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 is a long way, but I know some people, you know, 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'll help you remember. Transparency is in our DNA.
When we started this company back in 2015, it was basically a lot of my longtime investors and I, and they were used to just calling 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, like, you know, 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 three, 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 uplist 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 sesh. 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 gonna 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--w e're gonna end the day with a 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. You know, 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 appellation that matters most, which is this state. And so we don't have a hundred stores, two hundred stores. We have ten. In a post, you know, 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.
If you're a company that is driving lots and lots of revenue from BevMo's for cannabis, I think that the world may provide a pretty rude awakening. Our 10 stores, I'm not saying they wouldn't buy any more, but it's highly unlikely unless there was something that we just couldn't resist, and it made such a good ROI sense on a, in a short-term basis. Our focus is managing because we can get all the same things. 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. This guy, being a tech guy, he's sort of like Graham AI, where 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, you know, 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.
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. 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. 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. We're super excited about that.
Also, as a company, you're gonna meet some really great people. Our entire C-suite's 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. 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.
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, as we didn't believe in paying bonuses if we weren't making money, and how do we pay a 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 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 is 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... You know, 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. You know, today, we bank. There were times that we would take cash at nighttime to, I think, at one point, it was B of A, for some LLC that we had set up an account, and we did night drops because we could get $20,000 in. And we would pay people in cash and take out the deductions 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. And we know it'll 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 his presentation. Hemp. You guys may have heard we announced that, you know. So Greenhouse two, 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.
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. We're really excited about that potential that we think through the 2018 Farm Bill, that the federal government basically legalized cannabis in a different way. 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 our feet under us, then we're going to turn on the last two. We are not stopping. We can grow it and sell it because we're the cheapest, period. Full stop. 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, is the 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, 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 investor sesh has never been. So, in addition to that, the other best reason to be here is because it's 30 degrees Fahrenheit cooler than it was a week ago. So we're here at the right time.
For those of us who, those of you who have been following us for a while, I think it was two years ago, we had the hottest recorded temperature ever in Camarillo. It was a hundred and thirteen degrees. It tripped us up a bit. And one of the things we said was that we'd learn things so that the next time a heatwave happened, it wouldn't trip us up. 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 worked, the team did a good job. So fun to be here and see the progress.
So as you know, Kyle mentioned, the way we see ourselves is 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'm 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 wanted to touch on is just, you know, Glass House is particularly in cannabis in California, the number one 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 aliens 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 believed it was different for a lot of reasons that I'm going to tell you about here. So, brief timeline. We started just over three years ago. I think it was end of June, three years ago, that we went public. A lot has happened since then. We didn't own this farm, for example. Then we built it, we've retrofitted it, 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 weed in the entire state of California, which is the best on 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, at scale, but also do it with quality. So, 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 three 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 sq ft, and 350,000 sq ft 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, put in 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 loved cannabis products on the planet, where we get that feedback from. It's 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.
One of the things, to quote Warren Buffett, is, "Don't try and be brilliant, just try not to be stupid." I think one of the things that we've done a good job in not being stupid at is, we based our entire thesis of Glass House around what is cannabis going to look like, right? It's going to come back to first principles. It is agriculture. It starts with a 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 catch up. 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 twelve months of the year, because this is a great place to grow things. So the way it starts is you got basically, there's three things, right? There's people, there's ideas, and there's hardware, right? And for the military strategists out there, that'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 a 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 this 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 data to that. So if you think about things, you want temperate, 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 twelve-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 Fahrenheit and 86 degrees Fahrenheit, which is exactly the climate that cannabis likes. If you look over there in that, you know, 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's the appellation, California, that matters? There is nowhere else that it intersects quite the way that it does here. So our team, obviously, people, is what make 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 fourteen. 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 thirty years. He was the second employee at Glass House. He's been here since day one, up at our first farm.
Next to him is a guy who didn't know anything about cannabis two years ago, because he's a 25-year tomato grower, many of which were at this site. So he knows this location, this climate. He's now our director of nursery operations. Standing next to him is an absolute giant in the space. His name is Ben Vasquez. He's been on this. He's multi-generation in this area. He's been on this site since before there was a greenhouse. Every 25 years, every greenhouse has got his fingerprints on it. He is now one 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.
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 there, spend smart, is important. Below that, just a photo, just to remind you, that photo is six years old. So, you got me, you got Freddy, 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. 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, 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 gonna go through, and we're gonna see a whole bunch of stuff here, that I think is gonna be really interesting, and you guys are gonna understand why this place is special and why it lets us do what we do. Lay of the land, we'll touch on this on the tour, but just to give you the heads-up before we get started, this property is a hundred and sixty-five acres. It's a hundred and twenty 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 know, you're a 5-hour drive. There's a reason Amazon put their distribution center 5 miles away, and it's 'cause you are in the perfect place to distribute to all the western states over here, and that's where 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 Six that you're looking at right in the corner on. We're gonna go through Greenhouse One is the nursery. We're gonna look into Greenhouse Two, which will be the next expansion.
Greenhouse Five is what we just added, three and four are tomatoes and cucumbers. So you're gonna 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.
Any questions on this as we're on the tour, let me know. Some of the things that we will talk about, again, pre-preview for what you're gonna get to see a lot of this. Water is obviously a big deal. 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 LA, 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 three 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 would heat a river or the ocean, and we get CO2. Normally, you go up 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 a half or a third the cost. We get free heat, free CO2. It's about 98% efficient. Doesn't get any better for the environment or for the economics. Awesome story for the marketing as well. Solar, we're gonna drive by. We 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-designed 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 gonna see the pack house.
You're gonna see some cool things in there. Automated, bucking lines, systems we've designed, photo optical sorters, again, things that big ag guys have, but not many, and cannabis has. Every single thing you look at is gonna have saved seconds, which means it saves dollars, which means us, we can grow better weed for a lower cost than anybody else. Ultra climate, you can hear the fans running. Those are our positive pressure greenhouses. We'll talk about that, and then 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, twenty twenty-four guidance line, so the middle bar there. That includes three-quarters of Greenhouse five. Phase two is Greenhouse five, 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 five this year. Phase three is Greenhouse two that we're gonna 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 four brings in Greenhouse three and four. And one of the things I'm excited to announce here is that 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.
