Collective Mining Ltd. — Management Reports 2020

Apr 29, 2020

POCML 5 INC.

(a Capital Pool Corporation)

Management’s Discussion and Analysis

For the Period Ended: December 31, 2019

Date of Report: April 28, 2020

This management’s discussion and analysis of the financial condition and results of operation (“MD&A”) of POCML 5 Inc. (“POCML” or the “Company”) should be read in conjunction with POCML’s audited financial statements and notes thereto for the year ended December 31, 2019

All financial data in this MD&A has been prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). All dollar amounts in this MD&A are reported in Canadian dollars.

Caution Regarding Forward-Looking Information:

Certain information contained in this MD&A constitutes forward-looking information, which is information regarding possible events, conditions or results of operations of the Company that is based upon assumptions about future economic conditions and courses of action and which is inherently uncertain. All information other than statements of historical fact may be forward-looking information. Forward-looking information is often, but not always, identified by the use of words such as “seek”, “anticipate”, “budget”, “plan”, “continue”, “estimate”, “expect”, “forecast”, “may”, “will”, “project”, “predict”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar words or phrases (including negative variations) suggesting future outcomes or statements regarding an outlook. Forward-looking information contained in this MD&A includes, without limitation, our expectations regarding anticipated investment activities and results and financing activities, the impact of changes in accounting policies and other factors on our operating results, and the performance of global capital markets and interest rates.

Forward-looking information involves 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 information. The Company believes the expectations reflected in the forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and readers are cautioned not to place undue reliance on forward-looking information contained in this MD&A. The forward-looking information contained in this MD&A is provided as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as otherwise required by law. All of the forward-looking information contained in this MD&A is expressly qualified by this cautionary statement.

Nature of the Business and Incorporation:

POCML was incorporated under the Business Corporation Act (Ontario) on February 21, 2018 and is classified as a Capital Pool Company, as defined in the Policy 2.4 of the TSX Venture Exchange (the “Exchange”). The Company’s continuing operations, as intended, are dependent on its ability to secure equity financing with which it intends to identify and evaluate potential acquisitions of businesses, and once identified and evaluated, to negotiate an acquisition thereof or participation therein subject to receipt of regulatory and, if required, shareholders’ approval.

The Company’s continuing operations as intended are dependent upon its ability to identify, evaluate and negotiate an acquisition or business, or an interest therein. Such an acquisition will be subject to the approval of the regulatory authorities concerned and, in the case of a non-arm’s-length transaction, of the majority of the minority shareholders.

The Company is domiciled in the province of Ontario, Canada and the head office and the registered head office of the Company is located at 130 King Street West, Suite 2210, Toronto, Ontario M5X 1E4.

The Company currently has one employee, David D’Onofrio, who is the Chief Executive Officer, Chief Financial Officer, Secretary and a Director of the Company.

Results of Operations – Three months ended December 31, 2019

The Company recorded a net loss and comprehensive loss of $5,058 during the three months ended December 31, 2019 compared to a net loss of $111,549 for the three months ended December 31, 2018. The decrease was mainly due to a decrease in public reporting and listing costs.

The net loss for the three months ended December 31, 2019 is represented by the following expenses incurred in the period:

Operating, general and administrative Professional fees Interest income	$ 1,305 $ 5,710 $ (1,957)
	$ 5,058

The Company, during the three month period ended December 31, 2019, incurred expenses related to ongoing administration.

Results of Operations – Year ended December 31, 2019

The Company recorded a net loss and comprehensive loss of $11,209 during the year ended December 31, 2019 compared to a net loss of $126,889 for the year ended December 31, 2018. The decrease was mainly due to a decrease in public reporting and listing costs.

The net loss for the year ended December 31, 2019 is represented by the following expenses incurred in the period:

Operating, general and administrative Professional fees Interest income	$ 11,853 $ 7,401 $ (8,045)
	$ 11,209

The Company, during the year ended December 31, 2019, incurred expenses related to ongoing administration, as well as listing and filing fees all relating to the Company’s listing on the Exchange and included in Office and general (see information elsewhere in this MD&A).

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Liquidity and capital resources

As at December 31, 2018, the Company had cash of $530,463, and as of December 31, 2019, the Company had cash of $495,485. The decrease in cash from the previous period was primarily due to cash used in operating activities.

As of December 31, 2018 the Company had total liabilities of $29,952, and as at December 31, 2019 had total liabilities of $5,889. The decrease in liabilities was primary due to a decrease in accounts payable & accrued liabilities.

Shareholder equity decreased to $489,596 as at December 31, 2019 (December 31, 2018 - $530,757).

