Aleafia Health Announces Update Regarding Agreement to Amend Convertible Debentures and Equity Financing

• Debentureholders representing approximately 61.4% of the Convertible Debentures outstanding have entered into Support Agreements¹, including each member of the Steering Committee nominated by Debentureholders
• Company more than 90% towards achieving a minimum of 66 2/3% required to pass the Debenture Amendments
• Debentureholders of record as of May 24, 2022 who provide valid consent and voting instructions in favour of the Debenture Amendments may be eligible, subject to satisfaction of certain conditions, to receive a Consent Fee, payable through the issuance of New Debentures
• Distributing Solicitation Materials to Debentureholders today
• Coupled with the previously announced $5.6 million equity financing, the Debenture Amendments are expected to enable the Company to continue rapidly scaling into a top 10 Canadian LP² while building high-margin medical and international businesses

TORONTO, June 02, 2022 (GLOBE NEWSWIRE) — Aleafia Health Inc. (TSX: AH, OTCQX: ALEAF) (“Aleafia Health” or the “Company”) is pleased to provide an update further to its announcement on May 12, 2022 with respect to its proposal to amend certain key commercial terms of its unsecured convertible debentures (TSX:AH.DB), set to mature on June 27, 2022 (the “Convertible Debentures”). The Company filed on SEDAR and will be distributing to all holders of the Convertible Debentures (“Debentureholders”) a notice of Extraordinary Meeting of Debentureholders and consent and proxy solicitation statement (collectively, the “Solicitation Materials”). The Solicitation Materials are available under the Company’s profile on SEDAR at www.sedar.com.

The Company is also pleased to announce that it has received executed Support Agreements from Debentureholders representing approximately 61.4% of the principal amount of Convertible Debentures outstanding, pursuant to which such Debentureholders have agreed to, among other things, consent in writing to and, if necessary, vote in favour of an Extraordinary Resolution approving the Debenture Amendments at a Meeting of Debentureholders to be held on Thursday, June 23, 2022 at 8:30 a.m. (Eastern time). If Debentureholders representing at least 66 2/3% of the principal amount of all the outstanding Convertible Debentures have delivered valid consents and proxies consenting to and voting for the approval of the Extraordinary Resolution prior to 4:00 p.m. (Eastern time) on Friday, June 17, 2022, the Extraordinary Resolution will be passed by the written consent of the Debentureholders and the Meeting will be cancelled as it will no longer be required to complete the amendments.

“We are delighted that so many Debentureholders have already expressed support for the debenture amendments by delivering Support Agreements,” said Tricia Symmes, CEO. “This paves the way for an even stronger Aleafia Health focused on leveraging our highly-regarded portfolio of value-added branded cannabis products in the Canadian adult-use market, building the recurring revenue of our medical business, and further expanding into attractive international markets.”

“The Debenture Amendments, coupled with the $5.6 million in equity financing, are part of an ongoing transformation of our balance sheet. The Convertible Debentures which were to mature and be repaid by June 27, 2022, will be split into three series of equivalent size maturing in years 2024, 2026, and 2028. This additional timeframe provides us the runway to continue scaling our business and alleviates much of the uncertainty surrounding our capital structure. The equity financing in conjunction with our revolving receivables facility provides us liquidity to continue driving revenue growth,” said Matt Sale, CFO.

Key Expected Benefits of Debenture Amendments to Debentureholders:

• Retains the full face value for Debentureholders at a par value of $100.
• Provides an opportunity for Debentureholders to collect accrued and unpaid interest through the Consent Fee.
• Provides up to an additional six years of potential interest income by extending maturity dates.
• Improves optionality to convert the New Debentures into Common Shares through the Conversion Price adjustment.
• Limits the ability of the Company to raise additional secured indebtedness.
• Enhances Debentureholders’ security profile with, among other things, direct security interest in certain of the Company’s facilities.

