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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

☒ Quarterly report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended March 31, 2022

 

☐ Transition report pursuant section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from ________________ to ________________

 

Commission file number 000-55697

 

Life Clips, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

Wyoming   3861   46-2378100

(State or Other Jurisdiction of

Incorporation or Organization)

  

(Primary Standard Industrial

Classification Code Number)

  

(I.R.S. Employer

Identification No.)

 

2875 Northeast 191 Street

Suite 500 - #218

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

 

Registrant’s telephone number including area code: (800) 292-8991

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Ticker symbol(s)   Name of each exchange on which registered
         

 

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 ☒ 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

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

 

  Large accelerated filer ☐ Accelerated filer ☐
  Non-accelerated filer ☐ Smaller reporting company ☒
    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 ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class 

Outstanding at

May 12, 2022

 
Common Stock, $0.001 par value per share   1,794,446,647 

 

Indicate by check mark whether 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 7(a)(2)(B) of the Securities Act and Section 13(a) of the Exchange Act.

 

 

 

 

 

 

LIFE CLIPS, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2022

TABLE OF CONTENTS

 

    Page
PART I — FINANCIAL INFORMATION 3
     
Item 1. Consolidated Financial Statements 3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 20
Item 4. Controls and Procedures 20
     
PART II — OTHER INFORMATION 21
     
Item 1. Legal Proceedings 21
Item 1A. Risk Factors 21
Item 2. Properties 21
Item 3. Mining Safety Disclosures 21
Item 4. Other Information 21
Item 5. Exhibits 22
Signatures 23

 

2

 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Consolidated Financial Statements

 

Life Clips, Inc.

Consolidated Balance Sheets

 

     March 31,     June 30, 
   2022   2021 
    (Unaudited)    (Audited) 
ASSETS          
Current Assets          
Cash  $855,759   $230,685 
Accounts Receivable   1,254,154    - 
Due from Related Party   -    34,271 
Other Current Assets   410,719    - 
Total Current Assets   2,520,632    264,956 
           
Right-of-Use Asset   264,243    - 
Investments - Ehave Inc   8,549    38,422 
Property and Equipment, net   1,255,943    - 
Intangible Assets   

46,575,083

    - 
Total Assets  $50,624,450   $303,378 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
Current Liabilities:          
Accounts Payable  $3,182,560   $399,670 
Accrued Expenses and Interest Payable   259,224    521,521 
Deferred Revenue   -    50,000 
Due to Related Party   4,110,515    1,155,550 
Convertible Note Payable   3,492,293    3,582,872 
Convertible Note Payable - In Default   -    541,051 
Note Payable   250,000    - 
Derivative Liability - Convertible Notes Payable   -    1,577,001 
Lease Liability   118,325    - 
Total Current Liabilities   11,412,917    7,827,665 
           
Non-Current Liabilities:          
Lease Liability, Long-Term   147,392    - 
Convertible Note Payable   -    - 
Contingent Liability, Long-Term   14,558,823    - 
Total Liabilities   26,119,132    7,827,665 
           
Commitments and Contingencies (Note 11)   -     -  
           
Stockholders’ Equity          
Preferred Stock - Series A ($0.001 par value; 5,000,000 shares authorized, 5,000,000 and 4,000,000 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively)   5,000    4,000 
Preferred Stock - Series B ($0.001 par value; 5,760,000 shares authorized, 5,760,000 shares issued and outstanding at March 31, 2022 and June 30, 2021)   5,760    5,760 
Preferred Stock - Series C ($0.001 par value; 3,500,000 shares authorized, 2,000,000 and zero shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively)   2,000    - 
Common Stock, ($0.001 par value; 5,000,000,000 shares authorized, 1,781,946,647 and 1,322,822,904 shares issued and outstanding at March 31, 2022 and June 30, 2021, respectively)   1,781,947    1,322,823 
Common Stock To Be Issued   54,887    125,032 
Additional Paid-In Capital   56,133,617    23,866,298 
Accumulated Other Comprehensive Loss   (95,396)   (67,965)
Accumulated Deficit   (33,382,497)   (32,780,235)
Total Stockholders’ Equity   24,505,318    (7,524,287)
Total Liabilities and Stockholders’ Equity  $50,624,450   $303,378 

 

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

 

3

 

 

Life Clips, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMREHENSIVE LOSS

For the Three and Nine Months ended March 31, 2022 and 2021

(Unaudited)

 

     For the three month     For the three month     For the nine month     For the nine month 
   period ended   period ended   period ended   period ended 
   March 31, 2022   March 31, 2021   March 31, 2022   March 31, 2021 
Revenues                    
Commissions and Fees  $2,043,268   $-   $3,647,085   $- 
Investment Advisory   662,478    -    1,022,798    - 
Administrative Services   257,922    -    504,290    - 
License Income   -    -    50,000    - 
App Development Income   443    -    20,779    - 
Total Revenues   2,964,111    -    5,244,952    - 
Cost of Goods Sold   2,289,938    -    2,968,938    - 
Gross Profit   674,173    -    2,276,014    - 
                     
Operating Costs:                    
Professional Fees   368,192    90,373    1,089,325    283,827 
Marketing Expense   995,918    -    1,835,499    - 
Payroll Expense   175,197    -    488,435    - 
Other General and Administrative Expenses   132,651    866    371,512    2,802 
Travel and Meal Expenditures   37,246    -    83,708    - 
Total Operating Costs   1,709,204    91,239    3,868,479    286,629 
                     
Loss from Operations   (1,035,031)   (91,239)   (1,592,465)   (286,629)
                     
Other Income/(Expense):                    
Interest Expense   (75,119)   (105,418)   (244,212)   (297,402)
Change in Fair Value of Derivative   -    5,003,769    1,577,001    9,127,156 
Change in Fair Value of Contingent Liability   4,464,254    -    1,229,876    - 
Gain on Forgiveness   -    -    15,525    - 
Loss on Impairment of Intangibles   -    -    (1,522,597)   - 
Debt Discount Amortization   -    -    (80,369)   - 
Other Income   (29)        14,979      
Total Other Income (Expense)   4,389,106    4,898,351    990,203    8,829,754 
Income/(Loss) Before Income Taxes   3,354,075    4,807,112    (602,262)   8,543,125 
Provision for Income Taxes   -    -    -    - 
Net Income/(Loss)  $3,354,075   $4,807,112   $(602,262)  $8,543,125 
                     
