Argenta Silver Corp. — Management Reports 2020

Jun 12, 2020

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MANAGEMENT’S DISCUSSION AND ANALYSIS

DECEMBER 31, 2019

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MANAGEMENT’S DISCUSSION AND ANALYSIS

The following is management’s discussion and analysis (MD&A) of Butte Energy Inc.’s (Butte or the Company) operating and financial results for the year ended December 31, 2019, compared to the year ended December 31, 2018, as well as information and expectations concerning the Company’s outlook based on currently available information. The MD&A should be read in conjunction with the audited financial statements for the years ended December 31, 2019 and December 31, 2018. The financial statements have been prepared in accordance with International Accounting Standards. The reporting and measurement currency is the Canadian dollar.

This report is prepared as of June 12, 2020.

CAUTION REGARDING FORWARD-LOOKING INFORMATION

This MD&A contains forward-looking information including estimates of reserves and resources and future revenue associated therewith, expectations of future production, funds flow from operations and the Company’s planned work programs and changes thereto in the prospect areas of Central Alberta. The Company currently has no active operations and is evaluating opportunities, including those outside of the oil and gas industry. The use of any of the words “target”, “plans”, "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. Such forward-looking information, including but not limited to statements as to production targets, timing of the Company's planned work program and management's belief as to the potential of certain properties, involve known and unknown risks, uncertainties and other factors which may cause the actual results of the Company and its operations to be materially different from estimated costs or results expressed or implied by such forward-looking statements. Forward looking information is based on management’s expectations regarding future growth, results of operation, production, future capital and other expenditures (including the amount, nature and sources of funding thereof), environmental matters, business prospects and opportunities. Forward looking information involves significant known and unknown risks and uncertainties, which could cause actual results to differ materially from those anticipated. These risks include, but are not limited to: the risks associated with the oil and gas industry (e.g. operational risks in development, exploration and production; delays or changes in plans with respect to exploration and development projects or capital expenditures; the uncertainty of reserve and resource estimates and projections relating to production, costs and expenses, and health, safety and environmental risks), the risk of commodity price and foreign exchange rate fluctuations, risks and uncertainties associated with securing the necessary regulatory approvals and financing to proceed with continued development of the prospects in Central Alberta. Although the Company has attempted to take into account important factors that could cause actual costs or results to differ materially, there may be other factors that cause costs of the Company's program or results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. See the Principal Business Risks section of this MD&A for a further description of these risks. The forward-looking information included in this MD&A is expressly qualified in its entirety by this cautionary statement. Accordingly, readers should not place undue reliance on forwardlooking information.

Butte Energy Inc. | 1 | Year-ended December 31, 2019

OVERVIEW OF BUSINESS AND SELECTED FINANCIAL INFORMATION

Results at a Glance Financial (Canadian $ except as noted) General and administrative expenses Finance expense Loss for the period Basic and fully diluted loss per share Funds used in operations Funds used in investing activities Funds provided by financing activities Cash and cash equivalents Working capital deficiency Total assets Current and long-term liabilities Shareholders’ deficit	Year ended December 31, 2019 Year ended December 31, 2018
	(98,122) (105,711) (60,684) (58,131) (171,384) (189,993) ($0.00) ($0.00) (15,756) (174,832) (1,902) (94,227) - 300,000
	December 31, 2019 December 31, 2018
	14,013 31,671 (111,931) (1,231) 116,019 127,046 554,680 394,323 (21,532,813) (21,361,429)

As of December 31, 2019, the Company has no active operations. Previously, the Company had been engaged in the acquisition, exploration and development of petroleum and natural gas reserves in Western Canada. The new board of directors and management appointed in January 2018 are evaluating potential opportunities, including those outside of the oil and gas industry. In November 2018, the Company announced a proposed transaction which, if approved, will enter the Company into the cannabis industry (see “Proposed Transactions”).

Proposed Transaction - Butte enters cannabis industry with the Pura Cali group, announces RTO, change of business and financing

On November 20, 2018, the Company announced it had entered into an agreement to acquire all of the issued and outstanding equity of Pura Valley, LLC and Pura Extractions LLC (the “Purchased Companies”). The acquisition of the Purchased Companies is being done in conjunction with a 10:1 consolidation of Butte's share capital, a change of Butte's name, a financing, and changes to Butte's management (collectively, the "Proposed Transaction"). On completion of the Proposed Transaction, Butte will carry on the business currently carried on by the Purchased Companies. Among other closing conditions, the Proposed Transaction is subject to the approval of Butte's shareholders.

