ITEM 1. FINANCIAL
STATEMENTS
LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Index to Financial
Statements
LIFELOGGER
TECHNOLOGIES CORP.
BALANCE
SHEETS
|
|
June 30, 2016
|
|
|
December 31, 2015
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
496,990
|
|
|
$
|
131,699
|
|
Prepaid expenses
|
|
|
7,497
|
|
|
|
10,319
|
|
Deferred financing costs
|
|
|
6,873
|
|
|
|
3,453
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
511,360
|
|
|
|
145,471
|
|
|
|
|
|
|
|
|
|
|
Furniture and Fixtures
|
|
|
|
|
|
|
|
|
Furniture and fixtures
|
|
|
9,578
|
|
|
|
9,578
|
|
Accumulated depreciation
|
|
|
(2,052
|
)
|
|
|
(1,368
|
)
|
|
|
|
|
|
|
|
|
|
Furniture and fixtures, net
|
|
|
7,526
|
|
|
|
8,210
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
|
518,886
|
|
|
|
153,681
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
176,693
|
|
|
|
118,737
|
|
Corporate taxes payable
|
|
|
10,000
|
|
|
|
-
|
|
Due to related party
|
|
|
39,424
|
|
|
|
2,310
|
|
Note payable
|
|
|
-
|
|
|
|
135,000
|
|
Convertible Notes payable, net of unamortized discount of $244,267 and 283,763
|
|
|
940,324
|
|
|
|
189,921
|
|
Derivative liablity - notes
|
|
|
349,753
|
|
|
|
53,392
|
|
Derivative liablity - warrants
|
|
|
59,391
|
|
|
|
52,873
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
1,575,585
|
|
|
|
552,233
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,575,585
|
|
|
|
552,233
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity (Deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock par value $0.001: 5,000,000 shares authorized; None issued
or outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock par value $0.001: 120,000,000 shares authorized; 55,011,991
and 82,430,503 shares issued and outstanding, respectively
|
|
|
55,012
|
|
|
|
82,431
|
|
Additional paid-in capital
|
|
|
2,825,805
|
|
|
|
847,804
|
|
Accumulated deficit
|
|
|
(3,937,516
|
)
|
|
|
(1,328,787
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity (deficit)
|
|
|
(1,056,699
|
)
|
|
|
(398,552
|
)
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity (Deficit)
|
|
|
518,886
|
|
|
|
153,681
|
|
See
accompanying notes to the financial statements.
LIFELOGGER
TECHNOLOGIES CORP.
STATEMENTS
OF OPERATIONS
(Unaudited)
|
|
For the Three Months
|
|
|
For the Six Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
80,971
|
|
|
|
131,321
|
|
|
|
202,633
|
|
|
|
251,227
|
|
Advertising and promotions
|
|
|
6,848
|
|
|
|
1,113
|
|
|
|
10,487
|
|
|
|
10,013
|
|
Consulting -related parties
|
|
|
25,200
|
|
|
|
29,897
|
|
|
|
50,400
|
|
|
|
66,337
|
|
Consulting - other
|
|
|
78,890
|
|
|
|
52,051
|
|
|
|
161,411
|
|
|
|
103,880
|
|
Stock based compensation
|
|
|
177,570
|
|
|
|
76,800
|
|
|
|
348,344
|
|
|
|
92,800
|
|
Impairment of intangible assets
|
|
|
195,015
|
|
|
|
-
|
|
|
|
195,015
|
|
|
|
-
|
|
General and administrative
|
|
|
62,017
|
|
|
|
31,314
|
|
|
|
114,233
|
|
|
|
88,502
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
626,511
|
|
|
|
322,496
|
|
|
|
1,082,523
|
|
|
|
612,759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(626,511
|
)
|
|
|
(322,496
|
)
|
|
|
(1,082,523
|
)
|
|
|
(612,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivative-warrants
|
|
|
65,016
|
|
|
|
-
|
|
|
|
6,942
|
|
|
|
-
|
|
Change in fair value of derivative-notes
|
|
|
(222,942
|
)
|
|
|
-
|
|
|
|
(268,560
|
)
|
|
|
-
|
|
Loss on extinguishment of debt
|
|
|
(182,986
|
)
|
|
|
-
|
|
|
|
(682,067
|
)
|
|
|
-
|
|
Commitment fee expense
|
|
|
(250,000
|
)
|
|
|
-
|
|
|
|
(250,000
|
)
|
|
|
-
|
|
Interest expense
|
|
|
(191,806
|
)
|
|
|
-
|
|
|
|
(322,471
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
(782,718
|
)
|
|
|
-
|
|
|
|
(1,516,156
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income tax provision
|
|
|
(1,409,229
|
)
|
|
|
(322,496
|
)
|
|
|
(2,598,679
|
)
|
|
|
(612,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax provision
|
|
|
10,050
|
|
|
|
-
|
|
|
|
10,050
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(1,419,279
|
)
|
|
$
|
(322,496
|
)
|
|
$
|
(2,608,729
|
)
|
|
$
|
(612,759
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss Per Common Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.04
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and Diluted
|
|
|
64,657,393
|
|
|
|
82,149,501
|
|
|
|
73,893,729
|
|
|
|
82,003,064
|
|
See
accompanying notes to the financial statements.
LIFELOGGER
TECHNOLOGIES CORP.
STATEMENT
OF CHANGE IN STOCKHOLDERS’ EQUITY (DEFICIT)
FOR
THE INTERIM PERIOD ENDED JUNE 30, 2016 AND DECEMBER 31, 2015
(Unaudited)
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Total
|
|
|
|
Common stock par value $0.001
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
Number of Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
|
81,000,000
|
|
|
$
|
81,000
|
|
|
$
|
(26,623
|
)
|
|
$
|
(56,366
|
)
|
|
$
|
(1,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for cash, at $0.60 per share
|
|
|
841,666
|
|
|
|
842
|
|
|
|
504,158
|
|
|
|
|
|
|
|
505,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(185,883
|
)
|
|
|
(185,883
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014
|
|
|
81,841,666
|
|
|
$
|
81,842
|
|
|
$
|
477,535
|
|
|
$
|
(242,249
|
)
|
|
$
|
317,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for services
|
|
|
240,000
|
|
|
|
240
|
|
|
|
106,736
|
|
|
|
|
|
|
|
106,976
|
|
Common stock issued for cash, at $0.43 per share
|
|
|
348,837
|
|
|
|
349
|
|
|
|
149,651
|
|
|
|
|
|
|
|
150,000
|
|
Options granted for consultant
|
|
|
|
|
|
|
|
|
|
|
113,882
|
|
|
|
|
|
|
|
113,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,086,538
|
)
|
|
|
(1,086,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2015
|
|
|
82,430,503
|
|
|
$
|
82,431
|
|
|
$
|
847,804
|
|
|
$
|
(1,328,787
|
)
|
|
$
|
(398,552
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued for debt
|
|
|
1,808,288
|
|
|
|
1,808
|
|
|
|
495,470
|
|
|
|
|
|
|
|
497,278
|
|
Options granted for consultant
|
|
|
|
|
|
|
|
|
|
|
348,344
|
|
|
|
|
|
|
|
348,344
|
|
Common stock issued for intangible assets
|
|
|
2,600,200
|
|
|
|
2,600
|
|
|
|
192,415
|
|
|
|
|
|
|
|
195,015
|
|
Common stock issued for debt
|
|
|
8,173,000
|
|
|
|
8,173
|
|
|
|
901,772
|
|
|
|
|
|
|
|
909,945
|
|
Shares redeemed
|
|
|
(40,000,000
|
)
|
|
|
(40,000
|
)
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,608,729
|
)
|
|
|
(2,608,729
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2016
|
|
|
55,011,991
|
|
|
$
|
55,012
|
|
|
$
|
2,825,805
|
|
|
$
|
(3,937,516
|
)
|
|
$
|
(1,056,699
|
)
|
See
accompanying notes to the financial statements.
LIFELOGGER
TECHNOLOGIES CORP.
STATEMENTS
OF CASH FLOWS
(Unaudited)
|
|
For the six months ended
|
|
|
|
June 30, 2016
|
|
|
June 30, 2015
|
|
|
|
|
|
|
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,608,729
|
)
|
|
$
|
(612,759
|
)
|
Adjustments to reconcile net loss to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation expenses
|
|
|
684
|
|
|
|
684
|
|
Shares issued for consulting services
|
|
|
-
|
|
|
|
92,800
|
|
Options issued - consulting
|
|
|
348,344
|
|
|
|
-
|
|
Interest expense recognized through accretion of discount on debt
|
|
|
232,848
|
|
|
|
-
|
|
Original issue discount on new financing
|
|
|
26,653
|
|
|
|
|
|
Interest expense recognized through amortization of deferred financing costs
|
|
|
3,580
|
|
|
|
-
|
|
Amortization of commitment fee
|
|
|
250,000
|
|
|
|
|
|
Change in fair value of derivative liabilities-notes
|
|
|
268,560
|
|
|
|
-
|
|
Change in fair value of derivative liabilities-warrants
|
|
|
(6,942
|
)
|
|
|
-
|
|
Extinguishment of debt
|
|
|
682,067
|
|
|
|
|
|
Impairment of intangible asset
|
|
|
195,015
|
|
|
|
|
|
Changes in Operating Assets and Liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
-
|
|
|
|
93,021
|
|
Prepaid expenses
|
|
|
2,822
|
|
|
|
8,759
|
|
Accounts payable and accrued expenses
|
|
|
80,775
|
|
|
|
62,019
|
|
Corporate taxes payable
|
|
|
10,000
|
|
|
|
-
|
|
Accounts payable - related party
|
|
|
37,114
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net Cash Used in Operating Activities
|
|
|
(477,209
|
)
|
|
|
(355,476
|
)
|
|
|
|
|
|
|
|
|
|
Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of Capital Assets
|
|
|
-
|
|
|
|
(332
|
)
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
-
|
|
|
|
(332
|
)
|
|
|
|
|
|
|
|
|
|
Financing Activities:
|
|
|
|
|
|
|
|
|
Proceeds from note payable
|
|
|
849,500
|
|
|
|
-
|
|
Payment of deferred financing costs
|
|
|
(7,000
|
)
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
-
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Financing Activities
|
|
|
842,500
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash
|
|
|
365,291
|
|
|
|
(205,808
|
)
|
|
|
|
|
|
|
|
|
|
Cash - Beginning of Reporting Period
|
|
|
131,699
|
|
|
|
238,747
|
|
|
|
|
|
|
|
|
|
|
Cash - End of Reporting Period
|
|
$
|
496,990
|
|
|
$
|
32,939
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Income Tax Paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stocks for settlement of notes
payable and accrued interest
|
|
$
|
1,407,223
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Note payable issued for financing cost
|
|
$
|
250,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Acquisition of intangible assets
|
|
$
|
195,015
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Conversion of debt equity
|
|
$
|
488,575
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Shares redeemed
|
|
$
|
40,000
|
|
|
$
|
-
|
|
See
accompanying notes to the financial statements.
LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Notes to the
Financial Statements
(Unaudited)
Note 1 - Organization and Operations
Lifelogger Technologies Corp. (“we,”
“us,” “our,” or the “Company”) was incorporated under the laws of the State of Nevada on June
4, 2012 under the name Snap Online Marketing Inc. The Company changed its name effective as of January 31, 2014 and is engaged
in the development and commercialization of lifelogging solutions enabling the recording, secure online storage, organizing, retrieving,
appreciation and selective sharing of personal information, data, photos, videos and other activities with friends and the public
at large.
Note 2 - Summary of Significant
Accounting Policies
Basis of Presentation - Unaudited
Interim Financial Information
The accompanying unaudited interim
financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United
States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United
States Securities and Exchange Commission (“SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim
financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of
management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not
necessarily indicative of the results for the full fiscal year. These unaudited interim consolidated financial statements should
be read in conjunction with the financial statements of the Company for the year ended December 31, 2015 and notes thereto contained
in the information as part of the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange
Commission on April 8, 2016.
Use of Estimates and Assumptions
The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts of assets and 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.
Critical accounting estimates are estimates
for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly
uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or
operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements
were:
|
(i)
|
Assumption
as a going concern
: Management assumes that the Company will continue as a going concern, which contemplates continuity
of operations, realization of assets, and liquidation of liabilities in the normal course of business.
|
|
|
|
|
(ii)
|
Allowance
for doubtful accounts
: Management’s estimate of the allowance for doubtful accounts is based on historical sales,
historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that
may affect a client’s ability to pay. The Company evaluated the key factors and assumptions used to develop the allowance
in determining that it is reasonable in relation to the financial statements taken as a whole.
|
|
|
|
|
(iii)
|
Valuation
allowance for deferred tax assets
: Management assumes that the realization of the Company’s net deferred tax assets
resulting from its net operating loss (“NOL”) carry-forwards for Federal income tax purposes that may be offset
against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net
loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has
incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily
operations by way of a public or private offering, among other factors.
|
These significant accounting estimates
or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions,
and certain estimates or assumptions are difficult to measure or value.
Management bases its estimates on historical
experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources.
LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Notes to the
Financial Statements
(Unaudited)
Management regularly evaluates the
key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances,
historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted
accordingly.
Actual results could differ from those
estimates.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted
in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and
comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which
prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy
gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest
priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described
below:
|
Level
1
|
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date.
|
|
|
|
|
Level
2
|
Pricing inputs other
than quoted prices in active markets included in Level 1, which are either directly or
indirectly observable as of the reporting
date.
|
|
|
|
|
Level
3
|
Pricing
inputs that are generally observable inputs and not corroborated by market data.
|
Financial assets are considered Level
3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at
least one significant model assumption or input is unobservable.
The fair value hierarchy gives the
highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to
unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s
financial assets and liabilities, such as cash, prepaid expenses, accounts payable and accrued expenses approximate their fair
value because of the short maturity of those instruments.
Transactions involving related parties
cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings
may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions
were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can
be substantiated.
The Company includes fair value information
in the notes to financial statements when the fair value of its financial instruments is different from the book value. When the
book value approximates fair value, no additional disclosure is made.
Valuation of Derivatives
The Company evaluates its convertible
instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify
as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging.” The result of this accounting
treatment is that the fair value of the derivative is marked-to-market each balance sheet date. The change in fair value is recorded
in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument
is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are
initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liabilities at
the fair value of the instrument on the reclassification date. We analyzed the derivative financial instruments in accordance
with ASC 815. The objective is to provide guidance for determining whether an equity-linked financial instrument is indexed to
an entity’s own stock. This determination is needed for a scope exception which would enable a derivative instrument to
be accounted for under the accrual method. The classification of a non-derivative instrument that falls within the scope of ASC
815-40-05 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own
Stock” also hinges on whether the instrument is indexed to an entity’s own stock. A non-derivative instrument that
is not indexed to an entity’s own stock cannot be classified as equity and must be accounted for as a liability. There is
a two-step approach in determining whether an instrument or embedded feature is indexed to an entity’s own stock. First,
the instrument’s contingent exercise provisions, if any, must be evaluated, followed by an evaluation of the instrument’s
settlement provisions. The Company utilized multinomial lattice models that value the derivative liability based on a probability
weighted discounted cash flow model. The Company utilized the fair value standard set forth by the Financial Accounting Standards
Board, defined as the amount at which the assets (or liability) could be bought (or incurred) or sold (or settled) in a current
transaction between willing parties, that is, other than in a forced or liquidation sale.
LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Notes to the
Financial Statements
(Unaudited)
The derivative liabilities result in
a reduction of the initial carrying amount (as unamortized discount) of the Convertible Notes. This derivative liability is marked-to-market
each quarter with the change in fair value recorded in the income statement. Unamortized discount is amortized to interest expense
using the effective interest method over the life of the Convertible Note.
Cash Equivalents
The Company considers all highly liquid
investments with a maturity of three months or less to be cash and cash equivalents. There were no cash equivalents as at June
30, 2016.
Furniture and Fixtures
Furniture and fixtures are recorded
at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as
incurred. Depreciation is computed by the straight-line method (after taking into account their respective estimated residual
values) over the estimated useful lives of the respective assets as follows:
|
|
Estimated
Useful Life
(Years)
|
|
Furniture and fixture
|
|
|
7
|
|
Upon sale or retirement, the related
cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.
Related Parties
The Company follows subtopic 850-10
of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the Related
parties include: a. affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other
Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control
with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); b. entities for which investments
in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection
of Section 825-10-15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees,
such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the
Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly
influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented
from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating
policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly
influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate
interests.
LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Notes to the
Financial Statements
(Unaudited)
The financial statements shall include
disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar
items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of financial
statements is not required in those statements. The disclosures shall include:
|
a.
|
the
nature of the relationship(s) involved;
|
|
b.
|
a
description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of
the periods for which income statements are presented, and such other information deemed necessary to an understanding of
the effects of the transactions on the financial statements;
|
|
c.
|
the
dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change
in the method of establishing the terms from that used in the preceding period; and
|
|
d.
|
a
amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the
terms and manner of settlement.
|
Commitments and contingencies
The Company follows subtopic 450-20
of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date
the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more
future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves
an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or
unasserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or
unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency
indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature
of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote
are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Revenue Recognition
The Company applies paragraph 605-10-S99-1
of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable
and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii)
the sales price is fixed or determinable, and (iv) collectability is reasonably assured.
The Company derives its revenues from
sales contracts with its customer with revenues being generated upon rendering of services. Persuasive evidence of an arrangement
is demonstrated via invoice; service is considered provided when the service is delivered to the customers; and the sales price
to the customer is fixed upon acceptance of the purchase order and there is no separate sales rebate, discount, or volume incentive.
LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Notes to the
Financial Statements
(Unaudited)
Equity Instruments Issued to
Parties Other Than Employees for Acquiring Goods or Services
The Company accounts for equity instruments
issued to parties other than employees for acquiring goods or services under the guidance of Sub-topic 505-50 of the FASB Accounting
Standards Codification (“Sub-topic 505-50”).
Pursuant to ASC paragraph 505-50-25-7,
if fully vested, non-forfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for
goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the
elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached.
A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Whether
the corresponding cost is an immediate expense or a prepaid asset (or whether the debit should be characterized as contra-equity
under the requirements of paragraph 505-50-45-1) depends on the specific facts and circumstances. Pursuant to ASC paragraph 505-50-45-1,
a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, non-forfeitable
equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific
performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity
by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the
balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other
than employees in exchange for goods or services.
Pursuant to Paragraphs 505-50-25-8
and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only
after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified
performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner
as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using,
the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty
has the right to exercise expires unexercised.
Pursuant to ASC Paragraphs 505-50-30-2
and 505-50-30-11 share-based payment transactions with non-employees shall be measured at the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the
fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier
of the following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty
to earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty’s performance
is complete. If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the
Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company’s
common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum
(“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations
as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading
in the market.
Pursuant to ASC Paragraph 718-10-55-21
if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions,
an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in
paragraph 718-10-55-11 and takes into account,
at a minimum, all of the following
factors:
|
a.
|
The
exercise price of the option.
|
|
|
|
|
b.
|
The
expected term of the option, taking into account both the contractual term of the option and the effects of employees’
expected exercise and post-vesting employment termination behavior: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB
Accounting Standards Codification the expected term of share options and similar instruments represents the period of time
the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the
instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The
Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation
or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the
expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to
provide a reasonable basis upon which to estimate expected term.
|
|
|
|
|
c.
|
The
current price of the underlying share.
|
|
|
|
|
d.
|
The
expected volatility of the price of the underlying share for the expected term of the option. Pursuant to ASC Paragraph 718-10-55-25
a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities
for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average
volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would
likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects
of diversification that are present in an industry sector index, the volatility of an index should not be substituted for
the average of volatilities of otherwise similar entities in a fair value measurement. Pursuant to paragraph 718-10-S99-1
if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate
than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially
inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The Company
uses the average historical volatility of the comparable companies over the expected term of the share options or similar
instruments as its expected volatility.
|
|
|
|
|
e.
|
The
expected dividends on the underlying share for the expected term of the option. The expected dividend yield is based on the
Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term
of the share options and similar instruments.
|
|
|
|
|
f.
|
The
risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option
on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon
yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s
contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available
on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.
|
LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Notes to the
Financial Statements
(Unaudited)
Pursuant to ASC paragraph 505-50-S99-1,
if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity
instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are
not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should
be recorded.
Stock-Based Compensation
The Company records stock-based compensation
in accordance with FASB ASC Topic 718, “
Compensation – Stock Compensation
.” FASB ASC Topic 718 requires
companies to measure compensation cost for stock-based employee compensation at fair value at the grant date and recognize the
expense over the employee’s requisite service period. The Company recognizes in the statement of operations the grant-date
fair value of stock options and other equity-based compensation issued to employees and non-employees. There were 6,000,000 options
outstanding as of March 31, 2016 and December 31, 2015.
