CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K (this “Annual Report”) contains “forward-looking statements,” as that term is defined under the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements may include projections and estimates concerning our possible or assumed future results of operations, financial condition, business strategies and plans, market opportunity, competitive position, industry environment, and potential growth opportunities. In some cases, you can identify forward- looking statements by terms such as “may”, “will”, “should”, “believe”, “expect”, “could”, “intend”, “plan”, “anticipate”, “estimate”, “continue”, “predict”, “project”, “potential”, “target,” “goal” or other words that convey the uncertainty of future events or outcomes. You can also identify forward-looking statements by discussions of strategy, plans or intentions. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, because forward-looking statements relate to matters that have not yet occurred, they are inherently subject to significant business, competitive, economic, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These and other important factors, including, among others, those discussed in this Annual Report, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements in this Annual Report. Risks and uncertainties, the occurrence of which could adversely affect our business, include, but are not limited to, the following:
Given the foregoing risks and uncertainties, you are cautioned not to place undue reliance on the forward-looking statements in this Annual Report. The forward-looking statements contained in this Annual Report are not guarantees of future performance and our actual results of operations and financial condition may differ materially from such forward- looking statements. In addition, even if our results of operations and financial condition are consistent with the forward-looking statements in this Annual Report, they may not be predictive of results or developments in future periods.
Any forward-looking statement that we make in this Annual Report speaks only as of the date of this Annual Report. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements in this Annual Report, whether as a result of new information, future events or otherwise, after the date of this Annual Report.
Risk Factor Summary
There are a number of risks that you should carefully consider before making an investment in our business. These risks are discussed more fully in Item 1.A. of this Annual Report below. If any of these risks actually occur, our business, financial condition, operating results and cash flows could be materially adversely affected. These risk factors include, but are not limited to:
PART I
Unless the context otherwise requires, all references in this Annual Report to the “Company,” “Flora,” “we,” “us,” “our,” and similar references refer to Flora Growth Corp. and our subsidiaries.
Our functional currency and reporting currency is the U.S. dollar, the legal currency of the United States (which we refer to as “USD”, “US$” or “$”).
ITEM 1. BUSINESS
Flora Growth Corp. was incorporated on March 13, 2019, under the laws of the Province of Ontario. We are a multi-national cannabis company that manufactures and distributes consumer packaged goods, cultivates and distributes medicinal cannabis, and distributes pharmaceutical products.
Mission
Flora exists to create a world where the benefits of cannabis are accessible to everyone.
Development Overview
In May 2021, the Company completed its initial public offering (“IPO”) of our Common Shares and commenced trading on the Nasdaq Capital Market under the ticker symbol “FLGC.” Prior to our IPO, the Company engaged in a series of transactions in Colombia which laid the foundation for our growth and development. These transactions included the acquisition of our interests in Flora Labs 1, 2 and 4 (hereinafter defined), our Cosechemos cultivation and processing facility and a number of brands.
Since our IPO, Flora has acquired 100% of the outstanding equity interests in each of:
Business Strategy
Our business strategy is built on three core pillars: House of Brands (HoB), Commercial & Wholesale, and Pharmaceutical. This strategy was devised to allow us optimal access to markets around the globe based on the legal standing of cannabis in each of the geographical locations in which we operate. Our approach has enabled us to develop distribution networks, build customer bases establish operations as the regulatory framework evolves and allow for expanded access to cannabis and its derivatives. Furthermore, our strategy seeks to diversify our overall business, provide near-, mid- and long-term opportunities within revenue streams, de-risk our exposure to regulatory impediments and accelerate our ability to gain market share in the cannabis industry.
Our brand portfolio consists of a mix of products across multiple categories including food and beverage, nutraceuticals, cannabis accessories and technology, personal care and wellness. Consumer brands allow Flora to move assertively into nascent markets, develop customer bases and distribution channels and gather consumer insights which would not be possible with traditional cannabis sales alone. Through this channel we seek to build loyalty, credibility and enjoy healthy margins that help to support the rapid growth of our business.
