Footnotes
to Consolidated Financial Statements
December
31, 2021
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.
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 income/(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 December 31, 2021.
Intangible
Assets – The Company had no intangibles at
June 30, 2021. At December 31, 2021, the Company’s intangible assets consisted of approximately $46
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.
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.
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.
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 no revenues, net accumulated losses
since inception and an accumulated deficit of $(36,736,572). 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. The Board of the Company consists of three people: Robert Grinberg, Victoria Rudman, and Charles Adelson. 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.
SCHEDULE
OF BUSINESS ACQUISITIONS
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.
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 six months ended December 31, 2021 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 six months ended December
31, 2021 and for the year ending June 30, 2021:
SCHEDULE
OF PRO FORMA INFORMATION
| |
December
31, 2021 | | |
June
30, 2021 | |
Revenues | |
$ | 2,280,841 | | |
$ | 170,897 | |
Net Loss | |
| (3,956,337 | ) | |
| (3,698,228 | ) |
| |
| | | |
| | |
Net loss per share- basic and diluted | |
$ | (0.0025 | ) | |
$ | (0.0029 | ) |
| |
| | | |
| | |
Weighted average number of shares of common stock outstanding- basic and diluted | |
| 1,581,633,276 | | |
| 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.
NOTE
5. LEASES
In
connection with the acquisition of Belfrics, Inc. on August 25, 2021, the Company acquired four facilities’ leases.
Additionally,
one new lease was added in October 2021.
The
properties’ location, square footage, lease commencement date, expiration date, terms and payments are as follows:
SCHEDULE OF RIGHT-OF-USE ASSET
| |
Belfrics Holding Ltd | | |
Belfrics International Ltd | | |
Belfrics BT SDN BHD | | |
Belfrics Kenya Ltd | | |
Belfrics Cryptex Pvt Ltd | |
| |
| | |
| | |
| | |
| | |
| |
Location | |
| OKK Abudllah, Labuan | | |
| OKK Abudllah, Labuan | | |
| OKK Abudllah, Labuan | | |
| Chiromo Road, Nairobi | | |
| Koramangala, Bangalore | |
Square Footage | |
| 300 sq ft | | |
| 700 sq ft | | |
| 300 sq ft | | |
| 974 sq ft | | |
| 3,123 sq ft | |
Lease commencement date | |
| January 1, 2020 | | |
| January 1, 2020 | | |
| January 1, 2020 | | |
| January 1, 2018 | | |
| October 15, 2021 | |
Lease expiration date | |
| December 31, 2022 | | |
| December 31, 2022 | | |
| December 31, 2022 | | |
| April 1, 2023 | | |
| October 14, 2024 | |
Lease terms | |
| 3 years | | |
| 3 years | | |
| 3 years | | |
| 5
years | | |
| 3 years | |
Monthly lease payments | |
$ | 718 | | |
$ | 837 | | |
$ | 718 | | |
$ | 813 | | |
$ | 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 | | |
Total | |
Office Lease | |
$ | 11,225 | | |
$ | 13,096 | | |
$ | 11,225 | | |
$ | 61,643 | | |
$ | 115,085 | | |
$ | 212,274 | |
Less accumulated amortization | |
| (2,754 | ) | |
| (3,213 | ) | |
| (2,754 | ) | |
| (12,023 | ) | |
| (8,855 | ) | |
$ | (29,599 | ) |
Right-of-use, net | |
$ | 8,471 | | |
$ | 9,883 | | |
$ | 8,471 | | |
$ | 49,620 | | |
$ | 106,230 | | |
$ | 182,675 | |
Operating
lease liability is summarized below:
SCHEDULE OF OPERATING LEASE LIABILITY
| |
Belfrics Holding Ltd | | |
Belfrics International Ltd | | |
Belfrics BT SDN BHD | | |
Belfrics Kenya Ltd | | |
Belfrics Cryptex Pvt Ltd | | |
Total | |
Office Lease | |
$ | 8,471 | | |
$ | 9,883 | | |
$ | 8,471 | | |
$ | 49,620 | | |
$ | 106,721 | | |
$ | 183,166 | |
Less: current portion | |
| (8,471 | ) | |
| (9,883 | ) | |
| (8,471 | ) | |
| (36,982 | ) | |
| (34,723 | ) | |
$ | (98,530 | ) |
Long term portion | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 12,638 | | |
$ | 71,998 | | |
$ | 84,637 | |
Maturity
of lease liabilities are as follows:
SCHEDULE OF MATURITY OF LEASE LIABILITIES
| |
Belfrics Holding Ltd | | |
Belfrics International Ltd | | |
Belfrics BT SDN BHD | | |
Belfrics Kenya Ltd | | |
Belfrics Cryptex Pvt Ltd | | |
Total | |
Year ending June 30, 2022 | |
| 4,322 | | |
| 5,042 | | |
| 4,322 | | |
| 19,106 | | |
$ | 18,834 | | |
$ | 51,626 | |
Year ending June 30, 2023 | |
| 4,322 | | |
| 5,042 | | |
| 4,322 | | |
| 31,843 | | |
| 39,081 | | |
| 84,610 | |
Year ending June 30, 2024 | |
| - | | |
| - | | |
| - | | |
| - | | |
| 54,868 | | |
| 54,868 | |
Total future minimum lease payments | |
| 8,644 | | |
| 10,084 | | |
| 8,644 | | |
| 50,949 | | |
| 112,783 | | |
| 191,104 | |
Less imputed interest | |
| (173 | ) | |
| (202 | ) | |
| (173 | ) | |
| (1,329 | ) | |
| (6,062 | ) | |
| (7,938 | ) |
PV of Payments | |
| 8,471 | | |
| 9,883 | | |
| 8,471 | | |
| 49,620 | | |
| 106,721 | | |
| 183,166 | |
Total
rent expense for the three and six months period ended December 31, 2021 was $20,543 and $36,576, respectively.
