The Parent Company Archives - Green Market Report

StaffNovember 2, 2022
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The Daily Hit is a recap of cannabis business news for Nov. 2, 2022.

ON THE SITE

Green Thumb Beats on Record Revenue, Circle K Stores Remain in Question

Green Thumb Industries Inc. (CSE: GTII) (OTCQX: GTBIF) posted positive results that beat analysts’ expectations, with record revenue showing the demand for cannabis even as profits shrink industrywide. Green Thumb reported third-quarter revenue of $261.2 million, up 2.7% sequentially and up 11.8% from the prior-year period. This beat the Yahoo Finance average analyst estimate of $257.3 million. Read more here.

The Parent Company Sells Off Extraction Division

In yet another sign that the licensed California cannabis market is struggling, San Jose-based TPCO Holding Corp. (NEO: GRAM) (OTCQX: GRAMF) announced Wednesday that it had sold off its entire extraction division, a subsidiary called SISU Extraction LLC, for an undisclosed sum. Read more here.

Tilray Inks Distribution Deal with Charlotte’s Web Ahead of Health Canada Review

Tilray Brands Inc. (Nasdaq: TLRY) (TSX: TLRY) has inked a partnership with U.S.-based CBD giant Charlotte’s Web Holdings, Inc. (TSX: CWEB) (OTCQX: CWBHF) to sell hemp extract products in Canada. Under the agreement, Charlotte’s Web’s full-spectrum CBD products will be reach dispensary shelves through Tilray’s distribution network. Previously Charlotte’s Web products were only available in Canada to those that qualified for a special access medical exemption through Health Canada for specific need-states. Read more here.

Scotts Sales Drop 33% in Fourth Quarter, More Than Forecast

The Scotts Miracle-Gro Company (NYSE: SMG) announced in its financial results for the fourth quarter that ended Sept. 30, 2022, that sales fell by 33% to $493.6 million reflecting decreases in both major business segments. This missed the Yahoo Finance analyst estimates for sales of $519 million. Read more here.

Treez Acquires Payment Company Swifter

Cannabis cloud commerce platform company Treez is buying the payment solutions company Swifter. The value of the transaction was not disclosed. However, it does follow Treez Series C funding round of $51 million in April 2022. At the time the company said it would use the new funds to expand its footprint, pursue market expansion opportunities, and invest in partnerships that would connect each link in the supply chain. Read more here.

India Globalization Revenue Rises as it Shaves Losses

India Globalization Capital Inc. (NYSE American: IGC) posted rising revenues and cut losses as it reported its second fiscal quarter 2023 financial results. Revenue was roughly $202,000 for the second quarter, versus $56,000 during the same time last year. The company said that the rise in revenue is due mostly to growing sales of its CBD-based products and services, which increased 345% over last year. Read more here.

IN OTHER NEWS

Heritage Cannabis

Heritage Cannabis Holdings Corp. (CSE: CANN) (OTCQX: HERTF) has entered into an equity line of credit agreement with Obsidian Global Partners LLC whereby Obsidian proposes to purchase common shares in the capital of Heritage for the aggregate gross proceeds of up to $20 million by private placement, at Heritage’s discretion. Read more here.

Cansortium Inc.

Cansortium Inc. (CSE: TIUM.U) (OTCQX: CNTMF), a vertically integrated cannabis company operating under the Fluent brand, has agreed with certain of its directors to issue an aggregate of 1,048,386 common shares to such directors in exchange for the cancelling $162,500 of owed director fees. Read more here.


Debra BorchardtApril 1, 2022
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After the market closed on Thursday, TPCO Holding Corp.  (NEO: GRAM.U) (OTCQX: GRAMF) delivered its financial results for the fourth quarter and the full year ending December 31, 2021 as the company continues to record huge losses. In the fourth quarter, The Parent Company’s net sales were $39.6 million with a net loss of $50.6 million. The sales were essentially flat from the third quarter where sales were $39.7 million. The adjusted EBITDA loss for the quarter was $27.5 million.

Full Year Results

While net sales for the fiscal year 2021 were a healthy $173.4 million, the net loss was an eye-popping $587 million. DTC revenue for the year was $54.2 million or 31% of sales. Wholesale revenue for the fiscal year 2021 was $119.2 million of 69% of sales. Gross profit for 2021 was $20.2 million or 12% of net sales. The adjusted EBITDA loss for 2021 was $62 million. Since 2020, the company has logged losses of $818 million.

“2021 was a foundational year, as we developed an integrated omnichannel retail platform that provides us with direct access to over 80% of California’s adult population, positioning us to execute on our goal of becoming the number one choice for consumers by providing for both ease of access and high-quality innovative cannabis products,” said CEO Troy Datcher. “We have added significant talent to our organization, including industry experts and seasoned professionals that provide us with the depth of knowledge and expertise we need to lead in this market. While the challenges in the California market remain, including low bulk wholesale flower and oil pricing, high taxes, and persisting illicit market, we have successfully begun to pivot our focus to our higher margin direct to consumer revenue, doubling DTC revenue as a percentage of sales between the first and fourth quarters. Today more than ever, we believe we are well-positioned to win by leveraging our high-quality indoor-grown cannabis, strong consumer brands, and direct retail insights to innovate, create, and launch new products directly into the market that today’s consumers demand.”