The original agreement had subsequently been amended to extend the deadline of negotiation of a definitive agreement and related documentation respecting the Proposed Transaction to June 30, 2019, which has now expired. Although the parties have not formalized a further extension to the completion of the definitive agreement, the parties continue negotiations of finalizing a definitive agreement. Terms of the Proposed Transaction may change upon conclusion of agreeing on the definitive agreement.

Butte Energy Inc. | 2 | Year-ended December 31, 2019

The date of Butte's shares will remain halted until the closing of the Proposed Transaction. See “Proposed Transactions” for further details.

As previously announced, the maturity date of the $300,000 convertible debenture, which bears interest at 10% per annum, was extended from January 3, 2019 to January 4, 2021.

Organizational changes

In March 2019, Ron Tremblay, CEO and director of the Company, passed away after a brief illness. On April 24, 2019, the Company appointed Jason Rickert to act as Interim CEO. The Company also appointed Steven Parker as a director effective May 30, 2019, which fulfilled the vacancy on the Company’s board created by Mr. Tremblay’s passing. The Company continues to evaluate its potential opportunities and to actively work toward the achievement of the closing conditions for the Proposed Transaction as previously noted (see “Proposed Transaction - Butte enters cannabis industry with the Pura Cali group, announces RTO, change of business and financing”).

COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of the new Coronavirus (COVID-19) a pandemic (the “Pandemic”). Significant measures have been implemented in Canada, the United States of America (the “U.S.”), and the rest of the world by authorities in response to the increased impact from the Pandemic. Businesses and individuals are facing challenges responding to the rapid changes and uncertainties arising from the Pandemic.

The Company monitors guidance and relief programs from government, regulators, and health authorities.

• The officers and directors of the Company work remotely and are maintaining social distancing.

• In response to the Pandemic, securities regulatory authorities in Canada have granted a blanket exemption allowing issuers an additional 45 days to complete certain regulatory filings. As announced in news releases dated April 28 and May 28, 2020, the Company is relying on this exemptive relief to postpone its filings of its annual financial statements and management's discussion and analysis, for the year ended December 31, 2019 (the “Annual Financial Information”), and its first quarter financial statements and management’s discussion and analysis for the period ended March 31, 2020 (the “First Quarter Financial Information”) due to logistics and delays caused by the COVID-19 pandemic. Until such time as these documents are filed, Butte’s management and other insiders are subject to a trading blackout that reflects the principles contained in section 9 of National Policy 11-207 - Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions.

In order to fund future operations or acquisitions, the Company will need to raise additional funds by way of equity or debt. The Pandemic has adversely affected the economies and financial markets of many countries including Canada and the U.S. An economic downturn may negatively impact the timing and ability of the Company to raise additional funding or close new transactions. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

OVERVIEW OF PRIOR OIL AND GAS OPERATIONS

The Company operated one well at Chigwell 04-35-042-26 W4M, which had been shut-in since February 1, 2015. The well was shut-in due to AER guidelines relating to overproduction of non-native gas (CO2). In 2015, the Company actively started to sell the Chigwell property.

The Company placed the well at Chigwell 04-35-042-26 W4M in production in February 2017 before shutting it down again at the end of March 2017.

Butte Energy Inc. | 3 | Year-ended December 31, 2019

On August 15, 2017, the Company announced the completion of the sale of the Chigwell properties, which constituted the final disposition of the Company’s remaining asset. Proceeds of the sale were used for the payments of the liabilities and the Company, and the then board of directors actively sought a transaction(s) whereby the Company could continue as a going concern.

In January 2018, there was a change of control of the Company with a new board and management team appointed. The board of directors have been evaluating potential opportunities, including those outside of the oil and gas industry.

The Company still has obligations regarding the finalization of the reclamation of previously abandoned well sites. A provision of $80,870 for the expected reclamation costs is included in the Company’s statement of financial position as of December 31, 2019. The reclamation process is expected to be completed within one to three years.

