Condensed Interim Consolidated Financial Statements
For the three and nine months ended August 31, 2018 and 2017
(Unaudited)
NOTICE OF NO-AUDITOR REVIEW OF
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed interim consolidated financial statements have been prepared by Management and have not been subject to a review by the Company’s external independent auditors.
Liquid Media Group Ltd.
Condensed interim consolidated statements of financial position
As at August 31, 2018 and November 30, 2017
Expressed in Canadian Dollars
(Unaudited)
August 31, 2018 | November 30, 2017 | |||||
ASSETS | ||||||
Current | ||||||
Cash and cash equivalents | $ | 132,121 | $ | 54,307 | ||
Restricted cash (Note 4) | 574,510 | - | ||||
Accounts receivable | 91,248 | - | ||||
Sales tax and other receivables | 24,408 | 34,841 | ||||
Prepaid expenses | 25,912 | 154,603 | ||||
Loans receivable (Note 6) | 417,317 | 381,891 | ||||
1,265,516 | 625,642 | |||||
Investment in films (Note 13) | 343,281 | 319,820 | ||||
Investment in associate (Note 7) | 427,276 | 459,273 | ||||
Other assets | 56,506 | - | ||||
Goodwill (Note 5) | 1,964,587 | - | ||||
Total assets | $ | 4,057,166 | $ | 1,404,735 | ||
LIABILITIES | ||||||
Current | ||||||
Accounts payable and accrued liabilities (Note 12) | $ | 1,324,658 | $ | 421,501 | ||
Income tax payable | 45,018 | - | ||||
Due to related parties (Note 12) | 351,960 | 291,369 | ||||
Liabilities attributable to discontinued operations (Note 3) | 250,000 | - | ||||
Contingent consideration (Note 5) | 1,174,950 | - | ||||
Loans payable (Note 8) | 1,039,677 | 825,282 | ||||
4,186,263 | 1,538,152 | |||||
Deferred income taxes (Note 5) | 301,000 | - | ||||
Total liabilities | 4,487,263 | 1,538,152 | ||||
SHAREHOLDERS' EQUITY (DEFICIT) | ||||||
Share capital (Note 9) | 7,098,700 | 2,364,400 | ||||
Commitment to issue shares (Note 9) | 172,550 | 168,550 | ||||
Contributed surplus (Note 9) | 1,496,933 | 1,440,316 | ||||
Accumulated other comprehensive income | (783 | ) | - | |||
Accumulated deficit | (9,255,730 | ) | (4,106,683 | ) | ||
Deficit attributable to shareholders of the company | (488,330 | ) | (133,417 | ) | ||
Non-controlling interest | 58,233 | - | ||||
(430,097 | ) | (133,417 | ) | |||
Total liabilities and shareholders’ equity (deficit) | $ | 4,057,166 | $ | 1,404,735 | ||
Going concern(Note 2b) | ||||||
Commitments(Note 13) | ||||||
Subsequent Events(Note 14) |
Approved on behalf of the Board:
“Charlie Brezer” | “Daniel Cruz” | |
Director | Director |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
Liquid Media Group Ltd.
Condensed interim consolidated statements of comprehensive loss
For the three and nine months ended August 31, 2018 and 2017
Expressed in Canadian dollars, except number of shares
(Unaudited)
Three months ended August 31 | Nine months ended August 31 | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Sales | $ | 155,857 | $ | - | $ | 568,231 | $ | - | ||||
Cost of sales | (31,954 | ) | - | (158,330 | ) | - | ||||||
Gross profit | 123,903 | $ | - | 409,901 | $ | - | ||||||
Operating Expenses | ||||||||||||
Consulting and director fees (Note 12) | 347,814 | $ | 260,759 | 599,085 | $ | 516,448 | ||||||
Depreciation | - | - | - | 200 | ||||||||
Foreign exchange loss | 65,871 | 9,454 | 68,606 | 12,239 | ||||||||
Interest expense (Note 8 & 12) | 31,694 | 28,154 | 96,227 | 185,086 | ||||||||
Investor relations, filing and compliance fees | 4,046 | 9,782 | 12,075 | 13,713 | ||||||||
Other general and administrative expenses | 95,491 | 15,660 | 145,408 | 48,270 | ||||||||
Professional fees | 46,433 | 13,888 | 102,962 | 36,950 | ||||||||
Share-based compensation (Note 9 & 12) | - | 576,000 | - | 576,000 | ||||||||
Salaries and benefits | 19,330 | - | 42,982 | - | ||||||||
Travel and promotion | 66 | 30,234 | 12,533 | 59,406 | ||||||||
610,745 | 943,931 | 1,079,878 | 1,448,312 | |||||||||
Loss before other items | (486,842 | ) | (943,931 | ) | (669,977 | ) | (1,448,312 | ) | ||||
Other income (expenses) | ||||||||||||
Interest income | 17,575 | 13,630 | 39,471 | 24,074 | ||||||||
Listing expense (Note 3) | (4,090,871 | ) | - | (4,090,871 | ) | - | ||||||
Project investigation | (36,565 | ) | - | (289,767 | ) | - | ||||||
Write-off of deposit | - | - | - | (25,000 | ) | |||||||
Share of profit of equity investment (Note 7) | (25,304 | ) | (16,392 | ) | (31,997 | ) | 93,226 | |||||
(4,135,165 | ) | (2,762 | ) | (4,373,164 | ) | 92,300 | ||||||
Net loss before income tax | (4,622,007 | ) | (946,693 | ) | (5,043,141 | ) | (1,356,012 | ) | ||||
Income tax expense | 44,227 | - | 44,227 | - | ||||||||
Net loss | $ | (4,666,234 | ) | $ | (946,693 | ) | $ | (5,087,368 | ) | $ | (1,356,012 | ) |
Other comprehensive loss | ||||||||||||
Items that may be reclassified to profit and loss | ||||||||||||
Foreign currency translation adjustment | (3,496 | ) | - | (783 | ) | - | ||||||
Net loss and comprehensive loss | $ | (4,669,730 | ) | $ | (946,693 | ) | $ | (5,088,151 | ) | $ | (1,356,012 | ) |
Net loss attributable to: | ||||||||||||
Shareholders of the company | $ | (4,644,919 | ) | $ | (946,693 | ) | $ | (5,149,047 | ) | $ | (1,356,012 | ) |
Non-controlling interest | (21,315 | ) | - | 61,679 | - | |||||||
Net loss | $ | (4,666,234 | ) | $ | (946,693 | ) | $ | (5,087,368 | ) | $ | (1,356,012 | ) |
Loss per share, basic and diluted | $ | (1.26 | ) | $ | (0.09 | ) | $ | (1.66 | ) | $ | (0.14 | ) |
Weighted average number of common shares outstanding | ||||||||||||
Basic and diluted | 3,672,864 | 10,374,037 | 3,094,681 | 9,734,531 |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
Liquid Media Group Ltd.
