UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended December 31, 20162018
[ ] Transition report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________________ to ________________
Commission file number 333-198828000-55697
Life Clips, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Wyoming | 3861 | 46-2378100 | ||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
18851 NE 29th Ave. Suite 700 PMB# 348 | ||
Aventura, FL | 33180 | |
(Address of principal executive offices) | (zip code) |
18851 NE 29th Ave, Suite 700
Aventura, FL 33180Phone: (800) 292-8991
(Address andRegistrant’s telephone number of registrant’s principal executive offices and principal place of business)including area code: (800) 292-8991
Not ApplicableSecurities registered pursuant to Section 12(b) of the Act:
(Former name, former address and former fiscal year, if changed since last report)
Title of each class | Ticker symbol(s) | Name of each exchange on which registered | ||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one)
Large accelerated filer [ ] | Accelerated filer [ ] |
Non-accelerated filer [ ] | Smaller reporting company [X] |
Emerging growth company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class | Outstanding at August 19, 2020 | |||
Common Stock, $0.001 par value per share |
Indicate by check mark whether the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act and Section 13(a) of the Exchange Act. ___
LIFE CLIPS, INC.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 20162018
TABLE OF CONTENTS
Page | ||||
PART I — FINANCIAL INFORMATION | 3 | |||
Item 1. | Financial Statements | 3 | ||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | |||
Item 4. | ||||
PART II — OTHER INFORMATION | 16 | |||
Item 1. | Legal Proceedings | 16 | ||
Item 1A. | Risk Factors | 16 | ||
Item 2. | Properties | 16 | ||
Item 3. | Defaults Upon Senior Securities | 16 | ||
Item 4. | Mining Safety Disclosures | 16 | ||
Item 5. | Other Information | 17 | ||
Item | 17 | |||
Signatures |
2 |
PART I - FINANCIAL INFORMATION
Life Clips, Inc. and Subsidiary (F/K/A Blue Sky Media Corporation)
Consolidated Balance Sheets
December 31, 2016 | June 30, 2016 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 13,717 | $ | 469,233 | ||||
Due from related party | ||||||||
Total current assets | 13,717 | 469,233 | ||||||
Other Current Assets | ||||||||
Accounts Receivable | 5,486 | - | ||||||
Inventory | 29,705 | - | ||||||
Other Current Assets | 8,128 | - | ||||||
Deposit | - | 240,000 | ||||||
Investment - Batterfly Energy LTD | 32,500 | - | ||||||
Total other current assets | 75,819 | 240,000 | ||||||
Fixed Assets | ||||||||
Developed Software | 14,625 | - | ||||||
Total Fixed Assets | 14,625 | - | ||||||
Total asset | $ | 104,161 | $ | 709,233 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current liabilities | ||||||||
Accounts Payable | 226,363 | 162,759 | ||||||
Accrued Expense and Interest Payable | 136,806 | 48,476 | ||||||
Note Payable (net of discount of $180,097 and $681,047, respectively) | 195,067 | 108,953 | ||||||
Note Payable - Batteryfly Energy LTD | 500,000 | - | ||||||
Payroll Tax Liabilities | 18,350 | 8,195 | ||||||
Derivative Liabilities | 3,072,564 | 1,518,085 | ||||||
Total Current Liabilities | 4,149,150 | 1,846,468 | ||||||
Long Term Liabilities | ||||||||
Derivative Liability - Convertible Notes Payable | 231,624 | 18,625,104 | ||||||
Convertible Notes Payable (Net of debt discount of $1,393,152 and $908,466, respectively) | 975,267 | 334,112 | ||||||
Total Long Term Liabilities | 1,206,891 | 18,959,216 | ||||||
Total Liabilities | $ | 5,356,041 | $ | 20,805,684 | ||||
Shareholders’ deficit | ||||||||
Preferred stock, ($0.001 par value; 20,000,000 shares authorized, no shares were issued and outstanding). | - | - | ||||||
Common stock, ($0.001 par value; 320,000,000 shares authorized, 89,799,478 and 53,332,576 shares issued and outstanding as of December 31, 2016 and June 30, 2016, respectively). | 89,800 | 53,333 | ||||||
Additional paid in capital | 11,574,791 | 304,666 | ||||||
Accumulated deficit | (16,916,471 | ) | (20,454,450 | ) | ||||
Total shareholders’ deficit | (5,251,880 | ) | (20,096,451 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 104,161 | $ | 709,233 |
December 31, 2018 | June 30, 2018 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 45,866 | $ | 8,252 | ||||
Total assets | $ | 45,866 | $ | 8,252 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current liabilities | ||||||||
Accounts Payable | $ | 514,547 | $ | 514,986 | ||||
Accrued Expense and Interest Payable | 993,818 | 641,386 | ||||||
Convertible Notes Payable | 75,000 | - | ||||||
Convertible Note Payable - In Default (net of discount of $82,197 and $60,219, respectively) | 2,271,763 | 2,293,741 | ||||||
Notes Payable - In Default | 530,000 | 530,000 | ||||||
Derivative Liability - Convertible Notes Payable | 1,870,045 | 9,284,359 | ||||||
Total Current Liabilities | 6,255,173 | 13,264,472 | ||||||
Commitments and Contingencies (Note 8) | ||||||||
Shareholders’ deficit | ||||||||
Preferred Stock, ($0.001 par value; 20,000,000 shares authorized, 1,000,000 Series A shares issued and outstanding) | 1,000 | 1,000 | ||||||
Common Stock, ($0.001 par value; 5,000,000,000 shares authorized, 1,259,831,337 shares issued and outstanding) | 1,259,831 | 1,259,831 | ||||||
Common Stock to be Issued | 89,482 | 89,482 | ||||||
Additional paid in capital | 9,218,935 | 9,218,935 | ||||||
Accumulated deficit | (16,778,555 | ) | (23,825,468 | ) | ||||
Total shareholders’ deficit | (6,209,307 | ) | (13,256,220 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 45,866 | $ | 8,252 |
The accompanying notes are an integral part of these condensed, consolidated financial statements.
3 |
Life Clips, Inc. and Subsidiary (F/K/A Blue Sky Media Corporation)
Consolidated Statements of Operations
For the Three and Six Months ended December 31, 20162018 and 20152017
(Unaudited)
For the three month | For the three month | For the six month | For the six month | |||||||||||||
period ended | period ended | period ended | period ended | |||||||||||||
December 31, 2016 | December 31, 2015 | December 31, 2016 | December 31, 2015 | |||||||||||||
Revenues | ||||||||||||||||
Revenues | $ | 12,855 | $ | - | $ | 86,176 | $ | - | ||||||||
Cost of goods sold | 8,781 | - | 54,269 | - | ||||||||||||
Gross profit | 4,074 | - | 31,907 | - | ||||||||||||
Operating costs: | ||||||||||||||||
Compensation paid with stock | - | 10,150 | - | 10,150 | ||||||||||||
Finance Costs | 15,000 | 33,935 | 51,000 | 33,935 | ||||||||||||
Payroll Expense | 83,782 | 57,712 | 158,727 | 57,712 | ||||||||||||
Product Development Expense | 3,257 | 23,360 | 4,191 | 23,360 | ||||||||||||
Professional Fees | 53,927 | 5,699 | 1,813,192 | 5,699 | ||||||||||||
Licensing Fees | 137,000 | 137,000 | - | |||||||||||||
Marketing Expense | - | - | - | - | ||||||||||||
Software Fees and Support | 1,090 | - | 2,876 | - | ||||||||||||
Travel | 11,076 | 8,635 | 18,855 | 15,338 | ||||||||||||
Other general and administrative expenses | 20,347 | 12,818 | 51,081 | 55,397 | ||||||||||||
Total operating costs | 325,479 | 152,309 | 2,236,922 | 201,591 | ||||||||||||
(Loss) from operations | (321,405 | ) | (152,309 | ) | (2,205,015 | ) | (201,591 | ) | ||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (47,787 | ) | - | (92,019 | ) | (8,649 | ) | |||||||||
Amortization of Debt Discount | (715,460 | ) | (98,738 | ) | (1,131,979 | ) | (130,488 | ) | ||||||||
Loss on Derivative | 565,449 | (4,703,452 | ) | 13,157,878 | (4,703,452 | ) | ||||||||||
Loss on Acquisition of Batterfly Energy LTD | - | - | (6,191,000 | ) | - | |||||||||||
Total Other Income (Expense) | (197,798 | ) | (4,802,190 | ) | 5,742,880 | (4,842,589 | ) | |||||||||
(Loss) before income taxes | (519,203 | ) | (4,954,499 | ) | 3,537,865 | (5,044,180 | ) | |||||||||
Provision for income taxes | - | - | - | - | ||||||||||||
Net (loss) | $ | (519,203 | ) | $ | (4,954,499 | ) | $ | 3,537,865 | $ | (5,044,180 | ) | |||||
Basic earnings per share | ** | ** | 0.05 | ** | ||||||||||||
Weighted average number of common shares outstanding | 77,749,592 | 53,263,276 | 70,976,591 | 51,702,948 |
For the three month | For the three month | For the six month | For the six month | |||||||||||||
period ended | period ended | period ended | period ended | |||||||||||||
December 31, 2018 | December 31, 2017 | December 31, 2018 | December 31, 2017 | |||||||||||||
Revenues | ||||||||||||||||
Revenues | $ | - | $ | 485 | $ | - | $ | 512 | ||||||||
Cost of Goods Sold | - | - | - | - | ||||||||||||
Gross Profit | - | 485 | - | 512 | ||||||||||||
Operating Costs: | ||||||||||||||||
Licensing Fees | - | 62,500 | - | - | ||||||||||||
Finance Costs | 230 | - | 500 | - | ||||||||||||
Professional Fees | 15,236 | 60,996 | 32,266 | 226,939 | ||||||||||||
Consulting Fees | - | - | - | 5,400 | ||||||||||||
Management and Director Fees | 75,000 | - | 150,000 | - | ||||||||||||
Marketing Expense | - | - | - | 2,495 | ||||||||||||
Software Fees and Support | 225 | 355 | 572 | 567 | ||||||||||||
Travel, Meals and Entertainment | - | - | - | 2,691 | ||||||||||||
Other General and Administrative Expenses | 789 | 30,394 | 3,501 | 109,754 | ||||||||||||
Total Operating Costs | 91,480 | 154,245 | 186,839 | 347,846 | ||||||||||||
Income/(Loss) from Operations | (91,480 | ) | (153,760 | ) | (186,839 | ) | (347,334 | ) | ||||||||
Other Income/(Expense): | ||||||||||||||||
Loss on Extinguishment of Debt | (35,268 | ) | (274,430 | ) | (73,048 | ) | (929,564 | ) | ||||||||
Interest Expense | (91,964 | ) | (76,230 | ) | (182,514 | ) | (145,968 | ) | ||||||||
Change in Fair Value of Derivative | 2,616,268 | (1,105,729 | ) | 7,489,314 | (1,857,855 | ) | ||||||||||
Total Other Income (Expense) | 2,489,036 | (1,456,389 | ) | 7,233,752 | (2,933,387 | ) | ||||||||||
Income/(Loss) Before Income Taxes | 2,397,556 | (1,610,149 | ) | 7,046,913 | (3,280,721 | ) | ||||||||||
Provision for Income Taxes | - | - | - | - | ||||||||||||
Net Income/(Loss) | $ | 2,397,556 | $ | (1,610,149 | ) | $ | 7,046,913 | $ | (3,280,721 | ) | ||||||
Earnings/(Loss) Per Share: Basic and Diluted | ** | ** | $ | 0.01 | $ | (0.01 | ) | |||||||||
Weighted Average Number of Common Shares Outstanding: Basic and Diluted | 1,259,831,337 | 478,890,811 | 1,259,831,337 | 478,890,811 |
**Less than $0.01
The accompanying notes are an integral part of these condensed, consolidated financial statements.
