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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 7/16/19 Cannex Capital Holdings Inc. 40FR12G 138:29M Newsfile Corp/FA |
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Cannex Capital Holdings Inc.: Exhibit 99.55 - Filed by newsfilecorp.com |
CANNEX CAPITAL HOLDINGS INC.
(Formerly Arco
Resources Corp.)
CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Expressed in United States Dollars
NOTICE OF NO AUDITOR REVIEW OF
CONDENSED
CONSOLIDATED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated interim financial statements of Cannex Capital Holdings Inc. for the three months ended July 31, 2018 have been prepared by the management of the Company and approved by the Company’s audit committee.
The accompanying unaudited condensed consolidated interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management.
The Company’s independent auditor has not performed a review of these condensed consolidated interim financial statements in accordance with standards established by the Canadian Institute of Chartered Professional Accountants for a review of the condensed consolidated interim financial statements by an entity’s auditor.
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Consolidated Statements of Financial Position |
(United States dollars) |
Note | July 31 | April 30 | ||||||
2018 | 2018 | |||||||
$ | $ | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | 11,107,117 | 11,862,715 | ||||||
Accounts receivable | 6, 17 | 2,395,262 | 1,582,994 | |||||
Current portion of notes receivable | 7, 17 | 173,494 | 157,084 | |||||
Inventory | 110,593 | 147,705 | ||||||
Prepaid expenses | 347,943 | 128,798 | ||||||
Total current assets | 14,134,409 | 13,879,296 | ||||||
Non-current assets | ||||||||
Deposits | 57,995 | 59,456 | ||||||
Convertible note receivable and derivative asset | 8 | 2,561,370 | 2,511,759 | |||||
Property, plant and equipment | 9 | 29,826,072 | 30,277,769 | |||||
Equipment finance receivable | 7, 17 | 324,511 | 370,508 | |||||
Total non-current assets | 32,769,948 | 33,219,492 | ||||||
Total assets | 46,904,357 | 47,098,788 | ||||||
LIABILITIES | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities | 10, 17 | 1,206,575 | 2,377,155 | |||||
Income taxes payable | 339,000 | 75,000 | ||||||
Promissory note due within 12 months | 11 | 936,411 | 932,266 | |||||
Convertible promissory note due within 12 months | 12 | 1,072,000 | 1,144,201 | |||||
Derivative liability | 12 | 2,661,000 | 5,077,000 | |||||
Total current liabilities | 6,214,986 | 9,605,622 | ||||||
Non-current liabilities | ||||||||
Promissory note | 11 | 1,405,965 | 1,603,782 | |||||
Convertible promissory notes | 12 | 4,358,670 | 3,745,285 | |||||
Deferred income taxes | 1,095,295 | 1,117,295 | ||||||
Total non-current liabilities | 6,859,930 | 6,466,362 | ||||||
Total liabilities | 13,074,916 | 16,071,984 | ||||||
EQUITY | ||||||||
Share capital - common | 13 | 31,077,807 | 31,007,807 | |||||
Share capital – Class A | 13 | 1,462,329 | 1,462,329 | |||||
Reserves | 14 | 3,779,918 | 3,475,788 | |||||
Deficit | (2,490,613 | ) | (4,919,120 | ) | ||||
33,829,441 | 31,026,804 | |||||||
Total liabilities and equity | 46,904,357 | 47,098,788 | ||||||
Commitment (note 18) | ||||||||
Event after the reporting period (note 23) |
On behalf of the directors:
"Leo Gontmakher" | Director | "Roman Tkachenko" | Director |
Leo Gontmakher | Roman Tkachenko |
See accompanying notes
- 1 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Condensed Consolidated Interim Statements of Comprehensive Income (loss) |
(United States dollars) |
Three months ended | Note | July 31 | June 30 | ||||||
2018 | 2017 | ||||||||
$ | $ | ||||||||
Product sales | 19 | 1,106,227 | 362,261 | ||||||
Cost of sales | (828,824 | ) | (343,230 | ) | |||||
Gross profit | 277,403 | 19,031 | |||||||
Rental income | 19 | 2,294,208 | 1,166,080 | ||||||
2,571,611 | 1,185,111 | ||||||||
Operating expenses | |||||||||
Accretion | 12 | 270,000 | - | ||||||
Consulting | 66,625 | - | |||||||
Depreciation | 9 | 500,201 | 285,400 | ||||||
Director fees | 48,000 | - | |||||||
Foreign exchange | (193,446 | ) | - | ||||||
General | 170,573 | 21,154 | |||||||
Interest | 11, 12 | 323,710 | 332,813 | ||||||
Investor relations | 87,097 | 6,353 | |||||||
Professional | 217,057 | 42,986 | |||||||
Rent | 49,313 | - | |||||||
Share-based compensation | 16 | 489,790 | - | ||||||
Shareholder and regulatory | 23,588 | - | |||||||
Property taxes | 75,516 | 53,556 | |||||||
Travel | 37,509 | 30,673 | |||||||
Wages and salaries | 17 | 208,947 | 47,203 | ||||||
2,374,480 | 820,138 | ||||||||
Income (loss) before other items | 197,131 | 364,973 | |||||||
Other income (expense) | |||||||||
Change in fair value of derivative liabilities | 12 | 2,416,000 | - | ||||||
Interest income | 57,376 | - | |||||||
Income (loss) before income taxes | 2,670,507 | 364,973 | |||||||
Income taxes | |||||||||
Current | (264,000 | ) | - | ||||||
Deferred | 22,000 | (768,000 | ) | ||||||
(242,000 | ) | (768,000 | ) | ||||||
Income (loss) for the period | 2,428,507 | (403,027 | ) | ||||||
