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What changed in Flora Growth Corp.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Flora Growth Corp.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+339 added−332 removedSource: 10-K (2025-03-24) vs 10-K (2024-03-28)

Top changes in Flora Growth Corp.'s 2025 10-K

339 paragraphs added · 332 removed · 261 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

42 edited+18 added−15 removed45 unchanged
Biggest changePhatebo 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. Additionally, the Phatebo warehouse provides a logistics outpost for Flora's growing product portfolio and distribution network within the European Union.
Biggest changeAdditionally, the Phatebo warehouse provides a logistics outpost for Flora's growing product portfolio and distribution network within the European Union. TruHC Based in Hamburg, Germany, TruHC holds a GDP wholesale, and an EU-GMP processing and production license for medical cannabis.
Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation. • The False Claims Act, which imposes civil and criminal liability on individuals or entities that knowingly submit false or fraudulent claims for payment to the government or knowingly make, or cause to be made, a false statement in order to have a false claim paid, including qui tam or whistleblower suits. 10 • Reassignment of payment rules which prohibit certain types of billing and collection practices in connection with claims payable by the Medicare or Medicaid programs. • Similar state law provisions pertaining to anti-kickback, self-referral and false claims issues. • State laws that prohibit general business corporations, such as us, from practicing medicine, controlling physicians' medical decisions, or engaging in certain practices such as splitting fees with physicians. • Laws that regulate debt collection practices as applied to our debt collection practices. • Certain provisions of the Social Security Act of 1935 that impose criminal penalties on healthcare providers who fail to disclose, or refund known overpayments. • Federal and state laws that prohibit providers from billing and receiving payment from Medicare and Medicaid for services unless the services are medically necessary, adequately and accurately documented, and billed using codes that accurately reflect the type and level of services rendered. • Federal and state laws and policies that require healthcare providers to maintain licensure, certification or accreditation to enroll and participate in the Medicare and Medicaid programs, and to report certain changes in their operations to the agencies that administer these programs.
Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it to have committed a violation. • The False Claims Act, which imposes civil and criminal liability on individuals or entities that knowingly submit false or fraudulent claims for payment to the government or knowingly make, or cause to be made, a false statement in order to have a false claim paid, including qui tam or whistleblower suits. • Reassignment of payment rules which prohibit certain types of billing and collection practices in connection with claims payable by the Medicare or Medicaid programs. • Similar state law provisions pertaining to anti-kickback, self-referral and false claims issues. • State laws that prohibit general business corporations, such as us, from practicing medicine, controlling physicians' medical decisions, or engaging in certain practices such as splitting fees with physicians. • Laws that regulate debt collection practices as applied to our debt collection practices. • Certain provisions of the Social Security Act of 1935 that impose criminal penalties on healthcare providers who fail to disclose, or refund known overpayments. • Federal and state laws that prohibit providers from billing and receiving payment from Medicare and Medicaid for services unless the services are medically necessary, adequately and accurately documented, and billed using codes that accurately reflect the type and level of services rendered. • Federal and state laws and policies that require healthcare providers to maintain licensure, certification or accreditation to enroll and participate in the Medicare and Medicaid programs, and to report certain changes in their operations to the agencies that administer these programs.
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. House of Brands 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.
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. 5 House of Brands 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.
To date, the sales of all these Colombian entities have closed. Business Strategy Our business strategy is built on two core pillars: House of Brands and Commercial & Wholesale. 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.
To date, the sales of all these Colombian entities have closed. Business Strategy Our business strategy is built on two core pillars: House of Brands and Commercial & Wholesale. This strategy was devised to allow us access to markets around the globe based on the legal standing of cannabis in each of the geographical locations in which we operate.
Any action against us for violation of these laws or regulations could cause us to incur significant legal expenses, divert our management's attention from business operations, and result in adverse publicity. The laws, regulations and standards governing the provision of healthcare services may change significantly in the future.
Any action against us for violation of these laws or regulations could cause us to incur significant legal expenses, divert our management's attention from business operations, and result in adverse publicity. 11 The laws, regulations and standards governing the provision of healthcare services may change significantly in the future.
Distribution activities include storage, direct to consumer fulfillment as well as wholesale direct and third-party distributor shipments. 7 Germany, United Kingdom & Europe Flora has operations in Germany where we are an importer, exporter and distributor of prescription drugs and EU-GMP (as defined below) medical cannabis.
Distribution activities include storage, direct to consumer fulfillment as well as wholesale direct and third-party distributor shipments. Germany, United Kingdom & Europe Flora has operations in Germany where we are an importer, exporter and distributor of prescription drugs and EU-GMP (as defined below) medical cannabis.
In October 2023, the Florida Department of Agriculture and Consumer Services Division of Food Safety (the "Department") issued a stop sale order on 340 hemp extract products distributed by Just Brands primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product.
On October 31, 2023, the Florida Department of Agriculture and Consumer Services Division of Food Safety (the "Department") issued 340 stop sale orders on hemp-extract products distributed by Just Brands primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product (the "Just Brands 2023 Stop-Sale Order").
Under the new legislation, adults over the age of 18 can cultivate up to three plants for private consumption and be allowed to possess 50 grams at one time at home, and 25 grams in public, starting from April 1, 2024.
Under the new legislation, adults over the age of 18 can cultivate up to three plants for private consumption and are allowed to possess 50 grams at one time at home, and 25 grams in public, starting from April 1, 2024.
FGH currently owns two subsidiaries, ACA Müller and Phatebo that have these licenses. • If cannabis is imported from non-EU/EEA countries, the company will also need an import/manufacture license for pharmaceuticals issued by the relevant health authority.
The Company currently owns two subsidiaries, TruHC and Phatebo, that have these licenses. • If cannabis is imported from non-EU/EEA countries, the company will also need an import/manufacture license for pharmaceuticals issued by the relevant health authority.
A total of 74 of our employees and consultants were based in the United States and 34 of our employees and consultants were based internationally. To our knowledge, none of our employees are represented by a labor organization or are a party to any collective bargaining arrangement.
A total of 46 of our employees and consultants were based in the United States and 30 of our employees and consultants were based internationally. To our knowledge, none of our employees are represented by a labor organization or are a party to any collective bargaining arrangement.
From July 1, 2024, cannabis would also be available in licensed not-for-profit clubs with no more than 500 members, all of whom would have to be adults. Only club members would be allowed to consume their output.
Under the new legislation, from July 1, 2024, cannabis would also be available in licensed not-for-profit clubs with no more than 500 members, all of whom would have to be adults, and only club members would be allowed to consume their output.
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 the Federal Institute for Drugs and Medical Devices (the "BfArM") (the largest drug approval authority in Europe).
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 the Federal Institute for Drugs and Medical Devices (the "BfArM") (the largest drug approval authority in Europe). In November 2018, Phatebo also received a medical cannabis import and distribution license.
Regulation of our Industry Regulatory Framework in the United States Packaging, Labeling and Advertising The processing, formulation, manufacturing, packaging, labeling, advertising and distribution of our products are subject to federal laws and regulation by one or more federal agencies, including the United States Food and Drug Administration (the "FDA"), Federal Trade Commission, United States Department of Health and Human Services, the United States Department of Agriculture ("USDA"), and the United States Environmental Protection Agency.
A summary of such governmental approvals, licenses and permits are set forth below. 9 Regulation of our Industry Regulatory Framework in the United States Packaging, Labeling and Advertising The processing, formulation, manufacturing, packaging, labeling, advertising and distribution of our products are subject to federal laws and regulation by one or more federal agencies, including the United States Food and Drug Administration (the "FDA"), Federal Trade Commission, United States Department of Health and Human Services, the United States Department of Agriculture ("USDA"), and the United States Environmental Protection Agency.
Looking ahead, Future Markets Insights projects the global accessory market will reach $101 billion by 2031, representing a CAGR of 4.2%. ________________________ 4 Statista - Pharmaceutical Industry in Europe - Statistics & Facts 5 Statista - Revenue of leading pharmaceutical markets in Europe 6 Vantage Market Research - Cannabidiol (CBD) Market Size, Share & Trends Analysis Report Regulatory Flora has obtained the licenses to operate on a global scale including required governmental approvals, licenses and permits.
Looking ahead, the global accessory market will reach $96 billion by 2031, representing a CAGR of 4.3% 7 . ________________________ 4 Statista - Pharmaceutical Industry in Europe - Statistics & Facts 5 Statista - Revenue of leading pharmaceutical markets in Europe 6 Vantage Market Research - Cannabidiol (CBD) Market Size, Share & Trends Analysis Report 7 Business Wire - Smoking Accessories Research Report 2024 Regulatory Flora has obtained the licenses to operate on a global scale including required governmental approvals, licenses and permits.
We are actively fostering a culture of continued agility and exploration since the ability to pivot depending on market dynamics can result in a competitive advantage. A diversified strategy We believe that our growth strategy is our main competitive advantage.
Management will continue to re-evaluate and re-prioritize strategies to respond to these developments. We are actively fostering a culture of continued agility and exploration since the ability to pivot depending on market dynamics can result in a competitive advantage. A diversified strategy We believe that our growth strategy is our main competitive advantage.
As a result, Just Brands has stopped distributing these products in the State of Florida. There is no assurance that these products can be sold in another jurisdiction, or at all. Cannabis for Medical Purposes The United States healthcare industry is heavily regulated and closely scrutinized by federal, state and local governments.
There is no assurance that these products can be sold in another jurisdiction, or at all. 10 Cannabis for Medical Purposes The United States healthcare industry is heavily regulated and closely scrutinized by federal, state and local governments.
Just Brands is a leading distributor and retailer of cannabidiol ("CBD") derived products through its widely recognized "JustCBD" brand. High Roller manufactures several of the leading products sold by Just Brands; and • Vessel Brand Inc. ("Vessel"), a developer and retailer of high-end cannabis consumer technologies and accessories operating under its flagship brand "Vessel".
Just Brands is a leading distributor and retailer of cannabidiol ("CBD") derived products through its widely recognized "JustCBD" brand. High Roller manufactures several of the leading products sold by Just Brands; • Vessel Brand Inc.
By creating our two-pillar approach that addresses the bell curve of the future cannabis industry; consumer packaged goods, commercial cannabis supply chain experience, and cannabis prescription medication, Flora creates a moat, playing brand, vendor, and distributor of a broad collection of cannabis products, owned and brokered, suitable for markets around the world. 6 Supply chain experience Flora is continually developing the ability and expertise to move cannabis across the global supply chain in multiple business categories.
By creating our two-pillar approach that addresses the bell curve of the future cannabis industry; consumer packaged goods, commercial cannabis supply chain experience, and cannabis prescription medication, Flora creates a moat, playing brand, vendor, and distributor of a broad collection of cannabis products, owned and brokered, suitable for markets around the world.
ITEM 1. BUSINESS Flora Growth Corp. was incorporated on March 13, 2019, under the laws of the Province of Ontario. We are a multi-national cannabis company that manufactures and distributes consumer packaged goods and distributes medicinal cannabis and pharmaceutical products. Mission Flora exists to create a world where the benefits of cannabis are accessible to everyone.
ITEM 1. BUSINESS Flora Growth Corp. was incorporated on March 13, 2019, under the laws of the Province of Ontario. We are a multi-national cannabis company that manufactures and distributes consumer packaged goods and distributes medicinal cannabis and pharmaceutical products. Mission Flora's mission is to create a leading Nasdaq small-cap international cannabis company.
Revenue is expected to grow at a CAGR of approximately 14% between 2023 and 2027, resulting in a market volume of $607.6 million by 2027 3 . In February 2024, the Budestag, Germany’s lower house of parliament, voted to legalize cannabis for limited recreational use.
The Germany legal cannabis market size is expected to grow at a CAGR of approximately 15% between 2024 and 2030, resulting in a market volume of $85.6 million by 2030 3 . 8 In February 2024, the Budestag, Germany's lower house of parliament, voted to legalize cannabis for limited recreational use.
For this reason, an EU-GMP certification facilitates the movement of goods and contributes to the credibility of the product. In general, Article 51 of Commission Directive 2001/83/EC requires that each and every batch imported from an European Union country outside the European Union is checked to ensure that it complies with EU-GMP standards.
In general, Article 51 of Commission Directive 2001/83/EC requires that each and every batch imported from a European Union country outside the European Union is checked to ensure that it complies with EU-GMP standards.
Other Licenses • A company importing medical cannabis from non-EU/EEA countries is required to have an Import License for pharmaceuticals pursuant to Section 72 of the GMA. • There are several other licenses that might also be required for certain types of medical cannabis products or activities (such as a manufacturing license, in case the medical cannabis is processed, packed, labeled or market released in Germany according to Section 13 of the GMA).
Other Licenses • A company importing medical cannabis from non-EU/EEA countries is required to have an Import License for pharmaceuticals pursuant to Section 72 of the GMA. • There are several other licenses that might also be required for certain types of medical cannabis products or activities (such as a manufacturing license, in case the medical cannabis is processed, packed, labeled or market released in Germany according to Section 13 of the GMA). 13 Human Capital Resources As of December 31, 2024, we had a total of 76 employees, 64 of which were full-time and eleven were part-time.
Regime Treatment Under the Current German Regulatory Framework Prescribing and Dispensing • The legal framework enables doctors to prescribe medical cannabis. • Dispensed in the form of medicinal cannabis flowers, as a cannabis extract or as a finished product containing active THC. • Pursuant to the BtMG, only pharmacies are permitted upon a special prescription to supply cannabis to patients in the form of cannabis flowers, cannabis extracts (magistral preparations) or dronabinol or as finished products containing natural or synthetic cannabinoids. • The exact recipe instructions for such magistral preparations are laid down in the New Prescription Form, which is the standard work for drug production in pharmacies and is part of the German Drug Codex.
Under German law, the EU-GMP guidelines must be complied with respect to medicinal products and active substances that are manufactured, tested, stored, placed on the market in Germany, brought into or out of the German territory, imported or exported. 12 Regime Treatment Under the Current German Regulatory Framework Prescribing and Dispensing • The legal framework enables doctors to prescribe medical cannabis. • Dispensed in the form of medicinal cannabis flowers, as a cannabis extract or as a finished product containing active THC. • Pursuant to the BtMG, only pharmacies are permitted upon a special prescription to supply cannabis to patients in the form of cannabis flowers, cannabis extracts (magistral preparations) or dronabinol or as finished products containing natural or synthetic cannabinoids. • The exact recipe instructions for such magistral preparations are laid down in the New Prescription Form, which is the standard work for drug production in pharmacies and is part of the German Drug Codex.
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.
Its website www.australianvaporizers.com.au is a popular designation in the country with a large database of satisfied customers. 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.
Any such regulatory determination could prevent us from marketing particular products or using certain statements on those products, which could adversely affect our sales and results of operations. 9 Developments in the laws and regulations governing our products may result in a more stringent regulatory landscape, which could require reformulation of certain products to meet new standards, recalls or discontinuance of certain products that we are unable to reformulate, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling requirements, additional scientific substantiation requirements, and other requirements or restrictions.
Developments in the laws and regulations governing our products may result in a more stringent regulatory landscape, which could require reformulation of certain products to meet new standards, recalls or discontinuance of certain products that we are unable to reformulate, additional record-keeping requirements, increased documentation of the properties of certain products, additional or different labeling requirements, additional scientific substantiation requirements, and other requirements or restrictions.
The industry has a projected CAGR of 5.4% between 2022 and 2026 resulting in total sales of $295 billion by 2026 4 . In the European Union, Germany was the leading pharmaceutical market with a total revenue 5 .
The industry has a projected CAGR of 6.2% between 2023 and 2027 resulting in total sales of $335 billion by 2027 4 . In the European Union, Germany was the leading pharmaceutical market with a total revenue of $69 million in 2023 5 .
M&A Acquisition of businesses both domestically and internationally has played a critical role in the growth of the Company. We continue to seek out M&A targets that are accretive in nature and which provide access to previously untapped capabilities within Flora. Essential to this strategy and the evaluation process will be geography, cash flow, positive earnings, management and human capital.
M&A Acquisition of businesses both domestically and internationally has played a critical role in the growth of the Company. We continue to seek out M&A targets that are accretive in nature and which provide access to previously untapped capabilities within Flora.
