Unaudited Consolidated Pro Forma Fourth Quarter Revenues of $40 Million; Unaudited Consolidated Pro Forma Full Year Revenues of $189 Million

SAN JOSE, Calif.–(BUSINESS WIRE)–TPCO Holding Corp. (“The Parent Company” or the “Company”) (NEO: GRAM.U, GRAM.WT.U) (OTCQX: GRAMF; OTC PINK: GRMWF), formerly Subversive Capital Acquisition Corp., today announced financial results for the fourth quarter and year ended December 31, 2020 along with the filing of its Business Acquisition Report (“BAR”) in connection with its Qualifying Transactions in respect of each of CMG Partners, Inc. (“Caliva”), and Left Coast Ventures., (“LCV”) and SISU Extraction LLC (“SISU”) completed on January 15, 2021. All amounts are expressed in U.S. dollars.

The Company’s audited consolidated financial statements for the three months and year ended December 31, 2020, as well as its accompanying management discussion and analysis (“MD&A”) and the BAR have been filed on SEDAR www.sedar.com.

The Company cautions investors that the consolidated pro forma financial statements (i.e. which consolidates TPCO Holding, Caliva, LCV and SISU) as of December 31, 2020 included in the BAR and provided as exhibits to this press release are unaudited. The entity level financial statements for Caliva, LCV and SISU as of December 31, 2020 which are included in the BAR are audited. Please refer to TPCO’s MD&A for additional detail and discussion on the Company’s results from operations.

The Company will separately file its Annual Information Form (“AIF”) before the end of March 2021.

Fourth Quarter 2020 Financial Highlights

  • Unaudited consolidated pro forma revenues for the fourth quarter was $40.2 million, a 40% increase compared to $28.7 million in the fourth quarter of 2019.
  • Unaudited consolidated pro forma EBITDA loss for the fourth quarter was $93.4 million compared to a loss of $18.5 million in the fourth quarter of 2019. The fourth quarter 2020 EBITDA loss includes various transaction, non-recurring and approximately $70.5 million of non-cash expenses.
  • Unaudited consolidated pro forma Adjusted EBITDA loss for the fourth quarter was $17.7 million compared to a loss of $12.0 million in the fourth quarter of 2019. Adjusted EBITDA removes the effects of changes in fair value of financial instruments, impairment charges and other non-cash items.

Full Year 2020 Financial Highlights

  • Unaudited consolidated pro forma revenues for the year ended 2020 was $188.7 million, a 76% increase compared to $107.2 million in 2019.
  • 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.
  • Unaudited consolidated pro forma Adjusted EBITDA loss for the year ended 2020 was $34.6 million compared to a loss of $61.3 million in 2019.
  • The Company 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.”

The Parent Company Investment Highlights

  • Proven Business Model – The Parent Company is the largest vertically integrated omni-channel cannabis platform in California. The Parent Company’s operational footprint spans cultivation, extraction, manufacturing, distribution, brands, retail and delivery.
  • Progressive Operational Platform – The Parent Company owns its supply chain, enabling the company to leverage scale and produce and distribute a broad portfolio of cannabis products across consumer segments.
  • Omnichannel Platform – The Parent Company’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 first and third-party brands, allows The Parent Company to rapidly scale its direct-to-consumer reach to all Californians.
  • 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 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 plans to have significant consumer reach 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 one of the most well-capitalized cannabis companies in the United States and will pursue an aggressive consolidation strategy to accelerate growth and market share gains.
  • 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.

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, will guide 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 more information, please visit www.theparent.co.

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 The Parent Company’s future financial performance, ability of The Parent Company to execute on its growth and consolidation strategy, anticipated synergy benefits in 2021, and anticipated regulatory filings. 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 final prospectus dated December 16, 2020, 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.

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.

TPCO HOLDING CORP.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF LOSS FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2020 AND 2019

 
Proforma Consolidated Proforma Consolidated Proforma Consolidated Proforma Consolidated
Year Ended Three Months Ended Year Ended Three Months Ended
December 31, 2020 December 31, 2020 December 31, 2019 December 31, 2019
 
Revenues

$

188,662,575

 

$

40,221,288

 

$

107,201,085

 

$

28,683,409

 

 
Cost of Sales

156,452,631

 

37,224,355

 

95,118,184

 

28,349,432

 

 
Fair value changes to biological assets and changes in inventory sold

542,661

 

195,805

 

(753,531

)

(57,222

)

 
Gross Profit

32,752,605

 

3,192,738

 

11,329,370

 

276,755

 

 
Operating Expenses
General and administration

89,241,466

 

32,719,475

 

79,207,809

 

16,388,848

 

Sales and marketing

48,332,098

 

45,964,974

 

23,640,633

 

1,088,179

 

137,573,564

 

78,684,449

 

102,848,442

 

17,477,028

 

Other income (expense)
Loss before other income (expense)

(104,820,959

)

(75,491,711

)

(91,519,072

)

(17,200,273

)

 
Other income (expense)
Interest income

2,350,312

 

105,896

 

5,271,713

 

2,634,959

 

Transaction costs

 

 

 

 

(11,000,000

)

 

 

Depreciation of right-of-use assets

 

 

887,620

 

(988,102

)

(520,008

)