Condensed interim consolidated statements of cash flows
For the nine months ended August 31, 2018 and 2017
Expressed in Canadian dollars
(Unaudited)
Nine months ended August 31 | ||||||
2018 | 2017 | |||||
Cash provided by (used in): | ||||||
Operating Activities | ||||||
Net loss for the period | $ | (5,087,368 | ) | $ | (1,356,012 | ) |
Items not affecting cash: | ||||||
Accretion expense | - | 1,900 | ||||
Accrued interest expense (Note 8 & 12) | 96,227 | 34,203 | ||||
Accrued interest income (Note 6) | (35,426 | ) | (24,067 | ) | ||
Depreciation | - | 200 | ||||
Non-cash listing expense (Note 3) | 4,090,871 | - | ||||
Unrealized foreign exchange and other | 47,846 | - | ||||
Share-based payment | - | 576,000 | ||||
Share of (profit) loss on equity investment (Note 7) | 31,997 | (93,226 | ) | |||
(855,853 | ) | (861,002 | ) | |||
Changes in non-cash working capital: | ||||||
Accounts receivable | (91,248 | ) | - | |||
Sales tax and other receivables | 10,433 | (21,614 | ) | |||
Prepaid expenses | 165,823 | (109,417 | ) | |||
Accounts payable and accrued liabilities | 607,985 | 10,902 | ||||
Income tax payable | 45,018 | - | ||||
Net cash used in operating activities | (117,842 | ) | (981,131 | ) | ||
Investing Activities | ||||||
Cash acquired on Majesco acquisition (Note 5) | 13,770 | - | ||||
Cash acquired from reverse acquisition (Note 3) | 596,039 | - | ||||
Cash acquired prior to reverse acquisition (Note 3) | 124,561 | - | ||||
Investment in film | (23,461 | ) | (149,595 | ) | ||
Investment in other assets | (56,506 | ) | - | |||
Loan receivable | - | (250,000 | ) | |||
Loan receivable repaid | - | 11,448 | ||||
Cash generated (used) in investing activities | 654,403 | (388,147 | ) | |||
Financing Activities | ||||||
Loan proceeds (Note 8) | 140,000 | 2,000 | ||||
Loan repayments (Note 8) | (7,500 | ) | (1,756,831 | ) | ||
Loan proceeds from related parties | 132,901 | - | ||||
Loan repayments to related parties | (67,029 | ) | - | |||
Interest paid on loans | - | (158,475 | ) | |||
Shares issued for cash | 69,181 | 253,000 | ||||
Repayment of contingent consideration | (132,590 | ) | - | |||
Shares issuance costs | (23,200 | ) | - | |||
Commitment to issue shares | 4,000 | 676,338 | ||||
Cash generated (used) by financing activities | 115,763 | (983,968 | ) | |||
Net increase (decrease) in cash | 652,324 | (2,353,246 | ) | |||
Cash, beginning of period | 54,307 | 2,500,721 | ||||
Cash, including restricted cash, end of period | $ | 706,631 | $ | 147,475 | ||
SUPPLEMENTAL CASH DISCLOSURES | ||||||
Interest paid | $ | - | $ | 158,475 | ||
Interest received | $ | 3,963 | $ | - | ||
Items excluded from investing and financing activities: | ||||||
Contingent consideration (Note 5) | $ | 1,245,000 | $ | - | ||
Shares issued for non-cash consideration (Note 5) | $ | 415,000 | $ | - |
The accompanying notes form an integral part of these condensed interim consolidated financial statements.
Liquid Media Group Ltd.
