Hydreight Technologies Inc. — Interim / Quarterly Report 2021

Nov 25, 2021

PERIHELION CAPITAL LTD.

Condensed Consolidated Interim Financial Statements For the Nine Months Ended September 30, 2021 and 2020 (Expressed in Canadian Dollars - Unaudited)

NOTICE OF NO AUDITOR REVIEW OF CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

The accompanying unaudited condensed consolidated interim financial statements of Perihelion Capital Ltd. (the “Company”) have been prepared by and are the responsibility of the Company’s management.

In accordance with National Instrument 51-102 released by the Canadian Securities Administrators, the Company discloses that its independent auditors have not performed a review of these condensed consolidated interim financial statements.

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PERIHELION CAPITAL LTD.

Condensed Consolidated Interim Statements of Financial Position

( Unaudited - Expressed in Canadian Dollars )

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September 30, December 31,
Note 2021 2020
Assets
Current
Cash $ 1,729,457 $ 75,672
Cash held in trust 44,823 5,600
Subscription receivable 3 1,000 -
GST receivable - 8,177
Prepaid expenses 563 -
Short-term loan 4 25,000 25,000
Total Assets $ 1,800,843 $ 114,449
Liabilities and Shareholders’ Equity
Liabilities
Current
Accounts payable and accrued liabilities $ 73,629 $ 54,912
Shareholders’ Equity
Common Shares 5 2,107,175 292,866
Reserves 5 22,731 22,382
Deficit (402,692) (255,711)
1,727,214 59,537
Total Liabilities and Shareholders’ Equity $ 1,800,843 $ 114,449
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Nature of operations and going concern (note 1) Subsequent event (note 8)

Approved by on behalf of the Board:

Alexandros Tzilios (signed)

Alexandros Tzilios, Director

Darius Eghdami (signed)

Darius Eghdami, Director

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

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PERIHELION CAPITAL LTD.

Condensed Consolidated Interim Statements of Loss and Comprehensive Loss ( Unaudited - Expressed in Canadian Dollars )

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Three months Three months Nine months Nine months
ended ended ended ended
September 30, September 30, September 30, September 30,
2021 2020 2021 2020
Operating Expenses
Filing fees $ 3,645 $ 287 $ 27,883 $ 10,357
Professional fees 99,446 4,512 114,621 14,811
Share-based payments (10) - 349 1,172
Transaction costs (47,305) - - -
Bank charges and other 3,881 217 4,128 1,015
Net Loss and Comprehensive Loss $ (59,657) $ (5,016) $ (146,981) $ (27,355)
Basic and Diluted Loss per Share $ (0.00) $ (0.00) $ (0.02) $ (0.01)
Weighted Average Number of
Common Shares Outstanding 15,233,544 2,557,000 6,813,358 2,557,000
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The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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PERIHELION CAPITAL LTD.

Condensed Consolidated Interim Statement of Changes in Shareholders’ Equity ( Unaudited - Expressed in Canadian Dollars )

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Number of Total
Outstanding Common Shares Reserves Deficit Shareholders’
Note Shares Equity
Balance, January 1, 2020 2,557,000 $ 292,866 $ 20,860.00 -$ 167,066.00 $ 146,660.00
Share-based payments 5 - - 1,172 - 1,172
Net loss for the period - - - (27,355) (27,355)
Balance, September 30, 2020 2,557,000 292,866 22,032 (194,421) 120,477
Balance, January 1, 2021 2,557,000 $ 292,866 $ 22,382 $ (255,711.00) $ 59,537
Shares issued for cash 3,5 33,321,201 1,999,272 - - 1,999,272
Share issuance costs 5 - (184,963) - - (184,963)
Share-based payments 5 - - 349 - 349
Net loss for the period - - - (146,981) (146,981)
Balance, September 30, 2021 35,878,201 $ 2,107,175 $ 22,731 $ (402,692) $ 1,727,214
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The accompanying notes are an integral part of these condensed consolidated interim financial statements.

