UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________________
FORM 20-F
_________________________
| ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12 (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
❑REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
OR 12 (g) OF THE SECURITIES EXCHANGE ACT OF 1934
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal year ended November 30, 2021 |
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transition period from ________ to ________ |
⌧ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 2020
OR
| ☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Date of event requiring this shell company report ________ |
❑TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
OR
❑SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
Commission File Number 0-19884
LIQUID MEDIA GROUP LTD.
(Exact Name of Registrant as Specified in Its Charter)
British Columbia, CanadaA1
(Jurisdiction of Incorporation or Organization)
#202, 5626 Larch Street67 East 5th Avenue
Vancouver, BC V6M 4E1V5T 1G7
(Address of Principal Executive Offices)
Daniel Cruz,Ronald Thomson, Chief FinancialExecutive Officer
#202, 5626 Larch Street67 East 5th Avenue
Vancouver, BC V6M 4E1V5T 1G7
Telephone: 1.604.602.00011.416.350.5009
Email: daniel@liquidmediagroup.corthomson@liquidmediagroup.co
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Common Shares, without Par Value | YVR | NASDAQ |
(Title of Class) | Trading Symbol | Name of Each Exchange on Which Registered |
Securities registered or to be registered pursuant to Section 12(g) of the Act: NONE
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: NONE
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 10,875,568 common shares (as of March 1, 2021).
| 1. | Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: common shares (as of November 30, 2021). |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
☐ Yes ☒
| ☐ Yes | ☒ No |
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.☐ Yes ☒
| ☐ Yes | ☒ No |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ Yes
| ☒ Yes | ☐ No |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 2.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ Yes
| ☒ Yes | ☐ No |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or emerging growth company. See definition of “accelerated filer” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Accelerated filer ☐ | Non-accelerated filer ☒ | ||
| Emerging Growth Company ☐ |
Large accelerated filer ☐Accelerated filer ☐Non-accelerated filer ☒
Emerging Growth Company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark which basis of accounting the Registrant has used to prepare the financial statements included in this filing:
| U.S. GAAP ☐ | International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ | Other ☐ |
U.S. GAAP ☐International Financial Reporting Standards as issuedOther ☐
by the International Accounting Standards Board ☒
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the Company has elected to follow.
Item 17 ☐ | Item 18 ☐ |
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
| ☐ Yes | ☒ No |
Item 1. – Identity of Directors, Senior Management and Advisers5
Item 2. – Offer Statistics and Expected Timetable5
Item 4. – Information on the Company29
Item 4A. – Unresolved Staff Comments36
Item 5. – Operating and Financial Review and Prospects36
Item 6. – Directors, Senior Management and Employees49
Item 7. – Major Shareholders and Related Party Transactions60
Item 8. – Financial Information62
Item 9. – The Offer and Listing.63
Item 10. – Additional Information.63
Item 11. – Quantitative and Qualitative Disclosures About Market Risk.65
Item 12. – Description of Securities Other than Equity Securities.66
Item 13. – Defaults, Dividend Arrearages and Delinquencies.66
Item 14. – Material Modifications to the Rights of Security Holders and Use of Proceeds.66
Item 15. – Controls and Procedures.68
Item 16A. – Audit Committee Financial Expert.68
Item 16C. – Principal Accountant Fees and Services.68
Item 16D. – Exemptions from the Listing Standards for Audit Committees.69
Item 16E. – Purchases of Equity Securities by the Issuer and Affiliated Purchasers.69
Item 16F. – Change in Registrant’s Certifying Accountant69
Item 16G. – Corporate Governance69
Item 16H. – Mine Safety Disclosure70
Item 17. – Financial Statements.70
Item 18. – Financial Statements.70
| Item 17. | – Financial Statements | 72 | |
| Item 18. | – Financial Statements | 72 | |
| Item 19. | – Exhibits | 73 |
INTRODUCTION
The terms the “Company”, “LMG”, “Liquid”, “we”, “us” and “our” as used in this Annual Report on Form 20-F, or “Annual Report,” refer to Liquid Media Group Ltd. and its consolidated subsidiaries or predecessor entities, (including Leading Brands, Inc.), except where the context requires otherwise.
Unless otherwise specified, all references to “dollars” or “$” in this Annual Report are expressed in CanadianUS dollars (“C$or “USD$”), unless otherwise indicated, and all references to “U.S.“Canadian dollars,” or “US$“CAD$” are expressed in the currency of the United States of America. Canada.
This Annual Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”“Exchange Act”). Statements which are not historical facts are forward-looking statements. The Company, through its management, makes forward-looking statements concerning its expected future operations, performance, results and other developments. The words “may,” “continue,” “plan,” “believe,” “intend,” “expect,” “anticipate,” “project,” “estimate,” “predict” and similar expressions are also intended to identify forward-looking statements. Forward-looking statements relateincluded, but are not limited to, among other things:
♦Our business plan to create a vertically-integrated cloud-based global content production studio;
♦Our expectations regarding market acceptance of our gaming, tv and film offerings;
♦Our intention to make strategic acquisitions to grow our business;
♦Our expectations regarding litigation risks and outcomes;
♦Our plan to raise capital through a crowd-funding portal;
♦The effectiveness of steps taken to protect our intellectual property and our beliefs about non-infringement of the intellectual property of others; and
♦Our status as a foreign private issuer and our belief that we are not a Passive Foreign Investment Company.
| · | Our business plan to create a business solution empowering independent film and TV content creators to package, finance, deliver and monetize their intellectual property globally; |
| · | Our expectations regarding market acceptance of our key solutions offerings; |
| · | Our intention and ability to make strategic acquisitions to grow our business; and |
| · | The effectiveness of steps taken to protect our intellectual property and our beliefs about non-infringement of the intellectual property of others. |
Such forward-looking statements are estimates reflecting the Company’s judgment based upon current information and involve a number of risks and uncertainties, and there can be no assurance that other factors will not affect the accuracy of such forward-looking statements. It is impossible to identify all such factors. Factors which could cause actual results to differ materially from those estimated by the Company include, but are not limited to, those listed under “Item“Item 3.D. Risk Factors,,” as well as general economic conditions, changing trends in the filmprofessional video entertainment production and gaming mediamonetization industries, pricing, economic uncertainties (including currency exchange rates), government regulation, managing and maintaining growth, the effect of adverse publicity, litigation, competition and other factors which may be identified from time to time in the Company’s public announcements. Events may occur in the future that the Company is unable to accurately predict, or over which it has no control. If one or more of those uncertainties materialize, or if the underlying assumptions prove incorrect, actual outcomes may vary materially from those forward-looking statements included in this Annual Report.
All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
SPECIAL NOTE REGARDING LINKS TO EXTERNAL WEBSITES
Links to external, or third-party websites, are provided solely for convenience. We take no responsibility whatsoever for any third-party information contained in such third-party websites, and we specifically disclaim adoption or incorporation by reference of such information into this report.
FOREIGN PRIVATE ISSUER FILINGS
We are considered a “foreign private issuer” pursuant to Rule 405 promulgated under the Securities Act. In our capacity asAs a foreign private issuer, we are exempt from certain rules under the Exchange Act that impose certain disclosure obligations and procedural requirements for proxy solicitations under Section 14 of the Exchange Act. In addition, our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of our shares. Moreover, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act. In addition, we are not required to comply with Regulation FD, which restricts the selective disclosure of material information.
For as long as we are a “foreign private issuer” we intend to file our annual financial statements on Form 20-F and furnish our quarterly financial statements on Form 6-K to the SEC for so long as we are subject to the reporting requirements of Section 13(g) or 15(d) of the Exchange Act. However, the information we file or furnish may not be the same as the information that is required in annual and quarterly reports on Form 10-K or Form 10-Q for U.S. domestic issuers. Accordingly, there may be less information publicly available concerning us than there is for a company that files as a domestic issuer.
We may take advantage of these exemptions until such time as we are no longer a foreign private issuer. We are required to determine our status as a foreign private issuer on an annual basis at the end of our second fiscal quarter. We wouldwill cease to be a foreign private issuer at such time as more than 50% of our outstanding voting securities are held by United States residents and any of the following three circumstances applies: (1) the majority of our executive officers or directors are United States citizens or residents; (2) more than 50% of our assets are located in the United States; or (3) our business is administered principally in the United States. If we lose our “foreign private issuer status” we would be required to comply with Exchange Act reporting and other requirements applicable to U.S. domestic issuers, which are more detailed and extensive than the requirement for “foreign private issuers”.
Item 1. – Identity of Directors, Senior Management and Advisers
This item is not applicable for an Annual Report.
Item 2. – Offer Statistics and Expected Timetable
This item is not applicable for an Annual Report.
The following table sets forth certain selected consolidated financial information with respect to LMG for the periods indicated. It should be read in conjunction with this Annual Report and the Company’s consolidated financial statements listed in “Item 18 – Financial Statements” of this Annual Report. The following table is
derived from, and is qualified by, the Company’s financial statements and the notes thereto which have been prepared in accordance with International Financial Reporting Standards (“IFRSA. ”). [Reserved]
| Fiscal Year Ended Nov. 30, 2020 ($) | Fiscal Year Ended Nov. 30, 2019 ($) | Fiscal Year Ended Nov. 30, 2018 ($) | Fiscal Year Ended Nov. 30, 2017 ($) | Fiscal Year Ended Nov. 30, 2016 ($) |
Net sales / revenue from continuing operations | 47,317 | 27,109 | - | - | - |
Net loss from continuing operations | (5,183,411) | (7,535,660) | (7,576,796) | (1,928,870) | (465,644) |
Net income (loss) from discontinued operations | (2,813,889) | (89,656) | 76,563 | - | - |
Net loss | (7,997,300) | (7,625,316) | (7,500,233) | (1,928,870) | (465,644) |
Net loss attributable to shareholders of the Company | (6,231,009) | (7,581,384) | (7,537,749) | (1,928,870) | (465,644) |
Net income (loss) attributable to non-controlling interest | (1,766,291) | (43,932) | 37,516 | - | - |
Comprehensive loss | (8,316,571) | (7,612,541) | (7,101,341) | (1,928,870) | (465,644) |
Comprehensive loss attributable to shareholders of the Company | (6,530,170) | (7,560,001) | (7,255,667) | (1,928,870) | (465,644) |
Comprehensive income attributable to non-controlling interest | (1,786,401) | (52,540) | 154,326 | - | - |
Loss per share, continuing operations | (0.66) | (1.77) | (3.16) | (0.96) | (0.25) |
Loss per share, basic | (0.79) | (1.78) | (3.14) | (0.96) | (0.25) |
Total assets | 12,045,869 | 15,389,472 | 15,577,056 | 1,456,836 | 3,119,209 |
Net assets | 9,538,669 | 7,070,316 | 10,077,396 | (247,305) | (298,385) |
Share Capital | 29,999,645 | 21,118,940 | 18,032,601 | 2,364,400 | 1,081,000 |
Long-term debt | 42,945 | 2,513,842 | 675,942 | 126,000 | 2,500,000 |
Cash dividends declared per common share | - | - | - | - | - |
Weighted average common shares outstanding | 7,845,300 | 4,255,297 | 2,397,117 | 2,001,832 | 1,845,237 |
6
* the comparative figures have been reclassified to account for the discontinued operations of Majesco Entertainment Company.
Exchange Rates
|
Exchange rates for the previous six months: US$1 equivalent to the following in Canadian dollars:
February 2021 | January 2021 | December 2020 | November 2020 | October 2020 | September 2020 | |
High | 1.2828 | 1.2810 | 1.2718 | 1.3257 | 1.3349 | 1.3396 |
Low | 1.2530 | 1.2627 | 1.2718 | 1.2965 | 1.3122 | 1.3055 |
Average exchange rates for each of the five most recent fiscal years: US$1equivalent to the following in Canadian dollars:
| Year ended November 30, 2020 | Year ended November 30, 2019 | Year ended November 30, 2018 | Year ended November 30, 2017 | Year ended November 30, 2016 |
Average | 1.3446 | 1.3290 | 1.2907 | 1.3030 | 1.3276 |
B.Capitalization and indebtedness.
This item is not applicable for an Annual Report.
C.Reasons for the offer and use of proceeds.
This item is not applicable for an Annual Report.
Investing in our securities involves a high degree of risk, including those described below. Before making an investment decision, you should carefully consider the risks described below, together with the risks and other information included in any document that we file from time to time with the SEC. If any of the events described below or in any such other document that we file with the SEC occur or the risks described herein or therein materialize, our business, financial condition, results of operations, cash flow and prospects could be materially adversely affected. In addition, risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations, our financial results and the value of our securities.
Risk Related to Our Business and Our Industry
Covid-19 caused a global pandemic
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, potentially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our product and harm our business and results of operations; however, the Company has also recognized that the pandemic has led to a global increase in screen time and online gaming which is beneficial to the Company’s operations. It is not
possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations, or how it will impact the Company’s ability to conduct financings at this time.
We have a history of operating losses and negative cash flow, and we may never achieve profitability.
We have a history of operating losses and negative cash flows and may continue to incur operating losses and negative cash flows in the future. For the fiscal years ended November 30, 2021, 2020 2019 and 2018,2019, our operating losses were $8,260,489, $7,311,968$12,779,371, $6,109,385 and $2,380,524,$5,739,808, respectively. These operating losses have been generated as we attempt to implement our business plan, including expanding our existing productsservices and services,solutions, acquiring synergistic businesses and additional technology, marketing to clients and customers and otherwise growing our business. Indeed, we only began generating revenue in fiscal year 2018, due to the Company’s acquisition of its majority interest in Majesco Entertainment Company (“Majesco”) during fiscal year 2018. However, as of November 30, 2020, we no longer hold any interests in Majesco, and we cannot assure you that our revenue will increase, or whether we will ever operate profitably. We anticipate that our operating expenses will increase substantially in the foreseeable future as we increase our sales and marketing activities and continue to develop our technology, products, projects, and services. For example, we will need additional funds to add to our content library and for development costs incurred to develop new games and redevelop our retro games, for production costs incurredcomplete acquisitions in connection with the development of film and television projects, costs related to our cloud-based network initiative, for licensing and distribution expenses, and for the development and launchfurtherance of our online direct-to-consumer distribution platform. These efforts may prove more expensive than we currently anticipate, and we may incur significant additional costs and expenses in connection with our business development activities. In addition, our film and gamingobjectives to enable professional video creators to take their content creation operations are relatively capital intensive, while revenue-generating opportunities depend onfrom inception through the availability of projects in the market. All of these costs and expenses could prevent us from achieving or maintaining profitability in future periods.entire process to monetization.
Our limited operating history and our evolving business make it difficult to evaluate our results of operations and prospects.
Our limited operating history and evolving business make the prediction of our future results of operations difficult. You should consider our business and prospects in light of the risks, uncertainties and challenges that we will face as ato assist independent IP creators to package, finance, deliver and monetize their professional video IP globally. Previously, we had significant focus on the gaming television, film mediaindustry and entertainment company focused on developing and expanding our products, services, solutions and operations and which operates in highly competitive, rapidly evolving, and challenging markets. See “Thethat sector. We wrote off our investment in the gaming industry in which we operate is intensely competitive. If we are not able to effectively compete, including because customers and consumers prefer competitors’ products or services over our own, our operating results could suffer” and “Our industry is subject to significant, rapid changes, and we may fail to anticipate or successfully implement new or evolving technologies, or adopt successful business strategies, distribution methods or services” below. If we fail to address the risks and challenges that we face, including those described elsewhere in this “Risk Factors” section, our business, financial condition, results of operations, cash flow and prospects could be adversely affected.during fiscal year ended November 30, 2021.
We require additional financing to sustain and expand our operations, including providing working capital to our recent acquisitions, and we may not be able to obtain financing on acceptable terms, or at all, whichwould have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects.
We have limited capital, and we do not currently generate sufficient cash from our business to fund our operations. Our independent public accounting firm’s report on our financial statements as of and for the fiscal year ended November 30, 2020 included2021, includes a going-concern qualification, which expresses doubt about our ability to continue as a going concern based on our estimate that we did not have sufficient working capital to meet our liabilities and commitments as they become due for the upcoming 12 months and, therefore, need to obtain additional financing.concern. Our ability to operate profitably is dependent upon, among other things, obtaining substantial financing, developing our productsservices and servicessolutions and otherwise implementing our business plan. We will require additional capital to fund operating deficits,operations, including operations of our recently acquired subsidiaries, to pursue our growth strategystrategy. Historically, we have raised capital for our operations and acquisitions through developing or acquiring new products, content or services or
engaging in acquisitions of complementary businesses,equity financings and intend to establish and expand our marketing capabilities, and to finance general and administrative activities.At March 1, 2021,we did not have available borrowing capacity under any bank credit facility or other workingseek future financing through the capital line for us to borrow funds for working capital or other general corporate purposes. We may not be able to service or refinance our existing indebtedness or obtain debt or equity financing opportunities on favorable terms, if at all, which could impair our growth and adversely affect our existing operations. See “Our existing indebtedness, or indebtedness that we may incur in the future, could adversely affect us, and the terms of any debt covenants could limit how we conduct our business and our ability to raise additional funds” below formarkets. As a discussion of risks related to debt financing. If we raise equity financing, ourresult, shareholders may experience significant dilution of their ownership interests, and the per share value of our common shares could decline.
Under current SEC regulations, because our public float is less than $75 million, and for so long as our public float remains less than $75 million, the amount we can raise through primary public offerings of securities in any 12-month period using shelf registration statements is limited to an aggregate of one-third of our public float (referred to as the “baby shelf” rule). As of March 1, 2021, the aggregate market value of our outstanding common stock held by non-affiliates, or public float, was approximately US$16,993,808, based on 10,875,568outstanding common shares, of which 9,655,573 common shares were held by non-affiliates, at a price of US$1.76 per share, which was the last reported sale price of our common shares on the Nasdaq Capital Market on February 26, 2021. If our public float decreases, the amount of securities we may sell under our shelf registration statement may also decrease.
If we do not have, or are not able to obtain, sufficient funds, we may have to delay strategic acquisitions and other opportunities, investments, or projects, and, even if we are ultimately able to subsequently secure financing, such opportunities, investments or projects may not still be available to us on favorable terms or at all. If we are unable to raise adequate funds, we may have to liquidate some or all of our assets, or delay, reduce the scope of, or eliminate some or all of acquisitions and implementation of our creative work.business plan. Any of these actions could delay or otherwise inhibit our growth, weaken our ability to effectively compete in our industry, and otherwise have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects.
Our existing indebtedness, or indebtedness that we may incur in the future, could adversely affect us, and the terms of any debt covenants could limit how we conduct our business and our ability to raise additional funds.
As of our fiscal year ended November 30, 2020, we had total principal indebtedness of approximately $691,229, including under third-party loans and our credit facility. In February 2021, we settled the outstanding balance of $639,293 on our credit facility through the issuance of 215,000 treasury shares to the lender. Our ability to generate and maintain a level of cash flows from operating activities to make scheduled payments on our debt obligations, or to refinance our debt obligations, depends on our future financial and operating performance, which is subject to prevailing economic and competitive conditions and to various financial, business, regulatory and other factors, some of which are beyond our control. If we are unable to fund our debt service obligations, we may be forced to reduce or delay capital expenditures or sell assets, seek additional capital or seek to restructure or refinance our indebtedness. Further, our indebtedness may impair our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, restructuring, acquisitions or general corporate purposes. We may also incur substantial additional indebtedness in the future. If new debt or other liabilities are added to our current debt levels, the related risks that we and our subsidiaries now face, as described above, could intensify.
In addition, any agreements governing our debt obligations may contain financial covenants and covenants that restrict our ability and the ability of our subsidiaries to:
●incur additional indebtedness or issue common or preferred shares;
●create liens on our assets;
●pay dividends or make other equity distributions;
●repurchase our shares;
●purchase or redeem equity interests or debt;
●make certain investments;
●sell assets;
●consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and
●engage in transactions with affiliates.
As a result of these covenants, we could be limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs.
We may not be able to successfully implement our business plan.
Our business plan focuses on growingis to create a business solution empowering independent film and TV content creators to package, finance, deliver and monetize their intellectual property globally. While we believe that the market of independent content creators is large enough to implement our business both organically and through strategic acquisitions and other arrangements. We cannotplan, there is no guarantee that there will be a sufficient market to utilize our vision for a vertically-integrated, cloud-based global studio, producing content for all platforms through a network of sharedservices or that our services will be successful, or that weprofitable. Our ability to serve independent content creators will rely, in large part, our ability to identity and acquire companies which will be able to develop our gaming and media content, acquire additional content for development and franchising, or create the cloud-based network for global content development as contemplated bysuccessful in implementing our business plan. In addition, we are developing
Our business depends on the finding and launching an online direct-to-consumer distribution platform, the success of whichdistributing film and TV content and is subject to significant challenges; accordingly, we may not be successfulintense competition.
Our ability to operate successfully depends upon our ability to identify independent film and TV content creators in doing so. See “We may not be successfulorder to package, finance, deliver their production content. Poor performance of, disruption in developingthe creation of production content, or launching our online direct-to-consumer distribution platform” below.inability to identity a sufficient number of independent IP creators to produce video content could hurt our business and results of operations.
The potential growth of our business maywill depend upon our ability to consummate strategic acquisitions, which will depend on the availability of, andincluding our ability to identify suitable candidates; acquisitionscandidates. Acquisitions we pursue could result in operating and other difficulties relating to integration of new businesses into our existing business, dilution to our shareholders and other consequences harmful to our business.
We have previously engaged in strategic transactions, including with respect to acquisitions of technology, content, distribution and other assets relating to our business objectives, and as part of our growth strategy,strategy. In addition, we intend to continue to pursue strategic acquisitions of businesses, intellectual property and other assets that are complementary to our existing business and may expand our employee base, our content portfolio or the breadth of our product or service and solutions offerings. Our ability to grow through future acquisitions will depend on the availability of, and our ability to identify, suitable acquisition and investment opportunities at an acceptable cost, our ability to compete effectively to attract those opportunities, and the availability of financing to complete acquisitions. We may face significant competition in executingacquisitions, and to quickly and efficiently integrate those acquisition into our growth strategy. Future acquisitions or investments could involve our issuance of equity interests as consideration, resulting in dilution of our existing shareholders (see “Future capital raising efforts may be dilutive to our shareholders, result in increased interest expense in future periods or depress our share price” below), use of significant cash balances or incurrence of debt, contingent liabilities or amortization expenses related to intangible assets, any of which could adversely affect our business, financial condition, results of operations, cash flow and prospects.business. The benefits of an acquisition or investment may also take considerable time to develop, and we cannot be certain that any particular acquisition or investment will produce the intended benefits in a timely manner or to the extent anticipated or at all. Integration of a new company’s operations, assets and personnel into ours will require significant attention from our management, and the diversion of our management’s attention away from our business and any difficulties encountered in the integration process could harm our ability to manage our business. Future acquisitions will also expose us to potential risks, including risks associated with any acquired liabilities, the integration of new operations, technologies and personnel, unforeseen or hidden liabilities and unanticipated, information security vulnerabilities, the diversion of resources from our existing business, sites and technologies, the inability to generate sufficient revenue to offset the costs and expenses of the acquisitions, potential adverse tax and accounting effects, challenges relating to entering markets in which we may have limited or no prior experience and in which competitors may have a stronger market position, and potential loss of, or harm to, our relationships with employees, customers, consumers and suppliers as a result of integration of new businesses.
The industry in which we operate is intensely competitive. If we are not able to effectively compete, including because customers and consumers prefer competitors’ productsproperties or services over our own, our operating results could suffer.
We operate in a highly competitive industry, characterized by pressure to innovate, expand feature setsseek new properties to develop and functionality, accelerate new product releases and reduce prices. See “Our industry is subject to significant, rapid changes, and we may fail to anticipate or successfully implement new or evolving technologies, or adopt successful business strategies, distribution methods or services” below.distribute. We compete with other entertainment video providers, such as multichannel video programming distributors, streaming entertainment providers, video gaming providers and more broadly against other sources of entertainment that consumers could choose in their moments of free time. We also compete against streaming entertainment providers and content producersothers in obtaining content for our business, both for licensed streaming content and for original content projects.business. Our competitors range from large established production companies to emerging start-ups, and we expect new competitors to continue to emerge throughout the world. Some of our competitors have longer operating histories, better distribution channels, large customer bases, stronger brand recognition, exclusive rights to certain content and much greater financial, marketing and other resources, which may enable them to obtain more favorable terms from third parties, adopt more aggressive pricing and devote more resources to the development of their businesses. If we are unable to successfully or profitably compete with current and new competitors, our business will be adversely affected, and we may not be able to gain market share, earn revenue or become profitable.
In the gaming industry in particular, both the online and mobile games marketplaces are characterized by frequent product introductions, relatively low barriers to entry, and new and evolving business methods, technologies and platforms for development. We expect competition in these markets to intensify. If our competitors develop and market more successful products or services, offer competitive products or services at lower price points or based on payment models perceived as offering a better value proposition, or if we do not develop (or we are unable to otherwise acquire) consistently high-quality and well-received products and services, we may not be able to gain market share, earn revenue or become profitable. In addition, though many new products and services are regularly introduced in the gaming industry, only a relatively small number of “hit” titles accounts for a significant portion of total revenue for the industry, and the availability of significant financial resources is a major competitive factor in the production of high-quality products and in the marketing of products that are ultimately well-received. See “Our growth relies on market acceptance” below. Hit products or services offered by our competitors may take a larger share of consumer spending than we anticipate, which could cause revenue generated from our products and services to fall below expectations. In addition, we do not have a significant number of titles within our portfolio (whether developed by us or acquired from third parties), and the underperformance of a title may have a significant, adverse impact on our financial results. Our success and our ability to effectively compete depends, in part, on our ability to expand our portfolio of titles, but we may be unsuccessful in developing such titles in a timely manner or at all, and we may face challenges in acquiring such titles due to competition or our inability to secure financing to acquire such titles.
Our industry is subject to significant, rapid changes, and we may fail to anticipate or successfully implement new or evolving technologies, or adopt successful business strategies, distribution methods or services.
Rapid changes in our industry require us to anticipate the ways in which our products and services will be competitive in the market and try to predict and prepare for rapid changes in consumer demand that could materially alter public preferences for different forms of entertainment and leisure activities. The entertainment industry in general, and the gaming, television and film subindustries thereof in particular, are rapidly evolving, primarily as a result of free content, minimal entry costs for creation and distribution, expanded use of mobile devices and increased demand for content, all of which may prevent us from being able to accurately predict the overall effect that technological growth or new business strategies and delivery models may have on our potential revenue and profitability. In order to remain competitive, we must respond successfully to ongoing changes in consumer behaviors related to entertainment, particularly those behaviors related to the consumption
of video and gaming content. Developments in technology have led and are likely to continue to lead to new methods for the distribution of video and gaming content and changes in when, where and how people consume such content. These changes pose risks to the traditional television, film, movie theater and gaming console industries, including, for example, the disruption of the traditional movie theater and television content distribution model by on-demand, streaming and other online and mobile services, which are increasing in number and some of which have significant and growing subscriber/user bases. This has resulted in changes in consumers’ expectations regarding the availability and packaging of video content, their willingness to pay for access to such content, their perception of what quality entertainment is and how much it should cost, and the ease for a consumer to unsubscribe or switch. We believe the coronavirus (“COVID-19”) pandemic, in particular, has accelerated many of these changes, including, in part, due to government stay-at-home orders that have shifted the way in which consumers are able to access entertainment, increasing the demand for on-demand, streaming and other at-home content delivery methods and simultaneously decreasing the demand for out-of-home entertainment, including at movie theaters. We are not able to predict when movie theaters will be reopened, whether consumers will attend these venues at the same levels they previously did, and whether revenues from theatrical releases will be comparable to historical levels. We try to anticipate changes, shifts and challenges, and, as a result, we have invested, and in the future may invest, in new business strategies, technologies, distribution methods, products, and services. These investments may not achieve expected returns and may be insufficient to cover our investment and development costs. Such endeavors may involve significant risks and uncertainties, and the technology we choose to implement, the business strategies we choose to adopt and the products and services that we pursue may not ultimately be successful. If we do not successfully evolve our business in a manner that meets or exceeds user expectations, our business, financial condition, results of operations, cash flow and prospects may be adversely impacted.
Further, our competitors may adapt to an emerging technology or business model more quickly or effectively than we do, creating products that are technologically superior to ours, more appealing to consumers, or both. If, on the other hand, we elect not to pursue the development of products incorporating a new technology or for new platforms that achieve significant commercial success, our ability to meet consumer demands and effectively compete in our industry may be adversely affected. Adopting and incorporating new technology or adjusting to a new platform may require significant time and resources to shift product development resources to that technology, platform or business model, as the case may be, and may not enable our products to compete with our competitors’ existing products or platforms. Any failure to successfully adapt to, and appropriately allocate resources among, emerging technologies and to keep pace with rapid technological or other change in the industry could negatively impact our business and prevent us from achieving profitability or sustaining a meaningful market position.
We may not be successful in developing or launching our online direct-to-consumer distribution platform.
We are developing and launching an online direct-to-consumer distribution platform that would both allow us to bring our portfolio of content to market independently and serve as a platform for other content creators (whether filmmakers, makers of video games or otherwise) to self-distribute their content directly to consumers. The development of this platform is a relatively new endeavor for us, and we may not be successful in developing or launching our platform. The market for our platform, both for content creators and consumers, is relatively new and the development and launch of our platform is subject to significant challenges. Our business plan with respect to our distribution platform relies significantly upon our ability to develop the technology and systems underlying our platform, as well as obtaining market acceptance, developing brand recognition and building and growing a base of users of the platform through marketing and user engagement efforts. We may not be successful in any of these efforts, or we may not be able to do so in a timely, cost-effective manner; accordingly, the future prospects for revenue and profitability relating to our distribution platform are uncertain and difficult to evaluate. In addition, our new distribution platform could fail, resulting in the loss of our investment in the development and infrastructure needed to support the platform, as well as the opportunity cost of diverting management and financial resources away from our existing businesses and other opportunities.
We may fail to launch new products and services, in a timely manner or at all, and, when launched, our new products and services may not be commercially successful.
In order for our business plan to succeed over time, we will need to license, acquire, or develop new digital entertainment products and services that can generate additional revenue and diversify our revenue sources. A number of factors, including technological difficulties, government approvals and licenses of intellectual property rights required for launching new products and services, lack of sufficient development personnel and other resources, and adverse developments in our relationship with the licensors of any licensed products could result in a delay in launching our new products and services.
There are many factors that may adversely affect the popularity of our new products and services. For example, we may fail to anticipate and adapt to future technological trends and new business models, fail to satisfy consumer preferences and requirements, fail to effectively plan and organize marketing and promotion activities, fail to effectively detect and prevent programming errors or defects in the products, and fail to operate and offer our new products and services at acceptable costs. We cannot assure you that our new products and services will gain market acceptance and become commercially successful. Our inability to license, develop or acquire additional digital entertainment products and services that are commercially successful may impact our ability to effectively compete and will adversely affect our ability to generate revenue and achieve or maintain profitability in the future. If our games, streaming content and other entertainment offerings do not meet consumer expectations, whether because they fail to function as advertised, as consumers expect or otherwise, our sales may suffer, and our business may be negatively impacted.
Our growth relies on market acceptance.
There may not be broad market acceptance of any of our game, television, or film offerings or services, including our online direct-to-consumer distribution platform that we are developing. There also may not be broad market acceptance of our offerings if our competitors offer products or services that are preferred by prospective consumers of our products and services. Consumers consider many factors when evaluating our products relative to those of our competitors, including innovation, ease of use, price, feature sets, functionality, reliability, performance, reputation, and training and support, and we may not compare favorably against our competitors in any or all respects. Our efforts to attract and retain customers and to effectively compete with our competitors may not be successful in the near future, or at all, and our competitors may expend significant resources and otherwise engage in similar efforts that result in their taking of significant market share. If we fail to develop new products and to manage new product introductions and transitions properly, or if our offerings do not receive market acceptance, our costs may not be recouped, and profits may not be realized to the extent anticipated or at all. Revenue from existing or future programming may not replace any loss of revenue associated with the cancellation or unsuccessful commercialization of any particular production, and our business, financial condition, results of operations, cash flow and prospects could be harmed.
Our products may not receive favorable reviews or ratings or perform well, and third parties may not, or may not continue to, do business with us or promote our products or services, any of which could have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects.
Because the performance of our products, including, in particular, television and film programs, is often directly related to reviews from critics, ratings and other industry experts, poor reviews or ratings may negatively affect future revenue. Our results of operations will depend, in part, on the experience and judgment of our management to select and develop new investment and production opportunities. Our products may not obtain favorable reviews or ratings, and, as a result, third parties may not, or may not continue to, do business with us or promote our products or services. For example, if one or more of our film or television programs receive negative reviews and ratings, broadcasters may not license the rights to broadcast any of programs in development or renew licenses to broadcast the programs in our library, any of which could have a material adverse effect on our business, financial condition, results of operations, cash flow or prospects.
Licensed distributors’ decisions regarding the timing or release of and promotional support for our films, television programs and related products are important in determining the success of these films, programs and related products. We do not control the timing and manner in which our licensed distributors distribute our films, television programs or related products. Any decision by those distributors not to distribute or promote one of our films, television programs or related products or to promote competitors’ films, programs or related products to a greater extent than they promote us could have a material adverse effort on our business, financial condition, results of operations, cash flow or prospects.
We are subject to product development risks that could result in delays and additional costs, and we must adapt to changes in software technologies.
We depend on our internal development studios and third-party software developers to develop new interactive entertainment software within anticipated release schedules and cost projections. For example, the development cycle for emulated video games, meaning games that can be played on a computing device that emulates a video game console, generally ranges from three months to 12 months, and, for new titles, six months to two years. Therefore, our development costs can be substantial. Since many of our developers have been working from home due to the global COVID-19 pandemic, we have had to implement additional procedural safeguards and other steps in our development process to access proprietary information and content of ours and of our customers and other sensitive components of our business, in order to comply with security protocols within the industry or those established by our customers. Such additional procedural safeguards and other steps have resulted, and may continue to result, for the duration of the COVID-19 pandemic, in some production inefficiency and delays. See “The global COVID-19 pandemic may negatively affect our business, financial condition, results of operations, cash flow and prospects, and these impacts may persist for an extended period of time or become more pronounced” below for a discussion of risks to the Company relating to COVID-19. If we or our third-party developers experience unanticipated development delays, whether in connection with the COVID-19 pandemic or otherwise, financial difficulties or additional costs, we may not be able to release titles according to our schedule and at budgeted costs. Our products may not be sufficiently successful to allow us to recoup these costs or make a profit on these products.In addition, there are substantial risks that there will be no or an insufficient interest in the market for the titles we develop.
Programming errors or flaws in our products or the third party platforms, consoles and other methods through which our products are distributed could harm our reputation or decrease market acceptance of our products, which would harm our operating results.
Our products, including, in particular, our games, or the platforms, consoles and other distribution methods for our content may contain errors, bugs, flaws or corrupted data, and these defects may only become apparent after their launch, particularly as we launch new products and release new features to existing products under tight time constraints. We believe that, if consumers have a negative experience with our products, regardless of whether the error or flaw occurs in our products or any third party channels through which our products are distributed, consumers may be less inclined to continue, or resume playing our games or otherwise consuming our content or recommend our products to others. Undetected programming errors, game defects and data corruption can disrupt our operations, adversely affect the consumer experience (including, with respect to players of our games, by allowing other players to gain unfair advantage), harm our reputation, cause consumers to cease playing our games or consuming our other content, divert our resources and delay market acceptance of our products, any of which may subject us to liabilities or adversely impact our operating results.
Declines in consumer spending and other adverse changes in the economy could have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects.
Most of our products and services involve discretionary spending on the part of consumers. We believe that consumer spending is influenced by general economic conditions and the availability of discretionary income.
This makes our products particularly sensitive to general economic conditions and economic cycles as consumers are generally more willing to make discretionary purchases, including purchases of products like ours, during periods in which favorable economic conditions prevail. Adverse economic conditions such as a prolonged general economic downturn, including periods of increased inflation, unemployment levels, tax rates, interest rates or energy prices or declining consumer confidence, can reduce consumer spending. Reduced consumer spending may result in reduced demand for our products and may also require increased selling and promotional expenses, which may have an adverse effect on our business, financial condition, results of operations, cash flow and prospects. In addition, uncertainty and adverse changes in the economy could also increase costs associated with developing and publishing our products, increase the cost and availability of sources of financing, and increase our exposure to material losses from bad debts. If difficult economic conditions continue to persist or worsen in the future, our business, financial condition, results of operations, cash flow and prospects could be adversely affected.
We are particularly susceptible to adverse economic and other developments in Vancouver, British Columbia.
The Company’s business plan is particularly focused on the film and entertainment market of Vancouver, British Columbia, and, in this regard, a significant portion of the Company’s business operations, including a significant portion of the Company’s developers and other personnel, are concentrated in Vancouver. As a result, the Company is particularly susceptible to adverse changes in market conditions, catastrophic events and other unforeseen developments affecting Vancouver and its surrounding areas, any of which could have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects. Accordingly, our operations and prospects are more susceptible to regional economic and other conditions than our competitors that are more geographically diversified.
Companies and governmental agencies may restrict access to our website, other websites that carry our products, mobile applications or the internet, generally, which could lead to losses or slower growth due to the effects such restrictions may have on our customer base.
In general, consumers need to access the internet and platforms such as Facebook, Apple, Google, our website, the websites of our partners or entities controlled by us or mobile applications in order to play the games or access the other content we offer or expect to offer in the future. Companies and governmental entities outside of the U.S. and Canadamay block or restrict access to these sites or applications or the internet generally for a number of reasons, including, for example, confidentiality, security or a determination that greater regulatory oversight is required, or companies may adopt policies that restrict the ability of employees to access websites and applications. If companies or governmental entities outside of the U.S. and Canada block, limit or otherwise adopt restrictive policies or regulations which materially interfere with the ability of consumers to play our games or access our other content, our business and operations will be negatively affected.
Our business is subject to our ability to develop commercially successful products for the current video game platforms.
We are a provider of video game products primarily for the casual-game consumer and have published video games for interactive entertainment hardware platforms. The success of our business is, in part, subject to the continued popularity of these platforms and, to the extent such platforms maintain popularity, our ability to develop commercially successful products for these platforms.
Video game hardware manufacturers set the royalty rates and other fees that we must pay to provide games for their platforms and, therefore, have significant influence on our costs. If one or more of these manufacturers change their fee structure, our business, financial condition, results of operations, cash flow and prospects may be materially impacted.
In order to provide products and service for a video game system, we must obtain a license from third-party platform manufacturers, such as Nintendo, Sony and Microsoft, which give these companies the opportunity to set the fee structure that we must pay in order to provide games for that platform. Similarly, these companies have retained the flexibility to change their fee structures, or adopt different fee structures for online purchases of games, online gameplay and other new features for their consoles. The control that hardware manufacturers have over the fee structures for their platforms and online access could adversely impact our costs, margins and, ultimately, our ability to become profitable, as well as our ability to effectively compete. Accordingly, any increase in fee structures could adversely affect our business, financial condition, results of operations, cash flow and prospects.
The global COVID-19 pandemic may negatively affect our business, financial condition, results of operations, cash flow and prospects, and these impacts may persist for an extended period of time or become more pronounced.
The spread of COVID-19 and the recent developments surrounding the global pandemic, including governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic, may have negative impacts on our business. The extent to which the pandemic impacts our business, financial condition, results of operations, cash flow and prospects, including the duration and magnitude of such effects, will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the pandemic; its impact on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer spending; and its short- and longer-term impact on consumer behavior and levels of consumer confidence. A reduction in consumer spending as a result of any of the foregoing may result in reduced demand for our products,services and solutions, which may have an adverse effect on our business, financial condition, results of operations, cash flow and prospects. See “Declines in consumer spending and other adverse changes in the economy could have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects” above.
The third parties with which we do business, including those that license or provide content to us, have had their operations altered or temporarily suspended. To the extent the resulting economic disruption is severe, we could see some of our third-party providers go out of business, resulting in supply constraints and increased costs or delays to our productsservices and services.solutions. Such production pauses may cause us to, among other things, temporarily have less new content available in future periods, which could negatively impact consumer demand for our services, as well as retention of our existing customers. Temporary production pauses or permanent shutdowns in production could result in content asset impairments or other charges and will change the timing and amount of cash flows associated with production activity.
Our ability to grow our company may also be harmed by COVID-19. For example, the impact of COVID-19 on the financial markets may make it more difficult for us to secure financing necessary to finance our existing operations and pursue potential strategic acquisitions or other opportunities to grow our business, and after the pandemic subsides, any such acquisitions or other opportunities may no longer be available, including because such opportunities have been pursued by our competitors or because such opportunities may be too costly or time-consuming for us to pursue at that time. In addition, as a result of the risks described above, we may be required to raise additional capital, and our access to and the cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects, and the outlook for the industries that we serve as a whole. Further, the impact of COVID-19 on the financial markets, including its negative impact on the price of our common shares, and our business may adversely affect our ability to raise funds through equity financings, including the terms
of, and the willingness of investors to participate in, any such equity financings. See “Security“Security breaches involving the source code for our products or other sensitive and proprietary information could adversely affect our business” below for a discussion of the impact of COVID-19 on our security protocols and the risks associated therewith. The COVID-19 pandemic has accelerated many of the trends in the industry, including those changes related to evolving consumer behaviors surrounding the ways in which consumers access and, in the future, expect to access content. If we are unable to rapidly grow or evolve our business in order to respond to those changes, whether due to our inability to secure financing for acquisitions or otherwise, we may be unable to attract and retain customers and otherwise effectively compete in our industry, and our business, financial condition, results of operations, cash flow and prospects could be adversely affected. See “Our industry is subject to significant, rapid changes, and we may fail to anticipate or successfully implement new or evolving technologies, or adopt successful business strategies, distribution methods or services” above.
To the extent COVID-19 or any worsening of the global business and economic environment as a result thereof adversely affects our business, financial condition, results of operations, cash flow and prospects, it may also have the effect of heightening many of the other risks described under the caption “Risk Factors”“Risk Factors” in this Report on Form 20-F.
Under International Financial Reporting Standards, we will not be able to consolidate our financial statements with the financial statements of companies in which we own minority equity ownership interests.
Under International Financial Reporting Standards (“IFRS”), we account for our minority equity ownership interests in businesses in which we own 50% or less of the equity ownership and have no substantial influence over the management of the businesses. Under IFRS, we report such minority equity ownership interests as assets on our balance sheet at fair market value. However, IFRS does not permit the consolidation of our financial statements with the financial statements of companies in which we own minority equity ownership interests. As such, we are not be allowed to consolidate into our financial statements any portion of the revenues, earnings or assets of companies in which we own minority equity ownership interests, such as Waterproof Studios Inc. (“Waterproof”), in which we hold a 49% interest. We currently provide limited financial information about Waterproof in our filings with the SEC. Since we do not control Waterproof, we cannot guarantee that Waterproof will in the future provide us with copies of its financial statements, on a timely basis or at all. Our inability to obtain audited financial statements of Waterproof could adversely affect our ability to evaluate the results of operations of Waterproof and the value of our investment in Waterproof and to provide financial information about Waterproof in our filings with the SEC. Accordingly, investors may not be able to appropriately evaluate the results of operations of Waterproof or businesses in which we own minority equity interests in the future, which could materially adversely affect market perception of and investors’ ability to evaluate our business, financial condition, results of operations, cash flow and prospects and, consequently, the trading price of our common shares.
Fluctuations in the value of the U.S. dollar relative to the Canadian dollar may adversely affect our business.
Fluctuations in the value of the U.S. dollar or the Canadian dollar can be expected to affect our business. During 20202021 and continuing into 2021,2022, the U.S. dollar has remained strong in comparison to the Canadian dollar. As of February 26,November 30, 2021, the exchange rate was one Canadian dollar to US$1.2685.0.7805. A continued strong U.S. dollar relative to the Canadian dollar may create attractive business opportunities with third parties in the U.S. with which we currently do, or, in the future, may do, business. We cannot predict future changes in these exchange rates, and any future weakening of the U.S. dollar relative to the Canadian dollar may make our business less attractive to those U.S.-based third parties and less competitive with U.S.-based companies in our industry.
Also, the revenue we received at and for the year ended November 30, 20202021, was denominated in U.S. dollars, while most of our operating expenses are incurred in Canadian dollars. In preparing our financial statements, certain financial information is required to be translated from U.S.Canadian dollars to Canadian dollars.U.S. Dollars. If the U.S.Canadian dollar weakensstrengthens against the CanadianU.S. dollar, such currency translation could adversely affect our revenues,expensed, which could
have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects.
Currently, we do not engage in foreign currency hedging transactions to protect us against fluctuations in future exchange rates, in particular, between the U.S. dollar and the Canadian dollar, and we may be more adversely affected by any such currency fluctuations than our competitors that engage in hedging transactions. If we engage in hedging transactions in the future, we may expose ourselves to risks associated with such transactions, which may not eliminate any adverse impact of future currency fluctuations on our business, financial condition, results of operations, cash flow and prospects.
Changes in tax laws or tax rulings could materially affect our effective tax rates, financial position and results of operations.
The tax regimes to which we are subject or under which we operate is unsettled and may be subject to significant change. Changes in tax laws or tax rulings, or changes in interpretations of existing laws, could cause us to be subject to additional income-based taxes, non-income taxes (such as payroll, sales, use, value-added, net worth, property and goods and services taxes), or tariffs related to the import or export of our offerings, could materially affect our financial position and results of operations. Any significant changes to our effective tax rate or the imposition of significant tariffs on our products may result in a material adverse consequence on our business, financial condition, results of operations, cash flow and prospects.
We cannot guarantee that we will be able to claim investment tax credits in Canada.
Canadian regulations provide for tax credits to companies that support multimedia, e-commerce and research and development in Canada, including gaming, applications and other aspects of the entertainment industry. Those tax credits and other government incentives are important components of our growth strategy. If governmental authorities in Canada, and, in particular, in British Columbia, were to reduce or discontinue the tax credits available in respect of those activities, we may be unable to pursue our growth strategy.
As a company in the early stages of our development, we rely upon our management team; our future success depends significantly on their continued service and performance, as well as our ability to hire and retain additional competent and skilled management and technical and other personnel.
Our executive officers who are responsible for our management functions and are responsible for strategic identification and development, financing and other critical functions. Our future success depends significantly on their continued service and performance and the expansion of our management team. The departure, death, disability or other extended loss of services of any member of our management team, particularly with little or no notice, could cause delays on projects, frustrate our growth prospects and could have an adverse impact on our client and industry relationships, our project exploration and development programs, other aspects of our business and our financial condition, results of operations, cash flow and prospects.
Our success, growth prospects, and ability to capitalize on market opportunities also depend to a significant extent on our ability to identify, hire, motivate and retain qualified managerial personnel, including additional senior members of management, and creative and technical personnel in a competitive job market. We expect competition for personnel with the specialized creative and technical skills needed to create our products and provideoperate our services and solutions will continue to intensify in the future. Our competitors may be able to offer a work environment with higher compensation or more opportunities to work with cutting-edge technology than we can. Any new personnel we hire may not be or become as productive as we expect, asand we may face challenges in adequately or appropriately integrating them into our workforce and culture. If we are unable to retain our key personnel or appropriately match skill sets with our needs, we would be required to expend significant time and financial resources to identify and hire new qualified personnel and to transfer significant internal historical
knowledge, which might significantly delay or prevent our growth and the achievement of our business objectives.
Our management team has limited experience managing a public company.
Members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws, rules and regulations that govern public companies, including regulatory oversight and public reporting obligations under the federal securities laws. These obligations will require significant attention from our management and could divert their attention away from the day-to-day management of our business. In the event that members of our management team are not successful or efficient as managers of a public company, this could have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects. See also “As“As a company in the early stages of our development, we rely upon our management team; our future success depends significantly on their continued service and performance as well as our ability to hire and retain additional competent and skilled management, technical sales and other personnel” above.
We may not be able to manage our potential growth.
For us to succeed, our business needs to experience significant expansion, including by adding to our senior management team. See “As“As a company in the early stages of our development, we rely upon our management team; our future success depends significantly on their continued service and performance as well as our ability to hire and retain additional competent and skilled management, technical sales and other personnel” above. We may not achieve this expansion. This expansion, if accomplished, may place a significant strain on our management, operational and financial resources. To manage any material growth, we will be required to implement additional operational and financial systems, procedures and controls. We will also be required to expand our finance, administrative and operations staff. Our current and planned personnel, systems, procedures, controls and infrastructure may not be adequate to support our future operations at any increased level. Our failure to manage growth effectively could give rise to operational errors, loss of business opportunities, loss of employees and reduced productivity, any of which may adversely affect our ability to compete effectively and otherwise have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects.
We use a limited number of suppliers.
We rely on a limited number of suppliers for hardware, software, and film and gaming production equipment. While other sources of supply do exist for this equipment, an unexpected disruption in supply or an increase in pricing could have a negative impact on our earnings.
Our results of operations may fluctuate significantly as to our film operations depending upon the timing of television shows and films delivered or made available to various media.
Results of operations with respect to our production and distribution of film and television operations for any periods are significantly dependent upon the number and timing of television programs and films delivered or made available to various media. Although traditions are changing, due in part to increased competition from streaming and other on-demand content delivery methods, broadcasters have traditionally made most of their annual programming commitments between February and June, such that new programs can be ready for telecast at the start of the broadcast season in September, or, in the case of midseason replacements, in January. Because of the annual production cycle, any revenues from our film and television operations may not be earned on an even basis throughout the year and may fluctuate materially from quarter to quarter. Consequently, our results of operations for any one period may not necessarily be indicative of our results for future periods. Cash flows may also fluctuate and are not necessarily closely correlated with revenue recognition.
In light of governmental stay-at-home orders in the wake of COVID-19, there have been production delays in television and film programming, and we are not able to predict when production will resume or return to normal levels, and in some cases, whether production will resume at all. As a result, we cannot predict the manner or the extent to which such production delays will impact the traditional annual production cycle for television and film programs and any resulting impact on our business, financial condition, results of operations, cash flow and prospects.
Our business is subject to a variety of U.S., Canadian and other laws, many of which are unsettled and still developing, and which could subject us to claims or otherwise harm our business.
We are subject to a variety of laws in the U.S., Canada and elsewhere, including laws regarding consumer protection, intellectual property, data protection, export and national security, that are continuously evolving and developing. The scope and interpretation of the laws that are or may be applicable to us are often uncertain and may be conflicting, particularly laws outside the U.S. and Canada. For example, laws relating to the liability of providers of online services for activities of their users and other third parties are being tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the ads posted or the content provided by users. It is also likely that, if our business grows and our games are played or our other content is accessed in a greater number of countries, we will become subject to laws and regulations in additional jurisdictions. We are potentially subject to a number of laws and regulations of the U.S., Canada and other jurisdictions that affect the offering of certain types of content, such as that which depicts violence, many of which are ambiguous, still evolving and could be interpreted in ways that could harm our business or expose us to liability. In addition, certain of our games may become subject to gambling-related rules and regulations and expose us to civil and criminal penalties if we do not comply.
It is difficult to predict how existing laws, as well as new laws to which we may become subject, will be applied to our business. If we are not able to comply with these laws or regulations or if we become liable under these laws or regulations, our operations could be temporarily or indefinitely suspended, and we may be forced to implement changes to our business model or other aspects of our operations. This may require us to expend substantial resources or to modify our products,services and solutions, which would harm our business, financial condition, results of operations, cash flow and prospects. In addition, the increased attention focused upon liability issues as a result of lawsuits and legislative proposals could harm our reputation or otherwise impact the growth of our business. Any costs incurred as a result of this potential liability could harm our business, financial condition, results of operations, cash flow and prospects.
It is possible that a number of laws and regulations may be adopted or construed to apply to us in the U.S., Canada and elsewhere that could restrict the online and mobile industries, including as to data privacy, advertising, taxation, content suitability, copyright, distribution and antitrust matters. Furthermore, the growth and development of electronic commerce and virtual goods may prompt calls for more stringent consumer protection laws that may impose additional burdens on companies such as ours conducting business through the internet and mobile devices. We anticipate that scrutiny and regulation of our industry will increase, and we will be required to devote legal and other resources to addressing such regulation. For example, existing laws or new laws regarding the regulation of currency and banking institutions may be interpreted to cover virtual currency or goods. If that were to occur we may be required to seek licenses, authorizations or approvals from relevant regulators, the granting of which may be dependent on us meeting certain capital and other requirements, and we may be subject to additional regulation and oversight, all of which could significantly increase our operating costs. Changes in current laws or regulations or the imposition of new laws and regulations in the U.S., Canada or elsewhere regarding these activities may limit the growth of social game services and other aspects of the industry in which we operate and impair our business.
We may be involved in legal proceedings that may result in adverse outcomes.
From time to time, we may be involved in claims, suits, government investigations, audits and proceedings arising from the ordinary course of our business or otherwise. The nature of any such claims, suits, government investigations, audits and proceedings are inherently uncertain, and their results cannot be predicted with certainty. An adverse resolution in litigation, including litigation or other actions brought by our shareholders, customers, governmental authorities or another third party, could result in substantial damages or otherwise negatively impact our business, reputation and financial condition. Regardless of the outcome, such legal proceedings can have an adverse impact on us because of negative publicity, legal costs, diversion of management resources and other factors.
