Glass House Brands Inc 6-K, filed Aug 14, 2026
Glass House Brands Inc. (GLAS)
6-K
2026-08-14
For: 2026-06-30
View Original
Added on
August 15, 2026
About this 6-K
Glass House Brands Inc filed this 6-K on August 14, 2026.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of August, 2026.
Commission File Number 000-56261
Glass House Brands Inc.
(Translation of registrant’s name into English)
3645 Long Beach Blvd.
Long Beach, California 90807
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
¨ Form 20-F x Form 40-F
INCORPORATION BY REFERENCE
Exhibits 99.1 and 99.2 of this Report on Form 6-K is incorporated by reference into the Registration Statements on Form F-10 (File No. 333-297455) and Form S-8 (File No. 333-288297) of the Registrant, each as amended or supplemented.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Glass House Brands Inc. | |||||
Date: August 14, 2026 | /s/ Kyle Kazan | ||||
| By: Kyle Kazan | |||||
| Title: Chief Executive Officer | |||||
2
EXHIBIT INDEX
| Exhibit Number | Description | |||||||
Exhibit 99.1
GLASS HOUSE BRANDS INC.
UNAUDITED CONDENSED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
AS OF
JUNE 30, 2026 AND DECEMBER 31, 2025
AND FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2026 AND 2025
JUNE 30, 2026 AND 2025
GLASS HOUSE BRANDS INC.
Table of Contents
| Page(s) | |||||
GLASS HOUSE BRANDS INC.
Unaudited Condensed Consolidated Balance Sheets
(Amounts Expressed in United States Dollars in Thousands, Except Par Value and Share Data, Unless Otherwise Stated)
| June 30, 2026 | December 31, 2025 | |||||||||||||
| ASSETS | ||||||||||||||
| Current Assets: | ||||||||||||||
| Cash | $ | 18,554 | $ | 12,454 | ||||||||||
| Accounts Receivable, Net | 10,068 | 4,402 | ||||||||||||
| Income Taxes Receivable | 761 | 789 | ||||||||||||
| Prepaid Expenses and Other Current Assets | 7,811 | 14,945 | ||||||||||||
| Inventory | 34,022 | 24,299 | ||||||||||||
Notes Receivable | — | 800 | ||||||||||||
| Assets Associated with Discontinued Operations | — | 10,060 | ||||||||||||
| Total Current Assets | 71,216 | 67,749 | ||||||||||||
| Operating Lease Right-of-Use Assets, Net | 934 | 538 | ||||||||||||
| Finance Lease Right-of-Use Assets, Net | 634 | 1,144 | ||||||||||||
| Equity Method Investment | 14,490 | — | ||||||||||||
| Property, Plant and Equipment, Net | 221,091 | 215,326 | ||||||||||||
| Intangible Assets, Net | 919 | 781 | ||||||||||||
| Restricted Cash, Net of Current Portion | 3,500 | 3,500 | ||||||||||||
| Other Assets | 596 | 1,023 | ||||||||||||
| Non-Current Assets Associated with Discontinued Operations | — | 28,496 | ||||||||||||
| TOTAL ASSETS | $ | 313,380 | $ | 318,557 | ||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||
| Current Liabilities: | ||||||||||||||
| Accounts Payable and Accrued Liabilities | $ | 38,051 | $ | 28,254 | ||||||||||
| Current Portion of Operating Lease Liabilities | 325 | 157 | ||||||||||||
| Current Portion of Finance Lease Liabilities | 258 | 423 | ||||||||||||
| Current Portion of Notes Payable | 14,733 | 37 | ||||||||||||
| Liabilities Associated with Discontinued Operations | — | 9,088 | ||||||||||||
| Total Current Liabilities | 53,367 | 37,959 | ||||||||||||
| Operating Lease Liabilities, Net of Current Portion | 623 | 398 | ||||||||||||
| Finance Lease Liabilities, Net of Current Portion | 322 | 457 | ||||||||||||
| Other Non-Current Liabilities | 38,528 | 31,038 | ||||||||||||
| Notes Payable, Net of Current Portion | 55,408 | 68,629 | ||||||||||||
| Non-Current Liabilities Associated with Discontinued Operations | — | 5,474 | ||||||||||||
| TOTAL LIABILITIES | 148,248 | 143,955 | ||||||||||||
| MEZZANINE EQUITY: | ||||||||||||||
GH Group, Inc. Preferred Series D Shares ($0.00001 par value, 15,000 shares authorized, 15,000 shares issued and outstanding as of June 30, 2026 and December 31, 2025) | 15,000 | 15,000 | ||||||||||||
GH Group, Inc. Series E Convertible Preferred Shares ($0.00001 par value, 80,000 shares authorized, 77,500 shares issued and outstanding as of June 30, 2026 and December 31, 2025) | 77,500 | 77,500 | ||||||||||||
| SHAREHOLDERS’ EQUITY: | ||||||||||||||
Multiple Voting Shares (no par value, unlimited shares authorized, 4,754,979 shares issued and outstanding as of June 30, 2026 and December 31, 2025) | — | — | ||||||||||||
Subordinate Voting Shares (no par value, unlimited shares authorized, 82,800,487 and 75,282,908 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively) | — | — | ||||||||||||
Exchangeable Shares (no par value, unlimited shares authorized, 6,244,521 and 6,445,878 shares issued and outstanding as of June 30, 2026 and December 31, 2025, respectively) | — | — | ||||||||||||
Additional Paid-In Capital | 316,652 | 294,011 | ||||||||||||
| Accumulated Deficit | (244,020) | (220,075) | ||||||||||||
| Total Shareholders’ Equity Attributable to the Company | 72,632 | 73,936 | ||||||||||||
| Non-Controlling Interest | — | 8,166 | ||||||||||||
| TOTAL MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY | 165,132 | 174,602 | ||||||||||||
| TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY | $ | 313,380 | $ | 318,557 | ||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
- 1 -
GLASS HOUSE BRANDS INC.
Unaudited Condensed Interim Consolidated Statements of Operations
(Amounts Expressed in United States Dollars in Thousands, Except Share and Per Share Data, Unless Otherwise Stated)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Revenues, Net | $ | 47,017 | $ | 47,605 | $ | 75,627 | $ | 80,635 | ||||||||||||||||||
| Cost of Goods Sold (Exclusive of Depreciation and Amortization Shown Separately Below) | 31,249 | 21,535 | 55,808 | 40,153 | ||||||||||||||||||||||
| Gross Profit | 15,768 | 26,070 | 19,819 | 40,482 | ||||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||
| General and Administrative | 13,388 | 10,150 | 25,553 | 20,648 | ||||||||||||||||||||||
| Sales and Marketing | 357 | 321 | 453 | 555 | ||||||||||||||||||||||
| Professional Fees | 1,581 | 1,965 | 4,446 | 3,628 | ||||||||||||||||||||||
| Depreciation and Amortization | 3,438 | 3,353 | 6,918 | 6,633 | ||||||||||||||||||||||
| Total Operating Expenses | 18,764 | 15,789 | 37,370 | 31,464 | ||||||||||||||||||||||
| Income (Loss) from Operations | (2,996) | 10,281 | (17,551) | 9,018 | ||||||||||||||||||||||
| Other (Income) Expense: | ||||||||||||||||||||||||||
| Interest Expense | 628 | 1,882 | 1,898 | 4,121 | ||||||||||||||||||||||
| Interest Income | — | — | — | (288) | ||||||||||||||||||||||
| Equity in Income of Equity Method Investees | (665) | (44) | (665) | (84) | ||||||||||||||||||||||
| (Gain) Loss on Change in Fair Value of Derivative Asset and Liability | (595) | 328 | (1,004) | 2,061 | ||||||||||||||||||||||
| Loss on Change in Fair Value of Contingent Liabilities and Shares Payable | — | 95 | — | — | ||||||||||||||||||||||
| Loss on Extinguishment of Debt | — | — | — | 292 | ||||||||||||||||||||||
| Other Income, Net | (855) | (3,941) | (2,067) | (3,768) | ||||||||||||||||||||||
| Total Other (Income) Expense, Net | (1,487) | (1,680) | (1,838) | 2,334 | ||||||||||||||||||||||
| Income (Loss) from Operations Before Provision for Income Taxes | (1,509) | 11,961 | (15,713) | 6,684 | ||||||||||||||||||||||
| Provision for Income Taxes | 3,062 | 4,159 | 6,042 | 6,310 | ||||||||||||||||||||||
| Net Income (Loss) from Continuing Operations | (4,571) | 7,802 | (21,755) | 374 | ||||||||||||||||||||||
| Net Income (Loss) from Discontinued Operations | (2,112) | 942 | (1,934) | (1,638) | ||||||||||||||||||||||
| Net Income (Loss) | (6,683) | 8,744 | (23,689) | (1,264) | ||||||||||||||||||||||
| Net Income to Non-Controlling Interest | 130 | 75 | 256 | 127 | ||||||||||||||||||||||
| Net Income (Loss) Attributable to the Company | $ | (6,813) | $ | 8,669 | $ | (23,945) | $ | (1,391) | ||||||||||||||||||
| Income (Loss) Per Share From Continuing Operations - Basic | $ | (0.08) | $ | 0.04 | $ | (0.31) | $ | (0.11) | ||||||||||||||||||
| Income (Loss) Per Share From Discontinued Operations - Basic | $ | (0.03) | $ | 0.01 | $ | (0.02) | $ | (0.02) | ||||||||||||||||||
| Income (Loss) Per Share Attributable to the Company - Basic | $ | (0.11) | $ | 0.05 | $ | (0.34) | $ | (0.13) | ||||||||||||||||||
| Income (Loss) Per Share From Continuing Operations - Diluted | $ | (0.08) | $ | 0.04 | $ | (0.31) | $ | (0.11) | ||||||||||||||||||
| Income (Loss) Per Share From Discontinued Operations - Diluted | $ | (0.03) | $ | 0.01 | $ | (0.02) | $ | (0.02) | ||||||||||||||||||
| Income (Loss) Per Share Attributable to the Company - Diluted | $ | (0.11) | $ | 0.05 | $ | (0.34) | $ | (0.13) | ||||||||||||||||||
| Weighted-Average Shares Outstanding - Basic | 88,760,511 | 81,098,806 | 87,945,999 | 80,769,090 | ||||||||||||||||||||||
| Weighted-Average Shares Outstanding - Diluted | 88,760,511 | 82,821,413 | 87,945,999 | 80,769,090 | ||||||||||||||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
- 2 -
GLASS HOUSE BRANDS INC.
Unaudited Condensed Interim Consolidated Statements of Changes in Mezzanine Equity and Shareholders’ Equity
(Amounts Expressed in United States Dollars in Thousands, Except Share Data, Unless Otherwise Stated)
| Units | $ Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Multiple Voting Shares | Equity Shares | Exchange- able Voting Shares | Additional Paid-In Capital | Accumulated Deficit | TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS | Mezzanine Equity Preferred Series D | Mezzanine Equity Preferred Series E | Non-Controlling Interest | TOTAL MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AS OF DECEMBER 31, 2025 | 4,754,979 | 75,282,908 | 6,445,878 | $ | 294,011 | $ | (220,075) | $ | 73,936 | $ | 15,000 | $ | 77,500 | $ | 8,166 | $ | 174,602 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | — | — | — | — | (17,132) | (17,132) | — | — | 126 | (17,006) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation from Options and Restricted Stock Units | — | — | — | 4,243 | — | 4,243 | — | — | — | 4,243 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Exercise of Warrants | — | 136,858 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Conversion of Exchangeable Shares | — | 79,146 | (79,146) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Vesting of Restricted Stock Units | — | 598,402 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Exercise of Options | — | 112,090 | — | 350 | — | 350 | — | — | — | 350 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for At-the-Market Program | — | 2,086,737 | — | 18,359 | — | 18,359 | — | — | — | 18,359 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to Non-Controlling Interest Holders | — | — | — | — | — | — | — | — | (212) | (212) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends - Preferred Shareholders | — | — | — | (2,888) | — | (2,888) | — | — | — | (2,888) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AS OF MARCH 31, 2026 | 4,754,979 | 78,296,141 | 6,366,732 | 314,075 | (237,207) | 76,868 | 15,000 | 77,500 | 8,080 | 177,448 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | — | — | — | — | (6,813) | (6,813) | — | — | 130 | (6,683) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation from Options and Restricted Stock Units | — | — | — | 4,094 | — | 4,094 | — | — | — | 4,094 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Exercise of Warrants | — | 2,982,376 | — | 428 | — | 428 | — | — | — | 428 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Conversion of Exchangeable Shares | — | 122,211 | (122,211) | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Vesting of Restricted Stock Units | — | 937,095 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Exercise of Options | — | 17,553 | — | 53 | — | 53 | — | — | — | 53 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for At-the-Market Program | — | 385,000 | — | 4,925 | — | 4,925 | — | — | — | 4,925 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Payment of Interest on Convertible Debentures | — | 50,458 | — | 573 | — | 573 | — | — | — | 573 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Conversion of Convertible Debentures | — | 9,653 | — | 88 | — | 88 | — | — | — | 88 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distributions to Non-Controlling Interest Holders | — | — | — | — | — | — | — | — | (129) | (129) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| GHR Deconsolidation Tax Separation | — | — | — | (4,700) | — | (4,700) | — | — | — | (4,700) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Removal of Non-Controlling Interest Upon Deconsolidation of GHR | — | — | — | — | — | — | — | — | (8,081) | (8,081) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends - Preferred Shareholders | — | — | — | (2,884) | — | (2,884) | — | — | — | (2,884) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AS OF JUNE 30, 2026 | 4,754,979 | 82,800,487 | 6,244,521 | $ | 316,652 | $ | (244,020) | $ | 72,632 | $ | 15,000 | $ | 77,500 | $ | — | $ | 165,132 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
- 3 -
GLASS HOUSE BRANDS INC.
Unaudited Condensed Interim Consolidated Statements of Changes in Mezzanine Equity and Shareholders’ Equity
(Amounts Expressed in United States Dollars in Thousands, Except Share Data, Unless Otherwise Stated)
| Units | $ Amount | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Multiple Voting Shares | Equity Shares | Exchange- able Voting Shares | Additional Paid-In Capital | Accumulated Deficit | TOTAL EQUITY ATTRIBUTABLE TO SHAREHOLDERS | Mezzanine Equity Preferred Series B | Mezzanine Equity Preferred Series C | Mezzanine Equity Preferred Series D | Non-Controlling Interest | TOTAL MEZZANINE EQUITY AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AS OF DECEMBER 31, 2024 | 4,754,979 | 69,888,086 | 7,017,866 | $ | 306,652 | $ | (190,416) | $ | 116,236 | $ | 65,084 | $ | 6,279 | $ | 15,000 | $ | (38,544) | $ | 164,055 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income (Loss) | — | — | — | — | (10,060) | (10,060) | — | — | — | 52 | (10,008) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation from Options and Restricted Stock Units | — | — | — | 2,105 | — | 2,105 | — | — | — | — | 2,105 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Contingent Shares Payable in Connection with Camarillo Acquisition | — | — | — | 20,265 | — | 20,265 | — | — | — | — | 20,265 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Conversion of Exchangeable Shares | — | 128,842 | (128,842) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Vesting of Restricted Stock Units | — | 466,181 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Exercise of Options | — | 26,604 | — | 82 | — | 82 | — | — | — | — | 82 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Payment of Interest on Convertible Debentures | — | 8,495 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends - Preferred Shareholders | — | — | — | — | — | — | 2,411 | 228 | — | (4,577) | (1,938) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AS OF MARCH 31, 2025 | 4,754,979 | 70,518,208 | 6,889,024 | 329,104 | (200,476) | 128,628 | 67,495 | 6,507 | 15,000 | (43,069) | 174,561 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net Income | — | — | — | — | 8,669 | 8,669 | — | — | — | 75 | 8,744 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Compensation from Options and Restricted Stock Units | — | — | — | 2,944 | — | 2,944 | — | — | — | — | 2,944 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued and Shares Payable - NHC Business Acquisitions | — | 116,427 | — | 2,579 | — | 2,579 | — | — | — | — | 2,579 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued in Connection with Camarillo Acquisition | — | 500,000 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Conversion of Exchangeable Shares | — | 1,677 | (1,677) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Vesting of Restricted Stock Units | — | 623,189 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Exercise of Options | — | 95,483 | — | 276 | — | 276 | — | — | — | — | 276 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for 2024 Bonus | — | 208,772 | — | 1,114 | — | 1,114 | — | — | — | — | 1,114 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares Issued for Payment of Interest on Convertible Debentures | — | 129,409 | — | 646 | — | 646 | — | — | — | — | 646 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Variable Interest Entity Consolidation | — | — | — | 665 | — | 665 | — | — | — | 2,724 | 3,389 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dividends - Preferred Shareholders | — | — | — | — | — | — | 2,547 | 241 | — | (4,725) | (1,937) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE AS OF JUNE 30, 2025 | 4,754,979 | 72,193,165 | 6,887,347 | $ | 337,328 | $ | (191,807) | $ | 145,521 | $ | 70,042 | $ | 6,748 | $ | 15,000 | $ | (44,995) | $ | 192,316 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
- 4 -
GLASS HOUSE BRANDS INC.
Unaudited Condensed Interim Consolidated Statements of Cash Flows
(Amounts Expressed in United States Dollars in Thousands Unless Otherwise Stated)
| Six Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||
| Net Loss | $ | (23,689) | $ | (1,264) | ||||||||||
| Adjustments to Reconcile Net Loss to Net Cash Provided by (Used in) Operating Activities: | ||||||||||||||
| Bad Debt Expense, Net of Recoveries | (65) | 51 | ||||||||||||
| Interest Capitalized | (892) | — | ||||||||||||
| Depreciation and Amortization | 7,817 | 7,742 | ||||||||||||
| Loss on Deconsolidation of GHR | 2,490 | — | ||||||||||||
| Equity in Income of Equity Method Investees | (665) | (84) | ||||||||||||
| Impairment Expense for Intangible Assets | 170 | 1,900 | ||||||||||||
| Non-Cash Operating Lease Costs | 514 | 848 | ||||||||||||
| Loss on Extinguishment of Debt | — | 292 | ||||||||||||
| Accretion of Debt Discount and Loan Origination Fees | 126 | 286 | ||||||||||||
| Gain on Foreign Currency Debt Remeasurement | (1,562) | — | ||||||||||||
| (Gain) Loss on Change in Fair Value of Derivative Asset and Liability | (1,004) | 2,061 | ||||||||||||
| Share-Based Compensation | 8,737 | 5,049 | ||||||||||||
| Changes in Operating Assets and Liabilities: | ||||||||||||||
| Accounts Receivable | (5,796) | (4,672) | ||||||||||||
| Income Taxes Receivable | 27 | 996 | ||||||||||||
| Prepaid Expenses and Other Current Assets | (2,217) | 843 | ||||||||||||
| Inventory | (9,475) | (5,417) | ||||||||||||
| Other Assets | (40) | 1,966 | ||||||||||||
| Accounts Payable and Accrued Liabilities | 8,399 | 3,703 | ||||||||||||
| Interest Payments on Finance Leases | (50) | (145) | ||||||||||||
| Income Taxes Payable | 1 | 1,317 | ||||||||||||
| Operating Lease Liabilities | (522) | (825) | ||||||||||||
| Other Non-Current Liabilities | 6,120 | 5,561 | ||||||||||||
| NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | (11,576) | 20,208 | ||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||
| Purchases of Property and Equipment | (5,659) | (16,153) | ||||||||||||
| Cash Disposed in Deconsolidation of GHR | (6,027) | — | ||||||||||||
| Proceeds from Note Receivable | 800 | — | ||||||||||||
| Cash Received from Consolidation of Variable Interest Entity | — | 190 | ||||||||||||
| NET CASH USED IN INVESTING ACTIVITIES | (10,886) | (15,963) | ||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||
| Proceeds from the Issuance of At-the-Market Shares | 27,227 | — | ||||||||||||
| Proceeds from the Issuance of Notes Payable | — | 49,140 | ||||||||||||
| Payments for Debt Modification Fees | (250) | — | ||||||||||||
| Payments on Finance Leases | (507) | (521) | ||||||||||||
| Payments on Notes Payable | (18) | (42,069) | ||||||||||||
| Cash Received for Exercise of Options and Warrants | 831 | 358 | ||||||||||||
| Distributions to Non-Controlling Interest Holders | (341) | — | ||||||||||||
| Distributions to Preferred Shareholders | (5,776) | (3,875) | ||||||||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | 21,166 | 3,033 | ||||||||||||
NET INCREASE (DECREASE) IN CASH, RESTRICTED CASH AND CASH EQUIVALENTS | (1,296) | 7,278 | ||||||||||||
| Cash, Restricted Cash and Cash Equivalents, Beginning of Period | 23,350 | 36,923 | ||||||||||||
| CASH, RESTRICTED CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 22,054 | $ | 44,201 | ||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
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GLASS HOUSE BRANDS INC.
Unaudited Condensed Interim Consolidated Statements of Cash Flows
(Amounts Expressed in United States Dollars in Thousands Unless Otherwise Stated)
| Six Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| SUPPLEMENTAL DISCLOSURE FOR CASH FLOW INFORMATION | ||||||||||||||
| Cash Paid for Interest | $ | 2,271 | $ | 2,079 | ||||||||||
| Cash Paid for Taxes | — | 22 | ||||||||||||
| Non-Cash Investing and Financing Activities: | ||||||||||||||
| Acquisition of Equity Method Investment | 13,825 | — | ||||||||||||
| GHR Deconsolidation Tax Separation | 4,700 | — | ||||||||||||
| Notes Payable Issued for the Purchase of Property and Equipment | 3,959 | — | ||||||||||||
| Shares Issued for Payment of Interest on Convertible Debentures | 573 | 646 | ||||||||||||
| Payment of Debt Modification Fee | 250 | — | ||||||||||||
| Receipt of Intellectual Property License in Settlement of Note Receivable | 200 | — | ||||||||||||
| Contingent Shares Payable in Connection with Camarillo Acquisition | — | 20,265 | ||||||||||||
| Variable Interest Entity Consolidation | — | 12,231 | ||||||||||||
| Shares Issued to Settle Shares Payable - NHC Business Acquisitions | — | 2,579 | ||||||||||||
| Shares Issued for 2024 Bonus | — | 1,114 | ||||||||||||
| Recognition of Right-of-Use Assets for Finance Leases | — | 403 | ||||||||||||
The accompanying notes are an integral part of these Unaudited Condensed Interim Consolidated Financial Statements.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
1. NATURE OF OPERATIONS
Glass House Brands Inc. (“Glass House” or the “Company”), formerly known as Mercer Park Brand Acquisition Corp. (“Mercer Park”), was incorporated under the Business Corporations Act (British Columbia) on April 16, 2019. As of June 30, 2026, the Company generates cannabis revenue in the state of California and has a certain intellectual property licensing agreement in Florida. The Company, through its subsidiaries, cultivates, manufactures, and distributes cannabis bulk flower and trim to wholesalers and consumer packaged goods to third-party retail stores in the state of California. During the second quarter of 2026, the Company began cultivating hemp and completed its first hemp-related transaction. The Company continues to evaluate the manner and extent of its participation in the hemp market during the second half of 2026. The Company formerly owned and operated retail cannabis stores and provided dispensary operation management services in the state of California through June 11, 2026, see Deconsolidation Transaction below. The Company’s subordinate voting shares (“Subordinate Voting Shares”), restricted voting shares (“Restricted Voting Shares”) and limited voting shares (“Limited Voting Shares” and, collectively with the Subordinate Voting Shares and Restricted Voting Shares, the “Equity Shares”) are listed on Cboe Canada Inc. and trade under the symbol “GLAS.A.U.” Effective June 30, 2026, the Subordinate Voting Shares also commenced trading on the New York Stock Exchange (the “NYSE”) under the symbol “GLAS” (as further described under “Listing on the New York Stock Exchange” below). In connection with the NYSE listing, the Subordinate Voting Shares ceased trading on the OTCQX Market in the United States under the symbol “GLASF” at the close of market on June 29, 2026. The head office and principal address of the Company is 3645 Long Beach Boulevard, Long Beach, California 90807. The Company’s registered office in Canada is 666 Burrard Street, Suite 2500, Vancouver, BC V6C 2X8, Canada.
Deconsolidation Transaction
On June 12, 2026, the Company completed a series of transactions (collectively, the “Deconsolidation Transaction”) that resulted in the deconsolidation of Glass House Retail, LLC (“GHR”) and its subsidiaries, which together comprise the Company's dual-use retail dispensary business in the State of California (the “Retail Business”). The Deconsolidation Transaction separated the Company’s California cannabis retail dispensary operations from its cultivation, manufacturing and other operations and facilitated the listing of the Subordinate Voting Shares on the New York Stock Exchange.
Following the Deconsolidation Transaction, an independent third-party investor holds all of GHR’s outstanding voting Class A Units and has the right to appoint two of the three members of GHR’s board of managers. The Company, through its wholly owned subsidiary GHB Usub, LLC, retained 900 non-voting Exchangeable Units of GHR representing approximately 90% of GHR’s economic interest on an as-converted basis, if and when the Exchangeable Units become eligible for conversion and are converted. The Company no longer has a controlling financial interest in GHR and accounts for its retained interest under the equity method of accounting in accordance with Accounting Standards Codification (“ASC”) 323, Investments - Equity Method and Joint Ventures.
See Note 3 – Discontinued Operations, for additional information regarding the Deconsolidation Transaction, the Company’s continuing involvement with GHR and the accounting for the retained investment.
Listing on the New York Stock Exchange
On June 26, 2026, the Company filed a Registration Statement on Form 8-A with the U.S. Securities and Exchange Commission to register its Subordinate Voting Shares under Section 12(b) of the Securities Exchange Act of 1934, as amended. On the same date, the NYSE approved the listing of the Company’s Subordinate Voting Shares.
The Subordinate Voting Shares commenced trading on the NYSE under the symbol “GLAS” at the opening of trading on June 30, 2026. In connection with the NYSE listing, trading of the Subordinate Voting Shares on the OTCQX Market under the symbol “GLASF” ceased at the close of market on June 29, 2026. The Company’s Subordinate Voting Shares continue to trade on Cboe Canada under the symbol “GLAS.A.U.”
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Liquidity
Historically, the Company’s primary source of liquidity has been from its operations, capital contributions made by equity investors and preferred equity investors, and debt issuances. The Company is meeting its 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 six months ended June 30, 2026, the Company had an accumulated deficit of $244.0 million, a net loss attributable to the Company of $23.9 million and net cash used in operating activities of $11.6 million. The Company estimates that based on current business operations and working capital, it will continue to meet its obligations as they become due for at least the next 12 months.
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. The Company expects to continue to finance its operations, capital expenditures, facility improvements, product development and marketing primarily through cash from sales to customers and may consider future equity issuances and debt financing arrangements.
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.
The significant accounting policies and critical estimates applied by the Company in these unaudited condensed interim consolidated financial statements as of June 30, 2026 and December 31, 2025 and for the three and six months ended June 30, 2026 and 2025, and the accompanying notes (the “Unaudited Condensed Interim Consolidated Financial Statements”), are the same as those applied in the Company’s audited consolidated financial statements and accompanying notes for the years ended December 31, 2025 and 2024 (the “Consolidated Financial Statements”), unless disclosed otherwise below. The Consolidated Financial Statements filed on March 24, 2026, can be found on the Company’s SEDAR+ profile at www.sedarplus.ca and on EDGAR at www.sec.gov.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
The accompanying Unaudited Condensed Interim 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 June 30, 2026 and December 31, 2025, the consolidated results of operations for the three and six months ended June 30, 2026 and 2025 and cash flows for the six months ended June 30, 2026 and 2025 have been included.
The accompanying Unaudited Condensed Interim Consolidated Financial Statements do not include all of the information required for full annual financial statements. Accordingly, certain information, footnotes and disclosures normally included in the annual financial statements, prepared in accordance with GAAP, have been condensed or omitted. The financial data presented herein should be read in conjunction with the Company’s audited Consolidated Financial Statements for the year ended December 31, 2025, and the related notes thereto, and have been prepared using the same accounting policies described therein.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Discontinued Operations
The Company determined that the deconsolidation of Glass House Retail, LLC and its subsidiaries qualified for presentation as discontinued operations. Accordingly, the historical results of operations of the Retail Business through the deconsolidation date have been presented as discontinued operations in the Unaudited Condensed Interim Consolidated Financial Statements for all periods presented, and prior-period statement-of-operations amounts and related disclosures have been retrospectively recast, as applicable, to conform to the current-period presentation. The Company’s share of GHR’s post-deconsolidation income or loss is accounted for under the equity method and is included in continuing operations.
Unless otherwise noted, amounts and disclosures included in these notes that relate to the Company’s results of operations reflect continuing operations and exclude the results of the Retail Business. The Unaudited Condensed Interim Consolidated Statements of Cash Flows include the cash flows of the Retail Business through June 11, 2026 within the applicable operating, investing and financing classifications for all periods presented. See Note 3 – Discontinued Operations, for additional information regarding the Retail Business and its classification as discontinued operations.
Basis of Consolidation
These Unaudited Condensed Interim Consolidated Financial Statements as of June 30, 2026 and December 31, 2025 and for the three and six months ended June 30, 2026 and 2025 include the accounts of the Company, its wholly-owned subsidiaries and entities over which the Company has a controlling financial interest in accordance with ASC 810, Consolidation. The Company evaluates entities for consolidation under both the variable interest entity and voting interest entity models. Subsidiaries over which the Company has control are fully consolidated from the date control commences until the date control ceases. Under the voting interest entity model, control generally exists when the Company owns, directly or indirectly, more than fifty percent of the outstanding voting interests of an entity. In assessing control, currently exercisable potential voting rights are considered.
Equity Method Investments
The Company accounts for investments over which it has significant influence, but not control, under the equity method of accounting in accordance with ASC 323, Investments—Equity Method and Joint Ventures. The Company recognizes its share of an investee’s income or loss based on the substantive economic rights and contractual allocation provisions of the investee’s governing agreements. The carrying amount of an equity-method investment is adjusted for the Company’s share of investee income or loss, distributions received, basis-difference amortization or accretion and impairment, as applicable.
Consolidation of Variable Interest Entities
ASC 810 requires a reporting entity to consolidate a variable interest entity (“VIE”) if the reporting entity is the primary beneficiary of the VIE. A reporting entity is the primary beneficiary if it has both (i) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE.
In determining whether the Company is the primary beneficiary of a VIE, the Company considers the purpose and design of the VIE, the nature and significance of its variable interests, and both qualitative and quantitative factors regarding the nature, size and form of the Company’s involvement with the VIE. The Company does not consolidate a VIE for which it is not the primary beneficiary. Investments in unconsolidated VIEs over which the Company has significant influence are accounted for under the equity method when the requirements of ASC 323 are met. The Company reassesses whether an entity is a VIE and whether the Company is the primary beneficiary when facts and circumstances change.
Non-Controlling Interests
Non-controlling interests represent 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.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
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 June 30, 2026 and December 31, 2025, restricted cash was $3.5 million in each period which is held in escrow accounts and used as an interest reserve primarily for the Senior Secured Credit Facility (as defined below). See Note 12 – Notes Payable and Convertible Debentures for further discussion.
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 Unaudited Condensed Consolidated Balance Sheets, net of an allowance for credit losses. The Company analyzes the aging of accounts receivable, historical credit losses, customer creditworthiness and current economic trends in determining the allowance for credit losses. The Company does not accrue interest receivable on past due accounts receivable.
Accounts receivable, net is as follows (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Accounts Receivable Amortized Cost | $ | 10,492 | $ | 4,816 | ||||||||||
| Allowance for Credit Losses | (424) | (414) | ||||||||||||
| Accounts Receivable, Net | $ | 10,068 | $ | 4,402 | ||||||||||
The following table summarizes the changes in the allowance for credit losses for accounts receivable (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Balance, Beginning of Period | $ | (355) | $ | (372) | $ | (414) | $ | (472) | ||||||||||||||||||
| Provision for Expected Credit Losses | (63) | (98) | (135) | (29) | ||||||||||||||||||||||
| Write-offs | (6) | 24 | 125 | 55 | ||||||||||||||||||||||
| Balance, End of Period | $ | (424) | $ | (446) | $ | (424) | $ | (446) | ||||||||||||||||||
Interest Rate Derivative
The Company utilizes an interest rate swap, expiring on February 28, 2030, to manage its exposure to variability in future cash flows from interest rate fluctuations on its Senior Secured Credit Facility (as defined below). This swap effectively converts the variable interest rate on the debt to a fixed rate and is classified as a derivative under ASC 815, Derivatives and Hedging. The Company has not designated this contract for hedge accounting.
The interest rate swap is recorded at fair value within other non-current liabilities on the Unaudited Condensed Consolidated Balance Sheet and changes in fair value are recognized in (gain) loss on change in fair value of derivative asset and liability on the Unaudited Condensed Interim Consolidated Statements of Operations. The Company’s policy is not to enter into derivative instruments for trading or speculative purposes. Cash flows resulting from this derivative instrument are included within net cash provided by (used in) operating activities on the Unaudited Condensed Interim Consolidated Statements of Cash Flows.
The Company’s interest rate swap is measured at fair value using Level 2 inputs. The fair value is determined using a discounted cash flow method that incorporates observable inputs. The fair value calculation includes a credit valuation adjustment and forward interest rate curves for the same periods as the future maturity dates of the interest rate swap.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Employee Retention Tax Credits
On March 27, 2020, the U.S. government enacted the Coronavirus Aid Relief and Security Act (“CARES Act”) to provide certain relief as a result of the COVID-19 pandemic. The CARES Act provides tax relief, along with other stimulus measures, including a provision for an Employee Retention Credit (“ERC”). As there is no authoritative guidance under GAAP on accounting for government assistance to for-profit business entities, the Company accounts for the ERC by analogy to International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance. Since the filing of the ERCs through June 30, 2026, the Company filed with the Internal Revenue Service credits totaling $9.0 million during the year ended December 31, 2023. During the six months ended June 30, 2026, $0.6 million was received, of which $0.1 million was accrued for interest. During the year ended December 31, 2025, $7.6 million was received, of which $1.1 million was accrued for interest. The Company will not recognize the remaining amount of $2.0 million claimed as of June 30, 2026 until it has been determined that the Company has reasonable assurance that the credits will be realized.
Earnings and 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 applicable period. Multiple Voting Shares, as defined herein, are excluded from the calculation of 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 potential issuance of shares related to stock-based award plans, warrants, contingent shares, convertible preferred shares and convertible debentures are anti-dilutive. Diluted earnings per share includes shares related to stock-based award plans, warrants 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 preferred shares and convertible debentures. See Note 16 – Income (Loss) Per Share for further information.
Segmented Information
The Company operates in two reportable segments which are wholesale biomass and cannabis-related consumer packaged goods (“CPG”). The wholesale biomass segment includes the propagation, nursery, flowering canopy, drying, processing and distribution of cannabis biomass. The CPG segment includes the manufacturing, extraction, infusion, conversion, packaging and distribution of the Company’s branded cannabis products. Certain economic characteristics such as production processes, types of products, classes of customers, as well as distribution models differ between segments. Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the Chief Operating Decision Maker (“CODM”), who is the Company’s chief executive officer, in deciding how to allocate resources and assess the Company’s financial and operational performance. As of June 30, 2026, 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. See Note 20 – Segment Information for further information.
Recently Adopted Accounting Pronouncements
ASU 2025-05
In July 2025, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. ASU 2025-05 amends ASC 326, Financial Instruments—Credit Losses, and introduces a practical expedient available for all entities and an accounting policy election available for all entities, other than public business entities, that elect the practical expedient. These changes apply to the estimation of expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under ASC 606, Revenue Recognition. Under the practical expedient, entities may assume that current conditions as of the balance sheet date remain unchanged for the remaining life of the asset when developing reasonable and supportable forecasts. This simplifies the estimation process for short-term financial assets. The Company adopted ASU 2025-05 on January 1, 2026. The adoption of the standard did not have a material impact on the Unaudited Condensed Interim Consolidated Financial Statements.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
ASU 2024-04
In November 2024, the FASB issued ASU 2024-04, Induced Conversions of Convertible Debt Instruments. ASU 2024-04 clarifies requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion. To account for a settlement of a convertible debt instrument as an induced conversion, an inducement offer is required to provide the debt holder with, at a minimum, the consideration (in form and amount) issuable under the conversion privileges provided in the terms of the instrument. The Company adopted ASU 2024-04 on January 1, 2026. The adoption of the standard did not have a material impact on the Unaudited Condensed Interim Consolidated Financial Statements.
