Anacortes Mining Corp. — Interim / Quarterly Report 2020

Jun 2, 2020

First Light Capital Corp. Management Discussion and Analysis Quarterly Report – March 31, 2020

This Management Discussion and Analysis (“MD&A”) of First Light Capital Corp. (the “Company”) provides analysis of the Company’s financial results for the three-month period ended March 31, 2020. The following information should be read in conjunction with the unaudited condensed interim financial statements and the notes to the unaudited condensed interim financial statements for the three-month period ended March 31, 2020 and the audited financial statements for the year ended December 31, 2019, which are prepared in accordance with International Financial Reporting Standards (“IFRS”). All amounts are expressed in Canadian dollars unless otherwise noted.

This discussion includes certain statements that may be deemed “forward-looking statements”. Forward- looking statements usually include words such as may, will, would, expect, plan, anticipate, budget, estimates, potential, believe, intend, or other similar words. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, continued availability of capital and financing and general economic, market or business conditions. The Company does not update or revise forward-looking information even if new information becomes available unless legislation requires us to do so. Investors should not place undue reliance on forward-looking statements. Additional details of the specific risks associated with the operations of the Company and such forward-looking statements are set out below under “Risks and Uncertainties”. Investors are cautioned that any such statements are not guarantees of future performance and actual results or developments may differ materially from those projected in the forward-looking statements.

Date of Report

This MD&A is prepared as of May 26, 2020.

Corporate Profile and Overall Performance

First Light Capital Corp. (the “Company”) was incorporated under the Business Corporations Act of British Columbia on March 15, 2018. The Company is classified as a “Capital Pool Company” for the purposes of Policy 2.4 of the TSX Venture Exchange Inc. (the “TSX-V” or the “Exchange”). As a result, the Company’s principal business is the identification and evaluation of a Qualifying Transaction (“QT”) and once identified or evaluated, to negotiate an acquisition or participation in a business subject to receipt of shareholder approval, if required, and acceptance by regulatory authorities. The Company has not conducted commercial operations other than to enter into discussions for the purpose of identifying potential acquisitions or interests.

Until completion of a Qualifying Transaction, the Company will not carry on any business other than the identification and evaluation of businesses or assets with a view to completing a potential Qualifying Transaction. With the consent of the Exchange, this may include the raising of additional funds in order to finance an acquisition. Except as described in the Company’s prospectus dated March 20, 2019, the funds raised pursuant to the Company’s Initial Public Offering and any subsequent financing will be utilized only for the identification and evaluation of potential Qualifying Transactions and, to the extent permitted by Policy 2.4, for general and administrative expenses.

Qualifying Transaction

To date, the Company has not yet completed a Qualifying Transaction. The Company has limited funds to identify and complete a QT, and therefore there can be no assurance that the Company will be able to complete a QT within the time period permitted.

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Initial Public Offering

On March 20, 2019, the Company filed a Prospectus in respect of an Initial Public Offering (“IPO”). The Company’s IPO was completed on April 23, 2019 with the issuance of 2,500,000 common shares at a price of $0.10 per share, for gross proceeds of $250,000. In connection with the financing, the Company entered into an Agency Agreement with Leede Jones Gable Inc. (the “Agent”). As part of the Agency Agreement, the Agent received a cash commission of 10% of gross proceeds, or $25,000, a corporate finance fee of $10,500, and a legal cost reimbursement of $10,400. As part of the Agency Agreement, the Company agreed to grant Agent warrants (the “Agent’s Warrants”) which will entitle the Agent to purchase up to 10% of the common shares sold under the IPO, at a purchase price that is equal to the price per share offered in the IPO. The Agent’s Warrants are exercisable until 24 months from the Listing date.

The Company commenced trading on the Exchange on May 3, 2019 under the symbol XYZ.P.

Results of Operations

Three-months ending March 30, 2020

The Company’s only activity to date has been to attempt to identify businesses with a view to completing a Qualifying Transaction. During the three-month period ending March 31, 2020, the Company had a net loss of $38,839. The loss related primarily to professional fees of $29,100 and filing fees of $9,739. These costs were related to the Company’s listing on the Exchange, as well as audit and legal expenses relating to the filing of the Company’s Prospectus.

