Annual Report (10-k)

Date : 02/12/2020 @ 9:27PM
Source : Edgar (US Regulatory)
Stock : Life Clips Inc (PK) (LCLP)
Quote : 0.0001  0.0 (0.00%) @ 8:37PM

Annual Report (10-k)

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended June 30, 2018

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File No. 000-55697

 

LIFE CLIPS, INC.

(Exact Name of Issuer as specified in its charter)

 

Wyoming   46-2378100
(State or other jurisdiction   (IRS Employer
of incorporation)   File Number)

 

18851 NE 29th Ave.

Suite 700 PMB# 348

   
Aventura, FL   33180
(Address of principal executive offices)   (zip code)

 

(800) 292-8991

(Registrant’s telephone number, including area code)

 

Securities to be Registered Pursuant to Section 12(b) of the Act: None

 

Securities to be Registered Pursuant to Section 12(g) of the Act:

 

Common Stock, $0.001 per share par value

 

Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [  ] No [X].

 

Indicate by check mark if registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes [  ] No [X].

 

Indicate by check mark whether the registrant (1) has filed all Reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes: [X] No: [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files. Yes [X] No [  ]

 

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K is contained in this form and no disclosure will be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer [  ]   Accelerated filer [  ]
     
Non-accelerated filer [  ] (Do not check if a smaller reporting company)   Smaller reporting company [X]
     
Emerging growth company [  ]    

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes [  ] No [X].

 

The market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was approximately $1,375,375.

 

As of February 10, 2020, registrant had outstanding 1,259,831,337 shares of common stock.

 

 

 

 
 

 

FORM 10-K

 

LIFE CLIPS, INC.

 

INDEX

 

PART I  
   
Item 1. Description of Business 4
   
Item 1A. Risk Factors 6
   
Item 1B. Unresolved Staff Comments 6
   
Item 2. Properties 6
   
Item 3. Legal Proceedings 7
   
Item 4. Mine Safety Disclosures 7
   
PART II  
   
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 7
   
Item 6. Selected Financial Data 8
   
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 8
   
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 14
   
Item 8. Financial Statements and Supplementary Data 14
   
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 15
   
Item 9A. Controls and Procedures 15
   
PART III  
   
Item 10. Directors, Executive Officers and Corporate Governance 16
   
Item 11. Executive Compensation 19
   
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 20
   
Item 13. Certain Relationships and Related Transactions, and Director Independence 21
   
Item 14. Principal Accountant Fees and Services 21
   
PART IV  
   
Item 15. Exhibits Financial Statement Schedules 21
   
Signatures 22

 

-2-
 

 

Forward-Looking Statements

 

The following discussion contains forward-looking statements regarding us, our business, prospects and results of operations that are subject to certain risks and uncertainties posed by many factors and events that could cause our actual business, prospects and results of operations to differ materially from those that may be anticipated by such forward-looking statements. Factors that may affect such forward-looking statements include, without limitation: our ability to successfully develop new products and services for new markets; the impact of competition on our revenues, changes in law or regulatory requirements that adversely affect or preclude clients from using us for certain applications; delays our introduction of new products or services; and our failure to keep pace with our competitors.

 

When used in this discussion, words such as “believes”, “anticipates”, “expects”, “intends” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We undertake no obligation to revise any forward-looking statements in order to reflect events or circumstances that may subsequently arise. Readers are urged to carefully review and consider the various disclosures made by us in this report and other reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business.

 

-3-
 

 

PART I

 

ITEM 1. DESCRIPTION OF BUSINESS.

 

General Information about Our Company

 

Life Clips, Inc. (“Life Clips”, “we,” “us,” “our,” and the “Company”) was incorporated in Wyoming on March 20, 2013 as Blue Sky Media Corporation and its principal business was developing, financing, producing and distributing motion pictures and related entertainment products. Following the Company’s October 2, 2015 acquisition of Klear Kapture, Inc. (“Klear Kapture”), the Company continued Klear Kapture’s business of developing a body camera and an auditable software solution suitable for use by law enforcement. The Company changed its name to Life Clips, Inc. on November 3, 2015 in order to better reflect its business operations at the time.

 

Recent Developments

 

On July 11, 2016, the Company completed its acquisition (the “Acquisition”) of all of the outstanding equity securities of Batterfly Energy Ltd. (“Batterfly”), an Israel-based corporation that develops and distributes a single-use, cordless battery under the brand name Mobeego for use with cellular phones and other mobile devices. Batterfly is now a wholly owned subsidiary of the Company. The Acquisition was completed pursuant to a Stock Purchase Agreement, dated as of June 10, 2016 (the “Purchase Agreement”), among the Company, Batterfly and all of the shareholders of Batterfly, as amended.

 

Following the acquisition of Batterfly, we began to focus on developing three synergistic businesses:

 

Expanding the Mobeego line of mobile accessories.
Global Sourcing Services that includes product design, factory identification, negotiations, compliance qualification, and end-to-end logistics management to source products anywhere in the world.
Sales and marketing services that provide an efficient path for companies to launch and market product into multi-channel retail and capture the maximum return on investment.

 

The Company is currently pursuing alternative business opportunities. There has been limited activity due to a delay in securing funding. The Company is working to re-energize the business within the next 12 months.

 

Products

 

Our core product is Mobeego batteries.

 

Batteries

 

Mobeego consists of a one-time use, non-rechargeable, battery and a special, reusable phone adapter (plug), which is a small device that includes the charging control circuity as well as a specific male connector that matches user device’s female connector. The Company is evaluating the resumption of selling Mobeego in two manners:

 

  (1) Sets including a specific adapter and one or two emergency batteries
     
  (2) Refill Batteries
     
  (3) 6 pack of Batteries
     
  (4) set including an adapter and one emergency battery for Action cameras such as Life Clips’ action camera.

 

The Battery (Energy Unit):

 

The Energy Unit consists of a custom designed plastic casing, shaped as a small can of energy drink, hosting a powerful lithium battery. The energy “can” has a rail used to connect it to the adapter through a rail connection. This unit is designed to be seen as the “energy drink for the mobile devices”. It is for a single use and is non-rechargeable.

 

Adapter

 

The adapter is a small plastic device that connects to the Battery through 2 connectors and to the mobile device through the specific connector on user’s cellphone, which could be Lightning or Deck for iPhones, micro-USB for Android devices, Blackberries and others. The adapter features an On/Off switch and a LED to indicate when it’s charging. Within the adapter, there is a smart, electronic charging circuit on a circuit board.

 

-4-
 

 

Sales

 

We are evaluating a sales distribution model and the viability of sales of our products through retailers directly and through distributors. We are evaluating relationships with retailers and distributors, and our partners’ sales forces to map out a sales strategy for our products and a way to work with them to merchandise our products in a compelling manner in-store, as well as assessing a viable way to provide consumers with informative and convenient ecommerce experiences at retail partner websites.

 

Direct sales

 

In addition to the evaluation of our international sales model, we are evaluating the feasibility of selling directly to large and small retailers in the United States, directly to some retail outlets. Elements of the plans we are evaluating include:

 

Independent specialty retailers. Potential use of a network of location-based independent manufacturer representatives to sell our products to independent specialty retailers focused on action sports markets. Our representatives would provide highly personalized service to these retailers, including assisting with product mix planning, channel marketing and in-store merchandising, taking orders and providing clinics to educate retail sales personnel about Mobeego products.
   
Big box retailers. Potential sales to large retailers with a national presence, including Amazon.com, Inc., Best Buy, Target Corporation and Wal-Mart, Inc.
   
Mid-market retailers. Potential sales to retailers with a large regional or national presence, often focused on specific verticals such as consumer electronics, sporting goods, military, hunting and fishing and motor sports, which we refer to as our “mid-market” channel.
   
Ecommerce channel. Sales of our Mobeego products directly to consumers around the world through an online store. We will evaluate ways to drive consumers to our website through online and offline advertising, as well as marketing promotions carried out at tradeshows and sponsored events.

 

Competition, competitive position in the industry and methods of competition

 

The battery industry is highly competitive. The Company faces intense competition from very large, international corporations, as well as from local and national companies. In addition, the Company faces competition from well-known companies that have large market share.

 

The intensity of competition in the future is expected to increase and no assurance can be provided that the Company can sustain its market position or expand its business.

 

Many of the Company’s current and potential competitors are well established and have longer operating histories, significantly greater financial and operational resources, and name recognition which the Company does not have.

 

The global sourcing industry is highly competitive. We face competition from very large international competitors. The competition in the future is going to increase.

 

Status of any publicly announced new product or service

 

None.

 

Employees

 

As of June 30, 2018, we had 2 contracted employees.

 

Patents and Trademarks

 

The Company currently has a United States trademark, Serial Number 86888487, for Life Clips. The Company, pursuant to the Batterfly acquisition, now also holds a United States trademark, Serial Number 79172000 for Mobeego, a patent in China, number 201730018307.4, as well as two patents in Israel, numbers 002743724-0001 and 002743724-0002. Any encroachment upon the Company’s proprietary information, including the unauthorized use of its brand name, the use of a similar name by a competing company or a lawsuit initiated either by our Company or against our Company for infringement upon proprietary information or improper use of a trademark, may affect our ability to create brand name recognition, cause customer confusion and/or have a detrimental effect on its business due to the cost of defending any potential litigation related to infringement. Litigation or proceedings before the U.S. or International Patent and Trademark Offices may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets and/or to determine the validity and scope of the proprietary rights of others. Any such litigation or adverse proceeding could result in substantial costs and diversion of resources that could seriously harm our business operations and/or results of operations.

 

-5-
 

 

Government Approval

 

The battery and global sourcing industries may be regulated at the federal levels, both in terms of health and safety concerns, as well as product quality. Operation of the Company’s business requires various licenses, permits and approvals. The Company currently holds all applicable licenses and permits to operate its business, and will continue to hold all applicable permits and licenses to continue operating its business and running its marketplace. In addition, the Company will also ensure compliance with any additional licensing requirements that are required on an ongoing basis.

