Financial Performance - Net sales for the three months ended March 31, 2023, reached $20,107,000, a significant increase from $4,946,000 in the same period of 2022, representing a growth of approximately 305%[209] - The House of Brands segment generated $14,199,000 in net sales for Q1 2023, up from $5,063,000 in Q1 2022, indicating a growth of about 180%[209] - The Commercial and Wholesale segment reported net sales of $7,956,000 for Q1 2023, compared to $4,000 in Q1 2022, reflecting a substantial increase[209] - Revenue for the three months ended March 31, 2023, was $4.9 million, a significant decrease from $20.1 million in the same period in 2022, primarily due to acquisitions and intercompany eliminations[265] - JustCBD contributed $12.1 million in revenue for the three months ended March 31, 2023, compared to $3.5 million in the same period in 2022[265] - FGH contributed $8.0 million in revenue for the three months ended March 31, 2023, with an estimated increase of $13.1 million in revenue if acquired at January 1, 2022[265] - The House of Brands segment generated $14.2 million in revenue for the three months ended March 31, 2023, up from $5.1 million in the same period in 2022[266] - The pharmaceuticals segment reported revenue of $0.4 million for the three months ended March 31, 2023, down from $0.7 million in the same period in 2022, attributed to supply chain issues[267] - The commercial and wholesale segment generated $8.0 million in revenue for the three months ended March 31, 2023, compared to less than $0.1 million in the same period in 2022, driven by the acquisition of FGH[268] Expenses - Travel expenses totaled $0.1 million for the three months ended March 31, 2023, compared to $0.2 million for the same period in 2022, reflecting a decrease of 50%[178] - Share-based compensation expenses decreased to $0.7 million for the three months ended March 31, 2023, down from $1.5 million in the same period of 2022, a reduction of approximately 53.3%[179] - Research and development expenses were less than $0.1 million for the three months ended March 31, 2023, compared to $0.2 million for the same period in 2022, indicating a decrease of 50%[180] - Operating lease expenses increased to $0.4 million for the three months ended March 31, 2023, up from $0.2 million in the same period of 2022, representing a 100% increase[181] - Depreciation and amortization expenses rose to $0.9 million for the three months ended March 31, 2023, compared to $0.5 million for the same period in 2022, an increase of 80%[182] - Operating expenses decreased to $8.6 million in Q1 2023 from $10.3 million in Q1 2022, attributed to reduced promotion, communication, and professional fees[270] - Consulting and management fees rose to $4.0 million in Q1 2023 from $2.4 million in Q1 2022, mainly due to the acquisition of FGH and increased staffing[271][272] - Professional fees dropped to less than $0.1 million in Q1 2023 from $1.2 million in Q1 2022, reflecting efforts to reduce costs and eliminate one-time acquisition expenses[273] - General and administrative expenses fell to $0.5 million in Q1 2023 from $0.9 million in Q1 2022, due to cost-cutting measures[274] - Promotion and communication expenses decreased to $1.3 million in Q1 2023 from $2.5 million in Q1 2022, as part of corporate overhead minimization efforts[275] Assets and Liabilities - As of March 31, 2023, total assets amounted to $77,040,000, down from $80,987,000 as of December 31, 2022, indicating a decrease of about 5%[210] - The total amount claimed against the former entities of FGH currently exceeds the maximum $5.0 million of the indemnification agreement, with an estimated likelihood of loss not exceeding this amount[199] - The company assumed $4.0 million in liabilities from JustCBD, including $0.6 million of lease liabilities[233] - The Company incurred $0.5 million in transaction costs related to the acquisition of FGH in December 2022, with $9.1 million in assumed liabilities[234] Management and Governance - The company appointed Hussein Rakine as the new CEO on April 16, 2023, following the resignation of Luis Merchan, indicating a change in leadership[213][214] - Management concluded that the disclosure controls and procedures were not effective as of March 31, 2023, primarily due to an outstanding material weakness[186] - The company has not adopted any new accounting standards that impacted its financial reporting during the three months ended March 31, 2023[184] Market and Operational Challenges - The company is currently addressing a potential noncompliance issue with Colombian customs, which may result in a reasonably possible loss, although the amount cannot be estimated at this time[215][216] - The company continues to face challenges in achieving full cultivation potential, which impacts its liquidity and operational plans, necessitating additional capital access[231] Growth and Future Expectations - The fair value of contingent purchase consideration from business combinations was $3.5 million as of March 31, 2023, compared to $2.645 million as of December 31, 2022, indicating an increase of approximately 32.3%[202] - The company expects to continue incurring substantial additional annual expenses related to public company regulatory requirements and customary practices[245]

