Forward Water Technologies Corp. — Interim / Quarterly Report 2021

Sep 29, 2021

HOPE WELL CAPITAL CORP.*

Interim Condensed Consolidated Financial Statements (Expressed in Canadian dollars)

For the Three and Six Months Ended July 31, 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)

As at July 31, 2021 and January 31, 2021

	July 31,2021	January 31,2021
Assets
Current assets:
Cash and cash equivalents (note 3)	$ 679,745	$ 757,173
Total assets	$ 679,745	$ 757,173
Liabilities and Equity
Current liabilities:
Accounts payable and accrued liabilities	$ 110,701	$ 40,846
Total liabilities	110,701	40,846
Equity:
Share capital (note 4)	1,083,704	1,083,704
Contributed surplus (note 4)	281,321	281,321
Deficit	(795,981)	(648,698)
Total equity	569,044	716,327
Total liabilities and equity	$ 679,745	$ 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 Kales” 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 and Six Months Ended July 31, 2021 and 2020

		Three-month periods ended	Three-month periods ended	Three-month periods ended		Six-month	periods ended	periods ended
			July	31,			July	31,
		2021		2020		2021		2020
Other Income:
Interest income	$	13	$	668	$	23	$	1,891
Expenses:
TSXV filing fees and others	$	(35,017)	$	(4,071)	$	(35,990)	$	(22,715)
Professional fees		(82,596)		(13,562)		(111,316)		(35,749)
Net loss and
Comprehensive loss	$	(117,600)	$	(16,965)	$	(147,283)	$	(56,573)
Earning (Loss) per share
Basic	$	(0.019)	$	(0.003)	$	(0.024)	$	(0.009)
Diluted	$	(0.019)	$	(0.003)	$	(0.024)	$	(0.009)
Weighted average number
of shares outstanding
Basic		6,249,999		6,249,999		6,249,999		6,249,999
Diluted		6,249,999		6,249,999		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)

For the Six Months Ended July 31, 2021 and 2020

	Number of	Share	Contributed	Contributed
	Common Share	**Capital **		Surplus	Deficit		**Total **
Balance, February 1, 2020	7,724,999	$1,083,704	$	281,321	$ (529,041)	$	835,984
Net loss for the 6-month period	-	-		-	(56,573)		(56,573)
Balance, July 31, 2020	7,724,999	1,083,704		281,321	(585,614)		779,411
Net profit for 6-month period	-	-		-	(63,084)		(63,084)
Balance, January 31, 2021	7,724,999	$ 1,083,704	$	281,321	$ (648,698)	$	716,327
Net profit for 6-month period	-	-		-	(147,283)		(147,283)
Balance, July 31, 2021	7,724,999	$ 1,083,704	$	281,321	$ (795,981)	$	569,044

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 Six Months Ended July 31, 2021 and 2020

	July 31, 2021	July	31, 2020
Cash flows from operating activities:
Net loss for the year	$ (147,283)	$	(56,573)
Change in non-cash operating working capital:
Advances payable and accrued liabilities	69,855		(18,013)
Cash used in operating activities	(77,428)		(74,586)
Decrease in Cash	(77,428)		(74,586)
Cash and cash equivalents, beginning of period	757,173		854,997
Cash and cash equivalents, end ofperiod	$679,745	$	780,411

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 and Six Months Ended July 31, 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 and Six Months Ended July 31, 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 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.

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 wholly-owned 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

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three and Six Months Ended July 31, 2021

1. Nature of operations (continued)

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.

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. On July 26, 2021, FWT completed the second and final tranche of the FWT Financing by issuing a total of 1,300,000 Subscription Receipts. FWT issued a total of 6,500,000 Subscription Receipts for gross proceeds of $6.5 million in both tranches of the FWT Financing. 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 on June 4, 2021. 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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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three and Six Months Ended July 31, 2021

1. Nature of operations (continued)

Pursuant to the terms of the Combination Agreement, 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 proposed Qualifying Transaction does not constitute a Non-Arm’s Length Qualifying Transaction (as defined by the TSXV) and is not expected to be subject to shareholder approval. The Corporation held a shareholders’ meeting on July 8, 2021 to approve the name change and other related matter requiring shareholder approval under its governing corporate statute. Shareholders of the Corporation approved the Name Change and other matters related to the proposed Qualifying Transaction including the election of a new board of directors to hold office following completion of the proposed Qualifying Transaction; the appointment of a new auditor following completion of the proposed Qualifying Transaction; and the adoption of a new stock option plan to take effect upon completion of the Proposed Qualifying Transaction.

