UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K
☒ Annual
report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For
the fiscal year ended March 31, 2015;
or
☐ Transition
report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
COMMISSION
FILE NO. 333-201811
TRUE
2 BEAUTY, INC.
(Exact
name of registrant as specified in its charter)
Nevada |
|
46-1515670 |
(State
of Incorporation) |
|
(IRS
Employer Identification Number) |
301
Yamato Rd., Suite 1240, Boca Raton, FL 33431
(Address
of principal executive office, including Zip Code)
Registrant’s
telephone number, including area code: (800) 630-4190
Securities
registered pursuant to Section 12(b) of the Exchange Act:
Title
of each class |
|
Name
of Each Exchange on Which Registered |
Class
A Common Stock, $0.001 par value |
|
OTC
PINK |
Securities
registered pursuant to Section 12(g) of the Exchange Act: None
Indicate
by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes
☐ No ☒
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No
☐
Indicate
by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained in this form and will
not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company.
Large Accelerated
Filer ☐ |
|
Accelerated
Filer ☐ |
Non-accelerated Filer ☐ |
|
Smaller Reporting Company
☒ |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
☒
The
aggregate market value of the Common Stock held by non-affiliates of the Registrant, based upon the average of the closing bid
and asked price of the Common Stock on the OTC PINK system on September 30, 2014 of $0.031 was approximately $928,486.
As
of June 15, 2015, the registrant had 38,383,154 shares of common stock issued and outstanding.
TABLE
OF CONTENTS
| |
| |
Page | |
| |
PART I | |
| |
| |
| |
| |
Item 1. | |
Business | |
| 1 | |
Item 1A. | |
Risk Factors | |
| 6 | |
Item 2. | |
Properties | |
| 7 | |
Item 3. | |
Legal Proceedings | |
| 7 | |
Item 4. | |
Mine Safety | |
| 7 | |
| |
| |
| | |
| |
PART II | |
| | |
| |
| |
| | |
Item 5. | |
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | |
| 7 | |
Item 6. | |
Selected Financial Data | |
| 9 | |
Item 7. | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
| 9 | |
Item 7A. | |
Quantitative and Qualitative Disclosures About Market Risk | |
| 14 | |
Item 8. | |
Financial Statements and Supplementary Data | |
| 15 | |
Item 9. | |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | |
| 16 | |
Item 9A. | |
Controls and Procedures | |
| 16 | |
Item 9B. | |
Other Information | |
| 17 | |
| |
| |
| | |
| |
PART III | |
| | |
| |
| |
| | |
Item 10. | |
Directors, Executive Officers and Corporate Governance | |
| 17 | |
Item 11. | |
Executive Compensation | |
| 20 | |
Item 12. | |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | |
| 21 | |
Item 13. | |
Certain relationships and Related Transaction, and Director Independence | |
| 22 | |
Item 14. | |
Principal Accountant Fees and Services | |
| 22 | |
| |
| |
| | |
| |
PART IV | |
| | |
| |
| |
| | |
Item 15. | |
Exhibits and Financial Statement Schedules | |
| 23 | |
FORWARD
LOOKING STATEMENTS
This
report contains forward-looking statements, including statements regarding future financial performance and results and other
statements that are not historical facts. Such statements are included in “Business,” “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and elsewhere in this report. When used in this report, words
such as “may,” “will,” “should,” “could,” “anticipate,” “believe,”
“expect,” “estimate,” “intend,” “plan,” “predict,” “potential,”
“continue” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Although the
Company believes that the expectations reflected in these forward-looking statements are reasonable, there can be no assurance
that actual results or developments anticipated by the Company will be realized or, even if realized, that they will have the
expected effects on its business or operations. Actual results could differ materially from those contemplated by the forward-looking
statements as a result of certain factors beyond the Company’s control including: the ability to develop safe and efficacious
drugs, the failure to achieve positive clinical trials, the failure to successfully commercialize our products, competition and
technological change and existing and future regulations affecting our business.
PART
I
Item
1. Business
We
are an e-commerce business under development, planning to operate under the website, LegacyXChange.com, beginning in late third
quarter of 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’).
A portion 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.
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 expired 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 annual report,
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 June 12, 2015,
the site is approximately 85% 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. We estimate that the site
will be completed and “go live” in late third quarter of 2015.
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 July 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
Expenditures
for research and product development costs are expensed as incurred. We did not incur any research and development expense during
the years ended March 31, 2015 and 2014.
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.
Item
1A. Risk Factors
Because
we are a smaller reporting company as defined in Item 10(f)(1) of Regulation S-K, we are not required to provide risk factors
in this Form 10-K; however, risk factors are available for review in our S-1 filing at www.sec.gov.
Item
1B. Unresolved Staff Comments
Not applicable.
Item
2. Properties.
We do not
own or invest in real estate, interests in real estate, real estate mortgages or securities of or interests in persons primarily
engaged in real estate activities.
Our
executive offices are located at 301 Yamato Road, Suite 1240, Boca Raton, Florida. We pay rent of $112 per month on a month-to-month
basis. We have access to a conference/meeting room for 20 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.
Additionally, beginning from May 2015, we lease office space in Las Vegas, Nevada for our programmer and web design consultants
on a month-to-month basis at $500 per month.
Item
3. Legal Proceedings.
We are not
a party or otherwise involved in any pending legal proceedings nor are we aware of any pending or threatened litigation against
us
Item
4. Mine Safety Disclosures.
Not Applicable
PART
II
Item
5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities .
Market
Information
Our
shares of common stock are quoted on OTCPink 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 | |
| | |
| |
Fourth Quarter Ended March 31, 2015 | |
$ | .08 | | |
$ | .02 | |
Third Quarter ended December 31, 2014 | |
$ | .09 | | |
$ | .03 | |
Second Quarter ended September 30, 2014 | |
$ | .03 | | |
$ | .03 | |
First Quarter ended June 30, 2014 | |
$ | .05 | | |
$ | .04 | |
| |
| | | |
| | |
Fiscal
Year 2014 | |
| | | |
| | |
Fourth Quarter ended March 31, 2014 | |
$ | .08 | | |
$ | .07 | |
Third Quarter ended December 31, 2013 | |
$ | .08 | | |
$ | .06 | |
Second Quarter ended September 30, 2013 | |
$ | .08 | | |
$ | .06 | |
First Quarter ended June 30, 2013 | |
$ | .19 | | |
$ | .18 | |
As
of June 10, 2015, the closing sale price for our common stock as reported on the OTCPink was $0.07.
Cash
Dividends
We
have never paid cash dividends on our common stock, have no plans to pay any dividends, and it is unlikely that we will pay any
dividends in the foreseeable future. We currently intend to invest future earnings, if any, to finance expansion of our business.
Any payment of cash dividends in the future will be dependent upon our earnings, financial condition, capital requirements, and
other factors deemed relevant by our board of directors.
Common
Stock
We
are authorized to issue 190,000,000 shares of Common Stock, $0.001 par value per share. Currently we have 38,383,154 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 3,248,315
outstanding warrants to purchase our securities. Each Warrant entitles the Holder upon exercise to one Common Stock Share. These
warrants have 5-year term.
As of June 10, 2015, we had the following
securities which are exercisable into shares of our common stock were outstanding:
|
● |
1,048,315 shares of our common stock issuable upon the exercise of common stock purchase warrants with an exercise price of $0.40 per share. |
|
● |
2,200,000 shares of our common stock issuable upon the exercise of common stock purchase warrants with an exercise price of $0.07 per share. |
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 Annual Report,
we have 85 holders of our Common Stock.
Stock Option Grants
We do not have a stock option plan in
place and have not granted any stock options at this time.
