Halo Collective Enters into Subscription Agreement for Convertible Debentures

Halo Collective Inc. (“Halo” or the “Company”) (NEO: HALO) (OTCQB: HCANF) (Germany: A9KN) today announced that it has entered into a subscription agreement (the “Subscription Agreement”) with Global Tech Opportunities 6 (the “Subscriber”), that provides for the issuance of convertible debentures (each, a “Convertible Debenture”). The Company intends to use the proceeds for general working capital purposes as well as to fund various organic and acquisition growth initiatives.  The Subscriber is an investment fund managed by Alpha Blue Ocean (“ABO”).  Halo is expecting that approximately $15-20 million principal amount of Convertible Debentures will be issued pursuant to the Subscription Agreement through the balance of 2022 to fulfill the Company’s business plan, including the opening of Halo’s three planned dispensaries in the Los Angeles area.

“The U.S. west coast cannabis landscape is under-going massive disruption just as the opportunity for stronger players is as great as ever,” commented Kiran Sidhu, Halo’s CEO. “This new capital will allow us to focus on shareholder value creation through strategic investments in retail and indoor grow opportunities in California, new products and increased distribution in Oregon and California, and packaging up and building out our functional mushroom and CBD businesses.”

“Halo intends to open three marquee dispensaries in Los Angeles which will further augment the Company’s valuation. The Alpha Blue Ocean team has confidence in Halo’s senior management team and is providing Halo with access to capital to implement the Company’s business plan in 2022 and beyond. We are excited to be Halo’s financial partner to help increase value for all stakeholders”, said Amine Nedjai, ABO’s CEO.

The Subscription Agreement provides for the issuance of up to 24 Convertible Debentures with an aggregate principal amount of up to $65.0 million (including the Debenture Commitment Fee (as defined below)). In addition to the Debenture Commitment Fee, each Convertible Debenture will be issued for proceeds equal to 92% of the face value of the principal amount. The Convertible Debentures will mature on the date that is 24 months from the date of issuance and are convertible: (i) at any time at the option of the holder; and (ii) automatically at maturity. The conversion price of the Convertible Debentures (the “Conversion Price”) is equal to the lower of: (i) $1.00; and (ii) the closing price of the common shares in the capital of the Company (the “Common Shares”) on the NEO Exchange on the date immediately preceding the date on which a conversion notice is delivered to the Company (or, in the event of the automatic conversion of the outstanding principal upon the maturity of the Convertible Debenture, the maturity date).

In the event that the Conversion Price is greater than the average of the three lowest daily volume-weighted average prices observed over a period of fifteen (15) trading days immediately preceding the date of the relevant conversion notice (or, where no conversion notice is given, the relevant maturity date of the Convertible Debentures) (the “Theoretical Conversion Price”), the Company will be required to pay the Subscriber a make whole amount to compensate the Subscriber for the difference between the actual conversion price and the Theoretical Conversion Price (each, a “Make-Whole Amount”).

In connection with the Subscription Agreement, the Company has agreed to pay the Subscriber a commitment fee of $5.0 million (the “Debenture Commitment Fee”), which amount will be added in instalments of $2.5 million to the principal amount of the first two Convertible Debentures issued pursuant to the Subscription Agreement.

Upon the occurrence of certain events of default or a change of control, as set forth in the Subscription Agreement, the Convertible Debentures may, at the discretion of the Subscriber, be redeemed in cash prior to the maturity at price equal to 105% of the principal amount then outstanding. The Subscription Agreement also contains provisions preventing the Company from issuing Convertible Debentures if (i) the issuance of such Convertible Debentures would result in the Subscriber holding beneficial ownership or control of greater than 19.9% of the Common Shares (on a partially diluted basis), and (ii) the issuance of such Convertible Debentures would result in the Subscriber (and certain affiliates thereof) holding greater than an aggregate of $10.0 million principal amount of indebtedness under the Convertible Debentures and pursuant to the amended and restated loan agreement dated February 8, 2022 between Halo and the Subscriber and any convertible debentures issued in connection therewith.

