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 March 31,September 30, 2021
[ ]☐ 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 | ☒ | |
Emerging growth company | ☒ |
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
| ||||
Common Stock, $0.001 par value per share |
Indicate by check mark whether the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act and Section 13(a) of the Exchange Act. [ ]
LIFE CLIPS, INC.
FORM 10-Q FOR THE QUARTER ENDED MARCH 31,SEPTEMBER 30, 2021
TABLE OF CONTENTS
Page | |||
PART I — FINANCIAL INFORMATION | 3 | ||
Item 1. | Consolidated Financial Statements | 3 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | ||
Item 4. | Controls and Procedures | ||
PART II — OTHER INFORMATION | 19 | ||
Item 1. | Legal Proceedings | ||
Item 1A. | Risk Factors | ||
Item 2. | Properties | ||
Item 3. | |||
Mining Safety Disclosures | |||
Item | Other Information | ||
Item | Exhibits | ||
Signatures |
2 |
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Life Clips, Inc.
March 31, 2021 | June 30, 2020 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | $ | 39,303 | $ | 12,160 | ||||
Total assets | $ | 39,303 | $ | 12,160 | ||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
Current liabilities | ||||||||
Accounts Payable | $ | 361,159 | $ | 357,388 | ||||
Due to Related Party | 988,050 | 763,050 | ||||||
Accrued Expenses and Interest Payable | 1,661,180 | 1,379,655 | ||||||
Convertible Note Payable (net of discount of $34,123 and $0, respectively) | 15,877 | - | ||||||
Convertible Note Payable - In Default | 2,428,960 | 2,428,960 | ||||||
Notes Payable | 35,000 | - | ||||||
Notes Payable - In Default | 530,000 | 530,000 | ||||||
Derivative Liability - Convertible Notes Payable | 4,172,352 | 13,249,507 | ||||||
Total Current Liabilities | 10,192,578 | 18,708,560 | ||||||
Commitments and Contingencies | ||||||||
Shareholders’ deficit | ||||||||
Preferred stock, ($0.001 par value; 20,000,000 shares authorized, 1,000,000 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 | ||||||
Shares to be issued/returned | 125,032 | 125,032 | ||||||
Additional paid in capital | 9,218,935 | 9,218,935 | ||||||
Accumulated deficit | (20,758,073 | ) | (29,301,198 | ) | ||||
Total shareholders’ deficit | (10,153,275 | ) | (18,696,400 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 39,303 | $ | 12,160 |
September 30, 2021 | June 30, 2021 | |||||||
(Unaudited) | (Audited) | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash | 2,072,090 | 230,685 | ||||||
Accounts Receivable | 378,796 | - | ||||||
Due from Related Party | - | 34,271 | ||||||
Other Current Assets | 1,625,451 | - | ||||||
Total Current Assets | 4,076,337 | 264,956 | ||||||
Right-of-Use Asset | 92,028 | - | ||||||
Investments - Ehave Inc | 19,211 | 38,422 | ||||||
Property and Equipment, net | 1,410,869 | - | ||||||
Intangible Assets | 43,752,524 | - | ||||||
Total Assets | $ | 49,350,969 | $ | 303,378 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) | ||||||||
Current Liabilities | ||||||||
Accounts Payable | 1,078,687 | 399,670 | ||||||
Accrued Expenses and Interest Payable | 91,028 | 521,521 | ||||||
Deferred Revenue | 25,000 | 50,000 | ||||||
Due to Related Party | 5,504,287 | 1,155,550 | ||||||
Convertible Note Payable, less discount of $80,369 at June 30, 2021 | - | 3,582,872 | ||||||
Convertible Note Payable - In Default | - | 541,051 | ||||||
Derivative Liability - Convertible Notes Payable | - | 1,577,001 | ||||||
Lease Liability | 56,968 | - | ||||||
Total Current Liabilities | 6,775,970 | 7,827,665 | ||||||
Non-Current liabilities: | ||||||||
Lease Liability, Long-Term | 35,060 | |||||||
Convertible Note Payable | 4,369,895 | - | ||||||
Contingent Liability, Long-Term | 15,788,699 | - | ||||||
Total Liabilities | 26,949,624 | 7,827,665 | ||||||
Commitments and Contingencies (Note 10) | - | - | ||||||
Shareholders’ Equity (Deficit) | ||||||||
Preferred Stock - Series A ($par value; shares authorized, shares issued and outstanding) | 4,000 | 4,000 | ||||||
Preferred Stock - Series B ($par value; shares authorized, shares issued and outstanding) | 5,760 | 5,760 | ||||||
Preferred Stock - Series C ($par value; shares authorized, and zero shares issued and outstanding at September 30, 2021 and June 30, 2021, respectively) | 2,000 | - | ||||||
Preferred Stock value | ||||||||
Common Stock, ($par value; shares authorized, and shares issued and outstanding, respectively) | 1,617,727 | 1,322,823 | ||||||
Common Stock To Be Issued | 44,332 | 125,032 | ||||||
Additional Paid-In Capital | 54,115,388 | 23,866,298 | ||||||
Accumulated Other Comprehensive Loss | (93,354 | ) | (67,965 | ) | ||||
Accumulated Deficit | (33,294,508 | ) | (32,780,235 | ) | ||||
Total Shareholders’ Equity (Deficit) | 22,401,345 | (7,524,287 | ) | |||||
Total Liabilities and Shareholders’ Equity (Deficit) | $ | 49,350,969 | $ | 303,378 |
The accompanying notes are an integral part of these consolidated financial statements.
3 |
Life Clips, Inc.
Consolidated Statements of OperationsCONSOLIDATED STATEMENTS OF OPERATIONS AND COMREHENSIVE INCOME/(LOSS)
For the Three and Nine Months ended MarchSeptember 31, 2021 and 2020
(Unaudited)
For the three month | For the three month | |||||||
period ended | period ended | |||||||
September 30, 2021 | September 30, 2020 | |||||||
Revenues | ||||||||
License Income | $ | 25,000 | $ | - | ||||
Other Revenues | 20,574 | - | ||||||
Total Revenues | 45,574 | - | ||||||
Cost of Goods Sold | - | - | ||||||
Gross Profit | 45,574 | - | ||||||
Operating Costs: | ||||||||
Professional Fees | 237,679 | 81,655 | ||||||
Payroll Expense | 115,795 | - | ||||||
Marketing Expense | 50,000 | - | ||||||
Travel and Meal Expenditures | 25,846 | - | ||||||
Other General and Administrative Expenses | 33,129 | 971 | ||||||
Total Operating Costs | 462,449 | 82,626 | ||||||
Loss from Operations | (416,875 | ) | (82,626 | ) | ||||
Other Income/(Expense): | ||||||||
Interest Expense | (86,958 | ) | (93,603 | ) | ||||
Change in Fair Value of Derivative | 1,577,001 | 7,103,673 | ||||||
Forgiveness of Debt | 15,525 | - | ||||||
Loss on Impairment of Intangibles | (1,522,597 | ) | - | |||||
Debt Discount Amortization | (80,369 | ) | - | |||||
Total Other Income (Expense) | (97,398 | ) | 7,010,070 | |||||
Income/(Loss) Before Income Taxes | (514,273 | ) | 6,927,444 | |||||
Provision for Income Taxes | - | - | ||||||
Net Income/(Loss) | $ | (514,273 | ) | $ | 6,927,444 | |||
Other Comprehensive Loss: | ||||||||
Foreign Currency Translation Adjustment | 5,400 | - | ||||||
Change in Fair Value of Investment | (30,789 | ) | - | |||||
Comprehensive Loss | $ | (539,662 | ) | $ | 6,927,444 | |||
Earnings/(Loss) Per Share: Basic and Diluted | $ | (0.0003) | $ | 0.0055 | ||||
Weighted Average Number of Common Shares Outstanding: Basic and Diluted | 1,472,824,710 | 1,259,831,337 |
For the three month | For the three month | For the nine month | For the nine month | |||||||||||||
period ended | period ended | period ended | period ended | |||||||||||||
March 31, 2021 | March 31, 2020 | March 31, 2021 | March 31, 2020 | |||||||||||||
Revenues | ||||||||||||||||
Revenues | $ | - | $ | - | $ | - | $ | - | ||||||||
Cost of Goods Sold | - | - | - | - | ||||||||||||
Gross Profit | - | - | - | - | ||||||||||||
Operating Costs: | ||||||||||||||||