Risks Related to Intellectual Property and Personal and Proprietary Information
We depend on protection afforded by trademarks and copyrights to protect our intellectual property.
We have prepared two confirmatory assignments for recordation with the US Patent and Trademark Office and hold a number of trademarks andcertain copyrights relating to certain significant products,properties, services and solutions, and, as part of our growth strategy, we expect to continue to pursue the registration of and acquire intellectual property rights, including trademarks and copyrights, for productsproperties, services and solutions we develop and to license intellectual property from third parties for use in our business. We rely on trademark laws and contractual provisions to protect these trademarks and copyrights and regard such protection as critical to our success. The contractual arrangements and other steps we have taken to protect our intellectual property are expensive and time-consuming and may not result in intellectual property registrations or may not prevent the misappropriation of our proprietary information or deter independent development of similar technologies by others. Existing trade secret, copyright and trademark laws offer only limited protection and do not account for common law claims. Furthermore, the monitoring and enforcement against the unauthorized use of our intellectual property rights, including those rights licensed to us by third parties, could entail significant expenses and could prove difficult or impossible. For example, if litigation is necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of proprietary rights claimed by others, any litigation of that nature, regardless of outcome or merit, could result in substantial costs, adverse publicity or diversion of management and technical resources. If we fail to maintain, protect and enhance our intellectual property rights, our business, financial condition, results of operations, cash flow and prospects may be harmed.
In addition, the laws of countries in which we may choose to market our productsproperties, services and solutions may afford little or no effective protection of our owned or licensed intellectual property. If we lose some or all of our intellectual property rights, or if any intellectual property rights that we may develop or acquire in the future prove to be deficient, our business may be materially adversely affected.
We rely on the availability of licenses to intellectual property of third parties, which exposes us to risks over which we have little or no control.
Our ability to provide consumers with content they are seeking depends, in part, upon licenses of intellectual property from third parties. The terms and conditions of such licenses vary, and third parties may be unable or unwilling to provide or continue to provide us with valid licenses to the content we seek to distribute or rights to use their other intellectual property, on terms acceptable to us or at all. If third parties are not or are no longer willing or able to provide such licenses on terms acceptable to us, our ability to provide content to consumers and continue to compete in our industry may be adversely affected and/or our costs could increase.
In addition, a third party may assert that we or our end customers are in breach of the terms of a license, which could, among other things, give such third party the right to terminate a license or seek damages from us, or both. The inability to obtain or maintain certain licenses or other rights or to obtain or maintain such licenses or rights on favorable terms, or the need to engage in litigation regarding these matters, could adversely affect the content we are able to offer and the overall consumer experience and could otherwise disrupt our business.
Any of these events could have a material adverse effect on our business, financial condition, results of operations, cash flow and prospects.
Intellectual property claims may increase our costs or require us to cease selling affected products,properties, services and solutions, which could adversely affect our business, financial condition, results of operations, cash flow and prospects.
Development of original content, including publication and distribution, sometimes results in claims of intellectual property infringement. Although we make efforts to ensure our productsproperties, services and solutions do not violate the intellectual property rights of others, it is possible that third parties may still allege infringement. These claims and any litigation resulting from these claims may be time-consuming and costly to defend, divert management attention, and result in damage awards payable by us. They could also prevent us from selling the affected productproperty, service or solution or require us to redesign the affected productproperty, service or solution to avoid infringement or obtain a license for future sales of the affected productproperty, service or solution or prevent us from utilizing important technologies, ideas or formats.
Third parties with which we do business process, store and use personal information and other data of consumers of our content, and, as we implement our growth strategy, we may process, store and use such consumer data, which may subject us to governmental regulation and other legal obligations related to privacy and data security, and such third parties’ or our actual or perceived failure to comply with such obligations could harm our business.
Third parties with which we do business receive, store and process personal information and other data of consumers of our content. As we implement our growth strategy, we may receive, store and process such personal information and consumer data in connection with the provision of our productsservices and services.solutions. There are numerous federal, state and local laws around the world regarding privacy and data protection and the storing, sharing, use, processing, disclosure and protection of personal information and other customer data, including but not limited to Regulation (EU) 2016/679 (also known as the General Data Protection Regulation or GDPR) and the California Consumer Privacy Act of 2018 (also known as the CCPA). The scope of privacy and data protection laws is constantly evolving, the laws are subject to differing interpretations, and there may be inconsistencies between jurisdictions or conflicts with other rules or codes of conduct to which we are subject or agree to comply. Although we strive to comply with applicable laws, policies, legal obligations and certain industry codes of conduct relating to privacy and data protection, and notwithstanding the views of third parties with which we do business that they comply with such laws, policies, legal obligations and industry codes of conduct, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules, our practices or the practices of third parties with which we do business. The costs of compliance with these laws, policies, legal obligations and codes may be significant and may increase in the future. Any failure or perceived failure by us to comply with our privacy policies, our privacy-related obligations to consumers or other third parties, including under applicable security protocols, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, may result in governmental enforcement actions, litigation or public statements against us by consumer advocacy groups or others and could cause consumers to lose trust in us, which could have an adverse effect on our reputation and business, including our relationships with third parties with whom we do business. Additionally, if third parties we work with, such as customers, vendors or developers, violate applicable laws or our policies, such violations may also put our customers’ information at risk and could in turn have an adverse effect on our business.
In addition, many jurisdictions have laws, including but not limited to the GDPR and CCPA, that require minimum information security standards that are often vaguely defined and may be difficult to implement, and that create potential significant liability for failure to meet those standards. Many jurisdictions also have laws requiring notification to individuals and certain regulators when there is a security breach involving personal information. The costs of compliance with these laws may be significant and may increase in the future, and any failure or perceived failure by us to comply with these laws may subject us to significant liability. Responding to a security breach involving personal information often requires significant resources and costs,
and could cause consumers to lose trust in us, which could have an adverse effect on our reputation and business, including our relationships with third parties with whom we do business.
Security breaches involving the source code for our products or other sensitive and proprietary information could adversely affect our business.
We store the source code for our interactive entertainment software products as it is created, as well as other sensitive and proprietary information. A breach, whether physical, electronic or otherwise, of the systems on which such source code and otherour sensitive data are stored could lead to damage or piracy of our software.intellectual property. In addition, certain parties with whom we do business are given access to our sensitive and proprietary information in order to provide services and support our team, and certain third parties also license or otherwise provide us with rights to use their intellectual property. These third parties or our own employees may misappropriate our information or the third-party intellectual property used in our business and engage in unauthorized use of it. If we are subject to data security breaches, we may suffer a loss in sales, increased costs arising from the restoration or implementation of additional security measures, litigation or other legal action and reputational damage, which could materially and adversely affect our business, financial condition, results of operations, cash flow and prospects. Any theft and/or unauthorized use or publication of our or third parties’ intellectual property, including trade secrets, and other confidential business information as a result of such an event could adversely affect our competitive position, reputation, brand, and future sales of our productsservices and solutions and could adversely affect our relationships with third parties that may be critical to our future success. Our business could be subject to significant disruption, and we could suffer monetary and other losses and reputational harm, in the event of such incidents and claims.
Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats and also due to the expanding use of technology-based products and services by us and consumers of our productsservices and services.solutions. In the wake of COVID-19, these risks may be more likely to materialize and may be more severe if they occur, as our workforce as well as the workforces of the third parties with whom we have business relationships spend a significant amount of time working from home, where data networks may be less secure. The safeguards we have in place or may implement in the future may not prevent all unauthorized infiltrations or breaches, and we may suffer losses related to a security breach in the future, which losses may be material.
The proliferation of “cheating” programs and scam offers that seek to exploit our games and players affects the game-playing experience and may lead players to stop playing our games.
Unrelated third parties have developed, and may continue to develop, “cheating” programs that enable players to exploit our games, play them in an automated way or obtain unfair advantages over other players who do play fairly. These programs harm the experience of players who play fairly and may disrupt the virtual economy of our games. In addition, unrelated third parties attempt to scam our players with fake offers for virtual goods. We devote significant resources to discover and disable these programs and activities, and if we are unable to do so quickly our operations may be disrupted, our reputation damaged and players may stop playing our games. This may lead to lost revenue from paying players, increased cost of developing technological measures to combat these programs and activities, legal claims relating to the diminution in value of our virtual currency and goods, and increased customer service costs needed to respond to dissatisfied players.
Risks Related to Our Common Shares
We mayIf we do not satisfy the Nasdaq Capital Market continued listing requirements, our Common Shares could be able to maintaindelisted.
The listing of our listingCommon Shares on the Nasdaq Capital Market.
Our common shares tradeStock Market (“Nasdaq”) is contingent on the Nasdaq Capital Market. Following the Business Combination in August 2018, we were required to establishour compliance with the Nasdaq’s conditions for continued listing. On March 1, 2022, we received notice from Nasdaq initial listing requirements, which we did in October 2018. Nasdaq has continued listing requirementsindicating that we must meet to avoid delisting. The standards include,
among others, awere not in compliance with the minimum bid price requirement of $1.00US$1.00 per share and any of: (1) a minimum stockholders’ equity of $2.5 million; (2) a market value of listed securities of $35 million; or (3) net income from continuing operations of $500,000 inunder the most recently completed fiscal year or in two ofNasdaq Listing Rules. Under the last three fiscal years. Our results of operations and our fluctuating share price directly impact our ability to satisfy these listing standards. In the past, we have received written notices from Nasdaq for failing to meet its continued listing requirements, including our failure to hold an annual meeting of shareholders within 12 months of the end of our fiscal year ended November 30, 2018. Although we have regained compliance with Nasdaq’s continued listing standards, there can be no assurance that we will remain in compliance in the future. Ifnotice, we are unableafforded 180 days, or until August 29, 2022, to maintain these listing standards,regain compliance or we may be subject to delisting.
A In the event our Common Shares are no longer listed for trading on the Nasdaq, our trading volume and share price may decrease and we may experience difficulties in raising capital which could materially affect our operations and financial results. Further, delisting from Nasdaq would result in our common shares being eligible for quotation on the over-the-counter market, which is generally considered to be a less efficient trading system than listing on markets such as Nasdaq or other national exchanges because of lower trading volumes, transaction delays, and reduced security analyst and news media coverage. A delisting from Nasdaq could also result in a determination that our common shares are “penny stock,” which would require brokers trading in our common shareshave other negative effects, including potential loss of confidence by partners, lenders, suppliers and employees. Finally, delisting could make it harder for us to adhere to more stringent rules. These factors could reduce the level of trading activity in the trading market for our common sharesraise capital and contribute to lower prices and larger spreads in the bid and ask prices for our common shares.sell securities.
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Future capital raising efforts may be dilutive to our shareholders, result in increased interest expense in future periods or depress our share price.
In order to finance our operations, we have raised funds through the issuance of common shares and securities convertible into common shares, and we may do so again in the future. Any such offering in the future may have a dilutive effect on our earnings per share and/or book value per share. The actual amount of dilution, if any, cannot be determined at this time and will be based on numerous factors. In the future, we may issue common shares in connection with investments or acquisitions. The number of common shares issued in future offerings, including those issued in connection with an investment or acquisition, could be material. We cannot predict the size of future issuances of common shares or the size or terms of future issuances of debt instruments or other securities convertible into or exercisable or exchangeable for common shares, or the effect, if any, that future issuances and sales of our securities will have on the market price of our common shares. Sales or issuances of substantial numbers of common shares, or the perception that such sales could occur, may adversely affect the market price of our common shares. With any additional sale or issuance of common shares, or securities convertible into common shares, our investors may suffer dilution of their investment.
The right of RDL Realisation PLC to participate in future offerings by us could impair our ability to raise capital.
As previously disclosed in our filings with the SEC, in the event we issue any equity securities or securities convertible into equity securities, subject to limited exceptions, RDL Realisation PLC (formerly Ranger Direct Lending Fund, PLC) (“Ranger”) has the right, pursuant to the terms of the forbearance agreement between Ranger and us (the “Forbearance Agreement”), to participate in the offering of such securities such that Ranger may maintain its proportional ownership interest in us immediately prior to the completion of such offering. The existence of Ranger’s right of participation in connection with future issuances may require us to issue securities to Ranger in connection with any such issuance of equity securities or securities convertible into equity securities and may deter potential investors from providing us needed financing, or may deter investment banks from working with us, which may have a material adverse effect on our ability to obtain financing.
The price of our common shares may be volatile or may decline regardless of our operating performance.
The market price for our common shares may be highly volatile. In addition, the market price of our common shares may fluctuate significantly in response to a number ofseveral factors, mostmany of which we cannot control, including:
●variations in our financial results or those of companies that are perceived to be similar to us;
● actions by us or our competitors, such as sales initiatives, acquisitions or restructurings;
● additions or departures of key management personnel;
● legal proceedings involving us, our industry, or both;
●changes in our capitalization, including future issuances of our common shares or the incurrence of additional indebtedness;
●changes in market valuations of companies similar to ours;
● the prospects of the industry in which we operate;
● actions by our shareholders;
● speculation or reports by the press or investment community with respect to us or our industry in general;
●general economic, market and political conditions; and
●other risks, uncertainties and factors described under the caption “Risk Factors” in this Annual Report on Form 20-F.
| ● | variations in our financial results or those of companies that are perceived to be similar to us; |
| ● | actions by us or our competitors, such as sales initiatives, acquisitions or restructurings; |
| ● | additions or departures of key management personnel; |
| ● | legal proceedings involving us; |
| ● | changes in our capitalization, including future issuances of our common shares or the incurrence of indebtedness; |
| ● | changes in market valuations of companies similar to ours; |
| ● | the prospects of the industry in which we operate; |
| ● | actions by our shareholders; |
| ● | speculation or reports by the press or investment community with respect to us or our industry in general; |
| ● | general economic, market and political conditions; and |
| ● | other risks, uncertainties and factors described under the caption “Risk Factors” in this Annual Report on Form 20-F. |
The stock markets in general have often experienced volatility, including, most recently, in the wake of COVID-19, that has sometimes been unrelated or disproportionate to the operating performance of particular companies. These broad market fluctuations have caused, and may continue to cause, the trading price of our common shares to decline. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, on our business, financial condition, results of operations, cash flow and prospects, and on the market price of our common shares. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been brought against that company. We may become involved in this type of litigation in the future. Litigation of this type may be expensive to defend and may divert our management’s attention and resources from the operation of our business.
We incur significant costs and demands upon management and accounting and finance resources as a result of complying with the laws and regulations affecting public companies; any failure to establish and maintain adequate internal controls and/or disclosure controls or to recruit, train and retain necessary accounting and finance personnel could have an adverse effect on our ability to accurately and timely prepare our financial statements and otherwise make timely and accurate public disclosure.
As a public operating company, we incur significant administrative, legal, accounting and other burdens and expenses beyond those of a private company, including public company reporting obligations, both in the U.S. and under applicable Canadian national and provincial securities laws and regulations, and Nasdaq listing requirements. In particular, we have needed, and continue to need, to enhance and supplement our internal accounting resources with additional accounting and finance personnel with the requisite technical and public company experience and expertise to enable us to satisfy such reporting obligations. Currently, we rely upon the services of third parties for our accounting and financial reporting functions, which third-party arrangements create additional monitoring obligations and have the potential to increase risk in the system of internal control. Any failure to maintain an effective system of internal controls (including internal control over financial reporting) could limit our ability to report our financial results accurately and on a timely basis, or to detect and prevent fraud and could expose us to regulatory enforcement action and shareholder claims.
Furthermore, we are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002. As a non-accelerated filer under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not
required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, but we are required to document and test our internal control procedures and prepare annual management assessments of the effectiveness of our internal control over financial reporting. Therefore, our internal controls over financial reporting will not receive the level of review provided by the process relating to the auditor attestation included in annual reports of issuers that are subject to the auditor attestation requirements, which may adversely impact market perception of our business and our common shares. Our assessments must include disclosure of identified material weaknesses in our internal control over financial reporting. The existence of one or more material weaknesses could affect the accuracy and timing of our financial reporting. Testing and maintaining internal control over financial reporting involves significant costs and could divert management’s attention from other matters that are important to our business. Additionally, we may not be successful in remediating any deficiencies that may be identified. If we are unable to remediate any such deficiencies or otherwise fail to establish and maintain adequate accounting systems and internal control over financial reporting, or we are unable to continue to recruit, train and retain necessary accounting and finance personnel, we may not be able to accurately and timely prepare our financial statements and otherwise satisfy our public reporting obligations.
In 2019,During fiscal year ended November 30, 2021, we identified a material weakness in our internal controls, and such weakness may continue or additional material weaknesses may occur in the future. Specifically, our management conducted an assessment of the effectiveness of our internal control over financial reporting as of November 30, 2019. Based on this assessment, ourbecause management concluded that, as of November 30, 2019, our internal control over financial reporting wasdid not effective. Specifically, based on management’s assessment, we lack adequate oversight related to the developmentdesign and performance ofimplement internal controls to ensure an effective review process over period end financial disclosure and due to the limited number of personnel in the Company, there are inherent limitations to segregation of duties amongst personnel to perform adequate oversight.reporting. . Furthermore, our management concluded that, as of November 30, 2019,2021, our disclosure controls and procedures were not effective because of the material weakness in our internal control over financial reporting. Additionally, we face difficulties in obtaining information, including on a timely basis, with respect to LBI prior to the Business Combination, as well as Waterproof, for purposes of making financial and other public disclosure. These difficulties have also adversely affected our ability to timely file tax returns. We have not yet satisfactorily addressed these difficulties and have not yet remediated the weaknesses in our internal controls over financial reporting. Any inaccuracies in our financial statements or other public disclosures (in particular, if resulting in the need to restate previously filed financial statements), or delays in our making required SEC filings, whether as a result of the lack of effectiveness of our internal control over financial reporting or disclosure controls and procedures or otherwise, could have a material adverse effect on the confidence in our financial reporting, our credibility in the marketplace and the trading price of our common shares.
Our management team must continue to adapt to other requirements of being a public company. We need to devote significant resources to address these public company-associated requirements, including compliance programs and investor relations, as well as our financial reporting obligations. We incur substantial legal and financial compliance costs as a result of complying with these rules and regulations promulgated by the SEC. We are also required to simultaneously comply with applicable Canadian national and provincial securities laws and regulations, which result in legal, accounting and other related costs and make some activities more time-consuming and costly.
We are a “foreign private issuer” under U.S. securities laws and, as a result, are subject to disclosure obligations different from requirements applicable to U.S. domestic registrants listed on Nasdaq.
Although we are subject to the periodic reporting requirements under the Exchange Act, the periodic disclosure required of “foreign private issuers” (as defined in Rule 405 under the Securities Act) is different from periodic disclosure required of U.S. domestic registrants. Therefore, there may be less publicly available information about us than is regularly published by or about other public companies in the U.S., and we are exempt from certain other sections of the Exchange Act to which U.S. domestic registrants would otherwise be subject. See “We“We could lose our foreign private issuer status in the future, which could result in significant additional costs
and expenses to us” below. In addition, our executive officers, directors and large shareholders are not obligated to file reports under Section 16 of the Exchange Act, and certain of the governance rules and shareholder approval rules imposed by the Nasdaq are inapplicable to us.
We could lose our foreign private issuer status in the future, which could result in significant additional costs and expenses to us.
In order to maintain our current status as a foreign private issuer, if more than 50% of our outstanding voting securities are directly or indirectly owned by residents of the U.S., we must not have any of the following: (1) a majority of our executive officers or directors being U.S. citizens or residents, (2) more than 50% of our assets being located in the U.S., or (3) our business being principally administered in the U.S. If we were to lose our foreign private issuer status:
●we would no longer be exempt from certain of the provisions of U.S. securities laws, such as Regulation FD, the Section 16 disclosure and short swing-profit rules and the requirement to file proxy solicitation materials on Schedule 14A or 14C in connection with meetings of our shareholders;
●we would be required to commence reporting on forms required of U.S. companies, such as Forms 10-K, 10-Q and 8-K, rather than the forms currently available to us, such as Forms 20-F and 6-K;
●we would be subject to additional restrictions on offers and sales of securities outside the U.S., including in Canada; and
●we would lose the ability to rely upon certain exemptions from the Nasdaq corporate governance requirements that are available to foreign private issuers.
| ● | we would no longer be exempt from certain of the provisions of U.S. securities laws, such as Regulation FD, the Section 16 disclosure and short swing-profit rules and the requirement to file proxy solicitation materials on Schedule 14A or 14C in connection with meetings of our shareholders; |
| ● | we would be required to commence reporting on forms required of U.S. companies, such as Forms 10-K, 10-Q and 8-K, rather than the forms currently available to us, such as Forms 20-F and 6-K; |
| ● | we would be subject to additional restrictions on offers and sales of securities outside the U.S., including in Canada; and |
| ● | we would lose the ability to rely upon certain exemptions from the Nasdaq corporate governance requirements that are available to foreign private issuers. |
If we cease to qualify as a foreign private issuer, our regulatory and compliance costs may increase significantly in order to comply with the requirements discussed above.
If we were to be a passive foreign investment company for U.S. federal income tax purposes, U.S. holders of our common shares (or securities exercisable for or convertible into our common shares) may suffer adverse tax consequences.
If 75% or more of our gross income in a taxable year, including our pro-rata share of the gross income of any company, U.S. or foreign, in which we are considered to own, directly or indirectly, 25% or more of the shares by value, is passive income, then we will be a “passive foreign investment company,” or “PFIC,” for U.S. federal income tax purposes. Alternatively, we will be considered to be a PFIC if at least 50% of our assets in a taxable year, averaged over the year and ordinarily determined based on fair market value and including our pro-rata share of the assets of any company in which we are considered to own, directly or indirectly, 25% or more of the shares by value, are held for the production of, or produce, passive income. Once treated as a PFIC for any taxable year, a foreign corporation will generally continue to be treated as a PFIC for all subsequent taxable years for any U.S. shareholder who owned shares of the foreign corporation when it was treated as a PFIC. If we were to be a PFIC, and a U.S. shareholder does not make an election to treat us as a “qualified electing fund,” or “QEF,” or a “mark-to-market” election, “excess distributions” to such U.S. shareholder, and any gain recognized by such U.S. shareholder on a disposition of our common shares, would be taxed in an unfavorable way. Among other consequences, our dividends, to the extent that they constituted excess distributions, would be taxed at the regular rates applicable to ordinary income, rather than the 20% maximum rate applicable to certain dividends received by an individual from a qualified foreign corporation, and certain “interest” charges may apply. In addition, gains on the sale of our common shares would be treated in the same way as excess distributions.
The tests for determining PFIC status are applied annually. We currently dohave not expect to bedetermined if we are a PFIC for our current, prior and future taxable years. However, because ourOur PFIC status for any taxable year will depend on the composition of our income and assets and the value of our assets from time to time, we may become a PFIC for our current taxable year or any future taxable year.time. If we do become a PFIC, in the future, U.S. shareholders who hold common shares during any period when we are a PFIC will be subject to the foregoing rules, even if
we cease to be a PFIC, subject to exceptions for U.S. holders who made timely QEF or mark-to-market elections or certain other elections. We do not currently intend to prepare or provide the information that would enable our common shareholders to make a QEF election.
If we do become a PFIC for our current taxable year or any future taxable year, in addition to U.S. holders of our common shares, a U.S. holder of our securities exercisable for or convertible into our common shares during any year in which we are a PFIC would be adversely affected under the foregoing rules even if we cease to be a PFIC. Such U.S. holders should consult their own tax advisers concerning the potential application of the PFIC rules to their investment.
We have never paid cash dividends on our common shares, and we do not anticipate paying cash dividends in the foreseeable future.
We have never declared or paid any cash dividends on our common shares and do not intend to pay any cash dividends in the foreseeable future. We currently intend to retain any future earnings to fund the growth of our business. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that our board of directors may deem relevant. As a result, capital appreciation, if any, of our common shares will be the sole source of gain for the foreseeable future. There is no guarantee that our common shares will appreciate in value or even maintain the price at which a shareholder purchased such shareholder’s shares.
Provisions in our articles may prevent efforts by our shareholders to effect a change of control of our company or a change in our management.
Our articles provide for our board of directors to be divided into three classes of directors. Directors of each class are chosen for three-year terms upon the expiration of their current terms, and each year one class of directors is elected by our shareholders. Because we have a staggered board, our shareholders may be prevented from replacing a majority of our board of directors at any annual meeting, which may entrench management and discourage unsolicited shareholder proposals that may be in the best interests of our shareholders. In addition, the staggered terms of our directors may reduce the possibility of a tender offer or an attempt at a change in control, even though a tender offer or change in control might be in the best interest of our shareholders.
We are incorporated in British Columbia, Canada, and all but one of our directors and officers live in Canada, and allsome of the Company’s assets are in Canada; therefore, investors may have difficulty initiating legal claims and enforcing judgments against us and our directors and officers.
We are a company incorporated under the laws of British Columbia. Currently, all but one of our directors and officers are residents of Canada and allsome our assets and operations are located outside of the U.S. It may not be possible for shareholders to enforce in Canada judgments against the Company obtained in the U.S., including actions predicated upon the civil liability provisions of the U.S. federal securities laws. While reciprocal enforcement of judgment legislation exists between Canada and the U.S., we and our insiders may have defenses available to avoid in Canada the effect of U.S. judgments under Canadian law, making enforcement difficult or impossible. There is uncertainty as to whether Canadian courts would enforce (a) judgments of U.S. courts obtained against us or our insiders predicated upon the civil liability provisions of the U.S. federal and state securities laws or (b) in original actions brought in Canada, liabilities against us or our insiders predicated upon the U.S. federal and state securities laws. Therefore, our shareholders in the U.S. may have to avail themselves
of remedies under Canadian corporate and securities laws for any perceived oppression, breach of fiduciary duty and other similar legal complaints.complaints.
Item 4. – Information on the Company
A.History and development of the Company.
| A. | History and development of the Company |
1.The legal name of the Company is “Liquid Media Group Ltd.”
| 1. | The legal name of the Company is “Liquid Media Group Ltd.” |
2.The Company was incorporated under the Company Act (British Columbia) on February 4, 1986 under the name “2060 Investments Ltd.” On May 21, 1986, the Company changed its name to “Camfrey Resources Ltd.” On March 16, 1993, the Company changed its name to “Brio Industries Inc.,” and on October 25, 1999, the Company changed its name to Leading Brands, Inc. On August 10, 2018, the Company changed its name to “Liquid Media Group Ltd.”
| 2. | The Company was incorporated under the Company Act (British Columbia) on February 4, 1986 under the name “2060 Investments Ltd.” On May 21, 1986, the Company changed its name to “Camfrey Resources Ltd.” On March 16, 1993, the Company changed its name to “Brio Industries Inc.,” and on October 25, 1999, the Company changed its name to Leading Brands, Inc. On August 10, 2018, the Company changed its name to “Liquid Media Group Ltd.” |
On August 9, 2018, the Company consummated a business combination with Liquid CanadaMedia Group (Canada) Ltd. (“Liquid Canada”) by way of plan of arrangement under the Business Corporations Act (British Columbia) (the "Arrangement""Arrangement"). Pursuant to the Arrangement, Liquid Canada was acquired by and became a wholly-owned subsidiary of the Company. As part of the Arrangement, on August 10, 2018, the Company changed its name to Liquid Media Group Ltd. and Liquid Canada changed its name to Liquid Media Group (Canada) Ltd. At the time of completion of the Arrangement, the Company had 1,848,980 common shares issued and outstanding which included 1,288,497 common shares issued to former Liquid Canada shareholders, representing 69.69% of the Company’s issued and outstanding shares. Initially, the common shares of the Company issued in connection with the Arrangement were listed on NASDAQ under the ticker symbol “LBIX”. Effective August 10, 2018, the trading symbol of the Company was changed to “YVR”.
| 3. | The Company is a corporation incorporated under the laws of the province of British Columbia, Canada, and is governed by the Business Corporations Act (British Columbia). The head office of the Company is located at 67 East 5th Avenue, Vancouver, BC, V5T 1G7; Tel: 416-350-5009. |
3.The Company is a corporation incorporated under the laws of the province of British Columbia, Canada, and is governed by the Business Corporations Act (British Columbia). The head office of the Company is located at #202, 5626 Larch Street, Vancouver, BC, V6M 4E1; Tel: 604-602-0001
19
| 4. | During the Company’s fiscal year ended November 30, 2021, the Company realized several material changes to both its organizational structure as well as the nature of its business. |
| (a) | Ronald Thomson was appointed as Chief Executive Officer as of January 1, 2021. The Company entered into an employment agreement with Mr. Thomson whereby he would be paid $20,000 per month, with a provision that his compensation would retroactively increase to $30,000 per month upon the Company raising US$5 Million, which was accomplished. |
| (b) | In January 2021, the Company granted a consultant of the Company 321,735 stock options to a consultant, which options are exercisable at a price of $1.90 for a term of five years and subject to the following vesting provisions: 107,245 on January 14, 2021, 107,245 on July 14, 2021, and 107,245 on July 14, 2022. |
| (c) | In January 2021, the Company repriced 932,995 stock options with an exercise price of $2.55 per share and 25,000 stock options with an exercise price of $2.57 per share to $1.90 per share. All other terms remained unchanged. |
| (d) | In January 2021, the Company extended the maturity date of the outstanding convertible debenture by one year to February 26, 2022. |
| (e) | In February 2021, the Company extended the expiry date of 346,000 share purchase warrants with an exercise price of $1.75 from February 26, 2021 to March 11, 2021 due the investors being subject to a trading blackout. |
| (f) | In February 2021, Waterproof commenced an action against the Company in which Waterproof claimed that the Company misrepresented facts to Waterproof, inducing Waterproof to enter the Amended and Restated Shareholder Agreement (“ARSA”) with the Company. On October 22, 2022, the Company announced that via its wholly-owned subsidiary Liquid Canada, it had entered into a definitive settlement agreement with three shareholders of Waterproof terminating litigation among them in respect of the Company’s interest in Waterproof. See Item 8 -Legal Proceedings. |
| (g) | In March 2021, the Company’s SEC registration statement registering common shares that may be issued upon the exercise of outstanding warrants became effective. |
| (h) | In April 2021, the Company announced the appointment of Mr. Andy Wilson as CFO in place of Daniel Cruz, who stepped down as CFO. |
Completed Acquisitions during the year-ended November 30, 2021
| (a) | On September 22, 2021, the Company acquired 100% of the issued and outstanding shares of IndieFlix Group, Inc. (“IndieFlix”) in accordance with an Agreement and Plan of Merger (“IndieFlix Agreement”) and, in connection with the merger, former noteholders of IndieFlix agreed to extinguish IndieFlix debt in exchange for common shares of the Company. As consideration for the extinguishment of debt, the Company issued 499,996 common shares at closing and may issue up to 2,000,000 in additional common shares of the Company to the former noteholders of IndieFlix upon IndieFlix achieving total cumulative revenue of $64,868,466 before the seventh anniversary of the closing date as follows (“IndieFlix Transaction”): |
| · | 500,000 common shares upon IndieFlix achieving revenue of $4,521,630 (“IndieFlix First Milepost”) (499,996 common shares issued); |
| · | 500,000 common shares upon IndieFlix achieving revenue of $13,766,432 (“IndieFlix Second Milepost”); |
| · | 500,000 common shares upon IndieFlix achieving revenue of $31,496,648 (“IndieFlix Third Milepost”); and |
| · | 500,000, or such lesser number based on a pro rata amount of IndieFlix’s revenue recognized relative to the IndieFlix Fourth Milepost, common shares upon IndieFlix achieving revenue of $64,868,466 (“Fourth Milepost”). |
Proposed Acquisition – Letter of Intent
| (a) | In June 2021, the Company entered into a Letter of Intent with Filmdab, Inc., operating as Filmocracy (“Filmocracy”) for the Company to acquire 100% of the issued and outstanding shares of Filmocracy by issuing up to 1,250,000 common shares of the Company to the shareholders of Filmocracy. 25% of the consideration shares will be issued to the shareholders of Filmocracy on closing of the proposed transaction while the remainder will be issued based on Filmocracy achieving certain revenue targets over a six year period. Filmocracy is a B2B2C film and festival streaming platform. |
Financings/Share Issuances
| (a) | In January 2021, the Company issued 2,984 common shares valued at $6,953 to a consultant to settle $7,851 of outstanding accounts payable, resulting in a gain of $898 which is included in gain on debt settlements. |
| (b) | In January 2021, the Company issued 17,907 common shares valued at $46,948 to a consultant of the Company for advisory services provided to the Company. |
| (c) | In February 2021, the Company transferred 215,000 treasury shares valued at $479,450 to a creditor as full and final payment of a Forbearance Agreement. |
| (d) | In March 2021, the Company issued 250,001 common shares valued at $372,376 in relation to the vesting of 250,001 restricted share units. |
| (e) | In March 2021, the Company closed a registered direct offering, under its F-3 registration statement, by issuing 1,791,045 common shares of the Company at $3.35 per common share for total proceeds of $6,000,000. In connection with this offering, the Company paid legal fees of $69,095, agent fees of $470,000, and filing fees of $15,950. |
| (f) | In June 2021, the Company issued 39,894 common shares valued at $75,000 to a consultant for consulting services previously received. |
| (g) | In September 2021, the Company issued 237,501 common shares valued at $349,127 in relation to the vesting of 237,501 restricted share units. |
| (h) | In August 2021, the Company announced it had entered into an At-The-Market Agreement (“ATM Agreement”) which allows the Company to sell up to $6,051,342 of common shares of the Company. No shares under the ATM Agreement will be offered or sold in Canada. |
| (i) | In September 2021, the Company closed a sale of common shares under the ATM Agreement through the issuance of 437,365 common shares at $2.09 per common share for gross proceeds of $915,230. |
| (j) | In September 2021, the Company closed the agreement to acquire IndieFlix and issued 499,996 common shares. |
| (k) | During the year ended November 30, 2021, the Company issued the following for exercised stock options, warrants, and conversions: |
| · | issued 367,084 common shares for total proceeds of $440,501 in connection with the exercise of 367,084 share purchase warrants at $1.20 per warrant of which $440,501 was received during the year ended November 30, 2020. |
| · | issued 430,167 common shares for total proceeds of $752,793 in connection with the exercise of 430,167 share purchase warrants at $1.75 per warrant. As a result, the Company transferred $2,953 representing the fair value of the exercised warrants from reserves to share capital. |
| · | issued 990,000 common shares for total proceeds of $1,861,200 in connection with the exercise of 990,000 share purchase warrants at $1.88 per warrant. As a result, the Company transferred $221,353 representing the fair value of the exercised warrants from reserves to share capital. |
| · | issued 121,319 common shares valued at $423,503 in accordance with the exercise of 175,000 Cashless Warrants. As a result, the Company transferred $423,503 representing the fair value of the Cashless Warrants from derivative liabilities to share capital. |
| · | issued 270,000 units on the conversion of $405,000 worth of net convertible debentures. As a result, the Company transferred $49,966 from reserves to share capital representing the proportionate balance of the equity component. Each unit comprised of one common share and one warrant with each warrant entitling the holder to acquire one common share of the Company for $1.75 up to February 26, 2022. |
| · | issued 10,000 common shares for total proceeds to $19,000 in connection with the exercise of 10,000 stock options at $1.90 per option. As a result, the Company transferred $19,561 representing the fair value of the exercised options from reserves to share capital. |
Subsequent to the year ended November 30, 2020,2021, the Company realized several material changes to both its organizational structure as well as the nature of its business. business:
| (a) | On December 14, 2021, the Company acquired 100% of the issued and outstanding shares of iGEMS in accordance with an Agreement and Plan of Merger (“iGEMS Agreement”). As consideration, the Company will issue up to 850,000 common shares of the Company to the former shareholders of iGEMS upon iGEMS achieving total cumulative revenue of $9,413,550 before the sixth anniversary of the closing date as follows (“iGEMS Transaction”): |
●In December 2019, the Company announced the launch of Iridion 3D and its sequel, Iridion II on Steam for PC.
| · | 212,500 common shares on closing of the agreement (issued subsequently); |
| · | 212,500 common shares upon iGEMS achieving revenue of $473,577 (“iGEMS First Milepost”); |
| · | 212,500 common shares upon iGEMS achieving revenue of $2,401,384 (“iGEMS Second Milepost”); |
| · | 212,500, or such lesser number based on a pro rata amount of iGEMS revenue recognized relative to the iGEMS Third Milepost, common shares upon iGEMS achieving revenue of $9,413,550 (“iGEMS Third Milepost”). |
| (b) | On March 7, 2022, the Company acquired 100% of the issued and outstanding shares of DCU (“DCU Shares”), in accordance with a Securities Exchange Agreement (“DCU SEA”), for common shares of the Company which are scheduled to be paid out to DCU shareholders across specific performance milestones in three tranches (“DCU Transaction”) as follows: |
| a) | On closing of the SEA – 3,000,000 common shares (“Issuer Consideration Shares”) (issued subsequently) of Liquid; |
| b) | Issuer Additional Shares. |
●In January 2020, Jesse Sutton, a consultant of the Company and a director of Majesco, filed a lawsuit in the Supreme Court of British Columbia against the Company for approximately $400,000 for unpaid consulting fees, US$500,000 for the unpaid cash consideration for the purchase of 51% interest in Majesco, and a payment for the difference between US$500,000 and the value of the Company’s shares issued on the purchase of the 51% interest in Majesco. On August 31, 2020, a settlement agreement had been reached as described in 8(B) Significant Changes .
| · | Upon DCU achieving cumulative consolidated revenues of $4,750,000 before the fifth anniversary of the closing date (“DCU First Milepost”) – greater of: (i) 750,000 common shares of Liquid and (ii) 3,750,000 divided by a per share price of the greater of $1.25 or the five-day Volume Weighted Average Price of Liquid common shares immediately prior to the achievement of the First Milepost. |
| · | Upon DCU achieving cumulative consolidated revenues of $10,287,000 (“DCU Second Milepost”) after the DCU First Milepost but before the fifth anniversary of the closing date; – the greater of (i) 3,750,000 divided by (a) the greater of $1.25 or (b) the five-day Volume Weighted Average Price of Liquid common shares immediately prior to the achievement of the DCU First Milepost; and (ii) 5,625,000, less (A) 3,000,000 and (B) the number of Issuer Additional Shares issued on achievement of the First Milepost . |
●The Company held its annual shareholder meeting on February 4, 2020, at whichFor additional clarification, the Class III directors were electedminimum aggregate total (i) Issuer Consideration Shares and Davidson & Company LLP were appointed as the auditors for the ensuing year. Accordingly, the Company’s violation of the NASDAQ listing require regarding the holding of an annual shareholder meeting was remedied.
●In February 2020, a consultant of the Company filed a lawsuit in the Supreme Court of British Columbia against the Company in relation to the issuance of a share certificate for 59,706 common shares of the Company, 32,149 of which the consultant states is owing to him and general and special
damages in relation to the shares. In May 2020, the Company settled this lawsuit for $68,937 (US$50,000).
●In February 2020, the Company acquired a portfolio of assets for $4,464,885 (US$3,325,000). The acquired assets include the streaming platform Reelhouse, a self-distributed video content platform for independent filmmakers, and tools such as Slipstream, a Subscription Video on Demand (“SVOD”) service that focuses on curated action sports stories.
●In March 2020, the Company announced the launch of a new chapter of Ancient Aliens mobile game in partnership with A+E Networks.
●In March 2020, the Company announced the addition of Andrew Kaplan, a capital markets strategist, to its advisory board. The Company granted 25,000 stock options with an exercise price of US$2.55 and a term of five years to Mr. Kaplan in connection with his appointment.
●In April 2020, the Company announced the addition of Michael Timothy Doyle, a veteran interactive entertainment industry production executive, to its advisory board. The Company granted 25,000 stock options with an exercise price of US$2.55 and a term of five years to Mr. Doyle in connection with his appointment.
●In May 2020, the Company successfully launched the two-day New Faces New Voices 2020 Film Festival on the recently acquired ReelhouseLive platform.
●In July 2020, the Company announced they partnered with Invoke, the creators of Hootsuite, and Arkitek Creative to transform and advance the Company’s streaming platform.
●In August 2020, the Company partnered with Arcana Studios whereby Arcana will create animated content for the Company’s streaming platform.
●In August 2020, the Company retained Novus Merchant Partners Inc. (“Novus”) as its capital markets advisor. Novus will assist the Company in developing, implementing and executing on its business strategy of consolidating and vertically integrating intellectual property (IP) rights with production capabilities to leverage innovative technology as well as owned IP into full media franchises. As part of its mandate, Novus will act as financial advisor to the Company on strategic M&A transactions.
●In August 2020, the Company announced the ongoing addition of content to its Reelhouse Animation Playlist, the Company’s Video on Demand (“VOD”) service focusing on beautifully crafted animated stories. This latest growth to the Reelhouse content library comes via a partnership with Arcana Studios (“Arcana”), an entertainment company founded by Sean O’Reilly in 2004. In what is mutually envisioned to be the first step in a multi-stage partnership between the two companies, Arcana has agreed to contribute to the expanding Reelhouse animation playlist content library. Arcana is also continuing to build a pipeline of intellectual property that the Company aims to offer via its Reelhouse platform.
●In August 2020, the Company nominated mergers and acquisitions (M&A) strategist Andrew Kaplan to the Board of Waterproof Studios Inc. (“Waterproof”), in which the Company holds a 49% interest. Mr. Kaplan plans to lead a strategic review of the Waterproof asset with the aim to maximize capabilities and long-term value for Liquid shareholders. Pursuant to the shareholders’ agreement among Waterproof and its shareholders, the Company is entitled to determine three out of the six Board members of Waterproof. Andrew Kaplan replaced Charles Brezer, the Company’s President, on the Waterproof Board.
●In September 2020, the Company partnered with Polycade, the connected arcade platform invented by the son of Atari co-founder Nolan Bushnell, whereby the Company will make available all of its retro gaming titles on the Polycade Game Store which is launching in the fall of 2020.
●In October 2020, the Company announced that it had completed emulation of four retro video games, completing the commercialization process and advancing the monetization phase. The games -- Kwirk, Dirt Trax FX, Blast Works: Build, Trade, Destroy, and BlowOut -- are rolling out worldwide on popular PC platforms including Xbox and Steam. To make these titles rapidly available for gamers around the globe, the Company joined forces with Throwback Entertainment Inc. as publisher, expanding the existing relationship between the two companies. The Company will also publish Dirt Trax FX via its partnership with Polycade.
●In October, 2020, the Company announced that it had partnered with Eventival to offer a direct-to-consumer solution to help filmmakers monetize their creative works after a festival run and over the long term. In addition to empowering these creative professionals and sharing the Company’s digital platforms with hundreds of festivals around the world, the Company’s consumer audiences will gain access to a vastly expanded library of content, which is expected to drive new revenue through single ticket and subscription sales.
●In November, 2020, the Company announced the expansion of its Slipstream action-adventure sports content using the Unity real-time development platform. Unity allows independent filmmakers through Slipstream to attain widespread distribution across more than 20 popular global platforms such as Windows, Mac, iOS, Android, PlayStation, Xbox, Nintendo Switch, leading AR and VR platforms and Smart TVs. Slipstream’s new platform, allowing global distribution with access to major media devices, is transformative for the Company.
Financings
●In January 2020, the Company issued 57,125 common shares valued at $148,198 to settle debt of $190,706 resulting in a gain of $42,508 which is included in gain (loss) on debt settlements.
●In January 2020, the Company issued 11,764 common shares valued at $39,615 to a consultant of the Company for public relations services provided to the Company of which $33,058 of services were rendered during the year ended November 30, 2019 and was included in commitment to issues shares.
●In April 2020, the Company issued 50,103 common shares valued at $183,769 to settle debt of $180,294 resulting in a loss of $3,476 which is included in gain (loss) on debt settlements.
●In May 2020, the Company filed an F-3 registration statement in the United States which offers an indeterminate number of common shares, debt securities, subscription rights, warrants, and/or units of the Company for proceeds of up to US$25,000,000.
●In June 2020, the Company closed a registered direct offering, under its F-3 registration statement in the United States, by issuing 2,666,672 common shares of the Company at US$1.50 per common share for total proceeds of $5,353,203 (US$4,000,002). Concurrent with this offering, the Company issued to the investors 1,333,334 share purchase warrants exercisable for USD$1.88 per common share with a maturity date of June 9, 2025. In connection with these offerings, the Company paid legal fees of $409,200 (US$305,761), agent fees of $428,256 (US$320,000), and issued 213,333 agent warrants with a value of $338,5588 and an exercise price of $1.88 per common share with a maturity date of June 4, 2025
●In July 2020, the Company issued 29,536 shares valued at $60,000 to a consultant of the Company for advisory services provided to the Company.
●In September 2020, the Company issued 250,001 common shares valued at $482,272 in relation to the vesting of 250,001 restricted share units. As a result, the Company transferred $482,272 representing the fair value of the vested restricted stock units (“RSUs”) from reserves to share capital. On September 3, 2020, the Company granted 1,000,001 RSUs to certain directors, officers, and consultants of the Company which vest 25% on grant and 25% each six months thereafter. The granted RSUs convert to common shares of the Company upon vesting, accordingly, 250,001 common shares were issued upon grant.
●In November 2020, the Company issued 84,375 common shares valued at $176,769 to a consultant of the Company for services provided to the Company.
●During the year ended November 30, 2020, the Company:
oissued 515,000 units on the conversion of $961,186 (US$681,980) worth of net convertible debentures and 12,402 units on the conversion of $26,130 (US$18,605) worth of interest on the convertible debentures. As a result, the Company transferred $134,198 from reserves to share capital representing the proportionate balance of the equity component. Each unit comprised of one common share and one warrant with each warrant entitling the holder to acquire one common share of the Company for US$1.75 up to February 26, 2021.
oissued 493,111 common shares for total proceeds of $1,111,476(ii) Issuer Additional Shares issuable in connection with the exerciseachievement of 493,111 share purchase warrants at US$1.75 per warrant of which $104,139 was received duringboth the year ended November 30, 2019. As a result, the Company transferred $28,056 representing the fair value of the exercised warrants from reserves to share capital. First Milepost and Second Milepost is 5,625,000.
oissued 573,171 common shares for total proceeds of $907,036 in connection with the exercise of 573,171 share purchase warrants at US$1.20 per warrant.
| c) | The Company expended nil, $43,303 and $93,962 on the purchase of property, plant and equipment during the fiscal years ended November 30, 2021, 2020 and 2019, respectively. |
oreceived $574,457 for the exercise of 367,084 share purchase warrants with an exercise price of US$1.20 and an expiry date of August 30, 2020 which is included in commitment to issue shares. In December 2020, the shares were issued.
| d) | The Company expended $3,695,673, through the acquisition of IndieFlix, and $3,325,000 on the purchase of intangible assets during the fiscal year ended November 30, 2021, and 2020, respectively. The Company also expended $100,000 on the purchase of intangible assets for Majesco, its discontinued operation, during the fiscal year ended November 30, 2019. |
oissued 53,505 common shares for total proceeds of $196,427 in connection with the exercise of 53,505 stock options at US$2.55 per option. As a result, the Company transferred $144,245 representing the fair value of the exercised options from reserves to share capital.
Subsequent to the year ended November 30, 2020:
●On January 1, 2021, the Company appointed Ronald Thomson as its CEO to drive the growth of its evolving business. As President of global business development firm Cameron Thomson Group Ltd., Mr. Thomson has been building successful media/entertainment and tech companies for more than two decades from its offices in Toronto, London, Lake Como, Los Angeles and Taipei.
●The Company held its 2020 annual shareholder meeting on January 14, 2021, at which the Class II directors were elected and Davidson & Company LLP were appointed as the auditors for the ensuing year.
●The Company issued 497,251 common shares for total proceeds of $850,637 (US$668,293) in connection with: (1) the exercise of 367,084 share purchase warrants at US$1.20 per warrant for
proceeds of $560,934 (US$440,500) received during fiscal 2020; and (2) 130,167 share purchase warrants at US$1.75 per warrant for proceeds of $289,703 (US$227,792). The Company also issued 2,984 common shares in settlement of debt totalling $ 10,000 and 17,907 common shares for advisory services provided to the Company.
●The Company transferred 215,000 treasury shares to a creditor as full and final payment of its Forbearance Agreement.
●Waterproof commenced an action against the Company in which the Plaintiff claims that the Company misrepresented facts to Waterproof, inducing Waterproof to enter the Amended and Restated Shareholder Agreement (ARSA) with the Company. As a result, Waterproof claims that it has the right to purchase the Waterproof shareholdings from the Company at a fair market value as of May 17, 2019 in accordance with a calculation included in the ARSA. The Company disputes and denies this claim. The action is in its earliest stages and the Company has not had the opportunity to file a response.
●The Company extended the expiry date of 346,000 share purchase warrants with an exercise price of US$1.75 from February 26, 2021 to March 11, 2021 due the investors being subject to a trading blackout.
5.The Company expended $56,436 and $124,736 on the purchase of property, plant and equipment during the fiscal years ended November 30, 2020 and 2019, respectively. No amounts were expended during the fiscal year ended November 30, 2018.
6.The Company expended $4,464,885 on the purchase of intangible assets during the fiscal year ended November 30, 2020. The Company also expended $133,356 on the purchase of intangible assets for Majesco, its discontinued operation, during the fiscal year ended November 30, 2019. No amounts were expended during the the fiscal year ended November 30, 2018.
7.Capital expenditures that are planned for the fiscal year ending November 30, 2021 are in Canada and will be funded with cash on hand.
| e) | There have been no indications of public takeover offers by third parties in respect of the Company’s shares or by the Company in respect of other companies’ shares during the last and current fiscal year. |
| f) | The SEC maintains an internet site at http://www.sec.gov that contains reports and other information regarding companies, including the Company, that file electronically with the SEC. The Company's website is https://liquidmediagroup.co/. |
| B. | Business overview |
Liquid is a business solutions company empowering independent film and TV content creators to package, finance, deliver and monetize their intellectual property (IP) globally. Liquid’s four stage end-to-end solution will enable professional video creators to take their content from inception through the entire process to monetization. Liquid’s platform is expected to leverage sophisticated artificial intelligence (AI) and big data analytics technology, informed process structuring, financial risk reduction and funding, production best practices, together with monetization expertise to ensure recoupment and profitability of IP across diverse distribution. This will be accomplished through existing assets, recently completed acquisition of IndieFlix, iGEMS, and DCU, the proposed acquisition of Filmocracy, future acquisitions, and strategic partnerships including distribution agreements announced with Insight TV and dotstudioPRO, which bring total audience reach to nearly a billion households worldwide. In addition to its operations, the Company operates its business through direct and indirect subsidiaries of Liquid Canada, Liquid Media Production Funding Ltd. (“Liquid Production Funding”), Liquid Media Group (US), Inc. (“Liquid US”), IndieFlix., iGems and DCU.
Previously, significant portions of the Company’s shares or by the Company in respectbusiness consisted of other companies’ shares during the last and current fiscal year.
9.The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding companies, including the Company, that file electronically with the SEC. The Company’s website is https://liquidmediagroup.co/.
1.During the fiscal years ended November 30, 2020, November 30, 2019 and November 30, 2018, the Company’s primary business is aggregating mature gaming and film production service studios and creating a vertically integrated studio system for producing film, television, and gaming content from inspiration to distribution. distribution, and also exploitation of perceived opportunities in the gaming industry. With the adoption of its new business plan, the Company has decided to no longer pursue the gaming content industry and will focus on a business solution empowering independent film and TV content creators to package, finance, deliver and monetize their intellectual property globally.
2.On August 31, 2020,In May 2021, the Company agreedentered into a memorandum of understanding with InSightTV (“InSight”) following extensive discussions toward a content partnership, leveraging Insight’s 400M+ household reach in 53 countries. Under the proposed alliance, Insight, the leading millennial-focused global channel and content producer, will distribute select library content of the Company across their global distribution network. The companies would collaborate on the development of a new FAST (Free Advertising Supported TV) channel.
Over its five-year history, Insight has expanded to settle a lawsuitoperate six separate UHD (ultra-high definition) and HD linear channels across four continents, entering into partnerships with Jesse Sutton, the directorworld’s leading satellite and IP distribution providers to deliver content globally. It is anticipated that this alliance would further support the Company’s mission and vision, adding another series of Majesco, whereby Mr. Sutton agreed to settle $652,061 (US$500,000) payableopportunities for the acquisitionCompany’s IP creators, extending the content's lifecycle and expanding the Company’s audience in Europe as well as new markets overseas.
In October 2021, the Company entered into a strategic partnership with Slated, Inc. (“Slated”), further enhancing the Company’s analytic and optimization capabilities and four-phase solution engine, which is designed to drive sustainable growth for independent IP owners and producers.
Further strengthening the critical first phase of Majesco,the Company’s solution engine, the Company and Slated are partnering to bring objective analysis to producers and other creative professionals using data analytics to measure the strength of a production’s talent and producing team, the quality of the script or screener and to optimize the potential for financial returns. Additionally, Slated will be offering its newly launched Screening Analysis virtual test screening service, which helps filmmakers optimize their films in post-production and match completed films to the right distributors.
In November 2021, the Company announced its project intake procedures following an increase in demand for the Company’s four-phase solution engine to help drive content from inception through monetization. The boost in submissions follows the Company’s industry launch, star-studded “Big Splash'' gala and multiple panel presentations at the Toronto International Film Festival. These activities generated media coverage for the Company, including stories, coverage and interviews via Deadline Hollywood, Playback, Just Jared, E-Talk News, ET Canada, CTV’s “The Social” (Canada’s #1 daytime TV show), The Globe and Mail, People Magazine, Film Daily, Benzinga and more.
