ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
GENERAL
Blue
Eagle Lithium Inc. (“the company”) is a Nevada corporation that was incorporated on July 30, 2009. The company was
initially incorporated under the name “Wishbone Pet Products Inc.” with the intent to commence business operations
by developing, manufacturing, marketing, and selling dog waste removal devices.
Effective
July 20, 2018, the company changed its name to “Blue Eagle Lithium Inc.” and affected a 20-for-1 forward split of
its common stock by a majority vote of the shareholders. See Item 5.03 filed on Form 8-K filed July 26, 2018 for more details.
Effective
August 9, 2018, the company entered into a property assignment agreement (“the Property Purchase Agreement”) between
Blue Eagle Lithium Inc., and Oriental Rainbow Group Limited, pursuant to which the Company acquired 200 mineral claims or 4,000
Acres in the Railroad Valley of Nevada. The parties agreed on a purchase price for the 200 mineral claims, which was paid in by
the Company issuing and delivering to Oriental Rainbow Group Limited 500,000 restricted shares in the common stock of the capital
of the company as well as a further Issuance to Plateau Ventures LLC of 300,000 restricted shares as follows; 100,000 restricted
shares upon the effective date, 100,000 restricted shares ninety (90) days following the effective date and a final 100,000 restricted
shares one hundred and eighty (180) days. See Exhibit 10.2 - Property Purchase Agreement filed on Form 8-K filed August 16, 2018
for more details.
Effective
August 14, 2018, Rami Tabet (“Tabet”) and Rupert Ireland (“Ireland”) entered into a Stock Purchase Agreement
(the “Stock Purchase Agreement”), which provided for the sale by Tabet to Ireland of 40,000,000 shares (the “Shares”)
of Common Stock, $0.0001 par value (“Common Stock”), of the Company for a purchase price of $100,000. The transfer
of the Shares to Ireland was effective on August 14, 2018. Upon his acquisition of the Shares, Ireland became the holder of a
majority (approximately 53.3%) of the outstanding shares of Common Stock of the Company, which is sufficient ownership to give
him the power to elect all of the members of our Board of Directors. Tabet owned no shares of Common Stock immediately after giving
effect to the sale of the Shares to Ireland. For more details see Exhibit 10.1 – Share Purchase Agreement filed on Form
8-K filed August 16, 2018 for more details.
Effective
August 20, 2018, Mr. Peter Roderick Murray (“Mr. Murray”) was appointed and accepted the opportunity to serve as an
additional member on the Board of Directors, Mr. Murray was also appointed by the Board, and accepted the opportunity to serve,
as the Company’s Chief Operating Officer (“COO”) on a consultancy basis. Pursuant to Mr. Murray’s appointment
as COO and a director of the Board, the Company and Mr. Murray entered into a consulting agreement effective as of August 20,
2018. See Item 5.02 filed on form 8-K filed August 23, 2018 for more details.
The
company maintains its statutory resident agent’s office at 1859 Whitney Mesa Drive, Henderson, Nevada, 89014 and its business
office is located at 2831 St Rose Parkway, Suite 200, Henderson, NV, 89052. The company’s office telephone number is (702)
889-3369.
The
company is authorized to issue up to 200,000,000 shares of Common Stock with a par value of $0.0001 per share, of which 76,183,855shares
of Common Stock are currently issued and outstanding as at December 13, 2018.
The
company has not been involved in any bankruptcy, receivership or similar proceedings. There have been no material reclassifications,
merger consolidations or purchase or sale of a significant amount of assets not in the ordinary course of the company’s
business.
RESULTS
OF OPERATIONS
Our
financial statements have been prepared assuming that we will continue as a going concern and, accordingly, do not include adjustments
relating to the recoverability and realization of assets and classification of liabilities that might be necessary should we be
unable to continue in operation. We expect we will require additional capital to meet our long term operating requirements. We
expect to raise additional capital through, among other things, the sale of equity or debt securities.
