UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________ to _____________
Commission file number
(Exact name of registrant as specified in its charter)
| Province of |
Not Applicable |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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| (Address of principal executive offices) | (Zip Code) |
(
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No
As of August 3, 2023, the registrant had
Table of Contents
Cautionary Statement Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this "Quarterly Report") contains "forward-looking statements," as that term is defined under the Private Securities Litigation Reform Act of 1995 ("PSLRA"), Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements may include projections and estimates concerning our possible or assumed future results of operations, financial condition, business strategies and plans, market opportunity, competitive position, industry environment, and potential growth opportunities. In some cases, you can identify forward-looking statements by terms such as "may", "will", "should", "believe", "expect", "could", "intend", "plan", "anticipate", "estimate", "continue", "predict", "project", "potential", "target," "goal" or other words that convey the uncertainty of future events or outcomes. You can also identify forward-looking statements by discussions of strategy, plans or intentions. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, because forward-looking statements relate to matters that have not yet occurred, they are inherently subject to significant business, competitive, economic, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These and other important factors, including, among others, those discussed in this Quarterly Report, may cause our actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by the forward-looking statements in this Quarterly Report. Risks and uncertainties, the occurrence of which could adversely affect our business, include, but are not limited to, the following:
Given the foregoing risks and uncertainties, you are cautioned not to place undue reliance on the forward-looking statements in this Quarterly Report. The forward-looking statements contained in this Quarterly Report are not guarantees of future performance and our actual results of operations and financial condition may differ materially from such forward-looking statements. In addition, even if our results of operations and financial condition are consistent with the forward-looking statements in this Quarterly Report, they may not be predictive of results or developments in future periods.
Any forward-looking statement that we make in this Quarterly Report speaks only as of the date of this Quarterly Report. Except as required by law, we do not undertake any obligation to update or revise, or to publicly announce any update or revision to, any of the forward-looking statements in this Quarterly Report, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report.
PART I
Item 1. Financial Statements
Flora Growth Corp.
Table of Contents
4
Flora Growth Corp.
Unaudited Condensed Interim Consolidated Statements of Financial Position
(in thousands of United States dollars, except share amounts which are in thousands of shares)
| As at: | June 30, 2023 | December 31, 2022 | ||||
| ASSETS | ||||||
| Current | ||||||
| Cash | $ | $ | ||||
| Restricted cash | ||||||
| Trade and amounts receivable, net of $ |
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| Loans receivable and advances | ||||||
| Prepaid expenses and other current assets | ||||||
| Indemnification receivables | ||||||
| Inventory | ||||||
| Current assets held for sale | ||||||
| Total current assets | ||||||
| Non-current | ||||||
| Property, plant and equipment | ||||||
| Operating lease right of use assets | ||||||
| Intangible assets | ||||||
| Goodwill | ||||||
| Investments | ||||||
| Other assets | ||||||
| Noncurrent assets held for sale | ||||||
| Total assets | $ | $ | ||||
| LIABILITIES | ||||||
| Current | ||||||
| Trade payables | $ | $ | ||||
| Contingencies | ||||||
| Current portion of debt | ||||||
| Current portion of operating lease liability | ||||||
| Other accrued liabilities | ||||||
| Current liabilities held for sale | ||||||
| Total current liabilities | ||||||
| Non-current | ||||||
| Non-current operating lease liability | ||||||
| Deferred tax | ||||||
| Contingent purchase considerations | ||||||
| Noncurrent liabilities held for sale | ||||||
| Total liabilities | ||||||
| SHAREHOLDERS' EQUITY | ||||||
| Share capital, no par value, unlimited authorized, |
||||||
| Additional paid-in capital | ||||||
| Accumulated other comprehensive loss | ( |
) | ( |
) | ||
| Deficit | ( |
) | ( |
) | ||
| Total Flora Growth Corp. shareholders' equity | ||||||
| Non-controlling interest in subsidiaries | ( |
) | ( |
) | ||
| Total shareholders' equity | ||||||
| Total liabilities and shareholders' equity | $ | $ |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
Commitments and contingencies - see Note 16. Going concern - see Note 2.
5
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Flora Growth Corp. |
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Unaudited Condensed Interim Consolidated Statements of Loss and Comprehensive Loss |
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(in thousands of United States dollars, except per share amounts which are in thousands of shares) |
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| For the three months ended June 30, 2023 |
For the three months ended June 30, 2022 |
For the six months ended June 30, 2023 |
For the six months ended June 30, 2022 |
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| Revenue | $ | $ | $ | $ | ||||||||
| Cost of sales | ||||||||||||
| Gross profit | ||||||||||||
| Operating expenses | ||||||||||||
| Consulting and management fees | ||||||||||||
| Professional fees | ||||||||||||
| General and administrative | ||||||||||||
| Promotion and communication | ||||||||||||
| Travel expenses | ||||||||||||
| Share based compensation | ||||||||||||
| Research and development | ||||||||||||
| Operating lease expense | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Bad debt expense | ||||||||||||
| Asset impairment | ||||||||||||
| Other expenses (income), net | ||||||||||||
| Total operating expenses | ||||||||||||
| Operating loss | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Interest expense (income) | ( |
) | ( |
) | ||||||||
| Foreign exchange (gain) loss | ( |
) | ( |
) | ||||||||
| Unrealized (gain) loss from changes in fair value | ( |
) | ( |
) | ||||||||
| Net loss before income taxes and discontinued operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Income tax recovery | ( |
) | ( |
) | ||||||||
| Net loss from continuing operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Loss from discontinued operations, net of taxes | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Net loss for the period | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Other comprehensive gain (loss) | ||||||||||||
| Exchange differences on foreign operations, net of income taxes of $nil ($nil in 2022) | $ | $ | $ | $ | ( |
) | ||||||
| Total comprehensive loss for the period | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Net loss attributable to: | ||||||||||||
| Flora Growth Corp. continuing operations | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Flora Growth Corp. discontinued operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Non-controlling interests in subsidiaries | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Comprehensive loss attributable to: | ||||||||||||
| Flora Growth Corp. | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Non-controlling interests in subsidiaries | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Basic and diluted loss per share from continuing operations | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Basic and diluted loss per share from discontinued operations | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Basic and diluted loss per share attributable to Flora Growth Corp. | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| Weighted average number of common shares outstanding - basic and diluted |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
6
Flora Growth Corp.
Unaudited Condensed Interim Consolidated Statement of Shareholders' Equity (Deficiency)
(in thousands of United States dollars, except for share amounts which are in thousands of shares)
| Common shares | Additional paid-in capital |
Accumulated other comprehensive (loss) income |
Accumulated deficit |
Non- controlling interests in subsidiaries (deficiency) |
Shareholders' equity (deficiency) |
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| # | |||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||
| Common shares issued for business combinations | - | - | - | - | |||||||||||||||||
| Common shares issued for other agreements | - | - | - | - | |||||||||||||||||
| Acquisition of noncontrolling interest | - | - | ( |
) | ( |
) | |||||||||||||||
| Options issued | - | - | - | - | - | ||||||||||||||||
| Options exercised | - | - | - | - | |||||||||||||||||
| Warrants exercised | - | - | - | - | |||||||||||||||||
| Share issuance costs | - | - | ( |
) | - | - | - | ( |
) | ||||||||||||
| Other comprehensive loss - exchange differences on foreign operations (net of income taxes of $nil) |
- | - | - | ( |
) | - | - | ( |
) | ||||||||||||
| Net loss | - | - | - | - | ( |
) | ( |
) | ( |
) | |||||||||||
| Balance, March 31, 2022 | ( |
) | ( |
) | ( |
) | |||||||||||||||
| Share repurchase | - | - | ( |
) | - | - | - | ( |
) | ||||||||||||
| Equity issued for other agreements | - | - | - | - | |||||||||||||||||
| Options issued | - | - | - | - | - | ||||||||||||||||
| Options exercised | - | - | - | - | |||||||||||||||||
| Warrants exercised | - | - | - | - | |||||||||||||||||
| Warrants expired/cancelled | - | - | - | - | - | - | |||||||||||||||
| Share issuance costs | - | - | - | - | - | ||||||||||||||||
| Other comprehensive loss - exchange differences on foreign operations (net of income taxes of $nil) |
- | - | - | - | - | ||||||||||||||||
| Net loss | - | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||
| Balance, June 30, 2022 | $ | - | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||
| Equity issued for other agreements | - | - | - | - | |||||||||||||||||
| Options issued | - | - | - | - | - | ||||||||||||||||
| Options cancelled | - | - | ( |
) | - | - | - | ||||||||||||||
| Restricted units granted | - | - | - | - | |||||||||||||||||
| Other comprehensive loss - exchange differences on foreign operations (net of income taxes of $nil) |
- | - | - | - | - | ||||||||||||||||
| Net loss | - | - | - | - | ( |
) | ( |
) | ( |
) | |||||||||||
| Balance, March 31, 2023 | ( |
) | ( |
) | ( |
) | |||||||||||||||
| Equity issued for other agreements | - | - | - | - | |||||||||||||||||
| Options issued | - | - | - | - | - | ||||||||||||||||
| Options expired/cancelled | - | - | ( |
) | - | - | - | ( |
) | ||||||||||||
| Restricted stock granted | - | - | - | - | |||||||||||||||||
| Restricted stock cancelled | ( |
) | - | ( |
) | - | - | - | ( |
) | |||||||||||
| Share issuance costs | - | - | ( |
) | - | - | - | ( |
) | ||||||||||||
| Other comprehensive loss - exchange differences on foreign operations (net of income taxes of $nil) |
- | - | - | - | - | ||||||||||||||||
| Net loss | - | - | - | - | ( |
) | ( |
) | ( |
) | |||||||||||
| Balance, June 30, 2023 | $ | - | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||||
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
7
Flora Growth Corp.
Unaudited Condensed Interim Consolidated Statement of Cash Flows
(in thousands of United States dollars)
| For the six months ended June 30, 2023 |
For the six months ended June 30, 2022 |
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| Cash flows from operating activities: | ||||||
| Net loss | $ | ( |
) | $ | ( |
) |
| Adjustments to net loss: | ||||||
| Depreciation and amortization | ||||||
| Share based compensation | ||||||
| Asset impairment | ||||||
| Changes in fair value of investments and liabilities | ( |
) | ||||
| Bad debt expense | ||||||
| Interest expense (income) | ( |
) | ||||
| Interest paid | ( |
) | ( |
) | ||
| Income tax recovery | ( |
) | ||||
| ( |
) | ( |
) | |||
| Net change in non-cash working capital: | ||||||
| Trade and other receivables | ||||||
| Inventory | ( |
) | ||||
| Prepaid expenses and other assets | ( |
) | ( |
) | ||
| Trade payables and accrued liabilities | ( |
) | ( |
) | ||
| Net cash used in operating activities | ( |
) | ( |
) | ||
| Cash flows from financing activities: | ||||||
| Equity issue costs | ( |
) | ( |
) | ||
| Exercise of warrants and options | ||||||
| Common shares repurchased | ( |
) | ||||
| Loan borrowings | ||||||
| Loan repayments | ( |
) | ( |
) | ||
| Net cash provided (used) by financing activities | ( |
) | ||||
| Cash flows from investing activities: | ||||||
| Purchases of property, plant and equipment and intangible assets | ( |
) | ( |
) | ||
| Business and asset acquisitions, net of cash acquired | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ( |
) | ||
| Effect of exchange rate on changes on cash | ( |
) | ||||
| Change in cash during the period | ( |
) | ( |
) | ||
| Cash and restricted cash at beginning of period | ||||||
| Cash included in assets held for sale | ( |
) | ( |
) | ||
| Cash and restricted cash at end of period | $ | $ | ||||
| Supplemental disclosure of non-cash investing and financing activities | ||||||
| Common shares issued for business combinations | $ | $ | ||||
| Assets acquired for contingent consideration | ||||||
| Common shares issued for other agreements | ||||||
| Operating lease additions to right of use assets |
The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
8
Flora Growth Corp.
Notes to the unaudited condensed interim consolidated financial statements
For the three and six months ended June 30, 2023 and 2022
(In thousands of United States dollars, except shares and per share amounts)
1. NATURE OF OPERATIONS
Flora Growth Corp. (the "Company" or "Flora") was incorporated under the laws of the Province of Ontario, Canada on March 13, 2019. The Company is manufacturer, distributor and an all-outdoor cultivator of global cannabis and pharmaceutical products and brands, building a connected, design-led collective of plant-based wellness and lifestyle brands. The Company's registered office is located at 365 Bay Street, Suite 800, Toronto, Ontario, M5H 2V1, Canada and our principal place of business in the United States is located at 3406 SW 26th Terrace, Suite C-1, Fort Lauderdale, Florida 3312.
Presentation of comparative financial statements
On June 9, 2023, the Company consolidated its issued and outstanding common shares based on one new common share of the Company for every twenty existing common shares of the Company. All common shares and per share amounts have been restated to give retroactive effect to the share consolidation. See discussion in Note 13.
2. BASIS OF PRESENTATION
These unaudited condensed interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP. The Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2022. These unaudited condensed interim consolidated financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year.
These unaudited condensed interim consolidated financial statements apply the same accounting policies as those used in the financial statements included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2022.
These interim condensed consolidated financial statements have been prepared on a going concern basis, meaning that the Company will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations.
Prior to January 1, 2023, Flora was a foreign private issuer reporting its financial statements under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standard Boards. These consolidated financial statements, for all periods, are presented in accordance with U.S. GAAP.
Going concern
The accompanying unaudited interim condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue one year after the date these unaudited condensed interim consolidated financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.
The Company had cash of $
| 9 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
Basis of consolidation
These unaudited condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions were eliminated on consolidation. Subsidiaries are entities the Company controls when it is exposed, or has rights, to variable returns from its involvement in the entity and can affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are included in the consolidated financial results of the Company from the date of acquisition up to the date of disposition or loss of control. The Company's subsidiaries and respective ownership percentage have not changed from the year ended December 31, 2022. On July 5, 2023, the Company sold its shares in its Colombian related subsidiaries. The results of these subsidiaries are included in discontinued operations in the accompanying unaudited condensed interim consolidated financial statements. See discussion in Note 3.
3. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
On July 5, 2023, the Company entered into a Share Purchase Agreement with Lisan Farma Colombia LLC ("Lisan"), a Delaware limited liability company, to sell all its shares in its Colombian related subsidiaries and its Colombian assets for a purchase price of CAD $
The sale enables the Company to concentrate on its core business divisions, which are lifestyle brands in the United States and international pharmaceutical distribution. The sale was part of several strategic changes to cut costs and streamline operations.
The Company has presented the associated assets and liabilities of the Colombian subsidiaries as held for sale. The major classes of assets and liabilities classified as held for sale as of June 30, 2023 and December 31, 2022 were as follows:
| June 30, 2023 | December 31, 2022 | |||||
| Assets held for sale | ||||||
| Cash | $ | $ | ||||
| Trade and amounts receivable | ||||||
| Prepaid expenses and other current assets | ||||||
| Inventory | ||||||
| Total current assets held for sale | ||||||
| Property, plant and equipment | ||||||
| Operating lease right of use assets | ||||||
| Intangible assets | ||||||
| Other assets | ||||||
| Total noncurrent assets held for sale | ||||||
| Total assets held for sale | $ | $ | ||||
| Liabilities held for sale | ||||||
| Current portion of long-term debt | $ | $ | ||||
| Current portion of operating lease liability | ||||||
| Other accrued liabilities | ||||||
| Total current liabilities held for sale | ||||||
| Non-current operating lease liability | ||||||
| Total liabilities held for sale | $ | $ |
The following table summarizes the major classes of line items included in loss from discontinued operations, net of tax, for the three and six months ended June 30, 2023 and 2022:
|
For the three |
For the three |
For the six |
For the six |
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| Revenue | $ | $ | $ | $ | ||||||||
| Cost of sales | ||||||||||||
| Gross profit from discontinued operations | ||||||||||||
| Consulting and management fees | ||||||||||||
| Professional fees | ||||||||||||
| General and administrative | ||||||||||||
| Promotion and communication | ||||||||||||
| Operating lease expense | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Bad debt expense | ||||||||||||
| Asset impairment | ||||||||||||
| Other (income) expense | ||||||||||||
| Operating loss from discontinued operations | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Interest (income) expense | ||||||||||||
| Net loss before income taxes | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Loss on disposal of discontinued operations | ||||||||||||
| Income tax expense | ||||||||||||
| Loss from discontinued operations | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| 10 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
The following table summarizes the significant operating and investing items related to the Colombian subsidiaries for the six months ended June 30, 2023 and 2022
|
For the six |
For the six |
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| Operating activities of discontinued operations | ||||||
| Depreciation and amortization | $ | $ | ||||
| Bad debt expense | ||||||
| Asset impairment | ||||||
| Investing activities of discontinued operations | ||||||
| Purchases of property, plant and equipment | $ | $ |
The subsidiaries sold included Cosechemos Ya S.A.S, which was part of the commercial and wholesale segment; Flora Lab S.A.S, Flora Med S.A.S. and Labcofarm Laboratories S.A.S, which were part of the pharmaceuticals segment; Flora Growth Corp Colombia S.A.S., and Kasa Wholefoods Company, S.A.S. and Flora Beauty LLC Sucursal Colombia which were part of the house of brands segment.
The Company applies significant judgement in determining whether a disposal meets the criteria to present as held for sale at the reporting date, and whether the disposal represents a strategic shift that has (or will have) a major effect on its operations and financial results in order to be classified as a discontinued operation. The criteria evaluated are both quantitative and qualitative in nature, to evaluate the significance of the disposal relative to the operations of the Company as a whole. The Company has determined this disposition represents a strategic shift in operations that will have a major effect on the Company's operations and financial results, and accordingly, has been presented as discontinued operations.
During the three and six months ended June 30, 2023, the Company recorded a loss on disposal of $
4. TRADE AND AMOUNTS RECEIVABLE
The Company's trade and amounts receivable are recorded at amortized cost. The trade and other receivables balance as at June 30, 2023 and December 31, 2022 consists of trade accounts receivable, amounts recoverable from the Government of Canada for Harmonized Sales Taxes ("HST"), as well as Value Added Tax ("VAT") from various jurisdictions, and other receivables.
| June 30, 2023 | December 31, 2022 | |||||
| Trade accounts receivable | $ | $ | ||||
| Allowance for expected credit losses | ( |
) | ( |
) | ||
| HST/VAT receivable | ||||||
| Other receivables | ||||||
| Total | $ | $ |
Changes in the trade accounts receivable allowance in the three and six months ended June 30, 2023 relate to establishing an allowance for expected credit losses and reclassification of assets held for sale. There was $
| 11 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
| June 30, 2023 | |||
| Current | $ | ||
| 1-30 Days | |||
| 31-60 Days | |||
| 61-90 Days | |||
| 91-180 Days | |||
| 180+ Days | |||
| Total trade receivables | $ |
5. INVENTORY
Inventory is comprised of the following as at June 30, 2023 and 2022:
| June 30, 2023 | December 31, 2022 | |||||
| Raw materials and supplies | $ | $ | ||||
| Finished goods | ||||||
| Total | $ | $ |
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
| June 30, 2023 | December 31, 2022 | |||||
| Land | $ | $ | ||||
| Buildings | ||||||
| Machinery and office equipment | ||||||
| Vehicles | ||||||
| Total | ||||||
| Less: accumulated depreciation | ( |
) | ( |
) | ||
| Property, plant and equipment, net | $ | $ |
Depreciation expense for the three and six months ended June 30, 2023 was less than $
7. INVESTMENTS
As at June 30, 2023, the Company's investments consisted of common shares and warrants in an early-stage European cannabis company.
The Company did not exercise the warrants and they expired on February 1, 2023. The Company recorded the remaining value of the warrants as a loss on changes in fair value of the investment during the six months ended June 30, 2023.
