Carcetti Capital : Q2 2023 Financial Statements

CARCETTI CAPITAL CORP.

(formerly Cub Energy Inc.)

Condensed Interim Financial Statements

For the three and six months ended June 30, 2023 and 2022

(Unaudited, expressed in thousands of US Dollars, unless otherwise noted)

Notice of No Auditor Review of Interim Financial Statements

Under National Instrument 51-102, if an auditor has not performed a review of the condensed consolidated interim 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 financial statements of Carcetti Capital Corp. (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 condensed consolidated 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. These unaudited condensed consolidated interim financial statements include all adjustments, consisting of normal and recurring items, that management considers necessary for a fair presentation of the condensed consolidated interim financial position, results of operations and cash flows.

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Carcetti Capital Corp.

Condensed Interim Statements of Financial Position (Unaudited, expressed in thousands of US dollars)

	June 30,	December 31,
	2023	2022
	$	$
Assets
Current assets
Cash	301	7,190
Trade and other receivables	4	4
	305	7,194
Total assets	305	7,194
Liabilities
Current liabilities
Trade and other payables	14	92
Preferred share redemption payable (Note 10)	-	6,900
Total liabilities	14	6,992
Shareholders' equity
Share capital (Note 10)	55,525	55,157
Contributed surplus (Note 10)	5,454	5,454
Accumulated other comprehensive (loss) income	87	137
Accumulated deficit	(60,775)	(60,546)
Total shareholders' equity	291	202
Total shareholders' equity and liabilities	305	7,194

Nature of operations and going concern (Note 1)

These condensed interim financial statements for the three and six months ended June 30, 2023 and 2022, were approved by the Board of Directors of the Company on August 28, 2023.

Approved by the Board	"Glenn Kumoi"		"Richard Silas"
	Director (Signed)		Director (Signed)

See accompanying notes, which are an integral part of these condensed interim financial statements

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Carcetti Capital Corp.

Condensed Interim Statements of Operations and Comprehensive (Loss) Income (Unaudited, expressed in thousands of US dollars, except per share data)

	For the three months ended	For the six months ended
	June 30,		June 30,
	2023	2022	2023	2022
	$	$	$	$
Operating expenses
Selling and general administrative
expenses (Note 12)	172	136	259	531
Finance (income) loss, net	-	(25)	(30)	80
Net loss from continuing operations	172	111	229	611
Loss from discontinued operations (Note 5)	-	110	-	143
Net loss	172	221	229	754
Other comprehensive (income) loss
Items that may be reclassified to profit or loss
Foreign currency translation adjustment on
foreign operations	(9)	(56)	50	(151)
Comprehensive loss	163	165	279	603
Loss per share
Basic (Note 11)	(0.05)	(0.21)	(0.11)	(0.72)
Diluted (Note 11)	(0.05)	(0.21)	(0.11)	(0.72)

See accompanying notes, which are an integral part of these condensed interim financial statement

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Carcetti Capital Corp.

Condensed interim Statement of Changes in Shareholders' Equity (Unaudited, expressed in thousands of US dollars)

					Share of
					change in	Accumulated
					equity in	other
					associated	comprehensive
	Number of shares	Share capital	Contributed surplus	Other reserve	company	loss	Deficit	Total
		$	$	$	$	$		$
Balance, January 1, 2022	1,047,383	62,057	5,454	2,193	(2,187)	(41,796)	(18,265)	7,456
Currency translation adjustment	-	-	-	-	-	151	-	151
Net loss	-	-	-	-	-	-	(754)	(754)
Balance, June 30, 2022	1,047,383	62,057	5,454	2,193	(2,187)	(41,645)	(19,019)	6,853
Balance, January 1, 2023	1,047,383	55,157	5,454	-	-	137	(60,546)	202
Shares issued for proceeds	4,166,667	368	-	-	-	-	-	368
Currency translation adjustment	-	-	-	-	-	(50)	-	(50)
Net loss	-	-	-	-	-	-	(229)	(229)
Balance, June 30, 2023	5,214,500	55,525	5,454	-	-	87	(60,775)	291

See accompanying notes, which are an integral part of these condensed interim financial statements

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Carcetti Capital Corp.

