Vatic Ventures Corp. Management's Discussion & Analysis. Form F1. For the year ended February 28, 2011

Transcription

1 Vatic Ventures Corp. Management's Discussion & Analysis Form F1 For the year ended February 28, 2011

2 For the year ended February 28, June 23, 2011 OVERVIEW The following management discussion and analysis ( MD&A ) is a review of the operations, current financial position and outlook for Vatic Ventures Corp. (the "Company") and should be read in conjunction with the Company s audited financial statements and the accompanying notes for the year ended February 28, 2011, copies of which are filed on the SEDAR website: The Company prepares its financial statements in accordance with Canadian generally accepted accounting principles ( Canadian GAAP ). All dollar figures included herein and in the following discussion and analysis are quoted in Canadian dollars unless otherwise noted. The financial information in this MD&A is derived from the Company s financial statements prepared in accordance with Canadian GAAP. This MD&A may contain forward looking statements based on assumptions and judgments of management regarding events or results that may prove to be inaccurate as a result of risk factors beyond its control. Actual results may differ materially from the expect results. DESCRIPTION OF THE COMPANY S BUSINESS The Company was incorporated on October 30, 2007 and was classified as a Capital Pool Company ( CPC ) as defined in Policy 2.4 of the TSX Venture Exchange (the Exchange ). Until January 26, 2011, the principal business of the Company was the identification and evaluation of assets or a business and once identified or evaluated, to negotiate an acquisition of or participation in a business subject to receipt of shareholder approval, if required, and acceptance by regulatory authorities (as that term is defined in Policy 2.4). On May 17, 2010 and further amended on January 13, 2011, the Company announced that it entered into an option agreement (the Option ) to acquire an undivided 100% interest in a property (the Property ) consisting of 14 claims, covering 7,176 hectares southwest of Merritt, British Columbia (see Mineral Property). On January 26, 2011, the Exchange accepted the filing of the Company s Qualifying Transaction. As a result, the Company is listed on the Exchange as a Tier 2 mining exploration issuer and the common shares resumed trading on the Exchange on January 27, 2011 under the TSX-V symbol VCV. The Company is engaged in exploration and development of mineral properties, focusing on projects in British Columbia, Canada. At this time, the Company does not own any operating mines and has no operating income from mineral production. Funding for operations is raised primarily through public and private share offerings. Future operations and the Company s ability to meet its mineral interest commitments are dependent on the Company s ability to raise sufficient funds through share offerings, debt, or operations to support current and future expenditures. The Company expects to use its available working capital to finance exploration and development on the Property, and for general working capital, including complementary acquisitions. The Company s immediate short-term objectives are to: (a) complete the recommended work program on the Property; and (b) acquire and evaluate additional complementary mineral properties to expand the Company s portfolio.

3 For the year ended February 28, DESCRIPTION OF BUSINESS (cont d ) The Company s long-term objectives will be to: (a) determine if an economic mineral deposit exists on the Property; (b) find one or more economic mineral deposits and bring them to commercial production; and (c) deliver a return on capitalization to shareholders. The audited financial statements have been prepared under going concern assumption which contemplates the Company will continue in operation and realize its assets and discharge its liabilities in the normal course of operations. Should the going concern assumption not continue to be appropriate, further adjustments to carrying values may be required. The Company s ability to meet its obligations and maintain its current operations is contingent upon successful completion of additional financial arrangements and ultimately upon the discovery of proven reserves and generating profitable operations. Management expects to be successful in arranging sufficient funding to meet operating commitments for the ensuring year. However, the Company s future capital requirements will depend on many factors, including the costs of exploring and developing its mineral property, operating costs, the current market environment and global market conditions. At February 28, 2011 the Company has working capital of $723,696. For significant expenditures and mineral property development, the Company will almost exclusively depend on outside capital. Such outside capital will include the issuance of additional equity shares. There can be no assurance that capital will be available, as necessary, to meet the Company s operating commitments and further exploration and development plans. The issuance of additional equity securities by the Company may result in significant dilution to the equity interests of current shareholders. If the Company is unable to obtain financing in the amounts and on terms deemed acceptable, the further success of the business could be adversely affected. OVERALL PERFORMANCE During the year ended February 28, 2009, the Company completed its initial public offering ( IPO ) and issued 2,000,000 common shares at $0.10 per share. The agent was paid a commission of $20,000 and a corporate finance fee of $10,000, and was reimbursed legal fees of $10,000 and issued agent s warrants to acquire up to 200,000 common shares at $0.10 per share exercisable until May 15, The agent s warrants were valued at $7,541 using the Black-Scholes option-pricing model (assuming a risk-free interest rate of 3.75%, an expected life of 1 year, annualized volatility of 94.67% and a dividend rate of 0%). The Company incurred other legal and filing fees of $25,317 towards the IPO. During the year ended February 28, 2011, 200,000 agent s warrants were expired. On May 15, 2008, the Company granted to its directors options to acquire 500,000 shares at a price of $0.10 per share for a period of five years from the date the Company's Shares are listed on the Exchange. The fair value of $28,345 was recorded as stock based compensation using the Black-Scholes option pricing model. Any common shares acquired pursuant to the exercise of options prior to the completion of the qualifying transaction must be deposited in escrow and will be subject to escrow terms and released pro-rata to the shareholders as to 10% of the escrow shares upon issuance of a Final Exchange Bulletin by the Exchange and as to the remainder in six equal tranches of 15% every six months thereafter for a period of 36 months until the Final Exchange Bulletin is issued. As at February 28, 2011 and as of the date of this report, 150,000 of above shares were released and the remaining 1,350,000 common shares were held in escrow. On June 4, 2009, Greg Smith resigned as Director of the Company and; as a result on September 2, 2009, the Company cancelled 90,000 stock options granted to Mr. Smith.

