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press release

April 29, 2020, 5:00 p.m. EDT

The Flowr Corporation Announces Fourth Quarter and Full Year 2019 Results

TORONTO, April 29, Apr 29, 2020 (GLOBE NEWSWIRE via COMTEX) -- TORONTO, April 29, 2020 (GLOBE NEWSWIRE) -- The Flowr Corporation (tsx.v:FLWR) /zigman2/quotes/205237089/delayed FLWPF +0.14% ("Flowr" or the "Company") herein announces its financial and operational results for the fourth quarter and fiscal year ended December 31, 2019.

Key financial and operating highlights in the fourth quarter and for the full year of 2019

  • The Company generated gross revenue of approximately $1.6 million in the fourth quarter and achieved the highest level of quarterly production to date.

  • Full year gross revenues were approximately $8.2 million based on 993 kilograms sold.

  • Average price per gram in the fourth quarter was $6.10 and for the full year was $6.99, excluding a bulk wholesale transaction, average price per gram in the fourth quarter would have been $6.61 and $7.12 respectively on a normalized basis.

  • The Company sold through all of its BC Pink Kush packaged in the fourth quarter, all of which had minimum THC levels of 20%.

  • Flagship indoor Kelowna 1 Facility capex of $20.2 million was incurred in fiscal 2019 and the Kelowna 1 Facility was substantially completed in the quarter.

Subsequent financial and operational highlights post fiscal 2019

  • The Company strengthened its financial position with the closing of a non-brokered $20 million secured subordinated convertible debenture unit private placement on April 27, 2020, led by Flowr's Chairman and CEO who committed in excess of $10 million.

  • Insiders representing approximately 59% 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.

  • In February, the Company received Health Canada approval to double capacity at its flagship Kelowna 1 Facility enabling it to become fully operational including automated packaging equipment.

  • In March, the Company restructured 25% of its global workforce, saving in excess of $6 million in annual expenses.

  • With the aforementioned completion of the Kelowna facility, cost restructuring, and focus on the Canadian dried flower market, the Company re-iterated its objective of becoming cash flow positive in H2 2020 even with the uncertainty around COVID-19.

  • All 20 grow rooms at the Kelowna 1 Facility are currently propagated with plants and the Company expects 95% of 2020 production to be premium dried flower in excess of 20% THC.

  • The Company recently commissioned its automated packaging line and expects to see an improvement in efficiency beginning in the second quarter of 2020.

  • Flowr' BC Pink Kush was recently highlighted by the OCS ahead of 4/20 as their bestselling premium pink kush strain.

  • 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.

  • The Company recently 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.

  • 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. Consistent with its strategic focus in Canada, the Company will be focused initially on driving dried flower sales out of Holigen.

  • In January, the Company hired Irina Hossu 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.

  • The Company is forecasting first quarter 2020 gross revenues of approximately $1 million, due to legacy strain mix production headwinds. Notably, all first quarter sales were BC Pink Kush. The Company believes it will see a substantial increase in production and sales in the latter half of 2020 and onwards given the full operation of the Kelowna 1 Facility and production of primarily high THC strains including BC Pink Kush, BC Tahoe OG & BC Louis XII.

MANAGEMENT COMMENTARY

"We believe we are on the doorstep of seeing a step function change in our operating and financial results. 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 robust and promising. 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 recently joined a short list of companies with EU-GMP certification which will open the medicinal cannabis opportunity for us there soon. We now have certain GMP certifications in Australia as well as Europe. Our conviction in our strategic direction is further validated by management leading yet another round of financing in a very challenging capital markets environment. 2020 will be a big year for Flowr," said Vinay Tolia, Flowr's Chief Executive Officer.

FOURTH QUARTER 2019 RESULTS

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

In thousands of Canadian dollars,
(except per share and grams metrics)
Three months ended
December 31
Twelve months ended December 31
2019 2018 2019 2018
Grams Harvested - K1* 660,948 319,174 1,851,895 677,341
Grams Harvested - Flowr Forest 3,323,669 3,323,669
Grams Sold 215, 761 405,584 993,387 405,584
Average Net Realized Price per Gram 6.10 7.08 6.99 7.08
Gross Revenue 1,589 3,270 8,231 3,270
Net revenue 51 2,870 5,205 2,870
Gross profit (loss) before fair value adjustments (7,937 ) 252 (7,707 ) (390 )
Selling, General and Administrative expense 6,616 3,905 21,670 8,150
Share-based compensation 2,767 3,357 11,803 7,208
Net income/(loss)** (26,996 ) (6,059 ) (36,967 ) (17,907 )
Basic earnings/(loss) per share (0.21 ) (0.10 ) (0.33 ) (0.22 )
Diluted earnings/(loss) per share (0.21 ) (0.10 ) (0.33 ) (0.22 )
Cash used in investing activities (14,584 ) (10,609 ) (61,742 ) (21,670 )
Cash from financing activities 16,737 2,267 79,110 51,296
  • During the fourth quarter of 2019, out of the Kelowna 1 Facility, the Company produced 661 kilograms of dried cannabis, an increase of 50% over the third quarter. This represented the highest quarterly production figure to date.

