/THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT INTENDED FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR DISSEMINATION IN THE UNITED STATES./

CALGARY, May 10, 2019 /CNW/ - Westleaf Inc. (the "Company" or "Westleaf") (TSX-V:WL)(OTCQB:WSLFF) is pleased to announce that it has closed its previously announced bought deal financing (the "Offering") of 12,000 convertible debenture units of the Company (the "Units"), by way of short form prospectus, at a price of $1,000 per Unit for aggregate gross proceeds of $12,000,000. Each Unit consisted of one 9.5% senior unsecured convertible debenture (each a "Convertible Debenture") of the Company having a principal amount of $1,000 (the "Principal Amount") and 385 common share purchase warrants of the Company (the "Warrants").

"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 CEO of Westleaf Inc.

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) comprised of ~$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.





With the close of the convertible debenture financing, Westleaf now has access to of capital (cash position as of adjusted for net proceeds of the convertible debenture financing) comprised of of cash and the ability to draw up to 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 & Manufacturing Lab: Construction remains on schedule and on budget for The Plant with Phase I expected to be completed in June 2019 . The licensing process is well underway 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 I will allow Westleaf to process up to ~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.





Construction remains on schedule and on budget for with Phase I expected to be completed in . The licensing process is well underway with Health Canada, with the expectation that could receive a Standard Processing licence as early as Q3 2019. It is anticipated that Phase I will allow Westleaf to process up to ~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, Saskatchewan is on track, on budget and is scheduled to be complete in Q4 2019 with Health Canada licencing expected to follow completion. The facility is expected to produce up to 14,600 kg of dried cannabis flower when fully operational (estimates based on a total flower bench of 42,000 square feet (Phase I & II), 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.





Construction of near is on track, on budget and is scheduled to be complete in Q4 2019 with Health Canada licencing expected to follow completion. The facility is expected to produce up to 14,600 kg of dried cannabis flower when fully operational (estimates based on a total flower bench of 42,000 square feet (Phase I & II), 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 . The facility is anticipated to provide Westleaf's retail locations and 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 online ecommerce 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 licencing 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 (the "Maturity Date") from the closing date of the Offering (the "Closing Date") and will accrue interest at a rate of 9.5% 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 (the "Common Shares") 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"). 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 eighteen 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 (the "Effective Interest Shares") at a price equal to the daily volume weighted average trading price of the Common Shares on the TSX Venture Exchange (the "Exchange" or "TSXV") 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 TSXV policies (the "Common Share Interest Price"); (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 ("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 L.P. (the "Underwriters"), as amended by an amending agreement dated April 29, 2019 (the "Underwriting Agreement"). Pursuant to the terms of the Underwriting Agreement, the Company paid the Underwriters a cash commission equal to 7% of the gross proceeds raised in the Offering and 646,154 non-transferable compensation warrants (the "Broker 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 TSXV and are expected to commence trading shortly following the closing of the Offering, subject to the satisfaction of all listing conditions.

The securities comprising the Units sold, and the Common Shares issuable on the conversion of the Convertible Debentures and on the exercise of the Warrants and the Broker Warrants, have not been, nor will they be, registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States or to, or for the account or benefit of, U.S. persons absent registration or an applicable exemption from the registration requirements. This news release will not constitute an offer to sell or the solicitation of an offer to buy nor will there be any sale of the securities in any state in which such offer, solicitation or sale would be unlawful.

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. For more information, please visit www.westleaf.com or www.prairierecords.ca.

Neither TSXV nor its Regulation Services Provider (as that term is defined in the policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release

Cautionary Statements

This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects", or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events or results "may" or "could", "would", "might" or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate to, among other things, the completion dates for Westleaf's extraction and cultivation facilities, the processing and production capabilities of Westleaf's extraction and cultivation facilities, receipt of Health Canada licensing for Westleaf's extraction and cultivation facilities and the timing thereof, retail cannabis stores that Westleaf plans to open, the listing of the Convertible Debentures, the Warrants and the Common Shares issuable on the conversion of the Convertible Debentures and on the exercise of the Warrants and the Broker Warrants and the use of proceeds of the Offering. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: risks relating to the ability to obtain or maintain licences to retail cannabis products; review of Westleaf's extraction and cultivation facilities by Health Canada and receipt of licences from Health Canada in respect thereof; future legislative and regulatory developments involving cannabis; inability to access sufficient capital from internal and external sources, and/or inability to access sufficient capital on favourable terms; the labour market generally and the ability to access, hire and retain employees; general business, economic, competitive, political and social uncertainties; the satisfaction of conditions precedent under Westleaf's credit facilities; timing and completion of construction of Westleaf's extraction and cultivation facilities and retail locations; and the delay or failure to receive board, ATB Financial or regulatory approvals, as applicable. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Except as required by law, Westleaf assumes no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.

SOURCE Westleaf Inc.

For further information: Bruce Leslie, VP Corporate Communications, [email protected], 403-801-7612; Lauren Steeves, North Strategic, [email protected], 306-717-3253

Related Links

http://www.westleaf.com

