Constellation Capital Corp. — Management Reports 2024

Feb 26, 2024

CONSTELLATION CAPITAL CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS

For the year ended December 31, 2023 and for the period from July 27, 2022 (date of incorporation) to December 31, 2022

(Expressed in Canadian Dollars)

CONSTELLATION CAPITAL CORP.

Management’s Discussion and Analysis

For the year ended December 31, 2023 and for the period from July 27, 2022 to December 31, 2022 (Expressed in Canadian dollars)

MANAGEMENT’S DISCUSSION AND ANALYSIS

This Management’s Discussion & Analysis (“MD&A”) is intended to provide readers with the informa�on that management (“Management”) of Constella�on Capital Corp. (“The Company” or “Constella�on”) believes is required to gain an understanding of the financial results of the Company for the year ended December 31, 2023 and for the period ended December 31, 2022, and to assess the Company’s future prospects. Accordingly, certain sec�ons of this report contain forward-looking statements and forwardlooking informa�on (collec�vely, “Forward-Looking Informa�on” as defined under applicable Canadian securi�es laws), which are based on current plans and expecta�ons. See under the heading “Special Note Regarding Forward-Looking Informa�on”.

Repor�ng Standards (“IFRS”), as issued by the Interna�onal Accoun�ng Standards Board (“IASB”) and interpreta�ons issued by the Interna�onal Financial Repor�ng Interpreta�ons Commi�ee (“IFRIC”) in effect for the fiscal period beginning January 1, 2023.

notes as at and for the year ended December 31, 2023 and for the period ended December 31, 2022. All currency amounts in the accompanying financial statements and this MD&A are in Canadian dollars unless otherwise noted.

This MD&A has considered informa�on available up to and including February 5, 2024.

Special Note Regarding Forward Looking Informa�on

Certain statements in this MD&A, other than statements of historical fact, may include Forward-Looking Informa�on that involves various risks and uncertain�es. These can include, without limita�on, statements based on current expecta�ons involving a number of risks and uncertain�es. These risks and uncertain�es may have a material impact on future prospects and may cause actual results to differ from informa�on contained herein. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those an�cipated in such statements. These forwardlooking statements are based on the es�mates and opinions of Management on the dates they are made and are expressly qualified in their en�rety by this no�ce. Since actual events and results could differ materially, the reader is cau�oned not to place undue reliance on any Forward-Looking Informa�on. The Company assumes no obliga�on to update Forward-Looking Informa�on should circumstances or Management’s es�mates or opinions change, except as required by law. See “Cau�on Regarding ForwardLooking Informa�on” and “Risk Factors”.

MANAGEMENT AND BOARD OF DIRECTOR RESPONSIBILITIES

Management (specifically the Company’s CEO and CFO) is responsible for the reliability and timeliness of information disclosed in this MD&A. In this regard, Management has implemented systems, controls and processes (“Systems”) to ensure that all information required for this MD&A is collected and communicated on an accurate and timely basis. As a small company, the current Systems consist of firsthand involvement of the CEO and CFO in all material transactions of the Company. In Management’s view, the Company’s Systems are sufficient for the Company to report reliable and timely information.

CONSTELLATION CAPITAL CORP.

Management’s Discussion and Analysis

For the year ended December 31, 2023 and for the period from July 27, 2022 to December 31, 2022 (Expressed in Canadian dollars)

The Company’s Audit Committee is responsible for reviewing the Company’s interim and annual MD&A prior to release. The Company’s Board of Directors is responsible for approving the Company’s annual and interim MD&A prior to release.

DESCRIPTION OF THE BUSINESS

provisions of the Business Company’s Act (Alberta). The Company is classified as a Capital Pool Company (“CPC”) as defined in Policy 2.4 of the TSX Venture Exchange (the "Exchange"). The principal business of the Company is to iden�fy and evaluate assets or businesses with a view to poten�ally acquire them or an interest therein by comple�ng a purchase

transac�on, by exercising of an op�on or by any concomitant transac�on. The purpose of such an acquisi�on is to sa�sfy the related condi�ons of a qualifying transac�on under the Exchange rules.

capital of the Company (the “Common Shares”) at the price of $0.10 per Common Share for gross proceeds of $680,000 (the “Offering” or the “IPO”). On July 18, 2023, the TSX Venture Exchange (the “Exchange”) issued a bulle�n approving the lis�ng of the Common Shares. On July 21, 2023 the Common Shares began trading under the trading symbol “CNST.P”.