The Company’s project submission portal is now the principal way for all producers and content creators seeking to work with the Company to submit projects for financing, distribution and monetization. Whether a project is in the early stages and requires predictive analysis or production financing (Phases I and II) or is more advanced and needs digital asset management, distribution and monetization or discoverability (Phases III and IV), the submission portal enables each project to be matched to the appropriate phase of the Company’s solution engine.
In addition to its project submission portal, the Company has implemented its Phase I intelligence and analysis services portal, in partnership with Slated. The analysis service portal will help the Company determine which early-stage projects is ready to advance to Phase II and which projects need additional development or significant improvement before the Company can consider taking them on. Projects that are ready for Phase I will receive preferential pricing for the analysis bundle, which combines professional reviews of a screenplay, documentary script or screener with data science, then delivers detailed notes and financial projections. Projects that are further along in the production lifecycle will be directed to our Phase III and IV services.”
The critically important first phase of the Company’s solution engine determines the strength of a project’s team, analyzes the potential of scripts and screenplays, conducts virtual test screenings for narratives and documentaries, and provides financial analysis. The full analysis process combines data analytics and professional review. A confidential project page is created for each production and its creative team, then shared with $452,772the Company’s executives and project parties. Ultimately, this complete roadmap shows producers where their projects need to go, with key elements including:
Script reviews - undertaken by industry veterans who have read hundreds of scripts for agencies, management companies and production companies – including Creative Artists Agency, United Talent Agency, Paradigm Talent Agency, Universal, Paramount, Columbia Pictures, Warner Brothers, Metro-Goldwyn-Mayer, Walt Disney Pictures, 20th Century Fox, DreamWorks, Lionsgate and more.
Screening analysis - offering filmmakers and documentary producers early insight into how their production could fare with festivals, sales companies, distributors, audiences and critics. Team members have a proven track record in consulting fees owedrecommending independent gems that went on to Mr. Sutton,secure financing, packaging, sales and distribution as well as audience and critical acclaim after receiving high script and screening scores through the methodology the Company has adopted. Reviewers include those that have won Emmys for $260,824 (US$200,000)producing, written TV shows for major streamers and worked at almost every major studio.
Financial analysis - providing a statistical-based projection for each project by analyzing performance factors of more than 13,000 released films. Numbers are run like the big studios, then filmmakers and producers can make adjustments based on how combinations of talent and financial plans will impact their production, ultimately understanding how much revenue they could make.
This film slate will also be the first opportunity for the Company to unveil its professional blockchain approach, designed to enable independent producers to participate in cashthe benefits of blockchain including community engagement and owner-controlled distribution and monetization opportunities of blockchain technology. In development with Eluvio Content Fabric (“Eluvio”), this approach leverages tokenization and NFTs as value-adds for filmmakers across the content lifecycle.
These films are the first to successfully complete the first two phases of the Company’s four-phase solution engine, which is designed to drive quality programming to the finish line and to screens around the world from any stage of the production process. The Company is working with Eluvio to build a framework for independent content creators utilizing Eluvio’s global blockchain network for video, to support the evolving needs of independent producers and help them leverage transformative opportunities.”
The Eluvio is an advanced, open protocol blockchain network purpose-built for owner-controlled storage, distribution, and monetization of digital content at scale. It provides live and file-based content publishing, transcoding, packaging, sequencing, dynamic and static distribution, and minting of derivative NFTs, all backed by blockchain contracts providing proof of ownership and access control. Eluvio also provides publishers with the ability for their consumers to create secure and easy-to-use digital media wallets that can act as a digital vault and enable collectors to seamlessly purchase NFTs via credit cards or cryptocurrencies.
Eluvio’s blockchain platform is also notable for its low environmental impact. Through a novel compositional and just-in-time protocol, Eluvio does not make file copies and dramatically reduces the storage, network requirements, and latencies of traditional digital distribution systems; Eluvio’s blockchain avoids the computational energy consumption, and costs, of proof-of-work blockchains through its efficient proof-of-authority consensus and seamless combination of on and off chain transactions.
Eluvio is transforming the management, distribution, and economics of premium digital content. Eluvio is a utility blockchain network for owner-controlled storage, distribution, and monetization of digital content at scale. It provides live and file-based content publishing, transcoding, packaging, sequencing, and dynamic and static distribution, and minting of derivative NFTs for all ranges of content experiences. Customers of Eluvio include FOX, MGM Studios, SONY Pictures, and others. Eluvio LIVE, powered by the Eluvio, provides ticketed streaming events and media marketplaces from global artists including the Black Eyed Peas, Rita Ora, and others. Eluvio is led by Emmy Award-winning technologists, Michelle Munson and Serban Simu, founders and inventors of Aspera, a pioneer in digital video transport technology that was acquired by IBM, and a core team of innovators. Based in Berkeley, California, Eluvio has received numerous industry awards including the prestigious 2020 Engineering Excellence Award by the Hollywood.
In January 2022, the Company announced the launch of its first blockchain film streaming with a slate of digital panel presentations during the hybrid 2022 Sundance Film Festival (“Sundance”). Sundance is the largest and one of the most prestigious annual independent film festival in the United States.
Hosted via the Eluvio-Liquid Media blockchain framework, the original documentary film “Angst,” will be streamed on-demand for a limited time via Eluvio’s and the returnCompany’s next-generation supply chain, following the festival. This global screening and NFT event will engage with global audiences. It will also provide blockchain-based community access to Angst's “Creative Coping Toolkit,” which is designed to open up conversation and provide resources to help address mental health challenges in our communities.
To introduce the “Angst” streaming, the Company hosted a virtual panel conversation during Sundance, during which IndieFlix CEO Scilla Andreen discussed the documentary and its impact, and explained the important contents of the 51% ownershipAngst toolkit, which purchasers will access via NFT Tokens.
In tandem, the Company hosted a panel in partnership with DEADLINE during Sundance, addressing the future of Majesco. Upon signingentertainment on the Blockchain, NFTs for the entertainment industry, and the possibilities this technology brings to independent producers. Key panelists include Eluvio founder and CEO Michelle Munson, Greenfish.io Managing Director Tracie Mitchell, IndieFlix CEO Scilla Andreen, and Ron Thomson, the Company’s CEO.
IndieFlix Group, Inc.
On September 22, 2021, the Company acquired IndieFlix which is a global subscription video-on-demand streaming service focused on content with a purpose. IndieFlix has evolved its initial offering, by expanding into the “Live” social impact space, and transforming into an ‘edutainment’ company with a foundation to further support its mission and vision. CEO and Co-founder Scilla Andreen is an award-winning Producer, Director, Costume Designer and author. IndieFlix will play an important role in stage four of the Company’s business solution engine as the Company supports independents towards IP monetization in a shifting landscape. In recent years, IndieFlix expanded, adding B2B to their foundational B2C service, and is now established in distributing social impact-based film programming and curriculum to an array of audiences and markets - including corporate, government, education and others worldwide.
Per the acquisition agreement, the Company acquired 100% of the outstanding shares of an paid off certain promissory notes of IndieFlix for up to 2,500,000 common shares of the Company to be issued as follows: (i) 500,000 common shares on closing of the agreement (499,996 issued); (ii) 500,000 common shares upon IndieFlix achieving cumulative revenue of $4,521,630 between the Majesco operations were considered discontinuedclosing date and the balances were reclassifiedseventh anniversary of the closing date (“First Milepost”); (iii) 500,000 common shares upon IndieFlix achieving cumulative revenue of $9,244,802 between the First Milepost and the seventh anniversary of the closing date (“Second Milepost”); (iv) 500,000 common shares upon IndieFlix achieving cumulative revenue of $17,730,216 between the Second Milepost and the seventh anniversary of the closing date (“Third Milepost”); and (v) 500,000, or such lesser number based on a pro rata amount of IndieFlix’s revenue recognized relative to the Fourth Milepost, upon IndieFlix achieving cumulative revenue of $33,371,818 between the Third Milepost and the seventh anniversary of the closing date (“Fourth Milepost”).
IndieFlix aims to make life better through the power and enjoyment of film, driving community, conversation and change. Through their On-Demand Streaming and LiveTV channels, IndieFlix showcases classic and contemporary features, shorts and documentaries from around the world, in an Aladdin’s Cave of thought-provoking well-known and off-the-radar content. IndieFlix works directly with young up-and-coming to seasoned film makers to give them wide distribution where they are paid for every minute watched.
IndieFlix Education makes and distributes social impact films that address common individual and societal issues, from anxiety to social media addiction, cyber-bullying and school and workplace sexual harassment. These films cover difficult topics, but include empowering strategies and practical tips on how to move forward. IndieFlix screens their films in actual and virtual community environments, with moderated discussion and Q&A, so that reflection and learning can be grounded after each screening.
IndieFlix Festivals hosts virtual Independent Film Festivals around the world, from showcasing all films and events in the program, to handling ticket sales and streaming the films and discussion live or on- demand.
The IndieFlix Foundation is a 501c3 that operates at arms-length from IndieFlix and supports the making of education films, as such. well as support to provide free screenings and access to underserved communities.
In October 2021, the Company announced a partnership between the IndieFlix Foundation, the California Department of Education (“CDE”), the Department of Health Care Services’ (DHCS) CalHOPE program, and Blue Shield of California’s BlueSky initiative. IndieFlix will provide all execution and fulfillment services under the agreement and will receive all revenue net of a 5% fee retained by IndieFlix Foundation. The partnership, announced by CDE State Superintendent of Public Instruction Tony Thurmond, focuses on IndieFlix’s edutainment content and centers around the film “Angst: Building Resilience.” The film-based mental health support program and accompanying easy-to-use curriculum is available to all public middle and high schools across the state of California in a new effort to help address the increasing mental health challenges faced by students.
For additional information aboutThe goal of Angst is to raise awareness, connect students with support, and provide hope and coping strategies. The film features interviews with children and young adults discussing the discontinued operationsimpact anxiety has had on their lives during the pandemic. Angst also features a special interview with Michael Phelps, who has courageously shared his own mental health challenges and helped catapult the important conversation into the mainstream. The IndieFlix original film, produced by IndieFlix CEO Scilla Andreen and producer Karin Gornick, commenced screening in mid-October. It is ultimately expected to reach more than three million students across the state in 2021–22.
iGEMS TV, Inc.
On December 14, 2021, the Company acquired iGEMS which provides a comprehensive content recommendation engine and adds another key asset in stage IV of Majesco, referthe Company’s four-phase business engine, a solution to Note 20help professional film, television and video creators/producers outside the major studio system achieve sustainable growth.
Per the acquisition agreement, the Company acquired 100% of the outstanding shares of iGEMS for up to 850,000 common shares of the Company to be issued as follows: (i) 212,500 common shares on closing of the agreement (issued); (ii) 212,500 common shares upon iGEMS achieving cumulative revenue of $473,577 between the closing date and the sixth anniversary of the closing date (“First Milepost”); (iii) 500,000 common shares upon iGEMS achieving cumulative revenue of $1,927,087 between the First Milepost and the sixth anniversary of the closing date (“Second Milepost”); and (iv) 212,500, or such lesser number based on a pro rata amount of iGEMS revenue recognized relative to the Third Milepost, upon iGEMS achieving cumulative revenue of $7,012,166 between the Third Milepost and the sixth anniversary of the closing date (“Third Milepost”).
iGEMS uses a unique blend of machine learning anchored by human curation to help audiences discover engaging movies, TV series and TV programs to watch, and shows them where they can be viewed. This includes traditional genres, trending carousels and recommendations for programming not found in the audited consolidated financial statementsmassive libraries of the larger streaming platforms. Additionally, movie and TV collections are curated by a trusted guide especially for iGEMS users, and they recommend iGEMS on Filmocracy as well as titles playing exclusively on niche platforms, including projects still on the film festival circuit.
The iGEMS platform offers advanced search tools, allowing users to search by genre, category, emoji or mood. Audiences can select multiple age and genre categories to find the right fit for their movie and series binge. Viewers can also have dashboards with profiles to track their watchlists, ratings and reviews, while sharing with other fans.
In 2020, iGEMSpro was introduced as a solution for filmmakers, film festivals and industry professionals, offering educational resources, courses, industry reports and aggregated news, video and podcast content. iGEMS’s Film Festival Mastery course helps filmmakers navigate the film festival circuit; and iGEMS’s the Mine provides an ongoing blog report, taking a deeper dive into the independent film sector.
The iGEMSpro Directory was just recently launched, providing filmmakers with sales opportunities, and serves as a platform of discovery for acquisitions executives, as well as festival programmers. Highlights from the Directory will be tracked and eventually find their way to the film fans on the iGEMS side.
With the growing volume of movie and TV series options, and the explosion of digital streaming platforms, iGEMS has created a comprehensive recommendation engine on the market. Human curation, word of mouth and machine learning combine to help audiences discover what to watch, and where they can find it. They put out a weekly newsletter with iGEMSelections, sent to over 5,000 subscribers. iGEMSpro provides resources to the independent film space, aggregating news articles, podcasts and videos, while providing reports, affiliate discounts and online courses to support independent filmmakers. The iGEMSpro Directory is a sales platform for independent films to generate sales in the international marketplace.
Digital Cinema United Holdings Ltd.
On February 11, 2022, the Company entered into a definitive agreement to acquire DCU. Under the terms of the definitive agreement, the Company will acquire DCU for $11.25 Million, payable in common shares of the Company, which are scheduled to be paid out to DCU investors as follows:
| a. | On closing – 3,000,000 common shares (“Issuer Consideration Shares”) (issued subsequently) of Liquid; |
| b. | Issuer Additional Shares. |
| · | Upon DCU achieving cumulative consolidated revenues of $4,750,000 before the fifth anniversary of the closing date (“DCU First Milepost”) – greater of: (i) 750,000 common shares of Liquid and (ii) 3,750,000 divided by a per share price of the greater of $1.25 or the five-day Volume Weighted Average Price of Liquid common shares immediately prior to the achievement of the First Milepost. |
| · | Upon DCU achieving cumulative consolidated revenues of $10,287,000 (“DCU Second Milepost”) after the DCU First Milepost but before the fifth anniversary of the closing date; – the greater of (i) 3,750,000 divided by (a) the greater of $1.25 or (b) the five-day Volume Weighted Average Price of Liquid common shares immediately prior to the achievement of the DCU First Milepost;and (ii) 5,625,000, less (A) 3,000,000 and (B) the number of Issuer Additional Shares issued on achievement of the First Milepost. |
In the event of an adverse delisting event which is required by, or is a result of the failure of the Company to meet the continued listing requirements of, the exchange on which the Company’s common shares are listed, the DCU shareholders will be entitled to re-acquire the DCU Shares from the Company. The consideration to be paid by the DCU Shareholders to the Company for the year ended November 30, 2020.re-acquisition of such DCU Shares will be equal to (i) the Issuer Consideration Shares and Issuer Additional Shares, if any, paid to the DCU Shareholders; and (ii) a cash payment equal to the aggregate total amount invested or advanced by the Company in or to DCU plus interest.
The following discussion is directed atclosing occurred on March 7, 2022, and the continuing operationsDCU acquisition will drive phase III of the Company, which excludes Majesco asCompany’s four-phase business solution engine spanning the end-to-end creative process from inception to monetization.
DCU is a resultglobal provider of technical content services for theatrical, home entertainment, and digital distribution platforms, with operations in Los Angeles, London, Malta, Prague, and South Africa. DCU supports the distribution of content for Hollywood majors, independent studios, event cinema distributors, and renowned producers and content owners worldwide through DCP Production and DCP Delivery services of feature films and movie trailers to all cinemas in North America, Europe, Middle East, Africa, Australia, and New Zealand. DCU also provides International Servicing with Localization worldwide and direct delivery to Video-On-Demand (VOD) streaming platforms. DCU operates TPN (Trusted Partner Network) certified facilities across all of its regions.
DCU’s supply chain provides technical services and solutions that bring picture and audio to life in any environment, from movie theaters, airplanes and broadcast television all the way through to streaming and other VOD platforms. The creation of file formats, quality control, mastering, packaging and delivery, distribution and metadata management are some of the settlement described above.key areas in which DCU excels and helps content owners get their life’s work to audiences around the world. The resultscollaborative process between DCU and its clients allows producers and sales companies to take comfort in knowing their projects are in capable hands, trusted by over 700 distributors worldwide.
DCU will continue to provide its popular digital end-to-end supply chain services and tools to over 700 clients across North America, Latin America, Australia, New Zealand, Europe, the Middle East, and Africa. In parallel, DCU will play an important role in stage III of the Company aside from the discontinued operations are reflectiveCompany’s business solution engine, which covers integrated digital asset management of the operationscontent for IP owners and creators of the Company without Majesco.all sizes.
3.Streaming Platforms
In production services, DCU works with IP owners and producers to create the primary content source files that act as the fundamental backbone for the global deliverables of distribution.
ReelhouseThe next stage in the technology supply chain covers global servicing, as DCU collaborates with international sales agents to ensure delivery schedules comply with distributor expectations before starting the process of asset creation for delivery. DCU provides Digital Cinema Package (DCP) versioning with full localization, home video materials, broadcast deliverables, and all digital distribution files complying with up-to-date specification sheets for all different content platforms. The DCP file format is the name given to the collection of digital files sent to a cinema or streaming platform.
DCU distribution leverages a trusted global network featuring eDelivery to handle distribution across 40+ countries in North America, Latin America, Australia, New Zealand, Europe, the Middle East and Africa. This link in the supply chain enables studios, mini-majors and majors, to consolidate distribution across various territories via a widespread network while simultaneously bringing local DCP service solutions to independent distributors from within each territory.
The final piece of DCU’s content supply chain is comprised of digital and downstream distribution services. DCU’s home entertainment division has authored, encoded, and delivered thousands of DVD, Blu-ray, and VOD titles for clients to major retail chains as well as iTunes, Amazon, Google Play, Hulu, and many other digital platforms.
Projektor
Projektor, formerly Reelhouse is an online video community that provides filmmakers complete control to self-distribute content directly to their viewers. Filmmakers access the latest monetization, social, and showcasing features, which in turn engage viewers in what ReelhouseProjektor is setting as the new standard for online viewing experiences.
Reelhouse’sProjektor’s distribution platform connects viewers and creators directly, unlocking unprecedented film experiences.
Rather than a traditional retailer treating and delivering film as a commodity, ReelhouseProjektor specializes in the future needs of the digital film consumer by providing a customizable service for filmmakers. Interactive components, creator posts, physical/digital merchandising, extras etc. can all be controlled and bundled in various ways by the film creators themselves.
Such features not only create a more compelling storytelling experience, but also allows the filmmaker to increase the value of both EST and VOD in addition to unlocking new monetization streams. As the vibrant destination site of endless filmmakers distributing their work within this marketplace, Reelhouse’sProjektor’s viewer community allows for a meaningful discovery network.
Follow your favorite friends, curators or creators to discover new stories. Follow a new film to stay updated as more content becomes available before or after the actual film is released.Slipstream
Slipstream
is the Company’s Subscription Video on Demand (“SVOD”) service offering over 400 adventure Outdoor Films. The Netflix for adventure outdoor films. TheSlipstream site includes hundreds of action sports films with categories such as surfing, snow sports, rock climbing, kayaking, mountain biking, running, environmental documentaries and festival winners.
Slipstream is Liquid Subscription Videoallows viewers access to a growing library of adventure films curated to their taste on Demand (“SVOD”) product offering over 400 adventure Outdoor Films.mobile, tablet, PC and Smart TV. Films are categorized by interest, including Surfing, Snow sports, Rock Climbing, Kayaking, Mountain Biking, Running, Environmental Documentaries and Festival Winners. Slipstream also features ‘top film picks’ playlists from leaders in the outdoor space like Hazel Findlay, Semi Rad, Seb Montaz, JJ Wessels and Xavier de le Rue.
4.Letter of Intent – Filmocracy, Inc.
Gaming Content Creation
On June 7, 2021, the Company entered into a Letter of Intent with Filmocracy for the Company to acquire 100% of the issued and Distribution Businessoutstanding shares of Filmocracy by issuing up to 1,250,000 common shares of the Company to the shareholders of Filmocracy. 25% of the consideration shares will be issued to the shareholders of Filmocracy on closing of the proposed transaction while the remainder will be issued based on Filmocracy achieving certain revenue targets over a six year period (“Filmocracy Transaction”). The Company and Filmocracy are currently negotiating the terms for the definitive agreement.
Our primary business is producing gaming, televisionIn connection with the proposed Filmocracy Transaction, on September 17, 2021, and film content from inspirationsubsequently extended on December 17, 2021 and February 15, 2022, the Company entered into an agreement with Filmocracy for $608,735 whereby the Company will advance $608,735 to distribution, which we intend to grow primarily throughFilmocracy as follows: (1) $244,292 upon the aggregation of gaming, television and film content to create a vertically-integrated studio system. Our strategy involves partnering with, acquiring (and/or acquiring interests in) companies that have demonstrated success in our industry. We believe that imaginative video product is essential to success. To implement that strategy, we maintain a 49% interest in Waterproof Studios Inc. (“Waterproof”), an animation studio based in Vancouver, British Columbia, that has demonstrated success in providing content and animation to large studios. This strategic approach allows Waterproof and, by extension, us to avoid the substantial costs of wholly creating intellectual property, providing advertising and production. Instead, we provide segments of films for
studios that incur those costs. We believe that entering and participating in the film industry in this manner allows us to build our infrastructure while preserving capital, generating revenue and developing the skills necessary to develop films.
Additionally, we develop games, including console and desktop downloadable games as well as mobile games, for various platforms, including Apple’s iOS and the Android operating systems. Our strategy for building this part of our business focuses on partnering with or obtaining substantial interests in companies that have demonstrated the ability to successfully create games with a substantial audience. By leveraging these partnerships and acquisitions, we believe that we can more quickly and successfully enter the market and develop profitability, which we will believe will also enable us to finance future acquisitions and, thereby, acquire or organically develop the skills to create successful games in-house and capture moredate of the profits generated fromagreement (advanced September 21, 2021); (2) $190,594 on the games we develop.
We also intend to developfirst month anniversary (advanced October 25, 2021); and launch an online direct-to-consumer distribution platform(3) $173,849 on the second month anniversary (not yet advanced). The agreement bears interest at 6% per annum, is due on the earlier of April 30, 2022 or 30 days following the termination of the Filmocracy Transaction, and is secured by a general security agreement over certain assets. In the event that would both allow us to bring our portfolio of content to market independently and serve as a platform for other content creators (whether filmmakers, makers of video games or otherwise) to self-distribute their content directly to consumers. Through this platform, filmmakers wouldthe proposed transaction does not close, all amounts outstanding shall bear interest at 24% per annum. No assurance can be given that the Company will be able to accesscomplete the latest monetization, social and showcasing features, which would in turn engage viewers in online viewing experiences.
We are working to forge relationships with an extensive network of industry partners to integrate cutting-edge technology into our portfolio of gaming and film products. Initial growth efforts in this regard are intended to take steps to begin consolidating the city of Vancouver’s fragmented film and entertainment market, where more than $3.4 billion is spent annually on film and television production services. We have signed a licensing agreement to enable us to move digital content production into the cloud.
5.SeasonalityFilmocracy Transaction.
Liquid’sSeasonality
The Company’s operating results for any period are subject to cyclical or season fluctuations and dependent on factors such as the number and timing of film and television programs delivered, the budgets and financing cycles of broadcasters, overall demand for content, general advertising revenues and retail cycles associated with consumer spending activity, and the timing and level of success achieved by merchandise licencedlicensed and royalties paid in respect thereof, none of which can be predicted with certainty. Consequently, Liquid’sthe Company’s results from operations may fluctuate materially from period-to-period and the results of any one period are not necessarily indicative of results for future periods
6.The Company makes no statements concerning its competitive position.
C.Organizational structure.structure
The following is a list of the Company’s significant subsidiaries as of November 30, 2020:2021:
| ● | Liquid Media Group (Canada) Ltd. |
| - | Incorporated in British Columbia, Canada; |
| - | 100% owned by the Company. |
| ● | Liquid Media Production Funding Ltd. |
| - | Incorporated in Ontario, Canada; |
| - | 100% owned by the Company. |
| ● | Liquid Media Group (US), Inc. |
| - | Incorporated in Delaware |
| - | 100% owned by the Company |
| ● | IndieFlix Group, Inc. |
| - | Incorporated in Delaware |
| - | 100% owned by Liquid Media Group (US), Inc. |
| ● | Race Doc, LLC |
| - | Washington limited liability company |
| - | 100% owned by IndieFlix Group, Inc. |
●Liquid Media Group (Canada) Ltd. (“Liquid Canada”)
-Incorporated in British Columbia, Canada;
-100% owned by the Company; and
-Principal operating subsidiary of the Company.
D.Property, plant and equipment.equipment
The Company’s head office is located at #202, 5626 Larch Street,67 East 5th Avenue, Vancouver, BC, V6M 4E1 and is rented on a month-to-month basis.4E1.
Item 4A. – Unresolved Staff Comments
None.
Item 5. – Operating and Financial Review and Prospects
| A. | Operating results. |
TheInformation regarding the Company’s primary business is aggregating mature production service studios and creating a vertically integrated studio systemoperating results for producing film, television, and gaming content from inspiration to distribution.
During the yearyears ended November 30, 2018, pursuant2021 and 2020, is incorporated by reference to the closing of the Transaction, the Company underwent a fundamental change in business from beverage co-packingCompany’s Management’s Discussion and distributionAnalysis incorporated by reference to filmExhibits 15.2 and gaming content production and distribution.15.3.
| B. | Liquidity and capital resources. |
Overall Performance - Fiscal Year Ended November 30, 2020
DuringInformation regarding the yearCompany’s liquidity and capital resources for the years ended November 30, 2021 and 2020, is incorporated by reference to the Company’s primary focus was on (1) developing relationships through which the Company could expand its gamingManagement’s Discussion and film content, (2) acquiring a portfolio of streaming platforms,Analysis incorporated by reference to Exhibits 15.2 and (3) advancing and improving the acquired streaming platforms to allow for more robust content.
Gross Profit (Loss)
Gross profit (loss) decreased by $1,094,579 to $(715,867) for the year ended November 30, 2020 from $(1,810,446) for the comparable period in 2019. The decrease in gross loss is attributable to the Company writing off one license agreement at the end of fiscal 2019 and another during the first quarter of 2020.
Operating Expenses
For the year ended November 30, 2020, operating expenses increased by $2,043,100 from $5,501,522 in the year ended November 30, 2019 to $7,544,622 in the year ended November 30, 2020 primarily as a result of:15.3.
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Other Income (Expenses)
The following occurred during the year ended November 30, 2020 as compared to the year ended November 30, 2019:
●The Company recorded a decrease in the share of profit of equity investment of $195,726 from its investment in Waterproof due to the loss of significant control on March 1, 2019.
●The Company recorded a decrease in the write-off of licenses of $386,849 due to management deciding to no longer proceed with an existing license agreement.
●The Company recorded a decrease in project investigation of $192,601 in relation to the Arrangement between the Company and Liquid Canada during fiscal 2018. Fiscal 2019 included some additional costs associated with the legacy beverage business.
●The Company recorded an increase in gain on derivative liability of $1,551,796 due to the derivative liabilities being eliminated at the end of 2020 Q2.
●The Company recorded an increase in the gain on settlement of debt of $137,519 in relation to the settling of various debt through the issuance of the Company’s common shares, cash, and investment during the current period as compared to the settlements recorded in the comparative period.
●The Company recorded an increase in the unrealized gains on equity instruments of $1,429,043 relating to the revaluation of the Company’s investment in Waterproof at the end of the current year.
Overall Performance - Fiscal Year Ended November 30, 2019
During the year ended November 30, 2019, the Company’s primary focus was securing financing through the issuance of convertible debentures and on developing relationships through which the Company could expand its current gaming content.
Gross Profit (Loss)
Gross profit (loss) decreased by $1,485,200 to $(1,810,446) for the year ended November 30, 2019 from $(603,718) for the comparable period in 2018. The decrease in gross profit is attributable to: (1) lower sales earned in Majesco; and (2) the Company entering into license agreements for video games and platforms during the fourth quarter of fiscal 2018, which are being amortized over the term of the agreements.
Operating Expenses
For the year ended November 30, 2019, operating expenses increased by $3,724,716 from $1,766,806 in the year ended November 30, 2018 to $5,501,522 in the year ended November 30, 2019 primarily as a result of:
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Other Income (Expenses)
The following occurred during the year ended November 30, 2019 as compared to the year ended November 30, 2018:
●The Company recorded an increase in the share of profit of equity investment of $315,380 from its investment in Waterproof.
●The Company recorded a decrease in the write-off of associate of $310,484 as the Company decided to write-off its investment in Household Pests during fiscal 2018. There were no write-offs during fiscal 2019.
●The Company recorded an increase in the write-off of licenses of $717,125 as the Company decided not to proceed with the license with World of Wireless UK Limited. There were no write-offs during fiscal 2018.
●The Company recorded a decrease in listing expenses of $4,130,557 in relation to the Arrangement between the Company and Liquid Canada during fiscal 2018.
●The Company recorded a decrease in project investigation of $166,989 in relation to the Arrangement between the Company and Liquid Canada during fiscal 2018. Fiscal 2019 included some additional costs associated with the legacy beverage business.
●The Company recorded a decrease in derivative liability – warrants of $1,557,086 as no new derivatives were setup in fiscal 2019.
●The Company recorded a decrease in gain on derivative liability of $1,479,847 due to the revaluation of the derivative liabilities at the end of the fiscal 2019.
●The Company recorded an increase in the gain on settlement of debt of $308,157 in relation to the settling of various debt through the issuance of the Company’s common shares during the fiscal 2019 as compared to the settlements recorded in fiscal 2018.
●The Company recorded an increase in the unrealized gains on equity instruments of $953,961 relating to the revaluation of the Company’s investment in Waterproof in fiscal 2019. No revaluation was done in fiscal 2018 as the investment was previously held as an equity investment.
●The Company recorded an increase in the allowance for credit loss of $145,431 as management determined it was prudent to allow for a portion of the loans receivable in fiscal 2019. No allowance was recorded in fiscal 2018.
B.Liquidity and Capital Resources.
Fiscal Year Ended November 30, 2020
As at November 30, 2020, the Company has current assets of $1,470,630 and current liabilities of $2,464,255, which results in working capital deficit of $993,625 (2019 – working capital of $544,349).
The Company does not have adequate operating revenue to finance its existing obligations and therefore must continue to rely on external financing to generate capital to maintain its capacity to meet working capital requirements. The Company has relied on debt and equity raises to finance its operating activities since incorporation. The Company intends to continue to rely on debt and the issuance of shares to finance its operations. However, there is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company.
Cash Flows
The table below sets forth a summary of cash flow activity and should be read in conjunction with the Company’s cash flow statements:
| Year Ended November 30, | |
| 2020 | 2019 |
| $ | $ |
Cash flows used in operating activities | (6,138,396) | (4,026,634) |
Cash flows used in investing activities | (3,857,154) | (213,702) |
Cash flows provided by financing activities | 6,120,167 | 4,456,019 |
Effect of foreign exchange on cash | (7,045) | 44,391 |
Increase (decrease) in cash during the year | (3,882,428) | 260,074 |
Cash, beginning of period | 4,587,405 | 4,327,331 |
Cash, end of period | 704,977 | 4,587,405 |
The cash flow used in operating activities for year ended November 30, 2020 increased by $2,111,762 compared to the comparative year. The use of cash flows from operating activities represents the effect on cash flows from net losses adjusted for items not affecting cash, principally: accrued interest income and expenses, amortization and accretion, share-based compensation expense, changes in the value of derivatives, gains and losses on the settlement of debt, unrealized foreign exchange, the share of profit of its equity investment, the
unrealized gains on the revaluation of equity instruments, and the write off of various items, in addition to net changes in non-cash balances relating to operations.
Cash used by investing activities for year ended November 30, 2020 increased by $3,643,452 compared to the comparative year mostly due to the Company acquiring and developing a portfolio of assets including certain streaming platforms for $4,464,885 (US$3,325,000).
Cash provided by financing activities for year ended November 30, 2020 increased by $1,664,148 compared to the comparative year mostly due to the Company closing its registered direct offering for total proceeds of $5,353,203 (US$4,000,002) and receiving funds from the exercise of options and warrants during the current period. The comparative period included a private placement offering of unsecured convertible debentures of $3,502,793.
Fiscal Year Ended November 30, 2019
As at November 30, 2019, the Company has current assets of $6,349,663 and current liabilities of $5,805,314, which results in working capital of $544,349 (2018 - $710,406).
The Company does not have adequate operating revenue to finance its existing obligations and therefore must continue to rely on external financing to generate capital to maintain its capacity to meet working capital requirements. The Company has relied on debt and equity raises to finance its operating activities since incorporation. The Company intends to continue to rely on debt and the issuance of shares to finance its operations. However, there is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company.
Cash Flows
The table below sets forth a summary of cash flow activity and should be read in conjunction with the Company’s cash flow statements:
| Year ended November 30, | |
| 2019 | 2018 |
| $ | $ |
Cash inflows (outflows) used in operating activities | (4,026,634) | 326,256 |
Cash flows used in investing activities | (213,702) | (138,262) |
Cash flows provided by financing activities | 4,456,019 | 3,994,886 |
Effect of foreign exchange on cash | 44,391 | 90,144 |
Increase in cash during the year | 260,074 | 4,273,024 |
Cash, beginning of year | 4,327,331 | 54,307 |
Cash, end of year | 4,587,405 | 4,327,331 |
The cash flow used in operating activities increased by $4,352,890 to $(4,026,634) for the year ended November 30, 2019 from $326,256 compared to the comparative year. The decline in cash flow from operating activities represents the effect on cash flows from net losses adjusted for items not affecting cash, principally: accrued interest income and expenses, amortization and accretion, share-based compensation expense, changes in the value of derivatives, gains and losses on the settlement of debt, unrealized foreign exchange, the share of profit of its equity investment, the unrealized gains on the revaluation of equity instruments, and the write off of various items, in addition to net changes in non-cash balances relating to operations.
Cash used by investing activities for year ended November 30, 2019 decreased by $75,440 compared to the comparative year mostly due to the Company receiving cash from the Arrangement between the Company and Liquid Canada during fiscal 2018.
Cash provided by financing activities for year ended November 30, 2019 improved by $461,133 compared to the comparative year. During the year ended November 30, 2019, the financing activities mostly increased because the Company closed its private placement offering of unsecured convertible debentures by raising $3,502,793, received loan proceeds of $812,933, and raised $368,617 from the exercise of warrants. The comparative year included the closing of a private placement for $4,157,760, raising $167,500 in loan proceeds, and raising $156,615 from the exercise of warrants.
Other sources of financing are more fully described in the consolidated financial statements appearing in “Item 18 – Financial Statements” of this Annual Report.
The Company generally maintains cash or cash equivalents in Canadian and U.S. funds and does not use financial instruments for hedging purposes.
The Company has no material commitments for capital expenditures in the fiscal year ending November 30, 2020.
C.Research and development, patents and licenses, etc.
The Company does not have a formal research and development program, however, the Company has incurred research and development costs on its acquired streaming platforms induring fiscal 2020 . The Company develops its video games as2021 and when it sees fit2020 by working with existing staff and outside consultants, where appropriate.
We have prepared two confirmatory assignments for recordinationrecordation with the US Patent and Trademark Office for the Reelhouse Trademark.
| D. | Trend Information. |
During the fiscal years ended November 30, 2016 and 2017, the Company was focused on its film content and distribution business. In fiscal 2018, through the acquisition of Majesco, the Company added gaming content and distribution to its business. In 2020, the Company purchased a video distribution platform that connects viewers and creators directly.
The Company believesis unaware of any known trends, uncertainties, demand, comment or events that growing demand inare reasonably likely to have a material effect on the gaming content production and distribution business, as well as the accelerated industry adoption of cloud-based gaming, represent growth opportunities for the Company and its shareholders. Company.
E.Off-balance sheet arrangements.
| E. | Critical Accounting Estimates |
The Company had no off balance sheet arrangements during the fiscal years ended November 30, 2020, 2019 and 2018.
F.Tabular disclosure of contractual obligations.
There were no contractual obligations as of November 30, 2020.
The Company’s annual financial statements have been prepared in accordance with IFRS. Some accounting policies have a significant impact on the amount reported in these financial statements. A summary of those significant accounting policies can be found in the Summary ofNote 2 Significant Accounting Policies in the annual financial statements. Note that the preparation of this Annual Report requires the Company to make estimates
and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates. The Company believes, as explained below, that the most critical accounting policies cover the following areas: foreign currency translation, financial instruments, investment in associates, investment in content, equipment, intangible assets, leases, goodwill, impairment of non-financial assets, business combinations, discontinued operations, derivative liability, convertible debentures, share capital, share-based compensation, revenue recognition, royalties and licenses, and income taxes.
Foreign currency translation
The functional currency of an entity is the currency of the primary economic environment in which the entity operates. The functional currency of the Company and Liquid Canada changed from the CAD to the USD dollar effective September 1, 2018. The functional currencyall of Majesco wasits entities is the USD. The functional currency of Waterproof iswas the CAD.Canadian dollar (“CAD”). The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates.Rates.
Transactions in currencies other than USD are recorded at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the period end exchange rate while non-monetary assets and liabilities in foreign currencies are translated at historical rates. Revenues and expenses are translated at the average exchange rates approximating those in effect during the reporting period.
For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company’s USD operations are translated into CAD at the exchange rate at the reporting date. The income and expenses are translated using average rate. Foreign currency differences that arise on translation for consolidation purposes are recognized in other comprehensive income (loss).
Financial instruments
Financial assets
On initial recognition, financial assets are recognized at fair value and are subsequently classified and measured at: (i) amortized cost; (ii) fair value through other comprehensive income (“FVOCI”); or (iii) fair value through profit or loss (“FVTPL”). The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset is measured at fair value net of transaction costs that are directly attributable to its acquisition except for financial assets at FVTPL where transaction costs are expensed. All financial assets not classified and measured at amortized cost or FVOCI are measured at FVTPL. On initial recognition of an equity instrument that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income.
The classification determines the method by which the financial assets are carried on the statement of financial position subsequent to inception and how changes in value are recorded. Receivables and loans receivable are measured at amortized cost with subsequent impairments recognized in profit or loss. Cash, restricted cash, and investment in equity instruments are classified as FVTPL.
Impairment
An ‘expected credit loss’ impairment model applies which requires a loss allowance to be recognized based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognized for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset’s original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognized in profit or loss for the period.
In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.
For the years presented, the Company did not record an expected credit loss on its accounts receivable; however, an accumulated expected credit loss was recorded on its loans receivable as at November 30, 2021 and 2020.
Financial liabilities
Financial liabilities are designated as either: (i) fair value through profit or loss; or (ii) other financial liabilities.amortized cost. All financial liabilities are classified and subsequently measured at amortized cost except for financial liabilities at FVTPL. The classification determines the method by which the financial liabilities are carried on the statement of financial position subsequent to inception and how changes in value are recorded. Accounts payable and accrued liabilities, due to related parties, loans payable, convertible debentures, and long-term debt are classified as other financialamortized cost liabilities and carried on the statement of financial position at amortized cost. Derivative liabilities areliability is measured at FVTPL.
The Company’s investment in associates was accounted for using the equity method of accounting. An associate is an entity in which the Company has significant influence and which is neither a subsidiary nor a joint venture.
Under the equity method, the investment in the associate is carried in the statement of financial position at cost. The statement of loss reflects the share of the results of operations of the associate until significant influence ceases. Where there has been a change recognized directly in the equity of the associate, the Company recognizes its share of any changes and discloses this, when applicable, in the statement of changes in shareholders’ equity (deficiency). Profits and losses resulting from transactions between the Company and the associate are eliminated to the extent of the interest in the associate.
Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20 and 50 percent of the voting power of another entity. Investments in associates are accounted for using the equity method (equity accounted investees) and are recognized initially at cost. The financial statements include the Company’s share of the income and expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the Company from the date that significant influence or joint control commences, until the date that significant influence or joint control ceases. When the Company’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued, except to the extent that the Company has obligations, or has made payments on behalf of the investee.
Investment in content
Investment in content is accounted for as an intangible asset and represents the unamortized costs of programs that have been acquired, developed, produced and/or distributed by the Company. Investment in content is classified into the following three categories: content in production, released content, and acquired content. For content in production and released content, capitalized costs include all direct production and financing costs incurred during production that are expected to benefit future periods and net of equity investment by third parties that acquire participation rights. For acquired content, capitalized costs consist of minimum guarantee payments paid to the producer to acquire distribution rights.
Development costs represent expenditures made on content prior to production which are expensed when incurred.
The Company used the equity methodvaluation of accounting for its 49% investment in Waterproof until significant influence ceased on March 1, 2019.content, including acquired rights, is reviewed quarterly and any portion of the unamortized amount that appears not to be recoverable from future net revenues is recognized as accelerated amortization within direct operating expenses during the period the loss becomes evident.
Equipment
Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in profit or loss.
Assets under construction are not depreciated until available for their intended use.
Depreciation is charged over the estimated useful lives using the declining balance method as follows:
Computer equipment30%
Vehicles30%
| Computer equipment | 30% |
| Vehicles | 30% |
Intangible assets
The Company has intangible assets from acquisitions and development of gaming content.content and films. The amortization method, useful life and residual values are assessed annually and the assets are tested for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Amortization expense is recorded on a straight-line basis beginning with the month the corresponding assets are available for use and over the estimated useful lives provided below:
Video game catalogues15 years
Platform coding3 years
Brandsindefinite
| Video game catalogues | 15 years |
| Platform coding | 3 years |
| Brands | indefinite |
| Distribution libraries | 10 years |
Upon retirement or disposal, the cost of the asset disposed of and the related accumulated amortization are removed from the accounts and any gain or loss is reflected in profit and loss. Expenditures for repairs and maintenance are expensed as incurred.
Development expenditures, including the cost of material, direct labour, and other direct costs are recognized as an intangible asset when the following recognition requirements are met:
●
| · | the development costs can be measured reliably; |
| · | the project is technically and commercially feasible; |
●the project is technically and commercially feasible;
●the Company intends to and has sufficient resources to complete the project;
●the Company has the ability to use or sell the asset, and
●the asset will generate probable future economic benefits.
| · | the Company intends to and has sufficient resources to complete the project; |
| · | the Company has the ability to use or sell the asset, and |
| · | the asset will generate probable future economic benefits. |
Intangible assets being developed are amortized once development is complete and the asset starts to generate income.complete.
Video game catalogues
The video game catalogues are made up of a diverse variety of games, ranging in age and popularity. The catalogues are unique due to the diverse nature of the products within the catalogues, making it difficult to assign a useful life. The useful life of 15 years representsrepresented management’s view of the expected period over which the Company expectsexpected to receive benefits from the acquired gaming content packaged as catalogues. The election of this useful life is supported by internal game titles still producing revenue at this age.
Platform coding
The platform coding acquired by the Company is currently under development and is not yet subject to amortization.
Brand
Through the acquisition of Majesco, the Company acquired the “Majesco Entertainment” brand which was determined to have an indefinite life. The brand was written off during the year ended November 30, 2020 when the Company disposed of its investment in Majesco.
Distribution libraries
Through the acquisition of IndieFlix, the Company acquired distribution libraries. These assets are carried at cost, including amounts of purchase price allocations upon acquisitions. The useful life of 10 years represents management’s view of the expected period over which the Company expects benefits from the acquired distribution libraries.
Leases
At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company assesses whether the contract involves the use of an identified asset, whether the right to obtain substantially all of the economic benefits from use of the asset during the term of the arrangement exists, and if the Company has the right to direct the use of the asset. At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative standalone prices.
As a lessee, the Company recognizes a right-of-use asset and a lease liability at the commencement date of a lease. The right-of-use asset is initially measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received.
The right-of-use asset is subsequently depreciated from the commencement date to the earlier of the end of the lease term, or the end of the useful life of the asset. In addition, the right-of-use asset may be reduced due to impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
A lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental borrowing rate. Lease payments included in the measurement of the lease liability are comprised of:
| · | fixed payments, including in-substance fixed payments, less any lease incentives receivable; |
| · | variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; |
| · | amounts expected to be payable under a residual value guarantee; |
| · | exercise prices of purchase options if the Company is reasonably certain to exercise that option; and |
| · | payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. |
The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if there is a change in the estimate or assessment of the expected amount payable under a residual value guarantee, purchase, extension or termination option. Variable lease payments not included in the initial measurement of the lease liability are charged directly to profit or loss.
The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The lease payments associated with these leases are charged directly to profit or loss on a straight-line basis over the lease term.
Goodwill
Goodwill is deemed to have an indefinite life and is not amortized but is subject to, at a minimum, annual impairment tests. The Company assesses the impairment of goodwill on an annual basis or whenever events or changes in circumstances indicate that the fair value is less than its carrying value. Impairment is tested at the
cost center CGU level by comparing the fair value of a cost centerCGU with its carrying amount including goodwill. If the carrying amount of the cost centerCGU exceeds its fair value, goodwill of the cost centerCGU is considered impaired and the second step of the test is performed to determine the amount of impairment loss, if any.
Impairment of non-financial assets
The carrying amount of the Company’s non-financial assets is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in profit or loss.
The recoverable amount of assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years.
Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment.
Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable new assets. Acquisition costs incurred are expensed.
Discontinued operations
A discontinued operation is a component of the Company’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Company and which:
●represents a separate majour line of business or geographic area of operations;
●is part of a single coordinated plan to dispose of a separate majour line of business or geographic area of operations; or
●is a subsidiary acquired exclusively with a view to re-sale.
| · | represents a separate majour line of business or geographic area of operations; |
| · | is part of a single coordinated plan to dispose of a separate majour line of business or geographic area of operations; or |
| · | is a subsidiary acquired exclusively with a view to re-sale. |
Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of comprehensive loss is re-presented as if the operation had been discontinued from the start of the comparative year.
Derivative liability
Share purchase warrants outstanding during the yearsyear ended November 30, 2019 and 2018 met the criteria of a derivative instrument liability because they were exercisable in a currency other than the functional currency of the Company and thus did not meet the “fixed-for-fixed” criteria. Additionally, the contingent consideration due from the acquisition of IndieFlix during the year ended November 30, 2021 also did not meet the “fixed-for-fixed” criteria because the number of common shares of the Company to be issued varies depending on the revenue to be achieved by IndieFlix over the term of the agreement. As a result, the Company was required to separately account for the warrants and the contingent consideration as a derivative instrument liabilityliabilities recorded at fair value and marked-to-market each period with the changes in the fair value each period charged or credited to loss. Changes in fair value are recognized as gain/loss on derivative liability until the warrants are exercised or expire.expire and the common shares issued under the contingent consideration obligation have been fully settled.
Convertible debentures
The Company’s convertible debenture was classified as a liability, less the portion relating to the conversion feature which is classified as a component of equity. As a result, the recorded liability to repay the convertible notes iswas lower than its face value. The liability was initially recorded at fair value and subsequently at amortized cost using the effective interest rate method; the liability iswas accreted to the face value over the term of the convertible debenture.
Share capital
Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company’s common shares, share warrants, and options are classified as equity instruments.
Incremental costs directly attributable to the issue of new shares or options are recognized as a deduction from equity, net of tax.
Valuation of equity units issued in private placements:
The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component.
The fair value of the common shares issued in private placements is determined to be the more easily measurable component as they are valued at their fair value which is determined by the closing price on the issuance date. The remaining balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded to reserves.
Loss per share
Basic and diluted loss per share is computed by dividing net loss available to common shareholders by the weighted-average number of shares outstanding during the reporting period. If applicable, diluted income per share is computed similar to basic income per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of share options, warrants, and convertible debentures, if dilutive. The number of additional shares is calculated by assuming that outstanding share options and warrants were exercised and that the proceeds from such exercises were used to acquire common shares at the average market price during the reporting periods. For the years presented, this calculation proved to be anti-dilutive.
Share-based compensation
The Company grants stock options to buy common shares of the Company to directors, officers and consultants.
All stock options and compensatory warrants made to employees and non-employees are measured and recognized using the Black-Scholes option pricing model. For employees, the fair value of the options is measured at grant date. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete, the date the performance commitment is reached, or the date at which the equity instruments are granted if they are fully vested and non-forfeitable. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. Stock options that vest over time are recognized using the graded vesting method. Share based compensation is recognized as an expense with a corresponding increase in reserves. At each financial reporting period, the amount recognized as expense is adjusted to reflect the number of share options expected to vest. If and when the stock options are ultimately exercised, the applicable amounts of reserves are transferred to share capital.
Where the terms of a stock option are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the stock-based compensation arrangement or is otherwise beneficial to the employee as measured at the date of modification over the remaining vesting period.
The Company may grant Restricted Share Units (RSUs) to directors, officers, employees, and consultants. The fair value of the RSUs are estimated using the value on the grant date and are recognized as an expense over the vesting period. As the RSUs are redeemed and common shares are issued, the amount previously recognized in reserves is recorded as an increase to share capital.
Revenue recognition
Animation production services
Revenue from animation production services provided is recognized when the servicesperformance obligations have been providedachieved and control of the deliverable hasgoods or services have been transferred to the customer. Revenue collected prior to it being earned is recorded as deferred revenue and recognized as the related servicescustomer, which are provided. Management estimates the pace of revenue recognition based on contract milestones and determination of when it considered the revenue to be earned. The Company’s arrangements with customers are evidenced by contracts with customers. Any costs incurred to secure a contract will be capitalized and amortized over the period in which the revenue is recognized.normally:
| · | persuasive evidence of a contractual arrangement exists; |
| · | the program is complete; |
| · | the contractual delivery arrangements have been satisfied; |
| · | the customer has access to the licensed content and has the contractual right to broadcast or stream the content; |
| · | the fee is fixed or determinable; |
| · | collection of the fee is reasonably assured; and |
| · | the costs incurred or to be incurred in respect of the contractual arrangement can be measured reliably. |
Software games
Revenue from sales of interactive software games on game consoles and PCs are recognized as revenue when games are purchased by a customer.
Sales of the Company’s games are made by third party gaming platform companies pursuant to license agreements, and these gaming platform companies retain an agreed upon portion of sales as fees. The Company reports revenues related to these arrangements net of the fees retained by the gaming platform companies, as the Company has determined that the gaming platform companies are considered the primary obligors to the end consumers for the sale of the games.
Streaming services
Revenue from streaming services are recognized as revenue when the services have been provided and control of the deliverable has been transferred to the customer. The streaming services allows independent film makers to monetize their films on the Company’s streaming platforms. TheFor a portion of the streaming services, the Company earns a percentage of the sales charged by the filmmakers which is collected by third party payments providers. The Company reports revenues related to these sales net of the fees paid to the filmmakers and payment providers.
Subscription fees
Revenue from streaming subscription fees are recognized as revenue when the services have been provided and control of the deliverable has been transferred to the customer. Revenue collected prior to it being earned is recorded as deferred revenue and recognized over the term of the subscription.
Film distribution fees
Revenue from film distribution fees are recognized as revenue when the films have been provided and control of the deliverable has been transferred to the customer. Revenue collected prior to it being earned is recorded as deferred revenue and recognized when the film title has been delivered or activated.
Royalties and licenses
Royalty-based obligations with content licensors are either paid in advance and capitalized as prepaid royalties or are accrued as incurred and subsequently paid. These royalty-based obligations are generally expensed to cost of sales at the contractual rate based on a percentage of the revenue earned.
Current income tax
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the country where the Company operates and generates taxable income.
Deferred income tax
Deferred income tax is provided for based on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The carrying amount of
deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
Current income and deferred tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Changes in accounting standards
On December 1, 2019, the Company elected to early adopt the amendments to IFRS 3 Business Combinations. The amendment:
●clarifies minimum requirements to be a business,
●clarifies market participants ability to replace missing elements,
●clarifies the assessment of whether an acquired process is substantive,
●narrows the definition of outputs, and
●provides for an optional concentration test which is met if substantially all of the fair value of the gross net assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.
The Company has also adopted the following accounting standards effective December 1, 2019, which had no significant impact on the consolidated financial statements:
●IFRS 16 - Leases
●IFRIC 23 – Uncertainty Over Income Tax Treatments
Accounting pronouncements not yet adopted
Accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.
The Company seeks safe harbor for our forward-looking statements. Please see the section titled “Forward-Looking Statements” above.