Due to the Company's declining share price, the declining share price of comparable public companies and challenging economic factors, the Company determined that impairment indicators were present at June 30, 2023.
| 12 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
A schedule of the Company's investments activity is as follows:
|
Investee common shares |
Warrants CAD 0.30 exercise price |
Warrants CAD 1.00 exercise price |
Total | |||||||||
| Financial asset hierarchy level | Level 3 | Level 3 | Level 3 | |||||||||
| Balance at December 31, 2022 | $ | $ | $ | $ | ||||||||
| Loss on changes in fair value | ( |
) | ( |
) | ( |
) | ||||||
| Balance at June 30, 2023 | $ | $ | $ | $ |
The loss on changes in fair value appears in the unrealized (gain) loss on changes in fair value caption in the unaudited condensed interim consolidated statements of loss and comprehensive loss.
The value of the investee common shares appears in the investment line on the unaudited condensed interim consolidated statement of financial position.
8. ASSET ACQUISITIONS AND BUSINESS COMBINATIONS
Original Hemp asset acquisition
On March 1, 2023, the Company completed its acquisition of all the assets operating under the brand "Original Hemp". The Company analyzed the acquisition under ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, determining Original Hemp did not meet the definition of a business as it did not have inputs, processes, and outputs in place that constituted a business under Topic 805. As a result, the transaction has been accounted for as an asset acquisition whereby all of the assets acquired and liabilities assumed are assigned a carrying amount based on relative fair values. Total purchase consideration was $
As consideration for the purchased assets of Original Hemp, the Company will pay an amount equal to
The purchase is accounted for as an asset acquisition with amounts allocated as at the acquisition date to each major class of assets as follows:
| Inventory | $ | ||
| Intangible asset | |||
| Total net assets acquired | $ |
Franchise Global Health Inc. ("FGH") business combination
On December 23, 2022, the Company completed its acquisition of all the issued and outstanding common shares (the "Franchise Common Shares") of FGH., a corporation existing under the laws of the Province of British Columbia, by way of a statutory plan of arrangement (the "Arrangement") under the Business Corporations Act (British Columbia). FGH, through its wholly owned subsidiaries, is a multi-national operator in the medical cannabis and pharmaceutical industry with principal operations in Germany. The Company acquired FGH to expand its product offerings, accelerate its revenue growth, expand its customer and distribution capabilities in Germany and to improve synergies and cost savings.
The purchase consideration was comprised of
| 13 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
The purchase is accounted for as a business combination with amounts recognized as at the acquisition date for each major class of assets acquired and liabilities assumed are as follows:
| Current assets | |||
| Cash | $ | ||
| Trade receivables | |||
| Inventory | |||
| Indemnity receivables | |||
| Prepaid assets | |||
| Non-current assets | |||
| Property, plant, and equipment | |||
| Right of use assets | |||
| Intangible asset | |||
| Goodwill | |||
| Total assets | $ | ||
| Current liabilities | |||
| Trade payables and accrued liabilities | $ | ( |
) |
| Current lease liabilities | ( |
) | |
| Current portion of debt | ( |
) | |
| Long term lease liability | ( |
) | |
| Deferred tax | ( |
) | |
| Total liabilities | $ | ( |
) |
| Total net assets acquired | $ |
The amounts shown are provisional. The Company has a measurement period of one year following the acquisition date on December 23, 2022 to adjust the provisional amounts recognized for any new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of additional assets or liabilities, or affected the measurement of the amounts recognized as of that date.
As part of the acquisition terms, Clifford Starke, the Company's current Chief Executive Officer and a Director and the former Chief Executive Officer of FGH, together with certain affiliated entities under his control, entered into an agreement pursuant to which they agreed to indemnify the Company for certain potential liabilities of FGH and its subsidiaries, up to a maximum of $
1. any losses that are related to the ownership or the operation of FGH and its Canadian subsidiaries, in each case prior to the closing of the Arrangement, that are unknown to the Company and that: (i) have not been disclosed or accounted for in FGH filings; or (ii) have not been disclosed in the FGH Disclosure Letter, in each case as at the date of the Arrangement Agreement;
2. any losses that may arise from amounts owed or that may become owed to certain persons or in respect of certain matters identified in the indemnity agreement, as amended; and
3. any fraud, intentional misrepresentation, willful breach, or willful misconduct on the part of FGH or any other entity identified in the indemnity agreement of any of the foregoing in connection with the indemnity agreement or the Arrangement Agreement
The intangible assets of $
Just Brands LLC and High Roller Private Label LLC (collectively "JustCBD") business combination
On February 24, 2022, Flora Growth U.S. Holdings Corp., a wholly owned subsidiary of the Company, completed the acquisition of
The purchase consideration was comprised of (i) $
| 14 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
The fair value of the contingent purchase consideration at February 24, 2022 was determined using a Monte Carlo simulation incorporating Brownian motion with
The fair value of the contingent purchase consideration at June 30, 2023 was determined using a Monte Carlo simulation incorporating Brownian motion with
The purchase is accounted for as a business combination with amounts recognized as at the acquisition date for each major class of assets acquired and liabilities assumed are as follows:
| Current assets | |||
| Cash | $ | ||
| Trade receivables | |||
| Inventory | |||
| Other current assets | |||
| Non-current assets | |||
| Property, plant, and equipment | |||
| Right of use assets | |||
| Other non-current assets | |||
| Intangible asset | |||
| Goodwill | |||
| Total assets | $ | ||
| Current liabilities | |||
| Trade payables and accrued liabilities | $ | ( |
) |
| Current lease liabilities | ( |
) | |
| Provision for sales tax | ( |
) | |
| Deferred tax | ( |
) | |
| Other current liabilities | ( |
) | |
| Total liabilities | $ | ( |
) |
| Total net assets acquired | $ |
The fair value of the trade receivables reflects a $
The intangible assets of $
| 15 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
No Cap Hemp Co. business combination
On July 20, 2022, Just Brands LLC., a wholly owned subsidiary of the Company, acquired certain assets, assumed certain liabilities, retained certain employees and processes (together the "purchased assets") of No Cap Hemp Co. ("No Cap") for total purchase consideration of $
As consideration for the purchased assets of No Cap, Just Brands LLC will pay an amount equal to
The Company determined that the balance of this contingent consideration at June 30, 2023 was $
The purchase is accounted for as a business combination with amounts recognized as at the acquisition date for each major class of assets acquired and liabilities assumed are as follows:
| Current assets | |||
| Trade receivables | $ | ||
| Inventory | |||
| Non-current assets | |||
| Goodwill | |||
| Total assets | $ | ||
| Current liabilities | |||
| Trade payables and accrued liabilities | ( |
) | |
| Total liabilities | $ | ( |
) |
| Total net assets acquired | $ |
The fair value of the trade receivables reflects a $
The Company expects the goodwill to be deductible for United States income tax purposes. The goodwill is assigned to the house of brands segment.
9. INTANGIBLE ASSETS AND GOODWILL
A continuity of intangible assets for the six months ended June 30, 2023 is as follows:
| License |
Customer/Supplier Relationships |
Trademarks |
Patents |
Non- |
Goodwill | Total | |||||||||||||||
| Cost | |||||||||||||||||||||
| At December 31, 2022 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Additions | |||||||||||||||||||||
| Impairment | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | ( |
) | |||||||
| At June 30, 2023 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Accumulated Amortization | |||||||||||||||||||||
| At December 31, 2022 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Additions | |||||||||||||||||||||
| At June 30, 2023 | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||
| Foreign currency translation | ( |
) | ( |
) | |||||||||||||||||
| Net book value at June 30, 2023 | $ | $ | $ | $ | $ | $ | $ |
| 16 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
Amortization expense for the three and six months ended June 30, 2023 was $
At June 30, 2023, the weighted average amortization period remaining for intangible assets was
At June 30, 2023, the estimated future amortization expense related to intangible assets is as follows:
| 2023 | $ | ||
| 2024 | |||
| 2025 | |||
| 2026 | |||
| 2027 | |||
| Thereafter | |||
| Total | $ |
The Company's goodwill is assigned to the following reporting units:
| Vessel | JustCBD | Franchise | Total | |||||||||
| Gross goodwill recorded prior to December 31, 2022 | $ | $ | $ | $ | ||||||||
| Impairment recorded prior to December 31, 2022 | ( |
) | ( |
) | ( |
) | ||||||
| Net book value as at December 31, 2022 | ||||||||||||
| Impairment recorded | ( |
) | ( |
) | ( |
) | ||||||
| Net book value as at June 30, 2023 | $ | $ | $ | $ |
10. IMPAIRMENT OF ASSETS
Goodwill
The Company tests its goodwill for impairment as part of its annual fourth quarter impairment test, and at interim periods when impairment indicators exist. The Company's goodwill is assigned to the reporting units associated with the original acquisition of those operations. At June 30, 2023, the Company determined that indicators were present for its JustCBD and FGH reporting units due to the Company's declining share price, the declining share price of comparable public companies and challenging economic factors making it difficult to access capital.
As such, the Company tested the JustCBD reporting unit for impairment as at June 30, 2023 and determined that the carrying value of the reporting unit's assets exceeded the recoverable amount, resulting in goodwill impairment of $
Likewise, the Company tested the FGH reporting unit for impairment as at June 30, 2023 and determined that the carrying value of the reporting unit's assets exceeded the recoverable amount, resulting in goodwill impairment of $
| 17 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
Long-lived assets
For asset groups that had indicators of impairment, the Company performed a quantitative analysis as of June 30, 2023 to determine if impairment existed by comparing the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate over their remaining lives. This analysis indicated that certain asset values may not be recoverable. The Company then calculated the fair value of these assets using an income approach. As a result, the Company recorded an impairment of property, plant and equipment, operating lease right of use assets, customer relationships, trademarks, patents and non-compete agreements within its Vessel asset group within the house of brands segment totaling $
11. DEBT
Euro credit facility
The Company, through FGH, has a credit facility for
JustCBD insurance premium loan
The Company, through JustCBD, entered into a loan agreement for $
12. LEASES
The Company's leases primarily consist of administrative real estate leases in Germany and the United States. Management has determined all the Company's leases are operating leases through June 30, 2023. Information regarding the Company's leases is as follows:
|
Three months ended June 30, 2023 |
Three months ended June 30, 2022 |
Six months ended June 30, 2023 |
Six months ended June 30, 2022 |
|||||||||
| Components of lease expense | ||||||||||||
| Operating lease expense | $ | $ | $ | $ | ||||||||
| Short-term lease expense | ||||||||||||
| Total lease expense | $ | $ | $ | $ | ||||||||
| Other Information | ||||||||||||
| Operating cash flows from operating leases | $ | $ | $ | $ | ||||||||
| ROU assets obtained in exchange for new operating lease liabilities | ||||||||||||
| Weighted-average remaining lease term in years for operating leases | ||||||||||||
| Weighted-average discount rate for operating leases |
| 18 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
Maturities of operating lease liabilities as of June 30, 2023 are as follows:
| Thousands of United States dollars | Operating Leases | ||
| 2023 | $ | ||
| 2024 | |||
| 2025 | |||
| 2026 | |||
| 2027 | |||
| Total future lease payments | |||
| Less: imputed interest | ( |
) | |
| Total lease liabilities | |||
| Less: current lease liabilities | ( |
) | |
| Total non-current lease liabilities | $ |
Most of the Company’s leases contain renewal options to continue the leases for another term equivalent to the original term, which are generally up to two years. The lease liabilities above include renewal terms that management has executed or is reasonably certain of renewing, which only included leases that would have expired in 2023.
13. SHARE CAPITAL
Authorized and issued
The Company is authorized to issue an unlimited number of common shares, no par value.
The Company had the following significant common share transactions:
Six months ended June 30, 2023
REVERSE STOCK SPLIT
Upon the effectiveness of the Reverse Stock Split, every twenty shares of the issued and outstanding common shares were automatically combined and reclassified into one issued and outstanding common share. The Reverse Stock Split did not affect any shareholder's ownership percentage of the common shares, alter the par value of the common shares or modify any voting rights or other terms of the common shares. The number of authorized shares of common shares under the Company's Articles remained unchanged. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional interest as a result of the Reverse Stock Split was rounded down to the nearest whole common share.
All common shares and per share amounts have been restated to give retroactive effect to the share consolidation.
OTHER ISSUANCES
On January 31, 2023, the Company entered into a settlement agreement with a third party pursuant to which the Company issued
On April 12, 2023, Luis Merchan tendered his resignation as both Chairman of the Board of Directors of the Company and as its Chief Executive Officer. On this date, the Company entered into a separation agreement with Mr. Merchan, pursuant to which the Company issued
14. SHARE BASED COMPENSATION
The Company's 2022 Incentive Compensation Plan (the "2022 Plan") and its previous "'rolling" stock option plan (the "Prior Plan") are described in the Company's 2022 Form 10-K.
| 19 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
OPTIONS
Stock options granted under the Prior Plan are non-transferable and non-assignable and may be granted for a term not exceeding five years. Under the 2022 Plan, stock options may be granted with a term of up to ten years and in the case of all stock options, the exercise price may not be less than 100% of the fair market value of a Common Share on the date the award is granted. Stock option vesting terms are subject to the discretion of the Compensation Committee of the Company's Board of Directors. Common shares are newly issued from available authorized shares upon exercise of awards. The Company no longer makes new grants of stock options under the Prior Plan.
Information relating to share options outstanding and exercisable as at June 30, 2023 and December 31, 2021 is as follows:
| Options Outstanding | ||||||||||||
|
Number of |
Weighted average exercise price |
Weighted average remaining life (years) |
Aggregate intrinsic value |
|||||||||
| Outstanding balance, December 31, 2022 | $ | $ | ||||||||||
| Granted | $ | - | ||||||||||
| Cancelled | ( |
) | $ | - | ||||||||
| Outstanding balance, June 30, 2023 | $ | $ | ||||||||||
| Exercisable balance, June 30, 2023 | $ | $ | ||||||||||
The total benefit related to the options granted in the three and six months ended June 30, 2023 was ($
At June 30, 2023 the total remaining stock option cost for nonvested awards is expected to be $
See Note 20 for subsequent forfeiture of options.
RESTRICTED STOCK AWARDS
Information relating to restricted stock awards outstanding as at June 30, 2023 and December 31, 2022:
|
Number of |
|
|
Weighted |
|||
| Thousands | ||||||
| Balance, December 31, 2022 | $ | |||||
| Granted | ||||||
| Vested | ( |
) | ( |
) | ||
| Cancelled | ( |
) | ( |
) | ||
| Balance, June 30, 2023 | $ |
The total expense related to the restricted stock awards in the three and six months ended June 30, 2023 was $
The outstanding restricted stock awards vest over the next three years provided the award holder is still employed or engaged by the Company. As of June 30, 2023, the Company had $
See Note 20 for subsequent forfeiture of restricted share awards.
| 20 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
15. WARRANTS
The following summarizes the number of warrants outstanding as of June 30, 2023:
| Number of warrants |
Weighted average exercise price |
|||||
| Thousands | ||||||
| Balance, December 31, 2022 | $ | |||||
| Exercised | ( |
) | ||||
| Balance, June 30, 2023 | $ |
| Date of expiry |
Warrants outstanding |
Exercise price |
Grant date fair value |
Remaining life in years |
|||||||
| Thousands | |||||||||||
| $ | $ | ||||||||||
| $ | $ |
16. COMMITMENTS AND CONTINGENCIES
Provisions
The Company's current known provisions and contingent liabilities consist of the following as of June 30, 2023:
| Termination benefits | Legal disputes | Sales tax | Total | |||||||||
| Balance as at December 31, 2022 | $ | $ | $ | $ | ||||||||
| Payments/Settlements | ( |
) | ( |
) | ( |
) | ||||||
| Additional provisions | ||||||||||||
| Foreign currency translation | ||||||||||||
| Balance as at June 30, 2023 | $ | $ | $ | $ |
The legal disputes balance as of June 30, 2023 involves a former shareholder of ACA Muller, an entity that was part of the Company's acquisition of FGH in December 2022, who filed a statement of claim against a wholly owned subsidiary of the Company in the Constance Regional Court in Germany. While the Company believes that this claim is without merit, at this time the Company believes it is probable that a liability has been incurred and the Company is able to reasonably estimate the loss of $
The Sales tax relates to estimated amounts owed to certain jurisdictions in the Unites States for sales from the Company's JustCBD operations. The ending balance is recorded within contingencies on the unaudited condensed interim consolidated statement of financial position, and additions to the provision as a reduction of revenue on the unaudited condensed interim consolidated statements of loss and comprehensive loss.
Legal proceedings
The Company records liabilities for legal proceedings in those instances where it can reasonably estimate the amount of the loss and where liability is probable. The Company is engaged from time-to-time in various legal proceedings and claims that have arisen in the ordinary course of business. The outcome of all the proceedings and claims against the Company is subject to future resolution, including the uncertainties of litigation. Based on information currently known to the Company and after consultation with outside legal counsel, management believes that the probable ultimate resolution of any such proceedings and claims, individually or in the aggregate, will not have a material adverse effect on the financial condition of the Company, taken as a whole as at June 30, 2023.
On June 21, 2022, an action was brought against the Company in the Ontario Superior Court of Justice by Gerardo Andres Garcia Mendez claiming that the Company is obligated to issue
| 21 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
In connection with the Company's acquisition of FGH, the former Chief Executive Officer of FGH, together with certain affiliated entities under his control, entered into an agreement pursuant to which they agreed to indemnify the Company for certain potential liabilities of FGH and its subsidiaries, up to a maximum of $
On February 3, 2023, an action was brought in the Ontario Superior Court of Justice by Nathan Shantz and Liberacion e Inversiones S.A. against various parties including Clifford Starke, FGH's former Chief Executive Officer, and FGH. The statement of claim alleges that, prior to the closing of the Arrangement,
The total amount claimed against the former entities of FGH currently exceeds the maximum $
17. LOSS PER SHARE
The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive as the Company has a net loss for each period presented:
| June 30, 2023 | December 31, 2022 | |||||
| Stock options | ||||||
| Warrants | ||||||
| Restricted stock awards | ||||||
| JustCBD potential additional shares to settle contingent consideration | ||||||
| Total anti-dilutive |
18. FINANCIAL INSTRUMENTS
Fair value
The Company's financial instruments measured at amortized cost as at June 30, 2023 and December 31, 2022 consist of cash, trade and amounts receivable, loans receivable, trade payables, contingencies, accrued liabilities, lease liabilities, and debt and loans payable. The amounts reflected in the unaudited condensed interim consolidated statements of financial position approximate fair value due to the short-term maturity of these instruments.
Financial instruments recorded at the reporting date at fair value are classified into one of three levels based upon the fair value hierarchy. Items are categorized based on inputs used to derive fair value based on:
Level 1 - quoted prices that are unadjusted in active markets for identical assets or liabilities
Level 2 - inputs other than quoted prices included in level 1 that are observable for the asset/liability either directly or indirectly; and
Level 3 - inputs for the instruments are not based on any observable market data.
The Company's long-term investments require significant unobservable inputs and as discussed at Note 7, are measured at FVPL and as a Level 3 fair value financial instrument within the fair value hierarchy as at June 30, 2023. As discussed in Note 8, the Company's contingent purchase considerations consist of the estimated fair value of contingent purchase consideration from the acquisitions of JustCBD in February 2022, NoCap in July 2022 and Original Hemp in March 2023. The amount is measured at FVPL as a Level 2 fair value financial instrument within the fair value hierarchy as at June 30, 2023. As valuations of investments for which market quotations are not readily available are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Such changes may have a significant impact on the Company's financial condition or operating results.
| 22 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
The following tables present information about the Company's financial instruments and their classifications as at June 30, 2023 and December 31, 2022 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value.
| Fair value measurements at June 30, 2023 using: |
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Financial assets: | ||||||||||||
| Investments (Note 7) | $ | $ | $ | $ | ||||||||
| Financial liabilities: | ||||||||||||
| Contingent purchase consideration from asset acquisitions and business combinations (Note 8) | $ | $ | $ | $ |
| Fair value measurements at December 31, 2022 using: | ||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||
| Financial assets: | ||||||||||||
| Investments (Note 7) | $ | $ | $ | $ | ||||||||
| Financial liabilities: | ||||||||||||
| Contingent purchase consideration from business combinations (Note 8) | $ | $ | $ | $ |
19. SEGMENTED INFORMATION
The Company reports its financial results for the following three operating segments, which are also its reportable segments: commercial and wholesale (primarily FGH and Cosechemos subsidiaries), house of brands (primarily JustCBD, Vessel and Kasa Wholefoods Company subsidiaries), and pharmaceuticals (primarily Grupo Farmaceutico Cronomed and Breeze Laboratory subsidiaries). These segments reflect how the Company's operations are managed, how the Company Chief Executive Officer, who is the chief operating decision maker, allocates resources and evaluates performance, and how the Company's internal management financial reporting is structured.
