CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this registration statement constitute "forward-looking statements." These statements, identified by words such as "plan," "anticipate," "believe," "estimate," "should," "expect" and similar expressions include the Company's expectations and objectives regarding its future financial position, operating results and business strategy. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause its actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such factors include, general economic conditions particularly related to demand for the Company's products and services, changes in business strategy, competitive factors (including the introduction or enhancement of competitive services), pricing pressures, changes in operating expenses, fluctuation in foreign currency exchange rates, inability to attract or retain consulting, sales and/or development talent, changes in customer requirements, and/or evolving industry standards, as well as those factors discussed in "Part II, Item 1A. Risk Factors" of this annual report on Form 10-K.
Forward looking statements are based on a number of material factors and assumptions, including the availability and final receipt of required government licenses, that sufficient working capital is available to complete the proposed activities, that contracted parties provide goods and/or services on the agreed time frames. While the Company considers these assumptions may be reasonable based on information currently available to it, they may prove to be incorrect. Actual results may vary from such forward-looking information for a variety of reasons, including but not limited to risks and uncertainties disclosed in "Part II, Item 1A. Risk Factors" of this annual report on Form 10-K.
The Company intends to discuss in its Quarterly Reports and Annual Reports any events or circumstances that occurred during the period to which such documents relate that are reasonably likely to cause actual events or circumstances to differ materially from those disclosed in this registration statement. New factors emerge from time to time, and it is not possible for management to predict all of such factors and to assess in advance the impact of each such factor on its business or the extent to which any factor, or combination of such factors, may cause actual results to differ materially from those contained in any forwarding looking statement.
As used in this registration statement, unless the context otherwise requires, "we," "us," "our," the "Company" and "Live Current" refers to Live Current Media, Inc. All dollar amounts in this registration statement are in U.S. dollars unless otherwise stated.
ITEM 1. BUSINESS
General
Live Current is a digital technology company involved in the entertainment industry. Live Current is currently developing SPRT MTRX and Trivia Matrix, which are positioned in the sports/gaming sector.
Live Current Media, Inc. (the "Company") was incorporated under the laws of the State of Nevada on October 10, 1995. The Company has an authorized capital of 500,000,000 shares of common stock with 35,559,027 shares currently issued and outstanding.
The Company is the sole shareholder of Domain Holdings Inc., originally formed under the laws of British Columbia, Canada on July 4, 1994 and re-domiciled to Alberta, Canada on April 14, 1999 ("DHI"). The Company is also the majority shareholder of Perfume, Inc. (95% ownership), formed under the laws of the State of Delaware on March 13, 2008. Perfume, Inc. is currently dormant and does not carry on an active business. References herein to the Company include DHI and Perfume, Inc. (collectively, the "Subsidiaries") unless otherwise stated.
On March 21, 2019, the Company executed a distribution agreement (the "Distribution Agreement") with Cell MedX Corp. ("Cell MedX" or the "Device Manufacturer"), pursuant to which Cell MedX granted to the Company exclusive worldwide rights to distribute the eBalance microcurrent device to households and individual users. On January 29, 2020, the Company and Cell MedX entered a Buyback agreement to sell the exclusive distribution rights to the eBalance microcurrent device back to Cell MedX.
Evasyst Inc.
