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Flora Growth Reports Third Quarter 2022 Financial Results

  • Revenue for the three-month period ended September 30, 2022 was $10.8 million, an increase of 414% year over year
  • Revenue for the nine-month period ended September 30, 2022 was $25.7 million, an increase of 510% year over year
  • Gross profit for the three-month period ended September 30, 2022 was $5.0 million, an increase of 703% year over year with gross margins improving from 29.6% to 46.2%.
  • Company reaffirms its 2022 revenue guidance to range between $35 million - $45 million
  • Flora management to host a webcast today at 4:30PM ET

Flora Growth Corp. (NASDAQ: FLGC) (“Flora'' or the “Company”), a leading all-outdoor cultivator, manufacturer and distributor of global cannabis products and brands, reported today its financial and operating results for the third quarter and nine months ended September 30, 2022. All financial information is provided in U.S. dollars unless indicated otherwise.

“The third quarter of 2022 was another exciting quarter for Flora as we continued to lay the foundation of our business for the long-term,” said Luis Merchan, Chairman a CEO of Flora Growth. “During the quarter, we exported products to several new markets, including distribution of our Colombian grown high-CBD dried cannabis flower to Switzerland and the Czech Republic, as well as CBD isolate to the United States. Our global distribution network, coupled with our high-quality Colombian flower and derivatives, leave Flora well positioned to capitalize on the evolving global cannabis landscape.”

“Subsequent to the quarter, we signed a definitive agreement to acquire Franchise Global Health, a pharmaceutical and medical cannabis distributor with principal operations in Germany. This transformative deal would connect our Colombian commercial infrastructure and product portfolio to the German and EU cannabis markets, allowing Flora to significantly increase its international footprint.

“As we look ahead to the end of the year, we expect to finalize the transaction and solidify our presence in the European cannabis market. With our industry leading production costs and expanding global footprint, we believe our business is well positioned to accelerate growth into 2023 and beyond.”

3Q2022 Financial Highlights

  • Total revenue for the quarter was $10.8 million, an increase of 414% year over year, driven by Flora’s House of Brands division, which includes the acquisitions of JustCBD and Vessel.
  • Gross profit increased to approximately $5.0 million, up approximately 703% year over year.
  • Gross margin in the quarter improved from 29.6% to 46.2% year over year, and demonstrated a gradual improvement from 43.9% during 1H2022.
  • Net loss was approximately $7.4 million compared to a net loss of $3.6 million in 3Q 2021. Net loss margins reduced year over year, year to date, and in comparison to 1H2022.
  • Adjusted EBITDA (a non-IFRS measure defined below) was $(3.9) million compared to $(3.1) million in 3Q 2021. Adjusted EBITDA margin improved significantly from -150.1 % in 3Q2021 to -36.5 % in 3Q2022. For a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures, please see Table 4 under "Reconciliation of IFRS to non-IFRS financial results" included at the end of this release.
  • As of September 30, 2022, the Company had approximately $5.9 million in cash compared to $37.6 million as of December 31, 2021. The decrease was primarily due to cash paid for the acquisition of JustCBD, as well as higher operating expenses related to investments in headcount, sales and marketing and one-time expenses associated with Cosechemos operations and the Flora Lab expansion.

2022 Outlook

  • Flora Growth remains on track to meet its 2022 revenue guidance of $35-45 million.

Recent Operational Highlights

  • Announced the appointment of former JP Morgan executive Brandon Konigsberg to Flora’s Board of Directors and former Amazon executive Elshad Garayev as the Company’s Chief Financial Officer
  • Announced a joint venture with Colombia’s largest indigenous tribe to process and distribute cannabis products throughout the country
  • Acquired the No Cap Hemp Co. brand, bolstering new product offerings and revenue streams for the expanding House of Brands division
  • Awarded Best M&A Deal at the Benzinga Cannabis Capital Conference for the acquisition of JustCBD
  • Completed multiple commercial cannabis and CBD isolate exports to international markets in the United States, Switzerland and the Czech Republic
  • Signed a definitive agreement to acquire Franchise Global Health (FGH). While the completion of the transaction is subject to customary closing conditions for a transaction of such nature, including a formal vote by FGH shareholders, FGH shareholders holding in excess of 73% of FGH’s outstanding shares have agreed to vote in favor of the transaction.

