TRCE Terrace Global Inc

The Flowr Corporation (TSX.V: FLWR; OTC: FLWPF) (“Flowr” or the “Company”) is pleased to announce the closing of its strategic acquisition of Terrace Global Inc. (TSXV: TRCE) (“Terrace Global”) a multi-country operator led by experienced cannabis entrepreneurs focused on the development and acquisition of international cannabis assets (the “Acquisition”).

“We are very pleased to be able to close the strategic acquisition of Terrace Global. The closing of the Acquisition should allow Flowr to thrive in the global cannabis industry over the long term. We have been working with the Terrace Global team since April 2020 on our European joint venture and together we are better equipped to grow our business in Canada and abroad,” commented Steven Klein, Chairman and Chief Strategist of Flowr. “The Terrace Global team share a similar vision, values and have a high degree of inside ownership like Flowr does. The future of our organization indeed looks very bright.”

“Terrace Global was founded by a group of cannabis entrepreneurs who have built and exited several cannabis businesses, including MedReleaf Corp., ICC Labs Inc. and Bedrocan Canada Inc. We saw an opportunity in Flowr to enter the market at the right time on the cusp of significant growth in the retail and consumer side of the industry. We were attracted to Flowr because of its state-of-the-art facilities in Kelowna and Portugal, its experienced management team and founder base as well as its strategic partnership with Hawthorne/Scotts to bring to life the world’s first R&D facility dedicated to cannabis research,” commented Stephen Arbib, Director and Co-Founder of Terrace Global. “We see our re-entry in the Canadian market benefiting from second mover advantage. Businesses that will thrive now must do so on execution. We believe Flowr’s focus on the premium high THC segment is the right strategy and one that has already been rewarded in the market as evidenced by kind magazine’s recent recognition of Flowr’s BC Pink Kush as the top indica strain in Canada in 2020.”

Transaction Terms

The Transaction was affected by way of a court approved plan of arrangement under the Business Corporations Act (Ontario) (the “Arrangement”). Under the terms of the Transaction, each shareholder of Terrace Global (“Terrace Global Shareholder”) received 0.4973 of a Flowr Share per Terrace Global share resulting in the issuance of 144,558,919 common shares in the capital of Flowr for an aggregate purchase price of approximately $60 million.

Balance Sheet Strength

As of closing of the Transaction, the combined Company has $23.2 million of cash on its balance sheet which is expected to be used to support brand building, outdoor grow operations, and pursue strategic opportunities and investments that maximize shareholder value. In addition, the Company cancelled 9,266,538 common shares and 9,266,538 warrants held by Terrace Global and expects annual synergies to amount to approximately $2 million per year.

Liability Management

“The Acquisition of Terrace Global allowed the Company to work constructively with its senior lenders and its debentureholders to significantly improve our overall credit position. We have obtained a great deal of flexibility with respect to our financial covenants and expect to reduce the principal amount of the Company’s convertible debentures by approximately $16.4 million. These important changes along with the cash infusion from Terrace Global will allow management to focus on operational results in 2021,” commented Irina Hossu, Chief Financial Officer of the Company. “Flowr is in a much better financial position today than it was prior to this Acquisition as we now have total bank debt and convertible debentures of $31.7 million. We would like to thank our senior lenders and debentureholders for working with us to improve the financial position of Flowr.”

The Company’s outstanding convertible debenture is expected to be reduced by approximately $16.4 million upon completion of the early conversion of debentures by those debentureholders who elected to exercise their early conversion right to convert their debentures into Flowr shares (“Early Conversion Opportunity”). The Company believes the aggregate reduction of approximately $16.4 million in debt will improve its financial profile and outlook. Upon completion of the debenture conversion, Flowr’s total principal amounts of bank debt and convertible debentures will be reduced from $48.1 million to $31.7 million, with $19.1 million representing a secured loan facility against the Kelowna-1 facility.

To align with its business plan, and with support from its senior lenders, the Company has made certain amendments to its credit facility (the “ATB Facility”) with its lending syndicate led by ATB Financial. These amendments include, among others, (i) a requirement for the Company to maintain certain minimum amounts of cash in permitted accounts, (ii) a Senior Debt to Tangible Net Worth requirement and (iii) a Total Leverage Ratio and fixed charge requirement.

Management and Board Changes

In 2021, Vinay Tolia, Chief Executive Officer of Flowr, will be stepping down from his role as Chief Executive Officer and will be relocating to the United States for personal reasons. He will stay with the Company through the end of February to ensure a smooth transition. Mr. Tolia will remain on the Board of Directors. The current President of Flowr, Lance Emanuel, will lead the Company as Interim Chief Executive Officer.

“While we are sad to see Vinay head home, on behalf of myself and the Board of Directors, I would like to thank him for his years of service and commitment in building the company. Our very talented President, Lance Emanuel, has spent the past two plus years doing great things for the company, and we’re fortunate to have the management depth and expertise to ensure a smooth transition,” commented Steve Klein, Chairman and Chief Strategist of Flowr.

