000 for the three and nine months ended December 31, 2014 which was caused by
the effect of an increase in the our quoted stock price from the initial measurement
date and December 31, 2014 as determined using the Binomial Option Pricing Model. |
At December 31, 2014, and on the initial
measurements of the derivative liabilities, we valued the embedded conversion option derivative liabilities resulting in a loss
from change in fair value of derivative liabilities of $551,000 for the three and nine months ended December 31, 2014.
Net loss
As a result
of the factors described above, our net loss for the three months ended December 31, 2014 and 2013 was $836,903 and $81,163, respectively, or
a net loss per common share of $0.02 and $0.00 (basic and diluted), respectively. Our net loss for the nine months ended December
31, 2014 and 2013 was $1,047,128 and $277,545, respectively, or a net loss per common share of $0.03 and $0.01 (basic
and diluted), respectively.
Liquidity and Capital Resources
Liquidity is
the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise
operate on an ongoing basis. At December 31, 2014 and March 31, 2014, we had cash balances of approximately $149,000 and
$9,000, respectively.
Our working
capital deficit increased approximately $113,000 to working capital deficit of approximately $169,000 at March 31, 2014 from working
capital deficit of approximately $56,000 at March 31, 2013. The decrease in working capital is primarily attributable to
a decrease in cash of approximately $10,000, a decrease in prepaid expense of approximately $21,000, a decrease in prepaid salary
to officer of approximately $27,000, a decrease in inventories of approximately $29,000, an increase in loan payable of approximately
$20,000, an increase in advances for common stock purchases of approximately $113,500, an increase in accrued officer salary and
director fees of approximately $21,000 and an increase in due to shareholder of approximately $8,000, offset by a decrease in
accounts payable and accrued expenses of approximately $136,000.
Our
working capital deficit increased approximately $714,000 to working capital deficit of
approximately $883,000 at December 31, 2014 from working capital deficit of approximately $169,000 at March 31, 2014. The increase
in working capital deficit is primarily attributable to an increase in accounts payable and accrued expenses of approximately
$41,000, an increase in derivative liabilities of approximately $970,000, offset by an increase in cash of approximately $139,000,
a decrease in loans payable of approximately $20,000, a decrease in accrued officer salary and director fees of approximately
$11,000, a decrease in advances for common stock purchases of approximately $114,000, a decrease in due to shareholders of approximately
$8,000.
During the year ended March 31, 2013, we sold
a total of 6,953,709 shares of common stock to investors at an average price of $0.0551 per common share. During the fiscal year
ended March 31, 2013, we received cash proceeds of $298,180 from the sale of the shares and had a subscription receivable of $10,000,
which was collected in fiscal 2014.
During the fiscal year ended March 31, 2014,
we sold a total of 145,200 shares of common stock at an average price of $0.0551 per common share to investors. The proceeds received
by us from the sale of these shares were $8,000 in fiscal 2014.
During the period between April 1, 2014 and
the filing date of this report, we sold a total of 3,365,334 shares of common stock at an average price of $0.0551 per common
share to investors. The proceeds received by us from the sale of these shares were $185,420.
In October and November 2014, the Company
and 7 investors (the “Investors”) entered into convertible promissory note agreements, providing the issuance
of a 10% convertible promissory notes (the “Convertible Notes”) with an aggregate principal amount of $400,000. The
Convertible Notes are due and payable on the third anniversary of the date of issuance through October 2017. 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 $0.02. In the event a registration statement is not filed by either the Company within 60
days following the completion 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 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 a registration statement from the Company, including the Conversion
Shares is declared effective by the SEC. In connection with the issuance of these Convertible Notes above, the Company determined
that the terms of the Convertible Notes include 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.
Accordingly, under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in an Entity’s
Own Stock”, the convertible instruments shall be 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
was determined using the Binomial Option Pricing Model. On the initial measurement date, the fair value of the embedded conversion
option derivative of $419,000 was recorded as a derivative liability and was allocated as a debt discount up to the proceeds of
the notes ($383,125) with the remainder ($35,875) 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 was recorded as a component of other
income/(expense) in the accompanying consolidated statements of operations and totaled an expense of $551,000 through December
31, 2014.
Cash Flow
For the Year Ended March 31, 2014 and 2013
Net cash flow used in operating activities
was approximately $162,000 for the year ended March 31, 2014 as compared to net cash flow used in operating activities of approximately
$288,000 for the year ended March 31, 2013, a decrease of approximately $126,000.
· |
Net cash flow used in operating activities for the
year ended March 31, 2014 primarily reflected net loss of approximately $364,000 and the add-back of non-cash item, such as
stock-based compensation and fees of approximately $89,000, stock issued for interest of approximately $5,500, and a gain
from settlement of accounts payable of $34,594, offset by the changes in operating assets and liabilities primarily consisting
of a decrease in prepaid expense of approximately $35,000, a decrease in prepaid salary to officer of approximately
$27,000, a decrease in inventories of approximately $29,000, an increase in accounts payable and accrued expense of approximately
$22,000, an increase in accrued officer salary and director fees of approximately $21,000 and an increase in due to shareholder
of approximately $8,000. |
|
|
· |
Net cash flow used in operating activities for the year ended
March 31, 2013 mainly reflected net loss of approximately $823,000 and the add-back of non-cash item such as stock-based compensation
and fees of approximately $177,000 and an impairment loss from the impairment of acquired intangible assets of approximately
$220,000, and the changes in operating assets and liabilities such as an increase in prepaid expense of approximately
$26,000, offset by a decrease in accounts receivable of approximately $13,000, a decrease in prepaid salary to officer of
approximately $2,000, a decrease in inventories of approximately $98,000, an increase in accounts payable and accrued expense
of approximately $48,000, an increase in accrued officer salary and director fees of $750 and an increase in due to related
party of approximately $600. |
We did not incur any investing activity in
the years ended March 31, 2014 and 2013.
Net cash flow provided by financing activities
was approximately $152,000 for the year ended March 31, 2014 as compared to approximately $298,000 for the year ended March 31,
2013. During the year ended March 31, 2014, we received proceeds from loan payable of approximately $20,000, proceeds from common
stock subscriptions of approximately $114,000 and proceeds from sale of common stock of approximately $18,000. During the year
ended March 31, 2013, we received proceeds from sale of common stock of approximately $298,000.
For the Nine Months Ended December 31,
2014 and 2013
Net cash flow
used in operating activities was approximately $332,000 for the nine months ended December 31, 2014 as compared to net
cash flow used in operating activities of approximately $116,000 for the nine months ended December 31, 2013, an increase of approximately
$216,000.
· |
Net cash flow used in operating activities for the
nine months ended December 31, 2014 primarily reflected net loss of approximately $1,047,000 and the add-back of non-cash
item, such as stock-based compensation and fees of approximately $60,000, loss on settlement of loans approximately $6,000,
amortization of debt discount of approximately $21,000, initial fair value of derivative liabilities of approximately $36,000
and loss from change in fair value of derivative liabilities of approximately $551,000 and the changes in operating assets
and liabilities primarily consisting of a decrease in accrued officer salary and director
fees of approximately $11,000 and a decrease in due to shareholders of approximately $8,000, offset by a decrease in
prepaid expenses of approximately $17,000 and an increase in accounts payable and accrued
expenses of approximately $43,000. |
|
|
· |
Net cash flow used in operating activities for the nine months
ended December 31, 2013 mainly reflected net loss of approximately $278,000 and the add-back of non-cash item such as
stock-based compensation and fees of approximately $53,000, offset by the changes in operating
assets and liabilities such as: a decrease in prepaid expenses of approximately $23,000,
a decrease in prepaid salary to officer of approximately $27,000, a decrease in
inventories of approximately $29,000, an increase in accrued officer salary and director fees of approximately $16,000
and an increase in due to shareholders of approximately $11,000. |
We did not incur
any investing activity in the nine months ended December 31, 2014 and 2013.
Net cash flow
provided by financing activities was approximately $472,000 for the nine months ended December 31, 2014 as compared to
approximately $98,000 for the nine months ended December 31, 2013. During the nine months ended December 31, 2014, we received
proceeds from convertible notes of $400,000 and proceeds from sale of common stock of approximately $72,000. During the nine months
ended December 31, 2013, we received proceeds from common stock subscription of approximately $60,000, proceeds from loans payable
of $20,000 and proceeds from sale of common stock of approximately $18,000.
Our primary uses of cash have been for salaries
and fees paid to third parties for professional services. All funds received have been expended in the furtherance of growing
the business. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long
term:
· |
An increase in working capital requirements to finance
our current business, |
· |
Addition of administrative and sales personnel as
the business grows, and |
· |
The cost of being a public company. |
We currently have no material commitments
for capital expenditures. We will need to raise additional funds, particularly if we are unable to generate positive cash flow
as a result of our operations. We estimate that based on current plans and assumptions, that our available cash will be insufficient
to satisfy our cash requirements under our present operating expectations. Other than working capital and funds received pursuant
to the Securities Purchase Agreement, we presently have no other significant alternative source of working capital. We have used
these funds to fund our operating expenses, pay our obligations and grow our company. We will need to raise significant additional
capital to fund our operations and to provide working capital for our ongoing operations and obligations. We do not anticipate
we will be profitable in 2015. Therefore our future operation is dependent on our ability to secure additional financing. Financing
transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.
However, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult
to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is
possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek
alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution
or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock.
The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct
business operations. If we are unable to obtain additional financing, we will be required to cease our operations.
We anticipate that depending on market conditions
and our plan of operations, we may incur operating losses in the foreseeable future. Therefore, our independent registered public
accounting firm has raised substantial doubt about our ability to continue as a going concern in their audit opinion for the years
ended March 31, 2014 and 2013.
Our liquidity is negatively impacted by the
significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate
governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the Securities
and Exchange Commission. We expect all of these applicable rules and regulations to significantly increase our legal and financial
compliance costs and to make some activities more time consuming and costly.
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
We have certain fixed contractual obligations
and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest
rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the
timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination
of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated
financial position, results of operations, and cash flows. The following tables summarize our contractual obligations as of December
31, 2014, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.
|
|
Payments
Due by Period |
Contractual obligations: |
|
Total |
|
Less than
1 year |
|
1-3
years |
|
3-5
years |
|
5+ years |
Convertible notes payable
(principal) |
|
$ |
400,000 |
|
$ |
— |
|
$ |
400,000 |
|
$ |
— |
|
$ |
— |
Accrued interest for convertible notes |
|
|
7,693 |
|
|
7,693 |
|
|
— |
|
|
— |
|
|
— |
Total |
|
$ |
407,693 |
|
$ |
7,693 |
|
$ |
400,000 |
|
$ |
— |
|
$ |
— |
Off-balance Sheet Arrangements
The Company does not have any off-balance
sheet arrangements.
Plan
of Operations
We anticipate that
we will incur $480,000 of total expenses, including salaries, rent, marketing payments due pursuant to an agreement
with Applied DNA, and advertising to conduct our operations for the next 12 months at a burn rate of $40,000 per
month. Based on our current cash position of $80,000, we will be unable to conduct our operations for more than 2 months.
Additionally, we
have total estimated Plan of Operations expenditures of $900,000 as outlined in the following table. Our entire Plan of Operations
is contingent upon revenue levels and obtaining financing, of which there is no assurance that we will be able to obtain or on
terms acceptable to us.
Months
1-3 |
|
1)
Move executive offices to Las Vegas, Nevada to consolidate our employees and consultants; our current employees, other than
our CEO, reside in Las Vegas and our main consultant lives in California and can easily travel to Las Vegas |
$
2,000 |
2) Continue
development of online site: finish design work for each site page; program all graphic design, finish backend coding related
to feature functionality. Create Quality Control department to monitor quality control as site is developed. |
15,000 |
3) Develop
relationships with active and retired professional athletes: Currently, a consultant to the company, Bobby Grich, a retired
professional baseball player is helping to create relationships with active and retired professional athletes, for the purpose
of creating Original items for sale on the site at launch: |
5,000 |
4) Develop
relationships with business entities interested in selling their products on our site; working with a consultant to the company
with experience as a talent agent, helping to explore areas of business development with brand name products: |
5,000 |
5) Create
30 and 60 second spot commercials for launch; utilizing our business development director and graphics design person, who
are experienced in producing television commercials in producing commercials for television: |
45,000 |
6) Create
online and print advertisements; utilizing in house graphic designer and in house marketing specialist to design and implement
concept: |
15,000 |
7) Plan
for launch in approximately 4- months: create press material, develop social media, work with media agencies to determine
air time for television commercials: |
7,500 |
8) Setup
mechanics for marking at Applied DNA facilities: work with them on procedures and processes: |
12,500 |
9) Setup
for procedures for verification at Applied DNA facilities: work with them on procedures and processes |
7,500 |
10) Setup
procedures for marking at off- site locations: procedures and processes: |
7,500 |
11) Selling
our own products: Explore possibilities of maintaining products in inventory that can be used by athletes to sell once they
have added their signature: |
28,000 |
Total
estimated cost – 1-3 months |
$
150,000 |
Months
4-6 |
|
1)
Increase Board of Directors from our 2 existing directors to 5 total directors with experience in finance, marketing or management |
$
— |
2)
Increase working staff to approximately 10: includes another back end programmer 1, customer service-1, and account management-
3: |
90,000 |
3)
Increase spending on online, print and television advertising; in an effort to increase brand awareness, and drive use: |
100,000 |
4) Commence
attending trade shows to bring awareness of brand: designate one employee to plan, attend and follow up with all show leads: |
10,000 |
Total
estimated cost – 4-6 months |
$
200,000 |
Months
7-9 |
|
1)
Increase online, print and television advertising; in an effort to increase brand awareness, and drive use: |
150,000 |
2) Increase
staff to 15: includes customer service, account management, business development: $50,000 |
50,000 |
3) Develop
site in other languages, in preparation for launch outside US in 2016: hire business development person with experience in
launching websites outside the U.S.: |
15,000 |
4) We plan
to offer Origination marking services outside the U.S. within 12 months after launch, as well as explore options for creating
stand-alone sites for other countries. |
5,000 |
5) Develop
mobile application for site: with planned release in fourth quarter 2015: |
30,000 |
Total
estimated cost – 7-9 months |
$
250,000 |
Months
10-12 |
|
1) Increase
staff to 20-25: includes customer service, programmers, business development, accounting: |
200,000 |
2) Launch
mobile application: online, print, and TV ads: create marketing campaign, produce TV spots: |
100,000 |
Total
estimated cost – 10-12 months |
$
300,000 |
Total
Estimated Plan of Operations expenditures |
$
900,000 |
CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
We have had no disagreements with accountants on accounting and
financial disclosure.
LEGAL
PROCEEDINGS
There are no pending or threatened lawsuits
against us. From time to time, we may become involved in various lawsuits and legal proceedings that may arise in the ordinary
course of business. However, litigation is subject to inherent uncertainties and an adverse result in these or other matters may
arise from time to time that may have an adverse effect on our business, financial conditions, or operating results. We are not
aware of any legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business,
financial condition or operating results.
DIRECTORS, EXECUTIVE
OFFICERS, PROMOTERS AND CORPORATE GOVERNANCE
Board of Directors
Directors are elected at our annual meeting
of shareholders and serve for one year until the next annual meeting of shareholders or until their successors are elected and
qualified. We reimburse all directors for their expenses in connection with their activities as our directors.
Board Leadership Structure and Role in Risk Oversight
Although we have not adopted a formal policy
on whether the Chairman and Chief Executive Officer positions should be separate or combined, we have determined that it is in
our best interests and its shareholders to combine these roles. Due to the small size and our early development stage, we believe
it is currently most effective to have the Chairman and Chief Executive Officer positions combined.
Our board of directors is primarily responsible
for overseeing our risk management processes. The board of directors receives and reviews periodic reports from management, auditors,
legal counsel, and others, as considered appropriate regarding our assessment of risks. The board of directors focuses on the
most significant risks facing us and our general risk management strategy, and also ensures that risks undertaken by us are consistent
with the board’s appetite for risk. While the board oversees our risk management, management is responsible for day-to-day
risk management processes. We believe this division of responsibilities is the most effective approach for addressing the risks
facing us and that our board leadership structure supports this approach.
Directors and Executive Officers and Corporate Governance.
The following information sets forth the names of our officers
and directors, their present positions, and some brief information about their background.