4 For the year ended February 28, OVERALL PERFORMANCE (cont d ) On December 29, 2010, the Company received conditional acceptance for the Qualifying Transaction from the Exchange. On January 19, 2011, in connection with the closing of the Option Agreement, the Company has also completed a non-brokered private placement (the Placement ) of 6,000,000 units (each, a Unit ) at $0.10 per Unit for total proceeds of $600,000 and 2,000,000 flow-through Shares (each a FT Share ) at $0.12 per FT Share for total proceeds of $240,000. Each Unit consists of one Share and one share purchase warrant (each a Warrant ). Each Warrant entitles the holder to purchase one Share at an exercise price of $0.15 from January 19, 2011 until January 19, 2012 and at an exercise price of $0.20 from January 20, 2012 until January 19, All Shares, including Shares issued pursuant to the Warrants are subject to a four month hold period under applicable securities law and the Exchange policies, which hold period expires May 19, Canaccord Genuity Corp. ( Canaccord ) received $73,202 and 505,000 Warrants as a finder s fee in connection with the Placement. On January 19, 2011, the Company appointed Nasim Tyab as President and Chief Executive Officer; Tom Wilson as Chief Financial Officer; Loren Currie as Corporate Secretary; and George Cavey, Matt Mikulic, and Barry Coughlan as directors of the Company. Nasim Tyab will remain a director of the Company. The Company has also accepted the resignation of Murtaza Qureshi as an officer and director of the Company and the resignation of Micheal Cahen as a director of the Company. On January 19, 2011, the Company has also granted 50,000 stock options to Nasim Tyab, 200,000 stock options to Barry Couglan, 50,000 to Tom Wilson, 50,000 stock options to George Cavey, 50,000 stock options to Loren Currie, and 100,000 stock options to Matt Mikulic. Each stock option allows the individual to purchase one Share at a price of $0.10 per Share until January 19, The Company also cancelled 90,000 stock options granted to Mr. Qureshi and 170,000 stock options granted to Mr. Cahn. Mr. Qureshi s remaining 100,000 stock options were cancelled on April 19, On January 26, 2011, the Company completed its Qualifying Transaction (the QT ). The Company received the Final Exchange Bulletin for the Transaction from the Exchange. The Company is listed on the Exchange as a Tier 2 mining exploration issuer and the common shares resumed trading on the Exchange on January 26, 2011 under the TSX-V symbol VCV. On April 6, 2011, the Company announced that it had entered into a mineral property option agreement with K.J. Gold Canada Ltd. ( K.J. Gold ) and its wholly owned Mexican subsidiary (the Option Agreement ), whereby the Company can acquire an undivided 100% interest in and to certain mineral claims known as the La Silla West property (the La Silla West Property ) located in Sinaloa, Mexico which encompasses a total of approximately 29,000 hectares. The Transaction is subject to approval by the Exchange.

5 For the year ended February 28, MINERAL PROPERTIES Mineral Property Interests Brookmere Property, British Columbia, Canada On May 17, 2010 and as amended on January 14, 2011, the Company entered into a mineral property option agreement (the Agreement ) with Eastland Management Ltd. ( Eastland ). Pursuant to the terms of the Agreement, the Company has the option to acquire a 100% undivided interest in 14 claims (the Brookmere Property ) located southwest of Merritt, British Columbia, Canada (the Transaction ). To acquire a 100% undivided interest in the Brookemere property and to exercise the option, the Company shall pay Eastland: 1) $15,000 cash upon execution of the agreement (paid). 2) Issue 670,000 shares of the Company upon issuance of the Final Exchange Bulletin (common shares were issued and valued at $67,000). 3) Issue 200,000 shares of the Company on or before the first year anniversary of the bulletin. 4) Issue 300,000 shares of the Company on or before the second year anniversary of the bulletin. Upon the commencement of commercial production, the Company shall pay to Eastland a 1.5% Net Smelter Returns royalty. Upon execution of the agreement and the Company receiving the Geological Report, the Company shall pay $15,000 (paid) to Eastland, which amount shall be non-refundable even in the event that the agreement is terminated. Rider Capital Corp. received 67,000 shares as a finder s fee in connection with Transaction (common shares were issued and valued at $6,700). La Silla West Property, Sinaloa, Mexico On April 6, 2011, the Company entered into a mineral property option agreement with K.J. Gold Canada Ltd. ( K.J. Gold ) and its wholly owned Mexican subsidiary (the Option Agreement ), whereby the Company can acquire an undivided 100% interest in and to certain mineral claims known as the La Silla West property (the La Silla West Property ) located in Sinaloa, Mexico (the Transaction ). The Transaction encompasses a total of approximately 29,000 hectares. The Transaction is subject to approval by the Exchange. In order for the Company to exercise its option (the Option ) and earn an undivided 100% right, title and interest from the optionor (the Optionor ), the Company must: 1) upon execution of the Option Agreement, pay the optionor $15,000 cash (paid); 2) on issuance by the Exchange of the Final Bulletin for the Transaction, issue 1,000,000 common shares and $75,000 cash to the Optionor; 3) on or before the first anniversary date of the Option Agreement, pay the optionor an additional $75,000 cash and issue 1,000,000 common shares;

