Hello, everyone. Apologies for the slight delay here. Welcome to the Flora Growth 2021 Conference Call. This will be the first full-year earnings call Flora has had a public company, so we welcome everyone. My name is James Williams, VP of Corporate Development and Investor Relations.

Please note that this conference (ph) call is recorded, and we will publish for viewing shortly after the end of the meeting. Following the initial formal remarks, we'll conduct a short question-and-answer session.

Webcast participants can submit a question directly through the chat function in the webcast and further instructions we've provided as the Q&A begins. On the call with me today, are Luis Merchan, President, CEO and Chairman of the Board; Jason Warnock, Chief Commercial Officer; Jessie Casner, Chief Market officer.

[Technical Difficulty] press release was issued this morning and a copy of that press release can be found on the Investor Relations section of the Flora Growth website as well as on EDGAR. I would like to remind you that during this call, management prepared remarks may contain forward-looking statements, which are subject to risk and uncertainties.

And management may take additional forward-looking statements during the Q&A session. These statements do not guarantee future performance and therefore, undue reliance should not be placed on them. We refer you all to the risk factors contained in our filings in this -- with the Securities and Exchange Commission.

For more detailed discussion of the factors that could cause actual results to differ materially from the projections in any forward-looking statements.

The company undertakes no obligation to publicly correct or update the forward-looking statements made during the presentation to reflect future events or circumstances, except as maybe required under applicable securities law.

Finally, please note on this call today, we will refer to non-GAAP financial measures such as adjusted EBITDA, in which Flora excludes certain expenses from its GAAP financials. At this time, it's my pleasure to introduce Flora Growth’s President, CEO and Chairman of the Board, Luis Merchan.

Luis?.

Thank you, James for the introduction, and hello, everyone. Welcome to our 2021 earnings call. We appreciate the time you've taken to be here with us. Today, I will walk you through our 2021 performance as well as give you insights, and what we expect from 2022.

As a leading all-outdoor cultivator, and manufacturer and distributor of global cannabis [Technical Difficulty] Commercial and Wholesale, House of Brands and Life Sciences. Commercial and Wholesale operations now include our cultivation facility located on the outskirts of Bucaramanga, Colombia.

Where we grow cannabis at one of the lowest production costs in the world and our manufacturing facilities, Flora labs one, two, three and four. This infrastructure allows Flora to grow, extract, and manufacture a wide-array of cannabis derivatives and finished products for export.

Our House of Brands comprises the portfolio of brands and products available to consumers worldwide. This portfolio now reaches consumers all over the world over 500,000 of them and over 16,000 points of distribution around the world.

Our Life Sciences pillar is focused on the research and development of pharmaceutical grade products that are not only safe and effective but market ready for use by patients and consumers quickly and efficiently. 2021 was a foundational year for our company as we closed our first full year of revenues.

During this time, we achieved significant strategic milestones. This included our IPO in NASDAQ, in May, the completion of critical infrastructure project, the strengthening of our balance sheet, and the deployment of our M&A strategy.

These achievements insured Flora has a healthy balance sheet and we believe positions Flora to increase distribution, accelerate revenues, and gain market share in the global cannabis market in 2022. Let's review Flora’s financial performance. Audited revenues for the fiscal year 2021 were approximately $9 million, up from just over $100,000 in 2020.

This growth was mostly realized to our House of Brands pillar, especially as we’ve waited (ph) needed changes in the cannabis regulatory a legal framework in Colombia, to activate our Wholesale and Life Sciences pillars. Revenue for the second half of 2021, saw an increase of over 329% over the first half of the year and Q4 was up 229% over Q3.

This trend has continued to 2022 with Q1 revenue on additive revenues up approximately 450% over the same period last year. And even more exciting, the month of April has delivered the highest monthly growth of revenue for the company since its inception. In 2021, gross profit totaled $2.4 million or 27% gross margin.

