Forward Water Technologies Corp. — Interim / Quarterly Report 2021

Jun 30, 2021

HOPE WELL CAPITAL CORP.*

Interim Condensed Consolidated Financial Statements (Expressed in Canadian dollars)

For the Three Months Ended April 30, 2021

(Unaudited)

*Hope Well Capital Corp. is in no way affiliated with or related to Hopewell Capital Corporation, a separate pre-existing business engaged in the field of venture capital across Canada, or the Hopewell Group of Companies’ multifaceted real estate and logistics group.

HOPE WELL CAPITAL CORP.*

Interim Condensed Consolidated Statement of Financial Position

(Expressed in Canadian dollars)

(Unaudited)

	April 30,2021 January 31,2021	April 30,2021 January 31,2021
Assets
Current assets:
Cash and cash equivalents (note 3)	$ 750,799	$ 757,173
Total assets	$ 750,799	$ 757,173
Liabilities and Equity
Current liabilities:
Accounts payable and accrued liabilities	$ 64,155	$ 40,846
Total liabilities	64,155	40,846
Equity:
Share capital (note 4)	1,083,704	1,083,704
Contributed surplus (note 4)	281,321	281,321
Deficit	(678,381)	(648,698)
Total equity	686,644	716,327
Total liabilities and equity	$ 750,799	$ 757,173
Nature of operations (Note 1)
Subsequent events (Note 6)

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

On behalf of the Board:

Signed “Sheldon Kale”

Director

Signed “Peiwei Ni”

Director

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HOPE WELL CAPITAL CORP.*

Interim Condensed Consolidated Statement of Operations and Comprehensive Loss

(Expressed in Canadian dollars)

(Unaudited)

For the Three Months Ended

	April 30, 2021	April 30, 2020	April 30, 2020
Other Income:
Interest Income	$ 10	$	1,223
Expenses:
TSXV filing fees and others	$ 973	$	18,643
Professional fees	28,720		22,187
Net loss and comprehensive loss	$ (29,683)	$	(39,607)
Earning (Loss) per share
Basic	$ (0.005)	$	(0.006)
Diluted	$ (0.005)	$	(0.006)
Weighted average number of shares outstanding
Basic	6,249,999		6,249,999
Diluted	6,249,999		6,249,999

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

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HOPE WELL CAPITAL CORP.

Interim Condensed Consolidated Statement of Changes in Equity

(Expressed in Canadian dollars)

(Unaudited)

	Number of	Share	Contributed	Contributed
	Common Share	**Capital **		Surplus	Deficit		**Total **
Balance, January 31, 2020	7,724,999	$ 1,083,704	$	281,321	$ (529,041)	$	835,984
Net loss for the period	-	-		-	(39,607)		(39,607)
Balance, April 30, 2020	7,724,999	$ 1,083,704	$	281,321	$ (568,648)	$	796,377
Balance, January 31, 2021	7,724,999	$1,083,704	$	281,321	$ (648,698)	$	716,327
Net loss for the period	-	-		-	(29,683)		(29,683)
Balance, April 30, 2021	7,724,999	$ 1,083,704	$	281,321	$ (678,381)	$	686,644

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

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HOPE WELL CAPITAL CORP.

Interim Condensed Consolidated Statement of Cash Flows

(Expressed in Canadian dollars)

(Unaudited)

For the Three Months Ended

	April 30, 2021	April	30, 2020
Cash flows used in operating activities:
Net loss for the period	$ (29,683)	$	(39,607)
Change in non-cash operating working capital:
Advances payable and accrued liabilities	23,309		18,627
Cash used in operating activities	(6,374)		(20,980)
Decrease in Cash	(6,374)		(20,980)
Cash and cash equivalents, beginning of period	757,173		854,997
Cash and cash equivalents, end ofperiod	$750,799	$	834,017

The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three Months Ended April 30, 2021

1. Nature of operations

Hope Well Capital Corp. (the "Corporation" or "HWCC") was incorporated under the Business Corporations Act (Ontario) on December 1, 2016 with the intent of being classified as a Capital Pool Company ("CPC") as defined in Policy 2.4 of the TSX Venture Exchange (the "Exchange").

On May 3, 2017, the Corporation completed its initial public offering pursuant to a prospectus dated March 24, 2017 by issuing 6,249,999 common shares of the Corporation at a price of $0.20 per common share for total gross proceeds of $1,250,000. The common shares of the Corporation were listed on the Exchange on May 9, 2017 under the symbol "HOPE.P" and the Corporation was classified as a CPC.

The Corporation has no assets other than cash. The Corporation proposes to identify and evaluate potential acquisitions of businesses (for a "Qualifying Transaction"), and once identified and evaluated, to negotiate an acquisition or participation.