Professional Fees | 90,373 | 87,800 | 283,827 | 241,455 | ||||||||||||
Other General and Administrative Expenses | 752 | 944 | 2,295 | 6,150 | ||||||||||||
Software Fees and Support | 114 | 164 | 507 | 1,369 | ||||||||||||
Total Operating Costs | 91,239 | 88,908 | 286,629 | 248,974 | ||||||||||||
Loss from Operations | (91,239 | ) | (88,908 | ) | (286,629 | ) | (248,974 | ) | ||||||||
Other Income/(Expense): | ||||||||||||||||
Interest Expense | (105,418 | ) | (92,364 | ) | (297,402 | ) | (302,362 | ) | ||||||||
Change in Fair Value of Derivative | 5,003,769 | 6,535,398 | 9,127,156 | (7,397,059 | ) | |||||||||||
Total Other Income (Expense) | 4,898,351 | 6,443,034 | 8,829,754 | (7,699,421 | ) | |||||||||||
Income/(Loss) Before Income Taxes | 4,807,112 | 6,354,126 | 8,543,125 | (7,948,395 | ) | |||||||||||
Provision for Income Taxes | - | - | - | - | ||||||||||||
Net Income/(Loss) | $ | 4,807,112 | $ | 6,354,126 | $ 8, 543,125 | $ | (7,948,395 | ) | ||||||||
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 | 1,259,831,337 | 1,259,831,337 | 1,259,831,337 |
LIFE CLIPS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ DEFICIT (UNAUDITED)
For the three months ending March 31, 2021 and 2020
Preferred | Common | Common | Additional | Total | ||||||||||||||||||||||||||||
Stock | Stock | Stock | Paid-In | Accumulated | Shareholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Issuable | Capital | Deficit | (Deficit) | |||||||||||||||||||||||||
Balances as of December 31, 2020 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 125,032 | $ | 9,218,935 | $ | (25,565,185 | ) | $ | (14,960,387 | ) | ||||||||||||||||
Net Loss | - | - | - | - | -- | - | 4,807,112 | 4,807,112 | ||||||||||||||||||||||||
Balances as of March 31, 2021 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 125,032 | $ | 9,218,935 | $ | (20,758,073 | ) | $ | (10,153,275 | ) |
Preferred | Common | Common | Additional | Total | ||||||||||||||||||||||||||||
Stock | Stock | Stock | Paid-In | Accumulated | Shareholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Issuable | Capital | Deficit | (Deficit) | |||||||||||||||||||||||||
Balances as of December 31, 2019 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 125,032 | $ | 9,218,935 | $ | (32,863,392 | ) | $ | (22,258,594 | ) | ||||||||||||||||
Net Loss | - | - | - | - | - | - | 6,354,126 | 6,354,126 | ||||||||||||||||||||||||
Balances as of March 31, 2020 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 125,032 | $ | 9,218,935 | $ | (26,509,266 | ) | $ | (15,904,468 | ) |
For the nine months ending March 31, 2021 and 2020
Preferred | Common | Common | Additional | Total | ||||||||||||||||||||||||||||
Stock | Stock | Stock | Paid-In | Accumulated | Shareholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Issuable | Capital | Deficit | (Deficit) | |||||||||||||||||||||||||
Balances as of June 30, 2020 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 125,032 | $ | 9,218,935 | $ | (29,301,198 | ) | $ | (18,696,400 | ) | ||||||||||||||||
Net Income | - | - | - | - | - | - | 8,543,125 | 8,543,125 | ||||||||||||||||||||||||
Balances as of March 31, 2021 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 125,032 | $ | 9,218,935 | $ | (20,758,073 | ) | $ | (10,153,275 | ) |
Preferred | Common | Common | Additional | Total | ||||||||||||||||||||||||||||
Stock | Stock | Stock | Paid-In | Accumulated | Shareholders’ | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Issuable | Capital | Deficit | (Deficit) | |||||||||||||||||||||||||
Balances as of June 30, 2019 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 125,032 | $ | 9,218,935 | $ | (18,560,871 | ) | $ | (7,956,073 | ) | ||||||||||||||||
Net Loss | - | - | - | - | - | - | (7,948,395 | ) | (7,948,395 | ) | ||||||||||||||||||||||
Balances as of March 31, 2020 | 1,000,000 | $ | 1,000 | 1,259,831,337 | $ | 1,259,831 | $ | 125,032 | $ | 9,218,935 | $ | (26,509,266 | ) | $ | (15,904,468 | ) |
**Less than $0.01
The accompanying notes are an integral part of these consolidated financial statements.
LIFE CLIPS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT (UNAUDITED)CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
For the three months ended March 31,ending September 30, 2021 and 2020
Preferred - Series A | Preferred - Series B | Preferred - Series C | Common Stock | Common Stock To Be | Additional Paid-In | Accumulated Other Comprehensive | Accumulated | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Issued | Capital | Loss | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Balances as of June 30, 2021 | 40,000,000 | $ | 4,000 | 5,760,000 | $ | 5,760 | - | $ | - | 1,322,822,904 | $ | 1,322,823 | $ | 125,032 | $ | 23,866,298 | $ | (67,965 | ) | $ | (32,780,235 | ) | $ | (7,524,287 | ) | |||||||||||||||||||||||||||
Stock issued for Cash | - | - | - | - | - | - | 208,333,333 | 208,333 | - | 2,916,667 | - | - | 3,125,000 | |||||||||||||||||||||||||||||||||||||||
Stock Issued for Services | - | - | - | - | - | - | 2,692,489 | 2,693 | - | 9,800 | - | - | 12,493 | |||||||||||||||||||||||||||||||||||||||
Accrued Expenses Converted to Stock | - | - | - | - | - | - | 46,045,000 | 46,045 | - | 907,530 | - | - | 953,575 | |||||||||||||||||||||||||||||||||||||||
Common Stock Issued from Prior Periods | - | - | - | - | - | - | 13,500,000 | 13,500 | (80,700 | ) | 67,200 | - | - | - | ||||||||||||||||||||||||||||||||||||||
Debt Converted to Stock | - | - | - | - | - | - | 24,333,333 | 24,333 | - | 335,667 | - | - | 360,000 | |||||||||||||||||||||||||||||||||||||||
Belfrics Acquisition Shares | - | - | - | - | 2,000,000 | 2,000 | - | - | - | 26,012,226 | - | - | 26,014,226 | |||||||||||||||||||||||||||||||||||||||
Foreign Currency Translation Adjustment | - | - | - | - | - | - | - | - | - | - | 5,400 | - | 5,400 | |||||||||||||||||||||||||||||||||||||||
Change in Fair Value of Investment | - | - | - | - | - | - | - | - | - | - | (30,789 | ) | - | (30,789 | ) | |||||||||||||||||||||||||||||||||||||
Net Income | - | - | - | - | - | - | - | - | - | - | - | (514,273 | ) | (514,273 | ) | |||||||||||||||||||||||||||||||||||||
Balances as of September 30, 2021 | 40,000,000 | $ | 4,000 | 5,760,000 | $ | 5,760 | 2,000,000 | $ | 2,000 | 1,617,727,059 | $ | 1,617,727 | $ | 44,332 | $ | 54,115,388 | $ | (93,354 | ) | $ | (33,294,508 | ) | $ | 22,401,345 |
Preferred - Series A | Preferred - Series B | Preferred - Series C | Common Stock | Common Stock To Be | Additional Paid-In | Accumulated Other Comprehensive | Accumulated | Total Shareholders’ | ||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Issued | Capital | Loss | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||||||||
Balances as of June 30, 2020 | 1,000,000 | $ | 1,000 | - | $ | - | - | $ | - | 1,259,831,337 | $ | 1,259,831 | $ | 125,032 | $ | 9,218,935 | $ | - | $ | (29,301,198 | ) | $ | (18,696,400 | ) | ||||||||||||||||||||||||||||
Net Income | - | - | - | - | - | - | - | - | - | - | - | 6,927,444 | 6,927,444 | |||||||||||||||||||||||||||||||||||||||
Balances as of September 30, 2020 | 1,000,000 | $ | 1,000 | - | $ | - | - | $ | - | 1,259,831,337 | $ | 1,259,831 | $ | 125,032 | $ | 9,218,935 | $ | - | $ | (22,373,754 | ) | $ | (11,768,956 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
Life Clips, Inc.
