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, 20172018
[ ] Transition report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ________________ to ________________
Commission file number 000-55697
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) |
Registrant’s telephone number including area code:(800) 292-8991
Securities registered pursuant to Section 12(b) of the Act:
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 | |||
Common Stock, $0.001 par value per share | 1,259,831,337 |
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, 20172018
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 | 15 | |
Item 4. | Controls and Procedures | ||
PART II — OTHER INFORMATION | |||
Item 1. | Legal Proceedings | ||
Item 1A. | Risk Factors | ||
Item 2. | |||
Item 3. | Defaults Upon Senior Securities | ||
Item 4. | 16 | ||
Item 5. | Other Information | ||
Item 6. | Exhibits | ||
Signatures | 18 |
2 |
PART I - FINANCIAL INFORMATION
Life Clips, Inc.
Consolidated Balance Sheets
December 31, 2017 | June 30, 2017 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 15,871 | $ | 91,672 | ||||
Due from related party | - | - | ||||||
Total current assets | $ | 15,871 | $ | 91,672 | ||||
Other Current Assets | ||||||||
Accounts Receivable | - | 3,064 | ||||||
Total other current assets | - | 3,064 | ||||||
Total assets | $ | 15,871 | $ | 94,736 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current liabilities | ||||||||
Accounts Payable | $ | 576,296 | 358,226 | |||||
Accrued Expense and Interest Payable | 382,257 | 250,262 | ||||||
Customer Deposits | 84,538 | 84,538 | ||||||
Convertible Note Payable (net of discount of $172,350 and $407,905, respectively) | 2,107,461 | 1,637,990 | ||||||
Note Payable | 556,500 | 530,000 | ||||||
Liquidated Damages Payable | 58,542 | 37,316 | ||||||
Payroll Tax Liabilities | 18,755 | 18,776 | ||||||
Derivative Liability - Convertible Notes Payable | 4,718,513 | 2,959,841 | ||||||
Total Current Liabilities | $ | 8,502,862 | $ | 5,876,948 | ||||
Long Term Liabilities | ||||||||
Convertible Notes Payable | ||||||||
Total Long Term Liabilities | $ | - | $ | - | ||||
Total Liabilities | $ | 8,502,862 | $ | 5,876,948 | ||||
Shareholders’ deficit | ||||||||
Preferred stock, ($0.001 par value; 20,000,000 shares authorized, on 5/8/17 1,000,000 shares were issued and outstanding). | $ | 1,000 | $ | 1,000 | ||||
Common stock, ($0.001 par value; 8,000,000,000 shares authorized, 1,259,831,381 (plus 11,004,166 reserved for employee vesting) and 187,866,264 (plus 11,004,166 reserved for employee vesting) shares issued and outstanding as of December 31, 2017 and June 30, 2017, respectively. | 1,259,831 | 187,867 | ||||||
Shares to be issued/returned | 6,732 | 6,732 | ||||||
Additional paid in capital | 9,401,467 | 9,897,488 | ||||||
Accumulated deficit | (19,156,021 | ) | (15,875,299 | ) | ||||
Total shareholders’ deficit | $ | (8,486,990 | ) | $ | (5,782,212 | ) | ||
Total liabilities and shareholders’ deficit | $ | 15,871 | $ | 94,736 |
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
Consolidated Statements of Operations
For the Three and Six Months ended December 31, 20172018 and 20162017
(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, 2017 | December 31, 2016 | December 31, 2017 | December 31, 2016 | |||||||||||||
Revenues | $ | 485 | $ | 12,855 | $ | 512 | $ | 86,176 | ||||||||
Cost of goods sold | - | 8,781 | - | 54,269 | ||||||||||||
Gross profit | $ | 485 | $ | 4,074 | $ | 512 | $ | 31,907 | ||||||||
Operating costs: | ||||||||||||||||
Compensation paid with stock | $ | - | $ | - | $ | 5,400 | - | |||||||||
Finance Costs | - | 15,000 | - | 51,000 | ||||||||||||
Payroll Expense | - | 83,782 | - | 158,727 | ||||||||||||
Product Development Expense | - | 3,257 | - | 4,191 | ||||||||||||
Professional Fees | 60,996 | 53,927 | 226,939 | 1,813,192 | ||||||||||||
Licensing Fees | 62,500 | 137,000 | - | 137,000 | ||||||||||||
Marketing Expense | - | - | 2,495 | - | ||||||||||||