The Company's operates its manufacturing and distribution business in its United States, Germany, and Colombia subsidiaries. The Company also was engaged in the growth, cultivation, and development of medicinal cannabis and medicinal cannabis derivative products through its Colombia Cosechemos subsidiary. Management has defined the reportable segments of the Company based on this internal business unit reporting, which is by major product line, and aggregates similar businesses into the house of brands segment below. The Corporate segment reflects balances and expenses that do not directly influence business unit operations.
Information regarding the Company's segments is summarized as follows:
|
For the three months ended |
For the three months ended |
For the six months ended |
For the six months ended |
|||||||||
| June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||
| Net Sales | ||||||||||||
| Commercial & Wholesale | $ | $ | $ | $ | ||||||||
| House of Brands | ||||||||||||
| Pharmaceuticals | ||||||||||||
| Eliminations | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| $ | $ | $ | $ | |||||||||
| Net Loss | ||||||||||||
| Commercial & Wholesale | $ | ( |
) | $ | $ | ( |
) | $ | ||||
| House of Brands | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| Pharmaceuticals | ( |
) | ( |
) | ||||||||
| Corp & Eliminations | ( |
) | ( |
) | ( |
) | ( |
) | ||||
| $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) |
| As at | June 30, 2023 | December 31, 2022 | ||||
| Assets | ||||||
| Commercial & Wholesale | $ | $ | ||||
| House of Brands | ||||||
| Pharmaceuticals | ||||||
| Corp & Eliminations | ||||||
| $ | $ |
| 23 |
| Flora Growth Corp. Notes to the unaudited condensed interim consolidated financial statements For the three and six months ended June 30, 2023 and 2022 (In thousands of United States dollars, except shares and per share amounts) |
Disaggregation of net sales by geographic area:
|
For the three months ended |
For the three months ended |
For the six months ended |
For the six months ended |
|||||||||
| June 30, 2023 | June 30, 2022 | June 30, 2023 | June 30, 2022 | |||||||||
| Net Sales | ||||||||||||
| United States | $ | $ | $ | $ | ||||||||
| Germany | ||||||||||||
| United Kingdom | ||||||||||||
| $ | $ | $ | $ |
20. SUBSEQUENT EVENTS
SALE OF COLOMBIA ENTITIES
On July 5, 2023, the Company entered into a Share Purchase Agreement with Lisan Farma Colombia LLC ("Lisan"), a Delaware limited liability company, to sell all of its shares in certain Colombian companies and other Flora assets related to its Colombian operations for a purchase price of CAD $
The Company sold all of its shares and assets related to the following Colombian companies and branches:
The applicable capital stock of the Colombian entities will be transferred to Lisan at the date of closing. All assets underlying this sale are expected to be transferred to Lisan on an "as is where is" basis within the next 30 days. See discussion in Note 3.
OTHER
Subsequent to June 30, 2023, a total of
24
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides information we believe is relevant to an assessment and understanding of our results of operations, financial condition, liquidity and cash flows for the periods presented. This discussion should be read in conjunction with (a) our unaudited condensed consolidated financial statements and related notes contained elsewhere in Part I, Item 1, "Financial Statements" of this Quarterly Report, and (b) Part I, Item 1A "Risk Factors", Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements and related notes in our 2022 Annual Report. As discussed in the section above titled "Cautionary Statement Regarding Forward-Looking Statements," the following discussion contains forward-looking statements that are based upon our current expectations, including with respect to our future revenues and operating results. Our actual results may differ materially from those anticipated in such forward-looking statements as a result of various factors. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled "Risk Factors" included under Part II, Item 1A below and included under Part I, Item 1A in our 2022 Annual Report.
Amounts are expressed in United States dollars ("$" or "USD") unless otherwise stated to be in Canadian dollars ("CAD"), Euro ("€" or "EUR"), or Colombia pesos ("COP"). Amounts stated in foreign currencies include approximate USD amounts based on exchange rates on June 30, 2023. Variance, ratio, and percentage changes in this section are based on unrounded numbers. This section reports the Company's activities through June 30, 2023, unless otherwise indicated.
Overview of our Business
We are a multi-national cannabis company that manufactures and distributes consumer packaged goods and distributes medicinal cannabis and pharmaceutical products. Flora exists to create a world where the benefits of cannabis are accessible to everyone. Our business strategy was built on three core pillars: House of Brands, Commercial & Wholesale, and Pharmaceutical. This strategy was devised to allow us optimal access to markets around the globe based on the legal standing of cannabis in each of the geographical locations in which we operate. Our approach has enabled us to develop distribution networks, build customer bases, establish operations as the regulatory framework evolves and allow for expanded access to cannabis and its derivatives.
Our brand portfolio consists of a mix of products across multiple categories, including food and beverage, nutraceuticals, cannabis accessories and technology, personal care, and wellness. Consumer brands allow Flora to move assertively into nascent markets, develop customer bases and distribution channels, and gather consumer insights which would not be possible with traditional cannabis sales alone. Through this channel we seek to build loyalty, credibility and enjoy healthy margins that help to support the rapid growth of our business.
On July 5, 2023, the Company entered into a Share Purchase Agreement with Lisan Farma Colombia LLC, a Delaware limited liability company, to sell all its shares in its Colombian related subsidiaries and its Colombian assets for a purchase price of CAD $0.8 million (USD $0.6 million). The sale relates to all of Flora's operations in Colombia, including its interest in (i) its 361-acre Cosechemos farm located in Giron, Colombia and its related processing facilities and inventory and (ii) all other assets relating to Flora Lab 2, Flora Lab 4 and Flora's Colombian food and beverage and consumer products business (together "Colombia Assets"). The sale enables the Company to concentrate on its core business divisions, which are lifestyle brands in the United States and international pharmaceutical distribution. The sale was part of several strategic changes to cut costs and streamline operations. The sale is expected to close by August 18, 2023.
House of Brands
JustCBD is Flora's leading consumer packaged goods brand. JustCBD was launched in 2017 with a mission to bring high-quality, trustworthy, and budget-friendly CBD products to market. The JustCBD offering currently consists of over 350 products across 15 categories, including CBD gummies, topicals, tinctures, and vape products and ships to over 11,500 independent retailers worldwide. JustCBD also sells direct to consumers with a customer base of approximately 350,000 people. JustCBD products are available for purchase in smoke and vape shops, clinics, spas and pet stores, as well as other independent non-traditional retail channels. JustCBD's products are both internally and third-party lab-tested to ensure quality.
Vessel is Flora's cannabis accessory and technology brand currently servicing the United States and Canada through direct-to-consumer and retail sales. Vessel's products include cannabis consumption accessories, personal storage, and travel accessories for the vape and dry herb categories, which are sold to consumers, dispensaries, smoke shops and cannabis brands. Vessel has been fully integrated into JustCBD and now benefits from operational, logistical and sales synergies with JustCBD.
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Mambe was Flora's food and beverage brand with a focus in Latin America, offering infused natural fruit juices and canned goods. The brand operated on a business-to-business model, where we sell to both distributors and retail businesses. Over the last three years, Mambe has expanded its distribution in Colombia, primarily in supermarkets, discount retailers, coffee shops, restaurants and airports. Mambe's list of clients include well-known Colombian retailers Juan Valdez, Jumbo, Sipote Burrito and Xue. Additional brands in our portfolio include: Mind Naturals (skincare), Stardog Loungewear (apparel), No Cap Hemp Co (minor cannabinoids), KaLaya (skincare) and Original Hemp (e-commerce). The Mambe, Mind Naturals, Stardog Loungewear and KaLaya brands were sold as part of the Colombian Assets.
Commercial & Wholesale
The Company's Commercial and Wholesale pillar encompasses the distribution of pharmaceutical products to international markets. This pillar is anchored by Flora's wholly owned subsidiary, Phatebo, a multi-national operator in pharmaceutical and medical cannabis distribution, with principal operations in Germany. Prior to the sale of the Colombia Assets, this pillar also included the cultivation and transformation of cannabis at Cosechemos, our 249-acre licensed cultivation facility in Girón, Colombia. To date, the Company had not exported material amounts of cannabis.
Based in Germany, Phatebo is a wholesale pharmaceutical distribution company with import and export capabilities of a wide range of pharmaceutical goods and medical cannabis products to treat a variety of health indications, including drugs related to cancer therapies, ADHD, multiple sclerosis and anti-depressants, among others. Phatebo holds a license for the Trade in Narcotic Drugs (including the cannabis sales license amendment) and a wholesale trading license, both of which are issued by BfArM (the largest drug approval authority in Europe). Phatebo is focused on distributing pharmaceutical products within 28 countries globally, primarily in Europe, but also with sales to Asia, Latin America, and North America. In November 2018, Phatebo also received a medical cannabis import and distribution license. We intend to leverage Phatebo's existing network of approximately 1,200 pharmacies as Flora begins to move medicinal cannabis from third parties into Germany. Additionally, the Phatebo warehouse provides a logistics outpost for Flora's growing product portfolio and distribution network within the European Union.
Pharmaceutical
Flora's Pharmaceutical pillar was focused on developing pharmaceutical grade products and providing scientific-based research connected to molecules found in the cannabis plant. Through this pillar, Flora worked to provide access to medical cannabis, create awareness through education and initiate research studies for use in targeted and broad-based use cases leveraging multiple modalities. Our pharmaceutical pillar was anchored by Flora Lab 2 and Flora Lab 4, both of which are located in Bogota, Colombia. These laboratories allowed us to manufacture plant-based, medical-grade pharmaceuticals, phytotherapeutics, and dietary supplements. Flora Lab 2 and Flora Lab 4 were sold as part of the Colombia Assets sale.
Factors Impacting our Business
Challenges in realization of overhead reductions. The Company's operating expenses currently exceed its gross profit generated. Management has taken, and continues to implement, various cost-saving initiatives in an effort to lower overhead costs. However, the Company has not yet reached the critical balance in reducing overhead to meet both the existing and potential market demand in aggregate. The Company strives to attain sufficient growth to cover its overhead to reach profitability. If the Company fails to grow its business or reduce its operating expenses further in the long term, it will continue to face significant cash flow deficiencies in the future and continue to be reliant on debt and/or equity financing to fund operations.
Acquisition strategy disadvantages include significant transaction costs and liabilities of our acquirees. The Company has historically been opportunistic and pursues acquisitions from time to time that management believes will be complementary to or synergistic to the Company's existing business. However, any such acquisitions require the Company to incur heightened upfront transaction costs and require the Company to assume certain liabilities from the acquired company. In addition, while the Company believes such acquisitions will provide enhanced value in the long term, it is possible that the anticipated synergies from the acquisition may never be realized. For example, the Company acquired JustCBD in February 2022 and Franchise Global Health Inc. ("FGH") in December 2022. In connection with the acquisition of JustCBD, the Company incurred $0.6 million in transaction costs in the first quarter of 2022, which included legal and consulting fees incurred by the Company. In addition, we assumed $4.0 million in liabilities, which included $0.6 million of lease liabilities and other ordinary course operating liabilities. In connection with the acquisition of FGH, the Company incurred $0.5 million in transaction costs in the fourth quarter of 2022, which included legal and consulting fees incurred by the Company. In addition, we assumed $9.1 million in liabilities, which included $1.3 million of outstanding legal fees of FGH prior to the acquisition, $1.1 million of debt, $3.4 million of indemnified liabilities and other ordinary course operating liabilities. During the first fiscal half of 2023 the Company paid $1.0 million related to the acquisition of FGH, of which $0.7 million was related to outstanding FGH liabilities and $0.3 million was related to the Company's costs pertaining to the acquisition.
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Diversification of cashflows. Our sources of cash are diversified across geographic and product lines. Revenues are concentrated primarily in Germany and the United States, spanning pharmaceuticals, hemp and non-hemp consumer products and medicinal cannabis.
Low-cost cannabis acquisition and high-margin distribution. We aim to achieve economies of scale by sourcing medical cannabis and benefiting from production in low-cost jurisdictions across the globe. We then intend to utilize our cannabis and distribution networks to sell product in countries at an accretive margin. Provided we are able to navigate the uncertain regulatory environment for our cannabis products, Flora believes it is well-positioned to act as both an exporter and importer of medicinal cannabis to our distribution network in Germany where the supply of medicinal cannabis is largely dependent on imports.
International cannabis developments. Flora's growth is embedded in the expansion, regulation and legalization of medicinal and recreational cannabis and cannabis derivative products across the world. While medicinal cannabis has been regulated at the federal level in multiple countries, the Company is focused on the most robust markets in Germany and the European Union. We remain tuned to international developments as potentially lucrative medicinal cannabis markets open.
Product evolution and brand acceptance. As the cannabis industry continues to change, divergent regulations and the corresponding resources required to introduce high-quality products are expected to impact our market share. Gaining access to continuously evolving and superior products remains a critical success factor. Our ultimate ability to produce and acquire products meeting stringent quality control standards drives the extent of consumer acceptance. Furthermore, the intrinsic value within our brands, including JustCBD and Vessel, is subject to evolving consumer sentiment.
Regulatory proficiency and adoption. The markets in which Flora operates are highly regulated and require extensive experience in navigating the associated complexities. We have assembled a team with deep knowledge of the regulatory and governance environments in which the Company operates. Fundamental expertise entails compliance with product approvals, import permits, export permits, distribution licenses and other pertinent licenses.
Integration of acquired companies. Our growth has been fueled substantially by the acquisition of JustCBD, Vessel and FGH. Our continued ability to extract incremental synergies from a group of diversified entities is a key determinant of our ability to expand organically.
Public Company Costs
Following the consummation of our initial public offering, we became a public company, which has required the hiring of additional staff and implementation of processes and procedures to address public company regulatory requirements and customary practices. We expect to continue to incur substantial additional annual expenses for, among other things, directors' and officers' liability insurance, director fees and additional internal and external costs for investor relations, accounting, audit, legal, corporate secretary and other functions.
Minimum Bid Price Requirement
On July 8, 2022, the Company was notified by the Nasdaq Stock Market, LLC ("Nasdaq") that it was not in compliance with the minimum bid price requirement of $1.00 per share for 30 consecutive business days as set forth in Rule 5550(a)(2) of the Nasdaq Listing Rules (the "Minimum Bid Price Requirement"). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), Nasdaq provided a 180-calendar day period following the date of the notice to regain compliance. To regain compliance with the Minimum Bid Price Requirement, the Company was required to maintain a minimum closing bid price of $1.00 or more for at least 10 consecutive trading days. From June 9, 2023 through June 23, 2023, a period of 10 consecutive trading days, the closing bid price of the Company's Common Shares was greater than $1.00 per share. Accordingly, on June 26, 2023, the Company received formal notice from Nasdaq that it had regained compliance with the Minimum Bid Price Requirement and that the matter has been closed. Flora is now in compliance with all applicable continued listing standards and its Common Shares continue to be listed and traded on Nasdaq.
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Key Components of Results of Operations
Revenue
The Company primarily generates revenue as a distributor of pharmaceutical goods, and a manufacturer and reseller of a range of cannabis-based and complementary products. The Company has three major revenue groups, which are also its reportable segments:
(1) House of Brands;
(2) Commercial and Wholesale; and
(3) Pharmaceuticals.
These segments reflect how the Company's operations are managed, how the Company's Chief Executive Officer, who is the chief operating decision maker, allocates resources and evaluates performance, and how the Company's internal management financial reporting is structured.
The Company's operates its manufacturing and distribution business through its subsidiaries in the United States and Germany. For the six months ended June 30, 2023, the Company also was engaged in the growth, cultivation, and development of medicinal cannabis and medicinal cannabis derivative products in Colombia.
The Company uses the following five-step contract-based analysis of transactions to determine if, when and how much revenue can be recognized:
1. Identify the contract with a customer;
2. Identify the performance obligations in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to the performance obligations in the contract; and
5. Recognize revenue when or as the Company satisfies the performance obligations.
Revenue is recognized at the transaction price, which is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods to a customer. Gross revenue excludes duties and taxes collected on behalf of third parties. Revenue is presented net of expected price discounts, sales returns, customer rebates and other incentives. The Company's cannabis consumption accessory products include a six-month warranty, which the Company accrues for the estimated liability based on historical and expected claim costs.
The Company's contracts with customers for the sales of products consist of one performance obligation. Revenue from product sales is recognized at the point in time when control is transferred to the customer, which is on shipment or delivery, depending on the contract terms. The Company's payment terms generally range from 0 to 30 days from the transfer of control, and sometimes up to six months.
Cost of sales
The Company includes the cost of raw materials and supplies, purchased finished goods and changes in inventory reserves in cost of sales for each of its three reportable segments. Raw materials include the purchase cost of the materials, freight-in and duty. Finished goods include the cost of direct materials and labor and a proportion of manufacturing overhead allocated based on normal production capacity. Inventory reserves for excess and obsolete inventory are based upon quantities on hand, projected volumes from demand forecasts and net realizable value. The primary factors that can impact cost of goods sold on a period-to-period basis include the volume of products sold, the mix of products sold, third-party quality costs, transportation, overhead allocations and changes in inventory provisions.
Operating Expenses
The Company's operating expenses are apportioned based on the following categories:
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Non-Operating (Income) Expenses
Non-operating (income) expenses include interest income and expenses, foreign exchange losses and unrealized (gains) losses from changes in fair value. Interest is primarily related to the Company's operating lines of credit. Foreign exchange is largely related to the revaluation of balances denominated in foreign currencies to U.S. dollars. Unrealized (gains) losses from changes in fair value pertain to fluctuations in the fair values of the Company's investments and liabilities.
Income Tax
Income tax consists primarily of income taxes related to U.S. federal and state income taxes and income taxes in foreign jurisdictions in which we conduct business.
Loss from Discontinued Operations
Loss from discontinued operations includes the net loss, net of tax, of the Colombian subsidiaries sold on July 5, 2023. It also includes an expected loss on the disposal as the carrying value of the assets being sold exceeded the expected sale price.
Results of Operations
The following tables provide sets forth the Company's consolidated results of operations for the three and six months ended June 30, 2023 and 2022 (in thousands). The period-to-period comparisons of the Company's historical results are not necessarily indicative of the results that may be expected in the future. The results of operations data have been derived from our unaudited condensed interim consolidated financial statements for the three and six months ended June 30, 2023 and 2022 included elsewhere in this Quarterly Report.
| For the three months ended June 30, 2023 | For the three months ended June 30, 2022 | For the six months ended June 30, 2023 | For the six months ended June 30, 2022 | |||||||||
| Revenue | $ | 21,460 | $ | 8,943 | $ | 40,779 | $ | 13,144 | ||||
| Cost of sales | 17,500 | 5,624 | 31,473 | 7,597 | ||||||||
| Gross profit | 3,960 | 3,319 | 9,306 | 5,547 | ||||||||
| Consulting and management fees | 3,662 | 2,116 | 7,333 | 3,976 | ||||||||
| Professional fees | 668 | 727 | 665 | 1,705 | ||||||||
| General and administrative | 685 | 1,088 | 1,036 | 1,660 | ||||||||
| Promotion and communication | 1,263 | 2,039 | 2,571 | 4,414 | ||||||||
| Travel expenses | 124 | 291 | 256 | 492 | ||||||||
| Share based compensation | 338 | 1,263 | 992 | 2,789 | ||||||||
| Research and development | 13 | 111 | 29 | 233 | ||||||||
| Operating lease expense | 308 | 136 | 624 | 327 | ||||||||
| Depreciation and amortization | 874 | 706 | 1,738 | 1,050 | ||||||||
| Bad debt expense | 18 | 254 | 47 | 255 | ||||||||
| Asset impairment | 34,941 | 15,652 | 34,941 | 15,652 | ||||||||
| Other expenses, net | 1,127 | 456 | 1,505 | 810 | ||||||||
| Operating loss | (40,061 | ) | (21,520 | ) | (42,431 | ) | (27,816 | ) | ||||
| Non-operating (income) expenses | (1,951 | ) | 1,532 | (1,057 | ) | 1,491 | ||||||
| Net loss before taxes and discontinued operations | (38,110 | ) | (23,052 | ) | (41,374 | ) | (29,307 | ) | ||||
| Income tax benefit | (1,119 | ) | - | (1,196 | ) | - | ||||||
| Net loss from continuing operations | (36,991 | ) | (23,052 | ) | (40,178 | ) | (29,307 | ) | ||||
| Loss from discontinued operations | (7,565 | ) | (1,620 | ) | (8,283 | ) | (2,995 | ) | ||||
| Net loss for the period | $ | (44,556 | ) | $ | (24,672 | ) | $ | (48,461 | ) | $ | (32,302 | ) |
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For the Three Months Ended June 30, 2023, and 2022
Revenue
Revenue totaled $21.5 million and $8.9 million for the three months ended June 30, 2023 and 2022, respectively. The increase was primarily driven by the following:
Revenues generated for the three months ended June 30, 2023 by the House of Brands segment were $13.0 million compared to revenues generated for the three months ended June 30, 2022 of $10.8 million. The increase is primarily related to increased sales at JustCBD.
