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TORONTO–()–Flower One Holdings Inc. (the “Company”) (CSE: FONE) (OTCQX: FLOOF) (FSE: F11), a number one hashish cultivator, producer and innovator in Nevada, at the moment reported its monetary and working outcomes for the third quarter ended September 30, 2020. All quantities are expressed in U.S. {dollars} except indicated in any other case.

Third Quarter Highlights

  • The Company reported Q3 2020 income of $11.9 million, its strongest quarter thus far and up considerably from each Q2 2020 income of $3.9 million and Q3 2019 income of $2.5 million;
  • Q3 2020 income was forward of the Company’s steerage vary of $9.8M-10.8M;
  • The Company recorded a Q3 2020 gross margin of 25%, in comparison with 46% in Q2 2020, with the decline ensuing from the Company decreasing manufacturing throughout Q2 2020, as a result of COVID-19 pandemic, whereas incurring the identical stage of overhead – and likewise on account of discounted gross sales of ageing product from its services’ early harvests;
  • The Company not too long ago launched the Cookies model and its portfolio of premium flower strains, pre-rolls, concentrates and vapes, and continues to promote out all accessible packaged stock;
  • The Company continued to extend the crop allotment of premium flower manufacturers like Cookies, which we anticipate to end in stronger margins and elevated high line income. These changes are additionally anticipated to extend complete income per plant amongst different effectivity metrics;
  • Performance of lots of the Company’s Brand Partners remained sturdy throughout the quarter in accordance with BDS Analytics, a number one supplier of hashish {industry} market intelligence and insights:

    • the Company’s NLVO model ranked #1 of the highest 10 flower manufacturers in Nevada;
    • the Company’s merchandise represented 13 of the highest 20 flower SKUs bought in Nevada dispensaries;
    • Flower One presently supplies manufacturing inputs for 17 of the highest 20 vape SKUs in Nevada; and
    • Old Pal, which stays the #1 flower model primarily based on complete items bought and stays ranked #2 of the highest 10 flower manufacturers in Nevada.
  • In mid-September, Kiva launched Blackberry Blitz, a brand-new Camino taste impressed by the Las Vegas Raiders.

The Flower One team has been working diligently to elevate the quality of our flower and products,” mentioned Kellen O’Keefe, Flower One’s Chief Strategy Officer. “This focus on quality has allowed us to continue to shift our product mix more towards premium brand partners such as Cookies, 22Red, Lift Tickets and Heavy Hitters with several other premium partners coming online in 2021.”

Q3 reflected a strong revenue rebound for Flower One and the overall Nevada cannabis market,” mentioned Ken Villazor, Flower One’s President and CEO. “In addition, the overall Nevada cannabis market showed resiliency and momentum through Q3 as demonstrated by Nevada’s most recently reported monthly sales of $79.5M in August 2020 – a 27% increase year-over-year and its strongest month of recorded cannabis retail sales.”

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Third Quarter 2020 Financial Results

Revenues

For the three-month and nine-month interval ended September 30, 2020, the Company earned income of $11.9 million and $24.6 million, respectively, up considerably from Q2 2020 income of $3.9 million and the respective durations in 2019: $2.5 million for the three-month interval and $3.7 million for the 9 month interval. The enhance was a results of the Company’s elevated gross sales volumes generated from the Company’s flagship 455,000 sq. foot cultivation and manufacturing facility (the “NLV Greenhouse”). Cannabis flower gross sales out of the NLV Greenhouse commenced in August 2019 and cannabis-derivative merchandise out of the NLV Greenhouse extraction facility commenced in late September 2019.

Expenses

Cost of gross sales was $8.9 million for Q3 2020, as in comparison with $6.Three million within the prior quarter. The enhance in price of revenues was according to the elevated income volumes. Cost per harvested gram from the NLV Greenhouse was $0.69 in Q3 2020, a lower from $1.04 in Q2 2020. The elevated price of gross sales, as a share of gross sales in Q3 2020 vs Q2 2020, was as a result of larger output in Q3 2020 vs Q2 2020 absorbing non-variable manufacturing prices over elevated output. During the Q2 2020 shutdowns, overhead remained comparatively the identical as in Q1, thus leading to increased stock prices per gram produced. Most of the stock harvested and produced in Q2 2020 remained in stock as of June 30, 2020, which had a unfavourable affect on margins when the product was bought in Q3 2020. This was partially offset by revenues from higher-margin branded merchandise.

General and administrative bills for the quarter totaled $5.6 million, a lower of $0.1 million over Q2 2020, on account of decrease accounting and authorized prices, insurance coverage, consulting and different prices throughout the quarter offsetting increased hashish taxes associated to increased gross sales. The Company continues to establish methods to handle bills and scale back overhead prices.

