WSM Ventures Corp. — Management Reports 2021

Mar 26, 2021

WSM VENTURES CORP. (FORMERLY "AVALON BLOCKCHAIN INC.") Management Discussion and Analysis (“MD&A”) for the year ended December 31, 2020

1. Date and Presentation

This management discussion and analysis of financial position and results of operations (“MD&A) is prepared as at March 26, 2021 and should be read in conjunction with the consolidated financial statements for the year ended December 31, 2020 and 2019 and the related notes thereto. These consolidated financial statements, including comparatives, have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and Interpretations of the IFRS Interpretations Committee.

Management is responsible for the preparation and integrity of the consolidated financial statements, including the maintenance of appropriate information systems, procedures and internal controls. Management is also responsible for ensuring that information disclosed externally, including the consolidated financial statements and MD&A, is complete and reliable.

All dollar amounts included therein and in the following MD&A are expressed in Canadian dollars except where noted. This discussion contains forward-looking statements that involve risks and uncertainties. Such information, although considered to be reasonable by the Company’s management at the time of preparation, may prove to be inaccurate and actual results may differ materially from those anticipated in the statements made. Additional information on the Company is available for viewing on SEDAR at www.sedar.com.

2. History and Background

WSM Ventures Corp. (formerly "Avalon Blockchain Inc.") (the “Company") was incorporated in the Province of British Columbia on May 11, 1981. On April 15, 2020, the Company changed its name from Avalon Blockchain Inc. to WSM Ventures Corp. The head office and records office of the Company is located at 2200 – 885 West Georgia Street, Vancouver, British Columbia, Canada, V6C 3E8. The Company’s common shares are listed on the Canadian Securities Exchange (“CSE”) under the symbol “WSM.X” (formerly “AVLN”). The Company has no current business or business assets and is currently in the process of exploring various business opportunities. The head office of the Company is located at Suite 2200 – 885 West Georgia Street, Vancouver, British Columbia, V6C 3E8.

On May 12, 2017, the Company consolidated its issued and outstanding common shares, stock options and share purchase warrants on the basis of one (1) new share for every ten (10) existing shares. On November 22, 2017, the Company consolidated its share capital, stock options and warrants on the basis of one (1) new common share for up to one point three three four (1.3334) existing common shares. Unless otherwise indicated, all reference to share capital, stock options and share purchase warrants presented in this MD&A have been restated to reflect the two share consolidations.

On March 29, 2018, the Company changed its name from World Mahjong Limited to Avalon Blockchain Inc. following the completion of the reverse takeover transaction (“RTO”) and amalgamation (“Amalgamation”) of 1158716 B.C. Ltd. (“1158716”) with the Company’s newly incorporated wholly-owned subsidiary, 1146305 B.C. Ltd. (“1146305”). Pursuant to the amalgamation agreement and closing of the RTO, 1158716 and 1146305 amalgamated and the resulting entity (“Amalco”) became a wholly-owned subsidiary of the Company. The principal activity of Amalco is to seek the acquisition of qualifying assets or a business pursuant to the policies of the CSE.

As a result of the completion of the RTO, Amalco is deemed as the accounting acquirer for accounting purposes, and therefore its assets and liabilities and operations are included in the consolidated financial statements at their historical carrying value. Amalco’s operations were considered to be a continuance of the business and operations of Amalco. The Company’s results of operations are those of Amalco, with the Company’s operations being included from March 29, 2018 onwards, the closing date.

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3. Selected Annual Information

	December 31,	December 31,	December 31,	December 31,	December 31,	December 31,	December 31,	December 31,
		2020		2019		2018		2017
Total interest income	$	-	$	-	$	-	$	-
Loss and comprehensive loss		107,375		87,946		2,116,878		23,872
Basic and diluted loss per share		0.00		0.00		0.02		0.47
Total assets		245,060		338,644		428,837		1,300,017
Total liabilities		27,234		13,443		15,690		1,200,021
Cash dividends		-		-		-		-

During the year ended December 31, 2020, the Company had a loss of $107,375 as a result of the Company operations.

During the year ended December 31, 2019, the Company had a loss of $87,946 as a result of the Company operations.

During the year ended December 31, 2018, the Company had a loss of $2,116,878 as a result of the Company completing a RTO during the year. Incremental costs in the year ended December 31, 2018, compared to December 31, 2019, were largely due to the listing fee on the RTO in the amount of $1,463,373 and $381,180 as a project investigation fee.

