Mr. Kevin Wilson reports

LEEF BRANDS REPORTS FOURTH QUARTER AND FULL YEAR 2022 FINANCIAL RESULTS ALONG WITH FIRST QUARTER 2023 FINANCIAL RESULTS

Leef Brands Inc. has released its audited financial statements for the year ended 2022, along with the unaudited first quarter of 2023.

First quarter 2023 highlights:

• Net sales of $9.7-million increased 114 per cent from Q4 2022 and 31 per cent from Q1 2022;
• Gross profit of $3.5-million increased 96 per cent from Q4 2022 and 15 per cent from Q1 2022;
• Gross margin of 36 per cent increased 1 per cent from 2022 average;
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $726,000.

Full-year 2022 highlights:

• Net sales of $27-million, a decrease of 19 per cent from full-year 2021;
• Gross profit of $9.6-million, an increase of 14 per cent from full-year 2021;
• Gross margin of 35 per cent, an increase of 10 per cent from full-year 2021;
• Adjusted EBITDA of negative $2.7-million.

Operational highlights:

• The company had Q1 2023 revenue of $9.7-million, an increase of 114 per cent compared to the fourth quarter.
• The company successfully closed the acquisition of The Leaf retail store in Palm Desert, Calif., and has seen a positive effect to both top-line and bottom-line growth.
• The company entered into an exclusive sales and licensing agreement with Buddies Brand, one of California's top-selling brands.
• The company implemented cost-savings measures culminating in overall non-recurring operating expense savings of approximately $3.3-million, including the closure of redundant facilities in Sacramento and Concord, and transferring all operations therein to the company's state-of-the-art Willits facility, located in a more favourable local tax jurisdiction.
• The company made a significant investment in a new extraction line, Solventless concentrates, improving the overall product offering Leef Labs offers its customer base. Solventless concentrates are one of the fastest-growing market segments in the California cannabis retail segment.
• The company has significantly expanded the number of doors in which its Ganja Gold, Real Deal Resin and Heady products are distributed into. Leef Brands sold into more than 550 retail locations in 2022 -- a 267-per-cent increase year-over-year.

Management commentary

"Despite the overall difficult landscape of the California cannabis industry during 2022, our first-quarter results demonstrate that Leef's growth strategy is delivering positive results in a market that is recovering from many challenges," said Micah Anderson, chief executive officer of Leef. "With many of the larger MSOs [multistate operators] leaving the state, we remain optimistic about the future of the cannabis industry in California and are committed to maintaining our position as a leader in the market. I am proud of our team and how we have worked together to navigate the difficult landscape. The year 2022 was challenging for the entire cannabis industry. From an operations standpoint, I believe we have seen the bottom in pricing in California. According to the Department of Cannabis Control, 35 per cent of testing labs, 19.4 per cent of cultivators, 14.6 per cent of distributors, 19.1 per cent of manufacturers and 11 per cent of retailers did not renew their licences in 2023. As unfortunate as this is for some of our fellow colleagues, this will strengthen the supply and demand dynamics for operators in the California cannabis market."

"Leef's strong Q1 2023 results reflect our continued focus on financial discipline and executing on our core competencies," said Kevin Wilson, chief financial officer of Leef. "The management team of Leef engaged in a number of initiatives focused on operational improvements which yielded positive results in the first quarter. We expect these improvements to continue to drive operational performance moving forward."

Select financial highlights

Leef's full audited financial statements for the full year 2022 and the first quarter of 2023 are available on the company's website and under the company's profile at SEDAR.

The company is also pleased to announce the appointment of Ben Slome to the board of directors as an independent director. Mr. Slome will fill the vacancy left by Mr. Kou's resignation in March, 2023. Mr. Slome has been an investor and operator in the cannabis business for the last seven years, having held multiple positions with Cookies and Bell Rock Brands during that tenure.

In addition, the company issued 5,083,983 common shares to satisfy the working capital adjustment payment required as part of The Leaf at 73740 LLC transaction that closed on Jan. 11, 2023.

About Leef Brands Inc. (formerly, Icanic Brands Company Inc.)

Leef Brands is a leading California-based extraction and manufacturing cannabis company. Leef is owned and managed by some of the best legacy operators in the industry, and is one of California's largest and most sophisticated cannabis companies. The company's platform consists of an integrated supply chain, state-of-the-art manufacturing, industry-leading brands, and a robust bulk concentrate portfolio that powers some of the largest brands in California. The company's vision is simple: produce best-in-class products to the cannabis consumer. The company's mission is to build a great cannabis company with great people and great results.

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