EVASYST INC. |
EVASYST INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, 2022 and December 31, 2021 - unaudited
March 31 | December 31, | |||||
2022 | 2021 | |||||
ASSETS | ||||||
Current Assets | ||||||
Cash | $ | 144,122 | $ | 9,773 | ||
Prepaid expenses and other current assets | 56,214 | 9,538 | ||||
Total Current Assets | 200,336 | 19,311 | ||||
Fixed assets, net | 11,289 | 12,749 | ||||
Other assets | 19,407 | 14,728 | ||||
Total Assets | $ | 231,032 | $ | 46,788 | ||
LIABILITIES AND STOCKHOLDERS DEFICIT | ||||||
Current Liabilities | ||||||
Checks issued and payable | $ | - | $ | 12,106 | ||
Accounts payable | 546,767 | 385,081 | ||||
Accrued expenses | 38,062 | 91,565 | ||||
Accrued rent payable | 297,458 | 256,519 | ||||
Accrued interest payable | 5,819 | 11,992 | ||||
Deferred subscription revenue | 48,638 | 34,202 | ||||
Senior secured promissory notes | 400,000 | - | ||||
Secured promissory note | - | 38,000 | ||||
Right to use lease liability | 139,190 | 133,525 | ||||
Total Current Liabilities | 1,475,934 | 962,990 | ||||
Convertible notes | 3,346,510 | 2,715,343 | ||||
Interest payable | 236,661 | 210,013 | ||||
Stock payable | 1,020,002 | - | ||||
Right to use lease liability | 134,371 | 171,763 | ||||
Total Liabilities | 6,213,478 | 4,060,109 | ||||
Commitments and contingencies (Note 6) | ||||||
Stockholders' Deficit: | ||||||
Preferred stock No par value; 1,189,664 shares authorized; 907,232 and 907,232 issued and outstanding, respectively | 4,121,206 | 4,121,206 | ||||
Common stock $0.0001 par value; 5,000,000 shares authorized; 951,488 and 951,488 shares issued and outstanding, respectively | 95 | 95 | ||||
Stock subscription receivable | - | (87,190 | ) | |||
Additional paid in capital | 244,905 | 244,581 | ||||
Accumulated deficit | (10,348,652 | ) | (8,292,013 | ) | ||
Total Stockholders' Deficit | (5,982,446 | ) | (4,013,321 | ) | ||
Total Liabilities and Stockholders' Deficit | $ | 231,032 | $ | 46,788 |
The accompanying notes are an integral part of these financial statements.
EVASYST INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three month periods ended March 31, 2022 and 2021 - unaudited
2022 | 2021 | |||||
Revenues | $ | 87,542 | $ | 124,807 | ||
Operating Expenses | ||||||
Software and platform development costs | 100,333 | 93,664 | ||||
Professional fees | 848,419 | 27,426 | ||||
Depreciation and amortization | 5,037 | 4,822 | ||||
Wages and salaries | 1,000,814 | 21,208 | ||||
Advertising | 1,411 | 2,310 | ||||
General and administrative | 57,049 | 59,664 | ||||
Total Operating Expenses | 2,013,063 | 209,094 | ||||
Loss from Operations | (1,925,521 | ) | (84,287 | ) | ||
Other income (expense) | ||||||
Interest expense | (35,685 | ) | (35,241 | ) | ||
Forgiveness of subscription and interest receivable | (96,432 | ) | - | |||
Gain on forgiveness of CARES Act loan | - | 265,952 | ||||
Other miscellaneous income (expense), net | 999 | (1,836 | ) | |||
Total other income (expense) | (131,118 | ) | 228,875 | |||
Income (Loss) Before Income Taxes | (2,056,639 | ) | 144,588 | |||
Income Taxes | - | - | ||||
Net Income (Loss) | $ | (2,056,639 | ) | $ | 144,588 | |
Net Loss per Common Share: | ||||||
Basic & Diluted | $ | (2.16 | ) | $ | 0.15 | |
Weighted Average Common Shares Outstanding: | ||||||
Basic & Diluted | 951,488 | 951,488 |
The accompanying notes are an integral part of these financial statements.
