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Halo Collective Signs a Letter of Intent to Acquire Phytocann Group, a Leading European Wellness CBD Company

All figures in EURO unless stated otherwise indicated

Halo Collective CEO Kiran Sidhu visits a Phytocann retail store in Greater Paris. (CNW Group/Halo Collective Inc.)

Halo Collective CEO Kiran Sidhu visits a Phytocann retail store in Greater Paris. (CNW Group/Halo Collective Inc.)

View the interview of Phytocann Group CEO Alexandre-Henri Lacarré by Technikart magazine here: https://youtu.be/mHmNXMdSB3M (CNW Group/Halo Collective Inc.)

TORONTO, April 28, 2022 /PRNewswire/ -- Halo Collective Inc. ("Halo" or the "Company") (NEO: HALO) (OTCQB: HCANF) (Germany: A9KN) (France/Swiss ISIN: CA40638K5070) today announced that it has signed a letter of intent (the "LOI") and entered into exclusive negotiations to acquire Phytocann Holdings SA ("Phytocann"), one of Europe's leading wellness CBD companies (the "Planned Acquisition"). The Planned Acquisition would add substantial revenue, EBITDA, geographic diversification, and an impressive CBD-based product lineup to Halo when closed. Halo is proposing to acquire Phytocann through a wholly owned subsidiary to be formed by Halo, in Ontario, Canada; Phytocann International Holdings ("PIH"). PIH is the planned vehicle for all of Halo's remaining non-THC assets anchored by Phytocann. Alexandre-Henri Lacarré, the founder of Phytocann and a successful European entrepreneur, is expected to lead PIH as its CEO upon closing of Planned Acquisition.

Phytocann's audited 2020 revenue and earnings before taxes, depreciation, and amortization ("EBITDA") were approximately €5.3 million and €1.2 million, respectively, for the twelve-month period ended December 31, 20201. Phytocann is expected publish audited numbers for the period ended December 31, 2021 within the next 90 days. After the Planned Acquisition is completed, Phytocann's management projects net revenues and EBITDA of approximately €17 million and €4.3 million, respectively, for the first twelve-month period.2 These projections are based solely on Phytocann's existing European business driven by traditional and e-commerce revenue, and do not include contributions from Halo's operations non-THC company portfolio, and the launch of Phytocann's brands and e-commerce platforms into the United States.

Phytocann: Europe's Leading Premium CBD Company

Europe Cannabidiol (CBD) Market, 2021 & 2027. Source: https://www.graphicalresearch.com/industry-insights/1823/europe-cannabidiol-cbd-market (CNW Group/Halo Collective Inc.)

The European cannabinoid market in Europe in 2021 was estimated to be approximately €4.6 billion and is projected to grow to €25.9 by the year 2027. In comparison the U.S. market is expected to be approximately $18 billion in the same period.3

Phytocann was founded in 2017 by Alexandre-Henri Lacarré and headquartered in Villeneuve, Switzerland. The Company is vertically integrated from seed to sale, serving multiple market segments with a range of brands including 260 products that are distributed to over 1,000 stores in Switzerland and France. In addition, Phytocann is a wholesaler of bulk dried hemp flower and concentrates that are low in THC, but contain CBD, CBG, and CBN. The Company has recently launched business-to-business and business-to-consumer e-commerce platforms that primarily target French speaking customers. Phytocann currently has six operating wellness CBD franchised stores, five in France and one in Cyprus, and intends to add 30 more over the next 24 months. The Company has also developed its own vending machine, Qanabox, three are currently installed in stores with plans to add 50 more over the 12 months. Phytocann has over 100,000 ft2 (10,000 m2) of hybrid greenhouses canopy in Switzerland, which has an annual growing capacity of up to 11,000 pounds (5,000 kilograms) of premium indoor hemp.

The Company's brand lineup currently consists of Ivory Swiss Premium, Harvest Laboratoires, Easy Weed, Kanolia, Herboristerie Alexandra, Buddies, Ghosty Buds, and Qanabox.

