CENTURY FINANCIAL CAPITAL GROUP INC.
CONDENSED INTERIM FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED
FEBRUARY 28, 2018
(EXPRESSED IN CANADIAN DOLLARS)
(UNAUDITED)
Century Financial Capital Group Inc.
Condensed Interim Statements of Financial Position
(Expressed in Canadian Dollars)
Unaudited
| As at | As at | |||||
| February 28, | August 31, | |||||
| 2018 | 2017 | |||||
| ASSETS | ||||||
| Current assets | ||||||
| Cash | $ | 2,198,991 | $ | 17,693 | ||
| Prepaid expenses | 41,023 | - | ||||
| Total assets | $ | 2,240,014 | $ | 17,693 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities | $ | 40,125 | $ | 34,859 | ||
| Due to related parties (note 8) | - | 43,363 | ||||
| Loan payable (note 3) | - | 35,000 | ||||
| Total liabilities | 40,125 | 113,222 | ||||
| Shareholders' equity (deficiency) | ||||||
| Share capital (note 4) | 3,724,816 | 1,398,105 | ||||
| Reserve for share-based payments (note 6) | 25,725 | - | ||||
| Reserve for warrants (note 5) | 118,875 | - | ||||
| Shares to be issued (note 4(b)) | - | 233,318 | ||||
| Deficit | (1,669,527 | ) | (1,726,952 | ) | ||
| Total shareholders' equity (deficiency) | 2,199,889 | (95,529 | ) | |||
| Total liabilities and shareholders' equity | $ | 2,240,014 | $ | 17,693 |
The accompanying notes to the unaudited condensed interim financial statements are an integral part of these statements.
Nature of operations (note 1)
Subsequent event (note 9)
Approved on behalf of the Board:
"Yaron Conforti", Director
"Harry Bregman", Director
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Century Financial Capital Group Inc.
Condensed Interim Statements of Income (loss) and Comprehensive Income (loss)
(Expressed in Canadian Dollars)
Unaudited
| Three months | Three months | Six months | Six months | |||||||||
| ended | ended | ended | ended | |||||||||
| February 28, | February 28, | February 28, | February 28, | |||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||
| Operating expenses | ||||||||||||
| Accounting and corporate services | $ | 15,026 | $ | 3,839 | $ | 17,298 | $ | 3,090 | ||||
| Transfer fees | 1,790 | 950 | 2,740 | 1,700 | ||||||||
| Professional fees | 5,103 | 1,291 | 6,633 | 2,694 | ||||||||
| Office and general | 2,363 | 6,422 | 4,117 | 6,056 | ||||||||
| Share-based payments (notes 6 and 8) | 25,725 | - | 25,725 | - | ||||||||
| Loss before other items | (50,007 | ) | (12,502 | ) | (56,513 | ) | (13,540 | ) | ||||
| Gain on debt settlement | 113,938 | - | 113,938 | - | ||||||||
| Net income (loss) and comprehensive income (loss) for the period | $ | 63,931 | $ | (12,502 | ) | $ | 57,425 | $ | (13,540 | ) | ||
| Basic and diluted income (loss) per share (note 7) | $ | 0.00 | $ | (0.00 | ) | $ | 0.00 | $ | (0.00 | ) | ||
| Weighted average number of common shares outstanding | 69,145,001 | 2,920,558 | 35,849,839 | 2,920,558 |
The accompanying notes to the unaudited condensed interim financial statements are an integral part of these statements.
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Century Financial Capital Group Inc.