Our gross margin was temporarily impacted due to an effort to secure distribution food [indiscernible] in Colombia. Going forward, we expect to see an increase in our gross margin number as higher margin businesses like Vessel, JustCBD and our Commercial arm contribute more to the company's top line.

Operating expenses totaled $21.3 million resulting in an operating loss of $19 million. This included over $8 million in one-time items, including issuance, acquisition and legal expenses. Net loss for the year totaled $22.5 million resulted an EPS loss of $0.48 based on a weighted average of shares of outstand.

The company's EBITDA loss came in at $18.2 million, after one-time adjustments, our adjusted EBITDA was a loss of $10 million.

The majority of our CapEx expenditures were deployed and we focused $3 million in infrastructure expenditures in 2022, which were primarily be directed to increasing capacity for JustCBD and Vessel, both to service the increased demand in the U.S. and internationally.

According to our execution, for our pillar strategy has been to ensure we have sufficient capital to achieve our operational goals. As of December 31, 2021, the company had a cash balance of $37.6 million compared to $14.9 million on December 31, 2020.

This allowed us to begin 2022 with the acquisition of JustCBD and invest the infrastructure critical to our continued global expansion. As of December 31, 2021 Flora had working capital of $41.8 million.

As we look at what we have accomplished to-date and over these ahead, I’m pleased to reiterate our confidence in a previously stated guidance for fiscal year 2022 of $35 million to $45 million [Technical Difficulty] 288% to 400% growth year-over-year.

In addition to our financial results, we also accomplished the following major operational milestones in 2022 -- 2021. First, this year marked, start our commercial cannabis cultivation at our state of the art facility in Colombia.

The facility remains one of the largest licensed outdoor cultivation facilities in the world, specifically decide to cultivate high quality cannabis at a low cost for using less drugs and derivatives on a global scale. We completed our first harvest, received THCP certification and an excellent quarter of 43.6 stars for 2022.

We completely construction of our structured facility in Colombia, which we are now calling Flora Lab 1. And as we've previously announced, we were able to complete our first extraction in the last month of 2021.

As an international portfolio brands and supplier grow ingredients, we understand that our products are always strong as a distribution network they flow through.

As starting in 2021, we entered into a strategic partnership with Hoshi International, a European focused fully integrated cannabis company with the strategic assets along the entire value chain, including cultivation, processing and distribution of dry flower and oil derivatives to the emerging European cannabis market that will greatly support our EU distribution strategy.

As cannabis industry has continued to evolve, so has Flora that our strategy for capitalizing on the opportunity in front of us. While building a global supply chain of cannabis derivatives produce from Colombia, remains core to our mission. Over the past 12 months, we have also become so much [Technical Difficulty].

2021, our House of Brands portfolio experienced tremendous growth. Our Stardog Loungewear products are available now on Macys.com. Mind Naturals skincare continued to be met with great enthusiasm from retailers. And the industry as a whole having been recognized for its sustainability, our formulations by Cosmoprof, a major beauty trade organization.

The brand also launched at Walmart.com in Mexico. Additionally, we were able to reach a licensing agreement with Tonino Lamborghini brand to distribute cannabis infused beverages in the United States or Colombia. We anticipate this brand will give Flora significant exposure to the U.S. beverage cannabis market.

With products that are at the top of trending cannabis products research. Our Mambe brand continued to see growth in sales in Colombia. We're making strides towards moving the product line into the U.S. and other countries in a near term. We also completed the acquisition of a leading cannabis accessories brand Vessel.

This acquisition has strengthened Flora’s footprint in U.S.

provided depth in an adjacent product category and has meaningfully contributed to the bench of talent at all levels of the organization, include two important leadership additions to our organization to-date James Choe, our Chief Strategy Officer and Jessie Casner, our Chief Marketing officer. We'll hear from Jessie later in the call.

The Vessel team has to demonstrated a deep understanding of the cannabis consumer in the U.S. of brand building and bring with them a high level of operational excellence that has prepared Flora forward in a meaningful and impactful way.

We have been able to integrate these acquisitions, [Technical Difficulty] milestones quickly and efficiently, such that we may realize that benefit is creditor sections (ph) almost [Technical Difficulty].