 

Government and Industry Regulation

 

The Company will be subject to local and international laws and regulations that relate directly or indirectly to its operations, such as the Securities Act of 1933, the Securities and Exchange Act of 1934, and Wyoming Corporation Law. It will also be subject to common business and tax rules and regulations pertaining to the operation of its business, such as the United States Internal Revenue Tax Code and the Wyoming State Tax Code, as well as international tax codes and shipping tariffs. The Company will also be subject to proprietary regulations such as United States Trademark and Patent Law as it applies to the intellectual property of third parties. The Company believes that the effects of existing or probable governmental regulations will be additional responsibilities of the management of the Company to ensure that the Company is in compliance with securities regulations as they apply to the Company’s products as well as ensuring that the Company does not infringe on any proprietary rights of others with respect to its products. The Company will also need to maintain accurate financial records in order to remain compliant with securities regulations as well as any corporate tax liability it incurs.

 

Research and Development

 

During the year ended June 30, 2018, the Company spent $0 on the development of its products.

 

Environmental Compliance

 

We believe that we are not subject to any material costs for compliance with any environmental laws.

 

How to Obtain our SEC Filings

 

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendments to these reports, are available on our website at www.lifeclips.com, as soon as reasonably practicable after we file these reports electronically with, or furnish them to, the Securities and Exchange Commission (“SEC”). Except as otherwise stated in these reports, the information contained on our website or available by hyperlink from our website is not incorporated into this Annual Report on Form 10-K or other documents we file with, or furnish to, the SEC.

 

Our investor relations department can be contacted via email at ir@lifeclips.com or at our principal executive office located at 18851 NE 29th Ave., Suite 700 PMB# 348, Aventura, FL 33180. Our telephone number is (800)-292-8991.

 

ITEM 1A. RISK FACTORS

 

Not required for a Smaller Reporting Company.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2. PROPERTIES.

 

The Company’s operations are currently being conducted out of the Company’s office located at 18851 NE 29th Ave., Suite 700 PMB# 348, Aventura, FL 33180. The Company’s office space is being rented for a price of $135 per month. The Company considers the current principal office space to be adequate and will reassess its needs based upon the future growth of the Company.

 

-6-
 

 

ITEM 3. LEGAL PROCEEDINGS.

 

On January 11, 2017, the Company received a default notice related to a $500,000 promissory note (the “Batterfly Acquisition Note”) issued to the sellers of Batterfly Energy, Ltd. (“Batterfly”) as partial consideration for the Company’s July 11, 2017 acquisition of Batterfly. The Batterfly Acquisition Note required the Company to make a payment of $250,000 on October 6, 2017 and $250,000 on February 13, 2017. The default letter states that the Company failed to pay the $250,000 payment due on October 6, 2017, which began to accrue interest of 11% from October 6, 2017. In addition, the default notice states that the Company owes $20,000 in aggregate to two of the Batterfly shareholders related to consulting fees associated with the Batterfly acquisition. Finally, the default notice states that a payment of $250,000, as well as an additional payment of $20,000 must be paid by January 23, 2017. The Company filed a claim against the sellers of Batterfly with the London Court of International Arbitration (LCIA Arbitration No: 173692) and on September 7, 2017 the parties entered into a Stipulation for Stay of Arbitration in the matter as they seek to negotiate a settlement of their claim. The claim was settled during 2019 for which the Company agreed to issue 62,991,567 shares of common stock to the sellers of Batterfly. As of the date of this filing, the shares are still pending issuance.

 

Other than as set forth above, we are not a party to any material legal proceedings, nor is our property the subject of any material legal proceeding.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

Market Information

 

Our common stock is quoted on the OTC PINK Tier of the OTC Markets Group, under the symbol “LCLP”.

 

The following table sets forth the range of high and low bid prices of our common stock as reported and summarized on the OTC PINK, as applicable, for the periods indicated. These prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.

 

Calendar Quarter   High     Low  
Year Ended December 31, 2017            
2017 First Quarter   $ 0.009     $ 0.0079  
2017 Second Quarter   $ 0.0024     $ 0.0022  
2017 Third Quarter   $ 0.0006     $ 0.0005  
2017 Fourth Quarter   $ 0.0003     $ 0.0001  
Year Ended December 31, 2018                
2018 First Quarter   $ 0.0003     $ 0.0002  
2018 Second Quarter   $ 0.0005     $ 0.0003  
2018 Third Quarter   $ 0.0005     $ 0.0003  
2018 Fourth Quarter   $ 0.0006     $ 0.0004  

 

Holders

 

As of February 10, 2020, there were 66 record holders of our common stock, and there were 1,259,831,337 shares of our common stock outstanding.

 

Dividend Policy

 

We have not previously declared or paid any dividends on our common stock and do not anticipate declaring any dividends in the foreseeable future. The payment of dividends on our common stock is within the discretion of our board of directors. We intend to retain any earnings for use in our operations and the expansion of our business. Payment of dividends in the future will depend on our future earnings, future capital needs and our operating and financial condition, among other factors that our board of directors may deem relevant. We are not under any contractual restriction as to our present or future ability to pay dividends.

 

-7-
 

 

Recent Sales of Unregistered Securities

 

On September 19, 2017, the Company entered into an 18% Convertible Promissory Note with Long Side Ventures LLC, an unaffiliated third party. The note was in a principal amount of $30,000, and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the twenty-trading day period prior to the date of conversion. The note maturity date is August 30, 2018.

 

On November 16, 2017, the Company entered into an 18% Convertible Promissory Note with Long Side Ventures LLC, an unaffiliated third party. The note was in a principal amount of $15,000, and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the twenty-trading day period prior to the date of conversion. The note maturity date is November 16, 2018.

 

On January 19, 2018, the Company entered into an 18% Convertible Promissory Note with Crest Ventures LLC, an unaffiliated third party. The note was in a principal amount of $10,000, and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the five-trading day period prior to the date of conversion. The note maturity date is January 19, 2019.

 

On March 22, 2018, the Company entered into an 18% Convertible Promissory Note with Long Side Ventures LLC, an unaffiliated third party. The note was in a principal amount of $15,000, and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the twenty-trading day period prior to the date of conversion. The note maturity date is March 22, 2019.

 

On March 23, 2018, the Company entered into an 18% Convertible Promissory Note with Crest Ventures LLC, an unaffiliated third party. The note was in a principal amount of $10,000, and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the five-trading day period prior to the date of conversion. The note maturity date is March 23, 2019.

 

On April 18, 2018, the Company entered into an 18% Convertible Promissory Note with Long Side Ventures LLC, an unaffiliated third party. The note was in a principal amount of $20,000, and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the twenty-trading day period prior to the date of conversion. The note maturity date is April 18, 2019.

 

On May 1, 2018, the Company entered into an 18% Convertible Promissory Note with Crest Ventures LLC, an unaffiliated third party. The note was in a principal amount of $10,000, and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the five-trading day period prior to the date of conversion. The note maturity date is May 1, 2019.

 

These securities were issued in reliance on the exemption from registration provided by Sections 4(a)(2) and/or 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”).

 

ITEM 6. SELECTED FINANCIAL DATA

 

A smaller reporting company is not required to provide the information in this Item.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled “Selected Financial Data” and our financial statements and related notes included elsewhere in this Information Statement. Some of the information contained in this discussion and analysis or set forth elsewhere in this Information Statement, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially from those described below. You should read the “Risk Factors” section of this Information Statement for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

 

Overview

 

Life Clips, Inc. (the “Company”) was incorporated in Wyoming on March 20, 2013 as Blue Sky Media Corporation and its principal business was developing, financing, producing and distributing motion pictures and related entertainment products. Following the Company’s October 2, 2015 acquisition of Klear Kapture, Inc. (“Klear Kapture”), the Company continued Klear Kapture’s business of developing a body camera and an auditable software solution suitable for use by law enforcement. The Company changed its name to Life Clips, Inc. on November 3, 2015 in order to better reflect its business operations at the time.

 

-8-
 

 

On July 11, 2016, the Company completed its acquisition (the “Acquisition”) of all of the outstanding equity securities of Batterfly Energy Ltd. (“Batterfly”), an Israel-based corporation that develops and distributes a single-use, cordless battery under the brand name Mobeego for use with cellular phones and other mobile devices. Batterfly is now a wholly owned subsidiary of the Company. The Acquisition was completed pursuant to a Stock Purchase Agreement, dated as of June 10, 2016 (the “Purchase Agreement”), among the Company, Batterfly and all of the shareholders of Batterfly, as amended.

 

Following the acquisition of Batterfly, we began to focus on developing three synergistic businesses:

 

Expanding the Mobeego line of mobile accessories.
Global Sourcing Services that includes product design, factory identification, negotiations, compliance qualification, and end-to-end logistics management to source products anywhere in the world.
Sales and marketing services that provide an efficient path for companies to launch and market product into multi-channel retail and capture the maximum return on investment.

 

The Company is currently pursuing alternative business opportunities. There has been limited activity due to a delay in securing funding. The Company is working to re-energize the business within the next 12 months.

 

How We Generate Revenue

 

In May 2014, the FASB issued ASU 2014-09, which supersedes the revenue recognition requirements of Accounting Standards Codification, or ASC, Topic 605 “Revenue Recognition.” ASU 2014-09 requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new revenue recognition model requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing the revenue upon satisfaction of the performance obligations. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and change in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 can be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the date of the initial application along with additional disclosures. This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. The Company adopted the new revenue guidance effective July 1, 2017. There was no material impact to the Company’s financial statements or financial statement disclosures.

 

General and administrative expenses consisted of professional service fees, and other general and administrative overhead costs. Expenses are recognized when incurred.

 

Depending on the extent of our future growth, we may experience significant strain on our management, personnel, and information systems. We will need to implement and improve operational, financial, and management information systems. In addition, we are implementing new information systems that will provide better record-keeping, customer service and billing. However, there can be no assurance that our management resources or information systems will be sufficient to manage any future growth in our business, and the failure to do so could have a material adverse effect on our business, results of operations and financial condition.

 

Results of Operations

 

For the Years ended June 30, 2018 and June 30, 2017

 

The Company is reporting total revenue of $85,409 for the year ended June 30, 2018, of which only $871 was generated in the current year and the remaining was from revenue that was deferred at June 30, 2017. The Company generated $3,064 in revenue for the year ended June 30, 2017.

 

Cost of goods sold for the year ended June 30, 2018 was $0, which compares with cost of goods sold of $109,289 for the year ended June 30, 2017. The decrease in our cost of goods sold was related to insufficient funding for the development of products.

