Mr. Bruce Leslie reports

WESTLEAF INC. ANNOUNCES CLOSING OF CONVERTIBLE DEBENTURE UNIT FINANCING AND PROVIDES CORPORATE UPDATE

Westleaf Inc. has closed its previously announced bought deal financing of 12,000 convertible debenture units of the company, by way of short form prospectus, at a price of $1,000 per unit for aggregate gross proceeds of $12-million. Each unit comprises one 9.5 per cent senior unsecured convertible debenture of the company having a principal amount of $1,000 and 385 common share purchase warrants of the company.

"Westleaf is pleased to close it's previously announced $12-million financing, which bolsters the company's available capital to $57-million, allowing it to continue to advance its vertically integrated cannabis strategy with assets across the entire value chain (cultivation, extraction/product development and retail distribution)," said Scott Hurd, president and chief executive officer of Westleaf.

Update to operations:

• Strengthened financial position: With the close of the convertible debenture financing, Westleaf now has access to $57-million of capital (cash position as of April 30, 2019, adjusted for net proceeds of the convertible debenture financing), comprising approximately $27-million of cash and the ability to draw up to $30-million of undrawn, low-cost, non-dilutive capital under its non-revolving credit facilities with ATB Financial, subject to ATB Financial's discretion in certain cases and subject to the satisfaction of certain conditions precedent.
• The plant extraction and manufacturing lab: Construction remains on schedule and on budget for the plant, with phase 1 expected to be completed in June, 2019. The licensing process is well under way with Health Canada, with the expectation that the plant could receive a standard processing licence as early as Q3 2019. It is anticipated that phase 1 will allow Westleaf to process up to approximately 30,000 kilograms of cannabis feedstock per annum (based on 252 work days per year), which will be refined and manufactured into products, such as oils, tinctures and gel caps, and, ultimately, once fully legal, edibles, vapes, topicals and other high-margin cannabis products.
• Thunderchild cultivation facility: Construction of Thunderchild cultivation near Battleford, Sask., is on track, on budget and is scheduled to be complete in Q4 2019, with Health Canada licensing expected to follow completion. The facility is expected to produce up to 14,600 kilograms of dried cannabis flower when fully operational (estimates based on a total flower bench of 42,000 square feet (phase 1 and 2), 60 grams of flower yield per square foot per harvest and 5.8 harvests per annum). The first wing and processing hub are targeted to be complete in October, 2019. The Thunderchild cultivation facility is anticipated to provide Westleaf's retail locations and the plant with a reliable supply of high-quality cannabis.
• Prairie Records cannabis retail: Year to date, the company opened three Prairie Records cannabis retail stores in Saskatchewan, two in Saskatoon and one in Warman, as well as an on-line e-commerce platform serving all of Saskatchewan. Additional cannabis retail stores are planned for Saskatchewan, Alberta and British Columbia, with a total of 29 cannabis retail development permits secured, with timing of openings contingent on licensing from the respective provincial and municipal regulators.

Convertible debenture financing

The convertible debentures will mature and be repayable on a date that is 36 months from the closing date of the offering and will accrue interest at a rate of 9.5 per cent per annum, payable in arrears on the last business day of June and December in each year. The principal amount shall be convertible, for no additional consideration, into common shares in the capital of the company at the option of the holder at any time prior to the earlier of (i) the close of business on the maturity date and (ii) the business day immediately preceding the date specified by the company for repurchase of the convertible debentures upon a change of control of the company, at a conversion price equal to $1.30, subject to adjustment in certain events. The conversion price represents a conversion rate of approximately 769 common shares for each $1,000 principal amount of convertible debentures, subject to certain anti-dilution provisions.

If the holder elects to convert the convertible debentures after a period that is 18 months and one day following the closing date, then the holder will also receive the effective interest (as defined below), payable in (i) common shares at a price equal to the daily volume-weighted average trading price of the common shares on the TSX Venture Exchange for the consecutive 20 trading days of the commons shares on the exchange preceding the date of such election, or, if such trading price is lower than the maximum permitted discount for such common shares, the maximum permitted discount for the issuance of the common shares under TSX-V policies, (ii) cash, or, (iii) at the company's option, a combination of cash and common shares at the common share interest price. The effective interest is an amount equal to the interest that the holder would have received if the holder had held the convertible debentures until the maturity of the convertible debentures.

Each warrant will be exercisable to acquire one common share for a period of 36 months from the closing date at an exercise price of $1.65 per common share.

The offering was completed pursuant to an underwriting agreement dated April 16, 2019, between the company, Canaccord Genuity Corp. and GMP Securities LP, as amended by an amending agreement dated April 29, 2019. Pursuant to the terms of the underwriting agreement, the company paid the underwriters a cash commission equal to 7 per cent of the gross proceeds raised in the offering and 646,154 non-transferable compensation warrants. Each broker warrant is exercisable to acquire one common share at a price of $2.13 per common share, subject to anti-dilution adjustments that may apply until May 10, 2022.

The net proceeds of the offering will be used for retail capital expenditures, working capital requirements and general corporate purposes.

The convertible debentures, the warrants, the effective interest shares, and the common shares issuable on the conversion of the convertible debentures and on the exercise of the warrants and the broker warrants have been conditionally approved for listing on the TSX-V and are expected to commence trading shortly, following the closing of the offering, subject to the satisfaction of all listing conditions.

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. The retail concept leverages the instinctual tie between recreational cannabis and music and redefines the cannabis purchasing experience. The company also has two significant production facilities under construction and scheduled for completion in 2019.

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