Flora operates a small sales office in London, England, which serves as a homebase for all activities being conducted in Europe. From this office, Flora is able to support the European distribution and wholesale business for its products.
Flora operates a small sales office in London, England, which serves as a homebase for all activities being conducted in Europe. From this office, Flora can support the European distribution and wholesale business for its products. The Global Cannabis Industry Revenue in the cannabis market worldwide is forecasted to reach $68 billion in 2025 1 .
Sales and Marketing Across our various pillars, we sell products through three main channels: direct-to-consumer, wholesale and retail. Within JustCBD and Phatebo, sales are primarily focused on direct-to-consumer sales through brand websites and wholesale retail partners and are concentrated in the United States. Our international sales are conducted primarily through distribution partners who sell to third party retailers.
Within JustCBD and Phatebo, sales are primarily focused on direct-to-consumer sales through brand websites and wholesale retail partners and are concentrated in the United States and Europe. Our international sales are conducted primarily through distribution partners who sell to third party retailers. Distribution United States Distribution activities in the United States are primarily run from our Fort Lauderdale, Florida office.
These transactions included the acquisition of our interests in Flora Labs 1, 2 and 4 (hereinafter defined), our previously owned Cosechemos cultivation and processing facility and a number of brands. Since our IPO, Flora has acquired 100% of the outstanding equity interests in each of: • Franchise Global Health Inc.
These transactions included the acquisition of our previously owned interests in Flora Labs 1, 2 and 4, our previously owned Cosechemos cultivation and processing facility and a number of brands.
("FGH"), who together with its principal subsidiary, Phatebo GmbH ("Phatebo") is a multi-national operator in the pharmaceutical and medical cannabis industries, with principal operations in Germany; • Just Brands LLC ("Just Brands") and High Roller Private Label LLC ("High Roller") based in Fort Lauderdale, Florida.
Since our IPO, Flora has acquired 100% of the outstanding equity interests in each of: • Phatebo GmbH ("Phatebo") is a multi-national operator in the pharmaceutical and medical cannabis industries, with principal operations in Germany; • Just Brands LLC ("Just Brands") and High Roller Private Label LLC ("High Roller") based in Fort Lauderdale, Florida.
Europe The European cannabis landscape continues to advance largely with Germany, Malta, Switzerland, Poland and the United Kingdom being the furthest ahead by means of establishing a legal cannabis framework.
Hemp-derived CBD and its derivatives remain legal at the federal level under the Agriculture Improvement Act of 2018 (the "2018 Farm Bill"). Europe The European cannabis landscape continues to advance largely with Germany, Malta, Switzerland, Poland and the United Kingdom being the furthest ahead by means of establishing a legal cannabis framework.
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 Vessel is Flora's cannabis accessory and technology brand currently servicing the United States and Canada through direct-to-consumer and retail sales.
JustCBD's products are both internally and third-party lab-tested to ensure quality. Vessel Vessel is Flora's cannabis accessory and technology brand currently servicing the United States and Canada through direct-to-consumer and retail sales.
Any pharmaceutical manufacturer wishing to import medicinal products into the European Union must comply with EU GMP. A prerequisite under EU GMP is that medicinal products must be of consistently high quality, suitable for their intended use and meet the requirements of the marketing authorization based on stability data.
A prerequisite under EU GMP is that medicinal products must be of consistently high quality, suitable for their intended use and meet the requirements of the marketing authorization based on stability data. For this reason, an EU-GMP certification facilitates the movement of goods and contributes to the credibility of the product.
Our Competitive Strengths Due to the competitive and dynamic nature of the emerging cannabis products market and rapid changes in the regulatory environment, Flora does recognize the need to remain flexible, so we can react to opportunities and risks as they develop. Management will continue to re-evaluate and re-prioritize strategies to respond to these developments.
TruHC also holds a narcotic license with EU-GMP certified storage. 6 Our Competitive Strengths Due to the competitive and dynamic nature of the emerging cannabis products market and rapid changes in the regulatory environment, Flora does recognize the need to remain flexible, so we can react to opportunities and risks as they develop.
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.
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.
When the German federal government legalized cannabis for medical purposes in March 2017, they also established a cannabis agency as part of BfArM.
When the German federal government legalized cannabis for medical purposes in March 2017, they also established a cannabis agency as part of BfArM. This agency controls cultivation, harvesting, processing, quality inspection, storage, packaging and distribution to wholesaler and pharmacists or manufacturers.
The cannabis supply chain is complex and has high barriers of entry. Our team has been able to develop a strong understanding of distribution across the globe. Regulatory expertise Flora has the necessary regulatory requirements to fulfill needs across the global supply chain. Some of these requirements take several years to acquire.
Supply chain experience Flora is continually developing the ability and expertise to move cannabis across the global supply chain in multiple business categories. The cannabis supply chain is complex and has high barriers of entry. Our team has been able to develop a strong understanding of distribution across the globe.
This agency controls cultivation, harvesting, processing, quality inspection, storage, packaging and distribution to wholesaler and pharmacists or manufacturers. 11 EU-GMP Certification The guidelines on Good Manufacturing Practices, promulgated by European Medicines Agency (the "EU GMP") describe the minimum standard that a pharmaceutical manufacturer must meet in its production processes according to European standards.
EU-GMP Certification The guidelines on Good Manufacturing Practices, promulgated by European Medicines Agency (the "EU GMP") describe the minimum standard that a pharmaceutical manufacturer must meet in its production processes according to European standards. Any pharmaceutical manufacturer wishing to import medicinal products into the European Union must comply with EU GMP.
United States As Flora is listed on Nasdaq, we operate exclusively today in CBD-based or ancillary/accessory businesses in the U.S. market given the U.S. federal prohibition on cannabis products containing tetrahydrocannabinol ("THC"). This includes importing cosmetic and beauty products, accessory and non-cannabinoid products and CBD products.
The global legal cannabis market is growing at approximately a 2.3% compounded annual growth rate ("CAGR") and projected to reach approximately $75 billion by 2029 globally 1 . United States As Flora is listed on Nasdaq, we operate exclusively today in CBD-based or ancillary/accessory businesses in the U.S. market given the U.S. federal prohibition on cannabis products containing tetrahydrocannabinol ("THC").
Both of FGH's German subsidiaries, Phatebo and ACA Müller, hold these licenses.
Two of the Company's German subsidiaries, Phatebo and TruHC, hold these licenses.
Through this channel we seek to build loyalty, credibility and enjoy healthy margins that help to support the rapid growth of our business. 5 JustCBD Just Brands and High Roller (together with Just Brands, "JustCBD") are 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.
JustCBD Just Brands and High Roller (together with Just Brands, "JustCBD") are 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. 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.
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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.
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Flora develops products that not only elevate the cannabis experience but set new standards in wellness, through advancing technology and sustainable practices to deliver unparalleled quality and results.
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Distribution United States Distribution activities in the United States are primarily run from our Fort Lauderdale, Florida office and warehouse where all US-based products are housed.
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("Vessel"), a developer and retailer of high-end cannabis consumer technologies and accessories operating under its flagship brand "Vessel". • TruHC Pharma GmbH ("TruHC") is an early-stage cannabis company based in Hamburg, Germany, that holds wholesale, processing and production licenses for medical cannabis as well as a facility offering flexible production space with European Union Good Manufacturing Practice ("EU-GMP") certified modules; and • Australian Vaporizers Pty LTD ("AV") was founded in 2010 and is a wholesaler and an online retailer of vaporizers, hardware, and accessories in Australia.
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The Global Cannabis Industry The global cannabis market is growing at approximately a 16.6% compounded annual growth rate ("CAGR") and projected to reach approximately $51 billion by 2025 1 globally.
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AV Australian Vaporizers was founded in 2010 and has become a prominent online retailers of vaporizers, hardware, and accessories in Australia. It is an online expert for aromatherapy products, specializing in dry herb vaporizers. It has been providing vapes, accessories and knowledge to enthusiasts and newcomers alike.
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The U.S. hemp-derived CBD market is expected to grow to $11 billion in 2027 2 . Hemp-derived CBD and its derivatives remain legal at the federal level under the Agriculture Improvement Act of 2018 (the " 2018 Farm Bill").
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It also owns and operates an EU-GMP certified laboratory ready for instant cannabis analysis as required for the new Cannabis Social Clubs. The facility of TruHC is a flexible production space with EU-GMP certified modules that can be extended and customized for any production process from processing to extraction.
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The legislation was ratified by the Bundesrat, Germany’s upper parliamentary chamber, on March 22, 2024, and will be implemented once the President of Germany officially signs it.
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Regulatory expertise Flora has the necessary regulatory requirements to fulfill needs across the global supply chain. Some of these requirements take several years to acquire.
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The legislation makes Germany the largest federally legal recreational and medicinal cannabis market in the world . _______________________ 1 New Frontier Data - The Global Cannabis Report; Growth & Trends through 2025 2 Bright Field Group - CBD: FDA Impact & the Path Forward; 2022 Mid-Year US CBD Report 3 Statista - Medical Cannabis; Germany Pharmaceutical Market and Health Sector According to the data reported to the Drug Price Information System, pharmaceutical sales have shown sustained growth in recent years, although in 2019 it grew at the lowest rate since 2015.
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Essential to this strategy and the evaluation process will be geography, cash flow, positive earnings, management and human capital. 7 Sales and Marketing Across our various pillars, we sell products through three main channels: direct-to-consumer, wholesale and retail.
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In turn, the units sold rose from 1.06 billion in 2018 to 1.08 billion in 2019, showing a 2% increase. In 2020, drug makers raised prices on more than 860 drugs by around 5%, on average, according to 3 Axis.
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This includes importing cosmetic and beauty products, accessory and non-cannabinoid products and CBD products. The North America hemp-derived cannabidiol market size was valued at USD 1.5 billion in 2024. It is expected to expand at a CAGR of 13.5% from 2025 to 2030 2 .
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Drug price increases have slowed substantially since 2015, both in terms of the size of the hikes and the number of drugs affected.
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The legislation was ratified by the Bundesrat, Germany's upper parliamentary chamber, and signed by the President of Germany in March 2024, allowing its implementation on April 1, 2024. _______________________ 1 Statista: Cannabis - Woldwide | Statista Market Forecast - Highlights 2 Grand View Research - North America Hemp-derived Cannabidiol Market Size Report 3 Yahoo Finance - Germany Legal Cannabis Market Analysis 2024-2023 by Source Pharmaceutical Market and Health Sector Europe has a strong pharmaceutical history and a thriving industry with concentration of pharmaceutical companies in the German-Switzerland border area.
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Drug increases come at a time where increased pharmaceutical engineering has moved to fight COVID-19, with many companies exploring CBD as a drug to combat COVID-19. 8 Europe has a strong pharmaceutical history and a thriving industry with concentration of pharmaceutical companies in the German-Switzerland border area.
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Any such regulatory determination could prevent us from marketing particular products or using certain statements on those products, which could adversely affect our sales and results of operations.
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While the primary use for most products Flora produces is cannabis consumption, the majority of consumers do not buy their accessories at legal dispensaries instead relying on smoke shops and online retail.
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As a result, Just Brands stopped distributing these products in the State of Florida. There is no assurance that these products can be sold in another jurisdiction, or at all.
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A summary of such governmental approvals, licenses and permits are set forth below.
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In late January 2024, and in early February 2024, the Department issued a stop sale order on 231 hemp extract and other products distributed by Just Brands primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product (the "Just Brands 2024 Stop-Sale Order").
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Under Section 1(1) in conjunction with Annex I of BtMG, cannabis is a narcotic drug, subject to certain exceptions including seeds and cannabis from a certified source with a THC content of less than 0.2%, which are only used for scientific or commercial purposes and for which psychoactive abuse is excluded.
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On May 7, 2024, the Department and Just Brands entered into a Settlement Agreement and General Release ("May Settlement Agreement"), whereby Just Brands agreed to remove the hemp-extract products that are subject to the Just Brands 2023 Stop-Sale Order and the Just Brands 2024 Stop-Sale Order from the State of Florida by transferring them to out-of-state facilities, no later than 30 days after the date of the May Settlement Agreement.
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It is a criminal offence in Germany to illicitly cultivate, produce and trade in cannabis or to import, export, transit, sell, supply, otherwise place it on the market or acquire or procure it in any other way, subject to the foregoing exemptions.
Added
Just Brands also agreed to accept a (5) year revocation of its food permit, effectively immediately, prohibiting it from owning, operating, or creating a new business entity that owns or operates any food establishment in the state of Florida that requires a permit or license from the Department.
Removed
Under German law, the EU-GMP guidelines must be complied with respect to medicinal products and active substances that are manufactured, tested, stored, placed on the market in Germany, brought into or out of the German territory, imported or exported.
Added
The May Settlement Agreement is a full and complete settlement of the claims raised in the administrative and legal proceedings relating to this matter. There is no assurance that these products can be sold in another jurisdiction, or at all.
Removed
Both of FGH's subsidiaries ACA Müller and Phatebo have the radiation license. 12 Human Capital Resources As of December 31, 2023, we had a total of 108 employees, 97 of which were full-time and eleven were part-time.
Added
On April 2, 2024, the Department issued a stop sale order on certain hemp-extract and other products distributed by High Roller primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product (the "April 2024 Stop Sale Order").
Added
On June 27, 2024, the Department and High Roller entered into a Settlement Agreement and General Release ("June Settlement Agreement"), whereby High Roller agreed to remove the hemp-extract products that are subject to the April 2024 Stop Sale Order from the State of Florida by transferring them to out-of-state facilities, no later than 30 days after the date of the June Settlement Agreement.
Added
High Roller also agreed that it will not manufacture, distribute, or sell any "gummy" hemp extract products in the State of Florida for a period of two years from the date of the June Settlement Agreement.
Added
During this period, High Roller may continue to produce, distribute and/or sell other hemp extract product in Florida provided the products comply with applicable Florida laws. The June Settlement Agreement is a full and complete settlement of the claims raised in the administrative and legal proceedings relating to this matter.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

76 edited+21 added−18 removed212 unchanged
Biggest changeFor the years ended December 31, 2023 and 2022, we had losses of $56.3 million and $52.6 million, respectively, and as of December 31, 2023 an accumulated deficit of $142.5 million. Additionally, there can be no assurance that additional funding will be available to us for the development of our business, which will require the commitment of substantial resources.
Biggest changeAdditionally, there can be no assurance that additional funding will be available to us for the development of our business, which will require the commitment of substantial resources. Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development.
The Company's inventory has a shelf life and may reach its expiration and not be sold. The Company holds finished goods in inventory and its inventory has a shelf life. Finished goods in the Company's inventory may include cannabis flower, cannabis oil products and cosmeceuticals. The Company's inventory may reach its expiration and not be sold.
The Company holds finished goods in inventory and its inventory has a shelf life. Finished goods in the Company's inventory may include cannabis flower, cannabis oil products and cosmeceuticals. The Company's inventory may reach its expiration and not be sold.
We were required to adjust our disclosure and reporting to comply with the requirements for domestic U.S. companies, including that: 29 • we are required to prepare and report on forms that are applicable to U.S. domestic issuers, such as Forms 10-K, 10-Q and 8-K, rather than the forms formerly used by us, such as Forms 20-F and 6-K; • we are required to prepare and file proxy statements in accordance with SEC rules; • we are no longer exempt from certain requirements of U.S. securities laws such as (i) Regulation FD, which restricts the selective disclosure of material information, (ii) exemptions for filing beneficial ownership reports under Section 16(a) of the Exchange Act for executive officers, directors and 10% shareholders (Forms 3, 4, and 5), and (iii) the Section 16(b) short swing profit rules; • we are no longer permitted to disclose compensation information for our executive officers on an aggregate rather than an individual basis, although such exemption may still be available to us as long as we remain an "emerging growth company"; and • we have lost the ability to rely upon exemptions from U.S. stock exchange rules related to corporate governance requirements that are available to foreign private issuers.