One of the most exciting developments helping drive the future value proposition of Flora was the establishment of the Flora Life Sciences pillar, led by Researcher, a member of our Board of Directors Dr. Annabelle Manalo-Morgan. Here, we are unlocking the therapeutic potential of the Cannabis plant.

We believe we have the ability to do this in way that prioritizes patient safety, while we hope to move expeditiously through all necessary regulatory and compliance measures. We look forward to hearing from Dr. Annabelle later in the call. With that, I'll ask our Chief Commercial Officer [Technical Difficulty]. .

Good morning. Thank you, Luis. Thanks for the opportunity to join you all today for this overview. That's some of the amazing progress, we've really made in a pivotal year at Flora. As Luis mentioned, my name is Jason Warnock.

I'm the Chief Commercial Officer at Flora, and I oversee the company's commercial operations, which includes our wholesale, cultivation and facilities as well as our extraction and processing through our various Flora Lab locations. Let's begin with cultivation.

From the beginning, we have discussed how geo positioning and the cost advantages and the cost advantage of cannabis cultivation in Colombia are key to our market in our core differentiation.

As cannabis regulations change around the world and the market continues to commoditize, we believe the most strategic element of positioning for success will be reliable, consistent production of the highest quality cannabinoids at competitive pricing.

The location of our licensed 249 acres out -- all-outdoor cultivation facility in Colombia presents a suite of inherent advantages, including the approximately 12 hours of plus daily sunlight, clean water and ideal soil conditions, all to provide a stable footprint for yield year round growing and harvesting.

With a continual perpetual harvest at the volume we able to grow, we continue to experience industry-leading cultivation costs, demonstrated at $0.06 per gram of dried flower. That remains a significant differentiator in our global opportunity versus that of our largest competitors.

More importantly to that, the regulatory changes that happened in this year March 2022, in Colombia, have allowed for the export of high margin cannabis as dried flower, which still today accounts for 50% of the global cannabis market.

As well as that change was able to provide clear regulations for the use and the export of cannabis derivatives as an active ingredient in topical products as well as the food and beverage goods. This regulatory shift has expedited the revenue opportunity at for Flora, something that we're just beginning now to realize in 2022.

A key element of the March regulation change was Flora’s new psychoactive export quota that Luis had mentioned earlier that we received from the Colombian government.

Increasing our export capacity to over 43,000 kilograms of high-THC products, upon receipt of this new quota, we have ramped up our cultivation planning in a way to maximize the revenue generation, the capabilities of our farm as well as our extraction and processing labs.

Last year, we began with focus on CBD rich flower, as well as the commercial investigation of multiple strains of agricultural pilots prove the efficacy of our high-THC strains and derivatives. In 2021, we accomplished several successful harvest while still completing our on-site extraction and processing facility.

Since the regulatory changes a spring, I'm very pleased to report that we now have high-THC plants in the ground with an impending harvest in the weeks ahead. We have already announced the export agreement with the Israel-based [indiscernible] for the purchase of high-THC flower.

This is a perfect illustration of both the quality of the genetics available at our cultivation facility as well as the strong demand we see for dried outdoor grown flower in a global market.

Beyond this agreement, we have already received interest and LOIs from -- for both high-THC and high-CBD products for companies in U.S., Australia, Israel, South Africa, Germany, Portugal and Malta. And we fully expect to execute on purchase orders to be placed on the -- when as soon as this new export quotas production comes online.

And again, I think we're only beginning to unlock the potential of this cultivation facility. As we continue to see new regulation and new regulatory environments opening up, and the streamlining of the global distribution channels for both high CBD and THC rich flower and derivatives.

Refined cannabinoids and active pharmaceutical ingredients account for approximately 50% of the global cannabis market. Given our strategic advantages and established supply chain, we believe Flora can become one of the most competitive suppliers of cannabis derivatives on a global scale.