OPERATING AND FINANCIAL RESULTS

General and administrative expenses $ Exploration and evaluation expenditures Finance income Finance expense Foreign exchange gain Net loss and comprehensive loss for the period $ Loss per share – basic and diluted $	Three months ended December 31 2019 2018 “Q4 2019” “Q4 2018” (18,860)$ (66,209) $ (14,274) (30,204) (33,134) (96,413) 478 434 (15,171) (29,658) - - (47,827) $ (125,637) $ - $ - $	Years ended December 31	Years ended December 31
	2019 “Q4 2019” (18,860)$ (14,274) (33,134) 478 (15,171) - (47,827) $ - $	2019 “YTD 2019” (98,122)$ (14,480) (112,602) 1,902 (60,684) - (171,384)$ - $	2018
			“YTD 2018” (105,711) (30,389)
			(136,100) 1,352 (58,131) 2,886
			(189,993)
			-

General and Administrative Expenses

Consulting and management fees $ Listing and filing fees Office, insurance and miscellaneous Professional fees Shareholder relations Travel Total $	Three months ended December 31 2019 2018 - $ (2,500) $ 1,250 1,907 5,289 589 10,596 54,068 1,725 3,213 - 8,932 18,860 $ 66,209 $	Years ended December 31	Years ended December 31
	2019 - $ 1,250 5,289 10,596 1,725 - 18,860 $	2019 - $ 7,053 7,002 77,317 6,750 - 98,122 $	2018
			8,280 8,860 12,731 54,521 12,387 8,932
			105,711

General and administrative expenses (G&A) were $18,860 for Q4 2019, a decrease of $47,349 compared to Q4 2018. Q4 2018 reflects professional fees and travel incurred with the Proposed Transaction announced November 20, 2018.

Butte Energy Inc. | 4 | Year-ended December 31, 2019

G&A were $98,122 YTD 2019, a decrease of $7,589 compared to YTD 2018. In YTD 2019, the Company achieved savings in consulting fees, insurance, and travel. YTD 2018 also includes costs associated with holding a special meeting of shareholders in March 2018 to approve the continuance of the Company from Alberta to British Columbia. These savings were partially offset by an increase of $22,796 in professional fees due to legal fees incurred on the proposed transaction and the timing for the recognition of audit expenses recognized in 2019 versus 2018.

Exploration and evaluation expenditures

Exploration and evaluation expenditures was $14,274 for Q4 2019, a decrease of $15,930 compared to Q4 2018; and $14,480 for YTD 2019, a decrease of $15,909 compared to YTD 2018.

Activity relates to reclamation activities on previously abandoned well sites. Both Q4 2019 and Q4 2018 reflect updates to the provision for environmental liabilities based upon a review of actual and expected reclamation activities. YTD 2018 reflects additional costs for site visits and updated evaluations by an environmental consultant.

The Company did not incur any expenditures on evaluating new oil and gas prospects.

Finance Expense

The finance expense relates to interest expense on the convertible debt borrowed by the Company from a related party on January 3, 2018. The maturity date was subsequently extended to January 4, 2021. The amortized cost of the loan balance as of December 31, 2018 was updated to incorporate the effect of the extended maturity date.

SELECTED ANNUAL INFORMATION

Information for the three years ended December 31, 2019, as extracted from the Company’s audited financial statements, is presented below:

(CAD $, except as noted) Total revenue Loss from continuing operations Loss per share from continuing operations – basic and diluted Net loss and comprehensive loss for the year Loss per share – basic and diluted Total assets Total non-current financial liabilities Dividends	2019 2018 2017
	- - 1,000 (171,384) (189,993) (322,667) (0.00) (0.00) (0.01) (171,384) (189,993) (1,350,489) (0.00) (0.00) (0.03) 116,019 127,046 1,258 326,730 266,046 - - - -

The Company’s financial results presented above have been derived from the Company’s financial statements prepared under IFRS. The Company’s functional and presentation currency is the Canadian dollar.

The Company owned one producing asset, which was sold in 2017. In the statement of operations and comprehensive loss for the year ended December 31, 2017, the activity from this well was reflected as discontinued operations.

