Fire & Flower Amends Strategic Licensing Partnership and Option to Acquire Fire & Flower Holdings US (formerly American Acres)

/NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO UNITED STATES WIRE SERVICES/

Amendments enable further retail brand expansion and create an additional high margin US revenue channel for the Hifyre™ technology platform

TORONTO, Jan. 31, 2022 /CNW/ - Fire & Flower Holdings Corp. ("Fire & Flower'' or the "Company") (TSX: FAF) (OTCQX: FFLWF), today announced it has amended certain terms (the "Amendments") of its previously announced option agreement and licensing agreement (collectively "Strategic Agreements") with Fire & Flower US Holdings Inc. (formerly American Acres Managers) ("Fire & Flower US" or the "Licensee").

The Strategic Agreements provide Fire & Flower with a path to acquire corporate-owned cannabis retail stores in major markets in the US and deploys the Hifyre™ technology platform in the US.

Under the Strategic Agreements, Fire & Flower has the option to acquire Fire & Flower US, which acquisition is expected to occur upon the federal legalization of adult-use cannabis in the United States or when otherwise permitted by the policies of the Toronto Stock Exchange (the "TSX") or any other stock exchange on which the Company's securities are listed for trading.

"The amendments to our strategic agreements with Fire & Flower US expand the ability for the Fire & Flower and Hifyre brands to open in key markets ahead of federal permissibility of adult-use cannabis in the US. In addition, the technology, software and support fees create an additional high margin revenue channel in our digital business segment," commented Trevor Fencott, Chief Executive Officer of Fire & Flower.

Fencott continued, "The amended strategic agreements, along with our relationship with the owner of Circle K, Alimentation Couche-Tard, will help position Fire & Flower to one day be a key player in the US cannabis industry, where the demand for incorporating technologically advanced systems has never been greater. We believe the amendments to the strategic agreement provide a meaningful near and long-term benefit to Fire & Flower shareholders in our option to acquire Fire & Flower US."

Highlights of the Amendments to the Strategic Agreement

• Fire & Flower continues to have the option to acquire the Licensee.
• Hifyre will now receive a one-time implementation fee and ongoing software and support fees for each Fire & Flower branded store operated by Fire & Flower US.
• The Company shall (subject to certain conditions) pay to the shareholders of the Licensee an aggregate amount of US$5 million and will have the option to pay additional cash amounts. The cash amounts, plus a premium of 1%, calculated monthly, shall be deducted from the fair-market value purchase price payable upon exercise by Fire & Flower of the option to acquire the Licensee. This acquisition payment structure replaces the discount to fair market value contemplated in the Strategic Agreements prior to the Amendments.
• Upon payment of additional cash amounts, Fire & Flower may (i) extend its option to acquire the Licensee to February 2028 or such later date upon the federal legalization of adult-use cannabis in the United States or when such acquisition would otherwise permitted by the policies of the TSX or any other stock exchange on which the Company's securities are listed for trading, (ii) expand the number of cannabis retail stores that the Licensee may operate utilizing the licensed trademarks/intellectual property, and/or (ii) expand the Territory within which the Licensee may operate cannabis retailer stores utilizing the licensed trademarks/intellectual property.

Benefits of the Amendments

• High margin US revenue stream created in the Hifyre digital business segment.
• More favorable terms for Fire & Flower on its purchase option of Fire & Flower US.
• Establishes a framework for the Fire & Flower US network of cannabis retail stores utilizing Fire & Flower to expand within California and Colorado, and into other US states.

Related Party Disclosure

Trevor Fencott, an officer and director of the Company is a "related party", for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"), on account of being a Licensee Shareholder. As such, any payments or issuance of shares of the Company to be made to Mr. Fencott pursuant to the Option Agreement may be  a "related party transaction" for the purposes of MI 61-101. The Company is relying on exemptions from the formal valuation and minority shareholder approval requirements available under MI 61-101. The Company is exempt from the formal valuation requirement in section 5.4 and the minority shareholder approval requirement in section 5.6 of MI 61-101 in reliance on sections 5.5(a) and 5.7(a), respectively, of MI 61-101 as the fair market value of the transaction, insofar as it involves related parties, was not more than 25% of the Company's market capitalization. Mr. Fencott declared a conflict of interest and abstained from voting with respect to the approval of the transactions described herein.