Translation loss | (185,660 | ) | (6,804 | ) | |||||
Comprehensive income (loss) for the period | 2,242,847 | (409,831 | ) | ||||||
Basic and diluted income (loss) per share | 21 | 0.01 | (0.05 | ) | |||||
Weighted average number of shares outstanding | 21 | 183,713,937 | 7,655,659 |
See accompanying notes
- 2 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Condensed Consolidated Interim Statements of Cash Flow |
(United States dollars) |
Three months ended | Note | July 31 | June 30 | ||||||
2018 | 2017 | ||||||||
$ | $ | ||||||||
Operating activities | |||||||||
Income (loss) for the period | 2,428,507 | (403,027 | ) | ||||||
Items not requiring cash: | |||||||||
Accretion | 12 | 270,000 | - | ||||||
Depreciation | 9 | 500,201 | 285,400 | ||||||
Share-based compensation | 16 | 489,790 | - | ||||||
Interest expense | 271,184 | 332,813 | |||||||
Unrealized exchange loss (gain) | (85,397 | ) | - | ||||||
Change in fair value of derivative liabilities | 12 | (2,416,000 | ) | - | |||||
Deferred income taxes | (22,000 | ) | 768,000 | ||||||
Changes in working capital: | |||||||||
Accounts receivables | (813,186 | ) | 668,680 | ||||||
Inventory | 37,112 | 64,769 | |||||||
Prepaid expense | (218,880 | ) | (14,874 | ) | |||||
Accounts payable | (1,085,916 | ) | (1,177,633 | ) | |||||
Taxes payable | 264,000 | - | |||||||
Net cash generated from operations | (380,585 | ) | 524,128 | ||||||
Investing activities | |||||||||
Cash acquired from acquisitions | - | 183,148 | |||||||
Deposits | 1,461 | (274 | ) | ||||||
Purchase of property, plant and equipment | 9 | (48,504 | ) | (591,025 | ) | ||||
Repayment of equipment finance receivable | 8 | 29,587 | - | ||||||
Net cash used in investing activities | (17,456 | ) | (408,151 | ) | |||||
Financing activities | |||||||||
Issuance of common shares for cash, net of issuance costs | - | 148,003 | |||||||
Capital contributed | - | 1,793,380 | |||||||
Revolving loan advances | 10 | - | 639,088 | ||||||
Loan proceeds | 11 | (246,198 | ) | - | |||||
Loan repayments | 11 | - | (2,431,892 | ) | |||||
Interest paid | 10, 11 | 52,526 | (107,306 | ) | |||||
Net cash generated by (used in) financing activities | (193,672 | ) | 41,273 | ||||||
Effect of exchange rate movements on cash | (163,886 | ) | (6,153 | ) | |||||
Change in cash and cash equivalents | (755,599 | ) | 151,097 | ||||||
Cash and cash equivalents, beginning of period | 11,862,716 | - | |||||||
Cash and cash equivalents, end of period | 11,107,117 | 151,097 | |||||||
Cash and cash equivalents comprise | |||||||||
Cash | 1,107,458 | 151,097 | |||||||
Cash equivalents | 9,999,659 | - | |||||||
11,107,117 | 151,097 | ||||||||
Supplemental disclosure with respect to cash flow (note 23) |
See accompanying notes
- 3 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Condensed Consolidated Interim Statements of Equity |
(United States dollars) |
Members’ | Reserves | Deficit | Total | ||||||||||||||||||||||||
Note | Number of Shares | Share capital | equity | ||||||||||||||||||||||||
Common | Class A | Common | Class A | ||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | ||||||||||||||||||||||
March 31, 2017 | - | - | - | - | - | - | - | - | |||||||||||||||||||
Issuance of shares for cash | 13 | 18,550,355 | - | 148,003 | - | - | - | - | 148,003 | ||||||||||||||||||
Cash contributed | 13 | - | - | - | - | 2,293,379 | - | - | 2,293,379 | ||||||||||||||||||
Cash distributed | 13 | - | - | - | - | (499,999 | ) | - | - | (499,999 | ) | ||||||||||||||||
Loan converted to equity | 13 | - | - | - | - | 1,706,120 | - | - | 1,706,120 | ||||||||||||||||||
Effect of acquisitions under common control | - | - | - | - | (1,629,024 | ) | - | - | (1,629,024 | ) | |||||||||||||||||
Foreign currency translation loss | - | - | - | - | - | (6,804 | ) | - | (6,804 | ) | |||||||||||||||||
Loss for the period | - | - | - | - | - | - | (403,027 | ) | (403,027 | ) | |||||||||||||||||
June 30, 2017 | 18,550,355 | - | 148,033 | - | 1,870,476 | (6,804 | ) | (403,027 | ) | 1,608,648 | |||||||||||||||||
April 30, 2018 | 87,192,203 | 96,521,734 | 31,007,807 | 1,462,329 | - | 3,475,788 | (4,919,120 | ) | 31,026,804 | ||||||||||||||||||
Share issue costs | - | - | 70,000 | - | - | - | - | 70,000 | |||||||||||||||||||
Share-based compensation | 16 | - | - | - | - | - | 489,790 | - | 489,790 | ||||||||||||||||||
Foreign currency translation loss | - | - | - | - | - | (185,660 | ) | - | (185,660 | ) | |||||||||||||||||
Income for the period | - | - | - | - | - | - | 2,428,507 | 2,428,507 | |||||||||||||||||||
July 31, 2018 | 87,192,203 | 96,521,734 | 31,077,807 | 1,462,329 | - | 3,779,918 | (2,490,613 | ) | 33,829,441 |
See accompanying notes
- 4 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
1. |
Corporate Information |
