An offering statement pursuant to Regulation A relating to these securities has been filed with the United States 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 United States Securities and Exchange 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 Final Offering Circular or the offering statement in which such Final Offering Circular was filed may be obtained.

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 850

Orlando, FL 32801

Maximum offering of 2,000,000 shares

We are offering up to 1,500,000 shares of our common stock, no par value per share, at an offering price of $4.00 per share (the “Shares”) for an offering amount of up to $6,000,000 (the “Offering”). The Offering will terminate at the earliest of: (1) the date at which all Shares have been sold, (2) the date which is one year after this Offering being qualified by the U.S. Securities and Exchange Commission (the “SEC” or the “Commission”), or (3) the date on which this Offering is earlier terminated by the Company in its sole discretion and for any reason (the “Termination Date”). We have previously sold, pursuant to this Offering Circular (i) 3,810,167 shares at $1.25 for gross proceeds of $4,762,708.75 and (ii) 47,534 shares at $3.00 for gross proceeds of $142,602.

This Offering is being conducted on a “best efforts” basis without any minimum offering amount pursuant to Regulation A of Section 3(6) of the Securities Act of 1933, as amended (the “Securities Act”), for Tier 2 offerings. The Company reserves the right to undertake one or more closings on a rolling basis. We intend to use the net proceeds from this Offering for marketing expenditures, for working capital and for general corporate purposes, and such other purposes described in the “Use of Proceeds” section of this Offering Circular (the “Offering Circular”).

Prior to this Offering, there has been no public market for our Shares. We have applied to list our Shares on the NASDAQ Capital Market (“NASDAQ”) under the symbol “LEGN.” Our Shares will not commence trading on NASDAQ until a number of quantitative and qualitative conditions are met, including compliance with appropriate corporate governance conditions and raising a minimum amount of offering proceeds necessary for us to meet the quantitative initial listing requirements of NASDAQ, which we currently estimate to be approximately $5 million. Even if we meet the minimum requirements for listing on NASDAQ, we may wait before terminating the Offering and commencing the trading of our Shares on NASDAQ in order to raise additional proceeds. In the event we do not meet NASDAQ’s initial listing qualification requirements, we may apply to have our Shares listed or quoted on other securities exchange or market, including the over the counter (OTC) Market. No assurance can be given that any market for the Shares, including a market on NASDAQ, will ever develop or be maintained.

Craft Capital Management, LLC has agreed to act as selling agent (the “Selling Agent”), to offer the Shares to prospective investors on a “best efforts” basis. In addition, the Selling Agent may engage one or more co-managing selling agents, sub selling agents or selected dealers. The Selling Agent is not purchasing the Shares, and is not required to sell any specific number or dollar amount of the Shares in the Offering. See “Plan of Distribution.”

We expect to commence the offer and sale of the Shares as of the date on which the offering statement of which this Offering Circular is a part (the “Offering Statement”) is qualified by the Commission.

We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and, as such, may elect to comply with certain reduced reporting requirements for this Offering Circular and future filings after this Offering.

Investing in our Shares involves a high degree of risk. See “Risk Factors” beginning on page 3 for a discussion of certain risks that you should consider in connection with an investment in our Shares.

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 HEREBY 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 BEING 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.

For more information concerning the procedures of the Offering, please refer to “Plan of Distribution” beginning on page 28.

Craft Capital Management LLC

Selling Agent

Offering Circular dated             , 2018

TABLE OF CONTENTS

We are offering to sell, and seeking offers to buy, the Shares only in jurisdictions where such offers and sales are permitted. You should rely only on the information contained in this Offering Circular. We have not authorized anyone to provide you with any information other than the information contained in this Offering Circular. The information contained in this Offering Circular is accurate only as of its date, regardless of the time of its delivery or of any sale or delivery of our securities. Neither the delivery of this Offering Circular nor any sale or delivery of our securities shall, under any circumstances, imply that there has been no change in our affairs since the date of this Offering Circular. This Offering Circular will be updated and made available for delivery to the extent required by the federal securities laws.

RISK FACTORS

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.

We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to meet our obligations.

We are a holding company with multiple operating subsidiaries in the areas of education, transportation, small business finance, management and marketing. As a result, we are largely dependent upon the operations of our subsidiaries, including cash dividends and distributions as well as other transfers from our subsidiaries to meet our obligations. A substantial portion of our assets are held by Legion Select Holdings, LLC (“Legion Holdings”). The deterioration of income from, or other available assets of, Legion Holdings or any of our other subsidiaries for any reason could limit or impair their ability to pay dividends or other distributions to us, which in turn could adversely affect our financial condition and results of operations. Additionally, Legion Holdings is required to make dividend and certain other payments to the Preferred Owners (as defined in this Offering Circular) and will be required to pay off the Preferred Capital Account Balance as a priority to the interests of the Company (as defined in this Offering Circular). See “Contribution Agreement and LLC Operating Agreement” beginning on page 15.

Investments in small businesses and start-up companies are often risky.

We invest in small businesses through our operating subsidiaries. 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.

If a borrower declares bankruptcy, we may be unable to collect balances due under relevant loans.

Any of Legion Holding’s borrowers, or any guarantor of those obligations, could be subject to a bankruptcy proceeding pursuant to Title 11 of the bankruptcy laws of the United States. A bankruptcy filing by a borrower or guarantor could bar all efforts by us to collect pre-bankruptcy debts from these entities or their properties, unless we receive an enabling order from the bankruptcy court.

A tenant or lease guarantor bankruptcy could delay efforts to collect past due balances under the relevant loans, and could ultimately preclude full collection of these sums. A borrower or guarantor bankruptcy could cause a decrease or cessation of interest payments, which could adversely affect our financial condition and cash available for corporate purposes.

The allowance for loan losses could be insufficient to cover Legion Holding’s actual loan losses.

We make various assumptions and judgments about the collectability of our loan portfolio, including the creditworthiness of our borrowers and the value of the other assets serving as collateral for the repayment of many of our loans. In determining the amount of the allowance for loan losses, we review our loans and our loss and delinquency experience, and we evaluate economic conditions. If our assumptions are incorrect, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, resulting in additions to our allowance. Material additions to the allowance would materially decrease net income.

Conflicts of Interest

The Company may be subject to various potential conflicts of interest because of the fact that some of its officers and directors may be engaged in a range of business activities. In addition, the Company’s executive officers and directors may devote time to their outside business interests, so long as such activities do not materially or adversely interfere with their duties to the Company. In some cases, the Company’s executive officers and directors may have fiduciary obligations associated with these business interests that interfere with their ability to devote time to the Company’s business and affairs and that could adversely affect the Company’s operations. These business interests could require significant time and attention of the Company’s executive officers and directors.

There is no public trading market for the securities, and none may develop.

Prior to this Offering, there has been no public market for our Shares. We have applied to list our Shares on the NASDAQ Capital Market (“NASDAQ”) under the symbol “LEGN.” Our Shares will not commence trading on NASDAQ until a number of quantitative and qualitative conditions are met, including compliance with appropriate corporate governance conditions and raising a minimum amount of offering proceeds necessary for us to meet the quantitative initial listing requirements of NASDAQ, which we currently estimate to be approximately $5 million. Even if we meet the minimum requirements for listing on NASDAQ, we may wait before terminating the Offering and commencing the trading of our Shares on NASDAQ in order to raise additional proceeds. In the event we do not meet NASDAQ’s initial listing qualification requirements, we may apply to have our Shares listed or quoted on other securities exchange or market, including the over the counter (OTC) Market. No assurance can be given that any market for the Shares, including a market on NASDAQ or the OTC Markets, will ever develop or be maintained.

Our failure to make follow-on investments in our portfolio companies could impair our investment in a portfolio company.

Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in order to:

We may elect not to make follow-on investments or otherwise lack sufficient funds to make those investments. We will have the discretion to make any follow-on investments, subject to any applicable legal requirements and the availability of capital resources. The failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation.

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 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.

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’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:

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:

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. 

Failure to maintain effective systems of internal and disclosure controls could have a material adverse effect on the Company’s results of operation and financial condition.

Effective internal and disclosure controls are necessary for the Company to provide reliable financial reports and effectively prevent fraud, and to operate successfully as a public company. If the Company cannot provide reliable financial reports or prevent fraud, its reputation and operating results would be harmed. As part of the Company’s ongoing monitoring of internal controls, it may discover material weaknesses or significant deficiencies in its internal controls that require remediation. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The Company continually works on improving its internal controls. However, the Company cannot be certain that these measures will ensure that it implements and maintains adequate controls over its financial processes and reporting. Any failure to maintain effective controls or to timely implement any necessary improvement of the Company’s internal and disclosure controls could, among other things, result in losses from fraud or error, harm the Company’s reputation, or cause investors to lose confidence in the Company’s reported financial information, all of which could have a material adverse effect on the Company’s results of operation and financial condition.