Phytocann's brand lineup currently consists of multiple brands, including Ivory Swiss Premium: https://ivoryswiss.com (CNW Group/Halo Collective Inc.)

Phytocann's brand lineup currently consists of multiple brands, including Harvest Laboratoires: https://harvestlaboratoires.com (CNW Group/Halo Collective Inc.)

Phytocann's brand lineup currently consists of multiple brands, including Easy Weed: https://easyweedcbd.com (CNW Group/Halo Collective Inc.)

Phytocann's brand lineup currently consists of multiple brands, including Kanolia: https://kanolia.com (CNW Group/Halo Collective Inc.)

Phytocann's brand lineup currently consists of multiple brands, including Herboristerie Alexandra: https://herboristerie-alexandra.com (CNW Group/Halo Collective Inc.)

Phytocann's brand lineup currently consists of multiple brands, including Buddies: https://buddies-cbd.com (CNW Group/Halo Collective Inc.)

Unveiling of Value Enhancement Strategy

Following the acquisition of Phytocann, Halo management is expecting to create two separate companies under Halo Collective, a THC focused entity, and a non-THC focused entity:

  • Phytocann International Holdings: Phytocann and the remaining non-THC assets of Halo's are expected to be combined to establish a multi-national wellness platform consisting of a range of non-THC products that will be headquartered in Switzerland.

  • Halo Collective Cannabis Holdings: is expected to be established as a pure-play cannabis operation focused on the west coast of North America, with cultivation, extraction, manufacturing, distribution, and retail operations in California and Oregon. The business would have a singular focus on enhancing the growth and profitability of Halo's vertically integrated THC businesses, headquartered in Canada.

Planned Acquisition Structure

"The potential acquisition of Phytocann is a cornerstone of our shareholder value enhancement strategy," commented Kiran Sidhu, Halo's Chief Executive Officer. "Phytocann brings multiple, premium-branded CBD products that complement Halo's existing wellness offerings developed for the United States market. In addition, we see meaningful synergies with Halo's recent acquisitions of Dissolve Medical, H2C Beverages, Simply Sweet Gummies, and Hushrooms. Halo's distribution agreement with Sway Energy is also expected to be contributed. Importantly, the addition of Phytocann's high-margin CBD business is projected to be immediately accretive to Halo's bottom line. We believe that by separating the THC and non-THC businesses, we can significantly enhance value creation for all of Halo's stakeholders. We expect PIT to follow a similar path to Akanda Corp. (NASDAQ: AKAN)."

Proposed Deal Terms

Halo is expecting to form PIH under the laws of Ontario, Canada, and to transfer all CBD beverages, candy, dissolve strips, U.S. distribution agreements, and any other non-THC product assets of Halo to PIH, subject to Phytocann's approval and due diligence. As a result, PIH will be 100% held by Halo. PIH would then acquire 100% of the business and assets held directly or indirectly by Phytocann.

Under the terms of the LOI, Halo is offering upfront consideration of €12.2 million (the "Upfront Consideration"), with a further potential earn-out (the "Earn-Out Consideration") of up to €87.8 million in debt. The consideration is contemplated to be paid as follows:

(i)

Upfront Consideration: €12.2 million would be paid partially in shares of Halo, equal to 24% of the issued and outstanding Halo shares at the time of signing definitive agreement in respect of the Planned Acquisition (the "Definitive Agreement"), with the remaining part of the Upfront Consideration to be paid by way of a vendor note (the "Vendor Note") which matures upon the date falling two years (extendable to three years at the option of the Sellers) following completion of the Planned Acquisition;



(ii)

Earn-Out Consideration: The Earn-Out Consideration shall be calculated based on a multiple of the EBITDA and revenues of the PIH during an agreed period following the closing of the Planned Acquisition. The Earn-Out Consideration shall be paid by way of a note (the "Earn-Out Note") which matures upon the date falling two years (extendable to three years as the option of the Sellers) following completion of the Planned Acquisition;



(iii)

Interest. The Vendor Note and Earn-Out Note shall bear interest at a rate of 9% per annum and shall be secured by a pledge of 90% of Halo's shares in the PIH and a floating charge over the assets of PIH; and



(iv)

Interim Financing: As part of the Planned Acquisition, Halo would commit to finance PIH in the amount of CHF 2.5 million, CHF 1.0 million of which shall be used by PIH to repay certain shareholder loans of Phytocann held by the sellers of Phytocann.