Financial Data and Key Metrics Changes - The company generated $37.2 million in revenue for fiscal year 2022, representing a 314% increase year-over-year, primarily driven by the House of Brands businesses [7][80] - Adjusted EBITDA margin improved significantly compared to 2021, while the net loss for the period was $52.6 million, compared to $21.4 million in 2021, with a net loss margin improvement to negative 141.6% from negative 237.9% [9][70] - Gross profit for 2022 increased by 494% to $14.4 million, with gross margin rising from 27% to 39% due to high-margin acquired businesses [85] Business Line Data and Key Metrics Changes - The House of Brands division was a standout performer, driving the majority of the company's revenue, with expectations for this pillar to contribute approximately 45% of overall revenue in 2023 [10][12] - The JustCBD acquisition proved to be exceptionally accretive, with record-breaking sales during the Black Friday sales event in Q4 [88] - The wholesale distribution business, bolstered by the acquisition of Franchise Global Health, is expected to be a primary revenue driver, contributing up to 45% of total revenue [13] Market Data and Key Metrics Changes - The company is now better positioned to capitalize on opportunities in the European market, particularly Germany, with a network of 1,200 pharmacies and one of the first cannabis distribution licenses [13] - The company has begun exporting cannabis and derivatives from Colombia to various international markets, including Australia and Germany [98][115] Company Strategy and Development Direction - The company has a three-pillar strategy focusing on House of Brands, Commercial Wholesale, and Pharmaceutical development, which provides diversified revenue streams and access to major global cannabis markets [4] - The integration of Franchise Global Health is a key strategic move, expected to enhance the company's distribution capabilities across Europe [5][55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to fulfill inventory needs and meet revenue goals, despite the high working capital requirements of acquired businesses [22][24] - The company is closely monitoring regulatory changes, particularly in Colombia and Germany, which could significantly impact market opportunities [45] Other Important Information - The company transitioned to U.S. GAAP reporting standards, enhancing transparency and clarity in performance metrics [68] - Cash and cash equivalents as of December 31, 2022, were $9.5 million, a decrease from $37.6 million in the previous year, primarily due to acquisition-related expenses [33] Q&A Session Summary Question: Can you provide insights on EBITDA for the quarter? - Management noted that while Q4 results were not published, there was a reduction in gross profit due to year-end adjustments and sales campaigns impacting adjusted EBITDA [18] Question: What are the expectations for exports and the international landscape? - Management emphasized a conservative approach to regulatory expectations, acknowledging past disappointments while remaining optimistic about future opportunities [19] Question: Can you elaborate on the capital position and inventory needs? - Management highlighted the importance of maintaining inventory to meet revenue goals, especially given the high turnover of acquired businesses [22][102] Question: What is the outlook on the integration of Franchise Global Health? - Management confirmed that integration is ongoing, with expectations for synergies to be realized in upcoming quarters [30][29] Question: Can you provide an update on the Tonino Lamborghini partnership? - Management indicated that product categories are being evaluated to align with consumer expectations, with exciting developments anticipated in the second half of 2023 [106]

Ownership of our Common Shares may be considered unlawful in some jurisdictions and holders of our Common Shares may consequently be subject to liability in such jurisdictions. Cannabis-related financial transactions, including investment in the securities of cannabis companies and receipt of any associated benefits, such as dividends, are currently subject to anti-money laundering and a variety of other laws that vary by jurisdiction, many of which are unsettled and still developing. While the interpretati ...

