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FLWR - Flowr News Story

C$0.27 0.0  0.0%

Last Trade - 07/05/21

Sector
Healthcare
Size
Small Cap
Market Cap £54.0m
Enterprise Value £85.6m
Revenue £4.43m
Position in Universe 911th / 2702

The Flowr Corporation Announces Formation of Strategic Review Committee and Corporate Update with Refocused Business Strategy

Wed 14th April, 2021 11:23pm
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Highlights:
* Strategic Review Committee has commenced process of rightsizing headcount
for immediate cost reductions, reducing annual operating expenses by
approximately $2 million, excluding restructuring charges.
* The Company maintains a strong liquidity position with approximately $23.5
million in cash and cash equivalents as of March 31, 2021 with a $100 million
base shelf prospectus available.
* Flowr has disposed of non-core licenses and operations in offshore
jurisdictions.
* The Company expects approximately $5 million from non-core asset sales,
including approximately 4 acres of industrial land located in Kelowna.
* The Company focused on being an ultra-premium and premium dry flower
producer in Canada and the E.U.
TORONTO, April 14, 2021 (GLOBE NEWSWIRE) -- The Flowr Corporation (TSX.V:
FLWR; OTC: FLWPF) (“Flowr” or the “Company”) is pleased to announce
the results of a strategic review process designed to improve the financial
capacity of the Company and refocus the operations to the core business of the
Company, which is to produce ultra-premium and premium dry flower for the
Canadian and European markets. The Board of Directors of the Company appointed
a Strategic Review Committee led by independent director Joanne Lee with a
view to evaluating options for non-core assets and to develop a strategy for
reducing SG&A expenses at the Company.

“Since the start of the new year, the Strategic Review Committee has worked
hard to make Flowr a leaner and more focused Company,” commented Steve
Klein, Chair of the Board of Directors. “Within ninety days, the Company has
made the decision to dispose of non-core assets and has been very creative in
reducing cash outlays and started to right-size its headcount, all with a view
to improving its balance sheet and driving towards profitability. This is hard
work that we hope will pay off for all shareholders in the long-term.”

Strategic Review

The Strategic Review Committee was appointed by the Board of Directors with a
view to: (i) reduce corporate overhead and headcount; (ii) dispose of non-core
assets, including duplicative licenses in the E.U.; and (iii) implement
further cost savings strategies with a view to preserving cash and cash
equivalents.

SG&A Review

Headcount Reduction

In the first quarter of 2021, the Strategic Review Committee identified
corporate overhead reduction opportunities, resulting in SG&A reductions of
approximately $2 million per year. The Company has also determined to have the
majority of senior level executive positions relocate to its facilities in
Kelowna, British Columbia with relocations expected in the second quarter of
this year.

Toronto Office

The Company has made the strategic decision to close the Toronto office and
move most key management personnel positions to Kelowna. The Company is in the
process of sub-leasing its Toronto office. The Company has successfully
implemented remote working – as a result, all remaining Toronto employees
will continue to work remotely.

Fenwick Sublease

The Company has made the strategic decision to sub-sublease approximately 75%
of its multiuse facility located in Kelowna, along with the outdoor space
under its lease. The Company will continue to use a portion of the building
for dock warehousing needs and expects the subleases of the remaining areas to
result in annualized cash flow savings of up to approximately $500,000 per
year.

Non-Core Assets and Operations

Sale of Non-Core Assets

The Strategic Review Committee has identified approximately 4 acres of
industrial land in Kelowna that is non-core to the business and currently
vacant. The Company has initiated the sale of non-core land and expects gross
proceeds of between $4-5 million from the sale. In addition, the Company is in
the process of selling large-scale extraction manufacturing equipment and
expects gross proceeds from sale to be approximately $1 million. Lastly, the
Company owns approximately 6 hectares of industrial land in Aljustrel,
Portugal. The Company has yet to determine whether to sell this land; however,
the fair market value is expected to be in excess of $1 million.

Sale of Non-Core Licenses

The Company will be exiting all non-core jurisdictions, including Australia,
Uruguay and Spain. To that end, the Company has entered into an agreement to
sell Terra Nova Business Holdings Inc., an indirect wholly-owned subsidiary,
which holds a pre-license authorizing it to construct a medical cannabis
greenhouse facility in Portugal. The purchaser of Terra Nova has assumed all
of the obligations of Terra Nova and allowed for Flowr to regain a 10% equity
interest in the event certain milestone occur. In addition, Flowr has
terminated the call option agreement between Terrace Global Inc.
(“Terrace”), a wholly-owned subsidiary, and Inception Investment Corp.,
such that Terrace will no longer seek to acquire an equity interest in the
recreational cannabis business in Uruguay. Flowr has also sold Oransur, S.A.,
an indirect wholly-owned subsidiary, which was a hemp operator in Uruguay.
Under the terms of the agreement, Flowr will be allowed to regain a 10% equity
interest in the event certain milestones occur.

The Company is also in the process of selling TCann Pty Ltd., the entity that
holds its medical cannabis licenses in Australia. Upon completion this sale
will represent the Company’s exit from the Australian medical cannabis
market and there will be no further operating or capital expenses directed
towards those operation post-closing.