The decrease in the net loss in 2019 and 2018 compared to 2017 reflects the downsizing of the Company’s operations.

Butte Energy Inc. | 5 | Year-ended December 31, 2019

QUARTERLY SUMMARY

Below is a summary of the Company’s performance over the last eight quarters:

(CAD $, except as noted)	Q4 2019 Q3 2019 Q2 2019 Q1 2019
Total revenue Net loss and comprehensive loss for the period Loss per share – basic and diluted Total revenue Net loss and comprehensive loss for the period Loss per share – basic and diluted	- - - - (47,827) (18,418) (32,977) (72,162) - - - -
	Q4 2018 Q3 2018 Q2 2018 Q1 2018
	- - - - (125,637) (14,470) (17,064) (32,822) - - - -

The Company’s financial results presented above have been derived from the Company’s financial statements prepared under IFRS. The Company’s functional and presentation currency is the Canadian dollar.

The Company owned one producing asset, which was sold in 2017.

2018 and 2019 reflect a reduction in consulting and other general and administrative costs resulting from the downsizing of the Company’s operations and management’s effort to reduce costs. However, this decrease is offset by an increase in professional fees incurred on the proposed transaction. In addition, both Q4 2019 and Q4 2018 reflect an increase in the provision for the estimated reclamation of previously abandoned wells. Q4 2018 also includes an adjustment to the finance expense for the extension of the maturity date on the convertible loan.

LIQUIDITY AND CAPITAL RESOURCES

As at December 31, 2019, the Company had a working capital deficiency of $111,931.

Funds used in operations were $15,756 for YTD 2019 compared to $174,832 in YTD 2018. Trade and other payables increased $85,399 in YTD 2019 reflecting the increase in accrued legal fees on the proposed transaction. Management has limited expenditures and operations to conserve cash.

The maturity date of the convertible loan was extended from January 3, 2019 to January 4, 2021.

On May 7, 2020, the Company borrowed the principal amount of $55,000 from Stone’s Throw. The demand promissory note bears interest at 12% per annum.

Presently, the Company does not generate sufficient cash flows from its operations, and has no active operations as of December 31, 2019. Consequently, the new board of directors and management have been evaluating potential opportunities, including those outside of the oil and gas industry.

On November 20, 2018, the Company announced it had entered into an agreement to acquire all of the issued and outstanding equity of Pura Valley, LLC and Pura Extractions LLC. The acquisition of the Purchased Companies is being done in conjunction with a 10:1 consolidation of Butte's share capital, a change of Butte's name, a financing, and changes to Butte's management. On completion of the Proposed Transaction, Butte will carry on the business currently carried on by the Purchased Companies. Among other closing conditions, the Proposed Transaction is

Butte Energy Inc. | 6 | Year-ended December 31, 2019

subject to the approval of Butte's shareholders. Butte's shares will remain halted until the closing of the Proposed Transaction. See “Proposed Transactions” for further details.

In order to fund future operations or acquisitions, the Company will need to raise additional funds by way of equity or debt. However, there is no assurance that the Company will be able to raise such funds on terms acceptable to it. It is also not possible for the Company to predict the duration or magnitude of the adverse results of the Pandemic and its effects on the Company’s business or ability to raise funds (see “ COVID-19 Pandemic ”).

These factors indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.

OUTSTANDING SHARE DATA

There were 303,066,402 common shares outstanding as at June 11, 2020, and as at December 31, 2019.

In January 2018, the Company entered into a convertible loan agreement (the “Convertible Loan Agreement”) pursuant to which the Company has borrowed the principal amount of $300,000, which bears interest at 10% per annum and is repayable on the date that is 12 months from the date of issuance. Subsequent to December 31, 2018, the maturity date on this debt was extended by another two years to January 4, 2021. The principal amount and accrued interest will be convertible at the option of lender into units of the Company (“Units”) at a conversion price of $0.05 per Unit. Each Unit will consist of one Common Share and one Common Share purchase warrant (a “Warrant”). Each Warrant will entitle the holder to acquire one Common Share at an exercise price of $0.05 for a period of 12 months from the date they are issued. If the convertible loan plus accrued interest was fully converted on January 4, 2021, and all of the Warrants exercised, the lender would hold an additional 15,600,000 Common Shares

The Company had no stock options outstanding as at June 11, 2020, and as at December 31, 2019.

