C.A. Bancorp Inc.
TSX VENTURE : BKP

C.A. Bancorp Inc.

May 29, 2006 17:31 ET

C.A. Bancorp Inc. 'TSXV:BKP' Announces First Quarter 2006 Financial Results

TORONTO, ONTARIO--(CCNMatthews - May 29, 2006) - C.A. Bancorp Inc. (the "Company") (TSX VENTURE:BKP) is pleased to announce its financial results for the first quarter of 2006.

Highlights

- On January 26, 2006, the Company completed a Qualifying Transaction acquiring (a) all net assets of Sentry Select Focused Wealth Management Fund in exchange for 4,516,379 common shares and 4,516,379 common share purchase warrants of the Company, and (b) all of the outstanding shares of C.A. Bancorp Ltd. ("CABL") (now a wholly-owned subsidiary of C.A. Bancorp Inc.) and $9,874 due from Petro Assets Inc., the sole shareholder of CABL, in exchange for 3,399,906 common shares and 3,399,906 common share purchase warrants of the Company.

- The Company's net assets increased to $2,576,814 (December 31, 2005 - net liabilities of $89,085). The largest factor contributing to the increase of net assets was the Qualifying Transaction.

- The Company had total revenue of $24,794 (2005 - $320), comprised of interest and investment income.

- The Company incurred total expenses of $122,877 (2005 - $1,220), including $75,645 in administrative fees paid to Sentry Select Capital Corp. pursuant to the Administration Agreement.

Q1 financial results

The complete first quarter Management's Discussion and Analysis and Financial Statements are included in this news release. For further information about the company, please visit www.cabancorp.com.

Investment objectives and strategy

C.A. Bancorp Inc. operates two businesses: a merchant bank and a market intermediary (through its wholly owned subsidiary C.A. Bancorp Ltd.).

As a merchant bank, C.A. Bancorp Inc. will pursue a strategy of making equity investments in Canadian small- and middle-market, public and private companies that exhibit the potential for substantial capital appreciation through improved management, financial performance and enhanced strategic positioning. Among other strategies, C.A. Bancorp Inc. will target undervalued companies that are underperforming due to poor management execution or inadequate capital structure, or are undergoing a significant transition, such as a change in senior management or a succession in ownership.

It is anticipated that C.A. Bancorp Inc. will make investments of $0.5 million to $10 million in companies with enterprise values ranging from $20 million to $100 million. Transaction types may include open-market purchases and private placement of securities of public issuers, management buyouts, equity investment in private issuers, going-private transactions and restructurings. Typically, C.A. Bancorp Inc. will seek to exercise significant influence through positions on the boards of directors of portfolio companies, as well as through structural and governance rights in privately held companies. Effective control of each portfolio company will be sought, either through a shareholders' agreement, board representation or significant ownership, to ensure that C.A. Bancorp Inc. can direct change, if necessary. In all cases, board representation, governance standards and, in the case of the privately held companies, shareholder rights and protections will be sought.

C.A. Bancorp Inc. will invest in the form of subordinated debentures, convertible debentures, preferred shares, common equity or similar equity-like instruments.

C.A. Bancorp Inc. intends to be an active and constructive partner, whose executives will work together with management of portfolio companies to implement strategic, financial and governance initiatives with a view to creating significant value.

As a market intermediary, C.A. Bancorp Inc. will find equity and/or debt financing for junior and mid-market public and private companies in various industry sectors, including oil and gas, and mining.



C.A. BANCORP INC.
(Previously, Masthead Resources Ltd.)
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2006


This Management's Discussion and Analysis ("MD&A") presents an analysis of the financial condition of C.A. Bancorp Inc. (referred to herein as the "Company" and formerly called Masthead Resources Ltd,) for the three month period ended March 31, 2006. The following information should be read in conjunction with the unaudited interim consolidated financial statements of the Company as at and for the three month period ended March 31, 2006.

This MD&A is dated May 18, 2006 and presents material information up to this date. This information includes discussion and analysis of the Company's Qualifying Transaction (the "Qualifying Transaction"), which was completed on January 26, 2006.

OVERVIEW

The Company was incorporated on March 29, 2005 pursuant to the Business Corporations Act (Alberta) as Master Mines and Metals Inc. The Company initially issued 2,000,000 shares at $0.10 per share for total gross proceeds of $200,000. The Company was formed as a Capital Pool Corporation and consequently there was minimal business activity until it completed its Qualifying Transaction.

On April 27, 2005, the Company filed articles of Amendment to change its name to Masthead Resources Ltd.

On August 8, 2005, the Company filed a prospectus for an Initial Public Offering of 1,500,000 common shares at $0.20 per share. This Offering was successfully completed on August 22, 2005, raising additional capital of $300,000. The costs of the public offering were $92,106 and were charged against share capital.

On September 2, 2005, the Company began trading on the TSX Venture Exchange under the symbol "MTH.P".

THE QUALIFYING TRANSACTION

On December 17, 2005, the Company proposed to acquire i) 100 per cent of the net assets of Sentry Select Focused Wealth Management Fund (the "Fund"), and ii) 100 per cent of the outstanding common shares in C.A. Bancorp Ltd. ("CABL"), in exchange for common shares and common share purchase warrants of the Company.

The Fund was managed by Sentry Select Capital Corp. ("Sentry Select"), a corporation beneficially owned and controlled by the Chairman of the Board of Directors and CEO of the Company. C.A. Bancorp Ltd. (formerly Capital Access Corporation) was a private company, registered as a Limited Market Dealer and was inactive in prior years leading up to this transaction. CABL was, prior to the Qualifying Transaction (described below), indirectly controlled by the Chairman of the Board of Directors and CEO of the Company.

On January 26, 2006, the Company completed the qualifying transaction (the "Qualifying Transaction") acquiring (a) the net assets of the "Fund" in exchange for 4,516,379 common shares and 4,516,379 common share purchase warrants of the Company, and (b) 100 per cent of the outstanding shares of CABL (now a wholly-owned legal subsidiary of C.A. Bancorp Inc.) and $9,874 due from Petro Assets Inc., the sole shareholder of CABL, in exchange for 3,399,906 common shares and 3,399,906 common share purchase warrants of the Company. The acquisitions constituted the Company's "Qualifying Transaction" pursuant to Policy 2.4 of the TSX Venture Exchange.

Each of the warrants issued for the above transactions entitle the holders thereof to purchase one C.A. Bancorp Inc. common share for $0.35 for one year following the closing of the transactions. After the completion of the Qualifying Transaction on January 26, 2006, the Company changed its name from Masthead Resources Ltd. to C.A. Bancorp Inc. and its trading symbol on the TSX Venture Exchange to BKP.

The common shares and warrants issued to former shareholders of the Subsidiary will be held in escrow pursuant to a value security escrow agreement under the policies of the TSX Venture Exchange.