Risks Related to Our Common Stock and this Offering

Our executive officers, directors, major stockholder and their respective affiliates will continue to exercise significant control over our Company after this Offering, which will limit your ability to influence corporate matters and could delay or prevent a change in corporate control.

Immediately following the completion of this Offering, and disregarding any shares of Common Stock that they purchase in this Offering, if any, the existing holdings of our executive officers and directors and their affiliates, will represent beneficial ownership, in the aggregate, of approximately 63% of our outstanding Common Stock, assuming we issue the number of shares of Common Stock as set forth on the cover page of this Offering Circular. Please see “Principal Stockholders” on page 21 for more information. As a result, these stockholders will be able to influence our management and affairs and control the outcome of matters submitted to our stockholders for approval, including the election of directors and any sale, merger, consolidation, or sale of all or substantially all of our assets. These stockholders acquired their shares of Common Stock for substantially less than the price of the shares of Common Stock being acquired in this Offering, and these stockholders may have interests, with respect to their Common Stock, that are different from those of investors in this Offering and the concentration of voting power among one or more of these stockholders may have an adverse effect on the price of our Common Stock. 

We have broad discretion in how we use the proceeds of this Offering and may not use these proceeds effectively, which could affect our results of operations and cause the price of our Common Stock to decline.

We will have considerable discretion in the application of the net proceeds of this Offering. We intend to use the net proceeds from this Offering to fund our business strategy. As a result, investors will be relying upon management’s judgment with only limited information about our specific intentions for the use of the balance of the net proceeds of this Offering. We may use the net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds from this Offering in a manner that does not produce income or that loses value.

After the completion of this Offering, we may be at an increased risk of securities class action litigation.

Historically, securities class action litigation has often been brought against a company following a decline in the market price of its securities. If we were to be sued, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future and, as such, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

We have never declared or paid cash dividends on our common stock. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition, and any future loan arrangements we enter into may contain, terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

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.

USE OF PROCEEDS

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 $585,000. The below table assumes that the maximum proceeds raised of $6,000,000 through the Offering.

All proceeds will be used for hiring of new personnel, marketing and sales, operational expenses, potential acquisitions, making loans and growing our service businesses, and for general working capital. The following table represents management’s best estimate of the uses of the net proceeds received from the sale of Shares in this Offering⁴: 

The debt that we are expecting to retire includes $500,000 of corporate notes issued by the Hilton Institute of Business, bearing interest at the rate of 12% per annum and $500,000 of corporate notes issued by Legion Funding, bearing interest at the rate of 12% per annum.

The expected use of net proceeds from this Offering represents our intentions based upon our current plans and business conditions, which could change in the future as our plans and business conditions evolve and change. The amounts and timing of our actual expenditures, specifically with respect to working capital, may vary significantly depending on numerous factors. As a result, our management will retain broad discretion over the allocation of the net proceeds from this Offering.

If we sell all of the Shares offered in this Offering, we believe that the net proceeds of this Offering, together with our current resources, will allow us to fund our operations for at least the next 12 months. In the event we do not sell all of the Shares offered in this Offering, we may seek additional financing from other sources in order to support the intended use of proceeds indicated above. If we secure additional equity funding, investors in this Offering would be diluted. In all events, there can be no assurance that additional financing would be available to us when desired or needed and, if available, on terms acceptable to us.

DIVIDEND POLICY

We have not declared or paid any dividends on our Shares. 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. We are required to pay a dividend to the Preferred Holders (as defined below) as described elsewhere in this Offering Circular.

DILUTION

If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the offering price per share of our common stock and the as adjusted net tangible book value per share of our common stock immediately after the offering. Historical net tangible book value per share represents the amount of our total tangible assets less total liabilities, divided by the number of shares of our common stock

outstanding.

The historical net tangible book value of our common stock as of December 31, 2017 was approximately $8,339,330 or $0.64 per share based upon shares of common stock outstanding on such date. Historical net tangible book value (deficit) per share represents the amount of our total tangible assets reduced by the amount of our total liabilities, divided by the total number of shares of common stock outstanding. On a pro forma basis, after giving effect to (i) the sale of shares common stock and notes through June 2018 and (ii) our acquisitions of  Dorman – Willis Motors, Inc., SDC of Florida, LLC and Legion ARB, LLC, our pro forma net tangible book value as of December 31, 2017 would have been $11,969,422 or $0.75 per share of our common stock. After giving further effect to our sale of the Shares offered in this offering at an assumed initial public at $4.00 per share, assuming all Shares are sold and after deducting estimated selling agent discounts and commissions and our estimated offering expenses, our pro forma, as adjusted net tangible book value as of December 31, 2017 would have been $17,969,422 or $1.03 per share. This represents an immediate increase in net tangible book value of $0.28 per share to our existing stockholders, and an immediate dilution in net tangible book value of $2.97 per share to new investors. 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.

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. 

Our Business 

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 is a holding company with multiple operating subsidiaries in the areas of real estate services, real estate, education, small business finance, transportation, management and marketing. 

Our operating subsidiaries are: 

In synergy with Legion Marketing and this business’s existing management and sales teams, Legion is looking to expand its automotive footprint regionally across the southeastern United States.

Results of operations

Year Ended December 31, 2017 Compared to Year Ended December 31, 2016

Financial Income (Expenses), net

Our financial income for 2017 saw considerable growth due to fees derived from our advisory activity and interest income. Net Revenue for 2017 was $1,808,667 compared to $8,440 in 2016.

General and Administrative Expenses

Our general and administrative expenses for the year ended December 31, 2017 amounted to $5,568,460 compared to $824,489 for the year ended December 31, 2016. The increase was derived mainly from stock option-based payments, increases in marketing and business development expenses and from increased expenses associated with the hiring of new employees, and an increase in interest expenses and management fees.

Net Loss

As a result of the foregoing general and administrative expenses, and lack of sufficient revenues, our net loss for the year ended December 31, 2017 was $4,661,317 compared to net loss of $1,077,286 for the year ended December 31, 2016. The increase in net loss in 2017 compared to 2016 primarily resulted from stock option-based compensation.

Liquidity and Capital Resources

Since our inception, we have funded part of our operations primarily through direct private offerings of our equity and debt securities in the U.S.

As of December 31, 2017, we had cash and cash equivalents of $2,588,772 as compared to $1,813,778 as of December 31, 2016. This increase primarily resulted from private equity placements and long-term debt borrowing activity.

Net cash used in operating activities was -$1,935,361 for the year ended December 31, 2017 compared to -$1,087,798 for the year ended December 31, 2016. The increase in cash used in operating activities is a result of increased expenses as well as stock option compensation.

Net cash used in investing activities for the year ended December 31, 2017 was -$1,480,637 compared with net cash used in investing activities of -$22,267 for the year ended December 31, 2016 which was the result of Legion’s increased participation in new transactions.

We had positive cash flow from financing activities of $4,190,992 for the year ended December 31, 2017 compared to $2,917,000 for the year ended December 31, 2016. The cash flow from financing activities for the year ended December 31, 2017 was due to proceeds from notes payable, and private placement of Legion’s stock.

Application of Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles issued by the Financial Accounting Standards Board (“FASB”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this Annual Report on Form 1-K, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.

Expenses

Expenses are recognized as expenses when incurred.

Equity-based compensation

The Company accounts for its employees’ share-based compensation as an expense in the financial statements based on ASC 718. All awards are equity classified and therefore such cost is measured at the grant date fair value of the award. The Company estimates share option grant date fair value using the Black-Scholes option pricing model.

The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative of expected future trends.

The Company has historically not paid dividends and has no foreseeable plans to pay dividends

OUR BUSINESS

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 is a holding company with multiple operating subsidiaries in the areas of education, small business finance, management and marketing.

Our operating subsidiaries are as follows:

Contribution Agreement and LLC Operating Agreement

On November 30, 2017 Legion Select Holdings, LLC (“Legion Holdings”) was formed and acquired the assets of Legion Select Venture Fund, LLC pursuant to a Contribution Agreement. Legion Select Venture Fund, LLC received a preferred stock interest in Legion Holdings (the “Preferred Interest”) and an in initial Capital Account balance in the amount of $6,708,783 in Legion Holdings (the “Preferred Capital Account Balance”). Legion Capital Corporation is the manager (the “Manager”) and the holder of a common interest in Legion Holdings equating to 75% of the voting power of Legion Holdings (the “Common Interest”).