In addition, as we reported earlier this year, Flora has begun to shift now to true vertical integration, connecting supply of our own raw cannabis oil ingredients for use in our widely established and broad global product portfolio.

We currently have in place all the necessary CapEx, investments deployed already to cultivate and transform all cannabis derivatives on site, all within the highest global standards at a significant cost advantage.

Last year, as Luis mentioned, we received our International Medical Cannabis GACP certification for our cultivation and processing facility. This site, along with Flora Lab 1, has been built to EU GMP standards, and we fully expect to complete this formal certification later this year.

Now Let's take a closer look at our -- over the counter business and the larger wholesale scope. I will begin with this focus on our second Flora Lab facility, which is located in Bogota, Colombia. Flora Lab 2 already holds multiple GMP certifications, including those for cosmetics. phytotherapeutics, and dietary supplements.

And as I mentioned before, is now receiving Flora produced cannabis oil derivatives for inclusion in Flora's own branded product formulations as well as our white-label products for third-parties.

Built across four floors, the 16,000 square foot facility is where we produce the Mind Naturals products along with many other SKUs for use in the Colombian domestic market.

At Flora Lab number 2, we are currently manufacturing and distributing a line of over the counter products, registered with INVIMA and selling across a myriad of distribution channels in Colombia. Newly add as part of the JustCBD acquisition in this year was Flora Lab number 3. This is our first U.S. formulation in white laboratory facility.

Located in Fort Lauderdale, this 15,000 square foot custom formulation laboratory and manufacturing unit produces CBD only-products produced from hemp for use in the international and U.S. market. Flora Lab number 3 produces a wide range of custom products from edibles and topicals entirely for third-parties.

As we continue to connect and integrate the large international custom customer base from the existing brands like Vessel, JustCBD and Mind Naturals, Floor Lab number 3 provides us with the North American white-label production capacity to better connect U.S. wholesale customers as well as distribution.

Finally, our fourth lab Flora Lab number 4 is our medical prescription and custom formulation lab in Bogota, Colombia. As part of our Life Sciences pillar, Flora Lab number 4 is specifically working on medical prescription formulations and is part of our patent formulation group working towards clinical applications of cannabinoids. Dr.

Annabelle will be discussing the Life Sciences pillar a little later this morning and can you give more detail on the work we're doing at Flora number 4.

With these four facilities between Colombia and U.S., we fully built out the capacity to extract, transform, manufacture, distribute and market both Flora branded and white-labeled cannabinoid formulations in all of our intended legal markets.

We have built one of the largest cultivation capabilities in the industry, paired with a state-of-the-art extraction and processing, facilities built all with a key understanding that cost reduction will continue to drive the global wholesale equation. Finally, given our primary cultivation facility in Colombia, and as a U.S.

listed company, the strong U.S. dollar provides us a significant capital advantages during our construction and together -- that together with Colombia’s highly skilled workforce allows us to operate at approximately one-tenth the cost compared to that the U.S. That's said I want to emphasize.

We believe we're in an integral part of the Colombian community, and we've been honored as such. We are taking meaningful impact on those who work with our company as well as the communities we operate. Flora has always strived to work with our communities in a compassionate way.

And our investments in local infrastructure in education and access to necessities like power and water have made impacts to our staff and those who interact with our company in a positive and rewarding way. We are not there to take advantage.

We're there because it makes sense for our global strategy and we will make every effort to remain positive force in the region. To recap, in just one short year, we have demonstrated the business model, connected distribution of our global commercial operations.

We have hired renowned agronomist, engineers and scientists to further the quality and efficiency of our cultivation processing and our research.

We have completed multiple harvest of high quality flower, both rich in THC and CBD and brought a state-of-the-art extraction facility online and paired that with our high output GMP facilities in both Bogota and the United States, that are currently manufacturing thousands of products today.

We have the necessary equipment, commissioning, licensing and logistics in place to fully integrate our own product line with the global wholesale supply. I could not be more excited about the trajectory of our commercial business operations. And the amazing opportunity to unlock the potential value within the global market for organization.