Consolidated StatementsStatement of Cash Flows
For the NineThree Months Ended
(Unaudited)
March 31, 2021 | March 31, 2020 | September 30, 2021 | September 30, 2020 | |||||||||||||
Cash Flows From Operating Activities: | ||||||||||||||||
Net Income/(Loss) | $ | 8,543,125 | $ | (7,948,395 | ) | $ | (514,273 | ) | $ | 6,927,444 | ||||||
Adjustments to Reconcile Net Income/(Loss) to Net Cash From Operating Activities: | ||||||||||||||||
Changes in Fair Value of Derivative Liabilities | (9,127,156 | ) | 7,397,059 | (1,577,001 | ) | (7,103,673 | ) | |||||||||
Stock Issued for Services | 12,493 | - | ||||||||||||||
Change in Fair Value of Investments | 30,789 | - | ||||||||||||||
Loss on Impairment of Intangibles | 1,522,597 | - | ||||||||||||||
Amortization of Debt Discount | 15,878 | 22,890 | 80,369 | 178 | ||||||||||||
Gain on Forgiveness | (15,525 | ) | - | |||||||||||||
Depreciation | 17,019 | - | ||||||||||||||
Changes in Assets and Liabilities: | ||||||||||||||||
Accounts Receivable | (10,000 | ) | - | |||||||||||||
Accounts Payable | 3,771 | 6,300 | 8,135 | (3,781 | ) | |||||||||||
Accrued Expenses and Interest Payable | (266,499 | ) | 93,425 | |||||||||||||
Advance to Employees | (37,500 | ) | - | |||||||||||||
Deferred Revenue | 25,000 | - | ||||||||||||||
Due to Related Parties | 225,000 | 225,000 | (295,424 | ) | 75,000 | |||||||||||
Accrued Expenses and Interest Payable | 281,525 | 279,472 | ||||||||||||||
Due from Related Parties | 34,271 | - | ||||||||||||||
Net Cash From Operating Activities | (57,857 | ) | (17,674 | ) | (985,549 | ) | (11,407 | ) | ||||||||
Cash Flows From Investing Activities: | ||||||||||||||||
Purchases of Property and Equipment | (377,823 | ) | - | |||||||||||||
Net Cash Acquired on Acquisitions | 74,377 | - | ||||||||||||||
Net Cash From Investing Activities | (303,446 | ) | - | |||||||||||||
Cash Flows From Financing Activities: | ||||||||||||||||
Proceeds From Non-Convertible Notes Payables | 35,000 | - | ||||||||||||||
Proceeds From Issuance of Stock | 3,125,000 | - | ||||||||||||||
Proceeds From Convertible Notes Payables | 50,000 | - | - | 5,000 | ||||||||||||
Net Cash From Financing Activities | 85,000 | - | 3,125,000 | 5,000 | ||||||||||||
Effect of Exchange Rate on Cash | 5,400 | - | ||||||||||||||
Net Change in Cash | 27,143 | (17,674 | ) | 1,841,405 | (6,407 | ) | ||||||||||
Cash at Beginning of Period | 12,160 | 33,774 | 230,685 | 12,160 | ||||||||||||
Cash at End of Period | $ | 39,303 | $ | 16,100 | $ | 2,072,090 | $ | 5,753 | ||||||||
Supplemental Disclosures of Cash Flow Information: | ||||||||||||||||
Cash Paid for: | ||||||||||||||||
Interest | $ | - | $ | - | $ | - | $ | - | ||||||||
Income Taxes | $ | - | $ | - | $ | - | $ | - | ||||||||
Supplemental Disclosures of Cash Flow Information: | ||||||||||||||||
Cash Paid for: | ||||||||||||||||
Interest | $ | - | $ | - | ||||||||||||
Income Taxes | $ | - | $ | - | ||||||||||||
Non-cash Investing and Financing Activities | ||||||||||||||||
Accrued Interest Converted to Convertible Notes Payable | $ | 525,602 | $ | - | ||||||||||||
Convertible Notes Payable Converted to Common Shares | $ | 360,000 | $ | - | ||||||||||||
Accrued Expenses Converted to Common Shares | $ | 953,575 | - |
The accompanying notes are an integral part of these consolidated financial statements.
Life Clips, Inc.
Footnotes to Consolidated Financial Statements
March 31,September 30, 2021
NOTE 1. ORGANIZATION AND OPERATIONS
Life Clips, Inc. (the “Company”) was incorporated in Wyoming on March 20, 2013 as Blue Sky Media Corporation2013.
On April 5, 2021, the Company closed its acquisition of Cognitive Apps Software Solutions, Inc. (“Cognitive Apps”, a developer of artificial intelligence (AI) applications for the healthcare industry and itspsychedelic research. Cognitive Apps was incorporated in British Columbia, Canada on November 25, 2020. Its principal business wasis developing, financing, producing and distributing motion picturesAI based technological solutions to the mental health and related entertainment products. Followinghealthcare sector. Cognitive Apps sold all of its issued and outstanding capital stock to the Company’s October 2, 2015Company, becoming a 100% wholly owned subsidiary.
On August 25, 2021, the Company closed its acquisition of Klear Kapture, Inc. (“Klear Kapture”Belfrics Holdings Limited and its related entities (collectively “Belfrics”),. The new business of operating cryptocurrency exchanges and blockchain development services in Asia and Africa. Belfrics sold all of its issued and outstanding capital stock to the Company, continued Klear Kapture’s business of developingbecoming 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 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 a100% wholly owned subsidiarysubsidiary.
The Belfrics entities acquired are:
Belfrics Global PTE Ltd., a Singapore corporation
Belfrics BT Pvt Ltd, an India corporation
Belfrics Cryptex Pvt Ltd, an India corporation
Belfrics Tanzania Ltd, a Tanzania corporation
Belfrics Nigeria Pvt Ltd, a Nigeria corporation
Belfrics BT SDN BHD, a Malaysia corporation
Belfrics Holding Limited, a Malaysia corporation
Belfrics Academy SDN BHD, a Malaysia corporation
Belfrics International Ltd, a Malaysia corporation
Belfrics Europe SL, a Spain corporation
Belfrics Kenya Pvt. Ltd, a Kenya corporation
Incrypts SDN BHD, a Malaysia corporation
Belfrics Malaysia SDN BHD
Founded in 2014, Belfrics Belfrics internally developed a cryptocurrency digital exchange platform. Supported by the proprietary technology of Belrium Blockchain KYC solution, the Company. The Acquisition was completed pursuantKYC (“Know Your Customer”) and AML (“Anti-Money Laundering”) process of Belfrics Exchange is a well-accepted compliance solution. With 10 operational offices in 8 countries, Belfrics provides localized and personalized support to a Stock Purchase Agreement, dated as of June 10, 2016 (the “Purchase Agreement”), amongdigital currency traders. Through its Blockchain Academy, Belfrics provides continuous training to traders, developers and blockchain enthusiasts in more than 20 countries. Belfrics is licensed and regulated by the Company, Batterfly and all of the shareholders of Batterfly, as amended.Labuan Financial Services Authority (LFSA) in Malaysia.
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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 subsidiarieswholly owned subsidiary and all intercompany transactions and account balances have been eliminated in consolidation.