Except as otherwise provided in the Legion Holding Operating Agreement, the Manager, in its sole discretion, shall determine whether to make distributions to the members. In the event that any distributions are made prior to the expiration of the 5 year operating period beginning on the date of formation of Legion Holdings (the “Wind-Up Period”), such distributions are required to be paid out to the Manager and the members as follows: (1) to the Preferred Owners, in an amount equal to 12% per annum of their unpaid Preferred Capital Account Balance (the “Preferred Dividend”); (2) to the Manager, in an amount equal to 2% per annum on the unpaid aggregate capital account balance of Legion Holdings, payable monthly, in arrears (the “Management Fee”); and (3) thereafter, pro-rata, 75% to the holders of the Common Interest and 25% to the holders of the Preferred Interest. In the event that any distributions are made after the commencement of the Wind-Up Period, all distributions made by Legion Holdings are required to be paid out as follows: (1) to the Manager, in an amount equal to the unpaid and accrued Management Fees; (2) to pay off the Preferred Capital Account Balance (and any other capital account balance that exists at such time); (3) to the Preferred Owners in an amount equal to the unpaid Preferred Dividend and (4) thereafter, pro-rata, 75% to the holders of the Common Interest and 25% to the holders of the Preferred Interest. Upon a liquidation or dissolution of Legion Holdings, assets shall be paid out as follows: (1) to Legion Holdings’ creditors; (2) to the Manager, in an amount equal to the unpaid and accrued Management Fees; (3) to pay off the Preferred Capital Account Balance (and any other capital account balance that exists at such time); (4) to the Preferred Owners in an amount equal to the unpaid Preferred Dividend and (5) thereafter, pro-rata, 75% to the holders of the Common Interest and 25% to the holders of the Preferred Interest.

Acquisition Agreements

On July 2, 2018, Legion SDC, LLC (“Legion SDC”), a newly formed subsidiary of Legion Builders, entered into an acquisition agreement wherein it acquired all of the assets and certain liabilities of SDC of Florida, LLC (“SDC”). In exchange, Legion SDC (i) paid $500,000 to the existing owners of SDC, (ii) issued a note payable, due September 30, 2018, in the principal amount of $1,500,000, accruing interest at 12% per annum to the existing owners of SDC (iii) agreed to pay an additional $1 million by way of a mutually agreeable debt instrument or equity interest to the existing owners of SDC; to be determined within 6 months of July 2, 2018 and (iv) issued a 49% equity interest in Legion SDC to the existing owners of SDC.

On July 2, 2018, Legion ARB, LLC (“Legion ARB”), a newly formed subsidiary of Legion Builders, entered into an acquisition agreement wherein it acquired all of the assets and certain liabilities of A.R. Bailey Homes, LLC (“ARB”). In exchange, Legion ARB (i) paid $200,000 to the existing owners of ARB, (ii) issued a note payable, due September 30, 2018, in the principal amount of $800,000, accruing interest at 12% per annum to the existing owners of ARB, (iii) issued a note payable, due July 2, 2019, in the principal amount of $3,500,000, accruing interest at 6% per annum to the existing owners of ARB and (iv) issued a 49% equity interest in Legion ARB to the existing owners of ARB.

Secured Promissory Note – Delta Aggregate LLC and Delta Materials LLC

On January 12, 2017, Legion Select entered into a promissory note with Delta Aggregate LLC, and Delta Materials LLC (collectively “Delta”), for the benefit of Legion Select in the amount of $1.6 million (the “Promissory Note”). The Promissory Note was amended on April 7, 2017 to reflect a total amount owed of $2 million. The Promissory Note was amended and restated on April 7, 2017. Under the terms of the Promissory Note, Legion Select also acquired a 15% interest in Delta. Legion Select contributed this Promissory Note to Legion Holdings.

On February 16, 2018, the parties entered into a settlement agreement, loan amendment and membership buyout agreement whereby Delta agreed to buy 100% of Legion’s ownership interest in Delta for the total sum of $4 million effective as of February 16, 2018. The parties amended the security agreement to reflect the $4 million amount. The interest bears at a rate of 8% annually and the loan’s maturity date is June 30, 2019. If Delta pays Legion Select a minimum loan principal paydown of no less than $2 million on or before September 16, 2018, Legion Select will reduce the principal amount owed Legion to $3.3 million and further amend the loan to provide monthly interest only financing on the remaining principal with all unpaid interest principal being due on or before December 31, 2019.

Security Agreement – Moretti Yachts, Inc. and Miami Waterways, LLC

On March 8, 2017, Legion Select Venture Fund, LLC (“Legion Select”) entered into a security agreement and related transaction documents with Moretti Yachts Inc. and Miami Waterways, LLC (“Borrower”) for a promissory note for the benefit of Legion in the amount of $840,000 (the “Promissory Note”). On May 31, 2017, the parties executed an amended promissory note to the amount of $882,000 and on September 14, 2017 amended the Promissory note to the amount of $908,570. On March 27, 2018, Legion Select Holdings, LLC (“Legion Select”) as assignee for Legion entered into an amended and restated loan agreement with Borrower and Joseph Moretti where Legion Select assigned it right to acquire 100% of the membership rights in Specialized Yacht Sales, LLC to the Borrower. The new principal loan balance is $1,354,918.33 which is due and payable in full or on or before December 31, 2018.

The loan bears at an interest rate of 12% per year and is due and payable in full or on or before December 31, 2018. The loan is secured by a lien on assets of the Borrower.

The Promissory Note contains customary representations and warranties. The Promissory Note also contains covenants with respect to the maintenance of the collateral secured in the Promissory Note and types of insurance that must be maintained by Borrower.

Security Agreement – US Aviation Corp.

On February 15 , 2017, Legion Select Venture Fund, LLC and Legion High Yield Mortgage Fund I, LLC (collectively “Legion”) entered into a security agreement and related transaction documents with US Aviation Corp. for a promissory note for the benefit of Legion in the original principal amount of $1 million (collectively the “Security Agreement”). The principal amount was amended to $1.03 million on May 12, 20017, amended to $1.365 million on June 14, 2017, amended to $1.53 million on July 6, 2017 and amended to $1.86 million on September 21, 2017.The Security Agreement is secured by collateral in the form of three airplanes including all assets, business contracts or accounts receivable related to the charter use thereof. Legion Select contributed this Security Agreement to Legion Holdings.

The note bears at 25% simple annual interest and the entire principal balance, plus any accrued and unpaid interest, shall be due and payable in full on December 31, 2018.

The Security Agreement contains customary representations and warranties and covenants with respect to the maintenance of the collateral secured in the Security Agreement.

Security Agreement - Nona Invest

On December 21, 2017, Legion Capital Corporation (“Legion”) entered into a mortgage and security agreement with Nona Invest, LLC, (“Nona”) for a promissory note for the benefit of Legion in the original principal amount of $4 million (the “Security Agreement”). Nona has granted Legion interest in certain property and assets in exchange for the loan, including development rights. In connection with the Security Agreement, the parties also executed a construction loan agreement further defining the relationship and properties that are encumbered by the note.

The note bears at a 10% interest rate for the first twelve months and 12% for the remaining term of the loan. The note shall mature on December 31, 2020.

The Security Agreement contains customary representations and warranties, covenants with respect to the maintenance of the collateral secured in the Security Agreement and requirements for certain insurance policies.

Security Agreement – LMTH LLC

On February 16, 2018, we entered into a mortgage and security agreement with LMTH LLC (“LMTH”), for a promissory note for the benefit of Legion in the original principal amount of $3 million (the “Security Agreement”). LMTH has granted us an interest in certain property and assets in exchange for the loan. Additionally, the owner of LMTH has personally guaranteed the loan to Legion.

The note bears at an 8% interest rate for 24 months. The note matures on February 16, 2020 at which point the entire remaining principal balance along with all unpaid fees, costs and interest accrued shall be paid in full.

The Security Agreement contains customary representations and warranties, covenants with respect to the maintenance of the collateral secured in the Security Agreement and requirements for certain insurance policies.

Security Agreement – Marsan

On February 2, 2018, Legion Capital Corporation (“Legion”) entered into a mortgage and security agreement and related transactions with BBHRG Holdings at Little Lake Hamilton, LLC and Better Built Homes Residential Group, LLC, (collectively the “Borrower”) for a promissory note in the principal sum of $2.3 million (the “Security Agreement”). The Borrower has granted Legion an interest in certain property and assets in exchange for the loan and BellaViva at Harmony, LLC (“BellaViva”) has guaranteed the loan. On February 28, 2018, BellaViva agreed to spread the lien of the mortgage to real property owned by BellaViva in addition to the real property owned by the Borrower.

The note bears at an 8% interest rate for 24 months. The note matures on February 1, 2020 and the entire remaining principal balance, along with all unpaid fees, costs, and interest shall be paid in full on the maturity date.

The Security Agreement contains customary representations and warranties, covenants with respect to the maintenance of the collateral secured in the Security Agreement and requirements for certain insurance policies.

MANAGEMENT

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.

James S. Byrd, Jr (Chairman & CEO) Jim is a veteran corporate and securities attorney and venture capital executive. He has built, advised and managed companies, from start up to publicly trading companies in his 30-year career. He has been the Chairman, CEO and Director of numerous private and public companies, including Vice Chairman of Success Magazine, N.Y. (1998-2000). Jim graduated from Florida State University with a B.S, in 1981 and a J.D. in 1985. During the past 5 years, Jim has held the following positions.:

Legion Capital Corp. – Chairman and CEO – 2015-Present

Byrd & Byrd, PL - law firm – Partner/Owner 2012-2014

James S. Byrd, PA - law firm 2014 – Present – Owner

Engage Mobility, Inc., - mobile technology company - 2012 – 2015 – Chairman and CEO

Jim has been a director of the above listed companies during the past 5 years.