6 For the year ended February 28, MINERAL PROPERTIES (cont d ) Mineral Property Interests (cont d ) La Silla West Property, Sinaloa, Mexico (cont d ) 4) on or before the second anniversary date of the Option Agreement, pay the optionor an additional $75,000 cash and issue 1,000,000 common shares; 5) on or before the third anniversary date of the Option Agreement, pay the optionor an additional $75,000 cash and issue 1,000,000 common shares; and 6) on or before the fourth anniversary date of the Option Agreement, pay the optionor an additional $75,000 cash and issue 1,000,000 common shares. Upon the commencement of commercial production, the Company shall pay K.J. Gold a 2.0% Net Smelter Returns royalty. SELECTED ANNUAL INFORMATION The following financial data, which has been prepared in accordance with Canadian GAAP, is derived from the Company s audited financial information for the year ended February 28, 2011, 2010 and 2009: Year Ended Year Ended February 28, 2011 February 28, 2010 Year Ended February 28, 2009 $ $ $ Revenues Nil Nil Nil Net loss (137,358) (55,809) (60,732) Loss per share (0.03) (0.03) (0.04) Total Assets 890, , ,551 Long term debt Nil Nil Nil Cash dividends Nil Nil Nil The preparation of financial statements is in conformity with Canadian GAAP requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant areas requiring the use of management estimates includes the valuation of stock based compensation and future income taxes. Actual results may differ from these estimates.

7 For the year ended February 28, RESULTS OF OPERATIONS The Company had a net loss of $137,358 for the year ended February 28, 2011 ( $55,809). The Company s expenses related to professional fees for accounting and legal, property evaluation, transfer agent and filing fees and general administration fees. Such expenses consisted of accounting and auditing of $26,324 ( $16,826), amortization expense of $459 ( $Nil), consulting fees of $2,500 ( $Nil), legal expenses of $67,210 ( $23,596), management fees of $6,250 ( $Nil), office and general expenses of $889 ( $563), property evaluation of $2,000 ( $Nil), rent of $1,065 ( $Nil), stock based compensation of $8,994 ( $Nil), transfer agent and filing fees of $18,808 ( $15,020) and travel of $3,200 ( $Nil). During the year ended February 28, 2011, the Company also had interest income of $341 ( $196). The Company incurred expenses as a result of the QT closing. Expenses going forward will relate to exploration expenditures, general administration, professional fees and management fees. Accounting and auditing of $26,324 ( $16,826) relates to accounting and audit fees dealing with compliance, audit and advice pertaining to the projects and operations of the Company. The accounting and audit fees increased over the same period in the previous year due to increased operations of the Company. Consulting fees of $2,500 ( $Nil) relates to fees paid to consultants of the Company for consultation of the Company s prospective projects. The increase from the same period last year is attributed to the increase in activities associated with exploring prospective properties for the Company. Legal expenses of $67,210 ( $23,596) relates to legal expenses dealing with advice pertaining to the operations of the Company. There is an increase in legal expenses over the same period in the previous year due to increased operations of the Company. Management fees of $6,250 ( $Nil) relates to fees paid to officers of the Company for management of the Company s operations and projects. Office and general expenses of $889 ( $563) relates to expenses paid for administration and support. The increased from the same period of last year is attributed to increase expenses for the Company with its projects and the administration of such projects.

8 For the year ended February 28, SUMMARY OF QUARTERLY RESULTS The Company was incorporated on October 30, The Company s operating results for the period from March 1, 2009 to February 28, 2011 are summarized as follows: May 31, 2009 August 31, 2009 November 30, 2009 February 28, 2010 Revenue $ - $ - $ - $ - Net loss (16,288) (13,443) (5,423) (20,655) Basic and diluted net loss per share (0.01) (0.01) - - May 31, 2010 August 31, 2010 November 30, 2010 February 28, 2011 Revenue $ - $ - $ - $ - Net loss (12,526) (38,192) (13,992) (72,648) Basic and diluted net loss per share (0.01) (0.02) (0.01) (0.02) The decreased net loss in the quarter ended August 31, 2009 was mainly attributable to professional fees. Lower losses in the quarter ended November 30, 2009 were mainly attributable to professional fees and transfer agent and filing fees. Increased losses in the quarter ended February 28, 2010 relates to increased professional fees of $14,851 and increased transfer agent and filing fees of $5,770. Decreases in the quarter ended May 31, 2010 relates to decreased management fees of $11,668 and decreased transfer agent and filing fees of $857. Increases in the quarter ended August 31, 2010 relates to increased professional fees of $23,650 and increased transfer agent an filing fees of $12,118. Decreases in the quarter ended November 31, 2010 relates to decreased professional fees of $11,582 and decreased transfer agent and filing fees of $2,383. Increases in the quartered ended February 28, 2011 related to increased professional fees of $46,634, increased stock based compensation of $8,994 and increased transfer agent and filling fees of $3,450. FOURTH QUARTER RESULTS The Company had a net loss of $72,648 and general administrative expenses of $72,887 during the quarter ending February 28, Such expenses consisted of amortization expenses of $459 ( $Nil), Consulting fees of $2,500 ( $Nil), office and general expenses of $335 (2010- $66), management fees of $6,250 ( $Nil), rent of $1,065 ( $Nil), stock based compensation of $8,994 (2010 $Nil), professional fees of $46,634 ( $14,851), transfer agents and filing fees of $3,450 ( $5,770) and travel of $3,200 ( $Nil). The Company also recognized interest income of $239 ( $32) during the quarter ended February 28, The Company had a net working capital $723,696 for the quarter ended February 28, 2011 compared to a net working capital of $151,071 for the quarter ended February 28, Increased working capital in the year ended February 28, 2011 relates to increased issuance of shares. During the quarter ended February 28, 2011, the Company accrued $10,000 in professional fees relating to the audit of fiscal year 2011.

