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Sharp Therapeutics Corp. — Interim / Quarterly Report 2024
Nov 28, 2024
48457_rns_2024-11-28_8c2d2240-1d96-4fa2-b3d4-eaf909baef9e.pdf
Interim / Quarterly Report
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EVP Capital Inc.
(A Capital Pool Company)
Condensed Interim Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2024 and 2023
(In Canadian Dollars and Unaudited)
EVP CAPITAL INC.
NOTICE OF NO AUDITOR REVIEW OF UNAUDITED CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Under National Instrument 51-102, Continuous Disclosure Obligations, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the unaudited condensed interim consolidated financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.
The accompanying unaudited condensed interim consolidated financial statements of the Corporation have been prepared by and are the responsibility of the Corporation's management and approved by the Audit Committee and the Board of Directors of the Corporation.
The Corporation's independent auditor has not performed a review of these unaudited condensed interim consolidated financial statements. These unaudited interim consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting using accounting policies consistent with International Financial Reporting Standards.
November 28, 2024
EVP Capital Inc.
Condensed Interim Consolidated Statements of Financial Position
As at September 30, 2024 and December 31, 2023
(in Canadian Dollars)
| | September 30, 2024
(Unaudited) | December 31, 2023
(Audited) |
| --- | --- | --- |
| Assets | | |
| Cash | $ 111,639 | $ 395,946 |
| Total assets | $ 111,639 | $ 395,946 |
| Liabilities | | |
| Accounts payable and accrued liabilities | $ 47,254 | $ 24,623 |
| Total liabilities | 47,254 | 24,623 |
| Shareholders' equity | | |
| Share capital (Note 3) | 530,410 | 530,410 |
| Options reserve (Note 4) | 111,867 | 67,005 |
| Accumulated deficit | (577,892) | (226,092) |
| Total shareholders' equity | 64,385 | 371,323 |
| Total liabilities and shareholders' equity | $ 111,639 | $ 395,946 |
Incorporation and Nature of Business (Note 1)
Material Accounting Policies (Note 2)
Approved and authorized for issuance by the Board of Directors on November 28, 2024:
Approved by the Board
"Lorne Sugarman"
Director (Signed)
"Mark Dickinson"
Director (Signed)
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
EVP Capital Inc.
Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
For the Three and Nine Months Ended September 30, 2024 and 2023
(in Canadian Dollars and Unaudited)
| Three months ended September 30, | Nine months ended September 30, | |||
|---|---|---|---|---|
| 2024 | 2023 | 2024 | 2023 | |
| Expenses | ||||
| Professional and administrative fees | $ 107,078 | $ 31,231 | $ 306,938 | $ 92,145 |
| Share-based compensation | 44,862 | 34,960 | 44,862 | 34,960 |
| Total expenses | $ 151,940 | $ 66,191 | $ 351,800 | $ 127,105 |
| Net loss and comprehensive loss | $ (151,940) | $ (66,191) | $ (351,800) | $ (127,105) |
| Net loss per share - basic and diluted | $ (0.02) | $ (0.02) | $ (0.04) | $ (0.03) |
| Weighted average number of shares outstanding - basic and diluted | 8,545,200 | 3,945,200 | 8,545,200 | 3,642,534 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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EVP Capital Inc.
Condensed Interim Consolidated Statements of Changes in Cash Flows
For the Nine Months Ended September 30, 2024 and 2023
(in Canadian Dollars and Unaudited)
| Nine months ended September 30, | ||
|---|---|---|
| 2024 | 2023 | |
| Operating activities: | ||
| Net loss | $ (351,800) | $ (127,105) |
| Share-based compensation | 44,862 | 34,960 |
| Change in non-cash working capital items: | ||
| (Increase) in sales tax receivable | - | (18,994) |
| Decrease in subscription receivable | - | 5,000 |
| Increase (decrease) in accounts payable and accrued liabilities | 22,631 | (43,674) |
| Cash used in operating activities | (284,307) | (149,813) |
| Financing activities: | ||
| Deferred financing costs | - | (2,403) |
| Subscription advances net of share issuance costs | - | 400,460 |
| Cash provided by financing activities | - | 398,057 |
| Net change in cash | (284,307) | 248,244 |
| Cash, beginning of the period | 395,946 | 149,903 |
| Cash, end of the period | $ 111,639 | $ 398,147 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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EVP Capital Inc.