Other Comprehensive Loss:                    
Foreign currency translation adjustment   34,785    -    7,116    - 
Change in Value of Investment   (16,007)   -    (34,547)   - 
Comprehensive Loss  $3,372,853   $4,807,112   $(629,693)  $8,543,125 
                     
Earnings/(Loss) Per Share: Basic and Diluted    **      **      **      **  
Weighted Average Number of Common Shares Outstanding: Basic and Diluted   1,642,083,987    1,259,831,337    1,642,083,987    1,259,831,337 

 

** Less than $0.01

 

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

 

4

 

 

LIFE CLIPS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(UNAUDITED)

For the three months ending March 31, 2022 and 2021

 

                                          

 

Common
Stock

      Additional     Accumulated
Other 		           Total
Stockholders’ 		 
   Preferred - Series A   Preferred - Series B   Preferred - Series C   Common Stock   To Be   Paid-In   Comprehensive   Accumulated   Equity/ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Issued   Capital   Loss   Deficit   (Deficit) 
Balances as of December 31, 2021   4,000,000   $4,000    5,760,000   $5,760    2,000,000   $2,000    1,742,647,934   $1,742,648   $54,887   $55,770,035   $(114,174)  $(36,736,572)  $20,728,584 
Stock issued for Cash   -    -    -    -    -    -    -    -    -    -    -    -   $- 
Stock Issued for Services   -    -    -    -    -    -    1,422,930    1,423    -    22,700    -    -   $24,123 
Accrued Expenses Converted to Stock   -    -    -    -    -    -    -    -    -    -    -    -   $- 
Preferred Stock Issuance   1,000,000    1,000    -    -    -    -    -    -    -    -    -    -   $1,000 
Debt Converted to Stock   -    -    -    -    -    -    37,875,783    37,876    -    340,882    -    -   $378,758 
Belfrics Acquisition Shares   -    -    -    -    -    -    -    -    -    -    -    -   $- 
Foreign Currency Translation Adjustment   -    -    -    -    -    -    -    -    -    -    34,785    -   $34,785 
Change in Fair Value of Investment   -    -    -    -    -    -    -    -    -    -    (16,007)   -   $(16,007)
Net Income (Loss)   -    -    -    -    -    -    -    -    -    -    -    3,354,075   $3,354,075 
Balances as of March 31, 2022   5,000,000   $5,000    5,760,000   $5,760    2,000,000   $2,000    1,781,946,647   $1,781,947   $54,887   $56,133,617   $(95,396)  $(33,382,497)  $24,505,318 

 

                               Common
Stock		   Additional   Accumulated
Other		       Total
Stockholders’		 
   Preferred - Series A   Preferred - Series B   Preferred - Series C   Common Stock   To Be   Paid-In   Comprehensive   Accumulated   Equity/ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Issued   Capital   Loss   Deficit   (Deficit) 
Balances as of December 31, 2020   1,000,000   $1,000    -   $-    -   $-    1,259,831,337   $1,259,831   $125,032   $9,218,935   $-   $(25,565,185)  $(14,960,387)
Net Income   -    -    -    -    -    -    -    -    -    -    -    4,807,112    4,807,112 
Balances as of March 31, 2021   1,000,000   $1,000    -   $-    -   $-    1,259,831,337   $1,259,831   $125,032   $9,218,935   $-   $(20,758,073)  $(10,153,275)

 

For the nine months ending March 31, 2022 and 2021

 

                               Common
Stock		   Additional   Accumulated
Other		       Total
Stockholders’		 
   Preferred - Series A   Preferred - Series B   Preferred - Series C   Common Stock   To Be   Paid-In   Comprehensive   Accumulated   Equity/ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Issued   Capital   Loss   Deficit   (Deficit) 
Balances as of June 30, 2021   4,000,000   $4,000    5,760,000   $5,760    -   $-    1,322,822,904   $1,322,823   $125,032   $23,866,298   $(67,965)  $(32,780,235)  $(7,524,287)
Stock issued for Cash   -    -    -    -    -    -    282,777,734    282,778    10,555    4,106,667    -    -    4,400,000 
Stock Issued for Services   -    -    -    -    -    -    4,591,893    4,592         47,146    -    -    51,738 
Accrued Expenses Converted to Stock   -    -    -    -    -    -    46,045,000    46,045         907,531    -    -    953,576 
Common Stock Issued from Prior Periods   -    -    -    -    -    -    13,500,000    13,500    (80,700)   67,200    -    -    - 
Preferred Stock Issuance   1,000,000    1,000    -    -    -    -    -    -    -    -    -    -    1,000 
Debt Converted to Stock   -    -    -    -    -    -    112,209,116    112,209         1,126,549    -    -    1,238,758 
Belfrics Acquisition Shares   -    -    -    -    2,000,000    2,000    -    -    -    26,012,226    -    -    26,014,226 
Foreign Currency Translation Adjustment   -    -    -    -    -    -    -    -    -    -    7,116    -    7,116 
Change in Fair Value of Investment   -    -    -    -    -    -    -    -    -    -    (34,547)   -    (34,547)
Net Loss   -    -    -    -    -    -    -    -    -    -    -    (602,262)   (602,262)
Balances as of March 31, 2022   5,000,000   $5,000    5,760,000   $5,760    2,000,000   $2,000    1,781,946,647   $1,781,947   $54,887   $56,133,617   $(95,396)  $(33,382,497)  $24,505,318 

 

                               Common
Stock		   Additional   Accumulated
Other		       Total
Stockholders’		 
   Preferred - Series A   Preferred - Series B   Preferred - Series C   Common Stock   To Be   Paid-In   Comprehensive   Accumulated   Equity/ 
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Issued   Capital   Loss   Deficit   (Deficit) 
Balances as of June 30, 2020   1,000,000   $1,000    -   $-    -   $-    1,259,831,337   $1,259,831   $125,032   $9,218,935   $-   $(29,301,198)  $(18,696,400)
Net Income   -    -    -    -    -    -    -    -    -    -    -    8,543,125    8,543,125 
Balances as of March 31, 2021   1,000,000   $1,000    -   $-    -   $-    1,259,831,337   $1,259,831   $125,032   $9,218,935   $-   $(20,758,073)  $(10,153,275)

 

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

 

5

 

 

Life Clips, Inc.