Depreciation of property and equipment

(4,157,512

)

(754,816

)

(3,913,928

)

(2,058,311

)

Amortization of intangible asset

(13,656,000

)

(3,864,000

)

(13,056,000

)

(3,264,000

)

 
Interest expense

(7,282,633

)

3,195,627

 

(11,236,093

)

(5,032,900

)

Amortization of issue costs on Class A warrants

 

 

 

 

 

 

 

 

Underwriting commissions

(20,125,000

)

(20,125,000

)

 

 

 

 

Gain (loss) on change in fair value of derivative liability

 

 

(6,857,000

)

(1,909,663

)

(1,909,663

)

Loss on change in fair value of warrant liability

 

 

4,125,926

 

 

 

 

 

Loss on change in contingent consideration

(1,734,498

)

(1,504,498

)

 

 

 

 

Loss on note payable

 

 

8,374,074

 

 

 

 

 

Loss on change on extinguishment of Class A

 

 

 

 

(37,185,833

)

(2,807,906

)

Gain on debt modification

 

 

(1,505,967

)

1,115,000

 

1,115,000

 

Gain from non-controlling subsidiary

160,876

 

152,504

 

 

 

 

 

Share of loss in joint venture

(615,512

)

 

 

(144,252

)

(144,252

)

Gain on investment in Tarukino

91,545

 

 

 

 

 

 

 

Other expense

(1,449,497

)

(690,941

)

(724,332

)

(139,074

)

(46,417,919

)

(18,460,575

)

(73,771,490

)

(12,126,154

)

 
Net loss before income tax

(151,238,878

)

(93,952,286

)

(165,290,562

)

(29,326,427

)

Income tax expense

(1,607,468

)

1,350,468

 

(202

)

(9,344

)

Net loss and comprehensive loss for the year

$

(149,631,410

)

$

(95,302,754

)

$

(165,290,360

)

$

(29,317,083

)

TPCO HOLDING CORP.

NON-IFRS FINANCIAL PERFORMANCE MEASURES RECONCILIATION

UNAUDITED, CONSOLIDATED PRO FORMA FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2020 AND 2019

 
Proforma Consolidated Proforma Consolidated Proforma Consolidated Proforma Consolidated
Year Ended Three Months Ended Year Ended Three Months Ended
December 31, 2020 December 31, 2020 December 31, 2019 December 31, 2019
Net loss and comprehensive loss

$

(149,631,410

)

$

(95,302,754

)

$

(165,290,360

)

$

(29,317,083

)

Income tax

(1,607,468

)

1,350,468

 

(202

)

(9,344

)

Depreciation and amortization

17,813,512

 

3,731,196

 

17,958,030

 

5,842,319

 

Interest expense and debt amortization

7,282,633

 

(3,195,627

)

11,236,093

 

5,032,900

 

EBITDA

(126,142,733

)

(93,416,717

)

(136,096,439

)

(18,451,208

)

Adjustments:
Stock compensation expense

2,486,665

 

456,316

 

4,024,834

 

798,075

 

Net effect of fair changes in fair value of biological assets and inventory

(542,661

)

(195,805

)

753,531

 

57,222

 

Other non-recurring items:
Non-cash compensation associated with put liability

(4,724,725

)

(9,324,153

)

4,724,725

 

1,878,581

 

Brand strategy expense

18,500,000

 

18,500,000

 

 

 

 

 

Sales and marketing expense

45,240,000

 

45,240,000

 

 

 

 

 

Gain on change in fair value of derivative liability

 

 

6,857,000

 

 

 

 

 

Loss on change in fair value of warrant liability

 

 

(4,125,926

)

 

 

 

 

Loss on change in fair value of note payable at FVTPL

 

 

(8,374,074

)

 

 

 

 

Loss on change in fair value of contingent consideration

1,734,498

 

1,504,498

 

 

 

 

 

Loss on change in fair value of line of credit

 

 

 

 

 

 

 

 

Gain on settlement of line of credit

(2,299,898

)

(2,299,898

)

 

 

 

 

Provision for bad debts

658,913

 

658,913

 

 

 

 

 

Gain on debt modification

 

 

1,505,967

 

(1,115,000

)

(1,115,000

)

Impairment loss

 

 

 

 

11,149,274

 

 

 

Loss on disposal of property, plant and equipment and intangible assets

47,090

 

26,860

 

262,735

 

262,735

 

Loss on extinguishment of Class A Restricted Voting Shares

 

 

 

 

17,060,833

 

(17,317,094

)

Underwriting commission fees

20,125,000

 

20,125,000

 

20,125,000

 

20,125,000

 

Loss in JV from Equity Method and gain on investment

615,512

 

91,545

 

144,252

 

144,252

 

Gain on investment in Tarukino

(91,545

)

(91,545

)

 

 

 

 

Transaction cost

10,277,857

 

8,098,981

 

11,000,000

 

 

 

Additional adjustments

(438,769

)

(2,893,895

)

6,658,720

 

1,664,680

 

Adjusted EBITDA

$

(34,554,796

)

$

(17,656,933

)

$

(61,307,535

)

$

(11,952,757

)

 

Contacts

The Parent Company
Media // Annie Maines

press@theparent.co

Investor Relations

investor@theparent.co

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