Quarterly Finanical Results

Quarter Ended	Revenue	Income / (Loss)	Income/ (Loss) per share
December 31, 2019		(5,058)	(0.01)
September 30, 2019	-	(593)	(0.01)
June 30, 2019	-	(2,802)	(0.01)
March 31, 2019	-	(2,756)	(0.01)
December 31, 2018	-	(111,549)	(0.83)
September 30, 2018	-	(15,340)	-
June 30, 2018	-	Nil	Nil

Segmented Information

The Company has a single reportable geographic segment – Canada – and all of the Company’s assets are located in Canada.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Investor Relations

During the year ended December 31, 2019, the Company’s management handled the Company’s investor relations activities.

Outstanding Share Capital as at December 31, 2019

• (a) Authorized

• Unlimited number of common shares Unlimited number of special shares

• (b) Issued

• 10,000,000 common shares

$600,000

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On December 10, 2018, the Company completed an initial public offering of 2,000,000 common shares at $0.10 per share for gross proceeds of $200,000 pursuant to a prospectus dated October 26, 2018. The Company paid cash commission and other expenses of $16,576 and also issued 140,000 agent options to the registered agent. Each agent option entitles the holders to purchase the common shares at a price of $0.10 per common share until December 10, 2020.

Under the agency agreement, the Company granted to the agent the option to purchase 140,000 common shares at a price of $0.10 per common share until December 10, 2020. In addition, the Company paid a commission of $14,000, representing 7% of the aggregate gross proceeds of the offering to the agent as compensation for acting as agent, and a corporate finance fee of $10,000.

The cash raised from its initial public offering will be primarily used to pursue a qualifying transaction.

(c) Escrowed shares:

On August 30, 2018 the Company issued 8,000,000 common shares at $0.05 per share for total proceeds of $400,000.

The issued and outstanding common shares will be held in escrow pursuant to the requirements of the Exchange to be released as to 10% thereof on the completion of the Company’s Qualifying Transaction, as defined in the policies of the Exchange, and as to 15% thereof on each of the 6th, 12th, 18th, 24th, 30th and 36th months following the initial release.

All common shares acquired on exercise of stock options granted to directors and officers prior to the completion of a Qualifying Transaction, must also be deposited in escrow until the final exchange bulletin is issued.

All common shares of the Company acquired in the secondary market prior to the completion of a Qualifying Transaction by a Control Person, as defined in the policies of the Exchange, are required to be deposited in escrow. Subject to certain permitted exemptions, all securities of the Company held by principals of the resulting issuer will also be escrowed.

Transactions with Related Parties

Related parties include the Board of Directors, close family members and enterprises which are controlled by these individuals as well as persons performing similar functions.

There was no related party transactions for the year ended December 31, 2019.

Financial Instruments

The carrying values of cash, amounts receivable, and accounts payable and accrued liabilities approximate fair value due to the relatively short term maturities of these instruments.

Management of Capital

The Company's objective when managing capital is to maintain its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders.

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The Company includes equity, comprised of issued common shares and deficit, in the definition of capital.

The Company's primary objective with respect to its capital management is to ensure that it has sufficient cash resources to fund the identification and evaluation of potential acquisitions. To secure the additional capital necessary to pursue these plans, the Company may attempt to raise additional funds through the issuance of equity or by securing strategic partners.

The proceeds raised from the issuance of common shares may only be used to identify and evaluate assets or businesses for future investment, with the exception that not more than the lesser of 30% of the gross proceeds from the issuance of shares or $210,000 may be used to cover prescribed costs of issuing the common shares or administrative and general expenses of the Company. These restrictions apply until completion of a Qualifying Transaction by the Company as defined under the Exchange policy 2.4.

Contingency

There is no assurance that the Company will identify a business or asset that warrants acquisition or participation within the time limitations permissible under the policies of the Exchange, at which time the Exchange may suspend or de-list the Company’s shares from trading.

Risk Disclosures and Fair Value

The Company's financial instruments, consisting of cash, amounts receivable and accounts payable and accrued liabilities approximates fair value due to the relatively short term maturities of the instrument. It is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

Outlook

Management believes the Company is well positioned to seek and complete a qualifying transaction. The Company believes that it has sufficient cash and capital resources.

Subsequent Events

Subsequent to year-end, there was a global outbreak of COVID-19 (coronavirus), which has had significant impact on businesses through the restrictions put in place by the Canadian governments regarding travel, business operations and isolation/quarantine orders. At this time, it is unknown the extent of the impact the COVID-19 outbreak may have on the Corporation as this will depend on future developments that are highly uncertain and that cannot be predicted with confidence. These uncertainties arise from the inability to predict the ultimate geographic spread of the disease, and the duration of the outbreak, including the duration of travel restrictions, business closures or disruptions, and quarantine/isolation measures that are currently, or may be put, in place by Canada and other countries to fight the virus. While the extent of the impact is unknown, it is possible that this outbreak may cause difficulties in searching for a Qualifying Transaction, which could negatively impact the Company’s business and financial condition.

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