Bird Construction Inc. — Interim / Quarterly Report 2021

Dec 23, 2020

PACIFIC PARADYM ENERGY INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS For the three months ended October 31, 2020

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This Management’s Discussion and Analysis (“MD&A”) of Pacific Paradym Energy Inc. (“Pacific Paradym” or the “Company”) has been prepared by management as of December 23, 2020 should be read in conjunction with the interim financial statements and notes thereto for the period ended October 31, 2020. The Company reports its financial position, results of operations and cash flows in accordance with International Financial Reporting Standards (“IFRS”).

FORWARD-LOOKING STATEMENTS

Certain statements contained in the MD&A may constitute forward-looking statements. These statements relate to future events or the Company’s future performance. All statements, other than statements of historical fact, may be forward-looking statements.

Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “propose”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon by investors as actual results may vary. These statements speak only as of the date of this MD&A and are expressly qualified, in their entirety, by this cautionary statement. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of various risk factors.

Historical results of operations and trends that may be inferred from the following discussions and analysis may not necessarily indicate future results from operations.

Per barrel of oil equivalent (“boe”) amounts have been calculated using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil (“6:1”). The 6:1 conversion ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. BOE disclosure may be misleading, particularly if used in isolation. Readers should be aware that historical results are not necessarily indicative of future performance.

COVID-19

In March 2020, the World Health Organization declared a global pandemic related to the virus known as COVID-19. The expected impacts on global commerce are anticipated to be far reaching. To date, there have been significant wide-spread stock market declines and the movement of people and goods has become restricted, affecting supply, demand and pricing for many products. The oil and gas sector has been impacted significantly as many local and regional governments have issued public health orders in response to COVID-19, including restricting the movement of people, which could impact the Company’s ability to access properties and complete exploration, development or production programs in the coming year. These events are highly uncertain and as such, the Company cannot determine their financial impact at this time.

DESCRIPTION OF BUSINESS

The Company’s principal business plan is to acquire, explore and develop oil and gas properties and to ultimately seek earnings by exploiting the oil and gas reserves. Upon location of a commercial oil and gas reserve, the Company will actively prepare the site for extraction and enter a development stage. At present, management devotes most of its activities to its existing oil and gas properties and to the raising of sufficient funds to further explore and develop its oil and gas properties. The ability of the Company to emerge from the exploration stage with respect to any planned principal business activity is dependent upon its successful efforts to raise additional equity financing and/or attain profitable oil and gas operations. Management has plans to seek additional capital through private placements and public offerings of its common stock.

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OIL AND GAS OPERATIONS

Taber Property, Alberta

On March 24, 2010 the Company entered into a Farmout and Participation Agreement to acquire certain assets from Strategic Oil & Gas Ltd. (“SOG”) in the Taber area of Alberta. Under the terms of the agreement, the Company acquires 25% of SOG’s interest in all of the lands, which shall include the petroleum and natural gas rights associated with the title documents, the wells, pipelines and facilities (the “Assets”) located in the Taber area of Alberta (Twp. 10 Rge. 16 W4M). The Company advanced $1,600,000 (the “Purchase Price”) for the Assets. SOG commits to use the Purchase Price to drill two test wells (the “Test Wells”) equal to $1,600,000 (“Test Well Cap”). On August 31, 2010, the Company announced the completion of the two well drilling program, whereby the Company acquired 25% of SOG’s interest in all of the lands, including the petroleum and natural gas rights associated with the title documents, the wells, pipelines and facilities located in the Taber area of Alberta (Twp. 10 Rge. 16 W4M). Any additional wells that are mutually agreed upon to be drilled will be shared as to 25% by the Company and 75% by SOG.

Sinclair Property, Manitoba

Also, on February 17, 2011, the Company announced that it had acquired an interest in lands with offsetting Bakken oil production in the Sinclair field in Manitoba, paying approximately $700,000 to earn a 40% working and net interest in the horizontal developmental Bakken well in the Sinclair field of Manitoba. Upon completion of this well the Company will have earned a 40% interest in ¼ section of land as well. There is also potential for a second horizontal well to be developed at a future date. As of March 21, 2011, a horizontal well has been drilled to a depth of 1,745 meters. The well has been cashed successfully, horizontally completed and began continuous production on March 26, 2011.

As at July 31, 2015, due to declines in forward commodity prices, the Company determined a trigger to be present across all of its CGUs. As a result, the Company undertook an impairment test. Recoverable value was estimated at fair value based on before tax cash flows from oil and gas proved plus probable reserves estimated by the Company’s third party reserve evaluators and internally updated, at a 10% discount rate. It was determined that the book value of the CGUs exceeded the recoverable value and a $35,724 write-down was recognized.

On December 9, 2019, the Company sold its 40% working interest in its Sinclair property to Corval Energy Ltd. (“Corval”), the operator of the property, for $1. Corval will be responsible for all abandonment liabilities in the future and the Company has no further obligations with respect to this property.

RESULTS OF OPERATIONS

For the three months ended October 31, 2020, the Company had a net loss of $26,473 compared to $51,424 for the three months ended October 31, 2019. The decrease was mainly due to a decrease on production costs and royalties.

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SUMMARY OF QUARTERLY RESULTS

The following is a summary of the Company’s financial results for the eight most recently completed quarters:

	October 31, 2020	July 31, 2020	April 30, 2020	January 31, 2020
Total revenues	—	—	—	11,850
Net loss	(26,473)	(82,718)	(51,232)	(4,953)
Net loss per share, basic and diluted	—	—	—	—

	October 31, 2019	July 31, 2019	April 30, 2019	January 31, 2019
Total revenues	7,792	7,662	11,555	10,691
Net loss	(51,424)	(97,994)	(47,636)	(48,063)
Net loss per share, basic and diluted	—	—	—	—

LIQUIDITY AND CAPITAL RESOURCES

As at October 31, 2020, the Company had cash of $278 (July 31, 2020 - $289). As at October 31, 2020, the Company had a working capital deficit of $2,964,274 compared to a working capital deficit of $2,937,801 as at July 31, 2020.

