TPCO Merges with Gold Flora in All-Stock Deal

TPCO Holding Corp. (OTCQX: GRAMF), also known as The Parent Company, is merging with California-based cannabis company Gold Flora Corp.. Gold Flora will be the majority holder of the company with 51% of the shares, while The Parent Company shareholders will own approximately 49%.

Troy Datcher, CEO of The Parent Company, will be named chairman of the board, and Laurie Holcomb, Gold Flora CEO, will be named chief executive officer.

The combined company is forecast to have pro forma revenue of $116.4 million for the nine-month period ending Sept. 30, 2022, with a gross margin of 33%. The merger is expected to save the companies between $20 million and $25 million a year.

“This merger of equals with the Gold Flora Corp. represents the next stage in our evolution, leveraging our complementary assets and core capabilities to deliver the most value for our customers and shareholders,” Datcher said. “Together, we will have the strategic platform comprised of scale, cultivation capabilities, and brand portfolio to execute on our mission to create unique and culturally relevant products. This vertical integration will fuel both the development of more consumer brands and broader consumer reach while enabling us to improve our gross margin and profitability to establish our business as a true leader in California to take advantage of the incredible growth opportunities ahead of us.”

The combined company will be called the New Parent, but it will operate as Gold Flora Corp. The stock is expected to remain on the Neo Exchange and on the OTC Markets Group.

The Parent Company has agreed to make available to Gold Flora a line of credit of up to $5 million with an interest rate of 10% per year, which will be secured by certain assets of Gold Flora. The outstanding balance of the line of credit will become due and payable if the merger agreement is terminated, subject to certain conditions. It is anticipated that the line of credit shall be forgiven following the completion of the business combination.

There is a $4 million termination fee.

Economies of Scale

According to the statement, the combined company is expected to operate a footprint of 20 retail stores, 12 house brands, three distribution centers, one manufacturing facility, and six cultivation facilities, providing the size and scale to position the combined company as a leader in California.

The combined company will have an indoor cultivation canopy of approximately 72,000 square feet, with the opportunity to expand to a further approximately 240,000 square feet, critical to controlling its supply chain and inventory levels while providing consistent high-quality flower, as well as flower-driven products that leverage an exceptional proprietary genetics library to deliver exclusive offerings that align with consumer demands.

“By combining our proven approach to lean, effective infrastructure, and vertically integrated operations from cultivation through distribution and The Parent Company’s brand-building expertise and retail and delivery footprint, we expect to achieve market-defining performance at every level of the business,” Holcomb said.

Company Backgrounds

Gold Flora is a privately held, female-led company that owns and operates a portfolio of cannabis brands, companies, and retail dispensaries throughout the state. Its retail operations include King’s Crew in Long Beach, Airfield Supply Company in San Jose, and the Higher Level chain serving Hollister and Seaside.

The company sells and distributes for many prominent brands, including their own premium lines of Gold Flora, Roll Bleezy, Sword & Stoned, Aviation Cannabis, and Jetfuel Cannabis products. The company was built on a foundation of trust, transparency, and high ethical standards. It is also one of the few cannabis companies that is both vertically integrated and woman-led and operated.

The Parent Co. came to fame with the association of music mogul Jay Z. However, that relationship fizzled as TPCO found itself in financial trouble. Jay-Z took back his rights to his cannabis line Monogram.

TPCO has always seemed a little disjointed starting with two names: TPCO and The Parent Company. It was created through a SPAC in 2020 bringing together Carter, Roc Nation, Caliva Cannabis, and Left Coast Ventures. At the time, they said Caliva and Left Coast Ventures expected combined pro forma revenues of $185 million in 2020 and $334 million in 2021. Instead, sales for 2021 were only $178 million. Respectable, but nowhere near what had been projected. The company has also lost millions of dollars since forming.