Spruce  Ridge  Capital  Inc.    Investor  Communications      Year-­‐End  Financial  Results  and  Update                                                  July  16th,  2014    The  beginning  of  2014  has  marked  a  new  chapter  for  Spruce  Ridge  Capital  Inc.  (“Spruce”).  We  have  completed  a  restructuring  of  the  company,  injected  more  capital  into  the  business,  introduced  new  management  as  well  as  new  members  to  the  Board  of  Directors.  This  year  will  be  a  pivotal  milestone  in  our  research  and  planning  process,  but  before  we  go  any  further,  I  would  like  to  take  a  look  back.  Please  find  enclosed  the  audited  financial  results  for  the  period  from  May  3,  2013    to  March  31,  2014.      Financial  Highlights  Please  note  that  these  financials  pertain  to  a  period  that  was  largely  under  the  administration  of  previous  management,  as  Simmons  Financial  Holdings  Corp.  (“SFHC”)  was  appointed  on  January  15,  2014.  These  statements  have  been  reported  to  be  consistent  with  what  was  elected  in  the  previous  statements;  in  order  to  reclassify  our  deficit  into  a  restructuring  account  and  have  the  Plan  of  Arrangement  accounted  for  as  a  financial  reorganization,  our  financials  have  been  prepared  in  accordance  with  the  Accounting  Standards  for  Private  Entities  (ASPE).      Statement  of  Loss  and  Deficit  During  the  restructuring  period  from  May  3,  2013  to  March  31,  2014,  Spruce  incurred  net  losses  of  $323,485.  At  our  interim  reporting  period  at  December  31,  2013,  the  company  had  incurred  net  losses  of  $650,659  that  included  an  accretion  expense  of  $460,283.  We  have  reclassified  this  expense  because  interest  on  debt  related  to  the  land  classifies  as  a  development  cost,  therefore  it  has  since  been  capitalized  to  increase  the  cost  base  of  the  land,  reducing  the  amount  of  losses  incurred  for  the  period.  The  same  treatment  was  applied  to  the  property  tax  expense  of  $9,516  reported  at  interim.  Management  services  and  operating  expenses  of  $114,598  include  a  combination  of  CCAA  costs,  consulting  during  the  restructuring  of  Spruce,  and  management  fees.  Director  fees  have  been  recognized  as  a  long-­‐term  liability  as  payment  will  be  deferred  until  the  land  assets  are  sold.  Legal  fees  include  costs  incurred  from  the  SFHC  investment  and  interest  and  finance  fees  include  interest  charges  of  the  loan  payable.      Federal  and  provincial  tax  rates  have  been  applied  to  Spruce’s  loss  before  income  taxes  at  25%,  resulting  in  a  provision  for  income  taxes  of  $(68,621).  This  results  in  a  future  income  tax  recovery  of  $49,000.        