See “Proposed Transactions” for a summary of expected changes to the Company’s share capital if the closing conditions are met for the purchase agreement as announced on November 20, 2018.

OFF-BALANCE SHEET ARRANGEMENTS

The Company has not entered into any off-balance sheet transactions.

TRANSACTIONS WITH RELATED PARTIES

Borrowings

The Company has historically received funding from related parties.

On January 3, 2018, the Company borrowed the principal amount of $300,000 from Stone’s Throw, which bears interest at 10% per annum. In January 2019, the term of the convertible loan was extended to January 4, 2021 from January 3, 2019. The principal amount and accrued interest will be convertible at the option of Stone’s Throw into units of the Company (“Units”) at a conversion price of $0.05 per Unit. Each Unit will consist of one Common Share and one Common Share purchase warrant (a “Warrant”). Each Warrant will entitle the holder to acquire one Common Share at an exercise price of $0.05 for a period of 12 months from the date they are issued.

Butte Energy Inc. | 7 | Year-ended December 31, 2019

On May 7, 2020, the Company borrowed the principal amount of $55,000 from Stone’s Throw. The demand promissory note bears interest at 12% per annum.

Compensation to key management personnel

No amounts have been paid during 2019 to the executive officers or directors.

For 2018, the compensation expense of $5,000 relates to services provided by the Corporate Secretary. No amounts were paid to the remaining executive officers or directors in 2018

PROPOSED TRANSACTIONS

On November 20, 2018 the Company announced that it has entered into an agreement dated November 16, 2018 with Jonathan Lasser to acquire all of the issued and outstanding equity of Pura Valley, LLC ("Pura Valley"), which holds the licenced Price Creek Ranch production facility in Humboldt County, CA, and Pura Extractions LLC (“Pura Extraction”), which holds a majority interest in a high-capacity extraction lab with locations and immediate plans for two additional high-capacity labs for extraction and distillation.

The acquisition of the Purchased Companies is being done in conjunction with a 10:1 consolidation of Butte's share capital, a change of Butte's name, a financing, and changes to Butte's management. The parties have agreed to cooperate reasonably and in good faith in finalizing the structure of the Proposed Transaction for optimal tax treatment of the parties and for operational purposes. On completion of the Proposed Transaction, Butte will carry on the business currently carried on by the Purchased Companies.

The original agreement had subsequently been amended to extend the deadline of negotiation of a definitive agreement and related documentation respecting the Proposed Transaction to June 30, 2019, which has now expired. Although the parties have not formalized a further extension to the completion of the definitive agreement, the parties continue negotiations of finalizing a definitive agreement. Terms of the Proposed Transaction may change upon conclusion of agreeing on the definitive agreement.

Among other closing conditions, the Proposed Transaction is subject to the approval of Butte's shareholders. Butte's shares will remain halted until the closing of the Proposed Transaction. Further information respecting the Proposed Transaction and the Purchased Companies and their business will be contained in the management information circular to be prepared by the Company and delivered to its shareholders prior to the Meeting, a copy of which will be filed under the Company’s profile at www.sedar.com.

About the Purchased Companies

Jon Lasser is the innovative Founder and CEO of Pura Valley and Pura Extraction. For over 15 years, Mr. Lasser has been a leader in the Humboldt Country Organic Cannabis category. Pura Extraction has established new, innovation methods to isolate botanical compounds and to do so more efficiently resulting in better, purer quality outputs. These two entities will be the core of the Pura vision of a complete, organic, seed to consumer sales company. The Pura Team consists of many industry veterans, experienced executives, and stellar operators.

Acquisition of the Purchased Companies

The November 16, 2018 agreement between Butte and Mr. Lasser includes the following terms:

• In conjunction with a 10:1 consolidation of its share capital (the "Butte Consolidation"), Butte shall raise funds pursuant to a subscription receipt offering (the "Butte Financing"), which on closing will be contributed to a

Butte Energy Inc. | 8 | Year-ended December 31, 2019

newly formed wholly owned US subsidiary corporation ("USCo"), which shall invest such funds in the Purchased Companies and become the sole manager of the Purchased Companies.

