Solution Financial Inc. — Regulatory Filings 2021

Jun 29, 2021

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CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

SOLUTION FINANCIAL INC.

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2021 AND 2020 (UNAUDITED- PREPARED BY MANAGEMENT) (Expressed in Canadian dollars)

Unit 137 - 8680 Cambie Road Richmond, BC Canada V6X 4K1 Solution.Financial

These unaudited interim condensed consolidated financial statements of Solution Financial Inc. (the “Company”) have been prepared by and are the responsibility of the Company’s management. The Company’s independent auditor has not performed a review of these interim financial statements in accordance with standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditor.

SOLUTION FINANCIAL INC.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

(UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 2021 AND 2020

(Expressed in Canadian dollars)

TABLE OF CONTENTS	PAGE
Financial Statements
Condensed Consolidated Interim Statements of Financial Position	1
Condensed Consolidated Interim Statements of Comprehensive Income	2
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity	3
Condensed Consolidated Interim Statements of Cash Flows	4
Notes to the Condensed Consolidated Interim Financial Statements	5 - 22

SOLUTION FINANCIAL INC. Condensed Consolidated Interim Statements of Financial Position (Expressed in Canadian Dollars – Unaudited)

		(Unaudited)
		April 30,		October 31,
		2021		2020
ASSETS
Current
Cash and cash equivalents (Note 4)	$	2,072,107	$	2,526,379
Accounts receivable		338,378		393,041
Prepayment and deposits		260,925		78,042
Current portion of car loans receivable (Note 7)		1,697		6,598
Current portion of receivable under finance lease (Note 8)		294,200		328,484
Right-of-use assets		31,830		-
Inventory (Note 6)		747,517		554,029
		3,746,654		3,886,573
Right-of-use assets		76,649		22,268
Receivable under finance leases (Note 8)		302,754		334,222
Property under operating leases (Note 9)		22,846,036		24,523,140
Property and equipment(Note 10)		322,428		304,838
	$	27,294,521	$	29,071,041
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Bank indebtedness (Note 12)	$	7,667,125	$	10,062,818
Accounts payable and accrued liabilities		159,838		221,265
Deferred revenue (Note 14)		8,415		2,581
Lease liabilities		29,176		17,584
Customers' deposits and advances (Note 13)		669,774		607,740
Convertible debentures (Note 15)		3,137,842		2,686,146
Deferred tax liability		1,022,939		864,940
		12,695,109		14,463,074
Lease Liabilities		81,619		8,144
Customers' deposits (Note 13)		1,310,325		1,510,775
Deferred revenue(Note 14)		2,519,683		2,654,482
		16,606,736		18,636,475
Shareholders' equity
Share capital (Note 16)		7,088,947		7,078,073
Contributed surplus		916,627		872,622
Equity portion of convertible debentures (Note 15)		160,989		93,693
Retained earnings		2,521,222		2,390,178
		10,687,785		10,434,566
	$	27,294,521	$	29,071,041

Nature of Business (Note 1) Subsequent Events (Note 23)

APPROVED ON BEHALF OF THE BOARD

“ Bryan Pang ” Director “ Sean Hodgins ” Director

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

1

SOLUTION FINANCIAL INC. Condensed Consolidated Interim Statements of Comprehensive Income (Expressed in Canadian Dollars – Unaudited)

		For	3 months	For	3 months	For	6 months	For	6 months
		ended April 30,		ended April 30,		ended April 30,		ended April 30,
			2021		2020		2021		2020
Lease and brokerage sales
Sales and lease income (Note 19)	$		5,555,246 $		2,653,631 $		9,303,820 $		5,521,789
Brokerage commissions (Note 18)			26,051		101,920		160,269		220,206
Total Sales			5,581,297		2,755,551		9,464,089		5,741,995
Cost of Sales (Note 17)			4,425,063		2,007,818		7,314,544		4,172,805
Gross profit			1,156,234		747,733		2,149,545		1,569,190
Expenses
Sales and marketing (Note 20)			423,695		210,839		819,828		459,167
General and administration (Note 20)			321,679		285,490		559,438		492,313
Interest			126,214		189,680		243,629		367,586
Amortization			11,164		7,181		19,294		14,637
Share based compensation (Note 16)			827		4,617		73,338		41,911
			883,579		697,807		1,715,527		1,375,614
			272,655		49,926		434,018		193,576
Other items
Other income			7,040		48,504		17,810		49,753
Income before tax			279,695		98,430		451,828		243,329
Income taxes			80,000		58,835		158,000		127,335
Net income and comprehensive
income for the period			199,695		39,595		293,828		115,994
Basic and diluted earnings per common share		$	0.002	$	0.001	$	0.003	$	0.001
Weighted average number of common shares
outstanding			81,384,450		78,881,681		81,369,919		79,092,658

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

2

(Condensed Consolidated Interim Statements of Changes in Shareholder’s Equity (Expressed in Canadian Dollars – Unaudited)

SOLUTION FINANCIAL INC.

