TORONTO, Aug. 30, 2021 (GLOBE NEWSWIRE) — The Flowr Corporation (TSX.V: FLWR; OTC: FLWPF) (“Flowr” or the “Company”) herein announces its financial and operational results for the three and six months ended June 30, 2021. All financial information in this news release is reported in Canadian dollars and represents results from continuing operations, unless otherwise indicated.
Darryl Brooker, Chief Executive Officer of Flowr, commented, “The first half of 2021 represented a transition period for Flowr as we looked to focus our strategy of producing premium and ultra-premium dried flower cannabis in Canada, improve operational efficiencies, and explore opportunities to achieve revenue growth in Portugal.”
“We achieved gross revenue of $7 million and net revenue of $6 million in the first half of 2021, doubling the net revenue for the same period of 2020. Net revenue for the second quarter of 2021 however came in below our expectations at approximately $2.2 million, as we saw a decrease in sales of retail products in Canada offset by bulk sales of aged and lower tier inventory. Sales in the second quarter of 2021 was impacted by a slower than expected rollout in Quebec and increased competition for dried flowers at higher THC levels, while we worked to introduce new strains and product formats and expand our sales coverage in the third and fourth quarter of 2021.”
“Operationally, the K1 Facility has been planted to full capacity since early July, which is the first time we have had the facility at full utilization. We have seen very promising results from our pillar strains BC Pink Kush and BC Black Cherry, and are even more excited about the newest strain, BC Strawnana, which saw its first shipment in August. In addition to BC Strawnana, we are targeting to introduce multiple new, high-THC strains in 2021 and the first half of 2022. We have also expanded our product formats to 14 gram and 28 gram bags for dried flowers, and a new innovative style of pre-rolls to meet consumer demand. In June, Flowr entered into a supply agreement with Focus Medical Herbs Ltd., a company affiliated with IM Cannabis Corp. (collectively, “IMC”), to export at least five hundred kilograms of high quality dried flowers to Israel in bulk at very favourable prices, providing another sales channel for our premium products. In July, Flowr entered into an agreement with Green Hedge Education & Distribution Services Ltd. (“Green Hedge”) to act as our external sales agent in Ontario, Alberta, British Columbia, and Saskatchewan, significantly increasing our sales coverage in each province.”
“During the second quarter, we continued our efforts to improve operational efficiency and reduce SG&A costs. As part of the strategic review that was previously announced, for the year to date, we have achieved over $3.3 million in annualized SG&A and other cash savings, through rightsizing, reduction and relocation of various senior roles, sale of non-core assets and licenses, and subleasing of office and warehouse spaces. In addition, we have sold or are in advance stages of selling non-core assets with total estimated gross price of over $7 million.”
“In Portugal, Holigen Holdings Limited (“Holigen”) signed a medical cannabis supply agreement for the sale of cannabis biomass cultivated in 2020 for €500,000, representing the largest bulk medical cannabis sale in Portugal to date. On August 16, 2021, we announced a new partnership agreement with the popular US cannabis brand Cookies for the exclusive right to cultivate and distribute Cookies branded medical cannabis and merchandise in Portugal, with the opportunity to also supply the E.U. and other jurisdictions on a wholesale basis. The Cookies partnership is testament to the capability and our confidence in growing Holigen’s presence in the E.U. market.”
“As we look ahead to the second half of 2021, we are excited about the opportunities to continue growth in Canada and Portugal. Our focus will remain on executing our strategy to increase sales through new strain and product offerings, improving operational efficiency to ensure a consistent supply of high-grade premium products and healthy margins, and maximizing the potential of Holigen.”
Second Quarter and First Half 2021 Highlights
- Gross revenue totaled $2.4 million in Q2 2021 compared with $3.0 million in Q2 2020. Net revenue was approximately $2.2 million in Q2 2021 compared with $2.3 million in Q2 2020. Gross revenue for the first half of 2021 totaled $7.0 million compared with $4.0 million in the same period of 2020. Net revenue for the first half of 2021 totaled $6.0 million compared with $3.1 million in the first half of 2020.