I thank you again for the opportunity to share this with you today. And Luis, with that, I'd like to hand it back over to you. .

Jason, thank you to you and your team for the extensive work over the past year.

As many of you know, I spent most of my professional career working with brands in large retailers such as Macy's, bringing meaningful products to market and building relationships with consumers, the communities that we serve and that is precisely what we set out to do in our House of Brands pillar.

There have been many exciting developments and addition-ing just the first few months of the year, most notably the acquisition of the leading CBD consumer most brand JustCBD, in February. The integration of the JustCBD team and operations is well underway and we are already realizing the true value of cross-brand synergies.

To explore what we can expect from our House of Brands in 2022, I would like to invite our Chief marketing officer, Jessie Casner. She joined the Flora team via the Vessel acquisition along with Vessel Founder James Choe are now Chief Strategy Officer.

They are both brilliant brand marketers, who have taken the rates of overseeing and grown one of our most important strategic pillars our brand portfolio.

Jessie?.

Thanks, Luis. As Luis mentioned, we've achieved major milestones and created meaningful momentum within our House of Brands across the last year. With 2022 already shaping up to be the year that we unlock meaningful global penetration for our brands.

Mambe our food and beverage brand and Stardog, our hemp textiles and Shoe line have already shown signs of success in their prime markets.

So this year, we'll be focusing on SKU curation, narrative building, customer acquisition and supply chain mastery to ensure we bring to market the finest in food, beverage and hemp textiles styles in the industry.

Our clean skincare line, Mind Naturals has launched a new line of products focused on celebrating the biodiversity of Colombia’s native Flora, which quickly garnered the attention of the industry and they had a nomination by Cosmoprof, the leading trade organization in skincares and cosmetics.

Flora one for product of the year, and winning the team at Cosmo trend product award a few weeks ago in Bologna, Italy.

This new line which includes moisturizers, serums, eye creams and cleansers in addition to the existing CBD line, allows Mind to maximize market and retail opportunities around the globe and offers consumers the range of products they demand in a competitive skincare line.

As many of you will recall Vessel was a key acquisition for Flora, the transaction being completed in November of 2021 and provided critical access to the U.S.

cannabis market via premium ancillary cannabis products, A key focus of the Vessel team in 2022 will be global distribution and product category expansion, designing more diversity into the dried line that launch last year and launching the Canadian direct-to-consumer website just to name a few.

Additionally, the Vessel team has been working diligently to partner with leaders across the industry, whether that's MSOs, LPEs, professional athletes or artists to bring unparalleled experiences to consumers via product collaborations, many of which you will see hitting the market very soon.

We also expect Vessel to enter the UK in various EU countries via key distribution relationships brought about by relationships between distributors and JustCBD. Meanwhile, JustCBD’s U.S. foothold remains very strong and its global expansion continues to progress quickly.

The first brick-and-mortar JustCBD branded location in Germany is opened for business, with two more storefront opening soon. The key distribution agreements will also focus on Czech Republic, Poland, Austria, Ukraine, Georgia and Estonia as well as some Central and South American countries.

JustCBD continues to open new doors domestically as well and we'll be leveraging Flora’s broader team to deploy novel tactics that will help bolster scalable growth across their direct-to-consumer properties.

As mentioned previously, we are realizing the synergies between our House of Brand properties, which have offered real and meaning paths to revenue generation as well as gross margin benefit. JustCBD will soon support Vessel hardware for their vape accessories.

Vessel has secured both domestic and international distribution access to previously untapped channels and markets because of JustCBD relationships and how well Vessel is received in those channels. And Mind Naturals will be leveraging Vessels approach to customer acquisition retainment as they continue to expand their North American presence.

Just to note a few synergies across our brand portfolio. One other key I want to highlight about unlocking the full potential of our House of Brands will be the integration of Flora’s owned cannabis derivatives into the appropriate lines of product across the portfolio.

