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Flora Growth Corp. (NASDAQ: FLGC)

Flora Growth Corp. (NASDAQ: FLGC) is building a design-led collective of plant-based wellness and lifestyle brands that delivers the most compelling customer experiences in the world, one community at a time.

The company operates one of the largest outdoor cultivation facilities in the world with an aim of marketing a higher-quality premium product at below-market prices. By prioritizing natural ingredients and value-chain sustainability across its portfolio, the company leverages natural, cost-effective cultivation practices to supply cannabis and cannabis derivatives to wholesale buyers and its diverse business divisions.

Founded in Canada, Flora moved its headquarters to Miami in late 2021 as the company expanded its reach across the globe. Its base of cultivation operations are in Colombia, where it has built an extensive distribution network that includes Colombia’s largest distributors, while the recently acquired Vessel Brand team is based in Carlsbad, California.

Currently, Flora is organically growing market share across its three major pillars – wholesale cannabis, CPG cannabis brands, and pharmaceutical cannabis – while seeking revenue-generating acquisitions that offer human-capital expertise and an accretive distribution network to amplify revenue growth.

Wholesale

One of the core and most strategic aspects of Flora’s business model is Cosechemos, the company’s 247-acre cultivation facility in Colombia. Given Colombia’s ideal climate, Flora’s production cost is approximately $0.06/gram, compared to production costs of $1/gram or more in North America and other parts of the world.

Not only can Flora fully supply cannabis and its derivatives to its internal brands and divisions; it can do it at a cost that is hard to compete with and at the world’s highest quality standards.

Flora’s cultivation is certified GACP, which means the company’s flower can be used within medical markets globally. Flora also just completed a state-of-the-art EU-GMP compliant extraction facility at Cosechemos, throwing open the door to a significant revenue opportunity in the $16.47 billion global medical cannabis market. Sales are expected to start ramping up in early 2022 out of this facility.

In addition, the Colombian government recently overhauled cannabis legislation, opening the cannabis market by allowing the export and domestic consumption of dried flower and cannabis ingestibles.

House of Brands

Flora has curated a collection of consumer brands that are developed for key market segments and align with the company’s values to deliver on a plant-first, plant-focused, sustainable promise. These brands create high gross margin opportunities, as well as ownership of customer relationships.

The quality of Flora’s brand building speaks for itself, with an impressive early track record.

In November 2021, the company entered the rapidly growing U.S. CBD beverage market by signing a licensing agreement with luxury brand Tonino Lamborghini. Through this agreement, Flora will produce Tonino Lamborghini-branded cannabis beverages that will be distributed throughout North America and Colombia, with a major focus on the U.S.

“Together with Flora we aim at creating new and innovative products and experiences for the modern consumer’s wellbeing,” Ferrucio Lamborghini, CEO and VP of the Italian company, said in a news release.

Flora also recently acquired Vessel Brand Inc., the dominant brand in luxury cannabis consumer technology. This acquisition solidifies Flora’s U.S. presence, while also bringing key players to the executive team.

These moves were just a few of the many that Flora Growth made in the last year.

  • Flora’s Stardog brand opened its first brick and mortar store in Miami and signed a distribution deal with Macy’s, one of the world’s largest retailers.
  • Flora’s Mind Naturals brand signed distribution agreements with Walmart.com and Coppel, and its CBD skincare products are being exported to Spain and Mexico.
  • Flora’s cannabis infused food and beverages are expected to be distributed through Tropi, the largest food and beverage distributor in Colombia, once the recent law change comes into effect.

Pharma

Flora’s pharma division, led by renowned neuroscientist Dr. Annabelle Morgan-Manalo, is dedicated to understanding the applicable modalities and formulations of cannabinoid-based products that provide the most efficacious and bioavailable experiences for markets around the world.

Currently, the company is working with leading scientists and research institutions such as Vanderbilt University and the University of Manchester to advance access to and research of cannabinoid-based medicine.