On January 20, 2022, Live Current Media Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger Agreement") with Evasyst Inc. ("Evasyst") and the Company's wholly owned subsidiary formed for the purpose of completing the transactions set out in the Merger Agreement, Evasyst Acquisition Inc. ("LIVC Sub"). Under the terms of the Merger Agreement, the Company will acquire all of the outstanding shares of Evasyst (the "Evasyst Acquisition") by means of a reverse triangular merger, whereby LIVC Sub will merge with and into KAST, with KAST continuing as the surviving corporation (the "Merger"). Upon completion of the Merger all of the outstanding shares of Evasyst's common stock will be converted into the right to receive a total of 125,000,000 shares of the Company's common stock and each share of LIVC Sub common stock outstanding will be converted into one share of Evasyst common stock. Upon completion of the Merger, the board of directors of the Company is expected to consist of Mark Ollila, David Jeffs, Justin Weissberg, Leslie Klinger and Heidi Steiger. Mr. Ollila will act as the Chief Executive Officer and Chief Financial Officer of the Company, with Mr. Jeffs acting as the Secretary of the Company. Closing of the Merger remains subject to the satisfaction of certain conditions precedent, including (i) there being no outstanding securities of Evasyst other than shares of Evasyst common stock, (ii) Evasyst having no outstanding indebtedness other than trade payables incurred in the ordinary course of business, (iv) certain significant shareholders of the Company entering into lock up agreements for a period of six (6) months following completion of the Merger, and (v) Evasyst delivering to the Company those audited and unaudited financial statements as are required to be filed pursuant to the provisions of the Securities Exchange Act of 1934. The Merger is expected to complete prior to April 30, 2022.
Evasyst is a digital technology company operating the social video application "Kast". Users of Kast can host public or private watch parties with friends on their PC, Mac, web or mobile device. Kast's technology allows for the creation of intimate private watch parties that scales with millions of users.
Upon completion of the Merger, although the Company will continue to enhance its SPRT MTRX and Trivia Matrix gaming apps, the Company expects to devote most of its resources to the development and commercialization of Kast.
Gaming
Market. 70% of Americans play games online. 54% of those gamers are male, 46% are female and 52% are college educated. 60% play on their mobile devices. Gamers play for mental stimulation, relaxation and stress relief, while prize money is a major inducement.
In addition, gaming advertising revenue has doubled in the last two years. The most common platform for playing games is the smartphone leaving no doubt as to why gaming is taking off. 72% of revenue generated from the App Store is generated from gaming apps.
SPRT MTRX
SPRT MTRX is a gaming app, available in both iPhone and Android versions, in which players bid on the final scores of NHL, NFL and NBA games. The events are organized as "Challenges" and cover multiple games over one day. A cash prize is awarded to the player who receives the most points for correctly bidding on the final scores of the sports events included in the Challenge. The system for bidding on the final scores is unique in the gaming industry.
Business Model. The business model entails offering free prizes for playing the game, developing a large contingent of users and delivering advertisements. This model has proven popular among gamers as the lure of free money is a very attractive inducement. In addition, in-app purchases in the form of sports data and bidding preferences will be added in the future.
Development. The Company will continue to enhance the SPRT MTRX through 2022 by adding additional functionality including news and trivia and more sports such as MLB and EPL but does not anticipate generating any significant revenue from SPRT MTRX in fiscal 2022.
Trivia Matrix
Trivia Matrix is a mobile trivia game app. The game consists of a 4 x 4 grid of eight mixed pairs of trivia data belonging to a specific category. The categories are Geography, History, Sports, Natural World, Pop Culture and Entertainment. The goal of the game is to eliminate each pair of trivia by matching them together and clear the grid of all data. Examples of matches are; actor with movie, musician with band, painter with painting, country with capital and country with silhouette. Players can play individual games to beat the clock or play against other players (H2H) to climb a challenge ladder.
Revenue Model. Trivia Matrix is a free to play (F2P) game. Revenue is generated by presenting advertisements periodically to players who complete games and will be generated by in app purchases (IAP) such as pay to avoid advertisements and pay to gain access to a premium account, which includes more data and more questions. In-app purchases have not yet been enabled.
Trivia Matrix is available on the Apple App Store and Google Play Store.
Boxing.com FEDERATION
The Company was developing Boxing.com Federation during the 2020 fiscal year. In March 2021 the Company terminated development of this project.
ITEM 1A. RISK FACTORS
An investment in the Company's common shares involves a high degree of risk. You should carefully consider the risks described below and the other information in this registration statement before investing in its common shares. If any of the following risks occur, the Company's business, operating results and financial condition could be seriously harmed. The trading price of its common shares could decline due to any of these risks, and you may lose all or part of your investment.