About Fire & Flower

Fire & Flower is a leading, technology-powered, adult-use cannabis retailer with over 100 corporate-owned stores in its network. The Company leverages its wholly-owned technology development subsidiary, Hifyre Inc., to continually advance its proprietary retail operations model while also providing additional independent high-margin revenue streams. Fire & Flower guides consumers through the complex world of cannabis through education-focused, best-in-class retailing while the Hifyre™ digital retail and analytics platform empowers retailers to optimize their connections with consumers. The Company's leadership team combines extensive experience in the technology, cannabis and retail industries.

Through the strategic investment of Alimentation Couche-Tard Inc. (owner of Circle K convenience stores), the Company has set its sights on global expansion as new cannabis markets emerge and is poised to expand into the United States when permitted through its strategic licensing agreement with Fire & Flower U.S. Holdings upon the occurrence of certain changes to the cannabis regulatory regime.

Fire & Flower is a multi-banner cannabis retail operator that owns and operates the Fire & Flower, Friendly Stranger, Happy Dayz and Hotbox brands. Fire & Flower Holdings Corp. owns all issued and outstanding shares in Fire & Flower Inc. and Friendly Stranger Holdings Corp., licensed cannabis retailers that own and operate cannabis retail stores in the provinces of Alberta, Saskatchewan, Manitoba, British Columbia and Ontario, and the Yukon territory.

To learn more about Fire & Flower, visit https://www.fireandflower.com. 

About Hifyre

The Hifyre Digital Retail and Analytics Platform is a proprietary ecosystem of products that includes the Spark Perks member program, Hifyre ONE retail software platform, Hifyre IQ cannabis data and analytics platform, and Hifyre Reach digital advertising network.

The Hifyre platform also supports Fire & Flower's advanced operations and provides a competitive advantage in providing a tailored digital experience and understanding consumer behaviours in the evolving cannabis market.

To learn more about Hifyre, visit https://www.hifyre.com.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This news release contains certain forward-looking information within the meaning of applicable Canadian securities laws ("forward-looking statements"). All statements other than statements of present or historical fact are forward-looking statements. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "achieve", "could", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "outlook", "expect", "project" and similar words, including negatives thereof, suggesting future outcomes or that certain events or conditions "may" or "will" occur. These statements are only predictions.  Forward-looking statements in this news release include, but are not limited to, statements in respect of the development of F&F Branded Stores in the United States, payments of amounts to Licensee Shareholders, the potential benefits of the Amendments and the potential acquisition of the Licensee and the terms thereof.

Forward-looking statements are based on the opinions and estimates of management of Fire & Flower at the date the statements are made based on information then available to the Fire & Flower. Various factors and assumptions are applied in drawing conclusions or making the forecasts or projections set out in forward-looking statements, including market conditions and the business of the Company. Forward-looking statements are subject to and involve a number of known and unknown, variables, risks and uncertainties, many of which are beyond the control of Fire & Flower, which may cause Fire & Flower's actual performance and results to differ materially from any projections of future performance or results expressed or implied by such forward-looking statements. Such factors, among other things, include: regulatory and other approvals or consents; fluctuations in general macroeconomic conditions; fluctuations in securities markets; the impact of the COVID-19 pandemic; the ability of the Company to successfully achieve its business objectives and political and social uncertainties.

No assurance can be given that the expectations reflected in forward-looking statements will prove to be correct. Although the forward-looking statements contained in this news release are based upon what management of the Company believes, or believed at the time, to be reasonable assumptions, the Company cannot assure shareholders that actual results will be consistent with such forward-looking statements, as there may be other factors that cause results not to be as anticipated, estimated or intended. Readers should not place undue reliance on the forward-looking statements and information contained in this news release. Additional information regarding risks and uncertainties relating to the Company's business are contained under the heading "Risk Factors" in the Company's annual information form dated April 30, 2021 and the heading "Risks and Uncertainties" in the management discussion and analysis for the quarter ended October 30, 2021 filed on its issuer profile on SEDAR at www.sedar.com. The forward-looking statements contained in this press release are made as of the date of this press release, and the Company does not undertake to update any forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws.

No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein.

SOURCE Fire & Flower Holdings Corp.