LIFE
CLIPS, INC.
STATEMENTS
OF CASH FLOWS
For
the years ended June 30, 2017 and 2016
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
|
|
(Audited)
|
|
|
(Audited)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
gain/(loss)
|
|
$
|
4,579,151
|
|
|
$
|
(19,713,550
|
)
|
Common
Stock Compensation
|
|
|
307,600
|
|
|
|
1,199,933
|
|
Loss
on Debt Settlement
|
|
|
72,916
|
|
|
|
-
|
|
Changes
in derivative liabilities
|
|
|
(14,834,604
|
)
|
|
|
16,922,622
|
|
Amortization
of Debt discount
|
|
|
2,146,527
|
|
|
|
487,402
|
|
Loss
on Batterfly acquisition
|
|
|
6,223,500
|
|
|
|
-
|
|
Adjustments
to reconcile Net Income to Net Cash provided by operations:
|
|
|
|
|
|
|
|
|
Gain/(Loss)
on Derivative
|
|
|
-
|
|
|
|
-
|
|
Other
Current Assets
|
|
|
-
|
|
|
|
-
|
|
Deposit
|
|
|
|
|
|
|
|
|
Due
from related party
|
|
|
-
|
|
|
|
2,713
|
|
Accounts
Receivable
|
|
|
(3,064
|
)
|
|
|
|
|
Accounts
Payable
|
|
|
188,658
|
|
|
|
162,759
|
|
Accrued
expense and interest payable
|
|
|
201,786
|
|
|
|
33,938
|
|
Deferred
Revenue
|
|
|
84,538
|
|
|
|
-
|
|
Liquidated
Damages Payable
|
|
|
37,316
|
|
|
|
-
|
|
Payroll
tax liabilities
|
|
|
10,581
|
|
|
|
8,195
|
|
Net
cash (used in) operating activities
|
|
$
|
(985,095
|
)
|
|
$
|
(895,988
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Investment
- Batterfly Energy Ltd
|
|
|
(892,500
|
)
|
|
|
(240,000
|
)
|
Investment
- Ascenda
|
|
|
-
|
|
|
|
-
|
|
Net
cash (used in) provided by investing activities
|
|
$
|
(892,500
|
)
|
|
$
|
(240,000
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Repurchase
of common stock
|
|
|
-
|
|
|
|
(345,000
|
)
|
Repayment
of note payable-related party
|
|
|
(10,000
|
)
|
|
|
(85,000
|
)
|
Proceed
from convertible notes payables
|
|
|
1,510,034
|
|
|
|
2,032,578
|
|
Net
cash provided by financing activities
|
|
$
|
1,500,034
|
|
|
$
|
1,602,578
|
|
|
|
|
|
|
|
|
|
|
Net
cash increased in cash
|
|
|
(377,561
|
)
|
|
|
466,589
|
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of period
|
|
|
469,233
|
|
|
|
2,644
|
|
|
|
|
|
|
|
|
|
|
Cash
at end of period
|
|
$
|
91,672
|
|
|
$
|
469,233
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Cash
paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
-
|
|
|
$
|
11,791
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
TRANSACTIONS AFFECTING OPERATING, INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value
of common shares issued as payment of debt
|
|
$
|
-
|
|
|
$
|
-
|
|
Value
of common shares issued for services
|
|
$
|
35,400
|
|
|
$
|
-
|
|
Value
of common shares returned to treasury
|
|
$
|
30,617
|
|
|
$
|
-
|
|
Value
of common shares issued for acquisition of Batterfly Energy LTD
|
|
$
|
5,091,000
|
|
|
$
|
-
|
|
Issuance
of Common Stock for acquisition of Batterfly Energy LTD
|
|
|
9,500,000
|
|
|
|
-
|
|
Issuance
of Common Stock for convertible notes payable
|
|
|
141,650,914
|
|
|
|
-
|
|
Issuance
of Common Stock for services
|
|
|
3,250,000
|
|
|
|
-
|
|
Notes
payable
|
|
$
|
1,224,925
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial statements.
Life
Clips, Inc.
Footnotes
to Financial Statements June 30, 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 previously announced 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.
Our
Company is focused 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.
|
On
June 22, 2017, the Company entered into a Stock Purchase Agreement (the “SPA”) with Ascenda, a company limited by
shares incorporated under the laws of Independent State of Samoa (“Seller”), Hong Kong Ascenda International Co.,
Limited, a company limited by shares incorporated under the laws of Hong Kong (“Company HK”), and Hong Kong Ascenda
International Co., Limited, a company limited by shares incorporated under the laws of Independent State of Samoa (“Company
Samoa”, and collectively with Company HK, the “Targets” and each a “Target”). On November 27, 2017
the SPA was rescinded, ab initio, and is of no further force or effect. See Note 14.
