LEEF Brands 2024 Q1 Review: Sales Up but Losses Continue

The TDR Three Key Takeaways regarding LEEF Brands and Financials:

  1. LEEF Brands’ Q1 sales increase fails to offset continued financial losses.
  2. LEEF uses new share issuance to manage $450,000 in payables.
  3. Concerns rise over LEEF Brands’ long-term financial sustainability.

LEEF Brands (CSE: LEEF, OTC: LEEEF), despite achieving growth in 2023 and Q1 2024, continues to face significant financial losses as reported yesterday. These ongoing financial challenges are not only impacting the company’s profitability but also creating liquidity issues. LEEF Brands’ strategy to manage its liquidity concerns involves issuing new debt to settle accounts payable. Specifically, the company has recently decided to issue 15 million common shares at an average price of $0.03 CAD per share to address $450,000 USD in payables owed to a service provider.

Throughout 2023, LEEF Brands saw a noticeable increase in sales, yet the financial outcomes have remained challenging with persistent losses. The first quarter of 2024 has followed this pattern, where despite some improvements, the net losses have not abated.

First Quarter 2024 Highlights Include:

  1. Net sales of $7.9M, an increase of 35% from Q4 2023
  2. Gross Profit of $3.2M, an increase of 26% from Q4 2023
  3. Gross Margin of 40.6%, an increase of 25% from the full year 2023
  4. Adjusted EBITDA of $1.77M, an increase of 347% from Q4 2023

LEEF Brands’ financials reflect a broader issue faced by many small cannabis companies. The issuance of shares for settling debts shows the challenging cash flow situation that the company finds itself in. This approach allows the company to preserve liquidity while also meeting its immediate financial obligations. However, this could potentially dilute the value of existing shares, a trade-off that shareholders will need to consider.

Furthermore, the company’s reliance on issuing debt to manage liquidity raises concerns about its long-term financial health and the sustainability of its growth trajectory. While this method addresses short-term needs, it may not provide a stable foundation for enduring financial health, especially if losses continue at their current rate. Want to keep up to date with all of TDR’s research and news, subscribe to our daily Baked In newsletter.

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