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 second tranche of the previously announced non-brokered private placement (the “Offering”) of Series B Preferred Stock, face value US$1,000 per share of GH Group, Inc. (“GH Group”), a subsidiary of the Company. The second closing of the Offering included approximately US$4.8 million of fresh capital and approximately US$92,000 face value of additional Series A Preferred Stock exchanged for new Series B Preferred Stock. The combined new cash raised from the first and second closings is approximately US$19.5 million. A total of 42,197 shares of Series B Preferred Stock have been issued, with an aggregate face value of approximately US$42.2 million, making the raise 84.5% complete, based on the targeted total financing amount of US$50.0 million. The Company expects to complete the Offering in the next 30 days, after which a total of approximately US$50.0 million of Series B Preferred Stock is expected to be outstanding. For more information on the initial closing, please see here.
“We feel fortunate to have received such strong support from new and existing investors in this challenging market environment and we are thankful for the confidence bestowed on our company and management team,” stated Kyle Kazan, Glass House Brands Chairman and CEO. “As we close out the remainder of this fundraise, we are putting our full focus on our stated target of achieving free cash flow positive operations by the first quarter of 2023, excluding capex spending for the Phase II retrofit of 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 US$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 US$5.00 per Warrant Share subject to customary anti-dilution adjustments. The Company has the option to terminate any unexercised warrants if the underlying equity shares trade at a price of at least US$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 US$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 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 Offering of approximately US$26.5 million includes US$10 million which was used to repay an interim bridge loan from the Company’s senior lender immediately following the first closing and approximately US$16.5 million for working capital and transaction costs. Prior to initial closing of the Offering, the Company had approximately US$99.5 million outstanding in senior secured debt, unsecured convertible debt and preferred equity. Following the final closing of the Offering, this amount is expected to increase to approximately US$116 million.
glassThe 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.