 

Operating expenses, which consisted of professional fees, licensing fees, management fees, payroll expenses, finance costs, and general and administrative expenses, for the year ended June 30, 2018, were $403,885. This compares with operating expenses for the year ended June 30, 2017 of $1,492,703. The decrease in operating expenses for the year ended June 30, 2018 is related to insufficient capital to continue operating activities, which resulted in decreases in professional fees, licensing fees, management fees and payroll expense.

 

-9-
 

 

As a result of the foregoing, we had a net loss of $7,950,169 for the year ended June 30, 2018. This compares with a net gain for the year ended June 30, 2017 of $4,579,151. The difference is primarily due to a 2017 net gain in derivatives of $14,834,604 compared to a net loss of $6,324,518 for the year ended June 30, 2018. This was also offset by a 2017 loss of $6,223,500 on the acquisition of Batterfly Energy LTD and decreased amortization of debt discount.

 

In its audited financial statements as of June 30, 2018, the Company was issued an opinion by its auditors that raised substantial doubt about the ability to continue as a going concern based on the Company’s current financial position. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully develop and market our products and our ability to generate revenues.

 

Liquidity and Capital Resources

 

As of June 30, 2018, we had cash or cash equivalents of $8,252. As of June 30, 2017, we had cash or cash equivalents of $91,672.

 

Net cash from operating activities was $(193,420) for the year ended June 30, 2018. This compares to net cash from operating activities of $(985,095) for the year ended June 30, 2017. The change of $791,675 in our net cash from operating activities for the year ended June 30, 2018 was primarily due to a change in a net loss of $7,950,169 vs. net income of $4,579,151, coupled with significant swings in derivative liabilities offset by the loss on Batterfly acquisition.

 

Cash flows from investing activities was $0 for the year ended June 30, 2018, compared to the Investment on Batterfly of $892,500 for the year ended June 30, 2017.

 

Cash flows from financing activities was $110,000 for the year ended June 30, 2018, which compares to cash flows from financing activities of $1,500,034 for the year ended June 30, 2017. The decrease in our cash flows from financing activities for the year ended June 30, 2018 was due to a decrease in proceeds from convertible notes.

 

We have no present agreements or commitments with respect to any material acquisitions of other businesses, products, product rights or technologies or any other material capital expenditures. However, we will continue to evaluate acquisitions of and/or investments in products, technologies, capital equipment or improvements or companies that complement our business and may make such acquisitions and/or investments in the future. Accordingly, we may need to obtain additional sources of capital in the future to finance any such acquisitions and/or investments. We may not be able to obtain such financing on commercially reasonable terms, if at all. Due to the ongoing global economic crisis, we believe it may be difficult to obtain additional financing if needed. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

 

Stock Incentive Plan

 

On April 20, 2017, the Company approved the Life Clips, Inc. 2017 Stock and Incentive Plan (“the Plan”). The Plan provides for the granting of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock grants and units, performance units and awards, and cash. The Plan allows for an issuance of a maximum of 20,000,000 shares of common stock, with awards made at the discretion of the board of directors. No awards have been made to date.

 

Contractual Commitments

 

For the year ending June 30, 2018, the Company had several employment agreements with key officers that automatically renewed for a second term (year 2), the following table summarizes the terms and related share grants:

 

Name   Position   Contract Start   Contract End   Cash per month     Cash
Paid
out in
2018
  Accrued in
2018 (unpaid)
    1st Grant -
Vested
through
6/30/18, but
not issued
 
William Singer   VP   03/01/2017   03/01/2019   $ 3,500     None   $ 42,000       3,750,000  
Victoria Rudman   CFO   06/30/2017   06/30/2019   $ 12,500     None   $ 150,000       3,750,000  

 

William Singer was issued 3,000,000 shares on July 28, 2017 for services. He was also granted 6,000,000 on August 31, 2017; of which 1,500,000 shares vested on August 31, 2017 and 1,500,000 shares vested on March 1, 2018 and thereafter 250,000 shares of the Common Stock vesting each month thereafter.

 

Victoria Rudman was granted 7,500,000 shares of restricted common stock on June 30, 2017; of which 1,875,000 shares vested on December 30, 2017, 1,875,000 shares vested on June 30, 2018 and thereafter 625,000 shares of the Common Stock vesting each month thereafter.

 

-10-
 

 

Material Agreements

 

None

 

Financings

 

The following summary table is a listing of all outstanding convertible debt as of June 30, 2018:

 

Issue Date   Maturity Date   Original
Interest Rate
    Current Interest Rate (default)     June 30, 2017     June 30, 2018  
10/02/2015   10/02/2017     3.85 %     18.00 %   $ 265,124     $ 170,416  
12/07/2015   12/06/2016     10.00 %     10.00 %     100,000       91,051  
04/27/2016   04/27/2017     10.00 %     18.00 %     300,000       300,000  
05/13/2016   05/13/2017     10.00 %     22.00 %     608,930       1,075,305  
06/09/2016   06/09/2017     10.00 %     18.00 %     51,791       32,154  
07/21/2016   07/21/2017     10.00 %     10.00 %     75,000       75,000  
09/22/2016   09/22/2017     10.00 %     22.00 %     99,650       -  
10/18/2016   10/18/2017     10.00 %     18.00 %     45,366       -  
01/27/2017   01/27/2018     10.00 %     22.00 %     5,000       5,000  
01/27/2017   01/27/2018     10.00 %     22.00 %     5,000       5,000  
02/02/2017   02/02/2018     10.00 %     22.00 %     5,000       5,000  
02/10/2017   02/10/2018     10.00 %     22.00 %     11,666       11,666  
02/10/2017   02/10/2018     10.00 %     18.00 %     11,668       11,668  
02/14/2017   02/14/2018     10.00 %     22.00 %     11,700       11,700  
02/17/2017   02/17/2018     10.00 %     22.00 %     50,000       50,000  
02/23/2017   02/23/2018     10.00 %     22.00 %     50,000       50,000  
03/14/2017   03/14/2018     10.00 %     22.00 %     50,000       50,000  
03/15/2017   03/15/2018     10.00 %     22.00 %     50,000       50,000  
03/17/2017   03/17/2018     10.00 %     22.00 %     50,000       50,000  
03/28/2017   03/28/2018     10.00 %     22.00 %     50,000       50,000  
04/03/2017   04/03/2018     10.00 %     22.00 %     50,000       50,000  
05/01/2017   05/01/2018     10.00 %     22.00 %     50,000       50,000  
06/01/2017   06/01/2018     10.00 %     22.00 %     50,000       50,000  
09/19/2017   08/30/2018     18.00 %     18.00 %     -       30,000  
11/16/2017   11/16/2018     18.00 %     18.00 %     -       15,000  
01/19/2018   01/19/2019     18.00 %     18.00 %     -       10,000  
03/22/2018   03/22/2019     18.00 %     18.00 %     -       15,000  
03/23/2018   03/23/2019     18.00 %     18.00 %     -       10,000  
04/18/2018   04/18/2019     18.00 %     18.00 %     -       20,000  
05/01/2018   05/01/2019     18.00 %     18.00 %     -       10,000  
Total Convertible Notes                   $ 2,045,895     $ 2,353,960  

 

Capital Expenditures

 

Other Capital Expenditures

 

We expect to incur research and development costs, as well as marketing expenses in connection with the expansion of our business.

 

Fiscal year end

 

Our fiscal year end is June 30.

 

-11-
 

 

Going Concern

 

We believe that the actions presently being taken to further implement its business plan and generate revenues provide the opportunity for us to continue as a going concern. While we believe in the viability of our strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to further implement our business plan and generate revenues.

 

The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

 

Future Financings

 

We will require additional financing to fund our planned operations. We currently do not have committed sources of additional financing and may not be able to obtain additional financing particularly, if the volatile conditions of the stock and financial markets, and more particularly the market for early development stage company stocks persist. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to further delay or further scale down some or all of our activities or perhaps even cease the operations of the business.

 

Since inception we have funded our operations primarily through equity and debt financings and we expect that we will continue to fund our operations through the equity and debt financing, either alone or through strategic alliances. If we are able to raise additional financing by issuing equity securities, our existing stockholders’ ownership will be diluted. Obtaining commercial or other loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

 

There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his, her, or its investment in our common stock. Further, we may continue to be unprofitable.

 

Critical Accounting Policies

 

The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of our financial condition and results of operations and which require us to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies that are significant to understanding our results.

 

The following are deemed to be the most significant accounting policies affecting us.

 

Use of Estimates

 

The preparation of these financial statements in accordance 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 disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements. The more significant estimates and assumptions by management include among others: property and equipment, foreign currency transactions and translations, and common stock valuation. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.

 

Income Taxes

 

We account for income taxes under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on our balance sheets in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. We must assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. Changes in our valuation allowance in a period are recorded through the income tax provision on the statement of operations.

 

-12-
 

 

From the date of our inception we adopted ASC 740-10-30. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10, we recognized no material adjustment in the liability for unrecognized income tax benefits.

 

Non-Cash Equity Transactions

 

Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to contemporaneous cash sale of stock.

 

Fair Value of Financial Instruments

 

We apply the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As of June 30, 2018 and 2017, the fair value of accounts payable approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates.

 

Recent Accounting Pronouncements

 

Recently Adopted Standards. The following recently issued accounting standards were adopted during fiscal year 2018:

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition standards under U.S. GAAP. The new standard provides a five-step process for recognizing revenue that depicts 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. The Company adopted this ASU using the full retrospective method effective July 1, 2017. The impact of adoption of this ASU was immaterial and, accordingly, there were no changes to the previously issued financial statements for the year ended June 30, 2018.

 

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-15, Statement of Cash Flows, Classification of Certain Cash Receipts and Cash Payments. The new standard is intended to reduce diversity in practice in how certain cash receipts and cash payments are classified in the statements of cash flows and must be adopted retrospectively for each prior reporting period presented upon initial adoption. ASU 2016-15 was adopted effective July 1, 2017 and did not have a material impact on the Company’s consolidated financial statements for the years ended June 30, 2018 and 2017. Accordingly, there were no transactions that required retrospective adjustments in the statements of cash flows for the year ended June 30, 2018.