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PERIHELION CAPITAL LTD. Condensed Consolidated Interim Statements of Cash Flows

( Unaudited - Expressed in Canadian Dollars )

		Nine months		Nine months
	ended September		ended September
		30, 2021		30, 2020
Cash Provided by (Used in)
Operating Activities
Net loss for the period	$	(146,981)	$	(27,355)
Items not involving cash:
Share-based payments		349		1,172
Changes in non-cash working capitial items:
GST receivable		8,177		3,117
Prepaid expenses		(563)		-
Accountspayable and accrued liabilities		18,717		(5,630)
	$	(120,301)	$	(28,696)
Financing Activities
Cash held in trust		(39,223)		-
Proceeds from the issuance of common shares		1,998,272		-
Share issuance cost		(184,963)		-
Loan advanced		-		(25,000)
		1,774,086		(25,000)
Inflow (Outflow) of Cash		1,653,785		(53,696)
Cash, Beginning		75,672		149,843
Cash, Ending	$	1,729,457	$	96,147
Supplemental Cash Flow Information Share issuance costs included in trade payables and accrued liabilities	$	2,039	$	-

There were no cash investing activities during the nine-month period ended September 30, 2021 and 2020.

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

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PERIHELION CAPITAL LTD. Notes to the Condensed Consolidated Interim Financial Statements For the Nine-Month Period Ended September 30, 2021 and 2020 ( Unaudited - Expressed in Canadian Dollars )

1. NATURE OF OPERATIONS AND GOING CONCERN

Perihelion Capital Ltd. (the Company) was incorporated under the Business Corporations Act (British Columbia) on April 13, 2018 and is a capital pool company (“CPC”), as defined in TSX Venture Exchange (“TSX-V”) Policy 2.4 (“Policy 2.4”). The Company has made an application to have its common shares listed and called for trading on the TSX-V through a prospectus dated December 21, 2018. On February 13, 2020, the Company’s common shares effectively commenced trading on the Exchange under the symbol “PCL.P”.

The Company’s registered office address is 1800-355 Burrard Street, Vancouver, British Columbia V6C 2G8 and its principal place of business is 2402-1189 Melville Street, Vancouver, British Columbia, V6E 4T8.

The Company’s principal business activity is the identification and evaluation of assets, or businesses with the objective of completing a qualifying transaction (a “Qualifying Transaction”) as defined by Policy 2.4. Until such time that a Qualifying Transaction is completed, the Company will have no significant revenue and will incur expenses primarily for Qualifying Transaction investigation, TSX-V filing requirements, professional services, and office facilities and administration, subject to certain restrictions under Policy 2.4.

On October 28, 2020, the Company announced that it has entered into a binding merger agreement (the “Merger Agreement”) between Think Technologies Corp. (“Think”), an emerging leader in artificial intelligence software solutions, and the Company’s wholly owned subsidiary, 1203500 B.C. Ltd. (“PCL Subco”) in respect of the proposed completion of an arm’s length reverse-takeover transaction of Think by the Company (the “Proposed Transaction”). The Proposed Transaction will constitute the Company’s Qualifying Transaction, however, this merger has been terminated on mutual agreement on May 4, 2021 and the Company will continue to pursue and evaluate other businesses and assets with a view to completing a Qualifying Transaction. All transaction costs in connection to the Qualifying Transaction during the nine-months ended September 30, 2021 had been reclassed to professional fees.

These condensed consolidated interim financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business. There are material uncertainties that may cast significant doubt about the appropriateness of the going concern assumption as the Company incurred a net loss of $146,981 (2020 - $27,355) and has not generated any revenues for the nine-month period ended September 30, 2021. The Company’s continuing operations as intended are dependent upon the Company’s ability to complete a Qualifying Transaction. Such an acquisition will be subject to shareholder and regulatory approval. In the case of a non-arm’s length transaction (as defined in Policy 2.4), a majority of the minority shareholder approval must also be obtained. Should the Company fail to complete a Qualifying Transaction, its ability to raise sufficient financing to maintain operations may be impaired and, accordingly, the Company may be unable to realize the carrying value of its net assets. These condensed consolidated interim financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Such adjustments could be material.

Since March 2021, several measures have been implemented in Canada and the rest of the world in response to the increased impact from novel coronavirus (COVID-19). The Company continues to operate its business at this time. While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and the impacts of COVID-19 on business operations cannot be reasonably estimated at this time. The Company anticipates this could have an adverse impact on its business, results of operations, financial position and cash flows in future periods.

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Notes to the Condensed Consolidated Interim Financial Statements For the Nine-Month Period Ended September 30, 2021 and 2020 ( Unaudited - Expressed in Canadian Dollars )

PERIHELION CAPITAL LTD.

