NOTE 6. NOTES PAYABLE

On July 14, 2016 the Company issued a $30,000 promissory note to NUWA Group, LLC. The promissory note is a standard, non-convertible note.not convertible into any of the equity securities of the Company. The effective interest rate is 5.00% per annum, calculated yearly not in advance. The note iswas to be repaid in full on October 14, 2016.2016 and is past due/in default. Note proceeds are to bewere used for operating expenses.

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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.not convertible into any of the equity securities of the Company. The effective interest rate is 1.00% with a default interest rate of 10.00%. The note is to be repaid in two (2) payments, $250,000 on October 11, 2016 and the balance due on February 13, 2017. The Company has not paid the amounts due under this note. See Note 12.

On September 25, 2017, Huey Long, on behalf of the Company, without Board approval, entered into a Mutual Release Agreement and 12% Promissory Note with Scott Silverman. The note was in a principal amount of $26,500 and matured on March 1, 2018. The Company is currently in negotiations with Mr. Silverman.

At MarchDecember 31, 2017 and June 30, 20162017 the Company had notes payable in the amount of $850,034$556,500 and $0,$530,000, respectively.

NOTE 7.5. CONVERTIBLE DEBT AND WARRANTS

The Company has recorded derivative liabilities associated with convertible debt instruments and warrants, as more fully discussed at Note 8.

(A) Convertible DebtNotes and Warrants

On October 2, 2015, the Company completed an offering of its 3.85% Convertible Promissory Notes (the “3.85% Notes”) in the aggregate principal amount of $617,578 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, each a “Note” and collectively, the “Notes”), as applicable, with certain “accredited investors” (the “Investors”), as defined under Regulation D, Rule 501 of the Securities Act. The entire principal amount of the Notes remaining outstanding at MarchDecember 31, 2017 was $417,588,$261,467, 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 days 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. The balances of these Notes are past due/in default.

In connection with the Notes Offering, the Company entered into Registration Rights Agreements, each dated as of October 2, 2015 and December 7, 2015 and each by and between us and each of the Investors.

The Company entered into convertible notes with eleven third party accredited investors from December 2015 to December 2016. 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 terms specified in said date (see below). Interest rates range from 3.85% to 10% and are due at various dates from August 2016 to March 2018. These notes are convertible at any time by the investor, prior to the note principal and interest being repaid at rates ranging from $0.006 to $0.033 per share, subject to change due to a ratchet feature contained in most of the notes.

The Company has determined that the conversion feature of the Notes represents an embedded derivative since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the Notes are not considered to be conventional debt and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. See Note 7 for further discussion.

Conversion Price for all the notes listed in the table below is 50% of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date.

The Company has determined that the conversion feature of the Notes represents an embedded derivative since the Notes are convertible into a variable number of shares upon conversion. Accordingly, the Notes are not considered to be conventional debt and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. See Note 8 for further discussion.

(B) Terms of Debt

The debt carries interest between 3.85%, 10% and 10%,18% and is due in October 2017 through March 2018.2019

All convertible debt in connection with the Notes Offering are convertible at $0.026 and $0.033/share (on MarchDecember 31, 2017), however, the Notes include a “ratchet feature”, which allows for a lower conversion price based on market prices.

(C) Future Commitments

At MarchDecember 31, 2017, the Company has outstanding convertible debt of $2,222,272$2,336,310 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 March 31, 2017 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:

NOTE 8.6. DERIVATIVE LIABILITIES

The Company identified conversion features embedded within convertible debt and warrants issued infor the period ended MarchDecember 31, 2017. 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 summarizedThe warrant are classified as follow:liabilities or tainted

The convertible notes will generate derivative liabilities.

The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions as of Marchat December 31, 2017:2017, using the lattice binomial valuation model:

NOTE 9.7. CONVERTIBLE DEBT - NET

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.

The Company recorded debt discount of $318,598172,350 as of MarchDecember 31, 2017 and $2,076,912$407,905 for the year ended June 30, 2016.2017.

Accumulated amortization of debt discount amounted to $1,161,979$846,055 as of MarchDecember 31, 2017 and $487,399$2,146,527 for the year ended June 30, 2016. The Company recorded amortization expense of the debt issuance cost of $1,161,979 as of March 31, 2017 and $487,399 for the year ended June 30, 2016.2017.

