DTS8 COFFEE COMPANY, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these unaudited consolidated financial statements

DTS8 COFFEE COMPANY, LTD.

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

OCTOBERJULY 31, 2016 AND 2015

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

DTS8 Coffee Company, Ltd. (the "Company"“Company”) was incorporated in the State of Nevada on March 27, 2009. Effective January 22, 2013,2009 under the Company changed its name from Berkeley Coffee & Tea, Inc. to DTS8 Coffee Company, Ltd. On April 30, 2012, the Company acquired one hundred percent (100%)100% of the issued and outstanding capital stock of DTS8 Holdings Co., Ltd. (“DTS8 Holdings”), a corporation organized and existing since June 2008 under the laws of Hong Kong, and which owns DTS8 Coffee (Shanghai) Co., Ltd. (“DTS8 Coffee”), a wholly owned foreign subsidiary entity (“WOFE”) corporation organized and existing in Shanghai since January 19, 2009, under the laws of the People’s Republic of China.

In March 2013, the Company established a 100% owned subsidiary of DTS8 Coffee called DTS8 Coffee (Huzhou) Co. Ltd. (“DTS8 Huzhou”) in Huzhou, Zhejiang Province, China, which is approximately a two hour drive from Shanghai.China. DTS8 Huzhou is a coffee roaster equipped with the standard procedures to ensure that it meets regulatory requirements for food safety and sanitation in China. Effective May 1, 2016, the Company disposed of its former wholly-owned subsidiaries in China and incurred a loss in the amount of $117,034 to the statement of operations and comprehensive loss.

DTS8 Holdings, through its subsidiaries DTS8 Coffee and DTS8 Huzhou, is a gourmet coffee roasting, marketing and wholesale distribution company. The Company’s head office and coffee storage facility is located in Shanghai, China, and its coffee roasting facility is located in Nanxun Town, Huzhou, Zhejiang Province, China. The Company is in the business of roasting, marketing and selling gourmet roasted coffee to customers in Shanghai and other parts of China. It sells gourmet roasted coffee under the “DTS8 Coffee” label and other labels through distribution channels that reach consumers at restaurants, multi-location coffee shops, and offices.Suite 300, 1055 West Hastings Street, Vancouver, British Columbia, Canada, V6E 2E9.

NOTE 2 – BASIS OF PRESENTATION

The accompanying interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interimannual financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X as promulgated by the Securities and Exchange Commission (the “SEC”). In the opinion of management, the financial statements include all adjustments of a normal recurring nature necessary for a fair statement of the results for the periodsyears presented. Certain information and footnote disclosures normally included in financial statements prepared in conjunction with generally accepted accounting principles have been condensed or omitted as permitted by the rules and regulations of the United States Securities and Exchange Commission (“SEC”), although the Company believes that the disclosures contained in this report are adequate to make the information presented not misleading. The consolidated balance sheet information as of April 30, 2015 was derived from the consolidated audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended April 31, 2015. These consolidated financial statements should be read in conjunction with the annual consolidated audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2015, and other reports filed with the SEC.

The accompanying unaudited interim consolidated financial statements reflect all adjustments of a normal and recurring nature, which are, in the opinion of management, necessaryhave been prepared to present fairly the consolidated statements of financial position, resultsthe consolidated statements of operations and comprehensive loss, consolidated statements of changes in stockholders’ deficit and consolidated cash flows of the Company for the period ended July 31, 2016, for inclusion in the Company’s Form 10-Q for purposes of complying with the rules and regulations of the SEC as required by Article 8 of Regulation S-X. The accompanying interim periods presented. Theconsolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) using Company specific information where available and allocations and estimates where data is not maintained on the Company specific basis within its books and records. Due to the allocations and estimates used to prepare the financial statements, they may not reflect the financial position, cash flows and results of operations forof the Company in the future or its operations, cash flows and financial position.

The preparation of financial statements in accordance with US GAAP requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues, goodwill impairment and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of the Company’s financial statements; accordingly, it is possible that the actual results could differ from these periods are not necessarily comparable to, or indicativeestimates and assumptions and could have a material effect on the reported amounts of the Company’s financial position and results of any other interim period or for the fiscal year taken as a whole.operations.

NOTE 3 – GOING CONCERN UNCERTAINTY

The accompanying interim consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of the business. The Company has disposed of the majority of its assets, incurred material losses from operations.operations and has an accumulated deficit. At OctoberJuly 31, 2015,2016, the Company had a working capital deficit of $657,261$295,877 in addition to limited cash, limitedno revenue and unprofitabledisposition of its operations. For the sixthree months ended OctoberJuly 31, 2015,2016, the Company sustained net losses and generated negative cash flows from operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern for a reasonable period of time.concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is

contingent upon its ability to obtain additional financing and there is no assurance that the Company will be able to generate revenue and cash flow to meet its obligationsobtain such financings or obtain them on a timely basis.favorable terms.

DTS8 COFFEE COMPANY, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2016 AND 2015

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to assist in understanding the financial statements. The financial statements and notes are representations of the Company’s management, who are responsible for their integrity and objectivity. These accounting policies conform to US GAAP and have been consistently applied in the preparation of the financial statements.

Basis of Preparation

The accompanying interim consolidated financial statements have been prepared to present the consolidated statements of financial position, the consolidated statements of operations and comprehensive loss, consolidated statements of changes in stockholders’ deficit and consolidated cash flows of the Company for the three months ended July 31, 2016, and have been prepared in accordance with US GAAP.

Basis of Consolidation

The accompanying interim consolidated financial statements include the accounts of the Company, and its former direct and indirect wholly-owned subsidiaries DTS8 Holdings, Co., Ltd., DTS8 Coffee (Shanghai) Co., Ltd., and DTS8 Coffee (Huzhou) Co. Ltd.. All significant inter-company transactions and balances have beenwere eliminated upon consolidation.

Use of Estimates

In preparing financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues, goodwill impairment and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, bank indebtedness and accounts receivable. During the period ended July 31, 2016, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located in the United States of America, which management believes aren’t of high credit quality. With respect to accounts receivable, the Company extends credit based on an evaluation of the customer’s financial condition. The Company generally did not require collateral for accounts receivable and maintained an allowance for doubtful accounts of accounts receivable if necessary. As of July 31, 2016, the Company had no accounts receivable.

Cash and Cash Equivalents

Cash equivalents comprise certain highly liquid instruments with a maturity of three months or less when purchased. As at July 31, 2016 and April 30, 2016, cash and cash equivalents consist of cash only.

Receivables and Allowance for Doubtful Accounts

Trade accounts receivable are recorded at net realizable value and do not bear interest. The Company evaluates its allowance for doubtful accounts based upon knowledge of its customers and their compliance with credit terms. The evaluation process includes a review of customers’ accounts on a regular basis. The review process evaluates all account balances with amounts outstanding for more than 60 days and other specific amounts for which information obtained indicates that the balance may be uncollectible. As of July 31, 2016 and April 30, 2016, there was no allowance for doubtful accounts. Based on management’s best estimate of the amount of probable credit losses in accounts receivable. The Company does not have any off-balance-sheet credit exposure related to its customers. As of July 31, 2016, from the disposition of its operations during the year, the Company had no accounts receivable.

DTS8 COFFEE COMPANY, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2016 AND 2015

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED…)

Inventories

Inventories are stated at the lower of cost or market. The cost for inventories is determined using the first-in, first-out method. The cost includes all expenditures incurred in bringing the goods to the point of sale and putting them in a sellable condition. In assessingthe ultimate realization of inventories, management makes judgments as to future demand requirements compared to current or committed inventory levels. The Company estimates the demand requirements based on market conditions, forecasts prepared by its customers, sales contracts and orders in hand. In addition, the Company estimates net realizable value based on intended use, current market value and inventory aging analyses. The Company writes down inventories for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventories and their estimated market value based upon assumptions about future demand and market conditions. Inventories principally consist of green coffee beans, roasted coffee beans and packing supplies. As of July 31, 2016, from the disposition of its operations during the year, the Company had no inventory.

Property and Equipment

Property and equipment are recorded at cost. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use. Depreciation is provided on a straight-line basis over their estimated useful lives as set out below. Major remodels and improvements are capitalized. Maintenance and repairs that do not improve or extend the life of the respective assets are charged to expense as incurred. Upon sale or disposition, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount less proceeds from disposal is charged or credited to income.