4 |
LIFE CLIPS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)
For the three months ended December 31, 2018 and 2017
Preferred Stock | Common Stock | Common Stock To be | Additional Paid-In | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Issued | Capital | Deficit | Deficit | |||||||||||||||||||||||||
Balances as of September 30, 2018 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 89,482 | $ | 9,218,935 | $ | (19,176,111 | ) | $ | (8,606,863 | ) | ||||||||||||||||
Net Income | - | - | - | - | - | - | 2,397,556 | 2,397,556 | ||||||||||||||||||||||||
Balances as of December 31, 2018 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 89,482 | $ | 9,218,935 | $ | (16,778,555 | ) | $ | (6,209,307 | ) |
Preferred Stock | Common Stock | Common Stock To be | Additional Paid-In | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Issued | Capital | Deficit | Deficit | |||||||||||||||||||||||||
Balances as of September 30, 2017 | 1,000,000 | $ | 1,000 | 683,022,912 | $ | 683,024 | $ | 45,082 | $ | 9,683,604 | $ | (17,545,871 | ) | $ | (7,133,161 | ) | ||||||||||||||||
Shares issued for conversions and true-ups | - | - | 576,808,425 | 576,807 | - | (464,669 | ) | - | 112,138 | |||||||||||||||||||||||
Net Loss | - | - | - | - | - | - | (1,610,149 | ) | (1,610,149 | ) | ||||||||||||||||||||||
Balances as of December 31, 2017 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 45,082 | $ | 9,218,935 | $ | (19,156,020 | ) | $ | (8,631,172 | ) |
For the six months ended December 31, 2018 and 2017
Preferred Stock | Common Stock | Common Stock To be | Additional Paid-In | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Issued | Capital | Deficit | Deficit | |||||||||||||||||||||||||
Balances as of June 30, 2018 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 89,482 | $ | 9,218,935 | $ | (23,825,468 | ) | $ | (13,256,220 | ) | ||||||||||||||||
Net Income | - | - | - | - | - | - | 7,046,913 | 7,046,913 | ||||||||||||||||||||||||
Balances as of December 31, 2018 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 89,482 | $ | 9,218,935 | $ | (16,778,555 | ) | $ | (6,209,307 | ) |
Preferred Stock | Common Stock | Common Stock To be | Additional Paid-In | Accumulated | Total Shareholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Issued | Capital | Deficit | Deficit | |||||||||||||||||||||||||
Balances as of June 30, 2017 | 1,000,000 | $ | 1,000 | 187,866,308 | $ | 187,867 | $ | 45,082 | $ | 9,859,138 | $ | (15,875,299 | ) | $ | (5,782,212 | ) | ||||||||||||||||
Shares issued for conversions and true-ups | - | - | 1,068,965,029 | 1,068,964 | - | (642,603 | ) | - | 426,361 | |||||||||||||||||||||||
Shares issued for services | - | - | 3,000,000 | 3,000 | - | 2,400 | - | 5,400 | ||||||||||||||||||||||||
Net Loss | - | - | - | - | - | - | (3,280,721 | ) | (3,280,721 | ) | ||||||||||||||||||||||
Balances as of December 31, 2017 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 45,082 | $ | 9,218,935 | $ | (19,156,020 | ) | $ | (8,631,172 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
5 |
Life Clips, Inc. and Subsidiary (F/K/A Blue Sky Media Corporation)
StatementConsolidated Statements of Cash Flows
For the Six Months Ended
(Unaudited)
December 31, 2016 | December 31, 2015 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss) | $ | 3,537,865 | $ | (5,044,180 | ) | |||
Common Stock Compensation | 1,634,758 | 10,150 | ||||||
Accounts Receivable | (5,486 | ) | ||||||
Inventory | (29,705 | ) | (42,500 | ) | ||||
Deposit | 240,000 | |||||||
Other Current Assets | (8,128 | ) | 2,712 | |||||
Changes in derivative liabilities | (13,157,878 | ) | 4,703,452 | |||||
Amortization of Debt discount | 1,131,979 | 130,488 | ||||||
Loss on Batterfly acquisition | 6,191,000 | |||||||
Adjustments to reconcile Net Income to Net Cash provided by operations: | ||||||||
Accounts Payable | 63,604 | |||||||
Accrued expense and interest payable | (516,555 | ) | 913 | |||||
Payroll tax liabilities | 10,155 | 9,042 | ||||||
Net cash (used in) operating activities | (908,391 | ) | (229,923 | ) | ||||
Cash flows from investing activities: | ||||||||
Investment - Batterfly Energy Ltd | (32,500 | ) | ||||||
Developed software | (14,625 | ) | (88,957 | ) | ||||
Net cash (used in) provided by investing activities | (47,125 | ) | (88,957 | ) | ||||
Cash flows from financing activities: | ||||||||
Repurchase of common stock | (345,000 | ) | ||||||
Proceed from convertible notes payables | 500,000 | 867,577 | ||||||
Net cash provided by financing activities | 500,000 | 522,577 | ||||||
Net cash increased in cash | (455,516 | ) | 203,697 | |||||
Cash at beginning of period | 469,233 | 2,644 | ||||||
Cash at end of period | $ | 13,717 | $ | 206,341 | ||||
Supplemental Disclosures of cash flow information: | ||||||||
Cash paid for: | ||||||||
Interest | $ | - | $ | - | ||||
Income taxes | $ | - | $ | - | ||||
NON-CASH TRANSACTIONS AFFECTING OPERATING, INVESTING AND FINANCING ACTIVITIES | ||||||||
Value of common shares issued as payment of debt | $ | 366,112 | $ | 65,000 | ||||
Value of common shares issued for acquisition of Batterfly Energy LTD | $ | 5,091,000 | $ | 5,091,000 | ||||
Issuance of Common Stock for Acquisition of Batterfly Energy LTD | $ | 5,091,000 | $ | - | ||||
Issuance of Common Stock for Convertible Note Payable | $ | 1,925,369 | $ | - | ||||
Notes Payable | $ | 500,000 | $ | - |
December 31, 2018 | December 31, 2017 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net Income/(Loss) | $ | 7,046,913 | $ | (3,280,721 | ) | |||
Adjustments to Reconcile Net Income/(Loss) to Net Cash From Operating Activities: | ||||||||
Stock Compensation | - | 5,400 | ||||||
Changes in Fair Value of Derivative Liabilities | (7,489,314 | ) | 1,857,855 | |||||
Amortization of Debt Discount | 53,022 | 811,055 | ||||||
Changes in Assets and Liabilities: | ||||||||
Accounts Receivable | - | 3,064 | ||||||
Accounts Payable | (439 | ) | 218,069 | |||||
Accrued Expenses and Interest Payable | 352,432 | 237,978 | ||||||
Net Cash From Operating Activities | (37,386 | ) | (147,300 | ) | ||||
Cash Flows From Financing Activities: | ||||||||
Repayment of Note Payable-Related Party | - | 26,500 | ||||||
Proceeds From Convertible Notes Payables | 75,000 | 45,000 | ||||||
Net Cash From Financing Activities | 75,000 | 71,500 | ||||||
Net Change in Cash | 37,614 | (75,800 | ) | |||||
Cash at Beginning of Period | 8,252 | 91,672 | ||||||
Cash at End of Period | $ | 45,866 | $ | 15,872 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash Paid for: | ||||||||
Interest | $ | - | $ | - | ||||
Income Taxes | $ | - | $ | - | ||||
NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
Value of common shares issued as settlement of debt | $ | - | $ | 329,078 | ||||
Value of common shares issued as payment for services | - | 5,400 |
The accompanying notes are an integral part of these condensed, consolidated financial statements.
Life Clips, Inc.
(f/k/a Blue Sky Media Corp)Footnotes to Consolidated Financial Statements
Footnotes to Financial Statements December 31, 20162018
NOTE 1. ORGANIZATION AND OPERATIONS
Business and basis of presentation – Life Clips, Inc. (the “Company”) was incorporated under the laws ofin Wyoming on March 20, 2013 as Blue Sky Media Corporation. On November 3,Corporation and its principal business was developing, financing, producing and distributing motion pictures and related entertainment products. Following the Company’s October 2, 2015 acquisition of Klear Kapture, Inc. (“Klear Kapture”), the Company continued Klear Kapture’s business of developing a body camera and an auditable software solution suitable for use by law enforcement. The Company changed its name to Life Clips, Inc. on November 3, 2015 in order to more accuratelybetter reflect its business after a merger set forth below.
