Vencanna Ventures — Interim / Quarterly Report 2022

Dec 30, 2021

TOP STRIKE RESOURCES CORP.

Condensed Interim Financial Statements (unaudited)

Three and Six months ended October 31, 2021 and 2020

(Expressed in Canadian dollars)

Notice

Top Strike Resources’ auditor, MNP LLP, has not reviewed the condensed interim financial statements.

TOP STRIKE RESOURCES CORP.

Condensed Interim Statements of Financial Position (Expressed in Canadian dollars) (unaudited)

		October 31,	October 31,		April 30,
As at			2021		2021
	Notes
ASSETS
Current Assets
Cash		$	7,152,389		$ 723,943
Note receivable	4		2,717,750		2,469,958
Trade and other receivables			7,916		6,911
Prepaids			12,591		16,617
			9,890,646		3,217,429
Non-Current Assets
Deposits			2,500		2,500
Equipment			4,710		5,243
Investments	5		59,450		6,784,547
TOTAL ASSETS		$	9,957,306	$	10,009,719
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities			278,113		173,576
Unearned interest			-		12,787
			278,113		186,363
Non-Current liabilities
Loan	6		26,549		25,187
Convertible debenture – debt component	7		1,579,245		1,552,350
Convertible debenture–derivative component	7		(142,724)		323,664
TOTAL LIABILITIES			1,741,183		2,087,564
SHAREHOLDERS' EQUITY
Share capital	8		21,971,441		21,976,797
Warrants			4,556,922		4,556,922
Contributed surplus			1,888,651		1,879,212
Deficit			(20,200,891)		(20,485,420)
Treasury stock			-		(5,356)
TOTAL SHAREHOLDERS’ EQUITY			8,216,123		7,922,155
TOTAL LIABILITIES AND
SHAREHOLDERS’ EQUITY		$	9,957,306	$	10,009,719

Subsequent Event (Note 12)

See accompanying notes to the condensed interim financial statements.

TOP STRIKE RESOURCES CORP.

Condensed Interim Statements of Income (Loss) and Comprehensive Income (Loss) (Expressed in Canadian dollars) (unaudited)

			Three months		Six months
			ended		ended
			October 31		October
		2021	2020	2021	2020
	Notes
Revenues
Interest income		$ 118,168	$ 144,635	$ 355,520	$ 261,034
Change in fair market value of
investments and financial instruments:
Unrealized gain/loss on investments
And derivative instruments	5,7	195,709	-	380,043	10,400
Unrealized gain/(loss) on foreign	exch.	(19,655)	(6,936)	68,188	(211,552)
		294,222	137,699	803,751	59,882
Expenses
Office and miscellaneous		2,453	1,199	4,767	5,479
Depreciation		258	273	534	564
Professional fees		76,695	46,690	103,490	64,521
Corporate communication		16,003	7,988	32,968	11,451
Rent and parking		7,264	6,822	13,996	12,796
Travel		6,916	-	7,299	-
Salaries and benefits		135,274	122,260	265,449	207,354
Meals and entertainment		3,764	1,248	8,779	2,257
Interest and bank charges		37,002	62,979	72,500	82,551
Loss on disposal of property		-	-	-	206
Share-based compensation		4,720	21,583	9,440	59,310
		290,349	271,042	519,222	446,489
Income (loss) and comprehensive income
(loss) for the period		$ 3,873	$ (133,343)	$ 284,529	$ (386,607)
Earnings (loss) per share
Basic and diluted	9	$ 0.00	$ (0.00)	$ 0.00	$ (0.00)
Weighted average number of common
shares outstanding
Basic and diluted		181,411,390	181,991,390	181,411,390	181,991,390

See accompanying notes to the condensed interim financial statements.

