Global Hemp Group Inc.
Management Discussion and Analysis
Year ended September 30, 2021
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Management’s Discussion and Analysis
The following is management’s discussion in respect of the results of operations and financial position of Global Hemp Group Inc. (the “Company” or “GHG’) for the year ended September 30, 2021. The Company’s financial statements have been presented in accordance with International Financial Reporting Standards and are presented in Canadian dollars unless otherwise specified. Additional information, including the above mentioned financial statements, which contain extensive disclosure of the history of the Company are available on SEDAR (www.sedar.com) and at the Company’s website (www.globalhempgroup.com)
This MD&A has been prepared effective as of February 7, 2022
Forward Looking Statements
In the interest of providing the shareholders and potential investors of Global Hemp Group Inc. with information about the Company, including management’s assessment of the Company’s future plans and operations, certain information provided in this MD&A constitutes forward-looking statements or information (collectively, “forward- looking statements”). Forward-looking statements are typically identified by words such as “may”, “will”, “should”, “could”, “anticipate”, “expect”, “project”, “estimate”, “forecast”, “plan”, “intend”, “target”, “believe” and similar words suggesting future outcomes or statements regarding an outlook. Although these forward-looking statements are based on assumptions the Company considers to be reasonable based on the information available on the date such statements are made, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties, and other factors which may cause actual results, levels of activity, and achievements to differ materially from those expressed or implied by such statements. The forward-looking information contained in this MD&A is based on certain assumptions and analysis by management of the Company (the “Management”) in light of its experience and perception of historical trends, current conditions and expected future development and other factors that it believes are appropriate.
The material factors and assumptions used to develop the forward-looking statements herein include, but are not limited to, the following: (a) the regulatory climate in which the Company operates will continue to be favorable to the Company’s business; (b) the continued sales success of the Company’s products; (c) the continued success of sales and marketing activities; (d) there will be no significant delays in the development and commercialization of the Company’s products; (e) the Company will continue to maintain sufficient and effective production and R&D capabilities to compete on the attributes and cost of its products; (f) the Company’s ability to deal with adverse growing conditions (due to pests, disease, fungus, climate or other factors) in a timely and cost-effective manner; (g) there will be no significant reduction in the availability of qualified and cost-effective personnel resources; (h) new products will continue to be added to the Company’s portfolio; (i) demand for hemp-based wellness products will continue to grow in the foreseeable future; (j) there will be no significant barriers to the acceptance of the Company’s products in the market; (k) the Company will be able to maintain compliance with applicable contractual and regulatory obligations and requirements; (l) there will be adequate liquidity available to the Company to carry out its operations; and (m) superior products do not develop that would render the Company’s current and future product offerings undesirable and the Company is otherwise able to minimize the impact of competition and keep pace with changing consumer preferences; and (n) the Company will be able to successfully manage and integrate acquisitions.
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The Company’s forward-looking statements are subject to risks and uncertainties pertaining to, among other things, revenue fluctuations, nature of government regulations, economic conditions, loss of key customers, retention and availability of executive talent, competing products, common share price volatility, loss of proprietary information, product acceptance, system infrastructure functionality, information technology security, cash available to fund operations, crop risk, availability of capital and, international and political considerations, including but not limited to those risks and uncertainties discussed under the heading “Risk Factors” in this MD&A. The impact of any one risk, uncertainty, or factor on a particular forward-looking statement is not determinable with certainty as these are interdependent, and the Company’s future course of action depends on Management’s assessment of all information available at the relevant time. Except to the extent required by law, the Company assumes no obligation to publicly update or revise any forward-looking statements made in this MD&A, whether as a result of new information, future events, or otherwise. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on the Company’s behalf, are expressly qualified in their entirety by these cautionary statements.
Background & Nature of Business
Global Hemp Group (the “Company” or “GHG”) was incorporated on October 30, 2009 in British Columbia, Canada, originally under the name Arris Holdings Inc., and on March 24, 2014 changed its name to Global Hemp Group Inc.
The Company’s registered office is #106 – 1169 Mt. Seymour Road, North Vancouver, BC, V7H 2Y4. The Company’s common shares are currently traded on Canadian Securities Exchange (“CSE”) under the symbol “GHG”, on Börse Frankfurt under the symbol “GHG”, and on the U.S. OTCQB under the symbol “GBHPF”.
GHG is focused on a executing a multi-phased strategy to become a leader in the industrial hemp industry in the United States. The Company is headquartered in Vancouver, British Columbia. The current phase of the strategy focuses on the development of “sustainable” and “green” value-added industrial hemp products utilizing the processing of the entirety of the hemp plant for multi-merchantable applications, as will be showcased at the Colorado Hemp Agro-IndustrialZone (HAIZ)project in Hayden Colorado.
Benefits of the HAIZ strategy:
- Economic: The HAIZ was originally conceived at a time when hemp was just making its comeback after 80 years of repression and a continued uncertain regulatory framework. Consequently, markets for most hemp products were rather shallow leading to wide swings in prices. Cannabinoid extraction is typical of such markets, and it offered the best opportunity to finance the production of the less visible/attractive hemp products. Over the past two years, the more traditional hemp products (hurd and fibre) have become more established and provide real opportunities. Management expects that the time for these other hemp products has come and will become of central importance in the future of the Company.
- Social: From soil to shelf, the HAIZ concept is based on a collaborative rather than competitive operations model, benefiting all stakeholders throughout the process. From growing of the crops through to the final materials and products, the HAIZ concept promotes cross-sector partnerships, rural development and job creation.