Joseph B. (“Brad”) Hilton (President & Director) Brad is the Grandson of iconic American Hotelier Conrad Hilton and the former head of Hilton Hotels Information Technology Group. Brad is also a noted philanthropist through his involvement in the Hilton Foundation. During the past 5 years Brad has held the following positions.

Legion Capital Corp. – President – 2016-Present

Gains, LLC - consulting and venture group – 2012-Present – President

Blue Diamond Technologies – technology company – Chief Strategy Officer – 2012-Present

E-Corridor – technology company - Owner – 2012-Present

Brad has been a director of the above listed companies during the past 5 years.

Douglas (Shane) Hackett (Director & CMO) Shane is a 25-year media, marketing and public company executive. Shane is known as a direct marketing expert having founded, built and managed multiple broadcast, technology, marketing and training companies. He is the current Chairman of the Board at Market Leverage. 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.” Shane graduated from William Jewell College with a B.A. degree in 1986. Shane has held the following positions in the last 5 years.

Legion Capital Corp. – CMO – 2015 – Present

Engage Mobility – President – 2012 – 2015

Market Leverage, LLC – marketing company – Chairman - 2012-Present

Heartland Soccer Association – Soccer Association - Director – 2012 – Present

Shane has been a director of the above listed companies during the past 5 years.

Paul Carrazzone has served as our Senior Vice President and Chief Operating Officer since December 2017. Prior thereto, he served as a private investor and consultant. He graduated from the College of William and Mary in 1980 with a B.A. in economics.

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

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 December 31, 2017, our Directors were Jim Byrd, Shane Hackett and Brad Hilton. 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 have 2,503,067 million stock options outstanding in favor of BGA Holdings, LLC (managed by Joseph B. Hilton). These options are fully vested, and have a strike price as follows:

1,503,067 at $1 per share, 10 year term, such stock options are subject to a 5 year lock up agreement with certain provisions for limited sale or exercise during such period of time.

500,000 at $1.25 per share, 10 year term

500,000 at $1.75 per share, 10 year term

RELATED PARTY TRANSACTIONS

On November 30, 2017 Legion Select Holdings, LLC acquired the assets of Legion Select Venture Fund, LLC, the “Fund”), a Fund managed by James Byrd, Joseph Hilton and Shane Hackett in exchange for the Preferred Interest and Preferred Capital Account Balance in Legion Select Holdings, LLC in the amount of $6,708,783.

On December 28, 2016, Legion Select Venture Fund, LLC entered into asset purchase agreement, to acquire all assets of SOS Network, Inc. As of March 21, 2017, Hilton Institute of Business, a wholly owned subsidiary of the Company, paid a total of $475,730 to the Fund for 100% of the assets of the SOS business and the Fund retained no interest in these assets.

On August 10, 2017, Hilton sold a portion of the SOS assets (a portion of accounts receivable only) back to SOS for the purchase of price of $479,000 through the issuance of a twelve (12) month Promissory Note from SOS to Hilton, which note bears interest at a rate of 12% per annum. Hilton retained the inventory, online learning platform and database it originally acquired from the Fund.

Since the Managers of the Fund Manager are the same as the Board of Directors of the Company, this transaction is a “related party transaction” as that term is defined in Item 404 of Regulation S-K. As such, this transaction could represent a possible conflict of interest by persons who are officers or directors of the Company.

The Company leases its office under a month to month lease with a company controlled by the Company CEO, for monthly payments of $8,299 plus sales tax.

For the year ended December 31, 2017, marketing fees from a related company was Legion’s largest source of revenue, representing approximately 24% of Legion’s total revenues.

The Company had a 10% note receivable, due on demand, with an executive of the company for $20,328.

PRINCIPAL STOCKHOLDERS

The following table sets forth information as to the shares of common stock beneficially owned as of July 2, 2018, based on 16,029,569 shares outstanding on such date, 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.

(1) Legion Capital Partners (“LCP”) is owned by three officers of the Company:

James Byrd, Chairman and CEO

301 E. Pine St., Ste. 850, Orlando, Fl. 32801

Mr. Byrd (or his entity) owns 40% of LCP and therefore indirectly owns and controls 4 million shares

Douglas Hackett, Director and CMO

301 E. Pine St., Ste. 850, Orlando, Fl. 32801

Mr. Hackett (or his entity) owns 40% of LCP and therefore indirectly owns and controls 4 million shares

Paul Carrazzone, Senior Vice President

301 E. Pine St., Ste. 850, Orlando, Fl. 32801

Mr. Carrazzone (or his entity) owns 20% of LCP and therefore indirectly owns and controls 2 million shares

(2) Includes the following options owned by BGA Holdings, LLC, an entity managed by Joseph B. Hilton, all of which are exercisable:

1,503,067 at $1.00 per share, 10 year term, such stock options are subject to a 5 year lock up agreement with certain provisions for limited sale or exercise during such period of time.

500,000 at $1.25 per share, 10 year term

500,000 at $1.75 per share, 10 year term

DESCRIPTION OF CAPITAL

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 for zero par value. As of the date of this Offering Circular, there are 16,029,569 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.  Our subsidiary, Legion Select Holdings, LLC, has $6,708,783 of preferred membership units outstanding. Such Preferred Interest has the preferences as noted under “Business – Contribution Agreement and LLC Operating Agreement.”

Options and Warrants

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. 

SHARES 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 18,029,569 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:

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.

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR COMMON STOCK 

The following is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the ownership and disposition of our common stock but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. No ruling on the U.S. federal, state, or local tax considerations relevant to our operations or to the purchase, ownership or disposition of our shares, has been requested from the IRS or other tax authority. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below.

This summary also does not address the tax considerations arising under the laws of any non-U.S., state or local jurisdiction, or under U.S. federal gift and estate tax laws, except to the limited extent set forth below. In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:

You are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership and disposition of our common stock arising under the U.S. federal estate or gift tax rules or under the laws of any state, local, non-U.S., or other taxing jurisdiction or under any applicable tax treaty.

Non-U.S. Holder Defined

For purposes of this discussion, you are a non-U.S. holder (other than a partnership) if you are any holder other than:

In addition, if a partnership or entity classified as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner generally will depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships that hold our common stock, and partners in such partnerships, should consult their tax advisors.

Distributions

As described in “Dividend Policy,” we have never declared or paid cash dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. However, if we do make distributions on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, they will constitute a return of capital and will first reduce your basis in our common stock, but not below zero, and then will be treated as gain from the sale of stock as described below under “—Gain on Disposition of Common Stock.”

Subject to the discussion below on effectively connected income, backup withholding and foreign accounts, any dividend paid to you generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty. In order to receive a reduced treaty rate, you must provide us with an IRS Form W-8BEN, IRS Form W-8BEN-E or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate. A non-U.S. holder of shares of our common stock eligible for a reduced rate of U.S. withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. If the non-U.S. holder holds the stock through a financial institution or other agent acting on the non-U.S. holder’s behalf, the non-U.S. holder will be required to provide appropriate documentation to the agent, which then will be required to provide certification to us or our paying agent, either directly or through other intermediaries.

Dividends received by you that are effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, attributable to a permanent establishment maintained by you in the United States) are generally exempt from such withholding tax. In order to obtain this exemption, you must provide us with an IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. In addition, if you are a corporate non-U.S. holder, dividends you receive that are effectively connected with your conduct of a U.S. trade or business may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. You should consult your tax advisor regarding any applicable tax treaties that may provide for different rules.

Gain on Disposition of Common Stock

Subject to the discussion below regarding backup withholding and foreign accounts, you generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless:

We believe that we are not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion so assumes. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property relative to the fair market value of our other business assets, there can be no assurance that we will not become a USRPHC in the future. Even if we become a USRPHC, however, as long as our common stock is regularly traded on an established securities market, such common stock will be treated as U.S. real property interests only if you actually or constructively hold more than five percent of such regularly traded common stock at any time during the shorter of the five-year period preceding your disposition of, or your holding period for, our common stock.

If you are a non-U.S. holder described in the first bullet above, you will be required to pay tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates, and a corporate non-U.S. holder described in the first bullet above also may be subject to the branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty. If you are an individual non-U.S. holder described in the second bullet above, you will be required to pay a flat 30% tax (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, which gain may be offset by U.S. source capital losses for the year (provided you have timely filed U.S. federal income tax returns with respect to such losses). You should consult any applicable income tax or other treaties that may provide for different rules.

Federal Estate Tax

Our common stock beneficially owned by an individual who is not a citizen or resident of the United States (as defined for U.S. federal estate tax purposes) at the time of their death will generally be includable in the decedent’s gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. The test for whether an individual is a resident of the United States for U.S. federal estate tax purposes differs from the test used for U.S. federal income tax purposes. Some individuals, therefore, may be non-U.S. holders for U.S. federal income tax purposes, but not for U.S. federal estate tax purposes, and vice versa.