This vertical integration should not only provide benefit as we look at our blended gross margin across the business, but we'll internalize yet another piece of the supply chain. Supply chain mastery as we see it being the single most important factor to rapid and scalable growth in the global cannabis market.

Our ability to move assertively and capitalize on these synergies has been our executive team's primary focus across 2022, ensuring the integration of all personnel and every go-to-market pillar under the broader Flora umbrella.

The House of Brands provides access to global markets direct-to-consumer relationships and data unlocking previously untapped segments of the broader cannabis and plant-based wellness industry, which in the end will be our competitive advantage.

If we look ahead to the remainder of 2022 and beyond, we plan to leverage that advantage to continue to innovate across our existing product portfolio and develop new products and brands as key markets demand. And that has been a quick look at what we expect from our House of Brands this year. Thanks for your time. Back to you, Luis. .

Thank you, Jessie. We look forward to watching the continued growth of this pillar. Okay, I believe Dr. Annabelle is having some technical issues, but I would could not be more excited to introduce her. She's a member of our Board of Directors, a lead scientist. Hi, Dr.

Annabelle, are you there?.

Yes. I'm happy to, -- as a member of the Board, head of Flora Scientists and a Researcher. I've experienced a great deal of my career dedicated to exploring the medical applications of the cannabis plan. And today, I am so excited to report on some of the meaningful movements of the Life Sciences initiatives.

I'd like to start with discussing our first clinical study. This study is taking place in partnership with the University of Manchester in the UK, where we are studying the therapeutic potential of certain cannabinoids on fibromyalgia patients.

I am delighted to report that we have already progressed quickly through pre-clinical work to address safety and trial protocols and we are in the final phases of approval from the NHS, to needed to get our trial to human phase. We hope to see patient trials begin before the end of the year.

Another exciting development from the Life Sciences team is our path to commercialization of our patent pending formulations. We are working alongside Flora Lab 4, our custom prescription formulation lab, as we prepare to produce cannabinoid-based prescriptions for our clinical trials, and eventually for use in patients and consumers.

Additionally, we are actively pursuing registration for our Flora grown cannabis derivatives for use not only in trials and prescription drugs, but in over the counter and dietary supplement products. This type of research we have completed to-date, usually takes years and is very capital intensive.

But because of the existing safety profile of cannabis, our access to high quality cannabinoids through the Flora at ecosystem, and our close collaboration with partners like the University of Manchester, we believe we have the path to produce cannabis based medicine, safely and hopefully more quickly than in some traditional trials.

I also want to highlight the willingness of agencies like the NHS and INVIMA, as a key to explore what we believe is the future of medicinal cannabis. Beyond our work in the clinic, we at Flora are devoted to educating the world about the potential of cannabis.

As such, we are actively curating a robust platform of educational curriculum in partnership with edX, a leading global online learning platform. Notably, our first module is live. It's being conducted in Spanish and will be translated to English very shortly with more courses becoming available across the remainder of the year.

The focus of the curriculum is on the business of cannabis from sea to shelf (ph). We’re thrilled this information will soon be available to a massive audience. I look forward to providing more insights and updates on the intersection of science and cannabis as this year progresses. Thank you for your time, Luis. .

Thank you, Dr. Annabelle. Sorry, we couldn't get your video to work, but there's so much to look forward to from your team and you with regards to Life Science. 2021 was a year focused on laying the foundation for growth, as a global House of Brands, as a supplier and distributor of cannabis derivatives around the world.

And as a vehicle poised for long term value for our investors. We spent a year defining a structure and the rubric for how we approach our operations, with a keen focus on operational excellence, our formula for integration of assets, development of critical infrastructure and build out of human capital have set this stage for continued growth.

We believe Flora has continued to deliver on its promise of rapid and scalable growth all while raising the minimal outside capital and incorporating very little debt.

We will continue to focus our efforts on the markets we believe have the most promise and leverage our unique positioning to gain entry to new markets as we see the opportunity arise, whether through our House of Brands, our distribution of wholesale cannabis or via our clinical trials on pharma grade products.