Earnings Call: November 28, 2022, at 4:30PM ET

Live Webcast Details

Date: Monday, November 28, 2022

Time: 4:30 p.m. ET

Online Participant Link: https://us02web.zoom.us/webinar/register/WN_zaiec74LQyGi_I9YYxCOOQ

The recording will be available on the Company’s investor page until November 2023.

The live webcast will be available online through the above participant link and will be archived and available on the Company’s website within approximately 24 hours.

About Flora Growth Corp.

Flora is building a connected, design-led collective of plant-based wellness and lifestyle brands, designed to deliver the most compelling customer experiences in the world, one community at a time. As the operator of one of the largest outdoor cannabis cultivation facilities, Flora leverages natural, cost-effective cultivation practices to supply cannabis derivatives to its commercial, house of brands, and life sciences divisions. Visit www.floragrowth.com or follow @floragrowthcorp on social media for more information.

Cautionary Statement Concerning Forward-Looking Statements

This press release contains ‘‘forward-looking statements,’’ as defined by federal securities laws. Forward-looking statements reflect Flora’s current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words “believe,” “expect,” “anticipate,” “will,” “could,” “would,” “should,” “may,” “plan,” “estimate,” “intend,” “predict,” “potential,” “continue,” and the negatives of these words and other similar expressions generally identify forward looking statements. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled “Risk Factors” in Flora’s Annual Report on Form 20-F filed with the SEC on May 9, 2022, as amended, as such factors may be updated from time to time in Flora’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in Flora’s filings with the SEC. While forward-looking statements reflect Flora’s good faith beliefs, they are not guarantees of future performance. Flora disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to Flora (or to third parties making the forward-looking statements).

About non-IFRS financial measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with International Financial Reporting Standards ("IFRS"), we use the following non-IFRS financial measures: Adjusted EBITDA and Adjusted EBITDA margin.

  • Adjusted EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates adjusted EBITDA as total net loss, plus (minus) income taxes (recovery), plus (minus) interest expense (income), plus depreciation and amortization, plus (minus) non-operating expense (income), plus share based compensation, plus impairment charges, plus (minus) unrealized loss (income) from changes in fair value, plus charges related to the flow-through of inventory step-up on business combinations, plus other acquisition and transaction costs, plus (minus) non-cash fair value adjustments on the sale of inventory and biological assets.
  • Adjusted EBITDA margin % is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates adjusted EBITDA margin % as adjusted EBITDA, as described above, divided by revenue for the period.

Table 1. Consolidated Statements of Financial Position

Flora Growth Corp.

 

 

 

 

Interim Condensed Consolidated Statements of Financial Position

(Unaudited - Prepared by Management)

(in thousands of United States dollars)

 

 

 

 

 

 

September

 

 

December

 

30,

31,

As at:

2022

2021

ASSETS

 

 

 

 

 

 

Current

 

 

 

 

 

 

Cash

 

$

5,900

 

 

$

37,614

 

Restricted cash

 

 

1

 

 

 

2

 

Trade and amounts receivable

 

 

4,392

 

 

 

5,324

 

Loans receivable and advances

 

 

255

 

 

 

273

 

Prepaid expenses

 

 

1,990

 

 

 

1,700

 

Biological assets

 

 

91

 

 

 

37

 

Inventory

 

 

10,280

 

 

 

2,993

 

Total current assets

 

 

22,909

 

 

 

47,943

 

Non-current

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

4,349

 

 

 

3,750

 

Right of use assets

 

 

3,258

 

 

 