Revenues generated for the three months ended June 30, 2023 by the commercial and wholesale segment were $10.8 million compared to revenues generated for the three months ended June 30, 2022 of $nil. The increase was driven by the acquisition of FGH in December 2022, which contributed $10.8 million.
Revenues generated for the three months ended June 30, 2023 by the Company`s Colombian entities are included separately within Loss from Discontinued Operations.
Gross Profit
Gross profit totaled $4.0 million and $3.3 million for the three months ended June 30, 2023 and 2022, respectively. The increase was primarily driven by the acquisition of FGH, which contributed $0.6 million in the three months ended June 30, 2023 compared to $nil in the three months ended June 30, 2022. The increase was also driven by increased sales at JustCBD, which contributed $3.0 million in the three months ended June 30, 2023 compared to $2.8 million in the three months ended June 30, 2022. The remaining fluctuations are not significant. As a percentage of net sales, or gross margin, the Company reported 18% and 37% for the three months ended June 30, 2023 and 2022, respectively. The decrease is primarily due to the acquisition of FGH, which distributes relatively lower margin pharmaceuticals.
Operating Expenses
Operating expenses totaled $44.0 million and $24.8 million for the three months ended June 30, 2023 and June 30, 2022, respectively. The increase was primarily driven by increased asset impairments.
Consulting and Management Fees
Consulting and management fees were $3.7 million for the three months ended June 30, 2023 compared to $2.1 million for the three months ended June 30, 2022. These fees are related to employment and consulting contracts with most of the Company's management, as well as directors. The increase is primarily related to the acquisition of FGH, which contributed $0.7 million, as well as a severance payment made to the former Chief Executive Officer.
Professional Fees
Professional fees totaled $0.7 million for the three months ended June 30, 2023 compared to $0.7 million for the three months ended June 30, 2022. These expenses are associated with legal, accounting and audit services.
General and Administrative Expenses
General and administrative expenses totaled $0.7 million for the three months ended June 30, 2023 compared to $1.1 million for the three months ended June 30, 2022. The decrease is primarily due to the Company's efforts to reduce general and administrative expenses.
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Promotion and Communication Expenses
Promotion and communication expenses totaled $1.3 million for the three months ended June 30, 2023 compared to $2.0 million for the three months ended June 30, 2022. The decrease is primarily due to cost-cutting initiatives by the Company aimed at the minimization of corporate overhead. Promotion expenses incurred in the period largely relate to the nature of JustCBD's business model, which is centered around promoting its products as a method for stimulating revenue growth.
Travel Expenses
Travel expenses totaled $0.1 million for the three months ended June 30, 2023 compared to $0.3 million for the three months ended June 30, 2022. These expenses were for various trips related to the subsidiaries and the Company's promotional activities.
Share-based Compensation Expenses
Share based compensation expenses totaled $0.3 million for the three months ended June 30, 2023 compared to $1.3 million for the three months ended June 30, 2022. These expenses represent the amortization of the fair value of share-based payments. The decrease is primarily due to the cancellation of restricted stock awards, a result of employee terminations during the second quarter of fiscal 2023.
Research and Development Expenses
Research and development expenses totaled less than $0.1 million for the three months ended June 30, 2023 compared to $0.1 million for the three months ended June 30, 2022. Research and development expenses have been minimized in the period ended June 30, 2023 whereas in the period ended June 30, 2022 they consisted primarily of contract research fees, manufacturing, consultant fees, and costs related to the launch of new brands for the Vessel business.
Operating Lease Expenses
Operating lease expenses totaled $0.3 million for the three months ended June 30, 2023 compared to $0.1 million for three months ended June 30, 2022. The increase is primarily due to the acquisition of FGH and its accompanying facility and vehicle leases.
Depreciation and Amortization Expense
Depreciation and amortization expenses totaled $0.9 million for the three months ended June 30, 2023 compared to $0.7 million for the three months ended June 30, 2022. The increase in the depreciation and amortization is primarily due to the acquisition of FGH, and the corresponding amortization of the intangible assets acquired.
Bad Debt Expense
Bad debt expense totaled less than $0.1 million for the three months ended June 30, 2023 compared to $0.3 million for the three months ended June 30, 2022. The amounts reflect the Company's estimate of lifetime expected losses related to outstanding trade receivables.
Asset Impairment
Asset impairment totaled $34.9 million for the three months ended June 30, 2023 compared to $15.7 million for the three months ended June 30, 2022. The amount in 2023 represents impairment of the goodwill at JustCBD and FGH and the long-lived assets at Vessel, JustCBD and FGH. The amount in 2022 represents impairment of the goodwill at Vessel.
Other Expenses
Other expenses totaled $1.1 million for the three months ended June 30, 2023 compared to $0.5 million for the three months ended June 30, 2022. For both periods, these expenses consist mainly of insurance, repairs and maintenance and royalties partially offset by miscellaneous incomes.
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Non-operating (Income) Expenses
Flora realized $2.0 million in non-operating income for the three months ended June 30, 2023 compared to non-operating expense of $1.5 million for the three months ended June 30, 2022. These (incomes) expenses consist of unrealized losses from changes in fair value, interest (income) expense and foreign exchange loss. The increase in income is primarily due to a $2.0 million gain on the value of the contingent consideration related to the JustCBD acquisition during the three months ended June 30, 2023 compared to a $1.3 million loss during the three months ended June 30, 2022.
Income Tax Benefit
We recognized $1.1 million and $nil in income tax benefit for the three months ended June 30, 2023 and 2022, respectively. Our effective tax rate during the periods ended June 30, 2023 and 2022 was 2.9% and 0.0%, respectively. We maintain valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, we consider such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. We continue to believe our deferred tax assets are not more-likely-than-not to be realized and a full valuation allowance remains recorded against net deferred taxes as of June 30, 2023 and 2022. The income tax benefit in the three months ended June 30, 2023 is primarily related to the tax effect of the impairment charge on the intangible assets at FGH.
Loss from Discontinued Operations
Loss from discontinued operations totaled $7.6 million in the three months ended June 30, 2023 compared to $1.6 million in the three months ended June 30, 2022. The increase is primarily due to impairment charges and losses on disposal in relation to the Company`s Colombian operations.
Net loss
We incurred a net loss of $44.6 million and $24.7 million for the three months ended June 30, 2023 and 2022, respectively. The increase in net loss is primarily driven by increased asset impairments of $19.3 million and an increase of $6.0 million in relation to the loss from discontinued operations for the Company`s Colombian operations.
For the Six Months Ended June 30, 2023, and 2022
Revenue
Revenue totaled $40.8 million and $13.1 million for the six months ended June 30, 2023 and 2022, respectively. The increase was primarily driven by the following acquisitions:
Revenues generated for the six months ended June 30, 2023 by the House of Brands segment were $26.8 million compared to revenues generated for the six months ended June 30, 2022 of $15.8 million. The increase is primarily related to the acquisition of JustCBD in February 2022, which contributed $23.2 million and $12.5 million for the six months ended June 30, 2023 and June 30, 2022, respectively.
Revenues generated for the six months ended June 30, 2023 by the commercial and wholesale segment were $18.8 million compared to revenues generated for the six months ended June 30, 2022 of $nil. The increase was driven by the acquisition of FGH in December 2022, which contributed $18.8 million.
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Revenues generated for the six months ended June 30, 2023 by the Company`s Colombian entities are included separately within Loss from Discontinued Operations.
Gross Profit
Gross profit totaled $9.3 million and $5.5 million for the six months ended June 30, 2023 and 2022, respectively. The increase was primarily driven by the acquisitions of FGH and JustCBD, which contributed $1.3 million and $7.0 million, respectively, in the six months ended June 30, 2023. In the comparative period, JustCBD contributed $4.5 million and FGH did not contribute as it was acquired in December 2022. The remaining fluctuations are largely related to Vessel, which contributed $1.3 million in the six months ended June 30, 2023 compared to $1.0 million in the six months ended June 30, 2022. As a percentage of net sales, or gross margin, the Company reported 23% and 42% for the six months ended June 30, 2023 and 2022, respectively. The decrease is primarily due to the acquisition of FGH, which distributes relatively lower margin pharmaceuticals.
Operating Expenses
Operating expenses totaled $51.7 million and $33.4 million for the six months ended June 30, 2023 and June 30, 2022, respectively. The increase was primarily driven by increased asset impairments in the six months ended June 30, 2023, partially offset by reduced promotion and communication, professional fees and share based compensation expenses.
Consulting and Management Fees
Consulting and management fees were $7.3 million for the six months ended June 30, 2023 compared to $4.0 million for the six months ended June 30, 2022. These fees are related to employment and consulting contracts with most of the Company's management, as well as directors. The increase is primarily related to the acquisition of FGH, which contributed $1.2 million, as well as increased staffing to support expanded operations and a severance payment made to the former Chief Executive Officer.
Professional Fees
Professional fees totaled $0.7 million for the six months ended June 30, 2023 compared to $1.7 million for the six months ended June 30, 2022. These expenses are associated with legal, accounting and audit services. In the period ended June 30, 2023, the Company made a concerted effort to reduce professional fees and receive credit notes from certain service providers. In the period ended June 30, 2022, professional fees included one-time acquisition and transaction related costs relating to the Company's acquisition of JustCBD.
General and Administrative Expenses
General and administrative expenses totaled $1.0 million for the six months ended June 30, 2023 compared to $1.7 million for the six months ended June 30, 2022. The decrease is primarily due to the Company's efforts to reduce general and administrative expenses.
Promotion and Communication Expenses
Promotion and communication expenses totaled $2.6 million for the six months ended June 30, 2023 compared to $4.4 million for the six months ended June 30, 2022. The decrease is primarily due to cost-cutting initiatives by the Company aimed at the minimization of corporate overhead. Promotion expenses incurred in the period largely relate to the nature of JustCBD's business model, which is centered around promoting its products as a method for stimulating revenue growth.
Travel Expenses
Travel expenses totaled $0.3 million for the six months ended June 30, 2023 compared to $0.5 million for the six months ended June 30, 2022. These expenses were for various trips related to the subsidiaries and the Company's promotional activities.
Share-based Compensation Expenses
Share based compensation expenses totaled $1.0 million for the six months ended June 30, 2023 compared to $2.8 million for the six months ended June 30, 2022. These expenses represent the amortization of the fair value of share-based payments. The decrease is primarily due to the cancellation of restricted stock awards, a result of employee terminations during the first six months of 2023.
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Research and Development Expenses
Research and development expenses totaled less than $0.1 million for the six months ended June 30, 2023 compared to $0.2 million for the six months ended June 30, 2022. Research and development expenses have been minimized in the period ended June 30, 2023 whereas in the period ended June 30, 2022 they consisted primarily of contract research fees, manufacturing, consultant fees, and costs related to the launch of new brands for the Vessel business.
Operating Lease Expenses
Operating lease expenses totaled $0.6 million for the six months ended June 30, 2023 compared to $0.3 million for six months ended June 30, 2022. The increase is primarily due to the acquisition of FGH and its accompanying facility and vehicle leases.
Depreciation and Amortization Expense
Depreciation and amortization expenses totaled $1.7 million for the six months ended June 30, 2023 compared to $1.1 million for the six months ended June 30, 2022. The increase is primarily due to the acquisition of FGH, and the corresponding amortization of the intangible assets acquired.
Bad Debt Expense
Bad debt expense totaled less than $0.1 million for the six months ended June 30, 2023 compared to $0.3 million for the six months ended June 30, 2022. The amounts reflect the Company's estimate of lifetime expected losses related to outstanding trade receivables.
Asset Impairment
Asset impairment totaled $34.9 million for the six months ended June 30, 2023 compared to $15.7 million for the six months ended June 30, 2022. The amount in 2023 represents impairment of the goodwill at JustCBD and FGH and the long-lived assets at Vessel, JustCBD and FGH. The amount in 2022 represents impairment of the goodwill at Vessel.
Other Expenses
Other expenses totaled $1.5 million for the six months ended June 30, 2023 compared to $0.8 million for the six months ended June 30, 2022. For both periods, these expenses consist mainly of insurance, repairs and maintenance and royalties partially offset by miscellaneous incomes.
Non-operating (Income) Expenses
Flora realized $1.1 million in non-operating income for the six months ended June 30, 2023 compared to non-operating expense of $1.5 million for the six months ended June 30, 2022. This (income) expense consists of unrealized (gains) losses from changes in fair value, interest (income) expense and foreign exchange loss. The increase in income is primarily due to a $1.1 million gain on the value of the contingent consideration related to the JustCBD acquisition during the six months ended June 30, 2023 compared to a $1.3 million loss during the six months ended June 30, 2022.
Income Tax Benefit
We recognized $1.2 million and $nil in income tax benefit for the six months ended June 30, 2023 and 2022, respectively. Our effective tax rate during the periods ended June 30, 2023 and 2022 was 2.9% and 0.0%, respectively. The income tax benefit in the six months ended June 30, 2023 is primarily related to the tax effect of the impairment charge on the intangible assets at FGH.
Loss from Discontinued Operations
Loss from discontinued operations totaled $8.3 million in the six months ended June 30, 2023 compared to $3.0 million in the six months ended June 30, 2022. The increase is primarily due to impairment charges and losses on disposal in relation to the Company`s Colombian operations.
Net loss
We incurred a net loss of $48.5 million and $32.3 million for the six months ended June 30, 2023 and 2022, respectively. The increase in net loss is primarily driven by increased asset impairments of $19.3 million and an increase of $5.3 million in relation to the loss from discontinued operations for the Company`s Colombian operations.
34
Liquidity and Capital Resources
Since the Company's inception, we have funded our operations and capital spending through cash flows from product sales and proceeds from the sale of our capital stock. The Company is generating cash from sales and is deploying its capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and near term to support our business growth and expansion. We have generated significant operating losses and negative cash flows from operations as reflected in our accumulated deficit and consolidated statements of cash flows. We expect to continue to incur operating losses and negative cash flows in the foreseeable future. Our current principal sources of liquidity are cash and cash equivalents provided by our operations and prior equity offerings. Cash and cash equivalents consist primarily of cash on deposit with banks. Cash and cash equivalents were $1.8 million and $8.9 million as of June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023, the Company's current working capital, anticipated operating expenses and net losses, and the uncertainties surrounding its ability to raise additional capital as needed, raise substantial doubt as to whether existing cash and cash equivalents will be sufficient to meet its obligations as they come due within twelve months from the date the unaudited condensed interim consolidated financial statements were issued. The unaudited condensed interim consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company's ability to execute its operating plans through the remainder of 2023 and beyond depends on its ability to obtain additional funding through equity offerings, debt financing, or other forms of financing to meet planned growth requirements and to fund future operations, which may not be available on acceptable terms, or at all. If we are unable to raise the requisite funds, we will need to curtail or cease operations. See Note 2 to the Company's unaudited condensed interim consolidated financial statements included elsewhere in this Quarterly Report and to the Company's audited consolidated financial statements for the years ended December 31, 2022, and 2021, included in the 2022 Annual Report, for more information, and "Part I., Item IA Risk Factors - Management has performed an analysis of our ability to continue as a going concern, and has determined that, based on our current financial position, there is a substantial doubt about our ability to continue as a going concern" in the Company's 2022 Annual Report. We have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect. In the long term, we will be required to obtain additional financing to fund our current planned operations, which may consist of incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds. There can be no assurance that the Company will be able to obtain additional funds on terms acceptable to it, on a timely basis or at all. The failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the results of operations, and financial condition. If we do raise additional capital through public or private equity offerings, the ownership interest of our existing shareholders will be diluted. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.
The Company's primary uses of cash are for working capital requirements and capital expenditures. Additionally, from time to time, it may use capital for acquisitions and other investing and financing activities. Working capital is used principally for the Company's personnel as well as costs related to the manufacture and production of its products. The Company's capital expenditures consist primarily of additional facilities, improvements in existing facilities and product development.
Cash Flows
The following table sets forth the major components of the Company's unaudited condensed interim consolidated statements of cash flows for the periods presented.
| (In thousands of United States dollars) | For the six months ended June 30, 2023 | For the six months ended June 30, 2022 | ||||
| Cash used in operating activities | $ | (7,783 | ) | $ | (10,988 | ) |
| Cash from (used in) financing activities | 112 | (27 | ) | |||
| Cash used in investing activities | (195 | ) | (16,180 | ) | ||
| Effect of exchange rate change | 584 | (152 | ) | |||
| Change in cash during the period | (7,282 | ) | (27,347 | ) | ||
| Cash, beginning of period | 9,537 | 37,616 | ||||
| Cash included in assets held for sale | (448 | ) | (381 | ) | ||
| Cash, end of period | $ | 1,807 | $ | 9,888 |
Cash used in Operating Activities
Net cash used in operating activities for the six months ended June 30, 2023 and 2022 totaled $7.8 million and $11.0 million, respectively. Cash flows used in operating activities for the periods ended June 30, 2023 and 2022 were due primarily to operating expenses exceeding the gross profit for the periods.
35
Cash provided by (used in) Financing Activities
Net cash provided by (used in) financing activities for the year six months ended June 30, 2023 and 2022 totaled $0.1 million and less than ($0.1) million, respectively. Cash flows provided from financing activities for the period ended June 30, 2023 were primarily related to loan borrowings. Cash flows used in financing activities for the period ended June 30, 2022 were primarily related to the Company's share repurchase program, equity issuance costs and loan repayments, partially offset by proceeds received from warrant and stock option exercises.
Cash used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2023 and 2022 totaled $0.2 million and $16.2 million, respectively. Cash flows used in investing activities for the period ended June 30, 2023 were primarily related to the purchases of property, plant and equipment, and intangible assets. Cash flows used in investing activities for the period ended June 30, 2022 were primarily related to the cash portion of the consideration paid with respect to the acquisition of JustCBD in February 2022.
Working Capital
As of June 30, 2023, we had working capital of $4.4 million. The Company's primary cash flow needs are for the development of its cannabis and pharmaceutical activities, administrative expenses and for general working capital to support growing sales with related receivables and payables.
Funding Requirements
Our continued existence is dependent on our ability to generate positive cash flows through synergies within our operations, expanding our production capacity and geographic footprint, exploring strategic partnerships, and pursuing accretive acquisitions to supplement our organic growth. We are committed to attaining a level of sustained growth that will effectively offset our overhead costs, thereby paving the path to achieving profitability. We will be required in the future to raise additional capital through either equity or debt financings. To date, we have raised capital through multiple equity offerings. There were no equity offerings in the periods ended June 30, 2023 and 2022.