Backup Withholding and Information Reporting

Generally, we must report annually to the IRS the amount of dividends paid to you, your name and address and the amount of tax withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of residence.

Payments of dividends or of proceeds on the disposition of stock made to you may be subject to information reporting and backup withholding at a current rate of 28% unless you establish an exemption, for example, by properly certifying your non-U.S. status on an IRS Form W-8BEN, IRS Form W-8BEN-E or another appropriate version of IRS Form W-8.

Backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.

Foreign Account Tax Compliance

The Foreign Account Tax Compliance Act, or FATCA, imposes withholding tax at a rate of 30% on dividends on and gross proceeds from the sale or other disposition of our common stock paid to “foreign financial institutions” (as specially defined under these rules), unless such institution enters into an agreement with the U.S. government to withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding the U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise establishes an exemption. FATCA also generally imposes a U.S. federal withholding tax of 30% on dividends on and gross proceeds from the sale or other disposition of our common stock paid to a “non-financial foreign entity” (as specially defined for purposes of these rules) unless such entity provides the withholding agent with a certification identifying certain substantial direct and indirect U.S. owners of the entity, certifies that there are none or otherwise establishes an exemption. The withholding provisions under FATCA generally apply to dividends on our common stock, and under current transition rules, are expected to apply with respect to the gross proceeds from the sale or other disposition of our common stock on or after January 1, 2019. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph. Non-U.S. holders should consult their tax advisors regarding the possible implications of this legislation on their investment in our common stock.

Each prospective investor should consult its tax advisor regarding the particular U.S. federal, state and local and non-U.S. tax consequences of purchasing, holding and disposing of our common stock, including the consequences of any proposed change in applicable laws.

PLAN OF DISTRIBUTION

Engagement Agreement with the Selling Agent

We are currently party to an engagement agreement with the Selling Agent. The term of the offering began on the date of this Offering Circular and will continue until December 31, 2018, unless one of the following events occurs prior to December 31, 2018 (the “Termination Date”), in which case the engagement agreement would be terminated early:

Offering Expenses. We are responsible for all Offering fees and expenses, including the following: (i) fees and disbursements of our legal counsel, accountants, and other professionals we engage; (ii) fees and expenses incurred in the production of Offering documents, including design, printing, photograph, and written material procurement costs; (iii) all filing fees, including Financial Industry Regulatory Authority (“FINRA”) and state blue sky filing fees; (iv) all of the legal fees related to FINRA clearance; and (v) transportation, accommodation, and other roadshow expenses (which will be pre-approved by us. We have agreed to reimburse the Selling Agent for its legal costs of $35,000, $5,000 of which has been paid. The Selling Agent is also entitled to receive $30,000 toward its non-accountable expense allowance, including $20,000 which has been paid by us and $10,000 which will be paid at the first Closing.

Reimbursable Expenses in the Event of Termination. In the event the Offering does not close or the engagement agreement is terminated for any reason, we have agreed to reimburse the Selling Agent for all unreimbursed, reasonable, documented, out-of-pocket fees, expenses, and disbursements.

Selling Agent Commission. We have agreed that the definitive selling agency agreement will provide for us to pay a commission of eight percent (8.0%) ]of the gross proceeds received by us in the Offering, which shall be allocated by the Selling Agent to members of the selling group and soliciting dealers in its sole discretion.

Selling Agent Warrants

Upon each closing of this Offering, we have agreed to issue Selling Agent Warrants to the Selling Agent to purchase a number of shares of the Common Stock equal to three percent (3%) of the total shares of the Common Stock sold in such closing. The Selling Agent Warrants will be exercisable for five years after such date. The Selling Agent Warrants are not redeemable by us. The exercise price for the Selling Agent Warrants will be the amount that is 125% of the public offering price, or $5 per share.

The Selling Agent Warrants and the Common Stock underlying the Selling Agent Warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The Selling Agent, or permitted assignees under such rule, may not exercise, sell, transfer, assign, pledge, or hypothecate the Selling Agent Warrants or the Common Stock underlying the Selling Agent Warrants, nor will the Selling Agent or permitted assignees engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the Selling Agent Warrants or the underlying shares for a period of 180 days from the applicable closing, except that they may be transferred, in whole or in part, by operation of law or by reason of our reorganization, or to any underwriter or selected dealer participating in the Offering and their officers or partners if the Selling Agent Warrants or the underlying shares so transferred remain subject to the foregoing lock-up restrictions for the remainder of the time period. The Selling Agent Warrants will provide for adjustment in the number and price of the Selling Agent Warrants and the shares underlying such Selling Agent Warrants in the event of recapitalization, merger, stock split, or other structural transaction, or a future financing undertaken by us. The Selling Agent Warrants are also exercisable on a cashless basis. In addition, the Selling Agent Warrants provide for registration rights upon request, in certain cases. The demand registration right provided will not be greater than five years from the effective date of the Offering in compliance with FINRA Rule 5110(f)(2)(G)(iv). The piggyback registration right provided will not be greater than seven years from the effective date of the offering in compliance with FINRA Rule 5110(f)(2)(G)(v). We will bear all fees and expenses attendant to registering the securities issuable on exercise of the Selling Agent Warrants other than underwriting commissions incurred and payable by the holders.

Lock-Up Agreements

Except as provided below, we and our officers, directors, and more than 5% holders of our Common Stock as of the qualification of the Offering Statement and holders of the Private Placement Shares have agreed, or will agree, with the Selling Agent, subject to certain exceptions, that, without the prior written consent of the Selling Agent, we and they will not, directly or indirectly, during the period ending 180 days after the date of the final closing of the Offering:

This agreement does not apply, in our case, to securities issued in connection with portfolio acquisitions, pursuant to existing employee benefit plans or securities issued upon exercise of options, and other exceptions, and in the case of our officers, directors and other holders of our securities, exercise of stock options issued pursuant to a stock option or similar plans, and other exceptions.

Exchange Listing

We will apply to the Nasdaq Capital Market to list shares of our Common Stock under the symbol “LEGN.” Our Common Stock will not commence trading on NASDAQ until each of the following conditions are met: (i) the Offering is terminated; and (ii) we have filed a post-qualification amendment to the Offering Statement and a registration statement on Form 8-A; and such post-qualification amendment is qualified by the SEC and the Form 8-A has become effective. Pursuant to applicable rules under Regulation A, the Form 8-A will not become effective until the SEC qualifies the post-qualification amendment. We intend to file the post-qualification amendment and request its qualification immediately prior to the termination of the Offering in order that the Form 8-A may become effective as soon as practicable. Even if we meet the minimum requirements for listing on NASDAQ, we may wait before terminating the Offering and commencing the trading of our Common Stock on NASDAQ in order to raise additional proceeds. As a result, you may experience a delay between the closing of your purchase of shares of our Common Stock and the commencement of exchange trading of our Common Stock on NASDAQ.

Pricing of the Offering

Prior to the Offering, there has been no public market for the Shares. The initial public offering price was determined by negotiation between us and the Selling Agent. The principal factors considered in determining the initial public offering price include:

Indemnification and Control

We have agreed to indemnify the Selling Agent against certain liabilities, including liabilities under the Securities Act. If we are unable to provide this indemnification, we will contribute to the payments the Selling Agent and its affiliates and controlling persons may be required to make in respect of these liabilities.

The Selling Agent and its affiliates are engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. The Selling Agent and its affiliates may in the future perform various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.

Our Relationship with the Selling Agent

In the ordinary course of their various business activities, the Selling Agent and its affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer. The Selling Agent and its affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

Investment Limitations if We Do Not Obtain a Listing on a National Securities Exchange

As set forth in Title IV of the JOBS Act, there are no limits on how many shares an investor may purchase if the Offering results in a listing of our Common Stock on the NYSE American or other national securities exchange. The following would apply only if we are unable to obtain a listing on a national securities exchange and we seek for our Common Stock to trade on a platform of the OTC Markets.

Generally, in the case of trading on the over-the-counter markets, 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 (please see under “How to calculate your 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.

Because this is a Tier 2, Regulation A offering, most investors in the case of trading on the over-the-counter markets must comply with the 10% limitation on investment in the Offering. The only investor in this Offering exempt from this limitation is an “accredited investor” as defined under Rule 501 of Regulation D under the Securities Act (an “Accredited Investor”). If you meet one of the following tests you should qualify as an Accredited Investor:

Offering Period and Expiration Date

This Offering will start on or after the date that the Offering is qualified by the SEC and will terminate on the Termination Date.

An offering circular in electronic format may be made available on the websites maintained by the Selling Agents, or selling group members, if any, participating in the offering. The Selling Agent may agree to allocate a number of shares to Dealers. Dealers shall settle the transaction with the Selling Agent through DTC on closing. In the event that we do not qualify or list on the NASDAQ or another National Securities Exchange after the Offering, Dealers who are unable to participate in an over the counter security may withdraw their subscriptions prior to closing.

