Glass House Archives - Green Market Report

StaffSeptember 15, 2022
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5min670

The Daily Hit is a recap of cannabis business news for Sept. 15, 2022.

ON THE SITE

Schwazze To Snap Up Two Colorado Lightshade Dispensaries

Schwazze (OTCQX: SHWZ) (NEO:SHWZ) has agreed to acquire Lightshade’s adult-use dispensaries in  the Denver area: one in Aurora and the other in Denver’s Washington Park neighborhood. The acquisition continues the multistate operator’s aggressive expansion in Colorado and will bring the company’s total number of dispensaries in the state to 25 upon deal closing. Read more here.

Glass House Closes On Another Natural Healing Center Dispensary

Glass House Brands (OTCQX: GLASF) is a step closer to shoring up its M&A grabs. The company closed on its acquisition of the Natural Healing Center dispensary located in Morro Bay, California, after being granted local regulatory approvals. Consolidation of the financial results of the Morro Bay store into Glass House’s financials will be effective immediately, so Glass House will end the third quarter with seven retail dispensaries. Read more about Glass House’s expansion strategy here.

Green Market Report’s Cannabis Tech Awards Profile: Meadow, Best Retail Tech

Meadow’s complete suite of connected tools support smarter cannabis dispensary sales, as well as marketing, inventory and compliance management. With real-world feedback from high-volume retail partners since 2014, its software is optimized to help cannabis retailers sell more products, stay fully compliant with state and local regulations, keep staff and customers happy, and boost the bottom line. This is why Green Market Report honored Meadow at the first ever Green Market Report Tech Awards in San Francisco. Read more about Meadow’s innovative retail platform here.

IN OTHER NEWS

Report: More Than 100,000 Cannabis Jobs In Connecticut, New Jersey and New York by 2025

CannabizTeam, a cannabis-focused executive search and staffing firm, released its 1st Tri-State 2022 Cannabis Industry Salary Guide, a comprehensive report that provides insights into the rise and revenue potential of the tri-state market as it gains medical and recreational cannabis licenses. The report forecasts that the cannabis industry in Connecticut, New Jersey and New York will employ more than 100,000 people by 2025, but the industry will continue to rely heavily on temporary or on-demand staffers as they build out their infrastructure. Read more here.

Washington Department of Financial Institutions Approves Bankcard International Group’s PIN Debit Payment Services for Cannabis Dispensaries

Bankcard International Group (B.I.G.), a provider of cannabis merchant accounts for payment processing, announced that its services have been approved by the Washington State Department of Financial Institutions. Traditionally, cannabis businesses have had to use “workaround” solutions for electronic payments or accept cash only. B.I.G. provides the ability for cannabis retailers to accept PIN debit card payments just like traditional retail businesses. Read more here.


Debra BorchardtAugust 11, 2022
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Glass House Brands Inc. (OTCQX: GLASF and GHBWF) reported financial results for its second quarter ending June 30, 2022, with sales falling by 12% to $16.5 million from $18.7 million for the same time period in 2021. On a positive note, sales increased 18% sequentially from $14.0 million in the first quarter. the loss from operations was $17 million, which increased sequentially from the first quarter’s loss of $13 million.

“We continued to make solid progress against our strategic growth priorities during the second quarter, “stated Kyle Kazan, Chairman and CEO of Glass House Brands, “The initial harvest from our SoCal farm was completed in late May followed by the first sales of cannabis grown at the facility in June, both well ahead of schedule and significantly faster than the previous ramp up of our Casitas and Padaro farms. Over the past few years, our Casitas and Padaro farms have established a strong reputation for consistently growing high quality cannabis at a low cost. So, I can’t emphasize enough how thrilled we are that the SoCal farm is already producing cannabis with a higher and more consistent quality than the Casitas and Padaro farms. In addition, it has shown particular promise at growing high quality genetics at extremely close to indoor quality. Volume has ramped quickly and in July we produced 22,000 pounds of biomass across all three facilities, compared to a total of 25,000 pounds in the entire second quarter.”

