Blue River Resources Ltd. — Interim / Quarterly Report 2020

Feb 29, 2020

GCC GLOBAL CAPITAL CORPORATION

MANAGEMENT’S DISCUSSION AND ANANYSIS

FOR THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2019 (expressed in Canadian dollars unless otherwise stated) (unaudited)

February 28, 2020

GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

This portion of the Quarterly Report provides management’s discussion and analysis (“MD&A”) of the financial condition and results of operations, to enable a reader to assess material changes in financial condition and results of operations as at, and for the three and six months ended December 31, 2019, in comparison to the corresponding prior-year period. The MD&A is intended to help the reader understand GCC Global Capital Corporation’s (“GCCC”, “we”, “our” or the “Company”), operations, financial performance and present and future business environment. This MD&A, which has been prepared as of February 28, 2020, is intended to supplement and complement the unaudited condensed interim financial statements and notes thereto, prepared in accordance with International Accounting Standard 34 Interim Financial Reporting (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”), for the three and six months ended December 31, 2019 (collectively, the “Financial Statements”), which are available for viewing at www.sedar.com. You are encouraged to review the Financial Statements in conjunction with your review of this MD&A. This MD&A should be read in conjunction with both the annual audited consolidated financial statements for the years ended June 30, 2019 and June 30, 2018, the related annual MD&A. These documents and additional information relating to the Company are available on SEDAR at www.sedar.com.

For the purpose of preparing our MD&A, we consider the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in , a significant change in the market price or value of our shares; or (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) it would significantly alter the total mix of information available to the investors. We evaluate materiality with reference to all relevant circumstances, including potential market sensitivity.

Forward Looking Statements

Certain statements contained in this 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. Except as required under applicable securities legislation,

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

the Company undertakes no obligation to publicly update or revise forward-looking information, whether as a result of new information, future events or others.

Description and Overview of Business

The Company was incorporated under the Canada Business Corporations Act on May 10, 2012 and carried on business until January 8, 2015 as a Capital Pool Company in accordance with Policy 2.4 of the TSX Venture Exchange (the “ Exchange ”). The Company completed its initial public offering of 2,000,000 common shares at a price of $0.10 per common share for gross proceeds of $200,000 on December 20, 2012.

On April 24, 2017, the Company announced that it is proposing a change of business from a Tier 2 Mining Issuer to a Tier 2 Investment Issuer (the "Proposed COB") within the meaning of such terms in the policies of the Exchange. The Management and Board of the Company believe that the ideal allocation of the Company's working capital would be within the framework of an investment company. On January 2, 2018, the Exchange issued the Final Exchange Bulletin approving the Proposed COB. At the request of the Exchange, the Company has undertaken to complete a second investment within 6 months of the date of the Finance Exchange Bulletin and on July 25, 2018, the Company received the Exchange’s approval for the second investment.

On January 2, 2018, the Company announced that it has closed the acquisition of a 28.57% interest in the issuance and outstanding shares of New Age Development Ltd (the “New Age Investment”). The New Age Investment constituted a change of business of the Company from a Tier 2 Mining Issuer to a Tier 2 Investment Issuer. under the new trading symbol “GCCC” on the Exchange. On January 2, 2018, the Company changed its name to GCC Global Capital Corporation and its trading symbol to “GCCC” on the Exchange.

The Company's investment objectives are:

• a) to seek a high return on investment opportunities in any industry with a focus primarily in the natural resources sector, real estate industry and high-tech industry; and

• b) to limit downside risk while achieving a reasonable rate of return by focusing on opportunities with attractive risk to reward profiles.

Change in the Board of Directors

On October 17, 2018, Mr. Michael G. Wang resigned as Director of the Company; and on December 31, 2018, Ms. Qianying (Joanna) Zhou was elected in the Annual General Meeting and appointed as Director of the Company.