Debt
In addition to equity offerings, the Company also has access to a credit facility through its acquisition of FGH. The credit facility is in the amount of 1.0 million Euros with Hypoverinsbank, secured by the trade and other receivables of Phatebo GmbH - one of the subsidiaries of FGH. On June 30, 2023, the outstanding amount was 1.0 million Euros ($1.1 million USD). The credit facility has an interest rate of Euribor plus 2.95% per year and does not have a set maturity date. The interest rate is reset every two months.
Off-Balance Sheet Arrangements
As of June 30, 2023, the Company did not have any off-balance-sheet arrangements that have, or are reasonably likely to have, a current or future effect on its results of operations or financial condition, including, and without limitation, such considerations as liquidity and capital resources.
Contractual Obligations
At June 30, 2023, the Company had the following contractual obligations to make future payments, representing contracts and other commitments that are known and committed:
| (In thousands of United States dollars) | Total | Less than 1 Year | 1 - 3 Years | More than 3 Years | ||||||||
| Legal disputes (1) | $ | 2,968 | $ | 2,968 | $ | - | $ | - | ||||
| Sales tax (1) | 2,220 | 2,220 | - | - | ||||||||
| Contingent purchase consideration (2) | 2,354 | 1,633 | 266 | 455 | ||||||||
| Operating lease obligations (3) | 2,424 | 1,234 | 821 | 369 | ||||||||
| Debt (4) | 1,200 | 1,200 | - | - | ||||||||
| Total | $ | 11,166 | $ | 9,255 | $ | 1,087 | $ | 824 |
36
(1) See Note 16 of the Company's unaudited condensed interim consolidated financial statements, included elsewhere in this Quarterly Report.
(2) See Note 8 of the Company's unaudited condensed interim consolidated financial statements, included elsewhere in this Quarterly Report.
(3) See Note 12 of the Company's unaudited condensed interim consolidated financial statements, included elsewhere in this Quarterly Report.
(4) See Note 11 of the Company's unaudited condensed interim consolidated financial statements, included elsewhere in this Quarterly Report.
Critical Accounting Estimates
For information regarding our critical accounting policies and estimates, see "Critical Accounting Estimates" included in Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2022 Annual Report.
Recently Adopted Accounting Principles
There were no new accounting standards issued during the three months ended June 30, 2023 that impacted the Company. See Note 3, Significant Accounting Policies, of the notes to the consolidated financial statements for the year ended December 31, 2022 for a discussion of recently issued accounting standards.
37
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act and the regulations promulgated thereunder) as of June 30, 2023 (the "Evaluation Date"). Based on such evaluation, those officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective primarily due to the outstanding material weakness discussed in Part II, Item 9A, "Controls and Procedures" in our 2022 Annual Report.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
38
PART II
Item 1. Legal Proceedings
There have been no material changes to the legal proceedings described in Item 3 of our 2022 Annual Report.
Item 1A. Risk Factors
There have been no material changes to the risk factors described in the 2022 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
39
Item 6. Exhibits
40
| 31.2* | Certification of Principal Financial Officer of Flora Growth Corp. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |||||||
| 32.1* | Certification of Principal Executive Officer of Flora Growth Corp. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||
| 32.2* | Certification of Principal Financial Officer of Flora Growth Corp. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |||||||
| 101.INS | Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document | |||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
# Indicates management contract or compensatory plan or arrangement.
* Furnished herewith.
41
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: August 10, 2023 | Flora Growth Corp. | |
| By: | /s/ Clifford Starke | |
| Clifford Starke | ||
| Chief Executive Officer (Principal Executive Officer) | ||
| Dated: August 10, 2023 | ||
| By: | /s/ Dany Vaiman | |
| Dany Vaiman | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) |
42
AMENDMENT NO. 2 TO SHARE PURCHASE AGREEMENT
This Amendment No. 2 to Share Purchase Agreement ("Amendment") is entered into and made effective as of July 13, 2023 by and between Flora Growth Corp., a Canadian corporation ("Flora") and Lisan Farma Colombia LLC, a Delaware limited liability company ("Lisan"). Flora and Lisan are collectively referred to as the "Parties" and singularly referred toas "Party."
RECITALS
WHEREAS, Lisan and Flora are parties to that certain Share Purchase Agreement entered into on July 5, 2023 as modified by amendment No. 1 entered into on July 7, 2023 (as so amended, the "Agreement"). Capitalized terms not defined herein shall have the meaning ascribed to them in the Agreement;
WHEREAS, In the Agreement, Flora indicated in literal B of recitals that is owner of 2 "Branches". It is clarified the "Branch" Flora Growth Corp. Sucursal Colombia, owns the Lot of land called ¨Cantalavieja¨ N.2, which has an area of 124 hectares and 600 square meters (mts2), located at Vereda Girón, Bucaramanga (Santander), with real estate registration number 300- 10365 of the public document registration offices of Bucaramanga ("Oficina de Registro de Instrumentos Públicos"), and Land Code ("Código Catastral") No. 000000110067000.
NOW, THEREFORE, in consideration of the promises, the performance of the covenants and agreements hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties to this Amendment hereby represent, warrant, consent, and agree as follows:
1. Section 2.3 of the Agreement is hereby deleted in its entirety and replaced by the following:
¨2.3 The Purchase Price for the Transferred Shares and the Branches shall be eight hundred thousand Canadian dollars (CAD$800,000) (the "Purchase Price"). Lisan will pay in two installments as follows:
(i) Five Hundred Thousand Canadian Dollars (CAD$500,000) (the "First Installment") once Lisan receives the documents listed in Section 4.1., which will occur on July 14, 2023; and,
(ii) Three Hundred Thousand Canadian Dollars (CAD$300,000) (the "Second Installment") once Lisan receives the documents listed in Section 4.2., which will occur on or before July 21, 2023.
Payment shall be made in immediately available funds by wire transfer to the bank account of the Seller contained in Exhibit A".
2. Section 3 of the Agreement is hereby deleted in its entirety and replaced by the following: "
3. CLOSING.
The closing of the Transaction shall take place in two different stages:
(i) First closing: The first closing shall take place at 3:00 p.m. local time on July 14, 2023 (the "First Closing").
(ii) Second closing: The second closing shall take place at 10:00 a.m. local time on or before July 21, 2023, or such date as the Parties shall mutually agree (the "Second Closing"). The Second Closing is subject to the delivery of the documents listed in Section 4.2 of the Agreement. If Second Closing does not occur due to the non-delivery/compliance of the document established in Section 4.2.(i), Parties agree and establish that Seller and Purchaser will not have any liability for such circumstance and Purchaser will not pay the Second Installment until Second Closing is secured. In this case, Parties shall agree the subsequent steps to secure the Second Closing.
3. Section 4 of the Agreement is hereby deleted in its entirety and replaced by the following: "
4. TRANSACTIONS AT CLOSING.
4.1 In the First Closing: (a) The Purchaser shall transfer to the account indicated by the Seller by wire transfer of immediately available funds the First Installment and (b) upon receipt by Seller of the First Installment, Seller shall deliver physically to the Purchaser the following to the physical address set forth in Section 11.7(b) Purchaser:
(i) Shareholders meetings Minutes of Flora Lab S.A.S., Flora Med S.A.S. and Flora Growth Corp. Colombia S.A.S. whereby Shareholder General Assembly approves the sale of the Transferred Shares to Purchaser and/or waives the preemptive right established in the beforementioned Company's bylaws.
(ii) Powers of Attorney granted by Seller to Sandra Milena Barreto Garzon to attend Shareholders meetings of Flora Lab S.A.S., Flora Med S.A.S. and Flora Growth Corp. Colombia S.A.S. whereby Shareholder General Assembly approves the sale of the Transferred Shares to Purchaser and/or waives the preemptive right established in Company's bylaws.
(iii) General Shareholder Assembly Universal Meetings Minutes of Kasa Wholefoods Company S.A.S. whereby General Shareholder Assembly approve the removal of preemptive rights for the transfer of shares in company's bylaws.
(iv) Powers of Attorney granted by Seller to Sandra Milena Barreto Garzon to attend Shareholders meetings of Kasa Wholefoods Company S.A.S. dated July 10, 2023 and July 13, 2023.
(v) Powers of Attorney granted by Seller to Sandra Milena Barreto Garzon to attend Shareholders meetings of Flora Growth Corp. Colombia S.A.S. dated July 10, 2023.
(vi) Clarifying Minutes of Flora Growth Corp Colombia S.A.S. regarding Shareholders meetings held on July 10, 2023.
(vii) Certificate of shares issued by the Companies (excluding Cosechemos Ya S.A.S.) and Labcofarm Laboratorios S.A.S. and held by Seller and Flora Lab S.A.S., respectively, prior First Closing.
(viii) Transfer letters and endorsement notes to transfer the Transferred Shares in favor of Purchaser regarding all the Companies, except Cosechemos Ya S.A.S.
(ix) Power of Attorney granted by Seller to Sandra Milena Barreto Garzon to sign in the name and on behalf of the Seller the transfer letters and endorsement notes to transfer the Transferred Shares in favor of Purchaser regarding all the Companies.
(x) The Shareholder General Assembly Minutes Ledger and the Shareholders Ledger of the Companies, except Cosechemos Ya S.A.S. The Shareholders Ledger of each of these Companies, except Cosechemos Ya S.A.S., shall be updated with registration of the name of the Purchaser on said Ledgers.
(xi) The Shareholder General Assembly Minutes Ledger and the Shareholders Ledger of Labcofarm Laboratorios S.A.S. The Shareholders Ledger of Labcofarm Laboratorios S.A.S shall have Flora Lab S.A.S. as the unique shareholder.
(xii) The Board of Directors Ledger of Flora Lab S.A.S.
(xiii) Letters of resignation of Sandra Milena Barreto Garzon as the main legal representative of Flora Growth Corp Colombia S.A.S., Flora Lab S.A.S., Flora Med S.A.S., Labcofarm Laboratorios S.A.S., Kasa Wholefoods Company S.A.S. and the Branches.
(xiv) Letters of resignation of Juan Carlos Gomez Roa to the Board of Directors of Flora Lab S.A.S.
(xv) Settlement agreement signed by Andres Restrepo Bahamon and Flora Growth Corp. Sucursal Colombia.
(xvi) Letters of resignation of Andres Restrepo Bahamon as the legal representative/proxy of the Branches.
(xvii) Copy of the resolution adopted by its board of directors for consummating the Transaction.
4.2 In the Second Closing: (a) The Purchaser shall transfer to the account indicated by the Seller by wire transfer of immediately available funds the Second Installment and (b) upon receipt by Seller of the Second Installment, Seller shall deliver physically to the Purchaser the following to the physical address set forth in Section 11.7(b) Purchaser:
(i) General Shareholder Assembly Universal Meetings Minutes of Cosechemos Ya S.A.S. whereby General Shareholder Assembly approves the removal of preemptive rights for the transfer of shares in company's bylaws and in accordance with the provision set forth in Section 5 of the Shareholder Agreement for the transfer of shares in this company.
(ii) Power of Attorney granted by Seller to Sandra Milena Barreto Garzon to attend Universal Shareholders meetings of Cosechemos Ya S.A.S. dated July 12, 2023.
(iii) Certificate of shares issued by Cosechemos Ya S.A.S. and held by Seller, prior Second Closing.
(iv) Transfer letter and endorsement note to transfer the Transferred Shares in favor of Purchaser regarding Cosechemos Ya S.A.S.
(v) The Shareholder General Assembly Minutes Ledger and the Shareholders Ledger of Cosechemos Ya S.A.S. The Shareholders Ledger of this company shall be updated with registration of the name of the Purchaser on said Ledger.
(vi) The Board of Directors Ledger of Cosechemos Ya S.A.S.
(vii) Letter of resignation of Javier Alberto Franco Echeverry as the first and second legal representative of Cosechemos Ya S.A.S.
(viii) Letters of resignation of Juan Carlos Gomez Roa and Jason Warnock Marshall to the Board of Directors of Cosechemos Ya S.A.S.
The deliverables mentioned in 4.1. and 4.2. will collectively be the "Seller Deliverables".
4. Section 5 of the Agreement is hereby deleted in its entirety and replaced by the following:
"5. POST - CLOSING TRANSACTIONS.
Both Seller and Purchaser shall:
(i) Execute the public deed and/or private document, as applicable and in accordance with the provisions of Articles 525 et seq. of the Colombian Commercial Code by which the ¨Branches¨ are transferred to Lisan, which must be executed within 30 business days following the Closing, at Notary Office 30 of the Circle of Bogota D.C. at 10:00 a.m. This Date may be extended by written agreement of the parties. To this end, the Parties shall mutually agree the documents required to formalize the public deed and/or private document for the transfer of the Branches and shall agree the "price" to be included in the beforementioned documents for this purpose.
(ii) Registry of the public deed or notarized document for the transfer of the Branches to Seller before the Chamber of Commerce with jurisdiction in the place where the respective branch operates (i.e., Bogota, Colombia).
5. The Parties expressly acknowledge and agree that except as specifically set forth in this Amendment, the Agreement shall remain unmodified and in full force and effect.
6. This Amendment may be executed by email via scanned PDF and in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute the same agreement.
IN WITNESS WHEREOF, the Parties hereto have knowingly and voluntarily executed this Amendment on July 13, 2023.
FLORA GROWTH CORP.
By: _(s) Clifford Starke
Name: Clifford Starke
Title: Chief Executive Officer
LISAN FARMA COLOMBIA LLC
By: _(s) Rafael Santamaria
Name: Rafael Santamaria
Title: Authorized Person
AMENDMENT NO. 3 TO SHARE PURCHASE AGREEMENT
This Amendment No. 3 to Share Purchase Agreement ("Amendment") is entered into and made effective as of July 19, 2023 by and between Flora Growth Corp., a Canadian corporation ("Flora"), Lisan Farma Colombia LLC, a Delaware limited liability company ("Lisan") and Flora Beauty LLC, a company organized under the laws of Colorado (United States of America), domiciled for purposes of this Agreement at Colorado (United States of America), identified with registration No. 20201035580 ("Beauty"). Flora, Lisan and Beauty are collectively referred to as the "Parties" and singularly referred to as "Party."
RECITALS
WHEREAS, Lisan and Flora are parties to that certain Share Purchase Agreement entered into on July 5, 2023 as modified by amendment No. 1 entered into on July 7, 2023 and amendment No. 2 entered on July 13, 2023 (as so amended, the "Agreement"). Capitalized terms not defined herein shall have the meaning ascribed to them in the Agreement;
WHEREAS, In the Agreement, Flora indicated in literal B of recitals that is owner of 2 "Branches". It is clarified that the "Branch" Flora Beauty LLC Sucursal Colombia is owned by Beauty and not Flora Growth, therefore, it is necessary to conduct the respective amendment to rectify the ownership of the beforementioned branch.
WHEREAS, the Parties desire to state in the Agreement that Lisan may authorize that the Branches will be transferred directly to the latter or to the legal person authorized by Lisan.
WHEREAS, Flora and Beauty agree that the Purchase Price established in Amendment No. 2 includes the sell of the "Branch" Flora Beauty LLC Sucursal Colombia and that such Purchase Price will be paid directly to Flora pursuant to the express authorization granted by Beauty with the signature of this amendment.
NOW, THEREFORE, in consideration of the promises, the performance of the covenants and agreements hereinafter contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties to this Amendment hereby represent, warrant, consent, and agree as follows:
1. Recital B of the Agreement is hereby deleted in its entirety and replaced by the following:
"Additionally, Flora and Beauty are the owners of the following Colombian Branches (hereinafter, the "Branches"):
|
Branch Name |
Tax Identification Number (NIT) |
|
Flora Growth Corp. Sucursal Colombia |
901.379.188-1 |
|
Flora Beauty LLC Sucursal Colombia |
901.389.840-9" |
2. Recital C of the Agreement is hereby deleted in its entirety and replaced by the following:
"Flora wishes to sell to Lisan the shares it has in all of the Companies (hereinafter, the "Transferred Shares"), and Flora and Beauty the Branches wishes to sell to Lisan the Branches, in accordance with the terms and conditions set forth herein (hereinafter, the "Transaction")".
3. Recital D of the Agreement is hereby deleted in its entirety and replaced by the following:
"Lisan wishes to acquire the Transferred Shares and the Branches from Flora and Beauty, upon the terms and conditions hereof".
4. Recital E of the Agreement is hereby included as follows:
"E. Flora and Beauty will be collectively referred as the "Seller". However, for the obligations and liabilities set forth in this Agreement, Beauty will only be responsible for the transfer of the Branch Flora Beauty LLC Sucursal Colombia".
5. Section 1 of the Agreement is hereby deleted in its entirety and replaced by the following:
"1. PURPOSE OF THE TRANSACTION.
The transaction which is contemplated in this Agreement is the sale and transfer by the Seller to the Purchaser of 100% (one hundred percent) of the Transferred Shares and the Branches.
Lisan may authorize that the Branches will be transferred directly to the latter or to the legal person authorized by Lisan".
6. Section 2.3 of the Agreement is hereby deleted in its entirety and replaced by the following:
"2.3 The Purchase Price for the Transferred Shares and the Branches shall be eight hundred
thousand Canadian dollars (CAD$800,000) (the "Purchase Price"). Lisan will pay in two
installments as follows:
(i) Five Hundred Thousand Canadian Dollars (CAD$500,000) (the "First Installment") once Lisan receives the documents listed in Section 4.1., which will occur on July 14, 2023; and,
(ii) Three Hundred Thousand Canadian Dollars (CAD$300,000) (the "Second Installment") once Lisan receives the documents listed in Section 4.2., which will occur on or before July 21, 2023.
Payment shall be made in immediately available funds by wire transfer to the bank account
of the Seller contained in Exhibit A.
With the signature of this amendment, Beauty expressly recognizes and accepts that the Purchase Price includes the transfer of Flora Beauty LLC Sucursal Colombia and that such payment will be made directly to Flora".
7. This Amendment may be executed by email via scanned PDF and in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute the same agreement.
