An offering statement pursuant to Regulation A relating to these securities has been filed with the Securities and Exchange Commission. Information contained in this Preliminary Offering Circular is subject to completion or amendment. These securities may not be sold nor may offers to buy be accepted before the offering statement filed with the Commission is qualified. This Preliminary Offering Circular shall not constitute an offer to sell or the solicitation of an offer to buy nor may there be any sales of these securities in any state in which such offer, solicitation or sale would be unlawful before registration or qualification under the laws of any such state. We may elect to satisfy our obligation to deliver a Final Offering Circular by sending you a notice within two business days after the completion of our sale to you that contains the URL where the Offering Circular was filed may be obtained.
Preliminary Offering Circular
Subject to Completion. Dated __________ 2016
Legion Capital Corporation
(Exact name of issuer as specified in its charter)
Florida
(State or other jurisdiction of incorporation or organization)
www.legioncapitalcorp.com
301 E. Pine St.
Suite 301
Orlando, FL 32801
|
6799 |
47-3751122 | |
| (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification Number) |
Maximum offering of 5,000,000 shares
We are offering a maximum of 5,000,000 shares of common stock on a "no minimum/best efforts" basis. The offering will continue until the earlier of 12 months from the date this Offering is qualified for sale (which date may be extended for an additional 90 days at our option) or the date when all shares have been sold. Because there is no minimum offering amount, funds raised may not be sufficient to complete the plans of the Company as set forth in "Use of Proceeds" in this Offering Circular. See "Plan of Distribution" and "Securities Being Offered" for a description of our capital stock.
There is currently no trading market for our common stock. We intend to apply to have our shares of common stock approved for trading on the Nasdaq Exchange (subject to qualifications), or the OTCQB marketplace upon the completion of this offering.
These are speculative securities. Investing in our shares involves significant risks. You should purchase these securities only if you can afford a complete loss of your investment.
See “Risk Factors” to read about factors you should consider before buying shares of common stock.
Generally, no sale may be made to you in this offering if the aggregate purchase price you pay is more than 10% of the greater of your annual income or net worth. Different rules apply to accredited investors and non-natural persons. Before making any representation that your investment does not exceed applicable thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of Regulation A. For general information on investing, we encourage you to refer to www.investor.gov.
The United States Securities and Exchange Commission does not pass upon the merits of or give its approval to any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering circular or other solicitation materials. These securities are offered pursuant to an exemption from registration with the Commission; however, the Commission has not made an independent determination that the securities offered are exempt from registration.
This Offering Circular is following the offering circular format described in Part II (a)(1)(ii) of Form 1-A.
Offering Circular dated _____________, 2016
| SUMMARY | 3 |
| RISK FACTORS | 5 |
| USE OF PROCEEDS | 8 |
| DIVIDEND POLICY | 9 |
| DILUTION | 9 |
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 10 |
| BUSINESS | 10 |
| MANAGEMENT | |
| RELATIONSHIPS AND RELATED PARTY TRANSACTIONS | |
| PRINCIPAL STOCKHOLDERS | 13 |
| DESCRIPTION OF CAPITAL | 13 |
| SHARE ELIGIBLE FOR FUTURE SALE | 14 |
| PLAN OF DISTRIBUTION | 15 |
| VALIDITY OF COMMON STOCK | 15 |
| EXPERTS | 15 |
| INDEX TO AUDITED FINANCIAL STATEMENTS | F-1 |
| PART III EXHIBITS | |
| SIGNATURES |
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this Offering Circular. You must not rely on any unauthorized information or representations. This Offering Circular is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this Offering Circular is current only as of its date.
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This summary highlights information contained elsewhere in this Offering Circular. This summary does not contain all of the information that you should consider before deciding to invest in our common stock. You should read this entire Offering Circular carefully, including the “Risk Factors” section, our historical consolidated financial statements and the notes thereto, and unaudited pro forma financial information, each included elsewhere in this Offering Circular. Unless the context requires otherwise, references in this Offering Circular to “the Company,” “we,” “us” and “our” refer to Legion Capital Corporation
Our Company
Background
Legion Capital Corporation was formed in 2015 by attorney and venture capital executive James Byrd, along with direct marketing and technology entrepreneur Shane Hackett. Byrd and Hackett have spent their careers building technology driven direct marketing companies, bringing to Legion over 50 years combined experience in venture capital, corporate finance and direct marketing.
In February 2016, Byrd and Hackett joined forces with Joseph B. Hilton, grandson of iconic hotelier Conrad Hilton, and former executive with Hilton Hotels. Mr. Hilton has taken the role as President and Director of Legion.
Messrs. Byrd, Hackett and Hilton are also the Board of Directors for the Company.
The Offering
See “Risk Factors” and other information appearing elsewhere in this Offering Circular for a discussion of factors you should consider before deciding whether to invest in our common stock.
Overview
Legion Capital Corporation was originally incorporated as GreenSky Corporation on August 7, 2015 in Delaware, and merged with Legion Capital Corporation (the “Company”), a Florida Corporation on January 15, 2016. The Company was formed to be a venture capital, consulting and advisory firm, as well as a private fund manager. We manage two separate private funds under the names (1) Legion High Yield Secured Fund I, LLC; (2) Legion High Yield Mortgage Fund I, LLC. In addition, we provide consulting services on marketing, management, technology and other business matters, in addition to investing in, or taking ownership in certain client companies. We own two wholly owned subsidiaries, Legion Wealth Advisors, LLC, a Registered Investment Advisor, through which we conduct investment advisory services, and Stage One Funding, LLC, through which we advise small businesses on corporate finance.
Intellectual Property
We have applied for a service mark for our name, Legion Capital, and an associated logo, and that application is pending. We have no other intellectual property.
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Business and Product Status
We are a direct to market venture capital, advisory firm and private fund manager. We provide advisory services for companies including marketing, technology, management and other business consulting services. We are also a private fund manager, and, through our subsidiary companies we manage several private venture funds. We are also a registered investment advisor through our subsidiary Legion Wealth Advisors, LLC.
Risk Factors
Our ability to successfully operate our business and achieve our goals and strategies is subject to numerous risks as discussed in the section titled “Risk Factors”
Company Information
Legion Capital Corporation was originally incorporated as GreenSky Corporation on August 7, 2015 in Delaware, and merged with Legion Capital Corporation (the “Company”), a Florida Corporation on January 15, 2016.
Our corporate headquarters are located at 301 E. Pine St. Ste. 850 Orlando, FL 32801. Telephone: 4079684234. Our website is www.LegionCapitalCorp.com. We do not incorporate the information on or accessible through our website into this Offering Circular, and you should not consider any information on, or that can be accessed through, our website a part of this Offering Circular.
