Flower One Announces Third Quarter Revenue Growth of 18% Year-Over-Year

Rhea-AI Summary

Flower One Holdings Inc. (CSE: FONE, OTCQX: FLOOF) reported strong financial performance for Q3 2021, achieving revenue of $14.1M, an 18% increase from the previous year. The company raised $5M through a non-brokered private placement and formed key brand partnerships with Miss Grass and ALTWELL. Despite these gains, Flower One faces seasonal production challenges and plans operational upgrades to enhance quality and yield. As of September 30, 2021, cash reserves reached $4.9M, and total liabilities declined to $120M, reflecting ongoing restructuring efforts.

Positive

• Revenue increased to $14.1M, up 18% year-over-year.
• Successfully closed a non-brokered private placement, raising $5M.
• Established exclusive brand partnerships with Miss Grass and ALTWELL.

Negative

• Cost of sales for Q3 2021 was $14.8M, resulting in a gross margin of 27%.
• Seasonal production challenges highlighted the need for key operational improvements.
• Total liabilities remained high at $120M as of September 30, 2021.

LAS VEGAS & TORONTO--(BUSINESS WIRE)-- Flower One Holdings Inc. (“Flower One” or the “Company”) (CSE: FONE) (OTCQX: FLOOF) (FSE: F11), the leading cannabis cultivator and producer in Nevada, is pleased to announce its financial and operating results for the third quarter ended September 30, 2021. All amounts are expressed in U.S. dollars unless indicated otherwise.

Third Quarter Highlights:

• The Company reported revenue of $14.1M, representing a 18% increase over the same period of the prior year;
• Announced the full-time appointments of Kellen O’Keefe as Chief Executive Officer and Salpy Boyajian as Executive Vice President;
• Closed its above-market non-brokered private placement, raising gross proceeds of $5M;
• Announced an exclusive brand partnership with Miss Grass, a brand that serves as an innovative platform focused on cannabis education, culture and science;
• Appointed Nikki Brown as the first member of the Company’s Advisory Board;
• Announced a strategic brand partnership with ALTWELL, a leading California health and wellness cannabinoid-based brand.

“While we continued to see the positive impacts of the restructuring and operational advancements, we also experienced seasonal challenges related to our production, highlighting the need for several key improvements required to bring the facility to optimization and ultimately full capacity. We have begun the first phase of significant upgrades to the facility, which will further improve the quality and consistency of our product, and ultimately increase yield and total capacity,” said Kellen O’Keefe, Flower One’s President & Chief Executive Officer. “We are focused on implementing these improvements as quickly as possible, to ensure we are able to reduce the impact of seasonal challenges moving forward and to position us for a strong 2022 and beyond.”

Third Quarter 2021 Financial Results:

Revenues

For the three-month period ending September 30, 2021, the Company reported revenue of $14.1M, up 18% from third quarter 2020 revenues of $11.9M.

Expenses

The following contains certain adjustments to the third quarter numbers to properly reflect the year-to-date figures. As a result of the adjustments, the reported cost of sales for third quarter 2021 was $14.8M. Cost of sales for the nine-month period ending September 2021 was $33.5M, resulting in a gross margin of 27%.

Profitability Measures

For the nine-month period ending September 2021, gross profit was $15.2M, compared to a gross loss of $14.6M in the nine-month period ending September 2020. Cost of sales and gross profit both include various noncash charges related to changes in fair value adjustments of biological assets and inventory, both of which reflect year-to-year variances in cultivation, harvesting times and yields. The following chart contains certain adjustments to the third quarter numbers to properly reflect the year-to-date figures.