Condensed Interim Statements of Cash Flows
(Expressed in Canadian Dollars)
Unaudited
| Six months | Six months | |||||
| ended | ended | |||||
| February 28, | February 28, | |||||
| 2018 | 2017 | |||||
| Operating activities | ||||||
| Net income (loss) for the period | $ | 57,425 | $ | (13,540 | ) | |
| Adjustments for: | ||||||
| Share-based payments (notes 6 and 8) | 25,725 | - | ||||
| Gain on debt settlement | (113,938 | ) | - | |||
| Changes in non-cash working capital items: | ||||||
| Prepaid expenses | (41,023 | ) | - | |||
| Accounts payable and accrued liabilities | 5,266 | (2,373 | ) | |||
| Net cash used in operating activities | (66,545 | ) | (15,913 | ) | ||
| Financing activities | ||||||
| Proceeds from private placements (net of share issue costs) (note 4) | 2,247,843 | - | ||||
| Loan received | - | 35,000 | ||||
| Net cash provided by financing activities | 2,247,843 | 35,000 | ||||
| Net change in cash | 2,181,298 | 19,087 | ||||
| Cash, beginning of period | 17,693 | 9,343 | ||||
| Cash, end of period | $ | 2,198,991 | $ |
The accompanying notes to the unaudited condensed interim financial statements are an integral part of these statements.
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Century Financial Capital Group Inc.
Condensed Interim Statement of Changes in Shareholders' Equity (Deficiency)
(Expressed in Canadian Dollars)
Unaudited
| Number of | Reserve for | ||||||||||||||||||||
| Common | Share | Share-Based | Reserve for | Shares to be | |||||||||||||||||
| Shares | Capital | Payments | Warrants | issued | Deficit | Total | |||||||||||||||
| Balance, August 31, 2016 | 2,920,558 | $ | 1,398,105 | $ | - | $ | - | $ | 233,318 | $ | (1,702,502 | ) | $ | (71,079 | ) | ||||||
| Net loss and comprehensive loss for the period | - | - | - | - | - | (13,540 | ) | (13,540 | ) | ||||||||||||
| Balance, February 28, 2017 | 2,920,558 | $ | 1,398,105 | - | $ | - | $ | 233,318 | $ | (1,716,042 | ) | $ | (84,619 | ) | |||||||
| Balance, August 31, 2017 | 2,920,558 | 1,398,105 | - | - | 233,318 | (1,726,952 | ) | (95,529 | ) | ||||||||||||
| Private placements (note 4) | 87,833,332 | 2,545,000 | - | - | (45,000 | ) | - | 2,500,000 | |||||||||||||
| Share issue costs (note 4) | - | (252,157 | ) | - | - | - | - | (252,157 | ) | ||||||||||||
| Finders' warrant valuation (note 4) | - | (118,875 | ) | - | 118,875 | - | - | - | |||||||||||||
| Debt settlement (note 4) | 11,775,322 | 117,743 | - | - | (188,318 | ) | - | (70,575 | ) | ||||||||||||
| Note conversion (note 4) | 5,932,204 | 35,000 | - | - | - | - | 35,000 | ||||||||||||||
| Share-based payments (note 6) | - | - | 25,725 | - | - | - | 25,725 | ||||||||||||||
| Net income and comprehensive income for the period | - | - | - | - | - | 57,425 | 57,425 | ||||||||||||||
| Balance, February 28, 2018 | 108,461,416 | $ | 3,724,816 | $ | 25,725 | $ | 118,875 | $ | - | $ | (1,669,527 | ) | $ | 2,199,889 |
The accompanying notes to the unaudited condensed interim financial statements are an integral part of these statements.
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Century Financial Capital Group Inc.
Notes to Condensed Interim Financial Statements Three and Six Months Ended February 28, 2018 (Expressed in Canadian Dollars)
Unaudited
1. Nature of operations
Century Financial Capital Group Inc. (the "Company" or "Century") was incorporated under the Business Corporations Act of Ontario on October 20, 1994. The Company's head office is located at the Canadian Venture Building, 82 Richmond Street East, Toronto, Ontario, M5C 1P1.
As at February 28, 2018, the Company has a working capital of $2,199,889. These financial statements have been prepared on the assumption that the Company will continue as a going concern, meaning it will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities in the ordinary course of operations. Management believes the going concern assumption to be appropriate for these financial statements.
Letter of Intent - FV Pharma Inc. ("FV Pharma")
On January 12, 2018, the Company entered into an arm’s-length non-binding letter of intent (the “Letter of Intent”) pursuant to which Century and FV Pharma propose to complete a business combination by way of three-cornered amalgamation (the “Proposed Transaction”). Following the completion of the Proposed Transaction, the resulting entity (the “Resulting Issuer”) will hold all of the assets and continue the business of FV Pharma.