Name |
Age |
Position(s) |
William
Bollander |
44 |
Chief
Executive Officer/President/Director/Secretary/Treasurer |
Adam
Wasserman |
50 |
Chief
Financial Officer |
Chris
Jarvis |
42 |
Director |
Background of Officers and Directors
William Bollander has served as our President/Chief
Executive Officer/Chief Financial Officer/Chief Accountancy Officer/Director/Secretary/Treasurer since January 17, 2012. From
November 2008 to March 2011, he was an independent financial consultant for Vfinance, a registered securities broker dealer located
in located in Boca Raton FL. From March 2011 to November 2011, William Bollander was our business consultant. William Bollander
received a Bachelors Degree in Accounting & Information Systems from Queens College/City University of New York in February
1992.
Adam Wasserman has served as our Chief Financial
Officer since November 2014. He has been a majority shareholder and chief executive officer of CFO Oncall, Inc. since 1999. CFO
Oncall provides chief financial officer services to a number of companies. Through CFO Oncall, Mr. Wasserman has served as the
Chief Financial Officer of a number of private and publicly held companies including: Cleantech Solutions International, Inc.
since December 2012, Oriental Dragon Corp. since June 2010, and Wally World Media, Inc. since November 2012. Mr. Wasserman also
served as chief financial officer for FAL Exploration Corp (formerly Apps Genius Corp) from January 2010 to December 2014, Yew
Bio-Pharm Group, Inc. (YEWB) from September 2011 to November 2013, and other companies, all under the terms of consulting agreements
with CFO Oncall. Mr. Wasserman served as a member of the Board of Directors of CD International, Inc., a public company, from
January 2010 to December 2011 and a member of the Board of Directors and audit committee chairman of Bohai Pharmaceuticals
Group, Inc. from July 2010 to February 2012. Mr. Wasserman is a member of the American Institute of Certified Public Accountants.
Mr. Wasserman holds a Bachelor of Science Degree from the State University of New York at Albany.
Chris Jarvis has
been our Director since January 17, 2012. In 2006, Mr. Jarvis founded Caprock Risk Management, a boutique commodities firm
registered with the National Futures Association that specialized in the energy markets. Mr. Jarvis has over twenty years
of capital markets and investments experience covering the equity, commodity, and fixed income markets having worked from 1999 to 2005 with Advest as
a Senior Publishing Analyst and from 2005 to 2006 with Merrill Lynch (following Merrill’s
acquisition of Advest in November 2005) as an Oil & Natural Gas Analyst. In September 2001, Mr. Jarvis received
a Master’s in Business Administration with a concentration in finance from the University of Connecticut. Mr. Jarvis has
the designations of a Chartered Financial Analyst (CFA) and Chartered Market Technician (CMT).
Family Relationships
There are no family relationships among our directors and/or our
officers.
Committees of the Board of Directors
We presently do not have an audit committee,
compensation committee, nominating committee, corporate governance committee or any other committee of our board of directors.
Our entire Board of Directors meets to undertake the responsibilities that would otherwise be delegated to a committee of our
board of directors.
Meetings of our Board of Directors
We have had no meetings of our Board of Directors.
Our Board of Directors have approved corporate actions by Board resolution.
Terms of Office
Our directors are appointed for one-year terms
to hold office until the next annual general meeting of the holders of our Common Stock or until removed from office in accordance
with our by-laws. Our officers are appointed by our board of directors and hold office until removed by our Board of Directors
or terminated pursuant to their employment agreements.
Overview of Compensation Program
The following table sets forth the compensation
paid by us to our Officers for the fiscal years ended March 31, 2014 and 2013. This information includes the dollar value of base
salaries, bonus awards and number of stock options granted, and certain other compensation, if any. The compensation discussed
addresses all compensation awarded to, earned by, or paid to named executive officers.
EXECUTIVE
COMPENSATION *
Name |
|
Year |
|
Fees
Earned or Paid in Cash
($) |
|
Stock
Awards
($) |
|
Option
Awards Vested
($) |
|
Option
Awards Unvested
($) |
|
Non-Equity
Incentive Plan Compensation
($) |
|
Nonqualified
Deferred Compensation Earnings
($) |
|
All
Other Compensation
($) |
|
Total
($) |
William Bollander,
Chief Executive Officer, President, and Director |
|
|
2013
2014 |
|
|
|
105,000
120,000 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
105,000
120,000 |
|
Adam Wasserman |
|
|
2014 |
|
|
|
3,000 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
3,000 |
|
* In
accordance with the rules promulgated by the Securities and Exchange Commission, certain columns relating to information that
is not applicable have been omitted from this table.
Compensation of Directors
Chris Jarvis, our Director, is compensated
for his service as our Director. The Board of Directors has not awarded any options to our Directors. There are no contractual
arrangements with any member of the Board of Directors. We have no Director’s service contracts.
Long-Term Incentive Plan Awards
We do not have any long-term incentive plans that provide compensation
intended to serve as incentive for performance.
Indemnification
Under our Articles of Incorporation and Bylaws,
we may indemnify an Officer or Director who is made a party to any proceeding, including a lawsuit, because of his position, if
he acted in good faith and in a manner he reasonably believed to be in our best interest. We may advance expenses incurred in
defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he
is to be indemnified, we must indemnify him against all expenses incurred, including attorney’s fees. With respect to a
derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if
the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted
by the laws of the State of Nevada.
Regarding indemnification for liabilities
arising under the Securities Act of 1933, which may be permitted to directors or officers under Nevada law, we are informed that,
in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and
is, therefore, unenforceable.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
The following tables set forth the ownership,
as of the date of this prospectus, of our common stock by each person known by us to be the beneficial owner of more than 5% of
our outstanding common stock, our directors, and our executive officers and directors as a group. To the best of our knowledge,
the persons named have sole voting and investment power with respect to such shares, except as otherwise noted. There are not
any pending or anticipated arrangements that may cause a change in control.
The information presented below regarding
beneficial ownership of our voting securities has been presented in accordance with the rules of the Securities and Exchange Commission
and is not necessarily indicative of ownership for any other purpose. Under these rules, a person is deemed to be “beneficial
owner” of a security if that person has or shares the power to vote or direct the voting of the security or the power to
dispose or direct the disposition of the security. A person is deemed to own beneficially any security as to which such person
has the right to acquire sole or shared voting or investment power within 60 days through the conversion or exercise of any convertible
security, warrant, option or other right. More than one person may be deemed to be a beneficial owner of the same securities.
The percentage of beneficial ownership by any person as of a particular date is calculated by dividing the number of shares beneficially
owned by such person, which includes the number of shares as to which such person has the right to acquire voting or investment
power within 60 days, by the sum of the number of shares outstanding as of such date plus the number of shares as to which such
person has the right to acquire voting or investment power within 60 days. Consequently, the denominator used for calculating
such percentage may be different for each beneficial owner. Except as otherwise indicated below and under applicable community
property laws, we believe that the beneficial owners of our common stock listed below have sole voting and investment power with
respect to the shares shown. The business address for these shareholders is 301 Yamato Road, Suite 1240, Boca Raton, Florida,
33431.
| |
| | | |
| Amount | | |
| | | |
| | | |
| | |
| |
| Title
of | | |
| Beneficial | | |
| Direct | | |
| Indirect | | |
| Percent | |
Name | |
| Class | | |
| Ownership | | |
| Ownership | | |
| Ownership | | |
| of
Class | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
William Bollander | |
| Common | | |
| 6,500,000 | | |
| 6,500,000 | | |
| 0 | | |
| 17.60 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Adam Wasserman | |
| Common | | |
| 100,000 | | |
| 100,000 | | |
| 0 | | |
| | * |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Chris Jarvis | |
| Common | | |
| 500,000 | | |
| 500,000 | | |
| 0 | | |
| 1.4 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Eisenberg
Family Foundation(1) | |
| Common | ** | |
| 9,750,000 | | |
| 9,750,000 | | |
| 0 | | |
| 24.4 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ascendant
Partners, LLC(2) | |
| Common | ** | |
| 6,175,000 | | |
| 6,175,000 | | |
| 0 | | |
| 15.4 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Dina M. Palermo/Jeffrey Smith | |
| Common | ** | |
| 4,875,000 | | |
| 4,875,000 | | |
| 0 | | |
| 12.2 | % |
Joint Tenants with Rights of Survivorship | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Darryl Cohen | |
| Common | | |
| 3,552,191 | | |
| 3,552,191 | | |
| 0 | | |
| 9.6 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total | |
| | | |
| 31,452,191 | | |
| 31,452,191 | | |
| 0 | | |
| 80.6 | % |
* Less
than 1% |
|
|
|
** Reflects
the right of the shareholders who are debt holders to convert their debt into our common stock shares. |
|
(1)
Eisenberg Family Foundation’s principal is Solomon Eisenberg who has sole voting and investment control over the shares. |
|
(2)
Ascendant Partners, LLC’s principal is Richard Galterio who has sole voting and investment control over the shares. |
|
(1) This table is based upon information derived
from our stock records. Unless otherwise indicated in the footnotes to this table and subject to community property laws where
applicable, each of the shareholders named in this table has sole or shared voting and investment power with respect to the shares
indicated as beneficially owned. Except as set forth above, applicable percentages are based upon 36,951,165 shares of common
stock outstanding as of the date of this prospectus.
We are not registering common shares by any
stockholder who holds more than 5% of outstanding common shares and we are not registering shares held by our officers and directors.
Board of Directors
Director Compensation
Name |
|
|
Year |
|
|
|
Fees
Earned
or Paid
in Cash
($) |
|
|
|
Stock
Awards
($) |
|
|
|
Option
Awards
Vested
($) |
|
|
|
Option
Awards
Unvested
($) |
|
|
|
Non-Equity
Incentive Plan
Compensation
($) |
|
|
|
Nonqualified
Deferred
Compensation
Earnings
($) |
|
|
|
All
Other
Compensation
($) |
|
|
|
Total
($) |
|
William
Bollander |
|
|
2013
2014 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
Chris
Jarvis |
|
|
2013
2014 |
|
|
|
6,000
6,000 |
|
|
|
5,510
2,204 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
0
0 |
|
|
|
11,510
8,204 |
|
Long-Term Incentive Plan Awards
We do not have any long-term incentive plans
that provide compensation intended to serve as incentive for performance.
Director Independence
We have one independent director as defined
by the rules of any securities exchange or inter-dealer quotation system.
Code of Ethics
We have not yet adopted a formal, written
Code of Business Conduct and Ethics.
Audit, Nominating and Compensation Committee
We currently do not have audit, nominating
or compensation committees. Our Board of Directors as a whole will review audit, nominating and compensation matters.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our
directors or executive officers has, during the past ten years, been involved in any of the items below that we deem material
to their service on our behalf:
|
· |
been convicted in a criminal proceeding or been
subject to a pending criminal proceeding (excluding trafficking violations and other minor offenses); |
|
· |
had any bankruptcy petition filed by or against
the business or property of the person, or of any partnership, corporation or business association of which he was a general
partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; |
|
· |
been subject to any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently
or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities,
futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with the
persons engaged in any such activity; |
|
· |
been found by a court of competent jurisdiction
in a civil action or by the SEC or Commodity Futures Trading Commission to have violated a federal or state securities or
commodities law, and judgment has not been reversed, suspended or vacated; |
|
· |
been the subject of, or a party to, any federal
or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated (not
including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or
state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance
companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil
money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation
prohibiting mail or wire fraud in connection with any business entity; or |
|
· |
been the subject of, or a party to, any sanction
or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26)
of the Securities Exchange Act of 1934, as amended (“Exchange Act”), any registered entity (as defined in Section
1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary
authority over its members or persons associated with a member. |
There are currently no legal proceedings to
which any of our directors or officers is a party adverse to us or in which any of our directors or officers has a material interest
adverse to us.
CERTAIN RELATIONSHIPS
AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE.
None of our Officers or Directors have any
direct or indirect material interest in any transaction to which we are a party during the past two years, or in any proposed
transaction to which we are proposed to be a party.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
OF SECURITIES ACT LIABILITIES
Our directors and officers are indemnified
as provided by the Nevada corporate law and our bylaws. We have agreed to indemnify each of our directors and certain officers
against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions described
above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities
being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
We have been advised that in the opinion of
the SEC indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one
of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the
opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification
is against public policy to a court of appropriate jurisdiction. We will then be governed by the court’s decision.
LEGAL MATTERS
The validity of the issuance of the common
stock hereby will be passed upon for us by Frederick M. Lehrer, Attorney and Counselor at Law. Frederick M. Lehrer was compensated
200,000 common stock shares and additionally will be paid a total of $10,000 for preparation of this Registration Statement.
REPORTS TO SHAREHOLDERS
As a result of this offering as required under
Section 15(d) of the Securities Exchange Act of 1934, we will file periodic reports with the Securities and Exchange Commission
as required under Section 15(d). However, if in the future we are not required to continue filing reports under Section 15(d),
for example because we have less than three hundred shareholders of record at the end of the first fiscal year in which this registration
statement is declared effective and we do not file a Registration Statement on Form 8-A upon the occurrence of such an event,
our securities can no longer be quoted on the OTC Bulletin Board. There is no guarantee that we will be able to meet the requirements
to be able to cease filing reports under Section 15(d), in which case we will continue filing those reports in the years after
the fiscal year in which this registration statement is declared effective. Filing a registration statement on Form 8-A will require
us to continue to file quarterly and annual reports with the SEC, even though we are no longer required to do so under Section
15(d), and will also subject us to the proxy rules of the SEC. In addition, our officers, directors and 10% stockholders will
be required to submit reports to the SEC on their stock ownership and stock trading activity. Thus the filing of a Form 8-A in
such event makes our securities continue to be able to be quoted on the OTC Bulletin Board. We are not required under Section
12(g) or otherwise to become a mandatory 1934 Act filer unless we have more than 500 shareholders and total assets of more than
$10 million; however, we voluntarily intend to do so if we are no longer obligated to file reports under Section 15(d).
WHERE YOU CAN FIND MORE
INFORMATION
We have filed a registration statement, of
which this Prospectus is a part, with the SEC under the Securities Act with respect to our common stock. This Prospectus, which
constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement,
parts of which are omitted as permitted by the rules and regulations of the SEC. Statements contained in this Prospectus as to
the contents of any contract or other document are not necessarily complete. For further information pertaining to our common
stock, and us we refer you to our registration statement and the exhibits thereto, copies of which may be inspected without charge
at the SEC’s Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549. Information concerning the operation of
the SEC’s Public Reference Room is available by calling the SEC at 1-800-SEC-0330. Copies of all or any part of the registration
statement may be obtained at prescribed rates from the SEC. The SEC also makes our filings available to the public on its Internet
site (http://www.sec.gov).
TRUE 2 BEAUTY, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014 and 2013
TRUE 2 BEAUTY, INC. AND
SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014 and 2013
CONTENTS
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of:
True 2 Beauty, Inc.
We have audited the accompanying consolidated
balance sheets of True 2 Beauty, Inc. and Subsidiary as of March 31, 2014 and 2013 and the related consolidated statements of
operations, changes in stockholder’s deficit, and cash flows for each of the two years in the period ended March 31, 2014.
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the consolidated financial position of True 2 Beauty, Inc.
and Subsidiary as of March 31, 2014 and 2013 and the consolidated results of its operations and its cash flows for each of the
two years in the period ended March 31, 2014 in conformity with accounting principles generally accepted in the United States
of America.
The accompanying consolidated financial statements
have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial
statements, the Company had a net loss and net cash used in operations of $363,929 and $161,801, respectively for the year ended
March 31, 2014. The Company has a working capital deficit, accumulated deficit and stockholders’ deficit of $169,197, $8,243,601
and $169,197, respectively, at March 31, 2014. These matters raise substantial doubt about the Company’s ability to continue
as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Salberg & Company, P.A.
SALBERG & COMPANY, P.A.
