Glass House Brands Inc. (GLASF) Earnings Call Transcript & Summary

Okay. Hello. A lot of very familiar faces, a lot of fellow investors. Nice to see everybody. Number one, thank you, guys. I see many of you have traveled a distance, even San Diego was a long wave. But I know some people flew on in. So I really want to thank everybody for coming on out here. This is our first Annual Investor Day. You'll remember it probably because some of you have -- maybe never have felt an earthquake before. So if you felt that today, then hopefully, that will help you remember. Transparency is in our DNA. When we started this company back in 2015, it was basically a lot of my long-time investors and I, and they were used to just call me on the phone like they do for all the other private equity investments I've done since 1996, no secrets. We just tell you what's going on and you call me and come on out, you want to visit some of the projects we're doing, we'll do it. And so that's the DNA that we've continued to keep. Now we're a publicly traded company. And I believe we're the only publicly traded company in cannabis that has an in-person annual meeting. And we've had 3 and we'll have the fourth in June. And as we look at it as sort of training because should we have the opportunity to uplift to a much bigger exchange, we've already got a bunch of these under our belt. So we're super excited about that. That's our investor sess. And we like holding everything here because this facility is the heartbeat of our company. It is the engine that drives Glass House. And for those of you that haven't been here, it's going to blow your mind. For those of you that have been here and I've been here many, many times, it still blows my mind. So I'm really looking forward to the -- we're going to end the day with the tour. I'm looking across at cannabis experts. You guys analyzing, investing in it. You guys know more about cannabis now and when this becomes a legal federal, you guys have the big jump. So when I tell you that Glass House is different, I think you guys would understand. Since founding the company, we have focused in on building for the post-prohibition world. That's all we've been thinking about is when can we grow cannabis and sell it outside of California? And we've also been thinking what does that world look like? And that's why we focused in on low-cost, high-quality cultivation in the Appalachian that matters most, which is the state. And so we don't have 100 stores, 200 stores. We have 10. In a post -- in the post-prohibitionary world, I think you'll be able to get cannabis at 7-Eleven. I think you'll be able to get cannabis at gas stations. And so if you're a company that is driving lots and lots of revenue from BevMos for cannabis, I think that the world may provide a pretty rude awakening. So our 10 stores, I'm not saying they wouldn't buy anymore, but it's highly unlikely unless there was something that we just couldn't resist and it made such a good ROI sense in a short-term basis. Our focus is managing because we can get all the same things. And we love being vertically integrated, so we can take these plants, put it in our packages, sell it at our stores. And we get so much data, so much information. And this guy being a tech guy, he's sort of like Gram AI, we're just synthesizing data all the time. So being the lowest cost provider and focusing in on what we can control, which is us and our costs. We can't control the pricing of the market. But if we're lower than everybody else, then we just -- we do really well depending on the tides. And the other thing is from the get-go, because I'm a -- I have a private equity background, we want to make money. There has to be an ROI. Our capital allocation has to be well thought out. Let's try and raise the least amount of capital to get our projects done in a smart way, but what will that ROI be? And I think if you look at -- because of that and because we also have been focused on cultivation, we haven't had the curse of money, meaning people just told us over and over again how stupid we were. And when I say that money went into MedMen, money went into so many other brands that are not -- no longer here, and we've just had to be very hand to mouth and very deliberate in what we did. And when we decided to buy this and go public, I would tell you in a lot of ways, that went over like a lead balloon, because so many companies in Canada didn't do well with these large cultivations. And so -- but we felt very strongly in what we were doing and we just stayed focused. And I think when you see what we've done and compare it to everything you've seen, it is different. And it's different in a really good way. So we're super excited about that. Also as a company, you're going to meet some really great people, our entire C-suites here. We absolutely want to spend time with you guys. And one of the things that we do is from the get-go best idea wins. Internally, we have a lot of friction. We're radically transparent and no ego. Whoever has the best idea, that's the one we go with. So that also is at our core. And this team is as gritty as any group of humans I've ever been around with. With you guys, we have a strong alignment of interest. It's vitally important that if you're -- to me, if I'm investing with somebody, whether it's private or public, that the folks that are making the decisions have the exact same interest I do. And we have -- we own a lot of shares. We have never done a bonus until this year since we made money last year, that also made us an outlier. We didn't believe in paying bonuses if we weren't making money. And how do we pay bonus to C-suite, stock. Because if you're not believing that that's what we're here for, then you shouldn't be in the C-suite of this company. A couple of more points. You guys may know, California is the most difficult legal market in the world. It is an absolute knife fight here. We have a massive illicit market. We also have extremely high taxes. We've got crazy regulations and also the regulators don't seem to be regulating the illicit market. So we have a lot going on. All that has done has made us strong. The MSOs have largely left the state of California and left it for us, which we love. And you can see how hard it is by the other publicly traded companies that are based here in California, it's tough. It's a really -- we're cheering for them, but it's a tough market. And so I would tell you on the optimistic side, this is -- there's never been as good a day as today. One, it's spending time with you, but every day, things get a little bit easier for us. Today, we bank. There were times that we would take cash at night time to, I think, at 1 point, was BofA for some LLC that we had set up an account, and we did night drops because we can get $20,000 in. And we paid people in cash and take out the deduction for taxes in cash. So every day is this much easier. It's still not as easy as every other industry, but it's a great day today. So -- and we know it will be even better tomorrow. The last point I want to make, and I know this is going to come up a lot, and Graham is going to do a deep dive in this presentation. Hemp, you guys may have heard we announced that -- so Greenhouse too, we're going to walk by. We're super excited. That is our next greenhouse. Graham will get granular and we'll answer any questions. We have not formally made the decision to go with hemp. We are doing the deep dive with state regulations, federal regulations, but that would be our lean if we can do it. And part of that reason is the hemp market is a little bit different than the overall cannabis market here in California, and it would allow us to ship out of state. So we're really excited about that potential that -- we think through the 2018 farm bill that the state -- or the federal government basically legalized cannabis in a different way. And so we're going to be taking a look at that and we're really excited about it. One way or another, we're going to be turning on the next greenhouse, and then we're done with that, and we get that -- our feet under us, then we're going to turn on the net, the last 2. We are not stopping. We can grow it and sell it because we're the cheapest period, full stop. So that is our thesis. That's what we're going to be doing. And with that, I want to make sure I point out my co-founder, Board Director and President is Graham Farrar. He's right here. We got our CFO, Mark Vendetti, right there. We got our Corporate Counsel, Ben Vega right there. Our Chief Revenue Officer, Hilal Tabsh right there. So you've got the entire C-suite here. Some folks are going to be also making a presentation as Head of Retail, Jen Barry, and also is Jacqueline floating around. Jacqueline is our Head of Sales. So that's both CPG and wholesale. And Josh Karchmer is our Head of Marketing. So you're going to meet the team today, which I think is pretty cool. And with that said, welcome to our big farm. And let me introduce you to Mr. Graham Farrar.

