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June 25, 2020, 5:00 p.m. EDT

The Flowr Corporation Announces First Quarter 2020 Results and Changes to its Board of Directors

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TORONTO, June 25, Jun 25, 2020 (GLOBE NEWSWIRE via COMTEX) -- The Flowr Corporation (tsx.v:FLWR) /zigman2/quotes/205237089/composite FLWPF -8.32% ("Flowr" or the "Company") herein announces its financial and operational results for the first quarter ended March 31, 2020.

Key financial and operating highlights in the first quarter of 2020:

-- The Company generated gross revenue of approximately $1 million in the first quarter.

-- Average price per gram in the first quarter was $6.93, reflecting the Company's positioning in the premium segment.

-- 123 kgs of sales in the quarter was entirely of its flagship strain BC Pink Kush. The Company did not have enough finished product to meet demand in the quarter. Product availability has since substantially improved in the second quarter.

-- The Company harvested a total of 262kg of BC Pink Kush in the first quarter (with a large portion being harvested late in quarter). Flowr's BC Pink Kush has not been irradiated since January 2019, a testament to the ability to produce high-quality product in a controlled indoor environment.

-- In February, the Company received Health Canada approval to double capacity at its flagship Kelowna 1 Facility enabling it to become fully operational. The newly licensed area includes the Company's automated packaging equipment which is expected to drive productivity efficiencies going forward.

-- In March, the Company restructured 25% of its global workforce, saving approximately $6 million annually.

-- In late March, the Company announced that its European subsidiary Holigen received its EU-GMP certification at its facility in Sintra Portugal, putting the Company on a short list of cannabis companies with this license in Europe.

-- During the quarter, the Company launched a new and revitalized Flowr recreational brand initiative which included a full brand redesign, including new logo, new consumer facing website (flowr.ca) and various digital marketing initiatives.

-- During the quarter, Irina Hossu joined the Company as Chief Financial Officer to help lead the Company for its next stage of global growth. Irina brings over 15 year of experience in progressively senior finance leadership roles across a variety of global industries including consumer-packaged goods, beverage and alcohol, and financial technology.

Subsequent financial and operational highlights post end of the first quarter

-- The Company strengthened its financial position with the closing of an aggregate non-brokered $21.5 million secured subordinated convertible debenture unit private placement in two tranches, the first on April 27, 2020 and second on June 3, 2020, which were led by Flowr's Chairman and CEO who committed in excess of $11 million.

-- Insiders representing approximately 60% of total sharecount have signed a voluntary 1 year lockup, in addition to any lock-ups they have currently entered into, and have not sold a share since the Company's inception.

-- On May 14, 2020, the Company announced that it has entered into an Equity Line and Profit Sharing Agreement (the "Partnership") with Terrace Global Inc. /zigman2/quotes/202503094/delayed CA:TRCE +6.25% ("Terrace Global") to fund the development and operations of Holigen, with both parties expecting Terrace Global to fund at least $3 million over the course of the Partnership.

-- The Company shipped approximately 14,000 clones to Portugal to support the planting of Aljustrel for the 2020 season. Terrace has contributed 30,000 seeds to the Partnership, including 8 different high THC strains. The two companies have successfully planted the seeds and clones together in an area totaling approximately 1 million square feet of the Aljustrel Facility. The Company believes this project to be one of the largest outdoor THC growing operation in Europe to date.

-- The Company made its first dried flower sales in the Australian market through its Australian subsidiary Holigen Australia, selling Pink Kush and Sensi Star to medical patients.

-- All 20 grow rooms at the Kelowna 1 Facility are currently propagated with plants and the Company expects the vast majority of 2020 production to be premium dried flower in excess of 20% THC.

-- Flowr' BC Pink Kush was recently highlighted by the OCS ahead of 4/20 as their bestselling premium pink kush strain. A recent publication by the OCS, cited Flowr branded pre-rolls as the #1 selling brand of pre-rolls on OCS.ca for the period April 1, 2019 to March 31, 2020.

-- Over 500 kg of BC Pink Kush was harvested in April & May. The Company believes it will see a continued substantial increase in production and sales throughout the remainder of the year given the full operation of the Kelowna 1 Facility and production of primarily high THC strains.

-- Net revenues in Q2 2020 are expected to be in excess of $2 million with Q3 expected to be substantially greater than Q2. The Company re-iterates its objective of becoming cash flow positive in H2 2020 even with the uncertainty around COVID-19.

