CORRECTING and REPLACING The Parent Company Reports First Quarter 2021 Financial Results
In the section with the header "First Quarter 2021 Financial Results", the last sentence of the fifth paragraph should read: The above includes
The updated release reads:
THE PARENT COMPANY REPORTS FIRST QUARTER 2021 FINANCIAL RESULTS
Achieves Consolidated Net Sales of
Maintains Industry-Leading Balance Sheet with
Provides Update on Integration and Consolidation Strategy
Conference Call to be Held Today, May 17, 2021 at 5:00 p.m. EDT
TPCO Holding Corp. ("The Parent Company" or the “Company”) (NEO: GRAM.U) (OTCQX: GRAMF), today reported financial results for the first quarter ending March 31, 2021 (“Q1 2021”). The Company’s Q1 2021 financial results reflect the closing of the Company’s qualifying transaction on January 15, 2021. Prior to closing of the qualifying transaction, the Company was a special purpose acquisition company with no commercial operations. As such, reported sales figures for this quarter are expected to be lower than in future quarters due to the abridged operating period. All amounts are expressed in U.S. dollars.
First Quarter 2021 Financial Highlights
-
Net sales for Q1 2021 were
$39.9 million -
Adjusting for a full quarter of sales beginning January 1, 2021, Q1 2021 net sales would have been approximately
$45.6 million -
Gross profit for Q1 2021 was
$7.2 million , or18% of net sales -
Adjusted EBITDA loss for Q1 2021 was
$11.4 million . Adjusted EBITDA removes the effects of changes in fair value of financial instruments, impairment charges and other non-cash items. -
Cash and equivalents totaled
$281.0 million as of March 31, 2021
Management Commentary
“With some of the most well-known cannabis brands, an industry-leading balance sheet, and strong positioning in the California market, we entered 2021 with substantial forward momentum as we continue to execute on our growth and consolidation strategies,” said Steve Allan, Chief Executive Officer of The Parent Company. “Throughout our first quarter of public company operations, our team has worked diligently on the successful integration of our core business units and house of brands to build a strong foundation for sustained growth. This included our recently announced cultivation investments which have bolstered our supply chain with long-term access to high-quality indoor, greenhouse, and outdoor grown cannabis for use in our suite of branded product lines.”
Mr. Allan continued, “In addition, we strengthened our executive team, launched Fun Uncle Cruisers, our first product to take advantage of the full vertical integration of our business, and made our initial social equity investments from our dedicated
Mr. Allan concluded, “The California cannabis market is ripe for consolidation, and we plan to leverage our competitive positioning to become true leaders in this market. In addition, as we look to further expand our operations into new states, we plan to employ an asset-light model, utilizing our existing asset base to drive scale and profitability. We have a long runway for significant growth, both organically and through acquisitions, and we believe we will create meaningful long-term shareholder value.”
First Quarter 2021 Operational Highlights
- Completed the largest cannabis SPAC in history and announced the launch of The Parent Company with Shawn "JAY-Z" Carter, Roc Nation, CMG Partners, Inc. (“Caliva”), and Left Coast Ventures, Inc. (“Left Coast Ventures”)
- Appointed Mike Batesole as Chief Financial Officer
Subsequent Events
- Shawn 'JAY-Z' Carter's MONOGRAM challenges national drug policy and launches digital and out-of-home awareness campaign to magnify the hypocrisies of cannabis legislation
- Launched Fun Uncle Cruisers – a disruptive entry into the value vape category
- Launched an integrated loyalty program: Caliva CLUB
- Shawn 'JAY-Z' Carter's MONOGRAM Redefines 'The Good Life’ and launched the first installment of a three-part campaign that reimagines the iconic photos of renowned mid-century American photographer Slim Aarons through a contemporary lens
- Appointed Desiree Perez, CEO of Roc Nation, to the Board of Directors
- Signed definitive agreement to acquire four acres of outdoor cultivation located in Sonoma County, CA from Mosaic.Ag, an affiliate of Soma Rosa Farms
-
Completed a
$50 million strategic investment in Mercer Park Brand Acquisition Corp, as well as establishing a long-term supply agreement with Glass House Group for high-quality greenhouse-grown cannabis and a distribution agreement into Glass House Groups’ retail dispensary network -
Disposed of the Company's
34% minority interest in Half Moon Grow, as well the Company’s Acai Puree business line -
In addition, the Company has entered into a definitive agreement to sell its hemp CBD business unit to Arcadia Biosciences, Inc.® (Nasdaq: RKDA) (“Arcadia”), a leader in science-based approaches to enhancing the quality and nutritional content of crops and food ingredients, for
$4 million in cash and 827,400 shares of Arcadia stock. The transaction is expected to close in Q2 2021.
