Life
Clips, Inc. and Subsidary (F/K/A Blue Sky Media Corporation)
Statement
of Cash Flows
For
the Three Months Ended
(Unaudited)
|
|
September
30, 2016
|
|
September
30, 2015
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
Income (loss)
|
|
$
|
4,057,068
|
|
|
|
(90,641
|
)
|
Accounts Receivable
|
|
|
(33,370
|
)
|
|
|
-
|
|
Inventory
|
|
|
(3,881
|
)
|
|
|
-
|
|
Deposit
|
|
|
240,000
|
|
|
|
-
|
|
Other Current Assets
|
|
|
(5,000
|
)
|
|
|
(8,888
|
)
|
Changes in derivative
liabilities
|
|
|
(13,768,115
|
)
|
|
|
-
|
|
Amortization of
Debt discount
|
|
|
416,519
|
|
|
|
-
|
|
Adjustments to reconcile
Net Income to Net Cash provided by operations:
|
|
|
|
|
|
|
|
|
Accounts Payable
|
|
|
35,403
|
|
|
|
-
|
|
Accrued expense
and interest payable
|
|
|
39,518
|
|
|
|
-
|
|
Payroll tax liabilities
|
|
|
10,092
|
|
|
|
-
|
|
Net cash (used in)
operating activities
|
|
|
(9,011,766
|
)
|
|
|
(99,529
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
Investment - Batterfly
Energy Ltd
|
|
|
(32,500
|
)
|
|
|
-
|
|
Developed software
|
|
|
-
|
|
|
|
(10,000
|
)
|
Net cash (used in) provided by investing
activities
|
|
|
(32,500
|
)
|
|
|
(10,000
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Loans payable -
Others
|
|
|
|
|
|
|
31,750
|
|
Notes Payable
|
|
|
530
,000
|
|
|
|
75,000
|
|
Issuance of Common
Stock for Acquisition if Batterfly Energy Ltd
|
|
|
5,091,000
|
|
|
|
-
|
|
Issuance of Common
Stock for Convertible Note Payable
|
|
|
1,409,284
|
|
|
|
-
|
|
Issuance of Common
Stock for Services
|
|
|
1,634,758
|
|
|
|
-
|
|
Proceed from convertible
notes payables
|
|
|
81,402
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
8,746,444
|
|
|
|
106,750
|
|
|
|
|
|
|
|
|
|
|
Net cash increased
in cash
|
|
|
(297,822
|
)
|
|
|
(2,779
|
)
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
469,233
|
|
|
|
2,643
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
171,411
|
|
|
$
|
(136
|
)
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosures of cash flow
information:
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON-CASH TRANSACTIONS AFFECTING OPERATING,
INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of common shares issued as payment of debt
|
|
$
|
65,000
|
|
|
$
|
-
|
|
Value of common shares issued for acquisition
of Batterfly Energy LTD
|
|
$
|
5,091,000
|
|
|
$
|
-
|
|
Value of common shares issued as
payment for services
|
|
$
|
1,634,758
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these condensed, consolidated financial statements.
Life
Clips, Inc.
(f/k/a
Blue Sky Media Corp)
Footnotes
to Financial Statements September 30, 2016
NOTE
1. ORGANIZATION AND OPERATIONS
Business
and basis of presentation
– Life Clips, Inc. (the “Company”) was incorporated under the laws of Wyoming
on March 20, 2013 as Blue Sky Media Corporation. On November 3, 2015, the Company changed its name to Life Clips, Inc. to more
accurately reflect its business after a merger set forth below.
The
Company was in the business of developing, production and distributing motion pictures. The Company entered into a merger and
exchange agreement on October 2
nd
, 2015. Klear Kapture was in the business of developing state-of-the-art body/action
cameras.
On
October 2, 2015, the Company completed a stock merger and exchange agreement with Klear Kapture, Inc. (“Klear Kapture”).
Pursuant to the terms of the Share Exchange Agreement, the Company agreed to issue 380,037,120 shares of its unregistered common
stock to the shareholders of Klear Kapture in exchange for 10,000 shares of its common stock, representing 100% of its issued
and outstanding common stock. As part of the Share Exchange, the Company purchased 107,261,000 shares of our common stock from
its former executive officers and directors for a price of $345,000. Upon the effective date of the transaction, Klear Kapture
became a wholly owned subsidiary of Life Clips.
