Records Revenues on First Sales of
CannabisCompany to Host Conference Call and
Webcast Today at 5PM ET
The Flowr Corporation (TSXV: FLWR; OTC: FLWPF) (“Flowr” or the
“Company”), a Canadian Licensed Producer and global leader in
premium cannabis R&D, innovation, and cultivation, today
announced its results for the fourth quarter and full year ended
December 31, 2018. The Company’s financial statements and
management’s discussion and analysis for the periods are available
on SEDAR at www.sedar.com. All results are reported in Canadian
Dollars.
The following table summarizes the
Company’s key financial and operational results:
In thousands of CAD
dollars, |
Three months ended |
|
Year ended |
(except loss per share and
grams produced) |
December 31, |
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
Grams produced* |
259,091 |
|
— |
|
|
617,859 |
|
— |
|
Grams sold |
405,584 |
|
— |
|
|
405,584 |
|
— |
|
Average net realized price
per gram |
7.08 |
|
— |
|
|
7.08 |
|
— |
|
Gross revenueNet
revenue |
3,2702,870 |
|
—— |
|
|
3,2702,870 |
|
—— |
|
Gross profit (loss) before
fair value adjustments |
252 |
|
(104 |
) |
|
(390 |
) |
(258 |
) |
SG&A |
4,286 |
|
1,412 |
|
|
8,531 |
|
2,289 |
|
Share-based
compensation |
3,356 |
|
602 |
|
|
7,208 |
|
602 |
|
Listing expense |
— |
|
— |
|
|
1,803 |
|
— |
|
Net loss |
6,059 |
|
1,887 |
|
|
17,907 |
|
2,805 |
|
Loss per share (basic and
diluted) |
(0.10 |
) |
(0.04 |
) |
|
(0.22 |
) |
(0.05 |
) |
Cash used in investing
activities |
(10,609 |
) |
(5,116 |
) |
|
(21,670 |
) |
(8,132 |
) |
Cash from financing
activities |
2,267 |
|
13,614 |
|
|
51,296 |
|
17,363 |
|
|
*Grams
produced refers to the grams of dried cannabis harvested from
plants in the period. The Company calculates grams produced based
on the final recorded weight of dried harvested buds that have
completed the drying stage net of any weight loss during the drying
process for the period. |
Management Commentary
“2018 was an incredibly eventful year at Flowr
and we are only just getting started. As a global leader in the
premium cannabis industry, our design and cultivation expertise
along with our superior IP know-how enables us to grow high quality
cannabis on a large scale at what we believe will be
industry-leading yields. The revenue numbers reflect our ability to
grow and process high quality product with only a fraction of our
facility and packaging area complete. Once our Kelowna 1 facility
is completed in Q3 2019, our operational efficiency will only
improve.”
Flowr Co-CEO Vinay Tolia continued, “The fourth
quarter of 2018 marked a major milestone for Flowr, as we launched
our medicinal and recreational sales channels after receiving our
licenses in August 2018, and sold nearly 406 kilograms of premium
cannabis, despite having only 20% of our grow rooms in Kelowna 1
operational during the quarter itself. As of today, we have 10 grow
rooms in Kelowna 1 licensed for use and expect to have all 20 grow
rooms fully constructed in the third quarter of 2019.
Completion of Kelowna 1 should enable us to begin capitalizing on
strategic growth opportunities for medicinal and recreational use
with approximately 10,000 kilograms of capacity for premium
cannabis flower on an annualized basis.”
Results of Operations Three Months Ended
December 31, 2018, and December 31, 2017
Net loss in Q4 2018 totaled $6,059,002 which was
$4,171,257 higher than the net loss in Q4 2017. The increase is
mainly driven by the ramp up of the activities related to
cultivation operations, harvests and sales. Key costs in Q4 2018
were cost of sales, selling, general and administrative expenses
and share-based compensation partially offset by unrealized gains
on changes in fair value of biological assets.
Selling, general and administrative
expenditures, consisting primarily of salaries and professional
fees, were $4,286,622 in Q4 2018 compared to $1,411,933 in Q4 2017.