Condensed Interim Consolidated Statements of Changes in Shareholders' Equity
For the Nine Months Ended September 30, 2024 and 2023
(in Canadian Dollars and Unaudited)
| Number of shares | Share capital | Options reserve | Accumulated deficit | Shareholders' equity | |
|---|---|---|---|---|---|
| Balance, December 31, 2022 | 3,400,000 | $ 164,910 | $ - | $ (41,456) | 123,454 |
| Share subscription [Note 3(a)] | 545,200 | 27,260 | - | - | 27,260 |
| Net loss | - | - | - | (60,914) | (60,914) |
| Balance, June 30, 2023 | 3,945,200 | $ 192,170 | $ - | $ (102,370) | $ 89,800 |
| Share subscription [Note 3(b)] | 4,600,000 | 460,000 | - | - | 460,000 |
| Share issuance costs [Note 3(b)] | - | (121,760) | 34,960 | - | (86,800) |
| Share-based compensation (Note 4) | - | - | 32,045 | - | 32,045 |
| Net loss | - | - | - | (123,722) | (123,722) |
| Balance, December 31, 2023 | 8,545,200 | $ 530,410 | $ 67,005 | $ (226,092) | $ 371,323 |
| Share-based compensation (Note 4) | - | - | 44,862 | - | 44,862 |
| Net loss | - | - | - | (351,800) | (351,800) |
| Balance, September 30, 2024 | 8,545,200 | $ 530,410 | $ 111,867 | $ (577,892) | $ 64,385 |
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
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EVP Capital Inc.
Condensed Interim Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2024 and 2023
(in Canadian Dollars and Unaudited)
1. INCORPORATION AND NATURE OF BUSINESS
EVP Capital Inc. (the "Corporation") was incorporated under the Business Corporations Act (Ontario) on October 4, 2021. The Corporation changed its name to EVP Capital Inc. on April 25, 2023. The Corporation was formed for the primary purpose of completing an Initial Public Offering ("IPO") and listing on the TSX Venture Exchange ("Exchange") as a Capital Pool Corporation as defined in Policy 2.4 of the Exchange. The principal business of the Corporation is the identification and evaluation of assets or businesses with a view to completing a Qualifying Transaction ("QT"), as defined under the policies of the Exchange. The Corporation has not commenced commercial operations and has no assets other than cash, subscriptions receivable and deferred financing costs. Given the nature of the activities, no separate segmented information is reported. The Corporation's continuing operations, as intended, are dependent on its ability to secure sufficient financing with which it intends to identify and evaluate potential acquisitions of businesses, and once identified and evaluated, to negotiate an acquisition thereof or participation therein subject to receipt of regulatory and, if required, shareholders' approval.
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 QT by the Corporation as defined under the policies of the Exchange.
The registered address, head office and records of the Corporation is located at 121 King Street West, Suite 2150, Toronto, Ontario M5H 3T9.
On May 17, 2024, SEL AcquisitionCo Inc. ("Merger Sub") was incorporated in Delaware as a wholly-owned subsidiary of the Corporation. The purpose of the Merger Sub is to facilitate the implementation of the Arrangement transaction in connection with the proposed QT outlined below.
Agreement for Proposed Qualifying Transaction
On June 28, 2024, the Corporation entered into a definitive arrangement agreement and plan of merger (the "Arrangement Agreement") by and among the Corporation; Sharp Edge Labs, Inc., a Delaware corporation ("Sharp Edge"); and the Merger Sub. The Arrangement Agreement contemplates that the Corporation will acquire all of the issued and outstanding shares of Sharp Edge, an arm's length third-party, by way of merger conducted under the Delaware General Corporation Law in which the Merger Sub will merge with and into Sharp Edge, as part of a plan of arrangement (the "Arrangement") under the Business Corporations Act (Ontario) (the "OBCA").
Pursuant to the Arrangement, each issued and outstanding common share of Sharp Edge (each a "Sharp Edge Share") will be exchanged for common shares of the Corporation (the "Resulting Issuer Shares") on the basis of approximately 31.2194 Resulting Issuer Shares for one (1) Sharp Edge Share such that all holders of Sharp Edge Shares will become shareholders of the Corporation, and Sharp Edge will become a wholly-owned subsidiary of the Corporation upon completion of the Arrangement.