This research division has already submitted its first patent, having recently filed a USPTO provisional patent application on a cannabinoid-based formula. Flora looks to obtain approval for a cannabinoid-based product through clinical trials under an EUA from INVIMA (Colombian FDA).

Capital Markets Overview

This strong foundation has positioned Flora for rapid growth and dominance on the global stage, and it is being recognized by the experts. Analysts from Roth Capital Partners and MKM Partners each project significant gains for investors from current levels.

“We believe FLGC differentiates itself through additional consumer/CBD/hemp revenue channels, and its CPG-oriented management team continues to accelerate scaling these segments as an early-stage cannabis cultivator/operator,” Scott Fortune of Roth Capital Partners noted in a report.

This is all supported by Flora’s strong balance sheet. In November 2021, Flora closed a financing that brought in $31.5 million in gross proceeds. Add that to a cash balance of $18.8 million and potential funds from warrants of over $40 million, and it’s clear why Flora Growth is positioned to break out from the pack.

The company closed out 2021 by announcing a 2022 revenue guidance projection of $35-45 million. At the high end, this would be 4X growth compared to its 2021 projects.

Leadership Team

Luis Merchan is the President and CEO of Flora Growth. Mr. Merchan previously served as Macy’s Inc.’s Vice President of Workforce Strategy and Operations, where he managed the enterprise’s multi-billion-dollar P&L expense line for the entire 540 store portfolio. Throughout his tenure at Macy’s, he led various sales and marketing initiatives, including the B2B corporate sales team that was responsible for $160 million in annual revenue. Mr. Merchan obtained his Bachelor of Industrial Engineering from Pontifical Xaverian University in Bogota, Colombia, and his MBA from McNeese State University. He also holds a Graduate Certificate in Marketing Management from Harvard.

James Choe, Chief Strategy Officer, joins Flora from the Vessel team, where he was Founder and CEO. Mr. Choe has spent his career advising companies on corporate and brand strategy, human performance and product development, consulting for over one hundred brands throughout his career thus far and launching over 400 products to market across numerous industries, from conception to successful launch.

Jessie Casner, Chief Marketing Officer, also joined Flora from the Vessel team, where she was the VP of Marketing and Sales. With an extensive background in marketing, brand building and communications, she will lead the corporate investor relations division, part of Flora’s California-based team that will be focused on expanding reach throughout North America.

James Warnock, Chief Commercial Officer, is an experienced executive and global sales leader. He brings over 20 years of experience driving revenue growth and go-to-market strategy for high-profile, Fortune 500 brands. Mr. Warnock has worked in the cannabis industry for over a decade, along with the advertising, communications and emerging technology fields, where he has focused on creating strategic mergers and acquisitions, developing high-performing teams and creating resonant financing campaigns.

Javier Franco, VP of Agriculture, is a master horticulturist with more than 25 years of experience in the design, implementation and management of cultivation and propagation facilities for more than 30 species of cut flowers in Latin America. He completed his agricultural studies at Zamorano University in Honduras and later at an International Exchange Program at Ohio State University. Mr. Franco has directed technical, commercial and research groups in the cut flower, fruit and vegetable markets in Latin America and has participated in the commercial development of new technologies applied in agribusiness. He has also led the agri-management of organic crops and certifications of Good Agricultural Practices.

Investment Considerations
  • Flora Growth operates one of the largest outdoor cannabis cultivation facilities in the world with an aim of marketing a higher-quality premium product at below-market prices.
  • Flora moved its headquarters to Miami in late 2021.
  • Flora is organically growing market share across its three major pillars – wholesale cannabis, CPG cannabis brands, and pharmaceutical cannabis.
  • In November 2021, the company entered the rapidly growing U.S. CBD beverage market by signing a licensing agreement with luxury brand Tonino Lamborghini.
  • Flora recently acquired Vessel Brand Inc., the dominant brand in luxury cannabis consumer technology.
  • The company closed out 2021 by announcing a 2022 revenue guidance projection of $35-45 million.
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