Acceptance of Subscriptions. At Closing, the Selling Agent and the Dealers will represent to us that they know their customers who are subscribers in the Offering and that each of them comply with Rule 251 of Regulation A and/or they are accredited investors. Based upon these representations from the Selling Agent and the Dealers, we will accept subscriptions from them with payment and delivery of shares to occur at closing.

Under Rule 251 of Regulation A, non-accredited, non-natural person investors are subject to the investment limitation and may only invest funds which do not exceed 10% of the greater of the purchaser’s revenue or net assets (as of the purchaser’s most recent fiscal year end). In addition, non-accredited, natural person investors may only invest funds which do not exceed 10% of the greater of the purchaser’s annual income or net worth (please see below on how to calculate your net worth).

How to Calculate Net Worth: For the purposes of calculating your net worth, it is defined as the difference between total assets and total liabilities. This calculation must exclude the value of your primary residence and may exclude any indebtedness secured by your primary residence (up to an amount equal to the value of your primary residence). In the case of fiduciary accounts, net worth and/or income suitability requirements may be satisfied by the beneficiary of the account or by the fiduciary, if the fiduciary directly or indirectly provides funds for the purchase of the shares in this Offering.

In order to purchase the shares in this Offering and prior to the acceptance of any funds from an investor, an investor will be required to represent that he is either an accredited investor or is in compliance with the 10% of net worth or annual income limitation on investment in this Offering.

LEGAL MATTERS

The validity of the issuance of the common stock offered by us in this offering will be passed upon for us by James S. Byrd, PA. Morse and Morse, PLLC is acting as counsel to the selling agent.

EXPERTS

The financial statements of Legion Capital Corporation as of December 31, 2017 and 2016 and for each of the years then ended included in this Offering Circular, have been so included in reliance on the report of Soles, Heyn & Company, LLC, an independent registered public accounting firm appearing elsewhere herein, given on the authority of said firm as experts in auditing and accounting.

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2017

TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Legion Capital Corporation and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Legion Capital Corporation and Subsidiaries (the Company) as of December 31, 2017 and 2016, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2017 and 2016, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2017 and 2016, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

/s/ Soles, Heyn & Company, LLC

Soles, Heyn & Company, LLC

We have served as the Company’s auditor since 2018.

West Palm Beach, Florida

April 30, 2018

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to consolidated financial statements

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

See accompanying notes to consolidated financial statements

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

See accompanying notes to consolidated financial statements

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations

As of January 1, 2017, all venture funds, including Legion High Yield Mortgage Fund I, LLC, Legion Select Venture Fund, LLC, and the LLC managers thereof, were sold and are no longer subsidiaries of the Company. For the year ended December 31, 2017, there was effectively no gain or loss from this transaction. The operations of the venture funds have been presented as discontinued operations.

As of February 28, 2017, Legion Wealth Advisors, LLC was sold and transferred to Paul Pfeifer, CEO thereof, and is no longer a subsidiary of the Company. For the year ended December 31, 2017, there was effectively no gain or loss from this transaction. The operations of the venture funds have been presented as discontinued operations.

Therefore, as of March 1, 2017, the Company is no longer a Registered Investment Advisor or Fund Manager, and is now a holding company with operating subsidiaries as follows:

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 are insured at Federal Deposit Insurance Corporation limits of $250,000 each. The aggregate bank balances at December 31, 2017 were approximately $1,862,209 over the insured limit.

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.

Notes Receivable

In accordance with the guidance of ASC Topic 942, Financial Services – Depository and Lending, the Company reports loans and trade receivables not held for sale on the date of the financial statements at their outstanding principal balances, reduced by any write offs, and there were $370,000 of allowances for loan losses as of December 31, 2017 and 2016. 

Portfolio Segments are primarily in real estate and transportation. The primary credit quality indicators are paired to changes in overall market/industry valuation as well as changes in more specific pledged collateral valuations to evaluate a performing and non-performing note receivable on an individual basis. Most portfolio loans are established with significant amounts of prepaid interest and are short term (1-2 years) in duration. Notes receivable are considered on non-accrual or past due status on an individual note receivable basis. When an asset or investment becomes distressed due to changes in industry valuation, business valuation and ability to generate cash flow or acquire debt, each distressed or non-performing asset is evaluated on an individual case by case basis for restructuring and/or liquidation, and at that time an estimate for credit loss reserves is recorded.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation or amortization. Depreciation is recorded at the time property and equipment is placed in service using the straight-line method over the estimated useful lives of the related assets, which range from three to seven years. Leasehold improvements are amortized over the shorter of the expected useful lives of the related assets or the lease term.

Intangible Assets

The Company accounts for its intangible assets in accordance with the authoritative guidance issued by the ASC Topic 350 – Goodwill and Other. Intangibles are valued at their fair market value and are amortized taking into account the character of the acquired intangible asset and the expected period of benefit. The Company evaluates intangible assets, at a minimum, on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated undiscounted future cash flows.

The cost of internally developing, maintaining and restoring intangible assets that are not specifically identifiable, that have indeterminate lives, or that are inherent in a continuing business and related to an entity as a whole, are recognized as an expense when incurred.

An intangible asset with a definite useful life is amortized; an intangible asset with an indefinite useful life is not amortized until its useful life is determined to be no longer indefinite. The remaining useful lives of intangible assets not being amortized are evaluated at least annually to determine whether events and circumstances continue to support an indefinite useful life.

There were no indications of impairment based on management’s assessment of these assets at December 31, 2017. Factors we consider important that could trigger an impairment review include significant underperformance relative to historical or projected future operating results, significant changes in the manner of the use of our assets or the strategy for our overall business, and significant negative industry or economic trends. If current economic conditions worsen causing decreased revenues and increased costs, we may have to record impairment to our intangible assets.

Long-Lived Assets

The Company reviews long-lived assets (primarily comprised of property, equipment and leasehold improvement, notes receivable, and assets held for sale) for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of an asset to be held and used is measured by a comparison of the carrying amount of the asset to future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying value of the asset exceeds the fair value of the asset. As of December 31, 2017, the Company did not have any impairment on its long-lived assets.

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition

The Company generates revenue from providing asset management services to clients. The Company recognizes revenue when the following criteria are met:

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.

Interest income is recognized on an accrual basis at the stated interest rate in the respective loan and security agreements and note agreements for its investments in notes receivable.

Origination fees income is paid by borrower at closing as a discount to the loan and recognized over the life of the loan.

Due diligence and referral fees are deferred and recognized over the term of the notes receivable.

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.

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.

Income Taxes

The Company accounts for income taxes under the provisions of ASC 740 “Accounting for Income Taxes,” which requires a company to first determine whether it is more likely than not (which is defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more likely than not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.

Deferred income taxes are recognized for the tax consequences related to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes at each year end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recognized when, based on the weight of all available evidence, it is considered more likely than not that all, or some portion, of the deferred tax assets will not be realized. The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and cause a change in management’s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation is reflected in current income. Income tax expense is the sum of current income tax plus the change in deferred tax assets and liabilities.

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Principles of Consolidation

The Company Legion Capital Corporation and its Subsidiaries Hilton Institute of Business, LLC ,Legion Funding LLC, Legion Marketing, LLC, Legion Management Group, LLC, Legion Select Holdings, LLC, Legion Title LLC-Operations and Legion Wealth Advisors have been consolidated for financial statement purposes. All significant intercompany transactions and balances have been eliminated.

Concentrations

During fiscal 2017 Legion Capital Corporation (“Legion”) generated revenue from various business and income segments. Marketing fees from a single company, a related party, was Legion’s largest source of revenue, representing approximately 24% of Legion’s total revenues in 2017.

The primary income segments in Legion’s business activities in 2017 came from Advisory, Management and Marketing Fees which respectively represented 47%, 30% and 18% of Legion’s income.

Legion’s assets are regionally diversified, with a concentration in real estate and transportation. For 2017, only one asset accounted for more than a 10% of Legion’s consolidated revenues, and that asset represented 14% of Legion’s total income in 2017.

Recent Accounting Pronouncements

The Financial Accounting Standards Board has issued the following Accounting Standard Update (“ASU”) 2014-09 Revenue From Contracts with Customers, ASU No. 2016-01, Financial Instruments, ASU 2016-02, Leases, ASU 2016-13,Financial Instruments – Credit Losses, ASU No. 2016-15, Statement of Cash Flows.

Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2014-09 – Revenue From Contracts with Customers, which will supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principal of this ASU is that an entity should recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.

The original effective date for ASU 2014-09 would have required the Company to adopt beginning in its first quarter 2017. In July 2015, the FASB voted to amend ASU 2014-09 by approving a one-year deferral of the effective date as well as providing the option to early adopt the standard on the original effective date. Accordingly, the Company may adopt the standard in either its first quarter of 2017 or 2018. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company does not expect its adoption of the new revenue standard will have a significant impact on its consolidated financial statements.

