LIFE CLIPS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with the section entitled "Selected Financial Data" and our consolidated financial statements and related notes included elsewhere in this Information Statement. Some of the information contained in this discussion and analysis or set forth elsewhere in this Information Statement, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. See "Cautionary Note Regarding Forward-Looking Statements." Our actual results may differ materially from those described below. You should read the "Risk Factors" section of this Information Statement for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. OverviewLife Clips, Inc. (the "Company") was incorporated inWyoming onMarch 20, 2013 asBlue Sky Media Corporation and its principal business was developing, financing, producing and distributing motion pictures and related entertainment products. Following the Company'sOctober 2, 2015 acquisition ofKlear Kapture, Inc. ("Klear Kapture"), the Company continued Klear Kapture's business of developing a body camera and an auditable software solution suitable for use by law enforcement. The Company changed its name toLife Clips, Inc. onNovember 3, 2015 in order to better reflect its business operations at the time. -8-
OnJuly 11, 2016 , the Company completed its acquisition (the "Acquisition") of all of the outstanding equity securities ofBatterfly Energy Ltd. ("Batterfly"), anIsrael -based corporation that develops and distributes a single-use, cordless battery under the brand name Mobeego for use with cellular phones and other mobile devices. Batterfly is now a wholly owned subsidiary of the Company. The Acquisition was completed pursuant to a Stock Purchase Agreement, dated as ofJune 10, 2016 (the "Purchase Agreement"), among the Company, Batterfly and all of the shareholders of Batterfly, as amended.
Following the acquisition of Batterfly, we began to focus on developing three synergistic businesses:
? Expanding the Mobeego line of mobile accessories.
? Global Sourcing Services that includes product design, factory identification,
negotiations, compliance qualification, and end-to-end logistics management to
source products anywhere in the world.
? Sales and marketing services that provide an efficient path for companies to
launch and market product into multi-channel retail and capture the maximum
return on investment.
The Company is currently pursuing alternative business opportunities. There has been limited activity due to a delay in securing funding. The Company is working to re-energize the business within the next 12 months. How We Generate Revenue InMay 2014 , the FASB issued ASU 2014-09, which supersedes the revenue recognition requirements of Accounting Standards Codification, or ASC, Topic 605 "Revenue Recognition." ASU 2014-09 requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new revenue recognition model requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing the revenue upon satisfaction of the performance obligations. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and change in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 can be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the date of the initial application along with additional disclosures. This ASU is effective for annual reporting periods beginning afterDecember 15, 2017 , with the option to adopt as early asDecember 15, 2016 . The Company adopted the new revenue guidance effectiveJuly 1, 2017 . There was no material impact to the Company's consolidated financial statements or consolidated financial statement disclosures. General and administrative expenses consisted of professional service fees, and other general and administrative overhead costs. Expenses are recognized when incurred.
Depending on the extent of our future growth, we may experience significant strain on our management, personnel, and information systems. We will need to implement and improve operational, financial, and management information systems. In addition, we are implementing new information systems that will provide better record-keeping, customer service and billing. However, there can be no assurance that our management resources or information systems will be sufficient to manage any future growth in our business, and the failure to do so could have a material adverse effect on our business, results of operations
and financial condition. Results of Operations
For the Years ended
The Company is reporting
Cost of goods sold for the years ended
Operating expenses, which consisted of professional fees and general and administrative expenses, for the year endedJune 30, 2020 , were$326,614 . This compares with operating expenses for the year endedJune 30, 2019 , of$385,369 . The decrease of$58,755 in operating expenses for the year endedJune 30, 2020 is related to insufficient capital to continue operating activities, which resulted in decreases in professional fees. -9-
As a result of the foregoing, we had a net loss of$10,740,327 for the year endedJune 30, 2020 . This compares with a net income for the year endedJune 30, 2019 of$5,264,597 . The difference is primarily due to a 2019 net gain in derivatives of$6,128,517 compared to a net loss of$10,018,665 for the year endedJune 30, 2020 . In its audited consolidated financial statements as ofJune 30, 2020 , the Company was issued an opinion by its auditors that raised substantial doubt about the ability to continue as a going concern based on the Company's current financial position. Our ability to achieve and maintain profitability and positive cash flow is dependent upon our ability to successfully develop and market our products and our ability to generate revenues.
Liquidity and Capital Resources
As of
Net cash from operating activities was$(21,614) for the year endedJune 30, 2020 . This compares to net cash from operating activities of$(49,478) for the year endedJune 30, 2019 . The change of$(27,864) in our net cash from operating activities for the year endedJune 30, 2020 was primarily due to a change in a net loss of$10,740,327 vs. net income of$5,264,597 , primarily caused by a significant swing in the derivative liability.
