6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of August 2022

Commission File Number 001-40397

FLORA GROWTH CORP.

(Exact name of registrant as specified in its charter)

365 Bay Street, Suite 800

Toronto, Ontario M5H 2V1

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

☒ Form 20-F     ☐ Form 40-F

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

INFORMATION CONTAINED IN THIS FORM 6-K REPORT

Explanatory Note

On August 15, 2022, Flora Growth Corp., a company incorporated in the Province of Ontario (the “Company”), issued a press release providing a business update and announcing its financial results for the six months ended June 30, 2022. A copy of that press release is furnished as Exhibit 99.1 to this Report on Form 6-K.

The unaudited interim condensed consolidated financial statements for the Company as of and for the six month periods ended June 30, 2022 and 2021, and the Operating and Financial Review and Prospects of the Company for the corresponding periods are furnished as Exhibits 99.2 and Exhibit 99.3, respectively, to this Report on Form 6-K.

Exhibit Index

Exhibit 99.1	Press Release of Flora Growth Corp., dated August 15, 2022.
Exhibit 99.2	Unaudited Interim Condensed Consolidated Financial Statements as of and for the six month periods ended June 30, 2022 and 2021.
Exhibit 99.3	Operating and Financial Review and Prospects for the six month periods ended June 30, 2022 and 2021.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	FLORA GROWTH CORP.
Date: August 15, 2022	By:	/s/ Luis Merchan
	Name:	Luis Merchan
	Title:	Chief Executive Officer

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EX-99.1

  EXHIBIT 99.1

Flora Growth Reports H1 2022 Financial Results

· H1 2022 revenue increased to ~$15.0 million, up 604% from H1 2021 and 117% from H2 2021, driven by House of Brands

· Gross Profit increased to ~$7.0 million, up 547% compared to H1 2021 and 363% compared to H2 2021

· Company reaffirms its 2022 revenue guidance to range between $35.0 million - $45.0 million, indicating approximately 300% - 400% projected revenue growth from 2021

· Management to host a webcast today at 4:30 P.M. ET

FORT LAUDERDALE, FL, USA. & TORONTO, CAN.– August 15, 2022 -- Flora Growth Corp. (NASDAQ: FLGC) (“Flora” or the “Company”), a manufacturer and distributor of global cannabis products and brands, reported today its financial and operating results for the six months ended June 30, 2022. All financial information is provided in U.S. dollars unless indicated otherwise.

“In the first half of 2022, Flora delivered on its promise to double revenue compared to the second half of 2021, and we expect to maintain that trajectory to deliver our full year guidance as a result of continued growth in our House of Brands, the launch of several new brands in the United States, and the commencement of sales in our Commercial Wholesale and Life Sciences business,” said Luis Merchan, Chairman and CEO of Flora. “We started 2022 with the integration of both Vessel and JustCBD, and despite macro headwinds in the global markets as well as global cannabis regulations, we are extremely pleased with our growth year-to-date. We are also seeing positive movement in our Life Sciences division with progress on the approval of our clinical trials in the United Kingdom and the acquisition of Masaya, a science-backed, high-potency CBD brand.”

Merchan added: “We continue to prudently manage our overhead and working capital as we expect to improve profitability going forward. With all three of our core pillars generating revenue in the second half of 2022, continued gross margin expansion and a focus on streamlining operating expenses – we believe we have a path to profitability that few global cannabis companies can achieve in this difficult environment. The execution of our key initiatives is a testament to our team’s ability to deliver on plan. We will continue to execute as we focus on profitability and long term value creation.”

H1 2022 Financial Highlights:

· Total revenue for the six months ended June 30, 2022, was $14.9 million, up more than 7x year-over-year and 2x sequentially, with the growth driven by Flora’s House of Brands division, which includes the acquisitions of JustCBD and Vessel.

· Gross profit for the period increased to approximately $6.5 million, up more than 5x year-over-year and 4x sequentially.

· Net loss was approximately $32.7 million compared to a net loss of $5.1 million in H1 2021 and a net loss of $16.2 million in H2 2021. The increase in net loss included a non-cash goodwill impairment charge of $16.0 million related to the Vessel acquisition value, driven by a decline in market conditions (Vessel’s peer group public share prices) and the Company’s stock price.

· Adjusted EBITDA was $(8.2) million compared to $(4.9) million in H1 2021. Adjusted EBITDA margin improved significantly from -233% in H1 2021 to -55% in H1 2022. For a reconciliation of these non-IFRS financial measures to the most directly comparable IFRS financial measures, please see Table 4 under “Reconciliation of IFRS to non-IFRS financial results” included at the end of this release.

· As of June 30, 2022, the Company had approximately $10.3 million in cash compared to $37.6 million on December 31, 2021. The decrease was primarily due to cash paid for the JustCBD acquisition in February 2022, as well as higher operating expenses related to investments in headcount, sales and marketing to deliver on the Company’s growth objectives.

Reaffirms 2022 Outlook

· The Company is reaffirming its 2022 revenue guidance to range between $35.0 million - $45.0 million, projecting growth of approximately 300% - 400% over 2021.

H1 2022 Operating Highlights:

· Completed the acquisition of JustCBD, purchasing the company for $16.0 million in cash and 9.5 million common shares of Flora.

· Following the acquisition of Vessel Brand, Inc. in November 2021, Flora Growth named James Choe as Chief Strategy Officer and Jessie Casner as Chief Marketing Officer.

· Appointed former Director of Cannabis for the Florida Department of Agriculture and Consumer Services, Holly Bell, as Vice President of Regulatory Affairs.

· Signed a distribution agreement with Giant OTG Management to provide access to JustCBD products in U.S. airports.

· Increased presence in Europe with the opening of an office in London, while also receiving approval to sell JustCBD products on Amazon UK. The Company also established a brick-and-mortar JustCBD store in the Czech Republic and intends to launch more stores in Germany through its partnership with Greenyard.

· Acquired CBD brand Masaya to expand its Life Sciences offerings. Masaya formulations were submitted as part of the clinical trial program in partnership with the NHS (National Health Service in the UK) and University of Manchester.

· Completed build out of Flora’s all-outdoor cultivation and on-site extraction facility producing distillates and isolates using flower grown at its outdoor operation in Bucaramanga, Colombia.

· The Company reorganized its laboratory facilities which now include:

○	Flora Lab 1 – cannabis extraction facility in Bucaramanga, Colombia
○	Flora Lab 2 – GMP processing facility for cannabis and non-cannabis topicals, phytotherapeutics and OTC medicines in Bogota, Colombia
○	Flora Lab 3 – cannabis transformation facility for edibles and other cannabis derivatives in Fort Lauderdale, Florida
○	Flora Lab 4 – custom formulations lab for cannabis prescriptions in Bogota, Colombia

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Subsequent Announcements:

· Appointed Elshad Garayev to serve as Flora’s Chief Financial Officer. Mr Garayev served in a variety of financial leadership positions at companies such as Amazon, Boeing BP and RPK Capital.

· Appointed Brandon Konigsberg to the Board of Directors, who will serve as Chair of the Audit Committee and as a member of the Compensation Committee. Konigsberg was a former executive at JP Morgan Chase (“JPMC”), and has held various leadership roles, including CFO and COO for several growing and turnaround business units.

· Entered into an agreement with Pharma Indigena Misak Manasr Sas (“Manasr”), the largest indigenous tribe in Colombia, to commercialize and sell cannabis products domestically and internationally in partnership with the Misak people.

Earnings Call: August 15, 2022, at 4:30pm ET

Flora will host its H1 2022 earnings call via webcast today at 4:30 P.M. ET. During the webcast, Flora management will discuss its financial and operating results, and will also provide comments on the Company’s 2022 commercial operation, house of brands and life sciences strategies. Following the presentation, Flora will host a Q&A session.

Live Audio Webcast Details

Date: Monday, August 15, 2022

Time: 4:30 p.m. ET

Online Participant Link: https://www.floragrowth.com/flgc-h1-2022-earnings-call/

The recording will be available on the Company’s Investor Center page until June 2023.

The live webcast will be available online through the above participant link and will be archived and available on the Company’s website within approximately 24 hours. If any member of the investment community needs access to a phone dial-in, please email flora@cmwmedia.com and one will be provided.

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About Flora Growth Corp.

Flora is building a connected, design-led collective of plant-based wellness and lifestyle brands, designed to deliver the most compelling customer experiences in the world, one community at a time. As the operator of one of the largest outdoor cannabis cultivation facilities, Flora leverages natural, cost-effective cultivation practices to supply cannabis derivatives to its commercial, house of brands, and life sciences divisions. Visit www.floragrowth.com or follow @floragrowthcorp on social media for more information.

Contacts

Investor Relations:

Sean Mansouri, CFA

ir@floragrowth.com

Public Relations:

Cassandra Dowell

+1 (858) 221-8001

flora@cmwmedia.com

Cautionary Statement Concerning Forward-Looking Statements

This press release contains ‘‘forward-looking statements,’’ as defined by federal securities laws. Forward-looking statements reflect Flora’s current expectations and projections about future events at the time, and thus involve uncertainty and risk. The words “believe,” “expect,” “anticipate,” “will,” “could,” “would,” “should,” “may,” “plan,” “estimate,” “intend,” “predict,” “potential,” “continue,” and the negatives of these words and other similar expressions generally identify forward looking statements. Such forward-looking statements are subject to various risks and uncertainties, including those described under the section entitled “Risk Factors” in Flora’s Annual Report on Form 20-F filed with the SEC on May 9, 2022, as such factors may be updated from time to time in Flora’s periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in Flora’s filings with the SEC. While forward-looking statements reflect Flora’s good faith beliefs, they are not guarantees of future performance. Flora disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this press release, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to Flora (or to third parties making the forward-looking statements).

About non-IFRS financial measures

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with International Financial Reporting Standards (“IFRS”), we use the following non-IFRS financial measures: Adjusted EBITDA and Adjusted EBITDA margin.

· Adjusted EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates adjusted EBITDA as total net loss, plus (minus) income taxes (recovery), plus (minus) interest expense (income), plus depreciation and amortization, plus (minus) non-operating expense (income), plus share based compensation, plus impairment charges, plus (minus) fair value adjustments on investments, plus charges related to the flow-through of inventory step-up on business combinations, plus other acquisition and transaction costs, plus (minus) non-cash fair value adjustments on the sale of inventory and biological assets.

· Adjusted EBITDA margin % is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates adjusted EBITDA margin % as adjusted EBITDA, as described above, divided by revenue for the period.

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Table 1. Consolidated Statements of Financial Position

Flora Growth Corp.
Interim Condensed Consolidated Statements of Financial Position
(Unaudited - Prepared by Management)
(in thousands of United States dollars)
As at:	June 30, 2022			December 31, 2021
ASSETS
Current
Cash	$	10,268		$	37,614
Restricted cash		1			2
Trade and amounts receivable		5,092			5,324
Loans receivable and advances		262			273
Prepaid expenses		2,224			1,700
Biological assets		14			37
Inventory		9,295			2,993
Total current assets		27,156			47,943
Non-current
Property, plant and equipment		4,565			3,750
Right of use assets		3,639			1,229
Intangible assets		13,432			9,736
Goodwill		28,666			20,054
Investments		1,337			2,670
Other Assets		273			97
Total assets	$	79,068		$	85,479
LIABILITIES
Current
Trade payables and accrued liabilities	$	7,401		$	5,628
Current portion of long term debt		10			18
Current portion of lease liability		1,120			412
Other accrued liabilities		20			61
Total current liabilities		8,551			6,119
Non-current
Non-current debt		138			-
Non-current lease liability		2,441			908
Deferred tax		1,511			1,511
Other long term liabilities		3,958			-
Total liabilities		16,599			8,538
SHAREHOLDERS' EQUITY
Share capital		119,300			102,428
Options		6,611			3,712
Warrants		10,047			10,670
Accumulated other comprehensive loss		(1,675	)		(1,108	)
Deficit		(71,512	)		(38,536	)
Non-controlling interest		(302	)		(225	)
Total shareholders' equity		62,469			76,941
Total liabilities and shareholders' equity	$	79,068		$	85,479

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Table 2. Consolidated Statements of Loss.