- In Canada, Flowr sold approximately 2,239 kilograms of cannabis during Q2 2021, including 184 kilograms of retail products and 2,055 kilograms of cannabis through bulk sales. For the first half of 2021, Flowr sold 2,911 kilograms of cannabis including 726 kilograms of retail products and 2,186 kilograms through bulk sales.
- Net revenue from tolling services earned by Holigen in Portugal was $171,000 during Q2 2021 and $383,000 for the first half of 2021, compared with $nil for the same respective periods in 2020.
- Gross loss for Q2 2021 decreased to $1.3 million from a loss of $1.7 million for Q2 2020, while gross loss for the first half of 2021 improved to a loss of $3.4 million from a loss of $5.8 million during the first half of 2020, primarily as a result of the increase in net revenue, while the higher cost of sales recorded were offset by higher gains resulting from the reversal of fair value adjustments on inventory sold in the first half of 2021.
- SG&A expenses for Q2 2021 decreased to $4.2 million from $4.4 million in Q2 2020, while SG&A expenses for the first half of 2021 decreased to $8.8 million from $10.4 million in the same period 2020, as a result of cost reduction measures implemented.
- Strategic review – The previously announced strategic review is now substantially complete, resulting in: (i) the divestment of non-core licenses and certain extraction and related equipment for total proceeds of $1.1 million; (ii) signing of a binding agreement to sell certain non-core industrial land located in Kelowna for an aggregate purchase price of $6.3 million, subject to certain closing conditions; and (iii) annualized SG&A and other cash savings achieved of approximately $3.3 million, before restructuring charges, through a combination of rightsizing, subleasing excess office and warehouse facilities, and divestment of non-core foreign subsidiaries.
- In May 2021, Flowr’s BC Black Cherry strain won the top award at the Highlife Cannabis Cup. The Highlife Cannabis Cup, which was organized by Sessions Enterprises, host and creators of ‘The Highlife’, is the first of its kind in Canada and featured three micro-cultivators and three licensed producers.
- On June 2, 2021, the Company entered into an equity distribution agreement (the “Distribution Agreement”) with Cantor Fitzgerald Canada Corporation (the “Cantor”) in respect of the at-the-market equity program (the “ATM Financing”). The ATM Financing allows the Company to issue and sell up to $20 million of common shares in the capital of the Company (the “Common Shares”) from treasury to the public, from time to time, through Cantor, at the Company’s discretion and in accordance with the terms and conditions of the Distribution Agreement. The ATM Financing is intended to provide the Company with additional financing flexibility should it be required in the future.
- On June 7, 2021, Flowr announced that it has entered into a supply agreement with IMC which has an exclusive commercial agreement within Israel. Pursuant to the terms of the supply agreement, Flowr has agreed to export at least five hundred kilograms of premium dried flower cannabis in bulk form into Israel. In August, 2021, IMC issued its first purchase order for approximately 220 kilograms of medical cannabis and Flowr expects the first export to Israel to be completed in Q4 2021.
- On June 29, 2021, the Company entered into an agreement with Green Hedge to act as the Company’s external sales agent providing coverage to licensed cannabis wholesalers and retailers across Canada.
Subsequent to Second Quarter 2021
- On July 19 and July 27, 2021, Flowr closed two tranches of private placement financings for total gross proceeds of $7,564,000 and issued 36,019,047 units (“Units”) of the Company at a price of $0.21 per Unit. Each Unit consists of one Common Share and one Common Share purchase warrant which entitles the warrant holder thereof to acquire one Common Share at an exercise price of $0.26 per share any time for a period of 42 months from the closing date. In connection with the private placements, the Company paid ATB Capital Markets Inc. (“ATB”) a placement fee equal to $490,000 and granted ATB 2,004,000 broker warrants.
- On July 28, 2021, Flowr announced that Holigen entered into a medical cannabis supply agreement with Galaxiavertical – Unipessoal Lda. (“Galaxia”). Pursuant to the terms of the supply agreement, Galaxia has agreed to purchase from RPK the high-THC medical cannabis biomass produced from the Aljustrel site in 2020 at an aggregate price of approximately $750,000 (€500,000). This supply agreement represents the largest bulk medical cannabis sale in Portugal to date.
