EVBC Evolution Blockchain Group Inc (CE)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This quarterly report contains “forward-looking statements”. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, statements regarding: the plans, strategies and objections of management for future operations; the future plans or business of our company; future economic conditions or performance; and any statements of assumptions underlying any of the foregoing.

Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. Except as required by applicable law, we do not intend, and undertake no obligation, to update any forward-looking statement.

Although we believe the expectations reflected in the forward-looking statements in this report are reasonable, actual results could differ materially from those projected or assumed in any forward-looking statements. All forward-looking statements are subject to change and inherent risks and uncertainties. The factors impacting these risks and uncertainties include, but are not limited to:

As used in this quarterly report on Form 10-Q, the terms “ we ”, “ us ”, “ our ”, the “ Company ” and “ Evolution ” refer to Evolution Blockchain Group Inc., a Nevada corporation, and our wholly-owned subsidiary, ORC Exploration LLC, a Nevada corporation, unless otherwise specified.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We were incorporated under the laws of the State of Nevada on April 9, 2014. Our fiscal year end is April 30. Following incorporation, we commenced the business of a mineral exploration company. On May 8, 2014, we incorporated our wholly-owned subsidiary, ORC Exploration LLC, for the purposes of mineral exploration. On May 20, 2014, we acquired an option to acquire a 100% legal and beneficial ownership interest in the Elizabeth mineral claim, located in the Omineca Mining District in the central part of the Province of British Columbia. Our initial mining exploration program, which was scheduled to commence in the second quarter of the fiscal year ending April 30, 2015, was delayed until the fourth quarter due to forest fire concerns.

Due to a dearth of available financing options, which has affected many junior mining companies in recent years, we subsequently ran out of funds to proceed with our planned exploration program. As a result, our management decided to seek out other potential business operations and management skills for the continuation of our business. In connection therewith, effective June 8, 2015, our chief executive officer (“CEO”) and sole director, Jose Montes, resigned all positions as an officer and director of our company, and we appointed Mike Gilliland to serve as our sole officer and director. Effective March 14, 2016, Mr. Gilliland resigned all positions as an officer and director of our company, and we appointed Devon Loosdrecht to serve as our sole officer and director. Effective October 2, 2017, Mr. Loosdrecht resigned all positions as an officer and director of our company and we appointed Lawrence Stephenson to serve as our sole officer and director.

4

On April 8, 2016, we entered into an arrangement agreement (the “Arrangement Agreement”) with Garmatex Technologies, Inc. (“GTBC”), a private company incorporated under the laws of the Province of British Columbia, pursuant to which we agreed to acquire all of the outstanding securities of GTBC in exchange for the issuance of equivalent securities of our company by way of a statutory arrangement (the “Arrangement”) under the Business Corporations Act (British Columbia). The Arrangement Agreement contained customary representations, warranties, and conditions to closing. The closing of the Arrangement Exchange (the “Closing”) would only occur once we complete a name change, forward stock-split and was provided with audited financial statements from the Company, with such financial statements being prepared by an independent accounting firm registered with the Public Company Accounting Oversight Board (PCAOB).

Effective August 15, 2016, we completed a merger with our wholly-owned subsidiary, Garmatex Holdings . Ltd., a Nevada corporation, which was incorporated solely to effect a change in our name. As a result, we have changed our name from “Oaxaca Resources Corp.” to “Garmatex Holdings Ltd.”. Also, effective August 15, 2016, we effected a twelve and one-half to one forward stock split of our authorized and issued and outstanding common stock. As a result, our authorized capital of common stock increased from 90,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001 to 1,125,000,000 shares of common stock with a par value of $0.001 and 10,000,000 shares of preferred stock with a par value of $0.001 and our previously outstanding 2,520,000 shares of common stock increased to 31,500,000 shares of common stock outstanding. There are no shares of preferred stock currently outstanding. We changed our name and effected forward-split as per the terms and conditions of the Arrangement Agreement.

We entered into and executed a non-exclusive Sublicense Agreement dated March 8, 2017 and the Garmatex Trademark & Technology License Agreement dated March 9, 2017 (collectively, “Master Sublicense Agreement”) with Garmatex Technologies, Inc. a company formed under the laws of the Province of British Columbia, Canada (“GTBC”) whereby we were granted various Intellectual Property Rights related to the design, development and manufacturing of various scientifically-engineered fabric technologies and performance technologies; including a patented T3® design, Bact-Out®, CoolSkin®, WarmSkin®, Kottinu™, ColdSkin™, SteelSkin™, Satinu™, CamoSkin™, RecoverySkin™, SlimSkin™, AbsorbSkin™ and IceSkin™ (collectively the foregoing are referred to hereinafter as the “Licensed IP”).