Lance Emanuel joined Flowr in January 2019. Lance has been building seed and early-stage companies into multi-million-dollar enterprises while overseeing critical aspects of business operations in highly regulated markets for more than a decade. He has a wealth of experience in the management of sales, marketing, product management, R&D, technology, legal, compliance and regulatory affairs as well as in procuring both debt and equity financing and creating large scale strategic partnerships. He holds a BBA, with distinction, from the University of Michigan’s Ross School of Business and a Juris Doctor from the Benjamin N. Cardozo School of Law in New York City.

The Company is pleased to announce new appointments to the Board of Directors which include Jörg Cieslok, Michael Galego, Vincent Gasparro and Joanne Lee.   In addition, Stephen Arbib, Jonathan Goldman and Francisco Ortiz von Bismarck have been appointed as observers to the Board of Directors. The Board of Directors will continue to be led by current Chairman of the Board & Chief Strategist, Steve Klein. These new appointees join the following directors: Steve Klein (Chair), Vinay Tolia, Thomas Flow, Don Duet and Maurice Levesque.

The biographies of the new directors are set out below:

• Jörg Cieslok is an executive with few peers in the world of out-of-home media. Known for his industry foresight, out-of-the-box thinking, and sales and marketing strategy, Mr. Cieslok has changed the landscape of out-of-home media in Canada over the course of a 30-year career. By embracing creativity and innovation, he takes advertising campaigns from conceptual ideas to award-winning experiential media placements. Jörg was the recipient of the prestigious 2017 CVCA Private Equity deal of the year award for the sale of Cieslok Media to Bell Media.
• Michael Galego is an executive, lawyer and corporate director with extensive M&A and corporate finance experience. Mr. Galego is currently CEO of Apolo Capital Advisory Corp. and sits on the board of directors of several public and private companies. Mr. Galego was a co-founder and director of ICC Labs Inc. and was integral in its sale to Aurora Cannabis Inc. in November 2018. Mr. Galego was a co-founder, director and Chief Legal Officer of Terrace Global. Mr. Galego is a lawyer by training with more than fourteen years of M&A and corporate finance experience. His previous legal experience includes being General Counsel, Secretary and Managing Director of Acasta Enterprises Inc., Deputy General Counsel and Secretary of Pacific Exploration & Production Corp. and General Counsel and Secretary of CGX Energy Inc. Mr. Galego began his legal career as an associate in the business law department of Osler, Hoskin & Harcourt LLP. Mr. Galego also previously served as Chief Executive Officer of the Agricultural Division of the Stronach Group. Mr. Galego is a member of the TSX Venture Exchange (“TSXV”) Ontario Advisory Committee providing advice and recommendations to the TSXV on policy, operational and strategic issues likely to have a significant impact on the public venture capital market. Mr. Galego is currently on the board of directors of Waterfront Toronto (www.waterfrontoronto.ca), which is the advocate and steward of Toronto’s waterfront revitalization project. Mr. Galego has also been active in a number of charitable organizations and has served as a director of the Canadian Liver Foundation (www.liver.ca) and the Trillium Gift of Life Network (www.giftoflife.on.ca). Mr. Galego is a graduate of York University (Hons. B.A.) and the University of Windsor (LL.B). In 2013, he was recognized by Lexpert as one of Canada’s “Top 40 under 40” leading lawyers. In 2015, Mr. Galego attended Harvard Business School’s High Potentials Leadership Program after being nominated by Pacific E&P.
• Vincent Gasparro is currently the Managing Director, Corporate Development & Clean Energy Finance, at Vancity Community Investment Bank. From November 2018 to March 2020, he was the Principal Secretary in the Office of the Mayor of Toronto where he had specific public policy responsibilities including matters related to Toronto Hydro, Toronto Parking Authority, Toronto Global, Toronto Community Housing, CreateTo and the Toronto Police Service. Prior to that, Mr. Gasparro had various roles in private equity with Lynx Equity Ltd. and affiliates thereof, and from 2003 to 2006, served as Special Assistant in the Office of the Prime Minister of Canada. Mr. Gasparro has a BA from York University, an MSc from the London School of Economics and an MBA from the Villanova School of Business in Philadelphia. He currently sits on the board of Terrace Global Inc. and has previously served on the board of directors and was Chair of the Investment Advisory Committee of Toronto Community Housing Corporation.
• Joanne Lee is a seasoned business executive with strong Operations, Logistics and Procurement expertise, underpinned by extensive financial and M&A experience. She has held key roles in the Healthcare, Consumer Packaging, Polymer and Chemical sectors. As a proven organizational change leader, Ms. Lee has led teams through challenging turnarounds as well as significant business enhancements that have led to increased profitability. Ms. Lee joined Premier Candle Corporation (PCC) in 2009 as General Manager leading the corporation’s largest division. Today, as the company’s CEO, Ms. Lee oversees all company functions and divisions, providing both operational and strategic leadership. Her guidance has led to sustained top and bottom-line growth, and has positioned PCC as a North American industry leader known for its quality and progressive capabilities. Prior to joining Premier Candle Corporation Joanne spent several years with Bayer Inc, where she progressed through roles of increasing responsibility including VP, Head of Controlling, VP Business Partnering & Operations, VP Corporate Controlling, Business Planning & Analysis. Ms. Lee has demonstrated the ability to achieve results, resolve complex issues, seek and develop business opportunities. Ms. Lee also held an excellent track record for leading numerous M&A projects. Ms. Lee is recognized as a creative and outstanding leader in organizational development. She has been recognized with many leadership awards, and has been twice nominated for the RBC Canadian Women Entrepreneur Award. Ms. Lee graduated from University of Ryerson and majored in Finance and Accounting.

