Item
3.02 Unregistered Sales of Equity Securities.
On
November 27, 2018, we completed a private placement of an aggregate of 674,950 shares of common stock at a price of US$1.00 per
share for aggregate gross proceeds of US$674,950. In connection with the closing of the private placement, we paid cash commissions
in the aggregate amount of US$10,000.
Of
the 674,950 shares we issued: (i) 200,000 shares were issued pursuant to the exemption from registration under the
Securities
Act of 1933
, as amended provided by Section 4(a)(2) and/or Rule 506 of Regulation D promulgated under the
Securities Act
of 1933
, as amended to 1 investor who is an “accredited investor” within the meaning ascribed to that term in
Regulation D promulgated under the
Securities Act of 1933
, as amended; and (ii) 474,950 shares were issued to 17 non-U.S.
persons (as that term is defined in Regulation S of the
Securities Act of 1933
, as amended) in an offshore transaction
relying on Regulation S and/or Section 4(a)(2) of the
Securities Act of 1933
, as amended.
1373024
Alberta Inc., a company wholly-owned by Cameron Chell, our chairman and director, subscribed for 200,000 shares of our common
stock in the private placement.
Disclosure
Required by MI 61-101
1373024
Alberta Inc. (
“1373024 Alberta”
), a company wholly-owned by Cameron Chell, our chairman and director, participated
in the private placement and subscribed for 200,000 shares of our common stock, which constituted a “related party transaction”
within the meaning of Multilateral Instrument 61-101
Protection of Minority Security Holders in Special Transactions
(
“MI
61-101”
).
The
following supplementary information is provided in accordance with Section 5.2 of MI 61-101.
(a)
a description of the transaction and its material terms:
We
entered into a subscription agreement with 1373024 Alberta, whereby 1373024 Alberta agreed to purchase 200,000 shares of our common
stock at a price of US$1.00 per share for proceeds of US$200,000. Cameron Chell, the chairman and a director of our company, wholly
owns 1373024 Alberta.
(b)
the purpose and business reasons for the transaction:
Proceeds
of the private placement are expected to be used for working capital and general corporate purposes.
(c)
the anticipated effect of the transaction on the issuer’s business and affairs:
See
item (b).
(d)
a description of:
(i)
the interest in the transaction of every interested party and of the related parties and associated entities of the interested
parties:
See
item (a).
(ii)
the anticipated effect of the transaction on the percentage of securities of the issuer, or of an affiliated entity of the issuer,
beneficially owned or controlled by each person or company referred to in subparagraph (i) for which there would be a material
change in that percentage:
The
following table sets out the effect of the private placement (the
“Offering”
) on the percentage of securities
of our company beneficially owned or controlled by Mr. Chell:
Name
and
Position
|
|
Dollar
Amount
of Shares
Purchased
|
|
Number
of Shares
Purchased
|
|
No.
of
Shares Held
prior to
Closing of
the Offering
|
|
Percentage
of
Issued and
Outstanding
Shares prior to
Closing of the
Offering
|
|
No.
of Shares
Held After
Closing of
the Offering
|
|
Percentage
of
Issued and
Outstanding
Shares After
Closing of
the Offering
|
Cameron
Chell
Chairman and Director
|
|
US$200,000
|
|
200,000
Shares
(1)
|
|
Undiluted:
2,000,000
(2)
Diluted:
2,400,000
(3)
|
|
Undiluted:
9.6%
(4)
Diluted:
11.3%
(5)
|
|
Undiluted:
2,200,000
(6)
Diluted:
2,600,000
(7)
|
|
Undiluted:
10.2%
(8)
Diluted:
11.8%
(9)
|
*Less
than one percent
|
(1)
|
These
shares are held indirectly by 1373024 Alberta.
|
|
|
|
|
(2)
|
These
shares are held indirectly by Blockchain Fund GP Inc. (“Blockchain”), a company which Mr. Chell has the sole power
to vote or direct the vote, and to dispose or direct the disposition of the shares.