Flora Growth Corp.
Interim Condensed Consolidated Statements of Loss and Comprehensive Loss
(Unaudited - Prepared by Management)
(in thousands of United States dollars, except per share amounts which are in thousands of shares)
	For the six months ended June 30, 2022			For the six months ended June 30, 2021
Revenue	$	14,917		$	2,118
Cost of sales		8,415			1,106
Gross profit before fair value adjustments		6,502			1,012
Unrealized gain on changes in fair value of biological assets		46			-
Realized fair value amounts included in inventory sold		(2	)		-
Gross Profit		6,546			1,012
Operating Expenses
Consulting and management fees		5,243			2,262
Professional fees		2,096			766
General and administrative		2,429			1,481
Promotion and communication		4,719			1,180
Travel expenses		601			143
Share based compensation		2,855			95
Research and development		422			85
Depreciation and amortization		1,712			119
Bad debt expense		405			100
Goodwill impairment		16,000			-
Other expenses (income), net		1,178			(67	)
Total operating expenses		37,660			6,164
Operating Loss		(31,114	)		(5,152	)
Interest expense		69			64
Foreign exchange loss (gain)		200			(78	)
Unrealized loss on fair value of investments		1,333			-
Net loss before income taxes		(32,716	)		(5,138	)
Income tax benefit		-			-
Net loss for the period	$	(32,716	)	$	(5,138	)
Other comprehensive loss
Exchange differences on foreign operations		567			200
Total comprehensive loss for the period	$	(33,283	)	$	(5,338	)
Net loss attributable to:
Flora Growth Corp.	$	(32,611	)	$	(5,097	)
Non-controlling interests		(105	)		(41	)
Comprehensive loss attributable to:
Flora Growth Corp.	$	(33,178	)	$	(5,297	)
Non-controlling interests		(105	)		(41	)
Basic and diluted loss per share attributable to Flora Growth Corp.	$	(0.42	)	$	(0.13	)
Weighted average number of common shares outstanding - basic and diluted		76,944			39,604

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Table 3. Consolidated Statements of Cash Flows.

Flora Growth Corp.
Interim Condensed Consolidated Statement of Cash Flows
(Unaudited - Prepared by Management)
(in thousands of United States dollars)
	For the six months ended June 30, 2022			For the six months ended June 30, 2021
Cash flows from operating activities:
Net loss	$	(32,716	)	$	(5,138	)
Adjustments to net loss:
Depreciation and amortization		1,712			119
Stock-based compensation		3,044			95
Impairments		16,000			-
Changes in fair value of investments and biological assets		1,287			-
Bad debt expense		405			100
Interest expense		56			15
Income tax benefit		-			-
Income tax (paid) received		-			-
		(10,212	)		(4,809	)
Net change in non-cash working capital:
Trade and other receivables		802			(772	)
Inventory		(699	)		(421	)
Prepaid expenses and other assets		(33	)		(1,415	)
Trade payables and accrued liabilities		(341	)		1,647
Net cash used in operating activities		(10,483	)		(5,770	)
Cash flows from financing activities:
Common shares issued		-			16,664
Equity issue costs		(75	)		(2,024	)
Exercise of warrants and options		168			60
Repayments of lease liability		(420	)		(61	)
Common shares repurchased		(250	)		-
Interest paid		(69	)		-
Loan borrowing (repayments)		130			(220	)
Net cash (used) provided by financing activities		(516	)		14,419
Cash flows from investing activities:
Loans provided		-			(275	)
Loan repayments received		-			224
Purchases of property, plant and equipment and other assets		(722	)		(1,384	)
Purchase of investments		-			(2,430	)
Business and asset acquisitions, net of cash acquired		(15,457	)		(1,306	)
Net cash used in investing activities		(16,179	)		(5,171	)
Effect of exchange rate on changes on cash		(168	)		(195	)
Change in cash during the period		(27,346	)		3,283
Cash and cash equivalents at beginning of period		37,614			15,523
Cash and cash equivalents at end of period	$	10,268		$	18,806
Supplemental disclosure of non-cash activities
Right of use assets and lease liabilities acquired	$	2,053		$	-
Common shares issued for business combinations		14,917			-

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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Table 4. Reconciliation of IFRS to non-IFRS financial results.

The reconciliation of the Company’s Adjusted EBITDA, a non-IFRS financial measure, to net loss, the most directly comparable IFRS financial measure, for the six months ended June 30, 2022, and June 30, 2021 is presented in the table below:

(In thousands of United States dollars)	For the six months ended June 30, 2022			For the six months ended June 30, 2021
Net loss for the period	$	(32,716	)	$	(5,138	)
Income tax expense (benefit)		-			-
Interest expense		69			65
Depreciation and amortization		1,712			119
Non-operating expense (1)		200			(78	)
Share based compensation		3,044			95
Impairments (2)		16,000			-
Unrealized loss on fair value of investments		1,333			-
Charges related to the flow-through of inventory step-up on business combinations		1,631			-
Other acquisition and transaction costs		559			-
Non-cash fair value adjustments on the sale of inventory and biological assets		(44	)		-
Adjusted EBITDA	$	(8,212	)	$	(4,937	)
Adjusted EBITDA Margin %		-55.1	%		-233.1	%

(1)	Non-operating expense includes foreign exchange gain (loss).
(2)	Impairments include goodwill impairment.

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EX-99.2

 EXHIBIT 99.2

Flora Growth Corp.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the six months ended June 30, 2022 and 2021

(Unaudited)

(Expressed in United States Dollars)

Flora Growth Corp.
Interim Condensed Consolidated Statements of Financial Position
(Unaudited - Prepared by Management)
(in thousands of United States dollars)
As at:	June 30, 2022			December 31, 2021
ASSETS
Current
Cash	$	10,268		$	37,614
Restricted cash		1			2
Trade and amounts receivable (Note 3)		5,092			5,324
Loans receivable and advances		262			273
Prepaid expenses		2,224			1,700
Biological assets (Note 4)		14			37
Inventory (Note 5)		9,295			2,993
Total current assets		27,156			47,943
Non-current
Property, plant and equipment (Note 6)		4,565			3,750
Right of use assets (Note 11)		3,639			1,229
Intangible assets (Note 9)		13,432			9,736
Goodwill (Note 9)		28,666			20,054
Investments (Note 7)		1,337			2,670
Other Assets		273			97
Total assets	$	79,068		$	85,479
LIABILITIES
Current
Trade payables and accrued liabilities	$	7,401		$	5,628
Current portion of long term debt		10			18
Current portion of lease liability (Note 11)		1,120			412
Other accrued liabilities		20			61
Total current liabilities		8,551			6,119
Non-current
Non-current debt		138			-
Non-current lease liability (Note 11)		2,441			908
Deferred tax (Note 16)		1,511			1,511
Other long term liabilities (Note 8)		3,958			-
Total liabilities		16,599			8,538
SHAREHOLDERS’ EQUITY
Share capital (Note 12)		119,300			102,428
Options (Note 13)		6,611			3,712
Warrants (Note 14)		10,047			10,670
Accumulated other comprehensive loss		(1,675	)		(1,108	)
Deficit		(71,512	)		(38,536	)
Non-controlling interest		(302	)		(225	)
Total shareholders’ equity		62,469			76,941
Total liabilities and shareholders’ equity	$	79,068		$	85,479

Nature of operations (Note 1); Provisions, commitments and contingencies (Note 15); Subsequent events (Note 22)

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

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Flora Growth Corp.
Interim Condensed Consolidated Statements of Loss and Comprehensive Loss
(Unaudited - Prepared by Management)
(in thousands of United States dollars, except per share amounts which are in thousands of shares)
	For the six months ended June 30, 2022			For the six months ended June 30, 2021
Revenue (Note 21)	$	14,917		$	2,118
Cost of sales		8,415			1,106
Gross profit before fair value adjustments		6,502			1,012
Unrealized gain on changes in fair value of biological assets (Note 4)		46			-
Realized fair value amounts included in inventory sold (Note 4)		(2	)		-
Gross Profit		6,546			1,012
Operating Expenses
Consulting and management fees		5,243			2,262
Professional fees		2,096			766
General and administrative		2,429			1,481
Promotion and communication		4,719			1,180
Travel expenses		601			143
Share based compensation (Note 13)		2,855			95
Research and development		422			85
Depreciation and amortization (Notes 6 and 9)		1,712			119
Bad debt expense (Note 3)		405			100
Goodwill impairment (Notes 9 and 10)		16,000			-
Other expenses (income), net		1,178			(67	)
Total operating expenses		37,660			6,164
Operating Loss		(31,114	)		(5,152	)
Interest expense		69			64
Foreign exchange loss (gain)		200			(78	)
Unrealized loss on fair value of investments (Note 7)		1,333			-
Net loss before income taxes		(32,716	)		(5,138	)
Income tax benefit (Note 16)		-			-
Net loss for the period	$	(32,716	)	$	(5,138	)
Other comprehensive loss
Exchange differences on foreign operations		567			200
Total comprehensive loss for the period	$	(33,283	)	$	(5,338	)
Net loss attributable to:
Flora Growth Corp.	$	(32,611	)	$	(5,097	)
Non-controlling interests		(105	)		(41	)
Comprehensive loss attributable to:
Flora Growth Corp.	$	(33,178	)	$	(5,297	)
Non-controlling interests		(105	)		(41	)
Basic and diluted loss per share attributable to Flora Growth Corp.	$	(0.42	)	$	(0.13	)
Weighted average number of common shares outstanding - basic and diluted (Note 17)		76,944			39,604

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

Page 3

Flora Growth Corp.
Interim Condensed Consolidated Statement of Shareholders’ Equity (Deficiency)
(Unaudited - Prepared by Management)
(in thousands of United States dollars, except for share amounts which are in thousands of shares)
	Common Shares						Options			Warrants			Accumulated other comprehensive (loss) income			Accumulated Deficit			Non-Controlling interest (Deficiency)			Shareholders’ Equity (Deficiency)
	#			$			$			$			$			$			$			$
Balance, December 31, 2020		38,355			27,254			2,396			3,961			39			(17,287	)		(113	)		16,250
Initial public offering		3,333			16,667			-			-			-			-			-			16,667
Regulation A and Other Offerings		(1	)		(3	)		-			-			-			-			-			(3	)
Share issuance costs		-			(5,040	)		-			-			-			-			-			(5,040	)
Warrants issued		-			-			-			1,349			-			-			-			1,349
Warrants exercised		337			65			-			(5	)		-			-			-			60
Options issued		-			-			95			-			-			-			-			95
Other comprehensive loss –  exchange differences on foreign  operations		-			-			-			-			(201	)		-			-			(201	)
Current year net loss attributable to Flora		-			-			-			-			-			(5,097	)		(41	)		(5,138	)
Balance, June 30, 2021		42,024			38,943			2,491			5,305			(162	)		(22,384	)		(154	)		24,039
Balance, December 31, 2021		65,517			102,428			3,712			10,670			(1,108	)		(38,536	)		(225	)		76,941
Share repurchase (Note 12)		-			(250	)		-			-			-			-			-			(250	)
Common shares issued for business combinations (Notes 8 and 12)		9,500			14,697			-			-			-			-			-			14,697
Common shares issued for other agreements (Note 12)		811			1,470			84			-			-			-			-			1,554
Acquisition of noncontrolling interest (Note 8)		131			220			63			-			-			(365	)		28			(54	)
Options issued (Note 13)		-			-			2,771			-			-			-			-			2,771
Options exercised (Note 13)		512			96			(19	)		-			-			-			-			77
Warrants exercised (Note 14)		473			132			-			(41	)		-			-			-			91
Warrants expired/cancelled (Note 14)		-			582			-			(582	)		-			-			-			-
Share issuance costs		-			(75	)		-			-			-			-			-			(75	)
Other comprehensive loss –  exchange differences on foreign operations		-			-			-			-			(567	)		-			-			(567	)
Current year net loss attributable to Flora		-			-			-			-			-			(32,611	)		(105	)		(32,716	)
Balance, June 30, 2022		76,944			119,300			6,611			10,047			(1,675	)		(71,512	)		(302	)		62,469

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

Page 4

Flora Growth Corp.
Interim Condensed Consolidated Statement of Cash Flows
(Unaudited - Prepared by Management)
(in thousands of United States dollars)
	For the six months ended June 30, 2022			For the six months ended June 30, 2021
Cash flows from operating activities:
Net loss	$	(32,716	)	$	(5,138	)
Adjustments to net loss:
Depreciation and amortization		1,712			119
Stock-based compensation		3,044			95
Impairments		16,000			-
Changes in fair value of investments and biological assets		1,287			-
Bad debt expense		405			100
Interest expense		56			15
Income tax benefit		-			-
Income tax (paid) received		-			-
		(10,212	)		(4,809	)
Net change in non-cash working capital:
Trade and other receivables		802			(772	)
Inventory		(699	)		(421	)
Prepaid expenses and other assets		(33	)		(1,415	)
Trade payables and accrued liabilities		(341	)		1,647
Net cash used in operating activities		(10,483	)		(5,770	)
Cash flows from financing activities:
Common shares issued		-			16,664
Equity issue costs		(75	)		(2,024	)
Exercise of warrants and options		168			60
Repayments of lease liability		(420	)		(61	)
Common shares repurchased		(250	)		-
Interest paid		(69	)		-
Loan borrowing (repayments)		130			(220	)
Net cash (used) provided by financing activities		(516	)		14,419
Cash flows from investing activities:
Loans provided		-			(275	)
Loan repayments received		-			224
Purchases of property, plant and equipment and other assets		(722	)		(1,384	)
Purchase of investments		-			(2,430	)
Business and asset acquisitions, net of cash acquired		(15,457	)		(1,306	)
Net cash used in investing activities		(16,179	)		(5,171	)
Effect of exchange rate on changes on cash		(168	)		(195	)
Change in cash during the period		(27,346	)		3,283
Cash and cash equivalents at beginning of period		37,614			15,523
Cash and cash equivalents at end of period	$	10,268		$	18,806
Supplemental disclosure of non-cash activities
Right of use assets and lease liabilities acquired (Note 11)	$	2,053		$	-
Common shares issued for business combinations (Notes 8)		14,917			-

The accompanying notes are an integral part of these interim condensed consolidated financial statements.