Recent Accounting Pronouncements Not Yet Adopted
ASU 2026-02
In May 2026, the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818). ASU 2026-02 establishes recognition, measurement, presentation, and disclosure requirements for environmental credits and environmental credit obligations. The guidance applies to entities that purchase, receive, generate, or hold environmental credits, including credits used to satisfy regulatory compliance obligations. ASU 2026-02 is effective for the Company beginning in the first quarter of 2028, with early adoption permitted. The amendments should be applied on a retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings, or other appropriate equity components or net assets, as of the beginning of the annual reporting period of adoption. The Company is currently evaluating the impact that the adoption of this guidance will have on its Consolidated Financial Statements and related disclosures.
ASU 2026-01
In April 2026, the FASB issued ASU 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock. ASU 2026-01 requires paid-in-kind (“PIK”) dividends on equity-classified preferred stock, including preferred stock classified as temporary equity, to be initially measured based on the PIK dividend rate stated in the preferred stock agreement. ASU 2026-01 is effective for the Company beginning in the first quarter of 2027, with early adoption permitted, and may be applied either prospectively or on a modified retrospective basis. The Company is currently evaluating the impact that the adoption of this guidance will have on its Consolidated Financial Statements.
ASU 2025-12
In December 2025, the FASB issued ASU 2025-12, Codification Improvements. ASU 2025-12 includes amendments that clarify, correct, or make minor improvements to a variety of topics in the FASB Accounting Standards Codification. The amendments are intended to improve the clarity and consistency of the codification and are not expected to result in significant changes to existing accounting practice. ASU 2025-12 is effective for the Company beginning in the first quarter of 2027. Early adoption is permitted. ASU 2025-12 may be applied either prospectively or retrospectively, depending on the specific amendment. The Company does not expect the adoption of this standard to have a material impact on the Consolidated Financial Statements.
ASU 2025-11
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. ASU 2025-11 improves the guidance in ASC 270 by clarifying the applicability of interim reporting requirements, improving the organization and navigability of required interim disclosures, and adding a disclosure principle that requires entities to disclose events since the end of the most recent annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for the Company beginning in the first quarter of 2028. Early adoption is permitted. ASU 2025-11 may be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is currently assessing the impact this standard will have on the Consolidated Financial Statements.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
ASU 2025-10
In December 2025, the FASB issued ASU 2025-10, Government Grants (Topic 832): Accounting for Government Grants Received by Business Entities. ASU 2025-10 establishes authoritative recognition, measurement, presentation, and disclosure guidance in ASC 832 for government grants received by business entities, including guidance on the timing of recognition and the classification of grants related to assets and grants related to income. ASU 2025-10 is effective for the Company beginning in the first quarter of 2029. Early adoption is permitted. ASU 2025-10 may be applied using either a modified prospective approach, a modified retrospective approach, or a full retrospective approach. The Company is currently assessing the impact this standard will have on the Consolidated Financial Statements.
ASU 2025-09
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. ASU 2025-09 amends the guidance in ASC 815 to improve and clarify hedge accounting requirements, including changes related to hedge documentation, effectiveness assessments, and the application of hedge accounting to certain risk management activities. The amendments are intended to better align hedge accounting results with an entity’s risk management strategies. ASU 2025-09 is effective for the Company beginning in the first quarter of 2027. Early adoption is permitted. ASU 2025-09 is required to be applied on a prospective basis. The Company is currently assessing the impact this standard will have on the Consolidated Financial Statements.
ASU 2025-04
In May 2025, the FASB issued ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606). ASU 2025-04 revises the definition of the term performance condition for share-based consideration payable to a customer to incorporate conditions that are based on the volume or monetary amount of a customer’s purchases or potential purchases. ASU 2025-04 also eliminates the policy election to account for forfeitures as they occur for share-based consideration payable to a customer that contains a service-condition vesting feature. ASU 2025-04 also clarifies that ASC 606 variable consideration guidance does not apply to share-based payments to customers; instead, vesting probability should be assessed solely under ASC 718, Compensation—Stock Compensation. ASU 2025-04 is effective for the Company beginning in the first quarter of 2027. Early adoption is permitted. ASU 2025-04 may be applied on either a modified retrospective basis or on a retrospective basis. The Company is currently assessing the impact this standard will have on the Consolidated Financial Statements.
ASU 2025-03
In May 2025, the FASB issued ASU 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity. ASU 2025-03 clarifies the guidance to determine the accounting acquirer in a business combination that is effected primarily by exchanging equity interests, when the legal acquiree is a VIE that meets the definition of a business. ASU 2025-03 requires entities to consider the same factors in ASC 805, Business Combinations, required for determining which entity is the accounting acquirer in other acquisition transactions. ASU 2025-03 is effective for the Company beginning in the first quarter of 2027. Early adoption is permitted. ASU 2025-03 is required to be applied on a prospective basis to any acquisition transaction that occurs after the initial application date. The Company is currently assessing the impact this standard will have on the Consolidated Financial Statements.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
ASU 2024-03
In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure of specified information about certain costs and expenses including purchases of inventory, employee compensation, depreciation and intangible asset amortization for each income statement line item that contains those expenses in the notes to financial statements on an annual and interim basis. ASU 2024-03 also requires entities to include certain amounts that are required to be disclosed under existing U.S. GAAP to be included in the disaggregated income statement expense line item disclosures, disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively and disclose the amount of selling expenses and the entity’s definition of selling expenses. ASU 2024-03 is effective for the Company beginning with the 2027 annual report. Early adoption is permitted. ASU 2024-03 may be applied either prospectively to financial statements issued for reporting periods after the effective date or retrospectively to any or all prior periods presented in the financial statements. The Company is currently assessing the impact this standard will have on the Consolidated Financial Statements.
3. DISCONTINUED OPERATIONS
Deconsolidation of Retail Business
On June 12, 2026, the Company completed the Deconsolidation Transaction, which resulted in the deconsolidation of GHR and its subsidiaries.
The Deconsolidation Transaction was undertaken to segregate the Company’s dual-use cannabis Retail Business from its medical cannabis business and facilitate the Company’s application to list its subordinate voting shares on the NYSE.
Immediately prior to the Deconsolidation Transaction, the Company completed certain internal restructuring transactions pursuant to which entities and assets associated with the Retail Business were contributed to GHR. The Retail Business includes the Company’s California cannabis retail dispensary operations and the related assets, liabilities, cannabis licenses and other operating rights associated with those operations.
On June 12, 2026, NSJB Investments LLC (the “Investor”), an independent third party, acquired 100 Class A Units of GHR. The Class A Units represent all of GHR’s outstanding current voting interests and a 10% economic interest. The Investor has the right to appoint two of GHR’s three Board Managers. During the period before conversion of the Exchangeable Units described below (the “Interim Period”), distributions to the Class A Units are subject to a monthly distribution cap of $25 thousand.
The $2.5 million purchase price for the Class A Units was funded through an unsecured promissory note issued by the Investor to GHR. The note bears interest at 10% per annum, with interest capitalized and added to the outstanding principal balance annually, and matures on the earlier of five years after issuance and the exercise of the Call Right or Put Right described below.
The Company, through its indirect wholly owned subsidiary GHB Usub, LLC (“Holdings”), retained 900 Exchangeable Units of GHR representing approximately 90% of GHR’s economic interest on an as-converted basis, if and when the Exchangeable Units become eligible for conversion and are converted. Before conversion, the Exchangeable Units have no current voting rights, rights to distributions, or rights to participate in distributions of GHR’s assets upon liquidation. Holdings has the right to appoint one of GHR’s three Board Managers, subject to limitations on that manager’s participation in certain operational matters.
The “Triggering Event Date” means the date on which the NYSE, or another U.S. national securities exchange on which the Company’s shares are listed or proposed to be listed, first permits the listing of companies that consolidate the financial results of entities involved in the cultivation, distribution or possession of marijuana for non-medical adult-use purposes in the United States, as reasonably determined by the Company. Following the Triggering Event Date and receipt of the required regulatory approvals, Holdings may elect to convert all of its Exchangeable Units into Class B Units of GHR, which have voting and economic rights equivalent to the Class A Units. The conversion provisions include an adjustment intended to maintain the Investor’s interest at not less than 10% of GHR’s outstanding Units following conversion.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Following the Triggering Event Date, GHR — or, at GHR’s election, Holdings or its designee — has the right to purchase all of the Investor’s Class A Units at fair market value (the “Call Right”). The Investor also has the right to require GHR — or, at the Company’s election, Holdings or its designee — to purchase all of the Class A Units at fair market value (the “Put Right”). Fair market value is determined without a discount for minority interest or lack of marketability. Upon exercise of either right, the outstanding balance of the Investor’s promissory note, including accrued interest, is offset against the purchase price. The purchaser may settle the remaining purchase price through a five-year promissory note bearing interest at the same rate as the Investor’s promissory note.
The Company evaluated GHR under ASC 810, Consolidation, and concluded that GHR is a VIE. Although the Company holds variable interests in GHR through its Exchangeable Units and other contractual arrangements, the Company determined that it is not the primary beneficiary because it does not possess the power to direct the activities that most significantly affect GHR’s economic performance. The Investor, through its current voting rights and right to appoint two of GHR’s three Board Managers, directs the key operating and governance activities that most significantly affect GHR’s economic performance. Accordingly, the Company does not consolidate GHR.
The Company concluded that it retained significant influence over GHR through its right to appoint one of GHR’s three Board Managers, participation in strategic and operating policy matters, and other governance rights. Accordingly, the retained investment is accounted for under the equity method pursuant to ASC 323. The Company subsequently adjusts the equity method investment each reporting period for the Company’s contractual share of GHR’s post-deconsolidation income or loss, which is included as Equity in Income of Equity Method Investees in the Unaudited Condensed Interim Consolidated Statements of Operations. See Note 6 – Equity Method Investments for additional information.
Classification as Discontinued Operations
The Company concluded that the deconsolidation of the Retail Business represents a strategic shift that has a major effect on the Company’s operations and financial results. Prior to the Deconsolidation Transaction, the Retail Business constituted a separate reportable segment and its revenues, expenses, assets, liabilities and cash flows were consolidated within the Company’s consolidated financial statements.
As a result of the Deconsolidation Transaction, the Company transitioned from having a controlling financial interest and operational authority over the Retail Business to holding a noncontrolling investment in GHR. Accordingly, the historical operating results of the Retail Business through June 11, 2026, together with the loss recognized upon deconsolidation of GHR on June 12, 2026, have been classified as discontinued operations in the accompanying unaudited condensed consolidated statements of operations. Prior-period amounts have been retrospectively recast to conform to the current-period presentation. Beginning June 12, 2026, the Company’s share of GHR’s post-deconsolidation income or loss is recognized under the equity method and included in continuing operations.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Results of Discontinued Operations
The following table presents the operating results of discontinued operations for the three and six months ended June 30, 2026 and 2025 (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Revenues, Net | $ | 9,873 | $ | 12,262 | $ | 21,778 | $ | 24,050 | ||||||||||||||||||
| Cost of Goods Sold (Exclusive of Depreciation and Amortization Shown Separately Below) | 4,948 | 6,402 | 10,888 | 12,536 | ||||||||||||||||||||||
| Gross Profit | 4,925 | 5,860 | 10,890 | 11,514 | ||||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||
| General and Administrative | 3,739 | 4,465 | 8,523 | 9,051 | ||||||||||||||||||||||
| Sales and Marketing | 406 | 482 | 840 | 935 | ||||||||||||||||||||||
| Professional Fees | 7 | — | 7 | 5 | ||||||||||||||||||||||
| Depreciation and Amortization | 359 | 553 | 900 | 1,110 | ||||||||||||||||||||||
| Impairment Expense for Intangible Assets | 170 | — | 170 | 1,900 | ||||||||||||||||||||||
| Total Operating Expenses | 4,681 | 5,500 | 10,440 | 13,001 | ||||||||||||||||||||||
| Income (Loss) from Operations | 244 | 360 | 450 | (1,487) | ||||||||||||||||||||||
| Other (Income) Expense: | ||||||||||||||||||||||||||
| Interest Expense | 15 | 36 | 41 | 74 | ||||||||||||||||||||||
| Loss on Deconsolidation of GHR | 2,490 | — | 2,490 | — | ||||||||||||||||||||||
| Other Income, Net | (206) | (1,429) | (282) | (1,510) | ||||||||||||||||||||||
| Total Other (Income) Expense, Net | 2,299 | (1,393) | 2,249 | (1,436) | ||||||||||||||||||||||
| Net Income (Loss) from Discontinued Operations Before Provision for Income Taxes | (2,055) | 1,753 | (1,799) | (51) | ||||||||||||||||||||||
| Provision for Income Taxes | 57 | 811 | 135 | 1,587 | ||||||||||||||||||||||
| Net Income (Loss) from Discontinued Operations | $ | (2,112) | $ | 942 | $ | (1,934) | $ | (1,638) | ||||||||||||||||||
Net income (loss) from discontinued operations before income taxes attributable to the Company was a loss of $2.2 million and income of $1.7 million for the three months ended June 30, 2026 and 2025, respectively, and losses of $2.1 million and $0.2 million for the six months ended June 30, 2026 and 2025, respectively.
Deconsolidation Loss and Fair Value Measurement
Upon deconsolidation, the Company derecognized the assets, liabilities and non-controlling interests associated with GHR and measured its retained Exchangeable Units in GHR at fair value. The resulting gain (loss) on deconsolidation was determined as follows (in thousands):
| June 12, 2026 | ||||||||
| Fair Value of Retained Exchangeable Units in GHR—Nonrecurring Level 3 Measurement | $ | 13,825 | ||||||
| Carrying Amount of Non-Controlling Interests | 8,098 | |||||||
| Less: Carrying Amount of GHR Net Assets Derecognized | (24,413) | |||||||
| Loss on Deconsolidation of GHR | $ | (2,490) | ||||||
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
The Company recognized a loss on deconsolidation of $2.5 million during the three and six months ended June 30, 2026, which is included in loss on deconsolidation of GHR within income from discontinued operations in the accompanying unaudited condensed interim consolidated statements of operations. The loss was attributable to the remeasurement of the Company’s retained interest in GHR from its carrying amount of $16.3 million immediately before deconsolidation to its fair value of $13.8 million.
The fair value of the retained Exchangeable Units was measured on a nonrecurring basis and was classified within Level 3 of the fair value hierarchy. The valuation used the discounted cash flow method under the income approach as the primary valuation method, with the guideline public company method used as corroborative evidence. The discounted cash flow analysis resulted in a controlling, marketable equity value of GHR of approximately $23.1 million. That value was adjusted for the specific rights and restrictions of the Exchangeable Units, including their lack of current voting, distribution and liquidation rights, the probability and expected timing of the Triggering Event Date, and their lack of marketability.
Significant unobservable inputs used in the valuation included forecast annual revenue growth rates ranging from 2.5% to 3.9%, forecast Adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) margins ranging from 5.4% to 6.8%, a discount rate of 12.5%, a terminal growth rate of 4.0%, a 95% probability of the Triggering Event Date occurring, a probability-weighted expected term of 0.84 years, a 30% discount for lack of marketability and an equity volatility assumption of 95%.
The Deconsolidation Transaction was completed with an independent third-party Investor and was not a related-party transaction. Following the Deconsolidation Transaction, GHR is a related party of the Company as an equity-method investee.
Assets and Liabilities of Discontinued Operations
Because GHR was deconsolidated prior to June 30, 2026, the assets and liabilities of GHR are no longer included in the Company’s consolidated balance sheet as of June 30, 2026, other than the Company’s retained investment in GHR and amounts arising from continuing arrangements with GHR, as applicable.
The assets and liabilities of the Retail Business have been retrospectively reclassified in the comparative consolidated balance sheet as assets and liabilities of discontinued operations. There were no assets or liabilities of the Retail Business included in the Company’s consolidated balance sheet as of June 30, 2026 because GHR had been deconsolidated before that date.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Because GHR was deconsolidated prior to June 30, 2026, no assets or liabilities of the Retail Business were included in the Company’s Unaudited Condensed Consolidated Balance Sheet as of June 30, 2026. The following table presents the major classes of assets and liabilities of the Retail Business as of December 31, 2025 (in thousands):
| December 31, 2025 | ||||||||||||||
| ASSETS | ||||||||||||||
| Current Assets: | ||||||||||||||
| Cash | $ | 7,396 | ||||||||||||
| Accounts Receivable, Net | 14 | |||||||||||||
| Income Taxes Receivable | 3 | |||||||||||||
| Prepaid Expenses and Other Current Assets | 719 | |||||||||||||
| Inventory | 1,928 | |||||||||||||
| Total Current Assets | 10,060 | |||||||||||||
| Operating Lease Right-of-Use Assets, Net | 3,337 | |||||||||||||
| Finance Lease Right-of-Use Assets, Net | 892 | |||||||||||||
| Property, Plant and Equipment, Net | 13,434 | |||||||||||||
| Intangible Assets, Net | 10,797 | |||||||||||||
| Other Assets | 36 | |||||||||||||
| Total Assets of Discontinued Operations | $ | 38,556 | ||||||||||||
| LIABILITIES | ||||||||||||||
| Current Liabilities: | ||||||||||||||
| Accounts Payable and Accrued Liabilities | $ | 5,526 | ||||||||||||
| Income Taxes Payable | 2,190 | |||||||||||||
| Current Portion of Operating Lease Liabilities | 959 | |||||||||||||
| Current Portion of Finance Lease Liabilities | 413 | |||||||||||||
| Total Current Liabilities | 9,088 | |||||||||||||
| Operating Lease Liabilities, Net of Current Portion | 2,470 | |||||||||||||
| Finance Lease Liabilities, Net of Current Portion | 629 | |||||||||||||
| Deferred Tax Liabilities | 2,375 | |||||||||||||
| Total Liabilities of Discontinued Operations | $ | 14,562 | ||||||||||||
Cash Flows from Discontinued Operations
The Company elected to disclose the following depreciation, amortization, capital expenditures, and significant operating and investing noncash items associated with discontinued operations (in thousands):
| Six Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Depreciation and Amortization | $ | 900 | $ | 1,110 | ||||||||||
| Capital Expenditures | 92 | 113 | ||||||||||||
| Non-Cash Operating and Investing Activities: | ||||||||||||||
| Impairment Expense for Intangible Assets | 170 | 1,900 | ||||||||||||
| Non-Cash Operating Lease Costs | 4 | 149 | ||||||||||||
The cash flows associated with the Retail Business through June 11, 2026 are included within the applicable operating, investing and financing classifications in the accompanying Unaudited Condensed Interim Consolidated Statements of Cash Flows.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Continuing Involvement with GHR
Following the Deconsolidation Transaction, the Company’s significant continuing involvement with GHR consists of its retained equity-method investment, the consulting services agreement, continuing product sales, cost-reimbursement and other commercial arrangements, the protection arrangements applicable to the Exchangeable Units, and the Call Right and Put Right described above.
A subsidiary of the Company provides financial and accounting, human resources, regulatory and compliance, information technology, legal and administrative, purchasing and supply-chain, and general advisory services to GHR under a consulting services agreement. Fees under the agreement generally equal the service provider’s fully burdened costs plus 5%, subject to a monthly fee cap of $400 thousand. The agreement has no stated expiration date and is expected to continue until terminated by either party upon 90 days’ notice.
GHR’s loss before income taxes for the period from June 12, 2026 through June 30, 2026 was $0.8 million.
See Note 19 – Related Party Transactions, for information regarding related party transactions with GHR.
The protection arrangements remain in effect generally until the Exchangeable Units are converted into Class B Units or the Investor’s Class A Units are repurchased. The Company also entered into an indemnification agreement with the Investor. See Note 18 – Commitments and Contingencies, for additional information.
Retained Investment in GHR
Immediately before the Deconsolidation Transaction, the Company indirectly owned 100% of GHR. Following the Deconsolidation Transaction, the Company accounts for its retained interest in GHR under the equity method of accounting. The investment was initially recognized at its estimated fair value of $13.8 million on June 12, 2026. The initial measurement was a nonrecurring Level 3 fair-value measurement. Following initial recognition, the investment is carried under the equity method and is not remeasured at fair value on a recurring basis. See Note 6 – Equity Method Investments, for additional information regarding the basis for applying the equity method, the Company’s share of GHR’s post-deconsolidation income or loss, the carrying amount of the investment and equity-method basis differences.
As of June 30, 2026, the Company’s variable interests in GHR consist primarily of its retained Exchangeable Units and its obligations under the Indemnification Agreement. The carrying amount and balance sheet classification of the Company’s equity-method investment in GHR are disclosed in Note 6 – Equity Method Investments, and any liability recognized in connection with the Indemnification Agreement is disclosed in Note 18 – Commitments and Contingencies. The Company’s maximum exposure to loss associated with GHR includes the carrying amount of its equity-method investment and potential future payments under the Indemnification Agreement. Because the Indemnification Agreement does not contain a contractual cap and the amount of any potential future payments depends on uncertain future claims and circumstances, the Company’s total maximum exposure to loss cannot be reasonably quantified.
Reportable Segments
Prior to the Deconsolidation Transaction, the Retail Business represented one of the Company’s three reportable segments. Beginning June 12, 2026, the Retail Business is no longer a reportable segment of the Company because GHR is no longer consolidated. The historical results of operations of the Retail Business through the deconsolidation date have been presented as discontinued operations in the Unaudited Condensed Interim Consolidated Financial Statements for all periods presented.
See Note 20 – Segment Information for additional information.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
4. CONCENTRATIONS OF BUSINESS AND CREDIT RISK
The Company maintains certain 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 June 30, 2026 and December 31, 2025, 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 and projected future trends and other information. For the three months ended June 30, 2026 and 2025, there was one customer that comprised 21% and 28%, respectively, of the Company’s revenues. Revenue for this customer is included in the Company’s wholesale biomass segment. For the six months ended June 30, 2026 and 2025, the same customer comprised 23% and 28%, respectively, of the Company’s revenues. As of June 30, 2026 and December 31, 2025, this customer comprised 21% and 19%, respectively, of the Company’s gross accounts receivable balance.
5. INVENTORY
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Raw Materials | $ | 5,874 | $ | 6,957 | ||||||||||
| Work-in-Process | 19,138 | 13,859 | ||||||||||||
| Finished Goods | 9,010 | 3,483 | ||||||||||||
| Total Inventory | $ | 34,022 | $ | 24,299 | ||||||||||
6. EQUITY METHOD INVESTMENTS
The Company accounts for investments over which it has significant influence, but not control, under the equity method of accounting. Significant influence may arise through voting interests, representation on an investee’s governing body, contractual rights or other facts and circumstances.
Following the Deconsolidation Transaction, the Company concluded that GHR is a VIE. The Company determined that it is not the primary beneficiary of GHR because it does not possess the power to direct the activities that most significantly affect GHR’s economic performance. Accordingly, the Company does not consolidate GHR. See Note 3 – Discontinued Operations, for additional information regarding the Deconsolidation Transaction and the Company’s VIE analysis.
Although the Exchangeable Units do not currently have voting rights, the Company concluded that it has significant influence over GHR through Holdings’ right to appoint one of GHR’s three Board Managers, participation through its Board representation in strategic and operating policy decisions, and other governance and information rights. Accordingly, the Company accounts for its retained investment in GHR under the equity method pursuant to ASC 323, Investments—Equity Method and Joint Ventures.
The following table presents activity in the Company’s investment in GHR (in thousands):
| Balance at December 31, 2025 | $ | — | ||||||||||||||||||||||||
| Initial Recognition at Fair Value Upon Deconsolidation | 13,825 | |||||||||||||||||||||||||
| Equity in Income of Equity Method Investees | 665 | |||||||||||||||||||||||||
| Balance at June 30, 2026 | $ | 14,490 | ||||||||||||||||||||||||
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
During the three months ended June 30, 2026 and 2025, the Company recognized equity in income of equity-method investees of $665 thousand and $44 thousand, respectively. During the six months ended June 30, 2026 and 2025, the Company recognized equity in income of equity-method investees of $665 thousand and $84 thousand, respectively. The Company presents its share of investee income or loss in equity in income of equity method investees in the accompanying Unaudited Condensed Interim Consolidated Statements of Operations.
The retained investment in GHR was initially measured at fair value of $13.8 million on a nonrecurring basis as of June 12, 2026 and was classified within Level 3 of the fair value hierarchy at that measurement date. Following initial recognition, the GHR investment is accounted for under the equity method and is not remeasured at fair value on a recurring basis. See Note 3 – Discontinued Operations, for the valuation techniques and significant inputs used in the initial fair-value measurement.
Equity-method investments are subsequently adjusted for the Company’s share of investee income or loss, equity-method basis-difference amortization or accretion, distributions received and impairment, as applicable.
At June 12, 2026, the difference between the initial carrying amount of the GHR investment and the Company’s share of GHR’s underlying net assets was $0.9 million. The difference was assigned to intangible assets and equity-method goodwill.
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Land | $ | 69,097 | $ | 69,097 | ||||||||||
| Buildings | 172,643 | 160,518 | ||||||||||||
| Furniture and Fixtures | 1,045 | 1,037 | ||||||||||||
| Leasehold Improvements | 8,867 | 8,812 | ||||||||||||
| Equipment and Software | 11,337 | 9,582 | ||||||||||||
| Construction in Progress | 18,783 | 20,278 | ||||||||||||
| Total Property, Plant and Equipment | 281,772 | 269,324 | ||||||||||||
| Less Accumulated Depreciation and Amortization | (60,681) | (53,998) | ||||||||||||
| Property, Plant and Equipment, Net | $ | 221,091 | $ | 215,326 | ||||||||||
During the three months ended June 30, 2026 and 2025, the Company recorded depreciation expense of $3.3 million and $3.4 million, respectively. During the six months ended June 30, 2026 and 2025, the Company recorded depreciation expense of $6.8 million and $6.6 million, respectively. The amount of amortization recognized for finance leases during the three months ended June 30, 2026 and 2025 was $0.1 million in each period. The amount of amortization recognized for finance leases during the six months ended June 30, 2026 and 2025 was $0.2 million in each period. See Note 11 – Leases for further information.
During the three months ended June 30, 2026 and 2025, the Company capitalized interest to property and equipment of $0.5 million and nil, respectively. During the six months ended June 30, 2026 and 2025, the Company capitalized interest to property and equipment of $0.9 million and nil, respectively.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
8. INTANGIBLE ASSETS
Intangible assets consisted of the following (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Definite Lived Intangible Assets | ||||||||||||||
| Customer Relationships | $ | 587 | $ | 587 | ||||||||||
| Intellectual Property | 1,587 | 1,587 | ||||||||||||
| Total Definite Lived Intangible Assets | 2,174 | 2,174 | ||||||||||||
| Less Accumulated Amortization | (1,455) | (1,393) | ||||||||||||
| Definite Lived Intangible Assets, Net | 719 | 781 | ||||||||||||
| Indefinite Lived Intangible Assets | ||||||||||||||
| Intellectual Property | 200 | — | ||||||||||||
| Total Indefinite Lived Intangible Assets | 200 | — | ||||||||||||
| Total Intangible Assets, Net | $ | 919 | $ | 781 | ||||||||||
During the three months ended June 30, 2026 and 2025, the Company recorded amortization expense related to intangible assets of nil in each period. During the six months ended June 30, 2026 and 2025, the Company recorded amortization expense related to intangible assets of $0.1 million in each period.
The following is the future minimum amortization expense to be recognized as of June 30, 2026 for each of the following years (in thousands):
| 2026 (Remaining) | $ | 62 | ||||||
| 2027 | 123 | |||||||
| 2028 | 123 | |||||||
| 2029 | 123 | |||||||
| 2030 | 123 | |||||||
| Thereafter | 165 | |||||||
| Total Future Amortization Expense | $ | 719 | ||||||
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consisted of the following (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Accounts Payable | $ | 9,073 | $ | 10,633 | ||||||||||
| Accrued Liabilities | 23,638 | 15,053 | ||||||||||||
| Accrued Payroll and Related Liabilities | 3,412 | 1,644 | ||||||||||||
| Sales Tax and Cannabis Taxes | 1,928 | 924 | ||||||||||||
| Total Accounts Payable and Accrued Liabilities | $ | 38,051 | $ | 28,254 | ||||||||||
10. CONTINGENT SHARES PAYABLE AND EARNOUT LIABILITIES
Activity related to the contingent shares and earnout liabilities consisted of the following (in thousands):
| Balance at December 31, 2024 | $ | 20,265 | ||||||
| Reclassification of Contingent Shares Payable to Additional Paid-In Capital | (20,265) | |||||||
| Balance at June 30, 2025 | $ | — | ||||||
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
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 to purchase certain real property in conjunction with the Camarillo Transaction (the “Option Right”), the Company was obligated to pay a contingent earnout fee of up to $75 million, payable in Equity Shares, if certain conditions and financial metrics were met. During the quarter ended March 31, 2025, the measurement period concluded, and it was determined that the financial metrics were not met.
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 was obligated to issue up to 3,500,000 Equity Shares as a contingent payment, which are subject to certain conditions and events following closing. During the year ended December 31, 2025, the Company issued 500,000 shares related to the contingent payment. The Company is obligated to issue up to an additional 3,000,000 Equity Shares as a contingent payment, which are subject to certain conditions and events. As conditions related to the Equity Shares were expected to be satisfied, in accordance with U.S. GAAP, the Company reclassified the $20.3 million value of the shares from contingent shares payable and earnout liabilities to additional paid-in capital on the Unaudited Condensed Consolidated Balance Sheet during the three months ended March 31, 2025.
11. LEASES
The following table presents components of lease cost (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Finance Lease Cost: | ||||||||||||||||||||||||||
| Amortization of Finance Lease Right-of-Use Assets | $ | 46 | $ | 110 | $ | 155 | $ | 191 | ||||||||||||||||||
| Interest on Lease Liabilities | 23 | 41 | 50 | 78 | ||||||||||||||||||||||
| Operating Lease Cost | 109 | 67 | 183 | 392 | ||||||||||||||||||||||
| Short-Term Lease Costs | 335 | 325 | 629 | 571 | ||||||||||||||||||||||
| Total Lease Expenses | $ | 513 | $ | 543 | $ | 1,017 | $ | 1,232 | ||||||||||||||||||
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Additional information related to the Company’s leases is as follows (in thousands, except lease term and discount rate):
| Six Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Cash Paid for Amounts Included in the Measurement of Lease Liabilities: | ||||||||||||||
| Operating Cash Flows from Finance Leases | $ | 54 | $ | 76 | ||||||||||
| Operating Cash Flows from Operating Leases | $ | 185 | $ | 632 | ||||||||||
| Financing Cash Flows from Finance Leases | $ | 298 | $ | 243 | ||||||||||
| Non-Cash Additions to Right-of-Use Assets and Lease Liabilities: | ||||||||||||||
| Recognition of Right-of-Use Assets for Finance Leases | $ | — | $ | 403 | ||||||||||
| Recognition of Right-of-Use Assets for Operating Leases | $ | 531 | $ | — | ||||||||||
| Weighted-Average Remaining Lease Term (Years) - Finance Leases | 2 | 2 | ||||||||||||
| Weighted-Average Remaining Lease Term (Years) - Operating Leases | 3 | 4 | ||||||||||||
| Weighted-Average Discount Rate - Finance Leases | 13.19 | % | 14.17 | % | ||||||||||
| Weighted-Average Discount Rate - Operating Leases | 14.50 | % | 13.79 | % | ||||||||||
Effective June 12, 2026, the Company deconsolidated its Retail Business. Accordingly, the weighted-average lease information as of June 30, 2026 excludes leases of the Retail Business, while prior-period amounts include the Retail Business for periods during which it was consolidated.
Future minimum lease payments under non-cancelable finance and operating leases as of June 30, 2026 for each of the following years were as follows (in thousands):
| Operating Leases | Finance Leases | |||||||||||||||||||||||||
| Third Parties | Related Parties | Third Parties | Total | |||||||||||||||||||||||
| 2026 (Remaining) | $ | 165 | $ | 47 | $ | 160 | $ | 372 | ||||||||||||||||||
| 2027 | 314 | 93 | 311 | 718 | ||||||||||||||||||||||
| 2028 | 234 | 93 | 171 | 498 | ||||||||||||||||||||||
| 2029 | 48 | 93 | 32 | 173 | ||||||||||||||||||||||
| 2030 | 10 | 93 | — | 103 | ||||||||||||||||||||||
| Thereafter | 5 | — | — | 5 | ||||||||||||||||||||||
| Total Future Minimum Lease Payments | 776 | 419 | 674 | 1,869 | ||||||||||||||||||||||
| Less: Imputed Interest | (135) | (112) | (94) | (341) | ||||||||||||||||||||||
| Present Value of Lease Liability | 641 | 307 | 580 | 1,528 | ||||||||||||||||||||||
| Less: Current Portion of Lease Liability | (273) | (52) | (258) | (583) | ||||||||||||||||||||||
| Present Value of Lease Liability, Net of Current Portion | $ | 368 | $ | 255 | $ | 322 | $ | 945 | ||||||||||||||||||
As of June 30, 2026, the Company leases certain business facilities from certain related parties and third parties under non-cancellable operating lease agreements that specify minimum rentals. The lease terms included in the determination of the operating lease liabilities and future minimum rental payments reflect only the non-cancellable period of the leases and exclude periods covered by options to extend for which the Company is not reasonably certain it will exercise such options. These non-cancellable operating leases require monthly payments ranging from $800 to $19 thousand and expire through July 2031. Certain lease monthly payments related to non-cancellable operating leases may escalate up to 3.0% each year. In such cases, the variability in lease payments is included within the current and non-current operating lease liabilities.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
12. NOTES PAYABLE AND CONVERTIBLE DEBENTURES
Notes payable consisted of the following (in thousands):
| June 30, 2026 | December 31, 2025 | |||||||||||||
| Senior Secured Credit Facility | $ | 50,000 | $ | 50,000 | ||||||||||
| Convertible Debentures | 14,357 | 16,006 | ||||||||||||
| 2025 Lompoc Term Loan | 2,971 | 2,990 | ||||||||||||
| Greenhouse 2 Equipment Supplier Financing | 3,959 | — | ||||||||||||
| Total Notes Payable | 71,287 | 68,996 | ||||||||||||
| Less: Unamortized Debt Issuance Costs and Loan Origination Fees | (1,146) | (330) | ||||||||||||
| Net Amount | 70,141 | 68,666 | ||||||||||||
| Less: Current Portion of Notes Payable | (14,733) | (37) | ||||||||||||
| Notes Payable, Net of Current Portion | $ | 55,408 | $ | 68,629 | ||||||||||
Senior Secured Credit Facility
On February 28, 2025, the Company refinanced its Prior Credit Agreement (as defined below) and entered into a new senior secured credit facility for an aggregate principal amount of $50 million maturing on February 28, 2030, as amended (the “Senior Secured Credit Facility”) with certain U.S.-based commercial banks (together, the “Senior Secured Credit Facility Lender”). The Senior Secured Credit Facility is secured by a first priority lien on the Company’s Camarillo, Padaro and Casitas greenhouse farms and facilities and a first priority lien on the rest of the Company’s assets excluding other real estate and is jointly and severally guaranteed by several of the Company’s subsidiaries.
Payments for the first 2 years are interest-only. Principal and interest payments will be made during the last 3 years based on a straight-line amortization of the loan amount over a period of 15 years beginning on April 1, 2027, with a balloon payment of the remainder of the principal due on the maturity date. Interest payments began on April 1, 2025 and will be paid in monthly installments. The Senior Secured Credit Facility has optional and mandatory prepayments. The Company may make optional prepayments to repay the Senior Secured Credit Facility, in whole or in part, subject to paying an applicable premium. Mandatory prepayments include a change in control of the borrower subsidiaries including changes in parent company ownership or certain acquisition or controlling influence over the borrower subsidiaries.
