UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of April 2022
Commission File Number:
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F ☒ Form 40-F ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐
Documents included as part of this Report
Exhibit No. | Description | |
99.1 | Condensed Interim Consolidated Financial Statements for the three months ended February 28, 2022 and, 2021 | |
99.2 | Management’s Discussion and Analysis for the three months ended February 28, 2022 | |
101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
LIQUID MEDIA GROUP LTD. | ||
By: | /s/ Ronald Thomson | |
Ronald Thomson Chief Executive Officer | ||
Dated: April 25, 2022 |
Exhibit 99.1
LIQUID MEDIA GROUP LTD.
Condensed Interim Consolidated Financial Statements
For the three months ended February 28, 2022 and, 2021
(Expressed in United States Dollars)
(Unaudited)
Liquid Media Group Ltd.
Table of Contents
(Expressed in United States Dollars - Unaudited)
Page 1 |
NOTICE OF NO AUDITOR REVIEW OF
CONDENSED INTERIM FINANCIAL STATEMENTS
Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the condensed interim consolidated financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
The accompanying unaudited condensed interim consolidated financial statements have been prepared by and are the responsibility of management.
The Company's independent auditor has not performed a review of these financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada for a review of condensed interim consolidated financial statements by an entity's auditor.
Page 2 |
Liquid Media Group Ltd.
Condensed Interim Consolidated Statements of Financial Position
(Expressed in United States Dollars - Unaudited)
Note | February 28, 2022 | November 30, 2021 | ||||||||
$ | $ | |||||||||
ASSETS | ||||||||||
Current assets | ||||||||||
Cash | ||||||||||
Receivables | 5,22 | |||||||||
Prepaids | ||||||||||
Acquisition advances | 28,29 | |||||||||
Total current assets | ||||||||||
Restricted cash | 7 | |||||||||
Investment in content | 10 | |||||||||
Equipment | 11 | |||||||||
Intangible assets | 12 | |||||||||
Right-of-use assets | 13 | |||||||||
Goodwill | 14 | |||||||||
Total assets | ||||||||||
LIABILITIES | ||||||||||
Current liabilities | ||||||||||
Accounts payable and accrued liabilities | 15,22 | |||||||||
Corporate income taxes payable | ||||||||||
Deferred revenue | 16 | |||||||||
Current portion of long-term debt | 19 | |||||||||
Current portion of lease liability | 13 | |||||||||
Total current liabilities | ||||||||||
Long-term debt | 19 | |||||||||
Lease liability | 13 | |||||||||
Deferred income taxes | 3 | |||||||||
Derivative liability | 3,4,20 | |||||||||
Liabilities | ||||||||||
SHAREHOLDERS' EQUITY | ||||||||||
Share capital | 20 | |||||||||
Reserves | 20 | |||||||||
Accumulated deficit | ( | ) | ( | ) | ||||||
Total Equity | ||||||||||
Total equity and liabilities |
Nature and continuance of operations (Note 1)
Contingencies (Note 26)
Proposed transactions (Note 28)
Subsequent events (Note 29)
Approved on behalf of the Board of Directors on April 21, 2022:
“Ronald Thomson” | “Joshua Jackson” | |
Director | Director |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Page 3 |
Liquid Media Group Ltd.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
(Expressed in United States Dollars - Unaudited)
Three months ended | ||||||||||||
February 28, | ||||||||||||
Note | 2022 | 2021 | ||||||||||
$ | $ | |||||||||||
Sales | 22 | |||||||||||
Cost of sales | 8,12,22 | |||||||||||
Gross profit (loss) | ( | ) | ||||||||||
Operating expenses | ||||||||||||
Accretion expense | 18,19 | |||||||||||
Amortization | 12,13 | |||||||||||
Consulting fees | ||||||||||||
Depreciation | 11 | |||||||||||
Foreign exchange (gain) loss | ( | ) | ||||||||||
Interest expense | 17,19,22 | |||||||||||
Investor relations, filing, and compliance fees | ||||||||||||
Management and directors salaries and fees | 22 | |||||||||||
Marketing | ||||||||||||
Other general and administrative expenses | 22 | |||||||||||
Professional fees | ||||||||||||
Research and development | ||||||||||||
Share-based compensation | 20,22 | |||||||||||
Salaries and benefits | 22 | |||||||||||
Total operating expenses | ||||||||||||
Loss before other income (expenses) | ( | ) | ( | ) | ||||||||
Interest income | 6,28,29 | |||||||||||
Royalty income | 22 | |||||||||||
Gain (loss) on derivative liability | 3,4,20 | ( | ) | |||||||||
Gain (loss) on settlement of debt | 15,17 | |||||||||||
Gain (loss) on disposal of equipment | 11 | |||||||||||
Unrealized gains on equity instruments | 9 | |||||||||||
Allowance for credit loss | 6 | ( | ) | |||||||||
Total other income (expenses) | ||||||||||||
Loss before income taxes | ( | ) | ( | ) | ||||||||
Deferred income tax recovery | ( | ) | ||||||||||
Income tax expense | ||||||||||||
Loss and comprehensive loss for the period | ( | ) | ( | ) | ||||||||
Basic and diluted loss per common share - Company | $ | ( | ) | $ | ( | ) | ||||||
Weighted average number of common shares outstanding |
The accompanying notes are an integral part of these condensed interim consolidated financial statements
Page 4 |
Liquid Media Group Ltd.
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in United States Dollars - Unaudited)
Three months ended | ||||||||
February 28, | ||||||||
2022 | 2021 | |||||||
$ | $ | |||||||
Cash flows provided by (used in) operating activities | ||||||||
Loss from continuing operations for the period | ( | ) | ( | ) | ||||
Items not affecting cash: | ||||||||
Accretion expense | ||||||||
Accrued interest income | ( | ) | ( | ) | ||||
Accrued interest expense | ||||||||
Allowance for credit loss | ||||||||
Amortization - intangibles | ||||||||
Amortization - licenses | ||||||||
Amortization - right-of-use asset | ||||||||
Depreciation | ||||||||
Change in value of derivatives | ( | ) | ||||||
Deferred income tax recovery | ( | ) | ||||||
Interest on lease liability | ||||||||
Gain on settlement of debt | ( | ) | ||||||
Gain on disposal of equipment | ( | ) | ||||||
Share-based compensation | ||||||||
Shares issued for services | ||||||||
Unrealized foreign exchange | ( | ) | ||||||
Unrealized gains on equity instruments | ( | ) | ||||||
Changes in non-cash working capital: | ||||||||
Receivables | ( | ) | ||||||
Prepaids | ( | ) | ||||||
Accounts payable and accrued liabilities | ||||||||
Deferred revenue | ||||||||
Cash flows from (used in) operating activities | ( | ) | ( | ) | ||||
Cash flows provided by (used in) investing activities | ||||||||
Cash acquired on purchase of iGEMS | ||||||||
Investment in content | ( | ) | ||||||
Advances for acquisitions | ( | ) | ||||||
Cash flows from (used in) investing activities | ( | ) | ||||||
Cash flows provided by (used in) financing activities | ||||||||
Long-term debt repayments | ( | ) | ||||||
Interest paid on loans | ( | ) | ||||||
Lease payments | ( | ) | ||||||
Warrants exercised and issued for cash | ||||||||
Cash flows from (used in) financing activities | ( | ) | ||||||
Effect of foreign exchange on cash | ||||||||
Change in cash during the period | ( | ) | ( | ) | ||||
Cash, beginning of period | ||||||||
Cash, end of period | ||||||||
Supplemental cash-flow disclosure | ||||||||
Interest received | ||||||||
Interest paid |
Supplemental disclosure with respect to cash flows (Note 25)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Page 5 |
Liquid Media Group Ltd.
Condensed Interim Consolidated Statements of Changes in Shareholders’ Equity
(Expressed in United States Dollars - Unaudited)
Shares | Amount | Commitment to Issue Shares | Reserves | Deficit | Total | |||||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||||||||||
Balance, November 30, 2020 | ( | ) | ||||||||||||||||||||||
Shares issued to settle debt | ||||||||||||||||||||||||
Shares issued for services | ||||||||||||||||||||||||
Warrants exercised for cash | ( | ) | ( | ) | ||||||||||||||||||||
Share-based compensation | - | |||||||||||||||||||||||
Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
Balance, February 28, 2021 | ( | ) | ||||||||||||||||||||||
Shares issued pursuant to acquisition of IndieFlix | ||||||||||||||||||||||||
Shares issued for cash | ||||||||||||||||||||||||
Shares issued to settle debt | ||||||||||||||||||||||||
Units issued for convertible debentures and related interest | ( | ) | ||||||||||||||||||||||
Shares issued for restricted share units | ( | ) | ||||||||||||||||||||||
Shares issued for cashless warrant exercise | ||||||||||||||||||||||||
Share issuance costs | - | ( | ) | ( | ) | |||||||||||||||||||
Warrants exercised for cash | ( | ) | ||||||||||||||||||||||
Options exercised for cash | ( | ) | ||||||||||||||||||||||
Share-based compensation | - | |||||||||||||||||||||||
Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
Balance, November 30, 2021 | ( | ) | ||||||||||||||||||||||
Shares issued pursuant to acquisition of iGEMS | ||||||||||||||||||||||||
Share-based compensation | - | |||||||||||||||||||||||
Loss for the period | - | ( | ) | ( | ) | |||||||||||||||||||
Balance, February 28, 2022 | ( | ) |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
Page 6 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
1. NATURE AND CONTINUANCE OF OPERATIONS
Liquid Media Group Ltd. (“Liquid” or the “Company”) is a business solutions company empowering independent film and TV content creators to package, finance, deliver and monetize their professional video intellectual property globally. The head office of the Company is 67 East 5th Avenue, Vancouver, BC, V5T 1G7 and the registered records office of the Company is Suite 400, 725 Granville Street, PO Box 10325, Vancouver, BC, V7Y 1G5. The Company’s common shares are listed on the Nasdaq Stock Market (“Nasdaq”) under the trading symbol “YVR”.
On September 22, 2021, the Company acquired 100% of the shares of IndieFlix Group, Inc. (“IndieFlix”). IndieFlix is a Delaware corporation that has a global ‘edutainment’ streaming service that creates, promotes, and supports social impact films. (Note 3).
On December 14, 2021, the Company acquired 100% of the shares of iGEMS TV, Inc. (“iGEMS”). iGEMS is a Delaware corporation which provides a comprehensive content recommendation engine. (Note 4).
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 February 28, 2022, the Company has generated losses since inception
and has an accumulated deficit of $
These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies used in the preparation of these condensed interim consolidated financial statements.
Statement of compliance
These condensed interim consolidated financial statements, including comparatives, have been prepared in accordance with International Accounts Standards (“IAS”) 34, “Condensed Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) on a basis consistent with the accounting policies disclosed in the audited consolidated financial statements for the year ended November 30, 2021.
This condensed interim financial report does not include all of the information required of a full annual financial report and is intended to provide users with an update in relation to events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period. Therefore, it is recommended that this financial report be read in conjunction with the restated audited annual financial statements of the Company for the year ended November 30, 2021.
Page 7 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
2. Significant Accounting Policies (continued)
Basis of presentation
The condensed interim consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, except for certain financial assets and liabilities, including derivative instruments that are measured at fair value. The consolidated financial statements are presented in United States dollars unless otherwise noted.
As at November 30, 2021, the Company changed its accounting policy to present its results in United States dollars instead of Canadian dollars as done previously. This accounting change has been applied retrospectively in preparing these financial statements; as such, all comparative figures have been restated to reflect this change.
Basis of consolidation
These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries at the end of the reporting period as follows:
Percentage owned | ||||||||||
Incorporation | 2022 | 2021 | ||||||||
Liquid Media Group (Canada) Ltd. (“Liquid Canada”) | Canada | % | % | |||||||
Liquid Media Production Funding Ltd. (“Liquid Production Funding”) | ||||||||||
Liquid Media (US) Holding Co., Inc. (“Liquid US”) | USA | % | % | |||||||
Liquid Media Merger Sub 2, Inc. (“Liquid Merger Sub 2”) | USA | % | % | |||||||
iGEMS TV, Inc., (“iGEMS”) | USA | % | % | |||||||
IndieFlix Group, Inc. (“IndieFlix”) | USA | % | % | |||||||
Companies controlled by IndieFlix: | ||||||||||
RACE, LLC | USA | % | % |
On August 13, 2021 the Company incorporated Liquid US. On October 20, 2021 the Company incorporated Liquid Merger Sub 2. On November 30, 2021, the Company incorporated Liquid Production Funding.
On August 27, 2021, the Company incorporated Liquid Media Merger Sub, Inc. which was amalgamated with IndieFlix on September 22, 2021 (Note 3).
On September 22, 2021, the Company acquired 100% of the shares of IndieFlix, a Delaware corporation (Note 3).
On October 20, 2021 the Company incorporated Liquid Merger Sub 3, which was amalgamated with iGEMS on December 14, 2021 (Note 4).
On December 14, 2021, the Company acquired 100% of the shares of iGEMS, a Delaware corporation (Note 4).
All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated upon consolidation.
Page 8 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
2. Significant Accounting Policies (continued)
Basis of consolidation (continued)
Subsidiaries
Subsidiaries are all entities over which the Company has exposure to variable returns from its involvement and has the ability to use power over the investee to affect its returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company until the date on which control ceases.
Use of estimates
The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the period. Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates. Significant estimates and judgements made by management in the preparation of these consolidated financial statements are outlined below.
Uncertainty of COVID-19 pandemic
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, initially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and solutions and harm our business and results of operations; however, the Company has also recognized that the pandemic has led to a global increase in screen time which is beneficial to the Company’s operations. As countries continue to re-open from the pandemic, it is possible that screen time will decrease which may adversely affect the Company; however, it also leads to an increase in film and TV content being produced as film and TV producers are able to travel and continue operations leading to an increase in content available for the Company to package, finance, deliver, and monetize. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations, or how it will impact the Company’s ability to conduct financings at this time.
Functional currency
The functional currency of the Company and its subsidiaries is the United States dollar; however, determination of functional currency may involve certain judgments to determine the primary economic environment which is re-evaluated for each new entity or if conditions change.
Level of control or influence over companies
The accounting for investments in other companies can vary depending on the degree of control and influence over those other companies. Management is required to assess at each reporting date the Company’s control and influence over these other companies. Management has used its judgment to determine which companies are controlled and require consolidation and those which are significantly influenced and require equity accounting. The Company had considered its ownership position in Waterproof Studios Inc. (“Waterproof”) and determined it did not have the ability to influence the key operating activities of the entity. Accordingly, the Company accounted for its investment under fair value through profit or loss (Note 9) up to the disposal date of October 18, 2021.
Page 9 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
2. Significant Accounting Policies (continued)
Use of estimates (continued)
Income taxes
In assessing the probability of realizing income tax assets, management makes estimates related to expectation of future taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified.
Determination of Cash Generating Units (“CGUs”)
CGUs are the lowest level within an entity at which goodwill is monitored for internal management purposes which is not higher than an operating segment. The Company has assessed that each acquired entity is a separate CGU.
Valuation of share-based compensation and derivatives
The Company uses the Black-Scholes Option Pricing Model for valuation of share-based compensation and other equity based payments, excluding contingent consideration. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate, and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity reserves.
Valuation of contingent consideration
The Company uses a probability scenario based approached for valuation of share-based contingent consideration. Under the probability scenario based approach, management calculates the probability that the contingent shares will be issued under a low case, base case, and high case scenario. Changes in the probabilities can materially affect the fair value estimate and the Company’s earnings and equity reserves.
Valuation of intangible assets
Intangible assets are assessed for impairment indicators at each reporting date. Management first reviews qualitative factors in determining if an impairment needs to be recorded. Quantitative factors are then used to calculate the amount of impairment, if needed.
Valuation of investment in equity instrument
The Company values its equity instruments in private companies at fair value at each reporting date. The determination of fair value is based on estimates made by management on the expected earnings before income, taxes, and amortization multiplied by a reasonable factor for the appropriate industry applicable to the private company.
Estimation of expected credit loss
Loans receivable are assessed for an estimated credit loss at each reporting date. The estimated loss is determined based on management’s knowledge of the debtor and their ability to repay the loan. As the current debtors’ are private entities, management must rely on assertions provided to them from the debtor to make their estimates.
Valuation of convertible debentures
The equity portion of the convertible debenture is calculated using a discounted cash flow method which requires management to make an estimate on an appropriate discount rate.
Page 10 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
2. Significant Accounting Policies (continued)
Use of estimates (continued)
Valuation of right-of-use asset and lease liability
The application of IFRS 16 requires the Company to make judgments that affect the valuation of the right-of-use assets and the valuation of lease liabilities. These include: determining the contract term and determining the interest rate used for discounting of future cash flows.
The lease term determined by the Company is comprised of the non-cancellable period of lease agreements, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.
The present value of the lease payment is determined using a discount rate representing the rate of a commercial mortgage rate, observed in the period when the lease agreement commences or is modified.
Intangible assets
The Company has intangible assets from acquisitions and development of gaming content and films. The amortization method, useful life and residual values are assessed annually and the assets are tested for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Amortization expense is recorded on a straight-line basis beginning with the month the corresponding assets are available for use and over the estimated useful lives provided below:
Video game catalogues (in years) | ||
Platform coding (in years) | ||
Brands | ||
Distribution libraries (in years) |
Upon retirement or disposal, the cost of the asset disposed of and the related accumulated amortization are removed from the accounts and any gain or loss is reflected in profit and loss. Expenditures for repairs and maintenance are expensed as incurred.
Development expenditures, including the cost of material, direct labour, and other direct costs are recognized as an intangible asset when the following recognition requirements are met:
· | the development costs can be measured reliably; |
· | the project is technically and commercially feasible; |
· | the Company intends to and has sufficient resources to complete the project; |
· | the Company has the ability to use or sell the asset, and |
· | the asset will generate probable future economic benefits. |
Intangible assets being developed are amortized once development is complete.
Video game catalogues
The video game catalogues are made up of a diverse variety of games, ranging in age and popularity. The catalogues are unique due to the diverse nature of the products within the catalogues, making it difficult to assign a useful life. The useful life of 15 years represented management’s view of the expected period over which the Company expected to receive benefits from the acquired gaming content packaged as catalogues.
Platform coding
The platform coding acquired by the Company is currently under development and is not yet subject to amortization.
Page 11 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
2. Significant Accounting Policies (continued)
Intangible assets (continued)
Distribution libraries
Through the acquisition of IndieFlix, the Company acquired distribution libraries. These assets are carried at cost, including amounts of purchase price allocations upon acquisitions. The useful life of 10 years represents management’s view of the expected period over which the Company expects benefits from the acquired distribution libraries.
Comparative figures
Certain of the comparative figures have been reclassified in order to conform to the current year’s presentation.
Accounting pronouncements not yet adopted
Accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.
3. ACQUISITION OF INDIEFLIX GROUP, INC.
On September 22, 2021, the Company acquired 100% of the issued and outstanding shares of IndieFlix in accordance with an Agreement and Plan of Merger (“IndieFlix Agreement”) and, in connection with the merger, former noteholders of IndieFlix agreed to extinguish IndieFlix debt in exchange for common shares of the Company. As consideration for the extinguishment of debt, the Company issued 499,996 common shares at closing and may issue up to 2,000,000 in additional common shares of the Company to the former noteholders of IndieFlix upon IndieFlix achieving total cumulative revenue of $64,868,466 before the seventh anniversary of the closing date as follows (“IndieFlix Transaction”):
· | 500,000 common shares upon IndieFlix achieving revenue of $4,521,630 (“IndieFlix First Milepost”); |
· | 500,000 common shares upon IndieFlix achieving revenue of $13,766,432 (“IndieFlix Second Milepost”); |
· | 500,000 common shares upon IndieFlix achieving revenue of $31,496,648 (“IndieFlix Third Milepost”); and |
· | 500,000, or such lesser number based on a pro rata amount of IndieFlix’s revenue recognized relative to the IndieFlix Fourth Milepost, common shares upon IndieFlix achieving revenue of $64,868,466 (“Fourth Milepost”). |
Upon closing of the IndieFlix Agreement, Liquid Merger Sub was amalgamated with IndieFlix with the surviving entity retaining the name IndieFlix Group, Inc.
In connection with the IndieFlix Transaction, on May 10, 2021, the Company entered into a non-revolving credit facility with IndieFlix for $499,880 which was advanced as follows: (1) $102,852 upon the date of the promissory note (advanced May 10, 2021); (2) $173,043 on the first month anniversary (advanced June 10, 2021); and (3) $223,985 on the second month anniversary (advanced July 9, 2021). The promissory note bore interest at 6% per annum, was due on the earlier of December 31, 2021 or the closing of the IndieFlix Transaction, and was secured by a general security agreement over certain assets. As the note was considered an advance on acquisition, the Company re-assumed the advance on the closing of the IndieFlix Transaction on September 22, 2021.
Page 12 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
3. ACQUISITION OF INDIEFLIX GROUP, INC. (continued)
On September 22, 2021, the 2,000,000 common shares to be issued (“IndieFlix Contingent Consideration”) was valued to be $1,648,000. On February 28, 2022, the IndieFlix Contingent Consideration was revalued to $700,400 (November 30, 2021 - $1,277,200) resulting in a gain on derivative liability of $576,800 (February 28, 2021 - $nil). The IndieFlix Contingent Consideration was calculated by multiplying the closing share price of the Company’s shares by the following weighted average expected number of shares to vest calculated using a probability scenario based approach:
February 28, 2022 | November 30, 2021 | |||||||
Weighted average expected number of shares to vest | ||||||||
Low Case | ||||||||
Base Case | ||||||||
High Case | ||||||||
Expected number of shares to vest | ||||||||
Liquid share price | $ | $ |
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.
Total | ||||
$ | ||||
Consideration: | ||||
Common shares | ||||
IndieFlix Contingent Consideration | ||||
Total unadjusted purchase price | ||||
Cash acquired | ( | ) | ||
Total purchase price, net of cash acquired | ||||
Allocated as follows: | ||||
Accounts receivable | ||||
Inventory | ||||
Prepaids | ||||
Right-of-use asset | ||||
Accounts payable | ( | ) | ||
Deferred revenue | ( | ) | ||
Lease liability | ( | ) | ||
Loans payable | ( | ) | ||
Long-term debt | ( | ) | ||
Intangible assets – distribution libraries | ||||
Goodwill | ||||
Deferred income taxes | ( | ) | ||
Total |
Page 13 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
3. ACQUISITION OF INDIEFLIX GROUP, INC. (continued)
The purchase price allocation for the IndieFlix Transaction reflects various fair value estimates and analyses, which are subject to change within the respective measurement periods. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired at each acquisition date during the measurement periods. Measurement period adjustments that the Company determines to be material will be applied retrospectively to the period of acquisition in the Company’s consolidated financial statements, and, depending on the nature of the adjustments, other periods subsequent to the period of acquisition could also be affected.
The Company determined the estimated fair value of the acquired working capital, and identifiable intangible assets and goodwill after review and consideration of relevant information including discounted cash flow analyses, market data and management’s estimates.
For leases acquired, the Company measured the lease liability at the present value of the remaining lease payments, as if the acquired lease were a new lease at the acquisition date. The Company measured the right-of-use asset at the same amount as the lease liability, adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms.
IndieFlix’s distribution libraries
represent identifiable intangible assets acquired in the amounts of $
The fair value of the acquired assets and liabilities are provisional pending receipt of the final valuations for those assets and liabilities.
4. ACQUISITION OF iGEMS TV, INC.
On December 14, 2021, the Company acquired 100% of the issued and outstanding shares of iGEMS TV, Inc. (“IGEMS”) in accordance with an Agreement and Plan of Merger (“iGEMS Agreement”). As consideration, the Company will issue up to 850,000 common shares of the Company to the former shareholders of iGEMS upon iGEMS achieving total cumulative revenue of $9,412,830 before the sixth anniversary of the closing date as follows (“iGEMS Transaction”):
· | 212,500 common shares on closing of the agreement (issued subsequently); |
· | 212,500 common shares upon iGEMS achieving revenue of $473,577 (“iGEMS First Milepost”); |
· | 212,500 common shares upon iGEMS achieving revenue of $2,400,664 (“iGEMS Second Milepost”); |
· | 212,500, or such lesser number based on a pro rata amount of iGEMS revenue recognized relative to the iGEMS Third Milepost, common shares upon iGEMS achieving revenue of $9,412,830 (“iGEMS Third Milepost”). |
Upon closing of the iGEMS Agreement, Liquid Merger Sub 3 was amalgamated with iGEMS with the surviving entity retaining the name iGEMS TV, Inc.
In connection with the iGEMS Transaction, on June 25, 2021, the Company entered into an agreement with iGEMS for $100,000 which was advanced as follows: (1) $40,000 upon the date of the agreement (advanced June 28, 2021); (2) $33,000 on the first month anniversary (advanced August 3, 2021); and (3) $27,000 on the second month anniversary (advanced September 7, 2021). The agreement bore interest at 6% per annum and was due on the earlier of December 31, 2021 or 30 days following the termination of the iGEMS Transaction. The agreement was secured by a general security agreement over certain assets. The Company advanced a further $25,000 to iGEMS on December 10, 2021. As the advances were considered an advance on acquisition, the Company re-assumed the advance on the closing of the iGEMS Transaction on December 14, 2021.