Interim DisclosuresForeign Currency Translation– These unaudited consolidated financial statements should be read withThe Companies’ subsidiaries have 7 different functional currencies in addition to U.S. Dollar, but its reporting currency is in U.S. Dollar. The currencies are Canadian Dollars, Euro, Indian Rupee, Kenyan Shilling, Malaysian Ringgit, Nigerian Naira, and Tanzanian Shilling. The balance sheet accounts are translated at exchange rates in effect at the Company’s audited financial statementsend of the period and footnotes included in the Company’s Report on Form 10-Kincome statement accounts are translated at average exchange rates for the year ended June 30, 2020, filed with the Securitiesperiod. Translation gains and Exchange Commission (“the Commission”) on January 4, 2021. The resultslosses are included as a separate component of operations for the nine month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the entire year ending June 30, 2021 or for any future period.stockholders’ deficit.
Use of Estimates – The preparation of consolidated financial statements in conformity with GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Cash and Cash equivalentsEquivalents – For financial statement presentation purposes, the Company considers all short-term investments with a maturity date of three months or less to be cash equivalents.
Investments– The Company’s investments in marketable securities are measured at fair value with unrealized gains and losses recognized in other comprehensive income/(loss). The Company received a total of shares of Ehave, Inc.’s common stock as payment for a licensing agreement. These shares had a total value of $100,000 upon issuance. Subsequent to issuance, the stock price of the shares decreased and an unrealized loss on the investment of $80,789 was recognized, decreasing the asset value to $19,211 at June 30, 2021.
Intangible Assets– The Company had no intangibles at June 30, 2021. At September 30, 2021, the Company’s intangible assets consisted of approximately $43.7 million of cryptocurrency that is recorded at historical cost and not amortized due to its indefinite life. In addition, the Company had an immaterial amount of other intangibles which are recorded at cost based on third party expenditures. The Company will begin amortizing the other intangibles over their estimated remaining useful life when it begins revenue-producing applications. Useful lives of intangible assets are determined after considering the specific facts and circumstances related to each intangible asset. Factors that will be considered when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the long-term strategy for using the asset, any laws or other local regulations that could impact the asset, the historical performance of the asset, the long-term strategy for using the asset, any laws or other local regulations that could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Indefinite life intangibles are reviewed for impairment when circumstances suggest there could be an impairment, but at least annually.
Property and Equipment– Belfrics property and equipment includes computers and software, furniture and fittings, and office equipment. Depreciation is provided based on the estimated useful life of assets on straight line basis which ranges from three years to five years.
Leases- The Company accounts for leases in accordance with ASU 2016-02, “Leases” (Topic 842). Based on this standard, the Company determines if an agreement is a lease at inception. Leases are included – right to use, current portion of lease liability, and operating lease liability, less current portion in the Company’s consolidated balance sheets. Finance leases are included in right-of-use assets, lease liability and lease liability, long-term in the Company’s consolidated balance sheets.
As permitted under Topic 842, the Company has made an accounting policy election not to apply the recognition provisions to short term leases (leases with a lease term of 12 months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise); instead, the Company will recognize the lease payments for short-term leases on a straight-line basis over the lease term.
Impairment of Long-Lived Assets – When facts and circumstances indicate that the carving value of long-lived assets may not be recoverable. management recoverability of the carrying value by preparing estimates of revenues and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those Belfrics uses in its internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, it recognizes an impairment loss. The impairment loss recognized, if any, is the amount by interest charges) is less than the carrying amount, it recognizes an impairment loss. The impairment loss recognized, if any, is the amount by which the carving amount of the asset (or asset group) exceeds the fair value. Belfrics may use a variety of methods to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumption’s management believes hypothetical fair value of these assets, including discounted cash flow models, which are consistent with the assumption’s management believes hypothetical marketplace participants would use. The Company has not recorded any impairment expense on its long-lived assets as of September 30, 2021.
Income Tax – The Company accounts for income taxes under Accounting Standards CodificationCertifications (“ASC”) 740 “Income Taxes”“Income Taxes” (“ASC 740”). Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statementsstatement 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.
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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.
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, 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 levelLevel 3 (See Note 6)8). The Company accounts for its investments, at fair value, on a recurring basis under Level 1 (See Note 5)
Embedded Conversion Features – The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives“Derivatives and Hedging”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“Debt with Conversion and Other Options”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-ScholesMonte Carlo 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 included inamortized to interest expense over the line item loss on extinguishmentlife of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
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The Company accounts for stock-based compensation issued to nonemployees and consultants in accordance with the provisions of ASC 505-50 “Equity-Based“Equity-Based Payments to Non-Employees”Non-Employees”. Measurement of share-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-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.
Recognition of Licensing Revenues– The Company recognizes revenue in accordance with Accounting Standards Update (“ASU”) No. 2014-09 “Revenue“Revenue from Contracts with Customers”Customers” (“Topic 606”). Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of Topic 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenuesrevenue the amount of the transaction price that is allocated to the respective performance obligationsobligation when the performance obligation is satisfied or as it is satisfied. The Company primarily sells disposable and recyclable cell phone batteries. TheGenerally, the Company’s performance obligation is satisfied when the goods have been delivered, which isobligations are transferred to customers at a point in time.time, typically upon delivery.
Commission revenue is recorded on a trade-date basis when the Company satisfies its performance obligation. The Company applies the following five steps in order to determine the appropriate amount ofreceives commissions on cryptocurrency transaction initiated on its platform. Fees, investment advisory and administrative services revenue is recognized as it fulfills its obligations under each of its agreements:the services related to the underlying assignment are completed.
Recently Issued Accounting Pronouncements – Financial Accounting Standards Board (“FASB”) ASU 2016-02 “Leases (Topic 842)”- In February 2016,Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on the FASB issued ASU 2016-02, which will require lessees to recognize almost all leases on their balance sheet as a right-of-use assetCompany’s consolidated financial statements 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 implemented this standard on July 1, 2019.related disclosures.
Subsequent Events– The Company follows the guidance in ASC 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 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.
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 no revenues, net accumulated losses since inception and an accumulated deficit of $20,758,073. 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. 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
At March 31, 2021, the Company had three notes payable in the amount of $565,000, and at June 30, 2020, the Company had two notes payable in the amount of $530,000, with the following terms:
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NOTE 3. LEASES
NOTE 5. CONVERTIBLE DEBTIn connection with the acquisition of Belfrics, Inc. on August 25, 2021, the Company acquired four facilities’ leases.