NOTE 10.8. STOCKHOLDERS’ EQUITY (DEFICIT)

Shares Authorized

On December 15, 2015,April 4, 2016, the Company filed Articles of Amendment to authorize 300,000,000Restatement with the Wyoming Secretary of State authorizing 320,000,000 shares of common stock, par value $0.001 per share authorize(the “Common Stock”) and 20,000,000 shares of preferred stock,Preferred Stock, par value $0.001 per share(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 effectuate a 1 for 11 forward stock split. All common stockauthorize an 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.

As of December 31, 2017, the Company had 1,259,831,381 shares of Common Stock issued and per share data for the period presented in this Quarterly Report on Form 10-Q has been adjusted to give effect to the forward stock split.outstanding.

Preferred Stock

TheEffective as of May 19, 2017, the Company has authorized 20,000,000amended its Articles of Incorporation to designate 1,000,000 shares of preferred sharesstock as Series A Preferred Stock, with a par value of $0.001 per share. Theshare (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 any specific dividends or other distributions, other than those declared by the Board of Directors is authorizedDirectors. Each share of Series A Stock has 100 votes on any matter submitted to divide the authorized sharesshareholders of Preferredthe Company, and the Series A Stock into one or more series, eachvotes together with the holders of which shall be so designated as to distinguish the shares thereof from theoutstanding shares of all other capital stock of the Company (including the Common Stock and any other series of preferred stock then outstanding), and classes. Asnot 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 March 31,Series 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 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.

On April 20, 2016, the company adopted the Life Clips, Inc. 2016 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, has not designated any classesalthough no awards have been made to date. Accordingly, the Company cannot currently determine the amount of Preferred Stock and there are no shares of Preferred Stock issued or outstanding.awards that will be made under the plan.

Common Stock Issued

For the nine-month period ended MarchDecember 31, 2017, 53,654,9951,071,965,073 shares of common stock were issued, and 27,617,226 shares of common stock were returned by or former Chief Executive Officer and cancelled upon his resignation, bringing the total shares issued and outstanding to 79,370,345.1,259,831,381.

On February 3, 2017,The table below represents the Company issued 2,533,104Company’s issuances of shares of its common stock to Bezalel Partners, LLC in conversion of $35,969.76 of the purchaser’s convertible note payable principal and $7,433.00 in interest. The original issuance date of the $164,359.76 note payable was October 2, 2015. The conversion price of the note was stated at $0.017. The proceeds reduced Convertible Notes Payable to 43,402.76. This debt is now fully settled.

On February 8, 2017, the Company issued 4,480,000 shares of its common stock to Edgestone Associates, Inc. in conversion of $26,880.00conjunction with conversions of the purchaser’s convertible note payable. The original issuance dateconversion prices of the $ 700,000.00 note payable was May 13, 2016. The conversion price of the note wasnotes were 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 reduction in proceeds reducedto Convertible Notes Payable $26,880.00.can be found in Note 7.

On March 1,July 28, 2017, the Company issued 3,00,000re-issued, following the return of the shares of the company to facilitate the transaction with Ascenda, 3,000,000 shares of its common stock with a value of $0.0118 per common share to William Singer in connection with VP of Sales services performed in 2016.

On March 1, 2017, Robert Gruder returned 27,617,226 shares of the Company’s common stock to treasury.

On March 10, 2017, the Company issued 1,494,612 shares of its common stock to Atlanta Capital Partners, LLC in conversion of $15,000.00 of the purchaser’s convertible note payable plus $833.00 of interest. The original issuance date of the $ 15,000.00 note payable was August 23, 2016. The conversion 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 $15,833.00. This debt is now fully settled.

On March 30, 2017, the Company issued 5,660,377 shares of its common stock to St. George Investments LLC in conversion of $30,00.00 of the purchaser’s convertible note payable. The original issuance date of the $225,000.00 note payable was September 22, 2016. The conversion price of the note was stated at $0.026 per common share. The proceeds reduced Convertible Notes Payable $30,000.00.

On January 12, 2017, in conjunction with his resignation as the Company’s Chief Executive Officer and a director, Robert Gruder agreed to cancel 27,617,226 shares of the Company’s common stock issued to him in connection with the acquisition of Klear Kapture.

