Life
Clips, Inc. and Subsidiary
Statement
of Cash Flows
For
the Nine Months Ended
(Unaudited)
|
|
March
31, 2017
|
|
|
March
31, 2016
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net gain/(loss)
|
|
$
|
4,025,574
|
|
|
$
|
(5,239,226
|
)
|
Common Stock Compensation
|
|
|
1,670,158
|
|
|
|
-
|
|
Accounts Receivable
|
|
|
(9,062
|
)
|
|
|
-
|
|
Inventory
|
|
|
(37,790
|
)
|
|
|
(48,411
|
)
|
Deposit
|
|
|
240,000
|
|
|
|
-
|
|
Other Current Assets
|
|
|
(11,266
|
)
|
|
|
2,712
|
|
Changes in derivative liabilities
|
|
|
(14,457,887
|
)
|
|
|
4,614,094
|
|
Amortization of Debt discount
|
|
|
1,655,679
|
|
|
|
238,793
|
|
Loss on Batterfly acquisition
|
|
|
6,191,000
|
|
|
|
-
|
|
Adjustments to reconcile Net Income
to Net Cash provided by operations:
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
|
(74,151
|
)
|
|
|
-
|
|
Accrued expense and interest payable
|
|
|
(245,985
|
)
|
|
|
6,083
|
|
Payroll tax liabilities
|
|
|
(10,550
|
)
|
|
|
5,493
|
|
Net cash (used in) operating activities
|
|
$
|
(1,064,279
|
)
|
|
$
|
(420,462
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Investment - Batterfly Energy Ltd
|
|
|
(32,500
|
)
|
|
|
|
|
Developed software
|
|
|
-
|
|
|
|
(51,892
|
)
|
Net cash (used in) provided by investing
activities
|
|
$
|
(32,500
|
)
|
|
$
|
(51,892
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchase of common stock
|
|
|
-
|
|
|
|
(345,000
|
)
|
Loans payable - Others
|
|
|
-
|
|
|
|
(35,000
|
)
|
Proceed from
convertible notes payables
|
|
|
800,034
|
|
|
|
867,577
|
|
Net cash provided by financing activities
|
|
$
|
800,034
|
|
|
$
|
487,577
|
|
|
|
|
|
|
|
|
|
|
Net cash increased in cash
|
|
|
(296,745
|
)
|
|
|
15,223
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
468,933
|
|
|
|
2,644
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
172,188
|
|
|
$
|
17,867
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
482,208
|
|
|
$
|
65,000
|
|
Value of common shares issued for services
|
|
$
|
35,400
|
|
|
$
|
-
|
|
Value of common shares returned to treasury
|
|
$
|
27,617
|
|
|
$
|
-
|
|
Value of common shares issued for acquisition
of Batterfly Energy LTD
|
|
$
|
5,091,000
|
|
|
$
|
5,091,000
|
|
Issuance of Common Stock for acquisition
of Batterfly Energy LTD
|
|
|
9,500,000
|
|
|
|
-
|
|
Issuance of Common Stock for convertible
notes payable
|
|
|
16,113,462
|
|
|
|
-
|
|
Issuance of Common Stock for services
|
|
|
3,000,000
|
|
|
|
-
|
|
Notes payable
|
|
$
|
850,034
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these condensed, consolidated financial statements.
Life
Clips, Inc.
Footnotes
to Financial Statements March 31, 2017
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
October 2, 2015, the Company completed the acquisition of 100% of Klear Kapture, Inc. (“Klear Kapture”) its issued
and outstanding common stock in exchange for 38,037,120 shares of the Company’s unregistered common stock. As part of the
Share Exchange, the Company purchased 107,261,000 shares of its common stock from its former executive officers and directors
for a price of $345,000. Upon the effective date of the transaction, Klear Kapture became a wholly owned subsidiary of the Company.
The
Company acquired Batterfly Energy in July 2016. Batterfly manufactures the Mobeego® brand emergency cell phone batteries.
