The Flowr Corporation (TSX.V: FLWR; OTC: FLWPF) (“Flowr” or the
“Company”) announced that it has restructured approximately 25% of
its workforce globally, which is expected to result in an annual
reduction of headcount expenses in excess of approximately $6
million. In an effort to tighten the timeline towards becoming cash
flow positive in H2 2020, the Company has decided to focus its
resources near term on the Premium Canadian dried flower market,
specifically to continue building on the positive sales momentum it
has been seeing with its Flowr branded BC Pink Kush and other high
THC strains expected to be launched in the marketplace in 2020.
"The changes we announced today were part of an
ongoing comprehensive review of our operations to reduce costs,
focus on the highest value priorities and accelerate cash flow
generation, in addition to some of the anticipated macro-economic
headwinds stemming from COVID-19. This was an extremely difficult
decision that we did not take lightly and would like to thank
former and current employees for their tremendous contributions.
The resulting company will be a leaner, more efficient
organization. Our fundamental thesis that consumers demand quality
dried flower has been proven correct as evidenced by heavy demand
for our flagship strain, BC Pink Kush. We also look forward to the
release of our newest high THC strains BC Louis XIII and BC Tahoe
OG in the coming months. Given that our Kelowna 1 facility
(“Kelowna 1”) is now fully operational, we expect to see a step
function change in production and sales beginning in the second
quarter. While we continue to be very optimistic about our
derivative form factor product plans, in light of the current macro
environment we feel it’s prudent to delay further material
investments in these areas and focus on our core competency –
producing premium indoor-grown dried flower and building the Flowr
brand in the Canadian recreational market," commented Vinay
Tolia, CEO of Flowr.
OPERATIONAL UPDATES: CANADA
The Company has advanced its Kelowna Campus to
be a single hub for all aspects of cultivation, processing and
packaging to service the Canadian cannabis market. The Company has
only invested in either highly controlled indoor growing
environments for premium high THC dried cannabis (Kelowna 1) or low
cost outdoor and shade-house production for extraction (Flowr
Forest). Notably, the Company has not invested in traditional
greenhouses, which are more expensive to build and operate, because
it believes that they cannot produce premium smokable products.
Flowr has proven that low cost outdoor and shade-house grows
provide quality inputs, especially for use in extraction. Recently,
the Company launched new corporate and Canadian recreational
websites, consistent with its brand marketing strategies.
Kelowna 1 Indoor Facility
- On February 24, 2020, the Company announced it had received
approval from Health Canada to open an additional 10 grow rooms,
bringing the total to 20 at the Facility. The ultimate production
capacity is expected to be approximately 10,000 kg of premium
cannabis when fully optimized.
- Since that announcement, the Company has propagated 7 of the
newly licensed grow rooms with the remaining 3 to be planted within
the next 30 days.
- The Company has taken preventative measures to remain a
reliable supply chain partner during the COVID-19 pandemic.
Outdoor and Shade-House Facility (“Flowr
Forest”)
- The Company has decided to delay the launch of its live resin
product until its Canadian dried flower operations are generating
positive cash flow.
- As a result, the Company has decided to selectively plant
outdoors to enable optionality for a full outdoor grow to support
its revised live resin launch plans.
Flowr/Hawthorne R&D Facility (“R&D
Facility”)
Flowr and Hawthorne have entered a strategic
R&D alliance to build a state of the art, 45,000 square foot
R&D Facility, the 1st of its kind in Canada.
- Construction of the R&D Facility is substantially complete.
The Company submitted the evidence package to Health Canada to
license the first floor on February 24, 2020 and expects to receive
licensing approval in Q2 2020.
- Once operational, the R&D Facility will allow Flowr to stay
on the leading edge of cultivation technology and maximize plant
health and yields.
GLOBAL OPERATIONS
Portugal
Sintra, Portugal Indoor Facility
Sintra is a highly controlled indoor
cultivation, extract processing and finished product packaging
facility. Construction of the facility is substantially complete
with 3 of the 6 total grow rooms currently operational. Obtaining
GMP certification is both a critical step to the production and
sales of a high value medicinal product which can be distributed to
any country within in the EU and is Flowr’s top priority within its
Holigen business.
- The Company had its final GMP inspection in September 2019 and
still anticipates receipt of EU-GMP certification.
- Construction of the Sintra Facility is substantially
complete.
Aljustrel, Portugal
Aljustrel is a 7 million square foot outdoor
cultivation facility which has been deemed a Project of National
Interest by the Portuguese Government, the only cannabis related
project to receive this designation. The Company expects a phased
ramp up of production at Aljustrel to match capacity with the
revenue potential of an expanding European medicinal cannabis
market.
