Mr. Edoardo Mattei of Red White reports

RED WHITE & BLOOM AND ALEAFIA HEALTH MUTUALLY AGREE TO TERMINATE BINDING LETTER AGREEMENT

Red White & Bloom Brands Inc. and Aleafia Health Inc. have mutually terminated the binding letter agreement entered into between the parties on June 6, 2023, in respect of the proposed business combination transaction, as detailed in the joint press release issued on June 7, 2023. The termination is without liability or cost to either party.

Pursuant to the letter agreement and as a prerequisite to closing of the previously announced proposed transaction, the approval of holders of Aleafia convertible debentures issued under the amended and restated debenture indenture providing for the issue of certain convertible debentures dated as of June 27, 2022, between Aleafia and Computershare Trust Company of Canada, as the trustee, as supplemented by: (a) the first supplemental indenture dated as of June 27, 2022 (providing for the issue of the 8.5 per cent Series A secured convertible debentures due June 30, 2024); (b) the second supplemental indenture dated as of June 27, 2022 (providing for the issue of the 8.5 per cent Series B secured convertible debentures due June 30, 2026); and (c) the third supplemental indenture dated as of June 27, 2022 (providing for the issue of 8.50 per cent Series C secured debentures due June 30, 2028), was required to settle all outstanding amounts due to them for an aggregate amount of $6-million in exchange for the cancellation of all Aleafia convertible debentures.

While Aleafia had received support in writing from certain holders of the outstanding Aleafia convertible debentures, certain other holders representing more than 33-1/3rd per cent of the outstanding Aleafia convertible debentures, as represented by their designated representatives, have communicated to Aleafia and Red White that they will not accept the terms of the settlement set out in the letter agreement. As a result, a key condition of the proposed transaction cannot be satisfied, and the parties have mutually agreed to terminate the letter agreement.

Pursuant to an assignment of indebtedness and security dated June 6, 2023, NE SPC II LP sold to Red White all indebtedness of Aleafia and certain of its affiliates in connection with the loan agreement made as of Dec. 24, 2021, as amended on March 28, 2022, June 17, 2022, April 26, 2023, May 15, 2023, and May 31, 2023. Aleafia is currently in breach of certain covenants under the Aleafia senior secured loan agreement, and while Red White has not, to date, taken steps to formally note Aleafia in default or immediately enforce its security, Red White has not waived any outstanding breaches, and has reserved all of its rights and remedies under the Aleafia senior secured loan agreement and related security. Red White is currently considering all available options.

As a result of the termination of the letter agreement and in light of the status of the Aleafia senior secured loan agreement, disinterested members of the board of directors of Aleafia continue to explore and evaluate potential strategic alternatives that may be available to Aleafia with the goal of maximizing value for Aleafia stakeholders. Aleafia does not intend to comment further with respect to the continuing strategic review process unless and until it determines that additional disclosure is appropriate in the circumstances and in accordance with applicable securities laws.

About Red White & Bloom Brands Inc.

Red White is a multistate cannabis operator and house of premium brands in the U.S. legal cannabis sector. Red White is predominantly focusing its investments on the major U.S. markets, including Arizona, California, Florida, Massachusetts, Missouri and Michigan.

About Aleafia Health Inc.

Aleafia is a federally licensed Canadian cannabis company, offering cannabis products in Canadian adult-use and medical markets and in select international markets, including Australia and Germany. Aleafia operates a virtual medical cannabis clinic staffed by physicians and nurse practitioners, which provides health and wellness services across Canada.

Aleafia owns three licensed cannabis production facilities and operates a strategically located distribution centre in the province of Ontario, including the largest outdoor cannabis cultivation facility in Canada. Aleafia produces a diverse portfolio of cannabis and cannabis derivative products, including dried flower, preroll, milled, vapes, oils, capsules, edibles, sublingual strips and topicals.

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