The Company has capital requirements in excess of its currently available resources and needs to seek additional financing. There can be no assurance that the Company will have sufficient financing to meet its future capital requirements or that additional financing will be available on terms acceptable to the Company in the future.

Operating activities

For the three months ended October 31, 2020, the Company’s operating activities used cash of $3,011 compared to cash of $10,023 used by operating activities for the three months ended October 31, 2019.

Financing activities

For the three months ended October 31, 2020, the Company was provided net cash of $3,000 compared to $10,100 from financing activities for the three months ended October 31, 2019. For the three months ended October 31, 2020, the Company received related party loans of $3,000 offset by repayments to related parties of $Nil. For the three months ended October 31, 2019, the Company received related party loans of $10,100 offset by repayments to related parties of $Nil.

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Capital Management

The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits to other stakeholders. The capital structure of the Company consists of cash and equity comprised of issued share capital and share-based payment reserve.

The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its Board of Directors, will balance its overall capital structure through new share issues or by undertaking other activities as deemed appropriate under the specific circumstances.

The Company is not subject to externally imposed capital requirements and the Company’s overall strategy with respect to capital risk management remains unchanged from the year ended July 31, 2020.

OFF BALANCE SHEET ARRANGEMENTS

The Company does not utilize off-balance sheet arrangements.

TRANSACTIONS WITH RELATED PARTIES

(a) As at October 31, 2020, the amount of $7,161 (July 31, 2020 - $7,161) was owed to the President of the Company which is unsecured, non-interest bearing, and due on demand, and is included in accounts payable and accrued liabilities.

(b) As at October 31, 2020, the amount of $608,760 (July 31, 2020 - $607,760) was owed to a company controlled by the President of the Company which is unsecured, non-interest bearing, and due on demand.

(c) As at October 31, 2020, the amount of $737,433 (July 31, 2020 - $732,708) was owed to a company controlled by the President and the Chief Executive Officer of the Company which is unsecured, non-interest bearing, and due on demand.

(d) As at October 31, 2020, the amount of $209,000 (July 30, 2020 - $209,000) was owed to a company controlled by the Chief Executive Officer of the Company which is unsecured, non-interest bearing, and due on demand.

(e) As at October 31, 2020, the amount of $130,500 (July 31, 2020 - $128,500) was owed to the spouse of the President of the Company. The amount owing is unsecured, non-interest bearing, and due on demand. As at October 31, 2020, accrued interest of $2,153 (2019 - $2,153) is included in accounts payable and accrued liabilities.

(f) As at October 31, 2020, the amount of $181,150 (July 31, 2020 - $181,150) was owed to a director of the Company. Of this amount, $25,000 bears interest at 2% per month and the remaining balance is non-interest bearing. The amounts owed are unsecured and due on demand. During the period ended October 31, 2020, the Company incurred interest expense of $1,500 (2019 - $1,500) to this company. As at October 31, 2020, accrued interest of $40,258 (July 31, 2020 - $38,758) is included in accounts payable and accrued liabilities.

(g) During the period ended October 31, 2020, the amount of $4,500 (2019 - $4,500) was incurred to a company controlled by common directors of the Company for rent and administration fees.

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FINANCIAL INSTRUMENTS AND RISKS

(a) Fair Values

Fair value measurements are classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The fair value hierarchy has the following levels:

• Level 1 - valuation based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

• Level 2 - valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and,

• Level 3 - valuation techniques using inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The fair values of other financial instruments, which include cash, accounts receivable, accounts payable, loans payable, and amounts due to related parties, approximate their carrying values due to the relatively short-term maturity of these instruments.

(b) Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and accounts receivable. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions. The Company performs ongoing credit evaluations, does not require collateral and establishes an allowance for doubtful accounts based on the age of the receivable and the specific identification of receivables the Company considers at risk. The carrying amount of financial assets represents the maximum credit exposure.

(c) Foreign Exchange Rate Risk

The Company is not exposed to any significant foreign exchange rate risk.

(d) Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to significant interest rate risk as it does not have any liabilities with variable rates.

(e) 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 currently settles its financial obligations out of cash. The ability to do this relies on the Company raising equity financing in a timely manner and by maintaining sufficient cash in excess of anticipated needs.

(f) Price Risk

The Company is exposed to price risk with respect to commodity prices. The Company’s ability to raise capital to fund exploration and development activities is subject to risks associated with fluctuations in the market price of commodities.

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CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION

A number of new standards, and amendments to standards and interpretations, are not yet effective for the period ended October 31, 2020, and have not been early adopted in preparing these financial statements. These new standards, and amendments to standards and interpretations are either not applicable or are not expected to have a significant impact on the Company’s financial statements.

DISCLOSURE BY VENTURE ISSUER WITHOUT SIGNIFICANT REVENUE

An analysis of the material components of the Company’s general and administrative expenses is disclosed in the interim financial statements for the three months ended October 31, 2020 to which this MD&A relates.

DISCLOSURE OF OUTSTANDING SHARE DATA

Authorized: Unlimited common shares without par value

As at December 23, 2020, the Company had 36,406,676 shares issued and outstanding.

Share Purchase Warrants

As at December 23, 2020, the Company had no share purchase warrants outstanding.

Stock Options

As at December 23, 2020, the Company had no stock options outstanding.

OTHER

Additional disclosures pertaining to the Company’s material change reports, press releases and other information are available on the SEDAR website at www.sedar.com.