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. We've been talking a long time about the $100 pound. We wanted to give you guys the roadmap 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, 2022, 2023, 2024, 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 in 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. We think we'll be able to hit that by the time this is fully built out. The phase three expansion is Greenhouse II.
We'll talk a little bit about, you know, which path it goes, but what one of the beautiful things is optionality between cannabis and hemp, is we do the exact same thing in the greenhouse. So we're currently budgeting that at $25-$30 million. We've got it down for about a 10-month conversion. It's a bigger project than five and six because it's a greenhouse that's twenty-something years older. We'll dip in there, 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 timeline, but we expect it to produce quite a bit for us. The exciting thing there is it's our first greenhouse with supplemental lights. So it's got nearly 11,000 1,000-watt HPS lights in there, which are gonna improve yield.
They're gonna improve the ratio so that we can process things more efficiently, and we expect that it'll also raise the ASP because you get a higher quality product out of there. We're currently forecasting that for a first year of two hundred and seventy-five thousand pounds of additional output, so slightly higher than what we said would come out of Greenhouse Five, and I'm sure the trend will repeat itself, where we're able to take what we said and then beat it by a bit. Pro forma on there gives you an idea, two hundred and seventy-five thousand 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 lights.
So we come in with a, you know, pre-tax payback at only ten months, which makes it, once again, a pretty undeniable investment. Hemp. Hemp is 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 and our skill set to more states, Texas, Florida, New York.
You know, right there, you're talking with California, where we will continue to do our licensed operations. You're talking about one out of every three 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. We 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 II 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 at, ready to walk through that, right? A recent thing, for those of you who like the details, the DEA recently argued and said basically that THCA is still on 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 the 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. We're starting the process. We're doing the testing. We're watching the regulations. Whatever door opens up, we're gonna 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 gonna 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 one-eighth every hour that they're open, three-quarters of this entire farm is consumed just talking to Circle K and 7-Eleven. That's three-quarters 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 sq ft, now it feels like an R&D facility for us. Just like we walked into Padaro, and it felt gigantic, now it's just another farm. This felt gigantic. Today, it feels big. Soon, it's gonna feel not big enough, because we don't wanna just talk to 7-Eleven, Circle K.
We wanna talk to all the gas stations and all the convenience stores, and there's nobody better able to have this conversation about national-scale flower brands. No one even able to have it at all other than Glass House. So we will. This will not be our last farm. We will fill this up. We will go to the rest of the country. 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 3:00 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 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. 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, the print may be kinda 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, you know, one of the things, again, we talk about is interstate or hemp. Just as a setup, as we go into where the 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 'cause you can get high-quality cannabis at a very low cost. This data 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. 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 kinda lay it out on numbers. You see, you know, a state like Illinois, their average price is on flower, 66% higher than what a consumer is paying here. The one other thing to consider is that I, as Graham said, you know, 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 'cause 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 a brand side. If you think about wholesale, again, this is coming from Cannabis Benchmarks, right? The, I'm gonna 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 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, you know, we've always had in mind, we wanna build for national cannabis. There will be significant upside once the walls come down, and we can sell, you know, 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 foundationally, why is that important, right? And this is, again, apologize for the small print, but if you think about two 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 gonna 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 three 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? I've laid out three 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 sq ft came out. The average selling price was $212 per pound.
Even under those situations, you know, I would say we're gonna be a low 20% EBITDA business, right? Not saying we're going back there, but we, we've always said we wanna be built for the most difficult market situation. If you go to the 2023 average price, that's what we sold in 2023, at $300 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...
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 gonna 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 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's significant upside to the company once the walls come down, and we're able to sell. I'm using cannabis. If you believe hemp has similar economics, you're gonna 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 all the six greenhouses here are fully up and running and in production. And then just, you know, 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 600,000 lbs we do today stays in California, and the other 900,000 lbs go outside the state.
You know, again, that's dynamic, and if the markets were that much better outside of California, we'd shift even more sales outside of California. Again, the other key line in here, again, is 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 bumping your bottom line by about $50 million. So that is a significant piece of the profit for the company. So I just wanna say those are my remarks on this and kind of the overview. I'm gonna 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 save 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, then just raise your hand and we'll bring the mic over.
Well done, fellas. We got Red, Phil, and MJ. So while this slide is up, where it says California and U.S. market, U.S. 50% premium, that's cannabis. Where is the U.S. ASP on hemp right now?
Graham, you wanna take that one?
Yeah. 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 three 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 gonna 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 pounds sold through CPG US, 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, a pound out there, we're seeing, you know, prices in the $20, 20 an eighth range. I think Hilal is gonna touch to this a little bit. So $20 an eighth would be something like $2,000 a pound for packaged, you know, consumer-ready products in hemp.
2,000. And that says 416 right there.
Yeah, I think that's an ASP, so that's a blended number, which includes trim as well, so that number is gonna 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 entrants, it will, but we see is like things like bigs and smalls and stuff like that. Machine trimming is the standard. People don't separate flowers, so we see a lot of opportunity to, w hich I'm sure will bifurcate and will influence, but right now the hemp market behaves in a way that's like California twenty 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 cannabis?
W e sell our Allswell eighth on the shelf for $7.50, which puts you in somewhere right in, like, a $1,000 range, on a pound of that. So hemp pricing today is higher than the pricing we see in C alifornia.
Okay, thank you.
Is this on? Yeah. Hi, Graham, it's over here. How you doing?
Hey, Neil, how's it going?
Good. My question's on the hemp side of things. If you go hemp in phase two, 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, you know, how does that layer into your decision-making on, you know, what you're gonna do with phase II?
It's almost like we had a meeting about that this morning for two hours.
Yeah, 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, you know, we were, as Kyle mentioned, we were just going through the greenhouse. There wasn't a line that was different in the greenhouse that we would do in terms of CapEx, in terms of features, between, I'll call it Farm Bill and licensed cannabis, since they're actually the same, 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 commingle, right?