The Senior Secured Credit Facility has a floating interest rate based on the Wall Street Journal’s prime rate, which was 6.75% as of June 30, 2026, plus 1.25%. On February 28, 2025, the Company entered into an interest rate swap agreement with a notional amount of $50 million to convert the variability of cash flows resulting from fluctuations in variable rates to effectively set the interest rate at 8.58%. The interest rate swap agreement expires on February 28, 2030. See Note 13 – Derivative Instruments for more information.
Upon closing, the Company deposited an interest reserve in the amount of $3 million into an escrow account, which is included in restricted cash, net of current portion in the Unaudited Condensed Consolidated Balance Sheet as of June 30, 2026.
The Senior Secured Credit Facility contains a covenant which requires the Company to maintain liquidity in excess of $15 million at all times. The Senior Secured Credit Facility also contains a covenant which requires the Company to maintain a Consolidated Fixed-Charge Coverage Ratio of at least 1.25x measured quarterly on a trailing-twelve-month basis commencing as of December 31, 2024. The Fixed-Charge Coverage Ratio is defined as Adjusted EBITDA minus income tax expense divided by the current portion of long-term debt plus interest expense plus the current portion of capital leases. Preferred equity dividend payments and convertible debt payments are not included in the Fixed-Charge Coverage Ratio calculation as the former can be suspended if needed and the latter can be paid in shares.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
As of December 31, 2025, the Company was not in compliance with the Fixed-Charge Coverage Ratio financial covenant under its Senior Secured Credit Facility and also experienced certain technical events of default related to administrative and guarantor provisions, none of which related to payment obligations. As a result of these events of default, the lender had the contractual right to declare the related debt immediately due and payable. On March 16, 2026, the Company entered into a First Amendment and Waiver to the Senior Secured Credit Facility pursuant to which the lender waived the financial covenant violation and the related technical events of default. The amendment also suspends testing of the Fixed-Charge Coverage Ratio for the fiscal quarters ending March 31, 2026, June 30, 2026, and September 30, 2026, with covenant testing resuming for the fiscal quarter ending December 31, 2026. As a result of the waiver and covenant suspension, the lender does not have the contractual right to accelerate the debt arising from these events of default for a period greater than twelve months from December 31, 2025. Accordingly, the related debt has been classified as noncurrent as of June 30, 2026 and December 31, 2025.
Prior Senior Secured Credit Agreement
On December 9, 2021 (the “Prior Senior Secured Closing Date”), the Company entered into a senior secured term loan agreement (the “Prior Credit Agreement,” as amended), for total available proceeds of up to $100 million with funds managed by a U.S.-based private credit investment fund and other participating third-party lenders (together, the “Prior Senior Secured Lender”). Effective December 10, 2021, the Company closed on an initial term loan through the Prior Credit Agreement of $50 million.
On February 28, 2025, the Company used proceeds from the Senior Secured Credit Facility to repay the remaining balance of the Prior Credit Agreement term loan in the amount of $40.6 million plus fees and extinguished in its entirety the Company’s obligations under the Prior Credit Agreement. As a result, the Company recognized $0.3 million as a loss on extinguishment of debt in its Unaudited Condensed Interim Consolidated Statements of Operations.
2025 Lompoc Term Loan
On August 4, 2025, the Company entered into a term loan for an aggregate principal amount of $3 million maturing on August 4, 2035 (the “2025 Lompoc Term Loan”) with a U.S.-based bank (the “2025 Lompoc Term Loan Lender”). The 2025 Lompoc Term Loan requires monthly principal and interest payments commencing on September 4, 2025 and has an initial fixed interest rate of 8.5% for the first five years. Beginning September 4, 2030, the loan converts to a variable rate based on the Wall Street Journal prime rate plus 1%, resetting every five years, with a minimum floor rate of 5%. The loan is amortized over 25 years with a balloon payment due at maturity. Proceeds were used to acquire the remaining 76% ownership interest in a property located in Lompoc, California, on August 18, 2025.
The 2025 Lompoc Term Loan is secured by a first-priority deed of trust on the Company’s Lompoc facility and a first priority lien on other assets of the Company excluding other real estate. The loan is jointly and severally guaranteed by several of the Company’s subsidiaries.
The 2025 Lompoc Term Loan includes covenants including a requirement to maintain a minimum debt service coverage ratio of 1.25x, measured annually at the guarantor level, Glass House Brands Inc. As of December 31, 2025, the Company was not in compliance with this financial covenant. As a result, the lender had the contractual right to declare the related debt immediately due and payable. In March 2026, the lender provided a waiver of the financial covenant violation which prevents the lender from exercising its acceleration rights for a period of at least twelve months from December 31, 2025. Accordingly, the related debt has been classified as noncurrent as of June 30, 2026 and December 31, 2025.
Greenhouse 2 Equipment Supplier Financing
On January 15, 2026, the Company entered into an agreement for the purchase and installation of equipment for Greenhouse 2 at the Camarillo Facility, with an aggregate purchase price of approximately $4.7 million. The agreement includes a supplier financing arrangement for approximately $4.0 million of the purchase price. The financing bears interest at a rate of 7% and is repayable in ten equal semiannual installments over a five-year period. Payments are expected to commence approximately six months following delivery with the first installment due after installation is complete.
As of June 30, 2026, the Company has taken delivery of the equipment and recognized a corresponding financing liability of approximately $4.0 million.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
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 semi-annually in arrears until April 15, 2027 (the “Maturity Date”). Interest is payable either 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 volume-weighted average price (“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 either 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) CAD $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 either 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 June 30, 2026, the balance of $10.7 million and $3.6 million for the Series A Notes and Series B Notes, respectively remain outstanding.
As of June 30, 2026, the scheduled maturities of notes payable for each of the following years were as follows (in thousands):
| Principal Payments | ||||||||
| 2026 (Remaining) | $ | 18 | ||||||
| 2027 | 17,862 | |||||||
| 2028 | 4,112 | |||||||
| 2029 | 4,169 | |||||||
| 2030 | 41,452 | |||||||
| Thereafter | 3,674 | |||||||
| Total Future Minimum Principal Payments | $ | 71,287 | ||||||
13. DERIVATIVE INSTRUMENTS
Assets or liabilities associated with our derivative instruments are recorded at fair value in other assets and other non-current liabilities on our Unaudited Condensed Consolidated Balance Sheets. Gains and losses resulting from changes in fair value are recognized in (gain) loss on change in fair value of derivative asset and liability on the Unaudited Condensed Interim Consolidated Statements of Operations.
Interest Rate Risk
The Company utilizes an interest rate swap to manage its exposure to variability in future cash flows associated with fluctuations in interest rates on its Senior Secured Credit Facility. This swap effectively converts the variable interest rate on the debt to a fixed rate and is classified as a derivative under ASC 815. The Company has not designated this contract for hedge accounting.
The Company’s interest rate swap is measured at fair value using Level 2 inputs. The fair value is determined using a discounted cash flow method that incorporates observable inputs. The fair value calculation includes a credit valuation adjustment and forward interest rate curves for the same periods as the future maturity dates of the interest rate swap. As of June 30, 2026 and December 31, 2025, the interest rate swap fair value is in a liability position due to valuation inputs including projected changes in the forward interest rate curve.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Convertible Debenture Derivatives
The conversion features of the Series A Notes and Series B Notes were previously 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 binomial lattice model that is based on unobservable inputs and were classified as Level 3 fair value measurements in the fair value hierarchy. The Company assessed the conversion and settlement features of the Series A Notes and Series B Notes under ASC 815 and concluded that bifurcation as embedded derivatives is not required.
The following table presents the fair value of the Company’s derivative instruments not designated as hedging instruments (in thousands):
| Derivative instrument | Financial Statement Line Item | June 30, 2026 | December 31, 2025 | ||||||||||||||||||||
| Interest Rate Swap | Other Non-Current Liabilities | $ | (649) | $ | (1,653) | ||||||||||||||||||
| Convertible Debenture Conversion Feature | Other Assets | — | 466 | ||||||||||||||||||||
| Total | $ | (649) | $ | (1,187) | |||||||||||||||||||
The following table presents the change in fair value of the Company’s derivative instruments not designated as hedging instruments, including the initial recognition of fair value for the interest rate swap, as reported on the Unaudited Condensed Interim Consolidated Statements of Operations (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||||||||||||||
| Derivative instrument | Financial Statement Line Item | 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||||||
| Interest Rate Swap | (Gain) Loss on Change in Fair Value of Derivative Asset and Liability | $ | (595) | $ | 318 | $ | (1,004) | $ | 1,807 | ||||||||||||||||||||||||||
| Convertible Debenture Conversion Feature | (Gain) Loss on Change in Fair Value of Derivative Asset and Liability | — | 10 | — | 254 | ||||||||||||||||||||||||||||||
| Total | $ | (595) | $ | 328 | $ | (1,004) | $ | 2,061 | |||||||||||||||||||||||||||
14. SHAREHOLDERS’ EQUITY
As of June 30, 2026 and December 31, 2025, the authorized share capital of the Company was comprised of an unlimited number of (i) Subordinate Voting Shares, (ii) Restricted Voting Shares, (iii) Limited Voting Shares, (iv) Multiple Voting Shares and (v) 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 (British Columbia). On all matters upon which holders of Multiple Voting Shares are entitled to vote, each Multiple Voting Share entitles the holder thereof to 50 votes per Multiple Voting Share. Multiple Voting Shares are not entitled to dividends and are not convertible. The Multiple Voting Shares had a three-year sunset period that would have expired on June 29, 2024. At the annual general and special meeting of the shareholders of the Company held on June 23, 2023, shareholders passed a special resolution to amend the Articles of the Company to extend the “sunset” date for the Multiple Voting Shares to June 29, 2027, upon which they will be automatically redeemed for $0.001 per Multiple Voting Share, representing an aggregate redemption amount of approximately $5 thousand.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Equity Shares
The holders of each class of 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 (British Columbia) and except that holders of Limited Voting Shares are not entitled to vote for the election of directors of the Company. The Subordinate Voting Shares and Restricted Voting Shares carry one vote per share on all matters. The Limited Voting Shares carry one vote per share on all matters except the election of directors, as the holders of Limited Voting Shares do not have any entitlement to vote in respect of the election of directors of the Company.
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 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 in the Company’s remaining property along with all holders of the other classes of Equity Shares (on a per share basis).
Exchangeable Shares of MPB Acquisition Corp.
Exchangeable Shares are part of the authorized share capital of MPB Acquisition Corp. (“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. During the three months ended September 30, 2025, MPB amended and restated its Articles of Incorporation to provide for a new series of Exchangeable Shares that have substantially the same rights and obligations of the existing Exchangeable Shares. Until a holder exchanges its Exchangeable Shares for Equity Shares, the holder of such Exchangeable Shares will not have the right to vote at meetings of the shareholders of the Company, though it 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 Unaudited Condensed Interim 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 U.S. 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.
Preferred Shares of GH Group, Inc.
The authorized total number of preferred shares (the “GH Group Preferred Shares”) of GH Group, Inc. (“GH Group”) is 200,000 of which 55,000 shares are designated as shares of Series B Preferred Stock (“Series B Preferred”), 5,000 shares are designated as shares of Series C Preferred Stock (“Series C Preferred”), 15,000 shares are designated as shares of Series D Preferred Stock (“Series D Preferred”) and 80,000 shares are designated as shares of Series E Convertible Preferred Stock (“Series E Convertible Preferred”). The Series B Preferred and Series C Preferred were fully redeemed or converted and are no longer issued and outstanding.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Holders of GH Group Preferred Shares are not entitled to vote, except in connection with any changes to the Certificate of Incorporation or the Bylaws of GH Group that adversely affect the powers, preferences, privileges or rights of such GH Group Preferred Shares. Except as provided in the foregoing sentence, the Series B, Series C and Series D Preferred do not carry any voting rights and are not convertible. Except as provided above, the Series E Convertible Preferred do not carry any voting rights, except for limited protective provisions, and are 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 its stockholders, in the following order of priority and before any payment shall be made to the holders of GH Group Common Stock: (i) Series B Preferred, (ii) Series C Preferred, (iii) Series D Preferred and (iv) Series E Convertible Preferred. GH Group may redeem the GH Group Preferred Shares from a holder, in whole or in part, only after certain trigger events described below have occurred, and the redemption price will equal the liquidation value plus any accrued, unpaid and accumulated dividends.
The Series E Convertible Preferred are convertible at any time at the option of the holder into GH Group Class B Common Stock at a fixed conversion price of $9.00 per share. Each GH Group Class B Common Share is exchangeable for one Class C Common Share of MPB Acquisition Corp., which in turn is exchangeable for one publicly traded Subordinate Voting Share of Glass House Brands Inc. (the “Equity Shares”), resulting in an effective one-for-one exchange. GH Group may redeem the Series E Convertible Preferred, in whole or in part, at any time until the fifth anniversary of the original issuance after the earlier of the following trigger events have occurred: (a) (i) the 60-day volume-weighted average price of the Equity Shares is at least $12.00; (ii) the average daily trading volume of the Equity Shares exceeds one million shares; and (iii) the Equity Shares are listed on a major United States stock exchange, or (b) certain change of control events. Upon redemption, holders will receive the liquidation value plus any accrued, unpaid and accumulated dividends.
The Series B Preferred and the Series C Preferred carried a 20% cumulative dividend rate, which increased by 2.5% annually after the second anniversary and until the 54-month anniversary of the initial issuance. The Series D Preferred carry a 15% cumulative dividend rate, which increases by 5% following the fifth anniversary of the original issuance. The Series E Convertible Preferred carry a 12% cumulative dividend rate. Dividends accrue in arrears annually and are payable in cash quarterly if and when declared by GH Group’s board of directors.
There were 15,000 shares of Series D Preferred issued and outstanding as of June 30, 2026 and December 31, 2025; and there were 77,500 shares of Series E Convertible Preferred issued and outstanding as of June 30, 2026 and December 31, 2025. In accordance with the provisions above, the Company recorded dividends to the holders of GH Group Preferred Shares in the amount of $2.9 million and $4.7 million for the three months ended June 30, 2026 and 2025, respectively, and $5.8 million and $9.3 million for the six months ended June 30, 2026 and 2025, respectively.
2026 At-The-Market Program
In June 2026, the Company commenced an at-the-market distribution program (the “2026 ATM Program”), as amended in July 2026 (see Subsequent Events), by means of a prospectus supplement dated June 10, 2026 (the “Prospectus Supplement”) to its short form base shelf prospectus dated June 10, 2026 (the “Shelf Prospectus”) with the securities regulatory authorities in all provinces and territories of Canada in connection with the 2026 ATM Program. The 2026 ATM Program is subject to and governed by the terms of an equity distribution agreement dated June 10, 2026 (the “Equity Distribution Agreement”) with ATB Capital Markets Corp., pursuant to which, the Company may from time to time sell up to $100 million of its Subordinate Voting Shares, Restricted Voting Shares and Limited Voting Shares (collectively, the “Equity Shares”) under the 2026 ATM Program. See Note 21 – Subsequent Events, for information regarding the July 15, 2026 amendment to the ATM program.
2024 At-The-Market Program
The Company commenced an at-the-market distribution program (the “2024 ATM Program”) in December 2024 by means of a prospectus supplement dated December 2, 2024 (the “2024 Prospectus Supplement”) to its short form base shelf prospectus dated May 16, 2024 (the “2024 Shelf Prospectus”) with the securities regulatory authorities in all provinces and territories of Canada in connection with the 2024 ATM Program. The 2024 ATM Program was subject to and governed by the terms of an equity distribution agreement dated November 13, 2024 (the “2024 Equity Distribution Agreement”) with ATB Securities Inc. and Canaccord Genuity Corp., pursuant to which, the Company would from time to time sell up to $25 million of its Equity Shares under the 2024 ATM Program.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Share and Equity Transactions
During the six months ended June 30, 2026, the Company issued 2,086,737 Equity Shares under the 2024 ATM Program at an average price of $8.98 per share for gross proceeds of $18.7 million. The Company received net proceeds of $18.4 million after paying commissions of $0.4 million to the sales agent for the 2024 ATM Program. The share issuance costs have been presented net within additional paid-in capital.
During the six months ended June 30, 2026, the Company issued 385,000 Equity Shares under the 2026 ATM Program at an average price of $13.07 per share for gross proceeds of $4.9 million. The Company received net proceeds of $4.9 million. The share issuance costs have been presented net within additional paid-in capital.
During the six months ended June 30, 2026, the Company issued 9,653 Equity Shares for the conversion of the Plus Convertible Notes.
Non-Controlling Interests
Non-controlling interests represent 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 income attributable to a non-controlling interest during the three months ended June 30, 2026 and 2025 of $0.1 million in each period. The Company recorded income attributable to a non-controlling interest and during the six months ended June 30, 2026 and 2025 of $0.3 million and $0.1 million, respectively.
15. SHARE-BASED COMPENSATION AND EMPLOYEE BENEFIT PLAN
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. During the Company’s annual and special meeting of the shareholders held on June 20, 2025, disinterested shareholders approved a second amended and restated equity incentive plan (the “Second Amended Incentive Plan”) for purposes of instituting a one-time fixed increase to the rolling 10% share reserve to give effect to the number of shares issuable under the market-based restricted stock units as discussed below.
The Second Amended 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 Second Amended Incentive Plan (unless the Second Amended 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 Company’s board of directors (the “Board of Directors”) 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.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Stock Options
A reconciliation of the beginning and ending balance of stock options outstanding was as follows:
| Number of Stock Options | Weighted-Average Exercise Price | |||||||||||||
| Outstanding as of December 31, 2025 | 179,327 | $ | 3.10 | |||||||||||
| Exercised and Forfeited | (179,327) | 3.10 | ||||||||||||
| Outstanding as of June 30, 2026 | 0 | — | ||||||||||||
As of June 30, 2026 and December 31, 2025, options vested and exercisable were nil and 179,327, respectively.
Restricted Stock Units
A reconciliation of the beginning and ending balance of restricted stock units outstanding was as follows:
| Number of Restricted Stock Units | ||||||||
| Unvested as of December 31, 2025 | 5,326,867 | |||||||
| Granted | 47,012 | |||||||
| Vested | (1,535,497) | |||||||
| Forfeited | (130,512) | |||||||
| Unvested as of June 30, 2026 | 3,707,870 | |||||||
During the three months ended June 30, 2026 and 2025, the Company recognized $3.5 million and $2.8 million, respectively, in stock-based compensation related to restricted stock units and was included as a component of general and administrative expense in the Unaudited Condensed Interim Consolidated Statements of Operations. During the six months ended June 30, 2026 and 2025, the Company recognized $7.2 million and $4.9 million, respectively, in stock-based compensation related to restricted stock units and was included as a component of general and administrative expense in the Unaudited Condensed Interim Consolidated Statements of Operations. The fair value of the restricted stock units granted was determined using the value of the Equity Shares at the date of grant.
Market-Based Performance Restricted Stock Units
The Company’s market-based performance restricted stock units vest contingent upon the achievement of pre-determined market and service conditions. If market conditions are not met but service conditions are met, the market-based performance restricted stock units will not vest; however, any compensation expense that was recognized to date will not be reversed. The Company amortizes the fair value of market-based performance restricted stock units over the requisite service period and recognizes compensation cost on a straight-line basis over the service period. The number of Equity Shares, if any, to be issued for these awards is determined based on the achievement of specific share price targets during the performance period, as measured by the volume weighted average price over the 90 trading days ending on the last day of a fiscal quarter. The time-based vesting occurs on the third anniversary of the grant date and requires the participant to remain in the eligible service of the Company through that time. Awards that vest prior to the fourth anniversary of the grant date will settle out 50% on the fourth anniversary of the grant date, and 50% on the fifth anniversary of the grant date. Any additional awards that vest between the fourth and fifth anniversary of the grant date will settle 100% on the fifth anniversary of the grant date.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Fair value of the market-based restricted performance stock units is determined using the Monte-Carlo simulation with the following assumptions:
| Six Months Ended | ||||||||
| June 30, 2025 | ||||||||
| Expected term (in years) | 3.00 | |||||||
| Expected volatility | 72 | % | ||||||
| Weighted-average volatility | 72 | % | ||||||
| Risk-free interest rate | 3.92 | % | ||||||
| Dividend rate | — | % | ||||||
There were no market-based restricted performance stock units granted during the six months ended June 30, 2026. As of June 30, 2026, a maximum number of 3,000,000 granted and unvested market-based restricted performance stock units could potentially vest.
During the three months ended June 30, 2026 and 2025, the Company recognized $0.5 million and $0.1 million, respectively, in stock-based compensation related to market-based performance restricted stock units and was included as a component of general and administrative expense in the Unaudited Condensed Interim Consolidated Statements of Operations. During the six months ended June 30, 2026 and 2025, the Company recognized $1.0 million and $0.1 million, respectively, in stock-based compensation related to market-based restricted stock units and was included as a component of general and administrative expense in the Unaudited Condensed Interim Consolidated Statements of Operations.
Team Member Shareholder Participation Program
In December 2025, the Board of Directors approved the Team Member Shareholder Participation Program (the “TMSPP”) under the Company’s Incentive Plan. Eligible employees may receive unrestricted Equity Shares as consideration for services rendered. Under the terms of the TMSPP, eligible participating employees earn an annual award equal to approximately 5% of their gross base compensation for the applicable year. The number of Equity Shares issued is determined in the subsequent year based on the value of the award divided by a VWAP of the Company’s Equity Shares over a specified period prior to the issuance date.
As the awards are based on a fixed monetary value that is settled in a variable number of Equity Shares, the awards are classified as liability awards until settlement. Stock-based compensation expense is recognized over the requisite service period, which represents the period in which employees earn the award and satisfy the service condition. The liability is remeasured at each reporting date until settlement, with changes in value recognized in stock-based compensation expense. Upon issuance of shares, the liability is reclassified to equity.
During the three months ended June 30, 2026 and 2025, the Company recognized $0.2 million and nil, respectively, in stock-based compensation related to the TMSPP and was included as a component of general and administrative expense in the Unaudited Condensed Interim Consolidated Statements of Operations. During the six months ended June 30, 2026 and 2025, the Company recognized $0.5 million and nil, respectively, in stock-based compensation related to the TMSPP and was included as a component of general and administrative expense in the Unaudited Condensed Interim Consolidated Statements of Operations.
As of June 30, 2026, the Company recorded a liability of approximately $0.5 million related to the TMSPP, which is included in accounts payable and accrued liabilities in the Unaudited Condensed Consolidated Balance Sheet.
Stock Appreciation Right Units
The Company had authorized and issued certain stock appreciation rights (“SARs”) which were issued to various employees of the Company. SARs vested 33% one year after the grant date and the remaining 67% vested monthly over two years. Vested and exercised SARs would receive cash in the amount of SARs exercised multiplied by the excess of the fair market value of an Equity Share as of the exercise date over the stated strike price of the SAR. As SARs are cash-settled, the Company recognized the value of SARs as liabilities which were included in accounts payable and accrued liabilities in the Unaudited Condensed Consolidated Balance Sheets. As of June 30, 2026 and December 31, 2025, the Company recorded a liability of nil and $17 thousand, respectively.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
A reconciliation of the beginning and ending balance of the SARs outstanding was as follows:
| Number of Stock Appreciation Rights Units | ||||||||
| Outstanding as of December 31, 2025 | 2,922 | |||||||
| Exercised | (974) | |||||||
| Forfeited | (1,948) | |||||||
| Outstanding as of June 30, 2026 | 0 | |||||||
During the three months ended June 30, 2026 and 2025, the Company recognized nil thousand and $37 thousand, respectively, of expense related to the SARs. During the six months ended June 30, 2026 and 2025, the Company recognized $(5) thousand and nil, respectively, in expense related to SARs.
Warrants
A reconciliation of the beginning and ending balance of warrants outstanding was as follows:
| Number of Warrants | Weighted-Average Exercise Price | |||||||||||||
| Outstanding as of December 31, 2025 | 43,221,659 | $ | 9.68 | |||||||||||
| Exercised | (5,131,657) | 10.57 | ||||||||||||
| Redeemed | (30,644,500) | — | ||||||||||||
| Outstanding as of June 30, 2026 | 7,445,502 | 5.23 | ||||||||||||
The following table summarizes the warrants that remained outstanding as of June 30, 2026:
| Security Issuable | Exercise Price | Expiration Date | Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||||||||
| Equity Shares | 5.00 | July 2026 | 5,726,502 | 5,726,502 | |||||||||||||||||||||||||
| Equity Shares | 6.00 | July 2026 | 1,719,000 | 1,719,000 | |||||||||||||||||||||||||
| 7,445,502 | 7,445,502 | ||||||||||||||||||||||||||||
On April 28, 2026, the Company announced that it had delivered a notice of redemption, dated April 28, 2026, with respect to those certain warrants outstanding under the certain warrant agency agreement, dated May 13, 2019, between the Company and Odyssey Trust Company, as amended (the “Warrant Agency Agreement”). During the three months ended June 30, 2026, holders exercised 20,000 warrants for cash. On May 28, 2026, the Company redeemed the remaining 30,644,500 warrants in accordance with Section 3.4(1) of the Warrant Agency Agreement at a redemption ratio of 0.011826 Subordinate Voting Shares per warrant, resulting in the issuance of 362,401 Subordinate Voting Shares. Following the redemption, no warrants remained outstanding.
On June 23, 2026, the Company delivered notices to accelerate the expiry dates of its outstanding Series B and Series C share purchase warrants pursuant to the warrant indenture dated August 31, 2022, and its outstanding Series D share purchase warrants pursuant to the warrant indenture dated August 23, 2023. The acceleration provisions became available after the closing sale price of the Company’s Equity Shares equaled or exceeded $12.00 per share for 10 trading days within a 15-consecutive-trading-day period.
As a result of the acceleration, holders had until 5:00 p.m. Toronto time on July 23, 2026, to exercise the Series B and Series C warrants at an exercise price of $5.00 per share and the Series D warrants at an exercise price of $6.00 per share. Any warrants that remained unexercised after that time automatically expired and were no longer exercisable.
During the three months ended June 30, 2026, holders exercised 3,560,657 Series B warrants, 120,000 Series C warrants and 1,051,000 Series D warrants, resulting in the issuance of 2,599,975 subordinate voting shares and aggregate cash proceeds of approximately $0.4 million.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
As of June 30, 2026, warrants outstanding had a weighted-average remaining contractual life of 0.06 years.
Note 21 – Subsequent Events for information regarding warrant exercises subsequent to June 30, 2026.
Defined Contribution Plan
The Company sponsors a defined contribution plan under Section 401(k) of the Internal Revenue Code for eligible employees. Beginning in fiscal year 2025, the Company began matching employee contributions to the plan at a specified percentage of employee contributions.
Employer matching contributions are recognized as compensation expense in the period in which the contributions are made. During the three months ended June 30, 2026 and 2025, the Company recognized $71 thousand and nil, respectively, of expense related to employer contributions under the plan. During the six months ended June 30, 2026 and 2025, the Company recognized $137 thousand and nil, respectively, of expense related to employer contributions under the plan.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
16. INCOME (LOSS) PER SHARE
The following is a reconciliation for the calculation of basic and diluted income (loss) per share (in thousands, except share and per share data):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Net Income (Loss) from Continuing Operations | $ | (4,571) | $ | 7,802 | $ | (21,755) | $ | 374 | ||||||||||||||||||
| Less: Dividends and Increase in Redemption Values of GH Group Preferred Shares | (2,884) | (4,725) | (5,772) | (9,302) | ||||||||||||||||||||||
| Adjusted Net Income (Loss) From Continuing Operations | $ | (7,455) | $ | 3,077 | $ | (27,527) | $ | (8,928) | ||||||||||||||||||
| Net Income (Loss) from Discontinued Operations Before Non-Controlling Interest | $ | (2,112) | $ | 942 | $ | (1,934) | $ | (1,638) | ||||||||||||||||||
| Less: Net Income to Non-Controlling Interest | (130) | (75) | (256) | (127) | ||||||||||||||||||||||
| Net Income (Loss) Attributable to Discontinued Operations | $ | (2,242) | $ | 867 | $ | (2,190) | $ | (1,765) | ||||||||||||||||||
| Net Income (Loss) Attributable to the Company | $ | (6,813) | $ | 8,669 | $ | (23,945) | $ | (1,391) | ||||||||||||||||||
| Less: Dividends and Increase in Redemption Values of GH Group Preferred Shares | (2,884) | (4,725) | (5,772) | (9,302) | ||||||||||||||||||||||
| Adjusted Net Income (Loss) Attributable to the Company | $ | (9,697) | $ | 3,944 | $ | (29,717) | $ | (10,693) | ||||||||||||||||||
| Weighted-Average Shares Outstanding - Basic | 88,760,511 | 81,098,806 | 87,945,999 | 80,769,090 | ||||||||||||||||||||||
| Dilutive Potential Shares Related to Stock Award Plans and Warrants and Convertible Debentures | — | 1,722,607 | — | — | ||||||||||||||||||||||
| Weighted-Average Shares Outstanding - Diluted | 88,760,511 | 82,821,413 | 87,945,999 | 80,769,090 | ||||||||||||||||||||||
| Income (Loss) Per Share From Continuing Operations - Basic | $ | (0.08) | $ | 0.04 | $ | (0.31) | $ | (0.11) | ||||||||||||||||||
| Income (Loss) Per Share From Discontinued Operations - Basic | $ | (0.03) | $ | 0.01 | $ | (0.02) | $ | (0.02) | ||||||||||||||||||
| Income (Loss) Per Share Attributable to the Company - Basic | $ | (0.11) | $ | 0.05 | $ | (0.34) | $ | (0.13) | ||||||||||||||||||
| Income (Loss) Per Share From Continuing Operations - Diluted | $ | (0.08) | $ | 0.04 | $ | (0.31) | $ | (0.11) | ||||||||||||||||||
| Income (Loss) Per Share From Discontinued Operations - Diluted | $ | (0.03) | $ | 0.01 | $ | (0.02) | $ | (0.02) | ||||||||||||||||||
| Income (Loss) Per Share Attributable to the Company - Diluted | $ | (0.11) | $ | 0.05 | $ | (0.34) | $ | (0.13) | ||||||||||||||||||
For the three months ended June 30, 2026 and the three and six months ended June 30, 2026 and 2025, diluted loss per share was the same as basic loss per share as the potential issuance of shares related to stock-based award plans, warrants, contingent shares, convertible preferred shares and convertible debentures were anti-dilutive.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
The following common equivalent shares were excluded from the income (loss) per share - diluted calculation because their inclusion would have been anti-dilutive:
| For the Three Month Income (Loss) Per Share | For the Six Month Loss Per Share | |||||||||||||||||||||||||
| As of June 30, | As of June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Stock Award Plans | 6,753,539 | 5,919,860 | 6,753,539 | 9,575,142 | ||||||||||||||||||||||
| Warrants | 7,445,502 | 33,644,500 | 7,445,502 | 44,384,041 | ||||||||||||||||||||||
| Convertible Preferred Shares | 8,611,111 | — | 8,611,111 | — | ||||||||||||||||||||||
| Convertible Debentures | 1,352,692 | 2,992,910 | 1,352,692 | 2,992,910 | ||||||||||||||||||||||
| Total | 24,162,844 | 42,557,270 | 24,162,844 | 56,952,093 | ||||||||||||||||||||||
Net income (loss) attributable to the Company 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 potential issuance of shares related to stock-based award plans, warrants, contingent shares, convertible preferred shares and convertible debentures are antidilutive. After adjustments, as defined in ASC 260, if the Company is in a net income position, diluted earnings per share includes shares related to stock-based award plans, warrants, contingent shares, convertible preferred shares and convertible debentures 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 preferred shares and convertible debentures.
17. PROVISION FOR INCOME TAXES AND DEFERRED INCOME TAXES
Provision for income taxes consisted of the following (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Current: | ||||||||||||||||||||||||||
| Federal | $ | 3,001 | $ | 3,353 | $ | 6,034 | $ | 5,988 | ||||||||||||||||||
| State | 60 | 729 | 46 | 622 | ||||||||||||||||||||||
| Total Current | 3,061 | 4,082 | 6,080 | 6,610 | ||||||||||||||||||||||
| Deferred: | ||||||||||||||||||||||||||
| Federal | 1 | 77 | (38) | (300) | ||||||||||||||||||||||
| State | — | — | — | — | ||||||||||||||||||||||
| Total Deferred | 1 | 77 | (38) | (300) | ||||||||||||||||||||||
| Total Provision for Income Taxes | $ | 3,062 | $ | 4,159 | $ | 6,042 | $ | 6,310 | ||||||||||||||||||
The Company has used a discrete effective tax rate method to calculate taxes for the three and six months ended June 30, 2026 and 2025. 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 three and six-month periods ended June 30, 2026 and 2025.
In connection with the deconsolidation of GHR, the Company entered into a Tax Separation Agreement, effective June 11, 2026, with GHR and GHB Usub, LLC. Under the agreement, a deferred tax liability of $2.4 million was assigned to GHR, and the Company waived any right to seek reimbursement from GHR for $2.3 million of tax credits previously utilized by the Company to offset taxes on taxable income attributable to GHR.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
On April 23, 2026, the U.S. Department of Justice (“DOJ”) and its component agency, the Drug Enforcement Administration (“DEA”), issued an order (the “Rescheduling Order”) placing FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license in Schedule III. Marijuana products sold for adult-use recreational purposes remain classified as Schedule I controlled substances. The Company timely submitted applications to register certain California-licensed medical cannabis operations with the U.S. Drug Enforcement Administration pursuant to the expedited registration pathway established by the Rescheduling Order. The Company is continuing to evaluate the potential impact of the Rescheduling Order on its financial statements, including its tax positions.
As the Company operates in the legalized cannabis industry, it is subject to the limits of Internal Revenue Code (“IRC”) Section 280E (“Section 280E”) for U.S. federal income tax purposes under which the Company is only allowed to deduct certain expenses directly related to the cost of goods sold. 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.
Based on legal interpretation, it is the Company’s position that it does not owe taxes attributable to the application of Section 280E. Additionally, the Company has determined that the tax impact of its corporate overhead allocation was less likely than not to be sustained on the merits as required under ASC 740, Income Taxes, due to the evolving interpretations of Section 280E. The Company included in the balance of total unrecognized tax benefits as of June 30, 2026 and December 31, 2025 a potential benefit of $21.9 million and $31.7 million, respectively, that if recognized, would impact the effective tax rate on income from operations related to its tax positions based on legal interpretations that challenge the Company’s tax liability under Section 280E. Unrecognized tax benefits that reduce a net operating loss, similar to tax loss or tax credit carryforwards, are presented as a reduction to deferred income taxes.
The Company’s evaluation of tax positions was performed for those tax years which remain open 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 June 30, 2026, the Company’s federal tax returns since 2020 and state tax returns since 2019 are still subject to adjustment upon audit. The 2023 and 2024 stated tax return of Glass House Brands Inc. is currently under California Franchise Tax Board examination. No other 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.
On April 23, 2026, the DOJ and DEA issued an order placing FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license in Schedule III. See Note 21 – Subsequent Events for further discussion.
One Big Beautiful Bill Act
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”) (Public Law 119-21), a comprehensive tax reform and spending reconciliation bill. The legislation includes several significant business-tax provisions, notably affecting Sections 163(j), 168(k) (Bonus Depreciation), 179, and 174 of the Internal Revenue Code. The provisions most beneficial to the Company relate to the limitation on business interest expense under Section 163(j) and Bonus Depreciation for qualified property.
The OBBBA restores the more generous interest deduction limitation under Section 163(j) that had applied from 2018 through 2021. Under this amendment, the limitation is permanently based on EBITDA, rather than earnings before interest and taxes (“EBIT”). Beginning with tax years starting after December 31, 2024, taxpayers may again add back depreciation and amortization in computing adjusted taxable income for purposes of Section 163(j).
Additionally, for taxable years beginning after December 31, 2025, the OBBBA clarifies that any capitalized interest, other than amounts capitalized under Sections 263(g) and 263A(f), is treated as interest subject to the Section 163(j) limitation.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
The OBBBA also revives and permanently extends 100% bonus depreciation under Section 168(k) for qualified property acquired and placed in service on or after January 20, 2025. Qualified property generally includes tangible personal property with a recovery period of 20 years or less and qualified improvement property (“QIP”). Property is treated as acquired when a written binding contract is entered into to acquire the property. Property placed in service prior to January 20, 2025 remains eligible for 40% bonus depreciation.
