CoTec Holdings Corp. — Interim / Quarterly Report 2020

Jun 1, 2020

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UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended March 31, 2020

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (all tabular amounts in thousands of Canadian dollars)

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March 31, December 31,
2020 2019
ASSETS
Current
Cash $ 3 $ 10
Other receivables 6 5
TOTAL ASSETS $ 9 $ 15
LIABILITIES
Current
Trade and other payables $ 361 $ 283
Borrowings (Note 3) 200 200
TOTAL LIABILITIES 561 483
EQUITY
Share capital (Note 4) 90,134 90,134
Contributed surplus 9,969 9,969
Deficit (100,655) (100,571)
TOTAL EQUITY (552) (468)
TOTAL LIABILITIES AND EQUITY $ 9 $ 15
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Corporate information and going concern (Note 1)

On behalf of the Board:

(signed) John Conlon Director (signed) Hendrik Dietrichsen Director

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

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) – For the periods ended March 31

(all tabular amounts in thousands of Canadian dollars)

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2020 2019
Expenses
(59) -
General and administrative expenses (12) (4)
(71) (4)
Finance expense (13) (11)
Comprehensive loss for the period $ (84) $ (15)
Net loss per common share – basic and diluted $(0.01) $(0.00)
Weighted average number of common shares outstanding
Basic and diluted 11,440,384 11,440,384
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The accompanying notes are an integral part of these financial statements.

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY – For the periods ended March 31, 2020 & 2019

(all tabular amounts in thousands of Canadian dollars)

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Number of Contributed
shares Share capital surplus Deficit Total Equity
Balance – January 1, 2019 11,440,384 $ 90,134 $ 9,969 $ (100,496) $ (393)
Net income for the period - - - (15) (15)
Balance – March 31, 2019 11,440,384 $ 90,134 $ 9,969 $ (100,496) $ (393)
Balance – January 1, 2020 11,440,384 $ 90,134 $ 9,969 $ (100,571) $ (468)
Net income for the period - - - (84) (84)
Balance – March 31, 2020 11,440,384 $ 90,134 $ 9,969 $ (100,655) $ (552)
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The accompanying notes are an integral part of these financial statements.

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INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – For the periods ended March 31 (all tabular amounts in thousands of Canadian dollars)

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2020 2019
OPERATING ACTIVITIES
Loss for the period $ (84) $ (15)
Add items not affecting cash
Non-cash interest expense 13 11
Changes in non-cash working capital balances related to operations
Trade and other receivables (1) (1)
Trade and other payables 65 (3)
Cash used in by operating activities (7) (8)
Net increase (decrease) in cash for the period (7) (8)
Cash and cash equivalents, beginning of period 10 26
Cash and cash equivalents, end of period $ 3 $ 18
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The accompanying notes are an integral part of these financial statements.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the periods ended March 31, 2020 and 2019 (all tabular amounts in thousands of Canadian dollars except per share figures and unless otherwise noted)

1 Corporate information and going concern

EastCoal Inc. (the “Company”) was incorporated on December 15, 1986 under the laws of the Province of British Columbia, Canada. Its principal business activity is the acquisition and development of mineral properties and its registered address is Suite 428, 755 Burrard Street, Vancouver, BC, V6Z 1X6, Canada and its head office is located at Suite 1901 – Tudor Manor, 1311 Beach Avenue, Vancouver, British Columbia, Canada, V6E 1V6.

These consolidated financial statements were prepared using International Financial Reporting Standards that are applicable to a going concern.

The Company has experienced recurring operating losses and has accumulated a deficit of $100,655,406 at March 31, 2020. For the three month period ended March 31, 2020 the Company used cash in operating activities totalling $6,511. The Company had cash of $3,136 and a working capital deficit of $552,069 at March 31, 2020. Working capital is defined as current assets less current liabilities and provides a measure of the Company’s ability to settle liabilities that are due within one year with assets that are also expected to be converted into cash within one year. The working capital balance includes related party loans totalling $440,103, which have a maturity date of May 31, 2020.

The Company’s continued operation is dependent upon its ability to raise additional funding and/or to agree to an extension of the related party loans. Although the directors believe that the Company should be able to secure future fundraising as required and/or to agree to an extension of the director’s loan, there are no assurances that the Company will be successful in achieving this goal. As a result, there are material uncertainties that cast significant doubt about the Company’s ability to continue as a going concern and realize its assets and discharge its liabilities in the normal course of business. These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will realize on its assets and discharge its liabilities in the normal course of operations, and do not include adjustments to the amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. These adjustments may be material.

In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds, however the impact to date has been limited.

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the periods ended March 31, 2020 and 2019 (all tabular amounts in thousands of Canadian dollars except per share figures and unless otherwise noted)

2 Basis of presentation

These interim condensed consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting (“IAS 34”) and follow the same accounting policies and methods of application as contained in the annual financial statements for the year ended December 31, 2019. Accordingly, they should be read in conjunction with the Company’s most recent annual financial statements. These interim condensed consolidated financial statements were approved by the Board of Directors on May 30, 2020.

3 Borrowings

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March 31, December 31,
2020 2019
Related party loan 200 200
$ 200 $ 200
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As at March 31, 2020 the Company had borrowings of $200,000 relating to a financing on November 28, 2012. The original loan had a term of 12 months but was extended to May 31, 2020. This loan bore an interest rate of 12.0% per annum compounded annually payable at the time that the principal becomes due and payable.

In order to secure the performance of the Company’s obligations to the lenders under the loan agreement, the Company executed general security agreements, pursuant to which the Company granted to the lenders security interests in all present and future undertaking and property, both real and personal located in the province of British Columbia, of the Company, as described in the general security agreement.

Between November 28, 2012 and May 31, 2016 the remaining lenders agreed to waive this right to annual compound interest which resulted in interest being calculated on a simple basis. Effective June 1, 2016 interest is now being calculated on a compound basis in accordance with the terms of the original loan agreement, to be compounded annually at December 31 each year.

Accrued interest of $240,103 relating to the outstanding directors’ loan is included in trade and other payables at March 31, 2020 (December 31, 2019: $227,319).

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NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the periods ended March 31, 2020 and 2019 (all tabular amounts in thousands of Canadian dollars except per share figures and unless otherwise noted)

5 Related party transactions

As at March 31, 2020, $506,889 was payable to directors of the Company of which $200,000 is included in borrowings and $306,889 in trade and other payables. Interest of $12,784 relating to the outstanding balance was accrued during the three month period ended March 31, 2020 (March 31, 2019 - $11,289) and is included in the total amount payable to the director.

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