Light AI Inc. — Management Reports 2023

Jul 31, 2023

MOJAVE BRANDS INC.

FORM 51-102F1

MANAGEMENT DISCUSSION AND ANALYSIS

For the Nine Months Ended May 31, 2023

INTRODUCTION

This Management’s Discussion and Analysis (“MD&A”) has been prepared by the management of Mojave Brands Inc. (“Mojave” or the “Company”) as of July 30, 2023, and should be read in conjunction with the unaudited interim consolidated financial statements and related notes of the Company for the nine months ended May 31, 2023, and the audited consolidated financial statements of the Company together with the related notes thereto for the year ended August 31, 2022. The financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). All amounts are stated in Canadian dollars unless otherwise indicated.

Our financial statements and the management’s discussion and analysis are intended to provide a reasonable base for the investor to evaluate our financial situation. Additional information related to the Company and its operations is available on SEDAR at www.sedar.com.

FORWARD-LOOKING STATEMENTS

This MD&A contains "forward-looking information" within the meaning of applicable Canadian securities legislation. Forward-looking information includes, but is not limited to, information with respect to the Company’s future business plans and strategy. Generally, forward-looking information can be identified by the use of forwardlooking terminology such as "plans", "expects" (or "does not expect"), "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" (or "does not anticipate"), or "believes", and other similar words and phrases, or which states that certain actions, events, or results "may", "could", "might", or "will” occur. Forward-looking information is based on assumptions and expectations which the Company considers are reasonable, and which are based on management’s experience and its perception of trends, current conditions, and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances at the date that such statements are made. The assumptions used to develop forward-looking information include, but not limited to, assumptions about:

• The general business and economic conditions;

• The timing of the receipt of regulatory and governmental approvals, permits and authorizations necessary to implement and carry on the Company’s planned business objectives;

• The nature and location of the Company’s plants, and the timing of the ability to commence its business operations;

• The Company’s ability to secure the necessary consulting, technical and related services and supplies on favourable terms;

• The Company’s ability to attract and retain key staff;

• Treatment of the Company’s business under governmental regulatory regimes and tax laws and the renewal of the Company’s license thereunder;

• The anticipated terms of the consents, permits and authorizations necessary to carry out the planned operations and the Company’s ability to comply with such terms on a cost-effective basis;

• Fluctuations in the price of common shares and the market for the common shares: and

• The ability of the Company to generate cash flow from operations and from financing activities.

Although the Company believes that the assumptions and expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on forward-looking information. The Company can give no assurance that forward-looking information, or the assumptions and expectations on which it is based, will

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prove to be correct. The Company does not undertake to revise or update any forward-looking information, except in accordance with applicable laws. Readers should not place undue reliance on forward looking information.

Forward-looking information is subject to known and unknown risks and uncertainties that may cause the actual results, or performance of the Company to be materially different from those expressed or implied by such forwardlooking information. These risks and uncertainties include risk and uncertainties associated with the medical marijuana industry, such as the potential changes in government regulation, and the uncertainty of predicting operating and capital costs. They also include risks and uncertainties that affect the business environment generally, such as changes in interest rates and the condition of financial markets, and changes in exchange rates, and other risks identified herein under “Risks and Uncertainties”.

COMPANY OVERVIEW

Mojave Brands Inc. was incorporated under the name Infinity Minerals Corp. on 12, 2010, under the laws of the Province of British Columbia, Canada. The name of the Company was changed to Herbal Clone Bank Canada Inc. on August 29, 2014, to High Hampton Holdings Corp. on June 18, 2015, to Mojave Jane Brands Inc. on June 11, 2019, and to Mojave Brands Inc. on March 30, 2021. The Company is a reporting issuer in British Columbia, Ontario and Alberta, and its common shares are traded on the Canadian Securities Exchange (the “CSE”) under the symbol “MOJO” and on the Frankfurt Exchange under the symbol “FSE: 0HCN”.

The Company’s principal business was the manufacturing, processing and sale of cannabis extracts. Currently the Company is not generating revenues as it has closed down all its operations in the US, and plans to seek out other potential strategic alliances, joint venture, acquisition, or merger opportunities.

DISCUSSION OF OPERATIONS

Three month period ended May 31, 2023

During the three months ended May 31, 2023, the Company reported a net loss of $60,948 as compared to a net loss of $35,654 for the three months ended May 31, 2022. The net loss for the 2023 quarter relates primarily to general operating expenses of $66,773 (2022 - $36,752), partially offset by interest income of $6,085 (2022 - $3,704). The general operating expenses for the current quarter include mainly consulting fees of $27,000 (2022 - $nil) and management fees of $22,500 (2022 - $30,000).