The LOI contemplates that the Vendor Note and the Earn-Out Note will be repayable: (i) in cash, or (ii) at the election of the vendors, in shares of PIH. In the event that the Vendor Note and the Earn-Out Note are converted into shares of PIH, it is contemplated that they will convert at a price that results in the parties' ownership interests in PIH reflecting the relative cost of the parties' investments, (i) with Halo's being equal to the value of the share consideration and the book value of the non-THC businesses contributed to PIH by Halo, and (ii) with the vendors being equal to the principal and interest converted under the Earn-Out Note and the Vendor Note.

The LOI also contains a 75-day exclusivity period and a termination fee and expense reimbursement payable to Halo in certain circumstances if the transaction with Halo is not completed.

Halo expects to complete the Planned Acquisition in the next 90 days.  Completion of the Planned Acquisition is subject to the negotiation and entering into of the Definitive Agreement, the receipt of all applicable approvals (including the NEO Exchange) and the satisfaction or waiver of all closing conditions. There can be no assurance that the Planned Acquisition will be completed or the timing thereof.

About Phytocann Group Holdings

Founded in 2017 by Alexandre Henri Lacarré, Phytocann Group Holdings is a leader in premium-branded CBD products in Switzerland. Starting from their 10,000 m2 grow facility in Switzerland, Phytocann solidified their strong position in the European market by completing three acquisitions in Switzerland in 2020, then two acquisitions in France and Luxembourg in 2021.

Phytocann is currently selling its products business to business in Switzerland, France, Belgium, the Netherlands, Luxembourg, Spain, and Italy, while selling business to consumers in Switzerland and France, with plans to expand business to consumer activities to additional European countries in 2022 and 2023. Phytocann's products include CBD oils, vapes, pollens, cosmetics, food & beverages. In addition, Phytocann's products (under the brands Easy Weed and Ivory) are currently being sold in over 1,000 retail locations across Switzerland and France. (See full product lineup here: https://www.phytocannswiss.com/shop/.)

In late 2021, Phytocann launched franchise stores, of which the entity holds partnership agreements with two companies in France and Cyprus. During the first quarter of 2022, five franchise stores have been opened, offering the full range of Phytocann's product portfolio. PhytoCann's management plans to open 35 additional shops across the world over the next two years.

The brand range of Phytocann unifies six brands and 260+ products. Following the development of strong distribution partnerships at the beginning of 2022. Phytocann has now focused its resources on strengthening e-commerce activities including seven websites. Phytocann has a partnership with French artist, Vincent Faudemer, who created a limited series of packaging for Ivory called Alien X which includes an NFT collection for customers. This creates a new dimension to Phytocann with the possibility to mix cannabis and Web3 revenues under the joint venture being incorporated in Bahamas owned 50% by PhytoCann and 50% by Faudemer.

Simultaneously, Phytocann is focused on improving the customer experience and footprint of luxury premium brands such as Ivory and Harvest Laboratoires in France and other countries while expanding into other consumer health and wellness categories with its cosmetic line named "Kanolia", which will be distributed by Pharmasimple into the European market in a short period of time, and lately to the Asian market.

The objective of Phytocann for the coming years is to maintain its actual positions and expand its sales to new countries by developing multiple partnerships and strategic acquisitions.

Phytocann video presentation: https://youtu.be/tMRtq0Pc0Hw

Phytocann interview with TECHNIKART: https://www.youtube.com/watch?v=mHmNXMdSB3M

Phytocann interview with BFM business: https://www.dailymotion.com/video/x80vq8b

Connect with Phytocann: Email | Website | LinkedIn | Instagram | Youtube

About Halo Collective

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, Halo 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. Halo 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, and FlowerShop*.