9 For the year ended February 28, LIQUIDITY AND CAPITAL RESOURCES As of February 28, 2011, the Company had net working capital of $723,696 (February 28, $151,071) and cash of $751,114 (February 28, $162,682). The Company anticipates it will have sufficient funding for the following year to support exploration expenditures on its newly acquired property interests and for operating expenditures. Cash balances increased by $588,432 during the year ended February 28, 2011 compared with a decrease of $56,247 in the year ended February 28, Below are detailed discussions related to the Company s cash flows. Operating Activities 2011 vs During the year ended February 28, 2011, cash used in operating activities was $112,099 compared to cash used in operating activities of $49,247 during the year ended February 28, The increase in cash used for operating activities is primarily attributed to an increase in the operations of the Company. Investing Activities 2011 vs Net cash used in investing activities during the year ended February 28, 2011 was $50,593, compared with cash used in investing activities of $7,000 during the year ended February 28, The increase is attributable to cash used to acquire and incur exploration expenditures on the Brookmere property. Financing Activities 2011 vs Cash provided from financing activities during the year ended February 28, 2011 was $751,123, compared with cash used in financing activities of $nil during the year ended February 28, The increase is attributable to cash raised through the issuance of shares. As discussed under the heading Private Placement, on January 19, 2011 the Company completed a nonbrokered private placement for total proceeds of $840,000. The Company anticipates its general and administrative costs for the next 12 months are broken down as follows: Expense Annual Cost ($) President's Salary $48,000 Chief Financial Officer's Salary $9,000 Corporate Secretary's Salary $9,000 General and Administrative $18,000 Rent $32,000 Legal Fees $20,000 Audit Fees $25,000 Transfer Agent and Filing Fees $15,000 Total $176,000

10 For the year ended February 28, LIQUIDITY AND CAPITAL RESOURCES (cont d ) The Company anticipates that its current cash on hand will be sufficient to cover its minimum operating expenses for the next 12 months. As at February 28, 2011, the Company had shareholders equity of $847,530. The capital to date was from proceeds of the issuance of common shares. The Company did not have any revenues during the year ended February 28, Until the Company s property interests generate profits sufficient to maintain operations, the ability of the Company to meet financial liabilities and commitments is primarily dependent upon the continued issuance of equity to new or existing shareholders. The Company plans to raise any additional capital required to satisfy its operational requirements primarily through private placement of its equity securities. There is no assurance that the Company will be able to obtain further funds required for the continued working capital requirements. Outstanding Share Data Authorized: Unlimited common shares, without par value Unlimited preferred shares, without par value Number of shares Capital Stock Contributed Surplus Balance, as at February 28, 2009 and ,000,000 $ 252,236 $ 35,886 Shares issued for cash 8,000, ,000 - Shares issued for property acquisition 737,000 73,700 - Share issued costs - (88,877) - Agent's warrants - (7,374) 7,374 Stock options granted - - 8,994 Shares cancelled (1,500,000) - - Balance, February 28, ,237,000 $ 1,069,685 $ 52,254 During the year ended February 28, 2011, the Company completed the following share capital transactions: Financings: The Company completed a non-brokered private placement of 6,000,000 units at a price of $0.10 per unit for gross proceeds of $600,000. The units were issued as non flow-through units consisting of one common share and one share purchase warrant. A total of 6,000,000 warrants were issued. Shares, warrants and any shares issued upon exercise of the warrants are subject to a hold period of four months expiring on May 19, Each warrant will entitle the holder to purchase one additional common share of the Company at a price of $0.15 per share in the first year, and at a price of $0.20 per share in the second year after issuance. The agent s warrants were valued at $7,374 using the Black-Scholes option pricing model (assuming a risk-free interest 1.68%, an expected life of 2 year, annualized volatility of 374% and a divided rate of 0%). The Company issued 670,000 common shares (valued at $67,000) to Eastland Management Ltd. pursuant to a mineral property option agreement and 67,000 common shares (valued at $6,700) to Rider Capital Corp. as a finder s fee.