Convertible NotesThe properties’ location, square footage, lease commencement date, expiration date, terms and payments are as follows:
SCHEDULE OF RIGHT-OF-USE ASSET
Belfrics Holding Ltd | Belfrics International Ltd | Belfrics BT SDN BHD | Belfrics Kenya Ltd | |||||||||||||
Location | Suite B, Lot 3, Level 1, Lazenda Phase 3, OKK Abudllah, Labuan | Suite C, Lot 3, Level 1, Lazenda Phase 3, OKK Abudllah, Labuan | Suite E, Lot 3, Level 1, Lazenda Phase 3, OKK Abudllah, Labuan | 11th Floor Unit 2, Mirage Tower 1, Westlands, Chiromo Road. Nairobi. | ||||||||||||
Square Footage | 300 sq ft | 700 sq ft | 300 sq ft | 974 sq ft | ||||||||||||
Lease commencement date | January 1, 2020 | January 1, 2020 | January 1, 2020 | January 1, 2018 | ||||||||||||
Lease expiration date | December 31, 2022 | December 31, 2022 | December 31, 2022 | April 1, 2023 | ||||||||||||
Lease terms | 3 years | 3 years | 3 years | 8 years | ||||||||||||
Monthly lease payments | $ | 840 | $ | 720 | $ | 720 | $ | 709 |
Right-of-use asset is summarized below:
Belfrics Holding Ltd | Belfrics International Ltd | Belfrics BT SDN BHD | Belfrics Kenya Ltd | Total | ||||||||||||||||
Office Lease | $ | 11,225 | $ | 13,096 | $ | 11,225 | $ | 61,643 | $ | 97,189 | ||||||||||
Less accumulated amortization | (685 | ) | (799 | ) | (685 | ) | (2,992 | ) | (5,161 | ) | ||||||||||
Right-of-use, net | $ | 10,540 | $ | 12,297 | $ | 10,540 | $ | 58,651 | $ | 92,028 | ||||||||||
Operating lease liability is summarized below:
SCHEDULE OF OPERATING LEASE LIABILITY
Belfrics Holding Ltd | Belfrics International Ltd | Belfrics BT SDN BHD | Belfrics Kenya Ltd | Total | ||||||||||||||||
Office Lease | $ | 10,540 | $ | 12,296 | $ | 10,540 | $ | 58,652 | $ | 92,028 | ||||||||||
Less: current portion | (2,148 | ) | (9,791 | ) | (8,392 | ) | (36,637 | ) | (56,968 | ) | ||||||||||
Long term portion | $ | 8,392 | $ | 2,505 | $ | 2,148 | $ | 22,015 | $ | 35,060 |
SCHEDULE OF MATURITY OF LEASE LIABILITIES
Maturity of lease liabilities are as follows: | Belfrics Holding Ltd | Belfrics International Ltd | Belfrics BT SDN BHD | Belfrics Kenya Ltd | Total | |||||||||||||||
Year ending June 30, 2022 | $ | 6,483 | $ | 7,564 | $ | 6,483 | $ | 28,659 | $ | 49,189 | ||||||||||
Year ending June 30, 2023 | 4,322 | 5,042 | 4,322 | 31,843 | 45,529 | |||||||||||||||
Total future minimum lease payments | 10,805 | 12,606 | 10,805 | 60,502 | 94,718 | |||||||||||||||
Less imputed interest | (265 | ) | (310 | ) | (265 | ) | (1,850 | ) | (2,690 | ) | ||||||||||
Present Value of Payments | $ | 10,540 | $ | 12,296 | $ | 10,540 | $ | 58,652 | $ | 92,028 |
NOTE 4. PROPERY AND EQUIPMENT
As of March 31,June 30, 2021, the Company had no property and equipment. Property and equipment as of September 30, 2021 consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
September 30, 2021 | ||||
Software Development Fees | $ | 1,311,684 | ||
Plant and Machinery | 60,098 | |||
Furniture and Fittings | 36,210 | |||
Computers and Software | 19,896 | |||
Property and equipment, gross | - | |||
Accumulated Depreciation | (17,019 | ) | ||
Total | $ | 1,410,869 |
NOTE 5. ACQUISITION OF SUBSIDIARIES
BELFRICS
On August 25, 2021, the Company acquired 100% of Belfrics in consideration of the issuance of shares of the Company’s Series C preferred stock, with the opportunity to earn an additional shares of the Company’s Series C preferred stock. The consideration paid for Belfrics had a face value of $20,000,000, with the opportunity to acquire an additional $15,000,000 face value of the preferred stock. Giving effect to the formula converting the preferred stock to common stock, the value of the consideration paid at the time of closing was $41,802,925.
Voting Rights. Majority voting control of the Company lies in the Series A Preferred (“Series A”). The Series A have voting power equal to 2 billion common shares. These shares are held by Robert Grinberg, the Company’s CEO and Victoria Rudman, the Company’s CFO. Therefore, even if all preferred shares and other dilutive instruments were converted to common shares, the Series holders would still have majority voting rights. shares of
Board Composition. The Board of the Company consists of three people: Robert Grinberg, Victoria Rudman, and Charles Adelson. The principal of the Belfrics Entities has the right to be appointed to the Board. However, as of the date of filing, the original board of directors remains in place post-acquisition.
Executives/Senior Management. There was no change in senior management after the acquisition. Mr. Grinberg remains CEO and Ms. Rudman remains CFO. None of the Belfrics’ principals became an executive officer of the parent company.
Based on the forgoing management has determined that Life Clips, Inc. is both the legal and accounting acquirer as there was no change in control or management.
SCHEDULE OF BUSINESS ACQUISITIONS
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Consideration | ||||
Series C Preferred Stock | $ | 26,014,226 | ||
Contingent Liability | 15,788,699 | |||
Preferred Shares | $ | 41,802,925 | ||
Fair value of net identifiable assets (liabilities) acquired: | ||||
Cash | $ | 74,377 | ||
Other Current Assets | 1,626,712 | |||
Intangibles | 45,447,674 | |||
Property and Equipment | 1,050,065 | |||
Right-of-Use Asset | 97,189 | |||
Total fair value of net identifiable assets | $ | 48,296,017 | ||
Accounts payable and accrued expenses | $ | 335,452 | ||
Due to Related Party | 6,060,451 | |||
Lease Liability | 97,189 | |||
Total fair value of net identifiable liabilities | $ | 6,493,092 | ||
Fair value of net identifiable assets (liabilities) acquired | $ | 41,802,925 | ||
Goodwill | $ | - |
COGNITIVE APPS
On April 5, 2021, the Company closed its acquisition of Cognitive Apps Software Solutions, Inc. (“Cognitive Apps”, a developer of artificial intelligence (AI) applications for the healthcare industry and psychedelic research. Cognitive Apps was incorporated in British Columbia, Canada on November 25, 2020. Its principal business is developing, financing, producing and distributing AI based technological solutions to the mental health and healthcare sector. Cognitive Apps sold all of its issued and outstanding capital stock to the Company, becoming a 100% wholly owned subsidiary.
In exchange for the acquisition, Cognitive Apps received the following consideration:
(a) Preferred Shares. Exchange each issued and outstanding share of Cognitive Apps common stock for 80% of average of the 5 lowest closing prices for a share of common stock on the principal exchange or market on which such shares are then trading for the 20 trading days immediately preceding such date. Notwithstanding the foregoing, in no case shall the fair market value multiplied by the total number of shares issued and outstanding be less than $5,000,000. The fair value on the date of acquisition was calculated at $10,016,089. shares of Series B Preferred (“Series B”). The Series B are convertible based on
(b) Warrants. In addition to the Series B shares, the previous Cognitive Apps shareholders, on a pro-rata basis, will receive warrants to purchase a total of 3,500,000 shares of the common shares of the Company at an exercise price of $0.10. The fair value of the warrants on the date of acquisition was calculated at $20,111.
Cognitive Apps had no operations and no significant assets recorded at the acquisition date. Based on the calculated purchase price of $10,036,200, the entire amount was allocated to intangible assets. Due the lack of historical operations and uncertainty regarding future operations, the Company impaired the full value of the intangible asset acquired. Also, as there were no previous operations, there are no pro forma disclosures to present.
Pro Forma Disclosures
The following unaudited pro forma financial results reflects the historical operating results of the Company, including the unaudited pro forma results of Belfrics and Cogntive Apps for the three months ended September 30, 2021 and the year ended June 30, 2021 (Note the Company acquired Belfrics on August 25, 2021). The pro forma financial information set forth below reflects adjustments to the historical data of the Company to give effect to each of these acquisitions and the related equity issuances as if each had occurred on July 1, 2020. The pro forma information presented below does not purport to represent what the actual results of operations would have been for the periods indicated, nor does it purport to represent the Company’s future results of operations purport to represent what the actual results of operations would have been for the periods indicated, nor does it purport to represent the Company’s future results of operations.
SCHEDULE OF PRO FORMA INFORMATION
The following table summarizes on an unaudited pro forma basis the Company’s results of operations for the three months ended September 30, 2021 and for the year ending June 30, 2021:
September 30, 2021 | June 30, 2021 | |||||||
Revenues | $ | 45,574 | $ | 170,897 | ||||
Net Loss | (535,324 | ) | (3,698,228 | ) | ||||
Net loss per share- basic and diluted | $ | (0.0004 | ) | $ | (0.0029 | ) | ||
Weighted average number of shares of common stock outstanding- basic and diluted | 1,472,824,710 | 1,259,831,337 |
The calculations of pro forma net revenue and pro forma net loss give effect to the business combinations for the period from July 1, 2020 $2,428,960until the respective closing dates for (i) the historical net revenue and net income (loss), as applicable, of the acquired businesses, (ii) incremental depreciation and amortization for each business combination based on the fair value of property and equipment and identifiable intangible assets acquired and the related estimated useful lives.