Cannex Capital Holdings Inc. (formerly Arco Resources Corp.) ("Cannex" or the "Company") was incorporated as Atomic Minerals Ltd. on March 13, 2006 pursuant to the provisions of the British Columbia Business Corporations Act and was previously listed on the NEX board of the TSX Venture Exchange (the "Exchange"). On March 13, 2018, Cannex Capital Group Inc. (the "Cannex Group") and its security holders (the "Cannex Group Security holders") completed an amalgamation with Arco Resources Corp. ("Arco"), a public company listed on the NEX board of the Exchange pursuant to which the Cannex Group Security holders transferred all of their common shares of Cannex Group in exchange for common shares of Arco on a 1:1 ratio. The transaction resulted in the former Cannex Group Security holders obtaining control the resulting issuer, and therefore constituted a reverse takeover (the "RTO Amalgamation") under the policies of the Exchange. Concurrently with the RTO Amalgamation Cannex Group completed the acquisition of 100% of the membership units of BrightLeaf, LLC ("BrightLeaf"), an entity under common control with Cannex Group, for cash of $22,532,608, the issuance of convertible promissory notes of $9,033,025 and the assumed debts of $4,434,370. Prior to the acquisition BrightLeaf debt of $892,265 was converted to equity of BrightLeaf. | |
The ongoing entity, being the combined operations of Cannex Group and BrightLeaf, has adopted the name Cannex Capital Holdings Inc. Cannex has been identified for accounting purposes as the acquirer, and accordingly the entity is considered to be a continuation of Cannex and the net assets of Arco at the date of the RTO Amalgamation are deemed to have been acquired by Cannex. The comparative figures are those of Cannex and BrightLeaf prior to the RTO Amalgamation. | |
In connection with the RTO Amalgamation, Cannex delisted its common shares from the NEX and relisted on the Canadian Securities Exchange and completed a private placement, net of issuance costs, for $34,749,478. The Company’s common shares resumed trading on the Canadian Securities Exchange under the symbol "CNNX" on March 14, 2018. | |
The Company leases real estate and sells supplies to cannabis producers and is seeking to expand through investments in cannabis growers, processors and retailers. The head office and principal address of the Company is 1241 Alberni Street, Vancouver, British Columbia, V6E 4R4. |
- 5 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
2. |
Basis of Presentation | |
a) |
Change of year end | |
Cannex Group had a September 30 year end but, in conjunction with the RTO Amalgamation, elected to change its year end to April 30. The comparative statements of comprehensive income (loss) and cash flow are for the three-month period ended June 30, 2017. | ||
b) |
Statement of compliance | |
These condensed consolidated interim financial statements for the three months ended July 31, 2018 have been prepared in accordance with IAS 34 – Interim Financial Reporting and should be read in conjunction with the Company’s April 30, 2018 audited financial statements which were prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). | ||
The Company’s audit committee approved the release of these condensed consolidated interim financial statements on September 30, 2018. | ||
c) |
Basis of measurement | |
These condensed consolidated interim financial statements have been prepared on a historical cost basis, except for certain financial instruments, which are measured at fair value, as explained in the significant accounting policies set out in the Company’s April 30, 2018 audited financial statements. The condensed consolidated interim financial statements are presented in United States dollars. The functional currency of the parent company, Cannex, is the Canadian dollar ("C$") and the functional currency of its subsidiary companies is the United States dollar ("$"). | ||
The preparation of financial statements in compliance with IFRS requires management to make certain critical accounting estimates. It also requires management to exercise judgment in applying the Company’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in note 4. |
- 6 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
2. |
Basis of Presentation (continued) | |
d) |
Basis of consolidation | |
The condensed consolidated interim financial statements comprise the financial statements of the Company and its wholly-owned subsidiaries. Subsidiaries consist of entities over which the Company is exposed to, or has rights to, variable returns as well as the ability to affect these returns through the power to direct the relevant activities of the entity. To the extent that subsidiaries provide services that relate to the Company’s activities, they are fully consolidated from the date control is transferred and are deconsolidated from the date control ceases. All intercompany balances and transactions have been eliminated. | ||
Cannex’s principal subsidiaries are: |
Entity | Ownership | Principal Activity |
Percentage | ||
BrightLeaf Development LLC ("BrightLeaf") | 100% | Real estate holding |
Real Estate Properties LLC ("REP") | 100% | Real estate holding |
Fuller Hill Development Co LLC ("Fuller") | 100% | Leaseholds |
Ag-Grow Imports LLC ("Ag-Grow") | 100% | Sale of supplies |
Cannex Holdings (Nevada) Inc. ("Cannex USA") | 100% | Holding |
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.