1,229

 

Intangible assets

 

 

12,652

 

 

 

9,736

 

Goodwill

 

 

28,856

 

 

 

20,054

 

Investments

 

 

839

 

 

 

2,670

 

Other Assets

 

 

271

 

 

 

97

 

Total assets

 

$

73,134

 

 

$

85,479

 

LIABILITIES

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

Trade payables and accrued liabilities

 

$

7,559

 

 

$

5,628

 

Current portion of long term debt

 

 

5

 

 

 

18

 

Current portion of lease liability

 

 

1,102

 

 

 

412

 

Other accrued liabilities

 

 

18

 

 

 

61

 

Total current liabilities

 

 

8,684

 

 

 

6,119

 

Non-current

 

 

 

 

 

 

 

 

Non-current debt

 

 

79

 

 

 

-

 

Non-current lease liability

 

 

2,137

 

 

 

908

 

Deferred tax

 

 

1,531

 

 

 

1,511

 

Other long term liabilities

 

 

6,537

 

 

 

-

 

Total liabilities

 

 

18,968

 

 

 

8,538

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Share capital

 

 

120,160

 

 

 

102,428

 

Options

 

 

6,242

 

 

 

3,712

 

Warrants

 

 

9,276

 

 

 

10,670

 

Accumulated other comprehensive loss

 

 

(2,723

)

 

 

(1,108

)

Deficit

 

 

(78,457

)

 

 

(38,536

)

Non-controlling interest

 

 

(332

)

 

 

(225

)

Total shareholders' equity

 

 

54,166

 

 

 

76,941

 

Total liabilities and shareholders' equity

 

$

73,134

 

 

$

85,479

 

 Table 2. Consolidated Statements of Loss

Flora Growth Corp.

 

Interim Condensed Consolidated Statements of Loss and Comprehensive Loss

 

(Unaudited - Prepared by Management)

 

(in thousands of United States dollars, except per share amounts which are in thousands of shares)

 

 

 

For the

 

 

For the

 

 

 

 

 

 

three

three

For the nine

For the nine

months

months

months

months

ended

ended

ended

ended

September

September

September,

September

30,

30,

30,

30,

2022

2021

2022

2021

Revenue

 

$

10,765

 

 

$

2,093

 

 

$

25,682

 

 

$

4,211

 

Cost of sales

 

 

5,936

 

 

 

1,474

 

 

 

14,351

 

 

 

2,580

 

Gross profit before fair value adjustments

 

 

4,829

 

 

 

619

 

 

 

11,331

 

 

 

1,631

 

Unrealized gain on changes in fair value of biological assets

 

 

152

 

 

 

-

 

 

 

198

 

 

 

-

 

Realized fair value amounts included in inventory sold

 

 

(10

)

 

 

-

 

 

 

(12

)

 

 

-

 

Gross Profit

 

 

4,971

 

 

 

619

 

 

 

11,517

 

 

 

1,631

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consulting and management fees

 

 

3,237

 

 

 

1,905

 

 

 

8,480

 

 

 

4,167

 

Professional fees

 

 

802

 

 

 

904

 

 

 

2,898

 

 

 

1,670

 

General and administrative

 

 

1,186

 

 

 

610

 

 

 

3,615

 

 

 

2,091

 

Promotion and communication

 

 

2,195

 

 

 

34

 

 

 

6,914

 

 

 

1,214

 

Travel expenses

 

 

288

 

 

 

140

 

 

 

889

 

 

 

283

 

Share based compensation

 

 

139

 

 

 

393

 

 

 

2,994

 

 

 

488

 

Research and development

 

 

170

 

 

 

(20

)

 

 

592

 

 

 

65

 

Depreciation and amortization

 

 

985

 

 

 

67

 

 

 

2,697

 

 

 

186

 

Bad debt expense

 

 

631

 

 

 

-

 

 

 

1,036

 

 

 

100

 

Goodwill impairment

 

