Illicit Cannabis Market Takes A Punch At Another Licensed Producer: Flower One Q2 Revenue Drops 56% YoY

Flower One Holdings Inc. FLOOF FONEF, released its financial and operating results for the second quarter ended June 30, 2022, revealing revenue of $7.9 million, a decrease of 56% compared to $18.3 million in Q2 2021.

Nevada’s cannabis market continues to be harshly affected by the ongoing impact of the pandemic, and a thriving illicit market, which has resulted in price compression and decreased statewide cannabis sales. 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.

Q2 2022 Financial Highlights

• Gross profit before fair value adjustments was $1 million, compared to $7.2M 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, in order to maintain market position for both in-house and brand partner products.

• Gross profit was $1.5 million compared to $3.4 million in Q2 2021.

• Gross margin was 18%, the same as in Q2 2021.

• Net loss of $5.4 million, compared to a net loss of $1 million for the same period of the prior year.

• 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 to December 31, 2021.

“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,” stated Kellen O’Keefe, Flower One’s president and CEO.

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, that 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.

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 ended between March 31, 2021 and September 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.

Photo: Benzinga; Sources: courtesy of PatternPictures, lindsayfox via Pixabay

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