Securities Authorized for Issuance
under Equity Compensation Plans
We do not have in effect any compensation
plans under which our equity securities are authorized for issuance.
Purchase of Equity Securities by
the Issuer and Affiliated Purchasers
We did not purchase of our shares of
common stock or other securities during our fiscal year ended March 31, 2015.
Recent Sales of Unregistered Securities
On April 27, 2015, we issued 100,000
shares of common stock to our consultant for services rendered. The shares were valued at the fair market value on the grant date
of $0.06 per share based on market price and we recorded stock-based fees $6,000.
On May 1, 2015, we issued 180,000 shares
of common stock to our consultant for services to be rendered. The shares were valued at the fair market value on the grant date
of $0.0549 per share based on market price and we recorded prepaid expense of $9,882, which will be amortized over the service
period.
On May 1, 2015, we issued 175,000 shares
of common stock to a law firm for services to be rendered. The shares were valued at the fair market value on the grant date of
$0.0549 per share based on market price and we recorded prepaid expense of $9,608, which will be amortized over the service period.
On June 1, 2015, we issued 726,989 shares
of common stock to CFO Oncall to settle accrued liabilities of $26,667 pursuant to the related service agreement between we and
CFO Oncall (See Note 9 and 12). The shares were valued at $26,667 based on the 60% of the bid price of our common stock at the
last trading day of the previous quarter as defined in the service agreement. No gain or loss was recognized on this settlement.
On June 1, 2015, we issued 250,000 shares
of common stock to our consultant for services to be rendered. The shares were valued at the fair market value on the grant date
of $0.054 per share based on market price and we recorded prepaid expense of $13,500, which will be amortized over the service
period.
On May 19, 2015 and June 1, 2015, 5
investors and we entered into convertible promissory note agreements, providing the issuance of a 10% convertible promissory
notes (the “Fiscal 2016 Convertible Notes”) with an aggregate principal amount of $110,000. The Fiscal 2016 Convertible
Notes are due and payable on the third anniversary of the date of May 19, 2018 and June 1, 2018. The Investors are entitled, at
their option, at any time after the issuance of these Fiscal 2016 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 $0.05. The conversion price of the Fiscal 2016 Convertible Notes shall be subject to adjustment for issuances of
common stock at a purchase price of less than the then-effective conversion price.
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 6. Selected Financial Data
As a smaller reporting company, we are not required to provide
the information required by this Item.
Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations
Overview
We were originally incorporated as Burrow
Mining, Inc., a Nevada corporation, on December 11, 2006. In February 2010, we shifted our focus to the beauty industry and later
amended our Articles of Incorporation and changed our name to True 2 Beauty, Inc., to better reflect our new business focus.
On July 10, 2012, we 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. We 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.
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 our auction program, consumers are required to purchase bid packages directly from us. 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, we 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 us 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 2015 and fiscal 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 our shares
and the price paid by third party investors of $.0551 was a more reliable price than the quoted market price. The expense is recognized
over the service period of the award. We initially record 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 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, 2015 and 2014
Revenue
and gross (loss) profit
For
the years ended March 31, 2015 and 2014, we generated limited revenue of $437 and $35,240, respectively, and gross (loss) profit
of $(1,789) and $1,072, respectively, which related primarily to the sale of remaining inventory of beauty products.
Operating
expenses
For
the years ended March 31, 2015 and 2014, operating expenses amounted to $589,198 and $392,085, respectively, an increase of $197,113
or 50.3%. Operating expenses consisted of the following:
| |
For the Years Ended
March 31, | |
| |
2015 | | |
2014 | |
Compensation and related taxes | |
$ | 156,873 | | |
$ | 134,235 | |
Professional fees | |
| 361,463 | | |
| 200,797 | |
Other selling, general and administrative | |
| 70,862 | | |
| 57,053 | |
| |
$ | 589,198 | | |
$ | 392,085 | |
| ● | For
the years ended March 31, 2015 and 2014, compensation and related taxes amounted to $156,873
and $134,235, respectively, an increase of $22,638 or 16.9%. The increase during the
year ended March 31, 2015 is mainly attributable to an increase in bonus paid to our
CEO of approximately $1,000, an increase in stock-based salary paid to our director of
approximately $18,000 and an increase in payroll taxes of approximately $4,000. We expect
administrative salaries to increase in fiscal 2016 as we increase our operations. |
| ● | For
the years ended March 31, 2015 and 2014, professional fees amounted to $361,463 and $200,797,
respectively, an increase of $160,666 or 80.0%. The increase during the year ended March
31, 2015 is mainly attributable to an increase in accounting fees of approximately $46,000
due to an increase in accounting fees incurred for services performed by our chief financial
officer, an increase in audit fees incurred of $39,900, and an increase in consulting
fees of approximately $80,000 resulting from our business expansion, offset by a decrease
in other miscellaneous items of approximately $5,000. 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 years ended March 31, 2015 and 2014, other selling, general and administrative expenses
amounted to $70,862 and $57,053, respectively, an increase of $13,809, or 24.2%. The
increase during the year ended March 31, 2015 is mainly attributable to an increase in
travel and entertainment expenses of approximately $18,000 due to the increase in travel
for investor road shows and conferences and the increase in entertainment spending in
order to enhance our visibility, offset by a decrease in other miscellaneous items of
approximately $4,000 due to the stricter control in corporation spending. |
Loss
from operations
For
the years ended March 31, 2015 and 2014, loss from operations amounted to $590,987 and $391,013, respectively, an increase of
$199,974, or 51.1%
Other
income (expense)
Other
income (expense) includes gain from settlement of accounts payable, interest expense, initial derivative expense, loss from change
in fair value of derivative liabilities and loss on settlement of loans. For the year ended March 31, 2015, total other expense
amounted to $781,375 as compared to total other income $27,084 for the year ended March 31, 2014, an increase of $808,459. The
increase in other expense for the year ended March 31, 2015 as compared to the year ended March 31, 2014 was attributable to:
| ● | 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 a 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. |
| ● | An
increase in interest expense of $63,395, mainly due to the increase in interest from
our convertible notes payable, and |
| ● | An
increase in initial derivative expense of $35,875 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 $669,085 for which we did not have any corresponding
expense during the year ended March 31, 2014. 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 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 March 31, 2015, 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 $669,085 for the year ended March 31, 2015 which was primarily caused by the effect
of an increase in the our quoted stock price from the initial measurement date and March
31, 2015 as determined using the Binomial Option Pricing Model. |
Net
loss
As
a result of the factors described above, our net loss for the years ended March 31, 2015 and 2014 was $1,372,362 and $363,929, respectively, or
a net loss per common share of $0.04 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 March 31, 2015 and 2014, we had cash balances of approximately $4,400 and $9,300, respectively.
Our
working capital deficit increased approximately $1,008,000 to working capital deficit of approximately $1,177,000 at March 31,
2015 from working capital deficit of approximately $169,000 at March 31, 2014. The increase in working capital deficit was primarily
attributable to a decrease in cash of approximately $5,000, an increase in accounts payable and accrued liabilities of approximately
$80,000, and an increase in derivative liabilities of approximately $1,088,000, offset by an increase in prepaid expenses of approximately
$11,000, a decrease in accrued officer salary and director fees of approximately $13,000, a decrease in advances for common stock
purchases of approximately $114,000, a decrease in due to shareholder of approximately $8,000, and a decrease in loans payable
of approximately $20,000.
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 fiscal year ended March 31, 2015, 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 our common stock at a conversion
price for each share of common stock equal to $0.02. 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 undertaken by us or contain terms that are not fixed monetary amounts at inception.
