Convertible notes payable and Common stock warrant liability

6 Months Ended

Jun. 30, 2022

Convertible Notes Payable And Common Stock Warrant Liability

Convertible notes payable and Common stock warrant liability

10. Convertible notes payable and Common stock warrant liability

Fair Value Measurements: We measure the fair value of our financial and non-financial assets and liabilities at each reporting date. Fair value is defined as the exchange price at which an asset or liability would be transferred in the principal or most advantageous market in an orderly transaction between market participants as of a measurement date. Accounting guidance provides an established hierarchy to be used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs; observable inputs are required to be used when available. Observable inputs are those used by market participants to value an asset or liability and are developed based on market data obtained from sources independent of us. Unobservable inputs are those that reflect our assumptions about factors that market participants would use to value an asset or liability. Fair value measurements are classified and disclosed in one of the following three categories:

● Level 1 – Quoted market prices for identical assets or liabilities in active markets at the measurement date;

● Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities in active or non-active markets, or other inputs that can be corroborated by observable market data for substantially the full term of an asset or liability; and,

● Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of an asset or liability, including management’s best estimate of the factors that market participants would use in pricing an asset or liability at the measurement date.

We carry our convertible notes payable and common stock warrant liability at fair value. We carry our other financial instruments at amortized cost; these items include cash, accounts payable, and accrued expenses. The carrying amounts of our cash and cash equivalents, accounts payable, and accrued expenses are considered to be reasonable estimates of their respective fair values due to their short-term nature and, therefore, fair value information is not provided in the following table.

Utilizing the lowest level inputs available under the measurement hierarchy, the fair values of our measured financial instruments comprise the following (we had no Level 1 and 2 financial instruments):

Liabilities:

Convertible notes payable

Level 3

Convertible Notes Payable -

Our Level 3 financial liabilities consist of convertible notes payable (the “Notes”), all of which were issued as detailed below:

(i) On April 6, 2022, we entered into a Securities Purchase Agreement (“SPA”) with ONE44 CAPITAL, LLC, a Nevada limited liability company (“Purchaser”), pursuant to which we issued and sold to the Purchaser a convertible promissory note, dated April 6, 2022, in the principal amount of $120,000 (the “Note”).   The Note contains an original issue discount amount of $9,000 and legal fees payable to ONE44’s legal counsel of $6,000.

(ii)

On May 4, 2022, we entered into a Securities Purchase Agreement (“SPA”) with 1800 DIAGONAL LENDING LLC, a Virginia limited liability company, f/k/a Sixth Street Lending, LLC (“Purchaser”), pursuant to which we issued and sold to the Purchaser a convertible promissory note, dated May 4, 2022, in the principal amount of $68,750 (the “Note”). The Note contains legal fees payable to Purchaser’s legal counsel of $3,000 and to Purchaser a due diligence fee of $750. The term sheet also includes optional additional tranches of financing of up to $900,000 during the term of the note subject to further agreement with the purchaser.

(iii)

On June 17, 2022, we entered into a Securities Purchase Agreement (“SPA”) with 1800 DIAGONAL LENDING LLC, a Virginia limited liability company, f/k/a Sixth Street Lending, LLC (“Purchaser”), pursuant to which we issued and sold to the Purchaser a convertible promissory note, dated May 4, 2022, in the principal amount of $54,250 (the “Note”). The Note contains legal fees payable to Purchaser’s legal counsel of $3,000 and to Purchaser a due diligence fee of $1,250.