You should consider each of the following risk factors and the other information in this registration statement, including the Company's financial statements and the related notes, in evaluating its business and prospects. The risks and uncertainties described below are not the only ones that impact on the Company's business. Additional risks and uncertainties not presently known to the Company or that the Company currently consider immaterial may also impair its business operations. If any of the following risks do occur, its business and financial results could be harmed. In that case, the trading price of its common stock could decline.
Risks Associated with Completion of the Evasyst Acquisition
No Assurance of Completion. Completion of the Evasyst Acquisition remains subject to a number of conditions precedent. There is no assurance that the Evasyst Acquisition will complete prior to April 30, 2022 or at all.
Completion of the Evasyst Acquisition will result in Substantial Dilution. Completion of the Evasyst Acquisition will result in the issuance of 125,000,000 shares of the Company's common stock, resulting in a change in control of the Company. Existing stockholders of the Company will experience substantial dilution upon completion of the Merger.
Risks Associated with the Company's Gaming Business
Licensing. Currently, other than business and operations licenses applicable to most commercial ventures, the Company is not required to obtain any governmental approval for its business operations. There can be no assurance, however, that governmental institutions will not, in the future, impose licensing or other requirements on the Company. Additionally, as noted below, there are a variety of laws and regulations that may, directly or indirectly, have an impact on the Company's business.
Privacy Legislation and Regulations. While the Company is not currently subject to licensing requirements, entities engaged in operations over the Internet, particularly relating to the collection of user information, are subject to limitations on their ability to utilize such information under federal and state legislation and regulation. In 2000, the Gramm-Leach-Bliley Act required that the collection of identifiable information regarding users of financial services be subject to stringent disclosure and "opt-out" provisions. While this law and the regulations enacted by the Federal Trade Commission and others relates primarily to information relating to financial transactions and financial institutions, the broad definitions of those terms may make the businesses entered into by the Company and its strategic partners subject to the provisions of the Act. This, in turn, may increase the cost of doing business and make it unattractive to collect and transfer information regarding users of services. This, in turn, may reduce the revenues of the Company and its strategic partners, thus reducing potential revenues and profitability. Similarly, the Children On-line Privacy and Protection Act ("COPPA") imposes strict limitations on the ability of Internet ventures to collect information from minors. The impact of COPPA may be to increase the cost of doing business on the Internet and reducing potential revenue sources. The Company may also be impacted by the US Patriot Act, which requires certain companies to collect and provide information to United States governmental authorities. A number of state governments have also proposed or enacted privacy legislation that reflects or, in some cases, extends the limitations imposed by the Gramm-Leach-Bliley Act and COPPA. These laws may further impact the cost of doing business on the Internet and the attractiveness of Live Current's inventory of domain names.
Advertising Regulations. In response to concerns regarding "spam" (unsolicited electronic messages), "pop-up" web pages and other Internet advertising, the federal government and a number of states have adopted or proposed laws and regulations which would limit the use of unsolicited Internet advertisements. While a number of factors may prevent the effectiveness of such laws and regulations, the cumulative effect may be to limit the attractiveness of effecting and promoting sales on the Internet, thus reducing the value of the Company's advertising driven revenue model.
There are currently few laws or regulations that specifically regulate communications or commerce on the Internet. However, laws and regulations may be adopted in the future that address issues such as user privacy, pricing and the characteristics and quality of products and services. For example, the Telecommunications Act of 1996 sought to prohibit transmitting various types of information and content over the Internet. Several telecommunications companies have petitioned the Federal Communications Commission to regulate Internet service providers and on-line service providers in a manner similar to long distance telephone carriers and to impose access fees on those companies. This could increase the cost of transmitting data over the Internet. Moreover, it may take years to determine the extent to which existing laws relating to issues such as intellectual property ownership, libel and personal privacy are applicable to the Internet. Any new laws or regulations relating to the Internet or any new interpretations of existing laws could have a negative impact on Live Current's business and add additional costs to doing business on the Internet.
