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The Flowr Corporation (TSX.V: FLWR) Leverages Cultivation Skill and R&D Alliance to Boost Earnings Potential

  • The Flowr Corporation’s stock is rated as a ‘Speculative Buy’ in expectation of above-average profit margins and significant growth
  • Flowr fulfilled orders from three provinces on-time and in-full in advance of October 17 and is preparing re-stocking shipments
  • Investment in a 50,000 square foot cannabis R&D facility expected to keep the company on the cutting edge of cultivation productivity and quality

The Flowr Corporation (TSX.V: FLWR) is a Canada-based licensed producer of premium cannabis products. The company invests heavily in its cultivation and R&D teams and facilities in order to produce premium and ultra-premium cannabis that provides a consistent consumer experience to medical and recreational clients. The investments should also enable the company to achieve very high crop yields, resulting in high margins and strong return on investment. To achieve this, it has purpose-built cultivation facilities that are equipped with the most advanced cannabis growing technology in the industry.

In the cannabis sector, Flowr could become one of the most sought-after companies by investors, according to a recent report by Clarus Securities analyst Noel Atkinson. Atkinson rated the stock a “Speculative Buy,” as he believes Flowr has a unique advantage in that it will be able to successfully scale indoor cultivation of cannabis (http://nnw.fm/7Covy). The company fills one of the most lucrative product gaps in the cannabis sector in Canada, which is the production of premium flower with enough capacity to cater to a national customer base, the report says. Atkinson expects this strong market position to enable Flowr to increase its earnings before interest, tax, depreciation, and amortization (EBITDA) to $6.8 million in fiscal year 2019, supporting a projected 37 percent increase in Flowr’s stock price.

One of the greatest strengths of the company is the experience possessed by its cultivation team, which is led by company co-founder Tom Flow. Flow was also the co-founder of MedReleaf and built that company’s cultivation facility in Markham, Ontario, which has long been recognized as one of the most efficient in the industry. MedReleaf was acquired by Aurora (NYSE: ACB) (TSX: ACB) earlier this year for C$3.2 billion.

Flow and his team have built more than 15 cultivation facilities in total and, for Flowr, are constructing state-of-the-art indoor growing facilities that will initially total 85,000 square feet. The facilities are designed to Good Manufacturing Process standards – the same guidelines used in the construction of pharmaceutical production facilities. They employ patent-pending equipment to enhance the quality of the cannabis plants grown, as well as the efficiency of the facilities.

“Yield is one of the most important measures of a cannabis company’s performance an investor can look at,” Steve Klein, Flowr’s chairman and chief strategist, stated in a news release. “Growing cannabis requires a significant amount of real estate and the more revenue you can generate from that real estate, the more profitable it will be.”

“For example, Apple stores are very profitable because they sell thousands of dollars of merchandise per square foot versus industry averages in the hundreds of dollars per square foot,” Klein continued. “At Flowr, our goal is to have yields – or the amount of product we produce and sell per square foot of space we own – two to three times higher than industry averages. This will give us a lot of product to sell while supporting high profit margins.”

The company received initial purchase orders from the government-controlled cannabis retailers in the provinces of British Columbia, Nova Scotia and Ontario, as well as a dispensary in Saskatchewan. While some producers struggled to fulfil orders, Flowr completed its shipments on-time and in-full in anticipation of adult-use legalization of cannabis, which took place on October 17, 2018. Flowr products were available to more than half of Canada’s population when cannabis was legalized, and many sold out within days, according to retailer websites. The company is currently preparing additional shipments.

British Colombia receives two strains of Ace Valley cannabis and several strains of Flowr brand. In producing the Ace Valley cannabis, the company partners with another brand – Ace Hill Beer.

Flowr has branded medical cannabis products that it sells to clinics nationally under the FlowrRx brand. Sales are also done through the company’s website. The cultivation facility in Ontario measures 85,000 square foot, 20 percent of which is currently operational. Completion of the facility is scheduled for early 2019.

To remain at the cutting edge of quality and cultivation techniques, Flowr has a research and development department staffed by leading experts on cannabis and formed an exclusive R&D alliance with the Hawthorne Canada subsidiary of The Scotts Miracle-Gro Company (NYSE: SMG). Through the alliance, Hawthorne is building the first facility in North America dedicated to cannabis research and development adjacent to Flowr’s cultivation center in Kelowna, British Columbia. The 50,000 square foot facility includes indoor and greenhouse grow suites, laboratories, training areas and genetics breeding areas.

According to Chris Hagedorn, senior vice president and general manager of Hawthorne Gardening Company, the research facility will help optimize the company’s line of products, and Flowr was the obvious choice for a research partner. “When you look around Canada, there are a lot of licensed producers, but there aren’t a lot of folks up here doing the quality of work Flowr is,” he noted in an interview with KelownaNow (http://nnw.fm/E5l7G).

For more information, visit the company’s website at www.Flowr.ca

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