So you cannot have a processing facility that has a licensed premise, which is a very specific, defined term, and have hemp in there or cannabis outside the licensing facility. So what we can do, though, is you can have Greenhouse five, which is part of the licensed premise under the California rules for licensed cannabis, across the street from Greenhouse two, 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, you know, 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 is people are gonna realize that having different rules for a pilsner than you have for a stout is silly, and at some point, these things are gonna converge, and it's gonna be nothing but a, you know, label difference at the end of the day.
For clarity, t he 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 as a 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 w hen 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, you know, like everything else, we just use conservative estimates. But we think we'd be in pretty good shape.
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 is allowed. Put loading up a semi and having it trucked to Texas is allowed, right? One of the things the 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 compliant with the federal and then the receiving state's regulations.
T here's twenty-three 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. Also, Florida, the governor down there, his legislature, pretty conservative, tried to ban intoxicating hemp or really put the kibosh on it in a big way. He vetoed that bill and then came out against the Kim Rivers, you know, 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 him.
Yeah. Thanks very much.
Hi, 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 form, but, what the distribution would look like to then move nine hundred thousand pounds to Texas, Florida, et cetera. Like, what are the next steps from there?
Yeah, again, the nice thing, you know, if and we're exploring the path again via whatever method 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 out and 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, 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 good with California and Nevada, are they, are we still good? Because that's another path that could open this 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 fifteen cents to the East Coast, and it works. We did the math on a semi-truck. You know, it's a byproduct. You wouldn't even notice it. It's a rounding error in our COGS to get this stuff in a particularly dried form out to the East Coast. It's nothing.
And Mike, Graham's talking about interstate compacts for 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. It's sort of reminiscent to when cannabis started really growing here, where HERBL came online and, you know, 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, you know, get those inbounds.
Got it.
But we're going through the process of learning it ourselves.
Hey, guys. Thanks for doing this, by the way. Just on that topic, on hemp, is anybody doing what you guys are considering 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 or-
We'd be, we'd be a pioneer at our scale, but we're not a pioneer in the operation. I mean, the things, you know, Kyle mentioned, Whitney Economics, Beau 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 size to all of the licensed cannabis markets combined right now. So it is happening in a big way. We've 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 THCA flower line. Hello Mood is a company that you could look at $150 million a year in revenue right now. They sell everything, ship to almost all of the states. Hidden Hills is another one. So there's lots of folks out here playing in this space. At our scale, coming from California, that's a path that we're blazing.
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, you know, with the prefs and the 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.
I'll shut up. I'll shut up.
But we will talk about that.
He doesn't want the airtime yet, but he has it, and he's-
I know it's coming.
The mad scientist was hard at work on his slides.
Hi there. 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 decision's 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 know, you're in your sixth year. And so he just said, "I'm gonna do an executive order." And what he cared about was intoxicating hemp or hemp-derived cannabis being sold in competition to the cannabis market. He already knows it's overtaxed, but it's bringing in over a 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 gonna shut down smoke shops, and since he's not really shutting down illegal cannabis stores, I think it was more of just a, you know, kinda 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 state. We're 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.
How long do you think that's gonna 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 gonna 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, you know, 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 dispensaries 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, at cheaper than they're growing it. It's gonna be a really, really angry group of MSOs, in our opinion. That's a risk. We're hoping that doesn't happen, but...
Yeah, I think, you know, the biggest thing is how dynamic it is. As our counsel, Ben Vega, who's been, you know, 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, you know, 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 seven days that we're living in. So we need to get three things to line up. We need 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, who has 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 is you're diversified, so to speak, across forty-nine 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, you know, 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 DeSantis wants to call cannabis hemp and doesn't want weed, but he does want hemp, then we want to ship him 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 two different answers, right? One is, what do you do here? What do people buy here?
The other is, what can a farmer do that some other state wants, and we just want to make sure that lane is clean.
Yeah. And the threat of pissing off every MSO and having them call their state regulators, this, that, and the other, the threat that we see is just they're gonna shine a bright light on us. 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, yeah, we're gonna do hemp. We are very focused on making sure that we check, you know, 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, you know, in terms of our relative competitive advantage on the cost side, where are competitors, competitor growers, what are their cost structures look like for hemp? And, you know, how is that trending? I'm sure a lot of capital is going in. Is that also, you know, similar dynamics versus the traditional industry?
So let me. I'm gonna throw a couple of nuances and 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, I mean, Graham's going to have to kind of clarify what's out there and how that costs.
Yeah. I mean, what we're interested in doing is really growing the cannabis plant. Again, same, you know, hemp, cannabis, marijuana, weed, whatever you call it, it's cannabis. The plant's 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. A 4% tax goes to the Ventura County. We have a track and trace team of 10 people, that you don't need for cannabis. We have to do, you know, licenses that cost $100,000 a month. Cannabis license is $900 a year, right?
T here'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, you know. So if a hemp grower has an amazing team with 100-plus years of experience, and a $93 million farm and another $50 million in upgrades, and the perfect place to grow it, I think they could do a good job, too. But if they don't, they're going to pay and find the same result that you would, whether you call it Farm Bill or Prop 64.
So is this current premium just a result of hemp farmers just being, like, less productive?
I think the cur- [Crosstalk].
with much structurally higher costs?
I think the current premium is that you're getting to markets where, you know, 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 licensed program, and some call it our Farm Bill program, right? And you're getting product to people where they don't have other options. You're getting products to less mature markets. You're getting more demand for a fairly fixed supply. And so 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.
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 for an eighth is, you know, it's not so 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- [Crosstalk].
Yeah.
And thus, there's the interstate premium?
Let's see, I think we had a slide. So this, I think this slide probably is the best, you know t o help. 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 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, you know, we're happy at $600, right?
Like, they're paying, what, 4x+ 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 Cal- for us. And then we believe we will continue to carry a California premium because appellation matters, right?
The same wine from New Jersey and that wine 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, you know, our slide forecasting three 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, you know, 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 of all, follow-up on what Matt had asked. Kyle, you mentioned in terms of a more bear case scenario. So just wanted to clarify, right? So if the federal government did kind of shut it down, right, you said that would get rid of some product, but the facility as a whole could just be transitioned into cannabis within California, correct?
100%.
Right.