Competition. The Company competes with many companies possessing greater financial resources and technical facilities than itself in the B2C (business-to-consumer) market as well as for the recruitment and retention of qualified personnel. In addition, some of these competitors have been in business for longer than Live Current and may have established more strategic partnerships and relationships than the Company.
Dependence on One or a Few Major Customers. The Company does not currently depend on any single customer for a significant proportion of its business. However, as the Company enters into strategic transactions, the Company may choose to grant exclusive rights to a small number of parties or otherwise limit its activities that could, in turn, create such dependence. The Company, however, has no current plans to do so.
The Company will consider seeking further trademark protection for its online businesses, however, the Company may be unable to avail itself of trademark protection under United States laws. Consequently, the Company will seek trademark protection only where it has determined that the cost of obtaining protection, and the scope of protection provided, results in a meaningful benefit to the Company.
Market Acceptance. SPRT MTRX and Trivia Matrix are new products in a product abundant gaming market and there is no guarantee that they will be accepted by the market. In addition to acceptance, should they be accepted, there is no guarantee that they will maintain their popularity in a notoriously fickle gaming market.
Suspension of Live, Professional Sports. SPRT MTRX relies on live, professional sports to provide game content. Without live professional sports, SPRT MTRX will be forced to change its business model. This could possibly include developing artificial intelligence induced content. There could be significant costs associated with this change and there is no guarantee that it would meet with public acceptance.
Risks Related to the Company's Securities
Additional financing will be required. The Company anticipates that it will require significant additional financing to fund its proposed business development plans. The costs of developing the Company's platforms is anticipated to be substantially greater than the Company's existing financial resources.
If the Company is unable to obtain additional financing when needed, the Company may not be able to complete its business development plans or its business could fail. The Company will scale back its development plans depending upon its existing financial resources.
The Company's ability to obtain future financing will be subject to a number of factors, including the variability of the global economy, investor interest in our planned business projects, and the performance of equity markets in general. These factors may make the timing, amount, terms or conditions of additional financing unavailable to the Company. If the Company is not able to obtain financing when needed or in an amount sufficient to enable us to complete our programs, the Company may be required to scale back its business development plans.
Additional financings equity financing will dilute existing stockholders. The most likely source of future financing presently available to the Company is through the sale of shares of its common stock. Issuing shares of common stock, for financing purposes or otherwise, will dilute the interests of existing stockholders. Existing stockholders of the Company are also expected to have their interests significantly diluted as a result of the completion of the Evasyst Acquisition.
The Company's stock price is volatile. The stock markets in general, and the stock prices of internet companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of any specific public company. The market price of the Company's Common Stock is likely to fluctuate in the future, especially if the Company's Common Stock is thinly traded. Factors that may have a significant impact on the market price of the Company's Common Stock include:
(a) actual or anticipated variations in the Company's results of operations;
(b) the Company's ability or inability to generate new revenues;
(c) increased competition;
(d) government regulations, including internet regulations;
(e) conditions and trends in the internet industry;
(f) proprietary rights; or
(g) rumors or allegations regarding the Company's financial disclosures or practices.
The Company's stock price may be impacted by factors that are unrelated or disproportionate to its operating performance. These market fluctuations, as well as general economic, political and market conditions, such as recessions, interest rates or international currency fluctuations may adversely affect the market price of the Company's Common Stock.
The Company does not expect to pay dividends in the foreseeable future. The Company has never paid cash dividends on its Common Stock and has no plans to do so in the foreseeable future. The Company intends to retain earnings, if any, to develop and expand its business.