The Mobeego provides an extra 20-40% shot of power to a cell phone without having to be tethered or charged. The batteries have
a 10-year shelf life. The Company realized the packaging that was inherited did not convey the message properly and is in the
process of re-packaging the product.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of estimates
– The preparation of financial statements in conformity with generally accepted accounting principles 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 cash equivalents
– 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.
Income
Tax
– The Company accounts for income taxes under ASC 740 “Income Taxes” which codified SFAS 109, “Accounting
for Income Taxes.” under the asset and liability method of ASC 740, 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 requires presentation
of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net
income (loss) available to common shareholders (numerator) by the weighted average number of shares of common stock outstanding
during the period. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments
such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Diluted
EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Intangible
Asset
– The Company is developing software. The development cost through March 31, 2017 has totaled $14,625. The software
has an infinite useful life and will be tested annually for impairment.
Fair
Value of Financial Instruments
The
Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance
on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability,
as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes
a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation
techniques, are assigned a hierarchical level.
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 payable & accrued expenses, 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. See Note 8.
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 over the life
of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Stock
based compensation
– ASC 718 “Compensation Stock Compensation” codified SFAS No. 123 prescribes accounting
and reporting standards for all stock based compensation plans payments award 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 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 based compensation issued to nonemployees and consultants in accordance with the provisions of ASC
50550 “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 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 Revenues
– The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition
in Financial Statements”. This statement established that revenue can be recognized when persuasive evidence of an arrangement
exists, the services have been delivered, all significant contractual obligations have been satisfied, the fee is fixed or determinable
and collection is reasonably assured.
Subsequent
Events
– The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the
disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are
issued.
Pursuant
to ASU 2010-09 of the FASB Accounting Standards Codification, 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’ deficit of $(16,670,597). 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. The
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
4. RELATED PARTY TRANSACTIONS
On
January 12, 2017, in conjunction with his resignation as the Company’s Chief Executive Officer and a director, Robert Gruder
agreed to cancel 27,617,226 shares of the Company’s common stock issued to him in connection with the acquisition of Klear
Kapture.
NOTE
5. INTANGIBLE ASSETS
The
Company was developing software as part of
the Trademark License Agreement (the “Trademark
Agreement”) it entered into with HP Inc. (“HP”)
. The development costs of $14,625 were impaired upon
cancellation of the HP agreement on March 20, 2017 and an impairment charge of $14,625 was recorded in the period ended March
31, 2017. See Note 12.
|
|
March
31, 2017
|
|
|
June
30, 2016
|
|
|
|
|
|
|
|
|
Software
|
|
$
|
14,625
|
|
|
$
|
646,980
|
|
Less: Impairment Charges
|
|
|
(14,625
|
)
|
|
|
(646,980
|
)
|
Less: Accumulated
Amortization
|
|
|
—
|
|
|
|
—
|
|
Software - net
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
NOTE
6. NOTES PAYABLE
On
July 14, 2016 the Company issued a $30,000 promissory note to NUWA Group, LLC. The promissory note is a standard, non-convertible
note. The effective interest rate is 5.00% per annum, calculated yearly not in advance. The note is to be repaid in full on October
14, 2016. Note proceeds are to be used for operating expenses.
Pursuant
to the Stock Purchase Agreement by and among Batterfly Energy, LTD and the Company, on July 11, 2016 the Company issued a $500,000
Promissory Note and Stock Pledge Agreement to the former shareholders of Batterfly Energy, LTD. The promissory note is a standard,
non-convertible note. The effective interest rate is 1.00% with a default interest rate of 10.00%. The note is to be repaid 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.
At
March 31, 2017 and June 30, 2016 the Company had notes payable in the amount of $850,034 and $0, respectively.
NOTE
7. CONVERTIBLE DEBT AND WARRANTS
The
Company has recorded derivative liabilities associated with convertible debt instruments and warrants, as more fully discussed
at Note 8.
(A)
Convertible Debt
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 March 31, 2017 was $417,588, such amount being exclusive of securities converted
into the Notes separate from the offering of the Notes. Pursuant to the offering of the Notes, the Company received $617,578 and
$250,000 in net proceeds on October 2, 2015 and December 7, 2015, respectively.