Impairment of Long-Lived Assets

The Company accounts for impairment of property and equipment in accordance with Accounting Standards Codification (“ASC”) 360, “Accounting for Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of”, which requires the Company to evaluate a long-lived asset for recoverability when there is an event or circumstance that indicate the carrying value of the asset may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset or asset group is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition) and is measured as the excess of the carrying amount over the asset’s (or asset group’s) fair value. There was no impairment of long-lived assets for the period ended July 31, 2016.

Fair Value of Financial Instruments

ASC 820 “Fair Value Measurements and Disclosures”, adopted January 1, 2008, defines fair value, establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measures. The Company’s financial instruments include cash and cash equivalents, current receivables and payables, and derivative liabilities. These financial instruments are measured at their respective fair values. The three levels are defined as follows:

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value.

The Company has determined that certain convertible notes covered by these financial statements qualifies as derivative financial instruments under the provisions of FASBFinancial Accounting Standards Board (“FASB”) ASC Topic No. 815-40, “ Derivatives“Derivatives and Hedging – Contracts in an Entity’s Own Stock”. See Note 713 for more details.

DTS8 COFFEE COMPANY, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2016 AND 2015

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED…)

Estimating the fair value of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. The assumptions used to value the Company’s derivatives will have a direct effect on the fair values. In addition, valuation techniques are sensitive to changes in the trading market price of the Company’s common stock and its estimated volatility and interest rate changes and other variables or market conditions not within the Company’s control that can significantly affect management’s estimates of fair value and changes in fair value. Because derivative financial instruments are initially and subsequently carried at fair value, the Company’s net income may include significant charges or credits as these estimates and assumptions change.

The fair value of the derivative liabilities was determined using the Black-Scholes Model with any change in fair value during the period recorded in earnings as “Change in fair value of derivative liabilities”. Significant inputs used to calculate the fair value of the derivative liabilities include expected volatility, risk-free interest rate and dividend yield.

For cash, and cash equivalents, bank indebtedness, accounts receivables, prepaid expenses, and accounts payable and accruals, it is management’s opinion that the carrying values are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and if applicable, their stated interest rate approximates current rates available.

Management believes it is not practical to estimate the fair value of related party payables because the transactions cannot be assumed to have been consummated at arm’s length, the terms are not deemed to be market terms, there are no quoted values available for these instruments, and an independent valuation would not be practical due to the lack of data regarding similar instruments, if any, and the associated potential costs.

Revenue Recognition

The Company derives its revenue from the sale of roasted coffee. Revenue is recognized when persuasive evidence of an arrangement exists, delivery occurs, the sales price is fixed or determinable and collectability is reasonably assured. Coffees are considered delivered when title and risk have been transferred to the customer. Retail sales are recorded when payment is tendered at the point of sale. Wholesale sales are recorded upon delivery of coffee to the customers. In the People’s Republic of China, a value added tax (“VAT”) of 17% on invoiced amount is collected on behalf of tax authorities. Revenues represent the invoiced value of goods sold, net of VAT.

Advertising and Promotion Costs

Advertising and promotion costs are expensed as incurred. For the period ended July 31, 2016, the Company did not incur any advertising costs.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes pursuant to ASC 740 “Income Taxes”. ASC 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The provision for income taxes represents current taxes payable net of the change during the period in deferred tax assets and liabilities.

Comprehensive Income

The Company has adopted ASC 220, “Reporting Comprehensive Income”, which requires inclusion of foreign currency translation adjustments, reported separately in its statement of stockholders’ equity, in other comprehensive income. During the periods presented, other comprehensive income includes cumulative translation adjustment from foreign currency translation.

DTS8 COFFEE COMPANY, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2016 AND 2015

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED…)

Foreign Currency Translation

The Company’s functional and reporting currency is United States Dollarsdollars (“USD”). The functional currency of the Company’s former wholly-owned subsidiaries DTS8 Coffee and DTS8 Huzhou in the People’s Republic of China iswas Chinese currency Renminbi (“RMB”). Since RMB is not freely convertible into foreign currencies, all foreign exchange transactions involving RMB must take place either through the People’s Bank of China (the “PBOC”) or other institutions authorized to buy and sell foreign exchange. The exchange rate adopted for the foreign exchange transactions are the rates of exchange quoted by the PBOC.

The Company maintains its financial statements in the functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective periods.

For financial reporting purposes, the financial statements of the Company’s former wholly-owned subsidiaries DTS8 Coffee and DTS8 Huzhou in the People’s Republic of China arewere maintained in RMB and translated into USD. Balance sheet accounts with the exception of equity arewere translated using the closing exchange rate in effect at the balance sheet date, income and expense accounts arewere translated using the average exchange rate prevailing during the reporting period and the equity accounts were stated at their historical exchange rate.

Adjustments resulting from the translation or RMB to USD are included in accumulated other comprehensive income (loss) in stockholders’ deficit.

The exchange rates used for foreign currency translation were as follows (USD$1 = RMB):

Net Income (Loss)Related Parties

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Earnings per Share

Basic net income (loss)earnings per share isare computed by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net income (loss)earnings per share is computed similar to basic net income (loss)earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. If applicable, diluted net income (loss)earnings per share assume the conversion, exercise or issuance of all common stock instruments, such as convertible notes,note payable, unless the effect is to reduce a loss or increase earnings per share.

For The Company had no dilutive securities for the periods presented,ended July 31, 2016 and 2015.

DTS8 COFFEE COMPANY, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2016 AND 2015

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED…)

Stock Issued for Services

The Company accounts for stock-based compensation to employees in accordance with ASC 718 which requires companies to measure the computationcost of diluted loss per share equaled basic loss per share asservices received in exchange for an award of an equity instrument based upon the inclusiongrant-date fair value of any dilutive instruments would have hadthe award. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period. Stock-based compensation awards to non-employees are accounted for in accordance with ASC 505-50.

Recently Issued Accounting Pronouncements

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting”, to include share-based payment transactions for acquiring goods and services from nonemployees. ASU 2018-07 simplifies the accounting for nonemployee share-based payments, aligning it more closely with the accounting for employee awards. These changes become effective for the Company’s fiscal year beginning January 1, 2019. Early application is permitted. At this time, the Company does not expect this standard to affect the Company’s financial position, results of operations or cash flows and disclosures.

In February 2017, the FASB issued ASU 2017-05, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets”, which addresses the transfer to noncustomers of nonfinancial assets or ownership interests in consolidated subsidiaries that do not constitute a business and the contribution of nonfinancial assets that are not a business to a joint venture or other noncontrolled investee. These changes become effective for the Company’s fiscal year beginning January 1, 2018. At this time, the Company does not expect this standard to affect the Company’s financial position, results of operations or cash flows and disclosures.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which clarifies the definition of a business to assist entities in the evaluation of acquisitions and disposals of assets or businesses. If substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business. These changes become effective for the Company’s fiscal year beginning January 1, 2018. At this time, the Company does not expect this standard to affect the Company’s financial position, results of operations or cash flows and disclosures.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. These changes become effective for the Company’s fiscal year beginning January 1, 2018. At this time, the Company does not expect this standard to affect the Company’s financial position, results of operations or cash flows and disclosures.

In July, 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra Entity Transfer of Assets Other than Inventory”, which requires the recognition of the income tax consequences of an anti-dilutive effectintra-entity transfer of an asset, other than inventory, when the transfer occurs. These changes become effective for the Company’s fiscal year beginning after December 15, 2018. At this time, the Company does not expect this standard to affect the Company’s financial position, results of operations or cash flows and disclosures.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, which provides guidance on the earnings per share calculationpresentation and classification of certain cash receipts and payments in the periods presented.statement of cash flows. These changes become effective for the Company’s fiscal year beginning January 1, 2018. At this time, the Company does not expect this standard to affect the Company’s financial position, results of operations or cash flows and disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which will require lessees to recognize assets and liabilities for the rights and obligations created by most leases on the balance sheet. These changes become effective for the Company’s fiscal year beginning January 1, 2019. Modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, is required with an option to use certain transition relief. The Company is in the process of evaluating the impact of this ASU on its consolidated financial statements.