11 For the year ended February 28, LIQUIDITY AND CAPITAL RESOURCES (cont d ) The Company completed a non-brokered private placement of 2,000,000 flow-through units at a price $0.12 per unit for gross proceeds of $240,000. Each unit consists of one share and one share purchase warrant (each a Warrant ). Shares, warrants and any shares issued upon exercise of the warrants are subjected to a hold period of four months expiring on May 19, The Company paid share issued costs consisting of $73,202 in cash for finders fees and the issuance of 505,000 agents warrants in connection with the private placement. On June 10, 2011, the Company issued 650,000 common shares pursuant to the exercise of options at price of $0.10 per share for the total proceeds of $65,000. As of February 28, 2011, the Company has outstanding common shares of 12,237,000 and stock options of 750,000. As of the date of this report, the Company has outstanding common shares of 12,887,000, agents warrants of 505,000 and warrants of 6,000,000. As of the date of this report, the Company had 19,392,000 fully diluted shares outstanding. OFF-BALANCE SHEET ARRANGEMENTS The Company has no off-balance sheet arrangements as at February 28, 2011 or as of the date of this report. TRANSACTIONS WITH RELATED PARTIES During the year ended February 28, 2011 and 2010, the Company entered into the following transactions with related parties: Expenses paid or accured to officers: Management fees $ 6,250 $ - During the year ended February 28, 2011, the Company paid $750 ( $Nil) in management fees to Loren Currie, Corporate Secretary for the Company. During the year ended February 28, 2011, the Company paid $1,500 ( $Nil) in management fees to Tom Wilson, Chief Financial Officer for the Company. During the year ended February 28, 2011, the Company accrued $4,000 ( $Nil) in management fees to Nasim Tyab, President and Chief Executive Officer for the Company. During the year ended February 28, 2011, the Company negotiated a management services contact with Loren Currie, Tom Wilson and Nasim Tyab and agreed to pay a total sum of $750/$750/$4,000 on the first calendar day of each month commencing on February 24, The Company may at any time after the Initial Term (one year), terminate this Agreement by giving one month written notice. Related party transactions are in the normal course of operations and have been recorded at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

12 For the year ended February 28, FINANCIAL INSTRUMENTS The Company s financial instruments consist of cash, receivables and accounts payable and accrued liabilities. The estimated fair value of these financial instruments approximates their carrying values because of the short term to maturity of these instruments. Unless otherwise noted, it is management s opinion that the Company is not exposed to significant interest, currency, or credit risks arising from financial institutions. As of February 28, 2011, the Company had $34,309 in term deposits earning interest at a rate of 0.3% per annum. CRITICAL ACCOUNTING ESTIMATES During the year ended February 28, 2011, the Company did not have any critical accounting estimates. For a detailed summary of the Company s significant accounting policies, the reader is directed to Note 2 of the Notes to the audited financial statements for the year ended February 28, 2011 available on SEDAR at CHANGE IN ACCOUNTING POLICIES Recent Accounting Pronouncements a) Business Combinations, Non-controlling Interest and Consolidated Financial Statements The CICA issued Handbook Sections 1582 Business Combinations, 1601 Consolidated Financial Statements and 1602 Non-controlling Interests which replace CICA Handbook Sections 1581 Business Combinations and 1600 Consolidated Financial Statements. Section 1582 establishes standards for the accounting for business combinations that is equivalent to the business combination accounting standard under IFRS. Section 1582 is applicable for the Company s business combinations with acquisition dates on or after January 1, Section 1601 together with Section 1602 establishes standards for the preparation of consolidated financial statements. Section 1601 is applicable for the Company s interim and annual consolidated financial statements for its fiscal year beginning March 1, Early adoption of these Sections is permitted and all three Sections must be adopted concurrently. The adoption of the standard will not have material impact on the financial statements. b) International reporting standards In addition to the above new accounting standards, the Accounting Standards Board ( AcSB ), in 2006, published a new strategic plan that will significantly affect financial reporting requirements for Canadian companies. The AcSB strategic plan outlines the convergence of Canadian GAAP with International Financial Reporting Standards ( IFRS ) over an expected five year transitional period. In February 2008, the AcSB announced that 2011 is the changeover date for publicly listed companies to use IFRS, replacing Canada s own GAAP. The date is for interim and annual financial statements relating to fiscal years beginning on or after January 1, The transition date of March 1, 2011 will require the restatement for comparative purposes of amounts reported by the Company for the year ended February 28, FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS The Company's financial instruments consist of cash, receivables and accounts payable and accrued liabilities. Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments. The fair value of these financial instruments approximates their carrying value due to their short-term maturity or capacity for prompt liquidation.

13 For the year ended February 28, OUTSTANDING SHARES As of the date this report, the Company had the following outstanding: 12,887,000 common shares including 1,350,000 common shares held in escrow 505,000 agent s warrants 6,000,000 warrants As of the date of this report, the Company had 19,392,000 fully diluted shares outstanding. DISCLOSURE CONTROLS AND PROCEDURES The Company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in provincial securities legislation. The Company evaluated its disclosure controls and procedures as defined under National Instrument as at February 28, This evaluation was performed by the Company s Chief Executive Officer and Chief Financial Officer. Based on this evaluation, the Company s Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective. RISKS AND UNCERTAINTIES The Company believes that the following risks and uncertainties may materially affect its success. Limited Operating History The Company is a relatively new company with limited operating history and no history of business or mining operations, revenue generation or production history. The Company was incorporated on October 30, 2007 and has yet to generate a profit from its activities. The Company is subject to all of the business risks and uncertainties associated with any new business enterprise, including the risk that it will not achieve its growth objective. The Company anticipates that it may take several years to achieve positive cash flow from operations. Exploration, Development and Operating Risks The exploration for and development of minerals involves significant risks, which even a combination of careful evaluation, experience and knowledge may not eliminate. Few properties which are explored are ultimately developed into producing mines. There can be no guarantee that the estimates of quantities and qualities of minerals disclosed will be economically recoverable. With all mining operations there is uncertainty and, therefore, risk associated with operating parameters and costs resulting from the scaling up of extraction methods tested in pilot conditions. Mineral exploration is speculative in nature and there can be no assurance that any minerals discovered will result in an increase in the Company s resource base. The Company s operations are subject to all of the hazards and risks normally encountered in the exploration, development and production of minerals. These include unusual and unexpected geological formations, rock falls, seismic activity, flooding and other conditions involved in the extraction of material, any of which could result in damage to, or destruction of, mines and other producing facilities, damage to life or property, environmental damage and possible legal liability. Although precautions to minimize risk will be taken, operations are subject to hazards that may result in environmental pollution, and consequent liability that could have a material adverse impact on the business, operations and financial performance of the Company.

