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ITEM 2.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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FORWARD-LOOKING
STATEMENTS
This Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A) contains forward-looking statements that involve
known and unknown risks, significant uncertainties and other factors that may cause our actual results, levels of activity, performance
or achievements to be materially different from any future results, levels of activity, performance or achievements expressed,
or implied, by those forward-looking statements. You can identify forward-looking statements by the use of the words may,
will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the
negative of those terms. These statements are only predictions. In evaluating these statements, you should consider various
factors which may cause our actual results to differ materially from any forward-looking statements. Although we believe
that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking
statements. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.
Corporate History
We were incorporated on October 6, 2014
and are a startup exploration company without mining operations and we are in the business of mineral exploration. We have no revenues,
have achieved losses since inception, have been issued a going concern opinion by our auditors and rely upon the sale of our securities
to fund operations. We have not implemented our business plan to date. In order complete Phase 1, with an estimated cost of $7,800
and Phase II, with an estimated cost of $22,374 of our anticipated exploration program. We will need to raise additional funds,
with Phase 1 expected to commence between July 31, 2017 and September 30, 2017. To date we have not commenced our exploration program.
Our mining claims the Delcer Buttes 1-12 are currently in good standing with Elko County and Bureau of Land Management (BLM) There
is no assurance that a commercially viable copper, lead, zinc, and tungsten mineral deposit exists on our mining claims. Further
exploration will be required before a final evaluation as to the economic and legal feasibility of our mining claims can be determined.
Even if we complete our current exploration program and it is successful in identifying a copper, lead, zinc, and tungsten deposit,
we will have to spend substantial funds on further drilling and engineering studies before we will know if we have a commercially
viable mineral deposit or reserve.
We entered into a verbal agreement with
our consulting Geologist DA Bending to act as an agent to prospect, locate, stake claims, register claims and provide a preliminary
geological report for us, and is comprised of one claim block of 12 claims or 240 acres, respectively. The claims are located in
the Ruby Valley Approximately 83 km southeast of Elko Nevada. The nearest commercial airport is at Reno, approximately
360 road miles from the property. The Delcer Buttes Property is in good standing with the State of Nevada and The Bureau of Land
Management (BLM) and is due for renewal on or before August 31, 2017 at a cost of approximately $2,000. The claims are not accessible
all year round, there are periods where our claims may be un-accessible each year due to snow in the area. This means that our
exploration activities may be limited to a period of about eight to nine months per year. Further exploration is required before
a final evaluation as to the economic and legal feasibility is required to determine whether our mineral claims possess commercially
exploitable mineral deposits. We have not, nor has any predecessor, identified any commercially exploitable reserves of these minerals
on our mineral claims. As of October 31, 2017 the Claims have not been renewed.
On March 15, 2017, Mr. Laurie Stephenson was appointed as a member
of the board of directors. Additionally, Mr. Stephenson was appointed President, CEO, Secretary and Treasurer of the Corporation,
immediately following the resignation of Wan Soo Lee as an officer of the Corporation.
On March 15, 2017 Mr. Kook Chong Yoo tendered his resignation as
an officer and director of the Corporation. Additionally, On March 15, 2017 Mr. Wan Soo Lee tendered his resignation as an officer
of the Corporation. Mr. Lee will remain as a director of the Corporation.
Additionally, there have been no conflicts with the Corporation
or other board members during Mr. Yoo’s tenure as an officer and director and Mr. Lee’s tenure as an officer.
On March 29, 2017 the Registrant entered into a Letter of Intent
with Affordable Green Washington LLC of Tacoma WA to obtain an exclusive license to market and distribute Affordable Green’s
Products in the State of Washington.
The terms of the Letter of Intent are $50,000 on or before April
30, 2017, $50,000 on or before May 31, 2017 and a balance of $2,000,000 within six months for an aggregate total of $2,100,000.
On May 2, 2017 Mr. Jason Sakowski was appointed to the board of
directors and as an officer of the Corporation. Immediately following Mr. Sakowski’s appointment Laurence Stephenson resigned
his positions as an officer and director of the Corporation.