Mr. Datcher added, “With our consumer-first approach, state-wide DTC retail footprint, robust branded products portfolio, and focus on higher-value revenue streams, our priority for the remainder of the year will be preserving our strong balance sheet by reducing our cash burn while utilizing our DTC focus to drive improved margin to generate long-term value for our shareholders. Given our progress in 2021 and subject to any opportunistic partnership or acquisition transactions, we have set a goal to maintain a minimum cash balance of approximately $100 million at 2022 year-end, sufficient to sustain our business for a minimum of three years, and pivot to generating positive cash flow in the fiscal year 2023.”

Direct to Consumer includes in-store retail, pick up, and delivery. The company currently operates eleven omnichannel retail locations, three in Northern California, three in Central California, and five in Southern California along with six delivery hubs (including the Coastal Holding Company, LLC acquisition.) On the wholesale side, TPCO sells first-party and selected third-party products into 450 dispensaries across California. Additional wholesale revenue comes from sales of sourced bulk flower and oil produced in-house.

Unrestricted cash and cash equivalents totaled $165.3 million as of December 31, 2021. Since closing the company’s qualifying transaction, the company has invested $48.8 million in acquisitions and capital investments, $6.5 million to repurchase its own shares, and $81.9 million or an average of $6.8 million of cash per month on operations as it integrates and scales its businesses.


Debra BorchardtNovember 15, 2021
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TPCO Holding Corp. also known as The Parent Company (NEO: GRAM.U) (OTCQX: GRAMF) announced its financial numbers for the third quarter ending September 30, 2021, with an eye-popping charge of $570 million. The Parent Company’s revenue for the quarter was $39.7 million and the adjusted EBITDA loss for Q3 2021 was $16.2 million.

TPCO reported that its sales in the third quarter dropped by 26.7 % from the second-quarter revenue of approximately $54.2 million and blamed the decline on a decrease in bulk wholesale flower and bulk wholesale oil prices during the third quarter.  Wholesale revenue fell to $26.9 million versus $42.3 million in the second quarter and this was attributed to the decrease in whole flower pricing during the quarter. The direct-to-consumer revenue grew 7.6% sequentially to $12.8 million.

“Over the last several quarters we have executed on our strategic initiative to drive growth in the higher quality, direct-to-consumer revenue we generate by expanding our coverage in the California market through our omnichannel platform,” said Troy Datcher, Chief Executive Officer of The Parent Company. “While our performance was impacted by the continued bulk wholesale flower and oil pricing declines that were seen across the California market, we expect that as we continue to expand the direct-to-consumer line of our business we will reduce our exposure to these pricing fluctuations. Additionally, we remain well-positioned with our access to high-quality indoor-grown cannabis, which continues to command a higher price point in the market.”

Operating expenses in the quarter were $31.6 million, cash expenses included general and administrative costs of $9.9 million, salaries and benefits of $9 million, and sales and marketing expenses of $4.6 million. Non-cash expenses included stock-based compensation of $3.6 million and depreciation & amortization of $3.3 million.

Impairment Charge Details

TPCO said that the charge was based on the softening of the California cannabis market. As part of the impairment assessment, TPCO’s future forecasts considered changes in cash flow estimates due to lower flower and oil prices realized during the third quarter of 2021. While the Company remains optimistic that cannabis legalization will occur, our expected future cash flows reflect the current tax and regulatory environment. While the company insisted that the challenges it faced were not unique to the company and that the entire California market was experiencing these issues, few other companies have registered a charge of this magnitude.

“Furthermore, the Company would like to highlight that of the consideration paid for the Qualifying Transactions, $232,719,246 related to non-cash contingent consideration. This amount is potential additional consideration issuable, if and when, the stock price reaches certain thresholds. During the nine months ended September 30, 2021, the Company recorded a gain on contingent consideration of $220,997,087 which is reflected in the statement of operations.”

The charge won’t affect the company’s cash position which is a healthy $206.7 million as of September 30, 2021. 


StaffOctober 4, 2021
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TPCO Holding Corp. also known as The Parent Company (NEO: GRAM.U) (OTCQX: GRAMF) is buying California-based Coastal Holding Company in a deal with a valuation of $56 million that is expected to close in 2022. The acquisition will bring The Parent Company’s current California retail store and delivery depot footprints to eleven and six, respectively. The Parent Co. said this would make it the second-largest operating retail dispensary and delivery hub in the State with an expanded reach to over 80% of California’s population.