Software Fees and Support | 355 | 1,090 | 567 | 2,876 | ||||||||||||
Travel, Meals and Entertainment | - | 11,076 | 2,691 | 18,855 | ||||||||||||
Other general and administrative expenses | 30,395 | 20,347 | 109,755 | 51,081 | ||||||||||||
Total operating costs | $ | 154,245 | $ | 325,479 | $ | 347,847 | $ | 2,236,922 | ||||||||
Gain/(Loss) from operations | $ | (153,760 | ) | $ | (321,405 | ) | $ | (347,335 | ) | $ | (2,205,015 | ) | ||||
Other income (expense) | ||||||||||||||||
Interest expense | (76,230 | ) | (47,787 | ) | (145,968 | ) | (92,019 | ) | ||||||||
Loss on Debt Settlement | (27,663 | ) | - | (97,283 | ) | - | ||||||||||
Amortization of Debt Discount | (245,567 | ) | (715,460 | ) | (811,055 | ) | (1,131,979 | ) | ||||||||
Gain/(Loss) on Derivative | (1,105,729 | ) | 565,449 | (1,857,855 | ) | 13,157,878 | ||||||||||
Penalties and Settlements | (1,200 | ) | - | (21,226 | ) | - | ||||||||||
Loss on Acquisition of Batterfly Energy LTD | - | - | - | (6,191,000 | ) | |||||||||||
Total Other Income (Expense) | $ | (1,456,389 | ) | $ | (197,798 | ) | $ | (2,933,387 | ) | $ | 5,742,880 | |||||
Gain/(Loss) before income taxes | $ | (1,610,149 | ) | $ | (519,203 | ) | $ | (3,280,722 | ) | $ | 3,537,865 | |||||
Net Gain/(Loss) | $ | (1,610,149 | ) | $ | (519,203 | ) | $ | (3,280,722 | ) | $ | 3,537,865 | |||||
Basic earnings per share | ** | ** | (0.01 | ) | 0.05 | |||||||||||
Weighted average number of common shares outstanding | 478,890,811 | 77,749,592 | 478,890,811 | 70,976,591 |
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 Subsidary
StatementConsolidated Statements of Cash Flows
For the Six Months Ended
(Unaudited)
December 31, 2017 | December 31, 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net gain/(loss) | $ | (3,280,722 | ) | $ | 3,537,865 | |||
Common Stock Compensation | 5,400 | 1,634,758 | ||||||
Accounts Receivable | 3,064 | (5,486 | ) | |||||
Inventory | - | (29,705 | ) | |||||
Deposit | - | 240,000 | ||||||
Other Current Assets | - | (8,128 | ) | |||||
Changes in derivative liabilities | 1,857,855 | (13,157,878 | ) | |||||
Amortization of Debt discount | 811,055 | 1,131,979 | ||||||
Loss on Batterfly acquisition | - | 6,191,000 | ||||||
Adjustments to reconcile Net Income to Net Cash provided by operations: | ||||||||
Accounts Payable | 218,070 | 63,604 | ||||||
Accrued expense and interest payable | 216,751 | (516,555 | ) | |||||
Liquidated Damages Payable | 21,226 | - | ||||||
Payroll tax liabilities | - | 10,155 | ||||||
Net cash (used in) operating activities | $ | (147,300 | ) | $ | (908,391 | ) | ||
Cash flows from investing activities: | ||||||||
Investment - Batterfly Energy Ltd | $ | - | $ | (32,500 | ) | |||
Developed software | - | (14,625 | ) | |||||
Net cash (used in) provided by investing activities | $ | - | $ | (47,125 | ) | |||
Cash flows from financing activities: | ||||||||
Repurchase of common stock | - | - | ||||||
Notes Payable | 26,500 | - | ||||||
Proceed from convertible notes payables | 45,000 | 500,000 | ||||||
Net cash provided by financing activities | $ | 71,500 | $ | 500,000 | ||||
Net cash increased in cash | (75,800 | ) | (455,516 | ) | ||||
Cash at beginning of period | 91,672 | 469,233 | ||||||
Cash at end of period | $ | 15,871 | $ | 13,717 | ||||
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 | $ | 329,077.85 | $ | 366,112 | ||||
Value of common shares returned to treasury | $ | - | $ | - | ||||
Value of common shares issued for acquisition of Batterfly Energy LTD | $ | - | $ | 5,091,000 | ||||
Value of common shares issued as payment for services | $ | 5,400 | $ | - | ||||
Issuance of Common Stock for acquisition of Batterfly Energy LTD | 9,500,000 | 5,091,000 | ||||||
Issuance of Common Stock for convertible notes payable | 1,068,965,073 | 1,925,369 | ||||||
Issuance of Common Stock for services | 3,000,000 | - | ||||||
Notes payable | 426,361 | 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.