Condensed interim Statements of Cash Flows (Unaudited, expressed in thousands of US dollars)

For the six months ended
	June 30,
2023	2022
$	$
Operating activities
Net loss from continuing operations	(229)	(611)
Changes in working capital (Note 6)	(78)	2,038
Cash (used in) provided by operating activities	(307)	1,427
Cash used in discontinued operations	-	(117)
Investing activities
Proceeds on sale of KUB holdings (Note 4)	-	2,600
Cash provided by investing activities	-	2,600
Financing activities
Preferred share redemption (Note 10)	(6,900)	-
Repayment of KUB-Gas loan (Note 8)	-	(2,474)
Shares issued for proceeds	368	-
Cash used in financing activities	(6,532)	(2,474)
Cash used in discontinued financing activities	-	(139)
Net change in cash from continuing operations	(6,839)	1,553
Net change in cash from discontinued operations (Note 5)	-	(263)
Effect of foreign exchange on cash	(50)	85
Cash, beginning of period	7,190	7,368
Cash, end of period	301	8,743

Supplemental cash flow information (Note 6)

See accompanying notes, which are an integral part of these condensed interim financial statements

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Carcetti Capital Corp.

For the three and six months ended June 30, 2023 and 2022 Notes to the condensed interim financial statements (Unaudited, expressed in thousands of US dollars)

1 Nature of operations and going concern

Carcetti Capital Corp. (formerly Cub Energy Inc.) (the "Company") was engaged in the exploration and development of energy. The Company was incorporated pursuant to the provisions of the Business Corporations Act (Ontario) and continued under the Canadian Business Corporations Act in February 2012. The address of the Company's registered office is 1200 - 750 West Pender Street, Vancouver, BC, V6C 2T8, Canada and the records office is Suite 3300, 205 5th Avenue SW, Calgary, AB, T2P 2V7. The Company is listed on the NEX board of the TSX Venture Exchange ("TSXV") under the trading symbol "CART.H".

During the year ended December 31, 2022, the Company divested its subsidiary 3P International Energy Limited ("3P) and 3P's wholly owned subsidiary Tysagaz LLC ("Tysagaz"), which held a 100% working interest in one production licence in western Ukraine (See Note 5). Also during 2022 the Company, through its subsidiary Gastek

LLC ("Gastek"), sold its 35% equity interest in KUBGAS Holdings Limited ("KUB Holdings") which in turn owns a 100% equity interest in KUB-Gas LLC ("KUB-Gas").KUB-Gas owns and operates six licenced gas and gas condensate fields in eastern Ukraine (See Notes 4 and 8).

On December 30, 2022, the Company completed the reorganization of the Company's share capital to permit the

Company to pay a special cash distribution of CAD $9.00 per share (CAD$0.03 per share pre-share consolidation) to shareholders of record as at December 23, 2022 for a total distribution of $6,900 (the "Special Distribution"). See Note 10. In connection with the Special Distribution, the Company filed articles of amendment which created a new class of common shares ("Class B Common Shares") and a class of preferred shares ("Preferred Shares") and the exchange of the existing Company common shares for new Class B Common Shares and Preferred Shares on the basis of one Class B Common Share and one Preferred Share for every Company common share currently outstanding. During the six months ended June 30, 2023, the Special Distribution was paid to shareholders of record.

Also on December 30, 2022, the Company changed its name to "Carcetti Capital Corp." and completed a share consolidation on the basis of one (1) new share for every three hundred (300) old shares as part of the Company's reorganization. All share, stock option and per share amounts in these financial statements have been adjusted to give retroactive effect to the stock consolidation.

