Mr. Micah Anderson reports

LEEF BRANDS INC. REPORTS THIRD QUARTER 2023 FINANCIAL RESULTS

Leef Brands Inc. has released its financial results for the three and nine months ended Sept. 30, 2023. Unless otherwise noted, all currency references are in United States dollars.

Financial highlights:

• Net sales of $5.7-million for the three months ended Sept. 30, 2023, and $24.6-million for the nine months ended Sept. 30, 2023, represents a year-over-year increase of 10 per cent.
• Gross profit of $1.9-million for the three months ended Sept. 30, 2023, and $8.2-million for the nine months ended Sept. 30, 2023, represents a year-over-year increase of 6 per cent.
• Gross margin of 32.8 per cent for the three months ended Sept. 30, 2023, and 33.5 per cent for the nine months ended Sept. 30, 2023.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $224,500 for the three months ended Sept. 30, 2023, and $1.2-million for the nine months ended Sept. 30, 2023.

Management commentary

"Our year-over-year growth highlights our resilience and adaptability in the ever-evolving cannabis market," stated Micah Anderson, chief executive officer of Leef. "A key part of our strategy is the development of the Salisbury Canyon Ranch, our large-scale cultivation site in Santa Barbara county. This new site is not just an expansion; it's a leap forward in our ability to meet growing demand. With the ground-breaking already under way, including well installations and land preparations, we're gearing up for what we anticipate being a substantial harvest next fall. The completion of this farm in 2024 will be the catalyst that improves our biomass supply chain for the concentrate lines Leef specializes in. This will allow for us to bring predictability, consistency and higher margins which will position us well in late 2024 and beyond."

"The financial results for this quarter, particularly the 10-per-cent year-over-year increase in net sales, underscore our financial strength and the effectiveness of our business strategy," added Kevin Wilson, chief financial officer of Leef. "While we faced some revenue challenges in the third quarter, our continued focus on high-quality concentrates, customer service, along with strategic right-sizing has resulted in improved gross margins in the third quarter compared to the same period last year. In addition, the company has decreased operating expenses significantly year-over-year. These financial indicators are promising, reflecting our commitment to operational efficiency and our pursuit of sustainable growth in the dynamic cannabis market."

Q3 2023 financial results discussion

Investors are invited to access the financial results and analyses on the company's investor relations website and SEDAR+.

Subsequent events to the three months ended Sept. 30, 2023

The company has announced the issuance of 18,966,667 common shares at an average price of three Canadian cents per share as well as warrants to purchase 9,483,333 with a strike price of five Canadian cents, exercisable for two years, to settle $569,000 (Canadian) of payables to a service provider.

Unaudited Q3 2023 financial and operation metrics

Adjusted EBITDA

For the three and nine months ended Sept. 30, 2022, the company recognized a non-cash gain for the extinguishment of debt in the amount of $8,155,893 which resulted in adjusted EBITDA of $6,316,732. Removing this amount, the adjusted EBITDA would be a loss of ($1,839,161) and ($1,914,259) for the three and nine months, respectively. For the nine months ended Sept. 30, 2023, the company recognized a non-cash impairment of $17,409,624 which resulted in a large net loss of ($23,767,032). With this considered, the company has seen a year-over-year increase in adjusted EBITDA of $2-million and $3.2-million for the three and nine months ended Sept. 30, 2023.

About Leef Brands Inc.

Leef Brands is a leading California-based extraction and manufacturing cannabis company, recognized for its large-scale vertical integration and as one of the state's most sophisticated operators. With a comprehensive supply chain, cutting-edge manufacturing processes and a dynamic bulk concentrate portfolio, Leef powers some of the largest brands in California.

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