TOP STRIKE RESOURCES CORP. Condensed Interim Statements of Changes in Shareholders’ Equity (Expressed in Canadian dollars) (unaudited)

							Total
	Shares			Contributed		Treasury	shareholders’
	outstanding	Share capital	Warrants	surplus	Deficit	stock	equity
Balance at May 1, 2021	181,411,390	$21,976,797	$4,556,922	$1,879,212	$(20,485,420)	(5,356)	$7,922,154
Share base compensation	-	-	-	9,440	-	-	9,440
Shares cancelled-NCIB	-	(5,356)	-	-		5,356	-
Income and comprehensive
incomeforthe period	-	-	-	-	284,529	-	284,529
Balance at October 31,
2021	181,411,390	$21,971,441	$4,556,922	$1,888,651	$(20,200,891)	-	$8,216,123
Balance at May 1, 2020	181,991,390	$21,984,522	$4,556,922	$1,810,617	$(19,134,232)	-	$9,217,829
Share base compensation	-	-	-	59,310	-	-	59,310
Loss and comprehensive loss
for the period	-	-	-	-	(386,606)	-	(386,606)
Balance at October 31,
2020	181,991,390	$21,984,522	$4,556,922	$1,869,927	$(19,520,838)	-	$8,890,533

See accompanying notes to the condensed interim financial statements.

TOP STRIKE RESOURCES CORP.

Condensed Interim Statements of Cash Flows (Expressed in Canadian dollars) (unaudited)

		Three months		Six months
		Ended		Ended
		October 31		October 31
	2021	2020	2021	2020
Notes
Operating activities
Net income (loss) for the period	$ 3,873	$ (133,343)	$ 284,529	$ (386,606)
Adjustments for:
Interest income	-	(144,635)	(126,712)	(261,034)
Depreciation	257	273	533	564
Share-based compensation	4,719	21,583	9,440	59,310
Unrealized gain on investments and financial
instruments	(195,709)	-	(380,043)	(10,400)
Unrealized foreign exchange loss (gain)	19,655	6,936	(68,187)	211,552
Loan accretion	681	63,672	1,362	82,551
Government grants	-	(1,675)	-	(2,677)
Prepaids	(2,799)	(6,641)	4,026	(6,642)
Trade and other receivables	(5,221)	6,396	2,461	5,717
Unearned interest	-	-	(12,787)	-
Accounts payable and accrued liabilities	75,102	(17,129)	103,934	(23,784)
	(99,442)	(204,563)	(181,444)	(331,449)
Changes in non-cash working capital items:
Settlement of convertible promissory notes	-	-	6,838,699	-
Interest received	(118,169)	39,147	(228,809)	39,147
Net cash from (used) in operating activities	(217,611)	(165,416)	6,428,445	(292,302)
Financing activities
Loan proceeds	-	-	-	40,000
Advance to related parties	-	165	-	165
Net cash from financing activities	-	165	-	40,165
Change in cash and cash equivalents for the period	(217,611)	(165,251)	6,428,446	(252,137)
Cash and cash equivalents, beginning of period	7,370,000	3,659,036	723,943	3,745,922
Cash and cash equivalents, end of period	$ 7,152,389	$ 3,493,785	$ 7,152,389	$ 3,493,785

See accompanying notes to the condensed interim financial statements.

TOP STRIKE RESOURCES CORP. Notes to Condensed Interim Financial Statements For the three and six months ended October 31, 2021 and 2020 (Expressed in Canadian dollars) (unaudited)

1. Nature and continuance of operations

Prior to September 24, 2018, Top Strike Resources Corp. (“Top Strike”, the "Company") had no activity and had not earned significant revenues. The Company has evaluated several oil and gas as well as other opportunities. The Company had previously focused on international and domestic oil and gas projects but has expanded its scope to consider other industries as well.

On September 24, 2018, the Company announced the completion of a recapitalization financing, the appointment of a new management team and board of directors and commencement of trading on the Canadian Securities Exchange. The transactions have transitioned the Company from an oil and gas issuer to a merchant capital firm, operating as “Vencanna Ventures”, and aims to provide capital to early-stage global cannabis initiatives, including state compliant opportunities in the United States.