6 |
Life Clips, Inc.
Footnotes to Consolidated Financial Statements
December 31, 20172018
NOTE 1. ORGANIZATION AND OPERATIONS
Business and basis of presentation – 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-ownedwholly 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.
The Company is currently open to and pursuing alternative business opportunities.
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 no longer developing software. The software was determined to be completely impaired during the fiscal year ended June 30, 2017 and fully written off at that time.
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.
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 $(8,521,990).$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. NOTES PAYABLE
On July 14, 2016At December 31, 2018 and June 30, 2018, the Company issued a $30,000 promissory note to NUWA Group, LLC. The promissory note is not convertible into anyhad two notes payable in the amount of $530,000, with the equity securities of the Company. The effective interest rate is 5.00% per annum, calculated yearly not in advance. The note was to be repaid in full on October 14, 2016 and is past due/in default. Note proceeds were used for operating expenses.following terms:
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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 |
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 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.NOTE 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 September 25, 2017, Huey Long, on behalf ofAugust 8, 2018, the Company without Board approval, entered into a Mutual Release Agreement and 12%an 18% Convertible Promissory Note with Scott Silverman.Long Side Ventures LLC, an unaffiliated third party. The note was in a principal amount of $26,500$15,000, and matured on March 1, 2018. The Company is currently in negotiations with Mr. Silverman.
At December 31, 2017 and June 30, 2017 the Company had notes payable in the amount of $556,500 and $530,000, respectively.
NOTE 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 Notes 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 December 31, 2017 was $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, priora price equal 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 averagefifty percent (50%) of the lowest three trading pricesprice during the 20 tradingfive-trading day period prior to the conversion date.date of conversion. The note maturity date is August 8, 2019.
Balance at | Purchased | Balance at December 31, | Interest | Interest | Interest | ||||||||||||||||||||||||||
July 1, 2017 | Additions | Conversions | (sold) | 2017 | Expense | converted | Due Date | Rate | |||||||||||||||||||||||
151,073 | - | - | - | 151,073 | 2,900 | - | 10/02/17 | 3.85 | % | ||||||||||||||||||||||
69,578 | - | (69,578 | ) | - | - | 541 | 4,027 | 10/02/17 | 3.85 | % | |||||||||||||||||||||
44,473 | - | (25,130 | ) | - | 19,343 | 584 | - | 10/02/17 | 3.85 | % | |||||||||||||||||||||
100,000 | - | (8,949 | ) | - | 91,051 | 8,246 | - | 12/07/16 | 10.00 | % | |||||||||||||||||||||
300,000 | - | - | - | 300,000 | 26,926 | - | 04/28/17 | 10.00 | % | ||||||||||||||||||||||
608,930 | 504,000 | (37,625 | ) | - | 1,075,305 | 50,702 | - | 05/14/17 | 10.00 | % | |||||||||||||||||||||
51,791 | - | (19,637 | ) | - | 32,154 | 3,401 | - | 06/10/17 | 10.00 | % | |||||||||||||||||||||
75,000 | - | - | - | 75,000 | 6,732 | - | 07/22/17 | 10.00 | % | ||||||||||||||||||||||
99,650 | - | (108,800 | ) | - | (9,150 | ) | 3,138 | - | 09/23/17 | 10.00 | % | ||||||||||||||||||||