In
addition to the terms customarily included in such instruments, the Notes began accruing interest on the date that each Investor
submitted the principal balance of such Investor’s Note, with the interest thereon becoming due and payable on the two-year
anniversary of said date. Upon a default of the Notes, the interest rate will increase to 18%. The principal balance of each Note
and all unpaid interest will become due and payable twenty-four (24) months after the date of issuance. The Notes may be prepaid
with or without a penalty depending on the date of the prepayment. The principal and interest under the 3.85% Notes are converted
at $ $0.026. The principal and interest under the 10% Notes are convertible into shares of the Company’s common stock at
75% times the Volume Weighted Average Price for a 5 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.
In
connection with the Notes Offering, the Company entered into Registration Rights Agreements, each dated as of October 2, 2015
and December 7, 2015 and each by and between us and each of the Investors.
The
Company entered into convertible notes with eleven third party accredited investors from December 2015 to December 2016. In addition
to the terms customarily included in such instruments, the Notes began accruing interest on the date that each Investor submitted
the principal balance of such Investor’s Note, with the interest thereon becoming due and payable on terms specified in
said date (see below). Interest rates range from 3.85% to 10% and are due at various dates from August 2016 to March 2018. These
notes are convertible at any time by the investor, prior to the note principal and interest being repaid at rates ranging from
$0.006 to $0.033 per share, subject to change due to a ratchet feature contained in most of the notes.
Issue
Date
|
|
Maturity
Date
|
|
Interest
rate
|
|
|
Interest
rate
(default)
|
|
|
Total
Principal
|
|
|
Converted
|
|
|
Net
Principal
|
|
10/02/15
|
|
10/02/17
|
|
|
3.85
|
%
|
|
|
18.00
|
%
|
|
$
|
617,578
|
|
|
$
|
270,960
|
|
|
$
|
346,618
|
|
12/07/15
|
|
11/30/17
|
|
|
10.00
|
%
|
|
|
10.00
|
%
|
|
|
250,000
|
|
|
|
150,000
|
|
|
|
100,000
|
|
02/04/16
|
|
08/04/16
|
|
|
5.00
|
%
|
|
|
n/a
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
-
|
|
04/26/16
|
|
03/30/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
-
|
|
04/26/16
|
|
03/30/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
-
|
|
04/27/16
|
|
03/30/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
300,000
|
|
|
|
-
|
|
|
|
300,000
|
|
05/13/16
|
|
05/13/17
|
|
|
10.00
|
%
|
|
|
22.00
|
%
|
|
|
700,000
|
|
|
|
64,380
|
|
|
|
635,620
|
|
06/14/16
|
|
05/30/17
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
75,000
|
|
|
|
-
|
|
|
|
75,000
|
|
07/21/16
|
|
03/30/17
|
|
|
10.00
|
%
|
|
|
10.00
|
%
|
|
|
75,000
|
|
|
|
-
|
|
|
|
75,000
|
|
08/23/16
|
|
02/23/17
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
15,000
|
|
|
|
-
|
|
|
|
15,000
|
|
09/22/16
|
|
04/22/17
|
|
|
10.00
|
%
|
|
|
22.00
|
%
|
|
|
225,000
|
|
|
|
-
|
|
|
|
225,000
|
|
10/18/16
|
|
07/18/17
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
150,000
|
|
|
|
-
|
|
|
|
150,000
|
|
01/27/17
|
|
01/27/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
5,000
|
|
|
|
-
|
|
|
|
5,000
|
|
01/27/17
|
|
01/27/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
5,000
|
|
|
|
-
|
|
|
|
5,000
|
|
02/02/17
|
|
02/02/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
5,000
|
|
|
|
-
|
|
|
|
5,000
|
|
02/10/17
|
|
02/10/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
11,666
|
|
|
|
-
|
|
|
|
11,666
|
|
02/10/17
|
|
02/10/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
11,668
|
|
|
|
-
|
|
|
|
11,668
|
|
02/14/17
|
|
02/14/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
11,700
|
|
|
|
-
|
|
|
|
11,700
|
|
02/17/17
|
|
02/17/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
50,000
|
|
|
|
-
|
|
|
|
50,000
|
|
02/23/17
|
|
02/23/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
50,000
|
|
|
|
-
|
|
|
|
50,000
|
|
03/15/17
|
|
03/15/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
50,000
|
|
|
|
-
|
|
|
|
50,000
|
|
03/17/17
|
|
03/17/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
50,000
|
|
|
|
-
|
|
|
|
50,000
|
|
03/28/17
|
|
03/28/18
|
|
|
10.00
|
%
|
|
|
18.00
|
%
|
|
|
50,000
|
|
|
|
-
|
|
|
|
50,000
|
|
Total
Convertible Notes
|
|
$
|
2,797,612
|
|
|
$
|
575,340
|
|
|
$
|
2,222,272
|
|
(B)
Terms of Debt
The
debt carries interest between 3.85% and 10%, and is due in October 2017 through March 2018.
