EX-99.1 2 exh99_1.htm EXHIBIT 99.1
 
Exhibit 99.1
ADIRA ENERGY LTD.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2016

UNAUDITED
 
U.S. DOLLARS IN THOUSANDS
INDEX


 
Page
   
Consolidated Statements of Financial Position
3
   
Consolidated Statements of Comprehensive Profit and Loss
4
   
Consolidated Statements of Changes in Equity
5
   
Consolidated Statements of Cash Flows
6
   
Notes to Interim Consolidated Financial Statements
7 - 10
   
 
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NOTICE TO SHAREHOLDERS

The accompanying unaudited condensed consolidated interim financial statements of Adira Energy Ltd. for the nine month period ended September 30, 2016 have been prepared by management in accordance with International Financial Reporting Standards applicable to consolidated interim financial statements (see note 2 to the unaudited condensed consolidated interim financial statements). Recognizing that the Company is responsible for both the integrity and objectivity of the unaudited condensed consolidated interim financial statements, management is satisfied that these unaudited condensed consolidated interim financial statements have been fairly presented.

Under National Instrument 51-102, part 4, sub-section 4.3(3)(a), if an auditor has not performed a review of the interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The Company's independent auditor has not performed a review of these financial statements in accordance with standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity's auditor.
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ADIRA ENERGY LTD.
 
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
U.S. dollars in thousands

   
September 30,
    
December 31,
  
   
2016
    
2015
  
ASSETS
            
             
CURRENT ASSETS:
            
Cash and cash equivalents
  
$
37
    
$
124
  
Loan receivable
    
25
      
25
  
Other receivables and prepaid expenses
    
1
      
14
  
Deferred Expenses (Note 3)
    
72
      
-
  
                 
Total current assets
    
135
      
163
  
                 
                 
Total assets
  
$
135
    
$
409
  
                 
LIABILITIES AND EQUITY
                
                 
CURRENT LIABILITIES:
                
Trade payables
  
$
11
    
$
60
  
Other accounts payable and accrued liabilities
    
154
      
65
  
                 
Total current liabilities
    
165
      
125
  
                 
NON-CURRENT LIABILITIES
                
   Warrant liability
    
112
      
112
  
                 
 Total liabilities
    
277
      
237
  
                 
DEFICIT:
                
Share capital (Note 4)
    
-
      
-
  
Additional paid-in capital (Note 4)
    
34,060
      
34,060
  
Accumulated deficit
    
(34,202
)
    
(34,134
)
                 
Total deficit
    
(142
)
    
(74
)
                 
Total liabilities and deficit
  
$
135
    
$
163
  
 
The accompanying notes are an integral part of the condensed consolidated interim financial statements.

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ADIRA ENERGY LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS AND COMPREHENSIVE PROFIT AND LOSS
U.S. dollars in thousands, except share and per share data

   
Nine months ended
September 30,
    
Three months ended
September 30,
  
   
2016
    
2015
    
2016
    
2015
  
   
Unaudited
  
Expenses:
                        
General and administrative expenses
    
71
      
214
      
20
      
25
  
                                 
Total expenses
    
71
      
214
      
20
      
25
  
                                 
Operating loss
    
(71
)
    
(214
)
    
(20
)
    
(25
)
                                 
Foreign exchange gain (loss)
    
3
      
(39
)
    
1
      
5
  
                                 
Loss before income tax expense
    
(68
)
    
(253
)
    
(19
)
    
(20
)
Income tax expense
    
-
      
-
      
-
      
-
  
                                 
Net comprehensive loss
  
$
(68
)
  
$
(253
)
  
$
(19
)
  
$
(20
)
                                 
Basic and diluted net loss per share attributable to equity holders of the parent
  
$
(0.00
)
  
$
(0.02
)
  
$
(0.00
)
  
$
(0.00
)
                                 
Weighted average number of ordinary shares used in computing basic and diluted net loss per share
    
17,112,021
      
14,524,816
      
17,112,021
      
17,112,021
  
                                 
                                 
 
The accompanying notes are an integral part of the condensed consolidated interim financial statements.

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ADIRA ENERGY LTD.

CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
U.S. dollars in thousands, except share data


   
Number of shares
    
Share
capital
    
Additional paid-in
capital
    
Accumulated
deficit
    
Total
Equity
(Deficit)
  
Balance as of January 1, 2015
    
12,292,022
    
$
-
    
$
34,051
    
$
(33,865
)
  
$
186
  
Shares issued in private placement, net
    
4,820,000
      
-
      
7
      
-
      
7
  
Share-based compensation
    
-
      
-
      
2
      
-
      
2
  
Net loss and comprehensive loss for the nine months
    
-
      
-
      
-
      
(253
)
    
(253
)
Balance as of September 30, 2015
    
17,112,022
    
$
-
    
$
34,281
    
$
(34,118
)
  
$
(163
)
                                         
Net loss and comprehensive loss
    
-
      
-
      
-
      
(16
)
    
(16
)
Balance as of December 31, 2015
    
17,112,022
    
$
-
    
$
34,060
    
$
(34,134
)
  
$
(74
)
                                         
Net loss and comprehensive loss for the nine months
    
-
      
-
      
-
      
(68
)
    
(68
)
Balance as of September 30, 2016
    
17,112,022
    
$
-
    
$
34,060
    
$
(34,202
)
  
$
(142
)
 
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
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ADIRA ENERGY LTD.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
 
   
Nine months ended
September 30,
    
Three months ended
September 30,
  
   
2016
    
2015
    
2016
    
2015
  
   
Unaudited
  
Cash flows from operating activities:
                        
Net loss
  
$
(68
)
  
$
(253
)
    
(19
)
    
(20
)
Adjustments to reconcile net loss to net cash used in operating activities:
                                
Loss on sale of fixed assets
    
-
      
1
      
-
      
-
  
Share-based payment
    
-
      
2
      
-
          
                                 
     
-
      
3
      
-
      
-
  
Changes in asset and liability items:
                                
(Increase) decrease in other receivables prepaid expenses and deffered expenses
    
(59
)
    
57
      
10
      
17
  
(Decrease) increase in trade payables
    
(49
)
    
(159
)
    
(2
)
    
(42
)
Increase (decrease) in other accounts payable and accrued liabilities
    
89
      
(16
)
    
11
      
20
  
                                 
     
(19
)
    
(118
)
    
19
      
(5
)
                                 
Net cash used in operating activities
    
(87
)
    
(368
)
    
-
      
(25
)
Cash flows from investing activities:
                                
                                 
Proceeds from sale of equipment and other assets
    
-
      
1
      
-
      
-
  
Decrease in restricted deposits
    
-
      
9
      
-
      
-
  
                                 
Net cash provided by investing activities
    
-
      
10
      
-
      
-
  
Cash flows from financing activities:
                                
                                 
Proceeds from issue of shares, net of issuance expenses
    
-
      
228
      
-
      
-
  
                                 
Net cash provided by financing activities
    
-
      
228
      
-
      
-
  
Decrease in cash and cash equivalents
    
(87
)
    
(130
)
    
-
      
(25
)
Cash and cash equivalents at the beginning of the period
    
124
      
334
      
37
      
229
  
                                 
Cash and cash equivalents at the end of the period
  
$
37
    
$
204
    
$
37
    
$
204
  
 
 
The accompanying notes are an integral part of the condensed consolidated interim financial statements.

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ADIRA ENERGY LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 1:-
GENERAL

a.
Nature of operations:

Adira Energy Ltd. and its subsidiaries ("Adira" or "the Company"), is an oil and gas exploration company. Adira is a limited company, incorporated on April 8, 2009, and domiciled in Toronto, Ontario, Canada.  The registered head office is located at 4101 Yonge Street, Suite 706, Toronto,. Ontario, M2P 1N6.  The Company's shares are currently traded on the OTC market in the U.S. and the TSX Venture Exchange ("TSX") in Canada. The condesend consolidated interim financial statements of the Company for the three and nine months ended September 30, 2016 were authorized for issue in accordance with a resolution of the directors on November 28, 2016.

These financial statements have been prepared in a condensed format as of September 30, 2016, for the three and nine month period then ended ("interim consolidated financial statements"). These financial statements should be read in conjunction with the Company's annual financial statements as of December 31, 2015, and for the year then ended and the accompanying notes.

Letter of intent to complete a transaction

On November 4, 2015, the Company entered into a letter of intent ("LOI") with SMAART Holdings Inc. ("SMAART") whereby the Company will acquire SMAART through a three cornered amalgamation between the Company and its wholly owned subsidiary (the "Transaction").  In connection with the completion of the Transaction the amalgamated entity (the "Resulting Issuer") intends to continue to be listed on the TSX Venture Exchange using Adira's current listing.

