SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS

We believe that it is important to communicate our future expectations to our security holders and to the public. This report, therefore, contains statements about future events and expectations which are "forward-looking statements" within the meaning of Sections 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934, including the statements about our plans, objectives, expectations and prospects under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations." You can expect to identify these statements by forward-looking words such as "may," "might," "could," "would," "will," "anticipate," "believe," "plan," "estimate," "project," "expect," "intend," "seek" and other similar expressions. Any statement contained in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. Although we believe that the plans, objectives, expectations and prospects reflected in or suggested by our forward-looking statements are reasonable, those statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements, and we can give no assurance that our plans, objectives, expectations and prospects will be achieved.

Important factors that might cause our actual results to differ materially from the results contemplated by the forward-looking statements are contained in the "Risk Factors" section of and elsewhere in our Annual Report on Form 10-K for the fiscal year ended June 30, 2019, and in our subsequent filings with the Securities and Exchange Commission. The following discussion of our results of operations should be read together with our financial statements and related notes included elsewhere in this report.





Company Overview

GL Brands, Inc. is a global hemp consumer packaged goods house of brands that creates authentic, enduring and culturally relevant brands engaged in the development and sale of cannabis-derived wellness products. Through its premier brands, Green Lotus and IrieCBD, the Company delivers a full portfolio of hemp CBD products, including tinctures, soft gels, gummies, sparkling beverages, vapes, flower and topical segments to promote greater wellness and balance for consumers in the U.S. and throughout the world.

The Company's Consumer Product Brands

Each of the Company's brands is rooted in the fundamentals of product quality, brand authenticity and unmatched customer service. GL Brands, Inc. is driven by a reverence for the cannabis plant and a deep respect for the well-being of the consumer.

Green Lotus Hemp ("Green Lotus") is a rapidly growing premium hemp oil products brand that manufactures and distributes premium cannabinoid products including tinctures, gel caps, edibles, topicals, vape cartridges, flower, pre-roll, and beverages made from organic industrial hemp. Green Lotus has grown rapidly since its inception in 2016 and now has a national presence in over 1,700 locations in the U.S. and is a first mover in the Mexican CBD market, with 3,000 points of current distribution. The Company expects to grow its national presence to approximately 5,700 locations through calendar 2020. This includes 2,000 additional locations via its announced Greenlane Holdings distribution arrangement and 2,000 additional locations through a major retailer.

IrieCBD's ("Irie or Irie's") mission is to provide full-spectrum, natural solutions for health and wellness. Irie is a premium-priced hemp brand, distributing full-spectrum hemp CBD tinctures, edibles, topicals and capsules to over 300 high-end retailers and health and wellness chains in the United States and abroad. The Company expects to grow this number by approximately 350 domestic locations in 2020. In early calendar 2020, the Company will launch newly rebranded Irie hemp CBD products. This effort is a complete rebranding with the goal of solidifying Irie's position as a premium brand in the consumer marketplace.









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The Company's Mission

The Company's mission is to create authentic, meaningful brands and lead the world in the responsible manufacturing and distribution of hemp-derived cannabis consumer packaged goods.

The Company's Market Opportunity

The Company's long-term objective is to become a leading global hemp consumer packaged goods company. The Company believes that all the necessary components and capabilities are in place to accomplish this objective. The Company intends to achieve this goal by driving organic growth, as well as possible mergers and acquisitions, supported by a diverse brand and product portfolio of healthy and functional lifestyle products in leading product categories across all distribution channels through an aligned network of retailers and distribution partners.

