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TORONTO–()–Halo Labs Inc. (“Halo” or the “Company”) (NEO: HALO, OTCQX: AGEEF, Germany: A9KN) is pleased to announce that, further to its press release dated January 15, 2020, it has closed its acquisition of Outer Galactic Chocolates, LLC (“OGC”), holder of a Type N manufacturing license in Mendocino County. The acquisition gives Halo a license to produce infused and edible cannabis products adjacent to the Mendo Distribution and Transportation LLC (“MDT”) facility in Ukiah, California. A Type N license permits manufacturers to conduct most cannabis production and related activities, including packaging and labeling; however, it does not allow for extraction. For extraction in California, Halo utilizes its Type 7 licensed facility in Cathedral City, California. In total, Halo now operates 4,4000 SQF in Ukiah, with plans to annex additional licensed square footage in the coming future.

Transaction Highlights

  • Ownership of Type N California license, allowing for the production of infused and edible products, as well as the packaging of all related manufactured finished goods.
  • Halo also plans to launch its Hush® edible products gummies and elixirs in THC and multiple THC/CBD formulations, and distribute the award-winning Outer Galactic Chocolate branded chocolate edibles from the licensed Type N facility in Ukiah.
  • Retained OGC founder, Jeff Stewart, as a subject matter expert and consultant on edibles and gourmet chocolate production and all IP created from these projects.
  • Acquiring the license will reduce cost by eliminating monthly equipment and license rental fee; in addition, license includes long-term lease on licensed space, as well as walk in freezer, tables, racks and other equipment necessary for edibles production.

According to BDS Analytics, edibles spending in the US and Canada is forecasted to grow to more than $4.1 billion by 2022. In California, ingestibles generated $47 million in sales in May 2020, which represents 7% growth from the prior month, and 8% year-over-year growth. In Oregon, May 2020 sales reached $14 million, representing 12% growth from April 2020, and stunning 59% year-over-year growth from May 2019.

Halo believes variety in edibles selection is critical to capturing the interest and loyalty of consumers. As stated previously, Halo is in the process of launching one-, ten-, and twenty-piece gummy varieties, with multiple flavors before the end of Q3 2020. The gummies will be strain specific, broad spectrum, vegan, gluten-free, feature organic ingredients with no artificial flavors or colors. In addition to delivering value pricing, Halo also plans to utilize nano-emulsification for some product configurations, to quickly deliver the active ingredients for more rapid onset. The Company intends to launch strain-specific formulations in sativa, indica and hybrid, manufacturing under the newly-acquired license, and roll out up to thirty-six different SKU configurations in California over the next six months. The initial launch plan will feature updated branding for Hush™ in six strain-specific flavors including marionberry, watermelon, pineapple, strawberry, peach, and raspberry.

Jeff Stewart, a resident of Mendocino County and cannabis farmer since 1982, is leading the way, helping develop the formulations for the new Hush™ line of gummies. Since launching in 2017, OGC’s colorful line of milk, dark, and sugar-free chocolates have been recognized as “Best Dark Chocolate – Hybrid,” and “Best Chocolate – Truffle” by Edibles Magazine. OGC also took home the prize for “Best Chocolate” at the Emerald Cup in 2017.

Currently, the total daily capacity at OGC is 1,125 bags or 11,250 gummies per day, assuming a 10 piece configuration with total monthly output estimated to be 213,750 units. The target average wholesale sale price is $7.00 per package, which if achieved, could increase California monthly revenues by $1.5 million from gummy sales alone in 2020.

In addition to vegan and nano-emulsified gummies, Mr. Stewart will build out all of Halo’s California product development, including a full line of elixirs, chocolates, and dissolvable tablets. Halo will retain the intellectual property for use in California and all jurisdictions. Excited about the collaboration with Halo, Stewart celebrates the increasing use of quality edibles among consumers who want the cannabis experience while saving their lungs: “It’s great to offer the public a range of the healthiest edible options, crafted from the finest ingredients, with artisanal care. I look forward to working with Halo to reach more consumers and patients with high-quality and delicious cannabis edibles.”

Kiran Sidhu, Halo CEO and Co-Founder, comments, “Obtaining a Type N manufacturing license in California for the production of infused and edible products is a step in increasing Halo’s product offering in this high growth category. As we develop new lines with the award-winning expertise at OGC, we will support the expanded distribution of OGC-branded chocolates to Southern California. We look forward to expanding all of our product offerings in California, one of the world’s largest cannabis markets.” Mr. Sidhu continues, “As with our DNA Genetics and TerpHogz partnerships, this acquisition of OGC and collaboration with its management allows us to add value to the Halo product portfolio, by providing more high-quality and award-winning products to our dispensary partners.”

Transaction Details

On July 31, 2020, Halo acquired OGC in exchange for 1,981,825 Halo common shares (the “Halo Shares”), which implies a fair value price of C$237,819 based on the closing price of the Halo Shares on July 31, 2020. To effectuate the acquisition, OGC Merger Sub, Inc., an indirect wholly-owned subsidiary of Halo, merged with and into OGC. OGC remains the surviving entity and will be wholly-owned by PSG Coastal Holdings LLC, an indirect wholly-owned subsidiary of Halo. Upon closing, Halo issued 495,457 Halo Shares (25% of the total consideration) to OGC’s owner, Jeff Stewart. The remainder of the Halo Shares will be paid to Mr. Stewart in twelve equal installments of 123,864 Halo Shares, deliverable on the first day of each of the twelve months immediately following the closing. The Halo Shares are subject to restrictions on transfer such that the number of Halo Shares sold through any stock exchange may not exceed 10% of the total daily trading volume of all Halo common shares for the preceding trading day.

About Halo

Halo is a leading cannabis cultivation, manufacturing, and distribution company that grows, extracts and processes quality cannabis flower, oils, and concentrates. Halo has sold over five-million grams of oils and concentrates since inception. Additionally, Halo has continued to evolve its business by 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, three KushBar branded dispensaries, five 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 200-hectare cultivation zone via Bophelo Bioscience & Wellness (Pty) Ltd. 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,” “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 about the production, sale and distribution of Halo’s products 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.

Third Party Information

This press release includes market and industry data that has been obtained from third-party sources, including industry publications. The Company believes that the industry data is accurate and that its estimates and assumptions are reasonable, but there is no assurance as to the accuracy or completeness of this data. Third party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there is no assurance as to the accuracy or completeness of included information. Although the data is believed to be reliable, the Company has not independently verified any of the data from third party sources referred to in this press release or ascertained the underlying economic assumptions relied upon by such sources.

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