RESULTS OF OPERATIONS

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: C.A. Bancorp Ltd. ("CABL") and C.A. Bancorp Financial Ltd. ("CABFL"). CABFL, which was incorporated on March 15, 2006, has been inactive since incorporation and has no assets, liabilities, revenues or expenses. CABL was acquired on January 26, 2006 as part of the Qualifying Transaction.

The Qualifying Transaction has been recorded as a reverse takeover transaction ("RTO"), which does not constitute a business combination, in accordance with Abstract No 10 of the Emerging Issues Committee ("EIC-10") of the Canadian Institute of Chartered Accountants. Therefore, the consolidated financial statements are issued under the name of C.A. Bancorp Inc., the legal parent company, but are considered to be a continuation of the financial statements of C.A. Bancorp Ltd., the legal subsidiary.

The comparative balance sheet as at December 31, 2005 and the comparative statements of operations and cash flows for the three month period ended March 31, 2005 are those of CABL. The consolidated statements of operations and cash flows for the three month period ended March 31, 2006 include the results of operations and cash flows of CABL from January 1, 2006 and of the Company since January 26, 2006. All intercompany transactions and balances have been eliminated in these consolidated financial statements.

Acquisition of the Fund's net assets

The net assets of the Fund were comprised of cash of $1,590,831 and accrued liabilities of $10,098. The aggregate purchase price was $1,580,733 allocated to common shares valued at $1,424,015 and common share purchase warrants valued at $156,718.

Acquisition of the common shares of CABL

The estimated fair value of the assets and liabilities of CABL on the date of acquisition was $1,180,093. The aggregate purchase price was $1,189,967, including $9,874 due from Petro Assets Inc., allocated to common shares valued at $1,071,990 and common share purchase warrants valued at $117,977.

C.A. Bancorp Inc. net assets on January 26, 2006

The following table summarizes the estimated fair value of the assets and liabilities and the costs of the Qualifying Transaction of the Company immediately prior to the RTO.



As at
January 26, 2006
--------------------
--------------------
ASSETS

Cash and cash equivalents $ 379,365
Accounts and other receivables 7,920
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Total current assets 387,285
Deferred costs of the Qualifying Transaction 362,209
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749,494
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LIABILITIES
Accounts payable and accrued liabilities 410,086
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NET ASSETS $ 339,408
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Issue costs of $362,209 incurred in connection with the Qualifying Transaction have been charged to deficit.

Results of Operations for the three-month periods ended March 31, 2006 and 2005

For the three month period ended March 31, 2006 the Company had a net loss of $98,083. This represented a loss of $0.01 per share on a basic and fully diluted basis. For the three-month period ended March 31, 2005 the Company had a net loss of $900.

The Company had total revenue of $24,794 (2005: $320) comprised of interest income in the amount of $13,294 (2005: $320) earned on its cash and cash equivalents and $11,500 (2005: $nil) of investment income earned on its portfolio of marketable securities.

The Company incurred total expenses of $122,877 (2005:$1,220), comprised of general and administrative expenses of $106,370 (2005: $nil), audit, legal and filing charges of $10,913 (2005: $1,121); and interest and bank charges of $5,594 (2005: $99). Included in general and administrative expenses are $75,645 in administration fees paid to Sentry Select pursuant to an Administration Agreement between the Company and Sentry Select dated January 26, 2006. The Administration Agreement was effective retroactively to January 1, 2006 and pursuant to the agreement Sentry Select will provide administrative services to the Company for a monthly fee of $35,000 plus applicable taxes. As the Administration Agreement was with C.A. Bancorp Inc., the accounting subsidiary, the fees are reflected in the consolidated statement of operations on a prorated basis for the period from January 26, 2006 (the date of the RTO) to March 31, 2006.

The Company has non-capital losses for tax purposes which are available to be used in future years to offset taxable income for which it has not recognized a future income tax asset as, at the present time, it is uncertain when and whether the losses will be utilized.

Balance Sheet and Liquidity

As at March 31, 2006, the Company had total assets of $3,028,113 (December 31, 2005: $1,312,623), total liabilities of $451,299 (December 31, 2005: $1,401,708) and total shareholders' equity of $2,576,814 (December 31, 2005 - shareholders' deficiency of $89,085). The largest factor contributing to these increases was the completion of the Qualifying Transaction whereby the Company acquired (a) net assets from the Fund of $1,580,733, comprised of cash of $1,590,831 and accrued liabilities of $10,098; and (b) 100% of the common shares of CABL valued at $1,180,903 and $9,874 receivable from the shareholder of CABL. However, as the Qualifying Transaction was accounted for as a reverse takeover, the consolidated financial statements reflect CABL, the legal subsidiary, as the deemed acquirer of the net assets of the Fund and of C.A. Bancorp Inc. C.A. Bancorp Inc. had net assets of $339,408 as at the date of the Qualifying Transaction comprised primarily of cash and cash equivalents of $379,365, deferred costs of $362,209 related to the Qualifying Transaction and accounts payable and accrued liabilities of $410,086.

The Company's total assets as at March 31, 2006 of $3,028,113 (December 31, 2005: $1,312,623) were primarily comprised of cash and cash equivalents of $1,494,328 (December 31, 2005: $76,693), marketable securities of $1,383,815 (December 31, 2005: $1,082,939) and deferred costs of $79,867 (December 31, 2005: $130,483)

Marketable securities are carried on the consolidated balance sheet at the lower of cost or market value determined on an aggregate portfolio basis. The following tables summarize the investments held as at March 31, 2006 and December 31, 2005:



Number March 31, March 31,
of shares/ 2006 2006
Investment Name units Cost Market Value
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CAPVEST Income Corp.
- Debentures 2,000 $ 200,000 $ 200,000
CAPVEST Income Corp.
- Common shares 200,000 40,000 32,000
Arsenal Energy Inc.
- Shares 663,747 864,055 935,883
Strategic Energy Fund
- Trust units 20,000 279,760 257,800
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$ 1,383,815 $ 1,425,683
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Number Dec. 31, Dec. 31,
of shares/ 2005 2005
Investment Name units Cost Market Value
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CAPVEST Income Corp.
- Debentures 2,000 $ 200,000 $ 200,000
CAPVEST Income Corp.
- Common shares 200,000 40,000 38,000
Tiverton Petroleums Ltd.
- Class A shares 2,020,360 563,179 626,312
Strategic Energy Fund
- Trust units 20,000 279,760 279,000
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$ 1,082,939 $ 1,143,312
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Pursuant to the acquisition of Tiverton Petroleums Ltd. ("Tiverton"), by Arsenal Energy Inc. ("Arsenal"), which closed on March 13, 2006, the Company received 0.23 of an Arsenal common share for each (1) Tiverton share held.

The manager of Strategic Energy Fund and the investment advisor of CAPVEST Income Corp. are controlled by the Chairman of the Board of Directors and CEO of the Company.