Guidance Is Rich

Glass House is forecasting that in the third quarter it expects to achieve revenues of between $27 million and $30 million which is a 64% to 82% increase vs. the second quarter this year. “This assumes the wholesale pricing we are currently experiencing in Q3 remains constant through the balance of the quarter. Our Q4 revenue target is $50M and assumes Q4 wholesale pricing remains consistent with Q3 and includes revenue from our NHC acquisition as well as a partial quarter for our new Farmacy stores.” The company is also forecasting that it will triple its revenues to $200 million by 2023. The company is also forecasting it will be free cash flow positive by the first quarter of next year.

“Our aggressive retail expansion also remains firmly on track and we are on pace to have at least 11 dispensaries by year-end 2022, up from three just over a year ago when we started our
life as a public company. We closed our acquisition of the remaining 50% equity stake in The Pottery Dispensary in July and expect to open three new Farmacy locations in the fourth quarter. In May, we announced the acquisition of three Natural Healing Center (“NHC”) dispensaries and we are moving forward on closing these acquisitions. In addition, we are very happy to announce that we have agreed to acquire Natural Healing Center’s flagship Grover Beach store for $15.9 million, with $8.1m of the purchase price in assumed debt, $7.7 million in stock and $0.1 million in cash net of working capital. The Grover Beach store is the crown jewel of NHC’s dispensaries and netted US$16m in revenues in 2021. It is one of only four total dispensaries in Grover Beach and is the No. 1 taxpayer in the city, given its high sales volume and strong cash flow generation. The deal multiple based on the annualized EBITDA of the Grover Beach store in the first half of 2022 is 4.8x.”

Looking Ahead

Glass House said it has a long-term target of reducing cultivation costs to $100 per pound. The company said, “The management team is now ready to provide projections for the average cost of production across all 3 farms of $150 per pound for Q3 and $125 per pound for Q4 of this year. Please note that the SoCal farm is completing its ramp up through Q3. The projected improvement to $125 per pound in Q4 represents a 25% reduction from Q4 last year.”


Kaitlin DomangueNovember 5, 2021
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California-based, vertically integrated Glass House Brands Inc. (NEO: GLAS.A.U) (NEO: GLAS.WT.U) (OTCQX: GLASF) (OTCQX: GHBWF) announced its subsidiary, GH Group Inc., has filed a lawsuit against Element 7 CA, LLC (E7), a California dispensary with multiple locations across the state, and its principals Josh Black and Robert “Bobby” DiVito. The claim was filed at the Los Angeles County Superior Court – Central District earlier this week on November 2nd. 

The lawsuit was filed in an effort to enforce the complete transfer of retail licenses GH Group was set to acquire, per a Merger and Exchange Agreement between the two companies dated February 23rd, 2021. E7 was contractually committed to transfer seventeen retail licenses to Glass House Brands. Only three out of the seventeen have been fully transferred so far. Those three licenses are located in Dunsmuir, Hesperia, and Eureka, California. GH Group has also terminated the License Development Consulting Agreement between the two parties, also dated February 23rd, 2021. 

E7 In the News

This isn’t the first time E7 has made the news under less-than-ideal circumstances, with a Change.org petition included, garnering nearly 700/1,000 signatures. Namely, those who are against corporate cannabis. E7 filed an application with the town of Fairfax, California to operate a dispensary and delivery service. The company was accused by Fairfax residents of pushing local business owners out and bringing corporate cannabis in. The cannabis company applied for a storefront location at 1930 Sir Francis Drake Blvd, which is a family-owned acai bowl shop and cafe, Mana Bowls. “We are not a national chain and we don’t use locals as a front,” Josh Black, who was named in the Glass House Brands suit, told Marin Independent Journal. But Mana Bowls private Instagram account links the Change.org petition in their bio, potentially supplying a level of truth to Fairfax residents’ concerns about pushing out local businesses. 