 

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows – Restricted Cash, which requires entities that have restricted cash or restricted cash equivalents to reconcile the change during the period in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents in its statement of cash flows. As a result, amounts generally described as cash and restricted cash equivalents should be included with cash and cash equivalents shown on the statement of cash flows. The Company adopted this standard during 2018 using the retrospective transition method. The adoption did not result in any changes to the Company’s previously reported statements of cash flows for the year ended June 30, 2018.

 

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation: Scope of Modification Accounting, which provides clarification on when modification accounting should be used for changes to the terms or conditions of a share-based payment award. This standard does not change the accounting for modifications of share-based payment awards but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. This standard was adopted by the Company in the first quarter of fiscal 2018 and did not have a material impact on its financial statements.

 

Standards Required to be Adopted in Future Years. The following accounting standards are not yet effective; management has not completed its evaluation to determine the impact that adoption of these standards will have on the Company’s financial statements.

 

-13-
 

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the guidance on the impairment of financial instruments. This update adds an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. In November 2018, ASU 2016-13 was amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses. ASU 2018-19 changes the effective date of the credit loss standards (ASU 2016-13) to fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Further, the ASU clarifies that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. The Company does not believe that the impact of this ASU will have a material impact on its consolidated financial statements and related disclosures.

 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this ASU simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and eliminating the requirement for a reporting unit with a zero or negative carrying amount to perform a qualitative assessment. Instead, under this ASU, an entity would perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized is not to exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects will be considered, if applicable. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The Company does not believe that the impact of this ASU will have a material impact on its financial statements and related disclosures.

 

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, 2018, we have no off-balance sheet arrangements.

 

Inflation

 

We do not believe that inflation has had a material effect on our results of operations.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

A smaller reporting company is not required to provide the information in this Item.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

-14-
 

 

Life Clips, Inc.

 

Index to Financial Statements

 

CONTENTS

 

    Page
     
Report of Independent Registered Public Accounting Firm   F-2
     
Balance Sheets as of June 30, 2018 and 2017   F-4
     
Statements of Operations for the years ended June 30, 2018 and 2017   F-5
     
Statements of Changes in Shareholders’ Deficit for the years ended June 30, 2018 and 2017   F-6
     
Statements of Cash Flows for the years ended June 30, 2018 and 2017   F-7
     
Notes to Financial Statements   F-8

 

F-1
 

 

ACCELL_CORPORATE_282

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and
Stockholders of Life Clips, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Life Clips, Inc. (the Company) as of June 30, 2018, and the related consolidated statements of operations, changes in shareholders’ deficit, and cash flows for the year ended June 30, 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2018, and the results of its operations and its cash flows for the year ended June 30, 2018, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3, the Company has incurred net losses and has minimal revenues. These factors, and the need for additional financing in order for the Company to meet its business plans raises substantial doubt about the Company’s ability to continue as a going concern. Our opinion is not modified with respect to that matter.

 

/s/ Accell Audit & Compliance, P.A.

 

We have served as the Company’s auditor since 2019.

 

Tampa, Florida

 

February 11, 2020

 

F-2
 

 

 

NC Office

19720 Jetton Road, 3rd Floor

Cornelius, NC 28031

Tel: 704-897-8336

Fax: 704-919-5089

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Board of Directors and Shareholders of

Life Clips, Inc.

 

Opinion on the Financial Statements

 

We have audited the accompanying balance sheets of Life Clips, Inc. (the “Company”) as of June 30, 2017, and the related statements of income, comprehensive income, shareholders’ equity, and cash flows and the related notes (collectively referred to as the “financial statements”) for the period end June 30, 2017. Life Clips, Inc’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of June 30, 2017, and the results of its operations, changes in stockholders’ deficit and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

The Company’s Ability to Continue as a Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has an accumulated deficit, recurring losses, and expects continuing future losses, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ L&L CPAS, PA  

L&L CPAS, PA

Certified Public Accountants

Cornelius, North Carolina

The United States of America

April 3, 2018

 

The firm has served this client since July 2015.

 

F-3
 

 

LIFE CLIPS, INC.

BALANCE SHEETS

 

    June 30, 2018     June 30, 2017  
             
ASSETS                
Current Assets                
Cash   $ 8,252     $ 91,672  
Accounts Receivable     -       3,064  
Total Assets   $ 8,252     $ 94,736  
                 
LIABILITIES AND SHAREHOLDERS’ DEFICIT                
Current Liabilities                
Accounts Payable   $ 514,986     $ 358,226  
Accrued Expenses and Interest Payable     641,386       306,353  
Deferred Revenue     -       84,538  

Convertible Note Payable - In Default (net of discount of $60,219 and $407,905, respectively)

    2,293,741       1,637,990  
Notes Payable - In Default     530,000       530,000  
Derivative Liability - Convertible Notes Payable     9,284,359       2,959,841  

Total Current Liabilities

    13,264,472       5,876,948  
                 
Commitments and Contingencies (Note 9)                
                 
Shareholders’ Deficit                
Preferred Stock, ($0.001 par value; 20,000,000 shares authorized, 1,000,000 Series A shares were issued and outstanding as of June 30, 2018 and June 30, 2017, respectively.)     1,000       1,000  
Common Stock, ($0.001 par value; 5,000,000,000 shares authorized, 1,259,831,337 and 187,866,308 shares issued and outstanding as of June 30, 2018 and June 30, 2017, respectively.)     1,259,831       187,867  
Common Stock Issuable     89,482       45,082  
Additional Paid in Capital     9,218,935       9,859,138  
Accumulated Deficit     (23,825,468 )     (15,875,299 )
Total Shareholders’ Deficit     (13,256,220 )     (5,782,212 )
                 
Total Liabilities and Shareholders’ Deficit   $ 8,252     $ 94,736  

 

The accompanying notes are an integral part of these financial statements.

 

F-4
 

 

LIFE CLIPS, INC.

STATEMENTS OF OPERATIONS

For the Years Ended

 

    June 30, 2018     June 30, 2017  
             
Revenues                
Revenues   $ 85,409     $ 3,064  
Cost of Goods Sold     -       109,289  
Gross Profit     85,409       (106,225 )
                 
Operating Costs:                
Licensing Fees     -       262,000  
Finance Costs     -       51,000  
Payroll Expense     -       160,996  
Product Development Expense     -       4,191  
Professional Fees     381,820       662,940  
Consulting Fees     -       15,000  
Management Fees     -       188,000  
Marketing Expense     2,495       14,329  
Software Fees and Support     1,066       2,995  
Travel, Meals and Entertainment     2,721       31,544  
Other General and Administrative Expenses     15,783       99,708  
Total Operating Costs     403,885       1,492,703  
                 
Income/(Loss) from Operations     (318,476 )     (1,598,928 )
                 
Other Income/(Expense):                
Loss on Extinguishment of Debt     (559,564 )     (72,916 )
Interest Expense     (747,611 )     (2,360,109 )
Change in Fair Value of Derivative     (6,324,518 )     14,834,604  
Loss on Acquisition of Batterfly Energy LTD     -       (6,223,500 )
Total Other Income (Expense)     (7,631,693 )     6,178,079  
Income/(Loss) Before Income Taxes     (7,950,169 )     4,579,151  
Provision for Income Taxes     -       -  
Net Income/(Loss)   $ (7,950,169 )   $ 4,579,151  
                 
Earnings/(Loss) Per Share: Basic and Diluted     (0.01 )     0.05  
Weighted Average Number of Common Shares Outstanding: Basic and Diluted     985,622,702       90,001,941  

 

The accompanying notes are an integral part of these financial statements.

 

F-5
 

 

LIFE CLIPS, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

 

    Preferred Stock     Common Stock     Common
Stock
To Be
    Additional Paid-In     Accumulated     Total Shareholders’  
    Shares     Amount     Shares     Amount     Issued     Capital     Deficit     Deficit  
Balances as of June 30, 2016     -     $ -       53,332,620     $ 53,333     $ -     $ 304,666     $ (20,454,450 )   $ (20,096,451 )
Issuance of Preferred Stock for Services     1,000,000       1,000       -       -       -       -       -       1,000  
Shares Issued for Debt Conversions     -       -       141,650,914       141,651       13,482       855,787       -       1,010,920  
Shares Issued for Batterfly Acquisition     -       -       10,000,000       10,000       -       5,081,000       -       5,091,000  
Shares Issued for Ascenda Acquisition (Cancelled. Returned after 6/30/17)     -       -       10,000,000       10,000       (10,000 )     -       -       -  
Shares Issued for Services     -       -       500,000       500       -       265,500       -       266,000  
Shares Cancelled     -       -       (27,617,226 )     (27,617 )     -       27,617       -       -  
Stock Compensation     -       -       -       -       41,600       -       -       41,600  
Reclassify to APIC     -       -       -       -       -       3,324,568       -       3,324,568  
Net Income     -       -       -       -       -       -       4,579,151       4,579,151  
Balances as of June 30, 2017     1,000,000       1,000       187,866,308       187,867       45,082       9,859,138       (15,875,299 )     (5,782,212 )
Shares Issued for Debt Conversions     -       -       1,068,965,029       1,068,964       -       (642,603 )     -       426,361  
Stock Compensation     -       -       3,000,000       3,000       44,400       2,400       -       49,800  
Net Loss     -       -       -       -       -       -       (7,950,169 )     (7,950,169 )
Balances as of June 30, 2018     1,000,000     $ 1,000       1,259,831,337     $ 1,259,831     $ 89,482     $ 9,218,935     $ (23,825,468 )   $ (13,256,220 )

 

The accompanying notes are an integral part of these financial statements.

 

F-6
 

 

LIFE CLIPS, INC.

