Flower One Holdings Reports 2018 Fourth Quarter and Year-End Results

Published: May 2, 2019

Flower One Holdings Inc. reported its financial and operating results for the fourth quarter and year ended December 31, 2018. All amounts are expressed in U.S. dollars unless indicated otherwise.

Fourth quarter operational highlights:

  • Became a public company with the commencement of trading on the Canadian Securities Exchange on October 10, 2018;
  • Commenced trading in the United States on the OTCQB Marketplace on November 6, 2018;
  • Received approval from the State of Nevada for the recreational marijuana cultivation and production licenses for the Company’s 455,000 square foot commercial greenhouse cultivation and production facility (medical marijuana cultivation and production licenses were approved in July 2018); and
  • Completed the acquisition of the assets of NLV Organics, Inc. and related parties (“NLVO”), a fully licensed and fully operational cultivator and producer. The acquisition accelerated the Company’s growth plan and scale-up efforts in Nevada.

The Company has continued to make substantial operational progress in the four months since completion of its fourth quarter and year ended December 31, 2018.

Operational highlights subsequent to the fourth quarter 2018:

  • Last week, the Company announced that the conversion of its greenhouse was 95% complete. The greenhouse is now more than 60% canopied with five of eight zones fully planted;
  • The greenhouse’s high-tech cutting cell rooms and three expansive, multi-density vegetative zones are also fully populated;
  • Obtained lease equipment financing for up to $30M on February 11, 2019;
  • Raised CAN $57.5M through a prospectus offering of convertible debenture units that closed on March 28, 2019; and
  • Announced eight Brand Partnerships so far in 2019.

For more details on the greenhouse conversion, production facility construction, Brand Partnerships, and more, please refer to the Company’s Corporate Update issued on April 25, 2019, available here: http://bit.ly/FONEApr25.

“Flower One’s fourth quarter demonstrated the Company’s ongoing success in achieving very significant operational milestones including our transformation to a public company as well as our strategic acquisition of the assets of NLV Organics, which accelerated our ability to scale-up in the Nevada market,” said Ken Villazor, President and CEO.  “That pace of execution has only continued in the four months since the completion of our fourth quarter including and most notably that our state-of-the-art 400,000 square foot greenhouse is more than 60% canopied.”

Financial results

The Company was incorporated on December 18, 2017, and as such, no comparable information is available for the fourth quarter and full year periods ended December 31, 2017.

The Company’s operational activities during the quarter were primarily focused on advancing the conversion of its 455,000 square foot greenhouse and production facility for cultivating high-quality cannabis at scale.

Revenue for the fourth quarter and fiscal year was $130,969. Flower One only began recording revenue on November 9, 2018 subsequent to the acquisition of the assets of NLVO.

Cost of goods sold was $133,094 for the quarter and the year, and included production costs expensed and the cost of inventory sold.

For the quarter, the Company recorded a loss of $5,279,068, comprised of $2,734,111 in share-based compensation, $52,600 in foreign exchange loss related to the Company’s cash balances held in CAN$ and $2,778,677 in general and administrative expenses.

For the fiscal year, Flower One recorded a loss of $12,449,915, comprised of $3,239,257 in share-based compensation, $3,803,582 as a listing expense related to the RTO, $639,535 in foreign exchange loss related to the Company’s cash balances held in Canadian dollars and $5,053,861 in general and administrative expenses.

As at December 31, 2018, the Company had a working capital deficit of $32,866,665, largely due to a vendor note (“NLVO Note”) of $14,080,167 and the $18,000,000 note owed for the greenhouse.  The NLVO Note was repaid subsequent to December 31, 2018 and the maturity date on the $18,000,000 note was extended to March 31, 2020 with interest commencing April 1, 2019 at a rate of 9.5% per annum.