HEXO Corp. — Annual Report 2023

Dec 18, 2023

Chicane Capital I Corp.

(A Capital Pool Company) Financial Statements for the year ended August 31, 2023

(In Canadian Dollars)

December 18, 2023

The following management discussion and analysis (“ MD&A ”) of the results of the operations and financial position of Chicane Capital I Corp. (the “ Corporation ” or “ Chicane ”) prepared for the year ended August 31, 2023 and should be read in conjunction with the Corporation’s audited financial statements for year ended August 31, 2023. All figures contained in this MD&A are presented in Canadian dollars.

Forward-Looking Statements

Certain statements contained in this MD&A may constitute forward-looking statements. These statements relate to future events or the Corporation’s future performance. All statements, other than statements of historical fact, may be Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “propose”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Corporation believes that the expectations reflected in those forward-looking statements are reasonable, but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon by investors as actual results may vary. These statements speak only as of the date of this MD&A and are expressly qualified, in their entirety, by this cautionary statement. The Corporation’s actual results could differ materially from those anticipated in these forward-looking statements as a result of various risk factors.

The Corporation

Chicane Capital I Corp. filed its final prospectus on October 20, 2022, to raise between $300,000 and $350,000. Prior to this date, the Corporation had raised $145,000 through the sale of 2,900,000 common shares.

The purpose of the prospectus offering was to provide Chicane with a minimum amount of funds with which to identify and evaluate businesses or assets with a view to completing a Qualifying Transaction (as defined in the CPC Policy). Any proposed Qualifying Transaction must be approved by the TSX Venture Exchange Inc. (the “ Exchange ”) and, in the case of a Non-Arm’s Length Qualifying Transaction (as hereafter defined), must also receive Majority of the Minority Approval (as hereafter defined) in accordance with Exchange Policy 2.4 – Capital Pool Companies (the “ CPC Policy ”). The Corporation is a Capital Pool Company (“ CPC ”).

On December 14, 2022, Chicane Capital I Corp. completed its initial public offering of 3,088,000 common shares of the Corporation at a price of $0.10 per common share for gross proceeds of $308,800 (the " Offering "). The common shares trade on the Exchange under the symbol CCIC. Following the closing of the Offering, a total of 5,988,000 common shares are issued and outstanding.

Haywood Securities Inc. (the " Agent ") acted as agent for the Offering. In connection with the Offering, the Corporation granted to the Agent non-transferable warrants to acquire up to an aggregate of 308,800 Common Shares at a price of $0.10 per Common Share at any time up to the earlier of December 14, 2027 and the date that is 12 months from the completion of the Corporation's Qualifying Transaction. The Agent also received a cash commission equal to 10% of the aggregate gross proceeds from the sale of the Common Shares under the Offering and a corporate finance fee of $12,500

Following the closing of the Offering, a total of 5,988,000 common shares are issued and outstanding, of which 2,900,000 are currently held in escrow pursuant to the policies of the Exchange. The Corporation also issued 300,000 stock options exercisable into common shares at a price of $0.10 per share expiring on December 14, 2032.

Summary of Results

For the year ended August 31, 2023	For the period from February 23, 2022 (date of incorporation) to August 31, 2022
$267,182	$132,500
Nil	Nil
($62,162)	($28,032)
($62,162)	($28,032)
($0.028)	($0.947)

Results of Operations

Period ended August 31, 2023

The Corporation recorded a net income loss of $62,162 for the year ended on August 31, 2023. The net loss for the period is attributable to costs relating to professional fees, share-based payment expenses and filing fees.

Additional Disclosure for Venture Issuers

The following is a breakdown of the material costs.

Material Costs	For the year ended August 31, 2023	For the period from February 23, 2022 (date of incorporation) to August 31, 2022
Professional fees	$25,906	$21,500
Other Fees	$ 8,346	Nil
Stock-based compensation	$ 27,910	$ 6,532

Liquidity and Capital Resources

As of August 31, 2023, the Corporation had cash of $267,182.

Outstanding Share Data

As of November 30, 2022, 2,900,000 common shares were issued and outstanding. The Corporation also granted the directors and officers stock options, which will entitle the holders to purchase an aggregate of 290,000 common shares at a price of $0.05 per common share until August 29, 2027.

On December 14, 2022, Chicane Capital I Corp. completed its initial public offering of 3,088,000 common shares of the Corporation at a price of $0.10 per common share for gross proceeds of $308,800 (the " Offering "). The common shares trade on the Exchange under the symbol CCIC.

As of today and August 31, 2023, a total of 5,988,000 common shares are issued and outstanding.

Off-Balance Sheet Arrangements

There were no off-balance sheet arrangements for the year ended August 31, 2023.

Related Party Transactions

During the year ended August 31, 2023, the management and directors were awarded $27,910 (2022 - $6,532) of share-based payment expense and $8,475 for bookkeeping services (2022 - $nil).

Risks and Uncertainties

The Corporation’s sole objective is to identify a satisfactory Qualifying Transaction. The closing of any proposed Qualifying Transaction is subject to a number of terms and conditions, including completion of due diligence procedures by parties to the transaction and receipt of all required regulatory approvals, and there is no assurance that a transaction will be completed. If the Corporation does not complete a Qualifying Transaction within the time permitted by the Exchange, its common shares could be delisted.

Capital Management

The Corporation’s objective when managing capital is to maintain its ability to continue as a going concern, in order to provide returns for the shareholders and benefits for other stakeholders. The Corporation includes equity, comprised of issued common shares, in the definition of capital.

The Corporation's primary objective, with respect to its capital management, is to ensure that it has sufficient cash resources to fund the identification and evaluation of potential acquisitions. To secure the additional capital necessary to pursue these plans, the Corporation may attempt to raise additional funds through the issuance of equity or by securing strategic partners.

The proceeds raised from the issuance of share capital may only be used to identify and evaluate assets or businesses for future investment, with the exception that up to $3,000 per month may be used for reasonable general and administrative expenses of the Corporation. These restrictions apply until completion of a Qualifying Transaction by the Corporation as defined under the policies of the Exchange Policy 2.4.

Risk Disclosures and Fair Values

The Corporation’s financial instruments, consisting of cash, accounts payable and accrued liabilities, approximate fair value due to the relatively short-term maturities of the instruments. It is management’s opinion that the Corporation is not exposed to significant interest, currency or credit risks arising from these financial instruments.

Critical Accounting Estimates

The Corporation’s significant accounting policies are summarized in Note 2 to the audited financial statements for the period ended on August 31, 2023.

Additional Information

Additional information about the Corporation can also be found on SEDAR at www.sedar.com.