- 7 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
2. |
Basis of Presentation (continued) | |
e) |
Going concern | |
These consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to continue its operations for at least the next twelve months and will be able to realize its assets and discharge its liabilities in the normal course of business. | ||
The Company indirectly derives its revenues from the cannabis industry in certain states of the United States, which industry is illegal under United States federal law. The Company is not directly engaged in the manufacture, importation, possession, use, sale or distribution of cannabis in the recreational cannabis marketplace in either Canada or the United States, nor is the Company directly engaged in the manufacture, importation, possession, use, sale or distribution of cannabis in the medical cannabis marketplace in Canada or the United States. | ||
Almost half of the states in the United States have enacted legislation to regulate the sale and use of medical cannabis without limits on tetrahydrocannabinol ("THC"), while other states have regulated the sale and use of medical cannabis with strict limits on the levels of THC. Notwithstanding the permissive regulatory environment of adult-use recreational and medical cannabis at the state level, cannabis continues to be categorized as a controlled substance under the Controlled Substances Act in the United States and as such, cannabis-related practices or activities, including without limitation, the manufacture, importation, possession, use or distribution of cannabis are illegal under United States federal law. Strict compliance with state laws with respect to cannabis will neither absolve the Company of liability under United States federal law, nor provide a defense to any federal proceeding which may be brought against the Company. Any such proceedings brought against the Company may adversely affect the Company’s operations and financial performance. |
- 8 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
3. |
Adoption of New Accounting Pronouncements and Recent Developments | |
Certain pronouncements, issued by the IASB or the IFRS Interpretations Committee, were adopted during the period, or were mandatory for the Company’s fiscal periods beginning on or after May 1, 2018 or are required to be adopted in future periods. The following pronouncements are relevant to the consolidated financial statements: | ||
New standards, interpretations and amendments not yet effective | ||
a) |
IFRS 9 – Financial Instruments | |
IFRS 9 Financial Instruments is part of the IASB's wider project to replace IAS 39 – Financial Instruments: Recognition and Measurement. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortized cost and fair value. The basis of classification depends on the entity's business model and the contractual cash flow characteristics of the financial asset. On July 24, 2014, the IASB affirmed its proposal to deter the effective date of IFRS 9 to periods beginning after January 1, 2018. Earlier application of IFRS 9 continues to be permitted. The Company does not intend to early adopt this standard and is currently evaluating the impact of adopting this standard on the consolidated financial statements, but does not expect the impact to be material. | ||
b) |
IFRS 15 – Revenue from Contracts with Customers | |
In May 2014, the International Accounting Standards Board issued IFRS 15, Revenue from Contracts with Customers, which provides a single, principles-based five-step model for revenue recognition to be applied to all customer contracts, and requires enhanced disclosures. This standard is effective January 1, 2017 and allows early adoption. On July 22, 2015, the IASB unanimously affirmed its proposal to defer the effective date of IFRS 15 to periods beginning after January 1, 2018. Earlier application of IFRS 15 continues to be permitted. The Company does not intend to early adopt this standard. | ||
c) |
IFRS – Leases | |
IFRS 16 - Leases specifies how to recognize, measure, present and disclose leases. The standard provides a single lessee accounting model, requiring that lessees recognize assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has an insignificant value. Lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17. IFRS 16 was issued in January 2016 and will be applicable to the Company’s fiscal period beginning May 1, 2019, although early adoption is permitted. The Company does not intend to early adopt this standard and is currently evaluating the impact of adopting this standard on the consolidated financial statements. The Company expects that it will recognize additional assets and liabilities as a result of the leasing arrangements currently entered or to be entered by its subsidiaries. The full extent of the impact of adoption of the standard has not yet been determined and management will continue to assess the impact as January 1, 2019 approaches. | ||
There are no other pending IFRSs or IFRIC interpretations that are expected to be relevant to the Company’s financial statements. |
- 9 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
4. |
Critical Accounting Estimates and Judgments |
The Company makes estimates and assumptions about the future that affect the reported amounts of assets and liabilities. Estimates and judgments are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual experience may differ from these estimates and assumptions. | |
The effect of a change in an accounting estimate is recognized prospectively by including it in comprehensive income in the period of the change, if the change affects that period only, or in the period of the change and future periods, if the change affects both. | |
Information about critical judgments in applying accounting policies that have the most significant risk of causing material adjustment to the carrying amounts of assets and liabilities recognized in the financial statements within the next financial year are the same as those applied to the Company’s April 30, 2018 audited financial statements. | |
The Company makes critical judgments in the determination of property, plant and equipment, inventory, share-based compensation, fair value of financial instruments and impairment. |
- 10 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
5. |
Capital Management |
The Company’s primary objectives, when managing its capital, are to maintain adequate levels of funding to support the operations of the Company and to maintain corporate and administrative functions. The Company defines capital as revolving loans, promissory notes, convertible notes and equity, consisting of the issued units of the Company. The capital structure of the Company is managed to provide sufficient funding for planned operating activities of the Company. Funds are primarily secured through a combination of equity capital raised by way of private placements and debt. There can be no assurances that the Company will be able to continue raising equity capital and debt in this manner. | |
The Company invests all capital that is surplus to its immediate needs in short-term, liquid and highly rated financial instruments, such as cash and other short-term deposits, which are all held with major financial institutions. | |
There were no changes to the Company’s approach to capital management during the three months ended July 31, 2018 from the period ended April 30, 2018. The Company is not subject to any externally imposed capital requirements. | |
6. |
Accounts Receivable |
July 31 | April 30 | ||||||
2018 | 2018 | ||||||
$ | $ | ||||||
Trade accounts receivable | 2,316,520 | 1,515,887 | |||||
Allowance for doubtful debts | - | - | |||||
Net trade accounts receivable | 2,316,520 | 1,515,887 | |||||
Other receivables | 78,742 | 67,107 | |||||
2,395,262 | 1,582,994 |
As at July 31, 2018, two customers accounted for 97% (April 30, 2018 – 86%) of total accounts receivable (note 19).
- 11 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
7. |
Equipment Finance Receivable |
$ | ||||
April 30, 2018 | 527,592 | |||
Interest | 7,765 | |||
Repayments (principal and interest) | (37,352 | ) | ||
July 31, 2018 | 498,005 |
July 31 | April 30 | ||||||
2018 | 2018 | ||||||
$ | |||||||
Financial statement presentation: | |||||||
Current | 173,494 | 157,084 | |||||
Non-current | 324,511 | 370,508 | |||||
498,005 | 527,592 |
The equipment finance bears interest at 6% per year and is repayable in 48 instalments aggregating $12,451 per month.