Non-IFRS Measures
			Three-months ended September 30, 2021				Three-months ended September 30, 2020				Nine-months ended September 30, 2021				Nine-months ended September 30, 2020
Net income (loss) before income taxes		$	4,345,529			$	(17,192,698	)		$	(22,151,420	)		$	(44,863,299	)
Plus adjustments:
Depreciation and amortization			129,141				297,411				489,505				777,238
Finance expenses			5,659,980				6,205,422				17,705,907				19,418,094
EBITDA		$	10,134,650			$	(10,689,865	)		$	(3,956,008	)		$	(24,667,967	)
Plus adjustments:
Realized fair value adjustment on sale of inventory			4,325,330				5,299,280				17,619,707				10,476,901
Unrealized fair value adjustment (loss) on growth of biological assets			(615,110	)			(8,907,304	)			(20,161,817	)			(16,232,075	)
Write-down and provision for inventory			(2,072,067	)			16,986,205				-				27,633,848
Share-based compensation			21,428				333,283				790,482				1,109,492
Fair value gain on derivative			(14,088,119	)			(4,779,798	)			(20,728,838	)			(11,686,519	)
Gain on note payable modification			-				-				(14	)			-
Provision for impairment on intangible assets			-				-				-				9,300,225
Loss on disposal of property, plant and equipment			(96,853	)			-				7,304,247				-
Loss on debt modifications and extinguishment			-				-				4,762,208				-
Loss on convertible debt restructure			-				-				9,234,619				-
Foreign exchange gain (loss)			(3,342,247	)			421,698				(2,418,281	)			(1,576,624	)
Adjusted EBITDA		$	(5,732,988	)		$	(1,336,501	)		$	(7,553,695	)		$	(5,642,719	)

Balance Sheet

As of September 30, 2021, the Company had cash and cash equivalents of $4.9M, compared with $2.2M as of June 30, 2021, and $1.1M as of December 31, 2020. Total liabilities as of September 30, 2021 was $120M, compared to June 30, 2021 of $131.7M, and December 31, 2020 of $142.1M. While Flower One’s financial results are still affected by the ongoing restructuring and its associated fees and legacy costs, Flower One’s Board and Management team have taken decisive steps over the past quarter to further position the Company for long term success and to drive value for shareholders.

“While I have only been with the Company for a short time, I am pleased with the caliber of the team we have assembled and the improvements we have already implemented,” said Araxie Grant, Flower One’s Chief Financial Officer. “We can assure you that we are taking all of the necessary steps to achieve positive cash flow as quickly as possible. We will continue to explore all options with regards to decreasing the Company’s cost of capital and operating expenses.”

Flower One’s third quarter 2021 financial statements and management’s discussion and analysis will be issued and filed on SEDAR at www.sedar.com on November 29, 2021, and will be available on Flower One’s website at www.flowerone.com/investors/financial-reports.

Subsequent Events:

Executive Appointments:

The Company recently announced the hiring of Araxie Grant as the Company’s Chief Financial Officer. Ms. Grant brings almost two decades of finance and accounting experience over diverse industries including professional sports, gaming, entertainment and nonprofits. Most recently, Ms. Grant was the Vice President Controller for the Las Vegas Raiders football team, the Chief Financial Officer to the Arena Football League and previously a key financial executive at Las Vegas Sands Corporation, where she spent seven years building the company’s finance department. Ms. Grant holds a Master’s in Accounting degree from the University of Nevada.

Brand Partnerships:

In October, the Company announced a partnership with Justin Bieber and current brand partner, Palms, to launch the limited-edition PEACHES pre-rolls which can be found at Planet 13, MedMen, Cookies and other select dispensaries. Through the partnership, Flower One became the exclusive producer of Palms “PEACHES” line in the state of Nevada.

Notice of Conference Call:

Management will host a conference call at 10:00 a.m. ET on November 30, 2021, to discuss its financial results.

Date:		Tuesday, November 30, 2021
Time:		10:00 a.m. ET
Call:		1-877-407-0789 (Canada and U.S.)
		1-201-689-8562 (International)
Conference ID:		13724959
Webcast:		A live webcast will be available on Flower One’s website or at ViaVid.

All interested parties are invited to participate. Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.

For those unable to join the live webcast, a replay will be available until 11:59 p.m. ET on Tuesday, November 29, 2022. To access the archived webcast, please visit Flower One’s website.

About Flower One Holdings Inc.