Pursuant to the terms of the agreement, we acquired the rights to further develop, commercialize, market and distribute certain proprietary inventions and know-how related to the Products. In exchange, we agreed to the following terms and conditions: (i) the Parties shall enter into Amendment No. 1 to the Arrangement Agreement; and (ii) we agreed to cancel various loans made pursuant to a Loan Agreement between us and GTBC in the aggregate amount of $953,988.00CDN.

Effective on September 15, 2017 the Arrangement Agreement has been terminated between our Company and GTBC.

On January 25, 2018, the Company formed a wholly-owned subsidiary, Evolution Blockchain Group Inc., which was incorporated in the State of Nevada, United States.

Effective February 28, 2018, the Company effected a reverse stock split on the basis of 100:1. As such, the Company’s authorized capital was decreased from 1,125,000,000 shares of common stock, par value $0.001 to 11,250,000 shares of common stock, par value $0.001 and all shares of common stock issued and outstanding were decreased on the basis of one (1) new share for each one hundred (100) old shares. These consolidated financial statements give retroactive effect to such reverse split and all share and per share amounts have been adjusted accordingly.

On February 13, 2018, the Company changed its name from Garmatex Holdings Ltd. to Evolution Blockchain Group Inc.

5

Our Business

We plan to provide performance fabric solutions in virtually every sector that has textile applications. Our primary strategy is to deploy our performance fabrics as a premium ingredient brand, similar to Gore-Tex® in the outerwear market, or akin to Intel® in the computer space. We believe that our future fabrics will be superior in performance relative to current market “standards” and have a wide range of applications in multiple clothing and textile categories including, but not limited to, sports apparel, medical, sleepwear, linens, undergarments, military, designer wear, protective, industrial and first responders.

Our business model is to co-develop fabric with manufacturers to obtain exclusive licenses of technology and purchase fabric technology to build on our technology portfolio. We plan to commercialize these inventions by selling bolts of fabric directly to retailers and wholesalers. We plan to control the proprietary process of the technology for IP protection and do not intend to own any manufacturing facilities, which will effectively allow us to scale.

We are in the market to further acquire technologies from inventors looking for a commercialization partner.

Currently, we do not have a source of revenue. We are not able to fund our cash requirements through our current operations. Historically, we have been able to raise a limited amount of capital through private placements of our equity stock, but we are uncertain about our continued ability to raise funds privately.

Results of Operations for the period ended January 31, 2018.

We generated no revenues for the period ending January 31, 2018 and 2017. We do not expect to generate revenues until we have established a new business plan and operations and successfully implemented such business plan.

Three months ended January 31, 2018 compared to three months ended January 31, 2017

We incurred operating expenses of $50,220 for the three months ended January 31, 2018, compared with operating income of $4,053 for the three months ended January 31, 2017. The most significant changes in operating expenses comprised of legal fees of $11,985 (2017 - $2,690) a difference of $9,295 or 345.5%, consulting fees of $30,000 (2017 - $2,271) a difference of $27,729 or 1221%, and foreign exchange of $2,707 (2017 - ($15,604)) a difference of $18,311 or (117.3%). The difference between periods was attributable to the additional legal fees for the current quarter ending related to the BC Securities Inquiry, consulting fees accrued per the investor relations agreement with Core IR, and foreign exchange adjustments relating to the large promissory note receivable balance in the comparable period.

We incurred other expenses of $27,142 for the three months ended January 31, 2018, as compared to other income of $7,361 for the three months ended January 31, 2017. Our other expenses consisted of interest expense of $1,937 (2017 - $616) a difference of $1,321 or 214.4%, interest income of $nil (2017 - $7,977) a difference of $7,977 or 100%, and accretion expense of $25,205 (2016 - $nil) a difference of $25,205 or 100%. Interest expense for 2018 and 2017 included $1,937 and $616, respectively, to reflect the interest accrued on promissory notes issued during the periods.

