Flora Growth Corp. (NASDAQ: FLGC) Inks €2M Investment in Hoshi As Part of its European Expansion Plan

  • Flora closed a €2 million investment in Hoshi International Inc., fulfilling the earlier-announced LOI back in June 2021
  • This move is set to capitalize on Hoshi’s strong European presence, its technical know-how along with its understanding of the European market
  • Hoshi acknowledged the investment with the announcement that it would work together with Flora to bring to market finished product formats from Flora’s brand portfolio
  • Flora referred to this investment as the first of many steps by the company to advance its plans to launch products across the world

On August 24, 2021, Flora Growth (NASDAQ: FLGC) announced closing a €2 million investment in Hoshi International Inc. It also announced that it had increased its fully-diluted ownership in Hoshi through a securities swap.

When making the announcement, Luis Merchan, the President and Chief Executive Officer (“CEO”) of Flora, noted:

“We are excited to increase our alignment with the Hoshi management team and believe the partnership will be much greater in scope than only using their Portugal and Malta facilities as a European importation gateway for our Colombian cannabis flower and derivatives” (https://cnw.fm/Yyygf). 

Earlier in June this year, Flora had announced signing a Letter of Intent (“LOI”) for planning to make an initial strategic equity investment into Hoshi. Flora termed this as “the first of many steps to advance its plans to launch Flora-branded products across the world” (https://cnw.fm/XDa6T).

Having followed through with the investment, the company is now set to capitalize on Hoshi’s strong European presence. It is also bound to leverage the latter’s technical know-how, along with its understanding of the European market, to not only expand its market reach but also obtain its European Union Good Manufacturing Practices (“EU-GMP”) certification.

John Aird, the CEO of Hoshi, noted:

“We are excited to begin working alongside the Flora team and sharing our understanding of the European market while working together to bring to market finished product formats from Flora’s brand portfolio that are suitable for European medical consumers.

He further added:

“Not only has Flora made an investment into Hoshi, but through our securities swap, the Hoshi management team also has a vested interest in the success of Flora Growth and our long-term working relationship.”

Flora’s €2 million investment came with the following terms:

  • Flora would hold a right of first refusal to supply any cannabis oil or derivative products acquired by Hoshi or any of its affiliates at the processing facility in Malta. This will be subject to the parties entering into a definitive agreement by October 1, 2021
  • Flora would be Hoshi’s preferred supplier of genetic material and finished cannabis derivative products at its cultivation and processing facility in Portugal, subject to the two parties entering into a definitive agreement by October 1, 2021
  • Flora would be entitled to nominate one Director to Hoshi’s Board of Directors, specifically Luis Merchan, Flora’s President and CEO
  • Hoshi will use commercially reasonable efforts to grant Flora access to its EU-GMP auditors to assist Flora to obtain EU-GMP certification at its Cosechemos cultivation and extraction facility in Colombia

Hoshi is a fully integrated cannabis company that focuses on the European market. Its team comprises renowned cannabis entrepreneurs, hence its focus on developing and operationalizing assets across the global cannabis industry. Hoshi’s focus and emphasis are on cultivating, manufacturing, and distributing cannabis products throughout the EU. So far, the company is uniquely positioned to become the leading provider of cannabis and derivative products for this budding European market.

On the other hand, Flora is a cannabis cultivator, processor, and brand builder with a focus on the international market. It has made a name for itself by leveraging natural and cost-effective cultivation practices to supply cannabis derivatives to its diverse business divisions, including pharmaceuticals, hemp textiles, cosmetics, and food and beverage. Flora currently operates one of the world’s most extensive outdoor cultivation facilities, intending to market a higher-quality premium product at below-market prices.

2020 was a big year for the European medical cannabis industry. Germany’s imports of certified flower for medical purposes reached 9,231 kg, according to the Federal Institute for Drugs and Medical Devices. Between January and September 2020, the value of medical cannabis transactions in Germany alone amounted to €111 million, with flower sales accounting for 48.6% of these sales. Prohibition Partners has even projected that by 2024, over one million German patients will have access to medical cannabis, making Germany the leading European cannabis market in terms of growth.

It is further projected that the German medical cannabis market will be worth €7.7 billion by 2028. By the end of 2021, it is estimated that the entire European cannabis market will be valued at €403.4 million. By 2025, this industry is set to be valued at €3.2 billion, representing a compound annual growth rate (“CAGR”) of 67.4% between 2021 and 2025. 

Flora hopes to capitalize on Hoshi’s understanding of and presence within the European market to capitalize on its strategic growth plans. Closing this investment is a step in the right direction and a first in Flora’s overall expansion plan to venture into the European market for its cannabis products.

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

NOTE TO INVESTORS: The latest news and updates relating to FLGC are available in the company’s newsroom at https://cnw.fm/FLGC

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