Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2022 shares | |
Document Information [Line Items] | |
Document Type | 40-F |
Document Registration Statement | false |
Document Annual Report | true |
Document Period End Date | Dec. 31, 2022 |
Entity File Number | 000-56261 |
Entity Registrant Name | Glass House Brands Inc. |
Entity Primary SIC Number | 2833 |
Entity Incorporation, State or Country Code | CA |
Entity Tax Identification Number | 87-4028335 |
Entity Address State Or Province | CA |
Entity Address, Address Line One | 3645 Long Beach Blvd. |
Entity Address, City or Town | Long Beach |
Entity Address, Postal Zip Code | 90807 |
City Area Code | 212 |
Local Phone Number | 299-7670 |
Title of 12(g) Security | N/A |
Trading Symbol | N/A |
Security Exchange Name | NONE |
Annual Information Form | false |
Audited Annual Financial Statements | true |
Entity Current Reporting Status | Yes |
Entity Interactive Data Current | Yes |
Entity Emerging Growth Company | true |
Entity Ex Transition Period | false |
Entity Central Index Key | 0001848731 |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2022 |
Document Fiscal Period Focus | FY |
ICFR Auditor Attestation Flag | false |
Amendment Flag | false |
Auditor Name | Macias Gini & O’Connell LLP |
Auditor Location | Los Angeles, California |
Auditor Firm ID | 324 |
Business Contact | |
Document Information [Line Items] | |
Entity Address State Or Province | CA |
Entity Address, Address Line One | 3645 Long Beach Blvd. |
Entity Address, City or Town | Long Beach |
Entity Address, Postal Zip Code | 90807 |
City Area Code | 212 |
Local Phone Number | 299-7670 |
Contact Personnel Name | Kyle Kazan |
Multiple Voting Shares | |
Document Information [Line Items] | |
Entity Common Stock, Shares Outstanding | 4,754,979 |
Subordinate, Restricted and Limited Voting Shares | |
Document Information [Line Items] | |
Entity Common Stock, Shares Outstanding | 55,653,855 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Current Assets: | ||
Cash | $ 11,143,502 | $ 51,066,831 |
Restricted Cash | 3,000,000 | 3,000,000 |
Accounts Receivable, Net | 5,652,949 | 2,893,911 |
Prepaid Expenses and Other Current Assets | 8,347,055 | 5,562,963 |
Inventory | 12,057,570 | 6,596,302 |
Notes Receivable | 1,255,843 | |
Total Current Assets | 41,456,919 | 69,120,007 |
Operating Lease Right-of-Use Assets, Net | 10,847,642 | 3,077,730 |
Long Term Investments | 4,246,192 | 7,196,359 |
Property, Plant and Equipment, Net | 216,716,895 | 195,798,524 |
Intangible Assets, Net | 48,651,835 | 5,629,833 |
Goodwill | 21,808,566 | 4,918,823 |
Deferred Tax Asset | 1,289,882 | |
Other Assets | 3,650,468 | 2,339,993 |
TOTAL ASSETS | 348,668,399 | 288,081,269 |
Current Liabilities: | ||
Accounts Payable and Accrued Liabilities | 22,333,788 | 10,215,004 |
Income Taxes Payable | 7,549,878 | 5,038,983 |
Contingent Shares and Earnout Liabilities | 14,656,666 | 38,428,700 |
Shares Payable | 8,588,915 | 2,756,830 |
Current Portion of Operating Lease Liabilities | 1,077,971 | 269,154 |
Current Portion of Notes Payable | 40,237 | 37,986 |
Total Current Liabilities | 54,247,455 | 56,746,657 |
Operating Lease Liabilities, Net of Current Portion | 9,859,232 | 2,865,480 |
Other Non-Current Liabilities | 4,505,336 | 1,449,045 |
Deferred Tax Liabilities | 1,330,815 | |
Notes Payable, Net of Current Portion | 62,618,711 | 44,817,436 |
TOTAL LIABILITIES | 131,230,734 | 107,209,433 |
SHAREHOLDERS' EQUITY: | ||
Additional Paid-In Capital | 261,527,245 | 241,896,900 |
Accumulated Deficit | (96,362,182) | (60,827,290) |
Total Shareholders' Equity Attributable to the Company | 165,165,063 | 181,069,610 |
Non-Controlling Interest | (4,261,516) | (197,774) |
TOTAL SHAREHOLDERS' EQUITY | 217,437,665 | 180,871,836 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 348,668,399 | $ 288,081,269 |
Series B Preferred Stock | ||
MEZZANINE NON-CONTROLLING INTEREST: | ||
Preferred shares | 51,774,193 | |
Series C Preferred Stock | ||
MEZZANINE NON-CONTROLLING INTEREST: | ||
Preferred shares | $ 4,759,925 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 |
Multiple voting shares, par value (in dollars per share) | $ 0 | $ 0 |
Multiple voting shares, shares issued | 4,754,979 | 4,754,979 |
Multiple voting shares, shares outstanding | 4,754,979 | 4,754,979 |
Subordinate voting shares, par value (in dollars par share) | $ 0 | $ 0 |
Subordinate voting shares, shares issued | 55,653,855 | 38,563,405 |
Subordinate voting shares, shares outstanding | 55,653,855 | 38,563,405 |
Exchangeable non-voting shares, par value (in dollars per share) | $ 0 | $ 0 |
Exchangeable non-voting shares, shares issued | 12,566,550 | 18,256,784 |
Exchangeable non-voting shares, shares outstanding | 12,566,550 | 18,256,784 |
Redeemable noncontrolling interest, Preferred Series B | ||
Redeemable preferred shares, par value (in dollars per share) | $ 0 | $ 0 |
Redeemable preferred shares, shares authorized | 55,000 | 55,000 |
Redeemable preferred shares, issued | 49,969 | 0 |
Redeemable preferred shares, outstanding | 49,969 | 0 |
Redeemable noncontrolling interest, Preferred Series C | ||
Redeemable preferred shares, par value (in dollars per share) | $ 0 | $ 0 |
Redeemable preferred shares, shares authorized | 5,000 | 5,000 |
Redeemable preferred shares, issued | 4,700 | 0 |
Redeemable preferred shares, outstanding | 4,700 | 0 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Revenues, Net | $ 90,891,087 | $ 69,446,852 |
Cost of Goods Sold | 69,352,692 | 53,427,461 |
Gross Profit | 21,538,395 | 16,019,391 |
Operating Expenses: | ||
General and Administrative | 45,756,572 | 33,780,783 |
Sales and Marketing | 3,427,338 | 3,530,529 |
Professional Fees | 9,951,482 | 9,078,289 |
Depreciation and Amortization | 12,301,466 | 4,767,396 |
Total Operating Expenses | 71,436,858 | 51,156,997 |
Loss from Operations | (49,898,463) | (35,137,606) |
Other Expense (Income): | ||
Interest Expense | 7,608,490 | 2,736,875 |
Interest Income | (56,468) | (64,837) |
Loss on Equity Method Investments | 2,006,639 | 1,089,047 |
Loss (Gain) on Change in Fair Value of Derivative Liabilities | 29,863 | (825,000) |
(Gain) on Change in Fair Value of Contingent Liabilities and Shares Payable | (28,868,949) | (4,031,634) |
Loss on Disposition of Subsidiary | 6,090,337 | |
Loss on Extinguishment of Debt | 489,647 | |
Impairment Expense | 817,875 | |
Other (Income) Expense, Net | (252,822) | 117,216 |
Total Other (Income) Expense, Net | (19,043,600) | 5,929,879 |
Loss from Operations Before Provision for Income Tax Expense | (30,854,863) | (41,067,485) |
Provision for Income Tax Expense | (4,741,704) | (3,298,101) |
Net Loss | (35,596,567) | (44,365,586) |
Net Loss Attributable to Non-Controlling Interest | (61,675) | (197,774) |
Net Loss Attributable to the Company | $ (35,534,892) | $ (44,167,812) |
Loss Per Share - Basic and Diluted | ||
Earnings per share, basic | $ (0.87) | $ (1.14) |
Earnings per share, diluted | $ (0.87) | $ (1.14) |
Weighted-Average Shares Outstanding - Basic and Diluted | ||
Weighted average shares outstanding, basic | 64,182,436 | 40,280,639 |
Weighted average shares outstanding, diluted | 64,182,436 | 40,280,639 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Shareholders' Equity | Common Shares Previously Reported Class A Common shares USD ($) shares | Common Shares Previously Reported Common Class B [Member] USD ($) shares | Common Shares Cumulative effect of retroactive application of recapitalization Class A Common shares USD ($) shares | Common Shares Cumulative effect of retroactive application of recapitalization Common Class B [Member] USD ($) shares | Additional Paid-In Capital Previously Reported USD ($) | Additional Paid-In Capital Cumulative effect of retroactive application of recapitalization USD ($) | Additional Paid-In Capital Redeemable noncontrolling interest, Preferred Series B USD ($) | Additional Paid-In Capital Redeemable noncontrolling interest, Preferred Series C USD ($) | Additional Paid-In Capital USD ($) | Accumulated Deficit Previously Reported USD ($) | Accumulated Deficit USD ($) | TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS Previously Reported USD ($) | TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS Redeemable noncontrolling interest, Preferred Series B USD ($) | TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS Redeemable noncontrolling interest, Preferred Series C USD ($) | TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS USD ($) | Non-Controlling Interest Redeemable noncontrolling interest, Preferred Series B USD ($) | Non-Controlling Interest Redeemable noncontrolling interest, Preferred Series C USD ($) | Non-Controlling Interest USD ($) | Redeemable noncontrolling interest, Preferred Series B Redeemable noncontrolling interest, Preferred Series B USD ($) | Redeemable noncontrolling interest, Preferred Series B USD ($) | Redeemable noncontrolling interest, Preferred Series C Redeemable noncontrolling interest, Preferred Series C USD ($) | Redeemable noncontrolling interest, Preferred Series C USD ($) | Previously Reported USD ($) | Cumulative effect of retroactive application of recapitalization Exchangeable Voting Shares shares | Multiple Voting Shares shares | Subordinate Voting Shares. shares | Exchangeable Voting Shares shares | Redeemable noncontrolling interest, Preferred Series B USD ($) | Redeemable noncontrolling interest, Preferred Series C USD ($) | USD ($) shares |
Balance at Dec. 31, 2020 | $ 2,059 | $ 323 | $ (2,059) | $ (323) | $ 42,932,020 | $ 2,382 | $ 42,934,402 | $ (16,659,478) | $ (16,659,478) | $ 26,274,924 | $ 26,274,924 | $ 26,274,924 | $ 26,274,924 | |||||||||||||||||
Balance (in shares) at Dec. 31, 2020 | shares | 205,900,164 | 32,295,270 | (205,900,164) | (32,295,270) | 23,191,563 | 23,191,563 | ||||||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||||||||||||||||||
Net Loss Attributable to the Company | (44,167,812) | (44,167,812) | (44,167,812) | |||||||||||||||||||||||||||
Net Loss | (44,365,586) | |||||||||||||||||||||||||||||
Loss attributable to a non-controlling interest | $ (197,774) | 197,774 | ||||||||||||||||||||||||||||
Share-Based Compensation from Options | 88,654 | 88,654 | 88,654 | |||||||||||||||||||||||||||
Share-Based Compensation from Options (in shares) | shares | 479,195 | |||||||||||||||||||||||||||||
Issuance for Business Acquisition | 3,380,278 | 3,380,278 | 3,380,278 | |||||||||||||||||||||||||||
Issuance for business acquisition (in shares) | shares | 731,369 | |||||||||||||||||||||||||||||
Issuance for Exercise of Warrants (in shares) | shares | 160,149 | |||||||||||||||||||||||||||||
Issuance for Conversion of Preferred Shares (in shares) | shares | 2,577,227 | |||||||||||||||||||||||||||||
Shares Issued in Business Combination for Cash | 116,630,384 | 116,630,384 | 116,630,384 | |||||||||||||||||||||||||||
Shares Issued in Business Combination for Cash (in shares) | shares | 4,754,979 | 22,335,908 | ||||||||||||||||||||||||||||
Fair Value of Warrants Issued in Connection with Debt | 3,276,764 | 3,276,764 | 3,276,764 | |||||||||||||||||||||||||||
Share-Based Compensation from Options and RSU's | 8,484,913 | 8,484,913 | 8,484,913 | |||||||||||||||||||||||||||
Share-Based Compensation from Common Shares | 225,000 | 225,000 | 225,000 | |||||||||||||||||||||||||||
Share-Based Compensation from Common Shares (in shares) | shares | 48,682 | |||||||||||||||||||||||||||||
Issuance for Conversion of Convertible Debt | 1,925,000 | 1,925,000 | 1,925,000 | |||||||||||||||||||||||||||
Issuance for Conversion of Convertible Debt (in shares) | shares | 646,096 | |||||||||||||||||||||||||||||
Preferred Shares of Subsidiary Issued for Conversion of Debt | 31,285,258 | 31,285,258 | 31,285,258 | |||||||||||||||||||||||||||
Derivative Liability Reclassed to Equity Upon Conversion of Debt | 6,722,000 | 6,722,000 | 6,722,000 | |||||||||||||||||||||||||||
Shares Payable for Asset Acquisition | 748,500 | 748,500 | 748,500 | |||||||||||||||||||||||||||
Reclass of Shares Payable | (2,756,830) | (2,756,830) | (2,756,830) | |||||||||||||||||||||||||||
Issuance for Conversion of Exchangeable Shares | shares | 9,098,302 | (9,098,302) | ||||||||||||||||||||||||||||
Cash Received in Advance of Shares Issued | 1,500,000 | 1,500,000 | 1,500,000 | |||||||||||||||||||||||||||
Cash Received in Advance of Shares Issued (in shares) | shares | 150,000 | |||||||||||||||||||||||||||||
Shares Issued for the Purchase of Property and Equipment | 29,250,000 | 29,250,000 | 29,250,000 | |||||||||||||||||||||||||||
Shares Issued for the Purchase of Property and Equipment (in shares) | shares | 6,500,000 | |||||||||||||||||||||||||||||
Distributions to Preferred Shareholders | (1,797,423) | (1,797,423) | (1,797,423) | |||||||||||||||||||||||||||
Balance at Dec. 31, 2021 | 241,896,900 | (60,827,290) | 181,069,610 | 181,069,610 | ||||||||||||||||||||||||||
Balance at Dec. 31, 2021 | 241,896,900 | (60,827,290) | 180,871,836 | |||||||||||||||||||||||||||
Balance at Dec. 31, 2021 | (197,774) | $ (197,774) | ||||||||||||||||||||||||||||
Balance (in shares) at Dec. 31, 2021 | shares | 4,754,979 | 38,563,405 | 18,256,784 | |||||||||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||||||||||||||||||
Recapitalization Transaction Ratio | 10.27078 | |||||||||||||||||||||||||||||
Net Loss Attributable to the Company | (35,534,892) | (35,534,892) | (61,675) | $ (35,534,892) | ||||||||||||||||||||||||||
Net Loss | (35,596,567) | |||||||||||||||||||||||||||||
Loss attributable to a non-controlling interest | 61,675 | |||||||||||||||||||||||||||||
Share-Based Compensation from Options | 12,755,681 | 12,755,681 | $ 12,755,681 | |||||||||||||||||||||||||||
Share-Based Compensation from Options (in shares) | shares | 227,116 | |||||||||||||||||||||||||||||
Issuance for Business Acquisition | 25,266,796 | 25,266,796 | $ 25,266,796 | |||||||||||||||||||||||||||
Issuance for business acquisition (in shares) | shares | 8,417,325 | |||||||||||||||||||||||||||||
Fair Value of Incentive Shares Issued in a Business Acquisition | 188,122 | 188,122 | 188,122 | |||||||||||||||||||||||||||
Reclassification of Series A Preferred Shares to Non-Controlling Interests | (29,487,835) | (29,487,835) | 29,487,835 | |||||||||||||||||||||||||||
Redemption of Series A Preferred Shares | (772,718) | (772,718) | ||||||||||||||||||||||||||||
Issuance of Preferred Shares and Warrants | $ 7,790,939 | $ 966,208 | $ 7,790,939 | $ 966,208 | $ 19,467,011 | $ 3,733,792 | $ 27,257,950 | $ 4,700,000 | ||||||||||||||||||||||
Exchange of Series A Preferred Shares and Warrants For Series B Shares and Preferred Warrants | (17,082,976) | $ 17,082,976 | ||||||||||||||||||||||||||||
Adjustment of Preferred Shares to Redemption Value | $ (13,449,142) | $ (966,208) | $ 13,449,142 | $ 966,208 | ||||||||||||||||||||||||||
Issuance for Payment of Interest on Convertible Debentures | $ 868,763 | |||||||||||||||||||||||||||||
Issuance for Payment of Interest on Convertible Debentures (in Shares) | shares | 347,108 | |||||||||||||||||||||||||||||
Shares Issued for Exercise of Options | 303,694 | 303,694 | $ 303,694 | |||||||||||||||||||||||||||
Shares Issued for Exercise of Options (in shares) | shares | 227,116 | |||||||||||||||||||||||||||||
Shares Issued for Exercise of Restricted Stock Units (in shares) | shares | 2,162,265 | 2,162,265 | ||||||||||||||||||||||||||||
Contributions | 888,727 | 888,727 | 4,616,273 | $ 5,505,000 | ||||||||||||||||||||||||||
Fair Value of Warrants Issued in Connection with Debt | 89,250 | 89,250 | 89,250 | |||||||||||||||||||||||||||
Issuance for Working Capital Adjustment | shares | 246,402 | |||||||||||||||||||||||||||||
Dividends - Preferred Shareholders | (5,835,131) | 1,775,064 | $ 59,925 | (4,000,142) | ||||||||||||||||||||||||||
Issuance for Conversion of Convertible Debt | 868,763 | 868,763 | $ 868,763 | |||||||||||||||||||||||||||
Issuance for Conversion of Convertible Debt (in shares) | shares | 347,108 | |||||||||||||||||||||||||||||
Issuance for Conversion of Exchangeable Shares | shares | 5,936,636 | (5,936,636) | 5,936,636 | |||||||||||||||||||||||||||
Balance at Dec. 31, 2022 | $ 165,165,063 | $ 165,165,063 | ||||||||||||||||||||||||||||
Balance at Dec. 31, 2022 | $ 261,527,245 | $ (96,362,182) | $ 51,774,193 | $ 4,759,925 | 217,437,665 | |||||||||||||||||||||||||
Balance at Dec. 31, 2022 | $ (4,261,516) | $ (4,261,516) | ||||||||||||||||||||||||||||
Balance (in shares) at Dec. 31, 2022 | shares | 4,754,979 | 55,653,855 | 12,566,550 | |||||||||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity | ||||||||||||||||||||||||||||||
Recapitalization Transaction Ratio | 10.27078 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net Loss | $ (35,596,567) | $ (44,365,586) |
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities: | ||
Deferred Tax Expense | (2,620,697) | (89,768) |
Bad Debt Expense | 969,501 | 3,286,494 |
Interest Capitalized to Notes Payable | 1,427,522 | |
Interest Income Capitalized to Principal Balance | (64,085) | |
Depreciation and Amortization | 12,301,466 | 4,767,396 |
Loss on Equity Method Investments | 2,006,639 | 1,089,047 |
Impairment Expense | 817,875 | |
Loss on Disposition of Subsidiary | 6,090,337 | |
Loss on Extinguishment of Debt | 489,647 | |
Non-Cash Operating Lease Costs | 32,657 | 18,523 |
Accretion of Debt Discount and Loan Origination Fees | 1,521,638 | 953,549 |
Loss (Gain) on Change in Fair Value of Derivative Liabilities | 29,863 | (825,000) |
(Gain) on Change in Fair Value of Contingent Liabilities and Shares Payable | (28,868,949) | (4,031,634) |
Share-Based Compensation | 12,755,681 | 8,709,913 |
Changes in Operating Assets and Liabilities: | ||
Accounts Receivable | (2,013,793) | 2,182,335 |
Prepaid Expenses and Other Current Assets | (2,157,037) | (2,915,401) |
Inventory | (1,536,213) | 612,989 |
Other Assets | (1,243,174) | (1,881,146) |
Accounts Payable and Accrued Liabilities | 559,501 | 3,242,190 |
Interest Payments on Finance Leases | (14,577) | |
Income Taxes Payable | 712,507 | 89,514 |
Other Non-Current Liabilities | 1,867,139 | 599,687 |
NET CASH USED IN OPERATING ACTIVITIES | (40,804,768) | (20,285,249) |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of Property and Equipment | (27,765,732) | (108,495,825) |
Issuance of Note Receivable | (6,717,100) | (2,274,167) |
Contributions to Equity Method Investments | (513,343) | (787,502) |
Distributions Received from Equity Method Investments | 3,001,871 | 340,780 |
Cash Acquired in Business Acquisition, Net of Cash Paid | 2,793,631 | (284,028) |
NET CASH USED IN INVESTING ACTIVITIES | (29,200,673) | (111,500,742) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Proceeds from the Issuance of Notes Payable, Third Parties and Related Parties | 9,421,000 | 58,209,714 |
Proceeds from the Issuance of Preferred Shares | 31,957,950 | |
Redemption of Preferred Shares | (772,718) | |
Payments on Notes Payable, Third Parties and Related Parties | (9,887,672) | (954,092) |
Cash Received Upon Issuance of Equity | 303,694 | 125,859,372 |
Contributions | 3,060,000 | |
Distributions to Preferred Shareholders | (4,000,142) | (1,797,423) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 30,082,112 | 181,317,571 |
NET (DECREASE) INCREASE IN CASH, RESTRICTED CASH AND CASH EQUIVALENTS | (39,923,329) | 49,531,580 |
Cash, Restricted Cash and Cash Equivalents, Beginning of Year | 54,066,831 | 4,535,251 |
CASH, RESTRICTED CASH AND CASH EQUIVALENTS, END OF YEAR | 14,143,502 | 54,066,831 |
SUPPLEMENTAL DISCLOSURE FOR CASH FLOW INFORMATION | ||
Cash Paid for Interest | 4,713,783 | 379,956 |
Cash Paid for Taxes | 4,129,492 | 2,643,093 |
Non-Cash Investing and Financing Activities: | ||
Net Assets Acquired From an Acquisition, Excluding Cash Acquired | 62,711,127 | 5,709,615 |
Proceeds Deposited Into Escrow Account | 2,029,932 | |
Purchase of Property and Equipment from Proceeds of Note Payable, Third Parties | 242,868 | 255,757 |
Conversion of Convertible Debt and Derivative Liability to Equity | 39,932,258 | |
Shares Payable for Asset Acquisition | 748,500 | |
Issuance of Equity for Relief of Liabilities | 868,763 | |
Recognition of Right-of-Use Assets for Finance Leases | 301,022 | |
Exchange of Series A Preferred Shares and Warrants For Series B Shares and Preferred Warrants | 17,082,976 | |
Accretion of Series B and C Preferred Shares to Redemption Value | 14,415,350 | |
Recognition of Right-of-Use Assets for Operating Leases | 8,614,907 | 1,419,650 |
Conversion of Note Receivable to Equity of Investee | 5,461,257 | |
Fair Value of Warrants Issued in Connection with Debt | $ 89,250 | 3,276,764 |
Derivative Liability Incurred Upon Issuance of Convertible Debt | 182,000 | |
Reclass of Shares Payable | $ 2,756,830 | |
Non-Cash Investment and Non-Controlling Interest Addition | 2,445,000 | — |
Interest Capitalized to Property and Equipment | $ 1,043,392 | |
Shares Issued for the Purchase of Property and Equipment | $ 29,250,000 | |
Contingent Liabilities Recognized for the Purchase of Property and Equipment | 34,820,000 | |
Contingent Earnout Recorded as a Liability | $ 7,640,334 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 12 Months Ended |
Dec. 31, 2022 | |
NATURE OF OPERATIONS | |
NATURE OF OPERATIONS | 1. Glass House Brands Inc. (the “Company”), formerly known as Mercer Park Brand Acquisition Corp. (“Mercer Park”), was incorporated under the Business Corporations Act Business Combination Transaction On January 31, 2020, pursuant to an Agreement and Plan of Merger (and various securities exchange agreements), a roll-up transaction (the “Roll-Up”) was consummated whereby the assets and liabilities of a combined group of investment fund entities were merged with and into GH Group, Inc., formerly known as California Cannabis Enterprises, Inc. (“GH Group”), whereby GH Group survived the merger and now owns and controls the assets from such merged out entities. On June 29, 2021, Mercer Park, a special purpose acquisition corporation (or “SPAC”) listed on the Neo Exchange Inc. in Canada, consummated its qualifying transaction (the “Business Combination”) pursuant to the terms of an Agreement and Plan of Merger dated as of April 8, 2021, as amended (the “Business Combination Agreement”), pursuant to which Mercer Park indirectly acquired 100% of the common equity interests of GH Group, which included all outstanding Class A and Class B common shares and a certain portion of Series A preferred shares (the “Preferred Shares”) which were converted to common equity interests of GH Group. In addition, Mercer Park assumed all outstanding common share purchase warrants and the Preferred Shares purchase warrants and assumed or exchanged or caused to be exchanged all qualified incentive stock options of GH Group. The Business Combination was effectuated by a reverse merger of an indirect subsidiary of Mercer Park with GH Group, with GH Group as the surviving entity that became a majority-owned indirect subsidiary of the Company. As a result of the Business Combination, GH Group’s shareholders became the controlling shareholders of Mercer Park, which changed its name to Glass House Brands Inc. concurrently with the closing of the Business Combination. Upon closing of the Business Combination, Mercer Park indirectly acquired all of the issued and outstanding securities of GH Group with the exception of a portion of GH Group’s Preferred Shares, in exchange for an aggregate of 50,151,101 Equity Shares of the Company (which in total includes, on an as-exchanged basis, the Equity Shares issuable upon exchange of outstanding exchangeable shares (the “Exchangeable Shares”) of the Company’s subsidiary, MPB Acquisition Corp. (“MPB”)). The Company also issued 4,754,979 Multiple Voting Shares to certain founders of GH Group. In addition, 28,489,500 of the common share purchase warrants previously issued and outstanding in the capital of Mercer Park were assumed and remain outstanding. Of the 50,151,101 Equity Shares (inclusive of the Exchangeable Shares on an as-exchanged basis) noted above, 731,369 Exchangeable Shares are held in escrow pending any final working capital adjustments. Additionally, 1,008,975 Equity Shares issued to the previous sponsor of Mercer Park are subject to a contractual lock-up with the Company. These shares are to be released from the lock-up restrictions based upon the amount of cash raised by the Company from certain debt and equity financings through June 2023. As of December 31, 2022, the Company released 392,819 Equity Shares that were originally subject to the lock-up restrictions, and 616,156 Equity Shares are subject to a capital-based earnout of permitted debt or equity financings within one year following the closing of the Business Combination. As of December 31, 2022, additional earnout payments consisting of up to an additional 6,306,095 Equity Shares were issuable to the previous sponsor of Mercer Park and all holders of record of the Company’s Equity Shares, the Exchangeable Shares, vested stock options and vested restricted stock units (“RSUs”) as of December 31, 2022, in the event the 20-day volume-weighted average price (“VWAP”) of the Equity Shares reaches $13.00 or $15.00 within two years of closing the Business Combination. In the event that the permitted debt or equity raised by the Company and the Equity Share price targets are not met, the earnout payments will be forfeited. 1. (Continued) GH Group was deemed to be the acquirer in the Business Combination for accounting and financial reporting purposes based on an analysis of the criteria outlined in Accounting Standards Codification (“ASC”) 805 “Business Combinations” While Mercer Park was the legal acquirer in the Business Combination, because GH Group was deemed the accounting acquirer, the historical financial statements of GH Group became the historical financial statements of the Company upon the consummation of the Business Combination. As a result, the financial statements included in this report reflect (i) the historical operating results of GH Group prior to the Business Combination; (ii) the combined results of the Company and GH Group following the closing of the Business Combination; (iii) the assets and liabilities of GH Group at their historical cost; and (iv) the Company’s equity structure before and after the Business Combination. In accordance with applicable guidance, the equity structure of the Company has been restated in all comparative periods to reflect the number of Equity Shares (including the Exchangeable Shares on an as-exchanged basis) issued to GH Group’s shareholders in connection with the Business Combination on the statement of changes in shareholders equity and the footnotes to the Financial Statements. As such, the shares and corresponding capital amounts and earnings per share related to GH Group’s Class A and Class B common shares prior to the Business Combination have been retroactively restated to reflect an exchange ratio of 10.27078 Class A or Class B common shares of GH Group, as applicable, per 1 Equity Share of the Company, as established pursuant to the Business Combination Agreement. COVID-19 In response to the COVID-19 pandemic, governmental authorities have enacted and implemented various recommendations and safety measures in an attempt to limit the spread and magnitude of the pandemic. The COVID-19 pandemic, including government measures to limit the spread of COVID-19, did not have a material adverse impact on the Company’s results of operations during the current reporting period. While the ultimate severity of the outbreak and its impact on the economic environment remains uncertain, the Company continues to closely monitor the potential impact that a resurgence of the COVID-19 virus, including as a result of the emergence of new variants and strains, could have on the Company’s operations. In the event that the Company were to experience widespread transmission of the virus at one or more of the Company’s stores or other facilities, the Company could suffer reputational harm or other potential liabilities. Further, the Company’s business operations may be materially and adversely affected if a significant number of the Company’s employees are impacted by the virus. 1. (Continued) Liquidity Historically, the Company’s primary source of liquidity has been its operations, capital contributions made by equity investors and debt issuances. The Company is meeting its current operational obligations as they become due from its current working capital and from operations. However, the Company has sustained losses since inception and may require additional capital in the future. As of and for the year ended December 31, 2022, the Company had an accumulated deficit of $96,362,182, a net loss from operations of $35,534,892 and net cash used in operating activities of $40,804,768. The Company estimates that based on current business operations and working capital, it will continue to meet its obligations as they become due in the short term. The Company is generating cash from revenues and deploying its capital reserves to acquire and develop assets capable of producing additional revenues and earnings over both the immediate and near term. Capital reserves are primarily being utilized for capital expenditures, facility improvements, product development and marketing. Liquidity risk is the risk that the Company will not be able to meet its financial obligations associated with financial liabilities. The Company manages its liquidity risk through the management of its capital structure. The Company’s approach to managing liquidity is to ensure that it will have sufficient liquidity to settle obligations and liabilities when due. In the event sufficient cash flow is not available from operating activities, the Company may continue to raise equity or debt capital from investors in order to meet liquidity needs. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned programs. Any of these actions could materially harm the Company’s business, results of operations and future prospects. There can be no assurance that such financing will be available or will be on terms acceptable to the Company. |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. Basis of Preparation The accompanying Consolidated Financial Statements have been prepared on a going concern basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect the accounts and operations of the Company and those of the Company’s subsidiaries in which the Company has a controlling financial interest. Investments in entities in which the Company has significant influence, but less than a controlling financial interest, are accounted for using the equity method. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial position of the Company as of December 31, 2022 and 2021, the consolidated results of operations and cash flows for the years ended December 31, 2022 and 2021 have been included. Consolidation of Variable Interest Entities (a “VIE”) ASC 810 “ Consolidation 2. (Continued) Basis of Consolidation These Consolidated Financial Statements as of December 31, 2022 and 2021 include the accounts of the Company, its wholly-owned subsidiaries and entities over which the Company has control as defined in ASC 810. Subsidiaries over which the Company has control are fully consolidated from the date control commences until the date control ceases. Control exists when the Company has ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than fifty percent of the outstanding voting securities of another entity. In assessing control, potential voting rights that are currently exercisable are considered. The following are the Company’s principal wholly-owned or controlled subsidiaries and/or affiliates that are included in these consolidated financial statements as of and for the years ended December 31, 2022 and 2021: Corporate Entities Ownership Entity Location Purpose 2022 2021 MPB Acquisition Corp Nevada Holding company 100 % 100 % GH Group Inc Long Beach, CA Holding company 100 % 100 % GHB Unsub LLC Long Beach, CA Holding company 100 % 100 % Glass House Retail, LLC Long Beach, CA Holding company 100 % 100 % Glass House Cultivation LLC Camarillo Holding company 100 % 100 % Glass House Manufacturing LLC Lompoc, CA Holding company 100 % 100 % LOB Investment Co. LLC Long Beach, CA Holding company 100 % 100 % SoCal Hemp Co, LLC Long Beach, CA Holding company 0 % 100 % Plus Products Holding Inc. Long Beach, CA Holding company 100 % 0 % Plus Products Nevada LLC Long Beach, CA Holding company 100 % 0 % Plus Products Services LLC Long Beach, CA Holding company 100 % 0 % Plus Products Wonders LLC Long Beach, CA Holding company 100 % 0 % Uplift Services LLC Long Beach, CA Holding company 100 % 0 % Carberry LLC Long Beach, CA Holding company 100 % 0 % 2. (Continued) Management and Operating Entities Ownership Subsidiaries Location Purpose 2022 2021 G&H Supply Company, LLC Carpinteria, CA Cultivation management 100 % 100 % Mission Health Associates, Inc. Carpinteria, CA Cannabis cultivation 100 % 100 % MGF Management LLC Carpinteria, CA Cultivation management 100 % 100 % G&K Produce LLC Carpinteria, CA Cannabis cultivation 100 % 100 % K&G Flowers LLC Carpinteria, CA Cannabis cultivation 100 % 100 % Glass House Camarillo Cultivation LLC Camarillo, CA Cannabis cultivation 100 % 100 % Lompoc Manufacturing GHG, LLC Lompoc, CA Cannabis processing 100 % 100 % Lompoc Management Co. LLC Lompoc, CA Manufacturing management 100 % 100 % CA Manufacturing Solutions LLC Lompoc, CA Cannabis manufacturing 100 % 100 % Bud and Bloom Inc Santa Ana, CA Cannabis retail 100 % 100 % Farmacy SB Inc Santa Barbara, CA Cannabis retail 100 % 100 % ICANN LLC Berkeley, CA Cannabis retail 100 % 100 % Farmacy Isla Vista LLC Goleta, CA Cannabis retail 100 % 100 % SBDANK LLC Santa Ynez, CA Cannabis retail applicant 51 % 51 % E7 Eureka LLC Eureka, CA Cannabis retail applicant 100 % 100 % The Pottery Inc Los Angeles, CA Cannabis retail 100 % 0 % Natural Healing Center LLC Grover Beach, CA Cannabis retail 100 % 0 % NHC Lemoore LLC Lemoore, CA Cannabis retail 100 % 0 % NHC-MB LLC Morro Bay, CA Cannabis retail 100 % 0 % GHCC Management, LLC Carpinteria, CA Cultivation management 0 % 100 % Saint Gertrude Management Company, LLC Santa Ana, CA Retail Management 0 % 100 % Real Estate Entities Ownership Subsidiaries Location Purpose 2022 2021 Glass House Farm LLC Carpinteria, CA Real Estate 100 % 100 % Magu Farm LLC Carpinteria, CA Real Estate 100 % 100 % East Saint Gertrude 1327 LLC Santa Ana, CA Real Estate 100 % 100 % GH Camarillo LLC Camarillo, CA Real Estate 100 % 100 % 2000 De La Vina LLC Santa Barbara, CA Real Estate 0 % 100 % Non-Controlling Interest Non-controlling interest represents equity interests owned by parties that are not shareholders of the ultimate parent. The share of net assets attributable to non-controlling interests is presented as a component of equity. Their share of net income or loss is recognized directly in equity. Changes in the parent company’s ownership interest that do not result in a loss of control are accounted for as equity transactions. 