DTS8 COFFEE COMPANY, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2016 AND 2015

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED…)

Recently Issued Accounting Pronouncements (Continued…)

In July 2015,January 2016, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the2016-01, “Financial Instruments – Overall: Recognition and Measurement of Inventory”. The amendmentsFinancial Assets and Financial Liabilities”, which (i) requires equity investments (except those accounted for under the equity method of accounting, or those that result in ASU 2015-11 require an entityconsolidation of the investee) to measurebe measured at fair value with changes in scope inventory atfair value recognized in net income, (ii) requires public business entities to use the lowerexit price notion when measuring the fair value of costfinancial instruments for disclosure purposes, (iii) requires separate presentation of financial assets and net realizable value. Net realizable value isfinancial liabilities by measurement category and form of financial asset, and (iv) eliminates the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The amendments do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. The amendments in this ASU are effectiverequirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments arefinancial instruments measured at amortized cost. These changes become effective for fiscal years beginning after

December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. A reporting entity should apply the amendments prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The adoption of ASU 2015-11 is not expected to have a material impact on the Company’s consolidatedfiscal year beginning January 1, 2018. At this time, the Company does not expect this standard to affect the Company’s financial statements.position, results of operations or cash flows and disclosures.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)”, which has subsequently been amended to update revenue guidance under the newly-created ASC 606. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date”. The amendments in ASU 2015-14 defer, which deferred the effective date of ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” become effective for all entitiesthe Company’s fiscal year beginning January 1, 2018. At this time, the Company does not expect this standard to affect the Company’s financial position, results of operations or cash flows and disclosures.

Other recent accounting pronouncements issued by one year. Public business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

In September 2015, the FASB issued ASU 2015-16, “Business Combinations (Topic 805): Simplifying(including its Emerging Issues Task Force) and the Accounting for Measurement-Period Adjustments”. The amendments in ASU 2015-16 require that an acquirer recognize adjustments to estimated amounts thatSEC did not or are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the estimated amounts, calculated as if the accounting had been completed at the acquisition date. The amendments also require an entity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the estimated amounts had been recognized as of the acquisition date. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. The amendments should be applied prospectively to adjustments to provisional amounts that occur after the effective date with earlier application permitted for financial statements that have not been issued. The adoption of ASU 2015-16 is not expected to have a material impact on the Company’s consolidatedpresent or future financial statements.

In November 2015, the FASB issued ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes”. The amendments in ASU 2015-17 eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. The amendments in this ASU are effective for public business entities for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The amendments may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements.

NOTE 5 – INVENTORIESINVENTORY

Inventories consistThe Company’s former wholly-owned subsidiaries DTS8 Coffee and DTS8 Huzhou in the People’s Republic of China owned inventory. As the following:Company’s foreign operations were disposed of effective May 1, 2016, inventories were $Nil for the period ended July 31, 2016. See Note 14 for the inventory total as of July 31, 2016.

NOTE 6 – CONVERTIBLE NOTEPROPERTY AND EQUIPMENT

The Company’s former wholly-owned subsidiaries DTS8 Coffee and DTS8 Huzhou in the People’s Republic of China owned property and equipment. As the Company’s foreign operations were disposed of on May 1, 2016, property and equipment was $Nil for the period ended July 31, 2016. The depreciation expenses were $Nil and $3,943 for the three months ended July 31, 2016 and 2015, respectively. See Note 14 for the property and equipment as of July 31, 2016.

NOTE 7 – RELATED PARTY TRANSACTIONS

Related party transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

On March 6,August 10, 2015, Company entered into a management agreement with Douglas Thomas to serve as the President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company. Mr. Thomas’s engagement commenced on August 10, 2015, and shall continue on a year-to-year basis until terminated by either party upon 60 days prior written notice to the other party. The Company shall make a monthly management fee payment of $6,000 to Mr. Thomas, in arrears, on the 25th day of each month and issue 4,000,000 restricted common shares of the Company as engagement bonus remuneration. As of July 31, 2016 and April 30, 2016, the Company owed Mr. Thomas $136,549 and $118,548, respectively. On June 13, 2017, Mr. Thomas resigned as the President, Chief Executive Officer, Chief Financial Officer and Secretary of the Company and thereby ceased to be a related party.

DTS8 COFFEE COMPANY, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2016 AND 2015

NOTE 7 – RELATED PARTY TRANSACTIONS (CONTINUED…)

On August 31, 2015, the Company issuedentered into an agreement with Cherry Cai to serve as the financial controller of the Company. Ms. Cai’s engagement commenced on September 1, 2015, and shall continue on a convertible note (Note I) inyear-to-year basis until terminated by either party upon 30 days prior written notice to the amount of $54,000. The note is due together with any interest on December 10, 2015 (the “Maturity Date”).other party. The Company has to pay interest on the unpaid principal balance of the note at the rate of 8% per annum from March 10, 2015 until the Maturity Date. Any amount of principal or interest on the note which is not paid on the Maturity Date shall bear an interest at the rate of 22% per annum from the due date until the note is paid in full. The holder of the note shall have the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of the note and ending on the later of: (i) the Maturity Date and (ii) the date ofmake monthly fee payment of the note,$3,000 to Ms. Cai, in arrears, on 25th day of each in respect of the remaining outstanding principal amount of the note to convert all or any part of the outstandingmonth and unpaid principal amount of the note into fully paid and non-assessableissue 1,000,000 shares of common stock of the Company. The conversion price shall equal, subjectCompany to equitable adjustments for stock splits, stock dividends or rights offerings byMs. Cai. 500,000 shares were issued in September 2015 and balance of 500,000 shares was to be issued on September 1, 2016. As of July 31, 2016, the Company 61%

multiplied byhas deferred the market priceissuance of the average500,000 shares to a later date. As of July 31, 2016, and April 30, 2016, the Company owed Ms. Cai $12,200 and $1,700, respectively.

On April 30, 2012, upon its acquisition of DTS8 Holdings, the Company assumed a loan payable of $382,396 owed by DTS8 Coffee to a consultant who provides accounting and financial reporting services to the Company through his company from time to time on a monthly basis. Upon the disposition of DTS8 Holdings and its operations, the Company retained the loan payable of $251,027. The amounts owed, as a loan payable, as of July 31, 2016, and April 30, 2016, were $251,027. The balance of the lowest three trading pricesamount is unsecured, non-interest bearing, has no fixed term of repayment, and is repayable on demand, and the consultant has agreed not to demand payment within the next fiscal year. In addition, for the common stock duringperiods ended July 31, 2016 and April 30, 2016, the 10 trading days priorCompany owed the consultant $257,750 and $251,500, respectively, for consulting services provided to the conversion date.Company. Accordingly, as of July 31, 2016 and April 30, 2016, the total loans and consulting fees owed to this consultant totaled $508,777 and $371,749.

In accordance with ASC 815-15,On May 23, 2016, the Company analyzedentered into a loan agreement with Thomas Prasil Trust U/A/D November 26, 2003, in the conversion optionprincipal amount of the note for derivative accounting consideration.$185,000, due and payable in full on November 20, 2016. The loan bears an annual interest rate of 20%. The Company determined that the conversion optionpaid a loan fee of the note should be classified as a liability once the conversion option becomes effective after 180 days because there is no limit to the number of3,000,000 shares of common stock to bewhich was issued upon conversion of the note.on May 25, 2016.

On SeptemberAlso see Note 9 Note I became convertible. On September 18, 2015, the debt holder converted $12,000 of the note into 230,769 common shares at a conversion price of $0.0520 per share. On September 25, 2015, the debt holder converted $15,000 of the note into 260,417 common shares at a conversion price of $0.0576 per share. On September 30, 2015, the debt holder converted $20,000 of the note into 316,456 common shares at a conversion price of $0.0632 per share. On October 7, 2015, the debt holder converted the remaining principal of $7,000 and the accrued interest in the amount of $2,160 into a total number of 152,667 shares at a conversion price of $0.0600. As of October 31, 2015, the balance payable on Note I of $54,000 and accrued interest of $2,160 were fully converted into common stock.

On October 20, 2015, the Company issued two convertible promissory notes with same terms in a total amount of $210,000 (collectively, Note II) with a discount of 5%. The proceeds of $200,000 of the note were not received until October 23, 2015. The note is due together with any interest on April 19, 2015 (the “Maturity Date”). The Company has to pay interest on the unpaid principal balance of the note at the rate of 10% per annum from October 23, 2015 until the Maturity Date. The outstanding principal and interest at 120% may be redeemed within 90 days of closing and 130% after 90 days. The conversion price shall equal, subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company, 61% of the lowest daily volume weighted average price (“VWAP”) of the common stock during the 15 trading days priorissued to the conversion date. Upon default, the debt holder shall have the right to convert the note into shares of common stock at an alternative conversion price equal to 50% of the lowest daily VWAP of the common stock during the 20 trading days prior to the conversion date. All overdue accrued and unpaid interest to be paid shall entail a late fee at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law which shall accrue daily from the date such interest is due through and including the date of actual payment in full.