During the year ended December 31, 2017, the Company had a loss of $23,872 as a result of the Company operations.

4. Summary of Quarterly Results

The following selected financial data has been prepared in accordance with IFRS and should be read in conjunction with the Company’s consolidated financial statements. All dollar amounts are in Canadian dollars. There were no changes to the nature of the losses between the periods

December 31, 2020	September 30, 2020	June 30, 2020 March 31, 2020
Total assets $ 245,060 Working capital 217,826 Shareholders’ equity 217,826 Loss for the period (22,411) Basic and diluted loss per share (0.00)	$ 256,415 240,237 240,237 (22,930) (0.00)	$ 272,955 $ 321,869 263,167 301,057 263,167 301,057 (37,890) (24,144) (0.00) (0.00)
December 31, 2019	September 30, 2019	June 30, 2019 March 31, 2019
Total assets $ 338,644 Working capital 325,201 Shareholders’ equity 325,201 Loss for the period (21,021) Basic and diluted loss per share (0.00)	$ 356,193 346,222 346,222 (18,478) (0.00)	$ 372,204 $ 410,376 364,700 389,715 364,700 389,715 (25,015) (23,432) (0.00) (0.00)

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5. Results of Operations

For the year ended December 31, 2020, the Company incurred a net loss of $107,375 compared to a loss of $87,946 for the year ended December 31, 2019. Incremental costs in the year ended December 31, 2020, compared to December 31, 2019, were largely due to incremental legal and accounting fees of $16,638 and incremental filing fees of $3,828.

For the three-month period ended December 31, 2020, the Company incurred a net loss of $22,411 compared to a net loss of $21,021 for the three-month period ended December 31, 2019. The three-month period ended December 31, 2020 had higher filing fee expenses of $1,486.

6. Liquidity and Capital Resources

Liquidity risk is the risk that the Company will encounter difficulty in satisfying financial obligations as they become due. The Company manages its liquidity risk by forecasting cash flows from operations and anticipated investing and financing activities. The Company’s objective in managing liquidity risk is to maintain sufficient readily available reserves in order to meet its liquidity requirements.

Working capital

The net working capital, defined as current assets less current liabilities, decreased from working capital of $325,201 as at December 31, 2019 to working capital of $217,826 as at December 31, 2020 largely due to operational expenses (consulting, filing, & professional fees) in the year of $107,375.

Cash

As at December 31, 2020, the Company had cash of $245,042 compared with $338,626 as at December 31, 2019. The decrease in cash is largely due to $107,375 of operational expenses (consulting, filing, & professional fees) of which $13,791 relate to an incremental amount in accounts payable and accrued liabilities as outstanding balances at the year ended December 31, 2020.

Cash Used in Operating Activities

Cash used in operating activities during the year ended December 31, 2020 was $93,584 compared with $85,153 of cash used in operating activities during the year ended December 31, 2019.

Cash used in operating activities in the year ended December 31, 2020 was mainly for consulting fees ($49,775), professional fees ($37,801), and filing fees ($19,611), with an increase in accounts payable of $13,791.

Cash used in operating activities in the year ended December 31, 2019 was mainly for consulting fees ($50,878), professional fees ($21,163), and filing fees ($15,783).

Cash Used in Investing Activities

The Company incurred costs of $NIL for investing activities during the year ended December 31, 2020 and $NIL in the year ended December 31, 2019.

Cash Generated by Financing Activities

No cash was used in financing activities during the year ended December 31, 2020, as the company was inactive.

No cash was used in financing activities during the year ended December 31, 2019, as the company was inactive.

Requirement of Additional Equity or Debt Financing

The Company relies primarily on debt and equity financings for all funds raised to date for its operations. Until the Company starts generating profitable operations, the Company intends to continue relying upon the issuance of securities or debt financing to finance its operations.

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In March 2020 the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, and any related adverse public health developments, has adversely affected workforces, economies, and financial markets globally, potentially leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds. As of the date of this report, there has been no impact on the Company’s current state of operations.

7. Capital Resources

The Company manages its capital structure and makes adjustments to it, based on the funds available to the Company, in order to support the identification and evaluation of a business and continue as a going concern. The Company considers capital to be all accounts in equity. The Company is not subject to any external capital requirements therefore 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. Additional funds may be required to finance any business. Funds will also be used to investigate current business opportunities.

8. Off-Balance Sheet Arrangements

The Company currently has no off-balance sheet arrangements.