- 12 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
8. |
Convertible Note Receivable and Derivative Asset |
In April 2018, the Company subscribed for a promissory note with Ametrine Wellness dba Jetty Extracts ("Jetty"), a company which holds a 99.99% membership interest in Jetty Marketing, LLC a 50% membership interest in Jetty MindTricks, LLC, and a 5% membership interest in 57th Avenue LLC. Jetty is a California-based processor and distributor of cannabis products. | |
The Company agreed to advance up to $5,000,000 to Jetty. Advances are secured by the assets of Jetty and bear interest at 8% annually, due on maturity; and the promissory note will mature on October 10, 2020. In April 2018, the Company advanced $2,500,000 under the note and, subsequent to July 31, 2018, in August 2018, advanced a further $1,000,000. The loan may be converted into class A common stock of Jetty at a price equal to the lesser of (a) a 20% discount to the share valuation of the next bona fide capital raise after April 2018 or (b) a $30,000,000 valuation. The Company is not able to exert significant influence over the operations of Jetty. | |
The option to settle the promissory notes in common shares of Jetty represents an embedded derivative in the form of a call option to the Company. Jetty is a private company and its shares cannot be reliably valued using any market-derived indicators. Accordingly, the derivative asset was initially recognized by comparing a similar instrument without the conversion option and discounting the fair value of the host contract with the non-convertible instrument interest rate, which the Company estimates would be 15%. As at July 31, 2018, the fair value of the derivative asset remained the same. |
Convertible | Derivative | Total | ||||||||
note receivable | asset | |||||||||
$ | $ | $ | ||||||||
April 30, 2018 | 2,078,759 | 433,000 | 2,511,759 | |||||||
Interest | 49,611 | - | 49,611 | |||||||
July 31, 2018 | 2,128,370 | 433,000 | 2,561,370 |
- 13 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
9. |
Property, Plant and Equipment |
Land | Buildings | Leasehold | Equipment | Total | ||||||||||||
Improve- | and Fixtures | |||||||||||||||
ments | ||||||||||||||||
$ | $ | $ | $ | $ | ||||||||||||
Cost | ||||||||||||||||
At April 30, 2018 | 1,000,000 | 3,919,453 | 26,167,255 | 1,209,082 | 32,295,790 | |||||||||||
Purchases | - | - | 48,504 | - | 48,504 | |||||||||||
At July 31, 2018 | 1,000,000 | 3,919,453 | 26,215,759 | 1,209,082 | 32,344,294 | |||||||||||
Accumulated depreciation | ||||||||||||||||
At April 30, 2018 | - | 106,838 | 1,727,837 | 183,346 | 2,018,021 | |||||||||||
Depreciation expense | - | 25,641 | 427,297 | 47,263 | 500,201 | |||||||||||
At July 31, 2018 | - | 132,479 | 2,155,134 | 230,609 | 2,518,222 | |||||||||||
Net book value | ||||||||||||||||
At April 30, 2018 | 1,000,000 | 3,812,615 | 24,439,418 | 1,025,736 | 30,277,769 | |||||||||||
At July 31, 2018 | 1,000,000 | 3,786,974 | 24,060,625 | 978,473 | 29,826,072 |
10. | Accounts Payable and Accrued Liabilities |
July 31 | April 30 | ||||||
2018 | 2018 | ||||||
$ | $ | ||||||
Trade accounts payable | 1,158,575 | 2,016,867 | |||||
Accrued liabilities | 48,000 | 311,640 | |||||
Sales taxes | - | 48,648 | |||||
Accounts payable and accrued liabilities | 1,206,575 | 2,377,155 |
- 14 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
11. |
Promissory Note |
The note bears interest at 8.5% annually, with monthly payments of $82,066 including interest with the final payment due March 31, 2021, secured by property, plant and equipment of the Company. |
$ | ||||
April 30, 2018 | 2,536,048 | |||
Interest | 52,526 | |||
Repayments (principal and interest) | (246,198 | ) | ||
July 31, 2018 | 2,342,376 |
July 31 | April 30 | ||||||
2018 | 2018 | ||||||
$ | $ | ||||||
Financial statement presentation: | |||||||
Current liabilities | 936,411 | 932,266 | |||||
Non-current liabilities | 1,405,965 | 1,603,782 | |||||
2,342,376 | 2,536,048 |
- 15 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
12. |
Convertible Promissory Note |
On March 13, 2018, the Company entered into convertible promissory notes for $9,033,025 as part of the RTO Amalgamation. The convertible promissory notes are secured by the units of BrightLeaf and pay 12% interest, calculated and paid monthly, and mature on March 15, 2020. The notes are convertible into common shares of the Company at the option of the subscriber at any time until maturity at a price of C$1.00 per common share. The Company is to make monthly payments equal to the lesser of (1) interest for the previous month; and (2) 50% of the distributable cash of BrightLeaf, with distributable cash defined as cash received by BrightLeaf minus payments to lenders, cash expenses and expenditures and cash reserves. If the Company fails to make payments on time, the interest rate increases to 18% until the default is remedied, and an additional 50% late payment fee is charged. | |
The Company received a waiver from the holders of the notes described above, allowing it to defer required payments until August 2018 with no penalty. The Company requested this waiver as an accommodation to allow it to instead completely pay down a trade payable, which was interest bearing at 12% per year. As of August 2018, the trade payable was completely paid down, and the first required payment to the holders of the notes described above has been made. | |
The Company used the residual value method to allocate the principal amount between the liability and option components of the convertible promissory notes. The option component of the convertible promissory notes is a derivative liability as the ultimate number of common shares to be issued varies with the foreign exchange rate between United States and Canadian dollars. At the end of each reporting period, the Company revalues the derivative liability, that is the conversion option, by using the Black-Scholes option pricing model with the following assumptions: |