2. (Continued) Use of Estimates The preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the Consolidated Financial Statements and the reported amounts of total net revenue and expenses during the reporting period. The Company regularly evaluates significant estimates and assumptions related to the consolidation or non-consolidation of variable interest entities, estimated useful lives, depreciation of property and equipment, amortization of intangible assets, inventory valuation, share-based compensation, business combinations, goodwill impairment, long-lived asset impairment, purchased asset valuations, fair value of financial instruments, compound financial instruments, derivative liabilities, deferred income tax asset valuation allowances, incremental borrowing rates, lease terms applicable to lease contracts and going concern. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results the Company experiences may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations could be negatively impacted. Segmented Information The Company currently operates in one segment, the production and sale of cannabis products, which is how the Company’s Chief Operating Decision Maker manages the business and makes operating decisions. All of the Company’s operations are in the United States of America in the State of California. Intercompany sales and transactions are eliminated in consolidation. Reclassifications Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. GH Group issued Series A Preferred Shares which were classified initially in error as additional paid-in-capital within shareholders’ equity whereas they should have been classified within shareholders’ equity as a non-controlling interest. The error resulted in an overstatement of total shareholders’ equity attributable to the Company of approximately $29,487,000 and a corresponding understatement of non-controlling interest of approximately $29,487,000 for the year ended December 31, 2021. An adjustment has been made to the Consolidated Balance Sheet and Consolidated Statement of Changes in Shareholders’ Equity as of and for the year ended December 31, 2022 to reclassify approximately $29,487,000 in shareholder’s equity. The reclassification was not considered material to any prior period. There were no changes to total current assets, total assets, total current liabilities, total liabilities, total shareholders’ equity, cash flows or profit and loss to any prior period as a result of this reclassification. Cash and Cash Equivalents Cash and cash equivalents are comprised of cash and highly liquid investments that are readily convertible into known amounts of cash with original maturities of three months or less. Restricted Cash Restricted cash balances are those which meet the definition of cash and cash equivalents but are not available for use by the Company. As of December 31, 2022 and 2021, restricted cash was $3.0 million and $3.0 million, respectively, which is held in an escrow account and used as an interest reserve for the Company’s senior term loan agreement. See “ Note 16 – Notes Payable and Convertible Debentures 2. (Continued) Accounts Receivable The Company extends non-interest-bearing trade credit to its customers in the ordinary course of business which is not collateralized. Accounts receivable are shown on the face of the Consolidated Balance Sheets, net of an allowance for doubtful accounts. The Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness and current economic trends in determining the allowance for doubtful accounts. The Company does not accrue interest receivable on past due accounts receivable. The reserve for doubtful accounts was $1,114,183 and $60,000 as of December 31, 2022 and 2021, respectively. Inventory Inventory is comprised of raw materials, finished goods and work-in-process such as pre-harvested cannabis plants and by-products to be extracted. The costs of growing cannabis, including but not limited to labor, utilities, nutrition and supplies, are capitalized into inventory until the time of harvest. All direct and indirect costs, except depreciation and amortization related to inventory are capitalized when incurred, and subsequently classified to cost of goods sold in the Consolidated Statements of Operations. Raw materials and work-in-process are stated at the lower of cost or net realizable value, determined using the weighted average cost. Finished goods inventory is stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method of accounting. Net realizable value is determined as the estimated selling price in the ordinary course of business less estimated costs to sell. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items and reserves. The Company reviews inventory for obsolete, redundant and slow-moving goods, and any such inventory is written down to net realizable value. Packaging and supplies are initially valued at cost. The reserve estimate for excess and obsolete inventory is based on expected future use. The reserve estimates have historically been consistent with actual experience as evidenced by actual sale or disposal of the goods. As of December 31, 2022 and 2021, the Company’s reserve was $353,994 and $784,289, respectively. Investments Long-term investments are related to investments in equity and debt securities of entities over which the Company does not have a controlling financial interest or significant influence and are accounted for at fair value in accordance with ASC 321, “ Investments—Equity Securities Equity investments without readily determinable fair values (which are classified as Level 3 investments in the fair value hierarchy) are measured at cost with adjustments for observable changes in price or impairments (referred to as the “measurement alternative”). In applying the measurement alternative, the Company performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the fair value of the equity investments is less than carrying values. Changes in value are recorded in Other (Income) Expense, Net in the Consolidated Statement of Operations. Equity Method and Joint Venture Investments The Company accounts for investments in which it can exert significant influence but does not control as equity method investments in accordance with ASC 323, “ Investments—Equity Method and Joint Ventures Financial Instruments 2. (Continued) Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and impairment losses, if any. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset using the following terms and methods: Land Not Depreciated Buildings 15 Years Finance Lease Assets Shorter of Lease Term or Economic Life Furniture and Fixtures 5 Years Leasehold Improvements Shorter of Lease Term or Economic Life Equipment and Software 3 – 5 Years Construction in Progress Not Depreciated The assets’ residual values, useful lives and methods of depreciation are reviewed at each reporting period and adjusted prospectively, if appropriate. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is included in the Consolidated Statements of Operations in the period the asset is derecognized. Intangible Assets Intangible assets are recorded at cost, less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Intangible assets with a definite life are amortized on a straight-line basis over their estimated useful lives, which do not exceed the contractual period, if any. The estimated useful lives, residual values and amortization methods are reviewed at each reporting period, and any changes in estimates are accounted for prospectively. Intangible assets with an indefinite life or not yet available for use are not subject to amortization. Amortization is calculated on a straight-line basis over the estimated useful life of the asset using the following terms and methods: Dispensary Licenses Indefinite Intellectual Property 5 In accordance with ASC 350, “ Intangibles—Goodwill and Other Goodwill Goodwill is measured as the excess of consideration transferred over the net of the acquisition date fair value of assets acquired and liabilities assumed in a business acquisition. In accordance with ASC 350, goodwill and other intangible assets with indefinite lives are no longer subject to amortization. The Company reviews the goodwill and other intangible assets allocated to each of the Company’s reporting units for impairment on an annual basis as of year-end or whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the carrying amount of a reporting unit is in excess of its fair value, the Company recognizes an impairment charge equal to the amount in excess. 2. (Continued) The Company applies the guidance in Financial Accounting Standards Board (the “FASB”) Accounting Standards Update (“ASU”) 2011-08 “ Intangibles-Goodwill and Other-Testing Goodwill for Impairment During the years ended December 31, 2022 and 2021, the Company performed the Step Zero analysis for its goodwill impairment test. As a result of the Company’s Step Zero analysis, no further quantitative impairment test was deemed necessary. There were no impairments of goodwill or intangible assets with indefinite lives for the years ended December 31, 2022 and 2021. Impairment of Long-Lived Assets For purposes of the impairment test, long-lived assets such as property, plant and equipment, and definite-lived intangible assets are grouped with other assets and liabilities at the lowest level for which identifiable independent cash flows are available (“asset group”). In accordance with ASC 360, “ Property, Plant, and Equipment Leased Assets In accordance with ASU 2016-02, “ Leases (Topic 842) ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are classified as a finance lease or an operating lease. A finance lease is a lease in which at least one of the following is true: 1) ownership of the property transfers to the lessee by the end of the lease term; 2) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise; 3) the lease is for a major part of the remaining economic life of the underlying asset; 4) the present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already included in the lease payments equals or exceeds substantially all of the fair value; or 5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. The Company classifies a lease as an operating lease when it does not meet any one of these criteria. 2. (Continued) The Company applies judgment in determining whether a contract contains a lease and if a lease is classified as an operating lease or a finance lease. The Company applies judgment in determining the lease term as the non-cancellable term of the lease, which may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. All relevant factors that create an economic incentive for it to exercise either the renewal or termination options are considered. The Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate. The Company applies judgment in allocating the consideration in a contract between lease and non-lease components. It considers whether the Company can benefit from the ROU asset either on its own or together with other resources and whether the asset is highly dependent on or highly interrelated with another ROU asset. In accordance with ASC 842, lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The Company applies judgment in determining the incremental borrowing rate using estimates which are based on the information available at commencement date. The Company initially measures the ROU asset at the initial amount of the lease liability, plus initial direct costs and lease payments at or before the commencement date, less any lease incentives received. Additionally, management monitors for events or changes in circumstances that may require a reassessment of one of its leases and determine if a remeasurement is required. Income Taxes Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the Consolidated Balance Sheets. Effects of enacted tax law changes on deferred tax assets and liabilities are reflected as adjustments to tax expense in the period in which the law is enacted. Deferred tax assets may be reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. The Company follows accounting guidance issued by the FASB related to the application of accounting for uncertainty in income taxes. Under this guidance, the Company assesses the likelihood of the financial statement effect of a tax position that should be recognized when it is more likely than not that the position will be sustained upon examination by a taxing authority based on the technical merits of the tax position, circumstances, and information available as of the reporting date. Convertible Instruments The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities” 2. (Continued) The Company also assesses convertible instruments under ASU 2020-06, “ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity Derivative Liabilities The Company evaluates its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the Consolidated Statements of Operations. In calculating the fair value of derivative liabilities, the Company uses a valuation model when Level 1 inputs are not available to estimate fair value at each reporting date. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the Consolidated Balance Sheets as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the Consolidated Balance Sheets dates. Critical estimates and assumptions used in the model are discussed in “ Note 13 - Derivative Liabilities Business Combinations Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value at the date of acquisition. Acquisition related transaction costs are expensed as incurred and included in the Consolidated Statements of Operations. Identifiable assets and liabilities, including intangible assets of acquired businesses, are recorded at their fair value at the date of acquisition. When the Company acquires control of a business, any previously held equity interest is also remeasured to fair value. The excess of the purchase consideration and any previously held equity interest over the fair value of identifiable net assets acquired is goodwill. If the fair value of identifiable net assets acquired exceeds the purchase consideration and any previously held equity interest, the difference is recognized in the Consolidated Statements of Operations immediately as a gain on acquisition. See “Note 9 – Business Acquisitions” Contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. The Company allocates the total cost of the acquisition to the underlying net assets based on their respective estimated fair values. As part of this allocation process, the Company identifies and attributes values and estimated lives to the intangible assets acquired. These determinations involve significant estimates and assumptions regarding multiple, highly subjective variables, including those with respect to future cash flows, discount rates, asset lives, and the use of different valuation models, and therefore require considerable judgment. The Company’s estimates and assumptions are based, in part, on the availability of listed market prices or other transparent market data. These determinations affect the amount of amortization expense recognized in future periods. The Company bases its fair value estimates on assumptions it believes to be reasonable but are inherently uncertain. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates, and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with ASC 450, “Contingencies” 2. (Continued) Revenue Recognition Revenue is recognized by the Company in accordance with ASC 606, “ Revenue from Contracts with Customers” (1) Identify a customer along with a corresponding contract; (2) Identify the performance obligation(s) in the contract to transfer goods or provide distinct services to a customer; (3) Determine the transaction price the Company expects to be entitled to in exchange for transferring promised goods or services to a customer; (4) Allocate the transaction price to the performance obligation(s) in the contract; and (5) Recognize revenue when or as the Company satisfies the performance obligation(s). Revenues consist of wholesale and consumer packaged goods (“CPG”) and retail sales of cannabis, which are generally recognized at a point in time when control over the goods have been transferred to the customer and is recorded net of sales discounts. Payment is typically due upon transferring the goods to the customer or within a specified time period permitted under the Company’s credit policy. During the years ended December 31, 2022 and 2021, sales discounts were approximately $10.7 million and $4.0 million, respectively. Revenue is recognized upon the satisfaction of the performance obligations. The Company satisfies its performance obligations and transfers control upon delivery and acceptance by the customer. Dispensary Revenue The Company recognizes revenue from the sale of cannabis products for a fixed price upon delivery of goods to customers at the point of sale since at this time performance obligations are satisfied. Fees collected related to taxes that are required to be remitted to regulatory authorities are recorded as liabilities and are not included as a component of revenues. Cultivation and Wholesale CPG The Company recognizes revenue from the sale of cannabis products for a fixed price upon the shipment of cannabis goods as the Company has transferred to the buyer the significant risks and rewards of ownership of the goods. The Company does not retain either continuing material involvement to the degree usually associated with ownership or effective control over the goods sold. Excise taxes due upon sale are recorded as an expense in the accompanying Consolidated Statements of Operations. Cost of Goods Sold Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles and concentrates, packaging and other supplies, fees for services and processing, and allocated overhead, such as allocations of rent, administrative salaries, utilities and related costs. Cost of goods sold excludes depreciation and amortization. General and Administrative Expenses General and administrative expenses are comprised primarily of personnel costs, including salaries, incentive compensation, benefits, and share-based compensation, professional service costs, including legal, accounting, consulting and other professional fees, and corporate insurance and other facilities costs associated with the Company’s corporate offices. 2. (Continued) Share-Based Compensation The Company has an amended and restated equity incentive plan comprised of stock options (“Options”), unrestricted stock bonus, restricted stock units and stock appreciation rights (the “SARs”). Options provide the right to the purchase of one Equity Share per Option. RSUs provide the right to receive one Equity Share per unit (or cash payment equal to the fair market value of an Equity Share). The SARs provide the right to receive cash from the exercise of such right based on the increase in value between the exercise price and the fair market value of the Equity Shares of the Company at the time of exercise. The Company accounts for its share-based awards in accordance with ASC 718, “Compensation – Stock Compensation” The fair value models require the input of certain assumptions that require the Company’s judgment, including the expected term and the expected share price volatility of the underlying share. The assumptions used in calculating the fair value of share-based compensation represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change resulting in the use of different assumptions, share-based compensation expense could be materially different in the future. In addition, the Company elected not to estimate the expected forfeiture rate and only recognize expense for those shares that actually vest. If the actual forfeiture rate is materially different from management’s estimates, the share-based compensation expense could be significantly different from what the Company has recorded in the current period. Financial Instruments Fair Value The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company has not elected the fair value option for any eligible financial instruments. There have been no transfers between fair value levels during the years ended December 31, 2022 and 2021. 2. (Continued) Financial instruments are measured at amortized cost or at fair value. Financial instruments measured at amortized cost consist of accounts receivable, other liabilities, and accounts payable and accrued liabilities wherein the carrying value approximates fair value due to its short-term nature. Other financial instruments measured at amortized cost include notes payable wherein the carrying value at the effective interest rate approximates fair value as the interest rate for such notes payable. Cash and cash equivalents and restricted cash are measured at Level 1 inputs. Acquisition-related liabilities resulting from business combinations are measured at fair value using Level 1 or Level 3 inputs. Investments that are measured at fair value use Level 3 inputs. Refer to “Note 6 – Investments” Note 13 – Derivative Liabilities Note 14 – Contingent Shares and Earnout Liabilities The individual fair values attributed to the different components of a financing transaction, notably derivative financial instruments, convertible debentures and loans, are determined using valuation techniques. The Company uses judgment to select the methods used to ma |
CONCENTRATIONS OF BUSINESS AND
CONCENTRATIONS OF BUSINESS AND CREDIT RISK | 12 Months Ended |
Dec. 31, 2022 | |
CONCENTRATIONS OF BUSINESS AND CREDIT RISK | |
CONCENTRATIONS OF BUSINESS AND CREDIT RISK | 3. The Company maintains cash balances at its physical locations, which are not currently insured, and with various U.S. banks and credit unions with balances in excess of the Federal Deposit Insurance Corporation and National Credit Union Share Insurance Fund limits, respectively. The failure of a bank or credit union where the Company has significant deposits could result in a loss of a portion of such cash balances in excess of the insured limit, which could materially and adversely affect the Company’s business, financial condition and results of operations. As of December 31, 2022 and 2021, the Company has not experienced any losses with regards to its cash balances. The Company provides certain credit terms in the normal course of business to customers located throughout California. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends, and other information. There were two (2022) and one (2021) customer(s) for the year ended December 31, 2022 and 2021, respectively, that comprised 36% and 29%, respectively, of the Company’s revenues. As of December 31, 2022 and 2021, these same customers had a balance due to the Company of $5,240,179 and $2,403,097, respectively. |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2022 | |
INVENTORY | |
INVENTORY | 4. As of December 31, 2022 and 2021, inventory consists of the following: 2022 2021 Raw Materials $ 3,270,597 $ 1,325,590 Work-in-Process 4,428,440 2,777,244 Finished Goods 4,358,533 2,493,468 Total Inventory $ 12,057,570 $ 6,596,302 |
NOTES RECEIVABLE
NOTES RECEIVABLE | 12 Months Ended |
Dec. 31, 2022 | |
NOTES RECEIVABLE. | |
NOTES RECEIVABLE | 5. On May 12, 2022, the Company announced it executed definitive agreements (the “Agreements”) to acquire 100% of the equity interests in certain Natural Healing Center-branded and operated retail dispensaries. See “ Note 9 – Business Acquisitions The Company was issued senior secured promissory notes (the “Notes”) in conjunction with the Agreements. The Notes have an interest rate of 15% per annum with outstanding principal balance and accrued interest to be paid in full in cash 180 days following the closing of the plan of merger of Natural Healing Center, LLC, unless prepaid in whole or in part upon the closing of the transactions contemplated by the Agreements, as against the Merger Consideration (as defined in the Agreements). As of December 31, 2022 and 2021, the notes receivable balance is $1,255,843 and nil, respectively, and the Notes are included as Notes Receivable in the Consolidated Balance Sheets. |
INVESTMENTS
INVESTMENTS | 12 Months Ended |
Dec. 31, 2022 | |
INVESTMENTS. | |
INVESTMENTS | 6. The Company has various investments in entities in which it holds a significant but non-controlling interest through voting equity or through representation on the entities’ board of directors or equivalent governing bodies. Accordingly, the Company was deemed to have significant influence resulting in the Company accounting for these investments under the equity method. On August 17, 2022, the Company, through its subsidiary, 5042 Venice, LLC, closed on the sale of the 50% held undivided tenancy-in-common interest in its equity method investment (the “TIC Interest”). As part of the transaction, the Company no longer has an equity interest in the TIC Interest. However, the Company became the manager of 5042 Real Estate Investment LLC which acquired 42.93% of the TIC Interest and the remaining 7.07% was acquired by a related party to senior management of the Company. 6. (Continued) On July 28, 2022, the Company acquired the remaining equity and property ownership interests of N.R.O Management, LLC and The Pottery, a retail dispensary located in Los Angeles, California. See “ Note 9 – Business Acquisitions N.R.O 5042 Real LOB Group, Management, SoCal Hemp ICANN, 5042 Venice, Estate Investment, Lompoc TIC, Inc. LLC JV, LLC LLC LLC LLC LLC TOTAL Fair Value as of December 31, 2020 $ 2,809,412 $ 2,336,713 $ 1,058,778 $ 2,045,309 $ 2,222,695 $ — $ 228,961 $ 10,701,868 Additions — — 701,254 — — — 86,248 787,502 Distribution — — — — (243,880) — (96,900) (340,780) Reclass of Investment for Acquisition — — — (2,045,309) — — — (2,045,309) Impairment — — (817,875) — — — — (817,875) (Loss) Gain on Equity Method Investments (48,271) (317,764) (942,157) — 242,705 — (23,560) (1,089,047) Fair Value as of December 31, 2021 $ 2,761,141 $ 2,018,949 $ — $ — $ 2,221,520 $ — $ 194,749 $ 7,196,359 Additions — 300,000 213,000 — 343 2,445,000 — 2,958,343 Distributions — — — — (3,001,871) — — (3,001,871) Acquisition of Equity Method Investment — (900,000) — — — — — (900,000) (Loss) Gain on Equity Method Investments (457,671) (1,418,949) (213,000) — 780,008 (665,401) (31,626) (2,006,639) Fair Value as of December 31, 2022 $ 2,303,470 $ — $ — $ — $ — $ 1,779,599 $ 163,122 $ 4,246,192 During the years ended December 31, 2022 and 2021, the Company recorded net losses from equity method investments of $2,006,639 and $1,089,047, respectively. These investments are recorded at the amount of the Company’s initial investment and adjusted for the Company’s share of the investee’s income or loss and dividends paid. During the fourth quarter of the year ended December 31, 2021, the Company recognized $817,875 of other than temporary impairment as a result of the investee ceasing operations. The Company determined that the fair value of its investment in SoCal Hemp JV, LLC was nil as of December 31, 2021. |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2022 | |
PROPERTY, PLANT AND EQUIPMENT. | |
PROPERTY, PLANT AND EQUIPMENT | 7. As of December 31, 2022 and 2021, property, plant and equipment consist of the following: 2022 2021 Land $ 70,888,383 $ 70,782,068 Buildings 140,042,534 108,024,254 Finance Leases 301,022 — Furniture and Fixtures 471,696 316,395 Leasehold Improvements 10,927,265 8,412,489 Equipment and Software 8,050,827 5,712,519 Construction in Progress 6,447,286 11,867,167 Total Property, Plant and Equipment 237,129,013 205,114,892 Less Accumulated Depreciation and Amortization (20,412,118) (9,316,368) Property, Plant and Equipment, Net $ 216,716,895 $ 195,798,524 7. (Continued) During the years ended December 31, 2022 and 2021, the Company recorded depreciation expense of $11,323,468 and $4,597,229, respectively. The amount of depreciation recognized for finance leases during the years ended December 31, 2022 and 2021 was $15,051 and nil, respectively, see “Note 15 – Leases” for further information. Additionally, during the year ended December 31, 2022 and 2021, the Company capitalized interest to property and equipment of $1,043,392 and nil, respectively. During the year ended December 31, 2021, the Company entered into a third amendment to its acquisition agreement (the “Camarillo Acquisition Agreement”) regarding the purchase of certain real property in Camarillo, California. The purchase price was amended to $93,000,000, payable in cash. The Company further entered into a fourth amendment to the Camarillo Acquisition Agreement in which certain fixed assets in the amount of $110,000 were added to the net assets acquired and consideration to be credited to the sellers at closing. In addition, the parties agreed to afford the sellers more time to obtain terminations to UCC-1 financing statements with respect to certain personal property conveyed as part of the asset acquisition. The Company paid the total cash purchase price upon closing on September 14, 2021 (the “Camarillo Closing Date”). The asset acquisition was accounted for in accordance with ASC 805-50, “Acquisition of Assets Rather than a Business” “Note 14 – Contingent Shares and Earnout Liabilities” The following is a summary of the total consideration paid in the above transaction: Cash Payments $ 93,000,000 Survey and Other Fees 262,875 Shares Issued for the Purchase of Real Property 29,250,000 Fair Value of Contingent Consideration 14,973,000 Fair Value of Earn Out Payments 19,847,000 Total Consideration in the Camarillo Transaction $ 157,332,875 |
DISPOSITION OF SUBSIDIARY
DISPOSITION OF SUBSIDIARY | 12 Months Ended |
Dec. 31, 2022 | |
DISPOSITION OF SUBSIDIARY | |
DISPOSITION OF SUBSIDIARY | 8. On March 3, 2021, the Company entered into an agreement to assign all of its limited liability company membership interests in Field Investment Co. LLC (“Field Investment Co.”), a Company subsidiary, and Field Investment Co.’s subsidiaries, Field Taste Matters, Inc., ATES Enterprises, LLC, and Zero One Seven Management, LLC, for de minimis consideration to an unrelated third party. On the same day, the Company immediately divested itself of Field Investment Co. and recognized a loss on disposition of a subsidiary in the amount of $6,090,337 for the year ended December 31, 2021. The subsidiary disposed of does not qualify as a discontinued operation in accordance with ASC 205 “Discontinued Operations” The net assets of the subsidiary that was disposed of consists of the following: ASSETS: Accounts Receivable, Net $ 21,067 Prepaid Expenses and Other Current Assets 430,654 Operating Lease Right-of-Use Assets, Net 976,417 Property, Plant and Equipment, Net 310,501 Intangible Assets, Net 3,727,500 Goodwill 2,095,918 Other Assets 95,419 TOTAL ASSETS $ 7,657,476 LIABILITIES: Accounts Payable and Accrued Liabilities $ 473,500 Operating Lease Liabilities 1,051,588 Notes Payable 42,051 TOTAL LIABILITIES $ 1,567,139 NET ASSETS DISPOSED $ 6,090,337 |
BUSINESS ACQUISITIONS
BUSINESS ACQUISITIONS | 12 Months Ended |
Dec. 31, 2022 | |
BUSINESS ACQUISITIONS | |