First Quarter 2021 Financial Results
Net sales in Q1 2021 were
Gross profit in Q1 2021 was
Operating expenses in Q1 2021 were
Adjusted EBITDA loss for the first quarter 2021 was
Cash and cash equivalents totaled
The Company’s Q1 2021 consolidated financial statements, as well as its accompanying management discussion and analysis (“MD&A”) have been filed on SEDAR (www.sedar.com). Please refer to TPCO’s MD&A for additional detail and discussion on the Company’s results from operations.
Business Integration Update
Following the completion of the Company’s qualifying transaction on January 15, 2021, The Parent Company has implemented an integration strategy to streamline and optimize the Company’s operations. Centered on driving near-term margin expansion while positioning the Company for continued long term growth, in Q1 2021 The Parent Company has achieved the following:
- Portfolio Optimization: Streamlined the Company’s brand portfolio offering to 8 core brands from 17 previously, eliminating redundancies and reducing potential sales category overlap.
- SKU Rationalization: Selectively reduced total SKU count across the Company’s 8 remaining core brands with a focus on higher margin product offerings.
- Product Innovation: Launched Fun Uncle Cruisers, our first product to take advantage of the full vertical integration of our business and one that we believe illustrates how the Company’s significant efficiencies and resources can combine to create quality cannabis at an approachable price point with best-in-class product margins.
- Expanded Sourcing: Delivered significant value to the end consumer by strategically expanding the Company’s sourcing network, securing long-term access to over 900,000 pounds of high-quality, low-cost, California-grown cannabis to provide improved flower product availability and more attractive pricing.
- Manufacturing Consolidation: Successfully rationalized The Parent Company’s manufacturing facilities by closing its 23,000 square foot Santa Rosa facility and its Oakland facility, migrating certain manufacturing operations to its San Jose facility. As a result of these changes, the Company now operates three, streamlined manufacturing facilities.
- Distribution: To improve dispensary delivery times and to reduce operating costs, The Parent Company centralized its distribution operations to two wholesale hubs located at its San Jose and Costa Mesa locations, resulting in the closure of its North Hollywood facility.
-
Restructured and Optimized Organization: Integrated and consolidated teams from both Caliva and Left Coast Ventures into The Parent Company’s combined operations resulting in reduced overall personnel expenses by approximately
10% . Over time, the Company expects to add additional headcount in certain areas of its business to invest ahead of future grown. -
Asset Dispositions: In the quarter, the Company completed a review of its asset base and subsequently acted upon a series of structured dispositions that have refocused the Company on its core California cannabis operations. This included the sale of the Company's
34% minority interest in Half Moon Grow, as well the disposition of the Company’s Acai Puree business line. In addition, the Company has entered into a definitive agreement to sell its hemp CBD business to Arcadia Biosciences. The transaction is expected to close before the end of the second quarter.