Alberta, T2P 0M9.

RISKS AND UNCERTAINTIES

Where an acquisi�on or par�cipa�on is warranted, addi�onal funding may be required. The ability of the Company to fund its poten�al future opera�ons and commitments is dependent upon the ability of the Company to obtain addi�onal financing. There is no assurance that the Company will iden�fy a business or asset that warrants acquisi�on or par�cipa�on within the �me limita�ons permissible under the policies of the Exchange, at which �me the Exchange may suspend or de-list the Company's shares from trading.

SELECTED FINANCIAL INFORMATION

The Company was incorporated on July 27, 2022 and became a “Repor�ng Issuer” in the provinces of Alberta and Bri�sh Columbia pursuant to applicable securi�es legisla�on on April 24, 2023, the date of the final receipt for the Prospectus was issued by the Alberta and Bri�sh Columbia Securi�es Commissions.

For the year ended December 31, 2023, the Company reported no discon�nued opera�ons and declared no cash dividends.

CONSTELLATION CAPITAL CORP.

Management’s Discussion and Analysis

For the year ended December 31, 2023 and for the period from July 27, 2022 to December 31, 2022 (Expressed in Canadian dollars)

SUMMARY OF QUARTERLY RESULTS

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Three Months Three Three Months Three
CAD ($) Ended Months Ended Months
Dec. 31, 2023 Ended Jun. 30, 2023 Ended
$ Sept. 30, ($) Mar. 31,
2023 2023
$ ($)
Total assets 724,164 731,712 193,513 222,270
Total liabilities 8,560 3,409 4,399 17,386
Net working capital 715,604 728,303 189,114 204,884
Revenue - - - -
Net Loss (12,699) (82,433) (6,270) (12,033)
Basic and diluted loss per share (0.00) (0.02) - -
- -
Weighted average shares 6,800,000 5,321,739
outstanding
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Period from
CAD ($) July 27, 2022
to December
31, 2022 ($)
Total assets 246,224
Total liabilities 11,112
Net working capital 235,132
Revenue -
Net Loss (48,368)
Basic and diluted loss per share (0.01)
Weighted average shares -
outstanding
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RESULTS OF OPERATIONS

During the year ended December 31, 2023 the Company incurred a loss of $113,435 consis�ng of sharebased compensa�on, transfer agent and lis�ng fees, professional fees related to the comple�on of the ini�al public offering, accoun�ng services and general and administra�ve expenses.

OUTSTANDING SHARE DATA

Common shares

capital of the Company (the “Common Shares”) at the price of $0.10 per Common Share for gross proceeds of $680,000 (the “Offering” or the “IPO”). On July 18, 2023, the TSX Venture Exchange (the “Exchange”) issued a bulle�n approving the lis�ng of the Common Shares. On July 21, 2023 the Common Shares began trading under the trading symbol “CNST.P”.

CONSTELLATION CAPITAL CORP.

Management’s Discussion and Analysis

For the year ended December 31, 2023 and for the period from July 27, 2022 to December 31, 2022 (Expressed in Canadian dollars)

outstanding, 5,200,000 of which were issued to the founders of the Company at a price of $0.05 per share and are subject to escrow restric�ons pursuant to policies of the Exchange.

a cash commission equal to $68,000 (10% of the total gross proceeds of the IPO), a corporate finance fee of $15,750 and addi�onal considera�on consis�ng of agent’s share purchase op�ons in an amount equal to 10% of the Common Shares issued pursuant to the Offering registered in the name of the Agent or as the Agent may otherwise direct (the “Agent’s Op�ons”). Each Agent’s Op�on will en�tle the holder thereof to acquire one Common Share at an exercise price of $0.10 per Common Share up to July 20, 2025.