• The operating agreements of the Purchased Companies shall be amended and restated in their entirety to provide members of the Purchased Companies (other than USCo) with a redemption-exchange right which allows the members to exchange their LLC units for Butte shares or at the election of the LLC, a cash equivalent payment (the "Redemption-Exchange Right").

• Members of the Purchased Companies shall purchase special voting shares in Butte for a nominal price based on an appraisal, each of which shall entitle the holder to exercise the equivalent voting rights which would attach to the number of Butte shares such member would be entitled to acquire upon exercise of the RedemptionExchange Right. The number of such votes to which the holders of special voting shares are entitled will be reduced from time to time as the Redemption-Exchange Right is exercised.

• Butte will reserve an aggregate of 70,000,000 common shares of Butte ("Consideration Shares") for issuance to the members of the Purchased Companies upon the exercise of the Redemption-Exchange Right and in exchange for all of the issued and outstanding securities of the Purchased Companies. The value of the Consideration Shares for the purpose of the Proposed Transaction is $0.75 per share.

The Consideration Shares may be required to be escrowed pursuant to applicable stock exchange requirements.

Following the completion of the purchase of the Purchased Companies, (but prior to the issuance of securities pursuant to the Butte Financing, Mr. Lasser will have the right to exercise approximately 70% of the total votes ascribed to all of the Company’s outstanding shares. Mr. Lasser is an arm’s length party to the Company. A finder’s fee of 2,250,000 shares is payable in connection with the acquisition of the Purchased Companies.

The Proposed Transaction is expected to close later in 2020 and is subject to the conditions set out in the purchase agreement between the Company and Mr. Lasser, including the negotiation of a definitive agreement and related documentation respecting the Proposed Transaction on or before June 30, 2019 (expired – formal amendment to extend date not yet finalized) and the completion of the Butte Financing (described below). It is a condition of Closing of the Proposed Transaction that Butte shall have received conditional approval for the delisting of its common shares from the NEX and for listing of its common shares on the CSE. It is a further condition of the transaction that Stone's Throw Capital Inc. ("STC") will vote all of its common shares (representing approximately 95.4% of the Company’s issued and outstanding shares) in favour of the Proposed Transaction and the delisting of the Company’s shares from the NEX, and a support agreement respecting this commitment is expected to be entered into prior to or concurrently with the execution of the definitive agreement. The NEX may require majority of the minority approval of the Company’s shareholders for the delisting of the Company’s shares from the NEX.

The Butte Financing

Prior to closing the acquisition of the Purchased Companies, Butte will complete a financing (the "Butte Financing") to raise proceeds to fund the operation of the purchased business and its further growth and development, including the capitalization of USCo and the Purchased Companies. The Butte Financing shall be in an amount and at a price to be determined by the parties, acting reasonably and having regard to market conditions and the anticipated capital requirements of Butte and its business after closing of the acquisition of the Purchased Companies ("Closing"). The Butte Financing will be effected by the issuance of subscription receipts which will convert into Butte common shares at Closing. Finder's fees may be payable in connection with the Butte Financing.

The common shares of Butte issued pursuant to the Butte Financing will be subject to resale hold periods under applicable Canadian and United States securities laws.

Butte Energy Inc. | 9 | Year-ended December 31, 2019

New Management

On Closing, the existing board and management of Butte shall resign, and subject to their consent and the acceptability of such persons to the CSE, the board of directors of Butte shall include Jonathan Lasser. Douglas Meyer, Patrick McEntee and other persons to be determined prior to Closing. Mr. Lasser shall also serve as the Company’s President and Chief Executive Officer. Stone's Throw will be entitled to nominate one director to the board.

Mr. Lasser is the lead force behind the business development, strategic partnerships, team building, and organizational structure of Pura Valley, LLC and Pura Extractions LLC. He has carefully crafted the dynamic foundation of the company through a determined persistence that has manifested rapid growth for the business and its partners. He is a seasoned expert in organic land management and the commercial operation of sustainable outdoor and mixed light cultivation and retail dispensaries with a focus on original heritage strains alongside the newest, best-in-class genetics available and hemp cultivation. An experienced cultivator of twelve years, he has nurtured key industry relationships and assembled a powerful team capable of propelling it to be the most innovative, respected and competitive vertically integrated cannabis company in California.