Condensedinterimconsolidatedstatements ofchanges in equity(deficiency)
As at August 31, 2018 and 2017
Expressed in Canadian dollars, except number of shares
(Unaudited)
Accumulated | |||||||||||||||||||||||||||||||||
Additional | Commitment | Other | Attributable | Non- | |||||||||||||||||||||||||||||
Paid Up | to Issue | Contributed | Comprehensive | to company | controlling | ||||||||||||||||||||||||||||
Shares | Amount | Capital | Shares | Rights | Surplus | Income | Deficit | shareholders | interest | Total | |||||||||||||||||||||||
Balance, December 1, 2016 | 9,226,184 | $ | 1,081,000 | $ | - | $ | - | $ | - | $ | 14,397 | $ | - | $ | (1,532,952 | ) | $ | (437,555 | ) | $ | - | $ | (437,555 | ) | |||||||||
Shares issued for cash | 1,037,915 | 622,750 | - | - | - | - | - | - | 622,750 | - | 622,750 | ||||||||||||||||||||||
Shares issued to settle debt | 114,269 | 69,100 | - | - | - | - | - | - | 69,100 | - | 69,100 | ||||||||||||||||||||||
Shares subscription received | - | - | - | 550,338 | - | - | - | - | 550,338 | - | 550,338 | ||||||||||||||||||||||
Rights | - | - | - | - | 126,000 | - | - | - | 126,000 | - | 126,000 | ||||||||||||||||||||||
Share-based compensation | - | - | - | - | - | 576,000 | - | - | 576,000 | - | 576,000 | ||||||||||||||||||||||
Loss for the period | - | - | - | - | - | - | - | (1,356,012 | ) | (1,356,012 | ) | - | (1,356,012 | ) | |||||||||||||||||||
Balance, August 31, 2017 | 10,378,368 | $ | 1,772,850 | $ | - | $ | 550,338 | $ | 126,000 | $ | 590,397 | $ | - | $ | (2,888,964 | ) | $ | 150,621 | $ | - | $ | 150,621 | |||||||||||
Balance, December 1, 2017 | 10,888,572 | $ | 2,364,400 | $ | - | $ | 168,550 | $ | - | $ | 1,440,316 | $ | - | $ | (4,106,683 | ) | $ | (133,417 | ) | $ | - | $ | (133,417 | ) | |||||||||
Shares issued pursuant to acquisition agreement | 333,333 | 415,000 | - | - | - | - | - | - | 415,000 | - | 415,000 | ||||||||||||||||||||||
Non-controlling interest acquired | - | - | - | - | - | - | - | - | - | (3,446 | ) | (3,446 | ) | ||||||||||||||||||||
Opening balance of Leading Brands Inc. | 2,802,412 | 31,305,247 | 19,455,359 | - | - | - | - | (50,517,540 | ) | 243,066 | - | 243,066 | |||||||||||||||||||||
Eliminate capital stock of Liquid Media (Canada) Ltd. | (11,221,905 | ) | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||
Eliminate Leading Brands paid in capital and deficit | - | (31,305,247 | ) | (19,455,359 | ) | - | - | - | - | 50,517,540 | (243,066 | ) | - | (243,066 | ) | ||||||||||||||||||
Issuance of shares to former shareholders of Liquid Canada | 6,442,486 | 4,277,319 | - | - | - | 56,617 | - | - | 4,333,936 | - | 4,333,936 | ||||||||||||||||||||||
Share issuance costs | - | (23,200 | ) | - | - | - | - | - | - | (23,200 | ) | - | (23,200 | ) | |||||||||||||||||||
Warrants exercised for cash | 100,000 | 65,181 | - | - | - | - | - | - | 65,181 | - | 65,181 | ||||||||||||||||||||||
Warrants exercised for shares to be issued | - | - | - | 4,000 | - | - | - | - | 4,000 | - | 4,000 | ||||||||||||||||||||||
Exchange on translation | - | - | - | - | - | - | (783 | ) | - | (783 | ) | - | (783 | ) | |||||||||||||||||||
Loss for the period | - | - | - | - | - | - | - | (5,149,047 | ) | (5,149,047 | ) | 61,679 | (5,087,368 | ) | |||||||||||||||||||
Balance, August 31, 2018 | 9,344,898 | $ | 7,098,700 | $ | - | $ | 172,550 | $ | - | $ | 1,496,933 | $ | (783 | ) | $ | (9,255,730 | ) | $ | (488,330 | ) | $ | 58,233 | $ | (430,097 | ) |
Theaccompanying notes form anintegral part of thesecondensed interimconsolidatedfinancialstatements.
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
1. DESCRIPTION OF BUSINESS
Liquid Media Group Ltd. (“Liquid” or the “Company”), formerly Leading Brands Inc. (“LBIX”), is the parent company of Liquid Media Group (Canada) Ltd. (“Liquid Canada”). The Company is a media and entertainment company connecting mature production companies into a vertically integrated global studio, producing content for all platforms including film, TV, gaming and virtual reality. The head office of the Company is Suite 1000 – 409 Granville Street, Vancouver, British Columbia, V6C 1T2. The Company’s shares trade on the Nasdaq Stock Market (“Nasdaq”) under the trading symbol “YVR”. Details of the Company’s subsidiaries at the end of the reporting period are as follows:
Incorporation | Percentage owned | Functional Currency | |
Liquid Media Group (Canada) Ltd. | Canada | 100% | Canadian |
Household Pests Holdings, Inc. | USA | 50% | US |
Majesco Entertainment Company | USA | 51% | US |
On August 9, 2018, the Company announced the successful closing of the proposed business combination with Leading Brands Inc. (“LBIX”) 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, the Company had 9,244,898 common shares issued and outstanding, including 6,442,486 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 0.5741 of LBIX for 1 share of Liquid Canada (“Conversion Rate”). For accounting purposes, Liquid Canada is considered the acquirer and the Company, the acquiree. Accordingly, the condensed interim consolidated financial statements are in the name of Liquid Media Group Ltd; however, they are a continuation of the financial statements of Liquid Canada. The financial statements of the Company will be prepared in accordance with International Financial Reporting Standards (“IFRS”) (Note 2a). The financial statements of LBIX were formerly prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). Additional information on the transaction is disclosed in Note 3.
2. BASIS OF PREPARATION
(a) Statement of compliance
These unaudited condensed interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34,Interim Financial Reportingas issued by the International Accounting Standards Board ("IASB"). Accordingly, certain disclosures included in annual financial statements prepared in accordance with International Financial Reporting Standards as issued by the IASB have been condensed or omitted. These unaudited condensed interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended November 30, 2017. The
The accounting policies applied in the preparation of these unaudited condensed interim consolidated financial statements are consistent with those applied and disclosed in the Company’s audited consolidated financial statements for the year ended November 30, 2017. The Company’s interim results are not necessarily indicative of its results for a full year. All amounts are expressed in Canadian dollars, unless otherwise noted.
These condensed interim consolidated financial statements were reviewed by the Audit Committee and approved and authorized for issue by the Board of Directors on October 15, 2018.
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
(b) Going concern
These condensed interim 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 August 31, 2018, the Company has generated losses since inception and has an accumulated deficit of $9,255,730. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing. Management is of the opinion that sufficient working capital will be obtained from external financing to meet the Company’s liabilities and commitments as they become due, although there is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company. These condensed interim consolidated financial statements do not reflect any adjustments that may be necessary if the Company is unable to continue as a going concern. These conditions indicate the existence of a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern.