14 For the year ended February 28, RISKS AND UNCERTAINTIES (cont d ) Fluctuating Mineral Prices The economics of mineral exploration is affected by many factors beyond the Company s control, including commodity prices, the cost of operations, variations in the grade of minerals explored and fluctuations in the market price of minerals. Depending on the price of minerals, it may be determined that it is impractical to continue the mineral exploration operation. Mineral prices are prone to fluctuations and the marketability of minerals is affected by government regulation relating to price, royalties, allowable production and the importing and exporting of minerals, the effect of which cannot be accurately predicted. There is no assurance that a profitable market will exist for the sale of any minerals found on the Property. Substantial Capital Requirements and Liquidity Substantial additional funds for the establishment of the Company s current and planned mining operations will be required. No assurances can be given that the Company will be able to raise the additional funding that may be required for such activities, should such funding not be fully generated from operations. Mineral prices, environmental rehabilitation or restitution, revenues, taxes, transportation costs, capital expenditures, operating expenses and geological results are all factors which will have an impact on the amount of additional capital that may be required. To meet such funding requirements, the Company may be required to undertake additional equity financing, which would be dilutive to shareholders. Debt financing, if available, may also involve restrictions on financing and operating activities. There is no assurance that additional financing will be available on terms acceptable to the Company or at all. If the Company is unable to obtain additional financing as needed, it may be required to reduce the scope of its operations or anticipated expansion, and pursue only those development plans that can be funded through cash flows generated from its existing operations. Regulatory Requirements The current or future operations of the Company require permits from various governmental authorities, and such operations are and will be governed by laws and regulations governing exploration, development, production, taxes, labour standards, occupational health, waste disposal, toxic substances, land use, environmental protection, site safety and other matters. Companies engaged in the exploration and development of mineral properties generally experience increased costs and delays in development and other schedules as a result of the need to comply with applicable laws, regulations and permits. There can be no assurance that all permits which the Company may require for the facilities and conduct of exploration and development operations will be obtainable on reasonable terms or that such laws and regulation would not have an adverse effect on any exploration and development project which the Company might undertake. Failure to comply with applicable laws, regulations and permitting requirements may result in enforcement actions, including orders issued by regulatory or judicial authorities causing operations to cease or be curtailed, and may include corrective measures requiring capital expenditures, installation of additional equipment or remedial actions. Parties engaged in exploration and development operations may be required to compensate those suffering loss or damage by reason of the exploration and development activities and may have civil or criminal fines or penalties imposed upon them for violation of applicable laws or regulations. Amendments to current laws, regulation and permits governing operations and activities of mineral companies, or more stringent implementation thereof, could have a material adverse impact on the Company and cause increases in capital expenditures or exploration and development costs or require abandonment or delays in the development of new properties.

15 For the year ended February 28, RISKS AND UNCERTAINTIES (cont d ) Financing Risks and Dilution to Shareholders The Company will have limited financial resources, no operations and no revenues. If the Company s exploration program on the Property is successful, additional funds will be required for the purposes of further exploration and development. There can be no assurance that the Company will be able to obtain adequate financing in the future or that such financing will be available on favourable terms or at all. It is likely such additional capital will be raised through the issuance of additional equity, which will result in dilution to the Company s shareholders. Title to Properties Acquisition of title to mineral properties is a very detailed and time-consuming process. Title to, and the area of, mineral properties may be disputed. The Company cannot give an assurance that title to the Property will not be challenged or impugned. Mineral properties sometimes contain claims or transfer histories that examiners cannot verify. A successful claim that Eastland or the Company, as the case may be, does not have title to the Property could cause the Company to lose any rights to explore, develop and mine any minerals on that property, without compensation for its prior expenditures relating to such property. Requirement for Permits and Licenses As the Company holds an option to acquire the Property, subject to the NSR, it does not currently hold any permits or licences necessary to carry on proposed exploration activities on the Property. A substantial number of permits and licenses may be required should the Company proceed beyond exploration; such licenses and permits may be difficult to obtain and may be subject to changes in regulations and in various operational circumstances. It is uncertain whether the Company will be able to obtain all such licenses and permits. Competition There is competition within the mining industry for the discovery and acquisition of properties considered to have commercial potential. The Company will compete with other mining companies, many of which have greater financial, technical and other resources than the Company, for, among other things, the acquisition of minerals claims, leases and other mineral interests as well as for the recruitment and retention of qualified employees and other personnel. Reliance on Management and Dependence on Key Personnel The success of the Company will be largely dependent upon on the performance of the directors and officers and the ability to attract and retain key personnel. The loss of the services of these persons may have a material adverse effect on the Company s business and prospects. The Company will compete with numerous other companies for the recruitment and retention of qualified employees and contractors. There is no assurance that the Company can maintain the service of its directors and officers or other qualified personnel required to operate its business. Failure to do so could have a material adverse effect on the Company and its prospects.

