Mr. Scott Hurd of Westleaf reports

WESTLEAF ANNOUNCES ACQUISITION OF 50% INTEREST IN THE DELTA WEST EXTRACTION FACILITY FROM DELTA 9

Westleaf Inc. has signed a definitive agreement to acquire Delta 9 Cannabis Inc.'s 50-per-cent interest in the Delta West extraction facility, bringing Westleaf's total ownership to 100 per cent. Under the definitive agreement, Westleaf has agreed to issue an aggregate of 5.6 million common shares in the capital of Westleaf in consideration for the acquisition of Delta 9's 50-per-cent interest in the project. Closing is expected to occur on or about Jan. 31, 2019.

The Delta West facility is approximately 60,000 square feet with phase I (about 15,000 square feet) to include research and development, processing, extraction, manufacturing, and order fulfilment, all built to European Union GMP specifications with the intent to access international export markets. Phase II of the facility is designed to produce new derivative product lines in preparation of Health Canada's legalization of derivative products, expected to occur on Oct. 17, 2019. The Delta West facility is scheduled to open in the summer of 2019.

"This transaction is another step in the direction of becoming a significant vertically integrated player in the Canadian cannabis industry," said Scott Hurd, president and chief executive officer of Westleaf. "It is our view that over time, a diversified offering of derivative cannabis products will account for the majority of consumer demand. We are positioning to formulate unique, high-quality derivative products and leverage our expertise in building and running these types of facilities." Mr. Hurd refers to the senior management team at Westleaf who have combined, designed, built and operated multiple cultivation and extraction facilities in Canada and in United States, where medicinal or recreational cannabis has been legalized.

Transaction highlights

• Focus on derivative products -- Upon legalization of the broader set of derivative cannabis products, Westleaf believes a diversified offering of derivative cannabis products will account for the majority of consumer demand. Westleaf is focused on differentiated product formulations to produce vape cartridges, edibles, beverages and topicals to meet this expected demand.
• Demonstrated focus on accretive consolidation -- The transaction reinforces Westleaf's focus on consolidation in the various verticals of the cannabis industry. The cannabis market is highly fragmented and Westleaf continues to actively evaluate additional accretive merger and acquisition opportunities.
• Truly vertically integrated company -- Westleaf is one of the few truly vertically integrated companies in the Canadian cannabis industry, with assets owned and under development across each vertical of the business, including cultivation, extraction, processing and manufacturing, distribution, and wholly owned retail. Westleaf believes that being vertically integrated provides significant optionality and defensively positions the company to protect margins across the life cycle of the industry.

Transaction summary

Under the definitive agreement, Westleaf will purchase Delta 9's 50-per-cent interest in the Delta West LP, which owns the Delta West extraction facility, bringing Westleaf's total ownership of the partnership to 100 per cent. The purchase price is payable by way of the issuance of an aggregate of 5.6 million common shares which, based on the closing price of the common shares on the TSX Venture Exchange of $2.67 per common share on Jan. 25, 2019, represents an approximately $14.95-million. It is a condition to closing that Delta 9 enters into a voluntary escrow agreement that in addition to the four-month restricted period required by law, will restrict the transfer of the common shares issuable under the definitive agreement as to: (i) one million common shares for a four-month period following closing; and (ii) 4.6 million common shares for an eight-month hold period for closing. Closing is expected to occur on or about Jan. 31, 2019.

Completion of the transaction is subject to certain conditions and the receipt of all required regulatory and third party approvals, including the approval of the TSX Venture Exchange.

About Westleaf Inc.

Westleaf is a vertically integrated cannabis company focused on innovative retail experiences and engaging cannabis brands as well as cultivation, production and extraction of cannabis products. Westleaf is rolling out a national retail footprint for its retail concept Prairie Records, with stores planned for British Columbia, Alberta, Saskatchewan and potentially Ontario.

We seek Safe Harbor.