IN WITNESS WHEREOF, the Parties hereto have knowingly and voluntarily executed this Amendment on July 19, 2023.
| FLORA GROWTH CORP. | FLORA BEAUTY LLC. |
| By: _ (s) Clifford Starke | By: _ (s) Clifford Starke |
| Name: Clifford Starke | Name: Clifford Starke |
| Title: Chief Executive Officer | Title: Chief Executive Officer |
| LISAN FARMA COLOMBIA LLC | |
| By: _ (s) Rafael Santamaria | |
| Name: Rafael Santamaria | |
| Title: Authorized Person |
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Clifford Starke, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023 of Flora Growth Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: August 10, 2023 | /s/ Clifford Starke |
| Clifford Starke | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002
I, Dany Vaiman, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023 of Flora Growth Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
| Date: August 10, 2023 | /s/ Dany Vaiman |
| Dany Vaiman | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
I, Clifford Starke, Chief Executive Officer of Flora Growth Corp. (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 that, to the best of my knowledge:
1. the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended June 30, 2023 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: August 10, 2023 | /s/ Clifford Starke |
| Clifford Starke | |
| Chief Executive Officer | |
| (Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES OXLEY ACT OF 2002
I, Dany Vaiman, Chief Financial Officer of Flora Growth Corp. (the "Company"), certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350 that, to the best of my knowledge:
1. the Quarterly Report on Form 10-Q of the Company for the fiscal quarter ended June 30, 2023 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: August 10, 2023 | /s/ Dany Vaiman |
| Dany Vaiman | |
| Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Unaudited Condensed Interim Consolidated Statements of Financial Position (Parenthetical) - USD ($) shares in Thousands, $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Unaudited Condensed Interim Consolidated Statements of Financial Position | ||
| Trade and amounts receivable, allowance | $ 1,346 | $ 1,385 |
| Share capital, shares issued | 6,859 | 6,776 |
| Share capital, shares outstanding | 6,859 | 6,776 |
NATURE OF OPERATIONS |
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| Nature Of Operations And Going Concern [Abstract] | |
| NATURE OF OPERATIONS [Text Block] |
1. NATURE OF OPERATIONS Flora Growth Corp. (the "Company" or "Flora") was incorporated under the laws of the Province of Ontario, Canada on March 13, 2019. The Company is manufacturer, distributor and an all-outdoor cultivator of global cannabis and pharmaceutical products and brands, building a connected, design-led collective of plant-based wellness and lifestyle brands. The Company's registered office is located at 365 Bay Street, Suite 800, Toronto, Ontario, M5H 2V1, Canada and our principal place of business in the United States is located at 3406 SW 26th Terrace, Suite C-1, Fort Lauderdale, Florida 3312. Presentation of comparative financial statements On June 9, 2023, the Company consolidated its issued and outstanding common shares based on one new common share of the Company for every twenty existing common shares of the Company. All common shares and per share amounts have been restated to give retroactive effect to the share consolidation. See discussion in Note 13. |
BASIS OF PRESENTATION |
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| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| BASIS OF PRESENTATION [Text Block] |
2. BASIS OF PRESENTATION These unaudited condensed interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for interim financial information. Accordingly, they do not include all of the information and notes required by U.S. GAAP. The Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2022. These unaudited condensed interim consolidated financial statements reflect all adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of results for a full year. These unaudited condensed interim consolidated financial statements apply the same accounting policies as those used in the financial statements included in the Company's Annual Report filed on Form 10-K for the year ended December 31, 2022. These interim condensed consolidated financial statements have been prepared on a going concern basis, meaning that the Company will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations. Prior to January 1, 2023, Flora was a foreign private issuer reporting its financial statements under International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standard Boards. These consolidated financial statements, for all periods, are presented in accordance with U.S. GAAP. Going concern The accompanying unaudited interim condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue one year after the date these unaudited condensed interim consolidated financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company had cash of $1.8 million at June 30, 2023, net loss of $48.5 million for the six months ended June 30, 2023, and an accumulated deficit of $138.3 million at June 30, 2023. Current economic and market conditions have put pressure on the Company's growth plans. The Company's ability to continue as a going concern is dependent on its ability to obtain additional capital. The Company believes that its current level of cash is not sufficient to continue investing in growth, while at the same time meeting its obligations as they become due. These conditions raise substantial doubt regarding the Company's ability to continue as a going concern for a period of at least one year from the date of issuance of these interim condensed consolidated financial statements. To alleviate these conditions, management is currently evaluating various cost reductions and other alternatives and may seek to raise additional funds through the issuance of equity, debt securities, through arrangements with strategic partners, through obtaining credit from financial institutions or otherwise. The actual amount that the Company may be able to raise under these alternatives will depend on market conditions and other factors. As it seeks additional sources of financing, there can be no assurance that such financing would be available to the Company on favorable terms or at all. The Company's ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including but not limited to market and economic conditions, the Company's performance and investor sentiment with respect to it and its industry. The unaudited condensed interim consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. Basis of consolidation These unaudited condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions were eliminated on consolidation. Subsidiaries are entities the Company controls when it is exposed, or has rights, to variable returns from its involvement in the entity and can affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are included in the consolidated financial results of the Company from the date of acquisition up to the date of disposition or loss of control. The Company's subsidiaries and respective ownership percentage have not changed from the year ended December 31, 2022. On July 5, 2023, the Company sold its shares in its Colombian related subsidiaries. The results of these subsidiaries are included in discontinued operations in the accompanying unaudited condensed interim consolidated financial statements. See discussion in Note 3. |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS |
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| Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS [Text Block] |
3. ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS On July 5, 2023, the Company entered into a Share Purchase Agreement with Lisan Farma Colombia LLC ("Lisan"), a Delaware limited liability company, to sell all its shares in its Colombian related subsidiaries and its Colombian assets for a purchase price of CAD $0.8 million (USD $0.6 million). The sale relates to all of Flora's operations in Colombia, including its interest in (i) its 361-acre Cosechemos farm located in Giron, Colombia and its related processing facilities and inventory and (ii) all other assets relating to Flora Lab 2, Flora Lab 4 and Flora's Colombian food and beverage and consumer products business. The Company has received proceeds of CAD $0.5 million subsequent to period-end and expects to receive the remaining proceeds upon closing of the transaction. See discussion in Note 20. The sale enables the Company to concentrate on its core business divisions, which are lifestyle brands in the United States and international pharmaceutical distribution. The sale was part of several strategic changes to cut costs and streamline operations. The Company has presented the associated assets and liabilities of the Colombian subsidiaries as held for sale. The major classes of assets and liabilities classified as held for sale as of June 30, 2023 and December 31, 2022 were as follows:
The following table summarizes the major classes of line items included in loss from discontinued operations, net of tax, for the three and six months ended June 30, 2023 and 2022:
The following table summarizes the significant operating and investing items related to the Colombian subsidiaries for the six months ended June 30, 2023 and 2022
The subsidiaries sold included Cosechemos Ya S.A.S, which was part of the commercial and wholesale segment; Flora Lab S.A.S, Flora Med S.A.S. and Labcofarm Laboratories S.A.S, which were part of the pharmaceuticals segment; Flora Growth Corp Colombia S.A.S., and Kasa Wholefoods Company, S.A.S. and Flora Beauty LLC Sucursal Colombia which were part of the house of brands segment. The Company applies significant judgement in determining whether a disposal meets the criteria to present as held for sale at the reporting date, and whether the disposal represents a strategic shift that has (or will have) a major effect on its operations and financial results in order to be classified as a discontinued operation. The criteria evaluated are both quantitative and qualitative in nature, to evaluate the significance of the disposal relative to the operations of the Company as a whole. The Company has determined this disposition represents a strategic shift in operations that will have a major effect on the Company's operations and financial results, and accordingly, has been presented as discontinued operations. During the three and six months ended June 30, 2023, the Company recorded a loss on disposal of $1.9 million as the carrying value of the assets being sold exceeded the expected sale price. |
TRADE AND AMOUNTS RECEIVABLE |
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| TRADE AND AMOUNTS RECEIVABLE [Text Block] |
4. TRADE AND AMOUNTS RECEIVABLE The Company's trade and amounts receivable are recorded at amortized cost. The trade and other receivables balance as at June 30, 2023 and December 31, 2022 consists of trade accounts receivable, amounts recoverable from the Government of Canada for Harmonized Sales Taxes ("HST"), as well as Value Added Tax ("VAT") from various jurisdictions, and other receivables.
Changes in the trade accounts receivable allowance in the three and six months ended June 30, 2023 relate to establishing an allowance for expected credit losses and reclassification of assets held for sale. There was $0.1 million in write-offs of trade receivables during the three and six months ended June 30, 2023. The Company has no amounts written-off that are still subject to collection enforcement activity as at June 30, 2023. The Company's aging of trade accounts receivable is as follows:
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INVENTORY |
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| INVENTORY [Text Block] |
5. INVENTORY Inventory is comprised of the following as at June 30, 2023 and 2022:
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PROPERTY, PLANT AND EQUIPMENT |
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| PROPERTY, PLANT AND EQUIPMENT [Text Block] |
6. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following:
Depreciation expense for the three and six months ended June 30, 2023 was less than $0.1 million and $0.1 million, respectively, (June 30, 2022 - $0.1 million and $0.1 million, respectively) and was recorded in depreciation and amortization in the unaudited condensed interim consolidated statements of operations and comprehensive loss. An impairment of $0.2 million was recorded against Property, Plant and Equipment during the three and six months ended June 30, 2023. See Note 10. |
INVESTMENTS |
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| INVESTMENTS [Text Block] |
7. INVESTMENTS As at June 30, 2023, the Company's investments consisted of common shares and warrants in an early-stage European cannabis company. The Company owned approximately 9.6% of the investee, or approximately 9% on a diluted basis including exercisable warrants of other investors. The Company did not exercise the warrants and they expired on February 1, 2023. The Company recorded the remaining value of the warrants as a loss on changes in fair value of the investment during the six months ended June 30, 2023. Due to the Company's declining share price, the declining share price of comparable public companies and challenging economic factors, the Company determined that impairment indicators were present at June 30, 2023. The initial investment multiples were compared to the guideline public company multiples observed as at June 30, 2023 (0.4 price to book value and 0.5 price to tangible value), with these updated valuation multiples applied to the investee's estimated book value. The Company also considered the status of the investee's milestones since the purchase date, as well as recent transactions in the European cannabis market for indicators of change in value. The Company determined there has been a rapid decline in value of certain European cannabis assets, and, thus, recorded an impairment of the investment totaling $0.5 million during the period ending June 30, 2023. The impairment valuation model for the common shares uses Level 3 inputs of the fair value hierarchy. A schedule of the Company's investments activity is as follows:
The loss on changes in fair value appears in the unrealized (gain) loss on changes in fair value caption in the unaudited condensed interim consolidated statements of loss and comprehensive loss.
The value of the investee common shares appears in the investment line on the unaudited condensed interim consolidated statement of financial position. |
ASSET ACQUISITIONS AND BUSINESS COMBINATIONS |
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| ASSET ACQUISITIONS AND BUSINESS COMBINATIONS [Text Block] |
8. ASSET ACQUISITIONS AND BUSINESS COMBINATIONS Original Hemp asset acquisition On March 1, 2023, the Company completed its acquisition of all the assets operating under the brand "Original Hemp". The Company analyzed the acquisition under ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, determining Original Hemp did not meet the definition of a business as it did not have inputs, processes, and outputs in place that constituted a business under Topic 805. As a result, the transaction has been accounted for as an asset acquisition whereby all of the assets acquired and liabilities assumed are assigned a carrying amount based on relative fair values. Total purchase consideration was $0.3 million. As consideration for the purchased assets of Original Hemp, the Company will pay an amount equal to 50% of the net profits received in connection with the sale of Original Hemp products until such a time that the Company will have paid a total of $0.2 million. Once the Company has paid $0.2 million, the Company will pay an amount equal to 10% of the net profits received in connection with the sale of Original Hemp products until such a time that the Company will have paid an additional amount of $0.4 million. As these entire amounts are considered contingent consideration, it was valued using discounted cash flow models utilizing two different rates, high and low. The significant inputs to the valuation include the estimated seven-year time period to accumulate the $0.6 million maximum payment and discount rates of 31.5%, high, and 17.0%, low, to estimate the present value of the future cash outflows. The resulting acquisition date fair value of $0.3 million contingent purchase consideration is classified within the contingent purchase considerations line on the statement of financial position. At June 30, 2023, the remaining balance outstanding was $0.3 million. The purchase is accounted for as an asset acquisition with amounts allocated as at the acquisition date to each major class of assets as follows:
Franchise Global Health Inc. ("FGH") business combination On December 23, 2022, the Company completed its acquisition of all the issued and outstanding common shares (the "Franchise Common Shares") of FGH., a corporation existing under the laws of the Province of British Columbia, by way of a statutory plan of arrangement (the "Arrangement") under the Business Corporations Act (British Columbia). FGH, through its wholly owned subsidiaries, is a multi-national operator in the medical cannabis and pharmaceutical industry with principal operations in Germany. The Company acquired FGH to expand its product offerings, accelerate its revenue growth, expand its customer and distribution capabilities in Germany and to improve synergies and cost savings. The purchase consideration was comprised of 2,176,297 of Flora's common shares (the "Flora Shares"), valued at $9.8 million, inclusive of a 7.5% fair value discount for the required ninety (90) day restrictive legend on the Flora Shares delivered to the former shareholders of FGH. The purchase is accounted for as a business combination with amounts recognized as at the acquisition date for each major class of assets acquired and liabilities assumed are as follows:
The amounts shown are provisional. The Company has a measurement period of one year following the acquisition date on December 23, 2022 to adjust the provisional amounts recognized for any new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have resulted in the recognition of additional assets or liabilities, or affected the measurement of the amounts recognized as of that date. As part of the acquisition terms, Clifford Starke, the Company's current Chief Executive Officer and a Director and the former Chief Executive Officer of FGH, together with certain affiliated entities under his control, entered into an agreement pursuant to which they agreed to indemnify the Company for certain potential liabilities of FGH and its subsidiaries, up to a maximum of $5.0 million. A total of $3.4 million of liabilities were recognized in the trade payables and accrued liabilities of FGH on the date of acquisition that were subject to this indemnification obligation. The Company believes it will be fully indemnified by the current CEO of Flora, and, as such, has recorded $3.4 million of indemnification receivables. The indemnified losses include: 1. any losses that are related to the ownership or the operation of FGH and its Canadian subsidiaries, in each case prior to the closing of the Arrangement, that are unknown to the Company and that: (i) have not been disclosed or accounted for in FGH filings; or (ii) have not been disclosed in the FGH Disclosure Letter, in each case as at the date of the Arrangement Agreement; 2. any losses that may arise from amounts owed or that may become owed to certain persons or in respect of certain matters identified in the indemnity agreement, as amended; and 3. any fraud, intentional misrepresentation, willful breach, or willful misconduct on the part of FGH or any other entity identified in the indemnity agreement of any of the foregoing in connection with the indemnity agreement or the Arrangement Agreement The intangible assets of $6.1 million were comprised of the following categories and estimated useful lives: supplier relationships of $2.4 million for five years, customer relationships of $2.3 million for five years, and licenses of $1.4 million for five years. The Company does not expect the goodwill and intangible asset values to be deductible for Canadian income tax purposes. The goodwill is assigned to the commercial and wholesale segment. Just Brands LLC and High Roller Private Label LLC (collectively "JustCBD") business combination On February 24, 2022, Flora Growth U.S. Holdings Corp., a wholly owned subsidiary of the Company, completed the acquisition of 100% of the outstanding equity interests in each of (i) Just Brands LLC and (ii) High Roller Private Label LLC for total purchase consideration of $37.0 million. JustCBD is a manufacturer and distributor of consumable cannabinoid products, including gummies, tinctures, vape cartridges, and creams. JustCBD is based in Florida in the United States and was formed in 2017. The Company acquired JustCBD to expand its product offerings, accelerate its revenue growth, expand its customer and distribution capabilities in the United States and for the acquisition of human capital through JustCBD's management team. The purchase consideration was comprised of (i) $16.0 million of cash, less $0.2 million returned to the Company in August 2022 due to final calculated closing working capital falling short of the target working capital, (ii) 475,000 common shares of the Company valued at $14.7 million, inclusive of a 15% fair value discount for the required six-month holding period of the shares, and (iii) $4.0 million of contingent purchase consideration. The contingent purchase consideration is based on a clause in the purchase agreement that provides that if at any time during the 24 months following the acquisition date, the five-day volume weighted average price ("VWAP") per share of the Company's common shares as quoted on the Nasdaq Capital Market fails to equal or exceed $100.00, then the Company shall issue a number of additional common shares to the sellers equal to the difference between (x) a fraction, the numerator of which is $47.5 million and the denominator of which is the highest five day VWAP at any point during the 24 months following the closing and (y) the 475,000 common shares delivered to the sellers at the closing. In no event shall the Company be required to issue more than 182,500 common shares unless, if required by applicable law, it shall have obtained the consent of the Company's shareholders to do so. In the event the Company is required to deliver in excess of 182,500 shares to the sellers ("Excess Shares") and the Company shall not have obtained shareholder consent, if required, the Company may deliver cash to the sellers in lieu of such Excess Shares determined by a formula set forth in the purchase agreement. The contingent purchase consideration was classified as a financial liability within the contingent purchase considerations line on the statement of financial position as the Company may be required to settle any amounts due in cash instead of common shares if the Company's common shareholders do not provide requisite shareholder approval to issue additional common shares. It is now included in the other accrued liabilities line on the statement of financial position as the settlement date is within the next 12 months. The fair value of the contingent purchase consideration at February 24, 2022 was determined using a Monte Carlo simulation incorporating Brownian motion with 100,000 trials through a binomial model. The significant inputs to the valuation included the two-year time period, the Company's closing share price at February 24, 2022 ($36.40), estimated Company common share volatility (100%), and risk-free rate of 1.5% to discount the ending result to present value. The fair value of the contingent purchase consideration at June 30, 2023 was determined using a Monte Carlo simulation incorporating Brownian motion with 100,000 trials through a binomial model. The significant inputs to the valuation include the remaining time period, the Company's closing share price at June 30, 2023 ($2.38), estimated Company common share volatility (110%), and risk-free rate of 5.5% to discount the ending result to present value. The Company determined that the balance of this contingent consideration at June 30, 2023 was $1.5 million, with the $1.1 million decrease in the balance from December 31, 2022 recorded in the unrealized (gain) loss from changes in fair value caption in the unaudited condensed interim consolidated statements of loss and comprehensive loss. The purchase is accounted for as a business combination with amounts recognized as at the acquisition date for each major class of assets acquired and liabilities assumed are as follows:
The fair value of the trade receivables reflects a $0.3 million discount to the gross contractual amounts as allowance for potentially uncollectible amounts. The acquired provision for sales tax is discussed at Note 16 below. The intangible assets of $4.5 million are comprised of the following categories and estimated useful lives: tradenames of $3.1 million for eight to nine years, customer relationships of $1.2 million for five to seven years, and know-how of $0.2 million for three years. The Company expects the goodwill and intangible asset values to be deductible for Unites States income tax purposes. The goodwill is assigned to the house of brands segment. No Cap Hemp Co. business combination On July 20, 2022, Just Brands LLC., a wholly owned subsidiary of the Company, acquired certain assets, assumed certain liabilities, retained certain employees and processes (together the "purchased assets") of No Cap Hemp Co. ("No Cap") for total purchase consideration of $0.9 million. No Cap is a manufacturer and distributor of high quality and affordable CBD products. No Cap is based in Florida in the United States and was formed in 2017. Just Brands LLC acquired No Cap to expand its product offerings and accelerate its revenue growth. As consideration for the purchased assets of No Cap, Just Brands LLC will pay an amount equal to 10% of the sales of No Cap until such a time that Just Brands LLC will have paid a total of $2.0 million. Also on July 20, 2022, Just Brands LLC advanced $0.2 million to the former owners of No Cap. This $0.2 million will be settled prior to and in the same manner as the consideration for the purchased assets. As these entire amounts are considered contingent consideration, it was valued using discounted cash flow models utilizing two different rates, high and low. The significant inputs to the original valuation included the estimated nine-year time period to accumulate the $2.0 million maximum payment and discount rates of 23.5%, high, and 14.3%, low, to estimate the present value of the future cash outflows. The resulting acquisition date fair value of $0.9 million contingent purchase consideration is classified within the contingent purchase considerations line on the statement of financial position. The Company determined that the balance of this contingent consideration at June 30, 2023 was $0.5 million, with the $0.4 million decrease in the balance from December 31, 2022 recorded in the unrealized (gain) loss from changes in fair value caption in the unaudited condensed interim consolidated statements of loss and comprehensive loss. The purchase is accounted for as a business combination with amounts recognized as at the acquisition date for each major class of assets acquired and liabilities assumed are as follows:
The fair value of the trade receivables reflects a $0.2 million discount to the gross contractual amounts as allowance for potentially uncollectible amounts. The Company expects the goodwill to be deductible for United States income tax purposes. The goodwill is assigned to the house of brands segment. |
INTANGIBLE ASSETS AND GOODWILL |
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| INTANGIBLE ASSETS AND GOODWILL [Text Block] |
9. INTANGIBLE ASSETS AND GOODWILL A continuity of intangible assets for the six months ended June 30, 2023 is as follows:
Amortization expense for the three and six months ended June 30, 2023 was $0.8 million and $1.6 million respectively (June 30, 2022 - $0.3 million and $0.9 million, respectively) and was recorded in depreciation and amortization in the unaudited condensed interim consolidated statements of loss and comprehensive loss. At June 30, 2023, the weighted average amortization period remaining for intangible assets was 5.7 years. At June 30, 2023, the estimated future amortization expense related to intangible assets is as follows:
The Company's goodwill is assigned to the following reporting units:
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IMPAIRMENT OF ASSETS |
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| Impairment Of Assets [Abstract] | |
| IMPAIRMENT OF ASSETS [Text Block] |
10. IMPAIRMENT OF ASSETS Goodwill The Company tests its goodwill for impairment as part of its annual fourth quarter impairment test, and at interim periods when impairment indicators exist. The Company's goodwill is assigned to the reporting units associated with the original acquisition of those operations. At June 30, 2023, the Company determined that indicators were present for its JustCBD and FGH reporting units due to the Company's declining share price, the declining share price of comparable public companies and challenging economic factors making it difficult to access capital. As such, the Company tested the JustCBD reporting unit for impairment as at June 30, 2023 and determined that the carrying value of the reporting unit's assets exceeded the recoverable amount, resulting in goodwill impairment of $19.6 million recorded in the first half of fiscal 2023 within the Company's house of brands segment. The impairment is recorded in the asset impairment caption on the unaudited condensed interim consolidated statements of loss and comprehensive loss. The reporting unit's fair value was determined based on an income approach discounted cash flow model of $7.8 million. The income approach used a discount rate of 32%, operating margins from 3% to 9%, working capital requirements of 10% revenue, and a terminal period growth rate of 3%. The revenue growth rates start at 17% in 2023 and drop down to 3% in 2024 and thereafter. Likewise, the Company tested the FGH reporting unit for impairment as at June 30, 2023 and determined that the carrying value of the reporting unit's assets exceeded the recoverable amount, resulting in goodwill impairment of $3.7 million recorded in the first half of fiscal 2023 within the Company's commercial and wholesale segment. The impairment is recorded in the asset impairment caption on the unaudited condensed interim consolidated statements of loss and comprehensive loss. The reporting unit's fair value was determined based on an income approach discounted cash flow model of $2.3 million. The income approach used a discount rate of 17%, operating margins of about 2%, working capital requirements of 6% revenue, and a terminal period growth rate of 2%. The revenue growth rates start at 5% in 2023 and trend down to 2% in 2028 and thereafter. Long-lived assets For asset groups that had indicators of impairment, the Company performed a quantitative analysis as of June 30, 2023 to determine if impairment existed by comparing the carrying amount of each asset to the future undiscounted cash flows the asset is expected to generate over their remaining lives. This analysis indicated that certain asset values may not be recoverable. The Company then calculated the fair value of these assets using an income approach. As a result, the Company recorded an impairment of property, plant and equipment, operating lease right of use assets, customer relationships, trademarks, patents and non-compete agreements within its Vessel asset group within the house of brands segment totaling $6.6 million. Likewise, the Company recorded an impairment of supplier relationships, customer relationships and licenses within its FGH asset group within the commercial and wholesale segment totaling $3.7 million. Finally, the Company recorded an impairment of customer relationships, trademarks and patents within its JustCBD asset group within the house of brands segment totaling $0.4 million. These charges were recorded in the asset impairment caption on the unaudited condensed interim consolidated statements of loss and comprehensive loss. |
DEBT |
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| Debt Disclosure [Abstract] | |
| DEBT [Text Block] |
11. DEBT Euro credit facility The Company, through FGH, has a credit facility for 1.0 million Euro with Hypoverinsbank, secured by the trade and other receivables of one of the subsidiaries of FGH. As of June 30, 2023, the outstanding amount was 1.0 million Euros ($1.1 million USD). The credit facility has a rate of Euro Interbank Offer Rate ("Euribor") plus 2.95% per year and was originally due January 10, 2023. The Company and the bank agreed to renew the credit facility on January 10, 2023, under the same terms. The interest on the credit facility resets every two months and the interest on the outstanding balance is paid monthly. There arrangement is open ended without a predetermined maturity date. JustCBD insurance premium loan The Company, through JustCBD, entered into a loan agreement for $0.2 million with ClassicPlan Premium Financing, Inc, to finance the purchase of certain insurance policies. The loan is secured by the insurance policies, including all rights to cancel and to receive all unearned premiums, commissions, broker fees and other refunds arising out of these policies. As of June 30, 2023, the outstanding amount was $0.1 million. The loan has a rate of 10.1% per year and is due December 8, 2023. The Company makes monthly principal and interest payments of less than $0.1 million.