This Offering Circular summary highlights information contained elsewhere and does not contain all of the information that you should consider in making your investment decision. Before investing in our common stock, you should carefully read this entire Offering Circular, including our financial statements and the related notes included elsewhere in this Offering Circular. You should also consider, among other things, the matters described under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in each case appearing elsewhere in this Offering Circular.
| Common stock offered by us | 5,000,000 Shares | |
| Common stock to be outstanding immediately after this offering (assuming all shares of Common Stock in this offering are sold) | 16,571,500 Shares | |
| Use of proceeds | Marketing, personnel, working capital | |
| Risk factors | You should carefully read “Risk Factors” on page 5 in this Offering Circular for a discussion of factors that you should consider before deciding to invest in our common stock. |
| 4 |
Investing in our common stock involves a high degree of risk. You should carefully consider each of the following risks, together with all other information set forth in this Offering Circular, including the consolidated financial statements and the related notes, before making a decision to buy our common stock. If any of the following risks actually occurs, our business could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Investments in small businesses and start-up companies are often risky.
Small businesses may depend heavily upon a single customer, supplier, or employee whose departure would seriously damage the company's profitability. The demand for the company's product may be seasonal or be impacted by the overall economy, or the company could face other risks that are specific to its industry or type of business. The Company may also have a hard time competing against larger companies who can negotiate for better prices from suppliers, produce goods and services on a large scale more economically, or take advantage of bigger marketing budgets. Furthermore, a small business could face risks from lawsuits, governmental regulations, and other potential impediments to growth.
There is no public trading market for the securities, and none may develop.
There is no active trading market for the securities being offered and no market may develop in the foreseeable future for any of such securities. Even though the securities being sold hereunder are being registered for sale, that does not mean that an actual market will develop for the subsequent sale of purchase of the Company’s stock. If no subsequent market develops investors may end up with an illiquid investment and not be able to sell or otherwise monetize its stock.
The Company has limited operating history.
The Company is still in an early phase, and is just beginning to implement its business plan. There can be no assurance that it will ever operate profitably. The likelihood of its success should be considered in light of the problems, expenses, difficulties, complications and delays usually encountered by companies in their early stages of development, with low barriers to entry. The Company may not be successful in attaining the objectives necessary for it to overcome these risks and uncertainties.
The Company may need additional capital, which may not be available.
The Company may require funds in excess of its existing cash resources to fund operating deficits, develop new products or services, establish and expand its marketing capabilities, and finance general and administrative activities. Due to market conditions at the time the Company may need additional funding, or due to its financial condition at that time, it is possible that the Company will be unable to obtain additional funding as and when it needs it. If the Company is unable to obtain additional funding, it may not be able to repay debts when they are due and payable. If the Company is able to obtain capital it may be on unfavorable terms or terms which excessively dilute then-existing equity holders. If the Company is unable to obtain additional funding as and when needed, it could be forced to delay its development, marketing and expansion efforts and, if it continues to experience losses, potentially cease operations.
The Company's management has broad discretion in how the Company use the net proceeds of an offering.
The Company's management will have considerable discretion over the use of proceeds from their offering. You may not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately.
The Company may not be able to manage its potential growth.
For the Company to succeed, it needs to experience significant expansion. There can be no assurance that it will achieve this expansion. This expansion, if accomplished, may place a significant strain on the Company's management, operational and financial resources. To manage any material growth, the Company will be required to implement operational and financial systems, procedures and controls. It also will be required to expand its finance, administrative and operations staff. There can be no assurance that the Company's current and planned personnel, systems, procedures and controls will be adequate to support its future operations at any increased level. The Company's failure to manage growth effectively could have a material adverse effect on its business, results of operations and financial condition.
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The Company faces significant competition.
The Company faces competition from other companies, some of which might have received more funding than the Company has. One or more of the Company's competitors could offer services similar to those offered by the Company at significantly lower prices, which would cause downward pressure on the prices the Company would be able to charge for its services. If the Company is not able to charge the prices it anticipates charging for its services, there may be a material adverse effect on the Company's results of operations and financial condition. In addition, while the Company believes it is well-positioned to be the market leader in its industry, the emergence of one of its existing or future competitors as a market leader may limit the Company's ability to achieve national brand recognition, which could also have a material adverse effect on the Company's results of operations and financial condition.
The Company's growth relies on market acceptance.
While the Company believes that there will be significant customer demand for its products/services, there is no assurance that there will be broad market acceptance of the Company's offerings. There also may not be broad market acceptance of the Company's offerings if its competitors offer products/services which are preferred by prospective customers. In such event, there may be a material adverse effect on the Company's results of operations and financial condition, and the Company may not be able to achieve its goals.
The Company may not pay dividends for the foreseeable future.
Unless otherwise specified in the offering documents and subject to state law, you are not entitled to receive any dividends on your interest in the Company. Accordingly, any potential investor who anticipates the need for current dividends or income from an investment should not purchase any of the securities offered on the Site.
Because the Company's founders, directors and executive officers may be among the Company's largest stockholders, they can exert significant control over the Company's business and affairs and have actual or potential interests that may depart from those of subscribers in the offering.
The Company's founders, directors and executive officers own or control a significant percentage of the Company.
Additionally, the holdings of the Company's directors and executive officers may increase in the future upon vesting or other maturation of exercise rights under any of the options or warrants they may hold or in the future be granted or if they otherwise acquire additional interest in the Company. The interests of such persons may differ from the interests of the Company's other stockholders, including purchasers of securities in the offering. As a result, in addition to their board seats and offices, such persons will have significant influence over and control all corporate actions requiring stockholder approval, irrespective of how the Company's other stockholders, including purchasers in the offering, may vote, including the following actions:
| 1. | to elect or defeat the election of the Company's directors; |
| 2. | to amend or prevent amendment of the Company's Certificate of Incorporation or By-laws; |
| 3. | to effect or prevent a merger, sale of assets or other corporate transaction; and |
| 4. | to control the outcome of any other matter submitted to the Company's stockholders for vote. |
Such persons' ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of the Company, which in turn could reduce the Company's stock price or prevent the Company's stockholders from realizing a premium over the Company's stock price.
Our operating results may continue to be adversely affected as a result of unfavorable market, economic, social and political conditions.
An unstable global economic, social and political environment may have a negative impact on demand for our services, our business and our operations, including the U.S. economic environment. The economic, social and political environment has or may negatively impact, among other things:
| ● | current and future demand for our services; |
| ● | price competition for our products and services; |
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| ● | the price of our common stock; |
| ● | our liquidity; |
| ● | our ability to service our debt, to obtain financing or assume new debt obligations; and |
| ● | our ability to obtain payment for outstanding debts owed to us by our customers or other parties with whom we do business. |
In addition, to the extent that the economic, social and political environment impacts specific industry and geographic sectors in which many of our customers are concentrated, that may further negatively impact our business.
