The Flowr Corporation (“
Flowr” or the
“
Company”) (TSXV: FLWR, OTC: FLWPF) is pleased to
provide an operational update on its Canadian and European
operations and a renewed focus to maintaining its status as a
premium cannabis producer and making the requisite changes to its
operations in order to reach profitability.
“Since January, the Company has undertaken
several measures to improve the financial and operational viability
of its business. We have shed non-core assets and licenses, raised
additional equity capital and significantly reduced overall
indebtedness. From an operational perspective, the K1 facility is
now fully operational and each grow room is being utilized to
ensure our fixed costs are being spread out over a higher number of
production grams. The K1 facility is a world-class facility capable
of producing award winning high-THC strains, such as our BC Pink
Kush and BC Black Cherry, with a high level of consistency. We are
also introducing new exciting strains and product formats to meet
consumer demand, and are building a robust genetics program for
future growth,” commented Darry Brooker, Chief Executive Officer of
Flowr.
“In Europe, we entered into a bulk medical
cannabis supply agreement to monetize the outdoor medical cannabis
grown at the Aljustrel facility. We have also entered into a series
of licensing agreements with Cookies that will allow us to grow
their internationally renowned strains in addition to our own, and
develop a retail footprint through a pharmacy network in Portugal.
Overall, there has been a significant refocusing of the business
with a view to reaching profitability in our Canadian operations
and ensuring future value creation at our European operations where
we have a strategic lead on our competitors.”
Canadian Operations
Strategic Review
In April 2021, the Board of Directors of the
Company appointed a Strategic Review Committee with a view to
evaluating options for non-core assets and to develop a strategy
for reducing SG&A expenses at the Company. The strategic review
process is now substantially complete with the Company having
divested non-core licenses and sold certain extraction and related
equipment, for total proceeds of $1.1 million. In addition, the
Company has entered into a binding agreement to sell certain
industrial land located in Kelowna, British Columbia, subject to
certain closing conditions, for an aggregate purchase price of $6.3
million. The land sale is expected to close in the fourth quarter
of 2021.
For the year to date, the Company has taken a
series of cost reduction measures resulting in annualized SG&A
and other cash savings of approximately $3.3 million, before
restructuring charges, through a combination of rightsizing,
centralizing executive functions in Kelowna, subleasing excess
office and warehouse facility, and divestment of non-core foreign
subsidiaries.
K1 Facility
The K1 facility is a purpose-built 85,000 square
foot cannabis production facility with twenty grow rooms each
outfitted with independent fertigation, humidity, ventilation and
temperature controls. The last grow room was commissioned in July
2020 and the facility is now operating at 100% capacity. Currently,
the K1 facility is growing BC Black Cherry, BC Pink Kush, and BC
Strawnana. Utilizing our owned and operated Kelowna Research
Station, Flowr now has a range of unique high-THC genetics in
R&D, with a view to further expanding and enhancing our strain
offering across Canada in 2022.
New Product Launches
Flowr is pleased to announce the launch of its
latest strain BC Strawnana, which has tested at 25.6% THC and 2.9%
terpenes. The Company expects this product to be available in
Ontario, Alberta, British Columbia, and Saskatchewan starting in
the third quarter of 2021. BC Strawnana will nicely complement the
Company’s existing recreational product portfolio in Canada. This
new strain was developed to provide consumers with another premium
cannabis offering, with a strong sensory profile, high quality buds
and high THC.
Flowr is also pleased to announce that it has
launched its last “Underground Series” campaign with LB33, which
has tested at 25.5% THC and 3.2% terpenes. The Underground Series
is meant to provide consumers with unique product offerings that
are diverse and on a limited time basis. It allows us to utilize
our platform to recognize small, independent growers that share
some of Flowr’s values, and expand our portfolio to include
exciting new genetics.
Adding to the list of new offerings, Flowr is
pleased to announce new formats available in 14g and 28g bags,
further enhancing the format selection of premium cannabis for our
Canadian consumers.
Lastly, the Company is pleased to announce the
launch of BC Dog Walkers. BC Dog Walkers will provide consumers
with Flowr’s flagship strains, BC Pink Kush, BC Black Cherry and BC
Strawnana, in a 0.35 gram pre-roll format that prioritizes
convenience and accessibility. The pre-roll market in Canada has
seen significant increase since October 2018 and Flowr believes
that providing its flagship strains in this format will further
enhance its position as a premium cannabis producer.
Research License
Flowr is pleased to announce that it has been
granted a research license by Health Canada. The research license
allows the Company to distribute and administer its cannabis for
research purposes and to test and review its products based on
taste, sight, smell and touch. The Company will utilize this
research license in the research and development of novel product
offerings.