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825- 10), Recognition and Measurement of Financial Assets and Financial Liabilities. The provisions of the update require equity investments to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment. The update also simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. It also eliminates the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities, and eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value for financial instruments measured at amortized cost on the balance sheet. ASU No. 2016-01 requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. It also requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. The update requires separate presentation of financial assets and financial liabilities by category and form on the balance sheet or the accompanying notes to the financial statements. In addition, the update clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. For an emerging growth company, the amendments in the update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The adoption of this ASU is not expected to have a material impact on the Company’s financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), Conforming Amendments Related to Leases. This ASU amends the codification regarding leases in order to increase transparency and comparability. The ASU requires companies to recognize lease assets and liabilities on the statement of condition and disclose key information about leasing arrangements. A lessee would recognize a liability to make lease payments and a right-of-use asset representing its right to use the leased asset for the lease term. For an emerging growth company, the amendments in the update are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. The adoption of this ASU is not expected to have a material effect on the Company’s financial statements.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. The amendments introduce an impairment model that is based on expected credit losses (“ECL”), rather than incurred losses, to estimate credit losses on certain types of financial instruments (ex. loans and held to maturity securities), including certain off-balance sheet financial instruments (ex. commitments to extend credit and standby letters of credit that are not unconditionally cancellable). The ECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. An entity must use judgment in determining the relevant information and estimation methods that are appropriate in its circumstances. Financial instruments with similar risk characteristics may be grouped together when estimating the ECL. The ASU also amends the current available for sale security impairment model for debt securities whereby credit losses relating to available for sale debt securities should be recorded through an allowance for credit losses. For an emerging growth company, the amendments in the update are effective for fiscal years beginning after December 15, 2020, and interim periods within fiscal years beginning after December 15, 2021. The amendments will be applied through a modified retrospective approach, resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company is currently planning for the implementation of this accounting standard. It is too early to assess the impact this guidance will have on the Company’s financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments in this ASU clarify the proper classification for certain cash receipts and cash payments, including clarification on debt prepayment or debt extinguishment costs, settlement of zero-coupon debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies, among others. For an emerging growth company, the amendments in the update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 - CONTRIBUTION AND LLC OPERATING AGREEMENT

On November 30, 2017 Legion Select Holdings, LLC (“Legion Holdings”) was formed and acquired the assets of Legion Select Venture Fund, LLC pursuant to a Contribution Agreement. The prior owners of Legion Select Venture Fund, LLC (the “Preferred Owners”) received a preferred stock interest in Legion Holdings (the “Preferred Interest”) and an in initial Capital Account balance in the amount of $6,708,783 in Legion Holdings (the “Preferred Capital Account Balance”). Legion Capital Corporation is the manager (the “Manager”) and the holder of a common interest in Legion Holdings equating to 75% of the voting power of Legion Holdings (the “Common Interest”).  

Except as otherwise provided in the Legion Holding Operating Agreement, the Manager, in its sole discretion, shall determine whether to make distributions to the members. In the event that any distributions are made prior to the expiration of the 5 year operating period beginning on the date of formation of Legion Holdings (the “Wind-Up Period”), such distributions are required to be paid out to the Manager and the members as follows: (1) to the Preferred Owners, in an amount equal to 12% per annum of their unpaid Preferred Capital Account Balance (the “Preferred Dividend”); (2) to the Manager, in an amount equal to 2% per annum on the unpaid aggregate capital account balance of Legion Holdings, payable monthly, in arrears (the “Management Fee”); and (3) thereafter, pro-rata, 75% to the holders of the Common Interest and 25% to the holders of the Preferred Interest. In the event that any distributions are made after the commencement of the Wind-Up Period, all distributions made by Legion Holdings are required to be paid out as follows: (1) to the Manager, in an amount equal to the unpaid and accrued Management Fees; (2) to pay off the Preferred Capital Account Balance (and any other capital account balance that exists at such time); (3) to the Preferred Owners in an amount equal to the unpaid Preferred Dividend and (4) thereafter, pro-rata, 75% to the holders of the Common Interest and 25% to the holders of the Preferred Interest. Upon a liquidation or dissolution of Legion Holdings, assets shall be paid out as follows: (1) to Legion Holdings’ creditors; (2) to the Manager, in an amount equal to the unpaid and accrued Management Fees; (3) to pay off the Preferred Capital Account Balance (and any other capital account balance that exists at such time); (4) to the Preferred Owners in an amount equal to the unpaid Preferred Dividend and (5) thereafter, pro-rata, 75% to the holders of the Common Interest and 25% to the holders of the Preferred Interest. 

NOTE 3 - LIQUIDITY

The Company has sustained recurring losses and negative cash flows from operations. Over the past year, the Company’s growth has been funded through a combination of debt and equity financing. As of December 31, 2017, the Company had approximately $2,588,000 of unrestricted cash. The Company continues to obtain debt and equity financing as well as grow its portfolio of notes receivable and therefore believes that, as a result, it currently has sufficient cash and financing commitments to meet its funding requirements over the next year. However, the Company has experienced and continues to experience negative cash flows from operations, as well as an ongoing requirement for substantial additional capital investment. The Company expects that it will need to raise substantial additional capital to accomplish its business plan over the next several years. The Company expects to seek to obtain additional funding through a bank credit facility or private equity. There can be no assurance as to the availability or terms upon which such financing and capital might be available.

NOTE 4 - NOTES RECEIVABLE

Notes receivable in aggregate amount of $8,133,425 are secured, along with annual interest at the rate vary from 10% to 25%, and maturity date vary from February 2018 to December 31, 2019. The balance of the allowance for credit losses as of December 31, 2017 and 2016 was $370,000 and zero, respectively, with not write-offs or recoveries in either year. The following table summarizes the maturity dates: 

The following table presents (a) impaired loans with specific allowances and the amount of such allowances and (b) impaired loans without specific allowances as of December 31, 2017:

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 - NOTES RECEIVABLE (continued)

The following table presents our credit quality indicators as of December 31, 2017:

NOTE 5 - EQUIPMENT

The major classifications of property and equipment are summarized as follows at the balance sheet dates:

Depreciation expense for the years ended December 31, 2017 and 2016 was $ 8,123 and $1,812, respectively.

NOTE 6 - ASSET HELD FOR SALE

During 2017, the Company repossessed a property that it had a mortgage receivable is being held for sale in the amount of $387,723.

NOTE 7 - NOTES PAYABLE 

For the period ended December 31, 2017, the Company issued unsecured Senior Corporate Notes, in the aggregate amount of $575,000 with interest at 6%, 7% and 8% per annum for a period of 12 and 36 months.

In December 2016, the Company, through its subsidiaries Hilton and Legion Funding, issued Senior Corporate Notes, in the aggregate amount of $1,072,000, with monthly payments of interest only at 12% per annum for a period of 36 months. The Hilton note is secured by the assets of Hilton.

For the period ended December 31, 2017, the Company issued unsecured Corporate Notes, in the aggregate amount of $2,032,000 with monthly payments of interest only at varying rates between 6% and 12% per annum, with varying maturities of between 12 and 36 months.

The notes payable includes $610,000 of notes with a conversion option with the note holder with a right, but not an obligation, to convert all or a part of their note into common stock of Legion Capital Corporation at an exercise price of $2.00 per share at the time the Company begins trading publicly on the NASDAQ or other major exchange.

The aggregate maturity on the notes payable as of December 31, 2017 are as follows:

For the year ended December 31, 2017, total interest expense on these notes payable was $173,524.

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - STOCKHOLDERS’ EQUITY

For the years ended December 31, 2017 and 2016, the Company sold 2,270,421 shares of no par value common stock, and 952,000 shares of no par value common stock, respectively, and received $2,677,092 and $952,000, respectively. During 2017, the common stock sold included shares as part of the Company’s Regulation A+ initial public offering of stock.

On November 30, 2017 Legion Select Holdings, LLC (“Legion Holdings”) was formed and acquired the assets of Legion Select Venture Fund, LLC pursuant to a Contribution Agreement. The prior owners of Legion Select Venture Fund, LLC (the “Preferred Owners”) received a preferred stock interest in Legion Holdings (the “Preferred Interest”) and an in initial Capital Account balance in the amount of $6,708,783 in Legion Holdings (the “Preferred Capital Account Balance”). Legion Capital Corporation is the manager (the “Manager”) and the holder of a common interest in Legion Holdings equating to 75% of the voting power of Legion Holdings (the “Common Interest”).