The deal consists of $16.2 million in cash with a contingent consideration of up to $40 million in equity of The Parent Company upon completion of milestone events and a $9 million option to acquire the remaining equity of a southern California dispensary that Coastal currently holds a minority interest in.

“I am thrilled to add Coastal to our expanding retail network,” said Troy Datcher, Chief Executive Officer of The Parent Company. “With strategically positioned locations in high-traffic, densely populated regions, Coastal enables us to significantly increase our reach to a broader potential audience of consumers with both in-person retail and delivery options. In just over 4 months, we have more than tripled our operating retail stores in California.”

Mr. Datcher added, “As we continue to extend our reach in California, our focus remains on providing our customers with the exceptional product selection and retail experiences they have come to expect from us. I look forward to welcoming and working with the Coastal team and introducing their customers to our convenient in-store, delivery, and mobile app shopping options and full suite of high-quality brands.”

No.03 OG Handroll

The Parent Company’s product portfolio includes Monogram by Shawn “JAY-Z” Carter, Caliva, Deli, Fun Uncle, and Mirayo. Monogram just released its No.03 strain in the Heavy OG Handroll product type. The company said that the OG Handroll “takes inspiration from the smoke experience of a premium cigar, but implements a proprietary roll technique allowing the flower to burn slowly and evenly for multiple sessions. Highly trained artisan rollers break the flower down by hand, and roll using a time-honored process that was specially architected by MONOGRAM’s Culture & Cultivation Ambassador, DeAndre Watson.”

 


StaffAugust 3, 2021
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TPCO Holding Corp.  (OTCQX: GRAMF) has acquired an operating retail dispensary located in Ceres, California from the owners of Jayden’s Journey. Terms of the transaction were not disclosed and remain subject to customary closing conditions, including regulatory approval. The company said it plans to rebrand the location at a later date.

“This is a fantastic opportunity to expand our reach and increase the availability of our exceptional product selection and retail experiences to a broader potential audience of consumers and patients in California’s Central Valley,” said Steve Allan, Chief Executive Officer of The Parent Company. “This new location allows us to quickly access this important region and to drive future growth through the introduction of our robust delivery network. We look forward to building off the strong foundation that the team at Jayden’s Journey has created while continuing to honor their commitments to the community.”

Jayden’s Journey

Jayden was the first child to be given CBD on national television by his father Jason who pioneered the CBD movement. Jayden’s Juice began when the company founder, Jason David’s son was diagnosed with Dravet syndrome, a rare and catastrophic form of epilepsy, at four months old. Jayden had hundreds of seizures each day, and doctors believed he might not live past his fifth birthday. After spending more than a thousand dollars a month on 22 pills a day, the founder’s son was still experiencing terrifying seizures.

“In a desperate attempt to save his son’s life, Jason asked his doctor about cannabis as a treatment option. When his doctor advised doing whatever was necessary to save his son, he purchased oil from a CBD-rich cannabis strain. He held onto the product for weeks, too scared to subject his child to a form of treatment he wasn’t familiar with. The day he gave Jayden his first drop was the first day in Jayden’s life he was seizure-free.”

The company says it tests all of its products for pesticides and pathogens. It describes itself as a premier medical and recreational Cannabis dispensary with locations in Modesto and Ceres, Ca. Jayden’s Journey features the CBD product Jayden’s Juice! Results from Jayden’s Juice have been featured on Weed Wars, Discovery Channel, CNN, LA Times, CBS, NBC, ABC and highlighted on the famous Netflix documentary “Culture High.”


Debra BorchardtMay 21, 2021
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Editors Note: This interview was conducted on May 18, 2021. 

Debra Borchardt CEO Green Market Report:             Retracting the guidance for The Parent Company or TPCO Holding Company (OTC: GRAMF) in the recent earnings and the earnings report really caused a lot of criticism. People were not happy with that. What can you do now to gain back investors’ confidence, because the response I saw the investors were upset. Maybe not so much for the reason behind pulling the guidance, but just that it happened.

Steve Allen, CEO TPCO:                        I understand. People always want more information. Heck, I always want more information on what’s going on out there in the market, and so understand the perspective that folks have around that. The reality is for us is, especially with our new CFO, Mike Bates, onboard, we really want to make sure that when we are putting information out to the investment community that it is as accurate as it can possibly be. The reality within our strategy that we have here, especially having shored up the really critical key components of this, makes you think about our strategy, our strategy is to be a CPG brand-first company that’s focused on direct-to-consumer, that in California is powered by our vertically integrated platform. Now, outside of California, it’s really to leverage others in an asset-light approach. To establish the brand credentials, the quality in California, and then use the marketing air cover and then our production SOPs and move those into other states where people are able to perform against those SLAs to be able to have them, contract manufacturer, for us in those states.

When you look at the California component of it, a key critical area for us was ensuring that we had access to consistent raw materials and biomass, and I think what we’ve seen is while we have an incredible sourcing team who’s done a wonderful job there at being able to source for us and continue to do so, the reality is the fluctuations of the biomass market out there really makes it difficult on the predictable gross margin on a go-forward basis, as well as being able to ensure the consistency from a genetics profile that is required for us to be able to produce the branded product and really be that consumer packaged goods company with full control over what that genetic library looks like within it.