On May 19, 2015 and June 1, 2015, 5
investors and we entered into convertible promissory note agreements, providing the issuance of a 10% convertible promissory
notes (the “Fiscal 2016 Convertible Notes”) with an aggregate principal amount of $110,000. The Fiscal 2016 Convertible
Notes are due and payable on the third anniversary of the date of May 19, 2018 and June 1, 2018. The Investors are entitled, at
their option, at any time after the issuance of these Fiscal 2016 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 $0.05. The conversion price of the Fiscal 2016 Convertible Notes shall be subject to adjustment for issuances of
common stock at a purchase price of less than the then-effective conversion price.
Cash
Flow
Net
cash flow used in operating activities was approximately $477,000 for the year ended March 31, 2015 as compared to net cash flow
used in operating activities of approximately $162,000 for the year ended March 31, 2014, an increase of approximately $315,000.
| ● | Net
cash flow used in operating activities for the year ended March 31, 2015 primarily reflected
a net loss of approximately $1,372,000 and the add-back of non-cash items, such as stock-based
compensation and fees of approximately $78,000, loss on settlement of loans approximately
$6,000, amortization of debt discount of approximately $53,000, initial fair value of
derivative liabilities of approximately $36,000 and loss from change in fair value of
derivative liabilities of approximately $669,000 and the changes in operating assets
and liabilities primarily consisting of an increase in prepaid expenses of approximately
$7,000, a decrease in accrued officer salary and director fees of approximately $13,000,
and a decrease in due to shareholder of approximately $8,000, offset by an increase in
accounts payable and accrued liabilities of approximately $82,000. |
| ● | Net
cash flow used in operating activities for the year ended March 31, 2014 primarily reflected
a net loss of approximately $364,000 and adjustment from non-cash item of gain from settlement
of accounts payable of approximately $35,000, offset by the add-back of non-cash items,
such as stock-based compensation and fees of approximately $89,000 and stock issued for
loan fees of approximately $6,000, and 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 liabilities 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. |
We
did not incur any investing activity during the years ended March 31, 2015 and 2014.
Net
cash flow provided by financing activities was approximately $472,000 for the year ended March 31, 2015 as compared to approximately
$152,000 for the year ended March 31, 2014. During the year ended March 31, 2015, we received proceeds from convertible notes
of $400,000 and proceeds from sale of common stock of approximately $72,000. During the year ended March 31, 2014, we received
proceeds from loans 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.
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 fiscal 2016. 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, 2015 and 2014.
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 March 31, 2015, 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 | |
| 17,693 | | |
| 17,693 | | |
| - | | |
| - | | |
| - | |
Total | |
$ | 417,693 | | |
$ | 17,693 | | |
$ | 400,000 | | |
$ | - | | |
$ | - | |
Off-balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements.
Item
7A. Quantitative and Qualitative Disclosures about Market Risk
As a smaller
reporting company, we are not required to provide the information required by this item.
Item
8. Financial Statements and Supplementary Data.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
CONSOLIDATED
FINANCIAL STATEMENTS
March
31, 2015 and 2014
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
March
31, 2015 and 2014
CONTENTS | |
|
| |
|
Report of Independent Registered
Public Accounting Firm | |
F-2 |
| |
|
Consolidated Financial Statements: | |
|
| |
|
Consolidated Balance
Sheets - As of March 31, 2015 and 2014 | |
F-3 |
| |
|
Consolidated
Statements of Operations - For the Years Ended March 31, 2015 and 2014 | |
F-4 |
| |
|
Consolidated
Statements of Changes in Stockholders’ Deficit - For the Years Ended March 31, 2015 and 2014 | |
F-5 |
| |
|
Consolidated
Statements of Cash Flows - For the Years Ended March 31, 2015 and 2014 | |
F-6 |
| |
|
Notes to Consolidated
Financial Statements | |
F-7 to F-18 |
Report
of Independent Registered Public Accounting Firm
To the Board
of Directors and Stockholders of:
True
2 Beauty, Inc. and Subsidiary
We
have audited the accompanying consolidated balance sheets of True 2 Beauty, Inc. and Subsidiary as of March 31, 2015 and
2014 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, 2015. 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, 2015 and 2014 and the consolidated
results of its operations and its cash flows for each of the two years in the period ended March 31, 2015 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 $1,372,362 and
$476,878, respectively for the year ended March 31, 2015. The Company has a working capital deficit, accumulated deficit and stockholders’
deficit of $1,176,179, $9,615,963 and $1,246,806, respectively, at March 31, 2015. 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
June 15,
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, 2015 | | |
March
31, 2014 | |
| |
| | |
| |
ASSETS | |
| | |
| |
CURRENT ASSETS: | |
| | |
| |
Cash | |
$ | 4,362 | | |
$ | 9,345 | |
Prepaid expenses | |
| 28,801 | | |
| 18,225 | |
Security
deposit | |
| - | | |
| 636 | |
| |
| | | |
| | |
Total Current Assets | |
| 33,163 | | |
| 28,206 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 33,163 | | |
$ | 28,206 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
| |
| | | |
| | |
CURRENT LIABILITIES: | |
| | | |
| | |
Accounts payable and
accrued liabilities | |
$ | 113,747 | | |
$ | 33,575 | |
Accrued officer salary
and director fees | |
| 8,050 | | |
| 21,250 | |
Advances for common
stock purchases | |
| - | | |
| 113,525 | |
Due to shareholder | |
| - | | |
| 8,218 | |
Due to officer | |
| - | | |
| 508 | |
Derivative liabilities | |
| 1,088,085 | | |
| - | |
Loans payable | |
| - | | |
| 20,000 | |
Deferred
revenue | |
| - | | |
| 327 | |
| |
| | | |
| | |
Total Current Liabilities | |
| 1,209,882 | | |
| 197,403 | |
| |
| | | |
| | |
Convertible
notes payable, net of discount | |
| 70,087 | | |
| - | |
| |
| | | |
| | |
TOTAL LIABILITIES | |
| 1,279,969 | | |
| 197,403 | |
| |
| | | |
| | |
COMMITMENTS (Note 12) | |
| | | |
| | |
| |
| | | |
| | |
STOCKHOLDERS' DEFICIT: | |
| | | |
| | |
Preferred
stock ($0.001 par value; 10,000,000 shares authorized; No share issued or outstanding at March 31, 2015 and 2014) | |
| - | | |
| - | |
Common
stock, ($0.001 par value; 190,000,000 shares authorized; 36,951,165 and 31,601,531 shares issued and outstanding at March
31, 2015 and 2014, respectively) | |
| 36,951 | | |
| 31,601 | |
Additional paid-in
capital | |
| 8,332,206 | | |
| 8,042,803 | |
Accumulated
deficit | |
| (9,615,963 | ) | |
| (8,243,601 | ) |
| |
| | | |
| | |
TOTAL STOCKHOLDERS'
DEFICIT | |
| (1,246,806 | ) | |
| (169,197 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES
AND STOCKHOLDERS' DEFICIT | |
$ | 33,163 | | |
$ | 28,206 | |
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, | |
| |
2015 | | |
2014 | |
| |
| | |
| |
REVENUE, NET | |
$ | 437 | | |
$ | 35,240 | |
| |
| | | |
| | |
COST OF REVENUE | |
| 2,226 | | |
| 34,168 | |
| |
| | | |
| | |
GROSS (LOSS) PROFIT | |
| (1,789 | ) | |
| 1,072 | |
| |
| | | |
| | |
OPERATING EXPENSES | |
| | | |
| | |
Compensation and related
taxes | |
| 156,873 | | |
| 134,235 | |
Professional fees | |
| 361,463 | | |
| 200,797 | |
Other
selling, general and administrative | |
| 70,862 | | |
| 57,053 | |
| |
| | | |
| | |
TOTAL OPERATING
EXPENSES | |
| 589,198 | | |
| 392,085 | |
| |