Hey, everybody. My name is Graham. Thanks a lot for coming. I appreciate you being here. This is, as Kyle said, one of the best days, I think, to ever come to this farm for the things that you guys are interested in because we're going to go through everything on the current state of affairs. We're going to go through expansion plans. We're going to go through financials, and then we're going to take a tour that goes some places that even our investors sess has never been. So -- in addition to that, the other best reason to be here is because it's 30 degrees cooler than it was a week ago. So we're here at the right time. For those of us -- those of you who have been following us for a while, I think it was 2 years ago, we had the hottest recorded temperature ever in Camarillo, is 113 degrees. It tripped us up a bit. And one of the things we said was that we learned things so that the next time a heat wave happened, it wouldn't trip us up. And we had our second highest temperature a week ago. And the nice thing is I've got nothing to say about it. The greenhouse has performed beautifully. The upgrades work. The team did a good job. So fun to be here and see the progress. So as you know, Kyle mentioned, we -- the way we see ourselves, we are California cannabis and California cannabis is cannabis to the rest of the world. So that is what we are entirely about. Kyle spoke, I am speaking, Mark will be up next, and then you'll hear from Hilal and our team and Jen, on CPG and retail. So one of the things I want to touch on is just Glass House is particularly in California, the #1 cannabis company now in the world. We are the largest greenhouse grower and seller of cannabis as far as we know anywhere on the planet. I'm going to extend that to the universe until the Alien show up, but nobody is doing it bigger than we are. We heard many times that there was no reason to do this. They'd already tried it in Canada. It was impossible. We believed it was different, and we believe it was different for a lot of reasons that I'm going to tell you about here. So a brief time line. We started just over 3 years ago. I think it was the end of June, 3 years ago that we went public, a lot has happened since then. We didn't own this farm, for example. Then we've built it. We've retrofitted. We've expanded it. We're getting ready to expand it again. And then most recently, on the other end, we just had California tell us that we grow the best greenhouse suite in the entire state of California, which is the best in the planet. So that meant a lot to be able to not only do it at quality, not only be able to do it efficiently -- I'm sorry, at scale, but also do it with quality. So a quick rundown for us. We're vertically integrated. We think that makes a big difference, particularly in California, particularly in this environment. We've got 3 farms. So many of you have seen this farm before. A few of you may have actually seen the original farms. We have two, 150,000 square feet and a 350,000 square feet up the road in Santa Barbara, which is where we started. We've got a manufacturing facility in Lompoc, which is where we make our gummies, co-pack our flower, Allswell, Glass House and Plus are all happening up there recently putting some new equipment to automate those processes. And then we have 10 retail stores, which today is a strategic advantage. It's a connection to consumer. It's our beta platform, it's our data and analytics. It feeds our whole ecosystem with the goal of having the most consumed and love cannabis products on the planet, where we get that feedback from us from the consumers, from the bud tenders that happens at retail. So obviously, cultivation is my wheelhouse. So I'm going to spend most of my time here talking about that. So one of the things that to quote Warren Buffett is don't try and be brilliant, just try not to be stupid. And I think one of the things that we've done a good job and not being stupid at is we based our entire thesis of Glass House around what is cannabis going to look like, right? And it's going to come back to first principles. It is agriculture. It starts with the plant. And so that means if you start by trying to grow the plant in a place that doesn't like to grow, you're starting from behind and eventually that's going to matter and you're never going to be catch up. So we started here in California, as you drove through here. One of the things I'm sure you noticed was all the fields are green. They look like that for miles in every direction. They look like that 12 months of the year because this is a great place to grow things. So the way it starts is you got basically there's 3 things, right? There's people, there's ideas and the hardware, right? And for the military strategist out there, it's a John Boyd quote, but it starts with good people. We've got centuries of experience here in Glass House they come up with good ideas, and then we've done the best that we can to give them the tools to deliver that. So it starts with the climate. If it's cold outside, if there's no sun, it's not a great place. We've got tons here. Then it comes to the people. We've got world-class experience. I'll introduce some of the team members on the slide here to give you a little background. It is an ag area, right? So the other big thing is it takes a lot of labor to grow cannabis. Having an ample supply of trained agricultural labor for low cost, something you don't often hear in California, but of the places in California, this is about as good as it gets and then the technology, which we'll touch on and see some of in the tour. So we often say that this is the best place to grow cannabis. We wanted to put some kind of some data to that. So if you think about things, you want -- cannabis likes the same climate that we do as people basically. So if you want sunshine, which we have here, we actually have almost a perfect 12-hour day. It goes down to about 10 and up to about 14, but at the average of that is 12 hours, which is exactly what cannabis wants to flower. And then if you look at the climate as this map on the blue one shows between 65 degrees and 86 degrees, which is exactly the climate that cannabis likes. If you look over there in that left-hand -- right-hand corner in red, there's a pretty small dot, that is the place in the country that has the most days of that ideal climate, and we're sitting right in the middle of it. So if you put the Venn diagram together of where do you get the sunshine, where do you get the ideal climate, and where is the Appalachian California that matters. There is nowhere else that intersects quite the way that it does here. So our team, obviously, people is what makes this place go. Here's a few of them on our senior cultivation team. You're starting with Philip over there. Philip's a Dutch guy. He's been building and working in greenhouses since he was 14. Next to him is my longtime friend, Jason. He's our Senior Director of cannabis operations. Sometimes people ask me, when I was started in the industry, the answer is I started as a sophomore in high school. And I was standing next to this guy. He and I went to high school together. We've been growing together for over 30 years. He was the second employee at Glass House. He's been here since day 1 up at our first farm. Next to him is a guy who didn't know anything about cannabis 2 years ago, because he's a 25-year tomato grower, many of which were at this site. So he knows this location in this climate. He's now our Director of nursery operations. Standing next to him is an absolute giant in this space. His name is Ben Vasquez. He's been on this -- he's multigeneration in this area. He's been on this site since before there was a greenhouse. 25 years, every greenhouse he's got his fingerprints on it. He is now 1 of the best cannabis operators I've ever met, and brings an agricultural level of thinking that I think is unparalleled. And then Mark kind of an unsung hero. He's the guy that leads our CapEx project. So a lot of the growing is where the flashing lights are, but you don't get to grow until you've got a good spot. And you guys know the kind of investments we're making. So having that expertise in their spend smart is important. Below that just a photo, just remind you that photo is 6 years old. So you got me, you got Freddie, who still runs our dry rooms. Jason, who's my grower friend from high school and the guy, Mike, was actually the guy I bought weed from in high school. He's now one of our top sales guys. So what we are about, we grow the most best weed for the lowest dollars. If you want to sum up what we do, that is who we are. This facility helps make it happen. It's the second largest greenhouse in the United States for any crop. It's now the largest operational cannabis greenhouse that's ever been attempted, never mind succeeded at. And we're going to go through and we're going to see a whole bunch of stuff here that I think is going to be really interesting. You guys are going to understand why this place is special and why it lets us do what we do. So lay of the land. We'll touch on this on the tour, but just give you the heads up before we get started. This property is 165 acres. It's 120 acres of greenhouse, 12 laps around it is a marathon. And not only does it have that sunshine and the climate, but it's also as close as you could be to the largest cannabis consumption market in the world, right? LA? Nobody buys and smokes more weed than Los Angeles does, 10 million people just in the county, the surrounding areas. California is the fourth largest economy. The next biggest place is San Francisco and there you're a 5-hour drive. There's a reason Amazon put their distribution center 5 miles away and because you are in the perfect place to distribute to all the Western states over here, and that's where we get -- we're lucky enough to get to sit. So one of the things we wanted to do is we know it's somewhat confusing, and we always get questions that tell us that people are still trying to get their heads around how does this work. So this is a site map. This is greenhouse 6 that you're looking at right in the corner on. We're going to go through Greenhouse 1 is the nursery. We're going to look into Greenhouse 2, which will be the next expansion. Greenhouse 5 is what we just added 3 and 4, are shear tomatoes and cucumbers. So you're going to get a chance to see this. We wanted you guys to understand just how big they are, what the different functionalities are, what we forecast that each of them can do for yield and then you can start to integrate that into your models and things like that. So any questions on this as we're on the tour, let me know. Some of the things that we will talk about, again, preview for what you're going to get to see a lot of this, water is obviously a big deal. You can't grow plants without it. We're lucky enough. We're actually very lucky to get a second well that we just sunk. It looks like a small disconnected sink on the surface. It cost $1 million. But the reason it's exciting is it's 1,000 feet deep. It gets 2,500 gallons of water a minute, the water is crystal clear, and we pay almost nothing for it. For context, in L.A., they're paying I think, $1,200 an acre foot if you had a facility in Los Angeles, we pay $40 an acre foot for the exact same water. So those are the fundamental first principles differences of growing in the right spot versus somewhere else. You'll see our cogens as well, our cogens are power plants. There is nowhere you can put a power plant that is more efficient economically and efficient environmentally than on a farm because what we do is we burn natural gas, and we get 3 things. We get power, which we either use or sell. We get heat, which is what we use to keep the greenhouses warm. So we don't waste any of that like a normal power plant with heat a river or the ocean, and we get CO2 normally go up the path of the smokestack. Here, it goes right into the greenhouses because plants breathe CO2 like we breathe oxygen and it turbocharges them. So we make power for half or 1/3 of the cost, we get a free CO2, it's about 98% efficient. It doesn't get any more -- any better for the environment or for the economics, awesome story for the marketing as well. Solar, we're going to drive by. We've got a megawatt of solar powers, again, triple bottom line, great economics, great for the environment, great for marketing, power that we don't have to pay for is something we love. We will go back and see our dry houses. These are custom design dry rooms. Nobody else has anything like it because we design them ourselves. It allows us to have a better, more consistent product. We're going to see the packhouse. You're going to see some cool things in there, automated bucking lines, systems we've designed, photooptical sorters, again, things that big ag guys have, but not many in cannabis has. Every single thing you look at is going to have save seconds, which means it saves dollars, which means we can grow better weed for a lower cost than anybody else. Ultra Clima, you can hear the fans running. Those are our positive pressure greenhouses. We'll talk about that in the location we just touched on, doesn't get any better than Camarillo. So this gives you a sense for where we are and where we're going. Right now, we are at the 2024 guidance line, so the middle bar there. That includes a 3/4 of greenhouse 5, Phase 2 is greenhouse 5 full year. So you can see that we still have some embedded growth just from the time passing since we didn't get to have a full year of greenhouse 5 this year. Phase 3 is greenhouse 2 that we're going to dip into, and you'll see that greenhouse is now empty and ready to get started on for the next phase of conversion. And then Phase 4 brings in greenhouse 3 and 4. And one of the things I'm excited to announce here is that we are -- where are we -- we are raising our estimates from 1.5 million pounds out of this facility fully built out to 1.6 million pounds, even if you assume an ASP of $250, that extra 100,000 pounds is worth about $25 million in additional revenue. So based on what we're seeing here, we're excited to be able to lift those estimates up. The other thing, of course, is we know what we control, it's not pricing. It is quality cost production and that's what we're focused on. Everything we do is focused on those things. So we've been talking a long time about the $100 a pound. We wanted to give you guys the road map to that. We can see it every quarter year-over-year, we've been able to bring costs down. If you look at the trend on the right-hand chart, you can see it's actually in a line '22, '23, '24, that is pointed at our target. And then on the left-hand side, you can see the waterfall analysis of we've done the work. And based on what we're seeing, we can see where we get from our $130 a pound to that $100 a pound. I'm sure we won't stop there. But in the meantime, the efficiencies that we're seeing and finding the greenhouses, the process improvements, our ability to bring in automation over time, and then expense management bridges that gap from the $130 annual target over to the $100 that we're aiming at. So we think we'll be able to hit that by the time this is fully built out. So the Phase 3 expansion is Greenhouse 2. We'll talk a little bit about which path it goes. But one of the beautiful things is optionality between cannabis and hemp as we do the exact same thing in the greenhouse. So we're currently budgeting that at $25 million to $30 million. We've got it down for about a 10-month conversion. It's a bigger project than 5 and 6 because it's a greenhouse that's 20-something years older. We'll dip in there and again, and you'll be able to see it. You can see the differences. So it is a bigger project with a little bit longer time line, but we expect it to produce quite a bit for us. And the exciting thing there is it's our first greenhouse with supplemental light. So it's got nearly [indiscernible] watt HPS lights in there, which are going to improve yield. They're going to improve the ratio so that we can process things more efficiently, and we expect that it will also raise the ASP because you get a higher quality product out of there. We're currently forecasting that for a first year of 275,000 pounds of additional output, so slightly higher than what we said would come out of Greenhouse 5, and I'm sure the trend will repeat itself where we'll be able to take what we said and then beat it by a bit. Pro forma on there gives you an idea 275,000 pounds. And with the forecasting here has a slightly higher ASP because of the lights and slightly higher ratio of flower again because of the light. So we come in with a pretax payback at only 10 months, which makes it once again a pretty undeniable investment. Hemp. So hemp, I would think of hemp as a theme. The theme is that we know what people want. They want California cannabis grown by Glass House across the country. In some cases, they -- Kyle and I are forced to answer questions about why our products are in states that they shouldn't be. And the answer is because people want them so badly that some people are willing to do things they're not supposed to, to deliver to the customer what they want. Hemp is a path under the farm bill that we are investigating that potentially could allow us to bring what we grow in our skill set to more states, Texas, Florida and New York. Right there, you're talking with California, where we will continue to do our licensed operations. You're talking about 1 out of every 3 people in the country, and there's another 23 or so states more than that on the edible side that allow it. That said, hemp is very dynamic right now. So we have applied for our hemp license. Kyle and I went and did our fingerprinting, met with the County supervisors yesterday. We're meeting with the ag commissioner here in Ventura. We're expecting that in the next 30 days, we'll have a hemp license. We already have an area, greenhouse 2 is empty, and we've cleared out an area where we will do our first test hemp plants. Farm Bill, though, is up for renewal. There's active discussions happening right now. We will follow every rule that is required to do what we can do, which is make sure that every door that can be open to give us access to the consumer, we are standing that ready to walk through that, right? Recent thing for those of you who like the details, the DEA recently argued and said basically that THCA is still in the Controlled Substances Act, okay? We got to pay attention to that. Well, then last Thursday, a federal appeals court came out and said -- and again, for their law nerds, thanks to the Chevron decision recently, they said, sorry, DEA, we don't agree with your interpretation. This is what the law says. Once it's hemp, it's always hemp. THCA is not illegal. So that's in the last week, right? So these are the things that we're tracking. This is the reason we're slow and methodical. Anything we do, we do big. We do it with forethought and we make sure we always follow the rules. So we're starting the process. We're doing the testing. We're watching the regulations. Whatever door opens up, we're going to be there ready to walk through it. If it's the farm bill. If it's interstate pacts between governors, which we're also pushing on. If it's something catalyzed by Schedule III, if it's Nancy Mace's States Act and Trump saying leave it to the states and regulate it like alcohol, whatever it is, everything that we do here is 100% portable between those markets because what consumers want is California cannabis grown by Glass House, we are better set up to deliver it. I think everybody here, you probably wouldn't be sitting here if you didn't think cannabis was going to normalize over time, we think it will. If you do back of the napkin math, Circle K and 7-Eleven have 15,000 stores. If they sell 1/8 every hour that they're open, 3/4 of this entire farm is consumed just talking to Circle K in 7-Eleven. That's 3/4 of the Flower. This thing entirely built out. So just like when we walked into our Casitas farm and it felt gigantic at 150,000 square feet. Now it feels like an R&D facility for us. Just like we walked into Padero and it felt gigantic, now it's just another farm. This felt gigantic. Today, it feels big. Soon, it's going to feel not big enough because we don't want to just talk to 7-Eleven, Circle K. We want to talk to all the gases and all the convenience stores and there's nobody better able to have a conversation about national scale flower brands. There's no one even able to have it at all, other than Glass House. So this will not be our last farm. We will fill this up. We will go to the rest of the country, and we'll be looking for the next one. With that, I turn it over to our CFO, Mr. Mark Vendetti.

Thank you, Graham. Quick note. Our tour of the facility is scheduled for 3 p.m., scheduled to last about 90 minutes. So if people need to get out earlier than that, I don't see them right here, but we need -- you need to find Miguel or Bianca who can make sure we arrange it in such a way that you leave the tour early enough to get back here so you can get in your car and get out to the airport. We'll -- I'll make sure we find those, Miguel and Bianca later and point them out to you guys. One other note, I think John Brebeck, our VP of IR, mailed the presentation that we're going through out to everyone. So being the numbers guy, I cram as many small numbers on a page as possible. And so some of the stuff that print may be kind of tiny. So as we go through it, you may have a hard time seeing it on the monitor. If you do, again, you have the presentations. And then again, we're always welcome to get on a phone call and review the numbers with you in detail at a later point in time. So one of the things, again, we talk about is interstate or hemp. And just as a setup as we go into where Glass House could look like once this whole facility is built out. Again, Kyle mentioned this, one of the things to keep in mind or consider the California market is, again, among the lowest priced market. If you're a consumer, it's a great place to be because you can get high-quality cannabis at a very low cost. This data comes from comes from -- we're using headset analytics on this one, but just as a way to look at pricing across some of the different markets. And again, you can see the other markets, most of the other markets have significant premiums, right? You guys all know this, but wanted to just kind of lay it out on numbers. You see a state like Illinois, their average price is on flower is 66% higher than what a consumer is paying here. The one other thing to consider is that as Graham said, as California cannabis, we think we should actually be able to get a premium, right? So when it comes time to export, we should be able to get a premium to the local market because we're California cannabis. Again, how that will play out I'm not sure, but we think there's significant upside for us when the walls do come down. So that's on the retail side. Now if you think about wholesale, right, so that would have been more from the brand side. If you think about wholesale, again, this is coming from cannabis benchmarks, right? I'm going to call it the older legacy markets are generally on the left. So you see Colorado, California, Oregon, Washington, the more established, you see how prices have come down. But if you look at further to the right, and you see the newer markets in the Northeast and the Midwest. There's significantly higher wholesale pricing going on, right? And again, our view is -- and as Kyle said, we're built -- we've always had in mind, we want to build for national cannabis, there will be significant upside once the walls come down and we can sell broadly speaking, many of the states don't even have the equivalent of a greenhouse because they don't have the right climate to actually grow the cannabis, right? So kind of foundationally why is that important, right? And this is again, I apologize for the small print. But if you think about 2 things, right? First, you have to believe we can grow 1.6 million pounds, right? We have Graham and his team. Second thing is you need to believe we can get to $100 from a cost of production, right? So if you believe those and you go longer term, we're going to get this farm built out. What I've done here is laid out a couple of scenarios in the California market, which is very dynamic and ever-changing, laid out 3 scenarios in terms of if we produce 1.6 million pounds, sell 1.6 million pounds, we produce it at $100 per pound. What does the EBITDA, what does the revenue of the company look like? So I laid out 3 scenarios on the left. One is 2022, which was really an extremely difficult situation for the California market. We lost thousands of cultivators, millions of square feet came out. The average selling price was $212 a pound. Even under those situations, I would say we're going to be a low 20% EBITDA business, right? I'm not saying we're going back there. But we've always said we want to be built for the most difficult market situation. If you go to the 2023 average price, that's what we sold in 2023 at $312 a pound. All of a sudden, the EBITDA improves to $221 million. This year, using our guidance, we're in the middle -- we're at $175 million. So that -- those are all really good returns. You go to the very last column and you now say we're able to export our cannabis outside of California, what happens, right? So all of a sudden -- and again, what I used in this analysis is just saying we could sell it at a 50% premium, right? Everyone can come up with their own assumptions on what they think that's going to be. But I just said using our guidance for this year, let's put a 50% premium on that. Revenue approaches for the company, almost $700 million, right. Gross margins, 67% from a pro forma perspective and adjusted EBITDA of 44%. The one other thing I just want to say within this, we have done a very good job of keeping our overhead expenses well controlled and growing at a rate that's well below the rate of our sales line. So this assumes we continue to do that and get leverage not only in terms of the farm here, but leverage in terms of how we manage the business. So when you look at this, you can really see there is significant upside to the company once the walls come down and we're able to sell. I'm using cannabis. If you believe hemp have similar economics, you're going to see a similar type of number as you go out a couple of years. Now again, I haven't put a time frame on this because how quickly the farm gets built out, there are a lot of things that will come into play. But think about this once the -- all the 6 greenhouses here, are fully up and running and in production. And then just I thought I'd make it easy for people. I just put some of the key numbers on here again, pounds produced. For the last scenario on the right, basically assuming the 600 pounds we do today -- 600,000 pounds we do today stays in California. And the other 900 pounds go -- 900,000 pounds go outside the state. Again, that's dynamic. And if the markets were that much better outside of California, we shift even more sales outside of California. Again, the other key line in here, again, it's that last line is we remain confident and committed to delivering that $100 per pound. And if you just think about the importance of that number to the company, if you're doing 1.6 million pounds a year and you save $30 per pound, you're almost -- you're bumping your bottom line by about $50 million. So that is a significant piece of the profit for the company. So I just want to say those that -- those are my remarks on this and kind of the overview. I'm going to ask Kyle and Graham to come back up, and we've carved out -- we're actually a little bit ahead of schedule. Hopefully, we can say that at the end of the day to take Q&A from people in the audience for the next 20 or 25 minutes or so.

So we have microphones. So if you have a question, just raise your hand, and we'll bring the mic over.

Well done, fellows. We got Red, Phil and MG. So while this slide is up, where it says California in U.S. market, U.S. 50% premium. That's cannabis. Where is the U.S. ASP on hemp right now?

Graham, do you want to take that one?

Yes. So right now, if you went out in the market, you could find places where people are paying 2x the price for farm bill flower versus California cannabis today. This is a model for 3 years down the road when this is fully built out. So we anticipate there to be some compression over that time. And I think the exciting thing for us is no matter what that is, we think -- we believe that we are going to continue to see the California premium on there. So as those changes happen, we think we can continue to get at least 1.5x or a 50% premium above whatever the national market looks like because of our quality and because of California.