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, you know, hemp, is your strategy more geared towards the wholesale or your own CPG brand? Because you kind of mentioned the wholesale prices. You also mentioned, you know, getting together with C stores as well. So what would be your priority for the broader market? Would it be just, you know, getting the highest wholesale price, or would you want to prioritize selling the product, THCA, as your own Glass House Farms brand?
Okay. I'm back. Okay, 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 Glass House Allswell, we can advertise and do brand building under those, but we would. I think we would do both. Also, a wholesale is a lower lift because you don't need new packaging, you don't need direct-to-consumer websites, though you can 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'd do both.
We'd probably start with wholesale and flesh things out, and then be right after the D2C market as well.
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 just... Part of it's going to be what opportunities do we have? What are the margin, margins looking like? I see us as sort of like a Sunkist... you know, that we get the brand out, people start trusting that, "Hey, if I see Sunkist, that's, like, a better orange." And so, and then it allows us to just grow even using other people's farms.
Yeah, and I think, you know, 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 compacts, if we're talking about the STATES Act, if we're talking about decriminalization, if we're talking about Trump saying, "Leave it to the states," like, all those are roads 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 you think about timing, you said 10 months to build it out. Has that 10 months shot clock started? And when would you think the decision is, say, like, hemp versus cannabis? Is it somewhat reliant on the rescheduling? How are you thinking about timing? You know, I was wondering if today you'd say, like: "Hey, yes, we're going hemp," or, like, you planted that or not. 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 timeframe to see what he thinks. It is a different greenhouse than this one, and you know, that's six and five. This one has some different challenges, so I want to make sure we're conservative, but you know, we push, push, push. I'll leave the timing question to Graham.
Yeah. So the ten months is from placing the first order, which has not happened yet, but as Kyle alluded to, is, you know, we're doing the short strokes on getting ready for that. The decision on Farm Bill versus licensed 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'll go in there. That starts with either 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, you know, probably Q2 is when we need to say, "This is the direction that we anticipate going.
We've already applied for a hemp license, so that takes within thirty days. That's the statute. And by doing that, that allows us to put hemp plants in Greenhouse two 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. You know, 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? But whatever Graham has shared, and he's an aggressive guy, I would say hopefully we can. I mean, we'll be pushing to beat it.
[Inaudible] If there's positive resolution to the hemp bill next year, what would prevent, like, you know, your neighbor growing strawberry from getting a license?
The question was, if there's positive resolution on the hemp bill, what would stop all of our neighbors from switching to hemp? Nothing.
Yeah, they'd just be growing hemp outdoors in the rain, the sun, 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... You know, it's a lower bar to entry for sure. That's part of the reason that we're excited about it.
One thing, just to be clear, think of greenhouse and outdoor. That's outdoor, just when it sits out there on the field. This is greenhouse, right? Think of tomatoes for a second. Tomato sauce, the inputs are grown in a field. 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. You can see the tomatoes because you need to be able to control it. The nice thing about tomatoes, that 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.
[Inaudible] I don't need a microphone. So Porter's question, that's on the expansion. But what holds you back from converting grown cannabis that you have now and replanting them?
So on that one, Mark's question was Porter's question was about Greenhouse two, which is expansion. What stops us from turning Greenhouse six and five, the whole farm, 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 two, and if we said, "Hey, we need more hemp," we have Greenhouse three, and we have Greenhouse four. 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 two, three, and four, then I think we have a, you know, a decision point at that time.
But if you're looking for the answer, nothing would stop it, that would be the answer.
All right. So we're gonna take a lunch break now. The food is over there, and we want to reconvene at 12:45 P.M. Thank you all.
Thank you.
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 gonna 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 shit done. Really, she runs the heart and soul of all sales, distribution, and strategy for Glass House. On my left, from this side, is Jen.
Jen Barry is our VP of Retail. She has thirty years of experience in retail, very much a veteran in retail, mostly in fashion and in home goods industries, but also she has seven years in cannabis industry, so she is really an expert in retail cannabis. Her expertise is also get it 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+ years in the cannabis industry. Now, that's out of the way, I'll introduce my experience a little bit. I have six years experience in cannabis and hemp. I did sell hemp CBD, both for pets and human, for four years, but I've been with Glass House for two years. Before that, I co-founded a beverage company in Chicago called Limitless, which myself and my colleagues helped sell to Keurig Dr Pepper.
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 I was 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 gonna talk to you about is really little on the business, because I don't want... I promised my team not to steal their thunder. So let me jump into it.
So at Glass House, we have three 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 three farms, and we put it in our CPG portfolio. So our CPG portfolio consists of three 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. Allswell, 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 year, year and a half 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 three brands with 10 stores positioned across California. All the data I'm gonna mention today is from Headset, so I don't have to say every slide, "This is 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 to 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.
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 sq ft in canopy, active already, 3.5 million sq ft 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 notice last ninety days, actually last a hundred and eighty 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 their late twenties, early thirties. 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 five in our stores, which saying top five even in our stores, it's a highly competitive, call it, sector, the vape, but 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 three 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 two 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. Then most importantly, we have to continue to grow, because if we don't grow, we can talk next year, same time, and we'll 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 wholesale.
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 four 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 makes 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 two years, it skyrocketed to that position. So that really illustrates how we saw the opportunity, took hold of it, and grabbed it with both hands. And then transitioning to Glass House Farms. This illustrates how we can diversify. It's one plant, right?
One 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 mixed 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 consumer's needs. PLUSs 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.
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? 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. That's happening right now, and we will continue to evolve this brand as consumer interests and needs change. 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 makes smart and strategic business decisions. 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+ people down to a ninja-like sales team of four 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 that we have 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 two 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 gonna 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 two ways that we illustrate that we are just on the precipice of the success that we're gonna have. And with that, I'll transition to wholesale. Okay, well, thank you. I'll take your applause. Yeah, so wholesale, conversely, is business to business, right? This is where we sell bulk pounds. You guys are gonna 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 gonna 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.
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 gonna 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 gonna get consistency of supply. So we're gonna 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 two 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. 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 a mass exodus, if you will. A lot fewer people left, or 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 gonna 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 gonna 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 have 10 retail locations that are across the entire state. We are tracking right now to serve about a 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 three retail brands. We have Farmacy, NHC, and our store in The Pottery. I'm gonna give a little shout-out to my walking billboard right there, the Farmacy standing as. Appreciate it. Thank you very much on that one.