Share-based compensation was $3,356,823 in Q4 2018 compared to
$601,536 in Q4 2017. Share-based compensation expense in Q4 2018
resulted from the issuance of stock options in the latter half of
2018 primarily to officers and directors of the Company.
Adjusted EBITDA (Non-IFRS
Measure)
Adjusted EBITDA is net loss, plus (minus) income
taxes (recovery), plus (minus) interest income (expense), net, plus
depreciation and amortization, plus share-based compensation, plus
(minus) non-cash fair value adjustments on biological assets and
inventory sold, plus listing expense costs and plus (minus) loss
(gain) on investments. Management believes this measure provides
useful information as it is a commonly used measure in the capital
markets and as it is a close proxy for repeatable cash used by
operations.
In thousands of CAD
dollars |
Three months ended |
|
Year ended |
|
December 31, |
|
December 31, |
|
|
|
|
|
|
|
|
|
|
|
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
Net loss |
(6,059 |
) |
(1,887 |
) |
|
(17,907 |
) |
(2,805 |
) |
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
620 |
|
— |
|
|
640 |
|
— |
|
Unrealized (gains) losses
on fair value adjustments of biological assets |
(165 |
) |
— |
|
|
420 |
|
— |
|
Fair value adjustments on
inventory sold |
(500 |
) |
— |
|
|
(500 |
) |
— |
|
Share-based
compensation |
3,356 |
|
602 |
|
|
7,208 |
|
602 |
|
Listing expense |
— |
|
— |
|
|
1,803 |
|
— |
|
Net gains on valuation of
warrant investment |
(489 |
) |
(224 |
) |
|
(153 |
) |
(336 |
) |
Interest (income) expense |
(104 |
) |
— |
|
|
(102 |
) |
1 |
|
Adjusted EBITDA |
(3,341 |
) |
(1,509 |
) |
|
(8,591 |
) |
(2,538 |
) |
Adjusted EBITDA losses were higher for the three
and twelve months ended December 31, 2018 compared to 2017 by
$1,832,000 and $6,053,000, respectively, due to the ramp up of
cultivation, operating activities and sales in 2018.
Recent Business Developments
- On December 20, 2018 Flowr announced that it had entered into
an agreement to acquire a 19.8% interest in Holigen Holdings
Limited (Holigen). Holigen is a European-based cannabis company in
the process of developing large-scale cannabis cultivation
facilities and Good Manufacturing Process (GMP) compliant
production facilities that are expected to provide finished medical
cannabis products, pharmaceutical ingredients, and plants and seeds
to medical cannabis markets globally. Benefitting from Portugal’s
climate, cost-effective land and labour, and the high crop yields
it expects to generate by employing Flowr’s cultivation IP that has
been provided by Flowr, Holigen could be among the lowest cost
producers in the world. The closing of the acquisition is subject
to certain customary closing conditions.
- In February 2019, another stage of construction was completed
resulting in 6 additional grow rooms, similar in size to existing
grow rooms, with 4 available for use and propagated with plants.
Flowr expects to complete construction of Kelowna 1 by the end of
Q3 2019. As of today, Flowr has a total of 10 grow rooms licensed,
of which 8 are propagated with plants. Upon completion of the final
stages of construction, an additional 10 grow rooms will become
available.
- On February 5, 2019 Flowr announced that it submitted an
application to list its common shares on The NASDAQ Capital Market
(“NASDAQ”) and filed a Form 40-F Registration Statement with the
U.S. Securities and Exchange Commission (“SEC”). The listing of
Flowr’s shares on the NASDAQ will be subject to a number of
regulatory requirements, including registration of the common
shares with the SEC and a determination by the NASDAQ that Flowr
has satisfied all applicable listing requirements. Subject to
approval for listing, the common shares will continue to trade on
the TSXV under FLWR. A trading date will be made public once all
regulatory formalities are satisfied.