As of October 31, 2015, the balance payable on the convertible note was $210,460 representing the principal amount of $210,000 plus accrued interest of $460.  

As described in Note 7, the embedded conversion feature for both Note I and Note II qualified for liability classification at fair value. As a result, the Company recorded debt discounts resulting from derivative liabilities of $54,000 to Note 1 and $200,000 to Note II at the dates the notes became convertible. Due to the excess of the fair value of derivative liabilities over the principal of the notes on the day when the notes became convertible, the Company recorded loss on derivative liabilities in the amount of $292,718. This amount was included in change in fair value of derivative liabilities. In addition, the Company amortized the balance of debt discount of $54,000 associated to the exercise of the conversion option of Note 1.

Amortization of the debt discounts was recorded as a component of interest expense in the accompanying unaudited statements of operations and comprehensive loss. Amortization of debt discounts amounted to $64,500 and $0 for the three and six months ended October 31, 2015 and 2014, respectively. Contractual interest expense for the two convertible notes described in Note 7 amounted to $1,969 and $0 for the six months ended October 31, 2015 and 2014, respectively. Contractual interest expense for the two convertible notes described in Note 7 amounted to $882 and $0 for the three months ended June October 31, 2015 and 2014, respectively.

NOTE 7 – DERIVATIVE INSTRUMENTS AND THE FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company issued convertible notes and the conversion option embedded in the convertible notes contains no explicit limit to the number of shares to be issued upon settlement and as a result is classified as a liability under ASC 815 (see Note 6). The Company accounted for the embedded conversion option in accordance with ASC 815-40, which requires the Company to bifurcate the embedded conversion options as liability at the date when it becomes effective and to record changes in fair value relating to the conversion option liability in the statement of operations and comprehensive income as of each subsequent balance sheet date. The debt discount related to the convertible note is amortized over the life of the note using the effective interest method.parties.

The following table sets forth the Company’s consolidated financial assets and liabilities measured at fair value by level within the fair value hierarchy as of October 31, 2015. Assets and liabilities are classified in their entirety based on the lowest level of inputs that is significant to the fair value measurement.

The following is a reconciliation of the conversion option liability for which Level 3 inputs were used in determining the fair value:

The Company’s conversion option liabilities are valued using pricing models and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility and correlations of such inputs. These consolidated financial liabilities do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy.

The fair value at the commitment and re-measurement dates for convertible notes that are treated as derivative liabilities with embedded conversion features were based upon the following management assumptions for the six months ended October 31, 2015:

NOTE 8 – RELATED PARTY TRANSACTIONS

Related party transactions are measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties.

Upon the acquisition of DTS8 Holdings on April 30, 2012, the Company assumed a loan from Sean Tan to DTS8 Holdings. Sean Tan was the Company’s Chief Executive Officer and director until August 10, 2015, when Sean Tan resigned andDouglas Thomas replaced Mr. Tan in his positions with the Company. The loan from related parties bears no interest and has no fixed term of repayment. The Company entered into a debt settlement agreement dated August 28, 2015, with Sean Tan to convert $120,000 of debt owed by the Company, at the fair market price of $0.07 per share, being the closing stock price at August 28, 2015, for a total of 1,714,286 shares of the Company’s common stock. As of October 31, 2015 and April 30, 2015, $nil and $120,000, respectively, was recorded as due to related parties.

On March 31, 2011, the Company entered into a management agreement with Sean Tan, the Company’s officer and director, to serve as the President and Chief Executive Officer of the Company. This contract was terminated effective August 10, 2015. The Company entered into a debt settlement agreement dated August 28, 2015 with Sean Tan to convert the management fee payment of $128,000 owed by the Company, at the fair market price of $0.07

per share, being the closing stock price at August 28, 2015, for a total of 1,828,571 shares of the Company’s common stock.  For the periods ended October 31, 2015 and April 30, 2015, the Company owed Mr. Tan $nil and $110,000, respectively.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

The Company leasesdisposed of its corporate officesubsidiaries and coffee distributionoperations effective May 1, 2016 and storage facility located at Building B, #439, Jinyuan Ba Lu, Jiangqiao Town, Jiading District, Shanghai 201812, China. Lease commenced on October 1, 2013, and expires on September 30, 2017. Theas such does not have any leased area is approximately 92 square meters (990 square feet).properties or commitments as of July 31, 2016.

The Company also leases a warehouse for its coffee roasting and manufacturing at 801 Jiahe Road, 2^ndFloor, Nanxun Town, Huzhou City, 313009, Zhejiang, China. The leased area is approximately 1,041 square meters (11,205 square feet). The lease commenced on August 16, 2013, and expires on August 17, 2015. This lease was extended for additional six-month term, and now expires on February 17, 2016.  

Total lease payments for the periods ended October 31, 2015 and 2014 were $15,319 and $25,868, respectively.

NOTE 109 – COMMON STOCK

At OctoberJuly 31, 2015,2016, the Company’s authorized capital was 75,000,000 shares of common stock with a par value of $0.001 and 49,594,83258,928,163 shares were issued and outstanding.

In June 2015,May 2016, the Company issued 2,500,0001,121,076 and 1,470,588 restricted shares of common stock for the conversion of principal of $50,000 of Note II described in Note 12.

In May 2016, the Company issued 3,000,000 restricted shares of common stock at a price of $0.02$0.01 per share for cash proceeds of $50,000.

In August, 2015, the$185,000 from a related party. The Company issued 4,000,000also reserved 800,000 restricted shares of common stock to be issued as a loan fee. As of July 31, 2016, the Chief Executive Officer of the Company at a fair market price of $0.06 per share as payment for management fees. Total value of the services, valued at the fair market price, was $240,000. For the period ended October 31, 2015, $240,000 was expensed.shares have still not been issued.

In August, 2015,June 2016, the Company issued 1,100,0001,000,000 restricted shares of common stock to a director (1,000,000) and to two employees (50,000 each)consultant at a fair market price of $0.06$0.028 per share as payment for management fees. Total value of the services, valued at the fair market price, was $66,000. For the period ended October 31, 2015, $66,000 was expensed.

In August, 2015, the Company in lieu of cash payment issued 3,542,857 shares of the Company’s common stock as payment in full for the outstanding debts of $248,000 owed to the former director and Chief Executive Officer. The shares were issued at the fair market price of $0.07 per share, being the closing stock price at August 28, 2015.

In September, 2015, the Company issued 500,000 restricted shares of common stocks of the Company for consulting services valued at $0.085 per share or $42,500. For the period ended October 31, 2015, $42,500 was expensed.

In September, 2015, the Company issued 1,000,000 shares of common stock Company to a consultant at fair market price of $0.085 per share as payment for consulting fees. Total value of the services valued at the fair market price on the issuance date was $85,000.$28,000. For the periodthree months ended OctoberJuly 31, 2015, $85,0002016, $4,615 was expensed as consulting fees.

In September,NOTE 10 – CONCENTRATION RISK

The Company disposed of its subsidiaries and its operations on May 1, 2016 and as such does not have any concentrations of risk that would adversely affect the Company’s operations for the period ended July 31, 2016.

DTS8 COFFEE COMPANY, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2016 AND 2015

NOTE 11 – LOANS PAYABLE

As of July 31, 2016, the loans payable consisted of the following:

NOTE 12 – CONVERTIBLE NOTES

On March 6, 2015, the Company issued 1,000,000a convertible note (“Note I”) in the amount of $54,000. Note I was due together with any interest on December 10, 2015 (the “Maturity Date”). The Company was required to pay interest on the unpaid principal balance of Note I at the rate of 8% per annum from March 10, 2015, until the Maturity Date. Any amount of principal or interest which was not paid on the Maturity Date bore interest at the rate of 22% per annum from the due date until the note was paid in full. The holder of Note I had the right from time to time, and at any time during the period beginning on the date which was 180 days following the date of the note and ending on the later of: (i) the Maturity Date and (ii) the date of payment of the note, each in respect of the remaining outstanding principal amount of the note to convert all or any part of the outstanding and unpaid principal amount of the note into fully paid and non-assessable shares of common stock of the Company’s attorney at fairCompany. The conversion price was equal, subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company, to 61% multiplied by the market price of $0.085 per share as payment for legal fees. Total valuethe average of the services, valued atlowest three trading prices for the fair market price, was $85,000. ForCompany’s common stock during the period ended October 31, 2015, $85,000 was expensed as legal fees.10 trading days prior to the conversion date.

