WATSONVILLE, CA -- May 12, 2022 -- InvestorsHub NewsWire
-- Pacific
Technologies Group, Inc. AKA Demand Brands, Inc. (OTC
PINK: DMAN), ("Company" or "DB") http://dman.co, a leading vertically integrated
cannabis company, is pleased to publish this Letter from its CEO to
its Shareholders.
TO OUR
SHAREHOLDERS:
Demand
Brands passed a major milestone in Q1 of this year: the Company
acquired CF3 SPV 1, LLC, a fully vertically integrated cannabis
business (“CF3”). This acquisition defines the path forward to
achieve increased value for our shareholders: Vertical Integration
/ Innovation / Optimization “VIO”. This game plan is now coming to
fruition. The acquired businesses collectively generated a revenue
of $4.1 million and $1.4 million in adjusted EBITDA in 2020 &
2021, respectively, based on CF3’s unaudited
financials.
I was
part of the team that built Viridi Farms, a wholly-owned subsidiary
of CF3. Viridi Farms started in 2017 with zero SF under management.
Today Viridi manages smart farms for enterprises with 236K SF of
cultivation, processing, and nursery management. In 2020, Dawn R.
Loos, your Chief Compliance Officer, Kevin Sparks, your Chief
Operating Officer, and I spearheaded a brand & supply
management venture, which yielded $24M in revenue and 11% in
adjusted EBITDA margin in its first year of operations. This
translated into 198% return on investment. By 2021, our
real estate portfolio had grown to over 200K SF. We took that
opportunity to build a cannabis real estate holdings segment within
our business by creating Zenith Land Management LLC, a real estate
holding company. Viridi Farms transferred our real
estate leasehold interests from Viridi Farms to Zenith Land
Management.
At the
end of 2021, CF3 acquired Viridi Farms and Zenith Land Management.
CF3 appointed us as the DB management team to build a brand and
supply management segment by (i) leveraging our network of 120
retail locations and 5 wholesale distributors, and (ii) directing
acquisitions of retail
brands.
CF3 also
controls the exclusive rights to the intellectual property for MBX
Research’s patented crop protection and cultivation of microbial
nutrients. The technology has proven to increase yield by up to 30%
and increase THC levels to up to 33%. MBX Research partnership has
increased the value proposition of Viridi’s partner
enterprises.
We are a
bold but prudent team with over 150 years of combined industry
experience across the entire soil to sale process. As shareholders,
you are now invested in a vertical integration play (with real
estate in mind) driven by aggressive growth plans to venture
outside of the traditional cannabis business plan in search of
innovation and cutting-edge technologies that will define the next
generation of cannabis
business.
The
reverse merger between CF3 and Demand Brands was a strategic
decision that paves the path forward for DB. Greater access to
capital markets through the public markets and the ability to do
100% stock acquisitions are the key drivers of our growth plan.
2021 was a year of notable organic growth in our business segments,
and to build on that momentum, we have assembled a pipeline of 5
targeted acquisitions. Through such acquisitions, Demand will
become a multi-state operator with 1M+ SF under management, grow
our brand & supply management volume to 180k lbs. of premium
cannabis annually, and expand our portfolio of retail brands. Our
aggressive expansion plans require aggressive financing, which
entails significant risk, but public markets bolster our path to
achieving our goals.
I joined
Demand Brands because of my optimism and excitement for the
long-term value we can generate together. I hope to generate the
same enthusiasm for our shareholders. The
information provided in this letter will give clarity, address any
shareholder concerns, and emphasize the path forward, so that you
can assess the alignment of our vision and values with
yours.
With the
delivery of the valuation report released this
morning, CF3 has satisfied all conditions to close the acquisition
of CF3 by DB.
Contrarily, the completion of CF3 audited financial statements
was not a condition for closing. On January 12, 2022, the Company
announced that it had engaged EisnerAmper to provide accounting
services in connection with its acquisition of CF3 and to determine
its final valuation. The Company was in early-stage open
discussions with several auditors including EisnerAmper. The
Company did not formally engage them. CF3 duly retained
Stanton Park Advisors to conduct the required third-party
valuation, which they
delivered to Demand Brands. The valuation report indicates
a fair market value of $390,808,000 for
CF3.
As to
the long-term engagement with any accounting firm for Demand
Brands, the most important consideration is to find a veteran
cannabis accounting firm. We have a list of candidates with whom we
are in late-stage discussions and will share more information with
you soon. Upon completion of the audit, we plan to file a
registration statement with the U.S. Securities and Exchange
Commission (SEC) to become a reporting issuer and file for an
uplist to the OTC senior
boards.
Our
shareholders have supported the Company through the years, long
before its acquisition of CF3, and we fully appreciate and respect
that. Hence, we have established strict protocols across the
company, especially for accounting and investor relations. From
this day forward, all communication will be complete and accurate.