| | | |
| | |
LOSS FROM OPERATIONS | |
| (590,987 | ) | |
| (391,013 | ) |
| |
| | | |
| | |
OTHER INCOME (EXPENSE) | |
| | | |
| | |
Gain from settlement
of accounts payable | |
| - | | |
| 34,594 | |
Interest expense | |
| (70,905 | ) | |
| (7,510 | ) |
Initial derivative
expense | |
| (35,875 | ) | |
| - | |
Loss from change in
fair value of derivative liabilities | |
| (669,085 | ) | |
| - | |
Loss
on settlement of loans | |
| (5,510 | ) | |
| - | |
| |
| | | |
| | |
TOTAL OTHER INCOME
(EXPENSE) | |
| (781,375 | ) | |
| 27,084 | |
| |
| | | |
| | |
NET LOSS | |
$ | (1,372,362 | ) | |
$ | (363,929 | ) |
| |
| | | |
| | |
NET LOSS PER COMMON SHARE | |
| | | |
| | |
Basic
and diluted | |
$ | (0.04 | ) | |
$ | (0.01 | ) |
| |
| | | |
| | |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: | |
| | | |
| | |
Basic
and diluted | |
| 36,143,636 | | |
| 29,745,802 | |
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, 2015 and 2014
| |
Preferred
Stock | | |
Common
Stock | | |
Additional | | |
Common
Stock | | |
| | |
Total | |
| |
Number of | | |
| | |
Number of | | |
| | |
Paid-in | | |
Subscription | | |
Accumulated | | |
Stockholders' | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Receivable | | |
Deficit | | |
Deficit | |
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 for 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 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock
issued for services | |
| - | | |
| - | | |
| 1,485,000 | | |
| 1,485 | | |
| 80,338 | | |
| - | | |
| - | | |
| 81,823 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock
sold for cash and advance received in 2014 | |
| - | | |
| - | | |
| 3,365,334 | | |
| 3,365 | | |
| 182,055 | | |
| - | | |
| - | | |
| 185,420 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock
issued for loan settlements | |
| - | | |
| - | | |
| 499,300 | | |
| 500 | | |
| 27,010 | | |
| - | | |
| - | | |
| 27,510 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,372,362 | ) | |
| (1,372,362 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
at March 31, 2015 | |
| - | | |
$ | - | | |
| 36,951,165 | | |
$ | 36,951 | | |
$ | 8,332,206 | | |
$ | - | | |
$ | (9,615,963 | ) | |
$ | (1,246,806 | ) |
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, | |
| |
2015 | | |
2014 | |
CASH FLOWS FROM OPERATING ACTIVITIES | |
| | |
| |
Net loss | |
$ | (1,372,362 | ) | |
$ | (363,929 | ) |
Adjustments to reconcile
net loss to net cash used in operating activities: | |
| | | |
| | |
Stock-based compensation
and fees | |
| 78,150 | | |
| 88,986 | |
Stock issued for loan
fees | |
| - | | |
| 5,510 | |
Gain from settlement
of accounts payable | |
| - | | |
| (34,594 | ) |
Loss on settlement
of loans | |
| 5,510 | | |
| - | |
Amortization of debt
discount | |
| 53,212 | | |
| - | |
Initial fair value
of derivative liabilities | |
| 35,875 | | |
| - | |
Loss from change in
fair value of derivative liabilities | |
| 669,085 | | |
| - | |
Changes in operating
assets and liabilities: | |
| | | |
| | |
Prepaid expenses | |
| (6,903 | ) | |
| 34,955 | |
Prepaid salary to
officer | |
| - | | |
| 26,666 | |
Security deposit | |
| 636 | | |
| - | |
Inventories | |
| - | | |
| 29,282 | |
Accounts payable and
accrued liabilities | |
| 82,172 | | |
| 22,400 | |
Deferred revenue | |
| (327 | ) | |
| 327 | |
Accrued officer salary
and director fees | |
| (13,200 | ) | |
| 20,500 | |
Due to shareholder | |
| (8,218 | ) | |
| 8,218 | |
Due
to officer | |
| (508 | ) | |
| (122 | ) |
| |
| | | |
| | |
Net cash used in
operating activities | |
| (476,878 | ) | |
| (161,801 | ) |
| |
| | | |
| | |
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | |
Proceeds received
from convertible notes | |
| 400,000 | | |
| - | |
Proceeds received
from loans payable | |
| - | | |
| 20,000 | |
Proceeds received
as advance for future common stock subscriptions | |
| - | | |
| 113,525 | |
Proceeds
received from sale of stock | |
| 71,895 | | |
| 18,000 | |
| |
| | | |
| | |
Net cash provided
by financing activities | |
| 471,895 | | |
| 151,525 | |
| |
| | | |
| | |
NET DECREASE IN CASH AND CASH EQUIVALENTS | |
| (4,983 | ) | |
| (10,276 | ) |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS
- BEGINNING OF YEAR | |
| 9,345 | | |
| 19,621 | |
| |
| | | |
| | |
CASH AND CASH EQUIVALENTS
- END OF YEAR | |
$ | 4,362 | | |
$ | 9,345 | |
| |
| | | |
| | |
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 | |
$ | - | | |
$ | 123,975 | |
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 consolidated financial statements.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 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 focused on delivering users a wide array of sports and entertainment related
products that can be won in an action packed environment of a live auction.
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, LegacyXChange,
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 $1,372,362 and $363,929 for the
years ended March 31, 2015 and 2014, respectively, and net cash used in operations of $476,878 and $161,801 for the years ended
March 31, 2015 and 2014, respectively, and an accumulated deficit, a stockholders’ deficit and a working capital deficit
of $9,615,963, $1,246,806 and $1,176,719, respectively, at March 31, 2015, has a gross loss for the year ended March 31, 2015
and has minimal gross profit for the year ended March 31, 2014. 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, 2015 and 2014 include the valuation of deferred tax assets, valuation of 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. |
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014
NOTE
2 – BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
value of financial instruments and fair value measurements (continued)
The
carrying amounts reported in the consolidated balance sheets for cash, accounts payable and accrued expenses, accrued officer
salary and director fees, approximate their fair market value based on the short-term maturity of these instruments.
Certain
financial instruments, such as certain accounts payable, embody obligations that require (or permit at the Company’s discretion)
settlement by issuance of a variable number of the Company’s common shares that have a value equal to a fixed monetary amount.
The number of shares required to be issued to settle that unconditional obligation is variable, because that number of common
shares will be determined by the fair value of the Company’s common shares on the date of settlement or over a stated period
of time, such as the average over the last 30 days before settlement, or the beginning of the quarter. Pursuant to ASC 480-10-25-14(a),
the financial instruments are classified as a liability at the fixed monetary amount with a charge to expense to increase the
obligation to the fixed monetary amount. Upon issuance of the shares to settle the obligation, equity is increased by the amount
of the liability and no gain or loss is recognized for the difference between the settlement date or average market price and
the ending market price.
The
following table reflects changes for the year ended March 31, 2015 for all financial assets and liabilities categorized as Level
3 as of March 31, 2015.
| |
Derivative
Liabilities | | |
Fixed
Monetary Obligation | |
Liabilities: | |
| | |
| |
Balance as of March 31, 2014 | |
$ | - | | |
$ | - | |
Initial fair value of derivative
liabilities attributable to conversion feature | |
| 419,000 | | |
| - | |
Increase in fair value of fixed monetary
obligation | |
| - | | |
| 6,667 | |
Loss from change
in the fair value of derivative liabilities | |
| 669,085 | | |
| - | |
Balance as of March 31, 2015 | |
$ | 1,088,085 | | |
$ | 6,667 | |
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, 2015 and 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. As of March 31, 2015 and 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.