Financial Data and Key Metrics Changes - Revenue for Q3 2022 increased 414% year-over-year to approximately $10.8 million, surpassing total revenue for 2021 [7][14] - Gross profit in Q3 2022 increased 703% year-over-year to approximately $5 million, with gross margin expanding from 29.6% to 46.2% [14][8] - Operating expenses rose to $10 million from $4.2 million in the same period last year, primarily due to expenses from acquired businesses and expansion efforts [15] - Net loss for the period was $7.4 million compared to $3.6 million in the same period last year, with adjusted EBITDA improving from negative $3.1 million to negative $3.9 million [16] Business Line Data and Key Metrics Changes - The House of Brands pillar accounted for over 80% of total sales, with significant contributions from JustCBD and Vessel [9][20] - The Commercial Wholesale segment is fully operational, with a 247-acre cultivation facility in Colombia harvesting high-THC cannabis weekly [10] - The integration of JustCBD, Vessel, and No Cap has led to cost savings and sales synergies [9][20] Market Data and Key Metrics Changes - The company has cleared the regulatory path for cannabis export to five countries and received a high-THC cannabis quota of 43 tons from the Colombian government [10] - Successful exports of CBD isolate to the U.S. and dried flower to Switzerland and the Czech Republic have been achieved [24] Company Strategy and Development Direction - The company aims to be a leader in providing safe, high-quality cannabis globally, focusing on strategic initiatives across its three pillars [6][9] - M&A activities have been significant, with acquisitions of JustBrands, No Cap, and a pending acquisition of Franchise Global Health to enhance market presence [12][34] - The company is redirecting efforts towards EU GMP certification for dry bulk flower to capitalize on the EU market [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving revenue guidance of $35 million to $45 million for 2022 despite macroeconomic challenges [32] - The company anticipates a full activation of revenues from Colombian-grown cannabis in 2023, aligning with global demand for high-THC and high-CBD products [34] Other Important Information - The company remains debt-free as of September 30, with cash and cash equivalents at $5.9 million, down from $37.6 million at the end of 2021 [17][18] - The completion of Flora lab 4 is expected to enhance capabilities in manufacturing custom formulations for the medicinal cannabis market [29] Q&A Session Summary Question: What are the expectations for revenue growth in the upcoming quarters? - Management expects an increase in revenue for all brands in Q4 due to heightened demand during the holiday season [22] Question: How is the company addressing regulatory challenges? - The company has established strong regulatory connections and has successfully navigated the regulatory landscape to achieve export goals [24] Question: What is the strategy for the European market? - The company is focusing on building commercial export pathways for THC products, particularly through the pending acquisition of Franchise Global Health [27]

EX-99.2 3 flora_ex992.htm UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS EXHIBIT 99.2 Flora Growth Corp. INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended September 30, 2022 and 2021 (Unaudited) (Expressed in United States Dollars) Flora Growth Corp. Interim Condensed Consolidated Statements of Financial Position (Unaudited - Prepared by Management) (in thousands of United States dollars) | --- | --- | --- | --- | --- | --- | |---------------------------- ...

Financial Data and Key Metrics Changes - Revenue for the first half of 2022 reached $14.9 million, representing a 604% increase compared to the same period last year and more than doubling from the second half of 2021 [11] - Gross profit increased to approximately $7 million, up 547% year-over-year and 363% compared to the second half of 2021 [12] - Net loss for the first half was $32.7 million, compared to $5.1 million for the first half of 2021 and $16.2 million in the second half of 2021 [16] - Adjusted EBITDA loss was $8.2 million for the first half of 2022, with expectations for improvement going forward [15] Business Line Data and Key Metrics Changes - Revenue from Flora Lab and other brands outside of JustCBD and Vessel contributed 12% of overall revenue, as the company emphasized North American market penetration [11] - The House of Brands division accounted for approximately 85% of total revenues in the first half, primarily driven by JustCBD and Vessel [33] - Gross profit margin for household brands supported a gross profit of 43%, expected to continue climbing in the second half [12] Market Data and Key Metrics Changes - The company has expanded its international market presence, with revenue contribution from international sales at roughly 3% of total revenue in the first half, expected to grow significantly [32] - Flora has secured international distribution agreements for its MIND Naturals line, now available in Mexico and Hong Kong, and expanded its presence in Canada through Vessel [23] Company Strategy and Development Direction - The company’s growth strategy is categorized into three pillars: commercial wholesale, House of Brands, and life sciences, with a focus on operational discipline and market expansion [8] - Flora plans to continue expanding through organic growth and evaluating M&A opportunities, emphasizing revenue-generating and EBITDA-positive companies [21] - The company aims to optimize expenses and cash outlays