BUSINESS ACQUISITIONS | 9. The purchase price allocations for the business acquisitions completed during the year ended December 31, 2022, as set forth in the table below, reflect various preliminary fair value estimates and analyses that are subject to change within the measurement period as valuations are finalized. The primary areas of the preliminary purchase price allocations that are not yet finalized relate to the tax impact of the acquisitions, fair values of certain tangible assets, the valuation of intangible assets acquired and residual goodwill. The Company expects to continue to obtain information to assist in determining the fair value of the net assets acquired at the acquisition dates during the measurement periods. Measurement period adjustments that the Company determines to be material will be applied in the period the adjustment is determined to the acquisitions in the Company’s consolidated financial statements, and, depending on the nature of the adjustments, other periods subsequent to the period of acquisition could be affected. The acquisitions noted below were accounted for in accordance with ASC 805 “Business Combinations”. The preliminary (2022) allocation of purchase prices of business acquisitions completed during the year ended December 31, 2022 and summary of allocation of purchase price of the business acquisition completed during the year ended December 31, 2021 are as follows: 2022 Acquisitions 2021 Acquisition Natural Plus Products The Pottery, Healing NHC Lemoore, NHC-MB, Holding Inc. Inc. Center, LLC LLC LLC Total iCANN, LLC Closing Date: April 28, 2022 July 28, 2022 September 6, 2022 September 6, 2022 September 14, 2022 January 1, 2021 Total Consideration Convertible Debenture Notes $ 16,257,104 $ — $ — $ — $ — $ 16,257,104 $ — Restricted Stock Units Issued 188,122 — — — — 188,122 — Derivative Asset (251,020) — — — — (251,020) — Contingent Restricted Stock Units 5,460,000 — — — — 5,460,000 — Fair Value of Equity Issued 9,707,414 1,100,000 5,938,298 3,272,515 5,248,569 25,266,796 3,380,278 Shares Payable — — 2,262,000 1,274,000 1,933,000 5,469,000 — Fair Value of Remaining 50% equity interest — 900,000 — — — 900,000 — Cash Payment — — 590,795 1,642,522 305,427 2,538,744 442,956 Loan Forgiveness — — 5,461,257 — — 5,461,257 — Equity Investment Converted — — — — — — 2,045,309 Assumption of IRS Debt — — 6,753,499 — — 6,753,499 — Total Consideration $ 31,361,620 $ 2,000,000 $ 21,005,849 $ 6,189,037 $ 7,486,996 $ 68,043,502 $ 5,868,543 Net Assets Acquired (Liabilities Assumed) Current Assets (3) $ 6,454,308 $ 382,436 $ 4,146,644 $ 147,259 $ 468,585 $ 11,599,232 $ 562,221 Operating Right-of-Use Asset 294,159 3,671,969 992,717 991,606 772,647 6,723,098 1,160,730 Property, Plant and Equipment 789,779 37,201 273,679 1,788,166 — 2,888,825 692,645 Non-Current Assets 93,662 3,500 — — — 97,162 — Deferred Tax Assets, Net — — — — — — (209,466) Current Liabilities Assumed (1,339,301) (2,854,242) (2,496,552) (706,487) (655,334) (8,051,916) (922,745) Long-Term Liabilities Assumed (111,970) (3,671,969) (832,060) (833,989) (652,654) (6,102,642) (1,113,584) Intangible Assets: Intellectual Property 5,100,000 400,000 1,100,000 300,000 600,000 7,500,000 600,000 Customer Relationship 2,600,000 — — — — 2,600,000 — Cannabis License 12,900,000 2,900,000 12,000,000 1,000,000 5,100,000 33,900,000 2,900,000 Total Intangible Assets 20,600,000 3,300,000 13,100,000 1,300,000 5,700,000 44,000,000 3,500,000 Total Identifiable Net Assets Acquired (Net Liabilities Assumed) 26,780,637 868,895 15,184,428 2,686,555 5,633,244 51,153,759 3,669,801 Goodwill (1) 4,580,983 1,131,105 5,821,421 3,502,482 1,853,752 16,889,743 2,198,742 Total Net Assets Acquired $ 31,361,620 $ 2,000,000 $ 21,005,849 $ 6,189,037 $ 7,486,996 $ 68,043,502 $ 5,868,543 Revenues from Acquisition $ 4,877,839 $ 1,070,380 $ 3,468,548 $ 1,231,088 $ 1,912,771 $ 12,560,626 $ 6,819,012 Net Income (Loss) from Acquisition $ (101,022) $ (455,603) $ 925,110 $ (147,801) $ 443,972 $ 664,656 $ 60,834 Pro Forma Revenues (2) $ 3,911,580 $ 2,110,084 $ 8,158,053 $ 3,889,361 $ 4,647,797 $ 22,716,875 n/a Pro Forma Net Income (Loss) (2) $ 1,067,848 $ (1,287,036) $ 551,711 $ (231,069) $ 289,561 $ 391,015 n/a (1) Goodwill arising from acquisitions represent expected synergies, future income and growth, and other intangibles that do not qualify for separate recognition. Generally, goodwill related to dispensaries acquired within a state adds to the footprint of the Company’s dispensaries within the state, giving the Company’s customers more access to the Company’s branded stores. Goodwill related to cultivation and wholesale acquisitions provide for lower costs and synergies of the Company’s growing and wholesale distribution methods which allow for overall lower costs. (2) If the 2022 acquisitions had been completed on January 1, 2022, the Company estimates it would have recorded changes in revenues and changes in net (losses) income shown in the pro forma amounts noted above. As the 2021 acquisition was completed on January 1, 2021, no pro forma information is required. (3) Included in current assets acquired in the business combination was cash acquired, accounts receivable, other current assets and inventory as of the acquisition date. 9. (Continued) On January 1, 2021, the Company completed an acquisition of 100% of the equity interests of iCANN, LLC dba Farmacy Berkeley (“iCANN”), a licensed retail cannabis company located in Berkeley, California. Pursuant to the terms of the merger agreement between a subsidiary of the Company and iCANN, the following occurred: (i) the Company elected to convert an earlier issued convertible note with an unpaid principal amount of $2,000,000 and accrued interest of $45,309 into equity interests of iCANN; (ii) the Company paid $400,000 in cash to four founder-holders of iCANN equity interests: (iii) the Company issued 7,511,725 shares of Class A Common Stock of GH Group (which were ultimately exchanged for 731,369 Exchangeable Shares) to holders of iCANN equity interests; and (iv) $42,956 in cash to the remaining holders of iCANN equity interests who were not accredited investors. In addition, during the year ended December 31, 2021, the Company granted 48,682 Exchangeable Shares to various brokers and consultants as finders’ fees and recorded $225,000 in share-based compensation. On April 28, 2022, the Company completed an acquisition of 100% of the equity interests in Plus Products Holdings, Inc. (“Plus Products”), a leading cannabis edibles company located in California. Pursuant to the terms of the acquisition agreement, the preliminary purchase price is for an aggregate consideration of $31,361,620 and is comprised of the following: (i) 20,005 unsecured convertible debenture notes, of which 8,003 may be issued in the form of alternative convertible debenture notes (see “Note 16 – Notes Payable and Convertible Debentures” On July 28, 2022, the Company acquired the remaining equity and other ownership interests of N.R.O Management, LLC and The Pottery, a retail dispensary located in Los Angeles, California. The Company previously owned 50% of the equity and other ownership interests prior to July 28, 2022. The preliminary purchase price is for an aggregate consideration of $2,000,000 and is comprised of the following: (i) 500,000 Equity Shares of the Company and (ii) the fair value of the remaining 50% of the equity interests held. The shares will have a one-year lock-up period through July 28, 2023. As of the date of the acquisition, the total fair value of the equity shares was determined to be $1,100,000, or approximately $2.20 per share. The fair value of the remaining 50% equity interests was determined to be $900,000 using the income approach based on Level 3 inputs on the fair value hierarchy framework. In addition, the Company, or its designee, had the option of acquiring all the remaining undivided ownership interests in the underlying real property for $3,000,000, in cash. The Company elected not to acquire the remaining undivided ownership interests of the underlying real property. On September 7, 2022, the Company completed the acquisition of Natural Healing Center, LLC. (“Grover Beach”), a retail dispensary located in Grover Beach, California, through GHG-NHC Grover Inc., a wholly owned subsidiary of the Company. Pursuant to the terms of the merger agreement, the preliminary purchase price is for an aggregate consideration of $21,005,849, and is comprised of the following: (i) $5,938,298 fair value of the Equity Shares of the Company and $2,262,000 fair value of deferred Equity Shares payable, (ii) cash payment, (iii) loan forgiveness and (iv) assumption of certain IRS debt. The Equity Shares issued were paid upon closing with fair value determined as the closing price of the Company’s stock as of September 7, 2022. The deferred Equity Shares payable are to be issued upon the earlier of: 1) the sixth calendar quarter following the opening of NHC Turlock, LLC (“Turlock”) or 2) September 7, 2024. As of the date of the issuance of these financial statements, the merger of Turlock has not closed. On September 7, 2022, the Company completed the acquisition of NHC Lemoore, LLC (“Lemoore”), a retail dispensary located in Lemoore, California, through GHG-NHC Lemoore Inc., a wholly owned subsidiary of the Company. Pursuant to the terms of the merger agreement, the preliminary purchase price is for an aggregate consideration of $6,189,037, and is comprised of the following: (i) $3,272,515 fair value of the Equity Shares of the Company and $1,274,000 fair value of deferred Equity Shares and (ii) a cash payment. The Equity Shares issued were paid upon closing with fair value determined as the closing price of the Company’s stock as of September 7, 2022. The deferred Equity Shares payable are to be issued upon the earlier of: 1) the sixth calendar quarter following the opening of Turlock or 2) September 7, 2024. 9. (Continued) On September 14, 2022, the Company completed the acquisition of NHC-MB LLC (“Morro Bay”), a retail dispensary in Morro Bay, California, through GHG-NHC Morro Inc., a wholly owned subsidiary of the Company. Pursuant to the terms of the merger agreement, the preliminary purchase price is for an aggregate consideration of $7,486,996, and is comprised of the following: (i) $5,248,569 fair value of the Equity Shares of the Company and $1,933,000 fair value of deferred Equity Shares and (ii) a cash payment. 80% of the Equity Shares issued were paid upon closing with fair value determined as the closing price of the Company’s stock as of September 14, 2022. The deferred Equity Shares payable are to be issued upon the earlier of: 1) the sixth calendar quarter following the opening of Turlock or 2) September 14, 2024. The full value of the Equity Shares issued were accounted as consideration and included as a component of shares payable in the accompanying Consolidated Balance Sheets. |
INTANGIBLE ASSETS
INTANGIBLE ASSETS | 12 Months Ended |
Dec. 31, 2022 | |
INTANGIBLE ASSETS. | |
INTANGIBLE ASSETS | 10. As of December 31, 2022 and 2021, intangible assets consist of the following: 2022 2021 Definite Lived Intangible Assets Customer Relationships $ 2,600,000 $ — Intellectual Property 8,290,000 790,000 Total Definite Lived Intangible Assets 10,890,000 790,000 Less Accumulated Amortization (1,186,665) (208,667) Definite Lived Intangible Assets, Net 9,703,335 581,333 Indefinite Lived Intangible Assets Dispensary Licenses 38,948,500 5,048,500 Total Indefinite Lived Intangible Assets 38,948,500 5,048,500 Total Intangible Assets, Net $ 48,651,835 $ 5,629,833 The Company adjusted the calculation of the preliminary fair values of the intangible assets acquired in business acquisitions completed during the year ended December 31, 2022, which resulted in aggregate increase of $1,800,000 to the carrying value of these intangible assets within the measurement period (see Note 9, Business Acquisitions, and Note 11, Goodwill). For the year ended December 31, 2022 and 2021, the Company recorded amortization expense related to intangible assets of $977,998 and $170,167, respectively. Additionally, during the years ended December 31, 2022 and 2021, management noted no indications of impairment on its intangible assets. The following is the future minimum amortization expense to be recognized for the years ended December 31: December 31: 2023 1,668,000 2024 1,655,333 2025 1,630,000 2026 1,510,000 2027 1,030,002 Thereafter 2,210,000 Total Future Amortization Expense $ 9,703,335 |
GOODWILL
GOODWILL | 12 Months Ended |
Dec. 31, 2022 | |
GOODWILL | |
GOODWILL | 11. As of December 31, 2022 and 2021, goodwill was $21,808,566 and $4,918,823, respectively. See “ Note 8 – Disposition of Subsidiary Note 9 – Business Acquisitions During the year ended December 31, 2022, the Company made prospective adjustments to the purchase price allocations associated with previously acquired entities that resulted in changes to goodwill. The Company obtained additional information about the facts and circumstances that existed at the time of the acquisition that resulted in changes in the provisional amounts recognized. Goodwill is assigned to the reporting unit, which is the operating segment level or one level below the operating segment. Goodwill arises when the purchase price for acquired businesses exceeds the fair value of tangible and intangible assets acquired less assumed liabilities. Goodwill is reviewed annually for impairment or more frequently if impairment indicators arise. The goodwill impairment test compares the fair value of a reporting unit with its carrying amount. The amount by which the carrying amount exceeds the reporting unit’s fair value is recognized as a goodwill impairment loss. The Company conducts its annual goodwill impairment assessment as of the last day of the fiscal year. During the years ended December 31, 2022 and 2021, management noted no indications of impairment on its goodwill. |
ACCOUNTS PAYABLE AND ACCRUED LI
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 12 Months Ended |
Dec. 31, 2022 | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | 12. As of December 31, 2022 and 2021, accounts payable and accrued liabilities consist of the following: 2022 2021 Accounts Payable $ 6,869,941 $ 4,777,435 Accrued Liabilities 12,183,677 2,418,664 Accrued Payroll and Related Liabilities 2,009,598 1,699,253 Sales Tax and Cannabis Taxes 1,270,572 1,319,652 Total Accounts Payable and Accrued Liabilities $ 22,333,788 $ 10,215,004 The Company offers a customer loyalty rewards program that allows members to earn discounts on future purchases. Unused discounts earned by loyalty rewards program members are included in accrued liabilities and recorded as a sales discount at the time a qualifying purchase is made. The value of points accrued as of December 31, 2022 and 2021, was approximately $999,000 and $380,000, respectively. |
DERIVATIVE LIABILITIES
DERIVATIVE LIABILITIES | 12 Months Ended |
Dec. 31, 2022 | |
DERIVATIVE LIABILITIES | |
DERIVATIVE LIABILITIES | 13. During the year ended December 31, 2021, the Company issued convertible debt to third parties and related parties, see “Note 16 – Notes Payable and Convertible Debentures” “Note 17 – Notes Payable – Related Parties” 2021* Weighted-Average Risk Free Annual Rate 0.25 % Weighted-Average Average Probability at Maturity 0.00 % Weighted-Average Average Probability Before Maturity 100.00 % Weighted-Average Average Probability at Change of Control 0.00 % Weighted-Average Expected Annual Dividend Yield 0.0 % Weighted-Average Expected Stock Price Volatility 0.0 % Weighted-Average Expected Life in Years — * Represents inputs immediately prior to the conversion on June 29, 2021 13. (Continued) A reconciliation of the beginning and ending balance of derivative liabilities and change in fair value of derivative liabilities for the year ended December 31, 2021 is as follows: 2021 Balance at Beginning of Year $ 7,365,000 Derivative Liability Incurred Upon Issuance of Convertible Debt 182,000 Change in Fair Value (825,000) Reclassed to Equity Upon Conversion of Debt (6,722,000) Balance at End of Year $ — Derivative liabilities are included in current liabilities as the holders of the convertible notes can convert at any time. During the year ended December 31, 2021, GH Group converted all its convertible debt with derivative conversion features to the Preferred Shares. As a result, the Company recorded adjustments to the fair value of the derivative through the date of conversion. The remaining derivative balance was reclassified to shareholders’ equity upon conversion of the related convertible debt. See “Note 16 – Notes Payable and Convertible Debentures” “Note 17 – Notes Payable – Related Parties” Debt |
CONTINGENT SHARES AND EARNOUT L
CONTINGENT SHARES AND EARNOUT LIABILITIES | 12 Months Ended |
Dec. 31, 2022 | |
CONTINGENT SHARES AND EARNOUT LIABILITIES. | |
CONTINGENT SHARES AND EARNOUT LIABILITIES | 14. 2022 2021 Balance at Beginning of Year $ 38,428,700 $ — Contingent Shares Issued Upon Closing of Business Combination 5,460,000 (iv) 7,640,334 (i) Contingent Earnout Issued for Option Right — 19,847,000 (ii) Contingent Shares Issued for Option Right — 14,973,000 (iii) Change in Fair Value of Contingent Liabilities (29,232,034) (4,031,634) Balance at End of Year $ 14,656,666 $ 38,428,700 (i) Contingent Earnout – Business Combination on June 29, 2021 Upon closing of the Business Combination, 1,008,975 Equity Shares issued to the sponsor of Mercer Park were locked up by the Company. These Equity Shares are to be released from the lock-up restrictions based upon the amount of cash raised by the Company from certain debt and equity financings through June 2023. During the year ended December 31, 2021, the Company released 392,819 Equity Shares that were originally subject to lock-up restrictions. In accordance with ASC 480, “ Distinguishing Liabilities from Equity 14. (Continued) Additional earnout payments consisting of up to an additional 6,306,095 Equity Shares are issuable to the previous sponsor of Mercer Park and all holders of record of the Equity Shares, the Exchangeable Shares, vested stock options and vested RSUs as of December 31, 2022 in the event the 20-day VWAP of the Equity Shares reaches $13.00 or $15.00 within two years of closing of the Business Combination. In the event that the permitted debt or equity raised by the Company and the Equity Share price targets are not met, as described in the Investor Rights Agreement, the earnout payments will be forfeited. In accordance with ASC 480, management determined the provisions of these earnouts did not require liability treatment. As of December 31, 2022 and 2021, no Equity Shares were issued in connection with these earnouts. (ii) Contingent Earnout – Camarillo Transaction During the year ended December 31, 2021, the Company purchased certain real property in Camarillo, California (the “Camarillo Transaction”). As a consideration for the option right to purchase certain real property in conjunction with the Camarillo Transaction (the “Option Right”), the Company is obligated to pay a contingent earnout fee of up to $75,000,000, payable in the Equity Shares, if certain conditions and financial metrics are met. As of December 31, 2022 and 2021, the fair value of the contingent earnout was $4,041,000 and $22,571,000, respectively, and included as a component of contingent shares and earnout liabilities in the accompanying Consolidated Balance Sheets. The decrease in fair value of $18,530,000 and increase in fair value $2,724,000 were recorded as components of the change in fair value of contingent liabilities during the years ended December 31, 2022 and 2021, respectively, and is included in the accompanying Consolidated Statements of Operations. The value of the contingent consideration is based upon the potential earn-out of the facilities’ adjusted earnings during the earnout period and is measured at fair value using a discounted cash flow model that is based on unobservable inputs. (iii) Contingent Shares – Camarillo Transaction As additional consideration for the Option Right, the Company issued 6,500,000 Equity Shares upon the closing of the Camarillo Transaction. The Company allocated the fair value of the Option Right to the assets acquired upon its exercise in September 2021. In addition to the Equity Shares issued for the Option Right, the Company is obligated to issue up to 3,500,000 Equity Shares as a contingent payment, which are subject to certain conditions and events following closing. As of December 31, 2022 and 2021, the fair value of the contingent payment was $6,860,000 and $13,485,500, respectively, and included as a component in contingent shares and earnout liabilities in the accompanying Consolidated Balance Sheets. The Company recorded decreases in fair value of $6,625,500 and $1,487,500 during the years ended December 31, 2022 and 2021, respectively, and were included as components of the change in fair value of contingent liabilities in the accompanying Consolidated Statements of Operations. The value of the contingent consideration is based upon the value of the Company’s Equity Shares, the probability of future events occurring and other unobservable inputs. (iv) Contingent RSUs – Plus Products As consideration for the acquisition of Plus Products, see “Note 9 – Business Acquisitions” |
LEASES
LEASES | 12 Months Ended |
Dec. 31, 2022 | |
LEASES | |
LEASES | 15. The Company leases buildings which it plans to use for corporate purposes and the production and sale of cannabis products. In accordance with ASC 842, lease liability is initially measured at the present value of total lease payments, discounted using a discount rate set to the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company uses an estimated incremental borrowing rate. Total lease payments are comprised of (i) fixed lease payments less any incentives; (ii) variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date; (iii) the amount expected to be payable by the lessee under residual value guarantees; (iv) the exercise of purchase options, if the lessee is reasonably certain to exercise the options; (v) payments of penalties for early termination of a lease unless the Company is reasonably certain not to terminate early. The incremental borrowing rate is determined using estimates which are based on the information available at commencement date. An ROU asset is measured at the initial amount of the lease liability, plus initial direct costs and lease payments at or before the commencement date, less any lease incentives received. Operating leases may contain renewal options that provide for rent increases based on prevailing market conditions. The terms used to calculate the ROU assets for these properties include the renewal options that the Company is reasonably certain to exercise. Both ROU assets and lease liabilities exclude variable payments not based on an index or rate, which are treated as period costs. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants. For finance leases, lease costs are comprised of straight-line amortization of the ROU asset and the interest portion of lease payments which are recorded to Depreciation and Amortization and Interest Expense, respectively, on the Consolidated Statements of Operations. Finance lease ROU assets are amortized based on the lesser of the lease term and the useful life of the leased asset according to the capital asset accounting policy. If ownership of the ROU assets transfers to the Company at the end of the lease term or if the Company is reasonably certain to exercise a purchase option, amortization is calculated using the estimated useful life of the leased asset. The below are the details of the lease cost and other disclosures regarding the Company’s leases for the years ended December 31, 2022 and 2021: 2022 2021 Finance Lease Cost: Amortization of Finance Lease Right-of-Use Assets $ 15,051 $ — Interest on Lease Liabilities 14,577 — Operating Lease Cost 1,479,305 730,881 Short-Term Lease Costs 933,424 669,003 Total Lease Expenses $ 2,442,357 $ 1,399,884 2022 2021 Cash Paid for Amounts Included in the Measurement of Lease Liabilities: Operating Cash Flows from Finance Leases $ 9,802 $ — Operating Cash Flows from Operating Leases $ 1,446,649 $ 712,358 Financing Cash Flows from Finance Leases $ 19,715 $ — Non-Cash Additions to Right-of-Use Assets and Lease Liabilities: Recognition of Right-of-Use Assets for Finance Leases $ 301,022 $ — Recognition of Right-of-Use Assets for Operating Leases $ 8,614,907 $ 1,419,650 Weighted-Average Remaining Lease Term (Years) - Finance Leases 3.00 — Weighted-Average Remaining Lease Term (Years) - Operating Leases 7.00 8.00 Weighted-Average Discount Rate - Finance Leases 20.40 % — Weighted-Average Discount Rate - Operating Leases 12.02 % 17.00 % 15. (Continued) Future minimum lease payments under non-cancelable finance and operating leases as of December 31, 2022 are as follows: Operating Leases Finance Leases (1) December 31: Third Parties Related Parties Third Parties Total 2023 $ 1,371,629 $ 919,231 $ 118,069 $ 2,408,929 2024 1,399,456 931,720 118,069 2,449,245 2025 1,399,104 874,271 148,656 2,422,031 2026 1,372,745 890,899 — 2,263,644 2027 1,126,862 908,026 — 2,034,888 Thereafter 2,138,205 3,166,607 — 5,304,812 Total Future Minimum Lease Payments 8,808,001 7,690,754 384,794 16,883,549 Less Imputed Interest (2,792,842) (2,768,710) (103,987) (5,665,539) Present Value of Lease Liability 6,015,159 4,922,044 280,807 11,218,010 Less Current Portion of Lease Liability (710,793) (367,178) (66,791) (1,144,762) Present Value of Lease Liability, Net of Current Portion $ 5,304,366 $ 4,554,866 $ 214,016 $ 10,073,248 (1) Finance-type lease right-of-use assets recorded in property, plant and equipment as of December 31, 2022. As of December 31, 2022, the current portion of finance-type lease liabilities is recorded in accounts payable and accrued liabilities and the non-current portion of finance-type lease liabilities is recorded in other non-current liabilities. On September 14, 2021, the Company entered into an agreement to lease out a portion of its real property at approximately $500,000 per month for 36 months. However, lease payments to the Company are abated if certain contingencies are met by the lessee. As of December 31, 2022, such contingencies are expected to be met, and as a result, no rental income was recognized by the Company. The Company leases certain business facilities from related parties and third parties under non-cancellable operating lease agreements that specify minimum rentals. The operating leases require monthly payments ranging from $800 to $56,000 and expire through November 2032. Certain lease monthly payments may escalate up to 5.0% each year. In such cases, the variability in lease payments is included within the current and noncurrent operating lease liabilities. |
NOTES PAYABLE AND CONVERTIBLE D
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | 12 Months Ended |
Dec. 31, 2022 | |
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | |
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | 16. As of December 31, 2022 and 2021, notes payable consist of the following: 2022 2021 Term loan payable maturing in November 30, 2026, bearing interest at 10.00 percent per annum $ 50,000,000 $ 50,000,000 Convertible Debentures 16,006,084 — Other 442,222 238,835 Total Notes Payable 66,448,306 50,238,835 Less Unamortized Debt Issuance Costs and Loan Origination Fees (3,789,358) (5,383,413) Net Amount $ 62,658,948 $ 44,855,422 Less Current Portion of Notes Payable (40,237) (37,986) Notes Payable, Net of Current Portion $ 62,618,711 $ 44,817,436 In June 2021, GH Group completed a Series A Preferred Shares Financing at a face value of $12,530,963. The Series A Preferred Shares carried an annual 15.0 percent cumulative dividend in year 1. During March 2021, the Company raised $7,625,000 from unrelated third parties and recorded as debt. On June 29, 2021, all principal and accrued interest of such debt was converted to the Preferred Shares. See “Note 13 – Derivative Liabilities” “Note 18 – Shareholders’ Equity” Senior Secured Credit Agreement On December 9, 2021 (the “Senior Secure Closing Date”), the Company entered into a senior secured term loan agreement, as amended (the “Credit Agreement”), for total available proceeds of up to $100,000,000 with funds managed by a U.S.-based private credit investment fund and other third-party lenders (together, the “Senior Secured Lender”). Effective December 10, 2021, the Company closed on an initial term loan through the Credit Agreement of $50,000,000. The principal amount under the Credit Agreement will be paid in monthly installments in an aggregate amount equal to 1.25% per annum of the original principal amount, 24 months following the Senior Secure Closing Date, with a maturity date through November 30, 2026. Interest will be paid, beginning December 31, 2021, in monthly installments equal to the floating base rate plus the applicable term margin, or 5.25%. The interest rate will not be less than 10% per annum or exceed 12% per annum. As of December 31, 2022 and 2021, the interest rate was 10% and 10%, respectively. Two additional delayed draw term loans may be requested by the Company in an amount equal to the principal amount of $25,000,000 (or such lesser amount as agreed) each. The Company has optional and mandatory prepayments. Mandatory prepayments include any voluntary and involuntary sale or disposition of assets by the Company or any restricted subsidiaries. The outstanding principal amount of the obligation will be repaid by 100% of cash proceeds received from the sale or disposition of assets with certain exemptions as defined in the Credit Agreement. As of the Senior Secure Closing Date, the Company deposited an interest reserve in the amount of $3,000,000 into an escrow account and included as restricted cash in the Consolidated Balance Sheets as of December 31, 2022 and 2021. Additionally, the Company’s real properties held in Glass House Farm LLC, Magu Farm LLC and GH Camarillo LLC were pledged as security. The Credit Agreement contains a financial covenant which requires the Company to maintain liquidity in excess of $10,000,000 at all times. As of December 31, 2022 and 2021, the Company was in compliance with such financial covenant. Additionally, there are certain covenants which will require the Company to maintain a specific minimum debt service coverage ratio (“DSCR”) which will be measured quarterly beginning with the quarter ending December 31, 2022. Such covenants were not in effect as of December 31, 2021. As of December 31, 2022, the Company was in violation of one or more debt covenants and the Credit Agreement was subsequently amended to waive such violations. See “ Note – 25 – Subsequent Events Amendments to the Senior Secured Credit Agreement On January 21, 2022, the Company amended and restated the Credit Agreement (the “1st Amendment”) wherein certain events of default were waived. 16. (Continued) On May 12, 2022, the Company amended and restated the Credit Agreement (the “2 nd On August 30, 2022, the Company repaid the $10,000,000 Incremental Term Loan in cash. In accordance with ASC 470 “ Modifications and Extinguishments Convertible Debentures On April 28, 2022, the Company completed the Plus Products acquisition in which the purchase price was payable in part through an aggregate of 20,005 unsecured convertible debenture notes which consist of 12,003 debenture notes (the “Series A Notes”) and 8,002 debenture notes (the “Series B Notes”) (collectively, the “Plus Convertible Notes”). The Plus Convertible Notes accrue interest at 8.00% per annum payable in semi-annual arrears until April 15, 2027 (the “Maturity Date”). Interest is payable in cash, by the issuance of the Company’s Equity Shares or a combination of both at the sole discretion of the Company, based on the 10-day VWAP of the Equity Shares ending 5 trading days prior to the interest payment date with a fixed exchange rate of USD$1.00 to CAD$1.27. The Series A Notes are redeemable, at the sole option of the Company, in full or in part on a pro rata basis, and payable in cash, by the issuance of the Company’s Equity Shares, or a combination of both, at any time through the Maturity Date based on the higher of (i) the 10-day VWAP of the Equity Shares ending 5 trading days prior to the redemption date, or (ii) $4.08. The Series B Notes are redeemable, at the sole option of the Company, in full or in part on a pro rata basis, and payable in cash, by the issuance of the Company’s Equity Shares, or a combination of both, at any time through the Maturity Date based on the lower of (i) the 10-day VWAP of the Equity Shares ending 5 trading days prior to the redemption date, or (ii) $10.00 per Equity Share. In the event the Company’s Equity Shares achieve a closing price of $10.00 per share over any period greater than or equal to 20 consecutive trading days, each holder of the Series B Notes may elect to convert all or a portion of their holdings into the Company’s Equity Shares based on a conversion price of $10.00 per Equity Share. As of December 31, 2022, the Company recorded $11,894,989 and $4,111,095 for the Series A Notes and Series B Notes, respectively. The conversion features of the Series A Notes and Series B Notes were bifurcated from the related notes and classified as derivatives due to the variability of price in accordance with ASC 815. Accordingly, the fair value of the conversion features for the Series A Notes and Series B Notes were measured at fair value using a discounted cash flow model that is based on unobservable inputs. During the years ended December 31, 2022 and 2021, the Company recorded a change in derivative asset of approximately $30,000 and nil, respectively, as a component of change in fair value of derivatives in the Consolidated Statements of Operations. 16. (Continued) Scheduled maturities of notes payable for the years ended December 31: Principal December 31: Payments 2023 $ 668,955 2024 7,546,530 2025 7,549,256 2026 7,552,142 2027 7,750,339 Thereafter 35,381,084 Total Future Minimum Principal Payments $ 66,448,306 |
NOTES PAYABLE - RELATED PARTIES
NOTES PAYABLE - RELATED PARTIES | 12 Months Ended |
Dec. 31, 2022 | |
NOTES PAYABLE - RELATED PARTIES. | |
NOTES PAYABLE - RELATED PARTIES | 17. As of December 31, 2022 and 2021, the Company had nil notes payable outstanding from related parties. Senior Convertible Notes Effective January 8, 2020, the board of directors of GH Group approved approximately $17,500,000 in a private placement of Senior Convertible Notes. On January 4, 2021, the board of directors of GH Group approved an increase of the Senior Convertible Notes offering to $22,599,844. On June 29, 2021, the Senior Convertible Notes were automatically converted into the Preferred Shares of GH Group following the occurrence of a Qualified Equity Financing (the “QEF”) at a conversion price equal to the lesser of 80% of the cash price paid per Preferred Share or the quotient resulting from dividing $250,000,000 by the number of outstanding shares of Common Stock of GH Group immediately prior to the QEF. Prior to conversion, the Senior Convertible Notes bore cash interest at a rate of 4% per year paid quarterly and generally accrue interest at a rate of 4.3% per year. The Senior Convertible Note holders were also issued a security interest in the stock and membership interests held by GH Group and its subsidiaries. As noted above, on June 29, 2021, all principal and accrued interest under the Senior Convertible Notes were converted into the Preferred Shares. See “Note 13 – Derivative Liabilities” “Note 18 – Shareholders’ Equity” Secured Convertible Promissory Notes During the year ended December 31, 2018, Magu Farm LLC (“Magu Farm”) issued approximately $9,925,000 in secured promissory notes convertible into equity interests (collectively, the “Magu Farm Convertible Notes”) in Magu Investment Fund LLC (“Magu Investment Fund”) to certain lenders who are affiliates of shareholders of the Company (collectively, the “Magu Farm Lenders,” and individually, a “Magu Farm Lender”). 17. (Continued) On October 7, 2019, Magu Farm and Magu Investment Fund notified each Magu Farm Lender of Magu Investment Fund’s intention to merge with and into the Company at the closing of the Roll-Up. Subsequent to such notification, effective as of October 7, 2019, each Magu Farm Lender other than Kings Bay Investment Company Ltd., a Cayman Islands company (“KBIC”), entered into a letter agreement pursuant to which such Magu Farm Lender, among other things, (a) converted its respective Magu Farm Convertible Note with an aggregate value of $8,000,000 into equity interests in Magu Investment Fund and (b) agreed to terminate both the Co-Lending Agreement and its respective security interest as defined in the agreement. All accrued and unpaid interest were paid prior to conversion. Effective March 1, 2020, KBIC assigned the balance of its respective Magu Farm Convertible Note (the “Kings Bay Note”) to Kings Bay Capital Management Ltd., a Cayman Islands company (“KBCM”). Effective as of April 10, 2020, KBCM and the Company entered into an Assignment, Novation and Note Modification Agreement and a Security Agreement, pursuant to which, among other things, (a) the Company assumed all of Magu Farm’s rights, duties, liabilities and obligations under the Kings Bay Note, (b) the Kings Bay Note was modified to, among other things, provide KBCM with the right to convert the Kings Bay Note into Class A Common Stock at the same conversion price accorded to the other Magu Farm Lenders, and (c) the obligations under the Kings Bay Note were secured by a pledge of the securities of the Company’s subsidiaries but expressly subordinated to the holders of the Senior Convertible Notes. On June 29, 2021, all principal and accrued interest under the Kings Bay Note was converted into the Preferred Shares, and the Kings Bay security interest was terminated by filing of a UCC-3 termination statement. See “Note 18 – Shareholders’ Equity” In February 2021, GH Group issued a $2,000,000 unsecured promissory note in favor of Beach Front Properties, LLC. The debt was scheduled to mature in February 2022 bearing interest at fifteen percent (15%) per year. On June 29, 2021, all principal and accrued interest under such promissory note was converted to the Preferred Shares. See “Note 13 – Derivative Liabilities” “Note 18 – Shareholders’ Equity” In June 2021, GH Group completed a QEF for the offering and sale of the Preferred Shares having a face value of $12,530,963. The Preferred Shares carry an annual fifteen percent (15%) cumulative dividend in year 1, which is increased by 5% in the year following the first anniversary of the date of issuance. On June 29, 2021, all principal and accrued interest from GH Group’s convertible debt was converted into the Preferred Shares. See “Note 13 – Derivative Liabilities” “Note 18 – Shareholders’ Equity” |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2022 | |