The
following is a description of recent transactions entered into by the Company and its key distributors:
On
April 7, 2017, the Company entered into a five-year authorized sales representative agreement to provide global sales and marketing
to Textiss USA (Textiss), a California Corporation, for its Crazyboxer line of men’s underwear (the “Products”).
Textiss is a global leader in the textile and garment industry with a specialization in the design, production, and distribution
of underwear. Over the five-year contract, the Company will carry out worldwide multi-channel retail sales and marketing for Textiss
for the following accounts: Costco, HSN, Sam’s Club, Wal-Mart, Target, Nordstrom’s Rack, Amazon.com, Walmart.com,
Jet.com, Boxed.com, Costco.com, Samsclub.com, Target.com, Zappos.com and Nordstrom.com. With respect to each signed contract with
a customer for the sale of the Products, the Company will be entitled to the following commission:
|
1.
|
For
retail stores (brick and mortar) the commission will be 5% of Net Revenue (as defined below) received from the retailer;
|
|
2.
|
For
online stores managed by the Company, the commission rate will be 10% of Gross Revenue, minus returns.
|
|
3.
|
“Net
Revenue” shall be (i) gross revenue paid to the Company from the customer, less (ii) the cost of goods sold, any market
development funds (as agreed to by the Company) and product returns. The Company shall receive a monthly accounting of all
sales activity and commissions, and commissions shall be payable within the (10) days of the end of each month for all sales
in the preceding proceeding month.
|
The
Company and Textiss will have the option to extend the initial five-year term for additional periods of one-year each at the end
of the Initial Term or any Renewal Term.
On
April 12, 2017, the Company’s Mobeego battery products became available on Amazon.com. Mobeego™ is an affordable,
single-use, cordless battery that provides an instant shot of power for your phone, so you can stay mobile whenever and wherever.
After use, the battery can be discarded or recycled. Mobeego batteries are great for emergency preparedness, since they can be
stored up to 10 years without any power leaking. Each package contains a battery and a reusable smartphone adaptor.
The
Mobeego products available from the Company on Amazon,com include: the Mobeego Single Shot Starter Kit that includes an iPhone
or USB reusable adaptor and single battery providing up to 4 hours of additional power. Additional batteries are also available
in 3 packs and 6 packs. The Mobeego products are eligible for free shipping with an Amazon Prime membership.
On
April 19, 2017, the Company entered into a distribution agreement with Misaki Corporation (“Misaki”), organized under
the laws of Tokyo, Japan. It is a royalty free, non-exclusive one-year contract with a distributor to sell Mobeego products in
Japan. The contract granted Misaki the non-transferable right to promote, market and resell Mobeego products and will be automatically
renewed for one additional year, provided Misaki has performed all of its commitments and obligations. The terms of the contract
require Misaki to pay 50% of each accepted order in advance and 50% on delivery.
On
May 3, 2017, the Company entered into a distribution agreement with Axperrt Company Limited (“Axpert”), organized
under the laws of Republic of China. It is a royalty free, non-exclusive one-year contract with a distributor to sell Mobeego
products throughout Asia, New Zealand, Singapore, the Philippines, India, Indonesia, Cambodia and Vietnam. The contract grants
Axpert the non-transferable right to promote, market and resell Mobeego products and will be automatically renewed for one additional
year, provided Axpert has performed all of its commitments and obligations. The terms of the contract require Axpert to pay 50%
of each accepted order in advance and 50% on delivery.
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use
of estimates
– The preparation of financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
Cash
and cash equivalents
– For financial statement presentation purposes, the Company considers all short term investments
with a maturity date of three months or less to be cash equivalents.
Income
Tax
– The Company accounts for income taxes under ASC 740 “Income Taxes” which codified SFAS 109, “Accounting
for Income Taxes.” under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected
to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC
740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment
occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will
not realize tax assets through future operations.
Basic
and Diluted Net Income (Loss) Per Share
– The Company computes net income (loss) per share in accordance with ASC 260
“Earnings Per Share” which codified SFAS No. 128. “Earnings per Share.” ASC 260 requires presentation
of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net
income (loss) available to common shareholders (numerator) by the weighted average number of shares of common stock outstanding
during the period. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments
such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Diluted
EPS excludes all dilutive potential shares if their effect is anti-dilutive.
Intangible
Asset
– The Company is no longer developing software. The development cost through June 30, 2016 has totaled $70,450.
The software has an infinite useful life and will be tested annually for impairment.
Fair
Value of Financial Instruments
The
Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance
on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability,
as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that
market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes
a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation
techniques, are assigned a hierarchical level.
The
following are the hierarchical levels of inputs to measure fair value:
|
●
|
Level
1 – Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.
|
|
|
|
|
●
|
Level
2 – Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for
similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities;
or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
|
|
|
|
|
●
|
Level
3 – Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine
fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.
|
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets,
accounts payable & accrued expenses, certain notes payable and notes payable – related party, approximate their fair
values because of the short maturity of these instruments.