We were required to adjust our disclosure and reporting to comply with the requirements for domestic U.S. companies, including that: • we are required to prepare and report on forms that are applicable to U.S. domestic issuers, such as Forms 10-K, 10-Q and 8-K, rather than the forms formerly used by us, such as Forms 20-F and 6-K; • we are required to prepare and file proxy statements in accordance with SEC rules; • we are no longer exempt from certain requirements of U.S. securities laws such as (i) Regulation FD, which restricts the selective disclosure of material information, (ii) exemptions for filing beneficial ownership reports under Section 16(a) of the Exchange Act for executive officers, directors and 10% shareholders (Forms 3, 4, and 5), and (iii) the Section 16(b) short swing profit rules; • we are no longer permitted to disclose compensation information for our executive officers on an aggregate rather than an individual basis, although such exemption may still be available to us as long as we remain an "emerging growth company"; and • we have lost the ability to rely upon exemptions from U.S. stock exchange rules related to corporate governance requirements that are available to foreign private issuers.
We may not be able to achieve our business plan in a highly competitive market where recreational, adult-use cannabis is legal, or the market may experience a drop in the price of cannabis and cannabis products over time, decreasing our profit margins. 19 The Company is reliant on third party transportation services and importation services to deliver its products to customers.
We may not be able to achieve our business plan in a highly competitive market where recreational, adult-use cannabis is legal, or the market may experience a drop in the price of cannabis and cannabis products over time, decreasing our profit margins. The Company is reliant on third party transportation services and importation services to deliver its products to customers.
Furthermore, governmental authorities may change their administration, application or enforcement procedures at any time, which may adversely affect our ongoing regulatory compliance costs. There is no assurance that we will be able to comply or continue to comply with applicable regulations. 22 The FDA limits the ability to discuss the medical benefits of CBD.
Furthermore, governmental authorities may change their administration, application or enforcement procedures at any time, which may adversely affect our ongoing regulatory compliance costs. There is no assurance that we will be able to comply or continue to comply with applicable regulations. The FDA limits the ability to discuss the medical benefits of CBD.
Competition for qualified technical, sales and marketing staff, as well as officers and directors can be intense, and no assurance can be provided that the Company will be able to attract or retain key employees in the future, which may adversely affect the Company's operations. 32 Our inability to retain and acquire skilled personnel could impair our business and operations.
Competition for qualified technical, sales and marketing staff, as well as officers and directors can be intense, and no assurance can be provided that the Company will be able to attract or retain key employees in the future, which may adversely affect the Company's operations. Our inability to retain and acquire skilled personnel could impair our business and operations.
If these uncertainties continue, they may have an adverse effect upon the introduction of our products in different markets. Any failure on our part to comply with applicable regulations could prevent us from being able to carry on our business, and there may be additional costs associated with any such failure.
If these uncertainties continue, they may have an adverse effect upon the introduction of our products in different markets. 22 Any failure on our part to comply with applicable regulations could prevent us from being able to carry on our business, and there may be additional costs associated with any such failure.
" Each potential investor who is a U.S. taxpayer should consult its own tax advisor regarding the tax consequences of the PFIC rules and the acquisition, ownership, and disposition of the Common Shares. 25 The Company's ability to use its U.S. net operating loss carryforwards to offset its future U.S. taxable income may be subject to limitations.
" Each potential investor who is a U.S. taxpayer should consult its own tax advisor regarding the tax consequences of the PFIC rules and the acquisition, ownership, and disposition of the Common Shares. The Company's ability to use its U.S. net operating loss carryforwards to offset its future U.S. taxable income may be subject to limitations.
Holders of our Common Shares must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our Common Shares. If the price of our Common Shares fluctuates, you could lose a significant part of your investment.
Holders of our Common Shares must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our Common Shares. 31 If the price of our Common Shares fluctuates, you could lose a significant part of your investment.
The Company also depends on service providers such as toll manufacturers and contract laboratories to manufacture, process or test its products that are subject to GMP certification requirements. 18 We expect that regulatory agencies will periodically inspect our and our service providers' facilities to evaluate compliance with applicable GMP requirements.
The Company also depends on service providers such as toll manufacturers and contract laboratories to manufacture, process or test its products that are subject to GMP certification requirements. We expect that regulatory agencies will periodically inspect our and our service providers' facilities to evaluate compliance with applicable GMP requirements.
If we do not obtain additional financing, our business may never commence, in which case you would likely lose the entirety of your investment in the Company. 27 Holders of our Common Shares are subject to dilution resulting from the issuance of equity-based compensation by us.
If we do not obtain additional financing, our business may never commence, in which case you would likely lose the entirety of your investment in the Company. Holders of our Common Shares are subject to dilution resulting from the issuance of equity-based compensation by us.
The enforcement of federal laws in the United States is a risk to our business and any proceedings brought against us thereunder may materially, adversely affect our operations and financial performance. Our activities are, and will continue to be, subject to evolving regulation by governmental authorities.
The enforcement of federal laws in the United States is a risk to our business and any proceedings brought against us thereunder may materially, adversely affect our operations and financial performance. 21 Our activities are, and will continue to be, subject to evolving regulation by governmental authorities.
These prices affected by numerous factors beyond our control. Any price decline may have a material adverse effect on the Company's business, financial condition and results of operations. The Company could face competitive risks from the development and distribution of synthetic cannabis.
These prices affected by numerous factors beyond our control. Any price decline may have a material adverse effect on the Company's business, financial condition and results of operations. 19 The Company could face competitive risks from the development and distribution of synthetic cannabis.
We do not currently maintain key-person insurance on the lives of any of our key employees. We may be unable to implement our business strategy, which could have negative financial and reputational effects on our business. The growth and expansion of our business is heavily dependent upon the successful implementation of our business strategy.
We do not currently maintain key-person insurance on the lives of any of our key employees. 34 We may be unable to implement our business strategy, which could have negative financial and reputational effects on our business. The growth and expansion of our business is heavily dependent upon the successful implementation of our business strategy.
Each prospective investor should therefore contact his, her or its own legal advisor regarding the ownership of our Common Shares and any related potential liability. The Company's directors and officers may have a conflict of interest in conducting their duties.
Each prospective investor should therefore contact his, her or its own legal advisor regarding the ownership of our Common Shares and any related potential liability. 29 The Company's directors and officers may have a conflict of interest in conducting their duties.
Additionally, product recalls may lead to increased scrutiny of our operations by regulatory agencies, requiring further management attention, potential loss of applicable licenses, and potential legal fees and other expenses. 16 The Company's products could have unknown side effects.
Additionally, product recalls may lead to increased scrutiny of our operations by regulatory agencies, requiring further management attention, potential loss of applicable licenses, and potential legal fees and other expenses. The Company's products could have unknown side effects.
In addition, as we move into new jurisdictions, we will need to attract and recruit skilled employees in those new areas. We will need to grow the size of our organization, and we may experience difficulties in managing any growth we may achieve.
In addition, as we move into new jurisdictions, we will need to attract and recruit skilled employees in those new areas. 33 We will need to grow the size of our organization, and we may experience difficulties in managing any growth we may achieve.
As of the date hereof, most states and the District of Columbia have authorized industrial hemp programs pursuant to the United States of the 2018 Farm Bill, or under prior programs authorized under the 2014 Farm Bill or have plans under review by the USDA.
As of the date hereof, most states and the District of Columbia have authorized industrial hemp programs pursuant to the 2018 Farm Bill, or under prior programs authorized under the 2014 Farm Bill or have plans under review by the USDA.
Conditions or events including, but not limited to, the following could disrupt the Company's supply chains and in particular its ability to deliver its products, interrupt operations at its facilities, increase operating expenses, resulting in loss of sales, delayed performance of contractual obligations or require additional expenditures to be incurred: (i) extraordinary weather conditions or natural disasters such as hurricanes, tornadoes, floods, fires, extreme heat, earthquakes, etc.; (ii) a local, regional, national or international outbreak of a contagious disease, including the COVID-19 coronavirus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu, or any other similar illness could result in a general or acute decline in economic activity; (iii) political instability, social and labor unrest, war or terrorism, including the current conflict between Russia and Ukraine; or (iv) interruptions in the availability of basic commercial and social services and infrastructure including power and water shortages, and shipping and freight forwarding services including via air, sea, rail and road.
Conditions or events including, but not limited to, the following could disrupt the Company's supply chains and in particular its ability to deliver its products, interrupt operations at its facilities, increase operating expenses, resulting in loss of sales, delayed performance of contractual obligations or require additional expenditures to be incurred: (i) extraordinary weather conditions or natural disasters such as hurricanes, tornadoes, floods, fires, extreme heat, earthquakes, etc.; (ii) a local, regional, national or international outbreak of a contagious disease, including the COVID-19 coronavirus, Middle East Respiratory Syndrome, Severe Acute Respiratory Syndrome, H1N1 influenza virus, avian flu, or any other similar illness could result in a general or acute decline in economic activity; (iii) political instability, social and labor unrest, war or terrorism, including the current conflict between Russia and Ukraine; or (iv) interruptions in the availability of basic commercial and social services and infrastructure including power and water shortages, and shipping and freight forwarding services including via air, sea, rail and road. 15 Cannabis laws, regulations, and guidelines are dynamic and subject to changes.
If we are unable to obtain capital, our business would be jeopardized, and we may not be able to continue operations. We may increase our foreign sales in the future, and such sales may be subject to unexpected regulatory requirements and other barriers. Our functional currency is denominated in U.S. dollars.
If we are unable to obtain capital, our business would be jeopardized, and we may not be able to continue operations. We may increase our foreign sales in the future, and such sales may be subject to unexpected regulatory requirements, exchange rate fluctuations and other barriers. Our functional currency is denominated in U.S. dollars.
As of December 31, 2023, management believes the 2022 Material Weaknesses relating to its goodwill impairment testing and purchase price allocations have been fully remediated.
As of December 31, 2023, management believed the 2022 Material Weaknesses relating to its goodwill impairment testing and purchase price allocations have been fully remediated.
We are subject to the inherent risk of exposure to product liability claims, actions and litigation. As a distributor of products designed to be ingested by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused bodily harm or injury.
As a distributor of products designed to be ingested by humans, we face an inherent risk of exposure to product liability claims, regulatory action and litigation if our products are alleged to have caused bodily harm or injury.
While our growth strategy includes broadening our service and product offerings, implementing an aggressive marketing plan and employing product diversification, there can be no assurance that our systems, procedures and controls will be adequate to support our operations as they expand.
Our diversity of product offerings may not be successful. While our growth strategy includes broadening our service and product offerings, implementing an aggressive marketing plan and employing product diversification, there can be no assurance that our systems, procedures and controls will be adequate to support our operations as they expand.
In addition, as a result of being considered a "domestic issuer" for reporting and disclosure requirements: • we are no longer exempt from certain requirements of U.S. securities laws such as (i) Regulation FD, which restricts the selective disclosure of material information, (ii) exemptions for filing beneficial ownership reports under Section 16(a) of the Exchange Act for executive officers, directors and 10% shareholders (Forms 3, 4, and 5), and (iii) the Section 16(b) short swing profit rules; • we are no longer permitted to disclose compensation information for our executive officers on an aggregate rather than an individual basis, although such exemption may still be available to us as long as we remain an "emerging growth company"; and • we have lost the ability to rely upon exemptions from Nasdaq corporate governance requirements that are available to foreign private issuers.
Complying with the additional requirements of being considered a "domestic issuer" for reporting and disclosure requirements increases our legal and audit fees as a result of the following reporting and disclosure requirements: • we are not exempt from certain requirements of U.S. securities laws such as (i) Regulation FD, which restricts the selective disclosure of material information, (ii) exemptions for filing beneficial ownership reports under Section 16(a) of the Exchange Act for executive officers, directors and 10% shareholders (Forms 3, 4, and 5), and (iii) the Section 16(b) short swing profit rules; • we are not permitted to disclose compensation information for our executive officers on an aggregate rather than an individual basis, although such exemption may still be available to us for as long as we remain an "emerging growth company"; and • we lost the ability to rely upon exemptions from Nasdaq corporate governance requirements that are available to foreign private issuers.
In addition, although we are investing in sales and marketing activities to further penetrate newer regions, including expansion of our dedicated sales force, we may not be successful.
In addition, although we are investing in sales and marketing activities to further penetrate newer regions, including expansion of our dedicated sales force, we may not be successful. If we are not successful, our business and results of operations may be harmed.
We may have exposure to greater than anticipated tax liabilities or expenses. 24 Additionally, dividends and other intra-group payments made by our subsidiaries or international branches may expose the recipients of such payments to taxes in their jurisdictions of organization and operation and such dividends and other intra-group payments may also be subject to withholding taxes imposed by the jurisdiction in which the entity making the payment is organized or tax resident.
Additionally, dividends and other intra-group payments made by our subsidiaries or international branches may expose the recipients of such payments to taxes in their jurisdictions of organization and operation and such dividends and other intra-group payments may also be subject to withholding taxes imposed by the jurisdiction in which the entity making the payment is organized or tax resident.
On July 8, 2022, the Company was notified by the Nasdaq Stock Market, LLC 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").
On February 25, 2025, the Company was notified by 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.
A privacy breach may occur through procedural or process failure, information technology malfunction, or deliberate unauthorized intrusions. In addition, theft of data is an ongoing risk whether perpetrated via employee collusion or negligence or through deliberate cyber-attack. Any such privacy breach or theft could have a material adverse effect on the Company's business, financial condition and results of operations.
In addition, theft of data is an ongoing risk whether perpetrated via employee collusion or negligence or through deliberate cyber-attack. Any such privacy breach or theft could have a material adverse effect on the Company's business, financial condition and results of operations.
Reputational loss may result in decreased ability to enter into new customer, distributor or supplier relationships, retain existing customers, distributors or suppliers, reduced investor confidence and access to capital, increased challenges in developing and maintaining community relations and an impediment to our overall ability to advance our projects, thereby having a material adverse effect on our financial performance, financial condition, cash flows and growth prospects.
Reputational loss may result in decreased ability to enter into new customer, distributor or supplier relationships, retain existing customers, distributors or suppliers, reduced investor confidence and access to capital, increased challenges in developing and maintaining community relations and an impediment to our overall ability to advance our projects, thereby having a material adverse effect on our financial performance, financial condition, cash flows and growth prospects. 16 We are subject to the inherent risk of exposure to product liability claims, actions and litigation.
The legal cannabis industry is at a relatively early stage of its development. Consumer perceptions regarding legality, morality, consumption, safety, efficacy and quality of medicinal cannabis are mixed and evolving and can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of medicinal cannabis products.
Consumer perceptions regarding legality, morality, consumption, safety, efficacy and quality of medicinal cannabis are mixed and evolving and can be significantly influenced by scientific research or findings, regulatory investigations, litigation, media attention and other publicity regarding the consumption of medicinal cannabis products.
If we are not successful, our business and results of operations may be harmed. 17 Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs. The price and availability of key components used to manufacture our products has been increasing and may continue to fluctuate significantly.
Fluctuations in the cost and availability of raw materials, equipment, labor, and transportation could cause manufacturing delays or increase our costs. The price and availability of key components used to manufacture our products has been increasing and may continue to fluctuate significantly.
The determination of our provision for income taxes and other tax liabilities will require significant judgment (including based on external advice) as to the interpretation and application of these rules.
The determination of our provision for income taxes and other tax liabilities will require significant judgment (including based on external advice) as to the interpretation and application of these rules. We may have exposure to greater than anticipated tax liabilities or expenses.
There is substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the scope of operation of Farm Bill-compliant hemp programs relative to the emerging regulation of cannabinoids.
Uncertainty caused by potential changes to legal regulations could impact the use of CBD products. There is substantial uncertainty and different interpretations among federal, state and local regulatory agencies, legislators, academics and businesses as to the scope of operation of Farm Bill-compliant hemp programs relative to the emerging regulation of cannabinoids.
Any delays, interruption or increased costs in raw materials and/or the manufacturing or compounding of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long-term.
Any delays, interruption or increased costs in raw materials and/or the manufacturing or compounding of our products could have an adverse effect on our ability to meet retail customer and consumer demand for our products and result in lower revenues and net income both in the short and long-term. 18 The Company's inventory has a shelf life and may reach its expiration and not be sold.
The Company had cash and cash equivalents of $4.4 million at December 31, 2023, a loss of $56.3 million for the year ended December 31, 2023, and an accumulated deficit of $142.5 million at December 31, 2023. The Company's ability to continue as a going concern is dependent on its ability to obtain additional capital.