45,366 | - | (45,366 | ) | - | 0 | 974 | 4,983 | 10/19/17 | 10.00 | % | |||||||||||||||||||||
5,000 | - | - | - | 5,000 | 249 | - | 01/28/18 | 10.00 | % | ||||||||||||||||||||||
5,000 | - | - | - | 5,000 | 249 | - | 01/28/18 | 10.00 | % | ||||||||||||||||||||||
5,000 | - | - | - | 5,000 | 249 | - | 02/03/18 | 10.00 | % | ||||||||||||||||||||||
11,666 | - | - | - | 11,666 | 582 | - | 02/11/18 | 10.00 | % | ||||||||||||||||||||||
11,668 | - | - | - | 11,668 | 582 | - | 02/11/18 | 10.00 | % | ||||||||||||||||||||||
11,700 | - | - | - | 11,700 | 583 | - | 02/15/18 | 10.00 | % | ||||||||||||||||||||||
50,000 | - | - | - | 50,000 | 2,493 | - | 02/18/18 | 10.00 | % | ||||||||||||||||||||||
50,000 | - | - | - | 50,000 | 2,493 | - | 02/24/18 | 10.00 | % | ||||||||||||||||||||||
50,000 | - | - | - | 50,000 | 2,493 | - | 03/15/18 | 10.00 | % | ||||||||||||||||||||||
50,000 | - | - | - | 50,000 | 2,493 | - | 03/16/18 | 10.00 | % | ||||||||||||||||||||||
50,000 | - | - | - | 50,000 | 2,493 | - | 03/18/18 | 10.00 | % | ||||||||||||||||||||||
50,000 | - | - | - | 50,000 | 2,493 | - | 03/29/18 | 10.00 | % | ||||||||||||||||||||||
50,000 | - | - | - | 50,000 | 2,493 | - | 04/04/18 | 10.00 | % | ||||||||||||||||||||||
50,000 | - | - | - | 50,000 | 2,493 | - | 05/02/18 | 10.00 | % | ||||||||||||||||||||||
50,000 | - | - | - | 50,000 | 2,493 | - | 06/02/18 | 10.00 | % | ||||||||||||||||||||||
30,000 | - | - | - | 30,000 | 1,509 | - | 09/17/18 | 18.00 | % | ||||||||||||||||||||||
- | 15,000 | - | - | 15,000 | 333 | - | 11/17/17 | 18.00 | % | ||||||||||||||||||||||
2,075,895 | 519,000 | (315,084 | ) | - | 2,279,810 | 130,920 | 9,010 |
On September 24, 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 $5,000, 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 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 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 September 26, 2019.
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.
The Company has determinedevaluated the convertible promissory notes under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis of embedded 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 conversion featurerisks of the Notes represents anhost contract. The material embedded derivative since the Notes are convertible into a variable numberconsists of shares upon conversion. Accordingly, the Notes are not considered to be conventional debt and the embedded conversion feature must be bifurcated fromfeature. The conversion option bears risks of equity which were not clearly and closely related to the host debt hostagreement and accounted for as a derivative liability.required bifurcation. See Note 86 for further discussion.
(B) Terms of Debt
The debt carries interest between 3.85%, 10% and 18% and is due in October 2017 through March 2019
All convertible debt in connection with the Notes Offering are convertible at $0.026 and $0.033/share (on December 31, 2017), however, the Notes include a “ratchet feature”, which allows for a lower conversion price based on market prices.
(C) Future Commitments
At December 31, 2017, the Company has outstanding convertible debt of $2,336,310 which is payable within the next fifteen months.
NOTE 6. DERIVATIVE LIABILITIES
The Company identified conversion features embedded within convertible debt and warrants issued for the period ended December 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.
The warrant are classified as liabilities or tainted
The convertible notes will generate derivative liabilities.