NOTE
6. PROPERY AND EQUIPMENT
As
of June 30, 2021, the Company had no property and equipment. Property and equipment as of December 31, 2021 consisted of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
|
|
For the six month | |
|
|
period ended | |
|
|
December 31, 2021 | |
Software Development Fees |
|
$ | 992,188 | |
Plant and Machinery |
|
| 105,753 | |
Furniture and Fittings |
|
| 43,412 | |
Computers and Software |
|
| 23,862 | |
Accumulated Depreciation |
|
| (74,030 | ) |
Total |
|
$ | 1,091,185 | |
Total depreciation expense for the six
months period ended December 31, 2021 was $74,030.
NOTE
7. RELATED PARTY TRANSACTIONS
As of
December 31, and June 30, 2021, $4,246,617 and
$1,155,550, respectively,
was due to related parties for Belfrics only and is primarily comprised of loans from the Belfrics only 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 December 31, 2021, the amount has been repaid in full.
NOTE
8. NOTES PAYABLE
At
December 31, 2021, 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 December 31, 2021 | | |
Balance at June 30, 2021 | | |
Due Date | |
Interest Rate at December 31, 2021 | | |
|
$ | - | | |
$ | 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. |
| 2,778,241 | | |
| 3,288,241 | | |
06/15/2023 | |
| 8 | % | |
Conversion price equal
to $0.01. At December 31, 2021, convertible into 277.8 million shares not including interest. |
| 1,066,654 | | |
| - | | |
07/01/2023 | |
| 8 | % | |
Conversion price equal to $0.01. At December 31, 2021, 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 | |
| | | |
|
$ | 3,869,895 | | |
$ | 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 six months ended December 31, 2021 and 2020, respectively.
The
debt discount was $0 and $80,369 at December 31, 2021 and June 30, 2021, respectively.
NOTE
10. DERIVATIVE FINANCIAL INSTRUMENTS
As
of December 31, 2021, 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:
SCHEDULE
OF COMPONENTS OF DERIVATIVE LIABILITIES
| |
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:
SCHEDULE
OF GAIN (LOSS) OF DERIVATIVE INSTRUMENTS
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:
SCHEDULE
OF SIGNIFICANT INPUTS AND RESULTS FROM VALUATION ASSUMPTIONS
| |
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 six months ended December 31, 2021 and the
year ended June 30, 2021.
SCHEDULE
OF CHANGES IN FAIR VALUE INPUTS AND ASSUMPTIONS RELATED TO COMPOUND EMBEDDED DERIVATIVES
| |
December 31,
2021 | | |
Year Ended | |
| |
December 31, 2021 | | |
June 30, 2021 | |
Balances at beginning of period | |
$ | 1,577,001 | | |
$ | 13,249,507 | |
Issuances: | |
| | | |
| | |
Embedded derivatives | |
| - | | |
| 50,000 | |
Issuances: Embedded derivatives | |
| - | | |
| 50,000 | |
Conversions: | |
| | | |
| | |
Embedded derivatives | |
| - | | |
| - | |
Conversions: Embedded derivatives | |
| - | | |
| - | |
Reclassifications to equity: | |
| | | |
| | |
Embedded derivatives | |
| - | | |
| (4,448,276 | ) |
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 | |
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”).
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
The
Company has concluded that no subsequent events have occurred that require disclosure.