The Company had cash and cash equivalents of $6.1 million at December 31, 2024, a loss of $15.9 million for the year ended December 31, 2024, and an accumulated deficit of $158.1 million at December 31, 2024. The Company's ability to continue as a going concern is dependent on its ability to obtain additional capital.
Although we are committed to researching and developing new markets and products and improving existing products, there can be no assurances that such research and market development activities will prove profitable or that the resulting markets or products, if any, will be commercially viable or successfully produced and marketed.
There can be no assurance that our growth estimates are accurate or that the cannabis market will be large enough for our business to grow as projected. 23 Although we are committed to researching and developing new markets and products and improving existing products, there can be no assurances that such research and market development activities will prove profitable or that the resulting markets or products, if any, will be commercially viable or successfully produced and marketed.
We have recently acquired Just Brands and FGH and have a history of acquisitive activity, and we may in the future seek to acquire or invest in businesses, products, or technologies that we believe could complement our operations or expand our breadth, enhance our capabilities, or otherwise offer growth opportunities. Our diversity of product offerings may not be successful.
We acquired 100% equity interests in Just Brands, Franchise Global Health ("FGH"), AV, and TruHC. We have a history of acquisitive activity, and we may in the future seek to acquire or invest in businesses, products, or technologies that we believe could complement our operations or expand our breadth, enhance our capabilities, or otherwise offer growth opportunities.
You should carefully consider the risks described below, as well as other information contained in this report, including the consolidated financial statements and the notes thereto and Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations." The occurrence of any of the events discussed below could significantly and adversely affect our business, prospects, results of operations, financial condition, and cash flows. 13 RISKS RELATED TO OUR BUSINESS AND INDUSTRY We are an early-stage company with limited operating history and may never become profitable.
You should carefully consider the risks described below, as well as other information contained in this report, including the consolidated financial statements and the notes thereto and Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations." The occurrence of any of the events discussed below could significantly and adversely affect our business, prospects, results of operations, financial condition, and cash flows.
In an effort to alleviate these conditions, management continues to evaluate various cost reduction, asset sales, and other alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners, through obtaining credit from financial institutions or otherwise . 23 Our independent registered public accounting firm has raised substantial doubt as to our ability to continue as a going concern.
In an effort to alleviate these conditions, management continues to evaluate various cost reduction, asset sales, and other alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners, through obtaining credit from financial institutions or otherwise.
We are an early-stage company focused on supplying natural, medicinal-grade cannabis flower and high-quality cannabis derived medical and wellness products to large channel distributors and retailers globally. Formed in March 2019, we have a limited operating history. We have limited financial resources and minimal operating cash flow.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY We are an early-stage company with limited operating history and may never become profitable. We are an early-stage company focused on supplying natural, medicinal-grade cannabis flower and high-quality cannabis derived medical and wellness products to large channel distributors and retailers globally. Formed in March 2019, we have a limited operating history.
Pursuant to Section 404 of the Sarbanes-Oxley Act ("Section 404"), we will be required to furnish a report by our management on our internal controls over financial reporting, which, after we are no longer an emerging growth company, must be accompanied by an attestation report on internal controls over financial reporting issued by our independent registered public accounting firm.
Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and will make some activities more time consuming and costly. 28 Pursuant to Section 404 of the Sarbanes-Oxley Act ("Section 404"), we will be required to furnish a report by our management on our internal controls over financial reporting, which, after we are no longer an emerging growth company, must be accompanied by an attestation report on internal controls over financial reporting issued by our independent registered public accounting firm.
Our existing management team will continue to devote a substantial amount of time to these compliance initiatives, and we may need to hire additional personnel to assist us with complying with these requirements. Moreover, these rules and regulations will continue to increase our legal and financial compliance costs and will make some activities more time consuming and costly.
Our existing management team will continue to devote a substantial amount of time to these compliance initiatives, and we may need to hire additional personnel to assist us with complying with these requirements.
It is uncertain if and to what extent U.S. states will conform to U.S. federal income tax law with respect to the treatment of NOLs. As a result, the Company's ability to use its U.S. NOLs to offset its future U.S. taxable income may be subject to limitations, which could increase its tax liability and decrease its cash flow.
It is uncertain if and to what extent U.S. states will conform to U.S. federal income tax law with respect to the treatment of NOLs. As a result, the Company's ability to use its U.S.
In particular, potential investors should consider that we may be unable to: • successfully implement or execute our business plan, or that our business plan is sound; • adjust to changing conditions or keep pace with increased demand; • attract and retain an experienced management team; • successfully integrate businesses that we acquire; or • raise sufficient funds in the capital markets to effectuate our business plan, including product development, licensing and approvals.
In particular, potential investors should consider that we may be unable to: • successfully implement or execute our business plan, or that our business plan is sound; • adjust to changing conditions or keep pace with increased demand; • attract and retain an experienced management team; • successfully integrate businesses that we acquire; or • raise sufficient funds in the capital markets to effectuate our business plan, including product development, licensing and approvals. 14 Recent and future acquisitions and strategic investments could be difficult to integrate, divert the attention of key management personnel, disrupt our business, dilute shareholder value, may subject us to liability, and harm our results of operations and financial condition.
If the Company fails to regain compliance with the audit committee requirement, or if we otherwise fail to meet any other applicable requirements of the Nasdaq and we are unable to regain compliance, Nasdaq may make a determination to delist our Common Shares.
If the Company fails to meet any of the applicable continued listing standards of the Nasdaq and we are unable to regain compliance, Nasdaq may make a determination to delist our Common Shares.
There is no guarantee that the Common Shares will appreciate in value or even maintain the price at which you purchased them. 30 We are an emerging growth company and a smaller reporting company, and our compliance with the reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies could make our Common Shares less attractive to investors and may make it more difficult to raise capital as and when we need it.
We are an emerging growth company and a smaller reporting company, and our compliance with the reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies could make our Common Shares less attractive to investors and may make it more difficult to raise capital as and when we need it.
However, in connection with the audit of our financials for the year ended December 31, 2022, our auditors noted that the material weakness with respect to goodwill impairment testing and purchase price allocations remains un-remediated (the "2022 Material Weakness").
As of December 31, 2022, management believed the 2021 Material Weaknesses relating to its contract receivables and corresponding revenue and investor procedures have been fully remediated. 27 However, in connection with the audit of our financials for the year ended December 31, 2022, our auditors noted that the material weakness with respect to goodwill impairment testing and purchase price allocations remains un-remediated (the "2022 Material Weakness").
Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly and the bulk of operating costs and general administrative costs are not permitted to be deducted.
Therefore, businesses in the U.S. legal cannabis industry may be less profitable than they would otherwise be. 25 Although the IRS issued a clarification allowing the deduction of certain expenses, the scope of such items is interpreted very narrowly and the bulk of operating costs and general administrative costs are not permitted to be deducted.
In addition, changes in Federal or state laws could require us to alter the way we conduct our business in order to remain compliant with applicable state laws in ways we are presently unable to foresee.
In addition, changes in Federal or state laws could require us to alter the way we conduct our business in order to remain compliant with applicable state laws in ways we are presently unable to foresee. These possible changes, if necessary, could be costly and may adversely impact our results of operations in future periods.
The Company's success will depend, in part, on its ability to continue to enhance its product and service offerings so as to address the increasing sophistication and varied needs of the market and respond to technological and regulatory changes and emerging industry standards and practices on a timely and cost-effective basis.
The Company's success will depend, in part, on its ability to continue to enhance its product and service offerings so as to address the increasing sophistication and varied needs of the market and respond to technological and regulatory changes and emerging industry standards and practices on a timely and cost-effective basis. 17 Research regarding the medical benefits, viability, safety, efficacy, use and social acceptance of cannabis or isolated cannabinoids (such as CBD and THC) remains in early stages.
These licensing requirements could impede a merger, amalgamation, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our Common Shares, which, under certain circumstances, could reduce the market price of our Common Shares.
These licensing requirements could impede a merger, amalgamation, takeover or other business combination involving us or discourage a potential acquirer from making a tender offer for our Common Shares, which, under certain circumstances, could reduce the market price of our Common Shares. 30 We do not intend to pay dividends on our Common Shares in the near future, and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our Common Shares.
Cannabis laws, regulations, and guidelines are dynamic and subject to changes. Cannabis laws and regulations are dynamic and subject to evolving interpretations which could require us to incur substantial costs associated with compliance or alter certain aspects of our business plan.
Cannabis laws and regulations are dynamic and subject to evolving interpretations which could require us to incur substantial costs associated with compliance or alter certain aspects of our business plan. It is also possible that regulations may be enacted in the future that will be directly applicable to certain of our products and/or aspects of our businesses.
Research regarding the medical benefits, viability, safety, efficacy, use and social acceptance of cannabis or isolated cannabinoids (such as CBD and THC) remains in early stages. There have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids (such as CBD and THC).
There have been relatively few clinical trials on the benefits of cannabis or isolated cannabinoids (such as CBD and THC).
We may be required to allocate additional resources to implement additional preventative measures including significant investments in information technology systems. A serious cyber-security breach could have a material adverse effect on our business, financial condition and results of operations. The Company may collect and store certain personal information about customers and is responsible for protecting such information from privacy breaches.
A serious cyber-security breach could have a material adverse effect on our business, financial condition and results of operations. 20 The Company may collect and store certain personal information about customers and is responsible for protecting such information from privacy breaches. A privacy breach may occur through procedural or process failure, information technology malfunction, or deliberate unauthorized intrusions.
If we decide to hedge our foreign currency exposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs or illiquid markets. In addition, those activities may be limited in the protection they provide from foreign currency fluctuations and can themselves result in losses.
If we decide to hedge our foreign currency exposure, we may not be able to hedge effectively due to lack of experience, unreasonable costs or illiquid markets.
Congress amends the Controlled Substances Act with respect to marijuana (and the President approves such amendment), there is a risk that federal authorities may enforce current federal law. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable U.S. federal money laundering legislation.
Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable U.S. federal money laundering legislation.
There are significant legal restrictions and regulations that govern the cannabis industry in the United States. Marijuana remains a Schedule I drug under the Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute or possess cannabis in the United States.
Marijuana remains a Schedule I drug under the Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute or possess cannabis in the United States. In those states in which the use of marijuana has been legalized, its use remains a violation of federal law pursuant to the Controlled Substances Act.
The effective tax rate on a cannabis business depends on how large its ratio of non-deductible expenses is to its total revenues. Therefore, businesses in the U.S. legal cannabis industry may be less profitable than they would otherwise be.
The effective tax rate on a cannabis business depends on how large its ratio of non-deductible expenses is to its total revenues.
Department of the Treasury and the Company cannot predict how this legislation or any future changes in tax laws might affect the Company or purchasers of the Common Shares. 26 A number of international legislative and regulatory bodies have proposed legislation and begun investigations of the tax practices of multinational companies and, in the European Union, the tax policies of certain European Union member states.
A number of international legislative and regulatory bodies have proposed legislation and begun investigations of the tax practices of multinational companies and, in the European Union, the tax policies of certain European Union member states.
Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could harm our results of operations. In addition, if an acquired business fails to meet our expectations, our business, results of operations, and financial condition may suffer.
In addition, if an acquired business fails to meet our expectations, our business, results of operations, and financial condition may suffer.
A negative shift in the public's perception of the cannabis industry could affect future legislation or regulation in different jurisdictions. 15 Demand for cannabis and derivative products could be adversely affected and significantly influenced by scientific research or findings, regulatory proceedings, litigation, media attention or other research findings.
Demand for cannabis and derivative products could be adversely affected and significantly influenced by scientific research or findings, regulatory proceedings, litigation, media attention or other research findings. The legal cannabis industry is at a relatively early stage of its development.
In addition, the Company may not be able to obtain or utilize on terms that are favorable to it, or at all, licenses or other rights with respect to intellectual property that it does not own. 20 RISKS RELATED TO OUR REGULATORY FRAMEWORK Marijuana remains illegal under U.S. federal law, and the enforcement of U.S. cannabis laws could change.
Such licenses may not be available on terms acceptable to the Company or at all. In addition, the Company may not be able to obtain or utilize on terms that are favorable to it, or at all, licenses or other rights with respect to intellectual property that it does not own.
Public opinion can also exert a significant influence over the regulation of the cannabis industry.
Public opinion can also exert a significant influence over the regulation of the cannabis industry. A negative shift in the public's perception of the cannabis industry could affect future legislation or regulation in different jurisdictions.
Our efforts to grow our business may be costlier than we expect, and we may not be able to generate sufficient revenue to offset such higher operating expenses.
Our efforts to grow our business may be costlier than we expect, and we may not be able to generate sufficient revenue to offset such higher operating expenses. We may incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications and delays, and other unknown events.
Assumptions, estimates and judgments related to critical accounting matters could significantly affect our reported financial results or financial condition. The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles (" U.S. GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
In addition, those activities may be limited in the protection they provide from foreign currency fluctuations and can themselves result in losses. 24 Assumptions, estimates and judgments related to critical accounting matters could significantly affect our reported financial results or financial condition. The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles ("U.S.
Therefore, the success of an investment in the Common Shares will depend upon any future appreciation in their value.
Therefore, the success of an investment in the Common Shares will depend upon any future appreciation in their value. There is no guarantee that the Common Shares will appreciate in value or even maintain the price at which you purchased them.
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.
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. For the Company, this date is August 25, 2025.
Accordingly, you should consider our prospects in light of the costs, uncertainties, delays and difficulties frequently encountered by companies in the early stages of development. Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face.
Potential investors should carefully consider the risks and uncertainties that a company with a limited operating history will face.
Changes in global and local tax laws and regulations in jurisdictions in which the Company operates may adversely impact the Company and the value of the Common Shares.
NOLs to offset its future U.S. taxable income may be subject to limitations, which could increase its tax liability and decrease its cash flow. 26 Changes in global and local tax laws and regulations in jurisdictions in which the Company operates may adversely impact the Company and the value of the Common Shares.
Specifically, we may not successfully evaluate or utilize the acquired products, assets or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. 14 We may not be able to find and identify desirable acquisition targets or we may not be successful in entering into an agreement with any one target.
In addition, we have limited experience in acquiring other businesses. Specifically, we may not successfully evaluate or utilize the acquired products, assets or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges.
In those states in which the use of marijuana has been legalized, its use remains a violation of federal law pursuant to the Controlled Substances Act. The Controlled Substances Act classifies marijuana as a Schedule I controlled substance, and as such, medical and adult cannabis use is illegal under U.S. federal law. Unless and until the U.S.
The Controlled Substances Act classifies marijuana as a Schedule I controlled substance, and as such, medical and adult cannabis use is illegal under U.S. federal law. Unless and until the U.S. Congress amends the Controlled Substances Act with respect to marijuana (and the President approves such amendment), there is a risk that federal authorities may enforce current federal law.
Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our business. 31 Volatility in the market price of our Common Shares may prevent investors from being able to sell their shares at or above the public offering price.
We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our business.
We may incur significant losses in the future for a number of reasons, including unforeseen expenses, difficulties, complications and delays, and other unknown events. 33 There is no assurance that the Company's insurance coverage will be sufficient to cover all claims to which the Company may become subject.
There is no assurance that the Company's insurance coverage will be sufficient to cover all claims to which the Company may become subject.
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. 28 The audit committee of the Board of Directors of the Company, must include three independent members as required by Nasdaq Listing Rule 5605(c)(2)(A).
Nasdaq imposes, among other requirements, continued listing standards including a minimum bid requirement and the requirement that the audit committee of the Board of Directors of the Company include three independent members as required by Nasdaq Listing Rule 5605(c)(2)(A).
Ownership of our Common Shares may be considered unlawful in some jurisdictions and holders of our Common Shares may consequently be subject to liability in such jurisdictions.
To regain compliance with this minimum bid price requirement, the Company is required to maintain a minimum closing bid price of $1.00 or more for at least 10 consecutive trading days. Ownership of our Common Shares may be considered unlawful in some jurisdictions and holders of our Common Shares may consequently be subject to liability in such jurisdictions.
We expect that complying with these additional requirements would increase our legal and audit fees which in turn, could have a material adverse effect on our business, financial condition and results of operations.