Consolidated Statements of Cash Flows

For the Nine Months Ended

(Unaudited)

 

     March 31, 2022     March 31, 2021 
Cash Flows From Operating Activities:          
Net Income/(Loss)  $(602,262)  $8,543,125 
           
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:          
Changes in Fair Value of Derivative Liabilities   (1,577,001)   (9,127,156)
Stock Issued for Services   51,738    - 
Change in Fair Value of Contingent Liability   (1,229,876)   - 
Loss on Impairment of Intangibles   1,522,597    - 
Change in Fair Value of Investments   (4,674)   - 
Depreciation   74,030      
Amortization of Debt Discount   80,369    15,878 
Debt Foregiveness   (15,525)   - 
           
Changes in Assets and Liabilities:          
Accounts Receivable   (1,254,154)   - 
Other Current Assets   1,215,993   - 
Right of Use Asset   1,474   - 
Accounts Payable   (658,048)   3,771 
Accrued Expenses and Interest Payable   1,233,563    281,525 
Due to Related Parties   -    225,000 
Deferred Revenue   (50,000)   - 
Net Cash From Operating Activities   (1,211,776)   (57,857)
           
Cash Flows From Investing Activities:          
Purchases of Property and Equipment   (279,908)   - 
Due from Related Parties   34,271    - 
Purchase of Intangible Assets   (2,650,006)   - 
Net Cash Acquired on Acquisitions   74,377    - 
Net Cash From Investing Activities   (2,821,266)   - 
           
Cash Flows From Financing Activities:          
Issuance of Stock   4,401,000    - 
Proceeds From Notes Payables       35,000 
Proceeds From Convertible Notes Payables   250,000    50,000 
Net Cash From Financing Activities   4,651,000    85,000 
           
Effect of Exchange Rate on Cash   7,116    - 
           
Net Change in Cash   625,074    27,143 
           
Cash at Beginning of Period   230,685    12,160 
           
Cash at End of Period  $855,759   $39,303 
           
Non-cash Investing and Financing Activities          
Accrued Interest Converted to Convertible Notes Payable  $542,284   $- 
Value of Common Stock Issued for Convertible Notes Payable  $1,238,758   $- 
Due to Related Parties Converted to Accounts Payable  $3,105,486   $- 
Value of Common Stock Issued for Accrued Interest   $953,576   $- 

 

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

 

6

 

 

Life Clips, Inc.

Footnotes to Consolidated Financial Statements

March 31, 2022

 

NOTE 1. ORGANIZATION AND OPERATIONS

 

Life Clips, Inc. (the “Company”) was incorporated in Wyoming on March 20, 2013.

 

On April 5, 2021, the Company closed its acquisition of Cognitive Apps Software Solutions, Inc. (“Cognitive Apps”), a developer of artificial intelligence (AI) applications for the healthcare industry and psychedelic research. Cognitive Apps was incorporated in British Columbia, Canada on November 25, 2020. Its principal business is developing, financing, producing and distributing AI based technological solutions to the mental health and healthcare sector. The Company acquired all of the issued and outstanding capital stock of Cognitive Apps, making it a 100% wholly owned subsidiary.

 

On August 25, 2021, the Company closed its acquisition of Belfrics Holdings Limited and its related entities (collectively “Belfrics”). Belfrics operates cryptocurrency exchanges and blockchain development services in Asia and Africa. The Company acquired all of the issued and outstanding capital stock of Belfrics, making it a 100% wholly owned subsidiary.

 

The Belfrics entities acquired are:

 

  1. Belfrics Global PTE Ltd., a Singapore corporation
  2. Belfrics BT Pvt Ltd, an India corporation
  3. Belfrics Cryptex Pvt Ltd, an India corporation
  4. Belfrics Tanzania Ltd, a Tanzania corporation
  5. Belfrics Nigeria Pvt Ltd, a Nigeria corporation
  6. Belfrics BT SDN BHD, a Malaysia corporation
  7. Belfrics Holding Limited, a Malaysia corporation
  8. Belfrics Academy SDN BHD, a Malaysia corporation
  9. Belfrics International Ltd, a Malaysia corporation
  10. Belfrics Europe SL, a Spain corporation
  11. Belfrics Kenya Pvt. Ltd, a Kenya corporation
  12. Incrypts SDN BHD, a Malaysia corporation
  13. Belfrics Malaysia SDN BHD, a Malaysia corporation

 

Founded in 2014, Belfrics internally developed a cryptocurrency digital exchange platform. Supported by the proprietary technology of Belrium Blockchain KYC solution, the KYC (“Know Your Customer”) and AML (“Anti-Money Laundering”) process of Belfrics Exchange is a well-accepted compliance solution. With 10 offices in 8 countries, Belfrics provides localized and personalized support to digital currency traders. Through its Blockchain Academy, Belfrics provides continuous training to traders, developers, and blockchain enthusiasts in more than 20 countries. Belfrics is licensed and regulated by the Labuan Financial Services Authority (LFSA) in Malaysia.

 

7

 

 

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 financial statements of its wholly owned subsidiaries and all intercompany transactions and account balances have been eliminated in consolidation.

 

Foreign Currency Translation – The Company’s subsidiaries have 7 different functional currencies in addition to the U.S. Dollar, but its reporting currency is in U.S. Dollars. The currencies are Canadian Dollars, Euro, Indian Rupee, Kenyan Shilling, Malaysian Ringgit, Nigerian Naira, and Tanzanian Shilling. The balance sheet accounts are translated at exchange rates in effect at the end of the period and income statement accounts are translated at average exchange rates for the period. Translation gains and losses are included as a separate component of stockholders’ equity.

 

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.

 

Investments – The Company’s investments in marketable securities are measured at fair value with unrealized gains and losses recognized in other comprehensive loss. The Company received a total of 960,559 shares of Ehave, Inc.’s common stock as payment for a licensing agreement. These shares had a total value of $100,000 upon issuance. Subsequent to issuance, the stock price of the shares decreased and an unrealized loss on the investment of $80,789 was recognized, decreasing the asset value to $19,211 at March 31, 2022.