Our business depends heavily on our officers and directors.
Our future ability to execute our business plan depends upon the continued service of our CEO Jim Byrd, our President Brad Hilton and our CMO Shane Hackett. If we lost the services of one or more of our key personnel, or if one or more of our executive officers or employees joined a competitor or otherwise competed with us, our business may be adversely affected. We cannot assure that we will be able to retain or replace our key personnel.
If we are unable to retain the members of our management team or attract and retain qualified management team members in the future, our business and growth could suffer.
Our success and future growth depend, to a significant degree, on the continued contributions of the members of our management team. Each member of our management team is an at-will employee and may voluntarily terminate his or her employment with us at any time with minimal notice. We also may need to hire additional management team members to adequately manage our growing business. We may not be able to retain or identify and attract additional qualified management team members. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. If we lose the services of any member of our management team or if we are unable to attract and retain additional qualified senior managers, our business and growth could suffer.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements under the “Summary,” “Risk Factors,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in other sections of this Offering Circular. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” and the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to known and unknown risks, uncertainties and assumptions about us, may include projections of our future financial performance based on our growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements. In particular, you should consider the numerous risks and uncertainties described under “Risk Factors.
While we believe we have identified material risks, these risks and uncertainties are not exhaustive. Other sections of this Offering Circular describe additional factors that could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
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Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We are under no duty to update any of these forward-looking statements after the date of this Offering Circular to conform our prior statements to actual results or revised expectations, and we do not intend to do so.
Forward-looking statements include, but are not limited to, statements about:
| ● | our business’ strategies and investment policies; |
| ● | our business’ financing plans and the availability of capital; |
| ● | potential growth opportunities available to our business; |
| ● | the risks associated with potential acquisitions by us; |
| ● | the recruitment and retention of our officers and employees; |
| ● | our expected levels of compensation; |
| ● | the effects of competition on our business; and |
| ● | the impact of future legislation and regulatory changes on our business. |
We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this Offering Circular.
The following Use of Proceeds is based on estimates made by management. The Company planned the Use of Proceeds after deducting estimated offering expenses estimated to be $10,000. Management prepared the milestones based on three levels of offering raise success: 25% of the Maximum Offering proceeds raised ($250,000), 50% of the Maximum Offering proceeds raised ($500,000), 75% of the Maximum Offering proceeds raised ($750,000) and the Maximum Offering proceeds raised of $1,000,000 through the offering. The costs associated with operating as a public company are included in all our budgeted scenarios and management is responsible for the preparation of the required documents to keep the costs to a minimum.
Although we have no minimum offering, we have calculated use of proceeds such that if we raise 25% of the offering is budgeted to sustain operations for a twelve-month period. 25% of the Maximum Offering is sufficient to keep the Company current with its public listing status costs with prudently budgeted funds remaining which will be sufficient to complete the development of our marketing package. If the Company were to raise 50% of the Maximum Offering, then we would be able to expand our marketing outside the US. Raising the Maximum Offering will enable the Company to implement our full business. If we begin to generate profits, we plan to increase our marketing and sales activity accordingly.
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USE OF PROCEEDS TABLE GOES HERE:
| SALE AND MARKETING EXPENSES | 1,500,000 | |||
| HIRING SALES TEAMS AND PERSONNEL | 500,000 | |||
| LAUNCH OF INTERNATIONAL PLATFORM | 300,000 | |||
| TECHNOLOGY AND PLATFORM UPGRADES | 100,000 | |||
| GENERAL WORKING CAPITAL | 2,000,000 | |||
| COMMISSIONS AND OFFERING COSTS | 600,000 | |||
| TOTAL | 5,000,000 |
The foregoing represents our best estimate of the allocation of the proceeds of this offering based on planned use of funds for our operations and current objectives.
We have not declared or paid any dividends on our common stock. We intend to retain earnings for use in our operations and to finance our business. Any change in our dividend policy is within the discretion of our board of directors and will depend, among other things, on our earnings, debt service and capital requirements, restrictions in financing agreements, if any, business conditions, legal restrictions and other factors that our board of directors deems relevant.
If you invest in our shares, your interest will be diluted to the extent of the difference between the public offering price per share of our common stock and the as adjusted net tangible book value per share of our capital stock after this offering. Our net tangible book value as of June 30, 2016 was $466,012, or $0.04 per share of outstanding common stock. Without giving effect to any changes in the net tangible book value after June 30, 2016 other than the sale of 5,000,000 shares in this offering at the initial public offering price of $1.00 per share, our pro forma net tangible book value as of June 30, 2016 was $5,466,012 or $0.33 per share of outstanding capital stock. Dilution in net tangible book value per share represents the difference between the amount per share paid by the purchasers of our shares in this offering and the net tangible book value per share of our capital stock immediately afterwards. This represents an immediate increase of $0.29 per share of capital stock to existing shareholders and an immediate dilution of $0.67 per share of common stock to the new investors, or approximately 67% of the assumed initial public offering price of $1.00 per share. The following table illustrates this per share dilution:
The following table sets forth the estimated net tangible book value per share after the offering and the dilution to persons purchasing Common Stock based on the foregoing minimum and maximum offering assumptions.
| 25% of the Offering Subscribed | 50% of the Offering Subscribed | 75% of the Offering Subscribed | 100% of the Offering Subscribed | |||||||||||||
| Sale of Stock @ 1.00 per share | $ | 1,250,000 | $ | 2,500,000 | $ | 3,750,000 | $ | 5,000,000 | ||||||||
| Sale of shares (number of shares) | 1,250,000 | 2,500,000 | 3,750,000 | 5,000,000 | ||||||||||||
| Book value after offering | $ | 1,716,012 | $ | 2,966,012 | $ | 4,216,012 | $ | 5,466,012 | ||||||||
| Shares outstanding after the offering | 12,897,500 | 14,147,500 | 15,397,500 | 16,647,500 | ||||||||||||
| Offering price per share | 1.00 | 1.00 | 1.00 | 1.00 | ||||||||||||
| Book value per share before the offering | 0.04 | 0.04 | 0.04 | 0.04 | ||||||||||||
| Book value per share after the offering | 0.13 | 0.21 | 0.27 | 0.33 | ||||||||||||
| Net increase to original shareholders | 0.09 | 0.17 | 0.23 | 0.29 | ||||||||||||
| Decrease to investment to new shareholders | 0.87 | 0.79 | 0.73 | 0.67 | ||||||||||||
| Dilution to new shareholders | 87 | % | 79 | % | 73 | % | 67 | % | ||||||||
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited financial statements and the notes thereto of the Company included in this Offering Circular. The following discussion contains forward-looking statements. Actual results could differ materially from the results discussed in the forward-looking statements. See “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” above.