Investment in Associate

The Company has entered into a purchase and subscription agreement (the “New Age Agreement” or “Transaction”) dated April 21, 2017 and has closed the Transaction on January 2, 2018, wherein the Company acquired 1,000,000 common shares of New Age (the “New Age Shares”) from the sole shareholder of New Age, Hong Kong Shing Chi

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

City Holdings Ltd. (“HK Shing Chi”), at $1.00 per New Age Share. In addition, pursuant to the New Age Agreement, the Company would also subscribe for an additional 100,000 New Age Shares, at $1.00 per New Age Share, to provide New Age with cash and working capital. Following the completion of the Transaction on January 3, 2018, the Company holds 1,100,000 New Age Shares out of a total of 3,850,000 New Age Shares, representing 28.57% of the issued and outstanding capital of New Age. The Company has also appointed one director of New Age and concludes that there is significant influence over the entity. The investment in associate is accounted for under the equity method.

New Age Development Ltd. (“New Age”) is a private company incorporated under the Alberta Business Corporations Act on January 20, 2017. New Age’s sole assets are the land and improvements located at 4401 Macleod Trail, Calgary, Alberta, which comprise of 35,884 square feet of land and a 939 square feet vacant log structure (the “Property”). New Age acquired the Property on March 31, 2017 for an aggregate purchase price of $3,750,000 in cash.

The Company intends to explore the development opportunities for the Property with HK Shing Chi. Current plans are to explore the development of a mixed use commercial and residential 8 story building on the Property. The Company and HK Shing Chi may also elect to hold their investment in New Age and the Property for long term capital gains.

The Company’s share of net income from Investment in associate for the period is $219 (2018: loss of $(26,357)) which represents 28.57% of the net income and comprehensive income of New Age for the six months ended December 31, 2019.

Investment in associate is composed of:

	New Age
	$
Balance, July 1, 2017	-
Acquisition of New Age Shares	1,100,000
Share of net loss	(13,667)
Dividend received	-
Balance, June 30,2018	1,086,333
Share of net income	7,731
Balance, June 30, 2019	1,094,064
Share of net income	219
Balance,December 31,2019	1,094,283

The financial information of New Age as of June 30, 2018, June 30, 2019 and December 31, 2019 are presented as follows:

Statement of financial position as at June 30, 2018, June 30, 2019 and December 31, 2019

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GCC Global Capital Corporation Management’s Discussion and Analysis

For the Three and Six Months Ended December 31, 2019

	30-Dec-19 30-Jun-19 30-Jun-18
Current assets Non-current assets Liabilities Total liabilities and shareholder's equity	$ $ $
	20,608 33,103 18,883 4,125,000 4,125,000 3,950,000 (295,589) 308,849 146,690 (4,145,608) 4,158,103 3,968,883

Statement of income (loss) and comprehensive income (loss) for the period from January 2, 2018 to June 30, 2018, and period from July 1, 2018 to June 30, 2019 and period from July 1, 2019 to December 31, 2019:

	July 1, 2019 to	July 1, 2018 to	January 2, 2018
	December 31, 2019	June 30, 2019	to June 30, 2018
	$	$	$
Rental revenue	13,250	17,667	12,550
Net income(loss)	766	27,060	(47,836)

Right-of-use Asset and Lease Liability

On July 1, 2019, the Company adopted IFRS 16, Leases. The new standard brings most leases on-balance sheet for lessees under a single model, eliminating the distinction between operating and finance leases. Under the new standard, a lessee recognizes a rightof-use asset and a lease liability. The right-of-use asset is treated similarly to other nonfinancial assets and depreciated accordingly. The Company has an office lease which the Company entered into on July 1, 2019.

The Company has recorded this lease as a right-of-use asset and lease liability in the statement of financial position as at December 31, 2019. On July 1, 2019, the lease liability was measured at the present value of the future lease payments that were not paid at that date. These lease payments are discounted using a discount rate of 12%, which is the Company’s incremental borrowing rate.

Set out below, are the carrying amounts of the Company’s right-of-use asset and lease liability and the movements during the period:

Operating lease commitments as at July 1, 2019 Incremental borrowing rate as at July 1, 2019 Discounted operating lease commitments as at July 1, 2019 Prepaid rent Amortization Interest accretion Lease payments Balance, as at December 31, 2019	Right-of-Use Asset Lease Liability $ $
	- 48,600 - 12%
	44,718 44,718 - - (14,906) - - 2,174 - (16,200)
	29,812 30,692

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

Current portion of lease liabilities Long-term portion of lease liabilities	Right-of-Use Asset Lease Liability $ $
	- 30,692 - -
	- 30,692

The Company’s outstanding lease payments are $16,200 for the year ending June 30, 2020 and $16,200 for the year ending June 30, 2021.