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NOTE 6. RELATED PARTY TRANSACTIONS
At June 30, 2021, $1,155,550was due to related parties. As of September 30, 2021, $5,504,287 was due to related parties for Belfrics only and is primarily comprised of loans from the entities’ shareholders.
At June 30, 2021, the Company reported $34,271 due from related party, a Cog Apps shareholder. As of September 30, 2021 the amount has been repaid in full.
NOTE 7. CONVERTIBLE NOTES PAYABLE
Convertible Notes
As of September 30, 2021, the amount of the Company’s convertible notes were in-default.in-default was reduced to $0, when compared to June 30, 2021 amount of $541,051, as follows:
SCHEDULE OF CONVERTIBLE NOTES
Balance at March 31, 2021 | Balance at June 30, 2020 | Due Date | Interest Rate at March 31, 2021 | |||||||||||||||||||||
Balance at September 30, 2021 | Balance at September 30, 2021 | Balance at June 30, 2021 | Due Date | Interest Rate at September 30, 2021 | ||||||||||||||||||||
$ | 2,281,806 | $ | 1,931,806 | Range from 05/13/2017 to 01/20/2022 | 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 - $0.002 at March 31, 2021, convertible into 9,909 million shares not including interest. | - | $ | 541,051 | Range from 05/13/2017 to 01/20/2022 | 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 - at September 30, 2021, convertible into shares not including interest. | ||||||||||||
32,154 | 332,154 | 06/09/2017 | 18% | 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 - $0.003 at March 31, 2021, convertible into 474.5 million shares not including interest. | 4,369,895 | 3,288,241 | Range from 06/15/2023 to 07/01/23 | 8% | Conversion price equal to $0.01. At September 30, 2021, convertible into million shares not including interest. | |||||||||||||||
165,000 | 165,000 | Range from 01/27/2018 to 11/15/2019 | 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 - $0.002 at March 31, 2021, convertible into 235.7 million shares not including interest. | - | 375,000 | Range from 04/22/2023 to 12/23/2022 | Range from 4% to 10% | Conversion price equal to $0.015. At September 30, 2021, convertible into shares not including interest. | |||||||||||||||
2,478,960 | 2,428,960 | |||||||||||||||||||||||
(34,123 | ) | - | Less: Discount | |||||||||||||||||||||
$ | 2,444,837 | $ | 2,428,960 | 4,369,895 | $ | 4,204,292 |
The Company evaluated 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 risks of the host contract. The material embedded derivative consists of the embedded conversion feature. The conversion option bears risks of equity which were not clearly and closely related to the host debt agreement and required bifurcation. See Note 6 for further discussion.
Debt 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.
Total amortization of debt discount amounted to $80,369 and $178 for the three months ended September 30, 2021 and 2020, respectively.
The debt discount was $0 and $80,369 at September 30, 2021 and June 30, 2021, respectively.
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Future Commitments
At March 31,September 30, 2021 the Company has outstanding convertible debt of $2,478,960$4,344,896, which is due within the next 1221 months.
NOTE 6. 8. DERIVATIVE FINANCIAL INSTRUMENTS
As of September 30, 2021, the Company no longer has any derivatives.
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 March 31,June 30, 2021, the Company does not have enough authorized shares to settle all potential conversion and warrant transactions.
The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of March 31, 2021 and June 30, 20202021 and the amounts that were reflected in income related to derivatives for the period ended:
SCHEDULE OF COMPONENTS OF DERIVATIVE LIABILITIES
March 31, 2021 | June 30, 2021 | |||||||||||||||
The financings giving rise to derivative financial instruments | Indexed Shares* (in millions) | Fair Values | Indexed Shares* (in millions) | Fair Values | ||||||||||||
Embedded derivatives | 1,985 | $ | 4,172,352 | 563 | $ | 1,577,001 | ||||||||||
Total | 1,985 | $ | 4,172,352 | 563 | $ | 1,577,001 |
* | including principal and interest |
*including principal and interest
June 30, 2020 | ||||||||
The financings giving rise to derivative financial instruments | Indexed Shares* (in millions) | Fair Values | ||||||
Embedded derivatives | 68,617 | $ | 13,249,507 | |||||
Total | 68,617 | $ | 13,249,507 |
*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 March 31, 2021 andSeptember 30, 2020:
SCHEDULE OF GAIN (LOSS) OF DERIVATIVE INSTRUMENTS
The financings giving rise to derivative financial instruments and the gain (loss) effects: | June 30, 2021 | |||
Embedded derivatives | $ | 7,103,673 | ||
Total | $ | 7,103,673 |
The financings giving rise to derivative financial instruments and the gain (loss) effects: | For the Three Months Ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Embedded derivatives | $ | 5,003,769 | $ | 6,535,398 | ||||
Total | $ | 5,003,769 | $ | 6,535,398 |
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 nine months ended March 31, 2021 and 2020:
The financings giving rise to derivative financial instruments and the gain (loss) effects: | For the Nine Months Ended | |||||||
March 31, 2021 | March 31, 2020 | |||||||
Embedded derivatives | $ | 9,127,156 | $ | (7,397,059 | ) | |||
Total | $ | 9,127,156 | $ | (7,397,059 | ) |
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. For instruments in which the time to expiration has expired, the Company has utilized the intrinsic value as the fair value. The intrinsic value is the difference between the quoted market price on the valuation date and the applicable conversion price.
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:
SCHEDULE OF SIGNIFICANT INPUTS AND RESULTS FROM VALUATION ASSUMPTIONS
March 31, 2021 | June 30, 2020 | June 30, 2021 | ||||||||||
Quoted market price on valuation date | $ | 0.0041 | $ | 0.0003 | $ | |||||||
Range of effective contractual conversion rates | $0.002 - $0.00327 | $0.00005 - $0.00029 | $ | |||||||||
Contractual term to maturity | 0 - 0.81 | N/A | NA | |||||||||
Market volatility: | ||||||||||||
Volatility | 92.41% - 403.36 | % | N/A | NA | ||||||||
Risk-adjusted interest rate | 0.09% - 0.11 | % | N/A | NA |
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 nine months ended March 31, 2021 and year ended June 30, 2020.2021 and as of September 30, 2021.
SCHEDULE OF CHANGES IN FAIR VALUE INPUTS AND ASSUMPTIONS RELATED TO COMPOUND EMBEDDED DERIVATIVES
- | Year Ended | |||||||
September 30, 2021 | June 30, 2021 | |||||||
Balances at beginning of period | $ | 1,577,001 | $ | 13,249,507 | ||||
Issuances: | ||||||||
Embedded derivatives | - | 50,000 | ||||||
Conversions: | ||||||||
Embedded derivatives | - | - | ||||||
Reclassifications to equity: | ||||||||
Embedded derivatives | - | (4,448,276 | ) | |||||
Changes in fair value inputs and assumptions reflected in income | (1,577,001 | ) | (7,274,230 | ) | ||||
Balances at end of period | $ | - | $ | 1,577,001 |
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Period Ended | Year Ended | |||||||
March 31, 2021 | June 30, 2020 | |||||||
Balances at beginning of period | $ | 13,249,507 | $ | 3,230,842 | ||||
Issuances: | ||||||||
Embedded derivatives | 50,001 | - | ||||||
Detachable warrants | - | - | ||||||
Conversions: | ||||||||
Embedded derivatives | - | - | ||||||
Detachable warrants | - | - | ||||||
Expirations: | ||||||||
Detachable warrants | - | - | ||||||
Changes in fair value inputs and assumptions reflected in income | (9,127,156 | ) | 10,018,665 | |||||
Balances at end of period | $ | 4,172,352 | $ | 13,249,507 |
NOTE 9. EQUITY
NOTE 7. EQUITY
Authorized Capital
On September 28, 2017, the Company filed Articles of Amendment authorizing $0.001$ per share (the “Common Stock”) and 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. shares of common stock, par value
Preferred Stock
Effective May 19, 2017, the Company amended its Articles of Incorporation to designate $0.001$ per share (the “Series A Stock”).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 400 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.A. The Series A Stock is not convertible into any other class of shares of the Company. shares, which increased to on June 16, 2021, of preferred stock as Series A Preferred Stock, with a par value of
Additionally, the Board authorized shares of the Company’s Preferred Stock (“Series B”) pursuant to the acquisition of Cognitive Apps.
