| 17. WARRANTS | The following schedule summarizes the outstanding warrants
for the purchase of Common Shares of the Company:
September 30, 2017
December 31, 2016
Warrants Outstanding Weighted Average Exercise Price Weighted Average Life Remaining (yrs) Warrants Outstanding Weighted Average Exercise Price Weighted Average Life Remaining (yrs)
Beginning of period 17,310,000 $ 0.23 1.21 8,177,373 $ 0.25 1.39
Issued 17,477,782 0.21 1.65 11,935,000 0.21 2.05
Cancelled (1,750,000) 0.25 1.03 (1,125,000) 0.25 1.13
Expired (3,000,000) 0.34 - (1,677,373) 0.19 -
End of period 30,037,782 $ 0.21 0.89 17,310,000 $ 0.23 1.21
The Company has issued warrants for the purchase of Common
Shares of the Company as follows:
Issuance Date Number of Warrants Expected Life in Years Exercise Price ($) Risk Free Rate
Dividend Yield Expected Volatility Fair Value ($)
May 29, 2015 (a) 250,000 2.00 0.40 0.85% Nil 298% 35,362
May 29, 2015 (a) 250,000 2.00 0.50 0.85% Nil 298% 35,134
May 29, 2015 (a) 250,000 2.00 0.60 0.85% Nil 298% 34,934
May 29, 2015 (a) 250,000 2.00 0.70 0.85% Nil 298% 34,755
December 30, 2015 (b) 250,000 1.50 0.20 0.88% Nil 190% 26,821
December 31, 2015 (c) 3,250,000 2.00 0.20 1.19% Nil 265% 516,343
January 18, 2016 (d) 250,000 2.46 0.20 0.91% Nil 263% 51,598
February 18, 2016 (e) 300,000 2.00 0.25 0.80% Nil 275% 30,501
February 18, 2016 (f) 1,500,000 2.00 0.25 0.80% Nil 275% 152,503
March 2, 2016 (g) 1,000,000 2.00 0.20 0.91% Nil 271% 158,995
April 13, 2016 (h) 1,750,000 2.00 0.25 0.88% Nil 264% 241,754
May 20, 2016 (i) 3,750,000 2.00 0.20 1.03% Nil 259% 234,737
May 20, 2016 (j) 85,000 2.00 0.20 1.03% Nil 259% 14,225
July 15, 2016 (k) 300,000 2.46 0.20 0.91% Nil 263% 45,799
December 22, 2016 (l) 250,000 1.50 0.20 0.87% Nil 180% 18,840
December 31, 2016 (m) 2,750,000 2.00 0.20 1.20% Nil 259% 143,871
January 12, 2017 (n) 50,000 1.00 0.20 0.81% Nil 191% 4,988
January 20, 2017 (o) 750,000 2.00 0.20 1.20% Nil 267% 43,737
January 31, 2017 (p) 3,773,006 1.00 0.20 0.84% Nil 173% 224,479
January 31, 2017 (q) 411,361 1.00 0.20 0.84% Nil 173% 24,474
February 17, 2017 (r) 907,948 1.00 0.20 0.82% Nil 167% 63,641
February 17, 2017 (s) 108,954 1.00 0.20 0.82% Nil 167% 7,615
March 8, 2017 (t) 1,500,000 2.00 0.25 1.36% Nil 266% 193,438
March 21, 2017 (u) 3,270,045 1.00 0.20 1.00% Nil 165% 236,773
March 21, 2017 (v) 27,623 1.00 0.20 1.00% Nil 165% 2,000
April 4, 2017 (w) 250,000 1.00 0.20 1.03% Nil 163% 19,703
April 6, 2017 (x) 500,000 2.00 0.25 1.24% Nil 167% 52,643
June 2, 2017 (y) 1,634,615 1.00 0.20 1,16% Nil 171% 110,602
June 16, 2017 (z) 769,230 1.00 0.20 1.21% Nil 171% 57,765
June 28, 2017 (aa) 300,000 1.00 0.20 1.21% Nil 159% 23,020
July 1, 2017 (bb) 75,000 1.50 0.20 1.24% Nil 158% 7,000
July 31, 2017 (cc) 2,000,000 2.00 0.20 1.34% Nil 245% 252,631
July 31, 2017 (dd) 1,000,000 2.00 0.20 1.34% Nil 245% 21,930
August 18, 2017 (ee) 150,000 1.50 0.20 1.24% Nil 159% 11,670
33,912,782 3,134,281 (a) Issued in connection to a commission
agreement. The warrants vest in four tranches of 250,000 warrants each. The first tranche has an exercise price of $0.40 per share
and vested upon execution of the agreement. The second tranche has an exercise price of $0.50 per share and will vest upon the
sales agent delivering $500,001 in sales revenue to Gilla Worldwide. The third tranche has an exercise price of $0.60 per share
and will vest upon the sales agent delivering $1,000,001 in sales revenue to Gilla Worldwide. The fourth tranche has an exercise
price of $0.70 per share and will vest upon the sales agent delivering $1,500,001 in sales revenue Gilla Worldwide. During the
year ended December 31, 2015, the Company booked the fair value of the vested warrants in the amount of $35,362 as a prepaid to
be expensed over the two year life of the commission agreement. During the nine month periods ended September 30, 2017 and 2016,
the Company expensed $7,367 and $8,840, respectively, in stock based compensation which has been recorded as an administrative
expense. No portion of the value of the unvested warrants has been expensed as the sales agent had not yet delivered any sales
revenue to Gilla Worldwide. (b) Issued in connection to the Secured
Notes (note 11(iv)). During the year ended December 31, 2015, the Company booked the fair value of the warrants in the amount
of $26,821 as a prepaid to be expensed over the life of the Secured Notes. During the nine month periods ended September 30, 2017
and 2016, the Company expensed $8,843 and $8,892, respectively, of the prepaid as financing fees which has been recorded as an