The
Company accounts for its derivative liabilities, at fair value, on a recurring basis under level 3. See Note 8.
Embedded
Conversion Features
The
Company evaluates embedded conversion features within convertible debt under ASC 815 “Derivatives and Hedging” to
determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative
at fair value with changes in fair value recorded in earnings. If the conversion feature does not require derivative treatment
under ASC 815, the instrument is evaluated under ASC 470-20 “Debt with Conversion and Other Options” for consideration
of any beneficial conversion feature.
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain
features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the
derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the
fair value reported as charges or credits to income.
For
option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative
instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such
instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
Debt
Issue Costs and Debt Discount
The
Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These
costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life
of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Stock
based compensation
– ASC 718 “Compensation Stock Compensation” codified SFAS No. 123 prescribes accounting
and reporting standards for all stock based compensation plans payments award to employees, including employee stock options,
restricted stock, employee stock purchase plans and stock appreciation rights, which may be classified as either equity or liabilities.
The Company should determine if a present obligation to settle the share based payment transaction in cash or other assets exists.
A present obligation to settle in cash or other assets exists if: (a) the option to settle by issuing equity instruments lacks
commercial substance or (b) the present obligation is implied because of an entity’s past practices or stated policies.
If a present obligation exists, the transaction should be recognized as a liability; otherwise, the transaction should be
recognized as equity.
The
Company accounts for stock based compensation issued to nonemployees and consultants in accordance with the provisions of ASC
50550 “Equity Based Payments to NonEmployees” which codified SFAS 123 and the Emerging Issues Task Force consensus
in Issue No. 9618, “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring or in Conjunction
with Selling, Goods or Services”. Measurement of share based payment transactions with nonemployees shall be based on the
fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued.
The fair value of the share based payment transaction should be determined at the earlier of performance commitment date or performance
completion date.
Recognition
of Revenues
– The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition
in Financial Statements”. This statement established that revenue can be recognized when persuasive evidence of an arrangement
exists, the services have been delivered, all significant contractual obligations have been satisfied, the fee is fixed or determinable
and collection is reasonably assured.
Subsequent
Events
– The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the
disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are
issued.
Pursuant
to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued
when they are widely distributed to users, such as through filing them on EDGAR.
The
Company reviewed all recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA,
and the SEC and they did not or are not believed by management to have a material impact on the Company’s present or future
financial statements.
NOTE
3. UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN
The
accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and
the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying financial statements,
the Company has minimal revenues, net accumulated losses since inception and a shareholders’ deficit of $5,782,212 as of
June 30, 2017. These factors raise doubt about its ability to continue as a going concern. The ability of the Company to continue
as a going concern is dependent on management funding operating costs and the successful production and sales release of the Life
Clips camera. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue
as a going concern.
NOTE
4. RELATED PARTY TRANSACTIONS
At
June 30, 2017 and June 30, 2016, a major shareholder owed the Company $-0- and $-0-, respectively.
The
compensation paid to related parties for the ending June 30, 2017 is outlined in the following table:
|
|
|
|
|
Contract
|
|
|
Contract
|
|
|
Resignation
|
|
|
Cash
per
|
|
|
Cash
Paid out
|
|
|
Accrued
in 2017
|
|
|
1st
Grant - On Effective Date
|
|
Name
|
|
Position
|
|
|
Start
|
|
|
End
|
|
|
Date
|
|
|
month
|
|
|
in
2017
|
|
|
(unpaid)
|
|
|
# of Shares
|
|
Huey
Long
|
|
|
CEO
|
|
|
|
02/02/2017
|
|
|
|
02/02/2018
|
|
|
|
11/10/2017
|
|
|
$
|
25,000
|
|
|
$
|
125,000
|
|
|
|
-
|
|
|
|
3,750,000
|
|
William
Singer
|
|
|
Director
|
|
|
|
03/01/2017
|
|
|
|
03/01/2018
|
|
|
|
Active
|
|
|
$
|
3,500
|
|
|
$
|
17,500
|
|
|
|
-
|
|
|
|
1,500,000
|
|
Victoria
Rudman*
|
|
|
CFO
|
|
|
|
01/16/2017*
|
|
|
|
06/30/2018
|
|
|
|
Active
|
|
|
$
|
5,000
|
|
|
$
|
30,000
|
|
|
|
*Agreement
as of 7/1/17
|
|
|
|
1,875,000
|
|
*Ms.
Rudman was appointed CFO on January 16, 2017 (Form 8-K filed on January 23, 2017). A formal agreement was not executed until June
30, 2017 at a cash rate of $12,500 monthly.
