Mr. Kyle Kazan reports

GLASS HOUSE BRANDS ANNOUNCES INTENT TO RESTATE CERTAIN HISTORICAL FINANCIAL STATEMENTS

Glass House Brands Inc. intends to restate and reissue its financial statements for the fiscal years ended Dec. 31, 2021, and 2022 and the interim period ended March 31, 2023, and any corresponding management's discussion and analyses.

Management has determined the company needs to restate the financial statements for certain revenue transactions processed through a distributor. These revenue transactions only impact the company's consumer products (CPG) and retail business units. The company also expects to restate the allocation of the purchase consideration for certain acquisitions that were made in 2022 and will assess the impairment of goodwill recognized during the quarter ended March 31, 2023, to determine if it should be recognized in 2022.

Kyle Kazan, Glass House co-founder, chairman and chief executive officer, said: "An issue was brought to our attention whereby we were questioned about how sales of our CPG brands into our stores were booked. During that time, we used Herbl as the distributor for our CPG sales to all third party dispensaries along with our owned retail stores. As we never held any ownership or decision-making authority at Herbl, which was the largest distributor in California, we accounted for the sales as third party transactions. Upon further consideration, we have decided to restate our CPG sales into our stores during that time period as intercompany transactions. We expect this restatement will have an immaterial impact on our gross profit, adjusted EBITDA and net cash used in operating activities."

The company's Q3 2023 and Q2 2023 results, which produced record quarterly revenue, gross profit, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and net cash provided by operating activities, will not be affected by the restatement. The effect of the restatements will also have no impact on the company's Q4 2023 results or continuing operations.

The company will restate the accounting for Glass House's relationship with its CPG distributor during the restatement period for transactions between the distributor and company-owned retail stores from a third party distribution relationship to intercompany transactions. This will result in a reduction of wholesale CPG revenue and a similar reduction in costs associated with these transactions. In addition, the company will reclassify the distribution fee paid to the distributor from cost of goods sold to a reduction in revenue. The effect of the restatement on consolidated gross profit is expected to be immaterial, and gross margin percentage will increase given the reduction to revenues and similar reduction to the cost of goods sold.

On March 28, 2023, Glass House ended the distribution arrangement with its CPG distributor and changed the relationship to a logistics-only agreement for delivery of Glass House products to retail dispensary customers, including company-owned stores. From that point on, all transactions between the company's CPG business and its owned retail stores have been accounted for as intercompany transactions, and delivery fees have been treated as a cost of goods sold.

The company also expects to restate the allocation of the purchase consideration for certain acquisitions that were made in 2022 and will assess the impairment of goodwill recognized during the quarter ended March 31, 2023, to determine if it should be recognized in 2022. This is primarily a timing adjustment that will affect net income in each period restated but will have no impact on the company's net cash provided by operating activities.

It is expected that the restated documents and the 2023 audited annual financial statements will be filed before the end of March. The adjustments set forth above remain preliminary and could change as a result of additional work performed in connection with the preparation of such restated documents. In addition, there may be other items in the restated documents that may be impacted by the restatement. All adjustments are subject to change until the restated documents are approved by the company's audit committee and board of directors and filed on SEDAR+.

About Glass House Brands Inc.

Glass House 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 is committed to realizing its vision of excellence: outstanding cannabis products, produced sustainably, for the benefit of all.

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