interest expense. (c) Issued in connection to the issuance
of Convertible Debentures Series B (note 14). The relative fair value of the warrants in the amount of $516,343, along with
the BCF, represents debt discount on the Convertible Debentures Series B and is accreted over the life of the convertible debentures
using the effective interest rate. During the nine month periods ended September 30, 2017 and 2016, the Company recorded interest
expense in the amount of $129,969 and $27,613, respectively, related to debt discount which includes the accretion of the BCF of
the Convertible Debentures Series B. (d) Issued in connection to the Term
Loan (note 13). On July 15, 2016 and in connection to the Term Loan Amendment, the Company extended the expiration date of the
warrants to December 31, 2018, with all other terms of the warrants remaining the same. During the year ended December 31, 2016,
the Company booked the fair value of the warrants and the extension in the amount of $51,598 as a debt issuance cost to be expensed
over the life of the Term Loan. During the nine months ended September 30, 2017 and 2016, the Company expensed $14,198 and $18,077,
respectively, as financing fees which has been recorded as interest expense. On July 15, 2016 and in connection to the Term Loan
Amendment, the Company also extended the expiration date of the warrants for the purchase of 250,000 Common Shares that were issued
on August 1, 2014 in connection to the Credit Facility (note 12) and extended on January 18, 2016 in connection to the Term Loan
(note 13) until December 31, 2018, with all other terms of the warrants remaining the same. During the year ended December 31,
2016, the Company booked the fair value of the extensions in the amount of $42,325 as a prepaid to be expensed over the life of
the Term Loan. During the nine month periods ended September 30, 2017 and 2016, the Company expensed $12,144 and $13,724, respectively,
as financing fees which has been recorded as interest expense. (e) Issued in relation to a consulting
agreement. The warrants shall vest quarterly in eight equal tranches, with the first tranche vesting immediately and the final
tranche vesting on November 18, 2017. If the consulting agreement was terminated prior to the expiration of the warrants, any unexercised
fully vested warrants would expire thirty calendar days following the effective termination date and any unvested warrants would
be automatically canceled. On August 31, 2016, the Company terminated the consulting agreement and 187,500 of the unvested warrants
have been cancelled and the remaining 112,500 vested warrants remain outstanding and exercisable until February 17, 2018 as mutually
agreed in the termination. During the nine month periods ended September 30, 2017 and 2016, the Company expensed $nil and $16,511,
respectively, as stock based compensation which has been recorded as an administrative expense. (f) Issued in relation to a consulting
agreement. The warrants shall vest quarterly in eight equal tranches, with the first tranche vesting immediately and the final
tranche vesting on November 18, 2017. If the consulting agreement was terminated prior to the expiration of the warrants, any unexercised
fully vested warrants would expire thirty calendar days following the effective termination date and any unvested warrants shall
be automatically canceled. On October 25, 2016, the Company terminated the consulting agreement and 937,500 unvested warrants have
been cancelled and the remaining 562,500 vested warrants remain outstanding and exercisable until June 30, 2018 as mutually agreed
in the termination. During the nine month periods ended September 30, 2017 and 2016, the Company expensed $nil and $108,656, respectively,
as stock based compensation which has been recorded as an administrative expense. (g) Issued in connection to the Loan
Agreement (note 11(v)). The warrants shall vest in two equal tranches, with 500,000 warrants to vest upon the close of Loan Tranche
A and the remaining 500,000 warrants to vest upon the close of Loan Tranche B. On March 3, 2016 and April 14, 2016, the Company
closed Loan Tranche A and Loan Tranche B, respectively, at which dates the warrants became fully vested and exercisable. During
the year ended December 31, 2016, the Company booked the fair value of the warrants in the amount of $158,995 as a prepaid to be
expensed over the life of the Shareholder Loan. During the nine month periods ended September 30, 2017 and 2016, the Company expensed