Research and Development
The Company follows paragraph 730-10-25-1
of the FASB Accounting Standards Codification (formerly Statement of Financial Accounting Standards No. 2,
“Accounting
for Research and Development Costs”
) and paragraph 730-20-25-11 of the FASB Accounting Standards Codification (formerly
Statement of Financial Accounting Standards No. 68
“Research and Development Arrangements”
) for research and
development costs. Research and development costs are charged to expense as incurred. Research and development costs consist primarily
of remuneration for research and development staff, depreciation and maintenance expenses of research and development equipment,
material and testing costs for research and development as well as research and development arrangements with unrelated third
party research and development institutions.
Deferred Tax Assets and Income
Tax Provision
The Company accounts for income taxes
under Section 740-10-30 of the FASB Accounting Standards Codification, which requires recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax
assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will
not be realized.
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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in the statements of operations in the period that includes the enactment date.
LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Notes to the
Financial Statements
(Unaudited)
The Company adopted the provisions
of paragraph 740-10-25-13 of the FASB Accounting Standards Codification. Paragraph 740-10-25-13 addresses the determination of
whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under paragraph
740-10-25-13, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that
the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The
tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that
has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Paragraph 740-10-25-13 also provides
guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires
increased disclosures.
The estimated future tax effects of
temporary differences between the tax basis of assets and liabilities are reported in the accompanying balance sheets, as well
as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded
on its balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the
interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability.
In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s
opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies
from estimates, additional allowances or reversals of reserves may be necessary.
Tax years that remain subject
to examination by major tax jurisdictions
The Company discloses tax years that
remain subject to examination by major tax jurisdictions pursuant to the ASC Paragraph 740-10-50-15.
Earnings per Share
Earnings Per Share (“EPS”)
is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings
or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC
Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the
numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to
common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not
paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing
operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar
to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that
would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential
dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.
Pursuant to ASC Paragraphs 260-10-45-45-21
through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint
of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting
entity shall be reflected in diluted EPS by application of the treasury stock method unless the provisions of paragraphs 260-10-45-35
through 45-36 and 260-10-55-8 through 55-11 require that another method be applied. Equivalents of options and warrants include
non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions (see paragraph 260-10-55-23).
Anti-dilutive contracts, such as purchased put options and purchased call options, shall be excluded from diluted EPS. Under the
treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance,
if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase
common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The
incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall
be included in the denominator of the diluted EPS computation.
The computation of basic and diluted
loss per share for the six months ended June 30, 2016 and 2015 excludes the common stock equivalents of the following potentially
dilutive securities because their inclusion would be anti-dilutive (the number of potentially dilutive securities issuable upon
conversion of our convertible debt with a variable conversion rate is computed using the market price of our common stock during
as of the last trading day of the reporting period):
●
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Stock
Warrants (Exercise price - $0.2625/share) – 850,000 common stock equivalents
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●
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Stock
Warrants (Exercise price - $0.082/share) – 250,000 common stock equivalents
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●
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Convertible
Debt (Conversion price - $0.2625/share) –57,075 common stock equivalents
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●
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Convertible
Debt (Conversion price - $0.078/share) –3,986,676 common stock equivalents
|
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●
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Convertible
Debt (Conversion price - $0.078/share) –3,333,333 common stock equivalents
|
|
|
●
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Convertible
Debt (Conversion price - $0.078/share) –1,183,436 common stock equivalents
|
|
|
●
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Convertible
Debt (Conversion price - $0.075/share) –7,626,667 common stock equivalents
|
|
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●
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Stock
options (exercise price -$0.10/share) – 6,000,000 common stock equivalents.
|
There were no potentially dilutive
shares outstanding for the reporting period ended June 30, 2016 or December 31, 2015.
LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Notes to the
Financial Statements
(Unaudited)
Cash Flows Reporting
The Company adopted paragraph 230-10-45-24
of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether
they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect
or reconciliation method (“Indirect method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards
Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating
activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected
future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash
receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current
exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported
as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides
information about investing and financing activities not resulting in cash receipts or payments in the period pursuant to paragraph
830-230-45-1 of the FASB Accounting Standards Codification.
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 were 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.
Recently issued accounting pronouncements
In May 2014, the FASB issued the FASB
Accounting Standards Update No. 2014-09 “
Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”)
This guidance amends the existing FASB
Accounting Standards Codification, creating a new Topic 606,
Revenue from Contracts with Customer.
The core principle of
the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
To achieve that core principle, an
entity should apply the following steps:
1.
|
Identify
the contract(s) with the customer
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|
2.
|
Identify
the performance obligations in the contract
|
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3.
|
Determine
the transaction price
|
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4.
|
Allocate
the transaction price to the performance obligations in the contract
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5.
|
Recognize
revenue when (or as) the entity satisfies a performance obligations
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LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Notes to the
Financial Statements
(Unaudited)
The ASU also provides guidance on disclosures
that should be provided to enable financial statement users to understand the nature, amount, timing, and uncertainty of revenue
recognition and cash flows arising from contracts with customers. Qualitative and quantitative information is required about the
following:
1.
|
Contracts
with customers
- including revenue and impairments recognized, disaggregation of revenue, and information about contract
balances and performance obligations (including the transaction price allocated to the remaining performance obligations)
|
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2.
|
Significant
judgments and changes in judgments
- determining the timing of satisfaction of performance obligations (over time or at
a point in time), and determining the transaction price and amounts allocated to performance obligations.
|
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3.
|
Assets
recognized from the costs to obtain or fulfill a contract.
|
ASU 2014-09 is effective for periods
beginning after December 15, 2016, including interim reporting periods within that reporting period for all public entities. Early
application is not permitted.
In June 2014, the FASB issued the FASB
Accounting Standards Update No. 2014-12 “
Compensation-Stock Compensation (Topic 718)
:
Accounting for Share-Based
Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period”
(“ASU 2014-12”).
The amendments clarify the proper method
of accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the
requisite service period. The Update requires that a performance target that affects vesting and that could be achieved after
the requisite service period be treated as a performance condition. The performance target should not be reflected in estimating
the grant-date fair value of the award. Compensation cost should be recognized in the period in which it becomes probable that
the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the
requisite service has already been rendered.
The amendments in this Update are effective
for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted
and the Company has elected to implement the guidance in its quarter ended September 30, 2014.
In August 2014, the FASB issued the
FASB Accounting Standards Update No. 2014-15 “Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure
of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).
In connection with preparing financial
statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions
or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern
within one year after the date that the financial statements are issued (or within one year after the date that the financial
statements are available to be issued when applicable). Management’s evaluation should be based on relevant conditions and
events that are known and reasonably knowable at the date that the financial statements are issued (or at the date that the financial
statements are available to be issued when applicable). Substantial doubt about an entity’s ability to continue as a going
concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity
will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued
(or available to be issued). The term probable is used consistently with its use in Topic 450, Contingencies.
When management identifies conditions
or events that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider
whether its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The
mitigating effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will
be effectively implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial
doubt about the entity’s ability to continue as a going concern.
If conditions or events raise substantial
doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration
of management’s plans, the entity should disclose information that enables users of the financial statements to understand
all of the following (or refer to similar information disclosed elsewhere in the footnotes):
|
a.
|
Principal
conditions or events that raised substantial doubt about the entity’s ability to continue as a going concern (before
consideration of management’s plans)
|
|
|
|
|
b.
|
Management’s
evaluation of the significance of those conditions or events in relation to the entity’s ability to meet its obligations.
|
|
|
|
|
c.
|
Management’s
plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.
|
LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Notes to the
Financial Statements
(Unaudited)
If conditions or events raise substantial
doubt about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration
of management’s plans, an entity should include a statement in the footnotes indicating that there is substantial doubt
about the entity’s ability to continue as a going concern within one year after the date that the financial statements are
issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements
to understand all of the following:
The amendments in this Update are effective
for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application
is permitted.
In November 2014, the FASB issued the
FASB Accounting Standards Update No. 2014-16 “
Derivatives and Hedging (Topic 815)
:
Determining Whether the Host
Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity” (“ASU 2014-16”).
The amendments in ASU No. 2014-16 clarify that an entity must take into account all relevant terms and features when reviewing
the nature of the host contract. Additionally, the amendments state that no one term or feature would define the host contract’s
economic characteristics and risks. Instead, the economic characteristics and risks of the hybrid financial instrument as a whole
would determine the nature of the host contract. The amendments in this Update are effective for public business entities for
fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption, including adoption
in an interim period, is permitted.
In January 2015, the FASB issued the
FASB Accounting Standards Update No. 2015-01 “
Income Statement-Extraordinary and Unusual Items (Subtopic 225-20)
:
Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items” (“ASU 2015-01”).
This Update eliminates from GAAP the concept of extraordinary items and the requirements in Subtopic 225-20 for reporting
entities to separately classify, present, and disclose extraordinary events and transactions. The amendments in this Update are
effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is
permitted provided that the guidance is applied from the beginning of the fiscal year of adoption.
Management does not believe that any
other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying
financial statements.
Note 3 - Going Concern
The Company has elected to adopt early
application of Accounting Standards Update No. 2014-15,
“Presentation of Financial Statements-Going Concern (Subtopic
205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”)
.
The financial statements have been
prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, realization
of assets, and liquidation of liabilities in the normal course of business.
As reflected in the financial statements,
the Company had an accumulated deficit of $3,937,516 at June 30, 2016, a net loss of $2,608,729 and net cash used in operating
activities of $477,209 for the reporting period then ended. These factors raise substantial doubt about the Company’s ability
to continue as a going concern.
The Company is attempting to further
implement its business plan and generate sufficient revenue; however, its cash position may not be sufficient to support its daily
operations. While the Company believes in the viability of its strategy to further implement its business plan and generate sufficient
revenue and in its ability to raise additional funds by way of a public or private offering, there can be no assurances to that
effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business
plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.
The financial statements do not include
any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of
liabilities that might be necessary if the Company is unable to continue as a going concern.
LIFELOGGER
TECHNOLOGIES CORP.
June 30, 2016
and 2015
Notes to the
Financial Statements
(Unaudited)
Note 4 – Note Payable
On July 20,
2015 the Company entered into a securities purchase agreement (the “SPA”) with Glamis Capital SA (“Glamis”),
whereby Glamis agreed to invest $200,000 (the “Purchase Price”) in our Company in exchange for the Note (as defined
below). Pursuant to the SPA, we issued a promissory note to Glamis on July 20, 2015 (the “Issuance Date”) in the original
principal amount of $200,000.00, which bears interest at 10% per annum (the “Note”).
