LEEF Brands to Become One of the First Publicly Traded Cannabis Company to Integrate Bitcoin into its Treasury Reserve via US$5 Million Bitcoin-Backed Debenture Offering

Rhea-AI Summary

LEEF Brands announces its groundbreaking move to adopt Bitcoin as a treasury reserve asset, becoming one of the first publicly traded cannabis companies to take this step. The company has entered into an agreement with Canaccord Genuity for a US$5 million convertible debenture offering, with potential for an additional US$750,000 through an Over-Allotment Option.

The debentures, due in 2030, will bear 10% annual interest and be convertible to common shares at US$0.18 per share. They will be secured by Bitcoin holdings, making them the company's first lien debt obligations regarding Bitcoin assets. LEEF has already acquired 3.937 Bitcoin at an average cost of US$88,255.17, stored in a multi-signature cold wallet.

Positive

• First-mover advantage in cannabis industry for Bitcoin treasury strategy
• Secured US$5 million in convertible debenture financing with potential US$750,000 additional
• Already acquired 3.937 Bitcoin showing commitment to strategy
• 10% interest rate on debentures provides clear return structure

Negative

• High interest rate of 10% on debentures indicates significant cost of capital
• Bitcoin's price volatility poses risk to asset-backed security
• Potential shareholder dilution through convertible debentures and warrants
• Long-term debt commitment until 2030

Appoints Jamie Warm as VP of Strategy

NOT FOR DISTRIBUTION TO UNITED STATES NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES

VANCOUVER, British Columbia, Dec. 16, 2024 (GLOBE NEWSWIRE) -- LEEF Brands, Inc. (“LEEF” or the “Company”) (CSE: LEEF) (OTC: LEEEF), a leading publicly traded cannabis company, announces its adoption of Bitcoin as a treasury reserve asset, making it one of the first publicly traded cannabis companies to take this step. To further support its Bitcoin strategy, the Company has announced that it has entered into an agreement with Canaccord Genuity (the “Lead Agent”), to act as the lead agent, in connection with a best-efforts private placement offering (the “Offering”) of up to approximately US$5,000,000 in convertible debenture units (the “Debenture Units”). Each Debenture Unit shall consist of: (i) US$1,000 principal amount of convertible debenture (each, a “Debenture”); and (ii) 5,660 detachable common share purchase warrants of the Company (each, a “Warrant”). The closing of the Offering is expected to occur in January 2025, on such date as may be agreed to by the Company and the Lead Agent (the “Closing Date”).

Each Debenture will be due in 2030, will bear interest at 10% per annum, payable at maturity or upon conversion, and will be convertible into common shares of the Company (each, a “Common Share”) at the option of the holder at approximately US$0.18 (the “Conversion Price”) per Common Share at any time prior to close of business on the date that is two business days prior to the earlier of the date that is 5 years from the closing of the Offering and the redemption of the Debentures. Following three months from the Closing Date, if the 10-day volume weighted average price (the “VWAP”) of the Common Shares on the Canadian Securities Exchange (the “CSE”) is greater than or equal to approximately US$0.25 (being C$0.35 converted into U.S. dollars using a fixed exchange rate of US$1.00:C$1.415 (the “Fixed Exchange Rate”)) over 10 consecutive trading days, the Company has the option to convert the Debentures into Common Shares at the Conversion Price by providing at least 30 days’ notice to holders of Debentures. Trading prices of the Common Shares on the CSE are quoted in Canadian dollars and all references in this press release to VWAP in U.S. dollars refer to the Canadian dollar VWAP as converted into U.S. dollars using the Fixed Exchange Rate.

The Debentures will be redeemable by the Company for the principal amount owing plus accrued and unpaid interest upon giving 30 days’ notice to holders of Debentures, provided that the VWAP of the Common Shares on the CSE over the 10 consecutive trading days ending on the 5th trading day preceding such notice is not less than 110% of the Conversion Price. Principal owing under the Debentures may be satisfied, at the discretion of the Company, in cash or upon providing not less than 25 and not more than 60 days’ notice, the number of freely tradable Common Shares obtained by dividing the principal amount of Debentures owing by 95% of the VWAP of the Common Shares on the CSE over the 10 consecutive trading days ending 5 trading days prior to the applicable date.

