TORONTO–(BUSINESS WIRE)–Halo Labs Inc. (“Halo” or the “Company”) (NEO: HALO, OTCQX: AGEEF, Germany: A9KN) is pleased to announce that, further to its press releases dated January 16, March 2, 2020, March 6, 2020, and March 31, 2020 it has closed the following acquisitions:

• a 66 2/3% controlling membership interest in LKJ11 LLC (“LKJ”) a winning Los Angeles dispensary applicant; and
• 100% of the outstanding membership interest in LKJ11’s retail management company Crimson & Black LLC (“C&B”).

Furthermore on Wednesday July 1, 2020 the Los Angeles City Council adopted an urgency ordinance which requires the DCR to implement a streamlined approval process for the winning applicants to obtain authorization to operate. The Mayor has until July 13, 2020 to sign, following which the ordinance will become effective¹.

Transaction Highlights

LKJ11 Acquisition

On July 6, 2020, Halo acquired a company holding a 66 2/3% interest in LKJ11 in exchange for 42,881,646 Halo common shares (“Halo Shares”) at a deemed price of USD$0.2332 (CAD$0.3128²) per Halo Share, which represents USD$10 million (CAD$13,415,000²) of the total USD$11.5 million (CAD$15,427,250²) acquisition price for both LKJ11 and C&B as previously announced. To effectuate the LKJ11 transaction, the majority member of LKJ11 merged with and into Halo’s MFT11 Merger Sub, Inc. and the majority member remains the surviving entity and will be wholly-owned by PSG Coastal Holdings LLC (“PSG”), an indirect wholly-owned subsidiary of Halo. The Halo Shares will be issued as follows:

1. Upon closing, Halo issued approximately 8,576,329 Halo common shares to the vendors as follows:
   1. 4,288,165 Halo Shares are freely tradeable in accordance with applicable securities laws; and
   2. 4,288,164 Halo Shares are subject to a pooling agreement with trading restrictions whereby, for one year following their issuance, the aggregate shares sold on or through any stock exchange may not exceed: (a) 10% of the prior trading day’s total volume if the closing price of the Halo Shares is less than CAD$0.30 (USD $0.22²); or (b) 15% of the prior trading day’s total volume if the closing price of the Halo Shares is greater than or equal to CAD$0.30 (USD $0.22²).
2. 34,305,317 Halo Shares will be issued to the vendors, subject to a pooling agreement with trading restrictions whereby, for one year following their issuance, the aggregate shares sold on or through any stock exchange may not exceed: (a) 10% of the prior trading day’s total volume if the closing price of the Halo Shares is less than CAD$0.30 (USD $0.22²); or (b) 15% of the prior trading day’s total volume if the closing price of the Halo Shares is greater than or equal to CAD$0.30 (USD $0.22²), as well as certain reduction or cancellation rights, when the following performance milestones are achieved:
   1. 17,152,659 Halo Shares will be issued when LKJ11 is licensed by all applicable state and local regulatory agencies and the first legal sale of cannabis is made; and
   2. 17,152,658 Halo Shares will be issued when LKJ11 is granted a lease extension for an aggregate of five years or a new location lease for a term of 5 years from the closing date.

C&B Acquisition

On July 6, 2020, Halo acquired 100% of the outstanding membership interest in C&B in exchange for 6,432,247 Halo Shares at a deemed price of USD$0.2332 (CAD$0.3128²) per share, which represents USD$1,500,000 (CAD$2,012,250²) of the total USD$11,500,000 (CAD$15,427,250²) acquisition price for both LKJ11 and C&B as previously announced on January 16, 2020. To effectuate the C&B transaction, C&B merged with and into Halo’s C&B Merger Sub, Inc. and C&B remains the surviving entity and will be wholly-owned by PSG. The Halo Shares will be issued as follows:

1. 3,216,124 Halo Shares when LKJ11 is licensed by all applicable state and local regulatory agencies and the first legal sale of cannabis is made; and
2. 3,216,123 Halo Shares when LKJ11 is granted a lease extension for an aggregate of 5 years or a new location lease for a term of at least 5 years from the closing date.

All of the Halo Shares issued in connection with the C&B transaction will be subject to a pooling agreement with trading restrictions whereby, for one year following their issuance, the aggregate shares sold on through any stock exchange may not exceed: (a) 10% of the prior trading day’s total volume if the closing price of the Halo Shares is less than CAD $0.30 (USD $0.22²); or (b) 15% of the prior trading day’s total volume if the closing price of the Halo Shares is greater than or equal to CAD $0.30 (USD $0.22²).

The Transaction

LKJ11 holds a winning cannabis retailer application that the Department of Cannabis Regulation (DCR) is expected to resume processing in the near future. This streamlined process adopted by the City Council on July 1, will enable LKJ11 to resubmit operating agreements and undergo an initial licensing inspection to receive a temporary license as well as to pursue state approval. After temporary licensing, LKJ11 plans to build out the North Hollywood site which will feature nearly 4,000 square feet, sizeable onsite parking, and a prime location at the northwest corner of Lankershim Blvd. and Hesby Ave. Upon the NOHO dispensary opening, Halo expects to commence direct retail sales of its own branded and white-labeled cannabis products, in turn fueling LKJ11’s sales and reducing starting inventory costs. Halo will leverage manufacturing in Southern California at Cathedral City and cultivation procurement, manufacturing, and distribution operations in Northern California to scale up its direct-to-dispensary business.