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 at March 31, 2015 and 2014, respectively.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014
NOTE
2 – BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 March 31, 2015 and 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 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. |
● |
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 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, 2015 and 2014, the Company
does not believe it has any uncertain tax positions that would require either recognition or disclosure in the accompanying consolidated
financial statements.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 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 $305 and $4,039 for the years ended March
31, 2015 and 2014, 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 years ended March 31, 2015 and 2014.
Research
and development
Expenditures
for research and product development costs are expensed as incurred. The Company did not incur any research and development expense
during the years ended March 31, 2015 and 2014.
Basic
and diluted earnings per share
Pursuant
to ASC 260-10-45, basic earnings (loss) per common share is computed by dividing income (loss) allocable to common shareholders
by the weighted average number of shares of common stock outstanding for the periods presented. Diluted income (loss) per share
is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and
potentially dilutive securities outstanding during 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). For
the years ended March 31, 2015 and 2014, all potentially dilutive securities are excluded from the computation of diluted weighted
average number of shares of common stock outstanding as they would have had an anti-dilutive impact. The Company’s aggregate
common stock equivalents at March 31, 2015 and 2014 included the following:
| |
March
31, 2015 | | |
March
31, 2014 | |
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.
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.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014
NOTE
2 – BASIS OF PRESENTATION, GOING CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent
accounting pronouncements (continued)
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, 2015 and 2014, prepaid expenses consisted of the following:
| |
March
31, 2015 | | |
March
31, 2014 | |
Prepaid professional service
fees | |
$ | 28,801 | | |
$ | 13,775 | |
Prepaid travel
and other expense | |
| - | | |
| 4,450 | |
| |
$ | 28,801 | | |
$ | 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
March 31, 2015 and 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 year ended March 31, 2015, 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
consolidated statements of operations (See Note 11). During the year ended March 31, 2014, the total interest expense for the
above two loans amounted to $7,510.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014
NOTE
5 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
At
March 31, 2015 and 2014, accounts payable and accrued liabilities consisted of the following:
| |
March
31, 2015 | | |
March
31, 2014 | |
Accrued interest | |
$ | 17,693 | | |
$ | 2,000 | |
Accrued professional fees | |
| 67,364 | | |
| 12,922 | |
Accrued payroll
taxes | |
| 28,690 | | |
| 18,653 | |
| |
$ | 113,747 | | |
$ | 33,575 | |
NOTE
6 - ACCRUED OFFICER SALARY AND DIRECTOR FEES
In
connection with the employment of a board of director member, the Company has agreed to compensate him as follows: an initial
payment of $1,500 and quarterly payments of $1,500 during the term which he serves as a director of the Company. At March 31,
2015 and 2014, the amount due to this director was $4,750 and $6,750, respectively, and was included in accrued officer salary
and director fees in the accompanying consolidated balance sheets.
At
March 31, 2015 and 2014, the accrued and unpaid CEO’s salary was $3,300 and $14,500, respectively, and was included in accrued
officer salary and director fees in the accompanying consolidated balance sheets.
At
March 31, 2015 and 2014, accrued officer salary and director fees consisted of the following:
| |
March
31, 2015 | | |
March
31, 2014 | |
Accrued director's salary | |
$ | 4,750 | | |
$ | 6,750 | |
Accrued officer’s
salary | |
| 3,300 | | |
| 14,500 | |
| |
$ | 8,050 | | |
$ | 21,250 | |
NOTE
7 – DUE TO SHAREHOLDER
At
March 31, 2015 and 2014, the Company owed one shareholder $0 and $8,218, respectively, for payments made on behalf of the Company
and which have been reimbursed by 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, 2015 and 2014 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, 2015 and
2014 were as follows:
| |
Years
Ended March 31, | |
| |
2015 | | |
2014 | |
Income tax expense (benefit)
at U.S. statutory rate of 34% | |
$ | (466,603 | ) | |
$ | (123,736 | ) |
Income tax benefit - State | |
| (68,618 | ) | |
| (18,196 | ) |
Non-deductible expenses | |
| 328,314 | | |
| 52,970 | |
Change in valuation
allowance | |
| 206,907 | | |
| 88,962 | |
Total provision for
income tax | |
$ | - | | |
$ | - | |
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014
NOTE 8 –
INCOME TAXES (continued)
The Company’s
approximate net deferred tax asset at March 31, 2015 and 2014 was as follows:
Deferred Tax Asset: | |
March
31, 2015 | | |
March
31, 2014 | |
Net operating loss carryforward | |
$ | 1,047,938 | | |
$ | 841,031 | |
Valuation allowance | |
| (1,047,938 | ) | |
| (841,031 | ) |
Net deferred tax
asset | |
$ | - | | |
$ | - | |
The
net operating loss carryforward was $2,687,019 and $2,156,489 at March 31, 2015 and 2014, respectively. The Company provided a
valuation allowance equal to the deferred income tax asset for the years ended March 31, 2015 and 2014 because it was not known
whether future taxable income will be sufficient to utilize the loss carryforward. The increase in the allowance was $206,907
and $88,962 in fiscal 2015 and fiscal 2014, respectively. The potential tax benefit arising from the loss carryforward will expire
in 2035.
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 2013,
2014 and 2015 Corporate Income Tax Returns are subject to Internal Revenue Service examination.
NOTE 9 –
RELATED PARTY TRANSACTIONS
Due
to officer
At
March 31, 2015 and 2014, the Company owed Mr. William Bollander, its CEO, $0 and $508, respectively, for payments made on behalf
of the Company and which have been reimbursed by March 2015.
Other
On
October 29, 2014, the Company entered into a service agreement with CFO Oncall Inc., a company majority owned by the Company’s
chief financial officer (“CFO Oncall”), effective on November 1, 2014. In accordance to the service agreement, the
service fee is $5,000 per month which is payable as follows: $3,000 in cash payable in advance of the 1st of each month,
and $2,000 payable at the Company’s option in cash or the Company’s common stock (See Notes 12 and 13).
NOTE
10 – 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.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014
NOTE
10 – CONVERTIBLE NOTES PAYABLE (continued)
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 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.
During
the year ended March 31, 2015, 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) | |
| 2.5
to 3.0 years | |
Volatility | |
| 177%
to 201% | |
Risk-free interest rate | |
| 0.83%
to 1.10% | |
At
March 31, 2015, 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 $669,085 for year ended March
31, 2015. For the year ended March 31, 2015, amortization of debt discounts related to these convertible notes amounted to $53,212,
which has been included in interest expense on the accompanying consolidated statements of operations.
At
March 31, 2015 and 2014, convertible promissory notes consisted of the following:
| |
March
31,
2015 | | |
March
31,
2014 | |
Principal amount | |
$ | 400,000 | | |
$ | - | |
Less: unamortized
debt discount | |
| (329,913 | ) | |
| - | |
Convertible notes
payable, net | |
$ | 70,087 | | |
$ | - | |
note
11 – STOCKHOLDERS’ EQUITY (DEFICIT)
Authorized
shares
The
Company is authorized to issue 10,000,000 shares of its $0.001 par value preferred stock. As of March 31, 2015 and 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 March 31, 2015 and 2014, 36,951,165
and 31,601,531 shares of common stock were issued and outstanding, respectively.
Common
stock issued for service
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.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014
note
11 – STOCKHOLDERS’ EQUITY (DEFICIT) (continued)
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.
During
the year ended March 31, 2015, 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 $64,375 and had a remaining prepaid expense of $17,448 at March 31, 2015, which
will be amortized over the remaining service periods.
Common
stock sold for cash
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.
During
the fiscal year ended March 31, 2015, 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 year ended March 31, 2015, 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 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.