NOTE 11.9. STOCK INCENTIVE PLAN

On April 20, 2016, the Company adoptedapproved the Life Clips, Inc. 2016 Stock and Incentive Plan under which (“the Company may issuePlan”). The Plan provides for the granting of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock grants and units, performance units and awards, and cash. The Plan allows for an issuance of cash. Aa maximum of 20,000,000 shares of common stock, may be issued under the plan. Awards under the plan will bewith awards made at the discretion of the Boardboard of Directors, although nodirectors. No awards have been made to date. Accordingly, the Company cannot currently determine the amount of awards that may be made under the plan.

NOTE 12. COMMITMENTS AND CONTINGENCIES

Acquisition of Batterfly Energy, Ltd

On June 10, 2016, we entered into a Stock Purchase Agreement with Batterfly Energy Ltd. (“Batterfly”), and all of its shareholders. On July 11, 2016, the transaction closed (the “Batterfly Closing Date”). The transaction closed on July 11, 2016. Under the terms of the Stock Purchase Agreement, the Company acquired all of the outstanding capital stock of Batterfly in exchange for the following consideration:

On January 11, 2017, the Company received a default notice related to the Company’s failure to make any payments on the Batterfly Promissory Note. 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 did not make the payments demanded and is currently in discussions with the Batterfly shareholders regarding the matters asserted in the default notice.

HP Trademark License Agreement Termination

On March 30, 2017, the Company entered into a termination agreement with HP whereby they terminated the Trademark License Agreement. Pursuant to the terms of the termination agreement, the Company agreed to pay HP $62,500.00 by July 15, 2017 and $62,500.00 by October 15, 2017. As of March 30, 2017, the Company agreed to refrain from using any HP trademarks on any products and confirmed that the Company did not have any HP Branded Products in its inventory.

Management Agreements

Huey Long

In connection with his engagement as the Chief Executive Officer of the Company, the Company entered into an Executive Employment Agreement with Huey Long (the “Agreement”) on February 2, 2017. The Agreement is for a one year term, which automatically renews for successive additional one-year terms unless either Mr. Long or the Company notifies the other party that they do not wish the Agreement to so renew. The Agreement provides that Mr. Long will serve as the Company’s Chief Executive Officer and as a member of the Board.

Pursuant to the Agreement, the Company will pay Mr. Long a salary of $300,000 annually, payable on a monthly basis with the first payment due on February 7, 2017. In addition, the Company granted to Mr. Long, effective as of February 2, 2017, 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.

The Agreement also provides that Mr. Long will be granted (i) 500,000 additional shares of stock (provided that the Board may increase this number) on each anniversary of the commencement of the agreement, with such shares to vest 50% on the first anniversary of such grant and 50% to vest on the second anniversary of such grant and (ii) each, year, in the event that Mr. Long does not at that time own 10% of the number of shares of Common Stock outstanding (counting all prior stock grants as vested), a number of shares of Common Stock sufficient to bring Mr. Long up to such 10% ownership.

If Mr. Long’s engagement is terminated by the Company without “Cause,” or by Mr. Long for “Good Reason,” (in each case as defined the employment agreement) then a portion of the stock grants described above equal to a pro rata portion of the grants based on the time from February 2, 2017 to the date of termination, and assuming a 24-month vesting period, shall be deemed vested, and all other amounts shall be forfeited. If Mr. Long’s engagement is terminated by the Company with “Cause” or by Mr. Long without “Good Reason,” then all unvested portions of the stock grants described above as of the date of termination shall be forfeited.

Victoria Rudman

In connection with her engagement as the Chief Financial Officer of the Company which became effective on January 16, 2017, the Company and Ms. Rudman are in the process of entering into a formal agreement that will provide for payment of fees of $5,000 per month in cash with a stock incentive component. No definitive agreement has been completed as of March 31, 2017.