The Company trades under the symbol “VENI” on the Canadian Securities Exchange and under the symbol TPPRF on the OTCQB Venture Market (“OTCQB”), a US trading platform operated by the OTC Market Group in New York. The Company’s principal place of business is located in Calgary, Alberta. The address of the Company’s head office is Suite 310, 250 6[th] Avenue SW, Calgary, Alberta, T2P 3H7.

2. Basis of presentation

(a) Statement of compliance

These condensed interim financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting . These condensed interim financial statements do not include all the information required for full annual financial statements.

These condensed interim financial statements are stated in Canadian dollars and have been prepared following the same accounting policies and methods of computation as the financial statements for the year ended April 30, 2021 except as specified in Note 3 below. These condensed interim financial statements should be read in conjunction with the financial statements and notes thereto in the Company’s annual filings for the year ended April 30, 2021. The condensed interim financial statements were approved and authorized for issuance by the board of directors of Top Strike on December 29, 2021.

Basis of measurement

These unaudited condensed interim consolidated financial statements have been prepared on a historical cost basis, except for share-based payment transactions, investments, convertible notes, convertible debentures and derivative instruments which have been recorded at fair market value.

(b) Functional currency

The Company’s presentation currency is Canadian dollars. The functional currency of the Company is Canadian dollars.

3. Summary of significant accounting policies

The accounting policies used are consistent with those of the previous financial year as described in Note 3 of the Company’s financial statements for the year ended April 30, 2021.

TOP STRIKE RESOURCES CORP. Notes to Condensed Interim Financial Statements For the three and six months ended October 31, 2021 and 2020 (Expressed in Canadian dollars) (unaudited)

4. Note receivable

On March 11, 2021, the Company entered into a US$2,000,000 facility loan agreement with the Cannavative Group LLC (“Cannavative”) to facilitate planned capital expansion initiatives or other uses as agreed by the Company (the “Cannavative Note”). The commencement date of the Cannavative Note was March 19, 2021.

On March 12, 2021, the Company announced that it had entered into an exclusive non-binding letter of intent with Cannavative, pursuant to which the Company will acquire all of the common shares in the capital of Cannavative in an all-share exchange through the issuance of an aggregate of 360,000,000 common shares of the Company at a deemed issuance price of US$0.05 per common share. The proposed transaction is subject to, among other things, the execution of a definitive agreement between the Company and Cannavative (the “Definitive Agreement”) and customary closing conditions. The proposed transaction is subject to the acceptance of the Canadian Securities Exchange (the “ CSE ”) and the approval of the shareholders of the Company.

The maturity date of the Cannavative Note is March 19, 2022, or at any time prior to the maturity date at the borrower’s discretion. Interest on the Cannavative Note is 17.5% per annum. Upon execution of the Definitive Agreement interest will be reduced to 12.5% per annum. As at October 31, 2021, the principal and interest balance of the Cannavative Note is $2,717,750.

5. Investments

Galenas New Jersey LLC (“Galenas NJ”)

On August 8, 2019, the Company purchased an approximate 15% interest in Galenas NJ for $90,000. On December 18, 2019, the Company acquired an additional 22.5% interest in Galenas NJ from Medical Investor Holdings LLC (d.b.a. Vertical Companies) (“Vertical”) with a settlement of accrued interest of $127,950 on the Vertical loan. On January 24, 2020 the Company issued 2,222,222 common shares at a share price of $0.02 to Medical Investment Fund LLC (“MIF”) for exchange of additional 22.5% interest in Galenas NJ. The Company owns approximately 60% of Galenas NJ, which holds a cultivation application and a dispensary application. On October 15, 2021 the state announced the successful cultivation licenses. Galenas NJ was not awarded a cultivation license.

The investment in Galenas NJ is measured at FVTPL, and considered to be under Level 3 hierarchy. The fair value of this investment as at October 31, 2021, is $59,450 (2020 - $118,900). The fair value was determined based on comparable arm’s length transactions.

