Glass House Brands Inc. ("Glass House" or the "Company") (CBOE
CA: GLAS.A.U) (CBOE CA: GLAS.WT.U) (OTCQX: GLASF) (OTCQX: GHBWF),
one of the fastest-growing, vertically integrated cannabis
companies in the U.S., announced today that it will be voluntarily
dismissing without prejudice its defamation lawsuit against
Catalyst Cannabis Co., citing serious concerns about Catalyst’s
financial viability, which could render a judgment worthless, and
harassment threats by Catalyst to Glass House’s customers, and its
customers’ customers.
Glass House sued Catalyst (South Cord Holdings and South Cord
Management) and its two principals (Elliot Lewis and Damian Martin)
for making defamatory statements accusing Glass House of selling
into the unlicensed cannabis market, claims that Glass House has
vehemently denied. Catalyst has not provided any credible evidence
supporting its defamatory statements, despite promising to do so
nine months ago. Instead, Catalyst has said that industry-wide, up
to “93% of all legally cultivated cannabis ends up being diverted
to the illicit market,” and that licensed operators should be held
responsible for downstream diversions to the illicit market.
Essentially Catalyst wants to put the entire industry on trial,
something that Glass House does not want to be a part of. Glass
House only conducts business with licensed operators and has no
interest in subjecting its customers to similar harassment from
Catalyst.
While Glass House is confident it would prevail in its
defamation litigation, it said it has grave concerns about the
financial viability of Catalyst and its ability to pay a judgment.
As is widely reported, the cannabis retail market in California is
under serious distress. Catalyst recently announced layoffs and the
closure of one of its stores, citing the need for “some
repairs.”
Moreover, Catalyst CEO Eliot Lewis boasted on social media about
his company’s practice of systematically paying less excise taxes
than what the state would want, paying $2 million less in one
quarter alone (please see this link:
https://www.linkedin.com/posts/elliotlewisceo_wftp-activity-7158590677461725184-96Ym).
If this number is consistent throughout the year, it would mean
that Catalyst would be paying $8 million a year less in excise
taxes than most, if not all, other cannabis retailers in the State
with comparable sales.
Catalyst’s CEO also revealed that his company is being audited
by the State of California and is embroiled in separate litigation
challenging emergency regulations enacted by the CDTFA (the State
agency responsible for collecting excise tax), which he says are
directed at Catalyst and calls the “Catalyst regs.” Catalyst is
also involved in several other lawsuits including a case against
the Department of Cannabis Control (the State agency charged with
enforcing cannabis laws) and is in disputes with municipalities and
its employee’s union.
Addressing the customer harassment issue, Glass House said that
proceeding with the lawsuit would necessitate revealing details
about its customers, even though they are all licensed. Catalyst
made clear that its intent was to then serve similarly invasive
subpoenas on Glass House customers looking for diversion
downstream, even if Glass House’s customers, like Glass House, had
no knowledge of any such diversion.
Glass House said, while protecting the identity of its
customers, it produced to Catalyst voluminous documents including
manifests for all of its sales over the relevant time period. Glass
House’s documents prove it only sells legally to licensed brands,
manufacturers and distributors through California’s track-and-trace
system, METRC. Since all of Glass House’s customers are licensed,
Catalyst does not need to know their identities. Glass House said
it believes this substantiates that Catalyst knows Glass House does
not divert and instead that Catalyst is only interested in
harassing Glass House’s customers. The Company said while it has no
knowledge of any of its customers selling to the illicit market and
it has nothing to hide, it is not willing to subject its customers
and the industry to such abuse.
Kyle Kazan, Co-Founder, Chairman and CEO of Glass House, said,
“Despite the difficulty of the retail market in California, our
business continues to thrive. The first quarter of 2024 was another
very successful quarter for Glass House where we exceeded Q1
guidance across all operating metrics including cash, sales,
production and Adjusted EBITDA."
“Given the foregoing,” a spokesperson for Glass House added, “we
concluded that from a financial standpoint, there was a high
likelihood the judgment against Catalyst, Mr. Lewis and Mr. Martin
wouldn’t be worth the paper it was written on. We felt our time and
money was better spent serving our customers and growing our
business, so that we can continue to provide the best quality
cannabis at the lowest price.”
Glass House said Catalyst’s claims will be proven false through
the defeat of the separate litigation Catalyst filed against Glass
House for unfair competition.