The Company was inoperations at the business of developing, production and distributing motion pictures. The Company entered into a merger and exchange agreement on October 2nd, 2015. Klear Kapture was in the business of developing state-of-the-art body/action cameras.time.
On October 2, 2015,July 11, 2016, the Company completed a stock merger and exchange agreement with Klear Kapture, Inc. (“Klear Kapture”its acquisition (the “Acquisition”). Pursuant to the terms of all of the Share Exchange Agreement,outstanding equity securities of Batterfly Energy Ltd. (“Batterfly”), an Israel-based corporation that develops and distributes a single-use, cordless battery under the Company agreed to issue 380,037,120 shares of its unregistered common stock to the shareholders of Klear Kapture in exchangebrand name Mobeego for 10,000 shares of its common stock, representing 100% of its issueduse with cellular phones and outstanding common stock. As part of the Share Exchange, the Company purchased 107,261,000 shares of our common stock from its former executive officers and directors for a price of $345,000. Upon the effective date of the transaction, Klear Kapture becameother mobile devices. Batterfly is now a wholly owned subsidiary of Life Clips.the Company. The Acquisition was completed pursuant to a Stock Purchase Agreement, dated as of June 10, 2016 (the “Purchase Agreement”), among the Company, Batterfly and all of the shareholders of Batterfly, as amended.
The Company acquired Batterfly Energy in July 2016. Batterfly manufactures the Mobeego® brand emergency cell phone battery. The Mobeego provides an extra 20-40% shot of poweris currently open to a cell phone without having to be tethered or charged. The batteries have a 10-year shelf life. The Company realized the packaging that was inherited did not convey the message properly and is in the process of re-packaging the product.pursuing alternative business opportunities.
On September 22, 2016 the Company entered into a partnership license agreement with HP. The agreement allows Life Clips to design, manufacture and sell HP branded action cameras, 360 cameras, dash cameras and still cameras. The agreement also calls for accessory sales and the building of an online cloud repository to store, edit and share user created videos and pictures.
The Agreement called for the Company to no longer sell the Life Clips branded cameras or accessories to eliminate channel conflict or confusion. Therefore, the Company will focus its efforts on creating best in class HP branded products and accessories.
In January 2017, Robert Gruder, CEO and Robert Finnigan, President resigned from Life Clips. In January 2017, Victoria Rudman took on the role of CFO. In February 2017 Huey Long joined as CEO and in March 2017 William Singer was named the Executive Vice President of Sales.
Life Clips is restructuring to become a global consumer electronics company focused on developing hardware and accessories for mobility through the Mobeego brand and Digital Imaging Products through the Hewlett Packard (HP) brand. We are developing the design, sourcing, logistics and sales operations to quickly increase our sales of our existing products and put us in a position to launch new product in 2017.
The company will continue to focus on the development of mobile power and imaging products. We are immediately increasing our sales efforts on our unique products that are already available such as the Mobeego one-time charger for mobile devices. This device allows you to use your smartphone, tablet or any mobile device up to 4 hours on a single emergency charge. Once your done you simply dispose of the recyclable battery.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Consolidation – The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company consolidates the financial statements of its wholly-owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation.
Interim Disclosures – These unaudited consolidated financial statements should be read with the Company’s audited financial statements and footnotes included in the Company’s Report on Form 10-K for the year ended June 30, 2018, filed with the Securities and Exchange Commission (“the Commission”) on February 12, 2020. The results of operations for the six month period ended December 31, 2018 are not necessarily indicative of the results that may be expected for the entire year ending June 30, 2019 or for any future period.
Use of estimatesEstimates – The preparation of financial statements in conformity with generally accepted accounting principlesGAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Cash and cashCash equivalents – For financial statement presentation purposes, the Company considers all short termshort-term investments with a maturity date of three months or less to be cash equivalents.
Income Tax – The Company accounts for income taxes under ASCAccounting Standards Certifications (“ASC”) 740 “Income Taxes” which codified SFAS 109, “Accounting for Income Taxes.” under the asset and liability method of (“ASC 740, deferred740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.
Basic and Diluted Net Income (Loss) Per Share – The Company computes net income (loss) per share in accordance with ASC 260 “Earnings Per Share” which codified SFAS No. 128. “Earnings per Share.”(“ASC 260”). ASC 260 requires presentation of both basic and diluted earnings per share (EPS)“EPS” on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common shareholders (numerator) by the weighted average number of shares of common stock outstanding during the period. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Intangible Asset – The Company is developing software. The development cost through December 31, 2016 has totaled $14,625. The software has an infinite useful life and will be tested annually for impairment.
Fair Value of Financial Instruments
– The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
7 |
The following are the hierarchical levels of inputs to measure fair value:
● | Level 1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. | |
● | Level 2 – Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |
● | Level 3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. |
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets,accounts receivable, accounts payable, & accrued expenses and interest, certain notes payable and notes payable – related party, approximate their fair values because of the short maturity of these instruments.
The Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3. See3 (See Note 8.6).
Embedded Conversion Features
– The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion feature.
Derivative Financial Instruments
– The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.
For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Debt Issue Costs and Debt Discount
– The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense overincluded in the lifeline item loss on extinguishment of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Stock based compensationBased Compensation – ASC 718 “Compensation - Stock Compensation” codified SFAS No. 123 prescribes accounting and reporting standards for all stock basedstock-based compensation plansplan payments awardawarded to employees, including employee stock options, restricted stock, employee stock purchase plans and stock appreciation rights, which may be classified as either equity or liabilities. The Company should determine if a present obligation to settle the share basedshare-based payment transaction in cash or other assets exists. A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks commercial substance or (b) the present obligation is implied because of an entity’s past practices or stated policies. If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be recognized as equity.
The Company accounts for stock basedstock-based compensation issued to nonemployees and consultants in accordance with the provisions of ASC 50550 “Equity Based505-50 “Equity-Based Payments to Non-Employees” which codified SFAS 123 and the Emerging Issues Task Force consensus in Issue No. 9618, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction with Selling, Goods or Services”. Measurement of share basedshare-based payment transactions with nonemployees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share basedshare-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.
Common Stock – On December 15, 2015, the Company filed Articles of Amendment to authorize 320,000,000 shares of common stock, to change the par value to $0.001 and to execute a 11:1 forward stock split. All common stock and per share data for the period presented in this Quarterly Report on Form 10-K have been adjusted to give effect to the forward stock split.
Preferred Stock – On December 15, 2015, the Company filed Articles of Amendment to authorize 20,000,000 shares of preferred stock, par value $0.001.
Recognition of Revenues – The Company recognizes revenue in accordance with Staff Accounting BulletinStandards Update (“ASU”) No. 104,2014-09 “Revenue Recognition in Financial Statements”from Contracts with Customers”. This statement establishedThe Company recognizes as revenues the amount of the transaction price that revenue can be recognizedis allocated to the respective performance obligations when persuasive evidence of an arrangement exists, the servicesperformance obligation is satisfied, or as it is satisfied. The Company primarily sells disposable and recyclable cell phone batteries. The Company’s performance obligation is satisfied when the goods have been delivered, which is at a point in time. The Company applies the following five steps in order to determine the appropriate amount of revenue recognized as it fulfills its obligations under each of its agreements:
● | identify the contract with a customer; | |
● | identify the performance obligations in the contract; | |
● | determine the transaction price; | |
● | allocate the transaction price to performance obligations in the contract; and | |
● | recognize revenue as the performance obligation is satisfied. |
8 |
Recently Issued Accounting Pronouncements – Financial Accounting Standards Board (“FASB”) ASU 2016-02 “Leases (Topic 842)”- In February 2016, the FASB issued ASU 2016-02, which will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the potential impact this standard will have on its consolidated financial statements and related disclosures.
FASB ASU 2015-17 “Income Taxes (Topic 740)” - In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred tax assets and liabilities on the balance sheet. Previous GAAP required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts on the balance sheet. The amendment requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. The Company has adopted ASU 2015-17 as of July 1, 2017. Adopting this standard did not have a material impact on the Company’s consolidated financial statements or financial statement disclosures.
FASB ASU 2014-09 “Revenue from Contracts with Customers (Topic 606),” or ASU 2014-09 - In May 2014, the FASB issued ASU 2014-09, which supersedes the revenue recognition requirements of ASC Topic 605 “Revenue Recognition.” ASU 2014-09 requires revenue recognition to depict the transfer of 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. The new revenue recognition model requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing the revenue upon satisfaction of the performance obligations. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant contractual obligations have been satisfied,judgments and change in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 can be applied either retrospectively to each prior reporting period presented or retrospectively with the feecumulative effect of initially applying the update recognized at the date of the initial application along with additional disclosures. This ASU is fixedeffective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. The Company adopted the new revenue guidance effective July 1, 2017. There was no material impact to the Company’s consolidated financial statements or determinable and collection is reasonably assured.financial statement disclosures.
Subsequent Events– The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards CodificationASC 855 “Subsequent Events” for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued.
Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification,ASC, the Company, as an SEC filer, considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.
Recent Pronouncements –The Company reviewed all recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC and they did not or are not believed by management to have a material impact on the Company’s present or future financial statements.
NOTE 3. UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements, the Company has minimal revenues, net accumulated losses since inception and a shareholders’an accumulated deficit of $(16,916,471).$16,778,555. These factors raise doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on management funding operating costs and the successful production and sales release of the Life Clips camera.costs. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 4. RELATED PARTY TRANSACTIONSNOTES PAYABLE
At December 31, 20162018 and June 30, 2016, there were no related party transactions.
NOTE 5. INTANGIBLE ASSETS
The Company is developing software. The development cost for the period ended December 31 2016 is $14,625. The software has an infinite useful life and will be tested annually for impairment.