SHAREHOLDERS' EQUITY | |
SHAREHOLDERS' EQUITY | 18. As of December 31, 2022 and 2021, the authorized share capital of the Company is comprised of an unlimited number of (i) the Subordinate Voting Shares, (ii) the Restricted Voting Shares, (iii) the Limited Voting Shares, (iv) the Multiple Voting Shares and (v) the Preferred Shares. Multiple Voting Shares The Company is authorized to issue an unlimited number of Multiple Voting Shares without nominal or par value. Holders of Multiple Voting Shares are entitled to receive notice of any meeting of shareholders of the Company, and to attend, vote and speak at such meetings, except those meetings at which only holders of a specific class of shares are entitled to vote separately as a class under the Business Corporations Act 18. (Continued) Equity Shares The holders of each class of the Equity Shares are entitled to receive notice of, to attend (if applicable, virtually) and to vote at all meetings of shareholders of the Company, except that they are not able to vote (but are entitled to receive notice of, to attend and to speak) at those meetings at which the holders of a specific class are entitled to vote separately as a class under the Business Corporations Act In the case of liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or in the event of any other distribution of assets of the Company among its shareholders for the purpose of winding up its affairs, the holders of the Equity Shares are entitled, subject to the prior rights of the holders of any shares of the Company ranking in priority to the Equity Shares (including any liquidation preference on any issued and outstanding Multiple Voting Shares and/or Preferred Shares), to participate ratably the Company’s remaining property along with all holders of the other classes of the Equity Shares (on a per share basis). Exchangeable Shares of MPB Acquisition Corp. Exchangeable Shares are part of the authorized share capital of MPB, a wholly-owned subsidiary of the Company, which entitle their holders to rights that are comparable to those rights attached to the Equity Shares. The Exchangeable Shares carry one vote per share, and the aggregate voting power of the Exchangeable Shares must not exceed 49.9% of the total voting power of all classes of shares of MPB. Until a holder exchanges their Exchangeable Shares for the Equity Shares, the holder of such Exchangeable Shares will not have the right to vote at meetings of the shareholders of the Company, though they will have the right to vote at meetings of the shareholders of MPB, including with respect to altering the rights of holders of any of the Exchangeable Shares, or if MPB decides to take certain actions without fully protecting the holders of any of the Exchangeable Shares, or as otherwise required by law. The Exchangeable Shares are exchangeable at any time, on a one-for-one basis, for the Equity Shares at the option of the holder. The Company treats the Exchangeable Shares as options, each with a value equal to an Equity Share, which represents the holder’s claim on the equity of the Company. Pursuant to the terms of the Exchangeable Shares, the Company and MPB are required to maintain the economic equivalency of such Exchangeable Shares with the publicly traded Equity Shares of the Company. This means the Exchangeable Shares are required to share the same economic benefits and retain the same proportionate ownership in the assets of the Company as the holders of the Equity Shares. The Company has presented these Exchangeable Shares as a part of shareholders’ equity within these Consolidated Financial Statements due to (i) the fact that they are economically equivalent to the Equity Shares, and (ii) the holders of the Exchangeable Shares are subject to restrictions on transfer under US securities laws but may dispose of the Exchangeable Shares without such restriction by exchanging them for Equity Shares. Changes in these assumptions would affect the presentation of the Exchangeable Shares from shareholders’ equity to non-controlling interests; however, there would be no impact on earnings per share. 18. (Continued) Preferred Shares GH Group, Inc. The authorized total number of preferred shares (the “GH Group Preferred Shares”) of GH Group is 50,000,000 of which 45,000,000 shares are designated as shares of Series A Preferred Shares (“GH Group Series A Preferred”) and 55,000 shares are designated as shares of Series B Preferred Shares (“GH Group Series B Preferred”). On December 30, 2022, GH Group amended and restated its Certificate of Incorporation, to authorize 5,000 shares of Series C Preferred Shares (“GH Group Series C Preferred”). Holders of the GH Group Preferred Shares are entitled to receive notice of and attend any meeting of the shareholders of GH Group but are not entitled to vote. The GH Group Preferred Shares do not carry any voting rights and are not convertible. In the event of a liquidation, voluntary or involuntary, dissolution or winding-up of GH Group, the holders of outstanding GH Group Preferred Shares are entitled to be paid out of the assets of GH Group available for distribution to it stockholders, before any payment shall be made to the holders of GH Group common stock, of which holders of GH Group Series B Preferred are to receive payment prior to holders of GH Group Series A Preferred and GH Group Series C Preferred. GH Group has the right to redeem all or a portion of the GH Group Preferred Shares from a holder for an amount equal to the liquidation value and all unpaid accrued and accumulated dividends. The GH Group Series A Preferred carries a 15% cumulative dividend rate, which increases by 5% in the year following the first anniversary of the date of issuance. The GH Group Series B Preferred and the GH Group Series C Preferred carry a 20% cumulative annually There were nil and 18,515,491 shares of the GH Group Series A Preferred issued outstanding issued outstanding issued outstanding Non-Controlling Interest Non-controlling interest represents equity interests owned by parties that are not shareholders of the ultimate parent. The share of net assets attributable to non-controlling interests is presented as a component of equity. Their share of net income or loss is recognized directly in equity. Changes in the parent company’s ownership interest that do not result in a loss of control are accounted for as equity transactions. The Company recorded a loss attributable to a non-controlling interest during the years ended December 31, 2022 and 2021, of $61,675 and $197,774, respectively. The value of the equity issuances issued to non-controlling interest members were determined using the estimated fair value of the equity of the Company. Transactions Prior to the Business Combination January 1, 2021 through June 29, 2021 (GH Group) On January 1, 2021, GH Group issued the Class A Common Stock which was ultimately exchanged into 731,369 Exchangeable Shares valued at $3,380,278 related to an acquisition, see “Note 9 – Business Acquisitions”. In June 2021, GH Group issued Class A Common Stock which was ultimately exchanged into 646,096 Exchangeable Shares in conversion of $1,925,000 in the Senior Convertible Notes. 18. (Continued) In June 2021, GH Group issued Class A Common Stock which was ultimately exchanged into 160,149 Exchangeable Shares for the cashless exercise of 1,968,300 warrants. Transactions Contemporaneous to the Business Combination (June 29, 2021) and through December 31, 2021 On June 29, 2021, contemporaneously with the Business Combination, the Company issued 4,754,979 Multiple Voting Shares to the founders of GH Group and issued 22,335,908 Subordinate Voting Shares to investors for approximately $124,359,000 in cash, net of fees but before the value of the earnout liability recorded of $7,640,334, see “Note 14 – Contingent Shares and Earnout Liabilities” During the year ended December 31, 2021, the Company, through GH Group, issued 38,808,618 Preferred Shares in connection with the Series A Preferred Shares financing and conversion of the Senior Convertible Notes into the Preferred Shares with an aggregate value of $31,285,258, net of the value of the initial derivative liability. In conjunction with these transactions, the Company issued 4,928,578, as converted, Company warrants with an exercise price of $10.00 per warrant which expire in June 2024. Simultaneously, certain holders of the Preferred Shares holding 20,293,127 Preferred Shares elected to convert their Preferred Shares to 2,577,227 Exchangeable Shares. On June 29, 2021, certain holders of 5,392,564 vested options of GH Group exercised their options (some on a cashless basis and cash exercise) and were issued Subordinate Voting Shares. As a result, the Company issued 479,195 Subordinate Voting Shares with an aggregate value of $88,654. On September 14, 2021, in conjunction with the closing pursuant to the Camarillo Acquisition Agreement for the purchase of certain real property, the Company issued 6,500,000 Subordinate Voting Shares with an aggregate value of $29,250,000, see “Note 7 – Property, Plant and Equipment” On August 23, 2021, the Company received $1,500,000 from an investor prior to receiving Subordinate Voting Shares. During the year ended December 31, 2021, the Company issued 150,000 Subordinate Voting Shares to said investor. In October 2021, the Company agreed to issue 150,000 Subordinate Voting Shares at a per value price of $4.99 per share having an aggregate value of $748,500 to Element 7. Such shares are still pending delivery as of December 31, 2022. See “Note 22 – Commitments and Contingencies” On December 9, 2021, the Company issued 2,000,000 Company warrants with an exercise price of $11.50 per warrant which will expire in June 2026. See “ Note 16 – Notes Payable” During the year ended December 31, 2021, the Company’s Exchangeable Voting Shareholders exchanged 9,098,302 of their Exchangeable Shares for Subordinate Voting Shares in accordance with their agreements. Share and Equity Transactions During the Year Ended December 31, 2022 During the year ended December 31, 2022, the Company issued 2,311,213 Equity Shares to the sellers of Plus Products valued at $9,707,414, see “Note 9 – Business Acquisitions” During the year ended December 31, 2022, the Company issued 347,108 Equity Shares to certain convertible note holders for interest payments valued at $868,763. During the year ended December 31, 2022, the Company issued 227,116 Equity Shares to various individuals for the exercise of stock options. In exchange for the exercise of stock options, the Company received $303,694 in cash. 18. (Continued) During the year ended December 31, 2022, the Company issued 2,162,265 Equity Shares to various individuals for the conversion of Restricted Stock Units. During the year ended December 31, 2022, certain holders of Exchangeable Shares exchanged 5,936,636 Exchangeable Shares for a like number of Equity Shares. During the year ended December 31, 2022, the Company received $5,505,000 in contributions from controlling and non-controlling interests. During the year ended December 31, 2022, the Company issued 500,000 Equity Shares in connection with The Pottery acquisition valued at $1,100,000 at the time of issuance, see “Note 9 – Business Acquisitions” During the year ended December 31, 2022, the Company issued 5,606,112 Equity Shares to the sellers of the Natural Healing Centers retail dispensaries located in Grover Beach, Lemoore and Morro Bay valued at $14,459,382, see “Note 9 – Business Acquisitions” During the year ended December 31, 2022, the Company through its subsidiary, GH Group, issued 49,969 GH Group Series B Preferred Shares in connection with the GH Group Series B Preferred Shares financing with an aggregate value of $49,999,906 comprised of the following: (i) existing GH Group Series A Preferred Shares with a face value of $22,741,956 were exchanged for 22,712 GH Group Series B Preferred Shares and (ii) a new private placement of 27,257 GH Group Series B Preferred Shares with a face value of $27,257,950. In conjunction with these transactions, the Company cancelled 2,274,133 existing Company warrants and issued 9,999,937 Company warrants comprised of the following: (i) 4,548,347 replacement Company warrants and (ii) 5,451,590 Company warrants. The warrants have an exercise price of $5.00 per warrant and expire on August 31, 2027. The Company recorded the fair value of the Series B Preferred Shares as mezzanine non-controlling Interest in the amount of $36,549,987, which is net of the value allocated to the replacement warrants of $5,658,502 and newly issued warrants of $7,790,939. The Series B Preferred Shares are accounted for as mezzanine non-controlling Interest as the Series B Preferred Shares redemption feature is not in the sole control of the Company. The Series B Preferred Shares were recorded to its redemption value as of December 31, 2022 with an adjustment of $13,449,142. During the year ended December 31, 2022, the remaining, unexchanged GH Group Series A Preferred Shares were redeemed by the Company for $772,718, in cash. During the year ended December 31, 2022, the Company through its subsidiary, GH Group, closed on an additional private placement financing of 4,700 GH Group Series C Preferred Shares with an aggregate face value of $4,700,000. In conjunction with these transactions, the Company issued 940,000 Company warrants. The warrants have an exercise price of $5.00 per warrant which expire in August 2027. The Company recorded the fair value of the Series C Preferred Shares as mezzanine non-controlling Interest in the amount of $3,733,792, which is net of the value allocated to the newly issued warrants of $966,208. The Series C Preferred Shares are accounted for as mezzanine non-controlling Interest as the Series C Preferred Shares redemption feature is not in the sole control of the Company. The Series C Preferred Shares were recorded to its redemption value as of December 31, 2022 with an adjustment of $966,208. Variable Interest Entity On June 30, 2022, the Company transferred certain tenant improvements with a net book value of $762,095 to 2000 De La Vina LLC (“2000 DLV”), a wholly-owned subsidiary, and simultaneously sold 100% of its limited liability company membership interest in 2000 DLV for a cash payment of $3,060,000 upon closing to an entity in which certain executives and board members of the Company are members. As part of the transaction, the Company no longer has capital and profits interests in the Company; provided, however, the Company’s affiliate, GH Group, was appointed the manager and received a 20% carried interest or profits interest in 2000 DLV. Thus, the Company indirectly retains control of 2000 DLV under the First Amended and Restated Operating Agreement dated May 1, 2022 between the Company and members of 2000 DLV. Accordingly, 2000 DLV became a VIE of the Company. 18. (Continued) The below table summarizes information for entities the Company has concluded to be VIE’s as the Company possesses the power to direct activities through various agreements. Through these agreements, the Company can significantly impact the VIE and thus holds a controlling financial interest. This information represents amounts before intercompany eliminations. As of and for the year ended December 31, 2022, the aggregate balances of the VIE included in the accompanying Consolidated Balance Sheet and Consolidated Statements of Operations are as follows: 2022 Current Assets $ 111,686 Non-Current Assets $ 2,357,957 Total Assets $ 2,469,643 Non-Current Liabilities $ 241,373 Total Liabilities $ 241,373 Revenues, Net $ 139,500 Net Income Attributable to Non-Controlling Interest $ 56,997 |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 12 Months Ended |
Dec. 31, 2022 | |
SHARE-BASED COMPENSATION | |
SHARE-BASED COMPENSATION | 19. The Company has an amended and restated equity incentive plan (the “Incentive Plan”) under which the Company may issue various types of equity instruments or instruments that track to equity, more particularly the Equity Shares, to employees, officers, consultants and non-employee directors. The types of equity instruments issuable under the Incentive Plan encompass, among other things, stock options, unrestricted stock bonus, and restricted stock units (together, the “Awards”). The Awards are expensed and recorded as a component of general and administrative costs. The maximum number of the Awards that may be issued under the Incentive Plan is 10% of the fully-diluted Equity Shares of the Company (inclusive of the Equity Shares issuable in exchange for unrestricted Exchangeable Shares) as calculated using the treasury method. The Incentive Plan is an “evergreen” plan, meaning that if an Award expires, becomes un-exercisable, or is cancelled, forfeited or otherwise terminated without having been exercised or settled in full, as the case may be, the Equity Shares allocable to the unexercised portion of an Award shall again become available for future grant or sale under the Incentive Plan (unless the Incentive Plan has terminated by its terms), and the number of the Awards available for grant will increase as the number of issued and outstanding Equity Shares increases. Granting and vesting of the Awards are determined by and recommended to the Board for approval by the Compensation, Nomination and Corporate Governance Committee of the Board of Directors. The exercise price for options (if applicable) will generally not be less than the fair market value of the Award at the time of grant and will generally expire after 5 years. Stock Options Immediately prior to the close of the Business Combination during the year ended December 31, 2021, GH Group had 31,403,186 outstanding vested options with a blended average exercise price of $0.23 and 29,294,324 outstanding unvested options with a blended average exercise price of $0.26. Incident to the close, 5,392,564 options were exercised resulting in the issuance of 479,195 Subordinate Voting Shares. Of the remaining options, the vested GH Group non-qualified stock options (“NQSOs”) were paid the net-value of their outstanding options at close by reserving 1,433,793 Subordinate Voting Shares to be issued on or before June 29, 2024. As these shares have not been issued and are payable on June 29, 2024, the Company reclassified $2,756,830 from equity to shares payable. Unvested NQSOs were exchanged for RSUs of the Company on substantially similar terms to the NQSO grants equal to the net-value of such options at close using a Company share price of $10. As a result, the Company issued 1,076,499 RSUs. 19. (Continued) Vested and unvested GH Group incentive stock options (“ISOs”) were exchanged for Company incentive stock options using an exchange ratio of 10.27078 to 1. This resulted in the exchange of 21,065,367 ISOs for 2,051,000 Company incentive stock options. A reconciliation of the beginning and ending balance of stock options outstanding is as follows: Weighted- Number of Stock Average Exercise Options Price Balance as of December 31, 2020 48,403,624 $ 0.23 Granted Prior to Business Combination 12,182,545 $ 0.30 Forfeited Prior to Business Combination (296,350) $ 0.24 Exercised Prior to Business Combination (4,921,707) $ 0.26 Exchanged for Subordinate Shares At Business Combination (19,320,935) $ 0.26 Converted to RSU’s At Business Combination (14,886,359) $ 0.26 Effect on Conversion related to the Business Combination (19,108,791) $ 0.28 Granted After Business Combination 108,695 $ 4.60 Forfeited After Business Combination (72,938) $ 2.36 Balance as of December 31, 2021 2,087,784 $ 2.78 Exercised (227,116) $ 2.30 Forfeited (407,781) $ 2.82 Balance as of December 31, 2022 1,452,887 $ 2.84 The following table summarizes the stock options that remain outstanding as of December 31, 2022: Exercise Stock Options Security Issuable Price Expiration Date Outstanding Equity Shares $ 2.26 October 2024 629,641 Equity Shares $ 3.08 April 2025 115,917 Equity Shares $ 3.08 January 2026 598,634 Equity Shares $ 4.60 October 2026 108,695 1,452,887 As of December 31, 2022 and 2021, options vested and exercisable were 1,400,593 and 1,000,717, respectively. There were no stock options granted for the year ended December 31, 2022. For the year ended December 31, 2021, the fair value of stock options granted with a fixed exercise price was determined using the Black-Scholes option-pricing model with the following assumptions at the time of grant: 2021 Weighted-Average Risk-Free Annual Interest Rate 0.29 % Weighted-Average Expected Annual Dividend Yield 0.0 % Weighted-Average Expected Stock Price Volatility 84.6 % Weighted-Average Expected Life in Years 4.00 Weighted-Average Estimated Forfeiture Rate 0.0 % Stock price volatility was estimated by using the average historical volatility of comparable companies from a representative peer group of publicly-traded cannabis companies. The expected life represents the period of time that stock options granted are expected to be outstanding. The risk-free rate was based on the United States Treasury zero coupon bond with a remaining term equal to the expected life of the options. During the year ended December 31, 2021, the weighted-average fair value of stock options granted was $0.34 per option. As of December 31, 2022 and 2021, stock options outstanding have a weighted-average remaining contractual life of 2.4 years and 3.4 years, respectively. 19. (Continued) For the years ended December 31, 2022 and 2021, the Company recognized $1,934,561 and $4,442,223, respectively, of share-based compensation expense related to these stock options and is included as a component of general and administrative expense in the Consolidated Statements of Operations. Restricted Stock Units As previously noted, 1,076,499 RSUs were issued for the exchange of 14,886,359 GH Group ISOs held immediately prior to the Business Combination. An additional grant of 2,591,584 RSUs was made to certain members of the Company’s senior management team which vest over three years and is subject to accelerated vesting if certain performance metrics are achieved. A reconciliation of the beginning and ending balance of RSUs outstanding is as follows: Number of Restricted Stock Balance as of December 31, 2020 — Granted 2,591,584 Exchanged and Converted from Options 1,076,499 Forfeited (437,135) Balance as of December 31, 2021 3,230,948 Granted 1,968,837 Converted (2,162,265) Forfeited (1,036,986) Balance as of December 31, 2022 2,000,534 During the years ended December 31, 2022 and 2021, the Company recognized $10,821,120 and $4,042,690, respectively, in stock-based compensation related to RSUs and is included as a component of general and administrative expense in the Consolidated Statements of Operations. The fair value of the RSUs issued during the years ended December 31, 2022 and 2021 were determined using the value of the Equity Shares at the time of grant. Stock Appreciation Right Units During the year ended December 31, 2021, GH Group issued 230,752 SARs to various employees of the Company. The SARs vest 33% one year after the grant date and the remaining 67% vest monthly over two years. Vested and exercised SARs will receive cash in the amount of the SARs exercised multiplied by the excess of the fair market value of an Equity Share over the stated strike price of the SAR. As the SARs are cash-settled, the Company recognizes the value of the SAR as liabilities which are included in accounts payable and accrued liabilities in the Consolidated Balance Sheets. As of December 31, 2022 and 2021, the Company recorded a liability of nil and $35,442, respectively. 19. (Continued) A reconciliation of the beginning and ending balance of the SARs outstanding is as follows: Number of Stock Appreciation Rights Units Balance as of December 31, 2020 — Granted 230,752 Forfeited (71,016) Balance as of December 31, 2021 159,736 Forfeited (59,875) Balance as of December 31, 2022 99,861 During the years ended December 31, 2022 and 2021, the Company recognized a gain of $35,000 and an expense of $35,000, respectively, related to the SARs. Warrants A reconciliation of the beginning and ending balance of warrants outstanding is as follows: Weighted- Number of Average Exercise Warrants Price Balance as of December 31, 2020 1,968,300 $ 0.16 Exercised (1,968,300) $ 0.16 Assumed from the Business Combination 28,489,500 $ 11.50 Granted 6,928,578 $ 10.43 Balance as of December 31, 2021 35,418,078 $ 11.29 Granted 11,114,937 $ 5.10 Cancelled (2,274,133) $ 10.00 Balance as of December 31, 2022 44,258,882 $ 9.80 The following table summarizes the warrants that remain outstanding as of December 31, 2022: Warrants Warrants Security Issuable Exercise Price Expiration Date Outstanding Exercisable Equity Shares $ 11.50 June 2026 30,664,500 30,664,500 Equity Shares $ 10.00 June 2024 2,654,445 2,654,445 Equity Shares $ 5.00 August 2027 10,939,937 10,939,937 44,258,882 44,258,882 19. (Continued) For the year ended December 31, 2022, the fair value of the warrants granted with a fixed exercise price and fair valued using level 3 inputs was determined using the Black-Scholes option-pricing model with the following assumptions at the time of grant: 2022 Weighted-Average Risk-Free Annual Interest Rate 3.42 % Weighted-Average Expected Annual Dividend Yield 0.0 % Weighted-Average Expected Stock Price Volatility 103.74 % Weighted-Average Expected Life in Years 5.00 Weighted-Average Estimated Forfeiture Rate 0.0 % There were no warrants issued during the year ended December 31, 2021 that required fair valuing using level 3 inputs. During the years ended December 31, 2022 and 2021, the weighted-average fair value of warrants granted was $1.83 and $1.64, respectively, per warrant. As of December 31, 2022 and 2021, warrants outstanding have a weighted-average remaining contractual life of 3.6 years and 4.2 years, respectively. |
LOSS PER SHARE
LOSS PER SHARE | 12 Months Ended |
Dec. 31, 2022 | |
LOSS PER SHARE | |
LOSS PER SHARE | 20. The following is a reconciliation for the calculation of net loss attributable to the Company and the basic and diluted loss per share for the years ended December 31, 2022 and 2021: 2022 2021 Net Loss Attributable to the Company $ (35,534,892) $ (44,167,812) Less Dividends and Increase in Redemption Values of GH Group Preferred Shares (20,250,481) (1,797,423) Net Loss Attributable to the Company (55,785,373) (45,965,235) Weighted-Average Shares Outstanding - Basic and Diluted 64,182,436 40,280,639 Loss Per Share Attributable to the Company - Basic and Diluted $ (0.87) $ (1.14) Net income attributable to the Company, as reported, is adjusted for dividends and various other adjustments as defined in ASC 260 “Earnings Per Share”. After adjustments as defined in ASC 260, if the Company is in a net loss position, diluted loss per share is the same as basic loss per share when the issuance of shares on the exercise of convertible debentures, warrants, RSU’s and share options are anti-dilutive. After adjustments, as defined in ASC 260, if the Company is in a net income position, diluted earnings per share includes options, warrants, RSUs, convertible debt and contingently issuable shares that are determined to be dilutive using the treasury stock method for all equity instruments issuable in equity units and the “if converted” method for the Company’s convertible debt. |
PROVISION FOR INCOME TAXES AND
PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES | 12 Months Ended |
Dec. 31, 2022 | |
PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES | |
PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES | 21. Provision for income taxes consists of the following for the years ended December 31, 2022 and 2021: 2022 2021 Current: Federal $ 5,876,587 $ 3,382,708 State 1,485,814 5,161 Total Current 7,362,401 3,387,869 Deferred: Federal (1,890,711) (322,017) State (729,986) 232,249 Total Deferred (2,620,697) (89,768) Total Provision for Income Taxes $ 4,741,704 $ 3,298,101 As of December 31, 2022 and 2021, the components of deferred tax assets and liabilities were as follows: 2022 2021 Deferred Tax Assets: Allowance for Doubtful Accounts $ 998,674 $ 984,437 Inventory Reserve 58,840 219,474 Deferred Rent 17,102 18,978 Accrued Expenses 172,520 131,916 Interest Expense — — Operating Lease Liabilities 1,969,561 606,718 Non-qualified Stock Options 809,992 809,992 Stock-based Compensation 3,465,882 — Loss on Disposal of Subsidiary 1,600,209 1,720,979 Operating Losses 38,098,948 19,488,540 Property and Euipment 89,282 — Total Deferred Tax Assets 47,281,010 23,981,034 Valuation Allowance (44,082,411) (22,495,563) Net Deferred Tax Assets $ 3,198,599 $ 1,485,471 21. PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES (Continued) 2022 2021 Deferred Tax Liabilities: Contingent Consideration $ — $ (1,203,039) Property, Plant & Equipment — (937,801) Right-of-Use Assets (1,908,717) (598,774) State Taxes — (76,672) Total Deferred Tax Liabilities (1,908,717) (2,816,286) Net Deferred Tax Assets (Liabilities) $ 1,289,882 $ (1,330,815) The reconciliation between the effective tax rate on income and the statutory tax rate is as follows for the years ended December 31, 2022 and 2021: 2022 2021 Income Tax Benefit at Federal Rate $ (6,441,046) $ (8,634,892) State Taxes and Fees 1,737,004 1,435,197 IRS Section 280E Disallowance 1,633,905 1,922,244 Uncertain Tax Position 1,954,143 420,976 Change in Valuation Allowance 21,654,795 15,810,756 Change in Fair Value of Contingent Consideration (7,265,518) — State Tax Carryforwards (6,705,205) (3,928,330) Excess Accrual of Prior Year Taxes (1,722,370) (3,425,023) Other Permanent Differences (104,004) (302,827) Reported Income Tax Expense $ 4,741,704 $ 3,298,101 The Company has used a discrete effective tax rate method to calculate taxes for the years ended December 31, 2022 and 2021. The Company determined that since small changes in estimated ordinary income would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate for the fiscal years ended December 31, 2022 and 2021. As the Company operates in the legalized cannabis industry, it is subject to the limits of IRC Section 280E (“Section 280E”) for U.S. federal income tax purposes under which the Company is only allowed to deduct expenses directly related to the cost of goods sold of its product. This results in permanent differences between ordinary and necessary business expenses deemed nonallowable under Section 280E, whereas the Company deducts all operating expenses on its state tax returns for which there is no comparable provision of Section 280E under the California Revenue and Taxation Code. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits along with any associated interest and penalties that would be payable to the taxing authorities upon examination. 21. PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES (Continued) A reconciliation of the beginning and ending amount of total unrecognized tax benefits for years ended December 31, 2022 and 2021 is as follows: 2022 2021 Balance at Beginning of Year $ 1,449,046 $ 849,358 IRS Section 280E Positions Acquired 888,130 178,712 IRS Section 280E Positions 1,954,143 420,976 Balance at End of Year $ 4,291,319 $ 1,449,046 The Company has determined that the tax impact of its corporate overhead allocation was not more likely than not to be sustained on the merits as required under ASC 740 “Income Taxes” The Company’s evaluation of tax positions was performed for those tax years which remain open to for audit. The Company may from time to time, be assessed interest or penalties by the taxing authorities, although any such assessments historically have been minimal and immaterial to the Company’s financial results. In the event the Company is assessed for interest and/or penalties, such amounts will be classified as income tax expense in the financial statements. As of December 31, 2022, the Company’s federal tax returns since 2019 and state tax returns since 2018 are still subject to adjustment upon audit. The 2020 and 2021 tax returns for SoCal Hemp JV, LLC are currently under examination by the IRS. No other Company-related tax returns are currently being examined by any taxing authorities. While it is reasonably possible that certain portions of the unrecognized tax benefit may change from a lapse in applicable statute of limitations, it is not possible to reasonably estimate the effect of any amount of such a change to previously recorded uncertain tax positions in the next 12 months. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2022 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 22. Contingencies The Company’s operations are subject to a variety of local and state regulations. Failure to comply with one or more of these regulations could result in fines, restrictions on its operations, or revocation, cancellation, non-renewal or other losses of permits, licensed and entitlements that could result in the Company ceasing operations. While management of the Company believes that the Company is in compliance with applicable local and state statues, regulations, and ordinances as of December 31, 2022 and 2021, cannabis laws and regulations continue to evolve and are subject to differing interpretations. As a result, the Company may be subject to regulatory fines, penalties or restrictions in the future. Royalty Effective as of May 9, 2019, Sweet & Salty, Inc., a California corporation (“Lender”), and GH Brands LLC, a California limited liability company and subsidiary of the Company (“GH Brands”), entered into a License and Services Agreement, pursuant to which Lender granted to GH Brands an exclusive, transferable, sublicensable, right and license to use, exploit and incorporate the name, nicknames, initials, signature, voice, image, likeness, and photographic or graphic representations of likeness, statements and biography of the artist Annabella Avery Thorne, professionally known as Bella Thorne, for all purposes relating to or in connection with the development, quality control, cultivation, extraction, manufacture, production, branding, testing, advertising, marketing, promotion, commercialization, packaging, distribution, exploitation and/or sale of the products of GH Brands and its affiliates. The term of the License and Service Agreement is 3 years, with the right to renew upon 60 days prior notice for an additional 2-year st st nd st nd rd 2-year th th 22. COMMITMENTS AND CONTINGENCIES (Continued) Claims and Litigation From time to time, the Company may be involved in litigation relating to claims arising out of operations in the normal course of business. As of December 31, 2022 and 2021, there were no pending or threatening lawsuits that could be reasonably assessed to have resulted in a probable loss to the Company in an amount that can be reasonably estimated. As such, no accrual has been made in the Consolidated Financial Statements relating to claims and litigations. As of December 31, 2022 and 2021, there were also no proceedings in which any of the Company’s directors, officers or affiliates were an adverse party to the Company or had a material interest adverse to the Company’s interest. Element 7 Transaction and Litigation Effective February 23, 2021, GH Group entered into a Merger and Exchange Agreement (the “E7 Merger Agreement”) with Element 7 CA, LLC (“E7”) whereby GH Group had the right, subject to satisfactory completion of due diligence and other conditions, to obtain all of the limited liability company membership or other equity interests held by E7 in seventeen holding companies that hold the rights to certain in-process state and local cannabis retail licenses or license applications, some of which are partially owned. In addition, GH Group entered into a License Development and Consulting Agreement (the “E7 License Agreement”, and together with the E7 Merger Agreement, the “E7 Agreements”) with E7 to provide certain retail consulting services to develop and obtain up to thirty-four cannabis retail licenses in exchange for the payment of certain fees as set forth in the E7 License Agreement. In November 2021, GH Group terminated the E7 Agreements based on a breach of contractual terms by E7, and as of December 31, 2021, GH Group had converted certain pre-closing financing payments and consulting fees into notes receivable in the amount of $2,274,167. As of December 31, 2022 and 2021, the notes receivable was fully reserved by the Company. As of December 31, 2021, the Company had received certain limited liability company membership or other equity interests in one E7 entity out of seventeen entities that were contractually committed to be transferred under the E7 Merger Agreement. On November 4, 2021, GH Group filed a lawsuit in the Superior Court for the County of Los Angeles, Central District (Case No. 21STCV40401) against E7 and its principals and owners Josh Black and Robert “Bobby” DiVito (together, “Element 7”) for a variety of claims, including fraud and breach of contract and demanded performance under the E7 Agreements. The court proceeding was subsequently withdrawn by the Company without prejudice, and on March 13, 2022, GH Group entered into an agreement with American Patriot Brands, Inc. (“APB”) to jointly file suit against Element 7 to enforce the transfer of certain contractually committed licenses (the “Joint Litigation Agreement”). GH Group and APB jointly refiled a complaint against Element 7 in the Superior Court of California, County of Los Angeles (Case No. 22STCV09323). The Superior Court severed the claims of GH Group and APB, which resulted in APB’s claims remaining in Superior Court and GH Group’s claims being adjudicated in Signature Arbitration (Case No. LQMGL) (collectively, the “Element 7 Proceeding”). Under the terms of the Joint Litigation Agreement, GH Group will pay all legal fees for GH Group and APB’s joint litigation against Element 7. GH Group will have the option to purchase any E7 license or licensed entity interests recovered by APB from Element 7 that were included in the E7 Merger Agreement, that either have a state or local permit and a valid lease, or a local permit that is without a real property site but is in a competitive license jurisdiction, in each case at a valuation of $750,000 per E7 license or licensed entity, paid in Equity Shares at the 10-day |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2022 | |
NOTES PAYABLE - RELATED PARTIES | |
RELATED PARTY TRANSACTIONS | 23. Leases Neo Street Partners LLC, a company partially owned by an executive and board member of the Company, entered into a five-year lease with a subsidiary of the Company. The lease, which commenced in October 2018, provides for an initial annual base rent payment of $213,049 increasing to $243,491 for years two to five. Rent expense for the years ended December 31, 2022 and 2021 were $243,491 and $243,491, respectively. 3645 Long Beach LLC, a company partially owned by an executive and board member of the Company, entered into a five-year lease with a subsidiary of the Company. The lease, which commenced in December 2019, provides for an initial annual base rent payment of $64,477 increasing to $69,352 for year two and increasing five percent per annum thereafter. Rent expense for the years ended December 31, 2022 and 2021 were $73,412 and $69,352, respectively. Isla Vista GHG LLC, a company partially owned by executives and board members of the Company, entered into a ten-year lease with a subsidiary of the Company. The lease, which commences on the first calendar day after the Company publicly announces the opening of the retail location at the leased property (the “Commencement Date”), provides for an initial monthly rent of $5,000 starting April 19, 2022 until the Commencement Date. Effective on the Commencement Date, the initial annual base rent payment will be $144,000 and increasing three percent per annum thereafter. Rent expense for the years ended December 31, 2022 and 2021 were $59,417 and nil, respectively. In August 2022, the Kazan Trust dated December 10, 2004, a trust owned by an executive and board member of the Company, acquired partial ownership of a real estate entity that entered into a ten-year lease with a subsidiary of the Company. The lease, which commenced in July 2022, provides for an initial annual base rent payment of $36,489 increasing three percent per annum thereafter. Rent expense for the years ended December 31, 2022 and 2021 were $12,163 and nil, respectively. Consulting Agreement Beach Front Property Management Inc., a company that is majority-owned by an executive and board member of the Company, entered into a consulting agreement with the Company dated September 28, 2020. The monthly consulting fee is $10,860 for M&A advisory and assistance and real estate acquisition and financing services. The agreement may be terminated by either party for any/or no reason without penalty upon seven days written notice. Consulting fees for the years ended December 31, 2022 and 2021 were $130,320 and $130,320, respectively. Refer to “ Note 17 – Notes Payable - Related Parties |
REVENUES, NET
REVENUES, NET | 12 Months Ended |
Dec. 31, 2022 | |
REVENUES, NET | |
REVENUES, NET | 24. Revenues are disaggregated as follows for the years ended December 31, 2022 and 2021: 2022 2021 Retail $ 26,730,847 $ 21,734,403 Wholesale 64,160,240 47,712,449 Revenues, Net $ 90,891,087 $ 69,446,852 |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2022 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 25. Banking Environment Silicon Valley Bank (“SVB”) was closed on March 10, 2023 by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation (“FDIC”) as receiver. At the time of closing, the Company did not maintain any of its cash and cash equivalents with SVB. The Company maintains cash balances at its physical locations, which are not currently insured, and with various U.S. banks and credit unions with balances in excess of the Federal Deposit Insurance Corporation and National Credit Union Share Insurance Fund limits, respectively. The Company does not believe it will be impacted by the closure of SVB and will continue to monitor the situation as it evolves. Senior Secured Credit Agreement Amendment As of the date of the issuance of these financial statements, the Company entered into an amendment to the Credit Agreement by which the Senior Secured Lender waived the violations and agreed to extend the DSCR covenant for each fiscal quarter beginning on June 30, 2023. In connection with the amendment to the Credit Agreement, the Company will pay an amount equal to 2% of the aggregate principal amount of the loan outstanding on August 1, 2023. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Preparation | Basis of Preparation The accompanying Consolidated Financial Statements have been prepared on a going concern basis in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and reflect the accounts and operations of the Company and those of the Company’s subsidiaries in which the Company has a controlling financial interest. Investments in entities in which the Company has significant influence, but less than a controlling financial interest, are accounted for using the equity method. All intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the consolidated financial position of the Company as of December 31, 2022 and 2021, the consolidated results of operations and cash flows for the years ended December 31, 2022 and 2021 have been included. |
Consolidation of Variable Interest Entities ("VIE") | Consolidation of Variable Interest Entities (a “VIE”) ASC 810 “ Consolidation |
Basis of Consolidation | Basis of Consolidation These Consolidated Financial Statements as of December 31, 2022 and 2021 include the accounts of the Company, its wholly-owned subsidiaries and entities over which the Company has control as defined in ASC 810. Subsidiaries over which the Company has control are fully consolidated from the date control commences until the date control ceases. Control exists when the Company has ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than fifty percent of the outstanding voting securities of another entity. In assessing control, potential voting rights that are currently exercisable are considered. The following are the Company’s principal wholly-owned or controlled subsidiaries and/or affiliates that are included in these consolidated financial statements as of and for the years ended December 31, 2022 and 2021: Corporate Entities Ownership Entity Location Purpose 2022 2021 MPB Acquisition Corp Nevada Holding company 100 % 100 % GH Group Inc Long Beach, CA Holding company 100 % 100 % GHB Unsub LLC Long Beach, CA Holding company 100 % 100 % Glass House Retail, LLC Long Beach, CA Holding company 100 % 100 % Glass House Cultivation LLC Camarillo Holding company 100 % 100 % Glass House Manufacturing LLC Lompoc, CA Holding company 100 % 100 % LOB Investment Co. LLC Long Beach, CA Holding company 100 % 100 % SoCal Hemp Co, LLC Long Beach, CA Holding company 0 % 100 % Plus Products Holding Inc. Long Beach, CA Holding company 100 % 0 % Plus Products Nevada LLC Long Beach, CA Holding company 100 % 0 % Plus Products Services LLC Long Beach, CA Holding company 100 % 0 % Plus Products Wonders LLC Long Beach, CA Holding company 100 % 0 % Uplift Services LLC Long Beach, CA Holding company 100 % 0 % Carberry LLC Long Beach, CA Holding company 100 % 0 % 2. (Continued) Management and Operating Entities Ownership Subsidiaries Location Purpose 2022 2021 G&H Supply Company, LLC Carpinteria, CA Cultivation management 100 % 100 % Mission Health Associates, Inc. Carpinteria, CA Cannabis cultivation 100 % 100 % MGF Management LLC Carpinteria, CA Cultivation management 100 % 100 % G&K Produce LLC Carpinteria, CA Cannabis cultivation 100 % 100 % K&G Flowers LLC Carpinteria, CA Cannabis cultivation 100 % 100 % Glass House Camarillo Cultivation LLC Camarillo, CA Cannabis cultivation 100 % 100 % Lompoc Manufacturing GHG, LLC Lompoc, CA Cannabis processing 100 % 100 % Lompoc Management Co. LLC Lompoc, CA Manufacturing management 100 % 100 % CA Manufacturing Solutions LLC Lompoc, CA Cannabis manufacturing 100 % 100 % Bud and Bloom Inc Santa Ana, CA Cannabis retail 100 % 100 % Farmacy SB Inc Santa Barbara, CA Cannabis retail 100 % 100 % ICANN LLC Berkeley, CA Cannabis retail 100 % 100 % Farmacy Isla Vista LLC Goleta, CA Cannabis retail 100 % 100 % SBDANK LLC Santa Ynez, CA Cannabis retail applicant 51 % 51 % E7 Eureka LLC Eureka, CA Cannabis retail applicant 100 % 100 % The Pottery Inc Los Angeles, CA Cannabis retail 100 % 0 % Natural Healing Center LLC Grover Beach, CA Cannabis retail 100 % 0 % NHC Lemoore LLC Lemoore, CA Cannabis retail 100 % 0 % NHC-MB LLC Morro Bay, CA Cannabis retail 100 % 0 % GHCC Management, LLC Carpinteria, CA Cultivation management 0 % 100 % Saint Gertrude Management Company, LLC Santa Ana, CA Retail Management 0 % 100 % Real Estate Entities Ownership Subsidiaries Location Purpose 2022 2021 Glass House Farm LLC Carpinteria, CA Real Estate 100 % 100 % Magu Farm LLC Carpinteria, CA Real Estate 100 % 100 % East Saint Gertrude 1327 LLC Santa Ana, CA Real Estate 100 % 100 % GH Camarillo LLC Camarillo, CA Real Estate 100 % 100 % 2000 De La Vina LLC Santa Barbara, CA Real Estate 0 % 100 % |
Non-Controlling Interest | Non-Controlling Interest Non-controlling interest represents equity interests owned by parties that are not shareholders of the ultimate parent. The share of net assets attributable to non-controlling interests is presented as a component of equity. Their share of net income or loss is recognized directly in equity. Changes in the parent company’s ownership interest that do not result in a loss of control are accounted for as equity transactions. |
Use of Estimates | Use of Estimates The preparation of the Consolidated Financial Statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the Consolidated Financial Statements and the reported amounts of total net revenue and expenses during the reporting period. The Company regularly evaluates significant estimates and assumptions related to the consolidation or non-consolidation of variable interest entities, estimated useful lives, depreciation of property and equipment, amortization of intangible assets, inventory valuation, share-based compensation, business combinations, goodwill impairment, long-lived asset impairment, purchased asset valuations, fair value of financial instruments, compound financial instruments, derivative liabilities, deferred income tax asset valuation allowances, incremental borrowing rates, lease terms applicable to lease contracts and going concern. These estimates and assumptions are based on current facts, historical experience and various other factors that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of revenue, costs and expenses that are not readily apparent from other sources. The actual results the Company experiences may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations could be negatively impacted. |
Segmented Information | Segmented Information The Company currently operates in one segment, the production and sale of cannabis products, which is how the Company’s Chief Operating Decision Maker manages the business and makes operating decisions. All of the Company’s operations are in the United States of America in the State of California. Intercompany sales and transactions are eliminated in consolidation. |
Reclassifications | Reclassifications Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations. GH Group issued Series A Preferred Shares which were classified initially in error as additional paid-in-capital within shareholders’ equity whereas they should have been classified within shareholders’ equity as a non-controlling interest. The error resulted in an overstatement of total shareholders’ equity attributable to the Company of approximately $29,487,000 and a corresponding understatement of non-controlling interest of approximately $29,487,000 for the year ended December 31, 2021. An adjustment has been made to the Consolidated Balance Sheet and Consolidated Statement of Changes in Shareholders’ Equity as of and for the year ended December 31, 2022 to reclassify approximately $29,487,000 in shareholder’s equity. The reclassification was not considered material to any prior period. There were no changes to total current assets, total assets, total current liabilities, total liabilities, total shareholders’ equity, cash flows or profit and loss to any prior period as a result of this reclassification. |
Cash and Cash Equivalents | Cash and Cash Equivalents Cash and cash equivalents are comprised of cash and highly liquid investments that are readily convertible into known amounts of cash with original maturities of three months or less. |
Restricted Cash | Restricted Cash Restricted cash balances are those which meet the definition of cash and cash equivalents but are not available for use by the Company. As of December 31, 2022 and 2021, restricted cash was $3.0 million and $3.0 million, respectively, which is held in an escrow account and used as an interest reserve for the Company’s senior term loan agreement. See “ Note 16 – Notes Payable and Convertible Debentures |
Accounts Receivable | Accounts Receivable The Company extends non-interest-bearing trade credit to its customers in the ordinary course of business which is not collateralized. Accounts receivable are shown on the face of the Consolidated Balance Sheets, net of an allowance for doubtful accounts. The Company analyzes the aging of accounts receivable, historical bad debts, customer creditworthiness and current economic trends in determining the allowance for doubtful accounts. The Company does not accrue interest receivable on past due accounts receivable. The reserve for doubtful accounts was $1,114,183 and $60,000 as of December 31, 2022 and 2021, respectively. |
Inventory | Inventory Inventory is comprised of raw materials, finished goods and work-in-process such as pre-harvested cannabis plants and by-products to be extracted. The costs of growing cannabis, including but not limited to labor, utilities, nutrition and supplies, are capitalized into inventory until the time of harvest. All direct and indirect costs, except depreciation and amortization related to inventory are capitalized when incurred, and subsequently classified to cost of goods sold in the Consolidated Statements of Operations. Raw materials and work-in-process are stated at the lower of cost or net realizable value, determined using the weighted average cost. Finished goods inventory is stated at the lower of cost or net realizable value, with cost being determined on the first-in, first-out (“FIFO”) method of accounting. Net realizable value is determined as the estimated selling price in the ordinary course of business less estimated costs to sell. The Company periodically reviews physical inventory for excess, obsolete, and potentially impaired items and reserves. The Company reviews inventory for obsolete, redundant and slow-moving goods, and any such inventory is written down to net realizable value. Packaging and supplies are initially valued at cost. The reserve estimate for excess and obsolete inventory is based on expected future use. The reserve estimates have historically been consistent with actual experience as evidenced by actual sale or disposal of the goods. As of December 31, 2022 and 2021, the Company’s reserve was $353,994 and $784,289, respectively. |
Investments | Investments Long-term investments are related to investments in equity and debt securities of entities over which the Company does not have a controlling financial interest or significant influence and are accounted for at fair value in accordance with ASC 321, “ Investments—Equity Securities Equity investments without readily determinable fair values (which are classified as Level 3 investments in the fair value hierarchy) are measured at cost with adjustments for observable changes in price or impairments (referred to as the “measurement alternative”). In applying the measurement alternative, the Company performs a qualitative assessment on a quarterly basis and recognizes an impairment if there are sufficient indicators that the fair value of the equity investments is less than carrying values. Changes in value are recorded in Other (Income) Expense, Net in the Consolidated Statement of Operations. Equity Method and Joint Venture Investments The Company accounts for investments in which it can exert significant influence but does not control as equity method investments in accordance with ASC 323, “ Investments—Equity Method and Joint Ventures Financial Instruments |
Property, Plant and Equipment | Property, Plant and Equipment Property, plant and equipment are stated at cost, net of accumulated depreciation and impairment losses, if any. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset using the following terms and methods: Land Not Depreciated Buildings 15 Years Finance Lease Assets Shorter of Lease Term or Economic Life Furniture and Fixtures 5 Years Leasehold Improvements Shorter of Lease Term or Economic Life Equipment and Software 3 – 5 Years Construction in Progress Not Depreciated The assets’ residual values, useful lives and methods of depreciation are reviewed at each reporting period and adjusted prospectively, if appropriate. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use. Any gain or loss arising from de-recognition of the asset (calculated as the difference between the net disposal proceeds and the carrying value of the asset) is included in the Consolidated Statements of Operations in the period the asset is derecognized. |
Intangible Assets | Intangible Assets Intangible assets are recorded at cost, less accumulated amortization and impairment losses, if any. Intangible assets acquired in a business combination are measured at fair value at the acquisition date. Intangible assets with a definite life are amortized on a straight-line basis over their estimated useful lives, which do not exceed the contractual period, if any. The estimated useful lives, residual values and amortization methods are reviewed at each reporting period, and any changes in estimates are accounted for prospectively. Intangible assets with an indefinite life or not yet available for use are not subject to amortization. Amortization is calculated on a straight-line basis over the estimated useful life of the asset using the following terms and methods: Dispensary Licenses Indefinite Intellectual Property 5 In accordance with ASC 350, “ Intangibles—Goodwill and Other |
Goodwill | Goodwill Goodwill is measured as the excess of consideration transferred over the net of the acquisition date fair value of assets acquired and liabilities assumed in a business acquisition. In accordance with ASC 350, goodwill and other intangible assets with indefinite lives are no longer subject to amortization. The Company reviews the goodwill and other intangible assets allocated to each of the Company’s reporting units for impairment on an annual basis as of year-end or whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the carrying amount of a reporting unit is in excess of its fair value, the Company recognizes an impairment charge equal to the amount in excess. The Company applies the guidance in Financial Accounting Standards Board (the “FASB”) Accounting Standards Update (“ASU”) 2011-08 “ Intangibles-Goodwill and Other-Testing Goodwill for Impairment During the years ended December 31, 2022 and 2021, the Company performed the Step Zero analysis for its goodwill impairment test. As a result of the Company’s Step Zero analysis, no further quantitative impairment test was deemed necessary. There were no impairments of goodwill or intangible assets with indefinite lives for the years ended December 31, 2022 and 2021. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets For purposes of the impairment test, long-lived assets such as property, plant and equipment, and definite-lived intangible assets are grouped with other assets and liabilities at the lowest level for which identifiable independent cash flows are available (“asset group”). In accordance with ASC 360, “ Property, Plant, and Equipment |
Leased Assets | Leased Assets In accordance with ASU 2016-02, “ Leases (Topic 842) ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets are classified as a finance lease or an operating lease. A finance lease is a lease in which at least one of the following is true: 1) ownership of the property transfers to the lessee by the end of the lease term; 2) the lease grants the lessee an option to purchase the underlying asset that the lessee is reasonably certain to exercise; 3) the lease is for a major part of the remaining economic life of the underlying asset; 4) the present value of the sum of the lease payments and any residual value guaranteed by the lessee that is not already included in the lease payments equals or exceeds substantially all of the fair value; or 5) the underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. The Company classifies a lease as an operating lease when it does not meet any one of these criteria. The Company applies judgment in determining whether a contract contains a lease and if a lease is classified as an operating lease or a finance lease. The Company applies judgment in determining the lease term as the non-cancellable term of the lease, which may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. All relevant factors that create an economic incentive for it to exercise either the renewal or termination options are considered. The Company reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate. The Company applies judgment in allocating the consideration in a contract between lease and non-lease components. It considers whether the Company can benefit from the ROU asset either on its own or together with other resources and whether the asset is highly dependent on or highly interrelated with another ROU asset. In accordance with ASC 842, lease liability is initially measured at the present value of the lease payments, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. The Company applies judgment in determining the incremental borrowing rate using estimates which are based on the information available at commencement date. The Company initially measures the ROU asset at the initial amount of the lease liability, plus initial direct costs and lease payments at or before the commencement date, less any lease incentives received. Additionally, management monitors for events or changes in circumstances that may require a reassessment of one of its leases and determine if a remeasurement is required. |
Income Taxes | Income Taxes Deferred tax assets and liabilities are recorded for the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and amounts reported in the Consolidated Balance Sheets. Effects of enacted tax law changes on deferred tax assets and liabilities are reflected as adjustments to tax expense in the period in which the law is enacted. Deferred tax assets may be reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. The Company follows accounting guidance issued by the FASB related to the application of accounting for uncertainty in income taxes. Under this guidance, the Company assesses the likelihood of the financial statement effect of a tax position that should be recognized when it is more likely than not that the position will be sustained upon examination by a taxing authority based on the technical merits of the tax position, circumstances, and information available as of the reporting date. |
Convertible Instruments | Convertible Instruments The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with ASC 815, “Accounting for Derivative Instruments and Hedging Activities” The Company also assesses convertible instruments under ASU 2020-06, “ Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity |
Derivative Liabilities | Derivative Liabilities The Company evaluates its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the Consolidated Statements of Operations. In calculating the fair value of derivative liabilities, the Company uses a valuation model when Level 1 inputs are not available to estimate fair value at each reporting date. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the Consolidated Balance Sheets as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve months of the Consolidated Balance Sheets dates. Critical estimates and assumptions used in the model are discussed in “ Note 13 - Derivative Liabilities |
Business Combinations | Business Combinations Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value at the date of acquisition. Acquisition related transaction costs are expensed as incurred and included in the Consolidated Statements of Operations. Identifiable assets and liabilities, including intangible assets of acquired businesses, are recorded at their fair value at the date of acquisition. When the Company acquires control of a business, any previously held equity interest is also remeasured to fair value. The excess of the purchase consideration and any previously held equity interest over the fair value of identifiable net assets acquired is goodwill. If the fair value of identifiable net assets acquired exceeds the purchase consideration and any previously held equity interest, the difference is recognized in the Consolidated Statements of Operations immediately as a gain on acquisition. See “Note 9 – Business Acquisitions” Contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business combination. The Company allocates the total cost of the acquisition to the underlying net assets based on their respective estimated fair values. As part of this allocation process, the Company identifies and attributes values and estimated lives to the intangible assets acquired. These determinations involve significant estimates and assumptions regarding multiple, highly subjective variables, including those with respect to future cash flows, discount rates, asset lives, and the use of different valuation models, and therefore require considerable judgment. The Company’s estimates and assumptions are based, in part, on the availability of listed market prices or other transparent market data. These determinations affect the amount of amortization expense recognized in future periods. The Company bases its fair value estimates on assumptions it believes to be reasonable but are inherently uncertain. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates, and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or a liability is remeasured at subsequent reporting dates in accordance with ASC 450, “Contingencies” |
Revenue Recognition | Revenue Recognition Revenue is recognized by the Company in accordance with ASC 606, “ Revenue from Contracts with Customers” (1) Identify a customer along with a corresponding contract; (2) Identify the performance obligation(s) in the contract to transfer goods or provide distinct services to a customer; (3) Determine the transaction price the Company expects to be entitled to in exchange for transferring promised goods or services to a customer; (4) Allocate the transaction price to the performance obligation(s) in the contract; and (5) Recognize revenue when or as the Company satisfies the performance obligation(s). Revenues consist of wholesale and consumer packaged goods (“CPG”) and retail sales of cannabis, which are generally recognized at a point in time when control over the goods have been transferred to the customer and is recorded net of sales discounts. Payment is typically due upon transferring the goods to the customer or within a specified time period permitted under the Company’s credit policy. During the years ended December 31, 2022 and 2021, sales discounts were approximately $10.7 million and $4.0 million, respectively. Revenue is recognized upon the satisfaction of the performance obligations. The Company satisfies its performance obligations and transfers control upon delivery and acceptance by the customer. Dispensary Revenue The Company recognizes revenue from the sale of cannabis products for a fixed price upon delivery of goods to customers at the point of sale since at this time performance obligations are satisfied. Fees collected related to taxes that are required to be remitted to regulatory authorities are recorded as liabilities and are not included as a component of revenues. Cultivation and Wholesale CPG The Company recognizes revenue from the sale of cannabis products for a fixed price upon the shipment of cannabis goods as the Company has transferred to the buyer the significant risks and rewards of ownership of the goods. The Company does not retain either continuing material involvement to the degree usually associated with ownership or effective control over the goods sold. Excise taxes due upon sale are recorded as an expense in the accompanying Consolidated Statements of Operations. |