There have been no conflicts with the Corporation or other board
members during Mr. Stephenson’s tenure as an officer and director and his resignation was a result of conflicting schedules
and personal reasons.
On May 4, 2017, the Company entered into an Exclusive License Agreement
with Affordable Green Washington LLC.
The License Fees shall be due and payable as follows:
$25,000 Due upon execution of the agreement
receipt of which has been acknowledged by all parties; $25,000 Due on or before May 15, 2017; and $50,000 Due on or before May
31, 2017; and $2,000,000 on or before September 30, 2017, with closing to occur on or before May 31, 2017. There can be no assurance
that the Company will be able to raise the requisite funding associated with the terms and conditions of the License Agreement.
The License also provides the Company with
the right of first refusal to other states that has approved the medical and non-medical application of Marijuana and related products,
and first right of refusal for the country of Canada which has scheduled the legalization of Marijuana for medical and non-medical
use in 2018. Additionally, the agreement provides the Company with the opportunity to white paper license (use their own Brand)
with permission from Affordable Green Washington LLC.
The License Agreement contains customary representations
and warranties, any breaches of the representations and warranties will be subject to customary indemnification provisions, subject
to specified aggregate limits of liability. The foregoing summary description of the terms of the License Agreement may not contain
all information that is of interest to the reader. The license agreement may be read in its entirety as Exhibit 10.1 to form 8-K
filed with the SEC on May 9, 2017.
Additionally Director Wan Soo Lee resigned
his position as a director on May 4, 2017
On June 1, 2017, the Registrant entered into
an amended exclusive License Agreement with Affordable Green Washington LLC.
The Amended License Fees shall be due and payable as follows:
Licensee shall pay to Licensor an aggregate total $2,200,000 USD,
comprised of payments of twenty five thousand ($25,000) on or before April 30, 2017 and nine thousand eight hundred ($9,800) on
or before May 16
th
which the receipt is hereby acknowledged; and fifteen thousand two hundred ($15,200) on or before
June 2nd, 2017 and ten thousand ($10,000) on or before June 5th, 2017; and seventy-five thousand ($75,000) on or before June 30,
2017; and one hundred fifty thousand ($150,000) on or before July 30th, 2017; and two hundred fifty thousand ($250,000) on or before
August 25, 2017; and eight hundred-fifty thousand ($850,000) on or before September 25
th
and the balance of eight hundred
fifteen thousand ($815,000) on or before October 30, 2017.
The Amended License Agreement contains customary
representations and warranties and pre and post-closing covenants of each party and customary closing conditions. Breaches of the
representations and warranties will be subject to customary indemnification provisions, subject to specified aggregate limits of
liability. The foregoing summary description of the terms of the Amended License Agreement may not contain all information that
is of interest to the reader. For further information regarding the terms and conditions of the Amended License Agreement, this
reference is made to such agreement, The Amended License Agreement may be read in its entirety as Exhibit 10.1 to form 8-K/A filed
with the SEC on June 6, 2017.
Change of Name
On June 2, 2017 Pacificorp Holdings,
Ltd., Nevada corporation (the “Company”), entered into a short form Merger Agreement with the Company’s wholly
owned subsidiary in order to effect the change of their corporate name. The name change was effected through
a parent/subsidiary short-form merger of the Company and its wholly-owned subsidiary, Cannabis Leaf Incorporated., a Nevada Corporation
(the “Subsidiary”), under Section 92A.180 of the Nevada Revised Statutes (“NRS”). Pursuant to an Agreement
of Merger, dated June 2, 2017 (the “
Merger Agreement
”), between the Company and the Subsidiary, effective June
7, 2017, the Subsidiary merged with and into the Company and ceased to exist (the “Merger”). The Company is the surviving
entity and will adopt the Subsidiary’s name in the Merger.
To effectuate the Merger, the Company
filed Articles of Merger and the Merger Agreement with the Nevada Secretary of State on June 7, 2017. Copies of the Articles of
Merger and Merger Agreement are filed with the State of Nevada respectively and as Exhibits with the SEC on Form 8-K.