December 31, 2016 | June 30, 2016 | |||||||
Software | $ | 14,625 | $ | 646,980 | ||||
Less: Impairment Charges | (646,980 | ) | ||||||
Less: Accumulated Amortization | — | — | ||||||
Software - net | $ | -14,625- | $ | -0- |
NOTE 6. NOTES PAYABLE
On July 14, 20162018, the Company issued a $30,000 promissory note to NUWA Group, LLC. The promissory note is a standard, non-convertible note. The effective interest rate is 5.00% per annum, calculated yearly not in advance. The note is to be repaid in full on October 14, 2016. Note proceeds are to be used for operating expenses.
Pursuant to the Stock Purchase Agreement by and among Batterfly Energy, LTD and the Company, on July 11, 2016 the Company issued a $500,000 Promissory Note and Stock Pledge Agreement to the former shareholders of Batterfly Energy, LTD. The promissory note is a standard, non-convertible note. The effective interest rate is 1.00% with a default interest rate of 10.00%. The note is to be repaid inhad two (2) payments, $250,000 on October 11, 2016 and the balance due on February 13, 2017.
At December 31, 2016 and June 30, 2016 the Company had notes payable in the amount of $530,000, and $0, respectively.with the following terms:
NOTE 7. CONVERTIBLE DEBT AND WARRANTS
The Company has recorded derivative liabilities associated with convertible debt instruments and warrants, as more fully discussed at Note 8.
1. | The Batterfly Acquisition Note required the Company to make two payments of $250,000 on October 6, 2017 and February 13, 2017. Upon failure to pay the payment due, the balance began to accrue interest at 11% per annum. | |
2. | On July 14, 2016, the Company issued a new promissory note to NUWA Group, LLC., from which the Company received $30,000 in gross proceeds, has a maturity date of October 14, 2016, and bears interest at 5% per annum. This promissory note does not have a conversion feature. |
9 |
(A) Convertible DebtNOTE 5. CONVERTIBLE DEBT
Convertible Notes
Balance at December 31, 2018 | Balance at June 30, 2018 | Due Date | Interest Rate | Conversion Terms | ||||||||
$ | 1,931,806 | $ | 1,931,806 | Range from 10/01/2017 to 04/18/2018 | Range from 3.85% to 22% | Conversion price equal to fifty percent (50%) of the lowest trading price during the twenty (20) trading day period prior to the date of conversion - $0.0001 at June 30, 2018, convertible into 19,318 million shares not including interest. | ||||||
332,154 | 332,154 | Range from 06/10/17 to 03/30/18 | 10% | Conversion price equal to seventy five percent (75%) of the lowest trading price during the five (5) trading day period prior to the date of conversion - $0.0003 at June 30, 2018, convertible into 1,107 million shares not including interest. | ||||||||
90,000 | 90,000 | Range from 01/28/2018 to 05/01/2019 | Range from 10% to 22% | Conversion price equal to fifty percent (50%) of the lowest trading price during the five (5) trading day period prior to the date of conversion - $0.0002 at June 30, 2018, convertible into 450 million shares not including interest. | ||||||||
75,000 | - | 11/28/2019 | 18% | Conversion price equal to fifty percent (50%) of the lowest trading price during the five (5) trading day period prior to the date of conversion | ||||||||
$ | 2,428,960 | $ | 2,353,960 |
On October 2, 2015,August 8, 2018, the Company completedentered into an offering of its 3.85%18% Convertible Promissory Notes (the “3.85% Notes”)Note with Long Side Ventures LLC, an unaffiliated third party. The note was in the aggregatea principal amount of $617,578$15,000, and on December 7, 2015 the Company completed an offering of its 10% Convertible Promissory Notes (the “10% Notes”) in the aggregate principal amount of $250,000 (the “10% Notes”, and together with the 3.85% Notes, eachis convertible at a “Note” and collectively, the “Notes”price equal to fifty percent (50%), as applicable, with certain “accredited investors” (the “Investors”), as defined under Regulation D, Rule 501 of the Securities Act. The entire principal amount oflowest trading price during the Notes remaining outstanding at December 31, 2016 was $417,588, such amount being exclusive of securities converted into the Notes separate from the offering of the Notes. Pursuant to the offering of the Notes, the Company received $617,578 and $250,000 in net proceeds on October 2, 2015 and December 7, 2015, respectively.
In addition to the terms customarily included in such instruments, the Notes began accruing interest on the date that each Investor submitted the principal balance of such Investor’s Note, with the interest thereon becoming due and payable on the two-year anniversary of said date. Upon a default of the Notes, the interest rate will increase to 18%. The principal balance of each Note and all unpaid interest will become due and payable twenty-four (24) months after the date of issuance. The Notes may be prepaid with or without a penalty depending on the date of the prepayment. The principal and interest under the 3.85% Notes are converted at $ $0.026. The principal and interest under the 10% Notes are convertible into shares of the Company’s common stock at 75% times the Volume Weighted Average Price for a 5 daysfive-trading day period prior to the conversion date as quoted on the OTC market and pursuant to the terms of a Security Purchase Agreement, dated as of October 2, 2015 and December 7, 2015, as applicable, by and between the Company and each Investor.conversion. The note maturity date is August 8, 2019.
In connection with the Notes Offering,On September 24, 2018, the Company entered into Registration Rights Agreements, each dated asan 18% Convertible Promissory Note with Long Side Ventures LLC, an unaffiliated third party. The note was in a principal amount of October 2, 2015$5,000, and December 7, 2015 and each by and between us and eachis convertible at a price equal to fifty percent (50%) of the Investors.
The company entered into convertible notes with eleven third party accredited investors from December 2015 to December 2016. In addition tolowest trading price during the terms customarily included in such instruments, the Notes began accruing interest on the date that each Investor submitted the principal balance of such Investor’s Note, with the interest thereon becoming due and payable on terms specified in said date (see below). Interest rates range from 5% to 10% and are due at various dates from August 2016 to March 2018. These notes are convertible at any time by the investor,five-trading day period prior to the date of conversion. The note maturity date is September 24, 2019.
On September 26, 2018, the Company entered into an 18% Convertible Promissory Note with Crest Ventures LLC, an unaffiliated third party. The note was in a principal amount of $5,000, and interest being repaidis convertible at rates ranging from $0.006a price equal to $0.033 per share, subject to change due to a ratchet feature contained in mostfifty percent (50%) of the notes.lowest trading price during the five-trading day period prior to the date of conversion. The note maturity date is September 26, 2019.
Issue Date | Maturity Date | Interest rate | Interest rate (default) | Principal | ||||||||||
10/2/2015 | 10/2/2017 | 3.85 | % | 18 | % | 617,578.00 | ||||||||
12/7/2015 | 11/30/2017 | 10.00 | % | 10 | % | 250,000.00 | ||||||||
2/4/2016 | 8/4/2016 | 5.00 | % | na | 15,000.00 | |||||||||
4/26/2016 | 3/30/2018 | 10.00 | % | 18 | % | 25,000.00 | ||||||||
4/26/2016 | 3/30/2018 | 10.00 | % | 18 | % | 50,000.00 | ||||||||
4/27/2016 | 3/30/2018 | 10.00 | % | 18 | % | 300,000.00 | ||||||||
5/13/2016 | 5/13/2017 | 10.00 | % | 22 | % | 700,000.00 | ||||||||
6/14/2016 | 5/30/2017 | 10.00 | % | 18 | % | 75,000.00 | ||||||||
7/21/2016 | 3/30/2017 | 10.00 | % | 10 | % | 75,000.00 | ||||||||
8/23/2016 | 2/23/2017 | 10.00 | % | 18 | % | 15,000.00 | ||||||||
9/22/2016 | 4/22/2017 | 10.00 | % | 22 | % | 225,000.00 | ||||||||
10/18/2016 | 7/18/2017 | 10.00 | % | 18 | % | 150,000.00 | ||||||||
Total Convertible Notes | 2,497,578.00 |
On November 28, 2018, the Company entered into an 18% Convertible Promissory Note with Long Side Ventures LLC, an unaffiliated third party. The note was in a principal amount of $50,000 and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the five-trading day period prior to the date of conversion. The note maturity date is November 28, 2019.
(B) TermsThe Company evaluated the convertible promissory notes under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis of Debtembedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative consists of the embedded conversion feature. The conversion option bears risks of equity which were not clearly and closely related to the host debt agreement and required bifurcation. See Note 6 for further discussion.
The debt carries interest between 3.85% and 10%, and is due in October 2017 through March 2018.
All convertible debt in connection with the Notes Offering are convertible at $0.026 and $0.033/share (on December 31, 2016), however, the Notes include a “ratchet feature”, which allows for a lower offering price based on market prices.
(C) Future Commitments
At December 31, 2016, the Company has outstanding convertible debt of $1,920,088 which is payable within the next fifteen months.
(D) Warrants
The Company issued six warrants dated from February to July 2016. Four of the warrants are related to consulting agreements and two are related to convertible note holders. All warrants issued through December 31, 2016 were accounted for as derivative liabilities, as the warrants were not held on reserve at and therefore tainted. See Note 8. Two warrants issued were exercised during the period ended September, 2016. The details are:
Purpose of | Issue | Number Shares | Warrant | Period Warrants | ||||||||||
Warrant Issuance | Date | Common Stock | Exercise Price | Exercisable | ||||||||||
Consulting Services | 2/22/2016 | 2,600,000 | $ | 0.001 | 2/22/2016 to 2/22/2019 | |||||||||
Exercised | 9/9/2016 | (2,600,000 | ) | |||||||||||
Website design and Digital | 3/10/2016 | 1,916,500 | $ | 0.001 | 3/10/2016 to 3/10/2019 | |||||||||
Locker app development | ||||||||||||||
Exercised | 9/20/2016 | (1,916,500 | ) | |||||||||||
Investor Incentive | 4/27/2016 | 625,000 | $ | 0.400 | 4/27/2016 to (not defined) | |||||||||
Investor Incentive | 5/13/2016 | 350,000 | $ | 0.400 | 5/13/2016 to 5/13/2019 | |||||||||
Consulting Services | 7/29/2016 | 525,000 | $ | 0.001 | 7/29/2016 to 7/29/2021 | |||||||||
Consulting Services | 7/29/2016 | 225,000 | $ | 0.001 | 7/29/2016 to 7/29/2021 | |||||||||
Total | 1,725,000 |
NOTE 8. DERIVATIVE LIABILITIES
The Company identified conversion features embedded within convertible debt and warrants issued in the period ended December 31, 2016. The Company has determined that the features associated with the embedded conversion option, in the form a ratchet provision, should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would be available to settle all potential future conversion and warrant transactions.