Cost of Goods Sold | Cost of Goods Sold Cost of goods sold includes the costs directly attributable to product sales and includes amounts paid for finished goods, such as flower, edibles and concentrates, packaging and other supplies, fees for services and processing, and allocated overhead, such as allocations of rent, administrative salaries, utilities and related costs. Cost of goods sold excludes depreciation and amortization. |
General and Administrative Expenses | General and Administrative Expenses General and administrative expenses are comprised primarily of personnel costs, including salaries, incentive compensation, benefits, and share-based compensation, professional service costs, including legal, accounting, consulting and other professional fees, and corporate insurance and other facilities costs associated with the Company’s corporate offices. |
Share-Based Compensation | Share-Based Compensation The Company has an amended and restated equity incentive plan comprised of stock options (“Options”), unrestricted stock bonus, restricted stock units and stock appreciation rights (the “SARs”). Options provide the right to the purchase of one Equity Share per Option. RSUs provide the right to receive one Equity Share per unit (or cash payment equal to the fair market value of an Equity Share). The SARs provide the right to receive cash from the exercise of such right based on the increase in value between the exercise price and the fair market value of the Equity Shares of the Company at the time of exercise. The Company accounts for its share-based awards in accordance with ASC 718, “Compensation – Stock Compensation” The fair value models require the input of certain assumptions that require the Company’s judgment, including the expected term and the expected share price volatility of the underlying share. The assumptions used in calculating the fair value of share-based compensation represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change resulting in the use of different assumptions, share-based compensation expense could be materially different in the future. In addition, the Company elected not to estimate the expected forfeiture rate and only recognize expense for those shares that actually vest. If the actual forfeiture rate is materially different from management’s estimates, the share-based compensation expense could be significantly different from what the Company has recorded in the current period. |
Financial Instruments | Financial Instruments Fair Value The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: Level 1 – Quoted prices in active markets for identical assets or liabilities. Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. In accordance with the fair value accounting requirements, companies may choose to measure eligible financial instruments and certain other items at fair value. The Company has not elected the fair value option for any eligible financial instruments. There have been no transfers between fair value levels during the years ended December 31, 2022 and 2021. Financial instruments are measured at amortized cost or at fair value. Financial instruments measured at amortized cost consist of accounts receivable, other liabilities, and accounts payable and accrued liabilities wherein the carrying value approximates fair value due to its short-term nature. Other financial instruments measured at amortized cost include notes payable wherein the carrying value at the effective interest rate approximates fair value as the interest rate for such notes payable. Cash and cash equivalents and restricted cash are measured at Level 1 inputs. Acquisition-related liabilities resulting from business combinations are measured at fair value using Level 1 or Level 3 inputs. Investments that are measured at fair value use Level 3 inputs. Refer to “Note 6 – Investments” Note 13 – Derivative Liabilities Note 14 – Contingent Shares and Earnout Liabilities The individual fair values attributed to the different components of a financing transaction, notably derivative financial instruments, convertible debentures and loans, are determined using valuation techniques. The Company uses judgment to select the methods used to make certain assumptions and derive estimates. Significant judgment is also used when attributing fair values to each component of a transaction upon initial recognition, measuring fair values for certain instruments on a recurring basis and disclosing the fair values of financial instruments subsequently carried at amortized cost. These valuation estimates could be significantly different because of the use of judgment and the inherent uncertainty in estimating the fair value of instruments that are not quoted or observable in an active market. Impairment The Company assesses all information available, including on a forward-looking basis, related to the expected credit loss associated with its assets carried at amortized cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. To assess whether there is a significant increase in credit risk, the Company compares the risk of a default occurring on the asset at the reporting date with the risk of default at the date of initial recognition based on available information, and forward-looking information that is reasonable and supportive. For accounts receivable only, the Company applies the simplified approach as permitted by ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” |
Loss Per Share | Loss per Share The Company calculates basic earnings or loss per share by dividing net earnings or loss by the weighted-average number of the Equity Shares (including the Exchangeable Shares, as defined herein, on an as-exchanged basis) outstanding during the period. Multiple Voting Shares, as defined herein, are excluded in calculating earnings or loss per share as they do not participate in earnings or losses. Diluted loss per share is the same as basic loss per share if the issuance of shares on the exercise of convertible debentures, contingent shares, warrants, restricted stock units and share options are anti-dilutive. Diluted earnings per share includes options, warrants, restricted stock units, and contingently issuable shares that are determined to be dilutive using the treasury stock method for all equity instruments issuable in equity units and the “if converted” method for the Company’s convertible debentures. See “Note 20 – Loss Per Share” |
Recently Adopted Accounting Standards | Recently Adopted Accounting Standards In May 2021, the FASB issued ASU 2021-04, “ Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)” |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Summary of principle wholly-owned or controlled subsidiaries and affiliates | Corporate Entities Ownership Entity Location Purpose 2022 2021 MPB Acquisition Corp Nevada Holding company 100 % 100 % GH Group Inc Long Beach, CA Holding company 100 % 100 % GHB Unsub LLC Long Beach, CA Holding company 100 % 100 % Glass House Retail, LLC Long Beach, CA Holding company 100 % 100 % Glass House Cultivation LLC Camarillo Holding company 100 % 100 % Glass House Manufacturing LLC Lompoc, CA Holding company 100 % 100 % LOB Investment Co. LLC Long Beach, CA Holding company 100 % 100 % SoCal Hemp Co, LLC Long Beach, CA Holding company 0 % 100 % Plus Products Holding Inc. Long Beach, CA Holding company 100 % 0 % Plus Products Nevada LLC Long Beach, CA Holding company 100 % 0 % Plus Products Services LLC Long Beach, CA Holding company 100 % 0 % Plus Products Wonders LLC Long Beach, CA Holding company 100 % 0 % Uplift Services LLC Long Beach, CA Holding company 100 % 0 % Carberry LLC Long Beach, CA Holding company 100 % 0 % 2. (Continued) Management and Operating Entities Ownership Subsidiaries Location Purpose 2022 2021 G&H Supply Company, LLC Carpinteria, CA Cultivation management 100 % 100 % Mission Health Associates, Inc. Carpinteria, CA Cannabis cultivation 100 % 100 % MGF Management LLC Carpinteria, CA Cultivation management 100 % 100 % G&K Produce LLC Carpinteria, CA Cannabis cultivation 100 % 100 % K&G Flowers LLC Carpinteria, CA Cannabis cultivation 100 % 100 % Glass House Camarillo Cultivation LLC Camarillo, CA Cannabis cultivation 100 % 100 % Lompoc Manufacturing GHG, LLC Lompoc, CA Cannabis processing 100 % 100 % Lompoc Management Co. LLC Lompoc, CA Manufacturing management 100 % 100 % CA Manufacturing Solutions LLC Lompoc, CA Cannabis manufacturing 100 % 100 % Bud and Bloom Inc Santa Ana, CA Cannabis retail 100 % 100 % Farmacy SB Inc Santa Barbara, CA Cannabis retail 100 % 100 % ICANN LLC Berkeley, CA Cannabis retail 100 % 100 % Farmacy Isla Vista LLC Goleta, CA Cannabis retail 100 % 100 % SBDANK LLC Santa Ynez, CA Cannabis retail applicant 51 % 51 % E7 Eureka LLC Eureka, CA Cannabis retail applicant 100 % 100 % The Pottery Inc Los Angeles, CA Cannabis retail 100 % 0 % Natural Healing Center LLC Grover Beach, CA Cannabis retail 100 % 0 % NHC Lemoore LLC Lemoore, CA Cannabis retail 100 % 0 % NHC-MB LLC Morro Bay, CA Cannabis retail 100 % 0 % GHCC Management, LLC Carpinteria, CA Cultivation management 0 % 100 % Saint Gertrude Management Company, LLC Santa Ana, CA Retail Management 0 % 100 % Real Estate Entities Ownership Subsidiaries Location Purpose 2022 2021 Glass House Farm LLC Carpinteria, CA Real Estate 100 % 100 % Magu Farm LLC Carpinteria, CA Real Estate 100 % 100 % East Saint Gertrude 1327 LLC Santa Ana, CA Real Estate 100 % 100 % GH Camarillo LLC Camarillo, CA Real Estate 100 % 100 % 2000 De La Vina LLC Santa Barbara, CA Real Estate 0 % 100 % |
Schedule of estimated useful lives | Land Not Depreciated Buildings 15 Years Finance Lease Assets Shorter of Lease Term or Economic Life Furniture and Fixtures 5 Years Leasehold Improvements Shorter of Lease Term or Economic Life Equipment and Software 3 – 5 Years Construction in Progress Not Depreciated |
Schedule of useful lives of intangible assets | Dispensary Licenses Indefinite Intellectual Property 5 |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
INVENTORY | |
Schedule of inventory | 2022 2021 Raw Materials $ 3,270,597 $ 1,325,590 Work-in-Process 4,428,440 2,777,244 Finished Goods 4,358,533 2,493,468 Total Inventory $ 12,057,570 $ 6,596,302 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
INVESTMENTS. | |
Schedule of fair value of the equity method investment | N.R.O 5042 Real LOB Group, Management, SoCal Hemp ICANN, 5042 Venice, Estate Investment, Lompoc TIC, Inc. LLC JV, LLC LLC LLC LLC LLC TOTAL Fair Value as of December 31, 2020 $ 2,809,412 $ 2,336,713 $ 1,058,778 $ 2,045,309 $ 2,222,695 $ — $ 228,961 $ 10,701,868 Additions — — 701,254 — — — 86,248 787,502 Distribution — — — — (243,880) — (96,900) (340,780) Reclass of Investment for Acquisition — — — (2,045,309) — — — (2,045,309) Impairment — — (817,875) — — — — (817,875) (Loss) Gain on Equity Method Investments (48,271) (317,764) (942,157) — 242,705 — (23,560) (1,089,047) Fair Value as of December 31, 2021 $ 2,761,141 $ 2,018,949 $ — $ — $ 2,221,520 $ — $ 194,749 $ 7,196,359 Additions — 300,000 213,000 — 343 2,445,000 — 2,958,343 Distributions — — — — (3,001,871) — — (3,001,871) Acquisition of Equity Method Investment — (900,000) — — — — — (900,000) (Loss) Gain on Equity Method Investments (457,671) (1,418,949) (213,000) — 780,008 (665,401) (31,626) (2,006,639) Fair Value as of December 31, 2022 $ 2,303,470 $ — $ — $ — $ — $ 1,779,599 $ 163,122 $ 4,246,192 |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
PROPERTY, PLANT AND EQUIPMENT. | |
Schedule of property, plant and equipment | 2022 2021 Land $ 70,888,383 $ 70,782,068 Buildings 140,042,534 108,024,254 Finance Leases 301,022 — Furniture and Fixtures 471,696 316,395 Leasehold Improvements 10,927,265 8,412,489 Equipment and Software 8,050,827 5,712,519 Construction in Progress 6,447,286 11,867,167 Total Property, Plant and Equipment 237,129,013 205,114,892 Less Accumulated Depreciation and Amortization (20,412,118) (9,316,368) Property, Plant and Equipment, Net $ 216,716,895 $ 195,798,524 |
Schedule of total consideration paid in an asset acquisition | Cash Payments $ 93,000,000 Survey and Other Fees 262,875 Shares Issued for the Purchase of Real Property 29,250,000 Fair Value of Contingent Consideration 14,973,000 Fair Value of Earn Out Payments 19,847,000 Total Consideration in the Camarillo Transaction $ 157,332,875 |
DISPOSITION OF SUBSIDIARY (Tabl
DISPOSITION OF SUBSIDIARY (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
DISPOSITION OF SUBSIDIARY | |
Summary of net assets of the subsidiary disposed of | ASSETS: Accounts Receivable, Net $ 21,067 Prepaid Expenses and Other Current Assets 430,654 Operating Lease Right-of-Use Assets, Net 976,417 Property, Plant and Equipment, Net 310,501 Intangible Assets, Net 3,727,500 Goodwill 2,095,918 Other Assets 95,419 TOTAL ASSETS $ 7,657,476 LIABILITIES: Accounts Payable and Accrued Liabilities $ 473,500 Operating Lease Liabilities 1,051,588 Notes Payable 42,051 TOTAL LIABILITIES $ 1,567,139 NET ASSETS DISPOSED $ 6,090,337 |
BUSINESS ACQUISITIONS (Tables)
BUSINESS ACQUISITIONS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
BUSINESS ACQUISITIONS | |
Summary of business acquisitions | 2022 Acquisitions 2021 Acquisition Natural Plus Products The Pottery, Healing NHC Lemoore, NHC-MB, Holding Inc. Inc. Center, LLC LLC LLC Total iCANN, LLC Closing Date: April 28, 2022 July 28, 2022 September 6, 2022 September 6, 2022 September 14, 2022 January 1, 2021 Total Consideration Convertible Debenture Notes $ 16,257,104 $ — $ — $ — $ — $ 16,257,104 $ — Restricted Stock Units Issued 188,122 — — — — 188,122 — Derivative Asset (251,020) — — — — (251,020) — Contingent Restricted Stock Units 5,460,000 — — — — 5,460,000 — Fair Value of Equity Issued 9,707,414 1,100,000 5,938,298 3,272,515 5,248,569 25,266,796 3,380,278 Shares Payable — — 2,262,000 1,274,000 1,933,000 5,469,000 — Fair Value of Remaining 50% equity interest — 900,000 — — — 900,000 — Cash Payment — — 590,795 1,642,522 305,427 2,538,744 442,956 Loan Forgiveness — — 5,461,257 — — 5,461,257 — Equity Investment Converted — — — — — — 2,045,309 Assumption of IRS Debt — — 6,753,499 — — 6,753,499 — Total Consideration $ 31,361,620 $ 2,000,000 $ 21,005,849 $ 6,189,037 $ 7,486,996 $ 68,043,502 $ 5,868,543 Net Assets Acquired (Liabilities Assumed) Current Assets (3) $ 6,454,308 $ 382,436 $ 4,146,644 $ 147,259 $ 468,585 $ 11,599,232 $ 562,221 Operating Right-of-Use Asset 294,159 3,671,969 992,717 991,606 772,647 6,723,098 1,160,730 Property, Plant and Equipment 789,779 37,201 273,679 1,788,166 — 2,888,825 692,645 Non-Current Assets 93,662 3,500 — — — 97,162 — Deferred Tax Assets, Net — — — — — — (209,466) Current Liabilities Assumed (1,339,301) (2,854,242) (2,496,552) (706,487) (655,334) (8,051,916) (922,745) Long-Term Liabilities Assumed (111,970) (3,671,969) (832,060) (833,989) (652,654) (6,102,642) (1,113,584) Intangible Assets: Intellectual Property 5,100,000 400,000 1,100,000 300,000 600,000 7,500,000 600,000 Customer Relationship 2,600,000 — — — — 2,600,000 — Cannabis License 12,900,000 2,900,000 12,000,000 1,000,000 5,100,000 33,900,000 2,900,000 Total Intangible Assets 20,600,000 3,300,000 13,100,000 1,300,000 5,700,000 44,000,000 3,500,000 Total Identifiable Net Assets Acquired (Net Liabilities Assumed) 26,780,637 868,895 15,184,428 2,686,555 5,633,244 51,153,759 3,669,801 Goodwill (1) 4,580,983 1,131,105 5,821,421 3,502,482 1,853,752 16,889,743 2,198,742 Total Net Assets Acquired $ 31,361,620 $ 2,000,000 $ 21,005,849 $ 6,189,037 $ 7,486,996 $ 68,043,502 $ 5,868,543 Revenues from Acquisition $ 4,877,839 $ 1,070,380 $ 3,468,548 $ 1,231,088 $ 1,912,771 $ 12,560,626 $ 6,819,012 Net Income (Loss) from Acquisition $ (101,022) $ (455,603) $ 925,110 $ (147,801) $ 443,972 $ 664,656 $ 60,834 Pro Forma Revenues (2) $ 3,911,580 $ 2,110,084 $ 8,158,053 $ 3,889,361 $ 4,647,797 $ 22,716,875 n/a Pro Forma Net Income (Loss) (2) $ 1,067,848 $ (1,287,036) $ 551,711 $ (231,069) $ 289,561 $ 391,015 n/a (1) Goodwill arising from acquisitions represent expected synergies, future income and growth, and other intangibles that do not qualify for separate recognition. Generally, goodwill related to dispensaries acquired within a state adds to the footprint of the Company’s dispensaries within the state, giving the Company’s customers more access to the Company’s branded stores. Goodwill related to cultivation and wholesale acquisitions provide for lower costs and synergies of the Company’s growing and wholesale distribution methods which allow for overall lower costs. (2) If the 2022 acquisitions had been completed on January 1, 2022, the Company estimates it would have recorded changes in revenues and changes in net (losses) income shown in the pro forma amounts noted above. As the 2021 acquisition was completed on January 1, 2021, no pro forma information is required. (3) Included in current assets acquired in the business combination was cash acquired, accounts receivable, other current assets and inventory as of the acquisition date. |
INTANGIBLE ASSETS (Tables)
INTANGIBLE ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
INTANGIBLE ASSETS | |
Summary of intangible assets | 2022 2021 Definite Lived Intangible Assets Customer Relationships $ 2,600,000 $ — Intellectual Property 8,290,000 790,000 Total Definite Lived Intangible Assets 10,890,000 790,000 Less Accumulated Amortization (1,186,665) (208,667) Definite Lived Intangible Assets, Net 9,703,335 581,333 Indefinite Lived Intangible Assets Dispensary Licenses 38,948,500 5,048,500 Total Indefinite Lived Intangible Assets 38,948,500 5,048,500 Total Intangible Assets, Net $ 48,651,835 $ 5,629,833 |
Summary of expected future amortization expense of intangible assets | December 31: 2023 1,668,000 2024 1,655,333 2025 1,630,000 2026 1,510,000 2027 1,030,002 Thereafter 2,210,000 Total Future Amortization Expense $ 9,703,335 |
ACCOUNTS PAYABLE AND ACCRUED _2
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | |
Schedule of accounts payable and accrued liabilities | 2022 2021 Accounts Payable $ 6,869,941 $ 4,777,435 Accrued Liabilities 12,183,677 2,418,664 Accrued Payroll and Related Liabilities 2,009,598 1,699,253 Sales Tax and Cannabis Taxes 1,270,572 1,319,652 Total Accounts Payable and Accrued Liabilities $ 22,333,788 $ 10,215,004 |
DERIVATIVE LIABILITIES (Tables)
DERIVATIVE LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
DERIVATIVE LIABILITIES | |
Schedule of weighted average upon conversion | 2021* Weighted-Average Risk Free Annual Rate 0.25 % Weighted-Average Average Probability at Maturity 0.00 % Weighted-Average Average Probability Before Maturity 100.00 % Weighted-Average Average Probability at Change of Control 0.00 % Weighted-Average Expected Annual Dividend Yield 0.0 % Weighted-Average Expected Stock Price Volatility 0.0 % Weighted-Average Expected Life in Years — * Represents inputs immediately prior to the conversion on June 29, 2021 |
Schedule of Derivative Liabilities based on change in fair value | 2021 Balance at Beginning of Year $ 7,365,000 Derivative Liability Incurred Upon Issuance of Convertible Debt 182,000 Change in Fair Value (825,000) Reclassed to Equity Upon Conversion of Debt (6,722,000) Balance at End of Year $ — |
CONTINGENT SHARES AND EARNOUT_2
CONTINGENT SHARES AND EARNOUT LIABILITIES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
CONTINGENT SHARES AND EARNOUT LIABILITIES. | |
Schedule of Contingent Shares | 2022 2021 Balance at Beginning of Year $ 38,428,700 $ — Contingent Shares Issued Upon Closing of Business Combination 5,460,000 (iv) 7,640,334 (i) Contingent Earnout Issued for Option Right — 19,847,000 (ii) Contingent Shares Issued for Option Right — 14,973,000 (iii) Change in Fair Value of Contingent Liabilities (29,232,034) (4,031,634) Balance at End of Year $ 14,656,666 $ 38,428,700 |
LEASES (Tables)
LEASES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
LEASES | |
Summary of lease cost and other disclosure | 2022 2021 Finance Lease Cost: Amortization of Finance Lease Right-of-Use Assets $ 15,051 $ — Interest on Lease Liabilities 14,577 — Operating Lease Cost 1,479,305 730,881 Short-Term Lease Costs 933,424 669,003 Total Lease Expenses $ 2,442,357 $ 1,399,884 |
Summary of future minimum operating lease payments under non-cancelable operating lease | Operating Leases Finance Leases (1) December 31: Third Parties Related Parties Third Parties Total 2023 $ 1,371,629 $ 919,231 $ 118,069 $ 2,408,929 2024 1,399,456 931,720 118,069 2,449,245 2025 1,399,104 874,271 148,656 2,422,031 2026 1,372,745 890,899 — 2,263,644 2027 1,126,862 908,026 — 2,034,888 Thereafter 2,138,205 3,166,607 — 5,304,812 Total Future Minimum Lease Payments 8,808,001 7,690,754 384,794 16,883,549 Less Imputed Interest (2,792,842) (2,768,710) (103,987) (5,665,539) Present Value of Lease Liability 6,015,159 4,922,044 280,807 11,218,010 Less Current Portion of Lease Liability (710,793) (367,178) (66,791) (1,144,762) Present Value of Lease Liability, Net of Current Portion $ 5,304,366 $ 4,554,866 $ 214,016 $ 10,073,248 |
Schedule of disclosure relating to leases | 2022 2021 Cash Paid for Amounts Included in the Measurement of Lease Liabilities: Operating Cash Flows from Finance Leases $ 9,802 $ — Operating Cash Flows from Operating Leases $ 1,446,649 $ 712,358 Financing Cash Flows from Finance Leases $ 19,715 $ — Non-Cash Additions to Right-of-Use Assets and Lease Liabilities: Recognition of Right-of-Use Assets for Finance Leases $ 301,022 $ — Recognition of Right-of-Use Assets for Operating Leases $ 8,614,907 $ 1,419,650 Weighted-Average Remaining Lease Term (Years) - Finance Leases 3.00 — Weighted-Average Remaining Lease Term (Years) - Operating Leases 7.00 8.00 Weighted-Average Discount Rate - Finance Leases 20.40 % — Weighted-Average Discount Rate - Operating Leases 12.02 % 17.00 % |
NOTES PAYABLE AND CONVERTIBLE_2
NOTES PAYABLE AND CONVERTIBLE DEBENTURES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | |
Summary of notes payable | 2022 2021 Term loan payable maturing in November 30, 2026, bearing interest at 10.00 percent per annum $ 50,000,000 $ 50,000,000 Convertible Debentures 16,006,084 — Other 442,222 238,835 Total Notes Payable 66,448,306 50,238,835 Less Unamortized Debt Issuance Costs and Loan Origination Fees (3,789,358) (5,383,413) Net Amount $ 62,658,948 $ 44,855,422 Less Current Portion of Notes Payable (40,237) (37,986) Notes Payable, Net of Current Portion $ 62,618,711 $ 44,817,436 |
Schedule of maturities of notes payable | Principal December 31: Payments 2023 $ 668,955 2024 7,546,530 2025 7,549,256 2026 7,552,142 2027 7,750,339 Thereafter 35,381,084 Total Future Minimum Principal Payments $ 66,448,306 |
SHAREHOLDERS' EQUITY (Tables)
SHAREHOLDERS' EQUITY (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
SHAREHOLDERS' EQUITY | |
Schedule of aggregate balances of the VIE | 2022 Current Assets $ 111,686 Non-Current Assets $ 2,357,957 Total Assets $ 2,469,643 Non-Current Liabilities $ 241,373 Total Liabilities $ 241,373 Revenues, Net $ 139,500 Net Income Attributable to Non-Controlling Interest $ 56,997 |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
SHARE-BASED COMPENSATION | |
Schedule of reconciliation of the beginning and ending balance of stock options outstanding | Weighted- Number of Stock Average Exercise Options Price Balance as of December 31, 2020 48,403,624 $ 0.23 Granted Prior to Business Combination 12,182,545 $ 0.30 Forfeited Prior to Business Combination (296,350) $ 0.24 Exercised Prior to Business Combination (4,921,707) $ 0.26 Exchanged for Subordinate Shares At Business Combination (19,320,935) $ 0.26 Converted to RSU’s At Business Combination (14,886,359) $ 0.26 Effect on Conversion related to the Business Combination (19,108,791) $ 0.28 Granted After Business Combination 108,695 $ 4.60 Forfeited After Business Combination (72,938) $ 2.36 Balance as of December 31, 2021 2,087,784 $ 2.78 Exercised (227,116) $ 2.30 Forfeited (407,781) $ 2.82 Balance as of December 31, 2022 1,452,887 $ 2.84 |
Summary of the stock options that remain outstanding | Exercise Stock Options Security Issuable Price Expiration Date Outstanding Equity Shares $ 2.26 October 2024 629,641 Equity Shares $ 3.08 April 2025 115,917 Equity Shares $ 3.08 January 2026 598,634 Equity Shares $ 4.60 October 2026 108,695 1,452,887 |
Schedule of the assumptions to determine the fair value of stock options granted with a fixed exercise price | 2021 Weighted-Average Risk-Free Annual Interest Rate 0.29 % Weighted-Average Expected Annual Dividend Yield 0.0 % Weighted-Average Expected Stock Price Volatility 84.6 % Weighted-Average Expected Life in Years 4.00 Weighted-Average Estimated Forfeiture Rate 0.0 % |
Reconciliation of the beginning and ending balance of restricted stock units outstanding | Number of Restricted Stock Balance as of December 31, 2020 — Granted 2,591,584 Exchanged and Converted from Options 1,076,499 Forfeited (437,135) Balance as of December 31, 2021 3,230,948 Granted 1,968,837 Converted (2,162,265) Forfeited (1,036,986) Balance as of December 31, 2022 2,000,534 |
Reconciliation of the beginning and ending balance of SARs units outstanding | Number of Stock Appreciation Rights Units Balance as of December 31, 2020 — Granted 230,752 Forfeited (71,016) Balance as of December 31, 2021 159,736 Forfeited (59,875) Balance as of December 31, 2022 99,861 |
Reconciliation of the beginning and ending balance of warrants outstanding | Weighted- Number of Average Exercise Warrants Price Balance as of December 31, 2020 1,968,300 $ 0.16 Exercised (1,968,300) $ 0.16 Assumed from the Business Combination 28,489,500 $ 11.50 Granted 6,928,578 $ 10.43 Balance as of December 31, 2021 35,418,078 $ 11.29 Granted 11,114,937 $ 5.10 Cancelled (2,274,133) $ 10.00 Balance as of December 31, 2022 44,258,882 $ 9.80 |
Summary of warrants that remain outstanding | Warrants Warrants Security Issuable Exercise Price Expiration Date Outstanding Exercisable Equity Shares $ 11.50 June 2026 30,664,500 30,664,500 Equity Shares $ 10.00 June 2024 2,654,445 2,654,445 Equity Shares $ 5.00 August 2027 10,939,937 10,939,937 44,258,882 44,258,882 |
Schedule of the assumptions to determine the fair value of warrants options granted with a fixed exercise price and fair valued using level 3 inputs | 2022 Weighted-Average Risk-Free Annual Interest Rate 3.42 % Weighted-Average Expected Annual Dividend Yield 0.0 % Weighted-Average Expected Stock Price Volatility 103.74 % Weighted-Average Expected Life in Years 5.00 Weighted-Average Estimated Forfeiture Rate 0.0 % |
LOSS PER SHARE (Tables)
LOSS PER SHARE (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
LOSS PER SHARE | |
Reconciliation for the calculation of basic and diluted loss per share | 2022 2021 Net Loss Attributable to the Company $ (35,534,892) $ (44,167,812) Less Dividends and Increase in Redemption Values of GH Group Preferred Shares (20,250,481) (1,797,423) Net Loss Attributable to the Company (55,785,373) (45,965,235) Weighted-Average Shares Outstanding - Basic and Diluted 64,182,436 40,280,639 Loss Per Share Attributable to the Company - Basic and Diluted $ (0.87) $ (1.14) |
PROVISION FOR INCOME TAXES AN_2
PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES | |
Schedule of the provision for income taxes | 2022 2021 Current: Federal $ 5,876,587 $ 3,382,708 State 1,485,814 5,161 Total Current 7,362,401 3,387,869 Deferred: Federal (1,890,711) (322,017) State (729,986) 232,249 Total Deferred (2,620,697) (89,768) Total Provision for Income Taxes $ 4,741,704 $ 3,298,101 |
Schedule of the components of deferred tax assets and liabilities | 2022 2021 Deferred Tax Assets: Allowance for Doubtful Accounts $ 998,674 $ 984,437 Inventory Reserve 58,840 219,474 Deferred Rent 17,102 18,978 Accrued Expenses 172,520 131,916 Interest Expense — — Operating Lease Liabilities 1,969,561 606,718 Non-qualified Stock Options 809,992 809,992 Stock-based Compensation 3,465,882 — Loss on Disposal of Subsidiary 1,600,209 1,720,979 Operating Losses 38,098,948 19,488,540 Property and Euipment 89,282 — Total Deferred Tax Assets 47,281,010 23,981,034 Valuation Allowance (44,082,411) (22,495,563) Net Deferred Tax Assets $ 3,198,599 $ 1,485,471 21. PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES (Continued) 2022 2021 Deferred Tax Liabilities: Contingent Consideration $ — $ (1,203,039) Property, Plant & Equipment — (937,801) Right-of-Use Assets (1,908,717) (598,774) State Taxes — (76,672) Total Deferred Tax Liabilities (1,908,717) (2,816,286) Net Deferred Tax Assets (Liabilities) $ 1,289,882 $ (1,330,815) |
Reconciliation between the effective tax rate on income and the statutory tax rate | 2022 2021 Income Tax Benefit at Federal Rate $ (6,441,046) $ (8,634,892) State Taxes and Fees 1,737,004 1,435,197 IRS Section 280E Disallowance 1,633,905 1,922,244 Uncertain Tax Position 1,954,143 420,976 Change in Valuation Allowance 21,654,795 15,810,756 Change in Fair Value of Contingent Consideration (7,265,518) — State Tax Carryforwards (6,705,205) (3,928,330) Excess Accrual of Prior Year Taxes (1,722,370) (3,425,023) Other Permanent Differences (104,004) (302,827) Reported Income Tax Expense $ 4,741,704 $ 3,298,101 |
Reconciliation of the beginning and ending amount of total unrecognized tax benefits | 2022 2021 Balance at Beginning of Year $ 1,449,046 $ 849,358 IRS Section 280E Positions Acquired 888,130 178,712 IRS Section 280E Positions 1,954,143 420,976 Balance at End of Year $ 4,291,319 $ 1,449,046 |
REVENUES, NET (Tables)
REVENUES, NET (Tables) | 12 Months Ended |
Dec. 31, 2022 | |
REVENUES, NET | |
Summary of disaggregated revenues | 2022 2021 Retail $ 26,730,847 $ 21,734,403 Wholesale 64,160,240 47,712,449 Revenues, Net $ 90,891,087 $ 69,446,852 |
NATURE OF OPERATIONS (Details)
NATURE OF OPERATIONS (Details) | 12 Months Ended | |||
Dec. 31, 2022 USD ($) $ / shares shares | Dec. 31, 2021 USD ($) shares | Jun. 29, 2021 shares | Apr. 08, 2021 shares | |
Business Acquisition [Line Items] | ||||
Recapitalization Transaction Ratio | 10.27078 | 10.27078 | ||
Accumulated deficit | $ | $ 96,362,182 | $ 60,827,290 | ||
Net loss from operations | $ | 35,534,892 | 44,167,812 | ||
Net cash used in operating activities | $ | $ 40,804,768 | $ 20,285,249 | ||
Mercer Park | ||||
Business Acquisition [Line Items] | ||||
Equity shares | 616,156 | 1,008,975 | ||
Number Of Shares Contingently Issuable | 6,306,095 | |||
Mercer Park | Minimum | ||||
Business Acquisition [Line Items] | ||||
Shares Issuable Volume-weighted Average Price Trigger | $ / shares | $ 13 | |||
Mercer Park | Maximum | ||||
Business Acquisition [Line Items] | ||||
Shares Issuable Volume-weighted Average Price Trigger | $ / shares | $ 15 | |||
Mercer Park | Restricted Shares | ||||
Business Acquisition [Line Items] | ||||
Number Of Shares Contingently Issuable | 392,819 | |||
GH Group | ||||
Business Acquisition [Line Items] | ||||
Percentage Of Indirect Ownership | 1 | |||
GH Group | MPB Acquisition | ||||
Business Acquisition [Line Items] | ||||
Equity shares issued and outstanding acquired | 50,151,101 | |||
GH Group | Mercer Park | ||||
Business Acquisition [Line Items] | ||||
Common share purchase warrants | 28,489,500 | |||
GH Group | Mercer Park | Exchangeable Shares | ||||
Business Acquisition [Line Items] | ||||
Shares Held In Escrow | 731,369 | |||
GH Group | Mercer Park | Restricted Shares | ||||
Business Acquisition [Line Items] | ||||
Equity shares | 392,819 | 1,008,975 | ||
GH Group | Mercer Park | Founders | Multiple Voting Shares | ||||
Business Acquisition [Line Items] | ||||
Equity shares | 4,754,979 |
SUMMARY OF SIGNIFICANT ACCOUN_4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Details) | 12 Months Ended | ||
Dec. 31, 2022 USD ($) segment | Dec. 31, 2021 USD ($) | Dec. 31, 2020 USD ($) | |
Accounting Policies [Line Items] | |||
Number of operating segments | segment | 1 | ||
Restricted cash and cash equivalents | $ 3,000,000 | $ 3,000,000 | |
Reserve for doubtful accounts | 1,114,183 | 60,000 | |
Inventory valuation reserve | 353,994 | 784,289 | |
Sales discount | 10,700,000 | 4,000,000 | |
Fair value transfers between measurement levels | 0 | 0 | |
Overstatement of shareholders' equity on issuance of preferred shares | 29,487,000 | ||
Understatement of non-controlling interest on issuance of preferred shares | 29,487,000 | ||
Shareholders' equity | 165,165,063 | 181,069,610 | $ 26,274,924 |
Impairment of intangible assets | 0 | $ 0 | |
Reclassification from additional paid in capital to non-controlling interest | |||
Accounting Policies [Line Items] | |||
Shareholders' equity | $ 29,487,000 |
SUMMARY OF SIGNIFICANT ACCOUN_5
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Schedule of Wholly-owned or controlled subsidiaries and or affiliates (Details) | Dec. 31, 2022 | Dec. 31, 2021 |
MPB Acquisition | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
GH Group | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
GHB Unsub LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
Glass House Retail, LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
Glass House Cultivation, LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
Glass House Manufacturing, LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
LOB Investment Co. LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
SoCal Hemp Co, LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 0 | 100 |
Plus Products Holdings Inc | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 0 |
Plus Products Nevada LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 0 |
Plus Products Services LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 0 |
Plus Products Wonders LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 0 |
Uplift Services LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 0 |