Overview
Legion Capital Corporation was originally incorporated as GreenSky Corporation on August 7, 2015 in Delaware, and merged with Legion Capital Corporation (the “Company”), a Florida Corporation on January 15, 2016. Legion Capital Corporation was formed to be a venture capital, consulting and advisory firm, as well as a private fund manager. We manage two separate private funds under the names (1) Legion High Yield Secured Fund I, LLC; and (2) Legion High Yield Mortgage Fund I, LLC. In addition, we provide consulting services on marketing, management, technology and other business matters, in addition to investing in, or taking ownership in certain client companies. We own two wholly owned subsidiaries, Legion Wealth Advisors, LLC, a Registered Investment Advisor, through which we conduct investment advisory services, and Stage One Funding, LLC, through which we advise small businesses on corporate finance.
Company Information
Our corporate headquarters are located at 301 E. Pine St. Ste. 850 Orlando, FL 32801. Telephone: (407) 968-4234. Our subsidiary Legion Wealth Advisors, LLC is located at 1811 N Tatum Blvd Suite 3031, Phoenix AZ, 85028.
Our website is www.LegionCapitalCorp.com. We do not incorporate the information on or accessible through our website into this Offering Circular, and you should not consider any information on, or that can be accessed through, our website a part of this Offering Circular.
Legion is a venture firm founded on the principles of crowdfunding and direct solicitation under the new federal JOBS Act legislation recently passed by Congress. The JOBS Act and related rules, including the new crowdfunding regulations, allow companies to raise capital through direct investor solicitation using the internet, social media and other direct to market means. As a direct to market venture firm, Legion plans to build and finance portfolio companies through such means as Crowdfunding, Reg A+ Offerings (Mini-IPO) and other similar activities.
In August 2016, Legion launched its family of Legion Select High Yield Funds including the Legion High Yield Secured Fund I and the Legion High Yield Mortgage Fund I, and have begun operations in both of those funds.
On August 31, 2016, our subsidiary Legion Wealth Advisors, LLC, a Florida Limited Liability Company, acquired 100% of the assets of Sterling Pfeifer Wealth Advisor, PC, a registered investment advisor.
Legion will specialize in alternative investment strategies through a variety of portfolio companies and funds that Legion either owns, manages or holds equity stakes in, and will capitalize and groom these companies for larger scale funding either through crowdfunding, Reg A+ or otherwise.
Legion will generate revenues and profits in a number of ways including:
| 1. | Retainer and due diligence fees associated with investing or acquisition of portfolio companies and equity stakes in venture deals. |
| 2. | Consulting, advisory and marketing fees for services performed on behalf of portfolio and third party companies. |
| 3. | Ownership and equity stakes in portfolio companies and investments. |
| 4. | Management fees for management of our family of funds, including a carried profit interest in the profits of each fund. | |
| 5. | Investment advisory fees for managing investment accounts through Legion Wealth Advisors, LLC |
In short, Legion Capital is a direct to market venture capital, advisory firm and private fund manager, borne out of digital technology, social media and big data, focused on alternative investments and advisory services.
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Directors and Executive Officers
The following table sets forth the name, age, and position of our executive officers and directors. Executive officers are elected annually by our Board of Directors. Each executive officer holds his office until he resigns, is removed by the Board, or his successor is elected and qualified. Directors are elected annually by our shareholders at the annual meeting. Each director holds his office until his successor is elected and qualified or his earlier resignation or removal.
| Name | Age | Position | ||
| James S. Byrd, Jr. | 57 | Chairman, Chief Executive Officer | ||
| Joseph B. Hilton | 49 | President, Director | ||
| Douglas S. Hackett | 52 | Chief Marketing Officer, Director | ||
| Paul Pfeifer | 48 | President and CEO, Legion Wealth Advisors |
James S. Byrd, Jr (Chairman & CEO) Age 57. Jim is a veteran corporate and securities attorney and venture capital executive. Built, advised and managed numerous companies, from start up to publicly trading company in his distinguished 30-year career. Extensive experience in going public and venture capital transactions and has tried cases in both State and Federal Courts, as well as in front of FINRA, the Florida Supreme Court and the U.S. Court of Appeals. Chairman, CEO and Director of numerous private and public companies, including Vice Chairman of Success Magazine, N.Y. (1998-2000).
Joseph B. (“Brad”) Hilton (President & Director) Brad is the Grandson of iconic American Hotelier Conrad Hilton, one of the greatest American entrepreneurs in history. As former head of Hilton Hotels Information Technology Group, Brad helped spearhead an increase in corporate solicitations from $700 million to $1.2 billion at Hilton. Brad is also a noted philanthropist through his involvement in the Hilton Foundation.
Douglas S. Hackett (Director & CMO) Shane is a 25-year media, marketing and public company executive. Shane is widely renowned as a direct marketing expert having founded, built and managed multiple broadcast, technology, marketing and training companies. The current Chairman of the Board at Market Leverage, a previous Inc. 100 Advertising Firm and Fortune 5000 fastest growing company, Shane has also owned multiple radio stations and was the producer and creator of “Baseball Sunday with Joe Garagiola,” “Football Sunday” and “NBA Basketball Sunday.
Paul Pfeifer (President and CEO of Legion Wealth Advisors) Paul is the founder of Sterling Pfeifer Wealth Advisor, PC. He has been a Financial Advisor for more than 15 years. His Licenses include General Securities Representative (Series 7), Uniform Investment Advisor Law (Series 65), Uniform Securities Agent State Law (Series 63) and State of AZ Insurance License: Life, Accident & Health. Paul has extensive experience in Retirement Planning, Estate Planning, Income Planning, College Planning, and Private Equity.
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Family Relationships
There are no family relationships among any of the directors and executive officers.
Involvement in Certain Legal Proceedings
Our directors and officers have not been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, nor have been a party to any judicial or administrative proceeding during the past ten years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion below in “Certain Relationships and Related Transactions,” our directors and officers have not been involved in any transactions with us or any of our affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Code of Business Conduct and Ethics
To date, we have not adopted a code of business conduct and ethics for our management and employees. We intend to adopt one in the near future.
Executive Compensation
| Name and Principal Position | Year Ended |
Salary ($) |
Non- Qualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
|||||||||||||
| James S. Byrd, Jr/CEO/Chairman | 2016 | $ | 90,000 | 0 | 0 | 90,000 | ||||||||||||
| Douglas S. Hackett/CMO/Director | 2016 | $ | 90,000 | 0 | 0 | 90,000 | ||||||||||||
| Joseph B. Hilton/President/Director | 2016 | 0 | 0 | 0 | 0 | |||||||||||||
| Paul Pfeifer/CEO Legion Wealth Advisors | 2016 | 0 | 0 | 0 | 0 | |||||||||||||
Involvement in Certain Legal Proceedings
There have been no events under any bankruptcy act, no criminal proceedings, no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any of our directors, executive officers, promoters or control persons during the past ten years.