All
convertible debt in connection with the Notes Offering are convertible at $0.026 and $0.033/share (on March 31, 2017), however,
the Notes include a “ratchet feature”, which allows for a lower conversion price based on market prices.
(C)
Future Commitments
At
March 31, 2017, the Company has outstanding convertible debt of $2,222,272 which is payable within the next fifteen months.
(D)
Warrants
The
Company issued six warrants dated from February to July 2016. Four of the warrants are related to consulting agreements and two
are related to convertible note holders. All warrants issued through March 31, 2017 were accounted for as derivative liabilities,
as the warrants were not held on reserve at and therefore tainted. See Note 8. Two warrants issued were exercised during the period
ended September, 2016. The details are:
Purpose of
|
|
Issue
|
|
|
Number Shares
|
|
|
Warrant
|
|
|
Period Warrants
|
Warrant
Issuance
|
|
Date
|
|
|
Common
Stock
|
|
|
Exercise
Price
|
|
|
Exercisable
|
Consulting Services
|
|
|
2/22/2016
|
|
|
|
2,600,000
|
|
|
$
|
0.001
|
|
|
2/22/2016 to 2/22/2019
|
Exercised
|
|
|
9/9/2016
|
|
|
|
(2,600,000
|
)
|
|
|
|
|
|
|
Website design and Digital
|
|
|
3/10/2016
|
|
|
|
1,916,500
|
|
|
$
|
0.001
|
|
|
3/10/2016 to 3/10/2019
|
Locker app development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
9/20/2016
|
|
|
|
(1,916,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Incentive
|
|
|
4/27/2016
|
|
|
|
625,000
|
|
|
$
|
0.400
|
|
|
4/27/2016 to (not defined)
|
Investor Incentive
|
|
|
5/13/2016
|
|
|
|
350,000
|
|
|
$
|
0.400
|
|
|
5/13/2016 to 5/13/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting Services
|
|
|
7/29/2016
|
|
|
|
525,000
|
|
|
$
|
0.001
|
|
|
7/29/2016 to 7/29/2021
|
Consulting Services
|
|
|
7/29/2016
|
|
|
|
225,000
|
|
|
$
|
0.001
|
|
|
7/29/2016 to
7/29/2021
|
Total
|
|
|
|
|
|
|
1,725,000
|
|
|
|
|
|
|
|
NOTE
8. DERIVATIVE LIABILITIES
The
Company identified conversion features embedded within convertible debt and warrants issued in the period ended March 31, 2017.
The Company has determined that the features associated with the embedded conversion option, in the form a ratchet provision,
should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares
would be available to settle all potential future conversion and warrant transactions.