NOTE
5. INTANGIBLE ASSETS
The
Company is no longer in the business of developing software. The development cost for the years ended June 30, 2017 and 2016 are
$0 and $646,980, respectively. The software had been written off during the annual impairment test.
|
|
June
30, 2016
|
|
|
June
30, 2016
|
|
|
|
|
|
|
|
|
Software
|
|
$
|
—
|
|
|
$
|
646,980
|
|
Less:
Impairment Charges
|
|
|
—
|
|
|
|
(646,980
|
)
|
Less:
Accumulated Amortization
|
|
|
—
|
|
|
|
—
|
|
Software
- net
|
|
$
|
-0-
|
|
|
$
|
-0-
|
|
NOTE
6. NOTES PAYABLE
At
June 30, 2017 and June 30, 2016 the Company had notes payable in the amount of $530,000 and $0, respectively.
NOTE
7. CONVERTIBLE DEBT AND WARRANTS
The
Company has recorded derivative liabilities associated with convertible debt instruments and warrants, as more fully discussed
at Note 8.
(A)
Convertible Notes and Warrants
On
October 2, 2015, the Company completed an offering of its 3.85% Convertible Promissory Notes (the “3.85% Notes”) in
the aggregate principal amount of $617,578 and on December 7, 2015 the Company completed an offering of its 10% Convertible Promissory
Notes (the “10% Notes”) in the aggregate principal amount of $250,000 (the “10% Notes”, and together with
the 3.85% Notes, each a “Note” and collectively, the “Notes”), as applicable, with certain “accredited
investors” (the “Investors”), as defined under Regulation D, Rule 501 of the Securities Act. The entire principal
amount of the Notes remaining outstanding at December 31, 2016 was $417,588, such amount being exclusive of securities converted
into the Notes separate from the offering of the Notes. Pursuant to the offering of the Notes, the Company received $617,578 and
$250,000 in net proceeds on October 2, 2015 and December 7, 2015, respectively.
In
addition to the terms customarily included in such instruments, the Notes began accruing interest on the date that each Investor
submitted the principal balance of such Investor’s Note, with the interest thereon becoming due and payable on the two-year
anniversary of said date. Upon a default of the Notes, the interest rate will increase to 18%. The principal balance of each Note
and all unpaid interest will become due and payable twenty-four (24) months after the date of issuance. The Notes may be prepaid
with or without a penalty depending on the date of the prepayment. The principal and interest under the 3.85% Notes are converted
at $ $0.026. The principal and interest under the 10% Notes are convertible into shares of the Company’s common stock at
75% times the Volume Weighted Average Price for a 5 days period prior to the conversion date as quoted on the OTC market and pursuant
to the terms of a Security Purchase Agreement, dated as of October 2, 2015 and December 7, 2015, as applicable, by and between
the Company and each Investor.
In
connection with the Notes Offering, the Company entered into Registration Rights Agreements, each dated as of October 2, 2015
and December 7, 2015 and each by and between us and each of the Investors.
The
company entered into convertible notes with eleven third party accredited investors from December 2015 to December 2016. In addition
to the terms customarily included in such instruments, the Notes began accruing interest on the date that each Investor submitted
the principal balance of such Investor’s Note, with the interest thereon becoming due and payable on terms specified in
said date (see below). Interest rates range from 5% to 10% and are due at various dates from August 2016 to March 2018. These
notes are convertible at any time by the investor, prior to the note principal and interest being repaid at rates ranging from
$0.006 to $0.033 per share, subject to change due to a ratchet feature contained in most of the notes.
Balance
at
|
|
|
|
|
|
|
|
|
Purchased
|
|
|
Balance
at
|
|
|
Interest
|
|
|
Interest
|
|
|
Due
|
|
Interest
|
|
|
Conversion
|
July
1, 2016
|
|
|
Additions
|
|
|
Conversions
|
|
|
(sold)
|
|
|
June
30, 2017
|
|
|
Expense
|
|
|
converted
|
|
|
Date
|
|
Rate
|
|
|
Price
|
|
25,000
|
|
|
|
-
|
|
|
|
(25,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
1,274
|
|
|
|
(1,274
|
)
|
|
05/30/17
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
50,000
|
|
|
|
-
|
|
|
|
(50,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
3,041
|
|
|
|
(3,041
|
)
|
|
10/02/17
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
164,360
|
|
|
|
-
|
|
|
|
(164,360
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
7,433
|
|
|
|
(7,433
|
)
|
|
10/02/17
|
|
|
3.85
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
15,000
|
|
|
|
-
|
|
|
|
(15,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
813
|
|
|
|
(813
|
)
|
|
02/23/17
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
151,073
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
151,073
|
|