Warrant | Convertible notes | Total | ||||||||||
DL as of 6/30/2017 | 2,243 | 2,957,598 | 2,959,841 | |||||||||
Initial DL | - | 77,131 | 77,131 | |||||||||
Changes in DL | - | 1,825,723 | 1,825,723 | |||||||||
Reclassify to APIC | - | (144,182 | ) | (144,182 | ) | |||||||
DL as of 12/31/2017 | 2,243 | 4,716,270 | 4,718,513 |
The fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following management assumptions at December 31, 2017, using the lattice binomial valuation model:
Commitment Date | Re-measurement Date | |||||||
Expected dividends | 0 | % | 0 | % | ||||
Expected volatility | 220 | % | 261 | % | ||||
Expected term | 0.5 to 3 years | 0.10-2.87 years | ||||||
Risk free interest rate | 0.43%-1.11 | % | 0.36%- 0.71 | % |
NOTE 7. CONVERTIBLE DEBT - NET 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.
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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 172,350the Company’s derivative liabilities and linked common shares as of December 31, 20172018 and $407,905June 30, 2018 and the amounts that were reflected in income related to derivatives for the yearperiod 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
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 three months ended June 30,December 31, 2018 and 2017:
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 six months ended 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 has 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 development of significant 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, 2018 and 2017.
Accumulated amortization of debt discount amounted to $846,055 as of December 31, 2017 and $2,146,527 for the year ended June 30, 2017.
December 31, 2017 | June 30, 2017 | |||||||
Balance Prior Year | $ | 1,667,990 | $ | 443,065.00 | ||||
Proceeds | 45,000 | 980,034 | ||||||
Repayments | (90,466 | ) | (951,725 | ) | ||||
Less: gross Debt Discount recorded | (245,567 | ) | (980,034 | ) | ||||
Add: Amortization of Debt Discount | 730,504 | 2,146,650 | ||||||
Less: Current portion | (2,107,461 | ) | (1,637,990 | ) | ||||
Long-Term Convertible Debt | $ | - | $ | - |
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 8. STOCKHOLDERS’7. EQUITY (DEFICIT)
Shares Authorized Capital
On April 4, 2016,2017, the Company filed Articles of Restatement 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 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.
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As of December 31, 2017, the Company had 1,259,831,381 shares of Common Stock issued and outstanding.
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 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 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.
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.
Common Stock IssuedWarrants and Options
ForAt December 31, 2018 and June 30, 2018, the nine-month periodCompany 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, 2017, 1,071,965,073 shares2018 and 2017. The weighted average remaining lives of common stockthe warrants were issued, bringing the total shares issued0.34 and outstanding to 1,259,831,381.0.84 at December 31, 2018 and June 30, 2018, respectively.
The table below represents the Company’s issuances of shares of its common stock in conjunction with conversions of the purchaser’s convertible note payable. The conversion prices of the notes 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 to Convertible Notes Payable can be found in Note 7.NOTE 8. COMMITTMENTS AND CONTINGENCIES
Date of Conversion | Number of Shares | Note Holder Name | Price per share | Value of Conversion (Reduction of Notes Payable) | |||||||||||
July 6, 2017 | 5,984,848 | St. George Conversion #7 | $ | 0.00132 | $ | 7,900.00 | |||||||||
July 6, 2017 | 8,348,794 | St. George True-Up for 6/20 (#5) | $ | 0.00290 | 24,211.50 | ||||||||||
July 14, 2017 | 8,775,449 | JSJ Conversion | $ | 0.00090 | 7,897.90 | ||||||||||
July 24, 2017 | 10,500,000 | Edgestone Conversion | $ | 0.00095 | 9,975.00 | ||||||||||
July 26, 2017 | 6,535,792 | Taconic Conversion | $ | 0.00095 | 6,209.00 | ||||||||||