6. Loan

On June 6, 2020, the Company received a $40,000 Canada Emergency Response interest free loan to cover operating costs. The loan was offered by the Government of Canada through the Company’s bank and is related to the Covid19 pandemic. The balance of the loan is due on or before December 31, 2022. Full payment of the loan by December 31, 2022 will result in a loan forgiveness benefit of $10,000.

On December 31, 2022, the Corporation has the option to extend the loan for an additional 3 years at in annual interest rate of 5%. In determining the fair value of the loan, the Company used an effective interest rate of 10% and considered the interest free and forgiveness features of the loan.

The fair value of this loan on the initial recognition date of June 6, 2020 was $22,915. The fair value of this loan as at October 31, 2021 is $26,549. During the period the Company recorded loan accretion of $681 on the Statement of Income (Loss) and Comprehensive Income (Loss).

7.

Convertible debenture

On July 3, 2020, the Company issued a US$1,300,000 convertible debenture maturing July 3, 2022 (the “Debenture”). The Debenture is convertible at the holder’s option at a conversion rate of US$0.05 per common share totaling 26,000,000 common shares of the Company. The Debenture carries an interest rate of 8.0% and is accrued and payable on January 31, April 30, July 31, and October 31 of each year; interest is paid in cash, common stock, a combination

TOP STRIKE RESOURCES CORP. Notes to Condensed Interim Financial Statements For the three and six months ended October 31, 2021 and 2020 (Expressed in Canadian dollars) (unaudited)

7. Convertible debenture (continued)

thereof, or accrued. The Company also holds an option to extend the maturity of the Debenture to July 3, 2024 at an interest rate of 9.6% and common share conversion rate of 29,900,000 common shares. The Company may elect to force conversion if the Company’s 10-day weighted average closing price of its common shares traded through the facilities of the Canadian Stock Exchange prior to that date equals or exceeds US$0.075 per common share.

The conversion and debt feature of the Debenture is presented separately on the condensed statement of financial position due to the variability of foreign currency of the settlement feature. The derivative component is valued upon the initial issuance date July 3, 2020 and at each period end date. The Debenture carries an implied interest rate of 12.09%.

Convertible debenture	October 31, 2021		July 3, 2020
Debt component (US)	$ 1,159,997	$	1,174,622
Foreign exchange rate	~1.24		~1.36
Debt component	1,579,245		1,593,375
Derivative component	(142,704)		170,075
	$ 1,436,541	$	1,763,450

8. Share capital

• a) Authorized:

Unlimited number of common shares with no par value.

b) Issued

	Number of shares	Amount
Balance May 1, 2020	181,991,390	$ 21,984,522
Cancelled	(500,000)	(7,725)
Balance at April 30, 2021	181,491,390	21,976,797
Cancelled	(80,000)	(5,356)
Balance at October 31, 2021	181,411,390	$ 21,971,441

On May 4, 2021, the Company cancelled 80,000 shares held in treasury.

c) Warrants

	Number of
	warrants	Amount
Balance May 1, 2020	117,711,057	$ 4,556,922
Granted,exercised,expired	-	-
Balance at April 20, 2021	117,711,057	4,556,922
Expired	(61,044,161)	-
Balance October 31, 2021	56,666,896	$ 4,556,922

TOP STRIKE RESOURCES CORP. Notes to Condensed Interim Financial Statements For the three and six months ended October 31, 2021 and 2020 (Expressed in Canadian dollars) (unaudited)

8. Share capital (continued)

Each whole Warrant entitled the holder to acquire one Common Share as follows:

Number of warrants	Purchase price	Expiry date
3,104,319	$0.09	January 16, 2022
31,497,766	$0.06	September 24,2023
22,054,811	$0.06	October 19,2023
56,666,896

The fair value of the Warrants was determined using a Black-Scholes option pricing model using the following assumptions:

Risk-free rate (%)	1.91 – 2.40 %
Expected life (years)	3 – 5 years
Contractual life (years)	3 – 5 years
Expected volatility (%)	100%
Expected dividendyield	-

9.