The Merger was approved by the board
of directors of the Company and the Subsidiary on June 2, 2017. In accordance with NRS Section 92A.180, stockholder approval was
not required.
Increase in Authorized Common
shares and Forward Stock Split
On June 2, 2017, the Company’
Board of Directors approved amending the Company’s Articles of Incorporation by filing a Certificate of Change, pursuant
to NRS 78.209, increasing its authorized shares from 100,000,000 shares of common stock at $.001 par value to 600,000,000 shares
of common stock at $.001 par value; and affecting a 6 for 1 forward stock split (the “Forward Split”). The Certificate
of Change was filed with the Secretary of State of the State of Nevada on June 5, 2017. A copy of the Certificate of Change is
filed as Exhibit 3.3 to this Form 8-K and is incorporated by reference herein. In accordance with the Forward Split, a shareholder
holding 100 shares will receive 500 additional shares of common stock, so that the shareholder will hold a total of 600 shares
of common stock after the forward stock split. Shareholders will not need to return their share certificates; the additional
shares will be entered on the books of the Company’s stock transfer agent, Action Stock Transfer.
Shareholder may request certificates
for the additional shares, at the shareholder’s expense, from the stock transfer agent. The forward stock split will not
change the relative voting power of our shareholders.
The aforementioned forward split and
name change were approved by FINRA on June 26, 2017, there was no change in the Issuer’s trading symbol.
Other than changing the Company’s name as a result
of the Merger, increasing the authorized shares and affecting a 6 for 1 forward stock split, there were no other changes to the
Company’s Articles of Incorporation. None of these actions affect the rights of the Company’s security holders.
On July 25, 2017, the Registrant entered into an Addendum
to the previous executed Amended License Agreement with Affordable Green Washington LLC.
The
Addendum to the License Agreement further defines amended terms and conditions as follows:
Section 10. Consideration
a)
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Licensee shall pay to Licensor an aggregate total $2,300,000 USD ("Financing"), comprised of payments along the following schedule on or before the dates indicated below now referred to as the Financing Schedule:
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30 April, 2017
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$
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25,000.00
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PAID
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16 May, 2017
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$
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9,800.00
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PAID
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2 June, 2017
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$
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15,200.00
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PAID
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5 June, 2017
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$
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10,000.00
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PAID
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24 July, 2017
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$
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10,000.00
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27 July, 2017
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$
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35,000.00
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|
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10 August, 2017
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$
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50,000.00
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|
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25 August, 2017
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$
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255,000.00
|
|
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14 September, 2017
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$
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300,000.00
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|
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28 September, 2017
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$
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850,000.00
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|
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26 October, 2017
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$
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800,000.00
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TOTAL
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$
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2,300,000.00
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b)
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The Licensor will receive 100,000 restricted common shares of the Licensee on the closing of this Agreement;
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c)
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The Licensor will receive an additional 100,000 restricted common shares of the Licensee if at any time after August 25, 2017, the Licensee within 15 days is unable to make the Financing payment as outlined in the Financing Schedule;
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The Addendum to
the Amended License Agreement contains other terms and conditions. The foregoing summary description of the terms of the Addendum
to the Amended License Agreement may not contain all information that is of interest to the reader. For further information regarding
the terms and conditions of the Addendum to the Amended License Agreement, the agreement may viewed in its entirety filed
as Exhibit 10.1 to the Registrant's Current Report on Form 8-K as filed with the Securities and Exchange Commission on October
31, 2017.
On August 1, 2017
Jason Sakowski the registrants current President and CEO and a director entered in to purchase agreements with the former directors
and officers of the Registrant to purchase an aggregate total of twenty seven million (27,000,000) Restricted Common Shares, resulting
in a change in control of the Registrant. The purchase price for the shares is $10,000 and $5,000 respectively and is due and payable
on or before March 31, 2018.
