Debra Borchardt
Late on Friday after the market closed, Flower One Holdings Inc. (CSE: FONE) (OTCQX: FLOOF) announced its financial results for the first quarter ending March 31, 2022. Revenue fell 21% to $8.9 million from last year’s $13.8 million for the same time period. This missed the Yahoo Finance analyst estimates for revenue of $13.1 million.
Flower One attributed the dramatic drop in revenue to Nevada’s cannabis market which they say continues to be harshly affected by the ongoing impact of the pandemic, and a thriving black market, which has resulted in price compression and decreased statewide cannabis sales. In a statement, the company said, “While tourism has continued to slowly rebound to pre-pandemic levels, visitor counts still remain far below expectations as a direct result of the reduction in conferences, corporate, and international travel.
The net losses were trimmed to $10 million from $15 million. The company said its finance costs were reduced by approximately 40%, including a 37% decrease in its interest expense year-over-year. The company had a negative cash flow for the quarter of $4.1 million.
“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 & CEO. “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.”
A few weeks ago, the company restructured its debt and entered into a Term Debt Modification Agreement with its lender, RB Loan Portfolio II, LLC, on its existing $45.65 million Term Debt, secured by the facility at 3950 N. Bruce St., North Las Vegas, Nevada. The company will be able to defer interest payments through October 31, 2022, in order to provide additional liquidity to the business, reduce the cash interest payments by 30%, extend the maturity date of the Term Debt to January 31, 2026, and pay $9 million to the Term Lender on September 30, 2023, and if it misses that payment, it has the option to pay this First Loan Paydown on January 31, 2024, with a 2.5% penalty.
Going Concern
In Flower One’s filing, it said, “The company will need to raise additional capital in order to fund its planned operations and meet its obligations. While successful in obtaining financing to date, the company believes it will be able to obtain sufficient funds in the future and ultimately achieve profitability and positive cash flows from operations, there can be no assurance that the company will achieve profitability and be able to do so on terms favorable for the company.”
The company has $4.7 million in cash and cash equivalents. However, the first quarter saw the company report that it had a negative cash flow of $4.1 million and it will need to address its expenses.
“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 CFO. “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.”