July 31 | April 30 | |||||
2018 | 2018 | |||||
Annualized share price volatility | 80% | 100% | ||||
Risk-free interest rate | 2.07% | 2.11% | ||||
Expected lives | 1.6 years | 1.9 years | ||||
Dividend yield | 0.0% | 0.0% |
- 16 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
12. |
Convertible Promissory Note (continued) |
On April 30, 2018, the fair value of the derivative liability was estimated at $5,077,000. At July 31, 2018, the Company estimated the fair value of the derivative liability to be $3,361,000, with the result that the Company recorded a gain on the change in fair value of the derivative liability in the period ended July 31, 2018 of $1,716,000. During the period ended July 31, 2018, the Company recognized accretion of $270,000 representing the difference between the fair value of the convertible promissory note financing cost and nominal interest at 12%. |
Convertible | Derivative | Total | ||||||||
promissory note | liability | |||||||||
$ | $ | $ | ||||||||
April 30, 2018 | 4,889,486 | 5,077,000 | 9,966,486 | |||||||
Accretion | 270,000 | - | 270,000 | |||||||
Interest | 271,184 | - | 271,184 | |||||||
Change in fair value of derivative | - | (2,416,000 | ) | (2,416,000 | ) | |||||
July 31, 2018 | 5,430,670 | 2,661,000 | 8,091,670 |
July 31 | April 30 | ||||||
2018 | 2018 | ||||||
$ | $ | ||||||
Financial statement presentation: | |||||||
Current liabilities | 1,072,000 | 1,144,201 | |||||
Non-current liabilities | 4,358,670 | 3,745,285 | |||||
5,430,670 | 4,889,486 |
- 17 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
13. |
Share Capital and Members’ Capital |
Authorized capital | |
Unlimited number of common shares without par value; and Unlimited Class A shares without par value. | |
Issued capital | |
87,192,203 common shares 96,521,734 Class A shares | |
The Company did not issue any shares in the period ended July 31, 2018. | |
During the period ending June 30, 2017, Cannex Group issued 12,400,238 common shares at a price of C$0.005 for gross proceeds of C$62,001 ($49,601), and 6,150,117 common shares at a price of C$0.02 per share for gross proceeds of C$123,002 ($98,402). Of these shares, 7,575,355 were issued to members of BrightLeaf. | |
During the period ended June 30, 2017, members contributed net cash of $1,808,381 (cash contributions of $2,293,379 and cash distributed of $499,999). Certain members loans totalling $1,706,120 were converted to members’ equity (note 12). |
- 18 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
14. |
Reserves |
Reserves comprise the fair value of stock option grants and warrants prior to exercise and cumulative unrealized gains and losses on foreign exchange. |
Warrants | Share-based | Foreign | Total | ||||||||||
compensation | currency | ||||||||||||
reserve | translation | ||||||||||||
reserve | |||||||||||||
$ | $ | $ | $ | ||||||||||
April 30, 2018 | 554,933 | 3,278,936 | (358,081 | ) | 3,475,788 | ||||||||
Foreign currency translation reserve | - | - | (185,660 | ) | (185,660 | ) | |||||||
Share-based compensation | - | 489,790 | - | 489,790 | |||||||||
July 31, 2018 | 554,933 | 3,768,726 | (543,741 | ) | 3,779,918 |
15. |
Warrants |
Financing Warrants | Broker Warrants | ||||||||||||
Warrants | Weighted | Warrants | Weighted | ||||||||||
Outstanding | Average | Outstanding | Average | ||||||||||
Exercise | Exercise Price | ||||||||||||
Price | |||||||||||||
C$ | C$ | ||||||||||||
At July 31, 2018 and April 30, 2018 | 24,109,936 | 1.50 | 1,652,279 | 1.00 |
At July 31, 2018, warrants were outstanding enabling holders to acquire common shares or units as follows:
Number of Financing | Number of Broker | Exercise | Expiry Date | |||||||
Warrants | Warrants | Price | ||||||||
C$ | ||||||||||
24,109,936 | - | 1.50 | March 13, 2020 | |||||||
- | 1,652,279 | 1.00 | March 13, 2020 | |||||||
24,109,936 | 1,652,279 |
- 19 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
16. |
Share-Based Compensation |
Cannex’s board of directors has adopted rolling stock option plans under which the Company is authorized to grant options to directors, employees and consultants to acquire up to 10% of the issued and outstanding common shares and 10% of the issued and outstanding Class A shares. The exercise price of each option is based on the market price of the Company’s stock for a period preceding the date of grant. The options can be granted for a maximum term of ten years and vest as determined by the board of directors. The Company’s shares trade in Canadian dollars and options granted to date have been denominated in Canadian funds. | |
The Company’s practice is to issue share options with a term of five years that vest in increments over a two- year period. | |
Option Grants | |
In December 2017, the Company granted 11,650,000 options to directors, employees and consultants of the Company. The options are exercisable at C$1.00 per share until December 2022. Options granted to directors, employees and consultants vest in three equal tranches: March 13, 2018; March 13, 2019 and March 13, 2020. Options granted for investor relations vest in four equal tranches on June 13, 2018, September 13, 2018, December 13, 2018 and March 13, 2019. | |
A summary of stock option activity to July 31, 2018 follows: |
Stock Options | Weighted Average | |||||
Outstanding | Exercise Price | |||||
C$ | ||||||
April 30, 2018 | 11,400,000 | 1.00 | ||||
Forfeited | (150,000 | ) | 1.00 | |||
July 31, 2018 | 11,250,000 | 1.00 |
During the period ended July 31, 2018, the Company recognized share-based compensation of $489,790 (2017 - $nil) in connection with stock options issued.