EVASYST INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
For the three month periods ended March 31, 2022 and 2021 - unaudited
Additional | Stock | Total | ||||||||||||||||||||||
Preferred Stock | Common Stock | Paid-in | Subscription | Accumulated | Stockholders' | |||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Receivable | Deficit | Deficit | |||||||||||||||||
Balance at January 1, 2021 | 907,232 | $ | 4,121,206 | 951,488 | $ | 95 | $ | 217,372 | $ | (87,190 | ) | $ | (7,899,684 | ) | $ | (3,648,201 | ) | |||||||
Net income | - | - | - | - | - | - | 144,588 | 144,588 | ||||||||||||||||
Stock based compensation | - | - | - | - | 6,802 | - | - | 6,802 | ||||||||||||||||
Balance at March 31, 2021 | 907,232 | $ | 4,121,206 | 951,488 | $ | 95 | $ | 224,174 | $ | (87,190 | ) | $ | (7,755,096 | ) | $ | (3,496,811 | ) | |||||||
Balance at January 1, 2022 | 907,232 | $ | 4,121,206 | 951,488 | $ | 95 | $ | 244,581 | $ | (87,190 | ) | $ | (8,292,013 | ) | $ | (4,013,321 | ) | |||||||
Net loss | - | - | - | - | - | - | (2,056,639 | ) | (2,056,639 | ) | ||||||||||||||
Stock based compensation | - | - | - | - | 324 | - | - | 324 | ||||||||||||||||
Forgiveness of subscription receivable | - | - | - | - | - | 87,190 | - | 87,190 | ||||||||||||||||
Balance at March 31, 2022 | 907,232 | $ | 4,121,206 | 951,488 | $ | 95 | $ | 244,905 | $ | - | $ | (10,348,652 | ) | $ | (5,982,446 | ) |
The accompanying notes are an integral part of these financial statements.
EVASYST INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three month periods ended March 31, 2022 and 2021 - unaudited
2022 | 2021 | |||||
Cash Flows From Operating Activities: | ||||||
Net income (loss) | $ | 2,056,639 | ) | $ | 144,588 | |
Adjustments to reconcile net income (loss) to net cash used by operating activities: | ||||||
Depreciation | 5,037 | 4,822 | ||||
Amortization of debt discount | 540 | - | ||||
Stock based compensation | 324 | 6,802 | ||||
Professional fees paid with convertible debt | 613,250 | - | ||||
Wages and salaries paid with stock payable | 964,000 | - | ||||
Stock subscription and interest receivables forgiven | 96,432 | - | ||||
Gain on forgiveness of CARES Act note | - | (265,952 | ) | |||
Change in: | ||||||
Prepaid expenses | (46,676 | ) | (10,871 | ) | ||
Other assets | (4,679 | ) | - | |||
Accounts payable | 161,686 | 100,053 | ||||
Accrued expenses | (39,481 | ) | (60,079 | ) | ||
Accrued rent payable | 9,212 | 41,615 | ||||
Deferred subscription revenue | 14,436 | - | ||||
Accrued interest payable | 12,683 | 32,975 | ||||
Net cash used by operating activities | (269,875 | ) | (6,047 | ) | ||
Cash Flows From Investing Activities: | ||||||
Additions to fixed assets | (3,577 | ) | - | |||
Net cash used by investing activities | (3,577 | ) | - | |||
Cash Flows From Financing Activities: | ||||||
Change in checks issued and payable | (12,106 | ) | - | |||
Issuance of senior secured promissory notes | 400,000 | - | ||||
Borrowings under vendor financing | 43,000 | - | ||||
Payments on promissory note | (30,000 | ) | - | |||
Payments on vendor financing | (5,877 | ) | - | |||
Proceeds from exercise of stock options | 12,784 | - | ||||
Net cash provided by financing activities | 407,801 | - | ||||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 134,349 | (6,047 | ) | |||
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 9,773 | $ | 10,226 | |||
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 144,122 | 4,179 | |||
NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||
Convertible note issued for accrued expenses | $ | 17,917 | $ | - | ||
Convertible note issued for accounts payable | - | 11,095 | ||||
Stock payable issued for accrued liabilities | 33,768 | |||||
Stock payable issued for interest payable | 1,450 | |||||
Stock payable issued for promissory note | 8,000 |
The accompanying notes are an integral part of these financial statements.