Shareholder Approval of Transition to New CPC Policy

On July 8, 2021, the Corporation’s shareholders approved, at an annual and special meeting of shareholders, to transition the Corporation to certain provisions included in a new Policy 2.4 that became effective January 1, 2021. The transitioning provisions included that the Corporation’s common shares held in escrow would no longer be subject to cancellation should the Corporation not complete a Qualifying Transaction within 24 months of listing on TSX-V and, on completing a Qualifying Transaction, the release period for escrowed shares would be reduced to 18 months from 36 months; the Corporation’s share listing would no longer required to be moved to the NEX Tier of the TSX-V and the restrictions on the use of proceeds raised by the Corporation were amended to those disclosed in Note 3-Cash and Cash Equivalents.

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three and Six Months Ended July 31, 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 Corporation applies International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (“IASB”) effective as of July 31, 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 and Six Months Ended July 31, 2021

3. Cash and cash equivalents

The Corporation is not subject to any externally imposed capital requirements other than the expenditure restrictions applicable under Policy 2.4. On July 8, 2021, the Corporation obtained shareholder approval to adopt certain new provisions in Policy 2.4 (Note 1-Nature of Operations and Note 8-Subsequent Events), including updated expenditure restrictions for CPCs. These restrictions limit the Corporation’s expenditures to reasonable amounts related to the IPO and any proposed Qualifying Transaction, assurance and audit fees, escrow agent and transfer agent fees, regulatory filing fees and a maximum of $3,000 per month for other general and administrative costs.

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.

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

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three and Six Months Ended July 31, 2021

4. Share capital (continued)

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 were and will be deposited with the trustee under the escrow agreement dated March 24, 2017 (the “CPC Escrow Agreement”). Under the CPC 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 was amended on August 5, 2021 (see Note 8-Subsquent Event).

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 CPC 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 July 31, 2021, 1,475,000 common shares were held in escrow.

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

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three and Six Months Ended July 31, 2021

4. Share capital (continued)

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 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 July 31, 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.

5. Related party transactions

During the three months period ended July 31, 2021, the Corporation paid and accrued legal fees and disbursements of $74,341 ($544 in disbursements, and $73,797 in fees) provided by a legal professional corporation whose principal lawyer became a director of the Corporation on August 6, 2019.

During the six months period ended July 31, 2021, the Corporation paid and accrued legal fees and disbursements of $95,829 ($3,862 in disbursements, and $91,967 in fees) provided by a

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HOPE WELL CAPITAL CORP.

Notes to Interim Condensed Consolidated Financial Statements

(Expressed in Canadian dollars)

(Unaudited)

For the Three and Six Months Ended July 31, 2021

5. Related party transactions (continued)

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 and six months periods ended July 31, 2021.

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

6. Subsequent events

On August 5, 2021, the Corporation, TMX Trust Company and shareholders holding the 1,450,000 common shares entered into an amended and restated escrow agreement (the “Restated Escrow Agreement”) restating the CPC Escrow Agreement. Under the Restated Escrow Agreement, 25% of the escrowed Common Shares will be released from escrow on the issuance of the Final Exchange Bulletin (the "Initial Release") and an additional 25% will be released on the dates which are 6 months, 12 months, 18 months following the Initial Release.

On August 10, 2021, the Corporation received TSXV final approval for transitioning to the amended CPC policy following shareholder approval of the transitioning provisions on July 8, 2021. As a result of the provisions approved by shareholders, the Corporation’s common shares held in escrow are no longer subject to cancellation should the Corporation not complete a Qualifying Transaction within 24 months of listing on TSX-V and, on completing a Qualifying Transaction, the release period for escrowed shares is reduced to 18 months from 36 months pursuant to the Restated Escrow Agreement. Further, the Corporation’s share listing is no longer required to be moved to the NEX Tier of the TSX-V and restrictions on the use of proceeds raised by the Corporation have been amended to those disclosed in Note 3-Cash and Cash Equivalents.

On September 14, 2021, FWT received conditional approval from the TSXV for the proposed Qualifying Transaction.

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