Flow Beverage Corp. Announces $12M in Loans and Plans for Shareholder Consent
Toronto, May 27, 2025 – Flow Beverage Corp. (TSX: FLOW; OTCQX: FLWBF) (“Flow” or the “Company”), a leading producer of sustainable, alkaline spring water products, announced a series of significant financing developments aimed at strengthening its financial position and supporting its ongoing strategic review. The Company disclosed that it has secured an immediate $2 million senior secured loan from NFS Leasing Canada Ltd. (“NFS”) and has entered into a binding term sheet for a further senior secured loan of up to $4 million. Additionally, Flow revealed that it has signed a binding term sheet with RI Flow LLC (“RI Flow”) for a secured convertible loan facility of up to $6 million.
Both NFS and RI Flow are existing senior secured lenders to Flow and are affiliated with Clifford L. Rucker, an insider of the Company. Together, RI Flow, NFS, and Mr. Rucker collectively hold or control more than 10% of Flow’s voting securities on a partially diluted basis. All figures reported in this announcement are in Canadian dollars unless otherwise stated.
Flow’s Executive Chairman and Chief Executive Officer, Nicholas Reichenbach, expressed gratitude for the continued support of its key financial partners. “We are extremely pleased to have secured this vital funding from RI Flow and NFS,” said Reichenbach. “Their commitment allows us to pursue strategic alternatives while staying on course towards profitability. Our objective is to continue strengthening the Flow brand while optimizing our cost structure and securing a sustainable future. We are truly thankful to our long-standing partners and supporters for their confidence in our vision.”
Details of the NFS Financing Package
The $2 million senior secured loan advanced by NFS was issued pursuant to a term note (the “NFS Term Note”) and is structured to mature on May 23, 2028. The loan bears interest at an annual rate of 15%, which will accrue and compound annually. Repayment will commence after a three-month grace period, followed by 33 equal monthly installments covering both principal and interest.
The loan proceeds will be directed toward general corporate and working capital purposes. As part of this arrangement, Flow has committed to hiring a restructuring specialist under an initial six-month agreement to assist in its operational and financial realignment.
Alongside the NFS Term Note, the Company has entered into a binding term sheet with NFS for an additional senior secured loan of up to $4 million (the “NFS Term Loan”). This second facility will also mature three years from issuance and carry an interest rate of 15% per annum, payable under a similar amortization schedule as the NFS Term Note. The funds from this term loan will be disbursed in tranches, contingent upon Flow achieving certain monthly net revenue milestones, and will also be used for general working capital and operational needs.
Both the NFS Term Note and the NFS Term Loan will be secured by a first lien on all the assets of the Company and its subsidiaries. The security interest ranks pari passu with Flow’s existing obligations under a previous loan agreement dated December 30, 2022, between Flow and NFS.
Notably, Mr. Reichenbach has also entered into a Deficiency Agreement with NFS, whereby he has personally guaranteed certain loan and lease obligations between the Company and NFS under specified conditions.
RI Flow Convertible Loan Overview
In addition to the NFS funding, Flow has secured a commitment from RI Flow for a convertible loan facility of up to $6 million (the “RI Flow Convertible Loan”). The facility is structured as a secured loan maturing 18 months from issuance and bears interest at 15% per annum, compounded annually and payable in full at maturity, unless earlier converted.
The funds from RI Flow will be advanced in multiple tranches based on Flow’s performance against predetermined monthly revenue thresholds. Beginning one year after issuance, RI Flow will have the right to convert the outstanding principal and accrued interest into subordinate voting shares (“SV Shares”) of the Company at a fixed conversion price of $0.065 per share—a premium of 8.9% over the May 22, 2025 market price of $0.0597.
The convertible loan agreement includes provisions for early conversion or repayment in the event of a change of control of the Company or a divestiture of Flow’s Aurora, Ontario packaging facility. In such events, RI Flow may elect to convert its holdings into SV Shares or demand early repayment, provided that the Company receives a minimum of $12 million in net proceeds.
A maximum of 114,115,385 SV Shares may be issued upon full conversion, which would result in RI Flow holding approximately 61.89% of the Company’s equity and 48.75% of voting rights on an undiluted basis.
The loan is secured by a second lien on all assets of Flow and its subsidiaries, subordinated only to NFS’s secured obligations, and ranks pari passu with other obligations under RI Flow’s prior agreements.
Governance and Regulatory Compliance
Given that the transactions involve related parties and insiders of the Company, Flow has taken steps to ensure full compliance with the Toronto Stock Exchange (TSX) regulations and Canadian securities laws.
The TSX was notified pursuant to Section 501 of the TSX Company Manual, and an independent financial advisor retained by the Board provided a report confirming that the consideration received under the financing agreements exceeds 10% of Flow’s market capitalization. Despite the related-party nature of the transactions, the Board’s Independent Directors (excluding Mr. Reichenbach) unanimously approved the terms, concluding they were reasonable and in the best interests of the Company.
Due to the significant dilution potential and insider participation, the TSX has required shareholder approval under Sections 604 and 607 of the Manual. Rather than convening a general shareholder meeting, Flow intends to satisfy this requirement through written consent from a majority of disinterested shareholders, in accordance with Section 604(d).
The 12,050,000 SV Shares held by RI Flow, representing 13.43% of the Company’s equity, will be excluded from the vote.
Exemptions under MI 61-101 and Rationale
Flow’s Board has also determined that the transactions qualify for exemptions under Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions. Specifically, Flow is relying on the “financial hardship” exemptions from both the formal valuation and minority shareholder approval requirements, as outlined in Sections 5.5(g) and 5.7(e) of MI 61-101.
After careful evaluation of the Company’s liquidity needs, cash flow constraints, and available alternatives, the Independent Directors concluded that Flow is facing serious financial difficulty. The proposed financing arrangements are designed to stabilize the Company’s operations and are considered both reasonable and in the best interest of all stakeholders.
Due to the urgency of the financing and the evolving nature of the negotiations, Flow did not file a material change report 21 days prior to entering into the agreements. However, full disclosure has now been provided in this release.