Carberry LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 0 |
G&H Supply Company, LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
Mission Health Associates, Inc. | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
MGF Management LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
G&K Produce LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
K&G Flowers LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
GHCC Management LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 0 | 100 |
Glass House Camarillo Cultivation LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
Lompoc Manufacturing GHG, LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
Lompoc Management Co. LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
CA Manufacturing Solutions LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
Saint Gertrude Management Company LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 0 | 100 |
Bud and Bloom | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
Farmacy SB, Inc | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
ICANN, LLC [Member] | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
Farmacy Isla Vista, LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
SBDANK LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 51 | 51 |
E7 Eureka LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
The Pottery Inc | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 0 |
Natural Healing Center LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 0 |
NHC Lemoore LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 0 |
NHC-MB LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 0 |
Glass House Farm LLC [Member] | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
Magu Farm LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
East Saint Gertrube 1327 LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
GH Camarillo LLC | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 100 | 100 |
De La Vina LLC 2000 | ||
Subsidiary or Equity Method Investee [Line Items] | ||
Controlled interest ownership percentage by parent | 0 | 100 |
SUMMARY OF SIGNIFICANT ACCOUN_6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) | 12 Months Ended |
Dec. 31, 2022 | |
Building [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 15 years |
Furniture and Fixtures [Member] | |
Property, Plant and Equipment [Line Items] | |
Useful life | 5 years |
Equipment | Minimum | |
Property, Plant and Equipment [Line Items] | |
Useful life | 3 years |
Equipment | Maximum | |
Property, Plant and Equipment [Line Items] | |
Useful life | 5 years |
SUMMARY OF SIGNIFICANT ACCOUN_7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Intangible Assets (Details) - Intellectual Property | 12 Months Ended |
Dec. 31, 2022 | |
Minimum | |
Finite-Lived Intangible Assets [Line Items] | |
Useful life | 5 years |
Maximum | |
Finite-Lived Intangible Assets [Line Items] | |
Useful life | 10 years |
CONCENTRATIONS OF BUSINESS AN_2
CONCENTRATIONS OF BUSINESS AND CREDIT RISK (Details) - Customer Concentration Risk - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Accounts Receivable | ||
Accounts Receivable | $ 5,240,179 | |
One Customer 2021 | Revenue Benchmark | ||
Concentration Risk, Percentage | 36% | 29% |
One Customer 2021 | Accounts Receivable | ||
Accounts Receivable | $ 2,403,097 |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
INVENTORY | ||
Raw Materials | $ 3,270,597 | $ 1,325,590 |
Work-in-Process | 4,428,440 | 2,777,244 |
Finished Goods | 4,358,533 | 2,493,468 |
Total Inventory | $ 12,057,570 | $ 6,596,302 |
NOTES RECEIVABLE (Details)
NOTES RECEIVABLE (Details) | 12 Months Ended | ||
Dec. 31, 2022 USD ($) item | May 12, 2022 | Dec. 31, 2021 USD ($) | |
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Stock price (as a percent) | 80% | ||
Ratio of EBITDA | 6 | ||
Number of days VWAP of Equity shares | 25 days | ||
Unsecured promissory note (as a percent) | 20% | ||
Term of anniversary | 4 years | ||
Notes receivable annual interest rate | 15% | ||
Term of Accrued interest payment | 180 days | ||
Notes receivable | $ | $ 1,255,843 | $ 0 | |
Subordinated promissory note | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Note bearing interest | 8% | ||
Natural Healing Center, LLC | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Notes receivable reclassified | $ | $ 5,461,255 | ||
Number of acquisitions related to retail dispensaries closed | item | 3 | ||
CALIFORNIA | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Number of dispensaries to be acquired | item | 1 | ||
Executed Definitive Agreements | Natural Healing Center, LLC | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Percentage of equity interests acquired | 100% |
INVESTMENTS (Details)
INVESTMENTS (Details) - USD ($) | 3 Months Ended | 12 Months Ended | |||
Aug. 17, 2022 | Jul. 28, 2022 | Dec. 31, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
INVESTMENTS | |||||
Total Investments - Beginning Balance | $ 7,196,359 | $ 10,701,868 | |||
Additions | 2,958,343 | 787,502 | |||
Distribution | (3,001,871) | (340,780) | |||
Reclass of Investment for Acquisition | (2,045,309) | ||||
Impairment | $ (817,875) | (817,875) | |||
Acquisition of Equity Method Investment | (900,000) | ||||
(Loss) Gain on Equity Method Investments | $ 745,072 | (2,006,639) | (1,089,047) | ||
Total Investments - Ending Balance | 4,246,192 | 4,246,192 | 7,196,359 | ||
LOB Group, Inc | |||||
INVESTMENTS | |||||
Total Investments - Beginning Balance | 2,761,141 | 2,809,412 | |||
(Loss) Gain on Equity Method Investments | (457,671) | (48,271) | |||
Total Investments - Ending Balance | 2,303,470 | 2,303,470 | 2,761,141 | ||
NRO Management, LLC | |||||
INVESTMENTS | |||||
Total Investments - Beginning Balance | 2,018,949 | 2,336,713 | |||
Additions | 300,000 | ||||
Acquisition of Equity Method Investment | (900,000) | ||||
(Loss) Gain on Equity Method Investments | (1,418,949) | (317,764) | |||
Total Investments - Ending Balance | 2,018,949 | ||||
SoCal Hemp JV, LLC | |||||
INVESTMENTS | |||||
Total Investments - Beginning Balance | 1,058,778 | ||||
Additions | 213,000 | 701,254 | |||
Impairment | (817,875) | ||||
(Loss) Gain on Equity Method Investments | (213,000) | (942,157) | |||
Total Investments - Ending Balance | 0 | 0 | |||
ICANN, LLC | |||||
INVESTMENTS | |||||
Total Investments - Beginning Balance | 2,045,309 | ||||
Reclass of Investment for Acquisition | (2,045,309) | ||||
5042 Venice, LLC | |||||
INVESTMENTS | |||||
Total Investments - Beginning Balance | 2,221,520 | 2,222,695 | |||
Additions | 343 | ||||
Distribution | (3,001,871) | (243,880) | |||
(Loss) Gain on Equity Method Investments | 780,008 | 242,705 | |||
Total Investments - Ending Balance | 2,221,520 | ||||
Ownership interest sold (as a percent) | 50% | ||||
Lompoc TIC, LLC | |||||
INVESTMENTS | |||||
Total Investments - Beginning Balance | 194,749 | 228,961 | |||
Additions | 86,248 | ||||
Distribution | (96,900) | ||||
(Loss) Gain on Equity Method Investments | (31,626) | (23,560) | |||
Total Investments - Ending Balance | 163,122 | 163,122 | $ 194,749 | ||
5042 Real Estate Investment LLC | |||||
INVESTMENTS | |||||
Additions | 2,445,000 | ||||
(Loss) Gain on Equity Method Investments | (665,401) | ||||
Total Investments - Ending Balance | $ 1,779,599 | $ 1,779,599 | |||
TIC Interest | |||||
INVESTMENTS | |||||
Ownership interest acquired (as a percent) | 42.93% | ||||
Ownership interest acquired by related party (as a percent) | 7.07% |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
PROPERTY, PLANT AND EQUIPMENT | ||
Total Property, Plant and Equipment | $ 237,129,013 | $ 205,114,892 |
Less Accumulated Depreciation and Amortization | (20,412,118) | (9,316,368) |
Property, Plant and Equipment, Net | 216,716,895 | 195,798,524 |
Depreciation expense | 11,323,468 | 4,597,229 |
Capitalized interest | 1,043,392 | 0 |
Land | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Total Property, Plant and Equipment | 70,888,383 | 70,782,068 |
Buildings | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Total Property, Plant and Equipment | 140,042,534 | 108,024,254 |
Finance Leases | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Total Property, Plant and Equipment | 301,022 | |
Depreciation expense | 15,051 | 0 |
Furniture and Fixtures | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Total Property, Plant and Equipment | 471,696 | 316,395 |
Leasehold Improvements | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Total Property, Plant and Equipment | 10,927,265 | 8,412,489 |
Equipment and Software | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Total Property, Plant and Equipment | 8,050,827 | 5,712,519 |
Construction in Progress | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Total Property, Plant and Equipment | $ 6,447,286 | $ 11,867,167 |
PROPERTY, PLANT AND EQUIPMENT -
PROPERTY, PLANT AND EQUIPMENT - Narratives (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
PROPERTY, PLANT AND EQUIPMENT | ||
Fixed assets | $ 216,716,895 | $ 195,798,524 |
Camarillo acquisition | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Purchase price | 93,000,000 | |
Fixed assets | $ 110,000 | |
Equity shares | 6,500,000 | |
Value of shares issued | $ 29,250,000 | |
Equity shares issuable | 3,500,000 | |
Potential earnout fee | $ 75,000,000 |
PROPERTY, PLANT AND EQUIPMENT_3
PROPERTY, PLANT AND EQUIPMENT - Summary of the total consideration paid (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
PROPERTY, PLANT AND EQUIPMENT | ||
Cash Payments | $ 27,765,732 | $ 108,495,825 |
Fair Value of Contingent Consideration | $ 34,820,000 | |
Camarillo | ||
PROPERTY, PLANT AND EQUIPMENT | ||
Cash Payments | 93,000,000 | |
Survey and Other Fees | 262,875 | |
Shares Issued for the Purchase of Real Property | 29,250,000 | |
Fair Value of Contingent Consideration | 14,973,000 | |
Fair Value of Earn Out Payments | 19,847,000 | |
Total Consideration | $ 157,332,875 |
DISPOSITION OF SUBSIDIARY (Deta
DISPOSITION OF SUBSIDIARY (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Mar. 03, 2021 | |
DISPOSITION OF SUBSIDARY | |||
Loss on disposition of a subsidiary | $ 6,090,337 | ||
Field Investment Co. | Disposal Group | |||
DISPOSITION OF SUBSIDARY | |||
Loss on disposition of a subsidiary | $ 6,090,337 | ||
ASSETS: | |||
Accounts Receivable, Net | $ 21,067 | ||
Prepaid Expenses and Other Current Assets | 430,654 | ||
Operating Lease Right-of-Use Assets, Net | 976,417 | ||
Property, Plant and Equipment, Net | 310,501 | ||
Intangible Assets, Net | 3,727,500 | ||
Goodwill | 2,095,918 | ||
Other Assets | 95,419 | ||
TOTAL ASSETS | 7,657,476 | ||
LIABILITIES: | |||
Accounts Payable and Accrued Liabilities | 473,500 | ||
Operating Lease Liabilities | 1,051,588 | ||
Notes Payable | 42,051 | ||
TOTAL LIABILITIES | 1,567,139 | ||
NET ASSETS DISPOSED | $ 6,090,337 |
BUSINESS ACQUISITIONS (Details)
BUSINESS ACQUISITIONS (Details) - USD ($) | 12 Months Ended | ||||
Sep. 14, 2022 | Sep. 07, 2022 | Jan. 01, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Intangible Assets: | |||||
Goodwill | $ 21,808,566 | $ 4,918,823 | |||
i CANN | Founder-holders of i CANN equity interests | |||||
Total Consideration | |||||
Cash Payment | $ 400,000 | ||||
i CANN | Holders of i CANN equity interests who were not accredited investors | |||||
Total Consideration | |||||
Cash Payment | $ 42,956 | ||||
2022 Acquisitions | |||||
Total Consideration | |||||
Convertible Debenture Notes | 16,257,104 | ||||
Restricted Stock Units Issued | 188,122 | ||||
Derivative Asset | (251,020) | ||||
Contingent Restricted Stock Units | 5,460,000 | ||||
Fair Value of equity issued | 25,266,796 | ||||
Shares Payable | 5,469,000 | ||||
Fair Value of Remaining 50% equity interest | 900,000 | ||||
Cash Payment | 2,538,744 | ||||
Loan Forgiveness | 5,461,257 | ||||
Assumption of IRS Debt | 6,753,499 | ||||
Total Consideration | 68,043,502 | ||||
Net Assets Acquired (Liabilities Assumed) | |||||
Current Assets | 11,599,232 | ||||
Operating Lease Right-of-Use Asset | 6,723,098 | ||||
Property, Plant and Equipment, Net | 2,888,825 | ||||
Non-Current Assets | 97,162 | ||||
Current Liabilities Assumed | (8,051,916) | ||||
Long-Term Liabilities Assumed | (6,102,642) | ||||
Intangible Assets: | |||||
Intangible Assets | 44,000,000 | ||||
Total Identifiable Net Assets Acquired (Net Liabilities Assumed) | 51,153,759 | ||||
Goodwill | 16,889,743 | ||||
Total Net Assets Acquired | 68,043,502 | ||||
Net Income (Loss) from Acquisition | 664,656 | ||||
Revenues from Acquisition | 12,560,626 | ||||
Pro Forma Revenues | 22,716,875 | ||||
Pro Forma Net Loss | 391,015 | ||||
2022 Acquisitions | Intellectual Property | |||||
Intangible Assets: | |||||
Intangible Assets | 7,500,000 | ||||
2022 Acquisitions | Customer Relationships | |||||
Intangible Assets: | |||||
Intangible Assets | 2,600,000 | ||||
2022 Acquisitions | Cannabis License | |||||
Intangible Assets: | |||||
Intangible Assets | 33,900,000 | ||||
Plus Point Holding Inc, Acquisition | |||||
Total Consideration | |||||
Convertible Debenture Notes | 16,257,104 | ||||
Restricted Stock Units Issued | 188,122 | ||||
Derivative Asset | (251,020) | ||||
Contingent Restricted Stock Units | 5,460,000 | ||||
Fair Value of equity issued | 9,707,414 | ||||
Total Consideration | 31,361,620 | ||||
Net Assets Acquired (Liabilities Assumed) | |||||
Current Assets | 6,454,308 | ||||
Operating Lease Right-of-Use Asset | 294,159 | ||||
Property, Plant and Equipment, Net | 789,779 | ||||
Non-Current Assets | 93,662 | ||||
Current Liabilities Assumed | (1,339,301) | ||||
Long-Term Liabilities Assumed | (111,970) | ||||
Intangible Assets: | |||||
Intangible Assets | 20,600,000 | ||||
Total Identifiable Net Assets Acquired (Net Liabilities Assumed) | 26,780,637 | ||||
Goodwill | 4,580,983 | ||||
Total Net Assets Acquired | 31,361,620 | ||||
Net Income (Loss) from Acquisition | (101,022) | ||||
Revenues from Acquisition | 4,877,839 | ||||
Pro Forma Revenues | 3,911,580 | ||||
Pro Forma Net Loss | 1,067,848 | ||||
Plus Point Holding Inc, Acquisition | Intellectual Property | |||||
Intangible Assets: | |||||
Intangible Assets | 5,100,000 | ||||
Plus Point Holding Inc, Acquisition | Customer Relationships | |||||
Intangible Assets: | |||||
Intangible Assets | 2,600,000 | ||||
Plus Point Holding Inc, Acquisition | Cannabis License | |||||
Intangible Assets: | |||||
Intangible Assets | 12,900,000 | ||||
The Pottery Inc, Acquisition | |||||
Total Consideration | |||||
Fair Value of equity issued | 1,100,000 | ||||
Fair Value of Remaining 50% equity interest | 900,000 | ||||
Total Consideration | 2,000,000 | ||||
Net Assets Acquired (Liabilities Assumed) | |||||
Current Assets | 382,436 | ||||
Operating Lease Right-of-Use Asset | 3,671,969 | ||||
Property, Plant and Equipment, Net | 37,201 | ||||
Non-Current Assets | 3,500 | ||||
Current Liabilities Assumed | (2,854,242) | ||||
Long-Term Liabilities Assumed | (3,671,969) | ||||
Intangible Assets: | |||||
Intangible Assets | 3,300,000 | ||||
Total Identifiable Net Assets Acquired (Net Liabilities Assumed) | 868,895 | ||||
Goodwill | 1,131,105 | ||||
Total Net Assets Acquired | 2,000,000 | ||||
Net Income (Loss) from Acquisition | (455,603) | ||||
Revenues from Acquisition | 1,070,380 | ||||
Pro Forma Revenues | 2,110,084 | ||||
Pro Forma Net Loss | (1,287,036) | ||||
The Pottery Inc, Acquisition | Intellectual Property | |||||
Intangible Assets: | |||||
Intangible Assets | 400,000 | ||||
The Pottery Inc, Acquisition | Cannabis License | |||||
Intangible Assets: | |||||
Intangible Assets | 2,900,000 | ||||
Natural Healing Centre LLC, Acquisition | |||||
Total Consideration | |||||
Fair Value of equity issued | 5,938,298 | ||||
Shares Payable | 2,262,000 | ||||
Cash Payment | 590,795 | ||||
Loan Forgiveness | 5,461,257 | ||||
Assumption of IRS Debt | 6,753,499 | ||||
Total Consideration | 21,005,849 | ||||
Net Assets Acquired (Liabilities Assumed) | |||||
Current Assets | 4,146,644 | ||||
Operating Lease Right-of-Use Asset | 992,717 | ||||
Property, Plant and Equipment, Net | 273,679 | ||||
Current Liabilities Assumed | (2,496,552) | ||||
Long-Term Liabilities Assumed | (832,060) | ||||
Intangible Assets: | |||||
Intangible Assets | 13,100,000 | ||||
Total Identifiable Net Assets Acquired (Net Liabilities Assumed) | 15,184,428 | ||||
Goodwill | 5,821,421 | ||||
Total Net Assets Acquired | 21,005,849 | ||||
Net Income (Loss) from Acquisition | 925,110 | ||||
Revenues from Acquisition | 3,468,548 | ||||
Pro Forma Revenues | 8,158,053 | ||||
Pro Forma Net Loss | 551,711 | ||||
Natural Healing Centre LLC, Acquisition | Intellectual Property | |||||
Intangible Assets: | |||||
Intangible Assets | 1,100,000 | ||||
Natural Healing Centre LLC, Acquisition | Cannabis License | |||||
Intangible Assets: | |||||
Intangible Assets | 12,000,000 | ||||
NHC Lemoore LLC, Acquisition | |||||
Total Consideration | |||||
Fair Value of equity issued | 3,272,515 | ||||
Shares Payable | $ 3,272,515 | 1,274,000 | |||
Cash Payment | 1,642,522 | ||||
Total Consideration | $ 6,189,037 | 6,189,037 | |||
Net Assets Acquired (Liabilities Assumed) | |||||
Current Assets | 147,259 | ||||
Operating Lease Right-of-Use Asset | 991,606 | ||||
Property, Plant and Equipment, Net | 1,788,166 | ||||
Current Liabilities Assumed | (706,487) | ||||
Long-Term Liabilities Assumed | (833,989) | ||||
Intangible Assets: | |||||
Intangible Assets | 1,300,000 | ||||
Total Identifiable Net Assets Acquired (Net Liabilities Assumed) | 2,686,555 | ||||
Goodwill | 3,502,482 | ||||
Total Net Assets Acquired | 6,189,037 | ||||
Net Income (Loss) from Acquisition | (147,801) | ||||
Revenues from Acquisition | 1,231,088 | ||||
Pro Forma Revenues | 3,889,361 | ||||
Pro Forma Net Loss | (231,069) | ||||
NHC Lemoore LLC, Acquisition | Intellectual Property | |||||
Intangible Assets: | |||||
Intangible Assets | 300,000 | ||||
NHC Lemoore LLC, Acquisition | Cannabis License | |||||
Intangible Assets: | |||||
Intangible Assets | 1,000,000 | ||||
NH-MB LLC, Acquisition | |||||
Total Consideration | |||||
Fair Value of equity issued | 5,248,569 | ||||
Shares Payable | $ 5,248,569 | 1,933,000 | |||
Cash Payment | 305,427 | ||||
Total Consideration | $ 7,486,996 | 7,486,996 | |||
Net Assets Acquired (Liabilities Assumed) | |||||
Current Assets | 468,585 | ||||
Operating Lease Right-of-Use Asset | 772,647 | ||||
Current Liabilities Assumed | (655,334) | ||||
Long-Term Liabilities Assumed | (652,654) | ||||
Intangible Assets: | |||||
Intangible Assets | 5,700,000 | ||||
Total Identifiable Net Assets Acquired (Net Liabilities Assumed) | 5,633,244 | ||||
Goodwill | 1,853,752 | ||||
Total Net Assets Acquired | 7,486,996 | ||||
Net Income (Loss) from Acquisition | 443,972 | ||||
Revenues from Acquisition | 1,912,771 | ||||
Pro Forma Revenues | 4,647,797 | ||||
Pro Forma Net Loss | 289,561 | ||||
NH-MB LLC, Acquisition | Intellectual Property | |||||
Intangible Assets: | |||||
Intangible Assets | 600,000 | ||||
NH-MB LLC, Acquisition | Cannabis License | |||||
Intangible Assets: | |||||
Intangible Assets | 5,100,000 | ||||
iCANN, LLC | |||||
Total Consideration | |||||
Fair Value of equity issued | 3,380,278 | ||||
Cash Payment | 442,956 | ||||
Equity Investment Converted | 2,045,309 | ||||
Total Consideration | 5,868,543 | ||||
Net Assets Acquired (Liabilities Assumed) | |||||
Current Assets | 562,221 | ||||
Operating Lease Right-of-Use Asset | 1,160,730 | ||||
Property, Plant and Equipment, Net | 692,645 | ||||
Deferred Tax Assets, Net | (209,466) | ||||
Current Liabilities Assumed | (922,745) | ||||
Long-Term Liabilities Assumed | (1,113,584) | ||||
Intangible Assets: | |||||
Intangible Assets | 3,500,000 | ||||
Total Identifiable Net Assets Acquired (Net Liabilities Assumed) | 3,669,801 | ||||
Goodwill | 2,198,742 | ||||
Total Net Assets Acquired | 5,868,543 | ||||
Net Income (Loss) from Acquisition | 60,834 | ||||
Revenues from Acquisition | 6,819,012 | ||||
iCANN, LLC | Intellectual Property | |||||
Intangible Assets: | |||||
Intangible Assets | 600,000 | ||||
iCANN, LLC | Cannabis License | |||||
Intangible Assets: | |||||
Intangible Assets | $ 2,900,000 |
BUSINESS ACQUISITIONS - Additio
BUSINESS ACQUISITIONS - Additional Information (Details) - USD ($) | 12 Months Ended | |||||||
Sep. 14, 2022 | Sep. 07, 2022 | Jul. 28, 2022 | May 30, 2022 | Apr. 28, 2022 | Jan. 01, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
BUSINESS ACQUISITION | ||||||||
Conversion of convertible note unpaid principal | $ 2,000,000 | |||||||
Conversion of convertible note accrued interest | $ 45,309 | |||||||
Shares issued as a finder's fee | 7,511,725 | 48,682 | ||||||
Share-based compensation | $ 225,000 | |||||||
Unsecured convertible debenture note | 20,005 | |||||||
Alternative convertible debenture note | 8,003 | |||||||
Equity in shares | 2,102,578 | |||||||
Vesting period | 1 year | |||||||
Tranche one | ||||||||
BUSINESS ACQUISITION | ||||||||
Vesting percentage | 33% | |||||||
Tranche two | ||||||||
BUSINESS ACQUISITION | ||||||||
Vesting percentage | 67% | |||||||
Restricted Stock Units (RSUs) | ||||||||
BUSINESS ACQUISITION | ||||||||
Share-based compensation | $ 10,821,120 | $ 4,042,690 | ||||||
Incentive Shares | 44,751 | |||||||
Incentive RSUs | ||||||||
BUSINESS ACQUISITION | ||||||||
Incentive Shares | 208,635 | |||||||
RSUs contingent on revenue earnout provisions | ||||||||
BUSINESS ACQUISITION | ||||||||
Incentive RSUs | 1,300,000 | 1,300,000 | ||||||
Retention RSUs | ||||||||
BUSINESS ACQUISITION | ||||||||
Incentive RSUs | 450,000 | |||||||
The fair value of the Retention RSUs | $ 1,890,000 | |||||||
ICANN, LLC | ||||||||
BUSINESS ACQUISITION | ||||||||
Percentage of equity interest acquired | 100% | |||||||
Consideration, Number of Shares Issued | 731,369 | |||||||
NRO Management, LLC | ||||||||
BUSINESS ACQUISITION | ||||||||
Percentage of ownership interest held prior to acquisition | 50% | |||||||
Purchase price | $ 2,000,000 | |||||||
Percentage of equity interest acquired | 50% | |||||||
Consideration, Number of Shares Issued | 500,000 | |||||||
Lock-up period of shares | 1 year | |||||||
Fair Value of shares | $ 1,100,000 | |||||||
Fair value per share | $ 2.20 | |||||||
Option to acquire the remaining undivided ownership interest, value | $ 3,000,000 | |||||||
NRO Management, LLC | Level 3 | ||||||||
BUSINESS ACQUISITION | ||||||||
Percentage of equity interest acquired | 50% | |||||||
Fair Value of Remaining 50% equity interest | $ 900,000 | |||||||
Natural Healing Center, LLC | ||||||||
BUSINESS ACQUISITION | ||||||||
Purchase price | $ 21,005,849 | |||||||
Equity Shares | 5,938,298 | |||||||
Deferred shares payable | 2,262,000 | |||||||
NHC Lemoore LLC | ||||||||
BUSINESS ACQUISITION | ||||||||
Purchase price | 6,189,037 | $ 6,189,037 | ||||||
Equity Shares | 3,272,515 | 1,274,000 | ||||||
Deferred shares payable | $ 1,274,000 | |||||||
Cash Payment | 1,642,522 | |||||||
NHC-MB LLC | ||||||||
BUSINESS ACQUISITION | ||||||||
Purchase price | $ 7,486,996 | 7,486,996 | ||||||
Equity Shares | 5,248,569 | 1,933,000 | ||||||
Deferred shares payable | $ 1,933,000 | |||||||
Percentage of equity interest acquired | 80% | |||||||
Cash Payment | $ 305,427 | |||||||
Plus Products | ||||||||
BUSINESS ACQUISITION | ||||||||
Purchase price | $ 31,361,620 | |||||||
Percentage of equity interest acquired | 100% |
INTANGIBLE ASSETS (Details)
INTANGIBLE ASSETS (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Definite Lived Intangible Assets | ||
Total Definite Lived Intangible Assets | $ 10,890,000 | $ 790,000 |
Less Accumulated Amortization | (1,186,665) | (208,667) |
Total Future Amortization Expense | 9,703,335 | 581,333 |
Total Indefinite Lived Intangible Assets | 38,948,500 | 5,048,500 |
Total Intangible Assets, Net | 48,651,835 | 5,629,833 |
Increase in value of intangible assets | 1,800,000 | |
Amortization | ||
Amortization Expense | 977,998 | 170,167 |
Dispensary Licenses | ||
Definite Lived Intangible Assets | ||
Total Indefinite Lived Intangible Assets | 38,948,500 | 5,048,500 |
Intellectual Property | ||
Definite Lived Intangible Assets | ||
Total Definite Lived Intangible Assets | 8,290,000 | $ 790,000 |
Customer Relationships | ||
Definite Lived Intangible Assets | ||
Total Definite Lived Intangible Assets | $ 2,600,000 |
INTANGIBLE ASSETS - Expected Fu
INTANGIBLE ASSETS - Expected Future Amortization Expense (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Future Amortization Expense | ||
2023 | $ 1,668,000 | |
2024 | 1,655,333 | |
2025 | 1,630,000 | |
2026 | 1,510,000 | |
2027 | 1,030,002 | |
Thereafter | 2,210,000 | |
Total Future Amortization Expense | $ 9,703,335 | $ 581,333 |
GOODWILL (Details)
GOODWILL (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
GOODWILL | ||
Goodwill | $ 21,808,566 | $ 4,918,823 |
Increase in carrying value in goodwill | $ 415,965 |
ACCOUNTS PAYABLE AND ACCRUED _3
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES | ||
Accounts Payable | $ 6,869,941 | $ 4,777,435 |
Accrued Liabilities | 12,183,677 | 2,418,664 |
Accrued Payroll and Related Liabilities | 2,009,598 | 1,699,253 |
Sales Tax and Cannabis Taxes | 1,270,572 | 1,319,652 |
Total Accounts Payable and Accrued Liabilities | 22,333,788 | 10,215,004 |
Accrued loyalty rewards program | $ 999,000 | $ 380,000 |
DERIVATIVE LIABILITIES - Weight
DERIVATIVE LIABILITIES - Weighted Average Upon Conversion (Details) | Dec. 31, 2021 |
Weighted-Average Risk Free Annual Rate | |
DERIVATIVE LIABILITIES | |
Fair value measurement | 0.0025 |
Weighted-Average Average Probability at Maturity | |
DERIVATIVE LIABILITIES | |
Fair value measurement | 0 |
Weighted-Average Average Probability Before Maturity | |
DERIVATIVE LIABILITIES | |
Fair value measurement | 1 |
Weighted-Average Average Probability at Change of Control | |
DERIVATIVE LIABILITIES | |
Fair value measurement | 0 |
Weighted-Average Expected Annual Dividend Yield | |
DERIVATIVE LIABILITIES | |
Fair value measurement | 0 |
Weighted-Average Expected Stock Price Volatility | |
DERIVATIVE LIABILITIES | |
Fair value measurement | 0 |
DERIVATIVE LIABILITIES - Deriva
DERIVATIVE LIABILITIES - Derivative Liabilities based on change in Fair Value (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
DERIVATIVE LIABILITIES | ||
Balance at Beginning of Year | $ 7,365,000 | |
Derivative Liability Incurred Upon Issuance of convertible Debt | 182,000 | |
Change in Fair Value | (825,000) | |
Reclassed to Equity Upon Conversion of Debt | $ (6,722,000) | |
Extinguishment of debt | $ 0 |
CONTINGENT SHARES AND EARNOUT_3
CONTINGENT SHARES AND EARNOUT LIABILITIES - Contingent Shares (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
CONTINGENT SHARES AND EARNOUT LIABILITIES | ||
Balance at Beginning of Year | $ 38,428,700 | |
Contingent Shares Issued Upon Closing of Business Combination | 5,460,000 | $ 7,640,334 |
Change in Fair Value of Contingent Liabilities | (29,232,034) | (4,031,634) |
Balance at End of Year | 14,656,666 | 38,428,700 |
Contingent Earnout Camarillo Transaction | ||
CONTINGENT SHARES AND EARNOUT LIABILITIES | ||
Contingent Shares/Earnout Issued for Option Right | 4,041,000 | 19,847,000 |
Contingent Shares Camarillo Transaction | ||
CONTINGENT SHARES AND EARNOUT LIABILITIES | ||
Balance at Beginning of Year | 13,485,500 | |
Contingent Shares/Earnout Issued for Option Right | $ 6,860,000 | 14,973,000 |
Balance at End of Year | $ 13,485,500 |
CONTINGENT SHARES AND EARNOUT_4
CONTINGENT SHARES AND EARNOUT LIABILITIES - Contingent Earnout (Details) - USD ($) | 12 Months Ended | |||
May 30, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | Jun. 29, 2021 | |
CONTINGENT SHARES AND EARNOUT LIABILITIES | ||||
Contingency shares issued upon closing of business combination | $ 14,656,666 | $ 38,428,700 | ||
Change in fair value of contingent liabilities | 34,820,000 | |||
Gain contingency unrecorded amount | 1,207,666 | 2,372,200 | ||
Change in fair value recorded as a component of contingent liabilities | 1,164,534 | 5,268,134 | ||
Change in fair value of contingent liabilities. | 29,232,034 | 4,031,634 | ||
RSUs contingent on revenue earnout provisions | ||||
CONTINGENT SHARES AND EARNOUT LIABILITIES | ||||
Change in fair value recorded as a component of contingent liabilities | $ 2,548,000 | 0 | ||
RSUs contingent on revenue earnout provisions | 1,300,000 | 1,300,000 | ||
Change in fair value of contingent liabilities. | $ 2,912,000 | $ 0 | ||
Mercer Park | ||||
CONTINGENT SHARES AND EARNOUT LIABILITIES | ||||
Equity shares | 616,156 | 1,008,975 | ||
Number of shares contingently issuable | 6,306,095 | |||
Shares issued | 0 | 0 | ||
Mercer Park | Minimum | ||||
CONTINGENT SHARES AND EARNOUT LIABILITIES | ||||
Shares issuable volume-weighted average price trigger | $ 13 | |||
Mercer Park | Maximum | ||||
CONTINGENT SHARES AND EARNOUT LIABILITIES | ||||
Shares issuable volume-weighted average price trigger | $ 15 | |||
Mercer Park | Restricted Shares | ||||
CONTINGENT SHARES AND EARNOUT LIABILITIES | ||||
Number of shares contingently issuable | 392,819 | |||
Contingent Earnout Camarillo Transaction | ||||
CONTINGENT SHARES AND EARNOUT LIABILITIES | ||||
Contingent Shares/Earnout Issued for Option Right | $ 4,041,000 | $ 19,847,000 | ||
Gain contingency unrecorded amount | 22,571,000 | |||
Change in fair value recorded as a component of contingent liabilities | $ 18,530,000 | 2,724,000 | ||
Potential earnout fee | 75,000,000 | |||
Contingent Shares Camarillo Transaction | ||||
CONTINGENT SHARES AND EARNOUT LIABILITIES | ||||
Equity shares | 6,500,000 | |||
Number of shares contingently issuable | 3,500,000 | |||
Contingency shares issued upon closing of business combination | 13,485,500 | |||
Contingent Shares/Earnout Issued for Option Right | $ 6,860,000 | 14,973,000 | ||
Change in fair value recorded as a component of contingent liabilities | $ 6,625,500 | $ 1,487,500 |
LEASES - Cost (Details)
LEASES - Cost (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
LEASES | ||
Amortization of Finance Lease Right-of-Use Assets | $ 15,051 | |
Interest on Lease Liabilities | 14,577 | |
Non-Cash Operating Lease Costs | 1,479,305 | $ 730,881 |
Short-Term Lease Cost | 933,424 | 669,003 |
Total Lease Expenses | 2,442,357 | 1,399,884 |
Cash Paid for Amounts Included in the Measurement of Lease Liabilities: | ||
Operating Cash Flows from Finance Leases | 9,802 | |
Operating Cash Flows from Operating Leases | 1,446,649 | 712,358 |
Financing Cash Flows from Finance Leases | 19,715 | |
Non-Cash Addition to Right-of-Use Assets and Lease Liabilities: | ||
Recognition of Right-of-Use Assets for Finance Leases | 301,022 | |
Recognition of Right-of-Use Assets for Operating Leases | $ 8,614,907 | $ 1,419,650 |
Weighted-Average Remaining Lease Term (Years) - Finance Leases | 3 years | 0 years |
Weighted-Average Remaining Lease Term (Years) - Operating Leases | 7 years | 8 years |
Weighted-Average Discount Rate - Finance Leases | 20.40% | |
Weighted - Average Discount Rate - Operating Leases | 12.02% | 17% |
LEASES - Future payments (Detai
LEASES - Future payments (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Operating leases | ||
Less Current Portion of Lease Liability | $ (1,077,971) | $ (269,154) |
Present Value of Lease Liability, Net of Current Portion | 9,859,232 | $ 2,865,480 |
Total leases | ||
2023 | 2,408,929 | |
2024 | 2,449,245 | |
2025 | 2,422,031 | |
2026 | 2,263,644 | |
2027 | 2,034,888 | |
Thereafter | 5,304,812 | |
Total Future Minimum Lease Payments | 16,883,549 | |
Less Imputed Interest | (5,665,539) | |
Present Value of Lease Liability | 11,218,010 | |
Less Current Portion of Lease Liability | (1,144,762) | |
Present Value of Lease Liability, Net of Current Portion | 10,073,248 | |
Third Parties | ||
Operating leases | ||
2023 | 1,371,629 | |
2024 | 1,399,456 | |
2025 | 1,399,104 | |
2026 | 1,372,745 | |
2027 | 1,126,862 | |
Thereafter | 2,138,205 | |
Total Future Minimum Lease Payments | 8,808,001 | |
Less Imputed Interest | (2,792,842) | |
Present Value of Lease Liability | 6,015,159 | |
Less Current Portion of Lease Liability | (710,793) | |
Present Value of Lease Liability, Net of Current Portion | 5,304,366 | |
Finance leases | ||
2023 | 118,069 | |
2024 | 118,069 | |
2025 | 148,656 | |
Total Future Minimum Lease Payments | 384,794 | |
Less Imputed Interest | (103,987) | |
Present Value of Lease Liability | 280,807 | |
Less Current Portion of Lease Liability | (66,791) | |
Present Value of Lease Liability, Net of Current Portion | 214,016 | |
Related Parties | ||
Operating leases | ||
2023 | 919,231 | |
2024 | 931,720 | |
2025 | 874,271 | |
2026 | 890,899 | |
2027 | 908,026 | |
Thereafter | 3,166,607 | |
Total Future Minimum Lease Payments | 7,690,754 | |
Less Imputed Interest | (2,768,710) | |
Present Value of Lease Liability | 4,922,044 | |
Less Current Portion of Lease Liability | (367,178) | |
Present Value of Lease Liability, Net of Current Portion | $ 4,554,866 |
LEASES - Lease out of property
LEASES - Lease out of property (Details) | Sep. 14, 2021 USD ($) |
Lease out | |
Lease amount per month | $ 500,000 |
Lease term | 36 months |
Rental income | $ 0 |
LEASES - Lease description (Det
LEASES - Lease description (Details) | Dec. 31, 2022 USD ($) |
LEASES | |
Annual escalation rate | 5% |
Minimum | |
LEASES | |
Required monthly payments | $ 800 |
Maximum | |
LEASES | |
Required monthly payments | $ 56,000 |
NOTES PAYABLE AND CONVERTIBLE_3
NOTES PAYABLE AND CONVERTIBLE DEBENTURES - Schedule of debt (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||
Notes Payable | $ 66,448,306 | $ 50,238,835 |
Less Unamortized Debt Issuance Costs and Loan Origination Fees | (3,789,358) | (5,383,413) |
Net Amount | 62,658,948 | 44,855,422 |
Less Current Portion of Notes Payable | (40,237) | (37,986) |
Notes Payable, Net of Current Portion | 62,618,711 | 44,817,436 |
Term loan payable maturing in November 2026, 10.00% pe annum | ||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||
Notes Payable | $ 50,000,000 | $ 50,000,000 |
Stated interest rate | 10% | 10% |
Convertible Debentures | ||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||
Notes Payable | $ 16,006,084 | |
Other | ||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||
Notes Payable | $ 442,222 | $ 238,835 |
NOTES PAYABLE AND CONVERTIBLE_4
NOTES PAYABLE AND CONVERTIBLE DEBENTURES - Maturity schedule (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||