Okay? So the pound sold through CPG U.S., it says 416. Where would hemp right now be in Texas and Florida?

The pricing that you'd see on like a finished goods, CPG pound out there, we're seeing prices in the $20/8 range. I think Hilal is going to touch to this a little bit. So $20/8 would be something like $2,000 a pound for packaged consumer-ready products in hemp.

$2,000. And that says 416 right there.

Yes. I think that's an ASP. So that's a blended number, which includes trim as well. So that number is going to be a bit lower. But one of the nice things that we see from our research in the hemp market now is a lot of the things, at least today, that may change over time, probably with our entrance, it will. But we see is like things like big and small and stuff like that, machine trimming is the standard. People don't separate flower. So we see a lot of opportunity that which I'm sure we'll bifurcate and we'll influence. But right now, the hemp market behaves in a way that's like California 20 years ago from a cost and quality point of view.

So the $2,000 in hemp today in, let's say, Texas and Florida that compares apples-to-apples to what in California for Canada?

I mean we sell our Allswell 1/8 on the shelf for $7.50, which puts you in somewhere right in like $1,000 range on a pound of that. So the hemp pricing today is higher than the pricing we see in California.

Okay. My question is on the hemp side of things. So if you go hemp in Phase 2, help me understand the regulations. Are you able to grow hemp there and still process it through all the same processing area? Or do you have to come up with a whole new processing area. And how does that layer into your decision-making on what you're going to do with Phase 2?

It's almost like we had a meeting about that this morning for 2 hours.

Yes, exactly. So the beautiful thing is from an optionality point of view, the way that you grow and the way that you dry and the way that you process are essentially identical. So we're -- as commented, we're just going through the greenhouse. There wasn't a line that was different in the greenhouse that we would do in terms of CapEx and in terms of features between, I'll call it, farm bill and licensed cannabis since they're actually the same plant. So from that point of view, it's exactly the same. And from that point of view, all of our skill set, everything the team is good at applies 100% to either path. The regulations are very different, right? One of the very clear things is you are not allowed to co-mingle, right? So you cannot have a processing facility that has a license premise, which is a very specific defined term and have hemp in there or cannabis outside the licensing facility. So what you can do, though, is you can have Greenhouse 5, which is part of the license premise under the California rules for licensed cannabis across the street from Greenhouse 2, which could have a hemp license that we've actually already applied for under the California Department of Food and Agriculture on the federal regulations and they can sit right next to each other. So there is -- more often than not, everything we do applies from the regulatory point of view, there are some places where we need to keep things separated at least for now, anticipation as people are going to realize that having the different rules for [ Pilsner ] than you have for a stout is silly. And at some point, these things are going to converge, and it's going to be nothing, but a label difference at the end of the day.

And for clarity, the 2018 farm bill that basically legalized cannabis doesn't have a lot of restrictions. Like there's no testing mechanism. It's as far as pesticides, things like that. So the stuff that's being sold out there is pretty concerning to us. And we think that -- I mean, to us, we need to follow the THC levels because that's really the focus here. But as we discussed the team earlier in the day, people expect anything from us at this farm is going to be clean, clean, clean, tested to the parts per billion. And so when Mark asked that question about pricing, that's just for flower, not our flower. That's from California for sure, and it's also very clean. So we think that we'll be bringing a little bit of a different value. But like everything else, we just use conservative estimates, but we think we're -- we'd be in pretty good shape.

And there's lots of opportunities on the regulations that don't apply to Farm Bill, right? So no 280E, credit cards are allowed, shipping through even the USPS has allowed, loading up a semi and having a truck to Texas is allowed, right? One of the things that Farm Bill is very clear about is no state can prohibit the transport through it of a federally legal, federally compliant farm bill hemp. So you should be able to go all across the country and just make sure you're complying with the federal and then the receiving states regulations.

And there's 23 states right now that are just basically Farm Bill compliant including Texas, which has more smoke shops than we have dispensaries here, and we have like double the population. So it absolutely is ridiculous. And also Florida, the governor down there, his legislature pretty conservative, tried to ban intoxicating hemp or really put the kabash on it in a big way. He vetoed that bill and then came out against the Kim Rivers, Trulieve Cannabis bill. So he's put himself out there that, hey, I'm here for hemp. And if everything works out, we'd like to help them.

This is Mike Regan with Excelsior. Just can you help us understand what you need to do logistically from this standpoint? I mean, I'm very confident you can grow the high-quality product that you need to move in a hemp farm. But what the distribution will look like then move 900,000 pounds to Texas, Florida, et cetera. Like what are the next steps from there?

Yes. Again, the nice thing and we're exploring the path again via whatever it could be the farm bill. It could be the governors of California and Arizona making an agreement, right? We're pushing on the governor to go get clarity from the DOJ, that if you're compliant with a state's laws or you're compliant with multiple states laws as long as you're compliant with states laws or are they going to treat it any different than the forbearance that they have today. There's nothing federally more illegal about Las Vegas than Los Angeles. They just say, you're good with California, you're good with us. If we're with California and Nevada are they -- are we still good because that's another path that could open the same door. Beautiful thing is there is no distributor license for hemp. There is no regulation. There is none of the Prop 64 stuff. We've done the math, I mean, they're shipping bushels of celery that sell for $0.15 to the East Coast and it works. We did the math on a semi truck. You -- it's a by -- you wouldn't even notice it. It's a rounding in our COGS to get this stuff in a particularly drive form out to the East Coast is nothing.

And Mike, Graham is talking about interstate compact for cannabis, cannabis. To your question, I would tell you, it's such a new industry, and it's happening so fast that people are building those supply chains sort of reminiscent to when cannabis started really growing here where Herbal came online, and there were all kinds of distributors. So one of the reasons we put out in the press release was to sort of let the world know that we're thinking about it, so we could get those inbounds. But we're going through the process of learning it ourselves.

Just on that topic on hemp, is anybody doing what you guys are considered doing right now? Or are there people selling hemp interstate. So you're not a pioneer, you're just going to be following best-in-class?

We'd be a pioneer at our scale, but we're not a pioneer in the operation. I mean, the things -- as Kyle mentioned, Whitney Economics bill, Whitney is a worthwhile guy to pay attention to. He did a great study. He said the hemp cannabinoid market was $28 billion. It's a very comparable side to all of the licensed cannabis markets combined right now. So it is happening in a big way. We have seen stats from Texas 7,000 hemp dispensaries, i.e., dispensaries. If you go to Nashville, you can get a beer, have a dab and have a hamburger in the same place, something you can't even do here. Cookies is a well-known brand. They have a THC flower line. Hello Mood is a company that you could look at $150 million a year in revenue right now, to sell you everything shipped off most of the states. Hidden Hills is another one. So there's lots of folks out here play in this space at our scale coming from California, that's a path that we're blazing.

And Mark, I want to give you some airtime. In terms of the capital structure and the balance sheet, I know we're playing chicken and egg here, but with the press and warrants, what's your high-level thoughts?

So I'm going to defer that because we've got a whole section on that this afternoon, but we will talk about that.

He doesn't want the airtime yet, but he has it. And he is...

I know it's coming.

The mad scientist was hard at work on his slides.

Quick question. What do you consider the biggest risk in rolling out a hemp-based strategy? And then what does [ Gavin Newsom ] came out, I think it was last week against these products, does that even matter now that the DEA decisions been made that it does fall under the farm bill?

So Gavin, there are a few things that was pretty telling. One, he wanted it to be through a bill, a Legislative Bill. He couldn't get it done. That was like what the hell is going on, you're in your sixth year. And so he just said I'm going to do an executive order. And what he cared about was intoxicating hemp or hemp drive cannabis being sold in competition to the cannabis market. Harry knows it's overtaxed but it's bringing in over $1 billion a year to a state that right now is having difficulty living within its means. So he can't have the cannabis market collapse. So I think that was what that was. He didn't explain exactly how he was going to shut down smoke shops and since he's not really shutting down illegal cannabis stores, I think it was more of just a kind of howling at the moon in a big way. What we care about is their -- how they regulate cultivation of hemp so that we can sell out of the state. We sort of -- we agree that it should be regulated as it's sold in our state because there's literally no regulations for testing. And that means people are getting some garbage product and could be dangerous product, in my opinion.

And how long do you think that's going to last before the regulators come in and say no more of unregulated?

So that's the biggest risk. Right now, it's 23 states that we could go. They could all go away, the Feds could wake up. And so if you say what are the risks. The risks would be that we're growing hemp and then -- we have to go get it. We have to go get the license to sell here and the products weren't grown following that. So we'd have to basically throw it away or it would just be a, let's call it, a total loss there. And the other one is you talk about some ire that we're going to get from the industry. When I told you we're different, the MSOs, let's just say Florida for a second. You've got several MSOs down there. Check to see what they grow for. As Graham said, we're shooting for $100 on our Grow COGS. And it's not that expensive to sell it down there. So typically, the way they regulate where dispensers are, they're not in good locations like liquor stores and gas stations. Those are in better locations. So imagine how angry the Florida market would be, if you could buy California cannabis, which most consumers rather have, and cheaper than they're growing it. It's going to be a really, really angry group of MSOs in our opinion -- that's a risk. We're hoping that doesn't happen, but...

Yes. I think the biggest thing is how dynamic it is as our counsel of Ben Vega, who's been reading through the letters of all the things, it's really hard to get a straight answer and sometimes those straight answers changes. My example about the DEA's opinion had us saying, "Oh, okay, well, that makes us nervous. And then the Federal Appeals court comes out and says the DEA is wrong, right? I mean, that's the world. That's the last 7 days that we're living in. So we need to get 3 things to line up. We need the California's regulations to line up. We need the federal regulations to line up and we need the receiving state's regulations to line up. We've got an attorney we're talking to as a list of state-by-state regulations that he updates every day because that's how dynamic it is. Nice thing on the receiving state side as you're diversified, so to speak, across 49 other states. So if Texas changes the law, one direction, maybe Tennessee changes the law, the other direction or somebody new comes on. Everything that we do for California will be exactly what we do today. So nothing that we're talking about changes how we address California. So Newsom's stuff last Friday, it's no impact to us because we weren't planning to do anything different here in California. If you wanted to find the cloud in that, it's his view on hemp is being revealed there. If you want to find the silver lining on that, his power to do things unilaterally through emergency regulations is also being revealed there. So we have folks talking to the administration today about things that we would like to see to make sure that California, if the [ Santos ] wants to call cannabis hemp and doesn't want weed, but he does want hemp, then we want to ship them some hemp, right? And so we're talking to the State of California to make sure that they are not the roadblock that keeps the California farmer from shipping to Florida. They can regulate it how you want to sell it here in California. Those can be 2 different answers, right? One is what do you do here, what do people buy here? The other is what's going to farmer do than some other State ones. And we just want to make sure that lane is clean.

And the threat of pissing off every MSO and having them call for their state regulators, this that and the other. The threat that we see is just they're going to shine a bright light on us. So we just have to continue to do everything very, very focused in on following the laws. And that's why we are -- we didn't just say, "Oh, yes, we're going to do hemp, we are very focused on making sure that we check all the boxes, dot all the i's and cross all the t's.

I have a quick question on the supply side for hemp. So you're saying that on the ASP side, there's a premium. I'm curious, in terms of our relative competitive advantage on the cost side, where are competitive growers, what do their cost structures look like for hemp. And how is that trending? I'm sure probably a lot of capital is going in. Is that also similar dynamics versus the traditional industry?

So let me -- I'm going to throw a couple of nuance to let Graham kind of throw his best estimates on. Right now, you're seeing people grow hemp and then spray THCA all over it. I mean some of the stuff out there, you could do super cheap and it's garbage. So you have -- I mean Graham is going to have to kind of clarify what's out there and how that is -- how it costs.

Yes. I mean what we're interested in doing is really growing cannabis plant, again, same hemp, cannabis, marijuana, whatever you call -- cannabis. The plant is the same. It doesn't know what label you're putting on it. The difference is what regulatory structure are you playing to. So from that point of view, at the cultivation side, everything that we are good at, we are just as good at there, right? So there are less regulations, right? We believe we can reduce our cost. 4% tax goes in Ventura County. We have a track and trace team of 10 people that you don't need for cannabis. We have to do licenses that cost $100,000 a month, cannabis license is $900 a year, right? So there's a bunch of costs that fall out, which would apply, of course, to us and somebody else. But at the end of the day, the same things that make us competitive with licensed cannabis make us -- so if somebody -- if a hemp grower has an amazing team with 100-plus years of experience, a $93 million farm and another $50 million in upgrades in the perfect place to grow it, I think they could do a good job, too. But if they don't, they're going to find the same result that you would, whether you call it Farm Bill or [ crop 64 ].

So is this current premium just a result of hemp farmers just being like less productive with structurally higher cost?

I think the current premium is that you're getting to markets where the perceived notion is there are some states where they don't have cannabis. The reality is every state has cannabis now. Some call it our license program and some call it our Farm Bill program, right? And you're getting product to people where they don't have other options or getting products to less mature markets. You're getting more demand for a fairly fixed supply. And so you're just -- you're seeing that at the retail side, when people get access to cannabinoids in whatever form, they find it beneficial and they're willing to pay for it. And you go to these markets where -- they don't have all the taxes and things like that, and they have a lot of people who are shopping and enjoying these products and paying $30 [indiscernible] is not necessarily much different than buying a 12-pack or 24-pack of beer, and people are very used to that.

And the pricing premium, is that relative to the Marijuana product in the state? Or is that relative to, I guess, what we can sell it at and thus there's the interstate premium?

I think we had a slide. So I think this slide probably is the best. We're obviously using divining some of these answers. You guys can do your own divining and help us, but this is what you see for pricing, right? And take the labels off. This is what people are paying, right? We've got States here where they're paying over $2,000 a pound, right? So if you think about -- when we talk about selling cannabis, and we're happy at $600, right? Like they're paying 4 plus x that. So that's just the markets they live in, right? When these walls come down, it's going to harmonize. It's going to harmonize lower for almost every other state, and it's going to harmonize up for us. And then we believe we will continue to carry a California premium because Appalachian matters, right? The same one from New Jersey and that line from Napa. People are going to pay more for the Napa wine, California cannabis that's better and cheaper and what they want is going to continue to carry a premium. So our slide forecasting 3 years off, our crystal balls are made out of maybe just slightly better salt than everybody else's. But this is what we see today. And so if you forecast that forward, I think we're going to see a premium and it should be an improvement. We will get happier and most of the rest of the producers in other states will get sadder.