Common
stock issued for loan settlements
During
the year ended March 31, 2015, 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 consolidated statement of operations.
Warrants
The Company
issued warrants with the sale of common stock during fiscal 2015 and fiscal 2014. 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, 2015 and 2014 were as follows:
| |
Number
of Warrants | | |
Weighted
Average Exercise Price | |
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 | |
Issued | |
| 314,706 | | |
| 0.40 | |
Exercised/forfeited/expired | |
| - | | |
| - | |
Balance at March 31, 2015 | |
| 1,048,315 | | |
$ | 0.40 | |
Warrant exercisable at March 31, 2015 | |
| 1,048,315 | | |
$ | 0.40 | |
There was
no intrinsic value of the warrants at March 31, 2015.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014
note
11 – STOCKHOLDERS’ EQUITY (DEFICIT) (continued)
The following
table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at March 31, 2015:
Warrants
Outstanding | | |
Warrants
Exercisable | |
Range
of Exercise Price | | |
Number
Outstanding at March 31, 2015 | | |
Weighted
Average Remaining Contractual Life (Years) | | |
Weighted
Average Exercise Price | | |
Number
Exercisable at March 31, 2015 | | |
Weighted
Average Exercise Price | |
$ | 0.40 | | |
| 356,250 | | |
| 2.5 | | |
$ | 0.40 | | |
| 356,250 | | |
$ | 0.40 | |
| 0.40 | | |
| 25,000 | | |
| 2.6 | | |
| 0.40 | | |
| 25,000 | | |
| 0.40 | |
| 0.40 | | |
| 25,500 | | |
| 2.7 | | |
| 0.40 | | |
| 25,500 | | |
| 0.40 | |
| 0.40 | | |
| 161,543 | | |
| 2.8 | | |
| 0.40 | | |
| 161,543 | | |
| 0.40 | |
| 0.40 | | |
| 103,438 | | |
| 2.9 | | |
| 0.40 | | |
| 103,438 | | |
| 0.40 | |
| 0.40 | | |
| 46,877 | | |
| 3.0 | | |
| 0.40 | | |
| 46,877 | | |
| 0.40 | |
| 0.40 | | |
| 15,001 | | |
| 3.1 | | |
| 0.40 | | |
| 15,001 | | |
| 0.40 | |
| 0.40 | | |
| 106,912 | | |
| 4.1 | | |
| 0.40 | | |
| 106,912 | | |
| 0.40 | |
| 0.40 | | |
| 205,919 | | |
| 4.2 | | |
| 0.40 | | |
| 205,919 | | |
| 0.40 | |
$ | 0.40 | | |
| 1,875 | | |
| 4.3 | | |
| 0.40 | | |
| 1,875 | | |
| 0.40 | |
| | | |
| 1,048,315 | | |
| 3.1 | | |
$ | 0.40 | | |
| 1,048,315 | | |
$ | 0.40 | |
NOTE 12
– 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, 2015. There were no balances in excess of FDIC insured
levels at March 31, 2015 and 2014.
Customers
No
customer accounted for 10% or more of the Company’s revenue during the years ended March 31, 2015 and 2014.
Suppliers
No
supplier accounted for 10% or more of the Company’s purchase during the years ended March 31, 2015 and 2014.
Commitments
Service
contracts
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. This agreement expired in May 2015.
On
October 29, 2014, the Company entered into a service agreement with CFO Oncall, effective on November 1, 2014. In accordance to
the service agreement, the service fee is $5,000 per month which is payable as follows: $3,000 in cash payable in advance of the
1st of each month, and $2,000 payable at the Company’s option in cash or the Company’s common stock at
a 40% discount to quoted market prices. The $2,000 portion is accounted for as stock settled debt in accordance with ASC 480 resulting
in a premium on each $2,000 payment amount of $1,333. Accumulated premium included in accounts payable at March 31, 2015 was $6,667
(See Note 13).
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014
NOTE 12
– CONCENTRATIONS AND COMMITMENTS (continued)
Subsequent
commitments
On
May 1, 2015, the Company entered into a one-year legal service agreement with Frederick M. Lehrer, Esquire (“FML”)
who has agreed to provide corporate and securities related legal services to the Company. The agreement expires on April 30, 2016.
In accordance to this legal service agreement, the Company pays FML (a) a flat cash fee of $1,000 per month; and (b) an annual
stock fee of 175,000 shares of the Company’s common stock. The Company issued the 175,000 shares of common stock in June
2015 (See Note 13).
On
May 1, 2015, the Company entered into a one-year consulting agreement with a consultant who has agreed to provide consulting services
to the Company. The agreement expires on April 30, 2016. In accordance to this consulting agreement, the Company pays this consultant
(a) $6,000 to be paid in equal monthly installments; and (b) 180,000 shares of the Company’s common stock. The Company issued
the 180,000 shares of common stock in June 2015 (See Note 13).
On
June 1, 2015, the Company entered into a one-year consulting agreement with a consultant who has agreed to provide consulting
services to the Company. The agreement expires on May 31, 2016. In accordance to this consulting agreement, the Company pays the
consultant (a) Per Tier 1 athlete/celebrity: (i) 2,500 shares of the Company’s common stock; (ii) 4% of the advertising
revenue generated from items offered for sale on the site related to the athlete/celebrity, which were not sold directly by the
athlete/celebrity; (iii) 1% of the net item sales of any original merchandise sold by the athlete/celebrity; (b) For all other
tiers, including collectible specialists, corporations: (i) 1,500 shares of the Company’s common stock; (ii) 3% of the advertising
revenue generated from items offered for sale on the site related to the athlete/celebrity, which were not sold directly by the
athlete/celebrity; (iii) 1% of the net item sales of any original merchandise sold by the athlete/celebrity or entity; (c) 250,000
shares of the Company’s common stock upon signing, plus $3,500 per month for the following services: (i) advisory services
related to professional sports franchises; (ii) introduction to sports related industry leaders; (iii) assistance in athlete management;
(iv) assistance in athlete promotions. For (a) and (b), the percentage of net sales and percentage of advertising revenue will
be paid to the consultant as long as the athlete/celebrity/other remains a vendor for the Company, otherwise the consultant earns
no commission or fees. The consultant will be paid any commission on the 10th of each month for revenue generated in
the preceding month, and the first of every month for the $3,500 monthly payment. The Company issued the 250,000 shares of common
stock in June 2015 (See Note 13).
NOTE 13
– SUBSEQUENT EVENTS
Common
stock issued for service
On
April 27, 2015, the Company issued 100,000 shares of common stock to a consultant for services rendered. The shares were valued
at the fair market value on the grant date of $0.06 per share based on market price and the Company recorded stock-based fees
$6,000.
On
May 1, 2015, the Company issued 180,000 shares of common stock to a consultant for services to be rendered. The shares were valued
at the fair market value on the grant date of $0.0549 per share based on market price and the Company recorded prepaid expense
of $9,882, which will be amortized over the service period.
On
May 1, 2015, the Company issued 175,000 shares of common stock to a law firm for services to be rendered. The shares were valued
at the fair market value on the grant date of $0.0549 per share based on market price and the Company recorded prepaid expense
of $9,608, which will be amortized over the service period.
On
June 1, 2015, the Company issued 726,989 shares of common stock to CFO Oncall to settle accrued liabilities of $26,667 pursuant
to the related service agreement between the Company and CFO Oncall (See Note 9 and 12). The shares were valued at $26,667 based
on the 60% of the bid price of the Company’s common stock at the last trading day of the previous quarter as defined in
the service agreement. No gain or loss was recognized on this settlement.
