Mr. Kellen O'Keefe reports

FLOWER ONE REPORTS Q1-22 FINANCIAL RESULTS

Flower One Holdings Inc. has released its financial and operating results for the first quarter ended March 31, 2022. All amounts are expressed in U.S. dollars unless indicated otherwise.

First quarter 2022 financial and operating highlights:

• The company reported first quarter 2022 revenue of $8.9-million;
• Cost of flower production decreased 35 per cent year over year, a result of the company's continuing efforts to reduce costs, without compromising flower quality;
• Completed a $10.1-million financing and implemented loan modifications to its term debt, reducing the company's cost of capital and interest obligations.

"Despite ongoing market pressures, our team has continued to drive our business forward, making significant progress on cost savings, debt reduction and our overall turnaround plan," said Kellen O'Keefe, Flower One's president and chief executive officer. "Our commitment to producing quality cannabis at scale is at the heart of everything we do as an organization, and we are currently producing the best-quality flower in the company's history while simultaneously reducing our cost of production."

First quarter 2022 financial results

Revenues

For the three-month period ended March 31, 2022, the company reported revenue of $8.9-million, representing approximately 10 to 15 per cent of the state's wholesale market. Nevada's cannabis market continues to be harshly affected by the continuing impact of the pandemic, and a thriving black market, which has resulted in price compression and decreased statewide cannabis sales. While tourism has continued to slowly rebound to prepandemic levels, visitor counts still remain far below expectations as a direct result of the reduction in conferences, corporate and international travel. Nevada's first quarter 2022 retail cannabis sales decreased by over 21 per cent, as compared with first quarter 2021.

Expenses

Cost of sales for the first quarter of 2022 was $5-million, compared with $5-million from the same period in 2021. The decrease in gross margin is a direct result of wholesale price compression driven by top-line market softening and increased supply. The company has implemented cost-saving initiatives, including reducing the cost of flower production by 35 per cent. These cost-saving initiatives have significantly minimized the decrease in gross margin.

Profitability measures

First quarter 2022 gross profit before fair value adjustments was $3.9-million, compared with $8.9-million from the same period of the prior year. The decrease in gross profit is directly attributable to the decline in top-line revenue, as well as the fair value adjustments recorded on biological asset transformation.

                         FINANCIAL HIGHLIGHTS

                                                Three months ended March 31,
                                                      2022             2021 
                                                               (as restated)

Revenue                                         $8,949,249      $13,877,853 
Cost of sales                                    5,031,423        4,969,319  
Gross profit before fair value adjustments       3,917,826        8,908,534  
Gross margin before impact of biological assets         44%              64%

For the quarter, the company recorded a net loss of $10.2-million, compared with a net loss of $15.8-million for the same period of the prior year. The company's finance costs were reduced by approximately 40 per cent, including a 37-per-cent decrease to its interest expense year over year.

Balance sheet

As of March 31, 2022, the company had cash and cash equivalents of $4.7-million, compared with $4.9-million as of March 31, 2021. Its overall liability balance has decreased by $28.2-million year over year.

"As a company, we have implemented a variety of measures across the organization that reduced our overall costs, in spite of a very challenging global economic environment," said Araxie Grant, Flower One's chief financial officer. "Controlling our costs during these times is a testament to our team's financial discipline and represents significant progress towards achieving positive cash flow. Our finance department's ability to provide precise and insightful data continues to improve, enabling us to make better strategic decisions and create shareholder value."

Flower One's first quarter 2022 financial statements and management's discussion and analysis will be issued and filed on SEDAR on July 22, 2022, and will also be available on Flower One's website.

Conference call details

Date:  July 26, 2022

Time:  10 a.m. ET

Call:  1-877-407-0789 (Canada and United States) or 1-201-689-8562 (international)

Conference ID:  13731617

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 Aug. 2, 2022, and can be joined by dialling 1-844-512-2921 (toll-free) or 1-412-317-6671 (international) and providing PIN 13731617. Additionally, to listen to the archived webcast, please visit Flower One's website.

Restatement of 2021 interim financial information

The company previously announced that, 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, 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 would be restated and should no longer be relied upon.

As a result, the company has made both material and immaterial restatements to: (1) cash and cash equivalents; (2) current- and long-term prepaids and deposits; (3) the carrying value of cannabis and oil-based cannabis inventory and related cost of sales; (4) the valuation of biological assets and related fair value adjustments; (5) property, plant and equipment, loss on disposal of assets, and related depreciation; (6) trade payables, accrued liabilities and construction payables; (7) valuation methodology for convertible debentures and warrants, and related derivative liability and fair value loss on derivatives; (8) the classification of current and non-current equipment financing and term debt balances; (9) general and administrative expenses; (10) stock-based compensation expense for restricted share units (RSUs) granted in 2021; (11) loss on debt modification or extinguishment related to debt modifications; (12) related-party transaction disclosures; and (13) finance expenses, including interest, accretion and transaction costs.

The company has made restatements retrospectively to the comparative period as at and for the three-month period ended March 31, 2021. The condensed consolidated interim financial statements for the periods as at and ended between March 31, 2021, and Sept. 30, 2021, were not adjusted and refiled at the time of discovery of the need for restatement, rather the comparative period as at and for the three-month period ended March 31, 2021, and has been corrected in the unaudited condensed interim consolidated financial statements as at the three-month period ended March 31, 2022. The periods as at and ended June 31, 2021, and Sept. 30, 2021, will be corrected within the filing of the condensed consolidated interim financial statement as at and for the three-month period ended June 31, 2022.

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, 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: 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-technology 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 available 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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