As
a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt and warrants is
summarized as follow:
|
|
March
31, 2017
|
|
|
June
30, 2016
|
|
Carried forward from the
prior period ended
|
|
$
|
20,143,189
|
|
|
$
|
|
|
Fair value at the commitment date - convertible
debt
|
|
$
|
613,957
|
|
|
$
|
6,142,583
|
|
Fair value at the commitment date - warrants
|
|
|
359,163
|
|
|
|
1,541,236
|
|
Fair value mark to market adjustment - convertible
debt
|
|
|
(15,355,804
|
)
|
|
|
10,641,842
|
|
Fair value mark to market adjustment - warrants
|
|
|
(2,062,007
|
)
|
|
|
1,817,529
|
|
Reclassified to
additional paid in capital
|
|
|
(1,430,749
|
)
|
|
|
|
|
Totals
|
|
$
|
2,267,749
|
|
|
$
|
20,143,189
|
|
The
fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following
management assumptions as of March 31, 2017:
|
|
Commitment
Date
|
|
|
Re-measurement
Date
|
|
Expected
dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected
volatility
|
|
|
220
|
%
|
|
|
243
|
%
|
Expected
term
|
|
|
0.5
to 5 years
|
|
|
|
0.00-4.58
years
|
|
Risk
free interest rate
|
|
|
0.39%-1.14
|
%
|
|
|
0.62%-
1.93
|
%
|
NOTE
9. CONVERTIBLE DEBT - NET
The
Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining fair value
of the derivative liability, as it exceeded the gross proceeds of the note.
The
Company recorded debt discount of $318,598 as of March 31, 2017 and $2,076,912 for the year ended June 30, 2016.
Accumulated
amortization of debt discount amounted to $1,161,979 as of March 31, 2017 and $487,399 for the year ended June 30, 2016. The Company
recorded amortization expense of the debt issuance cost of $1,161,979 as of March 31, 2017 and $487,399 for the year ended June
30, 2016.
|
|
March
31, 2017
|
|
|
June
30, 2016
|
|
Balance Prior Year
|
|
$
|
443,065
|
|
|
$
|
85,000
|
|
Proceeds
|
|
|
872,604
|
|
|
|
2,032,578
|
|
Repayments
|
|
|
(581,112
|
)
|
|
|
(85,000
|
)
|
Less: gross Debt Discount recorded
|
|
|
(318,598
|
)
|
|
|
(2,076,912
|
)
|
Add: Amortization of Debt Discount
|
|
|
1,161,979
|
|
|
|
487,399
|
|
Less Current portion
|
|
|
(602,671
|
)
|
|
|
(108,953
|
)
|
Long-Term Convertible
Debt
|
|
$
|
975,267
|
|
|
|
334,112
|
|
NOTE
10. STOCKHOLDERS’ EQUITY (DEFICIT)
Shares
Authorized
On
December 15, 2015, the Company filed Articles of Amendment to authorize 300,000,000 shares of common stock, par value $0.001 per
share, authorize 20,000,000 shares of preferred stock, par value $0.001 per share and to effectuate a 1 for 11 forward stock split.
All common stock and per share data for the period presented in this Quarterly Report on Form 10-Q has been adjusted to give effect
to the forward stock split.
Preferred
Stock
The
Company has authorized 20,000,000 preferred shares with a par value of $0.001 per share. The Board of Directors is authorized
to divide the authorized shares of Preferred Stock into one or more series, each of which shall be so designated as to distinguish
the shares thereof from the shares of all other series and classes. As of March 31, 2017, the Board of Directors has not designated
any classes of Preferred Stock and there are no shares of Preferred Stock issued or outstanding.
Common
Stock Issued
For
the nine-month period ended March 31, 2017, 53,654,995 shares of common stock were issued and 27,617,226 shares of common stock
were returned by or former Chief Executive Officer and cancelled upon his resignation, bringing the total shares issued and outstanding
to 79,370,345.
On
February 3, 2017, the Company issued 2,533,104 shares of its common stock to Bezalel Partners, LLC in conversion of $35,969.76
of the purchaser’s convertible note payable principal and $7,433.00 in interest. The original issuance date of the $164,359.76
note payable was October 2, 2015. The conversion price of the note was stated at $0.017. The proceeds reduced Convertible Notes
Payable to 43,402.76. This debt is now fully settled.
