SHARE CAPITAL AND RESERVES | 15. SHARE CAPITAL AND RESERVES Authorized share capital The Company is authorized to issue 500,000,000 common shares without par value. The Company is authorized to issue the following preferred shares: Preferred shares without par value 9,999,900 Series “A” preferred shares 1,000,000 Series “B” preferred shares 100 Series “C” preferred shares 1,000,000 Series “D” preferred shares 4,000,000 Series “E” preferred shares 4,000,000 20,000,000 In October 2018, the Company completed a share consolidation on the basis of one new post-consolidation common share for every five pre-consolidation common shares. All current and comparative references to the number of common shares, weighted average number of common shares, loss per share, stock options, and warrants have been restated to give effect to this share consolidation. Issued share capital Common shares 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 licences (Note 8). 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 11). g) During the year, the Company 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. h) During the year, the Company 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. During the year ended November 30, 2017: a) On March 14, 2017, the Company issued 117,750 units valued at $353,250 to settle debt. Each unit was comprised of one common share and 0.287 of a share purchase warrant of the Company. Each whole warrant entitles the holder to purchase one additional common share at a price of $3.75 per share for a term of five years from closing. b) On April 6, 2017, the Company closed a non-brokered private placement and issued 89,833 units at a price of $3.00 per unit for gross proceeds of $269,500 of which $16,500 was settled for debt. Each unit consisted of one common share and 0.287 of a share purchase warrant of the Company. Each whole warrant entitles the holder to purchase one additional common share at a price of $3.75 per share for a term of five years from closing. c) On May 19, 2017, the Company issued 22,854 common shares to settle debts totaling $69,100. d) On September 6, 2017, the Company closed a non-brokered private placement and issued 73,291 common shares at $6.15 per share to settle debt totaling $204,123 and for cash totaling $246,615. A finders’ fee of 4,000 shares was issued with a value of $24,600 in connection with the private placement and has been recorded as a share issuance cost. e) On September 12, 2017, the Company issued 20,000 common shares pursuant to the exercise of stock options for total proceeds of $75,000. As a result, the Company transferred $48,000 representing the fair value of the exercised stock options from reserves to share capital. f) On October 23, 2017, the Company issued 4,750 common shares pursuant to the exercise of share purchase warrants for total proceeds of $17,812. No shares were issued during the year ended November 30, 2016. Preferred shares As at November 30, 2018, 2017, and 2016, no preferred shares were issued and outstanding. Loss per share The basic and diluted loss per share attributable to the Company for the year ended November 30, 2018 was $3.14 (2017 - $0.96; 2016 – $0.25) and was based on the loss attributable to common shareholders and the weighted average number of common shares outstanding of 2,397,117 (2017 – 2,001,832; 2016 – 1,845,237). The basic and diluted profit per share attributable to the non-controlling interests for the year ended November 30, 2018 was $0.02 and was based on the profit attributable to non-controlling interests and the weighted average number of common shares outstanding of 2,397,117. Stock options 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% (10% in 2016) of the issued common shares of the Company. The 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 including immediately, one and five years. Options granted generally have a life of 10 years. During the year ended November 30, 2017, the Company granted 240,000 stock options with a total fair value of $576,000 that vested immediately on grant. In connection with the Arrangement, the Company granted 117,000 stock options, with a total fair value of $207,438, 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 5). The following weighted average assumptions were used in the Black-Scholes option-pricing model for the valuation of the stock options granted: 2018 2017 2016 Risk-free interest rate 2.09% 1.28% - Dividend yield Nil Nil - Expected life 0.94 years 5 years - Volatility 127% 120% - Weighted average fair value per option $2.08 $2.40 - Stock option transactions are summarized as follows: Number of Weighted Average Stock Options Exercise Price $ Balance, November 30, 2015 and 2016 - - Granted 240,000 3.75 Exercised (20,000 ) 3.75 Balance, November 30, 2017 220,000 3.75 Cancelled – Plan of Arrangement (220,000 ) 3.75 Granted 117,000 17.69 (US$13.30) Balance, November 30, 2018 117,000 17.69 (US$13.30) A summary of the share options outstanding and exercisable at November 30, 2018 is as follows: Number of Number of Stock Options Stock Options Outstanding Exercisable Exercise Price Expiry Date $ 89,000 44,500 16.29 (US$12.25) July 18, 2019 12,000 12,000 19.95 (US$15.00) July 18, 2019 11,000 11,000 23.28 (US$17.50) July 18, 2019 5,000 5,000 24.54 (US$18.45) July 18, 2019 117,000 72,500 The weighted average life of share options outstanding at November 30, 2018 was 0.63 years. Warrants Agents’ warrants 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. The following weighted average assumptions were used in the Black-Scholes option-pricing model for the valuation of the agents’ warrants granted: 2018 Risk-free interest rate 2.30% Dividend yield Nil Expected life 2 years Volatility 105% Weighted average fair value per option $3.10 Agents’ warrants Agents’ warrant transactions are summarized as follows: Number of Weighted Average Agents’ Warrants Exercise Price Balance, November 30, 2015, 2016, 2017 4,574 1.25 Issued 8,000 5.32 (US$4.00) Exercised (1,837 ) 1.25 Balance, November 30, 2018 10,737 4.28 A summary of the agents’ warrants outstanding and exercisable at November 30, 2018 is as follows: Number of Agent’s Warrants Exercise Price Expiry Date $ 2,737 1.25 August 18, 2019 8,000 5.32 (US$4.00) October 15, 2020 10,737 The weighted average life of agent’s warrants outstanding at November 30, 2018 was 1.58 years. Share purchase warrants During the year ended November 30, 2017, the Company issued 103,791 share purchase warrants with an exercise price of $3.75, 132,043 share purchase warrants with an exercise price of $3.00 and 132,043 share purchase warrants with an exercise price of $6.00. 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. Share purchase warrants Share purchase warrant transactions are summarized as follows: Number of Share Purchase Weighted Average Warrants Exercise Price $ Balance, November 30, 2015 and 2016 - - Issued 323,673 4.36 Exercised (2,727 ) 3.75 Balance, November 30, 2017 320,946 4.36 Granted 800,000 6.65 Granted on anti-dilution clause 72,800 3.33(USD$2.50) Exercised (51,148 ) 3.01 Balance, November 30, 2018 1,142,598 5.96 A summary of the share purchase warrants outstanding and exercisable at November 30, 2018 is as follows: Number of Share Purchase Warrants Exercise Price Expiry Date $ 31,504 3.75 March 14, 2022 24,208 3.75 April 6, 2022 82,043 3.00 August 30, 2020 72,800 3.33 (USD$2.50) August 30, 2020 132,043 6.00 August 30, 2020 800,000 6.65 (USD$5.00) October 15, 2021 1,142,598 The weighted average life of share purchase warrants outstanding at November 30, 2018 was 2.62 years. Derivative liability 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. 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. The anti-dilution right for the A and B share purchase warrants was valued at $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. As at November 30, 2018, the rights attached to the B warrants were valued at $100,912 using the Black Scholes model with the following assumptions: risk free rate of 2.16%, expected life of 1.75 years, volatility of 114%%, dividend yield of $Nil, and a probability of exercise of 20% resulting in a derivative gain of $25,088. 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 occurs on the date of change on the Company’s previously issued share purchase warrants with CAD exercise prices. This derivative liability is being revalued at each reporting period. On initial recognition, the Company recorded a loss of $1,557,086 to set up the derivative liability. As at November 30, 2018, the Company revalued the derivative liability to $551,846 and recorded a gain of $1,005,240. A summary of the share purchase warrants outstanding and exercisable at November 30, 2017 is as follows: Number of Warrants Exercise Price Expiry Date $ 32,652 3.75 March 14, 2022 24,208 3.75 April 6, 2022 132,043 3.00 August 30, 2020 132,043 6.00 August 30, 2020 320,946 A summary of the share purchase warrants outstanding and exercisable at November 30, 2018 is as follows: Number of Warrants Exercise Price Expiry Date $ 31,504 3.75 March 14, 2022 24,208 3.75 April 6, 2022 82,043 3.00 August 30, 2020 132,043 6.00 August 30, 2020 269,798 The following weighted average assumptions were used in the Black-Scholes option-pricing model for the initial valuation and the valuation of the derivative liability as at November 30, 2018: 2018 Risk-free interest rate 2.08% Dividend yield Nil Expected life 2.25 years Volatility 102% Weighted average fair value per option 1.11 |