The Company has incorporated the applicable income-tax effects of OBBBA in its income tax provision for the six months ended June 30, 2026 and for the year ended December 31, 2025. The impact primarily reflects the reinstatement of the EBITDA-based limitation under Section 163(j), which increased the amount of deductible interest expense for the period. The Company also updated its deferred tax balances to reflect the enacted changes under OBBBA.
Management will continue to monitor the implementation of the OBBBA and evaluate any additional impacts on the Company’s deferred tax balances and effective tax rate.
18. COMMITMENTS AND CONTINGENCIES
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, licenses and entitlements that could result in the Company ceasing operations. While management of the Company believes that the Company was in compliance with applicable local and state statutes, regulations, and ordinances as of June 30, 2026 and December 31, 2025, cannabis laws and regulations continue to evolve and are subject to differing interpretations. Further, other than FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license, cannabis remains a Schedule I controlled substance and is illegal under U.S. federal law, which may result in federal enforcement actions. As a result, the Company may be subject to regulatory fines, penalties, restrictions or the risk of asset seizure in the future.
Indemnification Agreement Related to GHR Deconsolidation
In connection with the Deconsolidation Transaction, the Company entered into an indemnification agreement with the Investor covering specified losses arising from certain transaction-document obligations, regulatory and cannabis-license matters, taxes, prior operations and other specified matters. The agreement does not have a single fixed expiration date, and certain obligations continue until if and when all Exchangeable Units are converted into Class B Units. The agreement does not specify a maximum potential amount of future payments, and the Company is unable to reasonably estimate such amount because the amount, if any, depends on the nature and extent of future claims and related losses. The agreement includes provisions intended to prevent duplicative recovery from insurance or other sources and provides the Company with certain subrogation rights following payment.
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 June 30, 2026 and December 31, 2025, there were 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
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 Element 7 CA, LLC (“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 “Element 7 Proceeding”). Through the process of litigation, on September 19, 2023, E7, APB and GH Group entered into a Settlement and General Mutual Release Agreement (the “Element 7 Settlement”), where E7 agreed to pay GH Group $2.9 million to settle the Element 7 Proceeding; provided, that if E7 paid GH Group $1.9 million by December 15, 2023, then E7 would have been entitled to a credit of $1.0 million towards the $2.9 million payment. In addition, E7 would retain ownership of its cannabis retail licenses.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
E7 failed to pay GH Group $1.9 million by December 15, 2023, and it also failed to subsequently pay GH Group the $2.9 million that was due under the Element 7 Settlement.
On March 6, 2024, the Superior Court of Los Angeles entered into a Final Judgment and Order against E7 for the amount of $2.9 million in favor of GH Group.
On November 19, 2024, C and H Holdings (“C and H”) filed a breach of contract claim among other claims against E7 and other E7 related entities (“C and H Lawsuit”). In addition, C and H requested that the court appoint a receiver for E7 so that the assets could be used to satisfy C and H’s claims under its loan agreement with E7 and the related E7 entities that were included in the lawsuit. C and H also named GH Group in the lawsuit to prevent GH Group from satisfying its judgment against E7.
GH Group opposed the C and H Lawsuit. On April 30, 2025, the court dismissed the lawsuit against GH Group.
On October 30, 2025, GH Group assigned its judgment against Element 7 to NUG Inc. (“NUG”) in exchange for a firm commitment buying agreement whereby NUG agreed to purchase from GH Group a certain amount of its CPG products until such time as NUG purchased either (x) net revenue in excess of $7.2 million or (y) realized net profits in excess of $1.4 million. For purposes of calculating such amounts, NUG shall receive credit for all qualifying purchases made by NUG on or after November 1, 2024.
Catalyst Litigation
The Company was the plaintiff in litigation in the Central District Superior Court of the County of Los Angeles against Elliot Lewis (“Lewis”), Damian Martin (“Martin”), South Cord Holdings LLC (“SCH”), and South Cord Management LLC (“SCM”) (collectively, “Catalyst Defendants”) following various public, false, and defamatory statements made by Lewis and Martin, co-founders of SCM and SCH, that the Company is the “largest black marketeer” of cannabis in the history of the United States, only 25% of the Company’s cultivated cannabis is sold through legal channels, and therefore 70% to 80% is sold illegally, and that the Company is engaging in illicit conduct to avoid taxes.
The Company is the defendant in litigation in the Central District Superior Court of the County of Los Angeles filed by 562 Discount Med, Inc. (“Discount Med” doing business as Catalyst Cannabis Co.), an affiliate of SCH and SCM. Discount Med has asserted claims against the Company for violation of California Business & Professions Code Section 17200 et seq., California’s Unfair Competition Law. Discount Med similarly alleged, like the Catalyst Defendants, that the Company is the “largest black marketeer” of cannabis in the United States and has purposefully structured its business to profit from the illicit market. The Company has categorically denied all such allegations and asserted affirmative defenses.
On May 20, 2024, the Company voluntarily dismissed without prejudice the defamation lawsuit against the Catalyst Defendants.
On June 25, 2024, the Superior Court of California (Los Angeles County) dismissed the lawsuit filed by Discount Med against the Company for unfair competition. The Court granted Glass House’s motion for judgment on the pleadings with prejudice. On July 15, 2024, the Court entered a judgment in Glass House’s favor, awarding costs against the plaintiff and concluding the case.
On August 7, 2024, Discount Med filed a Notice of Appeal of the judgment of dismissal following an order granting a motion for judgment on the pleadings without leave to amend. On February 9, 2026, Discount Med voluntarily filed a request for dismissal as to the Company, which the Court granted on February 10, 2026. The matter was remitted to the state court for entry of a judgment. Following Discount Med’s voluntary dismissal of its appeal, the Court of Appeal issued the remittitur. Accordingly, the trial court’s July 15, 2024 judgment remains in effect, and the underlying action is now closed.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
19. RELATED PARTY TRANSACTIONS
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, provided for an initial annual base rent payment of $213 thousand, increasing to $243 thousand for years two to five. The lease was renewed for one year starting in October 2024. Rent expense for the three months ended June 30, 2026 and 2025 was nil and $94 thousand, respectively. Rent expense for the six months ended June 30, 2026 and 2025 was nil and $187 thousand, respectively. On August 18, 2025, the Company acquired the remaining 76% undivided ownership interest in the property located in Lompoc, California. This acquisition eliminates future related party rent expense associated with this property.
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, was renewed for five years starting on January 1, 2025. It provides for a base rent of $93 thousand, increasing annually by the greater of three percent or the CPI, capped at five percent. Rent expense for the three months ended June 30, 2026 and 2025 was $24 thousand and $20 thousand, respectively. Rent expense for the six months ended June 30, 2026 and 2025 was $61 thousand and $40 thousand, 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 GHR, which was a subsidiary of the Company through June 11, 2026. The lease, which commenced on the first calendar day after the Company publicly announced the opening of a retail cannabis location at the leased property (the “Commencement Date”), provided for initial monthly rent of $5 thousand starting April 19, 2022 until the Commencement Date. Effective on the Commencement Date, the initial annual base rent payment was $144 thousand, increasing three percent per annum thereafter. Rent expense recognized by the Company from April 1, 2026 through June 11, 2026 and for the three months ended June 30, 2025 was $31 thousand and $36 thousand, respectively. Rent expense recognized by the Company from January 1, 2026 through June 11, 2026 and for the six months ended June 30, 2025 was $70 thousand and $72 thousand, respectively. From June 12, 2026 through June 30, 2026, GHR recognized rent expense of $8 thousand. Since GHR is a related party of the Company as an equity-method investee, but is not controlled by the Company, the Company has continued to include information regarding this post-deconsolidation transaction in its related-party disclosures.
In August 2022, the Kazan Trust dated December 10, 2004, a trust of which the trustee is 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 GHR, which was a subsidiary of the Company through June 11, 2026. The lease, which commenced in July 2022, provided for an initial annual base rent payment of $36 thousand to the Kazan Trust, increasing three percent per annum thereafter. Rent expense recognized by the Company from April 1, 2026 through June 11, 2026 and for the three months ended June 30, 2025 was $8 thousand and $9 thousand, respectively. Rent expense recognized by the Company from January 1, 2026 through June 11, 2026 and for the six months ended June 30, 2025 was $18 thousand and $18 thousand, respectively. From June 12, 2026 through June 30, 2026, GHR recognized rent expense of $2 thousand. Since GHR is a related party of the Company as an equity-method investee, but is not controlled by the Company, the Company has continued to include information regarding this post-deconsolidation transaction in its related-party disclosures.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
2000 De La Vina LLC, a company partially owned by executives and board members of the Company, entered into two leases with subsidiaries of GHR, which was a subsidiary of the Company through June 11, 2026. Both leases commenced in July 2022 and have ten-year terms. The first lease provided for initial annual base rent of $60 thousand, increasing three percent annually thereafter, and the second lease provided for initial annual base rent of $180 thousand, increasing three percent annually thereafter. The first lease terminated in 2025 in connection with the sale of the underlying property. Subsequent to the termination of the lease during 2025, the Company entered into an agreement to settle its remaining lease obligations through a negotiated termination payment. Rent expense recognized by the Company from April 1, 2026 through June 11, 2026 and for the three months ended June 30, 2025 was $38 thousand and $46 thousand, respectively. Termination payments recognized by the Company from April 1, 2026 through June 11, 2026 were nil. Rent expense recognized by the Company from January 1, 2026 through June 11, 2026 and for the six months ended June 30, 2025 was $87 thousand and $91 thousand, respectively. Termination payments recognized by the Company from January 1, 2026 through June 11, 2026 were $27 thousand. From June 12, 2026 through June 30, 2026, GHR recognized rent expense of $10 thousand. Since GHR is a related party of the Company as an equity-method investee, but is not controlled by the Company, the Company has continued to include information regarding this post-deconsolidation transaction in its related-party disclosures.
5042 Real Estate Investment, LLC, a company partially owned by an executive and board member of the Company, owns an undivided tenancy-in-common interest in a property that is leased to a subsidiary of GHR, which was a subsidiary of the Company through June 11, 2026. The lease, which commenced in August 2022 and has a ten-year term, provided for an initial annual base rent payment of $222 thousand to 5042 Real Estate Investment, LLC, increasing three percent per annum thereafter. Rent expense recognized by the Company from April 1, 2026 through June 11, 2026 and for the three months ended June 30, 2025 was $47 thousand and $56 thousand, respectively. Rent expense recognized by the Company from January 1, 2026 through June 11, 2026 and for the six months ended June 30, 2025 was $108 thousand and $111 thousand, respectively. From June 12, 2026 through June 30, 2026, GHR recognized rent expense of $12 thousand. Since GHR is a related party of the Company as an equity-method investee, but is not controlled by the Company, the Company has continued to include information regarding this post-deconsolidation transaction in its related-party disclosures.
Consulting Agreement
Beach Front Property Management Inc., a company that is majority-owned by an executive and certain board members of the Company, entered into a consulting agreement with the Company dated September 28, 2020. The monthly consulting fee is $11 thousand for mergers and acquisitions advisory and assistance and real estate acquisition and financing services. The consulting agreement may be terminated by either party for any/or no reason without penalty upon seven days written notice. Consulting fees for the three months ended June 30, 2026 and 2025 were $52 thousand and $35 thousand, respectively. Consulting fees for the six months ended June 30, 2026 and 2025 were $105 thousand and $70 thousand, respectively.
Jon A. Neu Insurance
Jon A. Neu Insurance, an entity majority owned by Beach Front Properties LLC, provides insurance brokerage services to the Company. During the three months ended June 30, 2026 and 2025, the Company recognized insurance brokerage expense relating to services provided by Jon A. Neu Insurance of approximately $245 thousand and $54 thousand, respectively. During the six months ended June 30, 2026 and 2025, the Company recognized insurance brokerage expense relating to services provided by Jon A. Neu Insurance of approximately $245 thousand and $204 thousand, respectively.
Preferred Mezzanine Equity Transactions
Certain executive officers and directors of the Company hold preferred equity interests in GH Group, Inc., a consolidated subsidiary of the Company. During the three months ended June 30, 2026 and 2025, related-party holders received preferred dividends totaling approximately $0.5 million and $0.3 million, respectively, which were paid on a pro rata basis in accordance with the contractual terms applicable to all preferred stockholders. During the six months ended June 30, 2026 and 2025, related-party holders received preferred dividends totaling approximately $1.0 million and $0.6 million, respectively, which were paid on a pro rata basis in accordance with the contractual terms applicable to all preferred stockholders. All preferred share issuances, conversions, redemptions, and dividend payments involving related-party holders were completed on the same terms and conditions as those applicable to non-related-party preferred stockholders. No preferential rights or special arrangements were provided to related-party holders.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Glass House Retail, LLC
Effective June 12, 2026, the Company deconsolidated GHR and began accounting for its retained investment under the equity method. Following the Deconsolidation Transaction, GHR is a related party of the Company.
The Company conducts transactions with GHR under arrangements for consulting, advisory and administrative services, inventory sales and reimbursement of costs incurred by either party on behalf of the other. During the period from June 12, 2026 through June 30, 2026, the Company recognized aggregate revenues of $0.2 million relating to transactions with GHR. See Note 3 – Discontinued Operations, for additional information regarding the Deconsolidation Transaction and the Company’s continuing involvement with GHR, and Note 6 – Equity Method Investments, for additional information regarding the Company’s retained investment in GHR.
20. SEGMENT INFORMATION
During the three months ended March 31, 2026, the Company updated the measure of segment income (loss) reviewed by the Company’s CODM to include an allocation of certain corporate expenses to the Company’s reportable segments. This update reflects changes in the internal financial information regularly reviewed by the CODM for purposes of evaluating segment performance and allocating resources. Accordingly, prior period segment information has been recast to conform to the current period presentation.
Operations by reportable segment for the three months ended June 30, 2026 were as follows (in thousands):
| Three Months Ended June 30, 2026 | ||||||||||||||||||||||||||||||||
| Wholesale Biomass | CPG | Corporate and Other | Total | |||||||||||||||||||||||||||||
| Revenues, Net | $ | 41,736 | $ | 5,281 | $ | — | $ | 47,017 | ||||||||||||||||||||||||
| Cost of Goods Sold | 26,550 | 4,699 | — | 31,249 | ||||||||||||||||||||||||||||
| Gross Profit | 15,186 | 582 | — | 15,768 | ||||||||||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||||||||
| General and Administrative | 4,956 | 1,300 | 7,132 | 13,388 | ||||||||||||||||||||||||||||
| Sales and Marketing | 252 | 67 | 38 | 357 | ||||||||||||||||||||||||||||
| Professional Fees | 641 | 10 | 930 | 1,581 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 3,100 | 258 | 80 | 3,438 | ||||||||||||||||||||||||||||
| Income (Loss) from Operations | 6,237 | (1,053) | (8,180) | (2,996) | ||||||||||||||||||||||||||||
| Other (Income) Expense: | ||||||||||||||||||||||||||||||||
| Interest Expense | 720 | 66 | (158) | 628 | ||||||||||||||||||||||||||||
| Gain on Equity Method Investments | — | — | (665) | (665) | ||||||||||||||||||||||||||||
| Gain on Change in Fair Value of Derivative Asset and Liability | (595) | — | — | (595) | ||||||||||||||||||||||||||||
| Other (Income) Expense, Net | 37 | (1) | (891) | (855) | ||||||||||||||||||||||||||||
| Total Other (Income) Expense Net | 162 | 65 | (1,714) | (1,487) | ||||||||||||||||||||||||||||
| Income (Loss) Before Income Taxes | $ | 6,075 | $ | (1,118) | $ | (6,466) | $ | (1,509) | ||||||||||||||||||||||||
| Total Assets as of June 30, 2026 | $ | 268,161 | $ | 15,879 | $ | 29,340 | $ | 313,380 | ||||||||||||||||||||||||
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Operations by reportable segment for the three months ended June 30, 2025 were as follows (in thousands):
| Three Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||
| Wholesale Biomass | CPG | Corporate and Other | Total | |||||||||||||||||||||||||||||
| Revenues, Net | $ | 42,122 | $ | 5,483 | $ | — | $ | 47,605 | ||||||||||||||||||||||||
| Cost of Goods Sold | 18,001 | 3,534 | — | 21,535 | ||||||||||||||||||||||||||||
| Gross Profit | 24,121 | 1,949 | — | 26,070 | ||||||||||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||||||||
| General and Administrative | 3,638 | 1,145 | 5,367 | 10,150 | ||||||||||||||||||||||||||||
| Sales and Marketing | 60 | 254 | 7 | 321 | ||||||||||||||||||||||||||||
| Professional Fees | 196 | 30 | 1,739 | 1,965 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 3,095 | 198 | 60 | 3,353 | ||||||||||||||||||||||||||||
| Income (Loss) from Operations | 17,132 | 322 | (7,173) | 10,281 | ||||||||||||||||||||||||||||
| Other (Income) Expense: | ||||||||||||||||||||||||||||||||
| Interest Expense | 1,172 | 4 | 706 | 1,882 | ||||||||||||||||||||||||||||
| Gain on Equity Method Investments | — | — | (44) | (44) | ||||||||||||||||||||||||||||
| Loss on Change in Fair Value of Derivative Asset | 318 | — | 10 | 328 | ||||||||||||||||||||||||||||
| Loss on Change in Fair Value of Contingent Liabilities and Shares Payable | — | — | 95 | 95 | ||||||||||||||||||||||||||||
| Other (Income) Expense, Net | (1,917) | (1) | (2,023) | (3,941) | ||||||||||||||||||||||||||||
| Total Other (Income) Expense Net | (427) | 3 | (1,256) | (1,680) | ||||||||||||||||||||||||||||
| Income (Loss) Before Income Taxes | $ | 17,559 | $ | 319 | $ | (5,917) | $ | 11,961 | ||||||||||||||||||||||||
| Total Assets as of December 31, 2025 | $ | 249,120 | $ | 17,631 | $ | 51,806 | $ | 318,557 | ||||||||||||||||||||||||
Operations by reportable segment for the six months ended June 30, 2026 were as follows (in thousands):
| Six Months Ended June 30, 2026 | ||||||||||||||||||||||||||||||||
| Wholesale Biomass | CPG | Corporate and Other | Total | |||||||||||||||||||||||||||||
| Revenues, Net | $ | 65,710 | $ | 9,917 | $ | — | $ | 75,627 | ||||||||||||||||||||||||
| Cost of Goods Sold | 47,922 | 7,886 | — | 55,808 | ||||||||||||||||||||||||||||
Gross Profit | 17,788 | 2,031 | — | 19,819 | ||||||||||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||||||||
General and Administrative | 8,765 | 2,617 | 14,171 | 25,553 | ||||||||||||||||||||||||||||
| Sales and Marketing | 271 | 137 | 45 | 453 | ||||||||||||||||||||||||||||
| Professional Fees | 1,359 | 20 | 3,067 | 4,446 | ||||||||||||||||||||||||||||
Depreciation and Amortization | 6,267 | 521 | 130 | 6,918 | ||||||||||||||||||||||||||||
| Income (Loss) from Operations | 1,126 | (1,264) | (17,413) | (17,551) | ||||||||||||||||||||||||||||
| Other (Income) Expense: | ||||||||||||||||||||||||||||||||
| Interest Expense | 1,442 | 132 | 324 | 1,898 | ||||||||||||||||||||||||||||
| Gain on Equity Method Investments | — | — | (665) | (665) | ||||||||||||||||||||||||||||
| Gain on Change in Fair Value of Derivative Asset and Liability | (1,004) | — | — | (1,004) | ||||||||||||||||||||||||||||
| Other (Income) Expense, Net | 51 | 5 | (2,123) | (2,067) | ||||||||||||||||||||||||||||
| Total Other (Income) Expense Net | 489 | 137 | (2,464) | (1,838) | ||||||||||||||||||||||||||||
| Income (Loss) Before Income Taxes | $ | 637 | $ | (1,401) | $ | (14,949) | $ | (15,713) | ||||||||||||||||||||||||
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Operations by reportable segment for the six months ended June 30, 2025 were as follows (in thousands):
| Six Months Ended June 30, 2025 | ||||||||||||||||||||||||||||||||
| Wholesale Biomass | CPG | Corporate and Other | Total | |||||||||||||||||||||||||||||
| Revenues, Net | $ | 70,405 | $ | 10,230 | $ | — | $ | 80,635 | ||||||||||||||||||||||||
| Cost of Goods Sold | 33,093 | 7,060 | — | 40,153 | ||||||||||||||||||||||||||||
| Gross Profit | 37,312 | 3,170 | — | 40,482 | ||||||||||||||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||||||||||||||
| General and Administrative | 7,544 | 2,291 | 10,813 | 20,648 | ||||||||||||||||||||||||||||
| Sales and Marketing | 193 | 350 | 12 | 555 | ||||||||||||||||||||||||||||
Professional Fees | 331 | 46 | 3,251 | 3,628 | ||||||||||||||||||||||||||||
| Depreciation and Amortization | 6,123 | 389 | 121 | 6,633 | ||||||||||||||||||||||||||||
| Income (Loss) from Operations | 23,121 | 94 | (14,197) | 9,018 | ||||||||||||||||||||||||||||
| Other (Income) Expense: | ||||||||||||||||||||||||||||||||
| Interest Expense | 1,595 | 9 | 2,517 | 4,121 | ||||||||||||||||||||||||||||
| Interest Income | (288) | — | — | (288) | ||||||||||||||||||||||||||||
| Gain on Equity Method Investments | — | — | (84) | (84) | ||||||||||||||||||||||||||||
| Loss on Change in Fair Value of Derivative Asset and Liability | 1,807 | — | 254 | 2,061 | ||||||||||||||||||||||||||||
| Loss on Extinguishment of Debt | — | — | 292 | 292 | ||||||||||||||||||||||||||||
| Other (Income) Expense, Net | (1,741) | (1) | (2,026) | (3,768) | ||||||||||||||||||||||||||||
| Total Other Expense Net | 1,373 | 8 | 953 | 2,334 | ||||||||||||||||||||||||||||
| Income (Loss) Before Income Taxes | $ | 21,748 | $ | 86 | $ | (15,150) | $ | 6,684 | ||||||||||||||||||||||||
21. SUBSEQUENT EVENTS
At-The-Market Cross-Border Program
On July 14, 2026, the Company entered into an amended and restated equity distribution agreement (the “A&R Equity Distribution Agreement”) with ATB Capital Markets Corp., ATB Capital Markets USA Inc. and Wilson-Davis & Co., Inc. The A&R Equity Distribution Agreement superseded and replaced the Company’s equity distribution agreement dated June 10, 2026, and permits the Company to sell, from time to time, up to an aggregate of $100 million of its Equity Shares in Canada and the United States under its 2026 ATM Program. The amendment permits sales in the United States following the listing of the Company’s Equity Shares on the NYSE on June 30, 2026.
The Company filed an amended and restated prospectus supplement dated July 14, 2026, which amended and restated the prospectus supplement dated June 10, 2026, to the Company’s short form base shelf prospectus dated June 10, 2026. The offering is also being made in the United States pursuant to a prospectus supplement dated July 14, 2026, forming part of the Company’s effective registration statement on Form F-10.
The Company currently intends to use net proceeds of the 2026 ATM Program, if any, for cultivation expansion, potential acquisitions that may be identified in the future and general corporate purposes. The Company views the 2026 ATM Program as a long-term source of potential capital to be accessed on an opportunistic basis, rather than servicing an immediate need.
Since the Equity Shares will be distributed at trading prices prevailing at the time of sale, prices may vary between purchasers and during the period of distribution. The volume and timing of sales, if any, will be determined at the sole discretion of the Company’s management.
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GLASS HOUSE BRANDS INC.
Notes to Unaudited Condensed Interim Consolidated Financial Statements
(Amounts Expressed in United States Dollars Unless Otherwise Stated)
Sales of Equity Shares, if any, under the 2026 ATM Program are anticipated to be made in transactions that are deemed to be “at-the-market distributions” as defined in National Instrument 44-102 – Shelf Distributions, as sales made directly on CBOE Canada or any other recognized Canadian “marketplace” within the meaning of National Instrument 21-101 – Marketplace Operation, and in the manner of “at-the-market offering” as defined in Rule 415 of the U.S. Securities Act of 1933, as amended, including sales made directly on the NYSE.
Subsequent to June 30, 2026, the Company issued 141,600 Equity Shares under the 2026 ATM Program at an average price of $11.29 per share for gross proceeds of $1.6 million. The Company received net proceeds of $1.6 million after paying commissions of $32 thousand to the sales agent for the 2026 ATM Program.
Warrants
From July 1, 2026 through the accelerated expiry date of July 23, 2026, holders exercised an additional 4,846,502 Series B warrants, 880,000 Series C warrants and 1,719,000 Series D warrants, resulting in the issuance of 4,845,434 subordinate voting shares and aggregate cash proceeds of approximately $10.1 million. As of July 23, 2026, all outstanding Series B, Series C and Series D warrants have been fully exercised and no warrants of any series remain outstanding.
.
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Exhibit 99.2
GLASS HOUSE BRANDS INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND UNAUDITED RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2026 AND 2025
JUNE 30, 2026 AND 2025
Introduction
This management’s discussion and analysis of financial condition and results of operations (“MD&A”) is provided as of August 14, 2026 and should be read together with Glass House Brands Inc.’s (together with its wholly-owned subsidiaries, referred to as “Glass House,” the “Company,” “we,” “us” or “our”) unaudited condensed consolidated interim financial statements as of June 30, 2026 and December 31, 2025 and for the three and six months ended June 30, 2026 and 2025, and the accompanying notes (the “Unaudited Condensed Consolidated Interim Financial Statements”). The financial results discussed herein have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and, unless otherwise noted, are expressed in United States dollars. Additional information relating to the Company can be found on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.
Overview
Glass House, formerly known as Mercer Park Brand Acquisition Corp. (“Mercer Park”), was incorporated under the Business Corporations Act (British Columbia) on April 16, 2019. As of June 30, 2026, we are a cannabis company that operates in the state of California and have a certain intellectual property licensing agreement in Florida. We, through our subsidiaries, cultivate, manufacture and distribute cannabis bulk flower and trim to wholesalers and cannabis-related consumer packaged goods (“CPG”) to third-party retail stores in the state of California. Prior to the Deconsolidation Transaction (as defined below), we owned and operated retail cannabis stores and provided retail cannabis store management services in the state of California. Our subordinate voting shares (“Subordinate Voting Shares”), restricted voting shares (“Restricted Voting Shares”) and limited voting shares (“Limited Voting Shares,” and collectively, with the Subordinate Voting Shares and the Restricted Voting Shares, the “Equity Shares”) are listed on Cboe Canada, trading under the symbol “GLAS.A.U”. Effective June 30, 2026, the Subordinate Voting Shares also commenced trading on the New York Stock Exchange (the “NYSE”) under the symbol “GLAS” (refer to “Listing on the NYSE” below). In connection with the listing on the NYSE, the Subordinate Voting Shares ceased trading on the OTCQX in the United States under the symbol “GLASF” at the close of market on June 29, 2026. Our head office and principal address is 3645 Long Beach Boulevard, Long Beach, California 90807. Our registered office in Canada is 666 Burrard Street, Suite 2500, Vancouver, BC V6C 2X8, Canada.
Major Business Lines and Geographies
Subsequent to the Deconsolidation Transaction (as defined below), we view our financial results under two business lines – the creation of extensible wholesale cannabis biomass and cannabis-related consumer packaged goods. We generate our cannabis revenue in the state of California as of June 30, 2026 and we completed our first international sale of smokeable CBD biomass to Europe as part of the initial commercial harvest of Greenhouse 4 located at the Camarillo Facility during June 2026. In addition, we have a certain intellectual property licensing agreement in Florida.
While many cannabis businesses prioritize brand building and customer acquisition before securing a reliable product flow, we believe that in a consumer-focused CPG space, consistent delivery of high-quality product at an attractive price point is a first principle and a prerequisite for any other activity.
Cannabis Cultivation, Production and Sales
We operate multiple greenhouse cultivation facilities located in Carpinteria and Camarillo, California. Our manufacturing production facility is located in Lompoc, California. We operate an approximately 5.5 million square foot hi-tech greenhouse facility, the “Camarillo Facility,” located in Camarillo, California. On March 10, 2022, we received California state cannabis licenses and a cannabis business license from Ventura County for the Phase I retrofit of the Camarillo Facility. We completed the first harvest in June 2022. On March 1, 2023, we announced plans to commence a Phase II retrofit of an additional greenhouse, Greenhouse 5, to expand production at our Camarillo Facility. We completed the first harvest from Greenhouse 5 in the first quarter of 2024. On August 13, 2024, we announced plans to commence a Phase III retrofit of an additional greenhouse to expand production at our Camarillo Facility. On January 20, 2026, we announced that we completed the buildout of the first third of Greenhouse 2 during 2025 with initial contributions included within first quarter 2026 results. During the second quarter of 2026, we completed full planting of the remainder of Greenhouse 2. Additionally, we completed the initial light retrofit and buildout of approximately one-third of Greenhouse 4 to support production targeting exportation to international CBD and hemp markets. During June 2026, we completed our first international sale of smokeable hemp as part of the initial commercial harvest from Greenhouse 4.
We generate revenue by selling our cannabis products in bulk at wholesale and at retail, such as raw cannabis, cannabis oil, and cannabis CPG. We operate a manufacturing facility in Lompoc, California. We also have a certain intellectual property licensing agreement in Florida.
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Prior to the Deconsolidation Transaction (as defined below), we owned “Farmacy” branded retail dispensaries located in Santa Barbara, Santa Ana, Berkeley, Isla Vista and Santa Ynez, California; “Natural Healing Center” or “NHC” branded retail dispensaries located in Grover Beach, Lemoore, Morro Bay and Turlock, California. We operated one dispensary in Los Angeles, California under “The Pottery” brand. We also provided third-party retail cannabis store management services in California.
Deconsolidation Transaction
On June 17, 2026, the Company announced that it had applied to list its Subordinate Voting Shares on the New York Stock Exchange (the “NYSE”).
On June 12, 2026, the Company completed a series of transactions to facilitate the deconsolidation of the Company's dual-use cannabis retail business conducted through Glass House Retail, LLC (“GHR”) and its subsidiaries (the “Retail Business”), which comprised substantially all of the Company’s historical Retail reportable segment (the “Deconsolidation Transaction”). The Deconsolidation Transaction segregated the Company’s Retail Business from its cultivation, manufacturing and other operations and was undertaken in connection with the Company’s application to list its Subordinate Voting Shares on the NYSE.
In connection with the Deconsolidation Transaction, GHR entered into an amended and restated limited liability company agreement that established a three-class unit structure consisting of Class A Units, Class B Units and Exchangeable Units. An independent third-party investor, NSJB Investments LLC (the “GHR Investor”), acquired 100 Class A Units of GHR for approximately $2.5 million, funded through an unsecured promissory note issued by the GHR Investor to GHR. Following the Deconsolidation Transaction, the GHR Investor holds all of GHR’s outstanding voting Class A Units and has the right to appoint two of the three members of GHR’s board of managers.
The Company, through its indirect wholly owned subsidiary GHB Usub, LLC (“Holdings”), retained 900 Exchangeable Units of GHR. Prior to conversion, the Exchangeable Units are non-voting and do not provide Holdings with rights to current distributions or liquidation proceeds. The Exchangeable Units are convertible into Class B Units only after the date on which the NYSE permits the listing of companies that consolidate the financial statements of companies that cultivate, distribute or possess marijuana, as defined in 21 U.S.C. 802, for non-medical uses in the United States.
The Company, Holdings and GHR also entered into a protection agreement intended to preserve the value of the Exchangeable Units, which does not provide the Company or Holdings with the ability to direct the business, operations or activities of GHR. In addition, a subsidiary of the Company entered into a consulting services agreement with GHR pursuant to which it provides certain consulting, advisory and administrative services to GHR for fees generally equal to reimbursement of costs plus a 5% margin, subject to a monthly cap. The consulting services agreement may generally be terminated by either party upon 90 days’ notice.
As a result of the Deconsolidation Transaction, the Company deconsolidated GHR effective June 12, 2026 and classified the historical results of the Retail Business through June 11, 2026 as discontinued operations for all periods presented. Accordingly, unless otherwise noted, the results of operations discussed in this MD&A reflect the Company’s continuing operations and exclude the historical operating results of the Retail Business classified as discontinued operations. Beginning June 12, 2026, the Company’s share of GHR’s income or loss is recognized under the equity method and is included in continuing operations. See Note 3 – Discontinued Operations, to the Unaudited Condensed Interim Consolidated Financial Statements for additional information regarding the Deconsolidation Transaction and discontinued operations.
Listing on the New York Stock Exchange
On June 26, 2026, the Company filed a Registration Statement on Form 8-A with the U.S. Securities and Exchange Commission to register its Subordinate Voting Shares under Section 12(b) of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). On the same date, the NYSE approved the listing of the Company’s Subordinate Voting Shares.
The Subordinate Voting Shares commenced trading on the NYSE under the symbol “GLAS” at the opening of trading on June 30, 2026. In connection with the NYSE listing, trading of the Subordinate Voting Shares on the OTCQX Market under the symbol “GLASF” ceased at the close of market on June 29, 2026. The Company’s Subordinate Voting Shares continue to trade on Cboe Canada under the symbol “GLAS.A.U.”
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Strategic Retail Arrangement with Vireo Growth Inc.
On April 9, 2026, Glass House Brands Inc. entered into certain agreements with Vireo Growth Inc. (“Vireo”) to form a retail-focused strategic arrangement (the “Retail Joint Venture”) to acquire and operate cannabis dispensaries in California.
The arrangement with Vireo contemplates that, subject to regulatory approvals, the final transaction structure and other closing conditions, the parties would contribute their respective California dispensary operations to the Retail Joint Venture in exchange for equal ownership interests. The arrangement also includes call and put rights between the parties that become exercisable after five years.
As of June 30, 2026, no assets or liabilities had been contributed and the Retail Joint Venture had not commenced operations.
Market Update and Objectives
The state of California represents the largest single state-legalized adult-use and medical market for cannabis in the U.S., with an adult population of over 30 million. The California market is highly fragmented, with over 4,000 cultivation licenses in operation, over 775 distribution licenses, approximately 1,250 licensed dispensaries, greater than 600 brands and a significant illicit market. In addition, California operators face high taxes and fees, extensive regulation, heavy competition and a large illicit market. Accordingly, California operators may find it difficult to operate in this market. In 2025, we saw wholesale prices decline from 2024 exhibiting high levels of volatility, but due to our scaled operations and low cost production, we believe Glass House is best fit to operate in this difficult market. With this backdrop, we will continue to use scale in cultivation and distribution (at wholesale and through retailers) to achieve low cost of production that will allow us to outperform competitors and build superior brand awareness and loyalty.
On August 30, 2023, the Department of Health and Human Services recommended that marijuana be reclassified as a Schedule III controlled substance under the Controlled Substances Act (“CSA”), concluding that marijuana has a currently accepted medical use in treatment in the United States for purposes of the CSA scheduling criteria, which informed the U.S. Department of Justice’s (“DOJ”) subsequent rulemaking process. On May 21, 2024, the DOJ published a notice of proposed rulemaking (“NPRM”) proposing to transfer marijuana from Schedule I to Schedule III of the CSA. The public comment period for the NPRM concluded on July 22, 2024. In connection with the proposed rulemaking, the U.S. Drug Enforcement Administration (“DEA”) initially noticed an administrative hearing for December 2, 2024, which was later postponed to January 21, 2025. The hearing was subsequently canceled by the DEA’s Chief Administrative Law Judge due to procedural issues and pending appeals and legal actions.
Throughout 2025, the rescheduling process experienced continued delays, and there was no defined timeline for resolution of the outstanding procedural matters. In July 2025, President Donald Trump’s nominee to lead the DEA, Terrance Cole, was confirmed by the Senate and sworn in as Administrator of the DEA. While the administrative process to reschedule marijuana remained paused during his initial months in office, a policy development occurred on December 18, 2025, when President Trump signed an Executive Order titled “Increasing Medical Marijuana and Cannabidiol Research.” The Executive Order directs the Attorney General and the DEA to prioritize and expedite completion of the marijuana rescheduling process to the maximum extent permitted under federal law.