On
February 8, 2017, the Company issued 4,480,000 shares of its common stock to Edgestone Associates, Inc. in conversion of $26,880.00
of the purchaser’s convertible note payable. The original issuance date of the $ 700,000.00 note payable was May 13, 2016.
The conversion price of the note was stated at 50% multiplied by the Market Price, defined as the lowest Trading Price for the
Common Stock during the twenty (20) Trading Day period ending on the last complete Trading Day prior to the Conversion Date. The
proceeds reduced Convertible Notes Payable $26,880.00.
On
March 1, 2017, the Company issued 3,00,000 shares of its common stock with a value of $0.0118 per common share to William Singer
in connection with VP of Sales services performed in 2016.
On
March 1, 2017, Robert Gruder returned 27,617,226 shares of the Company’s common stock to treasury.
On
March 10, 2017, the Company issued 1,494,612 shares of its common stock to Atlanta Capital Partners, LLC in conversion of $15,000.00
of the purchaser’s convertible note payable plus $833.00 of interest. The original issuance date of the $ 15,000.00 note
payable was August 23, 2016. The conversion price of the note was stated at 75% of the volume weighted average price of the Company’s
common stock for a 5-day period prior to the conversion date. The proceeds reduced Convertible Notes Payable $15,833.00. This
debt is now fully settled.
On
March 30, 2017, the Company issued 5,660,377 shares of its common stock to St. George Investments LLC in conversion of $30,00.00
of the purchaser’s convertible note payable. The original issuance date of the $225,000.00 note payable was September 22,
2016. The conversion price of the note was stated at $0.026 per common share. The proceeds reduced Convertible Notes Payable $30,000.00.
On
January 12, 2017, in conjunction with his resignation as the Company’s Chief Executive Officer and a director, Robert Gruder
agreed to cancel 27,617,226 shares of the Company’s common stock issued to him in connection with the acquisition of Klear
Kapture.
NOTE
11. STOCK INCENTIVE PLAN
On
April 20, 2016, the Company adopted the Life Clips, Inc. 2016 Stock and Incentive Plan under which the Company may issue nonqualified
stock options, incentive stock options, stock appreciation rights, restricted stock grants and units, performance units and awards
of cash. A maximum of 20,000,000 shares of common stock may be issued under the plan. 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 may be made under the plan.
NOTE
12. COMMITMENTS AND CONTINGENCIES
Acquisition
of Batterfly Energy, Ltd
On
June 10, 2016, we entered into a Stock Purchase Agreement with Batterfly Energy Ltd. (“Batterfly”), and all of its
shareholders. On July 11, 2016, the transaction closed (the “Batterfly Closing Date”). The transaction closed on July
11, 2016. Under the terms of the Stock Purchase Agreement, the Company acquired all of the outstanding capital stock of Batterfly
in exchange for the following consideration:
|
(i)
|
$1,000,000
in cash, of which $450,000 was paid at closing, with the remainder paid in installments on the dates that are 12 months and
16 months after the Batterfly Closing Date;
|
|
|
|
|
(ii)
|
a
promissory note and stock pledge agreement issued by the Company payable to the Batterfly Shareholders in the amount of $500,000
payable in two installments of $250,000 on each of October 6, 2016 and $250,000 on February 13, 2017 (the “Batterfly
Promissory Note”);
|
|
|
|
|
(iii)
|
10,000,000
shares of the Company’s unregistered common stock issued to the Batterfly shareholders, with 5,000,000 shares being
issued to the Batterfly shareholders at Batterfly Closing Date, and the remaining 5,000,000 shares being held in escrow, to
be released 50% on the one year anniversary of the Batterfly Closing Date, and 50% on the date that the Company has sold an
aggregate of 1,000,000 units of Batterfly’s products; and
|
|
|
|
|
(iv)
|
quarterly
payments of cash, up to an aggregate amount of $2,000,000, based on the number of Batterfly’s products sold by the Company
after the Batterfly Closing Date.
|
On
January 11, 2017, the Company received a default notice related to the Company’s failure to make any payments on the Batterfly
Promissory Note. In addition, the default notice states that the Company owes $20,000 in aggregate to two of the Batterfly shareholders
related to consulting fees associated with the Batterfly acquisition. Finally, the default notice states that a payment of $250,000,
as well as an additional payment of $20,000 must be paid by January 23, 2017. The Company did not make the payments demanded and
is currently in discussions with the Batterfly shareholders regarding the matters asserted in the default notice.