Key Expected Benefits of Debenture Amendments to the Company

• Removes near-term uncertainty related to refinancing the Debentures.
• Improves cash flow, by removing mandatory cash interest payment obligation for 30 months.
• Balances the Company’s refinancing profile by splitting the Principal Amount into three equivalent series.
• Enhanced change of control terms have the potential to provide more value to Company’s stakeholders.
• Increases financial flexibility to execute the Company’s growth initiatives.

Debentureholders Who Execute Solicitation Materials Eligible to Receive Attractive Consent Fee

If certain conditions are met, each Debentureholder of record as of the Record Date who provides valid consent and voting instructions in favour of the Extraordinary Resolution before 4:00 p.m. (Eastern time) on Friday, June 17, 2022 or, if beneficial Debentureholders are providing instructions to an intermediary, in sufficient time before 4:00 p.m. (Eastern time) on Wednesday, June 15, 2022, may be eligible to receive a Consent Fee. Debentureholders should consult the Solicitation Materials to determine the deadline that applies to them. Debentureholders who do not respond to the Consent Solicitation by the applicable deadlines described in the Solicitation Materials will not receive payment of the Consent Fee. Debentureholders who have signed a Support Agreement are still required to provide valid consent and voting instructions in favour of the Extraordinary Resolution to receive the Consent Fee.

The Consent Fee will be equal to the amount of interest accrued between July 1, 2021 and the Effective Date of the Debenture Amendments on the principal amount of Convertible Debentures owned by such consenting Debentureholder as of the Record Date. The Consent Fee will be paid through the issuance of Consent Fee Debentures. Similar to the New Debentures, the Consent Fee Debentures will be subject to a statutory hold period of four months and one day from the date of issuance in accordance with applicable securities laws.

For Investor & Media Relations:

Matthew Sale, CFO
1-833-879-2533
IR@AleafiaHealth.com
LEARN MORE: www.AleafiaHealth.com

About Aleafia Health:

Aleafia Health, a vertically integrated and federally licensed Canadian cannabis company, owns three licensed cannabis production facilities, including the first large-scale, legal outdoor cultivation facility in Canadian history, and operates a strategically located distribution centre, all in the province of Ontario. The Company produces a diverse portfolio of cannabis derivative products including oils, capsules, edibles, sublingual strips, and vapes, for sale in Canada in the adult-use and medical markets and is pursuing opportunities in select international jurisdictions. The Company owns and operates a virtual network of medical cannabis clinics staffed by physicians and nurse practitioners.

Forward Looking Information

This news release contains forward-looking information within the meaning of applicable Canadian and United States securities laws. Often, but not always, forward-looking information can be identified by the use of words such as “plans”, “expects”, “estimates”, “intends”, “anticipates”, or “believes” or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved. In this press release, forward-looking statements include, among other things, statements regarding: the anticipated benefits of the Debenture Amendments to Debentureholders and the Company; and the anticipated positive impact of the Company’s equity financing when coupled with the Debenture Amendments on the Company’s ability to continue rapidly scaling into a top 10 Canadian LP while building high-margin medical and international businesses. Forward-looking information involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information contained in this news release. Risks, uncertainties, and other factors involved with forward-looking information could cause actual events, results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking information, including risks contained in the Company’s annual information form filed with Canadian securities regulators available on the Company’s SEDAR profile at www.sedar.com. Although the Company believes that the assumptions and factors used in preparing the forward-looking information in this news release are reasonable, undue reliance should not be placed on such information and no assurance can be given that such events will occur in the disclosed time frames or at all. The forward-looking information included in this news release are made as of the date of this news release and the Company does not undertake any obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities legislation.

¹ All capitalized terms used and not otherwise defined in this press release have the meanings ascribed thereto in the Solicitation Materials, which are available under the Company’s profile on SEDAR at www.sedar.com.
² Based on HiFyre data for Ontario, Alberta, British Columbia and Saskatchewan markets as of April 30, 2022.