After the markets closed on Monday, Flower One Holdings (CSE: FONE) (OTC: FLOOF) announced that it and its Canadian subsidiaries sought and obtained an Initial Order of the Supreme Court of British Columbia pursuant to the Companies’ Creditors Arrangement Act (the “CCAA”). This is considered the equivalent of the U.S. bankruptcy court.
The company also said it planned to become a private company by the end of the year to reduce the expense of being a publicly traded company. Flower One works with Cookies, Kiva, Old Pal, Heavy Hitters, Lift Ticket’s, HUXTON, and Flower One’s leading in-house brand, NLVO, and more.
The company said that the decision to start CCAA proceedings was made after careful consideration of its financial position and significant consultation with certain key creditors of Flower One. The CCAA proceedings are intended to facilitate a restructuring of the Canadian company’s balance sheet and the injection of additional capital.
In September, Flower One announced that its common stock listed on the OTCQB market would be transitioned to the OTC Expert Market Companies. The Expert Market provides the lowest level of disclosure in comparison to other OTC Market tiers. As a result, trading is limited to quotations on an unsolicited basis. That means that trades of securities subject to unsolicited quotation in the Expert Market are only available to broker-dealers, institutions, and other sophisticated investors, not average investors.
In August, Flower One posted results that missed expectations as the company reeled from consecutive periods of revenue drop amid financing concerns. Green Market Report wrote at the time that the company reported revenue of $7.9 million in the second quarter, below the Yahoo Finance Average analyst estimate for revenues of $9.6 million. The company posted a net loss of $5.4 million for the quarter, versus a net loss of $1 million for the same period last year. The earnings were a loss of one cent per share, in line with Yahoo estimates.
“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 CEO Kellen O’Keefe when the company reported its earnings.
In Flower One’s filing, the company said that it needed “adequate capital resources” to support its ongoing operations and development, adding that assessing its viability as a company “requires judgments about the company’s ability to execute its strategy by funding future working capital requirements.”
The company’s overall liability balance had increased by $11.9 million since the end of last year, and its company’s total liabilities were $138 million.
In addition to being a Canadian company, Flower One established a large presence in Nevada, which includes its 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 currently produces a wide range of products from flower, full-spectrum oils, and distillates to finished consumer packaged goods, including a variety of: pre-rolls, concentrates, edibles, topicals, and more for top-performing brands in cannabis.
PricewaterhouseCoopers was appointed as the monitor. PwC has set up a website at www.pwc.com/ca/FONE, where updates on the Canadian restructuring process, the monitor’s reports to the Court, court orders and other information will be posted as soon as they are available.
During the CCAA process, the U.S. operations of Flower One are expected to continue in the ordinary course and without interruption.