Boca Raton, Florida
January 30, 2015
2295 NW Corporate Blvd.,
Suite 240 • Boca Raton, FL 33431-7328
Phone: (561) 995-8270
• Toll Free: (866) CPA-8500 • Fax: (561) 995-1920
www.salbergco.com •
info@salbergco.com
Member National Association
of Certified Valuation Analysts • Registered with the PCAOB
Member CPAConnect
with Affiliated Offices Worldwide • Member AICPA Center for Audit Quality
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE
SHEETS
|
|
March 31, |
|
|
2014 |
|
2013 |
ASSETS |
|
|
|
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
9,345 |
|
|
$ |
19,621 |
|
Prepaid expenses |
|
|
18,225 |
|
|
|
39,405 |
|
Prepaid salary to officer |
|
|
— |
|
|
|
26,666 |
|
Security deposit |
|
|
636 |
|
|
|
636 |
|
Inventories |
|
|
— |
|
|
|
29,282 |
|
|
|
|
|
|
|
|
|
|
Total Current Assets |
|
|
28,206 |
|
|
|
115,610 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
28,206 |
|
|
$ |
115,610 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
|
|
|
Loans payable |
|
$ |
20,000 |
|
|
$ |
— |
|
Deferred revenue |
|
|
327 |
|
|
|
— |
|
Accounts payable and accrued expenses |
|
|
33,575 |
|
|
|
169,744 |
|
Accrued officer salary and director fees |
|
|
21,250 |
|
|
|
750 |
|
Advances for common stock purchases |
|
|
113,525 |
|
|
|
— |
|
Due to shareholder |
|
|
8,218 |
|
|
|
— |
|
Due to officer |
|
|
508 |
|
|
|
630 |
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities |
|
|
197,403 |
|
|
|
171,124 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS (Note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT: |
|
|
|
|
|
|
|
|
Preferred stock ($0.001 par value; 10,000,000 shares authorized; |
|
|
|
|
|
|
|
|
No shares issued or outstanding at March 31, 2014 and 2013) |
|
|
— |
|
|
|
— |
|
Common stock, ($0.001 par value; 190,000,000 shares authorized; |
|
|
|
|
|
|
|
|
31,601,531 and 27,241,331 shares issued and outstanding |
|
|
|
|
|
|
|
|
at March 31, 2014 and 2013, respectively) |
|
|
31,601 |
|
|
|
27,241 |
|
Additional paid-in capital |
|
|
8,042,803 |
|
|
|
7,806,917 |
|
Common stock subscription receivable |
|
|
— |
|
|
|
(10,000 |
) |
Accumulated deficit |
|
|
(8,243,601 |
) |
|
|
(7,879,672 |
) |
|
|
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS’ DEFICIT |
|
|
(169,197 |
) |
|
|
(55,514 |
) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
$ |
28,206 |
|
|
$ |
115,610 |
|
The accompanying notes
are an integral part of these consolidated financial statements.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS
OF OPERATIONS
|
|
For the Years Ended
March 31, |
|
|
2014 |
|
2013 |
|
|
|
|
|
|
|
|
|
REVENUE |
|
$ |
35,240 |
|
|
$ |
79,498 |
|
|
|
|
|
|
|
|
|
|
COST OF REVENUE |
|
|
34,168 |
|
|
|
101,207 |
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT (LOSS) |
|
|
1,072 |
|
|
|
(21,709 |
) |
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
Compensation and related taxes |
|
|
134,235 |
|
|
|
124,543 |
|
Professional fees |
|
|
200,797 |
|
|
|
376,891 |
|
Impairment loss |
|
|
— |
|
|
|
220,400 |
|
Other selling, general and administrative |
|
|
57,053 |
|
|
|
79,902 |
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING EXPENSES |
|
|
392,085 |
|
|
|
801,736 |
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(391,013 |
) |
|
|
(823,445 |
) |
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
Gain from settlement of accounts payable |
|
|
34,594 |
|
|
|
— |
|
Interest expense |
|
|
(7,510 |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME (EXPENSE) |
|
|
27,084 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(363,929 |
) |
|
$ |
(823,445 |
) |
|
|
|
|
|
|
|
|
|
NET LOSS PER COMMON SHARE |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
29,745,802 |
|
|
|
21,466,635 |
|
The
accompanying notes are an integral part of these consolidated financial statements.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For
the Years Ended March 31, 2014 and 2013
|
|
|
|
|
|
|
|
|
|
|
|
Common |
|
|
|
|
|
|
Preferred Stock |
|
Common Stock |
|
Additional |
|
Stock |
|
|
|
Total |
|
|
Number of |
|
|
|
Number of |
|
|
|
Paid-in |
|
Subscription |
|
Accumulated |
|
Stockholders’ |
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Receivable |
|
Deficit |
|
Deficit |
Balance at March 31, 2012 |
|
|
— |
|
|
$ |
— |
|
|
|
12,980,262 |
|
|
$ |
12,980 |
|
|
$ |
7,101,952 |
|
|
$ |
— |
|
|
$ |
(7,056,227 |
) |
|
$ |
58,705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for purchase of assets |
|
|
— |
|
|
|
— |
|
|
|
4,000,000 |
|
|
|
4,000 |
|
|
|
216,400 |
|
|
|
— |
|
|
|
— |
|
|
|
220,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for services |
|
|
— |
|
|
|
— |
|
|
|
3,460,000 |
|
|
|
3,460 |
|
|
|
187,186 |
|
|
|
— |
|
|
|
— |
|
|
|
190,646 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock cancelled |
|
|
— |
|
|
|
— |
|
|
|
(152,640 |
) |
|
|
(153 |
) |
|
|
153 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock sold for cash and subscription receivable |
|
|
— |
|
|
|
— |
|
|
|
6,953,709 |
|
|
|
6,954 |
|
|
|
301,226 |
|
|
|
(10,000 |
) |
|
|
— |
|
|
|
298,180 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(823,445 |
) |
|
|
(823,445 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2013 |
|
|
— |
|
|
|
— |
|
|
|
27,241,331 |
|
|
|
27,241 |
|
|
|
7,806,917 |
|
|
|
(10,000 |
) |
|
|
(7,879,672 |
) |
|
|
(55,514 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for services |
|
|
— |
|
|
|
— |
|
|
|
1,865,000 |
|
|
|
1,865 |
|
|
|
100,896 |
|
|
|
— |
|
|
|
— |
|
|
|
102,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued to settle accounts payable |
|
|
|
|
|
|
|
|
|
|
2,250,000 |
|
|
|
2,250 |
|
|
|
121,725 |
|
|
|
— |
|
|
|
— |
|
|
|
123,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock sold for cash and receipt of subscriptions
receivable |
|
|
— |
|
|
|
— |
|
|
|
145,200 |
|
|
|
145 |
|
|
|
7,855 |
|
|
|
10,000 |
|
|
|
— |
|
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for payment of loan fees |
|
|
— |
|
|
|
— |
|
|
|
100,000 |
|
|
|
100 |
|
|
|
5,410 |
|
|
|
— |
|
|
|
— |
|
|
|
5,510 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(363,929 |
) |
|
|
(363,929 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2014 |
|
|
— |
|
|
$ |
— |
|
|
|
31,601,531 |
|
|
$ |
31,601 |
|
|
$ |
8,042,803 |
|
|
$ |
— |
|
|
$ |
(8,243,601 |
) |
|
$ |
(169,197 |
) |
The
accompanying notes are an integral part of these consolidated financial statements.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|
For the Years Ended
March 31, |
|
|
2014 |
|
2013 |
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(363,929 |
) |
|
$ |
(823,445 |
) |
Adjustments to reconcile net loss to net cash |
|
|
|
|
|
|
|
|
used in operating activities: |
|
|
|
|
|
|
|
|
Stock-based compensation and fees |
|
|
88,986 |
|
|
|
176,871 |
|
Stock issued for loan fees |
|
|
5,510 |
|
|
|
— |
|
Gain from settlement of accounts payable |
|
|
(34,594 |
) |
|
|
— |
|
Impairment of purchased assets |
|
|
— |
|
|
|
220,400 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
— |
|
|
|
13,133 |
|
Prepaid expense |
|
|
34,955 |
|
|
|
(25,630 |
) |
Prepaid salary to officer |
|
|
26,666 |
|
|
|
2,250 |
|
Inventories |
|
|
29,282 |
|
|
|
98,130 |
|
Accounts payable and accrued expenses |
|
|
22,400 |
|
|
|
48,455 |
|
Deferred revenue |
|
|
327 |
|
|
|
— |
|
Accrued officer salary and director fees |
|
|
20,500 |
|
|
|
750 |
|
Due to shareholder |
|
|
8,218 |
|
|
|
— |
|
Due to officer |
|
|
(122 |
) |
|
|
630 |
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(161,801 |
) |
|
|
(288,456 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Proceeds received from loans payable |
|
|
20,000 |
|
|
|
— |
|
Proceeds received as advance for future common stock subscriptions |
|
|
113,525 |
|
|
|
— |
|
Proceeds received from sale of stock |
|
|
18,000 |
|
|
|
298,180 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
151,525 |
|
|
|
298,180 |
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
(10,276 |
) |
|
|
9,724 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR |
|
|
19,621 |
|
|
|
9,897 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS - END OF YEAR |
|
$ |
9,345 |
|
|
$ |
19,621 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Interest |
|
$ |
— |
|
|
$ |
— |
|
Income taxes |
|
$ |
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Stock issued for future services |
|
$ |
82,650 |
|
|
$ |
82,650 |
|
Stock issued for accounts payable |
|
$ |
123,975 |
|
|
$ |
— |
|
Stock issued for common stock subscription |
|
$ |
— |
|
|
$ |
10,000 |
|
Assets acquired in exchange for shares |
|
$ |
— |
|
|
$ |
220,400 |
|
The
accompanying notes are an integral part of these consolidated financial statements.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2014 and 2013
NOTE 1 – ORGANIZATION AND NATURE
OF OPERATIONS
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 its current name,
True 2 Beauty, Inc., to better reflect its then 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, Inc. in December 2014. The Company continued to sell existing inventory of beauty products
through May 2013 when the final inventory was sold. True2Bid operates an online e-commerce platform focus on delivering users
a wide array of sports and entertainment related products that can be won in an action packed environment of a live auction.
In addition to its e-commerce platform, the
Company has recently signed an eight-month agreement with Applied DNA to work together, in good faith, on a business partnership
focused on using Applied DNA Sciences’ unique SigNature© DNA taggant platform, digitalDNA © software platform
and other products as required for DNA marking, tracking and authentication of sports collectibles and sports memorabilia uniquely
and authentically identified to an athlete (“Goods”) and offered either within an online auction exchange environment
or through other means of sale.
NOTE 2 – BASIS OF PRESENTATION, GOING
CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The Company’s consolidated financial
statements include the financial statement of its wholly-owned subsidiary, True2Bid, Inc. All intercompany accounts and transactions
have been eliminated in consolidation.
Going concern
These consolidated financial statements have
been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization
of assets and the satisfaction of liabilities in the normal course of business.
As reflected in the accompanying consolidated
financial statements, the Company had a net loss of $363,929 and $823,445 for the years ended March 31, 2014 and 2013, respectively,
and net cash used in operations of $161,801 and $288,456 for the years ended March 31, 2014 and 2013, respectively, and an accumulated
deficit and stockholders’ deficit of $8,243,601 and $169,197, respectively, at March 31, 2014, and has minimal gross profit
for the year ended March 31, 2014 and a gross loss for the year ended March 31, 2013. These matters raise substantial doubt about
the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent
on the Company’s ability to raise additional capital, implement its business plan, and generate significant revenues. The
consolidated financial statements do not include any adjustments that might be necessary if the Company is 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.
Use of estimates
The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles in the United States of America 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 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 years ended March 31, 2014 and 2013
include the valuation of deferred tax assets, valuation of inventories and the valuation of stock-based compensation and fees.
Fair value of financial instruments and fair value measurements
The Company adopted 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 value as
follows:
TRUE 2 BEAUTY, INC. AND
SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2014 and 2013
NOTE 2 – BASIS OF PRESENTATION, GOING
CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair value of financial instruments and fair value measurements
(continued)
· |
Level 1-Inputs are unadjusted quoted prices in active
markets for identical assets or liabilities available at the measurement date. |
· |
Level 2-Inputs are unadjusted quoted prices for similar assets
and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active,
inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. |
· |
Level 3-Inputs are unobservable inputs which reflect the
reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability
based on the best available information. |
The carrying amounts reported in the
consolidated balance sheets for cash, loans payable, accounts payable and accrued expenses, accrued officer salary and director
fees, advance for common stock purchases, due to shareholder, and due to officer approximate their fair market value based on
the short-term maturity of these instruments. The Company did not have any non-financial assets or liabilities that are measured
at fair value on a recurring basis as of March 31, 2014 and 2013.
ASC 825-10 “Financial Instruments”,
allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option).
The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs.
If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings
at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
Cash and cash equivalents
Cash and cash equivalents consist of cash
and short-term highly liquid investments purchased with original maturities of three months or less. There were no cash equivalents
at March 31, 2014 and 2013.
Inventories and cost of revenue
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. Any
inventory adjustments are based upon management’s review of inventories on hand compared to estimated future usage and sales.
At March 31, 2013, the Company wrote down the inventory to its lower of cost or market resulting in a charge to cost of revenue
of $23,446. As of March 31, 2014 the Company has no inventory on hand because after May 2013 products sold were drop shipped from
the Company’s vendors to the Company’s customers.
Prepaid salary to officer
Since December of 2011, Mr. William Bollander
acted as the Interim Chief Executive Officer (“CEO”). In January 2012, the Company announced Mr. William Bollander
as its formal CEO. Mr. Bollander was paid $100,000 per year in his capacity as the CEO until December 31, 2012. Effective January
1, 2013, the Company increased its CEO’s salary from $100,000 to $120,000 annually. As of March 31, 2014 and 2013, the prepayment
of salary to CEO was $0 and $26,666, respectively, and was included as prepaid salary to officer in the accompanying consolidated
balance sheets.
Deferred revenue
Deferred revenue represents revenue collected
from the sale of bid packages for the Company’s online auctions but not earned as of the report date. Deferred revenue totaled
$327 and $0 as of March 31, 2014 and 2013, respectively.
Common stock subscription receivable
Common stock subscription receivable represents
common stock issued to investors but the corresponding payments have not yet been received as of the report date. The Company
decreases the subscription receivable at the time of payment collection. At March 31, 2014 and 2013, the Company had common stock
subscription receivable of $0 and $10,000, respectively.
TRUE 2 BEAUTY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014 and 2013
NOTE 2 – BASIS OF PRESENTATION, GOING
CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Advances for common stock purchases
Advances for common stock purchases consists
of prepayments from investors for the purchased of common stock prior to the signing of a stock subscription agreement which was
signed after the period end. The Company reclassified to equity the advances for common stock purchases at the time the stock
subscription was signed. At March 31, 2014 and 2013, the Company had advances for common stock purchases of $113,525 and $0, respectively.
Revenue recognition
The Company recognizes revenue when persuasive
evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable
and collectability is reasonably assured. The Company’s specific revenue recognition policies are as follows:
· |
Product sales from the sale of beauty products by
the parent entity (which ceased in May 2013) and sales of products through the subsidiary’s auction site are recognized
when the product is shipped to the customer and title is transferred. |
· |
Under the Company’s auction program, consumers
are required to purchase bid packages directly from the Company. Proceeds from the sales of bid packages are recorded as deferred
revenue until recognizable as discussed below. In connection with the sale of bid packages, the Company utilized the User-based
Revenue Model (“UBRM”). The UBRM is based on the presumption that the period of delivery for the bid package is
the estimated average user life which was estimated by the Company to be 60 days. Consequently, revenue from the sale
of bid packages is recognized ratably over the estimated user life of 60 days. |
Stock-based compensation
Stock-based compensation is accounted for
based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of
the cost of employee and director services received in exchange for an award of equity instruments over the period the employee
or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires
measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value
of the award.
Pursuant to ASC Topic 505-50, for share-based
payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The
expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation
expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting
date.
Income taxes
Deferred income tax assets and liabilities
arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities,
as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and
liabilities are classified as current or non-current, depending upon the classification 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
on the periods in which the temporary differences are expected to reverse. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized.
The Company follows the provisions of FASB
ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10). Certain recognition thresholds must be met before a tax position
is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a “more-likely-than-not”
threshold. As of March 31, 2014 and 2013, the Company does not believe it has any uncertain tax positions that would require either
recognition or disclosure in the accompanying consolidated financial statements.
Shipping costs
Shipping costs are included in other selling,
general and administrative expense and totaled $4,039 and $5,680 for the years ended March 31, 2014 and 2013, respectively.
