ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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
On May 4, 2017 the Registrant entered into an exclusive licensing agreement with Affordable Green Washington LLC of Tacoma WA to market and distribute Affordable Green’s Products in the State of Washington. Once marketing and distribution have been established in Washington State the Company may expand to other States on a State by State basis. Additionally, the Company also has first right of refusal to market and distribute Affordable Green’s products in Canada if as and when legislation is passed in Canada for the legalization and importation of Marijuana and Marijuana products.
We were incorporated on October 6, 2014, and were originally a startup exploration company without mining operations. 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 this business plan to date and have since entered into agreements to change our original business. 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. Due to the extensive experience in mining and exploration of Laurie Stephenson a former director and officer of the Company and currently a consultant of the Company, the Company may still choose to pursue the Original business plan also
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 83km 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.
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.
Events Subsequent to April 30, 2017
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 Licensee Agreement was amended in order to revise the payment schedule, making the milestones more attainable and attractive for both parties. As of June 19, 2017 the Company has paid a total of $60,000 on the License Agreement.
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 of which both have been paid by a third party subsequent to April 30, 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.
On June 2, 2017 the board of directors adopted a resolution to initiate a forward split on a 6 for 1 basis. Additionally, the resolution also provided for the merger of Cannabis Leaf Incorporated (subsidiary) into Pacificorp Holdings Ltd. (Parent), In addition to the resolution the Company has executed a Merger Agreement and Articles of Merger pursuant to NRS 92A.180 resulting in a forward split and name change to Cannabis Leaf Incorporated. No consideration was paid as part of this agreement. The Company has filed these corporate actions with FINRA and to date no approvals from FINRA have been granted.
RESULTS OF OPERATIONS
Working Capital
|
|
At April 30,
2017
|
|
|
At January 31, 2017
|
|
Current Assets
|
|
$
|
10,173
|
|
|
$
|
489
|
|
Current Liabilities
|
|
|
72,225
|
|
|
|
33,135
|
|
Working Capital
|
|
$
|
(62,052
|
)
|
|
|
(32,646
|
)
|
Cash Flows
|
|
Three Months Ended April 30, 2017
|
|
|
Three Months Ended April 30,2016
|
|
Cash Flows used in Operating Activities
|
|
$
|
(12,867
|
)
|
|
$
|
(4,320
|
)
|
Cash Flows used in Investing Activities
|
|
|
(25,000
|
)
|
|
|
-
|
|
Cash Flows provided by Financing Activities
|
|
|
43,600
|
|
|
|
4,200
|
|
Net Change During Period
|
|
$
|
5,733
|
|
|
$
|
(120
|
)
|
The decrease in our working capital at April 30, 2017 from the period ended January 31, 2017 is reflective of the current state of our business development.
As of April 30, 2017, we had cash on hand of $6,222. 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 April 30, 2017 was $5,053 as compared to
operating expenses for the three month period ended April 30, 2016 was $4,320. This was attributed to the 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 April 30, 2017, the Company’s cash balance was $6,222 compared to $489 as at January 31, 2017 and its total assets were $35,173 compared with $489 as at January 31, 2017. The increase in total assets is attributed to the Company entering into the License Agreement with Affordable Green Washington LLC and the increased costs associated with ongoing reporting requirements.
As of April 30, 2017, the Company had total liabilities of $72,225 compared with total liabilities of $33,135 as at January 31, 2017. The change in total liabilities was attributed to the Company entering into the License Agreement with Affordable Green Washington LLC. and increases in loans payable.
As of April 30, 2017, the Company had a working capital deficit of $(37,052) compared with $(32,646) as of January 31, 2017. The increase in working capital deficit was attributed to the Company entering into the License Agreement with Affordable Green Washington LLC, increases in unrelated party loans payable and increased costs associated with ongoing reporting requirements.
Cashflow from Operating Activities
During the three month period ended April 30, 2017, the Company used $12,867 of cash for operating activities. This was attributed to the increase in operating expenses for the Company, due to the Company entering into the License Agreement with Affordable Green Washington LLC., increases in unrelated party loans payable and increased costs associated with ongoing reporting requirements.
During the three month period ended April 30, 2016, the Company used $4,320 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 three month period ended April 30, 2017, the Company used $25,000 of cash in investing activities. This was received from an unrelated party loan and used for a deposit on the Company’s License Agreement with Affordable Green Washington LLC.
During the Three month period ended April 30, 2016, the Company used $0 of cash in investing activities.
Cashflow from Financing Activities
During the three month period ended April 30, 2017, the Company received $25,000 of cash from financing activities. This was received from an unrelated party loan.
During the three month period ended April 30, 2017, the Company received $18,600 of cash from financing activities. This was received from a related party loan.
During the Three month period ended April 30, 2016, the Company received $4,200 of cash from financing activities. This was received from shareholders contributions and advances from our directors
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.