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION

These condensed consolidated interim financial statements were authorized for issue by the Board of Directors on November 25, 2021.

Statement of Compliance

These condensed consolidated interim financial statements, including comparatives, have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. Certain information and note disclosures normally included in the audited annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRS”) have been omitted or condensed. As a result, these condensed consolidated interim financial statements should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2020.

Basis of Presentation

These condensed consolidated interim financial statements of the Company have been prepared on a historical cost basis except for some financial instruments classified in accordance with measurement standards under IFRS. These condensed consolidated interim financial statements are presented in Canadian dollars unless otherwise specified.

Critical accounting estimates and judgments

The Company makes estimates and assumptions concerning the future that will, by definition, seldom equal actual results. The following are the key estimates and judgments applied by management that most significantly affect the Company’s condensed consolidated interim financial statements. These estimates and judgments have significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

• i. Going concern Management assesses the Company’s ability to continue as a going concern in relation to its ability to raise funds.

• ii. Valuation of share-based payments and warrants When options and warrants are issued, the Company calculates their estimated fair value using the Black-Scholes valuation model. The Company uses its historical stock prices to determine volatility and estimated dividend yield rates to arrive at the inputs that are used in the valuation model to calculate the fair value of the options or warrants.

• iii. Recoverability of short-term loan

Estimates and judgments are inherent in the on-going assessment of the recoverability of short-term loan. The Company is not able to predict changes in financial conditions of its loan holder and the Company’s judgment related to short-term loan may be material.

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PERIHELION CAPITAL LTD. Notes to the Condensed Consolidated Interim Financial Statements For the Nine-Month Period Ended September 30, 2021 and 2020 ( Unaudited - Expressed in Canadian Dollars )

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PREPARATION (Cont’d)

Consolidation

The condensed consolidated interim financial statements include the accounts of the Company and its controlled subsidiary. Details of controlled subsidiary is as follows:

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*Incorporated under the Business Corporations Act (British Columbia) on April 1, 2020. This company is inactive.

3. SUBSCRIPTION RECEIVABLE

On August 27, 2021, the Company completed a non-brokered private placement of 33,321,201 (Note 5) common shares of the Company at a price of $0.06 per share for gross proceeds of $1,999,272. As at September 30, 2021, the company received $1,998,272 in connection to the private placement, and $1,000 was outstanding and included in subscription receivable. The outstanding amount had been received in full subsequent to September 30, 2021.

4. SHORT-TERM LOAN

On September 30, 2020, the Company advanced a loan of $25,000 to Think Technologies Corp. (“Think”) in connection with the Company’s terminated Qualifying Transaction. The loan is unsecured, non-interest bearing and has no specified date of repayment. The loan is refundable upon termination of the Qualifying Transaction.

As at September 30, 2021, the loan receivable balance was $25,000 (December 31, 2020 - $25,000).

5. SHARE CAPITAL

Effective August 27, 2021, the Company consolidated its common shares on the basis of 1 new share for every 2 old shares (the “Consolidation”). All share references herein to the number of shares, options, warrants, weighted average number of common shares and loss per share have been retrospectively restated for the Consolidation, including all such numbers presented for the prior periods.

• (a) Authorized share capital

Unlimited number of common shares without par value.

• (b) Issued and outstanding share capital

At September 30, 2021, there were 35,878,201 issued and fully paid common shares (December 31, 2020 – 2,557,000).

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PERIHELION CAPITAL LTD. Notes to the Condensed Consolidated Interim Financial Statements For the Nine-Month Period Ended September 30, 2021 and 2020 ( Unaudited - Expressed in Canadian Dollars )

5. SHARE CAPITAL (Cont’d)

(b) Issued and outstanding share capital (Cont’d)

During the nine months ended September 30, 2021, the Company completed a nonbrokered private placement of 33,321,201 common shares for total gross proceeds of $1,999,272 (Note 3). The Company paid finders’ fees of $172,427 to several agents and incurred $12,536 in share issuance cost in connection to the private placement.

(c) Stock options

The Company implemented an Incentive Stock Option Plan (the “Plan”) on June 25, 2018. Pursuant to the Plan, the Company grants stock options to directors, officers, employees and consultants for services, provided that the number of common shares reserved for issuance shall not exceed 10% of the issued and outstanding common shares exercisable for a period of up to 10 years. The exercise price and vesting terms of the options granted under the Plan will be determined by the Board of Directors. Until the completion of Qualifying Transaction, options granted to a director or officer individually may not exceed 5% of the common shares outstanding as at the closing of the CPC initial public offering (“IPO”); options granted to all technical consultants may not exceed 2% of the common shares outstanding as at the closing of the CPC IPO. No options may be granted to investor relations service provider; and the exercise price cannot be less than the greater of the IPO share price and the Discounted Market Price.