 

Intangible Assets – The Company had no intangibles at June 30, 2021. At March 31, 2022, the Company’s intangible assets consisted of approximately $46.6 million of cryptocurrency that is recorded at historical cost and not amortized due to its indefinite life. In addition, the Company had an immaterial amount of other intangibles which are recorded at cost based on third party expenditures. The Company will begin amortizing the other intangibles over their estimated remaining useful life when it begins revenue-producing applications. Useful lives of intangible assets are determined after considering the specific facts and circumstances related to each intangible asset. Factors that will be considered when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the long-term strategy for using the asset, any laws or other local regulations that could impact the asset, the historical performance of the asset, the long-term strategy for using the asset, any laws or other local regulations that could impact the useful life of the asset, and other economic factors, including competition and specific market conditions. Indefinite life intangibles are reviewed for impairment when circumstances suggest there could be an impairment, but at least annually.

 

Property and Equipment – Property and equipment includes computers and software, furniture and fittings, and office equipment. Depreciation is provided based on the estimated useful life of assets on a straight line basis which ranges from three years to five years.

 

Leases - The Company accounts for leases in accordance with Accounting Standards Update (“ASU”) No. 2016-02, “Leases” (Topic 842). Based on this standard, the Company determines if an agreement is a lease at inception. Leases are included in the right of use asset, less current portion of lease liability, and long-term lease liability, in the Company’s consolidated balance sheets. Finance leases are included in right-of-use assets, lease liability and lease liability, long-term in the Company’s consolidated balance sheets.

 

As permitted under Topic 842, the Company has made an accounting policy election not to apply the recognition provisions to short term leases (leases with a lease term of 12 months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise); instead, the Company will recognize the lease payments for short-term leases on a straight-line basis over the lease term.

 

Impairment of Long-Lived Assets – When facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable, management will assess the recoverability of the carrying value by preparing estimates of revenues and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those Belfrics uses in its internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, the Company recognizes an impairment loss. The impairment loss recognized, if any, is the amount by which interest charges are less than the carrying amount, or the amount by which the carrying amount of the asset (or asset group) exceeds the fair value. Belfrics may use a variety of methods to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumptions to support what management believes to be the fair value of these assets, including discounted cash flow models, which are consistent with the assumptions management believes hypothetical marketplace participants would use.

 

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 statement 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.

 

8

 

 

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 – 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 10). The Company accounts for its investments, at fair value, on a recurring basis under Level 1 (See Note 2)

 

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.

 

9

 

 

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 ASU No. 2014-09 “Revenue from Contracts with Customers” (“Topic 606”). Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

 

The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of Topic 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied. Generally, the Company’s performance obligations are transferred to customers at a point in time, typically upon delivery.

 

Commission and fee revenues are recorded on a trade-date basis when the Company satisfies its performance obligation. The Company receives commissions on cryptocurrency transaction initiated on its platform. When the digital assets are traded, upon the execution of the order, a fee is charged instantly.

 

Investment advisory revenue is recognized as the services related to the underlying assignment are completed.

 

Administrative services are provided as one-time and also on a recurring basis. The monies are collected in advance and the revenue is recognized upon completion.

 

App development revenue is recognized in full when the development is completed or in stages when the development is based on stage-wise delivery.

 

Recently Issued Accounting Pronouncements – Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on the Company’s consolidated financial statements and related 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.

 

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 $5.2 million in revenues, net accumulated losses since inception and an accumulated deficit of $33,382,497. 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. ACQUISITION OF SUBSIDIARIES

 

BELFRICS

 

On August 25, 2021, the Company acquired 100% of Belfrics in consideration of the issuance of 2,000,000 shares of the Company’s Series C preferred stock, with the opportunity to earn an additional 1,500,000 shares of the Company’s Series C preferred stock. The consideration paid for Belfrics had a face value of $26,014,226, with the opportunity to acquire an additional $15,000,000 face value of the preferred stock. Giving effect to the formula converting the preferred stock to common stock, the value of the consideration paid at the time of closing was $41,802,925.

 

Voting Rights. Majority voting control of the Company lies in the Series A Preferred stock (“Series A”). The 5,000,000 shares of Series A have voting power equal to 2 billion common shares. These shares are held by Robert Grinberg, the Company’s CEO and Victoria Rudman, the Company’s CFO. Therefore, even if all preferred shares and other dilutive instruments were converted to common shares, the Series holders would still have majority voting rights.

 

Board Composition. There was no change in the composition of the Board of the Company immediately after the acquisition. The principal of the Belfrics Entities has the right to be appointed to the Board. However, as of the date of filing, the original board of directors remains in place post-acquisition.

 

Executives/Senior Management. There was no change in senior management after the acquisition. Mr. Grinberg remains CEO and Ms. Rudman remains CFO. None of the Belfrics’ principals became an executive officer of the parent company.

 

Based on the forgoing, management has determined that Life Clips, Inc. is both the legal and accounting acquirer as there was no change in control or management.

 

Consideration      
Series C Preferred Stock  $26,014,226 
Contingent Liability, at time of closing   15,788,699 
Preferred Shares  $41,802,925 
      
Fair value of net identifiable assets (liabilities) acquired:     
Cash  $74,377 
Other Current Assets   1,626,712 
Intangibles   45,447,674 
Property and Equipment   1,050,065 
Right-of-Use Asset   97,189 
Total fair value of net identifiable assets  $48,296,017 
      
Accounts payable and accrued expenses  $335,452 
Due to Related Party   6,060,451 
Lease Liability   97,189 
Total fair value of net identifiable liabilities  $6,493,092 
      
Fair value of net identifiable assets (liabilities) acquired  $41,802,925 
      
Goodwill  $- 

 

The purchase accounting is preliminary and may change once the assessment of the purchase price allocation becomes final.