Balance  Sheet  Upon  implementation  of  the  Plan  of  Arrangement,  on  May  3  2013,  pursuant  to  the  CCAA  process,  Spruce  foreclosed  on  the  development  lands,  which  we  had  previously  provided  a  mortgage  on,  to  Spruce  Ridge  Estates  Inc.  (“Estates”),  a  related  company.  This  was  a  result  of  Estates  having  defaulted  on  their  mortgage.  As  per  the  notes  in  the  financial  statements  (note  3),  the  plan  of  arrangement  recognized  the  amount  due  from  Estates  of  $62,563,701.  The  cost  base  of  the  lands  held  for  development  was  recorded  at  the  fair  market  value  of  $10,296,065.    Assets  have  increased  primarily  due  to  the  reclassification  of  accretion  and  property  tax  costs  capitalized  into  land  value  as  well  as  the  residual  cash  raised  from  the  SFHC  investment.  Since  the  reorganization,  a  total  of  $665,149  of  discount  accretion  on  bonds  payable  have  been  capitalized  to  the  land  for  the  period  May  3,  2013  to  March  31,  2014.  This  accretion  along  with  $9,824  in  development  costs  has  increased  Spruce’s  land  value  from  $10.30  million  to  $10.97  million.      At  May  3,  2013,  the  value  of  the  bonds  reflect  three  items;  the  conversion  to  common  shares,  the  residual  fair  value  of  the  net  assets  and  the  discount  relating  to  the  interest-­‐free  component  of  the  bonds.  Liabilities  have  since  increased  as  a  result  of  the  issuance  of  $900,000  worth  of  bond  purchase  warrants  as  well  as  the  accretion  of  the  discount  on  the  bonds  payable  and  bond  purchase  warrants,  calculated  at  12%  per  annum,  capitalized  to  the  land.  The  loan  payable  of  $500,000  at  May  3,  2013  was  repaid  in  full  on  December  23,  2013  by  capital  raised  through  the  SFHC  investment.  Interest,  finance  and  renewal  fees  and  legal  costs  relating  to  the  loan  were  $50,640.      Shareholders’  equity  has  increased  from  the  issuance  of  $100,000  of  share  purchase  warrants,  but  has  decreased  overall  as  a  result  of  the  deficit  during  the  period.      Operational  Update  After  the  reorganization  of  Spruce,  the  company  is  now  in  a  strong  strategic  position  to  execute  on  a  long-­‐range  plan.  Our  objective  for  2014  has  been  to  make  headway  on  the  initial  site  planning  process.      Since  our  previous  communication,  Spruce  has  engaged  Civicworks  Planning  &  Design  to  assist  with  the  review  of  current  and  emerging  municipal  policies,  initial  site  planning  and  coordination  of  pre-­‐development  studies.  Civicworks  Planning  &  Design  has  vast  experience  in  the  area,  especially  dealing  with  the  Municipal  District  of  Foothills.  Over  the  next  12  months,  we  plan  to  achieve  significant  progress  with  pre-­‐design,  performing  studies,  and  identifying  issues.  Factors  of  consideration  while  planning  will  be  the  wildlife  corridor,  the  dark  skies  policy  surrounding  the  Rothney  Observatory,  water  and  wastewater  and  the  scenic  vistas  of  the  Cowboy  Trail.        

We  have  been  getting  to  know  our  neigbours  to  better  review  our  position  for  future  low-­‐density  development  plans.  Recently,  we  have  had  the  pleasure  to  tour  the  4,800  acres  of  land  just  east  of  our  property  known  as  the  Ann  &  Sandy  Cross  Conservation  Area.  The  Cross  Conservation  has  a  mandate  to  foster  the  protection  of  habitat  for  the  native  species  of  wildlife  and  being  so  close  in  proximity,  we  understand  the  importance  of  aligning  our  interests  with  theirs.  We  want  to  ensure  that  the  wildlife  coming  through  our  corridors;  big  cats,  elk,  deer,  porcupines,  black  bears  and  more,  are  protected.  We  look  forward  to  reaching  out  to  other  large  landowners  to  further  develop  our  plans.      If  you  have  any  questions  or  concerns,  please  don’t  hesitate  to  contact  our  investor  relations  manager  Rob  Petersen  by  email  –  robp@wheelhousesupport.ca  or  by  phone  (403)  266-­‐9316.        Respectfully,            Jay  Simmons    Chairman  and  CEO  Spruce  Ridge  Capital  Inc.                

Spruce Ridge Capital Inc. Financial Statements (Audited) For the period from May 3, 2013 to March 31, 2014

Independent Auditors' Report

To the ShareholdersSpruce Ridge Capital Inc.