Page 14 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
4. ACQUISITION OF iGEMS TV, INC. (continued)
On December 14, 2021, the 212,500 common shares to be issued (“iGEMS Contingent Consideration”) was valued to be $471,521. On February 28, 2022, the iGEMS Contingent Consideration was revalued to $291,485 resulting in a gain on derivative liability of $180,035. The iGEMS Contingent Consideration was calculated by multiplying the closing share price of the Company’s shares by the following weighted average expected number of shares to vest calculated using a probability scenario based approach:
February 28, 2022 | December 14, 2021 | |||||||
Weighted average expected number of shares to vest | ||||||||
Low Case | ||||||||
Base Case | ||||||||
High Case | ||||||||
Expected number of shares to vest | ||||||||
Liquid share price | $ | $ |
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.
Total | ||||
$ | ||||
Consideration: | ||||
Common shares | ||||
iGEMS Contingent Consideration | ||||
Total unadjusted purchase price | ||||
Cash acquired | ( | ) | ||
Total purchase price, net of cash acquired | ||||
Allocated as follows: | ||||
Accounts receivable | ||||
Accounts payable | ( | ) | ||
Loans payable | ( | ) | ||
Goodwill | ||||
Total |
The purchase price allocation for the iGEMS Transaction reflects various fair value estimates and analyses, which are subject to change within the respective measurement periods. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired at each acquisition date during the measurement periods. Measurement period adjustments that the Company determines to be material will be applied retrospectively to the period of acquisition in the Company’s consolidated financial statements, and, depending on the nature of the adjustments, other periods subsequent to the period of acquisition could also be affected.
The Company determined the estimated fair value of the acquired working capital and goodwill after review and consideration of relevant information including discounted cash flow analyses, market data and management’s estimates.
The fair value of the acquired assets and liabilities are provisional pending receipt of the final valuations for those assets and liabilities.
Page 15 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
5. RECEIVABLES
February 28, 2022 | November 30, 2021 | |||||||
$ | $ | |||||||
Accounts receivable | ||||||||
Sales tax receivable | ||||||||
Other receivables | ||||||||
Receivables |
6. LOANS RECEIVABLE
Long-term amounts
Loans receivable are classified as long-term when management has determined that they will not be receiving payment on these loans within the next twelve months. As at February 28, 2021, the long-term loans receivable including accrued interest are as follows:
Participant Games | Installment Entertainment | Total | ||||||||||
$ | $ | $ | ||||||||||
Balance November 30, 2020 | ||||||||||||
Accrued interest income | ||||||||||||
Expected credit loss | ( | ) | ( | ) | ( | ) | ||||||
Net exchange differences | ||||||||||||
Balance, November 30, 2021 and February 28, 2022 |
Participant Games
During fiscal 2017, the Company entered
into a subordinated convertible note with Participant Games Inc. in the amount of CAD$
Instalment Entertainment
During fiscal 2017, the Company entered
into a convertible note with Installment Entertainment Inc. in the amount of CAD$
7. RESTRICTED CASH
As at February 28, 2021, the Company
had two Guaranteed Investment Certificates (“GICs”) totaling $
Page 16 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
8. LICENSES
Four licenses were acquired during
the year ended November 30, 2018 through the issuance of
During the three months ended February
28, 2021, amortization, included in cost of sales, amounted to $nil (February 28, 2021 - $
The following table is a reconciliation of the licenses:
February 28, 2022 | November 30, 2021 | |||||||
$ | ||||||||
Balance, beginning of period | ||||||||
Amortization | ( | ) | ||||||
Write-offs | ( | ) | ||||||
Net exchange differences | ||||||||
Balance, end of period |
9. INVESTMENT IN EQUITY INSTRUMENTS
Until February 28, 2019, the Company accounted for its 49% interest in Waterproof using the equity method of accounting resulting in a carrying value of $445,987. At March 1, 2019, however, the Company no longer exerted significant influence over Waterproof’s operating activities resulting in the investment being reclassified as FVTPL.
The fair value as at March 1, 2019 was determined to be $1,252,525 resulting in a gain of $806,538 on derecognition from the equity accounting carrying value.
On October 18, 2021, the Company settled a lawsuit with the other shareholders of Waterproof whereby the Company transferred its 49% interest in Waterproof to the other shareholders for $666,683 (CAD$825,000) resulting in the Company recording a loss on disposal of investment of $3,438,560 (Note 26).
As at October 18, 2021, the value of
Waterproof’s common shares was estimated to be $
The following table is a reconciliation of the investment in Waterproof:
February 28, 2022 | November 30, 2021 | |||||||
$ | $ | |||||||
Balance, beginning of period | ||||||||
Change in fair value | ||||||||
Disposal of investment | ( | ) | ||||||
Balance, end of period |
10. INVESTMENT IN CONTENT
As at February 28, 2022 and November 30, 2021, the investment in content represents the unamortized costs of film content in production.
Page 17 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
11. EQUIPMENT
Computer Equipment | Vehicles | Total | ||||||||||
$ | $ | $ | ||||||||||
Cost: | ||||||||||||
At November 30, 2020 | ||||||||||||
Disposals | ( | ) | ( | ) | ||||||||
At November 30, 2021 | ||||||||||||
Disposals | ( | ) | ( | ) | ||||||||
At February 28, 2022 | ||||||||||||
Depreciation: | ||||||||||||
At November 30, 2020 | ||||||||||||
Additions | ||||||||||||
Disposals | ( | ) | ( | ) | ||||||||
At November 30, 2021 | ||||||||||||
Disposals | ( | ) | ( | ) | ||||||||
At February 28, 2022 | ||||||||||||
Net book value: | ||||||||||||
At November 30, 2021 | ||||||||||||
At February 28, 2022 |
During the year ended November 30,
2021, the Company disposed of its computer equipment for no proceeds resulting in a loss on disposal of equipment of $
In December 2021, the Company disposed
of the vehicle for $37,000 to the former CFO of the Company resulting in a gain on disposal of equipment of $
Page 18 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
12. INTANGIBLE ASSETS
Video Game Catalogues | Platform Coding | Distribution Libraries | Total | |||||||||||||
$ | $ | $ | $ | |||||||||||||
Cost: | ||||||||||||||||
At November 30, 2020 | ||||||||||||||||
Additions - acquisition of IndieFlix (Note 3) | ||||||||||||||||
Impairments | ( | ) | ( | ) | ( | ) | ||||||||||
At November 30, 2021 and February 28, 2022 | ||||||||||||||||
Amortization: | ||||||||||||||||
At November 30, 2020 | ||||||||||||||||
Additions | ||||||||||||||||
At November 30, 2021 | ||||||||||||||||
Additions | ||||||||||||||||
At February 28, 2022 | ||||||||||||||||
Net book value: | ||||||||||||||||
At November 30, 2021 | ||||||||||||||||
At February 28, 2022 |
During the year ended November 30,
2020, the Company acquired platform coding for a cash payment of $
During the year ended November 30,
2021, the Company acquired distribution libraries valued at $
During the year ended November 30,
2021, the Company determined that the video game catalogues and platform coding should be impaired resulting in the Company recognizing
an impairment of intangible assets of $
Amortization of the distribution libraries is included in cost of sales.
Page 19 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
13. RIGHT-OF-USE- ASSET AND LEASE LIABILITY
Right-of-Use Asset
Office Space | ||||
$ | ||||
Cost: | ||||
At November 30, 2020 | ||||
Additions - acquisition of IndieFlix (Note 3) | ||||
At November 30, 2021 and February 28, 2022 | ||||
Amortization: | ||||
At November 30, 2020 | ||||
Additions | ||||
At November 30, 2021 | ||||
Additions | ||||
At February 28, 2022 | ||||
Net book value: | ||||
At November 30, 2022 | ||||
At February 28, 2022 |
Amortization of right-of-use assets is calculated using the straight-line method over the remaining lease term.
Lease Liability
|
February 28, 2022 |
| November 30, 2021 | |||||
$ | $ | |||||||
Balance, beginning of period | ||||||||
Additions (Note 3) | ||||||||
Lease payments | ( | ) | ( | ) | ||||
Interest expense | ||||||||
Less: current portion | ( | ) | ( | ) | ||||
Balance, end of period |
The lease liability was discounted
at a discount rate of
Page 20 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
13. RIGHT-OF-USE- ASSET AND LEASE LIABILITY (continued)
The minimum lease payments in respect of the lease liability and the effect of discounting are as follows:
$ | ||||
Undiscounted minimum lease payments: | ||||
March 1, 2021 – November 30, 2022 | ||||
December 1, 2022 – November 30, 2023 | ||||
December 1, 2023 – November 30, 2024 | ||||
Total | ||||
Effect of discounting | ( | ) | ||
Total present value of lease liabilities | ||||
Less: current portion | ( | ) | ||
Balance, end of period |
14. GOODWILL
A summary of goodwill balance and transactions is as follows:
February 28, 2022 | November 30, 2021 | |||||||
$ | $ | |||||||
Balance, beginning of period | ||||||||
Additions (Notes 3 and 4) | ||||||||
Balance, end of period |
During the year ended November 30,
2021, the Company acquired goodwill of $
During the three months ended February
28, 2022, the Company acquired goodwill of $
Goodwill is tested for impairment annually or more frequently if events or circumstances indicate that the asset might be impaired. At November 30, 2021, the Company performed its impairment review of goodwill by comparing each cost center’s fair value to the net book value including goodwill. At February 28, 2022, the Company has determined that it has two cost centers: IndieFlix and iGEMS. The fair value of each cost center was determined by management based on a valuation using the income approach. The income approach uses future projections of cash flows from the cost center and includes, among other estimates, projections of future revenue and operating expenses, market supply and demand, projected capital spending and an assumption of the weighted average cost of capital. Management’s evaluation of fair values includes analysis based on the future cash flows generated by the underlying assets, estimated trends and other relevant determinants of fair value for these assets. Management has determined that no events have occurred subsequent to the date of the assessment that would require a further impairment review of goodwill.
Page 21 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
15. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
February 28, 2022 | November 30, 2021 | |||||||
$ | $ | |||||||
Accounts payable | ||||||||
Accrued liabilities | ||||||||
Wages payable | ||||||||
Payroll taxes payable | ||||||||
Accounts payable and accrued liabilities |
During the three months ended
February 28, 2022, the Company issued nil
During the three months ended February
28, 2021, the Company transferred
16. DEFERRED REVENUE
A summary of the deferred revenue is as follows:
February 28, 2022 | November 30, 2021 | |||||||
$ | ||||||||
Film distribution | ||||||||
Streaming subscriptions | ||||||||
Deferred Revenue |
17. LOANS PAYABLE
A summary of loans payable balances and transactions is as follows:
Credit Facility | ||||
$ | ||||
Balance, November 30, 2020 | ||||
Repayment - shares | ( | ) | ||
Net exchange differences | ||||
Balance, November 30, 2021 and February 28, 2022 |
Credit facility
In fiscal 2016 a CAD$2,500,000 Credit
facility was secured by assets of the Company under a general security agreement with a due date of November 30, 2018 and an interest
rate of
Page 22 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
17. LOANS PAYABLE (continued)
In June 2018, a new lender acquired the remaining $563,850 (CAD$750,000) loan and under new terms, the loan was due on August 20, 2018. The new lender obtained a Limited Power of Attorney over the Company’s 49% interest in Waterproof (“Waterproof POA”). In December 2018, the lender registered a general security agreement over all the Company’s current and future assets.
In November 2019, the new lender signed a Forebearance Agreement which extended the maturity date of the loan to November 30, 2020 and required the Company to make quarterly payments of CAD$250,000 commencing on March 31, 2020 until the principal and interest on the loan have been paid in full. In accordance with the Forbearance Agreement, the Company issued 215,000 treasury shares of the Company as security for the loan which will be transferred to the lender upon any default of the loan. Additionally, the new lender released the Waterproof POA and amended their general security agreement to exclude the Company’s investment in Waterproof. In March 2020, the new lender provided an extension allowing the delay of the quarterly payments to commence June 30, 2020.
During the year ended November 30,
2020, the Company repaid a further $385,650 (CAD$500,000) for this loan of which $85,388 (CAD$110,707) was applied to the principal and
$300,262 (CAD$389,293) was applied to the outstanding interest. As at November 30, 2020, interest of $
In February 2021, the new lender agreed to accept the 215,000 treasury shares held as security as full and final payment of the Forbearance Agreement (Note 20). Accordingly, the transfer of the 215,000 treasury shares resulted in a gain on debt settlement of $37,359 as the treasury shares were valued at $479,450 on the date of issuance to settle the outstanding principal of $498,329 and interest of $18,481.
18. CONVERTIBLE DEBENTURES
Liability component | Equity component | Total | ||||||||||
$ | $ | $ | ||||||||||
Balance, November 30, 2020 | ||||||||||||
Interest expense and accretion | ||||||||||||
Conversion of convertible debentures | ( | ) | ( | ) | ( | ) | ||||||
Reallocation of interest to accounts payable | ( | ) | ( | ) | ||||||||
Balance, November 30, 2021 |
On February 28, 2019, the Company closed its private placement offering of unsecured convertible debentures raising $2,678,000. Each debenture matured two years from closing, bore interest at 2% per annum, and was convertible into units at a price of $1.50 per unit. Each unit consisted of one common share and one share purchase warrant with each warrant entitling the holder to acquire one common share of the Company for $1.75 up to February 28, 2021. In January 2021, the Company agreed to extend the maturity date and associated warrant expiry date for one debenture holder by one year.
For accounting purposes, the convertible
debentures are separated into their liability and equity components by first valuing the liability component. The fair value of the liability
component at the time of issue was calculated as the discounted cash flows for the convertible debentures assuming a 12% discount rate,
which was the estimated rate for a similar debenture without a conversion feature. The fair value of the equity component (conversion
feature) was determined at the time of issue as the difference between the face value of the convertible debentures and the fair value
of the liability component, less a deferred income tax adjustment to reflect the book to tax difference in value of the convertible debentures
at the time of issuance. As the Company has excess tax assets to offset the deferred tax liability, which was created from the book to
tax difference in value of the convertible debentures, the deferred tax liability was reversed, resulting in a deferred tax recovery of
$
Page 23 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
18. CONVERTIBLE DEBENTURES (continued)
During the year ended November 30, 2021, debentures of $401,677 were converted into 270,000 units of the Company of which $nil was allocated to reserves relating to the value of the warrants issued. As a result, the Company transferred $49,967 from reserves to share capital representing the proportionate balance of the equity component.
Interest and accretion expense for
the three months ended February 28, 2022 was $nil
19. LONG-TERM DEBT
Third party | SBA Loan | Total | ||||||||||
$ | $ | $ | ||||||||||
Balance, November 30, 2020 (current and long-term) | ||||||||||||
Acquired on acquisition of IndieFlix (Note 3) | ||||||||||||
Payments | ( | ) | ( | ) | ||||||||
Interest expense and accretion | ||||||||||||
Balance, November 30, 2021 (current and long-term) | ||||||||||||
Interest expense and accretion | ||||||||||||
Balance, February 28, 2022 | ||||||||||||
Current portion | ||||||||||||
Long-term portion |
Third party
During the year ended November 30, 2020, the Company entered into a Conditional Sales Contract for the purchase of a vehicle. The agreement bore interest of 6.99%, required 60 monthly payments of CAD$1,028, and was secured by a vehicle with a net book value of $nil (November 30, 2021 - $30,312) (Note 11).
SBA loan
In June 2020, IndieFlix obtained a $150,000 U.S. Small Business Administration (“SBA”) loan which increased to $200,000 upon receiving a further $50,000 in July 2020. The SBA loan bears interest at 3.75% from the date of the advance and requires monthly payments of $1,023 commencing 24 months from the date of the first advance. The balance of principal and interest will be repayable over 30 years from the date of the first advance. The SBA loan is secured by a continuing security interest in all of IndieFlix’s current and future assets.
The loan is being accreting to its face value at an effective rate of 6.25% over the term of the loan.
On March 17, 2022, SBA provided an additional six month deferment for IndieFlix’s SBA Loan where the first payment has been deferred to 30 months from the date of the first advance from 24 months.
Page 24 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
20. SHARE CAPITAL AND RESERVES
Authorized share capital
The Company is authorized to issue 100,000,000 common shares without par value.
The Company is authorized to issue the following preferred shares:
Preferred shares without par value | ||||
Series “A” preferred shares | ||||
Series “B” preferred shares | ||||
Series “C” preferred shares | ||||
Series “D” preferred shares | ||||
Series “E” preferred shares | ||||
Issued share capital
Common shares
The Company had the following share issuances during the three months ended February 28, 2022:
a) | On December 14, 2021, the Company issued | common shares valued at $
The Company had the following share issuances during the year ended November 30, 2021:
a) | On January 25, 2021, the Company issued | common shares valued at $
b) | On January 29, 2021, the Company issued | common shares valued at $
c) | On February 12, 2021, the Company transferred | treasury shares valued at $ to a creditor as full and final payment of a Forbearance Agreement (Note 17).
d) | On March 3, 2021, the Company issued | common shares valued at $ in relation to the vesting
of restricted share units. As a result, the Company transferred $
e) | On March 22, 2021, the Company closed a registered direct offering, under its F-3 registration statement
in the United States, by issuing | common shares of the Company at $ per common share for total proceeds of $ . In
connection with this offering, the Company paid legal fees of $
f) | On June 9, 2021, the Company issued | common shares valued at $
Page 25 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
g) | On September 3, 2021, the Company issued | common shares valued at $ in relation to the vesting
of restricted share units. As a result, the Company transferred $
20. SHARE CAPITAL AND RESERVES (continued)
Issued share capital (continued)
Common shares (continued)
h) | On September 7, 2021 the Company closed a sale of common shares under its At-The-Market Agreement (“ATM
Agreement”) through the issuance of |
i) | On September 22, 2021, the Company issued | common shares valued at $
j) | During the year ended November 30, 2021, the Company issued the following for exercised stock options, warrants, and conversions: |
· | issued common shares for total proceeds of $ in connection with the exercise of share purchase warrants at $ per warrant of which $440,501 was received during the year ended November 30, 2020. |
· | issued common shares for total proceeds of $ in connection with the exercise of share purchase warrants at $ per warrant. As a result, the Company transferred $ representing the fair value of the exercised warrants from reserves to share capital. |
· | issued common shares for total proceeds of $ in connection with the exercise of share purchase warrants at $ per warrant. As a result, the Company transferred $ representing the fair value of the exercised warrants from reserves to share capital. |
· | issued |
· | issued |
· | issued |
Preferred shares
As at February 28, 2022 and November 30, 2021, 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 Forbearance Agreement (Note 17). In February 2021, the Company transferred these shares to the lender as full and final payment of the Forbearance Agreement.
Page 26 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
20. SHARE CAPITAL AND RESERVES (continued)
Stock options
The Company does not have a formal stock option plan. The Company occasionally grants stock options to its employees, officers, directors and consultants to purchase common shares of the Company. The options granted are exercisable at a price which is equal to or greater than the fair market value of the common shares at the date the options are granted. The options are granted with varied vesting periods but generally vest immediately on grant. Options granted generally have a life of five years.
On January 1, 2021, the Company granted
an officer of the Company
On January 14, 2021, the Company granted
a consultant of the Company
On January 1, 2021, the Company repriced 932,995 stock options with an exercise price of $2.55 and 25,000 stock options with an exercise price of $2.57 to $1.90 per option. All other terms remained unchanged. During the three months ended February 28, 2022, the Company recorded share-based compensation of $nil (February 28, 2021 - $71,617) in relation to this repricing.
In accordance with a Termination and Mutual Release Agreement entered into with a consultant of the Company effective April 14, 2021, the Company and a consultant agreed to modify the expiry date of 50,000 options outstanding from July 23, 2025 to May 14, 2022.
The following weighted average assumptions were used in the Black-Scholes option-pricing model for the valuation of the stock options granted:
February 28, 2022 | November 30, 2021 | |||||||
Risk-free interest rate | % | |||||||
Dividend yield | nil | |||||||
Expected life (in years) | - | |||||||
Volatility | % | |||||||
Weighted average fair value per option | $ |
Page 27 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
20. SHARE CAPITAL AND RESERVES (continued)
Stock options (continued)
Stock option transactions are summarized as follows:
Number of Stock Options | Weighted Average Exercise Price | Weighted Average Share Price on Exercise | ||||||||||
$ | $ | |||||||||||
Balance, November 30, 2020 | $ | - | ||||||||||
Granted | $ | - | ||||||||||
Exercised | ( | ) | $ | $ | ||||||||
Cancelled | ( | ) | $ | - | ||||||||
Balance, November 30, 2021 and February 28, 2022 | $ | - |
A summary of the stock options outstanding and exercisable at February 28, 2022 is as follows:
Number Outstanding | Number Exercisable | Exercise Price | Expiry Date | |||||||||
$ | ||||||||||||
$ | ||||||||||||
$ | ||||||||||||
$ | ||||||||||||
$ | ||||||||||||
$ | ||||||||||||
$ | ||||||||||||
$ | ||||||||||||
$ | ||||||||||||
$ | ||||||||||||
The weighted average life of share options outstanding at February 28, 2022 was
years and years for exercisable options.
Warrants
Agents’ warrants
Agents’ warrant transactions are summarized as follows:
Number of Agents’ Warrants | Weighted Average Exercise Price | |||||||
$ | ||||||||
Balance, November 30, 2020 | $ | |||||||
Exercised | ( | ) | $ | |||||
Balance, November 30, 2021 and February 28, 2022 | $ |
Page 28 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
20. SHARE CAPITAL AND RESERVES (continued)
Warrants (continued)
Agents’ warrants (continued)
A summary of the agents’ warrants outstanding and exercisable at February 28, 2022 is as follows:
Number Outstanding | Exercise Price | Expiry Date | ||||||
$ | ||||||||
$ | ||||||||
The weighted average life of agent’s warrants outstanding at February 28, 2022 was 3.27 years.
Share purchase warrants
On February 12, 2021, the Company extended the expiry date of 346,000 share purchase warrants with an exercise price of $1.75 from February 26, 2021 to March 11, 2021 due to the investors being subject to a trading blackout.
During the year ended November 30, 2021, the Company issued
share purchase warrants with an exercise price of $ per warrant in connection with the conversion of a convertible debenture (Note 18).
Share purchase warrant transactions are summarized as follows:
Number of Share Purchase Warrants | Weighted Average Exercise Price | ||||||||
$ | |||||||||
Balance, November 30, 2020 | $ | ||||||||
Issued | $ | ||||||||
Exercised | ( | ) | $ | ||||||
Expired | ( | ) | $ | ||||||
Balance, November 30, 2021 and February 28, 2022 | $ |
A summary of the share purchase warrants outstanding and exercisable at February 28, 2021 is as follows:
Number Outstanding | Exercise Price | Expiry Date | ||||||
$ | ||||||||
* | $ | |||||||
$ | ||||||||
* |
The weighted average life of share purchase warrants outstanding at February 28, 2022 was 3.08 years.
Page 29 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
20. SHARE CAPITAL AND RESERVES (continued)
Restricted share units (“RSUs”)
During the year ended November 30, 2020, the Company granted
RSUs to certain directors, officers, and consultants of the Company which vest 25% on grant (September 3, 2020) and 25% each six months thereafter. The granted RSUs convert to common shares of the Company upon vesting, accordingly, 250,001 common shares were issued upon grant.
During the three months ended February 28, 2022, the Company recorded share-based compensation expense of $
(February 28, 2021 - $ ) in relation to the issued RSUs. The fair value of the RSUs was measured using the value on the grant date of $1.47 per common share.
Number of RSUs | ||||
Balance, November 30, 2020 | ||||
Vested | ( | ) | ||
Cancelled | ( | ) | ||
Balance, November 30, 2021 and February 28, 2022 |
Derivative liability
On June 8, 2020, the Company closed a registered direct offering, under its F-3 registration statement in the United States, by issuing 2,666,672 common shares of the Company at $1.50 per common share for total proceeds of $4,000,002. Concurrent with this offering, the Company issued to the investors 1,333,334 share purchase warrants exercisable for $1.88 per common share with a maturity date of June 9, 2025. The holders of the Cashless Warrants may elect, if the Company does not have an effective registration statement registering or the prospectus contained therein is not available for the issuance of the Cashless Warrant shares to the holder, in lieu of exercising the Cashless Warrants for cash, a cashless exercise option to receive common shares equal to the fair value of the Cashless Warrants. The fair value is determined by multiplying the number of Cashless Warrants to be exercised by the previous day’s volume weighted average price (“VWAP”) less the exercise price with the difference divided by the VWAP. If a Cashless Warrant holder exercises this option, there will be variability in the number of shares issued per Cashless Warrant.
On initial recognition, the
Company allocated $351,779, being the fair value of the Cashless Warrants, from the proceeds of the offering included in share
capital to set up the derivative liability. On March 24, 2021, the Company’s registration statement restricting the Cashless
Warrant holders ability to elect to cashless exercise their Cashless Warrants became effective resulting in the Company revaluing
the derivative liability to $nil
On March 24, 2021, the Company revalued the derivative liability to $3,226,693 using the following Black Scholes assumptions: risk –free rate of $0.10%, dividend yield of nil, expected life of 0.01 years, and volatility of $150%. The Company transferred $423,503 from derivative liability to share capital in connection with the exercise of 175,000 Cashless Warrants on March 24, 2021 and reversed the remaining derivative liability on the expiry of the cashless exercise feature.
Page 30 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
21. ROYALTY INCOME
IndieFlix earns royalty income from its participating net profit rights in three separate US Limited Liability Companies (“LLC”) for which IndieFlix acts as a manager.
The Company has recognized $
22. RELATED PARTY TRANSACTIONS
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include the Company’s executive officers and Board of Director members.