(c) Critical accounting judgements, estimates and assumptions
The Company’s Management makes judgements in the process of applying the Company’s accounting policies in the preparation of its condensed interim consolidated financial statements. In addition, the preparation of the financial data requires that the Company’s Management make assumptions and estimates of effects of uncertain future events on the carrying amounts of the Company’s assets and liabilities, as well as expenses at the end of the reporting period. The estimation process is inherently uncertain, therefore future outcomes could differ from present estimates and assumptions, potentially having a material effect on the Company’s future results and disclosures. The critical judgements and estimates applied in the preparation of these condensed interim consolidated financial statements are consistent with those applied and disclosed in the audited consolidated financial statements for the year ended November 30, 2017.
These condensed interim consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The results of the subsidiaries will continue to be included in the condensed interim consolidated financial statements of the Company until the date the Company’s control over the subsidiaries ceases. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities.
(d) Comparative information
Certain comparative information has been reclassified to conform to the current year’s presentation. It was determined that the revised presentation provides more relevant information to users of the Company’s financial statements.
Within the condensed interim consolidated statements of financial position, the following comparative presentation changes were adopted:
• | The accrued interest receivable line item is now included in the loans receivable line item (previously separately presented as “Accrued Interest Receivable”); and |
• | The loans payable line item now includes accrued interest payable for the loan’s payable to non-related lenders of the Company (accrued interest payable to non-related lenders was previously presented in “Accounts Payable and Accrued Liabilities”). |
Within the condensed interim consolidated statements of comprehensive loss, the following comparative presentation changes were adopted:
• | The advertising expenses line item is now included within the “Travel and Promotion” line item (previously presented as “Advertising”); |
• | The accretion expenses line item is now included within the “Interest Expense” line item (previously presented as “Accretion Expense”); |
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
• | The portion of bank charges within the interest and bank charges line item is now included within the “Other General and Administrative Expenses” line item (previously presented within “Interest and Bank Charges”); |
• | The portion of the internal accounting fees (i.e. financial statement preparation and administrative bookkeeping) within the professional fees line item is now included within the “Other General and Administrative Expenses” line item (previously presented within “Professional Fees”); |
• | The rent expenses line item is now included within the “Other General and Administrative Expenses” line item (previously presented as “Rent”); |
• | The website expenses line item is now included within the “Other General and Administrative Expenses” line item (previously presented as “Website”); |
• | The shareholder information and transfer agent and filing fees line items are now included within the “Investor Relations, Filing and Compliance fees” line item (previously separately presented as “Shareholder Information” and “Transfer Agent and Filing Fees”, respectively): and |
• | The gain on settlement of accounts payable line item is now included within the “Other General and Administrative Expenses” line item (previously presented as “Gain on Settlement of Accounts Payable”). |
3. REVERSE ACQUISITION
As described in Note 1, on August 9, 2018, pursuant to an Arrangement between LBIX and Liquid Canada, LBIX acquired all of the issued and outstanding shares of Liquid Canada. The former shareholders of Liquid Canada received an aggregate of 6,442,486 common shares of LBIX for all of the outstanding common shares of Liquid Canada.
The transaction constitutes a reverse acquisition of LBIX and has been accounted for as a reverse acquisition transaction in accordance with the guidance provided under IFRS 2,Share-based Payment and IFRS 3,Business Combinations. As LBIX did not qualify as a business according to the definition in IFRS 3,Business Combination, this reverse acquisition does 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 LBIX and its public listing. Accordingly, the transaction has been accounted for at the fair value of the equity instruments granted by the shareholders of Liquid Canada to the shareholders and option holders of LBIX. The sum of the fair value of the consideration paid (based on the fair value of the LBIX shares just prior to the reverse acquisition) less the LBIX net assets acquired, has been recognized as a listing expense in the condensed interim consolidated statements of comprehensive loss for the period ended August 31, 2018.
For accounting purposes, Liquid Canada was treated as the accounting parent company (legal subsidiary) and LBIX has been treated as the accounting subsidiary (legal parent) in these condensed interim consolidated financial statements. As Liquid Canada was deemed to be the acquirer for accounting purposes, its assets, liabilities and operations since incorporation are included in these condensed interim consolidated financial statements at their historical carrying value. The results of operations of LBIX are included in these condensed interim consolidated financial statements from the date of the reverse acquisition of August 9, 2018.
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Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
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.
Cost of acquisition: | |||
Fair value of 2,802,412 shares at $1.17 USD X 1.305 | $ | 4,277,319 | |
Transaction costs – non-cash | 56,617 | ||
$ | 4,333,936 | ||
Allocated as follows: | |||
Cash | $ | 4,769 | |
Restricted cash | 574,510 | ||
Prepaid expenses | 37,132 | ||
Receivables | 124,561 | ||
Liabilities | (497,907 | ) | |
243,065 | |||
Allocated to listing expense | 4,090,871 | ||
$ | 4,333,963 |
Within the liabilities assumed as part of the Arrangement, the Company has $250,000 of liabilities attributable to discontinued operations as at August 31, 2018 as part of the disposal of LBIX’s legacy beverage assets.
4. RESTRICTED CASH
As at August 31, 2018, the Company held $574,510 in restricted cash (November 30, 2017: $nil). Restricted cash is held by the Company’s legal counsel in a trust account pursuant to the terms of an escrow agreement arising from the disposition of LBIX’s legacy beverage business. These funds are held aside for the purpose of existing claims, excluded liabilities and financial lease liabilities during the escrow period as specified in the terms of the sale agreement in relation to the Company’s legacy beverage business.
