Flower One Announces Proposed Restructuring Transaction Involving Its Convertible Debentures

Press Release

The Company is pleased to announce that it has entered into a Support Agreement with over a majority of its Convertible Debentureholders

Las Vegas, Nevada and Toronto, Ontario – March 2, 2021 – Flower One Holdings Inc. (“Flower One” or the “Company”) (CSE: FONE) (OTCQX: FLOOF) (FSE: F11), a leading cannabis cultivator and producer in Nevada, today announces its intention to consummate a proposed restructuring transaction involving the convertible debentures (the “March Debentures”) issued by Flower One pursuant to the debenture indenture dated March 28, 2019 (the “March Debenture Indenture”) and the convertible debentures (the “November Debentures”, together with the March Debentures, the “Debentures”) issued by Flower One pursuant to the debenture indenture dated November 15, 2019 (as supplemented by the supplemental debenture indenture dated as of December 18, 2019, the “November Debenture Indenture”). The proposed restructuring transaction has received support from more than a majority of the principal amount of the March Debentures and the November Debentures to date.

The Company is taking a further step in its previously announced restructuring initiative on February 1, 2021, which involves: (i) the right-sizing of its capital structure to reduce the debt service burdens on the business and improve cash flow, (ii) new investment being made into the Company to satisfy the terms of that certain loan modification and forbearance agreement dated January 26, 2021, and (iii) providing the Company with the runway it requires to maximize value to its stakeholders.

The Company intends to implement the proposed restructuring transaction pursuant to certain amendments (the “Amendments”) to the March Debenture Indenture and the November Debenture Indenture described below, and intends to convene meetings (the “Meetings”) of the holders of the Debentures to consider and vote on the Amendments. Flower One expects to convene the Meetings in April 2021 and will provide further details with respect to the dates of the Meetings and the materials to be disseminated to holders of Debentures in connection therewith in due course.

The Amendments to be considered at the Meetings are the following:

(a) Extending the maturity date to January 31, 2024;

(b) Amending the interest rate payable to 4% (if paid in cash) or 6% (if paid in common shares of the Company), at the Company’s option;

(c) A new forced conversion option available to the Company to convert 60% of the principal amount of each of the Debentures, as applicable, plus accrued interest, for units (the “Units”) at a conversion price of $0.35/unit. Each Unit will be comprised of one common share of the Company and 5/6 of a warrant (the “Warrants”), which Warrants will not be listed on the Canadian Securities Exchange or any exchange. Each whole Warrant is exercisable for one common share at an exercise price of $0.70 per common share for a period of 36 months; provided that if, at any time prior to the expiry date of the Warrants, the volume weighted average trading price of the common shares on the Canadian Securities Exchange, or other principal exchange on which the common shares are listed, is greater than $1.05 for 20 consecutive trading days, the Company may, within 10 business days of the occurrence of such event, deliver a notice to the holders of Warrants accelerating the expiry date of the Warrants to the date that is 30 days following the date of such notice;

(d) Amending the Conversion Price (as defined in the Debentures) to $0.385; and

(e) Amending the Current Market Price for a Mandatory Conversion Event (each as defined in the Debentures) to $1.05.

To date, Flower One has secured support from holders (the “Supporting Debentureholders”) of more than a majority of the principal amount of the March Debentures and the November Debentures to vote in favour of the Amendments at the Meetings and such holders have entered into a support agreement (including related joinder agreements) with the Company in connection therewith (the “Support Agreement”). If you are a holder of Debentures and would like to discuss the proposed restructuring transaction and Amendments, and the Support Agreement, with the Company, please contact Flower One at ir@flowerone.com or 702.660.7775 for further information.

The Support Agreement provides that the obligation of the Supporting Debentureholders to support the proposed restructuring transaction, including the Amendments, is subject to, among other things: (i) the Company and certain of its subsidiaries entering into an agreement to extend the maturity date under the US$30 million term loan between certain of Flower One’s subsidiaries, as borrowers, and RB Portfolio II, LLC, as lender, to January 26, 2023, and (ii) the Company raising at least $5 million in aggregate gross proceeds of equity or debt financing.

The Company’s board of directors unanimously recommends the proposed restructuring transaction and Amendments as being in the best interests of the Company, the holders of the Debentures and its stakeholders.

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, 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 financial performance; the Company’s ability to implement/or complete a restructuring transaction; the anticipated benefits and consequences of the restructuring transaction; the Company’s leadership as a cannabis cultivator, producer, innovator and full-service brand fulfillment partner; the Company’s ability to offer consistent, reliable and scalable fulfilment to a growing number of industry-leading brand partners; and the production of a wide range of products for the nation’s top-performing brands.

The Company is indirectly involved in the manufacture, possession, use, sale and distribution of cannabis in the recreational and medicinal cannabis marketplaces in the United States through its subsidiary Cana Nevada Corp. Local state laws where Cana Nevada Corp. operates permit such activities; however, these activities are currently illegal under United States federal law. Additional information regarding this and other risks and uncertainties relating to the Company’s business are contained under the heading “Risk Factors” in the Company’s management’s discussion and analysis for the nine and three months ended September 30, 2020 (the “MD&A”).

The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement, the “Forward-Looking Statements” section contained in 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, including, but not limited to: dependence on obtaining debentureholder and regulatory approvals; satisfying the conditions precedent to the Support Agreement; investing in target companies or projects that are engaged in activities currently considered illegal under United States federal law; changes in laws; limited operating history; reliance on management; requirements for additional financing; competition; hindering market growth and state adoption due to inconsistent public opinion and perception of the medical-use and adult-use marijuana industry and; regulatory or political change.

Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements in this news 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.



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