"Penny Stock" rules may make buying or selling the Company's Common Stock difficult, and severely limit its market and liquidity. Trading in The Company's Common Stock is subject to certain regulations adopted by the SEC commonly known as the "penny stock" rules. The Company's Common Stock qualifies as penny stocks and are covered by Section 15(g) of the Securities Exchange Act of 1934, which imposes additional sales practice requirements on broker/dealers who sell the Common Stock in the aftermarket. The "penny stock" rules govern how broker-dealers can deal with their clients and "penny stocks". For sales of The Company's Common Stock, the broker/dealer must make a special suitability determination and receive from you a written agreement prior to making a sale to you. The additional burdens imposed upon broker-dealers by the "penny stock" rules may discourage broker-dealers from effecting transactions in The Company's Common Stock, which could severely limit their market price and liquidity of its Common Stock. This could prevent you from reselling your shares and may cause the price of the Common Stock to decline.
Lack of operating revenues. The Company has limited operating revenues and is expected to continue to do so for the foreseeable future. Management has assessed the Company's ability to continue as a going concern and the financial statements included with this registration statement includes disclosure that there is a substantial doubt as to the Company's ability to continue as a going concern. The audit report of the Company's principal independent accountants for the years ended December 31, 2021 and December 31, 2020 includes a statement regarding the uncertainty of the Company's ability to continue as a going concern. The Company's failure to achieve profitability and positive operating revenues could have a material adverse effect on its financial condition and results of operations, and could cause the Company's business to fail.
No assurance that forward-looking assessments will be realized. The Company's ability to accomplish their objectives and whether or not they are financially successful is dependent upon numerous factors, each of which could have a material effect on the results obtained. Some of these factors are in the discretion and control of management and others are beyond management's control. The assumptions and hypotheses used in preparing any forward-looking assessments contained herein are considered reasonable by management. There can be no assurance, however, that any projections or assessments contained herein or otherwise made by management will be realized or achieved at any level.
Uncertainty due to Global Outbreak of COVID-19. In March of 2020, the World Health Organization declared an outbreak of COVID-19 a global pandemic. The COVID-19 has impacted a vast array of businesses through the restrictions put in place by most governments internationally, including the USA federal government as well as provincial and municipal governments, regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown to what extent the impact of the COVID-19 outbreak may have on the Company as this will depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place world-wide to fight the virus. While the extent of the impact is unknown, the COVID-19 outbreak may hinder the Company's ability to raise financing for exploration or operating costs due to uncertain capital markets, supply chain disruptions, increased government regulations and other unanticipated factors, all of which may also negatively impact the Company's business and financial condition.
ITEM 2. PROPERTIES
The Company does not currently have any interests in any real property.
The Company and its Subsidiaries operate from their principal office at 50 West Liberty Street, Suite 880, Reno, Nevada. The Company's telephone number is (604) 648-0500.
ITEM 3. LEGAL PROCEEDINGS
Wrongful Dismissal Proceedings with Former CEO of DHI
On March 9, 2000, a former Chief Executive Officer of DHI commenced a legal action against DHI for wrongful dismissal and breach of contract. He is seeking, at a minimum, 18.39% of the outstanding shares of DHI, specific performance of his contract, special damages of approximately $30,000, aggravated and punitive damages, interest and costs. On June 1, 2000, DHI filed a defense and counterclaim claiming damages and special damages for breach of fiduciary duty and breach of his employment contract. No further action has been taken with respect to these proceedings since 2000 and the Company does not consider these proceedings to be material.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Holders of the Company's Shares
As of the date of this Annual Report, the Company had 74 registered shareholders. The number of registered shareholders does not include shareholders holding their shares on deposit with brokers or dealers and registered in the name of stock depositories.
Market Information
The Company's common shares trade over-the-counter in the United States on the OTCQB marketplace under the symbol "LIVC."
Quotations entered on the OTCQB marketplace reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions.
Dividend Rights
There are no provisions in the Company's articles of incorporation or bylaws restricting the Company's ability to pay dividends on our common stock. Chapter 78 of the Nevada Revised Statutes (the "NRS") does provide certain limitations on the Company's ability to declare and pay dividends. Section 78.288 of the NRS prohibits the Company from declaring dividends where, after giving effect to the distribution of the dividend:
(a) The Company would not be able to pay its debts as they become due in the usual course of business; or
(b) Except as allowed in the Company's articles of incorporation the Company's total assets would be less than the sum of the Company's total liabilities plus the amount that would be needed to satisfy any preferential rights.
