Convertible Notes

6 Months Ended

Jun. 30, 2022

Convertible Notes Payable [Abstract]

Convertible Notes [Text Block]

2. Convertible Notes

Upon completion of the Merger on April 22, 2022, the Company assumed the accounting acquiree, Live Current's, convertible debt obligations. The debt was incurred by Live Current during the three month period ended March 31, 2022 and is described below.

On February 15, 2022 ("February Notes") and March 28, 2022 ("March Notes" and, together with the February Notes, the "Notes"), the Live Current issued convertible promissory notes that bear interest of 4.0% and have a term of two years. Both the February Notes and the March Notes have an initial conversion price to the Company's common stock of $0.34 per share. The Notes were issued with an original issue discount. In addition, in connection with the issuance of the February Notes, the Company paid a cash fee of $120,000 and issued 221,402 shares of its common stock with a fair value of $62,213,.96 to registered broker dealers. Along with the Notes, the Company also issued warrants to purchase up to 5,684,292 shares of common stock at an exercise price of $0.60 per share for a term of five years from the date of issuance.

Upon issuance of the Notes, the Company recognized total debt discount of $1,182,540 which will be amortized over the term of the debt using the interest method. During the three month period ended June 30, 2022, the Company recognized $25,708 in interest expense and $185,250 in financing costs associated with the amortization of the debt discount.

The Company may close a second tranche of the February Notes having a face value of $1,080,000 and warrants to purchase up to an additional 2,382,353 shares of the Company's common stock for gross proceeds of $1,000,000. Closing of the second tranche of the February Notes is conditional upon certain conditions precedent. There is no assurance that second tranche of February Notes will be completed or sold.

The Company may prepay the Notes (i) at any time during the first 90 days following closing at the face value of the, (ii) at any time during the period from 91 to 180 days following closing at a premium of 110% of the face value, and (iii) thereafter at 120% of the face value. The February Notes contain a number of customary events of default. Additionally, the February Notes are secured by all of the assets of the Company, including a lien on and security interest in all of the issued and outstanding equity interests of the wholly-owned subsidiaries of the Company. The March Notes are unsecured.