Outlook
The Parent Company has made substantial progress on its integration efforts and based on the continued strength of its organic operations, the Company believes it remains well positioned for sustained, long-term growth. On an ongoing basis, the Company reviews its financial forecasts to assess the reasonableness of specific developments and broader industry and economic factors. During this process, the Company reviews for unanticipated delays in receipt of licensing approvals, build out of facilities, integration activities, and corporate development opportunities due to competitive actions, as well as potential delays in the build out of its distribution centers and planned retail stores.
As a result of the above and due to the uncertainty inherent in forecasting operating results given the current status of the California cannabis industry, The Parent Company has elected to withdraw its previously provided guidance, which included benefits from potential corporate development activities as well as revenue from the Company’s divested hemp CBD business line.
The Parent Company 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, create operational efficiencies, and drive long-term shareholder value. As such, timing around these opportunities remains uncertain. To accelerate its execution on corporate development opportunities, the Company has retained two experienced external advisory firms with deep backgrounds in identifying, evaluating and executing inorganic opportunities.
The Company also announced today that Drew Kornreich is stepping down from his position as Chief M&A Officer to pursue other opportunities 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 Steve Allan, CEO of The Parent Company.
Conference Call
The Parent Company will host a conference call today, May 17, 2021, to discuss these results. Steve Allan, Chief Executive Officer, Mike Batesole, Chief Financial Officer, and Dennis O’Malley, Chief Operating Officer and President of Caliva, will host the call starting at 5:00 p.m. Eastern time. A question and answer session will follow management's prepared remarks.
DATE: |
Monday, May 17, 2021 |
||
TIME: |
5:00 p.m. Eastern Time |
||
WEBCAST: |
|||
DIAL-IN NUMBER: |
1 (877) 407-0789 |
||
CONFERENCE ID: |
13719172 |
||
REPLAY:
|
1 (844) 512-2921 or 1 (412) 317-6671
|
Financial results and analyses are available on the Company’s website (ir.theparent.co) and SEDAR (www.sedar.com).
About The Parent Company:
The Parent Company (TPCO Holding Corp.) (NEO: GRAM.U, GRAM.WT.U) (OTCQX: GRAMF; OTC PINK: GRMWF) is California's leading vertically integrated cannabis company combining best-in-class operations with leading voices in popular culture and social impact. The Parent Company brings together global icon and entrepreneur Shawn "JAY-Z" Carter, entertainment powerhouse ROC NATION, California's leading direct-to-consumer platform CALIVA, and leading cannabis and hemp manufacturer, LEFT COAST VENTURES, to form a cannabis industry leader for the post-prohibition era. Chief Visionary Officer Shawn "JAY-Z" Carter, one of the most recognized and celebrated entrepreneurs of our time, guides The Parent Company's brand strategy in partnership with Roc Nation, the world's preeminent entertainment company with a roster of culture-making artists, athletes and influencers. The brands we build together will pave a new path forward for a legacy rooted in equity, access, and justice.
For the latest news, activities, and media coverage, please visit www.theparent.co or connect with us on LinkedIn and Twitter.
Forward Looking Statements
This press release may contain forward-looking information within the meaning of applicable securities legislation which reflects The Parent Company’s current expectations regarding future events. The words “will”, “expects”, “intends” and similar expressions are often intended to identify forward looking information, although not all forward-looking information contains these identifying words.
Specific forward-looking information contained in this press release includes, but is not limited to, statements concerning (i) The Parent Company’s future financial performance(ii) ability of The Parent Company to execute on its growth and consolidation strategy; (iii) anticipated synergy benefits in 2021; (iv) expectations regarding future corporate development activities; (v) and expectations regarding The Parent Company’s expansion into new jurisdictions. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond The Parent Company’s control, which could cause actual results and events to differ materially from those that are disclosed in or implied by such forward looking information. Such risks and uncertainties include, but are not limited to: changes in general economic, business and political conditions, changes in applicable laws, the U.S. and Canadian regulatory landscapes and enforcement related to cannabis, changes in public opinion and perception of the cannabis industry, reliance on the expertise and judgment of senior management, as well as the factors discussed under the heading “Risk Factors” in The Parent Company’s Annual Information Form dated March 25, 2021, which is available on SEDAR at www.sedar.com. The Parent Company undertakes no obligation to update such forward-looking information, whether as a result of new information, future events or otherwise, except as expressly required by applicable law.