Each share of Series B shall be convertible, at the option of the holder thereof, beginning 12 months from the date of issuance, and thereafter at any time and from time to time, and without the payment of additional consideration by the holder thereof, into that number of fully paid and nonassessable shares of common stock (whether whole or fractional) that have a fair market value, in the aggregate, equal to the Series B conversion price.
The Series B conversion price shall initially be equal to $1.00 and shall be subject to adjustment as provided below. fair market value shall mean, as of any date of determination, 80% of average of the 5 lowest closing prices for a share of common stock on the principal exchange or market on which such shares are then trading for the 20 trading days immediately preceding such date. Notwithstanding the foregoing, in no case shall the fair market value multiplied by the total number of shares issued and outstanding be less than $5,000,000.
In conjunction with the acquisition of Belfrics, the Company filed a designation authorizing and designating
shares of Series C Convertible Preferred Stock (“Series C”).Each share of Series C shall be convertible, at the option of the holder thereof, beginning 12 months from the date of issuance, and thereafter at any time and from time to time, and without the payment of additional consideration by the holder thereof, into that number of fully paid and non-assessable shares of common stock (whether whole or fractional) that have a fair market value, in the aggregate, equal to the Series C conversion price.
The Series C conversion price shall initially be equal to $10.00 and shall be subject to adjustment as provided below. fair market value shall mean, as of any date of determination, 80% of average of the 5 lowest closing prices for a share of common stock on the principal exchange or market on which such shares are then trading for the 20 trading days immediately preceding such date. Notwithstanding the foregoing, in no case shall the Fair Market Value multiplied by the total number of shares issued and outstanding be less than $5,000,000.
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Stock and Incentive Plan
On April 20, 2017, the Company adopted the Life Clips, Inc. 2017 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 shares of common stock may be issued under the plan, representing in excess of 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.
NOTE 8. COMMITTMENTS10. COMMITMENTS AND CONTINGENCIES
From time to time, the Company may be a party to other legal proceedings. Management currently believes that the ultimate resolution of these matters will not have a material adverse effect on consolidated results of operations, financial position, or cash flow.
NOTE 9. 11. SUBSEQUENT EVENTS
On April 1, 2021, the Company loaned $30,000 to Cognitive Apps and Software, Inc., and entered into an 8% Promissory Note with a due date of July 1, 2021.
On April 5,October 22, 2021, the Company entered into an Acquisition Agreementintellectual property license agreement with Cognitive Apps Software Solutions, Inc., a British Columbia corporation, and the HoldersResearch Labs LLC, (“SRL”). In consideration of the Equity Securities of Cognitive Apps Software Solutions, Inc.
Each issuedmutual promises and outstanding share of Cognitive Apps common stock will be exchanged for 5,760,000 shares of LCLP Series B Preferred Shares plus warrants to purchase a total of 3,500,000 shares ofcovenants contained in the common shares ofagreement, the Company at an exercise price equalparties agreed to the market value of the Company’s common shares on the day prior to Closing. The Company shall use its best efforts after Closing to provide Cognitive Apps, as a wholly owned subsidiary, up to $1,000,000 in the form of an equity investment by Corporation into the subsidiary. It is anticipated that the Company shall begin financing Cognitive Apps upon the following schedule: $75,000 on the first day of April, May and June 2021, and $100,000 on the first day of June 2021 through December 2021 and $175,000 on or before January 7, 2022. Should the Company not be able to fulfill the financing needs of the Company pursuant to the funding schedule and such amounts remain due and owing for more than 30 days the target may request that it be spun out from the Company, and whatever money has been invested by the Company in the Target will be converted into the common equity of the target upon its sale or being spun off, at a valuation of the target of $9,000,000 plus any other amounts raised by Target. The costs and expenses associated with such a spin off in the case of the Company not funding the Target will be borne by the Company.following:
1. | The Company is granted a license to use SRL technology in block chain technology for the crypto-currency industries. The Company shall have the right to enter into agreements with third parties to sub-license the technology, subject to SRL approval. | |
2. | Consideration was shares of Company common stock. | |
3. | Term of agreement is for three years, beginning on January 8, 2022. There is a renewal option for successive 3-year terms at a cost of $250,000 payable in the common stock of the Company at a 25% discount to the market price, unless either party gives written notice of non-renewal to the other, at least 30 days before the end of the then-current term. |
On April 22, 2021, the Company entered into a 10% Future Advance Convertible Promissory Note with Leviston Resources LLC, an unaffiliated third party. The note is up to a principal amount of $550,000, of which the Company received an initial advance of $250,000. The note is convertible at a price equal to the price at which common stock is sold in the Maker’s next public offering, including the Qualified Reg A Offering. The note maturity date is six (6) months from the date of each disbursement.
On May 1, 2021, the Company loaned $30,000 to Cognitive Apps and Software, Inc., and entered into an 8% Promissory Note with a due date of August 1, 2021.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
The following discussion contains forward-looking statements regarding us, our business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation: our ability to successfully develop new products and services for new markets; the impact of competition on our revenues, changes in law or regulatory requirements that adversely affect or preclude clients from using us for certain applications; delays our introduction of new products or services; and our failure to keep pace with our competitors.
When used in this 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 these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this report and other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business.
General Information about Our Company
Life Clips, Inc. (“Life Clips”, “we,” “us,” “our,” and the(the “Company”) was incorporated in Wyoming on March 20, 2013 as Blue Sky Media Corporation2013.
On April 5, 2021, the Company closed its acquisition of Cognitive Apps Software Solutions, Inc. (“Cognitive Apps”, a developer of artificial intelligence (AI) applications for the healthcare industry and itspsychedelic research. Cognitive Apps was incorporated in British Columbia, Canada on November 25, 2020. Its principal business wasis developing, financing, producing and distributing motion picturesAI based technological solutions to the mental health and related entertainment products. Following the Company’s October 2, 2015 acquisitionhealthcare sector. Cognitive Apps sold all of Klear Kapture, Inc. (“Klear Kapture”),its issued and outstanding capital stock to the Company, continued Klear Kapture’s business of developingbecoming 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.100% wholly owned subsidiary.
On July 11, 2016,August 25, 2021, the Company completedclosed its acquisition (the “Acquisition”of Belfrics Holdings Limited and its related entities (collectively “Belfrics”). The new business of operating cryptocurrency exchanges and blockchain development services in Asia and Africa. Belfrics sold all of its issued and outstanding capital stock to the outstanding equity securities of Batterfly Energy Ltd. (“Batterfly”), an Israel-based corporation that develops and distributesCompany, becoming a single-use, cordless battery under the brand name Mobeego for use with cellular phones and other mobile devices. Batterfly is now a100% wholly owned subsidiary of the Company. The Acquisition was completed pursuant to a Stock Purchase Agreement, dated as of June 10, 2016 (the “Purchase Agreement”), among the Company, Batterfly and all of the shareholders of Batterfly, as amended.subsidiary.
Following the acquisition of Batterfly, we began to focus on developing three synergistic businesses:
The Company is currently pursuing alternative business opportunities. There has been limited activity due toBelfrics entities acquired are:
Belfrics Global PTE Ltd., a delay in securing funding. The Company is working to re-energize the business within the next 12 months.Singapore corporation
Belfrics BT Pvt Ltd, an India corporation
Belfrics Cryptex Pvt Ltd, an India corporation
Belfrics Tanzania Ltd, a Tanzania corporation
Belfrics Nigeria Pvt Ltd, a Nigeria corporation
Belfrics BT SDN BHD, a Malaysia corporation
Belfrics Holding Limited, a Malaysia corporation
Belfrics Academy SDN BHD, a Malaysia corporation
Belfrics International Ltd, a Malaysia corporation
Belfrics Europe SL, a Spain corporation
Belfrics Kenya Pvt. Ltd, a Kenya corporation
Incrypts SDN BHD, a Malaysia corporation
Belfrics Malaysia SDN BHD
Founded in 2014, Belfrics Belfrics internally developed a cryptocurrency digital exchange platform. Supported by the proprietary technology of Belrium Blockchain KYC solution, the KYC (“Know Your Customer”) and AML (“Anti-Money Laundering”) process of Belfrics Exchange is a well-accepted compliance solution. With 10 operational offices in 8 countries, Belfrics provides localized and personalized support to digital currency traders. Through its Blockchain Academy, Belfrics provides continuous training to traders, developers and blockchain enthusiasts in more than 20 countries. Belfrics is licensed and regulated by the Labuan Financial Services Authority (LFSA) in Malaysia.
