Halo Announces Planned $11.5 Million Purchase of North Hollywood Cannabis Dispensary & Cannabis Retail Management Company - Seite 2

LKJ LLC and Crimson & Black Acquisition

Based in Henderson, Nevada, and operating in Los Angeles County, LKJ is building one of North Hollywood´s largest retail dispensary locations with nearly 4,000 square feet and significant onsite parking. Located in the heart of North Hollywood, the dispensary is situated on Lankershim Blvd. and Hesby Ave., which are heavily transited streets with significant vehicle and pedestrian traffic.

On closing of the acquisition, Halo will own Crimson & Black which features an experienced retail management team and additional employees to staff the North Hollywood dispensary.

Upon the dispensary’s opening, Halo expects to commence direct retail sales of its own branded and white-labeled cannabis products, fueling LKJ’s sales. Halo will leverage manufacturing in Southern California at Cathedral City, and cultivation procurement, manufacturing, and distribution operations in Northern California, to scale up this direct to dispensary business swiftly.

Halo’s ‘Seed to Sale’ Strategy

The dispensary’s opening will mark Halo’s achievement of its previously announced ‘Seed to Sale’ business plan in California. By controlling cannabis cultivation, manufacturing, distribution, a retail dispensary and management company, Halo expects to achieve greater economies of scale and higher profit margins through vertically integrated operations. The dispensary’s sales are expected to be a meaningful contributor to Halo’s revenue and EBITDA growth in 2020 and beyond, as the Company builds on its position as an industry leading cannabis company.

Further afield, Halo plans to pursue similar ‘Seed to Sale’ strategies in other sales territories, both in North America and internationally. To this end, Halo announced on 24 December 2019 a binding Letter of Intent to acquire Canmart Limited, a UK licensed importer and distributor of medicinal cannabis products.

Transaction Detail

Under the Acquisition, Halo will acquire 66.67% of outstanding membership interests of LKJ and 100% of the outstanding membership interest of Crimson & Black.

Shares will be priced at the 30-day VWAP and the majority will be released from escrow in milestone-based payments subsequent to closing.

Upon closing, $2,000,000 of Halo Common Shares will be issued directly, subject to trading restrictions:

• $1,000,000 will be freely tradeable in accordance with securities laws;
• $1,000,000 will be subject to a customary pooling agreement whereby for one year the aggregate shares sold may not exceed 10% of the prior trading day’s total volume.
• $9,500,000 of Halo Common Shares will be issued and held in escrow and issued to the applicable vendors as milestones are achieved:
  • $4,750,000 will be released once the dispensary is licensed by all applicable state and local regulatory authorities and the first legal sale of cannabis is made;
  • and $4,750,000 will be released upon securing a lease for the dispensary on a term of at least 5 years.

The sellers are responsible for all build out / site transfer costs and shares held in escrow will back-stop the sellers’ indemnification obligations.