July 28, 2017 | 10,527,670 | Forest Conversion | $ | 0.00085 | 8,948.52 | ||||||||||
July 28, 2017 | 10,527,670 | Long Side Conversion | $ | 0.00085 | 8,948.52 | ||||||||||
July 31, 2017 | �� | 11,319,546 | JSJ Conversion | $ | 0.00080 | 9,055.64 | |||||||||
July 31, 2017 | 11,320,755 | St. George Conversion #8 | $ | 0.00106 | 12,000.00 | ||||||||||
July 31, 2017 | 5,133,638 | St. George True-Up for 7/6 (#6) | $ | 0.00420 | 21,561.28 | ||||||||||
August 2, 2017 | 13,964,037 | Summit Conversion | $ | 0.00090 | 12,567.63 | ||||||||||
August 7, 2017 | 11,556,604 | St. George Conversion #9 | $ | 0.00106 | 12,250.00 | ||||||||||
August 7, 2017 | 12,499,000 | Long Side Conversion | $ | 0.00090 | 11,249.10 | ||||||||||
August 10, 2017 | 11,319,546 | JSJ Conversion | $ | 0.00080 | 9,055.64 | ||||||||||
August 15, 2017 | 15,800,000 | Edgestone Conversion | $ | 0.00075 | 11,850.00 | ||||||||||
August 17, 2017 | 11,319,546 | JSJ Conversion | $ | 0.00075 | 8,489.66 | ||||||||||
August 21, 2017 | 16,800,000 | Long Side Conversion | $ | 0.00050 | 8,400.00 | ||||||||||
August 23, 2017 | 15,365,854 | St. George Conversion #10 | $ | 0.00082 | 12,600.00 | ||||||||||
August 23, 2017 | 1,467,982 | St. George True-Up for 7/6 (#7) | $ | 0.00100 | 1,467.98 | ||||||||||
August 24, 2017 | 15,800,000 | Edgestone Conversion | $ | 0.00035 | 5,530.00 | ||||||||||
August 28, 2017 | 16,684,458 | JSJ Conversion | $ | 0.00035 | 5,839.56 | ||||||||||
August 29, 2017 | 31,521,739 | St. George Conversion #11 | $ | 0.00046 | 14,500.00 | ||||||||||
August 30, 2017 | 19,457,656 | Long Side Conversion | $ | 0.00035 | 6,810.18 | ||||||||||
August 31, 2017 | 15,800,000 | Edgestone Conversion | $ | 0.00035 | 5,530.00 | ||||||||||
September 6, 2017 | 16,684,458 | JSJ Conversion | $ | 0.00035 | 5,839.56 | ||||||||||
September 6, 2017 | 16,477,273 | St. George Conversion #12 | $ | 0.00044 | 7,250.00 | ||||||||||
September 6, 2017 | 14,766,202 | St. George True-Up for 7/31 (#8) | $ | 0.00080 | 11,812.96 | ||||||||||
September 13, 2017 | 15,800,000 | Edgestone Conversion | $ | 0.00030 | 4,740.00 | ||||||||||
September 18, 2017 | 16,684,458 | JSJ Conversion | $ | 0.00025 | 4,171.11 | ||||||||||
September 22, 2017 | 33,823,529 | St. George Conversion #13 | $ | 0.00034 | 11,500.00 | ||||||||||
September 22, 2017 | 17,610,063 | St. George True-Up for 8/07 (#9) | $ | 0.00060 | 10,566.04 | ||||||||||
September 28, 2017 | 30,990,037 | Long Side Conversion | $ | 0.00025 | 7,747.51 | ||||||||||
September 28, 2017 | 30,990,000 | Taconic Conversion | $ | 0.00025 | 7,747.50 | ||||||||||
October 9, 2017 | 21,071,429 | St. George Conversion #14 | $ | 0.00028 | 5,900.00 | ||||||||||
October 9, 2017 | 21,692,970 | St. George True-Up for 8/23 (#10) | $ | 0.00070 | 15,185.08 | ||||||||||
October 9, 2017 | 13,790,761 | St. George True-Up for 8/29 (#11) | $ | 0.00070 | 9,653.53 | ||||||||||
October 9, 2017 | 25,295,228 | JSJ Conversion | $ | 0.00020 | 4,983.16 | ||||||||||
October 11, 2017 | 35,345,073 | Summit Conversion | $ | 0.00020 | 7,069.01 | ||||||||||
October 17, 2017 | 46,428,571 | St. George Conversion #15 | $ | 0.00028 | 13,000.00 | ||||||||||
October 18, 2017 | 39,930,895 | Long Side Conversion | $ | 0.00020 | 7,986.18 | ||||||||||
October 24, 2017 | 49,583,333 | St. George Conversion #16 | $ | 0.00024 | 11,900.00 | ||||||||||
October 24, 2017 | 9,415,584 | St. George True-Up for 8/23 (#12) | $ | 0.00030 | 2,824.68 | ||||||||||
October 24, 2017 | 44,240,232 | Long Side Conversion | $ | 0.00015 | 6,636.03 | ||||||||||
November 7, 2017 | 49,391,866 | Long Side Conversion | $ | 0.00010 | 4,939.19 | ||||||||||
November 14, 2017 | 51,856,520 | Taconic Conversion | $ | 0.00010 | 5,185.65 | ||||||||||
November 14, 2017 | 51,856,520 | Long Side Conversion | $ | 0.00010 | 5,185.65 | ||||||||||
November 22, 2017 | 57,031,800 | Long Side Conversion | $ | 0.00010 | 5,703.18 | ||||||||||
December 14, 2017 | 59,877,687 | Taconic Conversion | $ | 0.00010 | 5,987.77 | ||||||||||
TOTALS | 1,068,965,073 | $ | 426,361.00 |
