Halo Collective Expands into Functional Beverages, Agrees to Acquire H2C Beverages and Establishes a $30M Distribution Agreement with Elegance Brands

Strategic, Asset-Light Expansion into Functional Beverages Increases Halo’s Addressable Market and Near-Term Revenue Opportunity

 

All Figures in U.S. Dollars Unless Otherwise Stated

Toronto, January 12, 2022 – Halo Collective Inc. (“Halo” or the “Company”) (NEO: HALO) (OTCQB: HCANF) (Germany: A9KN) today announced that it is strategically expanding into the functional beverage market with a proposed stock-based acquisition of private company operating as H2C Beverages (“H2C”) and the entering into of a distribution and manufacturing agreement (the “Distribution Agreement”) with Elegance Brands Inc. (“Elegance”). Pursuant to the terms of the Distribution Agreement, Elegance has agreed to purchase $30 million of Halo’s H2C and Hushrooms™ branded products during the 24-month period following the launch of the products (the “Launch Period”) and to distribute these products to retail outlets in respective legal states across the United States.

Kiran Sidhu, Halo’s Chief Executive Officer, commented, “Nootropic nutraceuticals is a relatively new health category that we believe is poised for robust growth. Our strategic acquisition of H2C Beverages will bolster Halo’s growth opportunities, even as the recreational cannabis industry faces over-supply issues in our California and Oregon markets. Elegance Brands is the perfect partner to manage and distribute H2C and our functional mushroom brand Hushrooms to mainstream consumers.”

Added Raj Beri, Elegance’s CEO and Founder, “Elegance has successfully established a distribution network with a potential reach to tens of thousands of outlets nationwide that uniquely positions for the significant growth expected in the beverages and functional mushroom markets. We believe that Halo’s innovative line of products will be strong sellers alongside our portfolio of brands all built around innovation, and we are excited to offer them to our expanding distribution customers.”

Acquisition of H2C Beverages

Halo has signed a definitive agreement to acquire 1285826 B.C. Ltd. (dba H2C Beverages), a company focused on cannabinoids and non-psychotropic mushroom functional beverages (the “H2C Acquisition”). The H2C Acquisition is expected to provide Halo with a toehold in one of the fastest growing sectors of the cannabidiol market, estimated to account for $16 billion in U.S. sales by 2025, according to Brightfield Research , as well as to directly participate in rising consumer consciousness toward the health benefits of consuming small doses of cannabinoids and functional mushroom extracts paired with adaptogens. H2C’s product portfolio includes a line of premium flavored waters that are nano emulsified to maximize absorption and other plant-based beverages infused with cannabinoids, functional mushroom extracts with fulvic and humic minerals from the Rocky Mountains.

In consideration for all the issued and outstanding shares of H2C, Halo has agreed to issue 7,538,462 common shares in the capital of Halo (“Common Shares”). Closing of the H2C Acquisition is subject to the satisfaction of customary closing conditions, including, among others, the approval of the Neo Exchange Inc. (the “NEO”). The Company expects the H2C Acquisition to close in January 2022. Halo has also agreed to issue 603,077 Common Shares to an arm’s length finder in connection with the H2C Acquisition.

Distribution and Manufacturing Agreement with Elegance Brands

Halo has also expanded its collaborative relationship with Elegance by entering into the Distribution Agreement to propel the national distribution of beverages, capsules, and topical supplements under H2C and Halo’s functional mushroom brand, Hushrooms. This new category of functional supplements, nootropic nutraceuticals, will be marketed under three subcategories: active, relax and focus.

Under the Distribution Agreement, Elegance has agreed to purchase $30 million of H2C and Hushrooms branded products during the 24-month Launch Period and to distribute these products to retail outlets in respective legal states across the United States. Elegance shall purchase the products at a price of up to 130% of manufactured costs (including all direct costs, both third party and internal) incurred by the Company. All prices are exclusive of applicable taxes, including without limitation, sales, excise, use and property taxes, which shall be paid by Elegance. The Distribution Agreement is expected to deliver up to $9 million of profit (before tax) during the 24-month Launch Period.

During the period from the effective date of the Distribution Agreement until the Launch Period, which is expected to last up to six months, Elegance will provide certain consulting services to Halo including with respect to the development of branding, marketing, and manufacturing best practices, product development, and sales strategies through to launch. Pursuant to the Distribution Agreement, Halo has agreed to issue $2.5 million of Common Shares (the “Elegance Shares”) to Elegance in consideration for the consulting services to be provided by Elegance in connection with the branding, development, manufacturing, and distribution of the H2C and Hushrooms product lines. The Elegance Shares will be issuable in four equal monthly tranches of $625,000 per tranche. The number of Elegance Shares to be issuable under each tranche will be equal to the quotient of $625,000 (converted into Canadian dollars using the prevailing Bank of Canada exchange rate), divided by the greater of: (i) the volume weighted average price of the Common Shares on the NEO (or such other exchange on which the Common Shares are principally traded) for the twenty (20) trading days prior to the issuance of such Elegance Shares; and (ii) the minimum price permitted by the NEO. The issuance of such Elegance Shares is subject to, among other things, the approval of the NEO.

About Halo Collective Inc.

Halo is a leading, vertically integrated cannabis company that cultivates, extracts, manufactures, and distributes quality cannabis flower, oils, and concentrates and has sold approximately eleven million grams of oils and concentrates since inception. The Company continues to expand its business and scale efficiently, partnering with trustworthy leaders in the industry who value Halo’s operational expertise in bringing top-tier products to market.

