Mr. Kyle Kazan reports

GLASS HOUSE BRANDS CLOSES GROVER BEACH AND LEMOORE NATURAL HEALING CENTER DISPENSARY ACQUISITIONS

All local regulatory approvals have been obtained for Glass House Brands Inc.'s acquisition of the Natural Healing Center (NHC) dispensaries located in Grover Beach and Lemoore, Calif., and that the transactions have officially closed. Consolidation of the financial results of the Grover Beach and Lemoore stores into Glass House Brands financials will begin effective immediately.

On May 12, 2022, Glass House announced that it had executed definitive agreements to acquire 100 per cent of the equity interests in three Natural Healing Center retail assets: two operating retail dispensaries (Lemoore and Morro Bay) and one retail dispensary (Turlock) scheduled to open in Q4 2022. This was followed by the announcement in the company's Q2 earnings release on Aug. 11, 2022, that Glass House had agreed to acquire Natural Healing Center's flagship Grover Beach operating dispensary for $15.9-million (U.S.), with $8.1-million (U.S.) of the purchase price in assumed debt, $7.7-million (U.S.) in stock and $100,000 (U.S.) in cash net of working capital. The Grover Beach store is the crown jewel of NHC's dispensary portfolio and netted $16-million (U.S.) in revenues in 2021. It is one of only four total dispensaries in Grover Beach and is the No. 1 taxpayer in the city, given its high sales volume and strong cash flow generation.

"It is with great pleasure and enthusiasm that I welcome the incredibly talented and hard-working staff at NHC Grover Beach and Lemoore into the Glass House Brands family," said Kyle Kazan. "The Grover Beach and Lemoore dispensaries are the first two NHC dispensaries to be officially onboarded, and we expect to close the acquisition of the Morro Bay store in Q3 or Q4 2022, while Turlock is expected to close in Q4 2022 upon the store's opening. As we stated when announcing the execution of definitive agreements for the NHC transaction, this acquisition will advance us further in our goal of becoming one of the largest retailers in the state of California, adds further support to our recently acquired Plus edibles business and provides incremental outlets for CPG sales as the SoCal farm continues to expand its output. Given NHC's positioning in limited licence markets and its strong consumer following, we are excited to be adding these four dispensaries to our retail portfolio. We are now poised to execute a dramatic transformation in the size of our retail dispensary business. Glass House has the potential to reach an annual revenue run rate in excess of $200-million (U.S.) within the next 12 months, versus the company's 2021 revenue of $69-million (U.S.). The NHC transaction is expected to be immediately accretive to Glass House on both a revenue and EBITDA basis, with all of NHC's open locations currently generating EBITDA margins in excess of 20 per cent."

Valnette Garcia, the current chief executive officer of NHC, commented: "I am excited to see the Grover Beach and Lemoore transactions finalized and look forward to sharing best practices between NHC, the Farmacy stores and The Pottery to drive operating efficiencies, amplify purchasing bargaining power and heighten profitability, while always providing our customers with a world-class experience and the highest-quality cannabis at an affordable price."

Additional NHC transaction details

At the close of each NHC dispensary acquisition, Glass House will be purchasing the businesses or assets of these dispensaries and will enter into a five-year arm's-length term lease at each location with three five-year renewal options for a total term of up to 20 years.

Closing of the remaining two NHC dispensary transactions, Morro Bay and Turlock, are contingent upon the transfer of ownership being approved by local regulators and are further subject to certain customary closing conditions for transactions of this nature, including the approval of the NEO Exchange.

Glass House expects to issue on closing a total of approximately 2.35 million new equity shares in conjunction with the closing of the Grover Beach acquisition, and approximately 1.29 million equity shares in conjunction with the closing of the Lemoore acquisition. These shares will all be issued at $4.41 per equity share, the 25-day volume-weighted average price for Glass House Brands equity shares trading on the NEO Exchange calculated as of May 12, 2022, the date upon which definitive agreements were signed. A portion of the equity shares payable to the NHC sellers will be subject to certain contractual lockups and escrow holdbacks and generally will be paid out over two years if all equity shares are released after the lockup and holdback periods expire. They are also subject to certain contractual early release triggers.

About Glass House Brands Inc.

Glass House Brands is one of the fastest-growing, vertically integrated cannabis companies in the United States, 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 Mr. 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, Forbidden Flowers and Mama Sue Wellness, Glass House Brands is committed to realizing its vision of excellence: outstanding cannabis products, produced sustainably, for the benefit of all.

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