Page 5

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

1. NATURE OF OPERATIONS

Flora Growth Corp. (the “Company” or “Flora”) was incorporated under the laws of the Province of Ontario, Canada on March 13, 2019. The Company is a manufacturer of global cannabis products and brands, building a connected, design-led collective of plant-based wellness and lifestyle brands. The Company’s registered office is located at 365 Bay Street, Suite 800, Toronto, Ontario, M5H 2V1, Canada and our principal place of business in the United States is located at 3406 SW 26^th Terrace, Suite C-1, Fort Lauderdale, Florida 33312.

These interim condensed consolidated financial statements have been prepared on a going concern basis, meaning that the Company will continue in operation for the foreseeable future and will be able to realize assets and discharge liabilities in the ordinary course of operations.

2. BASIS OF PRESENTATION

Statement of compliance

These interim condensed consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”) and International Accounting Standards 34, Interim Financial Reporting (“IAS 34”), issued by the International Accounting Standards Board (“IASB”). These interim condensed consolidated financial statements do not include all notes of the type normally included within the annual financial statements and should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2021 included in our Annual Report on Form 20-F filed with the Securities and Exchange Commission (the “SEC”), which have been prepared in accordance with IFRS issued by the IASB and interpretations issued by the IFRS Interpretations Committee (“IFRIC”).

These consolidated financial statements were approved and authorized for issuance by the Board of Directors of the Company on August 11, 2022.

Basis of consolidation

These interim condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions were eliminated on consolidation. Subsidiaries are entities the Company controls when it is exposed, or has rights, to variable returns from its involvement in the entity and can affect those returns through its power to direct the relevant activities of the entity. Subsidiaries are included in the consolidated financial results of the Company from the date of acquisition up to the date of disposition or loss of control. As at June 30, 2022, the Company had the following subsidiaries:

Subsidiaries	Country of incorporation	Ownership	Functional currency
Cosechemos YA S.A.S.	Colombia	90%	Colombia Peso (COP)
Flora Growth Corp. Sucursal Colombia	Colombia	100%	Colombia Peso (COP)
Hemp Textiles & Co. LLC	United States	100%	United States Dollar (USD)
Hemp Textiles & Co. S.A.S.	Colombia	100%	Colombia Peso (COP)
Flora Beauty LLC	United States	100%	United States Dollar (USD)
Flora Beauty LLC Sucursal Colombia	Colombia	100%	Colombia Peso (COP)
Kasa Wholefoods Company S.A.S.	Colombia	90%	Colombia Peso (COP)
Kasa Wholefoods Company LLC	United States	100%	United States Dollar (USD)
Grupo Farmaceutico Cronomed S.A.S.	Colombia	100%	Colombia Peso (COP)
Labcofarm Laboratorios S.A.S.	Colombia	100%	Colombia Peso (COP)
Breeze Laboratory S.A.S.	Colombia	100%	Colombia Peso (COP)
Vessel Brand Inc.	United States	100%	United States Dollar (USD)
Just Brands LLC	United States	100%	United States Dollar (USD)
Just Brands International LTD	United Kingdom	100%	British Pound (GBP)
High Roller Private Label LLC	United States	100%	United States Dollar (USD)
Flora Growth US Holdings Corp.	United States	100%	United States Dollar (USD)
Flora Growth Management Corp.	United States	100%	United States Dollar (USD)
Cardiff Brand Corp.	United States	100%	United States Dollar (USD)
Keel Brand Corp.	United States	100%	United States Dollar (USD)
Flora Growth F&B Corp.	United States	100%	United States Dollar (USD)

Page 6

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

Basis of measurement

The interim condensed consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments that are measured at fair value and biological assets as explained in the accounting policies included in the audited consolidated financial statements of the Company for the year ended December 31, 2021. Historical cost is generally based on the fair value of the consideration given in exchange for goods and services.

The unaudited interim condensed consolidated financial statements are presented in United States dollars (“$”) unless otherwise noted.

Significant Accounting Policies and Critical Judgments and Estimation Uncertainties

The interim condensed consolidated financial statements were prepared using the same accounting policies, judgments, estimates and assumptions as those used in the Company’s consolidated financial statements for the year ended December 31, 2021, except as noted below for the following new significant transactions that occurred in 2022.

Contingent Purchase Consideration

Contingent consideration is measured at its acquisition date fair value and is included as part of the consideration transferred in a business combination, subject to the applicable terms and conditions. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as a liability is remeasured at subsequent reporting dates with the corresponding gain or loss recognized in profit or loss. Management exercises judgment to determine the classification of contingent consideration as equity or liability based on the terms of the agreement and potential for the consideration to result in a cash outflow by the Company. Fair value estimates are determined using appropriate valuation techniques based on the nature of the terms in the purchase agreement.

3. TRADE AND AMOUNTS RECEIVABLE

The Company’s trade and amounts receivable are recorded at amortized cost. The trade and other receivables balance as at June 30, 2022 and December 31, 2021 consists of trade accounts receivable, amounts recoverable from the Government of Canada for Harmonized Sales Taxes (“HST”) and other receivables.

	June 30, 2022			December 31, 2021
Thousands of United States dollars
Trade accounts receivable	$	5,428		$	5,565
Allowance for expected credit losses		(1,679	)		(1,252	)
HST receivable		411			259
Other receivables		932			752
Total	$	5,092		$	5,324

Changes in the trade accounts receivable allowance in the six months ended June 30, 2022 primarily relate to establishing an allowance for expected credit losses from the acquisition of JustCBD balances. There were no write-offs of trade receivables during the six months ended June 30, 2022. The Company has no amounts written-off that are still subject to collection enforcement activity as at June 30, 2022. There was an additional $0.3 million of expected credit losses recorded in other receivables as at June 30, 2022. The Company’s aging of trade accounts receivable is as follows:

	June 30, 2022
Thousands of United States dollars
Current	$	1,641
1-30 Days		614
31-60 Days		259
61-90 Days		383
91-180 Days		1,383
180+ Days		1,148
Total trade receivables	$	5,428

Page 7

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

4. BIOLOGICAL ASSETS

The Company’s biological assets consist of cannabis plants throughout the growth cycle including propagation, vegetative and flowering stages. Cannabis plants cease being biological assets upon harvest when the fair value at time of harvest is transferred to harvested cannabis inventory. The Company has no biological assets with title restricted or pledged as collateral, and no significant commitments for development or acquisition of biological assets as at June 30, 2022.

The changes in the carrying value of biological assets are as follows:

Thousands of United States Dollars
Opening balance at December 31, 2021	$	37
Changes in fair value less cost to sell due to biological transformation		46
Transferred to harvested cannabis inventory upon harvest		(69	)
Ending balance at June 30, 2022	$	14

The valuation of biological assets is based on an income approach (Level 3) in which the fair value at the point of harvesting is estimated based on selling prices less the costs to sell. For in-process biological assets (growing plants), the fair value at the point of harvest is adjusted based on the stage of growth at period-end. Harvested cannabis is transferred from biological assets at their fair value at harvest to harvested cannabis within inventory.

Significant inputs and assumptions used in determining the fair value of cannabis plants are as follows as at June 30, 2022:

Average selling price per gram of $0.10 – Represents estimated selling price of dried cannabis end products net of excise taxes, where applicable, for the period for all strains of cannabis, which is expected to approximate future selling prices. Increasing this amount results in an increase in fair value.

Weighted average yield of 21 gram per plant – Represents the weighted average number of grams of dried cannabis inventory expected to be harvested from each cannabis plant. Increasing this amount results in an increase in fair value.

Post-harvest cost per gram to complete production of $0.04 – Based on estimated future production costs incurred divided by estimated grams produced in the period. Increasing this amount results in a decrease in fair value.

Changes in the assumptions above of 10% would not have a significant impact on the fair value of biological assets as at June 30, 2022.

As at June 30, 2022, the weighted average fair value less cost to complete and cost to sell a gram of dried cannabis was $0.06 per gram. The Company’s biological assets produced 746 kilograms of dried cannabis in the six months ended June 30, 2022 and the Company expects the biological assets will yield 190 kilograms of cannabis when harvested. The weighted average stage of growth for the biological assets was 41%.

5. INVENTORY

Inventory is comprised of the following as at June 30, 2022 and December 31, 2021:

Thousands of United States dollars	June 30, 2022		December 31, 2021
Raw materials and supplies	$	2,161	$	899
Harvested cannabis		92		35
Work in progress		465		97
Finished goods		6,577		1,962
Total	$	9,295	$	2,993

Page 8

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

6. PROPERTY, PLANT AND EQUIPMENT

In Thousands of United States dollars	Construction in progress			Machinery and Office equipment			Buildings			Vehicles			Land			Subtotal			Right of use assets			Total
Cost at December 31, 2021	$	905		$	1,991		$	928		$	37		$	112		$	3,973		$	1,532		$	5,505
Additions		321			53			23			-			305			702			2,053			2,755
Business combinations (Note 8)		-			506			-			30			-			536			772			1,308
Foreign exchange translation		(52	)		(71	)		(38	)		(1	)		(22	)		(184	)		(49	)		(233	)
Cost as at June 30, 2022		1,174			2,479			913			66			395			5,027			4,308			9,335
Accumulated depreciation
As at December 31, 2021		-			(169	)		(44	)		(10	)		-			(223	)		(303	)		(526	)
Depreciation		-			(229	)		(44	)		(2	)		-			(275	)		(383	)		(658	)
Disposals		-			20			-			-			-			20			-			20
Foreign exchange translation		-			12			4			-			-			16			17			33
Accumulated depreciation as at June 30, 2022		-			(366	)		(84	)		(12	)		-			(462	)		(669	)		(1,131	)
Carrying value
As at December 31, 2020		905			1,822			884			27			112			3,750			1,229			4,979
As at June 30, 2022	$	1,174		$	2,113		$	829		$	54		$	395		$	4,565		$	3,639		$	8,204

7. LONG-TERM INVESTMENTS

As at June 30, 2022, the Company’s long-term investments consist of common shares and warrants to purchase additional common shares in an early stage European cannabis company. In 2021, the Company purchased common shares from the investee for Euro 2.0 million ($2.4 million), purchased its first tranche of warrants from existing investors in exchange for 225,000 common shares of the Company, and obtained a second tranche of warrants from the investee as an inducement to exercise some of the first tranche of warrants. As at June 30, 2022, the Company owns approximately 9.6% of the investee, or approximately 8.6% on a diluted basis including exercisable warrants of the Company and other investors.

The warrants allow the holder to purchase one common share of the investee for CAD 0.30 ($0.23) for the first tranche, and CAD 1.00 ($0.78) for the second tranche. The warrants were immediately exercisable and expire February 1, 2023.