 

-

 

 

 

-

 

 

 

16,000

 

 

 

-

 

Other expenses (income), net

 

 

346

 

 

 

198

 

 

 

1,524

 

 

 

131

 

Total operating expenses

 

 

9,979

 

 

 

4,231

 

 

 

47,639

 

 

 

10,395

 

Operating Loss

 

 

(5,008

)

 

 

(3,612

)

 

 

(36,122

)

 

 

(8,764

)

Interest expense

 

 

75

 

 

 

57

 

 

 

144

 

 

 

121

 

Foreign exchange loss (gain)

 

 

128

 

 

 

(38

)

 

 

328

 

 

 

(116

)

Unrealized loss from changes in fair value

 

 

2,177

 

 

 

-

 

 

 

3,510

 

 

 

-

 

Net loss before income taxes

 

 

(7,388

)

 

 

(3,631

)

 

 

(40,104

)

 

 

(8,769

)

Income tax benefit

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss for the period

 

$

(7,388

)

 

$

(3,631

)

 

$

(40,104

)

 

$

(8,769

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchange differences on foreign operations

 

1,048

 

 

463

 

 

1,615

 

 

663

 

Total comprehensive loss for the period

 

$

(8,436

)

 

$

(4,094

)

 

$

(41,719

)

 

$

(9,432

)

Net loss attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Flora Growth Corp.

 

$

(7,358

)

 

$

(3,608

)

 

$

(39,969

)

 

$

(8,705

)

Non-controlling interests

 

 

(30

)

 

 

(23

)

 

 

(135

)

 

 

(64

)

Comprehensive loss attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Flora Growth Corp.

 

$

(8,406

)

 

$

(4,071

)

 

$

(41,584

)

 

$

(9,368

)

Non-controlling interests

 

 

(30

)

 

 

(23

)

 

 

(135

)

 

 

(64

)

Basic and diluted loss per share attributable to Flora Growth Corp.

 

$

(0.10

)

 

$

(0.08

)

 

$

(0.54

)

 

$

(0.21

)

Weighted average number of common shares outstanding - basic and diluted

 

 

76,611

 

 

 

44,199

 

 

 

74,335

 

 

 

41,152

 

Table 3. Statement of Cash Flows

Flora Growth Corp.

Consolidated Statement of Cash Flows

(Unaudited - Prepared by Management)

(in thousands of United States dollars)

 

 

For the

 

 

For the

 

nine months

nine months

ended

ended

September

September

30,

30,

2022

2021

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(40,104

)

 

$

(8,769

)

Adjustments to net loss:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,697

 

 

 

186

 

Stock-based compensation

 

 

3,184

 

 

 

488

 

Impairments

 

 

16,000

 

 

 

-

 

Changes in fair value of investments, biological assets and liabilities

 

 

3,312

 

 

 

-

 

Bad debt expense

 

 

1,036

 

 

 

100

 

Interest expense

 

 

123

 

 

 

18

 

Income tax benefit

 

 

-

 

 

 

-

 

Income tax (paid) received

 

 

-

 

 

 

-

 

 

 

 

(13,752

)

 

 

(7,977

)

Net change in non-cash working capital:

 

 

 

 

 

 

 

 

Trade and other receivables

 

 

909

 

 

 

(9,692

)

Inventory

 

 

(884

)

 

 

(1,025

)

Prepaid expenses and other assets

 

 

353

 

 

 

(1,596

)

Trade payables and accrued liabilities

 

 

(458

)

 

 

1,005

 

Net cash used in operating activities

 

 

(13,832

)

 

 

(19,285

)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Common shares issued

 

 

-

 

 

 

18,067

 

Equity issue costs

 

 

(88

)

 

 

(2,431

)

Exercise of warrants and options

 

 

179

 

 

 

10,357

 

Repayments of lease liability

 

 

(707

)

 

 

(97

)

Common shares repurchased

 

 

(255

)

 

 

