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Halo Announces Planned Purchase of Mendo Distribution and Transportation, An Operating Northern California Cannabis Distributor

November 25, 2019

TORONTO--(BUSINESS WIRE)--Nov 25, 2019--

Halo Labs Inc. (“Halo” or the “Company”) (NEO: HALO, OTCQX: AGEEF, Germany: A9KN) is pleased to announce it has executed on an Agreement and Plan of Merger and Reorganization (the “Agreement”) with the sole member of Mendo Distribution and Transportation, LLC (“MDT”), pursuant to which a subsidiary of Halo will merge with and into MDT. The total consideration is $4.75 million, payable in common shares of Halo (the “Acquisition Shares”) and subject to adjustments to MDT’s balance sheet on the date of closing.

“With the pending investment into Ukiah Ventures, Inc. and now the planned acquisition of MDT, Halo is executing on our Northern California vertical integration strategy,” said Kiran Sidhu, CEO and Co-Founder of Halo. “We expect MDT will be a significant contributor to Halo’s growth in 2020 and beyond, as we build on our position as one of California’s leading cannabis companies.”

Transaction Highlights

-$4.75 million acquisition of MDT to be paid for using Halo stock, preserving the Company’s strong cash position

-$6.04 million of unaudited gross revenues realized from January 1 st thru September 30, 2019 by MDT

-Vertically integrating MDT into Halo is expected to enable the Company to:

- Increase revenue and gross margins across all Californian operations

- Extend distribution capability in Northern California

- Launch new edible and white label product lines with Type N license onsite

- Reduce overall distribution costs

- Reduce potential manufacturing and distribution taxes

-Closing is expected to be completed within 30 days

The Mendo Distribution and Transportation Acquisition

Based in Ukiah, California, MDT has been operating as a cannabis distributor since June 2018. Located in a two story approximately 4,500 square feet facility, MDT holds a Type 11 cannabis distribution license as well as manages a Type N license on site. Upon completion of this acquisition, Halo will be positioned to conduct assembly of finished goods for sale and product infusions such as edibles.

Following closing of the proposed acquisition, Halo plans to utilize the second story to launch its Hush™ edible and tincture lines in California (currently manufactured and sold in Oregon), as well as manage the existing manufacturing, distribution, and sales of the award-winning Outer Galactic Chocolates™.

On closing, Halo will also enter into an option to acquire the membership interests of Outer Galactic Chocolates LLC, the Type N licensee, for Halo common shares.

The Company will leverage MDT as a base to expand the existing bulk product, white label, and finished goods distribution business throughout the state and into Northern California. As a result of this acquisition, Halo expects to generate higher margins beyond bulk sales and additional revenue from managing the chocolate business. Furthermore, with no variable distribution tax in Mendocino County, this location allows the Company an opportunity to further reduce its overall tax liability and distribution costs.

Commenting further, Mr. Sidhu stated, “We will soon be able to directly distribute to white label clients and dispensaries, as well as manufacture and assemble finished goods, including edibles, in close proximity to both the Bay Area and Sacramento markets. MDT provides us with a strong footing in the Emerald Triangle, which is the largest source of cannabis in California. This is the second step in our Northern California vertical integration strategy, as we move one step closer to becoming a seed to sale company in California. We look forward to continuing this strategy and reporting on additional transformational opportunities to come.”

Transaction Detail

The Acquisition Shares will be priced at the 20-day VWAP and the majority will be released in equal monthly installments over the 12-month period following closing. In addition, $1.0 million of shares will be held in escrow for a period of 12 months and subject to a claw back provision to protect from any unforeseen or undisclosed liabilities. Furthermore, the Acquisition Shares will be subject to certain applicable resale restrictions under applicable Canadian and United States securities laws.

Completion of the transaction is subject to, among other things, the satisfaction or waiver of any conditions precedent to the consummation of the transaction (including the receipt of any requisite regulatory and stock exchange approvals).

Update Regarding Lease Buy-Down Previously Announced

The Company also wishes to provide an update to the previous disclosures of the Company relating to the lease buy-down agreement entered into with Falcon International Ltd. on July 16, 2019, as referenced in the Company’s news releases dated July 16, 2019 and November 14, 2019.

The closing of the lease buy-down transactions resulted in an issuance of 2,987,276 common shares at a price of $0.59 per common share to affiliates of Falcon International on July 24, 2019, pursuant to the agreement entered into on July 16, 2019 between the Company and Falcon International. This one-time issuance of shares satisfies in full all payment obligations of the Company under a lease for the Company’s facility in Cathedral City, California totaling $1,762,493 and results in reduced rental payments for the Company for the balance of the lease totalling approximately $1,221,401.

ABOUT HALO

Halo is a cannabis extraction company that develops and manufactures quality cannabis oils and concentrates, which are the fastest growing segments in the cannabis industry. Halo is a global leader in cannabis oil and concentrates, having produced over 4.5 million grams of oils and concentrates since inception. The Company has expertise across all major cannabis manufacturing processes, leveraging a variety of proprietary processes and products. The forward-thinking company is led by a strong management team with deep industry knowledge and blue-chip experience. The Company is currently operating in California and Oregon, as well as in Nevada with our partner Just Quality, LLC, and in Lesotho with the Bophelo strategic partnership. With a consumer-centric focus, Halo will continue to market innovative, branded, and private label products across multiple product categories. Halo recently acquired Dispensary Track platform which will alleviate customer flow constraints experienced by dispensaries and enable direct consumer interaction.

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 is not limited to, statements regarding the transaction including the terms thereof, the entering into of definitive documentation and closing conditions, the receipt of regulatory approvals, Halo’s overall acquisition of MDT and update regarding the lease buy-down previously announced.

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. 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.

View source version on businesswire.com:https://www.businesswire.com/news/home/20191124005101/en/

CONTACT: Halo Labs

Investor Relations

info@halocanna.com

KEYWORD: UNITED STATES NORTH AMERICA CANADA CALIFORNIA

INDUSTRY KEYWORD: ALTERNATIVE MEDICINE RETAIL HEALTH OTHER RETAIL OTHER HEALTH PHARMACEUTICAL

SOURCE: Halo Labs Inc.

Copyright Business Wire 2019.

PUB: 11/25/2019 02:30 AM/DISC: 11/25/2019 02:30 AM

http://www.businesswire.com/news/home/20191124005101/en