The Company’s cost of the investments was recorded based on the fair value of the consideration exchanged as at the respective transaction dates. The investee is not a publicly listed entity and has no active quoted prices for its common shares or warrants. Subsequent remeasurements are recorded as FVPL as indicated on the unrealized investments loss caption on the statement of loss and comprehensive loss. The Company estimated the fair value of the investments as at June 30, 2022 using Level 3 inputs of the fair value hierarchy with the fair value of the investee common shares at $0.32, the first tranche warrants at $0.13, and the second tranche warrants at $0.02.

The investee common shares were valued considering price to book value and price to tangible book value of the investee (3.6 and 4.8, respectively) as well as comparable guideline publicly traded companies at the time of initial investment. These initial investment multiples were compared to the guideline public company multiples observed as at June 30, 2022 (2.2 price to book value and 3.0 price to tangible value), with these updated valuation multiples applied to the investee’s estimated book value. The Company also considered the status of the investee’s milestones between the purchase date and year-end for indicators of change in value.

The fair value of the warrants was developed using a Black-Scholes model for each tranche with the following assumptions:

	Warrants CAD 0.30 exercise price			Warrants CAD 1.00 exercise price
Share price	$	0.32		$	0.32
Exercise price	$	0.23		$	0.78
Volatility		100	%		100	%
Risk-free interest rate		3.1	%		3.1	%
Dividend yield		0.0	%		0.0	%
Expected term in years		0.6			0.6
Fair value	$	0.13		$	0.02
Quantity owned		1,666,667			333,333
Fair value	$	222,000		$	8,000

Page 9

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

The share price is based on the calculated value of the investee’s common shares as discussed above. The volatility considers actual volatility of comparable guideline public companies.

A schedule of the Company’s long-term investments activity is as follows:

	Investee common shares			Warrants CAD 0.30 exercise price			Warrants CAD 1.00 exercise price
Financial asset hierarchy level	Level 3			Level 3			Level 3			Total
Thousands of United States dollars	$			$			$			$
Balance at December 31, 2021		1,987			625			58			2,670
Loss on changes in fair value		(880	)		(403	)		(50	)		(1,333	)
Balance at June 30, 2022		1,107			222			8			1,337

The loss on changes in fair value appear in the unrealized loss on fair value of investments caption in the statement of loss and comprehensive loss.

As a sensitivity assessment to the fair value calculations, a 10% change in the valuation multiples applied to the investee common shares results in a 10% change in the fair value as at June 30, 2022 of $111,000. Applying a 10% change in share price to the warrants results in an approximately $44,000 change in fair value, and a 10% change in volatility of approximately $14,000.

8. ASSET ACQUISITIONS AND BUSINESS COMBINATIONS

Just Brands LLC and High Roller Private Label LLC (collectively “JustCBD”) business combination

On February 24, 2022, Flora Growth U.S. Holdings Corp., a wholly-owned subsidiary of the Company, completed the acquisition of 100% of the outstanding equity interests in each of (i) Just Brands LLC and (ii) High Roller Private Label LLC for total purchase consideration of $34.6 million. JustCBD is a manufacturer and distributor of consumable cannabinoid products, including gummies, tinctures, vape cartridges, and creams. JustCBD is based in Florida in the United States and was formed in 2017. The Company acquired JustCBD to expand its product offerings, accelerate its revenue growth, expand its customer and distribution footprints in the United States and for the acquisition of human capital through JustCBD’s management team.

The purchase consideration was comprised of $16.0 million of cash, 9.5 million common shares of the Company valued at $14.7 million, inclusive of a 15% fair value discount for the required six-month holding period of the shares, and $4.0 million of contingent purchase consideration. The contingent purchase consideration is based on a clause in the purchase agreement that provides that if at any time during the 24 months following the acquisition date, the five-day volume weighted average price (“VWAP”) per share of the Company’s common shares as quoted on the Nasdaq Capital Market fails to equal or exceed $5.00, then the Company shall issue a number of additional common shares to the sellers equal to the difference between (x) a fraction, the numerator of which is $47.5 million and the denominator of which is the highest five day VWAP at any point during the 24 months following the closing and (y) the 9.5 million common shares delivered to the sellers at the closing. In no event shall the Company be required to issue more than 3.65 million common shares unless it shall have obtained the consent of the Company’s shareholders to do so. In the event the Company is required to deliver in excess of 3.65 million shares to the sellers (“Excess Shares”) and the Company shall not have obtained shareholder consent, the Company may deliver cash to the sellers in lieu of such Excess Shares determined by a formula set forth in the purchase agreement. The contingent purchase consideration is classified as a financial liability within other long-term liabilities on the statement of financial position as the Company may be required to settle any amounts due in cash instead of common shares if the Company’s common shareholders do not provide requisite shareholder approval to issue additional common shares.

The fair value of the contingent purchase consideration was determined using a Monte Carlo simulation incorporating Brownian motion with 100,000 trials through a binomial lattice model. The significant inputs to the valuation include the two year time period, the Company’s closing share price at February 24, 2022 ($1.82), estimated Company common share volatility (100%), and risk free rate of 1.5% to discount the ending result to present value.

Page 10

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

The amounts recognized as at the acquisition date for each major class of assets acquired and liabilities assumed are as follows:

(Thousands of United States dollars)
Current assets
Cash	$	535
Trade receivables		975
Inventory		5,534
Other current assets		540
Non-current assets
Property, plant, and equipment		537
Right of use assets		772
Other non-current assets		127
Intangible asset		4,757
Goodwill		24,869
Total assets	$	38,646
Current liabilities
Trade payables and accrued liabilities	$	(2,273	)
Current lease liabilities		(644	)
Provision for sales tax		(982	)
Other current liabilities		(99	)
Total liabilities	$	(3,998	)
Total net assets acquired	$	34,648

The fair value of the trade receivables reflects a $291,000 discount to the gross contractual amounts as allowance for potentially uncollectible amounts. Since the acquisition date through June 30, 2022, JustCBD revenue was $10.0 million with net loss and comprehensive loss of $0.4 million.

The intangible assets of $4.8 million are comprised of the following categories and estimated useful lives: tradenames of $3.4 million for eight to nine years, customer relationships of $1.2 million for five to seven years, and know-how of $0.2 million for three years. The Company expects the goodwill and intangible asset values to be deductible for Unites States income tax purposes.

If JustCBD was acquired at January 1, 2022, the combined revenue and net loss of JustCBD and the Company would have increased approximately $5.2 million and $1.6 million, respectively.

Acquisition of Minority interests

On January 18, 2022, the Company acquired the remaining 10% of the outstanding equity interests in Flora Beauty LLC from its minority shareholder in exchange for 100,000 common shares of the Company and a stock option exercisable for up to 50,000 common shares of the Company at an exercise price of $1.70 per share that expire five years from the date of the grant.

On January 31, 2022, the Company completed its acquisition of Breeze by acquiring the remaining 10% of the equity interests in Breeze from its minority shareholders in exchange for 30,282 common shares of the Company.

Page 11

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

9. INTANGIBLE ASSETS AND GOODWILL

A continuity of intangible assets for the six months ended June 30, 2022 is as follows:

In Thousands of United States dollars	License			Customer Relationships		Trademarks and Brands			Patents		Non-Compete Agreements		Goodwill			Total
Cost
At December 31, 2021	$	610		$	1,759	$	2,211		$	4,300	$	1,190	$	20,054		$	30,124
Acquired through business combinations (Note 8)		-			1,160		3,357			240		-		24,869			29,626
Impairment		-			-		-			-		-		(16,000	)		(16,000	)
At June 30, 2022	$	610		$	2,919	$	5,568		$	4,540	$	1,190	$	28,923		$	43,750
Accumulated Amortization
At December 31, 2021	$	129		$	26	$	35		$	48	$	66	$	-		$	304
Additions		82			169		306			297		198		-			1,052
At June 30, 2022	$	211		$	195	$	341		$	345	$	264	$	-		$	1,356
Foreign Currency translation		(18	)		-		(21	)		-		-		(257	)		(296	)
Net book value at June 30, 2022	$	381		$	2,724	$	5,206		$	4,195	$	926	$	28,666		$	42,098

The Company’s intangible asset additions in 2022 primarily consist of assets acquired as part of the February 2022 purchase of JustCBD (Note 8). Information regarding the significant JustCBD intangible assets within the indicated categories of the table above is as follows as at June 30, 2022:

· Tradenames: carrying amount $3.2 million with 92 to 104 months of remaining amortization periods

· Customer relationships: carrying amount $1.1 million with 56 to 80 months of remaining amortization periods

· Know-how: carrying amount $0.2 million with 32 months of remaining amortization period

The Company’s goodwill is assigned to the following cash generating units (“CGU’s”) as at June 30, 2022:

In Thousands of United States dollars	Pharmaceuticals and nutraceuticals		Vessel			JustCBD		Total
As at December 31, 2021	$	379	$	19,675		$	-	$	20,054
Acquired through business combinations (Note 8)		-		-			24,612		24,612
Impairment		-		(16,000	)		-		(16,000	)
As at June 30, 2022	$	379	$	3,675		$	24,612	$	28,666

10. IMPAIRMENT OF ASSETS

The carrying amounts of the Company’s non-financial assets are reviewed for impairment each reporting period or whenever events or changes in circumstances indicate that the carrying amount of an asset exceeds its recoverable amount. At June 30, 2022, the Company’s Vessel CGU had external indicators of impairment primarily due to a 2022 decline in comparable public company share prices which would negatively impact the implied valuation of Vessel. As such, the Company tested the Vessel CGU non-financial assets for impairment as at June 30, 2022. The Vessel CGU was acquired in November 2021 and is part of the Company’s consumer products reportable segment.

Vessel’s June 30, 2022 carrying value of $28.0 million is comprised primarily of goodwill and identified intangible assets of $28.0 million and other long-lived assets of $1.4 million. The carrying value is reduced by inseparable market participant liabilities associated with the November 2021 acquisition of Vessel which includes $1.4 million of deferred tax liability and $1.2 million of lease liability. The estimated recoverable amount of Vessel at June 30, 2022 was $11.9 million, resulting in impairment of $16.0 million as the carrying value of the CGU’s assets exceeds the recoverable amount. The impairment is recorded in goodwill impairment caption on the statement of loss and comprehensive loss.

The recoverable amount is based on fair value less costs of disposal. The fair value was determined based on guideline public companies similar to Vessel considering financial metrics such as historical revenue growth, gross margin and EBITDA profitability and with operations focused on consumer brands and similar sales channels. An enterprise value to latest twelve months revenue multiple of 1.75 was selected based on consideration of the enterprise value to latest twelve months multiples of the guideline companies. The multiple was applied to Vessel’s revenue for the twelve months ended June 30, 2022. Estimated costs of disposal of 3% were subtracted to arrive at the recoverable amount. The impairment test valuation is considered a Level 3 method within the IFRS 13 fair value hierarchy.

After the impairment, Vessel’s carrying value is equal to its recoverable amount. Any change in the significant assumptions could result in additional impairment of its goodwill and long-lived assets as at June 30, 2022. As a sensitivity assessment to the recoverable amount calculations, reducing the selected revenue multiple by 0.5 from 1.75 above down to 1.25 (approximately 29% decrease) would result in additional goodwill impairment of approximately $3.0 million.

Page 12

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

11. LEASES

The Company’s leases primarily consist of administrative real estate leases in Colombia and the United States, and the Company’s cultivation property in Santander, Colombia. Information regarding the Company’s leases is as follows:

Thousands of United States dollars	Six months ended June 30, 2022		Six months ended June 30, 2021
Lease expense
Amortization expense by class of underlying asset
Office Space	$	351	$	40
Building		5		5
Land		27		-
Total amortization expense		383		45
Interest on lease liabilities		83		14
Short-term and low value assets lease expense		510		-
Total lease expense	$	976	$	59
Other Information
Additions to right of use assets	$	2,053	$	-
Cash paid for amounts included in the measurement of lease liabilities
Financing cash flows from leases (interest)		69		16
Financing cash flows from leases (principal)		420		70
Operating cash flows for short term and low value asset leases		510		-
Total cash outflows from leases	$	999	$	86
Carrying amount of right of use asset by class of underlying asset
Office Space	$	2,492	$	231
Building		1,036		16
Land		111		-
Total carrying amount of right of use assets	$	3,639	$	247

The maturity analysis of the undiscounted contractual balances of the lease liability is as follows:

Thousands of United States dollars	As at June 30, 2022
2023	$	1,366
2024		1,251
2025		447
2026		440
2027		373
Thereafter		290
Total undiscounted cash flows	$	4,167
Less: present value discount		(606	)
Total lease liabilities	$	3,561

Page 13

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

Most of the Company’s leases contain renewal options to continue the leases for another term equivalent to the original term, which are generally up to two years. The lease liabilities above include renewal terms that management has executed or is reasonably certain of renewing, which only included leases that would have expired in 2022. The Company’s land lease for 361 hectares of property in Santander, Colombia expires August 31, 2024 and is recorded as a right of use asset in property, plant and equipment. There is an option to extend the lease for an additional five years, unless either the Company or lessor provide notice to terminate the lease at the end of the original term with six months’ notice.