Item 6. – Directors, Senior Management and Employees
| A. | Directors and Senior Management |
A.Directors and Senior Management
The following is a list of the current directors and senior officers of the Company, their municipalities of residence, their current positions with the Company, areas of experience, and principal business activities performed outside the Company:
Name and Municipality | Principal Occupation and Areas of Experience |
Joshua Jackson Woodland Hills, CA USA | Mr. Jackson has been the Chair of the Company since July 2018, prior to which he had the same roles with Liquid Canada since January 2014. Mr. Jackson is an actor, producer and director with over 20 years’ experience in the film industry. Mr. Jackson has won several awards and nominations for his film and television work, including a Genie for best actor and a “Screen Actors Guild” award. He has starred in Golden Globe winning show “The Affair”, “Dawson’s Creek” and “Fringe” with J.J Abrams as Director/Producer. As a 23-year member of the Screen Actors Guild and a 13 year member of the Directors Guild of America, Mr. Jackson has significant experience and a large network in the Hollywood business community. |
Ms. Basi is Executive Director of the Media & Entertainment Centre (VMEC) for the Vancouver Economic Commission, where she works strategically to grow and support the screen-based entertainment industries for the City of Vancouver and surrounding areas. Included in her portfolio are features, series, visual efforts and animation, games and virtual/augmented reality. With her move to the VMEC in 2011, Ms. Basi brought her 20 years of experience in the feature film, television and commercial industry in physical production, visual effects and animation. Clients included Walt Disney Studios, Columbia Pictures, Warner Bros., 20th Century Fox, Nike and Mercedes. Ms. Basis currently serves on the Executive Board of Women in Animation (WIM) Vancouver Chapter and as Vice President of the VRARA Vancouver Chapter (Virtual Reality/Augmented Reality Association), and is a member of numerous digital entertainment societies and member-based organizations. |
| Name and Municipality of Residence | Principal Occupation and Areas of Experience |
Andy Wilson Toronto, Ontario Canada | Mr. Wilson has been the CFO of the Company since April 26, 2021. Mr. Wilson is a senior strategy development and implementation executive with extensive experience in finance, investment banking and mergers & acquisitions, corporate boards and operating management. He is also Associate Director of Cameron Thomson Group and CFO of Electric Panda Entertainment and was previously CFO of Nice Media Studios and President/Co-Founder of YTW Growth Capital. Mr. Wilson also has served as a director and audit committee member of a number of public companies in Canada and as Senior Vice President, Mergers & Acquisitions of a Canadian integrated investment banking firm |
| Donna M. Moroney Vancouver, BC Canada | Ms. Moroney has been Corporate Secretary of the Company since November 12, 2019. She has over 30 years of extensive experience in regulatory and corporate compliance in both Canada and the United States, and as a senior officer for various public companies, and has instructed and provided training in regulatory compliance. As President and owner of Wiklow Corporate Services Inc. since 2008, she assists companies in the resource, financial and technology sectors in maintaining the securities and exchange demands on public companies, as well as keeping them up-to-date on relevant issues, policies and working practices. Ms. Moroney assists companies reporting in the U.S. in preparing registration statements, quarterly and annual financial filings and other various facets of meeting U.S. securities requirements. |
There are no arrangements or understandings pursuant to which any of the above was selected as a director or executive officer. There are no family relationships between any of the persons named above.
| B. | Compensation |
Compensation Principles
The Company is committed to the philosophy of sharing the benefits of success with those who help the Company grow and prosper. The Company’s strength and ability to sustain growth is based on an organization that perceives people as its single most important asset. The Company’s philosophy is to provide sufficient compensation opportunities in order to attract and retain key executive officers critical to the Company’s long-term success. The Company has developed an informal employee share option plan to increase the risk/reward ratio of its executive compensation program, to focus management on long-term strategic issues, and to align management’s interests with those of the shareholders of the Company in the sustained growth of shareholder value.
The Company does not have a formal compensation committee. The Company relies on the independent members of the Board for determining executive compensation. The Board may, from time to time, retain independent consultants to advise on compensation matters.
Compensation Program
The Company’s executive compensation program includes base salary, annual cash or short-term incentives (bonuses) and long-term incentive compensation in the form of stock options.
43
The compensation program is designed to:
| ● | promote an ownership mentality among key leadership and the Board of Directors; |
| ● | enhance the overall performance of the Company; and |
| ● | recognize and reward individual performance and responsibility. |
●promote an ownership mentality among key leadership and the Board of Directors;
●enhance the overall performance of the Company; and
●recognize and reward individual performance and responsibility.
Base Compensation
The Company determines base salary based on a combination of factors, including comparable market data, experience, expertise and job responsibilities. The Company’s process for determining executive compensation is relatively simple and does not include formal targets, criteria or analysis.Salary levels are reviewed periodically and adjustments may be made, if warranted, after an evaluation of executive and Company performance, salary trends in the Company’s business sector, and any increase in responsibilities assumed by the executive.
Short-Term Incentives
Bonuses for senior management are, with limited exceptions, discretionary and are intended to reward senior managers for exceptional performance that positively impacts the profitability and growth of the Company. Depending on the Company’s financial and operating performance, performance-based bonuses may be awarded.
Long-Term Incentives
The long-term incentives are intended to align executive and shareholder interests by creating a strong and direct link between executive compensation and shareholder return, and to enable executive officers to develop and maintain a significant, long-term stock ownership position in the Company’s common shares. Long-term incentives may be granted in the form of stock options which generally vest over several years of service with the Company. Further discussion follows in the section titled “Option-Based Awards”.
Risk Considerations
As the Company does not have a bonus program in place for its employees generally, and any significant bonuses for the Named Executive Officers (as defined below in the section “Summary Compensation Table”) must be approved by the Board, the Board has not considered the implications of risks associated with the Company’s compensation policies and practices. While the Board of Directors does not formally analyse risks associated with the Company’s compensation policies and practices, these policies and practices do not include structural inconsistencies that are likely to unduly encourage or cause an executive officer to expose the Company to inappropriate or excessive risks.
Financial Instruments
No Named Executive Officer or director is permitted to purchase financial instruments to hedge or offset a decrease in market value of equity securities granted as compensation or held, directly or indirectly, by the Named Executive Officer or director.
The Company does not have a formal stock option plan. Options for the purchase of common shares of the Company are granted from time to time to directors, officers and employees as an incentive. These options are long-term incentives that generally vest over several years of service with the Company. The options granted
are exercisable at a price which is equal to or greater than the fair market value of the common shares at the date the options are granted. Options are granted in consideration of the level of responsibility of the employee as well as his or her impact or contribution to the long-term operating performance of the Company. In determining the amount and frequency of such grants, a variety of factors are evaluated, including job level, and past, current and prospective services rendered. The Board also takes into account the number of options, if any, previously granted, and the exercise price of any outstanding options to ensure that such grants are in accordance with all applicable regulatory policies.
Compensation Governance
Please see the sections above titled “Base Compensation”, “Short-Term Incentives”, and “Long Term Incentives” for a discussion of the practices adopted by the Board to determine compensation for directors and executive officers. The Company does not have a formal compensation committee.
The following table (presented in accordance with Canada’s National Instrument Form 51-102F6 Statement of Executive Compensation) sets forth all annual and long term compensation for services in all capacities to the Company for the three most recently completed financial years of the Company in respect of:
(a)each individual who acted as the Chief Executive Officer (“CEO”) or the Chief Financial Officer (“CFO”) or acted in a similar capacity for all or any portion of the most recently completed financial year,
| (a) | each individual who acted as the Chief Executive Officer (“CEO”) or the Chief Financial Officer (“CFO”) or acted in a similar capacity for all or any portion of the most recently completed financial year, |
(b)each of the three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and the CFO, at the end of the most recently completed financial year whose total compensation was, individually, more than $150,000 for that financial year, and
| (b) | each of the three most highly compensated executive officers, or the three most highly compensated individuals acting in a similar capacity, other than the CEO and the CFO, at the end of the most recently completed financial year whose total compensation was, individually, more than $150,000 for that financial year, and |
(c)each individual who would have satisfied the criteria under paragraph (b) but for the fact that the individual was neither an executive officer of the Company, nor acting in a similar capacity, at the end of the most recently completed financial year.
| (c) | each individual who would have satisfied the criteria under paragraph (b) but for the fact that the individual was neither an executive officer of the Company, nor acting in a similar capacity, at the end of the most recently completed financial year. |
(collectively the “Named Executive Officers” or “NEOs”).
NEO | Fiscal Year | Salary | Share- based awards ($) (1) | Option- based awards | Non-equity Incentive plan compensation | All Other Compen- sation | Pension Value | Total compen- sation | |
Annual incentive plans | Long- term incentive plans | ||||||||
| 2021 |
N/A N/A |
N/A N/A |
N/A N/A | Nil | Nil |
N/A N/A | Nil N/A N/A |
N/A N/A |
| 2021 |
N/A N/A | Nil N/A N/A | Nil N/A N/A | Nil | Nil | Nil N/A N/A | Nil N/A N/A |
N/A N/A |
2021 |
|
|
163,655 280,574 | Nil | Nil |
4,483 4,505 | Nil |
430,244 394,838 | |
(1)The value of option awards reflects the grant date fair value of option based awards in the 2020, 2019 and 2018 fiscal years. The estimated fair value of the stock options granted was determined using the Black-Scholes option pricing model. The options are granted in U.S. dollars and are converted into Canadian dollars at the Bank of Canada closing rate as of the date of the options grant for accounting purposes.
(2)Mr. Cruz charged consulting fees from Wawel Den Inc., a company controlled by Mr. Cruz until December 31, 2019. Effectove January 1, 2020, Mr. Cruz was paid as an employee of the Company.
(3)Mr. Sutton charged consulting fees from Zift Interactive LLC., a company controlled by Mr. Sutton.
(4)Mr. Brezer charged consulting fees from Ispani Holdings Inc., a company controlled by Mr. Brezer until December 31, 2019. Effective January 1, 2020, Mr. Brezer was paid as an employee of the Company.
(5)During fiscal 2019, Mr. Cruz and Mr. Brezer were paid $6,000 each for directors fees. During fiscal 2020, Mr. Cruz and Mr. Brezer were paid $6,000 each for directors fees and received shares valued at $141,868 each from the vesting of RSUs .
During fiscal 2017, Liquid Canada
| Daniel Cruz (6) Former CFO | 2021 2020 2019 | 96,482 (7) 153,999 (7) 109,759 (7) | 136,788 108,107 Nil | 21,050 (9) 163,655 280,574 | Nil Nil Nil | Nil Nil Nil | 1,182 4,483 4,505 | Nil Nil Nil | 255,502 430,244 394,838 |
| Joshua Jackson Director | 2021 2020 2019 | Nil Nil) Nil) | 275,783 108,107 Nil | 8,211 (9) 163,655 21,511 | Nil Nil Nil | Nil Nil Nil | 4,787 4,483 4,505 | Nil Nil Nil | 288,781 276,245 26,016 |
| (1) | Represents RSUs vested during the years ended November 30, 2021 and 2020, based on the closing price of shares on the dates of vesting of $1.47 per share, $1.86 per share, and $1.89 per share. | |
| (2) | The value of option awards reflects the grant date fair value for the option awards that vested in the 2021, 2020 and 2019 fiscal years. The estimated fair value of the stock options granted was determined using the Black-Scholes option pricing model. | |
| (3) | Mr. Thomson was appointed as CEO on January 1, 2021 and as a director on January 14, 2021. | |
| (4) | Mr. Wilson was appointed as CFO on April 26, 2021. | |
| (5) | Mr. Brezer charged consulting fees from Ispani Holdings Inc., a company controlled by Mr. Brezer until December 31, 2019. Effective January 1, 2020, Mr. Brezer was paid as an employee of the Company. | |
| (6) | Mr. Cruz resigned as CFO on April 26, 2021 and as a director on May 31, 2021. | |
| (7) | Mr. Cruz charged consulting fees from Wawel Den Inc., a company controlled by Mr. Cruz until December 31, 2019. Effective January 1, 2020, Mr. Cruz was paid as an employee of the Company. | |
| (8) | During fiscal 2019 and 2020, Mr. Cruz, Mr. Brezer, and Mr. Jackson were paid CAD$6,000 each for directors’ fees. During fiscal 2021 Mr. Cruz and Mr. Brezer received directors fees of CAD$2,000 and Mr. Jackson received directors fees of $6,000. | |
| (9) | During fiscal 2021, no options were granted; however, options granted in fiscal 2019 and 2020 were repriced from $2.55 to $1.90. |
In January 2018, the Company entered into formal consulting agreements with Wawel Den Inc., a company controlled by Mr. Cruz, and Ispani Holdings Inc., a company controlled by Mr. Brezer, which expired on December 31, 2017. In January 2018, new agreements with Wawel Den Inc. and Ispani Holdings Inc. were entered into which expired on December 31, 2018. In January 2019, new agreements with Wawel Den Inc. and Ispani Holdings Inc. were entered into which expired on December 31, 2019. In May 2019, new agreements with Wawel Den Inc. and Ispani Holdings Inc. were entered into which continue on a month-to-month basis.into. On December 31, 2019, the agreements with Wawel Den Inc. and Ispani Holdings Inc. were terminated. In January 2020, Mr. Cruz and Mr. Brezer became employees of the Company.
In November 2020, the Company signedentered into employment agreements with Charlie Brezer, President and a director of the Company, and Daniel Cruz, the former CFO and aformer director of the Company. The agreements require total payments of $17,500CAD$17,500 each per month each.month. Included in the agreements is a provision for 12 months written notice or salary paid in lieu of notice upon termination without just cause. In April 2021, the employment agreement with Mr. Cruz was cancelled and replaced with a consulting agreement with the same terms.
In January 2021, the Company signed an employment agreement with Ronald Thomson, CEO of the Company. The agreement requires payments of CAD$20,000 per month. Included in the agreement is: (1) a provision for three months written notice or salary paid in lieu of notice upon termination without just cause and (2) a provision to increase the base salary to CAD$30,000 per month, retroactive to January 1, 2021, upon the Company raising US$5 million in funding, which was achieved.
Outstanding Option-Based Awards for Named Executive Officers
The following table sets forth particulars of all option-based and share-based awards outstanding for each Named Executive Officer at November 30, 2020:2021:
| Option-based Awards
| Share-based Awards | |||||
Name | Number of Securities underlying unexercised options (#) | Option exercise price ($) | Option Expiration Date | Value of unexercised in-the-money-options ($) | Number of shares or units of shares that have not vested (#) | Market or payout value of share awards that have not vested ($) | Market or payout value of vested share-based awards not paid out or distributed ($) |
Daniel Cruz | 150,000 | US2.55 (1) | Feb 28, 2024 | Nil | 220,625 | 487,345 | N/A |
Charlie Brezer | 107,995 | US2.55 (1) | Feb 28, 2024 | Nil | 220,625 | 487,345 | N/A |
(1)The exercise price was subsequently reduced to US$1.90 per share as of January 1, 2021.
(2)Based on closing price of shares on November 30, 2020 of US$1.74 per share at an exchange rate of 1.2695.
Option-based Awards
| Share-based Awards | ||||||
| Name | Number of Securities underlying unexercised options (#) | Option exercise price ($) | Option Expiration Date | Value of unexercised in-the-money-options ($) | Number of shares or units of shares that have not vested (#) | Market or payout value of share awards that have not vested ($) (1) | Market or payout value of vested share-based awards not paid out or distributed ($) |
| Ronald Thomson | 643,470 | 1.90 | Jan. 1, 2026 | Nil | Nil | N/A | N/A |
| Andy Wilson | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| Daniel Cruz | N/A | N/A | N/A | N/A | N/A | N/A | N/A |
| Charlie Brezer | N/A | N/A | N/A | N/A | 73,541 | $91,190 | N/A |
| Joshua Jackson | N/A | N/A | N/A | N/A | 73,541 | $91,190 | N/A |
| (1) | Based on closing price of shares on November 30, 2021 of $1.24 per share. |
Option Exercises During the Most Recently Completed Fiscal Year
On March 24, 2020, Charles BrezerDuring fiscal 2021, after Mr. Cruz had resigned as CFO, he exercised 42,005 stock10,000 options to acquire 42,005 common shares at awith an exercise price of US$2.55 per share. $1.90 and expiry of February 28, 2024.
Option Repricing
TheEffective January 1, 2021, the Company did not reprice anyrepriced 882,995 stock options during the most recent fiscal year.with an exercise price of $2.55 per share and 25,000 stock options with an exercise price of $2.57 per share to US$1.90 per share. All other terms remained unchanged.
Value Vested or Earned During the Year
The following table sets forth particulars of the value of option-based awards and share awards which vested during the year ended November 30, 2020,2021, and the value of non-equity incentive plan compensation earned during the year ended November 30, 20202021 for each Named Executive Officer:
Name | Option-based awards-Value vested during the year ($) (1) | Share awards – Value during the year on vesting ($) (2) | Non-equity incentive plan compensation-Pay-out during the year ($) (3) |
| Nil |
|
|
Andy Wilson | Nil | Nil | Nil |
| Daniel Cruz | Nil | 275,783 (4) | N/A |
| Charlie Brezer | Nil |
| N/A |
| Joshua Jackson | Nil | 275,783 | N/A |
(1)This amount is the aggregate dollar value that would have been realized if the options under option based awards had been exercised on the vesting date. It is determined by the difference between the exercise price of the option and the market price on November 30, 2020 converted to Canadian dollars at the exchange rate of 1.2965. If the option was not-in-the-money then a NIL value was assigned.
(2)RSUs vested during the year ended November 30, 2020, based on the closing price of shares on the date of vesting of US1.47 per share at an exchange rate of 1.3123.
(3)The Company did not pay any non-equity incentive plan compensation during the year ended November 30, 2020.
| (1) | This amount is the aggregate dollar value that would have been realized if the options under option based awards had been exercised on the vesting date. It is determined by the difference between the exercise price of the option and the market price on November 30, 2021. If the option was not-in-the-money then a NIL value was assigned. | |
| (2) | RSUs vested during the year ended November 30, 2021, based on the closing price of shares on the date of vesting of $1.86 per share and $1.89 per share. | |
| (3) | The Company did not pay any non-equity incentive plan compensation during the year ended November 30, 2021. | |
| (4) | Mr. Cruz received 73,542 common shares valued at $138,994 after he had resigned as CFO. |
The Company does not have a formal stock option plan. Stock options generally vest on grant date. The value vested during the year varies according to the vesting date and the market price of the underlying securities on a selected exercise date.
Further details regarding stock options may be found in the sections above titled “Option-Based“Option-Based Awards for Named Executive Officers”Officers” and below titled “Outstanding“Outstanding Option-Based Awards for Directors”Directors”.
Pension Plan Benefits
The Company does not have a pension plan or defined contribution plan that provides for payments or benefits to the Named Executive Officers at, following, or in connection with retirement.
Termination of Employment, Change in Responsibilities and Employment Contracts
In November 2020, the Company signedentered into employment agreements with Charlie Brezer, President and a director of the Company, and Daniel Cruz, the former CFO and aformer director of the Company. The agreements require total payments of $17,500CAD$17,500 each per month each.month. Included in the agreements is a provision for 12 months written notice or salary paid in lieu of notice upon termination without just cause. In April 2021, the employment agreement with Mr. Cruz was cancelled and replaced with a consulting agreement with the same terms.
In January 2021, the Company signed an employment agreement with Ronald Thomson, CEO of the Company. The agreement requires payments of CAD$20,000 per month. Included in the agreement is: (1) a provision for three months written notice or salary paid in lieu of notice upon termination without just cause and (2) a provision to increase the base salary to CAD$30,000 per month, retroactive to January 1, 2021, upon the Company raising US$5 million in funding, which was achieved.
Director Compensation
Reference is made to the Summary Compensation Table above for details of compensation paid to directors who are also Named Executive Officers, in their capacity as executive officers of the Company. Directors are also compensated for their services in their capacity as directors by the granting from time to time of incentive stock options.
The following table sets forth all amounts of compensation provided to the directors, who are not Named Executive Officers, for the Company’s most recently completed fiscal year ended November 30, 2020:2021:
Director | Fees Earned ($) | Share-based Awards ($) | Option-Based Awards ($) (1) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) |
Joshua Jackson | 6,000 | 141,868 | 220,542 | Nil | Nil | 368,410 |
Stephen Jackson | 6,000 | 14,468 | 8,822 | Nil | Nil | 29,290 |
Nancy Basi | 6,000 | 14,468 | 54,492 | N/A | N/A | 74,960 |
(1)The value of option awards reflects the grant date fair value of option based awards in the 2020 fiscal year. The estimated fair value of the stock options granted was determined using the Black-Scholes option pricing model. The options are granted in U.S. dollars and are converted into Canadian dollars at the Bank of Canada closing rate as of the date of the options grant for accounting purposes.
| Director Name | Fees Earned ($) | Share-based Awards ($)(1) | Option-Based Awards ($) (2) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) |
| Stephen Jackson | 4,787 | 28,125 | 4,608 | Nil | Nil | 37,520 |
| Nancy Basi | 4,787 | 28,125 | 2,144 | Nil | Nil | 35,056 |
| (1) | Represents RSUs vested during the year ended November 30, 2021, based on the closing price of shares on the dates of vesting of $1.86 per share, and $1.89 per share. | |
| (2) | The value of option awards reflects the grant date fair value of option based awards in the 2021 fiscal year. The estimated fair value of the stock options granted was determined using the Black-Scholes option pricing model. | |
| (3) | During fiscal 2021, no options were granted; however, options granted in fiscal 2019 and 2020 were repriced from $2.55 to $1.90. |
Outstanding Option-Based Awards for Directors
Options for the purchase of common shares of the Company are granted from time to time to directors under the same terms as those granted to employees, and described above in “Option-Based Awards”.
The following table sets forth particulars of all option-based and share-based awards outstanding for each director, who was not a Named Executive Officer, at November 30, 2020:2021:
| Option-based Awards
| Share-based Awards | Option-based Awards
| Share-based Awards | ||||||||||
Name | Number of Securities underlying unexercised options (#) | Option exercise price ($) | Option Expiration Date | Value of unexercised in-the-money-options ($)(1) | Number of shares or units of shares that have not vested (#) | Market or payout value of share awards that have not vested ($) (2) | Market or payout value of vested share-based awards not paid out or distributed ($) | Number of Securities underlying unexercised options (#) | Option exercise price ($) | Option Expiration Date | Value of unexercised in-the-money-options ($) | Number of shares or units of shares that have not vested (#) | Market or payout value of share awards that have not vested ($) (1) | Market or payout value of vested share-based awards not paid out or distributed ($) |
Joshua Jackson | 125,000 | US$2.55 (1) | July 23, 2025 | Nil | 220,625 | 497,710 | N/A | |||||||
Stephen Jackson | 50,000 | US$2.55 (1) | Feb 28, 2024 | Nil | 22,500 | 50,758 | N/A | N/A | N/A | N/A | 7,500 | 9,300 | N/A | |
Nancy Basi | 25,000 | US$2.55 (1) | Jan. 8, 2025 | Nil | 22,500 | 50,758 | N/A | N/A | N/A | N/A | 7,500 | 9,300 | N/A | |
| (1) | Based on closing price of shares on November 30, 2021 of $1.24 per share. |
(1)The exercise price was subsequently reduced to US$1.90 per share as of January 1, 2021.
(2)Based on closing price of shares on November 30, 2020 of US$1.74 per share at an exchange rate of 1.2965.No stock options were exercised by the directors during the most recently completed fiscal year.
On April 2, 2020, Joshua Jackson exercised 11,500 stock options to acquire 11,500 common shares at a price of US$2.55 per share.
Value Vested or Earned During the Year
The following table sets forth particulars of the value of option-based awards and share-based awards which vested during the year ended November 30, 2020,2021, and the value of non-equity incentive plan compensation earned during the year ended November 30, 20202021 for each director of the Company who was not a Named Executive Officer:
Name | Option-based awards-Value vested during the year ($) (1) | Share awards – Value during the year on vesting ($) (2) | Non-equity incentive plan compensation-Pay-out during the year ($) (3) |
| Nil |
| N/A |
|
|
|
|
Nancy Basi | Nil |
| N/A |
(1)This amount is the aggregate dollar value that would have been realized if the options under option based awards had been exercised on the vesting date. It is determined by the difference between the exercise price of the option and the market price on November 30, 2020 converted to Canadian dollars at the exchange rate of 1.2695. If the option was not-in-the-money then a NIL value was assigned.
(2)RSUs vested during the year ended November 30, 2020, based on the closing price of shares on the date of vesting of US1.47 per share at an exchange rate of 1.3123.
(3)The Company did not pay any non-equity incentive plan compensation during the year ended November 30, 2020.
| (1) | This amount is the aggregate dollar value that would have been realized if the options under option based awards had been exercised on the vesting date. It is determined by the difference between the exercise price of the option and the market price on November 30, 2020. If the option was not-in-the-money then a NIL value was assigned. |
| (2) | RSUs vested during the year ended November 30, 2021, based on the closing price of shares on the date of vesting of $1.86 per share and $1.89 per share. |
| (3) | The Company did not pay any non-equity incentive plan compensation during the year ended November 30, 2021. |
The Company does not have a formal stock option plan. Stock options generally vest on grant date. The value vested during the year varies according to the vesting date and the market price of the underlying securities on a selected exercise date.
Further details regarding stock options may be found in the sections above titled “Option-Based Awards for Named Executive Officers” and “Outstanding Option-Based Awards for Directors”.
Board Practices
1.The Company’s Board of Directors has been set at six directors and is divided into three classes designated as Class I, Class II and Class III, to provide for a rotation of three-year terms of office. Any director whose term has expired is eligible for re-election subject to Board approval.
| 1. | The Company’s Board of Directors consists of five directors and is divided into three classes designated as Class I, Class II and Class III, to provide for a rotation of three-year terms of office. Any director whose term has expired is eligible for re-election subject to Board approval. |
The following table lists the classes of directors and remaining terms of office for the directors and the period during which the directors have served:
Name | Class of Director | Director Since | Expiry Term |
Joshua Jackson | Class III | January 2014 | 2021 annual general meeting (“AGM”) |
| Class |
|
|
| Class II |
|
|
|
| January 14, 2021 | 2023 AGM |
Stephen Jackson | Class III | July 2018 | 2021 AGM |
Nancy Basi | Class I | May 2019 | 2022 AGM |
Three of the sixfive current directors are independent based upon the tests for independence set forth in applicable Canadian and U.S. securities legislation. Ronald Thomson is not independent as he is Chief Executive Officer of the Company Daniel Cruz is not independent as he is the Chief Financial Officer of the Company, and Charlie Brezer is not independent as he is President of the Company.
2.There are no directors’ service contracts with the Company or any of its subsidiaries providing for benefits upon termination of service.
| 2. | There are no directors’ service contracts with the Company or any of its subsidiaries providing for benefits upon termination of service. |
| 3. | Audit Committee |
The members of the Company’s Audit Committee are:
Stephen Jackson
Nancy Basi
All of the Audit Committee are independent directors, are financially literate, and are considered “financial experts” as defined by the SEC. For details on their professional careers, see “Item 6 – A. Directors, Senior Management and Employees”.
The Audit Committee has a written charter which specifies the scope of its authority and responsibility. A copy of the Audit Committee Charter was previously filed as an exhibit to the Company’s Annual Report on Form 20-F, filed on May 30, 2008, and is incorporated by reference. The Audit Committee reviews and re-assesses the adequacy of its written charter on an annual basis. The function of the Audit Committee is one of review and oversight. The committee also is responsible for monitoring the independence, qualifications and performance of the Company’s external auditors, overseeing the audits of the Company’s financial statements and approving any non-audit services. The committee reports to the Board of Directors from time to time with respect to its activities and its recommendations and provides background and supporting information as may be necessary for the Board of Directors to make an informed decision.
Nomination of Directors
The Board has adopted a charter for the Nominating and Corporate Governance Committee. The committee is currently comprised of two independent directors:
Joshua Jackson
Stephen Jackson
Pursuant to its charter, the responsibilities, powers and operation of the committee include: identifying and recommending new candidates for Board nomination; evaluating the effectiveness of the Board, its committees and its directors; monitoring and reviewing the Company’s corporate governance practices and policies and making recommendations for changes when appropriate; and ensuring that a comprehensive orientation is received by new directors and that continuing education opportunities are available.
In connection with its responsibilities relating to Board nominations, the committee is responsible for identifying and recommending new candidates for nomination to the Board based upon: (i) the competencies and skills necessary for the Board as a whole to possess; (ii) the competencies and skills necessary for each individual director to possess; (iii) the competencies and skills which each new nominee to the Board is expected to bring; and (iv) whether the proposed nominee to the Board will be able to devote sufficient time and resources to the Company. Other members of the Board and representatives of the food and beverage industry are consulted for possible candidates.
The size of the Board is reviewed on a regular basis by the committee and the Board. The committee and the Board will take into account the number of directors required to carry out the Board’s duties effectively, and to maintain a diversity of view and experience.
Compensation of Directors and the CEO
The independent directors have the responsibility for determining and reviewing compensation for the directors and senior management of the Company. Reference is made to the Compensation section above for further information.
The Board conducts informal assessments of the Board’s effectiveness, the individual directors and each of its committees on a regular basis. As part of the assessments, the Board reviews the mandates or charters and conducts reviews of applicable corporate policies.
As of March 1,November 30, 2021, the executive officers of Liquid Media Group Ltd. are:
Ronald Thomson | Chief Executive Officer, Director |
Charlie Brezer | President, Director |
| Chief Financial Officer |
| Donna Moroney | Corporate Secretary |
Following are the number of employees of the Company and its subsidiaries for the past three fiscal years as at the end of each fiscal year:
| November 30, 2020 | November 30, 2019 | November 30, 2018 | November 30, 2021 | November 30, 2020 | November 30, 2019 |
Canada | 2 | 0 | 0 | 5 | 2 | 0 |
United States | 2 | 2 | 21 | 2 | ||
Share ownership
Options to purchase common shares from the Company are granted from time to time to directors, officers and employees of the Company on terms and conditions acceptable to the Board of Directors.
As of November 30, 2020,2021, the Company had 957,9951,755,445 issued and outstanding options, with a weighted average exercise price of $3.31 (US$2.55).$1.90.
All ofOf the stock options granted, 1,004,730 were fully vested and are available for exercise as of November 30, 2020.2021.
The following table provides share ownership information with respect to the directors and officers listed in “Item 6 – Directors, Senior Management and Employees” above, as at March 1, 2021. 31, 2022.
# Shares (1) | No. of Common shares under Options Granted | No. of Common shares under Share Purchase Warrants |
| ||
Joshua Jackson |
| 125,000 |
|
| |
|
| 107,995 |
|
|
|
|
|
| Nil |
| |
|
>1% |
| Nil |
| |
|
|
| Nil |
| |
|
|
| Nil |
| |
Donna M. Moroney |
| 5,000 (2) | Nil |
| (1) | The information as to number of shares beneficially owned (directly or indirectly or over which control or direction is exercised) is not within the direct knowledge of the management of the Company and has been furnished by the respective director or officer. Percentages of ownership are based on 16,035,189 common shares of the Company issued and outstanding as at March 31, 2022. | |
| (2) | Stock options exercisable at $1.90 per share, expiring on July 23, 2025. | |
| (3) |
| |
| Stock options exercisable at $1.90 per share, expiring on January 1, 2026. | |
| (5) | Stock options exercisable at $1.90 per share, expiring on January 8, 2025. |
(3)The information as to number of shares beneficially owned (directly or indirectly or over which control or direction is exercised) is not within the direct knowledge of the management of the Company and has been furnished by the respective director or officer. Percentages of ownership are based on 10,875,568 common shares of the Company issued and outstanding as at March 1, 2021.
(4)Restricted Stock Units issued as of September 3, 2020 will vest into common shares as to 25% on date of issuance and 25% every six months thereafter.
(5)Stock options exercisable at US$1.90 per share, expiring on July 23, 2025.
(6)Share purchase warrants exercisable at US$1.75 per share, expiring on February 26, 2021.
(7)18,338 of these shares are held by Wawel Den Inc., a company controlled by Mr. Cruz.
(8)Stock options exercisable at US$1.90 per share, expiring on February 28, 2024.
(9)Stock options exercisable at US$1.90 per share, expiring on January 1, 2026.
(10)Stock options exercisable at US$1.90 per share, expiring on January 8, 2025.
Further information regarding stock options with respect to the directors and officers may be found in the sections above, titled “Outstanding Option-Based Awards for Named Executive Officers” and “Outstanding Awards for Directors.”
There are no other arrangements involving the employees in the capital of the Company.
Item 7. – Major Shareholders and Related Party Transactions
| A. | Major shareholders |
As at March 1, 2021,31, 2022, the Company had 10,875,56819,199,146 common shares without par value issued and outstanding.
| 1. | Following are the shareholders that are the beneficial owners of 5% or more of the Company’s voting securities, as of March 31, 2022: |
1.Following are the shareholders that are the beneficial owners of 5% or more of the Company’s voting securities, as of March 1, 2021:
Shareholder | Number of Shares | Percentage of Issued Capital |
Joshua Jackson | 1,375,075 | 12.64% |
(1)Includes 713,450 common shares currently held, 316,000 common share purchase warrants exercisable into 316,000 common shares, 125,000 stock options exercisable into 125,000 common shares, and 220,625 vesting into 220,625 common shares.
(b)To the best of the Company's knowledge, there has been no significant change in the percentage ownership held by any major shareholders during the past three fiscal years.
(a)
| Shareholder | Number of Shares | Percentage of Issued Capital |
| Joshua Jackson | 1,059,075 | 5.48% |
| Diamond Platinum Holdings Limited | 1,050,000 | 5.47% |
(c)The Company’s major shareholders do not have different voting rights than other shareholders.
2.The Company’s register of 63 registered shareholders showed that as of March 1, 2021, 4,373,904 of the Company’s common shares, or 40.21%, were held by 22 registered shareholders residing in the United States. The register includes Cede and Co., an American depository holding shares on behalf of beneficial shareholders. However, since the Company meets the Business Contacts Test of the definition of a Foreign Private Issuer, the Company’s status as a Foreign Private Issuer has not changed.
| (1) | Includes 934,075 common shares currently held and 125,000 stock options exercisable into 125,000 common shares. |
3.To the Company’s knowledge, the Company is not owned or controlled, directly or indirectly, by another corporation, any foreign government, or by any other natural or legal persons.
| (b) | To the best of the Company's knowledge, there has been no significant change in the percentage ownership held by any major shareholders during the past three fiscal years. |
4.To the Company’s knowledge, there are no arrangements the operation of which at a subsequent date may result in a change in control of the Company. A substantial number of common shares of the Company are held by depositories, brokerage firms and financial institutions in “street form”.
| (c) | The Company’s major shareholders do not have different voting rights than other shareholders. |
| 2. | The Company’s register of 61 registered shareholders showed that as of May 31, 2021, 7,495,135 of the Company’s common shares, or 51,34%, were held by 20 registered shareholders residing in the United States. The register includes Cede and Co., an American depository holding shares on behalf of beneficial shareholders. |
| 3. | To the Company’s knowledge, the Company is not owned or controlled, directly or indirectly, by another corporation, any foreign government, or by any other natural or legal persons. |
1.The Company has not at any time during the period since the beginning of the last fiscal year to November 30, 2020 been a party to any material transactions in which any director or officer of the Company, or any relative or spouse, or any relative of any such spouse, has any direct or indirect material interest except as follows:
| 4. | To the Company’s knowledge, there are no arrangements the operation of which at a subsequent date may result in a change in control of the Company. A substantial number of common shares of the Company are held by depositories, brokerage firms and financial institutions in “street form”. |
| B. | Related party transactions |
| 1. | The Company has not at any time during the period since the beginning of the last fiscal year to November 30, 2021, been a party to any material transactions in which any director or officer of the Company, or any relative or spouse, or any relative of any such spouse, has any direct or indirect material interest except as follows: |
In November 2020, the Company signed employment agreements with Charlie Brezer, President a director of the Company, and Daniel Cruz, the former CFO and a director of the Company. The agreements require total
payments of $17,500CAD$17,500 each per month each.month. Included in the agreements is a provision for 12 months written notice or salary paid in lieu of notice upon termination without just cause. In April 2021, the employment agreement with Mr. Cruz was cancelled and replaced with a consulting agreement with the same terms.
In January 2021, the Company signed an employment agreement with Ronald Thomson, the CEO of the Company. The agreement requires payments of CAD$20,000 per month. Included in the agreement is: (1) a provision for three months written notice or salary paid in lieu of notice upon termination without just cause and (2) a provision to increase the base salary to CAD$30,000 per month, retroactive to January 1, 2021, upon the Company raising US$5 million in funding (achieved).
During the year ended November 30, 2020,2021, the Company entered into the following transactions with related parties:
| a) | Incurred management and directors salaries and fees of $167,747 (2020 - $158,482) and share-based compensation of $227,312 (2020 - $368,836) to Charlie Brezer. As at November 30, 2021, Mr. Brezer owed the Company $2,215 (2020 – was owed $6,667) which was included in accounts payable and accrued liabilities |
a)Incurred management and directors salaries and fees of $213,500 (2019 - $161,000) to Mr. Brezer and Ispani Holdings Inc., interest expense of $nil (2019 - $5,174), and share-based compensation of $486,936 (2019 - $369,468) to Mr. Brezer. During the year ended November 30, 2019, Mr. Brezer advanced $23,930 (US$18,000) to the Company for the convertible debenture offering. In July 2019, Mr. Brezer converted his debenture into 12,000 units of the Company with each unit consisting of one common share and one share purchase warrant with each warrant entitling the holder to acquire one common share of the Company for US$1.75 up to February 28, 2021. As at November 30, 2020, $8,644 (2019 - $207,625) was included in accounts payable and accrued liabilities as owing to Mr. Brezer.
| b) | Incurred management and directors salaries and fees of $97,664 (2020 - $158,482) and share-based compensation of $166,537 (2020 - $368,836) to Daniel Cruz. As at November 30, 2021, $133,779 (November 30, 2020 - $6,340) was included in accounts payable and accrued liabilities as owing to Mr. Cruz. |
| c) | Incurred management and directors salaries and fees of $264,689 (2020 - $nil) and share-based compensation of $628,834 (2020 - $nil) to Ronald Thomson and rent of $26,407 (2020 - $nil) to Cameron Thomson Group Ltd. a company Mr. Thomson is a director and shareholder of. |
| d) | Incurred management salaries and fees of $nil (2020 - $132,838) to Jesse Sutton and Zift Interactive (“Zift”), a company controlled by Jesse Sutton, the director of Majesco, and salaries of $nil (2020 - $19,000) which is included in discontinued operations. On August 31, 2020, the Company agreed to settle a lawsuit with Mr. Sutton whereby Mr. Sutton agreed to settle $500,000 payable for the acquisition of Majesco, along with $347,186 in consulting fees owed to Mr. Sutton, for $200,000 in cash and the return of the 51% ownership of Majesco. |
| e) | Incurred directors fees of $4,787 (2020 - $4,483) and share-based compensation of $218,069 (2020 - $368,836) to Joshua Jackson, Chairman and a director of the Company. As at November 30, 2021, $9,213 (2020 - $4,463) was included in accounts payable and accrued liabilities as owing to Mr. Jackson. |
| f) | Incurred directors fees of $4,787 (2020 - $4,483) and share-based compensation of $26,010 (2020 - $27,407) to Stephen Jackson, a director of the Company. As at November 30, 2021, Mr. Jackson owed the Company $1,304 (2020 – was owed $1,728) which was included in accounts payable and accrued liabilities. |
| g) | Incurred directors fees of $4,787 (2020 - $4,483) and share-based compensation of $23,546 (2020 - $61,418) to Nancy Basi, a director of the Company. As at November 30, 2021, $1,470 (2020 - $1,703) was included in accounts payable and accrued liabilities as owing to Ms. Basi. |
| h) | Incurred management and directors salaries and fees of $97,796 (2020 - $nil) to Andy Wilson, the new CFO of the Company. As at November 30, 2021, $51,704 (2020 - $nil) was included in accounts payable and accrued liabilities as owing to Mr. Wilson. |
| i) | Incurred management and directors salaries and fees of $46,722 (2020 - $nil) to Scilla Andreen, a director of IndieFlix. As at November 30, 2021, $82,839 (2020 - $nil) was included in accounts payable and accrued liabilities as owing to Ms. Andreen. |
| j) | Earned interest income of $nil (2020 – $416) from a loan receivable issued to Waterproof. The loan receivable was received in full during the year ended November 30, 2020. |
| k) | Earned sales of $331,756 (2020 – $nil) from IndieFlix Foundation, a company Ms. Andreen is a director of. As at November 30, 2021, IndieFlix Foundation owed the Company $308,631 (2020 - $nil) which is included in receivables. |
b)Incurred management and directors salaries and fees of $213,500 (2019 - $161,000) to Mr. Cruz and Wawel Den Inc., and share-based compensation of $486,936 (2019 - $369,468) to Mr. Cruz. During the year ended November 30, 2019, Mr. Cruz advanced $93,060 (USD$70,000) to the Company for the convertible debenture offering. In July 2019, Mr. Cruz converted his debenture into 46,667 units of the Company with each unit consisting of one common share and one share purchase warrant with each warrant entitling the holder to acquire one common share of the Company for US$1.75 up to February 28, 2021. As at November 30, 2020, $8,220 (2019 - $20,460) was included in accounts payable and accrued liabilities as owing to Mr. Cruz.
| l) | Paid royalties, included in cost of sales, of $171,003 (2020 - $nil) to Angst, LLC, an entity managed by IndieFlix, and received royalty income of $9,241 (2020 - $nil). At November 30, 2021, $184,627 2020 - $nil) was included in accounts payable and accrued liabilities as owing Angst, LLC. |
c)Incurred management salaries and fees of $199,000 (2019 - $266,000) to Jesse Sutton and Zift Interactive. On August 31, 2020, the Company agreed to settle a lawsuit with Mr. Sutton whereby Mr. Sutton agreed to settle $652,061 (US$500,000) payable for the acquisition of Majesco, along with $452,772 in consulting fees owed to Mr. Sutton, for $260,824 (US$200,000) in cash and the return of the 51% ownership of Majesco. As at November 30, 2020, $nil (2019 - $908,970) was included in accounts payable and accrued liabilities as owing to Mr. Sutton and Zift.
| m) | Paid royalties, included in cost of sales, of $38,112 (2020 - $nil) to LIKE, LLC, an entity managed by IndieFlix. At November 30, 2021, LIKE, LLC owed the Company $49,566 (2020 - $nil) which is included in receivables. |
d)Incurred directors fees of $6,000 (2019 - $6,000) and share-based compensation of $486,936 (2019 - $28,326) to Joshua Jackson. During the year ended November 30, 2019, Mr. Jackson advanced $664,717 (US$500,000) to the Company for the convertible debenture offering. In April 2020, Mr. Jackson converted his debenture and accrued interest of $14,941 into 340,384 units of the Company with each unit consisting of one common share and one share purchase warrant with each warrant entitling the holder to acquire one common share of the Company for US$1.75 up to February 28, 2021. As at November 30, 2020, $5,786 (2019 - $144,900) was included in accounts payable and accrued liabilities as owing to Mr. Jackson.
e)Incurred directors fees of $6,000 (2019 - $6,000) and share-based compensation of $35,989 (2019 - $123,156) to Stephen Jackson. As at November 30, 2020, $2,240 (2019 - $6,000) was included in accounts payable and accrued liabilities as owing to Mr. Jackson.
f)Incurred directors fees of $6,000 (2019 - $3,500) and share-based compensation of $81,659 (2019 - $nil) to Nancy Basi. As at November 30, 2020, $2,208 (2019 - $3,500) was included in accounts payable and accrued liabilities as owing to Ms. Basi.
g)Earned interest income of $416 (2019 – $8,137) from a loan receivable issued to Waterproof. As at November 30, 2020, Waterproof owed the Company $nil (2019 - $94,882) for the outstanding balance of principal and interest on the loan.
| n) | Paid royalties, included in cost of sales, of $30,855 (2020 - $nil) to Bully Factor, LLC, an entity managed by IndieFlix. At November 30, 2021, Bully Factor, LLC owed the Company $41,656 (2020 - $nil) which is included in receivables. |
Summary of key management personnel compensation:
| For the year ended November 30, | For the year ended November 30, | ||||||||
| 2020 | 2019 | 2021 | 2020 | ||||||
| $ | $ | $ | |||||||
Management and directors salaries and fees | 625,000 | 577,500 | 688,979 | 463,251 | ||||||
Management and directors salaries and fees in discontinued operations | 19,000 | 26,000 | - | 19,000 | ||||||
Share-based compensation | 1,578,456 | 890,418 | 1,290,308 | 1,195,333 | ||||||
Interest expense | - | 5,174 | ||||||||
|
| 1,979,287 | 1,677,584 | |||||||
| 2,222,456 | 1,499,092 | ||||||||
These expenditures were measured by amounts agreed upon by the transacting parties.
The Company believes that the services described above were provided to the Company on a basis not less favorable than would be provided to an unrelated third party.
C.Interest of experts and counsel
| C. | Interest of experts and counsel |
This Item is not applicable for an Annual Report.
Item 8. – Financial Information
A.Consolidated Statements and Other Financial Information.
| A. | Consolidated Statements and Other Financial Information. |
Please see “Item“Item 18 - Financial Statements”Statements” for a list of the financial statements filed as part of this Annual Report.
As at November 30, 2020,2021, the Company was not subject to any legal proceedings or claims.
In February 2021, Waterproof commenced an action against the Company in which the Plaintiff claimsclaimed that the Company misrepresented facts to Waterproof, inducing Waterproof to enter the Amended and Restated Shareholder Agreement (ARSA)(“ARSA”) with the Company. As a result, Waterproof claimsclaimed that it hashad the right to purchase the Waterproof shareholdings from the Company at a fair market value as of May 17, 2019 in accordance with a calculation included in the ARSA. The Company disputes and denies this claim. The action is in its earliest stages andIn March 2021, the Company has not hadfiled a response disputing the opportunity to file a response.
In October 2021, the Company intendsentered into a definitive settlement agreement (the “Settlement Agreement”) with three shareholders (the “Waterproof Shareholders”) of Waterproof terminating litigation among them in respect of the Company’s interest in Waterproof (the “Claim”). Pursuant to consider dividend distributions when it determines that it cannot realize better returns to investors by investing internally.
On August 31, 2020,the Settlement Agreement, the Company agreed to settletransfer its interest in Waterproof to or for the benefit of the Waterproof Shareholders in consideration of a lawsuit with Jesse Sutton,cash payment of CAD$825,000 to the director of Majesco, whereby Mr. SuttonCompany, and the Waterproof Shareholders agreed to settle $652,061 (US$500,000) payable fordismiss the acquisitionClaim on a without cost basis. The Agreement also included customary mutual releases.
Dividend Distributions
We have never declared or paid cash dividends on our common shares and do not expect to do so in the foreseeable future. The declaration of Majesco, along with $452,772dividends is subject to the discretion of our board of directors and will depend on various factors, including our operating results, financial condition, future prospects and any other factors deemed relevant by our board of directors.
| B. | Significant Changes |
Subsequent to the year ended November 30, 2021, the Company entered into definitive agreements and completed the acquisitions of iGEMS and DCU, as more particularly described in consulting fees owed to Mr. Sutton, for $260,824 (US$200,000) in cashItem 4.A. History and the returnDevelopment of the 51% ownership of Majesco. Upon signing of the agreement, the Majesco operations were considered discontinued and the balances were reclassified as such.Company herein.
Item 9. – The Offer and Listing
| A. | Offer and listing details. |
This item is not applicable for an Annual Report.
| B. | Plan of Distribution |
This item is not applicable for an Annual Report.