TRUE 2 BEAUTY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014 and 2013
NOTE 2 – BASIS OF PRESENTATION, GOING
CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Advertising
Advertising is expensed as incurred and is
included in other selling, general and administrative expense and totaled $0 and $831 for the years ended March 31, 2014 and 2013,
respectively.
Research and development
Expenditures for research and product development
costs are expensed as incurred. The Company did not incur any research and development during the years ended March 31, 2014 and
2013.
Basic and diluted earnings per share
Pursuant to ASC 260-10-45, basic earnings
per common share is computed by dividing income (loss) available to common shareholders by the weighted average number of shares
of common stock outstanding for the periods presented. Diluted income 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
each 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. Potentially dilutive common shares consist of
common stock issuable for stock warrants (using the treasury stock method). In period where the Company has a net loss, all potentially
dilutive securities are excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact.
The following table sets forth the computation of basic and diluted earnings per share for the years ended March 31, 2014 and
2013.
|
|
Years Ended March
31, |
|
|
2014 |
|
2013 |
Net loss available to common
stockholders for basic and diluted net loss per share of common stock |
|
$ |
(363,929 |
) |
|
$ |
(823,445 |
) |
Weighted average common
stock outstanding – basic |
|
|
29,745,802 |
|
|
|
21,466,635 |
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
Stock warrants |
|
|
— |
|
|
|
— |
|
Weighted average common
stock outstanding – diluted |
|
|
29,745,802 |
|
|
|
21,466,635 |
|
Net loss per common share
– basic and diluted |
|
$ |
(0.01 |
) |
|
$ |
(0.04 |
) |
The Company’s aggregate common stock
equivalents at March 31, 2014 and 2013 included the following:
|
|
March 31, 2014 |
|
March 31, 2013 |
Stock
warrants |
|
|
733,609 |
|
|
|
718,608 |
|
Total |
|
|
733,609 |
|
|
|
718,608 |
|
Related parties
Parties are considered
to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled
by, or are under common control with the Company. Related parties also include principal owners of the Company, its management,
members of the immediate families of principal owners of the Company and its management and other parties with which the Company
may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent
that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all
related party transactions. All transactions are recorded at fair value of the goods or services exchanged.
TRUE 2 BEAUTY, INC. AND
SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2014 and 2013
NOTE 2 – BASIS OF PRESENTATION, GOING
CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent accounting pronouncements
In May 2014, the FASB issued Accounting Standards
Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition
guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred
to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services.
ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required
within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods
beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective
approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical
expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date
of adoption (which includes additional footnote disclosures). Early adoption is not permitted. The adoption of this guidance is
not expected to have a material impact on the Company’s consolidated financial statements.
In June 2014, the FASB issued Accounting Standards
Update No. 2014-12, Compensation — Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of
an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging
Issues Task Force) (ASU 2014-12). The guidance applies to all reporting entities that grant their employees share-based payments
in which the terms of the award provide that a performance target that affects vesting could be achieved after the requisite service
period. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service
period is treated as a performance condition. For all entities, the amendments in this Update are effective for annual periods
and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The effective
date is the same for both public business entities and all other entities. The adoption of this guidance is not expected to have
a material impact on the Company’s consolidated financial statements.
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 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 adoption of this guidance is not expected to have a material impact on
the Company’s consolidated financial statements.
NOTE 3 – PREPAID EXPENSES
At March 31, 2014 and 2013, prepaid expenses
consisted of the following:
|
|
March 31, 2014 |
|
March 31, 2013 |
Prepaid consulting fees |
|
$ |
13,775 |
|
|
$ |
13,775 |
|
Prepaid travel and other expense |
|
|
4,450 |
|
|
|
25,630 |
|
|
|
$ |
18,225 |
|
|
$ |
39,405 |
|
NOTE 4 – LOANS PAYABLE
On November 4, 2013, the Company and an individual
entered into a loan agreement, providing for the issuance of a loan in the principal amount of $10,000, with a fixed $1,000 interest
and also issued the lender 50,000 common shares as a loan fee valued at $2,755 and reflected as interest expense. All principal
and accrued interest were due on December 31, 2013. For the year ended March 31, 2014, interest and loan fees related to the loan
totaled $3,755 were included in interest expense in the accompanying consolidated statements of operations. On April 8, 2014,
the principal amount of $10,000 and all accrued and unpaid interest of the loan were settled for 249,650 shares of the Company’s
common stock, resulting in a loss on settlement of $2,755.
TRUE 2 BEAUTY, INC. AND
SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2014 and 2013
NOTE 4 – LOANS PAYABLE (continued)
On November 20, 2013, the Company and an individual
entered into a loan agreement, providing for the issuance of a loan in the principal amount of $10,000, with a fixed $1,000 interest
and also issued the lender 50,000 common shares as a loan fee valued at $2,755 and reflected as interest expense. All principal
and accrued interest were due on December 31, 2013. For the year ended March 31, 2014, interest and loan fees related to the loan
totaled $3,755 were included in interest expense in the accompanying consolidated statements of operations. On April 8, 2014,
the principal amount of $10,000 and all accrued and unpaid interest of the loan were settled for 249,650 shares of the Company’s
common stock, resulting in a loss on settlement of $2,755.
At March 31, 2014, the total principal for
the above loan payable amounted to $20,000, which amount was included in loan payable in the accompanying consolidated balance
sheets. During the year ended March 31, 2014, the total interest expense for the above two loans amounted to $7,510.
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED
EXPENSES
At March 31, 2014 and 2013, accounts payable
and accrued expenses consisted of the following:
|
|
March 31, 2014 |
|
March 31, 2013 |
Accrued interest |
|
$ |
2,000 |
|
|
$ |
— |
|
Accrued office lease payable |
|
|
— |
|
|
|
720 |
|
Accrued professional fees |
|
|
12,922 |
|
|
|
156,401 |
|
Accrued payroll taxes |
|
|
18,653 |
|
|
|
12,623 |
|
|
|
$ |
33,575 |
|
|
$ |
169,744 |
|
NOTE 6 - ACCRUED OFFICER SALARY AND DIRECTOR
FEES
In January 2012, the Company announced Mr.
Christopher Jarvis as a member of the Board of Director. In connection with Mr. Jarvis’ employment as a director, 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. As of March 31, 2014 and 2013, the amount due to Christopher Jarvis was $6,750 and $750,
respectively, and was included in accrued officer salary and director fees in the accompanying consolidated balance sheets.
As of March 31, 2014 and 2013, the accrued
and unpaid CEO’s salary was $14,500 and $0, respectively, and was included in accrued officer salary and director fees in
the accompanying consolidated balance sheets.
As of March 31, 2014 and 2013, accrued officer
salary and director fees consisted of the following:
|
|
March 31, 2014 |
|
March 31, 2013 |
Accrued director’s salary |
|
$ |
6,750 |
|
|
$ |
750 |
|
Accrued officer salary |
|
|
14,500 |
|
|
|
— |
|
|
|
$ |
21,250 |
|
|
$ |
750 |
|
NOTE 7 – DUE TO SHAREHOLDER
At March 31, 2014, the Company owed a shareholder
$8,218 for payments made on behalf of the Company and which has been reimbursed during the period from May 2014 through October
2014.
NOTE 8 – INCOME TAXES
The Company maintains deferred tax assets
and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. The deferred tax assets at March 31, 2014 and 2013
consist of net operating loss carryforwards. The net deferred tax asset has been fully offset by a valuation allowance because
of the uncertainty of the attainment of future taxable income. The items accounting for the difference between income taxes at
the effective statutory rate and the provision for income taxes for the years ended March 31, 2014 and 2013 were as follows:
TRUE 2 BEAUTY, INC. AND
SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014 and 2013
NOTE 8 – INCOME TAXES (continued)
|
|
Years Ended March
31, |
|
|
2014 |
|
2013 |
Income tax expense (benefit) at U.S. statutory rate of 34% |
|
$ |
(123,736 |
) |
|
$ |
(279,971 |
) |
Income tax benefit - State |
|
|
(18,196 |
) |
|
|
(41,172 |
) |
Non-deductible expenses |
|
|
52,970 |
|
|
|
154,936 |
|
Change in valuation allowance |
|
|
88,962 |
|
|
|
166,207 |
|
Total provision for income tax |
|
$ |
— |
|
|
$ |
— |
|
The Company’s approximate net deferred tax asset as of March
31, 2014 and 2013 was as follows:
Deferred Tax Asset: |
|
March 31, 2014 |
|
March 31, 2013 |
Net operating loss carryforward |
|
$ |
841,031 |
|
|
$ |
752,069 |
|
Valuation allowance |
|
|
(841,031 |
) |
|
|
(752,069 |
) |
Net deferred tax asset |
|
$ |
— |
|
|
$ |
— |
|
The net operating loss carryforward was $2,156,489
at March 31, 2014. The Company provided a valuation allowance equal to the deferred income tax asset for the years ended March
31, 2014 and 2013 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward.
The increase in the allowance was $88,962 in fiscal 2014. The potential tax benefit arising from the loss carryforward will expire
in 2034.
Additionally, the future utilization of the
net operating loss carryforward to offset future taxable income may be subject to an annual limitation as a result of ownership
changes that could occur in the future. If necessary, the deferred tax assets will be reduced by any carryforward that expires
prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance.
The Company does not have any uncertain tax
positions or events leading to uncertainty in a tax position. The Company’s 2012, 2013 and 2014 Corporate Income Tax Returns
are subject to Internal Revenue Service examination.
NOTE 9 – RELATED PARTY TRANSACTIONS
Due to officer
At March 31, 2014 and 2013, the Company owed
Mr. William Bollander, its CEO, $508 and $630, respectively, for payments made on behalf of the Company and which has been included
in Due to officer in the accompanying consolidated balance sheets.
note
10 – STOCKHOLDERS’ (DEFICIT) EQUITY
Authorized shares
The Company is authorized to issue 10,000,000
shares of its $0.001 par value preferred stock. As of March 31, 2014 and 2013, no preferred shares were issued and outstanding.
The Company is authorized to issue 190,000,000
shares of its $0.001 par value common stock. As of March 31, 2014 and 2013, 31,601,531 and
27,241,331 shares of common stock were issued and outstanding, respectively.
Common stock issued for asset purchase
On April 2, 2012, the Company issued 4,000,000
shares of common stock for the purchase of intangible assets of a beauty supply company. These common shares were valued on the
grant date at their fair value of $220,400 based on recent sales price of the common stock of $0.0551 per share. In connection
with issuance of these common shares, for the year ended March 31, 2013, the Company recorded the assets on the purchase date
and then a full impairment loss of $220,400 at March 31, 2013.
TRUE 2 BEAUTY, INC. AND
SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2014 and 2013
note 10 – STOCKHOLDERS’
(DEFICIT) EQUITY (continued)
Common stock issued for service
During the year ended March 31, 2013, the
Company issued 3,460,000 shares of common stock for services rendered, including 100,000 shares to a board member of the Company.
The shares were valued on the dates of grant at their fair value aggregating $190,646 based on the recent sales price of the common
stock of $0.0551 per share. The Company recorded stock-based compensation and fees $176,871 and had a remaining prepaid expense
of $13,775 at March 31, 2013, which was amortized in the fiscal year of 2014.
On December 13, 2013, the Company issued 750,000
shares of common stock to a law firm to exchange for the settlement of accounts payable of $75,919 pursuant to a settlement agreement
between the Company and the law firm. The shares were valued on the date of grant at their fair value of $41,325 based on the
recent sales price of the common stock of $0.0551 per share. In connection with the issuance of these common shares, the Company
recognized a gain from settlement of accounts payable of $34,594 which represented the difference between accounts payable at
March 31, 2013 of $75,919 for legal fees incurred and the amount of fair value of shares issued of $41,325.
In June 2013, the Company issued 1,500,000
common shares to settle accounts payable of $82,650. The shares were valued on the date of grant at their fair value of $82,650
based on the recent sales price of the common stock of $0.0551 per share. No gain or loss was recognized on this settlement.
During the year ended March 31, 2014, the
Company issued 1,865,000 shares of common stock for services, including 40,000 shares to the board member, Mr. Christopher Jarvis.
The shares were valued on the date of grant at their fair value of $102,761 based on recent sales price of the common stock of
$0.0551 per share. The Company recorded stock-based compensation and fees of $88,986, and recorded a remaining prepaid expense
of $13,775 at March 31, 2014, which was amortized in fiscal year 2015.
Common stock cancelled
On March 4, 2013, the Company cancelled a
total of 152,640 shares of previously issued common stock for the payment of consulting fees since the consultant did not perform
the services agreed to. In connection with the cancellation of these common shares, the Company decreased common stock by the
par value of $153 with a corresponding increase in additional paid-in capital of $153.
Common stock sold for cash
During the year ended March 31, 2013, the
Company sold a total of 6,953,709 shares of common stock to investors at an average price of $0.0551 per common share. The Company
had received $75,000 towards the purchase of these shares as of March 31, 2012. During the fiscal year ended March 31, 2013, the
Company received cash proceeds of $298,180 from the sale of the shares and had a subscription receivable of $10,000 which was
collected in fiscal 2014.
During the fiscal year ended March 31, 2014,
the Company sold a total of 145,200 shares of common stock at an average price of $0.0551 per common share to investors. The proceeds
received by the Company from the sale of these shares were $8,000 in fiscal 2014.
Common stock issued for payment of loan fees
During the year ended March 31, 2014, the
Company issued a total of 100,000 shares of common stock to two debtors for loan fees. The common shares were valued on the date
of grant at their fair value of $5,510 based on recent sales price of the common stock of $0.0551per share. The $5,510 is reflected
as interest expense.
Warrants
The Company issued warrants with common stock sold during 2014
and 2013. The warrants have an exercise price of $0.40 per share and expire in 5 years from issuance date.
Warrant activities for the years ended March 31, 2014 and 2013
were summarized as follows:
TRUE 2 BEAUTY, INC. AND
SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2014 and 2013
note 10 – STOCKHOLDERS’
(DEFICIT) EQUITY (continued)
Warrants (continued)
|
|
Number of Warrants |
|
Weighted Average
Exercise Price |
|
Balance at March 31, 2012 |
|
|
|
— |
|
|
$ |
— |
|
|
Issued |
|
|
|
718,608 |
|
|
|
0.40 |
|
|
Exercised/forfeited/expired |
|
|
|
— |
|
|
|
— |
|
|
Balance at March 31, 2013 |
|
|
|
718,608 |
|
|
|
0.40 |
|
|
Issued |
|
|
|
15,001 |
|
|
|
0.40 |
|
|
Exercised/forfeited/expired |
|
|
|
— |
|
|
|
— |
|
|
Balance at March 31, 2014 |
|
|
|
733,609 |
|
|
$ |
0.40 |
|
|
Warrant exercisable at March 31, 2014 |
|
|
|
733,609 |
|
|
$ |
0.40 |
|
There was no intrinsic value of the warrants as of March 31, 2014.
The following
table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at March 31, 2014:
Warrants
Outstanding |
|
Warrants
Exercisable |
Range
of
Exercise
Price |
|
Number
Outstanding at
March 31, 2014 |
|
Weighted
Average
Remaining
Contractual
Life (Years) |
|
Weighted
Average
Exercise
Price |
|
Number
Exercisable at
March 31, 2014 |
|
Weighted
Average
Exercise
Price |
$ |
0.40 |
|
|
|
356,250 |
|
|
|
3.5 |
|
|
$ |
0.40 |
|
|
|
356,250 |
|
|
$ |
0.40 |
|
|
0.40 |
|
|
|
25,000 |
|
|
|
3.6 |
|
|
|
0.40 |
|
|
|
25,000 |
|
|
|
0.40 |
|
|
0.40 |
|
|
|
25,500 |
|
|
|
3.7 |
|
|
|
0.40 |
|
|
|
25,500 |
|
|
|
0.40 |
|
|
0.40 |
|
|
|
161,543 |
|
|
|
3.8 |
|
|
|
0.40 |
|
|
|
161,543 |
|
|
|
0.40 |
|
|
0.40 |
|
|
|
103,438 |
|
|
|
3.9 |
|
|
|
0.40 |
|
|
|
103,438 |
|
|
|
0.40 |
|
|
0.40 |
|
|
|
46,877 |
|
|
|
4.0 |
|
|
|
0.40 |
|
|
|
46,877 |
|
|
|
0.40 |
|
|
0.40 |
|
|
|
15,001 |
|
|
|
4.1 |
|
|
|
0.40 |
|
|
|
15,001 |
|
|
|
0.40 |
|
|
|
|
|
|
733,609 |
|
|
|
3.7 |
|
|
$ |
0.40 |
|
|
|
733,609 |
|
|
$ |
0.40 |
|
NOTE 11 – CONCENTRATIONS
AND COMMITMENTS
Concentrations
Concentration of credit risk
The Company maintains its cash in bank and
financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in
such accounts through March 31, 2014. There were no balances in excess of FDIC insured levels as of March 31, 2014 and 2013.
