Financial Performance - The company reported a net income and positive cash flows from operating activities only in Q3 2023, raising doubts about its ability to achieve sustained profitability[112]. - Revenue for the three months ended March 31, 2025, was $11.8 million, down from $18.0 million in the same period of 2024, representing a decrease of approximately 34%[139]. - Gross profit decreased to $2.9 million for the three months ended March 31, 2025, compared to $3.9 million in 2024, with a gross margin improvement to 25% from 21%[139]. - Operating expenses totaled $3.9 million for the three months ended March 31, 2025, down from $6.3 million in 2024, primarily due to a $1.2 million gain on the disposal of insolvent subsidiaries[140]. - The company recorded a net loss of $0.8 million for the three months ended March 31, 2025, significantly reduced from a net loss of $3.4 million in 2024[157]. - Adjusted EBITDA for the three months ended March 31, 2025 was $(534,000), a decrease from $(268,000) in the prior year[161]. - Cash used in operating activities was $2.7 million for the three months ended March 31, 2025, compared to $1.3 million for the same period in 2024[167]. - As of March 31, 2025, the Company had cash of $3.7 million, down from $6.1 million as of December 31, 2024[162]. - The Company expects to continue incurring operating losses and negative cash flows in the foreseeable future[162]. Acquisitions and Market Strategy - The company acquired United Beverage Distribution Inc. in 2025, which specializes in cannabis-infused drinks and holds supply agreements with major beverage retailers[108]. - The company is focused on expanding its market presence in Germany and the European Union as cannabis regulations evolve globally[115]. - The company’s growth strategy includes acquisitions, but it faces risks related to transaction costs and the realization of anticipated synergies[113]. - The Company generated $437,000 from investing activities in the three months ended March 31, 2025, primarily related to the acquisition of United[169]. - The Company issued promissory notes totaling $2.1 million as part of the acquisition of United, with the first payments due in February 2026[173]. Revenue Sources and Segments - The company’s revenue is primarily generated from pharmaceutical goods distribution and cannabis-based products, with two major segments: House of Brands and Commercial & Wholesale[121][123]. - The company’s subsidiary, Phatebo, distributes pharmaceutical products in 28 countries, focusing on Europe, and holds licenses for narcotic drugs and medical cannabis[109]. - The company’s brand portfolio includes JustCBD and Vessel, which are positioned to capture market share in emerging cannabis markets[104][105]. - JustCBD's revenue contribution fell to $3.5 million in Q1 2025 from $5.4 million in Q1 2024, while Phatebo's revenue decreased to $6.9 million from $11.3 million[142]. Financial Obligations and Liquidity - The Company’s working capital as of March 31, 2025 was $0.6 million, indicating tight liquidity[170]. - As of March 31, 2025, the company's total contractual obligations amount to $11,464,000, with $6,283,000 due in less than 1 year[175]. - The company has $2,626,000 in sales tax obligations due within 1 year[175]. - Contingent purchase consideration related to acquisitions totals $531,000, all due within 1 year[178]. - Operating lease obligations total $3,554,000, with $830,000 due in less than 1 year and $1,896,000 due in 1-3 years[175]. - The company's debt obligations total $4,753,000, with $2,296,000 due in less than 1 year and $1,255,000 due in 1-3 years[175]. Operating Expenses and Cost Management - The company faces challenges in reducing overhead costs to meet market demand, impacting its cash flow and reliance on debt or equity financing[111]. - The company’s operating expenses include significant costs related to public company requirements, which are expected to continue increasing[119]. - Consulting and management fees decreased to $1.9 million in Q1 2025 from $2.3 million in Q1 2024, attributed to a reduction in total headcount[141]. - Research and development expenses remained stable at approximately $0.1 million for both Q1 2025 and Q1 2024, focusing on contract research and new brand launches[148]. Tax and Non-Operating Income - Non-operating income was $0.3 million for Q1 2025, a turnaround from a non-operating expense of $0.8 million in Q1 2024, primarily due to gains on contingent consideration[155]. - The effective tax rate for the periods ended March 31, 2025, and 2024 was -5.3% and -3.9%, respectively, with a full valuation allowance recorded against net deferred taxes[156]. Compliance and Regulatory Matters - The company has a minimum bid price requirement of $1.00 per share, with a compliance deadline of August 25, 2025, to avoid potential delisting from Nasdaq[120]. - No new accounting standards impacted the company during the three months ended March 31, 2025[177]. - The company has not disclosed any quantitative or qualitative market risk information[179].
Flora Growth(FLGC) - 2025 Q1 - Quarterly Report