The Corporation's continuing operations are dependent upon its ability to evaluate and negotiate an agreement to acquire an interest in a material asset or business within twenty-four months of listing on the Exchange. Where an acquisition or participation is warranted, additional funding may be required. The ability of the Corporation to fund its potential future operations and commitments is dependent upon its ability to obtain additional financing. There is no assurance that the Corporation will be able to complete a Qualifying Transaction within twenty-four months of being listed or that it will be able to secure the necessary financing to complete a Qualifying Transaction. The Exchange has suspended and may de-list the Corporation's common shares from trading should it not meet these requirements.

On May 10, 2019, the Exchange suspended trading of the Corporation’s shares in accordance with the Exchange policy as the Corporation was not able to identify a Qualifying Transaction within the time limitations permissible under the policies of the Exchange, which was by May 9, 2019. The trading of the Corporation’s shares on the Exchange will remain suspended until the Corporation completes a qualifying transaction, to the applicable Exchange policy has been amended. The Corporation continues to pursue its search for a Qualifying Transaction.

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three Months Ended April 30, 2021

1. Nature of operations (continued)

Hope Well Capital Corp. has its wholly owned subsidiary, 2644246 Ontario Limited. ("Hope Well Sub"), which was incorporated on July 5, 2018, and is inactive. These unaudited interim condensed consolidated financial statements include the financial statements of the Corporation and its wholly owned subsidiary.

The address of the Corporation's registered office, as of the year end date, was Suite 3000, 77 King Street West, Toronto, Ontario. These unaudited interim condensed consolidated financial statements were approved and authorized for issuance by the Board of Directors on June 29, 2021.

Proposed Qualifying Transaction with FWT

On February 3, 2021, the Corporation entered into a letter of intent (the "FWT LOI") for a business combination (the "FWT Transaction") with Forward Water Technologies Inc. ("FWT"), a corporation existing under the laws of Ontario that will result in a reverse take-over of HWCC on the TSXV. If completed, the FWT Transaction is intended to constitute the "Qualifying Transaction" of the CPC Policy of the TSXV. The LOI was superseded by a definitive business combination agreement entered into by the Corporation and FWT on June 2, 2021 (see “Subsequent Events”).

The proposed FWT Transaction is not a "Non-Arm's Length Qualifying Transaction" within the meaning of the CPC Policy of the TSXV and, as such, shareholder approval is not required, unless otherwise required by the TSXV.

HWCC and FWT will complete the FWT Transaction by way of a share exchange, amalgamation, arrangement, share purchase, or other form of transaction which would result in FWT becoming a wholly-owned subsidiary of HWCC or otherwise combine its corporate existence with a whollyowned subsidiary of HWCC. The FWT LOI was superseded by a definitive agreement between HWCC and FWT entered into on June 2, 2021 (see “Subsequent Events”). Following completion of the FWT Transaction, HWCC as the resulting issuer (the "Resulting Issuer") will hold all of FWT's assets and conduct the business of FWT.

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three Months Ended April 30, 2021

1. Nature of operations (continued)

Prior to, and as a condition of closing of the FWT Transaction and subject to TSXV approval, will change its name to "Forward Water Technologies Corp” or such other similar name approved by the directors of HWCC and FWT and acceptable to the applicable regulatory authorities.

The Corporation will, subject to acceptance by the TSXV and meeting other regulatory requirements, issue common shares of the Corporation in exchange for all of the issued and outstanding common shares of FWT (the "FWT Shares") on the basis of one FWT Share for five HWCC shares. All outstanding convertible securities of FWT will be replaced by convertible securities of the Resulting Issuer at the same exchange ratio.

In conjunction with the FWT Transaction, FWT entered into an engagement letter with Mackie Research Capital Corporation (“RCC”) on March 23, 2021 to conduct a brokered private placement (the "FWT Financing") led by RCC to raise gross proceeds of a maximum of $6,500,000 through the issuance of subscription receipts of FWT ("Subscription Receipts").

Pursuant to the terms of the FWT LOI, completion of the FWT Transaction will be subject to a number of conditions, including completion of a minimum raise of $4,250,000 in the FWT Financing, receipt of all required regulatory approvals, including the approval of the TSXV of the FWT Transaction, completion of all due diligence reviews, satisfaction of the minimum listing requirements of the TSXV and all requirements under the TSXV rules relating to completion of a qualifying transaction, and the execution of a definitive agreement. There can be no assurance that the FWT Transaction will be completed as proposed or at all.

The Corporation intends to hold a shareholders’ meeting to approve the name change and other related matter requiring shareholder approval under its governing corporate statute.

