BEACN Wizardry & Magic — Interim / Quarterly Report 2021

Jul 17, 2021

GERMINATE CAPITAL LTD.

MANAGEMENT’S DISCUSSION AND ANALYSIS – QUARTERLY HIGHLIGHTS FOR THE SIX MONTHS ENDED MAY 31, 2021

OVERVIEW AND INTRODUCTORY COMMENT

Germinate Capital Ltd. (the “Company” or “Germinate”) is incorporated and domiciled in Canada under the Business Corporations Act (British Columbia), and its registered office is 10th Floor, 595 Howe Street, Vancouver, BC, V6C 2T5.

Since incorporation, the Company’s sole activity has been the preparation of a prospectus to become listed on the TSX Venture Exchange (the “Exchange”) as a “Capital Pool Company” as defined in the Exchange’s Listing Policy 2.4.

As a Capital Pool Company, the principal business of the Company is to identify and evaluate opportunities for the acquisition of an interest in assets or businesses and, once identified and evaluated, to negotiate an acquisition or participation subject to receipt of shareholder approval and acceptance for filing by the Exchange. Until the completion of such a Qualifying Transaction (“QT”), as defined under Exchange Listing Policy 2.4, the Company will not carry on any business other than the identification and evaluation of assets or businesses in this connection. The Company does not have business operations or assets other than cash, and has no written or oral agreements for the acquisition of an asset or business at this time.

This MD&A is dated July 16, 2021 and discloses specified information up to that date. Unless otherwise noted, all currency amounts are expressed in Canadian dollars. The following information should be read in conjunction with the unaudited condensed interim financial statements and the related notes for the six months ended May 31, 2021 and the Company’s audited financial statements for the period ended November 30, 2020 and the related notes thereto.

Additional information relevant to the Company and the Company’s activities can be found on SEDAR at www.sedar.com.

MAJOR INTERIM PERIOD OPERATING MILESTONES

Initial Public Offering

On April 20, 2021, the Company announced that it had completed its initial public offering (the “Offering”). The Company issued an aggregate of 2,500,000 common shares in the capital of the Company (each, a “Common Share”) to purchasers in British Columbia and Alberta at a purchase price of $0.10 per Common Share for gross proceeds to the Company of $250,000. Following the closing of the Offering, a total of 4,800,000 Common Shares are issued and outstanding, of which 2,300,000 are currently held in escrow pursuant to the policies of the Exchange.

The net proceeds of the Offering, together with the proceeds from prior sales of Common Shares, will be used by the Company to identify and evaluate assets or businesses for acquisition with a view to completing a “Qualifying Transaction” under the Exchange’s capital pool company program.

Echelon Wealth Partners Inc. (the “Agent”) acted as agent for the Offering. In connection with the Offering, the Company granted to the Agent non-transferable options to acquire up to an aggregate of 250,000 Common Shares (the “Agent’s Options”). Each Agent’s Option is exercisable to acquire one Common Share at a price of $0.10 per Common Share until April 20, 2026. In connection with the Offering, the Agent also received a cash commission of $25,000, along with a corporate finance fee of $15,000, and was reimbursed for their legal fees and reasonable expenses totaling $16,846.

The Company is a capital pool company within the meaning of the policies of the Exchange. The Company has not commenced operations and has no assets other than cash. The Company will use the

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net proceeds of the Offering to identify and evaluate assets or businesses for acquisition with a view to completing a QT pursuant to the policies of the Exchange, and for administration costs.

The Common Shares were listed on the Exchange on April 20, 2021 and immediately halted pending closing of the Offering. The Common Shares resumed trading on the Exchange on April 22, 2021 under the trading symbol “GCAP.P”.

Acquisition of Beacon Hill Innovations Ltd.

On July 6, 2021, the Company announced that it had entered into a letter of intent with Beacon Hill Innovations Ltd. (“BEACN”) to acquire all of the issued and outstanding shares of BEACN. BEACN is a streaming and gaming technology products company based in Victoria, British Columbia and is incorporated under the laws of British Columbia. This transaction, along with the associated financing outlined below and all other related transactions will constitute the QT for Germinate under the Exchange Capital Pool Company rules. The QT will be an arm's-length transaction pursuant to which the shareholders of BEACN will become the largest shareholders of Germinate upon completion of the QT. Shareholder approval by shareholders of Germinate will not be required.

Germinate will be renamed as Beacon Hill Innovations Ltd. (or similar name) (the “Resulting Issuer”) upon completion of the QT and a new trading symbol will be assigned. A definitive purchase agreement outlining the detailed deal terms will be completed as a condition of closing of the QT.

The terms of the QT are as follows:

• Germinate will issue 32,151,003 common shares to the shareholders of BEACN in exchange for 100% of the common shares of BEACN for an aggregate deemed price of approximately $6.75 million. It is anticipated that many of the common shares issued to the shareholders of BEACN will be subject to escrow requirements under the Exchange escrow rules. Currently, 26.3% of BEACN’s shares are owned by one controlling shareholder, Mr. Jim Elliott and a company controlled by him.

• Germinate will also raise $2 million in conjunction with the QT by way of an Arm’s Length private placement of units (the “Units”) at $0.30 per Unit. Each Unit will be comprised of one common share and one-half of a non-transferable common share purchase warrant (each whole warrant, a “Warrant”). Each Warrant will entitle the holder to acquire one common share of Germinate at $0.60 for a 24-month period. All of the securities issued in the private placement will be subject to a four-month hold period from the date of closing.

INTERIM PERIOD FINANCIAL CONDITION

Capital Resources

On March 23, 2021, the Company closed a financing of 300,000 common shares at a price of $0.05 per share for gross proceeds of $15,000.