STATEMENTS OF CASH FLOWS

 

    June 30, 2018     June 30, 2017  
             
Cash Flows From Operating Activities:                
Net Income/(Loss)   $ (7,950,169 )   $ 4,579,151  
                 

Adjustments to Reconcile Net Income/(Loss) to Net Cash From Operating Activities:

               
Stock Compensation     49,800       307,600  
Loss on Extinguishment of Debt     559,564       72,916  
Changes in Fair Value of Derivative Liabilities     6,324,518       (14,834,604 )
Amortization of Debt Discount     457,686       2,146,527  
Loss on Batterfly Acquisition     -       6,223,500  
                 

Changes in Assets and Liabilities:

               
Accounts Receivable     3,064       (3,064 )
Accounts Payable     156,760       199,239  
Accrued Expenses and Interest Payable     289,895       239,102  
Deferred Revenue     (84,538 )     84,538  
Net Cash From Operating Activities     (193,420 )     (985,095 )
                 
Cash Flows From Investing Activities:                
Investment - Batterfly Energy Ltd     -       (892,500 )
Net Cash From Investing Activities     -       (892,500 )
                 
Cash Flows From Financing Activities:                
Repayment of Note Payable-Related Party     -       (10,000 )
Proceeds From Convertible Notes Payables     110,000       1,510,034  
Net Cash From Financing Activities     110,000       1,500,034  
                 
Net Change in Cash     (83,420 )     (377,561 )
                 
Cash at Beginning of Period     91,672       469,233  
                 
Cash at End of Period   $ 8,252     $ 91,672  
                 
Supplemental Disclosures of Cash Flow information:                
Cash Paid for:                
Interest   $ -     $ -  
Income Taxes   $ -     $ -  
                 
NON-CASH INVESTING AND FINANCING ACTIVITIES                
                 
Value of common shares issued as settlement of debt   $ 426,361     $ 1,010,920  

 

The accompanying notes are an integral part of these financial statements.

 

F-7
 

 

Life Clips, Inc.

Notes to Financial Statements June 30, 2018 and 2017

 

NOTE 1. ORGANIZATION AND OPERATIONS

 

Life Clips, Inc. (the “Company”) was incorporated in Wyoming on March 20, 2013 as Blue Sky Media Corporation and its principal business was developing, financing, producing and distributing motion pictures and related entertainment products. Following the Company’s October 2, 2015 acquisition of Klear Kapture, Inc. (“Klear Kapture”), the Company continued Klear Kapture’s business of developing a body camera and an auditable software solution suitable for use by law enforcement. The Company changed its name to Life Clips, Inc. on November 3, 2015 in order to better reflect its business operations at the time.

 

On July 11, 2016, the Company completed its acquisition (the “Acquisition”) of all of the outstanding equity securities of Batterfly Energy Ltd. (“Batterfly”), an Israel-based corporation that develops and distributes a single-use, cordless battery under the brand name Mobeego for use with cellular phones and other mobile devices. Batterfly is now a wholly owned subsidiary of the Company. The Acquisition was completed pursuant to a Stock Purchase Agreement, dated as of June 10, 2016 (the “Purchase Agreement”), among the Company, Batterfly and all of the shareholders of Batterfly, as amended.

 

The Company is currently open to and pursuing alternative business opportunities.

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

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 Accounting Standards Certifications (“ASC”) 740 “Income Taxes” (“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” (“ASC 260”). 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.

 

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.

 

F-8
 

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, accounts payable, accrued expenses and interest, deferred revenue, 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 6).

 

Embedded Conversion Features

 

The Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration of any beneficial conversion feature.

 

Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.

 

For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

 

Debt Issue Costs and Debt Discount

 

The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense 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” 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 505-50 “Equity-Based Payments to Non-Employees”. Measurement of share-based payment transactions with nonemployees shall be based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction should be determined at the earlier of performance commitment date or performance completion date.

 

Recognition of Revenues

 

The Company recognized revenue in accordance with Accounting Standards Update (“ASU”) No. 2014-09 “Revenue from Contracts with Customers”. The Company applies the following five steps in order to determine the appropriate amount of revenue recognized as it fulfills its obligations under each of its agreements:

 

  identify the contract with a customer;
  identify the performance obligations in the contract;
  determine the transaction price;
  allocate the transaction price to performance obligations in the contract; and
  recognize revenue as the performance obligation is satisfied.

 

F-9
 

 

Reclassifications

 

Certain amounts in the 2017 financial statements have been reclassified to conform to the current period financial presentation. These reclassifications had no effect on the previously reported net income, cash flows or shareholders’ deficit.

 

Recently Issued Accounting Pronouncements

 

Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU 2016-02 “Leases (Topic 842)”- In February 2016, the FASB issued ASU 2016-02, which will require lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the current model, but updated to align with certain changes to the lessee model and the new revenue recognition standard. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the potential impact this standard will have on its financial statements and related disclosures.

 

FASB ASU 2015-17 “Income Taxes (Topic 740)” - In November 2015, the FASB issued ASU 2015-17, which simplifies the presentation of deferred tax assets and liabilities on the balance sheet. Previous GAAP required an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts on the balance sheet. The amendment requires that deferred tax liabilities and assets be classified as noncurrent in a classified balance sheet. This ASU is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. The Company has adopted ASU 2015-17 as of July 1, 2017. Adopting this standard did not have a material impact on the Company’s financial statements or financial statement disclosures.

 

FASB ASU 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory,” or ASU 2015-11 - In July 2015, the FASB issued ASU 2015-11, which requires an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments apply to inventory that is measured using first-in, first-out (FIFO) or average cost. This ASU is effective for interim and annual reporting periods beginning after December 15, 2016, with the option to early adopt as of the beginning of an annual or interim period. The Company adopted ASU 2015-11 on July 1, 2017, the first day of the Company’s first quarter for the fiscal year ending June 30, 2018. Adoption of this standard did not have a material impact on the Company’s financial statements or financial statement disclosures.

 

FASB ASU 2014-09 “Revenue from Contracts with Customers (Topic 606),” or ASU 2014-09 - In May 2014, the FASB issued ASU 2014-09, which supersedes the revenue recognition requirements of Accounting Standards Codification, or ASC, Topic 605 “Revenue Recognition.” ASU 2014-09 requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new revenue recognition model requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing the revenue upon satisfaction of the performance obligations. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and change in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 can be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the date of the initial application along with additional disclosures. This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. The Company adopted the new revenue guidance effective July 1, 2017. There was no material impact to the Company’s financial statements or financial statement disclosures.

 

Subsequent Events – The Company follows the guidance in ASC 855 “Subsequent Events” for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued. Pursuant to ASU 2010-09 of the FASB ASC, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

 

F-10
 

 

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 an accumulated deficit of $23,825,468. These factors raise doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on management funding operating costs. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

NOTE 4. NOTES PAYABLE

 

At June 30, 2018 and 2017, the Company had two notes payable in the amount of $530,000, with the following terms:

 

1. The Batterfly Acquisition Note required the Company to make two payments of $250,000 on October 6, 2017 and February 13, 2017. Upon failure to pay the payment due, the balance began to accrue at 11% interest per annum.
2. On July 14, 2016, the Company issued a new promissory note to NUWA Group, LLC., from which the Company received $30,000 in gross proceeds, has a maturity date of October 14, 2016, and bears interest at 5% per annum. This promissory note does not have a conversion feature.

 

NOTE 5. CONVERTIBLE DEBT

 

Convertible Notes

 

Balance at
June 30, 2018
    Balance at
June 30, 2017
    Due Date   Interest Rate at June 30, 2018   Conversion Terms
$ 1,931,806     $ 1,564,526     Range from
10/01/2017 to
04/18/2018
  Range from
3.85% to 22%
  Conversion price equal to fifty percent (50%) of the lowest trading price during the twenty (20) trading day period prior to the date of conversion - $0.0001 at June 30, 2018, convertible into 19,318 million shares not including interest.
  332,154       421,369     Range from
06/10/17 to
03/30/18
  10%   Conversion price equal to seventy five percent (75%) of the lowest trading price during the five (5) trading day period prior to the date of conversion - $0.0003 at June 30, 2018, convertible into 1,107 million shares not including interest.
  90,000       60,000     Range from
01/28/2018 to
05/01/2019
  Range from
10% to 22%
  Conversion price equal to fifty percent (50%) of the lowest trading price during the five (5) trading day period prior to the date of conversion - $0.0002 at June 30, 2018, convertible into 450 million shares not including interest.
                         
$ 2,353,960     $ 2,045,895              

 

The Company evaluated the convertible promissory notes under ASC 815 Derivatives and Hedging (“ASC 815”). ASC 815 generally requires the analysis of embedded terms and features that have characteristics of derivatives to be evaluated for bifurcation and separate accounting in instances where their economic risks and characteristics are not clearly and closely related to the risks of the host contract. The material embedded derivative consists of the embedded conversion feature. The conversion option bears risks of equity which were not clearly and closely related to the host debt agreement and required bifurcation. See Note 6 for further discussion.

 

Debt Discount

 

The Company recorded the debt discount to the extent of the gross proceeds raised and expensed immediately the remaining fair value of the derivative liability, as it exceeded the gross proceeds of the note.

 

The convertible notes had a debt discount of $60,219 and $407,905 as of June 30, 2018 and 2017, respectively.

 

Accumulated amortization of debt discount amounted to $457,686 and $2,146,527 for the years ended June 30, 2018 and 2017, respectively.

 

F-11
 

 

Future Commitments

 

At June 30, 2018 and 2017, the Company has outstanding convertible debt of $2,353,960 and 2,045,895, respectively, which is currently due.

 

NOTE 6 –DERIVATIVE FINANCIAL INSTRUMENTS

 

The Company’s convertible promissory notes and detachable warrants gave rise to derivative financial instruments. The notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option. Additionally, the detachable warrants contained terms and features that gave rise to derivative liability classification. As of June 30, 2018, the Company does not have enough authorized shares to settle all potential conversion and warrant transactions.

 

The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of June 30, 2018 and 2017 and the amounts that were reflected in income related to derivatives for the period ended:

 

    June 30, 2018  
The financings giving rise to derivative financial instruments   Indexed
Shares*
(in millions)
    Fair
Values
 
Embedded derivatives     24,432     $ 9,284,352  
Derivative warrants     1       7  
Total     24,433     $ 9,284,359  

 

*including principal and interest

 

    June 30, 2017  
The financings giving rise to derivative financial instruments   Indexed
Shares*
(in millions)
    Fair
Values
 
Embedded derivatives     1,526     $ 2,957,598  
Derivative warrants     1       2,243  
Total     1,527     $ 2,959,841  

 

*including principal and interest

 

Current accounting principles that are provided in ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. The Company has selected the Binomial Lattice Model, which approximates the Monte Carlo Simulations, valuation technique to fair value the compound embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Binomial Lattice Model technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators.

