Optegra Ventures Inc. - Interim / Quarterly Report 2020

ESSEX MINERALS INC.

Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Six Months Ended March 31, 2020

General

The following Management Discussion and Analysis (“MD&A”) should be read in conjunction with the unaudited condensed interim financial statements and notes for the six months ended March 31, 2020 and 2019, and the audited financial statements and notes for the fiscal years ended September 30, 2019 and 2018. All monetary amounts, unless otherwise indicated, are expressed in Canadian dollars. Additional information relating to the Company can be found on the SEDAR website at www.sedar.com.

The MD&A was approved by the Board of Directors of the Company on June 1, 2020.

The head office and principal address of the company are located at 3002-1211 Melville Street, Vancouver, BC V6E 0A7 and registered and records office of the Company are located at 2500- 700 W Georgia Street, Vancouver, BC V7Y 1B3.

Statement of Compliance

These condensed interim financial statements have been prepared in accordance with International Accounting Standards 34 – Interim Financial Reporting , using accounting policies consistent with International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board and Interpretations of the International Financial Reporting Interpretations Committee. They do not include all of the information required for full annual financial statements.

Basis of Presentation

The condensed interim financial statements have been prepared on a historical cost basis except for some financial instruments classified in accordance with measurement standards under IFRS.

All amounts are in Canadian dollars unless otherwise stated.

Forward-Looking Statements

Certain statements contained in this document constitute “forward-looking statements”. When used in this document, the words “may”, “would”, “could”, “will”, “intend”, “plan”, “propose”, “progressing”, “anticipate”, “believe”, “forecast”, “estimate”, “expect” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Such statements reflect the Company’s current views with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the Company’s actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.

Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown risks, uncertainties and other factors, many of which are beyond the Company’s ability to predict or control could cause actual results to differ materially from those contained in the forward-looking statements, which include, without limitation, commodity price volatility, changes in debt and equity markets, increases in costs, interest rate and exchange rate fluctuations, general economic conditions, the ability of the Company to receive continued financial support from related parties and to obtain public equity financing, the ability to generate profitable operations in the future, and the receipt of regulatory approvals on acceptable terms. Readers are cautioned that the foregoing list of factors is not exhaustive of the factors that may affect the forward-looking statements.

Overview

The Company was incorporated on November 19, 2012 under the Business Corporations Act (British Columbia). The Company’s principal business activity is the exploration of mineral properties. The Company currently conducts substantially all of its operations in Canada in one business segment.

The Company is a natural resource company focused on mineral exploration opportunities where it can adopt an option earn-in and joint venture model with proven technical teams which have already expended the time and capital to assemble exploration projects where drill targets have been identified, with a particular emphasis on high-grade orogenic and epithermal gold projects in Tier 1 jurisdictions. On February 19, 2020, the Company entered into an agreement with private Australian companies, KNX Resources Ltd. (“KNX”) and IsMins Pty Ltd (“IsMins”), to earn in on the three gold projects in Australia. The properties have been selected for their potential to host large, high-grade gold deposits and were assembled by KNX in the Georgetown region of Queensland and the Pine Creek region of the Northern Territory.

On December 22, 2016, the Company received a receipt of the British Columbia Securities Commission for the Long Form Prospectus dated December 20, 2016 (the prospectus). On March 15, 2017, the Company completed an Initial Public Offering and its shares were listed on the TSX Venture Exchange (“TSXV”).

Significant Events and Transactions

5 for 1 Share Consolidation

On January 31, 2020. The Company consolidated all of the issued and outstanding common shares on a five for one basis. The consolidation has reduced the common shares issued and outstanding from 10,425,007 pre-consolidated to 2,085,001 post-consolidated common shares. All shares figures and references have been retroactively adjusted to reflect the share consolidation. Effective January 31, 2020, the common shares of the Company commenced trading on the TSX Venture Exchange on a consolidated basis.

Private Placement

On March 9, 2020, the Company completed the first tranche of a non-brokered private placement financing, issuing 12,675,000 common shares at a price of $0.10 per share for gross proceeds of $1,267,500.

On March 17, 2020, the Company completed the second tranche of a non-brokered private placement financing, issuing 2,325,000 common shares at a price of $0.10 per share for gross proceeds of $232,500.

Subsequent to March 31, 2020, 1,451,000 shares were issued as finders’ units in connection with the closing of March 2020 private placement. The shares were valued at $0.10 per share.