 

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COGNITIVE APPS

 

On April 5, 2021, the Company closed its acquisition of Cognitive Apps Software Solutions, Inc. (“Cognitive Apps”), a developer of artificial intelligence (AI) applications for the healthcare industry and psychedelic research. Cognitive Apps was incorporated in British Columbia, Canada on November 25, 2020. Its principal business is developing, financing, producing and distributing AI based technological solutions to the mental health and healthcare sector. Cognitive Apps sold all of its issued and outstanding capital stock to the Company, becoming a 100% wholly owned subsidiary.

 

In exchange for the acquisition, Cognitive Apps received the following consideration:

 

(a) Preferred Shares. Exchange each issued and outstanding share of Cognitive Apps common stock for 5,760,000 shares of Series B Preferred (“Series B”). The Series B are convertible based on 80% of the average of the 5 lowest closing prices for a share of common stock on the principal exchange or market on which such shares are then trading for the 20 trading days immediately preceding such date. Notwithstanding the foregoing, in no case shall the fair market value multiplied by the total number of shares issued and outstanding be less than $5,000,000. The fair value on the date of acquisition was calculated at $10,016,089.

 

(b) Warrants. In addition to the Series B shares, the previous Cognitive Apps shareholders, on a pro-rata basis, will receive warrants to purchase a total of 3,500,000 shares of the common shares of the Company at an exercise price of $0.10. The fair value of the warrants on the date of acquisition was calculated at $20,111.

 

Cognitive Apps had no operations and no significant assets recorded at the acquisition date. Based on the calculated purchase price of $10,036,200, the entire amount was allocated to intangible assets. Due to the lack of historical operations and uncertainty regarding future operations, the Company impaired the full value of the intangible asset acquired. Also, as there were no previous operations, there are no pro forma disclosures to present.

 

Pro Forma Disclosures

 

The following unaudited pro forma financial results reflects the historical operating results of the Company, including the unaudited pro forma results of Belfrics and Cognitive Apps for the nine months ended March 31, 2022 and the year ended June 30, 2021 (Note the Company acquired Belfrics on August 25, 2021). The pro forma financial information set forth below reflects adjustments to the historical data of the Company to give effect to each of these acquisitions and the related equity issuances as if each had occurred on July 1, 2020. The pro forma information presented below does not purport to represent what the actual results of operations would have been for the periods indicated, nor does it purport to represent the Company’s future results of operations.

 

The following table summarizes on an unaudited pro forma basis the Company’s results of operations for the nine months ended March 31, 2022 and for the year ending June 30, 2021:

 

   March 31, 2022   June 30, 2021 
Revenues  $5,244,952   $170,897 
Net Loss   (602,262)   (3,698,228)
           
Net loss per share- basic and diluted  $(0.0004)  $(0.0029)
           
Weighted average number of shares of common stock outstanding- basic and diluted   1,642,083,987    1,259,831,337 

 

The calculations of pro forma net revenue and pro forma net loss give effect to the business combinations for the period from July 1, 2020 until the respective closing dates for (i) the historical net revenue and net income (loss), as applicable, of the acquired businesses, (ii) incremental depreciation and amortization for each business combination based on the fair value of property and equipment and identifiable intangible assets acquired and the related estimated useful lives.

 

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NOTE 5. LEASES

 

In connection with the acquisition of Belfrics, Inc. on August 25, 2021, the Company acquired four facilities’ leases.

 

Additionally, two new leases have been added as of March 31, 2022.

 

The properties’ location, square footage, lease commencement date, expiration date, terms and payments are as follows:

 

   Belfrics Holding Ltd   Belfrics International Ltd   Belfrics BT SDN BHD   Belfrics Kenya Ltd   Belfrics Cryptex Pvt Ltd   Belfrics BT Pvt Ltd 
Location   OKK Abudllah, Labuan    OKK Abudllah, Labuan    OKK Abudllah, Labuan    Chiromo Road, Nairobi    Bangalore, India    Bangalore, India 
Square Footage   300 sq ft    700 sq ft    300 sq ft    974 sq ft    3,123 sq ft    3,123 sq ft 
Lease commencement date   January 1, 2020    January 1, 2020    January 1, 2020    January 1, 2018    October 15, 2021    January 1, 2022 
Lease expiration date   December 31, 2022    December 31, 2022    December 31, 2022    April 1, 2023    October 14, 2024    December 31, 2024 
Lease terms   3 years    3 years    3 years    5 years    3 years    3 years 
Monthly lease payments  $717   $837   $717   $804   $3,139   $3,139 

 

Right-of-use asset is summarized below:

 

   Belfrics Holding Ltd   Belfrics International Ltd   Belfrics BT SDN BHD   Belfrics Kenya Ltd   Belfrics Cryptex Pvt Ltd   BelfricsBT Pvt Ltd (India)   Total 
Office Lease  $11,225   $13,096   $11,225   $61,643   $115,085   $115,085   $327,359 
Less accumulated amortization   (4,842)   (5,649)   (4,842)   (21,139)   (17,789)   (8,855)   (63,116)
Right-of-use, net  $6,383   $7,447   $6,383   $40,504   $97,296   $106,230   $264,243 

 

Operating lease liability is summarized below:

 

   Belfrics Holding Ltd   Belfrics International Ltd   Belfrics BT SDN BHD   Belfrics Kenya Ltd   Belfrics Cryptex Pvt Ltd   Belfrics BT Pvt Ltd (India)   Total 
Office Lease  $6,383   $7,447   $6,383   $40,504   $98,279   $106,721   $265,717 
Less: current portion   (6,383)   (7,447)   (6,383)   (27,866)   (35,523)   (34,723)   (118,325)
Long term portion  $-   $-   $-   $12,638   $62,756   $71,998   $147,392 

 

Maturity of lease liabilities are as follows:

 

   Belfrics Holding Ltd   Belfrics International Ltd   Belfrics BT SDN BHD   Belfrics Kenya Ltd   Belfrics Cryptex Pvt Ltd   Belfrics BT Pvt Ltd (India)   Total 
                             
Year ending June 30, 2022  $2,161   $2,521   $2,161   $9,553   $9,417   $18,834   $44,647 
Year ending June 30, 2023   4,322    5,042    4,322    31,843    39,081    39,081    123,691 
Year ending June 30, 2024   

-

    -    -    -    54,868    54,868    109,736 
Total future minimum lease payments   6,483    7,563    6,483    41,396    103,366    112,783    278,074 
Less imputed interest   (100)   (116)   (100)   (892)   (5,087)   (6,062)   (12,357)
PV of Payments  $6,383   $7,447   $6,383   $40,504   $98,279   $106,721   $265,717 

 

Total rent expense for the three and nine months period ended March 31, 2022 was $11,543 and $27,734, respectively.

