Mr. Kevin Wilson reports

LEEF BRANDS ANNOUNCES US$7.0M FINANCING THROUGH THE PARTIAL SALE OF ITS CULTIVATION AND REAL ESTATE ASSETS AND EXPANSION PLANS

Leef Brands Inc. has arranged a $7-million (U.S.) financing related to the sale of a 60-per-cent interest of its wholly owned cultivation and real estate assets in Santa Barbara, Calif., as further described as follows. This milestone transaction comes after three years of diligent efforts, during which Leef secured a 187-acre land use permit in Santa Barbara county. The proceeds of the transaction will be principally utilized to develop one of the largest biomass cultivation sites in the state, for working capital needs, as well as supporting the expansion of Leef Labs, the company's state-of-the-art manufacturing facility.

Under the terms of the transaction, Arbor Ranch SB LLC, will provide financing of $7-million through an interest-free loan agreement with the company to finance the buildout and operation of the cannabis cultivation business, which shall be wholly managed by the company. The company shall pay the lender a customary lease amount until the loan is repaid in full and the lender shall receive membership units equal to 60 per cent of the equity value of the real estate holdings. In addition, the lender shall receive half warrants to purchase up to 56,875,000 common shares of Leef Brands Inc. with a strike price of eight cents.

Leef Labs is one of the leading extraction companies in the state and has been instrumental in powering some of the largest and most prominent brands in California. By bringing supply of biomass material in-house, Leef Labs can focus its efforts on producing the best and most consistent concentrates at scale. This initiative will enable the company to enhance efficiencies across the entire manufacturing process, foster stronger relationships with its client base through the provision of exclusive genetics, higher-yielding strains and unique terpene profiles and will support Leef Labs customer growth with a predictable and consistent supply of the highest-quality input material.

Throughout 2022, California witnessed a substantial decline in active cultivation licences, leading to a reduction in sun-grown cannabis production. Last year alone, approximately 20 per cent of farms in the state were forced to close and this trend is expected to continue into 2024. The significant decrease in production has led to pricing increases across the entire supply chain, making it increasingly challenging to balance supply and demand in California. While it is disheartening to witness the closure of the company's colleagues' businesses, it is encouraging to see pricing rebound to levels that allow companies to thrive in California once again.

"Similar to most operators in the space, our team has spent the last year identifying where we can garner operational efficiencies and increase profitability. For Leef, a secure supply chain strategically planted to support our manufacturing capabilities achieves just that. The buildout of our cultivation site marks a tremendous opportunity for Leef and lays the foundation for future expansion. As a customer-service-focused company, we believe that controlling our supply chain will allow us to improve upon quality and consistency, create superior products, and provide exceptional service to its clients. Our clients are always seeking production differentiation through exclusive strains and new innovations, and we plan on leveraging this new cultivation site to offer more tailored cultivation-to-concentrate solutions to meet their needs," said chief operating officer Emily Heitman.

The initial plan for the cultivation site is for Leef to strategically develop 187 acres. Each acre is expected to yield between 3,500 and 6,000 pounds of dried biomass per year. With these expansion plans, Leef Brands is poised to become one of the largest vertical concentrate providers in the state of California, where approximately 40 per cent of the estimated $5-billion retail sales in California are derived from the sale of concentrate products. The remaining acreage will enable the company to expand significantly should it have the ability to distribute products beyond state borders in the future.

Micah Anderson, chief executive officer of Leef Brands, stated: "This project has been three years in the making, and it's great to see it finally coming to life. I believe that this farm will significantly improve our business in the years to come as it dramatically enhances our current product offering and profitability and enables us to scale in the face of potential legalization measures. Leef is very grateful to have such a supportive shareholder base who believe in our vision and continue to support our strategic initiatives. The team at Leef is the best in the business as far as I'm concerned, and I can't wait to see what they do with the consistent supply chain this farm will bring to our business."

The company also announces the resignation of Mark Smith from the board of directors and as chairman of the board of the company, effective May 31, 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 and a robust bulk concentrate portfolio that powers some of the largest brands in California.

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