EVASYST INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2022 and 2021 - unaudited
1. Organization and Basis of Presentation
Nature of Business:
Evasyst Inc. (the "Company" or "Evasyst") is incorporated under the laws of the State of Delaware, as amended and restated on August 18, 2017. Evasyst is a digital technology company, operating with the social video application Kast. The Company has a subsidiary, Rabbit Asset Purchase Corp., which has had no activity since 2020.
Basis of Presentation:
The condensed consolidated financial statements, including notes, of the Company are representations of the Company's management, which is responsible for their integrity and objectivity. The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information, as well as the instructions to Form 10-Q. Accordingly, the consolidated financial statements do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of March 31, 2022, and its results of operations, cash flows, and changes in stockholders' equity for the three months ended March 31, 2022 and 2021. The balance sheet at December 31, 2021 was derived from audited annual consolidated financial statements but does not contain all of the footnote disclosures from the annual consolidated financial statements. All amounts presented are in U.S. dollars.
The results of operations for the three-month period ended March 31, 2022 are not necessarily indicative of the results expected for the full fiscal year or for any other fiscal period. The Company estimates that for 2022 the anticipated effective annual federal income tax rate will be 0%.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As of March 31, 2022, the Company has not achieved profitable operations, has incurred recurring operating losses and further losses are possible. The Company has an accumulated deficit of approximately $10.3 million. The Company's ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to further develop its business. To date, the Company has funded operations through the issuance of capital stock and debt. Management plans to continue raising additional funds through equity or debt financings and loans from directors. There is no certainty that further funding will be available as needed. These factors raise substantial doubt about the ability of the Company to continue operating as a going concern. The ability of the Company to continue its operations as a going concern is dependent upon its ability to raise sufficient new capital to fund its operating commitments and ongoing losses and ultimately on generating profitable operations. The consolidated financial statements do not include any adjustments to be recorded to assets or liabilities that might be necessary should the Company be unable to continue as a going concern.
EVASYST INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2022 and 2021 - unaudited
Net Loss per Share:
The Company calculates basic earnings (loss) per share by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding. We do not include the impact of any potentially dilutive common stock equivalents in our basic earnings (loss) per share calculations. Diluted earnings per share reflect potentially dilutive common stock equivalents, including options and warrants that could share in our earnings through the conversion of common shares, except where their inclusion would be anti-dilutive. For the three month periods ended March 31, 2022 and 2021, the Company had the following securities are excluded from the calculation of diluted income per share as their effect would have been anti-dilutive to the net loss for the periods.
March 31, 2022 | March 31, 2021 | |||||
Stock options | 125,459 | 181,503 | ||||
Restricted stock units | 398,897 | 398,897 | ||||
Convertible notes | Nil | Nil | ||||
Preferred stock | 907,232 | 907,232 | ||||
1,431,588 | 1,487,632 |
New Accounting Pronouncements:
Accounting standards that have been issued by the Financial Accounting Standards Board that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.
2. Secured Promissory Notes
During 2020, the Company entered into secured promissory notes with Shanon Prum and Mark Ollila, president of the Company, for $50,000 and $10,000, respectively. Interest on the notes is 18% and the notes are due in October 2021. The notes are collateralized by all of the Company's cash, accounts receivable, contracts, inventory and other property. Mr. Ollila was a guarantor of Mr. Prum's note.
During the three month period ended March 31, 2022, Mr. Prum's note was paid in full along with accrued interest for a total payment of $41,124. On March 29, 2022, the Company authorized the exchange of Mr. Ollila's note and accrued interest of $8,000 and $1,450, respectively, into shares of the Company's common stock for a total of $9,450. The balance is presented as common stock payable on the balance sheet as the shares were issued in April 2022 (see Note 5).
The balances of the promissory notes at March 31, 2022 and December 31, 2021 are nil and $38,000, respectively. Interest expense on the notes to Mr. Prum and Mr. Ollila during the three month periods ended March 31, 2022 and 2021 was $582 and $2,024 respectively.
EVASYST INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2022 and 2021 - unaudited
3. Senior Secured Promissory Notes
During the three month period ended March 31, 2022, the Company, as borrower, entered into two note agreements with Live Current Media, Inc. for $200,000 each. Live Current Media, Inc. acquired the Company in a merger that was completed on April 22, 2022. See Note 8, Subsequent Events. The notes bear interest at 18% and are due six months after issuance. The notes are secured by all of the Company's assets. Interest expense on the notes was $5,819 during the three month period ended March 31, 2022.