Any of these factors could depress economic activity and restrict our access to suppliers or customers and have a material adverse effect on their business, financial condition and results of operations, which in turn would negatively impact us. Political, social and geopolitical conditions can adversely affect our business.
Removed
Recent and future acquisitions and strategic investments could be difficult to integrate, divert the attention of key management personnel, disrupt our business, dilute shareholder value, may subject us to liability, and harm our results of operations and financial condition.
Added
We have limited financial resources and minimal operating cash flow. For the years ended December 31, 2024 and 2023, we had losses of $15.9 million and $56.3 million, respectively, and as of December 31, 2024 an accumulated deficit of $158.1 million.
Removed
In addition, we have limited experience in acquiring other businesses.
Added
We may not be able to find and identify desirable acquisition targets or we may not be successful in entering into an agreement with any one target. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could harm our results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

3 edited+1 added−1 removed14 unchanged
Biggest changeWhen a potential incident is first detected, the matter is communicated to the CFO as soon as possible so that the Company may work quickly and diligently to re-secure its systems and work to minimize any damage and further risk to it as a result thereof.
Biggest changeThis team oversees developing, maintaining and measuring compliance with the cyber risk management program, and dedicates significant resources to cybersecurity and risk management processes to adapt to the ever-changing cybersecurity landscape and to respond to emerging threats in a timely and effective manner. 35 When a potential incident is first detected , the matter is communicated to the CFO as soon as possible so that the Company may work quickly and diligently to re-secure its systems and work to minimize any damage and further risk to it as a result thereof.
The data include confidential, proprietary, and business and personal information that we collect, process, store, and transmit as part of our business, including on behalf of third parties.
The data includes confidential, proprietary, and business and personal information that we collect, process, store, and transmit as part of our business, including on behalf of third parties.
Further, a penetration of our systems or a third party's systems or other misappropriation or misuse of personal information could subject us to business, regulatory, litigation, and reputation risk, which could have a negative effect on our business, financial condition and results of operations. 34 We established an interdisciplinary team to monitor and assess cybersecurity risks on an ongoing basis, which is led by our Chief Financial Officer ("CFO").
Further, a penetration of our systems or a third party's systems or other misappropriation or misuse of personal information could subject us to business, regulatory, litigation, and reputation risk, which could have a negative effect on our business, financial condition and results of operations.
Removed
This team is in charge of developing, maintaining and measuring compliance with the cyber risk management program, and dedicates significant resources to cybersecurity and risk management processes to adapt to the ever-changing cybersecurity landscape and to respond to emerging threats in a timely and effective manner.
Added
We established an interdisciplinary team to monitor and assess cybersecurity risks on an ongoing basis, which is led by our Chief Financial Officer ("CFO").

Item 2. Properties

Properties — owned and leased real estate

4 edited+3 added−0 removed3 unchanged
Biggest changeWe lease a 13,483 sq. ft. facility in Fort Lauderdale, Florida where Flora Lab 3 conducts its manufacturing operations. We currently lease this facility for $41,400 a month, pursuant to a lease agreement that expires in June 2024. Phatebo leases a 7,300 square foot pharmaceutical storage and logistic center certified under Good Distribution Practices located in Hilzingen, Germany.
Biggest changePhatebo leases a 7,300 square foot pharmaceutical storage and logistic center certified under Good Distribution Practices located in Hilzingen, Germany. The monthly lease payments are €3,600 per month and the lease expired on February 29, 2024.
This property has been sublet to third parties for a total of $23,000 per month, pursuant to a sublease agreement that expires in June 2027. 35 We lease an 800 sq. ft store located in Miami, Florida for $8,000 per month, pursuant to a lease agreement that expires in November 2026, where we previously sold Stardog merchandise.
This property has been sublet to third parties for a total of $23,000 per month, pursuant to a sublease agreement that expires in June 2027. 36 We lease an 800 sq. ft store located in Miami, Florida for $8,000 per month, pursuant to a lease agreement that expires in November 2026, where we previously sold Stardog merchandise.
ITEM 2. PROPERTIES. We lease a 24,425 sq. ft. facility in Fort Lauderdale, Florida where Just CBD's and Vessel's distribution, wholesale (B2B), and direct-to-consumer (D2C) orders are fulfilled and shipped worldwide. We currently lease this facility for $30,787 a month, pursuant to a lease agreement that expires in April 2024.
ITEM 2. PROPERTIES. The Company leases a 14,280 sq. ft. facility in Pompano Beach, Florida where High Roller’s manufacturing operations and Just CBD’s and Vessel’s distribution, wholesale (B2B), and direct-to-consumer (D2C) orders are fulfilled and shipped worldwide. We currently lease this facility for $20,000 a month, pursuant to a lease agreement that expires in February 2029.
The monthly lease payments are €3,600 per month and the lease expires on February 29, 2024. Our Vessel operations were previously headquartered in Carlsbad, California, where we lease 12,000 sq. ft. of office and warehouse space for $24,000 a month, pursuant to a lease agreement that expires in June 2027.
The Company extended the lease for one year through February 29, 2025 after which Phatebo entered into a similar lease agreement in the same city. Our Vessel operations were previously headquartered in Carlsbad, California, where we lease 12,000 sq. ft. of office and warehouse space for $24,000 a month, pursuant to a lease agreement that expires in August 2027.
Added
The lease contains an option to extend in one 5-year increment. Just CBD leases 4,184 sq. ft. of office space in Fort Lauderdale, Florida. We currently lease this facility for $8,000 a month, pursuant to a lease agreement that expires in March 2028.
Added
TruHC leases a 6,956 square foot EU-GMP certified facility for warehouse, laboratory and office space in Hamburg, Germany. The monthly lease payments are €8,800 per month, pursuant to a lease agreement that expires in April 2025. The lease contains options to extend the lease in 5-year increments. The Company is reasonably certain of renewing this lease for another 5 years.
Added
AV leases a 7,169 square foot facility for warehouse and office space in Brisbane, Australia. The monthly lease payments are A$7,700 per month, pursuant to a lease agreement that expires in April 2027. The lease contains two options to extend for 5-year increments.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

6 edited+6 added−1 removed10 unchanged
Biggest changeThe Department seeks to assess penalties on what they claim to be a total of 215,154 violations (one for each package).
Biggest changeThe Department sought to assess penalties on what they claimed to be a total of 215,154 violations (one for each package). The Company disputed the Department's claim and vigorously defended against this action. The total cost of inventory impacted by the stop sale orders was $1,900,000.
The court ruled in favor of the Department and that Order is being appealed to the Eleventh Circuit Court of Appeals. Since then, the Department has initiated an Administrative Action claiming Just Brands moved product outside the State of Florida in violation of the Stop Sale Orders. The statute provides for a penalty of up to $5,000 per violation.
The court ruled in favor of the Department and that Order was being appealed to the Eleventh Circuit Court of Appeals. Since then, the Department has initiated an Administrative Action claiming Just Brands moved product outside the State of Florida in violation of the stop sale orders. The statute provides for a penalty of up to $5,000 per violation.
JustCBD-related litigation On November 1, 2023, Just Brands filed an emergency complaint for declaratory judgment and injunctive relief in the Southern District of Florida against the Department stemming from Stop Sale Orders issued by the Department whereby the Department prohibited Just Brands from selling and moving the majority of its products.
JustCBD-related litigation On November 1, 2023, Just Brands filed an Emergency Complaint for Declaratory Judgment and Injunctive Relief in the Southern District of Florida against the Department stemming from stop sale orders issued by the Department whereby the Department prohibited Just Brands from selling and moving most of its products.
Starke and his affiliated entities: On February 3, 2023, an action was brought in the Ontario Superior Court by Nathan Shantz and Liberacion E Inversiones S.A. against various parties, including Clifford Starke, our curren CEO and the former CEO of FGH, and FGH.
Starke and his affiliated entities: On February 3, 2023, an action was brought in the Ontario Superior Court by Nathan Shantz and Liberacion E Inversiones S.A. against various parties, including Clifford Starke, our current CEO and the former CEO of FGH, and FGH.
FGH-related litigation Prior to consummating the Arrangement with FGH, we entered into an agreement with Clifford Starke, our current CEO and the former Chairman and CEO of FGH, along with certain of his affiliated entities, pursuant to which they agreed to indemnify the Company against any financial losses we may incur with respect to certain matters, up to an aggregate amount of $5.0 million.
FGH-related litigation Prior to consummating the Arrangement with FGH, we entered into an agreement with Clifford Starke, our current CEO and the former Chairman and CEO of FGH, along with certain of his affiliated entities, pursuant to which they agreed to indemnify the Company against any financial losses we may incur with respect to certain matters, up to an aggregate amount of $5,000,000.
The Company disputes this claim and intends to vigorously defend against these actions. 36 Other matters On May 31, 2023, Maria Beatriz Fernandez Otero and Sara Cristina Jacome De Torres brought an action against the Company in the Ontario Superior Court of Justice claiming that the Company is obligated to issue 500,000 Common Shares (before the June 9, 2023 1-for-20 reverse stock split) each for a purchase price of $0.05 per share.
Other matters On May 31, 2023, Maria Beatriz Fernandez Otero and Sara Cristina Jacome De Torres brought an action against the Company in the Ontario Superior Court of Justice claiming that the Company is obligated to issue 500,000 Common Shares (before the June 9, 2023 1-for-20 reverse stock split) each for a purchase price of $0.05 per share.
Removed
The Company disputes such claims and intends to vigorously defend against this action.
Added
In March 2024, the Constance Regional Court in Germany ordered the Company to pay the plaintiff $3,000,000 plus interest thereon at a rate of 5% above the prime rate since September 6, 2020 in addition to 83% of the legal fees. The Company believes that this claim is without merit and has since filed an appeal in June 2024.
Added
On May 7, 2024, Just Brands and the Department agreed to a settlement and general release, whereby Just Brands will remove the products subject to the stop sales orders from the state of Florida, pay the Department $60,500 to reimburse the Department's attorney's fees, and accept a five-year revocation of its food permit in the state of Florida.
Added
By signing the release, Just Brands waived, settled and released all claims it had or might have against the Department.
Added
Similarly, on June 27, 2024, Just Brands and the Department agreed to a settlement and general release, whereby High Roller will remove the products subject to the Stop Sales Orders from the state of Florida, destroy products containing controlled substances, pay the Department $5,000 to reimburse the Department's attorney's fees, and accept a two-year suspension of the manufacture, distribution and sale of gummy hemp extract products in the state of Florida.
Added
By signing the release, High Roller waived, settled and released all claims it had or might have against the Department. 37 On April 30, 2024, a group representing the sellers of Just Brands LLC to Flora in February 2022 brought an action against the Company in the United States District Court for the Southern District of New York claiming that the Company failed to promptly issue additional shares in accordance with a specific formula set forth in the securities purchase agreement after the two-year anniversary of the closing, which occurred on February 24, 2024.
Added
The plaintiffs claim that they are entitled to 182,889 common shares and $38,000,000 to complete the acquisition of Just Brands LLC. The Company disputes this claim and intends to vigorously defend against these actions.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

32 edited+0 added−6 removed112 unchanged
Biggest changeAs long as the shares are then listed on a "designated stock exchange" (as defined in the Tax Act) (which currently includes the TSX and the NYSE American) at the time of disposition, the Common Shares generally will not constitute taxable Canadian property of a Non-Resident Holder, unless at any time during the 60-month period immediately preceding the disposition the following two conditions are met concurrently: (i) the Non-Resident Holder, persons with whom the Non-Resident Holder did not deal at arm's length, partnerships in which the Non-Resident Holder or persons with whom the Non-Resident Holder did not deal at arm's length holds a membership interest directly or indirectly through one or more partnerships, or the Non-Resident Holder together with all such persons, owned or was considered to own 25% or more of the issued shares of any class or series of shares of the capital stock of the Company; and (ii) more than 50% of the fair market value of the Common Shares was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, "Canadian resource properties" (as defined in the Tax Act), "timber resource properties" (as defined in the Tax Act) or a options in respect of, or interests in, or civil law rights in, such properties, whether or not it exists.
Biggest changeAs long as the shares are then listed on a "designated stock exchange" (as defined in the Tax Act) (which currently includes the TSX and the NYSE American) at the time of disposition, the Common Shares generally will not constitute taxable Canadian property of a Non-Resident Holder, unless at any time during the 60-month period immediately preceding the disposition the following two conditions are met concurrently: (i) the Non-Resident Holder, persons with whom the Non-Resident Holder did not deal at arm's length, partnerships in which the Non-Resident Holder or persons with whom the Non-Resident Holder did not deal at arm's length holds a membership interest directly or indirectly through one or more partnerships, or the Non-Resident Holder together with all such persons, owned or was considered to own 25% or more of the issued shares of any class or series of shares of the capital stock of the Company; and (ii) more than 50% of the fair market value of the Common Shares was derived directly or indirectly from one or any combination of real or immovable property situated in Canada, "Canadian resource properties" (as defined in the Tax Act), "timber resource properties" (as defined in the Tax Act) or a options in respect of, or interests in, or civil law rights in, such properties, whether or not it exists. 39 If the Common Shares are taxable Canadian property to a Non-Resident Holder, any capital gain realized on the disposition or deemed disposition of such shares, may not be subject to Canadian federal income tax pursuant to the terms of an applicable income tax treaty or convention between Canada and the country of residence of a Non-Resident Holder, including the Convention.
If such stock is traded on such a qualified exchange or other market, such stock generally will be "regularly traded" for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. Each U.S. Holder should consult its own tax advisor in this matter. A U.S.
If such stock is traded on such a qualified exchange or other market, such stock generally will be "regularly traded" for any calendar year during which such stock is traded, other than in de minimis quantities, on at least 15 days during each calendar quarter. Each U.S. Holder should consult its own tax advisor in this matter. 44 A U.S.
Holders should be aware that they could be subject to tax under the PFIC rules even if no distributions are received and no redemptions or other dispositions of Common Shares are made. 41 Default PFIC Rules Under Section 1291 of the Code If the Company is a PFIC for any tax year during which a U.S.
Holders should be aware that they could be subject to tax under the PFIC rules even if no distributions are received and no redemptions or other dispositions of Common Shares are made. Default PFIC Rules Under Section 1291 of the Code If the Company is a PFIC for any tax year during which a U.S.
Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code. Additional Considerations Receipt of Foreign Currency The amount of any distribution paid to a U.S.
Holder that is an individual, estate, or trust. There are currently no preferential tax rates for long-term capital gain of a U.S. Holder that is a corporation. Deductions for capital losses are subject to significant limitations under the Code. 46 Additional Considerations Receipt of Foreign Currency The amount of any distribution paid to a U.S.
Except as provided herein, this summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis. 39 U.S. Holders For purposes of this summary, the term "U.S.
Except as provided herein, this summary does not discuss the potential effects, whether adverse or beneficial, of any proposed legislation that, if enacted, could be applied on a retroactive or prospective basis. U.S. Holders For purposes of this summary, the term "U.S.
Holder's holding period for the Common Shares for which the Company is a PFIC and such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, the Common Shares. 43 A U.S.
Holder's holding period for the Common Shares for which the Company is a PFIC and such U.S. Holder has not made a timely QEF Election, the rules of Section 1291 of the Code discussed above will apply to certain dispositions of, and distributions on, the Common Shares. A U.S.
Holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as "personal interest," which is not deductible. A U.S.
Holder may, subject to certain limitations, elect to defer payment of current U.S. federal income tax on such amounts, subject to an interest charge. If such U.S. Holder is not a corporation, any such interest paid will be treated as "personal interest," which is not deductible. 43 A U.S.
For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses Common Shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such Common Shares. In addition, a U.S.
For example, under Section 1298(b)(6) of the Code, a U.S. Holder that uses Common Shares as security for a loan will, except as may be provided in Treasury Regulations, be treated as having made a taxable disposition of such Common Shares. 45 In addition, a U.S.
In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the conclusions described in this summary. Scope of this Summary Authorities This summary is based on the U.S.
In addition, because the authorities on which this summary is based are subject to various interpretations, the IRS and the U.S. courts could disagree with one or more of the conclusions described in this summary. 40 Scope of this Summary Authorities This summary is based on the U.S.