The Letter of Intent provides that Century and FV Pharma will negotiate and enter into a definitive agreement in respect of the Proposed Transaction in February 2018 (the “Definitive Agreement”), to be completed by way of a share exchange, amalgamation, arrangement, share purchase, or other form of transaction which would result in FV Pharma becoming a wholly-owned subsidiary of Century or otherwise combine its corporate existence with a wholly-owned subsidiary of Century. Once the Proposed Transaction structure is determined, the Letter of Intent will be superseded by the Definitive Agreement.
There are a number of conditions precedent to the completion of the Proposed Transaction for both Century and FV Pharma, including, but not limited to: completion of the Definitive Agreement; completion of the FV Pharma Financing (as defined herein), completion of satisfactory due diligence; shareholder approval of the articles of amendment of Century and the Proposed Transaction (if required); and receipt of all necessary regulatory approvals.
Prior to consummation of the Proposed Transaction, (A) Century will, subject to the approval of Century Shareholders, file articles of amendment to amend its authorized shares as follows: (i) amend and designate the current Century common shares as Class B subordinate voting shares (“Century Class B Shares”), with terms and conditions similar to the existing Class “B” Common Shares of FV Pharma (“FV Pharma Class B Shares”); and (ii) create a new class of Class A multiple voting shares (“Century Class A Shares”) with terms and conditions similar to the existing Class “A” Common Shares of FV Pharma (“FV Pharma Class A Shares”); (B) FV Pharma has completed a brokered private placement of subscription receipts for aggregate gross proceeds of C$33,404,392 (the “FV Pharma Financing”), for which First Republic Capital Corporation acted as exclusive lead agent; and (C) the Resulting Issuer will change its name to “CannaConneXion Inc.”, or such other name as the parties may agree.
Pursuant to the Proposed Transaction, Century will purchase all of the FV Pharma Class B Shares in exchange for Century Class B Shares issued from treasury, and all of the FV Pharma Class A Shares in exchange for Century Class A Shares issued from treasury. Holders of FV Pharma Class B Shares will receive one Century Class B Share for each one FV Pharma Class B Share held, resulting in the issuance of approximately 763,562,145 Century Class B Shares at a deemed issued price of $0.09 per Century Class B Share, and holders of FV Pharma Class A Shares will receive one Century Class A Share for each one FV Pharma Class A Share held, resulting in the issuance of 15,000 Century Class A Shares, all for aggregate ascribed value of approximately $70 million.
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Century Financial Capital Group Inc.
Notes to Condensed Interim Financial Statements Three and Six Months Ended February 28, 2018 (Expressed in Canadian Dollars)
Unaudited
1. Nature of operations (Continued)
Letter of Intent - FV Pharma Inc. ("FV Pharma") (continued)
Following the completion of the Proposed Transaction, the resulting issuer is expected to carry on the business of FV Pharma. FV Pharma is a licensed producer of marijuana under the Access to Cannabis for Medical Purposes Regulations (ACMPR) having received its cultivation license on October 13, 2017.
FV Pharma and Century have applied to the Canadian Securities Exchange (“CSE”) to qualify the listing of the Resulting Issuer Class B Shares on the CSE. There is no assurance the CSE will provide conditional or final approval of the application to list the Resulting Issuer Class B Shares on the CSE. The CSE has not reviewed or provided comments on the Proposed Transaction. The CSE's final approvals remain subject to fulfilling all of the requirements of the CSE.
2. Significant accounting policies
Statement of compliance
The Company applies IFRS as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRIC”). These unaudited condensed interim 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 IASB and interpretations issued by IFRIC.
The policies applied in these unaudited condensed interim financial statements are based on IFRSs issued and outstanding as of April 26, 2018, the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed in these unaudited condensed interim financial statements as compared with the most recent annual 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 financial statements for the year ending August 31, 2018 could result in restatement of these unaudited condensed interim financial statements.