In November 2020, the Company signed employment agreements with two directors of the Company. The agreements require total payments of CAD$17,500 each per month. Included in the agreements is a provision for 12 months written notice or salary paid in lieu of notice upon termination without just cause. In April 2021, one of the agreements was terminated and replaced with a consulting agreement with the same terms.
In January 2021, the Company signed an employment agreement with the new CEO of the Company. The agreement requires payments of CAD$20,000 per month. Included in the agreement is: (1) a provision for three months written notice or salary paid in lieu of notice upon termination without just cause and (2) a provision to increase the base salary to CAD$30,000 per month, retroactive to January 1, 2021, upon the Company raising US$5 million in funding (achieved).
Receivables at February 28, 2022
includes $
Accounts payable and accrued liabilities
at February 28, 2022 includes $
During the three months ended
February 28, 2022, the Company recorded revenue of $
During the three months ended
February 28, 2022, the Company recorded royalties, included in cost of sales, of $
During the three months ended
February 28, 2022, the Company incurred content curation costs, included in cost of sales, of $
During the three months ended
February 28, 2022, the Company incurred rent, included in other general and admin expenses, of $
Page 31 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
22. RELATED PARTY TRANSACTIONS (continued)
The following is a summary of key management personnel compensation:
|
Three months ended February 28, |
| ||||||
2022 | 2021 | |||||||
$ | $ | |||||||
Management and directors salaries and fees | ||||||||
Share-based compensation | ||||||||
Key management personnel compensation |
23. CAPITAL DISCLOSURE AND MANAGEMENT
The Company defines its capital as components of shareholders’ equity. The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern. The Company manages its capital structure to maximize its financial flexibility making adjustments to it in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. The Company does not presently utilize any quantitative measures to monitor its capital. There were no changes to the Company’s capital management during the three months ended February 28, 2022. The Company is not subject to externally imposed capital requirements.
24. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
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 – Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumption that market participants would use in pricing. |
The Company’s financial instruments consist of cash, restricted cash, receivables, accounts payable, and long-term debt. The fair value of receivables and accounts payable approximates their carrying values. Long-term debt has been valued using a valuation methodology on initial recognition. Cash and restricted cash is measured at fair value using level 1 inputs. The derivative liability for the warrants is measured using level 2 inputs. The derivative liability for the contingent consideration was measured at fair value using level 3 inputs.
Page 32 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
24. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
As at February 28, 2022, the fair value
of the level 3 derivative liability was $
The Company is exposed to a variety of financial risks by virtue of its activities including currency, credit, interest rate, and liquidity risk.
a) | Currency risk |
Foreign currency exchange rate risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. The Company’s operations are carried out in Canada and the United States. As the Company’s functional currency is USD, the Company is subject to foreign currency exchange rate risk on its net assets denominated in CAD which could have an adverse effect on the profitability of the Company. As at February 28, 2022, the Company had assets totaling CAD$570,832 and liabilities totalling CAD$758,239. A 10% change in the exchange rate would change comprehensive income (loss) by approximately $15,000. The Company currently does not have plans to enter into foreign currency future contracts to mitigate this risk, however it may do so in the future.
b) | Credit risk |
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
The Company’s cash is held in large Canadian and United States financial institutions. The Company maintains certain cash deposits with Schedule I financial institutions, which from time to time may exceed federally insured limits. The Company has not experienced any significant credit losses and believes it is not exposed to any significant credit risk. The Company’s sales tax receivable is due from the Government of Canada; therefore, the credit risk exposure is low.
The maximum exposure to credit risk
as at February 28, 2022 is the carrying value of the receivables and loans receivable. The Company has allowed for an expected credit
loss of $
b) | Interest rate risk |
Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company does not hold any financial liabilities with variable interest rates. The Company does maintain bank accounts which earn interest at variable rates but it does not believe it is currently subject to any significant interest rate risk.
Page 33 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
24. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)
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. As at February 28, 2022, the Company had a cash balance of $
25. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS
For the three months ended February 28, | ||||||||
2022 | 2021 | |||||||
$ | $ | |||||||
Supplemental non-cash disclosures | ||||||||
Reallocation of value of warrants upon exercise | ||||||||
Shares issued for debt settlements | ||||||||
Shares issued for commitment | ||||||||
Acquisition advances eliminated on acquisition of subsidiary (Note 4) |
26. CONTINGENCIES
On December 1, 2021, a consultant commenced an action against the Company in which the Plaintiff claims that the Company is in breach of contract and owes the consultant
common shares of the Company and $500,000, or alternatively, 250,000 common shares of the Company valued at $ . The Plaintiff is also requesting a judgement for costs, interest, and special damages. In December 2021, the Company filed a Response to Civil Claim denying the Plaintiffs’ claims for which the Plaintiff filed a Reply. The litigation is at an early stage.
27. SEGMENTED INFORMATION
During the three months ended February 28, 2022, the Company had four offices: a head office in Vancouver, British Columbia (Canada), a satellite office in Toronto, Ontario (Canada), IndieFlix’s office in Seattle, Washington (USA), and iGEMS’ office in Los Angeles, California (USA). During the three months ended February 28, 2021, the Company had two offices: a head office in Vancouver, British Columbia (Canada), a satellite office in Toronto, Ontario (Canada).
In evaluating performance, management does not distinguish or group its sales and cost of sales on a geographic basis. As at February 28, 2021, the Company determined it had two
reportable operating segments: the investment in film and television entertainment and the investment in video games. Due to Company impairing the video game segment assets and ceasing to operate that segment at November 30, 2021, the Company determined the investment in film and television entertainment segment was its only reportable segment at February 28, 2022.
Page 34 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
27. SEGMENTED INFORMATION (continued)
Revenue derived in the Company’s film and television entertainment and video games segments is earned from a large number of customers located throughout the world but mostly located in the United States of America. During the three months ended February 28, 2022, one customer accounted for 36% (February 28, 2021 – no customer accounted for more than 5%) of the Company’s sales.
Below summarizes the Company’s reportable operating segments for the three months ended February 28, 2021.
Film and Television Entertainment | Video Games | Total | ||||||||||
$ | $ | $ | ||||||||||
Segment Information | ||||||||||||
Revenue | ||||||||||||
Cost of sales | ( | ) | ( | ) | ( | ) | ||||||
Operating expenses | ( | ) | ( | ) | ( | ) | ||||||
Segment profit (loss) | ( | ) | ( | ) | ( | ) | ||||||
Corporate expenses: | ||||||||||||
Operating expenses | ( | ) | ||||||||||
Other income (expenses) | ||||||||||||
Comprehensive loss for the period | ( | ) | ||||||||||
Capital expenditures |
28. PROPOSED TRANSACTION
a) | On June 7, 2021, the Company entered into a Letter of Intent with Filmdab, Inc., operating as Filmocracy (“Filmocracy”) for the Company to acquire 100% of the issued and outstanding shares of Filmocracy by issuing up to 1,250,000 common shares of the Company to the shareholders of Filmocracy. 25% of the consideration shares will be issued to the shareholders of Filmocracy on closing of the proposed transaction while the remainder will be issued based on Filmocracy achieving certain revenue targets over a six year period (“Filmocracy Transaction”). The Company and Filmocracy are currently negotiating the terms for the definitive agreement. |
In connection with the proposed Filmocracy
Transaction, on September 17, 2021, and subsequently extended on December 17, 2021, February 15, 2022, and March 31, 2022, the Company
entered into an agreement with Filmocracy for $608,735 whereby the Company will advance $608,735 to Filmocracy as follows: (1) $
Page 35 |
Liquid Media Group Ltd.
Notes to Condensed Interim Consolidated Financial Statements
February 28, 2022
(Expressed in United States Dollars - Unaudited)
29. SUBSEQUENT EVENTS
The Company had the following subsequent events, not disclosed elsewhere in these financial statements:
a) | On March 3, 2022, the Company issued | common shares in relation to the vesting of restricted share units.
b) | On March 7, 2022, the Company acquired 100% of the issued and outstanding shares of Digital Cinema United Holding Ltd. (“DCU”) (“DCU Shares”), in accordance with a Securities Exchange Agreement (“DCU SEA”), for common shares of the Company which are scheduled to be paid out to DCU shareholders across specific performance milestones in three tranches (“DCU Transaction”) as follows: |
· | On closing of the SEA – | common shares(“Issuer Consideration Shares”) (issued subsequently) of Liquid;
· | Issuer Additional Shares: |
o | Upon DCU achieving cumulative consolidated revenues of $4,750,000 before the fifth anniversary of the closing date (“DCU First Milepost”) – greater of (i) 750,000 common shares of Liquid and (ii) 3,750,000 divided by a per share price of the greater of $1.25 or the five-day Volume Weighted Average Price of Liquid common shares immediately prior to the achievement of the First Milepost. |
o | Upon DCU achieving cumulative consolidated revenues of $10,287,000 (“DCU Second Milepost”) after the DCU First Milepost but before the fifth anniversary of the closing date; - the greater of (i) 3,750,000 divided by (A) the greater of $1.25 or (B) the five-day Volume Weighted Average Price of Liquid common shares immediately prior to the achievement of the DCU First Milepost; and (ii) 5,625,000, less (A) 3,000,000 and (B) the number of Issuer Additional Shares issued on achievement of the First Milepost. |
For additional clarification, the minimum aggregate total (i) Issuer Consideration Shares and (ii) Issuer Additional Shares issuable in connection with the achievement of both the First Milepost and Second Milepost is 5,625,000.
Included in the DCU SEA is a buyback right that entitles the DCU shareholders to acquire the DCU Shares from the Company should the Company’s shares be delisted for more than 180 days for the following consideration:
· | all shares of the Company issued to the DCU shareholders; |
· | any cash advanced to DCU by the Company; and |
· | interest on each amount of cash advanced at a rate of 6%, compounded annually in arrears. |
In connection with the DCU Transaction,
on August 31, 2021, the Company entered into an agreement with DCU whereby the Company advanced $1,147,928 to DCU as follows: (1) $
The acquisition will be accounted for using the acquisition method pursuant to IFRS 3, Business Combinations. Under the acquisition method, assets and liabilities are recorded at their fair values on the date of acquisition and the total consideration is allocated to the assets acquired and liabilities assumed. The excess consideration given over the fair value of the net assets acquired will be recorded as goodwill.
The initial accounting for the acquisition was not complete by the issuance date of these condensed interim consolidated financial statements.
Page 36
Exhibit 99.2
LIQUID MEDIA GROUP LTD.
Management’s Discussion and Analysis
For the three months ended February 28, 2022
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT’S DISCUSSION AND ANALYSIS
This Management’s Discussion and Analysis (“MD&A”) of Liquid Media Group Ltd. (“Liquid” or the “Company”), provides analysis of the Company’s financial results for the three months ended February 28, 2022. The following information should be read in conjunction with the accompanying unaudited condensed interim consolidated financial statements and accompanying notes for the three months ended February 28, 2022 (“Interim Financial Statements”) and the audited consolidated financial statements and accompanying notes for the year ended November 30, 2021 (“Annual Financial Statements”) which have been prepared in accordance with International Financial Reporting Standards (“IFRS”). The Board of Directors of the Company have approved the information and disclosures contained in this MD&A. This MD&A is dated as at April 21, 2022. All figures are in United States dollars unless otherwise noted. Additional information relating to the Company is available on SEDAR at www.sedar.com.
As at November 30, 2021, the Company changed its accounting policy to present its results in United States dollars instead of Canadian dollars as done previously. This accounting change has been applied retrospectively in preparing the Annual Financial Statements; as such, all comparative figures have been restated to reflect this change.
FORWARD-LOOKING STATEMENTS
This report includes “forward-looking information” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements which are not historical facts, are forward-looking statements. The Company, through its management, makes forward-looking public statements concerning its expected future operations, performance and other developments. The words “believe”, “intend”, “expect”, “anticipate”, “project”, “estimate”, “predict” and similar expressions are also intended to identify forward-looking statements. Forward-looking statements are not guarantees of future performance and are subject to a wide range of known and unknown risks and uncertainties and although the Company believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that such expectations will be realized. Forward-looking statements relate to, among other things: business objectives, goals and strategic plans; operating strategies; expected future revenues, earnings and margins; anticipated operating, selling and general and administrative costs; and anticipated capital expenditures.
Such forward-looking statements are necessarily estimates reflecting the Company's best judgment based upon current information and involve a number of risks and uncertainties, and there can be no assurance that other factors will not affect the accuracy of such forward-looking statements. For all such forward-looking statements, we claim the safe harbor for forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.
All forward-looking statements speak only as of the date made. All subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances.
2
MANAGEMENT'S DISCUSSION AND ANALYSIS
COMPANY BACKGROUND AND DESCRIPTION OF THE BUSINESS
The Company is the parent company of Liquid Media Group (Canada) Ltd. (“Liquid Canada”), Liquid Media Production Funding Ltd. (“Liquid Production Funding”), Liquid Media Group (US) Inc. (“Liquid US”) and, indirectly, IndieFlix Group, Inc. (“IndieFlix”), iGems TV, Inc. (“iGEMS”), and Digital Cinema United Holdings Ltd. (“DCU”). Liquid is a business solutions company empowering independent film and TV content creators to package, finance, deliver and monetize their intellectual property globally. Liquid’s four stage end-to-end solution will enable professional video creators to take their content from inception through the entire process to monetization. Liquid’s platform is expected to leverage sophisticated artificial intelligence (AI) and big data analytics technology, informed process structuring, financial risk reduction and funding, production best practices, together with monetization expertise to ensure recoupment and profitability of IP across diverse distribution. This will be accomplished through existing assets, recently completed acquisitions of IndieFlix, iGEMS, and DCU, the proposed acquisition of Filmdab, Inc. (“Filmocracy”), future acquisitions, and strategic partnerships including distribution agreements with InsightTV and dotstudioPRO, which bring total audience reach to nearly a billion households worldwide.
Current Year Summary
On January 21, 2022 the Company announced the presentation of IndieFlix’s original documentary ANGST streaming on blockchain technology in partnership with Eluvio. Additionally, the Company announced the creation of the ANGST NFT Collection.
On January 26, 2022, the Company announced the engagement of North Equities Corp. to facilitate increased social media growth and investor engagement on behalf of the Company.
Completed Acquisitions
a) | On December 14, 2021, the Company acquired 100% of the issued and outstanding shares of iGEMS in accordance with an Agreement and Plan of Merger (“iGEMS Agreement”). As consideration, the Company will issue up to 850,000 common shares of the Company to the former shareholders of iGEMS upon iGEMS achieving total cumulative revenue of $9,413,550 before the sixth anniversary of the closing date as follows (“iGEMS Transaction”): |
· | 212,500 common shares on closing of the agreement (issued subsequently); |
· | 212,500 common shares upon iGEMS achieving revenue of $473,577 (“iGEMS First Milepost”); |
· | 212,500 common shares upon iGEMS achieving revenue of $2,401,384 (“iGEMS Second Milepost”); |
· | 212,500, or such lesser number based on a pro rata amount of iGEMS revenue recognized relative to the iGEMS Third Milepost, common shares upon iGEMS achieving revenue of $9,413,550 (“iGEMS Third Milepost”). |
On December 14, 2021, the Company closed the agreement and issued 212,500 common shares accordingly.
Refer to Note 4 of the Annual Financial Statements for additional details of this acquisition.
3
MANAGEMENT'S DISCUSSION AND ANALYSIS
b) | On March 7, 2022, the Company acquired 100% of the issued and outstanding shares of DCU (“DCU Shares”), in accordance with a Securities Exchange Agreement (“DCU SEA”), for common shares of the Company which are scheduled to be paid out to DCU shareholders across specific performance milestones in three tranches (“DCU Transaction”) as follows: |
a. | On closing of the SEA – 3,000,000 common shares (“Issuer Consideration Shares”) (issued subsequently) of Liquid; |
b. | Issuer Additional Shares. |
· | Upon DCU achieving cumulative consolidated revenues of $4,750,000 before the fifth anniversary of the closing date (“DCU First Milepost”) – greater of: (i) 750,000 common shares of Liquid and (ii) 3,750,000 divided by a per share price of the greater of $1.25 or the five-day Volume Weighted Average Price of Liquid common shares immediately prior to the achievement of the First Milepost. |
· | Upon DCU achieving cumulative consolidated revenues of $10,287,000 (“DCU Second Milepost”) after the DCU First Milepost but before the fifth anniversary of the closing date; – the greater of (i) 3,750,000 divided by (a) the greater of $1.25 or (b) the five-day Volume Weighted Average Price of Liquid common shares immediately prior to the achievement of the DCU First Milepost;and (ii) 5,625,000, less (A) 3,000,000 and (B) the number of Issuer Additional Shares issued on achievement of the First Milepost . |
For additional clarification, the minimum aggregate total (i) Issuer Consideration Shares and (ii) Issuer Additional Shares issuable in connection with the achievement of both the First Milepost and Second Milepost is 5,625,000.
Refer to Note 29 of the Annual Financial Statements for additional details of this acquisition.
Proposed Acquisitions
On June 7, 2021, the Company entered into a Letter of Intent with Filmocracy for the Company to acquire 100% of the issued and outstanding shares of Filmocracy by issuing up to 1,250,000 common shares of the Company to the shareholders of Filmocracy. 25% of the consideration shares will be issued to the shareholders of Filmocracy on closing of the proposed transaction while the remainder will be issued based on Filmocracy achieving certain revenue targets over a six year period (“Filmocracy Transaction”). The Company and Filmocracy are currently negotiating the terms for the definitive agreement.
In connection with the proposed Filmocracy Transaction, on September 17, 2021, and subsequently extended on December 17, 2021 and February 15, 2022, the Company entered into an agreement with Filmocracy for $608,735 whereby the Company will advance $608,735 to Filmocracy as follows: (1) $244,292 upon the date of the agreement (advanced September 21, 2021); (2) $190,594 on the first month anniversary (advanced October 25, 2021); and (3) $173,849 on the second month anniversary (not yet advanced). The agreement bears interest at 6% per annum, is due on the earlier of April 30, 2022 or 30 days following the termination of the Filmocracy Transaction, and is secured by a general security agreement over certain assets. In the event that the proposed transaction does not close, all amounts outstanding shall bear interest at 24% per annum.
Financings
a) | On December 14, 2021, the Company issued 212,500 common shares valued at $233,750 for the acquisition of 100% of the outstanding shares of iGEMS. |
Subsequent Events
a) | On March 3, 2022, the Company issued 163,957 common shares in relation to the vesting of 163,957 restricted share units. |
b) | On March 7, the Company acquired DCU. Refer to the subsection Completed Acquisitions above for full details. |
4
MANAGEMENT'S DISCUSSION AND ANALYSIS
b) | On March 17, 2022, the U.S. Small Business Administration (“SBA”) provided an additional six month deferment for IndieFlix’s SBA Loan where the first payment has been deferred to 30 months from the date of the first advance from 24 months. |
c) | On March 14, 2022, the Company announced the presentation of IndieFlix’s original documentary RACE to be Human streaming on Eluvio’s blockchain technology in partnership with Eluvio. Additionally, the Company announced the creation of the RACE to be Human NFT Collection. |
CRITICAL JUDGEMENTS AND ESTIMATES
The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the period. Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates. Significant estimates and judgements made by management in the preparation of these consolidated financial statements are outlined below.
Uncertainty of COVID-19 pandemic
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, initially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and solutions and harm our business and results of operations; however, the Company has also recognized that the pandemic has led to a global increase in screen time which is beneficial to the Company’s operations. As countries continue to re-open from the pandemic, it is possible that screen time will decrease which may adversely affect the Company; however, it also leads to an increase in film and TV content being produced as film and TV producers are able to travel and continue operations leading to an increase in content available for the Company to package, finance, deliver, and monetize. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations, or how it will impact the Company’s ability to conduct financings at this time.
Functional currency
The functional currency of the Company and its subsidiaries is the United States dollar; however, determination of functional currency may involve certain judgments to determine the primary economic environment which is re-evaluated for each new entity or if conditions change.
Level of control or influence over companies
The accounting for investments in other companies can vary depending on the degree of control and influence over those other companies. Management is required to assess at each reporting date the Company’s control and influence over these other companies. Management has used its judgment to determine which companies are controlled and require consolidation and those which are significantly influenced and require equity accounting. The Company had considered its ownership position in Waterproof Studios Inc. (“Waterproof”) and determined it did not have the ability to influence the key operating activities of the entity. Accordingly, the Company accounted for its investment under fair value through profit or loss up to the disposal date of October 18, 2021.
Income taxes
In assessing the probability of realizing income tax assets, management makes estimates related to expectation of future taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS
Determination of Cash Generating Units (“CGUs”)
CGUs are the lowest level within an entity at which goodwill is monitored for internal management purposes which is not higher than an operating segment. The Company has assessed that each acquired entity is a separate CGU.
Valuation of share-based compensation and derivatives
The Company uses the Black-Scholes Option Pricing Model for valuation of share-based compensation and other equity based payments, excluding contingent consideration. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate, and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity reserves.
Valuation of contingent consideration
The Company uses a probability scenario based approached for valuation of share-based contingent consideration. Under the probability scenario based approach, management calculates the probability that the contingent shares will be issued under a low case, base case, and high case scenario. Changes in the probabilities can materially affect the fair value estimate and the Company’s earnings and equity reserves.
Valuation of intangible assets
Intangible assets are assessed for impairment indicators at each reporting date. Management first reviews qualitative factors in determining if an impairment needs to be recorded. Quantitative factors are then used to calculate the amount of impairment, if needed.
Valuation of investment in equity instrument
The Company values its equity instruments in private companies at fair value at each reporting date. The determination of fair value is based on estimates made by management on the expected earnings before income, taxes, and amortization multiplied by a reasonable factor for the appropriate industry applicable to the private company.
Estimation of expected credit loss
Loans receivable are assessed for an estimated credit loss at each reporting date. The estimated loss is determined based on management’s knowledge of the debtor and their ability to repay the loan. As the current debtors’ are private entities, management must rely on assertions provided to them from the debtor to make their estimates.
Valuation of convertible debentures
The equity portion of the convertible debenture is calculated using a discounted cash flow method which requires management to make an estimate on an appropriate discount rate.
Valuation of right-of-use asset and lease liability
The application of IFRS 16 requires the Company to make judgments that affect the valuation of the right-of-use assets and the valuation of lease liabilities. These include: determining the contract term and determining the interest rate used for discounting of future cash flows.
The lease term determined by the Company is comprised of the non-cancellable period of lease agreements, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.
The present value of the lease payment is determined using a discount rate representing the rate of a commercial mortgage rate, observed in the period when the lease agreement commences or is modified.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS
SELECTED QUARTERLY INFORMATION
The following financial data is derived from the Company’s unaudited condensed interim consolidated financial statements for the three months ended February 28, 2022 and 2021. The presentational and functional currency of the financial data is in United States dollars.
Three Months Ended February 28, | ||||
2022 | 2021 | |||
Sales | 577,689 | 8,882 | ||
Cost of sales | (538,413) | (136,863) | ||
Gross profit (loss) | 39,276 | (127,981) | ||
Operating expenses | (1,812,521) | (1,840,328) | ||
Other income (expenses) | 799,584 | 450,166 | ||
Loss before income tax | (973,661) | (1,518,143) | ||
Income tax expense (recovery) | (102,941) | - | ||
Loss and comprehensive loss for the period | (870,720) | (1,518,143) | ||
Basic and diluted loss per common share | (0.05) | (0.14) | ||
Working capital | 2,972,096 | 4,584,857 | ||
Total assets | 11,259,055 | 11,566,280 | ||
Total long-term liabilities | 1,864,588 | 2,272,057 |
RESULTS OF OPERATIONS – Three Months Ended February 28, 2022
During the quarter ended February 28, 2022, the Company’s primary focus was on execution of its strategic plan, including operating the recently acquired companies, moving the uncompleted acquisitions to completion, and entering into certain strategic relationships and distribution agreements. The first of those acquisitions (IndieFlix) was completed on September 21, 2021 while the second acquisition (iGEMS) was completed on December 14, 2021. The financial results of the operations of IndieFlix and iGEMS are included in the consolidated results of the Company from those dates of closing forward.
Sales
Sales increased by $568,807 to $577,689 for the quarter ended February 28, 2022 from $8,882 for the comparable period in 2021 due to the acquisition of IndieFlix on September 21, 2021.
Gross Profit (Loss)
Gross profit increased by $167,228 to $39,276 for the quarter ended February 28, 2022 from a loss of $127,981 for the comparable period in 2021. The increase in gross profit is attributable to the Company acquiring IndieFlix which had a positive gross profit prior to the acquisition and the Company writing off three license agreements during 2021 that no longer needed to be amortized during the current quarter.