Share capital

	Share capital	Share capital
	Issued and outstanding				Equity
		Common		Contributed	component of		Retained	shareholders'
	Number	shares	Warrants	surplus	convertible debt		earnings	equity
		$	$	$	$		$	$
Balance, October 31, 2019	79,324,031	5,519,562	634,492	675,880	339,759		2,306,831	9,476,524
Exercise of agents' warrants	104,100	38,141	-	(12,116)		-	-	26,025
Share based compensation on options	-	-	-	41,911		-	-	41,911
Purchase of common shares for cancellation	(1,047,500)	(73,230)	-	(283,126)		-	-	(356,356)
Warrants expired	-	-	(634,492)	634,492		-	-	-
Net and comprehensive income	-	-	-	-		-	115,994	115,994
Dividend	-	-	-	-		-	(158,365)	(158,365)
Balance, April 30, 2020	78,380,631	5,484,473	-	1,057,041	339,759		2,264,460	9,145,733
Exercise of employees' options	57,600	23,326	-	(8,926)		-	-	14,400
Share based compensation on options	-	-	-	9,440		-	-	9,440
Purchase of common shares for cancellation	(506,000)	(37,115)	-	(184,933)		-	-	(222,048)
Conversion of convertible debt	3,450,000	1,607,389	-	-	(246,066)		-	1,361,323
Net and comprehensive income	-	-	-	-		-	284,419	284,419
Dividend	-	-	-	-		-	(158,701)	(158,701)
Balance, October 31, 2020	81,382,231	7,078,073	-	872,622		93,693	2,390,178	10,434,566
Exercise of employees' options	40,000	16,198	-	(6,198)		-	-	10,000
Share based compensation on options	-	-	-	73,338		-	-	73,338
Purchase of common shares for cancellation	(62,500)	(5,324)	-	(23,135)		-	-	(28,459)
Issuance of convertible debt	-	-	-	-		67,296	-	67,296
Net and comprehensive income	-	-	-	-		-	293,828	293,828
Dividend	-	-	-	-		-	(162,784)	(162,784)
Balance, April 30, 2021	81,359,731	7,088,947	-	916,627	160,989		2,521,222	10,687,785

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

3

SOLUTION FINANCIAL INC. Condensed Consolidated Interim Statements of Cash Flows (Expressed in Canadian Dollars – Unaudited)

	For	6 months	For	6 months
	ended April 30,		ended April 30,
		2021		2020
Operating activities
Net income	$	293,828	$	115,994
Items not affecting cash and cash equivalents:
Amortization of property and equipment		19,294		14,637
Share-based compensation		73,338		41,911
Accretion expense on convertible debentures		27,837		104,145
Deferred Income taxes		157,999		418,000
Depreciation of property under operating lease		2,578,785		2,460,395
Depreciation of right-of-use assets		17,959		9,906
Change in non-cash working capital
Trade receivables and due from related company		54,662		27,584
Prepayment and deposits		(182,883)		5,837
Inventory		(193,488)		(247,389)
Car loans receivables		4,901		20,102
Lease payment receivables		65,752		(23,450)
Trade and other payables		(61,427)		26,915
Income taxes payable		-		(290,665)
Customers' deposits		(138,416)		82,435
Deferred revenue		(128,965)		65,655
		2,589,176		2,832,012
Investing activities
Acquisition of property and equipment		(36,884)		(15,692)
Acquisition of property under operating lease (net)		(901,681)		(5,072,012)
Acquisition of right of use assets		(104,170)		(47,549)
Interestpayment on lease liabilities		(2,363)		(1,426)
		(1,045,098)		(5,136,679)
Financing activities
Proceeds (repayments) from bank indebtedness		(2,395,693)		2,398,748
Purchase of common shares for cancellation		(28,459)		(356,356)
Convertible debentures		493,519		-
Agents' compensation options exercises		-		26,025
Stock options exercises		10,000		-
Payment of lease liabilities		85,067		39,291
Payment of dividends		(162,784)		(158,365)
		(1,998,350)		1,949,343
Net increase (decrease) in cash and cash equivalents		(454,272)		(355,324)
Cash and cash equivalents,beginningofperiod		2,526,379		583,192
Cash and cash equivalents,end ofperiod	$	2,072,107	$	227,868

4

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

1. Nature of Business and Share Exchange Agreement

Solution Financial Inc. (the “Company” or “Solution”), provides sourcing and leasing solutions for luxury and ultra-luxury vehicles, yachts and other high value assets in Western Canada.

The Company’s registered and records office is Unit 137, 8680 Cambie Road, Richmond, British Columbia, Canada, V6X 4K1. The Company’s shares trade on the TSX Venture exchange under the trading symbol “SFI”.

2. Basis of Presentation and Statement of Compliance

Statement of Compliance

These unaudited condensed interim financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”). Accordingly, certain disclosures included in annual financial statements prepared in accordance with International Financial Reporting Standards (“IFRSs”) as issued by the IASB have been condensed or omitted and these unaudited interim condensed financial statements should be read in conjunction with the Company’s audited financial statements for the year ended October 31, 2020.

Functional and Presentation Currency

The functional currency of an entity is the currency of the primary economic environment in which the entity operates. From inception, the functional currency of the Company has been the Canadian dollar. This is also the presentation currency of the Company.

These financial statements were approved by the Company’s Board of Directors and authorized for issue on June 29, 2021.

5

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

3. Critical Accounting Estimates and Use of Judgement

The preparation of these condensed interim financial statements requires management to make estimates and judgments about the future. Estimates and judgments are continuously evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. Areas of financial reporting that require management's estimates and judgments are discussed below.