12. CAPITAL STOCK

Authorized and issued

The Company has an unlimited number of common shares, no par value, authorized.

The Company had the following significant common share transactions:

Six months ended June 30, 2022

FEBRUARY 2022 PAYMENT TO JUSTCBD OWNERS

As discussed in Note 8, the Company issued 9,500,000 common shares of the Company valued at $14.7 million, inclusive of a 15% fair value discount for the required six-month holding period of the shares, to the prior owners of JustCBD as part of the Company’s acquisition of JustCBD in February 2022.

ACQUISITION OF NONCONTROLLING INTERESTS

On January 18, 2022, the Company issued 100,000 common shares of the Company valued at $0.2 million to acquire the remaining 10% of the outstanding equity interests in Flora Beauty LLC from its minority shareholders. In addition to the common shares, the Company granted a stock option, exercisable for up to 50,000 common shares of the Company at an exercise price of $1.70 per share that expire five years from the date of the grant.

On January 31, 2022, the Company issued 30,282 common shares of the Company valued at $0.1 million to complete its acquisition of Breeze by acquiring the remaining 10% of the equity interests in Breeze from its minority shareholders.

OTHER OFFERINGS

In January 2022, the Company amended an agreement with a consultant pursuant to which the Company issued 111,112 common shares of the Company valued at $0.2 million and a stock option, exercisable for up to 83,333 common shares of the Company at an exercise price of $2.25 per share that expire five years from the date of the grant.

On April 5, 2022, the Company issued 700,000 common shares of the Company valued at $1.3 million as part of a settlement agreement with Boustead Securities, LLC (“Boustead”) to resolve certain disputes arising under a prior underwriting agreement and engagement letter. In addition to the common shares, the Company paid Boustead $0.4 million.

SHARE REPURCHASE

On June 16, 2022, the Company announced that its Board of Directors had approved the repurchase of up to $5 million of its common shares. For the six months ended June 30, 2022, no shares were repurchased.

Any future repurchases will depend on factors such as market conditions, share price and other opportunities to invest capital for growth. From time to time when management does not possess material nonpublic information about the Company or its securities, the Company may enter a pre-defined plan with a broker to allow for the repurchase of shares at times when the Company ordinarily would not be active in the market due to internal trading blackout periods, insider trading rules or otherwise. Any such plans entered with our broker will be adopted in accordance with applicable securities laws such as the requirements of Rule 10b5-1 under the U.S. Securities Exchange Act of 1934, as amended.

13. OPTIONS

In March of 2019, the Company adopted a stock option plan whereby it may grant options for the purchase of common shares to any director, consultant, employee or officer of the Company or its subsidiaries. The aggregate number of shares that may be issuable pursuant to options granted under the Company’s stock option plan will not exceed 10% of the common shares of the Company outstanding (the “Shares”) at the date of grant. The options are non-transferable and non-assignable and may be granted for a term not exceeding five years. The exercise price of the options will be determined by the Board of Directors of the Company at the time of grant, but if the Shares are traded on any stock exchange (the “Exchange”), the exercise price may not be less than the closing price of the Shares on the Exchange on the trading date immediately preceding the date of grant, subject to all applicable regulatory requirements. Stock option vesting terms are subject to the discretion of the Company’s Board of Directors.

Page 14

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

Information relating to share options outstanding and exercisable as at June 30, 2022 and December 31, 2021:

	Number of options			Weighted average exercise price
	Thousands			$
Balance, December 31, 2021		5,448			1.96
Granted		471			1.62
Exercised		(512	)		0.15
Balance, June 30, 2022		5,407			2.09

Date of expiry	Options outstanding	Options exercisable	Exercise price	Grant date fair value vested	Remaining life in years
	Thousands	Thousands	$	Thousands of Dollars
June 28, 2024	949	949	0.15	35	2.0
April 23, 2025	117	117	2.25	344	2.8
July 6, 2025	317	317	2.25	252	3.0
July 15, 2025	84	-	2.25	84	3.0
July 31, 2025	17	17	2.25	23	3.1
September 8, 2025	66	66	2.25	92	3.2
November 4, 2025	666	666	2.25	918	3.4
December 23, 2025	500	500	2.25	689	3.5
June 3, 2026	241	241	3.87	686	3.9
June 10, 2026	167	167	3.68	455	3.9
September 21, 2026	16	-	5.20	54	4.2
September 25, 2026	240	-	6.90	1,026	4.2
December 16, 2026	1,640	175	2.04	1,590	4.5
January 17, 2027	50	50	1.70	63	4.6
January 26, 2027	287	217	1.48	296	4.6
May 16, 2027	50	-	1.30	4	4.9
	5,407	3,482	2.09	6,611	3.6

The fair value of stock options issued during the six months ended June 30, 2022 was determined at the time of issuance using the Black-Scholes option pricing model with the following weighted average inputs, assumptions and results:

Risk-free annual interest rate		1.75	%
Current stock price	$	1.58
Expected annualized volatility		100	%
Expected life (years)		4.65
Expected annual dividend yield		0	%
Exercise price	$	1.62

The total expense related to the options granted in the period ended June 30, 2022 was $2.9 million (2021 - $0.1 million). The options issued in 2022 vest one year following the date of grant if the award holder is still employed or engaged by the Company.

No stock options expired or were forfeited in the six months ended June 30, 2022.

Page 15

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

14.WARRANTS

The following tables show warrants outstanding as at June 30, 2022:

	Number of warrants			Weighted average exercise price
	Thousands
Balance, December 31, 2021		8,746		$	3.37
Exercised		(473	)		0.49
Cancelled/Expired		(885	)		3.00
Balance, June 30, 2022		7,388		$	3.60

Date of expiry	Warrants outstanding		Exercise price		Grant date fair value		Remaining life  in years
	Thousands		$		Thousands of Dollars
July 23, 2021 - September 20, 2022		1,178		3.00		776		0.12
November 18, 2026		5,750		3.75		8,706		4.39
November 18, 2027		460		3.30		1,055		5.39
		7,388		3.60		10,537		3.77

15. PROVISIONS, COMMITMENTS AND CONTINGENCIES

Provisions

The Company’s current known provisions and contingent liabilities consist of termination benefits and legal disputes.

Thousands of United States dollars	Termination benefits			Legal disputes			Sales tax
Balance as at December 31, 2021	$	352		$	1,681		$	-
Acquired through business combinations		-			-			982
Payments/settlements		(352	)		(1,681	)		-
Additional provisions		-			-			407
Balance as at June 30, 2022	$	-		$	-		$	1,389

The Sales tax provision relates to estimated amounts owed to certain jurisdictions in the Unites States for sales from the Company’s JustCBD operations. The opening balance was acquired during the February 24, 2022 acquisition of JustCBD, with additional provision for estimated amounts due on sales subsequent to the acquisition. The ending balance is recorded within trade payables and accrued liabilities with current liabilities on the statement of financial position, and as a reduction of revenue on the statement of loss and comprehensive loss.

The Company records liabilities for legal proceedings in those instances where it can reasonably estimate the amount of the loss and where liability is probable. The Company is engaged from time-to-time in various legal proceedings and claims that have arisen in the ordinary course of business. The outcome of all the proceedings and claims against the Company is subject to future resolution, including the uncertainties of litigation. Based on information currently known to the Company and after consultation with outside legal counsel, management believes that the probable ultimate resolution of any such proceedings and claims, individually or in the aggregate, will not have a material adverse effect on the financial condition of the Company, taken as a whole as at June 30, 2022.

On March 18, 2022, the Company received a letter from a law firm representing an undisclosed group of former pre-acquisition shareholders of VBI (the “VBI Shareholders”) seeking to engage in settlement discussions on the basis that the Company was purportedly misleading in its intentions to engage in a capital raising transaction shortly after the completion of the VBI acquisition. We promptly responded in writing and denied the VBI Shareholders presentation of the facts and denied all allegations against the Company. We believe that any potential claims as alleged in the letter are without merit and we intend to defend vigorously against them in connection with any future potential legal proceedings. The VBI Shareholders have not commenced litigation against the Company and it is unknown whether the VBI Shareholders will do so and what their claims may be. The Company believes that an unfavorable settlement in this matter is remote, and, as such, has not accrued a liability as of June 30, 2022.

Page 16

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

On June 21, 2022, an action was brought against the Company in the Ontario Superior Court of Justice by Gerardo Andres Garcia Mendez claiming that the Company is obligated to issue 3.0 million (pre-one-for three reverse stock split) common shares to him for a purchase price of $0.05 per share. Mr. Mendez claims he is entitled to such shares as a result of alleged consulting services he performed in 2019. The Company disputes his claims and intends to vigorously defend against this action. The Company believes that an unfavorable settlement in this matter is remote, and, as such, has not accrued a liability as of June 30, 2022.

In connection with the Company’s acquisition of JustCBD, the former owners of JustCBD agreed to fully indemnify the Company against any losses which may arise out of certain pre-existing litigation against JustCBD (including all matters disclosed below) as well as litigation which may be brought in the future against JustCBD and pertaining to the period prior to the acquisition. Since these matters are fully indemnified, the Company has not accrued any liability with respect to these claims. As of the date hereof, the following actions are pending against JustCBD:

Erin Gilbert et al. vs. Just CBD LLC, et al., Case No. 062019CA020275AXXXCE. This matter involves allegations that JustCBD sold a defective Just CBD mango Vape Cartridge which is alleged to have caused Plaintiff, Erin Gilbert, to suffer personal injuries. The claims asserted against JustCBD include: (1) strict liability design defect; (2) negligent design; (3) strict liability manufacturing defect; (4) negligent manufacturing; (5) warning defects; and (6) loss of consortium. The same allegations were asserted against seven (7) other defendants, including two (2) manufacturers of the actual vape cartridge. To date, JustCBD has vigorously defended the case and the case is in the discovery phase. Currently, this matter is scheduled for trial to commence on September 19, 2022 but it is likely the trial will be continued pending further discovery.

William Braley vs. Just Brands USA, Inc., Just Brands FL, LLC, and SSGI Financial Services, Inc., Case No. 21-cv-06812, Northern District of Illinois. This matter involves allegations that the Defendants falsely and deceptively marketed cannabidiol infused gummies as not containing Tetrahydrocannabinol (“THC”). Plaintiff asserts he has suffered damages because after ingesting the gummies he failed an employment related drug test. JustCBD disputes these claims. At this time, JustCBD has filed a motion to dismiss the RICO portion of the complaint and answered and asserted affirmative defenses to the Consumer Protection claims.

Management contracts

The Company is party to certain management contracts. As at June 30, 2022, these contracts require payments totaling approximately $2.3 million to be made upon the occurrence of a change in control to the officers of the Company. The Company is also committed to payments to certain individuals upon termination of approximately $1.9 million pursuant to the terms of these contracts. As a triggering event has not taken place, these amounts have not been recorded in these consolidated financial statements.

16. INCOME TAXES

Income tax expense is recognized at an amount determined by multiplying the income (loss) before income taxes for the interim period for each significant jurisdiction by management’s best estimate of the annual income tax rate expected for the full fiscal year for each significant jurisdiction.

There was no current or deferred income tax expense recorded for the six months ended June 30, 2022. The Company’s effective income tax rate of nil% for the six months ended June 30, 2022 is different than the statutory rate primarily due to the nonrecognition of deferred tax assets related to net operating losses.