16 For the year ended February 28, RISKS AND UNCERTAINTIES (cont d ) No Mineral Reserves or Mineral Resources The Property in which the Company will hold an interest is considered to be an early exploration stage property, however no mineral reserve or mineral resource estimates have been prepared in respect of the Property. Mineral reserves are, in the large part, estimates and no assurance can be given that the anticipated tonnages and grades will be achieved or that the indicated level of recovery will be realized. Reserve estimates for properties that have not yet commenced production may require revision based on actual production experience. Market price fluctuations of metals, as well as increased production costs or reduced recovery rates, may render mineral reserves containing relatively lower grades of mineralization uneconomic and may ultimately result in a restatement of reserves. Moreover, short-term operating factors relating to the mineral reserves, such as the need for orderly development of the ore bodies and the processing of new or different mineral grades, may cause a mining operation to be unprofitable in any particular accounting period. Environmental Risks The Company s exploration and appraisal programs will, in general, be subject to approval by regulatory bodies. Additionally, all phases of the mining business present environmental risks and hazards and are subject to environmental regulation pursuant to a variety of international conventions and federal, provincial and municipal laws and regulations. Environmental legislation provides for, among other things, restrictions and prohibitions on spills, releases or emissions of various substances produced in association with mining operations. The legislation also requires that wells and facility sites be operated, maintained, abandoned and reclaimed to the satisfaction of applicable regulatory authorities. Compliance with such legislation can require significant expenditures and a breach may result in the imposition of fines and penalties, some of which may be material. Environmental legislation is evolving in a manner expected to result in stricter standards and enforcement, larger fines and liability and potentially increased capital expenditures and operating costs. Governmental Regulations and Processing Licenses and Permits The activities of the Company are subject to Canadian and provincial approvals, various laws governing prospecting, development, land resumptions, production taxes, labour standards and occupational health, mine safety, toxic substances and other matters. Although the Company believes that its activities are currently carried out in accordance with all applicable rules and regulations, no assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could limit or curtail production or development. Amendments to current laws and regulations governing operations and activities of exploration and mining, or more stringent implementation thereof, could have a material adverse impact on the business, operations and financial performance of the Company. Further, the mining licenses and permits issued in respect of its projects may be subject to conditions which, if not satisfied, may lead to the revocation of such licenses. In the event of revocation, the value of the Company s investments in such projects may decline. Local Resident Concerns Apart from ordinary environmental issues, work on, or the development and mining of the Property could be subject to resistance from local residents that could either prevent or delay exploration and development of the Property.

17 For the year ended February 28, RISKS AND UNCERTAINTIES (cont d ) Management Inexperience in Developing Mines The management of the Company has some experience in exploring for minerals, but may lack all or some of the necessary technical training and experience to successfully develop and operate a mine. Without adequate training or experience in these areas, management may not be fully aware of many of the specific requirements related to working within the mining industry and their decisions and choices may not take into account all available and necessary engineering or managerial approaches that experienced mine operating companies commonly use to successfully develop a mine. Consequently, the Company s operations, earnings and ultimate financial success could be materially adversely effected. Conflicts of Interest Certain of the directors and officers of the Company will be engaged in, and will continue to engage in, other business activities on their own behalf and on behalf of other companies (including mineral resource companies) and, as a result of these and other activities, such directors and officers of the Company may become subject to conflicts of interest. The BCBCA provide that in the event that a director has a material interest in a contract or proposed contract or agreement that is material to the issuer, the director must disclose his interest in such contract or agreement and refrain from voting on any matter in respect of such contract or agreement, subject to and in accordance with the BCBCA. To the extent that conflicts of interest arise, such conflicts will be resolved in accordance with the provisions of the BCBCA. Uninsurable Risks Exploration, development and production operations on mineral properties involve numerous risks, including unexpected or unusual geological operating conditions, rock bursts, cave-ins, fires, floods, earthquakes and other environmental occurrences. It is not always possible to obtain insurance against all such risks and the Company may decide not to insure against certain risks as a result of high premiums or other reasons. Should such liabilities arise, they could have an adverse impact on the Company s results of operations and financial condition and could cause a decline in the value of the Company Shares. The Company does not intend to maintain insurance against environmental risks. Litigation The Company and/or its directors may be subject to a variety of civil or other legal proceedings, with or without merit. Dividends To date, the Company has not paid any dividends on its outstanding shares. Any decision to pay dividends on the shares of the Company will be made by its board of directors on the basis of the Company s earnings, financial requirements and other conditions. DIRECTORS AND OFFICERS Nasim Tyab, President, CEO and Director Barry Coughlan, Director George Cavey, Director Matt Mikulic, Director Tom Wilson, Director and CFO Loren Currie, Corporate Secretary