Employment Agreements
We have not entered into employment agreements with any of our employees, officers and directors.
Director Compensation
For the year ended June 30, 2016 our Directors were Jim Byrd, Shane Hackett, Brad Hilton, Arlene Pfeiff and Jeff Villwock). Mr. Villwock resigned in August 2016 and Ms. Pfeiff resigned in November 2016. No compensation was paid to any Director for acting as a Director. We do not currently have an established policy to provide compensation to members of our Board of Directors for their services in that capacity.
Outstanding Equity Awards at Fiscal Year End
We do not currently have a stock option or grant plan in place, and as of June 30, 2016 there were no stock options outstanding.
| 12 |
The following table sets forth information as to the shares of common stock beneficially owned as of June 30, 2016 by (i) each person known to us to be the beneficial owner of more than 5% of our common stock; (ii) each Director; (iii) each Executive Officer; and (iv) all of our Directors and Executive Officers as a group. Unless otherwise indicated in the footnotes following the table, the persons as to whom the information is given had sole voting and investment power over the shares of common stock shown as beneficially owned by them. Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act, which generally means that shares of common stock subject to options currently exercisable or exercisable within 60 days of the date hereof are considered to be beneficially owned, including for the purpose of computing the percentage ownership of the person holding such options, but are not considered outstanding when computing the percentage ownership of each other person. The footnotes below indicate the amount of unvested options for each person in the table. None of these unvested options vest within 60 days of the date hereof.
| Byrd & Company (James Byrd) | 4,000,000 | |||
| Douglas S. Hackett | 4,000,000 | |||
| BGA Holdings, LLC (Hilton) | 2,000,000 | |||
| Total of Officers and Directors as a Group | 10,000,000 |
The following summary is a description of the material terms of our capital stock and is not complete. You should also refer to our articles of incorporation, as amended and our bylaws, as amended, which are included as exhibits to the registration statement of which this Offering Circular forms a part.
The following is a summary of the rights of our capital stock as provided in our articles of incorporation and bylaws. For more detailed information, please see our articles of incorporation and bylaws, which have been filed as exhibits to the offering statement of which this Offering Circular is a part.
Our authorized capital stock consists of 100,000,000 shares of common stock, par value $0 and 0 shares of preferred stock, par value $n/a. As of the date of this Offering Circular, there are 11,571,500 shares of our common stock issued and outstanding and no shares of preferred stock issued and outstanding.
Common Stock: Each shareholder of our common stock is entitled to a pro rata share of cash distributions made to shareholders, including dividend payments. The holders of our common stock are entitled to one vote for each share of record on all matters to be voted on by shareholders. There is no cumulative voting with respect to the election of our directors or any other matter. Therefore, the holders of more than 50% of the common shares cannot determine solely, the election of our directors, or any other matters. The holders of our common stock are entitled to receive dividends when and if declared by our Board of Directors from funds legally available therefore. Cash dividends are at the sole discretion of our Board of Directors. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to pro-rata share in all assets remaining available for distribution to them after payment of our liabilities and after provision has been made for each class of stock, if any, having any preference in relation to our common stock. Holders of shares of our common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to our common stock.
Preferred Stock: We have no preferred stock authorized or issued.
Options and Warrants
| § | We have 300,000 stock options outstanding to Paul Pfeifer, 150,000 at an exercise price of $1.50 per share and 150,000 at an exercise price of $2 per share. These options become vested in August 2017. We also have 500,000 stock options outstanding to our Senior Vice President of Finance and Operations, Sean Robinson. Those options vest at a rate of 100,000 per year over a period of 5 years. The strike price for the options are (i) 100,000 at $1 per share, (ii) 100,000 at $1.50, (iii) 100,000 at $1.75, and (iv) 200,000 at $2. Once vested, all options have a 5 year term and include a provision for cashless exercise. |
| 13 |
Limitations on Liability and Indemnification of Officers and Directors
Florida law authorizes corporations to limit or eliminate (with a few exceptions) the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties as directors. Our articles of incorporation and bylaws include provisions that eliminate, to the extent allowable under Florida law, the personal liability of directors or officers for monetary damages for actions taken as a director or officer, as the case may be. Our articles of incorporation and bylaws also provide that we must indemnify and advance reasonable expenses to our directors and officers to the fullest extent permitted by Florida law. We are also expressly authorized to carry directors’ and officers’ insurance for our directors, officers, employees and agents for some liabilities. We currently maintain directors’ and officers’ insurance covering certain liabilities that may be incurred by directors and officers in the performance of their duties.
The limitation of liability and indemnification provisions in our articles of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. In addition, your investment may be adversely affected to the extent that, in a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuant to the indemnification provisions in our articles of incorporation and bylaws.
There is currently no pending litigation or proceeding involving any of directors, officers or employees for which indemnification is sought.
Transfer Agent
The transfer agent for our common stock is ClearTrust, LLC
SHARE ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of our common stock in the public market after this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities. We are unable to estimate the number of shares of common stock that may be sold in the future.
Upon the completion of this offering, we will have 16,571,500 outstanding shares of common stock if we complete the maximum offering hereunder. All of the shares sold in this offering will be freely tradable without restriction under the Securities Act unless purchased by one of our affiliates as that term is defined in Rule 144 under the Securities Act, which generally includes directors, officers or 5% stockholders.
Rule 144
Shares of our common stock held by any of our affiliates, as that term is defined in Rule 144 of the Securities Act, may be resold only pursuant to further registration under the Securities Act or in transactions that are exempt from registration under the Securities Act. In general, under Rule 144 as currently in effect, any of our affiliates would be entitled to sell, without further registration, within any three-month period a number of shares that does not exceed the greater of:
| ● | 1% of the number of shares of common stock then outstanding, which will equal about 165,715 shares immediately after this offering, assuming minimum offering size; or |
| ● | the average weekly trading volume of the unrestricted common stock during the four calendar weeks preceding the filing of a Form 144 with respect to the sale. |
Sales under Rule 144 by our affiliates will also be subject to manner of sale provisions and notice requirements and to the availability of current public information about us.
| 14 |
The Offering will be sold by our officers and directors, unless the Company engages placement agents to sell this Offering. At present, the Company has no agreements with any placement agents, but may engage such placement agents in the future. If a placement agent is engaged, it is estimated the Company may incur commissions up to 10% for the sale of the shares, plus other direct selling expenses.