We have audited the accompanying financial statements of Spruce Ridge Capital Inc.,which comprise the balance sheets as at March 31, 2014 and May 3, 2013, and thestatements of loss and deficit and cash flows for the period from May 3, 2013 to March 31,2014, and a summary of significant accounting policies and other explanatory information.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financialstatements in accordance with Canadian accounting standards for private enterprises,and for such internal control as management determines is necessary to enable thepreparation of financial statements that are free from material misstatement, whether dueto fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on ouraudits. We conducted our audits in accordance with Canadian generally accepted auditingstandards. Those standards require that we comply with ethical requirements and planand perform the audit to obtain reasonable assurance about whether the financialstatements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditors'judgment, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity’s internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements.

This office is independently owned and operated by Collins Barrow Calgary LLP. The Collins Barrow trademarks are used under license.

Collins Barrow Calgary LLP 1400 First Alberta Place 777 – 8th Avenue S.W. Calgary, Alberta, Canada T2P 3R5 T. 403.298.1500 F. 403.298.5814 e-mail: calgary@collinsbarrow.com

We believe that the audit evidence we have obtained in our audits is sufficient andappropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financialpositions of Spruce Ridge Capital Inc. as at March 31, 2014 and May 3, 2013, and theresults of its operations and its cash flows for the period from May 3, 2013 to March 31,2014 in accordance with Canadian accounting standards for private enterprises.

Emphasis of Matter

We draw attention to note 3 to the financial statements which describes the plan ofarrangement and financial reorganization that was completed by Spruce Ridge CapitalInc. on May 3, 2013. Our opinion is not qualified with respect to this matter.

CHARTERED ACCOUNTANTS

Calgary, CanadaJune 18, 2014

Spruce Ridge Capital Inc. Balance Sheets

March 31, 2014

May 3, 2013

Assets $  $

Land held for development (note 4) 10,971,038   10,296,065 

Cash  302,090    12,295 

Accounts Receivable  3,826    8,361 

Prepaid and Other Assets  1,380    27,566 

 11,278,334    10,344,287 

Liabilities and Shareholders’ Equity Liabilities

Bonds (note 6) 6,187,149   4,621,999 

Future income taxes 632,600   583,600 

Director Fees Payable (note 10) 50,000   ‐ 

Accounts Payable and Accrued Liabilities  287    6,905 

Loan Payable (note 5)  ‐    500,000 

 6,870,036    5,712,504 

Shareholders’ Equity: Common shares (note 8)  1,972,742    1,972,742 

Share purchase warrants (note 8)  100,000    ‐ 

Restructuring account (note 3)  2,659,041    2,659,041 

Deficit  (323,485)   ‐ 

 4,408,298    4,631,783 

 11,278,334    10,344,287 

Commitments (note 9)

Spruce Ridge Capital Inc. Statement of Loss and Deficit For the period from May 3, 2013 to March 31, 2014

 

For the period from May 3, 2013 to March 31, 2014

$

Expenses Management services and operating  114,598 

Director fees (note 10)  50,000 

Interest and finance fees (note 5)  50,858 

General meeting  5,609 

Legal  38,640 

Transfer agent and trustee  14,780 

Loss before income taxes  274,485 

Future income tax (note 7)  49,000 

Net Loss, being deficit end of period  323,485 

Spruce Ridge Capital Inc. Statement of Cash Flows For the period from May 3, 2013 to March 31, 2014

For the period from May 3, 2013 to March 31, 2014

$

Operating Activities Net Loss  (323,485)

Increase in items not involving cash Future income tax  49,000

Net change in non-cash operating working capital accounts: Accounts receivable  4,535 

Prepaid expenses  26,186 

Accounts payable and accrued liabilities  (6,618)

Director fees payable  50,000 

 (200,382)

Financing Activities: Loan advances  150,000 

Loan repayment  (650,000)

Issuance of bond purchase warrants  900,000 

Issuance of share purchase warrants  100,000 

 500,000 

Investing Activities Additions to land held for development  (9,823)