 

F-12
 

 

Significant inputs and results arising from the Binomial Lattice Model process are as follows for the embedded derivatives that have been bifurcated from the convertible notes and classified in liabilities:

 

    June 30, 2018   June 30, 2017
Quoted market price on valuation date   $0.0005   $0.0024
Range of effective contractual conversion rates   $0.0001 - $0.0003  

$0.0010 - $0.0018

Contractual term to maturity   0 – 0.83 Years   0.10 – 2.87 Years
Market volatility:        
Volatility   210%   261%
Risk-free interest rate   2.15%   0.71%

 

The Company has selected the Black Scholes Merton valuation technique to fair value the detachable warrants because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving compound embedded derivatives.

 

Significant inputs and results arising from the Black Scholes Merton process are as follows for the detachable warrants classified in liabilities:

 

    June 30, 2018   June 30, 2017
Quoted market price on valuation date   $0.0005   $0.0024
Contractual strike price   $0.40   $0.40
Contractual term to maturity   0.82 - 0.87 Years   1.82 – 1.87 Years
Market volatility:        
Volatility   210%   261%
Risk-free interest rate   2.15%   0.71%

 

The following table reflects the issuances of compound embedded derivatives and detachable warrants and changes in fair value inputs and assumptions related to the compound embedded derivatives during the years ended June 30, 2018 and 2017.

 

    Year Ended
June 30, 2018
    Year Ended
June 30, 2017
 
Balances at beginning of year   $ 2,959,841     $ 20,143,189  
Issuances:                
Embedded derivatives     443,639      

2,553,938

 
Detachable warrants     -       -  
Conversions:                
Embedded derivatives     (210,272 )     

(3,324,568

)
Detachable warrants     -       -  
Changes in fair value inputs and assumptions reflected in income     6,091,151       (16,392,718 )
                 
Balances at end of year   $ 9,284,359     $ 2,959,841  

 

NOTE 7. EQUITY

 

Authorized Capital

 

On April 4, 2017, the Company filed Articles of Restatement with the Wyoming Secretary of State authorizing 320,000,000 shares of common stock, par value $0.001 per share (the “Common Stock”) and 20,000,000 shares of Preferred Stock, par value $0.001 (the “Preferred Stock”). The Board may issue shares of Preferred Stock in one or more series and fix the rights, preferences and privileges thereof, including voting rights, terms of redemption, redemption prices, liquidation preferences, number of shares constituting any series or the designation of such series, without further vote or action by the stockholders.

 

On June 28, 2017, the Company filed Articles of Amendment to authorize an increase in the number of authorized shares of Common Stock from 300,000,000 to 800,000,000.

 

F-13
 

 

On September 28, 2017, the Company filed Articles of Amendment to authorize an increase in the number of authorized shares of Common Stock from 800,000,000 to 5,000,000,000.

 

Preferred Stock

 

Effective as of May 19, 2017, the Company amended its Articles of Incorporation to designate 1,000,000 shares of preferred stock as Series A Preferred Stock, with a par value of $0.001 per share (the “Series A Stock”). Each share of Series A Stock ranks, with respect to dividend rights and rights upon liquidation, winding up or dissolution of the Company, the same as the common stock of the Company, par value $0.001 per share (the “Common Stock”) and is not entitled to any specific dividends or other distributions, other than those declared by the Board of Directors. Each share of Series A Stock has 100 votes on any matter submitted to the shareholders of the Company, and the Series A Stock votes together with the holders of the outstanding shares of all other capital stock of the Company (including the Common Stock and any other series of preferred stock then outstanding), and not as a separate class, series or voting group on any such matter. The Series A Preferred Stock is not transferrable by the holder, and may be redeemed by the Company at any time for the par value. In the event that the holder of Series A Preferred Stock who is an employee or officer of the Company leaves their position as an employee or officer of the Company for any reason, the Series A Preferred Stock held by that holder will be automatically cancelled and will revert to being authorized and unissued shares of Series A Preferred Stock. The Series A Stock is not convertible into any other class of shares of the Company.

 

On May 25, 2017, the Company issued 1,000,000 shares of Series A Stock to Victoria Rudman, the Company’s Chief Financial Officer, in return for services provided to the Company by Ms. Rudman and to ensure Ms. Rudman’s continued service to the Company.

 

Effective as of June 2, 2017, the Company amended its Articles of Incorporation by amending the Certificate of Designation for the Series A Stock to increase the number of votes that each share of Series A Stock has to 200 votes. Effective as of August 7, 2017, the Company again amended its Articles of Incorporation by amending the Certificate of Designation for the Series A Stock to increase the number of votes that each share of Series A Stock has to 400 votes.

 

Stock and Incentive Plan

 

On April 20, 2017, the Company adopted the Life Clips, Inc. 2017 Stock and Incentive Plan under which the Company may issue nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock grants and units, performance units and awards of cash. A maximum of 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.

 

Warrants and Options

 

At June 30, 2018 and 2017, the Company had 975,000 warrants outstanding, with a strike price of $0.40. No warrants were granted, forfeited or expired during the years ended June 30, 2018 and 2017. The weighted average remaining lives of the warrants were 0.84 and 1.84 at June 30, 2018 and 2017, respectively.

 

NOTE 8. INCOME TAX PROVISION

 

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due. Deferred taxes relate to differences between the basis of assets and liabilities for financial and income tax reporting which will be either taxable or deductible when the assets or liabilities are recovered or settled.

 

The Company accounts for income taxes in accordance with the provisions of ASC 740, Accounting for Uncertainty in Income Taxes. The Company accounts for income taxes using an asset and liability approach to calculate deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.

 

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”) resulting in significant modifications to existing law. The Company has completed the accounting for the effects of the Act during the year ended June 30, 2018. The Company’s financial statements for the year ended June 30, 2018 reflect certain effects of the Act, which includes a reduction in the corporate tax rate from 34% to 21% as well as other changes.

 

F-14
 

 

At June 30, 2018, the Company has a net operating loss carry-forward of $23,825,468 available to offset future taxable income expiring through 2035. Utilization of future net operating losses may be limited due to potential ownership changes under Section 382 of the Internal Revenue Code.

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of June 30, 2018.

 

The effects of temporary differences that gave rise to significant portions of deferred tax assets at June 30, 2018 and 2017 are approximately as follows:

 

    June 30, 2018     June 30, 2017  
Net Operating Loss Carryforward   $ 23,825,468     $ 15,875,299  
Gross Deferred Tax Assets     5,003,348       5,397,602  
Less Valuation Allowance     (5,003,348 )     (5,397,602 )
Total Deferred Tax Assets – Net   $ -     $ -  

 

A reconciliation of income taxes computed at the statutory rate to the income tax amount recorded is as follows:

 

    Year ended June 30  
    2018     2017  
Income tax expense (benefit) at statutory rate   $ (1,669,535 )    $ 1,556,398  
Tax Cuts and Job Act Impact     2,063,789       -  
Decrease in valuation allowance     (394,254 )      (1,556,398 ) 
Income tax expense     -       -  

 

The Company had no gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. It has not accrued any interest or penalties associated with income taxes. The Company files income tax returns in the United States federal jurisdiction. With few exceptions, it is no longer subject to U.S. federal, state or non-U.S. income tax authorities on tax returns filed before January 31, 2012. No tax returns are currently under examination by tax authorities.

 

NOTE 9. COMMITTMENTS AND CONTINGENCIES

 

From time to time, the Company may be a part to other legal proceedings. Management currently believes that the ultimate resolution of these matters, and after consideration of amount accrued, will not have a material adverse effect on consolidated results of operations, financial position, or cash flow.

 

F-15
 

 

NOTE 10. SUBSEQUENT EVENTS

 

The Company follows the guidance in Section 855-10-50 of the FASB ASC for the disclosure of subsequent events. The company will evaluate subsequent events through the date of the issuance of the financial statements.

 

On August 8, 2018, the Company entered into an 18% Convertible Promissory Note with Long Side Ventures LLC, an unaffiliated third party. The note was in a principal amount of $15,000, and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the five-trading day period prior to the date of conversion. The note maturity date is August 8, 2019.

 

On September 24, 2018, the Company entered into an 18% Convertible Promissory Note with Long Side Ventures LLC, an unaffiliated third party. The note was in a principal amount of $5,000, and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the five-trading day period prior to the date of conversion. The note maturity date is September 24, 2019.

 

On September 26, 2018, the Company entered into an 18% Convertible Promissory Note with Crest Ventures LLC, an unaffiliated third party. The note was in a principal amount of $5,000, and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the five-trading day period prior to the date of conversion. The note maturity date is September 26, 2019.

 

On November 28, 2018, the Company entered into an 18% Convertible Promissory Note with Long Side Ventures LLC, an unaffiliated third party. The note was in a principal amount of $50,000, and is convertible at a price equal to fifty percent (50%) of the lowest trading price during the five-trading day period prior to the date of conversion. The note maturity date is November 28, 2019.

 

On January 11, 2017, the Company received a default notice related to a $500,000 promissory note (the “Batterfly Acquisition Note”) issued to the sellers of Batterfly Energy, Ltd. (“Batterfly”) as partial consideration for the Company’s July 11, 2017 acquisition of Batterfly. The Batterfly Acquisition Note required the Company to make a payment of $250,000 on October 6, 2017 and $250,000 on February 13, 2017. The default letter states that the Company failed to pay the $250,000 payment due on October 6, 2017, which began to accrue interest of 11% from October 6, 2017. In addition, the default notice states that the Company owes $20,000 in aggregate to two of the Batterfly shareholders related to consulting fees associated with the Batterfly acquisition. Finally, the default notice states that a payment of $250,000, as well as an additional payment of $20,000 must be paid by January 23, 2017. The Company filed a claim against the sellers of Batterfly with the London Court of International Arbitration (LCIA Arbitration No: 173692) and on September 7, 2017 the parties entered into a Stipulation for Stay of Arbitration in the matter as they seek to negotiate a settlement of their claim. The claim was settled during 2019 for which the Company agreed to issue 62,991,567 shares of common stock to the sellers of Batterfly. As of the date of this filing, the shares are still pending issuance.

 

F-16
 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

 

On December 6, 2018, the Company engaged Accell Audit and Compliance, P.A. as their independent auditor. This was a change from our previous auditor, L&L CPAs, PA.