In September 2015,accordance with ASC 815-15, the Company issued 230,769, 260,417 and 316,456 restrictedanalyzed the conversion option of the note for derivative accounting consideration. The Company determined that the conversion option of the note should be classified as a liability once the conversion option becomes effective after 180 days because there is no limit to the number of shares of common stocksstock to be issued upon conversion of the Company fornote.

On September 9, 2015, Note I became convertible. On September 18, 2015, the conversiondebt holder converted $12,000 of $12,000,the note into 230,769 shares of the Company’s common stock at a price of $0.0520 per share. On September 25, 2015, the debt holder converted $15,000 andof the note into 260,417 shares of the Company’s common stock at a price of $0.0576 per share. On September 30, 2015, the debt holder converted $20,000 of the Note I described in Note 6, respectively.

In Octobernote into 316,456 shares of the Company’s common stock at a price of $0.0632 per share. On July 7, 2015, the Company issued 152,667 restricted shares of common stocks of the Company for the conversion ofdebt holder converted the remaining principal of $7,000 and the accrued interest in the amount of $2,160 into a total of 152,667 shares of the Company’s common stock at a price of $0.0600. As of April 30, 2016, the principal amount of Note I described inof $54,000 and accrued interest of $2,160 were fully converted into 960,309 shares of the Company’s common stock. As of July 31, 2016, the balance payable on Note 6.I was $Nil.

On October 1, 2015, the Company entered into an agreement with Carter, Terry & Company acting as the Company’s exclusive Financial Advisory Investment Bank and Placement Agent for an initial period of 60 days, and then reverting to a non-exclusive advisor for the next twelve consecutive (12) months. The Company agreed to issue 200,000 restricted shares of common stocks of the Company upon the execution of the agreement. Within two years period, the Company agreed on cash compensation fees subject to: a). 10 % of the amount up to $1,000,000; b). 8% up to $5,000,000 and c). 6% over $5,000,000 for any equity or hybrid equity capital raised and also agreed to pay restricted shares equal to 4% of capital raised by the closing price of the stock on the date of close. In OctoberJuly 20, 2015, the Company issued 200,000 restrictedtwo convertible promissory notes (collectively, “Note II”) with the same terms in the total amount of $210,000 with a discount of 5%. The net proceeds of $200,000 were not received until July 23, 2015. Note II was due, together with any interest, on April 19, 2016 (the “Second Maturity Date”). The Company was required to pay interest on the unpaid principal balance of Note II at the rate of 10% per annum from July 23, 2015 until the Second Maturity Date. The outstanding principal and interest at 120% could be redeemed within 90 days of closing and 130% after 90 days. The conversion price was equal, subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company, to 61% of the lowest daily volume weighted average price (“VWAP”) of the Company’s common stock during the 15 trading days prior to the conversion date. Upon default, the holder of Note II had the right to convert Note II into shares of the Company’s common stocksstock at an alternative conversion price equal to Carter, Terry & Company valued50% of the lowest daily VWAP of the common stock during the 20 trading days prior to the conversion date. All overdue accrued and unpaid interest to be paid entailed a late fee at $0.11an interest rate equal to the lesser of 18% per annum or the maximum rate permitted by applicable law which accrued daily from the date such interest was due through and including the date of actual payment in full.

DTS8 COFFEE COMPANY, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2016 AND 2015

NOTE 12 – CONVERTIBLE NOTES (CONTINUED…)

On July 20, 2015, Note II became convertible. On April 25, 2016, the holder of Note II converted $25,000 of the note into 1,041,667 shares of the Company’s common stock at a price of $0.0240 per share. ForOn May 6, 2016, the debt holder converted $25,000 of the note into 1,121,076 shares of the Company’s common stock at a price of $0.022 per share. On May 16, 2016, the debt holder converted $25,000 of the note into 1,470,588 shares of the Company’s common stock at a price of $0.017 per share. The Company paid the remaining balance of principal and interest in the amount of $184,275 on May 24, 2016. As of July 31, 2016, the balance payable on Note II was $Nil.

As described in Note 4, the embedded conversion feature for both Note I and Note II qualified for liability classification at fair value. As a result, the Company recorded debt discounts resulting from derivative liabilities of $54,000 to Note I and $200,000 to Note II at the dates the notes became convertible. Due to the excess of the fair value of derivative liabilities over the principal of the notes on the day when the notes became convertible, the Company recorded loss on derivative liabilities in the amount of $292,718. This amount was included in change in fair value of derivative liabilities. In addition, the Company amortized the balance of debt discount of $54,000 associated to the exercise of the conversion option of Note I, and amortized the balance of debt discount of $200,000 over the life of Note II.

Amortization of the debt discounts was recorded as a component of interest expense in the accompanying consolidated statements of operations and comprehensive loss. Amortization of debt discounts amounted to $0 and $254,000 for the periods ended July 31, 2016 and April 30, 2016, respectively. Contractual interest expense for the two convertible notes amounted to $33,476 and $13,110 for the periods ended July 31, 2016 and April 30, 2016, respectively.

On March 2, 2016, the Company issued a convertible note (“Note III”) in the amount of $73,000. Note III was due together with any interest on December 4, 2016 (the “Third Maturity Date”). The Company is required to pay interest on the unpaid principal balance of Note III at the rate of 8% per annum from March 2, 2016 until the Third Maturity Date. Any amount of principal or interest which was not paid on the Maturity Date bears interest at the rate of 22% per annum from the due date until the note is paid in full. The holder of Note III has the right from time to time, and at any time during the period beginning on the date which is 180 days following the date of Note III and ending on the later of: (i) the Third Maturity Date and (ii) the date of payment of the note, each in respect of the remaining outstanding principal amount of the note to convert all or any part of the outstanding and unpaid principal amount of Note III into fully paid and non-assessable shares of the Company’s common stock. The conversion price is equal, subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company, to 63% multiplied by the market price of the average of the lowest three trading prices for the Company’s common stock during the 10 trading days prior to the conversion date. The note became convertible 180 days after its issuance on March 2, 2016 which was August 29, 2016.

As of April 30, 2016, the balance payable on the convertible notes was $258,000 representing the amounts owed for Note II of $185,000 and Note III of $73,000, respectively. As of July 31, 2016, the balance payable on the convertible notes was $73,000 representing the amount owed for Note III. The debt discount was $Nil as of July 31, 2016 and April 30, 2016. Contractual interest expense for Note III amounted to $2,176 and $Nil for the periods ended OctoberJuly 31, 2015, $22,000 was expensed2016 and April 30, 2016, respectively.

NOTE 13 – DERIVATIVE INSTRUMENTS AND THE FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company issued convertible notes and the conversion option embedded in the convertible notes contains no explicit limit to the number of shares to be issued upon settlement and as consulting fees.a result is classified as a liability under ASC 815. The Company accounted for the embedded conversion option in accordance with ASC 815-40, which requires the Company to bifurcate the embedded conversion options as liability at the date when it becomes effective and to record changes in fair value relating to the conversion option liability in the statement of operations and comprehensive income as of each subsequent balance sheet date. The debt discount related to the convertible note is amortized over the life of the note using the effective interest method.

The following table sets forth the Company’s consolidated financial assets and liabilities measured at fair value by level within the fair value hierarchy as of July 31, 2016. Assets and liabilities are classified in their entirety based on the lowest level of inputs that is significant to the fair value measurement.

DTS8 COFFEE COMPANY, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2016 AND 2015

NOTE 13 – DERIVATIVE INSTRUMENTS AND THE FAIR VALUE OF FINANCIAL INSTRUMENT (CONTINUED…)

The following is a reconciliation of the conversion option liability for which Level 3 inputs were used in determining the fair value:

The Company’s conversion option liabilities are valued using pricing models and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility and correlations of such inputs. These consolidated financial liabilities do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy.

The fair value at the commitment and re-measurement dates for convertible notes that are treated as derivative liabilities with embedded conversion features were based upon the following management assumptions for the three months ended July 31, 2016:

NOTE 14 – LIABILITIES HELD FOR SALE & DISCONTINUED OPERATIONS

Effective May 1, 2016, the Company disposed of its former direct and indirect wholly-owned subsidiaries and operations in the People’s Republic of China, DTS8 Coffee, DTS8 Huzhou, and DTS8 Holdings. The Company forgave all outstanding receivables form the subsidiaries and assumed a loan in the amount of $251,027 (see Note 7).