So for us, it really was about saying, “Okay, great. We’re able to source raw materials, but now we need to get to a greater degree of consistency and simultaneously get to a larger gross margin.” And so we did that. Our two transformative transactions, when you think about this is access to nearly a million pounds of biomass over the next 10 years, and it’s tied into some of the most advanced genetic libraries of any cultivators out there. We spent a lot of time evaluating and understanding who was in the market and selecting the particular partners that we wanted to move forward with. We got to great alignment there, and so when you think about what we’ve done, we’ve helped to integrate the business, we’ve helped to cut out the non-core assets, we’ve helped to streamline the operations of bringing three companies together, which doing that alone in three months is a Herculean task, yet alone shoring up the entire supply chain simultaneously.

What that actually does is it allows us now to be laser-focused on our direct-to-consumer and product categories. I think what the market will see from us is that we will go aggressively after M&A and development of other partnerships in retail, as well as organically building out our licenses, as we’ve always had as a plan, and really driving that on a go-forward here over the remainder of Q2 and into Q3. I think where the investor community will be pleased is when they see that we’re able to access 75% of California from 50% of California by the end of Q3. So that’s really where, when you think about the rationale for withdrawing the guidance, it’s that the timing of it-

Debra Borchardt:             You mentioned that the M&A. Obviously your M&A guy is gone. You hired some outside advisors to pursue deals. There’s a lot of money chasing deals right now, and it seems like the prices are just ballooning for the properties that are still viable to purchase. Are you concerned now that at this point in the game that you guys are going to be having to pay up to get properties?

Steve Allen:                        No. To be as blunt as possible, absolutely not. When we’re evaluating a direct-to-consumer target, it needs to be something that fits in operationally, which means strategically into the geographic footprint of what we’ve mapped across the state. It needs to be accretive and it needs to drive long-term value. So those are lenses that definitely bring down the number of available assets, from 700 assets probably down to 200 assets just by the fact that you’ve got to cut those down. But when you’re looking at the fact that we’re talking about doing maybe 10 or 12 retail acquisitions, that’s still leaving a broad pipeline for us as we continue to develop. We’re also doing organic simultaneously, applying for licenses. We just know those take 18 to 24 months to get up and operational. So we see those as density enhancing versus really being new geography opening for us. The M&A really is the way that we go through that.

No, we’re not going to overpay for assets. There’s no way we’re going to overpay for them. There are definitely scenarios where particular properties have become bid up, have become part of bidding wars, and the reality is in those scenarios, we’re highly unlikely to consummate a transaction that’s gotten into that type of a scenario. The good news is there’s a big enough pipeline out there, and there are very few players who actually have the cash on the balance sheet to be able to consummate these transactions. There’s a fair amount of-

Debra Borchardt:             True. You certainly are sitting on a lot of cash.

Steve Allen:                        Yeah. I jokingly refer to it, I’m married to an Australian, so this is why I can jokingly refer to it this way, but as the cannabis boomerang effect, which is we end up getting these conversations with particular targets, the targets are in conversations with multiple parties, they end up selecting a different party that has promised a higher multiple, essentially an evaluation that we view as not sustainable, and then that other acquirer is unable to actually consummate the deal. Either they just don’t have the cash on the balance sheet, or they’ve dug into the diligence, or they’ve taken an approach of, “Hey, I throw out a high number, and then I just beat you up and try to get to a lower number while we’re under exclusivity of an LOI period.

But meanwhile, you’ve got us sitting patiently around the hoop, waiting for the rebounder, waiting for that boomerang to come back, and it usually is about three, four, sometimes up to six months later that those boomerangs come back. I laugh about it because just over the last 10 days, we’ve had four of those boomerangs where these were conversations we had in Q1 that went away that all came back. Right? It’s almost like clockwork. 45, 60, 75 days later, “Oh, yeah. Here they are again. All right. Let’s now re-engage.”

And so I’m not worried at this point, because I haven’t seen a heavy amount of consummation of strategic deals or at least deals where they’re matching the footprint of geographies that we want to be in, and we’re still continuing to be engaged with multiple parties in each of those locations. Now, could that change over the next 90, 120, 360 days, as there’s more activity and more opportunity out there? Absolutely, it could. But at this point in time, it still is highly fragmented, and I still have yet to see substantial capital on balance sheets for most of these acquirers that are out there, side-by-side, having the conversations with us, which I think gives us such an incredible competitive advantage on closing rates.

Debra Borchardt:             Let’s talk about the product line. You guys just recently launched the Uncle Cruiser, which is really a value line, but you made a lot of noise about the Jay-Z Monogram line, which is very high-end and fancy. Could that be confusing to the customer base of the parent company? Is this value? Is this luxury? Is the luxury product and the value product being grown in the same cultivation facility? Is there a concern that having promotions of those two very different types of products confuses the customer?