ABO was created in 2017 by Pierre Vannineuse, Hugo Pingray and Amaury Mamou-Mani. ABO is a young and dynamic investment fund manager with the mission of revolutionizing the financial industry by offering innovative financing solutions. ABO implements a direct, rational and efficient approach by offering alternative financing solutions. In other words, flexible solutions for listed companies also referred to as PIPEs (Private Investment in Public Equity). ABO has executed more than 75 transactions since its inception with financial engagements of more than €1.5 billion.

Further information regarding the financing can be found in the Subscription Agreement, which will be posted to Halo’s SEDAR profile on www.sedar.com.

About Halo Collective Inc.

Halo is a leading, vertically integrated cannabis company focused on the West Coast of the United States and operates other emerging businesses in CBD and non-psychotropic mushroom functional beverages. In its cannabis operations, the Company cultivates, extracts, manufactures, and distributes quality cannabis flower, oils, and concentrates and has sold hundreds of millions of grams of cannabis in the form of flower, pre-rolls, vape carts, edibles, and concentrates since inception. The Company sells a portfolio of branded cannabis products including its proprietary Hush™, Winberry Farms™, Williams Wonder Farms, and Budega™ brands, and under license agreements with Papa’s Herb®, DNA Genetics, Terphogz, and FlowerShop*.

In Oregon, Halo has a combined 14 acres of owned and contracted outdoor and greenhouse cultivation. The Company also operates Food Concepts LLC, a master tenant of a 55,000 square foot indoor cannabis cultivation, processing, and wholesaling facility in Portland.

In California, Halo maintains licenses for extraction, manufacturing, and distribution. The Company has partnered with Green Matter to purchase the Bar X Farm in Lake County and plans to develop up to 63 acres of cultivation, comprising one of the largest licensed single-site grows in California. Halo is opening three retail dispensaries in Los Angeles under the Budega™ brand in North HollywoodHollywood, and Westwood.

Halo is also expanding into other consumer health and wellness categories expected to experience rapid growth in consumer demand, including functional supplements such as nootropic nutraceuticals. The Company has recently agreed to acquire H2C Beverages, a company focused on cannabinoids and non-psychotropic mushroom functional beverages, and entered into a distribution and manufacturing agreement with Elegance Brands Inc., to propel the national distribution of beverages, capsules, and topical supplements under H2C and Halo’s functional mushroom brand, Hushrooms.

Halo has acquired a range of software development assets, including CannPOS, Cannalift, CannaFeels, and a discrete sublingual dosing technology, Accudab. The Company intends to reorganize these entities (including their intellectual property and patent applications) into a subsidiary called Halo Tek Inc., and to complete a distribution of the shares of Halo Tek Inc. to shareholders on record, at date to be determined.

Outside of North America, Halo is the largest shareholder of Akanda Corp. (“Akanda”), an international medical cannabis company whose mission is to be the world’s leading platform for medical cannabis and wellness products. Led by an experienced global leadership team and guided by the highest ethical standards, Akanda is building a unique seed-to-patient model that leverages the competitive advantages of its cultivation campus in the Kingdom of Lesotho and a distribution marketplace and other innovative solutions designed to maximize patient access and choice. Halo also operates three Kushbar retail cannabis stores located in Alberta, Canada, leveraging its Oregon and California brands.

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”. Forward-looking information may relate to anticipated events or results including, but not limited to the issuance of Convertible Debentures, the payment of any Make-Whole Amount, the future payment of the Debenture Commitment Fee, the filing of the Subscription Agreement, the initial public offering and listing of Akanda Corp., management’s plans regarding its portfolio of cannabis businesses, the size of Halo’s planned cultivation facility in Northern California, 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 or 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.

SOURCE Halo Collective Inc.