On April 23, 2026, the DOJ and DEA announced that they had issued an order (the “Rescheduling Order”), effective April 22, 2026, placing FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license in Schedule III under the CSA, while marijuana products sold for adult-use recreational purposes remain classified as Schedule I controlled substances. In connection with this action, the DOJ and DEA also terminated the prior administrative proceedings associated with the NPRM and initiated a new expedited administrative hearing process to consider the broader proposed rescheduling of marijuana from Schedule I to Schedule III. The Rescheduling Order is limited in scope and does not broadly legalize marijuana under U.S. federal law, and the broader rescheduling process remains ongoing. On May 6, 2026, we announced that we submitted applications to register certain California-licensed medical cannabis operations with the DEA pursuant to the expedited registration pathway established by the Rescheduling Order.
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The new administrative hearing commenced on June 29, 2026 pursuant to a schedule that called for the hearing to conclude no later than July 15, 2026. This hearing, which proceeds under the original May 2024 NPRM, is the vehicle through which the DEA is evaluating whether to, among other things, extend Schedule III status to all marijuana, including adult-use marijuana, and replaces the prior administrative proceedings that had been noticed by the Biden Administration (which were terminated in connection with the Rescheduling Order). Following the conclusion of the hearing and any permitted post-hearing submissions, the Administrative Law Judge is expected to issue a recommended decision. The parties will then have an opportunity to file exceptions before the administrative record is transmitted to the Attorney General. The Attorney General, acting through the DEA, may then issue a final rule or, alternatively, a further notice of proposed rulemaking. Any final rule would be subject to potential judicial review. The timing and outcome of this broader rescheduling process remain uncertain, and a final rule could take several months or longer after the hearing concludes. Separately, the Rescheduling Order itself is subject to pending petitions for review before the U.S. Court of Appeals for the District of Columbia Circuit. These judicial proceedings are distinct from the ongoing administrative process relating to the broader rescheduling proposal.
On April 23, 2026, the U.S. Department of the Treasury and the Internal Revenue Service announced that they plan to issue guidance addressing the federal tax consequences of the Rescheduling Order. The expected guidance would address, among other matters, the application of Section 280E of the Internal Revenue Code to businesses with multiple activities and a transition rule under which rescheduling would generally first apply for the full taxable year that includes the effective date of the Rescheduling Order. As of the date of this MD&A, such guidance has not been issued.
Despite these developments, the impact, timing and ultimate outcome of the rescheduling process remain uncertain and subject to completion of the administrative process, potential judicial review, and other legal and regulatory considerations. In addition, legislative uncertainty persists with respect to federal tax treatment. In February 2025, two identical bills — S. 471 and H.R. 1447 — were introduced in Congress. These bills would amend the Internal Revenue Code to preserve the application of Section 280E to marijuana-related businesses even if marijuana is reclassified as a Schedule III substance. S. 471 was referred to the Senate Committee on Finance, and H.R. 1447 was referred to the House Committee on Ways and Means. As of the date of this MD&A, neither bill has advanced out of committee or been scheduled for a floor vote.
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Comparison of the Three Months Ended June 30, 2026 and 2025
The following are the results of our operations for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 (in thousands):
| Three Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Revenues, Net | $ | 47,017 | $ | 47,605 | ||||||||||
| Cost of Goods Sold (Exclusive of Depreciation and Amortization Shown Separately Below) | 31,249 | 21,535 | ||||||||||||
| Gross Profit | 15,768 | 26,070 | ||||||||||||
| Operating Expenses: | ||||||||||||||
| General and Administrative | 13,388 | 10,150 | ||||||||||||
| Sales and Marketing | 357 | 321 | ||||||||||||
| Professional Fees | 1,581 | 1,965 | ||||||||||||
| Depreciation and Amortization | 3,438 | 3,353 | ||||||||||||
| Total Operating Expenses | 18,764 | 15,789 | ||||||||||||
| Income (Loss) from Operations | (2,996) | 10,281 | ||||||||||||
| Other (Income) Expense: | ||||||||||||||
| Interest Expense | 628 | 1,882 | ||||||||||||
| Equity in Income of Equity Method Investees | (665) | (44) | ||||||||||||
| (Gain) Loss on Change in Fair Value of Derivative Asset and Liability | (595) | 328 | ||||||||||||
| Loss on Change in Fair Value of Contingent Liabilities and Shares Payable | — | 95 | ||||||||||||
| Other Income, Net | (855) | (3,941) | ||||||||||||
| Total Other Income, Net | (1,487) | (1,680) | ||||||||||||
| Income (Loss) from Operations Before Provision for Income Taxes | (1,509) | 11,961 | ||||||||||||
| Provision for Income Taxes | 3,062 | 4,159 | ||||||||||||
| Net Income (Loss) From Continuing Operations | (4,571) | 7,802 | ||||||||||||
| Net Income (Loss) From Discontinued Operations | (2,112) | 942 | ||||||||||||
| Net Income (Loss) | (6,683) | 8,744 | ||||||||||||
| Net Income Attributable to Non-Controlling Interest | 130 | 75 | ||||||||||||
| Net Income (Loss) Attributable to the Company | $ | (6,813) | $ | 8,669 | ||||||||||
Revenue
Revenue for the three months ended June 30, 2026 was $47.0 million, which represents a decrease of $0.6 million, or 1%, from $47.6 million for the three months ended June 30, 2025. Biomass revenue decreased by $0.4 million, or 1%, and CPG revenue decreased by $0.2 million, or 4%, for the three months ended June 30, 2026 as compared to the same period in the prior year. The decrease in wholesale biomass revenue was primarily due to a decline in equivalent dry pounds sold, partially offset by higher average selling prices of our biomass. As a result, our cultivation facilities reported $41.7 million in wholesale biomass revenue compared to $42.1 million in the same period in the prior year. CPG revenue was relatively consistent with results from the same period in the prior year.
Cost of Goods Sold and Gross Profit
Cost of goods sold for the three months ended June 30, 2026 was $31.2 million, an increase of $9.7 million, or 45%, compared with $21.5 million for the three months ended June 30, 2025. Gross profit for the three months ended June 30, 2026 was $15.8 million, representing a gross margin of 34%, compared to a gross profit of $26.1 million, representing a gross margin of 55% for the three months ended June 30, 2025. The increase in cost of goods sold during the three months ended June 30, 2026 was primarily attributable to higher cost of production for the wholesale biomass segment and increased production. Gross profit dollars for our wholesale biomass segment decreased by $8.9 million primarily due to an increase in cost of goods sold. Gross profit percentage for wholesale biomass was unfavorably impacted by higher production costs partially offset by higher average selling prices realized during the three months ended June 30, 2026 as compared to the same period in the prior year. Gross profit dollars for our CPG segment decreased by $1.3 million primarily due to an increase in cost of goods sold.
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Total Operating Expenses
Total operating expenses for the three months ended June 30, 2026 was $18.8 million, an increase of $3.0 million, or 19%, compared to total operating expenses of $15.8 million for the three months ended June 30, 2025. The increase in total operating expenses was attributable to the factors described below.
General and administrative expenses for the three months ended June 30, 2026 and 2025 were $13.4 million and $10.2 million, respectively, an increase of $3.2 million, or 31%. The increase in general and administrative expenses was primarily attributed to an increase of $2.1 million in employee-related costs and an increase of $0.6 million in cannabis taxes and licenses.
Sales and marketing expenses for the three months ended June 30, 2026 and 2025 were $0.4 million and $0.3 million, respectively, an increase of $0.1 million, or 33%. Sales and marketing expenses were largely consistent period over period and include trade marketing, point of sale marketing for our wholesale CPG business product lines and promotions in various media outlets.
Professional fees for the three months ended June 30, 2026 and 2025 were $1.6 million and $2.0 million, respectively, a decrease of $0.4 million, or 20%. Professional fees were largely consistent period over period.
Depreciation and amortization expenses for the three months ended June 30, 2026 and 2025 were $3.4 million in each period which was largely consistent period over period.
Total Other Income
Total other income for the three months ended June 30, 2026 and 2025 were income of $1.5 million and income of $1.7 million, respectively, a decrease of $0.2 million, or 12%. The decrease was primarily due to a $4.1 million decrease in employee retention tax credits. This amount was offset by a $1.3 million favorable change in interest expense mainly resulting from a lower interest rate on the Senior Secured Credit Facility (as defined below) as compared to the Prior Credit Agreement (as defined below) and a favorable change of $0.9 million in the fair value of derivative assets and liabilities.
Provision for Income Taxes
Provision for income taxes for the three months ended June 30, 2026 and 2025 was $3.1 million as compared to $4.2 million, respectively, a favorable change of $1.1 million, or 26%. The favorable change in the provision for income taxes was the result of our change in tax position.
Net Income (Loss) From Discontinued Operations
Net income (loss) from discontinued operations, net of tax, for the three months ended June 30, 2026 and 2025 was a loss of $2.1 million and income of $0.9 million, respectively, a change of $3.0 million. The change primarily reflected the $2.5 million loss recognized upon deconsolidation and the inclusion of the retail business’s operating results through June 11, 2026, compared with the full three months ended June 30, 2025. See Note 3 – Discontinued Operations, to the Unaudited Condensed Interim Consolidated Financial Statements.
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Comparison of the Six Months Ended June 30, 2026 and 2025
The following are the results of our operations for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 (in thousands):
| Six Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Revenues, Net | $ | 75,627 | $ | 80,635 | ||||||||||
| Cost of Goods Sold (Exclusive of Depreciation and Amortization Shown Separately Below) | 55,808 | 40,153 | ||||||||||||
| Gross Profit | 19,819 | 40,482 | ||||||||||||
| Operating Expenses: | ||||||||||||||
| General and Administrative | 25,553 | 20,648 | ||||||||||||
| Sales and Marketing | 453 | 555 | ||||||||||||
| Professional Fees | 4,446 | 3,628 | ||||||||||||
| Depreciation and Amortization | 6,918 | 6,633 | ||||||||||||
| Total Operating Expenses | 37,370 | 31,464 | ||||||||||||
| Income (Loss) from Operations | (17,551) | 9,018 | ||||||||||||
| Other (Income) Expense: | ||||||||||||||
| Interest Expense | 1,898 | 4,121 | ||||||||||||
| Interest Income | — | (288) | ||||||||||||
| Equity in Income of Equity Method Investees | (665) | (84) | ||||||||||||
| (Gain) Loss on Change in Fair Value of Derivative Asset and Liability | (1,004) | 2,061 | ||||||||||||
| Loss on Extinguishment of Debt | — | 292 | ||||||||||||
| Other Income, Net | (2,067) | (3,768) | ||||||||||||
| Total Other (Income) Expense, Net | (1,838) | 2,334 | ||||||||||||
| Income (Loss) from Operations Before Provision for Income Taxes | (15,713) | 6,684 | ||||||||||||
| Provision for Income Taxes | 6,042 | 6,310 | ||||||||||||
| Net Income (Loss) From Continuing Operations | (21,755) | 374 | ||||||||||||
| Net Loss From Discontinued Operations | (1,934) | (1,638) | ||||||||||||
| Net Loss | (23,689) | (1,264) | ||||||||||||
| Net Income Attributable to Non-Controlling Interest | 256 | 127 | ||||||||||||
| Net Loss Attributable to the Company | $ | (23,945) | $ | (1,391) | ||||||||||
Revenue
Revenue for the six months ended June 30, 2026 was $75.6 million, which represents a decrease of $5.0 million, or 6%, from $80.6 million for the six months ended June 30, 2025. Biomass revenue decreased by $4.7 million, or 7%, and CPG revenue decreased by $0.3 million, or 3%, for the six months ended June 30, 2026 as compared to the same period in the prior year. The decrease in wholesale biomass revenue during the six months ended June 30, 2026 was primarily due to a decrease in equivalent dry pounds sold and lower average selling prices of our biomass. As a result, our cultivation facilities reported $65.7 million in wholesale biomass revenue compared to $70.4 million in the same period in the prior year. CPG revenue was relatively consistent with results from the same period in the prior year.
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Cost of Goods Sold and Gross Profit
Cost of goods sold for the six months ended June 30, 2026 was $55.8 million, an increase of $15.6 million, or 39%, compared with $40.2 million for the six months ended June 30, 2025. Gross profit for the six months ended June 30, 2026 was $19.8 million, representing a gross margin of 26%, compared to a gross profit of $40.5 million, representing a gross margin of 50% for the six months ended June 30, 2025. The increase in cost of goods sold during the six months ended June 30, 2026 was primarily attributable to higher cost of production and increased production for our wholesale biomass segment. Gross profit dollars for our wholesale biomass segment decreased by $19.5 million primarily due to the increase in cost of goods sold. Gross profit percentage for wholesale biomass was unfavorably impacted by higher unit production costs realized during the six months ended June 30, 2026 as compared to the same period in the prior year. Gross profit dollars for our CPG segment decreased by $1.2 million primarily due to an increase in cost of goods sold.
Total Operating Expenses
Total operating expenses for the six months ended June 30, 2026 was $37.4 million, an increase of $5.9 million, or 19%, compared to total operating expenses of $31.5 million for the six months ended June 30, 2025. The increase in total operating expenses was attributable to the factors described below.
General and administrative expenses for the six months ended June 30, 2026 and 2025 were $25.6 million and $20.6 million, respectively, an increase of $5.0 million, or 24%. The increase in general and administrative expenses is primarily attributed to an increase in employee-related costs.
Sales and marketing expenses for the six months ended June 30, 2026 and 2025 were $0.5 million and $0.6 million, respectively, a decrease of $0.1 million, or 17%. Sales and marketing expenses were largely consistent period over period.
Professional fees for the six months ended June 30, 2026 and 2025 were $4.4 million and $3.6 million, respectively, an increase of $0.8 million, or 22%. This increase was primarily attributable to an increase in accounting and legal fees.
Depreciation and amortization expenses for the six months ended June 30, 2026 and 2025 were $6.9 million and $6.6 million, respectively, an increase of $0.3 million, or 5%, which is largely consistent period over period.
Total Other (Income) Expense
Total other (income) expense for the six months ended June 30, 2026 and 2025 was income of $1.8 million and expense of $2.3 million, respectively, a change of $4.1 million, or 178%. The change was primarily due to a favorable change of $3.1 million on the change in fair value of derivative asset and liability, a favorable change of $2.2 million in interest expense resulting from a lower interest rate on the Senior Secured Credit Facility (as defined below) as compared to the Prior Credit Agreement (as defined below) and a favorable change of $1.6 million in foreign currency debt remeasurement. These amounts were offset by a decrease of $4.3 million in employee retention tax credits.
Provision for Income Taxes
Provision for income taxes for the six months ended June 30, 2026 and 2025 was $6.0 million and $6.3 million, respectively, a favorable change of $0.3 million, or 5%. The favorable change in the provision for income taxes was the result of our change in tax position.
Net Loss From Discontinued Operations
Net loss from discontinued operations, net of tax, was $1.9 million for the six months ended June 30, 2026 as compared with a net loss of $1.6 million for the six months ended June 30, 2025, an increase of $0.3 million. The change primarily reflected the $2.5 million loss recognized upon deconsolidation during the six months ended June 30, 2026 and the inclusion of the retail business’s operating results through June 11, 2026, compared with the full six months ended June 30, 2025 partially offset by $1.9 million of other than temporary intangible asset impairment in retail cannabis licenses recognized during the six months ended June 30, 2025. See Note 3 – Discontinued Operations, to the Unaudited Condensed Interim Consolidated Financial Statements.
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Non-GAAP Financial Measures
In addition to providing financial measurements based on GAAP, we provide additional financial metrics that are not defined under, prepared in accordance with or a standardized financial measure under GAAP. Management uses such non-GAAP financial measures, in addition to GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision-making, for planning and forecasting purposes and to evaluate our financial performance. These non-GAAP financial measures (collectively, the “non-GAAP financial measures”) are:
| EBITDA | Net Income (Loss) (GAAP) adjusted for interest and financing costs, income taxes, depreciation, and amortization. This includes results of the Retail Business through June 11, 2026 and was no longer consolidated beginning June 12, 2026. This non-GAAP measure represents our current operating profitability and ability to generate cash flow. | ||||
| Adjusted EBITDA | EBITDA (non-GAAP) adjusted for share-based compensation, stock appreciation rights expense, change in equity method investments, impairment expense for goodwill and intangible assets, change in fair value of derivative instruments, change in fair value of contingent liabilities and shares payable, loss on extinguishment of debt, employee retention tax credits, non-recurring asset casualty loss and non-recurring legal and professional fees. This includes results of the Retail Business through June 11, 2026 and was no longer consolidated beginning June 12, 2026. This non-GAAP measure represents our current operating profitability and ability to generate cash flow, excluding certain material non-cash items and other adjustments, such as non-recurring, irregular or one-time expenditures, in order to improve comparability. | ||||
Management believes that these non-GAAP financial measures assess our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as they facilitate comparing financial results across accounting periods and to those of peer companies. Management also believes that these non-GAAP financial measures enable investors to evaluate our operating results and future prospects in the same manner as management. These non-GAAP financial measures may also exclude certain material non-cash items, expenses and gains and other adjustments that may be unusual in nature, infrequent or that we believe are not reflective of our ongoing operating results and performance.
As there are no standardized methods of calculating these non-GAAP financial measures, our methods may differ from those used by others, and accordingly, the use of these measures may not be directly comparable to similarly titled measures used by others in the cannabis industry or otherwise. Accordingly, these non-GAAP financial measures are intended to provide additional information and are not intended to represent and should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows or as measures of liquidity. Such non-GAAP financial measures should only be considered in conjunction with the GAAP financial measures presented herein and in our Unaudited Condensed Interim Consolidated Financial Statements.
These supplemental non-GAAP financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believes that the supplemental non-GAAP financial measures presented provide additional perspective and insights when analyzing the core operating performance of the business. In addition, we believe investors use both GAAP and non-GAAP measures to assess management’s past and future decisions associated with our priorities and allocation of capital, as well as to analyze how the business operates in, or responds to, swings in economic cycles or to other events that impact the cannabis industry.
These non-GAAP financial measures exclude certain material non-cash items and certain other adjustments we believe are not reflective of our ongoing operations and performance. These non-GAAP financial measures are not intended to represent and should not be considered as alternatives to net income, operating income or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows or as measures of liquidity. These non-GAAP financial measures have important limitations as analytical tools and should not be considered in isolation or as a substitute for any standardized measure under GAAP. For example, certain of these non-GAAP financial measures:
•exclude certain tax payments that may reduce cash available to us;
•do not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;
•do not reflect changes in, or cash requirements for, working capital needs; and
•do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on debt.
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Other companies in the cannabis industry may calculate these measures differently than we do, limiting their usefulness as comparative measures.
Adjusted EBITDA (non-GAAP)
The following table provides a reconciliation of our Net Income (Loss) to Adjusted EBITDA (non-GAAP) for the three months ended June 30, 2026 compared to the three months ended June 30, 2025 (in thousands):
| Three Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Net Income (Loss) (GAAP) | $ | (6,683) | $ | 8,744 | ||||||||||
| Depreciation and Amortization | 3,797 | 3,905 | ||||||||||||
| Interest, Net | 643 | 1,918 | ||||||||||||
| Provision for Income Taxes | 3,119 | 4,970 | ||||||||||||
| EBITDA from (Non-GAAP) | 876 | 19,537 | ||||||||||||
| Adjustments: | ||||||||||||||
| Share-Based Compensation | 4,214 | 2,944 | ||||||||||||
| Stock Appreciation Rights Expense | — | 37 | ||||||||||||
| Equity in Income of Equity Method Investees | (665) | (44) | ||||||||||||
| Loss Deconsolidation of GHR | 2,490 | — | ||||||||||||
| Impairment Expense for Intangible Assets | 170 | — | ||||||||||||
| Change in Fair Value of Derivative Asset and Liability | (595) | 328 | ||||||||||||
| Change in Fair Value of Contingent Liabilities and Shares Payable | — | 95 | ||||||||||||
| Employee Retention Tax Credits | (666) | (4,750) | ||||||||||||
| Non-Recurring Legal and Professional Fees | (135) | — | ||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 5,689 | $ | 18,147 | ||||||||||
On a non-GAAP basis, we recorded Adjusted EBITDA (Non-GAAP) of $5.7 million for the three months ended June 30, 2026, compared to an Adjusted EBITDA (Non-GAAP) of $18.1 million for the three months ended June 30, 2025, an unfavorable variance of $12.4 million, or 69%. The decrease was primarily driven by a decrease of $10.3 million in gross profit, as discussed in the Cost of Goods Sold and Gross Profit section in the Comparison of the Three Months Ended June 30, 2026 and 2025 above, as well as an increase of $2.0 million in general and administrative expenses (excluding share-based compensation and stock appreciation rights expense) primarily due an increase in employee-related costs and cannabis taxes and licenses.
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Adjusted EBITDA for the Six Months Ended June 30, 2026 and 2025 (non-GAAP)
The following table provides a reconciliation of our Net Loss to Adjusted EBITDA (non-GAAP) for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 (in thousands):
| Six Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Net Loss (GAAP) | $ | (23,689) | $ | (1,264) | ||||||||||
| Depreciation and Amortization | 7,818 | 7,743 | ||||||||||||
| Interest, Net | 1,939 | 3,907 | ||||||||||||
| Provision for Income Taxes | 6,177 | 7,896 | ||||||||||||
| EBITDA (Non-GAAP) | (7,755) | 18,282 | ||||||||||||
| Adjustments: | ||||||||||||||
| Share-Based Compensation | 8,737 | 5,049 | ||||||||||||
| Stock Appreciation Rights Expense | (5) | — | ||||||||||||
| Equity in Income of Equity Method Investees | (665) | (84) | ||||||||||||
| Loss Deconsolidation of GHR | 2,490 | — | ||||||||||||
| Impairment Expense for Intangible Assets | 170 | 1,900 | ||||||||||||
| Change in Fair Value of Derivative Asset and Liability | (1,004) | 2,061 | ||||||||||||
| Loss on Extinguishment of Debt | — | 292 | ||||||||||||
| Employee Retention Tax Credits | (666) | (4,960) | ||||||||||||
| Non-Recurring Legal and Professional Fees | 214 | — | ||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | 1,516 | $ | 22,540 | ||||||||||
On a non-GAAP basis, we recorded Adjusted EBITDA (Non-GAAP) of $1.5 million for the six months ended June 30, 2026, compared to an Adjusted EBITDA (Non-GAAP) of $22.5 million for the six months ended June 30, 2025, an unfavorable variance of $21.0 million, or 93%. The decrease was driven by a decrease of $20.7 million in gross profit, as discussed in the Cost of Goods Sold and Gross Profit section in the Comparison of the Six Months Ended June 30, 2026 and 2025 above.
Selected Quarterly Information
A summary of selected information for each of the quarters presented is as follows (in thousands, except per share data):
| Revenues | Net Income (Loss) from Continuing Operations | Earnings (Loss) Per Share-Basic from Continuing Operations | Earnings (Loss) Per Share-Diluted from Continuing Operations | Net Income (Loss) Before Non-Controlling Interest | Earnings (Loss) Per Share-Basic Attributable to the Company | Earnings (Loss) Per Share-Diluted Attributable to the Company | ||||||||||||||||||||||||||||||||||||||
| June 30, 2026 | $ | 47,017 | $ | (4,571) | $ | (0.08) | $ | (0.08) | $ | (6,683) | $ | (0.11) | $ | (0.11) | ||||||||||||||||||||||||||||||
| March 31, 2026 | 28,610 | (17,184) | (0.23) | (0.23) | (17,006) | (0.23) | (0.23) | |||||||||||||||||||||||||||||||||||||
| December 31, 2025 | 26,917 | (13,957) | (0.20) | (0.20) | (15,500) | (0.23) | (0.23) | |||||||||||||||||||||||||||||||||||||
| September 30, 2025 | 26,189 | (12,546) | (0.19) | (0.19) | (12,188) | (0.19) | (0.19) | |||||||||||||||||||||||||||||||||||||
| June 30, 2025 | 47,605 | 7,802 | 0.04 | 0.04 | 8,744 | 0.05 | 0.05 | |||||||||||||||||||||||||||||||||||||
| March 31, 2025 | 33,030 | (7,428) | (0.15) | (0.15) | (10,008) | (0.18) | (0.18) | |||||||||||||||||||||||||||||||||||||
| December 31, 2024 | 41,243 | 10,807 | 0.08 | 0.07 | 12,159 | 0.10 | 0.09 | |||||||||||||||||||||||||||||||||||||
| September 30, 2024 | 52,607 | (2,901) | (0.09) | (0.09) | (3,208) | (0.09) | (0.09) | |||||||||||||||||||||||||||||||||||||
Revenue for the quarter ended June 30, 2026 was $47.0 million, an increase of $18.4 million, or 64%, as compared to revenue of $28.6 million for the quarter ended March 31, 2026. The increase in revenue was primarily driven by higher biomass revenue due to higher average selling prices and higher biomass weight sold during the quarter. As a result, our cultivation facilities reported $41.7 million and $24.0 million for the quarters ended June 30, 2026 and March 31, 2026, respectively.
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Revenue for the quarter ended March 31, 2026 was $28.6 million, an increase of $1.7 million, or 6%, as compared to revenue of $26.9 million for the quarter ended December 31, 2025. The increase in revenue was primarily driven by higher biomass revenue due to higher average selling prices which offset lower biomass weight sold during the quarter. As a result, our cultivation facilities reported $24.0 million and $22.6 million for the quarters ended March 31, 2026 and December 31, 2025, respectively.
Revenue for the quarter ended December 31, 2025 was $26.9 million, which was relatively consistent with revenue of $26.2 million for the quarter ended September 30, 2025.
Revenue for the quarter ended September 30, 2025 was $26.2 million, a decrease of $21.4 million, or 45%, as compared to revenue of $47.6 million for the quarter ended June 30, 2025. The decrease in revenue was primarily driven by lower biomass sales due to reduced production resulting from labor constraints at our farms following the Federal agency actions. As a result, our cultivation facilities reported $21.2 million and $42.1 million for the quarters ended September 30, 2025 and June 30, 2025, respectively.
Revenue for the quarter ended June 30, 2025 was $47.6 million, an increase of $14.6 million, or 44%, as compared to revenue of $33.0 million for the quarter ended March 31, 2025. The increase in revenue was primarily due to an increase in biomass sales caused by higher biomass production related to the seasonality of plant cycle. As a result, our cultivation facilities reported $42.1 million and $28.3 million for the quarters ended June 30, 2025 and March 31, 2025, respectively.
Revenue for the quarter ended March 31, 2025 was $33.0 million, a decrease of $8.2 million, or 20%, as compared to revenue of $41.2 million for the quarter ended December 31, 2024. The decrease in revenue was primarily due to decreased biomass sales caused by lower biomass production related to the seasonality of plant cycle which reported $28.3 million and $36.3 million for the quarters ended March 31, 2025 and December 31, 2024, respectively.
Revenue for the quarter ended December 31, 2024 was $41.2 million, a decrease of $11.4 million, or 22%, as compared to revenue of $52.6 million for the quarter ended September 30, 2024. The decrease in revenue was primarily due to a decrease in biomass sales attributable to decreased production at the Camarillo Facility which reported $36.3 million and $47.8 million for the quarters ended December 31, 2024 and September 30, 2024, respectively.
Net loss for the quarter ended June 30, 2026 was $6.7 million, which represents a favorable change of $10.3 million, or 61%, from a net loss of $17.0 million for the quarter ended March 31, 2026. The change was primarily due to an $11.7 million increase in gross profit partially offset by the $2.5 million loss recognized upon deconsolidation of the retail business.
Net loss for the quarter ended March 31, 2026 was $17.0 million, which represents an unfavorable change of $1.5 million, or 10%, from a net loss of $15.5 million for the quarter ended December 31, 2025. The change was primarily due to a $3.2 million decrease in gross profit partially offset by a $1.5 million decrease in general and administrative expenses.
Net loss for the quarter ended December 31, 2025 was $15.5 million which represents an unfavorable change of $3.3 million, or 27%, from a net loss of $12.2 million for the quarter ended September 30, 2025. The unfavorable change was primarily due to a $1.9 million increase in the provision for income taxes and a $2.6 million increase in general and administrative expense. These amounts were partially offset by a $1.4 million increase in gross profit.
Net loss for the quarter ended September 30, 2025 was $12.2 million, which represents an unfavorable change of $20.9 million, or 240%, from a net income of $8.7 million for the quarter ended June 30, 2025. The change was primarily due to a $20.2 million decrease in gross profit, a $2.4 million decrease in employee retention tax credits and a $1.3 million increase in general and administrative expenses. These amounts were partially offset by a $3.9 million decrease in the provision for income taxes.
Net income for the quarter ended June 30, 2025 was $8.7 million, which represents a favorable change of $18.7 million, or 187%, from a net loss of $10.0 million for the quarter ended March 31, 2025. The change was primarily due to a $11.9 million increase in gross profit, a $4.8 million increase in employee retention tax credits, a $1.9 million decrease in other than temporary intangible asset impairments and a $1.4 million decrease in the change in fair value of derivative asset and liability partially offset by a $2.0 million increase in the provision for income taxes.
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Net loss for the quarter ended March 31, 2025 was $10.0 million, which represents an unfavorable change of $22.2 million, or 182%, from a net income of $12.2 million for the quarter ended December 31, 2024. The change was primarily due to an unfavorable change of $12.2 million on the change in the fair value of contingent liabilities and shares payable, a $2.7 million decrease in gross profit, a $2.4 million increase in the provision for income taxes, a $1.9 million increase in other than temporary intangible asset impairments and a $1.7 million increase in the change in fair value of derivative asset and liability.
Net income for the quarter ended December 31, 2024 was $12.2 million which represents a favorable change of $15.4 million, or 481%, from a net loss of $3.2 million for the quarter ended September 30, 2024. The change was primarily due to a favorable change of $12.3 million on the change in the fair value of contingent liabilities and shares payable, an $8.6 million decrease in the provision for income taxes and $6.3 million of other than temporary intangible asset impairment in the prior quarter. These favorable changes were partially offset by a decrease of $10.7 million in gross profit.
Liquidity and Capital Resources
Overview
Historically, our primary source of liquidity has been our operations, capital contributions made by equity investors, preferred equity investors and debt issuances. We meet our current operational obligations as they become due from our current working capital and from operations. However, we have sustained losses since inception and may require additional capital in the future. As of and for the six months ended June 30, 2026, we had an accumulated deficit of $244.0 million, a net loss attributable to the Company of $23.9 million and net cash used in operating activities of $11.6 million. We estimate that based on current business operations and working capital, we will continue to meet our obligations as they become due in the short term. We generate cash from revenues and deploying our 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. We expect to continue to finance our operations, capital expenditures, facility improvements, product development and marketing primarily through cash from sales to our customers and may consider future equity issuances and debt financing arrangements.
Liquidity risk is the risk that we will not be able to meet our financial obligations associated with financial liabilities. We manage liquidity risk through the management of our capital structure. Our approach to managing liquidity is to ensure that we will have sufficient liquidity to settle obligations and liabilities when due. In the event sufficient cash flow is not available from operating activities, we may continue to raise equity or debt capital from investors in order to meet liquidity needs. If we are not able to secure adequate additional funding, we 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 our 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 us.
Following the Deconsolidation Transaction, GHR’s cash and cash flows are no longer included in the Company’s consolidated financial statements after June 11, 2026. The Unaudited Condensed Interim Consolidated Statements of Cash Flows include the third-party cash flows of the Retail Business through June 11, 2026 within the applicable operating, investing and financing classifications. Cash flows between the Company and GHR before deconsolidation were eliminated in consolidation.
Senior Secured Credit Facility
On February 28, 2025, we entered into a new senior secured credit facility for an aggregate principal amount of $50 million maturing on February 28, 2030, as amended (the “Senior Secured Credit Facility”) with certain U.S.-based commercial banks (together, the “Senior Secured Credit Facility Lender”). Payments for the first 2 years are interest only. Principal and interest payments will be made during the last 3 years based on a straight-line amortization of the loan amount over a period of 15 years beginning on April 1, 2027, with a balloon payment of the remainder of the principal due on the maturity date.
The Senior Secured Credit Facility has a floating interest rate based on the Wall Street Journal’s prime rate, which was 6.75% as of June 30, 2026, plus 1.25%. On February 28, 2025, we entered into an interest rate swap agreement with a notional amount of $50 million to convert the variability of cash flows resulting from fluctuations in variable rates to effectively set the interest rate at 8.58%. The interest rate swap agreement expires on February 28, 2030. See Note 12 – Notes Payable and Convertible Debentures to our Unaudited Condensed Consolidated Interim Financial Statements for more information.
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The Senior Secured Credit Facility contains a covenant which requires us to maintain liquidity in excess of $15 million at all times. The Senior Secured Credit Facility also contains a covenant which requires us to maintain a Consolidated Fixed-Charge Coverage Ratio of at least 1.25x measured quarterly on a trailing-twelve-month basis commencing as of December 31, 2024. The Fixed-Charge Coverage Ratio is defined as Adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) minus income tax expense divided by the current portion of long-term debt plus interest expense plus the current portion of capital leases. Preferred equity dividend payments and convertible debt payments are not included in the Fixed-Charge Coverage Ratio calculation as the former can be suspended if needed and the latter can be paid in shares.
As of December 31, 2025, we were not in compliance with the Fixed-Charge Coverage Ratio financial covenant under the Senior Secured Credit Facility and also experienced certain technical events of default related to administrative and guarantor provisions, none of which related to payment obligations. As a result of these events of default, the lender had the contractual right to declare the related debt immediately due and payable. On March 16, 2026, we entered into a First Amendment and Waiver to the Senior Secured Credit Facility pursuant to which the lender waived the financial covenant violation and the related technical events of default. The amendment also suspends testing of the Fixed-Charge Coverage Ratio for the fiscal quarters ending March 31, 2026, June 30, 2026, and September 30, 2026, with covenant testing resuming for the fiscal quarter ending December 31, 2026. As a result of the waiver and covenant suspension, the lender does not have the contractual right to accelerate the debt arising from these events of default for a period greater than twelve months from December 31, 2025. Accordingly, the related debt has been classified as noncurrent as of June 30, 2026 and December 31, 2025.
See Note 12 – Notes Payable and Convertible Debentures to our Unaudited Condensed Consolidated Interim Financial Statements for more information.
We used the proceeds from the Senior Secured Credit Facility to repay the remaining balance of an existing senior secured term loan which was entered into on December 9, 2021, as amended (the “Prior Credit Agreement”), in the amount of $40.6 million plus fees on February 28, 2025 and intend to use the remaining proceeds for working capital and general corporate purposes.
2025 Lompoc Term Loan
On August 4, 2025, we entered into a term loan for an aggregate principal amount of $3 million maturing on August 4, 2035 (the “2025 Lompoc Term Loan”) with a U.S.-based bank (the “2025 Lompoc Term Loan Lender”). The 2025 Lompoc Term Loan requires monthly principal and interest payments commencing on September 4, 2025 and has an initial fixed interest rate of 8.5% for the first 5 years. Beginning September 4, 2030, the loan converts to a variable rate based on the Wall Street Journal prime rate plus 1%, resetting every five years, with a minimum floor rate of 5%. The loan is amortized over 25 years with a balloon payment due at maturity. Proceeds were used to acquire the remaining 76% ownership interest in a property we use and occupy for manufacturing located in Lompoc, California.
The 2025 Lompoc Term Loan includes covenants including a requirement to maintain a minimum debt service coverage ratio of 1.25x, measured annually at the guarantor level, Glass House Brands Inc. As of December 31, 2025, we were not in compliance with this financial covenant. As a result, the lender had the contractual right to declare the related debt immediately due and payable. In March 2026, the lender provided a waiver of the financial covenant violation which prevents the lender from exercising its acceleration rights for a period of at least twelve months from December 31, 2025. Accordingly, the related debt has been classified as noncurrent as of June 30, 2026 and December 31, 2025.
See Note 12 – Notes Payable and Convertible Debentures to our Unaudited Condensed Consolidated Interim Financial Statements for more information.
Greenhouse 2 Equipment Supplier Financing
On January 15, 2026, we entered into an agreement for the purchase and installation of equipment for Greenhouse 2 with an aggregate purchase price of approximately $4.7 million. The agreement includes a supplier financing arrangement for approximately $4.0 million of the purchase price. The financing bears interest at a rate of 7% and is repayable in ten equal semiannual installments over a five-year period. Payments are expected to commence approximately six months following delivery with the first installment due after installation is complete.