Customers
No customer accounted for 10% or more of the
Company’s revenue during the years ended March 31, 2014 and 2013.
Suppliers
No supplier accounted for 10% or more of the
Company’s purchase during the years ended March 31, 2014 and 2013.
TRUE 2 BEAUTY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014 and 2013
NOTE 11 – CONCENTRATIONS
AND COMMITMENTS (continued)
Commitments
Service contracts
On June 1, 2012, the Company entered into
a one-year service agreement with a one-year option for renewal with Darryl Cohen, a shareholder. The payment for Darryl Cohen’s
services includes 1,500,000 shares of common stock upon his acceptance of the service agreement. If the Company acquires any business
or products from any of his relationships, the Company agree to pay normal fees (to be negotiated at time of transaction) associated
with such transactions, in either cash or stock. In accordance with the service agreement, the Company issued Mr. Darryl Cohen
1,500,000 shares of common stock in June 2012. The service agreement was renewed on June 1, 2013 and the Company issued Mr. Darryl
Cohen 1,500,000 shares of common stock in June 2013. The term of the renewed service agreement was one year and expired on May
31, 2014. The common shares were valued at fair value using the recent sale price of the common stock on the dates of grant of
$0.0551 per common share, and the Company recorded stock-based compensation of $82,650 and $68,875 for the years ended March 31,
2014 and 2013, respectively, with a prepaid fee remaining at March 31, 2014 of $13,775.
On April 5, 2014, the Company entered into
a legal service agreement with Frederick M. Lehrer, Esquire (“FML”) who has agreed to perform corporate and securities
related legal services for the Company. The agreement expires upon the SEC issuing an effectiveness notice for S-1. In accordance
to this legal service agreement, the Company pays FML (a) a cash fee of $10,000 payable as follows (i) $2,000 upon execution of
this agreement; (ii) $3,000 upon filing the S-1; (iii) $5,000 upon the SEC issuing an effectiveness notice; and (b) 200,000 shares
of the Company’s common stock were issued to be issued within 20 days of the execution of this agreement. The Company made
the first $2,000 cash payment in May 2014 and issued the 200,000 shares of common stock in April 2014. The common shares were
valued at fair value using the recent sale price of the common stock on the date of grant of $0.0551 per common share and the
Company recorded stock-based compensation and fees of $11,020 in the six months ended September 30, 2014.
On April 28, 2014, the Company entered into
a service agreement with CFO Oncall Inc. In accordance to the service agreement, CFO Oncall Inc. provides the Company accounting
service and the Company issued CFO Oncall Inc. 100,000 shares of common stock in April 2014. The agreement expired on October
31, 2014. The common shares were valued at fair value using the recent sale price of the common stock on the date of grant of
$0.0551 per common share and the Company recorded stock-based compensation and fees of $5,510 in the six months ended September
30, 2014. On October 29, 2014, the Company entered into a new service agreement with CFO Oncall Inc., 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 1st of each month, and $2,000 payable at the Company’s option in cash or the Company’s
common stock.
In September 2014, the Company signed an eight-month
agreement with Applied DNA to work together, in good faith, on a business partnership focused on using Applied DNA Sciences’
unique SigNature© DNA taggant platform, digitalDNA © software platform and other products as required for DNA marking,
tracking and authentication of sports collectibles and sports memorabilia uniquely and authentically identified to an athlete
(“Goods”) and offered either within a True2Bid online auction exchange environment or through other means of sale.
The agreement requires a cash payment of $35,000 of which $10,000 has been paid, and the balance of $25,000 to be paid in two
installments of $12,500 each on February 1, 2015 and June 1, 2015, respectively.
NOTE 12 – SUBSEQUENT EVENTS
During the period between April 1, 2014 and
the filing date of this report, the Company sold a total of 3,365,334 shares of common stock at an average price of $0.0551 per
common share to investors. The proceeds received by the Company from the sale of these shares were $185,420.
On April 8, 2014, the Company issued a total
of 499,300 shares of common stock to two debtors to pay off outstanding loans payable with the principal amount of $20,000 and
to pay off accrued interest of $2,000. The common shares were valued on the date of grant at their fair value of $27,510 based
on recent sales price of the common stock of $0.0551 per share resulting in a loss on settlement of $5,510.
TRUE 2 BEAUTY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2014 and 2013
NOTE 12 – SUBSEQUENT EVENTS (continued)
During the period from April 1, 2014 through
the filing date of this report, the Company issued an aggregate of 1,485,000 shares of common stock for services rendered and
to be rendered, including 360,000 shares to a director. The common shares were valued on the dates of grant at their fair values
aggregating $81,824 based on recent sales price of the common stock of $0.0551 per share. The Company recorded prepaid expenses
of $81,824 which will be amortized over the related service period. Shares issued for services included the following:
• |
In July 2014, the Company granted 360,000 common shares to a director for services
rendered. The common shares were valued on the date of grant at their fair value of $19,836 based on the recent sales price
of $0.0551 per share. The $19,836 was expensed immediately. |
• |
On April 5, 2014, the Company entered into a legal service agreement with Frederick M. Lehrer,
Esquire (“FML”) who has agreed to perform corporate and securities related legal services for the Company. The
agreement expires upon the SEC issuing an effectiveness notice for S-1. In accordance to this legal service agreement, the
Company pays FML (a) a cash fee of $10,000 payable as follows (i) $2,000 upon execution of this agreement; (ii) $3,000 upon
filing the S-1; (iii) $5,000 upon the SEC issuing an effectiveness notice; and (b) 200,000 shares of the Company’s common
stock, valued at fair value based on recent sales price of the common stock of $0.0551 per share and were issued within 20
days of the execution of this agreement. The Company made the first $2,000 cash payment in May 2014. The $11,020 value of
the shares was expensed immediately due to the indefinite term of the agreement. |
• |
On April 18, 2014, the Company entered into a service agreement with Robert Grich who is a
consultant of the Company. The agreement is for a term of one year and requires 100,000 of common shares and cash payment
of $2,500 in total to Robert Grich. In accordance to the service agreement, the Company issued Mr. Robert Grich 100,000 shares
of common stock and made cash payment of $2,500 in April 2014. The common shares were valued on the date of grant at their
fair value of $5,510 based on recent sales price of the common stock of $0.0551 per share. The Company recorded prepaid expense
of $5,510 in April 2014, which will be amortized in the corresponding service period. |
• |
On April 28, 2014, the Company entered into a service agreement with CFO Oncall Inc. In accordance
to the service agreement, CFO Oncall Inc. provides the Company accounting service and the Company issued CFO Oncall Inc. 100,000
shares of common stock in April 2014. The agreement expired on October 31, 2014. On October 29, 2014, the Company entered
into a new service agreement with CFO Oncall Inc., 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 1st of
each month, and $2,000 payable at the Company’s option in cash or the Company’s common stock. The 100,000 shares
valued on the grant date at fair value of $5,510 based on recent sales price of the common stock of $0.0551. The Company expensed
the $5,510 immediately since the April 2014 agreement had an indefinite term. |
• |
On July 1, 2014, the Company entered into a service agreement with Patrick L. Stimson who
is a consultant of the Company. The agreement is for a term of two years and requires 250,000 shares of common stock. In accordance
to the service agreement, the Company issued Patrick L. Stimson 250,000 shares of common stock in July 2014. The common shares
were valued on the grant date at fair value of $13,775 based on recent sales price of the common stock of $0.0551 per share.
The Company recorded prepaid expense of $13,775 in July 2014, which will be amortized in the corresponding service period. |
• |
On July 1, 2014, the Company entered into a service agreement with Ronald Ellis who is a consultant
of the Company. The agreement is for a term of two years and requires 250,000 shares of common stock. In accordance to the
service agreement, the Company issued Ronald Ellis 250,000 shares of common stock in July 2014. The common shares were valued
on the grant date at fair value of $13,775 based on recent sales price of the common stock of $0.0551 per share. The Company
recorded prepaid expense of $13,775 in July 2014, which will be amortized in the corresponding service period. |
• |
In June and July 2014, the Company issued an aggregate of 225,000 shares to three separate
consultants valued on their grant dates at fair values aggregating $13,397 based on recent sales price of the common stock
of $0.0551 per share. The Company expensed the $13,397 immediately since the shares were for either services rendered or an
indefinite service term. |
In September 2014, the Company signed an eight-month
agreement with Applied DNA to work together, in good faith, on a business partnership focused on using Applied DNA Sciences’
unique SigNature© DNA taggant platform, digitalDNA © software platform and other products as required for DNA marking,
tracking and authentication of sports collectibles and sports memorabilia uniquely and authentically identified to an athlete
(“Goods”) and offered either within a True2Bid online auction exchange environment or through other means of sale.
The agreement requires a cash payment of $35,000.
TRUE 2 BEAUTY, INC. AND
SUBSIDIARY
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2014 and 2013
NOTE 12 – SUBSEQUENT EVENTS (continued)
In October and
November 2014, the Company and 7 investors (the “Investors”) entered into convertible promissory note agreements,
providing the issuance of a 10% convertible promissory notes (the “Convertible Notes”) with an aggregate principal
amount of $400,000. The Convertible Notes are due and payable on the third anniversary of the date of issuance through October
2017. 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 $0.02. 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. In
the event a registration statement is not filed by either the Company within 60 days following the completion 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 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 a registration statement from the Company, including the Conversion Shares is declared effective by the SEC. In connection
with the issuance of these Convertible Notes above, the Company determined that the terms of the Convertible Notes include 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. 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 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 was determined
using the Binomial Option Pricing Model. On the initial measurement date, the fair value of the embedded conversion option derivative
of $419,000 was recorded as a derivative liability and was allocated as a debt discount up to the proceeds of the notes ($383,125)
with the remainder ($35,875) 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 was recorded as a component of other income/(expense)
in the accompanying consolidated statements of operations.
The fair value of the initial derivative
liabilities were estimated using the Binomial option-pricing model with the following assumptions:
Dividend
rate |
0 |
|
Term
(in years) |
3.0 years |
|
Volatility |
175% to 188% |
|
Risk-free
interest rate |
0.73% to 1.10% |
|
TRUE 2 BEAUTY INC.
QUARTERLY REPORT
December 31, 2014
CONTENTS
TRUE
2 BEAUTY, INC. AND SUBSIDIARY |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
|
|
December
31, 2014 |
|
March
31, 2014 |
|
|
(Unaudited) |
|
|
ASSETS |
|
|
|
CURRENT
ASSETS: |
|
|
Cash |
|
$ |
148,831 |
|
|
$ |
9,345 |
|
Prepaid
expenses |
|
|
22,998 |
|
|
|
18,225 |
|
Security
deposit |
|
|
— |
|
|
|
636 |
|
|
|
|
|
|
|
|
|
|
Total
Current Assets |
|
|
171,829 |
|
|
|
28,206 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
171,829 |
|
|
$ |
28,206 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
75,021 |
|
|
$ |
33,575 |
|
Accrued
officer salary and director fees |
|
|
10,050 |
|
|
|
21,250 |
|
Advances
for common stock purchases |
|
|
— |
|
|
|
113,525 |
|
Due
to shareholders |
|
|
— |
|
|
|
8,218 |
|
Due
to officer |
|
|
170 |
|
|
|
508 |
|
Derivative
liabilities |
|
|
970,000 |
|
|
|
— |
|
Loans
payable |
|
|
— |
|
|
|
20,000 |
|
Deferred
revenue |
|
|
— |
|
|
|
327 |
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities |
|
|
1,055,241 |
|
|
|
197,403 |
|
|
|
|
|
|
|
|
|
|
Convertible
notes payable, net of discount |
|
|
38,160 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES |
|
|
1,093,401 |
|
|
|
197,403 |
|
|
|
|
|
|
|
|
|
|
COMMITMENTS
(Note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
DEFICIT: |
|
|
|
|
|
|
|
|
Preferred
stock ($0.001 par value; 10,000,000 shares authorized;
No share issued or outstanding at December 31, 2014 and March 31, 2014) |
|
|
— |
|
|
|
— |
|
Common
stock, ($0.001 par value; 190,000,000 shares authorized;
36,951,165 and 31,601,531 shares issued and outstanding at December
31, 2014 and March 31, 2014, respectively) |
|
|
36,951 |
|
|
|
31,601 |
|
Additional
paid-in capital |
|
|
8,332,206 |
|
|
|
8,042,803 |
|
Accumulated
deficit |
|
|
(9,290,729 |
) |
|
|
(8,243,601 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS’ DEFICIT |
|
|
(921,572 |
) |
|
|
(169,197 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
$ |
171,829 |
|
|
$ |
28,206 |
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY |
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| |
For the
Three Months Ended December 31, | |
For the
Nine Months Ended December 31, |
| |
2014 | |
2013 | |
2014 | |
2013 |
| |
| |
| |
| |
|
REVENUE,
NET | |
$ | 79 | | |
$ | 135 | | |
$ | 437 | | |
$ | 35,960 | |
| |
| | | |
| | | |
| | | |
| | |
COST OF REVENUE | |
| 690 | | |
| 829 | | |
| 2,226 | | |
| 33,938 | |
| |
| | | |
| | | |
| | | |
| | |
GROSS (LOSS) PROFIT | |
| (611 | ) | |
| (694 | ) | |
| (1,789 | ) | |
| 2,022 | |
| |
| | | |
| | | |
| | | |
| | |
OPERATING EXPENSES | |
| | | |
| | | |
| | | |
| | |
Compensation
and related taxes | |
| 36,325 | | |
| 31,500 | | |
| 122,887 | | |
| 96,704 | |
Professional
fees | |
| 149,887 | | |
| 33,297 | | |
| 244,151 | | |
| 138,362 | |
Other selling,
general and administrative | |
| 34,227 | | |
| 10,917 | | |
| 56,938 | | |
| 39,746 | |
| |
| | | |
| | | |
| | | |
| | |
TOTAL OPERATING
EXPENSES | |
| 220,439 | | |
| 75,714 | | |
| 423,976 | | |
| 274,812 | |
| |
| | | |
| | | |
| | | |
| | |
LOSS FROM OPERATIONS | |
| (221,050 | ) | |
| (76,408 | ) | |
| (425,765 | ) | |
| (272,790 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME (EXPENSE) | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (28,978 | ) | |
| (4,755 | ) | |
| (28,978 | ) | |
| (4,755 | ) |
Initial derivative
expense | |
| (35,875 | ) | |
| — | | |
| (35,875 | ) | |
| — | |
Loss from change
in fair value of derivative liabilities | |
| (551,000 | ) | |
| — | | |
| (551,000 | ) | |
| — | |
Loss on settlement
of loans | |
| — | | |
| — | | |
| (5,510 | ) | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
TOTAL OTHER INCOME
(EXPENSE) | |
| (615,853 | ) | |
| (4,755 | ) | |
| (621,363 | ) | |
| (4,755 | ) |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS | |
$ | (836,903 | ) | |
$ | (81,163 | ) | |
$ | (1,047,128 | ) | |
$ | (277,545 | ) |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS PER COMMON SHARE | |
| | | |
| | | |
| | | |
| | |
Basic and diluted | |
$ | (0.02 | ) | |
$ | (0.00 | ) | |
$ | (0.03 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | | |
| | | |
| | |
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted | |
| 36,951,165 | | |
| 30,614,574 | | |
| 35,879,354 | | |
| 29,204,473 | |
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY |
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT |
For
the Nine Months Ended December 31, 2014 |
| |
Preferred
Stock | |
Common
Stock | |
Additional | |
| |
Total |
| |
Number of | |
| |
Number of | |
| |
Paid-in | |
Accumulated | |
Stockholders’ |
| |
Shares | |
Amount | |
Shares | |
Amount | |
Capital | |
Deficit | |
Deficit |
Balance at March 31,
2014 | |
| — | | |
$ | — | | |
| 31,601,531 | | |
$ | 31,601 | | |
$ | 8,042,803 | | |
$ | (8,243,601 | ) | |
$ | (169,197 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for
services | |
| — | | |
| — | | |
| 1,485,000 | | |
| 1,485 | | |
| 80,338 | | |
| — | | |
| 81,823 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock sold for
cash | |
| — | | |
| — | | |
| 3,365,334 | | |
| 3,365 | | |
| 182,055 | | |
| — | | |
| 185,420 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock issued for
loan settlements | |
| — | | |
| — | | |
| 499,300 | | |
| 500 | | |
| 27,010 | | |
| — | | |
| 27,510 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,047,128 | ) | |
| (1,047,128 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance at December 31, 2014 (unaudited) | |
| — | | |
$ | — | | |
| 36,951,165 | | |
$ | 36,951 | | |
$ | 8,332,206 | | |
$ | (9,290,729 | ) | |
$ | (921,572 | ) |
The accompanying
notes are an integral part of these unaudited condensed consolidated financial statements.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY |
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| |
For the Nine Months
Ended December 31, |
| |
2014 | |
2013 |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| |
|
Net loss | |
$ | (1,047,128 | ) | |
$ | (277,545 | ) |
Adjustments to reconcile net loss
to net cash | |
| | | |
| | |
used in operating activities: | |
| | | |
| | |
Stock-based compensation and fees | |
| 59,554 | | |
| 53,171 | |
Loss on settlement of loans | |
| 5,510 | | |
| — | |
Amortization of debt discount | |
| 21,285 | | |
| — | |
Initial fair value of derivative
liabilities | |
| 35,875 | | |
| — | |
Loss from change in fair value
of derivative liabilities | |
| 551,000 | | |
| — | |
Changes in operating assets and
liabilities: | |
| | | |
| | |
Prepaid expenses | |
| 17,496 | | |
| 23,082 | |
Prepaid salary to officer | |
| — | | |
| 26,666 | |
Security deposit | |
| 636 | | |
| — | |
Inventories | |
| — | | |
| 29,282 | |
Bank overdraft | |
| — | | |
| 13 | |
Accounts payable and accrued expenses | |
| 43,446 | | |
| 3,448 | |
Deferred revenue | |
| (327 | ) | |
| — | |
Accrued officer salary and director
fees | |
| (11,200 | ) | |
| 15,700 | |
Due to shareholders | |
| (8,218 | ) | |
| 10,503 | |
Due to officer | |
| (338 | ) | |
| (142 | ) |
| |
| | | |
| | |
Net cash used in operating activities | |
| (332,409 | ) | |
| (115,822 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Proceeds received from common stock
subscription | |
| — | | |
| 59,525 | |
Proceeds received from convertible
notes | |
| 400,000 | | |
| — | |
Proceeds received from loans payable | |
| — | | |
| 20,000 | |
Proceeds received
from sale of stock | |
| 71,895 | | |
| 18,000 | |
| |
| | | |
| | |
Net cash provided by financing
activities | |
| 471,895 | | |
| 97,525 | |
| |
| | | |
| | |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | |
| 139,486 | | |
| (18,297 | ) |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS - beginning
of period | |
| 9,345 | | |
| 19,621 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS -
end of period | |
$ | 148,831 | | |
$ | 1,324 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid for: | |
| | | |
| | |
Interest | |
$ | — | | |
$ | — | |
Income taxes | |
$ | — | | |
$ | — | |
| |
| | | |
| | |
NON-CASH INVESTING AND FINANCING ACTIVITIES: | |
| | | |
| | |
Stock issued
for future services | |
$ | 33,060 | | |
$ | 82,650 | |
Stock issued
for accounts payable | |
$ | — | | |
$ | 158,569 | |
Stock issued
for loans' principal | |
$ | 20,000 | | |
$ | — | |
Stock issued
for accrued interest | |
$ | 2,000 | | |
$ | — | |
Stock issued
for common stock subscription advances | |
$ | 113,525 | | |
$ | — | |
The
accompanying notes are an integral part of these unaudited condensed consolidated financial statements. |
TRUE 2 BEAUTY INC. AND
SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2014
NOTE 1 – ORGANIZATION AND NATURE
OF OPERATIONS
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, Inc. (“LegacyXChange”) in December 2014. The Company continued to sell existing
inventory of beauty products through May 2013 when the final inventory was sold. LegacyXChange operates an online e-commerce platform
focus on delivering users a wide array of sports and entertainment related products that can be won in an action packed environment
of a live auction.