Since
the merger, the company has focused on developing software and cameras for the action sports market as well as seeking acquisitions
that are complementary to the video market. Our goal is to provide affordable yet high quality technology devices to meet the
growing consumer demand for videos and pictures. This field includes creating software to support our hardware offerings in mobile
Apps, cloud services, and future offerings in vertical markets for both our hardware and organically designed software.
Life
Clips is in the business to create digital life memories. We do this by designing, manufacturing and selling world class digital
devices that allow consumers to capture videos or pictures. Life Clips was a research and development company during the 2015
financial year. In July, 2016 we began shipping our first action cameras under the Life Clips brand. Almost concurrently with
that first delivery of cameras, the Company began negotiations with HP to design, manufacture and distribute HP branded cameras.
Our vision as a company remained the same, namely to create high quality digital cameras that should gain significant market share.
The
Company acquired Batterfly Energy in July 2016. Batterfly manufactures the Mobeego® brand emergency cell phone battery. The
Mobeego provides an extra 20-40% shot of power to a cell phone without having to be tethered or charged. The batteries have a
10-year shelf life. The Company realized the packaging that was inherited did not convey the message properly and is in the process
of re-packaging the product.
On
September 22, 2016 entered into a partnership license agreement with HP. The agreement allows Life Clips to design, manufacture
and sell HP branded action cameras, 360 cameras, dash cameras and still cameras. The agreement also calls for accessory sales
and the building of an online cloud repository to store, edit and share user created videos and pictures.
The
Agreement called for the Company to no longer sell the Life Clips branded cameras or accessories to eliminate channel conflict
or confusion. Therefore, the Company will focus its efforts on creating best in class HP branded products and accessories.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of estimates
– The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Cash
and cash equivalents
– For financial statement presentation purposes, the Company considers all short term investments
with a maturity date of three months or less to be cash equivalents.
Income
Tax
– The Company accounts for income taxes under ASC 740 “Income Taxes” which codified SFAS 109, “Accounting
for Income Taxes.” under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC
740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment
occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will
not realize tax assets through future operations.
Basic
and Diluted Net Income (Loss) Per Share
– The Company computes net income (loss) per share in accordance with ASC 260
“Earnings Per Share” which codified SFAS No. 128. “Earnings per Share.” ASC 260 requires presentation
of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net
income (loss) available to common shareholders (numerator) by the weighted average number of shares of common stock outstanding
during the period. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments
such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Diluted
EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Intangible
Asset
– The Company is developing software. The development cost through June 30, 2016 has totaled $70,450. The software
has an infinite useful life and will be tested annually for impairment.
Fair
Value of Financial Instruments
The
Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance
on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability,
as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes
a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation
techniques, are assigned a hierarchical level.
The
following are the hierarchical levels of inputs to measure fair value:
|
●
|
Level
1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.
|
|
|
|
|
●
|
Level
2 – Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for
similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities;
or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
|
●
|
Level
3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine
fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets,
accounts payable & accrued expenses, certain notes payable and notes payable – related party, approximate their fair
values because of the short maturity of these instruments.
The
Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3. See Note 8.
Embedded
Conversion Features
The
Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to
determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative
at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment
under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration
of any beneficial conversion feature.
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the
fair value reported as charges or credits to income.
For
option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative
instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Debt
Issue Costs and Debt Discount
The
Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These
costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life
of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Stock
based compensation
– ASC 718 “Compensation Stock Compensation” codified SFAS No. 123 prescribes accounting
and reporting standards for all stock based compensation plans payments award to employees, including employee stock options,
restricted stock, employee stock purchase plans and stock appreciation rights, which may be classified as either equity or liabilities.
The Company should determine if a present obligation to settle the share based payment transaction in cash or other assets exists.
A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks
commercial substance or (b) the present obligation is implied because of an entity’s past practices or stated policies.
If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be
recognized as equity.
