Flow Beverage Corp. (TSX:FLOW; OTCQX:FLWBF) (“Flow” or the “Company”) announced today that NFS Leasing Canada Ltd. (“NFS”) has advanced to the Company a $2 million senior secured business purpose loan pursuant to a term note (the “NFS Term Note”) and has entered into a binding term sheet for an additional senior secured term loan of up to $4 million (the “NFS Term Loan”). The Company also announced today that it has entered into a binding term sheet with RI Flow LLC (“RI Flow”) for a secured convertible loan of up to $6 million (the “RI Flow Convertible Loan”). NFS and RI Flow are existing senior secured lenders of the Company and are affiliated with Clifford L. Rucker, an insider of the Company. RI Flow, NFS Canada and Clifford L. Rucker collectively own, or have control or direction over, more than 10% of the voting rights attached to all of the Company’s outstanding voting securities on a partially diluted basis. All currency amounts stated in this press release are denominated in Canadian dollars unless specified otherwise.
Nicholas Reichenbach, Chairman and Chief Executive Officer of Flow, stated: “We are extremely pleased to have secured necessary funding from RI Flow and NFS to help the Company continue its path towards profitability, as it explores strategic alternatives. Our goal remains to grow the Flow brand while reducing costs and building a long-term and sustainable future for the Company. We sincerely thank RI Flow, NFS and Clifford L Rucker for their ongoing support and look forward to the journey ahead.”
NFS Term Note and NFS Term Loan
The NFS Term Note will mature on May 23, 2028 three years from the date of issue (the “NFS Note Maturity Date“), and bear interest at a rate of 15% per annum (“NFS Note Interest“) accruing on the funded amount of $2 million (the “NFS Note Amount”) from the date of issue and compounding annually. The NFS Note Amount and the NFS Note Interest will be payable in arrears beginning on the first calendar day of the first month after the date of issue, with no payments required for the first three consecutive months, followed by thirty-three equal monthly payments. In connection with the NFS Term Note, the Company will retain the services of a restructuring specialist for an initial six (6) month contract. The proceeds of the NFS Term Note will be used toward general corporate and working capital purposes.
The NFS Term Loan, once issued, will mature on a date that is three years from the date of issue (the “NFS Loan Maturity Date“) and bear interest at a rate of 15% per annum (“NFS Loan Interest“) accruing on the funded amount of up to $4 million (the “NFS Loan Amount”) from the date the applicable portion of the NFS Term Loan is advanced and compounding annually. The NFS Loan Amount and the NFS Loan Interest will be payable in arrears beginning on the first calendar day of the first month after the date of issue with no payments required for the first three consecutive months, followed by thirty-three equal monthly payments. The NFS Loan Amount will be advanced in tranches, with each tranche subject to the satisfaction of certain lending conditions, including the Company’s achievement of certain monthly net revenue milestones. The proceeds of the NFS Term Loan will be used solely for general corporate and working capital purposes.
The NFS Term Note and the NFS Term Loan will be secured against all assets of the Company and its subsidiaries on the same basis as the security provided pursuant to the Term Loan and Security Agreement dated as of December 30, 2022 between the Company and NFS (the “NFS Loan Agreement”) and will rank in right of payment of principal and interest pari passu with the other secured obligations pursuant to the NFS Loan Agreement and senior to all other obligations of the Company and its subsidiaries.
In connection with the NFS Term Note, Mr. Nicholas Reichenbach (“Mr. Reichenbach”), Executive Chairman and Chief Executive Officer of the Company, entered into a deficiency agreement with NFS (the “Deficiency Agreement”). Pursuant to the Deficiency Agreement, Mr. Reichenbach agreed to personally guarantee certain loans and leases between NFS and the Company based on certain terms and conditions as set out in the Deficiency Agreement.
RI Flow Convertible Loan
The RI Flow Convertible Loan will be issued for an aggregate principal amount of up to $6 million (the “RI Flow Convertible Loan Amount”) and mature eighteen months from the date of issuance (the “RI Flow Loan Maturity Date“). The RI Flow Convertible Loan will bear interest at a rate of 15% per annum (“RI Flow Loan Interest“) from the date the applicable portion of the RI Flow Convertible Loan Amount is advanced, compounded annually on the basis of a 365-day year, and paid on the RI Loan Maturity Date (“RI Flow Loan Interest“). On the RI Flow Loan Maturity Date, the outstanding principal amount of the RI Flow Convertible Loan (together with all accrued and unpaid interest thereon) not elected for conversion into SV Share shall become immediately due and payable by the Company in full in cash. The RI Flow Loan Amount will be advanced in tranches, subject to the satisfaction of certain lending conditions, including the Company’s achievement of certain monthly net revenue milestones.
Beginning one year following the issuance of the RI Flow Convertible Loan, RI Flow will have the right to convert all or any portion of the outstanding principal amount of the RI Flow Convertible Loan (and any accrued and unpaid interest thereon) into subordinate voting shares in the capital of the Company (each, a “SV Share”) at a conversion price of $0.065 per SV Share (the “Conversion Price”) on not less than ten business days’ notice to the Company. Upon a change of control of the Company or a divestiture of the Company’s packaging facility in Aurora, Ontario, and related operations, RI Flow will have the right to either (a) convert all or any portion of the outstanding principal amount of the RI Flow Convertible Loan (and any accrued and unpaid interest thereon) into SV Shares at the Conversion Price or (b) provided the Company receives net proceeds at the closing of such change of control or divestiture transaction results of at least $12 million, accelerate payment of the whole or any part of the outstanding principal amount of the RI Flow Convertible Loan (and any accrued and unpaid interest thereon) in cash. The RI Flow Convertible Loan will provide for customary anti-dilution provisions pursuant to which the Conversion Price will be subject to adjustment in certain customary events and will be non-transferable, other than to wholly-owned affiliates of RI Flow.
The maximum number of SV Shares issuable on conversion of the RI Flow Convertible Loan is 114,115,385 SVS, which represents 127.19% of the total number of issued and outstanding SV Shares and multiple voting shares on a non-diluted basis. The Conversion Price of $0.065 represents an 8.9% premium to the SV Share market price of $0.0597 as at May 22, 2025.
The RI Flow Convertible Loan will be secured against all assets of the Company and its subsidiaries on the same basis as the security provided pursuant to the Term Loan and Security Agreement dated as of October 31, 2024 between, inter alios, the Company, and RI Flow (the “RI Flow Loan Agreement”), and will rank in right of payment of principal and interest subordinate only to the obligations secured pursuant to the NFS Loan Agreement, pari passu with the secured obligations pursuant to the RI Flow Loan Agreement and senior to all other obligations of the Company and its subsidiaries.
Proceeds from the RI Flow Convertible Loan will be used for general working capital and corporate purposes.