We incurred a net loss of $77,362 for the three months ended January 31, 2018, as compared with a net revenue of $11,414 for the prior year three-month period. The reason for the increase in loss is due largely to the foreign exchange loss of $2,707 (2017 – ($15,504)), legal fees of $11,985 (2017 - $2,690), and interest income of $nil (2017 - $7,977).

Nine months ended January 31, 2018 compared to nine months ended January 31, 2017

We incurred operating expenses of $179,516 for the nine months ended January 31, 2018, compared with operating expenses of $72,028 for the nine months ended January 31, 2017. The most significant changes in operating expenses comprised of consulting fees of $88,789 (2017 - $18,524) a difference of $70,265 or 379.3%, legal fees of $36,018 (2017 - $17,113) a difference of $18,905 or 110.5%, and audit fees of $23,713 (2017 - $13,726) a difference of $9,987 or 72.8%. The difference between periods was attributable to the additional legal fees for the current quarter ending related to the Arrangement Agreement with the Company, the investor relations agreement with Core IR, and other matters relating to legal filings required. Audit fees also increased due to the changeover of auditors for the year ending April 30, 2017.

6

We incurred other expenses of $81,477 for the nine months ended January 31, 2018, as compared to other loss of $16,839 for the nine months ended January 31, 2017. Our other expenses consisted of interest expense of $5,777 (2017 - $1,847) a difference of $3,930 or 212.8%, interest income of $nil (2017 - $18,686) a difference of $18,686 or (100%), and accretion expense of $75,616 (2017 - $nil) a difference of $75,616 or 100%. Interest expense for 2018 and 2017 included $5,777 and $1,847, respectively, to reflect the interest accrued on promissory notes issued during the periods.

We incurred a net loss of $260,993 for the nine months ended January 31, 2018, as compared with a net loss of $55,189 for the prior year nine-month period. The reason for the increase in loss is due largely to accretion expense recorded on convertible debt of $75,616 (2017 - $nil), consulting fees of $88,789 (2017 - $18,524), legal fees of $36,018 (2017 - $17,113), and audit and accounting fees of $23,713 (2017 - $13,726). 

Liquidity and Capital Resources

As of January 31, 2018, we had total current assets of $3,144, consisting of cash in the amount of $3,144 and prepaid expenses of $nil. We had current liabilities of $283,490 as of January 31, 2018. Accordingly, we had a working capital deficit of $280,346 as of January 31, 2018.

As of April 30, 2017, we had total current assets of $31,809, consisting of cash in the amount of $27,880, prepaid expenses of $3,844 and due from related party of $85. We had current liabilities of $40,940 as of April 30, 2017. Accordingly, we had a working capital deficit of $9,131 as of April 30, 2017.

Operating Activities

Operating activities used $20,814 in cash for the nine months ended January 31, 2018 as compared to $48,467 used for the prior nine months ended January 31, 2017. The decrease in cash used for operating activities was attributable to the increase in net loss for the current period offset by non-cash adjustments which occurred during the current nine months ending.

Investing Activities

Investing activities used cash of $nil for the nine months ended January 31, 2018 as compared to $323,028 for the nine months ended January 31, 2017. The decrease in the use of cash was due to the advance of funds to GTBC in the prior year.

Financing Activities

Financing activities used cash of $3,656 for the nine months ended January 31, 2018, as compared to $369,530 for the nine months ended January 31, 2017, which comprised of $nil in due to related party payables offset by a promissory note repayment $3,656 (CDN$5,000) compared to $314,530 funds received for common stock in 2017.

Based upon our current financial condition, we do not expect to have sufficient cash to operate our business at the current level for the next twelve months. We intend to fund future operations through new business sales and debt and/or equity financing arrangements, which may be insufficient to fund expenditures or other cash requirements. We plan to seek additional financing in a private equity offering to secure funding for operations. There can be no assurance that we will be successful in raising additional funding. If we are not able to secure additional funding, the implementation of our future business plan will be impaired. There can be no assurance that such additional financing will be available to us on acceptable terms or at all.

7

Outstanding Share Data

On January 15, 2018, the Board of Directors approved a reverse stock split of the Company’s issued and authorized shares of common and preferred stock on the basis of 100 old shares for one (1) new share. The $0.001 par value of the common and preferred shares remained unchanged. This MD&A and the accompanying consolidated financial statements give retroactive effect to such reverse split and all share and per share amounts have been adjusted accordingly.

