Mr. Bill Mitoulas reports

LOWELL FARMS INC. ANNOUNCES TERMINATION OF THE ZABALA ROAD LEASE

On Jan. 12, 2024, Cypress Holding Company LLC, a wholly owned subsidiary of Lowell Farms Inc., surrendered possession of approximately 10 acres of real property at 139 Zabala Rd., Salinas, Calif. (the Zabala Road property) leased by Cypress pursuant to a lease agreement dated April 1, 2017, with Tinhouse LLC, doing business as Tinhouse Partners LLC, as landlord. Prior to vacating the premises on Jan. 12, 2024, the company had operated a cultivation facility, which includes four greenhouses totalling approximately 255,000 square feet, on the Zabala Road property.

As previously announced, in January, 2023, the company's board of directors formed a strategic alternatives special committee of independent directors to explore, review, and evaluate strategic and financial alternatives. As part of these efforts, the company entered into negotiations with the landlord to restructure the terms of the Zabala Road lease, which provided for an expiry date of Dec. 31, 2027, subject to five five-year extension options exercisable by Cypress.

In September, 2023, the company and the landlord reached a settlement amending the terms of the Zabala Road lease and reaching agreement on all rent-related issues. The landlord terminated the Zabala Road lease via a letter dated Oct. 6, 2023, which was served by its counsel on the company on Oct. 10, 2023. In October, 2023, the company filed a lawsuit for breach of contract and specific performance against the landlord to enforce the settlement terms. The landlord filed counterclaims and an unlawful detainer action against the company, claiming damages of more than $36-million, which the landlord claims are based on an analysis of accelerated rent due through the end of the term of the Zabala Road lease, along with attorney fees, improvements and other undefined costs.

The company intends to vigorously defend itself against the claims made by the landlord. However, no assurance can be provided as to whether or not the company will prevail, and it may be required to pay significant monetary damages.

About Lowell Farms Inc.

Lowell Farms is a California-based cannabis company with advanced production capabilities supporting the supply chain, including extraction, manufacturing, brand sales, marketing and distribution. Lowell Farms has an exclusive portfolio of award-winning brands, including Lowell Herb Co., House Weed, Moon, Cypress Cannabis and Original Pot Co. for licensed retailers statewide.

We seek Safe Harbor.