  • Approximately 30% of fourth quarter production and 69% of sales were attributed to BC Pink Kush.

  • Kilograms sold of 226 was up 5% over the third quarter.

  • Net revenues were impacted by a total of $1.4 million in one-time events, for full disclosure on this and inventory impairments please refer to Flowr's 2019 Q4 MD&A.

  • Average selling price per gram was $6.10 for the quarter and $6.99 for the year, which included 35kg sold at $3.50 per gram, in a bulk wholesale transaction. On a normalized basis excluding the bulk wholesale transaction, the average selling prices per gram would have been $6.61 and $7.12 respectively reflecting the Company's positioning in the premium segment.

The following table summarizes the Company's financial results for the three and twelve months ended December 31, 2019:

In thousands of CAD dollars Three months ended December 31 Twelve months ended December 31
2019 2018 2019 2018
(Loss)/Income before taxes (27,752 ) (6,059 ) (37,723 ) (17,907 )
Depreciation and amortization 1,272 620 3,198 640
Unrealized (gains) losses on fair value adjustments of biological assets 5,688 (165 ) 388 420
Fair value adjustments on inventory sold 44 (500 ) 482 (500 )
Inventory Impairment 5,303 -- 5,303 --
Share-based compensation 3,181 3,356 12,217 7,208
Transaction and listing costs -- 381 686 2,184
Unrealized losses on fair value of investments held in shares 41 -- 189 --
Unrealized loss on valuation of warrant investment 16 (489 ) 450 (153 )
Loss (gain) on acquisition of investment in Holigen 3,499 -- (8,153 ) --
Finance costs 391 -- 869 --
Interest expense (13 ) (104 ) (85 ) (102 )
Adjusted EBITDA (8,330 ) (2,960 ) (22,179 ) (8,210 )

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 and twelve months ended December 31, 2019, please refer to the Company's fourth quarter 2019 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:

Toll Free: 1-833-227-5845
Toll/International: 1-647-689-4072
Webcast: flowcorp.com/investors

Conference call replay details are as follows:

Toll Free: 1-800-585-8367
Toll/International: 1-416-621-4642
Passcode: 6296956
Webcast: flowrcorp.com/investors

The replay of the conference call will be available through midnight on Wednesday, May 13 [th] , 2020.

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 awaiting licensing from Health Canada. 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 operates GMP licensed facilities in both 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 Tolia
CEO and Director

CONTACT INFORMATION:

INVESTORS & MEDIA:
Thierry Elmaleh
Head of Capital Markets
(877) 356-9726 ext. 1528
thierry@flowr.ca

Notice regarding future-oriented financial information:

To the extent any forward-looking information 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 the Company 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 "Notice regarding forward-looking information".

Forward-Looking Information

This press release contains "forward-looking information" within the meaning of Canadian Securities laws, which may include but is not limited to: Flowr having an automated packaging line in place in the near term; with the completion of the Kelowna 1 Facility, cost restructuring, and focus on the Canadian dried flower market, the Company becoming cash flow positive in H2 2020 even with the uncertainty around COVID-19; the Company seeing efficiencies in the second quarter of 2020 based on its commissioned packaging line; Flowr's ability to produce high quality product in a controlled indoor environment and not having to irradiate product as a result of such expertise; the Company being focused initially on driving dried flower sales out of Holigen; Ms. Hossu helping lead the Company for its next stage of global growth; the Company's forecasted Q1 gross revenues; the Company forecasting a substantial increase in production and sales in 2020 and onwards given the full operation of the Kelowna 1 Facility and production of primarily high THC strains including BC Pink Kush, BC Tahoe OG & BC Louis XII; the Company being on the doorstep of seeing a step function change in its operating and financial results; the Company's view that customers demand high THC products and are willing to pay a premium for such products; sales trends and demand for the Company's BC Pink Kush strain remaining robust and promising; the Company's foundational thesis that growing high quality cannabis at scale is difficult and only a few companies are both focused and able to do so; EU-GMP certification opening the medicinal cannabis opportunity for the Company in global markets; 2020 being a big year for Flowr; the Company's belief that sun setting certain strains in favour of new genetics will address consumer demand; the Company's expectation that production from additional grow rooms during the fourth quarter will support an increase in sales volume; Flowr's expectation that new genetics will deliver higher yields as well as support the rollout of an expanded line of high THC products; the Company's expectation for Kelowna 1's production run-rate at the end of 2020; the Company's expectation that it will continue to realize premium pricing relative to the broader adult-use market; Flowr servicing the global medical cannabis market and operating GMP 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 craftmanship and product consistency; and Flowr's business, production and products and Flowr's plans to provide premium quality cannabis to adult use recreational and medical markets.

