Halo Labs Inc. (“Halo” or the “Company”) (NEO: HALO, OTCQX: AGEEF, Germany: A9KN) is pleased to announce a corporate update on various matters.

United States Operations and Partnerships by State

California

Halo continues its expansion in the California market. The Company commenced operations in the state in late 2018. Bulk product sales started in January 2019. White label and branded product sales have recently begun.

Halo is expanding its production capacity in Cathedral City. The initial 1,600 square foot facility in Cathedral City is capable of producing approximately 120 kg of bulk distillate, live resin or shatter per week. This facility is close to operating at full capacity based on working seven days per week operating 24 hours per day. A second 7,800 square foot facility is currently licensed and finalizing approval for build out with operations projected to begin in late 2019. A third facility is also undergoing planning, which is expected to add an additional 6,120 square feet contiguous to the second facility with projected occupancy in early 2020. In addition to type seven manufacturing licenses, the new facilities are expected to have distribution licenses enabling the Company to distribute products manufactured at such facilities to licensed dispensaries directly.

Halo has announced several partnerships in the California market, including:

• USD$2 million contract to supply Falcon International Corp. with up to 70,000 grams of bulk cannabis distillate per week on a six-month automatically renewing agreement;
• an agreement with Cannus Partners (currently operating as ikänik Farms) to supply 50,000 grams of high-grade distillate per week which is expected to add approximately USD$1 million per month in revenues;
• C4 Distro distribution partnership to bring Halo branded products, Gilt™ and Hush™, to approximately 200 dispensaries throughout Southern California; and
• partnership with Eaze™, the United States’ premier online marketplace for cannabis products, to sell its products direct to consumers in California with an initial roll out of the Gilt™ Branded DabTab™ Dablets™.

Oregon

Halo is currently operating out of two sites in Oregon. The Company’s manufacturing and distribution facility located in Medford is 12,000 square feet internally with an adjacent court yard of 7,200 square feet. The Company believes that this facility is sufficient in size and scope for the Oregon market. The Company also leases and cultivates four acres of outdoor canopy and manages two additional acres of canopy at a single location in East Evans Creek. All of the material cultivated at the East Evans Creek location is currently used for extraction. The Company is not planning to add any additional cannabis production facilities in Oregon at this time, however, Halo has recently announced plans to establish a CBD hemp processing facility in Talent close to the Medford manufacturing facility.

The Company’s focus in Oregon is to return its Oregon operations to profitability by the third quarter of 2019. Sales and gross margin in the first quarter of 2019 have both increased when compared to the first quarter of 2018 and the fourth quarter of 2018. The Company has increased the number of dispensaries carrying its products as well as the number of products offered in 2019, with a focus on products like Dabtab™ Dablets™ that are proprietary and have expected higher margins.

The Company has announced several developments in the Oregon market, including:

• the introduction of three Halo branded edible products including single piece chews, a gummy ten pack and a syrup-based drink which released in stores throughout Oregon in late November;
• the launch of DabTabs™ into more than 140 dispensaries in Oregon under the Company’s GILT brand;
• a binding letter of intent to secure a purpose-built hemp processing facility in Southern Oregon which is projected to yield monthly revenues of up to USD$3.5 million at current wholesale prices; and
• partnership with Eaze™, the United States’ premier online marketplace for cannabis products, to sell its products direct to consumers in Oregon with an initial roll out of the Gilt™ Branded DabTab™ Dablets.

Nevada

Halo is currently operating out of 2,000 square feet in the Company’s 8,000 square foot licensed facility in Clark County. The Company’s manufacturing process consists of purchasing bulk distillate and live resin, and manufacturing the bulk into finished goods, producing roughly 2,000 units per day. Last week, the Company began construction at the facility to add ethanol extraction capability which is expected to occupy another 2,000 square feet of space. The Company expects its ethanol extraction operations to commence in the next 120 days, which will add biomass to distillation capability. The Company has submitted its application to transfer the marijuana product manufacturing license held by Just Quality, LLC (“Just Quality”) and expects it to be transferred in the next 90 days.