Included in the cost of sales is $92,392 of amortization for the distribution libraries acquired on the purchase of IndieFlix.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS
Operating Expenses
For the quarter ended February 28, 2022, operating expenses decreased by $27,807 from $1,840,328 in the quarter ended February 28, 2021 to $1,812,521 in the quarter ended February 28, 2022 primarily as a result of:
Operating Expense | Increase / Decrease in Expenses |
Explanation for Change
|
Consulting fees | Decrease of $166,366 | Decreased due to fewer consultants being engaged during the current period. |
Management and directors salaries and fees | Increase of $124,868 | Increased due to the addition of two members to the management team – one for IndieFlix and one for iGEMS – and the increase in salaries paid to the CEO compared to 2021 Q1. |
Marketing | Decrease of $54,391 | Decreased due to the comparative period including a seven month digital marketing campaign that commenced in 2020 Q3. The decrease was partially offset by marketing incurred by IndieFlix and iGEMS which did not appear in the comparative period total. |
Other general and administrative expenses | Increase of $79,647 | Increased due to the acquisition of IndieFlix in 2021 Q4 and iGEMS at the beginning of 2022 Q1. |
Professional fees | Increase of $212,149 | Increased due to additional legal fees being incurred for the proposed and completed acquisitions. |
Share-based compensation (“SBC”) | Decrease of $591,209 | Decreased due to fewer unvested RSUs and share options outstanding that are subject to graded vesting. |
Salaries and benefits | Increase of $426,903 | Increased due to the acquisition of IndieFlix in 2021 Q4. |
Other Income (Expenses)
In addition to the above, the Company reported the following variations for the quarter ended February 28, 2022 as compared to the quarter ended February 28, 2021:
· | an increase in gain on derivative liability of $779,684 due to the revaluation of the IndieFlix contingent liability at quarter end and the addition of the iGEMS contingent liability during the quarter. |
· | Company’s derivatives held at November 30, 2021 being reevaluated at February 28, 2022 and a new derivative liability being set up in 2022 Q1 for the acquisition of iGEMS. |
· | a decrease in the unrealized gains on equity instruments of $456,373 relating to the revaluation of the Company’s investment in Waterproof as the investment was disposed of during 2021 Q4. |
Registered Direct Offering
On March 22, 2021, the Company closed its Registered Direct Offering by issuing 1,791,045 common shares of the Company at $3.35 per common share for total proceeds of $6,000,000, the principal purposes for which such proceeds were intended to be used as follows:
Use of Proceeds | Approximate Amount Expended as of the Date Hereof |
$ | |
Working capital purposes | 449,000 |
Expanding existing business or acquiring or investing in businesses | 2,208,000 |
Debt reduction or debt refinancing | 41,000 |
Capital expenditures | - |
Other general corporate purposes | 3,302,000 |
TOTAL | 6,000,000 |
8
MANAGEMENT'S DISCUSSION AND ANALYSIS
SUMMARY OF QUARTERLY RESULTS FOR THE LAST CONSECUTIVE EIGHT QUARTERS
The following table presents the unaudited summarized financial information for the last eight quarters:
Q1 | Q4 | Q3 | Q2 | |
F2022 | F2021 | F2021 | F2021 | |
$ | $ | $ | $ | |
Sales | 577,689 | 752,170 | 5,365 | 1,373 |
Cost of sales | (538,413) | (451,076) | (51,927) | (131,679) |
Gross profit (loss) | 39,276 | 301,094 | (46,562) | (130,306) |
Operating expenses | (1,812,521) | (1,870,307) | (1,007,645) | (1,411,875) |
Other income (expenses) | 799,584 | (7,109,213) | 190,672 | (184,851) |
Loss before income taxes | (973,661) | (8,678,426) | (863,535) | (1,727,032) |
Income tax (expense) recovery | (102,941) | 7,765 | - | - |
Loss for the period | (870,720) | (8,670,661) | (863,535) | (1,727,032) |
Loss per share | (0.05) | (0.55) | (0.06) | (0.13) |
Weighted average shares | 16,004,495 | 15,660,338 | 14,638,598 | 13,631,064 |
Q1 | Q4 | Q3 | Q2 | |
F2021 | F2020 | F2020 | F2020 | |
$ | $ | $ | $ | |
Sales | 8,882 | 19,277 | 5,028 | 5,391 |
Cost of sales | (136,863) | (130,429) | (137,587) | (127,517) |
Gross profit (loss) | (127,981) | (111,152) | (132,559) | (122,126) |
Operating expenses | (1,840,328) | (2,109,511) | (1,735,017) | (631,027) |
Other income (expenses) | 450,166 | 1,226,785 | 330,262 | 511,224 |
Loss before income taxes | (1,518,143) | (993,878) | (1,537,314) | (241,929) |
Income tax (expense) recovery | - | - | - | - |
Loss attributable to Liquid from continuing operations | (1,518,143) | (993,878) | (1,537,314) | (241,929) |
Profit (loss) from discontinued operations | - | - | (2,163,243) | 76,117 |
Loss for the period | (1,518,143) | (993,878) | (3,700,557) | (165,812) |
Non-controlling interest | - | - | (1,451,495) | 37,297 |
Loss attributable to shareholders of the Company | (1,518,143) | (993,878) | (2,249,062) | (203,109) |
Loss per share | (0.14) | (0.10) | (0.28) | (0.03) |
Weighted average shares | 10,541,439 | 10,026,148 | 7,926,936 | 5,932,016 |
The following one-time events also occurred:
· | the quarter ended August 31, 2020 (2020 Q3) included share-based compensation of $592,854 due to the granting of stock options during the quarter and additional marketing costs of $401,343 from the commencement of a new marketing campaign; |
· | the quarter ended November 30, 2020 (2020 Q4) included share-based compensation of $694,010 due to the granting of RSUs, incurred additional marketing costs of $451,700 from the marketing campaign which commenced in 2020 Q2, and recorded $326,930 of research and development costs. Additionally, the Company recorded an unrealized gain of $1,359,027 on its investment in Waterproof during 2020 Q4; |
· | the quarter ended February 28, 2021 (2021 Q1) included share-based compensation of $731,079 due to the granting of stock options during the quarter and the graded vesting of previously granted RSUs. Additionally, the Company recorded an unrealized gain of $456,373 on its investment in Waterproof during 2021 Q1; |
9
MANAGEMENT'S DISCUSSION AND ANALYSIS
· | the quarter ended May 31, 2021 (2021 Q2) included the write-off two licenses for $481,026 and recorded share-based compensation of $470,962 for previously granted stock options and RSUs subject to graded vesting. Additionally, the Company recorded an unrealized gain of $499,860 on its investment in Waterproof during 2021 Q2; |
· | the quarter ended August 31, 2021 (2021 Q3) included share-based compensation of $323,065 for previously granted stock options and RSUs subject to graded vesting; |
· | the quarter ended November 30, 2021 (2021 Q4) included the recording of $509,200 in professional fees which includes additional fees for the completed and proposed acquisitions of IndieFlix, iGEMS, and DCU, the impairment of intangibles of $4,214,445 for the write-down of the video game catalogue and platform coding, and a loss on the disposal of its investment in Waterproof of $3,438,560; and |
· | the quarter ended February 28, 2022 (2022 Q1) included the recording of $329,065 in professional fees which includes additional fees for the completed and proposed acquisitions of iGEMS and DCU and a gain of derivative liability of $756,835 from the revaluation of the IndieFlix contingent liability and the addition of the iGEMS contingent liability. |
The quarterly losses are also impacted by the non-cash fluctuations in the fair value of the Company’s amortization of licensing agreements and intangible assets, gains and losses on debt settlements and derivative liabilities, and other corporate costs. .
LIQUIDITY AND CAPITAL RESOURCES
As at February 28, 2022, the Company has current assets of $5,822,075 and current liabilities of $2,849,979, which results in working capital of $2,972,096 (November 30, 2021 – working capital of $4,584,857).
The Company does not have adequate operating revenue to finance its existing obligations and therefore must continue to rely on external financing to generate capital to maintain its capacity to meet working capital requirements. The Company has relied on debt and equity raises to finance its operating activities since incorporation. The Company intends to continue to rely on debt and the issuance of shares to finance its operations. However, there is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company.
Cash Flows
The table below sets forth a summary of cash flow activity and should be read in conjunction with the Company’s cash flow statements:
Three Months Ended February 28, | ||
2021 | 2020 | |
$ | $ | |
Cash flows used in operating activities | (671,472) | (451,886) |
Cash flows used in investing activities | (49,621) | - |
Cash flows provided by (used in) financing activities | (16,065) | 225,793 |
Effect of foreign exchange on cash | 6,302 | 3,121 |
Increase (decrease) in cash during the period | (730,856) | (223,392) |
Cash, beginning of period | 4,305,461 | 543,749 |
Cash, end of period | 3,574,605 | 320,357 |
10
MANAGEMENT'S DISCUSSION AND ANALYSIS
The cash flow used in operating activities for three months ended February 28, 2022 increased by $219,586 compared to the comparative period. The use of cash flows from operating activities represents the effect on cash flows from net losses adjusted for items not affecting cash, principally: accrued interest income and expenses, amortization and accretion, share-based compensation expense, changes in the value of derivatives, gains and losses on the settlement of debt, unrealized foreign exchange, unrealized gains on the revaluation of equity instruments, and the write off and impairments of various items, in addition to net changes in non-cash balances relating to operations.
Cash used by investing activities for three months ended February 28, 2022 increased by $49,621 compared to the comparative period mostly due to the Company investing funds to advance films being developed by IndieFlix.
Cash provided by financing activities for three months ended February 28, 2022 decreased by $241,438 compared to the comparative period mostly due to the comparative period including the receipt of $227,793 from the exercise of warrants.
Contractual Obligations | Payments Due by Period | ||||
Total | Less than 1 year | 1 – 3 years | 4 – 5 years | After 5 Years | |
$ | $ | $ | $ | $ | |
Debt | 339,636 | 4,092 | 24,552 | 24,552 | 286,440 |
Financial Lease Obligations | 124,000 | 66,150 | 57,850 | - | - |
Total Contractual Obligations | 463,636 | 70,242 | 82,402 | 24,552 | 286,440 |
OFF BALANCE SHEET ARRANGEMENTS
The Company did not have any off balance sheet arrangements as at February 28, 2022 or November 30, 2021.
COMMITMENTS
As at February 28, 2022 and the date of this report, the Company did not have any commitments not disclosed elsewhere.
CONTINGENCIES
On December 1, 2021, a consultant commenced an action against the Company in which the Plaintiff claims that the Company is in breach of contract and owes the consultant 175,000 common shares of the Company and $500,000, or alternatively, 250,000 common shares of the Company valued at $500,000. The Plaintiff is also requesting a judgement for costs, interest, and special damages. In December 2021, the Company filed a Response to Civil Claim denying the Plaintiffs’ claims for which the Plaintiff filed a Reply. The litigation is at an early stage.
TRANSACTIONS WITH RELATED PARTIES
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.
11
MANAGEMENT'S DISCUSSION AND ANALYSIS
In November 2020, the Company signed employment agreements with Charlie Brezer, President and a director of the Company, and Daniel Cruz, former CFO and director of the Company. The agreements require total payments of CAD$17,500 each per month. Included in the agreements is a provision for 12 months written notice or salary paid in lieu of notice upon termination without just cause. In April 2021, Mr. Cruz’s agreement was terminated and replaced with a consulting agreement with the same terms.
In January 2021, the Company signed an employment agreement with Ronald Thomson, the new CEO of the Company. The agreement requires payments of CAD$20,000 per month. Included in the agreement is: (1) a provision for three months written notice or salary paid in lieu of notice upon termination without just cause and (2) a provision to increase the base salary to CAD$30,000 per month, retroactive to January 1, 2021, upon the Company raising US$5 million in funding (which was achieved).
During the three months ended February 28, 2022, the Company entered into the following transactions with related parties:
a) | Incurred management and directors salaries and fees of $41,312 (February 28, 2021 - $42,083) and share-based compensation of $17,820 (February 28, 2021 - $115,686) to Charlie Brezer. As at February 28, 2022, Mr. Brezer owed the Company $1,347 (November 30, 2021 – $2,215) which was included in accounts payable and accrued liabilities. |
b) | Incurred management and directors salaries and fees of $nil (February 28, 2021 - $42,083) and share-based compensation of $nil (February 28, 2021 - $119,281) to Daniel Cruz. As at February 28, 2022, $133,779 (November 30, 2021 - $133,779) was included in accounts payable and accrued liabilities as owing to Mr. Cruz. |
c) | Incurred management and directors salaries and fees of $70,775 (February 28, 2021 - $47,187) and share-based compensation of $77,754 (February 28, 2021 - $137,118) to Ronald Thomson and rent of $11,056 (February 28, 2021 - $nil) to Cameron Thomson Group Ltd. a company Mr. Thomson is a director and shareholder of. |
d) | Incurred directors fees of $1,181 (February 28, 2021 - $1,182) and share-based compensation of $17,820 (February 28, 2021 - $106,443) to Joshua Jackson, Chairman and a director of the Company. As at February 28, 2022, $10,463 (November 30, 2021 - $9,213) was included in accounts payable and accrued liabilities as owing to Mr. Jackson. |
e) | Incurred directors fees of $1,181 (February 28, 2021 - $1,182) and share-based compensation of $1,817 (February 28, 2021 - $14,626) to Stephen Jackson, a director of the Company. As at February 28, 2022, $1,181 (November 30, 2021 - $1,304 owed from) was included in accounts payable and accrued liabilities as owing to Mr. Jackson |
f) | Incurred directors fees of $1,181 (February 28, 2021 - $1,182) and share-based compensation of $1,817 (February 28, 2021 - $12,162) to Nancy Basi, a director of the Company. As at February 28, 2022, $1,181 (November 30, 2021 - $1,470) was included in accounts payable and accrued liabilities as owing to Ms. Basi. |
g) | Incurred management and directors salaries and fees of $39,421 (February 28, 2021 - $nil) to Andy Wilson, the new CFO of the Company. As at February 28, 2022, $nil (November 30, 2021 - $51,704) was included in accounts payable and accrued liabilities as owing to Mr. Wilson. |
h) | Incurred management and directors salaries and fees of $43,750 (February 28, 2021 - $nil) to Scilla Andreen, a director of IndieFlix. As at November 30, 2021, $40,169 (November 30, 2021 - $82,839) was included in accounts payable and accrued liabilities as owing to Ms. Andreen. |
i) | Incurred management and directors salaries and fees of $39,954 (February 28, 2021 - $nil) to Jon Fitzgerald, a director of iGEMS, and content curation fees, included in cost of sales, of $19,500 (February 28, 2021 - $nil) to Cause Pictures, a company controlled by Mr. Fitzgerald. As at February 28, 2022, Mr. Fitzgerald owed the Company $14,010 (November 30, 2021 – $nil) which was included in receivables. |
12
MANAGEMENT'S DISCUSSION AND ANALYSIS
j) | Earned sales of $207,856 (February 28, 2021– $nil) from IndieFlix Foundation, a company Ms. Andreen is a director of. As at February 28, 2022, IndieFlix Foundation owed the Company $nil (November 30, 2021 - $308,631) which is included in receivables. |
k) | Paid royalties, included in cost of sales, of $107,610 (February 28, 2021 - $nil) to Angst, LLC, an entity managed by IndieFlix, and received royalty income of $12,068 (February 28, 2021 - $nil). At February 28, 2022, $192,212 (November 30, 2021 - $184,627) was included in accounts payable and accrued liabilities as owing Angst, LLC and $12,913 (November 30, 2021 - $nil) was included in receivables as receivable from Angst, LLC. |
l) | Paid royalties, included in cost of sales, of $11,384 (February 28, 2021 - $nil) to Bully Factor, LLC, an entity managed by IndieFlix. At February 28, 2022, Bully Factor, LLC owed the Company $30,272 (November 30, 2021 - $41,656) which is included in receivables. |
m) | Paid royalties, included in cost of sales, of $35,205 (February 28, 2021 - $nil) to LIKE, LLC, an entity managed by IndieFlix. At February 28, 2022, LIKE, LLC owed the Company $14,661 (November 30, 2021 - $49,566) which is included in receivables. |
Summary of key management personnel compensation:
Three Months Ended February 28, | |||
2022 | 2021 | ||
$ | $ | ||
Management and directors salaries and fees | 238,755 | 134,899 | |
Share-based compensation | 117,028 | 505,316 | |
355,783 | 640,215 |
These expenditures were measured by amounts agreed upon by the transacting parties.
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
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 – Unobservable inputs that are supported by little or no market activity, therefore requiring an entity to develop its own assumptions about the assumption that market participants would use in pricing. |
The Company’s financial instruments consist of cash, restricted cash, receivables, accounts payable, and long-term debt. The fair value of receivables and accounts payable approximates their carrying values. Long-term debt has been valued using a valuation methodology on initial recognition. Cash and restricted cash is measured at fair value using level 1 inputs. The derivative liability for the warrants is measured using level 2 inputs. The derivative liability for the contingent consideration was measured at fair value using level 3 inputs.
13
MANAGEMENT'S DISCUSSION AND ANALYSIS
As at February 28, 2022, the fair value of the level 3 derivative liability was $991,886 (November 30, 2021 - $1,277,200) based on management’s estimate of probabilities on the likelihood of IndieFlix and iGEMS achieving the projected revenue targets and the Company issuing the resulting common shares to the former noteholders of IndieFlix and shareholders of iGEMS. Management the assessed the probabilities on a low case, base case, and high case scenario with a 20%, 60%, and 20% probability, respectively, of occurring to determine a weighted average number of expected common shares to be issued. The Company’s investment in IndieFlix and iGEMS did not have a quoted market price on an active market and the Company assessed the fair value of the investment based on IndieFlix’s and iGEMS’ unobservable expected earnings. As a result, the fair values were classified as level 3 of the fair value hierarchy. The process of estimating the fair value of the contingent considerations was based on inherent measurement uncertainties and was based on techniques and assumptions that emphasize both qualitative and quantitative information. As at February 28, 2022, a 10% change in the number of expected common shares to be issued or a 10% change in the Company’s share price would change comprehensive income (loss) by approximately $99,000.
The Company is exposed to a variety of financial risks by virtue of its activities including currency, credit, interest rate, and liquidity risk.
a) | Currency risk |
Foreign currency exchange rate risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. The Company’s operations are carried out in Canada and the United States. As the Company’s functional currency is USD, the Company is subject to foreign currency exchange rate risk on its net assets denominated in CAD which could have an adverse effect on the profitability of the Company. As at February 28, 2022, the Company had assets totaling CAD$570,832 and liabilities totalling CAD$758,239. A 10% change in the exchange rate would change comprehensive income (loss) by approximately $15,000. The Company currently does not have plans to enter into foreign currency future contracts to mitigate this risk, however it may do so in the future.
b) | Credit risk |
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
The Company’s cash is held in large Canadian and United States financial institutions. The Company maintains certain cash deposits with Schedule I financial institutions, which from time to time may exceed federally insured limits. The Company has not experienced any significant credit losses and believes it is not exposed to any significant credit risk. The Company’s sales tax receivable is due from the Government of Canada; therefore, the credit risk exposure is low.
The maximum exposure to credit risk as at February 28, 2022 is the carrying value of the receivables and loans receivable. The Company has allowed for an expected credit loss of $356,070 on the loans receivable as at February 28, 2022. As at November 30, 2021, the Company had fully allowed for the loans receivable.
b) | Interest rate risk |
Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company does not hold any financial liabilities with variable interest rates. The Company does maintain bank accounts which earn interest at variable rates but it does not believe it is currently subject to any significant interest rate risk.
14
MANAGEMENT'S DISCUSSION AND ANALYSIS
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. As at February 28, 2022, the Company had a cash balance of $3,574,605 to settle current financial liabilities of $2,849,979. The Company is exposed to liquidity risk.
OTHER RISKS AND UNCERTAINTIES
The business and operations of the Company are subject to numerous risks, many of which are beyond the Company’s control. The Company considers the risks set out below to be some of the most significant to potential investors in the Company, but not all of the risks are associated with an investment in securities of the Company. If any of these risks materialize into actual events or circumstances or other possible additional risks and uncertainties of which the Company is currently unaware or which it considers to be material in relation to the Company’s business actually occur, the Company’s assets, liabilities, financial condition, results of operations (including future results of operations), business and business prospects, are likely to be materially and adversely affected. In such circumstances, the price of the Company’s securities could decline and investors may lose all or part of their investment.
Global Pandemics
In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, initially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and solutions and harm our business and results of operations; however, the Company has also recognized that the pandemic has led to a global increase in screen time which is beneficial to the Company’s operations. As countries continue to re-open from the pandemic, it is possible that screen time will decrease which may adversely affect the Company; however, it also leads to an increase in film and TV content being produced as film and TV producers are able to travel and continue operations leading to an increase in content available for the Company to package, finance, deliver and monetize. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations, or how it will impact the Company’s ability to conduct financings at this time.
Limited Operating History
The Company’s limited operating history and evolving business make the prediction of future results of operations difficult and, therefore, past results should not be taken as indicative of our future performance. You should consider our business and prospects in light of the risks, uncertainties, expenses and challenges that we will face to create a business solution empowering independent film and TV content creators to package, finance, deliver and monetize their intellectual property globally. Previously, the Company had significant focus on the gaming industry and on developing and expanding its services, solutions and operations in that sector. The Company wrote off its investment in the gaming industry during fiscal year ended November 30, 2021. If we fail to address the risks and challenges that we face, our business, financial condition and results of operations could be adversely affected.
15
MANAGEMENT'S DISCUSSION AND ANALYSIS
History of Operating Losses and Negative Cash Flows
Liquid has a history of operating losses and negative cash flows and may continue to incur operating losses and negative cash flows in the future. These operating losses have been generated as the Company attempts to implement its business plan, including expanding its existing products and services and solutions, acquiring synergistic businesses and additional technology, marketing to clients and customers and otherwise growing its business. The Company anticipates that its operating expenses will increase substantially in the foreseeable future as it completes acquisitions in furtherance of its business objectives to enable professional video creators to take their content from inception through the entire process to monetization.
Financing Risks
Liquid has limited capital and may require funds in excess of its existing cash resources to fund operating deficits, develop new services and solutions, establish and expand its marketing capabilities, and finance general and administrative activities. The Company does not currently generate sufficient cash from its businesses to fund its operations. Liquid does not have any bank credit facility or other working capital credit line under which it may borrow funds for working capital or other general corporate purposes. On August 25, 2021 the Company announced the launch of an At-The-Market equity financing program being conducted through Vitru Americas, LLC, but cannot guarantee that it will be successful in raising 100% of the funds it may need in that manner. If the Company does not have, or is not able to obtain, sufficient funds, it may have to delay strategic opportunities, investments, or projects. If Liquid is unable to raise adequate funds, it may have to liquidate some or all of its assets, or delay, reduce the scope of, or eliminate some or all of its work. Any of these actions could have a material adverse effect on Liquid’s business, results of operations or financial condition.
Failure to successfully implement business plan.
Liquid’s business plan is to create a business solution empowering independent film and TV content creators to package, finance, deliver and monetize their intellectual property globally. While the Company believes that the market of independent content creators is large enough to implement its business plan, there is no guarantee that there will be a sufficient market to utilize Liquid’s services or that its services will be profitable. The Company’s ability to serve independent content creators will rely, in large part, its ability to identity and acquire companies which will be successful in implementing its business plan.
Finding and distributing film and TV content and is subject to intense competition.
Liquid’s ability to operate successfully depends upon its ability to identify independent film and TV content creators in order to package, finance, deliver their production content. Poor performance of, disruption in the creation of these production video content, or an inability to identity a sufficient number of independent IP creators to produce video content could hurt The Company’s business and results of its operations.
Dependency of potential growth of business upon ability to consummate strategic acquisitions, including ability to identify suitable candidates/Risk that acquisitions could result in operating and other difficulties relating to integration of new businesses into existing business, dilution to shareholders, and other harmful consequences
Liquid has engaged in strategic transactions, including with respect to acquisitions of technology, content, distribution and other assets relating to its business objectives, and as part of its growth strategy. In addition, the Company intends to continue to pursue strategic acquisitions of businesses, intellectual property and other assets that are complementary to its existing business and may expand its employee base, content portfolio or the breadth of its service and solutions offerings. Liquid’s ability to grow through future acquisitions will depend on the availability of, and its ability to identify, suitable acquisition and investment opportunities at an acceptable cost, its ability to compete effectively to attract those opportunities, the availability of financing to complete acquisitions, and to quickly and efficiently integrate those acquisition into its business. The benefits of an acquisition or investment may also take considerable time to develop, and the Company cannot be certain that any particular acquisition or investment will produce the intended benefits in a timely manner or to the extent anticipated or at all. Integration of a new company’s operations, assets and personnel into Liquid’s will require significant attention from the Company’s management, and the diversion of its management’s attention away from its business and any difficulties encountered in the integration process could harm their ability to manage its business. Future acquisitions will also expose the Company to potential risks, including risks associated with any acquired liabilities, the integration of new operations, technologies and personnel, unforeseen or hidden liabilities and unanticipated, information security vulnerabilities, the diversion of resources from its existing business, sites and technologies, the inability to generate sufficient revenue to offset the costs and expenses of the acquisitions, potential adverse tax and accounting effects, challenges relating to entering markets in which the Company may have limited or no prior experience and in which competitors may have a stronger market position, and potential loss of, or harm to, its relationships with employees, customers, consumers and suppliers as a result of integration of new businesses.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS
Competition
Liquid operates in a highly competitive industry, characterized by pressure to innovate, seek new products properties to develop and distribute. The Company competes against others in obtaining content for its business. Competitors range from large established production companies to emerging start-ups, and the Company expects new competitors to continue to emerge throughout the world. Some competitors have longer operating histories, better distribution channels, large customer bases, stronger brand recognition, exclusive rights to certain content and much greater financial, marketing and other resources, which may enable them to obtain more favorable terms from third parties, adopt more aggressive pricing and devote more resources to the development of their businesses. If Liquid is unable to successfully or profitably compete with current and new competitors, its business will be adversely affected, and it may not be able to gain market share, earn revenue or become profitable.