We believe that the hemp CBD industry has the potential to disrupt the pharmaceutical, alcohol, tobacco, textile, and food and beverages sectors. Traditional consumer packaged companies recognize the rapid adoption of cannabis products and have responded by forming partnerships and or have made investments in some of the leading cannabis players in North America. We are already witnessing this phenomenon in the beer industry. It is no coincidence that the first non-cannabis consumer packaged goods companies to make major investments in the sector were beer manufacturers, with Constellation Brands leading the way with its $4.0 billion investment in Canadian-based Canopy Growth Corp. in 2018. This was followed by AB InBev's investment in a joint venture with Tilray to research cannabis-infused drinks for the Canadian market, and Molson Coors Canada's joint venture agreement with Hydropothecary Corp. to develop non-alcoholic, cannabis-infused beverages. Big tobacco has joined with Altria Group, Inc.'s $1.8 billion investment in Canadian-based Cronos Group, Inc.

Food and beverages that contain vitamins and other additives and ingredients to enhance health and well-being will see increased competition from products containing cannabinoids including CBD. For example, we believe that many consumers will replace traditional sports or energy drinks with cannabinoid-enhanced beverages. As an example of our ability to meet the anticipated demand for beverages, Green Lotus™ released a suite of hemp CBD carbonated beverages in Q1 of fiscal 2020.

Rich Maturo, VP, Cannabis Practice at The Nielsen Corporation, a global provider of market research and analysis of media, has stated his belief that a battle will emerge in retail as traditional brick-and-mortar CPG retail channels will steal share from online CBD retailers local specialty CBD retailers, and vape and tobacco shops. "Compared with current hemp-CBD users," Maturo says, "our survey data shows that new CBD consumers who say they're likely to consume CBD products in the next 12 months but have yet to consume are more than twice as likely to state that they'll shop for CBD products at a grocery chain or mass merchandiser. These same consumers are more than 3.5 times more likely to state that they'll purchase hemp-CBD products from a chain drug store."

The Company believes that its brands are well positioned to compete favorable in terms of emerging distribution opportunities at grocery chain and mass merchandisers through existing agreements and relationships. The following growth strategies describe, in part, these efforts.









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The Company's Growth Strategies

· Rebranding and creating a leading consumer packaged goods company

· Partnering with established distributors and retailers

· Focusing on operational excellence and product quality

· Establishing greater transparency and higher level of communication with the

capital markets

· Implementing corporate restructuring plan

Rebranding and Creating a Leading Consumer Packaged Goods Company. The Company is building a robust hemp CBD consumer packaged goods platform with industry-leading brands in the U.S. and Mexico. These are early days in the development of the hemp CBD sector, and the Company believes that firms that can scale, develop strong distribution networks, and offer high-quality brands will emerge as the industry leaders. The Company is in the final stages of a planned rebranding, including a new holding company name, which was implemented on November 20, 2019, a new stock symbol, and a marketing and e-commerce plan that will reflect a "house of brands" strategy, providing the Company with a more effective platform to organically develop or acquire additional brands to further our growth. The remaining item to complete is the acquisition of a new stock symbol, the process of which is under way. The Company will continue to leverage first-mover advantage to fully penetrate the Mexican market. The Company completed its inaugural shipment of topical hemp CBD products to Mexico on July 31, 2019 and has since followed this with two additional shipments. The Company expects to start shipping additional SKU's beginning in Q2 of calendar 2020 as part of a larger $26 million order already placed with the Company.

Partnering with established distributors and retailers. As the industry evolves, the distribution of hemp products has increasingly mirrored the distribution of wellness and other consumer packaged goods. To efficiently and rapidly increase our scale, the Company has formed partnerships with established distributors and leading regional and national retailers to expand our domestic footprint. Through these partnerships and an aggressive marketing outreach, the Company has gained traction with some of the largest distributors and leading traditional retailers in the United States. The Company is in advanced talks to partner with both traditional retailers and state-licensed cannabis players. In addition, as an example, the Company is supporting its omnichannel selling approach throughout North America in the following ways:





   ·  Retail - scale internal sales force while securing deals with established
      distributors to reach growth segments.
   ·  E-Commerce - the Company is augmenting its internal team and working with
      media, analytics, and public relations firms who specialize in cannabis to
      enhance our brand awareness and drive online sales.
   ·  Medical - establish brand credibility through partnerships with companies
      collecting patient data and medical practitioners, including participation
      in prospective clinical trials with Canadian company CB2 Insights utilizing
      Green Lotus hemp CBD soft gel capsules. The Company's participation in this
      study was publicly announced December 17, 2019.