Cash flows from investing activities was
Cash flows from financing activities was$0 for the year endedJune 30, 2020 , which compares to cash flows from financing activities of$75,000 for the year endedJune 30, 2019 . The decrease in our cash flows from financing activities for the year endedJune 30, 2020 was due to a decrease in proceeds from convertible notes. We have no present agreements or commitments with respect to any material acquisitions of other businesses, products, product rights or technologies or any other material capital expenditures. However, we will continue to evaluate acquisitions of and/or investments in products, technologies, capital equipment or improvements or companies that complement our business and may make such acquisitions and/or investments in the future. Accordingly, we may need to obtain additional sources of capital in the future to finance any such acquisitions and/or investments. We may not be able to obtain such financing on commercially reasonable terms, if at all. Due to the ongoing global economic crisis, we believe it may be difficult to obtain additional financing if needed. Even if we are able to obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.
Stock Incentive Plan
OnApril 20, 2017 , the Company approved theLife Clips, Inc. 2017 Stock and Incentive Plan ("the Plan"). The Plan provides for the granting of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock grants and units, performance units and awards. The Plan allows for an issuance of a maximum of 20,000,000 shares of common stock, with awards made at the discretion of the board of directors. No awards have been made to date.
Contractual Commitments For the year endingJune 30, 2020 , all Company employment agreements with key officers did not auto-renew, as they were made with the former CEO and deemed to be no longer pertinent. They were replaced onJuly 1, 2018 with a board resolution onJune 2, 2020 . The following table summarizes the terms and related share grants: Accrued in Accrued in Name Position 2019 (unpaid) 2020 (unpaid) William Singer VP$ 30,000 $ 30,000 Victoria Rudman CFO$ 180,000 $ 180,000 William Singer was granted 6,000,000 shares onAugust 31, 2017 ; of which the entire 6,000,000 share grant was fully vested byMarch 1, 2019 .Mr. Singer's employment contract was scheduled to endMarch 1, 2019 . His compensation of$2,500 per month has been accruing sinceJuly 1, 2018 .Victoria Rudman was granted 7,500,000 shares of restricted common stock onJune 30, 2017 ; of which the entire 7,500,000 share grant was fully vested byDecember 31, 2018 .Ms. Rudman's employment contract was scheduled to end onJune 30, 2019 . Her compensation of$15,000 per month has been accruing sinceJuly 1 ,
2018. -10- Material Agreements None Financings
The following summary table is a listing of all outstanding convertible debt as
of
Original
Maturity Interest Current Interest
Issue Date Date Rate Rate (default) June 30, 2020 June 30, 2019
10/02/2015 10/02/2017 3.85 % 18.00 % $ 170,416 $ 170,416
12/07/2015 12/06/2016 10.00 % 10.00 % 91,051 91,051
04/27/2016 04/27/2017 10.00 % 18.00 % 300,000 300,000
05/13/2016 05/13/2017 10.00 % 22.00 % 1,075,305 1,075,305
06/09/2016 06/09/2017 10.00 % 18.00 % 32,154 32,154
07/21/2016 07/21/2017 10.00 % 10.00 % 75,000 75,000
01/27/2017 01/27/2018 10.00 % 22.00 % 5,000 5,000
01/27/2017 01/27/2018 10.00 % 22.00 % 5,000 5,000
02/02/2017 02/02/2018 10.00 % 22.00 % 5,000 5,000
02/10/2017 02/10/2018 10.00 % 22.00 % 11,666 11,666
02/10/2017 02/10/2018 10.00 % 18.00 % 11,668 11,668
02/14/2017 02/14/2018 10.00 % 22.00 % 11,700 11,700
02/17/2017 02/17/2018 10.00 % 22.00 % 50,000 50,000
02/23/2017 02/23/2018 10.00 % 22.00 % 50,000 50,000
03/14/2017 03/14/2018 10.00 % 22.00 % 50,000 50,000
03/15/2017 03/15/2018 10.00 % 22.00 % 50,000 50,000
03/17/2017 03/17/2018 10.00 % 22.00 % 50,000 50,000
03/28/2017 03/28/2018 10.00 % 22.00 % 50,000 50,000
04/03/2017 04/03/2018 10.00 % 22.00 % 50,000 50,000
05/01/2017 05/01/2018 10.00 % 22.00 % 50,000 50,000
06/01/2017 06/01/2018 10.00 % 22.00 % 50,000 50,000
09/19/2017 08/30/2018 18.00 % 18.00 % 30,000 30,000
11/16/2017 11/16/2018 18.00 % 18.00 % 15,000 15,000
01/19/2018 01/19/2019 18.00 % 18.00 % 10,000 10,000
03/22/2018 03/22/2019 18.00 % 18.00 % 15,000 15,000
03/23/2018 03/23/2019 18.00 % 18.00 % 10,000 10,000
04/18/2018 04/18/2019 18.00 % 18.00 % 20,000 20,000
05/01/2018 05/01/2019 18.00 % 18.00 % 10,000 10,000
07/31/2018 07/31/2019 18.00 % 18.00 % 10,000 10,000
08/08/2018 08/08/2019 18.00 % 18.00 % 5,000 5,000
09/24/2018 09/24/2019 18.00 % 18.00 % 5,000 5,000
09/26/2018 09/26/2019 18.00 % 18.00 % 5,000 5,000
11/15/2018 11/15/2019 18.00 % 18.00 % 50,000 50,000
Total Convertible Notes$ 2,428,960 $ 2,428,960 Capital Expenditures Other Capital Expenditures
We expect to incur research and development costs, as well as marketing expenses in connection with the expansion of our business.