So we got one more question that's Aaron Grey.

First one, follow-up. Kyle, you mentioned in terms of a more bear-case scenario. So I just want to clarify, right? So if the federal government did kind of shut it down, right, you said that give us some product. But the facility as a whole could just be transitioned into cannabis within California, correct?

100%. And we are going to continue to build out. And if it's all cannabis sold in California, not a problem.

Right. And then my second question was in terms of the THCA hemp. Is your strategy more geared towards the wholesale or your own CPG brand because you kind of mentioned the wholesale prices. We also mentioned coming together with C-stores as well. So what would be your priority further broader market? Would it be just getting the highest wholesale price? Or would you want to prioritize selling the product THCA [indiscernible] Glass House Farms.

Both is the answer. We are good at both. We do both today. We believe one of the upsides to being able to do something in the Farm Bill is another restriction that comes off is we can't put Instagram ads for Glass House up right now. You could put Instagram up for Glass House Farm Bill, right? And so PLUS Glasshouse Allswell, we can advertise and do brand building under those, but we would -- I think we would do both. Also, wholesale is a lower lift because you don't need new packaging. You don't need direct-to-consumer websites, though you can't do them, which is amazing. You can take credit cards, which is amazing, right? So there's a lot of great things, but the reality is we do both. We probably start with wholesale and flush things out and then be right after the D2C market as well.

And I think the way we look at it is we would like to build a brand, but it's going to be a lot of biomass to throw off. And so it's just -- part of it is going to be what opportunities do we have? What are the margins looking like. I see us as sort of like a sun-kissed that we get the brand out, people start trusting that, hey, if I see sun-kiss that's like a better orange. And so -- and then it allows us to just grow even using other people's farms.

And I think a key thing to remember is these answers are all basically the same if we're talking about the Farm Bill, if we're talking about interstate packs, if we're talking about the States Act, if we're talking about decriminalization, if we're talking about Trump's [indiscernible] leave it to the States like we -- all those erodes to the goal, which is give consumers what they want, which is California cannabis grown by Glass House. We know they want it. So every path that we can use to get access to the consumer is interesting and we're pursuing it.

Sorry, John is hungry. He's really hungry.

I have a quick one. Just if I think about timing, you said 10 months to build it out. Has that 10 months [ short box ] started? And when is the -- when would you think the decision is, say, like hemp versus cannabis, -- is it somewhat relying on the rescheduling. How are you thinking about timing? I was wondering -- today, you'd say like, hey, yes, we're going -- like you planned at that or not. So just how do we -- how should we think about that?

We had a meeting about that this morning with the whole farm team and Mark, myself, Graham. It can't be built fast enough for me. Let's say we got orders in by the end of the month, I would ask Graham to sort of play with that time frame to see what he thinks. It is a different greenhouse than this one and the Stat 6 and 5. This one has some different challenges. So I want to make sure we're conservative, but we push, push, push. So I'll leave the timing question to Graham.

Yes. So the 10 months is from placing the first order, which has not happened yet. But as Kyle alluded to, is we're doing the short strokes on getting ready for that. The decision on Farm Bill versus licence probably is like a Q2 decision. So we still have some time. Really, the choice needs to be made when we start prepping the beginning of the process for the plants that are going there that starts with other seeds or a mom block. So you got to decide what genetics you're working with those become the clones, become the teens, become the first plants you harvest. So probably Q2 is when we need to say this is the direction that we anticipate going .

And we've already applied for hemp license. So that takes within 30 days, that's the statute. And by doing that, that allows us to put hemp plants in Greenhouse 2 and start testing them now. Like while stuff may be being shipped from Holland, we can start getting ahead of what issues might we have? We believe strongly in beta testing as much as possible and then also testing our plants that are in here that are cannabis by just doing some basic tests to see how would they come out if we -- would any of those strains be qualified as hemp. So -- but -- whatever Graham has shared and he's an aggressive guy, I would say, hopefully, we can -- we'll be pushing to beat it.

[indiscernible]

So the question was if there's a positive resolution on the hemp bill, what would stop all of our neighbors from switch to hemp? Nothing.

Yes, they've just been growing hemp outdoors and the rains on the dust. And so the same reason that people build greenhouses because for some crops you can grow better things in a greenhouse and making $100 million investments is a good choice. Cannabis is one of those crops. So -- but it's a lower bar to entry for sure, that's part of the reason that we're excited about it.

And one thing, just to be clear, think of greenhouse and out -- so that's outdoor, just when it just sits out there in the field, this is greenhouse, right? Think of tomatoes for a second. Tomato sauce -- the inputs are grown in the field. It doesn't matter what they look like because you never really see that the skin has brown dots or whatever because there's just so much uncontrollable outside. Greenhouse, when you go to Costco or Walmart, that's what you see inside those plastic little boxes. So you can see the tomatoes because you need to be able to control it. The nice thing about tomato is it has a skin. When you see the cannabis flower today, you'll see -- it's almost like a strawberry without a skin. So there are a lot of things that can go wrong with that product, even though they call it weed, it grows easily, but that doesn't mean it's going to be any good.

[indiscernible] that's on the expansion, what holds you back from converting from cannabis [indiscernible].

So on that one -- so Mark's question was, Porter's question was about Greenhouse 2, which is expansion. What stops us from turning Greenhouse 6 and 5, the whole farm 2 to hemp. What I would tell you, Mark, is right now, we are dominating very nicely in California. We're happy with what we're doing, and we think it's really important to win our home state. So we've got Greenhouse 2. And if we said, "Hey, we need more hemp. We have Greenhouse 3 and we have Greenhouse 4. So to me, I'd rather turn those new ones on, keep making money here, so the cash machine keeps going. And then after, if things are going so well in 2, 3 and 4, then I think we have a decision point at that time. But if you're looking for the answer of nothing would stop it, that would be the answer.

All right. So we're going to take a lunch break now. The food is over there, and we want to reconvene at 12:45. Thank you all.

Thank you. [Break]

Welcome back, everyone. My name is Hilal. I'm the Chief Revenue Officer for Glass House Brands. Before I commence with the material that we have prepared for you, I want to make sure I introduce my team because once we start the presentation, we're going to go back to back until the Q&A. So I want to do justice to my team and introduce them. To my right is Jacqueline. Jacqueline is our VP of Sales. She heads both CPG sales, which is consumer packaged goods as well as wholesale. Jacqueline has 15 years of experience in sales in wine and liquor with companies like Breakthru Beverage. She has 5 years' experience in the cannabis. Her expertise is get you done. And really, she runs the heart and soul of all sales, distribution and strategy for Glasshouse. On my left, from this side is Jen. Jen Barry is our VP of Retail. She has 30 years of experience in retail, pretty much a veteran in retail, mostly in fashion and in home goods industries, but also she has 7 years in cannabis industry. So she is really an expert in retail cannabis. Her expertise is also get you done. And then last but not least, I have Josh. Josh Karchmer is our VP of Marketing, a well-seasoned marketer with a strong background, 10 years in music, 10 years in advertising, working with companies like Microsoft, Chevy, Kia and so on. And then he has 5-plus years in the cannabis industry. Now that's out of the way. I'll introduce my experience a little bit. I have 6 years' experience in cannabis and hemp. I did sell hemp CBD, both for pets and human for 4 years, but I've been with the Glass House for 2 years. Before that, I cofounded a beverage company in Chicago called LIMITLESS, which myself and my colleagues help sell to Keurig's Dr. Pepper. And then before that, I worked for a small company, a small beverage company called Red Bull Energy Drink for 16 years of which 7 of those years are based in North America, managing United States and Canada for sales, marketing and distribution. My revenue was almost $1.8 billion, which is not easy, hence, I don't have a lot of hair. And then before that, I was still with Red Bull GmbH Global for 8 years based in Dubai where I managed Middle East, West Asia and Pacific, mostly for strategy and route-to-market. What I'm going to talk to you is really little on the business because I don't want -- I promise my team not to steal the thunders. So let me jump into it. So at Glass House, we have 3 channels of revenue. That's it, very simple. The first one is our greenhouse flower. This is where we sell flower directly to our customers. Very simple, very profitable. The second one, we take the best flower that we have in the farm or in the farms because we have 3 farms, and we put it in our CPG portfolio. So our CPG portfolio consists of 3 brands. We're very tight on brands. When I joined, we had a lot. Now we have way less, so we're more focused on what we're doing. Starting from below to the top PLUS is our edible gummies. It's a premium gummies. And then our award-winning Glass House Farms, flower that is born and raised and harvested here. This is our premium greenhouse and mixed light flower. And then last but not least, the newest addition to the family, I would say, 1 year, 1.5 years ago, is Allswell, which is a brand that has both edibles and it has flower. And last but not least, we have our retail channel. Our retail channel consists of 3 brands with 10 stores positioned across California. All the data I'm going to mention today is from Headset. So I don't have to say every slide, this is a Headset. So every data you see here is from Headset. So we looked at Headset data in the past almost 24 months, we noticed that there's price compression in California, and it still continues today. This impacted top line sales growth in California. However, if you look closer, there's a steady consumption. So there's an incline in consumption. So consumers are consuming more cannabis, but they're looking for the best value for money. What does that mean for us and the industry, it means winning in California and outside of California, you need to make sure that you provide value on quality flower or quality cannabis at the best price you can give to the consumers. And that's what we are structurally built to do. Starting with our cultivation facility that has over 1.5 million square foot in canopy active already, 3.5 million square foot in full capacity, coupled with our brand supply chain where it helps us be stronger every month and every year in our COGS. And finally, our retail that we own and we control both direct margins and profitability. So we're end-to-end with our, call it, engine. Having said that, it's not very surprising to see California market is stagnant for the past 24 months, while we are growing. So that really comes -- we're not lucky, just to be clear. And luck is very short-lived. We control our luck. And at Glass House, we -- like Kyle, Mark and especially Graham said, we grow the best flower in the best place at the cheapest price. That really is a great competitive advantage for us and it's music to the ears of any sales rep whether it's in California or outside of California. Looking at data closer, we noticed that over 51% of all cannabis consumed in California, this is Q2 2024, so recent, is flower, and that's our core competency. However, we look closer in the data and we noticed last 90 days, actually last 180 days, we noticed that gummies or not gummies -- vape -- smokable vapes, specifically with specific consumer typology and their shopper behavior, they're shopping more on the vape, specifically Gen Z, which is people in the late 20s, early 30s. So what we did, quickly we pivoted and made a vape and launched it in our lab like Graham said, and we launched it in April. It's already top 5 in our stores, with same top 5 even in our stores, it's a highly competitive, call it, sector. The vape -- it proves that what we do, we do right and we do it well. And then lastly, Jacqueline with her CPG team has launched it across all the States of California or the State of California, and we're like in almost 55 customers and growing every day, and it's very profitable. I'll end with this. I have 3 key responsibilities in this company since I joined, being fiscally responsible in every investment we do, and you can tell by looking at our quarterly earnings in the past 2 years; execute against what we say. If we say we have to do this, we have to execute against performance promise. No excuses, nothing. We have to do what we say. And then most importantly, we have to continue to grow because if we don't grow, we can talk next year same time, I will be same place, but we're going to continue to grow. With that, I will introduce Jacqueline to talk us through CPG, consumer packaged goods, sales and wholesales.

