NEXT GREEN WAVE HOLDINGS INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
For the Three and Nine Month Period Ended September 30, 2021
Business of the Company
Next Green Wave Holdings Inc. ("the Company"), is a Canadian based, North American seed to sale cannabis company which provides products and services to the cannabis industry in the State of California in the United States through its wholly-owned subsidiaries, Next Green Wave, LLC ("NGW"), Crossgate Capital US Holdings Corp., NGW Holdings, LLC, SDC Ventures, LLC (dissolved December 31, 2020) and NGWB, LLC.
This management discussion and analysis ("MD&A") of the financial condition and results of operations of the Company, and its subsidiaries, is for the three and nine-month period ended September 30, 2021.
This Management's Discussion and Analysis ("MD&A") is dated November 29, 2021, unless otherwise indicated, and should be read in conjunction with the consolidated condensed interim financial statements of the Company for the three and nine-month period ended September 30, 2021 and the related notes. The Company's significant accounting policies are set out in Note 2 of the audited consolidated financial statements for the year ended December 31, 2020.
This MD&A was written to comply with the requirements of National Instrument 51-102 - Continuous Disclosure Obligations. Results are reported in US dollars, unless otherwise noted. In the opinion of management, all adjustments (which consist only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results presented as at September 30, 2021, are not necessarily indicative of the results that may be expected for any future period. The financial statements are prepared in compliance with International Financial Reporting Standards.
For the purposes of preparing this MD&A, management, in conjunction with the Board of Directors, considers the materiality of information. Information is considered material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or value of the Company's common shares; or (ii) there is a substantial likelihood that a reasonable investor would consider it important in making an investment decision; or (iii) if it would significantly alter the total mix of information available to investors. Management, in conjunction with the Board of Directors, evaluates materiality with reference to all relevant circumstances, including potential market sensitivity.
Further information about the Company and its operations can be obtained from the Company website at www.nextgreewave.com, or from www.sedar.com.
Forward-Looking Statements
This MD&A may contain "forward‐looking statements" about the Company. In addition, the Company may make or approve certain statements in future filings with Canadian securities regulatory authorities, in press releases, or in oral or written presentations by representatives of the Company that are not statements of historical fact and may also constitute forward‐looking statements. All statements, other than statements of historical fact, made by the Company that address activities, events or developments that the Company expects or anticipates will or may occur in the future are forward‐looking statements, including, but not limited to, statements preceded by, followed by or that include words such as "may", "will", "would", "could", "should", "believes", "estimates", "projects", "potential", "expects", "plans", "intends", "anticipates", "targeted", "continues", "forecasts", "designed", "goal", or the negative of those words or other similar or comparable words and includes, among others, information regarding expectations of the effect of the Company; statements relating to the business and future activities of, and developments related to, the Company after the date of this MD&A; future business strategy, competitive strengths, goals, expansion and growth of the Company's business; operations and plans, including cultivation and licensing assets, and the grant of licenses or renewals; receipt of regulatory approvals in a timely manner or at all; the transfer and/or maintenance of licenses and third‐party consents in a timely manner or at all; the expansion of existing cultivation and production facilities, including the completion of cultivation and production facilities that are under construction; any potential future legalization of adult‐use and/or medical cannabis under U.S. federal law; expectations of market size and growth in the United States and the State of California; expectations for other economic, business, regulatory and/or competitive factors related to the Company or the cannabis industry generally; and other events or conditions that may occur in the future. These statements speak only as at the date they are made and are based on information currently available and on the then current expectations of the party making the statement and assumptions concerning future events, which are subject to a number of known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from that which was expressed or implied by such forward‐looking statements, including, but not limited to risks and uncertainties related to the following:
Next Green Wave Holdings Inc.