The Purchase
Price for the Note were funded as follows: (1) $70,000 on the Issuance Date and $65,000 on August 24, 2015. The principal from
each funding date, coupled with the accrued and unpaid interest relating to that principal amount, is due and payable one year
from the respective funding date (each a “Maturity Date”). Any amount of principal or interest that is due under the
Note, which is not paid by the respective Maturity Date, will bear interest at 14% per annum until it is paid. The Note can be
prepaid by the Company at any time while the Note is outstanding. In the event that the Company closes a future financing of at
least $1,000,000 while the Note is outstanding, the Company would become obligated to pay all amounts outstanding under the Note
within a reasonable time after such closing.
On November
12, 2015, the Company amended the SPA it entered into with Glamis to limit the amount Glamis is obligated to advance to the Company
under the Glamis Note to $135,000 and amend the Note to reflect a principal balance of $135,000 after giving effect to an August
24,2015 payment by Glamis to the Company of $65,000 under the Note. No further advances will be made by Glamis to the Company
under the Note.
On March 1,
2016 the Company finalized a settlement of debt owed to Glamis Capital SA through a conversion into common stock of the Company.
The total debt of $135,000 plus accrued and unpaid interest of $7,403 for a total of $142,403 was converted into 1,808,288 common
stock par value $.0001 based on an average of the previous 20 days close price of the common stock of the company discounted by
25% for a price of $.074875 per share. The loss on extinguishment of this debt was determined to be $354,876 based on the date
of the debt settlement agreement of February 24, 2016 and the closing stock price on that date to be $.0275.
Securities
Purchase Agreement and Convertible Notes Issued to Old Main Capital, LLC
On March 9,
2016 (the “Issuance Date”) we closed on the transaction contemplated by the securities purchase agreement (the “SPA”)
we entered into with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to purchase from the Company a convertible
promissory note (the “March 2016 Note”) in the original principal amount of $296,153 for $269,500, net of an original
issuance discount of $26,653 (the “Purchase Price”). The March 2016 Note bears interest at the rate of 10% per annum.
The Purchase Price will be paid as follows: (i) $84,500 was paid in cash to us on March 12, 2016 (ii) $100,000 was paid in cash
to us on April 6, 2016 (iii) $85,000 May 6, 2016. The principal from each funding date and the accrued and unpaid interest relating
to that principal amount is due and payable on March 9, 2017 (the “Maturity Date”). Any amount of principal or interest
that is due under the March 2016 Note which is not paid by the Maturity Date will bear interest at the rate of 24% per annum until
it is paid and subject to further increase as discussed below.
Beginning
6 months after the Issuance Date, we are required to make bi-weekly amortization payments (one payment every 2 weeks), consisting
of 1/12
th
of the outstanding principal and interest, until the March 2016 Note is no longer outstanding (each a “Bi-Weekly
Payment”). Such Bi-Weekly Payments may be made in cash, or in our common stock (“Common Stock”) if certain equity
conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock
greater than $30,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and we decide
to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the
amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal
the lower of (i) the closing price of the Common Stock on March 9, 2016, or (ii) 70% of the lowest VWAP of the Common Stock for
the 15 trading days immediately prior to the date of the Bi-Weekly Payment.
The March
2016 Note can be prepaid by us at any time while the March 2016 Note is outstanding, at a prepayment price of 125% multiplied
by the outstanding principal and interest of the March 2016 Note, subject to Old Main’s discretionary acceptance. If an
event of default occurs under the March 2016 Note, which is not cured within three business days, then upon Old Main’s provision
of notice to the Company of the occurrence of such event of default, the Company shall within three business days of such default
notice, pay the total amount outstanding under the March 2016 Note in cash (including principal, accrued and unpaid interest,
applicable penalties (including default multipliers). In the event that the Company does not pay the total amount outstanding
within three (3) business days of such default notice, then the total amount outstanding under the March 2016 Note (post-default
amount) at that time shall increase by 50%, and on the fourth business day after such default notice (the “Second Amortization
Payment Date”), the Company shall begin to make weekly amortization payments (for the avoidance of doubt, weekly shall mean
every week) (each a “Weekly Payment”), in (1) cash to Old Main or (2) Common Stock at a price per share equal to the
lesser of (i) the closing price of our common stock on March 9, 2016 or (ii) 52% of the lowest VWAP of the Common Stock for the
15 consecutive Trading Days ending on the Trading Day that is immediately prior to the applicable conversion date. Each Weekly
Payment shall consist of the greater of (i) $10,000.00 of value under the March 2016 Note or (ii) 1/24th of the total outstanding
amount under this March 2016 Note as of the Second Amortization Payment Date, including the principal, accrued and unpaid interest
(prorated through the entire pay-off period), and any applicable penalties.
LIFELOGGER
TECHNOLOGIES CORP.
June
30, 2016 and 2015
Notes
to the Financial Statements
(Unaudited)
On
June 9, 2016 we amended the March 2016 Note whereby we revised the note to remove the equity condition limitations, removed the
amortization payment requirements and to permit voluntary conversions in common stock. We also revised the conversion price to
mean the lesser of (a) the closing price of our common stock on March 9, 2016 or (b) 60% of the lowest VWAP price of our common
stock for the 15 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date.
The amendment was accounted for using the extinguishment of debt method. We recorded an $88,956 loss on extinguishment of debt.
On
June 9, 2016 (the “Issuance Date”) we closed on the transaction contemplated by the securities purchase agreement
(the “SPA”) we entered into with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to purchase
from the Company a convertible promissory note (the “Note”) in the original principal amount of $87,912 for $80,000,
net of an original issuance discount of $7,912 (the “Purchase Price”). The Note bears interest at the rate of 10%
per annum. The Purchase Price was paid on June 9, 2016 in cash. The principal from the funding date and the accrued and unpaid
interest relating to that principal amount is due and payable on June 9, 2017 (the “Maturity Date”). Any amount of
principal or interest that is due under the Note which is not paid by the Maturity Date will bear interest at the rate of 24%
per annum until it is paid and subject to further increase as discussed below. The conversion price is the lesser of (a) the closing
price of our common stock on June 9, 2016 or (b) 60% of the lowest VWAP price of our common stock for the 15 consecutive trading
days ending on the trading day that is immediately prior to any applicable conversion date.
Equity
Line of Credit
On
March 9, 2016, we issued an 8% convertible promissory note in the principal amount of $250,000 to Old Main as a commitment fee
for entering into a term sheet whereby Old Main agreed to provide us with up to $5,000,000 in financing over a 24 month period
through the purchase of our common stock. The proposed equity line will be subject to certain conditions, including, but not limited
to, our filing of a Registration Statement covering the resale of the securities issued to Old Main and our continued compliance
with the disclosure requirements under the Securities Exchange Act of 1934, as amended. Old Main’s commitment to provide
funding under the equity line of credit is subject to us entering into a definitive and binding agreement related to the proposed
equity line of credit and as of June 30, 2016 we have not entered into any such agreement.
The
terms and conditions of the $250,000 note are substantially identical to the March 2016 Note except the interest rate which is
8% per annum, half of which is guaranteed and the total amount of interest due on the Note for a period of six months is deemed
earned as of the date the note was issued. All interest payments will be payable in cash, or subject to certain equity conditions
in cash or common stock in the Company’s discretion. Accrued and unpaid interest shall be due on payable on each conversion
date and on the date the note matures, or as otherwise provided for in the note.
Beginning
six months after the date of the note, the Company is required to begin to make bi-weekly amortization payments (for the avoidance
of doubt, bi-weekly shall mean every two weeks), in cash to Old Main until the note is repaid in full. Each bi-weekly payment
shall consist of at least 1/12th of the total outstanding amount under the note as of the amortization payment date, including
the principal, accrued and unpaid interest (prorated through the entire pay-off period pursuant to this paragraph), and any applicable
penalties. The Company may make a bi-weekly payment to Old Main in the Company’s common stock, in the event that the equity
conditions provided for in the note are satisfied. The maturity date of the note in March 9, 2017.
We
amended this convertible note on June 9, 2016 to remove the equity condition limitations, removed the amortization payment requirements,
to permit voluntary conversions in common stock and revised the conversion price to mean the lesser of (a) the closing price of
our common stock on March 9, 2016 or (b) 60% of the lowest VWAP price of our common stock for the 15 consecutive trading days
ending on the trading day that is immediately prior to any applicable conversion date. This amendment was treated
as an extinguishment of debt and a resultant loss on extinguishment of debt of $94,030 was realized.
Securities
Purchase Agreement and Convertible Note Issued to SBI Investments LLC, 2014-1
On
June 30, 2016 (the “Issuance Date”) we closed on the transaction contemplated by the securities purchase agreement
(the “SPA”) we entered into with SBI Investments LLC, 2014-1 (“SBI”), whereby SBI agreed to
purchase from the Company a convertible promissory note (the “Note”) in the original principal amount of $550,000
for $500,000 net of an original issuance discount of $50,000 (the “Purchase Price”). The Note bears interest at the
rate of 8% per annum. The Purchase Price was paid on June 30, 2016 in cash. The principal from the funding date and the accrued
and unpaid interest relating to that principal amount is due and payable on June 30, 2017 (the “Maturity Date”). Any
amount of principal or interest that is due under the Note which is not paid by the Maturity Date will bear interest at the rate
of 24% per annum until it is paid and subject to further increase as discussed below. The conversion price is the lesser of (a)
the closing price of our common stock on June 30, 2016 ($0.08 per share) or (b) 60% of the lowest VWAP price of our common stock
for the 20 consecutive trading days ending on the trading day that is immediately prior to any applicable conversion date. The
principal from each funding date and the accrued and unpaid interest relating to that principal amount is due and payable on June
9, 2017 (the “Maturity Date”). Any amount of principal or interest that is due under the Note which is not paid by
the Maturity Date will bear interest at the rate of 24% per annum until it is paid and subject to further increase as discussed
below. This convertible debt has been accounted for as a derivative liability and is included in the Note 5 derivative
liability calculations below.
LIFELOGGER
TECHNOLOGIES CORP.
June
30, 2016 and 2015
Notes
to the Financial Statements
(Unaudited)
Beginning
6 months after the Issuance Date, we are required to make bi-weekly amortization payments (one payment every 2 weeks), consisting
of 1/12
th
of the outstanding principal and interest, until the Note is no longer outstanding (each a “Bi-Weekly
Payment”). Such Bi-Weekly Payments may be made in cash, or in our common stock (“Common Stock”) if certain equity
conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock
greater than $25,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and we decide
to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the
amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal
the lower of (i) the closing price of the Common Stock on June 30, 2016, $.08 per share, or (ii) 60% of the lowest VWAP of the
Common Stock for the 20 trading days immediately prior to the date of the Bi-Weekly Payment.