As of June 30, 2023, the Company had working capital of $291 (December 31, 2022 - $202) and accumulated deficit of $60,775 (December 31, 2022 - $60,546) since its inception and may incur future losses in the development of its business that may cast doubt significant doubt about the ability of the Company to continue as a going concern.

2 Basis of preparation

1. Statement of compliance
   These condensed interim financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS") and their interpretations as issued by the International Accounting Standards Board ("IASB").
   The condensed consolidated interim financial statements have been prepared in conformity with IAS 34 Interim Financial Reporting and do not include all the information required for full annual consolidated financial statements in accordance with IFRS and should be read in conjunction with the audited consolidated financials for the year ended December 31, 2022.

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Carcetti Capital Corp.

For the three and six months ended June 30, 2023 and 2022 Notes to the condensed interim financial statements (Unaudited, expressed in thousands of US dollars)

2 Basis of preparation (continued)

1. Basis of consolidation

Former subsidiaries and functional and reporting currencies

The following table describes the Company's former subsidiaries and former equity accounted investments, their jurisdiction of incorporation, functional currency, continuance or formation and the percentage of securities beneficially owned, controlled or directed by the Company. The Company held no subsidiaries and no equity investments as at June 30, 2023 and December 31, 2022.

	Percentage of	Jurisdiction of
	Voting Securities	Incorporation,
Name of former Subsidiary/	Previously Owned	Continuance or	Functional
Equity Accounted Investment		Formation	Currency
Gastek LLC	100%	California	US
KUBGAS Holdings Limited	35%	Cyprus	US
KUB-Gas LLC	35%	Ukraine	Hryvnia
KUB-Gas Borova LLC	35%	Ukraine	Hryvnia
3P International Energy Limited	100%	Cyprus	US
3P Energy Consulting LLC	100%	Ukraine	Hryvnia
Tysagaz LLC	100%	Ukraine	Hryvnia

The Company accounted for its 35% indirect ownership in KUB Holdings and KUB-Gas as an investment in associate subject to significant influence under the equity method (Note 4).

During the year ended December 31, 2022, the Company sold its 35% interest in KUB Holdings and sold its 100% interest in 3P and its two Ukraine subsidiaries, Tysagaz and 3P Energy Consulting LLC. See Notes 4 and 5. The Company also dissolved Gastek LLC in November 2022.

The functional currency of the Company is the Canadian dollar. The presentation currency of the financial statements is the US dollar. All financial information herein is presented in US dollars and is rounded to the nearest thousand except as noted. Financial information in Canadian dollars is noted as "CAD" and financial information in Euros is noted as "€".

1. Transactions eliminated on consolidation
   Intercompany balances and transactions, and any unrealized gains arising from intercompany transactions, are eliminated in preparing the financial statements. Unrealized gains arising on transactions with equity accounted investees are eliminated against the investment to the extent of the Company's interest in the investee. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.
2. Basis of measurement
   These financial statements have been prepared on a historical cost basis, except for financial instruments classified as financial instruments as fair value through profit and loss, which are stated at their fair value. In addition, these financial statements have been prepared using the accrual basis of accounting except for cash flow information.
3. Use of estimates and judgments
   Management makes a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with IFRS. Actual results could differ from those estimates. Significant estimates include:

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Carcetti Capital Corp.

For the three and six months ended June 30, 2023 and 2022 Notes to the condensed interim financial statements (Unaudited, expressed in thousands of US dollars)

2 Basis of preparation (continued)

1. Use of estimates and judgments (continued)
2. • The determination of cash-generating units ("CGU") requires judgment in defining a group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or groups of assets. CGUs are determined by similar geological structure, shared infrastructure, geographical proximity, commodity type, similar exposure to market risks and materiality.
   • Tax interpretations, regulations and legislations in the jurisdictions in which the Company operates are subject to change. As such, income taxes are subject to measurement uncertainty. Deferred income tax assets are assessed by management at the end of the reporting period to determine the likelihood that they will be realized from future taxable earnings.
   • Judgment is required to determine the functional currency of the parent and its subsidiaries. These judgments are continuously evaluated and are based on management's experience and knowledge of the relevant facts and circumstances, including analysis of the consideration factors identified in IAS 21, The Effects of Changes in Foreign Exchange Rates.
   • The Company applies judgment in assessing its ability to continue as a going concern for at least 12 months.