Dependant on Certain Key Personnel
Liquid’s executive officers are responsible for its management functions and are responsible for strategic identification and development, financing and other critical functions. The Company’s future success depends significantly on their continued service and performance and the expansion of Liquid’s management team. The departure, death, disability or other extended loss of services of any member of the management team, particularly with little or no notice, could cause delays on projects, frustrate growth prospects and could have an adverse impact on client and industry relationships, the Company’s project exploration and development programs, other aspects of its business and financial condition, results of operations, cash flow and prospects.
The Company’s success, growth prospects, and ability to capitalize on market opportunities also depend to a significant extent on its ability to identify, hire, motivate and retain qualified managerial personnel, including additional senior members of management, and creative and technical personnel in a competitive job market. Liquid expects competition for personnel with the specialized creative and technical skills needed to create and operate its products and provide its services and solutions will continue to intensify in the future. The Company’s competitors may be able to offer a work environment with higher compensation or more opportunities to work with cutting-edge technology than we can. Any new personnel the Company hires may not be or become as productive as it expects, and it may face challenges in adequately or appropriately integrating them into its workforce and culture. If Liquid is unable to retain key personnel or appropriately match skill sets with its needs, it would be required to expend significant time and financial resources to identify and hire new qualified personnel and to transfer significant internal historical knowledge, which might significantly delay or prevent the Company’s growth and the achievement of its business objectives.
Limited Public Company Experience of Management
Members of Liquid’s management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws, rules and regulations that govern public companies, including regulatory oversight and public reporting obligations under the federal securities laws. These obligations will require significant attention from management and could divert their attention away from the day-to-day management of Company business. In the event that members of the management team are not successful or efficient as managers of a public company, this could have a material adverse effect on Liquid’s business, financial condition, results of operations, cash flow and prospects. See also “Dependent on Certain Key Personnel” above.
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
Legal Proceedings
From time to time, Liquid may be involved in claims, suits, government investigations, audits and proceedings arising from the ordinary course of its business. Such claims, suits, government investigations, audits and proceedings are inherently uncertain and their results cannot be predicted with certainty. Regardless of the outcome, such legal proceedings can have an adverse impact on the Company because of legal costs, diversion of management resources and other factors.
Management of Potential Growth
For Liquid to succeed, its business needs to experience significant expansion, including by adding to its senior management team. See “Dependent on Certain Key Personnel” above. The Company may not achieve this expansion. This expansion, if accomplished, may place a significant strain on management, operational and financial resources. To manage any material growth, The Company will be required to implement additional operational and financial systems, procedures and controls. It will also be required to expand its finance, administrative and operations staff. Liquid’s current and planned personnel, systems, procedures, controls and infrastructure may not be adequate to support its future operations at any increased level. Any failure to manage growth effectively could give rise to operational errors, loss of business opportunities, loss of employees and reduced productivity, any of which may adversely affect the Company’s ability to compete effectively and otherwise have a material adverse effect on its business, financial condition, results of operations, cash flow and prospects.
Dependence on Trademarks and Copyrights
Liquid holds a number of trademarks and copyrights relating to certain significant properties, services and solutions, and, as part of its growth strategy, expects to continue to pursue the registration of and acquire intellectual property rights, including trademarks and copyrights, for properties, services and solutions it develops and to license intellectual property from third parties for use in its business. The Company relies on trademark laws and contractual provisions to protect these trademarks and copyrights and regard such protection as critical to its success. The contractual arrangements and other steps Liquid has taken to protect its intellectual property are expensive and time-consuming and may not result in intellectual property registrations or may not prevent the misappropriation of the Company’s proprietary information or deter independent development of similar technologies by others. Existing trade secret, copyright and trademark laws offer only limited protection and do not account for common law claims. Furthermore, the monitoring and enforcement against the unauthorized use of the Company’s intellectual property rights, including those rights licensed to it by third parties, could entail significant expenses and could prove difficult or impossible. For example, if litigation is necessary to enforce our intellectual property rights, protect the Company’s trade secrets or determine the validity and scope of proprietary rights claimed by others, any litigation of that nature, regardless of outcome or merit, could result in substantial costs, adverse publicity or diversion of management and technical resources. If Liquid fails to maintain, protect and enhance its intellectual property rights, its business, financial condition, results of operations, cash flow and prospects may be harmed.
In addition, the laws of countries in which Liquid may choose to market its products properties, services and solutions may afford little or no effective protection of the Company’s owned or licensed intellectual property. If Liquid loses some or all of its intellectual property rights, or if any intellectual property rights that it may develop or acquire in the future prove to be deficient, its business may be materially adversely affected.
Intellectual Property Claims
Development of original content, including publication and distribution, sometimes results in claims of intellectual property infringement. Although Liquid makes efforts to ensure its properties, services and solutions do not violate the intellectual property rights of others, it is possible that third parties may still allege infringement. These claims and any litigation resulting from these claims may be time consuming and costly to defend, divert management attention, and result in damage awards payable by the Company. They could also prevent Liquid from selling the affected property, service or solution; or require it to redesign the affected property, service or solution to avoid infringement or obtain a license for future sales of the affected property, service or solution or prevent it from utilizing important technologies, ideas or formats.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS
Governmental regulation and other legal obligations related to privacy and data security, and third parties’ or Liquid’s actual or perceived failure to comply with such obligations.
Third parties with which Liquid does business receive, store and process personal information and other data of consumers of its content. As the Company implements its growth strategy, it may receive, store and process such personal information and consumer data in connection with the provision of its services and solutions. There are numerous federal, state and local laws around the world regarding privacy and data protection and the storing, sharing, use, processing, disclosure and protection of personal information and other customer data, including but not limited to Regulation (EU) 2016/679 (also known as the General Data Protection Regulation or GDPR) and the California Consumer Privacy Act of 2018 (also known as the CCPA). The scope of privacy and data protection laws is constantly evolving, the laws are subject to differing interpretations, and there may be inconsistencies between jurisdictions or conflicts with other rules or codes of conduct to which we are subject or agree to comply. Although Liquid strives to comply with applicable laws, policies, legal obligations and certain industry codes of conduct relating to privacy and data protection, and notwithstanding the views of third parties with which it does business that they comply with such laws, policies, legal obligations and industry codes of conduct, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules, our practices or the practices of third parties with which the Company does business. The costs of compliance with these laws, policies, legal obligations and codes may be significant and may increase in the future. Any failure or perceived failure by Liquid to comply with its privacy policies, its privacy-related obligations to consumers or other third parties, including under applicable security protocols, or its privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other customer data, may result in governmental enforcement actions, litigation or public statements against us by consumer advocacy groups or others and could cause consumers to lose trust in the Company, which could have an adverse effect on its reputation and business, including its relationships with third parties with whom it does business. Additionally, if third parties Liquid works with, such as customers, vendors or developers, violate applicable laws or its policies, such violations may also put its customers’ information at risk and could in turn have an adverse effect on its business.
In addition, many jurisdictions have laws, including but not limited to the GDPR and CCPA, that require minimum information security standards that are often vaguely defined and may be difficult to implement, and that create potential significant liability for failure to meet those standards. Many jurisdictions also have laws requiring notification to individuals and certain regulators when there is a security breach involving personal information. The costs of compliance with these laws may be significant and may increase in the future, and any failure or perceived failure by us to comply with these laws may subject Liquid to significant liability. Responding to a security breach involving personal information often requires significant resources and costs, and could cause consumers to lose trust in the Company, which could have an adverse effect on its reputation and business, including our relationships with third parties with whom it does business.
Security Breaches
A breach, whether physical, electronic or otherwise, of the systems on which Liquid’s sensitive data are stored could lead to damage or piracy of its intellectual property. In addition, certain parties with whom the Company does business are given access to its sensitive and proprietary information in order to provide services and support its team, and certain third parties also license or otherwise provide Liquid with rights to use their intellectual property. These third parties or Liquid’s own employees may misappropriate its information or the third-party intellectual property used in its business and engage in unauthorized use of it. If the Company is subject to data security breaches, it may suffer a loss in sales, increased costs arising from the restoration or implementation of additional security measures, litigation or other legal action and reputational damage, which could materially and adversely affect its business, financial condition, results of operations, cash flow and prospects. Any theft and/or unauthorized use or publication of the Company’s or third parties’ intellectual property, including trade secrets, and other confidential business information as a result of such an event could adversely affect our competitive position, reputation, brand, and future sales of its services and solutions and could adversely affect its relationships with third parties that may be critical to its future success. Liquid’s business could be subject to significant disruption, and it could suffer monetary and other losses and reputational harm, in the event of such incidents and claims.
Risks and exposures related to cybersecurity attacks are expected to remain high for the foreseeable future due to the rapidly evolving nature and sophistication of these threats and also due to the expanding use of technology-based products and services by Liquid and consumers of its services and solutions. In the wake of COVID-19, these risks may be more likely to materialize and may be more severe if they occur, as the Company’s workforce as well as the workforces of the third parties with whom it has business relationships spend a significant amount of time working from home, where data networks may be less secure. The safeguards the Company has in place or may implement in the future may not prevent all unauthorized infiltrations or breaches, and it may suffer losses related to a security breach in the future, which losses may be material.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS
Retention of NASDAQ Listing
The listing of Liquid’s Common Shares on the Nasdaq Stock Market (“Nasdaq”) is contingent on its compliance with the Nasdaq’s conditions for continued listing. On March 1, 2022, the Company received notice from Nasdaq indicating that it was not in compliance with the minimum bid price requirement of US$1.00 per share under the Nasdaq Listing Rules. Under the notice, Liquid is afforded 180 days, or until August 29, 2022, to regain compliance or it may be subject to delisting. In the event the Company’s Common Shares are no longer listed for trading on the Nasdaq, its trading volume and share price may decrease and it may experience difficulties in raising capital which could materially affect its operations and financial results. Further, delisting from the Nasdaq could also have other negative effects, including potential loss of confidence by partners, lenders, suppliers and employees. Finally, delisting could make it harder for Liquid to raise capital and sell securities.
Loss of “Foreign Private Issuer” Status
In order to maintain Liquid’s current status as a foreign private issuer, if more than 50% of its outstanding voting securities are directly or indirectly owned by residents of the U.S., it must not have any of the following: (1) a majority of its executive officers or directors being U.S. citizens or residents, (2) more than 50% of its assets being located in the U.S., or (3) its business being principally administered in the U.S. If Liquid were to lose our foreign private issuer status:
● | it would no longer be exempt from certain of the provisions of U.S. securities laws, such as Regulation FD, the Section 16 disclosure and short swing-profit rules and the requirement to file proxy solicitation materials on Schedule 14A or 14C in connection with meetings of its shareholders; | |
● | it would be required to commence reporting on forms required of U.S. companies, such as Forms 10-K, 10-Q and 8-K, rather than the forms currently available to it, such as Forms 20-F and 6-K; | |
● | it would be subject to additional restrictions on offers and sales of securities outside the U.S., including in Canada; and | |
● | it would lose the ability to rely upon certain exemptions from the Nasdaq corporate governance requirements that are available to foreign private issuers. | |
● | If the Company ceases to qualify as a foreign private issuer, its regulatory and compliance costs may increase significantly in order to comply with the requirements discussed above. |
Characterization as a Passive Foreign Investment Company
If 75% or more of Liquid’s gross income in a taxable year, including its pro-rata share of the gross income of any company, U.S. or foreign, in which it is considered to own, directly or indirectly, 25% or more of the shares by value, is passive income, then we it be a “passive foreign investment company,” or “PFIC,” for U.S. federal income tax purposes. Alternatively, the Company will be considered to be a PFIC if at least 50% of its assets in a taxable year, averaged over the year and ordinarily determined based on fair market value and including our pro-rata share of the assets of any company in which it is considered to own, directly or indirectly, 25% or more of the shares by value, are held for the production of, or produce, passive income. Once treated as a PFIC for any taxable year, a foreign corporation will generally continue to be treated as a PFIC for all subsequent taxable years for any U.S. shareholder who owned shares of the foreign corporation when it was treated as a PFIC. If Liquid were to be a PFIC, and a U.S. shareholder does not make an election to treat it as a “qualified electing fund,” or “QEF,” or a “mark-to-market” election, “excess distributions” to such U.S. shareholder, and any gain recognized by such U.S. shareholder on a disposition of its common shares, would be taxed in an unfavorable way. Among other consequences, Company dividends, to the extent that they constituted excess distributions, would be taxed at the regular rates applicable to ordinary income, rather than the 20% maximum rate applicable to certain dividends received by an individual from a qualified foreign corporation, and certain “interest” charges may apply. In addition, gains on the sale of Liquid common shares would be treated in the same way as excess distributions.
20
MANAGEMENT'S DISCUSSION AND ANALYSIS
The tests for determining PFIC status are applied annually. Liquid has not determined if it is a PFIC for its current, prior and future taxable years. The Company’s PFIC status for any taxable year will depend on the composition of its income and assets and the value of its assets from time to time. If Liquid does become a PFIC, U.S. shareholders who hold common shares during any period when it is a PFIC will be subject to the foregoing rules, even if it ceases to be a PFIC, subject to exceptions for U.S. holders who made timely QEF or mark-to-market elections or certain other elections. Liquid does not currently intend to prepare or provide the information that would enable its common shareholders to make a QEF election.
If the Company does become a PFIC for its current taxable year or any future taxable year, in addition to U.S. holders of its common shares, a U.S. holder of its securities exercisable for or convertible into its common shares during any year in which it is a PFIC would be adversely affected under the foregoing rules even if the Company ceased to be a PFIC. Such U.S. holders should consult their own tax advisers concerning the potential application of the PFIC rules to their investment.
Dilution to Current Shareholders
In order to finance our operations, Liquid has raised funds through the issuance of common shares and securities convertible into common shares and may do so again in future. The Company cannot predict the size of future issuances of common shares or the size or terms of future issuances of debt instruments or other securities convertible into common shares, or the effect, if any, that future issuances and sales of its securities will have on the market price of its common shares. Sales or issuances of substantial numbers of common shares, or the perception that such sales could occur, may adversely affect the market price of Liquid’s common shares. With any additional sale or issuance of common shares, or securities convertible into common shares, our investors will suffer dilution to their voting power.
Payment of Dividends
Liquid has never declared or paid any cash dividends on its common shares and do not intend to pay any cash dividends in the foreseeable future. The Company currently intends to retain any future earnings to fund the growth of its business. Any determination to pay dividends in the future will be at the discretion of Liquid’s board of directors and will depend on its financial condition, results of operations, capital requirements, general business conditions and other factors that the board of directors may deem relevant. As a result, capital appreciation, if any, of the Company’s common shares will be the sole source of gain for the foreseeable future. There is no guarantee that Liquid’s common shares will appreciate in value or even maintain the price at which a shareholder purchased such shareholder’s shares.
Enforcement of Judgements Against the Company
The Company is incorporated under the laws of British Columbia. Currently, all but one of its directors and officers are residents of Canada and some of their assets and operations are located outside of the U.S. It may not be possible for shareholders to enforce in Canada judgments against the Company obtained in the U.S., including actions predicated upon the civil liability provisions of the U.S. federal securities laws. While reciprocal enforcement of judgment legislation exists between Canada and the U.S., the Company and its insiders may have defenses available to avoid in Canada the effect of U.S. judgments under Canadian law, making enforcement difficult or impossible. There is uncertainty as to whether Canadian courts would enforce (a) judgments of U.S. courts obtained against us or Company insiders predicated upon the civil liability provisions of the U.S. federal and state securities laws or (b) in original actions brought in Canada, liabilities against Liquid or its insiders predicated upon the U.S. federal and state securities laws. Therefore, Liquid shareholders in the U.S. may have to avail themselves of remedies under Canadian corporate and securities laws for any perceived oppression, breach of fiduciary duty and other similar legal complaints.
21
MANAGEMENT'S DISCUSSION AND ANALYSIS
DISCLOSURE OF CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING
The CFO, together with other members of management, have designed the Company’s disclosure controls and procedures in order to provide reasonable assurance that material information relating to the Company and its consolidated subsidiaries would be known to them, and by others, within those entities.
Management has also designed internal controls over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements in accordance with IFRS. Management has assessed the effectiveness of the Company’s internal control over financial reporting as of the three months ended February 28, 2022 and has concluded that the internal controls were effective.
While the officers of the Company have designed the Company’s disclosure controls and procedures and internal controls over financial reporting, they expect that these controls and procedures may not prevent all errors and fraud. A control system, no matter how well conceived or operated, can only provide reasonable, not absolute assurance, that the objectives of the control system are met.
DISCLOSURE DATA FOR OUTSTANDING COMMON SHARES, OPTIONS, AND WARRANTS
Common Shares
The Company has authorized to issue 100,000,000 of commons shares without par value and 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 |
Below is a summary of the common shares issued, stock options, share purchase warrants, and restricted share units as at November 30, 2021 and the date of this report:
February 28, 2022 |
Date of this Report | |
Common shares | 16,035,189 | 19,199,146 |
Stock options | 1,755,445 | 1,755,445 |
Agents’ warrants | 26,667 | 26,667 |
Share purchase warrants | 379,208 | 355,000 |
Restricted share units | 163,957 | - |
22
MANAGEMENT'S DISCUSSION AND ANALYSIS
Stock Options
The Company has issued incentive options to certain directors, officers, and consultants of the Company. As of the date of this report, the following options are outstanding and exercisable:
Number Outstanding | Number Exercisable | Exercise Price | Expiry Date |
$ | |||
50,000 | 50,000 | $1.90 | May 14, 2022 |
257,995 | 257,995 | $1.90 | February 28, 2024 |
25,000 | 25,000 | $1.90 | January 8, 2025 |
25,000 | 25,000 | $1.90 | February 13, 2025 |
25,000 | 25,000 | $1.90 | March 10, 2025 |
25,000 | 25,000 | $1.90 | April 13, 2025 |
275,000 | 275,000 | $1.90 | July 23, 2025 |
750,715 | 428,980 | $1.90 | January 1, 2026 |
321,735 | 214,490 | $1.90 | January 14, 2026 |
1,755,445 | 1,326,465 |
Warrants
A summary of the agents’ warrants outstanding as at the date of this report is as follows:
Agent’s Warrants Outstanding | Exercise Price | Expiry Date | |
$ | |||
26,667 | $1.88 | June 4, 2025 | |
26,667 |
A summary of the share purchase warrants outstanding as at the date of this report is as follows:
Share Purchase Warrants Outstanding | Exercise Price | Expiry Date | |
$ | |||
355,000 | $1.88 | June 9, 2025 | |
355,000 |
OTHER MD&A REQUIREMENTS
Additional information relating to the Company may be found on or in:
● | SEDAR at www.sedar.com; | |
● | the Company’s unaudited condensed interim consolidated financial statements for the three months ended February 28, 2022 and 2021; and | |
● | the Company’s audited consolidated financial statements for the years ended November 30, 2021, 2020 and 2019. |
This MD&A was approved by the Board of Directors of Liquid Media Group Ltd. effective April 21, 2022.
23
Cover |
3 Months Ended |
---|---|
Feb. 28, 2022 | |
Cover [Abstract] | |
Document Type | 6-K |
Amendment Flag | false |
Document Period End Date | Feb. 28, 2022 |
Current Fiscal Year End Date | --11-30 |
Entity File Number | 000-19884 |
Entity Registrant Name | LIQUID MEDIA GROUP LTD. |
Entity Central Index Key | 0000884247 |
Entity Address, Address Line One | 67 East 57th Avenue |
Entity Address, City or Town | Vancouver |
Entity Address, State or Province | BC |
Entity Address, Country | CA |
Entity Address, Postal Zip Code | V5T 1G7 |
Condensed Interim Consolidated Statements of Financial Position (Unaudited) - USD ($) |
Feb. 28, 2022 |
Nov. 30, 2021 |
---|---|---|
Current assets | ||
Cash | $ 3,574,605 | $ 4,305,461 |
Receivables | 450,775 | 778,505 |
Prepaids | 172,147 | 50,644 |
Acquisition advances | 1,624,548 | 1,702,882 |
Total current assets | 5,822,075 | 6,837,492 |
Restricted cash | 54,338 | 53,937 |
Investment in content | 87,586 | 40,984 |
Equipment | 30,312 | |
Intangible assets | 3,542,687 | 3,636,078 |
Right-of-use assets | 117,906 | 133,984 |
Goodwill | 1,634,463 | 833,493 |
Total assets | 11,259,055 | 11,566,280 |
Current liabilities | ||
Accounts payable and accrued liabilities | 2,093,029 | 2,001,732 |
Corporate income taxes payable | 5,206 | 5,206 |
Deferred revenue | 684,481 | 183,994 |
Current portion of long-term debt | 4,092 | |
Current portion of lease liability | 63,171 | 61,703 |
Total current liabilities | 2,849,979 | 2,252,635 |
Long-term debt | 156,679 | 158,265 |
Lease liability | 56,998 | 73,472 |
Deferred income taxes | 659,025 | 763,120 |
Derivative liability | 991,886 | 1,277,200 |
Liabilities | 4,714,567 | 4,524,692 |
SHAREHOLDERS' EQUITY | ||
Share capital | 35,336,670 | 35,102,920 |
Reserves | 3,540,705 | 3,400,835 |
Accumulated deficit | (32,332,887) | (31,462,167) |
Total Equity | 6,544,488 | 7,041,588 |
Total equity and liabilities | $ 11,259,055 | $ 11,566,280 |
NATURE AND CONTINUANCE OF OPERATIONS |
3 Months Ended |
---|---|
Feb. 28, 2022 | |
Nature And Continuance Of Operations | |
NATURE AND CONTINUANCE OF OPERATIONS | 1. NATURE AND CONTINUANCE OF OPERATIONS
Liquid Media Group Ltd. (“Liquid” or the “Company”) is a business solutions company empowering independent film and TV content creators to package, finance, deliver and monetize their professional video intellectual property globally. The head office of the Company is 67 East 5th Avenue, Vancouver, BC, V5T 1G7 and the registered records office of the Company is Suite 400, 725 Granville Street, PO Box 10325, Vancouver, BC, V7Y 1G5. The Company’s common shares are listed on the Nasdaq Stock Market (“Nasdaq”) under the trading symbol “YVR”.
On September 22, 2021, the Company acquired 100% of the shares of IndieFlix Group, Inc. (“IndieFlix”). IndieFlix is a Delaware corporation that has a global ‘edutainment’ streaming service that creates, promotes, and supports social impact films. (Note 3).
On December 14, 2021, the Company acquired 100% of the shares of iGEMS TV, Inc. (“iGEMS”). iGEMS is a Delaware corporation which provides a comprehensive content recommendation engine. (Note 4).
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 February 28, 2022, the Company has generated losses since inception and has an accumulated deficit of $32,332,887. The continued operations of the Company are dependent on its ability to generate future cash flows or obtain additional financing. Management has estimated that it does not have sufficient working capital to meet the Company’s liabilities and commitments as they become due for the upcoming 12 months. These material uncertainties cast substantial doubt upon the Company’s ability to continue as a going concern within one year of the approval of these financial statements. There is a risk that additional financing will not be available on a timely basis or on terms acceptable to the Company.
These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.
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SIGNIFICANT ACCOUNTING POLICIES |
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SIGNIFICANT ACCOUNTING POLICIES | 2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the significant accounting policies used in the preparation of these condensed interim consolidated financial statements.
Statement of compliance These condensed interim consolidated financial statements, including comparatives, have been prepared in accordance with International Accounts Standards (“IAS”) 34, “Condensed Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) on a basis consistent with the accounting policies disclosed in the audited consolidated financial statements for the year ended November 30, 2021.
This condensed interim financial report does not include all of the information required of a full annual financial report and is intended to provide users with an update in relation to events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period. Therefore, it is recommended that this financial report be read in conjunction with the restated audited annual financial statements of the Company for the year ended November 30, 2021.
Basis of presentation
The condensed interim consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, except for certain financial assets and liabilities, including derivative instruments that are measured at fair value. The consolidated financial statements are presented in United States dollars unless otherwise noted.
As at November 30, 2021, the Company changed its accounting policy to present its results in United States dollars instead of Canadian dollars as done previously. This accounting change has been applied retrospectively in preparing these financial statements; as such, all comparative figures have been restated to reflect this change.
Basis of consolidation
These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries at the end of the reporting period as follows:
On August 13, 2021 the Company incorporated Liquid US. On October 20, 2021 the Company incorporated Liquid Merger Sub 2. On November 30, 2021, the Company incorporated Liquid Production Funding.
On August 27, 2021, the Company incorporated Liquid Media Merger Sub, Inc. which was amalgamated with IndieFlix on September 22, 2021 (Note 3).
On September 22, 2021, the Company acquired 100% of the shares of IndieFlix, a Delaware corporation (Note 3).
On October 20, 2021 the Company incorporated Liquid Merger Sub 3, which was amalgamated with iGEMS on December 14, 2021 (Note 4).
On December 14, 2021, the Company acquired 100% of the shares of iGEMS, a Delaware corporation (Note 4).
All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated upon consolidation.
Subsidiaries Subsidiaries are all entities over which the Company has exposure to variable returns from its involvement and has the ability to use power over the investee to affect its returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company until the date on which control ceases.
Use of estimates
The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the period. Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates. Significant estimates and judgements made by management in the preparation of these consolidated financial statements are outlined below.
Uncertainty of COVID-19 pandemic In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, initially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and solutions and harm our business and results of operations; however, the Company has also recognized that the pandemic has led to a global increase in screen time which is beneficial to the Company’s operations. As countries continue to re-open from the pandemic, it is possible that screen time will decrease which may adversely affect the Company; however, it also leads to an increase in film and TV content being produced as film and TV producers are able to travel and continue operations leading to an increase in content available for the Company to package, finance, deliver, and monetize. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations, or how it will impact the Company’s ability to conduct financings at this time.