Steve Allen:                        I’m not concerned about it. I think if you look at most successful CPG companies, at the end of the day, they have a house of brands, right? You may not know that all of them roll up into a particular entity if you’re a consumer of them, and so it really is targeted towards the different consumer personas that are out there. We consider it incredibly important that when your goal is to be incorporating cannabis into the daily lives of consumers out there that really you need to be able to offer the breadth and depth of selections from both the form factor and a pricing perspective, from value up through ultra-premium. Really, when we look at it, the products themselves are priced against what’s out there within the market from a competitive standpoint, but it’s also priced against what those cogs are to be able to produce it.

So clearly our Deli Greens or our Fun Uncle Cruisers, the reality is they’re at a lower price point because there is a lower cost associated with the production. That’s not an indoor flower that we’re extracting and then putting into Fun Uncle Cruisers, right? That’s not the indoor flower we’re putting into Deli Greens. That’s outdoor and greenhouse flowers, which comes at a substantially lower cost, and so we’re able to provide that to the consumer. The difference is because of our vertical integration and because of that footprint, even more so now that we have these biomass agreements that we’ve been able to put in place, the reality is we have the opportunity to actually continue to push the price down for those value consumers to give them the better value within the market but while maintaining and improving margins.

The reality is if you’re not a fully integrated player that has this same kind of scale and access, you can’t do that. So if you want to compete, you’re essentially competing by squeezing your gross margin. We don’t really see that same thing. That’s where we really looked at it and said, “The most important first actions besides integrating the companies was to secure that biomass for the long term.” Now, we can feed that product portfolio at an unprecedented scale, which does allow us to move aggressively into the marketplace and be able to apply pressure on the market while we actually maintain margins, and others, frankly, will have had their margin shrink, and they’ll end up in unsustainable scenarios. So that’s how we look at it.

But across the spectrum of, again, the first question you asked, we really believe that it is important to have across that spectrum. Our Monogram products are having unique genetics and strains that are only available in those products, and it’s the highest quality of the indoor that we actually have on the market. So that’s where we look at it and see this as, yeah, it is priced differentiated because it is the best of the best, the cream of the crop. And so the folks that are looking for that are going to be able to have that product. For someone who’s looking for a value-based product, then they’re going to have that opportunity.

We want to provide that everywhere in between and across all form factors, so at the end of the day, people know that they can trust this set of products almost like you trust a Johnson & Johnson or a Procter & Gamble. You don’t necessarily know at every moment in time that it’s Johnson & Johnson or Procter & Gamble unless you go look at the fine print on the label, but because of it, you create this halo effect of trust. And again, because of where cannabis is today, coming out of 50 years of an egg in a frying pan, and just say, no, it is about building trust within that category, and that’s what we’re looking to do.

Debra Borchardt:             $25 million was spent on marketing with Roc Nation. At the beginning of this SPAC, there was a lot of attention paid to the synergies between Jay-Z and Roc Nation and all that, but is there concern about the perception that maybe that’s a lot of money to go to one of the company’s executive’s other company, like a little incestuous there? That’s certainly a lot of money for marketing for a new company.

Steve Allen:                        Well, I guess it’s all relative. We also received over 800 million media impressions just in the first three months. So if you try to look at it from that perspective, we’re paying less than three cents, and then everything is free on the go-forward. So the reality is if you think about it, no, because this is unprecedented access that you get. You’ll continue to see more that rolls out of that partnership. But to be clear, these are two separate things, right? One was the acquisition of Jay-Z’s half of the Monogram product. Caliva already owned the other half ahead of the time. The second component of it is that Jay-Z also took on a role really on that chief visionary officer. That’s separate from Roc Nation, right? That’s with him as an individual. That was not the original deals that Caliva had with him were with him, not with Roc Nation.

So adding in Roc Nation, what that provides is access to their list of talent across both the sporting and entertainment side of things, to be able to have ROFOs on potential product opportunities there, to be able to have the amplification that comes with them through it. We’ll see here in the coming weeks and months what the next phase of that relationship with Roc Nation looks like. Again, all of these things are staged out in a very coordinated process. We had Monogram, we had some very active marketing programs around Monogram between the state line and the hypocrisy advertisements around it up through what we did with the Slim Aarons’ Good Life Campaign.

And then what’s been kind of trailing underneath all of that and adding a little bit of fun to cannabis, so hypocrisy in the state lines is definitely about calling out some of the ridiculousness about cannabis rules and laws and regulations that exist out there, to really try and call out, frankly, craziness, to re-shake up what the viewpoint is on this 50 years of war on drugs and war on cannabis. But we also want to recognize that cannabis is and should be fun, right? While it may have a pain-sleep-anxiety component, it also has a relaxation and escapism component to it, and it’s used by different people at different times for different reasons, right? The same person may be using it for totally different reasons one day versus another day, and so we wanted to make sure that we’re able to call that out. So that was part of what we’ve done in the Good Life Campaign to basically show the incorporation into everyday life and the opportunity of really an aspirational component to it.