-

 

Interest paid

 

 

(126

)

 

 

-

 

Loan borrowing (repayments)

 

 

66

 

 

 

(247

)

Net cash (used) provided by financing activities

 

 

(931

)

 

 

25,649

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Loans provided

 

 

-

 

 

 

(268

)

Loan repayments received

 

 

-

 

 

 

224

 

Purchases of property, plant and equipment and other assets

 

 

(948

)

 

 

(1,472

)

Purchase of investments

 

 

-

 

 

 

(3,653

)

Business and asset acquisitions, net of cash acquired

 

 

(15,388

)

 

 

(1,284

)

Net cash used in investing activities

 

 

(16,336

)

 

 

(6,453

)

 

 

 

 

 

 

 

 

 

Effect of exchange rate on changes on cash

 

 

(615

)

 

 

(613

)

 

 

 

 

 

 

 

 

 

Change in cash during the period

 

 

(31,714

)

 

 

(702

)

Cash and cash equivalents at beginning of period

 

 

37,614

 

 

 

15,523

 

Cash and cash equivalents at end of period

 

$

5,900

 

 

$

14,821

 

Supplemental disclosure of non-cash activities

 

 

 

 

 

 

 

 

Right of use assets and lease liabilities acquired

 

$

2,042

 

 

$

-

 

Common shares issued for business combinations

 

 

14,917

 

 

 

-

 

Table 4. Reconciliation of IFRS to non-IFRS financial results

Adjusted EBITDA (non-IFRS measure) reconciliation to net loss and Adjusted EBITDA margin to net income (loss) margin. The reconciliation of the Company’s adjusted EBITDA, a non-IFRS financial measure, to net loss, the most directly comparable IFRS financial measure, for the three and nine months ended September 30, 2022, and September 30, 2021 is presented in the table below:

(In thousands of United States dollars)

 

For the

three

months

ended

September

30, 2022

 

 

For the

three

months

ended

September

30, 2021

 

 

For the

nine

months

ended

September

30, 2022

 

 

For the

nine

months

ended

September

30, 2021

 

Net loss for the period

 

$

(7,388

)

 

$

(3,631

)

 

$

(40,104

)

 

$

(8,769

)

Income tax expense (benefit)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Interest expense

 

 

75

 

 

 

57

 

 

 

144

 

 

 

121

 

Depreciation and amortization

 

 

985

 

 

 

67

 

 

 

2,697

 

 

 

186

 

Non-operating expense (1)

 

 

128

 

 

 

(38

)

 

 

328

 

 

 

(116

)

Share based compensation

 

 

140

 

 

 

393

 

 

 

3,184

 

 

 

488

 

Impairments (2)

 

 

-

 

 

 

-

 

 

 

16,000

 

 

 

-

 

Unrealized loss from changes in fair value (3)

 

 

2,177

 

 

 

-

 

 

 

3,510

 

 

 

-

 

Charges related to the flow-through of inventory step-up on business combinations

 

 

-

 

 

 

-

 

 

 

1,631

 

 

 

-

 

Other acquisition and transaction costs

 

 

94

 

 

 

10

 

 

 

653

 

 

 

10

 

Non-cash fair value adjustments on the sale of inventory and biological assets

 

 

(142

)

 

 

-

 

 

 

(186

)

 

 

-

 

Adjusted EBITDA

 

$

(3,931

)

 

$

(3,142

)

 

$

(12,143

)

 

$

(8,080

)

Adjusted EBITDA Margin %

 

 

-36.5

%

 

 

-150.1

%

 

 

-47.3

%

 

 

-191.9

%

(1)

Non-operating expense includes foreign exchange gain (loss).

 

 

(2)

Impairments include goodwill impairment.

 

 

(3)

Unrealized loss from changes in fair value includes changes in the value of the Company’s long-term investment in an early-stage European cannabis company and the value of the Company’s contingent consideration associated with its acquisition of JustCBD.

 

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