C&B and LKJ11 are both parties to a management agreement pursuant to which C&B will provide management services to LKJ11 in exchange for 7% of the net revenue of LKJ11. The acquisition of C&B will facilitate the addition of key management team members. Notably, David Cho will be leading the management of the NOHO dispensary.

Vertically integrating LKJ11 and C&B into Halo is expected to:

• Increase revenue and gross margins across all California operations;
• Provide an opportunity to enter LA dispensary market; and
• Enhance potential to build a delivery service for Studio City, North Hollywood, Hollywood Burbank, and the East San Fernando Valley

Kiran Sidhu, CEO and Co-Founder of Halo, states, “We are very pleased to have closed the acquisitions of LKJ11 and Crimson & Black. North Hollywood cannabis consumers will have more access to Halo products, a full suite of curated industry leading products, and a stellar dispensary experience, as a result of closing these transactions. Halo is one step closer to full vertical integration in California and further we have our sights set on additional retail locations in the Los Angeles market. The North Hollywood dispensary represents a flagship in our Southern California cluster of operations and we anticipate it will propel our continued success in California. With the streamlined licensing process adopted by the City Council we anticipate opening by Q4 2020 subject to regulatory approvals. We look forward to obtaining our license to operate.”

David Cho of Crimson & Black states, “We are excited to finalize the transaction agreements so that we can commence with detailed planning and execution of the operational model and retail buildout of the North Hollywood flagship location. Given the combination of the team, location, and retail footprint, the opening of the NOHO dispensary will represent a significant step in ‘Seed to Sale’ in California and of the vision of Halo as a vertically integrated global cannabis brand.”

About Halo

Halo is a leading cannabis cultivation, manufacturing, and distribution company that grows and extracts and processes quality cannabis flower, oils, and concentrates and has sold over 5 million grams of oils and concentrates since inception. Additionally, Halo has continued to evolve its business through delivering value with its products and now via verticalization in key markets in the United States and Africa with planned expansion into European and Canadian markets. With a consumer-centric focus, Halo markets innovative, branded, and private label products across multiple product categories.

Recently, the Company entered into binding agreements to acquire a dispensary in Los Angeles, 3 KushBar branded dispensaries, 5 development permits in Alberta Canada, and Canmart Limited which holds wholesale distribution and special licenses allowing the import and distribution of cannabis based products for medicinal use (CBPM’s) in the United Kingdom. Halo is led by a strong, diverse management team with deep industry knowledge and blue-chip experience. The Company is currently operating in the United States in California, Oregon, and Nevada while having an international presence in Lesotho within a planned 205-hectare cultivation zone via Bophelo as well as planned importation and distribution in the United Kingdom via Canmart.

For further information regarding Halo, see Halo’s disclosure documents on SEDAR at www.sedar.com.

Cautionary Note Regarding Forward-Looking Information and Statements

This press release contains certain “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only Halo’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of Halo’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved”. The forward-looking information and forward-looking statements contained herein may include, but are not limited to, statements regarding the impact to Halo of the acquisition of LKJ11 and Crimson & Black, future issuances of Halo Shares upon the achievement of certain milestones, the dispensary opening date, and Halo’s operations in California.

By identifying such information and statements in this manner, Halo is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from those expressed or implied by such information and statements. In addition, in connection with the forward-looking information and forward-looking statements contained in this press release, Halo has made certain assumptions. Although Halo believes that the assumptions and factors used in preparing, and the expectations contained in, the forward-looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements. Among others, the key factors that could cause actual results to differ materially from those projected in the forward-looking information and statements are the following: unexpected costs or delays in the completion of the Company’s proposed dispensaries and other operation; negative results experienced by the Company as a result of general economic conditions or the ongoing COVID-19 pandemic; delays in the ability of the Company to obtain certain regulatory approvals; unforeseen delays or costs in the completion of the Company’s construction projects; adverse changes to demand for cannabis products; ongoing projects by competitors that may impact the relative size of the Company’s growing operation; adverse changes in applicable laws; adverse changes in the application or enforcement of current laws, including those related to taxation; increasing costs of compliance with extensive government regulation; changes in general economic, business and political conditions, including changes in the financial markets; risks related to licensing, including the ability to obtain the requisite licenses or renew existing licenses for the Company’s proposed operations; dependence upon third party service providers, skilled labor and other key inputs; and the other risks disclosed in the Company’s annual information form dated April 16, 2020 and available on the Company’s profile at www.sedar.com. Should one or more of these risks, uncertainties or other factors materialize, or should assumptions underlying the forward-looking information or statements prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected.

The forward-looking information and forward-looking statements contained in this press release are made as of the date of this press release, and Halo does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward-looking information and statements attributable to Halo or persons acting on its behalf is expressly qualified in its entirety by this notice.

¹https://cannabis.lacity.org/blog/city-council-adopts-comprehensive-amendments-cannabis-procedures-ordinance

² CAD to USD conversions are based on an exchange rate of CAD 1.3415 to USD 1.00, as posted by the Bank of Canada as of 3/5/2020