- On March 8, 2019 Flowr announced its FlowrRx® products are now
available for purchase through Shoppers Drug Mart’s online medical
cannabis site, shoppersdrugmart.ca/cannabis and that Shoppers Drug
Mart will be the direct-to-patient online provider of FlowrRx®
products in Canada. Medical Cannabis by Shoppers Drug Mart is
currently available only to patients in Ontario. Previously
FlowrRx® products were available online to patients registered via
Flowr’s website.
Recent Leadership Developments
- Expansion of the R&D team with the hiring of North
America’s first cannabis cultivation Doctor of Philosophy (Ph.D.)
Deron Caplan as director of plant science.
- Celebrated Canadian Chef Ryan Reed to develop signature edible
cannabis products. Chef Reed will collaborate closely with Flowr's
R&D Team to research and develop high-quality edibles that are
expected to address the needs of a premium client.
- Promotion of Jason Broome to the role of Chief Research and
Innovation Officer (CRIO). Mr. Broome previously served as Senior
Vice President of Operations. As CRIO, Mr. Broome will seek to
develop new high-quality products and lead Flowr’s research into
cultivars, form factors and delivery systems for the global
markets. He will also oversee Flowr’s state-of-the-art R&D
facility, part of an exclusive partnership with Hawthorne Canada, a
subsidiary of The Scotts Miracle-Gro Company.
Growth Opportunities
- Flowr is expected to begin selling
a wide selection of cannabis cultivars in both clone and seed form
in Q2 2019. The Company expects that its highly efficient
cultivation process will allow it to produce more than 3.2 million
high quality clones on an annualized basis once its initial
cultivation facility is completed. These clones will be incremental
to Flowr’s cultivation process and therefore will be in excess of
what it needs for its retail and medical production.
- On February 12, 2019, Flowr
completed the purchase of land adjacent to its Kelowna 1 facility.
The Company intends to use these properties for greenhouse and
outdoor production of cannabis and extraction of such other form
factors (“Flowr Forest”). Pending Health Canada approval, Flowr
plans to begin construction of 42 greenhouses, each of
approximately 4,500 sq. ft. in size. As well, there are plans for
roughly 150,000 sq. ft. of outdoor grow on the same land. The
products cultivated from Flowr Forest are intended to be used for
extraction in developing edibles and concentrates.
- Flowr intends to develop a second
facility (“Kelowna 2”) on adjacent land parcels that have already
been purchased. Kelowna 2 is expected to be four times the size of
Kelowna 1 and have 80 grow rooms. The Company would require
additional sources of financing to move forward with the
project.
Conference Call and Webcast
Flowr will host a conference call and webcast
today at 5:00 p.m. Eastern Time. A question-and-answer session will
follow.
Toll Free: 1-877-705-6003Toll/International:
1-201-493-6725Webcast: www.flowr.ca/investors
A telephonic replay of the call will be
available later that same day through Thursday, April 18, 2019. To
listen to the archived call, dial Toll Free 1-844-512-2921 or
Toll/International 1-412-317-6671 and enter replay pin number
13689126, or access the webcast replay via Flowr’s website.
About The Flowr Corporation
Flowr, through its subsidiaries, holds a
cannabis production and sales license granted by Health
Canada. With a head office in Toronto and a production
facility in Kelowna, BC, Flowr builds and operates large-scale,
GMP-designed cultivation facilities. Flowr's investment in research
and development along with its sense of craftsmanship and a spirit
of innovation is expected to enable it to provide premium-quality
cannabis that appeals to the adult-use recreational market and
addresses specific patient needs in the medicinal market.
For more information, visit www.flowr.ca. Follow
Flowr on Twitter: @FlowrCanada; Facebook: Flowr Canada; Instagram:
@flowrcanada; and LinkedIn: The Flowr Corporation.