Douglas Meyer is a senior executive of various Consumer Packaged Goods and Over-the-Counter Medicine companies for almost 40 years. Mr. Meyer has worked at some of the leading United States and Global companies and private equity firms and is respected for his positive management style and successful financial and marketing achievements.

Patrick McEntee has been a leading CEO of technological science oriented companies for almost 20 years. Mr. McEntee has managed major divisions of Oracle, IBM and ABC/Disney. Currently, Mr. McEntee is CEO of Xeriplant, Inc. a company that delivers agricultural compliance, security, and resource systems and services that leverage botanical intelligence, mobility, and cloud computing. XERI is involved in the transformation of urban, rural, and remote agriculture.

Name Change

In conjunction with the Butte Consolidation, the Company will change its name from "Butte Energy Inc." to "Pura Cali Group Inc." or such other name as may be selected by the Butte board of directors.

The Convertible Debenture

Stone’s Throw holds a $300,000 convertible loan which bears interest at 10% per annum. STC agreed to extend the maturity date of the debenture from January 3, 2019 to January 4, 2021.

CHANGES IN ACCOUNTING POLICIES

IFRS 16 - Leases

Effective January 1, 2019, the Company adopted IFRS 16 using the modified retrospective application method, where the 2018 comparatives are not restated and the cumulative effect of initially applying IFRS 16 has been recorded on January 1, 2019 for any differences identified.

IFRS 16 introduces significant changes to the lessee accounting by removing the distinction between operating and finance leases under IAS 17 and requiring the recognition of a right-of-use asset (“ROU asset”) and a lease liability at the lease commencement for all leases, except for short-term leases (lease terms of 12 months or less) and leases of low value assets. Leases to explore for or use oil or natural gas are specifically excluded from the scope of IFRS 16.

Butte Energy Inc. | 10 | Year-ended December 31, 2019

As the Company does not have any applicable leases with a term of more than twelve months, the adoption of IFRS 16 did not have any effect on the Company’s financial statements.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements requires management to make estimates and use judgment regarding the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as at the date of the financial statements and the reported amounts of revenues and expenses during the year.

By their nature, estimates are subject to measurement uncertainty and changes in such estimates in future years could require a material change in the financial statements.

Accordingly, actual results may differ from the estimated amounts as future confirming events occur. Significant estimates and judgments made by management in the preparation of these financial statements are as follows:

• (i) Amounts recorded for the provision of environmental liabilities require the use of estimates with respect to the amount and timing of reclamation expenditures. The ultimate amount and timing of the restoration expenses are uncertain and cost estimates can vary in response to many factors. Based on a review of the expected timing of future cashflows, it was management’s judgment that the time value of money was not material and therefore did not need to present value the expenditures expected to be required to settle the obligation.

• (ii) Convertible debentures are accounted for in accordance with their substance and are presented in their component parts of debt and equity. The Company estimates the fair value of the debt component of convertible debentures by calculating the discounted cash flows of the debenture using an effective interest rate of a similar instrument but without the conversion feature. Similar instruments may have certain features that, while similar, may differ, such as the term, amount, security, and credit risk, and therefore management are required to exercise significant judgment or estimate in determining an appropriate discount rate.

• (iii) Tax interpretations, regulations and legislation are subject to change. As such, income taxes are subject to measurement uncertainty. Management assesses deferred income tax assets at the end of the reporting period to determine the likelihood that they will be realized from future taxable earnings.

FINANCIAL INSTRUMENTS

The Company’s financial instruments are exposed to certain financial risks: credit risk, liquidity risk and market risk.

(a) Credit Risk

Credit risk is the risk of loss associated with a counterparty’s inability to fulfill its payment obligations. All of the Company’s cash and cash equivalents and reclamation deposits are held with reputable financial institutions and, as such, the Company does not consider its credit risk to be significant as at December 31, 2019 and 2018.

• (b) Liquidity Risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk through cash flow forecasting including anticipated investing and financing activities.