The
Note can be prepaid by us at any time while the Note is outstanding, at a prepayment price of 125% multiplied by the outstanding
principal and interest of the Note, subject to SBI’s discretionary acceptance. If an event of default occurs under the Note,
which is not cured within three business days, then upon SBI’s provision of notice to the Company of the occurrence of such
event of default, the Company shall within three business days of such default notice, pay the total amount outstanding under
the Note in cash (including principal, accrued and unpaid interest, applicable penalties (including default multipliers). In the
event that the Company does not pay the total amount outstanding within three (3) business days of such default notice, the company
will pay interest at 24%.
Note
5 – Derivative Liability
In
connection with the sale of debt or equity instruments, the Company may sell options or warrants to purchase our common stock.
In certain circumstances, these options or warrants may be classified as derivative liabilities, rather than as equity. Additionally,
the debt or equity instruments may contain embedded derivative instruments, such as embedded derivative features which in certain
circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative
instrument liability.
The
Company’s derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair
value of the derivative liability recorded as charges or credits to income in the period in which the changes occur. For options,
warrants and bifurcated embedded derivative features that are accounted for as derivative instrument liabilities, the Company
estimates fair value using either quoted market prices of financial instruments with similar characteristics or other valuation
techniques. The valuation techniques require assumptions related to the remaining term of the instruments and risk-free rates
of return, our current common stock price and expected dividend yield, and the expected volatility of our common stock price over
the life of the instrument.
The
following table summarizes the warrant derivative liabilities and convertible notes activity for the period ending June
30, 2016:
Description
|
|
Derivative Liabilities
|
|
Fair value at December 31, 2015
|
|
$
|
106,265
|
|
Change due to Issuances
|
|
|
371,562
|
|
Change due to debt extinguishment
|
|
|
91,070
|
|
Change due to Exercise/Conversion
|
|
|
(421,371
|
)
|
Change in Fair Value
|
|
|
261,618
|
|
Fair value at June 30, 2016
|
|
$
|
409,144
|
|
For
the period ended June 30, 2016, net derivative expense was $157,926.
The
lattice methodology was used to value the embedded derivatives within the convertible note and the warrants issued, with the following
assumptions.
Assumptions
|
|
June 30, 2016
|
|
Dividend yield
|
|
|
0.00
|
%
|
Risk-free rate for term
|
|
|
0.21-1.68
|
%
|
Volatility
|
|
|
138.4-161.1
|
%
|
Maturity dates
|
|
|
.19-4.19
years
|
|
Stock Price
|
|
|
0.075
|
|
LIFELOGGER
TECHNOLOGIES CORP.
June
30, 2016 and 2015
Notes
to the Financial Statements
(Unaudited)
During
the period ending March 31, 2016, the Company amended the derivative notes on March 9, 2016. The amendment included revising the
“Alternate Conversion Price to mean 60% of the lowest traded price of the common stock for the 15 consecutive trading days
prior to the conversion date. The derivative liability increased by $91,070 due to the amendment which was booked as an additional
debt discount.
During
the quarter ending September 30, 2015, the Company issued 850,000 warrants to an investor as part of their Securities Purchase
Agreement in which the investor acquired a Convertible Note. The warrants have an exercise price of $0.2625 and a five-year term.
The warrants are treated as derivative liabilities since the holder has anti-dilution protections that will re-price the warrant
upon the issuance of lower priced equity linked instruments by the Company for the period of 180 days after issuance. The fair
value of the derivative liability related to these warrants at issuance was valued at $169,270 and was booked as a debt discount
to the Convertible Note and booked as a derivative liability on the balance sheet. The embedded conversion feature of the Convertible
Note is treated as a derivative liability since the conversion price is reset upon a fundamental transaction event. The fair value
of the derivative liability related to the embedded conversion feature was valued at $92,659 and was booked as a debt discount
(up to the amount of the note, with the excess expensed as interest expense).
Note
6 – Convertible Debt
Old
Main Capital, LLC – September 2015:
On
September 14, 2015 (the “Issuance Date”), the Company closed on the transactions contemplated by the securities purchase
agreement (the “SPA”) with Old Main Capital, LLC (“Old Main”), whereby Old Main agreed to invest $450,000.00
(the “Purchase Price”) in our Company in exchange for the Note (as defined below) and Warrants (as defined below).
Pursuant to the SPA, we issued a promissory note to Old Main, in the original principal amount of $473,864.00, which bears interest
at 10% per annum (the “September 2015 Note”). The Purchase Price will be paid as follows: (1) $250,000.00 funded in
cash to us on the Issuance Date, (2) the remaining $200,000.00 within 30 days after the Issuance Date. The principal from each
funding date, coupled with the accrued and unpaid interest relating to that principal amount, is due and payable on September
8, 2016 (the “Maturity Date”). Any amount of principal or interest that is due under the September 2015 Note, which
is not paid by the Maturity Date, will bear interest at the rate of 24% per annum until it is paid.
Beginning
6 months after the Issuance Date, we are required to make bi-weekly amortization payments (one payment every 2 weeks), consisting
of 1/12
th
of the outstanding principal and interest, until the September 2015 Note is on longer outstanding (each a
“Bi-Weekly Payment”). Such Bi-Weekly Payments may be made in cash, or in our common stock (“Common Stock”)
if certain equity conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume
of the Common Stock greater than $25,000 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied,
and we decide to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated
as follows: the amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price
shall equal the lower of (i) the closing price of the Common Stock on September 8, 2015, or (ii) 70% of the average of the lowest
VWAP of the Common Stock for the 15 trading days immediately prior to the date of the Bi-Weekly Payment. Additionally, Old Main
has the right at any time to convert amounts owed under the September 2015 Note into Common Stock at the closing price of the
Common Stock on September 8, 2015. If an event of default under the September 2015 Note occurs, Old Main has the right to convert
amounts owed under the September 2015 Note into Common Stock at 52% multiplied by the lowest VWAP of the Common Stock for the
15 trading days immediately prior to the applicable conversion date.
The
September 2015 Note can be prepaid by us at any time while the September 2015 Note is outstanding, at a prepayment price of 125%
multiplied by the outstanding principal and interest of the September 2015 Note, subject to Old Main’s discretionary acceptance.
If an event of default occurs under the September 2015 Note, which is not cured within 10 business days, Old Main has the option
to require our redemption of the September 2015 Note in cash at a redemption price of 130% multiplied by the outstanding principal
and interest of the September 2015 Note. The September 2015 Note contains representations, warranties, events of default, beneficial
ownership limitations, and other provisions that are customary of similar instruments.
Effective
on March 9, 2016, the September 2015 Note was amended whereby the conversion price in effect on any Conversion Date shall be equal
to the lesser of the (i) closing price of the Common Stock on September 8, 2015 (“Fixed Conversion Price”), or (ii)
60% of the lowest traded price of the Common Stock for the 15 consecutive trading days ending on the trading day that is immediately
prior to the applicable Conversion Date. All such determinations will be appropriately adjusted for any stock dividend, stock
split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock
during such measuring period. This amendment triggered an extinguishment of the debt since the change in the fair value of the
embedded derivative exceeded 10% of the carrying value of the debt. The Company booked a $144,205 loss on extinguishment based
on the amendment.
LIFELOGGER
TECHNOLOGIES CORP.
June
30, 2016 and 2015
Notes
to the Financial Statements
(Unaudited)
The
Company has converted $473,158 of principal and $15,416 of interest for 8,172,352 shares ranging in price per share of $.043 to
.085 to June 30, 2016. There is a remaining balance of principal and interest of $14,982 which has subsequently been paid in July
2016.
In
conjunction with the issuance of the September 2015 Note, we simultaneously issued 850,000 common stock purchase warrants to Old
Main (the “Warrants”). The Warrants may be exercised by Old Main at any time in the 5-year period following the issuance.
The exercise price for each share of the Common Stock is equal to the closing price of the Common Stock on September 8, 2015,
$0.2625 per share.
On
June 9, 2016 and June 30, 2016, the Company entered (either a new issuance or amendment to the 3/9/16 issuance which requires
derivative treatment on 6/9/16) into convertible derivative notes with Old Main Capital, LLC and SBI Investments LLC – Sea
Otter Global Ventures LLC (referred to as the “the Holders”), in the initial amount of $250,000 (Old Main Capital
Commitment Fee Note), $296,153 (Old Main Capital Bridge Note), $87,912 (Old Main Capital Note), and $550,000 (SBI Investments
LLC – Sea Otter Global Vent On June 9, 2016 and June 30, 2016, the Company entered (either a new issuance or amendment to
the 3/9/16 issuance which requires derivative treatment on 6/9/16) into convertible derivative notes with Old Main Capital, LLC
and SBI Investments LLC – Sea Otter Global Ventures LLC (referred to as the “the Holders”), in the initial amount
of $250,000 (Old Main Capital Commitment Fee Note), $296,153 (Old Main Capital Bridge Note), $87,912 (Old Main Capital Note),
and $550,000 (SBI Investments LLC – Sea Otter Global Ventures LLC Note) (with Original Issue Discounts and deferred financing
costs). The notes bear an interest rate of 8% or 10% per annum and matures in 1 year or less under the convertible note agreements,
the lender has the right to convert all or any part of the outstanding and unpaid principal and interest into shares of the Company’s
common stock. In addition, we issued the SBI–Sea Otter Holder a warrant to acquire 250,000 shares of the Company’s
common stock. The terms of the Convertible Note is as follows:
|
1.
|
The
Holders have the right from and after a 180 day delay from the Date of Issuance, and until any time until the Note is fully
paid, to convert any outstanding and unpaid principal portion of the Note, and accrued interest, into fully paid and non–assessable
shares of Common (par value $.001 per share). Bi–weekly amortization payments are due after 6 months.
|
|
|
|
|
2.
|
The
Convertible Notes are convertible at a fixed rate of $0.078 or $0.075 with no reset provisions. The 6/9/16 notes convert at
the lower of the fixed rate or this variable rate.
|
|
|
|
|
3.
|
Beneficial
ownership is limited to 9.99%.
|
|
|
|
|
4.
|
The
Company may redeem the Notes for 125% or 150% of the redemption amount and accrued interest. The Company may upon certain
equity conditions redeemed certain notes at the lessor of fixed conversion price and 60% of 15 Trading day low VWAP.
|
|
|
|
|
5.
|
In
the event of default the Note bears interest at 24% per annum and converts at 60% of 15 trading day low VWAP (default or fundamental
transaction) – a derivative feature.
|
The
June 9
th
amendments triggered an extinguishment of the debt since the change in the fair value of the embedded derivative
exceeded 10% of the carrying value of the debt. The Company booked a $182,986 loss on extinguishment based on the amendments.
