Fire & Flower Holdings Corp. (“Fire & Flower” or the “Company“) (TSX: FAF) (OTCQX: FFLWF), today announced plans to convert all of the Company’s approximately $28.5 million outstanding principal amount of 8.0% secured convertible debentures issued in April 2020 (the “April 2020 Debentures“) as well as the conversion of approximately $23.6 million principal amount of 8.0% unsecured convertible debentures issued to 2707031 Ontario Inc.,  as a wholly-owned indirect subsidiary of Alimentation Couche-Tard Inc. (collectively “ACT“), the owners of Circle K, in July 2019  (the “ACT Debentures“). Post conversion, the Company will have converted a total of approximately $52 million principal amount of debt (plus the accrued and unpaid interest thereon) to equity and ACT will hold 19.9% of the issued and outstanding shares of Fire & Flower.

Shawn Dym, Director and Founder of Green Acre Capital LP, commented, “We, along with other holders of the April 2020 Debentures, voluntarily agreed to amend the debentures to allow for the conversion well in advance of their maturity as we felt it was consistent with our support of the Company as shareholders rather than creditors. As management continues to execute on its growth plans and build shareholder value, we are supportive of de-levering the balance sheet to aid the Company’s expansion into new high-growth markets.  The Company has sufficient resources to grow its store count in Canada and expand its leading position in Canadian cannabis retail. Furthermore, we believe it is important to show the strength in its financial position as it pursues a listing on the Nasdaq and sets out for US brand expansion through its recently announced licensing deal with American Acres.”

“These conversions will significantly improve our balance sheet, reduce interest costs and support enhanced access to non-dilutive financing with our banking partner, ATB Financial,” remarked Trevor Fencott, Chief Executive Officer of Fire & Flower.  “We are very pleased with the support of our partners and welcome ACTs increased 19.9% ownership stake. We look forward to continuing to aggressively pursue our growth strategy in both Canada and the United States,” concluded Fencott.

Transaction Details:

The Company and Computershare Trust Company of Canada (the “Trustee“) entered into a supplemental indenture (the “Supplemental Indenture“) to the debenture indenture entered into between the Company and the Trustee dated April 28, 2020, as supplemented on July 23, 2020 (collectively, the “Indenture“), which governs the April 2020 Debentures. A copy of the Supplemental Indenture will be made available on the Company’s SEDAR profile at www.sedar.com.

The Supplemental Indenture amends the Indenture such that the Company may elect to force the conversion of all, but not less than all, of the April 2020 Debentures at any time provided that there is no event of default under the Indenture and the ten (10) day volume weighted average daily trading price (“VWAP“) per common share of the Company (the “Common Shares“) on the Toronto Stock Exchange (the “Exchange“) is greater than $1.25 (the “Forced Conversion“).  If the Forced Conversion occurs prior to July 1, 2021, an amount equal to the interest that would have accrued on the principal amount of such outstanding April 2020 Debentures from the date of the Forced Conversion (the “Conversion Date“) up to June 30, 2021 (the “Accelerated Interest“) shall accrue and be converted into Common Shares on the Conversion Date.

Upon entering into of the Supplemental Indenture, the Company exercised the Forced Conversion with a Conversion Date of March 3, 2021.  On the Conversion Date, the Company will issue an aggregate of approximately 59,231,328  Common Shares in respect of the conversion of the remaining $28.5 million principal amount of April 2020 Debentures and all accrued and unpaid interest thereon (including the Accelerated Interest).

Following completion of the Forced Conversion, the Company intends to convert approximately $23.6 million principal amount (plus the accrued and unpaid interest thereon) of the ACT Debentures.  Pursuant to the terms of the ACT Debentures, the Company may elect to force the conversion of all or part of the ACT Debentures (plus any accrued and unpaid interest thereon) at a price of $0.75 per Common Share, in the event that certain conditions precedent are satisfied, including: (a) the Common Shares having a 20-day VWAP of at least $1.00 at the time the Company gives its conversion notice to ACT and on the date of conversion; and (b) not less than $20 million principal amount of April 2020 Debentures have been converted into Common Shares.  The conversion date of the ACT Debentures is expected to be on or around March 10, 2021 and the Company expects to issue an aggregate of approximately 31,932,547 Common Shares to ACT in connection with such conversion.