Report of Foreign Issuer (6-k)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 6-K

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a – 16 OR 15d – 16 UNDER THE

THE SECURITIES EXCHANGE ACT OF 1934

 

For the month of July 2018

 

Commission File No. 0-53646

 

Novicius Corp.

(Translation of Registrant’s name into English)   1 King Street West, Suite 1505 Toronto, Ontario, Canada M5H 1A1

(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 40F.

 

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):

 

Yes ☐      No ☒

 

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):

 

Yes ☐      No ☒

 

 

 

 

TABLE OF CONTENTS

 

1.       Novicius Corp., Unaudited Interim Condensed Consolidated Financial Statements for the Three and Nine Months Ended May 31, 2018 as filed on Sedar on July 16, 2018.

 

2.       Novicius Corp., Management’s Discussion and Analysis for the Three and Nine Months Ended May 31, 2018 as filed on Sedar on July 16, 2018.

 

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.

Dated: July 16, 2018	NOVICIUS CORP.
	By:	/s/ James Cassina
	Name: James Cassina
	Title: Chief Financial Officer

 

 

 

 

 

Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018

(Unaudited)

(Expressed in Canadian Dollars)

 

Notice of No Auditor Review of

Interim Condensed Consolidated Financial Statements

 

Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the interim financial statements they must be accompanied by a notice indicating that the interim financial statements have not been reviewed by an auditor. The accompanying unaudited interim condensed consolidated financial statements of Novicius Corp. (the “Company”) have been prepared by and are the responsibility of the management of the Company. The Company’s independent auditor has not performed a review of these unaudited interim condensed consolidated financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants.

 

 

 

 

Interim Condensed Consolidated Statements of Financial Position
(Expressed in Canadian Dollars)
Unaudited			May 31, 2018				August 31, 2017
Assets
Current assets
Cash		$	5,440			$	1,040
Other receivables (Note 11)			8,710				41,007
Total current assets			14,150				42,047
Total Assets		$	14,150			$	42,047
Liabilities and Shareholders’ Deficiency
Current liabilities
Trade and other payables		$	639,272			$	529,823
Shareholder loans (Note 7)			74,696				—
Total current liabilities			713,968				529,823
Shareholders’ deficiency
Common shares (Note 9 a)			23,651,529				23,651,529
Share purchase warrants (Note 9 b)			749,866				749,866
Share purchase options (Note 9 d)			—				1,611,450
Contributed surplus			6,932,154				5,184,363
Accumulated deficit			(32,033,367	)			(31,684,984	)
Total shareholders’ deficiency			(699,818	)			(487,776	)
Total Liabilities and Shareholders’ Deficiency		$	14,150			$	42,047
Going Concern (Note 1 b)
Related Party Transactions and Balances (Note 7)
Subsequent Event (Note 12)

 

The accompanying notes are an integral part of these consolidated financial statements 

 

1

 

 

 

Interim Condensed Consolidated Statements of Operations and Other Comprehensive Loss
(Expressed in Canadian Dollars)
Unaudited
		Three Months Ended								Nine Months Ended
		May 31,								May 31,
		2018				2017				2018				2017
Revenue
Advertising revenue		$	—			$	4,508			$	—			$	4,508
Expenses
Hosting, advertising and technology services			791				56,733				2,866				51,279
Research, content development and technology support			—				36,218				—				292,727
General and administrative			91,593				119,830				206,985				397,453
Loss on foreign exchange			929				66				2,191				1,754
Stock based compensation (Note 9 e)			34,086				—				136,341				136,291
Stock based compensation-non employees (Note 9 e)			—				—				—				14,805
Anti-dilution fees (Note 8)			—				(9,818	)			—				8,182
			127,398				203,029				348,383				902,491
Net loss from operations and other comprehensive loss		$	(127,398	)		$	(198,521	)		$	(348,383	)		$	(897,983	)
Loss per share, basic and diluted		$	(0.024	)		$	(0.075	)		$	(0.066	)		$	(0.338	)
Weighted average shares outstanding, basic and diluted			5,283,164				2,658,319				5,283,164				2,655,784

 

The accompanying notes are an integral part of these consolidated financial statements

 

2

 

 

 

Interim Condensed Consolidated Statements of Changes in Shareholders’ Deficiency
(Expressed in Canadian Dollars)
Unaudited
		SHARE				SHARE				SHARE				SHARE				CONTRI-				ACCUMULATED				TOTAL
		CAPITAL				CAPITAL				PURCHASE				PURCHASE				BUTED				DEFICIT				SHARE-
		Number of				COMMON				WARRANTS				OPTIONS				SURPLUS								HOLDERS’
		Common				SHARES																				DEFICIENCY
		Shares*				$				$				$				$				$				$
Balance, August 31, 2016			2,650,627				23,220,683				2,925,837				828,334				1,921,743				(29,587,246	)			(690,649	)
Stock based compensation			—				—				—				151,096				—				—				151,096
Units issued as private placement			7,692				30,233				19,767				—				—				—				50,000
Stock options expired			—				—				—				(812,965	)			812,965				—				—
Net loss for the period			—				—				—				—				—				(897,983	)			(897,983	)
Balance, May 31, 2017			2,658,319				23,250,916				2,945,604				166,465				2,734,708				(30,485,229	)			(1,387,536	)
Warrants expired			—				—				(2,195,738	)			—				2,195,738				—				—
Stock based compensation			—				—				—				1,698,902				—				—				1,698,902
Stock options expired			—				—				—				(253,917	)			253,917				—				—
Shares issued as settlement of shareholder advances			1,187,672				213,781				—				—				—				—				213,781
Shares issued as anti-dilution provision			1,420,809				184,705				—				—				—				—				184,705
Units issued as anti-dilution provision			16,364				2,127				—				—				—				—				2,127
Net loss for the period			—				—				—				—				—				(1,199,755	)			(1,199,755	)
Balance, August 31, 2017			5,283,164				23,651,529				749,866				1,611,450				5,184,363				(31,684,984	)			(487,776	)
Stock based compensation			—				—				—				136,341				—				—				136,341
Stock options cancelled			—				—				—				(1,747,791	)			1,747,791				—				—
Net loss for the period			—				—				—				—				—				(348,383	)			(348,383	)
Balance, May 31, 2018			5,283,164				23,651,529				749,866				—				6,932,154				(32,033,367	)			(699,818	)

 

*Reflects the May 26, 2017 one (1) for ten (10) consolidation

 

The accompanying notes are an integral part of these consolidated financial statements

 

3

 

 

 

Interim Condensed Consolidated Statements of Cash Flows
(Expressed in Canadian Dollars)
Unaudited
		Nine Months Ended
		May 31,
		2018				2017
Cash provided by (used in)
Operating activities
Net loss		$	(348,383	)		$	(897,983	)
Items not involving cash:
Stock based compensation (Note 9 e)			136,341				151,096
Anti-dilution fees (Note 8)			—				8,182
Working capital adjustments
Increase in other receivables			32,296				(10,704	)
Decrease in prepaid expenses and deposits			—				17,799
Increase in trade and other payables			109,450				150,918
Net cash used in operating activites			(70,296	)			(580,692	)
Investing activities
Secured note receivable (Note 6)			—				(87,750	)
Net cash used in investing activities			—				(87,750	)
Financing activities
Shareholder loans (Note 7)			74,696				176,625
Private placement of units			—				50,000
Net cash provided by financing activities			74,696				226,625
Increase (decrease) in cash for the period			4,400				(441,817	)
Net effect of exchange rate changes in cash			—				(2,498	)
Cash, beginning of period			1,040				449,983
Cash, end of period		$	5,440			$	5,668

 

The accompanying notes are an integral part of these consolidated financial statements 

 

4

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018 and 2017

(Expressed In Canadian Dollars) (Unaudited)

 

1.

a)

Nature of Business

 

Novicius Corp. was amalgamated under the Business Corporations Act ( Ontario ) on November 30, 2009 (“Novicius” or the “Company”) . The Company filed articles of amendment effective May 26, 2017, and changed its name from Intelligent Content Enterprises Inc., to Novicius Corp., and consolidated its common shares on the basis of one (1) new share for every ten (10) old shares. Through the Company’s wholly owned Ontario subsidiary, DoubleTap Daily Inc., (formerly: Digital Widget Factory Inc.) the Company has developed, doubletap.co an online content management and advertising platform that powers user and advertising engagement programs in real-time to desktop, mobile and portable devices.

 

The Company’s registered and head office is located at 1 King Street West, Suite 1505, Toronto, Ontario, M5H 1A1. The Company’s common shares are listed for trading on the Canadian Securities Exchange under the symbol NVS.

 

The unaudited interim condensed consolidated financial statements include the accounts of Novicius, the legal parent, together with its wholly-owned subsidiaries, Ice Studio Productions Inc., incorporated in the Province of Ontario on June 16, 2016 (“ICE Studio”) and DoubleTap Daily Inc., incorporated in the Province of Ontario on February 29, 2016 (“DoubleTap”) .

 

b)

Going Concern

 

These unaudited interim condensed consolidated financial statements (the “Consolidated Financial Statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”) applicable to a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, as they come due for the foreseeable future. The Company has developed its advertising platform and has not yet realized profitable operations. The Company requires additional financing for its working capital and for the costs of development, content creation and marketing of its platform.

 

Due to continuing operating losses, the Company’s continuance as a going concern is dependent upon its ability to obtain adequate financing and to reach profitable levels of operation. The Company will continue to seek additional forms of debt or equity financing, or other means of funding its operations, however, there is no assurance that it will be successful in doing so or that funds will be available on terms acceptable to the Company, or at all. The ability of the Company to arrange such financing in the future will depend in part upon the prevailing capital market conditions as well as the business performance of the Company.

 

The Company has accumulated significant losses and negative cash flows from operations in recent years which raise doubt as to the validity of the going concern assumption. As at May 31, 2018, the Company has a working capital deficiency of $699,818 (August 31, 2017: $487,776) and an accumulated deficit of $32,033,367 (August 31, 2017: $31,684,984). These material uncertainties may cast significant doubt upon the entity’s ability to continue as a going concern. The Consolidated Financial Statements do not give effect to adjustments, if any, that would be necessary should the Company be unable to continue as a going concern and, therefore, be required to realize its assets and liquidate its liabilities in other than the normal course of business and at amounts that may differ from those shown in the accompanying Consolidated Financial Statements.

 

2.

