The Flowr Corporation

Producing Premium Quality Cannabis for the Canadian Medical and Recreational Markets

This profile is part of a paid investor education campaign.*

Overview

The Flowr Corporation (TSXV:FLWR), a Health Canada Licensed Producer (LP) of cannabis under the Access to Cannabis for Medical Purposes Regulations (ACMPR), is a leading cultivator founded by MedReleaf co-founder Tom Flow and a team of industry pioneers, successful start-up executives and top industry scientists.

Flowr is building the most advanced cultivation facilities in the industry which it expects to generate consistently high crop yields, deliver premium and ultra-premium cannabis products, and maximize return on investment. The company also will be an R&D leader as it was selected by the Hawthorne Gardening Division of The Scotts Miracle-Gro Company (NYSE:SMG) for an exclusive cannabis R&D alliance..

Flowr’s 85,000 square foot flagship facility in Kelowna, British Columbia, is engineered to pharmaceutical industry standards. This, along with exacting protocols designed by the Flowr team, enables the company to grow cannabis that exceeds Health Canada’s stringent quality standards without using taste-diminishing and smell-altering irradiation. Without the proper experience and protocols, most other Canadian producers have to use irradiation to kill yeast, mold and bacteria on their flower to meet quality standards. The presence of these pathogens and use of irradiation both negatively affect the pleasurable scents and flavors of cannabis while introducing or enhancing negative scents and flavors.

The Kelowna facility is 20 percent operational (as of December 2018) with the remaining 80 percent slated to come by mid-2019.  The Company expects to sell 350,000 grams of cannabis in 2018 and significantly more in 2019 and beyond. It expects to produce upwards of 12 million grams of premium, non-irradiated cannabis flower on an annual basis after the initial Kelowna facility is complete. With further enhanced yields and planned expansion of production facilities on the campus, Flowr expects to reach a total capacity of 60 million grams annually in 2022.

The Flowr Group Kelowna BC Map

Leading Flowr’s cultivation program is industry pioneer, company co-founder and Flowr president Tom Flow. Flow is widely recognized for his cannabis thought leadership and expertise building and operating cannabis cultivation facilities. Flow designed, built and set up SOPs for MedReleaf’s flagship Markham cultivation facility which has continued to be perhaps the most productive facility in the country prior to the Flowr flagship facility. Long one of Canada’s most efficient and profitable LPs, MedReleaf was acquired by Aurora (TSX: ACB; NYSE: ACB) for approximately C$3 billion. Flow and his team have designed and built more than a dozen cultivation facilities and secured three producer’s licenses under various Canadian regulatory regimes.

In March 2018, Flowr and the Hawthorne Gardening Division of The Scotts Miracle-Gro Company, a world leader in lawn and garden products, announced an exclusive strategic R&D alliance. After evaluating numerous Canadian LPs, Hawthorne chose to partner with Flowr based on the experience and expertise of the company’s cultivation and R&D teams and the company’s advanced growing capabilities.

Flowr is entering the market with two different brands to meet the growing demand for premium, non-irradiated cannabis in the medicinal and adult use markets: FlowerRx for the medicinal market and Flowr for the premium adult-use market. In addition to Flowr’s in-house brands, the company has partnered with Ace Valley, a new brand from the team behind Ace Hill Beer, to provide cannabis products to the adult-use recreational cannabis market.

Flowr recently was issued a Sales License by Health Canada, allowing it to sell to the medicinal and recreational markets. The company has reached agreements to be a supplier to the province-controlled exclusive legal retailers of adult-use cannabis in British Columbia, Ontario and Nova Scotia and with a private dispensary in Saskatchewan.  Flowr’s recreational products are available to more than half of Canada’s population and the Company has agreements with several major medical distributors.

