In light of the completion of its Qualifying Transaction with Big Mojo Capital
Inc., CapGain Properties Inc. (TSX VENTURE:CPP) ("CapGain") is releasing key pro
forma data concerning the resulting issuer, as contained below:
Pro Forma Consolidated Statement of Financial Positions
Expressed in United States Dollars
As of September 30, 2012
(Unaudited)
Pro Forma
Consolidated
CapGain Pro Forma CapGain
Big Mojo Properties Adjustments Properties
Capital Inc. Inc. (Note 4) Inc.
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US$ US$ US$ US$
ASSETS
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Current
Cash and cash
equivalents 25 164,014 311,500 (a) 414,039
(61,500) (c)
Goods and services
taxes recoverable 5,835 5,835
Prepaid expenses
and deposits 1,000 1,000
Real estate
inventories 7,485,000 7,485,000
Prepaid qualifying
transaction cost 135,010 (135,010) (c)
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Total current
assets 25 7,790,859 7,905,874
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Total assets 25 7,790,859 7,905,874
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LIABILITIES
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Current
Accounts payable
and accrued
liabilities 73,865 56,651 130,516
Mortgage payable 754,150 754,150
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Total current
liabilities 73,865 810,801 884,666
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Due to a related
party 99,726 99,726
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910,527 984,392
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SHAREHOLDERS' EQUITY
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Common Shares 211,625 6,397,981 311,500 (a) 8,346,770
907,637 (a)
5,000 (b)
724,652 (d)
(211,625) (d)
Preferred shares,
series A 907,637 907,637 (a)
Contributed surplus 97,000 (c) 156,261
41,439 (c)
17,822 (c)
Reserves 51,684 (51,684) (d)
Deficit (337,148) (425,286) (5,000) (b) (1,581,549)
(97,000) (c)
(41,439) (c)
(17,822) (c)
(135,010) (c)
(61,500) (c)
337,148 (d)
(798,492) (d)
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Total
shareholders'
equity (73,840) 6,880,332 6,921,482
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Total liabilities
and shareholders'
equity 25 7,790,859 7,905,874
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Pro forma assumptions and adjustments
The pro forma consolidated statement of financial position includes the
following pro forma assumptions and adjustments:
(a) The Corporation will issue a total of 33,440,486 Common Shares in exchange
for 33,440,486 issued Common Shares of CapGain and 4,538,185 Common Shares in
exchange for the issued 4,538,185 Preferred Shares, Series A of CapGain. In
addition, the Corporation will issue one Common Share in exchange for each
Common Share of CapGain issued by CapGain through the Private Placement. The
Private Placement expects to raise $550,000 from the issuance of 5,500,000
Common Shares at $0.10 per share, of which, 2,385,000 common shares amounting to
$238,500 was raised as of September 30, 2012.
(b) Sponsorship shares were issued to Union Securities, Ltd. totaling 50,000
common shares at $0.10 per share as partial compensation for acting as Sponsor.
The amount of $5,000 was charged to Deficit.
(c) Options to acquire common shares of the Corporation at an exercise price of
$0.10 per share, for up to 1,300,000 common shares were granted to directors of
the Corporation. The value assigned for each option is $0.07 and in total amount
of $97,000 which has been recorded under contributed surplus. The fair value of
the options has been estimated using the Black Scholes option pricing model with
the following assumptions: Exercise and share price $0.10; Risk-free interest
rate 1.64%; Expected volatility 100%; Expected dividend yield Nil; Weighted
average life 5 years; and Forfeiture rate Nil.
Prior to the proposed Qualifying Transaction, the Corporation had granted
400,000 stock options to its officers and directors. The options will expire 90
days following cessation of office, directorship or technical consulting
arrangement. Upon completion of the Qualifying Transactions, holders of the
300,000 stock options will no longer continue as officers and directors of the
Corporation, hence, CapGain, being the accounting parent, was deemed to have
issued replacement options to provide opportunity to the former officers and
directors to exercise their options within 90 days from the date of the
completion of Qualifying Transaction. In addition, replacement options were also
issued for the existing 100,000 stock options owned by a director of the
Corporation who will continue as a director of the consolidated entity.
Consequently, additional share-based payment expense was recorded in the amount
of $41.439. The Corporation also has Agent's Options of 200,000 outstanding and
exercisable as at September 30, 2012. These options have an exercise price of
$0.10 per share and expire on March 7, 2013. Costs incurred related to the
Qualifying Transaction were written off to Deficit in the amount of $135,010.
Additional transaction costs totaling $61,500 were incurred and charged to
Deficit. The existing 400,000 stock options granted to directors and officers of
the Corporation, 200,000 existing agent options and costs incurred related to
the Qualifying Transactions are a portion of the consideration for the
transaction.
(d) IFRS 2 states that for equity-settled share based payment transactions, the
entity shall measure the goods or services received, and the corresponding
increase in equity, directly, at the fair value of the goods or services
received, unless the fair value cannot be estimated reliably. If the entity
cannot estimate reliably the fair value of the goods or services received, the
entity will measure their value, and the corresponding increase in equity,
indirectly, by reference to the fair value of the equity instruments granted.
When the transaction is accounted for under IFRS 2, no goodwill will arise on
the transaction; rather the amount is recognized as a listing expense in Profit
and Loss, eventually to Deficit.
The transactions described in the Share Purchase Agreement in Note 3 will result
in the elimination of the Corporation's equity accounts as at September 30,
2012, along with the recognition of the fair value of the consideration granted
by CapGain for the net liabilities of the Corporation, the difference being
treated as a listing expense. The fair value of the common shares of the
Corporation was calculated at a deemed price of $0.181163 per share.
Consideration (in US $)
Fair value of common shares issued (4,000,000 shares at $0.181163): 724,652
Fair value of replacement stock options granted to former officers and directors
of the Corporation (400,000 stock options): 41,439
Fair value of agent stock options (200,000 stock options): 17,822
Transaction costs: 201,510
Total: 985,423
Net liability received
Cash: 25
Accounts payable and accrued liabilities: (73,865)
Total: (73,840)
Listing expense: 1,059,263
About CapGain
CapGain is an investment company that purchases, re-structures when applicable,
and sells real estate in the United States, with a forward moving focus on
income producing real estate. CapGain's contacts within the real estate and
finance industries allow the purchase of properties significantly below market
value.
Additional information on the operations or financial results of CapGain is
included in reports on file with applicable securities regulatory authorities
and may be accessed through the TMX website (www.tmx.com) and the SEDAR website
(www.sedar.com) under the profile for CapGain.
Forward-Looking Statements
This press release may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. All statements included in
this report and the documents that we incorporate by reference, are
forward-looking statements and can generally be identified by words such as
"will," "allow," "outlook," or the negative of these terms, and other comparable
terminology.
Various risks and other factors could cause actual results, and actual events
that occur, to differ materially from those contemplated by the forward looking
statements, such as whether CapGain is able to meet price, performance, quality
and delivery requirements. Although CapGain believes that the expectations
represented by any forward-looking statements and forward-looking information
contained herein are reasonable based on the information available to them on
the date of this document, management cannot assure investors that actual
results, performance or achievements will be consistent with these
forward-looking statements or forward-looking information. CapGain undertakes no
obligation to update the information in this press release to reflect events or
circumstances after the date hereof or to reflect the occurrence of anticipated
or unanticipated events.
FOR FURTHER INFORMATION PLEASE CONTACT:
CapGain Properties Inc.
Brian Knight
Chief Executive Officer
(847) 854-4213
bknight@capgain.ca
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