|
|
10,087
|
|
|
|
-
|
|
|
10/02/17
|
|
|
3.85
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
151,073
|
|
|
|
-
|
|
|
|
(81,494
|
)
|
|
|
-
|
|
|
|
69,578
|
|
|
|
7,952
|
|
|
|
-
|
|
|
10/02/17
|
|
|
3.85
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
151,073
|
|
|
|
-
|
|
|
|
(106,600
|
)
|
|
|
-
|
|
|
|
44,473
|
|
|
|
7,854
|
|
|
|
-
|
|
|
10/02/17
|
|
|
3.85
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
250,000
|
|
|
|
-
|
|
|
|
(150,000
|
)
|
|
|
-
|
|
|
|
100,000
|
|
|
|
32,792
|
|
|
|
-
|
|
|
12/07/16
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
300,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
300,000
|
|
|
|
38,992
|
|
|
|
-
|
|
|
04/28/17
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
700,000
|
|
|
|
-
|
|
|
|
(91,070
|
)
|
|
|
-
|
|
|
|
608,930
|
|
|
|
80,187
|
|
|
|
-
|
|
|
05/14/17
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
75,000
|
|
|
|
-
|
|
|
|
(23,209
|
)
|
|
|
-
|
|
|
|
51,791
|
|
|
|
25,833
|
|
|
|
-
|
|
|
06/10/17
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
75,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
75,000
|
|
|
|
7,007
|
|
|
|
-
|
|
|
07/22/17
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
225,000
|
|
|
|
(125,350
|
)
|
|
|
-
|
|
|
|
99,650
|
|
|
|
15,474
|
|
|
|
-
|
|
|
09/23/17
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
150,000
|
|
|
|
(94,634
|
)
|
|
|
(10,000
|
)
|
|
|
45,366
|
|
|
|
8,993
|
|
|
|
-
|
|
|
10/19/17
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000
|
|
|
|
210
|
|
|
|
-
|
|
|
01/28/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000
|
|
|
|
210
|
|
|
|
-
|
|
|
01/28/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
5,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000
|
|
|
|
201
|
|
|
|
-
|
|
|
02/03/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
11,666
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,666
|
|
|
|
444
|
|
|
|
-
|
|
|
02/11/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
11,668
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,668
|
|
|
|
444
|
|
|
|
-
|
|
|
02/11/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
11,700
|
|
|
|
-
|
|
|
|
-
|
|
|
|
11,700
|
|
|
|
433
|
|
|
|
-
|
|
|
02/15/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
1,808
|
|
|
|
-
|
|
|
02/18/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
1,726
|
|
|
|
-
|
|
|
02/24/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
1,466
|
|
|
|
-
|
|
|
03/15/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
1,452
|
|
|
|
-
|
|
|
03/16/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
1,425
|
|
|
|
-
|
|
|
03/18/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
1,274
|
|
|
|
-
|
|
|
03/29/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
1,205
|
|
|
|
-
|
|
|
04/04/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
822
|
|
|
|
-
|
|
|
05/02/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
50,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
50,000
|
|
|
|
397
|
|
|
|
-
|
|
|
06/02/18
|
|
|
10.00
|
%
|
|
50%
of the average of the lowest three trading prices during the 20 trading day period prior to the conversion date
|
|
-
|
|
|
|
30,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
1,442
|
|
|
|
|
|
|
10/14/16
|
|
|
5.00
|
%
|
|
Non-Convertible
|
|
2,032,578
|
|
|
|
980,034
|
|
|
|
(926,717
|
)
|
|
|
(10,000
|
)
|
|
|
2,075,895
|
|
|
|
262,691
|
|
|
|
(12,561
|
)
|
|
|
|
|
|
|
|
|
The
Company has determined that the conversion feature of the Notes represents an embedded derivative since the Notes are convertible
into a variable number of shares upon conversion. Accordingly, the Notes are not considered to be conventional debt and the embedded
conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. See Note 8 for further discussion.
(B)
Terms of Debt
The
debt carries interest between 3.85% and 10%, and is due in October 2017 and March 2018.
All
convertible debt in connection with the Notes Offering are convertible at $0.026 and $0.44/share (on June 30, 2016), however,
the Notes include a “ratchet feature”, which allows for a lower offering price based on market prices.
(C)
Future Commitments
At
June 30, 2016, the Company has outstanding convertible debt of $2,075,895 which is payable within the next eleven months.
The
Company recorded the debt discount to the extent of the gross proceeds raised, and expensed immediately the remaining fair value
of the derivative liability, as it exceeded the gross proceeds of the note.
The
Company recorded debt discount of $681,047 and $2,076,912 for the year ended June 30, 2017 and 2016.
The
amortization of debt discount amounted to $2,146,527 and $487,399 for the year ended June 30, 2017 and 2016, respectively.
The
Convertible Notes Payable changes for the year ended June 30, 2017 are listed in the following table.