With that being said, I wanna 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 three 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 one dispensary. If we pivot over to the Colorado area, that is for every 8.3 thousand Colorado residents, there is one dispensary. So quite a bit of a disparity there. To put it in a little bit more perspective, for every 1.3 California residents, there is one liquor license.
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, it's kind of giving us this really vast disparity in what we call weed deserts. 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. You have these small areas, again, where 50% of the active licenses are. 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 one 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 Jack 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 two, 2023 versus quarter two, 2024, is an 8% decline.
If you look at our stores, same comparison, we were up six year over year. So again, when I say that this strategic pricing was immediately effective, it was, and this articulates that. What I'll also say is this kind of re-emphasizes 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 enabled to optimize and prioritize our Glass House brand sales within our own stores. Right now, if you look at it, our Glass House brands deliver about a 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 obviously wanna sell our product, we wanna get behind it. We're 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, that kind of marriage of what you see happen in retail and how we make informed decisions. What I would say here, and, 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 two years ago.
When we acquired them, and the top line is our Farmacy and The 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% of their sale, and within a year, we grew that to 25%. This right here goes through the end of quarter four, 2023, 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 gonna bring traffic into your door? What are those things that you see on weed maps? 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, too. And that has been an incredible tool for us within our 10 locations to help drive traffic.
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 two, 2023 to quarter two, 2024, we saw a 20% increase in transactions. And Allswell ninety-nine, Glass House, and a couple of the 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. Oops, skipped a 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 impact 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, you know, 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 app. We have an app.
If you feel the need in your travels and you want to hit that QR code, it'll take you right to the Apple Store or Google Play Store, and you guys can download and become friends of 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 then 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, you know, 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, you know, 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 two 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 gonna pass the baton over to Josh.
All right. 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 a treat. There's nothing like this in the universe. Hilal gave me a great intro. I'll try to keep the background brief. Cannabis is my third career. I started out in music, worked for labels, was an artist manager, got into content production, advertising after that, owned an agency. I started the video department at Hurley, directed commercials for a lot of big brands. 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 Moxie, and we sat down, we talked for, like, four 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 as a consumer. But we talked for about four 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, you know, I got started at Moxie, was there for a couple of years through a period of... We raised $50 million. We got sold for $350 million. Company's now dead. High Times bought it, and it's gone. But, learned a lot there and then have been, you know, getting my ass kicked around the industry for several years.
Eighteen 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 it in California, and I wouldn't want to be anywhere else with anybody else. It's all happening right here. And so, you know, 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's accomplished over the last year. Let me hit play.
[Promotional Video Playing]
So yeah, 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 yeah, just a little bit about strategy and what marketing is and philosophies on marketing is if the farm is the heartbeat of Glass House, marketing is the 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 work super close with my colleagues, and 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 product, packaging, innovation. We work closely with everybody on that, and we partner with the farm. Our... 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 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, you know, 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, o ur 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, what? 400 people now. If we have 400 evangelists in this company, can you see how powerful we would be? So that's, 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, we're super gritty. We do not spend very much money. I have a small team, and we work hard. We manage five consumer brands, we help support three retail brands, and we run, 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 shit done. It also means just eliminating anything that doesn't add value. Could be a touch point as simple as, like, the little insert that used to go in the PLUS tins. It's costing us $75,000-$80,000 a year. It's a very easy thing to just rip out of it because it didn't matter. It wasn't adding value.
And we, yeah, 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 the same, you know, 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 saying on the package? Even the label, 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, yeah, just very excited about the portfolio of brands right now. Glass House Farms, our premium brand. Nobody's growing more great weed than 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, 'cause as a consumer, that's what I wanna buy. I wanna smoke the freshest, tastiest weed 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.
Just love what we've done, and then just sort of with the brand over the last year. We listened to consumer. We rolled out Farm Packs, giving them more bang for their buds. You know, you buy our weed now; it's like we're not... Eighth jars are a thing of the past. If you really smoke weed, you want a quarter, a half ounce, an ounce of fire weed, and we're doing that now in the Farm Packs. Yeah, just very excited about where we're going with Glass House. And just some of the value prop here, cured indoors. When you get a chance to go look and see how we're drying and curing weed today, you're gonna love it. It's like, growing weed is pretty much only half; it's half the challenge.
The rest of it is, how do you dry and cure it and get that quality consistently into the jar or 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 Wyld, I've eaten a lot of Camino. They're kicking our ass, like, in sales charts, but I think we have as strong or better a product. So the challenge for us this year is gonna be just to have people give PLUS a chance and try it. So amazing sampling campaign. We're gonna go make it happen and get PLUS popping. As Jacqueline mentioned, we're the first brand in the top ten 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 gonna get PLUS going. And then Allswell. I mean, Allswell has been sort of the belle of the ball. Now a top three brand in flower sales in California. And think about this, that is one input in three package sizes to get top three. There's a lot of blue sky. There's more blue sky in Allswell than any other brand. There's 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. Yeah, Allswell's amazing. Tons of blue sky. And that is it. I think we're ready for Q&A.
You can keep it. Thank you. We 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 gonna keep it. Questions?
So since HERBL blew up, have there been notable improvements in terms of collections? Ha ve you just tightened your credit policies, or has there been improvement in those that you extend credit to, have they been now 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 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, too, 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, you know, the stat, I think Jack said, you know, we're collecting 97% of the cash against the revenue, is a really good stat when you consider how the cannabis business is 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 two or three or four other brands who will just step in and take their place. So we haven't fallen into that trap.
The other thing I just want to mention, too, is we're lucky because my credit manager, Jack, and I have all worked together in previous lives, 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 $100,000 , 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 that low cost competitive in that environment? And then second of all, just kind of talk to us about the vape category, right? Pretty good growing category, kind of thoughts around growing that vape category for you guys?
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 very likely to continue to grow industry or category, and that's not only in California, it's across the state. 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 everyday EDLP, everyday 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 gonna grow with it, at least in Allswell, because we're giving the consumers what they want, but at a really competitive price. As for your first question?