 

NOTE 6. PROPERY AND EQUIPMENT

 

As of June 30, 2021, the Company had no property and equipment. Property and equipment as of March 31, 2022 consisted of the following:

 

   March 31, 2022 
Software Development Fees  $1,162,510 
Plant and Machinery   105,715 
Furniture and Fittings   43,744 
Computers and Software   18,004 
Accumulated Depreciation   (74,030)
Total  $1,255,943 

 

Total depreciation expense for the nine months period ended March 31, 2022 was $74,030.

 

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NOTE 7. RELATED PARTY TRANSACTIONS

 

As of March 31, 2022 and June 30, 2021, $4,110,515 and $1,155,550, respectively, was due to related parties and is primarily comprised of loans from the Belfrics entities’ shareholders and are advances due on demand with no interest.

 

At June 30, 2021, the Company reported $34,271 due from related party, a Cog Apps shareholder. As of March 31, 2022, the amount has been repaid in full.

 

NOTE 8. NOTES PAYABLE

 

At March 31, 2022, the Company had a $250,000 note payable at 4% interest due October 28, 2022.

 

NOTE 9. CONVERTIBLE NOTES PAYABLE

 

Convertible Notes

 SCHEDULE OF CONVERTIBLE NOTES

Balance at
March 31, 2022		   Balance at
June 30, 2021		   Due Date  Balance at
March 31, 2022		    
$-   $541,051   Range from 05/13/2017 to 01/20/2022   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. This was converted to the below line item including interest.
 2,400,639    3,288,241   06/15/2023   8%  Conversion price equal to $0.01. At March 31, 2022, convertible into 240 million shares not including interest.
 1,066,654    -   07/01/2023   8%  Conversion price equal to $0.01. At March 31, 2022, convertible into 106.7 million shares not including interest.
 25,000    375,000   Range from 12/23/2022 to 04/22/2023   Range from 4% to 10%   Conversion price equal to $0.015. At December 31, 2021, $350,000 was converted into 23.3 million shares, excluding interest.
 -    (80,369)  Less: Discount        
$3,492,293   $4,123,923            

 

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 10 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.

 

Total amortization of debt discount amounted to $0 and $35,904 for the nine months ended March 31, 2022 and 2021, respectively.

 

The debt discount was $0 and $80,369 at March 31, 2022 and June 30, 2021, respectively.

 

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NOTE 10. DERIVATIVE FINANCIAL INSTRUMENTS

 

As of March 31, 2022, the Company no longer has any derivatives.

 

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, 2021, 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, 2021 and the amounts that were reflected in income related to derivatives for the period ended:

   June 30, 2021 
The financings giving rise to derivative financial instruments  Indexed
Shares*
(in millions)		   Fair
Values		 
Embedded derivatives   563   $1,577,001 
Total   563   $1,577,001 

 

* 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 period ended June 30, 2021:

 

The financings giving rise to derivative financial instruments and the gain (loss) effects:  June 30, 2021 
Embedded derivatives  $7,103,673 
Total  $7,103,673 

 

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, 2021 
Quoted market price on valuation date  $0.0046 
Range of effective contractual conversion rates  $0.0018 
Contractual term to maturity   NA 
Market volatility:     
Volatility   NA 
Risk-adjusted interest rate   NA 

 

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 nine months ended March 31, 2022 and the year ended June 30, 2021.

 

             
       Year Ended 
   March 31, 2022   June 30, 2021 
Balances at beginning of period  $1,577,001   $13,249,507 
Issuances:          
Embedded derivatives   -    50,000 
           
Conversions:          
Embedded derivatives   -    - 
 Conversions: Embedded derivatives          
Reclassifications to equity:          
Embedded derivatives   -    (4,448,276)
           
Changes in fair value inputs and assumptions reflected in income   (1,577,001)   (7,274,230)
           
Balances at end of period  $-   $1,577,001 

 

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NOTE 11. EQUITY

 

Authorized Capital

 

On September 28, 2017, the Company filed an Article of Amendment authorizing 5,000,000,000 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, which increased to 5,000,000 on June 16, 2021, of preferred stock as Series A Preferred Stock, with a par value of $0.001 per share. Each share of Series A 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 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 has 400 votes on any matter submitted to the shareholders of the Company, and the Series A 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 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 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 held by that holder will be automatically cancelled and will revert to being authorized and unissued shares of Series A. The Series A is not convertible into any other class of shares of the Company.

 

Additionally, the Board authorized 5,760,000 shares of the Company’s Series B Convertible Preferred Stock (“Series B”) pursuant to the acquisition of Cognitive Apps.

 

Each share of Series B shall be convertible, at the option of the holder thereof, beginning 12 months from the date of issuance, and thereafter at any time and from time to time, and without the payment of additional consideration by the holder thereof, into that number of fully paid and nonassessable shares of common stock (whether whole or fractional) that have a fair market value, in the aggregate, equal to the Series B conversion price.

 

The Series B conversion price shall initially be equal to $1.00 and shall be subject to adjustment as provided below. Fair market value shall mean, as of any date of determination, 80% of average of the 5 lowest closing prices for a share of common stock on the principal exchange or market on which such shares are then trading for the 20 trading days immediately preceding such date. Notwithstanding the foregoing, in no case shall the fair market value multiplied by the total number of shares issued and outstanding be less than $5,000,000.

 

In conjunction with the acquisition of Belfrics, the Company filed a designation authorizing and designating 3,500,000 shares of Series C Convertible Preferred Stock (“Series C”).

 

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Each share of Series C shall be convertible, at the option of the holder thereof, beginning 12 months from the date of issuance, and thereafter at any time and from time to time, and without the payment of additional consideration by the holder thereof, into that number of fully paid and non-assessable shares of common stock (whether whole or fractional) that have a fair market value, in the aggregate, equal to the Series C conversion price.