In addi�on, the Company paid the agent legal and administra�on expenses of $25,816, less the deferred financing cost of $12,875.

680,000 Common Shares at an exercise price of $0.10 per Common Share to the directors and officers of the Company, which expire ten years from the date of grant.

Share issuance costs for the year ended December 31, 2023 were $184,560. Of the $184,560 in share issuance costs, $36,936 in fair value was recorded in rela�on to 680,000 non-transferable op�ons issued to the Agent.

All of the common shares issued at $0.05 are held in escrow un�l comple�on of a Qualifying Transac�on. 25% of the common shares held in escrow will be released on the issuance of the Final Exchange Bulle�n and an addi�onal 25% will be released on the dates 6 months, 12 months and 18 months following the ini�al release. These common shares, which are considered con�ngently issuable un�l the Company completes a Qualifying Transac�on, are not considered to be outstanding for the purpose of the loss per share calcula�on. As at December 31, 2023, there are 5,200,000 (2022 – 5,200,000) common shares held in escrow.

Stock op�ons

The Company’s stock op�ons are summarized as follows:

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Description Number Weighted Expiry Date
outstanding Average
Exercise Price
Officer and Director options 520,000 $0.05 August 30,
2032
Officer and Director options 680,000 $0.10 July 20, 2033
Total 1,200,000 $0.06
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LIQUIDITY AND CAPITAL RESOURCES

pursuant to Policy 2.4 of the TSX Venture Exchange (see Subsequent Events). At closing, the Company

CONSTELLATION CAPITAL CORP.

Management’s Discussion and Analysis

For the year ended December 31, 2023 and for the period from July 27, 2022 to December 31, 2022 (Expressed in Canadian dollars)

received gross proceeds of $680,000, represen�ng the issuance of 6,800,000 common shares of the Company at an issuance price of $0.10, less expenses retained by the agent of $96,691, for net proceeds of $583,309.

Considering the seed share investment of $260,000 (5.2 million shares at $0.05) and IPO related and opera�ng expenses of approximately $122,000, as of December 31, 2023, the Company has cash of $721,517. Management considers this sufficient for the Company to meet its ongoing obliga�ons.

OFF-BALANCE SHEET ARRANGEMENTS

TRANSACTIONS WITH RELATED PARTIES

For the period	Year Ended	Period Ended
	December 31, 2023	December 31, 2022
	($)	$
Accountingservices,Director	10,200	2,678
	10,200	2,678

During the year ended December 31, 2023, the Company incurred accoun�ng services in the amount of $10,200 (period ended December 31, 2022 - $2,678) from a company controlled by a director of the Company. As at December 31, 2023, $Nil (December 31, 2022 - $2,678) is included in accounts payable and accrued liabili�es related to these services.

During the year ended December 31, 2023, the Company incurred legal services in the amount of $40,882 (period ended December 31, 2022 - $14,234) from a law firm in which a spouse of a director is a partner. As at December 31, 2023, $Nil (December 31, 2022 - $935) is included in accounts payable and accrued liabili�es related to these services.

An addi�onal 680,000 stock op�ons were issued to directors and officers of the Company on July 20, 2023.

Transac�ons with related par�es are incurred in the normal course of business and ini�ally measured at fair value.

FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

risk, interest rate risk, custody risk, currency risk, and liquidity risk. The Company’s risk management func�on is performed by Management, with input from the Board of Directors. The Company seeks to minimize the effects of the iden�fied risks by focusing on ac�vely securing short to medium-term cash

CONSTELLATION CAPITAL CORP.

Management’s Discussion and Analysis

For the year ended December 31, 2023 and for the period from July 27, 2022 to December 31, 2022 (Expressed in Canadian dollars)

instruments, including deriva�ve financial instruments, for specula�ve purposes.

received to sell an asset or paid to transfer a liability in an orderly transac�on between market par�cipants at the measurement date. The carrying values of accounts receivable and accounts payable and accrued liabili�es approximate their fair value because of the near term to maturity of these instruments.