Focusing on operational excellence and product quality. To support the Company's robust sales pipeline in the United States and Mexico, the Company has made strategic investments in operations, including supply chain, manufacturing capabilities, product development, research and development, and multi-channel distribution. In doing so, the Company has developed a quality management system that enables it to meet the requirements of the regulatory agencies in the markets where the Company exports products, while consistently delivering high-quality and compliant products in all jurisdictions in which we operate.

Establishing greater transparency and higher level of communication with the capital markets. In Q3 of fiscal 2019, the Company hired a leading investor relations and public relations firm in the cannabis space to assist in communications and to support the underserved and much needed investor relations functions at the Company. The Company intends to aggressively market its story to both investors and retail consumers.









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Implementing corporate restructuring plan. Following the Acquisition of Green Lotus, the Board of Directors of the Company (the "Board") approved a strategic plan with the following objectives: (a) to transform the Company into a leading consumer packaged goods hemp CBD company with a concentration on the Green Lotus and IrieCBD brands in the United States and Mexico, rather than building a vertically-integrated hemp company in the U.S. and Europe; (b) sell or shut down non-core and non-accretive business segments; (c) consolidate the Company's manufacturing, sales, distribution and corporate functions into the newly acquired Green Lotus infrastructure, resulting in operational synergies and cost savings; and (d) formulate a comprehensive corporate rebranding plan for the Company.

The following actions have been executed or are underway as part of the Company's Board-approved strategic review and restructuring plan:





   ·  IrieCBD Operations: Immediately following the ECS Labs LLC acquisition, all
      IrieCBD manufacturing and distribution operations in Oakland, California,
      were transitioned to ECS Labs LLC facilities in Dallas, Texas. The IrieCBD
      brand has already begun realizing the benefit of ECS Labs LLC experienced
      internal sales team, gaining access to multiple medium-to-large accounts
      throughout the U.S. Staff redundancies have been addressed, and full staff
      integration was completed in Q4 of fiscal 2019.




   ·  Leafceuticals Europe: The Company exercised its option to terminate its
      Spanish greenhouse lease in May 2019, eliminating its remaining $4.3
      million of payment obligations. In 2018, Leafceuticals Europe S.L.U.
      ("Europe"), a subsidiary of the Company, purchased a 430,000 sq. ft. indoor
      grow facility located in Valencia, Spain. Consistent with the Company's
      plan to more efficiently leverage resources and focus capital on building
      its family of brands in North America, as of June 2019, all operations of
      Leafceuticals Europe ceased.




   ·  Tierra Science Global: Tierra Science Global, LLC ("Tierra") was acquired
      in 2018 and became a wholly owned subsidiary of the Company. Tierra offers
      health care supplements and wellness products through direct sales teams in
      Asia, Europe, and North America. Tierra was sold back to its original
      owners in July 2019.




   ·  Hempology: Hempology was developed internally as a product brand, with a
      focus on all-natural and locally sourced ingredients. Its portfolio
      included organic herbal vapeables, tinctures, topicals, and edibles. The
      Board determined that further investment in Hempology was unnecessary given
      the line of organic products offered by ECS Labs, LLC. To focus on the
      Company's core brands, the Company sold Hempology to San Francisco
      Distribution Company on July 25, 2019.




   ·  Leafceuticals Inc. (US): The Company has sold all extraction equipment
      domiciled in its Las Vegas facility and successfully vacated the space at
      the end of calendar 2019. The Company intends to transfer the remaining
      Leafceuticals assets to another wholly owned, operating subsidiary of the
      Company in Q1 of calendar 2020. Upon completion of this transfer,
      Leafceuticals will be dissolved, in accordance with the previously approved
      Board strategy.