Significant estimates used in the preparation of these financial statements include the following:

Covid-19 estimation uncertainty

During the three and six months ended April 30, 2021, the global financial markets were negatively impacted by the novel Coronavirus (“COVID-19”), which was declared a pandemic by the World Health Organization on March 11, 2020. This has led to significant global economic uncertainty, and the current outbreak of COVID-19 could have a material adverse effect on the Company’s operations and the operations of the Company’s suppliers and customers. The Company has taken what it believes to be appropriate safety precautions at its operations to safeguard the health of its employees and there have been no outbreaks to date at any of the Company's locations. The extent to which COVID-19 impacts the Company’s operations will depend on future developments, which continue to be highly uncertain and cannot be predicted with confidence. In addition, it is possible that estimates in the Company’s financial statements will change in the near term as a result of COVID-19 and the effect of any such changes could be material, which could result in, among other things, impairment of long-lived assets. The Company is closely monitoring the impact of the pandemic on all aspects of its business.

Determination of the Company’s allowance for credit losses

Judgment is required as to the timing of establishing an allowance for credit losses and the amount of the required allowance taking into consideration counterparty creditworthiness, current economic trends, the expected residual value of leased assets and past experience.

Valuation of inventory

Inventories are recorded at the lower of cost and net realizable value with cost determined on a specific item basis for new and used vehicles. In determining net realizable value for new vehicles, the Company primarily considers the age of the vehicles along with the timing of annual and model changeovers. For used vehicles, the Company considers recent market data and trends such as loss histories along with the current age of the inventory. The determination of net realizable value for inventories involves the use of estimates.

Valuation of underlying residual values of leased assets

The Company has significant investments in leased vehicles recorded as operating leases, which relate to vehicle leases. At the beginning of the lease contract a determination is made of the estimated realizable value of the vehicle at the end of the lease term, which is the critical assumption underlying the estimated carrying value of leased assets. The estimated realizable value is based on the lower of the contracted residual value or the current market estimate of residual value based on independent lease guides. Since the customer is not obligated to purchase the vehicle at the end of the contract, the Company is exposed to a risk of loss to the extent the value of the vehicle at the end of the lease term is below the residual value estimated at contract inception. Over the life of the lease

6

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

3. Critical Accounting Estimates and Use of Judgement (continued)

the Company evaluates the adequacy of the estimate of the residual value and may make adjustments to the extent the expected value of the vehicle at lease termination changes. Adjustments could result in a change in the depreciation rate of the leased asset or if an impairment exists, an impairment charge.

Useful lives of equipment

The Company’s capitalized property and equipment balances are determined in part through the use of estimates of the useful lives of the underlying assets. In developing their accounting policy for property and equipment, the Company makes estimates of these useful lives. Changes in useful lives of property and equipment may result in adjustments to these capitalized balances in future periods if there are signs that estimates may no longer be accurate.

Income taxes

The determination of current tax expense requires estimates and assumptions. Further the Company’s estimates of its deferred income tax assets and liabilities require subjective assumptions regarding future income tax rates and the likelihood of utilizing tax carry-forwards. Changes in these estimates and assumptions could materially affect the recorded amounts.

Significant judgements made as part of the preparation of these financial statements include the following:

Determination of lease type

On entering lease arrangements, the Company assesses whether the lease is a finance lease or an operating lease. As part of this determination, the Company makes a number of estimates associated with the lease, the customer, and the fair value of the underlying assets. The accounting for an operating lease is significantly different from that of a finance lease. As such, this determination has a significant impact on the way the leased assets are presented within Company’s

Share-based payments

The Company uses the Black-Scholes option pricing model to determine the fair value of options and warrants in order to calculate share-based compensation expense and the fair value of agent warrants. The Black-Scholes model involves six key inputs to determine fair value of an option: riskfree interest rate, exercise price, market price at date of issue, expected dividend yield, expected life, and expected volatility. Certain of the inputs are estimates that involve considerable judgment and are or could be affected by significant factors that are out of the Company’s control. The Company is also required to estimate the future forfeiture rate of options based on historical information in its calculation of share-based payments expense.

7

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

3. Critical Accounting Estimates and Use of Judgement (continued)

Share Capital

Common shares are classified as share capital. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of any tax effects.

Deferred financing costs incurred in connection with the issuance of common shares are capitalized until the financing is completed. In the event that the financing is not completed, these costs are expensed to profit or loss. Proceeds that are received in advance of the completion of an issuance of common shares are recorded within equity as subscriptions received in advance.

Earnings per Share

Basic earnings per share (“EPS”) is calculated using the weighted average number of common shares outstanding during the year. Diluted loss per share is calculated by adjusting the loss attributable to equity shareholders and the weighted average number of common shares outstanding for the effects of all potentially dilutive instruments. The calculation of diluted loss per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the year. In years where a loss is reported, diluted loss per share is the same as basic loss per share because the effects of potentially dilutive common shares would be anti-dilutive.