In addition to its e-commerce platform, the
Company has recently signed an agreement with Applied DNA to work together, in good faith, on a business partnership focused on
using Applied DNA Sciences’ unique SigNature© DNA taggant platform, digitalDNA © software platform and other products
as required for DNA marking, tracking and authentication of sports collectibles and sports memorabilia uniquely and authentically
identified to an athlete (“Goods”) and offered either within a LegacyXChange online auction exchange environment or
through other means of sale.
NOTE 2 – BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
Management acknowledges its responsibility
for the preparation of the accompanying unaudited condensed 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 condensed consolidated financial
statements include the financial statement of its wholly-owned subsidiary, LegacyXChange, Inc. All intercompany accounts and transactions
have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements for True 2 Beauty
Inc. and its subsidiary 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. These unaudited condensed consolidated financial statements should be read in conjunction with the summary of significant
accounting policies and notes to the consolidated financial statements for the years ended March 31, 2014 and 2013 included in
the Company’s Form S-1, amendment No. 2.
Going concern
These unaudited condensed consolidated financial
statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things,
the realization of assets and the satisfaction of liabilities in the normal course of business.
As reflected in the accompanying unaudited
condensed consolidated financial statements, the Company had a net loss of $1,047,128 and $277,545 for the nine months ended December
31, 2014 and 2013, respectively, and net cash used in operations of $332,409 and $115,822 for the nine months ended December 31,
2014 and 2013, respectively. Additionally, the Company had an accumulated deficit, a stockholders’ deficit and a working
capital deficit of $9,290,729, $921,572 and $883,412, respectively, at December 31, 2014, has a gross loss for the nine months
ended December 31, 2014 and has minimal gross profit for the nine months ended December 31, 2013. These matters raise substantial
doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern
is dependent on the Company’s ability to raise additional capital, implement its business plan, and generate significant
revenues. The unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if
the Company is 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.
TRUE 2 BEAUTY INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2014
NOTE 2 – BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of estimates
The preparation of the unaudited condensed
consolidated financial statements in conformity with generally accepted accounting principles in the United States of America
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 financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates. Significant estimates during the nine months ended
December 31, 2014 and 2013 include the valuation of deferred tax assets, derivative liabilities and the valuation of stock-based
compensation and fees.
Fair value of financial instruments and fair value measurements
The Company adopted 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 value as
follows:
· | Level
1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities
available at the measurement date. |
· | Level
2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets,
quoted prices for identical or similar assets and liabilities in markets that are not
active, inputs other than quoted prices that are observable, and inputs derived from
or corroborated by observable market data. |
· | Level
3-Inputs are unobservable inputs which reflect the reporting entity’s own
assumptions on what assumptions the market participants would use in pricing the asset
or liability based on the best available information. |
The carrying amounts reported in the unaudited
condensed consolidated balance sheets for cash, loans payable, accounts payable and accrued expenses, accrued officer salary and
director fees, advances for common stock purchases, due to shareholders, and due to officer approximate their fair market value
based on the short-term maturity of these instruments.
The following table reflects changes for the
nine months ended December 31, 2014 for all financial assets and liabilities categorized as Level 3 as of December 31, 2014.
Liabilities: | |
|
Balance of derivative liabilities as of March 31, 2014 | |
$ | — | |
Initial fair value of derivative liabilities
attributable to conversion feature | |
| 419,000 | |
Loss from change in the fair value of derivative liabilities | |
| 551,000 | |
Balance of derivative liabilities as of December 31, 2014 | |
$ | 970,000 | |
ASC 825-10 “Financial Instruments”,
allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option).
The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs.
If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings
at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
Cash and cash equivalents
Cash and cash equivalents consist of cash
and short-term highly liquid investments purchased with original maturities of three months or less. There were no cash equivalents
at December 31, 2014 and March 31, 2014.
Inventories and cost of revenue
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. Any
inventory adjustments are based upon management’s review of inventories on hand compared to estimated future usage and sales.
The Company has no inventory on hand as of December 31, 2014 because after May 2013 products sold are drop shipped from the Company’s
vendors to the Company’s customers.
TRUE 2 BEAUTY INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2014
NOTE 2 – BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Deferred revenue
Deferred revenue represents revenue collected
from the sale of bid packages for the Company’s online auctions but not earned as of the report date. Deferred revenue totaled
$0 and $327 as of December 31, 2014 and March 31, 2014, respectively.
Advances for common stock purchases
Advances for common stock purchases consist
of prepayments from investors for the purchase of common stock prior to the signing of a stock subscription agreement which was
signed after the period end. The Company reclassified to equity the advances for common stock purchases at the time the stock
subscription was signed. At December 31, 2014 and March 31, 2014, the Company had advances for common stock purchases of $0 and
$113,525, respectively.
Revenue recognition
The Company recognizes revenue when persuasive
evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable
and collectability is reasonably assured. The Company’s specific revenue recognition policies are as follows:
● |
Product sales from the sale of beauty products by the parent company (which ceased
in May 2013) and sales of products through the subsidiary auction web-site are recognized when the product is shipped to the
customer and title is transferred. |
● |
To participate in the Company’s auction program, consumers are required
to purchase bid packages directly from the Company. Proceeds from the sales of bid packages are recorded as deferred revenue
until recognizable as discussed below. In connection with the sale of bid packages, the Company utilized the User-based Revenue
Model (“UBRM”). The UBRM is based on the presumption that the period of delivery for the bid package is the estimated
average user life which was estimated by the Company to be 60 days. Consequently, revenue from the sale of bid packages is
recognized ratably over the estimated user life of 60 days. |
Stock-based compensation
Stock-based compensation is accounted for
based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of
the cost of employee and director services received in exchange for an award of equity instruments over the period the employee
or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires
measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value
of the award.
Pursuant to ASC Topic 505-50, for share-based
payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The
expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation
expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting
date.
Income taxes
Deferred income tax assets and liabilities
arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities,
as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and
liabilities are classified as current or non-current, depending upon the classification 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
on the periods in which the temporary differences are expected to reverse. Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be realized.
The Company follows the provisions of FASB
ASC 740-10 “Uncertainty in Income Taxes” (ASC 740-10). Certain recognition thresholds must be met before a tax position
is recognized in the financial statements. An entity may only recognize or continue to recognize tax positions that meet a “more-likely-than-not”
threshold. As of December 31, 2014 and March 31, 2014, the Company does not believe it has any uncertain tax positions that would
require either recognition or disclosure in the accompanying unaudited condensed consolidated financial statements.
TRUE 2 BEAUTY INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 2 – BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Shipping costs
Shipping costs are included in other selling,
general and administrative expense and totaled $142 and $4,040 for the nine months ended December 31, 2014 and 2013, respectively.
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 nine
months ended December 31, 2014 and 2013.
Research and development
Expenditures for research and product development
costs are expensed as incurred. The Company did not incur any research and development during the nine months ended December 31,
2014 and 2013.
Basic and diluted earnings per share
Pursuant to ASC 260-10-45, basic earnings
per common share is computed by dividing income (loss) available to common shareholders by the weighted average number of shares
of common stock outstanding for the periods presented. Diluted income 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
each 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. Potentially dilutive common shares consist of
common stock issuable for stock warrants (using the treasury stock method). In period where the Company has a net loss, all potentially
dilutive securities are excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact.
The following table sets forth the computation of basic and diluted earnings per share for the nine months ended December 31,
2014 and 2013.
| |
Three Months Ended December 31, | |
Nine Months Ended December 31, |
| |
2014 | |
2013 | |
2014 | |
2013 |
Net loss for basic and diluted net loss per share
of common stock | |
$ | (836,903 | ) | |
$ | (81,163 | ) | |
$ | (1,047,128 | ) | |
$ | (277,545 | ) |
Weighted average common stock outstanding - basic | |
| 36,951,165 | | |
| 30,614,574 | | |
| 35,879,354 | | |
| 29,204,473 | |
Effect of dilutive securities: | |
| | | |
| | | |
| | | |
| | |
Stock warrants | |
| — | | |
| — | | |
| — | | |
| — | |
Weighted average common stock outstanding - diluted | |
| 36,951,165 | | |
| 30,614,574 | | |
| 35,879,354 | | |
| 29,204,473 | |
Net loss per common share - basic and diluted | |
$ | (0.02 | ) | |
$ | (0.00 | ) | |
$ | (0.03 | ) | |
$ | (0.01 | ) |
The Company’s aggregate common stock
equivalents at December 31, 2014 and 2013 included the following:
| |
December 31, 2014 | |
December 31, 2013 |
Stock warrants | |
| 1,048,315 | | |
| 733,609 | |
Total | |
| 1,048,315 | | |
| 733,609 | |
Related parties
Parties are considered
to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled
by, or are under common control with the Company. Related parties also include principal owners of the Company, its management,
members of the immediate families of principal owners of the Company and its management and other parties with which the Company
may deal with if one party controls or can significantly influence the management or operating policies of the other to an extent
that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all
related party transactions. All transactions are recorded at fair value of the goods or services exchanged.
TRUE 2 BEAUTY INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2014
NOTE 3 – PREPAID EXPENSES
At December 31, 2014 and March 31, 2014, prepaid
expenses consisted of the following:
| |
December 31, 2014 | |
March 31, 2014 |
Prepaid consulting fees | |
$ | 22,998 | | |
$ | 13,775 | |
Prepaid travel and other expense | |
| — | | |
| 4,450 | |
| |
$ | 22,998 | | |
$ | 18,225 | |
NOTE 4 – LOANS PAYABLE
On November 4, 2013, the Company and an individual
entered into a loan agreement, providing for the issuance of a loan in the principal amount of $10,000. The loan was due on December
31, 2013. On April 8, 2014, the principal amount of $10,000 and all accrued and unpaid interest of the loan were settled for 249,650
shares of the Company’s common stock, resulting in a loss on settlement of $2,755.
On November 20, 2013, the Company and an individual
entered into a loan agreement, providing for the issuance of a loan in the principal amount of $10,000. The loan was due on December
31, 2013. On April 8, 2014, the principal amount of $10,000 and all accrued and unpaid interest of the loan were settled for 249,650
shares of the Company’s common stock, resulting in a loss on settlement of $2,755.
At December 31, 2014 and March 31, 2014, the
total principal for the above loans payable amounted to $0 and $20,000, respectively, which amount was included in loans payable
in the accompanying consolidated balance sheets. During the nine months ended December 31, 2014, the total loss on settlement
of the above two loans amounted to $5,510 which was included in loss on settlement of loans in the accompanying unaudited condensed
consolidated statements of operations (See Note 10).
NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED
EXPENSES
At December 31, 2014 and March 31, 2014, accounts
payable and accrued expenses consisted of the following:
| |
December 31, 2014 | |
March 31, 2014 |
Accrued interest | |
$ | 7,693 | | |
$ | 2,000 | |
Accrued professional fees | |
| 41,124 | | |
| 12,922 | |
Accrued payroll taxes | |
| 26,204 | | |
| 18,653 | |
| |
$ | 75,021 | | |
$ | 33,575 | |
NOTE 6 - ACCRUED OFFICER SALARY AND DIRECTOR
FEES
In January 2012, the Company selected a member
of the Board of Director. In connection with the director’s employment, 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. As
of December 31, 2014 and March 31, 2014, the amount due to the director was $4,250 and $6,750, respectively, and was included
in accrued officer salary and director fees in the accompanying unaudited condensed consolidated balance sheets.
As of December 31, 2014 and March 31, 2014,
the accrued and unpaid CEO’s salary was $5,800 and $14,500, respectively, and was included in accrued officer salary and
director fees in the accompanying unaudited condensed consolidated balance sheets.
At December 31, 2014 and March 31, 2014, accrued
officer salary and director fees consisted of the following:
| |
December 31, 2014 | |
March 31, 2014 |
Accrued director’s salary | |
$ | 4,250 | | |
$ | 6,750 | |
Accrued officer’s salary | |
| 5,800 | | |
| 14,500 | |
| |
$ | 10,050 | | |
$ | 21,250 | |
TRUE 2 BEAUTY INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 7 – DUE TO SHAREHOLDERS
At December 31, 2014 and March 31, 2014, the
Company owed two shareholders $0 and $8,218 for payments made on behalf of the Company and which have been reimbursed by October
2014.