The Share Purchase
Agreements contains other terms and conditions. The foregoing summary description of the terms of the Share Purchase Agreements
may not contain all information that is of interest to the reader. For further information regarding the terms and conditions of
the Share purchase Agreements, may viewed in their entirety which were filed as Exhibit 10.1 and 10.2 respectively on Form 8-K.
On October 24, 2017, Cannabis Leaf Incorporated (the “Company”)
entered into a Letter of Intent (the “LOI”) with Green Venture Capital Inc. (“Green Venture”) whereby the
Company will be assigned Green Venture’s interest in a Letter of Intent (the “MMS Farms LOI”) that Green Venture
has with MMS Farms, LLC (“MMS Farms”). MMS Farms owns a Tier 2 Recreational Marijuana Production and Processing License
which allows MMS Farms to produce and process recreational marijuana under the laws of the State of Washington.
Closing will take place on the MMS Farms LOI is assigned
to the Company by Green Venture and MMS Farms. The Company is to provide financing of $500,000 to Green Venture, payable in installments.
Further information will be disclosed once a definitive agreement is finalized.
Events Subsequent to October 31, 2017
As of October 31, 2017 the license agreement
with Affordable Green LLC is in default. However, the Company and Affordable Green are working together to remedy the default.
To date the Company has paid a total of $114,975 as a deposit on their License with Affordable Green LLC and subsequently have
paid an additional $27,480 for an aggregate total of $142,455 as of November 29, 2017 all funds received were by of short term
loans that bear a 5% annual interest rate.
On December 14, 2017, Cannabis
Leaf, Inc. (the “Company”) dismissed TAAD, LLP as its independent registered public accounting firm.
TAAD LLP’s report on the
Company’s financial statements for the fiscal years ended January 31, 2017 and January 31, 2016 contained an opinion on the
uncertainty of the Company to continue as a going concern because of the Company’s need to raise additional working capital
to service its debt and for its planned activity.
Other than as disclosed, TAAD,
LLP’s report on the financial statements for either of the past two fiscal years did not contain an adverse opinion or a
disclaimer of opinion, or was qualified or modified as to uncertainty, audit scope, or accounting principles, disclaimer of opinion,
modification, or qualification in accordance with 304(a)(1)(ii) of Regulation S-K.
The Company’s Board of Directors
approved the decision to change its independent registered public accounting firm.
During the fiscal years ended
January 31, 2017 and January 31, 2016, and the subsequent interim periods and further through the date of dismissal of, there have
been no disagreements with TAAD, LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement if not resolved to the satisfaction of, would have caused them to make reference to the
subject matter of the disagreement(s) in connection with their report on the Company’s financial statements for such years;
and there were no reportable events, as listed in Item 304(a)(1)(v) of Regulation S-K.
During the fiscal years ended January
31, 2017 and January 31, 2016, and further through the date of dismissal of TAAD, LLP , TAAD, LLP did not advise the Company
on any matter set forth in Item 304(a)(1)(v)(A) through (D) of Regulation S-K.
The Company Dismissed TAAD LLP as a
decision by Management
Engagement of New Independent Registered
Public Accounting Firm
On December 15, 2017 the Company engaged
(“BF Borgers CPA, PC) as our new independent registered public accounting firm to audit the Company’s financial statements
for the fiscal year ending January 31, 2018. During the past two fiscal years and the subsequent interim periods preceding the
engagement, the Company did not consult with BF Borgers CPA, PC regarding (i) the application of accounting principles to
a specific transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s
financial statements, and no written report or oral advice was provided to the Company by BF Borgers CPA, PC concluding there was
an important factor to be considered by the Company in reaching a decision as to an accounting, auditing or financial reporting
issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in Item 304 (a)(1)(iv) of Regulation
S-K or a reportable event, as that term is described in Item 304 (a)(1)(v) of Regulation S-K.