5. ACQUISITION OF MAJESCO ENTERTAINMENT COMPANY
On November 22, 2017, the Company entered into a share purchase agreement, and on December 12, 2017 entered into an amended and restated share purchase agreement to acquire 51% of the issued and outstanding shares of Majesco Entertainment Company, a U.S. corporation. As consideration, the Company will issue common shares of the Company with a value of US$500,000 based on a deemed price of US$1.50 per share and cash consideration of US$1,000,000 payable during the first four fiscal quarters following the fiscal quarter in which the closing occurs each, a (“Qualifying Quarter”). The cash consideration means an amount equal to two times the net revenue received by the Company. The cash consideration payable for each of the quarter shall not exceed US$250,000 and to the extent the cash consideration for any such Qualifying Quarter, other than the final Qualifying Quarter, exceeds such amount, the overage shall be credited to the cash consideration payable in the following Qualifying Quarter. On January 9, 2018, the Company issued 333,333 common shares. During the period ended August 31, 2018, the Company made a $100,000 USD payment on relation to the contingent consideration balance.
The acquisition has been 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 has been recorded as goodwill.
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
Total | |||
Cash | $ | 13,770 | |
Goodwill | 1,964,587 | ||
Accounts payable and other payables | (17,357 | ) | |
Deferred income taxes | (301,000 | ) | |
Net assets acquired | $ | 1,660,000 |
Consideration given | Total | ||
Common shares | $ | 415,000 | |
Estimated cash contingent payment on acquisition | 1,245,000 | ||
Consideration provided | $ | 1,660,000 |
6. LOANS RECEIVABLE
On July 21, 2016, the Company entered into a revolving facility credit agreement with Waterproof Studios Inc. (“Waterproof”). The Company extended to Waterproof an initial commitment amount of $100,000 which Waterproof can utilize during the year following the date of the agreement. The revolving facility credit is unsecured, bears interest at 8% per annum and had a maturity date of 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. Interest is payable on the first business day of each month. As at August 31, 2018, the Company had accrued interest receivable of $2,494 (November 30, 2017: $7,168).
On December 21, 2016, the Company entered into a subordinated convertible note (“Convertible Note”) with Participant Games Inc. (“Participant Games”) in the amount of $150,000. The Convertible Note is unsecured, bears interest at 15% per annum and is payable on demand on and after the first anniversary of the date of issuance. Participant Games may prepay this Convertible Note at any time, without penalty. The Company can convert, at any time prior to the maturity date, the principal sum into common shares of Participant Games at the conversion price equal to 80% of the current fair market value equivalent to a 20% discount subject to a minimum ownership stake of 10% of Participant Games. As at August 31, 2018, the Company had accrued interest receivable of $42,517 (November 30, 2017: $22,135).
On April 21, 2017, the Company entered into a subordinated convertible note with Installment Entertainment Inc. (“Installment Entertainment”) in the amount of $100,000. The convertible note is unsecured, bears interest at 15% per annum and is payable on demand on an after the first anniversary of the date of issuance. Installment Entertainment may prepay this convertible note at any time, without penalty. The Company can convert, at any time prior to the maturity date, the principal sum into common shares of Installment Entertainment with a conversion price equal to 80% of the current fair market value price equivalent to a 20% discount subject to a minimum ownership stake of 5% of Installment Entertainment. As at August 31, 2018, the Company had accrued interest receivable of $22,306 (November 30, 2017: $9,357).
As at August 31, 2018, loans receivable including accrued interest are as follows:
Participant | Installment | |||||||||||
Waterproof | Games | Entertainment | Total | |||||||||
December 1, 2017, including accrued interest | $ | 100,399 | $ | 172,135 | $ | 109,357 | $ | 381,891 | ||||
Accrued interest revenue | 6,058 | 20,382 | 12,949 | 39,389 | ||||||||
Repayments received | (3,963 | ) | - | - | (3,963 | ) | ||||||
Loans receivable, August 31, 2018 | $ | 102,494 | $ | 192,517 | $ | 122,306 | $ | 417,317 |
Interest revenue in relation to the loans above, was $39,389 and $24,067 for the nine months ended August 31, 2018 and 2017, respectively. Repayments received in relation to the loans above was $3,963 and $nil for the nine months ended August 31, 2018 and 2017.
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
7. INVESTMENT IN ASSOCIATE
On April 15, 2015, the Company completed a new option agreement with Waterproof and acquired 49% of the issued and outstanding shares of Waterproof through an equity financing of $475,000 and the issuance of 500,001 common shares of the Company with a fair value of $125,001. The Company made the following:
- Paid Waterproof a $25,000 (2014-paid) non-refundable deposit and issued 500,001 common shares (2015-issued) at a fair value of $125,001;
- Made a cash payment of $250,000 (2014-paid) on or before the later of 45 days from the date of the signing or August 18, 2014; and
- Made a cash payment of $225,000 on or before the closing date of the arrangement (2015-paid).
The Company also issued 200,000 common shares as a finder’s fee with a fair value of $50,000 during the year ended November 30, 2015. As the Company owns 49% of Waterproof, the Company accounts for its investment under the equity method.
The following table is a reconciliation of the investment in Waterproof:
August 31, 2018 | November 30, 2017 | |||||
Balance, beginning of period | $ | 459,273 | $ | 395,723 | ||
Share of income (loss) of equity investment | (31,997 | ) | 63,550 | |||
$ | 427,276 | $ | 459,273 |
The following table summarized Waterproof’s statements of financial position.
August 31, 2018 | November 30, 2017 | |||||
Current assets | $ | 1,503,271 | $ | 752,344 | ||
Non-current assets | 305,997 | 405,211 | ||||
Current liabilities | (1,453,023 | ) | (838,322 | ) | ||
Non-current liabilities | (39,610 | ) | (73,509 | ) | ||
$ | 316,635 | $ | 245,724 |
The following table summarizes Waterproof’s revenue, expenses and net (losses) income.
August 31, 2018 | August 31, 2017 | |||||
Revenue | $ | 2,528,342 | $ | 1,848,543 | ||
Cost of sales | (2,176,187 | ) | (1,202,859 | ) | ||
Expenses | (417,455 | ) | (455,427 | ) | ||
$ | (65,300 | ) | $ | 190,527 |
The Company has recorded a net loss of $31,997 (August 31, 2017: $93,226 net income) for the nine months ended August 31, 2018 in relation to its investment in Waterproof.