Management's Discussion and Analysis
Forward-Looking Statements (Continued)
- marijuana is illegal under U.S. federal law;
- marijuana is strictly regulated in those states which have legalized it for medical or recreational use;
- newly established legal regime;
- restricted access to banking;
- heightened scrutiny by Canadian and U.S. regulatory authorities;
- foreign investors in the Company and its directors, officers, and employees may be subject to entry bans into the United States;
- constraints on developing and marketing products;
- unfavorable tax treatment of cannabis businesses;
- risk of civil asset forfeiture;
- proceeds of crime statutes;
- limited intellectual property protection;
- lack of access to U.S. bankruptcy protections;
- potential FDA regulation;
- legality of contracts;
- limited operating history;
- actual results of operations may differ materially from the expectations of the Company's management;
- significant ongoing costs and obligations related to its investment in infrastructure, growth, regulatory compliance and operations;
- voting control;
- Next Green Wave Holdings Inc, being a holding company;
- the Company's products;
- unfavorable publicity or consumer perception;
- strategic alliances;
- risks inherent in an agricultural business;
- energy costs;
- reliance on key personnel;
- reliance on a single jurisdiction;
- unknown environmental risks;
- security risks;
- information technology risks;
- product recalls;
- results of future clinical research;
- competition;
- liquidity, financial resources and access to capital;
- licenses;
- future acquisitions or dispositions;
- insurance and uninsured risks;
- dependence on key inputs, suppliers and skilled labor;
- difficulty to forecast;
- management of growth;
- internal controls;
- failure to comply with anti‐bribery laws;
- conflict of interest;
- litigation;
- product liability;
- general economic risks;
- Next Green Wave Holdings Inc, being a Canadian company and shareholder protections differ from shareholder protections in the United States and elsewhere;
- volatile market price for the Company's securities;
- the Company may not pay dividends;
- future sales or issuances of securities could decrease the value of securities, dilute investors' voting power and reduce earnings per share;
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Next Green Wave Holdings Inc.
Management's Discussion and Analysis
- the regulated nature of the Company's business may impede or discourage a takeover, which could reduce the market price of the Company's securities;
- there is no assurance the Company will continue to meet the listing standards of the Canadian Securities Exchange or the OTCQX
- Currency fluctuations; and
- other factors beyond the Company's control, as more particularly described under the heading "Risk Factors" in this MD&A.
Readers are cautioned that the foregoing list is not exhaustive of all factors and assumptions which may have been used. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such forward‐ looking information and statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such information and statements. Accordingly, readers should not place undue reliance on forward‐ looking information and statements, as statements containing forward‐looking information involve significant risks and uncertainties and should not be read as guarantees of future results, performance, achievements, prospects and opportunities. The forward‐ looking information and statements contained herein are presented for the purposes of assisting readers in understanding the Company's expected financial and operating performance and the Company's plans and objectives and may not be appropriate for other purposes.
The cautionary statements contained or referred to in this section should be considered in connection with any subsequent written or oral forward‐looking statements that the Company and/or persons acting on its behalf may issue. The Company does not undertake any obligation to update or revise any forward‐ looking statements, whether as a result of new information, future events or otherwise, other than as required under securities legislation.
Company Overview
The Company was incorporated in the province of British Columbia on July 6, 2011. Its registered and records office is located at Suite 300 - 1055 West Hastings Street, Vancouver, B.C. V6E 2E9.
On October 10, 2018, the Company completed its Initial Public Offering ("IPO") and the Company's common shares are listed on the Canadian Securities Exchange ("CSE") under the trading symbol "NGW". In Q1 2019, the Company began trading on the OTCQX Best Market in the United States under the symbol "NXGWF".
The Company is a Canadian-based, North American seed to sale cannabis company which provides products and services to the cannabis industry in the State of California in the United States. The Company, through its wholly-owned subsidiary, Next Green Wave, LLC ("NGW"), is licensed by the State of California to produce, distribute and sell products throughout the State.
On April 18, 2019, the Company obtained the Certificate of Occupancy on its 35,000 square foot facility on one of its four properties zoned for cannabis production in the City of Coalinga, CA ("Facility A"). Facility A enables the Company to cultivate medicinal and recreational cannabis and manufacture and distribute cannabis products in accordance with the requirements under the Medical and Adult Use Regulation and Safety Act (MAUCRSA).
Key Developments
On January 4, 2021, the Company appointed Todd Hybels as its Chief Operating Officer and Glen Harder as the Chairman of the Board.
On January 6, 2021, the Company signed a two-year supply and production agreement (the "Agreement") with COOKIES, a premiere cannabis brand in California and throughout the world. As part of the Agreement:
- COOKIES will sell Next Green Wave branded products in COOKIES retail locations across California.
- Next Green Wave will cultivate exclusive COOKIES genetics to be packaged and sold under the Cookies brand name.
On January 28, 2021, the Company was named to the 2021 OTCQX® Best 50, a ranking of top performing companies, across all industries, traded on the OTCQX Best Market in 2020. The Company ranked 41st overall and 4th among all cannabis companies.
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Next Green Wave Holdings Inc.