This is a self-underwritten offering. This Offering Circular is part of an exemption under Regulation A that permits our officers and directors to sell the Shares directly to the public in those jurisdictions where the Offering Circular is approved, with no commission or other remuneration payable for any Shares sold. There are no plans or arrangements to enter into any contracts or agreements to sell the Shares with a broker or dealer, however, the Company may enter into a selling agreement with one or more broker dealers in the future. The Securities Purchase Agreement is not exclusive, and after the qualification by the Commission and acceptance by those states where the offering will occur, the Officer and Directors intend to advertise through personal contacts, telephone, and hold investment meetings in those approved jurisdictions only. We also intend to use any legally approved and available mass-advertising methods such as the Internet or print media. Officers and Directors will also distribute the prospectus to potential investors at meetings, to their business associates and to his friends and relatives who are interested the Company as a possible investment, so long as they offering is an accordance with the rules and regulations governing the offering of securities in the jurisdictions where the Offering Circular has been approved. In offering the securities on our behalf, the Officers and Directors will rely on the safe harbor from broker dealer registration set out in Rule 3a4-1 under the Securities Exchange Act of 1934.
Terms of the Offering
The Company is offering, on a best-efforts, self-underwritten basis, a maximum of 5,000,000 shares of its common stock at a price to be determined after qualification. There is no minimum investment required from any individual investor, however the Company may establish a minimum investment after qualification. The shares are intended to be sold directly through the efforts of our officers and directors, as well as through general solicitation to the extent allowed by law. The shares are being offered for a period not to exceed 360 days, subject to one extension of up to 90 days. The offering will terminate on the earlier of: (i) the date when the sale of all 5,000,000 shares is completed, or (ii) 360 days from the effective date of this document, unless extended for 90 days. For more information, see the section titled “Plan of Distribution” and “Use of Proceeds” herein.
None
REPORTS
As a Tier 1, Regulation A filer, we are not required to file any reports.
| 15 |
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2016 (UNAUDITED) AND JUNE 30, 2016 (AUDITED)
| F-1 |
TABLE OF CONTENTS
| F-2 |
To the Shareholders of Legion Capital Corporation:
I have audited the accompanying financial statements of Legion Capital Corporation and Subsidiary (the “Company”), which comprise the consolidated balance sheet as of June 30, 2016 and the related consolidated statements of operations, changes in shareholders’ equity, and cash flows for the period for August 7, 2015 (Inception) to June 30, 2016, and the related notes to the consolidated financial statements.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
My responsibility is to express an opinion on these consolidated financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal controls. Accordingly, I express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion.
Opinion
In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2016 and the results of its operations and its cash flows for the period then ended in accordance with accounting principles generally accepted in the United States of America.
| /s/ Patrick D. Heyn |
Patrick D. Heyn, CPA, P.A.
Atlantis, Florida
September 2, 2016
120 S. Olive Ave, Suite 500, West Palm Beach, Florida 33401, 561-429-6377
| F-3 |
CONSOLIDATED BALANCE SHEETS
| September 30, | June 30, | |||||||
| 2016 | 2016 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | 994,215 | $ | 513,544 | ||||
| Accounts receivable | 12,379 | - | ||||||
| Note receivable | 50,000 | - | ||||||
| Subscription receivable | - | 500 | ||||||
| Prepaid expenses and other current asset | 19,310 | 22,829 | ||||||
| Total current assets | 1,075,904 | 536,873 | ||||||
| Property and equipment, net | 3,124 | 3,378 | ||||||
| Assets related to discontinued operations | - | 86,813 | ||||||
| Total assets | $ | 1,079,028 | $ | 627,064 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expense | $ | 9,063 | $ | 2,239 | ||||
| Short-term note payable | 12,500 | 12,500 | ||||||
| Liabilities related to discontinued operations | - | 2,802 | ||||||
| Total current liabilities | 21,563 | 17,541 | ||||||
| Long-term notes payable | 124,500 | 59,500 | ||||||
| Total liabilities | 146,063 | 77,041 | ||||||
| Shareholders' equity | ||||||||
| Common stock, no par value, 100,000,000 shares authorized and 11,572,500 and 11,647,500 shares issued and outstanding at September 30, 2016 and June 30, 2016, respectively | 1,574,000 | 854,000 | ||||||
| Deferred stock compensation | (70,000 | ) | - | |||||
| Additional paid in capital | 84,000 | - | ||||||
| Accumulated deficit | (655,035 | ) | (303,977 | ) | ||||
| Total shareholders' equity | 932,965 | 550,023 | ||||||
| Total liabilities and shareholders' equity | $ | 1,079,028 | $ | 627,064 | ||||
See accompanying notes to consolidated financial statements.
| F-4 |
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Three Month ended | ||||||||||||
| Year ended | September 30, | |||||||||||
| June 30, 2016 | 2016 | 2015 | ||||||||||
| (Audited) | (Unaudited) | (Unaudited) | ||||||||||
| Net revenue | $ | - | $ | 79,841 | $ | - | ||||||
| General and administrative expenses | 244,242 | 251,920 | - | |||||||||
| Operating loss | (244,242 | ) | (172,079 | ) | - | |||||||
| Other income (expense): | ||||||||||||
| Interest expense | (2,046 | ) | (3,568 | ) | - | |||||||
| Total other income (expense) | (2,046 | ) | (3,568 | ) | - | |||||||
| Loss from continuing operations | (246,288 | ) | (175,647 | ) | - | |||||||
| Loss from operations of discontinued operations | (57,689 | ) | (96,400 | ) | - | |||||||
| Loss on disposition of assets pertaining to discontinued operations | - | (79,011 | ) | - | ||||||||
| Net loss | $ | (303,977 | ) | $ | (351,058 | ) | $ | - | ||||
See accompanying notes to consolidated financial statements.
| F-5 |
LEGION CAPITAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
| No par value Common Stock | Deferred Stock | Additional Paid-In | Accumulated | |||||||||||||||||||||
| Shares | Amount | Compensation | Capital | Deficit | Total | |||||||||||||||||||
| Balance - August 7, 2015 Inception | - | $ | - | $ | - | $ | - | $ | - | $ | - | |||||||||||||
| Shares issued for cash | 847,500 | 847,500 | - | - | - | 847,500 | ||||||||||||||||||
| Shares issued to officers | 10,800,000 | 6,500 | - | - | - | 6,500 | ||||||||||||||||||
| Net loss | - | - | - | - | (303,977 | ) | (303,977 | ) | ||||||||||||||||
| Balance - June 30, 2016 (Audited) | 11,647,500 | $ | 854,000 | $ | - | $ | - | $ | (303,977 | ) | $ | 550,023 | ||||||||||||
| Shares issued for cash | 725,000 | 725,000 | - | - | 725,000 | |||||||||||||||||||
| Options issued to officer | - | - | (70,000 | ) | 84,000 | - | 14,000 | |||||||||||||||||
| Cancellation of shares issued to officer | (800,000 | ) | (5,000 | ) | - | - | - | (5,000 | ) | |||||||||||||||
| Net loss | - | - | (351,058 | ) | (351,058 | ) | ||||||||||||||||||
| Balance - September 30, 2016 (Unaudited) | 11,572,500 | $ | 1,574,000 | $ | (70,000 | ) | $ | 84,000 | $ | (655,035 | ) | $ | 932,965 | |||||||||||
See accompanying notes to consolidated financial statements.