NOTE 8 – RELATED PARTY TRANSACTIONS
Due to officer
At December 31, 2014 and March 31, 2014, the
Company owed Mr. William Bollander, its CEO, $170 and $508, respectively, for payments made on behalf of the Company and which
has been included in Due to officer in the accompanying unaudited condensed consolidated balance sheets.
NOTE 9 – CONVERTIBLE NOTES PAYABLE
In October and November 2014, the Company
and 7 investors (the “Investors”) entered into convertible promissory note agreements, providing the issuance
of a 10% convertible promissory notes (the “Convertible Notes”) with an aggregate principal amount of $400,000. The
Convertible Notes are due and payable on the third anniversary of the date of issuance through October 2017. 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 $0.02. 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. In the event a registration statement is
not filed by either the Company within 60 days following the completion 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 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 a registration statement from the
Company, including the Conversion Shares is declared effective by the SEC. In connection with the issuance of these Convertible
Notes above, the Company determined that the terms of the Convertible Notes include 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. 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
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 was determined using the Binomial Option Pricing
Model. On the initial measurement date, the fair value of the embedded conversion option derivative of $419,000 was recorded as
a derivative liability and was allocated as a debt discount up to the proceeds of the notes ($383,125) with the remainder ($35,875)
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 was recorded as a component of other income/(expense) in the accompanying consolidated
statements of operations.
The fair value of the derivative liabilities
were estimated using the Binomial option-pricing model with the following assumptions:
Dividend rate | |
| 0 | |
Term (in years) | |
| 2.8 to 3.0 years | |
Volatility | |
| 175% to 188% | |
Risk-free interest rate | |
| 0.73% to 1.10% | |
At December 31, 2014, and on the initial measurements
of the derivative liabilities, the Company valued the embedded conversion option derivative liabilities resulting in a loss from
change in fair value of derivative liabilities of $551,000 for the nine months ended December 31, 2014. For the nine months ended
December 31, 2014, amortization of debt discounts related to these convertible notes amounted to $21,285, which has been included
in interest expense on the accompanying consolidated statements of operations.
At December 31, 2014 and March 31, 2014, convertible
promissory notes consisted of the following:
TRUE 2 BEAUTY INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
NOTE 9 – CONVERTIBLE NOTES PAYABLE
(continued)
| |
December 31, 2014 | |
March 31, 2014 |
Principal amount | |
$ | 400,000 | | |
$ | — | |
Less: unamortized debt discount | |
| (361,840 | ) | |
| — | |
Convertible notes payable, net | |
$ | 38,160 | | |
$ | — | |
note
10 – STOCKHOLDERS’ DEFICIT
Authorized shares
The Company is authorized to issue 10,000,000
shares of its $0.001 par value preferred stock. As of December 31, 2014 and March 31, 2014, no shares were issued and outstanding.
The Company is authorized to issue 190,000,000
shares of its $0.001 par value common stock. As of December 31, 2014 and March 31, 2014, 36,951,165 and 31,601,531
shares of common stock were issued and outstanding, respectively.
Common stock issued for services
During the nine months ended December 31,
2014, the Company issued 1,485,000 shares of common stock for services, including 360,000 shares to a board member of the Company.
The shares were valued on the grant date at their fair value of $81,823 based on the recent sales price of the common stock of
$0.0551 per share. The Company concluded that the fair value of the equity instruments issued in a share-based payment transaction
was a more reliable fair value than the fair value of goods or services received. The Company recorded stock-based compensation
and fees of $59,554 and had a remaining prepaid expense of $22,269 at December 31, 2014, which will be amortized over the remaining
service periods.
Common stock sold for cash
During the nine months ended December 31,
2014, the Company sold a total of 3,365,334 shares of common stock at an average price of $0.0551 per common share to investors
for a total of $185,420. During the nine months ended December 31, 2014, the Company received cash proceeds of $71,895 from the
sale of these shares and decreased advances for common stock purchases of $113,525.
Common stock issued for loan settlements
During the nine months ended December 31,
2014, the Company issued a total of 499,300 shares of common stock, valued on the grant date at their fair value of $27,510 based
on the recent sales price of the common stock of $0.0551 per share. These shares were issued in settlement of $20,000 in principal
and $2,000 of interest, resulting in a loss on settlement of $5,510 which is reflected in Other Expense in the accompanying unaudited
consolidated statement of operations.
Warrants
The Company issued warrants with common stock
during the nine months ended December 31, 2014. The warrants have an exercise price of $0.40 per share and expire in 5 years from
issuance date. Warrant activities for the nine months ended December 31, 2014 was as follows:
| |
Number of Warrants | |
Weighted Average Exercise Price |
| Balance at March 31, 2014 | | |
| 733,609 | | |
$ | 0.40 | |
| Issued | | |
| 314,706 | | |
| 0.40 | |
| Exercised/forfeited/expired | | |
| — | | |
| — | |
| Balance at December 31, 2014 | | |
| 1,048,315 | | |
$ | 0.40 | |
| Warrant exercisable at December 31, 2014 | | |
| 1,048,315 | | |
$ | 0.40 | |
There was no intrinsic value of the warrants
as of December 31, 2014.
TRUE 2 BEAUTY INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2014
note
10 – STOCKHOLDERS’ DEFICIT (continued)
Warrants (continued)
The following table summarizes the shares
of the Company’s common stock issuable upon exercise of warrants outstanding at December 31, 2014:
Warrants Outstanding |
|
Warrants Exercisable |
Range of Exercise Price | |
Number Outstanding at December 31, 2014 | |
Weighted Average Remaining Contractual Life (Years) | |
Weighted Average Exercise Price | |
Number Exercisable at December 31, 2014 | |
Weighted Average Exercise Price |
$ | 0.40 | | |
| 125,000 | | |
| 2.7 | | |
$ | 0.40 | | |
| 125,000 | | |
$ |
0.40 |
| 0.40 | | |
| 256,250 | | |
| 2.8 | | |
| 0.40 | | |
| 256,250 | | |
|
0.40 |
| 0.40 | | |
| 12,500 | | |
| 2.9 | | |
| 0.40 | | |
| 12,500 | | |
|
0.40 |
| 0.40 | | |
| 46,105 | | |
| 3.0 | | |
| 0.40 | | |
| 46,105 | | |
|
0.40 |
| 0.40 | | |
| 231,876 | | |
| 3.1 | | |
| 0.40 | | |
| 231,876 | | |
|
0.40 |
| 0.40 | | |
| 46,877 | | |
| 3.2 | | |
| 0.40 | | |
| 46,877 | | |
|
0.40 |
| 0.40 | | |
| 14,063 | | |
| 3.3 | | |
| 0.40 | | |
| 14,063 | | |
|
0.40 |
| 0.40 | | |
| 938 | | |
| 3.4 | | |
| 0.40 | | |
| 938 | | |
|
0.40 |
| 0.40 | | |
| 39,412 | | |
| 4.3 | | |
| 0.40 | | |
| 39,412 | | |
|
0.40 |
| 0.40 | | |
| 273,419 | | |
| 4.4 | | |
| 0.40 | | |
| 273,419 | | |
|
0.40 |
| 0.40 | | |
| 1,875 | | |
| 4.5 | | |
| 0.40 | | |
| 1,875 | | |
|
0.40 |
| | | |
| 1,048,315 | | |
| 3.6 | | |
$ | 0.40 | | |
| 1,048,315 | | |
$ |
0.40 |
NOTE 11 – CONCENTRATIONS
AND COMMITMENTS
Concentrations
Concentration of credit risk
The Company maintains its cash in bank and
financial institution deposits that at times may exceed federally insured limits. The Company has not experienced any losses in
such accounts through December 31, 2014. There were no balances in excess of FDIC insured levels as of December 31, 2014
and March 31, 2014.
Customers
No customer accounted for 10% or more of the
Company’s revenue during the nine months ended December 31, 2014 and 2013.
Suppliers
No supplier accounted for 10% or more of the
Company’s purchase during the nine months ended December 31, 2014 and 2013.
Commitments
Service contracts
On April 5, 2014, the Company entered into
a legal service agreement with a legal firm who has agreed to perform corporate and securities related legal services for the
Company. The agreement expires upon the SEC issuing an effectiveness notice for S-1. In accordance to this legal service agreement,
the Company pays the legal firm (a) a cash fee of $10,000 payable as follows (i) $2,000 upon execution of this agreement; (ii)
$3,000 upon filing the S-1; (iii) $5,000 upon the SEC issuing an effectiveness notice; and (b) 200,000 shares of the Company’s
common stock were issued to be issued within 20 days of the execution of this agreement. The Company made the first $2,000 cash
payment in May 2014 and issued the 200,000 shares of common stock in April 2014. The common shares were valued at fair value using
the recent sale price of the common stock on the date of grant of $0.0551 per common share and the Company recorded stock-based
compensation and fees of $11,020 in the nine months ended December 31, 2014. (See Note 10 Common Stock Issued for Service)
TRUE 2 BEAUTY INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2014
NOTE 11 –
CONCENTRATIONS AND COMMITMENTS (continued)
Commitments (continued)
Service contracts (continued)
On April 28, 2014, the Company entered into
a service agreement with an accounting company. In accordance to the service agreement, the accounting company provides the Company
accounting service and the Company issued the accounting company 100,000 shares of common stock in April 2014. The agreement expired
on October 31, 2014. The common shares were valued at fair value using the recent sale price of the common stock on the date of
grant of $0.0551 per common share and the Company recorded stock-based compensation and fees of $5,510 in the nine months ended
December 31, 2014.The Company entered into a new service agreement with the accounting company 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 1st of each month, and $2,000 payable at the Company’s option in cash or the Company’s
common stock. (See Note 10 – Common Stock Issued for Service)
In September 2014, the Company signed an eight-month
agreement with Applied DNA to work together, in good faith, on a business partnership focused on using Applied DNA Sciences’
unique SigNature© DNA taggant platform, digitalDNA © software platform and other products as required for DNA marking,
tracking and authentication of sports collectibles and sports memorabilia uniquely and authentically identified to an athlete
(“Goods”) and offered either within a True2Bid online auction exchange environment or through other means of sale.
The agreement requires a cash payment of $35,000, of which $10,000 has been paid and the balance of $25,000 shall be paid in two
payments of $12,500 each on February 1, 2015 and June 1, 2015. However, there has been no development pursuant to the three phases
as defined in the agreement and, accordingly, the Company believes an obligation does not exist and does not intend to pay these
installments until the milestones are reached.
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following is an estimate of the expenses
that will be incurred by us in connection with the issuance and distribution of the securities being registered.
SEC Registration Fee |
|
$ |
60.42 |
|
Accounting Fees and Expenses* |
|
$ |
3,000.00 |
|
Legal Fees and Expenses* |
|
$ |
10,000.00 |
|
Blue Sky Fees and Expenses* |
|
$ |
0.00 |
|
Printing and Engraving* |
|
$ |
2,000.00 |
|
Miscellaneous* |
|
$ |
0.00 |
|
Total Estimated Expenses* |
|
$ |
15,060.42 |
|
*Estimated
Item 14. Indemnification of Directors and Officers
Section 78.138 of the Nevada Revised
Statutes provides that a director or officer is not individually liable to the corporation or its stockholders or creditors for
any damages as a result of any act or failure to act in his capacity as a director or officer unless it is proven that (1) his
act or failure to act constituted a breach of his fiduciary duties as a director or officer and (2) his breach of those duties
involved intentional misconduct, fraud or a knowing violation of law.
This provision is intended to afford directors
and officer’s protection against and to limit their potential liability for monetary damages resulting from suits alleging
a breach of the duty of care by a director or officer. As a consequence of this provision, our stockholders will be unable to
recover monetary damages against directors or officers for action taken by them that may constitute negligence or gross negligence
in performance of their duties unless such conduct falls within one of the foregoing exceptions. The provision, however, does
not alter the applicable standards governing a director’s or officer’s fiduciary duty and does not eliminate or limit
our right or any stockholder to obtain an injunction or any other type of non-monetary relief in the event of a breach of fiduciary
duty.
Item 15. Recent Sales of Unregistered Securities
On January
31, 2012, in connection with our recapitalization, we issued 6,500,000 founder shares to our co-founder, William Bollander and
4,000,000 founder shares to our co-founder, Darryl Cohen or his assignees. These common shares were valued at par value of $0.001.
On April 2, 2012, we issued 4,000,000 shares of common stock to Darryl Cohen for the purchase of intangible assets of a beauty
supply company. These common shares were valued on the grant date at fair value of $220,400 based on the recent sales price of
the common stock of $0.0551 per share.
During the year ended March 31, 2013, we sold
a total of 6,953,709 shares of common stock to investors at an average price of $0.0551 per common share. The Company had received
$75,000 towards the purchase of these shares as of March 31, 2012. During the fiscal year ended March 31, 2013, we received cash
proceeds of $298,180 from the sale of the shares and had a subscription receivable of $10,000, which was collected in fiscal 2014.
In conjunction with the issuance of these common shares, the Company also issued 718,608 warrants at a weighted average exercise
price of $0.40, none of which have been exercised.
During the year ended March 31, 2013, we issued
3,460,000 shares of common stock for services rendered, including 100,000 shares to a Chris Jarvis, a board member of the Company,
1,500,000 common shares to Darryl Cohen, 800,000 shares to Jason Trawlick, 500,000 shares to Steve Shorr, 60,000 shares to Joseph
Dimicco, and 500,000 shares to Mirador Consulting LLC. These shares were valued on the grant dates at their fair value of $190,646
based on the recent sales price of the common stock of $0.0551 per share.
In June 2013, we issued 1,500,000 common shares
to Undiscovered Equities, Inc. to settle accounts payable of $82,650. The shares were valued on the grant date at their fair value
of $82,650 based on the recent sales price of the common stock of $0.0551 per share. No gain or loss was recognized on this settlement.
On December 13, 2013, we issued 750,000 shares
of common stock to a law firm, Davidoff, Hutcher & Citron, LLP in exchange for the settlement of accounts payable of $75,919
pursuant to a settlement agreement between us and the law firm. The shares were valued on the grant date at their fair value of
$41,325 based on the recent sales price of the common stock of $0.0551 per share.
During the year ended March 31, 2014, we issued
1,865,000 shares of common stock for services, including 40,000 shares to the board member, Mr. Christopher Jarvis, 1,500,000
shares to Darryl Cohen, and 325,000 shares to Green Baron Ventures, Inc. The shares were valued on the grant dates at their fair
values aggregating $102,761 based on the recent sales price of the common stock of $0.0551 per share.
During the fiscal year ended March 31, 2014, we sold a total of
145,200 shares of common stock at an average price of $0.0551 per common share to investors. The proceeds received by us from
the sale of these common shares were $8,000 in fiscal 2014. In conjunction with the issuance of these common shares, the Company
also issued 15,001 warrants at a weighted average exercise price of $0.40, none of which have been exercised.
During the year ended March 31, 2014, we issued
a total of 100,000 shares of common stock to two debtors for loan fees valued at $5,510. The common shares were valued on the
grant date at their fair value of $5.10 based on the recent sales price of the common stock of $0.0551 per share.
During the period between April 1, 2014 and
the filing date of this report, we sold a total of 3,365,334 shares of common stock at an average price of $0.0551 per common
share to investors. The proceeds received by the Company from the sale of these common shares were $185,420. In conjunction with
the issuance of these common shares, the Company also issued 314,706 warrants at a weighted average exercise price of $0.40, none
of which have been exercised.
On April 5, 2014, we entered into a legal
service agreement with Frederick M. Lehrer, Esquire who has agreed to perform corporate and securities related legal services
for the Company. In connection with these legal services, we issued 200,000 shares of common stock. These shares were valued on
the grant date at their fair value of $11,020 based on the recent sales price of $0.0551 per share and were expensed immediately.
On April 8, 2014, we issued a total of 499,300
shares of common stock to two debtors, Gene and Lois Vanderbur and Thomas and Rosetta Rickson, to pay off outstanding loans payable
with the principal amount of $20,000 and to pay off accrued interest of $2,000. The common shares were valued on the grant date
at their fair value of $27,510 based on the recent sales price of the common stock of $0.0551 per share, resulting in a loss on
settlement of $5,510.