Then there’s our Hightails episodes, which are really authentic, fun personal stories about how cannabis has helped to influence some key Roc Nation stars and their artistic development journey. This is where we need to be able to create that balance. We need to call out and bring dignity to cannabis, but we also need to make sure people understand that it still can be fun and enjoyable. And while we’re very serious about changing things at the federal level, we also know that we want to be able to have fun with cannabis in whatever form and function we’re able to while we wait for the federal hierarchy to bring about the necessary shifts and changes that take place.

Debra Borchardt:             Last question. You guys had a lot of work to do. I think that a lot of people call it “De-Spacking”, which is interesting that that’s kind of the new moniker of the things you have to do. Is that work done, because you spun out some assets, you pulled back on some of the SKUs?

Steve Allen:                        It’s not complete, but we’ve made substantial progress. As you said, we spun out three assets, we eliminated 10% of personnel expense. We are in process of consolidating three locations. While we have moved all of the operations out of those locations, we have not completed the process of actually selling those off, so that’s still in process. We continue to refine our combined company SOPs and operating systems as well as the digital infrastructure. So again, while a good portion of that is taking place, it’s not fully complete, and then if you want to get very squarely to, as you call it, despacking, the despacking process requires a purchase price allocation. That is incredibly complex when you’re bringing together, essentially, what was four-and-a-half entities, between Subversive Capital, we had Caliva and then 50% of Oji Enterprises, which was the Jay-Z brand, Monogram.

So you’re trying to bring all of those things together. The complexity of the international accounting associated with that, that won’t be done until probably the end of June in regards to us actually have completed that process. And then there’s a further component to it, which is we now need to take everything that we’ve done in IFRF, and we need to convert it all back to GAAP and get all of that audited because we do want to register with the SEC so that when, not if, but when there is a shift from a federal perspective, we will have completed all of the necessary pre-work to be able to list on the US exchange. So that effort will really be taking place in Q3. So as you kind of just thinking about what are the things that need to be done from a de-spack.

Debra Borchardt:             That sounds like fun. I think you’re going to need to use a lot of Uncle Cruiser to get through that.

Steve Allen:                        Yeah. I was going to say at the end, we’ll be excited to have it done. I don’t think anyone’s ever mistaken dealing with auditors and regulators as the enjoyment part of cannabis. That may fall into the pain, sleep, and anxiety side of cannabis.

Debra Borchardt:             Right. But you sold that CBD.

Steve Allen:                        There’s always going to be more to do. And look, we have an absolute acute focus on continuous improvement. So let’s be clear. It will never be done, because we’re going to be doing M&A activities, continuing to ingest more companies. That’s going to cause more integration. We’re absolutely eyes wide open, understanding that we need to absolutely get faster and better at our integration management to be effective because we do not want to be one of those statistics of 50% of M&A failing, and we know that the way you do that is appropriate diligence upfront, including the integration teams early on in the process, and really focusing on that integration management in that subsequent one to four, sometimes six quarters that it takes to really get something fully integrated, depending on what the asset is that you’re acquiring. We’ve got the team, plans, resources in place for it, but let’s be clear. It will never be done until we’ve finally rolled up all of the cannabis globally. So maybe I can tell you in 30 years that we’ll be done.

 

 


Debra BorchardtMay 18, 2021
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7min1130

TPCO Holding Corp. (OTCQX: GRAMF) has reported financial results for the first quarter ending March 31, 2021, which was full of firsts for this newly formed company. First-quarter 2021 net sales totaled $39.9 million, although since TPCO was created from a SPAC (special purpose acquisition company) that occurred on January 15, it was not a full quarter of sales. Had the company included those extra weeks, the first-quarter net sales would have been approximately $45.6 million.

The company delivered a net income of $19 million in the quarter. Despite the strong showing right out of the gate, The Parent Company decided to withdraw its previously provided guidance, which included benefits from potential corporate development activities as well as revenue from its divested hemp CBD business line. TPCO cited the uncertainty of the California cannabis market as another reason. Even though the company was pumping the brakes on its guidance, Allen said on the company earnings call, “We are actively working to expand our retail and delivery depots to broaden our reach, having set a goal to serve nearly 90% of the California market within the next 18 months. We’re at approximately 50% today and should be approaching 75% before the end of Q3 this year.”

The first quarter also experienced an adjusted EBITDA loss of $11.4 million. The loss was primarily attributable to the ongoing operation of the company’s core business. TPCO is in a comfortable position having ended the quarter with $281 million in cash and cash equivalents.