Overall, the exit or disposition of these businesses and assets are expected
to save the Company approximately $1 million on an annual basis.

Cash Preservation Initiatives

Marketing Budget in Shares

The Company’s marketing firm of record, Zerotrillion Ltd.
(“Zerotrillion”), has agreed to accept $310,778 of its fees payable in
common shares in the capital of the Company (the “Consideration Shares”)
pursuant to a shares for services agreement (the “Shares for Services
Agreement”). Pursuant to the Shares for Services Agreement, the Corporation
proposes to issue, subject to the approval of the TSX Venture Exchange
(“TSXV”), the Consideration Shares to the Consultant in lieu of cash as
compensation for the Consultant’s provision of certain media consulting
services, including advertising services, to the Corporation in accordance
with the Shares for Services Agreement and the 2021 Creative Services
Agreement appended thereto. The Consideration Shares will compensate the
Consultant for its services to the Corporation between March 31, 2021 and
March 31, 2022, and will be issued on a quarterly basis. The Consideration
Shares will be issued at a deemed price per Consideration Share equal to the
greater of: (i) $0.10; and (ii) the volume-weighted average trading price of
the Consideration Shares on the TSXV on the last trading day of each fiscal
quarter in which the Consulting Fee (as defined in the Shares for Services
Agreement) was earned through the provision of services to the Corporation,
less twenty-five percent (25%).

In 2021, Flowr won three awards at the ADCANN Awards - including the coveted
Brand of The Year award. The annual awards, which are voted on by the public,
exist to celebrate the best marketing and advertising across Canada’s
growing cannabis industry. Alongside the Brand of The Year Award, Flowr also
won Campaign of the Year for their Rembrandt inspired BC Pink Kush Campaign
which works with regulations of the cannabis industry to highlight Flowr’s
approach by blending art and science.

Zerotrillion, Flowr’s agency of record, was also recognized for its work
building the Flowr brand and subsequent campaigns and was awarded Agency of
The Year.

RSUs for Salary and Director Fees

In an effort to preserve cash and further alignment directors and employees
with the Company, the Company has implemented a program whereby employees may
take up to 20% of their base salary in restricted share units (“RSUs”). In
addition, the Board of Directors has agreed to receive 50% of its director
fees payable in RSUs.

Other Balance Sheet Initiatives

ATB Amendments

On December 18, 2020, the Company entered into an Amending and Restated Credit
Agreement (“ARCA”) with a syndicate of lenders led by ATB Financial. The
ARCA provided for additional covenant flexibility for the Company such that
the only financial covenants in place until the fourth quarter of 2021 are for
the Corporation to maintain a senior debt to tangible net worth ratio of
greater than 1.3:1 and a minimum cash on hand of $3.5 million. In addition,
the ARCA allows for the Corporation to prepay the ARCA by $5 million above its
principal repayments, at which point this covenant relief will be extended for
an additional year and the maturity of the loan would be extended for an
additional year.

In addition, the ARCA provided for the following financing baskets available
without lender pre-approval: (i) up to $2 million in respect of PMSI
financing; (ii) up to $2.5 million in respect of accounts receivable
factoring; and (iii) unlimited junior permitted indebtedness.

Debenture Conversion

On November 16, 2020, the Corporation announced completion of the early
conversion of certain of its 10.0% subordinated secured convertible debentures
due April 27, 2024 (the “Debentures”) pursuant to an early conversion
opportunity (the “Early Conversion Opportunity”). Approximately $16.4
million aggregate principal amount of Debentures were converted under the
Early Conversion Opportunity, resulting in the issuance of approximately 47.8
million Common Shares. Upon closing of the Early Conversion Opportunity, there
were approximately $5 million aggregate principal amount of 10% Subordinated
Debentures still outstanding. All such outstanding 10% Subordinated Debentures
continue to be governed by the terms of the indenture between the Corporation
and Computershare Trust Company of Canada dated April 27, 2020, as amended.

$15.9 Million Bought Deal Financing

On March 16, 2021, the Company closed a bought deal offering (the
“Offering”). In connection with the Offering, the Company issued
31,127,453 units of the Company (the “Units”) at a price of $0.51 per Unit
(the “Issue Price”) for aggregate gross proceeds to the Company of
approximately $15.9 million, inclusive of the partial exercise of the
over-allotment option. Each Unit consists of one Common Share and one full
Common Share purchase warrant of the Company (each whole warrant, a
“Warrant”). Each Warrant is exercisable to acquire one Common Share at an
exercise price of $0.64 per Common Share for a period of two years from March
16, 2021 (the “Closing Date”). Following the partial exercise of the
over-allotment option granted to the Underwriters, an additional 3,274,508
Units remain exercisable by the Underwriters at the Issue Price, in whole or
in part, at any time for a period of thirty days from the Closing Date. The
Underwriters were paid a cash commission equal to 7.0% of the gross proceeds
of the Offering and received Unit purchase warrants of the Company (the
“Underwriters’ Warrants”) equal to 6.0% of the number of Units sold
under the Offering, with each Underwriters’ Warrant being exercisable to
acquire one common share at the Issue Price for a period of 24 months from the
Closing Date. The net proceeds of the Offering will be used for general
corporate purposes.