| F-6 |
CONSOLIDATED STATEMENT OF CASH FLOWS
| Year ended | Three months ended September 30 | |||||||||||
| June 30, 2016 | 2016 | 2015 | ||||||||||
| (Audited) | (Unaudited) | (Unaudited) | ||||||||||
| Operating activities | ||||||||||||
| Net loss | $ | (303,977 | ) | $ | (351,058 | ) | $ | - | ||||
| (Gain) loss on disposition of assets pertaining to discontinued operations | (84,011 | ) | 79,011 | - | ||||||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||
| Depreciation and amortization | 592 | 2,001 | - | |||||||||
| Non cash compensation | - | 14,000 | - | |||||||||
| (Increase) decrease in: | ||||||||||||
| Accounts receivable | - | (12,379 | ) | - | ||||||||
| Prepaid expenses and other current asset | (22,829 | ) | 1,772 | - | ||||||||
| Increase (decrease) in: | ||||||||||||
| Accounts payable and accrued expenses | 2,239 | 6,824 | - | |||||||||
| Net cash used in operating activities | (407,986 | ) | (259,829 | ) | - | |||||||
| Investing activities | ||||||||||||
| Property and equipment acquisitions | (3,970 | ) | - | - | ||||||||
| Note receivable | - | (50,000 | ) | - | ||||||||
| Net cash used in investing activities | (3,970 | ) | (50,000 | ) | - | |||||||
| Financing activities | ||||||||||||
| Increase in notes payable | 72,000 | 65,000 | 2,500 | |||||||||
| Advance from affiliate | - | - | 500 | |||||||||
| Proceeds from issuances of common stock | 853,500 | 725,500 | - | |||||||||
| Net cash provided by financing activities | 925,500 | 790,500 | 3,000 | |||||||||
| Net increase in cash | 513,544 | 480,671 | 3,000 | |||||||||
| Cash - beginning | - | 513,544 | - | |||||||||
| Cash - ending | $ | 513,544 | 994,215 | 3,000 | ||||||||
| Supplemental cash flow information: | ||||||||||||
| Cash paid for interest | $ | 2,046 | $ | 3,568 | $ | - | ||||||
| Cash paid for income taxes | $ | - | $ | - | $ | - | ||||||
See accompanying notes to consolidated financial statements.
| F-7 |
LEGION CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying combined unaudited financial statements include the accounts of Legion Capital Corporation (the “Company”). Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements.
In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature necessary for a fair statement of the results for the three-month period have been made. Results for the interim period presented is not necessarily indicative of the results that might be expected for the entire fiscal year.
NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operations
The Company was incorporated as GreenSky Corporation on August 7, 2015 in Delaware, and merged with Legion Capital Corporation (the “Company”), a Florida Corporation on January 15, 2016.
The Company is in the process of deploying a crowdfunding platform with a fully integrated database access to various investors. The Company had one wholly owned subsidiary as of June 30, 2016, Legion Securities LLC, which was established to provide financial services to investors, however that subsidiary was split off in a tax-free reorganization on August 16, 2016.
On July 20, 2016, the Company incorporated a subsidiary Legion High Yield Secured Fund I Manager, LLC, a Delaware Limited Liability Company.
On August 9, 2016, the Company incorporated a subsidiary Legion High Yield Mortgage Fund I Manager, LLC, a Delaware Limited Liability Company.
On August 24, 2016, the Company incorporated a subsidiary Legion Wealth Advisors, LLC (“Legion Wealth”), a Florida Limited Liability Company.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three (3) months or less to be cash equivalents.
Cash accounts at two (2) banks are insured at Federal Deposit Insurance Corporation limits of $250,000 each. The aggregate bank balances at June 30, 2016 were $274,065 over the insured limit.
Cash accounts at one (1) bank are insured at Federal Deposit Insurance Corporation limits of $250,000 each. The bank balances at September 30, 2016 were $714,885 over the insured limit.
| F-8 |
LEGION CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Revenue Recognition
The Company generates revenue from providing asset management services to clients. The Company recognizes revenue when the following criteria are met:
| (1) | There is persuasive evidence of an arrangement with a client; | |
| (2) | The agreed-upon services have been provided; | |
| (3) | Fees are fixed or determinable; and | |
| (4) | Collection is probable. |
A fixed percentage asset-based management fee is earned periodically for providing asset management services. These fees are generally recognized as revenue each period in accordance with the terms of the asset management contract.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.
In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which temporary differences such as loss carry-forwards and tax credits become deductible. Management considers projected future taxable income and tax planning strategies in making this assessment and ensuring that the deferred tax asset valuation allowance is adjusted as appropriate.
Fair Value of Financial Instruments
FASB ASC 825, Disclosure about Fair Value of Financial Instruments, requires disclosure of the fair value of financial instruments when it is practical to estimate. Management believes the carrying values of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and notes payable are reasonable estimates of their fair value because of their short-term nature and interest rates.
| F-9 |
LEGION CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Equity-Based Compensation
The Company accounts for equity instruments issued to employees in accordance with the provisions of ASC 718 Stock Compensation (ASC 718). The computation of the expense associated with stock-based compensation requires the use of a valuation model. The FASB issued accounting guidance requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility, expected option lives, and expected option forfeiture rates, to value equity-based compensation. We currently use a Black-Scholes option pricing model to calculate the fair value of our stock options. We primarily use historical data to determine the assumptions to be used in the Black-Scholes model and have no reason to believe that future data is likely to differ materially from historical data. However, changes in the assumptions to reflect future stock price volatility and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards. This accounting guidance requires the recognition of the fair value of stock compensation in net income. Although every effort is made to ensure the accuracy of our estimates and assumptions, significant unanticipated changes in those estimates, interpretations and assumptions may result in recording stock option expense that may materially impact our financial statements for each respective reporting period.
Discontinued Operations
On August 16, 2016, the Company spun out its subsidiary, Legion Securities, LLC, to the its shareholders in a tax-free split off under Section 355 of the Internal Revenue Code.
The assets and results of Legion Securities, LLC are presented as a separate line item in the consolidated statements of operations and the consolidated balance sheet entitled “Assets/Liabilities sold relating to discontinued operations” and “Assets/Liabilities retained related to discontinued operations”. The financial information in the consolidated financial statements and notes to the consolidated financial statements has been revised to reflect only the results of continued operations.