There was also concern from people who didn’t want to make the town a “go-to” location for cannabis. “Fairfax already has the pot store and the CBD store,” said Ed Tilton, Fairfax resident who lives behind Mana Bowls, to the Marin Independent Journal. Parents of young children have also expressed their disinterest, as Mana Bowls is a place where families can be together. “Our town and kids need Mana Bowls. Cannabis can easily be delivered and does not need a storefront in Fairfax,” says one commenter on the Change.org petition. 

Glass House Brands feels confident the remaining fourteen licenses will be transferred. E7 has not yet made any statements about the lawsuit with Glass House Brands. 


StaffAugust 17, 2021
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After the market closed on Monday, Glass House Brands Inc. (OTC: GLASF) (OTC: GHBWF)reported financial results for its second quarter ending June 30, 2021. Glass House‘s revenue increased 62% for the quarter to $18.7 million from last year’s $11.6 million. Glass House said the increase in revenue was primarily due to an increase in cannabis production from its second greenhouse cultivation facility, which began operations in the first quarter of 2020. The net loss increased to $4.7 million from last year’s $3.6 million.

“We have continued to build on the substantial forward momentum we developed coming out of our qualifying transaction by executing on our expansion strategies and scaling our operations,” said Kyle Kazan, Glass House Chairman, and CEO. “While our results are strong and show consistent growth for both the top and bottom lines, we did face a few challenges at our Padaro farm coupled with a softer California wholesale flower market that have negatively impacted some of our yields and our COGS. “With our strong balance sheet, a team of proven operators, and significant growth projects ahead of us, we remain confident that we are exceptionally well-positioned to take on the significant opportunities ahead of us in the world’s largest cannabis market. We are on track to close the acquisition of our 5.5 million square foot cultivation facility later this month and are looking forward to accelerating the rollout of our retail network upon closing a number of these transactions under the merger and exchange agreement later this year.”

Glass House noted that the expansion of the cultivation facility had increased from 113,000 square feet during 2020 to over 390,000 square feet by the end of 2020. In the second quarter, wholesale and wholesale CPG revenue increased by $4.3 million or 54% compared to last year. The company’s cannabis retail dispensaries also contributed consistent revenue growth, increasing $2.8 million, or 77%.

Total operating expenses rose 56% to $9.6 million versus last year’s total expenses of $6.2 million. The company said that general and administrative expenses for Q2 2021 and Q2 2020 were $5.9 million and $4.6 million, respectively, an increase of $1.3 million, or 28%. The increase in general and administrative expenses is primarily attributed to the Company’s initiatives of operational expansion and used to support corporate, cultivation, and retail operations. Professional fees Q2 2021 and Q2 2020 were $1.9 million and $0.5 million, respectively, an increase of $1.4 million, or 288% related to the RTO transaction and other initiatives that occurred during the second quarter of 2021.

Glass House is sitting comfortably with cash and cash equivalents of $134.3 million as of June 30, 2021 versus just $4.5 million as of June 30, 2020. During the quarter, Glass House said it eliminated $38.3 million of debt through the completion of a Preferred Stock offering exchanging both principal and interest accrued to participating investors and issued both companies Preferred Stock and warrants, which triggered the equity conversion of all of the company’s outstanding Convertible Promissory Notes.


Debra BorchardtJuly 2, 2021
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Glass House Brands Inc. (NEO: GLAS.A.U ) has called off its previously announced conditional agreement to accept a $50 million strategic investment from The Parent Company, whose official name is TPCO Holding Corp (OTC: GRAMF). Glass House said that it was a mutual agreement and that the Strategic Investment will not be completed at this time. Glass House said in its statement that it will consider future partnership opportunities with The Parent Company after the purchase and retrofit of the 5.5 m square foot greenhouse cultivation facility located in Ventura County, California.

TPCO Holding Corp. confirmed that the private placement offering by Mercer Park Brand Acquisition Corp. has been terminated by the parties effective today  Mercer Park Brand Acquisition Corp. recently merged with Glass House.