All securities issued under the Offering comprised in the Debenture Units will be subject to a statutory four month hold period under applicable Canadian securities laws. The Debentures will be secured solely by Bitcoin held by the Company and will be effectively subordinate to all senior secured debt obligations of the Company to the extent of the value of the assets securing such obligations, with the exception of the Bitcoin held by the Company. The Debentures will be the Company’s first lien debt obligations with respect to the Bitcoin held by the Company. If the liquidation of Bitcoin is insufficient to repay the holders of the Debentures in full, such holders will be considered unsecured creditors for the purposes of the Company repaying such balance owing.

Each Warrant will entitle the holder to purchase one Common Share at the exercise price of US$0.28 per Common Share for a period of 36 months from the Closing Date. Following the Closing Date, if the VWAP of the Common Shares is approximately US$0.49 (C$0.70) or more over 10 consecutive trading days, the Company shall have the right upon providing notice to holders of Warrants to accelerate the expiry date of the Warrants to a date at least 30 days following the date of such notice.

The Convertible Dentures and the Warrants will be governed by respective indentures to be entered into as of the Closing Date.

The Company has also granted the Agents an option (the “Over-Allotment Option”), exercisable in whole or in part, to purchase up to an additional US$750,000 of Debenture Units. If the Over-Allotment Option is exercised in full, the aggregate gross proceeds of the Offering will be US$5,750,000.

The net proceeds raised under the Offering are intended to acquire bitcoin, fund growth opportunities, capital expenditures and for general corporate purposes.

Upon closing of the Offering, the Company shall pay to the Agents a customary commission for a transaction of this nature, payable in a combination of cash and Debenture Units.

The Offering will be made on a private placement basis in each province of Canada pursuant to available prospectus exemptions, in the United States pursuant to available registration requirement exemptions and in other jurisdictions agreed upon by the Company and the Lead Agent. Closing of the Offering is subject to certain conditions, including obtaining existing noteholder approvals, execution of definitive documentation, and completion of customary filings with the CSE. 

The Company’s Bitcoin-backed debentures align with its strategic plan to integrate Bitcoin into its treasury strategy. As part of this plan, LEEF has already acquired 3.937 Bitcoin at an average cost basis of US$88,255.17 and secured them in an institutionally delegated multi-signature cold wallet. After the purchases contemplated by this Offering, any future trading of Bitcoin will be at management’s discretion. Investments in Bitcoin are subject to price volatility and a number of other risks and uncertainties more particularly described below under the heading “Forward-Looking Statements”.

To lead this diversification strategy, LEEF has appointed Jamie Warm as Vice President of Strategy. Warm, a seasoned professional in both the cannabis and Bitcoin sectors, brings a unique combination of expertise. As the former CEO of Henry’s Original and an experienced Bitcoin consultant, he is well-equipped to guide LEEF in its integration of Bitcoin into its treasury strategy as well as evaluate future initiatives. Mr. Warm will be responsible for fundraising, exchange and custodian management, operational integration for LEEF into the Bitcoin ecosystem, as well as engage in PR and IR opportunities to discuss the strategy. Jamie Warm can be reached at jamie@leefca.com

“Cannabis needs Bitcoin,” said Warm. “The strategy is aimed to enhance shareholder value while providing financial resilience in a challenging industry. The Bitcoin-backed bond marks a significant step in demonstrating the compatibility of Bitcoin and cannabis. I am excited about the hard work ahead and look forward to integrating LEEF into the Bitcoin ecosystem, setting a new standard, and offering hope for the entire cannabis industry.”

LEEF’s dual-pronged strategy focuses on optimizing operations to maximize revenue while leveraging Bitcoin as a long-term treasury asset. The US$5.0 million Bitcoin-backed debentures will enable LEEF to expand its treasury reserve and operational capabilities, creating significant value for shareholders.

CEO Micah Anderson added, “I am excited to bring Jamie on to roll out LEEF’s Bitcoin treasury strategy. Jamie and I have worked together in cannabis for many years and share a similar thesis about the value Bitcoin can bring to LEEF as well as how to build a successful cannabis company. LEEF will continue to execute its operations with a mission of becoming the premier global extraction company. Adding Bitcoin into LEEF Brands treasury can amplify the growth and value of the company. There are many similarities between the cannabis and BTC industry and fundamentally.”