On behalf of The Flowr Corporation:Vinay
ToliaCo-CEO and Director
Non-IFRS
Financial Measures
This press release makes reference to certain
measures that are not recognized measures under International
Financial Reporting Standards (“IFRS”). These non-IFRS
measures are not recognized measures under IFRS and do not have a
standardized meaning prescribed by IFRS, and are therefore unlikely
to be comparable to similar measures presented by other
companies. When used, these measures are defined in such
terms as to allow the reconciliation to the closest IFRS
measure. These measures are provided as additional
information to complement those IFRS measures by providing further
understanding of the Company’s results of operations from
management’s perspective. Accordingly, they should not be
considered in isolation nor as a substitute to the Company’s
financial information reported under IFRS. Management uses
non‐IFRS measures such as Adjusted EBITDA to provide investors with
supplemental information of the Company’s operating performance and
thus highlight trends in the Company’s core business that may not
otherwise be apparent when relying solely on IFRS financial
measures. Management believes that securities analysts,
investors and other interested parties frequently use non‐IFRS
measures in the evaluation of issuers. Management also uses
non‐IFRS measures in order to facilitate operating performance
comparisons from period to period, prepare annual operating
budgets, to assess its ability to meet future debt service
requirements, in making capital expenditures, and to consider the
business’s working capital requirements. Readers are cautioned that
the non‐IFRS measures contained herein may not be appropriate for
any other purpose.
Forward-Looking Information
This press release includes forward-looking
information within the meaning of Canadian securities laws
regarding Flowr and its business, which may include, but are not
limited to: statements with respect to Holigen,
including the closing of the acquisition, facilities Holigen is
proposing to complete, the products it proposes to produce and
sell, and the markets it proposes to operate and distribute its
products in, Holigen potentially being among the lowest cost
producers in the world, Flowr intending to use the Flowr Forest for
greenhouse and outdoor production of cannabis and extraction of
such other form factors, the Company initiating its licensing
process with Health Canada and obtaining its license for Flowr
Forest, the Company planning to begin construction and growing the
Flowr Forest in 2019 and beyond, the products cultivated from the
Flowr Forest being used for extraction in developing edibles and
concentrates, the number of greenhouses, size of greenhouses, and
size of the outdoor grow at the Flowr Forest, the Company intending
to develop Kelowna 2, the planned size of Kelowna 2 and the number
of grow rooms expected in Kelowna 2, Flowr only getting started
with its planned operations and strategic direction, Flowr’s design
and cultivation expertise and superior IP know-how enabling it to
grow high quality cannabis on a large scale at
industry leading yields, Flowr’s operational efficiency
improving with the completion of the Kelowna 1 facility, Flowr
having 20 grow rooms fully constructed in the third quarter of
2019, the completion of the Kelowna
1 facility enabling Flowr to begin to capitalize on
strategic growth opportunities, the number of kilograms of capacity
on an annualized basis, Flowr beginning to sell a wide selection of
cannabis cultivars in both seed and clone form in the
timeframe disclosed herein, the Company’s cultivation process
allowing it to produce high quality clones, the number of
clones that Flowr expects to produce on an annualized basis
upon completion of the Kelowna 1 facility, the clones
being incremental to the Company’s cultivation process and in
excess of what it needs for its retail and medical production, the
completion and timing of completion of the Kelowna 1 facility, the
additional grow rooms that will become available upon completion
of the Kelowna 1 facility, the listing of the
Company’s common shares on the NASDAQ, the timing thereof and
trading of the common shares being approved for listing, Chef Reed
developing signature edible cannabis products and high quality
edibles that are expected to address the needs of a
premium client, the timing of the availability of edible products,
Mr. Broome developing high quality products and leading
Flowr’s research into cultivars, form factors and delivery
systems for the global markets, Flowr being well positioned to
complete its facilities build-out and ramp-up production in 2019
and capitalize on its strategic growth opportunities
globally, Flowr’s investment in research and development along
with its sense of craftsmanship and a spirit of innovation enabling
it to provide premium-quality cannabis that appeal to the adult-use
recreational market and address specific patient needs in the
medicinal market and other factors. Often, but not always,
forward-looking information can be identified by the use of words
such as “plans”, “is expected”, “expects”, “scheduled”, “intends”,
“contemplates”, “anticipates”, “believes”, “proposes” or variations
(including negative and grammatical variations) of such words and
phrases, or state that certain actions, events or results “may”,
“could”, “would”, “might” or “will” be taken, occur or be achieved.