Export to Israel
As previously announced on June 7, 2021, Flowr
entered into a supply agreement with Focus Medical Herbs Ltd., a
company which IM Cannabis Corp. (NASDAQ: IMCC) (CSE: IMCC)
(collectively, “IMCC”) has an exclusive commercial
agreement within Israel. Pursuant to the terms of the Supply
Agreement, Flowr has agreed to export up to five hundred kilograms
of premium dry flower cannabis in bulk form into Israel. IMCC has
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.
KRS Facility and Genetics
Program
Flowr owns and operates the Kelowna Research
Station (the “KRS Facility”) in partnership with
the Hawthorne Gardening Company, a subsidiary of The Scotts
Miracle-Gro Company. An objective of the Company is to develop new
and improved cannabis cultivars with genetics intended to optimize
levels of production. To that end, Flowr is in the process of
developing more than 50 high-THC exotic cannabis strains in order
to solidify its pipeline of new and exciting genetics. The KRS
Facility also allows Flowr’s R&D team to trial cultivars at the
KRS Facility prior to commercialization in the K1 facility,
allowing Flowr to trial genetics in a safe environment without
affecting its commercial production. The Company believes that the
KRS Facility will be a strong differentiator in ensuring Flowr’s
genetics program continues to stay ahead of other premium dried
flower producers.
Credit Agreement Amendments and Debt
Repayment
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”) 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 term
and operating facilities to approximately $9.8 million.
Equity Financing
As announced on July 19 and July 27, 2021, the
Company closed two separate tranches of private placement equity
financing 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 in
the capital of the Company 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 (“Broker
Warrants”).
Green Hedge
In August 2021, Flower announced that it signed
an agreement with Green Hedge Education & Distribution Services
Ltd. (“Green Hedge”) to act as the Company’s
external sales agent providing coverage to licensed cannabis
wholesalers and retailers across Canada. Green Hedge is a leading
cannabis sales and distribution company headquartered in Toronto,
Ontario led by Andrew von Teichman. His entrepreneurial experience
over two decades in distribution and consumer packaged goods has
established Green Hedge as one of Canada’s top cannabis field sales
agencies. Operating in six provinces with more than 2,000 active
retail partners in Canada, the company has a 93% penetration rate
with their customers.
European Operations
“In Europe, we see a significant opportunity for
the growth of the industry as well as for our operations based in
Portugal. Earlier this year, the Portuguese regulatory authorities
approved the first market authorization for medical cannabis to be
sold in local pharmacies in Portugal. We believe this was a
watershed moment for the medical cannabis industry in the E.U. as
there are now two jurisdictions, Germany and Portugal, that allow
for medical cannabis sales,” commented Darryl Brooker, Chief
Executive Officer of Flowr. “We also believe Portugal has the
potential to be the first European country to legalize an adult use
regime. While this transition may still be year away, we have taken
a long-term view on this opportunity and are setting the stage to
capture an early pole position with our partnership with Cookies.
Having Cookies as our partner is an important next step to
dominating the European cannabis market.”
First Revenues from
Portugal
In 2021, Flowr saw its first revenues from its
operations in the European Union as a result of a strategic
warehousing partnership with Tilray Inc. (TSX: TLRY). This
represented an important milestone for the Company and illustrates
the importance of operating an E.U. GMP certified facility.
Biomass Sale
On July 28, 2021, Flowr announced that Holigen
Holdings Limited (“Holigen”) entered into a
medical cannabis supply agreement (the “Supply
Agreement”) with Galaxiavertical - Unipessoal Lda. (the
“Galaxia”). Pursuant to the terms of the Supply
Agreement, Galaxia has agreed to purchase from RPK the high-THC
medical cannabis biomass at a price of approximately $750,000
(€500,000). This Supply Agreement represents the largest bulk
medical cannabis sale in Portugal to date.
Cookies Partnership
Holigen, through its wholly-owned subsidiary,
RPK Biopharma Ltd (“RPK Biopharma”) entered into a
series of agreements (the “Licensing Agreements”)
with Cookies Creative Consulting and Promotions Inc.
(“Cookies”) whereby RPK Biopharma 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, RPK Biopharma 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.
COVID UpdateAs of the date
hereof, all of the Company’s facilities and operations continue to
operate without disruption. To date there have been no material
negative impacts on production due to the COVID-19 pandemic. The
Company continues to employ strict safety measures and best
practices to preserve its ability to operate throughout the
duration of the pandemic.
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
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:
Darryl BrookerChief Executive Officer
CONTACT INFORMATION:
INVESTORS & MEDIA:John ChouChief Financial
OfficerJohn.chou@flowr.ca
Forward-Looking Information:
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 satisfaction of all of the conditions under the Supply
Agreement; the anticipated size of the European medical cannabis
market; the Company’s expectation that it will build on its
achievements as it continues to invest in sales and marketing;
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 further sales and distribution channels in Europe to
deliver medicinal cannabis to underserviced markets; future
legislative and regulatory developments in Canada, in Europe and
elsewhere; the cannabis industry in Canada and Europe, generally;
the ability of Flowr to implement its business strategies; and the
ability of 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 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 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.
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