The
Company accounts for stock based compensation issued to nonemployees and consultants in accordance with the provisions of ASC
50550 “Equity Based Payments to NonEmployees” which codified SFAS 123 and the Emerging Issues Task Force consensus
in Issue No. 9618, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction
with Selling, Goods or Services”. Measurement of share based payment transactions with nonemployees shall be based on the
fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued.
The fair value of the share based payment transaction should be determined at the earlier of performance commitment date or performance
completion date.
Common
Stock
– On December 15, 2015, the Company filed Articles of Amendment to authorize 320,000,000 shares of common stock,
to change the par value to $0.001 and to execute a 11:1 forward stock split. All common stock and per share data for the period
presented in this Quarterly Report on Form 10-K have been adjusted to give effect to the forward stock split.
Preferred
Stock
– On December 15, 2015, the Company filed Articles of Amendment to authorize 20,000,000 shares of preferred stock,
par value $0.001.
Recognition
of Revenues
– The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition
in Financial Statements”. This statement established that revenue can be recognized when persuasive evidence of an arrangement
exists, the services have been delivered, all significant contractual obligations have been satisfied, the fee is fixed or determinable
and collection is reasonably assured.
Subsequent
Events
– The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the
disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are
issued.
Pursuant
to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued
when they are widely distributed to users, such as through filing them on EDGAR.
Recent
Pronouncements
–
The
Company reviewed all recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA,
and the SEC and they did not or are not believed by management to have a material impact on the Company’s present or future
financial statements.
NOTE
3. UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements,
the Company has minimal revenues, net accumulated losses since inception and a shareholders’ deficit of $(7,904,341). These
factors raise doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern
is dependent on management funding operating costs and the successful production and sales release of the Life Clips camera. The
financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE
4. RELATED PARTY TRANSACTIONS
At
September 30, 2016 and June 30, 2016, there were no related party transactions.
NOTE
5. INTANGIBLE ASSETS
The
Company is developing software. The development cost for the period ended September 30, 2016 is $0. The software has an infinite
useful life and will be tested annually for impairment.
|
|
September
30, 2016
|
|
June
30, 2016
|
|
|
|
|
|
Software
|
|
$
|
0
|
|
|
$
|
646,980
|
|
Less: Impairment Charges
|
|
|
|
|
|
|
(646,980
|
)
|
Less: Accumulated
Amortization
|
|
|
-
|
|
|
|
-
|
|
Software - net
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
NOTE
6. NOTES PAYABLE
On
July 14, 2016 the Company issued a $30,000 promissory note to NUWA Group, LLC. The promissory note is a standard, non-convertible
note. The effective interest rate is 5.00% per annum, calculated yearly not in advance. The note is to be repaid in full on October
14, 2016. Note proceeds are to be used for operating expenses.
Pursuant
to the Stock Purchase Agreement by and among Batterfly Energy, LTD and the Company, on July 11, 2016 the Company issued a $500,000
Promissory Note and Stock Pledge Agreement to the former shareholders of Batterfly Energy, LTD. The promissory note is a standard,
non-convertible note. The effective interest rate is 1.00% with a default interest rate of 10.00%. The note is to be repaid in
two (2) payments, $250,000 on October 11, 2016 and the balance due on February 13, 2017.
At
September 30, 2016 and June 30, 2016 the Company had notes payable in the amount of $530,000 and $0, respectively.
NOTE
7. CONVERTIBLE DEBT AND WARRANTS
The
Company has recorded derivative liabilities associated with convertible debt instruments and warrants, as more fully discussed
at Note 8.
(A)
Convertible Debt
On
October 2, 2015, the Company completed an offering of its 3.85% Convertible Promissory Notes (the “3.85% Notes”) in
the aggregate principal amount of $617,578 and on December 7, 2015 the Company completed an offering of its 10% Convertible Promissory
Notes (the “10% Notes”) in the aggregate principal amount of $250,000 (the “10% Notes”, and together with
the 3.85% Notes, each a “Note” and collectively, the “Notes”), as applicable, with certain “accredited
investors” (the “Investors”), as defined under Regulation D, Rule 501 of the Securities Act. The entire principal
amount of the Notes remaining outstanding at September 30, 2016 was $802,578, such amount being exclusive of securities converted
into the Notes separate from the offering of the Notes. Pursuant to the offering of the Notes, the Company received $617,578 and
$250,000 in net proceeds on October 2, 2015 and December 7, 2015, respectively.