New standards not yet adopted and interpretations issued but not yet effective
IFRS 9 – Financial instruments (“IFRS 9”) was issued by the IASB in October 2010 and will replace IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”). IFRS 9 uses a single approach to determine whether a financial asset is measured at amortized cost or fair value, replacing the multiple rules in IAS 39. The approach in IFRS 9 is based on how an entity manages its financial instruments in the context of its business model and the contractual cash flow characteristics of the financial assets. Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS 9. IFRS 9 is effective for annual periods beginning on or after January 1, 2018.
3. Loan payable
On February 1, 2017, the Company entered into a $35,000 unsecured and non-interest bearing loan agreement with an individual who is a director and officer. The loan was due on demand and could be converted into common shares, at the sole option of the holder, at a rate of $0.0118 per share. On December 28, 2017, the loan was converted (see note 4).
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Century Financial Capital Group Inc.
Notes to Condensed Interim Financial Statements Three and Six Months Ended February 28, 2018 (Expressed in Canadian Dollars)
Unaudited
4. Share capital
a) Authorized share capital
The authorized share capital consists of unlimited number of common shares, unlimited number of convertible Class A preference shares and unlimited number of Class B preference shares. The common shares do not have a par value. All issued shares are fully paid.
b) Common shares issued
| Number of | ||||||
| common | ||||||
| shares | Amount | |||||
| Balance, August 31, 2016, February 28, 2017 and August 31, 2017 | 2,920,606 | $ | 1,398,105 | |||
| Private placements (i)(ii) | 87,833,332 | 2,545,000 | ||||
| Cost of issue (ii) | - | (252,157 | ) | |||
| Finders' warrant valuation (ii) | - | (118,875 | ) | |||
| Debt settlement (i) | 11,775,322 | 117,743 | ||||
| Note conversion (i) | 5,932,204 | 35,000 | ||||
| Balance, February 28, 2018 | 108,461,464 | $ | 3,724,816 |
(i) On December 28, 2017, the Company completed a non-brokered private placement (the “Private Placement”) of 4,500,000 common shares, debt settlements for an aggregate of 11,775,322 common shares (the “Debt Settlements”), and the issuance of 5,932,204 common shares under a convertible note dated February 1, 2017 (the "Convertible Note").
Under the Private Placement, 4,500,000 common shares were issued at a price of $0.01 per share for aggregate gross proceeds of $45,000 previously included as shares to be issued.
Concurrent with the closing of the Private Placement, the Company completed the Debt Settlements with certain creditors of the Company to settle the creditors’ debts for common shares. The Debt Settlements included settlements of debts which were previously approved by the Company’s shareholders in April 2014. Pursuant to the Debt Settlements the Company issued an aggregate of 11,775,322 Shares to settle an aggregate of $231,681 of debts.
On February 1, 2017, the Company entered into the Convertible Loan in the principal amount of $35,000 with Yaron Conforti, the CEO and a director of the Company (see note 3). In accordance with the terms of the Convertible Loan, pursuant to a notice of conversion, concurrent with the closing of the Private Placement and the Debt Settlements, Yaron Conforti exercised his right to convert the principal amount of the Convertible Note into 5,932,204 common shares (the “Note Conversion”).
Two insiders, Yaron Conforti and Harry Bregman, participated in the Debt Settlements pursuant to which they received an aggregate of 2,237,202 common shares. Yaron Conforti was also issued 750,000 common shares under the Private Placement and 5,932,204 common shares under the Convertible Loan.
All of the shares issued in connection with the Private Placement and the Debt Settlements are subject to a statutory hold period under applicable securities laws for a minimum period of four months and one day after the date of issuance.
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Century Financial Capital Group Inc.
Notes to Condensed Interim Financial Statements Three and Six Months Ended February 28, 2018 (Expressed in Canadian Dollars)
Unaudited
4. Share capital (Continued)
b) Common shares issued (continued)
(ii) On January 5, 2018, the Company closed a non-brokered private placement of 83,333,332 common shares of the Company at $0.03 per share for gross proceeds of $2,500,000 (the “Offering”).
All of the shares issued in connection with the Offering are subject to a statutory hold period under applicable securities laws for a minimum period of four months and one day after the date of issuance.