As of January 31, 2018, there were 383,855 shares of common stock outstanding. In addition, as of January 31, 2018, there were 20,956 share purchase warrants outstanding and 5,000 shares of common stock were issuable upon conversion of the convertible loan in the aggregate principal amount of $100,000 at the conversion price of $20.00 per share.

As of March 16, 2018, there were 383,864 shares of common stock outstanding.

Going Concern

Our financial statements have been prepared assuming that we will continue as a going concern which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred cumulative losses of $1,291,124 through January 31, 2018, expect to incur further losses in the development of our new business and have been dependent on funding operations through the issuance of convertible debt and private sale of equity securities. These conditions raise substantial doubt about our ability to continue as a going concern. Management’s plans include continuing to finance operations through the private or public placement of debt and/or equity securities and the reduction of expenditures. However, no assurance can be given at this time as to whether we will be able to achieve these objectives.

As discussed in the notes to our unaudited consolidated financial statements, we have no established source of revenue. This has raised substantial doubt for our auditors about our ability to continue as a going concern. Without realization of additional capital, it would be unlikely for us to continue as a going concern.

Off Balance Sheet Arrangements

We have performed an analysis of the related party loan balance under ASC 810-10, and has determined that the loan represents a variable interest in GTBC. GTBC is a variable interest entity (“VIE”) and depends on the Company, as well as additional parties, for continuing financial support in order to maintain operations. However, the Company cannot make key operating decisions considered to be most significant to the VIE, and is therefore not considered to be the primary beneficiary. Our maximum exposure to loss approximates to the carrying value of the due from related party loan balance on the Balance Sheet at January 31, 2018.

Other than noted above, we have no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.

Critical Accounting Policies

Our interim condensed consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States (“GAAP”). Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

There have been no significant changes in the critical accounting policies and estimates described in our Annual Report on Form 10-K for the year ended April 30, 2017 as filed with the SEC on October 31, 2017.

8

Recently Adopted Accounting Pronouncements

For fiscal years beginning after December 15, 2016:

In November 2015, the FASB issued ASC 2015-17 “ Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes” guidance simplifying the presentation of deferred tax liabilities and assets requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. Early adoption is permitted. The standard became effective for the Company on May 1, 2017. The adoption of this standard did not have any effect on its financial condition, results of operations and cash flows.

In August 2014, the FASB issued ASC 2014-15 “ Presentation of Financial Statements – Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” new guidance which provides details on when and how to disclose going concern uncertainties. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year and to provide certain footnote disclosures if conditions or events raise substantial doubt about an entity’s ability to continue as a going concern. Early adoption is permitted. The standard became effective for the Company on May 1, 2017. The adoption of this standard did not have any effect on its financial condition, results of operations and cash flows.

Recently Issued Accounting Pronouncements

For fiscal years beginning after December 15, 2017 :

In August 2016, the Financial Accounting Standards Board (“FASB”) issued ASC 2016-15 “ Statement of Cash Flows (Topic 230) – Classification of Certain Cash Receipts and Cash Payments” . These amendments are intended to provide guidance for each of the eight issues included, to reduce the current and potential future diversity in practice. Early adoption is permitted including in an interim period.

In January 2016, the FASB issued ASC 2016-01 “ Financial Instruments – Overall (Subtopic 825-10) – Recognition and Measurement of Financial Assets and Liabilities” a new standard related primarily to accounting for equity investments, financial liabilities where the fair value option has been elected, and the presentation and disclosure requirements for financial instruments. There will no longer be an available-for-sale classification and therefore, no changes in fair value will be reported in other comprehensive income for equity securities with readily determinable fair values. Early adoption is permitted.

For fiscal years beginning after December 15, 2018:

In July 2017, the Financial Accounting Standards Board (“FASB”) issued ASC 2017-11 “ Earnings Per Share (Topic 260), Distinguishing Liability from Equity (Topic 480), and Derivatives and Hedging (Topic 815) – (i) Accounting for Certain Financial Instruments with Down Round Features (ii) Replace of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments. ” The amendments in (i) change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features and to help clarify existing disclosure requirements. The amendments in (ii) recharacterize the indefinite deferral of certain provisions and do not have an accounting effect.

We are currently evaluating the impact of the above standards on our consolidated financial statements. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on our present or future consolidated financial statements.

9