In
addition to the terms customarily included in such instruments, the Notes began accruing interest on the date that each Investor
submitted the principal balance of such Investor’s Note, with the interest thereon becoming due and payable on the two-year
anniversary of said date. Upon a default of the Notes, the interest rate will increase to 18%. The principal balance of each Note
and all unpaid interest will become due and payable twenty-four (24) months after the date of issuance. The Notes may be prepaid
with or without a penalty depending on the date of the prepayment. The principal and interest under the 3.85% Notes are converted
at $ $0.026. The principal and interest under the 10% Notes are convertible into shares of the Company’s common stock at
75% times the Volume Weighted Average Price for a 5 days period prior to the conversion date as quoted on the OTC market and pursuant
to the terms of a Security Purchase Agreement, dated as of October 2, 2015 and December 7, 2015, as applicable, by and between
the Company and each Investor.
In
connection with the Notes Offering, the Company entered into Registration Rights Agreements, each dated as of October 2, 2015
and December 7, 2015 and each by and between us and each of the Investors.
The
company entered into convertible notes with ten third party accredited investors from December 2015 to September 2016. In addition
to the terms customarily included in such instruments, the Notes began accruing interest on the date that each Investor submitted
the principal balance of such Investor’s Note, with the interest thereon becoming due and payable on terms specified in
said date (see below). Interest rates range from 5% to 10% and are due at various dates from August 2016 to March 2018. These
notes are convertible at any time by the investor, prior to the note principal and interest being repaid at rates ranging from
$0.10 to $0.35 per share, subject to change due to a ratchet feature contained in most of the notes.
Issue
Date
|
|
Maturity
Date
|
|
Interest
rate
|
|
Interest
rate (default)
|
|
Principal
|
10/2/2015
|
|
10/2/2017
|
|
|
3.85
|
%
|
|
|
18
|
%
|
|
|
617,578.00
|
|
12/7/2015
|
|
11/30/2017
|
|
|
10.00
|
%
|
|
|
10
|
%
|
|
|
250,000.00
|
|
2/4/2016
|
|
8/4/2016
|
|
|
5.00
|
%
|
|
|
na
|
|
|
|
15,000.00
|
|
4/26/2016
|
|
3/30/2018
|
|
|
10.00
|
%
|
|
|
18
|
%
|
|
|
25,000.00
|
|
4/26/2016
|
|
3/30/2018
|
|
|
10.00
|
%
|
|
|
18
|
%
|
|
|
50,000.00
|
|
4/27/2016
|
|
3/30/2018
|
|
|
10.00
|
%
|
|
|
18
|
%
|
|
|
300,000.00
|
|
5/13/2016
|
|
5/13/2017
|
|
|
10.00
|
%
|
|
|
22
|
%
|
|
|
700,000.00
|
|
6/14/2016
|
|
5/30/2017
|
|
|
10.00
|
%
|
|
|
18
|
%
|
|
|
75,000.00
|
|
7/21/2016
|
|
3/30/2017
|
|
|
10.00
|
%
|
|
|
10
|
%
|
|
|
75,000.00
|
|
8/23/2016
|
|
2/23/2017
|
|
|
10.00
|
%
|
|
|
18
|
%
|
|
|
15,000.00
|
|
9/22/2016
|
|
4/22/2017
|
|
|
10.00
|
%
|
|
|
22
|
%
|
|
|
225,000.00
|
|
Total
Convertible Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
2,347,578.00
|
|
(B)
Terms of Debt
The
debt carries interest between 3.85% and 10%, and is due in October 2017 through March 2018.
All
convertible debt in connection with the Notes Offering are convertible at $0.026 and $0.183/share (on September 30, 2016), however,
the Notes include a “ratchet feature”, which allows for a lower offering price based on market prices.
(C)
Future Commitments
At
September 30, 2016, the Company has outstanding convertible debt of $2,347,578 which is payable within the next eighteen months.