Holder should consult with its own tax advisors regarding the availability of the foreign tax credit with respect to distributions by a PFIC. 44 The PFIC rules are complex, and each U.S.
Holder should consult with its own tax advisors regarding the availability of the foreign tax credit with respect to distributions by a PFIC. The PFIC rules are complex, and each U.S.
No cash dividends have been previously paid on our Common Shares and none are anticipated in fiscal 2024. We repurchased no Common Shares during the fourth quarter of the year ended December 31, 2023.
No cash dividends have been previously paid on our Common Shares and none are anticipated in fiscal 2025. We repurchased no Common Shares during the fourth quarter of the year ended December 31, 2024.
Holder," for the purposes of this section, means a Non-Resident Holder who, for purposes of the Canada-United States Tax Convention (1980) as amended, (the "Convention"), is at all relevant times a resident of the United States and is a "qualifying person" within the meaning of the Convention.
The term "U.S. Holder," for the purposes of this section, means a Non-Resident Holder who, for purposes of the Canada-United States Tax Convention (1980) as amended, (the "Convention"), is at all relevant times a resident of the United States and is a "qualifying person" within the meaning of the Convention.
The Common Shares will generally be considered capital property to a Non-Resident Holder unless either (i) the Non-Resident Holder holds the Common Shares in the course of carrying on a business of buying and selling securities or (ii) the Non-Resident Holder has acquired the Common Shares in a transaction or transactions considered to be an adventure or concern in the nature of trade. 37 The term "U.S.
The Common Shares will generally be considered capital property to a Non-Resident Holder unless either (i) the Non-Resident Holder holds the Common Shares in the course of carrying on a business of buying and selling securities or (ii) the Non-Resident Holder has acquired the Common Shares in a transaction or transactions considered to be an adventure or concern in the nature of trade.
In addition, for purposes of the PFIC income test and PFIC asset test described above, and assuming certain other requirements are met, "passive income" does not include certain interest, dividends, rents, or royalties that are received or accrued by the Company from certain "related persons" (as defined in Section 954(d)(3) of the Code) also organized in Canada, to the extent such items are properly allocable to the income of such related person that is not passive income.
In addition, for purposes of the PFIC income test and PFIC asset test described above, and assuming certain other requirements are met, "passive income" does not include certain interest, dividends, rents, or royalties that are received or accrued by the Company from certain "related persons" (as defined in Section 954(d)(3) of the Code) also organized in Canada, to the extent such items are properly allocable to the income of such related person that is not passive income. 42 Under certain attribution rules, if the Company is a PFIC, U.S.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our Common Shares are traded publicly on Nasdaq under the symbol "FLGC". As of March 21, 2024, there were approximately 4,531 holders of record of our Common Shares. We have not declared or paid any cash dividends on our Common Shares.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our Common Shares are traded publicly on Nasdaq under the symbol "FLGC". As of March 22, 2025, there were approximately 4,466 holders of record of our Common Shares. s We have not declared or paid any cash dividends on our Common Shares.
Holder files a U.S. federal income tax return for such year. If a U.S. Holder does not make a timely and effective QEF Election for the first year in the U.S. Holder's holding period for the Common Shares, the U.S. Holder may still be able to make a timely and effective QEF Election in a subsequent year if such U.S.
Holder does not make a timely and effective QEF Election for the first year in the U.S. Holder's holding period for the Common Shares, the U.S. Holder may still be able to make a timely and effective QEF Election in a subsequent year if such U.S.
The Company believes it was a PFIC for its most recently completed tax year, and based on current business plans and financial expectations, it believes that it will likely be a PFIC for its current tax year and may be a PFIC in subsequent tax years.
Holder resulting from the acquisition, ownership and disposition of Common Shares. The Company believes it was a PFIC for its most recently completed tax year, and based on current business plans and financial expectations, it believes that it will likely be a PFIC for its current tax year and may be a PFIC in subsequent tax years.
A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax, and under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S.
A failure to satisfy certain reporting requirements may result in an extension of the time period during which the IRS can assess a tax, and under certain circumstances, such an extension may apply to assessments of amounts unrelated to any unsatisfied reporting requirement. Each U.S. Holder should consult its own tax advisors regarding the information reporting and backup withholding rules.
Dividends on Common Shares Under the Tax Act, dividends on Common Shares paid or credited to a Non-Resident Holder will be subject to Canadian withholding tax at the rate of 25% of the gross amount of the dividends.
A Non-Resident Holder whose shares are taxable Canadian property should consult their own advisors. Dividends on Common Shares Under the Tax Act, dividends on Common Shares paid or credited to a Non-Resident Holder will be subject to Canadian withholding tax at the rate of 25% of the gross amount of the dividends.
Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder's U.S. federal income tax liability, if any, or will be refunded, if such U.S. Holder furnishes required information to the IRS in a timely manner.
Any amounts withheld under the U.S. backup withholding tax rules will be allowed as a credit against a U.S. Holder's U.S. federal income tax liability, if any, or will be refunded, if such U.S.
The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder.
Holder furnishes required information to the IRS in a timely manner. 47 The discussion of reporting requirements set forth above is not intended to constitute a complete description of all reporting requirements that may apply to a U.S. Holder.
A QEF Election will be treated as "timely" if such QEF Election is made for the first year in the U.S. Holder's holding period for the Common Shares in which the Company is a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S.
Holder's holding period for the Common Shares in which the Company is a PFIC. A U.S. Holder may make a timely QEF Election by filing the appropriate QEF Election documents at the time such U.S. Holder files a U.S. federal income tax return for such year. If a U.S.
Certain Canadian Federal Income Taxation Considerations The following is a general summary of the principal Canadian federal income tax considerations generally applicable under Income Tax Act (Canada) (the "Tax Act") to a holder of Common Shares, each of whom, at all relevant times, for the purposes of the Tax Act, holds such Common Shares as capital property, deals at arm's length with the Company, is not affiliated with the Company and, for purposes of the Tax Act, is not, is not deemed to be, a resident of Canada and has not and will not use or hold or be deemed to use or hold the Common Shares in the course of carrying on business in Canada (a "Non-Resident Holder").
Unregistered sale of Equity Securities There were no unregistered sales of equity securities by us during the year ended December 31, 2024 that were not reported in our quarterly reports on Form 10-Q or our current reports on Form 8-K. 38 Certain Canadian Federal Income Taxation Considerations The following is a general summary of the principal Canadian federal income tax considerations generally applicable under Income Tax Act (Canada) (the "Tax Act") to a holder of Common Shares, each of whom, at all relevant times, for the purposes of the Tax Act, holds such Common Shares as capital property, deals at arm's length with the Company, is not affiliated with the Company and, for purposes of the Tax Act, is not, is not deemed to be, a resident of Canada and has not and will not use or hold or be deemed to use or hold the Common Shares in the course of carrying on business in Canada (a "Non-Resident Holder").
Partners (or other owners or participants) of entities or arrangements that are classified as partnerships or as "pass-through" entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership and disposition of Common Shares. 40 Passive Foreign Investment Company Rules If the Company were to constitute a "passive foreign investment company" or "PFIC" within the meaning of Section 1297 of the Code for any year during a U.S.
Partners (or other owners or participants) of entities or arrangements that are classified as partnerships or as "pass-through" entities for U.S. federal income tax purposes should consult their own tax advisors regarding the U.S. federal income tax consequences arising from and relating to the acquisition, ownership and disposition of Common Shares.
Holder's tax basis in the Common Shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S.
Holder's tax basis in the Common Shares to reflect the amount included in income or allowed as a tax-free distribution because of such QEF Election. In addition, a U.S. Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of Common Shares.
Holder should consult its own tax advisors regarding the information reporting and backup withholding rules. 46 THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON SHARES. U.S.
THE ABOVE SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAX CONSIDERATIONS APPLICABLE TO U.S. HOLDERS WITH RESPECT TO THE ACQUISITION, OWNERSHIP AND DISPOSITION OF COMMON SHARES. U.S. HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES. ITEM 6. [Reserved].
If an entity or arrangement that is classified as a partnership (or other "pass-through" entity) for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax consequences to such entity or arrangement and the partners (or other owners or participants) of such entity or arrangement generally will depend on the activities of the entity or arrangement and the status of such partners (or owners or participants).
Holders described immediately above, should consult their own tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal net investment income, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of Common Shares. 41 If an entity or arrangement that is classified as a partnership (or other "pass-through" entity) for U.S. federal income tax purposes holds Common Shares, the U.S. federal income tax consequences to such entity or arrangement and the partners (or other owners or participants) of such entity or arrangement generally will depend on the activities of the entity or arrangement and the status of such partners (or owners or participants).
Any gain or loss recognized on a sale or other disposition of Common Shares generally will be United States source gain or loss. Certain U.S. Holders that are eligible for the benefits of Canada-U.S. Tax Convention may elect to treat such gain or loss as Canadian source gain or loss for U.S. foreign tax credit purposes.
Foreign Tax Credit Dividends paid on the Common Shares will be treated as foreign-source income, and generally will be treated as "passive category income" or "general category income" for U.S. foreign tax credit purposes. Any gain or loss recognized on a sale or other disposition of Common Shares generally will be United States source gain or loss. Certain U.S.
The Code applies various complex limitations on the amount of foreign taxes that may be claimed as a credit by U.S. taxpayers.
Holders that are eligible for the benefits of Canada-U.S. Tax Convention may elect to treat such gain or loss as Canadian source gain or loss for U.S. foreign tax credit purposes. The Code applies various complex limitations on the amount of foreign taxes that may be claimed as a credit by U.S. taxpayers.
Holder that makes a QEF Election generally will recognize capital gain or loss on the sale or other taxable disposition of Common Shares. 42 The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely.
The procedure for making a QEF Election, and the U.S. federal income tax consequences of making a QEF Election, will depend on whether such QEF Election is timely. A QEF Election will be treated as "timely" if such QEF Election is made for the first year in the U.S.
Holder should consult its own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency. 45 Foreign Tax Credit Dividends paid on the Common Shares will be treated as foreign-source income, and generally will be treated as "passive category income" or "general category income" for U.S. foreign tax credit purposes.
Holders who use the accrual method of tax accounting. Each U.S. Holder should consult its own U.S. tax advisors regarding the U.S. federal income tax consequences of receiving, owning, and disposing of foreign currency.
Holder's holding period, then certain potentially adverse rules would affect the U.S. federal income tax consequences to a U.S. Holder resulting from the acquisition, ownership and disposition of Common Shares.
Passive Foreign Investment Company Rules If the Company were to constitute a "passive foreign investment company" or "PFIC" within the meaning of Section 1297 of the Code for any year during a U.S. Holder's holding period, then certain potentially adverse rules would affect the U.S. federal income tax consequences to a U.S.
Removed
Unregistered sale of Equity Securities There were no unregistered sales of equity securities by us during the year ended December 31, 2023 that were not reported in our quarterly reports on Form 10-Q or our current reports on Form 8-K.
Removed
If the Common Shares are taxable Canadian property to a Non-Resident Holder, any capital gain realized on the disposition or deemed disposition of such shares, may not be subject to Canadian federal income tax pursuant to the terms of an applicable income tax treaty or convention between Canada and the country of residence of a Non-Resident Holder, including the Convention. 38 A Non-Resident Holder whose shares are taxable Canadian property should consult their own advisors.
Removed
Holders described immediately above, should consult their own tax advisors regarding the U.S. federal, U.S. federal alternative minimum, U.S. federal net investment income, U.S. federal estate and gift, U.S. state and local, and non-U.S. tax consequences relating to the acquisition, ownership and disposition of Common Shares.
Removed
Under certain attribution rules, if the Company is a PFIC, U.S.
Removed
Holders who use the accrual method of tax accounting. Each U.S.
Removed
HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS AS TO THE TAX CONSIDERATIONS APPLICABLE TO THEM IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES. ITEM 6. [Reserved].

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

98 edited+29 added−30 removed64 unchanged
Biggest changeGAAP financial measure, for the year ended December 31, 2022 is presented in the table below: (In thousands of United States dollars) JustCBD Vessel Phatebo Corporate & Other Consolidated Net loss from continuing operations $ (7,001 ) $ (21,985 ) $ (109 ) $ (17,608 ) $ (46,703 ) Income tax recovery (21 ) (1,372 ) (12 ) - (1,405 ) Interest expense (income) 17 (35 ) 2 (13 ) (29 ) Depreciation and amortization 643 1,434 1 66 2,144 EBITDA (6,362 ) (21,958 ) (118 ) (17,555 ) (45,993 ) Non-operating loss (income) (1) 56 4 (13 ) 276 323 Share based compensation - - - 3,404 3,404 Asset impairment 5,397 20,139 - 245 25,781 Unrealized loss from changes in fair value (2) - - - 593 593 Charges related to the flow-through of inventory step-up on business combinations 1,631 - - - 1,631 Other acquisition and transaction costs 614 81 - 353 1,048 Adjusted EBITDA $ 1,336 $ (1,734 ) $ (131 ) $ (12,684 ) $ (13,213 ) (1) Non-operating expense includes foreign exchange gain (loss).
Biggest changeGAAP financial measure, for the year ended December 31, 2024 is presented in the table below: 58 (In thousands of United States dollars) JustCBD Vessel Germany (3) Australian Vaporizers Corporate & Other Consolidated Net loss from continuing operations $ (3,007 ) $ (2,129 ) $ (1,004 ) $ (643 ) $ (9,124 ) $ (15,907 ) Income tax expense (recovery) 2 1 (186 ) (46 ) 52 (177 ) Interest expense 59 8 142 1 3 213 Depreciation and amortization 168 62 488 15 35 768 EBITDA (2,778 ) (2,058 ) (560 ) (673 ) (9,034 ) (15,103 ) Non-operating loss (1) 3 - - 21 461 485 Share based compensation - - - - 2,779 2,779 Asset impairment 585 1,206 - 414 32 2,237 Changes in financial instruments fair value (2) (57 ) - - - (202 ) (259 ) Charges related to the flow-through of inventory step-up on business combinations - - - 79 - 79 Other acquisition and transaction costs - - - - 266 266 Adjusted EBITDA $ (2,247 ) $ (852 ) $ (560 ) $ (159 ) $ (5,698 ) $ (9,516 ) The reconciliation of the Company's EBITDA and Adjusted EBITDA, non-U.S.
As a result, Just Brands has stopped distributing these products in the State of Florida. There is no assurance that these products can be sold in another jurisdiction, or at all.
As a result, Just Brands has stopped distributing these products in the State of Florida. There is no assurance that these products can be sold in another jurisdiction, or at all.
GAAP financial measures, to net income (loss) from continuing operations, the most directly comparable U.S.
GAAP financial measures, to net (loss) income from continuing operations, the most directly comparable U.S.
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.
Fundamental expertise entails compliance with product approvals, import permits, export permits, distribution licenses and other pertinent licenses. 50 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.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. An unrealized tax benefit may arise in connection with a period that has not yet been reviewed by the relevant tax authority.
Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. 64 An unrealized tax benefit may arise in connection with a period that has not yet been reviewed by the relevant tax authority.
Finished goods include the cost of direct materials and labor and a proportion of manufacturing overhead allocated based on normal production capacity . 60 Net realizable value represents the estimated selling price for inventories in the ordinary course of business, less all estimated costs of completion and costs necessary to make the sale.
Finished goods include the cost of direct materials and labor and a proportion of manufacturing overhead allocated based on normal production capacity. Net realizable value represents the estimated selling price for inventories in the ordinary course of business, less all estimated costs of completion and costs necessary to make the sale.
The Company and Lisan completed the sale of Cosechemos Ya S.A.S on November 1, 2023. Factors Impacting our Business Challenges in realization of overhead reductions. Management has taken, and continues to implement, various cost-saving initiatives to lower overhead costs.
The Company and Lisan completed the sale of Cosechemos Ya S.A.S on November 1, 2023. 49 Factors Impacting our Business Challenges in realization of overhead reductions. Management has taken, and continues to implement, various cost-saving initiatives to lower overhead costs.
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 companies.
The Company has 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 companies.