RESULTS OF OPERATIONS
Working Capital
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|
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|
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At October 31, 2017
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At January 31, 2017
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Current Assets
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$
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526
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$
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489
|
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Current Liabilities
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180,406
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33,135
|
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Working Capital
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$
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(179,880
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)
|
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(32,646
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)
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Cash Flows
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Nine Months Ended October 31, 2017
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Nine Months Ended October 31,2016
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Cash Flows used in Operating Activities
|
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$
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(33,563
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)
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$
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(8,031
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)
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Cash used in Investing Activities
|
|
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(114.975
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)
|
|
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—
|
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Cash Flows provided by Financing Activities
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148,575
|
|
|
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7,672
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Net Increase (decrease) in Cash During Period
|
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$
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37
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$
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(359
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)
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The decrease in our working
capital at October 31, 2017 from the period ended January 31, 2017 is reflective of the current state of our business development.
As of October 31, 2017,
we had cash on hand of $526. Since our inception, we have used our common stock and short term loans to raise money for our operations
and for our property and acquisitions. We have not attained profitable operations and are dependent upon obtaining financing to
pursue our plan of operation.
Operating Revenues
We have not generated any revenues since inception.
Operating Expenses and Net Loss
Operating expenses
for the three month period ended October 31, 2017 was $41,243 as compared to operating expenses for the three month period
ended October 31, 2016 was $3,050. This was attributed to the additional licensing deposits and an increase in operating
expenses for the Company, due to the Company entering into the License Agreement with Affordable Green Washington LLC.
Operating expenses
for the nine month period ended October 31, 2017 was $144,386 as compared to operating expenses for the nine month period
ended October 31, 2016 was $11,529. This was attributed to the additional licensing deposits and an increase in operating
expenses for the Company, due to the Company entering into the License Agreement with Affordable Green Washington LLC.
Liquidity and Capital Resources
As of October 31,
2017, the Company’s cash balance was $526 compared to $489 as at January 31, 2017 and its total assets were $526
compared with $489 as at January 31, 2017. The increase in total assets is attributed to the Company being able to secure
funding to pay license fees and ongoing operating costs upon entering into the License Agreement with Affordable Green
Washington LLC.
As of October 31, 2017,
the Company had total liabilities of $180,406 compared with total liabilities of $33,135 as at January 31, 2017. The change in
total liabilities was attributed Company being able to secure funding to pay license fees and ongoing operating costs in addition to the Company entering into the License Agreement with Affordable Green Washington LLC.
As of October 31,
2017, the Company had a working capital deficit of $(179,880) compared with $(32,646) as of January 31, 2017. The increase in
working capital deficit was attributed being able to secure funding to pay license fees and ongoing operating costs in
addition to the Company entering into the License Agreement with Affordable Green Washington LLC.
Cashflow from Operating Activities
During the nine
month period ended October 31, 2017, the Company used $33,563 of cash for operating activities. This was attributed the
Company being able to secure funding to pay license fees and ongoing operating cost, due to the Company entering into the
License Agreement with Affordable Green Washington LLC.
During the nine month
period ended October 31, 2016, the Company used $8,031 of cash for operating activities. This was attributed to the operating
expenses for the Company, in conjunction with their ongoing operating expenses and reporting requirements.
Cashflow from Investing Activities
During the nine month period
ended October 31, 2017, the Company used $114,975 of cash in investing activities. This was received from advances from an unrelated
third party and funds were used for a deposit on the Company’s License Agreement.
During the six month period ended October 31, 2016, the Company used $0 of cash in investing activities.
Cashflow from Financing Activities
During the nine month period
ended October 31, 2017, the Company received $148,575 of cash from financing activities. This was received from advances from our
directors and an unrelated third party.
During the nine month period
ended October 31, 2016, the Company received $7,672 of cash from financing activities. This was received from an unrelated party
loan.
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.
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. Any 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 exploration activities. To date we have not raised any
capital from the sale of equity securities and have relied on additional contributions from shareholders and our directors.
Critical Accounting Policies
We have identified certain
accounting policies, described below, that are most important to the portrayal of our current financial condition and results of
operations. Our significant accounting policies are disclosed in the notes to the financial statements included in this Quarterly
Report.
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.
Recent Accounting Pronouncements
The Company does not expect that the adoption
of any recent accounting standards to have a material impact on its financial statements.