Mr. Kellen O'Keefe reports

FLOWER ONE REPORTS Q2-22 FINANCIAL RESULTS

Flower One Holdings Inc. has released its financial and operating results for the second quarter ended June 30, 2022. All amounts are expressed in U.S. dollars unless indicated otherwise.

"Despite best efforts from our team to continue to produce the best-quality cannabis we can at the lowest possible price, we face significant market pressures, and with our current cash burn rate, we must continue to explore all avenues to source working capital, and there is no guarantee that the company will receive this funding," said Kellen O'Keefe, Flower One's president and chief executive officer.

Second quarter 2022 financial results

Revenues

For the three-month period ended June 30, 2022, the company reported revenue of $7.9-million. 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, and corporate and international travel.

Expenses

Cost of sales for the second quarter of 2022 was $6.9-million, compared with $11-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.

Profitability measures

Second quarter 2022 gross profit before fair value adjustments was $1-million, compared with $7.2-million from the same period of the prior year. The decrease in gross profit is directly attributable to wholesale price compression, as well as an increase in consumer incentives, such as pricing discounts and other promotions, to maintain market position for both in-house and brand partner products.

For the quarter, the company recorded a net loss of $5.4-million, compared with a net loss of $1-million for the same period of the prior year.

Balance sheet

As of June 30, 2022, the company had cash and cash equivalents of $3.6-million, compared with $2.2-million as of June 30, 2021. The company's overall liability balance has increased by $11.9-million as compared with Dec. 31, 2021.

"While still navigating through a challenging global economic environment, we continue to strengthen and refine our ability to decrease and control our costs," said Araxie Grant, Flower One's chief financial officer. "In the second quarter, we significantly reduced our operating expenses and continue to practise the financial discipline required to give the company the chance to achieve positive cash flow."

Flower One's second quarter 2022 financial statements and management's discussion and analysis will be issued and filed on SEDAR on Aug. 29, 2022, and will also be available on 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 periods as at and for the six-month period ended June 30, 2021, and the three-month periods ended March, 2021, June, 2021, September, 2021, and December, 2021. The condensed consolidated interim financial statements for the periods as at and for the periods ended 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- and six-month periods ended June 30, 2021, has been corrected in the unaudited condensed interim consolidated financial statements as at and for the three- and six-month periods ended June 30, 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, 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 OTCQB Market under the symbol FLOOF and on the Frankfurt Stock Exchange under the symbol F11.

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