9. Transactions with Related Parties

Key management personnel consist of officers and directors of the Company. During the year ended December 31, 2020, the Company paid management and consulting fees to a company controlled by a current officer totaling $21,000 (2019 - $21,000). There was no other remuneration paid to key management personnel during the twelve months ended December 31, 2020. As at December 31, 2020, there were no amounts due (December 31, 2019 - $Nil) within accrued liabilities and accounts payable to key management personnel or directors.

10. Financial Instruments

The Company is exposed to various financial instrument risks and assesses the impact and likelihood of this exposure. These risks include credit risk, market risk, interest rate risk, foreign currency risk and liquidity risk. Where material, these risks are reviewed and monitored by the Board of Directors.

Please refer to Note 7 of the accompanying consolidated financial statements for further details.

11. Significant accounting estimates and judgments

The preparation of these financial statements requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. These consolidated financial statements include estimates which, by their nature, are uncertain. 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 and future periods if the revision affects both current and future periods. These estimates are based on historical experience, current and future economic conditions and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

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

Significant accounting estimates include:

i. The measurement of deferred income tax assets and liabilities. ii. The valuation of listing expense.

Significant accounting judgments include:

i. The evaluation of the Company’s ability to continue as a going concern. ii. The determination of control in business acquisitions.

12. Issued and Outstanding Common Shares

The following table summarizes the outstanding share capital as of the date of the MD&A:

	Number of	Number of
	options/warrants issued	issued or issuable shares
Common shares	-	67,328,936
Stock options	-	-
Share purchase warrants	-	-

There were no transactions related to options, warrants, or shares over the year ended December 31, 2020.

13. Proposed Transactions

On January 11, 2021, the Company announced that it has initiated a review of the current capital structure of the Company and available financing options in the context of the current market. Subject to the results of the review, and the availability of financing, the Company intends to consolidate its common share capital on up to a twenty-for-one basis to make the Company more attractive to prospective investors. A decision to complete a consolidation has not been reached at this time, and the completion of any consolidation is subject to the approval of the Canadian Securities Exchange. The Company will provide further information as it becomes available.

14. Disclosure Controls and Procedures and Internal Controls Over Financial Reporting

The Company has exercised reasonable diligence, the filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the filings.

The Company has exercised reasonable diligence, the financial statements together with the other financial information included in the filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the filings.

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15. Forward Looking Information

Certain statements contained in this MD&A constitute forward-looking statements within the meaning of applicable securities laws including, among others, statements made or implied relating to the Company’s objectives including but not limited to, strategies to achieve those objectives, management’s beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts. Forward-looking statements generally can be identified by words such as “objective”, “may”, “will”, “expect”, “likely”, “intend”, “estimate”, “anticipate”, “believe”, “should”, “plans” or similar expressions suggesting future outcomes or events. Such forward-looking statements are not guarantees of future performance and reflect management’s current beliefs based on information currently available.

Such statements involve estimates and assumptions that are subject to a number of known and unknown risks, uncertainties and other factors inherent in the business of the Company, and other materials filed with the securities regulatory authorities from time to time which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Those risks and uncertainties include but are not limited to: the ability of the Company to fund the capital and operating expenses necessary to achieve the business objectives of the Company; the dependence on key personnel; and the ability to access capital markets.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date such statements were made and readers are advised to consider such forward-looking statements in light of the risks set forth above. Except as required by law, the Company assumes no obligation to update or revise any forward-looking statements to reflect new information or the occurrence of future events or circumstances.

16. Corporate Directory

Head Office

WSM Ventures Corp. Suite 2200, 885 West Georgia Street Vancouver, BC, V6C 3E8

Legal Counsel

Cassels Brock & Blackwell LLP Suite 2200 - 885 West Georgia Street Vancouver, BC, V6C 3E8

Officers and Directors

Aleem Nathwani (Chief Executive Officer & Director) David Ebert (Chief Financial Officer) Anthony Alvaro (VP Business Development & Director) Darren Devine (Director) Jon Malach (Director)

Auditors

Manning Elliott LLP 1700 – 1030 West Georgia Street Vancouver, BC, V6E 2Y3

Transfer Agent

Members of the Audit Committee

Darren Devine (Chair) Jon Malach Anthony Alvaro

Computershare Trust Company 3[rd] Floor – 510 Burrard Street Vancouver, BC, V6C 3B9

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