Halo Signs Definitive Agreement to Acquire two Additional LA Dispensary License Applicants and is on Track to Open First Ever Flowershop™ Dispensary in Partnership with G-Eazy

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All figures in USD unless stated otherwise

TORONTO, Feb. 6, 2021 /CNW/ - Halo Collective Inc. ("Halo" or the "Company") (NEO: HALO) (OTCQX: HCANF) (Germany: A9KN) is delighted to announce the signing of definitive agreements to acquire an interest in two successful Los Angeles dispensary license applicants and 100% ownership of each applicant's related management company ("the Transaction"), in a strategic move to further the Company's presence in California's growing cannabis market.

As Halo continues to implement its seed to sale verticalization strategy, owning and operating retail businesses is a key tactic to increase value by controlling distribution and adding operating margin. As such the signing of definitive agreements to acquire 66 ⅔%  of the two Los Angeles dispensary businesses, as well as 100% of their respective management companies marks a significant milestone for the Company. Halo plans to open the flagship stores in Hollywood and Westwood adjacent to Beverly Hills and at least one site will feature the first FlowerShop* branded dispensary.

The Company plans to brand the first applicant SDF11 LLC ("SDF11"), located in Hollywood, FlowerShop*, a cannabis lifestyle and conceptual wellness brand by Feel Better in which G-Eazy is a partner and key member.  As previously disclosed, Halo also owns 25% of Feel Better LLC ("Feel Better"). The second dispensary, ZXC11 LLC ("ZXC11"), has leased approximately 1,500 square feet in Westwood within two miles of the University of Los Angeles California campus ("UCLA"). Upon closing the Transaction, the Company plans to deepen its operations through these two storefronts and the Company's first dispensary acquisition that is already slated to open in the North Hollywood ("NOHO") village of Los Angeles.

Chief Executive Officer and Co-Founder of Halo, Kiran Sidhu, stated, "Since we partnered with G-Eazy, we actively searched for locations within Los Angeles to create flagship stores for FlowerShop*. We identified two optimal licenses close to Beverly Hills and in Hollywood. Our internal forecasts, based on numbers of dispensaries in similar locations and assuming growth based on market research, demonstrate these two locations alone could generate $55 million in revenue and $13 million in EBITDA per year once stabilized.^[1]  These figures do not include our third dispensary in NOHO which we plan to open in 2021 as well. The signing of definitive agreements to acquire two additional brick and mortar locations represents a major milestone to Halo Collective and is a critical puzzle piece for our California business.  We plan to open all three Los Angeles dispensaries by the third quarter of 2021."

California remains the highest-grossing state for cannabis retail sales in the United States. According to BDS data, California legal retail sales in 2020 totaled $3.5 billion. On this current trajectory, BDS projects that sales statewide will reach $4.5 billion in 2022.^[2]

In July 2020, the Los Angeles City Council updated its cannabis ordinance to allow temporary licensing approval to emerging businesses. These amendments allow applicants and licensees to relocate and limit the issuance of new retail licenses until January 1, 2025.^[3] These changes are expected to increase the speed to market for Halo's three planned Los Angeles dispensaries and increase the value of operations as new licenses will not be granted for years to come.

Chief Brand Officer and Co-Founder of Feel Better, Gabriel Garcia stated, "We are obsessed over retail — from customer experience to operational efficiency and everything in between. There is so much opportunity for innovation and improvement in the current landscape, and we cannot wait to bring Feel Better's FlowerShop* and conceptual wellness to the people of Los Angeles."

Transaction Highlights- Hollywood

Transaction Highlights for SDF11

• A subsidiary of Halo's subsidiary PSG Coastal Holdings LLC ("PSG") will merge with the limited liability company that owns 66 and two-thirds percent of SDF11 (the "SDF11 Company Majority Member"). The SDF11 Company Majority Member will survive, and PSG will then own 100 percent of the SDF11 Company Majority Member. The remaining 33 and one-third percent of SDF11 will continue to be owned by the Social Equity Applicant, as required under regulations issued by the Los Angeles Department of Cannabis Regulation (the "DCR").
• The consideration payable by Halo in respect of this merger is an aggregate of 39,076,923 Halo common shares ("Halo Shares") issuable as follows:
• 23,690,385 will be issued as a non-refundable pre-closing deposit upon Halo obtaining the approval of the NEO Exchange Inc. (the "NEO") of which 16,851,923 will be subject to volume trading restrictions set forth in a pooling agreement to be entered into among Halo and all of the recipients of the Halo Shares on behalf of the selling members of the four merger agreements (the "Pooling Agreement"); and
• 15,386,538 Halo Shares will be issued at closing of the merger which will occur when DCR approves PSG as the new majority owner of SDF11 and the new location on Franklin Ave. is approved by the DCR and the lease for the new location is executed (the "DCR Approval and Lease Milestone"). 
• The merger agreement includes customary representations and warranties, closing conditions and indemnification provisions.
• In addition, upon closing, Halo will issue an aggregate of 2,930,769 Halo Shares to an arm's length party as a finder's fee and such shares will be subject to a statutory hold period of four months and one day.  Halo will also reimburse the sellers for legal fees of USD $50,000.