The Company has never declared, nor paid, any dividend since their incorporation and they do not foresee paying any dividend in the near future since all available funds will be used to conduct the Company's business development activities. Any future payment of dividends will depend on its financing requirements and financial condition and other factors which the board of directors, in its sole discretion, may consider appropriate.
Recent Sales of Unregistered Securities
February 2022 Convertible Note Offering
On February 15, 2022 the Company completed a private placement offering (the "February 2022 Convertible Note Offering") of Original Issue Discount Senior Convertible Promissory Notes (the "February 2022 Convertible Notes") and warrants to purchase shares of the Company's common stock (the "February 2022 Warrants") with Mercer Street Global Opportunity Fund, LLC ("Mercer") pursuant to a securities purchase agreement between the Company and Mercer (the "Mercer Securities Purchase Agreement"). Under the February 2022 Convertible Note Offering, for an aggregate purchase price of $1,500,000, the Company issued to Mercer a February 2022 Convertible Note having a face value of $1,620,000, and February 2022 Warrants to purchase a total of 3,573,529 shares of the Company's common stock. At the request of the Company, the Company and Mercer may close a second tranche of February 2022 Convertible Notes having a face value of $1,080,000 and on February 2022 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 under the February 2022 Convertible Note Offering is conditional upon completion of the Evasyst Acquisition and certain other conditions precedent.
The February 2022 Convertible Notes mature 24 months after issuance, bear interest at a rate of 4% per annum and are convertible into shares of the Company's common stock at an initial conversion price of $0.34 per share, subject to adjustment for certain stock splits, stock combinations and dilutive share issuances. The Company may prepay the February 2022 Convertible Notes (i) at any time during the first 90 days following closing at the face value of the February 2022 Convertible Notes, (ii) at any time during the period from 91 to 180 days following closing at a premium of 110% of the face value of the February 2022 Convertible Notes, and (iii) thereafter at 120% of the face value of the February 2022 Convertible Notes. The February 2022 Convertible Notes contain a number of customary events of default. Additionally, the February 2022 Convertible 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, pursuant to a security agreement that was entered into in connection with the issuance of the February 2022 Convertible Notes.
The February 2022 Warrants are exercisable at an initial exercise price of $0.60 per share for a term ending on the 5 year anniversary of the date of issuance. The exercise price of the February 2022 Warrants are subject to adjustment for certain stock splits, stock combinations and dilutive share issuances.
In addition to the forgoing, until such time as there are no February 2022 Convertible Notes outstanding, if the Company proposes to offer and sell any securities of the Company in a subsequent financing, Mercer may elect to surrender its February 2022 Convertible Notes and February 2022 Warrants for securities of the same type offered in such subsequent financing on the same terms and conditions as that subsequent financing. Subject to certain stated exceptions, the Company is prohibited from incurring any debt, filing registration statements, entering into any variable rate transactions while the February 2022 Convertible Notes are outstanding, and until the earlier of 90 days following closing of the second tranche, or 180 days following closing of the first tranche, the Company is prohibited from issuing any shares of its common stock.
The February 2022 Convertible Notes and February 2022 Warrants may not be converted or exercised by the holder if, after give effect to such conversion or exercise, the holder would beneficially own greater than 4.99% of the Company's outstanding common stock, provided that the holder may, on not less than 61 days prior written notice to the Company, increase the limitation to 9.99% of the Company's outstanding common stock.
In connection with the Offering, the Company also entered into a registration rights agreement (the "Mercer Registration Agreement") with Mercer, pursuant to which the Company has agreed to file a registration statement (a with the Securities and Exchange Commission to register the resale of the shares of common stock issuable upon conversion of the February 2022 Convertible Notes and the February 2022 Warrants by no later than April 7, 2022, and to use commercially reasonable efforts to have such registration statement declared effective within 60 days after filing.