This item is not applicable for an Annual Report. This item is not applicable for an Annual Report. This item is not applicable for an Annual Report. Item 10. – Additional Information This item is not applicable for an Annual Report. All other information required by this “Item 10.B” is contained in Exhibit 2(d) incorporated by reference. Canada has no system of exchange controls. There are no exchange restrictions on borrowing from foreign countries or on the remittance of dividends, interest, royalties and similar payments, management fees, loan repayments, settlement of trade debts, or the repatriation of capital. Any such remittances to U.S. residents, however, may be subject to withholding tax. A brief and general description is included below of certain taxes, including withholding taxes, to which U.S. security holders may be subject under the existing tax laws and regulations of Canada. The consequences, if any, of provincial taxes are not considered. Please note that the following information is a brief summary only and security holders should seek the advice of their own tax advisors with respect to the applicability or effect on their own individual circumstances of the matters referred to herein and of any U.S. federal, state or local taxes. Taxation on Dividends Generally, cash dividends paid or deemed to be paid by a Canadian-corporation to non-resident shareholders are subject to a withholding tax of 25% (unless an income tax convention applies to reduce the withholding tax rate to some other amount). Dividends paid to U.S. residents are subject to a withholding tax of 15%, and dividends paid to a U.S. resident company which owns 10% or more of the voting shares of the Canadian corporation are subject to a withholding tax of 5%. Dividends paid by a Canadian corporation to shareholders residing in Canada are not subject to withholding tax. Taxation on Capital Gains Generally, the disposition by a non-resident of shares of a Canadian public corporation is not subject to Canadian income tax, unless such shares are “taxable Canadian property” within the meaning of the Income Tax Act (Canada) and no relief is afforded under any applicable tax treaty. The shares of the Company would be taxable Canadian property of a non-resident purchaser if the non-resident purchaser used the shares in carrying on a business in Canada, or if the non-resident, together with persons with whom he does not deal at arm’s length, owned 25% or more of the issued shares of any class of the capital stock of the Canadian corporation at any time during the five-year period immediately preceding the disposition. In addition, Canada may tax capital gains realized by an individual resident in the United States on the disposition of shares of a Canadian corporation if the following conditions are met: Holders of common shares of the Company should seek independent advice from their own professional tax advisers with respect to the income tax consequences arising from the holding of common shares of the Company. Certain United States Federal Income Tax Considerations The following is a general summary of certain material U.S. federal income tax considerations applicable to a U.S. Holder (as defined below) arising from the acquisition and disposition of the common shares. This summary applies only to U.S. Holders who hold common shares as capital assets (generally, property held for investment). This summary is for general information purposes only and does not purport to be a complete analysis or listing of all potential U.S. federal income tax considerations that may apply to a U.S. Holder as a result of the ownership and disposition of common shares. In addition, this summary does not take into account the individual facts and circumstances of any particular U.S. Holder that may affect the U.S. federal income tax consequences to such U.S. Holder, including specific tax consequences to a U.S. Holder under an applicable tax treaty. Accordingly, this summary is not intended to be, and should not be construed as, legal or U.S. federal income tax advice with respect to any particular U.S. Holder. In addition, this summary does not address the U.S. federal alternative minimum, U.S. federal estate and gift, U.S. Medicare contribution, U.S. state and local, or non-U.S. tax consequences of the acquisition, ownership or disposition of common shares. Except as specifically set forth below, this summary does not discuss applicable tax reporting requirements. Each U.S. Holder should consult its own tax advisor regarding all U.S. federal, U.S. state and local and non-U.S. tax consequences of the acquisition, ownership, or disposition of common shares. No opinion from U.S. legal counsel or ruling from the Internal Revenue Service (the “IRS”) has been requested, or will be obtained, regarding the U.S. federal income tax consequences of the acquisition, ownership or disposition of common shares. This summary is not binding on the IRS, and the IRS is not precluded from taking a position that is different from, and contrary to, any position taken in this summary. In addition, because the authorities upon which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the positions taken in this summary. Scope of This Disclosure Authorities. This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasury Regulations (whether final, temporary, or proposed), published rulings of the IRS, published administrative positions of the IRS, the Convention Between Canada and the United States of America with Respect to Taxes on Income and on Capital, signed September 26, 1980, as amended (the “Canada-U.S. Tax Convention”), and U.S. court decisions that are applicable and, in each case, as in effect and available, as of the date hereof. Any of the authorities on which this summary is based could be changed in a material and adverse manner at any time, and any such change could be applied on a retroactive or prospective basis which could affect the U.S. federal income tax considerations described in this summary. This summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis. U.S. Holders. For purposes of this summary, the term “U.S. Holder” means a beneficial owner of common shares that is for U.S. federal income tax purposes: Non-U.S. Holders. For purposes of this summary, a “non-U.S. Holder” is a beneficial owner of common shares that is not a partnership (or other “pass-through” entity) for U.S. federal income tax purposes and is not a U.S. Holder. This summary does not address the U.S. federal income tax considerations applicable to non-U.S. Holders arising from the acquisition, ownership or disposition of common shares. Accordingly, a non-U.S. Holder should consult its own tax advisor regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences (including the potential application of and operation of any income tax treaties) relating to the purchase of the common shares pursuant to the acquisition, ownership or disposition of common shares. Transactions Not Addressed. This summary does not address the tax consequences of transactions effected prior or subsequent to, or concurrently with, any purchase of the securities (whether or not any such transactions are undertaken in connection with the purchase of the securities), other than the U.S. federal income tax considerations to U.S. Holders of the acquisition of common shares and the ownership and disposition of such common shares. U.S. Holders Subject to Special U.S. Federal Income Tax Rules Not Addressed This summary does not address the U.S. federal income tax considerations of the acquisition, ownership, or disposition of common shares by U.S. Holders that are subject to special provisions under the Code, including, but not limited to, the following: (a) tax-exempt organizations, qualified retirement plans, individual retirement accounts, or other tax-deferred accounts; (b) financial institutions, underwriters, insurance companies, real estate investment trusts, or regulated investment companies; (c) broker-dealers, dealers, or traders in securities or currencies that elect to apply a “mark-to-market” accounting method; (d) U.S. Holders that have a “functional currency” other than the U.S. dollar; (e) U.S. Holders that own common shares as part of a straddle, hedging transaction, conversion transaction, constructive sale, or other arrangement involving more than one position; (f) U.S. Holders that acquire common shares in connection with the exercise of employee stock options or otherwise as compensation for services; (g) U.S. Holders that hold common shares other than as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment purposes); (h) U.S. Holders that own directly, indirectly, or by attribution, 10% or more, by voting power or value, of the outstanding stock of the Company; and (i) U.S. Holders subject to Section 451(b) of the Code. This summary also does not address the U.S. federal income tax considerations applicable to U.S. Holders who are: (a) U.S. expatriates or former long-term residents of the U.S.; (b) persons that have been, are, or will be a resident or deemed to be a resident in Canada for purposes of the Tax Act; (c) persons that use or hold, will use or hold, or that are or will be deemed to use or hold common shares in connection with carrying on a business in Canada; (d) persons whose common shares constitute “taxable Canadian property” under the Tax Act; or (e) persons that have a permanent establishment in Canada for purposes of the Canada-U.S. Tax Convention. U.S. Holders that are subject to special provisions under the Code, including U.S. Holders described immediately above, should consult their own tax advisors regarding all U.S. federal, U.S. state and local, and non-U.S. tax consequences (including the potential application and operation of any income tax treaties) relating to the acquisition, ownership, or disposition of common shares. If an entity or arrangement that is classified as a partnership (or other “pass-through” entity) for U.S. federal income tax purposes holds common shares, the U.S. federal income tax consequences to such partnership and the partners (or other owners) of such partnership of the acquisition, ownership, or disposition of the common shares generally will depend on the activities of the partnership and the status of such partners (or other owners). This summary does not address the U.S. federal income tax consequences for any such partner or partnership (or other “pass-through” entity or its owners). Owners of entities and arrangements that are classified as partnerships (or other “pass-through” entities) for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences of the acquisition, ownership, or disposition of common shares. Distributions on Common Shares As stated above, we have never paid a dividend and have no intention of paying a dividend. Subject to the PFIC rules discussed below, a U.S. Holder that receives a distribution, including a constructive distribution, with respect to Common Shares will be required to include the amount of such distribution in gross income as a dividend (without reduction for any Canadian income tax withheld from such distribution) to the extent of the current or accumulated “earnings and profits” of the Company, as computed for U.S. federal income tax purposes. To the extent that a distribution exceeds the current and accumulated “earnings and profits” of the Company, such distribution will be treated first as a tax-free return of capital to the extent of a U.S. Holder’s tax basis in the common shares and thereafter as gain from the sale or exchange of such common shares (see “Sale or Other Taxable Disposition of Common Shares” below). However, the Company may not maintain calculations of earnings and profits in accordance with U.S. federal income tax principles, and each U.S. Holder should therefore assume that any distribution by the Company with respect to the common shares will be reported to them as a dividend. Dividends received on the common shares generally will not be eligible for the “dividends received deduction” available to U.S. corporate shareholders receiving dividends from U.S. corporations. If the Company is eligible for the benefits of the Canada-U.S. Tax Convention, or another qualifying income tax treaty with the United States that includes an exchange of information program which the U.S. Treasury Department has determined is satisfactory for these purposes, or its shares are readily tradable on an established securities market in the U.S., dividends paid by the Company to non-corporate U.S. Holders generally will be eligible for the preferential tax rates applicable to long-term capital gains, provided certain holding period and other conditions are satisfied, including that the Company not be classified as a PFIC in the tax year of distribution or in the preceding tax year. The dividend rules are complex, and each U.S. Holder should consult its own tax advisor regarding the application of such rules. Sale or Other Taxable Disposition of Common Shares Subject to the PFIC rules discussed below, upon the sale or other taxable disposition of common shares, a U.S. Holder generally will recognize a capital gain or loss in an amount equal to the difference between the amount of cash plus the fair market value of any property received and such U.S. Holder’s tax basis in the common shares sold or otherwise disposed of. Such capital gain or loss will generally be a long-term capital gain or loss if, at the time of the sale or other taxable disposition, the U.S. Holder’s holding period for the common shares is more than one year. Preferential tax rates apply to long-term capital gains of non-corporate U.S. Holders. Deductions for capital losses are subject to significant limitations under the Code. A U.S. Holder’s tax basis in common shares generally will be such U.S. Holder’s U.S. dollar cost for such common shares. PFIC Status of the Company The Company has not performed an analysis of whether or not it was or will be deemed a PFIC for its prior and current taxable years. If the Company is or becomes a PFIC, the foregoing description of the U.S. federal income tax consequences to U.S. Holders of the ownership of Common Shares will be different. The U.S. federal income tax consequences of owning and disposing of common shares if the Company is or becomes a PFIC are described below under the heading “Tax Consequences if the Company is a PFIC.” A non-U.S. corporation is a PFIC for each tax year in which (i) 75% or more of its gross income is passive income (as defined for U.S. federal income tax purposes) (the “income test”) or (ii) 50% or more (by value) of its assets (based on an average of the quarterly values of the assets during such tax year) either produce or are held for the production of passive income (the “asset test”). For purposes of the PFIC provisions, “gross income” generally includes sales revenues less cost of goods sold, plus income from investments and from incidental or other operations or sources, and “passive income” generally includes dividends, interest, certain rents and royalties, certain gains from commodities or securities transactions and the excess of gains over losses from the disposition of certain assets which product passive income. If a non-U.S. corporation owns at least 25% (by value) of the stock of another corporation, the non-U.S. corporation is treated, for purposes of the income test and asset test, as owning its proportionate share of the assets of the other corporation and as receiving directly its proportionate share of the other corporation’s income. Under certain attribution and indirect ownership rules, if the Company is a PFIC, U.S. Holders will generally be deemed to own their proportionate share of the Company’s direct or indirect equity interest in any company that is also a PFIC (a “Subsidiary PFIC”), and will be subject to U.S. federal income tax on their proportionate share of (a) any “excess distributions,” as described below, on the stock of a Subsidiary PFIC and (b) a disposition or deemed disposition of the stock of a Subsidiary PFIC by the Company or another Subsidiary PFIC, both as if such U.S. Holders directly held the shares of such Subsidiary PFIC. In addition, U.S. Holders may be subject to U.S. federal income tax on any indirect gain realized on the stock of a Subsidiary PFIC on the sale or disposition of common shares. Accordingly, U.S. Holders should be aware that they could be subject to tax even if no distributions are received and no redemptions or other dispositions of the Company’s common shares are made. The determination of PFIC status is inherently factual, is subject to a number of uncertainties, and can be determined only annually at the close of the tax year in question. Additionally, the analysis depends, in part, on the application of complex U.S. federal income tax rules, which are subject to differing interpretations. There can be no assurance that the Company will or will not be determined to be a PFIC for the current tax year or any prior or future tax year, and no opinion of legal counsel or ruling from the IRS concerning the status of the Company as a PFIC has been obtained or will be requested. U.S. Holders should consult their own U.S. tax advisors regarding the PFIC status of the Company. Tax Consequences if the Company is a PFIC If the Company is a PFIC for any tax year during which a U.S. Holder holds common shares, special rules may increase such U.S. Holder’s U.S. federal income tax liability with respect to the ownership and disposition of such common shares. If the Company is a PFIC for any tax year during which a U.S. Holder owns common shares, the Company will be treated as a PFIC with respect to such U.S. Holder for that tax year and for all subsequent tax years, regardless of whether the Company meets the income test or the asset test for such subsequent tax years, unless the U.S. Holder makes a “deemed sale” election with respect to the common shares. If the election is made, the U.S. Holder will be deemed to sell the common shares it holds at their fair market value on the last day of the last taxable year in which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC excess distribution regime. After the deemed sale election, the U.S. Holder’s common shares would not be treated as shares of a PFIC unless the Company subsequently becomes a PFIC. U.S. Holders should consult their own U.S. tax advisors regarding the availability and desirability of a deemed sale election. Under the default PFIC rules: A U.S. Holder that makes a timely and effective “mark-to-market” election under Section 1296 of the Code (a “Mark-to-Market Election”) or a timely and effective election to treat the Company and each Subsidiary PFIC as a “qualified electing fund” (a “QEF”) under Section 1295 of the Code (a “QEF Election”) may generally mitigate or avoid the default PFIC rules described above with respect to common shares U.S. Holders should be aware that there can be no assurance that the Company has satisfied or will satisfy the recordkeeping requirements that apply to a QEF or that the Company has supplied or will supply U.S. Holders with information such U.S. Holders require to report under the QEF rules in the event that the Company is a PFIC for any tax year. A timely and effective QEF Election requires a U.S. Holder to include currently in gross income each year its pro rata share of the Company’s ordinary earnings and net capital gains, regardless of whether such earnings and gains are actually distributed. Thus, a U.S. Holder could have a tax liability with respect to such ordinary earnings or gains without a corresponding receipt of cash from the Company. If the Company is a QEF with respect to a U.S. Holder, the U.S. Holder’s basis in the common shares will be increased to reflect the amount of the taxed but undistributed income. Distributions of income that had previously been taxed will result in a corresponding reduction of basis in the common shares and will not be taxed again as a distribution to a U.S. Holder. Taxable gains on the disposition of common shares by a U.S. Holder that has made a timely and effective QEF Election are generally capital gains. A U.S. Holder must make a QEF Election for the Company and each Subsidiary PFIC if it wishes to have this treatment. To make a QEF Election, a U.S. Holder will need to have an annual information statement from the Company setting forth the ordinary earnings and net capital gains for the year and the Company may not provide this statement, in which case a QEF Election cannot be made. In general, a U.S. Holder must make a QEF Election on or before the due date for filing its income tax return for the first year to which the QEF Election will apply. Under applicable Treasury Regulations, a U.S. Holder will be permitted to make retroactive elections in particular, but limited, circumstances, including if it had a reasonable belief that the Company was not a PFIC and did not file a protective election. If a U.S. Holder owns PFIC stock indirectly through another PFIC, separate QEF Elections must be made for the PFIC in which the U.S. Holder is a direct shareholder and the Subsidiary PFIC for the QEF rules to apply to both PFICs. Each U.S. Holder should consult its own tax advisor regarding the availability and desirability of, and procedure for, making a timely and effective QEF Election (including a “pedigreed” QEF election where necessary) for the Company and any Subsidiary PFIC. Alternatively, a Mark-to-Market Election may be made with respect to “marketable stock” in a PFIC if the stock is “regularly traded” on a “qualified exchange or other market” (within the meaning of the Code and the applicable U.S. Treasury Regulations). A class of stock that is traded on one or more qualified exchanges or other markets is considered to be “regularly traded” for any calendar year during which such class of stock is traded in other than de minimis quantities on at least 15 days during each calendar quarter. If the common shares are considered to be “regularly traded” within this meaning, then a U.S. Holder generally will be eligible to make a Mark-to-Market Election with respect to its common shares. However, there is no assurance that the common shares will be or remain “regularly traded” for this purpose. A Mark-to-Market Election may not be made with respect to the stock of any Subsidiary PFIC. Hence, a Mark-to-Market Election will not be effective to eliminate the application of the default PFIC rules, described above, with respect to deemed dispositions of Subsidiary PFIC stock, or excess distributions with respect to a Subsidiary PFIC. A U.S. Holder that makes a timely and effective Mark-to-Market Election with respect to common shares generally will be required to recognize as ordinary income in each tax year in which the Company is a PFIC an amount equal to the excess, if any, of the fair market value of such shares as of the close of such taxable year over the U.S. Holder’s adjusted tax basis in such shares as of the close of such taxable year. A U.S. Holder’s adjusted tax basis in the common shares generally will be increased by the amount of ordinary income recognized with respect to such shares. If the U.S. Holder’s adjusted tax basis in the common shares as of the close of a tax year exceeds the fair market value of such shares as of the close of such taxable year, the U.S. Holder generally will recognize an ordinary loss, but only to the extent of net mark-to-market income recognized with respect to such shares for all prior taxable years. A U.S. Holder’s adjusted tax basis in its common shares generally will be decreased by the amount of ordinary loss recognized with respect to such shares. Any gain recognized upon a disposition of the common shares generally will be treated as ordinary income, and any loss recognized upon a disposition generally will be treated as an ordinary loss to the extent of net mark-to-market income recognized for all prior taxable years. Any loss recognized in excess thereof will be taxed as a capital loss. Capital losses are subject to significant limitations under the Code. Each U.S. Holder should consult its own tax advisor regarding the availability and desirability of, and procedure for, making a timely and effective Mark-to-Market Election with respect to the common shares. Foreign Tax Credit A U.S. Holder that pays (whether directly or through withholding) Canadian income tax in connection with the ownership or disposition of common shares may (under certain circumstances) be entitled to receive either a deduction or a credit for such Canadian income tax paid generally at the election of such U.S. Holder. Generally, a credit will reduce a U.S. Holder’s U.S. federal income tax liability on a dollar-for-dollar basis, whereas a deduction will reduce a U.S. Holder’s income subject to U.S. federal income tax. This election is made on a year-by-year basis and applies to all creditable foreign taxes paid (whether directly or through withholding) by a U.S. Holder during a year. Complex limitations apply to the foreign tax credit, including the general limitation that the credit cannot exceed the proportionate share of a U.S. Holder’s U.S. federal income tax liability that such U.S. Holder’s “foreign source” taxable income bears to such U.S. Holder’s worldwide taxable income. In applying this limitation, a U.S. Holder’s various items of income and deduction must be classified, under complex rules, as either “foreign source” or “U.S. source.” Generally, dividends paid by a non-U.S. corporation should be treated as foreign source for this purpose, and gains recognized on the sale of securities of a non-U.S. corporation by a U.S. Holder should be treated as U.S. source for this purpose, except as otherwise provided in an applicable income tax treaty and if an election is properly made under the Code. However, the amount of a distribution with respect to the common shares that is treated as a “dividend” may be lower for U.S. federal income tax purposes than it is for Canadian federal income tax purposes, resulting in a reduced foreign tax credit allowance to a U.S. Holder. In addition, this limitation is calculated separately with respect to specific categories of income. The foreign tax credit rules are complex, and each U.S. Holder should consult its own U.S. tax advisor regarding the foreign tax credit rules. Special rules apply to the amount of foreign tax credit that a U.S. Holder may claim on a distribution, including a constructive distribution, from a PFIC. Subject to such special rules, non-U.S. taxes paid with respect to any distribution in respect of stock in a PFIC are generally eligible for the foreign tax credit. The rules relating to distributions by a PFIC and their eligibility for the foreign tax credit are complicated, and a U.S. Holder should consult its own tax advisor regarding their application to the U.S. Holder. Receipt of Foreign Currency The amount of any distribution or proceeds paid in Canadian dollars to a U.S. Holder in connection with the ownership of common shares, or on the sale or other taxable disposition of common shares will be included in the gross income of a U.S. Holder as translated into U.S. dollars calculated by reference to the exchange rate prevailing on the date of actual or constructive receipt of the payment, regardless of whether the Canadian dollars are converted into U.S. dollars at that time. If the Canadian dollars received are not converted into U.S. dollars on the date of receipt, a U.S. Holder will have a basis in the Canadian dollars equal to their U.S. dollar value on the date of receipt. Any U.S. Holder who receives payment in Canadian dollars and engages in a subsequent conversion or other disposition of the Canadian dollars may have a foreign currency exchange gain or loss that would generally be treated as ordinary income or loss, and generally will be U.S. source income or loss for foreign tax credit purposes. Different rules apply to U.S. Holders who use the accrual method with respect to foreign currency. Each U.S. Holder should consult its own U.S. tax advisor regarding the U.S. federal income tax consequences of receiving, owning, and disposing of Canadian dollars. Information Reporting; Backup Withholding Under U.S. federal income tax law, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a non-U.S. corporation. For example, U.S. return disclosure obligations (and related penalties) are imposed on individuals who are U.S. Holders that hold certain specified foreign assets in excess of certain threshold amounts. The definition of “specified foreign financial assets” includes not only financial accounts maintained in non-U.S. financial institutions, but also, if held for investment and not in an account maintained by certain financial institutions, any stock or security issued by a non-U.S. person, any financial instrument or contract that has an issuer or counterparty other than a U.S. person and any interest in a non-U.S. entity. A U.S. Holder may be subject to these reporting requirements unless such U.S. Holder’s common shares are held in an account at certain financial institutions. Penalties for failure to file certain of these information returns are substantial. U.S. Holders should consult with their own tax advisors regarding the requirements of filing information returns on IRS Form 8938, and, if applicable, filing obligations relating to the PFIC rules, including possible reporting on an IRS Form 8621. Payments made within the U.S. or by a U.S. payor or U.S. middleman of (a) distributions on the common shares, and (b) proceeds arising from the sale or other taxable disposition of common shares generally will be subject to information reporting. In addition, backup withholding, currently at a rate of 24%, may apply to such payments if a U.S. Holder (a) fails to furnish such U.S. Holder’s correct U.S. taxpayer identification number (generally on IRS Form W-9), (b) furnishes an incorrect U.S. taxpayer identification number, (c) is notified by the IRS that such U.S. Holder has previously failed to properly report items subject to backup withholding, or (d) fails to certify, under penalty of perjury, that such U.S. Holder has furnished its correct U.S. taxpayer identification number and that the IRS has not notified such U.S. Holder that it is subject to backup withholding. Certain exempt persons generally are excluded from these information reporting and backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the U.S. backup withholding rules will be allowed as a credit against a U.S. Holder’s U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner. The information reporting and backup withholding rules may apply even if, under the Canada-U.S. Tax Convention, payments are eligible for a reduced withholding rate. The discussion of reporting requirements set forth above is not intended to constitute an exhaustive description of all reporting requirements that may apply to a U.S. Holder. A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax, and, under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder should consult its own tax advisor regarding the information reporting and backup withholding rules. 66 THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL U.S. TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE OWNERSHIP, EXERCISE OR DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN THEIR PARTICULAR CIRCUMSTANCES. This item is not applicable for an Annual Report. This item is not applicable for an Annual Report. Copies of documents concerning the Company, which are referred to in this Annual Report, are available for inspection at the head office of the Company located at 67 East 5th Avenue, Vancouver, BC, V5T 1G7. This item is not applicable for an Annual Report. Item 11. – Quantitative and Qualitative Disclosures About Market Risk The Company is exposed to a variety of financial risks by virtue of its activities including currency, credit, interest rate, and liquidity risk. Foreign currency exchange rate risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. The Company’s operations are carried out in Canada and the United States. As the Company’s functional currency is USD, the Company is subject to foreign currency exchange rate risk on its net assets denominated in CAD which could have an adverse effect on the profitability of the Company. As at November 30, 2021, the Company had assets totaling CAD$1,237,451 and liabilities totalling CAD$768,677. A 10% change in the exchange rate would change comprehensive income/loss by approximately $37,000. The Company currently does not have plans to enter into foreign currency future contracts to mitigate this risk, however it may do so in the future. Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company’s cash is held in large Canadian and United States financial institutions. The Company maintains certain cash deposits with Schedule I financial institutions, which from time to time may exceed federally insured limits. The Company has not experienced any significant credit losses and believes it is not exposed to any significant credit risk. The Company’s sales tax receivable is due from the Government of Canada; therefore, the credit risk exposure is low. The maximum exposure to credit risk as at November 30, 2021 is the carrying value of the receivables and loans receivable. The Company has allowed for an expected credit loss of $356,070 on the loans receivable as at November 30, 2021. During the year ended November 30, 2021, the Company increased the allowance by $101,085 which is included in the consolidated statements of comprehensive loss. Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company does not hold any financial liabilities with variable interest rates. The Company’s ability to continue as a going concern is dependent on management’s ability to raise required funding through future equity issuances and through short-term borrowing. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and the Board of Directors are actively involved in the review, planning and approval of significant expenditures and commitments. As at November 30, 2021, the Company had a cash balance of $4,305,461 to settle current financial liabilities of $2,252,635. The Company is exposed to liquidity risk. Item 12. – Description of Securities Other than Equity Securities This item is not applicable for an Annual Report, except for “Item 12.D.3” and “Item 12.D.4.” The Company does not have securities represented by American Depositary Receipts. PART II Item 13. – Defaults, Dividend Arrearages and Delinquencies None. Item 14. – Material Modifications to the Rights of Security Holders and Use of Proceeds Item 15. – Controls and Procedures Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 20-F. Based on this evaluation, our management concluded that as of the end of the period covered by this Annual Report on Form 20-F, our disclosure controls and procedures were Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of November 30, 69 Limitations on Effectiveness of Controls Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. The Company’s Board of Directors has determined that all three members of its Audit Committee, Stephen Jackson, Joshua Jackson, and Nancy Basi, satisfy the requirements of “audit committee financialexpert”. Stephen Jackson, Joshua Jackson and Nancy Basi are independent directors. For details on their professional careers, and for further information regarding the Company’s Audit Committee, see “Item 6.A” and “Item 6.C” above. The Company has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) that applies to the Company’s directors, officers and employees. A copy of this Code of Ethics was filed with the SEC on June 1, 2005 and is incorporated by reference. Copies will be provided at no charge upon request to the Company at The Company’s independent auditor for the fiscal year ended November 30, The Audit Committee approves all audit, audit-related services, tax services and other services provided by the auditor. Any services provided by auditor that are not specifically included within the scope of the audit must be pre-approved by the Audit Committee in advance of any engagement. Under the Sarbanes-Oxley Act of 2002, audit committees are permitted to approve certain fees for audit-related services, tax services and other services pursuant to a de minimus exception prior to the completion of an audit engagement. None of the fees paid to Davidson & Company LLP were approved pursuant to the de minimus exception. The aggregate fees billed by the Company’s external auditors Fiscal Year Audit Fees Audit Related Fees Tax Fees All Other Fees November 30, 2020 $150,312 Nil Nil $106,079 November 30, 2019 $153,004 Nil Nil Nil None. Item 16F. – Change in Registrant’s Certifying None. The Company is a foreign private issuer, and our common shares are listed on Shareholder Approval Requirements NASDAQ Marketplace Rule 5635 requires each issuer to obtain shareholder approval prior to certain dilutive events, including a transaction other than a public offering involving the sale of 20% or more of the issuer’s common shares outstanding prior to the transaction for less than the greater of book or market value of the stock. The Company does not follow this NASDAQ Marketplace Rule. Instead, and in accordance with the NASDAQ exemption, the Company complies with British Columbia corporate and securities laws which do not require shareholder approval for dilutive events unless the Company were to dispose of all or substantially all of its undertaking. In addition, Compensation Committee Requirements NASDAQ Marketplace Rule 5605(d) requires that all companies must have a compensation committee charter and a compensation committee consisting of at least two members, and each compensation committee member must be an independent director. The Company currently does not have a compensation committee or a compensation committee charter as it follows British Columbia corporate and securities laws with respect to the compensation of the officers of the Company. Board of Director Nomination Requirements NASDAQ Marketplace Rule 5605(e) requires Board of Director nominations must be either selected, or recommended for the Board's selection, by either a nominating committee comprised solely of independent directors or by a majority of the independent directors. The Company currently has a nominating committee and follows British Columbia corporate and securities laws with respect to the nomination and selection of directors. The directors of the Company are divided into three classes designated as Class I, Class II and Class III, to provide for a rotation of three-year terms of office, with a class renewed at the each annual general meeting of the shareholders of the Company or until their successors in office are duly elected or appointed. Not applicable. PART III Item 17. – Financial Statements The following financial statements pertaining to the Company are filed as part of this Annual Report: Report of Independent Registered Public Accounting Firm (Davidson & Company LLP, Vancouver, British Columbia; PCAOB ID #731) Consolidated Statements of Financial Position Consolidated Statements of Loss and Comprehensive Loss Consolidated Statements of Cash Flows Consolidated Statements of Changes in Shareholders’ Equity Notes to the Consolidated Financial Statements LIQUID MEDIA GROUP LTD. Consolidated Financial Statements For the years ended November 30, 2021, 2020, (Expressed in Liquid Media Group Ltd. Table of Contents (Expressed in Report of Independent Registered Public Accounting Firm To the Shareholders and Directors of Liquid Media Group Ltd. Note November 30, November 30, 2019 $ $ ASSETS Current assets Cash 704,977 4,587,405 Restricted cash 4 - 672,663 Receivables 6 238,059 698,361 Prepaids 7 527,594 296,352 Loans receivable 8 - 94,882 1,470,630 6,349,663 Loans receivable 8 110,102 233,837 Licenses 9 914,760 1,840,836 Investment in equity instruments 11 3,845,598 1,551,324 Equipment 12 140,353 123,305 Intangible assets 13 5,564,426 1,707,959 Goodwill 14 - 3,582,548 12,045,869 15,389,472 LIABILITIES Current liabilities Accounts payable and accrued liabilities 15 1,284,452 4,367,381 Loans payable 16,21 639,293 1,437,933 Convertible debentures 17,21 531,519 - Current portion of long-term debt 18 8,991 - 2,464,255 5,805,314 Convertible debentures 17,21 - 1,388,402 Long-term debt 18 42,945 - Deferred income taxes 27 - 23,163 Derivative liability 19 - 1,102,277 2,507,200 8,319,156 SHAREHOLDERS' EQUITY Share capital 19 29,999,645 21,118,940 Commitment to issue shares 19 574,457 137,197 Reserves 19 3,633,057 2,166,098 Accumulated other comprehensive income 4,304 303,465 Accumulated deficit (24,672,794) (18,441,785) Equity attributable to shareholders of the company 9,538,669 5,283,915 Non-controlling interest 22 - 1,786,401 9,538,669 7,070,316 12,045,869 15,389,472 We have audited the accompanying consolidated statements of financial position of Liquid Media Group Ltd. (the “Company”), as of November 30, 2021, November 30, 2020 and The accompanying Change in Presentation Currency As discussed in Note 2 to the consolidated financial statements, during the year ended November 30, 2021, the Company retroactively changed its presentation currency from the Canadian dollar to the U.S. dollar. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of Our audits included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Acquisition of IndieFlix Group, Inc. As described in Note 2 and 3 to the financial statements, the Company entered into an agreement to acquire a 100% interest in IndieFlix Group, Inc. (“Indieflix”) for total consideration of up to 2,500,000 common shares of the Company, to be issued pursuant to the achievement of certain revenue milestones by Indieflix. The transaction has been accounted for as a business combination under IFRS 3 – Business Combinations. Management estimates the fair value of acquired intangible assets and fair value of contingent consideration included in the provisional purchase price. The principal considerations for our determination that performing procedures relating to the provisional purchase price fair value assessments is a critical audit matter includes significant judgments, estimates and assumptions including projected cash flows of Indieflix operations, growth rates, and discount rates within the methodology utilized to measure the fair value of the related assets and liabilities acquired and consideration paid. Further, there is significant auditor judgment, subjectivity and effort in performing procedures to evaluate audit evidence relating to the aforementioned matters. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included, among others: Impairment assessment of intangible assets, licenses and goodwill As described in Notes 2, 8, 13, and 15 to the financial statements, the Company recorded impairments to the Company’s intangible assets and licenses of $0.49 million and $4.21 million, respectively. Management assesses whether any indication of impairment exists at the end of each reporting period with respect to finite life intangible assets and licenses and assesses the recoverable amount of the cash generating unit (“CGU”) to which goodwill is attributed to, which has been identified as the Indieflix CGU, on an annual basis, or more frequently if events or circumstances indicate that the asset might be impaired. If such an indication of impairment exists, the recoverable amount of the intangible asset or licenses is estimated in order to determine the extent of the impairment (if any). The principal considerations for our determination that performing procedures relating to the assessment of impairment indicators of intangible assets and licenses and assessing the recoverable amount of the Indieflix CGU is a critical audit matter includes significant judgments by management in assessing whether there were indicators of impairment, including among other items, expected future utilization of licenses and internal and external factors impacting intangible assets, including but not limited to technical feasibility and intent and ability to utilize the intangible asset for economic benefit. Further, there is significant auditor judgment, subjectivity and effort in performing procedures to evaluate audit evidence relating to the aforementioned matters. Year ended November 30, Note 2020 2019 2018 $ $ $ Sales 47,317 27,109 - Cost of sales 9 763,184 1,837,555 603,718 Gross profit (loss) (715,867) (1,810,446) (603,718) Operating expenses Accretion expense 17 67,175 211,155 - Amortization 13 101,350 100,202 17,722 Bad debts - - 10,020 Consulting fees 993,215 775,916 344,003 Depreciation 12 37,417 1,553 - Foreign exchange loss 40,691 16,833 65,612 Insurance 80,900 58,452 17,568 Interest expense 16,17,21 157,367 178,767 133,915 Investor relations, filing, and compliance fees 284,225 268,679 126,344 Management and directors salaries and fees 21 635,583 578,650 407,526 Marketing 2,102,152 1,166,286 - Other general and administrative expenses 78,416 49,808 11,327 Professional fees 588,039 891,673 519,076 Research and development 430,632 - - Share-based compensation 19,21 1,917,172 1,173,512 111,135 Travel 30,288 30,036 12,558 7,544,622 5,501,522 1,776,806 (8,260,489) (7,311,968) (2,380,524) Interest income 8 67,922 68,867 53,548 Share of profit (loss) of equity investment 10 - 195,726 (119,654) Write-off of associate 10 - - (310,484) Write-off of investment in films - - (12,447) Write-off of licenses 9 (330,276) (717,125) - Listing expense 3 - - (4,130,557) Project investigation 3 - (192,601) (359,590) Derivative liability - warrants - - (1,557,086) Gain (loss) on derivative liability 19 1,102,277 (449,519) 1,030,328 Gain (loss) on settlement of debt 15,16 39,032 (98,487) 209,670 Unrealized gains on equity instruments 11 2,383,004 953,961 - Allowance for credit loss 8 (184,881) (145,431) - 3,077,078 (384,609) (5,196,272) Loss before income taxes (5,183,411) (7,696,577) (7,576,796) Deferred income tax recovery 17 - (160,917) - Loss attributable to Liquid Media Group (5,183,411) (7,535,660) (7,576,796) Profit (loss) from discontinued operations 20 (2,813,889) (89,656) 76,563 Loss for the year (7,997,300) (7,625,316) (7,500,233) We have served as the Company’s auditor since 2019. Year ended November 30, Note 2020 2019 2018 $ $ $ Loss attributable to: Shareholders of the Company (6,231,009) (7,581,384) (7,537,749) Non-controlling interest from discontinued operations 9,22 (1,766,291) (43,932) 37,516 Loss for the year (7,997,300) (7,625,316) (7,500,233) Liquid Media Group Ltd. Consolidated Statements of Financial Position (Expressed in United States Dollars) December 1, The accompanying notes are an integral part of these consolidated financial statements. Liquid Media Group Ltd. Consolidated Statements of Financial Position (Expressed in United States Dollars) Nature and continuance of operations (Note 1) Contingencies (Note 29) Proposed transactions (Note 32) Subsequent events (Note 33) Approved on behalf of the Board of Directors on April 5, 2022: The accompanying notes are an integral part of these consolidated financial statements. Liquid Media Group Ltd. Consolidated Statements of Loss and Comprehensive Loss (Expressed in United States Dollars) The accompanying notes are an integral part of these consolidated financial statements. Liquid Media Group Ltd. Consolidated Statements of Loss and Comprehensive Loss (Expressed in United States Dollars) Loss per common share (Note 21) The accompanying notes are an integral part of these consolidated financial statements. Liquid Media Group Ltd. Consolidated Statements of Cash Flows (Expressed in United States Dollars) The accompanying notes are an integral part of these consolidated financial statements Liquid Media Group Ltd. Consolidated Statements of Cash Flows (Expressed in United States Dollars) Supplemental disclosure with respect to cash flows (Note 28) The accompanying notes are an integral part of these consolidated financial statements. Liquid Media Group Ltd. Consolidated Statements of Changes in Shareholders’ Equity (Expressed in United States Dollars) The accompanying notes are an integral part of these consolidated financial statements. Year ended November 30, Note 2020 2019 2018 $ $ $ Loss for the year (7,997,300) (7,625,316) (7,500,233) Other comprehensive income Foreign currency translation adjustment (319,271) 12,775 398,892 Comprehensive loss for the year (8,316,571) (7,612,541) (7,101,341) Comprehensive loss attributable to: Shareholders of the company (6,530,170) (7,560,001) (7,255,667) Non-controlling interest 22 (1,786,401) (52,540) 154,326 Comprehensive loss for the year (8,316,571) (7,612,541) (7,101,341) Year ended November 30, 2020 2019 2018 $ $ $ Cash flows provided by (used in) operating activities Loss from continuing operations for the year (5,183,411) (7,535,660) (7,576,796) Operating expenses of discontinued operations 38,635 113,876 119,667 Items not affecting cash: Accretion expense 67,175 211,155 - Accrued interest income (61,562) (60,662) (49,404) Accrued interest expense 128,171 162,152 126,360 Allowance for credit loss 184,881 145,431 - Amortization - intangibles 101,350 100,202 17,722 Amortization - licenses 596,882 1,819,596 603,718 Depreciation 37,417 1,553 - Bad debts - - 10,020 Change in value of derivatives (1,102,277) 449,519 526,758 Commitment to issue shares - 33,058 - Deferred income tax recovery - (160,917) - (Gain) loss on settlement of debt (39,032) 98,487 (172,816) Non-cash listing expense - - 4,130,557 Share of (profit) loss on equity investment - (195,726) 119,654 Share-based compensation 1,917,172 1,173,512 111,135 Shares issued for services 243,326 73,980 - Unrealized foreign exchange 11,659 (45,276) (85,083) Unrealized gains on equity instruments (2,383,004) (953,961) - Write-off of intangible assets - - 116,352 Write-off of investments in associates - - 310,484 Write-off of investments in film - - 12,447 Write-off of license fees 330,276 717,125 - Changes in non-cash working capital: Receivables (200,909) (654,532) 51,889 Prepaids (231,242) (204,840) 172,815 Accounts payable and accrued liabilities (593,903) 685,294 1,780,777 (6,138,396) (4,026,634) 326,256 Cash flows used in investing activities Cash acquired from reverse acquisition - - 579,279 Cash received prior to reverse acquisition - - 124,561 Payment for consideration of Majesco - - (196,505) Cash disposed on sale of Majesco (103,794) - - Acquisition of equipment (56,436) - - Investment in associate - - (2,339) Investment in intangibles (4,464,885) - (79,808) Loan receivable received 83,231 10,000 - Interest received on loans 12,067 7,807 - Restricted cash from reverse acquisition - - (574,510) Restricted cash received 679,021 574,510 - Purchase of restricted deposit certificate (6,358) (672,663) - Investing expenses of discontinued operations - (133,356) 11,060 (3,857,154) (213,702) (138,262) Year ended November 30, 2020 2019 2018 $ $ $ Cash flows provided by financing activities Loan proceeds 1,535 812,933 167,500 Loan repayments (775,175) (137,000) (27,500) Loan proceeds from related parties - - 37,582 Loan repayments to related parties - (172,203) (50,500) Long-term debt proceeds 51,936 - - Interest paid on loans (463,272) (23,260) - Convertible debentures received - 3,502,793 - Shares issued for cash 5,353,203 - 4,157,760 Share issuance costs (837,456) - (446,571) Commitment to issue shares 574,457 104,139 - Warrants exercised and issued for cash 2,018,512 368,617 156,615 Options exercised and issued for cash 196,427 - - 6,120,167 4,456,019 3,994,886 Effect of foreign exchange on cash (7,045) 44,391 90,144 Change in cash during the year (3,882,428) 260,074 4,273,024 Cash, beginning of year 4,587,405 4,327,331 54,307 Cash, end of year 704,977 4,587,405 4,327,331 Supplemental cash-flow disclosure Interest received 12,067 7,807 3,963 Interest paid 463,272 23,260 1,161 Liquid Media Group Ltd. Consolidated Statements of Changes in Shareholders’ Equity (Expressed in Shares Amount Commitment to Issue Shares Reserves Accumulated Other Comprehensive Income Deficit Non-controlling interest Total $ $ $ $ $ $ $ Balance, November 30, 2017 2,177,715 2,364,400 168,550 542,397 - (3,322,652) - (247,305) Shares issued pursuant to acquisition agreement 66,667 415,000 - - - - - 415,000 Non-controlling interest acquired - - - - - - 1,684,615 1,684,615 Eliminate capital stock of Liquid Media Group (Canada) Ltd. (2,244,381) - - - - - - - Opening balance of Liquid Media Group Ltd. 560,410 - - - - - - - Issuance of shares to former shareholders of Liquid Canada 1,288,497 4,277,319 - 96,303 - - - 4,373,622 Shares issued for cash 800,000 4,157,760 - - - - - 4,157,760 Shares issued for license fees 888,000 4,880,639 - - - - - 4,880,639 Shares issued to settle debt 113,764 623,771 - - - - - 623,771 Shares issued for intangible assets 268,000 1,469,456 - - - - - 1,469,456 Shares issued for commitment 28,451 156,000 (156,000) - - - - - Shares issued for share issuance costs 10,000 (448,145) - 24,774 - - - (423,371) Share issuance costs - (23,200) - - - - - (23,200) Warrants exercised for cash 52,985 159,601 (4,000) (2,986) - - - 152,615 Warrants exercised for shares to be issued - - 4,000 - - - - 4,000 Share-based compensation - - - 111,135 - - - 111,135 Foreign exchange on translation - - - - 282,082 - 116,810 398,892 Loss for the year - - - - - (7,537,749) 37,516 (7,500,233) Balance, November 30, 2018 4,010,108 18,032,601 12,550 771,623 282,082 (10,860,401) 1,838,941 10,077,396 Shares Amount Commitment to Issue Shares Reserves Accumulated Other Comprehensive Income Deficit Non-controlling interest Total $ $ $ $ $ $ $ Balance, November 30, 2018 4,010,108 18,032,601 12,550 771,623 282,082 (10,860,401) 1,838,941 10,077,396 Shares issued to settle debt 159,873 634,175 - - - - - 634,175 Units issued for convertible debentures 1,000,167 2,040,346 - (244,890) - - - 1,795,456 Residual value of warrants issued for convertible debentures - (30,779) - 30,779 - - - - Shares issued for services 17,222 73,980 - - - - - 73,980 Commitment to issue shares - - 137,197 - - - - 137,197 Warrants exercised for cash 158,291 368,617 - - - - - 368,617 Subscriptions reclassified to payables - - (12,550) - - - - (12,550) Share-based compensation - - - 1,173,512 - - - 1,173,512 Convertible debenture - equity portion - - - 435,074 - - - 435,074 Foreign exchange on translation - - - - 21,383 - (8,608) 12,775 Loss for the year - - - - - (7,581,384) (43,932) (7,625,316) Balance, November 30, 2019 5,345,661 21,118,940 137,197 2,166,098 303,465 (18,441,785) 1,786,401 7,070,316 Units issued for cash 2,666,672 5,353,203 - - - - - 4,177,189 Shares issued to settle debt 107,228 331,967 - - - - - 331,967 Units issued for convertible debentures and related interest 527,402 1,121,514 - (134,198) - - - 987,316 Shares issued for services 125,675 276,384 (33,058) - - - - 243,326 Shares issued for restricted share units 250,001 482,272 - (482,272) - - - - Share issuance costs - (1,176,014) - - - - - (1,176,014) Commitment to issue shares - - 574,457 - - - - 574,457 Warrants exercised for cash 1,066,282 2,150,707 (104,139) (28,056) - - - 2,018,512 Warrants issued for share issue costs - - - 338,558 - - - 338,558 Options exercised for cash 53,505 340,672 - (144,245) - - - 196,427 Share-based compensation - - - 1,917,172 - - - 1,917,172 Foreign exchange on translation - - - - (299,161) - (20,110) (319,271) Loss for the year - - - - - (6,231,009) (1,766,291) (7,997,300) Balance, November 30, 2020 10,142,426 29,999,645 574,457 3,633,057 4,304 (24,672,794) - 9,538,669 The accompanying notes are an integral part of these consolidated financial statements. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 1. Liquid Media Group Ltd. (“Liquid” or the “Company”) On These consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. As at November 30, These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. 2.SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies used in the preparation of these consolidated financial statements. Statement of compliance These consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). Basis of presentation The consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, except for certain financial assets and liabilities, including derivative instruments that are measured at fair value. The consolidated financial statements are presented in As at November 30, 2021, the Company changed its accounting policy to present its results in United States dollars instead of Canadian dollars as done previously. This accounting change has been applied retrospectively in preparing these financial statements; as such, all comparative figures have been restated to reflect this change. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 2. Significant Accounting Policies (continued) Basis of consolidation These consolidated financial statements include the accounts of the Company and its subsidiaries at the end of the reporting period as follows: Incorporation Percentage owned Incorporation 2020 2019 2018 Liquid Media Group (Canada) Ltd. (“Liquid Canada”) Canada 100% 100% 100% Companies owned by Liquid Canada: Majesco Entertainment Company (“Majesco) USA 0% 51% 51% On January 9, 2018, Liquid Canada acquired 51% of the shares of Majesco, On August 13, 2021 the Company incorporated Liquid US. On October 20, 2021 the Company incorporated Liquid Merger Sub 2 and Liquid Merger Sub 3. On November 30, 2021, the Company incorporated Liquid Production Funding. On August 27, 2021, the Company incorporated Liquid Media Merger Sub, Inc. which was amalgamated with IndieFlix on September 22, 2021 (Note 3). On September 22, 2021, the Company acquired 100% of the shares of IndieFlix, a Delaware corporation (Note 3). All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated upon consolidation. Non-controlling interest represented the portion of a subsidiary’s earnings and losses and net assets that is not held by the Company. If losses in a subsidiary applicable to a non-controlling interest exceed the non-controlling interest in the subsidiary’s equity, the excess is allocated to the non-controlling interest except to the extent that the majority has a binding obligation and is able to cover the losses. Subsidiaries Subsidiaries are all entities over which the Company has exposure to variable returns from its involvement and has the ability to use power over the investee to affect its returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company until the date on which control ceases. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 2. Use of estimates The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the period. Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates. Significant estimates and judgements made by management in the preparation of these consolidated financial statements are outlined below. In March 2020 the Functional currency The functional currency of the Company and its subsidiaries is the United States Level of control or influence over companies The accounting for investments in other companies can vary depending on the degree of control and influence over those other companies. Management is required to assess at each reporting date the Company’s control and influence over these other companies. Management has used its judgment to determine which companies are controlled and require consolidation and those which are significantly influenced and require equity accounting. The Company Income taxes In assessing the probability of realizing income tax assets, management makes estimates related to expectation of future taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified. Discontinued operations The Company classifies a component of the Company’s business as discontinued operations when there is a highly probable likelihood of a disposal of that component. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 2. Significant Accounting Policies (continued) Use of estimates (continued) Determination of Cash Generating Units (“CGUs”) CGUs are the lowest level within an entity at which goodwill is monitored for internal management purposes which is not higher than an operating segment. The Company has assessed that each acquired entity is a separate CGU. Valuation of share-based compensation The Company uses the Black-Scholes Option Pricing Model for valuation of share-based compensation and other equity based Valuation of contingent consideration The Company uses a probability scenario based approached for valuation of share-based contingent consideration. Under the probability scenario based approach, management calculates the probability that the contingent shares will be issued under a low case, base case, and high case scenario. Changes in the probabilities can materially affect the fair value estimate and the Company’s earnings and equity reserves. Valuation of intangible assets Valuation of investment in equity instrument The Company values its equity instruments in private companies at fair value at each reporting date. The determination of fair value is based on estimates made by management on the expected earnings before income, taxes, and amortization multiplied by a reasonable factor for the appropriate industry applicable to the private company. Loans receivable are assessed for an estimated credit loss at each reporting date. The estimated loss is determined based on management’s knowledge of the debtor and their ability to repay the loan. As the current debtors’ are private entities, management must rely on assertions provided to them from the debtor to make their estimates. Valuation of convertible debentures The equity portion of the convertible debenture is calculated using a discounted cash flow method which requires management to make an estimate on an appropriate discount rate. Valuation of right-of-use asset and lease liability The application of IFRS 16 requires the Company to make judgments that affect the valuation of the right-of-use assets and the valuation of lease liabilities. These include: determining the contract term and determining the interest rate used for discounting of future cash flows. The lease term determined by the Company is comprised of the non-cancellable period of lease agreements, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option. The present value of the lease payment is determined using a discount rate representing the rate of a commercial mortgage rate, observed in the period when the lease agreement commences or is modified. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 2. Significant Accounting Policies (continued) Foreign currency translation The functional currency of an entity is the currency of the primary economic environment in which the entity operates. The functional currency of the Company and Transactions in currencies other than USD are recorded at exchange rates prevailing on the dates of the transactions. At the end of each reporting period, monetary assets and liabilities denominated in foreign currencies are translated at the period end exchange rate while non-monetary assets and liabilities in foreign currencies are translated at historical rates. Revenues and expenses are translated at the average exchange rates approximating those in effect during the reporting period. Financial instruments Financial assets On initial recognition, financial assets are recognized at fair value and are subsequently classified and measured at: (i) amortized cost; (ii) fair value through other comprehensive income (“FVOCI”); or (iii) fair value through profit or loss (“FVTPL”). The classification of financial assets is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. A financial asset is measured at fair value net of transaction costs that are directly attributable to its acquisition except for financial assets at FVTPL where transaction costs are expensed. All financial assets not classified and measured at amortized cost or FVOCI are measured at FVTPL. On initial recognition of an equity instrument that is not held for trading, the Company may irrevocably elect to present subsequent changes in the investment’s fair value in other comprehensive income. The classification determines the method by which the financial assets are carried on the statement of financial position subsequent to inception and how changes in value are recorded. Receivables and loans receivable are measured at amortized cost with subsequent impairments recognized in profit or loss. Cash, restricted cash, and investment in equity instruments are classified as FVTPL. Impairment An ‘expected credit loss’ impairment model applies which requires a loss allowance to be recognized based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognized for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset’s original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognized in profit or loss for the period. In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized. For the years presented, the Company did not record an expected credit loss on its accounts receivable; however, an accumulated expected credit loss was recorded on its loans receivable as at November 30, 2021 and 2020. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 2. Significant Accounting Policies (continued) Financial instruments (continued) Financial liabilities Financial liabilities are designated as either: (i) fair value through profit or loss; or (ii) Investment in associates The Company’s investment in associates was accounted for using the equity method of accounting. An associate is an entity in which the Company has significant influence and which is neither a subsidiary nor a joint venture. Under the equity method, the investment in the associate is carried in the statement of financial position at cost. The statement of loss reflects the share of the results of operations of the associate until significant influence ceases. Where there has been a change recognized directly in the equity of the associate, the Company recognizes its share of any changes and discloses this, when applicable, in the statement of changes in shareholders’ equity (deficiency). Profits and losses resulting from transactions between the Company and the associate are eliminated to the extent of the interest in the associate. Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Company holds between 20 and 50 percent of the voting power of another entity. Investments in associates are accounted for using the equity method (equity accounted investees) and are recognized initially at cost. The financial statements include the Company’s share of the income and expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the Company from the date that significant influence or joint control commences, until the date that significant influence or joint control ceases. When the Company’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to nil, and the recognition of further losses is discontinued, except to the extent that the Company has obligations, or has made payments on behalf of the investee. Investment in content Investment in content is accounted for as an intangible asset and represents the unamortized costs of programs that have been acquired, developed, produced and/or distributed by the Company. Investment in content is classified into the following three categories: content in production, released content, and acquired content. For content in production and released content, capitalized costs include all direct production and financing costs incurred during production that are expected to benefit future periods and net of equity investment by third parties that acquire participation rights. For acquired content, capitalized costs consist of minimum guarantee payments paid to the producer to acquire distribution rights. Development costs represent expenditures made on content prior to production which are expensed when incurred. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 2. Significant Accounting Policies (continued) Investment in content (continued) The Equipment Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in profit or loss. Assets under construction are not depreciated until available for their intended use. Depreciation is charged over the estimated useful lives using the declining balance method as follows: Intangible assets The Company has intangible assets from acquisitions and development of gaming Upon retirement or disposal, the cost of the asset disposed of and the related accumulated amortization are removed from the accounts and any gain or loss is reflected in profit and loss. Expenditures for repairs and maintenance are expensed as incurred. Development expenditures, including the cost of material, direct labour, and other direct costs are recognized as an intangible asset when the following recognition requirements are met: Intangible assets being developed are amortized once development is Liquid Media Group Ltd. Notes to November 30, 2021 (Expressed in United States Dollars) 2. Significant Accounting Policies (continued) Intangible assets (continued) Video game catalogues The video game catalogues are made up of a diverse variety of games, ranging in age and popularity. The catalogues are unique due to the diverse nature of the products within the catalogues, making it difficult to assign a useful life. The useful life of 15 years Platform coding The platform coding acquired by the Company is currently under development and is not yet subject to amortization. Brand Through the acquisition of Majesco, Distribution libraries Through the acquisition of IndieFlix, the Company acquired distribution libraries. These assets are carried at cost, including amounts of purchase price allocations upon acquisitions. The useful life of 10 years represents management’s view of the expected period over which the Company expects benefits from the acquired distribution libraries. Leases At inception of a contract, the Company assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company assesses whether the contract involves the use of an identified asset, whether the right to obtain substantially all of the economic benefits from use of the asset during the term of the arrangement exists, and if the Company has the right to direct the use of the asset. At inception or on reassessment of a contract that contains a lease component, the Company allocates the consideration in the contract to each lease component on the basis of their relative standalone prices. As a lessee, the Company recognizes a right-of-use asset and a lease liability at the commencement date of a lease. The right-of-use asset is initially measured at cost, which is comprised of the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any decommissioning and restoration costs, less any lease incentives received. The right-of-use asset is subsequently depreciated from the commencement date to the earlier of the end of the lease term, or the end of the useful life of the asset. In addition, the right-of-use asset may be reduced due to impairment losses, if any, and adjusted for certain remeasurements of the lease liability. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 2. Significant Accounting Policies (continued) Leases (continued) A lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by the interest rate implicit in the lease, or if that rate cannot be readily determined, the incremental borrowing rate. Lease payments included in the measurement of the lease liability are comprised of: The lease liability is measured at amortized cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, or if there is a change in the estimate or assessment of the expected amount payable under a residual value guarantee, purchase, extension or termination option. Variable lease payments not included in the initial measurement of the lease liability are charged directly to profit or loss. The Company has elected not to recognize right-of-use assets and lease liabilities for short-term leases that have a lease term of 12 months or less and leases of low-value assets. The lease payments associated with these leases are charged directly to profit or loss on a straight-line basis over the lease term. Goodwill Goodwill is deemed to have an indefinite life and is not amortized but is subject to, at a minimum, annual impairment tests. The Company assesses the impairment of goodwill on an annual basis or whenever events or changes in circumstances indicate that the fair value is less than its carrying value. Impairment is tested at the Impairment of non-financial assets The carrying amount of the Company’s non-financial assets is reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. An impairment loss is recognized whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in profit or loss. The recoverable amount of assets is the greater of an asset’s fair value less cost to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 2. Significant Accounting Policies (continued) Impairment of non-financial assets (continued) An impairment loss is only reversed if there is an indication that the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount, however, not to an amount higher than the carrying amount that would have been determined had no impairment loss been recognized in previous years. Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Business combinations Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable new assets. Acquisition costs incurred are expensed. Discontinued operations A discontinued operation is a component of the Company’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Company and which: Classification as a discontinued operation occurs at the earlier of disposal or when the operation meets the criteria to be classified as held-for-sale. When an operation is classified as a discontinued operation, the comparative statement of comprehensive loss is re-presented as if the operation had been discontinued from the start of the comparative year. Derivative liability Share purchase warrants outstanding during the Convertible debentures The Company’s convertible debenture was classified as a liability, less the portion relating to the conversion feature which is classified as a component of equity. As a result, the recorded liability to repay the convertible notes Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 2. Significant Accounting Policies (continued) Share capital Financial instruments issued by the Company are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The Company’s common shares, share warrants, and options are classified as equity instruments. Incremental costs directly attributable to the issue of new shares or options are recognized as a deduction from equity, net of tax. Valuation of equity units issued in private placements: The Company has adopted a residual value method with respect to the measurement of shares and warrants issued as private placement units. The residual value method first allocates value to the more easily measurable component based on fair value and then the residual value, if any, to the less easily measurable component. The fair value of the common shares issued in private placements is determined to be the more easily measurable component as they are valued at their fair value which is determined by the closing price on the issuance date. The remaining balance, if any, is allocated to the attached warrants. Any fair value attributed to the warrants is recorded to reserves. Basic and diluted loss per share is computed by dividing net loss available to common shareholders by the weighted-average number of shares outstanding during the reporting period. If applicable, diluted income per share is computed similar to basic income per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of share options, warrants, and convertible debentures, if dilutive. The number of additional shares is calculated by assuming that outstanding share options and warrants were exercised and that the proceeds from such exercises were used to acquire common shares at the average market price during the reporting periods. For the years presented, this calculation proved to be anti-dilutive. The Company grants stock options to buy common shares of the Company to directors, officers and consultants. All stock options and compensatory warrants made to employees and non-employees are measured and recognized using the Black-Scholes option pricing model. For employees, the fair value of the options is measured at grant date. For non-employees, the fair value of the options is measured on the earlier of the date at which the counterparty performance is complete, the date the performance commitment is reached, or the date at which the equity instruments are granted if they are fully vested and non-forfeitable. Share-based payments to non-employees are measured at the fair value of the goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. Stock options that vest over time are recognized using the graded vesting method. Share based compensation is recognized as an expense with a corresponding increase in reserves. At each financial reporting period, the amount recognized as expense is adjusted to reflect the number of share options expected to vest. If and when the stock options are ultimately exercised, the applicable amounts of reserves are transferred to share capital. Where the terms of a stock option are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the stock-based compensation arrangement or is otherwise beneficial to the employee as measured at the date of modification over the remaining vesting period. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 2. Significant Accounting Policies (continued) Share-based compensation (continued) The Company may grant Restricted Share Units (RSUs) to directors, officers, employees, and consultants. The fair value of the RSUs are estimated using the value on the grant date and are recognized as an expense over the vesting period. As the RSUs are redeemed and common shares are issued, the amount previously recognized in reserves is recorded as an increase to share capital. Revenue recognition Revenue Software games Revenue from sales of interactive software games on game consoles and PCs are recognized as revenue when games are purchased by a customer. Sales of the Company’s games are made by third party gaming platform companies pursuant to license agreements, and these gaming platform companies retain an agreed upon portion of sales as fees. The Company reports revenues related to these arrangements net of the fees retained by the gaming platform companies, as the Company has determined that the gaming platform companies are considered the primary obligors to the end consumers for the sale of the games. Streaming services Revenue from streaming services are recognized as revenue when the services have been provided and control of the deliverable has been transferred to the customer. The streaming services allows independent film makers to monetize their films on the Company’s streaming platforms. Subscription fees Revenue from streaming subscription fees are recognized as revenue when the services have been provided and control of the deliverable has been transferred to the customer. Revenue collected prior to it being earned is recorded as deferred revenue and recognized over the term of the subscription. Film distribution fees Revenue from film distribution fees are recognized as revenue when the films have been provided and control of the deliverable has been transferred to the customer. Revenue collected prior to it being earned is recorded as deferred revenue and recognized when the film title has been delivered or activated. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 2. Significant Accounting Policies (continued) Royalties and licenses Royalty-based obligations with content licensors are either paid in advance and capitalized as prepaid royalties or are accrued as incurred and subsequently paid. These royalty-based obligations are generally expensed to cost of sales at the contractual rate based on a percentage of the revenue earned. Income taxes Current income tax Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date, in the country where the Company operates and generates taxable income. Deferred income tax Deferred income tax is provided for based on temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and recognized only to the extent that it is probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority. Current income and deferred tax relating to items recognized directly in other comprehensive income or equity is recognized in other comprehensive income or equity and not in profit or loss. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate. Accounting pronouncements not yet adopted Accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 3. ACQUISITION OF INDIEFLIX GROUP, INC. On September 22, 2021, the Company acquired Upon closing of the IndieFlix Agreement, Liquid In connection with the IndieFlix Transaction, on May 10, 2021, the Company entered into a non-revolving credit facility with IndieFlix for $499,880 which was advanced as follows: (1) $102,852 upon the date of the promissory note (advanced May 10, 2021); (2) $173,043 on the first month anniversary (advanced June 10, 2021); and (3) $223,985 on the second month anniversary (advanced July 9, 2021). The promissory note bore interest at 6% per annum, was due on the earlier of December 31, 2021 or the closing of the IndieFlix Transaction, and was secured by a general security agreement over certain assets. As the note was considered an advance on acquisition, the Company re-assumed the advance on the closing of the IndieFlix Transaction on September 22, 2021. On September 22, 2021, the 2,000,000 common shares to be issued (“IndieFlix Contingent Consideration”) was valued to be $1,648,000. On November 30, 2021, the IndieFlix Contingent Consideration was revalued to $1,277,200 resulting in a gain on The Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 3. ACQUISITION OF INDIEFLIX GROUP, INC. (continued) The purchase price allocation for the The Company determined the estimated fair value of the For IndieFlix’s distribution libraries represent identifiable intangible assets acquired in the amounts of The fair value of the acquired assets and liabilities are provisional pending receipt of the final valuations for those assets and liabilities. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in As at November 30, 2020 2019 $ $ Accounts receivable 10,360 25,299 Sales tax receivable 227,699 14,293 Other receivables - 658,769 238,059 698,361 Current amounts Loans receivable are classified as current when management has determined that there is reasonable assurance they will receive payment on these loans within the next twelve months. As at November 30, Waterproof Participant Games Installment Entertainment Total $ $ $ $ Balance November 30, 2018 104,552 199,806 126,937 431,295 Reclassified as long-term - (199,806) (126,937) (326,743) Accrued interest income 8,137 - - 8,137 Repayments received (17,807) - - (17,807) Balance November 30, 2019 94,882 - - 94,882 Accrued interest income 416 - - 416 Repayments received (95,298) - - (95,298) Balance November 30, 2020 - - - - Waterproof Studios Inc. During fiscal 2016, the Company entered into a revolving credit facility agreement with Waterproof and advanced Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 6. LOANS RECEIVABLE (continued) Long-term amounts Loans receivable are classified as long-term when management has determined that they will not be receiving payment on these loans within the next twelve months. As at November 30, Participant Games Installment Entertainment Total $ $ $ Balance November 30, 2018 - - - Reclassified from current 199,806 126,937 326,743 Accrued interest income 32,120 20,405 52,525 Expected credit loss (115,963) (29,468) (145,431) Balance November 30, 2019 115,963 117,874 233,837 Accrued interest income 37,391 23,755 61,146 Expected credit loss (86,026) (98,855) (184,881) Balance November 30, 2020 67,328 42,774 110,102 Participant Games During fiscal 2017, the Company entered into a subordinated convertible note with Participant Games Inc. in the amount of Instalment Entertainment During fiscal 2017, the Company entered into a convertible note with Installment Entertainment Inc. in the amount of As at November 30, 2021, the Company had two Guaranteed Investment Certificates (“GICs”) totaling $53,937 (2020 - $nil 0 ; 2019 - $nil 0) which earn interest at 0.45% and 0.10% per annum and renew annually on September 28 and July 8, respectively. The GICs have been assigned as security to the Royal Bank of Canada. As at November 30, 2021, the Company had a $nil (2020 - $nil; 2019 - $506,179) deposit certificate which earned interest at 0.35% per annum and matured and renewed monthly. The deposit certificate was assigned as security to City National Bank for a revolving bank loan (Note 18). Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 8. LICENSES Four licenses were acquired during the year ended November 30, 2018 through the issuance of common shares valued at During the year ended November 30, The following table is a reconciliation of the licenses: 2020 2019 $ Balance, beginning of year 1,840,836 4,382,598 Amortization (596,882) (1,819,596) Write-offs (330,276) (717,125) Currency translation adjustment 1,082 (5,041) Balance, end of year 914,760 1,840,836 Waterproof On April 15, 2015, the Company acquired a The Company owns 49% of Waterproof and previously held significant influence over the investment causing the Company to account for its investment using the equity method. As at March 1, 2019, the Company no longer had the ability to exert significant influence over Waterproof’s operating activities due to ongoing disputes, therefore causing the Company to reclassify the investment as FVTPL (Note The following table is a reconciliation of the investment in Waterproof as an equity investment: 2020 2019 2018 $ Balance, beginning of year - 397,629 509,857 Share of profit (loss) of equity investment - 195,726 (119,654) Currency translation adjustment - (6,081) 7,426 Derecognition to investment in equity instruments (Note 11) - (587,274) - Balance, end of year - 397,629 Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in Until February 28, 2019, the Company accounted for the investment in Waterproof The fair value as at March 1, 2019 was determined to be On October 18, 2021, the Company settled a lawsuit with the other shareholders of Waterproof whereby the Company transferred its 49% interest in Waterproof to the other shareholders for $666,683 (CAD$825,000) resulting in the Company recording a loss on disposal of investment of $3,438,560 (Note 29). As at The following table is a reconciliation of the investment in Waterproof: 2020 2019 $ $ Balance, beginning of year 1,551,324 - Recognition from investment in associates (Note 10) - 587,274 Change in fair value 2,383,004 953,961 Currency translation adjustment (88,730) 10,089 Balance, end of year 3,845,598 1,551,324 11. INVESTMENT IN CONTENT As at November 30, 2021, the investment in content represents the unamortized costs of film content in production. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in Computer Equipment Vehicles Total $ $ $ Cost: At November 30, 2018 - - - Additions 125,143 - 125,143 Net exchange differences (277) - (277) At November 30, 2019 124,866 - 124,866 Additions - 56,436 56,436 Net exchange differences (3,043) (293) (3,336) At November 30, 2020 121,823 56,143 177,966 Depreciation: At November 30, 2018 1,553 - 1,553 Net exchange differences 8 - 8 At November 30, 2019 1,561 - 1,561 Additions 37,417 - 37,417 Net exchange differences (1,365) - (1,365) At November 30, 2020 37,613 - 37,613 Net book value: At November 30, 2019 123,305 - 123,305 At November 30, 2020 84,210 56,143 140,353 12. EQUIPMENT No depreciation was taken on the vehicle during the year ended November 30, 2020 as it was purchased at the end of the fiscal year and not available for use. In December 2021, the Company disposed of the vehicle to the former CFO of the Company. During the year ended November 30, 2021, the Company disposed of its computer equipment for no proceeds resulting in a loss on disposal of equipment of $45,466. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in Video Game Catalogues Platform Brands Total $ $ $ $ Cost: At November 30, 2018 1,589,258 - 105,286 1,694,544 Additions - paid or accrued 133,356 - - 133,356 Net exchange differences (7,053) - 5,013 (2,040) At November 30, 2019 1,715,561 - 110,299 1,825,860 Additions - paid or accrued - 4,464,885 - 4,464,885 Dispositions (208,659) - (111,454) (320,113) Net exchange differences (40,598) (153,981) 1,155 (193,424) At November 30, 2020 1,466,304 4,310,904 - 5,777,208 Amortization: At November 30, 2018 17,722 - - 17,722 Additions 100,202 - - 100,202 Net exchange differences (23) - - (23) At November 30, 2019 117,901 - - 117,901 Additions 101,350 - - 101,350 Net exchange differences (6,469) - - (6,469) At November 30, 2020 212,782 - - 212,782 Net book value: At November 30, 2019 1,597,660 - 110,299 1,707,959 At November 30, 2020 1,253,522 4,310,904 - 5,564,426 13. INTANGIBLE ASSETS Brands pertained to Majesco Entertainment which were disposed of at August 31, During the year ended November 30, 2020, the Company acquired platform coding for a cash payment of During the year ended November 30, 2021, the Company acquired distribution libraries valued at $3,695,673 on the acquisition of IndieFlix (Note 3). During the year ended November 30, 2021, the Company determined that the video game catalogues and platform coding should be impaired resulting in the Company recognizing an impairment of intangible assets of $4,214,445. Amortization of the distribution libraries is included in cost of sales. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 14.RIGHT-OF-USE- ASSET AND LEASE LIABILITY Right-of-Use Asset Amortization of right-of-use assets is calculated using the straight-line method over the remaining lease term. Lease Liability The lease liability was discounted at a discount rate of 3.25%. The minimum lease payments in respect of the lease liability and the effect of discounting are as follows: Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 15. GOODWILL Goodwill of Goodwill is tested for impairment annually or more frequently if events or circumstances indicate that the asset might be impaired. At November 30, 2020 2019 $ Accounts payable 1,116,088 2,845,308 Accrued liabilities 154,958 821,014 Payroll taxes payable 13,406 474 Sales tax payable - 2,911 Payable on Majesco acquisition (Note 5) - 697,674 1,284,452 4,367,381 During the year ended November 30, During the year ended November 30, A summary of the deferred revenue is as follows: Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 18. LOANS PAYABLE A summary of loans payable balances and transactions is as follows: Related party Third party Credit Facility Bank Loan Total $ $ $ $ $ Balance, November 30, 2018 172,203 12,000 750,000 - 934,203 Advance - 150,000 - 662,933 812,933 Repayment - cash (172,203) (137,000) - - (309,203) Balance, November 30, 2019 - 25,000 750,000 662,933 1,437,933 Advance - - - 1,535 1,535 Repayment - cash - - (110,707) (664,468) (775,175) Repayment - shares - (25,000) - - (25,000) Balance, November 30, 2020 - - 639,293 - 639,293 Third party loans Third party loans included loans secured by assets of the Company with due dates ranging from demand loans to periods of one year and interest rates ranging from 0.0% to 14.4% per annum. As at November 30, 2019, the amount outstanding was due on demand and incurred interest of Credit facility In fiscal 2016 a In June 2018, a new lender acquired the remaining In November 2019, the new lender signed a Forebearance Agreement which extended the maturity date of the loan to November 30, 2020 and required the Company to make quarterly payments of During the year ended November 30, 2020, the Company repaid a further In February 2021, the new lender agreed to accept the 215,000 treasury shares held as security as full and final payment of the Forbearance Agreement (Note Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 18. LOANS PAYABLE (continued) Bank loan In May 2019, the Company entered into a revolving note for Liability component Equity component Total $ $ $ Balance, November 30, 2018 - - - Cash received 2,930,477 595,991 3,526,468 Deferred income tax liability - (160,917) (160,917) Interest expense and accretion 259,885 - 259,885 Settlement of convertible debentures (1,795,455) (244,890) (2,040,345) Reallocation of interest to accounts payable (25,156) - (25,156) Currency translation adjustment 18,651 - 18,651 Balance, November 30, 2019 1,388,402 190,184 1,578,586 Interest expense and accretion 83,140 - 83,140 Settlement of convertible debentures (961,186) (134,198) (1,095,384) Reallocation of interest to accounts payable (21,079) - (21,079) Currency translation adjustment 42,242 - 42,242 Balance, November 30, 2020 531,519 55,986 587,505 19. CONVERTIBLE DEBENTURES On February 28, 2019, the Company closed its private placement offering of unsecured convertible debentures raising For accounting purposes, the convertible debentures are separated into their liability and equity components by first valuing the liability component. The fair value of the liability component at the time of issue was calculated as the discounted cash flows for the convertible debentures assuming a 12% discount rate, which was the estimated rate for a similar debenture without a conversion feature. The fair value of the equity component (conversion feature) was determined at the time of issue as the difference between the face value of the convertible debentures and the fair value of the liability component, less a deferred income tax adjustment to reflect the book to tax difference in value of the convertible debentures at the time of issuance. As the Company has excess tax assets to offset the deferred tax liability, which was created from the book to tax difference in value of the convertible debentures, the deferred tax liability was reversed, resulting in a deferred tax recovery of During the year ended November 30, Interest and accretion expense for the year ended November 30, Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 20. LONG-TERM DEBT Balance, November 30, 2020 (current and long-term) Third party During the year ended November 30, 2020, the Company entered into a Conditional Sales Contract for the purchase of a vehicle. The agreement bears interest of 6.99%, requires 60 monthly payments of SBA loan In June 2020, IndieFlix obtained a $150,000 U.S. Small Business Administration (“SBA”) loan which increased to $200,000 upon receiving a further $50,000 in July 2020. The SBA loan bears interest at 3.75% from the date of the advance and requires monthly payments of $1,023 commencing 24 months from the date of the first advance. The balance of principal and interest will be repayable over 30 years from the date of the first advance. The SBA loan is secured by a continuing security interest in all of IndieFlix’s current and future assets. The On March 17, 2022, SBA provided an additional six month deferment for IndieFlix’s SBA Loan where the Authorized share capital The Company is authorized to issue The Company is authorized to issue the following preferred shares: Series “A” preferred shares Series “B” preferred shares Series “C” preferred shares Series “D” preferred shares Series “E” preferred shares Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 21. SHARE CAPITAL AND RESERVES (continued) Issued share capital Common shares The Company had the following share issuances during the year ended November 30, 2021: Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 21. SHARE CAPITAL AND RESERVES (continued) Issued share capital (continued) Common shares (continued) The Company had the following share issuances during the year ended November 30, 2020: Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 21. SHARE CAPITAL AND RESERVES (continued) Issued share capital (continued) Common shares (continued) Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 21. SHARE CAPITAL AND RESERVES (continued) Issued share capital (continued) Common shares (continued) The Company had the following share issuances during the year ended November 30, 2019: Preferred shares As at November 30, 2021, 2020, Treasury shares On November 27, 2019, the Company issued 215,000 common shares into treasury as security against a loan in accordance with a Forbearance Agreement (Note Profit (loss) per share Year ended November 30, 2020 2019 2018 $ $ $ Basic and diluted loss per share attributable to the Company from continuing operations (0.66) (1.77) (3.16) Basic and diluted loss per share attributable to the Company (0.79) (1.78) (3.14) Basic and diluted loss per share attributable to the non-controlling interest (0.23) (0.01) 0.02 Weighted average number of common shares outstanding 7,845,300 4,255,297 2,397,117 Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 21. SHARE CAPITAL AND RESERVES (continued) Stock options The During During the year ended November 30, 2020, the Company granted stock options with a total fair value of On January 1, 2021, the Company granted an officer of the Company stock options with a total fair value of $861,681, an exercise price of $, and a term of five years. The options will vest as follows: 107,245 on June 1, 2021, 321,735 on January 1, 2022, and 321,735 on January 1, 2023. During the year ended November 30, 2021, the Company recorded share-based compensation of $628,834 in relation to these options. On January 14, 2021, the Company granted a consultant of the Company stock options with a total fair value of $408,202, an exercise price of $, and a term of five years. The options will vest as follows: 107,245 on January 14, 2021, 107,245 on July 14, 2021, and 107,245 on July 14, 2022. During the year ended November 30, 2021, the Company recorded share-based compensation of $351,984 in relation to these options. On January 1, 2021, the Company repriced 932,995 stock options with an exercise price of $2.55 and 25,000 stock options with an exercise price of $2.57 to $1.90 per option. All other terms remained unchanged. During the year ended November 30, 2021, the Company recorded share-based compensation of $71,617 in relation to this repricing. In accordance with a Termination and Mutual Release Agreement entered into with a consultant of the Company effective April 14, 2021, the Company and a consultant agreed to modify the expiry date of 50,000 options outstanding from July 23, 2025 to May 14, 2022. The following weighted average assumptions were used in the Black-Scholes option-pricing model for the valuation of the stock options granted: 2020 2019 2018 Risk-free interest rate 0.47% 1.82% 2.09% Dividend yield Nil nil Nil Expected life 5.0 years 5.0 years 0.94 years Volatility 103% 92% 127% Weighted average fair value per option $1.79 $2.46 $2.08 Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 21. SHARE CAPITAL AND RESERVES (continued) Stock options (continued) Stock option transactions are summarized as follows: Number of Stock Options Weighted Average Exercise Price $ Balance, November 30, 2017 220,000 3.75 Cancelled – Plan of Arrangement (220,000) 3.75 Granted 117,000 17.24 (US$13.30) Balance, November 30, 2018 117,000 17.24 (US$13.30) Granted 461,500 3.31 (US$2.55) Cancelled (117,000) 17.24 (US$13.30) Balance, November 30, 2019 461,500 3.39 (US$2.55) Granted 550,000 3.31 (US$2.55) Exercised (53,505) 3.31 (US$2.55) Balance, November 30, 2020 957,995 3.31 (US$2.55) Number of Stock Options Exercised A summary of the The weighted average life of share options outstanding at November 30, Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 21. SHARE CAPITAL AND RESERVES (continued) Warrants Agents’ warrants During the year ended November 30, 2020, the Company issued 213,333 agents warrants with a total fair value of The following weighted average assumptions were used in the Black-Scholes option-pricing model for the valuation of the warrants granted: 2020 2019 2018 Risk-free interest rate 0.48% - 2.30% Dividend yield nil - Nil Expected life 5.0 years - 2 years Volatility 103% - 105% Weighted average fair value per warrant $1.59 - $3.10 Agents’ warrant transactions are summarized as follows: Number of Agents’ Warrants Weighted Average Exercise Price Number of Agents’ Warrants $ Balance, November 30, 2017 4,574 1.25 Issued 8,000 5.19 (US$4.00) Exercised (1,837) 1.25 Balance, November 30, 2018 10,737 4.35 Cancelled (2,737) 1.25 Balance, November 30, 2019 8,000 5.32 (US$4.00) Issued 213,333 2.44 (US$1.88) Cancelled (8,000) 5.19 (US$4.00) Balance, November 30, 2020 213,333 2.44 (US$1.88) A summary of the agents’ warrants outstanding and exercisable at November 30, The weighted average life of agent’s warrants outstanding at November 30, Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 21. SHARE CAPITAL AND RESERVES (continued) Warrants (continued) Share purchase warrants During the year ended November 30, 2019, the Company issued 1,000,167 share purchase warrants with an exercise price of On October 18, 2019, the Company repriced six tranches of share purchase warrants to During the year ended November 30, 2020, the Company: On February 12, 2021, the Company extended the expiry date of 346,000 share purchase warrants with an exercise price of During the year ended November 30, 2021, the Company issued share purchase warrants with an exercise price of $ per warrant in connection with the conversion of Share purchase warrant transactions are summarized as follows: Number of Share Purchase Warrants Weighted Average Exercise Price $ Balance, November 30, 2017 320,946 4.36 Granted 800,000 6.65 Granted on anti-dilution clause 72,800 3.24 (USD$2.50) Exercised (51,148) 3.01 Balance, November 30, 2018 1,142,598 6.05 Issued 1,000,167 2.33 (US$1.75) Exercised (158,291) 2.33 (US$1.75) Balance, November 30, 2019 1,984,474 1.92 (US$1.81) Issued 2,482,601 2.18 (US$1.68) Exercised (1,433,366) 1.80 (US$1.39) Balance, November 30, 2020 3,033,709 2.15 (US$1.66) Number of Share Purchase Warrants A summary of the share purchase warrants outstanding and exercisable at November 30, The weighted average life of share purchase warrants outstanding at November 30, Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 21. SHARE CAPITAL AND RESERVES (continued) Restricted share units (“RSUs”) During the year ended November 30, 2020, the Company granted RSUs to certain directors, officers, and consultants of the Company which vest 25% on grant (September 3, 2020) and 25% each six months thereafter. The granted RSUs convert to common shares of the Company upon vesting, accordingly, 250,001 common shares were issued upon grant. During the year ended November 30, Number of RSUs Balance, November 30, Granted Vested Balance, November 30, 2020 Derivative liability The anti-dilution right for the A and B share purchase warrants was valued at During the year ended November 30, 2020, certain B warrants were exercised causing the rights to expire resulting in the elimination of the liability. As at November 30, 2020, the rights attached to the B warrants were valued at Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 21. SHARE CAPITAL AND RESERVES (continued) Derivative liability (continued) The following weighted average assumptions were used in the Black-Scholes option-pricing model for the revaluation of the derivative liability as at November 30, 2021, 2020 2020 2019 2018 Risk-free interest rate - 1.70% 2.16% Dividend yield - Nil Nil Expected life - 0.75 year 1.75 years Volatility - 106% 114% Probability of exercise - 75% 20% As at November 30, 2019, the Company revalued the derivative liability to On initial recognition, the Company allocated $351,779, being the fair value of the Cashless Warrants, from the proceeds of the offering included in share capital to set up the derivative liability. On March 24, 2021, the Company’s registration statement restricting the Cashless Warrant holders ability to elect to cashless exercise their Cashless Warrants became effective resulting in the Company revaluing the derivative liability to $nil 0 (2020 - 2020 2019 2018 Risk-free interest rate - - 2.08% Dividend yield - - Nil Expected life - - 2.25 years Volatility - - 102% Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 22. DISCONTINUED OPERATIONS On January 9, 2018, the Company acquired 51% of the issued and outstanding shares of Majesco Entertainment Company, a U.S. corporation. As consideration, the Company issued 66,667 common shares with a value of $33,333 and was required to pay cash consideration of up to $1,000,000. On August 31, 2020, the Company agreed to settle The following is the breakdown of the discontinued operations on the statement of comprehensive loss: Year ended November 30, 2020 2019 2018 $ $ $ Sales 415,335 402,127 687,381 Cost of sales 141,815 148,249 155,031 Gross profit 273,520 253,878 532,350 Operating expenses Consulting and director fees 12,179 113,990 131,866 Other general and administrative expenses 14,371 30,296 23,041 Management and directors salaries and fees 89,658 113,229 95,121 Marketing - 282 - Professional fees 30,462 87,396 50,932 146,670 345,193 300,960 Impairment of goodwill (2,940,739) - - Write off of intangible assets - - (116,352) Loss on settlement of debt - - (36,854) (2,940,739) - (153,206) Profit (loss) before income taxes (2,813,889) (91,315) 78,184 Income tax expense - (1,659) 1,621 Profit (loss) from discontinued operations (2,813,889) (89,656) 76,563 Profit (loss) attributable to non-controlling (1,766,291) (43,932) 37,516 Profit (loss) attributable to the Company (1,047,598) (45,724) 39,047 The following is a breakdown of the change in cash flows for the discontinued operations: Year ended November 30, 2020 2019 2020 $ $ $ Net cash provided by (used in) operating activities 38,635 113,876 119,667 Net cash used in investing activities - (133,356) 11,060 Net cash flows for the year 38,635 (19,480) 130,727 Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in IndieFlix earns royalty income from its participating net profit rights in three separate US Limited Liability Companies (“LLC”) for which IndieFlix acts as a manager. The Company has recognized $9,241 of royalty income during the year ended November 30, 2021. 24. RELATED PARTY TRANSACTIONS Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include the Company’s executive officers and Board of Director members. In November 2020, the Company signed employment agreements with Accounts payable and accrued liabilities at November 30, In April 2020, a director converted his debenture of During the year ended November 30, During the year ended November 30, During the year ended November 30, 2021, the Company recorded During the year ended November 30, 2021, the Company recorded royalties, included in cost of sales, of $239,970 (2020 - $nil 0 ; 2019 - $nil 0) to three LLC’s for which IndieFlix acts as a manager and received royalty income of Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 24. RELATED PARTY TRANSACTIONS (continued) The following is a summary of key management personnel compensation: Year ended November 30, 2020 2019 2018 $ $ $ Management and directors salaries and fees 625,000 577,500 407,525 Management and directors salaries and fees in discontinued operations 19,000 26,000 - Share-based compensation 1,578,456 890,418 - Interest expense - 5,174 18,537 2,222,456 1,499,092 426,062 The following table presents the changes in equity attributable to the 2020 2019 $ $ Balance, beginning of year 1,786,401 1,838,941 Share of loss for the year (1,766,291) (43,932) Foreign exchange on translation (20,110) (8,608) Balance, end of year - 1,786,401 2020 2019 $ $ Assets Current - 33,770 Non-current - 3,905,471 - 3,939,241 Liabilities Current - 270,362 Non-current - 23,163 - 293,525 Net assets - 3,645,716 Non-controlling interest - 1,786,401 The following table presents the loss and comprehensive loss attributable to non-controlling interest: Year ended November 30, Note 2020 2019 2018 $ $ $ Profit (loss) attributable to non-controlling interest from discontinued operations 20 (1,766,291) (43,932) 37,516 Foreign exchange translation adjustment (20,110) (8,608) 116,810 Comprehensive loss attributable to non-controlling interest (1,786,401) (52,540) 154,326 The Company defines its capital as Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are: The Company’s financial instruments consist of cash, restricted cash, receivables, loans receivable, As at November 30, As at November 30, 2021, the fair value of the level 3 derivative liability was $1,277,200 (2020 - $nil 0) based on management’s estimate of probabilities on the likelihood of IndieFlix achieving the projected revenue targets and the Company issuing the resulting common shares to the former noteholders of IndieFlix. Management the assessed the probabilities on a low case, base case, and high case scenario with a 20%, 60%, and 20% probability, respectively, of occurring to determine a weighted average number of expected common shares to be issued. The Company’s investment in IndieFlix did not have a quoted market price on an active market and the Company assessed the fair value of the investment based on IndieFlix’s unobservable expected earnings. As a result, the fair value was classified as level 3 of the fair value hierarchy. The process of estimating the fair value of the contingent consideration was based on inherent measurement uncertainties and was based on techniques and assumptions that emphasize both qualitative and quantitative information. As at November 30, 2021, a 10% change in the number of expected common shares to be issued or a 10% change in the Company’s share price would change comprehensive income (loss) by approximately $128,000. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 27. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued) The Company is exposed to a variety of financial risks by virtue of its activities including currency, credit, interest rate, and liquidity risk. Foreign currency exchange rate risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. The Company’s operations are carried out in Canada and the United States. As the Company’s functional currency is USD, the Company is subject to foreign currency exchange rate risk on its net assets denominated in CAD which could have an adverse effect on the profitability of the Company. As at November 30, Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The Company’s cash is held in The maximum exposure to credit risk as at November 30, Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company does not hold any financial liabilities with variable interest rates. The Company’s ability to continue as a going concern is dependent on management’s ability to raise required funding through future equity issuances and through short-term borrowing. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and the Board of Directors are actively involved in the review, planning and approval of significant expenditures and commitments. As at November 30, Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in Years ended November 30, 2020 2019 2018 $ Supplemental non-cash disclosures Reallocation of value of options upon exercise 144,245 - Reallocation of value of warrants upon exercise 28,056 - 2,986 Reallocation of value of RSUs upon vesting 482,272 - Shares issued for the acquisition of Majesco (Note 5) - 415,000 Shares issued for intangible assets - 1,469,456 Shares issued for licenses - 4,880,639 Shares issued for debt settlements 331,967 634,175 623,771 Warrants issued for share issue costs 338,558 - 24,774 Net assets acquired on RTO (Note 3) - 243,065 Shares issued for commitment to issue shares 137,197 - 156,000 Acquisition of equipment in accounts payable - 125,143 - Units issued for conversion of convertible debentures and associated interest 1,121,514 2,040,346 - Accounts payable applied to convertible debentures - 23,675 - Derecognition of investment in associate - 587,274 - Loans receivable allocated to long-term - 379,268 - Residual value of warrants on conversion of convertible debentures - 30,779 - Accounts receivable applied to accounts payable 648,091 - Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in A reconciliation of income taxes at statutory rates with the reported taxes is as follows: 2020 2019 2018 $ Loss from continuing operations before income taxes (5,183,411) (7,696,577) (7,576,796) Profit (loss) from continuing operations before income taxes (2,813,889) (91,315) 78,184 Loss before income taxes (7,997,300) (7,787,892) (7,498,612) Expected income tax expense (recovery) at statutory rates (2,159,000) (2,103,000) (2,025,000) Change in statutory, foreign tax, foreign exchange rates and other (63,000) (44,576) (75,379) Permanent difference 563,000 356,000 1,439,000 Impact of deconsolidation (23,000) - Share issue cost (226,000) - (132,000) Adjustment to prior years provision versus statutory tax returns and expiry of non-capital losses (9,000) (123,000) - Change in unrecognized deferred tax assets 1,917,000 1,752,000 795,000 Income tax expense (recovery) - (162,576) 1,621 Deferred tax expense (recovery) relating to continuing operations - (160,917) - Current income tax expense (recovery) relating to discontinued operations - 1,659 (1,621) The significant components of the Company’s deferred tax liability is as follows: 2020 2019 $ $ Deferred tax assets (liabilities) Intangible assets - (23,163) Capital loss 197,000 - Investment in associates (434,000) (122,000) Debt with accretion - (41,000) Non-capital losses 237,000 163,000 Net deferred tax liability - (23,163) Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 30. INCOME TAXES (continued) No deferred tax asset has been recognized in respect of the following losses and temporary differences as it is not considered probable that sufficient future taxable profit will allow the deferred tax asset to be recovered: 2020 Expiry Date Range 2019 Expiry Date Range 2018 Expiry Date Range $ $ $ Property and equipment 3,222,000 No expiry date 2,675,000 No expiry date 437,000 No expiry date Share issue costs 865,000 2020-2024 305,000 2020-2022 414,000 2019-2022 Debt with accretion 122,000 No expiry date - No expiry date - No expiry date Investment in associates - No expiry date - No expiry date 56,000 No expiry date Allowable capital losses - No expiry date 323,000 No expiry date 11,000 No expiry date Non-capital losses 14,609,000 2026-2040 8,194,000 2026-2039 4,503,000 2026-2038 Tax attributes are subject to review, and potential adjustment, by tax authorities. During the years ended November 30, 2020 Revenue derived in the Company’s film and television entertainment and video games segments is earned from a large number of customers located throughout the Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 31. SEGMENTED INFORMATION (continued) Below summarizes the Company’s reportable operating segments for year ended November 30, 2021. Below summarizes the Company’s reportable operating segments for the year ended November 30, 2020. Film Video Games Total $ $ $ Segment Information Revenue 16,587 30,730 47,317 Cost of sales (56,058) (707,126) (763,184) Operating expenses (499,144) (127,155) (626,299) Discontinued operations - (2,813,889) (2,813,889) Segment profit (loss) (538,615) (3,617,440) (4,156,055) Corporate expenses: Operating expenses (6,918,323) Other income 3,077,078 Foreign currency translation (320,925) Comprehensive loss for the year (8,318,225) Capital expenditures 4,464,885 - 4,897,288 Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in United States Dollars) 31. SEGMENTED INFORMATION (continued) Below summarizes the Company’s reportable operating segments for the year ended November 30, 2019. Film Video Games Total $ $ $ Segment Information Revenue - 27,109 27,109 Cost of sales - (1,837,555) (1,837,555) Operating expenses - (100,202) (100,202) Other expenses - 195,726 195,726 Discontinued operations - (89,656) (89,656) Segment loss - (1,804,578) (1,804,578) Corporate expenses: Operating expenses (5,401,320) Other expenses (580,335) Tax recovery 160,917 Foreign currency translation 12,775 Comprehensive loss for the year (7,612,541) Capital expenditures: Equipment - 125,143 125,143 32. PROPOSED TRANSACTION In connection with the proposed Filmocracy Transaction, on September 17, 2021, and subsequently extended on December 17, 2021, February 15, 2022, and March 31, 2022, the Company entered into an agreement with Filmocracy for $608,735 whereby the Company will advance $608,735 to Filmocracy as follows: (1) $244,292 upon the date of the agreement (advanced September 21, 2021); (2) $190,594 on the first month anniversary (advanced October 25, 2021); and (3) $173,849 on the second month anniversary (not yet advanced). The agreement bears interest at 6% per annum, is due on the earlier of April 30, 2022 or 30 days following the termination of the Filmocracy Transaction, and is secured by a general security agreement over certain assets. In the event that the proposed transaction does not close, all amounts outstanding shall bear interest at 24% per annum. As at November 30, 2021, the Company has accrued $3,930 of interest income in connection with this advance for acquisition. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in Film Video Games Total $ $ $ Segment Information Cost of sales - (603,718) (603,718) Operating expenses - (17,722) (17,722) Other expenses (442,585) - (442,585) Discontinued operations - 76,563 76,563 Segment loss (442,585) (544,877) (987,462) Corporate expenses: Operating expenses (1,759,084) Other expenses (4,753,687) Foreign currency translation 398,892 Comprehensive loss for the year (7,101,341) Capital expenditures: Intangible assets - 79,808 79,808 Goodwill - 3,585,883 3,585,883 33. SUBSEQUENT EVENTS Upon closing of the iGEMS Agreement, Liquid Merger Sub 3 was amalgamated with iGEMS with the surviving entity retaining the name iGEMS TV, Inc. The acquisition will be accounted for using the acquisition method pursuant to As at December 31, 2021, iGEMS had net liabilities of $79,894 excluding any intangibles or goodwill to be recognized pursuant to the acquisition. The initial accounting for the acquisition was not complete by the issuance date of these consolidated financial statements. Liquid Media Group Ltd. Notes to Consolidated Financial Statements November 30, 2021 (Expressed in 33. SUBSEQUENT EVENTS (continued) For additional clarification, the minimum aggregate total (i) Issuer Consideration Shares and (ii) Issuer Additional Shares issuable in connection with the achievement of both the First Milepost and Second Milepost is 5,625,000. In connection with the DCU Transaction, on August 31, 2021, the Company The acquisition will be accounted for using the acquisition method pursuant to IFRS 3, Business Combinations. Under the acquisition method, assets and liabilities are recorded at their fair values on the date of acquisition and the total consideration is allocated to the assets acquired and liabilities assumed. The excess consideration given over the fair value of the net assets acquired will be recorded as goodwill. The initial accounting for the Exhibit No. Description 1.1 Certificate of Incorporation and Articles and amendments to the Articles and Memorandum of the Company, incorporated by reference from prior filing as Exhibit 3.1 to the Form F-3, filed with the SEC on September 24, 2007. Notice of Articles, incorporated by reference from prior filing as Exhibits 99.1 and 99.2 to the Form 6-K filed with the SEC on February 3, 2010. Description of Securities. Incorporated by reference to Amendment No. 2 to Form 20-F for the year ended November 30, 2020, filed with the SEC on August 24, 2021 Further Amended and Restated Shareholder Rights Plan Agreement, incorporated by reference from prior filing on Form 6-K filed with the SEC on July 7, 2015. Share Purchase Agreement dated September 15, 2017 between the Company and 1133438 B.C. Ltd. relating to the disposition of the Company’s subsidiaries, incorporated by reference from prior filing as Exhibit 4.2 to the Annual Report on Form 20-F filed with the SEC on June 1, 2018. Employment Agreement dated November 1, 2020, Employment Agreement dated November 1, 2020, between the Company and Charlie Brezer, President and a director of the Company. Incorporated by reference from prior filing as Exhibit 4.5 to the Annual Report on Form 20-F filed with the SEC on March 3, 2021. Sales Agreement dated August 24, 2021 between the Company and Virtu Americas LLC as agent (the “Sales Agent”), pursuant to which the Company may elect to sell, from time to time through the Sales Agent, ordinary shares, no par value per share of the Company, having an aggregate offering price of up to $6,051,342. Incorporated by reference to Exhibit 10.1 on Form 6-K filed with the SEC on August 24, 2021. Code of Ethics, incorporated by reference from the prior filing as Exhibit 11.1 to the Annual Report on Form 20-F, filed with the SEC on June 1, 15.3* Management’s Discussion and Analysis for the years ended November 30, 2020 Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). Inline XBRL Taxonomy Extension Schema Document Inline XBRL Taxonomy Extension Calculation Linkbase Document Inline XBRL Taxonomy Extension Definition Linkbase Document Inline XBRL Taxonomy Extension Label Linkbase Document Inline XBRL Taxonomy Extension Presentation Linkbase Document The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf. Date INDEX TO EXHIBITS Description 1.1 Certificate of Incorporation and Articles and amendments to the Articles and Memorandum of the Company, incorporated by reference from prior filing as Exhibit 3.1 to the Form F-3, filed with the SEC on September 24, 2007. Notice of Articles, incorporated by reference from prior filing as Exhibits 99.1 Description of Securities, incorporated by reference to Amendment No. 2 to Form 20-F for the year ended November 30, 2020, filed with the SEC on August 24, 2021. Further Amended and Restated Shareholder Rights Plan Agreement, incorporated by reference from prior filing on Form 6-K filed with the SEC on July 7, 2015. Share Purchase Agreement dated September 15, 2017 between the Company and 1133438 B.C. Ltd. Relating to the disposition of the Company’s subsidiaries, incorporated by reference from prior filing as Exhibit 4.2 to the Annual Report on Form 20-F filed with the SEC on June 1, 2018. Amended and Restated Arrangement Agreement dated January 14, 2018, between the Company and Liquid Canada (fka Liquid Media Group Ltd.), incorporated by reference from prior filing as Exhibit 4.3 to the Annual Report on Form 20-F filed with the SEC on June 1, 2018. Employment Agreement dated November 1, 2020, between the Company and Daniel Cruz, incorporated by reference from prior filing as Exhibit 4.4 to the Annual Report on Form 20-F filed with the SEC on March 3, 2021. Employment Agreement dated November 1, 2020 between the Company and Charlie Brezer, President and a director of the Company, incorporated by reference from prior filing as Exhibit 4.5 to the Annual Report on Form 20-F filed with the SEC on March 3, 2021. Sales Agreement dated August 24, 2021, between the Company and Virtu Americas LLC as agent (the “Sales Agent”), pursuant to which the Company may elect to sell, from time to time through the Sales Agent, ordinary shares, no par value per share of the Company, having an aggregate offering price of up to $6,051,342. Incorporated by reference to Exhibit 10.1 on Form 6-K filed with the SEC on August 24, 2021. Code of Ethics, incorporated by reference from the prior filing as Exhibit 11.1 to the Annual Report of Form 20-F, filed with the SEC on June 1, 2005 Management’s Discussion and Analysis for the years ended November 30, 2021 Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). Inline XBRL Taxonomy Extension Schema Document Inline XBRL Taxonomy Extension Calculation Linkbase Document Inline XBRL Taxonomy Extension Definition Linkbase Document Inline XBRL Taxonomy Extension Label Linkbase Document Inline XBRL Taxonomy Extension Presentation Linkbase Document C. Markets The Company’s common shares have been quoted on the NASDAQ (formerly called the NASDAQ Small-cap Market) since August 3, 1993. The Company’s common shares have been listed on the Nasdaq Capital Market of the NASDAQ stock market since August 3, 1993. Our ticker symbol is YVR.D. Selling Shareholders E. Dilution F. Expense of the Issue A. Share capital E.DilutionThis item is not applicable for an Annual Report.F.Expense of the IssueThis item is not applicable for an Annual Report.Item 10. – Additional InformationThis item is not applicable for an Annual Report.B. Memorandum and articles of association The Notice of Articles relating to the consolidation of the Company’s common shares and the increase in authorized share capital that were filed with the British Columbia Registry Services on February 1, 2010 were filed on a Form 6-K on February 3, 2010.All other information required by this “Item 10.B” was previously reported to the SEC in the Company’s registration statement on Form F-3, filed on September 24, 2007, and the increase in authorized share capital that were filed with the British Columbia Registry Services on February 1, 2010 were filed on a Form 6-K on February 3, 2010.C. Material contracts (i) Employment Agreements dated November 1, 2020 between the Company signed employment agreements withand each of Charlie Brezer, President and a director of the Company, and Daniel Cruz, the former CFO and aformer director of the Company. The agreements require total payments of $17,500CAD$17,500 each per month each.month. Included in the agreements is a provision for 12 months written notice or salary paid in lieu of notice upon termination without just cause. In April 2021, the employment agreement with Mr. Cruz was cancelled and replaced with a consulting agreement with the same terms.(ii) Employment Agreement dated January 1, 2021 between the Company and Ronald Thomson, CEO and a director of the Company, whereby Mr. Thomson would be paid CAD$20,000 per month, with a provision that his compensation would increase to CAD$30,000 per month upon the Company raising US$5 Million, which was accomplished. (iii) Sales Agreement dated August 24, 2021 (the “ATM Agreement”) between the Company and Virtu Americas LLC as agent (the “Sales Agent”), pursuant to which the Company may elect to sell, from time to time through the Sales Agent, ordinary shares, no par value per share of the Company, having an aggregate offering price of up to $6,051,342. (iv) Agreement and Plan of Merger dated September 1, 2021 and Amendment to Agreement and Plan of Merger dated September 15, 2021 by and among IndieFlix, the Company and LMG Merger Sub, Inc., a Delaware corporation and a wholly-owned or indirect wholly-owned subsidiary of the Company. (v) Agreement and Plan of Merger dated December 4, 2021 among the Company, Liquid Media Merger Sub 3, Inc., a Delaware corporation and a wholly-owned or indirect wholly-owned subsidiary of the Company, and iGEMS. (vi) Securities Exchange Agreement dated February 9, 2022 between the Company and DCU shareholders to acquire all of the outstanding equity shares of DCU in exchange for the Company's common shares. D. Exchange controls Canada has no system of exchange controls. There are no exchange restrictions on borrowing from foreign countries or on the remittance of dividends, interest, royalties and similar payments, management fees, loan repayments, settlement of trade debts, or the repatriation of capital. Any such remittances to U.S. residents, however, may be subject to withholding tax. E. Taxation A brief and general description is included below of certain taxes, including withholding taxes, to which U.S. security holders may be subject under the existing tax laws and regulations of Canada. The consequences, if any, of provincial taxes are not considered.Please note that the following information is a brief summary only and security holders should seek the advice of their own tax advisors with respect to the applicability or effect on their own individual circumstances of the matters referred to herein and of any U.S. federal, state or local taxes.Generally, cash dividends paid or deemed to be paid by a Canadian-corporation to non-resident shareholders are subject to a withholding tax of 25% (unless an income tax convention applies to reduce the withholding tax rate to some other amount). Dividends paid to U.S. residents are subject to a withholding tax of 15%, and dividends paid to a U.S. resident company which owns 10% or more of the voting shares of the Canadian corporation are subject to a withholding tax of 5%. Dividends paid by a Canadian corporation to shareholders residing in Canada are not subject to withholding tax.Generally, the disposition by a non-resident of shares of a Canadian public corporation is not subject to Canadian income tax, unless such shares are “taxable Canadian property” within the meaning of the Income Tax Act (Canada) and no relief is afforded under any applicable tax treaty. The shares of the Company would be taxable Canadian property of a non-resident purchaser if the non-resident purchaser used the shares in carrying on a business in Canada, or if the non-resident, together with persons with whom he does not deal at arm’s length, owned 25% or more of the issued shares of any class of the capital stock of the Canadian corporation at any time during the five-year period immediately preceding the disposition. ● the individual was resident in Canada for 120 months during any period of 20 consecutive years preceding, and at any time during the 10 years immediately preceding, the disposition of shares; and ● the individual owned the shares when he ceased to be resident in Canada. • An individual who is a citizen or resident of the Company should seek independent advice from their own professionalU.S.;• A corporation (or other entity taxable as a corporation for U.S. federal income tax advisers with respectpurposes) created or organized in or under the laws of the U.S., any state thereof or the District of Columbia;• An estate the income of which is subject to U.S. federal income taxation regardless of its source; or • A trust that (a) is subject to the income tax consequences arising fromprimary supervision of a court within the holdingU.S. and the control of one or more U.S. persons for all substantial decisions or (b) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.F. Dividends and paying agents This item is not applicable for an Annual Report.G. Statement by experts This item is not applicable for an Annual Report.H. Documents on display Copies of documents concerning the Company, which are referred to in this Annual Report, are available for inspection at the head office of the Company located at #202, 5626 Larch Street, Vancouver, BC, V6M 4E1.I. Subsidiary Information (a) Currency risk Foreign currency exchange rate risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. The Company’s operations are carried out in Canada and the United States. As the Company’s functional currency is USD, the Company is subject to foreign currency exchange rate risk on its net assets denominated in CAD which could have an adverse effect on the profitability of the Company. As at November 30, 2020, the Company had assets totaling CAD$385,416 and liabilities totalling CAD$317,679. A 10% change in the exchange rate would change other comprehensive income/loss by approximately US$5,000.(b) Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.The Company’s cash is held in a large Canadian financial institution. The Company maintains certain cash deposits with Schedule I financial institutions, which from time to time may exceed federally insured limits. The Company has not experienced any significant credit losses and believes it is not exposed to any significant credit risk. The Company’s restricted cash is held with a law firm in trust in which credit risk exposure is low. The Company’s sales tax receivable is due from the Government of Canada; therefore, the credit risk exposure is low.The maximum exposure to credit risk as at November 30, 2020 and 2019 is the carrying value of the loans receivable. The Company has allowed for an expected credit loss of $330,312 on the loans receivable as at November 30, 2020. During the year ended November 30, 2020, the Company increased the allowance by $184,881(c) Interest rate risk Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and liabilities with variable interest rates As at November 30, 2020, the loans included in loans payable and convertible debentures bear interest at rates of 14.4% and 2.0% per annum, respectively, and are due on demand. The long-term debt bears interest at 6.99% per annum and is payable over five years. The Company does maintain bank accounts which earn interest at variable rates but it does not believe it is currently subject to any significant interest rate risk.(d) Liquidity risk The Company’s ability to continue as a going concern is dependent on management’s ability to raise required funding through future equity issuances and through short-term borrowing. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and the Board of Directors are actively involved in the review, planning and approval of significant expenditures and commitments. As at November 30, 2020, the Company had a cash balance of $704,977 to settle current financial liabilities of $2,464,255. Additionally, as there is no assurance the convertible debentures will be converted into common shares of the Company, the Company is exposed to liquidity risk.Item 12. – Description of Securities Other than Equity SecuritiesThis item is not applicable for an Annual Report, except for “Item 12.D.3” and “Item 12.D.4.” The Company does not have securities represented by American Depositary Receipts.Item 13. – Defaults, Dividend Arrearages and DelinquenciesNone.Item 14. – Material Modifications to the Rights of Security Holders and Use of ProceedsB. There has beenwere no material withdrawalmodifications or substitutionqualification of assets securingrights evidenced by any class of registered securities by issuing or modifying any other class of the Company.securities.C. This item is not applicable. D. There has been no change of trustee or paying agent for any registered securities. E. This item is not applicable. Item 15. – Controls and Procedureseffective.not effective, because of a material weakness in our internal control over financial reporting, as discussed below.Management’s Annual Report on Internal Control Over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. The Company’s system of internal controls is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.A material weakness in our internal controls is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.2020.2021. Our management’s evaluation of our internal control over financial reporting was based on the framework in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management concluded that our internal control over financial reporting was not effective as of November 30, 2020.2021, because management did not design and implement internal controls to ensure an effective review process over period end financial disclosure and reporting. The Company will implement immediately an appropriate remedial measure whereby new review procedures will be established by the CFO.WeThe Company will continue to monitor and evaluate the effectiveness of ourits internal controls and procedures over financial reporting on an ongoing basis and are committed to taking further action and implementing additional improvements as necessary and as funds allow.necessary.Our chief executive officerThe Company does not expect that ourits disclosure controls or ourits internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our companyCompany have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC that permit a non-accelerated filer, such as the Company, to provide only management’s report in this Annual Report.Item 16A. – Audit Committee Financial Expert#202, 5626 Larch Street,67 East 5th Avenue, Vancouver, BC V6M 4E1,V5T 1G7 or electronically to info@liquidmediagroup.co.info@liquidmediagroup.co.There were no amendments or waivers to the Code of Ethics during the most recently completed fiscal year.Item 16C. – Principal Accountant Fees and Services Services.20202021, and November 30, 20192020, was Davidson & Company LLP, Chartered Professional Accountants.forduring each of the last two fiscal years for audit fees are as follows:Audit Fees Audit Related Fees Tax Fees All Other Fees November 30, 2021 $110,817 Nil $62.505 $111,402 Nil $78,172 Item 16D. – Exemptions from the Listing Standards for Audit CommitteesCommittees.Item 16E. – Purchases of Equity Securities by the Issuer and Affiliated PurchasersAccountant Accountant.Item 16G. – Corporate Governance Governance.NASDAQ.NASDAQ Stock Market. NASDAQ Marketplace Rule 5615(a)(3) permits a foreign private issuer to follow its home country practices in lieu of most of the requirements of the 5600 Series of the NASDAQ Marketplace Rules. In order to claim such an exemption,The Company is following its home country practice on the Company must disclose thefollowing matters and is disclosing significant differences between its home corporate governance practices and those required to be followed by U.S. domestic issuers under NASDAQ’s corporate governance requirements. Set forth below is a brief summary of such differences.SectionRule 5635 requires shareholder approval of most equity compensation plans and material revisions to such plans, as well as with respect to the sale of our securities at a discount to their market value to an officer, director, employee or consultant. We do not follow this NASDAQ Marketplace Rule. Instead, and in accordance with the NASDAQ exemption, we comply with with British Columbia corporate and securities laws which do not require shareholder approval of equity compensation plans or mostallows discount to market offerings of securities unless otherwise indicated in the articles of the Company.Item 16H. – Mine Safety Disclosure Disclosure.PART IIIItem 16I. – Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.Item 18. – Financial Statements