17. LOSS PER SHARE

The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive as the Company has a net loss for each period presented:

Thousands of securities	June 30, 2022		June 30, 2021
Stock options (Note 13)		5,407		4,202
Warrants (Note 14)		7,388		9,295
JustCBD potential additional shares to settle contingent consideration (Note 8)		13,141		-
Total anti-dilutive		25,936		13,497

Page 17

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

18. RELATED PARTY DISCLOSURES

Key management personnel compensation

In addition to their contracted fees, directors and officers also participate in the Company’s stock option program. Certain executive officers are subject to termination notices of 24 to 36 months and change of control payments (Note 15). Key management personnel compensation is comprised of the following:

Thousands of United States dollars	Six months ended June 30, 2022		Six months ended June 30, 2021
Directors’ and officers’ compensation	$	816	$	736
Share-based payments		197		1,748
	$	1,013	$	2,484

The Company defines key management personnel as those persons having authority and responsibility for planning, directing, and controlling the activities of the Company directly or indirectly, and was determined to be executive officers and directors (executive and non-executive) of the Company. The remuneration of directors and key executives is determined by the Board of Directors of the Company having regard to the performance of individuals and market trends.

As at June 30, 2022, $0.0 million of the above directors’ and officers’ compensation was included in the trade payables and accrued liabilities (December 31, 2021 – $0.1 million). These amounts are unsecured, non-interest bearing and due on demand.  The share-based payments amount above for the six months ended June 30, 2021 includes 333,333 common shares to the Chief Executive Officer of the Company, valued at $1.7 million, that were recorded to equity as share issuance costs as payment related to services provided during the Company’s initial public offering process.

Related party transactions

During the six months ended June 30, 2022, the Company incurred expenses for consulting, rent and promotion services totaling less than $0.1 million (June 30, 2021 - $0.1 million) from 2227929 Ontario Inc., an entity affiliated with a former director, and expenses for consulting in the amount of $0.3 million (June 30, 2021 - $0.1 million) total from Forbes and Manhattan Inc and 2051580 Ontario Corp., two entities affiliated with a former director. As at June 30, 2022, $0 (December 31, 2021 - $6,000) was owed to 2227929 Ontario Inc., $11,000 (December 31, 2021 - $11,000) was owed to Forbes and Manhattan Inc. and $0 was owed to 2051580 Ontario Corp. These amounts were included in trade payables and accrued liabilities, and are unsecured, non-interest bearing and due on demand. Fred Leigh is a former director of the Company and is also a director and officer of 2227929 Ontario Inc. Stan Bharti is a former director and former Chairman of the Company and is also a director of Forbes and Manhattan Inc.

19. FINANCIAL INSTRUMENTS AND RISK MANAGMENT

Environmental

The Company’s growth and development activities are subject to laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally becoming more restrictive. The Company believes its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations.

Fair value

The Company’s financial instruments measured at amortized cost as at June 30, 2022 and December 31, 2021 consist of cash, restricted cash, trade and amounts receivable, loans receivable, trade payables and accrued liabilities, lease liabilities, and debt and loans payable. The amounts reflected in the consolidated statements of financial position approximate fair value due to the short-term maturity of these instruments.

Financial instruments recorded at the reporting date at fair value are classified into one of three levels based upon the fair value hierarchy. Items are categorized based on inputs used to derive fair value based on:

Level 1 - quoted prices that are unadjusted in active markets for identical assets or liabilities

Level 2 - inputs other than quoted prices included in level 1 that are observable for the asset/liability either directly or indirectly; and

Level 3 - inputs for the instruments are not based on any observable market data.

The Company’s long-term investments require significant unobservable inputs and as discussed at Note 7, are measured at FVPL and as a Level 3 fair value financial instrument within the fair value hierarchy as at June 30, 2022. As discussed in Note 8, the Company’s other long-term liabilities consist of the estimated fair value of contingent purchase consideration from the acquisition of JustCBD in February 2022. The amount is measured at FVPL as a Level 2 fair value financial instrument within the fair value hierarchy as at June 30, 2022. As valuations of the investments and other long-term liabilities for which market quotations are not readily available are inherently uncertain, may fluctuate within short periods of time and are based on estimates, determination of fair value may differ materially from the values that would have resulted if a ready market existed for the investments. Such changes may have a significant impact on the Company’s financial condition or operating results.

Page 18

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

Risk management overview

The Company has exposure to credit, liquidity and market risks from its use of financial instruments. This note provides information about the Company’s exposure to each of these risks, the Company’s objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout these condensed interim consolidated financial statements.

Credit risk

Credit risk is the risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Company’s trade and other receivables, loans receivable and cash held with banks and other financial intermediaries.

The carrying amount of the cash, restricted cash, trade and amounts receivables and loan receivable represents the maximum credit exposure as presented in the statement of financial position.

The Company has assessed that there has been no significant increase in credit risk of the loans receivable from initial recognition based on the financial position of the borrowers, and the regulatory and economic environment of the borrowers. As a result, the loss allowance recognized during the period was limited to twelve months expected credit losses. Based on historical information, and adjusted for forward-looking expectations, the Company has assessed an insignificant loss allowance on the loans’ receivable and advances as at June 30, 2022 and December 31, 2021.

The Company provides credit to certain customers in the normal course of business and has established credit evaluation and monitoring processes to mitigate credit risk. Credit risk for customers is assessed on a case-by-case basis and an allowance for specific expected credit losses is recorded where required, in addition to an estimate of lifetime expected credit losses for the portfolio of accounts receivable. See credit risk analysis for trade receivables at Note 3.

The Company held cash and restricted cash of $10.3 million and $37.6 million as at June 30, 2022 and December 31, 2021, respectively, of which, $10.1 million and $37.4 million, respectively, was held with large financial institutions and national central banks. The remaining $0.2 million cash amounts for both periods are held with financial intermediaries in Colombia and the United States. The Company has assessed no significant increase in credit risk from initial recognition based on the availability of funds, and the regulatory and economic environment of the financial intermediary. As a result, the loss allowance recognized during the period was limited to twelve months of expected credit losses. Based on historical information, and adjusted for forward-looking expectations, the Company has assessed an insignificant loss allowance on these cash and restricted cash balances as at June 30, 2022 and December 31, 2021.

Market risk

Market risk is the risk that changes in market conditions, such as commodity prices, foreign exchange rates, and interest rates, will affect the Company’s net income or the value of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing the Company’s returns.

Foreign currency exchange rate risk is the risk that the fair value of future cash flows will fluctuate due to changes in foreign exchange rates. The Company does not currently use foreign exchange contracts to hedge its exposure to currency rate risk as management has determined that this risk is not significant. As such, the Company’s financial position and financial results may be adversely affected by the unfavorable fluctuations in currency exchange rates.

As at June 30, 2022, the Company had the following monetary assets and liabilities denominated in foreign currencies:

	CAD			COP			GBP			EUR			CHF
Thousands of foreign currencies
Cash		862			1,673,360			22			1,605			-
Amounts receivable		-			12,946,301			174			-			-
Loans receivable		-			-			-			-			250
Trade payables		(152	)		(8,285,897	)		(23	)		(5	)		-
Accrued liabilities		(175	)		(960,040	)		(16	)		-			-
Lease liability		-			(2,166,163	)		(27	)		-			-
Long term debt		-			(40,405	)		-			-			-
Net carrying value		535			3,167,156			130			1,600			250

Page 19

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

As at December 31, 2021, the Company had the following monetary assets and liabilities denominated in foreign currencies:

	CAD			COP			EUR		CHF
Thousands of foreign currencies
Cash		1,393			4,451,775			896		-
Amounts receivable		72			15,775,755			-		-
Loans receivable		-			-			-		250
Trade payables		(40	)		(5,398,068	)		-		-
Accrued liabilities		(589	)		(2,120,869	)		-		-
Lease liability		-			(1,690,797	)		-		-
Long term debt		-			(72,963	)		-		-
Net carrying value		836			10,944,833			896		250

Monetary assets and liabilities denominated in Canadian dollars, Colombian pesos, British pounds, Euros and Swiss Francs are subject to foreign currency risk. The Company has estimated that as at June 30, 2022, the effect of a 10% increase or decrease in Canadian dollars, Colombian pesos, British pounds, Euros and Swiss Francs (“CHF”) against the Unites States dollar on financial assets and liabilities would result in an increase or decrease of approximately $0.3 million (December 31, 2021 – $0.5 million) to net loss and comprehensive loss.

The Company calculates this sensitivity analysis based on the net financial assets denominated in each currency using the June 30, 2022 exchange rate, then changing the rate by 10%. Management determined 10% is a ‘reasonably possible’ change in foreign currency rates by considering the approximate change in rates in the prior twelve months.

It is management’s opinion that the Company is not subject to significant commodity or interest rate risk.

Management considers concentration risk with counterparties considering the level of purchases and sales of its business segments (Note 21). Several of the Company’s business units purchase substantially all their inventory or materials from a single supplier.

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities. The Company’s financial liabilities consist of trade payables and accrued liabilities, loans payable and debt, and lease liabilities as presented on the statement of financial position. The Company had cash and restricted cash as presented on the statement of financial position. The Company has no available credit lines of facilities to draw borrowings from should additional liquidity be needed. The Company’s policy is to review liquidity resources and ensure that sufficient funds are available to meet financial obligations as they become due. Further, the Company’s management is responsible for ensuring funds exist and are readily accessible to support business opportunities as they arise.

Trade payables and accrued liabilities consist of invoices payable to trade suppliers for administration and professional expenditures. The Company processes invoices within a normal payment period. Trade payables have contractual maturities of less than 90 days. Some suppliers of materials and inventory require full prepayment from the Company prior to providing such goods to the Company. See schedule of future lease commitments at Note 11.

The Company’s long-term investments in equity of other entities are not publicly traded and there is not an active market to sell the investments for cash.

Novel Coronavirus (“COVID-19”)

The Company’s operations could be significantly adversely affected by the effects of a widespread global outbreak of a contagious disease, including the recent outbreak of respiratory illness caused by COVID-19. The Company cannot accurately predict the impact COVID-19 will have on its operations and the ability of others to meet their obligations with the Company, including uncertainties relating to the ultimate geographic spread of the virus, the severity of the disease, the duration of the outbreak, and the length of travel and quarantine restrictions imposed by governments of affected countries. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could further affect the Company’s operations and ability to finance its operations.

Page 20

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

20. CAPITAL MANAGEMENT

The Company considers the aggregate of its common shares, options, warrants and borrowings as capital. The Company’s capital management objective is to ensure sufficient resources are available to meet day to day operating requirements and to safeguard its ability to continue as a going concern to provide returns for shareholders and benefits for other shareholders.

For the six months ended June 30, 2022, the Company had negative cash from operations and the main source of cash flow was generated from 2021 and prior financing activities. Potential business activities are appropriately evaluated by senior management and a formal review and approval process has been established by the Board of Directors. The Company may enter new financing arrangements to meet its objectives for managing capital until the Company’s operating cash flows are sufficient to cover its operational requirements. The Company’s capital management objectives were being met in 2022 primarily from the use of existing cash balances from 2021 and prior issuances of common shares and warrants and generating increasing revenue in 2022 from the Company’s reportable segments as presented in Note 21.

The Company’s officers and senior management take full responsibility for managing the Company’s capital and do so through quarterly meetings and regular review of financial information. The Company’s Board of Directors is responsible for overseeing this process.

The Company is not subject to any external capital requirements. As discussed in Note 12, on June 16, 2022, the Company announced that it plans to repurchase up to $5 million of its common shares.

21. SEGMENTED INFORMATION

The Company is engaged in the growth, cultivation, and development of medicinal cannabis and medicinal cannabis derivative products through its Colombia Cosechemos subsidiary. The Company’s other businesses are run through its other Colombia and United States subsidiaries. Management has defined the reportable segments of the Company based on this internal business unit reporting, which is by major product line, and aggregates similar businesses into the Consumer Products segment below. The Corporate segment reflects balances and expenses that do not directly influence business unit operations and includes the Company’s long-term investments. The Corporate segment revenue includes the license of intellectual property.

The following tables show information regarding the Company’s segments for the six months ended June 30, 2022 and June 30, 2021. The 2022 segments were updated to reflect the acquisition of JustCBD (Note 8) with High Roller Private Label LLC operations assigned to the Pharmaceuticals and Nutraceuticals segment, and Just Brands LLC assigned to the Consumer Products segment.