Advance for Australian Gold Properties

On March 20, 2020 the company advanced $41,800 to KNX Resources Ltd (“KNX”) a private Australian company as part of its ongoing due diligence on several Australian gold properties.

Selected Annual Information

Selected Annual Information
	September 30, 2019	September 30, 2018	September 30, 2017
	$	$	$
Sales or Revenue	-	-	-
Net loss	(707,399)	(250,535)	(133,308)
Net loss per share - basic and diluted	(0.07)	(0.02)	(0.02)
Total assets	82,896	563,651	664,061

Results of Operations

Results of Operations
		Three months	ended	March 31,		Six months	ended	March 31,
		2020		2019		2020		2019
Expenses
Management and consulting fees	$	243,500	$	-	$	245,000	$	30,000
General and administration		9,745		14,475		27,378		14,685
Professional fees		28,427		49,000		61,427		79,000
Regulatory and transfer agent fees		18,676		8,602		19,390		10,690
Property investigation costs		215,705		-		215,705		-
Travel and promotion		6,060		-		11,086		-
Total expenses		(522,113)		(72,077)		(579,986)		(134,375)
Interest expense		(730)		-		(2,600)		-
Foreign exchange gain		1,323		-		1,323		-
Net loss	$	(521,520)	$	(72,077)	$	(581,263)	$	(134,375)

Three months ended March 31, 2020

The net loss for the quarter ending March 31, 2020 was $521,520 compared to net loss of $72,077 for the quarter ending March 31, 2019. Major variances as follows:

For the quarter ended March 31, 2020, property investigation costs were $215,705 compared to $Nil for the prior year quarter. The increase in property investigation costs is due to services provided for the project due diligence, review and evaluation of terms of agreements in connection with the earn-in transaction on the three gold projects in Australia.
For the quarter ended March 31, 2020, regulatory and transfer agent fees were $18,676 compared to $8,602 for the prior year quarter. The increase in regulatory and transfer agent fees is attributable to the Company’s 5 for 1 consolidation of its common shares and the closing of a non-brokered private placement offering of 15,000,000 shares at a price of $0.10 per share for total gross proceeds of $1,500,000.
For the quarter ended March 31, 2020, management and consulting fees were $243,500 compared to $Nil for the prior year quarter. Management and consulting fees include director’s fee, fee for services provided by the CEO, and other consulting services. The increase is largely related to the consulting fees paid for developing and identifying capital sources for the Company. In addition, no management fees and director fees were paid in the prior year quarter.
For the quarter ended March 31, 2020, professional fees were $28,427 compared to $49,000 for the prior year quarter. The decrease in professional fees is largely related to the lower accounting fees due to reduced time spent in accounting related services in the current quarter. The decrease in accounting fees was partially offset by the accrual of year-end audit fees recorded in the current quarter. No accrual of year-end audit fee was recorded during the prior year quarter.

Six months ended March 31, 2020

For the six months ended March 31, 2020, property investigation costs were $219,705 compared to $Nil for the six months ended March 31, 2019. The increase in property investigation costs is due to services provided for the project due diligence, review, and evaluation of terms of agreements in connection with the earn-in transaction on the three gold projects in Australia.

For the six months ended March 31, 2020, regulatory and transfer agent fees were $19,390 compared to $10,690 for the six months ended March 31, 2019. The increase in regulatory and transfer agent fees is attributable to the Company’s 5 for 1 consolidation of its common shares and the closing of a nonbrokered private placement offering of 15,000,000 shares at a price of $0.10 per share for total gross proceeds of $1,500,000.
For the six months ended March 31, 2020, management and consulting fees were $245,000 compared to $30,000 for the six months ended March 31, 2019. Management and consulting fees include director’s fee, fee for services provided by the CEO, and other consulting services. The increase is largely related to the consulting fees paid for developing and identifying capital sources for the Company. In addition, no director fees and management fees were paid in the prior year.
For the six months ended March 31, 2020, professional fees were $61,427 compared to $79,000 for the six months ended March 31, 2019. The decrease in professional fees is largely related to the lower accounting fees due to reduced time spent in accounting related services in the current period. The decrease in accounting fees was partially offset by the accrual of year-end audit fees recorded in the current period. No accrual of year-end audit fee was recorded during the prior year.
For the six months ended March 31, 2020, general and administration were $27,278 compared to $14,685 for the six months ended March 31, 2019. The increase in general administration is largely related to higher rent expense in the current period. The Company paid five months of rent in the current period versus three months of rent in the prior year.

