Flower One Holdings Inc. (CSE: FONE) (OTCQX: FLOOF) has made some movement with its ongoing restructuring, including the restructuring of its term debt and its master lease. This comes on the heels of the company reporting its annual earnings. For the year ending in December 2021, Flower One reported 2021 revenue of $58.4 million, representing a 70% increase from the prior year. Despite all that revenue, as of December 31, 2021, the company only had cash and cash equivalents of $0.9 million, compared with $1.1 million as of December 31, 2020
While the company experienced a year-over-year revenue increase, It noted that fourth-quarter revenues were affected as Nevada historically endured a decline in both cannabis sales and tourism in its fourth quarter, in comparison to 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 fourth-quarter ending December 31, 2021. The company trimmed its net losses to $24.4 million versus the net loss of $117.5 million in 2020.
Term Debt Restructuring
Flower One said it has 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.
“This debt restructuring is a major step in our turnaround plan, as it will provide the Company with additional liquidity and a significant runway to continue our operational restructuring efforts, and position the Company for sustainable growth,” said Kellen O’Keefe, President & CEO. “We would like to thank our term lenders and loan participants for facilitating these momentous transactions.” Flower One also restructured its debt in 2021.
Master Lease Restructuring
The company also said in its statement that it has also entered into a Master Lease Modification Agreement in connection with the agreement dated February 1, 2019 with RB Loan Portfolio I, LP, a Delaware limited partnership, regarding the equipment lease financing of certain equipment at the Bruce Facility. The statement read, “Pursuant to which the Lessor has agreed to forbear existing events of default and make certain modifications to Master Lease, including (i) the deferral of certain payments through October 31, 2022, in order to provide additional liquidity to the business, (ii) revising the amortization schedule to enable a reduction in monthly payments for the duration of the Master Lease and (iii) extend the maturity date of the Master Lease to March 3, 2025.”
“Given the current state of the capital markets for cannabis, we are very pleased with this notable transaction. This crucial step in our restructuring not only provides the Company with significant cash interest savings, but also allows for a deferral of interest payments, ensuring we are able to preserve capital,” Araxie Grant, Flower One’s CFO.