Okay. Thank you, Hilal. So I'm going to start by talking about CPG, as Hilal mentioned, that's consumer packaged goods. The key here and what the main takeaways are is that, one, we have been successful, and more importantly, that we're going to continue to be successful, okay? And the reason that, that is, is twofold, mainly as it's been beat into you over the past 4 presentations, we have a great product, high-quality cannabis at our doorstep. And that, plus the fact that we're really nimble, we have an organization and specifically a CPG team that analyzes what's happening in the market, sees the changes that are occurring and make smart business decisions to seize those opportunities. So what's on the slide now is the fact that we have brands that are poised for growth, right? We have Allswell, as Hilal mentioned, fastest-growing flower brand in the State. Two, Glass House Farms. This is our premium brand. This is where we seize higher price points for a more educated and discerning consumer. And then three, we have our edible brand with PLUS, which is a loved favorite over 200 million gummies sold since its inception in 2017. And with that, as we talk about really looking at the price-to-value quality markers, right? As Hilal mentioned, we want something that consumers can feel like they're getting added value at the price that they're paying. And as you can see, we've reached that with our flower brands. We're selling more flower per unit than any of our competition. And looking at Allswell to start, a very exciting brand. This is a perfect example of us looking at the market, understanding that price compression is here to stay and realizing that we need to seize that opportunity. How did we do that? We used a consistent quality product. We put it in a mylar bag. We have an everyday low price. We don't promote it very often. We don't spend more than just that everyday low price. And like I said earlier, it's consistency. So same quality day after day, month after month that the consumer can get at the best possible price. And that's the reason why it sells more units than any other brand in the State. Additionally, as previously mentioned, in just under 2 years, it's skyrocketed to that position. So that really illustrates how we saw the opportunity to cultivate and grabbed it with both hands. And then transitioning to Glass House Farms. This illustrates how we can diversify. It's 1 plant, right, 1 product, but it's not because you can diversify exactly who you're trying to capture with each brand. Glass House Farms is more focused on its premium nature. It's in glass. It has higher potencies. It's harvested, freshly. So those are the quality markers that we talk to the consumer about. And as a result, we're targeting a consumer that will pay more. So that allows us both to diversify our portfolio set and also to grab higher margins with this product in particular. Also, I'm sure most of you have seen the Golden Bear down here. So not only do we just speak to the quality, it actually is an extremely high-quality product in that we've won the Golden Bear, which means best mix light in California. So that just once again speaks to finding what we're good at and executing it in a product form and really speaking into those points of differentiation to our consumer. And finally, PLUS. PLUS is another illustration of how we look at our consumer and identify opportunities to better fit that consumers' needs. PLUS has evolved over its time since 2017. Right now, what we're really excited to speak into is the fact that it was the first top 10 brand to go completely solventless recognizing an opportunity, something that our consumers want and really delivering on that promise. And then secondly, in our own stores, it's the top edible brand. What that means to all of us is that if you know PLUS, you love PLUS. So the challenge and the opportunity for us is how do we get it into more people's mouths. So we can make more people PLUS consumers. And that's why currently, today, we are undergoing the largest sampling campaign in the State in order to drive home our points of differentiation and our added value to our consumers. So that's happening right now, and we will continue to evolve this brand as consumer interests and needs change. So it's great to have good products and powerhouse brands, but it's also really important, like I mentioned earlier, that your team is nimble and make smart and strategic business decisions. So on this slide, you can see that we are doing more with less. First, we switched from a full-service distributor to a 3PL. That reduced our distribution fees very significantly. Secondly, we went from a support sales staff of 30-plus people down to a Ninja like sales team of 4 people, highly, highly efficient group of individuals in that sales team. Third, we now own our own receivables, right? I said earlier that we're with a 3PL distribution company. So we own our own AR. That means we get to choose who we do business with. And as the market struggles and there are dispensaries out there that don't pay our bills, we don't do business with them. We do business with people who pay for the products that we sell them. And I'm extremely proud to illustrate to you that, that fact is such in that we have 90 -- over 97% collections. And then lastly, we are laser focused on how we spend our money. There are lots of brands out there spending more than they make, right, giving away product and not getting anything in return. We're not doing that. We know that the most important thing is the bottom line. So at the end of the day, we promote in a highly strategic and targeted manner, which has allowed us to spend less than 4% of our total sales revenue on sales promotions. Lastly, let's talk for 2 seconds about timing. It's great to have good brands, and I happen to think we're a bunch of really smart people as evidenced on the previous slide, but timing is also on our side. We are poised to take more market share as brands go out of business because they're doing some of the things we talked about earlier, right? Giving away product, not getting paid. So we're going to take their market share there. Secondly, stores, not all of them are making smart decisions. We're partnering with the ones that have business acumen and can pay their bills. So at the end of the day, as they consolidate, we'll be with those winning accounts. So another 2 ways that we illustrate that we are just on the precipice of the success that we're going to have. And with that, I'll transition to wholesale. Okay. Well, thank you. I'll take your applause. Yes. So wholesale conversely is business to business, right? This is where we sell bulk pounds. You guys are going to see it in your tour. And the most spectacular evidence here is this chart, this table, right? Exponential growth I mean just a killer job done by the team selling last quarter, nearly 140,000 pounds of cannabis, right? So the takeaway is, as fast as they're growing it, every time Graham gets up here and talks about how much more he's going to grow, guess who gets to sell it, we do. But so far, we have illustrated that we have the potential to do that, right? And that's what this slide illustrates. It's great to sell it as fast as you can get it, but it's more important to sell it at the right price. So the reason our sales team is so strategic and successful is because they garner the highest possible price for the cannabis that we get access to sell. And we do that through long-standing relationships. We do that through strategic initiatives and partnerships with other distributors who have complementary customers to our own. We do that by offering quantity discounts. If you buy more, you get a slightly better deal. And lastly, we do that by being very strategic about how we partner with those customers. Most people know that you get the most cannabis in the summer when there's more light levels, and there's less cannabis in the market in the fall and the winter. So our customers are well aware that they're going to have access to less cannabis in those time periods. So we're very strategic about who we do business with in that time so that in the time where there's more supply in the market, we can hold the price a little bit higher and they will buy it at the higher price because they know they're going to get consistency of supply. So we're going to continue to be strategic about how we reach those customers and how and who we sell to. But it's also important to see what our current reach is. Right now in the past 2 months, you can see these stats, I won't read them out to you. But we are reaching everybody in the state with a legal California license, which is about 1,000 individual licenses right now. North to south, east to west, we are reaching everyone. It doesn't mean we're doing business with everyone because like I said earlier, we're being strategic about who we sell to and when, but we have access to those customers. And I think the most important thing as you think about our continued success in the wholesale department is the fact that we haven't tapped our potential. We have more customers to chase down, more avenues to explore and ways to differentiate our customer base, which is what we will continue to do as we open more greenhouses. And lastly, just a little bit of analysis on the legal licenses because I know in the past, you guys have heard that in 2022, there was really of mass exodus, if you will, a lot fewer people left -- a lot fewer people remained as cultivators in the back half of that year. It has since stabilized. If you look, obviously, to the right of the table there, you can see that in Q1 and in -- excuse me, in Q2 and in the quarter that we're in now, there's far fewer cultivators falling off. So the reason why that's important just to understand is that the business is stabilizing. It means that the cultivators that are still here will likely continue to be here. So us being strategic and having an understanding of who's sticking around as well as which customers we're doing business with, that's what's going to continue to make us successful as we watch the market stabilize. And with that, I will pass it over to Jen Barry.

Hi, everyone. I'm going to switch gears a little bit and talk about retail. As you guys can see on the screen and heard a couple of times through the presentation, we had 10 retail locations that are across the entire State. We are tracking right now to serve about 1 million customers this year, which is a record-breaking year for us. We also have incredibly deep relationships with hundreds and hundreds of brands. What I'd like to call out here too is, as Hilal already mentioned, we have 3 retail brands. We have pharmacy NHC and our store in Pottery. I'm going to give a little shout out to my walking billboard right there, the pharmacy standing there, appreciate it. Thank you very much on that one. And then with that being said, I want to talk a little bit about the California landscape and just this general conversation about 60% of the municipalities have moratoriums. I think you guys have heard that story a couple of times in California. Within the 40% that is remaining, 50% of active licenses are in 3 counties, which is articulated here on the slide. So what that is telling kind of quick hits for you or to put that in perspective, for every 26,000 California residents, there's 1 dispensary. We pivot over to the Colorado area. That is for every 8,300 Colorado residents, there is 1 dispensary. So quite a bit of a disparity there. And then to put it in a little bit more perspective for every 1.3 California residents, there is 1 liquor license. So what that is telling me and kind of what that tells really for us as a retailer is that we have a lot of density within our markets, concentrated and that is kind of giving us this really vast disparity in what we call weed deserts. So in saying that, what really what I see and what I see happening within our market is that you have these concentrated areas where you have the kind of race to market share is a really big deal for us. So you have these small areas, again, where 50% of the active licenses are. So you're going after a lot of market share, and then you're also seeing very highly competitive pricing, no surprise there. And if you've ever shopped in the California kind of sector and been to some of these dispensaries, you definitely see that. So emphasizing the point here that we launched a strategic pricing in quarter 1 of this year, and we saw immediate success with recapturing growth. So that was our game plan. We said, look at the market just like Jacque and her team, we are nimble. We go where the customer is asking us to go and we make sure that our goal is to recapture growth and really make sure that those footsteps are going into every single one of our 10 stores. And what I'll say here and what this also articulates that if you look at the California market, and I guess I should have said, all my stats are also from Headset, so I won't repeat it as well. But for California market year-over-year, so that's quarter 2 '23 versus quarter 2 '24 is an 8% decline. If you look at our stores, same comparison, we were up 6% year-over-year. So again, when I say that the strategic pricing was immediately effective, it was and this articulates that. What I'll also say is this kind of reemphasizes our ability as operators and as Hilal mentioned, been in the retail game for a little bit. So I think I've been through a lot. I've seen a lot of different variations in different companies. And so we are positioned to win in this environment. We're making really smart choices. We do it with a very lean and smart team, and we're feeling really good about this strategy. One of the big ways that we can do this, we lean on the verticality of our company. So we are incredibly fortunate. I think we keep talking about this unicorn that you guys are about to see. But we're able to optimize and prioritize our Glass House Brands sales within our own stores. Right now, if you look at it, our Glass House Brands deliver about 20% higher margin than any of our other third-party brands that we bring into the shop. So what that does to us with the verticality of our own brands, we're obviously want to sell our product. We want to get behind it. We have a data point for making all decisions. We are our own R&D. Our budtenders are incredibly passionate about our product. They hold no punches, they give a lot of feedback, and it's usually a great way for us to make sure we're connecting from the customer that walks through the door and making smart decisions on strains, on what formats are coming up. So that's that kind of that energy and that kind of marriage of what you see happen in retail and how we make informed decisions. What I would say here and something to articulate that not only is it the great brands that we're selling, but it's also the power of the team and the power of the message. So -- this slide here is just articulating natural healing centers, which we acquired about 2 years ago. When we acquired them and the top line is our pharmacy and pottery stores and then that lovely green line that you see or teal depending on what color you're going with. That's our natural healing centers. Before the acquisition, Glass House Brands was less than 5% in their sale. And within a year, we grew that to 25%. This right here goes through the end of quarter 4 '23, and we are committed to that because not only is it from a margin perspective, the really right thing for us to do, but it's also, as you get behind it, it's creating a lot of energy and marketing for us, and the teams are super passionate and our customers are telling us that they agree with the path that we're going. With these margins and the verticality of our company, another thing and you guys might have -- I think we talked about this a little bit, we've been able to do some really great promotions. So a lot of the things that we look at is looking for disruptive deals. What's going to bring traffic into your door. What are those things that you see on weed daps? What are those things that customers are looking for right now. We always talk about like go where the customer wants us to go, meet them where they're at right now. And so one of the things that we've done, we've been able to launch Allswell $9.99 out-the-door. I think there's a few T-shirts here with that on it as well, teal. And that has been an incredible tool for us within our 10 locations to help drive traffic. And what that -- and part of that story, if you look at it on the kind of graph to the right is showing you, again, same quarter 2, '23 to quarter 2, '24, we saw a 20% increase in transactions. In Allswell $9.99, Glass House and a couple of other strategies are a really big part of that. And I will say that that's an outlier within the California market. So what we're seeing and the things that we've implemented are working in the way that we want them to work. The next thing -- let's skip the slide there. One of the ways, and I think you guys -- most of you know that it's incredibly hard as retailers to talk to our customer. The regulatory constraints impacts on how we talk to them, when we talk to them, how they get information, how do they know what deals we're running? What are the things that are really moving the mark as far as connecting to our customers. So -- as you guys heard, I come from a long line of believing in the loyalty of our customers. So not only do you need new transactions and new customers every single time you open up your doors, but you've got to remain and keep your loyal customers. And one of the ways that we do that is with our Friends of the Farm loyalty program. As you can see here, that kind of app -- we have an app. You feel the need in your travels and you want to hit that QR code, it will take you right to the Apple Store or Google Play store, and you guys can download and become Friends of the Farm membership. We have 170,000 total members that we can speak to, and that's a significant number in the State of California. 44% of our revenue comes from our Friends of the Farm. So that's also telling the story that not only are new customers incredibly important, but keeping our loyal customers engaged with us coming time after time, our loyal customers spend more than our new customers do. So we want to keep them happy, and this is part of the program in which we do that. And the other thing I would say is that it's a 250 sales return on investment. So when I look at platform, I look at the tech stack, I look at what we're doing, our consumer expects us to behave like any other retail experience that they have out there. They don't know that the regulatory constraints apply to cannabis. So we have to find ways to engage them from our website to our loyalty program via apps and all of these things to make sure that they are keeping our 10 locations top of mind. And then I'll wrap up with this, but our central goal is always to enable the continuous growth while sustaining the bottom line. While we've implemented the strategic pricing, the great news about this is that we've maintained healthy margins despite offering the industry best pricing to consumers. You heard Kyle talk about it a little bit. You heard Graham speak to it a little bit, but we have the illicit market to compete with. And so again, day in and day out, we're really smart about our decisions. We're really savvy with our spend. We have lean teams as well. But I would tell you, if any of you guys have been to our shops, we have some of the best budtenders in the business because they care so much. Over the last 2 days, we actually brought our budtenders here to celebrate them, do farm tours and they walked away feeling incredibly connected to the company and to our brand. So bottom line for us is keeping our eye on the north star of growth, but also maintaining our healthy margins. At this point, I'm going to pass the baton over to Josh.

Thanks, everybody. Welcome. Welcome. I think a lot of you have been here before. Is there anybody who's never been to the farm, anyone for oh, wow, -- you're in for treat. There's nothing like this in the universe. Hilal gave me great intro. I'll try to keep the background brief. Cannabis is my third career. I started out on music, worked for labels. I was an artist manager, got into content production and advertising after that, owned an agency, I started the video department in Hurley, directed commercials for a lot of big brands. In 2018, I had a conversation with an old friend of mine who used to work for me, but he was the founder of a cannabis company called Maxi. And we sat down, we talked for like 4 hours. Cannabis has been in my life for -- well, about as long as Graham, but I never really understood where I fit into the industry other than consumer, but we talked for about 4 hours in 2018. And at the end of that, I was like, I'm going all in on cannabis. This is what I'm going to do for the rest of my career. So I got started in Maxi, was there for a couple of years through a period of -- we raised $50 million. We got sold for $350 million. Company is now dead, high times about it, and it's gone. But I learned a lot there, and then have been getting my a** kicked around the industry for several years and 18 months ago, Hilal poached me from High Season and best thing that ever happened to me. Smartest people I've ever worked with finally at a company where I see having a long-term career. There's nothing else like in California, and I wouldn't want to be anywhere else with anybody else. It's all happening right here. And so a deck page is worth a thousand words, but I kind of wanted to maybe show you something a little bit else, a little celebration of what this company has accomplished over the last year. So let me hit play. [Presentation]