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LEASES |
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| LEASES [Text Block] |
12. LEASES
The Company's leases primarily consist of administrative real estate leases in Germany and the United States. Management has determined all the Company's leases are operating leases through June 30, 2023. Information regarding the Company's leases is as follows:
Maturities of operating lease liabilities as of June 30, 2023 are as follows:
Most of the Company’s leases contain renewal options to continue the leases for another term equivalent to the original term, which are generally up to two years. The lease liabilities above include renewal terms that management has executed or is reasonably certain of renewing, which only included leases that would have expired in 2023. |
SHARE CAPITAL |
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| Stockholders' Equity Note [Abstract] | |
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13. SHARE CAPITAL Authorized and issued The Company is authorized to issue an unlimited number of common shares, no par value. The Company had the following significant common share transactions: Six months ended June 30, 2023 REVERSE STOCK SPLIT On June 7, 2023, the Company filed an amendment to its Articles of Incorporation (the "Reverse Stock Split Articles Amendment") with the Ontario Ministry of Public and Business Service Delivery to effect a reverse stock split of the Company's common shares, no par value per share (the "common shares"), at a ratio of 1-for-20, which became effective at 12:00:01 a.m. Eastern Time on June 9, 2023 (the "Reverse Stock Split"). Upon the effectiveness of the Reverse Stock Split, every twenty shares of the issued and outstanding common shares were automatically combined and reclassified into one issued and outstanding common share. The Reverse Stock Split did not affect any shareholder's ownership percentage of the common shares, alter the par value of the common shares or modify any voting rights or other terms of the common shares. The number of authorized shares of common shares under the Company's Articles remained unchanged. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional interest as a result of the Reverse Stock Split was rounded down to the nearest whole common share. All common shares and per share amounts have been restated to give retroactive effect to the share consolidation. OTHER ISSUANCES On January 31, 2023, the Company entered into a settlement agreement with a third party pursuant to which the Company issued 16,250 common shares of the Company, valued at $0.1 million, to a third party to settle a legal dispute that arose in April 2019. See Note 16. On April 12, 2023, Luis Merchan tendered his resignation as both Chairman of the Board of Directors of the Company and as its Chief Executive Officer. On this date, the Company entered into a separation agreement with Mr. Merchan, pursuant to which the Company issued 80,000 common shares of the Company, valued at $0.4 million, on April 26, 2023, and 30,000 common shares of the Company, valued at $0.1 million, on May 14, 2023 to Mr. Merchan. |
SHARE BASED COMPENSATION |
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| SHARE BASED COMPENSATION [Text Block] |
14. SHARE BASED COMPENSATION The Company's 2022 Incentive Compensation Plan (the "2022 Plan") and its previous "'rolling" stock option plan (the "Prior Plan") are described in the Company's 2022 Form 10-K. OPTIONS Stock options granted under the Prior Plan are non-transferable and non-assignable and may be granted for a term not exceeding five years. Under the 2022 Plan, stock options may be granted with a term of up to ten years and in the case of all stock options, the exercise price may not be less than 100% of the fair market value of a Common Share on the date the award is granted. Stock option vesting terms are subject to the discretion of the Compensation Committee of the Company's Board of Directors. Common shares are newly issued from available authorized shares upon exercise of awards. The Company no longer makes new grants of stock options under the Prior Plan. Information relating to share options outstanding and exercisable as at June 30, 2023 and December 31, 2021 is as follows:
The total benefit related to the options granted in the three and six months ended June 30, 2023 was ($0.2) million and less than ($0.1) million, respectively (2022 total expense - $1.3 million and $2.8 million, respectively). The benefit is the result of non-vested options cancelled during the period. This (benefit) expense is included in the share-based compensation line on the statement of comprehensive loss. Generally, the options granted in 2023 and 2022 vest one to two years following the date of grant provided that the recipient is still employed or engaged by the Company. At June 30, 2023 the total remaining stock option cost for nonvested awards is expected to be $0.1 million over a weighted average future period of 1.2 years until the awards vest. See Note 20 for subsequent forfeiture of options. RESTRICTED STOCK AWARDS Information relating to restricted stock awards outstanding as at June 30, 2023 and December 31, 2022:
The total expense related to the restricted stock awards in the three and six months ended June 30, 2023 was $0.1 million and $0.6 million (2022 - ). This expense is included in the share based compensation line on the unaudited condensed interim consolidated statements of loss and comprehensive loss. The outstanding restricted stock awards vest over the next three years provided the award holder is still employed or engaged by the Company. As of June 30, 2023, the Company had $0.2 million of unrecognized compensation expense related to restricted stock awards which will be recognized over the next three years. See Note 20 for subsequent forfeiture of restricted share awards. |
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WARRANTS |
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| WARRANTS [Text Block] |
15. WARRANTS The following summarizes the number of warrants outstanding as of June 30, 2023:
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COMMITMENTS AND CONTINGENCIES |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COMMITMENTS AND CONTINGENCIES [Text Block] |
16. COMMITMENTS AND CONTINGENCIES Provisions The Company's current known provisions and contingent liabilities consist of the following as of June 30, 2023:
The legal disputes balance as of June 30, 2023 involves a former shareholder of ACA Muller, an entity that was part of the Company's acquisition of FGH in December 2022, who filed a statement of claim against a wholly owned subsidiary of the Company in the Constance Regional Court in Germany. While the Company believes that this claim is without merit, at this time the Company believes it is probable that a liability has been incurred and the Company is able to reasonably estimate the loss of $3.0 million. As a result, without acknowledgement (explicitly or implicitly) of any amount of liability arising from this claim, the Company recognized a provision of $3.0 million to reflect the value of the claim. This dispute is covered under the indemnification agreement between the Company and the former Chief Executive Officer and shareholder of FGH as discussed in Note 8. The Company intends to vigorously defend itself through appropriate legal proceedings. The $3.0 million is recorded within contingencies and within indemnification receivables on the unaudited condensed interim consolidated statements of financial. The Sales tax relates to estimated amounts owed to certain jurisdictions in the Unites States for sales from the Company's JustCBD operations. The ending balance is recorded within contingencies on the unaudited condensed interim consolidated statement of financial position, and additions to the provision as a reduction of revenue on the unaudited condensed interim consolidated statements of loss and comprehensive loss. Legal proceedings The Company records liabilities for legal proceedings in those instances where it can reasonably estimate the amount of the loss and where liability is probable. The Company is engaged from time-to-time in various legal proceedings and claims that have arisen in the ordinary course of business. The outcome of all the proceedings and claims against the Company is subject to future resolution, including the uncertainties of litigation. Based on information currently known to the Company and after consultation with outside legal counsel, management believes that the probable ultimate resolution of any such proceedings and claims, individually or in the aggregate, will not have a material adverse effect on the financial condition of the Company, taken as a whole as at June 30, 2023. On June 21, 2022, an action was brought against the Company in the Ontario Superior Court of Justice by Gerardo Andres Garcia Mendez claiming that the Company is obligated to issue 3.0 million (pre-one-for three reverse stock split) common shares to him for a purchase price of $0.05 per share. Mr. Mendez claims he is entitled to such shares as a result of alleged consulting services he performed in 2019. The Company disputes his claims and intends to vigorously defend against this action. The Company believes that an unfavorable settlement in this matter is remote, and, as such, has not accrued a liability as of June 30, 2023. In connection with the Company's acquisition of FGH, the former Chief Executive Officer of FGH, together with certain affiliated entities under his control, entered into an agreement pursuant to which they agreed to indemnify the Company for certain potential liabilities of FGH and its subsidiaries, up to a maximum of $5.0 million. In addition to the matter regarding the former shareholder of ACA Mueller, discussed above, the following actions are pending as of the date hereof: On February 3, 2023, an action was brought in the Ontario Superior Court of Justice by Nathan Shantz and Liberacion e Inversiones S.A. against various parties including Clifford Starke, FGH's former Chief Executive Officer, and FGH. The statement of claim alleges that, prior to the closing of the Arrangement, 8,831,109 FGH shares purportedly owned by the plaintiffs were wrongfully transferred to third parties by Mr. Starke. FGH has been named as a defendant by virtue of the alleged wrongful conduct by Mr. Starke. The plaintiffs are seeking damages of $3.9 million. The defendants have all brought motions to stay the proceedings on the grounds that the Ontario court lacks jurisdiction over the claim. In the event FGH should incur any losses in connection with this matter, such losses are to be indemnified by Mr. Starke subject to the maximum threshold of the indemnity agreement. The total amount claimed against the former entities of FGH currently exceeds the maximum $5.0 million of the indemnification agreement. However, the Company is estimating the likelihood of loss in these cases will not exceed $5.0 million. |
LOSS PER SHARE |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| LOSS PER SHARE [Text Block] |
17. LOSS PER SHARE The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive as the Company has a net loss for each period presented:
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FINANCIAL INSTRUMENTS |
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| Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FINANCIAL INSTRUMENTS [Text Block] |
18. FINANCIAL INSTRUMENTS Fair value The Company's financial instruments measured at amortized cost as at June 30, 2023 and December 31, 2022 consist of cash, trade and amounts receivable, loans receivable, trade payables, contingencies, accrued liabilities, lease liabilities, and debt and loans payable. The amounts reflected in the unaudited condensed interim consolidated statements of financial position approximate fair value due to the short-term maturity of these instruments. Financial instruments recorded at the reporting date at fair value are classified into one of three levels based upon the fair value hierarchy. Items are categorized based on inputs used to derive fair value based on: Level 1 - quoted prices that are unadjusted in active markets for identical assets or liabilities Level 2 - inputs other than quoted prices included in level 1 that are observable for the asset/liability either directly or indirectly; and Level 3 - inputs for the instruments are not based on any observable market data. The Company's long-term investments require significant unobservable inputs and as discussed at Note 7, are measured at FVPL and as a Level 3 fair value financial instrument within the fair value hierarchy as at June 30, 2023. As discussed in Note 8, the Company's contingent purchase considerations consist of the estimated fair value of contingent purchase consideration from the acquisitions of JustCBD in February 2022, NoCap in July 2022 and Original Hemp in March 2023. The amount is measured at FVPL as a Level 2 fair value financial instrument within the fair value hierarchy as at June 30, 2023. As valuations of investments for which market quotations are not readily available are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Such changes may have a significant impact on the Company's financial condition or operating results. The following tables present information about the Company's financial instruments and their classifications as at June 30, 2023 and December 31, 2022 and indicate the fair value hierarchy of the valuation inputs utilized to determine such fair value.