Black & Crimson LLC (management company of SDF11):

• A subsidiary of PSG will merge with Black & Crimson LLC ("B&C").  B&C will survive, and PSG will then own 100% of B&C.
• The consideration payable by Halo in respect of this merger is an aggregate of 118,650,349 Halo Shares issuable as follows:
• 108,650,349 will be issued at closing (subject only to the approval of the NEO and other customary closing conditions), of which 18,650,349 of which will be subject to the Pooling Agreement
• 10,000,000 will be issued in escrow and released to the approved designees of the selling member upon the DCR Approval and Lease Milestone, or returned to Halo if the DCR Approval and Lease Milestone is not achieved within 18 months of the closing.
• It is a condition of closing that B&C will have $750,000 of cash on its balance sheet at closing.  This deal is intended to close as soon as possible, which closing may occur months in advance of the closing of the merger with the SDF11 Company Majority Member.
• The merger agreement includes customary representations and warranties, closing conditions and indemnification provisions.
• In addition, upon closing, Halo will issue an aggregate of 8,898,775  Halo Shares to an arm's length party as a finder's fee and such shares will be subject to a statutory hold period of four months and one day. 

Westwood

ZXC11 (dispensary business located in Westwood, CA):

• A subsidiary of PSG will merge with the limited liability company that owns 66 2/3% of ZXC11 (the "ZXC11 Company Majority Member").  ZXC11 Company Majority Member will survive, and PSG will then own 100% of ZXC11 Company Majority Member.  The other 33 1/3% of ZXC11 will continue to be owned by the Social Equity Applicant (which is required under the DCR regulations).
• The consideration payable by Halo in connection with this merger is an aggregate of 39,076,923 Halo Shares, issuable as follows:
• 23,690,385 will be issued as a non-refundable pre-closing deposit upon approval of the NEO of which 16,851,923 will be subject to the Pooling Agreement; and
• 15,386,538  will be issued at closing of the merger which will occur when DCR approves PSG as the new majority owner of ZXC11 (the "DCR Ownership Approval Milestone"). 
• The merger agreement includes customary representations and warranties, closing conditions and indemnification provisions.
• In addition, upon closing, Halo will issue an aggregate of 2,930,769 Halo Shares to an arm's length party as a finder's fee and such shares will be subject to a statutory hold period of four months and one day. 

POI11 LLC (management company of ZXC11):

• A subsidiary of PSG will merge with POI11 LLC ("POI11").  POI11 will survive, and PSG will then own 100% of POI11.
• The consideration payable in respect of this merger is an aggregate of 118,650,349 Halo Shares issuable as follows:
• 108,650,349 will be issued at closing (subject only to the approval of the NEO and other customary closing conditions) of which 18,650,349 will be subject to the Pooling Agreement;
• 10,000,000 will be issued in escrow and released to the approved designees of the selling member upon the DCR Approval Milestone, or returned to Halo if the DCR Approval Milestone is not achieved within 18 months of the closing.
• It is a condition of closing that POI11 will have $750,000 of cash on its balance sheet at closing.  This deal is intended to close as soon as possible, which closing may occur months in advance of the closing of the merger with the ZXC11 Company Majority Member.
• The merger agreement includes customary representations and warranties, closing conditions and indemnification provisions.
• In addition, upon closing, Halo will issue an aggregate of 8,898,775 Halo Shares to an arm's length party as a finder's fee and such shares will be subject to a statutory hold period of four months and one day.

Except as noted, all Halo Shares issued in connection with the Transaction will not be subject to any statutory hold periods.

FlowerShop* is a Sensory-Care™ brand, innovating in the wellness, cannabis and lifestyle categories. Co-founders Isaac Muwaswes and Gabriel Garcia explain Sensory-Care™ as a progressive take on wellness-creating products, experiences, content, and more -- all designed to enhance your senses. In addition to being part of G-Eazy's creative team, they bring a wealth of knowledge and experience from a diverse set of industries, including tech and marketing, where Isaac led brand development at Twitter; to fashion and retail, where Gabriel co-created the international cult-favorite label, Brooklyn Circus, in addition to working with Puma and Adidas.

Together, Isaac and Gabriel saw a void in the wellness, cannabis and lifestyle industries. They embarked on a mission to develop a "Feel Better™ Company", a joyful brand experience at every level -- from purchase to consumption -- that exceeds the expectations of design-driven consumers who curate every aspect of their lives. By creating the first digitally-native, direct-to-consumer platform in the cannabis space, FlowerShop* will positively disrupt the market with original content, products and experiences, focused on sustainability and multi-functional use -- helping the world to FEEL BETTER™, and ultimately encouraging acts of giving, spontaneity and love.