$61,610 and $42,619, respectively, of the prepaid as financing fees which has been recorded as interest expense. (h) Issued in connection to a consulting
agreement. Forty percent of the warrants vested immediately with the remaining sixty percent vesting in equal tranches of fifteen
percent on September 30, 2016, December 31 2016, September 30, 2017 and December 31, 2017. If the consulting agreement is terminated
prior to the expiration of the warrants, any unexercised fully vested warrants shall expire ninety calendar days following the
effective termination date and any unvested warrants shall be automatically canceled. During the nine month period ended September
30, 2017, the Company terminated the consulting agreement for cause and all warrants issued in connection to the consulting agreement
were canceled. As a result of the termination, the Company did not record any stock based compensation during the nine month period
ended September 30, 2017. During the nine month period ended September 30, 2016, the Company expensed $180,242 in stock based compensation
in relation to these warrants. (i) Issued in connection to the issuance
of Convertible Debentures Series C-1 (note 15). The relative fair value of the warrants in the amount of $234,737, along with the
BCF, represents debt discount on the Convertible Debentures Series C-1 and is accreted over the life of the convertible debentures
using the effective interest rate. During the nine month periods ended September 30, 2017 and 2016, the Company recorded interest
expense in the amount of $81,679 and $11,225, respectively, related to debt discount which includes the accretion of the BCF of
the Convertible Debentures Series C-1. (j) Issued as a commission payment
related to the issuance of the Convertible Debentures Series C-1. The fair value of the warrants in the amount of $14,225 was recorded
as a reduction to the proceeds received from the Convertible Debentures Series C-1 (note 15). (k) Issued in connection to the Term
Loan Amendment (note 13). During the year ended December 31, 2016, the Company booked the fair value of the warrants in the amount
of $45,799 as a prepaid to be expensed over the life of the Term Loan. During the nine month periods ended September 30, 2017 and
2016, the Company expensed $17,439 and $4,855, respectively, of the prepaid as financing fees which has been recorded as interest
expense. (l) Issued in connection to the Secured
Notes (note 11). During the year ended December 31, 2016, the Company booked the fair value of the warrants in the amount of $18,840
as debt issuance cost to be expensed over the life of the Secured Notes. During the nine month periods ended September 30, 2017
and 2016, the Company expensed $9,267 and $nil, respectively, of the prepaid as financing fees which has been recorded as interest
expense. (m) Issued in connection to the issuance
of Convertible Debentures Series C-2 (note 15). The relative fair value of the warrants in the amount of $143,871, along with the
BCF, represents debt discount on the Convertible Debentures Series C-2 and is accreted over the life of the convertible debentures
using the effective interest rate. During the nine month periods ended September 30, 2017 and 2016, the Company recorded interest
expense in the amount of $63,923 and $nil, respectively, related to debt discount which includes the accretion of the BCF of the
Convertible Debentures Series C-2. (n) Issued in connection to the Bridge
Loan Agreement (note 11(vi)). During the nine month periods ended September 30, 2017 and 2016, the Company expensed the fair value
of the warrants in the amount of $4,988 and $nil, respectively, as financing fees which has been recorded as interest expense. (o) Issued in connection to the issuance
of Convertible Debentures Series C-3 (note 15). The relative fair value of the warrants in the amount of $43,737, along with the
BCF, represents debt discount on the Convertible Debentures Series C-3 and is accreted over the life of the convertible debentures
using the effective interest rate. During the nine month periods ended September 30, 2017 and 2016, the Company recorded interest
expense in the amount of $18,184 and $nil, respectively, related to debt discount which includes the accretion of the BCF of the
Convertible Debentures Series C-3. (p) Issued in connection to private
placement units. No stock based compensation expense was recorded since the warrants were issued as part of a private placement