As at March 31, 2006, the Company had deferred costs of $79,867 (December 31, 2005: $80,667), which consist of professional fees incurred in connection with the development of an investment fund. These costs will be recovered from the investment fund if the Company successfully completes an offering of the fund. Also, as at December 31, 2005 the Company had deferred costs of $49,816 related to a corporate action suit against Tiverton Petroleums Ltd, in an effort to replace its Board of Directors. In 2006 the Company recovered these costs from Arsenal Energy Inc.

The Company's total current liabilities of $451,299 (December 31, 2005: $1,401,708) were comprised primarily of accounts payable and accrued liabilities of $321,260 (December 31, 2005: $11,685), $98,100 (December 31, 2005: $81,641) of margin loan for the acquisition of marketable securities, $31,939 (December 31, 2005: $117,076) due to Sentry Select for the reimbursement of third party expenses of the Company paid for by Sentry Select. The Company had no long-term debt. The due to Petro Assets Inc. decreased significantly from $1,124,178, at December 31, 2005, as a result of the conversion of the amounts due to Petro Assets Inc., as at January 25, 2006, of $1,196,177 to common shares of CABL immediately prior to the Qualifying Transaction.

Shareholders' Equity

The following is a continuity of the Company's share capital and common share purchase warrants:



Prior to RTO After RTO
--------------------- ------------------
--------------------- ------------------
Common shares Number Amount Number Amount
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---------------------------------------------------------------------
C.A. Bancorp Ltd.,
outstanding as at
January 1, 2006 1 $ 1 - $ -

Conversion of amounts due
to Petro Assets Inc.
to common shares 120 1,196,177 - -
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C.A. Bancorp Ltd.,
outstanding as at
January 26, 2006 121 1,196,178 3,368,590 1,078,201

Contribution from
Petro Assets Inc. - 9,874 31,316 9,874
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121 1,206,052 3,399,906 1,088,075

C.A. Bancorp Inc.,
outstanding as at
January 26, 2006 3,500,000 407,894 3,500,000 339,408

Issued to Fund
unitholders in
exchange for net
assets of Fund - - 4,516,379 1,424,014
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As at March 31, 2006 11,416,285 $2,851,497
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Prior to RTO After RTO
--------------------- ------------------
Common share --------------------- ------------------
purchase warrants Number Amount Number Amount
---------------------------------------------------------------------
---------------------------------------------------------------------
Issued to Fund
unitholders on
January 26, 2006 - $ - 4,516,379 $ 156,718

Issued to C.A. Bancorp
Ltd. shareholder on
January 26, 2006 - - 3,399,906 117,977
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As at March 31, 2006 - $ - 7,916,285 $ 274,695
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As at March 31, 2006 a total of 11,416,285 common shares were outstanding with total share capital of $2,851,497, and 7,916,285 common share purchase warrants were outstanding with total capital of $274,695. As at December 31, 2005 CABL had 1 common share issued and outstanding with total share capital of $1 and C.A. Bancorp Inc. had 3,500,000 common shares outstanding with total share capital of $407,894. The share structure of the Company under reverse takeover accounting continues to be that of the legal acquirer (C.A. Bancorp Inc.). As at the date of this report there have been no changes to the number of outstanding common shares and common share purchase warrants and there has been no change in the amount of outstanding stock options.

INVESTMENT ACTIVITIES

On November 8, 2005, C.A. Bancorp Ltd., together with Strategic Energy Fund requisitioned a special shareholder meeting with Tiverton Petroleums Ltd. ("Tiverton"). The meeting was called to remove the existing board of directors and replace such board with nominees of the Company, and to vote the offer from Arsenal Energy Inc. ("Arsenal") to merge with Tiverton in exchange for Arsenal shares.

At the meeting, held on February 22, 2006, the motion to replace the Board of Directors was defeated and the motion to accept the offer from Arsenal was re-negotiated at a higher premium to be voted on at a subsequent meeting. The Company withdrew all interest in pursuing matters or replacing the Board of Directors and reached an agreement with Arsenal that all expenses incurred by the Company would be reimbursed to a maximum of $700,000.

The Tiverton action was a success in the opinion of management of the Company. Although, the Company did not achieve the goal to remove the board of directors, its actions mandated Tiverton management to locate a strategic partner to enhance shareholder value. The Company negotiated a higher offer from Arsenal and accepted a higher proposed share exchange ratio and Arsenal agreed to cover all expenses of the transaction. As at March 31, 2006 C.A. Bancorp Ltd. held 663,747 shares of Arsenal at an average cost of $1.30 per share. The Company has begun to liquidate the shares into the market to raise capital for other projects.

SUMMARY OF INTERIM RESULTS

The following is a summary of the interim results for the three month periods ended March 31, 2006 and 2005.



2006 2005
--------- ---------
Revenues $ 24,794 $ 320
Expenses 122,877 1,220
--------- ---------
Net loss $(98,083) $ (900)
--------- ---------
--------- ---------

Loss per share - basic $ (0.01) $ (0.00)
Loss per share - diluted $ (0.01) $ (0.00)


LIQUIDITY AND CAPITAL RESOURCES

The Company has maintained a significant portion of its total assets in cash and cash equivalents and marketable securities. As at March 31, 2006 the Company had $1,494,328 in cash and cash equivalents and $1,425,683 in marketable securities (on a market value basis).

The Company has no long-term debt, no capital lease obligations and no other long-term obligations. Under such conditions, the Company has sufficient working capital to maintain current operations for at least twelve months. The Company anticipates that additional funds will be secured through private equity placements and other equity capital offerings to achieve its corporate strategy.

TRANSACTIONS WITH RELATED PARTIES

The acquisitions of the net assets of the Fund and CABL were related party transactions. John Driscoll, the President and Chief Executive Officer of Sentry Select Capital Corp. ("Sentry Select"), is also an officer and director of the Company. Sentry Select was the portfolio manager of the Fund. At December 31, 2005, a corporation beneficially owned by the Driscoll Children's Trust (a trust of which Mr. Driscoll is the trustee and a beneficiary) beneficially owned 54.29% of the outstanding common shares of the Company. The Driscoll Children's Trust also owned 15,000 trust units (3.92%) of the Fund. After the completion of the Qualifying Transaction, the President and Director maintained a controlling interest representing 51.46%.

The Company believes that any conflicts of interest that arose in the course of the transaction were dealt with in a manner that is generally acceptable in corporate transactions. Specifically:

1. Sentry Select has made full disclosure to unitholders of the Fund of these conflicts; and

2. None of the common shares of the Company or trust units of the Fund beneficially owned by Driscoll Children's Trust were voted at the meetings called to approve the transactions.

Sentry Select applied to the Canadian Securities Administrators ("CSA") for relief from the application of the provisions of securities legislation that would have prevented the transaction from taking place on account of these conflicts of interest. The CSA granted the requested relief on the condition that the transaction was approved by unitholders in accordance with the Declaration of Trust of the Fund.