The February 2022 Convertible Note Offering was completed pursuant to the exemptions from registration provided by Rule 506(b) of Regulation D of the United States Securities Act of 1933, as amended (the "Securities Act"), on the basis that Mercer is an "accredited investor" as defined in Rule 501 of Regulation D.
In connection with the February 2022 Convertible Note Offering, the Company issued 221,402 shares of the Company's common stock at a deemed cost of $0.271 per share as a brokerage fee.
March 2022 Convertible Note Offering
On March 28, 2022, the Company completed a private placement offering (the "March 2022 Convertible Note Offering") of Original Issue Discount Senior Unsecured Convertible Promissory Notes (the "March 2022 Convertible Notes") and warrants to purchase shares of the Company's common stock (the "March 2022 Warrants"). For gross proceeds of $886,000, the Company issued March 2022 Convertible Notes having an aggregate face value of $956,880 and March 2022 Warrants exercisable for a total of 2,110,765 shares of the Company's common stock.
The March 2022 Convertible Notes mature 24 months after issuance, bear interest at a rate of 4% per annum and are convertible into shares of the Company's common stock at an initial conversion price of $0.34 per share, subject to adjustment for certain stock splits, stock combinations and dilutive share issuances. The Company may prepay the March 2022 Convertible Notes (i) at any time during the first 90 days following closing at the face value of the March 2022 Convertible Notes, (ii) at any time during the period from 91 to 180 days following closing at a premium of 110% of the face value of the March 2022 Convertible Notes, and (iii) thereafter at 120% of the face value of the March 2022 Convertible Notes. The March 2022 Convertible Notes contain a number of customary events of default. The March 2022 Convertible Notes are unsecured.
The March 2022 Warrants are exercisable at an initial exercise price of $0.60 per share for a term ending on the 5 year anniversary of the date of issuance. The exercise price of the March 2022 Warrants are subject to adjustment for certain stock splits, stock combinations and dilutive share issuances.
There were no most favored nation rights or registration rights granted in respect of the March 2022 Convertible Note Offering.
The March 2022 Convertible Note Offering was completed pursuant to the exemptions from registration provided by Rule 506(b) of Regulation D and Rule 903 of the Securities Act, on the basis that each subscriber was either an "accredited investor" as defined in Rule 501 of Regulation D or was not a U.S. person as defined in Rule 902 of Regulation S.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
Management's Discussion and Analysis
The following selected financial data was derived from the Company's audited and unaudited consolidated financial statements. The information set forth below should be read in conjunction with the Company's consolidated financial statements and related notes included elsewhere in this registration statement. In addition, upon completion of the Evasyst Acquisition, of which there is no assurance, the Company expects to focus its resources on the development of Evasyst's video streaming business and the Company's own Gaming business. These businesses are significantly different from the domain name and web development business that the Company has historically been engaged in. As a result, historical results and capital requirements are not expected to be reflective of the Company's financial results and capital requirements moving forward.
Summary of Results
| |
|
12 months ended |
|
|
|
|
| |
|
December
31, 2021 |
|
|
December
31, 2020 |
|
|
% Change |
|
| Operating expenses (income) |
|
|
|
|
|
|
|
|
|
| Impairment of computer software |
$ |
195,962 |
|
$ |
- |
|
|
n/a |
|
| Domain content and registration |
|
3,072 |
|
|
3,140 |
|
|
-2.17% |
|
| General and administration |
|
52,032 |
|
|
42,162 |
|
|
23.41% |
|
| Interest expense |
|
- |
|
|
204 |
|
|
n/a |
|
| Management fees |
|
123,651 |
|
|
123,708 |
|
|
-0.05% |
|
| Marketing |
|
90,195 |
|
|
23,376 |
|
|
285.84% |
|
| Professional fees |
|
79,839 |
|
|
60,450 |
|
|
32.07% |
|
| Transfer agent and regulatory |
|
30,201 |
|
|
29,229 |
|
|
3.33% |
|
| Travel |
|
2,481 |
|
|
- |
|
|
n/a |
|
| Website Development |
|
62,302 |
|
|
1,506 |
|
|
4,036.92% |
|
| |
$ |
639,735 |
|
$ |
283,775 |
|
|
125.45% |
|
Results of Operation
Revenue
The Company recognized a gain of $913,246 from the sale of a domain name during the year ended December 31, 2021 (2020 - $117,466). The Company did not recognize recurring revenues during its 2021 or 2020 fiscal years. The Company continues to market its domain names in its portfolio and considers offers received for domain names in its portfolio. The Company believes its portfolio of domain names will continue to maintain its value over time. The Company does not anticipate earning significant advertising revenue from SPRT MTRX or Trivia Matrix in the 2022 fiscal year.