4. Financial Instruments and Risk Management

Fair value

The Company’s financial instruments recognized on the statements of financial position consist of cash, term deposits, accounts receivable, due from related company, car loans receivable, receivable under finance lease, bank indebtedness, accounts payable and accrued liabilities, customers’ advances, customers’ deposits, due to shareholder, convertible debentures and short-term loans payable. The fair values of the Company’s short term financial instruments approximate their carrying values due to their short-term maturity. The fair values of the Company’s long term financial assets and liabilities approximate their carrying values based on market interest rates. The Company has classified financial instruments as follows:

	Classification	Measurement
Financial assets:
Cash and cash equivalents	FVTPL	Fair Value
Accounts receivable	Loans and receivables	Amortized cost
Due from related company	Loans and receivables	Amortized cost
Car loan receivable	Loans and receivables	Amortized cost
Lease receivables	Loans and receivables	Amortized cost
Financial liabilities:
Bank indebtedness	Financial liabilities	Amortized cost
Accounts payable accrued liabilities	Financial liabilities	Amortized cost
Customers' advances	Financial liabilities	Amortized cost
Customers' deposits	Financial liabilities	Amortized cost
Convertible debentures	Financial liabilities	Amortized cost

8

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

4. Financial Instruments and Risk Management (continued)

The following is an analysis of the Company’s financial instruments measured using the fair value hierarchy as at April 30, 2021 and October 31, 2020:

	April 30, 2021	April 30, 2021	April 30, 2021
Cash $ Cash equivalents $	Level 1 2,059,724 $ 12,383 $		Level 2 - $ - $	Level 3 - -
Total $	2,072,107 $		- $	-
		October 31,2020
Cash $ Cash equivalents $	Level 1 2,514,011 $ 12,368 $		Level 2 - $ - $	Level 3 - -
Total $	2,526,379 $		- $	-

(Level 1) – Based on quoted market prices in active markets.

(Level 2) – Inputs, other than quoted prices in active markets, that are observable, either directly or indirectly.

(Level 3) – Unobservable inputs that are not corroborated by market data.

The Company’s cash equivalents consist of term deposits maturing within the next year.

The Company has exposure to the following risks from its use of financial instruments: credit, interest rate, liquidity, and price risk. The Company reviews its risk management framework on a quarterly basis and makes adjustments as necessary. The fair values of the Company’s financial assets and liabilities held at amortized cost approximates their book values.

Covid-19 risk

The spread of COVID-19 is expected to have a material adverse effect on global and regional economies and continues to negatively impact stock markets. The adverse effects on the economy and the stock market could adversely impact the Company’s ability to raise capital, or its ability to pursue other strategic initiatives.

Credit risk

Credit risk arises from the potential that a counter party will fail to perform its obligations. The Company’s financial instruments that are exposed to concentrations of credit risk consist of cash, term deposits, accounts receivable, due from related company, car loans receivable, and lease receivables. The Company attempts to mitigate the risks associated with cash and term deposits by dealing only with major Canadian financial institutions with good credit ratings and performs credit assessments of all customers making material orders. The Company attempts to mitigate the risks associated with car loans receivable and lease receivables through its credit check process performed before entering into any sales arrangement.

Interest rate risk

Interest rate risk is the risk that the fair values and future cash flows of the Company will fluctuate because of changes in market interest rates. The Company’s financial instruments that are exposed to concentrations of interest rate risk consist of bank indebtedness and short-term loans. A change in the prime rate of interest of 1% would result in additional interest expense for the Company of $76,671 per year.

9

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

4. Financial Instruments and Risk Management (continued)

Liquidity risk

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities as they come due. The Company currently settles all of its financial obligations out of cash generated from operations. The ability to do so relies on the Company maintaining sufficient cash in excess of anticipated needs. To help manage its liquidity the Company has obtained an operating loan agreement through a major schedule 1 Canadian Financial Institution (Note 12).

Price risk

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from currency risk or interest rate risk). The Company is at risk to changes in commodity prices, which may affect financing options available to the Company.

5. New Accounting Standards and Interpretations Adopted

There have been no new accounting standards or interpretations adopted during the three and six months ended April 30, 2021.

6. Inventory

Inventory at April 30, 2021 and October 31, 2020 consist of vehicles held for sale. The inventory is carried at the lower of cost or net realizable value and as at April 30, 2021 and October 31, 2020, the Company has not recorded any reserves for inventory write downs.

7. Car loans receivable

Car loans consist of loan agreements at interest rates ranging from 11% to 18% made to vehicle owners. In these agreements, the borrower has acquired the vehicle outright and the Company is providing financing to the purchaser that is secured by a lien against the underlying vehicle. As a result of the adoption of IFRS9 Financial Instruments, the Company records a provision for expected credit losses. Using the expected credit loss model these car loans receivable were classified as Stage 1 ‘performing’ at both April 30, 2021 and October 31, 2020.

Maturity Within 1 year In 1 to 3 years	Gross receivable Unearned income Net receivable $ $ $ 1,705 (8) 1,697 - - - 1,705 (8) 1,697 30-Apr-21	31-Oct-20
		Gross receivable Unearned income Net receivable $ $ $
		6,822 (224) 6,598 - - -
		6,822 (224) 6,598

The unearned income in the above table represents the unearned portion of interest receivable over the remaining term of the loan.

10

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

8. Receivable under finance lease

Finance lease receivables consist of conditional sales contracts, which have terms of 12 to 60 months with fixed rates of interest. All lease receivables are secured by the corresponding vehicle. As a result of the adoption of IFRS9 Financial Instruments, the Company records a provision for expected credit losses for receivables under finance lease. Using the expected credit loss model these receivables under finance lease were classified as Stage 1 ‘performing’ at both April 30, 2021 and October 31, 2020.