Basis of Preparation

 

Statement of Compliance

These Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the IFRS Interpretations Committee (“IFRIC”). These Consolidated Financial Statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by IFRS as issued by the IASB and interpretations issued by IFRIC. These Consolidated Financial Statements of the Company were approved by the Board of Directors on July 12, 2018.

 

Basis of Measurement

The Consolidated Financial Statements have been prepared on a historical cost basis except for certain financial instruments measured at fair value.

 

Functional and Presentation Currency

The functional and presentation currency of the parent Novicius and its wholly owned subsidiaries ICE Studio and DoubleTap is Canadian dollars.

 

5

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018 and 2017

(Expressed In Canadian Dollars) (Unaudited)

 

3.

Significant Accounting Policies

 

The policies applied in these Consolidated Financial Statements are based on IFRS issued and outstanding as of the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these Consolidated Financial Statements as compared with the most recent annual consolidated financial statements as at and for the year ended August 31, 2017. Any subsequent changes to IFRS that are given effect in the Company’s annual consolidated financial statements for the year ending August 31, 2018, could result in restatement of these Consolidated Financial Statements. These Consolidated Financial Statements should be read in conjunction with our annual consolidated financial statements as at and for the year ended August 31, 2017.

 

Significant Accounting Estimates and Judgements

The preparation of the Consolidated Financial Statements in accordance with IFRS requires that management make estimates and assumptions and use judgment regarding the measured amounts of assets, liabilities and contingent liabilities at the date of the Consolidated Financial Statements and reported amounts of revenue and expenses during the reporting period. Such estimates and judgments are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual outcomes may differ from these estimates.

 

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the amounts recognized in the Consolidated Financial Statements are:

 

Going Concern 

The assessment of the Company’s ability to execute its strategy by funding future working capital requirements involves judgment. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. There is an uncertainty regarding the Corporation’s ability to continue as a going concern (Note 1 b).

 

Fair value of financial instruments

The estimated fair value of financial assets and liabilities, by their very nature, are subject to measurement uncertainty.

 

Fair Value of Stock Based Compensation and Warrants

In determining the fair value of share based payments the calculated amounts are not based on historical cost but is derived based on assumptions (such as the expected volatility of the price of the underlying security, expected hold period before exercise, dividend yield and the risk-free rate of return) input into a pricing model. The model requires that management make forecasts as to future events, including estimates of: the average future hold period of issued stock options and compensation warrants before exercise, expiry or cancellation; future volatility of the Company’s share price in the expected hold period; dividend yield; and the appropriate risk-free rate of interest. The resulting value calculated is not necessarily the value that the holder of the option or warrant could receive in an arm’s length transaction, given that there is no market for the options or compensation warrants and they are not transferable. Similar calculations are made in estimating the fair value of the warrant component of an equity unit. The assumptions used in these calculations are inherently uncertain. Changes in these assumptions could materially affect the related fair value estimates.

 

Fair Value of Derivative Liabilities

The Company is exposed to risks related to changes in its share prices, foreign exchange rates, interest rate and volatility rates used to determine the estimated fair value of its derivative liabilities. In the determination of the fair value of these instruments, the Company utilizes certain independent values and, when not available, internal financial models which are based primarily on observable market data. Management’s judgment is required in the development of these models. This estimate also requires determining and making assumptions about the most appropriate inputs to the valuation model including the expected life, volatility, discount rates and dividend yield.

 

Settlement of Debt with Equity Instruments

Equity instruments issued to a creditor to extinguish a financial liability are measured at the fair value of the equity instruments at the date the financial liability is extinguished. The Company estimates the fair value of warrants using the Binomial Lattice pricing model and further assumptions including the expected life, volatility, discount rates and dividend yield. The fair value of the units comprising shares and warrants issued in connection with the extinguishment of a financial liability are then prorated to the total market value of the common shares.

 

6

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018 and 2017

(Expressed In Canadian Dollars) (Unaudited)

 

Income Tax 

Provisions for taxes are made using the best estimate of the amount expected to be paid based on a qualitative assessment of all relevant factors. The Company reviews the adequacy of these provisions at the end of the reporting period. However, it is possible that at some future date an additional liability could result from audits by taxing authorities. Where the final outcome of these tax-related matters is different from the amounts that were initially recorded, such differences will affect the tax provisions in the period in which such determination is made.

 

4.

Recent Accounting Pronouncements and Recent Adopted Accounting Standards

 

Recent Issued Accounting Pronouncements

The following standards, amendments and interpretations, which may be relevant to the Company have been introduced or revised by the IASB:

 

(i) In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, which supersedes IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, and IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers, and SIC 31 Revenue – Barter Transactions Involving Advertising Services. IFRS 15 establishes a comprehensive five-step framework for the timing and measurement of revenue recognition. The Company intends to adopt IFRS 15 effective September 1, 2018 and is currently assessing the impact of this new standard on the Consolidated Financial Statements.

 

(ii) In July 2014, the IASB issued the final version of IFRS 9, Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39, Financial Instruments – Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. The Company does not intend to adopt the new standard prior to its effective date and has not yet determined the impact of this new standard on the Consolidated Financial Statements.

 

(iii) On January 13, 2016, the IASB issued IFRS 16 Leases (“IFRS 16”) which will replace IAS 17, Leases. IFRS 16 will bring leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however, remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019. The Company is assessing the impact of this new standard on the Consolidated Financial Statements.

 

(iv) Amendments to IFRS 2 - Classification and measurement of Share-based payment transactions (“IFRS 2”): On June 20, 2016, the IASB issued amendments to IFRS 2, clarifying how to account for certain types of share-based payment transactions. The amendments apply for annual periods beginning on or after January 1, 2018. As a practical simplification, the amendments can be applied prospectively, retrospectively, or early application is permitted if information is available without the use of hindsight. The amendments provide requirements on the accounting for:

 

-

The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;

-

Share-based payment transactions with a net settlement feature for withholding tax obligations; and

-

A modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.

 

The Company intends to adopt the amendments to IFRS 2 in its Consolidated Financial Statements for the annual period beginning on September 1, 2018. The extent of the impact of adoption of the standard has not yet been determined.

 

IFRIC 22 – Foreign currency transactions and advance consideration: IFRIC was issued in December 2016 to provide guidance on accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The new interpretation is effective for annual periods beginning on or after January 1, 2018. The Company is currently assessing the interpretation on its consolidated financial statements.

 

5.

Segmented Information

 

The accounting policies used for the reportable segments are the same as the Company’s accounting policies. For the purposes of monitoring segment performance and allocating resources between segments, the Company’s executive officers monitor the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments. The Company’s reportable and geographical segment is located in Canada.

 

7

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018 and 2017

(Expressed In Canadian Dollars) (Unaudited)

 

6.

Secured Note Receivable

 

On May 25, 2016, the Company entered into a Term Sheet to license to acquire all the technology, production and client operations owned and operated by New York based Catch Star Studios LLC (“Catch Star”). On October 12, 2016, the Company advanced US$65,000 ($81,483 as at August 31, 2017) to Catch Star and entered into a Secured Promissory Note and General Security Agreement with Catch Star (the “Secured Note”). The Secured Note is due on demand and is secured by all of the assets of Catch Star. Subsequently, Catch Star and the Company could not reach a definitive agreement to memorialize the terms and conditions of the Term Sheet and abandoned the prospective transaction. On February 1, 2017, the Company issued a letter of demand for the repayment in full of the Secured Note from Catch Star. At August 31, 2017, the Company determined that the Secured Note was uncollectible and recorded an impairment of the full amount.

 

7.

Related Party Transactions and Balances

 

The following transactions with individuals related to the Company arose in the normal course of business have been accounted for at the amount agreed to by the related parties.

 

Compensation of Key Management Personnel

 

The remuneration of directors and other members of key management personnel during the periods set out were as follows:

 

		Three Months Ended								Nine Months Ended
		May 31								May 31
		2018				2017				2018				2017
Short term employee benefits (1) (2)		$	15,000			$	37,500			$	45,000			$	110,481
Director/Officer stock based compensation (3)			34,085				—				136,341				136,291
		$	49,085			$	37,500			$	181,341			$	246,772

 

The following balances owing to the President and Chief Financial Officer of the Company are included in trade and other payables and are unsecured, non-interest bearing and due on demand:

 

		May 31, 2018				August 31, 2017
Short term employee benefits (1) (2)		$	61,500			$	101,500
		$	61,500			$	101,500

 

(1)       The Company incurs management fees to the Chief Financial Officer of the Company at a rate of $5,000 per month.

(2)       On September 9, 2016, the Company entered into an employment agreement with the President of the Company under which the Company agreed to pay to the President, a base salary of $90,000 and grant one hundred thousand (100,000) common share purchase options (Note 9 e). Effective May 21, 2017, the Company and the President agreed to amend the terms of the employment agreement, by reducing the President’s base salary to $10.00 annually, allowing the President to contract his services to Torinit contemporaneous with his continued employment with the Company and providing a top up provision of up to $1,500 in a month from the Company if the gross compensation earned by the President from Torinit during June, July and August of 2017 (the “Period”), reduces the overall compensation earned by the President below $7,500 in any such month during the Period.

(3)       On September 9, 2016 and November 1, 2016, the Company granted options to purchase 130,000 and 50,000 common shares to officers and directors (Note 9 e).

 

On September 1, 2016, the Company entered into an agreement for a period of 12 months with Torinit Technologies Inc., (“Torinit”) to provide dedicated resource augmentation to DoubleTap in an effort to optimize user experience while navigating through the DoubleTap.co website and drive traffic growth by engaging users across all demographics (the “Torinit Services”). As consideration for the Torinit Services, the Company agreed to compensate Torinit the sum of $8,000 per month based on 320 hours per month for a 12 month period. Dikshant Batra, a director of the Company, is also the President, a director and major shareholder of Torinit. As at May 31, 2018 and August 31, 2017, included in trade and other payables of the Company is $23,961 due to Torinit.

 

As at May 31, 2018, the amount of directors’ fees included in trade and other payables was $10,400 (August 31, 2017: $10,200).

 

As at May 31, 2018, the Company had non-interest-bearing loans due on demand payable to Core Energy Enterprises Inc. (“Core”) a shareholder of the Company, in the aggregate amount of $40,800 (August 31, 2017: $Nil). The Chief Financial Officer of the Company is a major shareholder, officer and a director of Core.

 

8

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018 and 2017

(Expressed In Canadian Dollars) (Unaudited)

 

At May 31, 2018, the Company had a non-interest bearing, due on demand loan payable to a shareholder in the amount of $25,896 (US $20,000).