The Qualifying Transaction offers the resulting shareholders of the Company with an opportunity to participate in a merchant banking and market intermediary business, while creating the financial strength to sustain longer-term viability.

On January 26, 2006 Sentry Select and the Company entered into an administration agreement which was effective retroactively to January 1, 2006 (the "Administration Agreement"). Pursuant to the Administration Agreement Sentry Select will provide staffing including the services of President, accounting and administration, compliance, marketing, and office space for a fixed fee of $35,000 per month plus applicable taxes.

On May 18, 2006, as a result of the expansion of the scope and nature of the Company's business, the Board of Directors of the Company approved a new management agreement (the "Management Agreement") and an amendment to the January 26, 2006 Administration Agreement (the "Amended Administration Agreement"), each effective as of July 1, 2006 and subject to regulatory approval.

Pursuant to the Management Agreement, among other things, Sentry Select will manage the Company's merchant banking business, including searching for, evaluating and screening investment opportunities and conducting due diligence with respect to potential investments. For the provision of its services pursuant to the Management Agreement, the Company will pay Sentry Select a quarterly fee (the "Management Fee") of 1/4 of 1.50% of the Net Asset Value (the total net asset value less the Company's liabilities) calculated as at the close of business on the last business day of each calendar quarter. In addition to the Management Fee, Sentry Select will be entitled to be paid a performance bonus (the "Performance Bonus") equal to 20% of the amount by which the annual Net Pre-Tax Profits of the Company (the non-consolidated net income of the Company before income taxes and such Performance Bonus) calculated as at December 31 in each year exceeds a threshold of an 8% per year return earned on the Company's Net Asset Value (determined in accordance with the Management Agreement). The initial term of the Management Agreement will commence on July 1, 2006 and expire on December 31, 2011. The Management Agreement will renew automatically for successive five-year terms following the initial term, provided that there has been no breach or material default of the terms of the agreement by Sentry Select, subject to termination on any expiry date upon not less than 180 days prior written notice from the Company or Sentry Select to the other. In the event that the Company terminates the Management Agreement, Sentry Select will be entitled to receive from the Company an amount equal to five times 1.5% of the Net Asset Value calculated as at the close of business on the last business day of the term of the Management Agreement and five times the Performance Bonus paid in respect of the calendar year immediately preceding the date of termination of the Management Agreement. The Management Agreement may also be terminated by either party upon the occurrence of certain events.

The Amended Administrative Agreement amends and restates the administrative agreement of January 26, 2006 between the Company and Sentry Select. Effective as of July 1, 2006, Sentry Select will provide certain management and administrative services to the Company, including the provision of office space, equipment and all management and investment staff, and all accounting, clerical, secretarial, corporate and administrative services as may be reasonably necessary to perform its obligations under the Amended Administrative Agreement. The monthly fee paid to Sentry Select for the provision of such services will increase from $35,000 to $40,000. The Amended Administrative Agreement will immediately terminate upon the termination for any reason of the Management Agreement.

CORPORATE STRATEGY

The Company's strategy is to make equity and other capital investments in Canadian small and middle-market, public and private companies that exhibit the potential for substantial capital appreciation through improved management, financial performance and enhanced strategic positioning. Among other strategies, the Company targets under-valued companies that are under-performing due to poor management execution, inadequate capital structure or are undergoing a significant transition, such as change in senior management or succession in ownership.

It is anticipated that the Company will make investments of $0.5 million to $10 million in companies with enterprise values ranging from $20 million to $100 million. Transaction types may include open-market purchases and private placement of securities of public issuer's management buyouts, equity investment in private issuers, going-private transactions and restructurings. Typically, the Company will seek to exercise significant influences through position on the board of directors of portfolio companies, as well as through structural and governance rights in privately held companies. Effective control of each portfolio company will be sought, either through a shareholder's agreement, board representation or significant ownership, to ensure that the Company can direct change, if necessary. In all cases, board representation, governance standards and, in the case of the privately held companies shareholder rights and protections will be sought.

The Company will invest in the form of subordinated debentures, convertible debentures, preferred shares, common equity or similar equity-like instruments. The Company intends to be an active and constructive partner, whose executives will work together with management of portfolio companies to implement strategic, financial and governance initiatives with a view to creating significant value.

The Company continually reviews numerous transactions sourced from internal and external resources. Private transactions require numerous hours of due diligence from both a financial and operational standpoint.

Transactions are evaluated from a macro viewpoint to ascertain if a prospective investment meets our criteria then it is evaluated from a bottom up cash flow perspective to determine its value. As the Company grows we will continue to add analysts and legal counsel to ensure that our transactions are properly structured.

The time and effort required to complete the evaluation of prospective investments is substantial. Due diligence includes an in-depth evaluation of the industry, market, competition, business strategy and sales and marketing plan, products, customers and tax and labor issues. Where appropriate to ensure complete due diligence, the Company may engage other professionals with particular expertise for assistance and advice regarding a particular investment opportunity.

While evaluating a transaction the firm will evaluate it on several factors including, but not limited to:

- Quality and capability of management

- Commitment by management

- Size of the investment

- Investment structure

- Geographic diversification

- Stage of development

- Realization potential

- Industry focus

- Co-investment opportunities

OUTLOOK

The Company continues to develop a strategy to raise its first private equity related fund. We also continue to actively pursue investment opportunities using our vast direct contacts and sourcing opportunities through Sentry Select.

The business of any new or prospective fund will be to invest in small and medium sized private and publicly traded business that meet our investment criteria. The primary objective of the fund will be to generate long-term capital appreciation through a diversified portfolio of investments. The fund will invest in convertible debt and preferred share securities as well as common share holdings. The fund may have a specific mandate or targeted geographic location or it may be general and have limited investment guidelines.

Any funds the Company launches could take many forms. They may be exchanged traded or private funds or set up as exchange traded trusts or limited partnerships. Management of the Company is currently exploring its options and determining their long-term business plan.

The Company plans for the remainder of 2006 are to launch a number of different funds as well to invest a majority of the capital that is raised.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Company Factors

Future financial performance will be influenced by successful evaluation and acquisitions of potential business.

Non-Company factors

The Canadian mid market private equity space has been relatively undercapitalized in recent years and this is due to the significant change in the market participants. During the previous five years the main bank sponsored private equity groups that have been active in the space have either exited the business or significantly scaled back their investment activities. In addition Canada has its own unique regulatory, tax and capital market environment. These unique characteristics favor local firms.

RISK MANAGEMENT

The Company is looking for opportunities as outlined in 'Corporate Strategy' above. The merchant banking business is about accepting risk for return, and is therefore affected by a number of economic factors, including changing economic environments, capital markets and interest rates.