The Company has identified two townships in Clark County that are supportive of the Company’s previously announced plan to transfer the cultivation license pursuant to an asset purchase agreement between Just Quality and the Company. The Company has identified viable sites in both townships to build out a proposed 20-acre site to grow whole plant extractable material. The Company still expects to break ground on this site by end of 2019. This proposed location is expected to be a double insulated hoop house facility with supplemental light that will generate three cycle harvests per year and yield up to 25,000 pounds of useable greenhouse cannabis for extraction annually.

In the first quarter of 2019, Halo sold approximately USD$514,000 worth of product into 22 dispensaries throughout the state of Nevada. The Company continues initiatives to introduce innovative products such as the DabTabs™ line of products to the Nevada market while also expanding into a growing number of dispensaries month over month.

Bophelo Bioscience & Wellness (Pty) Ltd (“Bophelo”) Partnership in Lesotho, Africa

In 2017, Lesotho was the first sovereign nation in Africa to legalise the cultivation and manufacturing of cannabis. This decision to legalise the cannabis industry in Lesotho was soon followed in 2018 by South Africa’s functional legalization of cannabis for adult use purposes. These developments have fuelled interest in the Lesotho cannabis industry and have resulted in a number of opportunities presenting themselves. A number of Canadian Licensed Producers, such as Canopy Growth, Supreme Cannabis and Aphria have recently made strategic investments in Lesotho. To the knowledge of the Company, Halo is the first American cannabis company to announce entry into Lesotho.

Bophelo is a company domiciled in Lesotho and is the holder of a license to cultivate, manufacture, store, distribute, import and export cannabis. With a licenced canopy area capacity of five hectares (with the opportunity to expand this capacity by up to 200 hectares in 2020), Bophelo is amongst the largest licensed operators in Lesotho.

Halo has entered into a strategic partnership with Bophelo; to operate cannabis cultivation facilities on Bophelo’s five-hectare site and establish an oil production facility, in exchange for a 20% equity stake in Bophelo, a royalty earning arrangement on oil production and sales and a cost plus arrangement on direct costs incurred by the Company.

The project will begin within the initial licensed five hectares and Bophelo plans to plant two hectares of cannabis under greenhouses in November 2019. The final cost of products ready for export to Europe, Australia and Canada is projected to be under USD$1.00 per gram. Cannabis is expected to be ready for sales by the middle of 2020. According to Prohibition Partners, the European cannabis market has been estimated to be worth up to €123 billion by 2028 and will likely become the world’s largest legal market over the next five years. According to New Frontier Data, the market for cannabis in Africa is currently estimated at USD$37.3 billion, with the neighbouring South African legal cannabis market expected to be worth USD$1.851 billion by 2023 according to Business Insider ZA. It is estimated by New Frontier Data that one-third of the world’s marijuana consumers reside on the African continent.

In May 2019, Kiran Sidhu, the Chief Executive Officer of Halo, visited Lesotho. During his visit, Mr. Sidhu met with the Deputy Prime Minister and cabinet members.

Partnership with High Tide Inc.

Halo announced in late May 2019 that the Company was partnering with High Tide Inc. (“High Tide”) to introduce Halo branded products through High Tide’s extensive distribution channels. With reach extending throughout Canada, the United States, and Europe, High Tide offers a promising opportunity for Halo to reach consumers throughout the Western world.

The first phase of the partnership will be a roll-out of a do-it-yourself kit involving DabTabs™ where consumers can prefill DabTabs™ Tablets with measured doses of either cannabis or cannabidiol. The partnership is expected to generate distribution of DabTab™ Dablets™ do it yourself kits throughout Canada, the United States and Europe, and is expected to be the first of many products that the companies will launch jointly.

DabTabs™ Product Updates

Halo has begun rolling out DabTabs™ which includes the Dablets™ as well as both a vaporizer and shatterizer. These innovative products are changing the way that dabbing is experienced by the consumer, creating a cleaner and easier experience than traditional dabbing. The shatterizer is the newest form of vaporizers that allows the consumer to experience smooth, flavourful use of a variety of concentrates, dabs, waxes, resin, and many other forms of extracts on the go.