Non-IFRS Financial Performance Measures (Unaudited)
Adjusted net income (loss), EBITDA and adjusted EBITDA are not recognized measures under IFRS and this data may not be comparable to data presented by other companies. For a reconciliation of EBITDA and adjusted EBITDA to the most directly comparable IFRS measure, see the section entitled “Reconciliation of Non-IFRS Measures” of the Q1 2021 MD&A.
Adjusted net income (loss) is calculated by adjusting net income (loss) as recorded in the unaudited condensed consolidated interim statements of income (loss) and comprehensive income (loss) for the exclusion of certain other income and expense items determined in accordance with IFRS. The Company believes that this generally accepted measure allows the evaluation of the results of continuing operations and is useful in making comparisons between periods. Adjusted net income (loss) is intended to provide investors with information about the Company’s continuing income generating capabilities. Management uses this measure to monitor and plan for the operating performance of the Company in conjunction with other data prepared in accordance with IFRS.
EBITDA is calculated by adjusting net income (loss) as recorded in the unaudited condensed consolidated statements of income (loss) and comprehensive income (loss) for finance costs, current and deferred income tax, depreciation and amortization expenses. The Company believes that this measure allows the evaluation of the results of continuing operations and is useful in making comparisons between periods. EBITDA is intended to provide investors with information about the Company’s continuing income generating capabilities. Management uses this measure to monitor and plan for the operating performance of the Company in conjunction with other data prepared in accordance with IFRS.
Adjusted EBITDA is calculated by adjusting net income (loss) as recorded in the unaudited consolidated financial statements of income (loss) and comprehensive income (loss) for the exclusion of certain other income and expense items determined in accordance with IFRS, being the calculation for adjusted net income (loss) and then further adjusting for finance costs, current and deferred income tax, change in fair values, other non-recurring amounts, depreciation and amortization expenses. The Company believes that this generally accepted measure allows the evaluation of the results of continuing operations and is useful in making comparisons between periods. Adjusted EBITDA is intended to provide investors with information about the Company’s continuing income generating capabilities. Management uses this measure to monitor and plan for the operating performance of the Company in conjunction with other data prepared in accordance with IFRS.
Caution Regarding Cannabis Operations in the United States
Investors should note that there are significant legal restrictions and regulations that govern the cannabis industry in the United States. Cannabis remains a Schedule I drug under the U.S. Controlled Substances Act, making it illegal under federal law in the United States to, among other things, cultivate, distribute or possess cannabis in the United States. Financial transactions involving proceeds generated by, or intended to promote, cannabis-related business activities in the United States may form the basis for prosecution under applicable U.S. federal money laundering legislation.
While the approach to enforcement of such laws by the federal government in the United States has trended toward non-enforcement against individuals and businesses that comply with medical or adult-use cannabis programs in states where such programs are legal, strict compliance with state laws with respect to cannabis will neither absolve The Parent Company of liability under U.S. federal law, nor will it provide a defense to any federal proceeding which may be brought against the Company. The enforcement of federal laws in the United States is a significant risk to the business of The Parent Company and any proceedings brought against the Company thereunder may adversely affect the Company’s operations and financial performance.