   ·  Cicero Transact Group, LLC and Cicero Platform, LLC: The Company's stake in
      Cicero was sold to Sinclair Inc. effective June 27, 2019. In 2018, the
      Company purchased a minority stake in: (1) Cicero Transact Group, LLC, an
      online business-to-business deal platform, and (2) Cicero Platform Group
      LLC, a crypto-focused company. The Board determined this was a non-core
      asset. The Company's stake in both Cicero entities was sold for $145,000 in
      July of 2019.




   ·  AccuVape: On October 10, 2019, the Company and the former owner of AccuVape
      entered into a settlement agreement regarding the disposition of AccuVape.
      As of the date of this filing, all settlement agreement obligations have
      been satisfied. The Company intends to dissolve AccuVape in calendar year
      2020.




   ·  Media Properties: FreedomLeaf.com is the online website for the Company's
      print publication, "Freedom Leaf Magazine." The Board has determined that
      this publication is inconsistent with the Company's strategy of developing
      leading consumer product brands and is a non-core asset. The Company is
      engaged in discussions with several interested parties, and the Company
      expects a sale of these properties by the end of calendar 2020.

The Company is an audited and reporting publicly traded company under the symbol (OTC Pink: FRLF) with corporate headquarters located at 3939 Beltline Rd., Suite 350, Addison, Texas.











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Results of Operations

For the three months ended September 30, 2019 and September 30, 2018





Revenues

Our revenue was $2,121,508 for the three months ended September 30, 2019, compared to $608,658 for the three months ended September 30, 2018. Revenue, by class, is as follows:





Revenues:           September 30,       September 30,
                        2019                2018
Magazine related   $             -     $           472
Product sales            2,121,508             608,186
Total              $     2,121,508     $       608,658

Comparative results for the quarter reflect the consummation of our acquisition of ECS Labs LLC and recent launch of various hemp derived cannabis consumer packaged goods products. Note that the Company is no longer engaged in magazine related activities, which is reflective of the Company's focus on becoming a leading consumer packaged goods house of brands.





Operating Expenses

Cost of goods sold ("COGS") were $659,737 and $269,125 for the three months ended September 30, 2019 and 2018, respectively. COGS, by class, is as follows:

Cost of goods sold September 30, September 30,


                          2019                2018
Magazine related     $             -     $        14,053
Product sales                659,737             255,072
Total                $       659,737     $       269,125

The increase in direct costs reflects that the Company's revenues now derive from the sale of products.

For the three months ended September 30, 2019, our general and administrative expenses, compensation accruals and marketing and selling expenses ("Selected Expenses") were $15,879,477 compared to $1,152,756 for the three months ended September 30, 2018, resulting in an increase of $14,726,721. The increases were largely attributable to: (1) one-time, accrued expenses related to cash incentive compensation resulting from employment agreements of $2,126,131; (2) one-time, non-cash expenses related to stock incentive compensation accruals resulting from employment agreements of $11,621,197; (3) increased general and administrative expenses and marketing and selling expenses in reflection of actual and future product sales following the acquisition of ECS Labs LLC; and (4) one-time transactional expenses related to the acquisition of ECS Labs LLC of $250,453. The compensation accruals in items (1) and (2) above and transactional expenses in item (4) represent 88% of Selected Expenses and 95%, respectively, of the period over period increase in Selected Expenses.









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Other income (expenses)

Other income (expense) was $9,064 for the three months ended September 30, 2019, compared to $93,239 for the three months ended September 30, 2018. The September 30, 2019 figure includes a gain on sale of property and equipment of $45,086 and interest expense of $81,955 for the three months ended September 30, 2019.

