Glass House Brands Raises $14.7M with Sale of Preferred Stock and High Yield Warrants – New Cannabis Ventures


Glass House Brands Closes First Tranche of Non-Brokered Private Equity Placement

LONG BEACH, Calif. and TORONTO, Sept. 1, 2022 /CNW/ — Glass House Brands Inc. (“Glass House” or the “Company”) (NEO: GLAS.AU) (NEO: GLAS.WT.U) (OTCQX: GLASF) (OTCQX:GHBWF), one of the fastest growing and vertically integrated cannabis companies in the United States, today announced the closing of the first tranche of the previously announced non-brokered private placement (the “Offer”) of Series B Preferred Shares, par value of US$1,000 per share of GH Group, Inc. (“GH Group”), a subsidiary of the Company. The initial closing of the offering included approximately US$14.7 million of new funds invested and approximately US$22.6 million of face value of existing Series A Preferred Shares exchanged for new Series B Preferred Shares. A total of 37,337 Series B Preferred Shares have been issued, with an aggregate par value of approximately US$37.4 million. The Company expects to complete the offering within the next 30 days, after which an aggregate of approximately US$50.0 million of Series B Preferred Shares is expected to be outstanding.

“We feel fortunate to have successfully raised capital in this challenging market environment,” said Kyle Kazan, Chairman and CEO of Glass House Brands.

As the California cannabis industry struggles with commoditization, among other issues, we are very grateful for the support we have received from our existing preferred stock investors who have exchanged their Series A Preferred Shares for these Series B Preferred Shares. with new investors in this Series B. Preferred stock round.

Kyle Kazan, CEO of Glass House Brands

We are grateful for the trust placed in our company and our management team. As we close out the remainder of this fundraising, we are also focused on our stated goal of achieving positive non-capex free cash flow operations for SoCal Farm Phase II by Q1 2023.

The Company is using US$10.0 million of the cash proceeds from the placement to repay an interim bridge loan from its primary lender and the balance for general working capital and transaction costs.

Holders of Series B Preferred Shares will be entitled to an annual dividend at the rate of 20% for the first two years following the date of the initial issue of the Series B Preferred Shares (the “Initial Issue”), 22.5 % for the third year and, thereafter, 25% until the 54th anniversary of the initial issue. The dividend will accrue and be paid quarterly with an annual amount equal to 10% of the initial investment 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 Shares remain outstanding after the 54th anniversary of the original issue, the annual dividend will thereafter be payable only in cash at a rate of 20%.

The issuance of each Series B Preferred Share with a par value of US$1,000 per share will be accompanied by the delivery of 200 warrants (each, a “Warrant”) of the Company. Each Warrant has a term of five years and entitles its holder to purchase one new share in the capital of the Company (each, a “Warrant Share”) at a price of US$5.00 per Warrant Share. subscription subject to customary anti-dilution adjustments. The Company has the option to terminate any unexercised warrant if the underlying shares are trading at a price of at least US$12.00 per share, subject to customary anti-dilution provisions. As a condition of participating in the Offer, holders of Series A Preferred Shares who held existing warrants of the Company with an exercise price of US$10.00 (“Existing Warrants”) have accepted the cancellation of these existing warrants, with 100 existing warrants to be canceled for each Series B Preferred Share issued in exchange for Series A Preferred Shares.

The Warrants, the Warrant Shares issuable upon the exercise of the Warrants and all Equity Shares into which the Warrant Shares may be converted in accordance with their terms, are subject to a legal hold period of four months from the date of issue of the warrants under Canadian Securities Laws.

In connection with the Offering, certain directors and executive officers of the Company subscribed for a total of 8,544 Series B Preferred Shares and will receive a total of 1,708,827 warrants1. Participants in the offering included Mr. Kazan who, following the initial closing offering, beneficially owns or controls 6,153,769 (or approximately 12.7%) of the equity securities of the Company on a partially diluted basis. Immediately prior to the Offer, Mr. Kazan beneficially owned or controlled 5,574,901 (or 11.6%) of the Company’s equity securities on a partially diluted basis. Mr. Kazan received 1,157,732 additional warrants pursuant to his exchange of Series A Preferred Shares with a face value of US$5,788,671.89 (approximately C$7,589,527.71) for Series B preferred shares of equivalent par value. Mr. Kazan agreed to the cancellation of 578,864 existing warrants beneficially owned or controlled by him immediately prior to the initial closing of the offering. Mr. Kazan holds and controls his securities of the Company for investment purposes only and Mr. Kazan may increase or decrease his beneficial ownership or control over the securities of the Company, which he may do from time to time. , depending on the market or other factors. conditions and to the extent deemed desirable with regard to its general investment strategy. This press release is being distributed as required by National Instrument 62-103 Early Warning System and Related Issues Relating to Takeover Bids and Insider Reporting in connection with the planned filing of an early warning report (the “Early Warning Report”). A copy of the Early Warning Report will be available on SEDAR under the Company’s profile at www.sedar.com and may also be obtained by contacting John Brebeck, Vice President of Investor Relations for the Company, at [email protected]

As indicated above, the expected use of the net proceeds of the Offering of approximately US$26.5 million includes US$10 million to repay an interim bridge loan from the Company’s primary lender (as discussed below). above) and approximately US$16.5 million for working capital and transaction costs. Prior to the initial closing of the Offering, the Company had approximately US$99.5 million in senior secured debt, unsecured convertible debt and preferred stock. Following the final closing of the Offering, this amount is expected to increase to approximately US$116 million.

The securities issued pursuant to the Offer have not been and will not be registered under the United States Securities Act of 1933, as amended (the “1933 Act”), or under any state securities laws securities, and may not be offered or sold, directly or indirectly, or delivered in the United States absent registration or an applicable exemption from such registration requirements. This press 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.

Footnotes :
1. Each subscription by a director or senior officer of the Company is considered a “related party transaction” for the purposes of National Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“NI 61-101”) ). The Company has not filed a material change report more than 21 days before the expected closing date of the Offer, because the details of the Offer and the participation therein of each “related party” of the Company were only settled shortly before the closing of the Offer. the Offer, and the Company wished to close the Offer on an accelerated basis for valid commercial reasons. The Company relies on exemptions from the formal valuation and minority shareholder approval requirements available under NI 61-101. The Company is exempt from the formal valuation requirement of section 5.4 of MI 61-101 and the minority shareholder approval requirement of section 5.6 of MI 61-101 based on section 5.5(a) and section 5.7(1)(a), respectively. , of NI 61-101, since the fair market value of the transaction, to the extent that it involves related parties, is not greater than 25% of the Company’s market capitalization.

ABOUT THE GLASS HOUSE

Glass House is one of the fastest growing vertically integrated cannabis companies in the United States, with a particular focus on the California market and building leading, enduring brands to serve consumers across all segments. From its greenhouse operations to its manufacturing practices, brand building to retail, the company’s efforts are rooted in respect for people, the environment and the community that Kyle co-founds D. Kazan, President and CEO, and Graham Farrar. , President, instilled initially. Through its portfolio of brands, which includes Glass House Farms, PLUS Products, Allswell, Forbidden Flowers and Mama Sue Wellness, Glass House is committed to achieving its vision of excellence: exceptional cannabis products, produced sustainably, for the benefit of all. For more information and company updates, visit www.glasshousebrands.com.

original press release

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