William Singer

In connection with his engagement as the Executive Vice President of Sales and Marketing of the Company, the Company entered into an Executive Employment Agreement with William Singer (the “Agreement”) on March 1, 2017. The Agreement is for a two-year term, which automatically renews for successive additional one-year terms unless either Mr. Singer or the Company notifies the other party that they do not wish the Agreement to so renew. The Agreement provides that Mr. Singer will serve as the Company’s Executive Vice President of Sales and Marketing and as a member of the Board. Pursuant to the Agreement, the Company will pay Mr. Singer a salary of $3,500 per month, which commenced effective as of February 1, 2017, provided that following the month in which the Company begins generating revenue Mr. Singer’s salary will be increased to $5,000 per month. Mr. Singer will also receive a commission of 1% of any net sales revenue collected by the Company on the sales of its products, based on the wholesale price, and contingent on the sale being profitable to the Company, and will be eligible for a bonus as jointly determined by the Board and Mr. Singer.

In addition, the Company granted to Mr. Singer, effective as of March 1, 2017, a total of 6,000,000 shares of the Company’s unregistered common stock, par value $0.001 per share (the “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.

Pursuant to the Agreement, the Company also agreed to grant Mr. Singer 500,000 shares of Common Stock on each anniversary of March 1, 2017, provided that the amount of these shares of Common Stock will be based on performance and may be adjusted by the Board. The shares of Common Stock in these grants will vest 50% on each anniversary of the applicable grant.

If Mr. Singer’s engagement is terminated by the Company without “Cause,” or by Mr. Singer for “Good Reason,” (in each case as defined in the employment agreement) then a portion of the stock grants described above equal to a pro rata portion of the grants based on the time from the date of the grant to the date of termination, and assuming a 24-month vesting period, shall be deemed vested, and all other amounts shall be forfeited. If Mr. Singer’s engagement is terminated by the Company with “Cause” or by Mr. Singer without “Good Reason,” then all unvested portions of the stock grants described above as of the date of termination shall be forfeited.

Litigation

From time to time we may be a defendant and/or plaintiff in various other legal proceedings arising in the normal course of our business. We are currently not a party to any material legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings. In addition, we are not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Furthermore, as of the date, our management is not aware of any proceedings to which any of our directors, officers, or affiliates, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has a material interest adverse to us.

NOTE 13.10. 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 April 6, 2017,August 8, 2018, the Company entered into an 18% Convertible Promissory Note with Long Side Ventures LLC, an unaffiliated third party. The note was in a Warrant Settlement Agreement with St. George Investments LLC (“Holder”). Effective asprincipal amount of September 22, 2016,$15,000, and is convertible at a price equal to fifty percent (50%) of the Company issuedlowest trading price during the five trading day period prior to the Holder a warrant to purchase sharesdate of the Company’s common stock (the “Warrant”) pursuant to that certain Securities Agreement dated September 22, 2016 between Company and Holder (the “Purchase Agreement”). Upon the Company’s request, Holder agreed to cancel the Warrant in exchange for a payment in the amount of $20,000.00 (the “Settlement Payment”) as full payment for and satisfaction of the Company’s obligations under the Warrant.

Issuances of Common Stock

On April 7, 2017, the Company issued 3,685,000 shares of its unrestricted common stock upon conversion of $11,608 principal amount and zero interest of its convertibleconversion. The note payable.maturity date is August 8, 2019.

On April 12, 2017 8,731,618 shares of its unrestricted common stock upon conversion of $43,209 principal amount and zero interest of its convertible note payable.

On April 20, 2017 5,236,276 shares of its unrestricted common stock upon conversion of $16,494principal amount and zero interest of its convertible note payable.

On April 24, 2017 3,889,146 shares of its unrestricted common stock upon conversion of $11,862 principal amount and zero interest of its convertible note payable.

On April 25, 2017 14,777,637 shares of its unrestricted common stock upon conversion of $52,762 principal amount and zero interest of its convertible note payable.

On May 2, 2017 8,978,121 shares of its unrestricted common stock upon conversion of $27,763 principal amount and zero interest of its convertible note payable.

On May 9, 2017 12,525,486 shares of its unrestricted common stock upon conversion of $30,294 principal amount and zero interest of its convertible note payable.

Item 2. Management’s discussion and analysis of financial condition and results of operations.

This report contains forward-looking statements. The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report and other written and oral statements that we make from time to time contain such forward-looking statements that set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings, and financial results.

We caution that the factors described herein and other factors could cause our actual results of operations and financial condition to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

General

Life Clips, Inc. (the “Company”) was incorporated in Wyoming on March 20, 2013 as Blue Sky Media 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 better reflect its business operations at the time.