Liquidity and Capital Resources

At March 31, 2020 the Company had a working capital surplus of $554,192 and cash of $595,384 compared to $593,031 and $612,255 at December 31, 2019, respectively. As of the date of this report, the Company has not paid dividends and does not have any commitments for capital expenditures.

Management believes the Company has sufficient working capital at this time to meet its ongoing financial obligations; however there is no revenue generated from operations, and any additional working capital would require raising additional debt and/or equity capital. Management cannot provide assurance that the Company will ultimately achieve profitable operations, become cash flow positive, or raise additional debt and/or equity capital.

Transactions with Related Parties

On April 23, 2019, the Company granted 300,000 stock options to key management personnel and recorded sharebased compensation was $21,344 for the period ending June 30, 2019. Key management personnel consist of officers and directors of the Company. Key management compensation was $Nil for the three-month period ended March 31, 2020.

Outstanding Share Data

As at March 31, 2020, there were 12,500,000 common shares issued and outstanding.

As at December 31, 2019, there were 12,500,000 common shares issued and outstanding.

On April 23, 2019, the Company granted 300,000 stock options exercisable at a price of $0.10 per share for a period of five years, and 250,000 agent warrants to acquire 250,000 common shares at a price of $0.10 per share, for a 24 month period.

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Risks and Uncertainties

The Company’s sole objective is to identify a satisfactory Qualifying Transaction. The closing of any proposed Qualifying Transaction is subject to a number of terms and conditions, including completion of due diligence procedures by parties to the transaction and receipt of all required regulatory approvals, and there is no assurance that a transaction will be completed. If the Company does not complete a Qualifying Transaction within the time permitted by the Exchange, its common shares could be delisted.

The Company does not have a source of income, has not commenced commercial operations, and has no significant assets other than cash. There can be no assurance that the Company will be able to raise additional funding in the future on terms acceptable to the Company.

During the three-month period ended March 31, 2020, the outbreak of the novel strain of coronavirus, specifically identified as “COVID-19”, was declared a pandemic by the World Health Organization. The outbreak has resulted in governments worldwide enacting emergency measures to combat the spread of the virus which in turn have caused material disruption to business globally resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions. It is not possible to reliably estimate the length and severity of these developments and the impact on the financial results and condition of the Company in future periods.

The Company is exposed to financial instrument related risks. The type of risk exposure and the management of the exposure are as follows:

Credit risk

Credit risk is the risk of loss associated with the counterparty’s inability to fulfill its payment obligations. Financial instruments that potentially subject the Company to concentrations of credit risks consist principally of cash. To minimize the credit risk the Company places these instruments with a high quality financial institution.

Liquidity risk

Management closely monitors the liquidity position and expects to have adequate sources of funding to finance the identification and evaluation of a QT.

Interest rate risk

The Company is exposed to interest rate risk on the variable rate of interest earned on bank deposits. The fair value interest rate risk on bank deposits is insignificant as the deposits are short‐term.

The Company has not entered into any derivative instruments to manage interest rate fluctuations.

Currency risk

The Company’s expenses are denominated in Canadian dollars. The Company’s corporate office is based in Canada and current exposure to exchange rate fluctuations is minimal.

The Company does not have any foreign currency denominated monetary assets or liabilities. The principal business of the Company is the identification and evaluation of assets or a business and once identified and evaluated, to negotiate an acquisition or participation in a business subject to receipt of shareholder approval and acceptance by regulatory authorities.

Management Updates

Neil Currie, Brayden Sutton, and Benjamin Curry are the directors of First Light Capital Corp. Neil Currie was appointed as Chief Executive Officer, Chief Financial Officer and Corporate Secretary. Management believes that,

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on a collective basis, the Directors of First Light Capital Corp. possess the appropriate experience, qualifications and history to be capable of completing the Company’s Qualifying Transaction.

Off Balance Sheet Transactions

The Company does not have any off balance sheet arrangements as at March 31, 2020 or as of the date of this report.

Additional Information

Additional information relating to the Company can be found on SEDAR at www.sedar.com.

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