The first question, in relationship to Allswell and outside dispensaries, it's our biggest revenue driver. We just were shy of $1 million of revenue for Allswell last month, so it's doing incredibly well for us. 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. 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. Well, last quarter, actually, in unit sales. So unit sales, we're crushing it, but we're gonna 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 cohort?
It's both folds. It's the actual vape and how it smokes, 'cause there's no smell. You can put it in your pocket, it's easy, it's portable. And the other piece is consumers' mindset. Gen Z is different than Gen X and different than the baby boomers, and so on and so forth. Baby boomer is all about tincture. So it's also consumer and shopper-centric. So the key reason, I believe, is it's a consumer generation thing. So I hope that answers your question.
It's just convenience.
C onvenience. Yes, thank you.
It's easier. You know, you can pull... You know, you look, it's pre-rolls and vapes are an easy, you know, yeah, they're not sitting there with bongs 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, you know, in the meantime, yeah, I've, I got kids and, you know, yeah, vapes are easy.
Thank you for the presentation. 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'm gonna give a broad generalization, is 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, you know, come to the, you only can buy smalls, for example, and it's, like, off brand, and, and, and I just wonder how else you can lean into what I see as the power consumer, and away from this, like: "Look, we're the Apple store." Can you share your thoughts and long-term vision on that?
Yeah. Yeah, definitely. And, you know, what I'll say, and it's kinda going back to one of my first slides, is what's so unique about California, and if you look at our ten locations, what I love about our ten 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 Anthropologie and Nordstrom, so Anthropologie for sixteen years. I really like pretty things, and I really like that experience of 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 five 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, product that didn't sell, things that were manufactured or brought into an outlet shop that maybe didn't sell in the, you know, 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: "Yeah, I, I know why this is cheap, because it's almost a year old, and it's not gonna be fresh, and it's not gonna 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. I'm sorry, 36 legal dispensaries, not to even say the trap shops.
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 they're just a transaction. It's about getting them in and getting them out, and we really pride ourselves on that experience. So... I'm getting the mic taken from me, [Inaudible].
I' ll just add one thing, because your first question was like, why dispensaries are not doing well in general, or 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 run. 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 onto 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.
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.
Hey, 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 wholesaler? Yeah, 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 Z. 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 we're 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're responsible for making sure that they're selling it to, you know, in a legal, regular, 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, we - they were our only CPG customer. 'Cause 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 worked with Jack's team. So it was easy for us. We had one customer. We said, "Did they pay or didn't they?" 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 Jack's team and credit, we do the invoicing, we manage the receivables, so we now have how many customers?
Give or take, two hundred.
We deal with 200 customers, and in essence, again, thanks to her team and the other members, we've done it pretty seamlessly.
Easy as relative.
So 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, what do you think?
So we've I think, I feel we've saved money because the fees we were paying 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, Jack. People who've been in it before, and candidly, one of the reasons HERBL ran into difficulties is 'cause they were pretty loose with their credit, and they assumed their business was gonna continually grow, and it didn't. And they didn't right size it for what ended up happening to them.
All things considered, even with the additional headcount 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, significant decrease overall, even with the additional folks.
I just had 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 it used to?
It's all about focus. Field is not the biggest focus because, like I said, it's how many. When you go into a bar district, how many out of the twenty 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 nineteen bars that just turn over and make profit, but in turnover. We still have Field. We have another nine months worth of product, but we're kinda like gonna keep it on the low. To let it pay for itself, sell itself, but we're not making extended effort to grow it and to go to more dispensaries and 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.
I noticed when you talked about the rosin in the Plus gummies, you didn't use the word live. Does that mean that you're using in-house cured trim to make the rosin, or what is the input on the rosin that you're using for the Plus line?
It's a solventless. 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. 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. Yeah, made without chemical solvents. It's better for you, and we can make it at a price point. If we were doing field style, strain-specific, you know, live rosin and putting it in a gummy, we'd be selling it for two, three times what we're selling it for.
The only- [crosstalk]. The only other thing I was gonna 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.
Thank you.
Thank you. 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 we think about greater ACV, right? It doesn't sound like you want 100% ACV, you know, 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 and stores, via more SKUs or otherwise. And then third, just increased velocities of your existing SKUs in store. So as we think about the opportunities for growth within CPG, how should we think about what will be the greatest drivers there?
F irst, 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 turns, so they come back faster, and they're always choosing us over the competition.
In a traditional beverage term, which is easier to understand, there are two ways to grow. There is numerical distribution, and there is weighted distribution. We are 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 is not good business. Others are willing to take the risk, we are not. We are calculated on what we do, on who we deal with, but weighted distribution is what we are doing now. We have customers that do $100,000 a month, so that is significant. I hope that answered your question.
That's great. Thank you.
I think we're done. Thank you, everyone, for your time, and we appreciate you being here and listening, and thanks again.
We have a fifteen-minute break, and then we're coming back up at... We start again at... Or is it a ten-minute break. Get back at 2:10 P.M.
That, that'll be part of the conclusion of the day. All right, I'm gonna 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 P.M., have a little bit of a break, and then get everyone on the road for the tour starting at 3:00 P.M. 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 greenhouses. So, my thought here again, is we get consistent questions, or John and I do, with almost everyone we talk with about our balance sheet and 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 gonna show you, for the most part, is buried in our financials if you wanna play detective and read page 37 of 39 pages. But I thought I'd help organize it and bring it up in a simple fashion. Or said a different way, right? If you, if you give a man a fish, you've fed him for a day, but if you teach him how to fish, you've fed him for life. So after I'm done, I'm, 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 go to.
This is a snapshot of, like, where everything sat at the end of Q2, right? What are, I'm gonna call it, non-operating 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 gonna 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 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 and this farm, you have almost five point five million shares. And then beyond that, you have the warrants, right? So we have thirteen point nine million warrants outstanding with the B, Cs, and Ds, and then thirty point seven million of warrants associated with the SPAC. And basically, what I'm gonna 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 I'm gonna peel the onion and kinda go item by item.
