To Our Shareholders

First Quarter Results
Month ended May 22,1999


Our first quarter of fiscal 1999 saw the commissioning of our new Vancouver production line, the introduction of a completely re-vamped line-up of beverages and the diversification of our business with the purchase of an integrated food distributor.

Commencing the Spring, we introduced a new and exciting group of products to replace the old line-up that we had historically represented. We also entered into more formal, long term agreements with these brand owners and, to fill holes in our portfolio, designed and launched our own brands.

The process started in March with the launch of our proprietary Cool Canadian Premium Spring Water in its award winning packaging. We followed that with America's Best Iced Coffee and Hansen's Signature Soda and Functional Drinks. We were next appointed the licensees of SoBe, perhaps the hottest-selling new beverage in America. We next took on the Canadian rights for Fiji Natural Artesian Water and launched our own Country Harvest line of all natural juices and cocktails. By June we had entered into an agreement with The Seagram Beverage Company to represent their Ginger Ale and mixer line-up and had extended and formalized our successful relationship with Cable Car Beverage Company for Stewart's Fountain Classics. We were still not finished.

In April we opened up our distribution and sales office in Metropolitan Toronto, Ontario, giving us direct access to the balance of Canada and almost tripling the population base of the markets we reach. At this writing, we are also preparing to launch five of our own brands into the United States.

Commencing with the first quarter of fiscal 1999, we have moved from reporting periods consisting of twelve calendar months to thirteen four week periods. This allows us to operate a more simple accounting procedure. As a consequence, however, the number of days in our first quarter has been reduced by nine. We will report four periods in our second quarter to catch up the difference. When this is combined with the focus of our Vancouver plant on commissioning of Gatorade and Ocean Spray products, our sales for the period are reported lower than the same period last year ($9,137,650* versus $11,310,981*). Again due to the commissioning process undertaken in our Vancouver plant, our net loss for the period increased from $588,600* (or $0.09* per share) to $937,332 (or$0.13* per share). Our results were exacerbated, thanks to La Nina, by the wettest and dullest Spring in the recorded history of Western Canada and a prolonged labor disruption that interrupted business at one of our major customers.

Our recent acquisition of Can-Am Distributors and Alamo Snacks will provide us with many operational synergies and reduce the seasonality of our business. Over the ensuing weeks we will be consolidating our operations with those of Can-Am and introducing many of their products into our Integrated Distribution System. We anticipate annual cost savings in excess of $3,000,000& as a result. We have also broadly expanded the distribution base of the products that we master into many large convenience, retail grocery and mass merchandise outlets. The effect of these listings will be reflected in the second and ensuing quarters.

Thank you for your continued support.

*all amounts in Canadian dollars


Corporate Page
1999, Leading Brands, Inc.
All amounts are expressed in
Canadian dollars.