DabTabs Go™, the first portable vaporizer crossover designed for Dablets™, is expected to launch in July 2019. This product will be introduced by Halo under its Gilt™ brand in California, Nevada, and Oregon. This product provides quick, consistent and controlled heating, assuring consumers a full-spectrum, vaporization experience with DabTabs™ Dablets.

Halo has exclusive rights to the DabTabs™ products in Nevada and California, providing the Company with a unique position in capturing a large portion of the market.

Common Share Compensation of Directors & Management

Each of the independent directors of the Company has agreed to accept common shares in the capital of the Company (“Director Compensation Shares”) in lieu of the cash consideration such directors are entitled to receive for acting in such capacity from January 1, 2019 to March 31, 2019. The total aggregate amount of cash compensation to be satisfied through the issuance of the Directors Compensation Shares is CAD$110,717.50, which will be satisfied through the issuance of 145,679 Director Compensation Shares at a price of CAD$0.76 per Director Compensation Share.

Certain employees and independent contractors of the Company have agreed to accept common shares in the capital of the company (“Management Compensation Shares”) in lieu of the cash consideration such individuals are entitled to receive for acting in such capacity from January 1, 2019 to March 31, 2019. The total aggregate amount of cash compensation to be satisfied through the issuance of the Management Compensation Shares is CAD$1,489,907.80, which will be satisfied through the issuance of 1,960,405 Management Compensation Shares at a price of CAD$0.76 per Management Compensation Share.

In connection with the above transactions, certain “related parties”, for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”), are expected to receive Director Compensation Shares and Management Compensation Shares and the issuance thereto will be considered a “related party transaction” for the purposes of MI 61-101. The Company is relying on exemptions from the formal valuation and minority shareholder approval requirements available under MI 61-101. The Company is exempt from the formal valuation requirement in section 5.4 and the minority shareholder approval requirement in section 5.6 of MI 61-101 in reliance on sections 5.5(a) and 5.7(a), respectively, of MI 61-101 as the fair market value of the transaction, insofar as it involves related parties, is not more than 25% of the Company’s market capitalization.

Issuance of Stock Appreciation Rights

The Company intends to grant to certain employees and independent contractors an aggregate of: (i) 7,500,000 stock appreciation rights exercisable at CAD$0.80 (the “$0.80 SARs”), and (ii) 7,500,000 stock appreciation rights exercisable at CAD$1.00 (the “$1.00 SARs”), under the Company’s omnibus incentive plan. The $0.80 SARs vest and become exercisable one year following the date of grant and the $1.00 SARs vest and become exercisable two years following the date of grant.

In connection with the above transaction, certain “related parties”, for the purposes of MI 61-101, are expected to receive $0.80 SARs and $1.00 SARs and the issuance thereto will be considered a “related party transaction” for the purposes of MI 61-101. The Company is relying on exemptions from the formal valuation and minority shareholder approval requirements available under MI 61-101. The Company is exempt from the formal valuation requirement in section 5.4 and the minority shareholder approval requirement in section 5.6 of MI 61-101 in reliance on sections 5.5(a) and 5.7(a), respectively, of MI 61-101 as the fair market value of the transaction, insofar as it involves related parties, is not more than 25% of the Company’s market capitalization.

Issuance of Additional Warrants

In connection with the Company’s business combination by and among the Company, ANM, Inc. and Apogee Opportunities (USA) Inc. that was completed on September 28, 2018, an administrative error resulted in an under issuance of 1,428,629 common share purchase warrants. The Company intends to rectify this error by issuing an additional 1,428,629 common share purchase warrants (each, a “Warrant”). Each Warrant is exercisable to purchase one common share in the capital of the Company at a price of CAD$0.50 per common share until December 31, 2020, subject to acceleration.

