Notes
to Consolidated Financial Statements
June
30, 2020 and 2019
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
Basis
of Presentation and Consolidation – The consolidated financial statements of the Company have been
prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The
Company consolidates the consolidated financial statements of its wholly-owned subsidiaries and all intercompany transactions
and account balances have been eliminated in consolidation.
Use
of Estimates – The preparation of consolidated financial statements in conformity with GAAP 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 consolidated 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 consolidated 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 consolidated statements of operations. 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.
|
The
carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts payable, accrued expenses and
interest, certain notes payable and notes payable – due to related parties, 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 7).
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 Monte Carlo 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 plan payments awarded 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 recognizes revenue in accordance with Accounting Standards Update (“ASU”) No.
2014-09 “Revenue from Contracts with Customers”. The Company recognizes
as revenues the amount of the transaction price that is allocated to the respective performance obligations when the performance
obligation is satisfied, or as it is satisfied. The Company primarily sells disposable and recyclable cell phone batteries. The
Company’s performance obligation is satisfied when the goods have been delivered, which is at a point in time. 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.
|
Recently
Issued Accounting Pronouncements – Financial Accounting Standards Board, or FASB 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
consolidated balance sheet as a right-of-use asset and a lease liability. For consolidated 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 adopted this in Fiscal Year 2020.
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 consolidated financial statements are issued.
Pursuant to ASU 2010-09 of the FASB ASC, the Company as an SEC filer considers its consolidated financial statements issued
when they are widely distributed to users, such as through filing them on EDGAR.
NOTE
3. UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN
The
accompanying consolidated 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
consolidated financial statements, the Company has minimal revenues, net accumulated losses since inception and an accumulated
deficit of $29,301,198. 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 consolidated 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, 2020 and 2019, due to related parties was $763,050 and $463,050, respectively. This was comprised of unpaid compensation
of $580,550 to Victoria Rudman, $122,500 to William Singer, and $60,000 to Charles Adelson.
As
of June 2, 2020, the board approved to pay these amounts by converting them to common stock.
(1)
|
Victoria
Rudman has accrued salary at the rate of $15,000 per month and chairman fees at the rate of $4,000 per month since July 1,
2018.
|
(2)
|
William
Singer has accrued salary at the rate of $1,000 per month and director fees at the rate of $2,500 per month since July 1,
2018.
|
(3)
|
Charles
Adelson has accrued director fees at the rate of $2,500 per month since July 1, 2018.
|
NOTE
5. NOTES PAYABLE – IN DEFAULT
At
June 30, 2020 and 2019, 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
6. CONVERTIBLE NOTES PAYABLE
Convertible
Notes
Balance at
June 30,
2020
|
|
Balance at
June 30,
2019
|
|
Due Date
|
|
Interest
Rate at
June 30,
2020
|
|
Conversion Terms
|
$
|
1,931,806
|
|
|
$
|
1,931,806
|
|
|
Range
from
05/13/2017
to
4/18/2019
|
|
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 - $0.00005 at June 30, 2020, convertible into 38,636 million shares not including interest.
|
|
332,154
|
|
|
|
332,154
|
|
|
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 - $0.00029 at June 30, 2020, convertible into 2,214 million shares not including interest.
|
|
165,000
|
|
|
|
165,000
|
|
|
Range
from
01/27/2018
to
11/15/2019
|
|
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 - $0.00015 at June 30, 2020, convertible into 1,650 million shares not including interest.
|
$
|
2,428,960
|
|
|
$
|
2,428,960
|
|
|
|
|
|
|
|
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
7 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 $0 and $22,890 as of June 30, 2020 and 2019, respectively.
Total
amortization of debt discount amounted to $22,890 and $112,329 for the years ended June 30, 2020 and 2019, respectively.
NOTE
7. 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, 2020, 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,
2020 and 2019 and the amounts that were reflected in income related to derivatives for the period ended:
|
|
June 30, 2020
|
|
The financings giving rise to derivative financial instruments
|
|
Indexed
Shares*
(in millions)
|
|
|
Fair
Values
|
|
Embedded derivatives
|
|
|
68,617
|
|
|
$
|
13,249,507
|
|
Total
|
|
|
68,617
|
|
|
$
|
13,249,507
|
|
*including
principal and interest
|
|
June 30, 2019
|
|
The financings giving rise to derivative financial instruments
|
|
Indexed
Shares*
(in millions)
|
|
|
Fair
Values
|
|
Embedded derivatives
|
|
|
21,674
|
|
|
$
|
3,230,842
|
|
Total
|
|
|
21,674
|
|
|
$
|
3,230,842
|
|
*including
principal and interest
The
following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative
financial instruments by type of financing for the years ended June 30, 2020 and 2019:
The financings giving rise to derivative financial instruments and the gain (loss) effects:
|
|
For the Years Ended
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Embedded derivatives
|
|
$
|
(10,216,274
|
)
|
|
$
|
6,189,531
|
|
Derivative warrants
|
|
|
-
|
|
|
|
(5
|
)
|
Total
|
|
$
|
(10,216,274
|
)
|
|
$
|
6,189,526
|
|
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.