ABOUT GLASS HOUSE
Glass House is one of the fastest-growing, vertically integrated
cannabis companies in the U.S., with a dedicated focus on the
California market and building leading, lasting brands to serve
consumers across all segments. From its greenhouse cultivation
operations to its manufacturing practices, from brand-building to
retailing, the Company's efforts are rooted in the respect for
people, the environment, and the community that co-founders Kyle
Kazan, Chairman and CEO, and Graham Farrar, Board Member and
President, instilled at the outset. Through its portfolio of
brands, which includes Glass House Farms, PLUS Products, Allswell
and Mama Sue Wellness, Glass House is committed to realizing its
vision of excellence: outstanding cannabis products, produced
sustainably, for the benefit of all. For more information and
Company updates, visit www.glasshousebrands.com and
https://glasshousebrands.com/press-releases/.
FORWARD LOOKING STATEMENTS
This news release contains certain forward-looking information
and forward-looking statements, as defined in applicable securities
laws (collectively referred to herein as "forward-looking
statements"). Forward-looking statements reflect current
expectations or beliefs regarding future events or the Company's
future performance or financial results. All statements other than
statements of historical fact are forward-looking statements.
Often, but not always, forward-looking statements can be identified
by the use of words such as "plans", "expects", "is expected",
"budget", "scheduled", "estimates", "continues", "forecasts",
"projects", "predicts", "intends", "anticipates", "targets" or
"believes", or variations of, or the negatives of, such words and
phrases or state that certain actions, events or results "may",
"could", "would", "should", "might" or "will" be taken, occur or be
achieved. Forward-looking statements in this news release include,
without limitation the Company’s statements that: Glass House will
be voluntarily dismissing without prejudice its defamation lawsuit
against Catalyst Cannabis Co., citing serious concerns about
Catalyst’s financial viability, which could render a judgment
worthless, and harassment threats by Catalyst to Glass House’s
customers, and its customers’ customers; Glass House is confident
it would prevail in its defamation litigation; Glass House has
grave concerns about the financial viability of Catalyst and its
ability to pay a judgment; Catalyst’s practice of systematically
paying less excise taxes than what the state would want, paying $2
million less in one quarter alone (please see this link:
https://www.linkedin.com/posts/elliotlewisceo_wftp-activity-7158590677461725184-96Ym),
if consistent throughout the year, would mean that Catalyst would
be paying $8 million a year less in excise taxes than most, if not
all, other cannabis retailers in the State with comparable sales;
Glass House proceeding with the lawsuit would necessitate revealing
details about its customers, even though they are all licensed;
despite the difficulty of the retail market in California, Glass
House’s business continues to thrive; Glass House concluded that
from a financial standpoint, there was a high likelihood the
judgment against Catalyst, Mr. Lewis and Mr. Martin wouldn’t be
worth the paper it was written on and that Glass House felt its
time and money was better spent serving its customers and growing
its business, so that the Company can continue to provide the best
quality cannabis at the lowest price; Catalyst’s claims will be
proven false through the defeat of the separate litigation Catalyst
filed against Glass House for unfair competition. All
forward-looking statements, including those herein are qualified by
this cautionary statement. Although the Company believes that the
expectations expressed in such statements are based on reasonable
assumptions, such statements are not guarantees of future
performance and actual results or developments may differ
materially from those in the statements. Accordingly, readers
should not place undue reliance on forward-looking statements.
There are certain factors that could cause actual results to differ
materially from those in the forward-looking information, including
those risks disclosed in the Company's Annual Information Form
available on SEDAR+ at www.sedarplus.ca and in the Company's Form
40-F available on EDGAR at www.sec.gov. For more information on the
Company, investors are encouraged to review the Company's public
filings on SEDAR+ at www.sedarplus.ca. The forward-looking
statements in this news release speak only as of the date of this
news release or as of the date or dates specified in such
statements. The Company disclaims any intention or obligation to
update or revise any forward-looking information, whether as a
result of new information, future events or otherwise, other than
as required by law.
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version on businesswire.com: https://www.businesswire.com/news/home/20240520481387/en/
Glass House Brands Inc. John Brebeck, Vice President of Investor
Relations T: (562) 264-5078 E: ir@glasshousebrands.com
Mark Vendetti, Chief Financial Officer T: (562) 264-5078 E:
ir@glasshousebrands.com
Investor Relations Contact: KCSA Strategic Communications
Phil Carlson T: (212) 896-1233 E: GlassHouse@kcsa.com
Media Contact Sitrick And Company Terry Fahn T: (310)
614-9995 E: Terry_Fahn@Sitrick.com
Mike Sitrick T: (310) 432-4150 E: Mike_Sitrick@Sitrick.com