The success of a merchant bank is dependant on numerous items. In the previous years there has been an increasing demand for private equity transactions and markets are becoming increasingly sensitive to many risks. There has been an increase in merchant banking and private equity activity in recent years as the markets continue to look for candidates that can be turned into income trusts. This demand has led to increased competition for deals thereby lowering historical or perceived returns. It can also lead to less than ideal candidates being purchased. The Company will manage the risks associated with its corporate investment portfolio through planning and significant due diligence of investment opportunities and active involvement in existing investments.

As historical private equity returns have been higher than those of the public equity markets, the demand to own private equity investments has increased. This has led to an increase in the demand for private equity and made the process of raising capital easier.

Private equity securities are less liquid than public securities as there is no readily available market for an investment to sell. There is a possibility that when the investment is to be sold, the price received may not be equal to the management calculated value.

Currently, the Company has assets invested in cash and cash equivalents as well as in marketable securities. Therefore interest rates will affect income derived from the cash and cash equivalent investments and general risk such as commodity prices, the business environment and company specific risks will affect the value of the marketable securities. It is the Company's policy to invest any short-term reserves in securities highly rated by well recognized rating agencies and to continuously monitor all marketable securities.

For general risk factors affecting the Company see the section "Risk Factors" included in the Management Proxy Circular of the Company dated December 16, 2005 available on the Company's SEDAR profile at www.SEDAR.com.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Company's Chief Executive Officer and Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure. As at the end of the period covered by this management's discussion and analysis, management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures as required by Canadian securities laws. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the end of the period covered by this MD&A, the disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed in the Company's annual filings and interim filings (as such terms are defined under Multilateral Instrument 52-109- Certification of Disclosure in Issuers' Annual and Interim Filings of the Canadian Securities Administrators) and other reports filed or submitted under Canadian securities laws is recorded, processed, summarized and reported within the time periods specified by those laws and that material information is accumulated and communicated to management of the Company, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

This MD&A and other public announcements by the Company may contain information that is forward-looking and is subject to risks and uncertainties. Forward-looking information includes information concerning the Company's future financial performance, business strategy, plans, goals, and objectives. These statements involve known and unknown risks, uncertainties and other factors that could cause actual results or events to differ materially from those anticipated in such forward-looking statements, including, among other things: the ability of the Company to successfully implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits; competitive conditions in the businesses in which the Company participates; the outcome of pending legal proceedings, if any exist; general economic conditions and normal business uncertainty; interest rate fluctuations and other changes in borrowing costs; and changes to the laws, rules, and regulations applicable to the Company or the markets in which the Company operates. The Company intends the forward-looking information to speak only as of the first time made and does not undertake to update or revise it whether as a result of new information, future events or otherwise, except as required by law.



C.A. BANCORP INC.
(Previously, Masthead Resources Ltd.)
Consolidated Balance Sheets
(Unaudited)
---------------------------------------------------------------------
---------------------------------------------------------------------

As at As at
March 31, 2006 December 31, 2005
-------------- ------------------
-------------- ------------------

ASSETS

CURRENT
Cash and cash equivalents
(Note 4) $ 1,494,328 $ 76,693
Accounts and other receivables 41,638 12,508
Accrued interest receivable 8,591 -
Marketable securities (Note 6) 1,383,815 1,082,939
Due from related party (Note 3) 9,874 -
---------------------------------------------------------------------
2,938,246 1,172,140

NON-CURRENT
Contingency fund deposit (Note 7) 10,000 10,000
Deferred costs (Note 5) 79,867 130,483
---------------------------------------------------------------------
$ 3,028,113 $ 1,312,623
---------------------------------------------------------------------
---------------------------------------------------------------------

LIABILITIES

CURRENT
Due to broker $ 98,100 $ 81,641
Accounts payable and accrued
liabilities 321,260 11,685
Due to related party (Note
14(a) and (b)) 31,939 184,204
Due to Petro Assets Inc. (Note
14 (c)) - 1,124,178
---------------------------------------------------------------------
451,299 1,401,708

SHAREHOLDERS' EQUITY

Share capital (Note 8) 2,851,497 1
Warrants (Note 9) 274,695 -
Deficit (549,378) (89,086)
---------------------------------------------------------------------
2,576,814 (89,085)
---------------------------------------------------------------------
$ 3,028,113 $ 1,312,623
---------------------------------------------------------------------
---------------------------------------------------------------------

APPROVED ON BEHALF OF THE BOARD OF DIRECTORS

John F. Driscoll Director
--------------------

John Nestor Director
--------------------

The accompanying notes are an integral part of these consolidated
financial statements.


C.A. BANCORP INC.
(Previously, Masthead Resources Ltd.)
Consolidated Statements of Operations and Deficit
For the three month period ended March 31, (Unaudited)
---------------------------------------------------------------------
---------------------------------------------------------------------

2006 2005
----------- --------
----------- --------

REVENUE
Interest and investment income $ 24,794 $ 320
---------------------------------------------------------------------

EXPENSES
General and administrative (Note 14(a)) 106,370 -
Audit, legal and filing fees 10,913 1,121
Interest and bank charges 5,594 99
---------------------------------------------------------------------
122,877 1,220
---------------------------------------------------------------------

LOSS BEFORE INCOME TAXES (98,083) (900)

Provision for income taxes - -
---------------------------------------------------------------------
NET LOSS (98,083) (900)
---------------------------------------------------------------------

ISSUE COSTS OF QUALIFYING TRANSACTION
(Note 3) (362,209) -

DEFICIT, BEGINNING OF PERIOD (89,086) (3,641)
---------------------------------------------------------------------
DEFICIT, END OF PERIOD $ (549,378) $ (4,541)
---------------------------------------------------------------------
---------------------------------------------------------------------


LOSS PER SHARE (Note 11)

Basic $ (0.01) $ (0.00)
Diluted $ (0.01) $ (0.00)


The accompanying notes are an integral part of these consolidated
financial statements.


C.A. BANCORP INC.
(Previously, Masthead Resources Ltd.)
Consolidated Statements of Cash Flows
For the three month period ended March 31, (Unaudited)
---------------------------------------------------------------------
---------------------------------------------------------------------

2006 2005
---------- --------
---------- --------

OPERATING ACTIVITIES
Net loss $ (98,083) $ (900)
Net change in non-cash working capital:
Increase in receivables and other
current assets (24,580) (17,759)
Decrease in current liabilities (272,669) 17,781
Decrease in deferred costs 103,733 -
---------------------------------------------------------------------
Net cash provided by (used in)
operating activities (291,599) (878)
---------------------------------------------------------------------

INVESTING ACTIVITIES
Recovery of Tiverton action costs,
net of payments in the period 26,750 -
Purchase of marketable securities (300,876) -
---------------------------------------------------------------------
Net cash provided by (used in)
investing activities (274,126) -
---------------------------------------------------------------------

FINANCING ACTIVITIES
Cash and cash equivalents acquired from
C.A. Bancorp Inc. 379,365 -
Cash acquired from Sentry Select Focused
Wealth Management Fund 1,590,831 -
Cash advance received from Petro Assets
Inc. 72,000 -
Issue costs paid (58,836) -
---------------------------------------------------------------------
Net cash provided by (used in)
financing activities 1,983,360 -
---------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,417,635 (878)

CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 76,693 61,643
---------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 1,494,328 $ 60,765
---------------------------------------------------------------------
---------------------------------------------------------------------
REPRESENTED BY:
Cash $ 1,434,527 $ 1,054
Government of Canada Treasury Bills
(Note 4) 59,801 59,711
---------------------------------------------------------------------
$ 1,494,328 $ 60,765
---------------------------------------------------------------------
---------------------------------------------------------------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $ - $ -
Interest paid $ 1,922 $ 99
---------------------------------------------------------------------
---------------------------------------------------------------------

The accompanying notes are an integral part of these consolidated
financial statements.


