Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Except for the historical information
presented in this document, the matters discussed in this Form 10-Q for the quarter ended May 31, 2019, contain forward-looking
statements which involve assumptions and our future plans, strategies, and expectations. These statements are generally identified
by the use of words such as “may,” “will,” “should,” “expect,” “anticipate,”
“estimate,” “believe,” “intend,” or “project,” or the negative of these words or
other variations on these words or comparable terminology. These statements are expressed in good faith and based upon a reasonable
basis when made, but there can be no assurance that these expectations will be achieved or accomplished.
Such forward-looking statements include
statements regarding, among other things, (a) our potential profitability and cash flows, (b) our growth strategies, (c) our future
financing plans, and (d) our anticipated needs for working capital. This information may involve known and unknown risks, uncertainties,
and other factors that may cause our actual results, performance, or achievements to be materially different from the future results,
performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” as well as in this Form 10-Q generally. Actual
events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including,
without limitation, the matters described in this Form 10-Q generally. In light of these risks and uncertainties, there can be
no assurance that the forward-looking statements contained in this filing will in fact occur. In addition to the information expressly
required to be included in this filing, we will provide such further material information, if any, as may be necessary to make
the required statements, in light of the circumstances under which they are made, not misleading.
Although forward-looking statements
in this report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and
unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from
those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements,
which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect
any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation.
Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities
and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial
condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying
assumptions prove incorrect, our actual results may vary materially from those expected or projected.
Except where the context otherwise
requires and for purposes of this Form 10-Q only, “we,” “us,” “our,” “Company,”
“our Company,” and “MCTC” refer to “MCTC Holdings, Inc.”.
Overview
The following discussion and analysis
of our financial condition and results of operations (“MD&A”) should be read in conjunction with our financial
statements and the accompanying notes to the financial statements included in this Form 10-Q.
The MD&A is based on our financial
statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent
assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed
to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions
.
Description of Business
We were formed as a wholly-owned subsidiary
of New Energy Technologies, Inc. New Energy spun off its issued and outstanding shares to New Energy’s shareholders on December
18, 2007. We were incorporated under the name MultiChannel Technologies Corporation on February 28, 2005 in the State of Nevada,
and changed to MicroChannel Technologies Corporation, on April 4, 2005.
On or about June 27, 2018 we changed
domiciles from the State of Nevada to the State of Delaware and thereafter reorganized under the Delaware Holding Company Statute
Delaware General Corporation Law Section 251(g). On or about July 12, 2018, two subsidiaries were formed for the purpose of effecting
the reorganization. We incorporated MCTC Holdings, Inc. and MCTC Holdings Inc. incorporated MicroChannel Corp.. We then effected
a merger involving the three constituents and under the terms of the merger we were merged into MicroChannel Corp., with MicroChannel
Corp. surviving and our separate corporate existence ceasing. Following the merger MCTC Holdings, Inc. became the surviving publicly
traded issuer and all of our assets and liabilities were merged into MCTC Holdings, Inc.’s wholly owned subsidiary MicroChannel
Corp.. Our shareholders became the shareholders of MCTC Holdings, Inc. on a one for one basis.
After the current quarter in this report
ended, on June 7, 2019, there was a change of control for MCTC Holdings Inc. in which the subsidiary Microchannel Corp. was spun
out to the prior shareholders and is no longer part of MCTC Holdings, Inc.
The Company is not currently engaged in any business operations.
It is, however, in the process of attempting to identify, locate, and if warranted, acquire new commercial opportunities.
Employees
As of May 31, 2019, we did not have
any employees.
Results of Operations
For the Three months Ended May 31, 2019 and May 31,
2018
The Professional fees decreased by $10,501,
from $11,001 for the three months ended May 31, 2018, to $500 for the three months ended May 31, 2019. The Consulting fees decreased
by $4,000, from $4,000 for the three months ended May 31, 2018, to $0 for the three months ended May 31, 2019. General & Administrative
expenses increased by $2,776, from $2,549 for the three months ended May 31, 2018, to $5,325 for the three months ended May 31,
2019. The decline in Operating Expenses was due to a decrease in business operations in 2019.
The interest expense was $29,920 and
$2,644 for the three months ended May 31, 2018 and May 31, 2019, respectively, is related to a note payable that the Company issued
on January 9, 2014 in the amount of $70,000, to a shareholder of the Company and a multiple notes payable incurred from May 31,
2018 – May 31, 2019 in the amount of $69,058, to related parties. On May 8, 2018, $13,000 of the debt due to Related Parties
was converted into shares of common stock. On May 31, 2019 a legal expense of the Company was cancelled, along with the corresponding
note payable due to Related Parties of $5,000, as the funds were not required. As of May 31, 2019, $51,058 is due to Related Parties
and these notes bear interest at an annual rate of 10%. The outstanding balance of principal and accrued interest may be prepaid
on both without penalty. As of May 31, 2019, there cumulative interest due of $3,449 related to these notes. The $70,000 note payable
to a shareholder, bears interest at an annual rate of 7%, which then increased to 10% after it was in default. Principal and accrued
interest on the note payable of the company were due on January 9, 2016, with a default annual rate of 10% interest after that
date. As of May 31, 2019, there cumulative interest due of $33,541 related to this note.