Profitability Measures

Gross revenue in Q3 2020 amounted to $3.Zero million or 25% of income, in comparison with $1.Eight million, or 46% of income, for Q2 2020.

The internet loss for the quarter of $17.2 million was pushed partially by a one-time non-cash write-down of provision of stock totaling $17 million. The stock write-down was due the Company’s evaluation that sure stock available, from 2019 harvests, wouldn’t be profitability bought as flower or distillate. This write-down offset $8.9 million of non-cash changes upward to the worth of the Company’s organic belongings.

In addition to the one-time, non-cash impairment cost, bills for the quarter included: finance bills of $6.2 million, a achieve on the truthful worth of derivatives of $4.Eight million and $0.Four million in overseas trade losses.

Cash Flow

Cash circulation utilized by operations for the nine-months ending September 30, 2020 was $23.2 million. Cash offered from financing actions was $22.Eight million which was comprised of debt raises of $11.9 million and fairness raises of $19.5 million, which have been partially offset by repayments of debt totalling $8.6 million. Cash utilized in investing actions equaled $1.7 million and represented purchases of property, plant and gear. As of September 30, 2020, the Company had unfavourable working capital of $28.Three million.

The Company traditionally has funded its operations from debt and fairness raises. The Company presently is actively in search of capital. However, there may be no assurance that Company shall be profitable in elevating sufficient capital to satisfy its brief or long-term obligations till such time that it reaches optimistic money circulation internet of debt and operational obligations.

Flower One’s Q3 2020 monetary statements and administration’s dialogue and evaluation shall be issued and filed on SEDAR at www.sedar.com on November 30, 2020 and shall be accessible on Flower One’s web site at www.flowerone.com/investors/financial-reports.

Highlights Subsequent to Quarter-End

  • The re-opening of dispensaries in early May to in-person revenues continues to have a optimistic affect on gross sales and stock ranges at hashish retailers, regardless of solely partial resurgence of tourism to Las Vegas;
  • Beginning in Q3 2020 and persevering with by way of This autumn to-date, the Company has devoted extra of its greenhouse footprint to premium manufacturers;
  • During Q3 2020, the cultivation workforce started replanting the NLV Greenhouse (following the Q2 2020 operational discount as a result of COVID-19 pandemic) and as of Q3 2020 the NLV Greenhouse is totally planted and on a daily harvest cycle, and
  • During This autumn, the Company additionally introduced the achievement of sure operational milestones together with:

    • the implementation of Brand Partner Lift Ticket’s proprietary pre-roll know-how and processes, and
    • the signing of Nature’s Lab, an award-winning focus producer, as each a model accomplice and marketing consultant to additional enhance and speed up each high quality and capabilities of Flower One’s manufacturing lab.

Update of Term Debt Loan and Subversive Transaction

Subsequent to the quarter finish, the Company entered into an settlement with Subversive Real Estate LP (“Subversive”) for a brand new $39 million time period mortgage (the “Subversive Loan”), which included an choice to enter a sale-leaseback buy settlement for the Company’s greenhouse facility (along with the Subversive Loan, the “Subversive Transaction”). One of Subversive’s circumstances underneath the Subversive Loan was that Subversive full a qualifying transaction, a transaction unrelated to the Company. Subversive initially suggested the Company that it anticipated to shut the qualifying transaction in early November 2020 and shortly thereafter shut the Subversive Loan. In October 2020, subsequent to the Company’s announcement of the Subversive Loan, RB Loan Portfolio II, LLC (“RB II”), the Company’s current time period debt lender suggested that it thought of sure liens filed by third events in opposition to sure belongings of the Company to be a breach of the present $30 million time period debt (the “Term Debt”). As a results of cross default provision between the Term Debt and the Company’s current $17.5 million gear financing (the “Equipment Financing”), RB Loan Portfolio I, LP (“RB I”), the Equipment Financing lender, thought of the Company to be in breach of the Equipment Financing. In October 2020, the Company entered right into a payout settlement with RB II and a forbearance settlement with RB I, underneath which RB II and RB I agreed, amongst different issues, to forebear their rights till November 18, 2020 (a date after which the Company anticipated the Subversive Loan to shut). The Company supposed to make use of a part of the Subversive Loan proceeds to repay the Term Debt and take away the excellent liens. The Company additionally agreed to pay RB II a charge equal to incremental curiosity of three% on the steadiness of the Term Debt 2020 and to pay RB I incremental curiosity of 6% on the steadiness of the Equipment Financing.

On November 26, 2020, Subversive introduced that it has decided to not proceed with its beforehand introduced qualifying transaction and subsequently the corporate believes it’s unlikely to shut the Subversive mortgage. Nonetheless, the Company continues to work with Subversive to discover choices to shut the Subversive Transaction. The Company is presently negotiating with RB II to increase and amend the phrases of the Term Debt and with RB I to increase and amend the phrases of the Equipment Financing. There may be no assurance that the Company shall be profitable in negotiating profitable amendments to the Term Debt and the Equipment Financing.