4. Convertible Notes
During the three month period ended March 31, 2022, the Company issued additional convertible notes with the same terms as existing convertible notes as follows:
Consulting expense | $ | 613,250 | |
Accrued wages | 17,917 | ||
$ | 631,167 |
The convertible notes issued for consulting were to satisfy payables due for expenses incurred by Leawood VC Fund LP and Fairmont Capital, Inc., entities associated with major shareholders of the Company. The related consulting services were associated with the merger between the Company and Live Current Inc. ("Live Current") on April 22, 2022. See Note 8 Subsequent Events. The fair value of the consulting expenses was based upon the number of Live Current shares the debtholder ultimately received upon conversion of the notes multiplied by the trading price of the shares on the date of the note.
At March 31, 2022 and December 31, 2021, the balance of convertible debt was $3,346,510 and $2,715,343, respectively. Related accrued interest was $236,661 and $210,013, respectively.
At March 31, 2022 and December 31, 2021, convertible notes and accrued interest payable are due to the following related parties:
Convertible Debt | Accrued Interest Payable | ||||||||||||
March 31, | December 31, | March 31, | December 31, | ||||||||||
Nature of Relationship | 2022 | 2021 | 2022 | 2021 | |||||||||
Mark Ollila | CEO, Director | $ | 11,905 | $ | 11,905 | $ | 714 | $ | 596 | ||||
Company associated with Michael Gibbons | Director | 550,000 | 550,000 | 50,181 | 44,756 | ||||||||
Leawood VC Fund 1 LP | Greater than 5% shareholder | 250,000 | 250,000 | 24,411 | 21,945 | ||||||||
Trust associated with Stephen Petilli | Director | 100,000 | 100,000 | 8,619 | 7,633 | ||||||||
$ | 911,905 | $ | 911,905 | $ | 83,925 | $ | 74,930 |
All convertible notes were converted during April 2022 as a result of the Company's merger with Live Current.
EVASYST INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2022 and 2021 - unaudited
5. Equity
The Company issued no shares of its preferred or common stock during the three month periods ended March 31, 2022 and 2021. At March 31, 2022, the Company has the following stock payable amounts that represent shares of common stock to be issued:
Authorized by board during March 29, 2022 meeting: | |||
Compensation to Mr. Ollila | $ | 750,000 | |
Compensation to Justin Weissberg, Chairman of the Company | 214,000 | ||
964,000 | |||
In exchange for: | |||
Promissory note due to Mr. Ollila | 8,000 | ||
Accrued interest due to Mr. Ollila | 1,450 | ||
Accrued wages due to Mr. Ollila | 24,768 | ||
Accrued wages due to Mr. Weissberg | 9,000 | ||
1,007,218 | |||
Stock options exercised during the three month period ended March 31, 2022 | 12,784 | ||
Stock payable at March 31, 2022 | $ | 1,020,002 |
The shares authorized to be issued to Mr. Olilla and Mr. Weissberg for compensation on March 29, 2022 were subsequently modified on April 20, 2022 to include vesting terms over a period of eight years. However, upon merger with Live Current (see Note 8 Subsequent Events), all vesting was accelerated as consistent with the Company's Stock Plan.
For the three month period ended March 31, 2022, Mr. Olilla and Mr. Weissberg's compensation was calculated based upon the number of Live Current shares that each individual received upon the merger multiplied by the trading price of Live Current shares on the date of the board authorized the compensation.
Stock options
During the three month periods ended March 31, 2022 and 2021, no options were granted, expired or forfeited. During the three month period ended March 31, 2022, 56,044 options were exercised for total proceeds of $12,784.
At March 31, 2022, outstanding and vested options totaled 125,459 and 122,842, respectively. The options have a weighted average exercise price of $0.22 and a weighted average remaining term of 7.0 years. The options have no intrinsic value as of March 31, 2022.
In early April 2022, all outstanding options were exercised on a cashless basis.
EVASYST INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2022 and 2021 - unaudited
6. Leases
The Company leases its office in San Diego. The lease, as amended in 2019 and 2020, is for a term of four years and expires in January 2024. The initial ROU asset and liability recorded in 2019 relating to this lease were calculated based on the future lease payments due under the lease discounted using an estimated incremental borrowing rate of 12.0%.