Net loss attributable to common shareholders was $14,512,256 for the three months ended September 30, 2019, compared to net loss of $1,111,766 for the three months ended September 30, 2018. The higher net loss for the three months ended September 30, 2019 as compared to the same period in 2018 is largely attributable to: (1) one-time expenses related to compensation accruals resulting from employment agreements; (2) increased general and administrative expenses and marketing and selling expenses in reflection of actual and future product sales following the acquisition of ECS Labs LLC; and (3) one-time transactional expenses related to the acquisition of ECS Labs LLC.

Liquidity and Capital Resources

Liquidity and Capital Resources during the three months ended September 30, 2019 compared to the three months ended September 30, 2018

As of September 30, 2019, the Company had $328,279 in cash. The Company used cash in operations of $1,139,610 for the three months ended September 30, 2019, compared to cash used in operations of $525,800 for the three months ended September 30, 2018. The negative cash flow from operating activities for the three months ended September 30, 2019 was attributable to the Company's net loss attributable to common shareholders primarily due to: (1) increased overhead associated with ECS Labs LLC operations; (2) increased general and administrative expenses and marketing and selling expenses in anticipation of expanding product sales various planned activities; (3) increased inventory based on pending orders and in anticipation of growing sales in the amount of $885,995; and (4) payment of prior obligations of Freedom Leaf Inc. entities in the amount of $1,099,911.

The Company satisfied $1,099,911 in obligations of Freedom Leaf Inc., AccuVape, Leafceuticals, Tierra Science Global and Freedom Leaf Europe that were incurred prior to the acquisition of ECS Labs LLC ("Acquisition Obligations"). An additional $602,294 in Acquisition Obligations were paid subsequent to the filing period. $165,446 in Acquisition Obligations are not yet paid. These cash expenditures are non-recurring.

The Company generated (used) cash from investing activities of $70,203 and $(1,489) for the three months ended September 30, 2019 and 2018, respectively. The increase in cash generated from investing activities of $71,692 was primarily related to proceeds from the sale of fixed assets.

The Company had cash provided by financing activities of $1,038,500 and $470,427 for the three months ended September 30, 2019 and 2018, of which $1,100,000 was from the proceeds of notes payable compared to $60,000 for the same period in 2018.

The Company anticipates raising funds to pay for our expenses in the second half of calendar year 2020. We may borrow money from shareholders or issue debt or equity or enter into a strategic arrangement with a third party. There can be no assurance that additional capital will be available to us.





Going Concern

The accompanying financial statements and the factors within it, have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and the ability of the Company to continue as a going concern for a reasonable period of time. The Company sustained net losses attributable to common shareholders of $14,512,256 and cash used in operating activities of $1,139,610 for the three months ended September 30, 2019.











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In recent months, the Company has begun to execute its strategy of selling or shutting down non-core and non-accretive business segments and consolidating the Company's manufacturing, sales, distribution and corporate functions into the newly acquired ECS Labs LLC infrastructure. These initiatives should result in operational synergies and cost savings.

The Company's continuation as a going concern is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from third parties to sustain its current level of operations. See Note 11 - Subsequent Events, provides information regarding a $5,000,000 capital raise consummated by the Company on November 18, 2019.

Off Balance Sheet Arrangements

We currently have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.





Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experiences and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions and conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 1, "Summary of Significant Accounting Policies" in our audited financial statements for the year ended June 30, 2019, included in our Annual Report on Form 10-K as filed on November 14, 2019, for a discussion of our critical accounting policies and estimates.

Reclassification of Certain Expenses

The results of operations as of September 30, 2019 were not prepared on a consistent basis with prior periods. The results of operations in this filing were prepared classifying appropriate expenses as cost of goods sold ("COGS"). The term COGS refers to the direct costs of producing the products sold by the Company. The Company has elected to reflect COGS in order to accurately state inventory value and gross margin. Further, this change is reflective of the Company's transition to a product-based business. Previously, these costs were presented as direct costs of revenue. The result of this presentation method change results in no change to the net income, and no pro forma financial information is necessary.















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