JustCBD is Flora’s leading consumer packaged goods brand. JustCBD was launched in 2017 with a mission to bring high-quality, trustworthy and budget-friendly CBD products to market. The JustCBD offering currently consists of over 350 products across 15 categories, including CBD gummies, topicals, tinctures, and vape products and ships to over 11,500 independent retailers worldwide. JustCBD also sells direct to consumers with a customer base of approximately 350,000 people. JustCBD products are available for purchase in smoke and vape shops, clinics, spas and pet stores, as well as other independent non-traditional retail channels. JustCBD’s products are both internally and third-party lab-tested to ensure quality.
Vessel is Flora’s cannabis accessory and technology brand currently servicing the United States and Canada through direct-to-consumer and retail sales. Vessel’s products include cannabis consumption accessories, personal storage and travel accessories for the vape and dry herb categories, which are sold to consumers, dispensaries, smoke shops and cannabis brands. Vessel has positioned itself as a lifestyle brand, developing products for key consumer personas interested in “elevating” the consumption experience, focusing primarily on the direct-to-consumer business and have garnered a customer base of approximately 150,000 people. Since our acquisition of VBI in November 2021, Vessel has been fully integrated into JBL and now benefits from operational, logistical and sales synergies with JustCBD.
Mambe
Mambe is Flora’s food and beverage brand with a focus in Latin America, offering infused natural fruit juices and canned goods. The brand operates on a business-to-business model, where we sell to both distributors and retail businesses. Over the last three years, Mambe has expanded its distribution in Colombia, primarily in supermarkets, discount retailers, coffee shops, restaurants and airports. Mambe’s list of clients include well-known Colombian retailers Juan Valdez, Jumbo, Sipote Burrito and Xue.
Other brands
In addition to the brands set forth above, Flora has a curated portfolio of niche brands that focus on target audiences and specialty offerings. The revenue contribution of these brands is currently immaterial to our overall business; however, they allow Flora to further diversify its revenue streams, bolster white label capabilities and offer a broader ecosystem for cross selling. Additional brands in our portfolio include: Mind Naturals (skincare), Stardog Loungewear (apparel), No Cap Hemp Co (minor cannabinoids), KaLaya (skincare) and Original Hemp (e-commerce).
Located in Fort Lauderdale, Florida, Flora Lab 3 provides manufacturing capabilities to our HoB portfolio and primarily focuses on the manufacturing of ingestible gummies and tinctures for our JustCBD brand as well as for white label clients. This facility contains a lab for research and development, a drying room, a warehouse area, automated packaging lines for gummies and bottling lines for tinctures, topicals, and other bottled products. In addition, Flora Lab 3 also conducts in-house potency testing to test the efficacy of products produced.
Our Commercial and Wholesale pillar encompasses the cultivation, transformation and movement of cannabis and the distribution of pharmaceutical products to international markets. This pillar is anchored by Flora’s wholly owned subsidiary, Phatebo, a multi-national operator in pharmaceutical and medical cannabis distribution, with principal operations in Germany, and Cosechemos, our 249-acre licensed cultivation facility in Girón, Colombia. Cosechemos is also the site for Flora Lab 1, a transformation facility where the Company is able to produce high-THC and high-CBD flower and derivatives for medical products in Colombia and export to countries around the globe.
Through our acquisition of Franchise, we acquired its wholly-owned subsidiary, Phatebo. Based in Germany, Phatebo is a wholesale pharmaceutical distribution company with import and export capabilities of a wide range of pharmaceutical goods and medical cannabis products to treat a variety of health indications, including drugs related to cancer therapies, ADHD, multiple sclerosis and anti-depressants, among others. Phatebo holds a License for the Trade in Narcotic Drugs (including the cannabis sales license amendment) and a Wholesale Trading License, both of which are issued by BfArM (the largest drug approval authority in Europe). Phatebo is focused on distributing pharmaceutical products within 28 countries globally, primarily in Europe, but also with sales to Asia, Latin America, and North America. Neither Franchise, Phatebo, nor their direct or indirect subsidiaries, have direct, indirect or ancillary involvement in the cannabis industry in the United States. In November 2018, Phatebo also received a medical cannabis import and distribution license. We intend to leverage Phatebo’s existing network of approximately 1,200 pharmacies as Flora begins to move medicinal cannabis from our Cosechemos facility and third parties into Germany. Additionally, the Phatebo warehouse provides a logistics outpost for Flora’s growing product portfolio and distribution network within the European Union.