In Oregon, Halo has a combined 14 acres of owned and contracted outdoor and greenhouse cultivation. Halo 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. Halo has partnered with Green Matter and jointly purchased 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 has opened a dispensary in Los Angeles under the Budega brand in North Hollywood and plans to open two more in Hollywood, and Westwood in the second quarter of 2022.

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. Halo has recently acquired H2C Beverages, a company focused on cannabinoids and non-psychotropic mushroom functional beverages and entered into a distribution and manufacturing agreement with SWAY Energy Corporation (formerly Elegance Brands Inc.), to propel the national distribution of beverages, dissolvable strips, capsules, and topical supplements under H2C and Halo's functional mushroom brand, Hushrooms. Halo has also entered into the LOI to acquire Phytocann, one of Europe's leading wellness CBD consumer packaged goods companies, that consists of vertically integrated operations from seed to sale, serving multiple market segments with value and premium brands. The Planned Acquisition will anchor Halo's strategy in which it plans to separate all of its non-THC companies, including Phytocann, into a new wholly owned subsidiary PIH.

Halo has acquired a range of software development assets, including CannPOS, Cannalift, CannaFeels, and a discrete sublingual dosing technology, Accudab. Halo 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 a date to be determined.

Halo also operates three Kushbar retail cannabis stores located in Alberta, Canada.

Outside of North America, Halo is the largest shareholder of Akanda Corp. (NASDAQ: AKAN) currently owning 44% of the common shares. Akanda is an international medical cannabis and wellness platform company seeking to help people lead better lives through improved access to high quality and affordable products. Akanda is building a seed-to-patient supply chain, connecting patients in the UK and Europe with diverse products, including cannabis products cultivated at its competitively advantaged grow operation in the Kingdom of Lesotho and with other trusted third-party brands. Akanda's initial portfolio includes Bophelo Bioscience & Wellness, a GACP qualified cultivation campus in the Kingdom of Lesotho in Southern Africa, and CanMart, a UK-based fully licensed pharmaceutical importer and distributor which supplies pharmacies and clinics within the UK. In April 2022, Akanda entered into a definitive agreement to acquire Holigen Limited, securing a cannabis sector leadership position in Europe, the Middle East and Africa (EMEA) with EU GMP market access.

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

Connect with Halo Collective: Email | Website | LinkedIn | Twitter | Instagram

1 Audited net revenue is accounted for under Swiss GAAP.  EBITDA is computed using Swiss GAAP figures.

2  See "Cautionary Note Regarding Forward-Looking Information and Statements", "Financial Outlook" and "Non-IFRS Measures".

https://www.graphicalresearch.com/industry-insights/1823/europe-cannabidiol-cbd-market

Non-IFRS Financial Measures 

EBITDA is a non-IFRS financial measures that the Company uses to assess operating performance and does not have any standardized meaning prescribed by IFRS. EBITDA is defined as earnings (loss) before interest, tax, depreciation and amortization. This non-IFRS measure is provided to assist management and investors in determining operating performance. The Company also believes that securities analysts, investors and other interested parties frequently use this non-IFRS measure in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate this non-IFRS measure differently than the Company, this 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 and investing activities.

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 entering into of the Definitive Agreement and the terms thereof, completion of the Planned Acquisition, management's plans regarding its portfolio of cannabis businesses, the expected contribution from the Company's California dispensaries and the expected opening date thereof, the time and place for the Company's earnings call, 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 proposed spinoff 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 the Company's cannabis 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, 2022 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 to provide an outlook for net revenues and EBITDA of Phytocann for the 12 months' ended December 31, 2021 and the 12 month period following completion of the Planned Acquisition 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. The actual results of Phytocann's operations for any period 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.

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

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.

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www.haloco.com (CNW Group/Halo Collective Inc.)



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Halo Collective Signs a Letter of Intent to Acquire Phytocann Group, a Leading European Wellness CBD Company All figures in EURO unless stated otherwise indicated TORONTO, April 28, 2022 /PRNewswire/ - Halo Collective Inc. ("Halo" or the "Company") (NEO: HALO) (OTCQB: HCANF) (Germany: A9KN) (France/Swiss ISIN: CA40638K5070) today announced that it has …

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