Company Highlights

  • High quality, non-irradiated cannabis to be produced at scale with a focus on optimizing crop yields and quality to maximize profitability and return on investment.
  • Co-founder Tom Flow is a world-renowned cultivation expert and co-founder of MedReleaf (acquired by Aurora Cannabis for C$3 billion).
  • Anticipate a lasting shortage of high-quality cannabis flower in Canada – Flowr’s 60,000-kilogram targeted capacity will help fill this gap while commanding premium prices.
  • Cultivation facilities designed to support ultra-high yields with each room targeting six harvests and an industry leading ~450 g/SF/year once optimized, resulting in relatively low cost of goods sold.
  • Targeting medical and adult-use markets, all with a focus on high margin, premium cannabis to drive top and bottom line growth.
  • Partnership with Scotts Miracle-Gro subsidiary on a first-of-its-kind R&D facility under an exclusive alliance with Flowr.
  • Broke ground on R&D facility and construction is underway.
  • Obtained Health Canada Sales License and named one of the initial suppliers to the exclusive legal adult-use retailers in British Columbia, Nova Scotia and Ontario.
  • Fulfilled initial shipments to British Columbia, Ontario and Nova Scotia.
  • Strong management team with over 50 years of industry experience.

The Flowr Group Business Model

According to a public report issued by Clarus, new production in the Canadian cannabis market will be focused on lower quality greenhouse and outdoor product, resulting in a shortage of premium and ultra-premium product. In anticipation of this shortage, Flowr will focus on developing premium products efficiently, profitably and at-scale for both the medical and recreational markets.

Because it has the advantage of growing cannabis flower that will not require the taste- and scent damaging irradiation to meet Health Canada quality standards, Flowr’s products will provide a superior user sensory experience and command premium prices.

Flowr’s purpose built cultivation facilities also will enable it to achieve a significant advantage in both cost and volume of production. Flowr expects its cultivation facilities, built with proprietary, patent-pending systems, will deliver yields of 450 grams per square foot by the end of 2022, which is three times more efficient than the estimated industry average of approximately 150 grams per square foot.

By optimizing yield, the Company will produce significantly more cannabis flower on a smaller footprint than other producers, thus generating far high revenue per square foot and keeping costs much lower, leading to higher margins.

Flowr is poised to become the pre-eminent indoor premium cannabis grower in Canada and one of the country’s top LPs. The company’s focus on yield, quality and price point and its team’s ability to cultivate at scale are expected to drive high margins, significant growth and strong return on investment. Looking further ahead, Flowr is evaluating opportunities in a number of market segments, including export opportunities, international partnerships andother delivery form factors (oils, edibles, etc.) in Canada.

Brands

Flowr will offer patients and cannabis consumers distinct brands for the adult-use and medical cannabis markets.

FlowrRx

FlowrRx, featuring premium quality medicinal cannabis that enables patients to live better, fuller lives. A dedicated client services team will provide patients with personalized support while an R&D team develops innovative flower strains and premium products targeted to specific conditions. Patient well-being is considered at every stage of the process – from genetic selection to harvest, trimming and curing techniques. FlowrRx and its team of passionate scientists and leading cultivation specialists are dedicated to advancing the scientific understanding of cannabis.

Flowr

Flowr is the company’s premium recreational adult-use brand featuring an active, West Coast-inspired lifestyle for the cannabis connoisseur and enthusiast market. Through the continuous innovation of procedures and practices, Flowr’s talented team of experts is crafting premium products that deliver unparalleled experiences.

R&D partnership with Scotts Miracle-Gro subsidiary, Hawthorne Gardening Co.

In March 2018, Flowr announced that it had entered into a strategic R&D alliance with Hawthorne Gardening Co., a subsidiary of Scotts Miracle-Gro. Hawthorne and Flowr will construct an extensive R&D facility that is integrated into Flowr’s Kelowna campus. This facility is North America’s first dedicated cannabis R&D facility focused on advancing cannabis cultivation techniques and systems. The facility will support researchers from both organizations and combine laboratories, indoor and greenhouse grow suites, training areas and genetics breeding areas in a single building. Construction of the facility is currently underway.

The Flowr-Hawthorne alliance will help Flowr maintain its competitive advantage in cultivation and keep it on the cutting edge of cannabis innovation.

The Flowr Group Facility

Ace Valley Partnership

Flowr has partnered with Ace Valley, a new cannabis brand for the adult-use market that was created by the team behind Ace Hill Beer. Ace Valley will offer cannabis consumers pre-rolls and dried flower cultivated by Flowr. Ace Valley products are available through the Ontario Cannabis Store and through the British Columbia Liquor Distribution Board (BCLDB).

“From the start, Flowr and Ace Valley shared a commitment to creating high quality, authentic products for customers,” said Steve Klein, Chairman and Chief Strategist for Flowr.  “We believe that our focus on innovation, craftsmanship and consistency in cultivation and Ace Valley’s expertise around the craft consumer is a natural fit and provides the foundation for these initial Ace Valley products.”