Increase in cash  289,795 

Cash, beginning of period  12,295 

Cash, end of period  302,090 

Spruce Ridge Capital Inc. Notes to Financial Statements

1 Nature of Operations

Spruce Ridge Capital Inc. (“Capital” or the “Company”) was incorporated on September 6, 2007 for the purposes of acquiring land for development. The Company raised $49.2 million from approximately 1,800 investors (the “Bondholders”) by issuing 6% bonds which matured on December 31, 2012. Capital advanced $42.7 million (the “Loans”) to Spruce Ridge Estates Inc. (“Estates”), a related company by common ownership, for the purposes of acquiring development lands located in Calgary, Alberta and for development costs. Estates acquired the development lands for $64.7 million from a related company, and granted a mortgage on those lands to Capital, and a $22 million mortgage to the related company. Capital paid approximately $4.7 million of commissions, legal and other costs relating to the issuance of the Bonds, and advanced an additional $1.8 million to Estates to fund development costs. Due to market delays in the development of the lands and lack of working capital, Capital was unable to generate revenue and could not meet repayment obligations to the Bondholders and filed for creditor protection under the Companies Creditors Arrangements Act on August 24, 2012. A Plan of Arrangement was approved by the Bondholders on January 28, 2013, approved by the Court on February 4, 2013 and implemented on May 3, 2013. The balance sheet at May 3, 2013 has been prepared on the date the plan of arrangement was implemented (note 3). The Company has applied the provisions of CPA Canada Handbook section 1625 “Comprehensive Revaluation of Assets and Liabilities” as a result of the financial reorganization. The development of the lands remains the Company’s primary purpose.

2 Significant Accounting Policies The financial statements were prepared in accordance with Canadian Accounting Standards for private enterprises and include the following significant accounting policies: a) Land held for development Land held for development (the “Land”) was initially recognized at fair value based on independent appraisal as a result of implementation of the Plan of Arrangement, and subsequently has been measured at the lower of cost and net realizable value of the land. Costs capitalized to the Land held for development include all direct costs relating to the projects, carrying costs including interest on debt used to finance project acquisitions, overhead costs, property taxes and land acquisition costs. Indirect servicing and land costs are allocated to each phase of a land development on a net developable acre basis. Total costs within a phase are allocated to individual units based on anticipated selling prices. Net realizable value Management assesses whether any indicators of impairment circumstances exist. When such indicators are present, management determines the net realizable value of inventory based on the projected undiscounted future net cash flow after development and selling costs over the life of the project. If the future undiscounted cash flows are less than the carrying amount, the inventory is considered to be impaired and is then written down to the net realizable value. When the circumstance that previously caused inventories to be written down below cost no longer exists or when there is clear evidence of an increase in net realizable value because of changed economic circumstances, the amount of the write down is reversed. These projections take into account the specific business plan for the project and management’s best estimate of the most probable set of

Spruce Ridge Capital Inc. Notes to Financial Statements economic conditions anticipated to prevail in the market area. The ultimate net realizable value of the Land is dependent upon future market and economic conditions.

b) Financial instruments The Company initially measures its financial assets and liabilities at fair value, except for certain non-arm’s length transactions that are measured at the exchange amount. The Company subsequently measures all of its financial assets and financial liabilities at amortized cost. Financial assets measured at amortized cost include cash and accounts receivable. Financial liabilities measured at amortized cost include accounts payable and accrued liabilities, director fees payable, loan payable, and bonds. Impairment Financial assets measured at cost or amortized cost are tested for impairment, when there are indicators that the asset may be impaired. The amount of the write-down, if any, is recognized in net income. The previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance account. The reversal may be recorded provided it is no greater than the amount that had been previously reported as a reduction in the asset and it does not exceed original cost. The amount of the reversal is recognized in net income. Transaction costs Financial instruments, that are subsequently measured at cost or amortized cost, are adjusted by the transaction costs and financing fees that are directly attributable to their origination, issuance or assumption. Long-term debt is also reduced by financing fees and any debt premiums or discounts. The Company uses the effective interest method to amortize these adjustments to long-term debt. c) Income taxes The Company provides for future income taxes by using the asset and liability method. Under this method, future income tax assets and liabilities are computed for temporary differences between the carrying value and tax bases for assets and liabilities and the benefit of tax losses available to be carried forward to reduce taxable income in future years that are likely to be realized. Future tax assets and liabilities are calculated using enacted or substantially enacted tax laws and rates expected to be applicable to the periods in which the differences are expected to affect taxable income. Future tax benefits are recognized to the extent that realization of such benefits is more likely than not. d) Measurement uncertainty and use of estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. The valuation of land held for development is based on an independent appraiser’s best estimates of the future estimated selling price. The valuation of bonds payable including the bond purchase warrants is based on the estimated valuation of land held for development and management’s estimate of the appropriate interest rate for similar debt. The valuation of future income taxes are based on anticipated future tax rates in the period of reversal of timing differences.