 

8.        Derivative Liabilities

 

As at May 31, 2018, the Company had no derivative liabilities (August 31, 2017: $Nil).

 

On August 31, 2016, the Company completed private placements for gross proceeds of $260,000 and issued 23,636 units in the capital of the Company at a purchase price of $11.00 per unit. The subscription agreements contained an anti-dilution provision such that if within 18 months of August 31, 2016, the Company issues additional common shares for a consideration per share or with an exercise or conversion price per share, less than $11.00 (the “Adjusted Price”) the Holder shall be entitled to receive from the Company (for no additional consideration) additional units in an amount such that, when added to the number of units acquired by Holder under this agreement will equal the number of units that the Holder would otherwise be entitled to receive had this transaction occurred at the Adjusted Price. On November 30, 2016, the Company completed a private placement for gross proceeds of $50,000 and issued 7,692 units in the capital of the Company at a purchase price of $6.50 per unit and accordingly this transaction gave effect to additional units to be issued pursuant to the Adjusted Price. At May 31, 2017, the Company recorded the additional 16,364 units to be issued in the amount of $8,182 as a derivative liability on the statement of financial position and as anti-dilution fees on the statement of operations (Note 9 b (c) and Note 9 b (d)).

 

9.

Share Capital and Reserves

 

The Company filed articles of amendment effective May 26, 2017, and changed its name from Intelligent Content Enterprises Inc., to Novicius Corp., and consolidated its common shares on the basis of one (1) new share for every ten (10) old shares. The consolidated financial statements have been adjusted to reflect the consolidation accordingly.

 

a)

Share Capital

 

Authorized:  

Unlimited number of common shares at no par value

Unlimited number of preferred shares issuable in series

 

Common Shares Issued:

The following table sets out the changes in common shares during the respective periods:

 

		Number				Amount $
Balance August 31, 2016			2,650,627				23,220,683
Common shares issued as private placement (Note 9 b (a))			7,692				30,233
Common shares issued as settlement of shareholder advances (Note 9 b (b))			1,187,672				213,781
Common shares issued as anti-dilution provision (Note 9 b (c))			1,420,809				184,705
Common shares issued as anti-dilution provision (Note 9 b (d))			16,364				2,127
Balance August 31, 2017 and May 31, 2018			5,283,164				23,651,529

 

Preferred Shares Issued:

As at May 31, 2018 and August 31, 2017, there were no preferred shares issued.

 

b)

Share Purchase Warrants

 

The following table sets out the changes in warrants during the respective periods:

 

Warrants		Number of Warrants				Weighted Average Price
Outstanding, August 31, 2016			722,572			$	8.60
Warrants issued (Note 9 b (a))			7,692				—
Warrants issued (Note 9 b (d))			16,364				—
Warrants expired (Note 9 b (e))			(538,417	)			—
Balance, August 31, 2017 and May 31, 2018			208,211			$	5.27

 

9

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018 and 2017

(Expressed In Canadian Dollars) (Unaudited)

 

(a)        On November 30, 2016, the Company completed private placements for gross proceeds of $50,000 and issued 7,692 units in the capital of the Company at a purchase price of $6.50 per unit. Each unit is comprised of one (1) common share and one (1) common share purchase warrant. Each full warrant entitles the holder to purchase one (1) common share at an exercise price of $10.00 until November 30, 2019. The fair value of the units ($50,000) was allocated to common shares $30,233 and the amount allocated to warrants component using a Binomial Lattice model was $19,767.

 

(b)       Effective August 31, 2017, the Company settled shareholder advances of $213,781 and issued 1,187,672 common shares in the capital of the Company at a price of $0.18 per share.

 

(c)       Pursuant to the August 31, 2017, settlement of shareholder advances of $213,781 (Note 9 b (b), effective August 31, 2017, the Company issued 1,420,809 common shares in the capital of the Company pursuant to the anti-dilution provision of the August 31, 2016, private placement agreements. The fair value of $184,705 was calculated on the previous day’s closing price of the Company’s common shares and allocated to common shares and anti-dilution fees in the consolidated statement of operations (Note 8).

 

(d)       Pursuant to the November 30, 2016, private placement of $50,000 (Note 11 b (h), effective August 31, 2017, the Company issued 16,364 Units in the capital of the Company pursuant to the anti-dilution provision of the August 31, 2016, private placement agreements. Each unit is comprised of one (1) common share and one (1) common share purchase warrant. Each full warrant entitles the holder to purchase one (1) common share at an exercise price of $10.00 until November 30, 2019. The fair value of the units of $2,127 was allocated to common shares and anti-dilution fees in the consolidated statement of operations. No value was allocated to warrants based on the Binomial Lattice model (Note 8).

 

(e)       On August 31, 2017, 538,417 common share purchase warrants exercisable at $10.00 expired. The amount allocated to warrants based on the Binomial Lattice model was $2,195,738 with a corresponding increase to contributed surplus.

 

The following table summarizes the outstanding warrants as at May 31, 2018 and August 31, 2017, respectively:

 

Number of Warrants				Exercise Price				Expiry Date		Weighted Average Remaining Life (Years)				Warrant Value ($)
	160,519			$	3.50			March 1, 2019			0.75				603,370
	23,636			$	12.50			August 31, 2019			1.25				126,729
	24,056			$	10.00			November 30, 2019			1.50				19,767
	208,211										0.89				749,866

 

Number of Warrants				Exercise Price				Expiry Date		Weighted Average Remaining Life (Years)				Warrant Value ($)
	160,519			$	3.50			March 1, 2019			1.50				603,370
	23,636			$	12.50			August 31, 2019			2.00				126,729
	24,056			$	10.00			November 30, 2019			2.25				19,767
	208,211										1.64				749,866

 

c)

Weighted Average Shares Outstanding

 

The following table summarizes the weighted average shares outstanding:

 

			Three Months Ended								Six Months Ended
			May 31								May 31
			2018				2017				2018				2017
Weighted Average Shares Outstanding, basic and diluted				5,283,164				2,587,984				5,283,164				2,655,784

 

As at February 28, 2018, there were 208,211 common share purchase warrants that could be exercised, however they are anti-dilutive. The effects of any potential dilutive instruments on loss per share are anti-dilutive and therefore have been excluded from the calculation of diluted loss per share.

 

d)       Share Purchase Options

 

The Company has a stock option plan to provide incentives for directors, officers, employees and consultants of the Company. The maximum number of shares, which may be set aside for issuance under the stock option plan, is 20% of the issued and outstanding common shares of the Company on a rolling basis.

 

10

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018 and 2017

(Expressed In Canadian Dollars) (Unaudited)

 

The following table is a summary of the status of the Company’s stock options and changes during the period:

 

		Number				Weighted Average
		of Options				Exercise Price $
Balance, August 31, 2016			38,300				22.80
Granted			200,000				12.05
Expired			(83,300	)			(13.63	)
Balance, August 31, 2017			155,000				13.87
Cancelled (Note a)			(155,000	)			(13.87	)
Balance, May 31, 2018			—				—

a) On May 1, 2018, all outstanding share purchase options were released and cancelled.

 

The following table is a summary of the Company’s stock options outstanding and exercisable as at August 31, 2017:

 

Options Outstanding					Options Exercisable
Exercise Price	Number of Options		Weighted Average Remaining Life (Years)	Expiry Date	Number of Options	Weighted Average Exercise Price $
$12.00	5,000		2.20	November 11, 2019	5,000	0.39
$15.00	70,000		4.02	September 8, 2021	—	—
$13.00	80,000		4.02	September 8, 2021	80,000	6.71
	155,000		3.95		85,000	13.87

 

e)       Stock Based Compensation

 

Employees

On September 9, 2016, the Company granted 30,000 common share purchase options to shares to a director and 30,000 common share purchase options the President and recorded non-cash stock-based compensation expense of $44,416. These options were exercisable at $13.00 per share and expired on September 8, 2021. On May 1, 2018, these share purchase options were released and cancelled.

 

On September 9, 2016, the Company granted to the President 70,000 common share purchase options exercisable at $15.00 per share and expiring on September 8, 2021. Of these options 35,000 vested on September 8, 2017 and 35,000 vest on September 8, 2018. As at May 31, 2018, Company recorded non-cash stock-based compensation expense of $136,341 (May 31, 2017: $50,897). On May 1, 2018, these share purchase options were released and cancelled.

 

On November 1, 2016, the Company granted 50,000 common share purchase options vesting March 30, 2017 to the former Chief Financial Officer and recorded non-cash stock-based compensation expense of $40,978. These options were exercisable at $6.40 per share and expired on April 25, 2017.

 

Non-Employees

On September 9, 2016, the Company granted 20,000 immediately vesting common share purchase options to a consultant of the Company and recorded non-cash stock-based compensation expense of $14,805. These options were exercisable at $13.00 per share and expire on September 8, 2021. On May 1, 2018, these options were released and cancelled.

 

The fair value of the stock options granted were estimated on the date of the grant using the Black Scholes option pricing model with the following assumptions and inputs:

 

		November 1, 2016				September 9, 2016
Weighted average fair value per option		$	5.90			$	11.70
Weighted average risk-free interest rate			0.68	%			0.59	%
Forfeiture rate			0	%			0	%
Weighted average expected volatility			156.70	%			152.32	%
Expected life (years)			5				5
Dividend yield			Nil				Nil
Stock price on the date of grant		$	6.40			$	12.90

 

11

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018 and 2017

(Expressed In Canadian Dollars) (Unaudited)

 

10.

Non-Cash Transactions

 

The following table summarizes the non-cash transactions for the periods set out:

 

Non-Cash Transactions		May 31, 2018 ($)				May 31, 2017 ($)
Stock based compensation (Note 9 e)			136,341				151,096
Stock options cancelled/expired			(1,747,791	)			(812,965	)
Units to be issued as anti-dilution provision (Note 8)			—				8,182

 

11.

Financial Instruments and Concentration of Risks

 

Financial instruments are measured at fair value on initial recognition of the instrument. The types of risk exposure to the Company’s financial instruments and the ways in which such exposures are managed are as follows:

 

Credit Risk

 

Credit risk is primarily related to the Company’s receivables and cash and the risk of financial loss if a partner or counterparty to a financial instrument fails to meet its contractual obligations. At May 31, 2018, trade and other receivables amounts are $Nil (August 31, 2017: $Nil). At May 31, 2018, included in other receivables is HST due from the Government of Canada in the amount of $8,710 (August 31, 2017: $41,007).