In February 2021, the Company vacated the premises and pursuant to the terms of the lease agreement, was considered in default. As a result, the remaining balances of the ROU asset and of $354,895 was recognized as an impairment expense during 2021. Under the lease agreement, the Company was still obligated to pay the required lease payments. The Company is negotiating with the lessor to settle the amount due. Based on the most recent discussions, the amount due could range from approximately $200,000 to $840,000. The Company has concluded that the amount due under the amended lease agreement to be the most likely amount in the range that will be paid. At March 31, 2022 and December 31, 2021, the balances due under the agreement were $297,458 and $256,519, respectively, and is accrued on the consolidated balance sheet as accrued rent payable.
For the three month periods ended March 31, 2022 and 2021, rent expense of $9,212 and $41,615, respectively, on this lease was recognized.
At March 31, 2022, future minimum lease payments over the remaining lease agreement are as follows:
From April 1, 2022 to December 31, 2022 | $ | 123,296 | |
From January 1, 2023 to December 31, 2023 | 169,983 | ||
From January 1, 2024 | 14,618 | ||
Total | 307,898 | ||
Less imputed interest | (37,337 | ) | |
Net lease liability | 273,561 | ||
Current portion | (139,190 | ) | |
Long-term portion | $ | 134,371 |
In February 2022, the Company entered into a short term lease for an office space with payments due of $5,039 per month. Rent expense of $10,078 was recognized during the three month period ended March 31, 2022.
EVASYST INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2022 and 2021 - unaudited
7. CARES Act Loan
On May 1, 2020, the Company received a loan of $265,952 pursuant to the Paycheck Protection Program (the "PPP") under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The loan, which was in the form of a Note dated May 1, 2020 had an original maturity date on April 30, 2022 and an interest rate of 1% per annum. It is anticipated that the loan will be forgiven under the provisions of the CARES Act because the Company used the funds for qualifying expenses. Qualifying expenses included payroll costs, costs used to continue group health care benefits, rent, and utilities. The amount of the PPP loan was recognized as gain on forgiveness of the CARES Act loan during the three month period ended March 31, 2021 when the Company receives formal notification of forgiveness.
8. Subsequent Events
On April 22, 2022, the Company completed its merger agreement with Live Current Media, Inc. ("Live Current") whereby Live Current issued 125,000,000 common shares for all of the outstanding shares of the Company. Existing shareholders of the Company obtained 77% equity interest in the combined entity. The merger was to allow the Company to become a publicly traded company. In addition, the Company will be able to utilize domain names and customer relationships established by Live Current.
Pursuant to the merger agreement with the Company, John DaCosta and Amir Vahabzadeh resigned as directors of the Live Current and Mark Ollila, Heidi Steiger, Leslie S. Klinger, Justin Weissberg and Annamaria Rapakko were appointed to the board of directors. Pursuant to the merger agreement, on closing, David Jeffs resigned as CEO and CFO of Live Current and Mark Ollila was appointed the new CEO and Chairman of the board of directors and Steve Smith was appointed as CFO of the Live Current.
Although Live Current was the legal acquirer of the Company, under generally accepted accounting principles, the merger was accounted for as a reverse acquisition, with the Company being treated as the acquiring entity for accounting and financial reporting purposes. The purchase price consideration and provisional allocation to net assets acquired is presented below (based on March 31, 2022 financial information of Live Current):
Fair value of consideration transferred | $ | 9,423,142 | |
Recognized amounts of identifiable assets acquired: | |||
Cash and cash equivalents | 2,414,917 | ||
Prepaid expenses and other assets | 437,932 | ||
Intangible assets and goodwill | 8,135,954 | ||
Liabilities | (1,565,661 | ) | |
Net identifiable assets | $ | 9,423,142 |
EVASYST INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three month periods ended March 31, 2022 and 2021 - unaudited
The Company is currently determining the fair value of domain names, potential customer relationships, and licensing agreements that were acquired with Live Current. Any excess in consideration received over the fair value of net assets acquired will be assigned to goodwill. Because the acquisition occurred after the end of the period, there is no revenue or earnings of the combined entity in these consolidated financial statements.
All of the Company's convertible notes and preferred shares that were outstanding on the date of the merger were converted into equivalent shares of the Company immediately prior to the merger.
In June 2022, Mr. Ollila resigned as chairman and Heidi Steiger was appointed as Chairman of the board.