Thousands of United States dollars	Cannabis growth and derivative production			Consumer products			Pharmaceuticals and nutraceuticals		Beverage and food			Corporate and Eliminations			Total
For the six months ended June 30, 2022
Revenue	$	3		$	13,603		$	3,708	$	252		$	(2,649	)	$	14,917
Gross profit		47			4,304			2,096		99			-			6,546
Net (loss) income		(715	)		(19,420	)		317		(462	)		(12,436	)		(32,716	)
For the six months ended June 30, 2021
Revenue	$	-		$	286		$	1,629	$	310		$	(107	)	$	2,118
Gross profit		-			173			752		87			-			1,012
Net (loss) income		(428	)		(857	)		50		(64	)		(3,839	)		(5,138	)

Page 21

Flora Growth Corp.

Notes to the interim condensed consolidated financial statements (unaudited)

For the six months ended June 30, 2022 and June 30, 2021

(United States dollars, except shares and per share amounts)

Geographical information:

Thousands of United States dollars	Colombia		United States		Canada		United Kingdom		Total
Non-current assets at June 30, 2022	$	5,320	$	42,351	$	1,533	$	2,708	$	51,912
Total liabilities at June 30, 2022		2,732		9,290		4,496		81		16,599
Non-current assets at December 31, 2021	$	4,042	$	29,650	$	3,844	$	-	$	37,536
Total liabilities at December 31, 2021		2,359		3,106		3,073		-		8,538
Six months ended June 30, 2022
Net revenue	$	1,631	$	12,887	$	-	$	399	$	14,917
Gross profit		999		5,471		-		76		6,546
Six Months Ended June 30, 2021
Net revenue	$	2,069	$	49	$	-	$	-	$	2,118
Gross profit		1,009		3		-		-		1,012

In 2022, the Company did not have sales to a single customer exceeding 10% of its consolidated revenue.

22. SUBSEQUENT EVENTS

OTHER

Subsequent to June 30, 2022, a total of 266 warrants were exercised in exchange 266 common shares and a total of 798,602 warrants expired. Since June 30, 2022, the Company repurchased 366,645 of its common shares under its previously announced share repurchase plan for $250,000.

On July 5, 2022, the Company’s shareholders approved the 2022 Flora Growth Incentive Compensation Plan. Pursuant to this plan, the Company has reserved 6 million of its common shares for potential issuance to officers, directors, employees and consultants of the Company. Effective July 5, 2022, no further stock options may be issued under the Company’s 2019 stock option plan.

Page 22

EX-99.3

EXHIBIT 99.3

Operating and Financial Review and Prospects

For the six months ended June 30, 2022 and 2021

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) of Flora Growth Corp. (the “Company” or “Flora”) should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2021, and the accompanying notes thereto included in the Annual Report on Form 20-F for the year ended December 31, 2021 filed on May 9, 2022 (“Annual Report”) with the SEC, which were prepared in accordance with International Financial Reporting Standards (“IFRS”) as well as the unaudited interim condensed consolidated financial statements for the six months ended June 30, 2022, and the accompanying notes thereto filed on a Form 6-K with the SEC (collectively the “Financial Statements”). Amounts are expressed in United States dollars (“$” or “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 June 30, 2022. Variance, ratio, and percentage changes in this MD&A are based on unrounded numbers.

This MD&A reports the Company’s activities through June 30, 2022, unless otherwise indicated.

This MD&A contains certain non-IFRS and other specified financial measures as defined under applicable securities legislation, including Adjusted EBITDA. Please see the “Adjusted EBITDA” section below for a definition and reconciliation of Adjusted EBITDA. In determining these measures, the Company excludes certain items which are otherwise included in determining the comparable IFRS financial measures. The Company believes such non-IFRS and other specified financial measures are key performance indicators that improve the period-to-period comparability of the Company’s results and provide investors with more insight into, and an additional tool to understand and assess, the performance of the Company's ongoing core business operations. Where required by applicable securities legislation, the Company has provided definitions of those measures and reconciliations of those measures to the most directly comparable IFRS financial measures. Investors and other readers are encouraged to review the related IFRS financial measures and the reconciliation of non-IFRS and other specified financial measures to their most directly comparable IFRS financial measures set forth below in the section entitled “Adjusted EBITDA” and should consider non-IFRS and other specified financial measures as a supplement to, and not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with IFRS.

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. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks, and changes in circumstances that are difficult to predict. The Company’s actual results may differ materially from those contemplated by the forward-looking statements as a result of various factors, including, without limitation, changes in local, regional, national or global political, economic, business, competitive, market (supply and demand) and regulatory conditions. Please see “Special Note Regarding Forward-Looking Statements” in the Annual Report for more information regarding forward-looking statements. 

Flora has a very limited operating history upon which to base an evaluation of its business and prospects. Flora’s short operating history may hinder its ability to successfully meet its objectives and makes it difficult for potential investors to evaluate its business or prospective operations.

A. Operating Results Overview

Overview

We are a manufacturer of global cannabis products and brands, building a connected, design-led collective of plant-based wellness and lifestyle brands. The foundation of our business strategy is built on three core pillars: commercial/wholesale, house of brands, and life sciences.

1

Operating and Financial Review and Prospects

For the six months ended June 30, 2022 and 2021

Results of Operations

The following table sets forth key components of Flora’s results of operations for the six-month period ended June 30, 2022, as compared to the six-month period ended June 30, 2021.

Flora Growth Corp.
Interim Condensed Consolidated Statements of Loss and Comprehensive Loss
(in thousands of United States dollars, except per share amounts which are in thousands of shares)
	For the six months ended June 30, 2022			For the six months ended June 30, 2021
Revenue	$	14,917		$	2,118
Cost of sales		8,415			1,106
Gross profit before fair value adjustments		6,502			1,012
Unrealized gain on changes in fair value of biological assets		46			-
Realized fair value amounts included in inventory sold		(2	)		-
Gross Profit		6,546			1,012
Gross Profit %		43.9	%		47.8	%
Operating Expenses
Consulting and management fees		5,243			2,262
Professional fees		2,096			766
General and administrative		2,429			1,481
Promotion and communication		4,719			1,180
Travel expenses		601			143
Share based compensation		2,855			95
Research and development		422			85
Depreciation and amortization		1,712			119
Bad debt expense		405			100
Goodwill impairment		16,000			-
Other expenses (income), net		1,178			(67	)
Total operating expenses		37,660			6,164
Operating Loss		(31,114	)		(5,152	)
Interest expense		69			64
Foreign exchange loss (gain)		200			(78	)
Unrealized loss on fair value of investments		1,333			-
Net loss before income taxes		(32,716	)		(5,138	)
Income tax benefit		-			-
Net loss for the period	$	(32,716	)	$	(5,138	)
Other comprehensive loss
Exchange differences on foreign operations		567			200
Total comprehensive loss for the period	$	(33,283	)	$	(5,338	)
Net loss attributable to:
Flora Growth Corp.	$	(32,611	)	$	(5,097	)
Non-controlling interests		(105	)		(41	)
Comprehensive loss attributable to:
Flora Growth Corp.	$	(33,178	)	$	(5,297	)
Non-controlling interests		(105	)		(41	)
Basic and diluted loss per share attributable to Flora Growth Corp.	$	(0.42	)	$	(0.13	)
Weighted average number of common shares outstanding - basic and diluted		76,944			39,604

2

Operating and Financial Review and Prospects

For the six months ended June 30, 2022 and 2021

For the six months ended June 30, 2022, compared to the six months ended June 30, 2021.

For the six months ended June 30, 2022, the Company reported a net loss of $32.7 million, or $0.42 per share, compared to a net loss of $5.1 million, or $0.13 per share, for the six months ended June 30, 2021. Net loss increased from 2021 to 2022 primarily due to a $16.0 million impairment charge on the goodwill of Vessel Brand Inc. (“Vessel”), increased staffing to support expanded and future operations, increased share-based compensation due to option grants in late 2021, and a $1.3 million unrealized loss on the fair value of the Company’s long-term investment in an early-stage European cannabis company. The net loss was partially offset by an increase in gross profit due to higher volume of sales driven by the acquisitions of JustCBD in February 2022 and Vessel in November 2021.

The Company had working capital of $18.6 million on June 30, 2022, compared to working capital of $41.8 million on December 31, 2021. The decrease is primarily due to $15.5 million of net cash paid for the acquisition of JustCBD in February 2022 and $10.5 million used in operating activities for the six months ended June 30, 2022.

The Company will continue to utilize proceeds from prior financing and equity issuances as well as the revenue generated from our other business segments following its recent acquisitions and diversification to fund its operations until it reaches profitability. 

Revenues

Flora reported $14.9 million and $2.1 million in revenues for the six months ended June 30, 2022 and June 30, 2021, respectively. Revenues generated for the six months ended June 30, 2022, and June 30, 2021, by the consumer products segment were $13.6 million and $0.3 million, respectively. The increase was driven by the acquisition of JustCBD in February 2022 and Vessel in November 2021. Revenues generated for the six months ended June 30, 2022, and June 30, 2021, by the pharmaceuticals and nutraceuticals division were $3.7 million and $1.6 million, respectively. Revenues generated for the six months ended June 30, 2022, by the food and beverage segment of $0.3 million were flat compared to the six months ended June 30, 2021. To date, Flora has generated minimal revenues from its cannabis growth segment as the Company has completed minimal harvests in 2022 and continues to build out its operations for further processing and ultimate sale.

Cost of sales and gross profit

Flora’s cost of sales were $8.4 million for the six-month period ended June 30, 2022 compared to $1.1 million for the six-month period ended June 30, 2021. The increase is due to the increase in sales volume in 2022 compared to 2021 which was due to the acquisition of JustCBD in February 2022 and Vessel in November 2021. Included in the costs of sales in the consumer products segment for the six months ended June 30, 2022 was $1.6 million related to the markup to fair market value of inventory acquired with JustCBD. Flora also reported less than $0.1 million in unrealized gains on changes in the fair value of biological assets and realized fair value amounts included in inventory sold in its cannabis growth and derivative production segment relating to the Company’s commercial cannabis harvests in the first half of 2022.

Flora reported gross profit of $6.5 million and $1.0 million for the six-month periods ended June 30, 2022, and June 30, 2021, respectively. Gross profit reported for the six months ended June 30, 2022, and June 30, 2021, by the consumer products segment was $4.3 million and $0.2 million, respectively. The increase primarily related to the acquisition of JustCBD ($3.2 million) in February 2022 and Vessel ($1.0 million) in November 2021, partially offset by the $1.6 million charge related to the markup to fair market value of inventory acquired with JustCBD recorded in cost of sales. Gross profit reported for the six months ended June 30, 2022 and June 30, 2021, by the pharmaceuticals and nutraceuticals segment was $2.1 million and $0.8 million, respectively. The increase was due to the acquisition of JustCBD ($1.2 million) in February 2022. Gross profit reported for both the six months ended June 30, 2022 and June 30, 2021, by the food and beverage segment was $0.1 million. The cannabis growth and derivative production segment reported a gross profit of less than $0.1 million and $0.0 for the six months ended June 30, 2022, and June 30, 2021, respectively, as it completed its first commercial harvests in late 2021 and early 2022 and has generated minimal revenue.

 Consulting and Management Fees

Flora recorded consulting and management fees of $5.2 million and $2.3 million for the six-month periods ended June 30, 2022, and June 30, 2021, respectively. These fees are related to consulting contracts with most of the Company’s management, as well as directors, related parties and bonuses. The increase in 2022 primarily relates to increased staffing to support expanded and future operations.

3

Operating and Financial Review and Prospects

For the six months ended June 30, 2022 and 2021

Professional Fees

Flora recorded professional fees of $2.1 million and $0.8 million for the six-month periods ended June 30, 2022, and June 30, 2021, respectively. The increase in 2022 is primarily due to $0.5 million legal and accounting fees related to the acquisition of JustCBD, as discussed in “Item 4.B.—Business overview—Legal Proceedings” in the Annual Report.

General and Administrative Expenses

Flora recorded general and administrative expenses of $2.4 million and $1.5 million for the six-month periods ended June 30, 2022, and June 30, 2021, respectively. The increase in 2022 is primarily due the acquisition of JustCBD ($0.9 million) in February 2022 and Vessel ($0.1 million) in November 2021.

Promotion and Communication Expenses

Flora recorded promotion and communication expenses of $4.7 million and $1.2 million for the six-month periods ended June 30, 2022, and June 30, 2021, respectively. The increase in 2022 is primarily due to promotional activities related to the Company’s JustCBD and Vessel businesses, as well as costs incurred to support the expected launch of new brands in the second half of 2022, and costs associated with the Company building its marketing strategy.