Per share amounts

Basic and diluted earnings per share is calculated based on net loss and the weighted-average number of common shares outstanding.

	Three	months ended October 31	months ended October 31	months ended October 31	Six months ended October 31	Six months ended October 31
		2021		2020	2021	2020
Income(loss)for theperiod	$	3,873	$	(133,343)	$ 284,529	$(386,607)
Weighted average number of
common shares (basic and diluted)	181,411,390		181,991,390		181,411,390	181,991,390
Basic and diluted lossper share	$	(0.00)	$	(0.00)	$ 0.00	$(0.00)

As at October 31, 2021, there were 17,466,740 (2020 – 17,466,740) stock options considered anti-dilutive.

10. Related party transactions

During the period ended October 31, 2021, $63,444 (2020 - $28,115) in legal fees were incurred from a law firm at which an officer of the Company is a Partner. As at October 31, 2021, accounts payable and accrued liabilities included amounts payable to related parties totaling $66,616 (2020 - $21,288).

On July 3, 2020, the Company issued a debenture, Jon Sharun, a director of the Company is the holder of the US$1,300,000 debenture. During the period the Company elected to accrue US$28,555 in interest related to the debenture (Note 7). As at October 31, 2021, the Company has accrued $179,148 (US$144,661) to accounts payable and accrued liabilities on the Condensed Interim Statement of Financial Position.

11. Financial risk management

As at October 31, 2021, the carrying values of cash, trade and other receivables, prepaids and other trade payables approximate their values due to their short terms to maturity.

Financial risks

The Company has exposure to the following risks from its use of financial instruments:

TOP STRIKE RESOURCES CORP.

Notes to Condensed Interim Financial Statements For the three and six months ended October 31, 2021 and 2020 (Expressed in Canadian dollars) (unaudited)

11. Financial risk management (continued)

Credit risk

Credit risk represents the risk associated with the inability of a counterparty to fulfil its financial obligations. The Company is exposed to credit risk through cash, trade and other receivables and investments. The cash balance is primarily held in a chequing account at a reputable financial institution. Trade and other receivables consist of government receivables. The Company does not have significant concentration credit risk from cash, trade and other receivables.

As at October 31, 2021, the Company is exposed to credit risk of $2,717,750 related to its note receivable balance. The note is non-revolving and the maturity date is connected to the non-binding letter signed with Cannavative of March 12, 2021 and matures no later than March 19, 2022.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. As at October 31, 2021, the Company had a cash balance of $7,152,389 (April 30, 2021 - $723,943) to settle current liabilities of $278,113 (April 30, 2021 - $186,363). Historically, the Company's sole source of funding has been the issuance of equity securities for cash, through private placements and loans from related and other parties. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.

Market risk

Market risk is the risk of loss that may arise from changes in market factors such as interest rates, foreign exchange rates, and commodity and equity prices.

a) Interest risk

The Company is exposed to interest rate risk to the extent that the cash maintained at its banking institution is subject to floating rates of interest. The interest rate risk of cash is not considered significant.

As of October 31, 2021, the Company had a note receivable balance of $2,717,750 from an American participant in the cannabis industry. The interest rate on the loan is fixed, and as such, the Company is not exposed to significant interest rate risk.

b) Foreign currency risk

As at October 31, 2021, the Company holds a note receivable and has issued a convertible debenture in American Dollars. The Company’s objective in managing its foreign currency risk is to minimize its net exposure to foreign currency cash flows by transacting with third parties in the functional currency when possible. The Company is exposed to currency rate risk from fluctuations in the value of its investments which are denominated in $US and a convertible debenture. The Company does not currently use foreign exchange contracts to hedge its exposure to foreign currency risk.

As at October 31, 2021, a 1% foreign exchange differential in the American Dollar, with all other factors remaining constant, would result in $7,000 change in income (loss).

12. Subsequent Event

On December 7, 2021 the state of New Jersey announced the successful dispensary licenses. Galenas NJ was not awarded a dispensary license.