Functional currency The functional currency of the Company and its subsidiaries is the United States dollar; however, determination of functional currency may involve certain judgments to determine the primary economic environment which is re-evaluated for each new entity or if conditions change.
Level of control or influence over companies The accounting for investments in other companies can vary depending on the degree of control and influence over those other companies. Management is required to assess at each reporting date the Company’s control and influence over these other companies. Management has used its judgment to determine which companies are controlled and require consolidation and those which are significantly influenced and require equity accounting. The Company had considered its ownership position in Waterproof Studios Inc. (“Waterproof”) and determined it did not have the ability to influence the key operating activities of the entity. Accordingly, the Company accounted for its investment under fair value through profit or loss (Note 9) up to the disposal date of October 18, 2021.
Income taxes In assessing the probability of realizing income tax assets, management makes estimates related to expectation of future taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified.
Determination of Cash Generating Units (“CGUs”) CGUs are the lowest level within an entity at which goodwill is monitored for internal management purposes which is not higher than an operating segment. The Company has assessed that each acquired entity is a separate CGU.
Valuation of share-based compensation and derivatives The Company uses the Black-Scholes Option Pricing Model for valuation of share-based compensation and other equity based payments, excluding contingent consideration. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate, and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity reserves.
Valuation of contingent consideration The Company uses a probability scenario based approached for valuation of share-based contingent consideration. Under the probability scenario based approach, management calculates the probability that the contingent shares will be issued under a low case, base case, and high case scenario. Changes in the probabilities can materially affect the fair value estimate and the Company’s earnings and equity reserves.
Valuation of intangible assets Intangible assets are assessed for impairment indicators at each reporting date. Management first reviews qualitative factors in determining if an impairment needs to be recorded. Quantitative factors are then used to calculate the amount of impairment, if needed.
Valuation of investment in equity instrument The Company values its equity instruments in private companies at fair value at each reporting date. The determination of fair value is based on estimates made by management on the expected earnings before income, taxes, and amortization multiplied by a reasonable factor for the appropriate industry applicable to the private company.
Estimation of expected credit loss Loans receivable are assessed for an estimated credit loss at each reporting date. The estimated loss is determined based on management’s knowledge of the debtor and their ability to repay the loan. As the current debtors’ are private entities, management must rely on assertions provided to them from the debtor to make their estimates.
Valuation of convertible debentures The equity portion of the convertible debenture is calculated using a discounted cash flow method which requires management to make an estimate on an appropriate discount rate.
Valuation of right-of-use asset and lease liability The application of IFRS 16 requires the Company to make judgments that affect the valuation of the right-of-use assets and the valuation of lease liabilities. These include: determining the contract term and determining the interest rate used for discounting of future cash flows.
The lease term determined by the Company is comprised of the non-cancellable period of lease agreements, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.
The present value of the lease payment is determined using a discount rate representing the rate of a commercial mortgage rate, observed in the period when the lease agreement commences or is modified.
Intangible assets
The Company has intangible assets from acquisitions and development of gaming content and films. The amortization method, useful life and residual values are assessed annually and the assets are tested for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Amortization expense is recorded on a straight-line basis beginning with the month the corresponding assets are available for use and over the estimated useful lives provided below:
Upon retirement or disposal, the cost of the asset disposed of and the related accumulated amortization are removed from the accounts and any gain or loss is reflected in profit and loss. Expenditures for repairs and maintenance are expensed as incurred.
Development expenditures, including the cost of material, direct labour, and other direct costs are recognized as an intangible asset when the following recognition requirements are met:
Intangible assets being developed are amortized once development is complete.
Video game catalogues The video game catalogues are made up of a diverse variety of games, ranging in age and popularity. The catalogues are unique due to the diverse nature of the products within the catalogues, making it difficult to assign a useful life. The useful life of 15 years represented management’s view of the expected period over which the Company expected to receive benefits from the acquired gaming content packaged as catalogues.
Platform coding The platform coding acquired by the Company is currently under development and is not yet subject to amortization.
Distribution libraries Through the acquisition of IndieFlix, the Company acquired distribution libraries. These assets are carried at cost, including amounts of purchase price allocations upon acquisitions. The useful life of 10 years represents management’s view of the expected period over which the Company expects benefits from the acquired distribution libraries.
Comparative figures
Certain of the comparative figures have been reclassified in order to conform to the current year’s presentation.
Accounting pronouncements not yet adopted
Accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.
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ACQUISITION OF INDIEFLIX GROUP, INC. |
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ACQUISITION OF INDIEFLIX GROUP, INC. | 3. ACQUISITION OF INDIEFLIX GROUP, INC.
On September 22, 2021, the Company acquired 100% of the issued and outstanding shares of IndieFlix in accordance with an Agreement and Plan of Merger (“IndieFlix Agreement”) and, in connection with the merger, former noteholders of IndieFlix agreed to extinguish IndieFlix debt in exchange for common shares of the Company. As consideration for the extinguishment of debt, the Company issued 499,996 common shares at closing and may issue up to 2,000,000 in additional common shares of the Company to the former noteholders of IndieFlix upon IndieFlix achieving total cumulative revenue of $64,868,466 before the seventh anniversary of the closing date as follows (“IndieFlix Transaction”):
Upon closing of the IndieFlix Agreement, Liquid Merger Sub was amalgamated with IndieFlix with the surviving entity retaining the name IndieFlix Group, Inc.
In connection with the IndieFlix Transaction, on May 10, 2021, the Company entered into a non-revolving credit facility with IndieFlix for $499,880 which was advanced as follows: (1) $102,852 upon the date of the promissory note (advanced May 10, 2021); (2) $173,043 on the first month anniversary (advanced June 10, 2021); and (3) $223,985 on the second month anniversary (advanced July 9, 2021). The promissory note bore interest at 6% per annum, was due on the earlier of December 31, 2021 or the closing of the IndieFlix Transaction, and was secured by a general security agreement over certain assets. As the note was considered an advance on acquisition, the Company re-assumed the advance on the closing of the IndieFlix Transaction on September 22, 2021.
On September 22, 2021, the 2,000,000 common shares to be issued (“IndieFlix Contingent Consideration”) was valued to be $1,648,000. On February 28, 2022, the IndieFlix Contingent Consideration was revalued to $700,400 (November 30, 2021 - $1,277,200) resulting in a gain on derivative liability of $576,800 (February 28, 2021 - $nil). The IndieFlix Contingent Consideration was calculated by multiplying the closing share price of the Company’s shares by the following weighted average expected number of shares to vest calculated using a probability scenario based approach:
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.
The purchase price allocation for the IndieFlix Transaction reflects various fair value estimates and analyses, which are subject to change within the respective measurement periods. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired at each acquisition date during the measurement periods. Measurement period adjustments that the Company determines to be material will be applied retrospectively to the period of acquisition in the Company’s consolidated financial statements, and, depending on the nature of the adjustments, other periods subsequent to the period of acquisition could also be affected.
The Company determined the estimated fair value of the acquired working capital, and identifiable intangible assets and goodwill after review and consideration of relevant information including discounted cash flow analyses, market data and management’s estimates.
For leases acquired, the Company measured the lease liability at the present value of the remaining lease payments, as if the acquired lease were a new lease at the acquisition date. The Company measured the right-of-use asset at the same amount as the lease liability, adjusted to reflect favorable or unfavorable terms of the lease when compared with market terms.
IndieFlix’s distribution libraries represent identifiable intangible assets acquired in the amounts of $3,695,673, which was determined to have a finite useful life of 10 years.
The fair value of the acquired assets and liabilities are provisional pending receipt of the final valuations for those assets and liabilities.
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ACQUISITION OF iGEMS TV, INC. |
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ACQUISITION OF iGEMS TV, INC. | 4. ACQUISITION OF iGEMS TV, INC.
On December 14, 2021, the Company acquired 100% of the issued and outstanding shares of iGEMS TV, Inc. (“IGEMS”) in accordance with an Agreement and Plan of Merger (“iGEMS Agreement”). As consideration, the Company will issue up to 850,000 common shares of the Company to the former shareholders of iGEMS upon iGEMS achieving total cumulative revenue of $9,412,830 before the sixth anniversary of the closing date as follows (“iGEMS Transaction”):
Upon closing of the iGEMS Agreement, Liquid Merger Sub 3 was amalgamated with iGEMS with the surviving entity retaining the name iGEMS TV, Inc.
In connection with the iGEMS Transaction, on June 25, 2021, the Company entered into an agreement with iGEMS for $100,000 which was advanced as follows: (1) $40,000 upon the date of the agreement (advanced June 28, 2021); (2) $33,000 on the first month anniversary (advanced August 3, 2021); and (3) $27,000 on the second month anniversary (advanced September 7, 2021). The agreement bore interest at 6% per annum and was due on the earlier of December 31, 2021 or 30 days following the termination of the iGEMS Transaction. The agreement was secured by a general security agreement over certain assets. The Company advanced a further $25,000 to iGEMS on December 10, 2021. As the advances were considered an advance on acquisition, the Company re-assumed the advance on the closing of the iGEMS Transaction on December 14, 2021.
On December 14, 2021, the 212,500 common shares to be issued (“iGEMS Contingent Consideration”) was valued to be $471,521. On February 28, 2022, the iGEMS Contingent Consideration was revalued to $291,485 resulting in a gain on derivative liability of $180,035. The iGEMS Contingent Consideration was calculated by multiplying the closing share price of the Company’s shares by the following weighted average expected number of shares to vest calculated using a probability scenario based approach:
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.
The purchase price allocation for the iGEMS Transaction reflects various fair value estimates and analyses, which are subject to change within the respective measurement periods. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired at each acquisition date during the measurement periods. Measurement period adjustments that the Company determines to be material will be applied retrospectively to the period of acquisition in the Company’s consolidated financial statements, and, depending on the nature of the adjustments, other periods subsequent to the period of acquisition could also be affected.
The Company determined the estimated fair value of the acquired working capital and goodwill after review and consideration of relevant information including discounted cash flow analyses, market data and management’s estimates.
The fair value of the acquired assets and liabilities are provisional pending receipt of the final valuations for those assets and liabilities.
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RECEIVABLES |
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RECEIVABLES | 5. RECEIVABLES
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LOANS RECEIVABLE |
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LOANS RECEIVABLE | 6. LOANS RECEIVABLE
Long-term amounts
Loans receivable are classified as long-term when management has determined that they will not be receiving payment on these loans within the next twelve months. As at February 28, 2021, the long-term loans receivable including accrued interest are as follows:
Participant Games During fiscal 2017, the Company entered into a subordinated convertible note with Participant Games Inc. in the amount of CAD$150,000. The convertible note is unsecured, bears interest at 15% per annum and was due on demand on or before December 21, 2017. The loan was convertible into shares, at any time prior to December 21, 2018 and accordingly the value of the conversion feature remaining from the convertibility feature was nominal as at November 30, 2018. As at November 30, 2021, the Company accrued interest receivable of $127,114 and recorded an allowance for credit loss of $244,369, on a cumulative basis, as the note remained unpaid. As at November 30, 2021, the Company ceased recording any further interest on this loan.
Instalment Entertainment During fiscal 2017, the Company entered into a convertible note with Installment Entertainment Inc. in the amount of CAD$100,000. The convertible note is unsecured, bears interest at 15% per annum and was payable on demand on or before April 21, 2018. The loan was convertible into shares, at any time prior to April 21, 2018. As at November 30, 2021, the Company accrued interest receivable of $77,077 and has recorded an allowance for credit loss of $155,247, on a cumulative basis, as the note remained unpaid. As at November 30, 2021, the Company ceased recording any further interest on this loan.
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RESTRICTED CASH |
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RESTRICTED CASH | 7. RESTRICTED CASH
As at February 28, 2021, the Company had two Guaranteed Investment Certificates (“GICs”) totaling $54,338 (November 30, 2021 - $53,937) which earn interest at 0.45% and 0.10% per annum and renew annually on July 8 and September 28, respectively. The GICs have been assigned as security to the Royal Bank of Canada.
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LICENSES |
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LICENSES | 8. LICENSES
Four licenses were acquired during the year ended November 30, 2018 through the issuance of 250,581. During the year ended November 30, 2020, the Company acquired one additional license for $15,426. During the year ended November 30, 2021, the Company wrote-off the remaining three licenses which had an unamortized balance of $705,555 as there was no expected future use and the recoverable amount was considered to be nominal. common shares valued at $ . During the three months ended February 29, 2020, the Company wrote-off one license with an unamortized balance of $
During the three months ended February 28, 2021, amortization, included in cost of sales, amounted to $nil (February 28, 2021 - $105,403).
The following table is a reconciliation of the licenses:
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INVESTMENT IN EQUITY INSTRUMENTS |
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INVESTMENT IN EQUITY INSTRUMENTS | 9. INVESTMENT IN EQUITY INSTRUMENTS
Until February 28, 2019, the Company accounted for its 49% interest in Waterproof using the equity method of accounting resulting in a carrying value of $445,987. At March 1, 2019, however, the Company no longer exerted significant influence over Waterproof’s operating activities resulting in the investment being reclassified as FVTPL.
The fair value as at March 1, 2019 was determined to be $1,252,525 resulting in a gain of $806,538 on derecognition from the equity accounting carrying value.
On October 18, 2021, the Company settled a lawsuit with the other shareholders of Waterproof whereby the Company transferred its 49% interest in Waterproof to the other shareholders for $666,683 (CAD$825,000) resulting in the Company recording a loss on disposal of investment of $3,438,560 (Note 26).
As at October 18, 2021, the value of Waterproof’s common shares was estimated to be $1,139,133. resulting in an unrealized gain on equity instruments of $
The following table is a reconciliation of the investment in Waterproof:
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INVESTMENT IN CONTENT |
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INVESTMENT IN CONTENT | 10. INVESTMENT IN CONTENT
As at February 28, 2022 and November 30, 2021, the investment in content represents the unamortized costs of film content in production.
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EQUIPMENT | 11. EQUIPMENT
During the year ended November 30, 2021, the Company disposed of its computer equipment for no proceeds resulting in a loss on disposal of equipment of $45,466.
In December 2021, the Company disposed of the vehicle for $37,000 to the former CFO of the Company resulting in a gain on disposal of equipment of $6,688.
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INTANGIBLE ASSETS |
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INTANGIBLE ASSETS | 12. INTANGIBLE ASSETS
During the year ended November 30, 2020, the Company acquired platform coding for a cash payment of $3,325,000 (CAD$4,464,885) which is currently under development and not yet subject to amortization.
During the year ended November 30, 2021, the Company acquired distribution libraries valued at $3,695,673 on the acquisition of IndieFlix (Note 3).
During the year ended November 30, 2021, the Company determined that the video game catalogues and platform coding should be impaired resulting in the Company recognizing an impairment of intangible assets of $4,214,445.
Amortization of the distribution libraries is included in cost of sales.
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RIGHT-OF-USE- ASSET AND LEASE LIABILITY |
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RIGHT-OF-USE- ASSET AND LEASE LIABILITY | 13. RIGHT-OF-USE- ASSET AND LEASE LIABILITY
Right-of-Use Asset
Amortization of right-of-use assets is calculated using the straight-line method over the remaining lease term.
Lease Liability
The lease liability was discounted at a discount rate of 3.25%.
The minimum lease payments in respect of the lease liability and the effect of discounting are as follows:
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GOODWILL |
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GOODWILL | 14. GOODWILL
A summary of goodwill balance and transactions is as follows:
During the year ended November 30, 2021, the Company acquired goodwill of $833,493 pursuant to the acquisition of IndieFlix (Note 3).
During the three months ended February 28, 2022, the Company acquired goodwill of $800,970 pursuant to the acquisition of iGEMS (Note 4).
Goodwill is tested for impairment annually or more frequently if events or circumstances indicate that the asset might be impaired. At November 30, 2021, the Company performed its impairment review of goodwill by comparing each cost center’s fair value to the net book value including goodwill. At February 28, 2022, the Company has determined that it has two cost centers: IndieFlix and iGEMS. The fair value of each cost center was determined by management based on a valuation using the income approach. The income approach uses future projections of cash flows from the cost center and includes, among other estimates, projections of future revenue and operating expenses, market supply and demand, projected capital spending and an assumption of the weighted average cost of capital. Management’s evaluation of fair values includes analysis based on the future cash flows generated by the underlying assets, estimated trends and other relevant determinants of fair value for these assets. Management has determined that no events have occurred subsequent to the date of the assessment that would require a further impairment review of goodwill.
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ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
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ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 15. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
During the three months ended February 28, 2022, the Company issued nil 6,953) to settle accounts payable of $nil (February 28, 2021 - $7,851) resulting in a gain of $nil (February 28, 2021 – $898) which is included in gain on settlement of debt. (February 28, 2021 – ) common shares valued at $nil (February 28, 2021 - $
During the three months ended February 28, 2021, the Company transferred 18,481 of interest included in accounts payable (Notes 17 and 20). treasury shares to a creditor as full and final payment of a Forbearance Agreement which included the settlement of $
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DEFERRED REVENUE |
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DEFERRED REVENUE | 16. DEFERRED REVENUE
A summary of the deferred revenue is as follows:
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LOANS PAYABLE |
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LOANS PAYABLE | 17. LOANS PAYABLE
A summary of loans payable balances and transactions is as follows:
Credit facility In fiscal 2016 a CAD$2,500,000 Credit facility was secured by assets of the Company under a general security agreement with a due date of November 30, 2018 and an interest rate of 14.4% per annum. A fee of CAD$60,000 was settled through the issuance of shares during the year ended November 30, 2017. The Company repaid CAD$1,750,000 of principal and CAD$147,945 of interest during the year ended November 30, 2017.
In June 2018, a new lender acquired the remaining $563,850 (CAD$750,000) loan and under new terms, the loan was due on August 20, 2018. The new lender obtained a Limited Power of Attorney over the Company’s 49% interest in Waterproof (“Waterproof POA”). In December 2018, the lender registered a general security agreement over all the Company’s current and future assets.
In November 2019, the new lender signed a Forebearance Agreement which extended the maturity date of the loan to November 30, 2020 and required the Company to make quarterly payments of CAD$250,000 commencing on March 31, 2020 until the principal and interest on the loan have been paid in full. In accordance with the Forbearance Agreement, the Company issued 215,000 treasury shares of the Company as security for the loan which will be transferred to the lender upon any default of the loan. Additionally, the new lender released the Waterproof POA and amended their general security agreement to exclude the Company’s investment in Waterproof. In March 2020, the new lender provided an extension allowing the delay of the quarterly payments to commence June 30, 2020.
During the year ended November 30, 2020, the Company repaid a further $385,650 (CAD$500,000) for this loan of which $85,388 (CAD$110,707) was applied to the principal and $300,262 (CAD$389,293) was applied to the outstanding interest. As at November 30, 2020, interest of $5,447 remained outstanding and was included in accounts payable and accrued liabilities.
In February 2021, the new lender agreed to accept the 215,000 treasury shares held as security as full and final payment of the Forbearance Agreement (Note 20). Accordingly, the transfer of the 215,000 treasury shares resulted in a gain on debt settlement of $37,359 as the treasury shares were valued at $479,450 on the date of issuance to settle the outstanding principal of $498,329 and interest of $18,481.
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CONVERTIBLE DEBENTURES |
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CONVERTIBLE DEBENTURES | 18. CONVERTIBLE DEBENTURES
On February 28, 2019, the Company closed its private placement offering of unsecured convertible debentures raising $2,678,000. Each debenture matured two years from closing, bore interest at 2% per annum, and was convertible into units at a price of $1.50 per unit. Each unit consisted of one common share and one share purchase warrant with each warrant entitling the holder to acquire one common share of the Company for $1.75 up to February 28, 2021. In January 2021, the Company agreed to extend the maturity date and associated warrant expiry date for one debenture holder by one year.
For accounting purposes, the convertible debentures are separated into their liability and equity components by first valuing the liability component. The fair value of the liability component at the time of issue was calculated as the discounted cash flows for the convertible debentures assuming a 12% discount rate, which was the estimated rate for a similar debenture without a conversion feature. The fair value of the equity component (conversion feature) was determined at the time of issue as the difference between the face value of the convertible debentures and the fair value of the liability component, less a deferred income tax adjustment to reflect the book to tax difference in value of the convertible debentures at the time of issuance. As the Company has excess tax assets to offset the deferred tax liability, which was created from the book to tax difference in value of the convertible debentures, the deferred tax liability was reversed, resulting in a deferred tax recovery of $122,201 during the year ended November 30, 2019.
During the year ended November 30, 2021, debentures of $401,677 were converted into 270,000 units of the Company of which $nil was allocated to reserves relating to the value of the warrants issued. As a result, the Company transferred $49,967 from reserves to share capital representing the proportionate balance of the equity component.
Interest and accretion expense for the three months ended February 28, 2022 was $nil 12,752). (February 28, 2021 - $
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LONG-TERM DEBT |
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LONG-TERM DEBT | 19. LONG-TERM DEBT
Third party During the year ended November 30, 2020, the Company entered into a Conditional Sales Contract for the purchase of a vehicle. The agreement bore interest of 6.99%, required 60 monthly payments of CAD$1,028, and was secured by a vehicle with a net book value of $nil (November 30, 2021 - $30,312) (Note 11).
SBA loan In June 2020, IndieFlix obtained a $150,000 U.S. Small Business Administration (“SBA”) loan which increased to $200,000 upon receiving a further $50,000 in July 2020. The SBA loan bears interest at 3.75% from the date of the advance and requires monthly payments of $1,023 commencing 24 months from the date of the first advance. The balance of principal and interest will be repayable over 30 years from the date of the first advance. The SBA loan is secured by a continuing security interest in all of IndieFlix’s current and future assets.
The loan is being accreting to its face value at an effective rate of 6.25% over the term of the loan.
On March 17, 2022, SBA provided an additional six month deferment for IndieFlix’s SBA Loan where the first payment has been deferred to 30 months from the date of the first advance from 24 months.
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SHARE CAPITAL AND RESERVES |
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SHARE CAPITAL AND RESERVES | 20. SHARE CAPITAL AND RESERVES
Authorized share capital
The Company is authorized to issue 100,000,000 common shares without par value.
The Company is authorized to issue the following preferred shares:
Issued share capital
Common shares
The Company had the following share issuances during the three months ended February 28, 2022:
The Company had the following share issuances during the year ended November 30, 2021:
Preferred shares
As at February 28, 2022 and November 30, 2021, 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 Forbearance Agreement (Note 17). In February 2021, the Company transferred these shares to the lender as full and final payment of the Forbearance Agreement.
Stock options
The Company does not have a formal stock option plan. The Company occasionally grants stock options to its employees, officers, directors and consultants to purchase common shares of the Company. The options granted are exercisable at a price which is equal to or greater than the fair market value of the common shares at the date the options are granted. The options are granted with varied vesting periods but generally vest immediately on grant. Options granted generally have a life of five years.
On January 1, 2021, the Company granted an officer of the Company 861,681, an exercise price of $ , and a term of five years. The options will vest as follows: 107,245 on June 1, 2021, 321,735 on January 1, 2022, and 321,735 on January 1, 2023. During the three months ended February 28, 2022, the Company recorded share-based compensation of $77,754 (February 28, 2021 - $137,118) in relation to these options. stock options with a total fair value of $
On January 14, 2021, the Company granted a consultant of the Company 408,202, an exercise price of $ , and a term of five years. The options will vest as follows: 107,245 on January 14, 2021, 107,245 on July 14, 2021, and 107,245 on July 14, 2022. During the three months ended February 28, 2022, the Company recorded share-based compensation of $22,388 (February 28, 2021 - $181,901) in relation to these options. stock options with a total fair value of $
On January 1, 2021, the Company repriced 932,995 stock options with an exercise price of $2.55 and 25,000 stock options with an exercise price of $2.57 to $1.90 per option. All other terms remained unchanged. During the three months ended February 28, 2022, the Company recorded share-based compensation of $nil (February 28, 2021 - $71,617) in relation to this repricing.
In accordance with a Termination and Mutual Release Agreement entered into with a consultant of the Company effective April 14, 2021, the Company and a consultant agreed to modify the expiry date of 50,000 options outstanding from July 23, 2025 to May 14, 2022.
The following weighted average assumptions were used in the Black-Scholes option-pricing model for the valuation of the stock options granted:
Stock option transactions are summarized as follows:
A summary of the stock options outstanding and exercisable at February 28, 2022 is as follows:
The weighted average life of share options outstanding at February 28, 2022 was years and years for exercisable options.
Warrants
Agents’ warrants
Agents’ warrant transactions are summarized as follows:
A summary of the agents’ warrants outstanding and exercisable at February 28, 2022 is as follows:
The weighted average life of agent’s warrants outstanding at February 28, 2022 was 3.27 years.
Share purchase warrants
On February 12, 2021, the Company extended the expiry date of 346,000 share purchase warrants with an exercise price of $1.75 from February 26, 2021 to March 11, 2021 due to the investors being subject to a trading blackout.
During the year ended November 30, 2021, the Company issued share purchase warrants with an exercise price of $ per warrant in connection with the conversion of a convertible debenture (Note 18).
Share purchase warrant transactions are summarized as follows:
A summary of the share purchase warrants outstanding and exercisable at February 28, 2021 is as follows:
The weighted average life of share purchase warrants outstanding at February 28, 2022 was 3.08 years.