8. LOANS PAYABLE
On November 9, 2016, the Company secured a credit agreement with a lender in the amount of $2,500,000 “Working Capital Facility”. The Working Capital Facility will bear interest at an annual rate of 14.4%, is secured by a general security agreement against certain assets of the Company and has a term of two years from the date of initial funding. As at August 31, 2018, the Company had borrowed $750,000 (November 30, 2017: $750,000) of the Working Capital Facility with an accrued interest payable of $154,356 (November 30, 2017: $73,282).
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
During the period ended August 31, 2018, the Company secured $10,000 of additional loans from a lender and repaid $7,500 of this loan which was non-interest bearing, unsecured and payable on demand with a balance owing of $4,500 as at August 31, 2018 (November 30, 2017: $2,000).
On August 15, 2018, the Company secured a loan of $130,000 for short-term working capital purposes. The loan does not have a maturity date and bears interest at 14.4% per annum. The lender has the ability to convert the loan at the price of the last Company debt conversion.
The following is a continuity of the Company’s loans as at August 31, 2018:
Working | ||||||||||||
Capital Facility | Loan | Loan | Total | |||||||||
December 1, 2017 (including accrued interest) | $ | 823,282 | $ | 2,000 | $ | - | $ | 825,282 | ||||
Gross proceeds | - | 10,000 | 130,000 | 140,000 | ||||||||
Interest accrued | 81,074 | - | 821 | 81,895 | ||||||||
Repayments | - | (7,500 | ) | - | (7,500 | ) | ||||||
Current portion: loans payable,August 31, 2018 | $ | 904,356 | $ | 4,500 | $ | 130,821 | $ | 1,039,677 |
During the nine months ended August 31, 2018, the Company accrued interest expense of $81,895 (August 31, 2017: $178,230) and accretion expenses of $Nil (August 31, 2017: $1,900) in connection with the loans payable.
9. SHARE CAPITAL
(a) Authorized
The Company has the following number of authorized common shares:
August 31, 2018 | |||
Common shares without par value | 500,000,000 |
The Company has the following number of authorized preferred shares:
August 31, 2018 | |
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 |
(b) Issued
On January 9, 2018, the Company issued 333,333 common shares fair valued at the date of issuance at $415,000 pursuant to the December 12, 2017 share purchase agreement (Note 5).
On August 9, 2018, a reverse acquisition transaction was completed whereby LBIX issued 6,442,486 post-consolidation common shares 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 whereby each warrant was coverted by 0.5741 when transferred to the Company.
As at August 31, 2018, there were no preferred shares outstanding.
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
(c) Agents’ warrants
Details of agent’s warrants activities for the for the nine months ended August 31, 2018 are as follows:
Outstanding Options | Weighted Average Exercise Price | |||||
Agents warrants, November 30, 2017 | 39,840 | $ | 0.25 | |||
Conversion ratio – Plan of arrangement | 0.5741 | N/A | ||||
Revised balance | 22,872 | $ | 0.25 | |||
Exercised | (9,185 | ) | 0.25 | |||
Options exercisable, August 31, 2018 | 13,687 | $ | 0.25 |
As at August 31, 2018, the Company had 13,687 Agent’s warrants exercisable into one common share of the Company for $0.25 per share until August 18, 2019 with an expected weighted average remaining contractual life of 0.96 years.
(d) Share purchase warrants
Details of share purchase warrants activities for the nine months ended August 31, 2018 are as follows:
Outstanding Warrants | Weighted Average Exercise Price | |||||
Share purchase warrants, November 30, 2017 | 2,795,207 | $ | 0.87 | |||
Conversion ratio – Plan of arrangement | 0.5741 | N/A | ||||
Revised balance | 1,604,728 | 0.87 | ||||
Exercised | (100,000 | ) | 0.60 | |||
Warrants exercisable, August 31, 2018 | 1,504,728 | $ | 0.88 |
As at August 31, 2018, the Company had the following share purchase warrants outstanding.
Number of Warrants | Exercise Price | Expiry Date |
560,215 | $ 0.60 | August 30, 2020 |
660,215 | $ 1.20 | August 30, 2020 |
163,259 | $ 0.75 | March 14, 2022 |
121,039 | $ 0.75 | April 6, 2022 |
1,504,728 |
As at August 31, 2018, the Company had 1,504,728 share purchase warrants outstanding with an expected weighted average remaining contractual life of 2.29 years. During the period ended August 31, 2018, 100,000 warrants were exercised for 100,000 common shares of the Company for cash proceeds of $65,181 ($50,000 USD).
(e) Stock Options
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. The Company does not have a formal stock option plan.
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
A summary of the Company’s stock option activity is as follows:
Outstanding Options | Weighted Average Exercise Price | |||||
Balance outstanding, November 30, 2017 | 1,100,000 | $ | 0.75 | |||
Cancelled – Plan of arrangement | (1,100,000 | ) | 0.75 | |||
Conversion of LBIX options | 345,000 | 2.45 | ||||
Balance outstanding and exercisable, August 31, 2018 | 345,000 | $ | 2.45 |
As at August 31, 2018, the Company had 345,000 stock options exercisable at $2.45 per share until August 9, 2019 with an expected weighted average remaining contractual life of 0.94 years.
(f) Commitment to issue shares
As at August 31, 2018, the Company had received $172,550 (November 30, 2017: $168,550) as a commitment to issue shares and warrants.
10. FINANCIAL INSTRUMENTS
The Company is exposed to varying degrees to a variety of financial instrument related risks:
a) Fair value
The carrying value of cash, restricted cash, accounts receivable, sales tax and other receivables, due to related parties, loans receivable, liabilities attributable to discontinued operations, accounts payable and accrued liabilities, contingent consideration and loans payable approximated their fair value because of the relatively short-term nature of these instruments.
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:
- 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– Inputs that are not based on observable market data.