1. ORGANIZATION

C.A. Bancorp Inc. (the "Company") was incorporated as Master Mines and Metals Inc., pursuant to the provisions of the Business Corporations Act (Alberta) on March 29, 2005 and was classified as a Capital Pool Company as defined in Policy 2.4 of the TSX Venture Exchange (the "TSXV"). On April 19, 2005 the Company changed its name to Master West Resources Ltd. and on April 27, 2005 changed its name to Masthead Resources Ltd. The Company completed its initial public offering on August 22, 2005 issuing 1,500,000 common shares at $0.20 per share. On September 2, 2005 the Company began trading on the TSXV under the symbol "MTH.P". On January 26, 2006, the Company completed a Qualifying Transaction (described in Note 3) and changed its name to C.A. Bancorp Inc. and its trading symbol to "BKP".

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

These consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles.

(a) Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: C.A. Bancorp Ltd. ("CABL") and C.A. Bancorp Financial Ltd. ("CABFL"). CABFL, which was incorporated on March 15, 2006, has been inactive since incorporation and has no assets, liabilities, revenues or expenses. CABL was acquired on January 26, 2006 as part of the Qualifying Transaction. The Qualifying Transaction has been recorded as a reverse takeover transaction, which does not constitute a business combination, in accordance with Abstract No 10 of the Emerging Issues Committee ("EIC-10") of the Canadian Institute of Chartered Accountants. Therefore, the consolidated financial statements are issued under the name of C.A. Bancorp Inc., the legal parent company, but are considered to be a continuation of the financial statements of CABL, the legal subsidiary. The comparative balance sheet as at December 31, 2005 and the comparative statements of operations and cash flows for the three month period ended March 31, 2005 are those of CABL. The consolidated statements of operations and cash flows for the three month period ended March 31, 2006 include the results of operations and cash flows of CABL from January 1, 2006 and of the Company since January 26, 2006. All intercompany transactions and balances have been eliminated in these consolidated financial statements.

(b) Revenue recognition

Interest income is recognized on an accrual basis as it is earned. Dividend and distribution income are recorded on the ex-dividend or ex-distribution date, respectively.

(C) Cash and cash equivalents

Cash and cash equivalents are comprised of cash and short-term investments with maturities of three months or less from the date of their acquisition. Short-term investments are carried at cost plus accrued interest, which approximates market value.

(d) Marketable securities

Investments in marketable securities are carried at lower of cost or market value determined on an aggregate portfolio basis.

(e) Incentive stock options

The Company has an incentive stock option plan as described in Note 10. The Company follows the fair value method of accounting for the expense associated with the plan, whereby an estimate of the fair value of the stock options granted is measured and recorded as an expense over the vesting period or at the date of grant if options vest immediately, with the related offset recorded as shareholders' equity. The effect of actual forfeitures of previously granted options is recognized as they occur. Any consideration paid to the Company with respect to the exercise of stock options is credited to share capital. For the purpose of accounting for incentive stock options, Directors of the Company are considered employees and officers of the Company and other parties are considered non-employees.

(f) Income taxes

The Company uses the asset and liability method to provide for income taxes on all transactions recorded in the financial statements. The asset and liability method requires that income taxes reflect the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities and their tax basis. Future income tax assets and liabilities are determined for each temporary difference and unused losses, as applicable, at substantively enacted tax rates expected to be in effect when the assets are realized or the liabilities are settled. A valuation allowance is established to reduce future income tax assets to the amount that is more likely than not to be realized.

(g) Earnings per share

Basic earnings per share is calculated using the weighted average number of shares for the period. The treasury stock method is used to determine diluted earnings per share.

(h) Use of estimates

The preparation of financial statements in accordance with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the balance sheet and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

3. QUALIFYING TRANSACTION

On January 26, 2006, the Company completed the acquisition of (a) the net assets of Sentry Select Focused Wealth Management Fund (the "Fund") in exchange for 4,516,379 common shares and 4,516,379 common share purchase warrants of the Company and (b) 100 per cent of the outstanding common shares of CABL and $9,874 due from Petro Assets Inc., the sole shareholder of CABL, in exchange for 3,399,906 common shares and 3,399,906 common share purchase warrants of the Company. The acquisitions constituted the Company's "Qualifying Transaction" pursuant to Policy 2.4 of the TSXV.

The Fund was managed by Sentry Select Capital Corp. ("Sentry Select"), which is beneficially owned and controlled by the Chairman of the Board of Directors and CEO of the Company. The net assets of the Fund were comprised of cash of $1,590,831 and accrued liabilities of $10,098. The aggregate purchase price was $1,580,733 allocated to common shares valued at $1,424,015 and common share purchase warrants valued at $156,718.

CABL (previously, Capital Access Corporation) was a private company which was indirectly controlled by the Chairman of the Board of Directors and CEO of the Company through Petro Assets Inc. The fair value of the assets and liabilities of CABL on the date of acquisition was $1,180,093. The aggregate purchase price was $1,189,967, including $9,874 due from Petro Assets Inc., allocated to common shares valued at $1,071,990 and common share purchase warrants valued at $117,977.

The common share purchase warrants issued in connection with the above transactions entitle the holders thereof to purchase one common share of C.A. Bancorp Inc. for $0.35 for one year following the closing of the transactions. The warrants had an aggregate estimated fair value of $274,695, or $0.0347 per warrant, on the date of issuance as determined by the Company using a Black-Scholes option pricing model.

In determining the fair value of the warrants, management was required to make assumptions that have a material impact on the valuation. The following were the significant assumptions: market price per common share of $0.35; dividend yield of 0%; expected volatility of 20%; risk-free interest rate of 4.01%; and expected life of one year.

The Qualifying Transaction has been accounted for as a reverse takeover transaction (an "RTO"), which does not constitute a business combination. The Qualifying Transaction is measured at the exchange amount. Pursuant to the RTO accounting CABL, the legal subsidiary of the Company, was considered to have acquired the net assets of the Fund and all of the common shares of the Company. Issue costs of $362,209 incurred in connection with the Qualifying Transaction have been charged to deficit.