On July 11, 2016, the Company completed its previously announced acquisition (the “Acquisition”) of all of the outstanding equity securities of Batterfly Energy Ltd. (“Batterfly”), an Israel-based corporation that develops and distributes a single-use, cordless battery under the brand name Mobeego for use with cellular phones and other mobile devices. Batterfly is now a wholly-owned subsidiary of 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.

Our Company is focusedFollowing the acquisition of Batterfly, we began to focus on developing three synergistic businesses:

The following is a descriptionWe plan to reengage in these initiatives as we seek potential new distributors, joint venture and strategic alliance partners and additional sources of recent transactions entered into by the Companyfinancing to enable us to pursue marketing and its key distributors:

On April 7, 2017, the Company entered into a five-year authorized sales representative agreement to provide global salesfuture development and marketing to Textiss USA (Textiss), a California Corporation, for its Crazyboxer line of men’s underwear (the “Products”). Textiss is a global leader in the textile and garment industry with a specialization in the design, production, and distribution of underwear. Over the five-year contract, the Company will carry out worldwide multi-channel retail sales and marketing for Textiss for the following accounts: Costco, HSN, Sam’s Club, Wal-Mart, Target, Nordstrom’s Rack, Amazon.com, Walmart.com, Jet.com, Boxed.com, Costco.com, Samsclub.com, Target.com, Zappos.com and Nordstrom.com. With respect to each signed contract with a customer for the sale of the Products, the Company will be entitled to the following commission:

The Company and Textiss will have the option to extend the initial five-year term for additional periods of one-year each at the end of the Initial Term or any Renewal Term.

On April 12, 2017, the Company’s Mobeego battery products became available on Amazon.com. Mobeego™ is an affordable, single-use, cordless battery that provides an instant shot of power for your phone, so you can stay mobile whenever and wherever. After use, the battery can be discarded or recycled. Mobeego batteries are great for emergency preparedness, since they can be stored up to 10 years without any power leaking. Each package contains a battery and a reusable smartphone adaptor.

The Mobeego products available from the Company on Amazon,com include: the Mobeego Single Shot Starter Kit that includes an iPhone or USB reusable adaptor and single battery providing up to 4 hours of additional power. Additional batteries are also available in 3 packs and 6 packs. The Mobeego products are eligible for free shipping with an Amazon Prime membership.

On April 19, 2017, the Company entered into a distribution agreement with Misaki Corporation (“Misaki”), organized under the laws of Tokyo, Japan. It is a royalty free, non-exclusive one-year contract with a distributor to sell Mobeego products in Japan. The contract granted Misaki the non-transferable right to promote, market and resell Mobeego products and will be automatically renewed for one additional year, provided Misaki has performed all of its commitments and obligations. The terms of the contract require Misaki to pay 50% of each accepted order in advance and 50% on delivery.

On May 3, 2017, the Company entered into a distribution agreement with Axperrt Company Limited (“Axpert”), organized under the laws of Republic of China. It is a royalty free, non-exclusive one-year contract with a distributor to sell Mobeego products throughout Asia, New Zeland, Singapore, the Philippines, India, Indonesia, Cambodia and Vietnam. The contract grants Axpert the non-transferable right to promote, market and resell Mobeego products and will be automatically renewed for one additional year, provided Axpert has performed all of its commitments and obligations. The terms of the contract require Axpert to pay 50% of each accepted order in advance and 50% on delivery.

Recent Developments

In January 2017, Robert Gruder, the Company’s former Chief Executive Officer and a director and Robert Finnigan, the Company’s former President resigned their positions with the Company. In January 2017, Victoria Rudman took on the role of Chief Financial Officer and director. In February 2017 Huey Long joined the Company as its Chief Executive Officer and in March 2017 William Singer was named the Company’s Executive Vice President of Sales.

On January 11, 2017, the Company received a default noticecommercialization activities related to the Company’s failure to make any payments on the $500,000 promissory note issued to the Batterfly shareholders (the “Batterfly Promissory Note”). 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 did not make the payments demanded and is currently in discussions with the Batterfly shareholders regarding the matters asserted in the default notice.Mobeego.