(D)
Warrants
The
Company issued six warrants dated from February to July 2016. Four of the warrants are related to consulting agreements and two
are related to convertible note holders. All warrants issued through September 30, 2016 were accounted for as derivative liabilities,
as the warrants were not held on reserve at and therefore tainted. See Note 8. Two warrants issued were exercised during the period
ended September, 2016. The details are:
Purpose of
|
|
Issue
|
|
Number Shares
|
|
Warrant
|
|
Period Warrants
|
Warrant
Issuance
|
|
Date
|
|
Common
Stock
|
|
Exercise
Price
|
|
Exercisable
|
Consulting
Services
|
|
|
2/22/2016
|
|
|
|
2,600,000
|
|
|
$
|
0.001
|
|
|
2/22/2016 to 2/22/2019
|
Exercised
|
|
|
9/9/2016
|
|
|
|
(2,600,000
|
)
|
|
|
|
|
|
|
Website design and Digital
|
|
|
3/10/2016
|
|
|
|
1,916,500
|
|
|
$
|
0.001
|
|
|
3/10/2016 to 3/10/2019
|
Locker app development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
9/20/2016
|
|
|
|
(1,916,500
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Incentive
|
|
|
4/27/2016
|
|
|
|
625,000
|
|
|
$
|
0.400
|
|
|
4/27/2016 to (not defined)
|
Investor Incentive
|
|
|
5/13/2016
|
|
|
|
350,000
|
|
|
$
|
0.400
|
|
|
5/13/2016 to 5/13/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consulting Services
|
|
|
7/29/2016
|
|
|
|
525,000
|
|
|
$
|
0.001
|
|
|
7/29/2016 to 7/29/2021
|
Consulting Services
|
|
|
7/29/2016
|
|
|
|
225,000
|
|
|
$
|
0.001
|
|
|
7/29/2016 to 7/29/2021
|
Total
|
|
|
|
|
|
|
1,725,000
|
|
|
|
|
|
|
|
NOTE
8. DERIVATIVE LIABILITIES
The
Company identified conversion features embedded within convertible debt and warrants issued in the period ended September 30,
2016. The Company has determined that the features associated with the embedded conversion option, in the form a ratchet provision,
should be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares
would be available to settle all potential future conversion and warrant transactions.
As
a result of the application of ASC No. 815, the fair value of the ratchet feature related to convertible debt and warrants is
summarized as follow:
|
|
September
30, 2016
|
|
June
30, 2016
|
Fair value at the commitment
date - convertible debt
|
|
$
|
6,336,002
|
|
|
$
|
6,142,583
|
|
Fair value at the commitment date -
warrants
|
|
|
1,900,399
|
|
|
|
1,541,236
|
|
Fair value mark to market adjustment
- convertible debt
|
|
|
(272,564
|
)
|
|
|
10,641,842
|
|
Fair value mark
to market adjustment - warrants
|
|
|
(1,588,763
|
)
|
|
|
1,817,529
|
|
Totals
|
|
$
|
6,375,074
|
|
|
$
|
20.143.189
|
|
The
fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following
management assumptions as September 30, 2016:
|
|
Commitment
Date
|
|
Re-measurement
Date
|
Expected dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected volatility
|
|
|
220
|
%
|
|
|
261
|
%
|
Expected term
|
|
|
0.5
to 5 years
|
|
|
|
0.10-4.83
years
|
|
Risk free interest rate
|
|
|
0.39%-1.14%
|
|
|
|
0.36%-
0.71%
|
|
NOTE
9. CONVERTIBLE DEBT - NET
The
Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining fair value
of the derivative liability, as it exceeded the gross proceeds of the note.
The
Company recorded debt discount of $168,598 as of September 30, 2016 and $2,076,912 for the year ended June 30, 2016.
Accumulated
amortization of debt discount amounted to $903,919 as of September 30, 2016 and $487,399 for the year ended June 30, 2016. The
Company recorded amortization expense of the debt issuance cost of $416,519 as of September 30, 2016 and $487,399 for the year
ended June 30, 2016.
|
|
September
30, 2016
|
|
June
30, 2016
|
Balance Prior Year
|
|
|
443,065
|
|
|
|
85,000
|
|
Proceeds
|
|
|
315,000
|
|
|
|
2,032,578
|
|
Repayments
|
|
|
(65,000
|
)
|
|
|
(85,000
|
)
|
Less: gross Debt Discount recorded
|
|
|
(168,598
|
)
|
|
|
(2,076,912
|
)
|
Add: Amortization of Debt Discount
|
|
|
416,519
|
|
|
|
487,399
|
|
Less Current
portion
|
|
|
(480,587
|
)
|
|
|
(108,953
|
)
|
Long-Term Convertible
Debt
|
|
$
|
460,399
|
|
|
|
334,112
|
|
NOTE
11. EQUITY
For
the three month period ended September 30, 2016 17,503,758 shares of common stock were issued bringing out total shares issued
and outstanding to 70,836,334.