The Company has an accumulated deficit of $17,888,257 at December 31, 2021. The Company is presently in the development stage of its business and cannot provide any assurances that it will be able to generate regular or recurring revenues in the near future.
Operating Expenses
Operating expenses for the year ended December 31, 2021 were $639,735 as compared to $283,775 for the year ended December 31, 2020, an increase of approximately $356,000. The change is mainly due to an increase in development costs associated with Trivia Matrix and an increase in marketing activities and impairment expense related to SPRT MTRX.
Net Loss
The Company recorded a net loss of $150,615 for the year ended December 31, 2021 and net profit of $231,999 for the year ended December 31, 2020. The majority of the difference is the result of two transactions as follows: During the year ended December 31, 2021 the Company had a net gain of $913,246 from the sale of domain names compared to a net gain of $117,466 in the year ended December 31, 2020. In 2021 the equity investment resulting from the sale of the eBalance distribution rights described below decreased in value by $346,253 compared to an increase of $47,147 in 2020. In addition, in 2020 the Company recorded a one time gain on the sale of a licence related to the eBalance distribution rights transaction of $351,134. And in 2021 the Company recorded $95,722 in stock based compensation relating to the issuance of options to management, directors and consultants.
On January 29, 2020, the Company made the decision to exit the medical device distribution business and agreed to sell back to Cell MedX Corp. ("Cell MedX") the exclusive worldwide distribution rights to Cell MedX's eBalance microcurrent device, acquired in 2019 (the "Distribution Rights"). Under the terms of the agreement, the Company sold the Distribution Rights back to Cell MedX in consideration for a royalty on future sales of the eBalance device capped at US$507,500, plus warrants to purchase up to 2,000,000 shares in the common stock of Cell MedX (the "Warrants") exercisable for a period of three (3) years. 1,000,000 of the Warrants are exercisable at a price of $US0.50 per share (the "$0.50 Warrants"), with the remaining 1,000,000 Warrants exercisable at US$1.00 per share (the "$1.00 Warrants"). The Warrants are subject to an acceleration right, with the $0.50 Warrants being subject to acceleration if Cell MedX's common stock trades at or above $1.00 per share for 30 consecutive trading days, and the $1.00 Warrants being subject to acceleration if Cell MedX's common stock trades at or above $1.75 per share for 30 consecutive trading days.
Liquidity and Capital Resources
At December 31, 2021, the Company had a working capital surplus of $566,159, compared to $41,938 at December 31, 2020. The Company's only source of cashflow during the year ended December 31, 2021 was through the sale of domain names totaling $913,246. Due to the fact that the Company has incurred recurring losses and anticipates incurring further losses in the future, the Company has determined there is substantial doubt as to its ability to continue as a going concern.
In February 2022, the Company completed the February 2022 Convertible Note Offering for gross proceeds of $1,500,000, and in March 2022, the Company completed the March 2022 Convertible Note Offering for gross proceeds of $886,000. See "Recent Sales of Unregistered Securities" for additional details regarding the February 2022 Convertible Note Offering and the March 2022 Convertible Note Offering.
The Company does not anticipate purchasing any plant or significant equipment in the immediate future.
Off-Balance Sheet Arrangements
The Company has no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to shareholders.
Critical Accounting Policies
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.