2023 | $ 668,955 | |
2024 | 7,546,530 | |
2025 | 7,549,256 | |
2026 | 7,552,142 | |
2027 | 7,750,339 | |
Thereafter | 35,381,084 | |
Total Future Minimum Principal Payments | $ 66,448,306 | $ 50,238,835 |
NOTES PAYABLE AND CONVERTIBLE_5
NOTES PAYABLE AND CONVERTIBLE DEBENTURES - Paragraphs (Details) | 1 Months Ended | 12 Months Ended | ||||||
Aug. 30, 2022 USD ($) | May 12, 2022 USD ($) $ / shares shares | Apr. 28, 2022 $ / shares shares | Dec. 10, 2021 USD ($) | Jun. 30, 2021 USD ($) | Dec. 31, 2022 USD ($) loan $ / shares | Dec. 31, 2021 USD ($) | Dec. 09, 2021 USD ($) | |
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Balance | $ 66,448,306 | $ 50,238,835 | ||||||
Warrant exercise price (in dollar per share) | $ / shares | $ 5 | |||||||
Repayment of term loan | $ 9,887,672 | 954,092 | ||||||
Loss on extinguishment of debt | $ (489,647) | |||||||
Payment through unsecured convertible debenture notes | shares | 20,005 | |||||||
Number of days VWAP of Equity shares | 25 days | |||||||
Credit agreement | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Total available proceeds | $ 100,000,000 | |||||||
Incremental Term Loan | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Repayment of term loan | $ 10,000,000 | |||||||
Note payable maturing in June 2021, 7.00% pe annum | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Preferred stock financing value | $ 12,530,963 | |||||||
Cumulative dividend rate | 15% | |||||||
Amount raised recorded as debt | $ 7,625,000 | |||||||
Term loan payable maturing in November 2026, 10.00% pe annum | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Balance | $ 50,000,000 | $ 50,000,000 | ||||||
Stated interest rate | 10% | 10% | ||||||
Term loan payable maturing in November 2026, 10.00% pe annum | Base Rate | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Stated interest rate | 5.25% | |||||||
Term loan payable maturing in November 2026, 10.00% pe annum | Minimum | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Stated interest rate | 10% | |||||||
Term loan payable maturing in November 2026, 10.00% pe annum | Maximum | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Stated interest rate | 12% | |||||||
Credit agreement | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Liquidity Covenant | $ 10,000,000 | |||||||
Credit Agreement, Initial Term Loan | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Loan amount | $ 50,000,000 | |||||||
Credit Agreement, Annual Principal Payment, Percent Of Principal | 1.25% | |||||||
Monthly installment period that will equal to 1.25% pe annum of the original principal | 24 months | |||||||
Number of additional delayed draw | loan | 2 | |||||||
Term loan draw that maybe requested in each two additional delayed draws | $ 25,000,000 | |||||||
Percentage of proceeds of sale of assets to prepay outstanding principal amount | 100% | |||||||
Deposited interest reserve in escrow account | $ 3,000,000 | |||||||
Amendments to the Senior Secured Credit Agreement | Incremental Term Loan | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Accrued interest rate | 10% | |||||||
Total available proceeds | $ 110,000,000 | |||||||
Loan amount | $ 10,000,000 | |||||||
Warrants issued (in shares) | shares | 175,000 | |||||||
Warrant exercise price (in dollar per share) | $ / shares | $ 11.50 | |||||||
Debt discount recorded | 89,250 | |||||||
Percentage of fee on the outstanding principal amount | 1% | |||||||
Repayment of term loan | 10,000,000 | |||||||
Loss on extinguishment of debt | $ 489,647 | 579,000 | ||||||
Convertible Debentures | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Balance | 16,006,084 | |||||||
Accrued interest rate | 8% | |||||||
Number of days VWAP of Equity shares | 10 days | |||||||
Number of trading days prior to the date for equity shares | 5 days | |||||||
Convertible Debentures | Minimum | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Fixed exchange rate | 1 | |||||||
Convertible Debentures | Maximum | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Fixed exchange rate | 1.27 | |||||||
Series A Notes | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Payment through unsecured convertible debenture notes | shares | 12,003 | |||||||
Number of days VWAP of Equity shares | 10 days | |||||||
Number of trading days prior to the date for equity shares | 5 days | |||||||
Redemption price per share | $ / shares | $ 4.08 | |||||||
Value of shares issued | 11,894,989 | |||||||
Series B Notes | ||||||||
NOTES PAYABLE AND CONVERTIBLE DEBENTURES | ||||||||
Payment through unsecured convertible debenture notes | shares | 8,002 | |||||||
Number of days VWAP of Equity shares | 10 days | |||||||
Number of trading days prior to the date for equity shares | 5 days | |||||||
Threshold closing price for conversion into shares | $ / shares | $ 10 | |||||||
Threshold consecutive trading days considered for closing price | 20 days | |||||||
Conversion price | $ / shares | $ 10 | |||||||
Value of shares issued | 4,111,095 | |||||||
Change in the fair value of derivative asset | $ 30,000 | $ 0 |
NOTES PAYABLE - RELATED PARTI_2
NOTES PAYABLE - RELATED PARTIES Senior Convertible Notes & Secured Convertible Promissory Notes (Details) - USD ($) | 12 Months Ended | ||||||||
Jun. 29, 2021 | Jan. 04, 2021 | Jan. 01, 2021 | Jan. 08, 2020 | Oct. 07, 2019 | Dec. 31, 2022 | Dec. 31, 2018 | Jun. 30, 2021 | Feb. 28, 2021 | |
NOTES PAYABLE - RELATED PARTIES | |||||||||
Aggregate value of note converted into equity | $ 2,000,000 | ||||||||
Loss on extinguishment of debt | $ (489,647) | ||||||||
Magu Farm Convertible Notes | Secured Convertible Promissory Notes | |||||||||
NOTES PAYABLE - RELATED PARTIES | |||||||||
Aggregate value of note converted into equity | $ 8,000,000 | ||||||||
GH Group | Senior Convertible Notes | |||||||||
NOTES PAYABLE - RELATED PARTIES | |||||||||
Private placement amount approved by BOD | $ 22,599,844 | $ 17,500,000 | |||||||
Discount percentage of QEF that triggers conversion | 80% | ||||||||
Valuation cap to trigger conversion | $ 250,000,000 | ||||||||
Cash interest rate paid quarterly | 4% | ||||||||
Accrued interest rate | 4.30% | ||||||||
GH Group | Preferred Shares | Secured Convertible Promissory Notes | |||||||||
NOTES PAYABLE - RELATED PARTIES | |||||||||
Debt issued | $ 12,530,963 | $ 2,000,000 | |||||||
Preferred Stock, Dividend Rate, Percentage, Increase | 5% | ||||||||
Stated interest rate | 15% | 15% | |||||||
Magu Farm LLC | Secured Convertible Promissory Notes | |||||||||
NOTES PAYABLE - RELATED PARTIES | |||||||||
Aggregate value of note converted into equity | $ 9,925,000 |
SHAREHOLDERS' EQUITY - Authoriz
SHAREHOLDERS' EQUITY - Authorized (Details) | Dec. 31, 2022 Vote $ / shares | Dec. 31, 2021 $ / shares |
SHAREHOLDERS' EQUITY | ||
Multiple voting shares, par value (in dollars per share) | $ / shares | $ 0 | $ 0 |
Multiple Voting Shares | ||
SHAREHOLDERS' EQUITY | ||
Number of votes | Vote | 50 | |
Multiple voting shares, par value (in dollars per share) | $ / shares | $ 0.001 | |
Exchangeable Shares | ||
SHAREHOLDERS' EQUITY | ||
Number of votes | Vote | 1 | |
Maximum voting power percentage | 49.90% | |
Exchange ratio for subordinate voting shares | 1 |
SHAREHOLDERS' EQUITY - Preferre
SHAREHOLDERS' EQUITY - Preferred Shares - GH Group (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SHAREHOLDERS' EQUITY | ||
Dividends recorded | $ 4,000,142 | |
GH Group | Series A Preferred Stock | ||
SHAREHOLDERS' EQUITY | ||
Authorized number of Preferred Shares | 45,000,000 | |
Preferred shares issued | 0 | 18,515,491 |
Preferred shares outstanding | 0 | 18,515,491 |
Cumulative dividend rate | 15% | |
Percentage of increase in dividend rate | 5% | |
GH Group | Series B Preferred Stock | ||
SHAREHOLDERS' EQUITY | ||
Authorized number of Preferred Shares | 55,000 | |
Preferred shares issued | 49,969 | 0 |
Preferred shares outstanding | 49,969 | 0 |
Cumulative dividend rate | 20% | |
Percentage of increase in dividend rate | 2.50% | |
GH Group | Series C Preferred Stock | ||
SHAREHOLDERS' EQUITY | ||
Authorized number of Preferred Shares | 5,000 | |
Preferred shares issued | 4,700 | 0 |
Preferred shares outstanding | 4,700 | 0 |
Cumulative dividend rate | 20% | |
Percentage of increase in dividend rate | 2.50% | |
GH Group | Preferred Shares | ||
SHAREHOLDERS' EQUITY | ||
Authorized number of Preferred Shares | 50,000,000 | |
Maximum period for increase in the dividend rate | 54 months | |
Dividends recorded | $ 5,835,131 | $ 1,797,423 |
SHAREHOLDERS' EQUITY - Non-Cont
SHAREHOLDERS' EQUITY - Non-Controlling Interest (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SHAREHOLDERS' EQUITY | ||
Loss attributable to a non-controlling interest | $ 61,675 | $ 197,774 |
SHAREHOLDERS' EQUITY - Prior to
SHAREHOLDERS' EQUITY - Prior to the Business Combination through June 29, 2021 (Details) - USD ($) | 1 Months Ended | 12 Months Ended | ||
Jan. 01, 2021 | Jun. 30, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
SHAREHOLDERS' EQUITY | ||||
Share-based compensation | $ 225,000 | |||
Exchangeable Shares | GH Group Founder parties | Business Combination through June 29, 2021 | ||||
SHAREHOLDERS' EQUITY | ||||
Issuance for business acquisition (in shares) | 731,369 | |||
Fair Value of equity issued | $ 3,380,278 | |||
Share issued to convert senior convertible notes | 646,096 | |||
Shares issued for exercise of warrant | 160,149 | |||
Warrants exercised | 1,968,300 | |||
Exchangeable Shares | GH Group Founder parties | Convertible Debt | Business Combination through June 29, 2021 | ||||
SHAREHOLDERS' EQUITY | ||||
Senior convertible notes converted to shares | $ 1,925,000 | |||
Exchangeable Shares | GH Group Founder parties | Brokers and Consultants | Business Combination through June 29, 2021 | ||||
SHAREHOLDERS' EQUITY | ||||
Issuance for business acquisition (in shares) | 48,682 | |||
Share-based compensation | $ 225,000 | |||
iCANN, LLC dba Farmacy Berkeley | ||||
SHAREHOLDERS' EQUITY | ||||
Fair Value of equity issued | $ 3,380,278 |
SHAREHOLDERS' EQUITY - Transact
SHAREHOLDERS' EQUITY - Transactions Contemporaneous to the Business Combination (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |||||
Dec. 09, 2021 | Sep. 14, 2021 | Aug. 23, 2021 | Jun. 29, 2021 | Oct. 31, 2021 | Dec. 31, 2022 | Dec. 31, 2021 | |
Class of Stock [Line Items] | |||||||
Warrant exercise price (in dollar per share) | $ 5 | ||||||
Contingent Earnout Recorded as a Liability | $ 7,640,334 | ||||||
Business Combination June 29, 2021 and through December 31, 2021 | |||||||
Class of Stock [Line Items] | |||||||
Preferred shares converted | 20,293,127 | ||||||
Shares issued converting Preferred shares | 2,577,227 | ||||||
Investor | Business Combination June 29, 2021 and through December 31, 2021 | |||||||
Class of Stock [Line Items] | |||||||
Proceeds from issuance of shares | $ 1,500,000 | ||||||
June 2024 | Business Combination June 29, 2021 and through December 31, 2021 | |||||||
Class of Stock [Line Items] | |||||||
Warrants issued | 4,928,578 | ||||||
Warrant exercise price (in dollar per share) | $ 10 | ||||||
June 2026 | Business Combination June 29, 2021 and through December 31, 2021 | |||||||
Class of Stock [Line Items] | |||||||
Warrants issued | 2,000,000 | ||||||
Warrant exercise price (in dollar per share) | $ 11.50 | ||||||
Subordinate Voting Shares. | |||||||
Class of Stock [Line Items] | |||||||
Issuance for business acquisition (in shares) | 8,417,325 | ||||||
Share issue price per share | $ 4.99 | ||||||
Subordinate Voting Shares. | Business Combination June 29, 2021 and through December 31, 2021 | |||||||
Class of Stock [Line Items] | |||||||
Issuance for business acquisition (in shares) | 22,335,908 | 150,000 | 9,098,302 | ||||
Fair Value of equity issued | $ 124,359,000 | $ 748,500 | |||||
Earnout liability recorded | $ 7,640,334 | ||||||
Subordinate Voting Shares. | Investor | Business Combination June 29, 2021 and through December 31, 2021 | |||||||
Class of Stock [Line Items] | |||||||
Issuance for business acquisition (in shares) | 150,000 | ||||||
Subordinate Voting Shares. | Camarillo Acquisition Agreement | Business Combination June 29, 2021 and through December 31, 2021 | |||||||
Class of Stock [Line Items] | |||||||
Issuance for business acquisition (in shares) | 6,500,000 | ||||||
Value of shares issued | $ 29,250,000 | ||||||
GH Group | Multiple Voting Shares | Business Combination June 29, 2021 and through December 31, 2021 | |||||||
Class of Stock [Line Items] | |||||||
Issuance for business acquisition (in shares) | 4,754,979 | ||||||
GH Group | Subordinate Voting Shares. | Business Combination June 29, 2021 and through December 31, 2021 | |||||||
Class of Stock [Line Items] | |||||||
Fair Value of equity issued | $ 88,654 | ||||||
Vested options | 5,392,564 | ||||||
Shares issued for exercise of options | 479,195 | ||||||
GH Group | Series A Preferred Stock | Business Combination June 29, 2021 and through December 31, 2021 | |||||||
Class of Stock [Line Items] | |||||||
Shares issued | 38,808,618 | ||||||
Proceeds from issuance of shares | $ 31,285,258 |
SHAREHOLDERS' EQUITY - Share an
SHAREHOLDERS' EQUITY - Share and Equity Transactions (Details) | 12 Months Ended |
Dec. 31, 2022 USD ($) $ / shares shares | |
SHAREHOLDERS' EQUITY | |
Number of shares issued to convertible note holders for interest payments | shares | 347,108 |
Value of Shares issued to convertible note holders for interest payments | $ 868,763 |
Options exercised | shares | 227,116 |
Proceeds from exercise of stock options | $ 303,694 |
Number of shares issue on conversion of Restricted Stock Units | shares | 2,162,265 |
Number of shares issued on conversion of exchangeable shares | shares | 5,936,636 |
Contributions from controlling and non-controlling interests | $ 5,505,000 |
Number of warrants cancelled | shares | 2,274,133 |
Number of warrants issued on exchange | shares | 9,999,937 |
Number of replacement warrants issued | shares | 4,548,347 |
Number of warrants issued | shares | 5,451,590 |
Warrant exercise price (in dollar per share) | $ / shares | $ 5 |
Private placement financing | |
SHAREHOLDERS' EQUITY | |
Number of shares issued on exchange | shares | 27,257 |
Series B Preferred Stock | |
SHAREHOLDERS' EQUITY | |
Face value of shares exchanged | $ 27,257,950 |
Fair value of non-controlling interest | 36,549,987 |
Value of the replacement warrants | 5,658,502 |
Issuance of Preferred Shares and Warrants | 7,790,939 |
Adjustment of preferred shares to redemption value | 13,449,142 |
Series C Preferred Stock | |
SHAREHOLDERS' EQUITY | |
Fair value of non-controlling interest | 3,733,792 |
Issuance of Preferred Shares and Warrants | 966,208 |
Adjustment of preferred shares to redemption value | $ 966,208 |
GH Group | Private placement financing | |
SHAREHOLDERS' EQUITY | |
Number of shares issued | shares | 4,700 |
GH Group | Series A Preferred Stock | |
SHAREHOLDERS' EQUITY | |
Face value of shares exchanged | $ 22,741,956 |
Number of shares redeemed | $ 772,718 |
GH Group | Series B Preferred Stock | |
SHAREHOLDERS' EQUITY | |
Number of shares issued | shares | 49,969 |
Value of shares issued | $ 49,999,906 |
Number of shares issued on exchange | shares | 22,712 |
GH Group | Series C Preferred Stock | |
SHAREHOLDERS' EQUITY | |
Value of shares issued | $ 4,700,000 |
Number of warrants issued | shares | 940,000 |
Warrant exercise price (in dollar per share) | $ / shares | $ 5 |
Plus Products Holdings Inc | GH Group | |
SHAREHOLDERS' EQUITY | |
Issuance for business acquisition (in shares) | shares | 2,311,213 |
Fair Value of equity issued | $ 9,707,414 |
The Pottery Inc, Acquisition | |
SHAREHOLDERS' EQUITY | |
Issuance for business acquisition (in shares) | shares | 500,000 |
Fair Value of equity issued | $ 1,100,000 |
Grover Beach, Lemoore and Morro Bay | |
SHAREHOLDERS' EQUITY | |
Issuance for business acquisition (in shares) | shares | 5,606,112 |
Fair Value of equity issued | $ 14,459,382 |
SHAREHOLDERS' EQUITY - Variable
SHAREHOLDERS' EQUITY - Variable Interest Entity (Details) - USD ($) | 1 Months Ended | 12 Months Ended | |
Jun. 30, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
SHAREHOLDERS' EQUITY | |||
Current Assets | $ 41,456,919 | $ 69,120,007 | |
Total Assets | 348,668,399 | 288,081,269 | |
Total Liabilities | 131,230,734 | 107,209,433 | |
Revenues, Net | 90,891,087 | 69,446,852 | |
Net Income Attributable to Non-Controlling Interest | (61,675) | $ (197,774) | |
2000 DLV | |||
SHAREHOLDERS' EQUITY | |||
Transfer of tenant improvements | $ 762,095 | ||
Percentage of ownership interest sold | 100% | ||
Proceeds from sale of subsidiary | $ 3,060,000 | ||
VIE | |||
SHAREHOLDERS' EQUITY | |||
Current Assets | 111,686 | ||
Non-Current Assets | 2,357,957 | ||
Total Assets | 2,469,643 | ||
Non-Current Liabilities | 241,373 | ||
Total Liabilities | 241,373 | ||
Revenues, Net | 139,500 | ||
Net Income Attributable to Non-Controlling Interest | $ 56,997 |
SHARE-BASED COMPENSATION - Ince
SHARE-BASED COMPENSATION - Incentive Plan (Details) - Stock Options | 12 Months Ended |
Dec. 31, 2022 | |
SHARE-BASED COMPENSATION | |
Maximum number of awards, as a percent of capitalization | 10% |
Expiration period | 5 years |
SHARE-BASED COMPENSATION - GH G
SHARE-BASED COMPENSATION - GH Group Options (Details) | 12 Months Ended | |
Dec. 31, 2022 USD ($) shares | Dec. 31, 2021 USD ($) $ / shares $ / item shares | |
SHARE-BASED COMPENSATION | ||
Outstanding vested option | 1,000,717 | 1,000,717 |
Options exercised | 227,116 | |
Shares payable | $ | $ 8,588,915 | $ 2,756,830 |
Stock Options | ||
SHARE-BASED COMPENSATION | ||
Options issued | 2,051,000 | |
Restricted Stock Units (RSUs) | ||
SHARE-BASED COMPENSATION | ||
RSUs issued in exchange for stock options | 2,162,265 | 1,076,499 |
GH Group | Stock Options | ||
SHARE-BASED COMPENSATION | ||
Outstanding vested option | 31,403,186 | |
Outstanding vested option exercise price (in dollar per share) | $ / shares | $ 0.23 | |
Outstanding unvested option | 29,294,324 | |
Outstanding unvested option exercise price (in dollar per share) | $ / shares | $ 0.26 | |
Options exercised | 5,392,564 | |
Shares issued for exercise of options | 479,195 | |
Shares reserve for outstanding options | 1,433,793 | |
Shares payable | $ | $ 2,756,830 | |
Exchange ratio in the exchange of ISOs for options | $ / item | 10.27078 | |
GH Group ISOs exchange for stock options | 21,065,367 | |
GH Group | Restricted Stock Units (RSUs) | ||
SHARE-BASED COMPENSATION | ||
Share price used in the exchange of NQSO for RSUs (in dollar per share) | $ / shares | $ 10 | |
RSUs issued in exchange for stock options | 1,076,499 |
SHARE-BASED COMPENSATION - Opti
SHARE-BASED COMPENSATION - Options Activity (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Number of Stock Options | ||
Balance as of beginning of period | 2,087,784 | 48,403,624 |
Forfeited | (407,781) | |
Exercised | (227,116) | |
Exchanged for Subordinate Shares | (19,320,935) | |
Converted to RSU's | (14,886,359) | |
Effect on Conversion related to the Business Combination | (19,108,791) | |
Balance as of end of period | 1,452,887 | 2,087,784 |
Weighted Average Exercise Price | ||
Balance as of beginning of period (in dollar per share) | $ 2.78 | $ 0.23 |
Forfeited (in dollar per share) | 2.82 | |
Exercised (in dollar per share) | 2.30 | |
Exchanged for Subordinate Shares (in dollar per share) | 0.26 | |
Converted to RSUs (in dollar per share) | 0.26 | |
Effect on Conversion related to the Business Combination (in dollar per share) | 0.28 | |
Balance as of end of period (in dollar per share) | $ 2.84 | $ 2.78 |
Prior To Business Combination | ||
Number of Stock Options | ||
Granted | 12,182,545 | |
Forfeited | (296,350) | |
Exercised | (4,921,707) | |
Weighted Average Exercise Price | ||
Granted (in dollar per share) | $ 0.30 | |
Forfeited (in dollar per share) | 0.24 | |
Exercised (in dollar per share) | $ 0.26 | |
After Business Combination | ||
Number of Stock Options | ||
Granted | 108,695 | |
Forfeited | (72,938) | |
Weighted Average Exercise Price | ||
Granted (in dollar per share) | $ 4.60 | |
Forfeited (in dollar per share) | $ 2.36 |
SHARE-BASED COMPENSATION - Op_2
SHARE-BASED COMPENSATION - Options Expiration (Details) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
SHARE-BASED COMPENSATION | |||
Exercise Price | $ 2.84 | $ 2.78 | $ 0.23 |
Stock Options Outstanding | 1,452,887 | 2,087,784 | 48,403,624 |
Options vested | 1,400,593 | 1,400,593 | |
Stock Options Exercisable | 1,000,717 | 1,000,717 | |
October 2024 | |||
SHARE-BASED COMPENSATION | |||
Exercise Price | $ 2.26 | ||
Stock Options Outstanding | 629,641 | ||
April 2025 | |||
SHARE-BASED COMPENSATION | |||
Exercise Price | $ 3.08 | ||
Stock Options Outstanding | 115,917 | ||
January 2026 | |||
SHARE-BASED COMPENSATION | |||
Exercise Price | $ 3.08 | ||
Stock Options Outstanding | 598,634 | ||
October 2026 | |||
SHARE-BASED COMPENSATION | |||
Exercise Price | $ 4.60 | ||
Stock Options Outstanding | 108,695 |
SHARE-BASED COMPENSATION - Op_3
SHARE-BASED COMPENSATION - Options Valuation Assumption (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SHARE-BASED COMPENSATION | ||
Share-based compensation | $ 225,000 | |
Stock Options | ||
SHARE-BASED COMPENSATION | ||
Weighted-Average Risk-Free Annual Interest Rate | 0.29% | |
Weighted-Average Expected Annual Dividend Yield | 0% | |
Weighted-Average Expected Stock Price Volatility | 84.60% | |
Weighted-Average Expected Life in Years | 4 years | |
Weighted-Average Estimated Forfeiture Rate | 0% | |
Weighted-average fair value of stock options granted (in dollar per share) | $ 0.34 | |
Weighted-average remaining contractual life | 2 years 4 months 24 days | 3 years 4 months 24 days |
Share-based compensation | $ 1,934,561 | $ 4,442,223 |
SHARE-BASED COMPENSATION - RSUs
SHARE-BASED COMPENSATION - RSUs (Details) - USD ($) | 12 Months Ended | ||
Apr. 28, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
SHARE-BASED COMPENSATION | |||
Options converted to RSUs | 14,886,359 | ||
Vesting period | 1 year | ||
Number of Restricted Stock | |||
Share-based compensation | $ 225,000 | ||
Restricted Stock Units (RSUs) | |||
SHARE-BASED COMPENSATION | |||
Options converted to RSUs | 14,886,359 | ||
Number of Restricted Stock | |||
Balance as of the beginning of the period | 3,230,948 | ||
Granted | 1,968,837 | 2,591,584 | |
converted | (2,162,265) | (1,076,499) | |
Forfeited | (1,036,986) | (437,135) | |
Balance as of the end of the period | 2,000,534 | 3,230,948 | |
Share-based compensation | $ 10,821,120 | $ 4,042,690 | |
Restricted Stock Units (RSUs) | Management [Member] | |||
SHARE-BASED COMPENSATION | |||
Vesting period | 3 years | ||
Number of Restricted Stock | |||
converted | (2,591,584) |
SHARE-BASED COMPENSATION - Stoc
SHARE-BASED COMPENSATION - Stock Appreciation Rights (Details) - USD ($) | 12 Months Ended | ||
Apr. 28, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
SHARE-BASED COMPENSATION | |||
Vesting period | 1 year | ||
Share-based compensation | $ 225,000 | ||
Share-based Payment Arrangement, Tranche One | |||
SHARE-BASED COMPENSATION | |||
Vesting percentage | 33% | ||
Share-based Payment Arrangement, Tranche Two | |||
SHARE-BASED COMPENSATION | |||
Vesting percentage | 67% | ||
Stock Appreciation Rights (SARs) | |||
SHARE-BASED COMPENSATION | |||
Balance as of the beginning of the period | 159,736 | ||
Granted | 230,752 | ||
Forfeited | (59,875) | (71,016) | |
Balance as of the end of the period | 99,861 | 159,736 | |
Recorded liability | $ 0 | $ 35,442 | |
Gain on share based compensation | 35,000 | 35,000 | |
Share-based compensation | $ 35,000 | $ 35,000 | |
Stock Appreciation Rights (SARs) | Share-based Payment Arrangement, Tranche One | |||
SHARE-BASED COMPENSATION | |||
Vesting percentage | 33% | ||
Vesting period | 1 year | ||
Stock Appreciation Rights (SARs) | Share-based Payment Arrangement, Tranche Two | |||
SHARE-BASED COMPENSATION | |||
Vesting percentage | 67% | ||
Vesting period | 2 years |
SHARE-BASED COMPENSATION - Warr
SHARE-BASED COMPENSATION - Warrants Activity (Details) - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Weighted Average Exercise Price | ||
Balance as of end of period (in dollar per share) | $ 5 | |
Warrants | ||
Number of Restricted Stock | ||
Balance as of the beginning of the period | 35,418,078 | 1,968,300 |
Exercised | (1,968,300) | |
Assumed from the Business Combination | 28,489,500 | |
Granted | 11,114,937 | 6,928,578 |
Cancelled | (2,274,133) | |
Balance as of the end of the period | 44,258,882 | 35,418,078 |
Weighted Average Exercise Price | ||
Balance as of beginning of period (in dollar per share) | $ 11.29 | $ 0.16 |
Exercised (in dollar per share) | 0.16 | |
Assumed from the Business Combination (in dollar per share) | 11.50 | |
Granted (in dollar per share) | 5.10 | 10.43 |
Cancelled (in dollars per share) | (10) | |
Balance as of end of period (in dollar per share) | $ 9.80 | $ 11.29 |
SHARE-BASED COMPENSATION - Wa_2
SHARE-BASED COMPENSATION - Warrants By Expiration Date (Details) - $ / shares | Dec. 31, 2022 | Dec. 31, 2021 | Dec. 31, 2020 |
SHARE-BASED COMPENSATION | |||
Exercise Price (in dollar per share) | $ 5 | ||
Warrants | |||
SHARE-BASED COMPENSATION | |||
Exercise Price (in dollar per share) | $ 9.80 | $ 11.29 | $ 0.16 |
Warrants Outstanding | 44,258,882 | 35,418,078 | 1,968,300 |
Warrants Exercisable | 44,258,882 | ||
Warrants | June 2026 | |||
SHARE-BASED COMPENSATION | |||
Exercise Price (in dollar per share) | $ 11.50 | ||
Warrants Outstanding | 30,664,500 | ||
Warrants Exercisable | 30,664,500 | ||
Warrants | June 2024 | |||
SHARE-BASED COMPENSATION | |||
Exercise Price (in dollar per share) | $ 10 | ||
Warrants Outstanding | 2,654,445 | ||
Warrants Exercisable | 2,654,445 | ||
Warrants | August 2027 | |||
SHARE-BASED COMPENSATION | |||
Exercise Price (in dollar per share) | $ 5 | ||
Warrants Outstanding | 10,939,937 | ||
Warrants Exercisable | 10,939,937 |
SHARE-BASED COMPENSATION - Wa_3
SHARE-BASED COMPENSATION - Warrants Valuation (Details) - Warrants - $ / shares | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
SHARE-BASED COMPENSATION | ||
Weighted-Average Risk-Free Annual Interest Rate | 3.42% | |
Weighted-Average Expected Annual Dividend Yield | 0% | |
Weighted-Average Expected Stock Price Volatility | 103.74% | |
Weighted-Average Expected Life in Years | 5 years | |
Weighted-Average Estimated Forfeiture Rate | 0% | |
Weighted-average fair value of warrants granted (in dollar per share) | $ 1.83 | $ 1.64 |
Weighted-average remaining contractual life | 3 years 7 months 6 days | 4 years 2 months 12 days |
LOSS PER SHARE (Details)
LOSS PER SHARE (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
LOSS PER SHARE | ||
Net Loss Attributable to the Company | $ (35,534,892) | $ (44,167,812) |
Less Dividends and Increase in Redemption Values of GH Group Preferred Shares | (20,250,481) | (1,797,423) |
Net Loss Attributable to the Company | $ (55,785,373) | $ (45,965,235) |
Weighted average shares outstanding, basic | 64,182,436 | 40,280,639 |
Weighted average shares outstanding, diluted | 64,182,436 | 40,280,639 |
Loss per share - basic | $ (0.87) | $ (1.14) |
Loss per share - diluted | $ (0.87) | $ (1.14) |
PROVISION FOR INCOME TAXES AN_3
PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES - Components of Provision (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Current: | ||
Federal | $ 5,876,587 | $ 3,382,708 |
State | 1,485,814 | 5,161 |
Total Current | 7,362,401 | 3,387,869 |
Deferred: | ||
Federal | (1,890,711) | (322,017) |
State | (729,986) | 232,249 |
Total Deferred | (2,620,697) | (89,768) |
Reported Income Tax Expense | $ 4,741,704 | $ 3,298,101 |
PROVISION FOR INCOME TAXES AN_4
PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES - Deferred Taxes (Details) - USD ($) | Dec. 31, 2022 | Dec. 31, 2021 |
Deferred Tax Assets: | ||
Allowance for Doubtful Accounts | $ 998,674 | $ 984,437 |
Inventory Reserve | 58,840 | 219,474 |
Deferred Rent | 17,102 | 18,978 |
Accrued Expenses | 172,520 | 131,916 |
Operating Lease Liabilities | 1,969,561 | 606,718 |
Non-qualified Stock Options | 809,992 | 809,992 |
Stock-based Compensation | 3,465,882 | |
Loss on Disposal of Subsidiary | 1,600,209 | 1,720,979 |
Operating Losses | 38,098,948 | 19,488,540 |
Property and Euipment | 89,282 | |
Total Deferred Tax Assets | 47,281,010 | 23,981,034 |
Valuation Allowance | (44,082,411) | (22,495,563) |
Net Deferred Tax Assets | 3,198,599 | 1,485,471 |
Deferred Tax Liabilities: | ||
Contingent Consideration | (1,203,039) | |
Property, Plant & Equipment | (937,801) | |
Right-of-Use Assets | (1,908,717) | (598,774) |
State Taxes | (76,672) | |
Total Deferred Tax Liabilities | (1,908,717) | (2,816,286) |
Net Deferred Tax Assets (Liabilities) | $ 1,289,882 | $ (1,330,815) |
PROVISION FOR INCOME TAXES AN_5
PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES - Reconciliation of Effective Tax Rate to the Statutory Tax Rate (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Reconciliation between the effective tax rate on income and the statutory tax rate | ||
Income Tax Benefit at Federal Rate | $ (6,441,046) | $ (8,634,892) |
State Taxes and Fees | 1,737,004 | 1,435,197 |
IRS Section 280E Disallowance | 1,633,905 | 1,922,244 |
Uncertain Tax Position | 1,954,143 | 420,976 |
Change in Valuation Allowance | 21,654,795 | 15,810,756 |
Change in Fair Value of Contingent Consideration | (7,265,518) | |
State Tax Carryforwards | (6,705,205) | (3,928,330) |
Excess Accrual of Prior Year Taxes | (1,722,370) | (3,425,023) |
Other Permanent Differences | (104,004) | (302,827) |
Reported Income Tax Expense | $ 4,741,704 | $ 3,298,101 |
PROVISION FOR INCOME TAXES AN_6
PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES - Unrecognized Tax Benefits (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Reconciliation of the beginning and ending amount of total unrecognized tax benefits | ||
Beginning of year | $ 1,449,046 | $ 849,358 |
IRS Section 280E Positions Acquired | 888,130 | 178,712 |
IRS Section 280E Positions | 1,954,143 | 420,976 |
Balance at End of Year | 4,291,319 | 1,449,046 |
Amount of potential benefits that if recognized would impact the effective tax rate on income from operations | $ 4,291,319 | $ 1,449,046 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Royalty (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
COMMITMENTS AND CONTINGENCIES | ||
Accounts payable and accrued liabilities | $ 22,333,788 | $ 10,215,004 |
Royalty Agreements | ||
COMMITMENTS AND CONTINGENCIES | ||
Agreement period | 3 years | |
Period to renew agreement | 60 days | |
Agreement additional period | 2 years | |
Minimum guarantee fee | $ 1,000,000 | |
Minimum guarantee fee, initial payment | 50,000 | |
Minimum guarantee fee, 1st year | 200,000 | |
Minimum guarantee fee, 2nd year | 375,000 | |
Minimum guarantee fee, 3rd year | 375,000 | |
Minimum guarantee fee, renewal | 1,500,000 | |
Minimum guarantee fee, 4th year | 750,000 | |
Minimum guarantee fee, 5th year | 750,000 | |
Royalty expense | 331,944 | 388,436 |
Accounts payable and accrued liabilities | $ 508,333 | $ 328,125 |
Royalty Agreements | Bella Boxes | ||
COMMITMENTS AND CONTINGENCIES | ||
Royalty fee, 1st year (as a percent) | 10% | |
Royalty fee, years 2 to 5 (as a percent) | 12% | |
Royalty Agreements | Flower Products and Accessories | ||
COMMITMENTS AND CONTINGENCIES | ||
Royalty fee, 1st year (as a percent) | 6% | |
Royalty fee, 2nd year (as a percent) | 7% | |
Royalty fee, years 3 to 5 (as a percent) | 8% |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Element 7 Transaction (Details) | 12 Months Ended | ||
Feb. 23, 2021 USD ($) entity | Dec. 31, 2022 USD ($) | Dec. 31, 2021 USD ($) shares | |
COMMITMENTS AND CONTINGENCIES | |||
Issuance of Note Receivable | $ 9,887,672 | $ 954,092 | |
Number of days VWAP of Equity shares | 25 days | ||
Subordinate Voting Shares. | |||
COMMITMENTS AND CONTINGENCIES | |||
Cash Received in Advance of Shares Issued (in shares) | shares | 150,000 | ||
Element 7 | |||
COMMITMENTS AND CONTINGENCIES | |||
Number of membership received | entity | 17 | ||
Consideration payable | $ 2,274,167 | ||
Suit against Element | |||
COMMITMENTS AND CONTINGENCIES | |||
Claims and litigations | $ 0 | $ 0 | |
Joint litigation against Element 7 | |||
COMMITMENTS AND CONTINGENCIES | |||
Valuation amount per license | $ 750,000 | ||
Number of days VWAP of Equity shares | 10 days |
RELATED PARTY TRANSACTIONS - Le
RELATED PARTY TRANSACTIONS - Leases (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
RELATED PARTY TRANSACTIONS | ||
Rent expense | $ 1,479,305 | $ 730,881 |
Neo Street Partners LLC | Lease Agreements | ||
RELATED PARTY TRANSACTIONS | ||
Lease term | 5 years | |
Base rent, initial amount | $ 213,049 | |
Base rent, years two to five | 243,491 | |
Rent expense | $ 243,491 | 243,491 |
3645 Long Beach | Lease Agreements | ||
RELATED PARTY TRANSACTIONS | ||
Lease term | 5 years | |
Base rent, initial amount | $ 64,477 | |
Base rent, years two | $ 69,352 | |
Rent expense percentage | 5% | |
Rent expense | $ 73,412 | 69,352 |
Isla Vista GHG LLC, partially owned by management | ||
RELATED PARTY TRANSACTIONS | ||
Lease term | 10 years | |
Base rent, initial amount | $ 144,000 | |
Initial monthly rent | $ 5,000 | |
Increased percentage of rent | 3% | |
Rent expense | $ 59,417 | 0 |
Kazan Trust owned by management | ||
RELATED PARTY TRANSACTIONS | ||
Lease term | 10 years | |
Base rent, initial amount | $ 36,489 | |
Rent expense percentage | 3% | |
Rent expense | $ 12,163 | $ 0 |
RELATED PARTY TRANSACTIONS - Co
RELATED PARTY TRANSACTIONS - Consulting Agreement (Details) - Beach Front Property Management Inc - Consulting agreement - USD ($) | 12 Months Ended | ||
Sep. 28, 2020 | Dec. 31, 2022 | Dec. 31, 2021 | |
RELATED PARTY TRANSACTIONS | |||
Monthly consulting fee | $ 10,860 | ||
Termination period | 7 days | ||
Consulting fees | $ 130,320 | $ 130,320 |
REVENUES, NET (Details)
REVENUES, NET (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
REVENUES, NET | ||
Revenues, Net | $ 90,891,087 | $ 69,446,852 |
Retail | ||
REVENUES, NET | ||
Revenues, Net | 26,730,847 | 21,734,403 |
Wholesale | ||
REVENUES, NET | ||
Revenues, Net | $ 64,160,240 | $ 47,712,449 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) | Mar. 31, 2023 |
Subsequent event | |
Subsequent Event [Line Items] | |
Amount paid to amend credit agreement, as a percent | 2% |