The Company also recognized a gain of
$10,000 on the cancellation of debt in the three months ended May 31, 2019.
For the Nine months Ended May 31, 2019 and May 31,
2018
The Professional fees decreased by $16,642,
from $31,996 for the nine months ended May 31, 2018, to $15,354 for the nine months ended May 31, 2019. General & Administrative
expenses decreased by $1,022, from $10,936 for the nine months ended May 31, 2018, to $9,914 for the nine months ended May 31,
2019. The decline in Operating Expenses was due to a decrease in business operations in 2019.
The interest expense was $33,521 and
$7,827 for the nine months ended May 31, 2018 and May 31, 2019, respectively, is related to a note payable that the Company issued
on January 9, 2014 in the amount of $70,000, to a shareholder of the Company and a multiple notes payable incurred from May 31,
2018 – May 31, 2019 in the amount of $69,058, to related parties. On May 8, 2018, $13,000 of the debt due to Related Parties
was converted into shares of common stock. On May 31, 2019 a legal expense of the Company was cancelled, along with the corresponding
note payable due to Related Parties of $5,000, as the funds were not required. As of May 31, 2019, $51,058 is due to Related Parties
and these notes bear interest at an annual rate of 10%. The outstanding balance of principal and accrued interest may be prepaid
on both without penalty. As of May 31, 2019, there cumulative interest due of $3,449 related to these notes. The $70,000 note payable
to a shareholder, bears interest at an annual rate of 7%, which then increased to 10% after it was in default. Principal and accrued
interest on the note payable of the company were due on January 9, 2016, with a default annual rate of 10% interest after that
date. As of May 31, 2019, there cumulative interest due of $33,541 related to this note.
The Company also recognized a gain of
$10,000 on the cancellation of debt in the nine months ended May 31, 2019.
Net cash used in operating activities
was $28,626 for the prior nine months ended May 31, 2018, compared to net cash used in operating activities of $33,156 for the
current nine months ended May 31, 2019. Based on our current level of expenditures, additional funding is required to cover our
operations for at least the next twelve months. The company is in the process of attempting to identify, locate, and if warranted,
acquire new commercial opportunities.
Liquidity and Capital Resources
As of the year ended August 31, 2018,
we had an accumulated deficit of $738,004 and cash and cash equivalents of $4,652. As of the current quarter ended May 31, 2019,
we had an accumulated deficit of $761,099 and cash and cash equivalents of $0.
In January 2014, we received funding
by issuing a $70,000 note payable to a shareholder. The $70,000 note payable was due on January 9, 2016 and has not been repaid
as of the date of this filing and is thus in default as of May 31, 2019. As of May 31, 2019, $70,000 remained outstanding.
In October 2017 – May 31, 2019,
the Company incurred a related party debt in the amount of $11,000 to an entity related to the legal custodian of the Company for
professional fees. The debt was non-interest bearing. As of May 31, 2019, a legal custodian of the Company paid this expense directly
and $0 is owed.
In May 31, 2018 – May 31, 2019,
the Company issued a $39,399 in multiple notes payable to an entity related to the legal custodian of the Company for funds loaned.
The notes payable bear interest at an annual rate of 10% and are convertible to common shares of the Company at $0.0001 per share.
On May 8, 2018, $13,000 of the principal balance on notes payable was converted to common stock. As of May 31, 2019, $26,399 of
the principal balance remained outstanding on the notes payable and $2,550 in accrued interest.
In August 2018 – May 31, 2019,
the Company issued $29,649 in multiple notes payable to a legal custodian of the Company for funds loaned. The notes bear interest
at an annual rate of 10% and are payable upon demand. On May 31, 2019 a legal expense of the Company was cancelled, along with
the corresponding note payable of $5,000 due to related parties, as the funds were not required. As of May 31, 2019, $24,649 of
the principal balance remained outstanding on the notes payable and $899 in accrued interest.
Other Contractual Obligations
As of the nine months ended May 31,
2019, we do not have any contractual obligations other than the $70,000 note payable to a shareholder and $51,058 in notes payable
to related parties, a legal custodian of the company and an entity related to the legal custodian of the Company, with related
accrued interest on the notes. The $70,000 note payable was due on January 9, 2016 and has not been repaid as of this filing and
is thus in default.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Recently Issued Accounting Pronouncements
We review new accounting standards as
issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable
to the Company, we have not identified any standards that we believe merit further discussion. We do not expect the adoption of
any recently issued accounting pronouncements to have a significant impact on our financial position, results of operations, or
cash flows.