Spruce Ridge Capital Inc. Notes to Financial Statements By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant.

3 Plan of Arrangement and Financial Reorganization On January 28, 2013, the Company’s Bondholders (note 1) approved a Plan of Arrangement pursuant to the Companies Creditors Arrangements Act (the “Plan”), which was implemented on May 3, 2013. The main components of the Plan included:

Capital foreclosed on the development lands and title was transferred from Estates. The related company mortgage of $22 million was struck from title. Consideration was extinguishment of the Loans principal and accrued interest of approximately $62.6 million;

The common shares that were issued and outstanding prior to implementation of the Plan of Arrangement were cancelled;

The existing 6% bonds were exchanged for new Class A, non-interest bearing bonds having stated value of $60 million and new common shares having stated value of $1.97 million. As a result, the Bondholders now hold 100% of the issued common shares of Capital.

A new Board of Directors was appointed. The Plan of Arrangement has been accounted for as a financial reorganization as at May 3, 2013 in accordance with CPA Canada Handbook section 1625 Comprehensive Revaluation of Assets and Liabilities. The Company’s assets and liabilities have been adjusted to reflect the values established during the financial reorganization. The retained earnings has been reclassified to the restructuring account and the Company commenced accounting as of May 3, 2013 on a “fresh start” basis. The effect of the financial reorganization on the balance sheet accounts is as follows:

Prior to Financial Reorganization 

Assets (Liabilities/Equity)

(Unaudited) 

After Financial Reorganization 

Assets (Liabilities/Equity)  Restructuring 

$  $  $ 

Amounts due from Spruce Ridge Estates Inc.   62,563,701   ‐     (62,563,701) 

Land held for development   ‐     10,296,065    10,296,065 

Bonds payable   (62,082,841)   (4,622,000)   57,460,841 

Accounts payable and accrued liabilities   (268,878)   ‐     268,878 

Future income taxes   ‐     (583,600)   (583,600) 

Share capital ‐ new common shares issued   ‐     (1,972,742)   (1,972,742) 

Share capital ‐ old common shares cancelled   (1,000)   ‐     1,000 

Pre‐reorganization retained earnings   (215,327)   ‐     215,327 

Restructuring costs   ‐     (463,027)   (463,027) 

(4,345)   2,654,696    2,659,041 

The assets and liabilities have been adjusted to their estimated fair value at May 3, 2013. The fair market value of the land is based on its independently appraised value less estimated selling costs. The stated value of the bonds have been reduced first to reflect the conversion to new common shares, secondly to reflect the residual fair value of the net assets of the Company, and third to reflect the discount relating to the interest-free component of the bonds. Accounts payable and

Spruce Ridge Capital Inc. Notes to Financial Statements accrued liabilities have been written down to reflect a partial conversion to bonds and a write-off for amounts not claimed in the CCAA claims process. Future income taxes reflect the net tax effect of the differences between the accounting bases and tax bases of the assets and liabilities. The revaluation adjustments are classified to restructuring and included in shareholders’ equity.