SMAART is a British Columbia based corporation that owns a Nevada, USA subsidiary, SMAART Holdings Corp., which in turn owns the following active subsidiaries:

(i)
Empower Healthcare Corporation ("EHC") is an Oregon based corporation that provides physician services to patients. EHC focuses on pain management services and is a pioneer in the recommendation of cannabis based products to its patients.

(ii)
The Hemp & Cannabis Company ("THCC") is an Oregon corporation. THCC owns and leases real estate that was used to cultivate cannabis with state licenses in both Oregon and Washington.

(iii)
SMAART Inc. is an Oregon corporation that provides administrative services to SMAART owned companies.

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ADIRA ENERGY LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
 
NOTE 1:-
GENERAL (CONTINUED)

a.
Nature of operations (continued):

The Transaction is subject to a number of conditions typical in a transaction of this nature, including without limitation, the approval by at least 66 2/3% of the votes cast by Adira shareholders at a special meeting of Adira shareholders to approve the Transaction and the approval of the TSX Venture Exchange. On closing of the Transaction, it is expected that current shareholders of Adira will own 10% of the Resulting Issuer, while the current shareholders of the SMAART will own the remaining 90%.

Another condition of the Transaction is that SMAART complete a financing to close concurrently with the completion of the Transaction.

b. Financial position:

As reflected in the consolidated financial statements, as of June 30, 2016, the Company had an accumulated deficit of $34,202. The Company is an early-exploration stage company and its operating revenues are currently insufficient to finance its future operating expenses and exploration funding commitments.

The ability of the Company to continue as a going concern depends upon the discovery of economically recoverable reserves, the ability of the Company to obtain financing to complete development, and upon future profitable operations from the properties or proceeds from their disposition. There can be no assurance that the Company will be able to continue to raise funds from the aforementioned sources in which case the Company may be unable to meet its obligations. These factors raise substantial doubts about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to the carrying amounts and classifications of assets and liabilities that would result if the Company was unable to continue as a going concern.

NOTE 2:-
SIGNIFICANT ACCOUNTING POLICIES

The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for the preparation of financial statements for interim periods, as prescribed in IAS 34, "Interim Financial Reporting".

The significant accounting policies and methods of computation adopted in the preparation of the interim consolidated financial statements are consistent with those followed in the preparation of the annual consolidated financial statements.

NOTE 3:- DEFFERED EXPENSES

Deffered expenses realate to expenses incurred in connection with the SMAART trasnaction.

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ADIRA ENERGY LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
 
NOTE 4:-
EQUITY

a.
Stock Option Plan:

The movement in stock options during the three months ended September 30, 2016, was as follows:

   
Number of
options
outstanding
    
Weighted average
exercise price
  
             
Balance at December 31, 2015 (audited)
    
271,334
      
2.85
  
Options forfeited
    
(33,334
)
    
10.78
  
                 
Balance at September 30, 2016 (unaudited)
    
238,000
      
2.34
  

The following table summarizes information about stock options outstanding and exercisable as of September 30, 216 (unaudited):

Grant date
  
Expiry date
  
Grant date fair value
    
Exercise price (*)
    
Number of options outstanding
    
Number of options exercisable
    
Average remaining contractual life
  
                                   
December 1, 2011 (*)
  
November 30, 2016
  
$
3.30
    
$
5.73
      
2,000
      
2000
      
0.17
  
August 22, 2012 (*)
  
August 21, 2017
  
$
1.05
    
$
2.29
      
236,000
      
236,000
      
0.89
  
                                             
                         
238,000
      
238,000
          

(*)
The exercise price is denominated in Canadian dollars and was translated to USD in the table above using the exchange rate on September 30, 2016.

b. Share purchase warrants:

The following tables summarize information applicable to warrants outstanding as of September 30, 2016:
Issue date
  
Expiry date
  
Grant date fair value
    
Exercise
price (*)
    
Number of warrants
  
                       
May 7, 2015
  
May 6, 2018
  
$
0.04
    
$
0.03
      
4,820,000
  

(*)
The exercise price of these warrants is denominated in Canadian dollars and was translated to USD in the table above using the exchange rate as of September 30, 2016.

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ADIRA ENERGY LTD.
NOTES TO CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
 
NOTE 5:-
RELATED PARTY TRANSACTIONS

During the nine month period ended September 30, 2016, the Company incurred $5 thousand in consulting fees and operating expenses to private companies which are controlled by directors or officers of the Company, as compared to $60 during the nine month period ended September 30, 2015.

These transactions are in the ordinary course of business and are measured at the amount of consideration set and agreed by the related parties.
 
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