Summary of periodic results

The following table sets out selected quarterly information for the eight most recent quarters ended March 31, 2020:

31, 2020:
	Mar 31,	Dec 31,	Sep 30,	Jun 30,	Mar 31,	Dec 31,	Sep 30,	Jun 30,
	2020(Q2)	2019(Q1)	2019(Q4)	2019(Q3)	2019(Q2)	2018(Q1)	2018(Q4)	2018(Q3)
	$	$	$	$	$	$	$	$
Net loss	(521,520)	(59,743)	(541,211)	(31,813)	(72,077)	(62,298)	(65,928)	(99,329)
Basic and diluted
lossper share	(0.09)	(0.03)	(0.26)	(0.02)	(0.03)	(0.03)	(0.03)	(0.05)

Liquidity and Capital Resources

As at March 31, 2020, the Company had current assets of $748,242 and current liabilities of $189,647 compared to current assets of $82,896 and current liabilities of $370,962 as at September 30, 2019. As at March 31, 2020, the Company had working capital of $558,595 compared to working capital deficiency of $280,666 as at September 30, 2019.

Cash at March 31, 2020 were $700,448 compared to $46,793 at September 30, 2019.

The Company has financed its operations primarily from proceeds from the sale of shares and debt.

The Company is dependent on the capital markets as its sole source of operating capital and the Company’s capital resources are largely determined by the strength of the TSXV and by the status of the Company’s projects in relation to these markets, and its ability to compete for investor support of its projects. The Company plans to issue more securities at such time as it believes additional capital could be obtained on favourable terms. There can be no assurance that such funds can be available on favourable terms, if at all.

Outstanding Shares

As at June 1, 2020, the Company has 18,536,501 common shares outstanding.

There were no stock options or warrants outstanding as at June 1, 2020.

New Accounting Standards and Interpretations

New Accounting Policy

Leases

On October 1, 2019, the Company adopted IFRS 16 – Leases is a new standard which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both the lessee and lessor. It introduces a single lessee accounting model that requires the recognition of all assets and liabilities arising from a lease. The adoption of this new standard did not have a material impact on the condensed interim financial statements of the Company since the Company does not have any lease.

Related Party Balances and Transactions

Balances

At March 31, 2020, the Company has $53,863 (September 30, 2019 - $94,500) due to related parties included in trade payables and accrued liabilities. These amounts are unsecured, non-interest bearing and have no specified terms of repayment.

Transactions

During the six months ended March 31, 2020 and 2019, the Company has the following related party transactions:

	March 31, 2020	March 31, 2019
	$	$
Management and consulting fees paid to the CEO	8,000	-
Management and consulting fees paid to a director	3,000	-
Management and consulting fees paid to the former CEO	-	30,000
Professional fees paid to the CFO	6,000	-
Property investigation costs paid to a company controlled by the CEO	44,705	-
	61,705	30,000

Financial Instruments

The Company’s financial instruments are exposed to certain financial risks, including liquidity risk, and interest rate risk.

Liquidity risk

Liquidity risk is the risk that the Company will not meet its financial obligations as they become due. Refer to Note 1 of its condensed interim financial statements for further details related to the ability of the Company to continue as a going concern.

The Company’s approach to managing liquidity risk is to ensure that it will have sufficient liquidity to meet liabilities when due. As at March 30, 2020, the Company had a cash balance of $700,448 (September 30, 2019: $47,793) to settle current liabilities of $189,647 (September 30, 2019: $370,960). All of the Company’s financial liabilities have contractual maturities of less than 30 days and are subject to normal trade terms.

Historically, the Company’s sole source of funding has been the issuance of equity securities for cash, primarily through private placements. The Company’s access to financing is always uncertain. There can be no assurance of continued access to significant equity funding.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The carrying amounts of financial assets best represent the maximum credit risk exposure at the reporting date.

The Company’s cash is held in large Canadian financial institutions. The Company has not experience nor is exposed to any significant credit losses. As a result, the Company’s exposure to credit risk is minimal.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of financial instruments will fluctuate because of changes in market interest rates. An immaterial amount of interest rate exposure exists in respect of cash balances on the statement of financial position. As a result, the Company is not exposed to material cash flow interest rate risk on its cash balances.