2019, and 20182019CanadianUnited States Dollars)CanadianUnited States Dollars)Independent Auditors’ Report73Financial StatementsConsolidated Statements of Financial Position74 Consolidated Statements of Loss75Consolidated Statements of Comprehensive Loss77Consolidated Statements of Cash Flows78 Consolidated Statements of Changes in Shareholders’ Equity80 Notes to Consolidated Financial Statements82 F-1 
Consolidated Statements of Financial Position(Expressed in Canadian Dollars)
2020NatureOpinion on the Consolidated Financial StatementscontinuanceDecember 1, 2019, and the related consolidated statements of loss and comprehensive loss, changes in shareholders’ equity, and cash flows for the years ended November 30, 2021, 2020, and 2019, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of November 30, 2021, November 30, 2020, and December 1, 2019, and the results of its operations (Note 1)Contingencies (Note 26)Subsequent events (Note 29)and its cash flows for the years ended November 30, 2021, 2020, and 2019 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.Approved on behalf of the Board of Directors on February 28, 2021:“Joshua Jackson”Going Concern“Stephen Jackson” Director Director notesconsolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has generated losses since inception and the continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing; these issues raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.integralopinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.theseour audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.F-2 · evaluating the reasonableness of management’s assessment as a business combination; · assessing the valuation of assets acquired and liabilities assumed on the date of acquisition; · assessing the fair value estimate of acquired intangible assets by assessing reasonability of key inputs, including among other items, future cash flow forecasts, growth rates, and discount rates with the assistance of a fair value specialist; and · assessing the reasonability of contingent consideration shares expected to vest, and assessing the sensitivity of inputs impacting their fair value estimate with the assistance of a fair value specialist. F-3 Liquid Media Group Ltd.Consolidated Statements of Loss(ExpressedAddressing the matter involved performing procedures and evaluating audit evidence in Canadian Dollars)connection with forming our overall opinion on the financial statements. These procedures included, among others:
from continuing operations· evaluating the reasonableness of management’s assessment of indicators of impairment with respect to the intangible assets and licenses; · evaluating models estimating the recoverable amount of licenses and intangibles, which was considered to be nominal; and · evaluating the estimated recoverable amount of the Indieflix CGU, which included assessing for changes to the underlying assumptions to the acquisition date fair value of acquired intangibles utilized in the year-end estimate, which was determined to not have materially changed. The accompanying notes are an integral part of these consolidated financial statements./s/ Davidson & Company LLP Chartered Professional Accountants Vancouver, Canada April 7, 2022 Liquid Media Group Ltd.Consolidated Statements of Loss(Expressed in Canadian Dollars)Loss per common share (Note 19)F-4 November 30, Note 2021 2020 2019 $ $ $ (restated Note 2) (restated Note 2) ASSETS Current assets Cash 4,305,461 543,749 3,452,022 Receivables 4,24 778,505 183,615 523,327 Prepaids 5 50,644 406,932 223,005 Advances for acquisitions 32,33 1,702,882 — — Loans receivable 6 — — 71,399 Total current assets 6,837,492 1,134,296 4,775,932 Restricted cash 7 53,937 0 506,179 Loans receivable 6 — 84,923 175,962 Licenses 8 — 705,555 1,385,229 Investment in equity instruments 10 — 2,966,110 1,167,371 Investment in content 11 40,984 — — Equipment 12 30,312 108,254 92,787 Intangible assets 13 3,636,078 4,291,842 1,285,239 Right-of-use assets 14 133,984 — — Goodwill 15 833,493 — 2,695,867 Total assets 11,566,280 9,290,980 11,578,387 LIABILITIES Current liabilities Accounts payable and accrued liabilities 16,24 2,001,732 1,149,818 3,285,334 Corporate income taxes payable 30 5,206 — — Deferred revenue 17 183,994 — — Loans payable 18 — 493,087 1,082,045 Convertible debentures 19,24 — 409,960 — Current portion of long-term debt 20 — 6,935 — Current portion of lease liability 14 61,703 — — Current liabilities 2,252,635 2,059,800 4,367,379 Convertible debentures 19,24 — — 1,044,772 Long-term debt 20 158,265 33,124 — Lease liability 14 73,472 — — Deferred income taxes 3,30 763,120 — 17,430 Derivative liability 3,21 1,277,200 263,139 829,463 Liabilities 4,524,692 2,356,063 6,259,044 SHAREHOLDERS' EQUITY Share capital 21 35,102,920 22,435,363 16,164,479 Commitment to issue shares 21 — 440,501 103,750 Reserves 21 3,400,835 2,741,849 1,624,525 Accumulated deficit (31,462,167 ) (18,682,796 ) (13,984,650 ) Equity attributable to shareholders of the Company 7,041,588 6,934,917 3,908,104 Non-controlling interest 25 — — 1,411,239 Total Equity 7,041,588 6,934,917 5,319,343 Total equity and liabilities 11,566,280 9,290,980 11,578,387 F-5 “Ronald Thomson” “Joshua Jackson” Director Director F-6 Year ended November 30, Note 2021 2020 2019 $ $ $ (restated Note 2) (restated Note 2) Sales 24 767,790 35,487 20,427 Cost of sales 8,13,24 771,545 568,712 1,380,872 Gross profit (loss) (3,755 ) (533,225 ) (1,360,445 ) Operating expenses Accretion expense 19,20 10,067 51,520 158,736 Amortization 13,14 86,115 75,397 75,397 Consulting fees 838,699 899,619 597,309 Depreciation 12 32,476 27,836 1,175 Foreign exchange loss 53,728 31,674 12,941 Insurance 66,517 60,178 43,987 Interest expense 18,20,24 23,600 116,842 134,515 Investor relations, filing, and compliance fees 167,441 209,335 201,932 Management and directors salaries and fees 24 717,579 470,936 421,071 Marketing 696,777 1,587,526 877,165 Other general and administrative expenses 24 144,160 58,602 37,438 Professional fees 992,322 513,529 669,769 Research and development 308,305 326,930 — Share-based compensation 21,24 1,674,322 1,447,476 891,099 Salaries and benefits 24 291,908 — 869 Travel 26,139 22,783 22,647 Total operating expenses 6,130,155 5,900,183 4,146,050 Loss before other income (expenses) (6,133,910 ) (6,433,408 ) (5,506,495 ) Other income (expenses) Interest income 6,32,33 42,468 50,537 51,832 Royalty income 23 9,241 — — Share of profit of equity investment 9 — — 147,049 Write-off of licenses 8 (492,751 ) (250,581 ) (542,290 ) Project investigation — — (143,718 ) Impairment of intangible assets 13 (4,214,445 ) — — Gain (loss) on derivative liability 3,21 210,436 918,102 (338,719 ) Gain (loss) on settlement of debt 16,18 38,258 30,473 (74,168 ) Loss on disposal of equipment 12 (45,466 ) — — Loss on disposal of investment 10 (3,438,560 ) — — Unrealized gains on equity instruments 10 1,139,133 1,798,739 721,384 Allowance for credit loss 6 (101,085 ) (142,159 ) (109,437 ) Write-off of accounts payable 16 199,545 — — Total other income (expenses) (6,653,226 ) 2,405,111 (288,067 ) Loss before income taxes (12,787,136 ) (4,028,297 ) (5,794,562 ) Deferred income tax recovery 19,30 (12,971 ) — (122,201 ) Income tax expense 30 5,206 — — Loss attributable to Liquid Media Group from continuing operations (12,779,371 ) (4,028,297 ) (5,672,361 ) Loss from discontinued operations 22 — (2,081,088 ) (67,447 ) Loss for the year (12,779,371 ) (6,109,385 ) (5,739,808 ) F-7 Year ended November 30, Note 2021 2020 2019 $ $ $ (restated Note 2) (restated Note 2) Loss attributable to: Shareholders of the Company (12,779,371 ) (4,698,146 ) (5,706,759 ) Non-controlling interest from discontinued operations 25 — (1,411,239 ) (33,049 ) Loss for the year (12,779,371 ) (6,109,385 ) (5,739,808 ) F-8 Year ended November 30, 2021 2020 2019 $ $ $ (restated Note 2) (restated Note 2) Cash flows provided by (used in) operating activities Loss from continuing operations for the year (12,779,371 ) (4,028,297 ) (5,672,361 ) Operating expenses of discontinued operations — 79,179 56,760 Items not affecting cash: Accretion expense 10,067 51,520 158,736 Accrued interest income (41,382 ) 96,399 (45,653 ) Accrued interest expense 3,323 (46,153 ) 122,005 Accrued income taxes 5,206 — — Allowance for credit loss 101,085 142,159 109,437 Amortization - intangibles 136,992 75,397 75,397 Amortization - licenses 213,015 444,519 1,367,318 Amortization – right-of-use asset 10,718 — — Depreciation 32,476 27,836 1,175 Change in value of derivatives (210,436 ) (918,102 ) 338,719 Commitment to issue shares — — 25,000 Deferred income tax recovery (12,971 ) — (122,201 ) Impairment of intangible assets 4,214,445 — — Interest on lease liability 771 — — (Gain) loss on settlement of debt (38,258 ) (30,473 ) 74,168 Loss on disposal of equipment 45,466 — — Loss on disposal of investment 3,438,560 — — Share of (profit) loss on equity investment — — (147,049 ) Share-based compensation 1,674,322 1,447,476 891,099 Shares issued for services 46,948 184,910 55,514 Unrealized foreign exchange 1,782 (26 ) (42,450 ) Unrealized gains on equity instruments (1,139,133 ) (1,785,885 ) (721,384 ) Write-off of license fees 492,751 250,581 542,290 Write-off of old accounts payable 199,545 — — Changes in non-cash working capital: Receivables (406,612 ) (140,222 ) (490,370 ) Inventory 105 — — Prepaids 364,623 (183,927 ) (263,405 ) Accounts payable and accrued liabilities 130,430 (640,756 ) 626,675 Deferred revenue (67,441 ) — — Cash flows from (used in) operating activities (3,572,974 ) (4,973,865 ) (3,060,580 ) F-9 Year ended November 30, 2021 2020 2019 $ $ $ (restated Note 2) (restated Note 2) Cash flows provided by (used in) investing activities Cash acquired on purchase of IndieFlix 21,076 — — Cash disposed on sale of Majesco — (79,590 ) — Acquisition of equipment — (43,303 ) — Investment in content (40,984 ) — — Investment in intangibles — (3,340,426 ) — Proceeds on disposal of equity instruments 666,683 — — Loan receivable received — 64,196 8,558 Interest received on loans — 9,307 5,007 Advances for acquisitions (2,182,694 ) — — Restricted cash received — 510,879 431,917 Purchase of restricted deposit certificates (53,937 ) (4,700 ) (506,179 ) Investing expenses of discontinued operations — — (100,000 ) Cash flows from (used in) investing activities (1,589,856 ) (2,883,637 ) (160,697 ) Cash flows provided by (used in) financing activities Loan proceeds — 1,143 612,215 Loan repayments — (585,388 ) (104,197 ) Loan repayments to related parties — — (129,463 ) Long-term debt proceeds — 40,059 — Long-term debt repayments (37,343 ) — — Interest paid on loans (2,716 ) — (17,446 ) Convertible debentures received — — 2,660,000 Lease payments (10,298 ) — — Shares and warrants issued for cash 6,915,230 4,000,002 — Share issuance costs (573,351 ) (548,481 ) — Commitment to issue shares — 440,501 78,750 Warrants exercised and issued for cash 2,613,993 1,472,000 277,010 Options exercised and issued for cash 19,000 136,438 — Cash flows from (used in) financing activities 8,924,515 4,956,274 3,376,869 Effect of foreign exchange on cash 27 (7,045 ) 43,143 Change in cash during the year 3,761,712 (2,908,273 ) 198,735 Cash, beginning of year 543,749 3,452,022 3,253,287 Cash, end of year 4,305,461 543,749 3,452,022 Supplemental cash-flow disclosure Interest received — 12,067 5,007 Interest paid 2,569 304,924 17,446 F-10 Shares Amount Commitment to Issue Shares Reserves Deficit Non-controlling interest Total $ $ $ $ $ $ Balance, November 30, 2018 (restated Note 2) 4,010,108 13,834,828 10,000 564,960 (8,277,891 ) 1,444,288 7,576,185 Shares issued to settle debt 159,873 478,091 — — — — 478,091 Units issued for convertible debentures 1,000,167 1,542,229 — (185,122 ) — — 1,357,107 Residual value of warrants issued for convertible debentures — (23,193 ) — 23,193 — — — Shares issued for services 17,222 55,514 — — — — 55,514 Commitment to issue shares — — 103,750 — — — 103,750 Warrants exercised for cash 158,291 277,010 — — — — 277,010 Subscriptions reclassified to payables — — (10,000 ) — — — (10,000 ) Share-based compensation — — — 891,099 — — 891,099 Convertible debenture - equity portion — — — 330,395 — — 330,395 Loss for the year — — — — (5,706,759 ) (33,049 ) (5,739,808 ) Balance, November 30, 2019 (restated Note 2) 5,345,661 16,164,479 103,750 1,624,525 (13,984,650 ) 1,411,239 5,319,343 Units issued for cash 2,666,672 3,648,224 — — — — 3,648,224 Shares issued to settle debt 107,228 243,306 — — — — 243,306 Units issued for convertible debentures and related interest 527,402 795,891 — (95,306 ) — — 700,585 Shares issued for services 125,675 209,910 (25,000 ) — — — 184,910 Shares issued for restricted share units 250,001 367,501 — (367,501 ) — — — Share issuance costs — (801,457 ) — — — — (801,457 ) Commitment to issue shares — — 440,501 — — — 440,501 Warrants exercised for cash 1,066,282 1,570,990 (78,750 ) (20,240 ) — — 1,472,000 Warrants issued for share issue costs — — — 252,976 — — 252,976 Options exercised for cash 53,505 236,519 — (100,081 ) — — 136,438 Subscriptions reclassified to payables — — — — — — — Share-based compensation — — — 1,447,476 — — 1,447,476 Loss for the year — — — — (4,698,146 ) (1,411,239 ) (6,109,385 ) Balance, November 30, 2020 (restated Note 2) 10,142,426 22,435,363 440,501 2,741,849 (18,682,796 ) — 6,934,917 F-11 Liquid Media Group Ltd.Consolidated Statements of Comprehensive Loss(Expressed in Canadian Dollars)The accompanying notes are an integral part of these consolidated financial statements.Liquid Media Group Ltd.Consolidated Statements of Cash Flows(Expressed in Canadian Dollars)The accompanying notes are an integral part of these consolidated financial statements.Liquid Media Group Ltd.Consolidated Statements of Cash Flows(Expressed in Canadian Dollars)Supplemental disclosure with respect to cash flows (Note 25)The accompanying notes are an integral part of these consolidated financial statements.CanadianUnited States Dollars) Shares Amount Commitment to Issue Shares Reserves Deficit Non-controlling interes Total $ $ $ $ $ $ Balance, November 30, 2020 (restated Note 2) 10,142,426 22,435,363 440,501 2,741,849 (18,682,796 ) — 6,934,917 Shares issued pursuant to acquisition of IndieFlix 499,996 799,994 — — — — 799,994 Shares issued for cash 2,228,410 6,915,230 — — — — 6,915,230 Shares issued to settle debt 257,878 561,403 — — — — 561,403 Units issued for convertible debentures and related interest 270,000 454,967 — (49,967 ) — — 405,000 Shares issued for services 17,907 46,948 — — — — 46,948 Shares issued for restricted share units 487,502 721,502 — (721,502 ) — — — Shares issued for cashless warrant exercise 121,319 423,503 — — — — 423,503 Share issuance costs — (573,351 ) — — — — (573,351 ) Warrants exercised for cash 1,787,251 3,278,800 (440,501 ) (224,306 ) — — 2,613,993 Options exercised for cash 10,000 38,561 — (19,561 ) — — 19,000 Share-based compensation — — — 1,674,322 — — 1,674,322 Loss for the year — — — — (12,779,371 ) — (12,779,371 ) Balance, November 30, 2021 15,822,689 35,102,920 — 3,400,835 (31,462,167 ) — 7,041,588 The accompanying notes are an integral part of these consolidated financial statementsLiquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)F-12 of Changes in Shareholders’ EquityCanadianUnited States Dollars), formerly Leading Brands Inc. (“LBIX”), is the parenta business solutions company of Liquid Media Group (Canada) Ltd. (“Liquid Canada”), formerly Liquid Media Group Ltd. The Company is an entertainment company with a portfolio ofempowering independent film and TV content IP spanning creative industries. The Company’s mission iscreators to empower storytellers worldwide to develop, producepackage, finance, deliver and distribute content across channels and platforms.monetize their professional video intellectual property globally. The head office of the Company is 67 East 5th Avenue, Vancouver, BC, V5T 1G7 and the registered records office of the Company is Suite 202 – 5626 Larch400, 725 Granville Street, PO Box 10325, Vancouver, British Columbia, V6M 4E1.BC, V7Y 1G5. The Company’s common shares tradeare listed on the Nasdaq Stock Market (“Nasdaq”) under the trading symbol “YVR”.August 9, 2018,September 22, 2021, the Company announced the successful closingacquired 100% of the proposed business combination with Liquid Canada by way of plan of arrangement under the Business Corporations Act (British Columbia) (the "Arrangement"). Pursuant to the Arrangement, Liquid Canada was acquired by and became a wholly-owned subsidiary of LBIX. As part of the Arrangement, on August 10, 2018, LBIX changed its name to Liquid Media Group Ltd. and Liquid Canada changed its name to Liquid Media Group (Canada) Ltd. At the time of completion of the Arrangement, LBIX had 1,848,980 common shares issued and outstanding which included 1,288,497 common shares issued to former Liquid Canada shareholders, representing 69.69% of the Company’s issued and outstanding shares. Initially, the common shares of the Company issued in connection with the Arrangement were listed on NASDAQ under the ticker symbol “LBIX”. Effective August 10, 2018, the trading symbol of LBIX was changed to “YVR”.Upon closing of the transaction, the shareholders of Liquid Canada owned 69.69% of the common shares of the Company, and as a result, the transaction is considered a reverse acquisition of the Company by Liquid Canada. All previous common shares and warrants were exchanged at a ratio of one share of Liquid Canada for 0.5741 of LBIXIndieFlix Group, Inc. (“Conversion Rate”IndieFlix”). For accounting purposes, Liquid CanadaIndieFlix is considered the acquirera Delaware corporation that has a global ‘edutainment’ streaming service that creates, promotes, and the Company, the acquiree. Accordingly, the consolidated financial statements are in the name of Liquid Media Group Ltd; however, they are a continuation of the financial statements of Liquid Canadasupports social impact films. (Note 3).2020,2021, the Company has generated losses since inception and has an accumulated deficit of $24,672,794.$31,462,167. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing. Management has estimated that it does not have sufficient working capital to meet the Company’s liabilities and commitments as they become due for the upcoming 12 months and, therefore, will be required to obtain additional financing.months. These material uncertainties cast substantial doubt upon the Company’s ability to continue as a going concern within one year of the approval of these financial statements. There is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company.In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, potentially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our product and harm our business and results of operations; however, the Company has also recognized that the pandemic has led to a global increase in screen time and online gaming which is beneficial to the Company’s operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations, or how it will impact the Company’s ability to conduct financings at this time.Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)CanadianUnited States dollars unless otherwise noted.F-13 Schedule of Company and its subsidiaries at the end of the reporting period Percentage owned 2021 2020 2019 Canada 100 % 100 % 100 % USA 0 % 0 % 51 % Liquid Media Production Funding Ltd.
(“Liquid Production Funding”) Canada 100 % 0 % 0 % Liquid Media Group (US) Inc. (“Liquid US”) USA 100 % 0 % 0 % Liquid Media Merger Sub 2, Inc.
(“Liquid Merger Sub 2”) USA 100 % 0 % 0 % Liquid Media Merger Sub 3, Inc.
(“Liquid Merger Sub 3”) USA 100 % 0 % 0 % IndieFlix Group, Inc. (“IndieFlix”) USA 100 % 0 % 0 % Companies controlled by IndieFlix: RACE, LLC USA 100 % 0 % 0 % Entertainment Company (“Majesco”), a Nevada corporation. The CompanyMajesco is a provider of video game products primarily for the mass-market consumer (Notes 5 and 20).consumer. The Company deconsolidated Majesco as of August 31, 2020 as control was lost.lost (Note 22).F-14 of Changes in Shareholders’ EquityCanadianUnited States Dollars)SIGNIFICANT ACCOUNTING POLICIESSignificant Accounting Policies (continued)Significant judgements includesUncertainty of COVID-19 pandemicdeterminationWorld Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, initially leading to an economic downturn. It has also disrupted the normal operations of functional currency, assessments over level of control or influence over companies, the recoverabilitymany businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and measurement of deferred tax assets, assessments of acquisitions of groups of assets versus asolutions and harm our business and results of operations; however, the determinationCompany has also recognized that the pandemic has led to a global increase in screen time which is beneficial to the Company’s operations. As countries continue to re-open from the pandemic, it is possible that screen time will decrease which may adversely affect the Company; however, it also leads to an increase in film and TV content being produced as film and TV producers are able to travel and continue operations leading to an increase in content available for the Company to package, finance, deliver, and monetize. It is not possible for us to predict the duration or magnitude of a discontinued operation.the adverse results of the outbreak and its effects on our business, results of operations, or how it will impact the Company’s ability to conduct financings at this time.The most significant accounts that require estimates as the basis for determining the stated amounts include the valuation of share-based compensation, derivative, and convertible features; the valuation of intangible assets including goodwill; the valuation of investments in equity instruments; the valuation of expected credit loss; and the valuation of convertible debentures.Critical judgment exercised in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements is as follows:dollar (“USD”);dollar; however, determination of functional currency may involve certain judgments to determine the primary economic environment which is re-evaluated for each new entity or if conditions change.hashad considered its ownership position in Waterproof Studios Inc. (“Waterproof”) to constitute significant influence up to February 28, 2019 and thereafter doesdetermined it did not have the ability to influence the key operating activities of the entity. Accordingly, as of March 1, 2019 the Company has accounted for its investment under fair value through profit or loss (Notes 10 and 11). Additionally,(Note 10) up to the disposal date of October 18, 2021. The Company has also assessed that control of Majesco was lost as of August 31, 2020 (Note 20)22).Acquisition of group of assetsThe Company acquired platform coding which did not meet the definition of a business and is accounted for as an asset acquisition. The Company applied the amended IFRS 3 Business Combinations standard in its determination that the acquisition did not meet the definition of a business, in particular, the optional concentration test, as substantially all the fair value of the assets acquired were accounted in a group of similar identifiable assets.Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)2.SIGNIFICANT ACCOUNTING POLICIES (continued)Use of estimates (continued)F-15 Information about assumptions and estimation uncertainties that have a significant risk of resulting in material adjustments are as follows:derivatives, and convertible featuresderivativespayments.payments, excluding contingent consideration. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate, and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity reserves. including goodwillGoodwill and intangibleIntangible assets are assessed for impairment indicators at each reporting date. Management first reviews qualitative factors in determining if an impairment needs to be recorded. Quantitative factors are then used to calculate the amount of impairment, if needed. Goodwill and certain intangibles resulted from a business acquisition which were valued based on estimated discounted cash flows. As at November 30, 2020, that business was sold.ValuationEstimation of expected credit lossF-16 Liquid Canada changed from the CAD to the USD dollar effective September 1, 2018. The functional currencyall of Majesco wasits entities is the USD. The functional currency of Waterproof iswas the CAD.Canadian dollar (“CAD”). The functional currency determinations were conducted through an analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates.Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)2.SIGNIFICANT ACCOUNTING POLICIES (continued)Foreign currency translation (continued)For the purposes of presenting consolidated financial statements, the assets and liabilities of the Company’s USD operations are translated into CAD at the exchange rate at the reporting date. The income and expenses are translated using average rate. Foreign currency differences that arise on translation for consolidation purposes are recognized in other comprehensive income (loss).F-17 other financial liabilities.amortized cost. All financial liabilities are classified and subsequently measured at amortized cost except for financial liabilities at FVTPL. The classification determines the method by which the financial liabilities are carried on the statement of financial position subsequent to inception and how changes in value are recorded. Accounts payable and accrued liabilities, due to related parties, loans payable, convertible debentures, and long-term debt are classified as other financialamortized cost liabilities and carried on the statement of financial position at amortized cost. Derivative liabilities areliability is measured at FVTPL.Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)2.SIGNIFICANT ACCOUNTING POLICIES (continued)F-18 Company used the equity methodvaluation of accounting for its 49% investment in Waterproof until significant influence ceased on March 1, 2019.content, including acquired rights, is reviewed quarterly and any portion of the unamortized amount that appears not to be recoverable from future net revenues is recognized as accelerated amortization within direct operating expenses during the period the loss becomes evident.Computer equipment30% Vehicles30% Schedule of Equipment Computer equipment 30% Vehicles 30% Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)2.SIGNIFICANT ACCOUNTING POLICIES (continued)content.content and films. The amortization method, useful life and residual values are assessed annually and the assets are tested for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Amortization expense is recorded on a straight-line basis beginning with the month the corresponding assets are available for use and over the estimated useful lives provided below:Video game catalogues15 yearsSchedule of estimated useful lives of intangible assets Video game catalogues (years) 15 Platform coding (years) 3 Brands indefinite Distribution libraries (years) 10 Platform coding3 yearsBrandsindefinite·the development costs can be measured reliably; ·the project is technically and commercially feasible; ·the Company intends to and has sufficient resources to complete the project; ·the Company has the ability to use or sell the asset, and ·the asset will generate probable future economic benefits. · the development costs can be measured reliably; · the project is technically and commercially feasible; · the Company intends to and has sufficient resources to complete the project; · the Company has the ability to use or sell the asset, and · the asset will generate probable future economic benefits. complete and the asset startscomplete.F-19 generate income.Consolidated Financial Statementsrepresentsrepresented management’s view of the expected period over which the Company expectsexpected to receive benefits from the acquired gaming content packaged as catalogues. The election of this useful life is supported by internal game titles still producing revenue at this age. (Note 5), the Company acquired the “Majesco Entertainment” brand which was determined to have an indefinite life. The brand was written off during the year ended November 30, 2020 when the Company disposed of its investment in Majesco.F-20 · fixed payments, including in-substance fixed payments, less any lease incentives receivable; · variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date; · amounts expected to be payable under a residual value guarantee; · exercise prices of purchase options if the Company is reasonably certain to exercise that option; and · payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. cost centerCGU level by comparing the fair value of a cost centerCGU with its carrying amount including goodwill. If the carrying amount of the cost centerCGU exceeds its fair value, goodwill of the cost centerCGU is considered impaired and the second step of the test is performed to determine the amount of impairment loss, if any.Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)2.SIGNIFICANT ACCOUNTING POLICIES (continued)F-21 ·represents a separate majour line of business or geographic area of operations; ·is part of a single coordinated plan to dispose of a separate majour line of business or geographic area of operations; or ·is a subsidiary acquired exclusively with a view to re-sale. · represents a separate majour line of business or geographic area of operations; · is part of a single coordinated plan to dispose of a separate majour line of business or geographic area of operations; or · is a subsidiary acquired exclusively with a view to re-sale. Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)2.SIGNIFICANT ACCOUNTING POLICIES (continued)yearsyear ended November 30, 2019 and 2018 met the criteria of a derivative instrument liability because they were exercisable in a currency other than the functional currency of the Company and thus did not meet the “fixed-for-fixed” criteria. Additionally, the contingent consideration due from the acquisition of IndieFlix (Note 3) during the year ended November 30, 2021 also did not meet the “fixed-for-fixed” criteria because the number of common shares of the Company to be issued varies depending on the revenue to be achieved by IndieFlix over the term of the agreement. As a result, the Company was required to separately account for the warrants and the contingent consideration as a derivative instrument liabilityliabilities recorded at fair value and marked-to-market each period with the changes in the fair value each period charged or credited to loss. Changes in fair value are recognized as gain/loss on derivative liability until the warrants are exercised or expire.expire and the common shares issued under the contingent consideration obligation have been fully settled.iswas lower than its face value. The liability was initially recorded at fair value and subsequently at amortized cost using the effective interest rate method; the liability iswas accreted to the face value over the term of the convertible debenture.F-22 Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)2.SIGNIFICANT ACCOUNTING POLICIES (continued)F-23 Animation production services from animation production services provided is recognized when the servicesperformance obligations have been providedachieved and control of the deliverable hasgoods or services have been transferred to the customer. Revenue collected prior to it being earned is recorded as deferred revenue and recognized as the related servicescustomer, which are provided. Management estimates the pace of revenue recognition based on contract milestones and determination of when it considered the revenue to be earned. The Company’s arrangements with customers are evidenced by contracts with customers. Any costs incurred to secure a contract will be capitalized and amortized over the period in which the revenue is recognized.normally:· persuasive evidence of a contractual arrangement exists; · the program is complete; · the contractual delivery arrangements have been satisfied; · the customer has access to the licensed content and has the contractual right to broadcast or stream the content; · the fee is fixed or determinable; · collection of the fee is reasonably assured; and · the costs incurred or to be incurred in respect of the contractual arrangement can be measured reliably. Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)2.SIGNIFICANT ACCOUNTING POLICIES (continued)Revenue recognition (continued)TheFor a portion of the streaming services, the Company earns a percentage of the sales charged by the filmmakers which is collected by third party payments providers. The Company reports revenues related to these sales net of the fees paid to the filmmakers and payment providers.F-24 Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)2.SIGNIFICANT ACCOUNTING POLICIES (continued)Changes in accounting standardsOn December 1, 2019, the Company elected to early adopt the amendments to IFRS 3 Business Combinations. The amendment:·clarifies minimum requirements to be a business, ·clarifies market participants ability to replace missing elements, ·clarifies the assessment of whether an acquired process is substantive, ·narrows the definition of outputs, and ·provides for an optional concentration test which is met if substantially all of the fair value of the gross net assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. The Company has also adopted the following accounting standards effective December 1, 2019, which had no significant impact on the consolidated financial statements:·IFRS 16 - Leases ·IFRIC 23 – Uncertainty Over Income Tax Treatments F-25 3.REVERSE ACQUISITIONAs describedLiquid Media Group Ltd.Note 1, on August 9, 2018, pursuant to an Arrangement between LBIX and Liquid Canada, LBIXUnited States Dollars)all100% of the issued and outstanding shares of Liquid Canada. TheIndieFlix in accordance with an Agreement and Plan of Merger (“IndieFlix Agreement”) and, in connection with the merger, former shareholdersnoteholders of Liquid Canada received an aggregate of 1,288,497IndieFlix agreed to extinguish IndieFlix debt in exchange for common shares of LBIXthe Company. As consideration for allthe extinguishment of debt, the outstandingCompany issued 499,996 common shares at closing and may issue up to 2,000,000 in additional common shares of the Company to the former noteholders of IndieFlix upon IndieFlix achieving total cumulative revenue of $64,868,466 before the seventh anniversary of the closing date as follows (“IndieFlix Transaction”):· 500,000 common shares upon IndieFlix achieving revenue of $4,521,630 (“IndieFlix First Milepost”); · 500,000 common shares upon IndieFlix achieving revenue of $13,766,432 (“IndieFlix Second Milepost”); · 500,000 common shares upon IndieFlix achieving revenue of $31,496,648 (“IndieFlix Third Milepost”); and · 500,000, or such lesser number based on a pro rata amount of IndieFlix’s revenue recognized relative to the IndieFlix Fourth Milepost, common shares upon IndieFlix achieving revenue of $64,868,466 (“Fourth Milepost”). Canada. LBIX shareholders retained 560,410Merger Sub was amalgamated with IndieFlix with the surviving entity retaining the name IndieFlix Group, Inc.completionderivative liability of $370,800. The IndieFlix Contingent Consideration was calculated by multiplying the closing share price of the transaction andCompany’s shares on the former LBIX stock option holders were granted 117,000 stock options.date of acquisition by the following weighted average expected number of shares to vest calculated using a probability scenario based approach:Schedule of Weighted average expected number of shares to vest November 30, 2021 September 22, 2021 Weighted average expected number of shares to vest Low Case 150,000 150,000 Base Case 600,000 600,000 High Case 280,000 280,000 Expected number of shares to vest 1,030,000 1,030,000 Liquid share price $ 1.24 $ 1.60 transaction constituted a reverse acquisition of LBIX and hadhas been accounted for as a reverseusing the acquisition transaction in accordance with the guidance provided under IFRS 2, Share-based Payment andmethod pursuant to IFRS 3, Business Combinations. As LBIX did not qualify as a business accordingUnder the acquisition method, assets and liabilities are recorded at their fair values on the date of acquisition and the total consideration is allocated to the definition in IFRS 3, Business Combination, this reverse acquisition did not constitute a business combination; rather the transaction was accounted for as an asset acquisition by the issuance of shares of the Company, for the net assets of LBIXacquired and its public listing. Accordingly, the transaction had been accounted for atliabilities assumed. The excess consideration given over the fair value of the equity instruments granted bynet assets acquired has been recorded as goodwill.F-26 Schedule of estimate of the fair value of net assets acquired Total $ Consideration: Common shares 799,994 IndieFlix Contingent Consideration 1,648,000 Total unadjusted purchase price 2,447,994 Cash acquired (21,076 ) Total purchase price, net of cash acquired 2,426,918 Allocated as follows: Accounts receivable 188,278 Inventory 105 Prepaids 8,335 Right-of-use asset 144,702 Accounts payable (606,560 ) Deferred revenue (251,435 ) Lease liability (144,702 ) Loans payable (508,255 ) Long-term debt (156,625 ) Intangible assets – distribution libraries 3,695,673 Goodwill 833,493 Deferred income taxes (776,091 ) Total 2,426,918 shareholders of Liquid CanadaIndieFlix Transaction reflects various fair value estimates and analyses, which are subject to change within the shareholders and option holders of LBIX.respective measurement periods. The sum ofCompany expects to continue to obtain information to assist in determining the fair value of the consideration paid (basednet assets acquired at each acquisition date during the measurement periods. Measurement period adjustments that the Company determines to be material will be applied retrospectively to the period of acquisition in the Company’s consolidated financial statements, and, depending on the nature of the adjustments, other periods subsequent to the period of acquisition could also be affected.LBIX shares just prior to the reverse acquisition) less the LBIX netacquired working capital, and identifiable intangible assets acquired, has been recognized as a listing expense in profit or loss for the year ended November 30, 2018.and goodwill after review and consideration of relevant information including discounted cash flow analyses, market data and management’s estimates.accounting purposes, Liquid Canada was treatedleases acquired, the Company measured the lease liability at the present value of the remaining lease payments, as if the acquired lease were a new lease at the acquisition date. The Company measured the right-of-use asset at the same amount as the accounting parent company (legal subsidiary) and LBIX had been treated as the accounting subsidiary (legal parent) in these consolidated financial statements. As Liquid Canada was deemedlease liability, adjusted to be the acquirer for accounting purposes, its assets, liabilities and operations since incorporation are included in these consolidated financial statements at their historical carrying value. The results of operations of LBIX are included in these consolidated financial statements from the datereflect favorable or unfavorable terms of the reverse acquisitionlease when compared with market terms.August 9, 2018.$3,695,673, which was determined to have a finite useful life of 10 years.F-27 of Changes in Shareholders’ EquityCanadianUnited States Dollars)3.REVERSE ACQUISITION (continued)The following represents management's estimate of the fair value of the LBIX net assets acquired as at August 9, 2018 as a result of the reverse acquisition and is subject to final valuation adjustments.4. RECEIVABLESTotal$Cost of acquisition:Shares retained by public company shareholders - 560,410 shares at US$5.85 x 1.30474,277,319Fair value of stock options96,3034,373,622Allocated as follows:Cash4,769Restricted cash574,510Prepaid expenses37,132Receivables124,561Liabilities(497,907)243,065Allocated to listing expense4,130,5574,373,622Stock options granted were valued using the Black Scholes model using the following assumptions: risk free rate of 2.09%, volatility of 127%, dividend yield of $Nil, and expected life of 0.94 years.During the year ended November 30, 2020, the Company incurred costs of $nil (2019 - $192,601; 2018 - $359,590) related to the reverse acquisition that were recorded as project investigation costs.Schedule of trade receivable 2021 2020 $ $ Accounts receivable 512,041 7,991 Sales tax receivable 266,464 175,624 Receivables 778,505 183,615 4.5. PREPAIDSRESTRICTED CASH2020, the Company had a $Nil (November 30, 2019 - $672,663 (US$506,179)) deposit certificate which earned interest at 0.35% per annum and matured and renewed monthly. The deposit certificate was assigned as security to City National Bank for a revolving bank loan (Note 16).5.ACQUISITION OF MAJESCO ENTERTAINMENT COMPANYOn January 9, 2018, the Company acquired 51% of the issued and outstanding shares of Majesco Entertainment Company, a U.S. corporation. As consideration, the Company issued 66,667 common shares with a value of $415,000 and is required to pay cash consideration of up to US$1,000,000. During the year ended November 30, 2020, the Company settled the remaining balance of $632,061 (US$500,000) previously included in accounts payable (Note 20) (2019 - $664,405 (US$500,000)).In connection with the acquisition of Majesco, the Company agreed to pay a finder’s fee of 5% of the total purchase price for a total fee of $97,809 (US$75,000). As at November 30, 2020, the agent forgave the remaining US$25,000 resulting in $nil (November 30, 2019 - $33,223 (US$25,000)) being included in accounts payable.Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)6.RECEIVABLESOther receivables as at November 30, 2019 included the Company’s insurance claim for certain legal bills in relation to a lawsuit.7.PREPAIDSAs at November 30, 2020,2021, prepaids includes $370,432 (US$285,714) (November 30, 2019$nil 0 (2020 - $208,066 (US$156,570)$285,714) for a marketing campaign that is being expensed over the term of the campaign.8.2020,2021, the current loans receivable including accrued interest isare as follows:Schedule of Current Loans Receivable Waterproof $ Balance, November 30, 2019 71,399 Accrued interest income 316 Repayments received (71,715 ) Balance, November 30, 2020 and 2021 — $100,000CAD$100,000 to Waterproof. The revolving credit facility was unsecured, bore interest at 8%8% per annum and was due on July 21, 2017. If there is a default or an event of default has occurred and is continuing, all amounts outstanding shall bear interest, after as well as before judgment, at a rate per annum equal to 2% plus the applicable rate.rate. Interest was payable on the first business day of each month. As atThe Company received $71,715 (CAD$95,298) in December 2019 as full and final payment of the loan. During the year ended November 30, 2020, the Company had accruedrecorded interest receivable of $nil (November 30, 2019 - $11,651). The Company received payment$316 in full in December 2019.relation to this loan.F-28 of Changes in Shareholders’ EquityCanadianUnited States Dollars)8.2020,2021, the long-term loans receivable including accrued interest are as follows:Schedule of long term loans receivable including accrued interest Participant Games Installment Entertainment Total $ $ $ Balance November 30, 2019 87,262 88,700 175,962 Accrued interest income 27,837 17,685 45,522 Expected credit loss (66,001 ) (76,158 ) (142,159 ) Net exchange differences 2,833 2,765 5,598 Balance November 30, 2020 51,931 32,992 84,923 Accrued interest income 7,912 5,027 12,939 Expected credit loss (61,814 ) (39,271 ) (101,085 ) Net exchange differences 1,971 1,252 3,223 Balance, November 30, 2021 — — — $150,000.CAD$150,000. The convertible note is unsecured, bears interest at 15%15% per annum and was due on demand on or before December 21, 2017. The loan was convertible into shares, at any time prior to December 21, 2018 and accordingly the value of the conversion feature remaining from the convertibility feature was nominal as at November 30, 2018. As at November 30, 2020,2021, the Company has accrued interest receivable of $119,317 (November 30, 2019$127,114 (2020 - $81,926)$92,030) and has recorded an allowance for credit loss of $201,989 (November 30, 2019$244,369 (2020 - $115,963)$155,794), on a cumulative basis, as the note remains unpaid.$100,000.CAD$100,000. The convertible note is unsecured, bears interest at 15%15% per annum and was payable on demand on or before April 21, 2018. The loan was convertible into shares, at any time prior to April 21, 2018. As at November 30, 2020,2021, the Company has accrued interest receivable of $71,097 (November 30, 2019$77,077 (2020 - $47,342)$54,838) and has recorded an allowance for credit loss of $128,323 (November 30, 2019$155,247 (2020 - $29,468)$98,976), on a cumulative basis, as the note remains unpaid.9.7. RESTRICTED CASHF-29 $4,880,639.$. During the yearthree months ended November 30,February 29, 2020, the Company wrote-off one license with an unamortized balance of $330,276 (year$250,581. During the year ended November 30, 2019 –2020, the Company acquired one additional license withfor $15,426. During the year ended November 30, 2021, the Company wrote-off the remaining three licenses which had an unamortized balance $717,125). The remaining two licenses held at November 30, 2020 are being amortized overof $705,555 as there was no expected future use and the term of the corresponding agreements ranging from threerecoverable amount was considered to four years.be nominal.2020,2021, amortization, included in cost of sales, amounted to $596,882 (2019$213,015 (2020 - $1,819,596; 2018$444,519; 2019 – $603,718)$1,367,318). The cumulative currency translation adjustment at November 30, 2020 was $101,718 (November 30, 2019 - $100,636).Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)9.LICENSES (continued)Schedule of reconciliation of licenses 2021 2020 $ $ 705,555 1,385,229 Additions — 15,180 (213,015 ) (444,519 ) (492,751 ) (250,581 ) Net exchange differences 211 246 — 705,555 10.49%49% interest in Waterproof by paying $475,000$386,179 (CAD$475,000) and issuing common shares with a fair value of $125,001.$101,627. The Company also issued common shares as a finder’s fee with a fair value of $50,000$ (CAD$50,000) during the year ended November 30, 2015.11)10).Schedule of reconciliation of the investment in Waterproof 2021 2020 2019 $ $ $ — — 298,938 — — 147,049 Derecognition to investment in equity
instruments (Note 10) — — (445,987 ) — — — The following table summarizes Waterproof’s revenue, expenses and losses for the comparative years:F-30 2018$Revenue4,999,395Cost of sales(3,951,861)Expenses(1,291,786)Loss for the year(244,252) of Changes in Shareholders’ EquityCanadianUnited States Dollars)10.INVESTMENT IN ASSOCIATES (continued)Household PestsThe Company held a 50% interest in Household Pests Holdings Inc. (“Household Pests”) and accounted for its investment as a joint operation as the Company did not have the ability to control the key operating activities of the entity.During the year ended November 30, 2017, Household Pests entered into a letter of understanding with Household Pests, LLC in connection with the development, financing, production and exploitation of the proposed animated feature film currently entitled Household Pests (the “Film”). Additionally, Household Pests entered in to an option agreement with Pigmental, LLC (“Owner”) with respect to the purchase of all rights, titles, and interests in the Animation Work Purchase Agreement dated as of July 2, 2014 by and between Sergio Animation Studios, S.L. and the Owner for a sum of US$625,000. During the year ended November 30, 2017, the Company paid $125,500 (US$100,000) as acquisition costs and incurred $181,872 in deferred costs.As at November 30, 2018, Household Pests let the options lapse and as such, management wrote-off its $310,484 investment in Household Pests.11.10. INVESTMENT IN EQUITY INSTRUMENTS(Note 10) using the equity method of accounting resulting in a carrying value of $587,274 at$445,987. At March 1, 2019, however, the Company no longer exertsexerted significant influence over Waterproof’s operating activities resulting in the investment being reclassified as FVTPL.$1,649,362$1,252,525 resulting in a gain of $1,062,088$806,538 on derecognition from the equity accounting carrying value.November 30, 2020,October 18, 2021, the value of Waterproof’s common shares was estimated to be $3,845,598 (2019$ (November 30, 2020 - $1,551,324)$) resulting in an unrealized gain on equity instruments of $2,383,004 (2019$1,139,133 (November 30, 2020 - $953,961). The cumulative currency translation adjustment as at$1,798,739; November 30, 2020 was $(78,640) (20192019 - $10,089)$721,384).Schedule of reconciliation of the investment in Waterproof 2021 2020 $ $ Balance, beginning of year 2,966,110 1,167,371 Change in fair value 1,139,133 1,798,739 Disposal of investment (4,105,243 ) — Balance, end of year — 2,966,110 F-31 of Changes in Shareholders’ EquityCanadianUnited States Dollars)12.EQUIPMENT Schedule of Equipment Computer Equipment Vehicles Total $ $ $ Cost At November 30, 2019 93,962 — 93,962 Additions — 43,303 43,303 At November 30, 2020 93,962 43,303 137,265 Disposals (93,962 ) — (93,962 ) At November 30, 2021 — 43,303 43,303 Depreciation: At November 30, 2019 1,175 — 1,175 Additions 27,836 — 27,836 At November 30, 2020 29,011 — 29,011 Additions 19,485 12,991 32,476 Disposals (48,496 ) — (48,496 ) At November 30, 2021 — 12,991 12,991 Net book value: At November 30, 2020 64,951 43,303 108,254 At November 30, 2021 — 30,312 30,312 F-32 of Changes in Shareholders’ EquityCanadianUnited States Dollars)13.INTANGIBLE ASSETS
CodingAs at November 30, 2020, included in video game catalogues is $nil (November 30, 2019 - $212,625) of development costs which the Company has not begun amortizing.Schedule of intangible assets Video Game Catalogues Platform
