StockWireNews
Could Flora Growth Corp. (FLGC) Be Run Ready Once Again Due To Recent Regulation Changes In Colombia?
August 29th
Good Morning,
We've got some time before Monday's opening bell, so let's ease into it.
I've been tracking a past champ closely and think it could be on the verge of making a major statement in the markets.
After undertaking some recent, game-changing corporate actions, this company could soon be at the forefront of the "Green Leaf" revolution.
The Best Part?
We know how explosive this profile can be from past experience.
Brought to your attention back for the morning of May 24th, this profile opened up that session at $3.58.
All it did from there was rocket approximately $17.00+ to a high of $21.45 on August 16th.
That vertical eruption resulted in this profile surging approximately 499% in just a few short months.
See what I mean? Explosive.
Now with it trading at around half of its recent 52-week high from the middle of this month, it may be hanging around undervalued levels at this very moment.
For Monday, August 30th, there is only one Nasdaq profile to have at the top of your radar:
*Flora Growth Corp. (NASDAQ: FLGC)*
Flora Growth Corp. (NASDAQ: FLGC) has recognized this Colombian opportunity and to put it quite simply, has pounced to create a low-cost cultivation operation that could provide them with a global footprint in the years to come.
Flora is a cann-a-bis company that will leverage natural, cost-effective cultivation practices to supply cann-a-bis derivatives to its diverse business divisions of cosmetics, he-mp textiles, and food and beverage.
As the operator of one of the largest outdoor cultivation facilities, Flora strives to market a higher-quality premium product at below market prices. By prioritizing natural ingredients and value-chain sustainability across its portfolio, Flora creates premium products that help consumers restore and thrive.
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New Colombian Regulation Further Increases Revenue Potential
The President of Colombia has accepted and signed into effect some exciting revisions related to the existing Colombian cann-a-bis laws which allow for the:
- Sale and export of raw cann-a-bis materials, namely dried flower, to international markets
- Manufacturing, sale, and export of ingestible cann-a-binoid products in Colombia
- Promotion and advertising of cann-a-bis brands and products in Colombia
These new regulations are expected to allow Flora to increase near-term and long-term revenue, optimize its product supply chain both domestically and abroad.(6)
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New $11.50 Price Target From MKM Partners
Highlights from the report:
1H21 Recap: Flora reported 1H21 revenue of $2mn with a 60% gross margin, generating a net loss of -$4mn (-$1mn adjusted for one-time expenses). Flora guided to 2H21 revenue of $9mn-$11mn exclusive of announced M&A (Heimat and Vessel with combined trailing 12 mo revenue of $14mn) and exclusive of dried flower shipments.
This organic guidance is a sharp acceleration led by Kasa Wholefoods/Tropi and Flora Lab/Flora Beauty. Importantly, these organic numbers ($9mn-$11mn) were above our initial estimates ($7.6mn in 2H). When we launched on Flora, our numbers did not include any changes to Colombian legislation, nor did they include contributions from M&A.
The deals, which could close shortly, and shipments of dried CB flower provide further upside to guidance (and our former numbers), setting the stage for run-rate annual revenue of >$40mn as Flora exits 2021. Importantly, it will take very little revenue growth for Flora to become profitable. At a 60% gross margin, Flora would need to generate just another $2mn in organic revenue to become profitable (assuming organic revenue doesn't carry much additional SG&A).
We are raising our 2H21 and FY22 estimates for better than expected organic growth (2H21 and FY22) and legislative changes (FY22 forward). We are now modeling $12mn (from $7.6mn) in 2H21 net sales and +$1.8mn in adjusted EBITDA (from $0.7mn).
With the higher estimates (incl. legislative changes) our price target is now $11.50 (from $6).
Find the full report here.
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Flora Growth Reports H1 2021 Financial Results and Provides Guidance for H2 Revenue Anticipated Between $9-11M USD
H1 2021 Financial Summary:
- Flora Growth generated revenues of +$2M with a gross profit of 60% (unaudited), as compared to revenues of ~$100K for 2020.
- Their operating expenses for the first half were $6M, yielding a net loss of $4M (unaudited). However, these results were heavily affected by almost $3M of one-time IPO related expenses (unaudited).
- At June 30, 2021, Flora’s cash balance was approximately $19M with minimal debt (unaudited).
- Subsequent to June 30th, they have been seeing a substantial cash inflow from the exercise of the warrants sold as part of the Regulation A. To date, they have received commitments of more than $10M (some unfunded), with $7.2M in cash received and an additional $1M pending clearing. They expect to see this amount continue to grow over the following weeks.
- Flora Growth is a foreign private issuer and is required to submit financial results on a half-year basis, with a 6-month window to file the unaudited results. Flora anticipates filing its full results with the SEC in the following weeks.