Property and Equipment
Property and equipment is stated at cost. Depreciation is provided on the straight-line basis over three (3) to five (5) years. Leasehold improvements are amortized using the straight-line method over the shorter of the remaining related lease term or the estimated useful lives of the related improvements. The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
| F-10 |
LEGION CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Subsequent Events
In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through the date of the independent auditor’s report, the date the financial statements were available to be issued.
Principles of Consolidation
The Company and its Subsidiaries have been consolidated for financial statement purposes. All significant intercompany transactions and balances have been eliminated.
Recent Accounting Pronouncements
Recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future financial statements.
NOTE 2 – NOTE RECEIVABLE
On September 20, 2016, the Company advanced $50,000 to Legion Growth and Income Fund I, LLC. The promissory note is due on demand and carry interest at the rate of 8% per annum.
NOTE 3 – EQUIPMENT
The major classifications of property and equipment are summarized as follows at the balance sheet dates:
| June 30, 2016 | September 30, 2016 | |||||||
| Computer equipment & software | $ | 1,652 | $ | 1,652 | ||||
| Furniture | 2,318 | 2,318 | ||||||
| Less accumulated depreciation | (592 | ) | (846 | ) | ||||
| Property and equipment, net | $ | 3,378 | $ | 3,124 | ||||
Depreciation expense for the year ended June 30, 2016 is $592. Depreciation expense for the three months ended September 30, 2016 is $254.
| F-11 |
LEGION CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 – SHORT-TERM NOTE PAYABLE
On November 17, 2015, the Company issued a Corporate Note, in the amount of $12,500, with interest at 12% per annum for a period of 12 months.
NOTE 5 – LONG-TERM NOTE PAYABLE
On March 1, 2016, the Company issued a Corporate Note, in the amount of $19,500, with monthly payments of interest only at 12% per annum for a period of 24 months.
On May 19, 2016, the Company issued a Senior Corporate Note, in the amount of $40,000, with monthly payments of interest only at 10.25% per annum for a period of 24 months.
On July 7, 2016, the Company issued a Senior Corporate Note, in the amount of $10,000, with monthly payments of interest only at 10.25% per annum for a period of 36 months.
On August 2, 2016, the Company issued a Senior Corporate Note, in the amount of $40,000, with monthly payments of interest only at 10.25% per annum for a period of 36 months.
On August 24, 2016, the Company issued a Senior Corporate Note, in the amount of $15,000, with monthly payments of interest only at 10.25% per annum for a period of 36 months.
NOTE 6 – STOCKHOLDERS’ EQUITY
On January 6, 2016, the Company issued 10,000,000 shares of common stocks to officers and executive of the Company for $1,500.
On March 30, 2016, the Company issued 800,000 shares of common stock to an officer for $5,000. These 800,000 shares were canceled on August 16, 2016.
For the year ended June 30, 2016, the Company sold 847,500 shares of no par value common stock and received $847,500.
For the three months ended September 30, 2016, the Company sold 725,000 shares of no par value common stock and received $725,000.
NOTE 7 – STOCK OPTIONS
On August 1, 2016, the Company issued 300,000 stock options to an officer of the Company, 150,000 options at an exercise price of $1.50 per share and 150,000 options at an exercise price of $2 per share. These options become vested in August 2017.
The fair value of the Company's common stock option grants is estimated using a Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.
| F-12 |
LEGION CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 – STOCK OPTIONS (continued)
The following range of assumptions in the Black-Scholes option pricing model was used to determine fair value at the period ended September 30, 2016 below:
Expected Dividend Yield—The Company has never paid dividends and does not expect to pay dividends.
Risk-Free Interest Rate—The risk-free interest rate was based on the market yield currently available on United States Treasury securities with maturities approximately equal to the option’s expected term.
Expected Term—Expected term represents the period that the Company’s stock-based awards are expected to be outstanding. The Company’s assumptions about the expected term have been based on that of companies that have similar industry, life cycle, revenue, and market capitalization and the historical data on employee exercises.
Expected Volatility—The expected volatility is based on the historical stock volatilities of several of the Company’s publicly listed comparable companies over a period equal to the expected terms of the options, as the Company does not have a long trading history.
Forfeiture Rate—The Company estimates its forfeiture rate based on an analysis of its actual forfeitures and will continue to evaluate the adequacy of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior, and other factors. The impact from a forfeiture rate adjustment will be recognized in full in the period of adjustment, and if the actual number of future forfeitures differs from that estimated by the Company, the Company may be required to record adjustments to stock-based compensation expense in future periods.
Each of the inputs discussed above is subjective and generally requires significant management judgment.
The value of the award is recognized over the vesting period. As of September 30, 2016, the value of unvested options was $70,000 to be recognized over a period of 10 months.
NOTE 8 – LEASES
The Company leases its office under an expense sharing agreement, entered on April 8, 2016, with a company controlled by the CEO of the Company, and agreed to pay a fixed monthly payment of $4,000, plus sales tax, to lease for office space. The agreement is for a period of 1 year, subject to renewal by agreement of all parties.
In August, 2016, the Company signed an office lease in Arizona, for a monthly rent of approximately $720. The lease expires on July 31, 2017.
In September, 2016, the Company signed an office lease in California, for a monthly rent of approximately $800. The lease expires on February 28, 2017.
| F-13 |
LEGION CAPITAL CORPORATION AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 – DISCONTINUED OPERATIONS
On August 16, 2016, the Company divested its subsidiary Legion Securities, LLC, to its shareholders in a tax-free split off under Section 355 of the Internal Revenue Code.
The following are condensed statements of the discontinued operations (Legion Securities LLC) for the year ended June 30, 2016:
| June 30, 2016 | ||||
| Net Revenue | $ | - | ||
| General and administrative expenses | 57,689 | |||
| Loss from discontinued operation | $ | (57,689 | ) | |
Assets and liabilities retained relating to discontinued operations (Legion Securities LLC) consisted of the following at June 30, 2016:
| Current assets relating to discontinued operations: | ||||
| Cash | $ | 73,199 | ||
| Deposit | 10,000 | |||
| Prepaid expense and other asset | 3,614 | |||
| Total assets related to discontinued operations | $ | 86,813 | ||
| Current liabilities relating to discontinued operations: | ||||
| Accounts payable | $ | 100 | ||
| Accrued expense | 2,702 | |||
| Total liabilities related to discontinued operations | $ | 2,802 | ||
NOTE 10 – SUBSEQUENT EVENTS
The Company evaluated all transactions from November 11, 2016 through the financial statement issuance date for subsequent event disclosure consideration.
On October 24, 2016, the Company sold 25,000 shares of no par value common stock and received $25,000.
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