Flower One Announces Successful Closing of $20.85 Million Public Offering of Convertible Debenture Units

Press Release

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./

TORONTO, Nov. 15, 2019 /CNW/ – Flower One Holdings Inc. ("Flower One" or the "Company") (CSE: FONE) (OTCQX: FLOOF), today announced the closing of its previously announced marketed public offering (the "Offering") of unsecured convertible debenture units of the Company (the "Debenture Units") for aggregate gross proceeds of $20,850,000, which includes the proceeds from the partial exercise of the Over-Allotment Option (as defined below). In connection with the Offering, the Company issued a total of 20,850 Debenture Units at a price of $1,000 per Debenture Unit (the "Offering Price").

Flower One Holdings Inc. (CNW Group/Flower One Holdings Inc.)

The Offering was completed pursuant to an agency agreement (the "Agency Agreement") dated November 8, 2019 with Mackie Research Capital Corporation and Canaccord Genuity Corp., as co-lead agents and joint bookrunners (collectively, the "Lead Agents"), on behalf of a syndicate of agents including Industrial Alliance Securities Inc., Haywood Securities Inc., PI Financial Corp., Echelon Wealth Partners Inc. and Eight Capital (together with the Lead Agents, the "Agents").

As part of the Offering, the Agents have been granted an over-allotment option (the "Over-Allotment Option") for up to 30 days after the closing of the Offering, exercisable, in whole or in part at any time and from time to time, to increase the size of the Offering by up to 15% in Debenture Units (and/or the components thereof) on the same terms and conditions of the Offering. Pursuant to the Offering, the Company is pleased to announce additional gross proceeds of $850,000 from the partial exercise of the Over-Allotment Option, representing an additional 850 Debenture Units issued today by the Company. The Agents may from time to time for a period of 30 days as of today exercise the remaining or part of the Over-Allotment Option to cover over-allotments and for market stabilization purposes.

The net proceeds received by the Company from the Offering are intended to be used for: (a) advancing and supporting the continued launch of its Brand Partners’ products into the Nevada market; (b) working capital and general corporate purposes; and (c) initial exploratory costs associated with the Company’s market entry plans for California.

Each Debenture Unit consists of one 9.5% unsecured convertible debenture (the "Convertible Debentures") maturing three years from the date of issuance and 666 common share purchase warrants of the Company (the "Warrants"). Each Warrant shall entitle the holder thereof to purchase one common share in the capital of the Company (each, a "Common Share") at an exercise price of $1.55 at any time up to November 15, 2022, subject to certain adjustment and acceleration provisions. 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 (the "CSE"), or other principal exchange on which the Common Shares are listed, is greater than $3.10 for 20 consecutive trading days, the Company may 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.

The Convertible Debentures shall bear interest at a rate of 9.5% per annum from the date of issue, payable semi-annually in arrears on the last day of June and December in each year and will have a maturity 36 months from the date of issuance (the "Maturity Date"). The principal amount of each Convertible Debenture shall be convertible, for no additional consideration, into Common Shares at the option of the holder at any time prior to the earlier of: (i) the close of business on the Maturity Date, and (ii) the business day immediately preceding the date specified by the Company for redemption of the Convertible Debentures upon a change of control at a conversion price equal to $1.50 (the "Conversion Price"), subject to a mandatory conversion privilege. If the holder elects to convert the Convertible Debentures after January 15, 2020, then the holder will also receive the Effective Interest (as defined herein), payable in cash or Common Shares at a price equal to the daily volume weighted average trading price of the Common Shares on the CSE for the consecutive 20 trading days preceding the date of such election, or a combination of cash and Common Shares, at the Company’s option. The effective interest ("Effective Interest") is an amount equal to the interest that the holder would have received if the holder had held the Convertible Debentures until the Maturity Date.

Pursuant to the terms of the Agency Agreement, the Company paid the Agents a cash commission equal to 6.0% of the gross proceeds of the Offering, and issued to the Agents 972,027 non-transferable warrants (the "Broker Warrants") of the Company, each such Broker Warrant exercisable into a Common Share at an exercise price equal to the Conversion Price at any time up to November 15, 2022.

The Convertible Debentures and the Warrants have been approved for listing with the CSE under symbols "FONE.DB.A" and "FONE.WT.A", respectively and are expected to begin trading as of November 18, 2019.

Neither the Debentures Units (and the Convertible Debentures and the Warrants forming part of the Debenture Units) have been or will be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any state securities laws, and such securities may therefore not be offered or sold in the United States or to or for the account or benefit of a person in the United States or a U.S. Person (as defined in Regulation S of the U.S. Securities Act) absent registration or an applicable exemption from the registration requirements of the U.S. Securities Act and applicable U.S. state securities laws. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Debenture Units in any jurisdiction in which such offer, solicitation or sale would be unlawful.

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. Flower One’s flagship 400,000 square-foot greenhouse and 55,000 square-foot production facility is used for large scale cannabis cultivation, processing, and manufacturing. Flower One also owns and operates a second production facility in Las Vegas, with 25,000 square-feet of indoor cultivation and a commercial kitchen that will produce several of the nation’s top-performing edible and beverage brands. Flower One produces a wide range of products ranging from wholesale flower, full-spectrum oils, and distillates to finished consumer packaged goods including flower, pre-rolls, concentrates, edibles, beverages, and topicals for the top-performing brands in cannabis.

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

Forward Looking Statements

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 ability to gain access to further capital, to advance and support the continued launch of its Brand Partners’ products into the Nevada market; the Company’s market entry plans for California; the listing of the Convertible Debentures, the Warrants, and the common shares of the Company issuable upon conversion of the Convertible Debentures and the exercise of the Warrants on the CSE; the Company’s leadership as a cannabis cultivator, producer and full-service brand fulfillment partner; the Company’s ability to offer consistent, reliable and scalable fulfilment to its brand partners; and the production of a wide range of products including products of the top-performing edibles and beverage brands in the United States.

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 Shelf Prospectus dated October 22, 2019 and the Company’s Prospectus Supplement dated November 8, 2019, both filed on its issuer profile on SEDAR at www.sedar.com.

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 in the Shelf Prospectus and the Prospectus Supplement. 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 Shelf Prospectus and the Prospectus Supplement.

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 regulatory approvals; 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 Holdings 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.

SOURCE Flower One Holdings Inc.


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