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SEGMENTED INFORMATION |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SEGMENTED INFORMATION [Text Block] |
19. SEGMENTED INFORMATION The Company reports its financial results for the following three operating segments, which are also its reportable segments: commercial and wholesale (primarily FGH and Cosechemos subsidiaries), house of brands (primarily JustCBD, Vessel and Kasa Wholefoods Company subsidiaries), and pharmaceuticals (primarily Grupo Farmaceutico Cronomed and Breeze Laboratory subsidiaries). These segments reflect how the Company's operations are managed, how the Company Chief Executive Officer, who is the chief operating decision maker, allocates resources and evaluates performance, and how the Company's internal management financial reporting is structured. The Company's operates its manufacturing and distribution business in its United States, Germany, and Colombia subsidiaries. The Company also was engaged in the growth, cultivation, and development of medicinal cannabis and medicinal cannabis derivative products through its Colombia Cosechemos subsidiary. Management has defined the reportable segments of the Company based on this internal business unit reporting, which is by major product line, and aggregates similar businesses into the house of brands segment below. The Corporate segment reflects balances and expenses that do not directly influence business unit operations. Information regarding the Company's segments is summarized as follows:
Disaggregation of net sales by geographic area:
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SUBSEQUENT EVENTS |
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Jun. 30, 2023 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS [Text Block] |
20. SUBSEQUENT EVENTS SALE OF COLOMBIA ENTITIES On July 5, 2023, the Company entered into a Share Purchase Agreement with Lisan Farma Colombia LLC ("Lisan"), a Delaware limited liability company, to sell all of its shares in certain Colombian companies and other Flora assets related to its Colombian operations for a purchase price of CAD $0.8 million (USD $0.6 million). The Company sold all of its shares and assets related to the following Colombian companies and branches:
The applicable capital stock of the Colombian entities will be transferred to Lisan at the date of closing. All assets underlying this sale are expected to be transferred to Lisan on an "as is where is" basis within the next 30 days. See discussion in Note 3. OTHER Subsequent to June 30, 2023, a total of 4,000 restricted shares were forfeited and a total of 51,432 options were forfeited. |
BASIS OF PRESENTATION (Policies) |
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Jun. 30, 2023 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Going concern [Policy Text Block] |
Going concern The accompanying unaudited interim condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. The going concern basis of presentation assumes that the Company will continue one year after the date these unaudited condensed interim consolidated financial statements are issued and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business. The Company had cash of $1.8 million at June 30, 2023, net loss of $48.5 million for the six months ended June 30, 2023, and an accumulated deficit of $138.3 million at June 30, 2023. Current economic and market conditions have put pressure on the Company's growth plans. The Company's ability to continue as a going concern is dependent on its ability to obtain additional capital. The Company believes that its current level of cash is not sufficient to continue investing in growth, while at the same time meeting its obligations as they become due. These conditions raise substantial doubt regarding the Company's ability to continue as a going concern for a period of at least one year from the date of issuance of these interim condensed consolidated financial statements. To alleviate these conditions, management is currently evaluating various cost reductions and other alternatives and may seek to raise additional funds through the issuance of equity, debt securities, through arrangements with strategic partners, through obtaining credit from financial institutions or otherwise. The actual amount that the Company may be able to raise under these alternatives will depend on market conditions and other factors. As it seeks additional sources of financing, there can be no assurance that such financing would be available to the Company on favorable terms or at all. The Company's ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including but not limited to market and economic conditions, the Company's performance and investor sentiment with respect to it and its industry. The unaudited condensed interim consolidated financial statements do not include any adjustments for the recovery and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. |
| Basis of consolidation [Policy Text Block] |
Basis of consolidation These unaudited condensed interim consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions were eliminated on consolidation. Subsidiaries are entities the Company controls when it is exposed, or has rights, to variable returns from its involvement in the entity and can affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are included in the consolidated financial results of the Company from the date of acquisition up to the date of disposition or loss of control. The Company's subsidiaries and respective ownership percentage have not changed from the year ended December 31, 2022. On July 5, 2023, the Company sold its shares in its Colombian related subsidiaries. The results of these subsidiaries are included in discontinued operations in the accompanying unaudited condensed interim consolidated financial statements. See discussion in Note 3. |
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Tables) |
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| Schedule of major classes of assets and liabilities held for sale [Table Text Block] |
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| Schedule of loss from discontinued operations [Table Text Block] |
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| Schedule of significant operating and investing items [Table Text Block] |
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TRADE AND AMOUNTS RECEIVABLE (Tables) |
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| Schedule of trade and amounts receivable [Table Text Block] |
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| Schedule of aging of trade accounts receivable [Table Text Block] |
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INVENTORY (Tables) |
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| Schedule of inventory [Table Text Block] |
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PROPERTY PLANT AND EQUIPMENT (Tables) |
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| Schedule of property, plant and equipment [Table Text Block] |
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INVESTMENTS (Tables) |
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ASSET ACQUISITIONS AND BUSINESS COMBINATIONS (Tables) |
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| Schedule of major class of assets acquired and liabilities [Table Text Block] |
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| Schedule of major class of assets acquired and liabilities [Table Text Block] |
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| Schedule of major class of assets acquired and liabilities [Table Text Block] |
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| Schedule of major class of assets acquired and liabilities [Table Text Block] |
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INTANGIBLE ASSETS AND GOODWILL (Tables) |
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| Schedule of intangible assets [Table Text Block] |
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| Schedule of estimation of amortization expense [Table Text Block] |
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| Schedule of goodwill [Table Text Block] |
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LEASES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of leases [Table Text Block] |
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| Schedule of maturities of operating lease liabilities [Table Text Block] |
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SHARE BASED COMPENSATION (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of share options outstanding and exercisable [Table Text Block] |
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| Schedule of restricted stock awards [Table Text Block] |
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WARRANTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrants [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of warrants outstanding [Table Text Block] |
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| Schedule of warrants outstanding by date of expiry [Table Text Block] |
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COMMITMENTS AND CONTINGENCIES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of provisions and contingent liabilities [Table Text Block] |
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LOSS PER SHARE (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| Schedule of anti-dilutive shares [Table Text Block] |
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FINANCIAL INSTRUMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Instruments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of information about the financial instruments and their classifications [Table Text Block] |
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SEGMENTED INFORMATION (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of operation segment information [Table Text Block] |
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| Schedule of disaggregation of net sales by geographic area [Table Text Block] |
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BASIS OF PRESENTATION (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
| Cash | $ 1,800 | $ 1,800 | ||
| Net loss | (44,556) | $ (24,672) | (48,461) | $ (32,302) |
| Accumulated deficit | $ (138,300) | $ (138,300) | ||
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Narrative) (Details) $ in Millions, $ in Millions |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
|
Aug. 03, 2023
CAD ($)
|
Jul. 05, 2023
CAD ($)
|
Jul. 05, 2023
USD ($)
|
Jun. 30, 2023
USD ($)
|
Jun. 30, 2023
USD ($)
|
|
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
| Loss on disposal of discontinued operations | $ 1.9 | $ 1.9 | |||
| Subsequent Event [Member] | Share Purchase Agreement [Member] | Lisan Farma Colombia LLC [Member] | |||||
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
| Purchase price | $ 0.5 | $ 0.8 | $ 0.6 | ||
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS (Schedule of significant operating and investing items) (Details) - Discontinued Operations, Held-for-Sale [Member] - Share Purchase Agreement [Member] - Lisan Farma Colombia Llc [Member] - Colombian related subsidiaries and Colombian assets [Member] - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Operating Activities Of Discontinued Operations [Abstract] | ||||
| Depreciation and amortization | $ 148 | $ 296 | ||
| Bad debt expense | $ 565 | $ 150 | 565 | 150 |
| Asset impairment | $ 4,704 | $ 0 | 4,704 | 0 |
| Investing Activities Of Discontinued Operations [Abstract] | ||||
| Purchases of property, plant and equipment | $ 92 | $ 579 | ||
TRADE AND AMOUNTS RECEIVABLE (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2023 |
|
| Trade And Other Receivables [Abstract] | ||
| Write-offs of trade receivables | $ 0.1 | $ 0.1 |
TRADE AND AMOUNTS RECEIVABLE (Schedule of trade and other receivables) (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Trade And Other Receivables [Abstract] | ||
| Trade accounts receivable | $ 3,894 | $ 4,288 |
| Allowance for expected credit losses | (1,346) | (1,385) |
| HST/VAT receivable | 2,126 | 2,294 |
| Other receivables | 180 | 62 |
| Total | $ 4,854 | $ 5,259 |
TRADE AND AMOUNTS RECEIVABLE (Schedule of aging of trade accounts receivable) (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Financing Receivable, Past Due [Line Items] | ||
| Total trade receivables | $ 3,894 | $ 4,288 |
| Current [Member] | ||
| Financing Receivable, Past Due [Line Items] | ||
| Total trade receivables | 672 | |
| 1-30 Days [Member] | ||
| Financing Receivable, Past Due [Line Items] | ||
| Total trade receivables | 924 | |
| 31-60 Days [Member] | ||
| Financing Receivable, Past Due [Line Items] | ||
| Total trade receivables | 432 | |
| 61-90 Days [Member] | ||
| Financing Receivable, Past Due [Line Items] | ||
| Total trade receivables | 197 | |
| 91-180 Days [Member] | ||
| Financing Receivable, Past Due [Line Items] | ||
| Total trade receivables | 570 | |
| 180+ Days [Member] | ||
| Financing Receivable, Past Due [Line Items] | ||
| Total trade receivables | $ 1,099 |
INVENTORY (Schedule of inventory) (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Raw materials and supplies | $ 1,669 | $ 2,363 |
| Finished goods | 7,015 | 6,384 |
| Total | $ 8,684 | $ 8,747 |
PROPERTY PLANT AND EQUIPMENT (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| PROPERTY PLANT AND EQUIPMENT | ||||
| Depreciation expense | $ 0.1 | $ 0.1 | $ 0.1 | $ 0.1 |
| Impairment of property plant and equipment | $ 0.2 | $ 0.2 | ||
PROPERTY PLANT AND EQUIPMENT (Schedule of property, plant and equipment) (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment | $ 1,136 | $ 1,426 |
| Less: accumulated depreciation | (185) | (208) |
| Property, plant and equipment, net | 951 | 1,218 |
| Land [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment | 296 | 291 |
| Buildings [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment | 0 | 0 |
| Machinery and office equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment | 759 | 1,098 |
| Vehicles [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property, plant and equipment | $ 81 | $ 37 |
INVESTMENTS (Narrative) (Details) $ in Millions |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
USD ($)
| |
| INVESTMENTS | |
| Investment description | The Company owned approximately 9.6% of the investee, or approximately 9% on a diluted basis including exercisable warrants of other investors. |
| Description of impairment | The initial investment multiples were compared to the guideline public company multiples observed as at June 30, 2023 (0.4 price to book value and 0.5 price to tangible value), with these updated valuation multiples applied to the investee's estimated book value. |
| Impairment of investment | $ 0.5 |
INVESTMENTS (Schedule of investments activity) (Details) - Level 3 [Member] $ in Thousands |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
USD ($)
| |
| Investments in and Advances to Affiliates, Activity [Line Items] | |
| Investments, Beginning Balance | $ 764 |
| Loss on changes in fair value | (564) |
| Investments, Ending Balance | 200 |
| Investee Common Shares [Member] | |
| Investments in and Advances to Affiliates, Activity [Line Items] | |
| Investments, Beginning Balance | 730 |
| Loss on changes in fair value | (530) |
| Investments, Ending Balance | 200 |
| Warrants CAD 0.30 [Member] | |
| Investments in and Advances to Affiliates, Activity [Line Items] | |
| Investments, Beginning Balance | 34 |
| Loss on changes in fair value | (34) |
| Investments, Ending Balance | 0 |
| Warrants CAD 1.00 [Member] | |
| Investments in and Advances to Affiliates, Activity [Line Items] | |
| Investments, Beginning Balance | 0 |
| Loss on changes in fair value | 0 |
| Investments, Ending Balance | $ 0 |
INTANGIBLE ASSETS AND GOODWILL (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Goodwill and Intangible Assets Disclosure [Abstract] | ||||
| Amortization expense | $ 800 | $ 300 | $ 1,599 | $ 900 |
| Weighted average amortization period remaining for intangible assets | 5 years 8 months 12 days | 5 years 8 months 12 days | ||
INTANGIBLE ASSETS AND GOODWILL (Schedule of estimation of amortization expense) (Details) $ in Thousands |
Jun. 30, 2023
USD ($)
|
|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| 2023 | $ 587 |
| 2024 | 1,173 |
| 2025 | 1,109 |
| 2026 | 1,096 |
| 2027 | 1,032 |
| Thereafter | 720 |
| Finite-Lived Intangible Assets, Net, Total | $ 5,717 |
INTANGIBLE ASSETS AND GOODWILL (Schedule of goodwill) (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Goodwill [Line Items] | ||
| Gross goodwill | $ 48,445 | |
| Impairment recorded | $ (23,372) | (25,073) |
| Net book value | 0 | 23,372 |
| Vessel [Member] | ||
| Goodwill [Line Items] | ||
| Gross goodwill | 19,675 | |
| Impairment recorded | 0 | (19,675) |
| Net book value | 0 | 0 |
| JustCBD [Member] | ||
| Goodwill [Line Items] | ||
| Gross goodwill | 25,038 | |
| Impairment recorded | (19,640) | (5,398) |
| Net book value | 0 | 19,640 |
| Franchise [Member] | ||
| Goodwill [Line Items] | ||
| Gross goodwill | 3,732 | |
| Impairment recorded | (3,732) | 0 |
| Net book value | $ 0 | $ 3,732 |
IMPAIRMENT OF ASSETS (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Goodwill [Line Items] | ||||
| Impairments | $ 34,941 | $ 15,652 | $ 34,941 | $ 15,652 |
| JustCBD [Member] | Goodwill [Member] | ||||
| Goodwill [Line Items] | ||||
| Goodwill impairment | 19,600 | |||
| Fair value of reporting unit | 7,800 | $ 7,800 | ||
| Income approach, operating margins, description | The income approach used a discount rate of 32%, operating margins from 3% to 9%, working capital requirements of 10% revenue, and a terminal period growth rate of 3%. The revenue growth rates start at 17% in 2023 and drop down to 3% in 2024 and thereafter. | |||
| JustCBD [Member] | House of Brands Segment [Member] | ||||
| Goodwill [Line Items] | ||||
| Impairments | $ 400 | |||
| FGH [Member] | Goodwill [Member] | ||||
| Goodwill [Line Items] | ||||
| Goodwill impairment | 3,700 | |||
| Fair value of reporting unit | $ 2,300 | $ 2,300 | ||
| Income approach, operating margins, description | The income approach used a discount rate of 17%, operating margins of about 2%, working capital requirements of 6% revenue, and a terminal period growth rate of 2%. The revenue growth rates start at 5% in 2023 and trend down to 2% in 2028 and thereafter. | |||
| FGH [Member] | Commercial and Wholesale Segment [Member] | ||||
| Goodwill [Line Items] | ||||
| Impairments | $ 3,700 | |||
| Vessel Asset Group [Member] | House of Brands Segment [Member] | ||||
| Goodwill [Line Items] | ||||
| Impairments | $ 6,600 | |||
DEBT (Narrative) (Details) € in Millions, $ in Millions |
6 Months Ended | ||
|---|---|---|---|
|
Jun. 30, 2023
EUR (€)
|
Jun. 30, 2023
USD ($)
|
Jun. 30, 2023
USD ($)
|
|
| Hypoverinsbank [Member] | Euro Credit Facility [Member] | |||
| Line of Credit Facility [Line Items] | |||
| Credit facility | € | € 1.0 | ||
| Outstanding amount | € 1.0 | $ 1.1 | |
| Line of credit facility, interest rate description | The credit facility has a rate of Euro Interbank Offer Rate ("Euribor") plus 2.95% per year | The credit facility has a rate of Euro Interbank Offer Rate ("Euribor") plus 2.95% per year | |
| ClassicPlan Premium Financing [Member] | JustCBD insurance premium loan [Member] | |||
| Line of Credit Facility [Line Items] | |||
| Loan agreement, face amount | $ 0.2 | ||
| Loans payable | $ 0.1 | ||
| Loan agreement, interest rate | 10.10% | 10.10% | |
| Principal and interest payments | $ 0.1 | ||
LEASES (Schedule of leases) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Leases [Abstract] | ||||
| Operating lease expense | $ 308 | $ 136 | $ 624 | $ 327 |
| Short-term lease expense | 62 | 82 | 135 | 233 |
| Total lease expense | 370 | 218 | 759 | 560 |
| Other Information | ||||
| Operating cash flows from operating leases | 356 | 216 | 720 | 489 |
| ROU assets obtained in exchange for new operating lease liabilities | $ 0 | $ 2,097 | $ 97 | $ 2,825 |
| Weighted-average remaining lease term in years for operating leases | 3 years 4 months 24 days | 4 years 6 months | 3 years 4 months 24 days | 4 years 6 months |
| Weighted-average discount rate for operating leases | 7.70% | 8.10% | 7.70% | 8.10% |
LEASES (Schedule of maturities of operating lease liabilities) (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Leases [Abstract] | ||
| 2023 | $ 1,234 | |
| 2024 | 425 | |
| 2025 | 396 | |
| 2026 | 321 | |
| 2027 | 48 | |
| Total future lease payments | 2,424 | |
| Less: imputed interest | (247) | |
| Total lease liabilities | 2,177 | |
| Less: current lease liabilities | (1,124) | $ (1,116) |
| Total non-current lease liabilities | $ 1,053 | $ 1,561 |
SHARE CAPITAL (Narrative) (Details) - USD ($) $ in Millions |
1 Months Ended | |||
|---|---|---|---|---|
Jun. 07, 2023 |
May 14, 2023 |
Apr. 26, 2023 |
Jan. 31, 2023 |
|
| Capital Unit [Line Items] | ||||
| Reverse stock split | On June 7, 2023, the Company filed an amendment to its Articles of Incorporation (the "Reverse Stock Split Articles Amendment") with the Ontario Ministry of Public and Business Service Delivery to effect a reverse stock split of the Company's common shares, no par value per share (the "common shares"), at a ratio of 1-for-20, which became effective at 12:00:01 a.m. Eastern Time on June 9, 2023 (the "Reverse Stock Split"). | |||
| Settlement Agreement [Member] | ||||
| Capital Unit [Line Items] | ||||
| Number of common shares shares issued | 16,250 | |||
| Value of common shares shares issued | $ 0.1 | |||
| Separation Agreement [Member] | ||||
| Capital Unit [Line Items] | ||||
| Number of common shares shares issued | 30,000 | 80,000 | ||
| Value of common shares shares issued | $ 0.1 | $ 0.4 | ||
SHARE BASED COMPENSATION (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
| Options [Member] | |||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||
| Expense (benefit) related to options granted | $ (0.2) | $ 1.3 | $ (0.1) | $ 2.8 | |
| Remaining stock option cost for nonvested awards | 0.1 | $ 0.1 | |||
| Remaining weighted average vesting period | 1 year 2 months 12 days | ||||
| Restricted Stock Awards [Member] | |||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||||
| Restricted stock awards expense | 0.1 | $ 0.6 | |||
| Remaining stock option cost for nonvested awards | $ 0.2 | $ 0.2 | |||
SHARE BASED COMPENSATION (Schedule of restricted stock awards) (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
$ / shares
shares
| |
| Share-Based Payment Arrangement [Abstract] | |
| Number of restricted stock awards, Beginning Balance | shares | 146 |
| Number of restricted stock awards, Granted | shares | 112 |
| Number of restricted stock awards, Vested | shares | (38) |
| Number of restricted stock awards, Cancelled | shares | (155) |
| Number of restricted stock awards, Ending Balance | shares | 65 |
| Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 13.64 |
| Weighted Average Exercise Price, Granted | $ / shares | 5.85 |
| Weighted Average Exercise Price, Vested | $ / shares | (13.74) |
| Weighted Average Exercise Price, Cancelled | $ / shares | (9.17) |
| Weighted Average Exercise Price, Ending Balance | $ / shares | $ 11.22 |
WARRANTS (Schedule of warrants outstanding) (Details) |
6 Months Ended |
|---|---|
|
Jun. 30, 2023
$ / shares
shares
| |
| Class of Warrant or Right [Line Items] | |
| Number of warrants Balance, Ending | 960 |
| Warrants [Member] | |
| Class of Warrant or Right [Line Items] | |
| Number of warrants Balance, Beginning | 961 |
| Exercised | (1) |
| Number of warrants Balance, Ending | 960 |
| Weighted average exercise price, Beginning Balance | $ / shares | $ 24.84 |
| Weighted average exercise price, Exercised | $ / shares | 8 |
| Weighted average exercise price, Ending Balance | $ / shares | $ 24.84 |
COMMITMENTS AND CONTINGENCIES (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | 6 Months Ended | |
|---|---|---|---|
Feb. 03, 2023 |
Jun. 21, 2022 |
Jun. 30, 2023 |
|
| Schedule Of Commitments And Contingencies [Line Items] | |||
| Loss contingency provision | $ 389 | ||
| Additional Legal Disputes [Member] | |||
| Schedule Of Commitments And Contingencies [Line Items] | |||
| Estimate of possible loss | 3,000 | ||
| Loss contingency provision | 3,000 | ||
| Gerardo Andres Garcia Mendez [Member] | |||
| Schedule Of Commitments And Contingencies [Line Items] | |||
| Number of shares to be issued pre-one-for three reverse stock split | 3,000,000 | ||
| Purchase price per share | $ 0.05 | ||
| Franchise Global Health Inc [Member] | |||
| Schedule Of Commitments And Contingencies [Line Items] | |||
| Maximum limit of indemnification agreement | $ 5,000 | ||
| Mr Starke [Member] | |||
| Schedule Of Commitments And Contingencies [Line Items] | |||
| Wrongfully transferred shares | 8,831,109 | ||
| Value of damages sought | $ 3,900 |
LOSS PER SHARE (Schedule of anti-dilutive shares) (Details) - shares |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total anti-dilutive | 1,902 | 2,054 |
| Stock Options [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total anti-dilutive | 220 | 290 |
| Warrants [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total anti-dilutive | 960 | 961 |
| Restricted Stock Awards [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total anti-dilutive | 65 | 146 |
| JustCBD potential additional shares to settle contingent consideration [Member] | ||
| Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
| Total anti-dilutive | 657 | 657 |
FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (Schedule of information about the financial instruments and their classifications) (Details) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
| Investments | $ 200 | $ 734 |
| Contingent purchase consideration from asset acquisitions and business combinations | 2,354 | 3,547 |
| Level 1 [Member] | ||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
| Investments | 0 | 0 |
| Contingent purchase consideration from asset acquisitions and business combinations | 0 | 0 |
| Level 2 [Member] | ||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
| Investments | 0 | 0 |
| Contingent purchase consideration from asset acquisitions and business combinations | 2,354 | 3,547 |
| Level 3 [Member] | ||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
| Investments | 200 | 734 |
| Contingent purchase consideration from asset acquisitions and business combinations | $ 0 | $ 0 |
SEGMENTED INFORMATION (Schedule of operation segments information) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
| Segment Reporting Information [Line Items] | |||||
| Net Sales | $ 21,460 | $ 8,943 | $ 40,779 | $ 13,144 | |
| Net Loss | (36,991) | (23,052) | (40,178) | (29,307) | |
| Assets | 30,479 | 30,479 | $ 80,987 | ||
| Commercial & Wholesale [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Net Sales | 10,797 | 0 | 18,755 | 0 | |
| Net Loss | (6,710) | 0 | (6,737) | 0 | |
| Assets | 11,129 | 11,129 | 22,225 | ||
| House of Brands [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Net Sales | 13,000 | 10,810 | 26,765 | 15,793 | |
| Net Loss | (28,763) | (17,354) | (29,118) | (18,016) | |
| Assets | 16,317 | 16,317 | 48,950 | ||
| Pharmaceuticals [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Net Sales | 0 | 0 | 0 | 0 | |
| Net Loss | (36) | 0 | (81) | 0 | |
| Assets | 1,159 | 1,159 | 3,313 | ||
| Corp & Eliminations [Member] | |||||
| Segment Reporting Information [Line Items] | |||||
| Net Sales | (2,337) | (1,867) | (4,741) | (2,649) | |
| Net Loss | (1,482) | $ (5,698) | (4,242) | $ (11,291) | |
| Assets | $ 1,874 | $ 1,874 | $ 6,499 | ||
SEGMENTED INFORMATION (Schedule of disaggregation of net sales by geographic area) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Segment Reporting Information [Line Items] | ||||
| Net Sales | $ 21,460 | $ 8,943 | $ 40,779 | $ 13,144 |
| UNITED STATES | ||||
| Segment Reporting Information [Line Items] | ||||
| Net Sales | 10,352 | 8,679 | 21,351 | 12,745 |
| GERMANY | ||||
| Segment Reporting Information [Line Items] | ||||
| Net Sales | 10,797 | 0 | 18,755 | 0 |
| UNITED KINGDOM | ||||
| Segment Reporting Information [Line Items] | ||||
| Net Sales | $ 311 | $ 264 | $ 673 | $ 399 |
SUBSEQUENT EVENTS (Narrative) (Details) - Subsequent Event [Member] $ in Millions, $ in Millions |
Aug. 03, 2023
CAD ($)
shares
|
Jul. 05, 2023
CAD ($)
|
Jul. 05, 2023
USD ($)
|
|---|---|---|---|
| Subsequent Event [Line Items] | |||
| Number of restricted shares forfeited | 4,000 | ||
| Number of options share forfeited | 51,432 | ||
| Share Purchase Agreement [Member] | Lisan Farma Colombia LLC [Member] | |||
| Subsequent Event [Line Items] | |||
| Purchase price | $ 0.5 | $ 0.8 | $ 0.6 |