 

Concentration risk exists in cash because cash balances are maintained with one financial institution. The risk is mitigated because the financial institution is an international bank and all amounts are due on demand. The Company’s maximum exposure to credit risk is as follows:

 

		May 31, 2018 ($)				August 31, 2017 ($)
Cash			5,440				1,040
Balance			5,440				1,040

 

Liquidity Risk

The Company monitors its liquidity position regularly to assess whether it has the funds necessary to fulfill planned opportunities or that viable options are available to fund such opportunities from new equity issuances or alternative sources of financings. As a company without significant revenue, there are inherent liquidity risks, including the possibility that additional financing may not be available to the Company, or that such financing terms may not be acceptable to the Company.

 

The following table illustrates the contractual maturities of financial liabilities:

 

May 31, 2018		Payments Due by Period $
		Total				Less than 1 year				1-3 years				4-5 years				After 5 years
Trade and other payables			639,272				639,272				—				—				—
Shareholder loans			74,696				74,696
Total			713,968				713,968				—				—

 

August 31, 2017		Payments Due by Period $
		Total				Less than 1 year				1-3 years				4-5 years				After 5 years
Trade and other payables			529,823				529,823				—				—				—
Total			529,823				529,823				—				—				—

 

Market Risk  

Market risk represents the risk of loss that may impact the Company’s financial position, results of operations, or cash flows due to adverse changes in financial market prices, including interest rate risk, foreign currency exchange rate risk, and other relevant market or price risks. The Company does not use derivative instruments to mitigate this risk.

 

(i)       Currency Risk 

The Company is exposed to the fluctuations in foreign exchange rates. The Company operates in Canada and a portion of its expenses are incurred in US dollars. A significant change in the currency exchange rates between the Canadian dollar relative to US dollar could have an effect on the Company’s financial instruments. The Company does not hedge its foreign currency exposure.

 

12

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018 and 2017

(Expressed In Canadian Dollars) (Unaudited)

 

The following assets and liabilities are denominated in US dollars as at the year-end set out below:

 

		May 31, 2018 ($)				May 31, 2017 ($)
Cash			—				1,589
Secured note receivable			—				65,000
Trade and other payables			(39,414	)			(41,706	)
Net assets (liabilities) denominated in US$			(39,414	)			24,883
Net assets (liabilities) CDN dollar equivalent at period end (1)			(51,033	)			33,592
(1) Translated at the exchange rate in effect at May 31, 2018 $1.2948 (May 31, 2017: $1.35)

 

The following table shows the estimated sensitivity of the Company’s total loss for the periods set out from a change in the US dollar exchange rate in which the Company has exposure with all other variables held constant.

 

	May 31, 2018		May 31, 2017
	Increase	Decrease	Increase	Decrease
Percentage change in US Dollar	In total loss from a change in % in the US Exchange Rate ($)		In total loss from a change in % in the US Exchange Rate ($)
5%	(3,304)	3,304	(2,268)	2,268
10%	(6,608)	6,608	(4,535)	4,535
15%	(9,912)	9,912	(6,803)	6,803

 

(ii)       Interest Rate Risk

Interest rate risk refers to the risk that the value of a financial instrument or cash flows associated with the instrument will fluctuate due to changes in market interest rates. The majority of the Company’s debt is short-term in nature with fixed rates.

 

(iii)       Fair Value of Financial Instruments

The Company’s financial instruments included on the consolidated statements of financial position are comprised of cash, secured note receivable and trade and other payables. The Company classifies the fair value of financial instruments measured at fair value according to the following hierarchy based on the amount of observable inputs used to value the instrument.

 

• Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

 

• Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1. Prices in Level 2 are either directly or indirectly observable as of the reporting date. Level 2 valuations are based on inputs, including quoted forward prices for commodities, time value and volatility factors, which can be substantially observed or corroborated in the marketplace.

 

• Level 3 – Valuations in this level are those with inputs for the asset or liability that are not based on observable market data.

 

						May 31, 2018								August 31, 2017
Financial Instrument Classification		Level				Carrying Value ($)				Fair Value ($)				Carrying Value ($)				Fair Value ($)
Fair value through profit or loss:
Cash			1				5,440				5,440				1,040				1,040
Other financial liabilities:
Trade and other payables							639,272				639,272				529,823				529,823
Shareholder loans							74,696				74,696				—				—

 

Cash is stated at fair value (Level 1 measurement). The carrying value of trade and other payables and shareholder loans approximate their fair value due to the short-term maturity of these financial instruments.

 

13

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018 and 2017

(Expressed In Canadian Dollars) (Unaudited)

 

Capital Management

The Company’s objectives when managing capital are to ensure the Company will have sufficient financial capacity, liquidity and flexibility to fund its operations, growth and ongoing development opportunities. The Company’s capital requirements currently exceed its operational cash flow. As such, the Company is dependent upon future financings in order to maintain liquidity and will be required to issue equity or issue debt.

 

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions, availability of capital and the risk characteristics of any underlying assets in order to meet current and upcoming obligations.

 

The board of directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management and favourable market conditions to sustain future development of the business. As at May 31, 2018 and August 31, 2017, the Company considered its capital structure to be comprised of shareholders’ deficiency.

 

12.       Subsequent Events

 

Subsequent to the period end the Company executed an amended and restated non-binding letter of intent with Grown Rogue Unlimited, LLC, an Oregon limited liability company (“Grown Rogue”) pursuant to which it is contemplated that the Company may combine its business operations with Grown Rogue by way of a three-cornered amalgamation (the “RTO Transaction”) resulting in a reverse take-over of the Company by Grown Rogue and the listing for trading of the shares of the resulting issuer on the Canadian Securities Exchange (the “Exchange”). The non-binding letter of intent has been amended and restated (the “Amended LOI”) to extend the term of the Amended LOI, to reflect the amended terms of the Private Placement (as defined below) to be completed by an affiliate of Grown Rogue prior to the closing of the RTO Transaction, and to reflect continuing discussions between Grown Rogue and the Company with respect to the terms of the RTO Transaction.

 

Pursuant to the Amended LOI It is expected that prior to the completion of the RTO Transaction, all of the unitholders of Grown Rogue will exchange their units of Grown Rogue for common shares in Grown Rogue Canada Inc. (“Grown Rogue Canada”), a company incorporated under the laws of Ontario, which will result in Grown Rogue Canada owning all of the units in Grown Rogue (the “Grown Rogue Securities Exchange”). Upon completion of the Grown Rogue Securities Exchange, Grown Rogue Canada will amalgamate with a subsidiary of Novicius and the shareholders of Grown Rogue Canada that participated in the Grown Rogue Securities Exchange will receive common shares of Novicius at a deemed price of $0.44 per share.

 

In addition, the Company and Grown Rogue Canada announced that Grown Rogue Canada completed an initial tranche of its planned financing for a total issuance of 5,673,417 subscription receipts (the “Subscription Receipts”) at a price of $0.44 each for total proceeds of $2,496,303 (the “Private Placement”). Each Subscription Receipt is convertible, without additional consideration, into a unit (a “GRC Unit”) consisting of one common share in GRC (“GRC Share”) and one common share purchase warrant in GRC (“GRC Warrant”). Each GRC Warrant entitles the holder to purchase one GRC Share at a price of $0.55 per share until 24 months after the RTO Transaction has been completed.

 

GRC plans to complete a second tranche and raise up to an additional $3,500,000 in Subscription Receipts prior to the completion of the RTO Transaction. The GRC Units and the Compensation Options will be exchanged for corresponding securities, respectively, in Novicius (as the resulting issuer) upon completion of the RTO Transaction.

 

All of the gross proceeds received by Grown Rogue Canada under the Private Placement are being held in escrow and are to be released to Grown Rogue Canada upon satisfying certain conditions including, among other things, (i) CSE approval of the RTO Transaction and (ii) the acquisition by Grown Rogue Canada of, directly or indirectly, 100% of the membership units of Grown Rogue Unlimited, LLC (the “Escrow Release Condition”). If the Escrow Release Condition is not satisfied or waived by September 3, 2018, the Subscription Receipts will automatically be cancelled and the proceeds of the Private Placement will be returned to the holders of the Subscription Receipts in an amount per Subscription Receipt equal to: (i) the purchase price of the Subscription Receipt; and (ii) a pro rata share of interest, if any, earned thereon.

 

M Partners Inc. and PI Financial Corp. acted as co-lead agents for GRC (the “Agents”) in connection with the Private Placement and will receive, upon closing of the RTO Transaction, a cash commission equal to 7% of the aggregate proceeds of the portion of the Private Placement sold to subscribers sourced by the Agents, and a cash commission equal to 3.5% of the aggregate proceeds from all other subscribers participating in the private placement. The Agents have received an aggregate number of compensation options (the “Compensation Options”) equal to 7% of the number of Subscription Receipts issued to subscribers sourced by the Agents, and an aggregate number of Compensation Options equal to 3.5% of the number of Subscription Receipts issued to all other subscribers participating in the private placement.

 

14

 

 

 

Notes to Interim Condensed Consolidated Financial Statements

For the Three and Nine Months Ended May 31, 2018 and 2017

(Expressed In Canadian Dollars) (Unaudited)

 

Each Compensation Option entitles the holder to purchase one GRC Unit at a price of $0.44 per unit until 24 months after completing the RTO Transaction.

 

There can be no assurance that the RTO Transaction will occur, or that it will occur on the terms and conditions contemplated in this news release. The RTO Transaction could be modified, restructured or terminated. Actual results could differ materially from those currently anticipated due to a number of factors and risks. The completion of the RTO Transaction is contingent on a number of conditions precedent including, but not limited to, (i) receipt of all requisite corporate, shareholder and regulatory approvals, (ii) completion of satisfactory due diligence by each of the parties, (iii) completion of the Grown Rogue Securities Exchange, (iv) completion of the Brokered Offering, (v) completion of the Company’s anticipated consolidation of 1.4 pre-consolidated common shares for one 1 post-consolidated common share, (vi) the reduction of Novicius debt, and (vii) the execution of a definitive agreement between the parties. No assurance is given that the Transaction will close as contemplated.

 

15

 

 

 

(Formerly: Intelligent Content Enterprises Inc.)