Each one of the pillars holds a tremendous amount of potential individually. So when combined creates a pathway to scale and profitability. With that, I’d like to thank you all again for joining us and I will now invite James Williams back to moderate..

Wonderful. Thank you, Luis. We're going a brief moment now to queue some questions. We already have some submitted over to us. I'll just give it a brief moment and then we'll begin. Okay. This first question comes from Erin Gray, AGP.

Can you provide an update on how you expect revenue guidance to be split across the different divisions including obviously the acquisition of JustCBD, Luis?.

Absolutely. We expect 2022 to be a meaningful year for our three growth pillars and all the three of them will activate and contribute in terms of revenue before year end. This fleet will be significantly skewed towards our House of Brands.

Our House of Brands will contribute between 60% and 70% of our revenues and we expect the net balance of the contribution to come from our Wholesale and Commercial operations. As of today, we have not included revenue of projections (ph) in our guidance from our Life Sciences division.

But as I mentioned, we expect Life Sciences to activate before end of the year. .

Maybe this one's for James Choe -- also -- sorry, Jason Warnock, also from AGP. Congrats again on the 43 tonne quote on THC flower.

Can you provide some color in progress on finding partners in various countries as well as discussing a little bit more on the timing of those sales?.

Thanks, James. Good question. So the key to understanding this is that the -- with the update of the quota, we could only technically begin cultivation of those high-THC strains beginning with the launch of that quota. So that was in March of this year.

So we are projecting for Q3 when we are going to start to recognize those opportunity to distribute those -- and those particular high-THC strains. So our goal has not been necessarily difficult to find locate distribution partners.

Again, as I mentioned in my section, we do have and have proven out high quality-THC products at a very competitive cost. We've already announced some of the deals in the market and we continue to connect supply partners and supply brokers in some cases to make sure that all markets that are available to us.

So it’s not been a shortage of particular partners that we're looking for and we haven't had any issues to-date getting the initial LOIs and expressions of interest into our a funnel of opportunity. .

Thank you, Jason. Next question comes from Scott Fortune of Roth Capital.

Can you write a little color on the JustCBD growth opportunity in 2022, as well as the margin profile? And following up on that, can you discuss a little bit on the opportunity in color around the JustCBD and Vessel synergies?.

Yeah. It's meaningful. JustCBD is a company that was founded by Hussein Rakine, who is an exceptional, a leader and founder. There's 13 product categories and almost 300 SKUs.

The best seller category is their gummies, which is broadly distributed in some market share leader both in the United States and in countries in which we are starting distribution. The European markets are exceptionally interesting to us.

We are experiencing tremendous growth from the JustCBD category in the European markets, and we expect to launch the JustCBD products in the second half of 2022 in Latin America, specifically in Colombia since it’s the territory where we have staked our ground and we expect to own the market share in that category as soon as the [Technical Difficulty] provides with the clearest to start distributing.

From a gross margin perspective, the markets are very healthy around 60% -- mix of 60% depending on the product category as I mentioned. There's 12 of them. And in terms of cross synergies, they have been invaluable. We have immediately identified synergies between Vessel and JustCBD in terms of distribution.

The Vessel brand was heavily weighted to [Technical Difficulty] the channel 90% of revenues coming from Vessel came from the DTC channel. And now we're leveraging the 14,000 distribution points that JustCBD had cultivated over the last several years to distribute Vessel products.

We've also find efficiencies in the supply chain as we have two warehouses, one of the East Coast and West Coast. This synergies allows us to save times and also save shipping costs in across both product categories.

And finally, I will say, I'm very encouraged by the opportunity of launching cross-brand and new product lines that are aligned they should intelligent than we're gathering from both JustCBD and the Vessel consumer. .

Wonderful. Thank you, Luis. Maybe this next question again for Jason Warnock, again from Scott Fortune. Can you provide an update on outdoor call it the [indiscernible] production as well as onsite extraction capacity.

What type of capacity are you seeing on the THC in CBD yields that Flora is growing currently?.