Halo currently operates in the United States in Oregon and California. The Company sells cannabis products principally to dispensaries in the U.S. under its brands Hush™, Mojave, and Exhale, and under license agreements with Papa’s Herb®, DNA Genetics, Terphogz, and FlowerShop*, a cannabis lifestyle and conceptual wellness brand that includes G-Eazy as a partner and key member.

As part of continued expansion and vertical integration in the U.S., Halo boasts several grow operations throughout Oregon and two planned in California. In Oregon, the Company has a combined 11 acres of owned and contracted outdoor and green house cultivation, including East Evans Creek, a six-acre grow site in Jackson County with four licenses owned and operated by Halo and two third-party licenses under contract to sell all of their product to Halo; Winberry Farms, a one-acre grow site located 30 miles outside of Eugene in Lane County with a license owned and operated by Halo; and William’s Wonder Farms, a three-acre grow site in Applegate Valley, under contract to sell all of its product to Halo pending the closing of Halo’s acquisition of its licenses and business assets. Halo has recently acquired Food Concepts LLC, a master tenant of a 55,000 square foot indoor cannabis cultivation, processing, and wholesaling facility in Portland, Oregon operated by the Pistil Point entities.

In California, the Company is building out Ukiah Ventures, a planned 30,000 square foot indoor cannabis grow and processing facility, which aims to include up to an additional five acres of industrial land to expand the site. Recently, Halo partnered with Green Matter in California to purchase the Farm in Lake County, developing up to 63 acres of cultivation, comprising one of the largest licensed single site grows in California. Halo also plans to expand its operations in California by opening three dispensaries under the Budega™ brand in North Hollywood, Hollywood, and Westwood.

In Canada, Halo acquired three KushBar retail cannabis stores located in Alberta as a first in its planned entry into the Canadian market, leveraging its Oregon and California brands. With the KushBar retail stores as a foundation, the Company plans to expand its foothold in Canada.

Halo has also acquired a range of software development assets, including CannPOS, Cannalift, and, more recently, CannaFeels. In addition, Halo owns the discrete sublingual dosing technology, Accudab. The Company intends to spin-off these assets and its intellectual property and patent applications into its subsidiary Halo Tek Inc. and expects to complete a distribution to shareholders on a record date to be determined by Halo.

Halo recently completed the sale of certain of its non-U.S. operations to Akanda Corp., whose mission is to provide high-quality and ethically sourced medical cannabis products to patients worldwide. As an independent company, Akanda is seeking to deliver on this promise while driving positive change in wellness, empowering individuals in Lesotho, and uplifting the quality of the lives of employees and the local communities where it operates, all while limiting its carbon footprint. Akanda combines the scaled production capabilities of Bophelo Bioscience & Wellness Pty. Ltd., a Lesotho-based cultivation and processing campus located in the world’s first Special Economic Zone (SEZ) containing a cannabis cultivation operation, with distribution and route-to-market efficiency of CanMart Ltd., UK-based fully approved pharmaceutical importer, and distributor that supplies pharmacies and clinics within the UK. With a potential maximum licensed canopy area of 200 hectares (495 acres), Bophelo has scalability that is arguably unmatched in the world today. Following the sale, Halo is Akanda’s largest shareholder.

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

Connect with Halo Collective: EmailWebsite | LinkedIn | Twitter | Instagram

About H2C Beverages Inc.

H2C Beverages Inc. is a brand that specializes in non-psychoactive cannabinoids and functional mushroom beverages by fusing the holistic benefits of adaptogens in a refreshing  drink. H2C sources its water from fresh rocky mountain sources and infuses it into proprietary formulations using purified nanonized non-psychoactive cannabinoids and functional mushrooms. Learn more at www.h2crevolution.com.

About Elegance Brands Inc.

Elegance Brands, Inc. is a global beverage company that develops, markets, and distributes products with a focus on innovation. In addition to its flagship brand, SWAY Energy + Immunity Drink, Elegance offers a range of functional beverages, plus super-premium spirits and alcohol brands, including Elegance Vodka across a network of best-in-class distributors in the U.S. as well as direct to consumer via its various brands’ websites. For more information about the Elegance story, visit www.elegance-brands.com.

Contact Information

Halo Collective Inc.

Investor Relations

info@haloco.com

www.haloco.com/investors

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”. Forward-looking information may relate to anticipated events or results including, but not limited to the expected benefits of the H2C Acquisition and the Distribution Agreement, the expected closing of the H2C Acquisition, the expected growth of the nootropic nutraceutical market, the distribution of the Company’s proposed H2C and Hushrooms branded products and the anticipated profit therefrom, management’s plans regarding its portfolio of cannabis businesses, the Company’s expansion plans regarding Canada, 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 UK market and the proposed spin-off by Halo Tek Inc.

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: inability of management to successfully integrate the operations of acquired businesses, changes in the consumer market for cannabis products, changes in the expected outcomes of the proposed changes to Halo’s operations, delays in obtaining required licenses or approvals necessary for the build-out of Oregon operations, dispensaries or Canadian operations, the proposed spin-out with Halo Tek Inc., delays or unforeseen costs incurred in connection with construction, the ability of competitors to scale operations in Northern California, delays or unforeseen difficulties in connection with the cultivation and harvest of Halo’s raw material, changes in general economic, business and political conditions, including changes in the financial markets; and the other risks disclosed in the Company’s annual information form dated March 31, 2021 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.

Non-Solicitation

This press release shall not constitute an offer to sell nor the solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

 

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