Butte Energy Inc. | 11 | Year-ended December 31, 2019

Although the Company has no current active operations, the board of directors are actively working on a transaction(s) whereby the Company will continue as a going concern (see “Proposed Transactions” for further details). In order to fund future operations or acquisitions, the Company will need to raise additional funds by way of equity or debt. However, there is no assurance that the Company will be able to raise such funds on terms acceptable to it. These factors indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.

( c ) Market Risk

Market risk is the risk that changes in market prices, such as commodity prices, foreign exchange rates and interest rates will affect the Company’s income or the value of the financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

The Company currently has no operating properties and therefore the exposure to market risk is minimal.

DETERMINATION OF FAIR VALUES

The fair value of cash and cash equivalents, accounts receivable, trade and other payables and convertible loans is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. The fair values of these balances approximate their carrying value.

Financial assets and liabilities recorded or disclosed at fair value in the statement of financial position are categorized using a three-level hierarchy that reflects the level of judgment associated with the inputs used to measure their fair value. The fair values of financial assets and liabilities included in Level 1 are determined by reference to unadjusted quoted prices in active markets for identical assets and liabilities. Fair values of financial assets and liabilities in Level 2 are based on inputs other than Level 1 quoted prices that are observable for the asset or liability either directly (as prices) or indirectly (derived from prices). The fair values in Level 3 financial assets and liabilities are not based on observable market data.

The estimated fair value of cash and cash equivalents was based on Level 1 inputs.

PRINCIPAL BUSINESS RISKS

The Company’s business and results of operations are subject to a number of risks and uncertainties, including but not limited to the following:

Exploration, development, production and marketing of oil and natural gas involves a wide variety of risks which include but are not limited to the uncertainty of finding oil and gas in commercial quantities, securing markets for existing reserves, commodity price fluctuations, exchange and interest rate exposure and changes to government regulations. Changes in government regulation further include risks relating to prices, taxes, royalties and environmental protection. The oil and gas industry is intensely competitive and the Company competes with a large number of companies with greater resources.

The Company currently has no revenues from operations and is evaluating potential opportunities, including those outside of the oil and gas industry. On November 20, 2018, the Company announced a proposed transaction, which, if approved, would result in the Company entering the cannabis industry (see “Proposed Transactions”). Should this proposed transaction proceed, it will expose the Company to different business risks than if it continued in the

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oil and gas industry. Should this proposed transaction not proceed, the Company will need to seek and evaluate alternative opportunities and options regarding the Company’s future operations.

The Company’s ability to close the Proposed Transaction or acquire new prospects will require that sufficient capital from outside sources will be available to the Company in a timely manner. Several factors affect the availability of equity or debt financing, many that are beyond the control of the Company.

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

The Company will continue to seek to obtain funding through similar or other means depending on market conditions and other relevant factors at the time. However, there can be no assurance that the Company will be able to acquire a new prospect, obtain additional funding or obtain it on acceptable terms, or establish profitable operations.

These factors indicate the existence of a material uncertainty that may cast significant doubt about the Company’s ability to continue as a going concern.

INTERNAL CONTROL OVER REPORTING

Management has established processes to provide it with sufficient knowledge to support representations that it has exercised reasonable diligence to ensure that (i) the financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the financial statements, and (ii) the financial statements fairly present in all material respects the financial condition, results of operations and cash flow of the Company, as of the date of and for the periods presented.

In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”), the Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as defined in NI 52-109. In particular, the certifying officers filing such certificate are not making any representations relating to the establishment and maintenance of:

(i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with the issuer’s GAAP (IFRS).

The Company’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in the certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.

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CORPORATE INFORMATION

STOCK EXCHANGE LISTING	NEX Board of the TSX Venture Exchange Trading Symbol: BEN.H
MAILING ADDRESS	500-666 Burrard Street Vancouver, BC, Canada V6C 2X8
REGISTERED ADDRESS	1700-666 Burrard street Vancouver, BC, Canada V6C 2X8
DIRECTORS	Lee Bowles Steven Parker Jason Rickert
OFFICERS	Jason Rickert – Interim CEO JoAnne Odette – Chief Financial Officer Christina Boddy – Corporate Secretary
AUDITORS	Davidson & Company LLP
TRANSFER AGENT AND REGISTRAR	Computershare

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