Loan from Jiu Fa Investments Ltd

On February 19, 2019, the Company entered into a loan agreement (the “Loan Agreement”) to borrow up to a maximum amount of $1,000,000 (the “Loan”) from Jiu Fa Investments Ltd. (the “Lender”, or “Jiu Fa”). The principal amount of the Loan under the Loan Agreement bears an interest rate of 12.0% per annum and the Loan matures on the earlier of: (i) February 28, 2021; or (ii) the date that Metath Investment Co., Ltd. ceases to own, or have control or direction over, common shares of the Company (“Common Shares”) representing at least 20% of the issued and outstanding Common Shares.

The Lender has provided an initial advance to the Company under the Loan Agreement in the aggregate amount of $50,000. Further amounts may be advanced during the term of the Loan in such amounts and at such times as agreed to by the Lender and the Company, up to the maximum amount of the Loan. Amounts outstanding under the Loan will be represented by a grid promissory note issued by the Company in favor of the Lender.

The Company intends to use the proceeds of the Loan to fund its operations and for general and administrative expenses.

Mr. Huijun Wang, a director and the Chief Executive Officer of the Company, is also the President of the Lender. Accordingly, the Loan is considered a related party transaction.

Summary of advances from Jiu Fa and interest incurred as of December 31, 2019:

Date	$
February 5, 2019	50,000
March 15, 2019	50,000
March 27, 2019	33,902
April 11, 2019	50,000
May 2, 2019	1,500
May 17, 2019	50,000
June 28, 2019	50,000
Interest incurred as of June 30, 2019	7,258
August 1, 2019	30,000
August 19, 2019	50,000
September 27, 2019	50,000
Interest incurred for the 3 months ended September 30, 2019	10,080

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

Date	$
November 1, 2019	20,000
November 15, 2019	50,000
December 10, 2019	50,000
Interest incurred for the 3 months ended December 31, 2019	14,777
Balance as of December 31, 2019	567,516

Overall Performance

As at December 31, 2019, the Company has total assets of $1,262,467 (June 30, 2019: $1,254,309), including cash and cash equivalents of $44,232 (June 30, 2019: $40,727), accounts and other receivables of $19,655 (June 30, 2019: $39,841), prepaid of $23,788 (June 30, 2019: $23,240), Right-of-use asset of $29,812 (June 30, 2019: $nil) and property and equipment of $50,697 (June 30, 2019: $56,437). The Company has $101,211 in accounts payable and accrued liabilities which includes $32,819 of due to related parties (June 30, 2019: $66,294 in accounts payable and accrued liabilities which includes $20,926 of due to related parties), Lease liabilities of $30,692 (June 30, 2019: $nil), Investment in Associate of $1,094,283 (June 30, 2019: $1,094,064) and Loan from Jiu Fa Investments Ltd of $567,516 (June 30, 2019: $292,659). The Company had a working capital deficit of $44 ,228 on December 31, 2019 (June 30, 2019: working capital of $37,514).

Results of Operations

a) Second Quarter Results of Operations

The net loss for the three months ended December 31, 2019 was $163,303, compared to a net loss of $210,402 for the three months ended December 31, 2018, for a difference of $47,099. The significant variances in expenses for the period include the following:

• 1) Accounting and legal fees of $1,741 (2018: $3,275) – the decrease of Accounting and legal fees for the period in 2019 was due to less legal services requested.

• 2) Audit fee of $7,500 (2018: $8,605) – there was no material difference on Audit fee.

• 3) Consulting fee of $3,300 (2018: $8,300) – the decrease of Consulting fee for the period in 2019 was due to less consulting services requested.

• 4) Depreciation expenses of $10,322 (2018: $5,039) – the increase of Depreciation expenses for the period in 2019 were due to the amortization of the Right-of-use Asset for the office lease recorded in the 2019 period.