CEO Steve Allen said, “The foundation of our company is dependent upon the vertical integration of our business in California. And to that end, we integrated our core assets, shed non-core assets, and improved our product distribution.” He went on to discuss this week’s transaction in which TPCO acquired four acres of outdoor cultivation from Mosaic.Ag an affiliate of Soma Rosa Farms, our strategic investment in Mercer Park Brand Acquisition Corp. along with the retail partnership agreements with the Glass House Group. “These pivotal transactions coupled with our own award-winning indoor capabilities, provide us with an unprecedented scale and margin advantage through long-term access to a significant supply of high-quality indoor greenhouse and outdoor-grown cannabis biomass, which covers all of our plan product and brand needs for the foreseeable future and allows us to achieve the full potential of our vertical integration,” said Allen.

The company noted that first-quarter operating expenses were $61.9 million, which included $40 million of non-cash expenses, comprised of $25 million of marketing expenses that were settled in shares for services provided under the Roc Nation agreement. In addition, stock-based compensation of $6.2 million and depreciation of $7.9 million, the remaining $21.9 million of cash operating expenses were comprised of general administrative costs of $9.5 million, salaries and benefits of $7.8 million, and sales and marketing expenses of $4.6 million.

Chief Operating Officer Dennis O’Malley said on the company’s conference call “The Mosaic.Ag farm acquisition and the 10-year Glass House partnership provide long-term access to top-quality outdoor and greenhouse flower at best-in-class pricing. This access to outdoor and greenhouse flower, in addition to our existing indoor cultivation, provides for a full flower portfolio for The Parent Company long-term and completes our vertical integration California. Access to this variety of cannabis allows us to increase margins on current products as well as provides for opportunities to expand our product portfolio in the future. Beyond access to high quality flower, we are specifically excited about our long-term product partnership with Glass House, where our branded wholesale business will be selling nearly $25 million of our product portfolio into Glass House stores over the next six years.”

Restructured Product Line

TPCO narrowed its brand portfolio offering to eight core brands from 17 previously, eliminating redundancies and reducing potential sales category overlap. It also selectively reduced the total SKU count across its eight remaining core brands with a focus on higher-margin product offerings. This quarter it launched Fun Uncle Cruisers, the first product to take advantage of the full vertical integration of its business.

Looking Ahead

The Parent Company said it has a robust pipeline of potential corporate development activities and remains committed to ensuring that potential acquisitions are accretive to the company’s strategic growth initiatives. The company noted that the timing around these opportunities remains uncertain. To accelerate its execution on corporate development opportunities, TPCO said it has retained two experienced external advisory firms with deep backgrounds in identifying, evaluating, and executing inorganic opportunities.

So it seems that since it outsourced the M&A work, Drew Kornreich is stepping down from his position as Chief M&A Officer effective May 17, 2021. “On behalf of the entire team, I’d like to thank Drew for his diligent work and greatly appreciate all his contributions throughout his tenure both at Caliva and The Parent Company,” said Allan.


StaffMarch 16, 2021
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3min780

TPCO Holding Corp.  also known as The Parent Company (OTCQX: GRAMF), formerly Subversive Capital Acquisition Corp., announced financial results for the fourth quarter and year ended December 31, 2020, along with the filing of its Business Acquisition Report in connection with its Qualifying Transactions in respect of each of CMG Partners, Inc. and Left Coast Ventures.,  and SISU Extraction LLC  completed on January 15, 2021. The company said it would separately file its Annual Information Form (“AIF”) before the end of March 2021.

The company’s unaudited consolidated pro forma revenues for the fourth quarter were $40.2 million, a 40% increase versus $28.7 million in the fourth quarter of 2019. The unaudited consolidated pro forma EBITDA loss for the fourth quarter was $93.4 million versus a loss of $18.5 million in the fourth quarter of 2019. The company said that the fourth quarter 2020 EBITDA loss included various transactions, non-recurring, and approximately $70.5 million of non-cash expenses.

2020 Financial Highlights

The company also reported that its unaudited consolidated pro forma revenues for the year ended 2020 were $188.7 million, a 76% increase over 2019’s $107.2 million. The unaudited consolidated pro forma EBITDA loss for the year ended 2020 was $126.1 million compared to a loss of $136.1 million in 2019.

TPCO said it had $337.9 million of unaudited consolidated pro forma cash available on December 31, 2020, to execute on its growth strategy.

Steve Allan, The Parent Company’s CEO, said, “We are excited to have closed 2020 with momentum forming the largest vertically integrated cannabis company in California by revenue, vertically integrated footprint, brand portfolio and balance sheet post our transaction close in January. This year is pivotal for The Parent Company as we work through the complex integration process to lay the foundation for future growth and acquisitions. Our team has been diligently working to integrate the newly combined businesses over the last two months and we expect synergies will be realized in our financial results in the back half of 2021. We are optimizing our brand portfolio, planning to launch the first of our value-tier products near the end of this quarter, and expanding our omnichannel footprint in the coming weeks to reach more consumers.”

