| SHARE CAPITAL AND RESERVES | 18. 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 Issued share capital Common shares During the year ended November 30, 2019: 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 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) In November 2019, the Company issued 158,291 common
shares valued at $368,617 for the exercise of warrants with an exercise price of US$1.75. e) During the year, the Company issued 1,000,167 units
on the conversion of $1,795,455 (US$1,133,761) worth of 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
28, 2021. 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 9). 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, 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. Preferred shares As at November 30, 2019 and 2018, no preferred shares were issued
and outstanding. Treasury shares On November 27, 2019, the Company issued 215,000 common shares into treasury as security
against a loan in accordance with a Forebarance Agreement (Note 16). Commitment to issue shares As at November 30, 2019, the Company was committed to issuing $137,197
(2018 – $12,500) worth of common shares of which $33,058 is for services received and $104,139 is for 45,000 common shares
to be issued in relation to the exercise of warrants. Loss per share The basic and diluted loss per share attributable to the Company for
the year ended November 30, 2019 was $1.78 (2018 - $3.14; 2017 - $0.96) and was based on the loss attributable to common shareholders
and the weighted average number of common shares outstanding of 4,255,297 (2018 – 2,397,117; 2017 – 2,001,832). The basic and diluted profit (loss) per share attributable to the
non-controlling interests for the year ended November 30, 2019 was $(0.01) (2018 – $0.02) and was based on the profit (loss)
attributable to non-controlling interests and the weighted average number of common shares outstanding of 4,255,297 (2018 –
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% 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 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,
2019, the Company recorded share-based compensation of $36,781 (2018 - $111,135) in relation to these options. During the year ended November 30, 2019, the Company granted 461,500
stock options with a total fair value of $ 1,136,731 that vested immediately on grant. The following weighted average assumptions were used in the Black-Scholes
option-pricing model for the valuation of the stock options granted:
2019 2018 2017
Risk-free interest rate 1.82% 2.09% 1.28%
Dividend yield Nil Nil Nil
Expected life 5.0 years 0.94 years 5 years
Volatility 92% 127% 120%
Weighted average fair value per option $2.46 $2.08 $2.40 Stock option transactions are summarized as follows:
Number of Stock Options Weighted Average Exercise Price
$
Balance, November 30, 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 17.67 (USD$13.30)
Balance, November 30, 2018 117,000 17.67 (USD$13.30)
Granted 461,500 3.39 (USD$2.55)
Cancelled (117,000) 17.67 (USD$13.30)
Balance, November 30, 2019 461,500 3.39 A summary of the share options outstanding and exercisable at November
30, 2019 is as follows:
Number of Stock Options Exercise Price Expiry Date
$
461,500 3.39 (USD$2.55) February 28, 2024
461,500 The weighted average life of share options outstanding at November
30, 2019 was 4.25 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 warrant $3.10 Agents’ warrant transactions are summarized as follows:
Number of Agents’ Warrants Weighted Average Exercise Price
$
Balance, November 30, 2016 and 2017 4,574 1.25
Issued 8,000 5.32 (USD$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 A summary of the agents’ warrants outstanding and exercisable
at November 30, 2019 is as follows:
Number of Agent’s Warrants Exercise Price Expiry Date
$
8,000 5.32 (USD$4.00) October 15, 2020
8,000 The weighted average life of agent’s warrants outstanding at
November 30, 2019 was 0.88 years. Share purchase warrants 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. During the year ended November 30, 2019, the Company issued 1,000,167
share purchase warrants with an exercise price of USD$1.75 per warrant in connection with the conversion of various convertible
debentures. On October 18, 2019, the Company repriced six tranches of share purchase
warrants to US$1.20. Share purchase warrant transactions are summarized as follows:
Number of Share Purchase Warrants Weighted Average Exercise Price
$
Balance, November 30, 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 3.32 (USD$2.50)
Exercised (51,148) 3.01
Balance, November 30, 2018 1,142,598 6.05
Granted 1,000,167 2.33 (USD$1.75)
Exercised (158,291) 2.33 (USD$1.75)
Balance, November 30, 2019 1,984,474 1.92 A summary of the share purchase warrants outstanding and exercisable
at November 30, 2019 is as follows:
Number of Share Purchase Warrants Exercise Price Expiry Date
$
31,504 1.59 (USD$1.20) March 14, 2022
24,208 1.59 (USD$1.20) April 6, 2022
286,886 1.59 (USD$1.20) August 30, 2020
800,000 1.59 (USD$1.20) October 15, 2021
841,876 2.33 (USD$1.75) February 26, 2021
1,984,474 The weighted average life of share purchase warrants outstanding at
November 30, 2019 was 1.46 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, 2019, the rights attached to the B warrants were valued at $1,102,277 (2018 - $100,912)
resulting in a derivative loss of $1,001,365 for the year ended November 30, 2019 (2018 - gain of $25,088). 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, 2019 and November 30, 2018
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% 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. 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. As at November 30, 2019, the Company revalued the derivative liability to $nil and recorded
a gain of $551,846. 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, 2019 and November 30, 2018:
2019 2018
Risk-free interest rate - 2.08%
Dividend yield - Nil
Expected life - 2.25 years
Volatility - 102% |