The
terms of the SBI Warrants are as follows:
1.
|
The
Warrants have a 3 year term.
|
|
|
2.
|
The
2 issuances of 125,000 Warrant each may be exercised at a conversion price of the lesser of: (i) $0.0820 or $0.0960, or (ii)
any lower price of equity linked instruments issued by the Company while the warrant is issued and outstanding (full ratchet
reset). This anti–dilution protections provides a full reset upon the issuance of lower price securities by the Company
and is available to SBI during the initial 180 days that the Warrant is outstanding.
|
|
|
3.
|
Beneficial
ownership is limited to 4.99% initially and upon Holder request to 9.99%.
|
On
June 9, 2016, the amended Old Capital notes (Bridge Note and Commitment Fee) provided the holder with a variable rate conversion
feature. This feature taints all warrants/notes and ongoing derivative treatment is required until the note is paid or converted
in full.
|
6.
|
The
Company may redeem the Notes for 125% or 150% of the redemption amount and accrued interest. The Company may upon certain
equity conditions redeemed certain notes at the lessor of fixed conversion price and 60% of 15 Trading day low VWAP.
|
|
|
|
|
7.
|
In
the event of default the Note bears interest at 24% per annum and converts at 60% of 15 trading day low VWAP (default or fundamental
transaction) – a derivative feature.
|
LIFELOGGER
TECHNOLOGIES CORP.
June
30, 2016 and 2015
Notes
to the Financial Statements
(Unaudited)
Following
is an analysis of convertible debt issued to Old Main Capital and SBI Investments at June 30, 2016:
|
|
June
30, 2016
|
|
Contractual balance
|
|
$
|
1,184,591
|
|
Less unamortized discount
|
|
|
(244,267
|
)
|
|
|
|
|
|
Convertible debt
|
|
$
|
940,324
|
|
The
above amount does not include accrued interest to June 30, 2016 of $65,660 which is included with Accounts payable and accrued
expenses.
This
note is a derivative because it contains an embedded conversion feature that resets the conversion price upon a fundamental transaction
event. The Company recorded a debt discount based on the original issue discount, the embedded derivative, and the derivative
warrant issued The debt discount is being amortized over the term of the convertible debt.
Note
7 - Fair Value of Financial Instruments.
The
Company’s financial instruments consist of cash and cash equivalents, accounts payable, accrued liabilities and convertible
debt. The estimated fair value of cash, accounts payable and accrued liabilities approximate their carrying amounts due to the
short-term nature of these instruments.
The
Company utilizes various types of financing to fund its business needs, including convertible debt with warrants attached. The
Company reviews its warrants and conversion features of securities issued as to whether they are freestanding or contain an embedded
derivative and, if so, whether they are classified as a liability at each reporting period until the amount is settled and reclassified
into equity with changes in fair value recognized in current earnings. At March 31, 2016, the Company had convertible debt and
warrants to purchase common stock. The fair value of the warrants and the embedded conversion feature of the convertible debt
is classified as a liability. Some of these units have embedded conversion features that are treated as a discount on the notes.
Such financial instruments are initially recorded at fair value and amortized to interest expense over the life of the debt using
the effective interest method.
Inputs
used in the valuation to derive fair value are classified based on a fair value hierarchy which distinguishes between assumptions
based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of
three levels:
Level
one — Quoted market prices in active markets for identical assets or liabilities;
Level
two — Inputs other than level one inputs that are either directly or indirectly observable; and
Level
three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect
those assumptions that a market participant would use.
LIFELOGGER
TECHNOLOGIES CORP.
June
30, 2016 and 2015
Notes
to the Financial Statements
(Unaudited)
Determining
which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy
disclosures each quarter. The Company’s derivative liability is measured at fair value on a recurring basis. The Company
classifies the fair value of these convertible notes and warrants derivative liability under level three. The Company’s
settlement payable is measured at fair value on a recurring basis based on the most recent settlement offer. The Company classifies
the fair value of the settlement payable under level three. The Company’s rescission liability is measured at fair value
on a recurring basis based on the most recent stock price. The Company classifies the fair value of the rescission liability under
level one.
Based
on ASC Topic 815 and related guidance, the Company concluded the common stock purchase warrants are required to be accounted for
as derivatives as of the issue date due to a reset feature on the exercise price. At the date of issuance warrant derivative liabilities
were measured at fair value using either quoted market prices of financial instruments with similar characteristics or other valuation
techniques. The Company records the fair value of these derivatives on its balance sheet at fair value with changes in the values
of these derivatives reflected in the consolidated statements of operations as “Gain (loss) on derivative liabilities.”
These derivative instruments are not designated as hedging instruments under ASC 815-10 and are disclosed on the balance sheet
under Derivative Liabilities.
The
following table presents liabilities that are measured and recognized at fair value as of June 30, 2016 on a recurring and non-recurring
basis:
Description
|
|
|
Level
1
|
|
|
Level 2
|
|
|
Level
3
|
|
|
Gains (Losses)
|
|
Derivatives
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
409,144
|
|
|
$
|
(275,502
|
)
|
Fair
Value at June 30, 2016
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
409,144
|
|
|
$
|
(275,502
|
)
|
Note
8 - Related Party Transactions
Related
Parties
Related
parties with whom the Company had transactions are:
Related
Parties
|
|
Relationship
|
|
|
|
Stewart
Garner
|
|
Chairman,
CEO, CFO and director
|
Consulting
services from Officer
Consulting
services provided by the officer for the period from the three months ended June 30, 2016 and 2015 were as follows:
|
|
For
the Six months
Ended
June 30, 2016
|
|
|
For the Six months
Ended
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
President, Chief Executive Officer and Chief Financial Officer
|
|
$
|
50,400
|
|
|
$
|
36,440
|
|
During
the six month period ended, June 30, 2016 the Company borrowed $39,424 from Stewart Garner, the President, Chief Executive Officer
and Chief Financial Officer of the Company, to fund operations. These loans are unsecured, due on demand and carry no interest.
Note
9 - Stockholders’ Equity (Deficit)
Shares
Authorized
Upon
formation the total number of shares of all classes of stock which the Company is authorized to issue is seventy-five million
(75,000,000) shares of common stock, par value $.001 per share.
On
January 31, 2014, effective upon the filing of an amendment to the Article of Incorporation of the Company with the Nevada Secretary
of State, the Company increased its authorized share capital to 125,000,000 shares consisting of 120,000,000 shares of common
stock, par value $0.001 per share and 5,000,000 shares of preferred stock, par value $0.001 per share and effectuated a 10 for
1 stock split.
All
shares and per share amounts in the financial statements have been adjusted to give retroactive effect to the ten-for-one (1:10)
Forward Stock Split.
LIFELOGGER
TECHNOLOGIES CORP.
June
30, 2016 and 2015
Notes
to the Financial Statements
(Unaudited)
Common
Stock
Common
Shares Issued Cash
No
common shares were issued for cash during the period.
On
March 1, 2016 $142,403 of debt and accrued interest was converted to 1,808,288 shares of common stock at a conversion price of
$.074875 per share.
On
March 14, 2016 $42,177 of debt was converted to 628,293 shares of common stock at a conversion price of $.06713 per share.
On
April 6, 2016 $25,000 of debt was converted to 295,509 shares of common stock at a conversion price of $.0846 per share.
On
April 14, 2016 $25,000 of debt was converted to 347,223 shares of common stock at a conversion price of $.072 per share.
On
April 18, 2016 $35,000 of debt was converted to 486,112 shares of common stock at a conversion price of $.072 per share.
On
April 25, 2016 $50,000 of debt was converted to 694,445 shares of common stock at a conversion price of $.072 per share.
On
April 27, 2016 $30,000 of debt was converted to 458,715 shares of common stock at a conversion price of $.0654 per share.
On
April 29, 2016 $35,000 of debt was converted to 583,334 shares of common stock at a conversion price of $.06 per share.
On
May 2, 2016 $36,397 of debt and interest were converted to 606,609 shares of common stock at a conversion price of $.06 per share.
On
May 4, 2016 $40,000 of debt was converted to 740,741 shares of common stock at a conversion price of $.054 per share.
On
May 11, 2016 $40,000 of debt was converted to 740,741 shares of common stock at a conversion price of $.054 per share.
On
May 16, 2016 $30,000 of debt was converted to 555,556 shares of common stock at a conversion price of $.054 per share.
Effective
May 17, 2016, the Company redeemed 40,000,000 shares of its common stock held by Consumer Electronics Ventures Corp. (“Consumer
Electronics”), its former majority shareholder. The Company did not pay any cash compensation to Consumer Electronics for
the redemption which was made in consideration of the intended increase in value of the remaining shares of common stock held
by Consumer Electronics.
On
May 20, 2016 $30,000 of debt was converted to 555,556 shares of common stock at a conversion price of $.054 per share.
On
May 26, 2016 $30,000 of debt was converted to 613,497 shares of common stock at a conversion price of $.0489 per share.
On
June 6, 2016 $25,000 of debt was converted to 514,404 shares of common stock at a conversion price of $.0486 per share.
On
June 14, 2016 $15,000 of debt was converted to 351,618 shares of common stock at a conversion price of $.04266 per share.
Note
10 - Acquisition of Assets
On
November 10, 2015, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Pixorial,
Inc. (the “Seller”), pursuant to which the Company agreed to purchase, and the Seller agreed to sell, Pixorial’s
assets (the “Pixorial Asset Acquisition”), which are comprised of source code, software, trade secrets, processes,
ideas, know-how, improvements, discoveries, developments, designs, techniques and contract rights related to the Pixorial app,
including but not limited to contract rights related to the Pixorial app for inclusion on the Apple store and the Google Play
store. Pixorial’s software offers online user-friendly tools and applications to access, download, edit, tag, process, store,
organize and share videos, photos and music from any device, services which we plan to integrate with our existing software.
LIFELOGGER
TECHNOLOGIES CORP.