while focusing on financial discipline, with a revenue guidance of $35 million to $45 million for 2022 [44] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenging market dynamics, including inflation fears and supply chain disruptions, but noted significant progress in business performance [7] - The company is optimistic about the future, expecting to achieve profitability and positive cash flow next year without additional capital injection [18] - Regulatory movements in Colombia, such as the legalization of dry flower exports, are seen as positive developments for the company [8] Other Important Information - The company has completed its capital expenditures for 2022 and is moving into a period of execution, realizing the investments made over the past years [63] - Flora has partnered with the Misak community, a native tribe in Colombia, to support small cultivators in the cannabis industry [65] Q&A Session Summary Question: What is the M&A strategy? - The company will continue to evaluate M&A opportunities, focusing on revenue-generating and EBITDA-positive companies to strengthen its balance sheet and capabilities [45] Question: Are you required to raise money given the cash balance? - The company is not required to raise money and expects to become cash flow positive early next year without additional capital [46] Question: What are the near-term priorities for growth and consolidating operations? - The company is focused on fully integrating acquisitions of JustCBD and Vessel while amplifying revenue generation from the House of Brands [48] Question: What challenges does the company foresee in the coming months? - The biggest challenge is unpredictable changes in the regulatory environment [66]

Financial Performance - Revenue for the six months ended June 30, 2022, was $14,917,000, a significant increase from $2,118,000 in the same period of 2021, representing a growth of 605%[7] - Gross profit for the same period was $6,546,000, compared to $1,012,000 in 2021, indicating a growth of 546%[7] - The net loss for the six months ended June 30, 2022, was $32,716,000, compared to a net loss of $5,138,000 in 2021, reflecting a deterioration of 536%[7] - The company reported a net loss of $0.4 million for JustCBD, which generated revenue of $10.0 million since the acquisition date[54] - For the six months ended June 30, 2022, net revenue was $1,631,000, a decrease of 21% compared to $2,069,000 for the same period in 2021[139] - Gross profit for the six months ended June 30, 2022, was $999,000, down from $1,009,000 in the prior year, reflecting a slight decline[139] Assets and Liabilities - Total current assets decreased to $27,156,000 as of June 30, 2022, down from $47,943,000 at the end of 2021, a decline of 43.5%[2] - Total liabilities increased to $16,599,000 as of June 30, 2022, compared to $8,538,000 at the end of 2021, an increase of 94.5%[2] - Shareholders' equity decreased to $62,469,000 as of June 30, 2022, down from $76,941,000 at the end of 2021, a decline of 18.8%[2] - Cash and cash equivalents decreased to $10,268,000 as of June 30, 2022, down from $37,614,000 at the end of 2021, a decline of 72.7%[2] - Non-current assets at June 30, 2022, totaled $51,912,000, compared to $37,536,000 at December 31, 2021, indicating growth in asset base[139] Cash Flow and Investments - Total cash used in operating activities for the six months ended June 30, 2022, was $10,483,000, compared to $5,770,000 for the same period in 2021, indicating an 81% increase in cash outflow[12] - The company reported a total of $16,179,000 used in investing activities for the six months ended June 30, 2022, compared to $5,171,000 for the same period in 2021, marking a 212% increase in cash used for investments[13] - Cash outflows from leases totaled $999,000 for the six months ended June 30, 2022, compared to $86,000 in the same period of 2021[67] Acquisitions and Goodwill - The company completed the acquisition of Just Brands LLC and High Roller Private Label LLC for a total purchase consideration of $34.6 million to expand its product offerings and market presence[49] - The company acquired JustCBD's intangible assets valued at $4.8 million, including tradenames ($3.4 million), customer relationships ($1.2 million), and know-how ($0.2 million)[55] - The goodwill assigned to cash-generating units as of June 30, 2022, totaled $28.666 million, reflecting the impact of the recent acquisitions[61] Shareholder and Stock Information - The weighted average number of common shares outstanding increased to 76,944,000 from 39,604,000 in the previous year, an increase of 94.3%[7] - The company issued common shares for business combinations amounting to $14,917,000 during the reporting period[13] - The company issued 9,500,000 common shares valued at $14.7 million in February 2022 as part of the acquisition of JustCBD[72] - A total of 100,000 common shares valued at $0.2 million were issued to acquire the remaining 10% of Flora Beauty LLC on January 18, 2022[73] - The total expense related to stock options granted in the period ended June 30, 2022, was $2.9 million, significantly higher than $0.1 million in 2021[82] Legal and Regulatory Matters - The company is engaged in various legal proceedings, including a claim for 3.0 million common shares by Gerardo Andres Garcia Mendez, which the company disputes[93] - The company believes that the probable resolution of ongoing legal proceedings will not have a material adverse effect on its financial condition as of June 30, 2022[89] - The company has made expenditures to comply with environmental laws and regulations, which