Flora Growth Applauds Update to Colombian Cannabis Regulations that Substantially Increases Revenue Potential; Executes International Cannabis Supply Agreement

  • Colombian legislative update now allows for the sale and export of raw cannabis materials, namely dried flower, to international markets
  • New regulations position Colombia’s cultivators as leaders to supply the global cannabis market; dried cannabis flower continues to account for an estimated 50% of demand in major international markets, including US, Germany, and Australia (1)
  • New regulations allow for the manufacturing, sale, and export of ingestible cannabinoid products in Colombia, increasing near term revenue potential for Flora’s Kasa Wholefoods division
  • Flora capitalizes on law change, signing a supply agreement with an international distributor based in South Africa to provide raw and finished medical cannabis products
  • Update allows for the promotion and advertising of cannabis brands and products in Colombia, increasing access to the growing Colombian cannabis market

TORONTO–(BUSINESS WIRE)–Flora Growth Corp. (NASDAQ: FLGC) (“Flora” or the “Company”), a leading all-outdoor cultivator and manufacturer of global cannabis products and brands, is pleased to announce that following an extensive consultation process, the President of Colombia has accepted and signed into effect the revisions related to the existing Colombian cannabis laws. The reformed legislation is aimed at improving access to cannabis products for Colombians and positions Colombia as the leader to supply the global cannabis market.

“We’re also very pleased to now be able to bring new and existing wellness products to market. We have a loyal and passionate following and are very eager to meet the demand that we’ve been receiving but haven’t been able to deliver on previously because of the regulations.”

Colombian Cannabis Cultivation

Located near the equator, select regions of Colombia have the ideal climate for the cultivation of cannabis 365 days a year. The country also boasts one of the world’s largest cut-flower industries, resulting in a labor force with substantial agricultural experience that can produce a high-quality cannabis product at low-cost. This combination of geographic factors and legislative updates positions Colombia as a major player in the international cannabis market due to its low-cost structure.

Flora’s Colombian cultivation facility, Cosechemos, has maximized this cultivation potential by achieving a production cost below $0.06 per gram of dried flower. This represents a 60% lower production cost than its closest competitor(2). With over 12.5 hours of natural sunlight, natural water springs onsite, and over 247 acres of licensed all-outdoor organic cultivation, Flora Growth is uniquely positioned to benefit from this legislative update across a number of verticals.

Legislative Update Signifies Increased Revenue Potential

The new regulations are expected to allow Flora to increase near-term and long-term revenue, optimize its global supply chain of premium brands and products, and maximize economics both domestically and abroad. The following points highlight the impact of this legislative change:

  1. Currently in the global cannabis market, dried flower accounts for over 50% of the sales demand. Through this legislative update, Colombian cultivators like Flora, have gained access to this massive segment of the global market that was previously inaccessible. With a production cost that is substantially lower than its North American peers, Flora is able to market a high-quality product at below North American prices.
  2. By allowing the manufacturing, sale, and export of cannabinoid ingestible products, near-term revenues opportunities are created. Flora’s food and beverage division, Kasa Wholefoods, anticipates amplified revenue growth and intends on leveraging existing relationships to distribute CBD versions of its portfolio, including the recently announced US$10M distribution agreement with Tropi, Colombia’s largest food and beverage distributor with 130,000 points of distribution across the country.
  3. By removing marketing restrictions on cannabis products locally, Flora is expected to be able to drive increased awareness across its portfolio of products and additional sales through its 1,500+ points of distribution within Colombia.
  4. By permitting the sale of cannabinoid medical products through drugstores as “custom formulas”, access to cannabis products is substantially increased within the domestic Colombian market. Custom formulas are pharmaceutical products prescribed and prepared by pharmacists to meet the unique needs of a patient and are intended to complement medical prescriptions. This change favors Flora Lab, which holds licenses to produce custom formulas and has existing relationships with drugstore chains throughout Colombia.

“We would like to thank the Colombian government and all of the parties involved with passing this legislation. As we quickly move to ramp up production at Cosechemos, we believe that Colombia will become a global player in the regulated cannabis market. We believe this will result in an increased positive economic impact to our community, while also benefiting Flora and its shareholders,” said Luis Merchan, President and CEO of Flora. “We’re also very pleased to now be able to bring new and existing wellness products to market. We have a loyal and passionate following and are very eager to meet the demand that we’ve been receiving but haven’t been able to deliver on previously because of the regulations.”

Flora Targets International Cannabis Markets

As an immediate impact of this law change, Flora has signed a Letter of Intent (“LOI”) with an international distributor to supply its dried flower and derivatives. The Company expects to ship its premium cannabis products upon completion of its first commercial harvest and obtaining necessary import licenses.

The cannabis products will be distributed by Kiricann, with operations in South Africa with and distribution agreements in Germany and the EU. Kiricann imports and distributes medical CBD (Cannabidiol) while working with patients and wellness practitioners to educate about the authorization and use of medical cannabis and the benefits of CBD.

Flora anticipates signing additional supply agreements in the coming months as the global cannabis market begins to appreciate the low-cost, high-quality product that is cultivated within Colombia. This includes assessing the opportunity to ship its low-cost cannabis flower to pending acquisition Koch & Gsell, for use in its market-leading cannabis pre-roll brand (Heimat), which generated over US$7.6M in trailing twelve-month revenue.

“This legislative update immediately accelerates Flora’s ability to generate revenue through the sale of our cannabis flower to international markets, as noted by our first international supply agreement. Having the ability to export our high-margin, high-quality cannabis flower – in addition to selling cannabinoid ingestible products – will meaningfully impact our growth and revenue generation,” said Jason Warnock, Chief Revenue Officer of Flora. “We are very excited to leverage our existing product portfolio and distribution channels to quickly deliver these new products to Colombians and our international partners.”

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