Great. Well, thanks, James. So as I mentioned before, looking at the weighted (ph) we were able to cultivate and have been cultivating high CBD strains going back for some time out into last year. So the capacity and the opportunity on the CBD is across multiple of our both proprietary and different genetics that we use.

So we're seeing a various range of those. I mean, certainly, we have low THC products that we would send in different markets. And we also have very high CBD output from over our cultivation. So those would be then primarily been extracted and refined into -- with your isolate or distillate.

Currently, we're experiencing our capacity around 600 kilos a week is what we're producing from that site. Again, going back, we're looking at the perpetual harvest.

So we're always continually harvesting throughout the year and we're using say 65% of our resources today on the cultivation of high-THC strains, and these strains would be coming line in Q3 and Q4.

That again is focused on those markets probably being for export of dry flower, as I mentioned earlier about 50% of the business is dry flower, the other 50% for extraction. Again, our extraction facility can be ramped up, that’s just a single shift as is showing the current status of what our production. Thanks, James. .

Dr.

Annabelle, can you comment on the status of our preclinical and clinical trials with the University of Manchester?.

We're on a note that pre-clinical data usually takes five to ten years and is extremely costly. And that's prior to an NHS or an FDA, [indiscernible] committee approval, which will then allow us to study in patients.

But as I mentioned, because of cannabis a safety profile, we've been able to move very quickly in under actually six months and are in the review process with the NHS to go into patients. And in detail the -- we have done a metadata analysis. We completed all our formulations where we've tested for chemical compositions and dispersion.

We've already packed filed and patents on all of our formulations and delivery. And with the study, we've done in-vitro and in-vivo, so in cells and in animals, we've tested for safety, which is the most important, of course.

And we've tested for efficacy, we've looked at dose response months and have had a full array of data analysis and we are definitely prepared just waiting for the approval to go into patients.

So this really allows us to -- as soon as we get into patients, we can really hammer the market with products that are in study and look forward to a FDA or NHS approval on our pharmaceutical products specifically for fibromyalgia to begin with as early as the end of this year. So we're definitely in motion. .

Thanks so much Dr. Annabelle. The last questions will come from Bill Kirk of MKM.

Luis, can you comment on the Colombian election [Technical Difficulty] a little bit in any potential impact that may have to our business?.

Yes. As members of the audience know we have been -- we have established a very positive relationship with the current Colombian government. And that also means that we have to cultivate relationships and understand what the economic growth plan for the future potential candidates in Colombia are -- is.

I'm very pleased to share that both candidates support cannabis as major economic growth in Colombia, both candidates are running under the platform of investment in agriculture, investment in agricultural commodities and of course, in with that regard cannabis becomes a pivotal element of their campaigns.

So regardless of what the outcome is, whether it's petrol or [indiscernible] both of the candidates that are running for presidential election, we feel confident that the Colombian government will continue to support Flora Growth and the cannabis industry as a whole. .

And this last question, we’ll end here.

Can you just give a quick comment on your outlook for gross margins in 2022?.

Yeah. I think it's important to highlight that, that our margins once again were impacted in 2021 due to number one, our aggressive expansion into distribution that, that gave some passed on some benefits into their -- our distribution partners, as well as a contribution from some revenue categories that had lower margin contribution.

This year, we expect 60% to 70% of our revenue come from a House of Brands. And specifically within those revenues JustCBD and Naturals will be the major continuous of growth and both of the market profiles on those two brands are over 50% I just mentioned in the press release around 60%.

So we feel very strongly that the market contribution is going to improve dramatically. We have seen already that margin improve several percentage points for Q1, and we expect that to continue into the balance of the year.

And the last comment that I'll make around gross margins is that, we expect our Commercial brand to be fully online and generating meaningful revenues in the second half of the year, which as you know given our cost structure in our cultivation facility will be able to achieve in one of the largest margins in the cannabis industry as a whole. .

That concludes the Flora Growth call. We thank again everyone for dealing with some of the technical issues and appreciate everyone joining. Thank you..