On
June 1, 2015, the Company issued 250,000 shares of common stock to a consultant for services to be rendered. The shares were valued
at the fair market value on the grant date of $0.054 per share based on market price and the Company recorded prepaid expense
of $13,500, which will be amortized over the service period.
TRUE
2 BEAUTY, INC. AND SUBSIDIARY
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2015 and 2014
NOTE 13
– SUBSEQUENT EVENTS (continued)
Fiscal
2016 Convertible Notes
On
May 19, 2015 and June 1, 2015, the Company and 5 investors (the “Investors”) entered into convertible promissory
note agreements, providing the issuance of a 10% convertible promissory notes (the “Fiscal 2016 Convertible Notes”)
with an aggregate principal amount of $110,000. The Fiscal 2016 Convertible Notes are due and payable on the third anniversary
of the date of May 19, 2018 and June 1, 2018. The Investors are entitled, at their option, at any time after the issuance of these
Fiscal 2016 Convertible Notes, to convert all or any lesser portion of the outstanding principal amount and accrued but unpaid
interest into the Company’s common stock at a conversion price for each share of common stock equal to $0.05. The conversion
price of the Fiscal 2016 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 connection with the issuance of these Fiscal 2016 Convertible Notes, the Company
issued five-year common stock purchase warrants (“Warrants”) exercisable at $0.07 per share. These investors received
20 Warrants for each dollar invested in the Fiscal 2016 Convertible Notes. The exercise price of the Warrant shall be subject
to adjustment for issuance of common stock at a consideration per share of less than the then-effective exercise price.
In
connection with the issuance of these Fiscal 2016 Convertible Notes, the Company determined that the terms of the Fiscal 2016
Convertible Notes and the 2,200,000 warrants include down-round provisions under which the conversion price and exercise price
could be affected by future equity offerings undertaken by the Company or contain terms that are not fixed monetary amounts at
inception. Accordingly, under the provisions of FASB ASC Topic No. 815-40, “Derivatives and Hedging – Contracts in
an Entity’s Own Stock”, the embedded conversion option contained in the convertible instruments and warrants were
accounted for as a derivative liabilities at the date of issuance and shall be adjusted to fair value through earnings at each
reporting date. The fair value of the embedded conversion option derivatives and warrants derivatives was determined using the
Binomial Option Pricing Model. On the initial measurement date, the fair value of the embedded conversion option derivatives and
warrants derivatives of $223,671 was recorded as a derivative liability and was allocated as a debt discount up to the proceeds
of the notes ($110,000) with the remainder ($113,671) charged to current period operations as initial derivative expense. Any
gains and losses recorded from changes in the fair value of the liability for derivative contract will be recorded as a component
of other income/(expense) in the consolidated statements of operations.
Item
9. Changes and Disagreements with Accountants on Accounting and Financial Disclosures.
There
were no disagreements with our accountants related to accounting principles or practices, financial statement disclosure, internal
controls or auditing scope.
Item
9A. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
We
maintain “disclosure controls and procedures,” as that term is defined in Rule 13a-15(e), promulgated by the SEC pursuant
to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include
controls and procedures designed to ensure that information required to be disclosed in our company’s reports filed under
the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to our management, including our principal executive officer
and principal financial officer to allow timely decisions regarding required disclosure. Our management, with the participation
of our principal executive officer and principal financial officer, evaluated our company’s disclosure controls and procedures
as of the end of the period covered by this annual report on Form 10-K. Based on this evaluation, our principal executive officer
and principal financial officer concluded that as of March 31, 2015, our disclosure controls and procedures were not effective.
The ineffectiveness of our disclosure controls and procedures was due to material weaknesses, which we identified, in our internal
control over financial reporting.
Internal
control over financial reporting
Management’s
Annual Report on Internal Control over Financial Reporting
Our
management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management, with
the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal
control over financial reporting as of February 28, 2015. Our management’s evaluation of our internal control over financial
reporting was based on the framework in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this evaluation, our management concluded that as of March 31, 2015, our internal control
over financial reporting was not effective.
The
ineffectiveness of our internal control over financial reporting was due to the following material weaknesses which we identified
in our internal control over financial reporting: (1) the lack of multiples levels of management review on complex accounting
and financial reporting issues, and (2) a lack of adequate segregation of duties and necessary corporate accounting resources
in our financial reporting process and accounting function as a result of our limited financial resources to support hiring of
personnel and implementation of accounting systems. Until such time as we expand our staff to include additional accounting personnel
and hire a full time chief financial officer, it is likely we will continue to report material weaknesses in our internal control
over financial reporting.
A
material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented
or detected on a timely basis.
In
light of these material weaknesses, we performed additional analyses and procedures in order to conclude that our consolidated
financial statements for the year ended March 31, 2015 included in this Annual Report on Form 10-K were fairly stated in accordance
with GAAP.
Limitations
on Effectiveness of Controls
Our
principal executive officer and principal financial officer do not expect that our disclosure controls or our internal control
over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to
their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include
the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake.
Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management
override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential
future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements
due to error or fraud may occur and not be detected.
This
annual report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant
to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual
report.
Changes
in Internal Control over Financial Reporting
No
changes were made to our internal control over financial reporting during the quarter ended March 31, 2015 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item
9B. Other Information.
Not
Applicable.
PART
III
Item
10. Directors, Executive Officers and Corporate Governance
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 | |
43 | |
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 Bachelor’s 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 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 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).
Employment
Agreements
Except
as discussed below, we have no formal employment agreements with any of our employees, directors or officers.
On
October 29, 2014, we entered into a service agreement with CFO Oncall Inc., a company majority owned by our chief financial officer,
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 our common stock.
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.
Audit
Committee Financial Expert
We
have not established an audit committee. Therefore, our Board of Directors have not designated any of its members as an “audit
committee financial expert” as defined by the rules and regulations of the Securities and Exchange Commission.
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.
Potential
Conflicts of Interest
We
are not aware of any conflicts of interest with our officers and directors.
Overview
of Compensation Program
The
table in Item 11 Executive Compensation 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.
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.
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.
Compliance
with Section 16(a) of the Exchange Act
Our common
stock is not registered pursuant to Section 12 of the Exchange Act. Accordingly, officers, directors, and principal shareholders
are not subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange Act.
Item
11. Executive Compensation
The
following summary compensation table indicates the cash and non-cash compensation earned during the years ended March 31, 2015
and 2014 by each person who served as chief executive officer and chief financial officer during the year ended March 31, 2015.
No other executive officer received compensation equal or exceeding $100,000.
SUMMARY
ANNUAL COMPENSATION TABLE *
Name and Position | |
Year | | |
Fees Earned or Paid in Cash ($) | | |
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 | |
| 2014
2015 | | |
| 120,000 121,000 | | |
| 0 0 | | |
| 0 0 | | |
| 0 0 | | |
| 0 0 | | |
| 0
0 | | |
| 0
0 | | |
| 120,000
121,000 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Adam Wasserman, Chief Financial | |
| 2014 | | |
| 3,000 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 3,000 | |
Officer | |
| 2015 | | |
| 24,000 | | |
| 22,177 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 0 | | |
| 46,177 | |
*
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.
Grants
of Plan-Based Awards
There
were no grants of plan-based awards during the fiscal year ended March 31, 2015.
Outstanding
Equity Awards at Fiscal Year End
There
were no outstanding equity awards at the year ended March 31, 2015.
Option
Exercises and Stock Vested
During
our Fiscal year ended March 31, 2015, there were no options exercised by our named officer.
Compensation
of Directors
We
do not have any agreements for compensating our directors for their services in their capacity as directors.
Pension,
Retirement or Similar Benefit Plans
There
are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.
We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors
or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.
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.