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: Flowr not having an automated packaging line in place in the near term, which would result in additional costs and less efficiencies; the completion of the Kelowna 1 Facility, cost restructuring, and focus on the Canadian dried flower market, not positioning the Company to become cash flow positive in H2 2020 even with the uncertainty around COVID-19, and thus requiring the Company to obtain additional liquidity and/or file for creditor protection; Flowr's not be able to produce high quality product in a controlled indoor environment and having to irradiate product, which could materially adversely impact sales of Flowr's products; the Company failing to realize sales out of Holigen, and thus having limited growth and revenue generation generally and outside of Canada; Ms. Hossu failing to help the Company for its next stage of global growth; the Company not achieving the forecasted Q1 gross revenues, which could put further pressure on the trading price of the Company's securities; the Company failing to increase production and sales in 2020 and onwards, despite the full operation of the Kelowna 1 Facility and production of primarily high THC strains including BC Pink Kush, BC Tahoe OG & BC Louis XII, which could materially adversely effect the Company's financial results and working capital; the Company failing to produce, or having crop failures of, its new product offerings, given the limited amount of experience growing such strains; the Company not being able to use recent events to change its operating and financial results; the Company's view that customers demand high THC products and are willing to pay a premium for such products not materializing, which could materially adversely effect the Company's business, operations and financial results; sales trends and demand for the Company's BC Pink Kush strain not being robust; the Company's foundational thesis that growing high quality cannabis at scale is difficult and only a few companies are both focused and able to do so not materializing, thus impacting the Company's strategy and ultimately its financial results; EU-GMP certification failing to open the medicinal cannabis opportunity for the Company in global markets; 2020 failing to be a big year for Flowr; Flowr's inability to scale its business in 2020, which could materially adversely impact its financial condition and result in breach of its debt arrangements; Flowr being unable to complete its crop and harvest at Aljustrel in 2020, which could materially adversely impact its competitive position globally and its business and operations; the additional grow rooms at Kelowna 1 not becoming operational as anticipated or at all; the Company's infrastructure being unable to support Flowr's objective to be cash flow positive in the second half of 2020; the Company being unable to complete its objectives and/or those objectives not positioning the Company for long term success; the Company being unable to get the additional grow rooms at Kelowna 1 operational and producing product in the timelines described herein, which would materially adversely impact its ability to meet its revenue targets in 2020 and also its ability to become cash flow positive; new genetics not driving further operational improvements and/or enhancing the Company's product mix; the Canadian industry not being in short supply of premium dry flower; the Company's expectations, including timing, for the first harvest from Portugal not being realized; the Company not being well positioned to distribute EU-GMP compliant product into underserviced markets; the Company being unable to address consumer demand with new genetics; the Company being unable to prioritize data acquisition to ensure production planning is driven by consumer insights and that its portfolio of finished products will address consumer preference; production from additional grow rooms during the fourth quarter not being able to support an increase in sales volume; Flowr being unable to advance its plan for its Kelowna Campus to be a single hub for all aspects of cultivation, processing and packaging to service the Canadian cannabis market; Kelowna 1 being unable to produce high caliber dried flower; production capacity at Kelowna 1 once it is fully licensed and "dialed in" being less than expected; the Company being unable to double its operating capacity at Kelowna 1; Flowr being unable to deliver finished products from new genetics into the marketplace in 2020; new genetics not delivering higher yields and/or not supporting the rollout of an expanded line of high THC products; Kelowna 1 being unable to reach the anticipated production run-rate at the end of 2020; the Company not realizing premium pricing relative to the broader adult-use market; any inaccuracies in the estimated total capex for Kelowna 1; Flowr Forest's production per annum being less than anticipated; the Company being unable to execute its plan to launch a live resin vape offering as its first extract product, including with respect to anticipated timing; the Company being unable to launch other concentrate products; the Company being unable to satisfy its expectations for propagation and harvesting Flowr Forest in 2020; the inability to complete construction of facilities in Portugal in a timely fashion or at all; the inability to realize revenue from the Company's European operations within the anticipated timeframe or at all; the Company being unable to establish sales and distribution channels in Europe and Australia to deliver medicinal cannabis to underserviced markets; any failure to realize expectations with respect to the anticipated timing for harvests, propagation, completion of construction and installation of extraction infrastructure at the Company's Sintra facility; the Company being unable to commence GMP packaging and commercial sales in Europe within the anticipated timeframe or at all; the Company being unable to realize expectations for annual production and processing capacity at its Sintra facility; the inability to complete a partial extraction and processing facility at the Company's Aljustrel facility; the Aljustrel facility being unable to complete a phased ramp up of production; the Company's inability to realize expectations for harvests at its Aljustrel facility in 2020; Flowr's assets in Australia not being a hub for distribution and sales of medicinal cannabis into the Australasian region; 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 craftmanship and product consistency; the construction and development of Holigen's and 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; the impacts of the COVID-19 pandemic materially adversely effecting Flowr's business; the 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 they are 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. When considering such forward-looking information, readers should keep in mind the risk factors and other cautionary statements in Flowr's Annual Information Form dated April 28, 2020 (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.

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.

(C) Copyright 2020 GlobeNewswire, Inc. All rights reserved.

/zigman2/quotes/205237089/delayed
US : U.S.: OTC
$ 0.36
+0.0005 +0.14%
Volume: 3,795
Aug. 12, 2020 11:36a
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$43.66 million
Rev. per Employee
N/A
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