- The Company plans to plant over 1,000,000 square feet of
cultivation area in 2020 with a harvest expected in Q4 2020.
Australia
The Company maintains its GMP compliant
packaging facility in Australia. Flowr expects its assets in
Australia to be a hub for distribution and sales of medicinal
cannabis into the Australasian region.
- During the first quarter, Holigen Australia received a modest
shipment of premium dried flower from our Kelowna 1 Facility to be
sold and distributed into the Australian market.
FINANCIAL UPDATE
Further to the Company’s announcement on
November 19, 2019 relating to the entering into of a credit
agreement with ATB Financial (“ATB”) for access to debt financing
of up to $25 million, on February 28, 2020, the Company completed
its second draw-down of $3.2 million from its term facility, and
$500,000 from its revolving operating credit facility under the
credit agreement. Furthermore, the Company is assessing various
financing alternatives to address near term working capital
needs.
About The Flowr Corporation
The Flowr Corporation is a Toronto-headquartered
cannabis company with operations in Canada, Europe, and Australia.
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 that is currently under construction. From this campus,
Flowr produces recreational and medicinal products.
Internationally, Flowr intends to service the global medical
cannabis market through its subsidiary Holigen, which has a license
for cannabis cultivation in Portugal and will operate GMP-designed
manufacturing facilities in Portugal and Australia.
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:
Vinay ToliaCEO and Director
Contact Info:
INVESTORS & MEDIA:Thierry ElmalehHead of
Capital Markets(877) 356-9726 ext. 1528thierry@flowr.ca
Future-Oriented Financial
Information
To the extent any forward-looking statements in
this press release constitutes future-oriented financial
information or financial outlooks within the meaning of securities
laws, such information is being provided to demonstrate the
potential financial performance of Flowr and readers are cautioned
that this information may not be appropriate for any other purpose
and that they should not place undue reliance on such
future-oriented financial information and financial outlooks.
Future-oriented financial information and financial outlooks, as
with forward-looking information generally, are, without
limitation, based on the assumptions and subject to the risks set
out below under “Forward-Looking Information and Statements”.
Forward-Looking Information and
Statements
This press release contains “forward-looking
information” within the meaning of Canadian Securities laws, which
may include but is not limited to: the Company taking steps to
ensure continuity of production at its flagship Kelowna facility;
the Company’s primary strategic focus over the next six months
being the Canadian premium dried flower market; the Company
delaying investments in Rec 2.0 products until it becomes cash flow
positive; the expected timing for receipt of GMP certification in
Portugal; the expected timing for planting and harvesting an
outdoor crop in Portugal; Flowr’s plan to get to cash flow positive
in H2 2020 by focusing on premium indoor grown dried flower; the
Company’s expected annual reduction in headcount expenses resulting
from restructuring its workforce globally; the Company’s expected
timeline towards becoming cash flow positive in H2 2020; the
Company focusing its resources near term on the Premium Canadian
dried flower market; the Company continuing to build on the
positive sales momentum it has been seeing with its Flowr branded
BC Pink Kush and other high THC strains expected to be launched in
the marketplace in 2020; Flowr reducing costs, focusing on the
highest value priorities and accelerating cash flow generation;
Flowr becoming a leaner, more efficient organization; Flowr
releasing new high THC strains BC Louis XIII and BC Tahoe OG in the
coming months; the Company’s expectation that it will see a step
function change in production and sales beginning in the second
quarter; the Company continuing to be very optimistic about its
derivative form factor product plans but delaying further material
investments in these areas; the Company focusing on its core
competency, including with respect to producing premium
indoor-grown dried flower and building the Flowr brand in the
Canadian recreational market; the Company’s belief that traditional
greenhouses cannot produce premium smokable products; Flowr’s
expectation for the ultimate production capacity of Kelowna 1 when
fully optimized; Flowr’s expected timeline for planting the
remaining newly licensed grow rooms at Kelowna 1; the Company
remaining a reliable supply chain partner during the COVID-19
pandemic; the Company delaying the launch of its live resin product
until its Canadian dried flower operations are generating positive
cash flow; the Company selectively planting outdoors at Flowr
Forest to enable optionality for a full outdoor grow to support its
revised live resin launch plans; the Company’s expectations for the
receipt of licensing approval for the R&D Facility; the R&D
Facility allowing Flowr to stay on the leading edge of cultivation
technology and maximize plant health and yields; obtaining GMP
certification being Flowr’s top priority within its Holigen
business; the Company’s expectations for a phased ramp up of
production at Aljustrel to match capacity with the revenue
potential of an expanding European medicinal cannabis market; the
Company’s plan to plant over 1,000,000 square feet of cultivation