The following table provides additional information with respect to the loss on disposal of the subsidiaries

DTS8 COFFEE COMPANY, LTD.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2016 AND 2015

NOTE 1115 – SUBSEQUENT EVENTS

On November 2, 2015,April 30, 2018, the Company entered intoholders of a letter of intent to acquire a coffee roasting and wholesale company located in the East Coast of the United States. Under the terms of the contemplated acquisition, the Company will acquire 100%majority of the issued and outstanding common stock of the Company approved an increase in the Company’s authorized capital from 75,000,000 shares of the coffee company. The acquisition is subjectcommon stock, par value $0.001, to a number500,000,000 shares of conditions, including DTS8 completing and accepting the results of its due diligence investigation, a valuation opinion and receiving audited financial statements.  As of the date of this report,common stock, par value $0.001. On July 17, 2018, the Company was informally effected the processAuthorized Capital Increase by filing a Certificate of completingAmendment with the due diligence.Nevada Secretary of State.

In August 2018, the Company issued an aggregate of 1,786,227 shares of common stock at a price of $0.02 per share for cash proceeds of $35,725 from unrelated parties.

In November 2018, the Company issued 5,000,000 shares of common stock at a price of $0.02 per share for cash proceeds of $100,000 from an unrelated party.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

All references in this ReportIn December 2018, the Company issued 40,500 shares of common stock at a price of $0.02 per share for cash proceeds of $810 from an unrelated party and issued 2,564,103 shares of common stock at a price of $0.0039 per share pursuant to the “Company”, “we”, “us” or “our” are to DTS8 Coffee Company, Ltd.conversion of $10,000 in principal and its 100% owned subsidiary DTS8 Holdings Co. Ltd. (“DTS8 Holdings”), which owns 100% of DTS8 Coffee (Shanghai) Co., Ltd. (“DTS8 Coffee”) which owns 100% of DTS8 Coffee (Huzhou) Co., Ltd. (“DTS8 Huzhou”)interest under a convertible note (Note III). See Note 12.

This Report contains “forward-looking statements” that involve risk and uncertainties.  We use forward-looking statements that you can identify by words or terminology such as "may", "should", "could", "predict", "potential", "continue", "expect", "anticipate", "future", "intend", "plan", "believe", "estimate" and similar expressions (or the negative of these expressions).  Except for historical information, this Report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and statements regarding our expectations, hopes, beliefs, intentions or strategies regarding the future.  All statements other than statements of historical facts included in this report, including, without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and other plans and objectives for future operations, and future product demand, supply, costs, marketing, transportation and pricing factors, are forward-looking statements.  Actual results, levels of activity, performance, achievements and events may vary materially from those implied by the forward-looking statements.  These statements are based on our current beliefs, expectations and assumptions. Any such statements should be considered in light of various risks and uncertainties that could cause results to differ materially from expectations, estimates or forecasts expressed.  The various risks and uncertainties include, but are not limited to: changes in general economic conditions, changes in business conditions in the coffee industry, fluctuations in consumer demand for coffee products, the availability and costs of green beans, increased competition within the green bean and roasted coffee businesses, our lack of successful operating history, our history of continued losses, our inability to successfully implement our business plan, fluctuations in the price of green coffee, concentration of single product and sales, lack of significant experience in the coffee industry of our employees, inability to hire, train and retain qualified personnel, inability to acquire customers, natural disasters, adverse weather conditions, diseases, political and social instability in countries where we source green coffee beans, weak consumer demand for our roasted coffee, and the fact that we own only one roasting plant and interruption to our only roasting plant may cause significant disruption to our roasting operation.  Most of these factors are difficult to predict accurately and are generally beyond our control.  You should consider the areas of risk described in connection with any forward-looking statements that may be made herein.  Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this Report.  Readers should carefully review this Report in its entirety, including but not limited to our financial statements and the notes thereto.  Except for our ongoing obligations to disclose material information under Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.

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

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

As a fully licensed artisan fresh coffee roaster in China, we are well positioned in Shanghai, China to capitalize onWe were incorporated under the continued growth in consumption of coffee in China. According to theInternational Coffee Organization report dated August 10, 2015,“the production and consumption of coffee in China have been growing at double-digit rates, and show few signs of slowing. As the economy of China continues to grow, the pool of consumers with disposable income expands and demand for coffee rises accordingly. The presence of coffee shops is no longer a novelty, but rather an essential featurelaws of the urban landscape.  China is rapidly developing a taste for coffee”.

Chinese consumers are now choosing coffee more by its origin country and flavor, rather than by brand, which is similar to the current trendState of coffee consumption habits in Western countries. In China, the expanding coffee culture and the popularity of coffee shops in bigger cities is increasing the awareness and sale of fresh roasted coffee.  Supplying gourmet, artisan roasted, coffees, fresh from our roaster located in Huzhou, positions us well in Shanghai to participate in the development and evolution of this new coffee drinking culture in all of China. Fresh, artisan roasted coffee is only available at a limited number of premium food service establishments. The opening of new coffee cafes and fast food restaurants has increased coffee sales in China due to the adoption of modern lifestyles and affluence within the country. The evolution in the taste and buying habits of Chinese consumers is creating opportunities for the continued development of a robust coffee market.  

Review of Operations

Sales for the six months ended October 31, 2015 and 2014 were $184,833 compared to $173,839. The increase of approximately 6.3% is attributable to an increase in sales volume to existing and new wholesale customers. Cost of sales were $123,826 and $109,350, respectively, and our gross profits for the six months ended October 31, 2015 and 2014, were $61,007 (33% of sales) $64,489 (37% of sales). The gross margin changes are due to the increased cost of sales resulting from increased raw coffee prices during the period while the occupancy costs remained at same level. Our general and administrative expenses were $758,555 and $490,125 during the six months ended October 31, 2015, and 2014.

Our operating expenses for the six months ended October 31, 2015 and 2014 were $774,582 and $503,960. The increase of $270,622 were mainly due to higher office and administration costs and shares issued at a fair market value of $540,500 for services which were comprised with $342,500 for management and director fees, $6,000 for wages & benefits, $107,000 for consulting fees and $85,000 for legal fees. Our marketing expenses were $15,980 and $13,835 during the six months ended October 31, 2015 and 2014. Our losses for the six months ended October 31, 2015 and 2014 were $821,017 and $439,471, respectively. Consequently, our accumulated loss to October 31, 2015 was $8,688,495.

Liquidity and Capital Resources

Provided below is selected financial data about us for the periods ended October 31, 2015 and April 30, 2015.  Our financial statements and notes thereto are included in this Report under “Financial Statements”.

As of October 31, 2015, we had $178,644 in cash, receivables of $66,204, inventory of $18,531, and advance to a related party of $397, while our accounts payable and accruals were $144,848 and due to related parties amount was $591,485 and the net value of our machinery, plant and equipment was $45,161. Our paid in capital was $8,028,775, and stockholders’ equity was ($612,100).  Since our inceptionNevada on March 27, 2009 we have incurred an accumulated deficit of $8,688,495 and other comprehensive loss from currency translations of $1,974.  

As ofunder the name “Berkeley Coffee & Tea, Inc.” On April 30, 2015,2012, we had $85,665acquired 100% of the issued and outstanding capital stock of DTS8 Holdings Co., Ltd. (“DTS8 Holdings”), a corporation organized and existing under the laws of Hong Kong, and which owns DTS8 Coffee (Shanghai) Co., Ltd. (“DTS8 Coffee”), a wholly owned foreign subsidiary entity (“WOFE”) corporation organized and existing under the laws of the People’s Republic of China.

In March 2013, we established a 100% owned subsidiary of DTS8 Coffee called DTS8 Coffee (Huzhou) Co. Ltd. (“DTS8 Huzhou”) in cash, receivables of $78,551, inventory of $58,150Huzhou, Zhejiang Province, China. DTS8 Huzhou is a coffee roaster equipped with the standard procedures to ensure that it meets regulatory requirements for food safety and prepaid expenses of $9,004, while our accounts payable and accruals were $240,334, loans from related parties were $772,952 andsanitation in China. Effective May 1, 2016, we had a convertible note payable of $54,000. The net valuedisposed of our machinery, plantformer subsidiaries in China and equipment was $54,907. Our paid in capital was $7,057,409 and shareholders’ equity deficit was $781,009. thereby became a blank cheque company.

We incurred accumulated losses of $7,867,478currently maintain a mailing address at Suite 300 – 1055 West Hastings Street, Vancouver, British Columbia, Canada V6E 2E9 and our telephone number is (604) 609-6163. We do not have any subsidiaries. Our fiscal year end is April 30. Our current plans are to merge with, engage in a capital stock exchange with, purchase all or substantially all of the assets of, or engage in any other comprehensive loss from currency translations was $5,731 as of April 30, 2015.similar business combination with one or more operating businesses.