About LEEF Brands Inc.

LEEF Brands Inc. 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. For more information, visit www.LeefBrands.com. 

LEEF Brands Inc.

Per: "Kevin Wilson"
Chief Financial Officer

Forward-Looking Statements 

This news release contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws (collectively, "forward-looking statements") including, but not limited to, statements regarding the terms of the Convertible Debentures and the security related thereto; the anticipated closing of the Offering; the use of proceeds from the Offering; the Company’s treasury diversification strategy of adding Bitcoin to its reserves; and the acceleration of the Company’s expansion into cryptocurrency.

Forward-looking statements reflect current expectations or beliefs regarding future events or the Company's future performance or financial results. All statements other than statements of historical fact are forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "continues", "forecasts", "projects", "predicts", "intends", "anticipates", "targets" or "believes", or variations of, or the negatives of, such words and phrases or state that certain actions, events or results "may", "could", "would", "should", "might" or "will" be taken, occur or be achieved. All forward-looking statements, including those herein are qualified by this cautionary statement. Although the Company believes that the expectations expressed in such statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the statements.

There are certain factors that could cause actual results to differ materially from those in the forward-looking information, including, but not limited to: the failure to complete the Offering on acceptable terms; risks inherent with investing in Bitcoin, including Bitcoin’s volatility; risks related to potential failure to maintain the Bitcoin network; risks related to potential manipulation of the Bitcoin blockchain; risks related to incorrect or fraudulent Bitcoin transactions, which may be irreversible; the uncertainty of geopolitical events' impact on the supply and demand for cryptocurrencies; the risks inherent with relatively new cryptocurrency exchanges and other trading venues which are, in most cases, largely unregulated and may therefore be more exposed to fraud and failure; the risks of implementing a new treasury diversification strategy; risks relating to the strategy of maintaining and increasing Bitcoin holdings; risks related to the impact of depreciating Bitcoin prices on working capital; risks related to the uncertainty of acceptance and/or widespread use of cryptocurrency; effects on Bitcoin prices as a result of the most recent Bitcoin halving; risks related to the demand and pricing of Bitcoin; risks and uncertainties associated with custody of digital assets; risks related to the Company's cryptocurrency inventory's exposure to cybersecurity threats and hacks, including a loss or theft of the Company's Bitcoin; inadequate sources of recovery of cryptocurrency assets, and other general risks disclosed in the Company's public filings on the Company's issuer profile on SEDAR+ at www.sedarplus.ca. Accordingly, readers should not place undue reliance on forward-looking statements.

For more information on the Company, investors are encouraged to review the Company's public filings on SEDAR+ at www.sedarplus.ca. The forward-looking statements and financial outlooks contained in this news release speak only as of the date of this news release or as of the date or dates specified in such statements. The Company disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by law.

SOURCE LEEF Brands, Inc.

LEEF Brands, Inc., Micah Anderson, CEO, or Kevin Wilson, CFO, 707-703-4111, ir@leefca.com

FAQ

How much Bitcoin does LEEF Brands (LEEEF) currently hold in its treasury?

LEEF Brands currently holds 3.937 Bitcoin, purchased at an average cost basis of US$88,255.17, stored in an institutionally delegated multi-signature cold wallet.

What are the terms of LEEF Brands' (LEEEF) US$5 million Bitcoin-backed debenture offering?

The debentures are due in 2030, bear 10% annual interest, and are convertible to common shares at US$0.18 per share. They are secured by Bitcoin holdings and include warrant attachments.

When will LEEF Brands' (LEEEF) Bitcoin-backed debenture offering close?

The offering is expected to close in January 2025, subject to conditions including existing noteholder approvals and CSE filings.

What is the conversion price for LEEF Brands' (LEEEF) new debentures?

The conversion price is set at approximately US$0.18 per Common Share.

How will LEEF Brands (LEEEF) use the proceeds from the US$5 million debenture offering?

The net proceeds will be used to acquire bitcoin, fund growth opportunities, capital expenditures, and for general corporate purposes.