Management's Discussion and Analysis
In June 2021, the Company commenced construction on its 62,000 sq.ft. premium indoor cultivation facility ("Facility B").
In August 2021, the Company was awarded its building permit, for Facility B, by the City of Coalinga.
In September 2021, Ben Kovacs resigned as a Director of the Company.
On October 1, 2021, Curtis Floyd was appointed to the Company's Board of Directors.
As of the date of this MD&A, the Company had the following products for sale, including:
-
Next Green Wave(www.nextgreenwave.com) o Premium Bulk Flower
o Premium Jarred Flower (3.5g) o Sauce Carts
The Company wishes to emphasize the importance of the going concern assumption which can be referenced in Note 1 of the September 30, 2021 consolidated condensed interim financial statements and the Liquidity and Capital Resources section of this MD&A.
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Next Green Wave Holdings Inc.
Management's Discussion and Analysis
Results of Operations
For the three months ended | For the nine months ended | |||||||
September 30, | September 30, | September 30, | September 30, | |||||
2021 | 2020 | 2021 | 2020 | |||||
Revenue | $ | 4,294,386 | $ | 3,582,416 | $ | 12,712,607 | $ | 7,933,704 |
Cost of Sales | (2,213,194) | (1,688,971) | (6,372,448) | (2,368,215) | ||||
Gross profit before fair value adjustments | 2,081,192 | 1,893,445 | 6,340,159 | 5,565,489 | ||||
Fair value changes in biological assets included in inventory sold | (975,165) | 113,526 | (4,861,386) | (2,645,991) | ||||
Unrealized fair value adjustment on growth of biological assets | 1,442,443 | (285,993) | 4,878,697 | 158,232 | ||||
Gross profit | 2,548,470 | 1,720,978 | 6,357,470 | 3,077,730 | ||||
Operating Expenses | ||||||||
Bank charges | 20,830 | 49,237 | 54,119 | 99,909 | ||||
Depreciation | 89,824 | 206,307 | 439,716 | 651,762 | ||||
Directors fees | 11,932 | 16,561 | 57,990 | 42,866 | ||||
Foreign exchange loss (gain) | (2,884) | (10,476) | (26,358) | (1,514) | ||||
General office | 17,552 | 6,790 | 59,273 | 99,431 | ||||
Insurance | 82,822 | 109,676 | 207,760 | 251,498 | ||||
Investor relations, marketing and communications | 6,720 | 13,122 | 146,670 | 127,379 | ||||
Royalty payments | - | 6,467 | - | 62,058 | ||||
Professional fees | 55,444 | 66,448 | 99,014 | 122,105 | ||||
Consulting services | 24,979 | 31,766 | 63,092 | 122,330 | ||||
Regulatory and filing fees | 7,983 | 13,607 | 46,597 | 24,818 | ||||
Salaries and management fees | 71,737 | 162,745 | 195,810 | 602,003 | ||||
Stock-based compensation | 53,897 | 271,138 | 399,313 | 427,195 | ||||
Travel, meals and entertainment | 26,935 | 12,706 | 75,921 | 76,184 | ||||
Total operating expenses | 467,771 | 956,094 | 1,818,917 | 2,708,024 | ||||
Income from operations | 2,080,699 | 764,884 | 4,538,553 | 369,706 | ||||
Other Expenses (Income) | ||||||||
Transaction costs | 20,296 | (348) | 539,835 | 70,694 | ||||
Unrealized gain on investments | - | 5,449 | - | (954,735) | ||||
Reversal of impairment of assets | - | - | - | (2,447,948) | ||||
Interest and accretion expense | 255,226 | 359,072 | 649,095 | 931,551 | ||||
Interest income | (7,100) | (1,296) | (18,890) | (2,262) | ||||
Net income for the period, before provision for income taxes | 1,812,277 | 402,007 | 3,368,513 | 2,772,406 | ||||
Current tax expense | 394,354 | - | 1,454,493 | - | ||||
Deferred income tax | (77,593) | - | (588,837) | - | ||||
Net income for the period | $ | 1,495,516 | $ | 402,007 | $ | 2,502,857 | $ | 2,772,406 |
Other comprehensive income | ||||||||
Cumulative translation income (loss) | (59,358) | 862 | (1,801) | (11,152) | ||||
Total comprehensive income for the period | $ | 1,436,158 | $ | 402,869 | $ | 2,501,056 | $ | 2,761,254 |
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Next Green Wave Holdings Inc. published this content on 30 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 November 2021 01:40:05 UTC.