 

The Series C conversion price shall initially be equal to $10.00 and shall be subject to adjustment as provided below. Fair market value shall mean, as of any date of determination, 80% of average of the 5 lowest closing prices for a share of common stock on the principal exchange or market on which such shares are then trading for the 20 trading days immediately preceding such date. Notwithstanding the foregoing, in no case shall the fair market value multiplied by the total number of shares issued and outstanding be less than $5,000,000.

 

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 1% 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 12. COMMITMENTS 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 13. SUBSEQUENT EVENTS

 

On April 6, 2022, the Company and its subsidiary, Belfrics, entered into a satisfaction and release agreement, wherein the Company accepted payment of 1,000,000 BEL (Belrium Tokens) for the forgiveness of $3,000,000 in notes plus interest.

 

On April 10, 2022, the Company entered into an exchange agreement with Seven Knots, LLC. The Company exchanged 62,903 BEL, in satisfaction of the note held by Seven Knots resulting in the Company reducing its notes payable by $250,000, including interest payable of $6,247.

 

On April 10, 2022, the Company entered into three exchange agreements: one with Keystone Capital Partners, LLC, and two with Mastiff Group, LLC. The Company exchanged 748,222 BEL, reducing its convertible debt, including interest, by $3,042,699.

 

On April 10, 2022, the Company entered into an exchange agreement with Keystone Capital Partners, LLC. The Company exchanged 38,876 BEL, for Keystone’s subscription for 10,555,600 common stock shares with an aggregate purchase price of $158,334 received by the Company on November 19, 2021, as part of the original Regulation A offering.

 

On April 12, 2022, the Company entered into three exchange agreements with Crest Ventures, LLC, Long Side Ventures, LLC, and Taconic Group, LLC. The Company exchanged 141,750 BEL, for outstanding convertible debt, held by Crest, Long Side and Taconic, in the aggregate amount including interest, of $565,438.

 

On April 21, 2022, the Company received $125,000 from Keystone Capital Partners, LLC as part of the Regulation A Tier 2 offering, for which it issued 12,500,000 shares of common stock on April 29, 2022.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

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.

 

General Information about Our Company

 

Life Clips, Inc. (the “Company”) was incorporated in Wyoming on March 20, 2013.

 

On April 5, 2021, the Company closed its acquisition of Cognitive Apps Software Solutions, Inc. (“Cognitive Apps”), a developer of artificial intelligence (AI) applications for the healthcare industry and psychedelic research. Cognitive Apps was incorporated in British Columbia, Canada on November 25, 2020. Its principal business is developing, financing, producing and distributing AI based technological solutions to the mental health and healthcare sector. Cognitive Apps sold all of its issued and outstanding capital stock to the Company, becoming a 100% wholly owned subsidiary.

 

On August 25, 2021, the Company closed its acquisition of Belfrics Holdings Limited and its related entities (collectively “Belfrics”). The new business of operating cryptocurrency exchanges and blockchain development services in Asia and Africa. Belfrics sold all of its issued and outstanding capital stock to the Company, becoming a 100% wholly owned subsidiary.

 

The Belfrics entities acquired are:

 

Belfrics Global PTE Ltd., a Singapore corporation

Belfrics BT Pvt Ltd, an India corporation

Belfrics Cryptex Pvt Ltd, an India corporation

Belfrics Tanzania Ltd, a Tanzania corporation

Belfrics Nigeria Pvt Ltd, a Nigeria corporation

Belfrics BT SDN BHD, a Malaysia corporation

Belfrics Holding Limited, a Malaysia corporation

Belfrics Academy SDN BHD, a Malaysia corporation

Belfrics International Ltd, a Malaysia corporation

Belfrics Europe SL, a Spain corporation

Belfrics Kenya Pvt. Ltd, a Kenya corporation

Incrypts SDN BHD, a Malaysia corporation

Belfrics Malaysia SDN BHD, a Malaysia corporation

 

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In exchange for the acquisition, Belfrics received the following consideration:

 

  (a) Preferred Shares. Exchange each issued and outstanding share of The Belfrics Entities common stock for 2,000,000 shares of Series C Preferred Shares, pursuant to the Designation set forth as Exhibit B.
     
  (c) Earn Out. Upon obtaining the milestones set forth on Schedule 2.1(c) the Sellers shall be entitled to up to an additional 1,500,000 of Series C Preferred Stock on a pro rata basis.

 

Founded in 2014, the Belfrics digital exchange platform, which was fully developed in-house, is one of the most compliant platforms in the cryptocurrency industry. Supported by the proprietary technology of Belrium Blockchain KYC solution, the KYC (“Know Your Customer”) and AML (“Anti-Money Laundering”) process of Belfrics Exchange is a well-accepted compliance solution. With 10 operational offices in 8 countries, Belfrics provides localized and personalized support to digital currency traders. Through its Blockchain Academy, Belfrics provides continuous training to traders, developers and Blockchain enthusiasts in more than 20 countries. Belfrics is licensed and regulated by the Labuan Financial Services Authority (LFSA) in Malaysia.

 

Results of Operations for the Three Months Ended March 31, 2022 and 2021

 

For the three months ended March 31, 2022 and 2021, the Company had revenues of 2,964,111 and $0 respectively. This is as a direct result of the acquisition of Belfrics and is primarily generated by Belfrics. 

 

For the three months ended March 31, 2022 and 2021, the Company had gross profit of $674,173 and $0, respectively. This is as a direct result of the acquisition of Belfrics and is primarily generated by Belfrics.

 

Total operating costs were $1,709,204 compared with $91,239 for the three months ended March 31, 2022 and 2021, respectively. The increase is directly related to higher professional fees, marketing expenses, payroll expenses, travel and meal expenditures, as well as other general and administrative expenses, primarily due to the acquisition of Belfrics.

 

Other Income (Expense) was $4,389,106 when compared with $4,898,351 for the three months ended March 31, 2022 and 2021, respectively. The difference of $509,245 is primarily due to a change in fair value of derivatives in 2021, and a change in fair value of contingent liability in 2022. There were no derivative calculations required in 2022, which caused in an increase of $5,003,769. In 2022, management’s assessment of the stock milestones attainable by Belfrics resulted in an increase of $4,464,254.