The contractual maturity of the portfolio outstanding of continuing operations as at April 30, 2021 and October 31, 2020, assuming no prepayments, is as follows:

Maturity Within 1 year In 1 to 3 years After 3 years	Gross receivable Unearned income Net receivable $ $ $ 358,864 (64,664) 294,200 296,851 (42,062) 254,789 54,221 (6,256) 47,965 709,936 (112,982) 596,954 30-Apr-21	31-Oct-20
		Gross receivable Unearned income Net receivable $ $ $
		403,921 (75,437) 328,484 341,142 (43,238) 297,904 39,037 (2,719) 36,318
		784,100 (121,394) 662,706

Included in the above table, the residual interest of assets as at April 30, 2021 are $113,450 (October 31, 2020 - $98,450). As of April 30, 2021, the Company has recognized $88,514 (October 31, 2020 - $75,099). This recognized portion is included in the net investments column in the above table of the amounts receivable under finance lease.

The Company has a history with limited payment defaults or credit losses. The lease agreements include security deposits and the Company has a history of releasing or selling vehicles repossessed without taking any losses. As such, the Company has no provisions for credit losses.

11

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

9. Property under operating leases

The Company acts as a lessor in connection with operating leases and recognizes the leased assets in its statements of financial position. The lease payments received, are recognized in net income as rental revenue

COST At the beginning of the period Additions Disposals At the the end of the period ACCUMULATED DEPRECIATION At the beginning of the period Depreciation charge for the period Disposals At the the end of the period Net carrying amount	For the six months andyear ended
	30-Apr-21 31-Oct-20 $ $
	30,597,439 24,941,758 6,197,795 15,273,379 (7,671,238) (9,617,698)
	29,123,996 30,597,439
	6,074,299 3,644,701 2,578,785 5,157,281 (2,375,124) (2,727,683)
	6,277,960 6,074,299
	22,846,036 24,523,140

The above depreciation charge for the period is included within the Company’s cost of sales in the statements of comprehensive income (Note 19).

Below are the future minimum lease payments arising from non-cancellable operating leases of continuing operations:

Within 1 year In 1 to 3 years After 3 years	30-Apr-21 31-Oct-20
	4,625,706 5,003,596 3,477,912 3,914,321 305,850 138,304
	8,409,468 $ 9,056,221 $

12

SOLUTION FINANCIAL INC.

Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

10. Property and equipment

		Land		Buildings		Furniture and Equipment		Computer Equipment		Software		Leasehold Improvements		Total
Cost
Balance, October 31, 2019	$	161,883	$	94,025	$	118,915	$	8,229	$	59,062	$	-	$	442,114
Additions		-		-		6,883		1,199		7,610		-		15,692
Balance, April 30, 2020	$	161,883	$	94,025	$	125,798	$	9,428	$	66,672	$	-	$	457,806
Accumulated Amortization
Balance, October 31, 2019	$	-	$	39,470	$	67,682	$	5,298	$	14,766	$	-	$	127,216
Additions		-		1,160		5,123		971		7,383		-		14,637
Balance, April 30, 2020	$	-	$	40,630	$	72,805	$	6,269	$	22,149	$	-	$	141,853
Net Book Value
Balance,April 30,2020	$	161,883	$	53,395	$	52,993	$	3,159	$	44,523	$	-	$	315,953

		Land		Buildings		Furniture and Equipment		Computer Equipment		Software		Leasehold Improvements		Total
Cost
Balance, October 31, 2020	$	161,883	$	94,025	$	126,465	$	10,744	$	77,347	$	-	$	470,464
Additions		-		-		10,374				8,960		17,550		36,884
Balance, April 30, 2021	$	161,883	$	94,025	$	136,839	$	10,744	$	86,307	$	17,550	$	507,348
Accumulated Amortization
Balance, October 31, 2020	$	-	$	41,652	$	81,703	$	8,167	$	34,104	$	-	$	165,626
Additions		-		1,048		4,996		708		10,787		1,755		19,294
Balance, April 30, 2021	$	-	$	42,700	$	86,699	$	8,875	$	44,891	$	1,755	$	184,920
Net Book Value
Balance,April 30,2021	$	161,883	$	51,325	$	50,140	$	1,869	$	41,416	$	15,795	$	322,428

11. Related party transactions

The Company uses an office leased by Solution Lease Club, a Company controlled by the CEO of the Company for administration and promotional purposes. Solution Lease Club’s office is at Unit 6, 11220 Voyageur Way, Richmond. The Company pays Solution Lease Club a $125 fee for each sales and lease transaction for property usage. During the three and six months ended April 30, 2021, the Company paid $13,375 and $25,875 to Solution Lease Club (2020- $7,500 and $15,900).

During the three and six months ended April 30, 2021, remuneration of directors and other members of key management personnel are $120,377 and $195,849 (2020 – $39,114 and 109,290).

During the three and six months ended April 30, 2021, the Company paid a total of $49,951 and $55,809 to a law firm where a partner is a director of the Company (2020 – $31,325 and $42,239).

13

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

12. Bank indebtedness

On September 21, 2020, the Company amended its Credit Loan Facility with an $2,500,000 increase to $12,500,000. The Credit Loan Facility bears interest at prime plus 1.20% per annum.

The loan agreement allows the Company to draw on funds as needed and is secured by a personal guarantee of the Company’s CEO and certain assets of the Company.

As at April 30, 2021, the total outstanding balance on the loan agreement is $7,667,125 (October 31, 2020 - $10,062,818). As part of the bank covenants, the Company is required to maintain a cash flow coverage ratio of not less than 1.25:1 and a debt to tangible net worth ratio not greater than 2.25:1.