TPCO Holding Corp.
|
|||||
(Unaudited, in United States dollars)
|
|
|
March 31,
|
|
December 31, 2020 |
|
|
|
|
|
|
Assets |
|
|
|
|
|
Current Cash |
|
$ |
281,025,634 |
$ |
- |
Restricted cash and cash equivalents |
|
|
5,306,405 |
|
582,622,025 |
Accounts receivables |
|
|
4,591,133 |
|
- |
Other receivables |
|
|
- |
|
24,977,765 |
Biological assets |
|
|
2,624,018 |
|
- |
Inventory |
|
|
31,606,078 |
|
- |
Prepaid expenses |
|
|
7,152,991 |
|
- |
Assets held for sale |
|
|
18,774,542 |
|
- |
Other current assets |
|
|
2,242,948 |
|
- |
Total current asset |
|
|
353,323,749 |
|
607,599,790 |
|
|
|
|
|
|
Investment in equity shares |
|
|
591,545 |
|
- |
Security deposits |
|
|
962,582 |
|
- |
Prepaid expenses and other assets |
|
|
2,652,062 |
|
81,333 |
Property and equipment |
|
|
11,794,694 |
|
- |
Right-of-use assets |
|
|
52,353,734 |
|
- |
Goodwill and intangibles |
|
|
847,354,978 |
|
- |
Total assets |
|
$ |
1,269,033,344 |
$ |
607,681,123 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current |
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
38,584,019 |
$ |
28,321,972 |
Consideration payable |
|
|
3,369,507 |
|
- |
Current portion of lease liability |
|
|
3,277,486 |
|
- |
Loans payable |
|
|
3,358,686 |
|
- |
Cash settled share-based payments |
|
|
2,822,371 |
|
- |
Contingent consideration |
|
|
101,625,392 |
|
- |
Liabilities held for sale |
|
|
4,920,589 |
|
- |
Class A Restricted Voting Shares subject to redemption |
|
|
- |
|
582,622,025 |
Total current liabilities |
|
|
157,958,050 |
|
610,943,997 |
|
|
|
|
|
|
Other long-term liabilities |
|
|
1,507,572 |
|
- |
Lease liabilities |
|
|
51,188,685 |
|
- |
Deferred tax liabilities |
|
|
97,464,014 |
|
- |
Total liabilities |
|
|
308,118,321 |
|
610,943,997 |
|
|
|
|
|
|
Shareholders’ equity |
|
|
|
|
|
Common shares |
|
|
952,900,779 |
|
- |
Warrant reserve |
|
|
4,796,410 |
|
4,796,410 |
Class B shares |
|
|
- |
|
13,404,356 |
Shares to be issued |
|
|
19,529,798 |
|
25,087,000 |
Contributed surplus |
|
|
9,962,442 |
|
- |
Deficit |
|
|
(26,274,406) |
|
(46,550,640) |
Total shareholders’ equity |
|
|
960,915,023 |
|
(3,262,874) |
Total liabilities and shareholders’ equity |
|
$ |
1,269,033,344 |
$ |
607,681,123 |
|
|
|
|
|
|
TPCO Holding Corp.
|
|||||
|
|
|
Three-months ended |
||
|
|
|
March 31, 2021 |
|
March 31, 2020 |
|
|||||
Sales |
|
$ |
39,917,388 |
$ |
- |
Cost of sales |
|
35,238,987 |
- |
||
Gross profit before fair value adjustments |
|
4,678,401 |
- |
||
|
|
|
|
|
|
Net effect of changes in fair value of |
|
||||
biological assets and inventory |
|
2,522,154 |
- |
||
|
|
|
|
|
|
Gross profit |
|
7,200,555 |
- |
||
|
|
|
|
|
|
Operating expenses |
|
61,859,064 |
311,573 |
||
|
|
|
|
|
|
Loss from operations |
|
(54,658,509) |
(311,573) |
||
|
|
|
|
|
|
Other income (expense) |
|
||||
Interest income |
|
|
6,908 |
|
1,949,342 |
Interest expense |
|
(1,623,227) |
(1,949,342) |
||
Amortization of issuance costs on Class A warrants |
|
|
- |
|
(2,836,240) |
Loss on remeasurement of assets held for sale |
|
|
(58,022,984) |
|
- |
Change in fair value of contingent consideration |
|
|
131,093,854 |
|
- |
Other expense |
|
(117,157) |
- |
||
|
71,337,394 |
(2,836,240) |
|||
|
|
|
|
|
|
Income (loss) before income taxes |
|
16,678,885 |
(3,147,813) |
||
|
|
|
|
|
|
Income tax benefit |
|
3,101,292 |
- |
||
Net income (loss) and comprehensive income (loss) |
|
$ |
19,780,177 |
$ |
(3,147,813) |
|
|||||
Earnings (loss) per share |
|
|
|
|
|
Basic |
|
$ |
0.23 |
$ |
(0.22) |
Diluted |
|
$ |
0.21 |
$ |
(0.22) |
|
|
|
|
|
|
Weighted average number of common shares |
|
|
|
|
|
Basic |
|
|
84,413,911 |
|
14,543,750 |
Diluted |
|
|
85,697,978 |
|
14,543,750 |
TPCO Holding Corp.