“In addition to our supply of award-winning, in-house cannabis, we remain well-positioned with sufficient access to both high-quality, low-cost indoor and outdoor-grown cannabis for use in our portfolio of branded products that are sold through our wholesale and direct-to-consumer channels,” said Steve Allan, Chief Executive Officer of The Parent Company. “Glass House is building a robust cultivation footprint in California, and we look forward to working with their team in the future on potential collaborations as we broaden our reach across the State. Looking ahead, we will continue to strategically deploy our capital on high-growth investment opportunities that will solidify our leadership position and offer strong value for our shareholders.”

Glass House also said that it didn’t expect the termination of the investment to affect the current purchase and development plans for the Camarillo Greenhouse Facility, its acquisition of seventeen retail licenses, or the pre-transfer construction currently occurring concerning four of those retail locations, or its ongoing land use permitting concerning recently won licenses in Isla Vista and Santa Ynez, California.

Glass House said it expects to complete the purchase of the Camarillo Greenhouse facility this quarter and is currently negotiating with several banks and other lenders for property secured financing, the majority of which is expected to be used for the retrofit.

On Monday, July 5, Glass House is set to begin trading on the NEO exchange in Canada under the name GH Group, Inc. or Glass House Brands. The subordinate, restricted, and limited voting shares and warrants of Glass House were approved for listing on the NEO Exchange under the symbols “GLAS.A.U” and “GLAS.WT.U”.

In 2020, Glass House reported that it grew revenue 185% year-over-year to $53 million and generated positive adjusted EBITDA, driven by its expanded cultivation and distribution footprint, improved supply chain and production efficiencies, and enhanced consumer brand profile. Including the assets of the Southern California Greenhouses and proposed Element 7 retail licenses, the combined company expects to generate full-year 2022 revenue and adjusted EBITDA of approximately $326 million and $104 million, respectively.

 


Debra BorchardtJune 30, 2021
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The Mercer Park brand SPAC will begin trading next week on July 5 on the NEO exchange in Canada under the name GH Group, Inc. or Glass House Brands. The subordinate, restricted, and limited voting shares and warrants of Glass House were approved for listing on the NEO Exchange under the symbols “GLAS.A.U” and “GLAS.WT.U”, respectively. The symbol on the OTC is MRCQF, but markets are closed in the U.S. on Monday for the Independence Day holiday.

“With one of the strongest retail and wholesale networks in our industry combined with best-in-class cultivation processes and our scaled and highly efficient cost structure, we are exceptionally well-positioned to capitalize on the growing statewide and national consumer packaged goods (“CPG”) opportunity,” said Kyle Kazan, Glass House Chairman, and CEO. “We look forward to leveraging our leadership position in California to introduce high-quality, sustainably grown, craft cannabis to the market to support the health and enjoyment of our consumers, as well as our environment and our community.”

In 2020, Glass House reported that it grew revenue 185% year-over-year to $53 million and generated positive adjusted EBITDA, driven by its expanded cultivation and distribution footprint, improved supply chain and production efficiencies, and enhanced consumer brand profile. Including the assets of the Southern California Greenhouses and proposed Element 7 retail licenses, the combined company expects to generate full-year 2022 revenue and adjusted EBITDA of approximately $326 million and $104 million, respectively.

Glass House Highlights

Glass House currently operates a cultivation footprint of over 500,000 square feet, producing over 110,000 lbs. of biomass per year. Glass House also has an agreement to acquire an additional 5.5 million ft2 state-of-the-art Southern California Greenhouse, an agricultural producer that will transition in phases to cannabis cultivation. This additional capacity is expected to increase Glass House’s current footprint to up to approximately 2.5 million ft2 by 2023. The company’s total targeted long-term footprint of 6 million ft2 is expected to be by far the largest cultivation capacity in California.