Except as otherwise provided in the Legion Holding Operating Agreement, the Manager, in its sole discretion, shall determine whether to make distributions to the members. In the event that any distributions are made prior to the expiration of the 5 year operating period beginning on the date of formation of Legion Holdings (the “Wind-Up Period”), such distributions are required to be paid out to the Manager and the members as follows: (1) to the Preferred Owners, in an amount equal to 12% per annum of their unpaid Preferred Capital Account Balance (the “Preferred Dividend”); (2) to the Manager, in an amount equal to 2% per annum on the unpaid aggregate capital account balance of Legion Holdings, payable monthly, in arrears (the “Management Fee”); and (3) thereafter, pro-rata, 75% to the holders of the Common Interest and 25% to the holders of the Preferred Interest. In the event that any distributions are made after the commencement of the Wind-Up Period, all distributions made by Legion Holdings are required to be paid out as follows: (1) to the Manager, in an amount equal to the unpaid and accrued Management Fees; (2) to pay off the Preferred Capital Account Balance (and any other capital account balance that exists at such time); (3) to the Preferred Owners in an amount equal to the unpaid Preferred Dividend and (4) thereafter, pro-rata, 75% to the holders of the Common Interest and 25% to the holders of the Preferred Interest. Upon a liquidation or dissolution of Legion Holdings, assets shall be paid out as follows: (1) to Legion Holdings’ creditors; (2) to the Manager, in an amount equal to the unpaid and accrued Management Fees; (3) to pay off the Preferred Capital Account Balance (and any other capital account balance that exists at such time); (4) to the Preferred Owners in an amount equal to the unpaid Preferred Dividend and (5) thereafter, pro-rata, 75% to the holders of the Common Interest and 25% to the holders of the Preferred Interest.

NOTE 9 - 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 did not become vested prior to the employee leaving the Company, and have therefore been canceled.

On November 7, 2016, the Company issued 500,000 stock options outstanding to another officer of the Company. 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. These options did not become vested prior to the employee leaving the Company, and have therefore been canceled.

In November 2017, the Company granted 3 million stock options outstanding in favor of BGA Holdings, LLC (managed by Joseph B. Hilton). These options are fully vested, and have a strike price as follows:

2,000,000 at $1.00 per share, 10 year term

500,000 at $1.25 per share, 10 year term

500,000 at $1.75 per share, 10 year term

The weighted-average grant-date fair value of options granted during the year ended December 31, 2017 was $0.94. The options to Mr. Hilton’s company were issued in consideration of cancellation of 2 million shares previously agreed to be issued to Mr. Hilton’s company.

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.

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - STOCK OPTIONS (continued)

The following range of assumptions in the Black-Scholes option pricing model was used to determine fair value of the options issued on December 31, 2017: 

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 has not experienced significant exercise activity on stock options. The Company determines the expected term of its stock option awards issued using the simplified method. The simplified method assumes each vesting tranche of the award has a term equal to the midpoint between when the award vests and when the award expires.

Each of the inputs discussed above is subjective and generally requires significant management judgment. The Company utilize the following inputs to calculate its options as of December 31, 2017:

A summary of the option activity as of December 31, 2017  is presented below :

Total stock compensation expense for the year ended December 31, 2017 was $2,828,158. All stock options were fully vested as of December 31, 2017.

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.

NOTE 10 - INCOME TAXES

The Company did not provide any Federal and State income tax for the years ended December 31, 2017 and 2016 due to the Company’s net losses. As of December 31, 2017 and 2016, the Company’s deferred tax asset consisted its net operating losses of $1,205,107 and $226,230, respectively.

 Deferred tax assets and liabilities reflect the effects of tax losses, credits and the future income tax effects of temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Future taxable income is expected to be subject to an approximate rate of 21%.

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - INCOME TAXES (continued)

As of December 31, 2017 and 2016, the Company had a valuation allowance of $1,205,107 and $226,230, respectively, for its deferred tax assets. The Company believes that such assets did not meet the more likely than not criteria to be recoverable through projected future profitable operations in the foreseeable future.

Effective January 1, 2007, the Company adopted FASB guidance that addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The FASB also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2017 and 2016, the Company does not have a liability for unrecognized tax benefits.

The Company’s net operating loss carry forward for income tax purposes as of December 31, 2017 was approximately $5,739,000 and may be offset against future taxable income through 2036. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.

NOTE 11 - LEASES

The Company leases its office under a month to month lease with a company controlled by the Company CEO, for monthly payments of $8,299 plus sales tax.

In January 2017, the Company signed an office lease in California, for a monthly rent of approximately $1,800. The lease expires in September 2018.

NOTE 12 - RELATED PARTY TRANSACTIONS

On November 30, 2017, Legion Select Holdings, LLC acquired the assets of Legion Select Venture Fund, LLC in exchange for preferred membership units in Legion Select Holdings, LLC in the amount of $6,708,783.

For the year ended December 31, 2017, marketing fees from a related company was Legion’s largest source of revenue, representing approximately 24% of Legion’s total revenues.

The Company had a 10% note receivable, due on demand, with an executive of the company for $20,328.

On December 28, 2016, Legion Select Venture Fund, LLC (the “Fund”), a Fund managed by James Byrd, Joseph Hilton (“Hilton”) and Shane Hackett entered into asset purchase agreement, to acquire all assets of SOS Network, Inc.

As of March 21, 2017, Hilton Institute of Business, a wholly owned subsidiary of the Company, paid a total of $475,730 to the Fund, for 100% of the assets of the SOS business, and the Fund retained no interest in these assets.

On August 10, 2017, Hilton sold a portion of the SOS assets (a portion of accounts receivable only) back to SOS for the purchase of price of $479,000 through the issuance of a twelve (12) month Promissory Note from SOS to Hilton for purchase of the assets, with interest at 12% per annum. Hilton retained the inventory, online learning platform and database it originally acquired from the Fund.

NOTE 13 - ACQUISITIONS

On November 30, 2017 the Company established Legion Select Holdings, LLC, and acquired $6,708,783 of assets, including loans and partnership holdings in several businesses from Legion Select Venture Fund, LLC, a venture fund affiliated with the Company but owned and managed separately. The Company issued 100% Preferred membership interest in Legion Select Holdings, LLC valued at $6,708,783, which was the carry over basis of the notes receivable acquired, for acquisition of these assets.

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - SUBSEQUENT EVENTS

Effective as of January 1, 2018, the Company acquired all of the stock of Dorman – Willis Motors, Inc., an automobile dealership, and now owns that dealership. The Company formed Legion Transportation to own these automotive and other transportation assets.  No cash was given for this acquisition, but the dealership was acquired subject to the Legion debt. 2016 Financial statements (unaudited) from Dorman-Willis Motors, Inc., along with Pro-Forma 2017 financial statements are set forth below.

Dorman Willis December 31, 2017 Balance Sheet

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - SUBSEQUENT EVENTS (continued)

Combined 2017 Balance Sheet (Pro-forma)

LEGION CAPITAL CORPORATION AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 - SUBSEQUENT EVENTS (continued)

Dorman Willis Year Ended 2017 Statement of Operations

Combined 2017 Statement of Operations (Pro-Forma)

On February 16, 2018, the Company sold its equity interest in a sand and stone mining operation to the other partner in that company, and now holds a $4 million secured note and mortgage on the company and the real estate. There are certain discounts, down to $3 million, if said loan is paid early.

February 22, 2018, the Company acquired the rights to acquire a 100% interest in a maritime renovation and sales company and simultaneously sold said rights and said interest to a third party, and now holds a $1.7 million secured loan on the assets of that company and the buyer company.

In 2018, the Company has sold 868,733 shares of equity for $1,083,104, and has issued $561,000 of corporate notes to lenders and/or investors with maturity dates ranging from 1 to 3 years, and interest rates ranging from 6% to 10% per annum.

UNAUDITED 

On July 2, 2018, Legion SDC, LLC (“Legion SDC”), a newly formed subsidiary of Legion Builders, entered into an acquisition agreement wherein it acquired all of the assets and certain liabilities of SDC of Florida, LLC (“SDC”). In exchange, Legion SDC (i) paid $500,000 to the existing owners of SDC, (ii) issued a note payable, due September 30, 2018, in the principal amount of $1,500,000, accruing interest at 12% per annum to the existing owners of SDC (iii) agreed to pay an additional $1 million by way of a mutually agreeable debt instrument or equity interest to the existing owners of SDC; to be determined within 6 months of July 2, 2018 and (iv) issued a 49% equity interest in Legion SDC to the existing owners of SDC.

On July 2, 2018, Legion ARB, LLC (“Legion ARB”), a newly formed subsidiary of Legion Builders, entered into an acquisition agreement wherein it acquired all of the assets and certain liabilities of A.R. Bailey Homes, LLC (“ARB”). In exchange, Legion ARB (i) paid $200,000 to the existing owners of ARB, (ii) issued a note payable, due September 30, 2018, in the principal amount of $800,000, accruing interest at 12% per annum to the existing owners of ARB, (iii) issued a note payable, due July 2, 2019, in the principal amount of $3,500,000, accruing interest at 6% per annum to the existing owners of ARB and (iv) issued a 49% equity interest in Legion ARB to the existing owners of ARB.

PART III – EXHIBITS

Index to Exhibits