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
Balance
Prior Year (current and long term)
|
|
$
|
443,065
|
|
|
$
|
85,000
|
|
Proceeds
|
|
|
980,034
|
|
|
|
2,032,578
|
|
Repayments/Conversion
|
|
|
(951,725
|
)
|
|
|
(85,000
|
)
|
Less:
gross Debt Discount recorded
|
|
|
(980,034
|
)
|
|
|
(2,076,912
|
)
|
Add:
Amortization of Debt Discount
|
|
|
2,146,650
|
|
|
|
487,399
|
|
Less
Current portion
|
|
|
(1,637,990
|
)
|
|
|
(108,953
|
)
|
Long-Term
Convertible Debt
|
|
$
|
-
|
|
|
$
|
334,112
|
|
NOTE
8. DERIVATIVE LIABILITIES
The
Company identified conversion features embedded within convertible debt and warrants issued in the year ended June 30, 2017. The
Company has determined that the features associated with the embedded conversion option, in the form a ratchet provision, should
be accounted for at fair value, as a derivative liability, as the Company cannot determine if a sufficient number of shares would
be available to settle all potential future conversion and warrant transactions.
The
derivate liability changes for the year ended June 30, 217 are listed in the following table.
|
|
Derivative
Liabilities
|
|
DL
as of 6/30/2016
|
|
|
20,143,189
|
|
Initial
DL
|
|
|
2,533,938
|
|
Changes
in DL
|
|
|
(16,392,718
|
)
|
Reclassify
to APIC
|
|
|
(3,324,568
|
)
|
DL
as of 6/30/2017
|
|
|
2,959,841
|
|
The
fair value at the commitment and re-measurement dates for the Company’s derivative liabilities were based upon the following
management assumptions as June 30, 2017:
|
|
Commitment
Date
|
|
|
Re-measurement
Date
|
|
Expected
dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
Expected
volatility
|
|
|
220
|
%
|
|
|
261
|
%
|
Expected
term
|
|
|
0.5
to 3 years
|
|
|
|
0.10-2.87
years
|
|
Risk
free interest rate
|
|
|
0.43%-1.11
|
%
|
|
|
0.36%-
0.71
|
%
|
NOTE
9. EQUITY
Authorized
Capital
On
April 4, 2016, 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.
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.
As
of June 30, 2017, the Company had 187,866,264 shares of Common Stock issued and outstanding.
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.
On
April 20, 2016, the company adopted the Life Clips, Inc. 2016 Stock and Incentive Plan under which the Company may issue nonqualified
stock options, incentive stock options, stock appreciation rights, restricted stock grants and units, performance units and awards
of cash. A maximum of 20,000,000 shares of common stock may be issued under the plan, representing in excess of 35% of the number
of the Company’s currently outstanding shares. Awards under the plan will be made at the discretion of the Board of Directors,
although no awards have been made to date. Accordingly, the Company cannot currently determine the amount of awards that will
be made under the plan.
Common
Stock
Net
common stock issued for the year ended June 30, 2017 was 134,533,688 shares compared to 36,466,902 shares for the year ended June
30, 2016, as follows:
|
|
Preferred
Stock
|
|
|
Common
Stock
|
|
|
Shares
to
be
Issued and
|
|
|
AdditionalPaid-In
|
|
|
Accumulated
|
|
|
Total
Shareholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Returned
|
|
|
Capital
|
|
|
Deficit
|
|
|
(Deficit)
|
|
Issuance
of Preferred Stock for services
|
|
|
1,000,000
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000
|
|
Shares
issued for conversions and true-ups
|
|
|
|
|
|
|
|
|
|
|
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 consulting services
|
|
|
|
|
|
|
|
|
|
|
500,000
|
|
|
|
500
|
|
|
|
|
|
|
|
265,500
|
|
|
|
|
|
|
|
266,000
|
|
Shares
cancelled and returned to treasury
|
|
|
|
|
|
|
|
|
|
|
(27,617,226
|
)
|
|
|
(27,617
|
)
|
|
|
|
|
|
|
27,617
|
|
|
|
|
|
|
|
-
|
|
Shares
in treasury for employee stock vesting -To be issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,250
|
|
|
|
38,350
|
|
|
|
|
|
|
|
41,600
|
|
Recalissfy
to APIC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,324,568
|
|
|
|
|
|
|
|
77,818
|
|
Balances
as of June 30, 2017
|
|
|
1,000,000
|
|
|
$
|
1,000
|
|
|
|
134,533,688
|
|
|
$
|
134,534
|
|
|
|
6,732
|
|
|
$
|
9,592,822
|
|
|
$
|
-
|
|
|
$
|
6,488,338
|
|
Warrants
and Options
There
are two warrants whose fair value at the balance sheet date is $2,243.