June
30, 2016 and 2015
Notes
to the Financial Statements
(Unaudited)
Under
the terms of the Asset Purchase Agreement, the Company agreed to issue 3,200,000 shares of its unregistered common stock to the
existing shareholders and certain creditors of Pixorial, and, pending the closing, to enter into a consulting agreement with Andres
Espineira (the “Espineira Consulting Agreement”), Pixorial’s founder and Chief Executive Officer, the duration
of which will be 40 months from the date of the Asset Purchase Agreement. Under the terms of the Espineira Consulting Agreement,
Mr. Espineira will be responsible for leading the integration team that will be engaged in the development of the enhancements
to the Company’s existing life-logging software tools by incorporating the tools developed by Pixorial. The Espineira Consulting
Agreement provides for the Company’s payment to him of $8,000 per month and awards him stock options to acquire 6,000,000
shares of the Company’s common stock exercisable at the market price of the common stock as of October 31, 2015, one-third
the number of which may be sold beginning as of each of the first three anniversaries of November 1, 2015. The shares to be issued
to Pixorial’s shareholders will also be subject to a lock-up agreement whereby one-third the number received by each may
be sold beginning as of each of the first three anniversaries of the closing of the Pixorial Asset Acquisition.
Additionally,
under the terms of the Asset Purchase Agreement, the Company and Pixorial have entered into a licensing agreement effective as
of November 1, 2015 (the “Pixorial License Agreement”) whereby the Company has licensed the exclusive use of certain
of Pixorial’s software, source code, software, trade secrets, processes, ideas, know-how, improvements, discoveries, developments,
designs, techniques and contract rights related to the Licensor’s Pixorial app (the “Pixorial Software”). The
duration of the Pixorial License Agreement is the earlier of twelve months or the closing of the transactions under the Asset
Purchase Agreement.
Consummation
of the Pixorial Asset Acquisition is subject to certain conditions and is expected to be closed no later than April 30, 2016.
In order to extend the April 30, 2016 deadline for consummating the purchase of the assets of Pixorial as discussed in Note 10,
the Company and Pixorial entered into Amendment No. 2 to Asset Purchase Agreement (the “Second Amendment”) dated May
3, 2016 that extends the deadline for consummating the transactions contemplated under the Asset Purchase Agreement to June 15,
2016.
The
Asset Purchase Agreement was closed on June 30, 2016 whereby the Company issued 2,600,200 shares of common stock. The common stock
was valued at $195,015 based on the closing price of $.075/share of the Company’s common stock on the acquisition
date. The purchase price as allocated as follows: trademark - $5,000 and customer list - $190,015. Management determined that
these intangible assets were impaired and took a charge to earnings of $195,015 during the period ended June 30, 2016.
Note
11 - Subsequent Events
The
Company has evaluated all events that occurred after the balance sheet date through the date when the financial statements were
issued to determine if they must be reported. The Management of the Company determined that there were no reportable subsequent
event(s) to be disclosed.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
FORWARD-LOOKING
STATEMENTS
This
report contains forward-looking statements. The Securities and Exchange Commission encourages companies to disclose forward-looking
information so that investors can better understand a company’s future prospects and make informed investment decisions.
This report and other written and oral statements that we make from time to time contain such forward-looking statements that
set out anticipated results based on management’s plans and assumptions regarding future events or performance. We have
tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,”
“expect,” “project,” “intend,” “plan,” “believe,” “will”
and similar expressions in connection with any discussion of future operating or financial performance. In particular, these include
statements relating to future actions, future performance or results of current and anticipated sales efforts, expenses, the outcome
of contingencies, such as legal proceedings, and financial results. Factors that could cause our actual results of operations
and financial condition to differ materially are discussed in greater detail in the “Risk Factors” section of our
Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC on April 8, 2016.
We
caution that the factors described herein and other factors could cause our actual results of operations and financial condition
to differ materially from those expressed in any forward-looking statements we make and that investors should not place undue
reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such
statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after
the date on which such statement is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
New factors emerge from time to time, and it is not possible for us to predict all of such factors. Further, we cannot assess
the impact of each such factor on our results of operations or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any forward-looking statements.
The
following discussion should be read in conjunction with our consolidated financial statements and the related notes that appear
elsewhere in this quarterly report on Form 10-Q.
The
Company
We
are a lifelogging software company engaged in the development and commercialization of innovative lifelogging solutions enabling
the recording, secure online storage, organizing, retrieving, appreciation and selective sharing of personal information, data,
photos, videos and other activities with friends and the public at large. We developed a proprietary cloud-based software solution
accessible on iOS and Android devices that offers an enhanced media experience for consumers by augmenting videos, livestreams
and photos with additional context information and providing a platform that makes it easy to find and use that data when viewing
or sharing media. The first iteration of that context information is focused on geo-location, face-detection, and different options
for tagging and social interaction.
Our
Core Business
Lifelogging
is a way of journaling one’s life using media, often through the use of wearable electronic devices. We make lifelogging
accessible to the mass market by taking videos and images right from users’ smart phones, wearable camera and/or sensor
solutions, and adding geographic, visual and test data designed to enhance the relevance and context of the information collected.
We make it easier for users to retrieve and share their media with family and friends without having to be an expert in using
advanced functions in real time, using live stream or recording, at the user’s option. We allow consumers to easily capture
and live stream videos with geographic coordinates and automatic face detection and to tag special moments while recording. The
video playback features an interactive map and ability to skip to in-video frames with faces detected and added tags. Search features
allow users the ability to retrieve videos beyond the basic title and description, including location, face or in-line video tags.
Sharing videos on popular social channels like Facebook and Twitter using links makes it easy to manage large media files.
Our
vision is to seamlessly integrate with a wide range of wearable cameras and mobile devices. To realize this vision, our plan is
to integrate with selected leading camera manufacturers. We refer to this integrated eco-system as the LifeLogger Platform. In
addition, we plan to offer our LifeLogger Platform on a “white-label” license basis to device manufacturers and leading
companies in our selected industries. The LifeLogger video cloud storage solution and iOS and Android applications are architected
for scalability with high availability designed for use with widely available third party cloud based data providers.
We
completed a prototype of our integrated Lifelogger wearable video camera for testing and continue to market this product to potential
distributors and joint venture and strategic alliance partners. We are evaluating opportunities from these marketing efforts to
determine the extent of our future development and marketing of this device.
Software
Development Milestones
Following
the successful launch of our private beta version of the LifeLogger Platform in August 2015 to users who expressed interest for
exclusive testing with their iOS and Android devices, we launched an open public version during the first quarter of 2016. This
release has the primary value proposition built in with geo-coordinates, face detection, playback with interactive map, social
engagement features that enable easy sharing and ability to “like” other postings. We are actively collecting and
monitoring the usage and feedback to launch a future iOS and Android release that is being designed to increase engagement with
added features for social engagement and continuous improvements to the user interface and experience.
Revenue
Model
We
plan to implement a freemium revenue model with viral marketing of free plans leading to paid upgrades and subscriptions for advanced
software features and additional storage. Our plan is to add a paid model following testing of the open beta platform, which we
expect to launch in late 2016 or early 2017.
Recent
Developments
Share
Redemption
. Effective May 18, 2016, we redeemed 40,000,000 shares of our common stock held by Consumer Electronics Ventures
Corp. (“Consumer Electronics”), our former majority shareholder pursuant to the terms of a Stock Redemption Agreement
we entered into with Consumer Electronics. We did not pay any cash compensation to Consumer Electronics for the redemption which
was made in consideration of the intended increase in value of the remaining shares of our common stock held by Consumer Electronics.
The shares were valued at par value of $0.001 and reduced the common share value and increased the additional paid in capital.
Acquisition
of Pixorial Assets
. On June 30, 2016, we
completed the acquisition of certain
assets of
Pixorial, Inc. (“Pixorial”) pursuant to the terms of the Amended and Restated Asset Purchase
Agreement entered into among us, Pixorial and Andres Espiniera dated June 20, 2016 (the “Amended Agreement”) as previously
disclosed in our Current Report on Form 8-K filed with the SEC on June 21, 2016. Pursuant to the terms of the Amended Agreement,
we acquired the trademark “What’s Your Story” and Pixorial’s customer list (the “Pixorial Asset
Acquisition”).
Under
the terms of the Amended Agreement, we agreed to issue 2,600,200 shares of our unregistered common stock to the existing shareholders
and certain creditors of Pixorial. In addition, we amended the exercise price of Mr. Espineira’s November 10, 2015 stock
option award to acquire 6,000,000 shares of our common stock to $.10 per share. The shares of our common stock to be issued to
Pixorial’s shareholders and creditors are subject to a lock-up agreement whereby one-third the number received by each may
be sold beginning as of each of the first three anniversaries of the closing of the Pixorial Asset Acquisition.
In
addition, Siena Pier Ventures 2007 Fund, LLP and Siena Pier Ventures, LLC (the “Secured Creditors”), holders of certain
indebtedness of Pixorial in the aggregate principal sum of $2,025,000 (the “Siena Debt”) agreed to cancel a portion
of the Siena Debt in exchange for 2,437,800 of the total 2,600,200 shares of our common stock to be tendered as consideration
for the Pixorial Asset Acquisition and the Secured Creditors’ shares are subject to a lock-up agreement whereby only one-third
of the shares may be sold beginning on each of the first three anniversaries of the closing of the Pixorial Asset Acquisition
which occurred on June 30, 2016.
RESULTS
OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016 AND JUNE 30, 2015
The
following comparative analysis on results of operations was based primarily on the comparative financial statements, footnotes
and related information for the periods identified below and should be read in conjunction with the financial statements and the
notes to those statements that are included elsewhere in this report. The results discussed below are for the three and six months
ended June 30, 2016 and 2015. For comparative purposes, we are comparing the three and six months ended June 30, 2016, to the
three and six months ended June 30, 2015. The following discussion should be read in conjunction with the Company’s consolidated
financial statements and the related notes included in this quarterly report.
Revenue.
Total revenue was $0 for the six month periods ended June 30, 2016 and June 30, 2015, respectively. We plan to implement
a freemium revenue model with viral marketing of free plans leading to paid upgrades and subscriptions for advanced software features
and additional storage. Our plan is to add a paid model following testing of the open beta platform, which we expect to complete
in the third or fourth quarter of 2016.
Cost
of Revenue
. We had no cost of revenues for the period ended June 30, 2016 or 2015 as we had no revenues. We are not able
to predict what our expected gross profits will be in remaining periods in fiscal 2016 as we are unable to estimate software licensing
revenue from our LifeLogger Platform.
Operating
Expenses
. Total operating expenses were $626,511 and $322,496 for the three months ended June 30, 2016 and June 30, 2015,
respectively. Total operating expenses were $1,082,523 and $612,759 for the six months ended June 30, 2016 and June 30, 2015,
respectively. These increases are primarily attributable to increases in stock based compensation expense, impairment of intangible
assets related to certain assets acquired from Pixorial during the three month period and general and administrative expenses
with an offsetting decrease in consulting and research and development. We expect increases in our operating expenses as we ramp
up our software development and sales efforts.
