Flora Growth(US:FLGC)2023-11-07 16:00Financial Performance - Gross profit for Q3 2023 totaled $4.9 million, up from $4.7 million in Q3 2022, primarily driven by the acquisition of FGH, which contributed $0.6 million[63]. - Gross margin decreased to 29% in Q3 2023 from 48% in Q3 2022, attributed to the lower margin pharmaceuticals distributed by FGH[63]. - Non-operating income for Q3 2023 was $1.1 million, compared to a non-operating expense of $2.3 million in Q3 2022, mainly due to a $0.8 million gain on contingent consideration related to the JustCBD acquisition[69]. - Income from discontinued operations improved to $0.5 million in Q3 2023 from a loss of $0.7 million in Q3 2022, due to the derecognition of equity components related to sold Colombian entities[70]. - Adjusted EBITDA for Q3 2023 was $2.1 million, compared to an Adjusted EBITDA loss of $1.3 million in Q3 2022[82]. - The company reported a net income of $1.1 million for the three months ended September 30, 2023, compared to a net loss of $7.4 million for the same period in 2022, reflecting significant operational improvements[101]. - Revenue for the nine months ended September 30, 2023, totaled $58.1 million, up from $22.9 million in the same period of 2022, driven by acquisitions including FGH and JustCBD[102]. - FGH contributed $27.8 million to revenue, while JustCBD contributed $25.0 million, compared to $17.7 million in the prior year[102]. Cost Management - Consulting and management fees decreased to $2.3 million in Q3 2023 from $2.8 million in Q3 2022, due to a reduction in corporate office headcount[64]. - Promotion and communication expenses for the nine months ended September 30, 2023, were $3.7 million, down from $6.6 million in the same period of 2022, reflecting cost-cutting initiatives[75]. - Share-based compensation expenses for the nine months ended September 30, 2023, totaled $1.0 million, down from $3.0 million in the same period of 2022, due to the cancellation of restricted stock awards[76]. - Professional fees decreased to $0.4 million for the three months ended September 30, 2023, from $0.7 million in the same period of 2022, due to cost-cutting initiatives[95]. - Depreciation and amortization expenses totaled $0.3 million for the three months ended September 30, 2023, down from $0.6 million in the same period of 2022, primarily due to the sale of Colombian operations[98]. Cash Flow and Financing - The company raised $2.7 million through a registered direct offering of 1,369,000 units at $2.00 per unit on September 21, 2023[88]. - As of September 30, 2023, the company had working capital of $7.3 million, including $4.8 million in cash, to support operational activities and sales growth[118]. - Net cash used in investing activities for the three months ended September 30, 2023, totaled $0.2 million, compared to less than $0.1 million for the same period in 2022[131]. - Net cash used in investing activities for the nine months ended September 30, 2023, was $0.3 million, significantly lower than $16.2 million for the same period in 2022[131]. - The primary uses of cash include working capital requirements and capital expenditures, with working capital mainly for personnel and product manufacturing costs[129]. - The company incurred non-operating expenses, including foreign exchange losses and unrealized losses from changes in fair value related to its acquisition of JustCBD[128]. Compliance and Risk - The company regained compliance with Nasdaq's minimum bid price requirement on June 26, 2023, after maintaining a closing bid price above $1.00 for 10 consecutive trading days[56]. - The company faces substantial doubt about its ability to continue as a going concern without obtaining additional financing, which may not be available on acceptable terms[85]. - The effective tax rate for the three months ended September 30, 2023, was 8.8%, compared to 0.0% in the same period of 2022, with a tax benefit of $0.1 million recognized in 2023[100]. - There have been no changes in internal control over financial reporting that materially affected the company during the three months ended September 30, 2023[137]. - The company has not reported any material changes to legal proceedings or risk factors since the 2022 Annual Report[139][140]. Asset Management - Asset impairment totaled $34.9 million for the nine months ended September 30, 2023, compared to $15.7 million in the same period of 2022, primarily related to goodwill impairment at JustCBD and FGH[109]. - The company’s capital expenditures primarily consist of improvements in existing facilities and product development[129]. - The company’s primary cash flow activities are related to acquisitions and other investing and financing activities[129]. - The company has engaged in multiple amendments to its Share Purchase Agreement with Lisan Farma Colombia LLC, effective in July 2023[10.3][10.4]. - The company’s disclosure controls and procedures were evaluated as effective as of September 30, 2023[136].