 

ITEM 9A. CONTROLS AND PROCEDURES.

 

Management’s annual report on internal control over financial reporting

 

Our management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of June 30, 2018. Our management’s evaluation of our internal control over financial reporting was based on the framework in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that as of June 30, 2018, our internal control over financial reporting was not effective.

 

The ineffectiveness of our internal control over financial reporting was due to the following material weaknesses which we identified in our internal control over financial reporting: (1) the lack of multiples levels of management review on complex accounting and financial reporting issues, (2) a lack of adequate segregation of duties and necessary corporate accounting resources in our financial reporting process and accounting function as a result of our limited financial resources to support hiring of personnel and implementation of accounting systems.

 

We expect to be materially dependent upon third parties to provide us with accounting consulting services related to accounting services for the foreseeable future. We believe this will be sufficient to remediate the material weaknesses related to our accounting discussed above. Until such time as we have a chief financial officer with the requisite expertise in U.S. GAAP, there are no assurances that the material weaknesses and significant deficiencies in our disclosure controls and procedures will not result in errors in our financial statements which could lead to a restatement of those financial statements.

 

A material weakness is a deficiency or a combination of control deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 

Limitations on Effectiveness of Controls

 

Our principal executive officer and principal financial officer do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

-15-
 

 

Changes in Internal Control Over Financial Reporting.

 

We have made no change in our internal control over financial reporting during the fourth quarter of our fiscal year ended June 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Attestation Report of the Registered Public Accounting Firm.

 

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report on Form 10-K.

 

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

 

Set forth below are the names of the directors and officers of the Company, all positions and offices with the Company held, the period during which he has served as such, and the business experience during at least the last five years:

 

Name and Address   Age   Date Appointed to Office   Position(s)
Victoria Rudman   51   January 16, 2017   Director and Chief Financial Officer
        April 3, 2018   Interim Chief Executive Officer
William Singer   47   March 1, 2017   Director, EVP Sales and Marketing
Dr. Charles Adelson   41   August 29, 2017   Director

 

The above listed officers and directors are not involved, and have not been involved in the past five years, in any legal proceedings that are material to an evaluation of their ability or integrity.

 

DESCRIPTION

 

Background Information about Our Officers and Directors

 

Victoria Rudman – Director, Chief Financial Officer and Interim Chief Executive Officer

 

Ms. Victoria Rudman has been the Company’s Chief Financial Officer, Secretary, Treasure and a Director since January 16, 2017, Secretary and since April 3, 2018 its Interim Chief Executive Officer. Ms. Rudman has over 20 years of professional experience in multiple aspects of leadership, operations, accounting, finance, taxation and fiscal management.

 

Ms. Rudman has spent most of her career in Fortune 50 global investment bank and retail brokerage firms as well as small cap public companies and startup ventures. She served as Chairman and CEO of Intelligent Living Inc. from 2011-2014. Previously, Victoria held various technology controllership positions at Morgan Stanley and acted as a Vice President at Bear Stearns and Director of Business Planning & Strategy at Visual Networks, where she was the lead project manager for the entire technology business enterprise, including IPO and strategic M&A. Victoria holds a Bachelor of Business Administration in Public Accounting from Pace University, Lubin School of Business.

 

In connection with her engagement as the Chief Financial Officer of the Company, the Company entered into an Executive Employment Agreement with Ms. Rudman (the “Agreement”) on June 30, 2017. The Agreement is for a two-year term, which automatically renews for successive additional one-year terms unless either Ms. Rudman or the Company notifies the other party that they do not wish the Agreement to so renew. The Agreement provides that Ms. Rudman will serve as the Company’s Chief Executive Officer and as a member of the Board.

 

Pursuant to the Agreement, the Company will pay Ms. Rudman a salary of $150,000 annually, payable on a monthly basis. The Company is currently unable to pay this Base Salary. Therefore, the Company and the Executive have agreed to an initial payment of $8,000 per month towards the Base Salary. The Base Salary shall then accrue until the Company has raised $100,000 or more for working capital, collectively, since the Effective Date and, at such time, the accrued Base Salary shall be paid in full and regular payments of the Base Salary going forward will commence.

 

-16-
 

 

In addition, the Company granted to Ms. Rudman, effective as of June 30, 2017, a total of 7,500,000 shares of the Company’s unregistered common stock, par value $0.001 per share (the “Common Stock”). 1,875,000 shares of the Common Stock will vest on December 30, 2017, 1,875,000 shares of the Common Stock will vest on June 30, 2017 and thereafter 625,000 shares of the Common Stock will vest each month thereafter.

 

Pursuant to the Agreement, the Company also agreed to grant Ms. Rudman 500,000 shares of Common Stock on each anniversary of June 30, 2017, provided that the amount of these shares of Common Stock will be based on performance and may be adjusted by the Board. The shares of Common Stock in these grants will vest 50% on each anniversary of the applicable grant.

 

If Ms. Rudman’s engagement is terminated by the Company without “Cause,” or by Ms. Rudman for “Good Reason,” (in each case as defined below) then a portion of the stock grants described above equal to a pro rata portion of the grants based on the time from the date of the grant to the date of termination, and assuming a 24-month vesting period, shall be deemed vested, and all other amounts shall be forfeited. If Ms. Rudman’s engagement is terminated by the Company with “Cause” or by Ms. Rudman without “Good Reason,” then all unvested portions of the stock grants described above as of the date of termination shall be forfeited.

 

The background information presented above regarding Ms. Rudman’s specific experience, qualifications, attributes and skills in addition to her reputation for integrity, honesty and adherence to high ethical standards are expected to benefit the Company as a member of its Board of Directors.

 

William Singer – Director, Executive Vice President of Sales and Marketing

 

Mr. William Singer is a Multi-Channel Retail Expert, an entrepreneur and investor, and has launched several successful businesses and products in retail, transportation, eCommerce, mobility, and services. Mr. Singer’s first startup was when he was 19 in 1991, which he ran for 20 years. It was a bus business called Bill’s Bus with a route from the university town in Santa Barbara to the downtown so that students didn’t drink and drive. He sold the business in 2011. Mr. Singer also worked with legendary investor, Louis Navellier. In his career, William has raised over $50 million.

 

In 2012, Mr. Singer was President of Tru Connect LLC, a national provider of wireless voice, messaging, and data services. Mr. Singer’s sole position in the prior 5 years, other than with True Connect LLC (or with the Company), has been as the Managing Member of Summerland Advisors, LLC, a registered investment advisor in California, from 2012 to the present. He became involved with the Company in October 2015 as an advisor, and served as the Company’s vice president of sales from April 2017 through January 2017.

 

Mr. Singer has successfully launched products into major retailers including RadioShack, Best Buy, Target, Wal-Mart, QVC and Amazon.com. Mr. Singer has global contacts and significant experience in multi-channel retail, business, sales and marketing. The Board believes that Mr. Singer’s extensive experience in executive management and the other factors discussed herein make him uniquely suited and qualified to serve as a member of the Board and as the Company’s Executive Vice President of Sales and Marketing.

 

In connection with his engagement as the Executive Vice President of Sales and Marketing of the Company, the Company entered into an Executive Employment Agreement with Mr. Singer (the “Agreement”) on March 1, 2017. The Agreement is for a two-year term, which automatically renews for successive additional one-year terms unless either Mr. Singer or the Company notifies the other party that they do not wish the Agreement to so renew. The Agreement provides that Mr. Singer will serve as the Company’s Executive Vice President of Sales and Marketing and as a member of the Board.

 

Pursuant to the Agreement, the Company will pay Mr. Singer a salary of $3,500 per month, which commenced effective as of February 1, 2017, provided that following the month in which the Company begins generating revenue Mr. Singer’s salary will be increased to $5,000 per month. Mr. Singer will also receive a commission of 1% of any net sales revenue collected by the Company on the sales of its products, based on the wholesale price, and contingent on the sale being profitable to the Company, and will be eligible for a bonus as jointly determined by the Board and Mr. Singer.

 

In addition, the Company granted to Mr. Singer, effective as of March 1, 2017, a total of 6,000,000 shares of the Company’s unregistered common stock, par value $0.001 per share (the “Common Stock”). 1,500,000 shares of the Common Stock will vest on March 1, 2018 and thereafter 250,000 shares of the Common Stock will vest each month thereafter.

 

Pursuant to the Agreement, the Company also agreed to grant Mr. Singer 500,000 shares of Common Stock on each anniversary of March 1, 2017, provided that the amount of these shares of Common Stock will be based on performance and may be adjusted by the Board. The shares of Common Stock in these grants will vest 50% on each anniversary of the applicable grant.

 

-17-
 

 

If Mr. Singer’s engagement is terminated by the Company without “Cause,” or by Mr. Singer for “Good Reason,” (in each case as defined below) then a portion of the stock grants described above equal to a pro rata portion of the grants based on the time from the date of the grant to the date of termination, and assuming a 24-month vesting period, shall be deemed vested, and all other amounts shall be forfeited. If Mr. Singer’s engagement is terminated by the Company with “Cause” or by Mr. Singer without “Good Reason,” then all unvested portions of the stock grants described above as of the date of termination shall be forfeited.

 

The background information presented above regarding Mr. Singer’s specific experience, qualifications, attributes and skills in addition to his reputation for integrity, honesty and adherence to high ethical standards are expected to benefit the Company as a member of its Board of Directors.

 

Dr. Charles Adelson – Director

 

Dr. Charles Adelson graduated from the University of Central Florida in Orlando, where he received a B.S. in Micro and Molecular Biology. Dr. Charles Adelson went on to receive his Doctor of Medical Dentistry at Nova Southeastern University’s School of Dental Medicine. He continued his studies there after completing a three-year postdoctoral surgical residency with extensive training in implant placement, periodontal s surgery, and regenerative bone therapy. Dr. Charles Adelson has participated in several medical missions sponsored by the Women of Hope. He traveled to both the inner cities and the rural areas of Jamaica, providing dental care to orphan children. In addition to dentistry and philanthropy Dr. Adelson is as well an experienced businessman owning several commercial properties throughout South Florida.

 

The background information presented above regarding Dr. Adelson’s specific experience, qualifications, attributes and skills in addition to his reputation for integrity, honesty and adherence to high ethical standards are expected to benefit the Company as a member of its Board of Directors.