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 largely held in large by Canadian financial institutions. The Company maintains cash deposits with Schedule A 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 August 31, 2018 and November 30, 2017 is the carrying value of the loans receivable and accounts receivable. The Company has not experienced any significant credit losses and believes it is not exposed to any significant credit risk.
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
c) 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. The Company intends to meet its current obligations in the following year with funds to be raised through private placements, shares for debt, loans and related party loans.
d) 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 at August 31, 2018, the Company had the following amounts denominated in US dollars: current assets totaling $205,294 USD (November 30, 2017: $Nil), accounts payable of $262,338 USD (November 30, 2017: $54,163 USD), due to related parties of $38,645 USD (November 30, 2017: $Nil) and contingent consideration of $900,000 USD (November 30, 2017: $Nil). These factors expose the Company to foreign currency exchange rate risk, which could have an adverse effect on the profitability of the Company. A 10% change in the exchange rate would change other comprehensive income/loss by approximately $129,000 CAD. At this time, 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.
11. CAPITAL RISK MANAGEMENT
The Company defines its capital as 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. The Company is not subject to externally imposed capital requirements.
12. 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.
The aggregate value of transactions relating to key management personnel were as follows:
August 31, 2018 | August 31, 2017 | |||||
Consulting fees paid or accrued to CEO | $ | 37,758 | $ | 127,240 | ||
Consulting fees paid or accrued to CFO | 90,000 | 85,000 | ||||
Consulting fees paid or accrued to CTO | 120,000 | - | ||||
Consulting fees paid or accrued to directors | 92,000 | 82,500 | ||||
Share-based compensation | - | 576,000 | ||||
Interest expense paid or accrued to directors | 16,352 | 5,063 | ||||
$ | 356,110 | $ | 875,803 |
Accounts payable and accrued liabilities at August 31, 2018 includes $552,856 (November 30, 2017: $217,644) owing to directors or officers of the Company or to companies controlled by common directors for unpaid consulting fees and/or expense reimbursements. Also included in accounts payable and accrued liabilities at August 31, 2018 are $38,922 (November 30, 2017: $22,570) in accrued interest payable to directors of the Company.
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
As at August 31, 2018, the loan due from Waterproof, which includes accrued interest receivable was $102,494 (November 30, 2017: $100,399).
Included in due to related parties as at August 31, 2018, was $351,960 (November 30, 2017: $291,369) owing to two directors of the Company of which $77,750 was non-interest bearing and payable on demand and the balance of $223,674 bears interest at 8% per annum and payable on demand. As at August 31, 2018, the Company accrued $14,331 (November 30, 2017: $4,084) in accrued interest payable which is included in accounts payable and accrued liabilities. Also included in due to related parties is $50,536 owed to Zift Interactive LLC a company that controls 49% of Majesco Entertainment Company. The amount due is non-interest bearing and have no fixed term of repayment.
These expenditures were measured by amounts agreed upon by the transacting parties.
13. COMMITMENTS AND PROPOSED TRANSACTIONS
(a) Financial Obligations
The following table summarizes the remaining contractual and expected maturities of the Company's financial obligations as at August 31, 2018:
August 31, | November | ||||||||||||||
Within 1 year | 2 to 5 years | Over 5 years | 2018 | 30, 2017 | |||||||||||
Accounts payable and accrued liabilities | $ | 1,324,658 | $ | - | $ | - | $ | 1,324,658 | $ | 421,501 | |||||
Income tax payable | 45,018 | - | - | 45,018 | - | ||||||||||
Due to related parties | 351,960 | - | - | 351,960 | 291,369 | ||||||||||
Liabilities attributable to discontinued operations | 250,000 | - | - | 250,000 | - | ||||||||||
Contingent consideration | 1,174,950 | - | - | 1,174,950 | - | ||||||||||
Loan repayments | 1,039,677 | - | - | 1,039,677 | 825,282 | ||||||||||
Minimum rental and lease payments (1) | 82,049 | - | - | 82,049 | - | ||||||||||
$ | 4,268,312 | $ | - | $ | - | $ | 4,268,312 | $ | 1,538,152 |
(1) | The Company is committed to an operating lease pertaining to an office space. On September 15, 2017 in connection with LBIX’s sale of its former subsidiaries, the Company entered into a series of share purchase and escrow agreements whereby the Company deposited $600,000 in escrow as security for potential financial lease liabilities (as well as excluded liabilities and existing claims) relating to the office lease between Leading Brands of Canada, Inc. and the landlord. The office lease is currently being subleased and has not resulted in additional payments from the Company since the sale of the Company’s subsidiaries. The Company expects that the remaining exposure of the office lease commitment is until April 2019. |
(b) Household Pests
The film’s budget is estimated at approximately $33,000,000 USD and the Company’s share of the budget will be approximately $10,000,000 depending on the amount of an additional investor. The Company will receive a share in proportion to their equity investment to the overall budget from 50% of 100% of adjusted gross receipts derived from the exploitation of the film in all media worldwide, which shall be payable on a pro-rata and pari passu basis with all other equity investors.
In addition to the foregoing and in relation to producer services on the film, the Company will receive an additional profit participation of 15% of adjusted gross receipts derived from the exploitation of the film in all media worldwide. This agreement is subject to securing the financing for the film’s budget and completion of a long-form agreement.
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
As at August 31, 2018, the Company has incurred $205,334 (November 30, 2017: $181,873) in pre-production cost.
On August 31, 2017, the Company through its subsidiary Household Pests Holdings, Inc. 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 $625,000 USD (the “Purchase Price”) subject to terms and conditions.
Option period shall commence on August 31, 2017 until September 14, 2017 (subject to payment of the First Extension Option Fee) and may be extended until September 1, 2018 subject to payment of the second extension Option Fee (the “Option Period”).
The Company shall pay the following sums in consideration of the Option:
- $10 USD for the initial period (paid) to the owner and $50,000 USD to the owner of the Screenplay (paid) which shall be applicable against the Purchase Price;
- $10 USD for the extension period (paid) to the owner and $50,000 USD to the owner of the Screenplay (paid) which shall be applicable against the Purchase Price;
The Company may exercise the Option at any time during the Option Period by the earlier of providing the Owner with written notice thereof and by commencing principal photography of the first motion picture based on the Rights, and by paying the Owner the Purchase Price less the option payments.