For instruments in which the time to expiration has expired, the Company has utilized the intrinsic value as the fair value.
The intrinsic value is the difference between the quoted market price on the valuation date and the applicable conversion price.
Significant
inputs and results arising from the Monte Carlo Simulation process are as follows for the embedded derivatives that have been
bifurcated from the convertible notes and classified in liabilities:
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Quoted market price on valuation date
|
|
$
|
0.0003
|
|
|
$
|
0.0003
|
|
Range of effective contractual conversion rates
|
|
$
|
0.00005 - $0.00029
|
|
|
$
|
0.00015
- $0.00023
|
|
Contractual term to maturity
|
|
|
N/A
|
|
|
|
0.11 – 0.42 Years
|
|
Market volatility:
|
|
|
|
|
|
|
|
|
Volatility
|
|
|
N/A
|
|
|
|
0% - 57.68
|
%
|
Risk-adjusted interest rate
|
|
|
N/A
|
|
|
|
2.12% - 2.21
|
%
|
The
following table reflects the issuances of compound embedded derivatives and detachable warrants and changes in fair value inputs
and assumptions related to the embedded derivatives and detachable warrants during the years ended June 30, 2020 and 2019:
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Balances at beginning of year
|
|
$
|
3,230,842
|
|
|
$
|
9,284,359
|
|
Issuances:
|
|
|
|
|
|
|
|
|
Embedded derivatives
|
|
|
-
|
|
|
|
75,000
|
|
Detachable warrants
|
|
|
-
|
|
|
|
-
|
|
Conversions:
|
|
|
|
|
|
|
|
|
Embedded derivatives
|
|
|
-
|
|
|
|
-
|
|
Detachable warrants
|
|
|
-
|
|
|
|
-
|
|
Expirations:
|
|
|
|
|
|
|
|
|
Detachable warrants
|
|
|
-
|
|
|
|
-
|
|
Changes in fair value inputs and assumptions reflected in income
|
|
|
10,018,665
|
|
|
|
(6,128,517
|
)
|
|
|
|
|
|
|
|
|
|
Balances at end of year
|
|
$
|
13,249,507
|
|
|
$
|
3,230,842
|
|
NOTE
8. EQUITY
Authorized
Capital
On
September 28, 2017, the Company filed Articles of Amendment authorizing 5,000,000, 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.
Preferred
Stock
Effective
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 400 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.
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.
NOTE
9. INCOME TAX PROVISION
Income
taxes are provided for the tax effects of transactions reported in the consolidated 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.
At
June 30, 2020, the Company has a net operating loss carry-forward of $(29,301,198) 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, 2020.
The
effects of temporary differences that gave rise to significant portions of deferred tax assets at June 30, 2020 and 2019 are approximately
as follows:
|
|
June 30, 2020
|
|
|
June 30, 2019
|
|
Net Operating Loss Carryforward
|
|
$
|
29,301,198
|
|
|
$
|
18,560,871
|
|
Above multiplied by tax rate of
|
|
|
21
|
%
|
|
|
21
|
%
|
Gross Deferred Tax Assets
|
|
|
6,153,251
|
|
|
|
3,897,783
|
|
Less Valuation Allowance
|
|
|
(6,153,251
|
)
|
|
|
(3,897,783
|
)
|
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
|
|
|
|
2020
|
|
|
2019
|
|
Income tax expense (benefit) at statutory rate
|
|
$
|
(2,255,469
|
)
|
|
$
|
1,105,565
|
|
Decrease in valuation allowance
|
|
|
2,255,469
|
|
|
|
(1,105,565
|
)
|
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
10. COMMITTMENTS AND CONTINGENCIES
From
time to time, the Company may be a party to other legal proceedings. Management currently believes that the ultimate resolution
of these matters will not have a material adverse effect on consolidated results of operations, financial position, or cash flow.
NOTE
11. SUBSEQUENT EVENTS
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.
On
September 17, 2020, 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 twenty-trading day period prior to the date of conversion. The note maturity date is September 17, 2021.
On
November 12, 2020, 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 twenty-trading day period prior to the date of conversion. The note maturity date is November 12, 2021.
On
November 13, 2020, the Company entered into an 18% Convertible Promissory Note with RT Acquisitions 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 twenty-trading day period prior to the date of conversion. The note maturity date is November 13, 2021.
On
December 14, 2020, the Company entered into an 18% Convertible Promissory Note with Taconic Group 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 twenty-trading day period prior to the date of conversion. The note maturity date is December 14, 2021.
On
December 17, 2020, the Board of Directors rescinded the June 2, 2020 resolutions and reinstated the previously exchanged salary
and director fee accruals.
On
December 23, 2020, 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 twenty-trading day period prior to the date of conversion. The note maturity date is December 23, 2021.
On
December 24, 2020, the Company entered into an 18% Convertible Promissory Note with RT Acquisitions 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 twenty-trading day period prior to the date of conversion. The note maturity date is December 24, 2021.