As of June 30, 2026, we have taken delivery of the equipment and recognized a corresponding financing liability of approximately $4.0 million.
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Preferred Equity Refinancing
On July 16, 2025, we announced a recapitalization and non-brokered private placement (collectively, the “Offering”) of Series E Convertible Preferred Stock, face value of $1,000 per share (the “Series E Convertible Preferred”), of GH Group, Inc. (“GH Group”). The Series E Convertible Preferred replaces GH Group’s existing Series B Preferred Stock (“Series B Preferred”) and Series C Preferred Stock (“Series C Preferred”). Any holders of Series B Preferred and Series C Preferred shares who elected not to exchange into the Series E Convertible Preferred were redeemed by GH Group, which effectively canceled the Series B Preferred and Series C Preferred on a go-forward basis.
The Series E Convertible Preferred are convertible at any time at the option of the holder into GH Group Class B Common Stock at a fixed conversion price of $9.00 per share. Each GH Group Class B Common Share is exchangeable for one Class C Common Share of MPB Acquisition Corp., which in turn is exchangeable for one publicly traded Subordinate Voting Share of Glass House Brands Inc. (the “Equity Shares”), resulting in an effective one-for-one exchange. GH Group may redeem the Series E Convertible Preferred, in whole or in part, at any time until the fifth anniversary of the original issuance after the earlier of the following trigger events have occurred: (a) (i) the 60-day volume-weighted average price of the Equity Shares is at least $12.00; (ii) the average daily trading volume of the Equity Shares exceeds one million shares; and (iii) the Equity Shares are listed on a major United States stock exchange, or (b) certain change of control events. Upon redemption, holders will receive the liquidation value plus any accrued, unpaid and accumulated dividends.
During the year ended December 31, 2025, through our subsidiary, GH Group, we issued 77,500 shares of Series E Convertible Preferred in connection with the GH Group Series E Convertible Preferred financing with an aggregate value of $77.5 million comprised of the following: (i) existing shares of Series B Preferred and Series C Preferred with aggregate face value of $58.5 million were exchanged for 58,473 shares of Series E Convertible Preferred, (ii) Series B Preferred and Series C Preferred dividends payable of $0.5 million were exchanged for 535 shares of Series E Convertible Preferred, and (iii) a new private placement of 18,492 Series E Convertible Preferred with a face value of $18.5 million. We recorded the fair value of shares of Series E Convertible Preferred in mezzanine equity in the amount of $77.5 million. During the year ended December 31, 2025, the remaining, unexchanged shares of Series B Preferred and Series C Preferred were redeemed for $18.5 million in cash.
2026 At-The-Market Program
In June 2026, we commenced an at-the-market distribution program (the “2026 ATM Program”), as amended in July 2026, by means of a prospectus supplement dated June 10, 2026 (the “Prospectus Supplement”) to our short form base shelf prospectus dated June 10, 2026 (the “Shelf Prospectus”) with the securities regulatory authorities in all provinces and territories of Canada in connection with the 2026 ATM Program. The 2026 ATM Program was subject to and governed by the terms of an equity distribution agreement dated June 10, 2026 (the “Equity Distribution Agreement”) with ATB Capital Markets Corp., pursuant to which, the Company may from time to time sell up to $100 million of its Subordinate Voting Shares, Restricted Voting Shares and Limited Voting Shares (collectively, the “Equity Shares”) under the 2026 ATM Program.
On July 14, 2026, we entered into an amended and restated equity distribution agreement (the “A&R Equity Distribution Agreement”) with ATB Capital Markets Corp., ATB Capital Markets USA Inc. and Wilson-Davis & Co., Inc. The A&R Equity Distribution Agreement superseded and replaced the equity distribution agreement dated June 10, 2026 and permits us to sell, from time to time, up to an aggregate of $100 million of Equity Shares in Canada and the United States under the 2026 ATM Program. The amendment permits sales in the United States following the listing of our Equity Shares on the NYSE on June 30, 2026. We also filed an amended and restated prospectus supplement dated July 14, 2026, which amended and restated the prospectus supplement dated June 10, 2026, to our short form base shelf prospectus dated June 10, 2026. The offering is also being made in the United States pursuant to a prospectus supplement dated July 14, 2026, forming part of our effective registration statement on Form F-10.
Since the Equity Shares will be distributed at trading prices prevailing at the time of the sale, prices may vary between purchasers and during the period of distribution. The volume and timing of sales will be determined at management’s sole discretion and in accordance with the terms of the Equity Distribution Agreement.
During the six months ended June 30, 2026, we issued 385,000 Equity Shares under the 2026 ATM Program at an average price of $13.07 per share for gross proceeds of $4.9 million. We received net proceeds of $4.9 million.
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Subsequent to June 30, 2026, the Company issued 141,600 Equity Shares under the 2026 ATM Program at an average price of $11.29 per share for gross proceeds of $1.6 million. The Company received net proceeds of $1.6 million after paying commissions of $32 thousand to the sales agent for the 2026 ATM Program.
2024 At-The-Market Program
We commenced an at-the-market distribution program (the “2024 ATM Program”) in December 2024 by means of a prospectus supplement dated December 2, 2024 (the “2024 Prospectus Supplement”) to its short form base shelf prospectus dated May 16, 2024 (the “2024 Shelf Prospectus”) with the securities regulatory authorities in all provinces and territories of Canada in connection with the 2024 ATM Program. The 2024 ATM Program was subject to and governed by the terms of an equity distribution agreement dated November 13, 2024 (the “2024 Equity Distribution Agreement”) with ATB Securities Inc. and Canaccord Genuity Corp., pursuant to which, we would from time to time sell up to $25 million of the Company’s Subordinate Voting Shares, Restricted Voting Shares and Limited Voting Shares (collectively, the “Equity Shares”) under the 2024 ATM Program.
During the six months ended June 30, 2026, we issued 2,086,737 Equity Shares under the 2024 ATM Program at an average price of $8.98 per share for gross proceeds of $18.7 million. We received net proceeds of $18.4 million after paying commissions of $0.4 million to the sales agent for the 2024 ATM Program. During the year ended December 31, 2025, we issued 678,167 Equity Shares under the 2024 ATM Program at an average price of $9.12 per share for gross proceeds of $6.2 million. We received net proceeds of $6.1 million after paying commissions of $124 thousand to the sales agent for the 2024 ATM Program and $411 in other transaction costs. During the year ended December 31, 2024, we issued 10,000 Equity Shares under the 2024 ATM Program at an average price of $6.72 per share for gross proceeds of $67 thousand. We received net proceeds of $66 thousand after paying commissions of $1 thousand to the sales agent for the 2024 ATM Program and $276 in other transaction costs.
Financial Condition
Cash Flows
The following table summarizes our Unaudited Condensed Consolidated Interim Statements of Cash Flows from the Unaudited Condensed Consolidated Interim Financial Statements for the six months ended June 30, 2026 and 2025 (in thousands):
| Six Months Ended | ||||||||||||||
| June 30, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Net Cash Provided by (Used in) Operating Activities | $ | (11,576) | $ | 20,208 | ||||||||||
| Net Cash Used in Investing Activities | (10,886) | (15,963) | ||||||||||||
| Net Cash Provided by Financing Activities | 21,166 | 3,033 | ||||||||||||
| Net Increase (Decrease) in Cash, Restricted Cash and Cash Equivalents | (1,296) | 7,278 | ||||||||||||
| Cash, Restricted Cash and Cash Equivalents, Beginning of Period | 23,350 | 36,923 | ||||||||||||
| Cash, Restricted Cash and Cash Equivalents, End of Period | $ | 22,054 | $ | 44,201 | ||||||||||
Cash Flow from Operating Activities
Net cash used in operating activities was $11.6 million for the six months ended June 30, 2026, a change of $31.8 million, or 157%, as compared to net cash provided by operating activities of $20.2 million for the six months ended June 30, 2025. The change was due to an unfavorable change in net loss, net of adjustments to reconcile net loss to net cash provided by (used in) operating activities, of $24.9 million for the six months ended June 30, 2026 as compared to the same period in the prior year primarily due to a $20.7 million decrease in gross profit as discussed in the Comparison of the Six Months Ended June 30, 2026 and 2025 above and a decrease of $4.3 million in employee retention tax credits. The change was also due to an unfavorable change in net operating assets and liabilities of $6.9 million for the six months ended June 30, 2026 as compared to the same period in the prior year primarily due to an unfavorable change of $4.1 million in inventory, an unfavorable change of $3.1 million in prepaid expenses and other current assets, an unfavorable change of $2.0 million in other assets and an unfavorable change of $1.3 million in income taxes payable. These amounts were partially offset by a favorable change of $4.7 million in accounts payable and accrued liabilities.
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Cash Flow from Investing Activities
Net cash used in investing activities was $10.9 million for the six months ended June 30, 2026, a decrease of $5.1 million, or 32%, compared to net cash used in investing activities of $16.0 million for the six months ended June 30, 2025. This decrease was primarily driven by a decrease of $10.5 million in purchases of property and equipment primarily due to a decrease in spending for Phase III expansion at the Camarillo Facility during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. This amount was partially offset by $6.0 million reduction in cash due to the deconsolidation of GHR.
Cash Flow from Financing Activities
Net cash provided by financing activities was $21.2 million for the six months ended June 30, 2026, an increase of $18.2 million, or 607%, compared to net cash provided by financing activities of $3.0 million for the six months ended June 30, 2025. This increase was primarily driven by a decrease of $42.1 million of payments on notes payable primarily related to the repayment of the Previous Credit Agreement during the six months ended June 30, 2025 and $27.2 million proceeds received from the issuance of At-the-Money Shares during the six months ended June 30, 2026, partially offset by $49.1 million of proceeds received under the Senior Secured Credit Facility during the six months ended June 30, 2025.
As discussed in the Liquidity and Capital Resources section above, our primary source of liquidity has been operations, capital contributions made by equity investors and debt issuances. In the event sufficient cash flow is not available from operating activities, we may continue to raise equity capital from investors in order to meet liquidity needs.
Contractual Obligations
We have contractual obligations to make future payments, including debt agreements and lease agreements from third parties.
The following table summarizes such obligations as of June 30, 2026 (in thousands):
| 2026 | 2027 | 2028-2029 | After 2029 | Total | ||||||||||||||||||||||||||||
| (remaining) | ||||||||||||||||||||||||||||||||
| Notes Payable to Third Parties | $ | 18 | $ | 17,862 | $ | 8,281 | $ | 45,126 | $ | 71,287 | ||||||||||||||||||||||
| Lease Obligations | 372 | 718 | 671 | 108 | 1,869 | |||||||||||||||||||||||||||
| Total Contractual Obligations | $ | 390 | $ | 18,580 | $ | 8,952 | $ | 45,234 | $ | 73,156 | ||||||||||||||||||||||
Off-Balance Sheet Arrangements
As of the date of this MD&A, other than the Company’s continuing arrangements with GHR described elsewhere in this MD&A and the accompanying financial statements, we do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our results of operations or financial condition including, without limitation, such considerations as liquidity and capital resources that have not previously been discussed.
Transactions with Related Parties
Related parties are defined as management and members of the Company and/or members of their immediate family and/or other companies and/or entities in which a board member or senior officer is a principal owner or senior executive. Other than disclosed elsewhere herein and in the Unaudited Condensed Consolidated Interim Financial Statements, related party transactions and balances are as follows:
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, provided for an initial annual base rent payment of $213 thousand, increasing to $243 thousand for years two to five. The lease was renewed for one year starting in October 2024. Rent expense for the three months ended June 30, 2026 and 2025 was nil and $94 thousand, respectively. Rent expense for the six months ended June 30, 2026 and 2025 was nil and $187 thousand, respectively. On August 18, 2025, the Company acquired the remaining 76% undivided ownership interest in the property located in Lompoc, California. This acquisition eliminates future related party rent expense associated with this property.
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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, was renewed for five years starting on January 1, 2025. It provides for a base rent of $93 thousand, increasing annually by the greater of three percent or the CPI, capped at five percent. Rent expense for the three months ended June 30, 2026 and 2025 was $24 thousand and $20 thousand, respectively. Rent expense for the six months ended June 30, 2026 and 2025 was $61 thousand and $40 thousand, 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 GHR, which was a subsidiary of the Company through June 11, 2026. The lease, which commenced on the first calendar day after the Company publicly announced the opening of a retail cannabis location at the leased property (the “Commencement Date”), provided for initial monthly rent of $5 thousand starting April 19, 2022 until the Commencement Date. Effective on the Commencement Date, the initial annual base rent payment was $144 thousand, increasing three percent per annum thereafter. Rent expense recognized by the Company from April 1, 2026 through June 11, 2026 and for the three months ended June 30, 2025 was $31 thousand and $36 thousand, respectively. Rent expense recognized by the Company from January 1, 2026 through June 11, 2026 and for the six months ended June 30, 2025 was $70 thousand and $72 thousand, respectively. From June 12, 2026 through June 30, 2026, GHR recognized rent expense of $8 thousand. Since GHR is a related party of the Company as an equity-method investee, but is not controlled by the Company, the Company has continued to include information regarding this post-deconsolidation transaction in its related-party disclosures.
In August 2022, the Kazan Trust dated December 10, 2004, a trust of which the trustee is 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 GHR, which was a subsidiary of the Company through June 11, 2026. The lease, which commenced in July 2022, provided for an initial annual base rent payment of $36 thousand to the Kazan Trust, increasing three percent per annum thereafter. Rent expense recognized by the Company from April 1, 2026 through June 11, 2026 and for the three months ended June 30, 2025 was $8 thousand and $9 thousand, respectively. Rent expense recognized by the Company from January 1, 2026 through June 11, 2026 and for the six months ended June 30, 2025 was $18 thousand and $18 thousand, respectively. From June 12, 2026 through June 30, 2026, GHR recognized rent expense of $2 thousand. Since GHR is a related party of the Company as an equity-method investee, but is not controlled by the Company, the Company has continued to include information regarding this post-deconsolidation transaction in its related-party disclosures.
2000 De La Vina LLC, a company partially owned by executives and board members of the Company, entered into two leases with subsidiaries of GHR, which was a subsidiary of the Company through June 11, 2026. Both leases commenced in July 2022 and have ten-year terms. The first lease provided for initial annual base rent of $60 thousand, increasing three percent annually thereafter, and the second lease provided for initial annual base rent of $180 thousand, increasing three percent annually thereafter. The first lease terminated in 2025 in connection with the sale of the underlying property. Subsequent to the termination of the lease during 2025, the Company entered into an agreement to settle its remaining lease obligations through a negotiated termination payment. Rent expense recognized by the Company from April 1, 2026 through June 11, 2026 and for the three months ended June 30, 2025 was $38 thousand and $46 thousand, respectively. Termination payments recognized by the Company from April 1, 2026 through June 11, 2026 were nil. Rent expense recognized by the Company from January 1, 2026 through June 11, 2026 and for the six months ended June 30, 2025 was $87 thousand and $91 thousand, respectively. Termination payments recognized by the Company from January 1, 2026 through June 11, 2026 were $27 thousand. From June 12, 2026 through June 30, 2026, GHR recognized rent expense of $10 thousand. Since GHR is a related party of the Company as an equity-method investee, but is not controlled by the Company, the Company has continued to include information regarding this post-deconsolidation transaction in its related-party disclosures.
5042 Real Estate Investment, LLC, a company partially owned by an executive and board member of the Company, owns an undivided tenancy-in-common interest in a property that is leased to a subsidiary of GHR, which was a subsidiary of the Company through June 11, 2026. The lease, which commenced in August 2022 and has a ten-year term, provided for an initial annual base rent payment of $222 thousand to 5042 Real Estate Investment, LLC, increasing three percent per annum thereafter. Rent expense recognized by the Company from April 1, 2026 through June 11, 2026 and for the three months ended June 30, 2025 was $47 thousand and $56 thousand, respectively. Rent expense recognized by the Company from January 1, 2026 through June 11, 2026 and for the six months ended June 30, 2025 was $108 thousand and $111 thousand, respectively. From June 12, 2026 through June 30, 2026, GHR recognized rent expense of $12 thousand. Since GHR is a related party of the Company as an equity-method investee, but is not controlled by the Company, the Company has continued to include information regarding this post-deconsolidation transaction in its related-party disclosures.
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Consulting Agreement
Beach Front Property Management Inc., a company that is majority-owned by an executive and certain board members of the Company, entered into a consulting agreement with the Company dated September 28, 2020. The monthly consulting fee is $11 thousand for mergers and acquisitions advisory and assistance and real estate acquisition and financing services. The consulting agreement may be terminated by either party for any/or no reason without penalty upon seven days written notice. Consulting fees for the three months ended June 30, 2026 and 2025 were $52 thousand and $35 thousand, respectively. Consulting fees for the six months ended June 30, 2026 and 2025 were $105 thousand and $70 thousand, respectively.
Jon A. Neu Insurance
Jon A. Neu Insurance, an entity majority owned by Beach Front Properties LLC, provides insurance brokerage services to the Company. During the three months ended June 30, 2026 and 2025, the Company recognized insurance brokerage expense relating to services provided by Jon A. Neu Insurance of approximately $245 thousand and $54 thousand, respectively. During the six months ended June 30, 2026 and 2025, the Company recognized insurance brokerage expense relating to services provided by Jon A. Neu Insurance of approximately $245 thousand and $204 thousand, respectively.
Preferred Mezzanine Equity Transactions
Certain executive officers and directors of the Company hold preferred equity interests in GH Group, Inc., a consolidated subsidiary of the Company. During the three months ended June 30, 2026 and 2025, related-party holders received preferred dividends totaling approximately $0.5 million and $0.3 million, respectively, which were paid on a pro rata basis in accordance with the contractual terms applicable to all preferred stockholders. During the six months ended June 30, 2026 and 2025, related-party holders received preferred dividends totaling approximately $1.0 million and $0.6 million, respectively, which were paid on a pro rata basis in accordance with the contractual terms applicable to all preferred stockholders. All preferred share issuances, conversions, redemptions, and dividend payments involving related-party holders were completed on the same terms and conditions as those applicable to non-related-party preferred stockholders. No preferential rights or special arrangements were provided to related-party holders.
Glass House Retail, LLC
Effective June 12, 2026, the Company deconsolidated GHR and began accounting for its retained investment under the equity method. Following the Deconsolidation Transaction, GHR is a related party of the Company.
The Company conducts transactions with GHR under arrangements for consulting, advisory and administrative services, inventory sales and reimbursement of costs incurred by either party on behalf of the other. During the period from June 12, 2026 through June 30, 2026, the Company recognized aggregate revenues of $0.2 million. See Note 3 – Discontinued Operations, for additional information regarding the Deconsolidation Transaction and the Company’s continuing involvement with GHR, and Note 6 – Equity Method Investments, for additional information regarding the Company’s retained investment in GHR.
Critical Accounting Estimates
Use of Estimates
The preparation of the Unaudited Condensed Consolidated Interim Financial Statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the Unaudited Condensed Consolidated Interim Financial Statements and the reported amounts of total net revenue and expenses during the reporting period. We regularly evaluate 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 assets and liabilities, deferred income tax asset valuation allowances, incremental borrowing rates, and 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 we believe 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. Our actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, our future results of operations could be negatively impacted.
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Except as discussed below, there have been no changes to our critical accounting estimates described in the Management’s Discussion and Analysis of financial condition and results of operations for the year ended December 31, 2025, available on SEDAR+ at www.sedarplus.ca, that have had a material impact on our Unaudited Condensed Consolidated Interim Financial Statements and related notes.
Deconsolidation and Valuation of Retained Investments
When we cease to have a controlling financial interest in an entity, we deconsolidate the entity and recognize any retained interest at fair value. Determining whether a controlling financial interest has been lost may require significant judgment and consideration of voting and governance rights, economic interests, contractual arrangements, related-party relationships and other facts and circumstances.
The fair value of a retained interest may be determined using valuation techniques that require significant estimates and assumptions. These estimates and assumptions may include projected future cash flows, discount rates, market-participant assumptions, the probability and expected timing of future conversion or liquidity events, the economic and governance rights associated with the retained interest, and restrictions affecting the transferability or marketability of the retained interest. Changes in these estimates and assumptions could materially affect the fair value of the retained interest, the gain or loss recognized upon deconsolidation and the initial carrying amount of the retained investment.
When a retained investment is subsequently accounted for under the equity method, additional judgment may be required in determining differences between the initial carrying amount of the investment and our proportionate interest in the underlying net assets of the investee, the appropriate accounting for those basis differences and whether events or changes in circumstances indicate that the investment may be impaired.
In June 2026, we applied these estimates and judgments in connection with the deconsolidation of GHR and the initial measurement of our retained investment in GHR. Significant assumptions used in determining the fair value of the retained Exchangeable Units included GHR’s projected future cash flows, the applicable discount rate, the probability and expected timing of the Stock Exchange Permissibility Date, the rights and restrictions associated with the Exchangeable Units and assumptions regarding their marketability. Changes in these assumptions could have materially affected the fair value of the retained investment and the resulting gain or loss recognized upon deconsolidation.
Consolidation of Variable Interest Entities
Accounting Standards Codification (“ASC”) 810, Consolidation, requires a reporting entity to consolidate a variable interest entity (“VIE”) if it has both (i) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and (ii) the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The party that meets both criteria is considered the primary beneficiary of the VIE.
The Company’s determination of whether an entity is a VIE and, if so, whether the Company is the primary beneficiary requires significant judgment. The Company considers the purpose and design of the entity, the nature of its variable interests, the activities that most significantly affect the entity’s economic performance, the parties that have the power to direct those activities, and the nature and significance of the Company’s economic exposure. The Company considers both qualitative and quantitative factors in evaluating the nature and significance of its variable interests and economic exposure to the VIE.
The Company does not consolidate a VIE for which it is not the primary beneficiary. If the Company has the ability to exercise significant influence over an unconsolidated VIE, the Company accounts for its investment under the equity method when the requirements of ASC 323, Investments — Equity Method and Joint Ventures, are met. The Company reassesses whether an entity is a VIE and whether the Company is the primary beneficiary when facts and circumstances change.
Changes in Accounting Policies Including Adoption
See Note 2 – Summary of Significant Accounting Policies to our Unaudited Condensed Consolidated Interim Financial Statements for a summary of recently adopted accounting pronouncements.
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Recently Issued Accounting Pronouncements
See Note 2 – Summary of Significant Accounting Policies to our Unaudited Condensed Consolidated Interim Financial Statements for a summary of recently issued accounting pronouncements.
Other Risks and Uncertainties
Credit Risk
Credit risk is the risk of a potential loss to us if a customer or third party to a financial instrument fails to meet its contractual obligations. The maximum credit exposure as of June 30, 2026 and December 31, 2025 is the carrying values of cash and cash equivalents, accounts receivable and notes receivable. We do not have significant credit risk with respect to our customers. All cash and cash equivalents are placed with major U.S. financial institutions. We provide credit to certain of our customers in the normal course of business and have established credit evaluation and monitoring processes to mitigate credit risk but have limited risk as the majority of our sales are transacted with cash.
Liquidity Risk
Liquidity risk is the risk that we will not be able to meet our financial obligations associated with financial liabilities. We manage liquidity risk through the management of our capital structure. Our approach to managing liquidity risk is to ensure that we will have sufficient liquidity to settle obligations and liabilities when due. In the event sufficient cash flow is not available from operating activities, we may continue to raise equity or debt capital from investors in order to meet liquidity needs. If we are not able to secure adequate additional funding, we 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 our 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 us.
Interest Rate Risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Cash and cash equivalents bear interest at market rates. Other than our Senior Secured Credit Facility and 2025 Lompoc Term Loan, our financial liabilities have fixed rates of interest and therefore expose us to a limited interest rate fair value risk. We use an interest rate swap to effectively convert the variable rate on our Senior Secured Credit Facility to a fixed interest rate.
Price Risk
Price risk is the risk of variability in fair value due to movements in equity or market prices. Our investments are susceptible to price risk arising from uncertainties about their future outlook, future values and the impact of market conditions. The fair value of investments in privately-held entities are based on a market approach, which uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Tax Risk
Tax risk is the risk of changes in the tax environment that would have a material adverse effect on our business, results of operations, and financial condition. Under current federal tax law, businesses engaged in the cultivation, manufacture or sale of marijuana may be subject to a comparatively high effective federal tax rate as a result of Internal Revenue Code Section 280E (“Section 280E”), which generally disallows deductions or credits for expenses incurred in carrying on a trade or business involving a Schedule I or II controlled substance, other than amounts properly included in cost of goods sold. Based on legal interpretations, it is our position that we do not owe taxes attributable to the application of Section 280E. Any increase in tax levies resulting from additional tax measures may have a further adverse effect on our operations, while any decrease in such tax levies will be beneficial to future operations.
Foreign Exchange Risk
The Company is exposed to foreign exchange risk as certain of its debt obligations and other expenditures are denominated in currencies other than its functional currency. As a result, fluctuations in exchange rates may impact the Company’s results of operations, cash flows, and financial position, including the U.S. dollar value of outstanding obligations and the cost of goods and services purchased from certain vendors.
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Tariffs and Trade Barriers
Recently, there have been significant changes to U.S. trade policies, sanctions, legislation, treaties and tariffs, including, but not limited to, trade policies and tariffs affecting products from outside of the U.S. For example, in early 2025, the Trump Administration announced significant new tariffs on certain foreign imports into the U.S., and more specifically, from Mexico and Canada, and has proposed additional new tariffs that may be implemented in the future. On February 20, 2026, the U.S. Supreme Court in Learning Resources v. Trump, et al. (Docket No. 24-1287) ruled on the legality of certain tariffs enacted under the International Emergency Economic Powers Act (“IEEPA”). Specifically, the Court held that IEEPA does not authorize the President to impose tariffs, and therefore, such tariffs were unlawful, unconstitutional exercises of executive authority. The scope of the ruling invalidated all IEEPA-based tariffs, which resultingly were terminated and triggered massive refund obligations to importers. However, other tariffs will continue to remain in place based on different statutory authority, and new tariffs may also be imposed on goods imported to the U.S. from various countries under such different statutory authority. Accordingly, the extent and duration of increased or new tariffs and the resulting impact on general economic conditions and on our business are uncertain and depend on various factors, such as negotiations between the U.S. and affected countries, the responses of other countries or regions, exemptions or exclusions that may be granted, availability and cost of alternative sources of supply, and demand for our products. Any new or additional tariffs on goods imported to the U.S. from Mexico, Canada, or other countries, or products imported into the European Union or other non-U.S. markets, could also increase our costs. We are monitoring the impact of tariffs on expenses and may take additional steps to maintain profitability including expense reductions or increasing prices which may diminish demand for our products. Additionally, it is possible that U.S. policy changes and uncertainty about such changes could increase market volatility and currency exchange rate fluctuations. As a result of these dynamics, we cannot predict the impact to our business of any future changes to the U.S.’s or other countries’ trading relationships or the impact of new laws or regulations adopted by the U.S. or other countries. In addition to the direct impact to our costs, the tariffs may weaken consumer confidence and may result in elevated inflation depressing discretionary consumer spending negatively impact demand for our products.
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REGULATORY ENVIRONMENT: ISSUERS WITH CANNABIS-RELATED ASSETS IN THE UNITED STATES
In accordance with Staff Notice 51-352, below is a discussion of the current federal and California regulatory regimes where the Company is currently directly and indirectly involved, through its subsidiaries and investments, in the U.S. regulated cannabis industry.
In accordance with Staff Notice 51-352, the Company evaluates, monitors and reassesses this disclosure, and any related risks, on an ongoing basis and the same will be supplemented, amended and communicated to investors in public filings, including in the event of government policy changes or the introduction of new or amended guidance, laws or regulations regarding the U.S. regulated cannabis industry. Any non-compliance, citations or notices of violation which may have an impact on the Company’s licenses, business activities, or operations will be promptly disclosed by the Company.
The Company derives its revenues from the cannabis industry in California, and such activities remain subject to significant restrictions and risks under U.S. federal law.
The Company is involved (through its licensed subsidiaries) in the regulated cannabis industry in the U.S. where state, local and territorial laws permit such activities. The legalization and regulation of cannabis for medical and adult-use purposes is being implemented at the State level in the United States, and in California, at the State and local levels. State laws regulating cannabis are in direct conflict with the CSA, which historically has listed marijuana as a Schedule I drug. On April 23, 2026, however, the DOJ and the DEA issued the Rescheduling Order, effective April 22, 2026, placing FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license in Schedule III of the CSA, and establishing an expedited registration process for entities holding such state medical marijuana licenses.
Although certain states and territories of the U.S. authorize medical and/or adult-use cannabis production and distribution by licensed or registered entities, under U.S. federal law, marijuana-related activities remain subject to significant federal restrictions, and the Rescheduling Order does not broadly legalize marijuana, does not by its terms broadly apply to adult-use marijuana activities, and does not complete the separate administrative process addressing the broader proposed rescheduling of marijuana from Schedule I to Schedule III. Although the Company’s activities are compliant with applicable United States state and local laws, strict compliance with state and local laws with respect to cannabis may neither absolve the Company of liability under United States federal law, nor may it provide a defense to any federal proceeding which may be brought against the Company, including the risk of having assets seized.
There is currently no broad federal statutory or regulatory safe harbor protecting state-legal cannabis activities from federal enforcement, and federal authorities retain discretion to enforce applicable laws. Although the DOJ and DEA have now taken limited action with respect to FDA-approved marijuana products and marijuana products regulated by qualifying state medical marijuana licenses, that action is limited in scope and broader federal rescheduling remains pending. Significantly, the placement of marijuana in Schedule III introduces substantial new regulatory complexity. The regulatory framework applicable to Schedule III controlled substances differs materially from existing state-regulated cannabis programs, including with respect to DEA registration, manufacturing, distribution, recordkeeping, security, labeling, and prescription requirements. In addition, the United States is a signatory to the Single Convention on Narcotic Drugs of 1961, which imposes certain international treaty obligations including production quota requirements that the DEA must administer through the International Narcotics Control Board. The DEA has indicated it will issue additional guidance on recordkeeping, order forms, security standards, and labeling requirements specific to state-licensed operators, but such guidance has not yet been issued and the timing and scope remain uncertain. There is no established compliance pathway that reconciles traditional Schedule III requirements with the existing state-licensed cannabis regulatory framework, and it is unclear how or whether certain federal requirements, including those arising from international treaty obligations, will be applied to state-licensed medical marijuana operations. There can be no assurance that the Company’s operations, even if compliant with applicable state and local laws, would be compliant with federal requirements applicable to Schedule III substances, and the Company may face material compliance challenges, operational disruptions, or enforcement risk as the federal regulatory framework continues to develop.
Currently, its subsidiaries and managed entities are directly engaged in the cultivation, manufacture, processing, sale and distribution of cannabis and hold the state and local adult-use and medical licenses required for its participation in the regulated cannabis marketplace in the state of California.
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The Company’s Statement of Financial Position and Operating Statement Exposure to U.S. Cannabis Related Activities.
As of the date of this MD&A, the majority of the Company’s business was directly derived from U.S. cannabis-related activities. As such, substantially all of the Company’s statement of financial position and results of operations relate to cannabis-related activities.
California Cannabis Market
Management believes that California, given its talent pool, wealth of brand and product expertise and superior growing conditions, is the most strategic base for expansion once cannabis is legalized at the federal level clearing the way for interstate commerce. It is management’s view that California has significant impact on global consumer trends, especially the CPG industry. In other states and around the world, California cannabis strains are often perceived as the “gold standard.” With over 30 million adult residents and approximately 271 million visitors annually, the legal market for California cannabis product sales was $4.0 billion in 2024 per the California Department of Tax and Fee Administration and is larger than any other state in the United States. It is commonly estimated by third-party sources that the total California cannabis market derived from illicit sales is materially larger than the regulated market, although such estimates are inherently uncertain. The total size of the US legal market for cannabis in 2024 was estimated at US $32.1 billion by the MJBiz Factbook, and this source projects that the market will grow to US $54.2 billion by 2029.
In 1996, California was the first state to legalize medical marijuana through Proposition 215, the Compassionate Use Act. This legalized the use, possession and cultivation of medical marijuana by patients with a physician recommendation for treatment of cancer, anorexia, AIDS, chronic pain, spasticity, glaucoma, arthritis, migraine or any other illness for which marijuana provides relief. In 2003, Senate Bill 420 was signed into law establishing an optional identification card system for medical marijuana patients.
In September 2015, the California legislature passed three bills collectively known as Medical Cannabis Regulation and Safety Act (“MCRSA”). MCRSA established a general licensing and regulatory framework for medical marijuana businesses in California. The system created multiple license types for dispensaries, infused products manufacturers, cultivation facilities, testing laboratories, transportation companies, and distributors. Edible infused product manufacturers would require either volatile solvent or non-volatile solvent manufacturing licenses depending on their specific extraction methodology. Multiple agencies would oversee different aspects of the program and businesses would require a state license and local approval to operate. However, in November 2016, voters in California overwhelmingly passed Proposition 64, the Adult Use of Marijuana Act (“AUMA”) creating an adult use marijuana program for adults 21 years of age or older. AUMA had some conflicting provisions with MCRSA, so in June 2017, the California State Legislature passed Senate Bill No. 94, known as the Medical and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”), which combined and expanded upon MCRSA and AUMA to provide a set of comprehensive regulations to govern medical and adult use licensing regime for cannabis businesses in the State of California. MAUCRSA went into effect on January 1, 2018. The California Bureau of Cannabis Control (the “BCC”), the California Department of Food and Agriculture (the “CDFA”), the California Department of Public Health – Manufactured Cannabis Safety Branch (the “CDPH”), and the California Department of Tax and Fee Administration all had some degree of regulatory responsibility for marijuana operations. MAUCRSA became effective on January 1, 2018.
From January 2018 through mid-2021, three (3) different state programs licensed and regulated cannabis businesses: the BCC, the CDFA, and the CDPH. In July 2021, the California Department of Cannabis Control (the “DCC”) was established by consolidating the three former state cannabis authorities, the BCC, the CDFA, and the CDPH. The DCC released consolidated regulations in September 2021 aimed at:
•creating a single point of contact for licensees, local governments and other stakeholders;
•simplifying and centralizing licensing and regulatory oversight;
•supporting businesses to be successful and compliant with state law; and
•improving enforcement coordination.
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In July 2019, California enacted A.B. 97. In relevant part, this bill authorized licensing authorities to issue citations and fines to a licensee or an unlicensed person who violates MAUCRSA. The maximum fine is $5,000 per violation for licensees and $30,000 per violation for unlicensed persons. Each day of a violation constitutes a separate violation. A.B. 97 also repeals a prior requirement that an applicant for a provisional license first hold a temporary license. The bill also requires applicants for provisional licenses to submit evidence of compliance with the California Environmental Quality Act, limits the validity of a provisional license to 12 months with subsequent renewals as approved by the relevant licensing authority, and allows licensing authorities to revoke provisional licenses for failing to diligently pursue final licensure. Finally, the bill required the CDPH to establish a certification program for manufactured cannabis products comparable to the National Organic Program and the California Organic Food and Farming Act. In October 2019, California enacted A.B. 1529. This bill mandated that all cannabis vaping cartridges and cannabis vaporizers must include a universal symbol identifying the product as a vaping product.
In recent years, California has continued to pass legislation impacting the state’s cannabis industry. California has brought an end to most DCC-issued provisional licenses. January 1, 2025 was the last day for the DCC to renew provisional licenses, and January 1, 2026 was the last day for any provisional license to be in effect, subject to limited exceptions for certain local-equity retailer provisional licenses.
In 2023 and 2024, California adopted cannabis-related legislation to protect job applicants from discrimination based on prior cannabis use, and, effective 2025, legislation went into effect allowing licensed cannabis dispensaries to, provided local regulations allow, operate consumption lounges. State-level taxes continue to be high. On July 1, 2025, applicable excise taxes rose by four percent to 19 percent. On September 22, 2025, California Assembly Bill 564 (“AB 564”) was signed into law, reversing the increase in the cannabis excise tax that had raised the rate to 19 percent and returning (or keeping) it at 15 percent through July 2028.