The Arrangement, which was approved unanimously by the Corporation's Board of Directors, is to be carried out by way of a court-approved plan of arrangement under the OBCA, and will require the approval of two-thirds (66-2/3%) of the votes cast by shareholders of the Corporation at an annual general and special meeting of the shareholders of the Corporation scheduled on December 6, 2024 (the "Meeting"). The Corporation has obtained voting support agreements from certain of its shareholders representing approximately 61.8% of the issued and outstanding shares of the Corporation, pursuant to which shareholders of the Corporation will vote their shares at the shareholders' meeting in favour of the Arrangement and any actions required in furtherance of the actions contemplated thereby.
EVP Capital Inc.
Condensed Interim Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2024 and 2023
(in Canadian Dollars and Unaudited)
- INCORPORATION AND NATURE OF BUSINESS – continued
Agreement for Proposed Qualifying Transaction
In addition to the approval of shareholders of the Corporation, the completion of the Arrangement will be subject to court and regulatory approvals, including the Exchange, and must be completed by December 20, 2024 per the Arrangement. On October 21, 2024, conditional approval from the Exchange on the proposed QT and court approval to call the annual and special meeting of the Corporation's shareholders were received. Subject to the satisfaction of such conditions, the Arrangement is anticipated to be completed on or before December 13, 2024. See subsequent event disclosure in Note 7.
On November 28, 2024, the Board of Directors approved the condensed interim consolidated financial statements for the three and nine months ended September 30, 2024.
- MATERIAL ACCOUNTING POLICIES
Statement of Compliance
The accompanying unaudited condensed interim consolidated financial statements, including comparative information, have been prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board and Interpretations of the International Financial Reporting Interpretations Committee and in accordance with International Accounting Standard 34, Interim Financial Reporting. These condensed interim consolidated financial statements should be read in conjunction with the Corporation's audited financial statements for the year ended December 31, 2023.
Basis of Presentation
The condensed interim consolidated financial statements are presented in Canadian dollars, which is the Corporation's functional and presentation currency. The condensed interim consolidated financial statements are prepared on a historical cost basis except for certain financial instruments classified as fair value through profit or loss ("FVPTL"), which are stated at their fair value. The accounting policies have been applied consistently throughout the entire year and prior period presented in these consolidated financial statements.
Basis of Consolidation
The condensed interim consolidated financial statements incorporate the financial statements of EVP Capital Inc. and SEL AcquisitionCo Inc., which is the wholly-owned subsidiary of the Corporation and was incorporated in the state of Delaware on May 17, 2024.
All assets, liabilities, equity, income, expenses, and cash flows relating to transactions between EVP Capital Inc. and SEL AcquisitionCo Inc. are eliminated upon consolidation.
Use of Estimates and Judgments
The preparation of these condensed interim consolidated financial statements in conformity with IFRS requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed interim consolidated financial statements and reported amounts of expenses during the period. It also requires management to exercise its judgment in the processing of applying the Corporation's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
EVP Capital Inc.
Condensed Interim Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2024 and 2023
(in Canadian Dollars and Unaudited)
2. MATERIAL ACCOUNTING POLICIES – continued
Use of Estimates and Judgments
The impacts of such estimates and judgments are pervasive throughout the condensed interim consolidated financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates and judgments are recognized in the period in which the estimate is revised and future periods if the revision affects both current and future periods. Actual results could differ from these estimates.
The following are the key judgments, estimates and assumptions management considers to be material to the condensed interim consolidated financial statements:
Share-based compensation
The Corporation measures the cost of share-based awards with directors, officers, and third-parties by reference to the fair value of the related instruments at the date at which they are granted. Estimating the fair value for share-based compensation requires determining the most appropriate valuation model for a grant, which depends on the terms and conditions of the grant. This also requires making assumptions and determining the most appropriate inputs to the valuation model including: the fair value of the underlying shares, the expected life of the option, volatility, forfeiture rate, risk-free rate, and dividend yield. Variation in actual results for any of these inputs will result in a different value of the stock option realized from the original estimate. The assumptions and estimates used are further outlined in Note 4.
Income Tax
In assessing deferred income tax assets, management considers whether it is probable that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible.
Management's judgment is required to determine the amount of deferred income tax assets that can be recognized, based upon the likely timing and the level of future taxable income together with future tax planning strategies.
3. SHARE CAPITAL
Authorized - Unlimited common shares
| Issued | # | $ |
|---|---|---|
| Balance, December 31, 2022 | 3,400,000 | 164,910 |
| Common shares issued from private placement (a) | 545,200 | 27,260 |
| Common shares issued from initial public offering (b) | 4,600,000 | 460,000 |
| Cost of issuance | - | (121,760) |
| Balance, December 31, 2023 | 8,545,200 | 530,410 |
| Balance, September 30, 2024 | 8,545,200 | 530,410 |
EVP Capital Inc.