1. Significant accounting policies
   These condensed interim financial statements are prepared in accordance with IFRS and follow the same accounting policies and methods of their application as the most recent audited financial statements for the year ended December 31, 2022. These financial statements should be read in conjunction with those consolidated financial statements.
2. Assets and liabilities held for sale
   On September 7, 2021, the Company announced it had entered into a letter agreement to sell its 35% interest in KUB Holdings for a cash payment of $2,600 and the settlement of debt. The settlement of debt includes the trade payable to KUB-Gas and the loan from KUB-Gas (Note 8). On February 2, 2022, the Company completed the sale of its 35% interest in KUB Holdings and received cash proceeds of $2,600 and settled the balance of debt owing to KUB-Gas. The effective date of the transaction is November 15, 2021. The debt was settled through the repayment of the debt to KUB-Gas and simultaneous issue of dividends to the Company, net of withholding taxes. During the year ended December 31, 2021, the Company classified the 35% equity investment as an asset held for sale. The asset was $nil at June 30, 2023 (December 31, 2022 - $nil).

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Carcetti Capital Corp.

For the three and six months ended June 30, 2023 and 2022 Notes to the condensed interim financial statements (Unaudited, expressed in thousands of US dollars)

4 Assets and liabilities held for sale (continued)

Based on the book value of the assets disposed of on February 2, 2022, the related sales proceeds and the effect of recycling of foreign exchange, the loss on the sale of KUB Holdings was calculated to be $18,025, related to the $18,025 in recycling of foreign exchange as summarized below:

As at	February 2, 2022
Equity investment	$3,028
Dividend receivable	2,046
Total net assets	5,074
Cash	2,600
Loan from KUB-Gas	2,474
Total consideration	5,074
Recycling of foreign exchange	18,025
Loss on disposal of KUB Holdings	$ 18,025
The continuity of the Company's investment in KUB Holdings is as follows:
	$
Investment in KUB Holdings as at January 1, 2022	-
Reversal of impairment of KUB Holdings	428
Transfer to assets held for sale	(428)
Investment in KUB Holdings as June 30, 2023 and December 31, 2022	-

The Company recorded no dividends during the six months ended June 30, 2023 (December 31, 2022 - $2,046).

5 Discontinued operations

On August 17, 2022, the Company closed the Sale and Purchase Agreement ("SPA") for the sale of its 100% interest in 3P and its wholly-owned Ukraine subsidiaries, Tysagaz and 3P Consulting. The sale was for nominal consideration and the buyer assuming all of 3P's, Tysagaz' and 3P Consulting' liabilities. The buyer group was comprised of the Chief Financial Officer and former Chief Operating Officer of the Company. The Company received the financial benefit of 3P including the natural gas sales through to July 31, 2022.

As at July 31, 2022, 3P and its subsidiaries had the following assets and liabilities and a negative net book value of $391. The Company has previously recorded impairments of its property, plant and equipment related to 3P and its subsidiaries in previous years. Following the sale of 3P and its subsidiaries the Company determined that its recoverable amount exceeded its carrying amount. As a result, the Company recorded a reversal of impairment of property, plant and equipment of $391 during the year ended December 31, 2022 on the sale of 3P as detailed below.

	July 31, 2022
As at,
Current assets	$ 340
Current liabilities	(323)
Non-current liabilities	(408)
Reversal of impairment of property, plant and equipment	$ (391)

The Company recorded a loss on the disposal of 3P of $24,761 during the year ended December 31, 2022. The loss primarily related to the $24,761 in recycling of foreign exchange translation and $391 in a reversal of a previous years impairment charge on property, plant and equipment as per the below:

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