The Parent Company's Shares Plummet On Q1 Earnings, Cannabis Co. Withdraws Its Guidance

TPCO Holding Corp. GRAMF, doing business as "The Parent Company,” reported Monday its first-quarter financial results with first-quarter net sales of $39.9 million. These results cover the period from January 15^th - when the company finalized its qualifying transaction, prior to which it had no commercial activities.

Key First-Quarter Figures

• Net sales would have amounted to $45.6 million when adjusted to cover a full quarter starting January 1^st;
• Its quarterly gross profit was $7.2 million, revealing a gross margin of 18%;
• It had an adjusted EBITDA loss of $11.4 million, which could be accredited mostly to its continuing core operation;
• Its operating expenses in the quarter reached $61.9 million, counting $40 million of non-cash expenses;
• At the end of the quarter, the company held $281.0 million in cash and cash equivalents, compared to $372.8 million it held on the date of closing the company’s qualifying transaction.

First Quarter Operational Highlights

• On January 15^th it had finalized the biggest SPAC deal in history with Shawn "JAY-Z" Carter, Roc Nation, CMG Partners, Inc. (“Caliva”), and Left Coast Ventures, Inc.  Under the agreement, Subversive Capital purchased Caliva and Left Coast Ventures for $282.9 million and $142.2 million, respectively. 
• In February it appointed Mike Batesole as chief financial officer.

“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,” Steve Allan, CEO of The Parent Company stated.

 “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 $10 million fund," Allan said. "I am pleased with the initial results of these efforts, and we will continue to work to optimize our vertically integrated platform as we both prudently evaluate potential acquisition opportunities and organically build our business for long-term success.”

Withdrawing Guidance

California-based vertically integrated cannabis company noted that it expects delays in obtaining licensing approvals consisting of integration operations, facilities and corporate development opportunities, as a result of which it is pulling out its previously offered guidance.

Important Subsequent Milestones

• Shaw “Jay-Z” Carter’s Monogram launched a cannabis law-focused awareness campaign;
• The company rolled out a line of vape cartridges called Fun Uncle Cruisers;
• Launched an integrated loyalty program – Caliva Club.
• Invested around $50 million in GH Group, Inc. via a private placement offering by Mercer Park Brand Acquisition Corp. BRND MRCQF. The strategic investment came on the heels of the announced merger between Mercer Park Brand, a special purpose acquisition company, and Glass House.
• Agreed to sell its hemp CBD business to Arcadia Biosciences, Inc. RKDA for $4 million in cash and 827,400 of Arcadia stock.

In addition, The Parent Company revealed that its Chief M&A Officer Drew Kornreich stepped down from this position.

Price Action

The Parent Company’s shares were trading 13.02% lower at $6.40 per share at the time of writing.

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