• 5) Director fee of $3,000 (2018: $5,000) – the decrease of Director fee for the period in 2019 was due to one independent director waiving his director fee.

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

• 6) Filing fee of $3,807 (2018: $10,909) - the decrease of Filing fee for the period in 2019 was due to fewer material changes and transactions.

• 7) General & administrative expenses of $12,129 (2018: $19,739) – the decrease of General & administrative expenses for the period in 2019 was due to less administrative activities.

• 8) Rent of $nil (2018: $31,245) – the Company adopted IFRS 16, Leases in 2019 that required the office lease to be recorded as a Right-of-use Asset and Lease Liability. As a result, there was no rent expense in 2019.

• 9) Share of income from Investment in associate of $833 (2018: $16,075 loss) – the decrease for the period in 2019 was due to fewer development work for the project.

• 10) Travel of $1,810 (2018: $3,153) – the decrease of Travel for the period in 2019 was due to fewer travel for potential projects and investors.

• 11) Wages and Salaries of $116,105 (2018: $103,409) – the increase for the period in 2019 was due to additional employees.

• 12) Net change in unrealized gain on the short-term investment of $nil (2018: $18,855); and Realized loss on short-term investment $nil (2018: $27,258 loss) – there was no short-term investment during the period in 2019.

In the 2019 period, there was no significant difference for Interest income and Management fee, compared to the period of 2018.

The net loss for the six months ended December 31, 2019, was $332,308 compared to a net loss of $458,590 for the six months ended December 31, 2018, for a difference of $126,282. The significant variances in expenses for the period include the following:

• 1) Accounting and legal fees of $3,149 (2018: $5,191) – the decrease of Accounting and legal fees for the period in 2019 was due to less legal services requested.

• 2) Audit fee of $17,500 (2018: $30,335) – larger amount for the period in 2018 was due to additional audit work for New Age Development Ltd.

• 3) Consulting fee of $6,300 (2018: $11,300) – the decrease of Consulting fee for the period in 2019 was due to less consulting services requested.

• 4) Depreciation expenses of $20,646 (2018: $10,038) – the increase of Depreciation expenses for the period in 2019 were due amortization of the Right-of-use Asset for the office lease recorded in the 2019 period.

• 5) Director fee of $3,000 (2018: $6,000) – the decrease of Director fee for the period in 2019 was due to one independent director waiving his director fee.

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

• 6) Filing fee of $6,668 (2018: $14,514) - the decrease of Filing fee for the period in 2019 was due to fewer material changes and transactions.

• 7) General & administrative expenses of $24,222 (2018: $44,123) – the decrease of General & administrative expenses for the period in 2019 was due to less administrative activities.

• 8) Rent of $nil (2018: $62,491) – the Company adopted IFRS 16, Leases in 2019 that required the office lease to be recorded as a Right-of-use Asset and Lease Liability. As a result, there was no rent expense in 2019.

• 9) Share of income from Investment in associate of $219 (2018: $16,075 loss) – the income for the period in 2019 was due to less development work for the project.

• 10) Realized loss on short-term investment $nil (2018: $24,432 loss) – there was no short-term investment during the period in 2019.

In the period of 2019, there was no significant difference for Travel, Wages and salaries, Interest income Net change in unrealized gain/(loss) on short-term investment, and Management fee, compared to the period of 2018.

b) Quarterly Results

The following table sets out a summary of the results of the Company for the periods noted:

	December 31, 2019	September 30, 2019	June 30, 2019	March 31, 2019
Net loss and comprehensive loss forthe period	163,303	169,005	102,750	258,179
Loss per share – basic and diluted	(0.01)	(0.01)	(0.01)	(0.02)
Total assets	1,262,467	1,278,861	1,254,309	1,189,971
Total liabilities	699,419	552,510	358,953	191,866
Total shareholders’ equity	563,048	726,351	895,356	998,105

	December 31, 2018	September 30, 2018	June 30, 2018	March 31, 2018
Net loss and comprehensive loss for the period	210,402	248,188	253,208	208,428
Loss per share – basic and diluted	(0.02)	(0.02)	(0.02)	(0.02)
Total assets	1,328,529	1,537,279	1,775,572	2,008,783
Total liabilities	72,245	70,593	60,698	40,701
Total shareholders’ equity	1,256,284	1,466,686	1,714,874	1,968,085

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

Liquidity & Capital Resources

Cash flows used in operating activities was $230,295 (2018: $398,261) for the six months ended December 31, 2019.