So first thing I wanna talk about is basically the contingent shares and the earn-outs, and the shares payable, and what's that gonna 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 gonna 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 gonna 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 Houweling, 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 2026, or if we get the entire farm licensed cannabis before June 2026, right? Good news, if that actually happens, it means we're going, you know, flat out 300 miles an hour to get it done. But if you're thinking about share counts, 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 the 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 first of this year. It's a twelve-month period. It runs through March thirty-first 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, a forecast of about $80 million in EBITDA coming from Camarillo over the twelve-month period, right? It's very sensitive.
For every 3. I think for every 3.5 million above that we go, he 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 gonna get more shares, but that should be a good thing, right? So it's kind of in reverse. The one other thing I do want to point out about this agreement is this was developed or signed during a period where wholesale greenhouse flower was selling for $1,200 a pound, right? So if that's where the market was today, we'd be blowing right by that.
The simplest thing to do when you see that number at the end of Q3 is just take 3.5 times our share price at the end of the quarter. Go, "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 to got some deferred shares. Again, part of it was to make sure as we kind of ran the stores, there was 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 what's remaining in that number is gonna go down by roughly 70%, and that number should be a lot smaller. Now, that the number of shares is fixed, so that the once we issue the five eighty-two, the remainder should be out there until Q3 of 2026. So that's, you know, kinda how those two 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 November 30 of 2026. By the time we amortize, it'll 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 at 12%. The floating range is 10%-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 gonna need several rate cuts before that 12% would come down. So that's the 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 gonna let them ride right now until basically the maturity. There are two tranches. The larger one, almost $12 million. There's no cap, right?
As long as we think our share price is gonna go up, we're just gonna let it roll until the end of April 2027 when it becomes due, and we'll convert into shares at that point in time. The Series B part of that $4.1 billion is actually capped at $10. So once we hit $10, we'll issue the shares. That'll 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 would 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 gonna be roughly $127-$127.5 million. So then, just understanding, so what's the cash impact to that? Or how do you, how should you guys think about modeling cash, right? I'm gonna say for the next couple of quarters, the cash out the door related to the dividends, amortization, and the interest is gonna be roughly $5.2 million. Right?
So, you know, we're paying almost $1.9 million in debt amortization. We have a few car loans and other things in there, so that's why it's not exact, the exact amount. And then the cash interest, as we amortize down the balance, is gonna 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 gonna 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 gonna 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. You know, the exercise price on the D warrants is $6. The exercise price on the Bs and Cs are $5. They expire August the twenty-seventh, so basically in another three 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, you know, 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 gonna be, but in theory, if everyone said, "I wanna 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 gonna, we're gonna, we're gonna force the early redemption, and it's up to you whether you want to do it and, 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, you know, you're, you know, we'd 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, you know, 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 gonna do to my diluted share count, right? So we do have an ability to force, and I'll call it an early expiration, when the share price crosses $10, right? And, you know, 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 gonna stay above $10, as an example, the 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 curveball and says, "My first day in office, I am going to legalize, not reschedule, but legalize cannabis." And, you know, we pop up, and they do it as a New Year's Eve present, so they do it on twelve twenty-seven, right? And the share price goes up $5, right? I just... Don't please quote me on that, but this is all hypothetical. We could basically send out a notice and force a redemption of 4.4 million shares. As a nice way to reduce the redemptions when it gets really high, and you're now issuing shares at a much higher number.
Or at that point at which you say, "I could access the market, at a higher number, and why dilute myself with 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 forty-four million shares or warrants and remove them and issue twelve million shares, right? So again, looking for ways for not only me as the CFO and the executive teams as 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 two or three years, I just wanna 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. You know, 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. It, 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 would 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.
We're gonna continue to give RSUs on an annual basis, right? So again, if you wanna throw a number in there and you say, "Well, how many shares are we gonna have in 2027?" Just keep that in mind, right? Everything's done on a three-year basis. All right, now this is a real eye chart, but just... Again, this helps. 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 at page 79 or, t his, 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 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 time zero or when they expire, that number goes down, right? So if we decided to do that at, you know, 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 time zero, all the numbers in the very last row are basically assuming cashless 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, you know, 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 gonna be in there.
Gonna have the deferred Camarillo shares, and you're gonna have the deferred NHC shares. Right? Those are gonna 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. So as an example, let's say we got to 18 in March of 2025, we'd 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 gonna redeem it, and we're gonna be capped at $411,000. There's no reason to let that accrue. And just, we, we pay the semiannual dividends with shares. So assuming we continue to let this roll to maturity, we, we could end up issuing a couple hundred thousand shares. Again, crossing $12, we issue 7.8 million again on a cashless basis. And then I laid out two scenarios for the SPACs, right? Assuming a $12.28 at the end of this year and just letting them roll to the very end. So, you know, 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're, if you leave here tonight going, "We're gonna have 120 million by the time we get to 2027," I don't think that's a good assumption, right? It's gonna. We're gonna try to manage it somewhere within this range. Okay? So I, I'm gonna 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 spent 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 gonna 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 there, like, a large holder or is there- It's a cross-section of, I'm gonna call it, existing. I'm gonna 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, you know, as we raised that money. So interestingly, the B, 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, into Series B at a time when you were to 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? Wouldn't be that. I mean, Green Thumb did it today .
Yeah.
Not hard at all.
Yeah
H onestly, versus, you know, convert shares. You know, what, what do you think is the most elegant solution there? 'Cause honestly, it could be done right now. I don't see why it's not done right now.
Right.
That's my [Inaudible].
So, that's-
It's outrageous that you're paying now 22.5%.
Right. So I'm gonna flip to the next page, 'cause 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, "You know, we're gonna raise $25 million. I'm gonna say, given what we showed you guys and what you'll see, we're gonna need another $25 million for the phase three expansion, right? So I'm looking at $168 million. I'll start at the top again. You know, Kyle's working to replace the secured facility with $50 million. We have a relationship with East West Bank. They're kind of the lead.
We wanna get in there, hopefully sub 10% interest only or an extended amortization period, which not only we lower 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-$75 million, right? We've had a, 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. Bring in some equity, particularly focused on the phase three expansion.
And then I have to say, there's nothing concrete today, but we've had active discussions about how to replace that preferred equity from anything, again, convertible debt to straight debt. You know, one of the things again, you know, is there another preferred Series Z? 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 gonna happen to the market going forward, right? And again, is a bird in the hand better than two in the bush? You know, we really believe rescheduling is gonna happen. When that happens, the capital markets should be much easier to access. The cost of capital should go down.