Q2 2021 Operational Highlights:
- Completed an IPO and successful public listing on the Nasdaq Capital Market exchange under the ticker symbol "FLGC"; Flora is the first known all-outdoor grower ever listed on the NASDAQ, the first cann-a-bis company to list via a traditional IPO on an American exchange, and has what management believes the largest licensed cultivation footprint in Colombia
- Announced intent to acquire 100 percent of Koch & Gsell, manufacturer of the leading Swiss he-mp and tobacco pre-roll brand Heimat
- Executed a strategic in-vest-ment of $2.4M into Hoshi International, opening up distribution of Flora’s product portfolio into the European Union ("EU")
- Expanded into U.K. and Central American markets with sales to new international distribution partners; bringing the total countries that Flora and its divisions currently have product in market to 13
- Bolstered board of directors and management team with key additions:
- Marc Mastronardi – Director
- Jason Warnock – Chief Revenue Officer
- Lee Leiderman – Chief Financial Officer
- Formed Science Advisory Team and began expansion of scientific and academic endeavors with key addition:
- Appointed Dr. Annabelle Manalo-Morgan, PhD, as Lead Scientific Advisor
- Made a commitment to environmental sustainability across the Flora value chain, including throughout cultivation and manufacturing practices, as well as screening all potential input materials, packaging, and social outcomes associated with each product in the portfolio
- Formed Flora Lab manufacturing division that operates a modern 16,000-square-ft manufacturing facility and holds multiple GMP certifications with a diversified portfolio including over 190 products and 63 over-the-counter ("OTC") products registered and licensed with INVIMA (FDA-equivalent in Colombia).
Operational Highlights Subsequent to Period End:
- Kasa Wholefoods., Flora’s food & beverage division, signed a sales agreement to supply food products to Colombia’s largest consumer packaged goods ("CPG") distributor, Tropi, which has 130,000+ distribution points across 38 cities in Colombia; Kasa has since completed its first purchase order valued at approximately $1.1M and expects this initial agreement to generate additional revenue of its CB and he-mp portfolio, expecting future sales to reach approximately $2M per month
- Announced intent to acquire 100 percent of Vessel Brand, an industry leader in luxury cann-a-bis consumer technology
- Announced intent to form a joint venture with Canadian based Avaria, the manufacturer and owner of KaLaya – an award-winning pain cream distributed nation-wide across Canada
- As a result of the reformed Colombian cann-a-bis legislation aimed at improving access to cann-a-bis products for Colombians and positioning Colombia as the leader to supply the global cann-a-bis market, Flora immediately announced that it had executed a Letter of Intent with Kiricann, an international distributor with operations in South Africa and distribution agreements in Germany and the EU, to provide its dried flower and derivatives; additionally, the Company announced plans for the manufacturing, sale, and distribution of CB-infused food and beverage products; further plans to increase awareness across its premium brand and product portfolio as a result of the loosened marketing restrictions; and, lastly plans to manufacture custom cann-a-bis pharmaceutical products for the Colombian medical cann-a-bis market
- Announced intent with Evergreen Pharmacare, a licensed Australian importer and distributor of medical cann-a-bis products, to supply its premium dried flower and derivative products to the Australian medical cann-a-bis and OTC CB markets
- Flora Beauty division formally launched Ô ("Awe"), its premium brand and product line designed and marketed by founding partner, trend-setter, and global beauty influencer Paulina Vega
Read the full article here.
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Colombia: A Potential Game-changer In The Global Cann-a-bis Industry (And How Flora Growth Corp. Could Benefit Greatly)
Long known for its illicit drug trade, Colombia is also a hotbed for agricultural businesses which include everything from coffee to bananas and cut flowers.
These commodities have made Colombia a force in the global market and cann-a-bis could be the next big economic breakout for this developing country.
Roughly 5 years ago, the Colombian government signed the 1787 bill into law. Law 1787 was created to regulate the use of medicinal cann-a-bis and its trade in the country.(4)
By doing this, Colombia joined a slew of other countries looking to explore the potential advantages of using cann-a-bis as an alternative to pharmaceuticals.
Legislators soon saw to create a legal framework allowing for cultivation, extraction, product manufacturing, and exporting of cann-a-bis-related products.
This is where Flora Growth Corp. (NASDAQ: FLGC) comes into play.
"Given its cost advantages, we believe Colombia is positioned to become a major global export hub for cann-a-bis, particularly if producers pursue EU GMP-compliant operating practices." - Canaccord Genuity(1)
The Cosechemos cultivation farm, Flora’s core division, is located in Bucaramanga, Colombia, and is licensed to cultivate 247 acres (100 hectares) of cann-a-bis.
With Cosechemos' demonstrated low production costs, Flora is ready to sell high-quality cann-a-bis at competitive prices.