Cash flows used in investment activities was $nil (2018: $802) for the six months ended December 31, 2019.

Cash flows provided from financing activities was $233,800 (2018: $Nil) from $250,000 borrowed from Jiu Fa investments Ltd through a loan with annual interest at 12%, calculated semi-annually and offset by $16,200 of lease liability payments.

At December 31, 2019, the Company had working capital deficit of $44,228 and accumulated deficit of $3,708,707. During the six months ended December 31, 2019, the Company incurred a net loss of $332,308. The Company has not generated revenues from operations. The ability of the Company to carry out its business objectives is dependent on its ability to secure continued financial support from related parties, to obtain public equity financing, or to ultimately attain profitable operations in the future. Whether and when the Company can attain profitability and positive cash flows is uncertain. There can be no assurance that the Company will be able to successfully obtain the required financing under acceptable terms. Management of the Company believes that the current level of working capital is not sufficient to pay for expected expenditures over the next 12 months. These factors raise significant doubt about the Company’s ability to continue as a going concern. If the going concern assumption is not appropriate, material adjustments to the condensed interim financial statements could be required.

Outstanding Share Data

The Company is authorized to issue unlimited number of common shares without nominal or par value of which, 12,527,200 common shares were issued and outstanding as of December 31, 2019 and as of the date of this MD&A.

Upon closing of the Company’s initial public offering on December 20, 2012, the Company granted 125,000 incentive stock options to the directors and officers of the Company. The options were granted with an exercise price of $0.10 per common share and are exercisable for a period of ten years from the date of the grant. All stock options were fully vested on the date of grant.

The following table reflects the outstanding and exercisable stock options as at December 31, 2019 and as of the date of this MD&A:

As at:	Number of outstanding	Weighted Average ExercisePrice	Expiry Date
December 31,2019	75,000	$0.10	December 20,2022

Escrow Shares

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

Subject to an Escrow Agreement pursuant to the requirements of the TSX Venture Exchange, the 9,701,500 common shares held by Metath Investments Co., Ltd (“Metath”) prior to the completion of the Company’s Change of Business are held in escrow. Under the Escrow Agreement, 10% of the escrowed shares will be released on January 2, 2018 when the Final Exchange Bulletin was issued (the Exchange’s acceptance of the Change of Business application) and an additional 15% will be released on each of the dates which are 6 months, 12 months, 18 months, 24 months, 30 months and 36 months following the initial release. As at December 31, 2019, 4,365,675 common shares are held in escrow. As at February 28, 2020, 2,910,450 common shares are held in escrow.

Related Party Transactions

During the three and six months ended December 31, 2019 and December 31, 2018, the Company entered into the transactions with related parties as stated in the following table:

	Six Months ended December 31	Six Months ended December 31	Three months ended December 31	Three months ended December 31
	2019	2018	2019	2018
	$	$	$	$
Paid or Accrued directors' fee	3,000	6,000	3,000	5,000
Paid salaries to the key management personnel	137,950	145,950	68,975	70,975
Paid or accrued consulting fees to a director	7,300	8,100	4,300	5,100
Paid oraccrued consultingfees to anofficer	-	-	-	-
Total	148,250	160,050	76,275	81,075

As at December 31, 2019, the amount due to the above related parties is $32,819 (June 30, 2019: $20,926) which is included in the accounts payable balance.

As at December 31, 2019, the Company advanced $2,000 (June 30, 2019: $2,000) to management. The advances are included in the prepaid balance.

These transactions are in the normal course of operations and have been valued in these financial statements at the exchange amount, which is the amount of consideration established and agreed to by the related party.

In addition to the related party transactions noted above, the Company reimbursed all these related parties for out-of-pocket direct costs incurred on behalf of the Company. Such costs include travel, postage, courier charges, printing and telephone charges.

During the period ended December 31, 2019, the Company also received fees for providing consulting services to two companies with a director in common, totaling $24,000 (2018: $24,000).