On July 28, 2017,From time to time, the Company re-issued, followingmay be a party to other legal proceedings. Management currently believes that the returnultimate resolution of the sharesthese matters will not have a material adverse effect on consolidated results 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.operations, financial position, or cash flow.
NOTE 9. STOCK INCENTIVE PLAN
On April 20, 2016, the Company approved the Life Clips, Inc. 2016 Stock and Incentive Plan (“the Plan”). 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 a maximum of 20,000,000 shares of common stock, with awards made at the discretion of the board of directors. No awards have been made to date.
NOTE 10. SUBSEQUENT EVENTS
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, 2017 acquisition of Batterfly. The Batterfly Acquisition Note required the Company to make a payment of $250,000 on October 6, 2017 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, 2017, which began to accrue interest of 11% from October 6, 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 followsfiled a claim against the guidancesellers 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 Section 855-10-50the matter as they seek to negotiate a settlement of their claim. The claim was settled during 2019 for which the FASB Accounting Standards Codification forCompany agreed to issue 62,991,567 shares of common stock to the disclosuresellers of subsequent events. The Company will evaluate subsequent events throughBatterfly. As of the date of this filing, the issuance of the financial statements.shares are still pending issuance.
On August 8, 2018,June 2, 2020, the Company entered into an 18% Convertible Promissory Note with Long Side Ventures LLC, an unaffiliated third party. The note wasBoard of Directors, agreed to issue 5,260,000,000 common stock shares in a principal amountlieu of $15,000,unpaid management and is convertible at a price equal to fifty percent (50%)director salaries of the lowest trading price during the five trading day period prior toaccrued amounts from July 1, 2018 through and including March 31, 2020. As of the date of conversion. The note maturity date is August 8, 2019.this filing, the shares are still pending issuance.
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Item 2. Management’s discussion and analysis of financial condition and results of operations.
This reportForward-Looking Statements
The following discussion 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 futurestatements regarding us, our business, 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 currentoperations that are subject to certain risks and anticipated sales efforts, expenses, the outcome of contingencies, such as legal proceedings,uncertainties posed by many factors and financial results.
We cautionevents that the factors described herein and other factors could cause our actual business, prospects and results of operations and financial condition to differ materially from those expressed in anythat may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements we makeinclude, 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 investors shouldadversely 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 discussion, words such as “believes”, “anticipates”, “expects”, “intends” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on any suchthese forward-looking statements. Further, any forward-looking statement speaksstatements, which speak only as of the date on which such statement is made, and weof this report. We undertake no obligation to updaterevise any forward-looking statementstatements in order to reflect events or circumstances afterthat may subsequently arise. Readers are urged to carefully review and consider the date on which such statement isvarious disclosures made orby us in this report and other reports filed with the Securities and Exchange Commission that attempt to reflectadvise interested parties of the occurrence of anticipated or unanticipated events or circumstances. Newrisks and 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 onthat may affect 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.business.