Condensed Interim Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2024 and 2023
(in Canadian Dollars and Unaudited)
3. SHARE CAPITAL – continued
(a) Private Placement
On May 2, 2023, the Corporation authorized the sale and issuance of 545,200 common shares at a price of $0.05 per share for gross proceeds of $27,260.
(b) Initial Public Offering
On May 9, 2023, the Corporation entered into an agency agreement with Canaccord Genuity Corp. (the "Agent") to raise gross proceeds of $460,000 in connection with the Corporation's Initial Public Offering (the "IPO") of 4,600,000 common shares (the "Offering") at a price of $0.10 per common share (the "Offering Price").
On August 4, 2023, the Corporation completed its IPO and issued 4,600,000 common shares at a price of $0.10 per Common Share for gross proceeds of $460,000. After completion of the Offering, the Corporation has 8,545,200 Common Shares issued and outstanding.
As part of the IPO completion, the Corporation paid commission of 10% of gross proceeds to the Agent and granted the Agent an option to acquire 10% of the common shares issued, being 460,000 common shares, exercisable for a period ending five years from the closing date at an exercise price of $0.10 ("Agent's Options"). The Agent's Options will be qualified for distribution under the prospectus. Not more than 50% of the aggregate number of common shares which can be acquired on the exercise of the entire Agent's Options may be sold by the Agent prior to the completion of a QT. The remaining 50% may be sold after the completion of the QT.
In addition, the Corporation paid the Agent a corporate finance fee of $15,000 prior to December 31, 2022, which was included in deferred financing costs prior to the IPO and then deducted from share capital upon the IPO completion. On August 4, 2023, the Corporation also paid the Agent's legal fees and other costs and expenses totalling $71,800 pursuant to the Offering.
(c) Escrowed Common Shares Release
On August 4, 2023, the completion date of the Corporation's IPO, 3,945,200 of the issued and outstanding common shares of the Corporation were released from escrow on the issuance of the Final Exchange Bulletin as defined in the policies of the Exchange (the "Initial Release"). An additional 25% will be released on each of the dates which are 6 months, 12 months, and 18 months following the Initial Release.
All common shares acquired on exercise of stock options granted to directors and officers of the Corporation prior to completion of the QT must also be deposited in escrow until the Final Exchange Bulletin is issued. All common shares acquired in the secondary market prior to the completion of a QT 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 will also be subject to escrow.
EVP Capital Inc.
Condensed Interim Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2024 and 2023
(in Canadian Dollars and Unaudited)
4. SHARE-BASED COMPENSATION
Share options issued to directors, officers, and third-parties are measured at fair value at the grant date and are recognized as an expense over the relevant vesting periods with a corresponding credit to options reserve. The fair value of the options is calculated using the Black-Scholes option pricing model. When determining the fair value of share options, management is required to make certain assumptions and estimates related to the risk-free interest rate, dividend yield, share price volatility, life of options, and forfeiture rate. Upon the exercise of share options, the related options reserve is transferred to common shares. The following chart summarizes the options granted:
| Options Issued | ||
|---|---|---|
| Number of Options | Weighted average exercise price per share | |
| Balance, December 31, 2022 | - | $ - |
| Balance, September 30, 2023 | - | $ - |
| Granted (a), (b) | 1,314,520 | 0.10 |
| Balance, December 31, 2023 | 1,314,520 | $ 0.10 |
| Balance, September 30, 2024 | 1,314,520 | $ 0.10 |
(a) Concurrent with the closing of the Offering, the Agent received an option to purchase 460,000 Common Shares at a price of $0.10 per Common Share and exercisable until August 4, 2028 (the "Agent's Options"). The Agent's Options vest immediately upon the grant date and expire five years from the grant date.
(b) Concurrent with the closing of the Offering, the Corporation also granted options to acquire an aggregate of 854,520 Common Shares at an exercise price of $0.10 per Common Share to the directors and officers of the Corporation, whereby the options expire ten years from the date of grant. These options vested on August 4, 2024, which was one year after the grant date.
During the three and nine months ended September 30, 2024 and 2023, there were no share options granted to the Agent, directors, or officers. The Corporation recorded share-based compensation expense of $44,862 for the three and nine months ended September 30, 2024 ($nil for the three and nine months ended September 30, 2023).