On April 20, 2021, the Company completed its Offering (see “ Initial Public Offering ” section above) and upon completion of the Offering, the Company granted 450,000 stock options with an exercise price of $0.10 expiring on April 20, 2031 to its directors and officers.

The Company is aware of the current conditions in the financial markets and has planned accordingly. The Company’s current treasury and the future cash flows from equity issuances and the potential exercise of finders’ warrants and options to be issued and granted upon the closing of the initial public offering will allow its efforts to continue throughout 2021. If the market conditions prevail or improve, the Company will make adjustment to budgets accordingly.

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Liquidity

As at May 31, 2021, the Company had working capital of $242,933 (November 30, 2020 – $82,005). As at May 31, 2021, cash totaled $289,052, an increase of $219,807 from $69,245 as at November 30, 2020. The increase was due to net proceeds received from share issuances of $220,644 while being offset by operating expenses of $837.

Operations

For the six months ended May 31, 2021 compared with the period from incorporation on August 14, 2020 to November 30, 2020:

The Company incurred losses of $43,062 ($0.02 loss per share) and $17,995 ($0.04 loss per share) respectively during the six months ending May 31, 2021 and for the period from incorporation on August 14, 2020 to November 30, 2020.

Excluding the non-cash share-based compensation of $15,146 (2020 – $Nil), the Company’s general and administrative expenses amounted to $27,916 (2020 - $17,995), an increase of $9,921. The change in the expenses was mainly due to increases in: (a) accounting fees (2021 - $16,415; 2020 - $Nil); (b) legal fees (2021 - $5,873; 2020 - $2,490) and (c) listing fees (2021 - $5,588; 2020 - $Nil) as the Company prepared to go public. These increases were offset by decreases in: (a) professional fees (2021 - $Nil; 2020 - $15,000) and (b) rent (2021 - $Nil; 2020 - $500).

For the three months ended May 31, 2021 compared with the period from incorporation on August

14, 2020 to November 30, 2020:

The Company incurred losses of $25,634 ($0.01 loss per share) and $17,995 ($0.04 loss per share) respectively during the three months ending May 31, 2021 and for the period from incorporation on August 14, 2020 to November 30, 2020.

Excluding the non-cash share-based compensation of $15,146 (2020 – $Nil), the Company’s general and administrative expenses amounted to $10,488 (2020 - $17,995), a slight decrease of $7,507. The change in the expenses was mainly due to decreases in: (a) professional fees (2021 - $Nil; 2020 - $15,000), (b) legal fee (2021 - $873; 2020 - $2,490) and (c) rent (2021 - $Nil; 2020 - $500) as the Company incurred some upfront costs for going public in earlier periods.

SIGNIFICANT RELATED PARTY TRANSACTIONS

		Six months ended May 31, 2021		Balance due	Balance due
Amounts due to:	Service		For the Period from Incorporation on August 14, 2020 to November 30, 2020	As at May 31, 2021	As at November 30, 2020
Pacific Opportunity Capital Ltd., a company controlled by Mark T. Brown, a director	Accounting, management, and rent services	10,415 $	500 $	9,492 $	525 $
TOTAL:		10,415 $	500 $	9,492 $	525 $

Amounts owing to/from related parties are non-interest bearing, unsecured, and have no fixed terms of repayment. The changes during the period were measured by the exchange amount, which is the amount agreed upon by the transacting parties.

COMMITMENTS, EXPECTED OR UNEXPECTED, OR UNCERTAINTIES

As of the date of the MD&A, the Company does not have any commitments, expected or unexpected, or uncertainties.

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RISK FACTORS

In our prospectus filed on SEDAR on February 16, 2021 in connection with our initial public offering, we have set out our discussion of the risk factors which we believe are the most significant risks faced by Germinate. An adverse development in any one risk factor or any combination of risk factors could result in material adverse outcomes to the Company’s undertakings and to the interests of stakeholders in the Company including its investors. Readers are cautioned to take into account the risk factors to which the Company and its operations are exposed. To the date of this document, there have been no significant changes to the risk factors set out in our Annual MD&A.

DISCLOSURE OF OUTSTANDING SHARE DATA

The authorized share capital of the Company consists of an unlimited number of common shares without par value. The following is a summary of the Company’s outstanding share data as at May 31, 2021:

	Issued and outstanding
	May 31, 2021 July 16, 2021
Common shares outstanding	4,800,000 4,800,000
Stock options Finder's Warrants	450,000 450,000 250,000 250,000
Fully diluted common shares outstanding	5,500,000 5,500,000

Cautionary Statements

This document contains “forward-looking statements” within the meaning of applicable Canadian securities regulations. All statements other than statements of historical fact herein, including, without limitation, statements regarding exploration results and plans, and our other future plans and objectives, are forward-looking statements that involve various risks and uncertainties. Such forward-looking statements include, without limitation, our estimates of exploration investment, the scope of our exploration programs, and our expectations of ongoing administrative costs. There can be no assurance that such statements will prove to be accurate, and future events and actual results could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from our expectations are disclosed in the Company’s documents filed from time to time via SEDAR with the Canadian regulatory agencies to whose policies we are bound. Forward-looking statements are based on the estimates and opinions of management on the date the statements are made, and we do not undertake any obligation to update forward-looking statements should conditions or our estimates or opinions change, except as required by law. Forward-looking statements are subject to risks, uncertainties and other factors, including risks associated with mineral exploration, price volatility in the mineral commodities we seek, and operational and political risks. Readers are cautioned not to place undue reliance on forward-looking statements.

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