You know, internally, we've had active discussions on uplisting and what that might look like, and we wanna 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 wanna 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 six months after rescheduling or when 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, two and a half. It goes up $2.5 million .
I t's high. It's very high on our priority. So a couple other things I do want, I do wanna point out, right? There's a couple 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 gonna get our money. As far as I know, they are paying them, but they're slow-rolling it. You know, 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.
When we filed it, we actually used a tax attorney and didn't use one of these firms that charged 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 number ten or eleven from CPA, to be our tax advisor 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 two in a reasonable timeframe, there's $13 million of cash.
Again, we would probably redeploy back against, you know, some of these items. But yeah, it's on our radar screen. So, you know, we'd like to do something, again, you know, while the market's good, take advantage of the nine-dollar 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.
J ust kinda going back to the issue of, you know, there's a lot of stock to chew through-
Yeah.
You're basically, you're saying between now and $12, there's just a lot of-
Yep.
There's an issuance wall. That's basically the... Whether it's, you're gonna have to issue it one way or another-
Yeah.
Between here and $12.
Yeah.
Unless you get a massive upside-
Right.
Rescheduling, there's still gonna be issuance.
Yeah.
It's fine.
Yeah. No, and as I said, we've been having active conversations with several of the leading banks on, you know, how we want to approach this, and it's unfortunately still a, you know, equity is not cheap still, because everyone we've talked to is saying, you know, if you're gonna do something, you need to issue at a 10% or 15% discount, and you need a, you know, 0.5 warrant coverage. And so we're. As I said, we're looking at a variety of different ways to go about it.
What about just going, taking out, call it $100 million of debt?
Kyle, you want to answer that question?
I know you don't think of it as debt, but the preferred equity is-
No, I do think I
22.5%.
I don't like it because, one, it's a high rate, and two, when 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 a hundred million?
Yeah, very good question. I would tell you, everything's on the table. I would tell you that I think we're on the precipice of Schedule III, that that could be a game changer, and our stock price could be a game changer, and we're months away, like, should be first quarter next year, would be my guesstimation. And we're having all the conversations. To me, right now, it's if something's gonna 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. 'Cause we don't we wanna clean up our balance sheet, but we also wanna be careful. It could be the biggest game changer we've had, and I'd hate to miss it by two months.
I don't think you have a microphone.
[Inaudible] That's okay, I can talk loud. So if I understand about the ERTC, California tax credit, and the stock options-
Yeah.
It sounds like that by the end of this year assuming everything goes according to plan, that you're gonna have something like 15 + million [Crosstalk].
Yeah
in cash that's coming in.
Yeah.
Plus. Yeah, I understand, but there's some amortization [crosstalk].
Yeah
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 three, which is $25 to30 million. I know you don't need to spend that all upfront.
Right.
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 are thinking differently. I've always assumed. I've just assumed, 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 a common. He was referring to, like, me, one of the people, like. I'm trying to think through, like, how you're thinking about bringing in cash now versus later, depending on government moving. And you know, you have, like, preferred equity investors like myself that would be open to certain, I'm sure, new methods of investing in the company. You have warrants that are wildly in the money.
I appreciate you being sensitive on dilution. I just wonder how much of the strategy is like, 'cause I go back to, like, Allswell had warrants. They offered an incentive. It did create some dilution, but then that brought in a bunch of cash that... I'm just curious if all the simplicity outweighs dilution versus cash in the bank, de-risking things. I know it's all complicated, but.
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 of. [Crosstalk]
I want a deal on the warrants.
Are you making an offer? So, if nothing happens, Schedule III doesn't happen, things like that, then we, you know, we're still gonna clean up the balance sheet. Schedule III happens, one big question that nobody's 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 want a real exchange versus the OTC, where you have no volume. 'Cause a lot of the people looked at this as, "Hey, I'm taking a risk." It's more like debt. So I think our conversion rate is gonna be a lot different if versus just instead of raising the money, just converting the pref and making that raise something you could 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 rescheduling was gonna happen in September, this month, before the election. We also thought we had different candidates, and so a lot of things are up in the air 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 three months or $12 versus $9, the extra few months were not that expensive. Now, the risk is nothing happens and our stock tanks, and you're like, "Oh, shit!" But that's a risk that I'm pretty comfortable Schedule III is coming.
Are, do you feel more confident because you have these tax credits and this cash coming in, that you feel like you have-- Not that you're cash poor. I mean, I'm just thinking more of t he $25 to 30 million in CapEx?
So we have the cash on 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, you know, growth is what we do, and I would tell you, getting it, getting Glass House Greenhouse Two rolling is imminent. Okay.
All right. W e got another question.
If you were to receive a license for hemp, would 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 licensed. We will have a hemp license on Greenhouse Two within twenty-five days. By statute, they have to give it to us. We're gonna look into it. That's a great idea.
Yeah.
I suspect because we grow cannabis, you know, like, getting 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 gonna be yelling, "Turn it all into hemp." I don't see him right now, but if he's here, that's what... Happily, he's 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.
I have a quick follow-up.
Yeah, 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 fifteenth. We're working on strategy, which again, we're rethinking how we handle 280E within our 2023. You know, again, it's worth about $10 million in cash, the difference between with and without 280E for the company. Again, you know, 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 gonna 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. 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 walk 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 and Tupperware, and I was like: "Where-- Why do you guys keep... This is, like, burp-fresh or what is this?" And they're like: "No, it's illegal." I go: "You guys have plugs delivered to you?" They go, "Yeah, they deliver right here." I go, "My house? The illegal weed's being delivered to my house?" They're like: "Yeah." 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 call Graham.
I'm like: "Graham, we 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 thing, where's Jesse Redmond? There he is. So Jesse decided... It's all good. We'll go to it. We'll go, we'll get... So Jesse decided to spend his fiftieth 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 singing a little happy five-oh to Jesse. Ready? Happy birthday to you. Happy birthday to you. Happy birthday, dear Jesse. Happy birthday to you. Okay, so really cool. Happy five-oh, man. You don't look it, you don't act it. I think it's the weed.