In connection with closing of the Offering, the Company paid eligible finders cash commissions in the total of $225,000, being 9% of the aggregate proceeds from the sale of shares to purchasers introduced by the finders. The Company also issued non-transferable warrants (the “Finder’s Warrants”) to the finders to acquire up to a total of 3,749,999 common shares, being 9% of the number of shares sold to purchasers introduced by the finders. Each Finder’s Warrant entitles the holder to purchase one common share at a price of $0.06 per share, expiring 24-months from the Finder’s Warrant issuance date. The Finder's Warrants issued were assigned a value of $118,875 using the Black- Scholes valuation model with the following assumptions: share price of $0.06, expected dividend yield of 0%, expected volatility of 100%, risk-free rate of return of 1.7% and an expected maturity of 2 years.
5. Warrants
The following table reflects the continuity of warrants for the periods ended February 28, 2018 and 2017.
| Weighted | ||||||
| Number of | Average | |||||
| Warrants | Exercise Price | |||||
| Balance, August 31, 2016, February 28, 2017 and August 31, 2017 | - | $ | - | |||
| Granted (note 4) | 3,749,999 | 0.06 | ||||
| Balance, February 28, 2018 | 3,749,999 | $ | 0.06 |
The Company had the following warrants outstanding at February 28, 2018:
| Exercise | |||||||||
| Expiry Date | Number | Price | Fair Value | ||||||
| January 4, 2020 | 3,749,999 | $ | 0.06 | $ | 118,875 |
6. Share-based payments
| Weighted | ||||||
| Number of | Average | |||||
| Options | Exercise Price | |||||
| Balance, August 31, 2016, February 28, 2017 and August 31, 2017 | - | $ | - | |||
| Granted (i) | 750,000 | 0.05 | ||||
| Balance, February 28, 2018 | 750,000 | $ | 0.05 |
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Century Financial Capital Group Inc.
Notes to Condensed Interim Financial Statements Three and Six Months Ended February 28, 2018 (Expressed in Canadian Dollars)
Unaudited
6. Share-based payments (Continued)
(i) On December 23, 2017, the Company granted 750,000 stock options to certain officers, directors and consultants of the Company exercisable at a price of $0.05 per common share. The options vested immediately and expire two years from grant. The grant date fair value of $25,725 was assigned to the stock options as estimated by using the Black- Scholes valuation model with the following assumptions: share price of $0.06, expected dividend yield of 0%, expected volatility of 100%, risk-free rate of return of 1.66% and an expected maturity of 2 years.
For the three and six months ended February 28, 2018, $25,725 was expensed to share-based payments (three and six months ended February 28, 2017 - $nil).
The following table provides further information on the outstanding options as at February 28, 2018:
| Weighted | Weighted | ||||||||||||||
| Number | Number | Average | Average | ||||||||||||
| Expiry Date | Exercisable | Outstanding | Exercise Price | Years Remaining | Fair Value | ||||||||||
| December 23, 2019 | 750,000 | 750,000 | $ | 0.05 | 1.82 | $ | 25,725 |
8. Related party transactions
Related parties include the board of directors, senior management, close family members and companies that are controlled by these individuals as well as certain persons performing similar functions.
Share-based payments to directors and management for the three and six months ended February 28, 2018 totaled $24,010 (three and six months ended February 28, 2017 - $nil).
As at February 28, 2018, the amounts due to related parties of $nil (August 31, 2017 - $43,363) include $nil (August 31, 2017 - $16,010) payable to a director of the Company and $nil (August 31, 2017 - $27,353) payable to a company controlled by the same director of the Company and the director’s spouse (see note 4).
See notes 3 and 4.
9. Subsequent event
On February 20, 2018, the Company declared a stock dividend of 1 common share for each 1 existing common share of the Company outstanding, issued on March 16, 2018 to the shareholders of record as of March 5, 2018. Pursuant to the stock dividend, the Company will issue an aggregate of 54,230,732 common shares based on the number of common shares outstanding as of the date hereof. All applicable references to the number of shares has been restated to reflect the effect of the share dividend, unless otherwise noted.