As a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt and warrants is summarized as follow:
December 31, 2016 | June 30, 2016 | |||||||
Carried forward from the prior period ended | $ | 20,143,189 | $ | |||||
Fair value at the commitment date - convertible debt | $ | 613,957 | $ | 6,142,583 | ||||
Fair value at the commitment date - warrants | 359,163 | 1,541,236 | ||||||
Fair value mark to market adjustment - convertible debt | (14,405,830 | ) | 10,641,842 | |||||
Fair value mark to market adjustment - warrants | (2,062,007 | ) | 1,817,529 | |||||
Reclassified to additional paid in capital | (1,344,284 | ) | ||||||
Totals | $ | 3,304,188 | $ | 20,143,189 |
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as December 31, 2016:
Commitment Date | Re-measurement Date | |||||||
Expected dividends | 0 | % | 0 | % | ||||
Expected volatility | 220 | % | 243 | % | ||||
Expected term | 0.5 to 5 years | 0.00-4.58 years | ||||||
Risk free interest rate | 0.39%-1.14 | % | 0.62%- 1.93 | % |
NOTE 9. CONVERTIBLE DEBT - NETDebt Discount
The Company recorded the debt discount to the extent of the gross proceeds raised and expensed immediately the remaining fair value of the derivative liability, as it exceeded the gross proceeds of the note.
Future Commitments
At December 31, 2018 the Company has outstanding convertible debt of $2,428,960, which is due within the next 12 months.
10 |
NOTE 6 –DERIVATIVE FINANCIAL INSTRUMENTS
The Company’s convertible promissory notes and detachable warrants gave rise to derivative financial instruments. The notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option. Additionally, the detachable warrants contained terms and features that gave rise to derivative liability classification. As of December 31, 2018, the Company recorded debt discountdoes not have enough authorized shares to settle all potential conversion and warrant transactions.
The following tables summarize the components of $315,598the Company’s derivative liabilities and linked common shares as of December 31, 20162018 and $2,076,912June 30, 2018 and the amounts that were reflected in income related to derivatives for the year ended June 30, 2016.period ended:
December 31, 2018 | ||||||||
The financings giving rise to derivative financial instruments | Indexed Shares* (in millions) | Fair Values | ||||||
Embedded derivatives | 174,800 | $ | 1,870,045 | |||||
Derivative warrants | 1 | 0 | ||||||
Total | 174,801 | $ | 1,870,045 |
*including principal and interest
June 30, 2018 | ||||||||
The financings giving rise to derivative financial instruments | Indexed Shares* (in millions) | Fair Values | ||||||
Embedded derivatives | 24,432 | $ | 9,284,352 | |||||
Derivative warrants | 1 | 7 | ||||||
Total | 24,433 | $ | 9,284,359 |
*including principal and interest
Accumulated amortizationThe following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of debt discount amounted to $1,619,379 asthe derivative financial instruments by type of financing for the three months ended December 31, 20162018 and $487,3992017:
The financings giving rise to derivative financial instruments and the gain (loss) effects: | For the Three Months Ended | |||||||
| December 31, 2018 | December 31, 2017 | ||||||
Embedded derivatives | $ | 2,616,268 | $ | (1,105,729 | ) | |||
Derivative warrants | 0 | 0 | ||||||
Total | $ | 2,616,268 | $ | (1,105,729 | ) |
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the yearsix months ended June 30, 2016.December 31, 2018 and 2017:
The financings giving rise to derivative financial instruments and the gain (loss) effects: | For the Six Months Ended | |||||||
December 31, 2018 | December 31, 2017 | |||||||
Embedded derivatives | $ | 7,489,314 | $ | (1,860,098 | ) | |||
Derivative warrants | 0 | 2,243 | ||||||
Total | $ | 7,489,314 | $ | (1,857,855 | ) |
Current accounting principles that are provided in ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. The Company recorded amortization expensehas selected the Binomial Lattice Model, which approximates the Monte Carlo Simulations, valuation technique to fair value the compound embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Binomial Lattice Model technique is a level three valuation technique because it requires the debt issuance costdevelopment of $1,131,979significant internal assumptions in addition to observable market indicators.
11 |
Significant inputs and results arising from the Monte Carlo Simulation process are as follows for the embedded derivatives that have been bifurcated from the convertible notes and classified in liabilities:
December 31, 2018 | June 30, 2018 | |||||||
Quoted market price on valuation date | $ | 0.0004 | $ | 0.0005 | ||||
Range of effective contractual conversion rates | $ | 0.00025 | $ | 0.0001 - $0.0003 | ||||
Contractual term to maturity | 0.05 – 0.91 Years | 0 – 0.83 Years | ||||||
Market volatility: | ||||||||
Volatility | 140 | % | 210 | % | ||||
Risk-adjusted interest rate | 2.54 | % | 2.15 | % |
The Company has selected the Black Scholes Merton valuation technique to fair value the detachable warrants because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives.
Significant inputs and results arising from the Black Scholes Merton process are as follows for the detachable warrants classified in liabilities:
December 31, 2018 | June 30, 2018 | |||||||
Quoted market price on valuation date | $ | 0.0004 | $ | 0.0005 | ||||
Contractual strike price | $ | 0.40 | $ | 0.40 | ||||
Contractual term to maturity | 0.32 - 0.37 Years | 0.82 - 0.87 Years | ||||||
Market volatility: | ||||||||
Volatility | 104 | % | 210 | % | ||||
Risk-free interest rate | 2.47 | % | 2.15 | % |
The following table reflects the issuances of compound embedded derivatives and detachable warrants and changes in fair value inputs and assumptions related to the embedded derivatives and detachable warrants during the six months ended December 31, 20162018 and $487,399 for the year ended June 30, 2016.2017.
December 31, 2016 | June 30, 2016 | |||||||
Balance Prior Year | 443,065 | 85,000 | ||||||
Proceeds | $ | 465,000 | 2,032,578 | |||||
Repayments | (581,112 | ) | (85,000 | ) | ||||
Less: gross Debt Discount recorded | (318,598 | ) | (2,076,912 | ) | ||||
Add: Amortization of Debt Discount | 1,131,979 | 487,399 | ||||||
Less Current portion | (195,067 | ) | (108,953 | ) | ||||
Long-Term Convertible Debt | $ | 945,267 | 334,112 |
Six Months Ended | Six Months Ended | |||||||
December 31, 2018 | December 31, 2017 | |||||||
Balances at beginning of period | $ | 9,284,359 | $ | 2,959,841 | ||||
Issuances: | ||||||||
Embedded derivatives | 136,011 | 612,033 | ||||||
Detachable warrants | - | - | ||||||
Conversions: | ||||||||
Embedded derivatives | - | (315,084 | ) | |||||
Detachable warrants | - | - | ||||||
Changes in fair value inputs and assumptions reflected in income | (7,550,325 | ) | 1,825,723 | |||||
Balances at end of year | $ | 1,870,045 | $ | 5,082,513 |
NOTE 10.7. EQUITY
For the six-month period ended December 31, 2016 36,466,902 shares of common stock were issued bringing the total shares issued and outstanding to 89,799,478.Authorized Capital
On October 2, 2015 (the “Effective Date”) the Company entered into and closed on a merger and exchange agreement (the “Share Exchange Agreement”) with Klear Kapture in an effort to expand its current line of business. Klear Kapture has developed a body camera and an auditable software solution suitable for use by law enforcement that it intends to produce, market and sell. Following the closing of the Share Exchange Agreement, we intend to continue Klear Kapture’s historical business and proposed business and have entered into a services agreement with our former executive officers and directors to operate our film marketing, distribution and production video and APP development businesses pursuant to the terms of a Services Agreement dated October 2, 2015 (the “Services Agreement”). However, we no longer intend to operate the pre-transaction business of the Company.
Pursuant to a consulting agreement with a non-related third party, we issued 3,190,000 shares on October 2, 2015 for a price of approximately $0.00318 per share (an aggregate of $10,150), which was recorded as consulting services.
On December 15, 2015,April 4, 2017, the Company filed Articles of Amendment to authorizeRestatement with the Wyoming Secretary of State authorizing 320,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”) and 20,000,000 shares of Preferred Stock, par value $0.001 (the “Preferred Stock”). The Board may issue shares of Preferred Stock in one or more series and fix the rights, preferences and privileges thereof, including voting rights, terms of redemption, redemption prices, liquidation preferences, number of shares constituting any series or the designation of such series, without further vote or action by the stockholders.
On June 28, 2017, the Company filed Articles of Amendment to authorize 20,000,000 sharean increase in the number of authorized shares of Common Stock from 300,000,000 to 800,000,000.
On September 28, 2017, the Company filed Articles of Amendment to authorize an increase in the number of authorized shares of Common Stock from 800,000,000 to 5,000,000,000.
12 |
Preferred Stock
Effective as of May 19, 2017, the Company amended its Articles of Incorporation to designate 1,000,000 shares of preferred stock as Series A Preferred Stock, with a par value of $0.001 per share (the “Series A Stock”). Each share of Series A Stock ranks, with respect to dividend rights and rights upon liquidation, winding up or dissolution of the Company, the same as the common stock of the Company, par value $0.001 per share (the “Common Stock”) and is not entitled to execute a 11:1 forward stock split. All common stock and perany specific dividends or other distributions, other than those declared by the Board of Directors. Each share date for the period presented in this Annual Reportof Series A Stock has 100 votes on Form 10-K has been adjusted to give effect to the forward stock split.