4 Land Held for Development March 31, May 3, 2014 2013 Land held for development 924.77 acres $10,971,038 $10,296,065 Capitalized costs $9,823 in development costs and $632,890 of accretion of discount on bonds payable [note 6(a)] have been capitalized to the land for the period May 3, 2013 to March 31, 2014. $32,260 of accretion of discount on bond purchase warrants payable [note 6(b)] have been capitalized to the land for the period of May 3, 2013 to March 31, 2014.

5 Loan payable The Company had a $1,250,000 line of credit with a third party private lender, of which $500,000 was drawn on January 11, 2013. The credit facility carried at 12% per annum, was secured by a first charge on the land held for development and matured on July 11, 2013. The facility could be renewed in six-month renewal terms until July 11, 2014 with financing fees of 1.5% of the principal balance at each renewal. On July 11th, 2013 the Company renewed the loan to November 15, 2013. On December 23, 2013 the loan was paid in full. Interest, finance and renewal fees and legal costs totalling $50,640 were paid during the period from May 3, 2013 to March 31, 2014.

6 Bonds payable and Bond purchase warrants a) Bonds Payable On May 3, 2013 the Company issued non-interest bearing Class A Bonds to replace the 6% bonds previously issued, in connection with the Plan (note 3). The Class A Bonds are redeemable at the option of the Company in whole or in part at any time prior to maturity. The Class A Bonds face and redemption values are $60,110,098, are subject to excluded asset provisions in the Bond Indenture, are secured by a fixed mortgage on the lands and mature December 31, 2017. The Bond Indenture provides for the establishment of an Excluded Asset Account upon the sale or other realization of the assets of the Company whereby the first $2,000,000 of net proceeds from the realization of assets shall be deposited to the Excluded Asset Account for use by the Company as determined by the Board of Directors and shall not be subject to the fixed charge of the Class A Bonds. The Class A Bonds have been recorded at their estimated fair value determined as follows:

Spruce Ridge Capital Inc. Notes to Financial Statements

$

Face value of 6% bonds issued before financial reorganization   49,197,600 

Accrued interest to August 24, 2012   12,664,225 Accounts payable paid by way of Class A Bonds issued in accordance with the financial reorganization   221,015 

 62,082,840 

Conversion of bonds to Class A common shares (note 3)   (1,972,742) 

Face and redemption value, Class A Bonds issued   60,110,098 

Adjustment to fair value, being residual value of net assets   (52,266,120) 

Adjustment to reflect deemed market rate of 12% per annum   (3,221,979) 

Balance, May 3, 2013   4,621,999 

Accretion of discount on bonds payable    632,890 

Bond purchase warrants issued [note 6(b)]  900,000 

Accretion of bond purchase warrant [note 6(b)]  32,260 

Balance, March 31, 2014   6,187,149 

b) Bond purchase warrants On December 23, 2013, the Company issued $900,000 of Bond Purchase Warrants (the “Bond Warrants”) for cash consideration of $900,000. The holders are entitled to receive, upon exercise of the Bond Warrants, $6,029,400 of Class A Bonds, identical to existing Class A Bonds. In accordance with investment agreements related to the issue of the Bond Warrants, the Company is required to establish Bond Warrant Reserve Accounts to which the Company, in the event that a distribution is made on the Class A Bonds, will deposit the amount that would be payable to the holders of the Bond Warrants had those warrants been exercised and the underlying Class A Bonds issued. Concurrent with the granting of the Bond Warrants, the Company entered into a Management Agreement (note 9) with Simmons Financial Holdings Corporation (“SFHC”). In the event that the Management Agreement is terminated by the Company prior to the expiry of its original term (with certain exceptions), the holders may put the Bond Warrants back to the Company and require the Company to purchase the Bond Warrants at a repurchase price equal to their fair value plus the amounts in the Bond Warrant Reserve accounts. The Company may, at its option, if required to repurchase the Bond Warrants, pay the purchase price by cash payment, cash payment to be funded by the sale of a portion of the Land held for development within 180 days, or by transfer of title to a portion of the Land held for development which has a fair market value in the amount of the repurchase price. The accretion of the discount on bond purchase warrants payable of $32,260, calculated at a rate of 12% per annum, was capitalized to land held for development.