Restricted share units (“RSUs”)
During the year ended November 30, 2020, the Company granted RSUs to certain directors, officers, and consultants of the Company which vest 25% on grant (September 3, 2020) and 25% each six months thereafter. The granted RSUs convert to common shares of the Company upon vesting, accordingly, 250,001 common shares were issued upon grant.
During the three months ended February 28, 2022, the Company recorded share-based compensation expense of $ (February 28, 2021 - $ ) in relation to the issued RSUs. The fair value of the RSUs was measured using the value on the grant date of $1.47 per common share.
Derivative liability
On June 8, 2020, the Company closed a registered direct offering, under its F-3 registration statement in the United States, by issuing 2,666,672 common shares of the Company at $1.50 per common share for total proceeds of $4,000,002. Concurrent with this offering, the Company issued to the investors 1,333,334 share purchase warrants exercisable for $1.88 per common share with a maturity date of June 9, 2025. The holders of the Cashless Warrants may elect, if the Company does not have an effective registration statement registering or the prospectus contained therein is not available for the issuance of the Cashless Warrant shares to the holder, in lieu of exercising the Cashless Warrants for cash, a cashless exercise option to receive common shares equal to the fair value of the Cashless Warrants. The fair value is determined by multiplying the number of Cashless Warrants to be exercised by the previous day’s volume weighted average price (“VWAP”) less the exercise price with the difference divided by the VWAP. If a Cashless Warrant holder exercises this option, there will be variability in the number of shares issued per Cashless Warrant.
On initial recognition, the Company allocated $351,779, being the fair value of the Cashless Warrants, from the proceeds of the offering included in share capital to set up the derivative liability. On March 24, 2021, the Company’s registration statement restricting the Cashless Warrant holders ability to elect to cashless exercise their Cashless Warrants became effective resulting in the Company revaluing the derivative liability to $nil 285,988) and recording a loss of $160,364 (February 28, 2021 - loss of $22,849). (February 28, 2021 - $
On March 24, 2021, the Company revalued the derivative liability to $3,226,693 using the following Black Scholes assumptions: risk –free rate of $0.10%, dividend yield of nil, expected life of 0.01 years, and volatility of $150%. The Company transferred $423,503 from derivative liability to share capital in connection with the exercise of 175,000 Cashless Warrants on March 24, 2021 and reversed the remaining derivative liability on the expiry of the cashless exercise feature.
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ROYALTY INCOME |
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ROYALTY INCOME | 21. ROYALTY INCOME
IndieFlix earns royalty income from its participating net profit rights in three separate US Limited Liability Companies (“LLC”) for which IndieFlix acts as a manager.
The Company has recognized $12,068 (February 28, 2021 - $nil ) of royalty income during the three months ended February 28, 2022.
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RELATED PARTY TRANSACTIONS | 22. RELATED PARTY TRANSACTIONS
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly. Key management personnel include the Company’s executive officers and Board of Director members.
In November 2020, the Company signed employment agreements with two directors of the Company. The agreements require total payments of CAD$17,500 each per month. Included in the agreements is a provision for 12 months written notice or salary paid in lieu of notice upon termination without just cause. In April 2021, one of the agreements was terminated and replaced with a consulting agreement with the same terms.
In January 2021, the Company signed an employment agreement with the new CEO of the Company. The agreement requires payments of CAD$20,000 per month. Included in the agreement is: (1) a provision for three months written notice or salary paid in lieu of notice upon termination without just cause and (2) a provision to increase the base salary to CAD$30,000 per month, retroactive to January 1, 2021, upon the Company raising US$5 million in funding (achieved).
Receivables at February 28, 2022 includes $14,010 (November 30, 2021 - $nil ) from a director of iGEMS for advances taken.
Accounts payable and accrued liabilities at February 28, 2022 includes $185,425 (November 30, 2021 - $275,486) owing to directors, officers, and a former director for unpaid directors fees, salaries, consulting fees, expense reimbursements, and loan interest.
During the three months ended February 28, 2022, the Company recorded revenue of $207,856 (February 28, 2021 - $nil ) to a company with a director in common with IndieFlix. As at February 28, 2022, the Company had a receivable of $nil (November 30, 2021 - $308,631) from this company.
During the three months ended February 28, 2022, the Company recorded royalties, included in cost of sales, of $154,199 (February 28, 2021 - $nil ) to three LLC’s for which IndieFlix acts as a manager and received royalty income of $12,068 (February 28, 2021 - $nil ) from one of these LLCs. Additionally, as at February 28, 2022, the Company had a payable of $192,212 (November 30, 2021 - $184,627) to one of these LLC’s for unpaid royalties and a receivable of $57,846 (November 30, 2021 - $91,222) from three of these LLC’s for royalty income and recoupment of costs incurred on their behalves.
During the three months ended February 28, 2022, the Company incurred content curation costs, included in cost of sales, of $19,500 (February 28, 2021 - $nil ) to a company controlled by a director of iGEMS.
During the three months ended February 28, 2022, the Company incurred rent, included in other general and admin expenses, of $11,056 (February 28, 2021 - $nil ) to a company with a director in common.
The following is a summary of key management personnel compensation:
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CAPITAL DISCLOSURE AND MANAGEMENT |
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CAPITAL DISCLOSURE AND MANAGEMENT | 23. CAPITAL DISCLOSURE AND MANAGEMENT
The Company defines its capital as components of shareholders’ equity. The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern. The Company manages its capital structure to maximize its financial flexibility making adjustments to it in response to changes in economic conditions and the risk characteristics of the underlying assets and business opportunities. The Company does not presently utilize any quantitative measures to monitor its capital. There were no changes to the Company’s capital management during the three months ended February 28, 2022. The Company is not subject to externally imposed capital requirements.
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FINANCIAL INSTRUMENTS AND RISK MANAGEMENT |
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FINANCIAL INSTRUMENTS AND RISK MANAGEMENT | 24. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:
The Company’s financial instruments consist of cash, restricted cash, receivables, accounts payable, and long-term debt. The fair value of receivables and accounts payable approximates their carrying values. Long-term debt has been valued using a valuation methodology on initial recognition. Cash and restricted cash is measured at fair value using level 1 inputs. The derivative liability for the warrants is measured using level 2 inputs. The derivative liability for the contingent consideration was measured at fair value using level 3 inputs.
As at February 28, 2022, the fair value of the level 3 derivative liability was $991,886 (November 30, 2021 - $1,277,200) based on management’s estimate of probabilities on the likelihood of IndieFlix and iGEMS achieving the projected revenue targets and the Company issuing the resulting common shares to the former noteholders of IndieFlix and shareholders of iGEMS. Management the assessed the probabilities on a low case, base case, and high case scenario with a 20%, 60%, and 20% probability, respectively, of occurring to determine a weighted average number of expected common shares to be issued. The Company’s investment in IndieFlix and iGEMS did not have a quoted market price on an active market and the Company assessed the fair value of the investment based on IndieFlix’s and iGEMS’ unobservable expected earnings. As a result, the fair values were classified as level 3 of the fair value hierarchy. The process of estimating the fair value of the contingent considerations was based on inherent measurement uncertainties and was based on techniques and assumptions that emphasize both qualitative and quantitative information. As at February 28, 2022, a 10% change in the number of expected common shares to be issued or a 10% change in the Company’s share price would change comprehensive income (loss) by approximately $99,000.
The Company is exposed to a variety of financial risks by virtue of its activities including currency, credit, interest rate, and liquidity risk.
Foreign currency exchange rate risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. The Company’s operations are carried out in Canada and the United States. As the Company’s functional currency is USD, the Company is subject to foreign currency exchange rate risk on its net assets denominated in CAD which could have an adverse effect on the profitability of the Company. As at February 28, 2022, the Company had assets totaling CAD$570,832 and liabilities totalling CAD$758,239. A 10% change in the exchange rate would change comprehensive income (loss) by approximately $15,000. The Company currently does not have plans to enter into foreign currency future contracts to mitigate this risk, however it may do so in the future.
Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
The Company’s cash is held in large Canadian and United States financial institutions. The Company maintains certain cash deposits with Schedule I financial institutions, which from time to time may exceed federally insured limits. The Company has not experienced any significant credit losses and believes it is not exposed to any significant credit risk. The Company’s sales tax receivable is due from the Government of Canada; therefore, the credit risk exposure is low.
The maximum exposure to credit risk as at February 28, 2022 is the carrying value of the receivables and loans receivable. The Company has allowed for an expected credit loss of $356,070 on the loans receivable as at February 28, 2022. As at November 30, 2021, the Company had fully allowed for the loans receivable.
Interest rate risk is the risk the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Financial assets and liabilities with variable interest rates expose the Company to cash flow interest rate risk. The Company does not hold any financial liabilities with variable interest rates. The Company does maintain bank accounts which earn interest at variable rates but it does not believe it is currently subject to any significant interest rate risk.
The Company’s ability to continue as a going concern is dependent on management’s ability to raise required funding through future equity issuances and through short-term borrowing. The Company manages its liquidity risk by forecasting cash flows from operations and anticipating any investing and financing activities. Management and the Board of Directors are actively involved in the review, planning and approval of significant expenditures and commitments. As at February 28, 2022, the Company had a cash balance of $3,574,605 to settle current financial liabilities of $2,849,979. The Company is exposed to liquidity risk.
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SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS |
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SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS | 25. SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS
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CONTINGENCIES |
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CONTINGENCIES | 26. CONTINGENCIES
On December 1, 2021, a consultant commenced an action against the Company in which the Plaintiff claims that the Company is in breach of contract and owes the consultant common shares of the Company and $500,000, or alternatively, 250,000 common shares of the Company valued at $ . The Plaintiff is also requesting a judgement for costs, interest, and special damages. In December 2021, the Company filed a Response to Civil Claim denying the Plaintiffs’ claims for which the Plaintiff filed a Reply. The litigation is at an early stage.
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SEGMENTED INFORMATION |
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SEGMENTED INFORMATION | 27. SEGMENTED INFORMATION
During the three months ended February 28, 2022, the Company had four offices: a head office in Vancouver, British Columbia (Canada), a satellite office in Toronto, Ontario (Canada), IndieFlix’s office in Seattle, Washington (USA), and iGEMS’ office in Los Angeles, California (USA). During the three months ended February 28, 2021, the Company had two offices: a head office in Vancouver, British Columbia (Canada), a satellite office in Toronto, Ontario (Canada).
In evaluating performance, management does not distinguish or group its sales and cost of sales on a geographic basis. As at February 28, 2021, the Company determined it had two reportable operating segments: the investment in film and television entertainment and the investment in video games. Due to Company impairing the video game segment assets and ceasing to operate that segment at November 30, 2021, the Company determined the investment in film and television entertainment segment was its only reportable segment at February 28, 2022.
Revenue derived in the Company’s film and television entertainment and video games segments is earned from a large number of customers located throughout the world but mostly located in the United States of America. During the three months ended February 28, 2022, one customer accounted for 36% (February 28, 2021 – no customer accounted for more than 5%) of the Company’s sales.
Below summarizes the Company’s reportable operating segments for the three months ended February 28, 2021.
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PROPOSED TRANSACTION |
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PROPOSED TRANSACTION | 28. PROPOSED TRANSACTION
In connection with the proposed Filmocracy Transaction, on September 17, 2021, and subsequently extended on December 17, 2021, February 15, 2022, and March 31, 2022, the Company entered into an agreement with Filmocracy for $608,735 whereby the Company will advance $608,735 to Filmocracy as follows: (1) $244,292 upon the date of the agreement (advanced September 21, 2021); (2) $190,594 on the first month anniversary (advanced October 25, 2021); and (3) $173,849 on the second month anniversary (not yet advanced). The agreement bears interest at 6% per annum, is due on the earlier of April 30, 2022 or 30 days following the termination of the Filmocracy Transaction, and is secured by a general security agreement over certain assets. In the event that the proposed transaction does not close, all amounts outstanding shall bear interest at 24% per annum. As at February 28, 2022, the Company has accrued $10,453 of interest income in connection with this advance for acquisition.
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SUBSEQUENT EVENTS |
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SUBSEQUENT EVENTS | 29. SUBSEQUENT EVENTS
The Company had the following subsequent events, not disclosed elsewhere in these financial statements:
For additional clarification, the minimum aggregate total (i) Issuer Consideration Shares and (ii) Issuer Additional Shares issuable in connection with the achievement of both the First Milepost and Second Milepost is 5,625,000.
Included in the DCU SEA is a buyback right that entitles the DCU shareholders to acquire the DCU Shares from the Company should the Company’s shares be delisted for more than 180 days for the following consideration:
In connection with the DCU Transaction, on August 31, 2021, the Company entered into an agreement with DCU whereby the Company advanced $1,147,928 to DCU as follows: (1) $573,964 upon the date of the agreement (advanced September 1, 2021); and (2) $573,964 on the first month anniversary (advanced October 4, 2021). The advances bore interest at 6% per annum and was due on the earlier of (1) February 28, 2022; (2) the termination of the letter of intent entered into between the Company and DCU on June 7, 2021; or (3) the closing of the DCU Transaction. The agreement was secured by a pledge over all of the shares held in DCU (“Pledge Agreement”). As the funds were considered an advance on acquisition, the Company re-assumed the advance on the closing of the DCU Transaction on March 8, 2022. As at February 28, 2022, the Company had accrued $31,281 of interest income in connection with this advance.
The acquisition will be accounted for using the acquisition method pursuant to IFRS 3, Business Combinations. Under the acquisition method, assets and liabilities are recorded at their fair values on the date of acquisition and the total consideration is allocated to the assets acquired and liabilities assumed. The excess consideration given over the fair value of the net assets acquired will be recorded as goodwill.
The initial accounting for the acquisition was not complete by the issuance date of these condensed interim consolidated financial statements. |
SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Statement of compliance | Statement of compliance These condensed interim consolidated financial statements, including comparatives, have been prepared in accordance with International Accounts Standards (“IAS”) 34, “Condensed Interim Financial Reporting” using accounting policies consistent with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”) on a basis consistent with the accounting policies disclosed in the audited consolidated financial statements for the year ended November 30, 2021.
This condensed interim financial report does not include all of the information required of a full annual financial report and is intended to provide users with an update in relation to events and transactions that are significant to an understanding of the changes in financial position and performance of the Company since the end of the last annual reporting period. Therefore, it is recommended that this financial report be read in conjunction with the restated audited annual financial statements of the Company for the year ended November 30, 2021.
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Basis of presentation | Basis of presentation
The condensed interim consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, except for certain financial assets and liabilities, including derivative instruments that are measured at fair value. The consolidated financial statements are presented in United States dollars unless otherwise noted.
As at November 30, 2021, the Company changed its accounting policy to present its results in United States dollars instead of Canadian dollars as done previously. This accounting change has been applied retrospectively in preparing these financial statements; as such, all comparative figures have been restated to reflect this change.
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Basis of consolidation | Basis of consolidation
These condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries at the end of the reporting period as follows:
On August 13, 2021 the Company incorporated Liquid US. On October 20, 2021 the Company incorporated Liquid Merger Sub 2. On November 30, 2021, the Company incorporated Liquid Production Funding.
On August 27, 2021, the Company incorporated Liquid Media Merger Sub, Inc. which was amalgamated with IndieFlix on September 22, 2021 (Note 3).
On September 22, 2021, the Company acquired 100% of the shares of IndieFlix, a Delaware corporation (Note 3).
On October 20, 2021 the Company incorporated Liquid Merger Sub 3, which was amalgamated with iGEMS on December 14, 2021 (Note 4).
On December 14, 2021, the Company acquired 100% of the shares of iGEMS, a Delaware corporation (Note 4).
All significant intercompany accounts and transactions between the Company and its subsidiaries have been eliminated upon consolidation.
Subsidiaries Subsidiaries are all entities over which the Company has exposure to variable returns from its involvement and has the ability to use power over the investee to affect its returns. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Company until the date on which control ceases.
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Use of estimates | Use of estimates
The preparation of financial statements in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported revenues and expenses during the period. Although management uses historical experience and its best knowledge of the amount, events or actions to form the basis for judgments and estimates, actual results may differ from these estimates. Significant estimates and judgements made by management in the preparation of these consolidated financial statements are outlined below.
Uncertainty of COVID-19 pandemic In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak and any related adverse public health developments, has adversely affected workforces, customers, economies, and financial markets globally, initially leading to an economic downturn. It has also disrupted the normal operations of many businesses, including ours. This outbreak could decrease spending, adversely affect demand for our services and solutions and harm our business and results of operations; however, the Company has also recognized that the pandemic has led to a global increase in screen time which is beneficial to the Company’s operations. As countries continue to re-open from the pandemic, it is possible that screen time will decrease which may adversely affect the Company; however, it also leads to an increase in film and TV content being produced as film and TV producers are able to travel and continue operations leading to an increase in content available for the Company to package, finance, deliver, and monetize. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak and its effects on our business, results of operations, or how it will impact the Company’s ability to conduct financings at this time.
Functional currency The functional currency of the Company and its subsidiaries is the United States dollar; however, determination of functional currency may involve certain judgments to determine the primary economic environment which is re-evaluated for each new entity or if conditions change.
Level of control or influence over companies The accounting for investments in other companies can vary depending on the degree of control and influence over those other companies. Management is required to assess at each reporting date the Company’s control and influence over these other companies. Management has used its judgment to determine which companies are controlled and require consolidation and those which are significantly influenced and require equity accounting. The Company had considered its ownership position in Waterproof Studios Inc. (“Waterproof”) and determined it did not have the ability to influence the key operating activities of the entity. Accordingly, the Company accounted for its investment under fair value through profit or loss (Note 9) up to the disposal date of October 18, 2021.
Income taxes In assessing the probability of realizing income tax assets, management makes estimates related to expectation of future taxable income, applicable tax opportunities, expected timing of reversals of existing temporary differences and the likelihood that tax positions taken will be sustained upon examination by applicable tax authorities. In making its assessments, management gives additional weight to positive and negative evidence that can be objectively verified.
Determination of Cash Generating Units (“CGUs”) CGUs are the lowest level within an entity at which goodwill is monitored for internal management purposes which is not higher than an operating segment. The Company has assessed that each acquired entity is a separate CGU.
Valuation of share-based compensation and derivatives The Company uses the Black-Scholes Option Pricing Model for valuation of share-based compensation and other equity based payments, excluding contingent consideration. Option pricing models require the input of subjective assumptions including expected price volatility, interest rate, and forfeiture rate. Changes in the input assumptions can materially affect the fair value estimate and the Company’s earnings and equity reserves.
Valuation of contingent consideration The Company uses a probability scenario based approached for valuation of share-based contingent consideration. Under the probability scenario based approach, management calculates the probability that the contingent shares will be issued under a low case, base case, and high case scenario. Changes in the probabilities can materially affect the fair value estimate and the Company’s earnings and equity reserves.
Valuation of intangible assets Intangible assets are assessed for impairment indicators at each reporting date. Management first reviews qualitative factors in determining if an impairment needs to be recorded. Quantitative factors are then used to calculate the amount of impairment, if needed.
Valuation of investment in equity instrument The Company values its equity instruments in private companies at fair value at each reporting date. The determination of fair value is based on estimates made by management on the expected earnings before income, taxes, and amortization multiplied by a reasonable factor for the appropriate industry applicable to the private company.
Estimation of expected credit loss Loans receivable are assessed for an estimated credit loss at each reporting date. The estimated loss is determined based on management’s knowledge of the debtor and their ability to repay the loan. As the current debtors’ are private entities, management must rely on assertions provided to them from the debtor to make their estimates.
Valuation of convertible debentures The equity portion of the convertible debenture is calculated using a discounted cash flow method which requires management to make an estimate on an appropriate discount rate.
Valuation of right-of-use asset and lease liability The application of IFRS 16 requires the Company to make judgments that affect the valuation of the right-of-use assets and the valuation of lease liabilities. These include: determining the contract term and determining the interest rate used for discounting of future cash flows.
The lease term determined by the Company is comprised of the non-cancellable period of lease agreements, periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option and periods covered by an option to terminate the lease if the Company is reasonably certain not to exercise that option.
The present value of the lease payment is determined using a discount rate representing the rate of a commercial mortgage rate, observed in the period when the lease agreement commences or is modified.
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Intangible assets | Intangible assets
The Company has intangible assets from acquisitions and development of gaming content and films. The amortization method, useful life and residual values are assessed annually and the assets are tested for impairment annually, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Amortization expense is recorded on a straight-line basis beginning with the month the corresponding assets are available for use and over the estimated useful lives provided below:
Upon retirement or disposal, the cost of the asset disposed of and the related accumulated amortization are removed from the accounts and any gain or loss is reflected in profit and loss. Expenditures for repairs and maintenance are expensed as incurred.
Development expenditures, including the cost of material, direct labour, and other direct costs are recognized as an intangible asset when the following recognition requirements are met:
Intangible assets being developed are amortized once development is complete.
Video game catalogues The video game catalogues are made up of a diverse variety of games, ranging in age and popularity. The catalogues are unique due to the diverse nature of the products within the catalogues, making it difficult to assign a useful life. The useful life of 15 years represented management’s view of the expected period over which the Company expected to receive benefits from the acquired gaming content packaged as catalogues.
Platform coding The platform coding acquired by the Company is currently under development and is not yet subject to amortization.
Distribution libraries Through the acquisition of IndieFlix, the Company acquired distribution libraries. These assets are carried at cost, including amounts of purchase price allocations upon acquisitions. The useful life of 10 years represents management’s view of the expected period over which the Company expects benefits from the acquired distribution libraries.
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Comparative figures | Comparative figures
Certain of the comparative figures have been reclassified in order to conform to the current year’s presentation.
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Accounting pronouncements not yet adopted | Accounting pronouncements not yet adopted
Accounting standards or amendments to existing accounting standards that have been issued but have future effective dates are either not applicable or are not expected to have a significant impact on the Company’s consolidated financial statements.