- On August 6, 2021, the Company entered into an amendment to its amended and restated credit agreement (“ARCA”) with a credit facility from a syndicate of lenders led by ATB Financial (“ATB Financial”) whereby the senior creditors agreed to certain amendments allowing Flowr to additional flexibility under the ARCA to issue equity and to enter into financings arrangements with respect to Holigen. The Company also repaid $7.5 million towards the credit facility on August 6, 2021, reducing the principal amount outstanding under the ATB Financial term and operating facilities to approximately $9.8 million. The Company expects the indebtedness pursuant to the ARCA to be reduced to less than $6 million by year-end, representing a significant reduction in overall indebtedness.
- On August 6, 2021, the Company announced that Ryan Roebuck joined the Board of Directors of the Company. Mr. Roebuck is the co-founder and CEO of Edition X, which owns and operates cannabis retail stores and branded products and accessories in Canada and California. Prior to Edition X, for seven years, Mr. Roebuck was a partner at XDL Capital, managing a portfolio of early-stage investments with a focus on the cannabis sector. Over the time at XDL Capital, dozens of investments were made into the sector since 2012 with numerous realized exits. Mr. Roebuck was previously a founding director and investor of Pharmacan Capital (now Cronos Group Inc.) and began his career as a top-rated equity research analyst covering special situations. On August 6, 2021, the Company also announced Michael Galego resigned from the Board of Directors. Mr. Galego will maintain certain observer rights on the Board of Directors.
- On August 16, 2021, Flowr announced that Holigen, through its wholly-owned subsidiary, RPK entered into a series of agreements (the “Licensing Agreements”) with Cookies Creative Consulting and Promotions Inc. (“Cookies”) whereby an indirect wholly-owned subsidiary of Holigen will be cultivating and distributing Cookies products in Portugal from its E.U. GMP facility in Sintra. Pursuant to the terms of the Licensing Agreements, Holigen will cultivate and have the exclusive rights to sell Cookies branded products, including non-cannabis merchandise, in Portugal for three years subject to certain milestone commitments. Flowr has commenced the process of importing the Cookies branded genetics from Canada into Portugal and expects to be able to commence commercial production by year-end. Cookies will consult with Flowr on the development of a medical retail distribution strategy in Portugal through the country’s existing pharmacy networks and the design of up to three proprietary retail pharmacy outlets in the country.
SELECTED FINANCIAL AND OPERATIONAL RESULTS
|In thousands of CAD dollars,||Three months ended
||Six months ended
|(except loss per share and grams harvested)||June 30,
|Grams harvested – K1||1,251,416||1,345,567||1,920,723||1,835,668|
|Cost of sales||6,034||2,896||9,526||4,629|
|Impairment of inventory||129||461||878||1,127|
|Gross loss before fair value adjustments||(3,991||)||(1,043||)||(4,398||)||(2,666||)|
|Selling and marketing and G&A||4,195||4,417||8,795||10,436|
|Gain from disposal of subsidiary||1,113||—||1,059||—|
|Basic and diluted loss per share||(0.02||)||0.04||(0.04||)||(0.13||)|
(1) Gross revenue net of excise tax, provision for returns and concessions
For a full discussion of Flowr’s operational and financial results, please refer to the Company’s Management’s Discussion & Analysis and Interim Condensed Consolidated Financial Statements for the three and six months ended June 30, 2021, which have been filed on SEDAR at www.sedar.com.
About The Flowr Corporation
The Flowr Corporation is a Canadian cannabis company with operations in Canada and the European Union. Its Canadian operating campus, located in Kelowna, BC, includes a purpose-built, GMP-designed indoor cultivation facility, an outdoor and greenhouse cultivation site, and a state-of-the-art R&D facility. From this campus, Flowr produces recreational and medicinal products. Internationally, Flowr services the global medical cannabis market through its subsidiary, Holigen Holdings Limited, which has a license for cannabis cultivation in Portugal and operates a GMP licensed facility in Portugal. In 2020, Flowr’s BC Pink Kush was recognized as the top indica strain in Canada by KIND magazine.
