Here is full disclosure Not sure if we shild smile or weep THE FLOWR CORPORATION ANNOUNCES RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2018
The Flowr Corp. has released its results for the fourth quarter and full year ended Dec. 31, 2018. The Company's financial statements and management's discussion and analysis for the periods are available on SEDAR at www.sedar.com.
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 revenue 3,270 - 3,270 - Net revenue 2,870 - 2,870 - 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.
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 FlowrRxtrademark 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 FlowrRxtrademark products in Canada. Medical Cannabis by Shoppers Drug Mart is currently available only to patients in Ontario. Previously FlowrRxtrademark 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: 1-877-705-6003
Toll/International: 1-201-493-6725
Webcast: 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.