Management believes that EBITDA and Adjusted EBITDA provide meaningful and useful financial information as these measures demonstrate the operating performance of the business. The reconciliation of the Company's EBITDA and Adjusted EBITDA, non-U.S. GAAP financial measures, to net (loss) income from continuing operations, the most directly comparable U.S.
Management believes that EBITDA and Adjusted EBITDA provide meaningful and useful financial information as these measures demonstrate the operating performance of the business. The reconciliation of the Company's EBITDA and Adjusted EBITDA, non-U.S. GAAP financial measures, to net loss from continuing operations, the most directly comparable U.S.
We paid $0.3 million in issuance costs relating to the September 2023 unit offering and issued 54,760 warrants issued to the placement agent. As of December 31, 2023, all of the warrants issued in connection with the September 2023 unit offering remain outstanding.
We paid $0.3 million in issuance costs relating to the September 2023 unit offering and issued 54,760 warrants issued to the placement agent. As of December 31, 2024, all of the warrants issued in connection with the September 2023 unit offering remain outstanding.
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. 50 Operating Expenses The Company's operating expenses are apportioned based on the following categories: • Consulting and management fees include salary and benefit expenses for employees, directors and consultants for the Company's corporate activities, other than those included in one of general and administrative, share-based compensation, and research and development. • Professional fees include legal, audit and other expenses incurred by third-party service providers. • General and administrative include certain public company costs, merchant fees and temporary labor and subcontractor costs for the Company's operating subsidiaries. • Promotion and communication expenses consist primarily of services engaged in marketing and promotion of our products and costs associated with initiatives and development programs and salary and benefit expenses for certain employees. • Travel expenses relate to flight, lodging and incidental expenses for attending conferences, events and key business meetings. • Share-based compensation includes the cost of vesting of the Company's equity awards, including share options and restricted share awards. • Research and development expenses primarily consist of salary and benefit expenses for employees engaged in research and development activities, as well as other general costs associated with R&D activities. • Operating lease expense represents the cost of the Company's operating leases, primarily consisting of real estate and equipment. • Depreciation and amortization expense is provided on a straight-line basis over the corresponding assets' estimated useful lives. • Bad debt expense consists of changes in the provision for the Company's expected credit losses.
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. 52 Operating Expenses The Company's operating expenses are apportioned based on the following categories: • Consulting and management fees include salary and benefit expenses for employees, directors and consultants for the Company's corporate activities, other than those included in one of general and administrative, share-based compensation, and research and development. • Professional fees include legal, audit and other expenses incurred by third-party service providers. • General and administrative include certain public company costs, merchant fees and temporary labor and subcontractor costs for the Company's operating subsidiaries. • Promotion and communication expenses consist primarily of services engaged in marketing and promotion of our products and costs associated with initiatives and development programs and salary and benefit expenses for certain employees. • Travel expenses relate to flight, lodging and incidental expenses for attending conferences, events and key business meetings. • Share-based compensation includes the cost of vesting of the Company's equity awards, including share options, restricted share awards and stock appreciation rights. • Research and development expenses primarily consist of salary and benefit expenses for employees engaged in research and development activities, as well as other general costs associated with R&D activities. • Operating lease expense represents the cost of the Company's operating leases, primarily consisting of real estate and equipment. • Depreciation and amortization expense is provided on a straight-line basis over the corresponding assets' estimated useful lives. • Bad debt expense consists of changes in the provision for the Company's expected credit losses.
As of December 31, 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 consolidated financial statements were issued.
As of December 31, 2024, 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 consolidated financial statements were issued.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") of the Company should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2023, and the accompanying notes thereto (the "Financial Statements") included in this Annual Report, which have been prepared in accordance with U.S. GAAP.
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") of the Company should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2024, and the accompanying notes thereto (the "Financial Statements") included in this Annual Report, which have been prepared in accordance with U.S. GAAP.
Off-Balance Sheet Arrangements As of December 31, 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.
Off-Balance Sheet Arrangements As of December 31, 2024, 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.
This MD&A reports the Company's activities through December 31, 2023, unless otherwise indicated. Forward-looking statements are based on the Company's current expectations and assumptions regarding its business, potential target businesses, the economy and other future conditions.
This MD&A reports the Company's activities through December 31, 2024, unless otherwise indicated. Forward-looking statements are based on the Company's current expectations and assumptions regarding its business, potential target businesses, the economy and other future conditions.
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.
In November 2018, Phatebo also received a medical cannabis import and distribution license. We intend to leverage Phatebo's existing network of 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.
Management's plans in regard to these matters are described in Note 2 of the Company's audited consolidated financial statements for the year ended December 31, 2023. For more information, see Item 1A "Risk Factors." 48 Acquisition strategy disadvantages include significant transaction costs and liabilities of our acquirees.
Management's plans in regard to these matters are described in Note 2 of the Company's audited consolidated financial statements for the year ended December 31, 2024. For more information, see Item 1A "Risk Factors." Acquisition strategy disadvantages include significant transaction costs and liabilities of our acquirees.
In late January 2024, and in early February 2024, the Department issued a stop sale order on 231 hemp extract and other products distributed by Just Brands primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product.
On January 22, 2024, the Department issued a stop sale order on 231 hemp extract and other products distributed by Just Brands primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product.
Cash flows used in operating activities for the year ended December 31, 2023 were due primarily to operating expenses exceeding the gross profit for the year. Cash flows used in operating activities for the year ended December 31, 2022 were also due primarily to operating expenses exceeding the gross profit for the year.
Cash flows used in operating activities for the year ended December 31, 2024 were due primarily to operating expenses exceeding the gross profit for the year. Cash flows used in operating activities for the year ended December 31, 2023 were also due primarily to operating expenses exceeding the gross profit for the year.
GAAP financial measure, for the year ended December 31, 2023 is presented in the table below: (In thousands of United States dollars) JustCBD Vessel Phatebo Corporate & Other Consolidated Net (loss) income from continuing operations $ (22,790 ) $ (8,372 ) $ 274 $ ( 15,781 ) $ (46,669 ) Income tax expense (recovery) - 3 101 (1,732 ) (1,628 ) Interest expense (income) 9 2 92 (11 ) 92 Depreciation and amortization 742 736 28 829 2,335 EBITDA (22,039 ) (7,631 ) 495 (16,695 ) (45,870 ) Non-operating loss (income) (1) 2 14 - (174 ) (158 ) Share based compensation - - - 1,591 1,591 Asset impairment 22,892 7,402 - 9,213 39,507 Unrealized gain from changes in fair value (2) (964 ) - - (1,027 ) (1,991 ) Charges related to the flow-through of inventory step-up on business combinations - - - 45 45 Adjusted EBITDA $ (109 ) $ (215 ) $ 495 $ (7,047 ) $ (6,876 ) 56 The reconciliation of the Company's EBITDA and Adjusted EBITDA, non-U.S.
GAAP financial measure, for the year ended December 31, 2023 is presented in the table below: (In thousands of United States dollars) JustCBD Vessel Germany (3) Corporate & Other Consolidated Net (loss) income from continuing operations $ (22,790 ) $ (8,372 ) $ 274 $ (15,781 ) $ (46,669 ) Income tax expense (recovery) - 3 101 (1,732 ) (1,628 ) Interest expense (income) 9 2 92 (11 ) 92 Depreciation and amortization 742 736 28 829 2,335 EBITDA (22,039 ) (7,631 ) 495 (16,695 ) (45,870 ) Non-operating loss (income) (1) 2 14 - (174 ) (158 ) Share based compensation - - - 1,591 1,591 Asset impairment 22,892 7,402 - 9,213 39,507 Changes in financial instruments fair value (2) (964 ) - - (1,027 ) (1,991 ) Charges related to the flow-through of inventory step-up on business combinations - - - 45 45 Adjusted EBITDA $ (109 ) $ (215 ) $ 495 $ (7,047 ) $ (6,876 ) (1) Non-operating loss (income) includes foreign exchange (loss) gain.
Non-operating (Income) Expenses Flora realized $2.1 million in non-operating income for the year ended December 31, 2023 compared to non-operating expense of $0.9 million for the year ended December 31, 2022. This (income) expense consists of unrealized (gains) losses from changes in fair value, interest (income) expense and foreign exchange loss.
Non-operating Expenses (Income) Flora realized $0.4 million in non-operating expense for the year ended December 31, 2024 compared to non-operating income of $2.1 million for the year ended December 31, 2023. This expense (income) consists of unrealized losses (gains) from changes in fair value, interest (income) expense and foreign exchange loss.
Our effective tax rate during the year ended December 31, 2023 and 2022 was 3.4% and 2.9%, respectively. The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized.
Our effective tax rate during the year ended December 31, 2024 and 2023 was 1.1% and 3.4%, respectively. The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized.
Flora calculates Adjusted EBITDA as EBITDA plus (minus) non-operating expense (income), plus share based compensation expense, plus asset impairment charges, plus (minus) unrealized loss (gain) from changes in fair value, plus charges related to the flow-through of inventory step-up on business combinations, plus other acquisition and transaction costs.
Flora calculates Adjusted EBITDA as EBITDA plus (minus) non-operating expense (income), plus share based compensation expense, plus asset impairment charges, plus (minus) changes in financial instruments fair value, plus charges related to the flow-through of inventory step-up on business combinations, plus other acquisition and transaction costs.
The credit facilities have interest rates ranging from 5.45% to 6.46% per year and does not have a set maturity date. The interest rate is reset every time a new amount is drawn.
The credit facilities have interest rates ranging from 5.15% to 5.29% per year and does not have a set maturity date. The interest rate is reset every time a new amount is drawn.
Revenues generated for the year ended December 31, 2023 by the Company`s Colombian entities are included separately within Loss from Discontinued Operations . Revenues generated for the year ended December 31, 2023 by the House of Brands segment were $37.8 million compared to revenues generated for the year ended December 31, 2022 of $33.3 million.
Revenues generated for the year ended December 31, 2023 by the Company`s Colombian entities are included separately within Loss from Discontinued Operations . Revenues generated for the year ended December 31, 2024 by the House of Brands segment were $23.6 million compared to revenues generated for the year ended December 31, 2023 of $37.8 million.
Non-Operating Expenses Non-operating expenses include interest income and expenses, foreign exchange losses and unrealized losses from changes in fair value. Interest is primarily related to the Company's lease liabilities and operating lines of credit. Foreign exchange is largely related to the revaluation of balances denominated in foreign currencies to U.S. dollars.
Non-Operating Expenses Non-operating expenses include interest income and expenses, foreign exchange losses and changes in financial instruments 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.
Amounts are expressed in 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 December 31, 2023. Variance, ratio, and percentage changes in this MD&A are based on unrounded numbers.
Amounts are expressed in USD unless otherwise stated to be in Canadian dollars ("CAD"), Euro ("€" or "EUR"), or Australian dollars ("AUD"). Amounts stated in foreign currencies include approximate USD amounts based on exchange rates on December 31, 2024. Variance, ratio, and percentage changes in this MD&A are based on unrounded numbers.
Revenues are concentrated primarily in Germany and the United States, spanning pharmaceuticals, hemp and non-hemp consumer products and medicinal cannabis. 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.
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. 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.
Unrealized 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.
Changes in financial instruments fair value pertains 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.
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 $0.4 million for the year ended December 31, 2023 compared to $0.9 million for the year ended December 31, 2022.
Promotion expenses incurred in both periods also largely relate to the nature of JustCBD's business model, which is centered around promoting its products as a method for stimulating revenue. Travel Expenses Travel expenses totaled $0.5 million for the year ended December 31, 2024 compared to $0.4 million for the year ended December 31, 2023.
Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.
Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities.
Cash from Financing Activities Net cash provided from financing activities for the years ended December 31, 2023 and 2022 totaled $3.2 million and $4.4 million, respectively.
Cash from Financing Activities Net cash provided from financing activities for the years ended December 31, 2024 and 2023 totaled $6.5 million and $3.2 million, respectively.
The increase in income is primarily due to a $2.0 million gain on the value of the contingent consideration related to the JustCBD, No Cap Hemp and Original Hemp acquisitions during the year ended December 31, 2023, compared to a $0.6 million loss during the year ended December 31, 2022. 55 Income Tax Benefit The Company recognized $1.6 million and $1.4 million in income tax benefit for the years ended December 31, 2023 and 2022, respectively.
The reduced income is primarily due to a $0.3 million gain on the value of the contingent consideration related to the JustCBD and Original Hemp acquisitions during the year ended December 31, 2024, compared to a $2.0 million gain during the year ended December 31, 2023. 57 Income Tax Benefit The Company recognized $0.2 million and $1.6 million in income tax benefit for the years ended December 31, 2024 and 2023, respectively.
The Company believes that the following critical accounting policies involve the more significant judgments and estimates used in the preparation of its consolidated financial statements and are the most critical to aid the reader in fully understanding and evaluating the Company's reported financial results.
Actual results may differ from these estimates, and such differences may be material. 62 The Company believes that the following critical accounting policies involve the more significant judgments and estimates used in the preparation of its consolidated financial statements and are the most critical to aid the reader in fully understanding and evaluating the Company's reported financial results.
Flora then concluded that the carrying values of its JustCBD and FGH reporting units were higher than their respective estimated fair values, and a cumulative goodwill impairment loss totaling $23.4 million was recognized for the year ended December 31, 2023. The factors listed above representing goodwill impairment indicators were also indicators of impairment for certain other of our long-lived assets.
Flora then concluded that the carrying values of its JustCBD and FGH reporting units were higher than their respective estimated fair values, and a cumulative goodwill impairment loss totaling $23.4 million was recognized for the year ended December 31, 2023.
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 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.
Cash and cash equivalents consist primarily of cash on deposit with banks. Cash and cash equivalents were $4.4 million and $8.9 million as of December 31, 2023 and 2022, respectively.
Cash and cash equivalents consist primarily of cash on deposit with banks. Cash and cash equivalents were $6.1 million and $4.4 million as of December 31, 2024 and 2023, respectively.
Cash flows used in investing activities for the year ended December 31, 2023 were primarily related to capital expenditures related to equipment in the House of Brands segment.
Cash flows used in investing activities for the year ended December 31, 2023 were primarily related to capital expenditures related to equipment in the House of Brands segment. Working Capital As of December 31, 2024, we had working capital of $0.9 million.
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 TruHC, the Company incurred $0.2 million in transaction costs in 2024, which included legal and consulting fees incurred by the Company. In addition, we assumed $1.5 million in liabilities, which included $0.4 million of lease liabilities and other ordinary course operating liabilities.
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.
For asset groups that had indicators of impairment, the Company performed a quantitative analysis as of each interim period in 2023 to determine if impairment existed by comparing the carrying amount of each asset group to the future undiscounted cash flows the asset group is expected to generate over their remaining lives.
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 FGH in December 2022.
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 TruHC in April 2024 and Australian Vaporizers in June 2024.
As set forth in such notification, Nasdaq advised the Company that, under Nasdaq Rule 5605(c)(4), the Company was afforded a cure period in order to regain compliance (i) until the earlier of the Company's next annual shareholders' meeting or November 30, 2024, or (ii) if the next annual shareholders' meeting is held before May 28, 2024, then the Company must evidence compliance no later than May 28, 2024. 49 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.
As set forth in such notification, Nasdaq advised the Company that, under Nasdaq Rule 5605(c)(4), the Company was afforded a cure period in order to regain compliance (i) until the earlier of the Company's next annual shareholders' meeting or November 30, 2024, or (ii) if the next annual shareholders' meeting is held before May 28, 2024, then the Company must evidence compliance no later than May 28, 2024.
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.
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.
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 growth, manufacture, and production of its products. The Company's capital expenditures consist primarily of additional facilities, improvements in existing facilities and product development.
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 growth, manufacture, and production of its products.
Cash flows provided from financing activities for the year ended December 31, 2023 were primarily related to the Company's September 2023 unit offering (as described below) and borrowings on a credit facility through its FGH subsidiary (as described below), partially offset by amounts used for equity issuances costs and loan repayments. 58 Cash flows provided from financing activities for the year ended December 31, 2022 were primarily related to the Company's December 2022 unit offering (as described below) as well as from proceeds received from warrant and stock option exercises, partially offset by amounts used for equity issuances costs and for the Company's share repurchase program.