HP
Trademark License Agreement Termination
On
March 30, 2017, the Company entered into a termination agreement with HP whereby they terminated the Trademark License Agreement.
Pursuant to the terms of the termination agreement, the Company agreed to pay HP $62,500.00 by July 15, 2017 and $62,500.00 by
October 15, 2017. As of March 30, 2017, the Company agreed to refrain from using any HP trademarks on any products and confirmed
that the Company did not have any HP Branded Products in its inventory.
Management
Agreements
Huey
Long
In
connection with his engagement as the Chief Executive Officer of the Company, the Company entered into an Executive Employment
Agreement with Huey Long (the “Agreement”) on February 2, 2017. The Agreement is for a one year term, which automatically
renews for successive additional one-year terms unless either Mr. Long or the Company notifies the other party that they do not
wish the Agreement to so renew. The Agreement provides that Mr. Long will serve as the Company’s Chief Executive Officer
and as a member of the Board.
Pursuant
to the Agreement, the Company will pay Mr. Long a salary of $300,000 annually, payable on a monthly basis with the first payment
due on February 7, 2017. In addition, the Company granted to Mr. Long, effective as of February 2, 2017, a total of 15,500,000
shares of the Company’s unregistered common stock, par value $0.001 per share (the “Common Stock”) via two stock
grants, one for 15,000,000 shares of unregistered Common Stock and one for 500,000 shares of unregistered Common Stock. 3,750,000
shares of Common Stock in the first grant will vest on August 2, 2017 and 3,750,000 shares of Common Stock in the first grant
will vest on February 2, 2018. The balance of 7,500,000 shares of Common Stock will thereafter vest pro rata over the following
12 months.
The
500,000 shares in the second grant will vest shall vest on the Company achieving positive cash flow and meeting such other goals
as determined by the Board.
The
Agreement also provides that Mr. Long will be granted (i) 500,000 additional shares of stock (provided that the Board may increase
this number) on each anniversary of the commencement of the agreement, with such shares to vest 50% on the first anniversary of
such grant and 50% to vest on the second anniversary of such grant and (ii) each, year, in the event that Mr. Long does not at
that time own 10% of the number of shares of Common Stock outstanding (counting all prior stock grants as vested), a number of
shares of Common Stock sufficient to bring Mr. Long up to such 10% ownership.
If
Mr. Long’s engagement is terminated by the Company without “Cause,” or by Mr. Long for “Good Reason,”
(in each case as defined the employment agreement) then a portion of the stock grants described above equal to a pro rata portion
of the grants based on the time from February 2, 2017 to the date of termination, and assuming a 24-month vesting period, shall
be deemed vested, and all other amounts shall be forfeited. If Mr. Long’s engagement is terminated by the Company with “Cause”
or by Mr. Long without “Good Reason,” then all unvested portions of the stock grants described above as of the date
of termination shall be forfeited.
Victoria
Rudman
In
connection with her engagement as the Chief Financial Officer of the Company which became effective on January 16, 2017, the Company
and Ms. Rudman are in the process of entering into a formal agreement that will provide for payment of fees of $5,000 per month
in cash with a stock incentive component. No definitive agreement has been completed as of March 31, 2017.
William
Singer
In
connection with his engagement as the Executive Vice President of Sales and Marketing of the Company, the Company entered into
an Executive Employment Agreement with William Singer (the “Agreement”) on March 1, 2017. The Agreement is for a two-year
term, which automatically renews for successive additional one-year terms unless either Mr. Singer or the Company notifies the
other party that they do not wish the Agreement to so renew. The Agreement provides that Mr. Singer will serve as the Company’s
Executive Vice President of Sales and Marketing and as a member of the Board. Pursuant to the Agreement, the Company will pay
Mr. Singer a salary of $3,500 per month, which commenced effective as of February 1, 2017, provided that following the month in
which the Company begins generating revenue Mr. Singer’s salary will be increased to $5,000 per month. Mr. Singer will also
receive a commission of 1% of any net sales revenue collected by the Company on the sales of its products, based on the wholesale
price, and contingent on the sale being profitable to the Company, and will be eligible for a bonus as jointly determined by the
Board and Mr. Singer.