Recent Developments
None
Significant Accounting Policies
Please see Note 2On August 25, 2021, Belfrics sold all of its issued and outstanding capital stock to the Company’s unaudited consolidated financial statements as of andCompany, becoming a 100% wholly owned subsidiary
In exchange for the nine months ended March 31, 2021 includedacquisition, Belfrics received the following consideration:
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(a) | Preferred Shares. Exchange each issued and outstanding share of The Belfrics Entities common stock for $20,000,000 shares of Series C Preferred Shares, pursuant to the Designation set forth as Exhibit B. | |
(c) | Earn Out. Upon obtaining the milestones set forth on Schedule 2.1(c) the Sellers shall be entitled to up to an additional $15,000,000 of Series C Preferred Stock on a pro rata basis. |
Founded in this Quarterly Report for a discussion2014, the Belfrics digital exchange platform, which was fully developed in-house, is one of the Company’s significant accounting policies.most compliant platforms in the cryptocurrency industry. Supported by the proprietary technology of Belrium Blockchain KYC solution, the KYC (“Know Your Customer”) and AML (“Anti-Money Laundering”) process of Belfrics Exchange is a well-accepted compliance solution. With 10 operational offices in 8 countries, Belfrics provides localized and personalized support to digital currency traders. Through its Blockchain Academy, Belfrics provides continuous training to traders, developers and Blockchain enthusiasts in more than 20 countries. Belfrics is licensed and regulated by the Labuan Financial Services Authority (LFSA) in Malaysia.
Results of Operations for the Three Months Ended March 31,September 30, 2021 and 2020
For the three months ended March 31,September 30, 2021 and 2020, wethe Company had gross profit of $0.$45,574 and $0, respectively.
Total operating costs were $91,239$462,449 compared with $88,908$82,626 for the three months ended March 31,September 30, 2021 and 2020 respectively. The increasedecrease is directly related to higher professional fees.fees, offset by lower general and administrative expenses.
Other incomeIncome (Expense) was $4,898,351when$(97,398) when compared with $6,443,034$7,010,070 for the three months ended March 31,September 30, 2021 and 2020 respectively. This change is primarily due to a change in fair value of derivatives.
Net incomeloss for the three months ended March 31,September 30, 2021 was $4,807,112$514,273 as compared to net income of $6,354,126$6,927,444 for the three months ended March 31,September 30, 2020.
The net income (loss) 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.
Results of Operations for the Nine Months Ended March 31, 2021 and 2020
For the nine months ended March 31, 2021 and 2020, we had gross profit of $0.
Total operating costs were $286,629 compared with $248,974 for the nine months ended March 31, 2021 and 2020, respectively. The increase is directly related to higher professional fees.
Other Income (Expense) was $8,829,754 when compared with $(7,699,421) for the nine months ended March 31, 2021 and 2020, respectively. This change is primarily due to a change in fair value of derivatives.
Net income for the nine months ended March 31, 2021 was $8,543,125 as compared to net loss of $(7,948,395) for the nine months ended March 31, 2020.
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 March 31,September 30, 2021 the Company had cash on hand of $39,303,$2,072,090, total assets of $39,303,$49,350,969, total liabilities of $10,192,578$26,949,624 and total shareholders’shareholder’s deficit of $10,153,275.$22,401,345.
The Company’s cash was generated from a series of convertible notes issued to non-related third parties.parties as well as Regulation A fund raising. 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 March 31,September 30, 2021 period ended. The Company has not negotiated nor has available to it any other third party sources of liquidity.
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Cash flows from operating activities for the nine monththree-month periods ended March 31,September 30, 2021 and 2020 were $57,857$(980,149) and $17,674,$11,407, respectively. ThisThe change was primarily due to net gainloss being offset by changes in fair value of derivative liabilities.
Cash flows from investing activities totaled $(303,446) and $0 for the three-month periods ended September 30, 2021 and 2020, respectively. The increase was directly related to Belfrics purchases of property and equipment $(377,823), offset by net cash acquired on acquisitions of $74,377.
Cash flows from financing activities totaled $85,000$3,125,000 and $0$5,000 for the nine monththree-month periods ended March 31,September 30, 2021 and 2020, respectively. The $85,000$5,000 were proceeds comprised of $50,000 from a convertible notes payable and a $35,000 non-convertible promissory note.note 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.
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 March 31,September 30, 2021. 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 March 31,September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
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, 20162017 acquisition of Batterfly. The Batterfly Acquisition Note requiresrequired the Company to make a payment of $250,000 on October 6, 20162017 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, 2016,2017, which began to accrue interest of 11% from October 6, 2016.2017. In addition, the default notice states that the Company owes $20,000 in aggregate to two of the Batterfly shareholders related to consulting fees associated with the Batterfly acquisition. Finally, the default notice states that a payment of $250,000, as well as an additional payment of $20,000 must be paid by January 23, 2017. The Company filed a claim against the sellers of Batterfly with the London Court of International Arbitration (LCIA Arbitration No: 173692) and on September 7, 2017 the parties entered into a Stipulation for Stay of Arbitration in the matter as they seek to negotiate a settlement of their claim. The claim was settled duringin August 2019 for which the Company agreed to issue 62,991,567 shares of common stock to the sellers of Batterfly. As
All shares were issued on June 16, 2021 and as per the agreement, fully releasing the Company of any and all liens, including but not limited to, the dateBatterfly promissory note of this filing, the shares are still pending issuance.$500,000, which was removed from our liabilities.
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.
Not required for a Smaller reporting companies are not required to provide the information required by this item.Reporting Company.
The Company’s operations are currently being conducted out of the Company’s officesoffice 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 per month.
The Cognitive Apps subsidiary’s operations are currently being conducted out of offices located at 263 W, 49th Avenue, Vancouver, BC, V5Y2Z8, Canada. Cognitive Apps does not pay any rent for this space.
The Belfrics Entities subsidiary’s main corporate operations are currently being conducted out of the Belfrics Holding Limited offices at Suite C, Lot 3, Level 1, Lazenda Phase 3, OKK Abudllah, Labuan. Belfrics holds seven leases in various locations for a price of $8,724 per month.
The Company considers the current principal office spacespaces 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. The claim was settled during 2019 for which the Company agreed to issue 62,991,567 shares of common stock to the sellers of Batterfly. As of the date of this filing, the shares are still pending issuance.
Other than as set forth above, we are not a party to any material legal proceedings, nor is our property the subject of any material legal proceeding.
Item 4.3. Mining Safety Disclosures
Not Applicable.
Not Applicable.
Item 5. Exhibits
Number | Exhibit | |
31.1* | Certification of Chief Executive Officer pursuant to Section 302 | |
32.1* | Certification of Chief Executive Officer pursuant to Section 906 | |
101.INS* | Inline XBRL Instance Document | |
101.SCH* | Inline XBRL Taxonomy Schema | |
101.CAL* | Inline XBRL Taxonomy Calculation Linkbase | |
101.DEF* | Inline XBRL Taxonomy Definition Linkbase | |
101.LAB* | Inline XBRL Taxonomy Label Linkbase | |
101.PRE* | Inline XBRL Taxonomy Presentation Linkbase | |
Cover Page Interactive Data File (embedded within the Inline XBRL | ||
* 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
SIGNATURES
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: | By: | /s/ Victoria Rudman |
Victoria Rudman | ||
Interim Chief Financial Officer (Principal Financial and Accounting Officer) |