 

Family Relationships

 

There are no family relationships among our directors and executive officers. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it. No director or executive officer has been convicted of a criminal offense within the past five years or is the subject of a pending criminal proceeding. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. No director or officer has been found by a court to have violated a federal or state securities or commodities law.

 

Committees of the Board of Directors

 

There are no committees of the Board of Directors.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Securities Exchange Act of 1934 (the “34 Act”) requires our officers and directors and persons owning more than ten percent of the Common Stock, to file initial reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). Additionally, Item 405 of Regulation S-K under the 34 Act requires us to identify in its Form 10-K and proxy statement those individuals for whom one of the above referenced reports was not filed on a timely basis during the most recent year or prior years. Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons we believe that during year ended June 30, 2017, all filing requirements applicable to our executive officers and directors, and persons who own more than 10% of our common stock were complied with except Ms. Rudman, Mr. Singer and Dr. Adelson failed to file a Form 3 or Form 4 as required under the 34 Act.

 

Code of Ethics

 

Our board of directors has not adopted a code of ethics but plans to do so in the future.

 

Corporate Governance

 

Term of Office

 

Each director of our company is to serve for a term of one year ending on the date of subsequent annual meeting of stockholders following the annual meeting at which such director was elected. Notwithstanding the foregoing, each director is to serve until his successor is elected and qualified or until his death, resignation or removal. Our board of directors is to elect our officers and each officer is to serve until his successor is elected and qualified or until his death, resignation or removal.

 

-18-
 

 

Committees of the Board

 

All proceedings of our board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the corporate laws of the State of Wyoming and our By-laws, as valid and effective as if they had been passed at a meeting of our directors duly called and held.

 

We currently do not have nominating or compensation committees or committees performing similar functions, nor do we have a written nominating or compensation committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes that the functions of such committees can be adequately performed by our board of directors.

 

We do not have any defined policy or procedure requirements for shareholders to submit recommendations or nominations for directors. We do not currently have any specific or minimum criteria for the election of nominees to our board of directors and we do not have any specific process or procedure for evaluating such nominees. Our board of directors assesses all candidates, whether submitted by management or shareholders, and makes recommendations for election or appointment.

 

A shareholder who wishes to communicate with our board of directors may do so by directing a written request to the address appearing on the first page of this annual report.

 

Options/SAR Grants and Fiscal Year End Option Exercises and Values

 

On April 20, 2017, the Company approved the Life Clips, Inc. 2017 Stock and Incentive Plan (“the Plan”). The Plan provides for the granting of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock grants and units, performance units and awards, and cash. The Plan allows for an issuance of a maximum of 20,000,000 shares of common stock, with awards made at the discretion of the board of directors. No awards have been made to date. The current management does not have any plans to issue stock options in the future to executive officers and directors.

 

ITEM 11. EXECUTIVE COMPENSATION

 

The following table sets forth information concerning the compensation of our named executive officers during Fiscal 2018 and 2017:

 

Name and

Principal Position

  Year    

Salary

($)

   

Bonus

($)

   

Stock

Awards

($)

   

Option

Awards

   

Non-Equity

Incentive

Compensation

($)

   

Non-Qualified

Deferred

Compensation

Earnings
($)

   

All Other

Compensation

($)

   

Totals

($)

 
                                                       

Huey Long, Former CEO(1)(2)

  2017     $ 300,000         —          —       3,750,000            —           —     $ 300,000     $ 150,000  
                                                                       
Victoria Rudman, CFO and Interim CEO (2)(3)   2017     $ 150,000                   7,500,000                       $ 150,000  
                                                                       
Victoria Rudman, CFO and Interim CEO   2018     $ 150,000                                         $ 150,000  

 

(1) The compensation for Mr. Long and Ms. Rudman is being accrued until the Company has sufficient funds to pay for their services.

(2) Resigned as CEO and a Director on November 24, 2017.

(3) Victoria Rudman was granted 7,500,000 shares of common stock on June 30, 2017; of which 1,875,000 shares will vest on December 30, 2017 and 1,875,000 shares will vest on June 30, 2018.

 

The compensation for Ms. Rudman is being accrued until the Company has sufficient funds to pay for their services.

 

Victoria Rudman was granted 7,500,000 shares of restricted common stock on June 30, 2017; of which 1,875,000 shares vested on December 30, 2017, 1,875,000 shares vested on June 30, 2018 and thereafter 625,000 shares of the Common Stock will vest each month thereafter.

 

Compensation of Management. See Item 10 above under Background Information about Our Officers and Directors.

 

Option Grants. No option grants have been exercised by the executive officers named in the Summary Compensation Table.

 

-19-
 

 

Aggregated Option Exercises and Fiscal Year-End Option Value. There have been no stock options exercised by the executive officers named in the Summary Compensation Table.

 

Long-Term Incentive Plan (“LTIP”) Awards. There have been no awards made to named executive officers in the last completed fiscal year under any LTIP.

 

Compensation of Directors

 

Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, our sole director in such capacity.

 

Stuart Posner, Wayne Thomas, and Charles Adelson were appointed as directors on August 29, 2017. Each of Mr. Posner, Mr. Thomas and Mr. Adelson shall receive a total of 1,000,000 stock options, with 250,000 of the options vesting as of August 29, 2017, and the remaining 750,000 options vesting equally over each subsequent 90-day period for three consecutive 90-day periods.

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

 

The following sets forth the number of shares of our $0.001 par value common stock beneficially owned by (i) each person who, as of June 30, 2018, was known by us to own beneficially more than five percent (5%) of its common stock; (ii) our individual Directors and (iii) our Officers and Directors as a group. A total of 1,259,831,337 common shares were issued and outstanding as of June 30, 2018.

 

Name and Address of
Beneficial Owner(1)
  Common Stock
Beneficial
Ownership
    Percent of
Class(2)
    Outstanding
Series A
Preferred
Stock
    Percent
of Class
 
Named Executive Officers and Directors:                                
Victoria Rudman (4)     3,750,000       0.30 %     1,000,000       100.00 %
William Singer (5)     3,750,000       0.30 %                
Dr. Charles Adelson (6)     1,000,000       0.08 %                
All executive officers and directors as a group (five people)     8,500,000       0.67 %     1,000,000       100.00 %
                                 
Other 5% Stockholders     None                          

 

Only included above are shares issued and vested through June 30, 2018.

 

(1) All ownership is beneficial and of record, unless indicated otherwise.

 

(2) The Beneficial owner has sole voting and investment power with respect to the shares shown

 

(3) Each share of Series A Preferred Stock entitles the holder to 400 votes on all matters submitted to a vote of the Company’s stockholders.

 

(4) Victoria Rudman was granted 7,500,000 shares of restricted common stock on June 30, 2017; of which 1,875,000 shares vested on December 30, 2017, 1,875,000 shares vested on June 30, 2018 and thereafter 625,000 shares of the Common Stock vesting each month thereafter.

 

(5) William Singer was re-issued 3,000,000 shares on July 28, 2017 for prior year services. He was also granted 6,000,000 on August 31, 2017; of which 1,500,000 shares vested on August 31, 2017 and 1,500,000 shares vested on March 1, 2018 and thereafter 250,000 shares of the Common Stock vesting each month thereafter.

 

(6) Dr. Charles Adelson was appointed as a director on August 29, 2017. Mr. Adelson was awarded a total of 1,000,000 stock options, with 250,000 of the options vested August 29, 2017, and the remaining 250,000 options vesting equally over each subsequent 90-day period for three consecutive 90-day periods, as follows:

 

August 29, 2017     250,000  
November 27, 2017     250,000  
February 25, 2018     250,000  
May 26, 2018     250,000  
Total     1,000,000  

 

-20-
 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Except for compensation arrangements discussed elsewhere in this Annual Report on Form 10-K below, since July 1, 2018, there have been no transactions, or currently proposed transactions, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or 1% of the average of our total assets at year-end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest:

 

  (i) Any director or executive officer of our company;
     
  (ii) Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock;
     
  (iii) Any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons, and any person (other than a tenant or employee) sharing the household of any of the foregoing persons.

 

ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Our independent auditor, Accell Audit and Compliance, P.A. billed an aggregate of $10,000 for the year ended June 30, 2018 for professional services rendered for the audit of the Company’s annual financial statements. Our previous auditor, L&L CPAs PA billed an aggregate of $13,500 in connection with all the quarterly filings for the year ended June 30, 2018.

 

Our independent auditor, L&L CPAs, PA billed an aggregate of $20,000 for the year ended June 30, 2017 and for professional services rendered for the audit of the Company’s annual financial statements and review of the financial statements included in our quarterly reports.

 

We do not have an audit committee and as a result our board of directors performs the duties of an audit committee. Our board of directors evaluates the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services.

 

PART IV

 

ITEM 15. EXHIBITS FINANCIAL STATEMENT SCHEDULES.

 

The following financial information is filed as part of this report:

 

(a)              (1) FINANCIAL STATEMENTS

 

(2) SCHEDULES

 

(3) EXHIBITS. The following exhibits required by Item 601 to be filed herewith are incorporated by reference to previously filed documents:

 

Exhibit

Number

  Description
     
31.1*   Certification of Chief Executive Officer pursuant to Section 302
     
32.1*   Certification of Chief Executive Officer pursuant to Section 906
     
101.INS*    XBRL Instance Document
     
101.SCH*    XBRL Taxonomy Schema
     
101.CAL*    XBRL Taxonomy Calculation Linkbase
     
101.DEF*    XBRL Taxonomy Definition Linkbase
     
101.LAB*    XBRL Taxonomy Label Linkbase
     
101.PRE*    XBRL Taxonomy Presentation Linkbase

 

* Furnished herewith. XBRL (eXtensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

+ Management contract or compensatory plan

 

-21-
 

 

SIGNATURES

 

In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on February 12.

 

  Life Clips, Inc.
     
  By: /s/ Victoria Rudman
   

Victoria Rudman, Interim Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacity and on the date indicated.

 

Signature   Title   Date
         
/s/ Victoria Rudman       February 12, 2020
Victoria Rudman   Interim Chief Executive Officer, Chief Financial Officer and Director (Principal Executive Officer and Principal Financial and Accounting Officer)    
         
/s/ William Singer       February 12, 2020
William Singer   Director    

 

-22-

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