Mr. Kellen O'Keefe reports

FLOWER ONE ANNOUNCES FY-21 FINANCIAL RESULTS

Flower One Holdings Inc. has released its financial and operating results for the year ended Dec. 31, 2021, and updates to its board of directors. All amounts are expressed in U.S. dollars, unless indicated otherwise.

2021 financial and operating highlights:

• The company reported 2021 revenue of $58.4-million, representing a 70-per-cent increase from the prior year;
• Gross profit increased 153 per cent year-over-year, representing a 37-per-cent margin;
• In-house brand NLVO was repeatedly recognized as one of the top-selling flower brands in the state of Nevada;
• Began its comprehensive debt and corporate restructuring. The restructuring of certain debentures further reduced the company's continuing debt service obligations;
• Initiated facility upgrades to further improve product quality and consistency, leading to higher average selling prices from year prior.

"We are proud of the year-end results and our ability to maintain a leading position in Nevada amidst challenging market conditions. The improvements we have made year-over-year are significant and represent the tremendous effort given from our entire team and all of our partners. At Flower One, our mission is to deliver quality product at scale and given our unique position we continue to do this on a daily basis. With that said, we recognize the hard work that lies ahead and are laser focused on finishing the critical upgrades to our facilities, and delivering consistent and dependable quality products, both imperative to our primary objective of achieving positive cash flow. We are confident that these facility enhancements will set us up for long-term success as we are able to execute on our growth strategy while driving shareholder value," said Kellen O'Keefe, Flower One's president and chief executive officer.

2021 financial results

Revenues

For the year ended Dec. 31, 2021, the company reported revenue of $58.4-million, up 70 per cent from 2020 revenues of $34.2-million. While the company experienced a year-over-year revenue increase, fourth quarter revenues were affected as Nevada historically endures a decline in both cannabis sales and tourism in its fourth quarter, in comparison with the remainder of the year. Additionally, increased competition combined with decreased demand led to price compression in the wholesale market. Due to these compounding factors and the COVID-19 variants, the company endured a decline in revenue in its three-months ended Dec. 31, 2021.

Expenses

Cost of sales for the year ended Dec. 31, 2021, was $33.5-million, compared with $25-million from 2020, an increase of 34 per cent. This was primarily due to increased sales and associated selling costs.

Profitability measures

For the year ended Dec. 31, 2021, gross profit before fair value adjustments was $24.9-million, compared with $9.2-million in 2020, representing a gross margin of 43 per cent, up from 27 per cent in the same period of the prior year.

Gross profit for the year ended Dec. 31, 2021, was $21.4-million, as compared with a gross loss of $40.3-million in 2021. The changes in gross profit are directly attributable to the operational restructuring, leading to dramatic quality improvements, resulting in increases in revenue, cost of sales and biological asset transformation.

The company recorded a net loss of $24.4-million for the year ended Dec. 31, 2021, compared with a net loss of $117.5-million in 2020.

Balance sheet

As of Dec. 31, 2021, the company had cash and cash equivalents of $900,000, compared with $1.1-million as of Dec. 31, 2020.

"Since joining Flower One late last year, I have prioritized the implementation of proper accounting measures, and implementing systems and processes that ensure accuracy, efficiency and optimal performance. We continue to reduce our cost of capital as well as our interest expense," said Araxie Grant, Flower One's chief financial officer. "While we are pleased with our progress to date, we continue to work to achieve operating efficiencies, improve our cash flow and further improve the balance sheet."

Flower One's 2021 financial statements and management's discussion and analysis will be issued and filed on SEDAR on June 30, 2022, and will also be available on Flower One's website, along with its 2021 annual report.

Conference call details:

Date:  Thursday, June 30, 2022

Time:  11 a.m. ET

Call:  877-407-0789 (Canada and United States) 201-689-8562 (international)

Conference identification (ID):  13731049

Webcast:  A live webcast will be available on Flower One's website or 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 telephone replay will be available until 11:59 p.m. ET on Thursday, July 7, 2022, and can be accessed by dialling 844-512-2921 (toll-free) or 412-317-6671 (international) and providing pin No. 13731049. Additionally, to access the archived webcast, please visit Flower One's website.

Restatement 2021 interim financial information

The company determined, on the recommendation of the audit committee of the company's board of directors and after consultation with MNP LLP, the company's independent registered public accounting firm, that Flower One's previously issued unaudited interim financial statements for each of the first, second and third quarters of 2021 prepared in accordance with International Financial Reporting Standards, as filed on SEDAR, will be restated and should no longer be relied upon.

While 2021 annual reporting procedures are now complete, during the company's work in preparing the annual financial statements, it was determined that certain accounting adjustments are required in respect of previously reported quarterly financial information for the first, second and third quarters of 2021. In particular (1) valuation of biological assets, (2) carrying value of cannabis and oil-based cannabis inventory, and related cost of sales, (3) valuation methodology for convertible debentures and warrants, (4) loss on disposal of auctioned assets and related depreciation expense, (5) accounting timing and cut-off issues related to cost of sales, operating expenses and other expenses, and (6) the recalculation of provision of income taxes will be required following the adjustments. The company is currently working to determine the specific quantum of such adjustments.

The company anticipates that the Q1 2021 restatements will be reflected in restated comparative figures in the company's interim unaudited financial statements for the period ended March 31, 2022. The company has applied for an extension of the management cease trade order dated May 4, 2022, in order to allow the company additional time to prepare and file its Q1 2022 statements. The company currently anticipates that the Q1 2022 and restated comparative period of Q1 2021 statements will be filed on or before July 22, 2022, but no assurance can be given that the anticipated timing of filing will be met.

The company anticipates that the Q2 2021 and Q3 2021 statements will be restated when the quantum of those adjustments has been determined.

Board of directors update:

Effective immediately, Thomas Gesky will replace Mitchell Kahn on the company's board of directors.

"On behalf of the board of directors, I would like to thank Mitch for his many contributions and time he has dedicated to Flower One since his appointment at the beginning of our restructuring," said Salpy Boyajian, Flower One's executive-vice-president and board chairman. "Tom has proven to be a valuable addition to Flower One since his recent advisory appointment and we are excited to welcome him as a member of our board of directors."

"I am pleased to join the board at such a pivotal turning point for Flower One, where I can utilize my experience to make a real difference in the organization and help develop a high-performing culture to assure the company is positioned for long-term success," said Mr. Gesky, board director.

About Flower One Holdings Inc.

Flower One is the largest cannabis cultivator, producer and full-service brand fulfilment 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 fulfilment to a growing number of industry-leading cannabis brands (Cookies, Kiva, Old Pal, Heavy Hitters, Lift Ticket's, The Clear, Huxton, 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: prerolls, 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 making high-quality cannabis accessible to all.

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.

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