“The Company would like to thank Karen Basian, Pauric Duffy, Dr. Lyle Oberg and David Miller for all of their hard work and dedication as members of our Board of Directors since the Company’s founding and who have been instrumental in helping Flowr become the global cannabis company it is today,” commented Steve Klein, Chairman and Chief Strategist of Flowr. “We also want to welcome our new Board members, Jörg, Michael, Vince and Joanne, to the Company. Their diverse experience and expertise will serve us well as we embark on the next chapter in our evolution,” added Mr. Klein.

Advisors and Counsel

ATB Capital Markets Inc. acted as the exclusive financial advisor to Flowr and provided an independent Fairness Opinion to the Flowr Board of Directors. Fasken Martineau DuMoulin LLP acted as legal counsel to Flowr. Hyperion Capital Inc. acted as the exclusive financial advisor to Terrace Global. Wildeboer Dellelce LLP acted as legal counsel to Terrace Global. Norton Rose Fulbright Canada LLP acted as legal counsel to the Board of Directors of Terrace Global.

About The Flowr Corporation

The Flowr Corporation is a Toronto-headquartered cannabis company with operations in Canada, Europe, and Australia.  Its Canadian operating campus, located in Kelowna, BC, includes a purpose-built, GMP-designed indoor cultivation facility; an outdoor and greenhouse cultivation site; and a state-of-the-art R&D facility.  From this campus, Flowr produces recreational and medicinal products.  Internationally, Flowr intends to service the global medical cannabis market through its subsidiary Holigen, which has a license for cannabis cultivation in Portugal and operates GMP licensed facilities in both Portugal and Australia. In 2020, Flowr’s BC Pink Kush was recognized as the top indica strain in Canada by kind magazine.

Flowr aims to support improving outcomes through responsible cannabis use and, as an established expert in cannabis cultivation, strives to be the brand of choice for consumers and patients seeking the highest-quality craftsmanship and product consistency across a portfolio of differentiated cannabis products.

For more information, please visit flowrcorp.com or follow Flowr on Twitter: @FlowrCanada and LinkedIn: The Flowr Corporation.

On behalf of The Flowr Corporation:Lance EmanuelInterim CEO

CONTACT INFORMATION:

INVESTORS & MEDIA:Thierry ElmalehHead of Capital Markets(877) 356-9726 ext. 1528thierry@flowr.caForward-Looking Information and Statements

This press release contains “forward-looking information” within the meaning of Canadian securities laws, which may include but is not limited to statements made concerning: the Company’s financial position, management of liabilities, completion of the early conversion of the debentures, overall debt reduction, strength of the Company’s balance sheet, statements with respect to new management and board members and Flowr’s positioning in the global cannabis space. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “is expected”, “expects”, “scheduled”, “intends”, “contemplates”, “anticipates”, “believes”, “proposes” or variations (including negative and grammatical variations) of such words and phrases, or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. Such information and statements are based on the current expectations of Flowr’s management and are based on assumptions and subject to risks and uncertainties. Although Flowr’s management believes that the assumptions underlying such information and statements are reasonable, they may prove to be incorrect. The forward-looking events and circumstances discussed in this press release may not occur by certain specified dates or at all and could differ materially as a result of known and unknown risk factors and uncertainties affecting Flowr, including risks relating to: completion of the early conversion of the debentures; the issuance of Flowr shares upon conversion of the debentures; overall debt reduction; general economic and stock market conditions; adverse industry events; loss of markets; future legislative and regulatory developments in Canada and elsewhere; the cannabis industry in Canada generally; the ability of Flowr to implement its business strategies; Flowr’s inability to produce or sell premium quality cannabis, risks and uncertainties detailed from time to time in Flowr’s filings with the Canadian Securities Administrators; the Company’s inability to raise capital or have the liquidity to operate or advance its strategic initiatives and many other factors beyond the control of Flowr.

Although Flowr has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking information or statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. No forward-looking information or statement can be guaranteed. Except as required by applicable securities laws, forward-looking information and statements speak only as of the date on which they are made and Flowr undertakes no obligation to publicly update or revise any forward-looking information or statements, whether as a result of new information, future events or otherwise. When considering such forward-looking information and statements, readers should keep in mind the risk factors and other cautionary statements in Flowr’s Annual Information Form dated April 29, 2020 (the “AIF”) and filed with the applicable securities regulatory authorities in Canada. The risk factors and other factors noted in the AIF could cause actual events or results to differ materially from those described in any forward-looking information or statements.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.