Flowr aims to support improving outcomes through responsible cannabis use and, as an established expert in cannabis cultivation, strives to be the brand of choice for consumers and patients seeking the highest-quality craftsmanship and product consistency across a portfolio of differentiated cannabis products.
For more information, please visit flowrcorp.com or follow Flowr on Twitter: @FlowrCanada and LinkedIn: The Flowr Corporation.
On behalf of The Flowr Corporation:
Chief Executive Officer
INVESTORS & MEDIA:
Chief Financial Officer
Certain statements made in this press release may constitute “forward-looking information”, “future oriented financial information” or “financial outlooks” (collectively, “forward-looking information”) within the meaning of applicable securities laws. Forward-looking information may relate to anticipated events or results including, but not limited to: the Company’s expectation that it will build on its achievements as it continues to invest in sales and marketing; the Company’s expectations for sales of product in Quebec; Flowr servicing the global medical cannabis market and operating GMP facilities in Portugal; Flowr’s business, production and products; Flowr’s plans to provide premium quality cannabis to adult use recreational and medical markets; EU-GMP certification opening the medicinal cannabis opportunity for the Company in global markets; the Company being well positioned to distribute EU-GMP compliant product into underserviced markets; Flowr’s ability to realize revenue from the Company’s European operations within the anticipated timeframe or at all; Flowr’s ability to establish sales and distribution channels in Europe to deliver medicinal cannabis to underserviced markets; expectations with respect to the anticipated timing for harvests, propagation, completion of construction and installation of extraction infrastructure at the Company’s Sintra facility; the Company being unable to commence GMP packaging and commercial sales within the anticipated timeframe or at all; Flowr’s ability to service the global medical cannabis market and/or operate GMP-designed manufacturing facilities in Portugal; the sale of medical cannabis in pharmacies in Portugal representing a watershed moment for cannabis in the E.U.; the Company’s ability to complete offering(s) of its securities under the Final Shelf Prospectus; the expected impact of the strategic review decisions on the Company; the actual costs of savings from the Company’s restructuring initiatives, including with respect to its workforce; the Company’s plans to divest its interests in certain of its subsidiaries; the Company’s ability to obtain licensing from Health Canada and other regulatory authorities with respect to its properties and facilities; future legislative and regulatory developments in Canada and elsewhere; the cannabis industry in Canada generally; the ability of Flowr to implement its business strategies; and the ability of Flowr to produce or sell premium quality cannabis. Particularly, information regarding our expectations of future results, targets, performance achievements, prospects or opportunities is forward-looking information. Often, but not always, forward-looking statements can be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “believe”, “estimate”, “plan”, “could”, “should”, “would”, “outlook”, “forecast”, “anticipate”, “foresee”, “continue” or the negative of these terms or variations of them or similar terminology. Forward-looking information is current as of the date it is made and is based on reasonable estimates and assumptions made by us at the relevant time in light of our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we believe are appropriate and reasonable in the circumstances. To the extent any forward-looking information in this press release constitutes “future oriented financial information” or “financial outlooks”, within the meaning of applicable securities laws, the purpose of such information being provided is to demonstrate the potential of the Company and readers are cautioned that this information may not be appropriate for any other purpose. However, we do not undertake to update any such forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws in Canada. There can be no assurance that such estimates and assumptions will prove to be correct. Many factors could cause our actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking information as discussed in the “Risk Factors” section of the Company’s 2020 Annual Information Form dated April 28, 2021 (the “AIF”). A copy of the AIF and the Company’s other publicly filed documents can be accessed under the Company’s profile on the System for Electronic Document Analysis and Retrieval (“SEDAR”) at www.sedar.com. The Company cautions that the list of risk factors and uncertainties described in the AIF is not exhaustive and other factors could also adversely affect its results. Readers are urged to consider the risks, uncertainties and assumptions carefully in evaluating the forward-looking information and are cautioned not to place undue reliance on such information.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.