 

Management’s Discussion and Analysis

For the Three and Nine Months Ended

May 31, 2018

 

1 King Street West, Suite 1505, Toronto, ON, Canada Telephone: [phone], Facsimile: 416 364-8244

 

 

 

 

OVERVIEW

 

Novicius Corp., was amalgamated under the Business Corporations Act ( Ontario ) on November 30, 2009 (“Novicius” or the “Company”) . The Company filed articles of amendment effective May 26, 2017, and changed its name from Intelligent Content Enterprises Inc., to Novicius Corp., and consolidated its common shares on the basis of one (1) new share for every ten (10) old shares. Through the Company’s wholly owned Ontario subsidiary, DoubleTap Daily Inc., (formerly: Digital Widget Factory Inc.) the Company has developed doubletap.co , an online content management and advertising platform that powers user and advertising engagement programs in real-time to desktop, mobile and portable devices.

 

The Company’s registered office is located at 1 King Street West, Suite 1505, Toronto, Ontario, M5H 1A1. The Company’s common shares are listed for trading and on the Canadian Securities Exchange under the symbol NVS.

 

Our Canadian public filings can be accessed and viewed via the System for Electronic Data Analysis and Retrieval (“SEDAR”) at www.sedar.com. Readers can also access and view our Canadian public insider trading reports via the System for Electronic Disclosure by Insiders at www.sedi.ca. Our U.S. public filings are available at the public reference room of the U.S. Securities and Exchange Commission (“SEC”) located at 100 F Street, N.E., Room 1580, Washington, DC 20549 and at the website maintained by the SEC at www.sec.gov.

 

The Company’s Unaudited Interim Condensed Consolidated Financial Statements for the three and nine months ended May 31, 2018 and 2017 and notes thereto, include the accounts of Novicius, the legal parent, together with its wholly-owned subsidiaries, Ice Studio Productions Inc., incorporated in the Province of Ontario on June 16, 2016 (“ICE Studio”) and DoubleTap Daily Inc. incorporated in the Province of Ontario on February 29, 2016 (“DoubleTap”). All Intercompany balances and transactions have been eliminated on consolidation.

 

The following Management’s Discussion and Analysis of Novicius should be read in conjunction with the Company’s Unaudited Interim Condensed Consolidated Financial Statements for the three and nine months ended May 31, 2018 and notes thereto (the “Consolidated Financial Statements”). This Management’s Discussion and Analysis is dated July 12, 2018, and has been approved by the Board of Directors of the Company.

 

The Company’s Consolidated Financial Statements were prepared using the same accounting policies and methods of computation as those described in our annual consolidated financial statements for the year ended August 31, 2017. Any subsequent changes to IFRS that are given effect in the Company’s annual consolidated financial statements for the year ending August 31, 2018 could result in restatement of the Consolidated Financial Statements. The Consolidated Financial Statements should be read in conjunction with the annual consolidated financial statements for the year ended August 31, 2017. All amounts herein are presented in Canadian dollars, unless otherwise noted.

 

The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the IFRS Interpretations Committee (“IFRIC”). The Consolidated Financial Statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Accordingly, they do not include all of the information required for full annual financial statements required by IFRS as issued by the IASB and interpretations issued by IFRIC.

 

FORWARD LOOKING STATEMENTS

 

This Management’s Discussion and Analysis contains certain forward-looking statements, including management’s assessment of future plans and operations, and capital expenditures and the timing thereof, that involve substantial known and unknown risks and uncertainties, certain of which are beyond the Company’s control. Such risks and uncertainties include, without limitation, risks associated with ability to access sufficient capital from internal and external sources, the impact of general economic conditions in Canada, the United States and overseas, industry conditions, changes in laws and regulations (including the adoption of new laws and regulations) and changes in how they are interpreted and enforced, increased competition, the lack of availability of qualified personnel or management, fluctuations in foreign exchange or interest rates, stock market volatility and market valuations of companies with respect to announced transactions and the final valuations thereof, and obtaining required approvals of regulatory authorities. The Company’s actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits, including the amount of proceeds, that the Company will derive there from. Readers are cautioned that the foregoing list of factors is not exhaustive. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Furthermore, the forward-looking statements contained in this Management Discussion and Analysis are made as at the date of this Management Discussion and Analysis and the Company does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable securities laws.

 

2  

 

 

OVERALL PERFORMANCE

 

Net loss for the nine months ended May 31, 2018 was $348,383 compared to a net loss of $902,491 for the nine months ended May 31, 2017. During the nine months ended May 31, 2018, the Company recorded $Nil for research, content development and technology support costs compared to $292,727 in the same nine month period in 2017. For the nine months ended May 31, 2018, hosting, advertising and technology services was $2,866 versus $51,279 for the same period in 2017. The reduction in research, content development and technology support costs and hosting and advertising during 2018 was mainly attributed to the correction of prior period errors related to the DWF Settlement Agreement. For the six months ended May 31, 2018, general and administrative costs decreased by $190,468 to $206,985 compared to general and administrative costs of $397,453 for the same nine month period in 2017. For the nine months ended May 31, 2018, the Company recorded $Nil in anti-dilution fees versus $8,182 for the nine months ended May 31, 2017. On November 30, 2016, the Company completed a private placement for gross proceeds of $50,000 and issued 7,692 units in the capital of the Company at a purchase price of $6.50 per unit and accordingly this transaction gave effect to additional units to be issued pursuant to the anti-dilution provision of the August 31, 2016 private placement agreements. For the nine months ended May 31, 2018, the Company recorded $136,341 in stock based compensation versus stock based compensation of $151,096 for the same nine month period in 2017. During 2018, the Company recorded $136,341 as non-cash stock based compensation expense upon the partial vesting of 70,000 common share purchase options exercisable at $15.00 per share.

 

During the nine months ended May 31, 2018, the Company received non-interest bearing due on demand shareholders loans of $74,696.

 

The Company anticipates further expenditures to be made on future opportunities evaluated by the Company. Any expenditure which exceeds available cash will be required to be funded by additional share capital or debt issued by the Company, or by other means. The Company’s long-term profitability will depend upon its ability to successfully implement its business plan. The Company’s past primary source of liquidity and capital resources has been proceeds from the issuance of share capital and shareholders’ loans.

 

RISK AND UNCERTAINTIES

 

There have been no material changes during the nine months ended May 31, 2018, to the risks and uncertainties as identified in the Company’s Management Discussion and Analysis and the Annual Report on Form 20F for the year ended August 31, 2017. The following table illustrates the contractual maturities of financial liabilities:

 

May 31, 2018		Payments Due by Period $
		Total				Less than 1 year				1-3 years				4-5 years				After 5 years
Trade and other payables			639,272				639,272				—				—				—
Shareholder loans			74,696				74,696
Total			713,968				713,968				—				—

August 31, 2017		Payments Due by Period $
		Total				Less than 1 year				1-3 years				4-5 years				After 5 years
Trade and other payables			529,823				529,823				—				—				—
Total			529,823				529,823				—				—				—

 

Capital Management

The Company’s objectives when managing capital are to ensure the Company will have sufficient financial capacity, liquidity and flexibility to fund its operations, growth and ongoing development opportunities. The Company’s capital requirements currently exceed its operational cash flow. As such, the Company is dependent upon future financings in order to maintain liquidity and will be required to issue equity or issue debt.

 

The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions, availability of capital and the risk characteristics of any underlying assets in order to meet current and upcoming obligations.

 

The board of directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management and favourable market conditions to sustain future development of the business. As at May 31, 2018 and August 31, 2017, the Company considered its capital structure to be comprised of shareholders’ deficiency.

 

RESULTS OF OPERATIONS

 

Hosting, Advertising and Technology Services

For the three months ended May 31, 2018, the Company incurred hosting and technology costs of $791 compared to $56,733 for the same three month period in 2017.

 

3  

 

 

For the nine months ended May 31, 2018, the Company incurred hosting and technology costs of $2,866 compared to $51,279 for the same nine month period in 2017. The decrease in hosting and technology costs experienced during 2018 was mainly attributed to the correction of prior period errors related to the DWF Settlement Agreement.

 

Research, Content Development and Technology Support  

For the three months ended May 31, 2018, the Company incurred research, content development and technology support costs of $Nil versus $36,218 in the prior comparable period in 2017.

 

For the nine months ended May 31, 2018, the Company incurred research, content development and technology support costs of $Nil compared to $292,727 for the same period in 2017. The reduction in research, content development and technology support costs during 2018 was mainly attributed to the correction of prior period errors related to the DWF Settlement Agreement.

 

General and Administrative Expenses		For the Three Months Ended								For the Nine Months Ended
		May 31,								May 31,
		2018				2017				2018				2017
Professional fees		$	51,529			$	40,462			$	51,559			$	128,059
Head office costs			25,500				24,795				76,500				76,035
Management fees			15,000				15,000				45,000				45,000
Transfer and registrar costs			3,641				4,723				10,569				17,152
Shareholders information			(4,451	)			29,402				21,547				60,017
Office and general costs			374				2,117				1,610				10,558
Directors fees			—				1,500				200				7,800
Rent			—				—				—				19,912
Travel			—				1,831				—				2,920
Consulting fees			—				—				—				30,000
Total		$	91,593			$	119,830			$	206,985			$	397,453

 

General and administrative expenses for the three months ended May 31, 2018, were $28,237 lower at $91,593 compared to $119,830 for the three months ended May 31, 2017. The decrease in expenses during 2018, was primarily attributed to a decrease in shareholders information costs of $33,853 to $(4,451) compared to $29,402 for the same three month period in 2017, a decrease of $1,743 to $374 in general and office costs versus $2,117 in the comparable three month period in 2017. These decreases were partially offset by an increase of $11,067 to $51,529 in professional fees versus $40,462 during the three month period ended May 31, 2017.

 

General and administrative expenses for the nine months ended May 31, 2018, were $190,468 lower at $206,985 compared to $397,453 for the nine months ended May 31, 2017. The decrease in expenses during the nine month period in 2018, was primarily attributed to a decrease in professional fees of $76,500 to $51,559 compared to $128,059 for the same nine month period in 2017, a decrease in shareholders information of $38,470 to $21,547 versus $60,017 during the same nine month period in 2017, a decrease in consulting fees of $30,000 to $Nil compared to $30,000 in the same nine month period in 2017, and a decrease of $19,912 to $Nil in rent compared to rent of $19,912 for the nine months ended May 31, 2017.

 

Loss on Foreign Exchange

For the three months ended May 31, 2018, the Company recorded a loss on foreign exchange of $929 compared to a loss of $66 for the same three month period in 2017.