Pursuant to the terms of the Share Exchange Agreement, as of the Effective Date, we agreed to issue 38,037,120 shares of our unregistered common stockany matter submitted to the shareholders of Klear Kapture in exchange for 10,000 shares of its common stock, representing 100% of its issuedthe Company, and outstanding common stock in the Share Exchange. As part of the Share Exchange, we purchased 107,261,000 shares of our common stock from our former executive officers and directors for a price of approximately $ 0.00318 per share (an aggregate of $345,000). Upon the Effective Date, Klear Kapture became a wholly owned subsidiary of our company and our pro-forma shares of common stock outstanding giving effect to the repurchase of shares from our former executive officers and directors is 53,343,620. Robert Gruder who was appointed as our Chief Executive Officer and a Director in connectionSeries A Stock votes together with the Share Exchange received 30,296,563 sharesholders of our common stock in exchange for 7,965 shares of Klear Kapture’s common stock he previously owned. Mr. Gruder’s ownership of our common stock at the exchange date represented approximately 56.8% of our issued and outstanding shares of common stock. At September 30, 2016 Mr. Gruder’s ownershipall other capital stock of our commonthe Company (including the Common Stock and any other series of preferred stock represents approximately 30.8%then outstanding), and not as a separate class, series or voting group on any such matter. The Series A Preferred Stock is not transferrable by the holder and may be redeemed by the Company at any time for the par value. In the event that the holder of ourSeries A Preferred Stock who is an employee or officer of the Company leaves their position as an employee or officer of the Company for any reason, the Series A Preferred Stock held by that holder will be automatically cancelled and will revert to being authorized and unissued shares of Series A Preferred Stock. The Series A Stock is not convertible into any other class of shares of the Company.
On May 25, 2017, the Company issued 1,000,000 shares of Series A Stock to Victoria Rudman, the Company’s Chief Financial Officer, in return for services provided to the Company by Ms. Rudman and outstanding shares.to ensure Ms. Rudman’s continued service to the Company.
Effective as of June 2, 2017, the Company amended its Articles of Incorporation by amending the Certificate of Designation for the Series A Stock to increase the number of votes that each share of Series A Stock has to 200 votes. Effective as of August 7, 2017, the Company again amended its Articles of Incorporation by amending the Certificate of Designation for the Series A Stock to increase the number of votes that each share of Series A Stock has to 400 votes.
Stock and Incentive Plan
On April 20, 2016,2017, the companyCompany adopted the Life Clips, Inc. 20162017 Stock and Incentive Plan under which the Company may issue nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock grants and units, performance units and awards of cash. A maximum of 20,000,000 shares of common stock may be issued under the plan, representing in excess of 35% of the number of the Company’s currently outstanding shares. Awards under the plan will be made at the discretion of the Board of Directors, although no awards have been made to date. Accordingly, the Company cannot currently determine the amount of awards that will be made under the plan.
Warrants and Options
At December 31, 2018 and June 30, 2018, the Company had 975,000 warrants outstanding, with a strike price of $0.40. No warrants were granted, forfeited or expired during the six month periods ended December 31, 2018 and 2017. The Company has issued six warrants dated from February to July 2016. Fourweighted average remaining lives of the warrants are related to consulting agreementswere 0.34 and two are related to convertible note holders. See Note 7 (D) for details:0.84 at December 31, 2018 and June 30, 2018, respectively.
On August 31, 2016, the company issued 2,593,247 shares of its common stock to NUWA Group LLC in a cashless warrant exchange pursuant to the terms of a business consulting agreement dated February 22, 2016. The share price at the effective date was $0.365 and the warrant for 2,600,000 shares was exercisable at $0.001 per share for total increase in Common Stock of $2,593.25 and in Additional Paid In Capital of $943,941.91.NOTE 8. COMMITTMENTS AND CONTINGENCIES
On September 9, 2016,From time to time, the company issued 2,500,000 sharesCompany may be a party to other legal proceedings. Management currently believes that the ultimate resolution of its common stock to Long Side Ventures LLC in exchange for $65,000.00these matters will not have a material adverse effect on consolidated results of the purchaser’s convertible note payable. The original issuance date of the $ 151,072.71 note payable was October 2, 2015. The exercise price of the note was stated at $0.026 per common share. The proceeds reduced Convertible Notes Payable $65,000.00.operations, financial position, or cash flow.
On September 20, 2016, the company issued 1,910,511 shares of its common stock to Binary Ventures, Inc. in a cashless warrant exchange pursuant to the terms of a business consulting agreement dated March 10, 2016. The share price at the effective date was $0.221 and the warrant for 1,916,500 shares was exercisable at $0.001 per share for total increase in Common Stock of $1,910.51 and in Additional Paid In Capital of $420,312.42.
On October 24, 2016, the company issued 1,807,229 shares of its common stock to Susannah Forest 2011 Revocable Trust in exchange for $150,000.00 of the purchaser’s convertible note payable. The original issuance date of the $ 250,000.00 note payable was December 7, 2015. The exercise price of the note was stated at 75% of the volume weighted average price of the Company’s common stock for a 5-day period prior to the conversion date, subject to certain minimum and maximum conversion prices. The proceeds reduced Convertible Notes Payable $150,000.00.
On October 26, 2016, the company issued 3,534,706 shares of its common stock to Bezalel Partners, LLC in exchange for $60,090.00 of the purchaser’s convertible note payable. The original issuance date of the $ 164,359.76 note payable was October 2, 2015. The exercise price of the note was stated at $0.017. The proceeds reduced Convertible Notes Payable $60,090.00.
On November 29, 2016, the company issued 268,102 shares of its common stock to R&T Sports Marketing, Inc. in exchange for $25,000.00 of the purchaser’s convertible note payable. The original issuance date of the $ 25,000.00 note payable was April 26, 2016. The exercise price of the note was stated at 75% of the volume weighted average price of the Company’s common stock for a 5-day period prior to the conversion date, subject to certain minimum and maximum conversion prices. The proceeds reduced Convertible Notes Payable $25,000.00.
On December 6, 2016, the company issued 157,895 shares of its common stock to Atlanta Capital Partners, LLC in exchange for $15,000.00 of the purchaser’s convertible note payable. The original issuance date of the $ 15,000.00 note payable was August 23, 2016. The exercise price of the note was stated at 75% of the volume weighted average price of the Company’s common stock for a 5-day period prior to the conversion date. The proceeds reduced Convertible Notes Payable $15,000.00.
On December 7, 2016, the company issued 2,900,000 shares of its common stock to Taconic Group, LLC in exchange for $75,400.00 of the purchaser’s convertible note payable. The original issuance date of the $ 151,072.71 note payable was October 2, 2015. The exercise price of the note was stated at $0.026 per common share. The proceeds reduced Convertible Notes Payable $75,400.00.
On December 7, 2016, the company issued 3,731,343 shares of its common stock to Edgestone Associates, Inc. in exchange for $37,500.00 of the purchaser’s convertible note payable. The original issuance date of the $ 700,000.00 note payable was May 13, 2016. The exercise price of the note was stated at 50% multiplied by the Market Price, defined as the lowest Trading Price for the Common Stock during the twenty (20) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. The proceeds reduced Convertible Notes Payable $37,500.00.
On December 8, 2016, the company issued 1,346,221 shares of its common stock to Summit Trading Partners, LLC in exchange for $50,000.00 of the purchaser’s convertible note payable. The original issuance date of the $ 50,000.00 note payable was April 26, 2016. The exercise price of the note was stated at 75% of the volume weighted average price of the Company’s common stock for a 5-day period prior to the conversion date, subject to certain minimum and maximum conversion prices. The proceeds reduced Convertible Notes Payable $50,000.00.
On December 15, 2016, the company issued 4,017,648 shares of its common stock to Bezalel Partners, LLC in exchange for $68,300.00 of the purchaser’s convertible note payable. The original issuance date of the $ 164,359.76 note payable was October 2, 2015. The exercise price of the note was stated at $0.017. The proceeds reduced Convertible Notes Payable $68,300.00.
On December 26, 2016, the company issued 1,200,000 shares of its common stock to Taconic Group, LLC in exchange for $31,200.00 of the purchaser’s convertible note payable. The original issuance date of the $ 151,072.71 note payable was October 2, 2015. The exercise price of the note was stated at $0.026 per common share. The proceeds reduced Convertible Notes Payable $31,200.00.
NOTE 11.9. SUBSEQUENT EVENTS
The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The company will evaluate subsequent events through the date of the issuance of the financial statements.
On January 11, 2017, the Company received a default notice related to the Company’s Batterfly acquisition. On July 11, 2016 the Company entered into a Stock Purchase Agreement$500,000 promissory note (the “Agreement”“Batterfly Acquisition Note”) withissued to the sellers of Batterfly Energy, Ltd. Pursuant to(“Batterfly”) as partial consideration for the agreement, and the related PromissoryCompany’s July 11, 2017 acquisition of Batterfly. The Batterfly Acquisition Note (the “Note”),required the Company was to make an initiala payment of $500,000 to the Batterfly sellers, with $250,000 being due on October 6, 20162017 and $250,000 being due on February 13, 2017. The default letter states that the Company failed to pay the initial $250,000 payment due on October 6, 2016,2017, which began to accrue interest of 11% from October 6, 2016.2017. In addition, the default notice states that the Company owes $20,000 in aggregate to two of the Batterfly shareholders related to consulting fees associated with the Batterfly acquisition. Finally, the default notice states that a payment of $250,000, as well as an additional payment of $20,000 must be paid by January 23, 2017. The Company is currently deciding howfiled a claim against the sellers of Batterfly with the London Court of International Arbitration (LCIA Arbitration No: 173692) and on September 7, 2017 the parties entered into a Stipulation for Stay of Arbitration in the matter as they seek to proceed and respondnegotiate a settlement of their claim. The claim was settled during 2019 for which the Company agreed to issue 62,991,567 shares of common stock to the default notice.sellers of Batterfly. As of the date of this filing, the shares are still pending issuance.
On February 9, 2017 2,553,104June 2, 2020, the Board of Directors, agreed to issue 5,260,000,000 common stock shares were issued in a conversionlieu of a convertible note payable.unpaid management and director salaries of the accrued amounts from July 1, 2018 through and including March 31, 2020. As of the date of this filing, the shares are still pending issuance.
On February 9, 2017 4,480,000 shares were issued in a conversion of a convertible note payable.