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SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Schedule of Company and its subsidiaries at the end of the reporting period |
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Schedule of estimated useful lives of intangible assets |
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ACQUISITION OF INDIEFLIX GROUP, INC. (Tables) - Indiex Flix [Member] |
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Schedule of Weighted average expected number of shares to vest |
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Schedule of estimate of the fair value of net assets acquired |
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ACQUISITION OF iGEMS TV, INC. (Tables) - I G E M S [Member] |
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Feb. 28, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
IfrsStatementLineItems [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted average expected number of shares to vest |
|
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Schedule of estimate of the fair value of net assets acquired |
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RECEIVABLES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of trade receivable |
|
LOANS RECEIVABLE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans Receivable | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long term loans receivable including accrued interest |
|
LICENSES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Licenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of licenses |
|
INVESTMENT IN EQUITY INSTRUMENTS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment In Equity Instruments | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reconciliation of the investment in Waterproof |
|
EQUIPMENT (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Equipment Abstract | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Equipment |
|
INTANGIBLE ASSETS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of intangible assets |
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RIGHT-OF-USE- ASSET AND LEASE LIABILITY (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Right of Use Asset |
|
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Schedule of Lease Liability |
|
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Schedule of lease payments |
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GOODWILL (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure Goodwill Abstract | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of goodwill |
|
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounts Payable And Accrued Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Payable and Accured Liabilities |
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DEFERRED REVENUE (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Deferred Revenue |
|
LOANS PAYABLE (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | ||||||||||||||||||||||||||||||||||||
Schedule of loans payable balances and transactions |
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CONVERTIBLE DEBENTURES (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Convertible Debentures | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Convertible Debentures |
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LONG-TERM DEBT (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long term debt |
|
SHARE CAPITAL AND RESERVES (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of authorized to issue of preferred shares |
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Schedule of weighted average assumptions by Black-Scholes option-pricing model |
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Schedule of stock option transactions |
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Schedule of summary of the share options outstanding and exercisable |
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Schedule of agents' warrant transactions |
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Schedule of agents' warrants outstanding and exercisable |
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Schedule of share purchase warrant transactions |
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Schedule of share purchase warrants outstanding and exercisable for warrants |
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Schedule of Restricted share units |
|
RELATED PARTY TRANSACTIONS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of key management personnel compensation |
|
SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Disclosures With Respect To Cash Flows | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of disclosures with respect to cash flows |
|
SEGMENTED INFORMATION (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Feb. 28, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of reportable operating segments |
|
NATURE AND CONTINUANCE OF OPERATIONS (Details Narrative) - USD ($) |
Feb. 28, 2022 |
Nov. 30, 2021 |
---|---|---|
Nature And Continuance Of Operations | ||
Accumulated deficit | $ 32,332,887 | $ 31,462,167 |
SIGNIFICANT ACCOUNTING POLICIES (Details) |
3 Months Ended | |
---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
|
Liquid Media Group [Member] | ||
Reserve Quantities [Line Items] | ||
Percentage owned | 100.00% | 100.00% |
Liquid U S [Member] | ||
Reserve Quantities [Line Items] | ||
Percentage owned | 100.00% | 100.00% |
Liquid Merger Sub 2 [Member] | ||
Reserve Quantities [Line Items] | ||
Percentage owned | 100.00% | 100.00% |
I G E M S [Member] | ||
Reserve Quantities [Line Items] | ||
Percentage owned | 100.00% | 0.00% |
Indie Flix [Member] | ||
Reserve Quantities [Line Items] | ||
Percentage owned | 100.00% | 100.00% |
Indie Flix R A C E L L C [Member] | ||
Reserve Quantities [Line Items] | ||
Percentage owned | 100.00% | 100.00% |
SIGNIFICANT ACCOUNTING POLICIES (Details 1) |
3 Months Ended |
---|---|
Feb. 28, 2022 | |
Video Game Catalogues [Member] | |
IfrsStatementLineItems [Line Items] | |
Intangible assets useful lives | 15 years |
Platform Coding [Member] | |
IfrsStatementLineItems [Line Items] | |
Intangible assets useful lives | 3 years |
Brands [Member] | |
IfrsStatementLineItems [Line Items] | |
Intangible assets useful lives | indefinite |
Distribution Libraries [Member] | |
IfrsStatementLineItems [Line Items] | |
Intangible assets useful lives | 10 years |
ACQUISITION OF INDIEFLIX GROUP, INC. (Details) - Indiex Flix [Member] - $ / shares |
Feb. 28, 2022 |
Nov. 30, 2021 |
---|---|---|
Weighted average expected number of shares to vest | ||
Low Case | 150,000 | 150,000 |
Base Case | 600,000 | 600,000 |
High Case | 280,000 | 280,000 |
Expected number of shares to vest | 1,030,000 | 1,030,000 |
Liquid share price | $ 0.68 | $ 1.24 |
ACQUISITION OF INDIEFLIX GROUP, INC. (Details 1) - USD ($) |
Feb. 28, 2022 |
Nov. 30, 2021 |
Sep. 22, 2021 |
Nov. 30, 2020 |
---|---|---|---|---|
Allocated as follows: | ||||
Right-of-use asset | $ 117,906 | $ 133,984 | ||
Deferred revenue | 684,481 | 183,994 | ||
Lease liability | (56,998) | (135,175) | ||
Intangible assets – distribution libraries | 3,542,687 | 3,636,078 | ||
Goodwill | $ 1,634,463 | $ 833,493 | ||
Indiex Flix [Member] | ||||
Consideration: | ||||
Common shares | $ 799,994 | |||
IndieFlix Contingent Consideration | (1,648,000) | |||
Total unadjusted purchase price | 2,447,994 | |||
Cash acquired | (21,076) | |||
Total purchase price, net of cash acquired | 2,426,918 | |||
Allocated as follows: | ||||
Accounts receivable | 188,278 | |||
Inventory | 105 | |||
Prepaids | 8,335 | |||
Right-of-use asset | 144,702 | |||
Accounts payable | (606,560) | |||
Deferred revenue | (251,435) | |||
Lease liability | (144,702) | |||
Loans payable | (508,255) | |||
Long-term debt | 156,625 | |||
Intangible assets – distribution libraries | 3,695,673 | |||
Goodwill | 833,493 | |||
Deferred income taxes | (776,091) | |||
Total | $ 2,426,918 |
ACQUISITION OF INDIEFLIX GROUP, INC. (Details Narrative) |
1 Months Ended |
---|---|
Sep. 22, 2021
USD ($)
| |
Acquisition Of Indieflix Group Inc. | |
Intangible assets acquired | $ 3,695,673 |
Useful life | 10 years |
ACQUISITION OF iGEMS TV, INC. (Details) - I G E M S [Member] - $ / shares |
Feb. 28, 2022 |
Dec. 14, 2021 |
---|---|---|
Weighted average expected number of shares to vest | ||
Low Case | 315,563 | 315,563 |
Base Case | 422,025 | 422,025 |
High Case | 561,638 | 561,638 |
Expected number of shares to vest | 428,655 | 428,655 |
Liquid share price | $ 0.68 | $ 1.10 |
ACQUISITION OF iGEMS TV, INC. (Details 1) - USD ($) |
Feb. 28, 2022 |
Dec. 14, 2021 |
Nov. 30, 2021 |
Nov. 30, 2020 |
---|---|---|---|---|
Allocated as follows: | ||||
Goodwill | $ 1,634,463 | $ 833,493 | ||
I G E M S [Member] | ||||
Consideration: | ||||
Common shares | $ 233,750 | |||
iGEMS Contingent Consideration | 471,521 | |||
Total unadjusted purchase price | 705,271 | |||
Cash acquired | (21,981) | |||
Total purchase price, net of cash acquired | 683,290 | |||
Allocated as follows: | ||||
Accounts receivable | 10,749 | |||
Accounts payable | (1,136) | |||
Loans payable | (127,293) | |||
Goodwill | 800,970 | |||
Total | $ 683,290 |
RECEIVABLES (Details) - USD ($) |
Feb. 28, 2022 |
Nov. 30, 2021 |
---|---|---|
Accounts receivable | $ 153,521 | $ 512,041 |
Sales tax receivable | 283,244 | 266,464 |
Other receivables | 14,010 | |
Receivables | $ 450,775 | $ 778,505 |
LOANS RECEIVABLE (Details) |
12 Months Ended |
---|---|
Nov. 30, 2021
USD ($)
| |
IfrsStatementLineItems [Line Items] | |
Opening balance | $ 84,923 |
Accrued interest income | 12,939 |
Expected credit loss | (101,085) |
Net exchange differences | 3,223 |
Closing balance | |
Participant Games Inc [Member] | |
IfrsStatementLineItems [Line Items] | |
Opening balance | 51,931 |
Accrued interest income | 7,912 |
Expected credit loss | (61,814) |
Net exchange differences | 1,971 |
Closing balance | |
Installment Entertainment Inc [Member] | |
IfrsStatementLineItems [Line Items] | |
Opening balance | 32,992 |
Accrued interest income | 5,027 |
Expected credit loss | (39,271) |
Net exchange differences | 1,252 |
Closing balance |
LOANS RECEIVABLE (Details Narrative) |
12 Months Ended | |
---|---|---|
Nov. 30, 2017
CAD ($)
|
Nov. 30, 2021
USD ($)
|
|
Participant Games Inc [Member] | ||
IfrsStatementLineItems [Line Items] | ||
Advances | $ 150,000 | |
Loan receivable interest rate | 15.00% | |
Accrued interest receivable | $ 127,114 | |
Allowance for credit loss | 244,369 | |
Installment Entertainment Inc [Member] | ||
IfrsStatementLineItems [Line Items] | ||
Advances | $ 100,000 | |
Loan receivable interest rate | 15.00% | |
Accrued interest receivable | 77,077 | |
Allowance for credit loss | $ 155,247 |
RESTRICTED CASH (Details Narrative) - USD ($) |
Feb. 28, 2022 |
Nov. 30, 2021 |
---|---|---|
Restricted cash and cash equivalents | $ 54,338 | $ 53,937 |
LICENSES (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
Nov. 30, 2021 |
|
Licenses | |||
Balance, beginning of year | $ 705,555 | $ 705,555 | |
Amortization | $ 105,403 | (213,015) | |
Write-offs | (492,751) | ||
Net exchange differences | 211 | ||
Balance, end of year |
LICENSES (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
Feb. 29, 2020 |
Nov. 30, 2021 |
Nov. 30, 2018 |
|
Licenses | |||||
Number of common shares issued for licenses | 888,000 | ||||
Amount of common shares issued for licenses | $ 3,756,360 | ||||
Unamortized balance | $ 250,581 | $ 705,555 | |||
Amortization licenses cost | $ 105,403 | $ (213,015) |
INVESTMENT IN EQUITY INSTRUMENTS (Details) - Waterproof [Member] - USD ($) |
3 Months Ended | 12 Months Ended |
---|---|---|
Feb. 28, 2022 |
Nov. 30, 2021 |
|
IfrsStatementLineItems [Line Items] | ||
Balance, beginning of year | $ 2,966,110 | |
Change in fair value | 1,139,133 | |
Disposal of investment | (4,105,243) | |
Balance, end of year |
INVESTMENT IN EQUITY INSTRUMENTS (Details Narrative) - Waterproof [Member] |
Oct. 18, 2021
USD ($)
|
---|---|
IfrsStatementLineItems [Line Items] | |
Estimated common shares value | $ 4,105,243 |
Unrealized gain on equity instruments | $ 1,139,133 |
EQUIPMENT (Details Narrative) - USD ($) |
1 Months Ended | 12 Months Ended |
---|---|---|
Dec. 31, 2021 |
Nov. 30, 2021 |
|
Disclosure Equipment Abstract | ||
Loss on disposal of equipment | $ 45,466 | |
Gain on disposal of equipment | $ 6,688 |
INTANGIBLE ASSETS (Details Narrative) - USD ($) |
12 Months Ended | |
---|---|---|
Nov. 30, 2021 |
Nov. 30, 2020 |
|
IfrsStatementLineItems [Line Items] | ||
Goodwill Acquire distribution libraries | $ 3,695,673 | |
Impairment of intangible assets | $ 4,214,445 | |
Video Game Catalogues [Member] | ||
IfrsStatementLineItems [Line Items] | ||
Development costs | $ 3,325,000 |
RIGHT-OF-USE- ASSET AND LEASE LIABILITY (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
---|---|---|
Feb. 28, 2022 |
Nov. 30, 2021 |
|
IfrsStatementLineItems [Line Items] | ||
Beginning Balance | $ 133,984 | |
Ending Balance | 117,906 | $ 133,984 |
Right-of-use assets [member] | ||
IfrsStatementLineItems [Line Items] | ||
Net book value | 117,906 | 133,984 |
Right-of-use assets [member] | Gross carrying amount [member] | ||
IfrsStatementLineItems [Line Items] | ||
Beginning Balance | 144,702 | |
Additions | 144,702 | |
Ending Balance | 144,702 | |
Right-of-use assets [member] | Accumulated impairment [member] | ||
IfrsStatementLineItems [Line Items] | ||
Beginning Balance | 10,718 | |
Additions | 16,078 | 10,718 |
Ending Balance | $ 26,796 | $ 10,718 |
RIGHT-OF-USE- ASSET AND LEASE LIABILITY (Details 1) - USD ($) |
3 Months Ended | 12 Months Ended |
---|---|---|
Feb. 28, 2022 |
Nov. 30, 2021 |
|
Balance, beginning of year | $ 135,175 | |
Additions | 144,702 | |
Lease payments | (16,065) | (10,298) |
Interest expense | 1,059 | 771 |
Gross lease liability | 120,169 | 135,175 |
Less: current portion | (63,171) | (61,703) |
Balance, end of year | $ 56,998 | $ 73,472 |
RIGHT-OF-USE- ASSET AND LEASE LIABILITY (Details 2) - USD ($) |
Feb. 28, 2022 |
Nov. 30, 2021 |
Nov. 30, 2020 |
---|---|---|---|
December 1, 2021 - November 30, 2022 | $ 49,122 | ||
December 1, 2022 - November 30, 2023 | 69,093 | ||
December 1, 2023 - November 30, 2024 | 5,785 | ||
Total | 124,000 | ||
Effect of discounting | (3,831) | ||
Total present value of lease liabilities | 120,169 | $ 135,175 | |
Less: current portion | (63,171) | (61,703) | |
Balance, end of year | $ 56,998 | $ 135,175 |
RIGHT-OF-USE- ASSET AND LEASE LIABILITY (Details Narrative) |
3 Months Ended |
---|---|
Feb. 28, 2022 | |
Lease liability discount rate | 3.25% |
GOODWILL (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
---|---|---|
Feb. 28, 2022 |
Nov. 30, 2021 |
|
Disclosure Goodwill Abstract | ||
Balance, beginning of period | $ 833,493 | |
Goodwill acquired | 800,970 | 833,493 |
Balance, end of period | $ 1,634,463 | $ 833,493 |
GOODWILL (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended |
---|---|---|
Feb. 28, 2022 |
Nov. 30, 2021 |
|
IfrsStatementLineItems [Line Items] | ||
Goodwill acquired | $ 800,970 | $ 833,493 |
Indie Flix [Member] | ||
IfrsStatementLineItems [Line Items] | ||
Goodwill acquired | $ 833,493 | |
I G E M S [Member] | ||
IfrsStatementLineItems [Line Items] | ||
Goodwill acquired | $ 800,970 |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($) |
Feb. 28, 2022 |
Nov. 30, 2021 |
---|---|---|
Accounts Payable And Accrued Liabilities | ||
Accounts payable | $ 1,893,306 | $ 1,625,418 |
Accrued liabilities | 91,795 | 242,601 |
Wages payable | 53,038 | 102,079 |
Payroll taxes payable | 54,890 | 31,634 |
Accounts payable and accrued liabilities | $ 2,093,029 | $ 2,001,732 |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
|
Accounts Payable And Accrued Liabilities | ||
Stock issued during period, shares, issued for settlement of accounts payable | 0 | 2,984 |
Stock issued during period, value, issued for settlement of accounts payable | $ 0 | $ 6,953 |
Amount of accounts payable settlement | 0 | 7,851 |
Gain on debt settlements | $ 0 | $ 898 |
Number of shares transferred | 215,000 | |
Settlement of interest included in accounts payable | $ 18,481 |
DEFERRED REVENUE (Details) - USD ($) |
Feb. 28, 2022 |
Nov. 30, 2021 |
---|---|---|
Film distribution | $ 678,114 | $ 179,196 |
Streaming subscriptions | 6,367 | 4,798 |
Deferred Revenue | $ 684,481 | $ 183,994 |
LOANS PAYABLE (Details) - Credit Facility [Member] |
12 Months Ended |
---|---|
Nov. 30, 2021
USD ($)
| |
IfrsStatementLineItems [Line Items] | |
Balance | $ 493,087 |
Repayment - shares | (498,329) |
Net exchange differences | 5,242 |
Balance |
LOANS PAYABLE (Details Narrative) - USD ($) |
Feb. 28, 2022 |
Nov. 30, 2021 |
Nov. 30, 2020 |
---|---|---|---|
IfrsStatementLineItems [Line Items] | |||
Accounts payable and accrued liabilities | $ 2,093,029 | $ 2,001,732 | |
Credit Facility [Member] | |||
IfrsStatementLineItems [Line Items] | |||
Percentage of interest rate | 14.40% | ||
Accounts payable and accrued liabilities | $ 5,447 |
CONVERTIBLE DEBENTURES (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
Nov. 30, 2021 |
|
IfrsStatementLineItems [Line Items] | |||
Balance at beginning | $ 459,927 | $ 459,927 | |
Interest expense and accretion | 0 | 12,752 | 8,427 |
Conversion of convertible debentures | (451,644) | ||
Reallocation of interest to accounts payable | (16,710) | ||
Balance at end | |||
Liability Component | |||
IfrsStatementLineItems [Line Items] | |||
Balance at beginning | 409,960 | 409,960 | |
Interest expense and accretion | 8,427 | ||
Conversion of convertible debentures | (401,677) | ||
Reallocation of interest to accounts payable | (16,710) | ||
Balance at end | |||
Equity Component | |||
IfrsStatementLineItems [Line Items] | |||
Balance at beginning | $ 49,967 | 49,967 | |
Interest expense and accretion | |||
Conversion of convertible debentures | (49,967) | ||
Reallocation of interest to accounts payable | |||
Balance at end |
CONVERTIBLE DEBENTURES (Details Narrative) - USD ($) |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
Nov. 30, 2021 |
Nov. 30, 2019 |
|
Convertible Debentures | ||||
Deferred tax recovery | $ 122,201 | |||
Interest expense and accretion | $ 0 | $ 12,752 | $ 8,427 |
LONG-TERM DEBT (Details) - USD ($) |
3 Months Ended | 12 Months Ended |
---|---|---|
Feb. 28, 2022 |
Nov. 30, 2021 |
|
IfrsStatementLineItems [Line Items] | ||
Balance at Beginning | $ 158,265 | $ 40,059 |
Acquired on acquisition of IndieFlix | 156,625 | |
Payments | (42,775) | |
Interest expense and accretion | 2,506 | 4,356 |
Balance at end | 160,771 | 158,265 |
Current portion | 4,092 | |
Long-term portion | 156,679 | 158,265 |
Third Party [Member] | ||
IfrsStatementLineItems [Line Items] | ||
Balance at Beginning | 40,059 | |
Acquired on acquisition of IndieFlix | ||
Payments | (42,775) | |
Interest expense and accretion | 2,716 | |
Balance at end | ||
Current portion | ||
Long-term portion | ||
S B A Loan [Member] | ||
IfrsStatementLineItems [Line Items] | ||
Balance at Beginning | 158,265 | |
Acquired on acquisition of IndieFlix | 156,625 | |
Payments | ||
Interest expense and accretion | 2,506 | 1,640 |
Balance at end | 160,771 | $ 158,265 |
Current portion | 4,092 | |
Long-term portion | $ 156,679 |
SHARE CAPITAL AND RESERVES (Details 1) - $ / shares |
3 Months Ended | |
---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
|
Risk-free interest rate | 0.41% | |
Dividend yield | ||
Expected life | 5 years | |
Volatility | 105.00% | |
Weighted average fair value per option | $ 1.18 |
SHARE CAPITAL AND RESERVES (Details 2) |
3 Months Ended | 12 Months Ended |
---|---|---|
Feb. 28, 2022
shares
$ / shares
|
Nov. 30, 2021
shares
$ / shares
|
|
Balance | shares | 1,755,445 | 957,995 |
Balance | $ 1.90 | $ 2.55 |
Granted | shares | 1,072,450 | |
Granted | $ 1.90 | |
Exercised | shares | (10,000) | |
Exercised | $ 1.90 | |
Exercised | $ 2.00 | |
Cancelled | shares | (265,000) | |
Cancelled | $ 1.90 | |
Balance | shares | 1,755,445 | 1,755,445 |
Balance | $ 1.90 |
SHARE CAPITAL AND RESERVES (Details 4) |
12 Months Ended |
---|---|
Nov. 30, 2021
shares
$ / shares
| |
IfrsStatementLineItems [Line Items] | |
Balance | $ 2.55 |
Exercised | 1.90 |
Balance | $ 1.90 |
Agents Warrants [Member] | |
IfrsStatementLineItems [Line Items] | |
Balance | shares | 213,333 |
Balance | $ 1.88 |
Exercised | shares | (186,666) |
Exercised | $ 1.88 |
Balance | shares | 26,667 |
Balance | $ 1.88 |
SHARE CAPITAL AND RESERVES (Details 5) |
3 Months Ended | ||
---|---|---|---|
Feb. 28, 2022
shares
$ / shares
|
Nov. 30, 2021
shares
|
Nov. 30, 2020
shares
|
|
IfrsStatementLineItems [Line Items] | |||
Number of Warrants | 26,667 | ||
Agents Warrants [Member] | |||
IfrsStatementLineItems [Line Items] | |||
Number of Warrants | 26,667 | 26,667 | 213,333 |
Exercise Price | $ / shares | $ 1.88 | ||
Expiry Date | Jun. 04, 2025 |
SHARE CAPITAL AND RESERVES (Details 6) |
12 Months Ended |
---|---|
Nov. 30, 2021
shares
$ / shares
| |
IfrsStatementLineItems [Line Items] | |
Balance | $ 2.55 |
Exercised | 1.90 |
Expired | 1.90 |
Balance | $ 1.90 |
Share Purchase Warrants [Member] | |
IfrsStatementLineItems [Line Items] | |
Balance | shares | 3,033,709 |
Balance | $ 1.66 |
Issued | shares | 270,000 |
Issued | $ 1.75 |
Exercised | shares | (1,408,501) |
Exercised | $ 1.84 |
Expired | shares | (1,516,000) |
Expired | $ 1.46 |
Balance | shares | 379,208 |
Balance | $ 1.84 |
SHARE CAPITAL AND RESERVES (Details 7) |
3 Months Ended | ||||
---|---|---|---|---|---|
Feb. 28, 2022
shares
$ / shares
|
Nov. 30, 2021
shares
|
Nov. 30, 2020
shares
|
|||
IfrsStatementLineItems [Line Items] | |||||
Number of Warrants | 26,667 | ||||
Share Purchase Warrants [Member] | |||||
IfrsStatementLineItems [Line Items] | |||||
Number of Warrants | 379,208 | 379,208 | 3,033,709 | ||
Share Purchase Warrants [Member] | Ranges Of Exercise Prices 1. 20 [Member] | |||||
IfrsStatementLineItems [Line Items] | |||||
Number of Warrants | [1] | 24,208 | |||
Exercise Price | $ / shares | $ 1.20 | ||||
Expiry Date | Apr. 06, 2022 | ||||
Share Purchase Warrants [Member] | Ranges Of Exercise Prices 1. 88 [Member] | |||||
IfrsStatementLineItems [Line Items] | |||||
Number of Warrants | 355,000 | ||||
Exercise Price | $ / shares | $ 1.88 | ||||
Expiry Date | Jun. 09, 2025 | ||||
|
SHARE CAPITAL AND RESERVES (Details 8) - Restricted share units |
12 Months Ended |
---|---|
Nov. 30, 2021
shares
| |
IfrsStatementLineItems [Line Items] | |
Balance | 750,000 |
Vested | (487,502) |
Cancelled | (98,541) |
Balance | 163,957 |
ROYALTY INCOME (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
|
IfrsStatementLineItems [Line Items] | ||
Royalty income | $ 12,068 | |
Indie Flix [Member] | ||
IfrsStatementLineItems [Line Items] | ||
Royalty income | $ 12,068 | $ 0 |
RELATED PARTY TRANSACTIONS (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
|
Management and directors salaries and fees | $ 238,755 | $ 134,899 |
Share-based compensation | 117,028 | 505,316 |
Key management personnel compensation | $ 355,783 | $ 640,215 |
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
Nov. 30, 2021 |
|
IfrsStatementLineItems [Line Items] | |||
Receivable | $ 14,010 | $ 0 | |
Revenue | 577,689 | $ 8,882 | |
Royalty income | 12,068 | ||
Directors [Member] | |||
IfrsStatementLineItems [Line Items] | |||
Accounts payable and accrued liabilities | 185,425 | 275,486 | |
Revenue | 207,856 | 0 | |
Rent | 11,056 | 0 | |
Indie Flix [Member] | |||
IfrsStatementLineItems [Line Items] | |||
Receivable | 0 | $ 308,631 | |
Royalties | 154,199 | 0 | |
Royalty income | 12,068 | 0 | |
I G E M S [Member] | |||
IfrsStatementLineItems [Line Items] | |||
Content curation costs | $ 19,500 | $ 0 |
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Details Narrative) - USD ($) |
3 Months Ended | |
---|---|---|
Feb. 28, 2022 |
Nov. 30, 2021 |
|
Derivative liabilities | $ 991,886 | $ 1,277,200 |
Expected credit loss loans receivable | 356,070 | |
Cash | $ 3,574,605 | $ 4,305,461 |
SUPPLEMENTAL DISCLOSURES WITH RESPECT TO CASH FLOWS (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
|
Supplemental non-cash disclosures | ||
Reallocation of value of warrants upon exercise | $ 2,953 | |
Shares issued for debt settlements | 486,403 | |
Shares issued for commitment | 440,501 | |
Acquisition advances eliminated on acquisition of subsidiary (Note 4) | $ 127,293 |
CONTINGENCIES (Details Narrative) |
3 Months Ended |
---|---|
Feb. 28, 2022
USD ($)
shares
| |
Contingencies | |
Number of common shares owed | shares | 175,000 |
Value of common shares owed | $ | $ 500,000 |
SEGMENTED INFORMATION (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Feb. 28, 2022 |
Feb. 28, 2021 |
|
IfrsStatementLineItems [Line Items] | ||
Revenue | $ 577,689 | $ 8,882 |
Cost of sales | (538,413) | (136,863) |
Segment profit (loss) | (870,720) | $ (1,518,143) |
Operating segments [member] | ||
IfrsStatementLineItems [Line Items] | ||
Revenue | 8,882 | |
Cost of sales | 136,863 | |
Operating expenses | (164,633) | |
Segment profit (loss) | (292,614) | |
Corporate expenses: | ||
Operating expenses | (1,675,695) | |
Other income (expenses) | 450,166 | |
Comprehensive loss for the period | (1,518,143) | |
Capital expenditures | ||
Film [Member] | Operating segments [member] | ||
IfrsStatementLineItems [Line Items] | ||
Revenue | 5,199 | |
Cost of sales | 24,404 | |
Operating expenses | (145,783) | |
Segment profit (loss) | (164,988) | |
Corporate expenses: | ||
Capital expenditures | ||
Video Games [Member] | Operating segments [member] | ||
IfrsStatementLineItems [Line Items] | ||
Revenue | 3,683 | |
Cost of sales | 112,459 | |
Operating expenses | (18,850) | |
Segment profit (loss) | (127,626) | |
Corporate expenses: | ||
Capital expenditures |
SEGMENTED INFORMATION (Details Narrative) |
3 Months Ended |
---|---|
Feb. 28, 2022
Segment
| |
Number of reportable operating segments | 2 |
PROPOSED TRANSACTION (Details Narrative) - Filmocracy [Member] - USD ($) |
Feb. 28, 2022 |
Oct. 25, 2021 |
Sep. 21, 2021 |
Sep. 17, 2021 |
---|---|---|---|---|
IfrsStatementLineItems [Line Items] | ||||
Advanced from related party | $ 190,594 | $ 244,292 | ||
Interest rate | 6.00% | |||
Accrued of interest income | $ 10,453 |
SUBSEQUENT EVENTS (Details Narrative) - USD ($) |
Mar. 03, 2022 |
Feb. 28, 2022 |
Oct. 04, 2021 |
Sep. 01, 2021 |
Aug. 31, 2021 |
---|---|---|---|---|---|
IfrsStatementLineItems [Line Items] | |||||
Numbert of shares issued | 163,957 | ||||
Number of vesting shares | 163,957 | ||||
Digital Cinema United Holding [Member] | |||||
IfrsStatementLineItems [Line Items] | |||||
Issuer Consideration Shares | 3,000,000 | ||||
Advanced from related party | $ 573,964 | $ 573,964 | |||
Interest rate | 6.00% | ||||
Accrued of interest income | $ 31,281 |
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