Results
of Operations for the Three and Six month period ended October 31, 2018 and 2017
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For the three months
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For the six months
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ended October 31,
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ended October 31,
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2018
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2017
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2018
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2017
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OPERATING EXPENSES
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Amortization
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$
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395
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$
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-
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$
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395
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$
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-
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Consulting fees
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76,000
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-
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76,250
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-
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Management fees
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148,950
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-
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148,950
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-
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General & administrative expenses
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18,377
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2,119
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25,052
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4,064
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Marketing and promotional expenses
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78,873
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-
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78,873
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-
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Mineral exploration expenses
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32,500
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-
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32,500
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-
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Professional fees
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17,587
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3,075
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20,312
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6,050
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TOTAL EXPENSES
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372,682
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5,194
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382,332
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10,114
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OPERATING LOSS
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$
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(372,682
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)
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$
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(5,194
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)
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$
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(382,332
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)
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$
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(10,114
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)
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OTHER EXPENSES
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Interest on loans
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4,539
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3,064
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9,078
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6,058
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NET INCOME/(LOSS) before income taxes
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$
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(377,221
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)
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$
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(8,258
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$
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(391,410
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$
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(16,172
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Income taxes
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-
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-
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-
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-
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NET LOSS AND COMPREHENSIVE LOSS
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$
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(377,221
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)
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$
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(8,258
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)
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$
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(391,410
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)
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$
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(16,172
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)
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Three
Month Period Ended October 31, 2018
Net
Loss.
During the three month periods ended October 31, 2018, the Company had a net loss of $377,221 as compared to the same
period for the prior fiscal period of $8,258 net loss. The increase loss of $368,963 was primarily due to losses relating to amortization,
consulting fees, management fees, general & administrative expenses, marketing and promotional expenses, mineral exploration
expenses, professional fees and interest on loans. This was due to the new business activities of the Company which include operational
costs relating to shares issuances to attract consultants and management services, start-up costs, marketing and promotional expenses
and maintaining mineral rights.
The
weighted average number of shares outstanding was 75,854,283 for the three months period ended October 31, 2018 and 75,000,000
for the three months period ended October 31, 2017.
Operating
Expenses.
The Company’s operating expenses during the three month periods ended October 31, 2018 were $372,682 compared
to $5,194 for the same period ended October 31, 2017. The increase of $367,489 which were primarily due to the increase in the
Company’s operations relating to shares issued to consultants for their services of $76,000, shares issued to corporate
management of $118,750, corporate management fees of $30,200, professional fees of $20,312, marketing and promotional expenses
of $78,873, mineral exploration expenses of $32,500, and general and administrative expenses of $25,052.
Six
Month Period Ended October 31, 2018
Net
Loss.
During the six month periods ended October 31, 2018, the Company had a net loss of $391,410 or $ (0.005) per share.
The loss was primarily due to losses relating to amortization, consulting fees, management fees, general & administrative
expenses, marketing and promotional expenses, mineral exploration expenses, professional fees and interest on loans, compared
to the same period for the prior fiscal period when the Company had a net loss of $16,172 or $(0.0002) per share, which was primarily
due to general & administrative expenses, professional fees and interest on loans.
The
weighted average number of shares outstanding was 75,427,142 for the six months period ended October 31, 2018 and 75,000,000 for
the six months period ended October 31, 2017.
Operating
Expenses.
The Company’s operating expenses during the six month periods ended October 31, 2018 were $382,332 compared
to $10,114 for the same period ended October 31, 2017. The increase of $372,218 which were primarily due to the increase in the
Company’s operations relating to shares issued to consultants for their services of $76,000, shares issued to corporate
management of $118,750, corporate management fees of $30,200, professional fees of $20,312, marketing and promotional expenses
of $78,873, mineral exploration expenses of $32,500, and general and administrative expenses of $25,052.
LIQUIDITY
AND CAPITAL RESOURCES
Six
Month Period Ended October 31, 2018
As
at October 31, 2018, our current assets were $12,973 compared to $15,618 as of April 30, 2018. As of October 31, 2018, our current
liabilities were $263,788 compared to $210,910 at April 30, 2018. Current liabilities as of October 31, 2018 were comprised of
$101,300 in loans payable, $50,000 in convertible notes payable and $112,488 in accounts payable and accrued liabilities. The
Company had working capital deficiency of $250,815 as of October 31, 2018 compared to working capital deficiency of $195,292 as
of April 30, 2018.
During
the six months ended October 31, 2018, the Company received net proceeds of $150,000 from private placements subscriptions. As
a result, stockholders’ equity (deficit) increased from $(195,292) as of April 30, 2018 to $208,048 as of October 31, 2018.
Cash
Flows from Operating Activities
We
have not generated positive cash flows from operating activities. For the six month period ended October 31, 2018, net cash flow
used in operating activities were $(150,387) consisting of a net loss of $391,410, an increase in accounts payable and accrued
interest of $52,878, and a $7,000 decrease in prepaid expenses. For the six month period ended October 31, 2017, net cash flow
used in operating activities were $(6,988). Non-cash adjustments to reconcile net income used in operating activities include
$194,750 for shares issued for consulting and management services.