Fiscal year end
Our fiscal year end is
-11- Going Concern
We believe that the actions presently being taken to further implement the Company's business plan and generate revenues provide the opportunity for us to continue as a going concern. While we believe in the viability of our strategy to generate revenues and in its ability to raise additional funds, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to further implement our business plan and generate revenues.
The consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.
Future Financings We will require additional financing to fund our planned operations. We currently do not have committed sources of additional financing and may not be able to obtain additional financing particularly, if the volatile conditions of the stock and financial markets, and more particularly the market for early development stage company stocks persist. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, if and when it is needed, we will be forced to further delay or further scale down some or all of our activities or perhaps even cease the operations of the business. Since inception we have funded our operations primarily through equity and debt financings and we expect that we will continue to fund our operations through equity and debt financing, either alone or through strategic alliances. If we are able to raise additional financing by issuing equity securities, our existing stockholders' ownership will be diluted. Obtaining commercial or other loans, assuming those loans would be available, will increase our liabilities and future cash commitments. There is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on his, her, or its investment in our common stock. Further, we may continue to be unprofitable.
Critical Accounting Policies
TheSEC has defined a company's critical accounting policies as the ones that are most important to the portrayal of our financial condition and results of operations and which require us to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies that are significant to understanding our results.
The following are deemed to be the most significant accounting policies affecting us.
Use of Estimates The preparation of these consolidated financial statements in accordance with accounting principles generally accepted inthe United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the consolidated financial statements. The more significant estimates and assumptions by management include among others: property and equipment, foreign currency transactions and translations, and common stock valuation. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. Income Taxes We account for income taxes under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on our consolidated balance sheets in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. We must assess the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. Changes in our valuation allowance in a period are recorded through the income tax provision on the consolidated statements of operations. -12- From the date of our inception we adopted ASC 740-10-30. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity's consolidated financial statements and prescribes a recognition threshold and measurement attributes for consolidated financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10, we recognized no material adjustment in the liability for unrecognized income tax benefits.
Non-Cash Equity Transactions
Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to contemporaneous cash sale of stock.
Fair Value of Financial Instruments
We apply the provisions of accounting guidance, FASB Topic ASC 825, that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the consolidated balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties. As ofJune 30, 2020 and 2019, the fair value of accounts payable approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates.
Recent Accounting Pronouncements
There were no Recently Adopted Standards.
-13- InJune 2016 , the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the guidance on the impairment of financial instruments. This update adds an impairment model (known as the current expected credit losses model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. InNovember 2018 , ASU 2016-13 was amended by ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2018-19 changes the effective date of the credit loss standards (ASU 2016-13) to fiscal years beginning afterDecember 15, 2021 , including interim periods within those fiscal years. Further, the ASU clarifies that operating lease receivables are not within the scope of ASC 326-20 and should instead be accounted for under the new leasing standard, ASC 842. The Company does not believe that the impact of this ASU will have a material impact on its consolidated financial statements and related disclosures. InJanuary 2017 , the FASB issued ASU No. 2017-04, Intangibles -Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The amendments in this ASU simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test and eliminating the requirement for a reporting unit with a zero or negative carrying amount to perform a qualitative assessment. Instead, under this ASU, an entity would perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized is not to exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects will be considered, if applicable. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning afterDecember 15, 2019 . Early adoption is permitted. The Company does not believe that the impact of this ASU will have a material impact on its consolidated financial statements and related disclosures.
Off-Balance Sheet Arrangements
UnderSEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. As ofJune 30, 2020 , we have no off-balance sheet arrangements. Inflation
We do not believe that inflation has had a material effect on our results of operations.
© Edgar Online, source