Credit risk

Credit risk arises from the possibility that the en��es to which the Company provides services may experience financial difficulty and be unable to fulfill their obliga�ons. The Company is currently in a preproduc�on phase and has no ac�ve accounts receivable or revenue from sales of product. The Company intends to manage its credit risk through a credit assessment process and through extensive credit monitoring and collec�ons processes. The Company’s maximum exposure to credit risk is limited to the carrying amount of financial assets recognized at the repor�ng date and presented in the statement of financial posi�on.

Interest rate risk

December 31, 2023. As such, the Company does not have significant exposure to interest rate risk from variable interest rates.

Custody risk

Custody risk is the risk of loss of cash and cash equivalents held in custody caused by the insolvency or negligence of the custodian. To mi�gate this risk, the Company uses a Tier 1 Canadian Chartered Bank as its custodian.

Currency risk

The Company may be subject to foreign currency risk due to some of its cash and cash equivalents, accounts receivable, accounts payable and accrued liabili�es poten�ally being denominated in foreign currencies. Therefore, there is a small risk of earnings fluctua�ons arising from changes in and the degree of vola�lity of foreign exchange rates arising on foreign monetary assets and liabili�es.

As at December 31, 2023, the Company’s cash and cash equivalents were all denominated in Canadian currency, and all of the accounts payable and accrued liabili�es were denominated in Canadian currency.

Liquidity risk

become due. The Company ac�vely monitors its financing obliga�ons, as well as its cash and cash equivalents, to ensure that it has sufficient available funds to meet current and foreseeable future financial requirements at a reasonable cost.

CONSTELLATION CAPITAL CORP.

Management’s Discussion and Analysis

For the year ended December 31, 2023 and for the period from July 27, 2022 to December 31, 2022 (Expressed in Canadian dollars)

CRITICAL ACCOUNTING ESTIMATES

The preparation of the financial statements in conformity with IFRS requires Management to make estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. 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 can differ from these estimates.

Estimates

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

Fair value of financial instruments

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

Taxes

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.

Judgments

The key areas of judgment that have a significant risk of causing material adjustment to the amounts recognized in the financial statements are:

Taxes

The Company recognizes deferred tax assets to the extent that it is probable that future taxable profits will be available to utilize the Company’s deductible temporary differences which are based on management’s judgment on the degree of future taxable profits. To the extent that future taxable profits differ significantly from the estimates impacts the amount of the deferred tax assets management judges is probable.

Financial instruments

The Company is required to classify its various financial instruments into certain categories for the financial instruments’ initial and subsequent measurement. This classification is based on management’s judgement as to the purpose of the financial instrument and to which category is most applicable.

CONSTELLATION CAPITAL CORP.

Management’s Discussion and Analysis

For the year ended December 31, 2023 and for the period from July 27, 2022 to December 31, 2022 (Expressed in Canadian dollars)

Stock op�ons

The Company records stock-based payments based on management’s judgement of the expected exercise date of options which is impacted by the timing of completion of the qualifying transaction.

Key Sources of Es�ma�on Uncertainty

Due to the limited nature of the Company’s opera�ons since incorpora�on on July 27, 2022, Management has not yet been required to make significant assump�ons about the future that could result in a material adjustment to the carrying amounts of assets and liabili�es of the Company in the event that actual results differ from assump�ons made.

CAPITAL RISK MANAGEMENT

which was $715,604 at December 31, 2023. Its principal source of cash is from the issuance of common shares. The Company’s capital management objec�ves are to safeguard its ability to con�nue as a going concern and to have sufficient capital to be able to iden�fy, evaluate and then acquire an interest in a business or assets.

The Company manages the capital structure and makes adjustments to it in light of changes in economic condi�ons and the risk characteris�cs of the underlying assets. To maintain or adjust the capital structure, the Company may a�empt to issue new shares.

Subsequent to the IPO, proceeds raised from the issuance of common shares may only be used to iden�fy and evaluate assets or business for future investment, with the excep�on that not more than 30% of the gross proceeds from the issuance of shares issued in the IPO may be used to cover prescribed costs of issuing the common shares or administra�ve and general expenses of the Company. These restric�ons apply un�l the comple�on of a Qualifying Transac�on.