The acquisition of CF3 brings a full suite of corporate leadership
professionals to Demand Brands. Three members of our corporate
leadership, (including myself, Dawn R. Loos, and Kevin Sparks) are
legacy members of CF3, and Ankur Chhapolika, your Chief Financial
Officer, and Ankit Jain, your Chief Accounting Officer bring
substantial experience in public company management. To show our
commitment to the fiscal health of the Company, our compensation is
heavily skewed towards stock options tied to the company’s growth
milestones as opposed to cash. Our new mission as well as our
values are part of a carefully curated plan to achieve the daunting
milestones ahead. As I have said publicly before, I am compelled to
remind you and the team that Demand Brands is the warrior
of the new era of cannabis consolidation resulting from a decade of
industry transformation and we will not stop at anything
to build Demand Brands into an industry
leader.
Please
note that in Q1 of this year, the team was primarily focused on the
private to public transition, rebranding campaign, capital raise,
and setting up our public compliance and accounting
protocols. As such, the financial results of CF3 for Q1
2022 will not be indicative of our true operational performance.
With our transition into Demand Brands now complete, we are excited
to produce financial results for our shareholders that reflect the
true potential of our vertically integrated platform. Discussions
are ongoing with long-term capital partners. We hope to update you
soon with more exciting
news.
OUR GOALS FOR 2022 AND
BEYOND:
We are
building a company that is here to stay. Our business plan is
driven by long-term growth milestones.
Today, we capture value at each stage of the complete soil to sale
process. We strive every day for even superior optimization through
vertical integration and innovation. We are on a mission to
establish leadership in today's fragmented market through the
integration of our business segments that perform in unison and
fuel each other’s growth and expansion plans, organically and
through synergistic M&A.
Our
Management Consulting sector provides a full suite of operations
& management services to its cultivation, processing, and
nursery management partners. They are generally small and medium
enterprises looking for performative results they can derive from
our vertically integrated capabilities. Our expertise ranges from
proprietary cultivation and processing techniques to patented
science & technology solutions that improve efficiency,
quality, and productivity at every stage of the soil to sale
process. Utilizing superior underwriting intelligence gained
through data analytics and years of operational experience we will
prudently identify potential M&A targets.
.
Our real
estate division (“Soil”) achieves backward vertical integration: we
lease properties to businesses, in the cannabis cultivation,
processing, and nursery
sectors.
Through
our brand & supply management division (“Sale”), we offer
marketing, product quality, & supply management for growers,
retailers & ancillary cannabis businesses. Our supply agreement
with Sun Supply, LLC, will lock down management of an
estimated 180k lbs. of premium cannabis supply per
annum, starting Q1 2024, yielding more than $200M in
revenue per annum.
Our
definition of success is to win the race for the most
robust, most profitable & the most socially equitable cannabis
company which optimizes the soil to sale process through diverse
partnerships & acquisitions and fully unlocks the potential for
exponential growth in the cannabis
industry.
Our
focus on long-term growth compels us to make bold investment
decisions. We will continue to share with you the strategic thought
process behind our choices so that your viewpoint is always
incorporated into our long-term leadership investment decisions. I
am pleased to share our core investment ethos with
you:
- We will continue to focus on
long-term partnerships with synergistic small and medium cannabis
enterprises that show promise for long-term
growth.
- We will continue to invest in our
in-house science & technology capabilities to further plant
science, genetics, and patented technology solutions to improve
efficiency, quality, and productivity at every stage of the soil to
sale process while practicing good stewardship of the
environment.
- We will continue to acquire
founder-run businesses for 100% stock (cashless) transactions to
align new partners with our vision of long-term
growth.
- We will continue to prioritize cash
reserves to fuel growth and
expansion.
- We will continue to advocate for the
decriminalization of the industry for everyone and champion the
voices of groups disproportionately affected by the war on
drugs.
- We will expand our real estate
segment to achieve (i) forward vertical integration through the
acquisition of retail locations and (ii) superior backward vertical
integration through the acquisition of pharma grade
facilities.
- We will continue to grow our team
with forward thinkers and outliers who are primarily compensated in
stock options.
Our
investment philosophy is a deliberate one built upon a
history of vetting, successful investment decisions, and
long-standing partnerships. 2022 is off to a momentous
start with the acquisition of CF3 which instantly propelled Demand
Brands into a vertically integrated platform primed to establish
leadership in today’s fragmented cannabis
market.
We thank
you, our shareholders, and look forward to this journey
together.
/s/ Andrew
Colehower
Andrew
Colehower
Chief
Executive Officer,
Demand
Brands, Inc
About Demand
Brands
Demand Brands is a publicly-traded company that has
vertical integration, optimization, and innovation at the heart of
its core strategy. We strategically invest in, acquire &
partner with synergistic cannabis companies to optimize and expand
our vertically integrated platform with the goal of becoming a
multi-state operation that captures value at every stage of the
soil to sale process. Our capabilities include cultivation,
processing, brand & supply management, and real
estate.
PRESS CONTACT
ir@dman.co
+1
(415) 685-0317
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SOURCE: Demand Brands,
Inc.
Cautionary Note Regarding Forward-Looking Information
and Statements. This press release includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. In addition to statements that explicitly
describe such risks and uncertainties, readers are urged to
consider statements labeled with the terms “believes”, “belief”,
“expects”, “intends”, “anticipates”, “projects” “will”, or “plans”
to be uncertain and forward-looking. The forward-looking statements
contained herein are also subject generally to other risks and
uncertainties that are described from time to time in the company’s
reports and registration statements filed with the Securities and
Exchange Commission.
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