General Information about Our Company
Life Clips, Inc. (the(“Life Clips”, “we,” “us,” “our,” and 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-ownedwholly 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.
Following the acquisition of Batterfly, we began to focus on 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. |
We plan to reengage in these initiatives as we seek potential new distributors, joint venture and strategic alliance partners and additional sources of financing to enable us to pursue marketing and future development and commercialization activities related to the Mobeego.
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.
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 November 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 “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, theThe Company is no longer seekingcurrently pursuing alternative business opportunities. There has been limited activity due to launch its planned global sourcinga delay in securing funding. The Company is working to re-energize the business with Textiss USA, Misaki Corporation and Axperrt Company Limited as previously disclosed.
On March 30, 2018, Victoria Rudman was namedwithin the Company’s Interim Chief Executive Officer.next 12 months.
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, 20172018 included in this Quarterly Report for a discussion of the Company’s significant accounting policies.
Results of Operations for the Three and Six Months Ended December 31, 20172018 and December 31, 20162017
For the three months ended December 31, 20172018 and 2016,2017, we had gross profit of $485$0 and $4,074$485 respectively.
Total operating expenses were $154,245$91,480 compared with $325,479$154,245 for the three months ended December 31, 20172018 and 2016,2017, respectively. The decrease is directly related to lower professional fees and other G&A expenses.
Net lossOther Income (Expense) was $2,489,036 when compared with $(1,456,389) for the three months ended December 31, 2018 and 2017, respectively. This change is primarily due to a change in fair value of derivatives.
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Net income for the three months ended December 31, 2018 was $1,610,149$2,397,556 as compared to net loss of $519,203$1,610,149 for the three months ended December 31, 2017
The 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 2016.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.
Results of Operations for the Six Months Ended December 31, 2018 and 2017
For the six months ended December 31, 20172018 and 2016,2017, we had gross profit of $512$0 and $31,907,$512 respectively.
Total operating expenses were $347,847$186,839 compared with $2,205,015$347,846 for the six months ended December 31, 20172018 and 2016,2017, respectively. The decrease is primarily duedirectly related to a decrease inlower professional fees and stock issuances for professional services.other G&A expenses.
Net lossOther 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 $3,280,722$7,046,913 as compared to net incomeloss of $3,537,865 at$3,280,721 for the six months ended December 31, 2016.2017.
The 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 December 31, 20172018 the Company had cash on hand of $15,871, total current assets of $15,871 and$45,866, total assets of $15,871,$45,866, total liabilities of $8,502,862$6,255,173 and total shareholder’s deficit of $8,486,990.$6,209,307.
The Company’s cash was generated from a series of convertible notes issued to non-related third parties, and two promissory notes to non-related third party of $26,500 and $30,000.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, 20172018 period ended. The Company has not negotiated nor has available to it any other third party sources of liquidity.
Cash flows used infrom operating activities for the six months periodmonth periods ended December 31, 2018 and 2017 were $37,386 and $147,300, comparedrespectively. The change was primarily due to cash flows usednet income being offset by changes in operating activitiesfair value of $908,391 to the six months period ended December 31, 2016.derivative liabilities.
Cash flows used in investingfrom financing activities totaled $0 for the six months period ended December 31, 2017$75,000 and $47,125 for the six months period ended December 31, 2016.
Cash flows provided by financing activities totaled $71,500 for the six months period ended December 31, 2018 and 2017, and cash flows provided by financing activities totaled $500,000 for the six months period ended December 31, 2016.respectively. The $75,000 were 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.
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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, 2017.2018. 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, 20172018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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 discussionsThe 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 ongoing.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.
The Company’s operations are currently being conducted out of the Company’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 price of $135.00$135 per month. The Company considers the current principal office space to be adequate and will reassess its needs based upon the future growth of the Company.
Item 3. Defaults Upon Senior Securities.
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 discussionsThe 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 ongoing.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.
Item 4. Mining Safety Disclosures
Not Applicable.
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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.Not Applicable.
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.
* 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
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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.
Life Clips, Inc. | ||
Date: August | By: | /s/ Victoria Rudman |
Victoria Rudman | ||
Interim Chief Financial Officer (Principal Financial and Accounting Officer) |
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