On the retail side, Glass House said it has generated 365,000 transactions, an average in-store ticket of $65 and an average delivery ticket of $101 in 2020. In addition to its current four dispensaries, Glass House has entered into an agreement to merge with 17 in-process retail licensed entities from California-based Element 7. These licenses, together with two new recent license awards, are expected to bring Glass House’s retail footprint to a total of 23 open locations by the end of the first half of 2022, representing the highest statewide store count of any single California cannabis operator.

Since beginning its CPG business in early 2020, Glass House added 550 retail doors to its CPG distribution, achieving a $50 million annualized revenue run rate for its wholesale business at year-end. Over the long term, the Company aims to build its wholesale network to over 700 dispensaries statewide.

Kazan’s & Farrar’s Control

Shareholders should note that CEO Kazan’s total voting power based on Equity Shares and MVS is approximately 32.7%. Kazan paid $202.53 (C$249.82) to buy over two million multiple voting shares of Glass House that represented 46.5% of the outstanding MVS.

Kazan bought 3,544,752 subordinate, restricted or limited voting shares of Glass House representing approximately 4.3% of the outstanding equity shares.

Glass House President Graham Farrar’ total voting power based on his equity shares and the MVS is approximately 20.6%. He paid $132.11 (C$162.96) for 1,321,087 MVS, representing approximately 27.8% of the total number of outstanding MVS.

Graham bought 1,224,289 Equity Shares, representing approximately 1.5% of the outstanding equity shares.

 


StaffApril 8, 2021
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Mercer Park Brand Acquisition Corp.  (OTCQX: MRCQF), a Special Purpose Acquisition Company (SPAC), just announced its agreement to acquire Glass House Group, a vertically integrated California operator, for $567M USD.

The deal has a $1.024B equity valuation and a $691M approximate enterprise valuation, and with plans for a whopping 6M sqft greenhouse and 21 retail stores this year, making this the biggest California cannabis company to date. Glass House Group will be listed on the NEO Exchange (NEO:GLAS.U)

“When we formed Mercer Park BRND, we aimed to create a platform that could launch the first national cannabis brands in the United States,” said BRND Chairman Jonathan Sandelman. “We view successful cannabis brand-building as a combination of four factors: the ability to control quality biomass at a large scale; produce at the most competitive costs; offer the highest quality products; and deliver the best value proposition to consumers. This took us to California with its ideal growing climate and community of talented and experienced growers, and ultimately to Glass House Group and this incredible portfolio of assets and talent. Glass House has a track record of excellence across all four of these drivers and has established a top ranked flower brand in one of the most competitive cannabis markets in the world. Combined with the proposed combination with the Southern California Greenhouse asset and 17 proposed Element 7 retail licenses, Glass House Group is poised to become the largest, vertically integrated brand-building platform in California, the world’s largest cannabis market.”

Glass House consists of the following:

  • Cultivation: Glass House currently operates a cultivation footprint of over 500,000 ft2, producing over 110,000 lbs. of dry flower biomass per year. Glass House also has an agreement to acquire an additional 5.5 million ft2 state-of-the-art Southern California Greenhouse, an agricultural producer that will transition in phases to cannabis cultivation. This additional capacity is expected to increase Glass House’s current footprint to up to approximately 2.5 million ft2 by 2023. The Company’s total, targeted long-term footprint of 6 million ft2 is expected to be by far the largest cultivation capacity in California.
  • Retail: Across the four award-winning dispensaries it currently operates in California, Glass House generated 365,000 transactions, an average in-store ticket of US$65 and an average delivery ticket of US$101 in 2020. In addition to its current footprint, Glass House has entered into an agreement to merge with 17 in-process retail licenses from Element 7, a California company specializing in obtaining dispensing licenses. These licenses are expected to bring the Company’s retail footprint to a total of 21 open locations by the end of the first quarter 2022, representing the highest statewide store count of any single California cannabis operator.
  • Wholesale: Since beginning its CPG business in early 2020, Glass House added 250 retail doors to its CPG distribution, achieving a US$50 million annualized revenue run rate for its wholesale business at year-end. Over the long term, the Company aims to build its wholesale network to over 700 dispensaries statewide.

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