Travel Expenses

Flora recorded travel expenses of $0.6 million and $0.1 million for the six-month periods ended June 30, 2022, and June 30, 2021, respectively. These expenses were for various trips related to the subsidiaries and the Company’s promotion.

 Share Based Compensation Expenses

Flora recorded share-based compensation expenses of $2.9 million and $0.1 million for the six-month periods ended June 30, 2022, and June 30, 2021, respectively. These expenses represent the amortization of the fair value of share-based payments. The increase in 2022 is primarily due to the stock options granted late in 2021 and early in 2022 having a one-year vesting period that the expense is recognized over, compared to minimal grants in early 2021.

Research and Development Expenses

Flora research and development expenses were $0.4 million and $0.1 million for the six-month periods ended June 30, 2022, and June 30, 2021. Research and development expenses to date consist primarily of contract research fees, manufacturing, consultant fees, and study related costs related to cultivation of cannabis in Colombia for the Cosechemos business, as well as costs related to the launch of new brands for the Vessel business.

Goodwill

As a result of external indicators of impairment primarily due to a 2022 decline in comparable public company share prices which would negatively impact the implied valuation of Vessel, the Company tested the Vessel CGU non-financial assets for impairment as at June 30, 2022. This test resulted in an impairment of $16.0 million as the carrying value of the Vessel CGU’s assets exceeded the recoverable amount.

Bad Debt and Other

Flora recorded bad debt expense of $0.4 million for the six-month period ended June 30, 2022, compared to $0.1 million in the six-months ended June 30, 2021, to reflect the Company’s estimate of lifetime expected losses related to outstanding trade receivables.

Flora recorded other expenses (income), net of $1.2 million and ($0.1) million for the six-month periods ended June 30, 2022, and June 30, 2021, respectively. These expenses consist mainly of insurance, repairs and maintenance, rent and royalties partially offset by miscellaneous incomes. The increase in 2022 is due to the acquisition of JustCBD in February 2022 and Vessel in November 2021, as well as increased costs to support the overall increased operations of the Company.

4

Operating and Financial Review and Prospects

For the six months ended June 30, 2022 and 2021

Unrealized (Gain) Loss on Fair Value of Investments

The Company’s 2021 investment in its European cannabis investee decreased approximately $1.3 million during the first six months of 2022 compared to having no such investments in the first six months of 2021. The decrease is due to decreases in observed marketplace valuation metrics affecting cannabis related companies during the first half of 2022.

Net Loss

Flora recorded net loss of $32.7 million and $5.1 million for the six-month periods ended June 30, 2022, and June 30, 2021, respectively. The increase in loss was driven by the recording of goodwill impairment ($16.0 million) and amortization of the fair market value market of inventory acquired ($1.6 million), both within the consumer products segment. The Company also recorded more promotion (+$3.5 million) and stock-based compensation expenses (+$2.8 million), as well as a $1.3 million loss on investment in its European cannabis investee for the six-months ended June 30, 2022, compared to June 30, 2021.

Adjusted EBITDA

Adjusted EBITDA is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates Adjusted EBITDA as total net loss, plus (minus) income taxes (recovery), plus (minus) interest expense (income), plus depreciation and amortization, plus (minus) non-operating expense (income), plus share based compensation, plus impairment charges, plus (minus) fair value adjustments on investments, plus charges related to the flow-through of inventory step-up on business combinations, plus other acquisition and transaction costs, plus (minus) non-cash fair value adjustments on the sale of inventory and biological assets. Management believes that Adjusted EBTIDA provides meaningful and useful financial information as this measure demonstrates the operating performance of the business.

Adjusted EBITDA margin % is a non-IFRS financial measure that does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. The Company calculates adjusted EBITDA margin % as adjusted EBITDA, as described above, divided by revenue for the period.

The reconciliation of the Company’s Adjusted EBITDA, a non-IFRS financial measure, to net loss, the most directly comparable IFRS financial measure, for the six months ended June 30, 2022, and June 30, 2021 is presented in the table below:

(In thousands of United States dollars)	For the six months ended June 30, 2022			For the six months ended June 30, 2021
Net loss for the period	$	(32,716	)	$	(5,138	)
Income tax expense (benefit)		-			-
Interest expense		69			65
Depreciation and amortization		1,712			119
Non-operating expense (1)		200			(78	)
Share based compensation		3,044			95
Impairments (2)		16,000			-
Unrealized loss on fair value of investments		1,333			-
Charges related to the flow-through of inventory step-up on business combinations		1,631			-
Other acquisition and transaction costs		559			-
Non-cash fair value adjustments on the sale of inventory and biological assets		(44	)		-
Adjusted EBITDA	$	(8,212	)	$	(4,937	)
Adjusted EBITDA Margin %		-55.1	%		-233.1	%

(1)	Non-operating expense includes foreign exchange gain (loss).
(2)	Impairments include goodwill impairment.

5

Operating and Financial Review and Prospects

For the six months ended June 30, 2022 and 2021

B. Liquidity and Capital Resources

The following table sets forth the major components of the Company’s interim condensed consolidated statements of cash flows for the periods presented.

(In thousands of United States dollars)	For the six months ended June 30, 2022			For the six months ended June 30, 2021
Cash from operating activities	$	(10,483	)	$	(5,770	)
Cash from financing activities		(516	)		14,419
Cash from investing activities		(16,179	)		(5,171	)
Effect of exchange rate change		(168	)		(195	)
Change in cash during the period		(27,346	)		3,283
Cash, beginning of period		37,614			15,523
Cash, end of period	$	10,268		$	18,806

Cash from Operating Activities

Net cash used in operating activities for the six-months ended June 30, 2022 and June 30, 2021, totaled $10.5 million and $5.8 million, respectively. Cash flows used in operating activities for the six-months ended June 30, 2022 were due primarily to cash based operating expenses exceeding gross profit for the period.

Cash flows used in operating activities for the six-months ended June 30, 2021 were due primarily to cash based operating expenses exceeding gross profit for the period and a net increase in working capital requirements.

Cash from Financing Activities

Net cash (used) provided in financing activities for the six-months ended June 30, 2022 and June 30, 2021, totaled ($0.5) million and $14.4 million, respectively. Cash flows used in financing activities for the six-months ended June 30, 2022 were primarily for scheduled payments for the Company’s leases and for a common share repurchase agreement, partially offset by proceeds received from warrant and stock option exercises. 

Cash flows provided in financing activities for the six-months ended June 30, 2021 were due primarily to the Company’s Regulation A Offering and Initial Public Offering, partially offset by equity issuance costs and required loan repayments.

 Cash from Investing Activities

Net cash used in investing activities for the six-months ended June 30, 2022 and June 30, 2021, totaled $16.2 million and $5.2 million, respectively. Cash flows used in investing activities for the six-months ended June 30, 2022 were due primarily to the acquisition of JustCBD in February 2022 and capital expenditures primarily to construct the Cosechemos cannabis cultivation buildings and productions in Colombia.

Cash flows used in investing activities for the six-months ended June 30, 2021 were due primarily to payments for business and asset acquisitions for the Company’s Colombia operations and the purchases of property, plant and equipment to support Cosechemos and other operations.

Working Capital

As of June 30, 2022, Flora had working capital of $18.6 million. The Company’s primary cash flow needs are for the development of its cannabis activities, administrative expenses and for general working capital to support growing sales and production with related receivables and payables.

Capital Expenditures

Flora does not have any contractual obligations for ongoing capital expenditures at this time.

6

Operating and Financial Review and Prospects

For the six months ended June 30, 2022 and 2021

Off-Balance Sheet Arrangements

Flora did not have, during the periods presented, and it does not currently have, any off-balance sheet arrangements.

Contractual Obligations, Commitments and Contingencies

The following table sets forth the amount of the Company’s contractual obligations as of June 30, 2022.

In thousands of US dollars	Total		Less than 1 year		1 - 3 years		More than 3 years
Capital (finance) lease obligations	$	4,167	$	1,366	$	1,698	$	1,103
Contingent purchase consideration		3,958		-		3,958		-
Sales Tax		1,430		1,430		-		-
Total	$	9,555	$	2,796	$	5,656	$	1,103

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Other than the item noted below, the Company is not aware of any matters which result in a loss contingency.

The Company is not able to reasonably estimate the timing of payments associated with deferred tax liabilities and therefore, the preceding table excludes total deferred tax liabilities of $1.5 million.

The contingent purchase consideration is based on a clause in the JustCBD purchase agreement that provides if any time during the 24 months following the February 24, 2022 acquisition date the five-day volume weighted average price (“VWAP”) per share of the Company's common shares as quoted on the Nasdaq Capital Market fails to equal or exceed $5.00, then the Company shall issue a number of additional common shares to the sellers equal to the difference between (x) a fraction, the numerator of which is $47.5 million and the denominator of which is the highest five day VWAP at any point during the 24 months following the closing and (y) the 9.5 million common shares delivered to the sellers at the closing. In no event shall the Company be required to issue more than 3.65 million common shares unless it shall have obtained the consent of the Company’s shareholders to do so. In the event the Company is required to deliver in excess of 3.65 million shares to the sellers (“Excess Shares”) and the Company shall not have obtained shareholder consent, the Company may deliver cash to the sellers in lieu of such Excess Shares determined by a formula set forth in the purchase agreement. The settlement of any amount due may be required with cash should Flora not have required shareholder approval to issue these potential shares. The amount in the table above is the estimated fair value of the potential liability as at June 30, 2022.

C. Trend Information

For a discussion of trends, see “Item 4.B—Business Overview,” “Item 5.A—Operating Results Overview” and “Item 5.B—Liquidity and Capital Resources” in the Annual Report. The trends discussed in the Annual Report have not materially changed as of the date of this MD&A.

Plan of Operations

As noted above, the continuation of the Company’s current plan of operations is dependent on its ability to complete the development of its cannabis operations and/or other potential projects and attain future profitable production. As a result of raising capital through the sale of Common Shares offered for sale in the Company’s various equity offerings to date, in addition to revenue generated from its business, Flora believes that it will have sufficient cash resources to fund its plan of operations through 2023.

7

Operating and Financial Review and Prospects

For the six months ended June 30, 2022 and 2021

Flora continually evaluates its plan of operations to determine the manner in which it can most effectively utilize its limited cash resources. The timing of completion of any aspect of its plan of operations is highly dependent upon the availability of cash to implement that aspect of the plan and other factors beyond the Company’s control. There is no assurance that the Company will successfully obtain the required capital or revenues, or, if obtained, that the amounts will be sufficient to fund its ongoing operations.

Emerging Growth Company Status

The Company is an “emerging growth company”, as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, it is eligible to take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to SEC reporting companies that are not emerging growth companies. For so long as the Company remains an emerging growth company, it will not be required to, among other things:

· present more than two years of audited financial statements and two years of related selected financial data and management’s discussion and analysis of financial condition and results of operations disclosure in its registration statement;

· have an auditor report on its internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; and

· disclose certain executive compensation related items.

The Company will remain an emerging growth company until the earlier of (i) the last day of the fiscal year following the fifth anniversary of its initial public offering, (ii) the last day of the fiscal year during which it has total annual gross revenue of at least $1.07 billion, (iii) the date on which it is deemed to be a “large accelerated filer” under the Exchange Act, which means the market value of its Common Shares that are held by non-affiliates exceeds $700.0 million as of the last business day of its most recently completed second fiscal quarter, and (iv) the date on which it has issued more than $1.0 billion in non-convertible debt during the prior three-year period.

D. Critical Accounting Policies and Estimates

Flora’s financial statements were prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). The preparation of interim financial statements in accordance with International Accounting Standards (“IAS”) 34, Interim Financial Reporting, requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying its accounting policies.

On a periodic basis, Flora evaluates its judgments, assumptions and estimates. The Company bases its estimates on historical experience, authoritative pronouncements and various other assumptions that it believes to be reasonable under the circumstances. Actual results may differ from these estimates. [However, the Company estimates have not materially changed over the periods presented in the financial statements included in this MD&A.] For summary information about critical judgments, assumptions and estimation uncertainties in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements, see Note 4. Critical Judgements and Estimation Uncertainties, in the notes to the consolidated financial statements included in the Annual Report.

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