|
|||||||
|
|
|
|
Three-months ended |
|||
|
|
|
|
March 31, 2021 |
|
March 31, 2020 |
|
|
|
|
|
|
|
|
|
Cash provided by (used in) |
|
|
|
|
|
||
Operating activities |
|
|
|
|
|
||
Net income (loss) |
|
|
$ |
19,780,177 |
$ |
(3,147,813) |
|
Adjustments for items not involving cash |
|
|
|
|
|
||
Amortization of issue costs on Class A warrants |
|
|
- |
|
2,836,240 |
||
Loss on remeasurement of assets held for sale |
|
|
58,022,984 |
|
- |
||
Interest expense |
|
|
1,623,227 |
|
1,949,342 |
||
Provision for bad debts |
|
|
174,111 |
|
- |
||
Depreciation and amortization |
|
|
7,951,093 |
|
- |
||
Shares issued for long-term strategic contracts |
|
|
25,000,000 |
|
- |
||
Share based compensation expense |
|
|
6,829,929 |
|
- |
||
Non-cash sales and marketing expense |
|
|
1,755,096 |
|
- |
||
Fair value change on biological assets |
|
|
(2,522,154) |
|
- |
||
Fair value change of contingent consideration |
|
|
(131,093,854) |
|
- |
||
Deferred income tax recovery |
|
|
(3,312,619) |
|
- |
||
|
|
|
|
(15,792,010) |
|
1,637,769 |
|
|
|
|
|
|
|
|
|
Net changes in non-cash working capital items |
|
|
(40,111,018) |
|
311,573 |
||
Total operating |
|
|
|
(55,903,028) |
|
1,949,342 |
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
||
Proceeds from private placement |
|
|
51,635,000 |
|
- |
||
Redemption of Class A restricted voting shares |
|
|
(264,318,686) |
|
- |
||
Repayment of lease liabilities |
|
|
(1,587,771) |
|
- |
||
Repayment of loans payable |
|
|
(2,778,668) |
|
- |
||
Repayment of notes payable |
|
|
(15,400,000) |
|
- |
||
Repayment of line of credit |
|
|
(10,836,105) |
|
- |
||
Total financing |
|
|
|
(243,286,230) |
|
- |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
Net cash paid in business combinations |
|
|
(1,874,925) |
|
- |
||
Cash held in Escrow |
|
|
582,622,025 |
|
(1,949,342) |
||
Purchases of property and equipment |
|
|
(532,208) |
|
- |
||
Total investing |
|
|
|
580,214,892 |
|
(1,949,342) |
|
|
|
|
|
|
|
|
|
Net change in cash during the year |
|
|
281,025,634 |
|
- |
||
|
|
|
|
|
|
|
|
Cash |
|
|
|
|
|
||
Beginning of year |
|
$ |
- |
$ |
- |
||
|
|
|
|
|
|
|
|
End of year |
|
$ |
281,025,634 |
$ |
- |
||
|
|
|
|
|
|
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20210517005900/en/