On April 18, 2014, we entered into a service
agreement with Robert Grich who is a consultant of the Company. In accordance to the service agreement, we issued Mr. Robert Grich
100,000 shares of common stock. The common shares were valued on the grant date at fair value of $5,510 based on the recent sales
price of the common stock of $0.0551 per share.
On April 28, 2014, we entered into a service
agreement with CFO Oncall, Inc., a company majority owned by our chief financial officer, Adam Wasserman. In accordance to the
service agreement, CFO Oncall Inc. provides us accounting service and we issued CFO Oncall Inc. 100,000 shares of common stock
in April 2014. The 100,000 shares valued on the grant date at their fair value of $5,510 based on the recent sales price of common
stock of $0.0511 per share and were expensed at the grant date since the April 2014 agreement had an indefinite term.
In July 2014, we granted 360,000 common shares
to a director, Chris Jarvis, for services rendered. These shares were valued on the grant date at their fair value of $19,836
based on the recent sales price of $0.0551 per share and were expensed immediately.
On July 1, 2014, we entered into a service agreement with Patrick
L. Stimson who is a consultant of the Company. The agreement is for a term of two years and requires 250,000 shares of common
stock. In accordance to the service agreement, we issued Patrick L. Stimson 250,000 shares of common stock in July 2014. The common
shares were valued on the grant date at their fair value of $13,775 based on the recent sales price of the common stock of $0.0551
per share.
On July 1, 2014, we entered into a service
agreement with Ronald Ellis who is our consultant. The agreement is for a term of two years and requires 250,000 shares of common
stock. In accordance to the service agreement, we issued Ronald Ellis 250,000 shares of common stock in July 2014. The common
shares were valued on the grant date at their fair value of $13,775 based on the recent sales price of the common stock of $0.0551
per share.
In June and July 2014, we issued an aggregate
of 225,000 shares to three separate consultants, Terry DiCicco, Giampiero Palladino, and Carl D. Pahl. These shares were valued
on the grant dates at their fair value of $12,397 based on the recent sales price of $0.0551 per share. The value was expensed
immediately since the shares were for either services rendered or an indefinite service term.
In
October and November 2014, we entered into 7 convertible promissory note agreements (“Convertible Notes” or “Convertible
Note”), providing for the issuance of 10% convertible promissory notes with an aggregate principal amount of $400,000. The
Convertible Notes are due and payable on the third anniversary of the date of issuance through October 2017. The below named 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 our common stock at a conversion price for each share
of common stock equal to $0.02. The 7 convertible note agreements we entered into are: (a) a $95,000 Convertible Note on October
15, 2014 with Ascendant Partners LLC; (b) a $75,000 Convertible Note with Dina M. Palermo/Jeffrey Smith JTWROS on October 21,
2014; (c) a $150,000 Convertible Note with the Eisenberg Family Foundation on October 23, 2014; (d) a $25,000 with Plantation
Partners LLC on October 23, 2014; (e) a $5,000 Convertible Note with Gerald E. Commissionn on November 5, 2014; (f) a $25,000
Convertible Note with DTMFS LP on November 11, 2014; and (g) a $25,000 Convertible Note with David Stefansky on November 19, 2014.
The 7 convertible notes reflect conversion rights of 26,000,000 shares, 20,000,000 shares of which correspond to
the aggregate principal loan amount of $400,000 and 6,000,000 shares that correspond to interest accrued should the notes be carried
to maturity.
The foregoing transactions pursuant to which
the restricted shares were issued to purchasers did not involve a public offering of our securities and, therefore, were exempt
from the registration and prospectus delivery requirements of the Securities Act pursuant to the provisions of Section 4(2) of
that Act. In connection with the offer and sale of the restricted shares, no general solicitation or advertising was used and
no commissions were paid in connection with the offer or sale of the shares.
Item 16. Exhibits and Financial Statement Schedules
The following is a complete list of Exhibits filed as part of this
Registration Statement:
Exhibit No. |
Description |
|
|
3.1 |
Articles of Incorporation* * |
|
|
3.5 |
Bylaws *** |
|
|
4.1 |
Form of Convertible Promissory Note** * |
|
|
4.2 |
Form of Subscription Agreement*** |
|
|
4.3 |
Form of Registration Rights Agreement*** |
|
|
5 |
Opinion of Frederick M. Lehrer, Esquire** |
|
|
10.1 |
Agreement with Applied DNA Sciences** |
|
|
21 |
Subsidiary of Registrant* |
|
|
23.1 |
Consent of Salberg & Company, P.A.** |
|
|
23.2 |
Consent of Counsel (included in Exhibit 5) |
* Previously filed as exhibit to Form S-1 Registration Statement
filed on February 2, 2015.
** Filed herein
*** Previously filed as exhibit to Form S-1 Registration Statement
filed on March 20, 2015.
Item 17. Undertakings.
The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
i. To
include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
ii. To
reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price
set forth in the “Calculation of Registration Fee” table in the effective registration statement.
iii. To
include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
(2) That,
for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To
remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at
the termination of the offering.
(4) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant
of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(5) Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included
in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in
a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to
a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date
of first use.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this registrant statement to be duly signed on its behalf by the undersigned, thereunto duly authorized
in the , in the City of Boca Raton, Florida, on March 20, 2015.
True 2 Beauty, Inc.
By: |
/S/ William Bollander |
|
|
William Bollander |
|
|
Chief Executive Officer |
|
|
Date: April 7, 2015 |
|
In accordance with the requirements of the
Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates
indicated.
By: |
/S/
William Bollander |
|
|
William Bollander, Chief Executive Officer
|
|
|
Date: April 7, 2015 |
|
|
|
|
By: |
/S/ Adam
Wasserman |
|
|
Adam Wasserman, Chief Financial Officer
|
|
|
Date: April 7, 2015 |
|
|
|
|
By: |
/S/ Adam
Wasserman |
|
|
Adam Wasserman, Chief Accounting Officer
|
|
|
Date: April 7, 2015 |
|
|
|
|
By: |
/S/ Chris
Jarvis |
|
|
Director |
|
|
Date: April 7, 2015 |
|
True2Beauty,
Inc. S-1/A
Exhibit
5
Frederick
M. Lehrer
Attorney
and Counselor at Law
285
Uptown Blvd, 402
Altamonte
Springs, Florida 32701
flehrer@securitiesattorney1.com
(321)
972-8060
True2Beauty,
Inc.
301 Yamato
Road, Suite 140
Boca Raton,
Florida 33431
April 6,
2015
This letter
will constitute an opinion upon the legality of the sale by certain selling shareholders of True2Beauty, Inc., a Nevada corporation
(the “Company”), of up to 26,000,000 common stock shares (the “Shares), all as referred to in the Registration
Statement on Form S-1 filed by the Company with the Securities and Exchange Commission. The Shares cover the resale by seven selling
security holders of a maximum of 26,000,000 common stock shares reflecting their conversion rights of 26,000,000 shares pursuant
to seven convertible promissory notes, 20,000,000 shares of which correspond to the aggregate principal loan amount of $400,000
and 6,000,000 shares that correspond to interest accrued should the notes be carried to maturity.
I have examined
the Company’s Articles of Incorporation, Bylaws, and Board of Directors’ resolutions, the applicable laws of the State
of Nevada and a copy of the Registration Statement. In my opinion:
· |
the
Company is authorized to issue the Shares to be held by the selling shareholders and such shares will be validly issued and
represent fully paid and non-assessable shares of the Company’s common stock; and |
· |
the
Company has authorized the Shares to be issued and such shares will, when sold, be legally issued, fully paid and non-assessable.
|
I hereby
consent to the filing of this opinion as Exhibit 5 to the Registration Statement and to the reference of Frederick M. Lehrer,
Esquire under the caption “Legal Matters” in the registration statement.
Very truly
yours,
Frederick
M. Lehrer, Esquire
Attorney
and Counselor at Law
/s/
Frederick M. Lehrer |
|
Frederick M.
Lehrer, Esquire |
|
True2Beauty,
Inc. S-1/A
Exhibit
10.1
Heads
of Agreement
Applied
DNA Sciences and True2Bid
This
Heads of Agreement (HOA) is entered into as of September 2014, (the “Effective Date”) by and between Applied DNA Sciences,
Inc. (“ADNAS”), a Delaware corporation located at 50 Health Sciences Drive, Stony Brook, New York, 11790, USA and
True2Bid with a place of business at 301 Yamato Road, Suite 1240, Boca Raton, Florida 33431, USA.
SCOPE
Both
parties agree to work together, in good faith, on a business partnership focused on using Applied DNA Sciences’ unique SigNature©
DNA taggant platform, digitalDNA© software platform and other products as required for DNA marking, tracking and authentication
of sports collectibles and sports memorabilia uniquely and authentically identified to an athlete (“Goods”) and offered
either within a True2Bid online auction exchange environment or through other means of sale.
Scope
includes only Goods, which are DNA-marked post-manufacturing. True2Bid will ensure authenticity via relationships with individual
athletes or through relationships with organizations facilitating events to create uniquely identified Goods, including as examples,
but not limited to, companies that sponsor signings by athletes at sporting events or charity events.
Scope
specifically excludes items which are DNA-marked at a source manufacturer other than True2Bid, including as examples, but not
limited to, sports jerseys DNA-marked during manufacturing, containing the name of an athlete.
The
parties will communicate about these opportunities, should they arise, to avoid conflict. Scope may be expanded or reduced during
the Term of the Agreement with the written approval of both parties.
The
partnership is intended to develop through three Phases:
| • | Phase
0 Proof of Concept |
| o | True2Bid
purchases DNA mark for use during the development phase and beyond. Title of the mark
passes to True2Bid upon receipt of a purchase order and creation of the mark. ADNAS will
notify True2Bid when the mark has been created. The mark will be securely stored for
True2Bid at ADNAS’ Stony Brook facility until ready for use by True2Bid. |
| o | True2Bid
and ADNAS define one scenario use case as a model for developing the marking, authentication
and digital platform solution for Goods. |
| o | DNA
mark up to ten items within the use case scenario and demonstrate field screening, lab
authentication and a proof of concept chain of custody software application for user
feedback purposes |
| o | Determine
Phase 1 deliverables, investment and projected revenue for a commercial-scale environment |
| | |
| o | Upon
successful completion of Phase 0, the Parties will negotiate the terms of a Phase 1 pilot
program which will include funding requirements and sources, revenue-sharing models and
possible extension of Exclusivity |
| o | Build
out marking, field screening, authentication and software solution based upon feedback
from proof of concept to handle a broader set of items and users, scale to be determined |
| o | Finalize
Phase 2 commercialization scope |
| • | Phase
2 Commercialization |
| o | Make
all marking, authentication, software and support services operational. |
ADNAS
will provide for Phase 0:
| • | Limited
Exclusivity for DNA marking, authentication and tracking of Goods for True2Bid during
the Term and any mutually agreed extension to the Term. ADNAS will not, for this Term,
develop a similar solution with any other company. |
| • | Unique
DNA Mark - ADNAS will design and create one Unique SigNature DNA mark. (Title of
the mark passes to True2Bid upon receipt of a purchase order and creation of the mark.
ADNAS will notify True2Bid when the mark has been created. The mark will be securely
stored for True2Bid at ADNAS’ Stony Brook facility until ready for use by True2Bid.).
ADNAS” will provide the technology platform for retaining all information associated
with each marked product, including DNA marking and such information necessary to associate
each marked item with an owner. |
| • | Development
Services: ADNAS will tailor a formulation, packaging and chain of custody solution
specific to one type of collectible substrate for proof of concept within the Phase 0
scenario use case; |
| • | Quality
Control and Forensic Services in Stony Brook, NY. This agreement will provide for
up to three (3) forensic authentications including the issuance of Certificates of DNA
Analysis (CODA) during the Phase 0 period; |
| | |
| • | One
UV torch for screening of DNA marks; |
| | |
| • | Meetings
as required, with preferred method by phone or online meeting. |
True2Bid
will provide for Phase 0:
| • | Consideration
will be paid as follows: |
| o | $35,000
value for unique True2Bid mark |
| • | $10,000
paid upon signing (“Effective Date”) |
| • | Balance
paid as $12,500 at four (4) months and $12,500 at eight (8) months after Effective Date. |
| • | Limited
Exclusivity for DNA marking, authentication and registration tracking of Goods for
True2Bid online auction exchange or through other means of sale (the “Territory”)
during the Term and any mutually agreed extension to the Term. True2Bid will not, for
this Term, develop a similar solution with any other company in the Territory. |
| • | Access
to responsible subject matter experts for decisions related to use case scenario
and business modelling |
| • | Collectibles
samples to be marked, authenticated and tracked |
Term
and Termination Duration: This HOA comes into effect on the Effective Date and shall be effective for the period
of eight (8) months (“Term”) unless extended or shortened by mutual written consent of both Parties.
This
period of exclusivity can be extended if both parties agree to additional commitments in production, sales, funding and/or evolving
product partnerships.
Ownership
and Confidentiality
True2Bid
agrees that all ownership rights in and to the SigNature DNA and digitalDNA system and all related technology and products including
but not limited to the DNA marking, authentication and chain of custody tracking software and all the intellectual property rights
therein remain with ADNAS and are the confidential and proprietary information of ADNAS.
Right
to Terminate
Either
party shall have the right to terminate this Agreement if the other party defaults on any of its obligations under this Agreement,
unless within thirty (30) calendar days after written notice of such default, the defaulting party remedies the default.
Effect
of Termination
Upon
termination of this Agreement, each party shall upon request return to the other party any business, technical or product-related
materials that may be of a confidential nature. The rights and responsibilities
as set out in the aforementioned Ownership and Confidentiality clause shall continue in force indefinitely after termination of
this Agreement.
Public
Relations: ADNAS and True2Bid agree to jointly cooperate in public relations and communications to market and promote
the solution derived from this Agreement through their established marketing and sales channels.
Indemnity
True2Bid
shall indemnify, defend and hold harmless ADNAS from and against all claims, suits, liability and expense (including but not limited
to reasonable attorneys fees) relating to any failure of True2Bid to comply with the Quality Control and Chain of Custody procedures.
Limitation
of Remedies
NEITHER
PARTY WILL BE LIABLE FOR LOST PROFITS OR ANY INDIRECT, INCIDENTAL, SPECIAL, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES OF ANY
KIND, HOWSOEVER CAUSED; PROVIDED THAT THE FOREGOING WILL NOT APPLY TO A PARTY’S CONFIDENTIALITY AND INDEMNIFICATION OBLIGATIONS
HEREUNDER.
Governing
Law
This
Agreement will be governed by the laws of the State of New York without regard to any provisions of conflicts of laws. The New
York State Supreme Court, County of New York, or the United States District Court for the Southern District of New York shall
have exclusive jurisdiction to adjudicate any dispute arising in connection with this Agreement and each party hereby consents
to such jurisdiction.
Independent
Contractors
The
parties acknowledge and agree that they are dealing with each other hereunder as independent contractors. Nothing contained in
this Agreement will be interpreted as constituting either party the joint venturer, employee or partner of the other party or
as conferring upon either party the power of authority to bind the other party in any transaction with third parties.
Authority
to Contract
Both
parties hereto warrant that they are validly organized corporations, in good standing under the laws of their states of incorporation,
and have the authority to enter into this Agreement.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective authorized officers
or representatives as of the date first written above.
Applied
DNA Sciences, Inc. |
|
True2Bid |
|
|
|
|
|
|
By: |
/S/
James A. Hayward, Ph.D., Sc.D. |
|
By: |
/S/
William Bollander |
Name: |
James A. Hayward, Ph.D., Sc.D. |
|
Name: |
William Bollander |
Title: |
President & CEO |
|
Title: |
CEO |
True2Beauty,
Inc. S-1/A
Exhibit
23.1
Consent
of Independent Registered Public Accounting Firm
We hereby consent
to the use of our report dated January 30, 2015, on the consolidated financial statements of True 2 Beauty, Inc. for the years
ended March 31, 2014 and 2013, included herein on the registration statement of True 2 Beauty, Inc. on Form S-1, amendment no.
3, and to the reference to our firm under the heading “Experts” in the prospectus.
/S/ Salberg & Company,
P.A.
SALBERG & COMPANY, P.A.
Boca Raton, Florida
April 6, 2015
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