 

For the nine months ended May 31, 2018, the Company recorded a loss on foreign exchange of $2,191 compared to a loss of $1,754 for the same nine month period in 2017. These foreign exchange gains and losses are attributed to the translation of monetary assets and liabilities not denominated in the functional currency of the Company.

 

Stock Based Compensation  

On May 31, 2018, all of the 155,000 outstanding common share purchase options were released and cancelled.

 

Employees  

For the three months ended May 31, 2018, the Company recorded stock based compensation of $34,086 compared to $Nil for the same three month period in 2017. During 2018, the Company recorded $34,086 as non-cash stock based compensation expense upon the partial vesting of 70,000 common share purchase options exercisable at $15.00 per share.

 

For the nine months ended May 31, 2018, the Company recorded stock based compensation of $136,341 compared to $136,291 for the same nine month period in 2017. During the nine months ended in 2018, 70,000 common share purchase options exercisable at $15.00 per share vested and $136,341 was recorded as non-cash stock based compensation expense.

 

During the nine months ended May 31, 2017, the Company granted the following stock options:

 

4  

 

 

On September 9, 2016, the Company granted 30,000 common share purchase options to shares to a director and 30,000 common share purchase options to the President. These options were exercisable at $13.00 per share and expire on September 8, 2021 and the Company recorded non-cash stock based compensation expense of $44,416.

 

On September 9, 2016, the Company granted to the President 70,000 common share purchase options exercisable at $15.00 per share and expiring on September 8, 2021. Of these options 35,000 vested on September 8, 2017 and 35,000 vest on September 8, 2018. The Company recorded non-cash stock based compensation expense of $50,897.

 

On November 1, 2016, the Company granted 50,000 common share purchase options to the former Chief Financial Officer. These options were exercisable at $6.40 per share and expired on April 25, 2017. The Company had recorded non-cash stock based compensation expense of $40,978.

 

Non Employees  

For the three months ended May 31, 2018, the Company recorded stock based compensation for non-employees of $Nil compared to $Nil for the same three month period in 2017.

 

For the nine months ended May 31, 2018, the Company recorded stock based compensation for non-employees of $Nil compared to $14,805 for the same nine month period in 2017. On September 9, 2016, the Company granted 20,000 common share purchase options to a consultant of the Company. These options were exercisable at $13.00 per share and expire on September 8, 2021. The Company recorded non-cash stock based compensation expense of $14,805.

 

Anti-Dilution Fees

For the three months ended May 31, 2018, the Company recorded anti-dilution fees of $Nil compared to $(9,818) for the same period in 2017.

 

For the nine months ended May 31, 2018, the Company recorded anti-dilution fees of $Nil compared to $8,182 for the same period in 2017.

 

On August 31, 2016, the Company completed private placements for gross proceeds of $260,000 and issued 23,636 units in the capital of the Company at a purchase price of $11.00 per unit. The subscription agreements contained an anti-dilution provision such that if within 18 months of August 31, 2016, the Company issues additional common shares for a consideration per share or with an exercise or conversion price per share, less than $11.00 (the “Adjusted Price”) the Holder shall be entitled to receive from the Company (for no additional consideration) additional units in an amount such that, when added to the number of units acquired by Holder under this agreement will equal the number of units that the Holder would otherwise be entitled to receive had this transaction occurred at the Adjusted Price. On November 30, 2016, the Company completed a private placement for gross proceeds of $50,000 and issued 7,692 units in the capital of the Company at a purchase price of $6.50 per unit and accordingly this transaction gave effect to additional units to be issued pursuant to the Adjusted Price. At May 31, 2017, the Company recorded the additional 16,364 units to be issued in the amount of $8,182 as a derivative liability on the statement of financial position and as anti-dilution fees on the statement of operations.

 

Net Loss from Operations and Other Comprehensive Loss

Net loss from operations and other comprehensive loss for the three months ended May 31, 2018, was $127,398, compared to a net loss of $203,029 for the three months ended May 31, 2017. The decrease in net loss for the three months ended May 31, 2018, was primarily attributed to a decrease in hosting, advertising and technology services of $55,942 to $791 versus $56,733 for the three month period in 2017, a decrease research, content development and technology support costs of $36,218 to $Nil versus $36,218 in the prior comparable period in 2017. The reduction in hosting and advertising and research, content development and technology support costs during 2018 was mainly attributed to the correction of prior period errors related to the DWF Settlement Agreement. General and administrative expenses for the three months ended May 31, 2018, were also lower by $28,237 to $91,593 compared to $119,830 for the three months ended May 31, 2017. The decrease in general and administrative expenses during 2018, was primarily attributed was primarily attributed to a decrease in shareholders information costs of $33,853 to $(4,451) compared to $29,402 for the same three month period in 2017. For the three months ended May 31, 2018, the Company recorded $34,086 in stock based compensation versus $Nil for the comparable three month period in 2017.

 

Net loss from operations and other comprehensive loss for the nine months ended May 31, 2018, was $348,383 compared to a net loss from operations of $902,491 for the nine months ended May 31, 2017. The decrease in net loss for the nine months ended May 31, 2018, was primarily attributed to a decrease in research, content development and technology support costs of $292,727 to $Nil compared to $292,727 in the prior comparable period in 2017 and a decrease in hosting advertising and technology services of $48,413 to $2,866 versus $51,279 incurred in the same nine month period ended May 31, 2017. General and administrative expenses for the nine months ended May 31, 2018, were $190,468 lower at $206,985 compared to $397,453 for the nine months ended May 31, 2017. The decrease in expenses during the nine month period in 2018, was primarily attributed to a decrease in professional fees of $76,500 to $51,559 compared to $128,059 for the same nine month period in 2017, a decrease in shareholders information of $38,470 to $21,547 versus $60,017 during the same nine month period in 2017, a decrease in consulting fees of $30,000 to $Nil compared to $30,000 in the same nine month period in 2017, and a decrease of $19,912 to $Nil in rent compared to rent of $19,912 for the nine months ended May 31, 2017.

 

5  

 

 

Loss per Share, Basic and Diluted

Loss per share, basic and diluted for the three months ended May 31, 2018 was $0.024 compared to a loss per share, basic and diluted of $0.075 for the same three month period in 2017.

 

Loss per share, basic and diluted for the nine months ended May 31, 2018 was $0.066 compared to a loss per share, basic and diluted of $0.338 for the same nine month period in 2017.

 

SUMMARY OF QUARTERLY RESULTS

 

The following tables reflect the summary of quarterly results for the periods set out.

 

		2018				2018				2017				2017
For the quarter ending		May 31				February 28				November 30				August 31
Net loss for the period		$	(127,398	)		$	(93,406	)		$	(127,578	)		$	(1,199,755	)
Loss per share, basic and diluted		$	(0.024	)		$	(0.018	)		$	(0.024	)		$	(0.447	)

 

During ended May 31, 2018, the Company incurred stock based compensation expense of $34,086. For the three months ended February 28, 2018 and November 30, 2017, the Company recorded stock based compensation expense of $51,128, respectively. During the quarter ended August 31, 2017, the Company recorded stock based compensation expense of $1,698,901, a gain on de-recognition of financial liabilities of $893,990 and anti-dilution fees of $178,650.

 

		2017				2017				2016				2016
For the quarter ending		May 31				February 28				November 30				August 31
Net loss for the period		$	(198,521	)		$	(81,215	)		$	(618,247	)		$	(153,579	)
Loss per share, basic and diluted		$	(0.075	)		$	(0.031	)		$	(0.233	)		$	(0.060	)

 

During ended May 31, 2017, the Company incurred general and administrative expenditures of $119,830. During the quarter ended February 28, 2017, the Company recorded research, content development and technology support costs of $63,641. During the quarter ended November 30, 2016, the Company recorded anti-dilution fees of $104,727. During the quarter ended August 31, 2016, the Company reversed a previously recorded gain on de-recognition financial liabilities for prior obligations of Dyami Energy in the amount of $893,990.

 

CAPITAL EXPENDITURES

 

For the nine months ended May 31, 2018, the Company did not incur any capital expenditures. On May 25, 2016, the Company entered into a Term Sheet to license to acquire all the technology, production and client operations owned and operated by New York based Catch Star Studios LLC (“Catch Star Studios”). On October 12, 2016, the Company advanced US$65,000 ($81,483 at August 31, 2017) to Catch Star and entered into a Secured Promissory Note and General Security Agreement with Catch Star (the “Secured Note”). The Secured Note is due on demand and is secured by all of the assets of Catch Star. Subsequently, Catch Star and the Company could not reach a definitive agreement to memorialize the terms and conditions of the Term Sheet and abandoned the prospective transaction. On February 1, 2017, the Company issued a letter of demand for the repayment in full of the Secured Note from Catch Star. At August 31, 2017, the Company determined that the Secured Note was uncollectible and recorded an impairment of the full amount.

 

The Company expects that capital expenditures will increase in future reporting periods as the Company seeks further opportunities and ventures of merit.

 

FINANCING ACTIVITIES

 

For the nine months ended May 31, 2018, the Company received shareholder loans totaling $74,696.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash as of May 31, 2018, was $5,440 (August 31, 2017: $1,040). During the nine months ended May 31, 2018, the Company received shareholder loans totaling $74,696.

 

For the three months ended May 31, 2018, the primary use of funds was related to general and administrative expenditures. The Company’s working capital deficiency at May 31, 2018 was $699,818 (August 31, 2017: $487,776).

 

Our current assets of $14,150 as at May 31, 2018, ($42,047 as of August 31, 2017) include the following items: cash $5,440 ($1,040 as of August 31, 2017), and other receivables $8,710 ($41,007 as of August 31, 2017).

 

6  

 

 

Our current liabilities of $713,968 as of May 31, 2018 ($529,823 as of August 31, 2017) include the following items: trade and other payables $639,272 ($529,823 as of August 31, 2017); and shareholder loans of $74,696 ($Nil as of August 31, 2017).

 

At May 31, 2018, the Company had outstanding 208,211 common share purchase warrants. If any of these warrants are exercised, it would generate additional capital for us.

 

Management of the Company recognizes that cash flow from operations is not sufficient to meet its working capital requirements or fund additional opportunities or ventures of merit. The Company has liquidity risk which necessitates the Company to obtain debt financing or raise additional equity. There is no assurance the Company will be able to obtain the necessary financing in a timely manner.

 

The Company’s past primary source of liquidity and capital resources has been proceeds from the issuance of share capital, loans and shareholders’ loans. If the Company issued additional common shares from treasury it would cause the current shareholders of the Company dilution.