Cash
Flows from Financing Activities
We
have financed our operations primarily from either the issuance of our shares of common stock under private placements or from
loans. In the six months period ended October 31, 2018, we received $150,000 in Common Stock subscription proceeds. In the comparative
period for fiscal 2017, we generated $6,961 in proceeds relating to shareholder loans.
Cash
Flows from Investing Activities
We
have spent $9,258 to develop our website and infrastructure during the six months period ended October 31, 2018 as compared to
$nil for the same time period for the prior for fiscal period in 2017.
PLAN
OF OPERATION AND FUNDING
In
order to evaluate the lithium resource potential of the Railroad Valley Property, the company, plans to develop a technical database
using cloud geographic information system (“GIS”) technology populated by publicly available geological, oil well,
water well and seismic data. This database will be used to produce proprietary surface, subsurface and GIS maps. Additional technical
studies addressing 3D mapping enhancement, age dating, source migration, burial history, glacial rebound, x-ray diffraction and
grain size will help fine tune the database. A budget of $350,000 will be required for personnel, third party consultancy fees
and software programs to complete these tasks by the end of October 2019.
The technical database development is planned to take place in parallel to the work programs and is designed
to fill technical data gaps and move the Railroad Valley understandings towards defensible resource estimates. Baseline surface
sampling has already been conducted at the property in Railroad Valley and the company
’
s
operations team has commenced field mapping, environmental impact assessments, shallow surface borehole planning, drilling and
evaluation, seismic acquisition program planning, 2D/3D seismic execution phase, processing and interpretation. We project that
a budget of $800,000 will be required for personnel, third party consultancy fees and equipment to complete these objectives by
the end of December 2019.
As
the data gaps are filled and resource potential quantified, we are planning for deeper borehole drilling, production borehole
drilling and surface production pond/equipment construction. Environmental Impact Studies and permissions will be updated to reflect
planning requirements. The planning process is anticipated to require $250,000 and the execution phases is anticipated to require
$5,000,000 to be ideally completed in December 2020.
We
estimate that the company will require approximately $6,400,000 to conduct the full exploration program over a two-year period,
which will be used to pay for prospecting and geological mapping, airborne surveys, lodging and food for workers, transportation
of workers to and from the work sites, fuel, pick-up truck rentals, assays, drilling, equipment rental, additional claim staking
and supervision.
Our
officers and directors have agreed to pay all costs and expenses of having the Company comply with the federal and state securities
laws (associated with being a public company) should the Company be unable to do so. We estimate that these costs will be approximately
$20,000 per year. Our officers and directors have also agreed to pay the other expenses of the Company, excluding those direct
costs and expenses of data gathering and mineral exploration, should the Company be unable to do so. To implement our business
plan, we will need to secure financing for our business development. We have no source of funding at this time and, to date, have
largely relied on private placement issuances of our Common Stock and debt for our operations. If we are unable to raise additional
funds to implement our business plan and satisfy our reporting obligations, there is a risk the company may be unable to continue
as a going concern and/or that investors will no longer have access to current financial and other information about our business
affairs. Additional funding to implement our full business plan or a partial exploration program will depend upon our ability
to secure loans or obtain either private or public financing. We have had some preliminary negotiations for funding that have
been unsuccessful and we currently have not undertaken any further negotiations. There is no assurance that we will be able to
obtain such funding on any terms or terms acceptable to us and if adequate funds are not secured in a timely fashion, then there
is a substantial risk that the Company will be unable to implement its business plan and/or continue as a going concern, which
could lead to significant diminution in the value of the Company or the failure of our business.
OFF-BALANCE
SHEET ARRANGEMENTS
As
of the date of this report, we do not have any 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 are material.
GOING
CONCERN
The
independent auditors’ report accompanying our audited April 30, 2018 financial statements contained an explanatory paragraph
expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared “assuming
that we will continue as a going concern,” which contemplates that we will realize our assets and satisfy our liabilities
and commitments in the ordinary course of business.
The
Company is an exploration stage company. Presently, the Company’s operations do not generate cash flow and its financial
success is dependent on management’s ability to discover economically viable mineral deposits. The mineral exploration process
can take many years and is subject to factors that are beyond the Company’s control. In order to continue as a going concern
and to meet its corporate objectives, which primarily consist of exploration work on its mineral properties, the Company will
require additional financing through debt or equity issuances or other available means. Although the Company has been partially
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 advantageous to the Company. As described under Plan of Operation and Funding above,
Management believes it may have the opportunity to raise equity capital as required in the long term but recognizes there will
be risks involved that may be beyond their control. The annual and interim financial statements do not include any adjustments
to the recoverability and classification of reduced asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue operations. These adjustments could be material. The Company is not subject to material externally-imposed
capital constraints.