ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Safe Harbor Statement

This report on Form 10-Q contains certain forward-looking statements.  All statements other than statements of historical fact are "forward-looking statements" for purposes of these provisions, including any projections of earnings, revenues, or other financial items; any statements of the plans, strategies, and objectives of management for future operation; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; statements of belief; and any statement of assumptions underlying any of the foregoing. Such forward-looking statements are subject to inherent risks and uncertainties, and actual results could differ materially from those anticipated by the forward-looking statements.

These forward-looking statements involve significant risks and uncertainties, including, but not limited to, the following: competition, promotional costs, and risk of declining revenues.  Our actual results could differ materially from those anticipated in such forward-looking statements as a result of a number of factors.  These forward-looking statements are made as of the date of this filing, and we assume no obligation to update such forward-looking statements.  The following discusses our financial condition and results of operations based upon our financial statements which have been prepared in conformity with accounting principles generally accepted in the United States.  It should be read in conjunction with our financial statements and the notes thereto included elsewhere herein.

The following discussion should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this Form 10-Q.  The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.

Operating Expenses

Three Months Ended August 31, 2016 and 2015

During the three months ended August 31, 2016, the Company incurred operating expenses of $49,252 compared with $207,558 during the three months ended August 31, 2015. The Company recorded a $Nil of consulting fees during the three months ended August 31, 2016 compared to $67,900 cost of consulting fees incurred during the three months ended August 31, 2015.  Consulting fees incurred to related parties for management services decreased by $86,720 due to a reduction in the number of officers and directors compensated. General and administrative expenses decreased by $10,186 due to a general decrease in operating activities. General and administrative expenses charged by related parties decreased $13,500 due to a reduction in the rates charge by the Company's related party for legal fees. The Company terminated its property acquisition agreement for the British Columbia, Canada property at the end of 2015 resulting in a reduction of $2,500 in option payments from the prior period. The Company entered into a lease for a new facility during the three months ended August 31, 2016 resulting in $22,500 of rent expense.

Nine Months Ended August 31, 2016 and 2015

During the nine months ended August 31, 2016, the Company incurred operating expenses of $144,604 compared with $563,619 during the nine months ended August 31, 2015. The Company reduced consulting expense by $220,900 during the nine months ended August 31, 2016 compared to the nine months ended August 31, 2015 due to the Company focusing on the commercialization of products derived from the Hemp and Cannabis plant. Consulting fees incurred to related parties for management services decreased by $123,305 due to a reduction in the number of officers and directors compensated during the nine months ended August 31, 2016. General and administrative expenses decreased by $16,128 due to a general decrease in operations. General and administrative expenses charged by related parties decreased by $40,500 when compared to the nine months ended August 31, 2016 due to a reduction in the rates charge by the Company's related party for legal fees. The Company terminated its property acquisition agreement for the British Columbia, Canada property at the end of 2015 resulting in a reduction of $48,500 in option payments from the prior period.  The Company entered into a lease for a new facility March, 2016 resulting in $37,500 of rent expense as of August 31, 2016.

 

Net Loss

During the three months August 31, 2016, the Company incurred a net loss of $49,792 and a net loss per share of $0.00 compared with a net loss of $207,675 and a net loss per share of $0.00 for the three months ended August 31, 2015 due to the factors discussed above.

During the nine months ended August 31, 2016, the Company incurred a net loss of $145,697 and a net loss per share of $0.00 compared with a net loss of $563,736 and a net loss per share of $0.00 for the nine months ended August 31, 2015 due to the factors discussed above.

Liquidity and Capital Resources

As of August 31, 2016, the Company has a working capital deficit of $423,629, and an accumulated deficit of $1,212,234. The continuation of the Company as a going concern is dependent upon the continued financial support from its management, and its ability to identify future investment opportunities and obtain the necessary debt or equity financing, and generating profitable operations from the Company's future operations. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. These financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Cash flow from Operating Activities

During the nine months ended August 31, 2016, the Company used $60,757 of cash in operating activities compared to the use of $113,342 of cash for operating activities during the nine months ended August 31, 2015 for a decrease of $52,585 in cash used in operating activities. The decrease in cash used for operating activities is due to a decrease in the overall operating activity of the Company compared to prior year.

Cash flow from Investing Activities

During the nine months ended August 31, 2016, the Company used $nil of cash for investing activities compared with $7,182 during the nine months ended August 31, 2015. The decrease in the use of cash is due to the fact that the Company had advanced $12,467 to an unrelated party during the nine month period ended August 31, 2015. The Company received a repayment of $5,285, and deemed the remaining balance to be uncollectible. Consequently, the Company recognized bad debt of $7,182 on the loan receivable for uncollectible principal and interest.

Cash flow from Financing Activities

During the nine months ended August 31, 2016, the Company received $60,964 of cash from financing activities compared with $120,524 during the nine months ended August 31, 2015.  During the current period, the Company received $65,000 as loans from unrelated parties and $2,064 in loans from related parties, offset by $6,100 paid to a related party for amounts owed. During the prior period, the Company repaid $5,000 to a related party and received $120,524 in advances from related parties, which included $42,000 from a note payable issued to a related party.

 

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Subsequent Events

On September 21, 2016, the Company issued a $10,000 promissory note to an unrelated party. Under the terms of the note, the amount due is unsecured, bears interest at 3% per annum, and is due 180 days from the date of issuance .

Going Concern

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities. For these reasons, our auditors stated in their report on our audited financial statements that they have substantial doubt that we will be able to continue as a going concern without further financing.

Future Financings

We will continue to rely on equity sales of our common shares in order to continue to fund our business operations. Issuances of additional shares will result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of the equity securities or arrange for debt or other financing to fund planned acquisitions and activities.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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.

We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A complete summary of these policies is included in note (1) of the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes for the reporting period. Significant areas requiring the use of management estimates relate to the valuation of its mineral leases and claims and our ability to obtain final government permission to complete the project.

Stock-Based Compensation

The Company records stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation , using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. Equity instruments issued to employees and the cost of the services received as consideration are measured and recognized based on the fair value of the equity instruments issued.

Recently Issued Accounting Pronouncements

The Company has reviewed all the recently issued, but not yet effective, accounting pronouncements and does not believe that the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations as reported in its financial statements.

Contractual Obligations

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.