 

Outlook and Capital Requirements

The Company anticipates further expenditures to expand its current business plan. Amounts expended on future opportunities and ventures of merit is dependent on the nature of the opportunities evaluated by the Company. Any expenditure which exceeds available cash will be required to be funded by additional share capital or debt issued by the Company, or by other means. The Company’s long-term profitability will depend upon its ability to successfully implement its business plan.

 

DERIVATIVE LIABILITIES

 

As at May 31, 2018, the Company had no derivative liabilities (August 31, 2017: $Nil).

 

On August 31, 2016, the Company completed private placements for gross proceeds of $260,000 and issued 23,636 units in the capital of the Company at a purchase price of $11.00 per unit. The subscription agreements contained an anti-dilution provision such that if within 18 months of August 31, 2016, the Company issues additional common shares for a consideration per share or with an exercise or conversion price per share, less than $11.00 (the “Adjusted Price”) the Holder shall be entitled to receive from the Company (for no additional consideration) additional units in an amount such that, when added to the number of units acquired by Holder under this agreement will equal the number of units that the Holder would otherwise be entitled to receive had this transaction occurred at the Adjusted Price. On November 30, 2016, the Company completed a private placement for gross proceeds of $50,000 and issued 7,692 units in the capital of the Company at a purchase price of $6.50 per unit and accordingly this transaction gave effect to additional units to be issued pursuant to the Adjusted Price. At May 31, 2017, the Company recorded the additional 16,364 units to be issued in the amount of $8,182 as a derivative liability on the statement of financial position and as anti-dilution fees on the statement of operations.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

The Company has no off-balance sheet arrangements.

 

SEGMENTED INFORMATION

 

The accounting policies used for the reportable segments are the same as the Company’s accounting policies. For the purposes of monitoring segment performance and allocating resources between segments, the Company’s executive officers monitor the tangible, intangible and financial assets attributable to each segment. All assets are allocated to reportable segments. The Company’s reportable and geographical segment is located in Canada.

 

RELATED PARTY TRANSACTIONS AND BALANCES

 

The following transactions with individuals related to the Company arose in the normal course of business have been accounted for at the amount agreed to by the related parties.

 

Compensation of Key Management Personnel

The remuneration of directors and other members of key management personnel during the periods set out were as follows:

 

		Three Months Ended								Nine Months Ended
		May 31								May 31
		2018				2017				2018				2017
Short term employee benefits (1) (2)		$	15,000			$	37,500			$	45,000			$	110,481
Director/Officer stock based compensation (3)			34,085				—				136,341				136,291
		$	49,085			$	37,500			$	181,341			$	246,772

 

7  

 

 

The following balances owing to the President and Chief Financial Officer of the Company are included in trade and other payables and are unsecured, non-interest bearing and due on demand:

 

		May 31, 2018				August 31, 2017
Short term employee benefits (1) (2)		$	61,500			$	101,500
		$	61,500			$	101,500

 

(1)

The Company incurs management fees to the Chief Financial Officer of the Company at a rate of $5,000 per month.

(2)

On September 9, 2016, the Company entered into an employment agreement with the President of the Company under which the Company agreed to pay to the President, a base salary of $90,000 and grant one hundred thousand (100,000) common share purchase options (Note 9 e). Effective May 21, 2017, the Company and the President agreed to amend the terms of the employment agreement, by reducing the President’s base salary to $10.00 annually, allowing the President to contract his services to Torinit contemporaneous with his continued employment with the Company and providing a top up provision of up to $1,500 in a month from the Company if the gross compensation earned by the President from Torinit during June, July and August of 2017 (the “Period”), reduces the overall compensation earned by the President below $7,500 in any such month during the Period.

(3)

On September 9, 2016 and November 1, 2016, the Company granted options to purchase 130,000 and 50,000 common shares to officers and directors.

 

On September 1, 2016, the Company entered into an agreement for a period of 12 months with Torinit Technologies Inc., (“Torinit”) to provide dedicated resource augmentation to DoubleTap in an effort to optimize user experience while navigating through the doubleTap.co website and drive traffic growth by engaging users across all demographics (the “Torinit Services”). As consideration for the Torinit Services, the Company agreed to compensate Torinit the sum of $8,000 per month based on 320 hours per month for a 12 month period. Dikshant Batra, a director of the Company, is also the President, a director and major shareholder of Torinit. As at May 31, 2018 and August 31, 2017, included in trade and other payables of the Company is $23,961 due to Torinit.

 

As at May 31, 2018, the amount of directors’ fees included in trade and other payables was $10,400 (August 31, 2017: $10,200).

 

As at May 31, 2018, the Company had non-interest bearing loans due on demand payable to Core Energy Enterprises Inc. (“Core”) a shareholder of the Company, in the aggregate amount of $40,800 (August 31, 2017: $Nil). The Chief Financial Officer of the Company is a major shareholder, officer and a director of Core.

 

At May 31, 2018, the Company had a non-interest bearing, due on demand loan payable to a shareholder in the amount of $25,896 (US $20,000).

 

SIGNIFICANT ACCOUNTING POLICIES

 

The Consolidated Financial Statements were prepared using the same accounting policies and methods as those described in our consolidated financial statements for the year ended August 31, 2017.

 

CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

 

The Company’s management made assumptions, estimates and judgments in the preparation of the Consolidated Financial Statements. Actual results may differ from those estimates, and those differences may be material. There have been no material changes in the three months ended May 31, 2018 to the critical accounting estimates and judgments.

 

RECENT ISSUED ACCOUNTING PRONOUNCEMENTS

 

The following standards, amendments and interpretations, which may be relevant to the Company have been introduced or revised by the IASB:

 

(i) In May 2014, the IASB issued IFRS 15 Revenue from Contracts with Customers, which supersedes IAS 11 Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer Loyalty Programmes, and IFRIC 15 Agreements for the Construction of Real Estate, IFRIC 18 Transfers of Assets from Customers, and SIC 31 Revenue – Barter Transactions Involving Advertising Services. IFRS 15 establishes a comprehensive five-step framework for the timing and measurement of revenue recognition. The Company intends to adopt IFRS 15 effective September 1, 2018, and is currently assessing the impact of this new standard on the Consolidated Financial Statements.

 

(ii) In July 2014, the IASB issued the final version of IFRS 9, Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39, Financial Instruments – Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods beginning on or after January 1, 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. The Company does not intend to adopt the new standard prior to its effective date and has not yet determined the impact of this new standard on the Consolidated Financial Statements.

 

8  

 

 

(iii) On January 13, 2016, the IASB issued IFRS 16 Leases (“IFRS 16”) which will replace IAS 17, Leases. IFRS 16 will bring leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Lessor accounting however, remains largely unchanged and the distinction between operating and finance leases is retained. IFRS 16 is effective for annual reporting periods beginning on or after January 1, 2019. The Company is assessing the impact of this new standard on the Consolidated Financial Statements.

 

(iv) Amendments to IFRS 2 - Classification and measurement of Share-based payment transactions (“IFRS 2”): On June 20, 2016, the IASB issued amendments to IFRS 2, clarifying how to account for certain types of share-based payment transactions. The amendments apply for annual periods beginning on or after January 1, 2018. As a practical simplification, the amendments can be applied prospectively, retrospectively, or early application is permitted if information is available without the use of hindsight. The amendments provide requirements on the accounting for:

 

-

The effects of vesting and non-vesting conditions on the measurement of cash-settled share-based payments;

-

Share-based payment transactions with a net settlement feature for withholding tax obligations; and

-

A modification to the terms and conditions of a share-based payment that changes the classification of the transaction from cash-settled to equity-settled.

 

The Company intends to adopt the amendments to IFRS 2 in its Consolidated Financial Statements for the annual period beginning on September 1, 2018. The extent of the impact of adoption of the standard has not yet been determined.

 

IFRIC 22 – Foreign currency transactions and advance consideration: IFRIC was issued in December 2016 to provide guidance on accounting for transactions that include the receipt or payment of advance consideration in a foreign currency. The new interpretation is effective for annual periods beginning on or after January 1, 2018. The Company is currently assessing the interpretation on its consolidated financial statements.

 

SHARE CAPITAL AND RESERVES

 

The Company filed articles of amendment effective May 26, 2017, and changed its name from Intelligent Content Enterprises Inc., to Novicius Corp., and consolidated its common shares on the basis of one (1) new share for every ten (10) old shares. The consolidated financial statements have been adjusted to reflect the consolidation accordingly.

 

A)

Share Capital

 

Authorized:  

Unlimited number of common shares at no par value

Unlimited number of preferred shares issuable in series

 

Common Shares Issued:

The following table sets out the changes in common shares during the respective periods:

 

		Number				Amount $
Balance August 31, 2016			2,650,627				23,220,683
Common shares issued as private placement (Note B a)			7,692				30,233
Common shares issued as settlement of shareholder advances (Note B b)			1,187,672				213,781
Common shares issued as anti-dilution provision (Note B c)			1,420,809				184,705
Common shares issued as anti-dilution provision (Note B d)			16,364				2,127
Balance August 31, 2017 and May 31, 2018			5,283,164				23,651,529

 

Preferred Shares Issued:

As at May 31, 2018 and August 31, 2017, there were no preferred shares issued.

 

B)

Share Purchase Warrants

 

The following table sets out the changes in warrants during the respective periods:

Warrants		Number   of Warrants				Weighted Average Price
Outstanding, August 31, 2016			722,572			$	8.60
Warrants issued (Note a)			7,692				—
Warrants issued (Note d)			16,364				—
Warrants expired (Note e)			(538,417	)			—
Balance, August 31, 2017 and May 31, 2018			208,211			$	5.27

 

9  

 

 

(a)        On November 30, 2016, the Company completed private placements for gross proceeds of $50,000 and issued 7,692 units in the capital of the Company at a purchase price of $6.50 per unit. Each unit is comprised of one (1) common share and one (1) common share purchase warrant. Each full warrant entitles the holder to purchase one (1) common share at an exercise price of $10.00 until November 30, 2019. The fair value of the units ($50,000) was allocated to common shares $30,233 and the amount allocated to warrants component using a Binomial Lattice model was $19,767.

 

(b)       Effective August 31, 2017, the Company settled shareholder advances of $213,781 and issued 1,187,672 common shares in the capital of the Company at a price of $0.18 per share.