Clarification of Previous News Release

The Company also wishes to correct an inadvertent error in its prior news release dated February 20, 2019. Specifically, the previous news release noted that each month, for a period of four months, the Company was permitted to elect to satisfy a certain portion of certain individuals’ cash compensation through the issuance of common shares in the capital of the Company, with the total amount of cash compensation subject to such option being approximately USD$56,667 per month. The Company clarifies that the actual total amount of cash compensation subject to such option was approximately USD$85,565 per month.

ABOUT HALO LABS

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 has expertise in all major cannabis manufacturing processes, leveraging proprietary processes and products, and has produced over 3.5M grams of oils and concentrates since inception. 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 Nevada with our partner Just Quality. The Company has also begun operations in Lesotho Africa through a strategic partnership. With a consumer-centric focus, Halo will continue to market innovative branded and private label products across multiple product categories.

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, information concerning the expected start date of the Company’s operations at the Company’s second facility in California, the expected space to be added by the completion of a third facility in California and the projected occupancy date thereof, the licenses to be obtained by the new facilities planned in California, the expected revenue to be realized by the Company from its agreement with Cannus Partners, the Company’s plans with respect to its production facilities in Oregon, the Company’s intention to return to profitability in Oregon in 2019, the expected margins to be realized by the Company on Dabtab™ Dablets™, the projected revenues expected from the hemp processing facility planned for Southern Oregon, the space requirements and timing for the Company’s ethanol extraction capabilities in Nevada, the timing of the license transfer by Just Quality, the timing, characteristics and expected yield of the Company’s planned facility in Clark County, Nevada, the initial plans regarding Bophelo’s operations in Lesotho, the projected cost of Bophelo’s products, the expected timing for product sales for Bophelo, the size and timing of the growth of the European and South African cannabis markets, the distribution territories and additional products planned for distribution under the Company’s partnership with High Tide, the timing and brand under which the DabTabsGo™ product line will be launched, the issuance of the Director Compensation Shares, the issuance of the Management Compensation Shares, the issuance of the $0.80 SARs and $1.00 SARs, the date on which the $0.80 SARs and $1.00 SARs will become vested and exercisable, the issuance of the Warrants and the date on which the Warrants will expire.

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, level of activity, performance or achievements of Halo 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.

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: adverse changes in applicable laws; the delay or failure to obtain necessary regulatory approvals including the approval of the Neo Exchange Inc. and California regulatory authorities, the acceleration of the Warrants, adverse changes to suppliers and other third parties with which the Company does business, changes in general economic, business and political conditions, including changes in the financial markets and the other risks disclosed in the most recent annual information form. 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.

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. Key assumptions used herein are that there will not be any delays or unexpected cost overruns in construction of the Company’s proposed facilities in Nevada, Oregon or California, the Company will be able to obtain license transfers and required licenses in a timely manner from applicable regulatory authorities, the Company will be able to realize margins, production amounts and sales in accordance with current forecasts prepared by management, construction of additional facilities will be completed in accordance with current plans, the Company’s needs in the Nevada market will not change prior to the start of construction on the proposed facilities in the state, Bophelo will conduct its operations in accordance with the plans and strategies communicated to management to the date hereof, estimates and assumptions used by Prohibition Partners and New Frontier Data in the development of their estimates contained herein are correct, there will not be any unexpected factors to delay or deteriorate the Company’s partnership with High Tide and such partnership will progress in accordance with the plans currently discussed between the parties, there will not be any market specific or economic conditions that result in the Company’s current plans becoming infeasible or unprofitable, there will not be unexpected costs or delays incurred by the Company in the launch of its planned products, including, without limitation, the DabTabsGo™ product line, the Neo Exchange Inc. will approve the transactions contemplated herein in a timely manner, there will not be a significant change in the financial market that would cause employees and independent contractors to refuse the acceptance of the Director Compensation Shares or Management Compensation Shares, the expiry date of the Warrants will not be accelerated and the $0.80 SARs and $1.00 SARs will vest in accordance with the terms thereof and will not be amended or terminated prior to the applicable vesting dates. 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.