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

Financial Instruments

Financial instruments measured at fair value are classified into one of three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values. The three levels of the fair value hierarchy are:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities

Level 2 – Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly; and

Level 3 – Inputs that are not based on observable market data.

The Company’s financial instruments include cash and cash equivalents, short term investments, accounts and other receivables (excluding GST receivables), due to related parties and accounts payable and accrued liabilities. The carrying amounts of cash and cash equivalents, short term investments, accounts and other receivables (excluding GST receivables), due to related parties, and accounts payable and accrued liabilities approximate their fair values because of the short-term nature of these instruments.

The fair value of cash and cash equivalents and short-term investments are based on level 1 inputs of the fair value hierarchy.

Short-term investment

The short-term investment are the real estate trust units purchased on July 30, 2018 on the secondary market. The trust units are three real estate investment trusts listed on the Toronto Stock Exchange with an aggregate purchase price of $249,982 (collectively, the “Investments”). Pursuant to the Investments, the Company acquired: (1) 5,200 trust units of Artis Real Estate Investment Trust at a price per trust unit of $13.33; (2) 5,400 trust units of Cominar Real Estate Investment Trust at a price per trust unit of $12.94; and (3) 5,400 trust units of H&R Real Estate Investment Trust at a price per trust unit of $20.51.

The Company received final approval of the TSX Venture Exchange (the “Exchange”) for the Investments on July 25, 2018 and the Investments constitute the Company’s second investment as required pursuant to the undertaking provided to the Exchange in connection with the Company’s change of business completed on January 2, 2018. Each of the Investments was an “arm’s length transaction” for the purposes of the TSX Venture Exchange.

The short-term investment is recorded at fair market value with realized and unrealized gains and losses reported in the statement of comprehensive loss. On October 12, 2018, the Company sold all the Investments for gross proceeds of $225,569, resulting in a loss of $24,431.

Financial risk management objectives and policies

(a) Overview

The Company has exposure to credit risk, liquidity risk and market risk from its use of financial instruments. This note presents information about the Company's exposure to each of these risks, the Company's objectives, policies and processes for measuring and

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

managing risk, and the Company's management of capital. The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framework.

(b) Credit Risk

Credit risk is the risk of potential loss to the Company if the counterparty to a financial instrument fails to meet its contractual obligations. The Company's credit risk is primarily attributable to its liquid financial assets including cash. The Company limits its exposure to credit risk on liquid financial assets through investing its cash and cash equivalents and short-term investments with high credit quality financial institutions.

(c) 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 ensures that there is sufficient capital in order to meet short term business requirements, after taking into account cash flows from operations and the Company's holdings of cash. The Company's cash is currently invested in business accounts with high-credit quality financial institutions which are available on demand by the Company for its programs. As at December 31, 2019, the Company had a cash and cash equivalents and short-term investments of $44,232 (June 30, 2019: $40,727), accounts and other receivable (excluding GST receivables) of $17,175 (June 30, 2019: $38,392) and current liabilities of $131,903 (June 30, 2019: $66,294).

(d) Market Risk

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

(e) Capital Management

The Company's policy is to maintain a strong capital base so as to maintain investor and creditor confidence and to sustain future development of the business. The capital structure of the Company consists of equity, comprising share capital, net of accumulated deficit. The Company's capital management objectives are to safeguard its ability to continue as a going concern and to have sufficient capital to be able to identify, evaluate and then acquire an interest in a business or assets. The Company manages its capital structure through the preparation of operating budgets, which are approved by the Board of Directors. There were no changes in the Company's approach to capital management during the period. The Company does not have any externally imposed capital requirements or external covenants to which it is subject to.

Significant Accounting Judgements and Estimates

Significant assumptions about the future and key sources of estimation uncertainty that management has made at the financial position reporting date, that could result in a material

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

adjustment to the carrying amounts of assets and liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:

• a) Critical accounting judgments

• i) Going concern

Management has applied judgements in the assessment of the Company's ability to continue as a going concern when preparing its financial statements for the six months ended December 31, 2019. Management prepares the financial statements on a going concern basis unless management either intends to liquidate the entity or to cease trading or has no realistic alternative but to do so. In assessing whether the going concern assumption is appropriate, management takes into account all available information about the future, which is at least, but is not limited to, twelve months from the end of the reporting period.

ii) Investment in associate

The Company uses judgment in its assessment of whether the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, including but not limited to, the ability to exercise significant influence through board representation, material transactions with the investee, provision of technical information, and the interchange of managerial personnel. Whether an investment is classified as an investment in associate can have a significant impact on the entries made on and after acquisition.