 

(c)       Pursuant to the August 31, 2017, settlement of shareholder advances of $213,781 (Note 9 b (b), effective August 31, 2017, the Company issued 1,420,809 common shares in the capital of the Company pursuant to the anti-dilution provision of the August 31, 2016, private placement agreements. The fair value of $184,705 was calculated on the previous day’s closing price of the Company’s common shares and allocated to common shares and anti-dilution fees in the consolidated statement of operations.

 

(d)       Pursuant to the November 30, 2016, private placement of $50,000 (Note 11 b (h), effective August 31, 2017, the Company issued 16,364 Units in the capital of the Company pursuant to the anti-dilution provision of the August 31, 2016, private placement agreements. Each unit is comprised of one (1) common share and one (1) common share purchase warrant. Each full warrant entitles the holder to purchase one (1) common share at an exercise price of $10.00 until November 30, 2019. The fair value of the units of $2,127 was allocated to common shares and anti-dilution fees in the consolidated statement of operations. No value was allocated to warrants based on the Binomial Lattice model.

 

(e)       On August 31, 2017, 538,417 common share purchase warrants exercisable at $10.00 expired. The amount allocated to warrants based on the Binomial Lattice model was $2,195,738 with a corresponding increase to contributed surplus.

 

The following table summarizes the outstanding warrants as at May 31, 2018 and August 31, 2017, respectively:

 

Number of   Warrants				Exercise Price				Expiry Date		Weighted Average Remaining Life (Years)				Warrant Value ($)
	160,519			$	3.50			March 1, 2019			0.75				603,370
	23,636			$	12.50			August 31, 2019			1.25				126,729
	24,056			$	10.00			November 30, 2019			1.50				19,767
	208,211										0.89				749,866

 

Number of   Warrants				Exercise   Price				Expiry Date		Weighted Average Remaining Life (Years)				Warrant Value ($)
	160,519			$	3.50			March 1, 2019			1.50				603,370
	23,636			$	12.50			August 31, 2019			2.00				126,729
	24,056			$	10.00			November 30, 2019			2.25				19,767
	208,211										1.64				749,866

 

C)

Weighted Average Shares Outstanding

 

The following table summarizes the weighted average shares outstanding:

 

				Three Months Ended								Nine Months Ended
				May 31								May 31
				2018				2017				2018				2017
	Weighted Average Shares Outstanding, basic and diluted				5,283,164				2,587,984				5,283,164				2,655,784

 

As at February 28, 2018, there were 208,211 common share purchase warrants that could be exercised, however they are anti-dilutive. The effects of any potential dilutive instruments on loss per share are anti-dilutive and therefore have been excluded from the calculation of diluted loss per share.

 

D)       Share Purchase Options

 

The Company has a stock option plan to provide incentives for directors, officers, employees and consultants of the Company. The maximum number of shares, which may be set aside for issuance under the stock option plan, is 20% of the issued and outstanding common shares of the Company on a rolling basis.

 

10  

 

 

The following table is a summary of the status of the Company’s stock options and changes during the period:

 

		Number				Weighted Average
		of Options				Exercise Price $
Balance, August 31, 2016			38,300				22.80
Granted			200,000				12.05
Expired			(83,300	)			(13.63	)
Balance, August 31, 2017			155,000				13.87
Cancelled (Note a)			(155,000	)			(13.87	)
Balance, May 31, 2018			—				—

 

a)     On May 1, 2018, all outstanding share purchase options were released and cancelled.

 

The following table is a summary of the Company’s stock options outstanding and exercisable as at August 31, 2017:

 

Options Outstanding														Options Exercisable
Exercise Price				Number of Options				Weighted Average   Remaining Life (Years)				Expiry Date		Number of Options				Weighted Average Exercise Price $
$	12.00				5,000				2.20			November 11, 2019			5,000				0.39
$	15.00				70,000				4.02			September 8, 2021			—				—
$	13.00				80,000				4.02			September 8, 2021			80,000				6.71
					155,000				3.95						85,000				13.87

 

e)       Stock Based Compensation

 

Employees

On September 9, 2016, the Company granted 30,000 common share purchase options to shares to a director and 30,000 common share purchase options the President and recorded non-cash stock based compensation expense of $44,416. These options were exercisable at $13.00 per share and expired on September 8, 2021. On May 1, 2018, these share purchase options were released and cancelled.

 

On September 9, 2016, the Company granted to the President 70,000 common share purchase options exercisable at $15.00 per share and expiring on September 8, 2021. Of these options 35,000 vested on September 8, 2017 and 35,000 vest on September 8, 2018. As at May 31, 2018, Company recorded non-cash stock based compensation expense of $136,341 (May 31, 2017: $50,897). On May 1, 2018, these share purchase options were released and cancelled.

 

On November 1, 2016, the Company granted 50,000 common share purchase options vesting March 30, 2017 to the former Chief Financial Officer and recorded non-cash stock based compensation expense of $40,978. These options were exercisable at $6.40 per share and expired on April 25, 2017.

 

Non Employees  

On September 9, 2016, the Company granted 20,000 immediately vesting common share purchase options to a consultant of the Company and recorded non-cash stock based compensation expense of $14,805. These options were exercisable at $13.00 per share and expire on September 8, 2021. On May 1, 2018, these options were released and cancelled.

 

The fair value of the stock options granted were estimated on the date of the grant using the Black Scholes option pricing model with the following assumptions and inputs:

 

		November 1, 2016				September 9, 2016
Weighted average fair value per option		$	5.90			$	11.70
Weighted average risk free interest rate			0.68	%			0.59	%
Forfeiture rate			0	%			0	%
Weighted average expected volatility			156.70	%			152.32	%
Expected life (years)			5				5
Dividend yield			Nil				Nil
Stock price on the date of grant		$	6.40			$	12.90

 

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SUBSEQUENT EVENTS

 

Subsequent to the period end the Company executed an amended and restated non-binding letter of intent with Grown Rogue Unlimited, LLC, an Oregon limited liability company (“Grown Rogue”) pursuant to which it is contemplated that the Company may combine its business operations with Grown Rogue by way of a three-cornered amalgamation (the “RTO Transaction”) resulting in a reverse take-over of the Company by Grown Rogue and the listing for trading of the shares of the resulting issuer on the Canadian Securities Exchange (the “Exchange”). The non-binding letter of intent has been amended and restated (the “Amended LOI”) to extend the term of the Amended LOI, to reflect the amended terms of the Private Placement (as defined below) to be completed by an affiliate of Grown Rogue prior to the closing of the RTO Transaction, and to reflect continuing discussions between Grown Rogue and the Company with respect to the terms of the RTO Transaction.

 

Pursuant to the Amended LOI It is expected that prior to the completion of the RTO Transaction, all of the unitholders of Grown Rogue will exchange their units of Grown Rogue for common shares in Grown Rogue Canada Inc. (“Grown Rogue Canada”), a company incorporated under the laws of Ontario, which will result in Grown Rogue Canada owning all of the units in Grown Rogue (the “Grown Rogue Securities Exchange”). Upon completion of the Grown Rogue Securities Exchange, Grown Rogue Canada will amalgamate with a subsidiary of Novicius and the shareholders of Grown Rogue Canada that participated in the Grown Rogue Securities Exchange will receive common shares of Novicius at a deemed price of $0.44 per share.

 

In addition, the Company and Grown Rogue Canada announced that Grown Rogue Canada completed an initial tranche of its planned financing for a total issuance of 5,673,417 subscription receipts (the “Subscription Receipts”) at a price of $0.44 each for total proceeds of $2,496,303 (the “Private Placement”). Each Subscription Receipt is convertible, without additional consideration, into a unit (a “GRC Unit”) consisting of one common share in GRC (“GRC Share”) and one common share purchase warrant in GRC (“GRC Warrant”). Each GRC Warrant entitles the holder to purchase one GRC Share at a price of $0.55 per share until 24 months after the RTO Transaction has been completed.

 

GRC plans to complete a second tranche and raise up to an additional $3,500,000 in Subscription Receipts prior to the completion of the RTO Transaction. The GRC Units and the Compensation Options will be exchanged for corresponding securities, respectively, in Novicius (as the resulting issuer) upon completion of the RTO Transaction.

 

All of the gross proceeds received by Grown Rogue Canada under the Private Placement are being held in escrow and are to be released to Grown Rogue Canada upon satisfying certain conditions including, among other things, (i) CSE approval of the RTO Transaction and (ii) the acquisition by Grown Rogue Canada of, directly or indirectly, 100% of the membership units of Grown Rogue Unlimited, LLC (the “Escrow Release Condition”). If the Escrow Release Condition is not satisfied or waived by September 3, 2018, the Subscription Receipts will automatically be cancelled and the proceeds of the Private Placement will be returned to the holders of the Subscription Receipts in an amount per Subscription Receipt equal to: (i) the purchase price of the Subscription Receipt; and (ii) a pro rata share of interest, if any, earned thereon.

 

M Partners Inc. and PI Financial Corp. acted as co-lead agents for GRC (the “Agents”) in connection with the Private Placement and will receive, upon closing of the RTO Transaction, a cash commission equal to 7% of the aggregate proceeds of the portion of the Private Placement sold to subscribers sourced by the Agents, and a cash commission equal to 3.5% of the aggregate proceeds from all other subscribers participating in the private placement.  The Agents have received an aggregate number of compensation options (the “Compensation Options”) equal to 7% of the number of Subscription Receipts issued to subscribers sourced by the Agents, and an aggregate number of Compensation Options equal to 3.5% of the number of Subscription Receipts issued to all other subscribers participating in the private placement.

 

Each Compensation Option entitles the holder to purchase one GRC Unit at a price of $0.44 per unit until 24 months after completing the RTO Transaction.

 

There can be no assurance that the RTO Transaction will occur, or that it will occur on the terms and conditions contemplated in this news release. The RTO Transaction could be modified, restructured or terminated. Actual results could differ materially from those currently anticipated due to a number of factors and risks. The completion of the RTO Transaction is contingent on a number of conditions precedent including, but not limited to, (i) receipt of all requisite corporate, shareholder and regulatory approvals, (ii) completion of satisfactory due diligence by each of the parties, (iii) completion of the Grown Rogue Securities Exchange, (iv) completion of the Brokered Offering, (v) completion of the Company’s anticipated consolidation of 1.4 pre-consolidated common shares for one 1 post-consolidated common share, (vi) the reduction of Novicius debt, and (vii) the execution of a definitive agreement between the parties. No assurance is given that the Transaction will close as contemplated.

 

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