13 |
On February 2, 2017, in connection with Huey Long’s engagement as the Chief Executive Officer of the Company, the Company granted to Mr. Long a total of 15,500,000 shares of the Company’s unregistered common stock, par value $0.001 per share (the “Common Stock”) via two stock grants, one for 15,000,000 shares of unregistered Common Stock and one for 500,000 shares of unregistered Common Stock. 3,750,000 shares of Common Stock in the first grant will vest on August 2, 2017 and 3,750,000 shares of Common Stock in the first grant will vest on February 2, 2018. The balance of 7,500,000 shares of Common Stock will thereafter vest pro rata over the following 12 months. The 500,000 shares in the second grant will vest shall vest on the Company achieving positive cash flow and meeting such other goals as determined by the Board.
On March 1, 2017, in connection with William Singer’s engagement as Executive Vice President of Sales and Marketing of the Company, the Company granted to Mr. Singer a total of 6,000,000 shares of the Company’s unregistered Common Stock. 1,500,000 shares of the Common Stock will vest on March 1, 2018 and thereafter 250,000 shares of the Common Stock will vest each month thereafter.
Item 2. Management’s discussion and analysis of financial condition and results of operations.
Unless we specify otherwise, all referencesForward-Looking Statements
The following discussion contains forward-looking statements regarding us, our business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation: our ability to successfully develop new products and services for new markets; the impact of competition on our revenues, changes in law or regulatory requirements that adversely affect or preclude clients from using us for certain applications; delays our introduction of new products or services; and our failure to keep pace with our competitors.
When used in this Annual Report to the “Company,” “our,” “we” and “us” refer to Life Clips, Inc. and its consolidated subsidiaries. In addition to statements of current and historical facts, this Quarterly Report on Form 10-K contains forward-looking statements. Thediscussion, words “forecast,” “will,” “intend,” “anticipate,” “project,” “intend,” “expect,” “should,” “believe”such as “believes”, “anticipates”, “expects”, “intends” and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors, including those discussed in “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limitedthe exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the following:
This list of factors that may affect future performance and the accuracy of forward-looking statements are illustrative but not exhaustive. Accordingly, all forward-looking statements should be evaluated with an understanding of their inherent uncertainty. Except as required by law, we assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.our business.
General Information about Our Company
We wereLife Clips, Inc. (“Life Clips”, “we,” “us,” “our,” and the “Company”) was incorporated in Wyoming on March 20, 2013 and our principal business was providing consumers with an alternative way to capture, manage, share, broadcast and enjoy situational life experiences. Prior to October 2, 2015, when we acquired by Klear Kapture, Inc., a Delaware corporation (“Klear Kapture”), our name was “Blueas Blue Sky Media Corporation” and ourits principal business was developing, financing, producing and distributing motion pictures and related entertainment products. Following the Company’s October 2, 2015 acquisition of Klear Kapture, Inc. (“Klear Kapture”), the Company continued Klear Kapture’s business of developing a body camera and an auditable software solution suitable for use by law enforcement. The Company changed its name to Life Clips, Inc. on November 3, 2015 in order to better reflect its business operations at the time.
On September 22,July 11, 2016, Life Clips entered intothe Company completed its acquisition (the “Acquisition”) of all of the outstanding equity securities of Batterfly Energy Ltd. (“Batterfly”), an Israel-based corporation that develops and distributes a partnership license agreementsingle-use, cordless battery under the brand name Mobeego for use with HP.cellular phones and other mobile devices. Batterfly is now a wholly owned subsidiary of the Company. The agreement allows Life ClipsAcquisition was completed pursuant to design, manufacturea Stock Purchase Agreement, dated as of June 10, 2016 (the “Purchase Agreement”), among the Company, Batterfly and sell HP branded action cameras, 360 cameras, dash cameras and still cameras. The agreement also calls for accessory sales andall of the buildingshareholders of an online cloud repository to store, edit and share user created videos and pictures.Batterfly, as amended.
The agreement called forFollowing the companyacquisition of Batterfly, we began to no longer sell the Life Clips branded cameras or accessories to eliminate channel conflict or confusion. Therefore, the company will focus its efforts on creating best in class HP branded products and accessories.developing three synergistic businesses:
● | Expanding the Mobeego line of mobile accessories. | |
● | Global Sourcing Services that includes product design, factory identification, negotiations, compliance qualification, and end-to-end logistics management to source products anywhere in the world. | |
● | Sales and marketing services that provide an efficient path for companies to launch and market product into multi-channel retail and capture the maximum return on investment. |
The Company acquired Batterfly Energy in July, 2016. Batterfly manufactures the Mobeego brand emergency cell phone battery. The Mobeego provides an extra 20-40% shot of poweris currently pursuing alternative business opportunities. There has been limited activity due to a cell phone without having to be tethered or charged. The batteries have a 10-year shelf life.delay in securing funding. The Company realizedis working to re-energize the packaging that was inherited did not conveybusiness within the message properly and is in the process of re-packaging the product.
Life Clips is restructuring to become a global consumer electronics company focused on developing hardware and accessories for mobility through the Mobeego brand and Digital Imaging Products through the Hewlett Packard (HP) brand. We are developing the design, sourcing, logistics and sales operations to quickly increase our sales of our existing products and put us in a position to launch new product in 2017.next 12 months.
Our common stock is quoted for trading on the OTCQB under the symbol “LCLP.” Our principal executive offices are located at Harbour Centre, 18851 NE 29thAvenue., Suite 700, Aventura, FL 33180. Our telephone number is (800) 292-8991.Recent Developments
None
Significant Accounting Policies
Please see Note 2 to the Company’s unaudited financial statements as of and for the three and six months ended December 31, 20162018 included in this AnnualQuarterly Report for a discussion of the Company’s significant accounting policies.
Results of Operations for the Three Months Ended December 31, 2018 and 2017
For the sixthree months ended December 31, 20162018 and 2015,2017, we had gross revenuesprofit of $86,176$0 and $0$485 respectively.
Total operating expenses were $2,236,922$91,480 compared with $201,591$154,245 for the sixthree months ended December 31, 20162018 and 2015,2017, respectively. In connectionThe decrease is directly related to lower professional fees and other G&A expenses.
Other Income (Expense) was $2,489,036 when compared with $(1,456,389) for the completion of the share exchange transaction with Klear Kapture on October 2, 2015, the Company received additional working capital. The Company believed that continuing to operate its existing line of business was not in the best interests of its shareholders. New management decided tothree months ended December 31, 2018 and 2017, respectively. This change the primary focus of the business. Using the new working capital, the Company continued developing Klear Kapture’s concepts of an innovative state-of-the-art action camera set. Operating expenses therefore increased significantlyis primarily due to software and design costs associated with the developing including adding new employees.a change in fair value of derivatives.
14 |
Net income for the sixthree months ended December 31, 20162018 was $3,537,865$2,397,556 as compared to net loss of $5,044,180 at$1,610,149 for the three months ended December 31, 2015. 2017
The increased net income was primarily due to calculations of SFAS 123R, which requires that companies use a fair value method to value stock options and other forms of share-based payments and recognize the related compensation expense in calculating net earnings. SFAS 123R applies to all companies that have issued stock options and other stock-based compensation, whether the firm is a large public company with actively traded, liquid stock, a public company whose stock is thinly traded, or a private company.
The Company is focusing its business model on the developmentResults of mobile power and imaging productsOperations for the successSix Months Ended December 31, 2018 and 2017
For the six months ended December 31, 2018 and 2017, we had gross profit of continued operations. We are immediately increasing our sales efforts on our unique products$0 and $512 respectively.
Total operating expenses were $186,839 compared with $347,846 for the six months ended December 31, 2018 and 2017, respectively. The decrease is directly related to lower professional fees and other G&A expenses.
Other Income (Expense) was $7,233,752 when compared with $(2,933,387) for the six months ended December 31, 2018 and 2017, respectively. This change is primarily due to a change in fair value of derivatives.
Net income for the six months ended December 31, 2018 was $7,046,913 as compared to net loss of $3,280,721 for the six months ended December 31, 2017.
The net income was primarily due to calculations of SFAS 123R, which requires that are already available such ascompanies use a fair value method to value stock options and other forms of share-based payments and recognize the Mobeego one-time charger for mobile devices. This device allows yourelated compensation expense in calculating net earnings. SFAS 123R applies to use your smartphone, tabletall companies that have issued stock options and other stock-based compensation, whether the firm is a large public company with actively traded, liquid stock, a public company whose stock is thinly traded, or any mobile device up to 4 hours on a single emergency charge. Once your done you simply dispose of the recyclable battery.private company.
Liquidity and Capital Resources
Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of the period ending December 31, 20162018 the Company had cash on hand of $13,717, total current assets of $75,819 and$45,866, total assets of $104,161,$45,866, total current liabilities of $4,149,150$6,255,173 and total shareholder’s deficit of $16,916,471.$6,209,307.
The Company’s cash was generated from a series of convertible notes issued to non-related third parties, and a $30,000 promissory note to a non-related third party and a $500,000 short term promissory note as part of the acquisition of Batterfly Energy LTD.parties. The Company plans to raise additional working capital via additional notes or equity sales to ensure that it will have enough cash to fund its primary operation for the next twelve (12) months.
The Company has no agreements in place with its shareholders, officer and director or with any third parties to fund operations beyond the end of the Company’s December 31, 20162018 period ended. The Company has not negotiated nor has available to it any other third party sources of liquidity.
Cash flows usedfrom operating activities for the six month periods ended December 31, 2018 and 2017 were $37,386 and $147,300, respectively. The change was primarily due to net income being offset by operatingchanges in fair value of derivative liabilities.
Cash flows from financing activities totaled $75,000 and $71,500 for the six months period ended December 31, 20162018 and 2017, respectively. The $75,000 were $908,391 compared to cash flows used in operating activities of $229.923 to the six months period ended December 31, 2015.
Cash flows used in investing activities totaled $47,125 for the six months period ended December 31, 2016 and $88,957 for the six months period ended December 31, 2015.
Cash flows provided by financing activities totaled $500,000 for the six months period ended December 31, 2016 and cash flows provided by financing activities totaled $522,577 for the six months period ended December 31, 2015.proceeds from convertible notes payable.