 

Net income for the three months ended March 31, 2022 was $3,354,075 as compared to net income of $4,807,112 for the three months ended March 31, 2021.

 

Results of Operations for the Nine Months Ended March 31, 2022 and 2021

 

For the nine months ended March 31, 2022 and 2021, the Company had revenues of $5,244,952 and $0, respectively. This is as a direct result of the acquisition of Belfrics and is primarily generated by Belfrics.

 

For the nine months ended March 31, 2022 and 2021, we had gross profit of $2,276,014 and $0, respectively. This is as a direct result of the acquisition of Belfrics and is primarily generated by Belfrics.

 

Total operating costs were $3,868,479 when compared with $286,629 for the nine months ended March 31, 2022 and 2021, respectively. The increase is directly related to higher professional fees, marketing expenses, payroll expenses, travel and meal expenditures, as well as other general and administrative expenses, primarily due to the acquisition of Belfrics.

 

Other Income (Expense) was $990,203 when compared with $8,829,754 for the nine months ended March 31, 2022 and 2021, respectively. This change is primarily due to a change in fair value of derivatives of that decreased from $9,127,156 in 2021 to $1,577,001 in 2022. This is further offset by a change in fair value of contingent liability not present in 2021, as well as a loss on impairment of intangibles. The contingent liability and the impairment is due to the acquisition of Belfrics.

 

Net Loss for the nine months ended March 31, 2022 was $602,262 as compared to Net Income of $8,543,125 for the nine months ended March 31, 2021.

 

Liquidity and Capital Resources

 

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. As of March 31, 2022 the Company had cash on hand of $855,759, total assets of $50,624,450, total liabilities of $26,119,132 and total stockholder’s equity of $24,505,318. As all variable convertible notes payable were converted to a fixed value, the derivative liability of $1,577,001 was final and ended on June 30, 2021. A loss on impairment of intangibles in the amount of $1,522,597 was recorded to impair cryptocurrency assets.

 

The Company’s cash was generated from a Regulation A fundraising. The Company plans to raise additional working capital via additional notes or equity sales to ensure that it will have enough cash to fund its primary operation for the next twelve (12) months.

 

The Company has no agreements in place with its shareholders, officer and director or with any third parties to fund operations beyond the end of the Company’s March 31, 2022 period ended. The Company has not negotiated nor has available to it any other third party sources of liquidity.

 

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Cash flows from operating activities for the nine-month periods ended March 31, 2022 and 2021 were $(1,211,776) and $(57,857), respectively. The change was primarily due to net loss and increased accounts payable being offset by changes in fair value of derivative liabilities, due to related parties, loss on impairment of intangibles and accrued expenses converted to stock, which are directly related to the acquisition of Belfrics.

 

Cash flows from investing activities totaled $(2,821,266) and $0 for the nine-month periods ended March 31, 2022 and 2021, respectively. The change was directly related to Belfrics’ purchase of intangible assets of $2,650,006, purchases of property and equipment of $279,908, offset by net cash acquired on acquisitions of $74,377 and due from related parties of 34,271.

 

Cash flows from financing activities totaled $4,651,000 and $85,000 for the nine-month periods ended March 31, 2022 and 2021, respectively. This is primarily due to the new proceeds from the Regulation A financing.

 

Off-Balance Sheet Arrangements

 

The Company has no current off-balance sheet arrangements and does not anticipate entering into any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

 

Not applicable.

 

Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

Our chief executive officer and chief financial officer are responsible for establishing and maintaining our disclosure controls and procedures. Disclosure controls and procedures means controls and other procedures that are designed to ensure that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in those reports is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our chief executive officer and chief financial officer evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of March 31, 2022. Based on that evaluation, our chief executive officer and chief financial officer have concluded that, as of the evaluation date, such controls and procedures were not effective.

 

Changes in internal controls

 

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

20

 

 

PART II - OTHER INFORMATION

 

Item 1. 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 in August 2019 for which the Company agreed to issue 62,991,567 shares of common stock to the sellers of Batterfly.

 

All shares were issued on June 16, 2021 and as per the agreement, fully releasing the Company of any and all liens, including but not limited to, the Batterfly promissory note of $500,000, which was removed from our liabilities.

 

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 1 A. Risk Factors

 

Not required for a Smaller Reporting Company.

 

Item 2. Properties

 

The Company’s operations are currently being conducted out of the Company’s office located at 2875 Northeast 191 Street, Suite 500 - #218, Aventura, FL, Aventura, FL 33180. The Company’s office space is being rented for a price of $135 per month.

The Cognitive Apps subsidiary’s operations are currently being conducted out of offices located at 263 W, 49th Avenue, Vancouver, BC, V5Y2Z8, Canada. Cog Apps began paying $1,584 monthly rent for this space as of January 2022.

 

The Belfrics Entities subsidiary’s main corporate operations are currently being conducted out of the Belfrics Holding Limited offices at Suite C, Lot 3, Level 1, Lazenda Phase 3, OKK Abudllah, Labuan. Belfrics holds seven leases in various locations for a total price of $11,543 per month.

 

The Company considers the current spaces to be adequate and will reassess its needs based upon the future growth of the Company.

 

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 3. Mining Safety Disclosures

 

Not Applicable.

 

Item 4. Other Information

 

Not Applicable.

 

21

 

 

Item 5. Exhibits

 

Number   Exhibit
     
31.1*   Certification of Chief Financial Officer pursuant to Section 302
     
32.1*   Certification of Chief Executive Officer pursuant to Section 906
     
101.INS*   Inline XBRL Instance Document
     
101.SCH*   Inline XBRL Taxonomy Schema
     
101.CAL*   Inline XBRL Taxonomy Calculation Linkbase
     
101.DEF*   Inline XBRL Taxonomy Definition Linkbase
     
101.LAB*   Inline XBRL Taxonomy Label Linkbase
     
101.PRE*   Inline XBRL Taxonomy Presentation Linkbase
     
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)

 

* 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

 

22

 

 

SIGNATURES

 

Pursuant to the requirements 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.

 

  Life Clips, Inc.
   
Date: May 16, 2022 By: /s/ Victoria Rudman
    Victoria Rudman
    Chief Financial Officer (Principal Financial and Accounting Officer)

 

23

 

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