MANAGEMENT COMMENTARY

"As previously mentioned, we believe Q1 was the bottom for us in the Canadian recreational market and that we will see a step function change in our operating and financial results going forward. Our flagship purpose-built indoor facility in Canada is finally fully operational and licensed. We are producing only high quality and high THC strains out of it, which we know consumers demand and are willing to pay a premium for. Sales trends and demand for our BC Pink Kush strain remain very encouraging. Our foundational thesis that growing high quality cannabis at scale is difficult and only a few companies are both focused and able to do so is playing out in our view. In Europe, we are extremely excited by our Partnership with Terrace Global after having recently joined a short list of companies with EU-GMP certification. We expect Holigen to contribute more meaningfully to our results beginning in 2021. Our conviction in our strategic direction is further validated by management recently leading yet another round of financing in a very challenging capital markets environment." said Vinay Tolia, Flowr's Chief Executive Officer.

FIRST QUARTER 2020 RESULTS

The following table summarizes the Company's key financial and operational results:







        In thousands of Canadian dollars,                 Three months ended
        (except per share and grams metrics)              March 31
                                                          2020      2019
        Grams Harvested - K1                              490,101   279,760
        Grams Sold                                        122,514   211,195
        Average Net Realized Price per Gram               6.93      7.70
        Gross Revenue                                     1,012     1,812
        Net revenue                                       776       1,626
        Gross profit (loss) before fair value adjustments (1,623)   114
        Selling, General and Administrative expense       6,019     3,701
        Share-based compensation                          857       2,103
        Net income/(loss)                                 (12,492)  (5,850)
        Basic earnings/(loss) per share                   (0.09)    (0.06)
        Diluted earnings/(loss) per share                 (0.09)    (0.06)
        Cash used in investing activities                 (4,023)   (12,645)
        Cash from financing activities                    3,576     2,110
        


-- 100% of sales and of first quarter production were attributed to BC Pink Kush.

-- Average selling price per gram was $6.93 reflecting the Company's positioning in the premium segment.

-- Kilograms sold of 123 was down 46% over the fourth quarter as the Company worked through the last of legacy strain mix headwinds.

-- Gross revenues were approximately $1 million in the quarter. Returns and price concessions were $73k in the quarter. Inventory impairment was $666k in the quarter on legacy strains which the Company is no longer producing.

The following table summarizes the Company's financial results for the three months ended March 31, 2020:







        In thousands of CAD dollars                                              Three months ended March 31
                                                                                 2020          2019
        (Loss)/Income before taxes                                               (12,778)      (5,998)
        Depreciation and amortization                                            1,240         469
        Unrealized (gains) losses on fair value adjustments of biological assets 2,628         (206)
        Fair value adjustments on inventory sold                                 (158)         (42)
        Inventory Impairment                                                     666           --
        Share-based compensation                                                 892           2,103
        Restructuring costs                                                      737           --
        Unrealized losses on fair value of investments held in shares            (2)           148
        Unrealized loss on valuation of warrant investment                       39            351
        Loss (gain) on acquisition of investment in Holigen                      --            --
        Finance costs                                                            498           --
        Interest expense                                                         (24)          40
        Adjusted EBITDA                                                          (6,262)       (3,135)
        


Adjusted EBITDA (Non-IFRS Measure)

Adjusted EBITDA is defined as 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, plus (minus) loss (gain) on investments and plus inventory impairments. 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.

For a full discussion of Flowr's operational and financial results for the three months ended March 31, 2020, please refer to the Company's first quarter 2020 Management's Discussion & Analysis and Financial Statements, which have been filed on SEDAR.

CONFERENCE CALL AND WEBCAST

The Company will host a conference call and webcast to review these results today at 5:30 p.m. Eastern Time.

Conference call and webcast details are as follows:

/zigman2/quotes/205237089/composite
US : U.S.: OTC
$ 0.31
-0.03 -8.32%
Volume: 129,625
Aug. 14, 2020 3:59p
P/E Ratio
N/A
Dividend Yield
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Market Cap
$39.63 million
Rev. per Employee
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/zigman2/quotes/202503094/delayed
CA : Canada: TSX Venture
$ 0.17
+0.01 +6.25%
Volume: 0.00
Aug. 11, 2020 9:42a
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$9.75 million
Rev. per Employee
N/A
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