- Environmental: Global Hemp Group is committed to environmentally-friendly processes and products, from farm to final consumer. Because of its light weight, transport of hemp intermediate goods is costly and carries
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a heavy carbon footprint. By concentrating production and processing to a zone adjacent to the farming area, the HAIZ minimizes both adverse economic and environmental effects.
To further support and innovate the HAIZ, Global Hemp Group has established a Research and Development Divisionto actively pursue the development of Intellectual Property that can be patented for implementation at its projects and beyond. The Division is led by Prof. Víctor M. Castaño, Ph.D.from the National Autonomous University of Mexico (UNAM), a highly recognized leader in areas of applied science and technology. The R&D team brings an amazing wealth of knowledge and experience in multiple disciplines and will initially focus on development of Environmentally-Friendly Construction Materials, Nanofertilizers and Eco-Friendly Production of Hemp-Based Graphene.
Message from the President
There is no question that hemp can and will impact almost every industry in the global economy as it continues to be legalized worldwide. It has been creating jobs and new business opportunities, as well as stimulating ancillary industries that generate new business for an industry that did not exist just a few short years ago.
Management has always believed that the industrial applications of the hemp plant will be by far the largest and most lucrative segment over time, even larger than the CBD market. The roadmap to success in the hemp industry is starting to finally look similar to most other normalized industries as far as regulation and infrastructure. However, we are still blazing new trails and developing breakthrough technologies specific to the hemp industry and will continue to for decades to come.
The refocusing of Global Hemp Group back to the industrial applications of hemp has begun to provide some amazing opportunities now, and for the future. Developing a complete Green Community and the Hemp-Agro- Industrial Zone or HAIZ, in Hayden Colorado will give GHG an opportunity to become a leader in sustainable, eco-friendlyhemp-based construction in the United States. This development will significantly expand existing real estate and water infrastructure assets for the Company, while providing multiple revenue stream opportunities.
In addition, R&D is an extremely important segment of the Company’s business. Having signed a Collaboration Agreement with Aramat Querétaroand the National Autonomous University of Mexico (Universidad Nacional Autonoma de Mexico – UNAM), one of the leading Spanish-speaking universities of the world and the most prestigious Latin American educational institution, will allow GHG access to state-of-the-art laboratory facilities at the university, as well as UNAM’s research library, and an opportunity to interact with students and professors holding a wide range of expertise. This has made it possible to expand the focus of the R&D Division’s experimental and conceptual work, while continuing to work on new Intellectual Property related to Environmentally-Friendly Alternative Construction Materials that can be used in conjunction with our project in Colorado and marketed widely.
We look forward to keeping you updated on the progress of the Global Hemp Group as we continue to execute on our projects.
Curt Huber, President & CEO
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Company Shifts Focus to Sustainable Industrial Hemp Applications for 2021
Global Hemp Group underwent a significant shift in business focus for 2021, transforming the Company from being singularly focused on the cultivation of hemp for cannabinoid extraction with the completion of the sale of the Oregon farm in July 2021, to a Company that will be focused on the industrial aspects of hemp and what will be the largest segment of the hemp market over time. This transformation began in September of 2020 with the signing of the Exclusive Strategic partnership to develop the Colorado Green Community and Hemp Agro- Industrial Zone (HAIZ) in northwest Colorado (see the news release of Sept 16/20 for more detail).
The project will be developed under the banner of Innovative Hemp Technologies (IHT). IHT’s core objective; to develop “green” and “affordable” homes in a Planned Unit Development (PUD) utilizing hemp-based construction materials to meet historical pent-up demand in the area, which will include develop large scale irrigation and cultivation of industrial hemp and the manufacture of hemp-based construction products and textiles. This will significantly expand the existing infrastructure assets while generating multiple revenue streams for the Company.
Historically hemp projects have struggled as growing hemp and identifying a market to sell to, will not create a successful company. But adding a buyer for your product to the equation and becoming vertically integrated, certainly will. In the case of the Colorado project, a market has been identified with a large scale pent up demand (affordable/attainable housing) that hasn’t been relieved in several decades, that also has a barrier to entry from others and will be successful without the inclusion of hemp-based building materials, making it an ideal market to enter. By utilizing a campus setting like that of the HAIZ, the Company will efficiently implement these vertically integrated functions (water, agriculture, processing, housing). Proven industry professionals have been engaged to work alongside IHT’s management in the areas of agriculture, R&D, manufacturing, and construction to achieve the Company’s objectives.
Execution of the HAIZ project will create substantial shareholder value through the incremental introduction of additional (multiple) revenue streams to meet IHT’s objectives and set GHG on a path to become a leader in sustainable hemp-based “green” construction in the United States. The Colorado “HAIZ” will become a “showcase” project to demonstrate “green” hemp construction products and technologies for third-party offtake and for replication in other suitable U.S. markets.
The project will leverage the existing infrastructure to turn “dry land” farming acreage into irrigated land that can subsequently be used to develop “affordable housing” and high value agricultural crops such as industrial hemp. GHG’s vision is to take the hemp grown onsite and convert as much of the conventional building materials used at the project into sustainable, hemp-based building materials for use in the housing development. This project contemplates a 25-yearbuild-out. The luxuries of a long-term project with demonstrably high demand are:
- economies of scale
- opportunity to implement learned efficiencies
- opportunity to continually refine product offerings though intimate familiarity with specific markets
- access to new markets stemming from other by-products of the hemp processing (fibre and microfibres)
Acreage Parcels Acquired for the Green Community
There have been three properties acquired to date for a total acreage package of 875 acres.
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Global Hemp Group Inc. published this content on 07 February 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 07 February 2022 06:17:02 UTC.
Income Statement Evolution