On March 30, 2017, the Company entered into a termination agreement with HP Inc. (“HP”) whereby they terminated the Trademark License Agreement theyAgreement. Pursuant to the terms of the termination agreement, the Company agreed to pay HP $62,500.00 by July 15, 2017 and $62,500.00 by October 15, 2017. As of March 30, 2017, the Company agreed to refrain from using any HP trademarks on any products and confirmed that the Company did not have any HP Branded Products in its inventory.

On June 22, 2017, the Company entered into a Stock Purchase Agreement (the “SPA”) with Ascenda, a company limited by shares incorporated under the laws of Independent State of Samoa (“Ascenda”), Hong Kong Ascenda International Co., Limited, a company limited by shares incorporated under the laws of Hong Kong (“Company HK”), and Hong Kong Ascenda International Co., Limited, a company limited by shares incorporated under the laws of Independent State of Samoa (“Company Samoa”, and collectively with Company HK, the “Targets” and each a “Target”).

Effective as of September 15, 2016November 24, 2017, Huey Long, the Company’s Chief Executive Officer and a member of its board of directors, resigned his position as an officer and director of the Company as previously disclosed by the Company. Further, on November 27, 2017, Seller, Company HK, Company Samoa and Donald Ruan entered into a Rescission and Mutual Release Agreement (the “Trademark“Rescission Agreement”). pursuant to which the parties thereto agreed to rescind, ab initio, the SPA. As a result of the Rescission Agreement, the acquisition of the Targets is deemed not to have occurred, and the note issued by the Company as partial consideration for the acquisition was terminated and rescindedab initio, and will be of no further force or effect. As a result of these events, and the Company’s efforts to secure additional financing and additional partners to expand sales of its Mobeego product line, the Company is no longer seeking to launch its planned global sourcing business with Textiss USA, Misaki Corporation and Axperrt Company Limited as previously disclosed.

On March 30, 2018, Victoria Rudman was named the Company’s Interim Chief Executive Officer.

Recent Developments

None

Significant Accounting Policies

Please see Note 2 to the Company’s unaudited financial statements as of and for the three and ninesix months ended MarchDecember 31, 2017 included in this Quarterly Report for a discussion of the Company’s significant accounting policies.

Results of Operations for the Three and NineSix Months Ended MarchDecember 31, 2017 and MarchDecember 31, 2016

For the three months ended MarchDecember 31, 2017 and 2016, we had gross profit of $(10,541)$485 and $534$4,074 respectively. Revenues were $3,662 net of COGS of $14,203.

Total operating expenses were $232,908$154,245 compared with $163,627$325,479 for the three months ended MarchDecember 31, 2017 and 2016, respectively. The increasedecrease is directly related to higherlower professional fees and other G&A expenses.

Net incomeloss for the three months ended MarchDecember 31, 2017 was $485,271$1,610,149 as compared to net loss of $194,215 at March 31,$519,203 in 2016.

For the ninesix months ended MarchDecember 31, 2017 and 2016, we had gross profit of $21,355$512 and $534$31,907, respectively. Revenues were $89,827 net of COGS of $68,472.

Total operating expenses were $2,467,381$347,847 compared with $366,049$2,205,015 for the ninesix months ended MarchDecember 31, 2017 and 2016, respectively. The increasedecrease is primarily due to an increasea decrease in professional fees and stock issuances for professional services.

Net incomeloss for the ninesix months ended MarchDecember 31, 2017 was $4,025,574$3,280,722 as compared to net lossincome of $5,239,226$3,537,865 at MarchDecember 31, 2016.

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.

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 MarchDecember 31, 2017 the Company had cash on hand of $172,188,$15,871, total current assets of $172,188$15,871 and total assets of $251,540,$15,871, total liabilities of $4,777,652$8,502,862 and total shareholder’s deficit of $4,526,212.$8,486,990.

The Company’s cash was generated from a series of convertible notes issued to non-related third parties, and a $30,000two promissory notenotes to a non-related third party of $26,500 and a $500,000 short-term promissory note as part of the acquisition of Batterfly Energy LTD.$30,000. 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 MarchDecember 31, 2017 period ended. The Company has not negotiated nor has available to it any other third party sources of liquidity.