Fair value of Financial Instruments

The Company’s financial instruments measured at fair value consist of cash, receivables (excluding GST), accounts payable and accrued liabilities, and loan payable. The carrying values of cash, receivables (excluding GST), accounts payable and accrued liabilities, and loan payable approximate their fair values due to their short-term in nature and/or the existence of market related interest rates on the instruments.

Financial instruments measure 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 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 assets or liabilities either directly or indirectly; and
Level 3 – inputs that are not based on observable market data.
All financial instruments are classified as Level 1.

Management Changes

On March 9, 2020, the Company announced the resignation of Yari Nieken as the Company’s President, Chief Executive Officer and as a director. Paul Loudon was appointed as a new director and replaces Mr. Nieken as President and Chief Executive Officer of the Company.

On April 15, 2020, the Company announced the resignation of Usama Chaudhry as the Company’s Chief Financial Officer. Elena Tanzola was appointed as the new Chief Financial Officer and Corporate Secretary of the Company.

On April 15, 2020, the Company announced the resignations of Wilson Yu and Chris Andrews as directors of the Company. The Company appointed James Harris as new director.

On April 15, 2020, the Company appointed Patrick Harford as VP of business development.

Subsequent Events

Refer to Note 11 of the condensed interim financial statements for the six months ended March 31, 2020.

Capital Management

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the acquisition, exploration and development of mineral properties. The Board of Directors does not establish quantitative return on capital criteria for management, but rather relies on the expertise of the Company’s management to sustain future development of the business.

The capital structure of the Company consists of shareholder’s equity, comprising issued capital and deficit. The Company is not exposed to any externally imposed requirements. Management reviews its capital management approach on an ongoing basis and believes that this approach, given the relative size of the Company, is reasonable.

Risks and Uncertainties

The Company has limited financial resources and there is no assurance that additional funding will be available to it for further development of its projects or to fulfil its obligations under applicable agreement. There can be no assurance that the Company will be able to obtain adequate financing in the future or that the terms of such financing will be favourable. Failure to obtain such additional financing could result in delay or indefinite postponement of the Company’s intended business operations with the possible dilution or loss of such interest. Further, revenues, financings and profits, if any, will depend upon various factors, including the success, if any, of intended business operations. There is no assurance that the Company can operate profitably or that it will successfully implement its plans.

The Company is in development stage and has no operating earnings. The likelihood of success of the Company must be considered in light of the problems, expenses and difficulties, complications and delays frequently encountered in connection with the establishment of any business. The Company operates at a loss and there is no assurance that the Company will ever be profitable.

Since March 2020, several measures have been implemented in Canada and the rest of the world in response to the increased impact from novel coronavirus (COVID-19). The Company continues to operate its business at this time. While the impact of COVID-19 is expected to be temporary, the current circumstances are dynamic and the impacts of COVID-19 on business operations cannot be reasonably estimated at this time. The Company anticipates this could have an adverse impact on its business, results of operations, financial position and cash flows in 2020.

ESSEX MINERALS INC. CORPORATE DATA June 1, 2020

HEAD OFFICE

ESSEX MINERALS INC. 3002 - 1211 Melville Street, Vancouver, BC, V6E 0A& Tel: 604-681-4653 Email: [email protected]

SOLICITOR

Farris LLP 2005 - 700 W. Georgia Street Vancouver, BC V7Y 1B3 Email [email protected] Jay Sujir Tel: 604.684-9151

REGISTRAR & TRANSFER AGENT

Computershare Inc. 510 Burrard Street Vancouver, BC V6C 3B9 Tel: 604-661-9440

AUDITORS

MNP LLP 2200 - 1021 West Hastings Street Vancouver, BC V6E 0C3 Tel: 604.685.8408 Fax: 604.685.8594 Email: [email protected]

DIRECTORS AND OFFICERS

Paul Loudon Elena Tanzola James Harris Yuying Liang Patrick Harford

Director, President, CEO CFO, Corporate Secretary Director Director VP Business Development

INVESTOR CONTACTS

Elena Tanzola Tel: 604-681-4653 Email: [email protected]

LISTINGS

CAPITALIZATION

Unlimited number of Authorized: common shares, no par value Issued: 18,536,501 Options: Nil Warrants: Nil Escrowed shares: Nil

TSX Venture Exchange Trading Symbol: ESX.V CUSIP #: 297133100