Nine month period ended May 31, 2023

During the nine months ended May 31, 2023, the Company reported a net loss of $106,381 as compared to a net income of $111,561 for the nine months ended May 31, 2022. The net loss for the 2023 period relates primarily to general operating expenses of $148,972 (2022 - $128,418), partially offset by foreign exchange gain of $18,587 (2022 - $2,849), interest income of $14,004 (2022 - $4,743) and a gain on loan repayment of $10,000 (2022 - $nil). The net income in the 2022 period is a result of $201,118 of recovery of doubtful GST receivable.

The general operating expenses related mainly to costs of maintaining the Company and identifying potential business opportunities. The main expense items included consulting fees of $27,000 (2022 - $250), filing and transfer agent fees of $16,834 (2022 - $13,093), legal fees of $16,738 (2022 - $12,636), and management fees of $67,500 (2022 - $90,000).

SUMMARY OF QUARTERLY RESULTS

The following table sets forth selected unaudited financial information for the Company’s eight most recent quarters ending with the last quarter for the three months ended May 31, 2023.

For the Three Months Ended

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		Fiscal 2023			Fiscal 2022	Fiscal 2022		Fiscal 2021
	May 31, 2023	Feb. 28, 2023	Nov. 30, 2022	Aug. 31, 2022	May 31, 2022	Feb. 28, 2022	Nov. 30, 2021	Aug. 31, 2021
	($)	($)	($)	($)	($)	($)	($)	($)
Total revenues	-	-	-	-	-	-	-	-
Net income (loss) from continuing operations	(60,948)	(29,427)	(16,006)	(44,442)	(34,538)	151,064	(37,724)	(99,770)
Net income (loss)	(60,948)	(29,427)	(16,006)	(44,442)	(35,654)	184,939	(37,724)	(190,137)
Net income (loss) from continuing operations per share - basic and diluted	(0.01)	(0.00)	(0.00)	(0.00)	(0.00)	0.01	(0.00)	(0.01)
Net income (loss) per share - basic and diluted	(0.01)	(0.00)	(0.00)	(0.00)	(0.00)	0.01	(0.00)	(0.03)

LIQUIDITY AND CAPITAL RESOURCES

As at May 31, 2023, the Company had a cash balance of $751,946, a decrease of $129,190 from the cash balance of $881,136 as at August 31, 2022. The Company spent $99,190 in operating activities and paid off $30,000 of the loan from the Canadian Government.

The Company had working capital of $597,755 as at May 31, 2023 compared to working capital of $744,136 as at August 31, 2022.

Going Concern

As at the date of this MD&A, the Company had not yet achieved profitable operations and expects to incur further losses in the development of its business objectives. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due and to attain future profitable operations. While the Company has been successful in the past in obtaining financing, there is no assurance that it will be able to obtain adequate financing in the future or that such financing will be on terms acceptable to the Company. Further, if an equity offering is used to raise required additional capital, it may result in dilution to existing shareholders based on the size of such an offering. Management believes that the current cash position will be sufficient to fund the Company’s operating requirements for at least the next 12 months. Should the Company identify a business acquisition opportunity, it would be required to raise additional capital to finance the transaction.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

RELATED PARTY TRANSACTIONS AND BALANCES

Key management personnel include directors (executive and non-executive) and officers of the Company. The compensation paid or payable to key management personnel and entities over which they have control or significant influence during the nine month periods ended May 31 is as follows:

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		2023		2022
Management fees	$	67,500	$	90,000

The Company entered into the following transactions with related parties during the nine months ended May 31, 2023:

a) Incurred management fees of $67,500 (2022 - $90,000) to a company controlled by a director of the Company.

The Company has entered into an administrative services agreement with a company controlled by a director of the Company for administrative and accounting services for a monthly fee of $7,500.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the Company’s consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from those estimates and judgments. The impacts of such estimates are pervasive throughout the financial statements and may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the period in which the estimate is revised.

Areas requiring a significant degree of estimation and judgment by the Company’s management relate to but are not limited to:

• the fair value measurements for financial instruments;

• the recoverability and measurement of deferred tax assets and liabilities; and

• whether the Company has sufficient financing to operate as a going concern.