Base Shelf Prospectus

On April 13, 2021, the Company announced that it filed a final short form base
shelf prospectus (the “Final Shelf Prospectus”) with the securities
commissions or similar authorities in each province of Canada.

The Final Shelf Prospectus enables the Company to offer and issue up to
$100,000,000 of common shares, preferred shares, debt securities, subscription
receipts and warrants, or any combination thereof (collectively, the
“Securities”). The Securities may be issued from time to time, separately
or together, in amounts, at prices, and on terms to be determined based on
market conditions at the time of the offering and as set out in an
accompanying prospectus supplement, during the 25-month period that the Final
Shelf Prospectus remains effective. The amount and timing of any future
offerings will be based on the Company’s financial requirements and market
conditions at that time.

About The Flowr Corporation

The Flowr Corporation is a Toronto-headquartered cannabis company with
operations in Canada, Europe, and Australia. Its Canadian operating campus,
located in Kelowna, BC, includes a purpose-built, GMP-designed indoor
cultivation facility; an outdoor and greenhouse cultivation site; and a
state-of-the-art R&D facility. From this campus, Flowr produces recreational
and medicinal products. Internationally, Flowr intends to service the global
medical cannabis market through its subsidiary Holigen, which has a license
for cannabis cultivation in Portugal and operates GMP licensed facilities in
both Portugal and Australia. In 2020, Flowr’s BC Pink Kush was recognized as
the top indica strain in Canada by kind magazine.

Flowr aims to support improving outcomes through responsible cannabis use and,
as an established expert in cannabis cultivation, strives to be the brand of
choice for consumers and patients seeking the highest-quality craftsmanship
and product consistency across a portfolio of differentiated cannabis
products.

For more information, please visit flowrcorp.com
(https://www.globenewswire.com/Tracker?data=gm_PHRJME0YMJYFywGGPXa_bciSlOmRWVRhYXu-KzwfwLQo-Vcz9ET2EjTjCH4MltgeTOR5e0TGaemoWNdp4Og==)
or follow Flowr on Twitter: @FlowrCanada and LinkedIn: The Flowr Corporation.

On behalf of The Flowr Corporation:
Lance Emanuel
President and Interim Chief Executive Officer

CONTACT INFORMATION:

INVESTORS & MEDIA:
Irina Hossu
Chief Financial Officer
irina.hossu@flowr.ca

Forward-Looking Information and Statements

This press release contains “forward-looking information” within the
meaning of Canadian securities laws. Often, but not always, forward-looking
information can be identified by the use of words such as “plans”, “is
expected”, “expects”, “scheduled”, “intends”,
“contemplates”, “anticipates”, “believes”, “proposes” or
variations (including negative and grammatical variations) of such words and
phrases, or state that certain actions, events or results “may”,
“could”, “would”, “might” or “will” be taken, occur or be
achieved. Such information and statements are based on the current
expectations of Flowr’s management and are based on assumptions and subject
to risks and uncertainties. Although Flowr’s management believes that the
assumptions underlying such information and statements are reasonable, they
may prove to be incorrect. The forward-looking events and circumstances
discussed in this press release may not occur by certain specified dates or at
all and could differ materially as a result of known and unknown risk factors
and uncertainties affecting Flowr, including risks relating to: the inability
to complete the sale of non-core assets described in this press release;
general economic and stock market conditions; adverse industry events; loss of
markets; future legislative and regulatory developments in Canada and
elsewhere; the cannabis industry in Canada generally; the ability of Flowr to
implement its business strategies; Flowr’s inability to produce or sell
premium quality cannabis, risks and uncertainties detailed from time to time
in Flowr’s filings with the Canadian Securities Administrators; the
Company’s inability to raise capital or have the liquidity to operate or
advance its strategic initiatives and many other factors beyond the control of
Flowr.

Although Flowr has attempted to identify important factors that could cause
actual actions, events or results to differ materially from those described in
forward-looking information or statements, there may be other factors that
cause actions, events or results to differ from those anticipated, estimated
or intended. No forward-looking information or statement can be guaranteed.
Except as required by applicable securities laws, forward-looking information
and statements speak only as of the date on which they are made and Flowr
undertakes no obligation to publicly update or revise any forward-looking
information or statements, whether as a result of new information, future
events or otherwise. When considering such forward-looking information and
statements, readers should keep in mind the risk factors and other cautionary
statements in Flowr’s Annual Information Form dated April 29, 2020 (the
“AIF”) and filed with the applicable securities regulatory authorities in
Canada. The risk factors and other factors noted in the AIF could cause actual
events or results to differ materially from those described in any
forward-looking information or statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that
term is defined in policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release.

(https://www.globenewswire.com/NewsRoom/AttachmentNg/c2f80cdc-4dec-49f4-96f1-9dc064de4a51)



GlobeNewswire, Inc. 2021
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