So again, I love us. I don't know I've been fortunate to do a lot of cool things in my life, but right now, what we're doing, building this company, best thing ever. So yes, just a little bit about strategy and what marketing is and philosophies on marketing is if, if the farm is the heartbeat of Glass House, marketing is a connective tissue. We work across the entire organization. Great companies and cultures are built from the inside out. So our job is really to connect the entire company. We're storytellers and connectors. And we serve everybody. We were super close with my colleagues. I have the best colleagues in the industry as well. Best team ever, work really closely with sales, corporate and IR, our team partnered up with John and Mark, like we produce these events. We produce Analyst Day, Investor Sesh, all the consumer events. We work really closely with Jen and her team, supply chain, all the products, packaging, innovation. We work closely with everybody on that, and we partner with the farm. We're great storytellers. So as we learn -- I mean as we grow and scale, we need to be able to train our people to do to grow Glass House weed. So we make all the training videos, work super closely with the farm and do a lot of storytelling. Our marketing strategy is -- we saw in the video, the core values that we rolled out this last quarter. Everything we do is aligned with those values and really driven by it on the customer first side, we work -- our customers are internal and external. We are marketing internally as much as we are to outside people because if we can build an army, we got about 400 people now. We have 400 evangelists in this company. Can you see how powerful we would be. So that's our job, just fire everybody up, get it going and really be the voice of the end consumer, along with analytics and retail data and sales, we're listening to what customers want and giving it to them. Do the right thing. We don't market out of ego. I'm not doing anything to impress my friends or like make it look good on my portfolio resume. Every decision that we make is driving the business forward what's right for the business. So we're doing that, and we stay laser-focused on strategic priorities. We tune out noise and not everything is an opportunity. Grit or super gritty, we do not spend very much money. We have a small team and we work hard. We manage 5 consumer brands. We help support 3 retail brands and we help run the corporate brand. It's a lot for a small team to do. The only way to do that is to be gritty, hire the best people we can get and just get shipped done. It also means just eliminating anything that doesn't add value, could be a touch point as simple as like little insert that used to go in the PLUS pins. It's costing us $75,000, $80,000 a year. It's a very easy thing to just rip out because it didn't matter. It wasn't adding value. And we -- yes, our internal team really does everything. We don't lean too hard on outside agencies. It's all coming from within because nobody knows our business like us. So I'd rather trust my team to do it than someone else and positive attitude sort of speaks for itself. The pillars of what we do, it's around continuing to drive brands and innovation, giving the customer what they want, making sure we're making the right thing at the right price, telling the right stories about it, not just our products, but our internal teams, just getting everybody talking -- telling the same story. I tell my team that we're not a marketing department, we're a storytelling department and their story -- story isn't just a video, story is what are we seeing on the package, even the way like, are we putting the right information? Are we telling the right story at every touch point? That's our responsibility. And we're connectors through events like this, consumer events, anywhere we can connect with consumers, social media, content. We're doing it. We make it happen. And yes, just very excited about the portfolio brands right now. Glass House Farms, our premium brand. Nobody's grown more great we've been at Glass House. It's harvested fresh daily. These plants don't take a vacation. We are taking fresh plants down daily leaning into that messaging right now because as a consumer, that's what I want to buy. I want to smoke freshest, tastiest sweet, I can get my hands on. So harvested fresh daily. We're telling an award-winning story now, Best of California. Best of California. That's the mantra. We did it this year. Kudos to the team. I just love what we've done. And then just sort of the -- with the brand over the last year, we listened to the consumer. We rolled out farm packs, giving them more bang for bucks. You buy our weed now. It's like we're not HRs or a thing of the past. If you really smoke weed, you want quarter half ounce or an ounce of fire weed and we're doing that now in the farm packs. Yes, just very excited about where we're going with Glass House and just some of the value prop here, cured in doors, when you get a chance to go look and see how we're drying and curing weed today, you're going to love it. It's like growing weed is pretty much only half, it's half of challenge. The rest of it is how do you dry and cure it and get that quality consistently into the jar, into the bag every time, and that magic happens in post harvest. Excited to show you that, plus rolling out the sampling campaign right now. I've sat down. I've eaten a lot of PLUS. I've eaten a lot of wild. I've eaten a lot of [ Kamino ] They're kicking our a** like in sales charts, but I think we have as strong or better a product. So the challenge for us this year is going to be just to have people give PLUS a chance and try it. So amazing sampling campaign. We're going to go make it happen. And get PLUS pop in as Jacqueline mentioned, we're the first brand in the top 10 to go all solventless rosin. So now at that same price point, we didn't raise the price. We've got a better-for-you product, that's solventless, it's vegan. It's delicious, it's consistent, and we're going to get PLUS going. And Allswell. I mean, Allswell has been sort of the bell of the ball, now a top 3 brand flower sales in California. And think about this, that is 1 input in 3 package sizes to get top 3. There's a lot of blue sky. There's more blue sky in Allswell than any other brand. There is a lot of other amazing flower here that we can go and create and push out through Allswell. So excited for that. Very excited for our vape carts, which are doing well. Yes, Allswell is amazing, tons of blue sky. And that is it. I think we're ready for Q&A.

Thank you. We'll open up now for questions. I hope that gave you a little bit of an idea of what we do every day. I can't take this out, so I'm going to keep it. Questions.

So since HERBL blew up, have there been notable improvements in terms of collections? And is it -- have you just tightened your credit policies? Or has there been an improvement in those that you've said prior to -- have they been paying on time?

So both. One is we're very discerning about who we do business with. So the customers that we choose to sell to are ones that pay and pay relatively on time. And then two, since we own our own receivables, we also dictate the policy, how quickly we cut people off if they're not paying, how long we keep them off until they pay. We're very, very strict. We have the most strict credit policy in the industry, and that's for a good reason because there's no sense in continuing to feed somebody if they're not paying on time. So the answer is both.

So this is a topic near and dear to my heart. We're lucky to have a CEO who says, if you don't get paid, it isn't a sale even though the accountants may say it's a sale. So we're very focused on the cash we collect. And the stat, I think Jacque said, we're getting -- collecting 97% of the cash against the revenue is a really good stat, when you consider how the cannabis business has operated because many retailers because of the number of brands go, I'll buy from you today. And then 60 days later, I'm delinquent, and there's 2 or 3 or 4 other brands, who will just step in and take their place. So we haven't fallen into that trap. So the other thing I just want to mention, too, is we're lucky because my credit manager, Jacque and I have all worked together in previous life. So we have a good working relationship, and there's always contention between sales and credit. But again, we're focused on the same thing and it's really worked well for the company since we've left HERBL. And we really have not had a hiccup, right? We did it without big losses. Other companies had hundreds of thousands of dollars, and we had very minimal write-offs.

Two Questions. First on Allswell. Congratulations on rolling that out, doing really well in your own stores. What's the uptake on kind of the other retailers? And then from a competitive landscape, who are you replacing kind of that value side, how are you looking at Allswell as a low-cost competitive in that environment? And then second one, just kind of talk to us about the big category, right? Pretty good growing category kind of thoughts around growing that vape category for you guys.

So I'll answer the second question. I'll let Jacqueline answer the first question. On the vape category, it's very clear. The syndicated data shows from headset that vape is a very, very likely to keep continue to grow industry or category. And that's not only in California, it's across the state. So we just launched vape. We already had a vape, which was disposable, call it the craft cocktails of the liquor as an example. Now we're doing your every day, EDLP, every day, lower price for consumers, so we can touch mass consumers. I mean we have a good problem now, out of stock, meaning the demand is higher than our production, but now we've got caught up recently, and we're planning for the future. So the vape will continue to grow, and we're going to grow with it at least in Allswell because we're giving the consumers what they want at a really competitive price. As for your first question?

So the first question in relationship to Allswell and outside dispensaries. It's our biggest revenue driver. So we just -- we're shy of $1 million of revenue for Allswell last month. So it's doing incredibly well for us. And then the sort of Part B of that first question in regards to who are we taking share from? The answer is in that value consumer, it's been a lot of people and brands that just pop in and pop out, right? When somebody can source low-cost weed, put it into a quick bag and sell it to consumers, there hasn't been a lot of consistency. So there isn't necessarily a singular brand to point to, like, oh, we took their share, it's all the little guys that didn't necessarily have a big brand presence that we're taking share from. We are the single most consistent low-cost leader in dispensaries.

We sold the most flower in the entire state last month -- last quarter actually in unit sales. So unit sales, we're crushing it, but we're going to continue to do that. It's not just how you start, it's how you finish. Good question. Thank you. Any more questions?

What is it about the vape category that's resonating more with the Gen Z customer as opposed to any other cohorts?

It's a consume -- it's both folds. It's the actual vape and how it smokes because there is no smell, you can put it in your bucket, it's easy, and it's portable. And the other piece is consumers' mindset, Gen Z is different than Gen X, different than the big farmers and so on and so forth. Movements is all about tincture. So it's also consumer and shopper centric. So the key reason, I believe, is a consumer generation thing. So I hope that answers your question.

It's just convenient.

And convenient. Yes, thank you.

It's easier. You can pull out, you look at pre-rolls and vapes are an easy. Yes, they're not sitting there with bonds and learning how to roll joints right away. I think it's our responsibility, our generation to teach the young ones how to roll a joint and how to take a bong rip. But in the meantime, yes, I've got kids and vapes are easy.

I wanted to talk or just share some thoughts and one, thank you for expressing about the retail strategy and cutting prices. I wanted to ask and just hear your thoughts on why retail and I am going to give a broad generalization, it's so terrible in cannabis? And in particular, like why we see very little innovation, why isn't there like an outlet store? Why isn't there come to the -- you only can buy smalls for example, and it's like off brand and I just wonder how else you can lean into what I see as the power consumer and away from this like, look where the Apple store. Can you share your thoughts and long-term vision on that?

Yes, definitely. And what I'll say it's kind of going back to one of my first slides is what's so unique about California. And if you look at our 10 locations, what I love about our 10 locations is the diversity within each of those municipalities. We're in highly competitive dense markets. We're also in markets where it's limited license. So we learn a lot through kind of the consumer experience about what they're looking for. My background, I worked for anthropology in Nordstrom. So anthropology for 16 years. I really like pretty things and I really like that experience when you walk into a shop, it's not just what you're selling and who you see, it's how that shop makes you feel. So kind of going back to that Apple concept. I think maybe 5 years ago, the consumer really was swayed a little bit more about, they walked in, they saw the chandelier. They saw all these beautiful things. And now really, what they're telling us is that they want to be treated well. They want the best prices. They want fresh product and part of our strategic planning and the way that we're looking at this with the pricing is that we're not some of these outlet -- like the outlet model when you really think about it, that is older product, a product that didn't sell, things that were manufactured or brought into an outlet shop that maybe didn't sell in the traditional brick-and-mortar. What we're doing is we're flipping the script a little bit. We are all about a curated fresh menu. We haven't changed our menu and our strategic pricing isn't what you see in other retailers, where you go in and you're like, "Yes, I know why this is cheap because it's almost a year old, and it's not going to be fresh and it's not going to be good. So that consumer concept of meeting them where they are right now and I think you think about inflation, you think about all those things that are happening in retail and if you're in a really dense market. I live in Los Angeles, specifically in West Hollywood, on my way from my house to go to our Pottery location, I pass 36 dispensaries. Sorry, 36 legal dispensaries, not to even say the trap shop. So along every kind of street that you have, you have to do something for your consumer that is going to make them come back over and over again. And I think some of the misses that you're seeing out there is that it's transactional. Customers are going into shops and adjust a transaction, it's about getting them in and getting them out and we really pride ourselves on that experience.

I'll just add one thing because your first question was like why the dispensaries are not doing well in general -- retail dispensaries? Some of them are really doing well. But most of them are not because simply, they're not business operators. They don't do their homework. They're not -- it's a business first of retail and you have to do your homework and you have to work on your P&L and understand your cash flow and your spend and your promotions and so on and so forth. When you add all this up and you're not doing this homework, you're just running on to how many brands I can bring to abuse them and make the best out of them and make profit. It doesn't work like that. It's consistency and running it as a business. And there are some that are doing a really good job in California. We're one of them because we have an expert in retail that looks at the business every day, and we share information with each other every single day, like a daily basis, so we can pivot and things. I hope that answered your question.

You talked about switching distribution to 3PL. Can you drill down a little bit on that and walk through what that means and what you were doing before and also what it means from a regulatory perspective now that you're not depending on a whole -- it sounds like a wholesaler? Just walk us through what that means.

Sure. There hasn't been any change on the regulatory side. Both of them are distros that we're selling to. Previously, it was HERBL. So they were full service, meaning that they provided a support sales staff. They provided -- they did all the collections on their own. They picked and packed, they stocked the trucks, they made the deliveries, right? So they did everything from point A all the way to the problem one challenge that they ran into was that they had a bunch of outstanding bills that never got paid. As a result, we saw that coming and made some very strategic decisions to separate our collections from them and then ultimately, they ended up going under who are with now alchemist. They're a traditional distributor in that they take our product, they house it and they deliver it, but it's our sales force, our collections. We never -- we always own the inventory. So 3PL, meaning that they just take the inventory, put it in the warehouse and deliver it.

But they are responsible for making sure that they're selling it to legal -- from a regulatory way, right?

Yes. The answer is in both situations, the distributor is responsible for checking licenses, onboarding customers, ensuring that they have all the proper checks and balances from a regulatory standpoint.

So just one, the simplest way to think about it when we were dealing with HERBL, they were our only CPG customer because we sold it to HERBL and then once they took the product, they owned the product and were responsible for selling it, right? They had a sales force. They work with Jacque's team. So it was easy for us, we have one customer. We said did they pay or didn't pay as we saw they had trouble. We made contingent plans and we had a transition, which allowed us to move to the new process without significant losses. Today, with Jacque's team and credit, we do the invoicing, we manage the receivables. So we now have how many customers?

Give or take 200.

So we deal with 200 customers in essence, again, thanks to her team and the other members. We've done it pretty seamlessly.

Sorry, one last one. So just given that there's more overhead from an administrative perspective, does that mean it's a higher cost per unit from a distribution perspective or lower? Or what do you think?

So we've -- I feel we've saved money because the fees we were paying to HERBL were higher than I think the fees we pay to alchemist plus the internal staffing we had to bring on. And again, part of it is lucky enough to have a credit manager, who's done this Jacque, people who have been in it before and candidly, one of the reasons HERBL ran into difficulties is because we're pretty loose with their credit, and they assume their business was going to continually grow and it did it, and they did rightsize it for what ended up happening to them.

All things considered, even with the additional head count that we took on to run credit, there's still fewer people on the team now than there were internally plus a difference of 5% in fees. So significant decrease overall, even with the additional folks.

Sort of a question. You guys used to have a brand called Field, which made things.

We still have it.

You still have it, okay, I didn't see it listed up there, so that still is making cartridges, concentrates, all the things that used to.

So it's all about focus. Field is not biggest focus because like I said, it's how many -- when you go into a bar district, how many out of the 20 bars you see craft cocktail bars, maybe one. Field is like a craft cocktail drink you make because it's live rosin, live resin, it's really expensive to make, expensive to pay versus the other 19 bars that just turnover make profit and turnover. We still have Field. We have another 9 months' worth of product, but we're kind of like going to keep it on the low, let it pay for itself, sell itself, but we're not making extended effort to grow it and to go to more dispensaries or more places to sell it.

So it seems broadly the strategy is to make things more affordable as opposed to going after the higher-end niche market?

Kind of, yes.

And I noticed when you talked about the Rosin and the PLUS gummies, you didn't use the word live. Does that mean that you're using in-house cure trim to make the rosin or what is the input on the rosin that you're using for the PLUS line?