18 For the year ended February 28, FORWARD-LOOKING STATEMENTS This MD&A contains forward-looking statements. Forward-looking statements are projections of events, revenues, income, future economic performance or management s plans and objectives for future operations. In some cases, you can identify forward-looking statements by the use of terminology such as may, should, expects, plans, anticipates, believes, estimates, predicts, potential or continue or the negative of these terms or other comparable terminology. Examples of forward-looking statements made in this MD&A include statements about the Company s business plans; the costs and timing of its developments; its future investments and allocation of capital resources; success of exploration activities; requirements for additional capital; government regulation of mining operations. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including: general economic and business conditions, fluctuations in worldwide prices and demand for minerals; our lack of operating history; the actual results of current exploration activities; conclusions or economic evaluations; changes in project parameters as plans continue to be refined; possible variations in grade and or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes or other risks of the mining industry; delays in obtaining government approvals or financing or incompletion of development or construction activities, any of which may cause our or our industry s 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 these forward-looking statements. While these forward-looking statements and any assumptions upon which they are based are made in good faith and reflect our current judgment regarding the direction of the Company s business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the Canada, the Company do not intend to update any of the forward-looking statements to conform these statements to actual results. ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS A breakdown of general and administrative expenses is provided in the financial statements for year ended February 28, OTHER MATTERS Legal proceedings: There are no ongoing legal proceedings of any kind initiated by the Company or by third parties against the Company. Contingent liabilities: At the date of MD&A, management was unaware of any outstanding contingent liability relating to the Company s activities. OUTLOOK The Company s primary focus for the foreseeable future will be on reviewing its financial position and developing the property acquired.

19 For the year ended February 28, MANAGEMENT S REPORT ON INTERNAL CONTROL OVER FINANICAL REPORTING In connection with Exemption Orders issued in November 2007 by each of the securities commissions across Canada, the Chief Executive Officer ( CEO ) and Chief Financial Officer ( CFO ) of the Company will file a Venture Issuer Basic Certificate with respect to the financial information contained in the unaudited interim financial statements and the audited annual financial statements and respective accompanying MD&A. In contrast to the certificate under National Instrument ( NI ) (Certification of Disclosure in Issuer s Annual and Interim Filings), the Venture Issuer Basic Certification includes a Note to Reader stating that the CEO and CFO do not make any representations relating to the establishment and maintenance of disclosure controls and procedures and internal control over financing reporting, as defined in MI IFRS CHANGEOVER PLAN In February 2008, the Accounting Standards Board ( AcSB ) confirmed that IFRS will replace Canadian GAAP for public accountable enterprises for fiscal years beginning on or after January 1, 2011, including comparative figures for the prior year. The Company will transition to IFRS effective March 1, 2011 and plans to issue its first complete set of financial statements under IFRS for the year ending February 28, The Company is going to consult external advisors to assist in the development and execution of a changeover plan to complete the transition to IFRS. The key elements of the Company s changeover plan will include the impact of IFRS on the following items: a) Accounting policies i) Property, Plant and Equipment ( PP&E ) IFRS and Canadian GAAP contain the same basic principles of accounting for property, plant and equipment; however, there are some differences between them. For example, capitalization of directly attributable costs in accordance with IAS 16, Property, Plant and Equipment ( IAS 16 ) may require measurement of an item of property, plant and equipment upon initial recognition to include or exclude certain previously recognized amounts under Canadian GAAP. Specifically, there may be changes in accounting for: 1) The amount of capitalized overheads; 2) The capitalization of major inspections that were previously expensed under Canadian GAAP; 3) The capitalization of depreciation for which the future economic benefits of that asset are absorbed in the production of another assets; and 4) The capitalization of borrowing costs in accordance with IAS 23, borrowing Costs. Management does not expect this to have an impact on the Company s financial position.

20 For the year ended February 28, IFRS CHANGEOVER PLAN (cont d ) a) Accounting policies (cont d ) ii) Impairment of Assets IAS 36, Impairment of Assets ( IAS 36 ) uses a one-step approach for testing and measuring asset impairments, with asset carrying values being compared to the higher of value in use and fair value less costs to sell. Value in use is defined as being equal to the present value of future cash flows expected to be derived from the asset in its current state. In the absence of an active market, fair value less costs to sell may also be determined using discounted cash flows. The use of discounted cash flows under IFRS to test and measure asset impairment differs from Canadian GAAP where undiscounted future cash flows are used to compare against the asset s carrying value to determine if impairment exists. This may result in more frequent write-downs in the carrying value of assets under IFRS since asset carrying values that were previously supported under Canadian GAAP based on undiscounted cash flows may not be supported on discounted cash flow basis under IFRS. However, under IAS 36, previous impairment losses may be reversed where circumstances change such that the impairment has reduced. This also differs from Canadian GAAP, which prohibits the reversal of previously recognized impairment losses. Management does not expect this to have an impact on the Company s financial position. iii) Income Taxes IAS 12, Income Taxes ( IAS 12 ) prescribes that an entity account for the tax consequences of transactions and other events in the same way that it accounts for the transactions and other events themselves. Therefore, where transactions and other events are recognized in earnings, the recognition of deferred tax assets or liabilities, which arise from those transactions, should also be recorded in earnings. For transactions that are recognized outside of the statement of earnings, either in other comprehensive income or directly in equity, and any related tax effects should also be recognized outside of the statement of earnings. The most significant impact of IAS 12 on the Company will be derived directly from the accounting policy decisions made under IAS 16. Management does not expect this to have an impact on the Company s financial position. iv) Business Combinations Under IFRS 3, Business Combinations ( IFRS 3 ), business combinations must be accounted for by applying the acquisition method. One of the parties to business combination can always be identified as the acquirer, being the entity that obtains control of the other business. Control is defined as the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In accordance with IFRS 3, acquisition-related cost incurred to effect a business combination shall be expensed in the period the costs are incurred. Under IFRS, these costs are not permitted to form a component of goodwill as is permitted under Canadian GAAP. Management does not expect this to have an impact on the Company s financial position.