7 Income taxes The provision for income taxes differs from the result that would have been obtained by applying the combined federal and provincial tax rates (2013 – 25%) to the Company’s loss before income taxes. The differences result from the following:

$ 

Loss before income taxes   (274,485) 

Expected income tax recovery at statutory rates – 25%   (68,621) 

Income inclusion arising from debt forgiveness   117,621 

Future income tax    49,000 

Spruce Ridge Capital Inc. Notes to Financial Statements The Company’s non-capital losses expire in the following years:

$ 

2032  52,646,290 

2033  49,624 

52,695,914 

8 Common shares and Share purchase warrants a) Common shares An unlimited number of common shares have been authorized for issuance, of which, 1,972,742 common shares at a stated value of 1,972,742 have been issued as at May 3, 2013 and March 31, 2014. Each share is entitled to one vote per share. b) Share purchase warrants On December 23, 2013, the Company issued $100,000 of Share purchase warrants (the “Share Warrants”) for cash consideration of $100,000. The holders are entitled to receive, upon exercise of the Share Warrants, 197,878 common shares. In accordance with investment agreements related to the issue of the Share Warrants, the Company is required to establish Share Warrant Reserve Accounts to which the Company, in the event that a distribution is made on common shares, will deposit the amount that would be payable to the holders of the Share Warrants had those warrants been exercised and the underlying common shares issued. Concurrent with the granting of the Share Warrants, the Company entered into a Management Agreement with SFHC (note 9). In the event that the Management Agreement is terminated by the Company prior to the expiry of its original term (with certain exceptions), the holders may put the Share Warrants back to the Company and require the Company to purchase the Share Warrants at a repurchase price equal to their fair value plus the amounts in the Share Warrant Reserve accounts. The Company may, at its option, if required to repurchase the Share Warrants, pay the purchase price by cash payment, cash payment to be funded by the sale of a portion of the Land held for development within 180 days, or by transfer of title of a portion of the Land held for development which has a fair market value in the amount of the repurchase price.

9 Commitments On December 23, 2013, the Company entered into a Management Agreement with SFHC to provide management services for the next three years. In accordance with the Management Agreement, SFHC is to be paid a base annual management fee of $120,000. SFHC is entitled to an incentive fee equal to 25% of the appreciation in net asset value (as defined in the Management Agreement) upon the sale or partial sale of the land held for development and on termination of the Management Agreement. The Company may at its option pay the incentive fee by cash payment to be funded by the sale of a portion of the land held for development within 180 days, or by transfer of title to a portion of the land which has a fair market value equal to the incentive fee. In addition, provided that the Management Agreement is in effect at the time of sale, SFHC is entitled to a 5% commission on the sale of the Land held for development and in that circumstance SFHC shall be responsible for all commissions payable to third parties.

10 Director fees The Company has agreed to pay director fees of $50,000 for 2013. The directors have agreed to defer receipt of those fees until the land assets are sold.

Spruce Ridge Capital Inc. Notes to Financial Statements

11 Financial Instruments The Company is exposed to the following significant financial risks: a) Credit risk The Company is exposed to credit risk associated with cash. The risk is mitigated as the cash is maintained with a major financial institution. The maximum exposure to credit risk is represented by the carrying amount of cash on the balance sheet. b) Interest rate risk Interest rate price risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market interest rates. The fair value of bonds payable including bond purchase warrants are subject to changes in estimated market rates. As rates increase, the fair value of the liability will decrease and vice versa. c) Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. The Company is exposed to the risk that there will be insufficient working capital to meet obligations. The Company is managing the risk by regular monitoring of bank balances and by not incurring long-term financial instruments, excepting the bonds payable.