Such statements are based on the current expectations of Flowr’s
management and are based on assumptions and subject to risks and
uncertainties. Although Flowr’s management believes that the
assumptions underlying these statements are reasonable, they may
prove to be incorrect. The forward-looking events and circumstances
discussed in this press release may not occur by certain specified
dates or at all and could differ materially as a result of known
and unknown risk factors and uncertainties affecting Flowr,
including, but not limited to, Flowr being delayed in closing
the acquisition of Holigen or such acquisition not being completed,
Holigen being unable to complete construction of its proposed
facilities or being unable to get the required licenses to operate
such facilities, Holigen not being able to produce and/or sell the
products described herein or in the markets it proposes to sell
such products, Holigen not being among the lowest cost producers in
the world, resulting in decreased margins, higher costs and
additional financing requirements, the inability of Flowr to use
the Flowr Forest for greenhouse and outdoor production of cannabis
and extraction of such other form factors, as result of the
inability to receive required approvals and licenses, which could
have a material adverse impact on Flowr’s results of operations,
financial condition and business, the number of greenhouses, size
of greenhouses and/or size of outdoor production being materially
less than the numbers described herein, which could materially
adversely impact the products to be cultivated and produced out of
the Flowr Forest and the Company’s forecasts, the Company failing
to initiate its licensing process with Health Canada and/or being
unable to obtain its Health Canada license for the Flowr Forest,
the Company being delayed in initiating its licensing process or
Health Canada not approving the license for the Flowr Forest, which
could have a material adverse impact on its financial condition,
results of operations and business, the Company being delayed in
constructing the Flowr Forest or not being able to construct or
plant the Flowr Forest at all for any reason, including as a result
of not receiving required approvals or due to weather conditions,
which could have a material adverse impact on Flowr’s financial
condition, results of operations, business, and/or ability to
compete in the other form factor markets, the products cultivated
from the Flowr Forest not being used or the inability to use such
products for extraction in developing edibles and concentrates, any
delay in the timing that edibles and concentrates are expected to
be legally sold in Canada, which could materially adversely impact
Flowr’s future cash-flows and forecasts, Flowr not being in a
position to launch cannabis oils and vape technologies in 2019 or
not launching them at all, which could have a material adverse
impact on Flowr financial results, operations and financial
condition, including losing competitive advantages over other
licensed producers, the Company not being able to construct the
Kelowna 2 facility, which would reduce Flowr’s capacity and
have an impact on future financial results, Kelowna 2 being smaller
and/or containing fewer grow rooms than as described herein, which
could materially reduce the Company’s future planned capacity and
forecasts, Flowr not being well positioned to execute
on its planned operational and strategic
direction, the inability of Flowr’s design and
cultivation expertise and superior IP
know-how enabling it to grow high quality cannabis on a
large scale at industry leading yields, Flowr’s operational
efficiency not improving as a result of
the completion of the Kelowna 1 facility, Flowr failing
to complete the 20 grow rooms or such rooms not
being fully operational on the timing described
herein, which could have a material adverse impact on Flowr’s
business, financial condition and results of operations, the
completion of the Kelowna 1 facility not allowing Flowr
to begin to capitalize on strategic growth
opportunities, Flowr not achieving or producing the
number of kilograms of capacity on an annualized basis as set
forth herein, which could have a material adverse
effect on Flowr’s business, financial condition and results of
operations, Flowr not being able to or being delayed
in selling a wide selection of cannabis cultivars in both
seed and clone form in 2019, which could have a material
adverse impact on Flowr’s business, financial condition and results
of operations, the Company’s cultivation process not
enabling it to produce high quality clones, Flowr not
being able to produce the number of clones set forth
herein or at all on annualized basis upon completion
of the Kelowna 1 facility, which could have a
material adverse impact on Flowr’s business, financial condition
and results of operations, the clones that Flowr produces
not being incremental to the Company’s cultivation process and
in excess of what it needs for its retail and medical
production, which could have a material adverse impact on
Flowr’s business, financial condition and results of
operations, the Kelowna 1 facility not being completed or