Stock options outstanding and exercisable at September 30, 2021 are as follows:

Number of options	Number of options	Exercise	Expiry
outstanding	exercisable	Price	Date
100,000	100,000	$0.20	June 25,2023

The remaining contractual life for options outstanding at September 30, 2021 is 1.73 years.

There were no options granted during the nine-month ended September 30, 2021.

The Company applied the fair value method using the Black-Scholes option pricing model in accounting for stock options granted. Accordingly, share-based payments of $349 (September 30, 2020 - $1,172) were incurred for officers and directors of the Company for the vested portion of the options during the nine-month period ended September 30, 2021.

(d) Agents’ Warrants

During the nine-month period ended September 30, 2021, 150,700 warrants issued in previous period were expired unexercised. No new warrants are issued in the nine-month period ended September 30, 2021.

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PERIHELION CAPITAL LTD.

Notes to the Condensed Consolidated Interim Financial Statements For the Nine-Month Period Ended September 30, 2021 and 2020 ( Unaudited - Expressed in Canadian Dollars )

6. RELATED PARTY TRANSACTIONS

Related parties include the Board of Directors, close family members and enterprises which are controlled by these individuals as well as persons performing similar functions.

During the nine-month period ended September 30, 2021, share-based payments of $349 (September 30, 2020 - $1,172) (Note 5) were incurred for officers and directors of the Company. There was no other remuneration paid to related parties during the period.

7. FINANCIAL INSTRUMENTS

Fair value

The Company’s financial instruments consist of cash, cash held in trust, subscription receivable, and accounts payable and accrued liabilities. The fair value of these financial instruments approximates their carrying values due to the short-term nature of these investments. All financial instruments are classified as Level 1.

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

• Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

• Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

• Level 3 – Inputs that are not based on observable market data.

The Company is exposed in varying degrees to a variety of financial instrument related risks. The Board of Directors approves and monitors the risk management processes, inclusive of documented investment policies, counterparty limits, and controlling and reporting structures. The type of risk exposure and the way in which such exposure is managed is summarized as follows:

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Company’s primary exposure to credit risk is on its cash held in bank accounts, cash held in trust and loan advanced. The majority of cash is deposited in bank accounts at a major bank in Canada. As most of the Company’s cash is held by one bank there is a concentration of credit risk. This risk is managed by using major banks that are high credit quality financial institutions as determined by rating agencies. Cash held in trust is held with a reputable law firm. The Company’s short-term loan receivable is subject to expected credit loss model. The carrying amount of the short-term loan represents the maximum credit exposure.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company’s normal operating requirements on an ongoing basis. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash. The Company’s liabilities as at September 30, 2021 are due within 90 days.

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PERIHELION CAPITAL LTD. Notes to the Condensed Consolidated Interim Financial Statements For the Nine-Month Period Ended September 30, 2021 and 2020 ( Unaudited - Expressed in Canadian Dollars )

7. FINANCIAL INSTRUMENTS (Cont’d)

Liquidity risk (cont’d)

Historically, the Company’s principal source of funding has been the issuance of equity securities for cash, primarily through private placements. The Company’s access to financing is always uncertain. There can be no assurance of continued access to necessary levels of equity funding.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to significant interest rate risk.

Capital management

The Company is actively looking to acquire an interest in a business or assets and this involves a high degree of risk. The Company has not determined whether it will be successful in its endeavors and does not generate cash flows from operations. The Company’s primary source of funds comes from the issuance of common shares. The Company does not use other sources of financing that require fixed payments of interest and principal due to lack of cash flow from current operations and is not subject to any externally imposed capital requirements. There were no changes in the Company’s approach to capital management during the nine-month period ended September 30, 2021.

The Company’s objective when managing capital is to safeguard the Company’s ability to continue as a going concern.

The Company defines its capital as shareholders’ equity. Capital requirements are driven by the Company’s general operations. To effectively manage the Company’s capital requirements, the Company monitors expenses and overhead to ensure costs and commitments are being paid.

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