“California is the largest and most influential cannabis market globally, and we believe The Parent Company is best positioned to consolidate and become one of the leaders in this cannabis market,” continued Allan. “Our vertically integrated supply chain, brand portfolio, unrivaled consumer access, and one of the healthiest balance sheets in cannabis will allow us to reshape the industry starting with California. We have a long runway for growth, especially as we execute on our consolidation strategy, and believe we can create meaningful long term shareholder value.”


Debra BorchardtJanuary 15, 2021
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7min1150

TPCO Holding Corp. (OTCQX: SBVCF, SBVQF) completed its qualifying transaction to acquire CMG Partners Inc. better known as Caliva and Left Coast Ventures, Inc. with global icon, entrepreneur and MONOGRAM founder, Shawn “JAY-Z” Carter and entertainment powerhouse Roc Nation. TPCO said it expects pro forma revenues of $334 million in 2021.

Shawn “JAY-Z” Carter, The Parent Company’s Chief Visionary Officer, said, “This is an incredible time for this industry. The end of cannabis prohibition is here, and The Parent Company will lead the charge to a more expansive and inclusive cannabis industry. We are paving a path forward for a legacy rooted in dignity, justice, care, and consistency. The brands we build will redefine growth, social impact, and social equity. This is our time. I’m proud and excited to lead the vision of The Parent Company.”

Jay-Z recently launched his premium cannabis line called Monogram, whose flower is cultivated at The Parent Company’s flagship growing facility in San Jose, California, using a batch-by-batch approach. The company said that each plant receives personalized attention from the company’s expert growers, who grade and select every flower by hand. The team is led by Cultivation Ambassador DeAndre Watson, who has been working with the plant for over 25 years. The packaging is matt black and looks as if it’s inspired by a high-end cosmetics line.

Common Shares and Warrants are now trading on the NEO Exchange under the symbols “GRAM.U” and “GRAM.WT.U”, respectively, and remain trading on the OTCQX under the symbols “SBVCF” and “SBVQF,” respectively. Beginning January 19, 2021, the OTCQX symbol “SBVCF” will change to “GRAMF.”

Michael Auerbach, Chairman of SCAC and The Parent Company, added, “This is an industry-defining moment. With its experienced management team, advanced infrastructure, industry-leading operational efficiencies, proven strategy of brands, and cultural influence, The Parent Company will help shape the future of cannabis in the U.S. and beyond as well as begin to repair and rectify the wrongs of prohibition.”

The Parent Company listed the following investment highlights in a company statement:

 Progressive Operational Platform –

  • TPCO owns its supply chain, enabling the company to leverage scale and profitably produce and distribute a broad portfolio of cannabis products for every consumer segment. The vertically integrated, omnichannel strategy maximizes gross profit and EBITDA margins, scales consumer reach, generates proprietary consumer data, and beats the illicit market on price, quality, and convenience.
  • Omnichannel Platform – TPCO’s scalable omnichannel business offers customers convenient express or scheduled delivery, and in-store or curbside pick-up, all through a single user-centric e-commerce platform, Caliva.com. This omnichannel e-commerce platform, offering both a robust portfolio of high-margin owned brands as well as third-party brands, allows The Parent Company to rapidly scale its direct-to-consumer reach to all Californians. Coupled with its powerful sourcing and low-cost manufacturing capabilities, this omnichannel platform offers consumers across California compelling pricing and convenience while remaining profitable.
  • Exclusive Brand Partnerships and Leading Cultural Influence – Brand strategy and marketing playbook led by Shawn “JAY-Z” Carter and Roc Nation, leveraging unparalleled cultural influence of leading artists and entertainers to build the most valuable and scalable brand portfolio in cannabis. JAY-Z officially launched the first his flagship cannabis line, MONOGRAM, on December 10, 2020.
  • Unrivaled Consumer Reach  TPCO currently reaches over 50% of consumers in California through Caliva.com, its existing direct-to-consumer platform. The Parent Company will have the greatest consumer reach of any cannabis company in California, reaching 75% of consumers in the state by the end of 2021 and almost 90% by the end of 2022 through scaling of its omnichannel platform.
  • Strong Balance Sheet –The Parent Company is the most well-capitalized cannabis company in the United States and will pursue an aggressive M&A strategy to accelerate growth, market share gains, and profitability.
  • Industry-Defining Social Impact  Led by Shawn “JAY-Z” Carter, The Parent Company will fund The Parent Company Social Equity Ventures with an initial target of $10 million and an annual contribution of at least 2% of its net income to invest in minority-owned and Black-owned cannabis businesses and contribute to the effort to rectify the wrongs of prohibition through diversifying both the business leadership and workforce of the cannabis industry. Beyond investing, the fund will also support organizations and programs focused on diversifying the cannabis workforce through job fairs and placement, industry training and education, as well as Social Equity application support.

Steve Allan, The Parent Company’s CEO, said, “With both the most comprehensive vertically integrated platform and brand portfolio in California, and the healthiest balance sheet in cannabis, we will reshape the industry in the world’s largest cannabis economy.”


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