So it's a solvent. So it's made in a big extraction machine as if we were making BHO except we're not hitting it with butane. It's water and pressure that's separating the trichomes. So it's -- and it's not necessarily made from live material, it could be at some point but the operative word is solventless. It's a solventless rosin, it's -- yes, maybe without solventless, maybe without chemical solvents, it's better for you. And it's still -- we can make it at a price point. If we were doing Field style strain-specific live rosin and putting it in a gummy, we'd be selling it for 2, 3x what we're selling it for.

The only other thing I was going to add in reference to how our brands are segmented is, I wouldn't say it's just the value consumer we're going after because PLUS is a premium gummy. It's one of the higher -- it's in the higher price category, if you will, compared to like an Allswell gummy, which is the value purchaser. Additionally, Glass House Farms relative to Allswell is more premium. So, yes, we are seizing the opportunity to drive value adds to consumers, which right now because their wallets are pinched, tends to be that we're meeting them where they're at with the low-cost affordable brands, but we do also have premium brands in PLUS and with Glass House Farms.

Any more questions?

An overall question in terms of the growth opportunities for CPG. So how should we think about the drivers there? So if you think about greater ACV, right? It doesn't sound like you want 100% ACV given the potential AR issues that you have. So what type of white space do you have there? And then you could have greater depth of SKUs in your existing retailers, in stores, be more SKUs or otherwise. And then third, just increased velocities of your existing SKUs in stores. So as we think about the opportunities for growth in the CPG, how should we think about what will be the greatest drivers there?

So first, you're right. We're purposely not dealing with certain stores because of payment issues. So the idea is to be very targeted and strategic about who we're dealing with because as I mentioned, other stores are going out of business. So as those stores go out of business, more foot traffic goes to the stores that we are dealing with, which is increased revenues. Secondly, you're absolutely right. More products in the stores that we're doing business with, right, ensuring full distribution as well as continuing to innovate and provide them with new products as we open or launch rather Allswell vape and additional SKUs. So that's the second piece. And what was the third part of the question?

Greater velocity of the existing SKUs?

Yes, of course. And then continuing to do the right thing through branding and strategic promotional dollars to increase terms so they come back faster, and they're always choosing us over the competition.

So a traditional beverage term, which is easier to understand, there's 2 ways to grow. There's numerical distribution, and there's weighted distribution. We're growing weighted. We can go more numerical, we can be in 500 stores. But like Mark said and Jacqueline said, we might not get paid, and that's not good business. Others are willing to take the risk for now. So we're calculated on what we do and who we deal with, but weighted distribution is what we're doing now. We have customers that does $100,000 a month. So that's significant. I hope that answers your question. I think we're done. Thank you, everyone, for your time, and we appreciate you being here and listening.

We have 15-minute break and then we're coming back up at we start again or is it a 10-minute break. [Break]

That will be part of the conclusion of the day. All right. I'm going to go ahead and get started. We're now in the, I'd say, seventh inning of the ninth inning game. We're getting close. And so the plan is to try to be done around 2:50, have a little bit of a break and then get everyone on the road for the tour starting at 3:00. So no matter how exciting my numbers may be, they will pale in comparison to what you guys will see as we go through the Green House's. So my thought here again, as we get consistent' questions, John and I do with almost everyone we talk with about our balance sheet, warrants and share count and everything related to that. So my hope is a large part of this will be very educational. And everything I'm going to show you for the most part is buried in our financials, if you want to play detective and read Page 37 of 39 pages. But I thought I'd help organize it and bring it up to the -- up in a simple fashion or said different way, right? If you give a man a fish, you fed him for a day. But if you teach him how to fish, you fed him for life. So after I'm done, I'm hoping when you guys look at our Q3 balance sheet, you'll be able to look at it and figure out how it was calculated. So the first thing I want to do. This is a snapshot of like where everything sat at the end of Q2, right? What are, I'm going to call it, nonoperating liabilities. So things related to our share liabilities, our notes payable, the preferred equity. So we had $182 million outstanding. But of that $182 million, about $55 million is actually going to be satisfied through issuance of shares, right? So $127 million is related to cash. We had 74 million shares outstanding, almost 5 million RSUs and stock options. And luckily for our employees, all the stock options are well in the money. Most of them were issued in the $3 range. So if you've been here for a couple of years, you're in a good position. Many of those expire in October. So we'll have some happy employees. And then if you look at our shares payable, and those are related to our acquisitions for both the NHC acquisition in this farm. You have almost 5.5 million shares. And then beyond that, you have the warrants, right? So we have 13.9 million warrants outstanding with the Bs, Cs and Ds, and then 30.7 million of warrants associated with the SPAC. And basically, what I'm going to try to do is peel the onion a bit here as we walk through how we're thinking about each of these items and how they're being calculated and how you guys can use this if you're developing forward-looking models for share counts and warrants and all of that kind of stuff. So then just looking so I'm going to peel the onion and kind of go item by item. So the first thing I want to talk about is basically the contingent shares and the earn-outs and the shares payable and what's that going to do to the share count. Again, all of these items, although they sit on the balance sheet as a liability dollar amount, they're all going to be satisfied in shares. So as you think about cash and if you're running ratios and stuff, these are not cash -- this is not a cash outflow, it's going to be a share outflow. So as of the end of Q2, to satisfy these, we would basically need to issue about 4.6 million shares related to the purchase of this farm. So if you think about that, when we bought the farm, the former operator, Casey Halling, had an option. He helped us buy the farm. As part of that, we issued him 6.5 million shares at the time of the purchase. He had 3.5 million shares deferred, right? He will get those shares most likely by June of 2026, or if we get the entire farm licensed to candidates, before June of 2026, right? Good news, if that actually happens, it means we're going flat out 300 miles an hour to get it done. But if you're thinking about share count, the best thing to do is put 3.5 million in at some point in 2026. They get valued as the share price at the last day of the quarter. So when you think about it, what was on our balance sheet for that, was $25.2 million. Within that same bucket, there's a contingent earn-out. So when the transaction happened, Casey has an incentive earn-out based off how much EBITDA the farm produces, right? The earn-out period started basically April 1 of this year. It's a 12-month period. It runs through March 31 of next year, right? So it's really calculated based off of the EBITDA. It's adjusted for CapEx spending and a few other things. The simplest way to think about it is it was almost $8 million at the end of Q2. And at the share price, we would issue him about $1.1 million. Now the thing behind that is this indicates at the time of forecast of about $80 million in EBITDA coming from Camarillo over the 12-month period, right? It's very sensitive for every -- I think for every 3.5 million above that, we go, it can pick up 1 million shares. Now the one thing to remember is if he gets an earn-out, they will be issued at the share price in March of 2025, not at the current share price. So in theory, if we're hitting these numbers and we're blowing the EBITDA out of the water relative to this, he's going to get more shares, but that should be a good thing, right? So it's kind of been reversed. The one other thing I do want to point out about this agreement is this was developed or signed during a period where wholesale Green House Flower we're selling for $1,200 a pound, right? So if that's where the market was today, we'd be blowing right by them. So the simplest thing to do when you see that number at the end of Q3 is just take 3.5 million times our share price at the end of the quarter, that's the holdback and the balance is related to the earn-out. The next number just to talk about is the deferred shares. So this comes as part of the NHC acquisition. So when we sold it, the person we sold it too got some deferred shares. Again, part of it was to make sure as we kind of ran the stores, there were no skeletons. There was nothing wrong once even despite you do due diligence. The key of those shares, 582,000 should be issued this quarter, right? So that -- so what's remaining in that number is going to go down by roughly 70%, and that number should be a lot smaller. Now the number of shares is fixed. So that -- once we issue the 582,000, the remainder should be out there until Q3 of 2026. So that's kind of how those 2 lines are calculated. So then moving on to notes payable and the preferred equity. So at the top, we have our secured credit facility, right? Matures 11/30 of 2026. By the time we amortize, it will be down to $27.5 million, right? We're amortizing at roughly $625,000 a month or $7.5 million a quarter. We're actively trying to refinance that at a sub 10% rate. Today, our rate is 12%. It's capped to 12%. The floating range is 10% to 12%. I think it's prime plus 5.25%. So even though the Fed may cut rates, we're still well above the 12% cap. So we're going to need several rate cuts before that 12% would come down. So that's a secured facility. Underlying below that, we have the plus convertible debenture. So we assume that debt when we purchase plus, right? It's very favorable terms for us we -- since we bought them out of CCAA and because of that, we're just going to let them ride right now until basically the maturity. There are 2 tranches. The larger one almost $12 million. There's no cap, right? So as long as we think our share price is going to go up, we're just going to let it roll until the end of April in 2027, when it becomes due, and we'll convert into shares at that point in time. The Series B part of that $4.1 million is actually capped at $10. So once we hit $10, we'll issue the shares, that will go away on the balance sheet, right? If you look at, again, the share price at the end of Q2 and if we had just cleaned it up, it will be about 2.2 million shares. And then again, everyone's been asking about the series, the preferred equity, the Bs, Cs and Ds again right now. So the Bs and Cs pay a 10% cash dividend off the original investment. The Series B just bumped up to 22.5% total interest rate. So it's at a growing rate. Series C happens later in the year. Just in the short term, the amount stays relatively fixed because as we amortize the credit facility, the preferred equity goes up by about the same amount. So the balance is going to be roughly $127.5 million. So then just understanding, so what's the cash impact of that? Or how should you guys think about modeling cash, right? I'm going to say for the next couple of quarters, the cash out the door related to the dividends, amortization and the interest is going to be roughly $5.2 million, right? So we're paying almost $1.9 million in debt amortization. We have a few car loans and other things in and there. So that's why it's not the exact amount. And then the cash interest as we amortize down the balance is going to come down a little bit. That's calculated at 12%. And then you can see the dividends in there. Again, as long for the next couple of years, we're going to be paying about $1.9 million a quarter. So again, simplistically, if you want to think about cash flow. This right now is how to think about the interest expense, the financing side of the business. All right. So now we're going to talk about the warrants and a little bit on the ISOs and the RSUs. So if you're fortunate enough to be a holder of the B, C or D warrants, you're solidly in the money today. The exercise price on the D warrants is $6, the exercise price on the Bs and Cs are $5. They expire August '27, so basically in another 3 years. As I'm up here talking with you guys today, my simple thought again is we're looking and watching our share price. And once we get to $12, that's where we can actually, I guess, force something to happen. We can force an expiration on those warrants. I've kind of laid out the numbers. So one of the things just to consider since they're so in the money at that point if we cross $12, I expect some people will actually write a check for the $5 times the number of warrants or the $6 times the number of warrants. I don't know what that number is going to be. But in theory, if everyone said, I want to buy my shares at $5 when they're trading at $12, we could bring in $72 million at the time that happens, right? Again, the simple plan though is when we cross $12, don't just keep letting them run. They hit $12, we'll reach out to people and go, "Hey, we're going to force the early redemption, and it's up to you whether you want to do it and send us a check for $5 times your warrants, or we'll just exercise it on a cashless basis," right? So the -- again, the difference, we probably have to redeem what's out there now for almost 8 million shares if everyone did it on a cashless basis versus the 14 million that remain outstanding. So the SPAC warrants, right, those are the warrants that have a strike price of $11.50. You've got over 30 million of those outstanding today. They expire at the end of June in 2026. And that's the place where, again, I think John and I get a lot of questions, is how should I think about what the share -- what that's going to do to my diluted share count, right? So we do have an ability to force, I'll call it, an early expiration when the share price crosses $10, right? And one of the things we look at this is go, why did we cross $10, and do we think we're crossing $10 and it's sustainable, right? So if we do cross $10 and we think we're going to stay above $10, is an example of a number in here is basically based off this happening at the end of the fiscal year. So I'll lay out a scenario. The election happens, whoever wins the election throws everyone a curve ball and says, "My first day in office, I am going to legalize, not reschedule, but legalize cannabis." And we pop up, and they do it as a New Year's Eve present. So I do it on 12/27, right? And the share price goes up $5, right? Just don't please quote me on that, but this is all hypothetical. We could basically send out a notice and forced redemption of 4.4 million shares, is a nice way to reduce the redemptions when it gets really high and you're now issuing shares in a much higher number, or at that point, would you say I could access the market at a higher number and why dilute myself would pick the number of shares. So that's one of the things we're watching. Again, we watch the share price. We watch the VWAP. So in this instance, if you look at what might happen, we could actually take 44 million shares or warrants and remove them and issue 12 million shares, right? So again, looking for ways for not only me as the CFO and the executive teams is owners, but to bring some certainty to how warrants could get handled. And if you guys are running your again, share counts and models as to what you think EPS might be in 2 or 3 years. I just want to make sure you guys can understand this. And then last but not least, we have 1.2 million stock options outstanding. Again, most of the big chunk of those expire literally next month. So most of those are in the $3 range. So I expect everyone to exercise that. We have 3.7 million RSUs outstanding. We view from a compensation perspective, we give RSUs to directors and up. And they're an important part of the compensation for the company. I mean, one of the nice things, if you look around the team, there's a lot of continuity within the Glass House management team and that, I'll say, director and up very low turnover. One of the reasons, again, people all have strong ownership with the company, and this is one of the reasons why I think that's the case. So we're going to continue to give our issues on an annual basis, right? So again, if you want to throw a number in there and you say, how many shares are we going to have in 2027, just keep that in mind, right? Everything is done on a 3-year basis. All right. Now this is a real eye chart. But just, again, this helps -- again, you should all have this from a PowerPoint presentation, but this is the actual matrix of the early expiration. And so for anyone who wants to read the 300-page indenture of the original warrant, they can go in and do that. It's available online in the SEDAR filing, buried somewhere in Page 79, there's a table that I've tried to summarize here. So the simplest way to think about is I'll go down the $12 a share column. So if we forced conversion at $12 on 12/28, we would issue 6.5 million shares. And the closer we get to x0 or when they expire, that number goes down, right? So if we decided to do that at 12/28 on 2025, it would be $4.2 million. So again, part of what we'll consider as we do this is where the stock price is and at what time period we are until we expire. Basically what happens at x0, all the numbers in the very last row are basically assuming cash conversion. But again, the thought is, hopefully, we'll never be at a point where we're issuing 30 million shares despite bringing in all the cash because we feel we would be better going to the market at that point in time and getting whatever is available. And then the similar table for the warrants for the Bs, Cs, and Ds. Okay. So this is the last slide on kind of shares and how the warrants all fit together, right? So I think the way I think about this is over the next couple of years, our diluted or our share -- outstanding shares are going to go up to about $84 million with certainty, right? Because you got the ISOs and RSUs, they're going to be in there, going to have the deferred Camarillo shares and you're going to have the deferred NHC shares, right? Those are going to happen with a high degree of certainty. And then you look at the earn-out, right? So I'm using the current value of the earn-out as an example. Let's say we got to 18 in '20 -- in the last -- in March of 2025. We have to issue 439,000 shares. So again, the earn-out itself is first tied to a dollar amount, then divided by the share price. So the key is, again, if we're paying one, get the share price up, so we issue fewer shares. And then again, the same thing I did with the Series A and Series B recall, when we hit 10 for the Series B, we're going to redeem it, and we're going to be capped at $411,000. There's no reason to let that accrue. And just we pay the semiannual dividends with shares. So assuming we continue to let this roll to maturity, we could end up issuing a couple of hundred thousand shares. Again, crossing $12, we issue $7.8 million again on a cashless basis. And then I laid out 2 scenarios for the SPACs, right, assuming a 1,228 at the end of this year and just letting them roll to the very end. So depending on where our share price is, over the next couple of years, we could be -- and I go, hopefully, we're not in the 93 range because that means our share price hasn't done what we would want it to do. But I think, certainly, we have the options to make sure we're not at $104 million. So I think we'll -- it's hard to say specifically where the number will be, but if you leave here tonight and we're going to have $120 million by the time we get to 2027, I don't think that's a good assumption, right? It's going to -- we're going to try to manage it somewhere within this range. Okay. So I'm going to stop for a second before we go into like how we're thinking about raising funds or how we're kind of approaching the market going forward because that's really, really, really dense stuff. And I can't tell you how much time I've spent on that. John Brebeck has been on that, Ben Vega spent on that, analyzing it, working with our Canadian counsel, Bennett Jones, coming up with what we think is a reasonable strategy to, again, minimize the dilution for the existing shareholders. So I'm going to stop real quickly and go, do we have any questions on that. Again, we'll have more time at the end. But before we go into the kind of view of the fundraising and recapitalizing the company, are there any questions?