In order to legally operate a medical or adult use cannabis business in California, the operator must have both a local and state license. This requires license holders to operate in local jurisdictions with cannabis licensing programs. Therefore, local jurisdictions in California are allowed to determine the number of licenses they will issue to cannabis operators or can choose to outright ban licensed commercial cannabis activity. Local jurisdictions also are free to require additional permits, and impose ordinances, rules, and regulations that surpass state laws and regulations.
To the knowledge of management of the Company, there have not been any statements or guidance made by federal authorities or prosecutors regarding any changes to the risk of enforcement action specific to the State of California.
U.S. Federal Overview
The Controlled Substances Act
The U.S. federal government regulates drugs through the federal CSA (21 U.S.C. § 811), which places controlled substances, including cannabis (referred to under the CSA as “marihuana” but referenced herein as “cannabis”),1 in 1 of 5 different schedules. Cannabis is historically classified as a Schedule I drug; however, effective April 22, 2026, the DOJ and DEA placed, via the Rescheduling Order, FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license in Schedule III of the CSA. The Company notes, however, that the Rescheduling Order is limited in scope and does not itself broadly remove marijuana from Schedule I for all purposes or all activities. Moreover, to the extent marijuana is a Schedule III substance and even if marijuana were to be more broadly placed in Schedule III following completion of the administrative process, such reclassification does not and would not, in itself, legalize cannabis under federal law, and presumably subjects the Company to a distinct federal regulatory regime that is materially different from, and potentially inconsistent with, existing state cannabis regulatory frameworks.
1 The CSA states: “The term 'marihuana' means all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of such plant; and every compound, manufacture, salt, derivative, mixture, or preparation of such plant, its seeds or resin. Such term does not include the mature stalks of such plant, fiber produced from such stalks, oil or cake made from the seeds of such plant, any other compound, manufacture, salt, derivative, mixture, or preparation of such mature stalks (except the resin extracted therefrom), fiber, oil, or cake, or the sterilized seed of such plant which is incapable of germination.” 21 U.S.C. § 802(16).
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As a Schedule I drug, the federal DEA considers cannabis to have a high potential for abuse, no currently accepted medical use in treatment in the U.S., and a lack of accepted safety for use of the drug under medical supervision.2 By notable contrast, the U.S. federal government has a separate regulatory regime regulating industrial hemp and excludes industrial hemp from cannabis; industrial hemp is defined under U.S. federal law as “any part of the plant Cannabis sativa L., including the seeds thereof and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers,” with no more than a 0.3% concentration of delta-9 tetrahydrocannabinol (“THC”) on a dry weight basis (referred to herein as “hemp” or “industrial hemp”). However, in November 2025, Congress enacted changes to the federal hemp framework (P.L. 119-37, § 781) that, among other things, tightened federal treatment of certain intoxicating hemp-derived cannabinoid products and may cause certain products that previously relied on “hemp” status to be treated as controlled substances under the CSA depending on THC content and other statutory criteria.3 Section 781 of P.L. 119-37 becomes effective 365 days after enactment, which is November 12, 2026.
Although certain states and territories of the U.S. authorize medical or adult-use cannabis production and distribution by duly-licensed entities, under current U.S. federal law, the possession, use, cultivation, and transfer of cannabis and any related drug paraphernalia is illegal, and any such acts are criminal acts. The concepts of “medical cannabis,” “retail cannabis” and “adult-use cannabis” do not exist under U.S. federal law—there is only the Schedule I drug which remains illegal for purchase or sale. Although the Company’s activities may be materially compliant with applicable state, local and territorial laws, strict compliance with such laws with respect to cannabis may neither absolve the Company of liability under U.S. federal law nor provide a defense to federal criminal charges that may be brought against the Company. The Rescheduling Order does not broadly legalize marijuana, does not broadly eliminate federal restrictions on adult-use marijuana activities, does not resolve the conflict between federal and state cannabis laws, and does not complete the broader federal rescheduling process. The DOJ and DEA terminated the prior Biden Administration administrative proceedings and commenced new expedited administrative proceedings, with a hearing that began June 29, 2026, to consider broader rescheduling of marijuana—including adult-use marijuana—from Schedule I to Schedule III, proceeding under the original May 2024 NPRM. In addition, the regulatory requirements applicable to Schedule III substances may impose obligations that differ materially from existing state cannabis programs, and the Company cannot assure that its operations would satisfy such federal requirements if and to the extent they are determined to apply. The Supremacy Clause of the U.S. Constitution establishes that the U.S. Constitution and federal laws made pursuant to it are paramount and, in case of conflict between federal and state law, federal law shall govern.
Nonetheless, 38 U.S. states, the District of Columbia, and the territories of Puerto Rico, the U.S. Virgin Islands, Guam, and the Northern Mariana Islands have legalized or decriminalized some form of cannabis for medical use, while 24 states and the District of Columbia have legalized the adult-use of cannabis for recreational purposes. Notwithstanding the foregoing, cannabis remains illegal under U.S. federal law, with cannabis listed as a Schedule I drug under the CSA.
2 21 U.S.C. 812(b)(1).
3See Lachenmeier, DW & Rehm, J. (2015). Comparative risk assessment of alcohol, tobacco, cannabis and other illicit drugs using the margin of exposure approach. Scientific Reports, 5, 8126. doi: 10.1038/srep08126; see also Thomas, G & Davis, C. (2009). Cannabis, Tobacco and Alcohol Use in Canada: Comparing risks of harm and costs to society. Visions Journal, 5. Retrieved from http://www.heretohelp.bc.ca/sites/default/files/visions_cannabis.pdf; see also Jacobus et al. (2009). White matter integrity in adolescents with histories of marijuana use and binge drinking. Neurotoxicology and Teratology, 31, 349-355. https://doi.org/10.1016/j.ntt.2009.07.006; Could smoking pot cut risk of head, neck cancer? (2009 August 25). Retrieved from https://www.reuters.com/article/us-smoking-pot/could-smoking-pot-cut-risk-of-head-neck-cancer-idUSTRE57O5DC20090825; Watson, SJ, Benson JA Jr. & Joy, JE. (2000). Marijuana and medicine: assessing the science base: a summary of the 1999 Institute of Medicine report. Arch Gen Psychiatry Review, 57, 547-552. Retrieved from https://www.ncbi.nlm.nih.gov/pubmed/10839332; see also Hoaken, Peter N.S. & Stewart, Sherry H. (2003). Drugs of abuse and the elicitation of human aggressive behavior. Addictive Behaviours, 28, 1533-1554. Retrieved from http://www.ukcia.org/research/AgressiveBehavior.pdf; and see also Fals-Steward, W., Golden, J. & Schumacher, JA. (2003). Intimate partner violence and substance use: a longitudinal day-to-day examination. Addictive Behaviors, 28, 1555-1574. Retrieved from https://www.ncbi.nlm.nih.gov/pubmed/14656545.
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Until 2018, the federal government provided guidance to federal law enforcement agencies and banking institutions regarding cannabis through a series of memoranda from the DOJ. The most recent such memorandum was drafted by former Deputy Attorney General James Cole on August 29, 2013 (“Cole Memorandum”).4 The Cole Memorandum offered guidance to federal enforcement agencies as to how to prioritize civil enforcement, criminal investigations and prosecutions regarding cannabis in all states, and acknowledged that, notwithstanding the designation of cannabis as a Schedule I controlled substance at the federal level, certain states have enacted laws authorizing the use of cannabis. The Cole Memorandum also noted that state jurisdictions that have enacted laws legalizing cannabis in some form have also implemented strong and effective regulatory and enforcement systems to control the cultivation, processing, distribution, sale and possession of cannabis. As such, conduct in compliance with those laws and regulations is less likely to be a priority at the federal level. The Cole Memorandum was seen by many state-legal cannabis companies as a safe harbor for their licensed operations that were conducted in full compliance with all applicable state and local regulations. However, on January 4, 2018, former U.S. Attorney General Jeff Sessions rescinded the Cole Memorandum. In the absence of a uniform federal policy, as a result of the recission of the Cole Memorandum, federal prosecutors are free to utilize their prosecutorial discretion to decide whether to prosecute commercial cannabis activities despite the existence of state-level and territorial-level laws that may be inconsistent with federal prohibitions.5
Following his election, President Biden appointed Merrick Garland to serve as the U.S. Attorney General. While Attorney General Garland indicated in his confirmation hearing that he felt that enforcement of the federal cannabis prohibition against state-licensed cannabis businesses would not be a priority target of DOJ resources, no formal enforcement policy was ever issued by the Biden administration. As of the date of this MD&A, Todd Blanche, appointed by President Trump, is serving as Acting Attorney General and also holds the office of Deputy Attorney General. The Company is not aware of any formal DOJ enforcement memorandum, guidance, or other public statement by Acting Attorney General Blanche specifically addressing state-legal cannabis businesses or hemp-derived cannabinoid businesses. Accordingly, there can be no assurance that current DOJ leadership will adopt an enforcement posture materially different from the general federal risks described herein.
On April 1, 2025, the White House stated that “no action is being considered at this time” in terms of cannabis policy.6 President Donald Trump’s nominee to lead the DEA, Terrance Cole, was confirmed and sworn in as the new Administrator of the DEA in July 2025. Mr. Cole had indicated in recent congressional testimony that examining a proposal to federally reschedule marijuana would be one of his first priorities if confirmed for the role, though a list of Mr. Cole’s strategic priorities published by the DEA following his elevation to Administrator did not include cannabis rescheduling. On April 23, 2026, the DOJ and DEA announced that they had issued the Rescheduling Order, effective April 22, 2026, placing FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license in Schedule III under the CSA. The DOJ and DEA also announced that they were withdrawing the prior Biden Administration notice of hearing and terminating those proceedings, and commencing a new expedited administrative hearing process to consider broader rescheduling of marijuana—including adult-use marijuana—from Schedule I to Schedule III, proceeding under the original May 2024 NPRM. The hearing commenced on June 29, 2026. While this action reflects a material development in federal cannabis policy, it is limited in scope and does not constitute a comprehensive resolution of marijuana’s federal legal status, including with respect to adult-use activities and the broader rescheduling process.
4See James M. Cole, Memorandum for all United States Attorneys re: Guidance Regarding Marijuana Enforcement (Aug. 29, 2013), available at https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf.
5 Please note the below discussion of the Rohrabacher-Farr Amendment, which prevents the federal government from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in compliance with state and local law, and which acts to restrict federal prosecutors from targeting many commercial cannabis operators even in lieu of the recission of the Cole Memorandum.
6 See “Pro-marijuana group aims to sway Trump by airing ads around White House and Mar-a-Lago,” CNN, available at https://www.cnn.com/2025/04/01/politics/trump-marijuana-ads/index.html.
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On December 18, 2025, President Trump issued an Executive Order addressing marijuana and cannabidiol research and federal cannabis policy, which, among other directives, instructs the Attorney General to take steps, consistent with applicable law, to expedite the federal administrative process related to moving marijuana to Schedule III of the CSA and to implement associated federal actions described in the Executive Order. The Executive Order does not itself reschedule marijuana or legalize cannabis under U.S. federal law, and any change in marijuana’s scheduling remains subject to completion of the applicable rulemaking process. On April 23, 2026, the DOJ and DEA announced the Rescheduling Order, effective April 22, 2026, immediately placing FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license in Schedule III under the CSA. The DOJ and DEA also terminated the prior Biden Administration administrative proceedings and initiated a new expedited administrative hearing process to consider broader rescheduling of marijuana—including adult-use marijuana—from Schedule I to Schedule III, proceeding under the original May 2024 NPRM. The hearing commenced on June 29, 2026. Following the conclusion of the hearing and post-hearing submissions, the Administrative Law Judge is expected to issue a recommended decision, after which the parties may file exceptions and the Attorney General, acting through the DEA, may issue a final rule or a further notice of proposed rulemaking. The Rescheduling Order does not itself broadly legalize marijuana under U.S. federal law and does not complete the broader rescheduling process. Accordingly, broader marijuana scheduling and related federal treatment remain subject to further administrative proceedings, and there can be no assurance as to timing or outcome.
There is no guarantee that state and local laws legalizing and regulating the sale and use of cannabis will not be repealed or overturned, or that local governmental authorities will not limit the applicability of state, local and territorial laws within their respective jurisdictions. Unless and until the U.S. Congress (“Congress”) and/or the appropriate federal regulatory agencies amend the CSA with respect to cannabis (and as to the timing or scope of any such potential amendments there can be no assurance) in a manner that makes federally legal the current state and local commercial cannabis programs, there is a risk that federal authorities may enforce current U.S. federal law.
As an industry best practice, despite the rescission of the Cole Memorandum, the Company abides by the following standard operating policies and procedures:
1.Ensure that its operations are materially compliant with all licensing requirements as established by the applicable state, county, municipality, town, township, borough, and other political/administrative divisions;
2.Ensure that its cannabis related activities materially adhere to the scope of the licensing obtained (for example: in the states where cannabis is permitted only for adult-use, the products are only sold to individuals who meet the applicable requirements);
3.Implement policies and procedures to ensure that cannabis products are not distributed to minors;
4.Implement policies and procedures to ensure that funds are not distributed to criminal enterprises, gangs or cartels;
5.Implement an inventory tracking system and necessary procedures to ensure that such compliance system is effective in tracking inventory and preventing diversion of cannabis or cannabis products into those states and territories where cannabis is not permitted by state, territorial, or local law, or across any state, territorial, or local lines in general;
6.Ensure that its state-authorized cannabis business activity is not used as a cover or pretense for trafficking of other illegal drugs, is engaged in any other illegal activity or any activities that are contrary to any applicable anti- money laundering statutes; and
7.Ensure that its products comply with applicable regulations and contain necessary disclaimers about the contents of the products to prevent adverse public health consequences from cannabis use and prevent impaired driving.
In addition, the Company conducts background checks to ensure that the principals and management of its operating subsidiaries are of good character, have not been involved with other illegal drugs, engaged in illegal activity or activities involving violence, or use of firearms in the cultivation, manufacturing or distribution of cannabis. The Company also conducts ongoing reviews of the activities of its cannabis businesses, the premises on which they operate and the policies and procedures that are related to the possession by the Company of cannabis or cannabis products of the Company outside of the licensed premises. See “Compliance and Monitoring” section herein for additional details.
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One limited legislative safeguard for the medical cannabis industry currently remains in place in the form of a recurring appropriations rider commonly referred to as the “Rohrabacher-Farr Amendment” (also known as the “Rohrabacher-Blumenauer” or “Joyce-Leahy” Amendment). In enacted fiscal year 2026 appropriations legislation, Public Law 119-74, Section 531 provides that none of the funds made available under that Act to the DOJ may be used to prevent specified states and territories, including California, from implementing their own laws authorizing the use, distribution, possession, or cultivation of medical marijuana. This rider is currently in effect, but it is temporary in nature and expires with the applicable appropriations legislation at the end of the federal fiscal year on September 30, 2026, unless renewed or extended by Congress. The rider does not amend the Controlled Substances Act, does not legalize cannabis under U.S. federal law, applies only to medical marijuana programs, and does not apply to adult-use cannabis activities. Its scope and application have been subject to judicial interpretation, including limitations that it protects only conduct in strict compliance with applicable state law. In addition, the rider must be renewed through the annual appropriations process and may be modified, omitted, allowed to lapse, or interpreted narrowly in future legislation or judicial proceedings. There can be no assurance that this rider will continue to be included in future appropriations acts or that it will be interpreted or enforced in a manner favorable to the Company. Accordingly, notwithstanding its current inclusion in enacted appropriations legislation, the Company remains subject to the full risk of federal enforcement of U.S. cannabis laws.
On October 6, 2022, President Biden announced a series of marijuana-related initiatives. Included amongst them was a directive to the Secretary of Health and Human Services and the Attorney General “to initiate the administrative process to review expeditiously how marijuana is scheduled under federal law. Federal law currently classifies marijuana in Schedule I of the CSA, the classification meant for the most dangerous substances.” This administrative review would be conducted by the FDA and the DEA. On August 30, 2023, the Department of Health and Human Services published its recommendation that marijuana should be moved to Schedule III. In April 2024, the DEA presented a proposed change rescheduling cannabis to Schedule III and opened a public comment period. That public comment period ended on July 22, 2024. The vast majority of the thousands of comments received were in favor of rescheduling. In response, two leading congressional Republicans, Rep. Cathy McMorris Rogers, who chairs the House Energy and Commerce Committee, and Rep. Brett Guthrie, who chairs the Subcommittee on Health, wrote a letter to the DOJ and the Department of Health and Human Services questioning the rescheduling process as constituting “unusual circumstances” and suggesting the DEA has doubts about rescheduling. The lawmakers pointed out that the proposed rule itself states that the “DEA has not yet made a determination as to its views of the appropriate schedule for marijuana.” The DEA had noticed its intention to convene a hearing on December 2, 2024 on the notice of proposed rulemaking. The DEA postponed the hearing to January 21, 2025, but the hearing was eventually canceled by the Chief Administrative Law Judge for the DEA (an internal administrative tribunal of the DEA) due to procedural issues and pending appeals and legal actions. The Chief Administrative Law Judge ordered a joint status update, establishing a deadline of April 21, 2025 for the parties to respond. On April 23, 2026, the DOJ and DEA announced that they were withdrawing the prior Biden Administration notice of hearing and terminating those proceedings, and commencing a new expedited administrative hearing process to consider broader rescheduling of marijuana—including adult-use marijuana—from Schedule I to Schedule III. The new hearing, which commenced on June 29, 2026, proceeds under the original May 2024 NPRM. DOJ stated that this action is intended to accelerate the administrative process and provide firm deadlines. Following the conclusion of the hearing and post-hearing submissions, the Administrative Law Judge is expected to issue a recommended decision, after which the parties may file exceptions and the Attorney General, acting through the DEA, may issue a final rule or a further notice of proposed rulemaking. There can be no assurance as to timing or outcome.
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The Attorney General, acting through the DEA, has the final say in whether to change marijuana’s scheduling and is not bound to abide by the recommendations of the Department of Health and Human Services. Additionally, changing marijuana’s scheduling under the CSA is not equivalent to decriminalizing cannabis use, and would serve to alter, but not eliminate, federal regulation of marijuana. Altering the scheduling would mean the federal government acknowledges some medical uses of marijuana, but would not change its current status as a controlled substance prohibited for most uses under federal law; indeed, placing cannabis on a different schedule, such as Schedule III as contemplated, would have the effect of imposing a separate federal program of rules and regulations on commercial cannabis activity largely incongruent with the programs permitted under state, local and territorial laws currently in effect, and the prevailing business environment of the regulated cannabis marketplace in the U.S. The DOJ and DEA have now taken limited action to place FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license in Schedule III, while separately initiating expedited proceedings—proceeding under the original May 2024 NPRM—to consider broader rescheduling of marijuana, including adult-use marijuana, from Schedule I to Schedule III. Even so, changing marijuana’s scheduling under the CSA is not equivalent to broadly legalizing or decriminalizing cannabis use. The Rescheduling Order is expressly limited, broader rescheduling remains pending, and any broader move to Schedule III would alter, but not eliminate, federal regulation of marijuana. As a result, the Company remains subject to a federal regulatory framework that differs materially from existing state-regulated cannabis programs and business practices. Accordingly, the Rescheduling Order should not be interpreted as a federal endorsement or approval of state-legal cannabis activities, and significant legal and regulatory uncertainty remains.
On September 27, 2023, the Senate Banking Committee passed the Secure and Fair Enforcement Regulation Banking Act (“SAFER Banking Act”) out of committee. The SAFER Banking Act has been proposed but has not been enacted into law as of the date of this filing. While some banks, credit unions and other financial services providers will provide banking services to the regulated cannabis industry, the majority of medicinal or recreational cannabis businesses do not participate in traditional banking systems due to the risks of federal prosecution. The SAFER Banking Act would include safe harbor from certain criminal, civil and administrative penalties which may otherwise result due to the status of marijuana under federal law or on the basis of a banking institution’s provision of financial services to a business that violates federal law. While marijuana would remain federally illegal under the SAFER Banking Act, the law could resolve existing tensions between federal and state law with respect to banking, lending to, and insuring a state or territorial-legal cannabis business. As of the date of this filing, the SAFER Banking Act is pending a vote on the Senate floor, but no vote has been scheduled.
The current Department of the Treasury Financial Crimes Enforcement Network (“FinCEN”) guidance (FIN-2014-G001, issued February 14, 2014) remains in line with the Cole Memorandum and details due diligence requirements, the requirement to file regular Suspicious Activity Reports for cannabis-related businesses, and compliance with Currency Transaction Reports. Existing guidelines permit banking institutions to service the regulated cannabis industry if they follow strict guidelines and comply with regular mandatory reporting relating to those entities.
Nevertheless, as of the date of this MD&A, marijuana sold for adult-use recreational purposes remains a Schedule I controlled substance at the federal level, while FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license have been placed in Schedule III pursuant to the Rescheduling Order. The U.S. federal government has always reserved the right to enforce federal law regarding the sale and disbursement of medical or adult-use cannabis, even if state law sanctions such sale and disbursement. If the U.S. federal government begins to enforce U.S. federal laws relating to cannabis in states and territories where the sale and use of cannabis is currently legal, or if existing applicable state, local and territorial laws are repealed or curtailed, the Company’s business, results of operations, financial condition and prospects could be materially adversely affected.
Money Laundering Laws
Under U.S. federal law, it may potentially be a violation of federal money laundering statutes for financial institutions to take any proceeds from the sale of any Schedule I controlled substance. Due to the CSA’s current categorization of marijuana as a Schedule I drug, federal law makes it illegal for financial institutions that depend on the Federal Reserve’s money transfer system to take any proceeds from marijuana sales as deposits. Banks and other financial institutions could be prosecuted and possibly convicted of money laundering for providing services to cannabis businesses under the U.S. Currency and Foreign Transactions Reporting Act of 1970 (“Bank Secrecy Act”). Therefore, under the Bank Secrecy Act, banks or other financial institutions that provide a cannabis business with a checking account, debit or credit card, small business loan, or any other service could be charged with money laundering or conspiracy.
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While there has been no change in U.S. federal banking laws to accommodate businesses in the large and increasing number of U.S. states and territories that have legalized medical and/or adult-use marijuana, in 2014, the FinCEN issued guidance to prosecutors of money laundering and other financial crimes (“FinCEN Guidance”) and notified banks that it would not seek enforcement of money laundering laws against banks that service marijuana-related businesses operating under state or territorial law, provided that strict due diligence and reporting standards are met. The FinCEN Guidance advised prosecutors not to focus their enforcement efforts on banks and other financial institutions that serve marijuana-related businesses so long as that business is legal in their state or territory and none of the federal enforcement priorities referenced in the Cole Memorandum are being violated (such as keeping marijuana away from children and out of the hands of organized crime). The FinCEN Guidance also clarifies how financial institutions can provide services to marijuana-related businesses consistent with their Bank Secrecy Act obligations, including thorough customer due diligence, but makes it clear that they are doing so at their own risk. The customer due diligence steps include:
1.Verifying with the appropriate state and territorial authorities whether the business is duly licensed and registered;
2.Reviewing the license application (and related documentation) submitted by the business for obtaining a state or territorial license to operate its marijuana-related business;
3.Requesting from state or territorial licensing and enforcement authorities available information about the business and related parties;
4.Developing an understanding of the normal and expected activity for the business, including the types of products to be sold and the types of customers to be served (e.g., medical versus adult-use customers);
5.Ongoing monitoring of publicly available sources for adverse information about the business and related parties;
6.Ongoing monitoring for suspicious activity, including for any of the red flags described in this guidance; and
7.Refreshing information obtained as part of customer due diligence on a periodic basis and commensurate with the risk.
With respect to information regarding state and territorial licensure obtained in connection with such customer due diligence, a financial institution may reasonably rely on the accuracy of information provided by state and territorial licensing authorities, where states and territories make such information available.
Because most banks and other financial institutions are unwilling to provide any banking or financial services to cannabis businesses, these businesses can be forced into becoming “cash-only” businesses. While the FinCEN Guidance decreased some risk for banks and financial institutions considering serving the industry, in practice it has not materially increased banks’ willingness to provide services to regulated cannabis businesses, and most banks continue to decline to operate under the strict requirements provided under the FinCEN Guidance. This is because, as described above, the current law does not provide banks immunity from prosecution, and it also requires banks and other financial institutions to undertake time-consuming and costly due diligence on each regulated cannabis business they accept as a customer.
The relatively few state-chartered banks and/or credit unions that have agreed to work with marijuana-related businesses to date are typically limiting those accounts to small percentages of their total deposits to avoid creating a liquidity risk. Since, theoretically, the federal government could change the banking laws as it relates to marijuana-related businesses at any time and without notice, these state- charted banks and credit unions must keep sufficient cash on hand to be able to return the full value of all deposits from marijuana-related businesses in a single day, while also keeping sufficient liquid capital on hand to serve their other customers. Those state-chartered banks and credit unions that do have customers in the cannabis industry charge marijuana-related businesses higher fees to pass on the added cost of ensuring compliance with the FinCEN Guidance. Unlike the Cole Memorandum, however, the FinCEN Guidance from 2014 has not been rescinded.
The Secretary of the Treasury, Scott Bessent, has not articulated an official position of the U.S. Department of the Treasury with regard to the FinCEN Guidance. Accordingly, as an industry best practice and consistent with its standard operating procedures, the Company adheres to all customer due diligence steps in the FinCEN Guidance.
In both Canada and the U.S., transactions involving banks and other financial institutions are both difficult and unpredictable under the current legal and regulatory landscape. Legislative changes could help to reduce or eliminate these challenges for companies in the cannabis space and would improve the efficiency of both significant and minor financial transactions.
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In the absence of comprehensive reform of U.S. federal cannabis legislation that would federally decriminalize the cannabis industry, a growing number of members of Congress have expressed support for federal legislation that would eliminate from the scope of federal money laundering statutes the financing activity of businesses operating under state and territorial-sanctioned cannabis programs. On September 26, 2019, the U.S. House of Representatives passed the Secured and Fair Enforcement Banking Act of 2019 (commonly known as the “SAFE Banking Act”), which aims to provide safe harbor guidance to financial institutions that work with U.S. regulated cannabis businesses. The SAFE Banking Act has since been introduced and has passed the U.S. House of Representatives several times, but has not been passed by the U.S. Senate. The SAFE Banking Act has also been proposed as a rider to federal annual budget bills and the National Defense Appropriations Act. However, such attempts have failed. As of the date of this MD&A, the SAFER Banking Act remains pending and has not yet been scheduled for a Senate floor vote. While Congress may consider legislation in the future that may permanently address these issues, there can be no assurance of the content of any proposed legislation or that such legislation is ever passed. The Company’s inability, or limitations on the Company’s ability, to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for the Company to operate and conduct its business as planned or to operate efficiently.
Federal Taxation of Cannabis Businesses
An additional challenge to cannabis-related businesses is that the provisions of Section 280E of the Internal Revenue Code of 1986, as amended (“Section 280E”), are being applied punitively by the IRS to businesses operating in the medical and adult-use cannabis industry. Section 280E prohibits businesses from deducting certain expenses associated with the trafficking of controlled substances within the meaning of Schedule I and II of the CSA. The IRS has applied Section 280E broadly and punitively in tax audits against various cannabis businesses in the U.S. that are permitted under applicable state and territorial laws, seeking substantial sums in tax liabilities, interest and penalties resulting from the underpayment of taxes due to the lack of deductibility of otherwise ordinary business expenses, the deduction of which is prohibited by Section 280E. Although the IRS has from time to time issued clarifications allowing the deduction of certain expenses that can be categorized as the cost of goods sold, the scope of such items is interpreted somewhat narrowly and disparately depending upon the type of cannabis vertical (e.g., cultivation, manufacturing, retail and distribution), and the bulk of operating costs, selling, and general administrative costs are not permitted to be deducted, especially on the retail side. Therefore, businesses in the state, local and territorial-legal cannabis industry are subject to substantially higher effective tax rates and thus may be less profitable than they would otherwise be. Notwithstanding the foregoing, there have been numerous challenges by cannabis stakeholders to the IRS’s application of Section 280E to cannabis business activities, several of which are pending resolution. Any potential change in scheduling could affect the application of Section 280E. The Rescheduling Order may affect the federal tax treatment of certain marijuana-related activities because it places FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license in Schedule III under the CSA. On April 23, 2026, the U.S. Department of the Treasury and the IRS announced that they plan to issue guidance addressing the federal tax consequences of the Rescheduling Order, including the application of Section 280E to businesses with multiple activities and a transition rule under which rescheduling would generally first apply for the full taxable year that includes the effective date of the Rescheduling Order. If issued as anticipated, such guidance could potentially provide clarity regarding the non-application of Section 280E to qualifying medical marijuana activities, which would represent a significant positive development for the Company’s tax position with respect to its medical cannabis operations. However, as of the date of this MD&A, such guidance has not been issued, and given the limited scope of the Rescheduling Order and the nature of the Company’s operations post Deconsolidation, no assurance can be given that the Rescheduling Order or any resulting guidance will materially alter the Company’s overall tax treatment under Section 280E.
Service Providers
As a result of any adverse change to the approach in enforcement of U.S. federal cannabis laws, adverse regulatory or political change, additional scrutiny by regulatory authorities, adverse change in public perception in respect of the consumption of marijuana or otherwise, third party service providers to the Company could abruptly suspend or withdraw their services, which may have a material adverse effect on the Company’s business, revenues, operating results, financial condition, or prospects.
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Ability to Access Capital
Given the current U.S. federal laws regarding cannabis, traditional bank financing is typically not available to U.S. cannabis companies. Specifically, the federal illegality of marijuana in the U.S. means that financial transactions involving proceeds generated by cannabis-related conduct can form the basis for prosecution under anti-money laundering statutes, the unlicensed money transmitter statute and the Bank Secrecy Act. As a result, businesses involved in the cannabis industry often have difficulty finding bank and/or merchant processors willing to accept their business. Banks who do accept deposits from cannabis-related businesses in the U.S. must do so in compliance with the FinCEN guidance and other applicable Bank Secrecy Act obligations, both discussed above. For clarity, the DOJ’s “Cole Memorandum” was rescinded in 2018 and does not provide operative federal enforcement guidance.
If the Company requires equity and/or debt financing to support its on-going operations, to undertake capital expenditures and to undertake acquisitions or other business combination transactions, there can be no assurance that additional financing will be available to the Company when needed or on terms which are commercially reasonable or otherwise acceptable. The Company’s inability to raise financing through traditional banking to fund its on-going operations, capital expenditures or acquisitions could limit its growth and may have a material adverse effect upon the Company’s business, results of operations, financial condition or prospects.
If additional funds are raised through further issuances of equity or convertible debt securities, existing Company shareholders could suffer significant dilution, and any new equity securities issued could have rights, preferences and privileges superior to existing holders of Equity Shares.
Heightened Scrutiny by Regulatory Authorities
For the reasons set forth above, the Company’s existing operations in the U.S., and any future operations or investments of the Company, may become the subject of heightened scrutiny by regulators, stock exchanges and other authorities in Canada, the U.S. or elsewhere. As a result, the Company may be subject to significant direct and indirect interaction with public officials. There can be no assurance that this heightened scrutiny will not in turn lead to the imposition of certain restrictions on the Company’s ability to operate or invest in any other jurisdiction or have consequences for its stock exchange listing or Canadian reporting obligations, in addition to those described herein.
Changes to government policy or public opinion may also result in a significant influence on the regulation of the cannabis industry in Canada, the U.S., or elsewhere. A negative shift in the public’s perception of medical or adult-use cannabis in Canada, the U.S. or any other applicable jurisdiction could affect future legislation or regulation, or enforcement. Such a shift could cause state jurisdictions to abandon initiatives or proposals to legalize medical or adult-use cannabis, thereby limiting the number of new state or territorial jurisdictions into which the Company could expand. Any inability to fully implement the Company’s business strategy in the state in which the Company currently operates may have a material adverse effect on the Company’s business, financial condition, and results of operations. See the “Risk Factors” section of the Annual Information Form for the year ended December 31, 2025, available on SEDAR+ at www.sedarplus.ca for additional details.
Further, violations of any federal laws and regulations could result in significant fines, penalties, administrative sanctions, convictions, or settlements arising from civil proceedings conducted by either the U.S. federal government or private citizens, or criminal charges, including, but not limited to, disgorgement of profits, asset forfeiture, and cessation of business activities or divestiture. Any enforcement action against the Company or any of its licensed operating facilities could have a material adverse effect on (1) the Company’s reputation, (2) the Company’s ability to conduct business, (3) the Company’s holdings (directly or indirectly) of medical or adult-use cannabis licenses in the U.S., (4) the listing or quoting of the Company’s securities on the Canadian stock exchange or other stock exchanges, (5) the Company’s financial position, (6) the Company’s operating results, profitability, or liquidity, or (7) the market price of the Company’s publicly traded shares. In addition, it is difficult for the Company to estimate the time or resources that would be needed for the investigation of any such matters or their final resolution because the time and resources that may be necessary depend on the nature and extent of any information requested by the applicable authorities involved, and such time or resources could be substantial. See the “Risk Factors” section of the Annual Information Form for the year ended December 31, 2025, available on SEDAR+ at www.sedarplus.ca for additional details. The Company’s business activities, and the business activities of its subsidiaries, while believed to be compliant with applicable U.S. state and local laws, currently are illegal under U.S. federal law.
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Further, the CDS Clearing and Depository Services Inc. (“CDS”), Canada’s central securities depository which clears and settles trades in the Canadian equity, fixed income and money markets, indicated that it would refuse to settle trades for cannabis issuers that have investments in the U.S. The TMX Group, the owner and operator of CDS, subsequently issued a statement in August 2017 reaffirming that there is no CDS ban on the clearing of securities of issuers with cannabis-related activities in the U.S., despite media reports to the contrary and that the TMX Group was working with regulators to arrive at a solution that will clarify this matter, which would be communicated at a later time.
In February 2018, following discussions with the Canadian Securities Administrators and recognized Canadian securities exchanges, the TMX Group announced the signing of a Memorandum of Understanding (“MOU”) with The Aequitas NEO Exchange Inc. (now, Cboe Canada), the Canadian Securities Exchange, the Toronto Stock Exchange, and the TSX Venture Exchange. The MOU outlines the parties’ understanding of Canada’s regulatory framework applicable to the rules, procedures, and regulatory oversight of the exchanges and CDS as it relates to issuers with cannabis-related activities in the U.S. The MOU confirms, with respect to the clearing of listed securities, that CDS relies on the exchanges to review the conduct of listed issuers. As a result, there is currently no CDS ban on the clearing of the securities of issuers with cannabis-related activities in the U.S. However, there can be no guarantee that this approach to regulation will continue in the future. If such a ban were to be implemented at a time when the Company’s equity shares are listed on a stock exchange, it would have a material adverse effect on the ability of such holders to make and settle trades. In particular, such equity would become highly illiquid as until an alternative was implemented, investors would have no ability to affect a trade of securities through the facilities of the applicable stock exchange.
Compliance and Monitoring
As of the date of this MD&A, the Company believes that each of its licensed operating entities (a) holds all applicable state and local licenses to cultivate, manufacture, possess, and/or distribute cannabis in the State of California, and (b) is in good standing and in material compliance with California’s cannabis regulatory program. The Company is in material compliance with its obligations under state and local laws related to its cannabis cultivation, manufacturing, distribution and dispensary licenses (the latter referring to prior to Deconsolidation), other than minor violations that would not result in a material fine, suspension, non-renewal or revocation of any relevant license.
The Company uses reasonable commercial efforts to ensure that its business is in material compliance with laws and applicable licensing requirements and engages in the regulatory and legislative process nationally and in the state where it operates through its compliance department, outside government relations consultants, cannabis industry groups and legal counsel.
The compliance department is managed by the Company’s General Counsel and Corporate Secretary, Benjamin Vega (“General Counsel”). The Company’s compliance department is charged with knowing the local regulatory processes in California and is responsible for monitoring developments with their state and local agencies and governing bodies. The compliance department regularly reports regulatory developments to the Company’s General Counsel through written and oral communications and is charged with the creation and implementation of plans regarding all regulatory developments. The Company’s General Counsel works with external legal advisors in California to ensure that the Company is in ongoing compliance with applicable state and local laws and regulations and is aware of pending legislation and regulations at both the state and local levels which may impact the Company’s ongoing operations in any material respect.