Cash flows provided from financing activities for the year ended December 31, 2024 were related to the Company's April 2024 and December 2024 unit offerings (as described below) as well as net borrowings on the credit facilities in Germany through the Company's Phatebo subsidiary (as described below). 60 Cash flows provided from financing activities for the year ended December 31, 2023 were primarily related to the Company's September 2023 unit offering (as described below) and borrowings on a credit facility through its FGH subsidiary (as described below), partially offset by amounts used for equity issuances costs and loan repayments.
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.
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.
Contractual Obligations At December 31, 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) 2,962 2,962 - - Sales tax (1) 2,538 2,538 - - Contingent purchase consideration (2) 1,095 921 52 122 Operating lease obligations (3) 1,926 900 834 192 Long term debt (4) 1,931 1,931 - - Total $ 10,452 $ 9,252 $ 886 $ 314 (1) See Note 19 of the Company's Consolidated Financial Statements for the year ended December 31, 2023.
Contractual Obligations At December 31, 2024, 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) 4,241 4,241 - - Sales tax (1) 2,695 2,695 - - Contingent purchase consideration (2) 835 835 - - Operating lease obligations (3) 3,409 1,048 1,721 640 Long term debt (4) 2,080 2,080 - - Total $ 13,260 $ 10,899 $ 1,721 $ 640 (1) See Note 19 of the Company's consolidated financial statements for the year ended December 31, 2024.
For the year ended December 31, 2023 For the year ended December 31, 2022 Revenue $ 76,071 $ 33,401 Gross profit 17,738 13,251 Consulting and management fees 11,876 9,232 Professional fees 2,301 3,884 General and administrative 1,646 3,287 Promotion and communication 4,710 8,033 Travel expenses 413 930 Share based compensation 1,591 3,404 Research and development 62 388 Operating lease expense 1,211 937 Depreciation and amortization 2,335 2,144 Bad debt expense 236 941 Other expenses (income), net 2,204 1,511 Goodwill and other asset impairments 39,507 25,781 Operating loss (50,354 ) (47,221 ) Non-operating expenses (2,057 ) 887 Net loss before taxes and discontinued operations (48,297 ) (48,108 ) Income tax benefit (1,628 ) (1,405 ) Net loss from continuing operations (46,669 ) (46,703 ) Loss from discontinued operations (9,678 ) (5,926 ) Net loss for the period $ (56,347 ) $ (52,629 ) Stop Sale Order by Florida Department of Agriculture and Consumer Services Division of Food Safety On October 31, 2023, the Department issued 340 stop sale orders on hemp extract products distributed by Just Brands primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product.
The results of operations data have been derived from our audited consolidated financial statements included elsewhere in this Annual Report. 53 For the year ended December 31, 2024 For the year ended December 31, 2023 Revenue $ 59,505 $ 76,071 Gross profit 12,497 17,738 Consulting and management fees 9,661 11,876 Professional fees 2,684 2,301 General and administrative 1,938 1,646 Promotion and communication 5,298 4,710 Travel expenses 505 413 Share based compensation 2,779 1,591 Research and development 418 62 Operating lease expense 718 1,211 Depreciation and amortization 768 2,335 Bad debt expense 411 236 Other expenses, net 725 2,204 Goodwill and other asset impairments 2,237 39,507 Operating loss ( 15,645 ) (50,354 ) Non-operating expenses 439 (2,057 ) Net loss before taxes and discontinued operations (16,084 ) (48,297 ) Income tax benefit (177 ) (1,628 ) Net loss from continuing operations (15,907 ) (46,669 ) Loss from discontinued operations - (9,678 ) Net loss for the period $ (15,907 ) $ (56,347 ) Stop Sale Order by Florida Department of Agriculture and Consumer Services Division of Food Safety On October 31, 2023, the Department issued 340 stop sale orders on hemp extract products distributed by Just Brands primarily on the basis that such products were determined to be attractive to children with the product and/or labels in the shape of an animal, human, or cartoon; or bears any reasonable resemblance to an existing candy product, or branded food product.
Flora continues to believe its 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 December 31, 2023 and 2022.
Flora continues to believe its 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 December 31, 2024 and 2023. Loss from Discontinued Operations Loss from discontinued operations totaled $nil in the year ended December 31, 2024 compared to $9.7 million in the year ended December 31, 2023.
Impairment of goodwill and indefinite-lived intangible assets Goodwill is allocated to the reporting unit in which the business that created the goodwill resides. A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management.
A reporting unit is an operating segment, or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management.
Amortization expense is recorded within depreciation and amortization on the consolidated statements of loss and comprehensive loss. Intangible assets that have indefinite useful lives are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired.
Intangible assets that have indefinite useful lives are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Impairment of goodwill and indefinite-lived intangible assets Goodwill is allocated to the reporting unit in which the business that created the goodwill resides.
Our equity offerings in 2022 and 2023 are described below. September 2023 Unit Offering In September 2023, we closed a registered direct offering of 1,369,000 units of the Company at a price of $2.00 per unit for gross proceeds of $2.7 million.
Our equity offerings in 2023 and 2024 are described below. December 2024 Unit Offerings In December 2024, we closed a registered direct offering of 2,850,000 units of the Company at a price of $1.25 per unit for gross proceeds of $3.6 million. Each unit is comprised of one Common Share of the Company.
(In thousands of United States dollars) For the year ended December 31, 2023 For the year ended December 31, 2022 Cash used in operating activities $ (8,396 ) $ (15,935 ) Cash from financing activities 3,150 4,413 Cash used in investing activities (234 ) (15,802 ) Effect of exchange rate change 930 (755 ) Change in cash during the period (4,550 ) (28,079 ) Cash, beginning of period 8,935 37,616 Cash included in assets held for sale - (602 ) Cash, end of period $ 4,385 $ 8,935 Cash used in Operating Activities Net cash used in operating activities for the years ended December 31, 2023 and 2022 totaled $8.4 million and $15.9 million, respectively.
(In thousands of United States dollars) For the year ended December 31, 2024 For the year ended December 31, 2023 Cash used in operating activities $ (5,032 ) $ (8,396 ) Cash from financing activities 6,494 3,150 Cash from (used) in investing activities 203 (234 ) Effect of exchange rate change 2 930 Change in cash during the period 1,667 (4,550 ) Cash, beginning of period 4,385 8,935 Cash, end of period $ 6,052 $ 4,385 Cash used in Operating Activities Net cash used in operating activities for the years ended December 31, 2024 and 2023 totaled $5.0 million and $8.4 million, respectively.
(2) Unrealized loss from changes in fair value includes changes in the value of the Company's long-term investment in an early-stage European cannabis company and the value of the Company's contingent consideration associated with its acquisition of JustCBD.
(2) Changes in financial instruments fair value includes changes in the value of the Company's long-term investment in an early-stage European cannabis company and the value of the Company's contingent consideration associated with its acquisitions of JustCBD and Original Hemp. (3) Germany includes the Company's main operating entities in Germany, Phatebo and TruHC.
The Company's ability to execute its operating plans through 2024 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.
The 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. 59 The Company's ability to execute its operating plans through 2025 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.
Intangible Assets Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date.
Intangible Assets Intangible assets are recorded at cost less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Amortization is provided on a straight-line basis over the assets' estimated useful lives, which do not exceed the contractual period, if any.
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. 57 The Company's primary uses of cash are for working capital requirements and capital expenditures.
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.
Cash Flows The following table sets forth the major components of the Company's condensed consolidated statements of cash flows for the periods presented.
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 condensed consolidated statements of cash flows for the periods presented.
Goodwill and other asset impairments Goodwill and other asset impairments totaled $39.5 million and $25.8 million in asset impairments for the years ended December 31, 2023 and 2022, respectively. The Company tests its goodwill and indefinite-lived intangibles for impairment as part of its annual fourth quarter impairment test, and at interim periods when impairment indicators exist.
The Company tests its goodwill and indefinite-lived intangibles for impairment as part of its annual fourth quarter impairment test, and at interim periods when impairment indicators exist.
These expenses were for various trips related to the subsidiaries' and the Company's promotional activities. The decrease of $0.5 million in 2023 is due to the Company's efforts to minimize overhead expenses. Share-based Compensation Expenses Share based compensation expenses totaled $1.6 million for the year ended December 31, 2023 compared to $3.4 million for the year ended December 31, 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 $2.8 million for the year ended December 31, 2024 compared to $1.6 million for the year ended December 31, 2023. These expenses represent the amortization of the fair value of share-based payments.
Research and Development Expenses Research and development expenses totaled $0.1 million for the year ended December 31, 2023 compared to $0.4 million for the year ended December 31, 2022.
The increase is due to the grant of Stock Appreciation Rights to key employees during the year ended December 31, 2024. Research and Development Expenses Research and development expenses totaled $0.4 million for the year ended December 31, 2024 compared to $0.1 million for the year ended December 31, 2023.
Purchase price allocations may be preliminary and, during the measurement period not to exceed one year from the date of acquisition, changes in assumptions and estimates that result in adjustments to the fair value of assets acquired and liabilities assumed are recorded in the period the adjustments are determined.
Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognized in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of. 63 Purchase price allocations may be preliminary and, during the measurement period not to exceed one year from the date of acquisition, changes in assumptions and estimates that result in adjustments to the fair value of assets acquired and liabilities assumed are recorded in the period the adjustments are determined.
Loss from Discontinued Operations Loss from discontinued operations includes the net income (loss), net of tax, of the Colombian subsidiaries sold on July 5, 2023 and on November 1, 2023.
Loss from Discontinued Operations Loss from discontinued operations includes the net loss, net of tax, of the Colombian subsidiaries sold on July 5, 2023 and on November 1, 2023. It also includes an expected loss on the disposal as the carrying value of the assets being sold exceeded the expected sale price.
Until the sale of the Colombia Assets, 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.
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.
(2) See Note 10 of the Company's Consolidated Financial Statements for the year ended December 31, 2023. (3) See Note 14 of the Company's Consolidated Financial Statements for the year ended December 31, 2023. (4) See Note 13 of the Company's Consolidated Financial Statements for the year ended December 31, 2023.
(2) Contingent purchase consideration related to the February 2022 acquisition of JustCBD and the March 2023 acquisition of Original Hemp. (3) See Note 14 of the Company's consolidated financial statements for the year ended December 31, 2024. (4) See Note 13 of the Company's consolidated financial statements for the year ended December 31, 2024.
The amounts reflect the Company's estimate of lifetime expected losses related to outstanding trade receivables. The $0.7 million decrease in 2023 is driven by the Company's exit from the Colombian related businesses. Other Expenses Other expenses totaled $2.2 million for the year ended December 31, 2023 compared to $1.5 million for the year ended December 31, 2022.
Bad Debt Expense Bad debt expense totaled $0.4 million for the year ended December 31, 2024 compared to $0.2 million for the year ended December 31, 2023. The amounts reflect the Company's estimate of lifetime expected losses related to outstanding trade receivables.
Revenue Revenue totaled $76.1 million and $33.4 million for the years ended December 31, 2023 and 2022, respectively.
Operating Expenses Operating expenses totaled $28.1 million and $68.1 million for the years ended December 31, 2024 and 2023, respectively.
The increase was primarily driven by the following: 52 • FGH contributed $38.3 million for the year ended December 31, 2023 compared to $0.1 million for the year ended December 31, 2022. • JustCBD contributed $31.1 million for the year ended December 31, 2023 compared to $26.4 million for the year ended December 31, 2022. • Vessel contributed $6.7 million for the year ended December 31, 2023, compared to $7.0 million for the year ended December 31, 2022.
The decrease was primarily driven by the following: • Phatebo contributed $35.9 million for the year ended December 31, 2024 compared to $38.3 million for the year ended December 31, 2023. • JustCBD contributed $17.7 million for the year ended December 31, 2024 compared to $31.1 million for the year ended December 31, 2023. • Vessel contributed $5.2 million for the year ended December 31, 2024, compared to $6.7 million for the year ended December 31, 2023. • AV was acquired in June 2024 and contributed $0.7 million during the year ended December 31, 2024.
Net loss The Company incurred a net loss of $56.3 million and $52.6 million for the years ended December 31, 2023 and 2022, respectively.
The sale of the Colombian subsidiaries was completed during the third and fourth quarters of 2023. Net loss The Company incurred a net loss of $15.9 million and $56.3 million for the years ended December 31, 2024 and 2023, respectively.
The credit facilities total 4.0 million Euros with two different German banks, Hypoverinsbank and Volksbank, secured by either joint and several guarantees or default guarantees. On December 31, 2023, the outstanding amount was 1.8 million Euros ($1.9 million USD) and was due within three months.
Debt In addition to the equity offerings described above, the Company also has access to credit facilities through Phatebo. The credit facilities total 2.4 million Euros with three different German banks, Hypoverinsbank, Arztebank and Volksbank, secured by default guarantees. On December 31, 2024, the outstanding amount was 2.0 million Euros ($2.1 million USD) and was due within six months.
The Company performed a quantitative analysis as of December 31, 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 resulted in impairments operating lease right of use assets and certain intangibles assets totaling $2.7 million.
For asset groups that had indicators of impairment, the Company performed a quantitative analysis as of each interim period in 2024 to determine if impairment existed by comparing the carrying amount of each asset group to the future undiscounted cash flows the asset group is expected to generate over their remaining lives.
Research and development expenses have been minimized in the period ended December 31, 2023 whereas in the period ended December 31, 2022 they consisted primarily of contract research fees, manufacturing, consultant fees, and costs related to the launch of new brands for the Vessel business.
Research and development expenses consist 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 $0.7 million for the year ended December 31, 2024 compared to $1.2 million for the year ended December 31, 2023.
EBITDA and Adjusted EBITDA EBITDA and Adjusted EBITDA are non-U.S. GAAP financial measures that do not have any standardized meaning prescribed by U.S. GAAP and may not be comparable to similar measures presented by other companies.
GAAP financial measures that do not have any standardized meaning prescribed by U.S. GAAP and may not be comparable to similar measures presented by other companies. Flora calculates EBITDA as total net (loss) income from continuing operations, plus (minus) income taxes (recovery), plus (minus) interest expense (income), plus depreciation and amortization.
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.
This strategy was devised to allow us access to markets around the globe based on the legal standing of cannabis in each of the geographical locations in which we operate.
This analysis resulted in impairments of property, plant and equipment, operating lease right of use assets and certain intangibles assets totaling $13.4 million for the quarter ended June 30, 2023. The Company performed a similar analysis for its asset groups as of December 31, 2023, and determined that indicators of impairment were present.
This analysis resulted in impairments of property, plant and equipment, operating lease right of use assets and certain intangibles assets totaling $16.1 million for the year ended December 31, 2023.
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. 47 Vessel is Flora's cannabis accessory and technology brand currently servicing the United States and Canada through direct-to-consumer and retail sales.
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.
A change in the recognition or measurement of an unrealized tax benefit is reflected in the period during which the change occurs.
A change in the recognition or measurement of an unrealized tax benefit is reflected in the period during which the change occurs. Interest and penalties in respect of income taxes are not recognized in the consolidated statement of operations as a component of income taxes but as a component of interest expense.
Interest and penalties in respect of income taxes are not recognized in the consolidated statement of operations as a component of income taxes but as a component of interest expense. 62 Recently Adopted Accounting Principles See Note 3, "Significant Accounting Policies", of the notes to the consolidated financial statements for a discussion of recently issued accounting standards. ITEM 7A.
Recently Adopted Accounting Principles See Note 3, "Significant Accounting Policies", of the notes to the consolidated financial statements for a discussion of recently issued accounting standards.
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.
The Company has two major revenue groups, which are also its two reportable segments: (1) House of Brands; and (2) commercial and wholesale. 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.
Revenues generated for the year ended December 31, 2023 by the commercial and wholesale segment were $38.3 million compared to revenues generated for the year ended December 31, 2022 of $0.1 million. The revenue was entirely generated by FGH, which was acquired on December 23, 2022. Revenues from the pharmaceuticals segment were formerly generated by the Company's Colombian entities.
Revenues generated for the year ended December 31, 2024 by the commercial and wholesale segment were $35.9 million compared to revenues generated for the year ended December 31, 2023 of $38.3 million. The decrease in revenue, which was entirely generated by Phatebo, was driven by a change in management and customer transition.

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