Off-Balance Sheet Arrangements
The Company has no current off-balance sheet arrangements and does not anticipate entering into any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
15 |
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our chief executive officer and chief financial officer are responsible for establishing and maintaining our disclosure controls and procedures. Disclosure controls and procedures means controls and other procedures that are designed to ensure that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in those reports is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2015.2018. Based on that evaluation, our chief executive officer and chief financial officer have concluded that, as of the evaluation date, such controls and procedures were not effective.
Changes in internal controls
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 20162018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
None.On January 11, 2017, the Company received a default notice related to a $500,000 promissory note (the “Batterfly Acquisition Note”) issued to the sellers of Batterfly Energy, Ltd. (“Batterfly”) as partial consideration for the Company’s July 11, 2016 acquisition of Batterfly. The Batterfly Acquisition Note requires the Company to make a payment of $250,000 on October 6, 2016 and $250,000 on February 13, 2017. The default letter states that the Company failed to pay the $250,000 payment due on October 6, 2016, which began to accrue interest of 11% from October 6, 2016. In addition, the default notice states that the Company owes $20,000 in aggregate to two of the Batterfly shareholders related to consulting fees associated with the Batterfly acquisition. Finally, the default notice states that a payment of $250,000, as well as an additional payment of $20,000 must be paid by January 23, 2017. The Company filed a claim against the sellers of Batterfly with the London Court of International Arbitration (LCIA Arbitration No: 173692) and on September 7, 2017 the parties entered into a Stipulation for Stay of Arbitration in the matter as they seek to negotiate a settlement of their claim. The claim was settled during 2019 for which the Company agreed to issue 62,991,567 shares of common stock to the sellers of Batterfly. As of the date of this filing, the shares are still pending issuance.
Other than as set forth above, we are not a party to any material legal proceedings, nor is our property the subject of any material legal proceeding.
Smaller reporting companies are not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On December 7, 2015, we entered into a Securities Purchase Agreement (the “Purchase AgreementProperties”) with Susannah Forest (the “Purchaser”) under which the Company issued a Secured Convertible Promissory Note (the “Note”) to the Purchaser in a private placement. The Note was offered and sold in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506(b) of Regulation D thereunder. The Purchaser also qualified as an “accredited investor” within the meaning of Rule 501 of Regulation D. The Company received gross proceeds of $250,000.00 from the sale of the Note.
The Purchaser has the right at any time to convert all or a portion of the outstanding and unpaid principal amount of the note and any accrued and unpaid interest into shares of common stock of the Company. The conversion price is the amount equal to 75% of the volume weighted average priceCompany’s operations are currently being conducted out of the Company’s common stockoffices located at 18851 NE 29th Ave., Suite 700 PMB# 348, Aventura, FL 33180. The Company’s office space is being rented for a 5-day period priorprice of $135 per month. The Company considers the conversion date, subject to certain minimum and maximum conversion prices. The number of shares of common stock issuable is determined by dividing the amountcurrent principal office space to be converted by the conversion price. The conversion price is subject to adjustmentadequate and will reassess its needs based upon the occurrence of certain events.
On August 31, 2016, the company issued 2,593,247 shares of its common stock to NUWA Group LLC in a cashless warrant exchange pursuant to the terms of a business consulting agreement dated February 22, 2016. The share price at the effective date was $0.365 and the warrant for 2,600,000 shares was exercisable at $0.001 per share for total increase in Common Stock of $2,593.25 and in Additional Paid In Capital of $943,941.91.
On September 9, 2016, the company issued 2,500,000 shares of its common stock to Long Side Ventures LLC in exchange for $65,000.00future growth of the purchaser’s convertible note payable. The original issuance date of the $ 151,072.71 note payable was October 2, 2015. The exercise price of the note was stated at $0.026 per common share. The proceeds reduced Convertible Notes Payable $65,000.00.Company.
On September 20, 2016, the company issued 1,910,511 shares of its common stock to Binary Ventures, Inc. in a cashless warrant exchange pursuant to the terms of a business consulting agreement dated March 10, 2016. The share price at the effective date was $0.221 and the warrant for 1,916,500 shares was exercisable at $0.001 per share for total increase in Common Stock of $1,910.51 and in Additional Paid In Capital of $420,312.42.
On October 24, 2016, the company issued 1,807,229 shares of its common stock to Susannah Forest 2011 Revocable Trust in exchange for $150,000.00 of the purchaser’s convertible note payable. The original issuance date of the $ 250,000.00 note payable was December 7, 2015. The exercise price of the note was stated at 75% of the volume weighted average price of the Company’s common stock for a 5-day period prior to the conversion date, subject to certain minimum and maximum conversion prices. The proceeds reduced Convertible Notes Payable $150,000.00.
On October 26, 2016, the company issued 3,534,706 shares of its common stock to Bezalel Partners, LLC in exchange for $60,090.00 of the purchaser’s convertible note payable. The original issuance date of the $ 164,359.76 note payable was October 2, 2015. The exercise price of the note was stated at $0.017. The proceeds reduced Convertible Notes Payable $60,090.00.
On November 29, 2016, the company issued 268,102 shares of its common stock to R&T Sports Marketing, Inc. in exchange for $25,000.00 of the purchaser’s convertible note payable. The original issuance date of the $ 25,000.00 note payable was April 26, 2016. The exercise price of the note was stated at 75% of the volume weighted average price of the Company’s common stock for a 5-day period prior to the conversion date, subject to certain minimum and maximum conversion prices. The proceeds reduced Convertible Notes Payable $25,000.00.
On December 6, 2016, the company issued 157,895 shares of its common stock to Atlanta Capital Partners, LLC in exchange for $15,000.00 of the purchaser’s convertible note payable. The original issuance date of the $ 15,000.00 note payable was August 23, 2016. The exercise price of the note was stated at 75% of the volume weighted average price of the Company’s common stock for a 5-day period prior to the conversion date. The proceeds reduced Convertible Notes Payable $15,000.00.
On December 7, 2016, the company issued 2,900,000 shares of its common stock to Taconic Group, LLC in exchange for $75,400.00 of the purchaser’s convertible note payable. The original issuance date of the $ 151,072.71 note payable was October 2, 2015. The exercise price of the note was stated at $0.026 per common share. The proceeds reduced Convertible Notes Payable $75,400.00.
On December 7, 2016, the company issued 3,731,343 shares of its common stock to Edgestone Associates, Inc. in exchange for $37,500.00 of the purchaser’s convertible note payable. The original issuance date of the $ 700,000.00 note payable was May 13, 2016. The exercise price of the note was stated at 50% multiplied by the Market Price, defined as the lowest Trading Price for the Common Stock during the twenty (20) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. The proceeds reduced Convertible Notes Payable $37,500.00.
On December 8, 2016, the company issued 1,346,221 shares of its common stock to Summit Trading Partners, LLC in exchange for $50,000.00 of the purchaser’s convertible note payable. The original issuance date of the $ 50,000.00 note payable was April 26, 2016. The exercise price of the note was stated at 75% of the volume weighted average price of the Company’s common stock for a 5-day period prior to the conversion date, subject to certain minimum and maximum conversion prices. The proceeds reduced Convertible Notes Payable $50,000.00.
On December 15, 2016, the company issued 4,017,648 shares of its common stock to Bezalel Partners, LLC in exchange for $68,300.00 of the purchaser’s convertible note payable. The original issuance date of the $ 164,359.76 note payable was October 2, 2015. The exercise price of the note was stated at $0.017. The proceeds reduced Convertible Notes Payable $68,300.00.
On December 26, 2016, the company issued 1,200,000 shares of its common stock to Taconic Group, LLC in exchange for $31,200.00 of the purchaser’s convertible note payable. The original issuance date of the $151,072.71 note payable was October 2, 2015. The exercise price of the note was stated at $0.026 per common share. The proceeds reduced Convertible Notes Payable $31,200.00.
Item 3. Defaults uponUpon Senior SecuritiesSecurities.
Please see Note 6On January 11, 2017, the Company received a default notice related to a $500,000 promissory note (the “Batterfly Acquisition Note”) issued to the financial statements includedsellers of Batterfly Energy, Ltd. (“Batterfly”) as partial consideration for the Company’s July 11, 2016 acquisition of Batterfly. The Batterfly Acquisition Note requires the Company to make a payment of $250,000 on October 6, 2016 and $250,000 on February 13, 2017. The default letter states that the Company failed to pay the $250,000 payment due on October 6, 2016, which began to accrue interest of 11% from October 6, 2016. In addition, the default notice states that the Company owes $20,000 in Item 1aggregate to two of the Batterfly shareholders related to consulting fees associated with the Batterfly acquisition. Finally, the default notice states that a payment of $250,000, as well as an additional payment of $20,000 must be paid by January 23, 2017. The Company filed a claim against the sellers of Batterfly with the London Court of International Arbitration (LCIA Arbitration No: 173692) and on September 7, 2017 the parties entered into a Stipulation for Stay of Arbitration in the matter as they seek to negotiate a settlement of their claim. The claim was settled during 2019 for which the Company agreed to issue 62,991,567 shares of common stock to the sellers of Batterfly. As of the date of this Annual Report on Form 10-K, whichfiling, the shares are still pending issuance.
Other than as set forth above, we are not a party to any material legal proceedings, nor is incorporated herein by this reference.our property the subject of any material legal proceeding.
Item 4. Mining Safety Disclosures
None.Not Applicable.
16 |
None.Not Applicable.
Number | Exhibit | |
31.1* | ||
Certification of | ||
32.1* | Certification of | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Schema | |
101.CAL* | XBRL Taxonomy Calculation Linkbase | |
101.DEF* | XBRL Taxonomy Definition Linkbase | |
101.LAB* | XBRL Taxonomy Label Linkbase | |
101.PRE* | XBRL Taxonomy Presentation Linkbase |
** Filed Herewith Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
+ Management contract or compensatory plan
17 |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 21, 2020 | By: | /s/ Victoria Rudman | |
Victoria Rudman | |||
Interim Chief Financial Officer (Principal Financial and Accounting Officer) |
18 |