About Flower One Holdings Inc.

Flower One is the most important hashish cultivator, producer, and full-service model achievement accomplice within the state of Nevada. By combining greater than 20 years of greenhouse operational excellence with best-in-class hashish operators, Flower One presents constant, dependable and scalable achievement to a rising variety of industry-leading hashish manufacturers. Flower One’s flagship 400,000 square-foot greenhouse and 55,000 square-foot manufacturing facility are used for big scale hashish cultivation, processing and manufacturing. Flower One additionally operates a second cultivation and manufacturing facility with 25,000 square-feet of indoor cultivation and a industrial kitchen that produce a number of of the nation’s top-performing edible manufacturers. Flower One produces a variety of merchandise starting from: wholesale flower; full-spectrum oils and distillates, to completed client packaged items together with: flower; pre-roll, concentrates, edibles, and topicals for the top-performing manufacturers in hashish.

The Company’s widespread shares are traded on the Canadian Securities Exchange underneath the Company’s image “FONE”, within the United States on the OTCQX Best Market underneath the image “FLOOF” and on the Frankfurt Stock Exchange underneath the image “F11”.

For extra info, go to: https://flowerone.com.

Forward Looking Statements

Statements on this press launch that aren’t statements of historic or present reality represent “forward-looking information” throughout the that means of Canadian securities legal guidelines and “forward-looking statements” throughout the that means of United States securities legal guidelines (collectively, “forward-looking statements”). Such forward-looking statements contain identified and unknown dangers, uncertainties, and different unknown components that might trigger the precise outcomes of the Company to be materially totally different from historic outcomes or from any future precise outcomes expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such dangers and uncertainties, readers are urged to contemplate statements labeled with the phrases “believes,” “belief,” “expects,” “intends,” “anticipates,” “potential,” “should,” “may,” “will,” “plans,” “continue” or different related expressions to be unsure and forward-looking.

Forward-looking statements might embrace, with out limitation, statements referring to the Company’s anticipated stronger margins and income; worth offered to Flower One’s model and retail companions; potential supply of merchandise to the Nevada hashish market; enterprise continuity on account of COVID-19; the Nevada’s hashish market; the anticipated progress in demand; the Company’s management as a hashish cultivator, producer, innovator and full-service model achievement accomplice; the Company’s means to supply constant, dependable and scalable fulfilment to a rising variety of industry-leading model companions, and the manufacturing of a variety of merchandise for the nation’s top-performing manufacturers.

The Company is not directly concerned within the manufacture, possession, use, sale and distribution of hashish within the leisure and medicinal hashish marketplaces within the United States by way of its subsidiary Cana Nevada Corp. Local state legal guidelines the place Cana Nevada Corp. operates allow such actions; nevertheless, these actions are presently unlawful underneath United States federal regulation. Additional info relating to this and different dangers and uncertainties referring to the Company’s enterprise are contained underneath the heading “Risk Factors” within the Company’s Annual Information Form dated June 23, 2020 (the “Annual Information Form”) filed on its issuer profile on SEDAR at www.sedar.com.

The forward-looking statements contained on this press launch are expressly certified of their entirety by this cautionary assertion, the “Cautionary Statement regarding Forward-Looking Information” part contained within the Annual Information Form. All forward-looking statements on this press launch are made as of the date of this press launch. The forward-looking statements contained herein are additionally topic usually to assumptions and dangers and uncertainties which can be described occasionally within the Company’s public securities filings with the Canadian securities commissions, together with the Company’s Annual Information Form.

Although Flower One has tried to establish vital components that might trigger precise outcomes, efficiency or achievements to vary materially from these contained within the forward-looking statements, there may be different components that trigger outcomes, efficiency or achievements to not be as anticipated, estimated or supposed, together with, however not restricted to: dependence on acquiring regulatory approvals; investing in goal corporations or tasks which can be engaged in actions presently thought of unlawful underneath United States federal regulation; modifications in legal guidelines; restricted working historical past; reliance on administration; necessities for extra financing; competitors; hindering market progress and state adoption as a consequence of inconsistent public opinion and notion of the medical-use and adult-use marijuana {industry} and; regulatory or political change.

Accordingly, readers mustn’t place undue reliance on forward-looking statements. The forward-looking statements on this information launch are made as of the date of this launch. Flower One Holdings disclaims and doesn’t undertake any intention or obligation to replace or revise any such forward-looking statements, whether or not on account of new info, future occasions or in any other case, besides as required by relevant regulation.

NEITHER THE CANADIAN SECURITIES EXCHANGE NOR THEIR REGULATIONS SERVICES PROVIDER HAVE REVIEWED OR ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

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