The
Company had issued four warrants dated from February to May 2016. Two of the warrants were related to consulting agreements and
have been fully converted. The remaining two are related to convertible note holders. The details are:
Purpose
of
|
|
Issue
|
|
|
Number
Shares
|
|
|
Warrant
|
|
|
Period
Warrants
|
|
Warrant
Issuance
|
|
Date
|
|
|
Common
Stock
|
|
|
Exercise
Price
|
|
|
Exercisable
|
|
Consulting
Services
|
|
|
2/22/2016
|
|
|
|
2,600,000
|
|
|
$
|
0.001
|
|
|
|
2/22/2016
to 2/22/2019
|
|
Website
design and Digital
|
|
|
3/10/2016
|
|
|
|
1,916,500
|
|
|
$
|
0.001
|
|
|
|
3/10/2016
to 3/10/2019
|
|
Locker
app development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor
Incentive
|
|
|
4/27/2016
|
|
|
|
625,000
|
|
|
$
|
0.400
|
|
|
|
4/27/2016
to 3/30/2018
|
|
Investor
Incentive
|
|
|
5/13/2016
|
|
|
|
350,000
|
|
|
$
|
0.400
|
|
|
|
5/13/2016
to 5/13/2019
|
|
Total
|
|
|
|
|
|
|
5,491,500
|
|
|
|
|
|
|
|
|
|
NOTE
10. EMPLOYMENT AGREEMENTS
For
the year ending June 30, 2017, the Company entered into several employment agreements with key officers, the following table summarizes
the terms and related share grants:
|
|
|
|
|
Contract
|
|
|
Contract
|
|
|
Resignation
|
|
|
Cash
per month
|
|
|
Cash
Paid out
|
|
|
Accrued
in 2017
|
|
|
1st
Grant - On Effective
|
|
Name
|
|
Position
|
|
|
Start
|
|
|
End
|
|
|
Date
|
|
|
# of shares
|
|
|
in
2017
|
|
|
(unpaid)
|
|
|
Date
|
|
Huey
Long
|
|
|
CEO
|
|
|
|
02/02/2017
|
|
|
|
02/02/2018
|
|
|
|
11/10/2017
|
|
|
$
|
25,000
|
|
|
$
|
125,000
|
|
|
|
-
|
|
|
|
3,750,000
|
|
William
Singer
|
|
|
VP
|
|
|
|
03/01/2017
|
|
|
|
03/01/2018
|
|
|
|
Active
|
|
|
$
|
3,500
|
|
|
$
|
17,500
|
|
|
|
-
|
|
|
|
1,500,000
|
|
Scott
Silverman
|
|
|
VP
|
|
|
|
06/21/2017
|
|
|
|
06/21/2018
|
|
|
|
09/25/2017
|
|
|
$
|
12,500
|
|
|
$
|
6,250
|
|
|
$
|
6,250
|
|
|
|
Resigned
prior to Vesting date, therefore no shares issued.
|
|
Victoria
Rudman*
|
|
|
CFO
|
|
|
|
01/16/2017*
|
|
|
|
06/30/2018
|
|
|
|
Active
|
|
|
$
|
5,000
|
|
|
$
|
30,000
|
|
|
|
*Agreement
as of 7/1/17
|
|
|
|
1,875,000
|
|
*Ms.
Rudman was appointed CFO on January 16, 2017 (Form 8-K filed on January 23, 2017). A formal agreement was not executed until June
30, 2017 at a cash rate of $12,500 monthly.
|
|
|
|
|
Contract
|
|
|
Contract
|
|
|
Resignation
|
|
|
Cash
per month
|
|
|
Cash
Paid out
|
|
|
Accrued
in 2017
|
|
|
1st
Grant - On Effective
|
|
Name
|
|
Position
|
|
|
Start
|
|
|
End
|
|
|
Date
|
|
|
#
of Shares
|
|
|
in
2017
|
|
|
(unpaid)
|
|
|
Date
|
|
Huey
Long
|
|
|
CEO
|
|
|
|
02/02/2017
|
|
|
|
02/02/2018
|
|
|
|
11/10/2017
|
|
|
$
|
25,000
|
|
|
$
|
125,000
|
|
|
|
-
|
|
|
|
3,750,000
|
|
William
Singer
|
|
|
VP
|
|
|
|
03/01/2017
|
|
|
|
03/01/2018
|
|
|
|
Active
|
|
|
$
|
3,500
|
|
|
$
|
17,500
|
|
|
|
-
|
|
|
|
1,500,000
|
|
Scott
Silverman
|
|
|
VP
|
|
|
|
06/21/2017
|
|
|
|
06/21/2018
|
|
|
|
09/25/2017
|
|
|
$
|
12,500
|
|
|
$
|
6,250
|
|
|
$
|
6,250
|
|
|
|
Resigned
prior to Vesting date, therefore no shares issued.
|
|
Victoria
Rudman*
|
|
|
CFO
|
|
|
|
01/16/2017*
|
|
|
|
06/30/2018
|
|
|
|
Active
|
|
|
$
|
5,000
|
|
|
$
|
30,000
|
|
|
|
*Agreement
as of 7/1/17
|
|
|
|
1,875,000
|
|
NOTE
11. MATERIAL AGREEMENTS
On
July 11, 2016, the Company completed its previously announced 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.