The following table summarizes the estimated fair value of the assets and liabilities and the costs of the Qualifying Transaction of the Company immediately prior to the RTO:



As at
January 26, 2006
----------------
----------------
ASSETS
Cash and cash equivalents $ 379,365
Accounts and other receivables 7,920
---------------------------------------------------------------------
Total current assets 387,285
Deferred costs of the Qualifying Transaction 362,209
---------------------------------------------------------------------
749,494
---------------------------------------------------------------------

LIABILITIES
Accounts payable and accrued liabilities 410,086
---------------------------------------------------------------------

NET ASSETS $ 339,408
---------------------------------------------------------------------
---------------------------------------------------------------------


4. CASH EQUIVALENTS

As at March 31, 2006 the Company held a Government of Canada Treasury Bill, yielding 2.89% and maturing on April 6, 2006 in the amount of $60,000. As at December 31, 2005 the Company held a Government of Canada Treasury Bill, yielding 2.63% and maturing on January 26, 2006 in the amount of $60,000.

5. DEFERRED COSTS

As at March 31, 2006 the Company had deferred costs of $79,867 (December 31, 2005: $80,667) related to professional fees incurred for the development of an investment fund which is expected to be completed during 2006. These costs will be deferred until the closing of an offering of the investment fund, at which time the Company anticipates recovering these costs from the investment fund. Any deferred costs that are not expected to be recoverable will be expensed.

As at December 31, 2005 the Company also had deferred costs of $49,816 related to a corporate action suit against Tiverton Petroleums Ltd, in an effort to replace its Board of Directors. In 2006 the Company recovered these costs from Arsenal Energy Inc.

6. MARKETABLE SECURITIES



Number
of shares/ Mar. 31, 2006 Mar. 31, 2006
Investment Name units Cost Market Value
----------------------- ---------- ------------- -------------

CAPVEST Income Corp.
- Debentures 2,000 $ 200,000 $ 200,000
CAPVEST Income Corp.
- Common shares 200,000 40,000 32,000
Arsenal Energy Inc.
- Shares 663,747 864,055 935,883
Strategic Energy Fund
- Trust units 20,000 279,760 257,800
---------------------------------------------------------------------
$ 1,383,815 $ 1,425,683
---------------------------------------------------------------------
---------------------------------------------------------------------

Number
of shares/ Dec. 31, 2005 Dec. 31, 2005
Investment Name units Cost Market Value
----------------------- ---------- ------------- -------------

CAPVEST Income Corp.
- Debentures 2,000 $ 200,000 $ 200,000
CAPVEST Income Corp.
- Common shares 200,000 40,000 38,000
Tiverton Petroleums Ltd.
- Class A shares 2,020,360 563,179 626,312
Strategic Energy Fund
- Trust units 20,000 279,760 279,000
---------------------------------------------------------------------
$ 1,082,939 $ 1,143,312
---------------------------------------------------------------------
---------------------------------------------------------------------


Pursuant to the acquisition of Tiverton Petroleums Ltd. ("Tiverton"), by Arsenal Energy Inc. ("Arsenal"), which closed on March 13, 2006, the Company received 0.23 of an Arsenal common share for each (1) Tiverton share held.

The manager of Strategic Energy Fund, and the investment advisor of CAPVEST Income Corp. are controlled by the Chairman of the Board of Directors and CEO of the Company.

7. CONTINGENCY FUND DEPOSIT

The Company is required by the Ontario Securities Commission (the "OSC") to maintain a contingency fund deposit of $10,000 with CIBC Mellon Trust Company. The funds in the plan are invested and any interest may be used to settle with creditors of any bankrupt OSC participant and to pay registrant related legal fees.

8. SHARE CAPITAL

Authorized:

The authorized share capital of the Company consists of an unlimited number of Common Shares and an unlimited number of First Preferred Shares without nominal or par value.

The following is a continuity of the share capital of the Company:



Prior to RTO After RTO
------------------ ------------------
Common shares Number Amount Number Amount
---------------------------------------------------------------------
---------------------------------------------------------------------

C.A. Bancorp Ltd.,
outstanding as at January
1, 2006 1 $ 1 - $ -
Conversion of amounts due
to Petro Assets Inc. to
common shares 120 1,196,177 - -
---------------------------------------------------------------------
C.A. Bancorp Ltd.,
outstanding as at January
26, 2006 (Note 3) 121 1,196,178 3,368,590 1,078,201

Contribution from Petro
Assets Inc. (Note 3) - - 31,316 9,874
---------------------------------------------------------------------

121 1,196,178 3,399,906 1,088,075
C.A. Bancorp Inc.,
outstanding as at
January 26, 2006
(Note 3) 3,500,000 407,894 3,500,000 339,408

Issued to Fund unitholders
in exchange for net
assets of Fund (Note 3) - - 4,516,379 1,424,014
---------------------------------------------------------------------

As at March 31, 2006 11,416,285 $ 2,851,497
---------------------------------------------------------------------
---------------------------------------------------------------------


9. WARRANTS



Prior to RTO After RTO
------------------ ------------------
Common shares purchase
warrants Number Amount Number Amount
---------------------------------------------------------------------
---------------------------------------------------------------------

Issued to Fund unitholders
on January 26, 2006
(Note 3) - $ - 4,516,379 $ 156,718
Issued to C.A. Bancorp Ltd.
shareholder on January 26,
2006 (Note 3) - - 3,399,906 117,977
---------------------------------------------------------------------

As at March 31, 2006 - $ - 7,916,285 $ 274,695
---------------------------------------------------------------------
---------------------------------------------------------------------


10. INCENTIVE STOCK OPTIONS

The Company has a stock option plan for the benefit of directors, officers and employees of and consultants and service providers to the Company (the "Plan"). Pursuant to the Plan, the Board of Directors may allocate non-transferable options to purchase up to a maximum of 10% of the outstanding Common Shares of the Company. Options granted pursuant to the Plan are exercisable at a price not less than the market price of the Common Shares on the stock exchange on which such shares are traded less any applicable discounts permitted by the rules of such exchange. The maximum number of Common Shares which may be reserved for issuance to any one person under the Plan is 5% of the Common Shares outstanding at the time of grant.

On September 15, 2005, the Company granted, to Directors, an aggregate of 215,000 options to purchase Common Shares which may be exercised from issuance at a price of $0.20 per share for a period of five years from the date of grant. The stock option plan and the grant of options there under are subject to regulatory approval and the Escrow Agreement. The estimated fair value of these options on the date of grant was $14,405 and was charged to incentive stock option compensation on the statement of operations of C.A. Bancorp Inc., the accounting subsidiary, in the third quarter of 2005 and therefore are not included in the comparative financial statements.