- 20 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
16. |
Share-Based Compensation (continued) |
At July 31, 2018, the Company had outstanding and exercisable stock options as follows: |
Outstanding Options | Exercisable Options | |||||||||||||||
Exercise Price | Number | Weighted | Weighted | Number | Weighted | |||||||||||
Average | Average | Average | ||||||||||||||
Remaining | Exercise | Exercise | ||||||||||||||
Life | Price | Price | ||||||||||||||
C$ | C$ | C$ | ||||||||||||||
$1.00 | 11,250,000 | 4.4 years | 1.00 | 3,725,000 | 1.00 |
The Company employed the Black-Scholes option-pricing model using the following weighted average assumptions to determine share-based compensation:
2018 | |||
Annualized share price volatility | 100% | ||
Risk-free interest rate | 2.0% | ||
Expected option lives | 4.75 years | ||
Dividend yield | 0.0% |
- 21 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
17. |
Related Party Transactions |
The Company considers key management personnel to be those persons determined as having authority and responsibility for planning, directing and controlling the activities of the Company. Key management includes the Company’s board of directors and executive officers. | |
Key management personnel compensation was: |
Three months ended | July 31 | June 30 | |||||
2018 | 2017 | ||||||
$ | $ | ||||||
Short-term employee benefits | 51,480 | - | |||||
Management fees (included in wages and salaries) | 146,014 | - | |||||
Directors’ fees | 48,000 | - | |||||
Share-based compensation (note 16) | 326,542 | - | |||||
572,036 | - | ||||||
Included in management fees above are amount paid to companies | |||||||
controlled by related parties: | |||||||
º A company controlled by the Company’s CEO | 23,007 | - | |||||
º A company controlled by the Company’s CFO | 23,007 | - | |||||
º A company controlled by the Company’s COO | 100,000 | - | |||||
146,014 | - |
Short-term employee benefits were paid or accrued directly to employees and directors of the Company.
Share-based compensation comprised the fair value of incentive stock options awarded to directors and officers.
At July 31, 2018, the Company owed $7,508,364 (April 30, 2018 - $9,283,194) to related parties on account of convertible promissory notes and derivative liabilities (note 12).
- 22 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
17. |
Related Party Transactions (continued) |
During the period ended July 31, 2018, the Company generated product sales of $1,083,975 (June 30, 2017 - $176,900) and rental income of $1,574,208 (June 30, 2017 - $1,166,080) from a company owned by an individual holding 2,037,658 common shares and 12,015,565 Class A shares (see note 19). | |
During the period ended July 31, 2018, the Company generated product sales of $15,000 (June 30, 2017 - $nil) and rental income of $720,000 (June 30, 2017 - $nil) from a company owned by a member of the board of the Company (see note 19). | |
In the period ended July 31, 2018, the Company paid or accrued interest of $251,650 (June 30, 2017 - $282,936) to related parties. | |
As at July 31, 2018, $57,042 (April 30, 2018 - $63,343) is owing to related parties on account of compensation and expenses incurred. | |
As at July 31, 2018, $2,395,262 (April 30, 2018 - $365,887) of the Company’s trade receivables were due from companies controlled by related parties. | |
As at July 31, 2018, $498,005 (April 30, 2018 - $527,592) of equipment finance receivable is due from companies controlled by related parties. | |
18. |
Commitments |
The Company has entered into a commercial property lease with a remaining life of 4.8 years, with a five-year renewal option. The future minimum rental payments under the lease at July 31, 2018 were: |
Periods ending April 30 | $ | ||
2019 | 187,500 | ||
2020 | 255,000 | ||
2021 | 255,000 | ||
2022 | 255,000 | ||
2023 | 255,000 | ||
2024 | 21,250 | ||
1,228,750 |
- 23 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
19. |
Segment Reporting |
As at July 31, 2018, the Company had three reportable segments: (1) real estate; (2) supplies; and (3) corporate. Operating segments are aggregated and organized by the nature of the product and service provided. |
July 31, 2018 | Real Estate | Supplies | Corporate | Total | |||||||||
$ | $ | $ | $ | ||||||||||
Revenue from external customers | 2,294,208 | 1,106,227 | - | 3,400,435 | |||||||||
Depreciation | 500,126 | - | 75 | 500,201 | |||||||||
Interest expense | 52,526 | - | 271,184 | 323,710 | |||||||||
Interdivisional sales (purchases) | - | - | - | - | |||||||||
Share-based compensation | - | - | 489,790 | 489,790 | |||||||||
Income (loss) before income taxes | 1,615,613 | 217,172 | 837,722 | 2,670,507 | |||||||||
Income taxes | (317,000 | ) | (46,000 | ) | 121,000 | (242,000 | ) | ||||||
Capital expenditures | 48,504 | - | - | 48,504 | |||||||||
Total assets | 30,854,470 | 1,888,285 | 14,161,602 | 46,904,357 |
- 24 -
CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
19. |
Segment Reporting (continued) |
June 30, 2017 | Real Estate | Supplies | Corporate | Total | |||||||||
$ | $ | $ | $ | ||||||||||
Revenue from external customers | 1,166,080 | 362,261 | - | 1,528,341 | |||||||||
Depreciation | 285,400 | - | - | 285,400 | |||||||||
Interest expense | 312,431 | 17,400 | 2,982 | 332,813 | |||||||||
Interdivisional sales (purchases) | (70,064 | ) | 70,064 | - | - | ||||||||
Income (loss) before income taxes | 514,450 | (34,214 | ) | (115,263 | ) | 364,973 | |||||||
Income taxes | (768,000 | ) | - | - | (768,000 | ) | |||||||
Capital expenditures | 591,025 | - | - | 591,025* | |||||||||
Total assets | 29,573,942 | 1,462,431 | 739,618 | 31,775,991 |
* Does not include capitalized interest of $57,284
The geographical location of assets is as follows:
July 31 | April 30 | ||||||
2018 | 2018 | ||||||
$ | $ | ||||||
US | 35,925,859 | 35,268,206 | |||||
Canada | 10,978,498 | 11,830,582 | |||||
Total assets | 46,904,357 | 47,098,788 |
All of the Company’s long-lived assets are located in the United States. All revenues were generated in the United States.