Options issued during the year ended December 31, 2023 were fair valued based on the following weighted average assumptions:
| Options Issued | 2023 |
|---|---|
| Risk free annual interest rate (i) | 3.55% - 3.87% |
| Expected annual dividend yield | - |
| Expected share price volatility (ii) | 100% |
| Expected life of options (years) (iii) | 5 years for Agent Options, 10 years for directors’ and officers’ options |
| Forfeiture rate | 0% |
i. Based on the Bank of Canada benchmark bond yield rate with a term equal to the expected life of the options
ii. Estimated using the average historical volatility of a comparable publicly-traded capital pool company
iii. Represents the time period that options granted are expected to be outstanding
EVP Capital Inc.
Condensed Interim Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2024 and 2023
(in Canadian Dollars and Unaudited)
4. SHARE-BASED COMPENSATION – continued
The following table outlines the details of the options outstanding as at September 30, 2024:
| Grant date | Number Outstanding | Number Exercisable | Exercise Price | Remaining Life (Years) | Expiry Date |
|---|---|---|---|---|---|
| August 4, 2023 | 460,000 | 460,000 | $ 0.10 | 3.84 | August 4, 2028 |
| August 4, 2023 | 854,520 | 854,520 | $ 0.10 | 8.84 | August 4, 2033 |
| As at June 30, 2024 | 1,314,520 | 1,314,520 | $ 0.10 | 6.34 |
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
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 shareholders and benefits for other stakeholders. The Corporation includes equity, comprised of share capital and accumulated deficit, 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 QT by the Corporation as defined under the policies of the Exchange.
Risk Disclosures and Fair Values
The Corporation's financial instruments, consisting of accounts payable and accrued liabilities, approximate fair value due to the relatively short-term maturity 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.
(a) Liquidity Risk
As at September 30, 2024, the Corporation had accounts payable and accrued liabilities of $47,254 and cash on hand of $111,639 to meet its current obligations. As a result, management believes that the Corporation has minimal liquidity risk.
(b) Credit Risk
Credit risk is the risk of loss associated with the counterparty's inability to fulfill its payment obligations. Management believes that the Corporation has no significant credit risk.
EVP Capital Inc.
Condensed Interim Notes to the Consolidated Financial Statements
For the Three and Nine Months Ended September 30, 2024 and 2023
(in Canadian Dollars and Unaudited)
5. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES – continued
Risk Disclosures and Fair Values
(c) Market Risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Corporation's income or value of its holdings or financial instruments. The Corporation's activities have only been transacted in Canadian dollars since incorporation, and in addition, the Corporation carries no interest-bearing debt. As such, management believes the Corporation has minimal market risks facing it at present.
6. RELATED PARTY TRANSACTIONS
There was no remuneration paid to key management personnel during the three and nine months ended September 30, 2024 and 2023. Other related party transactions during the three and nine months ended September 30, 2024 and 2023 were as follows:
(i) Legal fees of $98,869 and $158,054 (2023 – $39,721 and $46,239), respectively, recorded in professional and administrative expenses with a law firm controlled by a director of the Corporation, and
(ii) Accounting fees of $29,547 and $43,108 (2023 – $7,154 and $18,467), respectively, recorded in professional and administrative expenses with a company controlled by an officer of the Corporation. As at September 30, 2024, $9,599 is owed by the Corporation in accounting fees to the company controlled by an officer of the Corporation (2023 – $2,769).
All related party transactions were incurred in the ordinary course of business under market terms and conditions comparable to those with unrelated third parties and were measured at fair value.
7. SUBSEQUENT EVENT
On October 21, 2024, the Corporation received conditional approval from the Exchange for the Arrangement. The Arrangement constitutes a QT under the Exchange's Policy 2.4 – Capital Pool Companies. Upon completion of the Arrangement, the Corporation's share will be listed as a Tier 2 Life Sciences Issuer on the Exchange. The Exchange's approval is subject to a number of conditions including completion of a financing by Sharp Edge for proceeds of US $5,000,000 (which was satisfied on October 18, 2024), the Corporation's shareholder approval at the annual and special meeting to approve the Arrangement, requisite approval of Sharp Edge's shareholders, receipt of final Ontario Superior Court of Justice (Commercial List) approval for the Arrangement, and other customary conditions for a transaction of this nature.
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