On September 2, 2005, pursuant to the public offering, the agent was granted a non-transferable option to purchase up to 150,000 common Shares at $0.20 per share. The option is exercisable at any time from issuance to 24 months from the date of listing of the Company's shares on the TSXV. The estimated fair value of these options on the date of grant was $6,000 and was charged to share issue costs in the financial statements of C.A. Bancorp Inc., the accounting subsidiary, in the third quarter of 2005 and therefore are not included in the comparative financial statements.

The fair value of the incentive stock options on the date of grant was estimated using a Black-Scholes option pricing model. In determining the fair value of options, management was required to make assumptions that could have a material impact on the valuation. The following were the significant assumptions: dividend yield of 0%; expected volatility of 30%; risk-free interest rate of 3.69% to 3.82%; and expected life of two to five years.

There was no change to the number of options outstanding or exercisable during the period ended March 31, 2006. The following table summarizes information about the stock options outstanding as of March 31, 2006:



Exercisable
Outstanding Expiry Number of Exercise
Number of options Date options Price
----------------- ------ ----------- --------

215,000 September 15, 2010 215,000 $ 0.20
150,000 September 2, 2007 150,000 $ 0.20
-------------------------------------------------------------------
-------------------------------------------------------------------


As at March 31, 2006, the weighted average contractual remaining life of the options was 3.22 years.

11. LOSS PER SHARE

The weighted average numbers of shares outstanding for the period ended March 31, 2006 and loss per share were as follows:



Weighted Average
Number of Loss
shares Per Share
---------------- ----------

Basic 9,189,513 $ (0.01)
Diluted (i) 9,189,513 (0.01)
---------------------------------------------------------------------
---------------------------------------------------------------------


The weighted average numbers of shares outstanding for the period ended March 31, 2005 and loss per share were as follows:



Weighted Average Loss
Number of shares Per Share
-------------------------------------
Basic 3,399,906 $ (0.00)
Diluted (i) 3,399,906 $ (0.00)
----------------------------------------------------------------------
----------------------------------------------------------------------

(i) The incentive stock options and warrants were excluded from the
calculations of diluted earnings per share because they were
anti-dilutive.


12. FINANCIAL INSTRUMENTS

Except as disclosed elsewhere in these consolidated financial statements, the carrying value of the Company's financial instruments approximates their fair value.

13. INCOME TAXES

Future income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's future income tax assets (liabilities) as at March 31, 2006 are as follows:



As at
March 31, 2006
-----------------
Future income tax assets
Non-capital loss carryforwards $ 130,366
Issue costs 130,479
----------------------------------------------------------------------
260,845
Valuation allowance (260,845)
----------------------------------------------------------------------
Net future tax asset $ -
----------------------------------------------------------------------


As at March 31, 2006, the Company and its subsidiaries had non-capital losses available to be carried forward to offset income in future years of $363,138. The benefit of these losses has not been recognized in these financial statements. These losses expire as follows:



Year

2012 $ 130,439
2013 232,699
------------
$ 363,138
------------


The provision for income taxes differs from the result which would be obtained by applying the combined Canadian Federal and Provincial statutory income tax rates to income before income taxes as follows:



For the period
ended March 31, 2006
------------------------
Loss before income taxes $ (98,083)
Combined federal and provincial income tax rate 35.9%
Expected income taxes (35,212)
Permanent differences 212
Valuation allowance 35,000
---------------------------------------------------------------------
$ -
---------------------------------------------------------------------
---------------------------------------------------------------------


14. RELATED PARTY TRANSACTIONS

a) Administration Agreement

On January 26, 2006 the Company and Sentry Select entered into an administration agreement (the "Administration Agreement") pursuant to which Sentry Select will provide administrative services to the Company for a monthly fee of $35,000 plus applicable taxes, effective as of January 1, 2006. For the three month period ended March 31, 2006, $105,000 was charged to C.A. Bancorp Inc. in respect of the Administration Agreement. The consolidated statement of operations includes $75,645 which has been charged to general and administrative expenses on the statement of operations and reflects the prorated amount of such fees since the date of the RTO. As of March 31, 2006 $nil was due to Sentry Select in respect of such fees.

Prior to the Administration Agreement referred to above, CABL had a support services agreement dated September 1, 2005 with Sentry Select to provide consulting, administration and accounting services. For the period from September 1, 2005 to December 31, 2005 the fee for administration services was $67,128 and was due to Sentry Select at December 31, 2005.

b) Reimbursement of expenses

As at March 31, 2006 $31,939 (December 31, 2005: $117,076) was due to Sentry Select for reimbursement of third party expenses of the Company paid for by Sentry Select. The amount is due on demand and is non-interest bearing.

c) Due to Petro Assets Inc.

As at December 31, 2005, Petro Assets Inc. ("PAI"), a Company controlled by the Chairman of the Board of Directors and CEO, was the sole shareholder of CABL. As at December 31, 2005, CABL had the following amounts due to PAI:

i. $39,181 due to PAI in respect of reimbursement of third party expenses of the Company paid for by PAI.

ii. Pursuant to a loan agreement dated October 24, 2005, CABL had a loan payable to PAI in the amount of $1,000,000 plus accrued interest of $7,497 thereon. The loan is payable on demand and bears interest at the prime rate.

iii. Pursuant to a subordinated debt agreement dated September 1997, CABL had a loan payable to PAI in the amount of $77,500 which is unsecured, non-interest bearing and payable on demand.

The amounts due to PAI by CABL as at January 25, 2006, immediately prior to the Qualifying Transaction, were converted into common shares of CABL.

15. SUBSEQUENT EVENTS

On May 18, 2006, the independent members of the Board of Directors of the Company approved a Management Agreement between the Company and Sentry Select and an amendment to the Administration Agreement dated January 26, 2006, each of which will be effective from July 1, 2006, and which are subject to regulatory approval.

The Management Agreement engages Sentry Select to provide investment management services in respect of the Company's merchant banking business and other investing activities, including searching for, evaluating and screening investment opportunities and conducing due diligence with respect to potential investments, for a quarterly fee of 1/4 of 1.50%, plus applicable taxes, based on the Company's net asset value. Sentry Select will also be entitled to a performance bonus equal to 20% of the amount by which the annual net non-consolidated net pre-tax profits of the Company, as at December 31 in each year, exceeds the Bonus Threshold for such year. The Bonus Threshold is an amount equal to a return of 8% per annum compounded annually based on the Company's net asset value.

The Administration Agreement was amended to provide Sentry Select with a monthly fee of $40,000, plus applicable taxes for the provision of administrative services including accounting and recordkeeping, regulatory reporting and compliance, investor relations, office space, equipment and administrative and management personnel, and other administrative and office services.



The Exchange Tower
130 King Street West
Suite 2805, P.O. Box 104
Toronto, Ontario M5X 1A4
Telephone: (416) 214-5985
Fax: (416) 364-2398


The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information