For more information about Flowershop*, please visit www.fromflowershop.com/halo

About Halo

Halo is a leading, vertically integrated cannabis company that cultivates, extracts, manufactures and distributes quality cannabis flower, oils and concentrates, and has sold approximately eight million grams of oils and concentrates since inception. Halo continues to evolve its business and scale efficiently, partnering with trustworthy leaders in the industry, who value the Company's operational expertise in bringing top-tier products to market. Current growth includes expansion in key U.S. markets, the United Kingdom, Africa, the Republic of Malta in partnership with MedCan Ltd., and planned expansion into the Canadian retail market.

Halo is led by a strong, diverse and innovative management team with deep industry knowledge and blue-chip experience. The company is currently operating in the U.S. in California, Oregon and Nevada. The Company sells cannabis products principally to dispensaries under its own brands Hush, Mojave, Exhale, and under partnership or license with OG DNA Genetics, Terphogz (doing business as Zkittlez™), Winberry Farms and FlowerShop.

As part of continued expansion and vertical integration in the U.S., Halo boasts several grow operations throughout Oregon and California. In Oregon, the Company has a combined seven acres of outdoor cultivation, including East Evans Creek, a six-acre grow site in Jackson County, and Winberry Farms, a one-acre grow site in Lane County. In California, the Company is building out Ukiah Ventures, a planned 30,000-square-foot indoor grow, processing and manufacturing facility, including up to an additional five acres of industrial land to expand. Halo has also partnered with GMH to purchase Bar X Ranch in Lake County, California, with plans to develop up to 80 acres of cultivation, which would comprise the largest grow in Northern California.

Recently, the Company has entered into a non-binding letter of intent with Red Light Holland Corp. for the purpose of creating a joint venture to become a licensed psilocybin manufacturer to supply psilocybin products to licensed service centers in the State of Oregon.

Internationally, the Company is currently cultivating cannabis at Bophelo Bioscience & Wellness (Pty) Ltd ("Bophelo") in Lesotho, Africa, which holds one of the largest marijuana cultivation licenses in Africa with a future capacity of up to 495 acres. To further Halo's global presence, the Company recently acquired cannabis-based product for medicinal use ("CBPM") importation and distribution licensing in the United Kingdom via cannabis suppliers Canmart Ltd. Halo expects the cultivation and manufacturing operations of Bophelo, combined with the importation and distribution capabilities of Canmart, to drive growth of a well-positioned business to serve the U.K. market.

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 about the Transaction, the development of dispensaries in partnership with G-Eazy, , the prospects thereof and the production, distribution and sale of functional mushroom products, Halo's planned expansion into the Canadian retail market, the expected size and capabilities of the final facility planned at Ukiah Ventures, the size of Halo's planned cultivation facility in Northern California and the ability of Bophelo and Canmart to serve the U.K. market, and the approval, opening, and financial performance of the three planned Los Angeles dispensaries.

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 operations; 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; delays or unforeseen difficulties in connection with the cultivation and harvest of Halo's raw material; 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 other disclosure documents 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.

Financial Outlook

This press release contains a financial outlook within the meaning of applicable Canadian securities laws. The financial outlook has been prepared by management of the Company to provide an outlook for the revenue and EBITDA of the two dispensary locations to be acquired pursuant to the Transaction and may not be appropriate for any other purpose. The financial outlook has been prepared based on a number of assumptions including the assumptions discussed under the heading "Cautionary Note Regarding Forward-Looking Information and Statements" above and assumptions with respect to market conditions, pricing, and demand.  Material assumptions also include year by year sales, store capacity, number of budtender stations, daily, weekly, monthly and annual transactions proportioned to average sale per transaction. The actual results will likely vary from the amounts set forth in these projections and such variations may be material. The Company and its management believe that the financial outlook has been prepared on a reasonable basis. However, because this information is highly subjective and subject to numerous risks, including the risks discussed under the heading "Cautionary Note Regarding Forward-Looking Information and Statements" above, it should not be relied on as necessarily indicative of future results.

Use of Non-IFRS Measures

This press release refers to " EBITDA" which is a Non-IFRS metric used by management and does not have any standardized meaning prescribed by IFRS and may not be comparable to similar measures presented by other companies. Management defines the EBITDA as net earnings (loss) before net finance costs, income tax expense (benefit) and depreciation and amortization expense. Management believes EBITDA is a useful financial metric to assess its operating performance on a cash basis before the impact of non-cash items. As other companies may calculate this non-IFRS measure differently than the Company, these metrics may not be comparable to similarly titled measures reported by other companies. We caution readers that EBITDA should not be substituted for determining net loss as an indicator of operating results, or as a substitute for cash flows from operating activities.

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.

SOURCE Halo Collective Inc.