Actual results may differ from those estimates and judgments.

FINANCIAL INSTRUMENTS

As of May 31, 2023, the carrying amounts of accounts payables carried at amortized cost are considered a reasonable approximation of their fair values due to the relatively short period to maturity of these financial instruments.

Financial risk management

The Company’s financial risks arising from its financial instruments are credit risk, liquidity risk, and interest rate risk. Risk management is carried out by the Company's management team with guidance from the Audit Committee under policies approved by the Board of Directors. The Board of Directors also provides regular guidance for overall risk management.

Credit risk

Credit risk is the risk of potential loss to the Company if the counter party to a financial instrument fails to meet its contractual obligations. The credit risk of the Company is associated with cash. The credit risk with respect to its cash is minimal as they are held with high-credit quality financial institutions.

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Liquidity risk

The Company's approach to managing liquidity risk is to ensure that it will have enough liquidity to meet liabilities when due. as they fall due. As at May 31, 2023, the Company has a cash balance of $751,946 and current liabilities of $156,985. The Company's accounts payable and accrued liabilities have contractual maturities of less than 30 days and are subject to normal trade terms.

Interest rate risk

The Company is exposed to interest rate risk arising from cash held in Canadian financial institutions. The interest rate risk on cash is not considered significant due to its short-term nature and maturity. The exposure to interest rates for the Company is considered minimal.

OUTSTANDING SHARE DATA

The Company had the following common shares, stock options and warrants outstanding as at the date of this report:

Issued and Outstanding Common shares	10,242,428
Stock options	20,000
Warrants	5,750,000
	16,012,428

CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION

New accounting standards

There were no new or amended IFRS pronouncements effective September 1, 2022 that impacted the Company’s consolidated financial statements.

RISK AND UNCERTAINTIES

The Company’s business is subject to risks inherent in a high growth, heavily regulated enterprise, and the Company has identified certain risks pertinent to its business that may materially and adversely affect our business, products, financial condition and operating results. There are many factors that affect our business and our results of operations, some of which are beyond our control. The following is a description of important factors that may cause our actual results of operations in future periods to differ materially from those currently expected or discussed in the forward-looking statements set forth in this report relating to our financial results, operations and business prospects. Except as required by law, we undertake no obligation to update any such forward-looking statements to reflect events or circumstances after the date of this MD&A. These risks include, but are not limited to the following:

Additional funding requirements

The Company has not generated positive cash flows from operating activities. As a result of the Company’s negative cash flow from operating activities, the Company continues to rely on the issuance of securities or other sources of financing to generate the funds required to fund its business. The Company may continue to have negative operating cash flow for the foreseeable future. The Company expects to continue to increase operating expenses as it implements initiatives to grow its business. If the Company’s revenues do not increase to offset these expected increases in costs and operating expenses, the Company will not be profitable. There is no assurance that the Company will be successful in achieving a return on shareholders’ investments and the likelihood of success must be considered in light of the early stage of operations and the impact of COVID-19 to its business operations.

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Business acquisition risk

A number of risks associated with business acquisition include: (i) potential disruption of our ongoing business; (ii) distraction of management; (iii) increased financial leverage; (iv) the anticipated benefits and cost savings of those transactions may not be realized fully, or at all, or may take longer to realize than expected; (v) increased scope and complexity of our operations; and (vi) loss or reduction of control over certain of our assets. The presence of one or more material liabilities and/or commitments of an acquired company that are unknown to us at the time of acquisition could have a material adverse effect on our results of operations, business prospects and financial condition. A strategic transaction may result in a significant change in the nature of our business, operations and strategy. In addition, we may encounter unforeseen obstacles or costs in implementing a strategic transaction or integrating any acquired business into our existing operations.

DISCLOSURE CONTROLS

In connection with Exemption Orders issued by each of the securities commissions across Canada, the Chief Executive Officer and Chief Financial Officer of the Company will file a Venture Issuer Basic Certificate with respect to the financial information contained in the audited annual financial statements and respective accompanying Management’s Discussion and Analysis.

In contrast to the certificates under National Instrument (“NI”) 52-109 (Certification of disclosure in an Issuer’s Annual and Interim Filings), the Venture Issuer Basic Certification does not include representations relating to the establishment and maintenance of disclosure controls and procedures and internal control over financial reporting as defined in NI 52-109.

APPROVAL

The Board of Directors of Mojave brands Inc. has approved the contents of this management discussion and analysis on July 30, 2023.

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