area in 2020 with a harvest expected in Q4 2020 at its Aljustrel
facility; Flowr’s expectation that its assets in Australia will be
a hub for distribution and sales of medicinal cannabis into the
Australasian region; the Company assessing various financing
alternatives to address near term working capital needs; Flowr
servicing the global medical cannabis market and operating
GMP-designed manufacturing facilities in Portugal and Australia;
Flowr supporting improving outcomes through responsible cannabis
use and striving to be the brand of choice for consumers and
patients seeking highest-quality craftsmanship and product
consistency; and Flowr’s business, production and products. 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 information and
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 such information and 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 risks relating to: the
Company being unable to ensure continuity of production at its
flagship Kelowna facility; the Company not becoming cash flow
positive on the anticipated timeline, or at all; the Company not
receiving GMP certification in Portugal on the anticipated
timeline, or at all; Flowr being unable to plant and harvest an
outdoor crop in Portugal on the anticipated timeline, or at all;
Flowr being unable to get to cash flow positive in H2 2020 by
focusing on premium indoor grown dried flower, or at all; the
Company’s not realizing the expected annual reduction in headcount
expenses resulting from restructuring its workforce globally; the
Company being unable to focus its resources near term on the
Premium Canadian dried flower market; the Company being unable to
continue building on the positive sales momentum it has been seeing
with its Flowr branded BC Pink Kush and other high THC strains
expected to be launched in the marketplace in 2020; Flowr being
unable to launch other high THC strains on the anticipated
timeline, or at all; the Company being unable to reduce costs,
focus on the highest value priorities and accelerate cash flow
generation; Flowr being unable to become a leaner, more efficient
organization; the Company not realizing a step function change in
production and sales on the anticipated timeline, or at all; the
Company being unable to focus on its core competency; the ultimate
production capacity of Kelowna 1 not reaching expectations, even
when fully optimized; the Company being unable to plant the
remaining newly licensed grow rooms at Kelowna 1 on the anticipated
timeline, or at all; the Company being unable to remain a reliable
supply chain partner during the COVID-19 pandemic; the Company
being unable to selectively plant outdoors to enable optionality
for a full outdoor grow to support its revised live resin launch
plans; the Company not receiving licensing approval for the R&D
Facility on the anticipated timeline, or at all; the R&D
Facility not allowing Flowr to stay on the leading edge of
cultivation technology or to maximize plant health and yields; the
Company’s being unable to ramp up production at Aljustrel to match
capacity with the revenue potential of an expanding European
medicinal cannabis market on the anticipated timeline, or at all;
the Company being unable to plant over 1,000,000 square feet of
cultivation area in 2020 with a harvest expected in Q4 2020 at its
Aljustrel facility on the anticipated timeline, or at all; Flowr’s
assets in Australia not being a hub for distribution and sales of
medicinal cannabis into the Australasian region; the Company being
unable to access any financing alternatives to address near term
working capital needs; the impact of the COVID-19 outbreak on the
business and financial conditions of the Company; Flowr being
unable to service the global medical cannabis market and/or operate
GMP-designed manufacturing facilities in Portugal and Australia;
Flowr being unable to support improving outcomes through
responsible cannabis use and/or striving to be the brand of choice
for consumers and patients seeking highest-quality craftsmanship
and product consistency; the construction and development of the
Company’s cultivation and production facilities; general economic
and stock market conditions; adverse industry events; loss of
markets; future legislative and regulatory developments in Canada
and elsewhere; the cannabis industry in Canada generally; the
ability of Flowr to implement its business strategies; Flowr’s
inability to produce or sell premium quality cannabis, 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 or statements, there may be other
factors that cause actions, events or results to differ from those
anticipated, estimated or intended. No forward-looking information
or statement can be guaranteed. Except as required by applicable
securities laws, forward-looking information and statements speak
only as of the date on which they are made and Flowr undertakes no
obligation to publicly update or revise any forward-looking
information or statements, whether as a result of new information,
future events or otherwise. When considering such forward-looking
information and statements, readers should keep in mind the risk
factors and other cautionary statements in Flowr’s Annual
Information Form dated April 3, 2019 (the “AIF”) and filed with the
applicable securities regulatory authorities in Canada. The risk
factors and other factors noted in the AIF could cause actual
events or results to differ materially from those described in any
forward-looking information or statements.
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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