On
October 2, 2015 (the “Effective Date”) the Company entered into and closed on a merger and exchange agreement (the
“Share Exchange Agreement”) with Klear Kapture in an effort to expand its current line of business. Klear Kapture
has developed a body camera and an auditable software solution suitable for use by law enforcement that it intends to produce,
market and sell. Following the closing of the Share Exchange Agreement, we intend to continue Klear Kapture’s historical
business and proposed business and have entered into a services agreement with our former executive officers and directors to
operate our film marketing, distribution and production video and APP development businesses pursuant to the terms of a Services
Agreement dated October 2, 2015 (the “Services Agreement”). However, we no longer intend to operate the pre-transaction
business of the Company.
Pursuant
to a consulting agreement with a non-related third party, we issued 3,190,000 shares on October 2, 2015 for a price of approximately
$0.00318 per share (an aggregate of $10,150), which was recorded as consulting services.
On
December 15, 2015, the Company filed Articles of Amendment to authorize 320,000,000 shares of common stock, par value $0.001 per
share, to authorize 20,000,000 share of preferred stock, par value $0.001 per share, and to execute a 11:1 forward stock split.
All common stock and per share date for the period presented in this Annual Report on Form 10-K has been adjusted to give effect
to the forward stock split.
Pursuant
to the terms of the Share Exchange Agreement, as of the Effective Date, we agreed to issue 38,037,120 shares of our unregistered
common stock to the shareholders of Klear Kapture in exchange for 10,000 shares of its common stock, representing 100% of its
issued and outstanding common stock in the Share Exchange. As part of the Share Exchange, we purchased 107,261,000 shares of our
common stock from our former executive officers and directors for a price of approximately $ 0.00318 per share (an aggregate of
$345,000). Upon the Effective Date, Klear Kapture became a wholly owned subsidiary of our company and our pro-forma shares of
common stock outstanding giving effect to the repurchase of shares from our former executive officers and directors is 53,343,620.
Robert Gruder who was appointed as our Chief Executive Officer and a Director in connection with the Share Exchange received 30,296,563
shares of our common stock in exchange for 7,965 shares of Klear Kapture’s common stock he previously owned. Mr. Gruder’s
ownership of our common stock at the exchange date represented approximately 56.8% of our issued and outstanding shares of common
stock. At September 30, 2016 Mr. Gruder’s ownership of our common stock represents approximately 40.4% of our issued and
outstanding shares.
On
April 20, 2016, the company adopted the Life Clips, Inc. 2016 Stock and Incentive Plan under which the Company may issue nonqualified
stock options, incentive stock options, stock appreciation rights, restricted stock grants and units, performance units and awards
of cash. A maximum of 20,000,000 shares of common stock may be issued under the plan, representing in excess of 35% of the number
of the Company’s currently outstanding shares. Awards under the plan will be made at the discretion of the Board of Directors,
although no awards have been made to date. Accordingly, the Company cannot currently determine the amount of awards that will
be made under the plan.
The
Company has issued six warrants dated from February to July 2016. Four of the warrants are related to consulting agreements and
two are related to convertible note holders. See Note 7 (D) for details:
NOTE
12. SUBSEQUENT EVENTS
The
Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent
events. The company will evaluate subsequent events through the date of the issuance of the financial statements.
On
October 24, 2016 3,534,706 shares were issued in a conversion of a convertible note payable.
On
October 24, 2016 1,807,229 shares were issued in a conversion of a convertible note payable.
On
November 8, 2016 268,102 shares were issued in a conversion of a convertible note payable.
On
November 11, 2016 157,895 shares were issued in a conversion of a convertible note payable.
On
November 15, 2016 2,900,000 shares were issued in a conversion of a convertible note payable.