What's the makeup of the preferred shareholder base? Is it a broad list of folks? Is it like a large holder?

It's cross-section of, I'm going to call it, existing -- I'm going to say they're mostly individuals as opposed to institutions. But it's a broad base of people who have invested with Kyle in his previous real estate investments who have done well with Kyle and have -- as we raise that money, so interestingly, the Bs, Cs and Ds, we raised that ourselves. We didn't have a bank helping us because we did it during 2022 when the market was like not good. So you've got again some family offices, wealthy individuals. There are a few institutions in there. But most of the people who put money in were familiar with Glass House and may have been equity holders already or have been in or out of the instruments in the past. So I would say they understand the company. They've been supporters of the company. So I think whatever we end up doing they'll be supportive of us because I think many of them own shares and the preferred equity. They love the dividend. They love the warrants, but they also don't like the potential dilution and how expensive it is. So it's a bit of a love-hate. And everyone in the management team is a -- one, it was a good investment despite the risk and is a show of we believe in the company. Kyle, Graham, Ben, Hilal and I all put our own money in the Series B at a time when you would say the capital markets for cannabis were among the worst they've ever been.

So if you think about the preferred equity, which is essentially debt, what's your appetite for solving that with a debt raise currently, which you could do probably pretty quickly? I wouldn't be -- I mean, Green Thumb did it today, not hard at all, honestly, versus convert, issued shares. What do you think is the most elegant solution there? Because honestly, it could be done right now. I don't see why it's not done right now. That's my thing. It's outrageous you're paying now 22.5%.

Right. So I'm going to flip to the next page because that's really what the next page is. So if you look at again, where we're at today, right, if you look at the $168 million. And then you go, we're going to raise $25 million -- I'm going to say, given what we showed you guys and what you'll see, we're going to need another $25 million for the Phase III expansion, right? So I'm looking at $168 million. I'll start at the top. Again, Kyle is working to replace the secured facility with $50 million. We have a relationship with East West Bank. They're kind of the lead. Do you want to get in there hopefully sub-10%, interest only or an extended amortization period which not only we lowered the interest expense, but we save cash because we're not amortizing. So that's the first thing. Going now to the bottom, right? We've been in active conversations, right? And I'm saying, so right now, we're looking at, again, I would just say, on the equity side, trying to go $25 million to $75 million, right? We've had a nice increase in our share price, right? We've gone from under $5 at the end of last year. We're now, I don't know where we closed today above $9, bringing some equity, particularly focused on the Phase III expansion. And then I'd just say there's nothing concrete today. Well, we've had active discussions about how to replace that preferred equity from anything from, again, convertible debt to straight debt. One of the things, again, is there another preferred series E, I don't know. But we're in active conversations. The one thing that is impacting a lot of the decision is our view of what's going to happen to the market going forward, right? And again, is a bird in the hand better than 2 in the bush? We really believe the rescheduling is going to happen. When that happens, the capital markets should be much easier to access, the cost of capital should go down. And internally, we've had active discussions on uplifting and what that might look like, and we want to be ready when the rescheduling happens, if the NYSE or NASDAQ or someone gives us the green light to do that. Hell, we may even do it without the green light, right, just to push the issue. So part of it is we're just not sure when we want to go do this. Again, I know everyone wants sooner versus later, but we've been in active conversations. That's about as much as I can tell you right now. In terms of, again, if the costs are going to be much lower in 6 months after rescheduling or if that happens versus trying to do it right now. But it's clearly on our radar screen, and it's not something that we're just letting lie out there without any thought against Again, it's one of these things, I get it. I look at it and I go, $2.5 million -- it goes up $2.5 million. Yes, it's high -- it's very high on our priority. So a couple of other things I do want to point out, right? And there's a couple of other things just from a funding perspective, and I'll go to taxes on the next slide. So we did file an ERTC claim about a year ago, that's $11.5 million. We have not -- the IRS won't tell us when we're going to get our money. As far as I know, they are paying them, but they're slow rolling it. So we haven't actively baked that into our plans, but I have it in the back of my mind that, that's going to come in. We -- when we filed it, we actually used a tax attorney and didn't use one of these firms that charge 15% or 20% that the IRS came back and said, that's not a legal way to be doing this. So we know we're not being held up on that. We've engaged Baker Tilly, which is, I think, kind of #10 or #11 from the CPA to be our tax adviser and do our taxes for us. So they've relooked at how we've been doing, and we immediately went off and filed a refund for the state of California, which should bring in about $1.2 million for 2022. So we're again actively working the tax side. So if we get those 2 in a reasonable timeframe, there's $13 million of cash. Again, we would probably redeploy back against some of these items. But yes, it's on our radar screen. So we'd like to do something again, while the markets could take advantage of the $9 share price and really do something on the equity side. And so again, we've talked to all of the leading banks in the world of cannabis.

So just kind of going back to the...

Back to the issue of -- there's a lot of stock to queue through between -- basically you're saying between now and $12, there's just a lot of issuance wall. That's basically the -- whether it's you're going to have to issue it one way or another between here and $12.

Yes. .

Unless you get a massive upside, rescheduling, there's still going to be issuance.

Yes. That's fine.

And as I said, we've been having active conversations with several of the leading banks on how we want to approach this. And it's -- unfortunately, it's still -- equity is not cheap still because everyone we've talked to is saying, if you're going to do something, you need to issue at a 10% or a 15% discount and you need a 0.5 warrant coverage. And so as I said, we're looking at a variety of different ways to go about it.

And what about just going -- taking out, call it, $100 million of debt?

Kyle, do you want to answer that question?

I know you don't think of this debt, but preferred equity is debt, it's 22.5%.

No, I do think. I don't like it because, one, it's a high rate. And two, we do get rescheduling, it's not deductible. So it's actually even higher capital at some point, let's call it, in the future, where interest is really deductible from a normal perspective. So the question is why not do $100 million?

Yes. Very good question. I would tell you, everything is on the table. I would tell you that I think we're on the precipice of schedule 3, that, that could be a game changer in our stock price, could be a game changer, and we're months away, like it should be first quarter next year would be my guesstimation. And we're having all the conversations. To me, right now, it's -- if someone is going to move the needle on price, it might be worth waiting a little bit. But I'm having conversations with that in mind. Banks -- investment banks, some of the folks in here, their banks. So we're considering everything. Because we don't -- we want to clean up our balance sheet, but we also want to be careful. It could be the biggest game changer we've had, and I'd hate to miss it by 2 months. I don't think you have a microphone.

It's okay. I can go without. So if I understand, the [Technical Difficulty] seems to have spreaded and the stock option. It sounds like by the end of this year, assuming everything goes according to plan, that we're going to have something like $15-plus million in cash that's coming in, plus the -- yes, I understand. But there's some amortization of the debt. But so if I just consider that $15 million, one of the things that I think about is you launching the Phase III, which is $25 million to $30 million. I know you don't need to spend that all up front. I know how conservative you are, Mark.

Thank you.

Yes. And so I'm just trying to think in my head I've always -- in terms of the share, maybe other people were thinking different. I've always assumed, I'm just assume -- and I appreciate you watching dilution. I've already always assumed you had 100 million shares. I just assumed it was all. And so I'm just curious like -- and Morgan, I'm a preferred equity holder and I comment, he was referring to like me, one of the people. I'm trying to think through like how you're thinking about bringing in cash now versus later depending on government moving and you have like a preferred equity investors like myself, that would be open to certain -- I'm sure certain new methods of investing in the company. You have warrants that are wildly in the money, and I appreciate you being sensitive on dilution. I just wonder how much of the strategy is like -- because I go back to like Ayr Wellness had warrants. They offered an incentive. It did create some dilution, but then that brought in a bunch of cash that I am just curious of your -- all the simply -- I just wonder how much simplicity overweights dilution versus cash in the bank derisking things. I know it's all complicated, but...

So I don't even know if there was a question in there. But so the way I would look at it, and we spend a lot...

I want a deal on the warrants.

Are you making an offer? So if nothing happens, Schedule 3 doesn't happen, things like that, then we're still going to clean up the balance sheet. Schedule 3 happens, one big question that nobody has really asked is what about uplisting to the NYSE or NASDAQ? The chances of somebody wanting to convert at a slight discount, that pref if they actually run a real exchange versus the OTC where you have no volume because a lot of the people look at this says, hey, I'm taking a risk. It's more like debt. So I think our conversion rate is going to be a lot different versus just instead of raising the money, just converting the prefs and making that raise something you can do on an ATM. So I would tell you like we're sort of locked and loaded, if you will, with a few different options, and we're just watching. We all thought that the rescheduling was going to happen in September this month for the election. We also thought we had different candidates, and so a lot of things are up in the Ayr these days. What I would say is it is a priority. I'm not trying to be penny wise pound foolish. But if our stock was at 14% at 3 months or 12 versus 9, the extra few months were not that expensive. Now the risk is nothing happens in our stock tanks and you're like, "Oh, s***." But that's a risk that -- I'm pretty comfortable Schedule 3 is coming.

And is it -- do you feel more confident because you have these tax credits and this cash coming in that you feel like you have, not that your cash poor, I mean, I'm just thinking of the $25 million to $30 million in CapEx.

So we have the cash in the balance sheet right now to start the process. I mean that's public. It won't cost that much to get it rolling. And so I would tell you that growth is in -- is what we do. And I would tell you, getting Glass House greenhouse II rolling is imminent.

All right. No, we had another question.

Does that allow you to access low interest Department of agriculture loans?

So that's a little bit of a curveball. I would tell you that we will be -- we will have a help license on greenhouse too within 25 days. By statute, they have to give it to us. We're going to look into it. That's a great idea. I suspect because we grow cannabis like in a real estate loan from the USDA might be a little bit more difficult since it's not just a straight hemp. I know if Mark is somewhere in this room, he's going to be yelling turn it all into hemp. I don't see him right now. But if he's here, that's what -- happily he is not right here, but he would say just turn it in. If this was all hemp, then that changes the game.

So there's just one last thing I want to cover. And then I think we will migrate. Yes, we'll migrate. We'll go back to Kyle. The last thing I do want to talk about, again, just from a tax perspective, we're actively looking on what to do with our 2023 taxes. We have not paid them yet. Again, we'll file them on October 15. We're working on strategy, which again we're rethinking how we handle 280 within our 2023. Again, it's worth about $10 million in cash. The difference between with and without 2 AE for the company. Again, Baker Tilly has been instrumental in us. We've been talking to tax attorneys on what the right approach is. So we're not sitting on our hands thinking about what we want to do with taxes. So with that, I'm going to let Kyle take it back over.

So this will be very short. I know it's been a long day of hanging around the main area of Disneyland without going on any rides. That's coming. I wanted to mention in your bags, the swag bags we gave you, I was told a lot of thought went in. The Allswell, that is our value brand. The gummies are the sleep gummies. That is extremely popular. They work really well. I always have a tin on my nightstand. So there's some really good stuff in there. So please enjoy those products. The one thing about the Allswell out the door, $9.99. So like come walking in our store, $9.99, including tax, you're out the door with an eighth of fresh cannabis. That was literally born from during the pandemic when my son came back from college with his buddies. I go down. Below our deck, we have a nice little view, they're playing poker. They're all smoking weed and drinking White Claws, and I see they have weed in Tupperware. And I was like, "Why do you guys keep this, is this like a burp fresh, what is this? And they're like, "No, that's legal." I go, "You guys have plugs delivered to you." They go, "Yes, they deliver right here." I go, "My house?" The legal weed is being delivered to my house. So like, yes, I go, that is awfully ironic. I go, "Why do you do that? You don't know what's in it." And they're like, "We can't afford legal weed." So I called Graham. I'm like, "Graham, we've got to find a way to just get COGS down and get this thing out the door." So it was really Graham and his team that did that. And it is the trend on retail that you heard Jen talk about. Retail in California is doing this. We're doing this. So if you do -- it's more pronounced when you see everyone doing this and we're doing that. So -- and really and truly, a lot of that has to do with Graham and his team. The last, last thing, where is Jesse Redmond? There he is. So Jesse decided, it's all good. We'll go to it. We'll go. So Jesse he decided to spend his 50th birthday with us all here today. So we have some cupcakes to grab on the way on the tour. But I do think, if you guys don't mind, sing in a little happy 50 to Jesse. Ready? Happy birthday to you. Happy birthday to you. Happy birthday, dear Jesse. Happy birthday to you. Okay. So just so really cool, happy 50. You don't look it. You don't act it. I think it's the weed. I would do a quick bathroom break, get some water, and we're going to be leaving from right there. And the cupcakes are underneath that umbrella over there.