of Common Shares. The fair value of the warrants were calculated and recorded in additional paid in capital. (q) Issued as a commission payment
related to the issuance of private placement units. The fair value of the warrants in the amount of $24,474 was recorded as a reduction
to the proceeds received from the private placement issuance. (r) Issued in connection to private
placement units. No stock based compensation expense was recorded since the warrants were issued as part of a private placement
of Common Shares. The fair value of the warrants were calculated and recorded in additional paid in capital. (s) Issued as a commission payment
related to the issuance of private placement units. The fair value of the warrants in the amount of $7,615 was recorded as a reduction
to the proceeds received from the private placement issuance. (t) Issued in connection to an employment
agreement. The warrants will vest in three equal tranches, with the first tranche vesting upon the employee generating over $25,000
in sales of new business for two consecutive months, the second tranche vesting upon the employee generating cumulative sales of
over $500,000 and the third tranche vesting upon the employee generating cumulative sales of over $1,000,000 of new business. At
September 30, 2017, no stock based compensation has been recorded as the employee has not yet begun to generate new business sales. (u) Issued in connection to private
placement units. No stock based compensation expense was recorded since the warrants were issued as part of a private placement
of Common Shares. The fair value of the warrants were calculated and recorded in additional paid in capital. (v) Issued as a commission payment
related to the issuance of the private placement units. The fair value of the warrants in the amount of $2,000 was recorded as
a reduction to the proceeds received from the private placement issuance. (w) Issued in connection to private
placement units. No stock based compensation expense was recorded since the warrants were issued as part of a private placement
of Common Shares. The fair value of the warrants were calculated and recorded in additional paid in capital. (x) Issued in connection to an employment
agreement, the warrants shall vest in two equal tranches, with the first tranche vesting upon the commercial sale of a new product
to be developed by the employee and the second tranche vesting upon the commercial sale of a total of two new products developed
by the employee. Both tranches have vested and the Company has recorded $52,643 in stock based compensation for the nine month
period ended September 30, 2017 (September 30, 2016 - $nil). (y) Issued in connection to private
placement units. No stock based compensation expense was recorded since the warrants were issued as part of a private placement
of Common Shares. The fair value of the warrants were calculated and recorded in additional paid in capital. (z) Issued in connection to private
placement units. No stock based compensation expense was recorded since the warrants were issued as part of a private placement
of Common Shares. The fair value of the warrants were calculated and recorded in additional paid in capital. (aa) Issued in connection to private
placement units. No stock based compensation expense was recorded since the warrants were issued as part of a private placement
of Common Shares. The fair value of the warrants were calculated and recorded in additional paid in capital. (bb) Issued in connection with a
consulting agreement. During the nine month periods ended September 30, 2017 and 2016, the Company $7,000 and $nil, respectively,
as stock based compensation which was recorded as an administrative expense. (cc) Issued in connection with the
acquisition of a subsidiary (note 4(c)). (dd) Issued in connection to an employment
agreement, the warrants shall vest in four equal tranches every six months following the date of issuance. During the nine month
periods ended September 30, 2017 and 2016, the Company $21,930 and $nil, respectively, as stock based compensation which was recorded
as an administrative expense. (ee) Issued in connection with a
promissory note (note (x)). During the nine month period ended September 30, 2017, the Company booked the fair value of the warrants
in the amount of $11,670 as a prepaid to be expensed over the life of the promissory note. During the nine month periods ended
September 30, 2017 and 2016, the Company expensed $914 and $nil, respectively, of the prepaid as financing fees which has been
recorded as an interest expense. |