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 | |
| 2014 2015 | | |
| 0 0 | | |
| 0 0 | | |
| 0 0 | | |
| 0 0 | | |
| 0 0 | | |
| 0 0 | | |
| 0 0 | | |
| 0 0 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Chris Jarvis | |
| 2014 2015 | | |
| 6,000 6,000 | | |
| 2,204 19,836 | | |
| 0 0 | | |
| 0 0 | | |
| 0 0 | | |
| 0 0 | | |
| 0 0 | | |
| 8,204 25,836 | |
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The
following tables set forth the ownership, as of the date of this report, 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 of | | |
| | |
| | |
| |
| |
Title of |
| |
Beneficial | | |
Direct | | |
Indirect | | |
Percent | |
Name | |
Class |
| |
Ownership | | |
Ownership | | |
Ownership | | |
of Class | |
| |
|
| |
| | | |
| | | |
| | | |
| | |
William Bollander | |
Common |
| |
| 6,500,000 | | |
| 6,500,000 | | |
| 0 | | |
| 16.9 | % |
| |
|
| |
| | | |
| | | |
| | | |
| | |
Adam Wasserman(4) | |
Common |
| |
| 826,989 | | |
| 0 | | |
| 826,989 | | |
| 2.2 | % |
| |
|
| |
| | | |
| | | |
| | | |
| | |
Chris Jarvis | |
Common |
| |
| 500,000 | | |
| 500,000 | | |
| 0 | | |
| 1.3 | % |
| |
|
| |
| | | |
| | | |
| | | |
| | |
All current officers and directors as a group (three persons owning stock) | |
|
| |
| 7,826,989 | | |
| 7,000,000 | | |
| 826,989 | | |
| 20.4 | % |
| |
|
| |
| | | |
| | | |
| | | |
| | |
Eisenberg Family Foundation(1) | |
Common |
** | |
| 8,250,000 | | |
| 8,250,000 | | |
| 0 | | |
| 17.7 | % |
| |
|
| |
| | | |
| | | |
| | | |
| | |
Ascendant Partners, LLC(2) | |
Common |
** | |
| 5,225,000 | | |
| 5,225,000 | | |
| 0 | | |
| 12.0 | % |
| |
|
| |
| | | |
| | | |
| | | |
| | |
Dina M. Palermo/Jeffrey Smith | |
Common |
** | |
| 4,275,000 | | |
| 4,275,000 | | |
| 0 | | |
| 10.1 | % |
Joint Tenants with Rights of Survivorship(3) | |
|
| |
| | | |
| | | |
| | | |
| | |
| |
|
| |
| | | |
| | | |
| | | |
| | |
Joseph Lansing | |
Common |
| |
| 2,117,561 | | |
| 2,117,561 | | |
| 0 | | |
| 5.5 | % |
| |
|
| |
| | | |
| | | |
| | | |
| | |
Darryl Cohen | |
Common |
| |
| 3,127,825 | | |
| 3,127,825 | | |
| 0 | | |
| 8.1 | % |
* 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. Includes 8,250,000 shares issuable upon conversion of $165,000
of debt and accrued interest at $0.02 per share. |
| (2) | Ascendant
Partners, LLC’s principal is Richard Galterio who has sole voting and investment
control over the shares. Includes 5,225,000 shares issuable upon conversion of $104,500
of debt and accrued interest at $0.02 per share. |
| (3) | Includes
4,125,000 shares issuable upon conversion of $82,500 of debt and accrued interest at
$0.02 per share. |
| (4) | 826,989
common shares held by CFO Oncall, Inc., a company majority-owned by Adam Wasserman who
has sole voting and investment control over the shares. |
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 38,383,154 shares of common stock outstanding as of the date of this annual report.
Item
13. Certain Relationships and Related Transaction, 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.
We
have no independent directors.
Item
14. Principal Accounting Fees and Services
The
following table sets forth the fees billed by our principal independent accountants, Salberg & Company, P.A., for each of
our last two fiscal years for the categories of services indicated.
| |
Years Ended March 31, | |
Category | |
2015 | | |
2014 | |
Audit Fees | |
$ | 24,000 | | |
$ | 19,300 | |
Audit Related Fees | |
| 3,600 | | |
| - | |
Tax Fees | |
| - | | |
| - | |
All other fees | |
| - | | |
| - | |
Total | |
$ | 27,600 | | |
$ | 19,300 | |
PART
IV
Item
15. Exhibits, Financial Statement Schedules
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*** |
|
|
|
10.1 |
|
Agreement
with Applied DNA Sciences** |
|
|
|
21 |
|
Subsidiary
of Registrant* |
|
|
|
31.1 |
|
Certification
pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended, filed herewith (Chief Executive
Officer).** |
|
|
|
31.2 |
|
Certification
pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934, as amended, filed herewith (Principal Financial
Officer).** |
|
|
|
32.1 |
|
Certification
furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Chief Executive Officer and Chief Financial Officer).** |
*
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.
SIGNATURES
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
|
True
2 Beauty, Inc. |
|
(Registrant) |
|
|
|
|
By: |
/s/
William Bollander |
|
|
William
Bollander |
|
|
Chief
Executive Officer |
|
|
|
|
Date:
June 15, 2015 |
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/
William Bollander |
|
Chairman
& Chief Executive Officer |
|
June
15, 2015 |
William
Bollander |
|
(principal
executive officer) |
|
|
|
|
|
|
|
/s/
Adam Wasserman |
|
Chief
Financial Officer |
|
June
15, 2015 |
Adam
Wasserman |
|
(principal
financial and accounting officer) |
|
|
|
|
|
|
|
/s/
Chris Jarvis |
|
Director |
|
June
15, 2015 |
Chris
Jarvis |
|
|
|
|
24
Exhibit
31.1
Certificate
of Principal Executive Officer
Pursuant
to Rule 13a-14(a)/15d-14(a)
I,
William Bollander , certify that:
1.
I have reviewed this annual report on Form 10-K for the year ended March 31, 2015 of True2Beauty Inc. (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present, in all
material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report.
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting )as defined
in the Exchange Act Rules 13a - 15(f) and 15d - 15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the registrant’s board of directors:
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date:
June 15, 2015 |
|
|
|
/s/
William Bollander |
|
William
Bollander |
|
President
and Chief Executive Officer |
|
Exhibit
31.2
Certificate
of Principal Financial Officer
Pursuant
to Rule 13a-14(a)/15d-14(a)
I,
Adam Wasserman, certify that:
1.
I have reviewed this annual report on Form 10-K for the year ended March 31, 2015 of True2 Beauty, Inc. (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present, in all
material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report.
4.
The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting )as defined
in the Exchange Act Rules 13a - 15(f) and 15d - 15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the
registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the registrant’s board of directors:
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information;
and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting.
Date:
June 15, 2015 |
|
|
|
/s/
Adam Wasserman |
|
Adam
Wasserman |
|
Chief
Accounting Officer |
|
Exhibit
32.1
Section
1350 Certification of Principal Executive Officer
In
connection with the annual report of True 2 Beauty, Inc. (the “Company”) on Form 10-K for the year ended March 31,
2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William Bollander,
the President and Chief Executive Officer of the Company, and I, Adam Wasserman, Chief Accounting Officer, certify to the best
of our knowledge:
1.
The Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company.
Date:
June 15, 2015 |
/s/
William Bollander |
|
William
Bollander |
|
President
and Chief Executive Officer |
|
|
Date:
June 15, 2015 |
/s/
Adam Wasserman |
|
Adam
Wasserman |
|
Chief
Accounting Officer |
(USOTC:LEGX)
과거 데이터 주식 차트
부터 5월(5) 2024 으로 6월(6) 2024
(USOTC:LEGX)
과거 데이터 주식 차트
부터 6월(6) 2023 으로 6월(6) 2024