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Although the Company believes that its business activities are materially compliant with applicable state and local laws, strict compliance with state and local laws with respect to cannabis may neither absolve the Company of liability under U.S. federal law nor provide a defense to any federal proceeding which may be brought against the Company. Any such proceedings brought against the Company may result in a material adverse effect on the Company. The Company currently derives 100% of its revenues from the regulated cannabis industry in California. Substantially all of the Company’s statement of financial position and results of operations relate to cannabis-related activities. Cannabis activities remain subject to significant restrictions and risks under U.S. federal law. The DOJ and DEA adopted the Rescheduling Order, effective April 22, 2026, and thereby placed FDA-approved marijuana products and marijuana products regulated by a qualifying state-issued medical marijuana license in Schedule III and established an expedited registration process for qualifying state medical marijuana licensees. However, this action does not broadly legalize commercial cannabis activity under the CSA, does not broadly resolve the federal treatment of adult-use cannabis activities, and does not complete the broader rescheduling process. Moreover, the placement of marijuana in Schedule III introduces significant new federal regulatory requirements, including DEA registration, manufacturing controls, distribution restrictions, recordkeeping obligations, security standards, and international treaty obligations under the Single Convention on Narcotic Drugs, that differ materially from and may conflict with existing state cannabis regulatory frameworks. The DEA has indicated it will issue additional guidance applicable to state-licensed operators, but such guidance has not yet been issued and there is currently no established compliance pathway that reconciles traditional Schedule III requirements with state-licensed cannabis operations. Accordingly, even where the Company’s cannabis-related activities are compliant with applicable state and local laws, significant federal enforcement, regulatory, tax and compliance risk remains. In particular, the Rescheduling Order does not constitute a general authorization for the Company’s business model, and any current and future application of Schedule III requirements could require substantial changes to the Company’s operations, compliance systems, and licensing structure, or could result in the Company being unable to comply with applicable federal law. There can be no assurance that the Company does or will be able to operate in a manner that is compliant with both state and federal law if and to the extent federal Schedule III requirements are applied to its activities.
In addition to the above disclosure, please see the “Risk Factors” section of the Annual Information Form for further risk factors associated with the Company’s operations for the year ended December 31, 2025, available on SEDAR+ at www.sedarplus.ca.
California Legal Framework and How It Affects the Company’s Business
California Licensing Scheme
California’s licensing body for medical and adult-use cannabis is the Department of Cannabis Control (“DCC”). There is no limit to the number of licenses the State of California may issue; however, some local jurisdictions have a limit on the number of licenses they will issue. Each license grants one licensed premises, and the main classes of licenses are: cultivation, retailer, distributor, manufacturer, microbusiness, event organizer, and testing laboratory. Additionally, a license may not be held by, or issued to, any person holding office in, or employed by, any agency of the State of California or any of its political subdivisions when the duties of such person are associated with enforcement of laws or regulations regarding cannabis or cannabis products. Although there are no requirements for vertical integration, California does define specific cultivation license types by canopy size.
California Medical Patient Requirements
Edibles labeled as “FOR MEDICAL USE ONLY” and only available for sale to a medicinal-use patient, may contain up to 500mg THC per package (adult use limit is 100mg THC/package). Topicals labeled as “FOR MEDICAL USE ONLY” and only available for sale to a medicinal-use patient, may contain up to 2000mg THC per package (adult use limit is 1000mg THC/package).
California Recent and Proposed Legislation
On August 31, 2024, the California State legislature approved Assembly Bill 1775, which would allow local jurisdictions the authority to approve “cannabis cafes,” where licensed retail and microbusiness (with retail) facilities could sell food and nonalcoholic beverages and host live music and other performances. On September 30, 2024, Governor Newsom approved Assembly Bill 1775, making the law effective on January 1, 2025. Under current law, some California cannabis dispensaries already offer “consumption lounges” for customers to use cannabis products on-site, but they are barred from selling anything other than prepackaged snacks and drinks. As of January 1, 2025, certain food and nonalcoholic beverage sales are permitted provided the applicable local jurisdiction approves such sales activities under its relevant regulatory program.
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On August 30, 2024, the California State legislature approved Senate Bill 1059, which prohibits cities or counties from including in the definition of gross receipts, for purposes of any local tax or fee on a licensed cannabis retailer, the amount of any cannabis excise tax imposed under California law or any sales and use taxes. Governor Newsom signed Senate Bill 1059 into law on September 29, 2024. Senate Bill 1059 took effect January 1, 2025, and will effectively remove a strategy for local governments to essentially compound taxation by precluding them from including amounts paid in state taxes in the tax base for a local tax.
In September 2025, AB 564 was passed into law in California, which reversed the scheduled increase in the state cannabis excise tax and maintains the excise tax rate at fifteen percent (15%) through June 30, 2028 (i.e., through the end of FY 2027–28), and the change became operative October 1, 2025.In addition, recent federal developments relating to cannabis rescheduling and broader cannabis reform initiatives in Washington, D.C. may impact the future tax and regulatory environment applicable to the cannabis industry; however, the timing, scope, and ultimate outcome of any such developments remain uncertain.
For a detailed description of risk factors associated with the Company and its operations, please see the “Risk Factors” section of the Company’s Annual Information Form for the year ended December 31, 2025, available on SEDAR+ at www.sedarplus.ca.
REGULATORY ENVIRONMENT: ISSUERS WITH HEMP-RELATED ASSETS IN THE UNITED STATES
Below is a discussion of the current federal and California regulatory regimes where the Company may directly or indirectly be involved, through its subsidiaries and investments, in the U.S. regulated hemp industry.
The Company’s Hemp-Related Activities are Limited, Contingent, and May Not Result in Commercial Revenues.
The Company has entered into the regulated hemp industry in the U.S. where state, local and territorial laws permit such activities. As part of the California authorized state hemp program, the Company has entered into and recently renewed a partnership with the Regents of the University of California to cultivate hemp for scientific research purposes. The Company and its subsidiaries and managed entities also do, and may, directly or indirectly participate in the cultivation, manufacture, processing, sale and/or distribution of industrial hemp and products containing hemp or hemp-derived substances, and such entities possess or will possess a hemp cultivation license as required for participation in the regulated hemp marketplace. In the future, the Company may, through its wholly-owned or managed affiliates, make further investments into other companies directly and indirectly participating in the regulated hemp industry across the U.S. and internationally.
The Company’s Statement of Financial Position and Operating Statement Exposure to U.S. Hemp Related Activities.
On July 7, 2026 the Company announced that it completed its first international sale of smokeable CBD biomass to Europe as part of the initial commercial harvest of Greenhouse 4 located at the Camarillo Facility during June 2026. The Company has procured from Ventura County, a local jurisdiction of California, a registration to cultivate industrial hemp and although the Company is not currently actively growing industrial hemp under this registration, the registration remains valid. As part of the California authorized state hemp program, the Company has entered into and recently renewed a partnership with the Regents of the University of California to cultivate hemp for scientific research purposes.
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United States Regulation of Industrial Hemp and Hemp-Based Cannabinoids
On December 20, 2018, President Trump signed the Agriculture Improvement Act of 2018, Pub. L. 115- 334, (popularly known as the “2018 Farm Bill”) into law.7 Under the 2018 Farm Bill, industrial and commercial hemp are no longer to be classified as a Schedule I controlled substance in the U.S. The definition of “hemp” includes the plant cannabis sativa L and any part of that plant, including seeds, derivatives, extracts, cannabinoids and isomers, which contain no more than 0.3% of delta-9 THC concentration by dry weight. The 2018 Farm Bill allows states to create regulatory programs allowing for the licensed cultivation of hemp and the production of hemp-derived products. Hemp and products derived from it, such as CBD, may then be sold into commerce and transported across state lines, provided that the hemp from which any product is derived was cultivated under a license issued by an authorized state program approved by the U.S. Department of Agriculture and otherwise meets the definition of “hemp.” As of the date of this filing, however, following the effectiveness of the amendments enacted under Public Law No. 119, certain hemp-derived cannabinoid products may no longer qualify as lawful “hemp,” which could restrict or prohibit their interstate transportation notwithstanding permissive state laws.
In November 2025, Congress enacted the “Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026,” H.R. 5371 (119th Cong.), which became Public Law No. 119-37 on November 12, 2025. Section 781 of Public Law 119-37 amends the federal “hemp” definition in 7 U.S.C. § 1639, and provides that these amendments take effect 365 days after enactment. As amended, the definition shifts to a “total tetrahydrocannabinols” standard, expressly including THCA, capped at not more than 0.3% on a dry-weight basis, and adds statutory exclusions that remove certain cannabinoid products from treatment as lawful “hemp.” Those exclusions include (among other things): (i) “intermediate hemp-derived cannabinoid products,” including products containing specified synthesized/manufactured cannabinoids and/or exceeding a combined total of more than 0.3% “total tetrahydrocannabinols” plus other “THC-like cannabinoids” (as determined by HHS), and (ii) “final hemp-derived cannabinoid products” exceeding a per-container threshold of 0.4 milligrams combined total (including THCA and other “THC-like cannabinoids” as determined by HHS). These amendments, once effective, can be expected to materially narrow the range of hemp-derived cannabinoid products treated as lawful “hemp” under federal law and could increase federal controlled-substance risk for non-compliant products.
The implementation and interpretation of these amendments will depend on forthcoming rulemaking and guidance from the FDA, HHS, and other federal agencies. In addition, Congress has introduced legislation that could modify, delay, or repeal certain aspects of these amendments prior to their effective date. Accordingly, there can be no assurance that the statutory framework described herein will be implemented as enacted or without material modification.
Despite the removal of CBD extracted from hemp and other hemp extracts produced under authorized state hemp programs excluded from the CSA, the FDA’s stated position remains that it is a prohibited act under the Federal Food, Drug, and Cosmetic Act (“FD&C Act”) to introduce into interstate commerce a food to which CBD, THC or cannabinoids has been added, or to market a product containing these ingredients as a dietary supplement.8
The FDA continues to enforce against violations of the FD&C Act by issuing warning letters to companies marketing and selling hemp-derived products. Over the past several years, the FDA has issued warning letters to companies marketing and selling unapproved hemp-derived CBD products. The letters reiterate the agency’s position that CBD cannot be added to food and dietary supplements, and as such, the agency has targeted companies whose products violated the FD&C Act’s prohibition against: (i) marketing CBD as or in a dietary supplement, human and animal food, or food additives; (ii) marketing a dietary supplement, human and animal food, or cosmetic with disease or drug claims (i.e., claims suggesting that a product is intended to treat, cure, or prevent diseases); (iii) including a substance in human or animal food when that substance is not GRAS (generally recognized as safe); and (iv) selling products that are misbranded due to their failure to include “adequate directions for use by a layperson.” The FDA also issued a consumer update reaffirming its position that CBD cannot lawfully be added to food or marketed as a dietary supplement due to existing provisions of the FD&C Act and outlining the data and potential safety issues it is considering as part of its ongoing evaluation of potential regulatory frameworks for CBD. Notably, the FDA states that it could not conclude based on available data that CBD is “generally recognized as safe” for use in human or animal food. While this is broad and may not be applicable in all instances, it nevertheless could materially and adversely impact the Company’s business and financial condition. Further, the FDA has repeatedly stated that it will continue to police the market and enforce against CBD products. On March 22, 2021, for example, the agency issued warning letters to two companies for selling over-the-counter products labeled as containing CBD, alleging the products were illegally marketed, unapproved drugs, which were misbranded due to prominent featuring
7 H.R.2 - 115th Congress (2017-2018): Agriculture Improvement Act of 2018, Congress.gov (2018), https://www.congress.gov/bill/115th-congress/house-bill/2/text.
8 Notably, to date the FDA’s enforcement activities in respect of the sale of CBD foods and supplements has been largely focused upon those manufacturers and distributors that have made impermissible claims about the efficacy of CBD for treating certain diseases and medical conditions.
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of CBD on the labeling, followed by additional warning letters issued in 2021 and 2022. The FDA’s enforcement against the unlawful sale and marketing of CBD products has to date been limited to the issuance of warning letters, but other enforcement mechanisms are available to the FDA, including civil and criminal penalties. The FDA’s current prohibition on certain hemp-derived products and the unknowns and associated risks of potential future regulations governing hemp-derived products may have a material adverse effect on the Company’s business, revenues, operating results, financial condition, or prospects.
On January 26, 2023, the FDA announced its conclusion that existing regulatory pathways are not appropriate for CBD and that a new regulatory pathway would benefit consumers by providing safeguards and oversight to manage and minimize risks related to CBD products. The agency also stated that it is prepared to work with Congress on this matter and that it “will continue to take action against CBD and other Cannabis-derived products to protect the public, in coordination with state regulatory partners, when appropriate” by “monitoring the marketplace, identifying products that pose risks and acting within our authorities.” We note that although much of the official discussion on hemp-derived products had been localized to hemp-derived CBD, other hemp-derived cannabinoids should be assumed to be included. Further, as discussed below, regulatory changes surrounding the so-called “intoxicating” hemp-derived cannabinoids also have been an area of increasing concern and regulation.
Since 2024, Congress has introduced various legislation to amend the 2018 Farm Bill for the purpose of prohibiting or curbing the commercial production, sale, and distribution of certain hemp-derived cannabinoids with an “intoxicating” effect.
As noted above, Public Law No. 119-37 in November 2025 introduced amendments to the federal hemp definition originally established by the 2018 Farm Bill (effective 365 days after enactment) that (i) adopt a “total tetrahydrocannabinols” standard (including THCA) for hemp plant material and (ii) create product-based exclusions, including a per-container THC/cannabinoid threshold for certain final hemp-derived cannabinoid products.
These amendments, once effective in late 2026, are expected to directly and materially affect the legality, commercial viability, and regulatory compliance of hemp-derived cannabinoid products in which the Company may have a direct or indirect interest. The new laws will, if they become effective, directly and materially affect the legality, commercial viability, and regulatory compliance of products manufactured, distributed or otherwise produced using industrial hemp, in which the Company may have a direct or indirect interest. Hemp-derived cannabinoid products that fall outside the amended definition of “hemp,” including those exceeding applicable “total tetrahydrocannabinols” thresholds or otherwise captured by statutory exclusions, may be treated as “marihuana” or tetrahydrocannabinols under the Controlled Substances Act and, therefore, as Schedule I controlled substances under federal law.
As a result, there can be no assurance that federal law will continue to permit the manufacture, distribution, or sale of hemp-derived intoxicating products, and such changes to federal law or regulation may materially and adversely affect the business operations, prospects, and cash flows if hemp industry stakeholders.
As a result of the 2018 Farm Bill, federal law dictates that cannabinoids (like CBD and THC) derived from hemp are not a controlled substance; however, cannabinoids derived from hemp may still be considered a controlled substance under applicable state law. In addition, the federal amendments enacted in Public Law No. 119-37 (effective 365 days after enactment) exclude certain hemp-derived cannabinoid products, including specified synthesized or manufactured cannabinoids and products exceeding statutory THC or cannabinoid thresholds, from the definition of lawful “hemp,” which may cause such products to be treated as controlled substances under federal law. Individual states take varying approaches to regulating the production and sale of hemp and hemp-derived cannabinoids. Some states explicitly authorize and regulate the production and sale of hemp-derived cannabinoids (and/or products that contain them) or otherwise provide legal protection for authorized individuals to engage in commercial hemp activities. Other states, however, maintain drug laws that do not distinguish between marijuana and hemp and/or hemp-derived cannabinoids which results in hemp being classified as a controlled substance under certain state laws. State laws are in many cases not consistent between or among states and, in some instances, with federal law regarding hemp. Products regulated as “hemp” products under applicable state law may not qualify as lawful “hemp” under federal law, and such products remain subject to applicable federal controlled-substance restrictions notwithstanding more permissive state laws.
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State-Level Hemp-Related Legislation
Various U.S. state and local authorities have enacted legislation and/or regulations to create regulatory programs regarding the cultivation of hemp, as well as the manufacturing and distribution of hemp products, especially hemp products containing “intoxicating” hemp-derived cannabinoids. A significant number of states have, in recent years, enacted legislation or adopted regulatory policies restricting or prohibiting hemp-derived cannabinoids with intoxicating effects (including delta-8 THC and similar compounds), imposing “total THC” standards, and/or establishing minimum age requirements for purchase. Other states have instituted bans or significant restrictions on some or all products with some or all hemp-derived cannabinoids, and others are considering legislation involving similar bans or significant restrictions. These state-level developments have contributed to increased regulatory scrutiny and have influenced ongoing federal legislative and policy considerations. Stakeholders must navigate patchwork of hemp laws and regulations that vary, and sometimes conflict between states. As a result, the regulatory and legal challenges associated with operating within the hemp industry are, generally, increasing both in terms of the quantity and complexity.
California, for instance, previously enacted Assembly Bill 45 (“AB 45”), which established a regulatory framework for the manufacture and sale of hemp-derived products, including foods, beverages, dietary supplements, and cosmetics containing hemp-derived cannabinoids such as CBD, subject to specified testing, labeling, and THC concentration requirements. AB 45 remains operative with respect to non-intoxicating hemp-derived products and is administered primarily by the CDPH. California Assembly Bill 8 (“AB 8”), however, was signed into law by Governor Gavin Newsom on October 2, 2025. The measure integrates “intoxicating hemp” and hemp-derived cannabinoids, including delta-8 THC and delta-10 THC, into the state’s regulated cannabis market. AB 8 revises the definition of “industrial hemp” to apply a “total THC” standard (encompassing delta-9 THC and its precursors) and restricts the manufacture, distribution, and retail sale of intoxicating hemp products to entities licensed under California’s cannabis regulatory framework. Once effective, the law prohibits unlicensed sales of such products, aligns testing, labeling, and packaging requirements with cannabis regulations, and expands enforcement authority for state and local agencies.
The legislation establishes a phased implementation timeline. Certain provisions, including limitations on the use of hemp extract in foods, beverages, and dietary supplements, take effect January 1, 2026. Full statutory enforcement of the transition—under which intoxicating hemp products must be sold only through licensed cannabis channels—commences January 1, 2028. Accordingly, AB 8 creates a multi-year transition period intended to harmonize the previously unregulated hemp-derived intoxicant market with the existing cannabis control regime. Implementation of AB 8 will require additional regulatory action and guidance from state agencies, and certain aspects of its scope and enforcement remain subject to clarification.
The CDPH previously adopted emergency regulations on September 24, 2024, prohibiting the sale of hemp products containing any detectable amount of THC or other intoxicating cannabinoids and limiting sales to individuals 21 years of age or older. These emergency rules remain in effect and serve as the operative regulatory framework pending final rulemaking. CDPH has initiated permanent regulations that would codify many of the emergency provisions, and those proceedings are ongoing. AB 8 is designed to complement and ultimately supersede the emergency regime, providing a statutory foundation for continued enforcement against unregulated intoxicating hemp products until its full operative date in 2028.
As a result, California currently maintains overlapping and evolving regulatory frameworks applicable to hemp-derived products, including (i) AB 45 governing non-intoxicating hemp products, (ii) CDPH emergency regulations adopted in 2024 restricting hemp products containing detectable amounts of THC or other intoxicating cannabinoids, and (iii) AB 8, which establishes a phased transition of intoxicating hemp products into the state’s regulated cannabis market. The interaction of these frameworks remains subject to ongoing rulemaking and enforcement developments.
For a detailed description of risk factors associated with the Company and its operations, please see the “Risk Factors” section of the Company’s Annual Information Form for the year ended December 31, 2025, available on SEDAR+ at www.sedarplus.ca.
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Holding Foreign Insiders Accountable Act
Section 8103 of the National Defense Authorization Act for Fiscal Year 2026, known as the Holding Foreign Insiders Accountable Act, amended Section 16(a) of the Exchange Act, effective March 18, 2026, to require every person who is a director or an officer of a foreign private issuer with a class of equity securities registered under Section 12 of the Exchange Act to file beneficial ownership reports with the SEC. On March 5, 2026, however, the SEC issued an order under Section 16(a)(5) exempting directors and officers of certain foreign private issuers, including directors and officers of foreign private issuers incorporated or organized in Canada and subject to Canada’s National Instrument 55-104 – Insider Reporting Requirements and Exemptions, from the Section 16(a) reporting requirements and related rules, provided that the individual director or officer is required to report transactions under the applicable qualifying foreign reporting regime and any report filed under that regime is made available to the general public in English within no more than two business days of its public posting. Directors and officers of foreign private issuers remain exempt from Sections 16(b) and 16(c) of the Exchange Act.
Shareholders’ Equity
As of June 30, 2026 and December 31, 2025, our authorized share capital was comprised of an unlimited number of (i) Subordinate Voting Shares, (ii) Restricted Voting Shares, (iii) Limited Voting Shares, (iv) Multiple Voting Shares and (v) Preferred Shares.
Multiple Voting Shares
We are 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 (British Columbia). On all matters upon which holders of Multiple Voting Shares are entitled to vote, each Multiple Voting Share entitles the holder thereof to 50 votes per Multiple Voting Share. Multiple Voting Shares are not entitled to dividends and are not convertible. The Multiple Voting Shares had a three (3)-year sunset period that would have expired on June 29, 2024. At our annual general and special meeting of shareholders held on June 23, 2023, shareholders passed a special resolution to amend the Articles to extend the “sunset” date for the Multiple Voting Shares to June 29, 2027, upon which they will be automatically redeemed for $0.001 per Multiple Voting Share, representing an aggregate redemption amount of approximately $5 thousand.
Equity Shares
The holders of each class of 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 (British Columbia) and except that holders of Limited Voting Shares are not entitled to vote for the election of directors of the Company. The Subordinate Voting Shares and Restricted Voting Shares carry one vote per share on all matters. The Limited Voting Shares carry one vote per share on all matters except the election of directors, as the holders of Limited Voting Shares do not have any entitlement to vote in respect of the election of directors of the Company.
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 our assets among our shareholders for the purpose of winding up our affairs, the holders of 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 in the Company’s remaining property along with all holders of the other classes of Equity Shares (on a per share basis).
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Exchangeable Shares of MPB Acquisition Corp.
Exchangeable Shares are part of the authorized share capital of MPB Acquisition Corp. (“MPB”), our wholly-owned subsidiary, 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. During the three months ended September 30, 2025, MPB amended and restated its Articles of Incorporation to provide for a new series of Exchangeable Shares that has substantially the same rights and obligations of the existing Exchangeable Shares. Until a holder exchanges their Exchangeable Shares for 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.
We treat the Exchangeable Shares as options, each with a value equal to an Equity Share, which represents the holder’s claim on our equity. Pursuant to the terms of the Exchangeable Shares, we and MPB are required to maintain the economic equivalency of such Exchangeable Shares with our publicly traded Equity Shares. This means the Exchangeable Shares are required to share the same economic benefits and retain the same proportionate ownership in our assets as the holders of the Equity Shares. We have presented these Exchangeable Shares as a part of shareholders’ equity within these Unaudited Condensed Consolidated Interim 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 U.S. 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.
Preferred Shares of GH Group, Inc.
The authorized total number of preferred shares (the “GH Group Preferred Shares”) of GH Group, Inc. (“GH Group”) is 200,000 of which 55,000 shares are designated as shares of Series B Preferred Stock (“ Series B Preferred”), 5,000 shares are designated as shares of Series C Preferred Stock (“Series C Preferred”), 15,000 shares are designated as shares of Series D Preferred Stock (“Series D Preferred”) and 80,000 shares are designated as shares of Series E Convertible Preferred Stock (“Series E Convertible Preferred”). The Series B Preferred and Series C Preferred were fully redeemed or converted and are no longer issued and outstanding.
Holders of GH Group Preferred Shares are not entitled to vote, except in connection with any changes to the Certificate of Incorporation or the Bylaws of GH Group that adversely affect the powers, preferences, privileges or rights of such GH Group Preferred Shares. Except as provided in the foregoing sentence, the Series B, Series C and Series D Preferred do not carry any voting rights and are not convertible. Except as provided above, the Series E Convertible Preferred do not carry any voting rights, except for limited protective provisions, and are 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 its stockholders, in the following order of priority and before any payment shall be made to the holders of GH Group Common Stock: (i) Series B Preferred, (ii) Series C Preferred, (iii) Series D Preferred and (iv) Series E Convertible Preferred. GH Group may redeem the GH Group Preferred Shares from a holder, in whole or in part, only after certain trigger events described below have occurred, and the redemption price will equal the liquidation value plus any accrued, unpaid and accumulated dividends.
The Series E Convertible Preferred are convertible at any time at the option of the holder into GH Group Class B Common Stock at a fixed conversion price of $9.00 per share. Each GH Group Class B Common Share is exchangeable for one Class C Common Share of MPB Acquisition Corp., which in turn is exchangeable for one publicly traded Subordinate Voting Share of Glass House Brands Inc. (the “Equity Shares”), resulting in an effective one-for-one exchange. GH Group may redeem the Series E Convertible Preferred, in whole or in part, at any time until the fifth anniversary of the original issuance after the earlier of the following trigger events have occurred: (a) (i) the 60-day volume-weighted average price of the Equity Shares is at least $12.00; (ii) the average daily trading volume of the Equity Shares exceeds one million shares; and (iii) the Equity Shares are listed on a major United States stock exchange, or (b) certain change of control events. Upon redemption, holders will receive the liquidation value plus any accrued, unpaid and accumulated dividends.
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The Series B Preferred and the Series C Preferred carried a 20% cumulative dividend rate, which increased by 2.5% annually after the second anniversary and until the 54-month anniversary of the initial issuance. The Series D Preferred carry a 15% cumulative dividend rate, which increases by 5% following the fifth anniversary of the original issuance. The Series E Convertible Preferred carry a 12% cumulative dividend rate. Dividends accrue in arrears annually and are payable in cash quarterly if and when declared by GH Group’s board of directors.
There were 15,000 shares of Series D Preferred issued and outstanding as of June 30, 2026 and December 31, 2025; and there were 77,500 shares of Series E Convertible Preferred issued and outstanding as of June 30, 2026 and December 31, 2025. In accordance with the provisions above, the Company recorded dividends to the holders of GH Group Preferred Shares in the amount of $2.9 million and $4.7 million for the three months ended June 30, 2026 and 2025, respectively.
Shares Outstanding
As of August 1, 2026, we had 4,754,979 Multiple Voting Shares and 87,997,984 Equity Shares issued and outstanding. There were 6,244,521 Exchangeable Shares issued and outstanding in the capital of MPB Acquisition Corp. In addition, we had an aggregate of 5,480,724 Restricted Stock Units and 3,000,000 Market-Based Performance Restricted Stock Units outstanding as of August 1, 2026.
The following table summarizes the Equity Shares that were issued and outstanding as of August 1, 2026:
| Equity Shares | Issued and Outstanding | ||||||||||
| Subordinate Voting Shares (SVS) | 20,730,722 | ||||||||||
| Restricted Voting Shares (RVS) | 15,975,743 | ||||||||||
| Limited Voting Shares (LVS) | 51,291,519 | ||||||||||
| 87,997,984 | |||||||||||
Cautionary Note Regarding Forward-Looking Information
This MD&A contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as “forward-looking statements”). These statements relate to future events or our future performance. 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” or “believes,” or variations of, or the negatives of, such words and phrases, or statements that certain actions, events or results “may,” “could,” “would,” “should,” “might” or “will” be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those anticipated in such forward-looking statements. Forward looking statements include, but are not limited to: statements concerning the completion of, and matters relating to, the various proposed transactions discussed by us herein and the expected timing related thereto; our expected operations, financial results and condition; general economic trends; expectations of market size and growth in the United States and California, the State we operate in; cannabis cultivation, production and extraction capacity estimates and projections; additional funding requirements; our future objectives and strategies to achieve those objectives; our estimated cash flow and capitalization and adequacy thereof; and other statements with respect to management’s beliefs, plans, estimates and intentions, and similar statements concerning anticipated future events, results, circumstances, performance or expectations that are not historical facts.
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Inherent in forward-looking statements are risks, uncertainties, and other factors beyond our ability to predict or control. Factors that could cause such differences include, but are not limited to: cannabis is a controlled substance under applicable legislation; the enforcement of cannabis laws could change; differing regulatory requirements across jurisdictions may hinder economies of scale; legal, regulatory or other political change; the unpredictable nature of the cannabis industry; regulatory scrutiny; the impact of regulatory scrutiny on the ability to raise capital; anti-money laundering laws and regulations; any reclassification of cannabis or changes in the federal legality and regulation of U.S. controlled substances; restrictions on the availability of favorable locations; enforceability of contracts; general regulatory and licensing risks; California regulatory regime and transfer and grant of licenses; limitations on ownership of licenses; regulatory action from the Food and Drug Administration; competition; ability to attract and retain customers; unfavorable publicity or consumer perception; results of future clinical research and/or controversy surrounding vaporizers and vaporizer products; limited market data and difficulty to forecast; constraints on marketing products; execution of our business strategy; reliance on management; ability to establish and maintain effective internal control over financial reporting; competition from synthetic production and technological advances; fraudulent or illegal activity by employees, contractors and consultants; product liability and recalls; risks related to product development and identifying markets for sale; dependence on suppliers, manufacturers, and contractors; reliance on inputs; reliance on equipment and skilled labor; service providers; litigation and any unexpected outcomes thereof; intellectual property risks; information technology systems, cyber-attacks, security, and privacy breaches; bonding and insurance coverage; transportation; energy costs; risks inherent in an agricultural business; management of growth; risks of leverage; future acquisitions or dispositions; difficulty attracting and retaining personnel; and past performance not being indicative of future results.
Readers are cautioned that the factors outlined herein are not an exhaustive list of the factors or assumptions that may affect the forward-looking statements, and that the assumptions underlying such statements may prove to be incorrect. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this MD&A. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any of our future results, performance or achievements expressed or implied by forward-looking statements. All forward-looking statements herein are qualified by this cautionary statement. The forward-looking statements in this MD&A speak only as of the date of this MD&A or as of the date specified in such statement. Accordingly, readers should not place undue reliance on forward-looking statements. We undertake no obligation to update publicly or otherwise revise any forward-looking statements whether because of new information or future events or otherwise, except as may be required by law. If we do update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements, unless required by law.
Disclosure Controls and Internal Control over Financial Reporting
In accordance with National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”), management is responsible for establishing and maintaining adequate Disclosure Controls and Procedures (“DCP”) and Internal Control Over Financial Reporting (“ICFR”).
Disclosure Controls and Procedures
In accordance with NI 52-109, management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of the Company’s DCP. Based on this evaluation as of June 30, 2026, and as a result of the material weakness in ICFR described below, our CEO and CFO concluded that the Company’s DCP were not effective as of such date.
Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), using criteria set forth in Internal Control–Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
ICFR is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with applicable U.S. GAAP. ICFR includes those policies and procedures that provide reasonable assurance regarding:
•the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets;
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•the recording of transactions as necessary to permit preparation of financial statements in accordance with applicable U.S. GAAP;
•the execution of receipts and expenditures only in accordance with authorizations of management and the board of directors; and
•the prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in ICFR such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Material Weakness in Internal Control over Financial Reporting
During management’s evaluation of the effectiveness of internal control over financial reporting as of December 31, 2025, management identified a material weakness related to information technology general controls (“ITGCs”) associated with certain third-party service providers supporting the Company’s primary enterprise resource planning (“ERP”) system and its retail revenue and inventory management system.
The third-party service organizations that host and support these systems did not provide Service Organization Control (“SOC”) 1 Type II reports covering the relevant period. As a result, management did not have sufficient evidence regarding the design and operating effectiveness of controls at these service organizations.
In addition, management did not maintain effective controls over system-generated reports and financial information used in financial reporting. Although certain compensating review controls were designed, such controls were not fully implemented or consistently executed and evidenced during the period.
Due to the Company’s reliance on these systems and the lack of sufficient evidence to support (i) the underlying ITGC environment at the service organizations and (ii) the completeness and accuracy of system-generated reports and financial information, management concluded that there was a reasonable possibility that a material misstatement of the consolidated financial statements would not be prevented or detected on a timely basis.
Accordingly, management determined that this deficiency constitutes a material weakness in ICFR. This material weakness is considered pervasive due to the Company’s reliance on its ERP system and its retail revenue and inventory management system, including the related system-generated reports and financial information used in financial reporting.
Management’s Assessment of ICFR
Management evaluated the effectiveness of the Company’s ICFR as of December 31, 2025, based on the COSO framework. Based on this evaluation, and due to the material weakness described above, management concluded that the Company’s ICFR was not effective as of December 31, 2025.
Despite the material weakness described above, management believes that the Unaudited Condensed Consolidated Interim Financial Statements included in this quarterly report fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods presented.
Remediation Plan
Management has initiated remediation actions to address the identified material weakness.
During the quarter ended March 31, 2026, the Company undertook the following actions:
•Engaged with relevant third-party service providers regarding the availability of SOC 1 Type II reports. As of June 30, 2026, one key service provider has engaged an independent accounting firm to perform a SOC 1 Type II examination, which is currently in process and is expected to cover the Company’s fiscal year 2026 reporting period.
•Designed and initiated implementation of enhanced controls over system-generated reports and financial information, including procedures to validate the completeness and accuracy of data used in financial reporting.
•Identified key reports and data dependencies used in financial reporting and initiated procedures to assess report logic, data sources, and completeness.
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•Initiated the development and implementation of governance procedures over third-party service providers, including monitoring of SOC report availability and establishing procedures to evaluate service organization controls.
•Management is in the process of evaluating alternative solutions and service providers capable of providing SOC 1 Type II reports for a specific third-party application where such reports are not currently available.
These remediation activities are ongoing. The enhanced controls described above have not yet been fully implemented and have not operated for a sufficient period of time to conclude on their operating effectiveness. Accordingly, the material weakness has not been remediated as of June 30, 2026. Management will continue to execute its remediation plan and further develop and implement these controls.
Changes in Internal Control Over Financial Reporting
Except for the remediation activities described above, there were no changes in the Company’s internal control over financial reporting during the quarter ended June 30, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations of Controls and Procedures
Management, including our CEO and CFO, believes that any DCP or ICFR, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of inherent limitations, controls are designed based on assumptions and may not operate as intended as conditions change over time, and no evaluation of controls can provide absolute assurance that all control issues or instances of fraud, if any, have been prevented or detected. These inherent limitations include the possibility of human error, circumvention of controls through collusion, or unauthorized override of controls. Accordingly, misstatements due to error or fraud may occur and not be detected.
Additional Information
Additional information relating to the Company, including our Annual Information Form for the year ended December 31, 2025, is available on SEDAR+ at www.sedarplus.ca.
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Exhibit 99.3
Form 52-109F2
Certification of Interim Filings Full Certificate
I, Mark Vendetti, Chief Financial Officer of Glass House Brands Inc., certify the following:
1.Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Glass House Brands Inc. (the “issuer”) for the interim period ended June 30, 2026.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is based on principles set out in the Internal Control – Integrated Framework (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period
(a)a description of the material weakness;
(b)the impact of the material weakness on the issuer’s financial reporting and its ICFR; and
(c)the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2026 and ended on June 30, 2026 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Dated August 14, 2026.
(signed) “Mark Vendetti”
Mark Vendetti
Chief Financial Officer
Exhibit 99.4
Form 52-109F2
Certification of Interim Filings Full Certificate
I, Kyle Kazan, Chief Executive Officer of Glass House Brands Inc., certify the following:
1.Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Glass House Brands Inc. (the “issuer”) for the interim period ended June 30, 2026.
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.
4. Responsibility: The issuer’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.
5. Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer and I have, as at the end of the period covered by the interim filings
(a) designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that
(i) material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and
(ii) information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
(b) designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
5.1 Control framework: The control framework the issuer’s other certifying officer and I used to design the issuer’s ICFR is based on principles set out in the Internal Control – Integrated Framework (COSO Framework) published by The Committee of Sponsoring Organizations of the Treadway Commission (COSO).
5.2 ICFR – material weakness relating to design: The issuer has disclosed in its interim MD&A for each material weakness relating to design existing at the end of the interim period
(a.)a description of the material weakness;
(b.)the impact of the material weakness on the issuer’s financial reporting and its ICFR; and
(c.)the issuer’s current plans, if any, or any actions already undertaken, for remediating the material weakness.
5.3 Limitation on scope of design: N/A
6. Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2026 and ended on June 30, 2026 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
Dated August 14, 2026.
(signed) “Kyle Kazan”
Kyle Kazan
Chief Executive Officer