During the period ended October 31, 2015, we financed our operations by selling shares of common stock and issued convertible promissory note. Our ability to continue with our business is subject to our ability to continue generating additional revenue and obtaining equity financing for working capital. To fund our ongoing operations, we may be forced to find alternate sources of financing, which at this time cannot be assured.

As of the date of this Report,report, we do not have any specific business combination under consideration and we have not incurredidentified any coffee-related researchprospective target business, nor has anyone done so on our behalf. We cannot provide any assurance as to whether any proposed business combination will be feasible at all, or will be feasible on terms acceptable to us, and developmentwe have no way of forecasting whether any proposed business combination will be successfully completed on a timely basis.

We believe that the earliest we will begin generating revenues will not be until after the completion of a business combination. However, even if we successfully complete a business combination, we may not be able to achieve our anticipated business goals, gain any operating benefits or generate any profits.

We are a “shell company” as defined in Rule 405 under the Securities Act of 1933, as amended, and Rule 12b-2 under the Exchange Act, since we only have nominal operations and nominal assets.

Results of Operations

For the Three Months ended July 31, 2016

Revenue

We did not generate any revenue during the three months ended July 31, 2016, and we did not generate any revenue from continuing operations during the same period in the prior year. We do not anticipate that we will earn any revenue during the current fiscal year or in the foreseeable future, as we do not have any operations and are presently engaged in seeking a business combination with a target business. We anticipate that we will incur substantial losses over the next year, unless we are able to successfully complete a business combination and develop the business of the target company.

Expenses

During the three months ended July 31, 2016, our total operating expenses decreased by $42,715 from the same period in 2015, from $73,716 to $30,461.

Our operating expenses consist entirely of general and administrative expenses, which include management fees, consulting fees, professional fees, transfer agent fees, investor relations expenses, office and general expenses, and financing costs. Our professional fees consist of accounting, legal and audit fees. Our office and general expenses include rent, communication expenses (e.g., internet and telephone), office supplies, bank charges, courier fees and postage costs.

Our general and administrative expenses for the three months ended July 31, 2016 consisted of $18,000 in management fees, $12,930 in professional fees, $5,718 in financing costs, $4,615 in consulting fees, $3,579 in investor relations expenses, $1,849 in office and general expenses and $1,636 in transfer agent fees, as offset by $17,866 in expense recovery due to discontinued operations.

Other Income/Expense

During the three months ended July 31, 2016, we incurred $40,647 in interest expense and a positive change of $190,877 in the fair value of our derivative liabilities, resulting in other income of $150,230. During the same period in 2015, our other expenses of $1,087 consisted entirely of interest expense.

Net Income/Loss

During the three months ended July 31, 2016, we generated net income of $2,735, which was equal to our net income from continuing operations of $119,769 less our net loss from discontinued operations of $117,034. During the same period in 2015, we incurred a net loss of $78,829, consisting of a $74,263 net loss from continuing operations and a $4,566 net loss from discontinued operations.

Our net income/loss per share from continuing operations for both the three months ended July 31, 2016 and 2015 was $0.00. In addition, our net income/loss from discontinued operations for the three months ended July 31, 2016 was $0.00.

Liquidity and Capital Resources

As of July 31, 2016, we had $1,251 in cash and cash equivalents, $24,636 in current and total assets, $320,513 in current liabilities, $978,039 in total liabilities and a working capital deficit of $295,877. As of July 31, 2016, we also had an accumulated deficit of $9,472,723.

During the three months ended July 31, 2016 we spent $92,950 in net cash on continuing operating activities, compared to spending $50,837 in net cash on continuing operating activities during the same period in 2015. The increase in our spending on operating activities between the two periods was largely due to certain adjustments to reconcile our net loss to net cash used in continuing operating activities.

We did not engage in any continuing investing activities during the three months ended July 31, 2016 or 2015.

During the three months ended July 31, 2016 we received $86,926 in net cash from continuing financing activities, including $191,250 in proceeds from notes payable and $28,500 in proceeds from related parties. These amounts were offset by repayments of convertible notes totaling $132,824. During the same period in 2015, we spent $53,207 in net cash on continuing financing activities, consisting of $50,000 in proceeds from share issuances less $103,207 in repayments to related parties.

During the three months ended July 31, 2016 we did not spend any net cash on discontinued operating activities, whereas we received $28,875 in net cash from discounted operating activities during the same period in the prior year.

Our cash holdings decreased by $6,024 during the three months ended July 31, 2016, from $7,275 to $1,251.

We are currently reviewing businesses in relation to a potential business combination. If we are successful in consummating a business combination, we will likely incur expenses for personnel and business expansion. In order for us to attract and retain quality personnel, we anticipate that we will need to offer competitive salaries, issue common stock to consultants and employees and grant stock options. We estimate that our operating expenses over the next 12 months will be approximately $100,000, all of which will be general and administrative expenses. This estimate may change significantly depending on the nature of our future business activities and whether we continue our operations.

We are not currently in good short-term financial standing and we do not anticipate that we will earn any revenue in the near future or generate positive internal operating cash flow until we can complete a business combination. It may take several years for us to acquire an operating business, develop a business plan and generate revenue. There is no assurance we will achieve profitable operations following the completion of any business combination.

As of July 31, 2016, we had $1,251 in cash. Since we will require additional capital to fund the acquisition of an operating business, we plan to incur any researchproceed by way of private placements, loans or development expenses in the future.possibly a direct offering. However, there is no assurance that we will be able to raise enough capital to meet our future cash requirements.

Going Concern

Our consolidated interim financial statements for the three months ended July 31, 2016 have been prepared on a going concern basis and contain an explanatory paragraph in Note 3 which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. We have incurred material recurring losses from operations. As of October 31, 2015, we had an accumulated deficit, limited cash and unprofitable operations. These factors, among others, indicateidentifies issues that we may be unable to continue as a going concern for a reasonable period of time. Our financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that may

be necessary should we be unable to continue as a going concern. Our continuation as a going concern is contingent upon our ability to obtain additional financing and to generate revenue and cash flow to meet our obligations on a timely basis. Any failure to generate revenue and profits will raise substantial doubt about our ability to continue as a going concern. We plan to retainOur financial statements do not include any cash we earn in order to develop our business.adjustments that might result from the outcome of this uncertainty.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies &and Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and the reported amounts of revenues, goodwill impairment and expenses during the reporting period. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of our financial statements; accordingly, it is possible that the actual results could differ from these estimates and assumptions and could have a material effect on the reported amounts of our financial position and results of operations.

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make a variety of estimates and assumptions that affect (1) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and (2) the reported amounts of revenues and expenses during the reporting periods covered by the financial statements. Our management routinely makes judgments and estimates about the effect of matters that are inherently uncertain. As the number of variables and assumptions affecting the future resolution of the uncertainties increases, these judgments become even more subjective and complex. Although we believe that our estimates and assumptions are reasonable, actual results may differ significantly from these estimates. Changes in estimates and assumptions based upon actual results may have a material impact on our results of operations and/or financial condition. We have identified certain accounting policies that we believe are most important to the portrayal of our current financial condition and results of operations. Our significant accounting policies are disclosed in Note 4 to the financial statements included in this Report.report.

Revenue RecognitionRelated Parties

We derive our revenueA party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the salemanagement or operating policies of roasted coffee. Revenuethe transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

Stock Issued for Services

The Company accounts for stock-based compensation to employees in accordance with ASC 718 which requires companies to measure the cost of services received in exchange for an award of an equity instrument based upon the grant-date fair value of the award. Stock-based compensation expense is recognized when persuasive evidence of an arrangement exists, delivery occurs, the sales price is fixed or determinable and collectability is reasonably assured.  Coffee is considered delivered when title and risk have been transferred to the customer.  Retail sales are recorded when payment is tendered at point of sale.  Wholesale sales are recorded upon delivery of coffee to the customers.   

Property and Equipment

Property and equipment are stated at cost.  Depreciation is provided using theon a straight-line or accelerated methodsbasis over the estimated useful lives of the assets.  The useful lives of property, plant and equipmentrequisite service period. Stock-based compensation awards to non-employees are accounted for purposes of computing depreciation are five to ten years for equipment. We evaluate the recoverability of property and equipment when events and circumstances indicate that such assets might be impaired.  We determine impairment by comparing the undiscounted future cash flows estimated to be generated by these assets to their respective carrying amounts. Maintenance and repairs are expensed as incurred. Replacements and betterments are capitalized.  The cost and related reserves of assets sold or retired are removed from the accounts, and any resulting gain or loss is reflected in results of operations.