Management

Steve Klein —Chairman of the Board and Chief Strategy Officer

Steve Klein began his career as a corporate tax attorney at Skadden Arps in New York before leaving in 1992 to co-found Apple Core Holdings, a private investment firm with holdings in hotels, hospitality venues, entertainment, technology, investment funds and cannabis.  Apple Core’s investments include hotels in midtown Manhattan, Bengal Capital, Gotham Hall Events, The Ziegfeld Ballroom, and Zeno Radio. He produced both the award-winning Broadway show and Spike Lee film “Passing Strange.”

Klein holds a J.D., Magna Cum Laude, from Boston University Law School and a Master’s Degree in tax law from New York University Law School.  He received his Bachelor of Science in business from the State University of New York in Albany.

Tom Flow — Co-CEO, Director

Tom Flow co-founded and built MedReleaf in 2014, Canada’s most profitable LP, which has agreed to be acquired for C$3.2B.  Flow and his team, many of whom have joined him at Flowr, built 17 facilities ranging from 3,000 to 30,000-square-feet under several Canadian regulatory regimes.  Flow is widely recognized for his cannabis thought leadership and expertise building and operating cannabis cultivation facilities.

Vinay Tolia –  Co-CEO, Director

Vinay Tolia is the co-founder and managing member of derivatives trading hedge fund Bengal Capital Trading LLC.  He is also an early investor/advisor in numerous cannabis companies, including GTI and Bloom Farms. Earlier in his career, Tolia was an investment banker at Peter J. Solomon Company and Midtown Capital.

Lance Emanuel — President

Lance Emanuel has a proven record of successfully building and scaling companies in highly regulated industries.  He brings a wealth of experience in the management of operations, sales, technology, legal, compliance and regulatory affairs as well as in procuring both debt and equity financing and developing large scale strategic partnerships.

Emanuel holds a BBA, with distinction, from the University of Michigan’s Ross School of Business and received his Juris Doctor from the Benjamin N. Cardozo School of Law in New York City. He has been licensed to practice law in New York State since 2008.

Alex Dann — CFO

Alex Dann is a bilingual CPA, CA with over 25 years of experience leading financial operations and strategic planning for multinational public companies, primarily in the mining and manufacturing sectors. Dann was most recently CFO of Era Resources Inc., prior to its acquisition by The Sentient Group. He has held senior positions including CFO of Avion Gold Corporation prior to its acquisition by Endeavour Mining Ltd., CFO of Goldbelt Resources Ltd. prior to its acquisition by Wega Mining ASA and Group Controller of Litens Automotive Partnership, a division within Magna International Inc.

Dr. Lyle Oberg —Chief Policy and Medical Officer, Director

Dr. Oberg received his MD degree from the University of Alberta in 1983. Dr. Oberg was a member of the Alberta Legislature from 1993 to 2008, and was the former Alberta Minister of Finance. Dr. Oberg was also formerly a medical doctor practicing in Alberta.

Francesco Tallarico — General Counsel and Corporate Secretary

Francesco Tallarico oversees all aspects of Flowr’s legal needs, including being an integral part of Flowr’s M&A and corporate finance strategy. Prior to joining Flowr, Tallarico served as Chief Legal Officer and Corporate Secretary at Concordia International Corp., a specialty pharmaceutical company that is operating in over 90 countries. At Concordia, he led the global legal and compliance functions, including having led Concordia’s M&A transactions valued at over US$4.5 billion and corporate restructuring that resulted in Concordia reducing its debt by approximately US$2.4 billion.

Before joining Concordia, Tallarico practiced law in Toronto at Fasken Martineau DuMoulin LLP, specializing in corporate finance, M&A and securities matters. He received his Bachelor of Arts from the University of Toronto and his Juris Doctor from the University of Windsor.

Jason Broome Senior VP Operations

Jason Broome has 15 years’ experience in the pharmaceutical industry with roles in: sales, marketing, business, unit management, government affairs and global advisory boards. He has established, operated and sold several healthcare-related companies. With a master’s degree in Molecular Genetics, his expertise spans all aspects of development. From molecule to market, he has led the commercialization of several key pharmaceutical brands.


 

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