13. Customers’ deposits

Customers’ deposits are refundable security deposits received by the Company at lease inception. They are applied to the residual balance if a buyout option is exercised or will be refunded at the maturity of the lease upon return of the vehicle. As at April 30, 2021, the Company has deposits of $567,100 on leases coming due in the next year (October 31, 2020 - $600,100) and $1,310,325 deposits coming due in more than a year (October 31, 2020 - $1,510,755).

Balance, October 31, 2019	$	2,003,875
Additions		416,200
Refunds		(313,700)
Balance, April 30, 2020	$	2,106,375
Additions		693,250
Refunds		(688,750)
Balance, October 31, 2020	$	2,110,875
Additions		342,550
Refunds		(576,000)
Balance, April 30, 2021	$	1,877,425

14. Deferred revenue

Deferred revenue are lease down payments received by the Company at lease inception. They are recognized as rental income on a straight-line basis over the terms of the lease. In case of pre-mature termination, any balance of the unrealized down payment will be recognized at the same time.

15. Convertible Debenture

On October 3, 2018, the Company closed the first tranche of its previously announced nonbrokered financing of unsecured convertible debentures (“October 3, 2018 Debentures”) in the principal amount of $1,380,000. The Debentures matured on October 3, 2020 (“Maturity Date”) and bear interest at a rate of 3.99% per annum, calculated and paid semi-annually.

14

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

15. Convertible Debenture (continued)

The principal amount and any accrued and unpaid interest on the Debenture may be converted into common share in the capital of the Company (“Shares”), in whole or in part, at any time following the Issue Date but on or before the Maturity Date at a conversion price of $0.40 per Share.

On issuance, the Company recognized the fair value of the liability component of $1,133,934 based on the terms of the Debentures and a discount rate of 15.22%. The residual amount of $246,066 was allocated to the equity portion.

During the year ended October 31, 2020, all of the October 3, 2018 Debentures were converted at $0.40 per share into a total of 3,450,000 common shares.

On January 7, 2019, the Company closed the first tranche of its previously announced nonbrokered financing of unsecured convertible debentures (“January 7, 2019 Debentures”) in the principal amount of $2,000,000.

The Debentures matured on January 4, 2021 (“Maturity Date”) and bore interest at a rate of 5.0% per annum, calculated and paid semi-annually. The principal amount and any accrued and unpaid interest on the Debenture were convertible into common shares in the capital of the Company (“Shares”), in whole or in part, at any time following the Issue Date but on or before the Maturity Date at a conversion price of $0.50 per Share.

On issuance, the Company recognized the fair value of the liability component of $1,895,506 based on the terms of the Debentures and a discount rate of 7.93%. The residual amount of $94,494 was allocated to the equity portion.

On April 15, 2019, the Company closed a non-brokered private placement of unsecured convertible debentures (“April 15, 2019 Debentures”) in the principal amount of $705,000. The Debentures matured on April 15, 2021 (“Maturity Date”) and bore interest at a rate of 5.0% per annum, calculated and paid semi-annually. The principal amount and any accrued and unpaid interest on the Debenture were convertible into common shares in the capital of the Company (“Shares”), in whole or in part, at any time following the Issue Date but on or before the Maturity Date at a conversion price of $0.50 per Share.

On original issuance, the Company recognized the fair value of the liability component of $665,963 based on the terms of the Debentures and a discount rate of 8.11%. The residual amount of $33,199 was allocated to the equity portion.

On March 8, 2021, the Company closed its previously announced non-brokered financing of unsecured convertible debentures (“March 8, 2021 Debentures”) in the principal amount of $3,225,400. The convertible debenture financing consisted of a reinvestment of the $2,000,000 matured January 7, 2019 Debentures and $615,400 of the matured April 15, 2019 Debentures and interest. The March 8, 2021 Debentures will mature on March 8, 2023 (“Maturity Date”) and bear interest at a rate of 5.0% per annum, calculated and paid semi-annually. The principal amount and any accrued and unpaid interest on the Debenture may be convertible into common shares in the capital of the Company (“Shares”), in whole or in part, at any time following the Issue Date but on or before the Maturity Date at a conversion price of $0.50 per Share.

15

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

On issuance, the Company recognized the fair value of the liability component of $3,131,223 based on the terms of the Debentures and a discount rate of 6.61%. The residual amount of $67,296 was allocated to the equity portion.

Balance, October 31, 2019	3,868,586
Accretion included in interest expense	102,718
Balance, April 30, 2020	3,971,304
Fair value of reclassified coversion	(1,361,323)
Accretion included in interest expense	76,165
Balance, October 31, 2020	2,686,146
Repayment of convertible debts	(2,705,000)
Issuance of convertible debts	3,131,223
Accretion included in interest expense	25,473
Balance, April 30, 2021	3,137,842

16. Share Capital

Authorized share capital

Unlimited number of common shares without par value.

Issued share capital

During the six months ended April 30, 2021 the Company completed the following transactions:

• (i) The Company issued 40,000 common shares for cash proceeds of $10,000 pursuant to the exercise of employees’ options.

• (ii) The Company purchased and cancelled 62,500 of its common shares on the open market at an average price of $0.45 for total cost of $28,105, pursuant to a normal course issuer bid (the “NCIB”). Under the renewed NCIB, a total of up to 4,068,111 common shares may be purchased through the facilities of the TSXV, and any such purchases will be at market prices. The NCIB will commence on or after December 18, 2020 and will end on December 17, 2021 or on such earlier date as the Company may complete its purchase pursuant to the NCIB or as it may otherwise determine.