• b) Critical accounting estimates

• i) Property and equipment

The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. Increasing an asset’s expected life or its residual value would result in a reduced depreciation charge in the consolidated income statement.

The useful lives and residual values of the subject assets are determined by management at the time the asset is acquired and reviewed annually for appropriateness. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.

• ii) Current and deferred taxes

Accounting for income taxes is a complex process requiring management to interpret frequently changing laws and regulations and make judgments relating to the application of tax law, the estimated timing of temporary difference reversals, and the estimated realization of tax assets. All tax filings are subject to subsequent government audits and potential reassessment. These interpretations, judgments and changes related to them impact current and deferred tax provisions, deferred income tax assets and liabilities and results of operations.

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

• iii) Significant judgement in determining the lease term of contracts with renewal options

The Company determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised.

The Company has the option, under some of its leases to lease the assets for additional terms. The Company applies judgement in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew (e.g., a change in business strategy).

The Company applies judgment in determining its incremental borrowing rate used in calculating the present value of lease payments. The Company takes into account factors such as interest rates in borrowings that are similar in nature and term to its leases. The Company compares its incremental borrowing rate to the rates incurred by similar market participants.

New Accounting Pronouncements

IFRS 16 supersedes IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, Standing Interpretations Committee (“SIC”)-15 Operating LeasesIncentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model.

The Company adopted IFRS 16 using the modified retrospective method of adoption with the date of initial application of July 1. 2019. Under this method, the standard is applied retrospectively with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company elected to calculate lease liabilities and rightof-use assets on the application date and not at inception of the leases.

The Company applied the available practical expedients wherein it:

• 1) Used a single discount rate to leases with reasonably similar characteristics.

• 2) Relied on its assessment of whether leases are onerous immediately before the date of initial application.

• 3) Applied the short-term leases exemptions to leases with lease term that ends within 12 months at the date of initial application.

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

• 4) Accounted for the lease component and associated non-lease component in lease payments as a single lease component.

• 5) Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application

• 6) Used hindsight in determining the lease term where the contract contains options to extend or terminate the lease.

The Company has an office lease. Before the adoption of IFRS 16, the Company classified each of its leases at the inception date as an operating lease. In an operating lease, the leased property was not capitalized, and the lease payments were recognized as rent expense in profit or loss on a straight-line basis over the lease term. Any prepaid rent and accrued rent were recognized under prepaid expenses and accounts payable and accrued liabilities, respectively. Upon adoption of IFRS 16, the Company applied a single recognition and measurement approach for all leases.

The Company recognized right-of-use assets and lease liabilities for those leases previously classified as operating leases. The right-of-use assets for most leases were recognized based on the carrying amount as if the standard had always been applied, apart from the use of incremental borrowing rate at the date of initial application. In some leases, the right-ofuse assets were recognized based on the amount equal to the lease liabilities. Lease liabilities were recognized based on the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application.

The effect of adopting IFRS 16 as at July 1, 2019 (increase/(decrease)) is as follows:

Right-of-use-assets Liabilities Lease liability – current portion Lease liability – long-term portion Total liabilities	$ 44,718
	31,483 13,235
	44,718

Set out below are the new accounting policies of the Company upon adoption of IFRS 16:

Right-of-use assets

The Company recognizes right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Company is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognized right-of-use assets are depreciated on a straight-line basis over 1.5 years, which

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GCC Global Capital Corporation Management’s Discussion and Analysis For the Three and Six Months Ended December 31, 2019

is the lease term. Right-of-use assets are subject to impairment.

Lease liabilities

At the commencement date of the lease, the Company recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Company and payments of penalties for terminating a lease, if the lease term reflects the Company exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognized as expense in the period on which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Company uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset.

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