Flower One is the largest cannabis cultivator, producer, and full-service brand fulfillment partner in the state of Nevada. By combining more than 20 years of greenhouse operational excellence with best-in-class cannabis operators, Flower One offers consistent, reliable, and scalable fulfillment to a growing number of industry-leading cannabis brands (Cookies, Kiva, Old Pal, Heavy Hitters, Lift Ticket’s, The Clear, HUXTON, and Flower One’s leading in-house brand, NLVO, and more). Flower One currently produces a wide range of products from flower, full-spectrum oils, and distillates to finished consumer packaged goods, including a variety of: pre-rolls, concentrates, edibles, topicals, and more for top-performing brands in cannabis. Flower One’s Nevada footprint includes the Company’s flagship facility, a 400,000 square-foot high-tech greenhouse and 55,000 square-foot production facility, as well as a second site with a 25,000 square-foot indoor cultivation facility and commercial kitchen. Flower One has built an industry-leading team focused on becoming the first high-quality, low-cost brand fulfillment partner.

The Company’s common shares are traded on the Canadian Securities Exchange under the Company’s symbol “FONE”, in the United States on the OTCQX Best Market under the symbol “FLOOF” and on the Frankfurt Stock Exchange under the symbol “F11”. For more information, visit: https://flowerone.com.

Cautionary Note Regarding Forward-Looking Information

Statements in this press release that are not statements of historical or current fact constitute “forward-looking information” within the meaning of Canadian securities laws and “forward-looking statements” within the meaning of United States securities laws (collectively, “forward-looking statements”). Such forward-looking statements involve known and unknown risks, uncertainties, and other unknown factors that could cause the actual results of the Company to be materially different from historical results or from any future actual results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms “believes,” “belief,” “expects,” “intends,” “anticipates,” “potential,” “should,” “may,” “will,” “plans,” “continue” or other similar expressions to be uncertain and forward-looking.

Forward-looking statements may include, without limitation, statements relating to the Company’s position as a leader in the Nevada cannabis market and anticipated sales and record revenue; the Company’s leadership as a cannabis cultivator, producer, innovator and full-service brand fulfillment partner; the production of a wide range of products for the nation’s top-performing brands; the Company continuing to see the positive impacts of the restructuring and operational advancements; the Company’s ability to implement improvements to the facility as quickly as possible and that improvements to the facility will result in improved quality and consistency of product; the Company’s ability to reduce the impact of seasonal challenges; the Company’s ability to achieve positive cash flow and sustainable growth; the Company’s ability to produce more and better-quality products; the Company being well placed to capture the high growth opportunity by the Nevada market; and the Company’s ability to achieve long term success and drive value for shareholders.

The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement, the “Cautionary Statement regarding Forward-Looking Information” section contained the Company’s management’s discussion and analysis for the three and nine months ended September 30, 2021 (the “MD&A”). All forward-looking statements in this press release are made as of the date of this press release. The forward-looking statements contained herein are also subject generally to assumptions and risks and uncertainties that are described from time to time in the Company’s public securities filings with the Canadian securities commissions, including the Company’s MD&A. Although Flower One has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in the forward-looking statements, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended.

Although the Company believes that any forward-looking information and statements herein are reasonable, in light of the use of assumptions and the significant risks and uncertainties inherent in such information and statements, there can be no assurance that any such forward-looking information and statements will prove to be accurate, and accordingly readers are advised to rely on their own evaluation of such risks and uncertainties and should not place undue reliance upon such forward-looking information and statements. Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements in this press release are made as of the date of this release. Flower One disclaims and does not undertake any intention or obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20211129005825/en/

Flower One Investor Relations

ir@flowerone.com

Kellen O’Keefe, President & CEO

702.660.7775

Flower One Media

media@flowerone.com

Source: Flower One Holdings Inc.

FAQ

What were the financial results for Flower One Holdings in Q3 2021?

Flower One reported Q3 2021 revenue of $14.1M, an 18% increase year-over-year.

What is the current cash position of Flower One Holdings?

As of September 30, 2021, Flower One had cash and cash equivalents of $4.9M.

How did Flower One Holdings address its liabilities in the latest report?

Total liabilities decreased to $120M from $131.7M in the previous quarter.

What partnerships did Flower One Holdings announce recently?

Flower One announced strategic brand partnerships with Miss Grass and ALTWELL.

When is the conference call for Flower One Holdings' financial results?

The conference call is scheduled for November 30, 2021, at 10:00 a.m. ET.