• (iii) The Company paid dividends of $162,784 or $0.002 per share.

16

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

16. Share Capital (continued)

During the six months ended April 30, 2020 the Company completed the following transactions:

• (i) The Company issued 104,100 common shares for cash proceeds of $26,025 pursuant to the exercise of agents’ compensation options.

• (ii) The Company purchased and cancelled 1,047,500 of its common shares on the open market at an average price of $0.34 for total cost of $352,995, pursuant to a normal course issuer bid (the “NCIB”). Under the NCIB, a total of up to 3,966,202 common shares may be purchased through the facilities of the TSXV, and any such purchases will be at market prices. The NCIB will commence on or after December 16, 2019 and will end on December 16, 2020 or on such earlier date as the Company may complete its purchase pursuant to the NCIB or as it may otherwise determine.

• (iii) The Company paid dividends of $158,365 or $0.002 per share.

Escrow shares

At April 30, 2021, 73,429 (October 31, 2020- 220,310) common shares were held in escrow and deposited with a trustee under a CPC escrow agreement. Under the escrow agreement, 10% of the escrowed shares will be released on completion of a qualifying transaction (“QT”), 15% of the escrowed shares will be released every 6 months following the initial release on completion of a QT over a period of 36 months.

At April 30, 2021, 21,632,640 (October 31, 2020- 37,857,119) common shares were held in escrow and deposited with a trustee under the Surplus escrow agreement. Under the surplus escrow agreement, 5% of escrowed shares will be released on completion of a QT and 6 months from the release date, 10% release 12 and 18 months from QT completion date and 15% release 24 and 30 from QT completion date, and 40% release 36 months from QT completion date.

Stock options and warrants

The Company follows the policies of the TSX-V under which it is authorized to grant options to executive officers and directors, employees and consultants enabling them to acquire up to 10% of the issued and outstanding common stock of the Company. Under the policies, the exercise price of each option equals the market price, or a discounted price of the Company’s stock as calculated on the date of grant. The options can be granted for a maximum term of three years and vest at the discretion of the Board of Directors.

17

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

16. Share Capital (continued)

Stock option transactions are summarized as follows:

Stock option transactions are summarized as follows:
	Stock Options
	Number Weighted Average Exercise Price
Outstanding, October 31, 2019 Exercised-Agent's options Expired- Agent's options Granted-Employees' options	4,537,700 0.25 $ (104,100) 0.25 $ (30,000) 0.25 $ 250,000 0.37 $
Outstanding,April 30,2020	4,653,600 0.26 $
Exercised-Employees' options Outstanding, October 31, 2020 Exercised-Agent's options Expired- Agent's options	(57,600) 0.25 $ 4,596,000 0.26 $ (40,000) 0.25 $ 350,000 0.40 $
Outstanding,April 30,2021	4,906,000 0.27 $
Exercisable,April 30,2021	4,781,000 0.27 $

As at April 30, 2021, the following were outstanding:

			Weighted Average	Weighted Average	Weighted average
	ExpiryDate	Number of Shares		Exercise Price	period
Options	June 25, 2021	4,306,000	$	0.25	0.1 years
	November 6, 2022	250,000	$	0.37	1.5 years
	November 16,2022	350,000	$	0.40	1.5years
		4,906,000	$	0.27	0.3 years

Stock option activities during the six months ended April 30, 2021:

• (i) The Company issued 40,000 common shares for cash proceeds of $10,000 pursuant to the exercise of employee stock options.

• (ii) The Company granted an aggregate of 350,000 fully vested stock options to a member of the Board of Directors, each option being exercisable into one common share at a price of $0.40 per share.

Stock option activities during the six months ended April 30, 2020:

• (i) The Company issued 104,100 common shares for cash proceeds of $26,025 pursuant to the exercise of agents’ compensation options.

• (ii) 30,000 agents’ compensation options expired on December 22, 2019.

• (iii) The Company granted an aggregate of 250,000 fully vested stock options to a member of the Board of Directors, each such option being exercisable into one common share at a price of $0.37 per share.

Subsequent to quarter end, 2,520,000 employee and director stock options were exercised for gross proceeds of $630,000.

18

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

16. Share Capital (continued)

Warrant transactions are summarized as follows:

	Warrants
	Number Weighted Average Exercise Price
Outstanding, October 31, 2019 Warrants issued on exercise of Agents' options Warrants expired	9,618,800 0.40 $ 52,050 0.40 $ (9,670,850) 0.40 $
Outstanding,April 30,2020,October 31,2020 and April 30,2021	- - $
Exercisable,April 30,2021	- - $

There were no warrant activities during the six months ended April 30, 2021.

Warrant activity during the six months ended April 30, 2020:

(i) 52,050 warrants were issued from the exercise of 104,100 agents’ compensation options. (ii) 9,670,850 warrants expired on December 22, 2019.

Share-based compensation

During the six months period ended April 30, 2021, the company recognized $73,338 as share-based compensation for options granted to directors, officers, and employees.

The Company applies the fair value method in accounting for its stock options at the time of grant using the Black-Scholes option pricing model using the following estimates: expected dividend yield of 0%; risk-free interest rate of 0.60-1.10%; expected life of 2-3 years; common share price of $0.25$0.40; and expected volatility of 50%-100%. Volatility is based on a range of comparable companies operating in the same industry, adjusted for the Company’s limited history.

17. Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

For the six months ended Apr 30,		2021		2020
Net income available to common shareholders for basic and
diluted earningsper share	$	293,828	$	115,994
Weighted average number of common share outstanding -
basic		81,369,919		79,092,658
Effect of dilutive securities - share-basedpayments		2,065,282		1,364,812
Weighted average number of common shares outstanding-
diluted		83,435,201		80,457,470
Earnings per share - reported:
Basic	$	0.003	$	0.001
Diluted	$	0.003	$	0.001

19

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

18. Brokerage Commissions

The gross sales through third-party dealerships were:

	For 3 months ended April 30, 2021	For 3 months ended April 30, 2020	For 6 months ended April 30, 2021 For 6 months ended April 30, 2020
Brokerage lease $ Cost of brokerage lease Brokerage sale Cost of brokerage sale Total brokerage commissions $	3,345 $ - 3,345 2,311,252 (2,288,546) 22,706 26,051 $	- $ - - 1,983,924 (1,882,004) 101,920 101,920 $	5,639 $ 4,668 - - 5,639 4,668 5,343,382 4,009,339 (5,188,752) (3,793,801) 154,630 215,538 160,269 $ 220,206

19. Sales and Cost of Sales by Nature

Sales include the following major sales by nature:

	For 3 months ended April 30, 2021	For 3 months ended April 30, 2020	For 6 months ended April 30, 2021 For 6 months ended April 30, 2020
Vehicle sales $ Finance lease vehicle sales Interest and administrative income Rental revenue Registration fees Total $	3,613,912 $ - 583,188 1,312,335 45,811 5,555,246 $	641,065 $ 112,922 543,721 1,314,315 41,608 2,653,631 $	5,239,929 $ 1,678,210 133,923 139,910 1,179,293 1,053,694 2,663,823 2,562,298 86,852 87,677 9,303,820 $ 5,521,789

Included within cost of sales for the six months period ended April 30, 2021 is amortization of property under operating lease of $2,578,785 (2020 - $2,460,395)

20. Expense by Nature

Sales and marketing expenses include the following major expenses by nature:

	For 3 months ended April 30, 2021	For 3 months ended April 30, 2020	For 6 months ended April 30, 2021 For 6 months ended April 30, 2020
Advertising and promotion $ Commissions Donations Marketing Meals and entertainment Demo vehicle rental Total $	17,700 $ 385,056 - 16,831 4,108 - 423,695 $	8,719 $ 143,677 5,000 15,171 2,851 35,421 210,839 $	55,385 $ 30,395 718,881 304,358 - 5,000 31,875 36,025 8,119 6,908 4,098 76,481 818,358 $ 459,167

20

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

20. Expense by Nature (continued)

General and administrative expenses include the following major expenses by nature:

	For 3 months ended April 30, 2021	For 3 months ended April 30, 2020	For 6 months ended April 30, 2021 For 6 months ended April 30, 2020
Accounting and legal $ Consulting fees Regulatory and transfer agent Insurance	58,214 $ 22,436 69,295 9,250	65,918 $ 37,581 33,108 763	109,886 $ 106,452 41,017 45,377 102,487 41,567 19,873 26,693
License and permit	1,499	8,712	4,318 2,409
Office and miscellaneous	48,905	24,078	73,617 59,745
Repairs and maintenance Salaries and wages Total $	600 111,479 321,679 $	550 114,780 285,490 $	1,250 1,200 206,990 208,870 559,438 $ 492,313

21. Capital Management

The Company’s objectives, when managing capital, are to safeguard cash as well as maintain financial liquidity and flexibility in order to preserve its ability to meet financial obligations and deploy capital to grow its businesses.

The Company’s financial strategy is designed to maintain a flexible capital structure consistent with the objectives stated above and to respond to business growth opportunities and changes in economic conditions. In order to maintain or adjust its capital structure, the Company may issue shares or issue debt (secured, unsecured, convertible and/or other types of available debt instruments). The Company is subject to certain externally imposed capital requirements as described in Note 12. The Company did not change its capital management strategy in the three ended April 30, 2021 and 2020.

22. Segmented Information

The Company operates in one business segment being retail sales, leases, and financing for highend automotive vehicles, boats, and commercial equipment and out of two locations being Richmond, BC, Calgary AB and Vaughan ON.

23. Subsequent Events

On June 4, 2021, the Company announced it closed its previously announced commercially reasonable best efforts public offering pursuant to which the Company issued 5,936,042 units of the Company at a price of $0.40 per Unit for gross proceeds of $2,374,417.

Each Unit was comprised of one common share of the Company and one-half of one Share purchase warrant (each whole Share purchase warrant, a "Warrant"). Each Warrant entitles the holder to acquire one Share at an exercise price of C$0.50 per Share. The Warrants are exercisable until June 4, 2022. The Agent received (i) a cash commission of $89,080 and (ii) 167,025 warrants (the "Agent's Warrants"). Each Agent's Warrant entitles the holder thereof to acquire one Share at an exercise price of C$0.40 per Share until June 4, 2022.

21

SOLUTION FINANCIAL INC. Notes to Condensed Consolidated Interim Financial Statements For the three and six months ended April 30, 2021 and 2020 (Expressed in Canadian dollars- Unaudited)

23. Subsequent Events (continued)

On June 25, 2021, 2,520,000 employee and director stock options were exercised for gross proceeds of $630,000.

22