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three Months Ended April 30, 2021

1. Nature of operations (continued)

Impact of COVID 19

During the period, there was a global outbreak of COVID-19 (coronavirus), which has had a significant impact on businesses through the restrictions put in place by the Canadian, provincial and municipal governments regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown the extent of the impact the COVID-19 outbreak may have on the Corporation as this will depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place by Canada and other countries to fight the virus.

2. Significant accounting policies

a) Statement of compliance

The Company applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”) effective as of April 30, 2021. These unaudited condensed interim consolidated 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 the IASB.

b) Basis of measurement

These unaudited interim condensed consolidated financial statements have been prepared on an accrual basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three Months Ended April 30, 2021

3. Cash and cash equivalents

Once the Corporation has been classified as a Capital Pool Company, the proceeds raised from the issuance of capital stock may only be used to identify and evaluate assets or businesses for future investments, with the exception that not more than the lesser of 30% of the gross proceeds from the sale of all securities issued by the Corporation or $210,000 may be used to cover prescribed costs of issuing the common shares or administrative and general expenditures of the Corporation. These restrictions apply until completion of a Qualifying Transaction by the Corporation as defined under the policies of the Exchange.

4. Share capital

Authorized Unlimited Common Shares

The Corporation is authorized to issue an unlimited number of common shares, and on April 30, 2017, the Corporation issued 1,475,000 common shares at $0.10 per share for total proceeds of $147,500.

On May 3, 2017, the Corporation completed its initial public offering (the “Offering”) pursuant to the Prospectus through its agent, Mackie Research Capital Corporation (the “Agent”) of 6,249,999 common shares of the Corporation at a price of $0.20 per common share for total gross proceeds of $1,250,000.

As consideration for its role as agent, the Corporation granted to the Agent a non-transferable option to purchase up to 625,000 common shares of the Corporation at a price of $0.20 per common share for a period of 24 months until May 3, 2019. In addition, the Agent received a cash commission in an amount equal to 10% of the gross proceeds of the initial public offering, a work fee of $15,000 and reimbursement of certain expenses.

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three Months Ended April 30, 2021

4. Share capital (continued)

Upon closing of the initial public offering, the Corporation also granted 772,500 incentive stock options to its directors and officers which are exercisable for a period of five years at an exercise price of $0.20 per share. On June 29, 2017, the Corporation received the resignation from a director and officer, and the 270,375 options granted to this director and officer expired on September 29, 2017 without being exercised in accordance with the terms of the stock option plan. On November 6, 2017, the Corporation granted a total of 270,374 options to two directors, exercisable at a price of $0.21 per share until November 6, 2022.

Escrow shares

All the 1,475,000 common shares issued prior to the Offering and all common shares that may be acquired from treasury of the Corporation by non-arm's length parties, as defined in the policies of the Exchange, of the Corporation prior to the completion of the Qualifying Transaction will be deposited with the trustee under the escrow agreement. Under the Discount Seed Escrow Agreement, 10% of the escrowed Common Shares will be released from escrow on the issuance of the Final Exchange Bulletin (the "Initial Release") and an additional 15% will be released on the dates which are 6 months, 12 months, 18 months, 24 months, 30 months and 36 months following the Initial Release. This release schedule may be accelerated if the Corporation is listed as a Tier 1 Issuer.

All common shares acquired upon exercise of stock options prior to the completion of a Qualifying Transaction must also be deposited in escrow until the final exchange bulletin is issued, following which the common shares will be released from escrow in accordance with the terms of the escrow agreement.

All common shares of the Corporation acquired in the secondary market prior to the completion of a Qualifying Transaction by a control person, as defined in the policies of the Exchange, are required to be deposited in escrow. Subject to certain permitted exemptions, all securities of the Corporation held by principals of the resulting issuer following the Qualifying Transaction will also be escrowed. As at April 30, 2021, 1,475,000 common shares were held in escrow.

10

HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three Months Ended April 30, 2021

4. Share capital (continued)

Stock Option Plan

During the year ended January 31, 2018, the directors of the Corporation approved a stock option plan (the "Plan") for the directors, officers, employees and consultants of the Corporation. The outstanding options granted under the Plan are exercisable for a period of up to 10 years from the date of the grant. The exercise price of the options shall be determined by the Board of Directors at the time of the grant. The aggregate number of shares issuable upon the exercise of all options granted under the plan shall not exceed 10% of the issued and outstanding common shares of the Corporation from time to time. The number of common shares reserved for issuance to (a) any participant will not exceed 5% of the issued and