On
June 22, 2017, the Company entered into a Stock Purchase Agreement (the “SPA”) with Ascenda Corporation, a company
limited by shares incorporated under the laws of Independent State of Samoa (“Ascenda”), Hong Kong Ascenda International
Co., Limited, a company limited by shares incorporated under the laws of Hong Kong (“Company HK”), and Hong Kong Ascenda
International Co., Limited, a company limited by shares incorporated under the laws of Independent State of Samoa (“Company
Samoa”, and collectively with Company HK, the “Targets” and each a “Target”).
Effective
as of November 24, 2017, Huey Long, the Company’s Chief Executive Officer and a member of its board of directors, resigned
his position as an officer and director of the Company as previously disclosed by the Company. Further, on November 27, 2017,
Seller, Company HK, Company Samoa and Donald Ruan entered into a Rescission and Mutual Release Agreement (the “Rescission
Agreement”) pursuant to which the parties thereto agreed to rescind, ab initio, the SPA. As a result of the Rescission Agreement,
the acquisition of the Targets is deemed not to have occurred and will be of no further force or effect. As a result of these
events, and the Company’s efforts to secure additional financing and additional partners to expand sales of its Mobeego
product line, the Company is no longer seeking to launch its planned global sourcing business with Textiss USA, Misaki Corporation
and Axperrt Company Limited as previously disclosed.
NOTE
12. 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.
At
June 30, 2016, the Company has a net operating loss carry-forward of approximately $20,454,450 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, 2016.
The
effects of temporary differences that gave rise to significant portions of deferred tax assets at June 30, 2017 and June 30, 2016
are approximately as follows:
|
|
June
30, 2017
|
|
|
June
30, 2016
|
|
Net
operating loss carryforward
|
|
$
|
15,875,299
|
|
|
$
|
20,454,450
|
|
Gross
Deferred Tax Assets
|
|
|
5,397,602
|
|
|
|
6,954,000
|
|
Less
Valuation Allowance
|
|
|
(5,397,602
|
)
|
|
|
(6,954,000
|
)
|
Total
Deferred Tax Assets – Net
|
|
|
-
|
|
|
|
-
|
|
There
was no income tax expense for the years ended June 30, 2017 and 2016 due to the Company’s net losses.
NOTE
13. SUBSEQUENT EVENTS
The
Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent
events. The company will evaluate subsequent events through the date of the issuance of the financial statements.
Effective
as of July 24, 2017, and as disclosed the Form 8-K filed by the Company on August 2, 2017, the Company amended its Articles of
Incorporation to increase the number of authorized shares of common stock of the Company, par value $0.001 per share (the “Common
Stock”) from 300,000,000 shares of Common Stock to 800,000,000 shares of Common Stock.
Effective
as of August 7, 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 400 votes.
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 five trading day period prior to the date of conversion. The note maturity date is August 30, 2018.
Effective
as of September 26, 2017,
the
Company
amended its Articles of Incorporation to increase the number of authorized shares of common stock of the Company, par value $0.001
per share (the “Common Stock”) from 800,000,000 shares of Common Stock to 5,000,000,000 shares of Common Stock.
Effective
as of November 24, 2017, Huey Long, the Company’s Chief Executive Officer and a member of its board of directors, resigned
his position as an officer and director of the Company pursuant to a resignation letter dated November 10, 2017 as previously
disclosed by the Company. The Company has accrued $75,000 through November 24, 2017 to reflect unpaid amounts to Mr. Long provided
for in the February 2, 2017 employment agreement it entered into with Mr. Long.
On
November 27, 2017, Seller, Company HK, Company Samoa and Donald Ruan entered into a Rescission and Mutual Release Agreement (the
“Rescission Agreement”) pursuant to which the parties thereto agreed to rescind, ab initio, the Company’s June
22, 2017 acquisition of Company HK and Company Samoa pursuant to the SPA described in Note 1. As a result of the Rescission Agreement,
the Acquisition is deemed not to have occurred, and the Note issued by the Company as partial consideration for the acquisition
was terminated and rescinded
ab initio
, and will be of no further force or effect. The 10,000,000 shares were cancelled
and returned to the Company.
Pursuant
to the terms of the Rescission Agreement, Mr. Ruan resigned from all positions he held as a director or officer of the Company
and any of its subsidiaries. In addition, the Employment Agreement entered into between the Company and Mr. Ruan was terminated,
and Mr. Ruan waived any rights to the 500,000 shares of common stock that were to be issued by the Company pursuant to the Employment
Agreement.
On
September 25, 2017, Huey Long, on behalf of the Company, without Board approval, entered into a Mutual Release Agreement and 12%
Promissory Note with Scott Silverman. The note was in a principal amount of $26,500 and matured on March 1, 2018. The Company
is currently in negotiations with Mr. Silverman.
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 five 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 five trading day period prior to the date of conversion. The note maturity date is March 1, 2019.
On
March 23, 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 March 1, 2019.
After
year ending June 30. 2017, there were a total of 1,071,965,073 common stock shares issued.