In
addition, the Company granted to Mr. Singer, effective as of March 1, 2017, a total of 6,000,000 shares of the Company’s
unregistered common stock, par value $0.001 per share (the “Common Stock”). 1,500,000 shares of the Common Stock will
vest on March 1, 2018 and thereafter 250,000 shares of the Common Stock will vest each month thereafter.
Pursuant
to the Agreement, the Company also agreed to grant Mr. Singer 500,000 shares of Common Stock on each anniversary of March 1, 2017,
provided that the amount of these shares of Common Stock will be based on performance and may be adjusted by the Board. The shares
of Common Stock in these grants will vest 50% on each anniversary of the applicable grant.
If
Mr. Singer’s engagement is terminated by the Company without “Cause,” or by Mr. Singer for “Good Reason,”
(in each case as defined in the employment agreement) then a portion of the stock grants described above equal to a pro rata portion
of the grants based on the time from the date of the grant to the date of termination, and assuming a 24-month vesting period,
shall be deemed vested, and all other amounts shall be forfeited. If Mr. Singer’s engagement is terminated by the Company
with “Cause” or by Mr. Singer without “Good Reason,” then all unvested portions of the stock grants described
above as of the date of termination shall be forfeited.
Litigation
From
time to time we may be a defendant and/or plaintiff in various other legal proceedings arising in the normal course of our business.
We are currently not a party to any material legal proceedings or government actions, including any bankruptcy, receivership,
or similar proceedings. In addition, we are not aware of any known litigation or liabilities involving the operators of our properties
that could affect our operations. Furthermore, as of the date, our management is not aware of any proceedings to which any of
our directors, officers, or affiliates, or any associate of any such director, officer, affiliate, or security holder is a party
adverse to our company or has a material interest adverse to us.
NOTE
13. SUBSEQUENT EVENTS
The
Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent
events. The Company will evaluate subsequent events through the date of the issuance of the financial statements.
On
April 6, 2017, the Company entered into a Warrant Settlement Agreement with St. George Investments LLC (“Holder”).
Effective as of September 22, 2016, the Company issued to the Holder a warrant to purchase shares of the Company’s common
stock (the “Warrant”) pursuant to that certain Securities Agreement dated September 22, 2016 between Company and Holder
(the “Purchase Agreement”). Upon the Company’s request, Holder agreed to cancel the Warrant in exchange for
a payment in the amount of $20,000.00 (the “Settlement Payment”) as full payment for and satisfaction of the Company’s
obligations under the Warrant.
Issuances
of Common Stock
On
April 7, 2017, the Company issued 3,685,000 shares of its unrestricted common stock upon conversion of $11,608 principal amount
and zero interest of its convertible note payable.
On
April 12, 2017 8,731,618 shares of its unrestricted common stock upon conversion of $43,209 principal amount and zero interest
of its convertible note payable.
On
April 20, 2017 5,236,276 shares of its unrestricted common stock upon conversion of $16,494principal amount and zero interest
of its convertible note payable.
On
April 24, 2017 3,889,146 shares of its unrestricted common stock upon conversion of $11,862 principal amount and zero interest
of its convertible note payable.
On
April 25, 2017 14,777,637 shares of its unrestricted common stock upon conversion of $52,762 principal amount and zero interest
of its convertible note payable.
On
May 2, 2017 8,978,121 shares of its unrestricted common stock upon conversion of $27,763 principal amount and zero interest of
its convertible note payable.
On
May 9, 2017 12,525,486 shares of its unrestricted common stock upon conversion of $30,294 principal amount and zero interest of
its convertible note payable.