Coding Brands Distribution Libraries Total $ $ $ $ $ Cost: At November 30, 2019 1,290,960 — 83,000 — 1,373,960 Additions - paid or accrued — 3,325,000 — — 3,325,000 Write-offs (160,000 ) — (83,000 ) — (243,000 ) At November 30, 2020 1,130,960 3,325,000 — — 4,455,960 Additions – acquisition of IndieFlix (Note 3) — — — 3,695,673 3,695,673 Impairments (890,445 ) (3,324,000 ) — — (4,214,445 ) At November 30, 2021 240,515 1,000 — 3,695,673 3,937,188 Amortization: At November 30, 2019 88,721 — — — 88,721 Additions 75,397 — — — 75,397 At November 30, 2020 164,118 — — — 164,118 Additions 75,397 — — 61,595 136,992 At November 30, 2021 239,515 — — 61,595 301,110 Net book value: At November 30, 2020 966,842 3,325,000 — — 4,291,842 At November 30, 2021 1,000 1,000 — 3,634,078 3,636,078 2020.2020 (Note 20)22).$4,464,885 (US$3,325,000)$3,325,000 (CAD$4,464,885) which is currently under development and not yet subject to amortization.F-33 of Changes in Shareholders’ EquityCanadianUnited States Dollars)Schedule of Right of Use Asset Office Space $ Cost: At November 30, 2020 — Additions - acquisition of IndieFlix (Note 3) 144,702 At November 30, 2021 144,702 Amortization: At November 30, 2020 — Additions 10,718 At November 30, 2021 10,718 Net book value: At November 30, 2021 — At November 30, 2021 133,984 Schedule of Lease Liability 2021 $ Balance, beginning of year — Additions (Note 3) 144,702 Lease payments (10,298 ) Interest expense 771 135,175 Less: current portion (61,703 ) Balance, end of year 73,472 Schedule of lease payments 2021 $ Undiscounted minimum lease payments: - December 1, 2021 – November 30, 2022 65,187 December 1, 2022 – November 30, 2023 69,093 December 1, 2023 – November 30, 2024 5,785 Total 140,065 Effect of discounting (4,890 ) Total present value of lease liabilities 135,175 Less: current portion (61,703 ) Balance, end of year 73,472 F-34 $3,356,355$833,493 was acquired during the year ended November 30, 20182021 pursuant to the acquisition of Majesco. As atIndieFlix (Note 3).2020,2021, the Company performed its impairment review of goodwill was disposed of uponby comparing each cost center’s fair value to the deconsolidationnet book value including goodwill. The Company has determined that it has one cost center: IndieFlix. The fair value of the Majesco operations (Note 20).cost center was determined by management based on a valuation using the income approach. The currency translation adjustment as at November 30, 2020 was $nil (November 30, 2019 - $226,193).income approach uses future projections of cash flows from the cost center and includes, among other estimates, projections of future revenue and operating expenses, market supply and demand, projected capital spending and an assumption of the weighted average cost of capital. Management’s evaluation of fair values includes analysis based on the future cash flows generated by the underlying assets, estimated trends and other relevant determinants of fair value for these assets. Management has determined that no events have occurred subsequent to the date of the assessment that would require a further impairment review of goodwill.15.16. ACCOUNTS PAYABLE AND ACCRUED LIABILITIESSchedule of Accounts Payable and Accured Liabilities 2021 2020 $ $ 1,625,418 1,019,959 242,601 119,519 Wages payable 102,079 — 31,634 10,340 Accounts payable and accrued liabilities 2,001,732 1,149,818 2020,2021, the Company issued 100,317 (2019 (2020 – 159,873; 2018; 2019 – 81,937)) common shares valued at $306,620 (2019$81,953 (2020 - $634,175; 2018 - $449,291)$255,742; 2019 – $478,091) to settle accounts payable of $346,000 (2019$82,851 (2020 - $535,688; $595,045)$225,516; 2019 - $532,716) resulting in a gain of $39,380 (2019$898 (2020 – loss of $98,487; 2018 – gain of $145,764)$30,696; 2019 - $74,168) which is included in gain (loss) on settlement of debt. Additionally, the Company wrote off aged accounts payable of $199,545.2020,2021, the Company issued 12,402 units valued at $26,130transferred treasury shares to converta creditor as full and final payment of a Forbearance Agreement which included the settlement of $18,481 of interest on the convertible debentures included in accounts payable (Notes 1718 and 19)21).16.17. DEFERRED REVENUESchedule of Deferred Revenue 2021 $ Film distribution 179,196 Streaming subscriptions 4,798 183,994 F-35 Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)16.LOANS PAYABLE (continued)Related party loansRelated party loans consisted of amounts advanced by directors or companies controlled by them. Several of the loans were secured by assets of the Company with due dates ranging from demand loans to periods of one year and interest rates ranging from 0.0% to 8.0% per annum. As at November 30, 2019, all loans have been paid in full. As at November 30, 2020, interest of $nil (2019 - $39,747) remains outstanding and is included in accounts payable and accrued liabilities.Schedule of loans payable balances and transactions Third party Credit Facility Bank Loan Total $ $ $ $ Balance, November 30, 2019 18,813 564,375 498,857 1,082,045 Advance — — 1,143 1,143 Repayment - cash — (85,388 ) (500,000 ) (585,388 ) Repayment - shares (17,790 ) — — (17,790 ) Net exchange differences (1,023 ) 14,100 — 13,077 Balance, November 30, 2020 — 493,087 — 493,087 Repayment - shares — (498,329 ) — (498,329 ) Net exchange differences — 5,242 — 5,242 Balance, November 30, 2021 — — — — 14.4%14.4% per annum. During the year ended November 30, 2020, the Company issued 6,911 common shares valued at $25,347$18,037 to settle the $25,000$17,790 loan outstanding resulting in a loss of $348. Interest of $nil (2019 - $2,192) remains outstanding and is included in accounts payable and accrued liabilities.$247.$2,500,000CAD$2,500,000 Credit facility was secured by assets of the Company under a general security agreement with a due date of November 30, 2018 and an interest rate of 14.4%14.4% per annum. A fee of $60,000CAD$60,000 was settled through the issuance of shares during the year ended November 30, 2017. The Company repaid $1,750,000CAD$1,750,000 of principal and $147,945CAD$147,945 of interest during the year ended November 30, 2017.$750,000$563,850 (CAD$750,000) loan and under new terms, the loan was due on August 20, 2018. The new lender obtained a Limited Power of Attorney over the Company’s 49% interest in Waterproof (“Waterproof POA”). In December 2018, the lender registered a general security agreement over all the Company’s current and future assets.$250,000CAD$250,000 commencing on March 31, 2020 until the principal and interest on the loan have been paid in full. In accordance with the ForebaranceForbearance Agreement, the Company issued 215,000 treasury shares of the Company as security for the loan which will be transferred to the lender upon any default of the loan. Additionally, the new lender released the Waterproof POA and amended their general security agreement to exclude the Company’s investment in Waterproof. In March 2020, the new lender provided an extension allowing the delay of the quarterly payments to commence June 30, 2020.$500,000$385,650 (CAD$500,000) for this loan of which $110,707 has been$85,388 (CAD$110,707) was applied to the principal and $389,293 has been$300,262 (CAD$389,293) was applied to the outstanding interest. InterestAs at November 30, 2020, interest of $7,062 (2019 - $289,282) remains$5,447 remained outstanding and iswas included in accounts payable and accrued liabilities at November 30, 2020.liabilities.29)21). Accordingly, the transfer of the 215,000 treasury shares resulted in a gain on debt settlement of $37,359 as the treasury shares were valued at $479,450 on the date of issuance to settle the outstanding principal of $498,329 and interest of $18,481.F-36 US$500,000$500,000 with City National Bank which bore interest at 2.35% per annum and was secured by a deposit certificate of US$500,000$500,000 (Note 4)7). As at November 30, 2020, the Company had repaid this loan in full.Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)17.CONVERTIBLE DEBENTURES Schedule of Convertible Debentures Liability component Equity component Total $ $ $ Balance, November 30, 2019 1,044,772 145,273 1,190,045 Interest expense and accretion 63,427 — 63,427 Conversion of convertible debentures (681,980 ) (95,306 ) (777,286 ) Reallocation of interest to accounts payable (16,259 ) — (16,259 ) Balance, November 30, 2020 409,960 49,967 459,927 Interest expense and accretion 8,427 — 8,427 Conversion of convertible debentures (401,677 ) (49,967 ) (451,644 ) Reallocation of interest to accounts payable (16,710 ) — (16,710 ) Balance, November 30, 2021 — — — $3,526,468 (US$2,678,000).$2,678,000. Each debenture will maturematured two years from closing, will bearbore interest at 2% per annum, and can be convertedwas convertible into units at a price of US$1.50$1.50 per unit. Each unit will consistconsisted of one common share and one share purchase warrant with each warrant entitling the holder to acquire one common share of the Company for US$1.75$1.75 up to February 28, 2021. In January 2021, the Company agreed to extend the maturity date and associated warrant expiry date for one debenture holder by one year.$160,917$122,201 during the year ended November 30, 20192019.2020,2021, debentures of $961,186 (US$681,980) (2019$401,677 (2020 - $1,795,455 (US$1,133,761)$681,980; 2019 - $1,133,761) were converted into 515,000 (2019270,000 (2020 – 527,402; 2019 – 1,000,167) units of the Company of which $nil (2019(2020 - $nil; 2019 – $30,779)$23,193) was allocated to reserves relating to the value of the warrants issued. As a result, the Company transferred $134,198 (2019$49,967 (2020 - $95,306; 2019 – $244,890)$185,122) from reserves to share capital representing the proportionate balance of the equity component.20202021 was $83,140 (2019$8,427 (2020 - $259,885)$63,427; 2019 - $158,736).F-37 of Changes in Shareholders’ EquityCanadianUnited States Dollars)18.LONG-TERM DEBTSchedule of long term debt Third party SBA Loan Third party $ $ Balance, November 30, 2019 — — — Advances 40,059 — 40,059 40,059 — 40,059 Acquired on acquisition of IndieFlix (Note 3) — 156,625 156,625 Payments (42,775 ) — (42,775 ) Interest expense and accretion 2,716 1,640 4,356 Balance, November 30, 2021 — 158,265 158,265 Current portion — — — Long-term portion — 158,265 158,265 $Balance, November 30, 2019-Advances51,936Balance, November 30, 202051,936Current portion8,991Long-term portion42,945$1,028,CAD$1,028, and iswas secured by a vehicle with a net book value of $56,143$30,312 (November 30, 2020 - $43,303) (Note 12). As at November 30, 2020, $6,935 of the loan was presented as current.principal payments required underloan is being accreting to its face value at an effective rate of 6.25% over the long-term debtterm of the loan.next four fiscal years are as follows:2022$9,640202310,336202411,082202511,887first payment has been deferred to 30 months from the date of the first advance from 24 months.19.21. SHARE CAPITAL AND RESERVES500,000,000100,000,000 common shares without par value.Schedule of authorized to issue of preferred shares Preferred shares without par value 9,999,900 1,000,000 100 1,000,000 4,000,000 4,000,000 20,000,000 F-38 a) 20,000,000b) On January 29, 2021, the Company issued common shares valued at $46,948 to a consultant of the Company for advisory services provided to the Company. c) On February 12, 2021, the Company transferred treasury shares valued at $ to a creditor as full and final payment of a Forbearance Agreement (Note 18). d) On March 3, 2021, the Company issued common shares valued at $ in relation to the vesting of restricted share units. As a result, the Company transferred $372,376 representing the fair value of the vested RSUs from reserves to share capital. e) On March 22, 2021, the Company closed a registered direct offering, under its F-3 registration statement in the United States, by issuing common shares of the Company at $ per common share for total proceeds of $. In connection with this offering, the Company paid legal fees of $69,095, agent fees of $470,000, and filing fees of $15,950. f) On June 9, 2021, the Company issued common shares valued at $75,000 to a consultant for consulting services rendered during the year ended November 30, 2020 which was included in accounts payable (Note 16). g) On September 3, 2021, the Company issued common shares valued at $ in relation to the vesting of restricted share units. As a result, the Company transferred $349,127 representing the fair value of the vested RSUs from reserves to share capital. h) On September 7, 2021 the Company closed a sale of common shares under its At-The-Market Agreement (“ATM Agreement”) through the issuance of 437,365 common shares at $ per common share for gross proceeds of $915,230. The Company’s ATM Agreement allows the Company to distribute up to $6,051,342 of common shares of the Company. i) On September 22, 2021, the Company issued common shares valued at $799,994 for the acquisition of 100% of the outstanding shares of IndieFlix (Note 3). F-39 j) During the year ended November 30, 2021, the Company issued the following for exercised stock options, warrants, and conversions: · issued common shares for total proceeds of $ in connection with the exercise of share purchase warrants at $ per warrant of which $440,501 was received during the year ended November 30, 2020. · issued common shares for total proceeds of $ in connection with the exercise of share purchase warrants at $ per warrant. As a result, the Company transferred $ representing the fair value of the exercised warrants from reserves to share capital. · issued common shares for total proceeds of $ in connection with the exercise of share purchase warrants at $ per warrant. As a result, the Company transferred $ representing the fair value of the exercised warrants from reserves to share capital. · issued 121,319 common shares valued at $423,503 in accordance with the exercise of 175,000 Cashless Warrants. As a result, the Company transferred $423,503 representing the fair value of the Cashless Warrants from derivative liabilities to share capital. · issued units on the conversion of $405,000 worth of net convertible debentures. As a result, the Company transferred $49,966 from reserves to share capital representing the proportionate balance of the equity component. Each unit comprised of one common share and one warrant with each warrant entitling the holder to acquire one common share of the Company for $1.75 up to February 26, 2022 (Note 19). · issued 10,000 common shares for total proceeds to $19,000 in connection with the exercise of 10,000 stock options at $1.90 per option. As a result, the Company transferred $19,561 representing the fair value of the exercised options from reserves to share capital. a) On January 22, 2020, the Company issued common shares valued at $112,537 to settle debt of $145,483 resulting in a gain of $32,946 which is included in gain on debt settlements. a)On January 22, 2020, the Company issued 57,125 common shares valued at $148,198 to settle debt of $190,706 (Note 15) resulting in a gain of $42,508 which is included in gain (loss) on debt settlements. b) On January 22, 2020, the Company issued common shares valued at $30,000 to a consultant of the Company for public relations services provided to the Company of which $25,000 of services were rendered during the year ended November 30, 2019 and was included in commitment to issue shares. c) On April 27, 2020, the Company issued common shares valued at $130,769 to settle debt of $128,296 resulting in a loss of $2,473 which is included in gain on debt settlements. F-40 of Changes in Shareholders’ EquityCanadianUnited States Dollars)19.b)On January 22, 2020, the Company issued 11,764 common shares valued at $39,615 to a consultant of the Company for public relations services provided to the Company of which $33,058 of services were rendered during the year ended November 30, 2019d) On June 8, 2020, the Company closed a registered direct offering, under its F-3 registration statement in the United States, by issuing common shares of the Company at $ per common share for total proceeds of $. Concurrent with this offering, the Company issued to the investors share purchase warrants exercisable for $ per common share with a maturity date of June 9, 2025 (“Cashless Warrants”). In connection with these offerings, the Company paid legal fees of $305,761, agent fees of $320,000, and issued 213,333 agent warrants with a value of $252,976 and an exercise price of $1.88 per common share with a maturity date of June 4, 2025 of which $77,280 related to the issuance of the Cashless Warrants and was expensed to professional fees. e) On July 29, 2020, the Company issued common shares valued at $44,910 to a consultant of the Company for advisory services provided to the Company. f) On September 16, 2020, the Company issued common shares valued at $ in relation to the vesting of restricted share units. As a result, the Company transferred $367,501 representing the fair value of the vested RSUs from reserves to share capital. g) On November 17, 2020, the Company issued common shares valued at $135,000 to a consultant of the Company for services provided to the Company. h) During the year ended November 30, 2020, the Company issued the following for exercised stock options, warrants, and conversions: · issued units on the conversion of $681,980 worth of net convertible debentures and units on the conversion of $18,605 worth of interest on the convertible debentures. As a result, the Company transferred $95,306 from reserves to share capital representing the proportionate balance of the equity component. Each unit comprised of one common share and one warrant with each warrant entitling the holder to acquire one common share of the Company for $1.75 up to February 26, 2021. · issued common shares for total proceeds of $ in connection with the exercise of share purchase warrants at $ per warrant of which $78,750 was received during the year ended November 30, 2019. As a result, the Company transferred $ representing the fair value of the exercised warrants from reserves to share capital. · issued common shares for total proceeds of $ in connection with the exercise of share purchase warrants at $ per warrant. · received $ for the exercise of share purchase warrants with an exercise price of $ and an expiry date of August 30, 2020 which is included in commitment to issue shares. In December 2020, the shares were issued. · issued 53,505 common shares for total proceeds of $136,438 in connection with the exercise of 53,505 stock options at $2.55 per option. As a result, the Company transferred $100,081 representing the fair value of the exercised options from reserves to share capital. F-41 c)On April 27, 2020, the Company issued 50,103 common shares valued at $183,769 to settle debt of $180,294 (Notes 15 and 16) resulting in a loss of $3,476 which is included in gain (loss) on debt settlements. d)On June 8, 2020, the Company closed a registered direct offering, under its F-3 registration statement in the United States, by issuing 2,666,672 common shares of the Company at US$1.50 per common share for total proceeds of $5,353,203 (US$4,000,002). Concurrent with this offering, the Company issued to the investors 1,333,334 share purchase warrants exercisable for USD$1.88 per common share with a maturity date of June 9, 2025. In connection with these offerings, the Company paid legal fees of $409,200 (US$305,761), agent fees of $428,256 (US$320,000), and issued 213,333 agent warrants with a value of $338,558 and an exercise price of US$1.88 per common share with a maturity date of June 4, 2025. e)On July 29, 2020, the Company issued 29,536 common shares valued at $60,000 to a consultant of the Company for advisory services provided to the Company. f)On September 16, 2020, the Company issued 250,001 common shares valued at $482,272 in relation to the vesting of 250,001 restricted share units. As a result, the Company transferred $482,272 representing the fair value of the vested RSUs from reserves to share capital. g)On November 17, 2020, the Company issued 84,375 common shares valued at $176,769 to a consultant of the Company for services provided to the Company. h)During the year ended November 30, 2020, the Company issued the following for exercised stock options, warrants, and conversions: ·issued 515,000 units on the conversion of $961,186 (US$681,980) worth of net convertible debentures (Note 17) and 12,402 units on the conversion of $26,130 (US$18,605) worth of interest on the convertible debentures. As a result, the Company transferred $134,198 from reserves to share capital representing the proportionate balance of the equity component. Each unit comprised of one common share and one warrant with each warrant entitling the holder to acquire one common share of the Company for US$1.75 up to February 26, 2021. ·issued 493,111 common shares for total proceeds of $1,111,476 in connection with the exercise of 493,111 share purchase warrants at US$1.75 per warrant of which $104,139 was received during the year ended November 30, 2019. As a result, the Company transferred $28,056 representing the fair value of the exercised warrants from reserves to share capital. ·issued 573,171 common shares for total proceeds of $907,036 in connection with the exercise of 573,171 share purchase warrants at US$1.20 per warrant. ·received $574,457 for the exercise of 367,084 share purchase warrants with an exercise price of US$1.20 and an expiry date of August 30, 2020 which is included in commitment to issue shares. In December 2020, the shares were issued (Note 29). of Changes in Shareholders’ EquityCanadianUnited States Dollars)19.·issued 53,505 common shares for total proceeds of $196,427 in connection with the exercise of 53,505 stock options at US$2.55 per option. As a result, the Company transferred $144,245 representing the fair value of the exercised options from reserves to share capital. a) On February 28, 2019, the Company issued common shares valued at $296,935 to settle debt of $255,000 resulting in a loss of $41,935 which is included in loss on debt settlements. a)On February 28, 2019, the Company issued 113,334 common shares valued at $391,013 to settle debt of $335,792 resulting in a loss of $55,221 which is included in loss on debt settlements. b) On April 30, 2019, the Company issued common shares valued at $181,156 to settle debt of $148,923 resulting in a loss of $32,233 which is included in loss on debt settlements. c) On April 30, 2019, the Company issued common shares valued at $55,514 to various consultants of the Company for consulting and public relations services provided to the Company. d) During the year ended November 30, 2019, the Company issued the following for exercised warrants and conversions: · issued common shares for total proceeds of $ in connection to the exercise of share purchase warrants with an exercise price of $ per warrant. · issued units on the conversion of $1,357,107 worth of net convertible debentures (Note 19). As a result, the Company transferred $185,122 from reserves to share capital representing the proportionate balance of the unamortized equity component. Additionally, the Company allocated $23,193 to reserves representing the value of the warrants issued. Each unit comprised of one common share and one warrant with each warrant entitling the holder to acquire one common share of the Company for $1.75 up to February 26, 2021. b)On April 30, 2019, the Company issued 46,539 common shares valued at $243,162 to settle debt of $199,896 resulting in a loss of $43,266 which is included in loss on debt settlements. c)On April 30, 2019, the Company issued 17,222 common shares valued at $73,980 to various consultants of the Company for consulting and public relations services provided to the Company. d)During the year ended November 30, 2019, the Company issued the following for exercised warrants and conversions: ·issued 158,291 common shares valued at $368,617 in connection to the exercise of 158,291 share purchase warrants with an exercise price of US$1.75 per warrant. ·issued 1,000,167 units on the conversion of $1,795,455 (US$1,133,761) worth of net convertible debentures (Note 17). As a result, the Company transferred $244,890 from reserves to share capital representing the proportionate balance of the unamortized equity component. Additionally, the Company allocated $30,779 to reserves representing the value of the warrants issued. Each unit comprised of one common share and one warrant with each warrant entitling the holder to acquire one common share of the Company for US$1.75 up to February 26, 2021. The Company had the following share issuances during the year ended November 30, 2018:a)On January 9, 2018, the Company issued 66,667 common shares valued at $415,000 pursuant to the December 12, 2017 share purchase agreement for Majesco (Note 5). b)On August 9, 2018, a reverse acquisition transaction was completed whereby LBIX issued 1,288,497 common shares valued at $4,277,319 in exchange for all of the issued and outstanding shares of Liquid Canada (Note 3). Warrants held by Liquid Canada were transferred to the Company as part of the Arrangement valued at $96,303. c)On October 15, 2018, the Company completed a brokered private placement which consisted of the issuance of 800,000 units at a price of US$4.00 per unit for gross proceeds of $4,157,760 (US$3,200,000). Each unit consisted of one common share and one share purchase warrant exercisable for a three-year period at an exercise price of US$5.00 per warrant. The Company incurred agents’ fees of $410,218, legal fees of $36,353, issued 10,000 common shares valued at $41,531 to an agent, and issued 8,000 agents warrants valued at $24,774 in connection with the closing of this private placement. d)On October 15, 2018 the Company issued 888,000 common shares valued at $4,880,639 for licenses (Note 9). Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)19.SHARE CAPITAL AND RESERVES (continued)Issued share capital (continued)Common shares (continued)e)On October 15, 2018, the Company issued 113,764 common shares valued at $623,771 to settle debt of $833,487 resulting in a gain of $209,716 which is included in gain on debt settlements and issued 28,451 common shares valued at $156,000 for a commitment to issue shares. f)On October 15, 2018, the Company issued 268,000 common shares valued at $1,469,456 for the purchase of video games in connection with two separate purchase agreements (Note 13). g)During the year ended November 30, 2018, the Company issued the following for exercised warrants and conversions: ·issued 51,148 common shares in connection with the exercise of share purchase warrants for proceeds of $154,320. As a result, the Company transferred $23,854 representing the fair value of the exercised share purchase warrants from reserves to share capital. ·issued 1,837 common shares in connection with the exercise of 1,837 agents’ warrants at $1.25 per warrant for proceeds of $2,296. As a result, the Company transferred $2,985 representing the fair value of the exercised share purchase warrants from reserves to share capital. 2019, and 2018,2019 no preferred shares were issued and outstanding.16)18). In February 2021, the Company transferred these shares to the lender as full and final payment of the Forbearance Agreement (Note 29).Agreement.Schedule of Profit Loss per share Year ended November 30, 2021 2020 2019 $ $ $ Basic and diluted loss per share attributable to the Company from continuing operations (0.94 ) (0.51 ) (1.33 ) Basic and diluted loss per share attributable to the Company (0.94 ) (0.60 ) (1.34 ) Basic and diluted loss per share attributable to the non-controlling interest — (0.18 ) (0.01 ) Weighted average number of common shares outstanding 13,629,121 7,845,300 4,255,297 F-42 of Changes in Shareholders’ EquityCanadianUnited States Dollars)19.Prior to the Arrangement described in Note 3, the Company had a stock option plan whereby the Company could grant share options to directors, officers, employees, and consultants enabling them to acquire up to 15% of the issued common shares of the Company. exercise price of each option is set by the Board of Directors at the time of grant subject to a minimum price of $0.10 per share but cannot be less than the market price (less permissible discounts) on the Canadian Stock Exchange. Options can have a maximum term of five years and typically terminate ninety days following the termination of the optionee’s employment or engagement (thirty days for options granted for investor relations services), except in the case of retirement or death. Vesting of options is at the discretion of the Board of Directors at the time the options are granted.All stock options outstanding in Liquid Canada were cancelled upon the completion of the Arrangement.Following the Arrangement, the Company does not have a formal stock option plan. The Company occasionally grants stock options to its employees, officers, directors and consultants to purchase common shares of the Company. The options granted are exercisable at a price which is equal to or greater than the fair market value of the common shares at the date the options are granted. The options are granted with varied vesting periods but generally vest immediately on grant. Options granted generally have a life of five years.fiscal 2018 and in connection with the Arrangement, the Company granted 117,000 stock options, with a total fair value of $236,345, to former option holders of LBIX of which 89,000 stock options vest 25% on grant date, 25% on October 2, 2018, 25% on January 2, 2019, and 25% on April 2, 2019. Of the total fair value granted, $96,303 was considered to be part of the cost of acquisition of LBIX (Note 3). During the year ended November 30, 2020, the Company recorded share-based compensation of $Nil (2019 -$36,781; 2018 - $111,135) in relation to these options.During the year ended November 30, 2019, the Company granted stock options with a total fair value of $1,136,731$863,234 that vested immediately on grant.$1,011,582$753,467 that vested immediately on grant.Schedule of weighted average assumptions by Black-Scholes option-pricing model 2021 2020 2019 Risk-free interest rate % % % Dividend yield nil Nil nil Expected life 5.0 years 5.0 years 5.0 years Volatility % % % Weighted average fair value per option $ $ $ F-43 of Changes in Shareholders’ EquityCanadianUnited States Dollars)19. Schedule of stock option transactions Weighted Average Exercise Price Weighted Average Share Price on Exercise $ $ Balance, November 30, 2019 461,500 $ 2.55 — Granted 550,000 $ 2.55 — Exercised (53,505 ) $ 2.55 — Balance, November 30, 2020 957,995 $ 2.55 — Granted 1,072,450 $ 1.90 — (10,000 ) $ 1.90 $ 2.00 Cancelled (265,000 ) $ 1.90 — Balance, November 30, 2021 1,755,445 $ 1.90 — sharestock options outstanding and exercisable at November 30, 20202021 is as follows:Number of Stock OptionsExercise PriceExpiry Date$407,9953.31 (US$2.55)February 28, 202425,0003.31 (US$2.55)January 8, 202525,0003.31 (US$2.55)February 13, 202525,0003.31 (US$2.55)March 10, 202525,0003.33 (US$2.57)April 13, 2025450,0003.31 (US$2.55)July 23, 2025957,995 Schedule of summary of the share options outstanding and exercisable Number Outstanding Number Exercisable Exercise Price Expiry Date $ 50,000 50,000 $ 1.90 May 14, 2022 257,995 257,995 $ 1.90 February 28, 2024 25,000 25,000 $ 1.90 January 8, 2025 25,000 25,000 $ 1.90 February 13, 2025 25,000 25,000 $ 1.90 March 10, 2025 25,000 25,000 $ 1.90 April 13, 2025 275,000 275,000 $ 1.90 July 23, 2025 750,715 107,245 $ 1.90 January 1, 2026 321,735 214,490 $ 1.90 January 14, 2026 1,755,445 1,004,730 20202021 was 4.01 years. years and years for exercisable options.F-44 $338,558$252,976 and an exercise price of US$1.88$1.88 per warrant in connection with the private placement which closed on June 8, 2020.During the year ended November 30, 2018, the Company issued 8,000 agents’ warrants with an exercise price of US$4.00 per warrant with a total fair value of $24,774 in connection with the October 15, 2018 private placement.Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)19.SHARE CAPITAL AND RESERVES (continued)Warrants (continued)Agents’ warrants (continued)Schedule of weighted average assumptions used in the Black-Scholes option-pricing model for the valuation of the agents' warrants granted 2021 2020 2019 - 0.48% - - nil - - 5.0 years - - 103% - - $ - Schedule of agents' warrant transactions Weighted Average Exercise Price $ 8,000 $ 4.00 213,333 $ 1.88 (8,000 ) $ 4.00 213,333 $ 1.88 Exercised (186,666 ) $ 1.88 Balance, November 30, 2021 26,667 $ 1.88 20202021 is as follows:Number of Agent’s WarrantsExercise PriceExpiry Date$213,3332.44 (US$1.88)June 4, 2025213,333 Schedule of agents' warrants outstanding and exercisable Number Outstanding Exercise Price Expiry Date $ 26,667 $ 1.88 June 4, 2025 26,667 20202021 was 4.523.52 years.F-45 of Changes in Shareholders’ EquityCanadianUnited States Dollars)19.During the year ended November 30, 2018, the Company issued 800,000 share purchase warrants with an exercise price of US$5.00 per warrant in connection with the October 15, 2018 private placement.The Company provided an anti-dilution clause on 132,043 warrants issued during the year ended November 30, 2017 that are triggered on exercise of such warrants. During the year ended November 30, 2018, 72,800 additional warrants with an exercise price of US$2.50 were issued under this provision.US$1.75$1.75 per warrant in connection with the conversion of various convertible debentures.US$1.20.$1.20.· issued share purchase warrants with an exercise price of $ per warrant in connection with the conversion of various convertible debentures; · issued share purchase warrants with an exercise price of $ per warrant in connection with the exercise of the “B” share purchase warrants described under Derivative liability below; and · issued share purchase warrants with an exercise price of $ per warrant in connection with the registered direct offering which closed in June 2020. ·issued 527,402US$$1.75 from February 26, 2021 to March 11, 2021 due to the investors being subject to a trading blackout.variousa convertible debentures; ·621,865 share purchase warrants with an exercise price of US$1.20 per warrant in connection with the exercise of the “B” share purchase warrants described under Derivative liability below; and ·1,333,334 share purchase warrants with an exercise price of US$1.88 per warrant in connection with the registered direct offering which closed in June 2020. debenture (Note 19).Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)19.SHARE CAPITAL AND RESERVES (continued)Warrants (continued)Share purchase warrants (continued)Schedule of share purchase warrant transactions Weighted Average Exercise Price $ Balance, November 30, 2019 1,984,474 $ 1.81 Issued 2,482,601 $ 1.68 Exercised (1,433,366 ) $ 1.39 Balance, November 30, 2020 3,033,709 $ 1.66 Issued 270,000 $ 1.75 Exercised (1,408,501 ) $ 1.84 Expired (1,516,000 ) $ 1.46 Balance, November 30, 2021 379,208 $ 1.84 20202021 is as follows:Number of Share Purchase WarrantsExercise PriceExpiry Date$800,0001.56 (US$1.20)October 15, 2021876,1672.27 (US$1.75)February 26, 202124,2081.56 (US$1.20)April 6, 20221,333,3342.44 (US$1.88)June 9, 20253,033,709 Schedule of share purchase warrants outstanding and exercisable for warrants Number Outstanding Exercise Price Expiry Date $ 24,208 $ 1.20 April 6, 2022 355,000 $ 1.88 June 9, 2025 379,208 20202021 was 2.303.33 years.F-46 2020,2021, the Company recorded share-based compensation expense of $905,590$ (2020 - $) in relation to the issued RSUs. The fair value of the RSUs was measured using the value on the grant date of US$$ per common share.Schedule of Restricted share units 2017, 2018, and 2019- 1,000,001 (250,001)(250,001 ) 750,000 Vested (487,502 ) Cancelled (98,541 ) Balance, November 30, 2021 163,957 Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)19.SHARE CAPITAL AND RESERVES (continued)a)On August 30, 2017, the Company completed a non-brokered private placement of 132,043 units for cash proceeds of $126,000. Each unit consisted of one “A” share purchase warrant and one “B” share purchase warrant. Each “A” warrant entitles the holder to purchase one share of the Company for a period of three years from closing at a price of $3.00 per warrant. Each “B” warrant entitles the holder to purchase one share of the Company for a period of three years from closing at a price of $6.00, repriced to USD$1.20a) On August 30, 2017, the Company completed a non-brokered private placement of 132,043 units for cash proceeds of CAD$126,000. Each unit consisted of one “A” share purchase warrant and one “B” share purchase warrant. Each “A” warrant entitles the holder to purchase one share of the Company for a period of three years from closing at a price of CAD$3.00 per warrant. Each “B” warrant entitles the holder to purchase one share of the Company for a period of three years from closing at a price of CAD$6.00, repriced to $1.20 on October 18, 2019. The warrant agreement provides an anti-dilution clause for each of the A and B warrants that, upon exercise of the warrants, will cause the Company to issue additional warrants sufficient to entitle the warrant holder to acquire 10% of the issued and outstanding common shares of the Company. Such right is limited to one exercise of either of the A and B warrants and all of the A warrants must be exercised prior to exercising any of the class B warrants. $126,000CAD$126,000 as at November 30, 2017 as the acquisition price approximated fair value due to the recency of the transaction. During the year ended November 30, 2018, certain A warrants were exercised causing the rights to expire resulting in a decrease to the liability.$Nil$nil (2019 - $1,102,277)$nil) resulting in a derivative gain of $1,102,277$829,463 for the year ended November 30, 2020 (2019 – loss of $1,001,365; 2018 - gain of $25,088)$753,597).F-47 2019 and 2018:2019:Schedule of weighted average assumptions by Black-Scholes option-pricing model for the valuation of the derivative liability 2021 2020 2019 Risk-free interest rate - - 1.70% Dividend yield - - Nil Expected life - - 0.75 year Volatility - - % Probability of exercise - - % b)Due to the Company changing its functional currency from the CAD to the USD during the year ended November 30, 2018, a derivative liability occurred on the date of change on the Company’s previously issued share purchase warrants with CAD exercise prices. During the year ended November 30, 2019, the share purchase warrants with a CAD exercise price was repriced to USD resulting in the elimination of the derivative liability. b) Due to the Company changing its functional currency from the CAD to the USD during the year ended November 30, 2018, a derivative liability occurred on the date of change on the Company’s previously issued share purchase warrants with CAD exercise prices. During the year ended November 30, 2019, the share purchase warrants with a CAD exercise price was repriced to USD resulting in the elimination of the derivative liability. $Nil$nil and recorded a gain of $551,846 (2018$414,878.c) On June 8, 2020, the Company closed a registered direct offering, under its F-3 registration statement in the United States, by issuing 2,666,672 common shares of the Company at $1.50 per common share for total proceeds of $4,000,002. Concurrent with this offering, the Company issued to the investors 1,333,334 share purchase warrants exercisable for $1.88 per common share with a maturity date of June 9, 2025. The holders of the Cashless Warrants may elect, if the Company does not have an effective registration statement registering or the prospectus contained therein is not available for the issuance of the Cashless Warrant shares to the holder, in lieu of exercising the Cashless Warrants for cash, a cashless exercise option to receive common shares equal to the fair value of the Cashless Warrants. The fair value is determined by multiplying the number of Cashless Warrants to be exercised by the previous day’s volume weighted average price (“VWAP”) less the exercise price with the difference divided by the VWAP. If a Cashless Warrant holder exercises this option, there will be variability in the number of shares issued per Cashless Warrant. $1,005,240)$263,139) and recording a loss of $160,364 (2020 - gain of $88,639).The following weighted average assumptions were used inOn March 24, 2021, the Black-Scholes option-pricing model for the revaluation ofCompany revalued the derivative liability as at November 30, 2020, 2019,to $3,226,693 using the following Black Scholes assumptions: risk –free rate of $0.10%, dividend yield of nil, expected life of 0.01 years, and 2018:volatility of $150%. The Company transferred $423,503 from derivative liability to share capital in connection with the exercise of 175,000 Cashless Warrants on March 24, 2021 and reversed the remaining derivative liability on the expiry of the cashless exercise feature.F-48 of Changes in Shareholders’ EquityCanadianUnited States Dollars)20.DISCONTINUED OPERATIONS$652,061 (US$500,000)the remaining balance of $500,000 previously included in accounts payable, for the Majesco acquisition (Note 5), along with $452,772$347,186 in consulting fees owed to the previous owner of Majesco, for $260,824 (US$200,000)$200,000 in cash and the return of the Company’s 51% ownership of Majesco. Upon signing of the agreement, the Majesco operations were considered discontinued and the balances were reclassified as such.Schedule of Discontinued Operations Year ended November 30, 2020 2019 $ $ 304,522 302,066 104,981 111,555 Gross profit (loss) 199,541 190,511 9,000 85,500 10,609 22,793 66,328 85,203 - 213 22,201 65,503 Total operating expenses 108,138 259,212 Other income (expenses) (2,172,491 ) - Total other income (expenses) (2,172,491 ) - (2,081,088 ) (68,701 ) Income tax expense (recovery) - (1,254 ) (2,081,088 ) (67,447 )
interest from discontinued operations (1,411,239 ) (33,049 )
from discontinued operations (669,849 ) (34,398 ) Year ended November 30, 2020 2019 $ $ Net cash provided by operating activities 79,179 56,760 Net cash used in investing activities - (100,000 ) Net cash flows for the year 79,179 (43,240 ) F-49 of Changes in Shareholders’ EquityCanadianUnited States Dollars)21.23. ROYALTY INCOMECharlie Brezer, a director of the Company, and Daniel Cruz, the CFO and a directortwo directors of the Company. The agreements require total payments of $17,500CAD$17,500 each per month each.month. Included in the agreements is a provision for 12 months written notice or salary paid in lieu of notice upon termination without just cause. In April 2021, one of the agreements was terminated and replaced with a consulting agreement with the same terms.A summaryIn January 2021, the Company signed an employment agreement with the new CEO of related party loansthe Company. The agreement requires payments of CAD$20,000 per month. Included in the agreement is: (1) a provision for three months written notice or salary paid in lieu of notice upon termination without just cause and related transactions is included(2) a provision to increase the base salary to CAD$30,000 per month, retroactive to January 1, 2021, upon the Company raising US$5 million in Notes 5 and 16. Interest expense paid or accrued to related parties during the year ended November 30, 2020 was $nil (2019 - $5,174; 2018 - $18,537)funding (achieved).20202021 includes $27,098 (2019$275,486 (2020 - $945,940)$20,901) owing to directors, officers, or to companies controlled by commonand a former director for unpaid directors for unpaidfees, salaries, consulting fees, expense reimbursements, and loan interest. Additionally, accounts payable and accrued liabilities includes $nil (2019 - $664,452) payable toMajesco relating to$500,000 and the purchaseassociated accrued interest of $10,576 into 340,384 units of the Company’s 51% interest in Majesco.Company (Note 19).2020,2021, the Company receivedrecorded interest income of $nil (20190 (2020 - $781,395 (US$588,000)$316; 2019 - $6,122) for convertible debentures detailed in Note 17 from three directors of the Company. In July 2019, two directors converted their debentures worth $116,990 (US$88,000) into 58,667 units of the Company. In April 2020, the remaining director converted his debenture of $706,350 (US$500,000) and the associated accrued interest of $14,941 (US$10,576) into 340,384 units of the Company.As at November 30, 2019,relating to a loan was due from Waterproof which included accrued interest receivable, amounting to $94,882. As atwas repaid in full in during the year ended November 30, 2020 the loan was repaid in full. (Note 6).2020,2021, the Company incurred rent, included in other general and admin expenses, of $26,407 (2020 - $nil 0 ; 2019 - $nil 0) to a company with a director in common.interestrevenue of $331,756 (2020 - $nil 0 ; 2019 - $nil 0) to a company with a director in common with IndieFlix. As at November 30, 2021, the Company had a receivable of $308,631 from this company.$416 (2019$9,241 (2020 - $8,137; 2018 - $8,116)$nil 0) from one of these LLCs. Additionally, as at November 30, 2021, the Company had a payable of $184,627 to one of these LLC’s for unpaid royalties and a receivable of $91,222 from two of these LLC’s for recoupment of costs incurred on their behalves.F-50 connection to this loan receivable. (Note 8).United States Dollars)Schedule of key management personnel compensation For the year ended November 30, 2021 2020 2019 $ $ $ Management and directors salaries and fees 688,979 463,251 421,071 Management and directors salaries and fees
in discontinued operations 0 19,000 26,000 Share-based compensation 1,290,308 1,195,333 676,184 Interest expense 0 0 3,880 key management personnel compensation 1,979,287 1,677,584 1,127,135 Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)22.25. NON-CONTROLLING INTEREST49%49% non-controlling interest in Majesco:The following table presents the non-controlling interest as at November 30, 2020 and 2019:Schedule of non-controlling interest 2021 2020 $ $ Balance, beginning of year - 1,411,239 Share of loss for the year - (1,411,239 ) Balance, end of year - - Schedule of loss and comprehensive loss attributable to non-controlling interest For the year ended November 30, Note 2021 2020 2019 $ $ $ Loss attributable to non-controlling interest from discontinued operations 22 - (1,411,239 ) (33,049 ) Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)23.26. CAPITAL DISCLOSURE AND MANAGEMENTcash andcomponents of shareholders’ equity. The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern. The Company manages its capital structure to maximize its financial flexibility making adjustments to it in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. The Company does not presently utilize any quantitative measures to monitor its capital. There were no changes to the Company’s capital management during the year. The Company is not subject to externally imposed capital requirements other than disclosedrequirements.F-51 Note 16.United States Dollars)24.27. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT·Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; ·Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and ·Level 3 – Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumption that market participants would use in pricing. • Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities; · Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and · Level 3 – Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumption that market participants would use in pricing. investment in equity instruments, accounts payable, and accrued liabilities, loans payable, convertible debentures,and long-term debt, and derivative liability.debt. The fair value of receivables, loans receivable, accounts payable and accrued liabilities, and loans payable and long-term debt approximates their carrying values. Long-term debt has been valued using a valuation methodology on initial recognition. Cash and restricted cash areis measured at fair value using level 1 inputs. Convertible debentures andThe derivative liability arefor the warrants is measured using level 2 inputs. The investment in equity instruments isand the derivative liability for the contingent consideration was measured at fair value using level 3 inputs.2020,2021, the fair value of the level 3 assetequity instruments was $3,845,598 (2019$nil 0 (2020 - $1,551,324)$2,966,110) based on a multiple of 6.9 times management’s estimate of Waterproof’s expected earnings before interest, taxes, and expected amortization. The Company’s investment in Waterproof doesdid not have a quoted market price on an active market and the Company has assessed the fair value of the investment based on Waterproof’s unobservable earnings. As a result, the fair value iswas classified as level 3 of the fair value hierarchy. The process of estimating the fair value of Waterproof iswas based on inherent measurement uncertainties and iswas based on techniques and assumptions that emphasize both qualitative and quantitative information. There iswas no reasonable quantitative basis to estimate the potential effect of changing the assumptions to reasonably possible alternative assumptions on estimated fair value of the investment.F-52 a)Currency risk a) Currency risk 2020,2021, the Company had assets totaling CAD$385,4161,237,451 and liabilities totalling CAD$317,679.768,677. A 10% change in the exchange rate would change other comprehensive income/lossincome (loss) by approximately US$5,000.$37,000. The Company currently does not have plans to enter into foreign currency future contracts to mitigate this risk, however it may do so in the future.Liquid Media Group Ltd.Consolidated Statements of Changes in Shareholders’ Equity(Expressed in Canadian Dollars)24.FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)b)Credit risk b) Credit risk a large Canadian and United States financial institution.institutions. The Company maintains certain cash deposits with Schedule I financial institutions, which from time to time may exceed federally insured limits. The Company has not experienced any significant credit losses and believes it is not exposed to any significant credit risk. The Company’s restricted cash is held with a law firm in trust in which credit risk exposure is low. The Company’s sales tax receivable is due from the Government of Canada; therefore, the credit risk exposure is low.2020 and 20192021 is the carrying value of the receivables and loans receivable. The Company has allowed for an expected credit loss of $330,312$356,070 on the loans receivable as at November 30, 2020.2021. During the year ended November 30, 2020,2021, the Company increased the allowance by $184,881$101,085 which is included in the consolidated statements of comprehensive loss.c)Interest rate risk b) Interest rate risk As at November 30, 2020, the loans included in loans payable and convertible debentures bear interest at rates of 14.4% and 2.0% per annum, respectively, and are due on demand. The long-term debt bears interest at 6.99% per annum and is payable over five years. The Company does maintain bank accounts which earn interest at variable rates but it does not believe it is currently subject to any significant interest rate risk.d)Liquidity risk c) Liquidity risk 2020,2021, the Company had a cash balance of $704,977$4,305,461 to settle current financial liabilities of $2,464,255. Additionally, as there is no assurance the convertible debentures will be converted into common shares of the Company, the$2,252,635. The Company is exposed to liquidity risk.F-53 of Changes in Shareholders’ EquityCanadianUnited States Dollars)25.28. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWSSchedule of disclosures with respect to cash flows Years ended November 30, 2021 2020 2019 $ $ $ 19,561 100,080 - 224,306 20,240 - 721,502 367,502 - Shares issued for the acquisition of IndieFlix (Note 3) 799,994 - - 561,403 243,306 478,091 - 252,976 - 440,501 103,750 - Shares issued for Cashless Warrants 423,503 - - - - 93,962 454,967 795,891 1,542,229 - - 18,000 - - 445,987 - - 285,399 Acquisition advances eliminated on acquisition of subsidiary (Note 3) 508,255 - - - - 23,193 - 470,061 - 26.29. CONTINGENCIESCONTINGENCIESa) On February 18, 2021, Waterproof commenced an action against the Company in which the Plaintiff claimed that the Company misrepresented facts to Waterproof, inducing Waterproof to enter the Amended and Restated Shareholder Agreement (“ARSA”) with the Company. As a result, Waterproof claimed that it has the right to purchase the Waterproof shareholdings from the Company at a fair market value as of May 17, 2019 in accordance with a calculation included in the ARSA. In March 2021, the Company filed a Response to Civil Claim denying the Plaintiffs’ claims, or alternatively, that the purchase price proposed by the Plaintiffs is not binding and does not reflect the full value of Liquid’s interest in Waterpoof. On October 18, 2021, the Company agreed to settle the lawsuit for receipt of $666,683 (CAD$825,000) in exchange for the Company’s 49% interest in Waterproof and resignation of the Company’s representatives from Waterproof’s Board of Directors (Note 10). a)In January 2020, a consultant of the Company filed a lawsuit in the Supreme Court of British Columbia against the Company for approximately $400,000 for unpaid consulting fees, US$500,000 for the unpaid cash consideration for the purchase of 51% interest in Majesco, and a payment for the difference between US$500,000 and the value of the Company’s shares issued on the purchase of the 51% interest in Majesco. On August 31, 2020, a settlement agreement had been reached whereby the Company would pay US$200,000 and transfer the 51% interest in the common shares of Majesco back to the consultant (Note 20). As at November 30, 2020, the Company paid $260,824 (US$200,000) in full. b) On December 1, 2021, a consultant commenced an action against the Company in which the Plaintiff claims that the Company is in breach of contract and owes the consultant common shares of the Company and $500,000, or alternatively, 250,000 common shares of the Company valued at $. The Plaintiff is also requesting a judgement for costs, interest, and special damages. In December 2021, the Company filed a Response to Civil Claim denying the Plaintiffs’ claims for which the Plaintiff filed a Reply. The litigation is at an early stage. F-54 b)In February 2020, a consultant of the Company filed a lawsuit in the Supreme Court of British Columbia against the Company in relation to the issuance of a share certificate for 59,706 common shares of the Company, 32,149 of which the consultant states is owing to him and general and special damages in relation to the shares. In May 2020, the Company settled this lawsuit for $68,937 (US$50,000). of Changes in Shareholders’ EquityCanadianUnited States Dollars)27.30. INCOME TAXESSchedule of reconciliation of income taxes at statutory rates with the reported taxes 2021 2020 2019 $ $ $ (12,779,371 ) (4,028,297 ) (5,672,361 ) - (2,081,088 ) (67,447 ) (12,779,371 ) (6,109,385 ) (5,739,808 ) (3,450,000 ) (1,650,000 ) (1,550,000 ) (61,765 ) (25,000 ) (41,455 ) 430,000 398,000 243,000 Impact of subsidiary and investment acquisitions and disposals 1,111,000 (17,000 ) - (155,000 ) (168,000 ) - Adjustment to prior years provision versus statutory tax returns (108,000 ) (7,000 ) (93,000 ) 2,226,000 1,469,000 1,318,000 (7,765 ) - (123,455 ) (12,971 ) - (122,201 ) Current income tax expense relating to continuing operations 5,206 - - - - (1,254 ) Components of deferred tax liability 2021 2020 2019 $ $ $ Deferred tax assets (liabilities) Intangible assets (763,120 ) - (17,430 ) Capital loss - 147,000 - Investment in associates - (335,000 ) (92,000 ) Debt with accretion - - (31,000 ) Non-capital losses - 188,000 123,000 Net deferred tax liability (763,120 ) - (17,430 ) F-55 of Changes in Shareholders’ EquityCanadianUnited States Dollars)27.Schedule of unrecognized temporary tax differences 2021 Expiry Date Range 2020 Expiry Date Range 2019 Expiry Date Range $ $ $ 7,983,000 No expiry date 2,485,000 No expiry date 2,013,000 No expiry date 419,000 2022-2025 667,000 2020-2024 230,000 2020-2022 - No expiry date 94,000 No expiry date - No expiry date Derivative liability 1,277,000 No expiry date - No expiry date - No expiry date 437,000 No expiry date - No expiry date 243,000 No expiry date 15,625,000 2026-2041 11,431,000 2026-2040 6,166,000 2026-2039 28.31. SEGMENTED INFORMATION2019, and 2018,2019, the Company had two offices: a head-office in Vancouver, BC, and Majesco’s office in New York, New York. During the year ended November 30, 2021, the Company had three offices: a head office in Vancouver, BC, a satellite office in Toronto, ON, and IndieFlix’s office in Seattle, Washington. In evaluating performance, management does not distinguish or group its sales and cost of sales on a geographic basis. During the year ended November 30, 2018, the Company had two reportable operating segments: the investment in the production of films and the investment in video games. During the year ended November 30, 2019, the Company had one reportable operating segment: the investment in video games. Upon the acquisition of the Platform coding (Note 13) during the year ended November 30, 2020, the Company determined it now has two2 reportable operating segments: the investment in distribution of filmsfilm and television entertainment and the investment in video games.world. Noworld but mostly located in the United States of America. During the year ended November 30, 2021, one customer exceeds 5%accounted for 43% of the Company’s sales.F-56 of Changes in Shareholders’ EquityCanadianUnited States Dollars)28.Schedule of reportable operating segments Film and Television Entertainment Video Games Total $ $ $ Segment Information Revenue 761,009 6,781 767,790 Cost of sales (532,210 ) (239,335 ) (771,545 ) Operating expenses (464,044 ) (145,813 ) (609,857 ) Other income (expenses) (3,324,000 ) (1,383,196 ) (4,707,196 ) Tax recovery 7,765 - 7,765 Segment profit (loss) (3,551,480 ) (1,761,563 ) (5,313,043 ) Corporate expenses: Operating expenses (5,520,298 ) Other income (expenses) (1,946,030 ) Comprehensive loss for the year (12,779,371 ) Capital expenditures - - - Film and Television Entertainment Video Games Total $ $ $ Segment Information Revenue 12,409 23,078 35,487 Cost of sales (41,435 ) (527,277 ) (568,712 ) Operating expenses (378,988 ) (95,869 ) (474,857 ) Discontinued operations - (2,081,088 ) (2,081,088 ) Segment profit (loss) (408,014 ) (2,681,156 ) (3,089,170 ) Corporate expenses: Operating expenses (5,425,326 ) Other income (expenses) 2,405,111 Comprehensive loss for the year (6,109,385 ) Capital expenditures 3,325,000 - 3,325,000 F-57 Film and Television Entertainment Video Games Total $ $ $ Segment Information Revenue - 20,427 20,427 Cost of sales - (1,380,872 ) (1,380,872 ) Operating expenses - (75,397 ) (75,397 ) Other income (expenses) - 147,049 147,049 Discontinued operations - (67,447 ) (67,447 ) Segment profit (loss) - (1,356,240 ) (1,356,240 ) Corporate expenses: Operating expenses (4,070,653 ) Other income (expenses) (435,116 ) Tax recovery 122,201 Comprehensive loss for the year (5,739,808 ) Capital expenditures - - - a) On June 7, 2021, the Company entered into a Letter of Intent with Filmdab, Inc., operating as Filmocracy (“Filmocracy”) for the Company to acquire 100% of the issued and outstanding shares of Filmocracy by issuing up to 1,250,000 common shares of the Company to the shareholders of Filmocracy. 25% of the consideration shares will be issued to the shareholders of Filmocracy on closing of the proposed transaction while the remainder will be issued based on Filmocracy achieving certain revenue targets over a six year period (“Filmocracy Transaction”). The Company and Filmocracy are currently negotiating the terms for the definitive agreement. F-58 of Changes in Shareholders’ EquityCanadianUnited States Dollars)28.SEGMENTED INFORMATION (continued)Below summarizes the Company’s reportable operating segments for the year ended November 30, 2018.29.SUBSEQUENT EVENTSThe Company had the following subsequent events, not disclosed elsewhere in these financial statements:a) On December 14, 2021, the Company acquired 100% of the issued and outstanding shares of iGEMS TV, Inc. (“IGEMS”) in accordance with an Agreement and Plan of Merger (“iGEMS Agreement”). As consideration, the Company will issue up to common shares of the Company to the former shareholders of iGEMS upon iGEMS achieving total cumulative revenue of $9,412,830 before the sixth anniversary of the closing date as follows (“iGEMS Transaction”): · 212,500 common shares on closing of the agreement (issued subsequently); · 212,500 common shares upon iGEMS achieving revenue of $473,577 (“iGEMS First Milepost”); · 212,500 common shares upon iGEMS achieving revenue of $2,400,664 (“iGEMS Second Milepost”); · 212,500, or such lesser number based on a pro rata amount of iGEMS revenue recognized relative to the iGEMS Third Milepost, common shares upon iGEMS achieving revenue of $9,412,830 (“iGEMS Third Milepost”). a)In December 2020,connection with the Company signed an employment agreement with a new CEO of the Company. The agreement requires total payments of $20,000 per month. Included in the agreement is a provision for a salary increase to $30,000 per month upon the Company raising US$5 million in funding and three months written notice or salary paid in lieu of notice upon termination without just cause. b)On December 10, 2020, the Company issued 367,084 common shares for the exercise of 367,084 share purchase warrants with an exercise price of US$1.20 for total proceeds of $574,457 which were included in commitment to issue shares at November 30, 2020. c)On January 1, 2021, the Company granted an officer of the Company 750,715 stock options with an exercise price of US$1.90 and a term of five years. The options will vest as follows: 107,245iGEMS Transaction, on June 1, 2021, 321,735 on January 1, 2022, and 321,735 on January 1, 2023. d)On January 1, 2021, the Company repriced 932,995 stock options with an exercise price of US$2.55 and 25,000 stock options with an exercise price of US$2.57 to US$1.90 per option. All other terms remained unchanged. e)On January 14, 2021, the Company granted a consultant of the Company 321,735 stock options with an exercise price of US$1.90 and a term of five years. The options will vest as follows: 107,245 on January 14, 2021, 107,245 on July 14, 2021, and 107,245 on July 14, 2022. f)On January 14, 2021, the Company extended the maturity date of the outstanding convertible debenture by one year to February 26, 2022. g)On January 25, 2021, the Company issued 2,984 common sharesentered into an agreement with iGEMS for $100,000 which was advanced as follows: (1) $40,000 upon the date of the agreement (advanced June 28, 2021); (2) $33,000 on the first month anniversary (advanced August 3, 2021); and (3) $27,000 on the second month anniversary (advanced September 7, 2021). The agreement bore interest at 6% per annum and was due on the earlier of December 31, 2021 or 30 days following the termination of the iGEMS Transaction. The agreement was secured by a general security agreement over certain assets. As the advance was considered an advance on acquisition, the Company re-assumed the advance on the closing of the iGEMS Transaction on December 14, 2021. As at November 30, 2021, the Company had accrued $2,076 of interest income in connection with this advance. ..a consultantIFRS 3, Business Combinations. Under the acquisition method, assets and liabilities are recorded at their fair values on the date of acquisition and the total consideration is allocated to settle $10,000the assets acquired and liabilities assumed. The excess consideration given over the fair value of outstanding accounts payable. the net assets acquired will be recorded as goodwill.b) On March 3, 2022, the Company issued common shares in relation to the vesting of restricted share units. F-59 of Changes in Shareholders’ EquityCanadianUnited States Dollars)29.c) On March 7, 2022, the Company acquired 100% of the issued and outstanding shares of Digital Cinema United Holding Ltd. (“DCU”) (“DCU Shares”), in accordance with a Securities Exchange Agreement (“DCU SEA”), for common shares of the Company which are scheduled to be paid out to DCU shareholders across specific performance milestones in three tranches (“DCU Transaction”) as follows: · On closing of the SEA – common shares(“Issuer Consideration Shares”) (issued subsequently) of Liquid; · Issuer Additional Shares: o Upon DCU achieving cumulative consolidated revenues of $4,750,000 before the fifth anniversary of the closing date (“DCU First Milepost”) – greater of (i) 750,000 common shares of Liquid and (ii) 3,750,000 divided by a per share price of the greater of $1.25 or the five-day Volume Weighted Average Price of Liquid common shares immediately prior to the achievement of the First Milepost. o Upon DCU achieving cumulative consolidated revenues of $10,287,000 (“DCU Second Milepost”) after the DCU First Milepost but before the fifth anniversary of the closing date; - the greater of (i) 3,750,000 divided by (A) the greater of $1.25 or (B) the five-day Volume Weighted Average Price of Liquid common shares immediately prior to the achievement of the DCU First Milepost; and (ii) 5,625,000, less (A) 3,000,000 and (B) the number of Issuer Additional Shares issued on achievement of the First Milepost. h)On January 29,Included in the DCU SEA is a buyback right that entitles the DCU shareholders to acquire the DCU Shares from the Company should the Company’s shares be delisted for more than 180 days for the following consideration:· all shares of the Company issued to the DCU shareholders; · any cash advanced to DCU by the Company; and · interest on each amount of cash advanced at a rate of 6%, compounded annually in arrears. issued 17,907 common sharesentered into an agreement with DCU whereby the Company advanced $1,147,928 to a consultantDCU as follows: (1) $573,964 upon the date of the agreement (advanced September 1, 2021); and (2) $573,964 on the first month anniversary (advanced October 4, 2021). The advances bore interest at 6% per annum and was due on the earlier of (1) February 28, 2022; (2) the termination of the letter of intent entered into between the Company for advisory services provided toand DCU on June 7, 2021; or (3) the Company. i)In Februaryclosing of the DCU Transaction. The agreement was secured by a pledge over all of the shares held in DCU (“Pledge Agreement”). As the funds were considered an advance on acquisition, the Company re-assumed the advance on the closing of the DCU Transaction on March 8, 2022. As at November 30, 2021, the Company issued 130,167 common shareshas accrued $14,062 of interest income in connection with this advance.exerciseacquisition was not complete by the issuance date of 130,167 share purchase warrants with an exercise price of US$1.75. these consolidated financial statements.j)On February 12, 2021, the Company transferred 215,000 treasury shares to a creditor as full and final payment of a Forbearance Agreement (Note 16). k)On February 18, 2021, Waterproof commenced an action against the Company in which the Plaintiff claims that the Company misrepresented facts to Waterproof, inducing Waterproof to enter the Amended and Restated Shareholder Agreement (ARSA) with the Company. As a result, Waterproof claims that it has the right to purchase the Waterproof shareholdings from the Company at a fair market value as of May 17, 2019 in accordance with a calculation included in the ARSA. The Company disputes and denies this claim. The action is in its earliest stages and the Company has not had the opportunity to file a response. F-60 l)On February 12, 2021, the Company extended the expiry date of 346,000 share purchase warrants with an exercise price of US$1.75 from February 26, 2021 to March 11, 2021 due to the investors being subject to a trading blackout. 1.2 2(d) 4.1 4.2 4.3 Amended and Restated Arrangement Agreement dated January 14, 2018 between the Company and Liquid Canada (fka Liquid Media Group Ltd.), incorporated by reference from prior filing as Exhibit 4.3 to the Annual Report on Form 20-F filed with the SEC on June 1, 2018.4.4*4.4 be tweenbetween the Company and Daniel Cruz, incorporated by reference from prior filing as Exhibit 4.4 to the Annual Report on Form 20-F filed with the SEC on March 3, 202.4.5*4.5 4.6* Form of Consulting Agreement dated April, 2021 between the Company and Daniel Cruz, former CFO and director of the Company. 8.1*4.7* Form of Employment Agreement dated January 1, 2021, between the Company and Ronald Thomson, CEO and a director of the Company. 4.8 4.9* Agreement and Plan of Merger dated September 1, 2021 and Amendment to Agreement and Plan of Merger dated September 15, 2021 by and among IndieFlix Group, Inc., the Company and LMG Merger Sub, a Delaware corporation and a wholly-owned or indirect wholly-owned subsidiary of the Company. 73 4.10* 4.11* Securities Exchange Agreement dated February 9, 2022, between the Company and DCU shareholders to acquire all of the outstanding equity shares of DCU in exchange for the Company's common shares. 8.1* Subsidiaries of the Registrant 11.1 20052005.12.1*12.1* Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 12.2*12.2* Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 13.1* 13.2* Certifications of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 15.1* Consent of Davidson & Co. LLP Chartered Professional Accountants 15.2* Management’s Discussion and Analysis for the years ended November 30, 2021 101.INS* 101.SCH* 101.CAL* 101.DEF* 101.LAB* 101.PRE* 104.* Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). 74 March 1, 2021 April 7, 2022LIQUID MEDIA GROUP LTD. By: “Ronald Thomson” Ronald Thomson, Chief Executive Officer Exhibit No. By:“Daniel Cruz”Daniel Cruz,Chief Financial OfficerExhibit No.Descriptionhttps://www.sec.gov/Archives/edgar/data/884247/000106299307003713/formf3.htm1.2 https://www.sec.gov/Archives/edgar/data/884247/000106299310000325/exhibit99-1.htm
and 99.2https://www.sec.gov/Archives/edgar/data/884247/000106299310000325/exhibit99-2.htm
to the Form 6-K filed with the SEC on February 3, 2010.2.(d) 4.1 https://www.sec.gov/Archives/edgar/data/884247/000106299315003721/form6k.htm4.2 https://www.sec.gov/Archives/edgar/data/884247/000119312518181963/d409843dex42.htm4.3 https://www.sec.gov/Archives/edgar/data/884247/000119312518181963/d409843dex43.htm4.4*4.4 4.5*4.5 4.6* 4.7* 4.8 4.9* 4.10* 4.11* Securities Exchange Agreement dated February 9, 2022, between the Company and DCU shareholders to acquire all of the outstanding equity shares of DCU in exchange for the Company's common shares. 8.1* 11.1 https://www.sec.gov/Archives/edgar/data/884247/000106299305001265/exhibit11-1.htm12.1*12.1* Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 12.2*12.2* Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 13.1*13.1* Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 13.2* Certifications of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 15.1* Consent of Davidson & Co. LLP Chartered Professional Accountants 15.2* 15.3* Management’s Discussion and Analysis for the years ended November 30, 2020 101.INS* 101.SCH* 101.CAL* 101.DEF* 101.LAB* 101.PRE* 104.* Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).