Other
Expenses
. Other expenses were $609,935 and $0 for the three months ended June 30, 2016 and June 30, 2015, respectively.
Other expenses were $1,343,373 and $0 for the six months ended June 30, 2016 and June 30, 2015, respectively. The increase is
primarily attributable to an increase in loss on extinguishment of debt, change in fair value of derivatives, commitment fee expense
and interest expense associated with our increased borrowing and change in the fair value of derivative warrants and notes. We
expect increases in our interest expense due to our increased borrowings and are unable to predict changes in the fair value of
our derivative securities which is largely based on the trading price of our common stock.
Net
Loss
. The net loss was $1,419,279 and $322,496 for the three months ended June 30, 2016 and June 30, 2015, respectively.
The net loss was $2,608,729 and $612,759 for the six months ended June 30, 2016 and June 30, 2015, respectively. This increase
is a result of the increase in operating expenses and other expenses discussed above.
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 June 30, 2016,
our working capital amounted to $(1,064,225), a decrease of $657,463 as compared to working capital of $(406,762), as of December
31, 2015. This decrease is primarily a result of increases in Convertible Notes Payable, derivative liabilities for notes and
warrants, accounts payable and amounts due a related party, partially offset by an increase in cash and decrease in note payable.
Working capital consisted primarily of cash of $496,990, Accounts payable and accrued expenses of $176,693, Convertible Notes
Payable of $940,324, and Derivative Liabilities of $349,753.
Net
cash used in operating activities was $477,209 during the six month period ended June 30, 2016 compared to $355,476 in the six
month period ended June 30, 2015. The increase in cash used in operating activities is primarily attributable to an increase in
net loss and partially offset by options issued as compensation, extinguishment of debt, impairment of intangible assets and change
in derivative liability reporting.
Net
cash used in investing activities was $0 during the six month period ended June 30, 2016 compared to $332 in the six month period
ended June 30, 2015.
Net
cash provided by financing activities was $842,500 during the six month period ended June 30, 2016 compared to $150,000 in the
six month period ended June 30, 2015. The increase in cash provided by financing activities consisted of proceeds from a note
payable.
We
do not have sufficient resources to effectuate all aspects of our business plan. We expect to incur a minimum of $570,000 in expenses
during the next twelve months of operations if we continue to pursue our current plans. We estimate that this will be comprised
of approximately $137,000 towards development of the Lifelogger Platform, $257,000 towards administrative and executive subcontractors,
and marketing expenses will be determined based on our open beta feedback. Additionally, approximately $176,000 will be needed
for general overhead expenses such as for corporate legal and accounting fees, office overhead and general working
capital. We will have to raise additional funds to pay for all of our planned expenses. We potentially will have to issue additional
debt or equity, or enter into a strategic arrangement with a third party to carry out some aspects of our business plan. There
can be no assurance that additional capital will be available to us. Other than the agreements discussed below, we currently have
no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other
sources. Since we have no other such arrangements or plans currently in effect, our inability to raise funds for the above purposes
will have a severe negative impact on our ability to remain a viable company.
Recent
Financing Transactions
Securities
Purchase Agreement and Convertible Note Issued to Old Main Capital, LLC
Promissory
Note and Warrants to SBI Investments LLC, 2014-1
On
June 30, 2016 (the “Issuance Date”), we closed on the transactions contemplated by the securities purchase agreement
(the “SPA”) with SBI Investments LLC, 2014-1 (“SBI”), whereby SBI agreed to invest $500,000.00 (the “Purchase
Price”) in our Company in exchange for the Note (as defined below), Series A Warrant (as defined below), and Series B Warrant
(as defined below). Pursuant to the SPA, we issued a promissory note to SBI, in the original principal amount of $550,000.00,
which bears interest at 8% per annum (the “Note”). The Purchase Price was paid to us in full on the Issuance Date.
The maturity date of the Note is June 30, 2017 (the “Maturity Date”). Any amount of principal or interest that is
due under the Note, which is not paid by the Maturity Date, will bear interest at the rate of 24% per annum until it is paid.
Beginning
6 months after the Issuance Date, we are required to make bi-weekly amortization payments (one payment every 2 weeks), consisting
of 1/12
th
of the outstanding principal and interest, until the Note is on longer outstanding (each a “Bi-Weekly
Payment”). Each Bi-Weekly Payment may be made in cash, or in our common stock (“Common Stock”) if certain equity
conditions are satisfied. Such equity conditions include but are not limited to an average daily dollar volume of the Common Stock
greater than $25,000.00 for the 20 trading days prior to a Bi-Weekly Payment. If the equity conditions are satisfied, and we decide
to make a Bi-Weekly payment in Common Stock, then the shares of Common Stock to be delivered shall be calculated as follows: the
amount of the Bi-Weekly Payment divided by the Base Conversion Price (as defined below). The Base Conversion Price shall equal
the lower of (i) the closing price of the Common Stock on June 30, 2016, or (ii) 60% of the average of the lowest VWAP of the
Common Stock for the 20 trading days immediately prior to the date of the Bi-Weekly Payment. Additionally, SBI has the right at
any time, beginning six months after the Issuance Date, to convert amounts owed under the Note into Common Stock at the closing
price of the Common Stock on June 30, 2016. The conversion price under the Note is subject to proportional adjustment in the event
of stock splits, stock dividends and similar corporate events as provided therein. If an event of default under the Note occurs,
SBI has the right to convert amounts owed under the Note into Common Stock at 60% multiplied by the lowest VWAP of the Common
Stock for the 20 trading days immediately prior to the applicable conversion date.
The
Note is not convertible to the extent that (a) the number of shares of our common stock beneficially owned by the holder and (b)
the number of shares of our common stock issuable upon the conversion of the Note or otherwise would result in the beneficial
ownership by holder of more than 4.99% of our then outstanding common stock. This ownership limitation can be increased or decreased
to any percentage not exceeding 9.99% by the holder upon 61 days’ notice to us by the holder.
The
Note can be prepaid by us at any time while the Note is outstanding, at a prepayment price of 125% multiplied by the outstanding
principal and interest of the Note, subject to SBI’s discretionary acceptance. If an event of default occurs under the Note,
which is not cured within 10 business days after SBI’s notice to us of such event of default, SBI has the option to require
our redemption of the Note in cash at a redemption price of 130% multiplied by the outstanding principal and interest of the Note.
The Note contains representations, warranties, events of default, beneficial ownership limitations, and other provisions that
are customary of similar instruments.
In
conjunction with the issuance of the Note, we simultaneously issued to SBI a Series A warrant to purchase 125,000 shares of Common
Stock (the “Series A Warrant”) and Series B warrant to purchase 125,000 shares of Common Stock (the “Series
B Warrant”). The Warrants may be exercised by SBI at any time in the 3 year period following the Issuance Date. The exercise
price for each share of the Common Stock under the Series A Warrant is equal to $0.082. The exercise price for each share of the
Common Stock under the Series B Warrant is equal to $0.096. The exercise prices under the Series A Warrant and the Series B Warrant
are subject to proportional adjustment in the event of stock splits, stock dividends and similar corporate events as provided
therein. In addition, if at any time the Company grants, issues or sells any common stock equivalents or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “
Purchase
Rights
”), then the holder of the warrants will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which the holder could have acquired if the holder had held the number of shares of common stock
acquirable upon complete exercise of the warrant (without regard to any limitations on exercise hereof, including without limitation,
the beneficial ownership limitation) immediately before the date on which a record is taken for the grant, issuance or sale of
such purchase rights, or, if no such record is taken, the date as of which the record holders of shares of common stock are to
be determined for the grant, issue or sale of such purchase rights (provided, however, to the extent that the holder’s right
to participate in any such purchase right would result in the holder exceeding the beneficial ownership limitation, then the holder
shall not be entitled to participate in such purchase right to such extent (or beneficial ownership of such shares of common stock
as a result of such purchase right to such extent) and such purchase right to such extent shall be held in abeyance for the holder
until such time, if ever, as its right thereto would not result in the holder exceeding the beneficial ownership limitation).
The
Note is not convertible to the extent that (a) the number of shares of our common stock beneficially owned by the holder and (b)
the number of shares of our common stock issuable upon the conversion of the Note or otherwise would result in the beneficial
ownership by holder of more than 4.99% of our then outstanding common stock. This ownership limitation can be increased or decreased
to any percentage not exceeding 9.99% by the holder upon 61 days’ notice to us by the holder.
Equity
Line of Credit
On
March 9, 2016, we issued an 8% convertible promissory note in the principal amount of $250,000 to Old Main as a commitment fee
for entering into a term sheet whereby Old Main agreed to provide us with up to $5,000,000 in financing over a 24 month period
through the purchase of our common stock. The proposed equity line will be subject to certain conditions, including, but not limited
to, our filing of a Registration Statement covering the resale of the securities issued to Old Main and our continued compliance
with the disclosure requirements under the Securities Exchange Act of 1934, as amended. Old Main’s commitment to provide
funding under the equity line of credit is subject to us entering into a definitive and binding agreement related to the proposed
equity line of credit and as of the date of this report we have not entered into any such agreement. We amended this convertible
note on June 9, 2016 to remove the equity condition limitations, removed the amortization payment requirements, to permit voluntary
conversions in common stock and revised the conversion price to mean the lesser of (a) the closing price of our common stock on
March 9, 2016 or (b) 60% of the lowest VWAP price of our common stock for the 15 consecutive trading days ending on the trading
day that is immediately prior to any applicable conversion date.
Going
Concern Consideration
We
have incurred significant losses since our inception on June 4, 2012. We had a net loss during the six month period ended June
30, 2016 of $2,608,729 and an accumulated deficit of $3,937,516 as of June 30, 2016. This raises substantial doubt about our ability
to continue as a going concern. Our ability to continue as a going concern is dependent our ability to raise additional capital
and generate additional revenues and profits from our business plan.
In
the opinion of our independent registered public accounting firm for our fiscal year ended December 31, 2015, our auditor included
a statement that there is a substantial doubt as our ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Inflation
In
the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management
will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.
Off-Balance
Sheet Arrangements
Under
SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current
or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to investors. As of June 30, 2016, we have no off-balance
sheet arrangements that meet such criterion.
CRITICAL
ACCOUNTING POLICIES
Our
significant accounting policies are disclosed in Note 2 of our Financial Statements included elsewhere in this Quarterly Report
on Form 10-Q.