are continually changing and becoming more restrictive[107] Tax and Management Compensation - The total compensation for key management personnel for the six months ended June 30, 2022, was $1,013,000, compared to $2,484,000 for the same period in 2021[103] - The company has not recorded any current or deferred income tax expense for the six months ended June 30, 2022, resulting in an effective income tax rate of nil%[98] Currency and Financial Instruments - The company does not currently hedge its foreign exchange exposure, which may adversely affect its financial position due to unfavorable currency fluctuations[119] - A 10% change in foreign currency rates could result in an estimated impact of approximately $0.3 million on net loss as of June 30, 2022[122] - The company's financial instruments measured at amortized cost approximate fair value due to their short-term maturity as of June 30, 2022[108]

Financial Performance - Audited revenues for fiscal year 2021 were approximately $9 million, up from just over $100,000 in 2020, primarily driven by the House of Brands pillar [10] - Revenue for the second half of 2021 increased over 329% compared to the first half, with Q4 up 229% over Q3, and Q1 2022 revenue increased approximately 450% year-over-year [11] - Gross profit totaled $2.4 million, resulting in a gross margin of 27%, which is expected to improve as higher margin businesses contribute more [12] - Operating expenses totaled $21.3 million, leading to an operating loss of $19 million, with a net loss of $22.5 million and an EPS loss of $0.48 [13] - As of December 31, 2021, the company had a cash balance of $37.6 million, up from $14.9 million in 2020, allowing for strategic acquisitions and infrastructure investments [14] Business Lines and Market Data - The House of Brands portfolio now reaches over 500,000 consumers and 16,000 distribution points globally, with significant growth in brands like JustCBD and Mind Naturals [8][20] - The Commercial and Wholesale operations include a cultivation facility in Colombia, which boasts one of the lowest production costs globally at $0.06 per gram of dried flower [28] - The Life Sciences pillar focuses on R&D for pharmaceutical-grade products, with plans to commercialize cannabinoid-based prescriptions and dietary supplements [58] Company Strategy and Industry Competition - The company aims to leverage its low-cost production in Colombia to gain market share in the global cannabis market, with a focus on vertical integration and supply chain mastery [19][34] - Flora Growth has established partnerships to enhance its distribution capabilities, including a strategic partnership with Hoshi International for the European market [18] - The company anticipates that 60% to 70% of its revenue in 2022 will come from the House of Brands, with the remainder from Wholesale and Commercial operations [65] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, emphasizing the importance of operational excellence and strategic acquisitions [62] - The company is optimistic about the regulatory environment in Colombia, with both presidential candidates supporting cannabis as a key economic growth element [76] - Management expects gross margins to improve significantly in 2022, driven by higher contributions from the House of Brands and the Commercial brand [77] Other Important Information - Flora Growth completed the acquisition of JustCBD, which is expected to enhance revenue and market share, particularly in Europe and Latin America [68] - The company has made significant investments in infrastructure and human capital to support its growth strategy [62] - Flora Growth is actively pursuing educational initiatives to promote the potential of cannabis, partnering with edX for online courses [60] Q&A Session Summary Question: Update on revenue guidance split across divisions - Management expects 2022 to see significant contributions from all three growth pillars, with the House of Brands contributing 60% to 70% of revenues [65] Question: Progress on finding partners for THC flower distribution - The company is projecting to recognize distribution opportunities for high-THC strains by Q3, with no issues in finding distribution partners [66][67] Question: JustCBD growth opportunity and margin profile - JustCBD is experiencing strong growth, particularly in Europe, with gross margins around 60% depending on the product category [68] Question: Update on outdoor cultivation and extraction capacity - The company is currently producing around 600 kilos per week, focusing on high-THC strains for Q3 and Q4 [71] Question: Status of preclinical and clinical trials with the University of Manchester - The company is in the final phases of approval for human trials, expecting to begin before the end of the year [73][74] Question: Impact of Colombian elections on business - Both presidential candidates support cannabis as a key economic growth element, providing confidence in continued government support [75][76] Question: Outlook for gross margins in 2022 - Management expects gross margins to improve significantly, with contributions from high-margin brands like JustCBD and Naturals [77][78]

United States Securities and Exchange Commission Washington, D.C. 20549 Title of each class Trading symbol Name of each exchange on which registered Common Shares, no par value FLGC Nasdaq Capital Market FORM 20-F ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 Commission file number 001-40397 Flora Growth Corp. (Exact name of Registrant as specified in its charter) Province of Ontario (Jurisdiction of incorporation or organiza ...