completed in time, the additional grow rooms that will become
available upon completion of the Kelowna 1 facility not
becoming available on time or at all, which could have a
material adverse impact on Flowr’s business, financial
condition and results of operations, the listing of the
Company’s common shares on the NASDAQ not being approved or
further delayed, which could impact the liquidity of the
Company’s common shares or cause a significant
decline in the price of the common shares, Chef Reed not
being able to develop signature edible cannabis products and
high quality edibles that are expected to address the needs
of a premium client, any delay in the timing of the
availability of edible products, which could
materially adversely impact additional revenue streams for
Flowr, Mr. Broome not being able to lead and
develop high quality products and Flowr’s research into
cultivars, form factors and delivery systems for the global
markets, which could have a material
impact on Flowr’s growth and share of an addressable
market, the steps taken by Flowr not preparing it financially
and/or operationally for the recreational use market and/or to
execute on its business strategy, Flowr not completing the build
out and/or ramp-up of production in 2019, which could materially
adversely impact Flowr’s financial condition, results
of operations and business, Flowr not being able to execute on
growth strategies, including international opportunities, which
could adversely impact Flowr’s growth and future prospects, Flowr
not being able to sustain its competitive advantage in cultivation
and being unable to remain at the forefront of industry innovation,
whether as a result of failed construction of the facilities or
otherwise, Flowr not being able to meet demand or fulfill purchase
orders, which could materially impact revenues and its
relationships with purchasers, Flowr requiring additional financing
from time to time in order to continue its operations or expand
domestically or globally and such
financing not being available when needed or on
terms and conditions acceptable to the Company, new laws or
regulations adversely affecting the Company’s business and results
of operations, results of operation activities and development of
projects, project cost overruns or unanticipated costs and
expenses, the inability of Flowr’s products to be high quality, the
inability of Flowr’s products to appeal to the adult-use
recreational market and address specific patient needs in the
medicinal market, the inability of Flowr to produce and distribute
premium, high quality products, the inability to supply products or
any delay in such supply, Flowr’s securities, the inability to
generate cash flows, revenues and/or stable margins, the inability
to grow organically, risks associated with the geographic markets
in which Flowr operates and/or distributes its products, risks
associated with fluctuations in exchange rates (including, without
limitation, fluctuations in currencies), risks associated with the
use of Flowr’s products to treat certain conditions, the cannabis
industry and the regulation thereof, the failure to comply with
applicable laws, risks relating to partnership arrangements
(including the Hawthorne partnership), possible failure to realize
the anticipated benefits of partnership arrangements
(including the Hawthorne partnership), product launches (including,
without limitation, unsuccessful product launches), the inability
to launch products, the failure to obtain regulatory approvals,
economic factors, market conditions, risks associated with the
acquisition and/or launch of products, the equity and debt markets
generally, risks associated with growth and competition (including,
without limitation, with respect to Flowr’s products), general
economic and stock market conditions, risks and uncertainties
detailed from time to time in Flowr’s filings with the Canadian
Securities Administrators and many other factors beyond the control
of Flowr. Although Flowr has attempted to identify important
factors that could cause actual actions, events or results to
differ materially from those described in forward-looking
information, there may be other factors that cause actions, events
or results to differ from those anticipated, estimated or intended.
No forward-looking information can be guaranteed. Except as
required by applicable securities laws, forward-looking information
speaks only as of the date on which it is made and Flowr undertakes
no obligation to publicly update or revise any forward-looking
information, whether as a result of new information, future events,
or otherwise.
Neither the TSX Venture Exchange nor its
Regulation Services Provider (as that term is defined in the
policies of the TSX Venture Exchange) accepts responsibility for
the adequacy or accuracy of this press release.
CONTACT INFORMATION:U.S. MEDIA:Tim Streeb,
ICR1-646-677-1800tim.streeb@icrinc.com
CANADIAN MEDIA: Rebecca Brown, Crowns
Agency1-647-456-5599rebecca@crowns.agency
INVESTOR RELATONS:Raphael Gross,
ICR1-203-682-8253raphael.gross@icrinc.com
Bram JuddThe Flowr Corporation1-647-483-7065 ext.
1520bram@flowr.ca
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