|
|
|
|
|
(3)
|
Comprised
of: (i) 2,000,000 shares held indirectly by Blockchain and (ii) 400,000 options held directly, each of which is exercisable
into one share at an exercise price of US$0.10 until October 15, 2027.
|
|
|
|
|
(4)
|
Based
on 20,874,524 shares outstanding prior to the completion of the Offering.
|
|
|
|
|
(5)
|
Based
on 21,274,524 shares comprised of: (i) 20,874,524 shares outstanding prior to the completion of the Offering and (ii) 400,000
shares that may be issuable on exercise of options held by Mr. Chell.
|
|
|
|
|
(6)
|
Comprised
of: (i) 2,000,000 shares held indirectly by Blockchain and (ii) 200,000 shares held indirectly by 1373024 Alberta.
|
|
|
|
|
(7)
|
Comprised
of: (i) 2,000,000 shares held indirectly by Blockchain, (ii) 200,000 shares held indirectly by 1373024 Alberta and (iii) all
of the convertible securities of our company set out in footnote (3) above.
|
|
|
|
|
(8)
|
Based
on 21,549,474 shares outstanding after the completion of the Offering.
|
|
|
|
|
(9)
|
Based
on 21,949,474 shares comprised of: (i) 21,549,474 shares outstanding after the completion of the Offering and (ii) 400,000
shares that may be issuable on exercise of options held by Mr. Chell.
|
(e)
unless this information will be included in another disclosure document for the transaction, a discussion of the review and approval
process adopted by the board of directors and the special committee, if any, of the issuer for the transaction, including a discussion
of any materially contrary view or abstention by a director and any material disagreement between the board and the special committee:
Mr.
Chell abstained on the resolution of the board of directors approving the Offering with respect to share subscription by 1373024
Alberta. A special committee was not established in connection with the approval of the Offering, and no materially contrary view
or abstention was expressed or made by any director.
(f)
a summary in accordance with section 6.5 of MI 61-101, of the formal valuation, if any, obtained for the transaction, unless the
formal valuation is included in its entirety in the material change report or will be included in its entirety in another disclosure
document for the transaction:
Not
applicable.
(g)
disclosure, in accordance with section 6.8 of MI 61-101, of every prior valuation in respect of the issuer that related to the
subject matter of or is otherwise relevant to the transaction:
(i)
that has been made in the 24 months before the date of the material change report:
Not
applicable.
(ii)
the existence of which is known, after reasonable enquiry, to the issuer or to any director or officer of the issuer:
Not
applicable.
(h)
the general nature and material terms of any agreement entered into by the issuer, or a related party of the issuer, with an interested
party or a joint actor with an interested party, in connection with the transaction:
See
item (a).
(i)
disclosure of the formal valuation and minority approval exemptions, if any, on which the issuer is relying under sections 5.5
and 5.7 of MI 61-101 respectively, and the facts supporting reliance on the exemptions:
The
issuance of 200,000 shares to 1373024 Alberta was exempt from the valuation requirement of MI 61-101 by virtue of the exemptions
contained in (i) Section 5.5(a) of MI 61-101 in that the fair market value of the shares subscribed by 1373024 Alberta did not
exceed 25% of our company’s market capitalization and (ii) section 5.5(b) of MI 61-101 as shares of our common stock are
not listed on a specified market and from the minority shareholder approval requirements of MI 61-101 by virtue of the exemption
contained in section 5.7(a) of MI 61-101 in that the fair market value of the shares subscribed by 1373024 Alberta did not exceed
25% of our company’s market capitalization.
As
this current report on Form 8-K is being filed less than 21 days before the closing of the Offering, there is a requirement under
MI 61-101 to explain why the shorter period was reasonable or necessary in the circumstances. In the view of our company, it was
necessary to immediately close the Offering and therefore, such shorter period was reasonable and necessary in the circumstances
to improve our company’s financial position.