Receivables

Trade accounts receivable are recorded at the net realizable value and do not bear interest. No allowance for doubtful accounts was made during period based on management’s best estimate of the amount of probable credit losses in existing accounts receivable. We evaluate our allowance for doubtful accounts based upon knowledge of our customers and their complianceaccordance with credit terms. The evaluation process includes a review of customers’ accounts on a regular basis. The review process evaluates all account balances with amounts outstanding for 60 days and other specific amounts for which information obtained indicates that the balance may be uncollectible.  As at October 31, 2015 and April 30, 2015, there was no allowance for doubtful accounts.  We do not have any off-balance-sheet credit exposure related to our customers.ASC 505-50.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

ITEM 3

QUANTITAIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 4. Controls and Procedures.

ITEM 4

CONTROL AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We evaluated the effectiveness of ourmaintain disclosure controls and procedures, as required by paragraph (b) ofdefined in Rule 13a-15 or13a-15(e) and Rule 15d-1515d-15(e) under the Exchange Act, as of the end of the period covered by this Report, being October 31, 2015. This evaluation was conducted with the participation of our principal executive officer and our principal accounting officer.

Disclosure controlsthat are those controls and other procedures designed to ensure that information we are required to disclosebe disclosed by us in the reports that we file pursuant toor submit under the Exchange Act is correctly recorded, processed, summarized and reported. reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”), and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We maintain a system of internal accounting controls that is designed to provide reasonable assurance assets are safeguarded and transactions are executed and properly recorded in accordance with management’s authorization. This system is continually reviewed and augmented by written policies and procedures, the careful selection and training of qualified personnel and an internal audit program to monitor its effectiveness.

Our management does not expect our disclosure controls or our internal controls over financial reporting will prevent all error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, but not absolute, assurance the objectives of a control system are met. Further, any control system reflects limitations on resources, and the benefits of a control system must be considered relative to its costs. These limitations also include the realities that judgments in decision-making can be faulty and breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of a control. A design of a control system is also based upon certain assumptions about potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Changes in Internal Control overAs of the end of the period covered by this report, our management, with the participation of our Chief Executive Officer and Chief Financial Reporting

Officer, carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon theirthis evaluation, ofand the material weaknesses in our controlsinternal control over financial reporting as required by paragraph (d) of Rule 13a-15 or Rule 15d-15 underidentified in our annual report for the Exchange Act,year ended April 30, 2016, our principal executive officer and principal accounting officer havemanagement concluded that our disclosure controls and procedures were not effective to ensure that information we are required to disclose in the reports we file or submit under the Exchange Act is recorded, processed, summarized and will be, effectivereported within the time periods specified in providing reasonable assurancethe SEC’s rules and forms, and that materialsuch information relating to us iswas not accumulated and communicated to management, including our principal executiveChief Executive Officer and principal financial officer(s), or persons performing similar functions, as appropriateChief Financial Officer, to allow timely decisions regarding required disclosure. Theredisclosures.

Changes in Internal Controls

During the three months ended July 31, 2016, there were no changes in our internal controlscontrol over financial reporting (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act), that occurred during the quarter covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal controlscontrol over financial reporting.

PART II -– OTHER INFORMATION

Item 1. Legal Proceedings.

ITEM 1

LEGAL PROCEEDINGS

AsWe are not aware of any legal proceedings to which we are a party or of which our property is the datesubject. None of this Report, thereour directors, officers, affiliates, any owner of record or beneficially of more than 5% of our voting securities, or any associate of any such director, officer, affiliate or security holder is no litigation pending(i) a party adverse to us in any legal proceedings, or (ii) has a material interest adverse to us in any legal proceedings. We are not aware of any other legal proceedings that have been threatened by or against us. However, from time to time we may be subject to legal proceedings and claims in the ordinary course of business.  Such claims, even if not meritorious, would result in the expenditure by us of significant financial and managerial resources.

ITEM 1A

RISK FACTORS

Not applicable.

ITEM 2

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

RecentItem 2. Unregistered Sales of UnregisteredEquity Securities and Use of Proceeds.

On August  24, 2015,During the three months ended July 31, 2016, we completed the following sales of unregistered securities:

In May 2016, we issued 4,00,000tranches of 1,121,076 and 1,470,588 restricted shares of common stock to one investor in connection with the conversion of an officer and directoraggregate of $50,000 under two convertible promissory notes in the Company pursuant to a management agreementaggregate principal amount of $210,000 dated at a fair market price of $0.06 per share as payment for management fees. Total value of the services, valued at the fair market price, was $240,000.  For the period ended October 31, 2015, $240,000 was expensed as management fees. The shares were issued with a restrictive legend, and the shares are exempt from registration as contained in Section 4(2) of the Securities Act based upon the fact that the shares were issued in a private transaction to a director of the Company.  July 20 2015.

On August 24, 2015,June 22, 2016, we issued 1,1,00,0003,000,000 restricted shares of our common stock to a director and two employeesrelated party at a price of $0.01 per share for cash proceeds of $185,000. In addition, we reserved 800,000 shares of our common stock to be issued to the related party as a loan fee, which shares have not been issued as of the Company at a fair market pricedate of $0.06 per share as payment for management fees. Total value of the services, valued at the fair market price, was $66,000. For the period ended October 31, 2015, $66,000 was expensed as management fees.  The shares were issued with a restrictive legend, and the shares are exempt from registration as contained in Section 4(2) of the Securities Act based upon the fact that the shares were issued in a private transaction to a director and two employees of the Company.  this report.

On AugustJune 28, 2015, the Company in lieu of cash payment issued 3,542,857 shares of the Company’s common stock as payment in full for the outstanding debts of $248,000 owed to the former director and the chief executive officer. The shares were issued at the fair market price of $0.07 per share, being the closing stock price at August 28, 2015. The shares were issued with a restrictive legend and in reliance on an exemption from registration under Regulation S of the Securities Act.  

On September 10, 2015,2016, we issued 500,0001,000,000 restricted shares of our common stock to a consultant of the Company at a fair marketdeemed price of $0.085$0.028 per share as paymentin consideration for consulting fees. Total value of the services,fees valued at $28,000.

We issued these shares in reliance upon the fair market price, was $42,500. For the period ended October 31, 2015, $42,500 was expensed as consulting fees.  The shares were issued with a restrictive legend, and the shares are exemptexemption from registration as contained inprovided by Section 4(2)4(a)(2) of the Securities ActAct. Our reliance on Section 4(2) was based uponon the fact thatfollowing factors: (a) the issuances were isolated private transactions by us which did not involve a public offering; (b) there was only one investor in each transaction; (c) there were no subsequent or contemporaneous public offerings of securities by us; (d) the shares were issued in a private transactionnot broken down into smaller denominations; and are exempt from registration as contained in Section 4(2)(e) the negotiations for the sale of the Securities Act based uponshares took place directly between the fact that the shares were issued in a private transactionapplicable investor and no general solicitation was used.  

On October 20, 2015, the Company issued two convertible promissory notes with same terms in a total amount of $210,000 with a discount of 5%. The proceeds of $200,000 of the note were not received until October 23, 2015. The note is due together with any interest on April 19, 2015 (the “Maturity Date”). The Company has to pay interest on the unpaid principal balance of the note at the rate of 10% per annum from October 23, 2015 until the Maturity Date. The outstanding principal and interest at 120% may be redeemed within 90 days of closing and 130% after 90 days. The conversion price shall equal, subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company, 61% of the lowest daily volume weighted average price (“VWAP”) of the common stock during the 15 trading days prior to the conversion date.us.

Item 3. Defaults Upon Senior Securities.

The note was issued in reliance on an exemption from the registration requirements of Rule 506 of Regulation D under the Securities Act. The cash proceeds of was used for general working capital.

Stock Repurchase

We do not have a stock repurchase plan.

ITEM 3

DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4Item 4. Mine Safety Disclosures.

MINE SAFETY DISCLOSURES

Not applicable.

Item 5. Other Information.

ITEM 5

OTHER INFORMATIONNone.

As of the date of this Report, our management is unaware of any additional information to be reported on Form 8-K during the quarters ended October 31, 2015.Item 6. Exhibits.

No material changes were made to the procedures by which security holders may recommend nominees our board of directors.  

ITEM 6

EXHIBITS  

*  XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.SIGNATURES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DTS8 COFFEE COMPANY, LTD.