Stock Option Plan (continued)

outstanding common shares in a twelve-month period, and (b) any individual director or officer will not exceed 5% of the issued and outstanding common shares while the corporation is a CPC, and (c) any person conducting investor relations activities within a 12 month period shall not exceed 2% of the common shares outstanding at the time of grant, provided that, while the Corporation is a CPC, no common shares may be reserved for issuance to any persons conducting investor relations activities, promotional or market-making services, and (d) Insiders shall not exceed 10% of the common shares outstanding from time to time, and (e) Insiders within a 12 month period shall not exceed 10% of the common shares outstanding from time to time; and (f) to any one consultant in any 12 month period shall not exceed 2% of the common shares outstanding at the time of the grant. Options granted to an optionee while the Corporation is a CPC who does not continue as a director, officer, technical consultant or employee of the resulting issuer may be exercised until the later of 12 months after the completion of the Qualifying Transaction and 90 days after the optionee ceases to be a director, officer, technical consultant or employee of the resulting issuer.

As at April 30, 2021, the Corporation had a total of 772,499 stock options outstanding and exercisable, with 502,125 stock options exercisable for a period of five years until May 3, 2022 at an exercise price of $0.20 per share, and 270,374 stock options exercisable for a period of five years until November 6, 2022 at an exercise price of $0.21 per share.

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three Months Ended April 30, 2021

5. Related party transactions

During the three months period ended April 30, 2021, the Corporation paid and accrued legal fees and disbursements of $21,488 ($3,318 in disbursements, and $18,170 in fees) provided by a legal professional corporation whose principal lawyer became a director of the Corporation on August 6, 2019.

There was no other transaction with related parties and no remuneration was paid to key management personnel during the three months period ended April 30, 2021.

All transactions with related parties occurred in the normal course of operations.

6. Subsequent events

On June 2, 2021, HWCC and FWT entered into a business combination agreement with respect to the FWT Transaction (the “Combination Agreement”) which supersedes the FWT LOI. Under the terms of the Combination Agreement, the FWT Transaction will be completed by way of a three-cornered amalgamation under the laws of Ontario, whereby 2644246 Ontario Limited, a wholly-owned subsidiary of HWCC, will amalgamate with and into FWT (the “Amalgamation”), with FWT surviving as a whollyowned subsidiary of HWCC. Prior to the completion of the FWT Transaction HWCC will change its name to “Forward Water Technologies Corp.” (the “Name Change”) and, following completion of the FWT Transaction, the HWCC as the resulting issuer will conduct FWT’s business under the new name. Pursuant to the terms of the Combination Agreement, and in connection with the Amalgamation: (a) holders of outstanding FWT Shares, including FWT Shares issued upon conversion of the Subscription Receipts issued in connection with the FWT Financing, will receive five fully paid and non-assessable common shares in the capital of HWCC (each a “Resulting Issuer Share”) for each FWT Share (the “Exchange Ratio”) held at the deemed price of $0.20 per Resulting Issuer Share; and (b) holders of outstanding FWT securities other than FWT Shares will have such securities replaced with securities of HWCC in numbers and exercise prices, as applicable, adjusted based on the Exchange Ratio.

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three Months Ended April 30, 2021

6. Subsequent events (continued)

On June 4, 2021, FWT completed the first tranche of the FWT Financing by issuing a total of 5,170,000 Subscription Receipts at $1.00 per Subscription Receipt. HWCC and FWT entered into an agency agreement with Research Capital Corporation, WD Capital Markets Inc. and Fraser Mackenzie Corporate Finance, a division of Waverley Corporate Financial Services Ltd. with respect to the FWT Financing. Each Subscription Receipt will be converted immediately before the completion of the FWT Transaction into an FWT unit comprised of one FWT Share and one-half of one FWT warrant, with each full FWT warrant will be exercisable into one FWT Share at $1.25 per share for 24 months after the completion of the FWT Transaction. HWCC also entered into a warrant indenture with FWT and TSX Trust Company dated as of June 4, 2021 governing the FWT warrants and HWCC warrants to be issued on completion of the FWT Transaction in exchange therefor. The gross proceeds of the FWT Financing, net of the agents’ expenses and 50% of the agents’ commission and fees, were placed in escrow pursuant to the terms of a subscription receipt agreement dated May 14, 2021 between FWT, the lead agent and TSX Trust Company. Upon satisfaction or waiver of the escrow release conditions including the completion of the FWT Transaction, the escrowed funds together with any interest earned thereon, will be released to HWCC as the resulting issuer (and the agents in respect of the remaining agents’ commission and fees) in accordance with the terms set out in the subscription receipt agreement. If the escrow release conditions are not satisfied or waived, or if the FWT Transaction is not completed, the Subscription Receipts will be cancelled without any further action and the escrowed funds together with any interest earned thereon will be returned to subscribers on a pro rata basis with any shortage of funds being paid by FWT.

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