The following customers represented more than 10% of sales (see note 17):
July 31, 2018 | June 30, 2017 | ||||||||||||
Amount | % | Amount | % | ||||||||||
$ | $ | ||||||||||||
Customer A | 2,658,183 | 78 | 1,342,980 | 88 | |||||||||
Customer B | 735,000 | 22 | - | - |
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CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
20. |
Financial Risk Management |
The Company’s activities expose it to a variety of financial risks, including foreign exchange risk, interest rate risk, commodity price risk, credit risk and liquidity risk. The Company does not have a practice of trading derivatives. | |
Fair Values | |
Other than derivative assets and a derivative liability, the Company does not hold any financial instruments subject to level 1, 2 or 3 fair value measurements. There were no changes in level 1, 2, or 3 financial instruments during the period ended July 31, 2018. | |
Foreign Exchange Risk | |
The Company’s activities are primarily undertaken in the United States but the parent company is located in Canada and the Company is exposed to changes in exchange rate between the US and Canadian dollars. | |
As at July 31, 2018 with other variables unchanged, a 10% increase (decrease) in the Canadian dollar would decrease (increase) net earnings by approximately $55,900. Exposure to the Canadian dollar on financial instruments is as follows: |
Balance at July 31, 2018 | $ | ||
Cash and cash equivalents | 28,513 | ||
Receivables | 78,742 | ||
Accounts payable and accrued liabilities | (834,968 | ) |
Balance at April 30, 2018 | $ | ||
Cash and cash equivalents | 245,412 | ||
Receivables | 67,107 | ||
Accounts payable and accrued liabilities | (1,043,507 | ) |
Interest Rate Risk
The Company’s interest rate risk mainly arises from the interest rate impact on cash and cash equivalents. Cash earns interest based on market interest rates. The Company’s revolving loans and promissory notes have fixed interest rates and are not exposed to interest rate risk until maturity.
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CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
20. |
Financial Risk Management (continued) |
Credit Risk | |
Credit risk arises from the non-performance by counterparties of contractual financial obligations. The Company’s credit risk arises primarily with respect to its cash and cash equivalents and trade receivables. | |
The Company manages credit risk by holding cash with large reputable financial institutions and trading with recognized creditworthy third parties. In addition, receivable balances are monitored on an on-going basis with the result that the Company’s exposure to bad debt is not significant. | |
The Company also manages its credit risk by investing its cash only in obligations of Canada and the United States or its respective agencies, obligations of enterprises sponsored by any of the above governments; bankers’ acceptances purchased in the secondary market and having received the highest credit rating from a recognized rating agency in Canada or the United States, with a term of less than 180 days; and bank term deposits and bearer deposit notes, with a term of less than 180 days. | |
The Company’s maximum exposure to credit risk at the reporting date is the carrying value of cash and trade receivables. | |
Liquidity Risk | |
The Company manages liquidity risk by maintaining adequate cash balances. If necessary, it may raise funds through the issuance of debt, equity, or monetization of non-core assets. To ensure that there is sufficient capital to meet obligations, the Company continuously monitors and reviews actual and forecasted cash flows and matches the maturity profile of financial assets to development, capital and operating needs. |
July 31, 2018 | Less than | Three to 12 | One to five | Total | |||||||||
three months | months | years | |||||||||||
$ | $ | $ | $ | ||||||||||
Accounts payable and accrued liabilities | 1,206,575 | - | - | 1,206,575 | |||||||||
Promissory notes | 197,817 | 738,594 | 1,405,965 | 2,342,376 | |||||||||
Convertible promissory notes | 268,045 | 803,955 | 8,677,670 | 9,749,670 | |||||||||
1,672,437 | 1,542,549 | 10,083,635 | 13,298,621 |
Fair Value
The fair value of the Company’s financial assets and financial liabilities, other than a convertible note receivable and convertible promissory notes, approximate the carrying value due to the short-term maturities of the instruments and for long-term promissory notes, notes receivable, a market rate of interest.
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CANNEX CAPITAL HOLDINGS INC. |
(formerly Arco Resources Corp.) |
Notes to the Condensed Consolidated Interim Financial Statements |
For the Three Months Ended July 31, 2018 |
(United States dollars) |
21. |
Earnings (Loss) Per Share |
Three months ended | July 31 | June 30 | |||||
2018 | 2017 | ||||||
Income (loss) for the period | $ | 2,428,507 | $ | (403,027 | ) | ||
Weighted average number of common shares outstanding | 183,713,937 | 7,655,639 | |||||
Income (loss) per share, basic and diluted ($ per share) | 0.01 | (0.05 | ) |
For the purpose of determining income (loss) share, common shares and Class A shares are treated as participating on an equal basis.
Diluted income (loss) per share for the periods ended July 31, 2018 and June 30, 2017 are the same as basic income (loss) per share. At July 31, 2018, the exercise of the 11,250,000 share options and 25,762,215 warrants would be anti-dilutive. There were no stock options or warrants outstanding at June 30, 2017.
22. |
Supplemental Disclosure With Respect to Cash Flow | |
During the period ended July 31, 2018 the Company incurred the following non-cash transactions: | ||
Paid $nil in income taxes. | ||
During the period ended June 30, 2017 the Company incurred the following non-cash transactions: | ||
Paid $nil in income taxes. | ||
Converted promissory notes of $1,706,120 (note 12) into equity. | ||
23. |
Events After the Reporting Period | |
In August 2018, the Company advanced a further $1,000,000 under its convertible promissory note with Jetty, see note 8. |
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This ‘40FR12G’ Filing | Date | Other Filings | ||
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3/31/21 | None on these Dates | |||
10/10/20 | ||||
3/15/20 | ||||
3/13/20 | ||||
Filed on: | 7/16/19 | |||
5/1/19 | ||||
3/13/19 | ||||
1/1/19 | ||||
12/13/18 | ||||
9/30/18 | ||||
9/13/18 | ||||
7/31/18 | ||||
6/13/18 | ||||
5/1/18 | ||||
4/30/18 | ||||
3/14/18 | ||||
3/13/18 | ||||
1/1/18 | ||||
6/30/17 | ||||
3/31/17 | ||||
1/1/17 | ||||
7/22/15 | ||||
7/24/14 | ||||
3/13/06 | ||||
List all Filings |