(c) Hard Apple formerly known as Blue Eyes
On April 21, 2017, the Company entered into an option and purchase agreement (the “Agreement”) with Jerome Charyn (the “Owner”) with respects to the option to acquire all of the rights in and to and derived from a book entitled “Blue Eyes” (the “Book”) and a bible for a TV series based on the Book (the “Bible”), which Book and the Bible, together with all plots, themes, titles, subtitles, characters, characterizations, character names, dialogue, descriptions, translations, sequences, and other versions thereof, including all copyrights in all of the foregoing, are hereinafter collectively referred to as the “Property” for a sum of 2.5% of the amount of the final budget for the production costs between $75,000 USD to $250,000 USD less the first option payment subject to conditions.
The Company paid $12,477 (US$10,000) upon execution of the agreement (the “First Option Payment”) which grants an option period of 18 months (the “First Option Term”) from the date of the Agreement.
The Company can pay $3,000 USD to extend the option period for another 12 months commencing on the first day after the last day of the First Option Term. The Company may exercise the option at any time during the option period by the earlier of providing the Owner with written notice. In addition, the Owner is entitled to receive contingent compensation in the amount equal to 2.5% of the adjusted gross receipts received by the Company and certain royalties if it to a television series or television movie series.
14. SUBSEQUENT EVENTS
As part of efforts to satisfy the Nasdaq initial listing criteria, on September 13, 2018, the Company announced entering into an engagement letter (the “Engagement Letter”) with Mackie Research Capital Corp. (the “Agent”) to act as lead Agent and sole bookrunner, on a best-efforts basis, in connection with a proposed private placement (the “Offering”) of a minimum of $4,000,000 USD and up to $6,500,000 USD through the issuance of subscription receipts (“Subscription Receipts”) of the Company. Under the terms of the Engagement Letter, each Subscription Receipt issued in connection with the Offering will be automatically exchanged, into one common share of the Company upon the completion of certain escrow release conditions.
On September 20, 2018, the Nasdaq informed the Company that it had granted the Company’s request for the continued listing of its shares on Nasdaq through October 15, 2018 provided that the Company can demonstrate compliance with all applicable initial listing criteria, including the $4.00 bid price, $5 million stockholders’ equity and $15 million market value of publicly held shares requirements.
Liquid Media Group Ltd. |
Notes to the condensed interim consolidated financial statements |
For the three and nine months ended August 31, 2018 |
Expressed in Canadian dollars, except number of shares |
(Unaudited) |
On September 25, 2018, the Company entered into an agreement to acquire all rights and interest in 65 video game titles (the “Acquisition Agreement”) from Throwback Entertainment Inc. (“Throwback”). Under the terms of the Acquisition Agreement, the Company will issue 670,000 restricted share units at US$1.49 per share, giving the deal a valuation of approximately US$1 million.
On October 12, 2018, the Company announced that it had entered into several agreements to settle a total of $756,449 USD of Company debt (the “YVR Debt”) through the issuance of 711,103 common shares of the Company at an average price of $1.06 USD per share (the “Debt Settlement”). The YVR Debt included accrued management fees owing to companies controlled by Directors of the Company, fees owed to consultants, and loans to YVR from various shareholders, including a Director of the Company.
On October 12, 2018, the Company also announced that it had entered into the following investment and license acquisition agreements:
SeriesOne Holdings LLC(“S1”): The Company will issue approximately 1,900,000 restricted share units to S1 at an average price of $0.895 USD per share unit (as calculated before the Reverse Stock Split as defined below) in exchange for an initial 36-month platform license to operate a S1 crowd-funding portal solution under the Company brand. In addition, the Company acquired an exclusive license across all S1’s crowd-funding platforms for the entertainment and gaming industries for an initial term of 12-months.
World of Wireless UK Limited(“WOW”): The Company will issue approximately 1,500,000 restricted share units to WOW at an average price of $0.90 USD per share unit (as calculated before the Reverse Stock Split as defined below) in exchange for the development of a complete Company-branded in-game payment and rewards system for Company video games. The deliverable from WOW will include supporting mobile applications, loyalty and reward subsystems, and global payment network interfaces. As part of the rewards system, WOW will develop a Liquid Token system which will enable Company consumers to exchange Liquid Tokens via mobile accounts, or use them to make in-game purchases or upgrades.
Lightning Man Media LLC(“Lightning Man”):The Company will issue approximately 600,000 restricted share units to Lightning Man at an average price of $0.83 USD per share unit (as calculated before the Reverse Stock Split as defined below) as consideration for a license to market and distribute 6 video games owned by Lightning Man, including: Bunny Boom, Bar Crasher, Nyctophobia, Resurgence, Clowns and Machetes, and Piggy Pals. As part of the Lightning Man agreement, the Company has agreed to pay a total of $100,000 (in three tranches) to Lightning Man over a 6-month period for the rights to 2 future video game titles that will be jointly developed by YVR and Lightning Man.
Zift Interactive LLC (“Zift”): The Company will issue approximately 670,000 restricted share units at average price of $1.50 USD per share (as calculated before the Reverse Stock Split as defined below) in exchange for complete intellectual property rights to “Blowout” and “Blast Works” video game titles. The Company announced that it has plans to re-launch both titles to modern video game platforms and consoles.
On October 15, 2018, the Company effected a 1-for-5 reverse stock split (the “ReverseStock Split”) in furtherance of the Company’s compliance plan and to fulfill Nasdaq’s $4.00 per-share minimum bid price requirement. The closing bid price for the Company’s common shares closed at $0.84 on Nasdaq on Friday, October 12, 2018. The post-split price, which is equivalent to $4.20 per share, exceeds Nasdaq’s minimum required closing bid price of $4.00 per share. Following the reverse split, the new CUSIP number for the Company’s common stock will be 53634Q204.