- Demand for the Series B Offering exceeded the $50 million cap
- Glass House is raising an additional $5 million in a follow-on private placement of Series C Preferred Stock for an extra measure of balance sheet strength
LONG BEACH, CA and TORONTO, Dec. 6, 2022 /CNW/ - Glass House Brands Inc. ("Glass House" or the "Company") (NEO: GLAS.A.U) (NEO: GLAS.WT.U) (OTCQX: GLASF) (OTCQX: GHBWF), one of the fastest-growing, vertically-integrated cannabis companies in the U.S., today announced the closing of the third and final tranche of the previously announced non-brokered private placement (the "Offering") of Series B Preferred Stock, face value $1,000 per share of GH Group, Inc. ("GH Group"), a subsidiary of the Company. The final closing of the Offering included approximately $7.8 million of cash. Of this amount, about $7.0 million was fresh capital, while about $0.8 million was used to fully redeem the remaining issued and outstanding shares of Series A Preferred Stock of GH Group. Combined new cash raised from all three closings is approximately $26.5 million, not including the amount used to redeem the shares of Series A Preferred Stock.
A total of 49,969 shares of Series B Preferred Stock have been issued, with an aggregate face value of approximately $50 million, making the raise 100% complete, based on the targeted total financing amount of $50 million. For more information, please see the press release for the initial closing here and the press release for the second closing here.
Kyle Kazan, Glass House Brands Co-Founder, Chairman and CEO stated, "I am happy to announce that we have completed the Series B Preferred Stock offering. It is fully subscribed at $50 million. There was excess investor demand, but we hit our cap and could not accept any additional subscriptions. I'm humbled by the interest in our Preferred Equity round which exceeded the $50 million ceiling, so we decided to offer a small non-brokered private placement of shares of Series C Preferred Stock of GH Group capped at $5 million. Having more cash in the bank gives us extra cushion going into a likely recessionary economy in 2023 and 2024. The terms of the Series C Preferred Stock offering are nearly identical to the Series B Preferred Stock offering, with the key difference being that the Series C Preferred Stock will be designated as junior to the Series B Preferred Stock. In terms of dilution to our equity base, we expect the potential dilution from this relatively small Series C Preferred Stock financing to be minimal – approximately 1% of the outstanding shares of Glass House assuming that all warrants are eventually exercised on a cashless basis. With the Series B Preferred Stock offering now closed and the Series C Preferred Stock offering collecting final subscriptions, we continue to focus on our stated target of achieving free cash flow positive operations by the third quarter of 2023, excluding capex spending for expansion of cannabis cultivation capacity at the SoCal farm."
Holders of the Series B Preferred Stock will be entitled to an annual dividend at a rate of 20% for the first two years after the date of initial issuance of Series B Preferred Stock (the "Initial Issuance"), 22.5% for the third year and, thereafter, 25% until the 54-month anniversary of the Initial Issuance. The dividend will accrue and be paid quarterly with an annual amount equal to 10% of the initial investment being payable in cash and the balance of the dividend being paid in kind, accumulating and compounding on a quarterly basis until paid; provided that if the Series B Preferred Stock remains outstanding after the 54-month anniversary of the Initial Issuance, the annual dividend shall thereafter be payable solely in cash at a rate of 20%.
The issuance of each share of Series B Preferred Stock with a face value of $1,000 per share was accompanied by the delivery of 200 warrants (each, a "Warrant") of the Company. Each Warrant has a five-year term from the Initial Issuance and entitles the holder to purchase one new equity share in the capital of the Company (each, a "Warrant Share") at a price of $5.00 per Warrant Share subject to customary anti-dilution adjustments. The Company has the option to accelerate the expiration of any unexercised warrants if the underlying equity shares of the Company trade at a price of at least $12.00 per share, subject to customary anti-dilution provisions. As a condition to entering into the Offering, holders of Series A Preferred Stock who participated in the Offering and held existing warrants of the Company with a $10.00 exercise price ("Existing Warrants") agreed to the cancelation of such Existing Warrants, with 100 Existing Warrants to be canceled for each Series B Preferred Share that is issued in exchange for Series A Preferred Stock.
The Warrants, the Warrant Shares issuable upon exercise of the Warrants, and any equity shares of the Company into which the Warrant Shares may convert in accordance with their terms, are subject to a four-month statutory hold period from the date of issuance of the Warrants under applicable Canadian securities laws.
The intended use of net proceeds from the Series B offering of approximately $26.5 million includes $10 million which was used to repay an interim bridge loan from the Company's senior lender immediately following the first closing, and approximately $16.5 million for working capital and transaction costs. Prior to initial closing of the Offering, the Company had approximately $99.5 million outstanding in senior secured debt, unsecured convertible debt and preferred equity. As of this final closing of the Series B offering, this amount is expected to increase to approximately $116 million. Upon closing of the Series C Preferred Stock offering, this amount is expected to increase to $121 million.
The securities issued pursuant to the Offering have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "1933 Act"), or under any state securities laws, and may not be offered or sold, directly or indirectly, or delivered within the United States absent registration or an applicable exemption from such registration requirements. This news release does not constitute an offer to sell or a solicitation to buy such securities in any jurisdiction in which such offer, sale or solicitation would be unlawful.
ABOUT GLASS HOUSE
Glass House is one of the fastest-growing, vertically integrated cannabis companies in the U.S., with a dedicated focus on the California market and building leading, lasting brands to serve consumers across all segments. From its greenhouse cultivation operations to its manufacturing practices, from brand-building to retailing, the Company's efforts are rooted in the respect for people, the environment, and the community that co-founders Kyle D. Kazan, Chairman and CEO, and Graham Farrar, President, instilled at the outset. Through its portfolio of brands, which includes Glass House Farms, PLUS Products, Allswell, Forbidden Flowers, and Mama Sue Wellness, Glass House is committed to realizing its vision of excellence: outstanding cannabis products, produced sustainably, for the benefit of all. For more information and company updates, visit www.glasshousebrands.com.
FORWARD LOOKING STATEMENTS
This news release contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as "forward-looking statements"). Forward-looking statements reflect current expectations or beliefs regarding future events or the Company's future performance or financial results. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward- looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "continues", "forecasts", "projects", "predicts", "intends", "anticipates", "targets" or "believes", or variations of, or the negatives of, such words and phrases or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. Forward-looking statements in this news release include, without limitation, the expected use of proceeds of the Offering, the total amount of Series C Preferred Stock to be issued, the completion of the Series C closing, and the stated target of achieving free cash flow positive operations excluding capex spending for expansion of cannabis cultivation capacity at the SoCal farm by the third quarter of 2023. All forward-looking statements, including those herein are qualified by this cautionary statement. Although the Company believes that the expectations expressed in such statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the statements. Accordingly, readers should not place undue reliance on forward-looking statements. There are certain factors that could cause actual results to differ materially from those in the forward-looking information, including those risks disclosed in the Company's Annual Information Form available on SEDAR at www.sedar.com and in the Company's Form 40-F available on EDGAR at www.sec.gov. For more information on the Company, investors are encouraged to review the Company's public filings on SEDAR at www.sedar.com. The forward-looking statements in this news release speak only as of the date of this news release or as of the date or dates specified in such statements. The Company disclaims any intention or obligation to update or revise any forward- looking information, whether as a result of new information, future events or otherwise, other than as required by law.
SOURCE Glass House Brands Inc.
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