Cash flows used byin operating activities for the ninesix months period ended MarchDecember 31, 2017 were $1,064,279$147,300 compared to cash flows used in operating activities of $420,462$908,391 to the ninesix months period ended MarchDecember 31, 2016.

Cash flows used in investing activities totaled $32,500$0 for the ninesix months period ended MarchDecember 31, 2017 and $51,892$47,125 for the ninesix months period ended MarchDecember 31, 2016.

Cash flows provided by financing activities totaled $800,034$71,500 for the ninesix months period ended MarchDecember 31, 2017 and cash flows provided by financing activities totaled $487,577$500,000 for the ninesix months period ended MarchDecember 31, 2016.

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.

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, 2015.2017. 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 MarchDecember 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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. Settlement discussions are ongoing.

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.

Item 1 A. Risk Factors

Smaller reporting companies are not required to provide the information required by this item.

Itemtem 2. Unregistered Sales of Equity Securities and Use of ProceedsProperties

On February 3, 2017, the Company issued 2,533,104 shares of its common stock to Bezalel Partners, LLC in conversion of $35,969.76The Company’s operations are currently being conducted out of the purchaser’s convertible note payable principal and $7,433.00 in interestCompany’s offices located at 18851 NE 29th Ave., Suite 700 PMB# 348, Aventura, FL 33180. The Company’s office space is being rented for a conversion price of $0.017$135.00 per share.

On February 8, 2017,month. The Company considers the Company issued 4,480,000 shares ofcurrent principal office space to be adequate and will reassess its common stock to Edgestone Associates, Inc. in conversion of $26,880.00needs based upon the future growth of the purchaser’s convertible note payable at a conversion price of $0.006 per share.Company.

On March 1, 2017, the Company issued 3,00,000 shares of its common stock with a value of $0.0118 per common share to William Singer in connection with VP of Sales for services performed in 2016.

On March 10, 2017, the Company issued 1,494,612 shares of its common stock to Atlanta Capital Partners, LLC in conversion of $15,000.00 of the purchaser’s convertible note payable plus $833.00 of interest at a conversion price of $0.01058 per share.

On March 30, 2017, the Company issued 5,660,377 shares of its common stock to St. George Investments LLC in conversion of $30,00.00 of the purchaser’s convertible note payable at a conversion price of $0.0053 per share.

These shares of our common stock were issued in reliance on the exemption from registration provided by Sections 4(a)(2) and 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).

Item 3. Defaults uponUpon Senior SecuritiesSecurities.

On January 11, 2017, the Company received a default notice related to the Company’s failure to make any payments on thea $500,000 promissory note (the “Batterfly Acquisition Note”) issued to the sellers of Batterfly shareholders (the “Batterfly Promissory Note”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 did not makefiled a claim against the payments demanded and is currently in discussionssellers of Batterfly with the Batterfly shareholders regardingLondon Court of International Arbitration (LCIA Arbitration No: 173692) and on September 7, 2017 the matters assertedparties entered into a Stipulation for Stay of Arbitration in the default notice.matter as they seek to negotiate a settlement of their claim. Settlement discussions are ongoing.

In addition, see Note 7Other than as set forth above, we are not a party to any material legal proceedings, nor is our property the financial statements included in Item 1 to this Quarterly Report on Form 10-Q, which is incorporated herein by this reference.subject of any material legal proceeding.

Item 4. Mining Safety Disclosures

None.Not Applicable.

Item 5. Other Information

None.Effective as of May 19, 2017, the Company amended its Articles of Incorporation to designate the Series A Stock as a series of preferred stock of the Company. 1,000,000 shares of Series A Stock are authorized, with a par value of $0.001 per share. 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 any specific dividends or other distributions, other than those declared by the Board of Directors. Each share of Series A Stock has 100 votes on any matter submitted to the shareholders of the Company, and the Series A Stock votes together with the holders of the outstanding shares of all other capital stock of the Company (including the Common Stock and any other series of preferred stock 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 Series 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 Preferred Stock is not convertible into any other class of shares of the Corporation.

On May 17 2017, the Company issued 1,000,000 shares of the Series A Preferred Stock to Victoria Rudman, the Company’s Chief Financial Officer and a director, in return for services provided to the Company by Ms. Rudman and to ensure Ms. Rudman’s continued service to the Company.

Item 6. Exhibits