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TORONTO — Halo Labs Inc. (“Halo” or the “Company”) (NEO: HALO, OTCQX: AGEEF, Germany: A9KN) ), is pleased to announce that it has entered into an asset purchase agreement (the “Agreement”) with High Tide Inc. (“High Tide”) (CSE: HITI) (OTCQB:HITIF) (FRA:2LY) and affiliates thereof for the $12 million purchase of High Tides’ KushBar retail cannabis brand, retail cannabis stores and all associated assets (the “Transaction”).
The Transaction provides for the acquisition by Halo of 3 licensed cannabis retail stores1 and the rights to 5 locations across Alberta which have already received development permits (the “Portfolio”) for aggregate consideration of $12 million, payable in common shares of Halo ( “Halo Shares”) at a deemed price of $0.26 per Halo Share. Concurrent with signing the Agreement, Halo has issued 13,461,538 Halo Shares to High Tide (the “Deposit Shares”) as a deposit to secure the Transaction (such deposit being refundable in certain limited circumstances, including force majeure). In connection with entering into the Agreement, Halo has issued an aggregate of 2,307,692 Halo Shares as a finder fee to certain arm’s-length consultants of the Company.
- Proposed $12 million acquisition by Halo of the KushBar retail cannabis brand, which includes:
- 3 licensed retail cannabis stores, 2 are currently operating and 1 is expected to open within 45 days (the “Licensed Premises”)
- 5 development permits to build new cannabis retail stores in Calgary, Edmonton, Edson, and Fort McMurray (the “Development Premises”)
- All copyrights, trade marks, digital assets and rights to all KushBar intellectual property
- Deposit of $3.5 million, paid to High Tide through the issue of 13,461,538 Halo Shares
- The Transaction is expected to provide Halo with entry into the growing Canadian cannabis market
- Under cannabis 2.0, the Canadian market poised to grow from $1.5B to over $3B in 2020 according to Canaccord Genuity2
- The Transaction is subject to the review and approval of the Alberta, Gaming, Liquor, and Cannabis Commission (“AGLC”) and the satisfaction or waiver of other customary conditions and is expected to close within 150 days of this announcement
Expanding High Tide and Halo’s Strategic Partnership
The Transaction follows Halo and High Tide’s announcement of a strategic partnership in May 2019. This expansion provides Halo with a foothold into the Canadian cannabis market.
Halo intends to engage in discussions with existing licensed producers (“LP”) of cannabis in Canada to secure manufacturing capacity for its proprietary products including DabTabs™, the Precisa sublingual dosing system, boutique concentrates (such as shatter, hash, rosin and diamonds), solventless and live resin vaporizer cartridges and pens and may consider applying for licence issued under the Cannabis Act (Canada) including with respect to the cultivation, sale or processing of cannabis. Pursuant to the Agreement, High Tide has agreed to use their best efforts to list all of Halo’s products or branded products in its retail cannabis stores, subject to compliance with applicable laws.
Raj Grover, High Tide’s President & Chief Executive Officer, commented, “Through the sale of KushBar under this Transaction, High Tide simplifies its retail cannabis strategy to focus on Canna Cabana while adding another client for its evolving third-party retail store management business.”
Kiran Sidhu, Halo CEO and Co-Founder, added, “We are excited to mark our strategic entry into the Canadian retail cannabis market with this initial Portfolio of assets in Alberta. We look forward to strengthening our relationship with High Tide and benefitting from its expertise in retail store development and operations management.
“Once Halo’s products are approved for sale in Alberta, directly acquiring retail storefronts is expected to give Halo the ability to showcase its branded products to Canadian consumers. The Transaction also creates an opportunity to widen our expected sales base across Alberta’s network of more than 400 retail outlets once Halo’s products are approved for sale in the Province. With recent positive changes in Canadian cannabis legislation, this is the perfect environment for us to enter Canada and further grow our oil and concentrate business. We are expecting to use this acquisition as the foundation to build a larger retail footprint in Canada.”
The KushBar Portfolio
While Canna Cabana operates across Canada, KushBar is based in Alberta and currently operates 2 retail cannabis stores in Camrose and Morinville, with 1 in Medicine Hat that is due to open in 45 days. The subsequent 5 KushBar stores are set to open in Alberta markets including Calgary and Edmonton, as well as Edson and Fort MacMurray.
To provide continuity and allow Halo to scale the remaining 5 locations, High Tide will continue to operate and manage the retail cannabis stores during a transition period in exchange for a percentage of gross revenues, subject to certain limits. High Tide will also assist Halo through the AGLC licensing process and oversee construction of the 5 new locations pursuant to the terms of a regulatory management agreement entered into between Halo and High Tide and pursuant to a construction management agreement and a retail management agreement that are to be entered into prior to closing of the Transaction.
Halo expect to have sufficient capital to complete the development and construction of the Development Premises using cash on hand or making draws under the Company’s previously announced $10M principal amount unsecured debt financing agreement.
The Growing Retail Cannabis Market in Alberta, Canada
Alberta is at the forefront of the Canadian legal cannabis market and the Transaction thus unlocks an attractive market for Halo. Arcview and BDS reported that in 2018 the province constituted 38 percent of Canadian national sales3. The province is now poised to grow further through the roll out of Cannabis 2.0 and, as of February 10, 2020, vape product sales newly permitted by the AGLC.
Mr. Sidhu added, “Halo is excited to be entering the Canadian cannabis market as Cannabis 2.0 is initiated throughout the country. KushBar gives Halo the foundation to grow through a known dispensary brand in an attractive and growing retail market. Establishing ourselves in Alberta, one of Canada’s largest cannabis consuming populations, will be the foothold Halo needs to continue Canadian expansion.”
About High Tide Inc.
High Tide is an Alberta-based, retail-focused cannabis company enhanced by the manufacturing and wholesale distribution of smoking accessories and cannabis lifestyle products. It is a vertically-integrated company in the Canadian cannabis market, with portfolio subsidiaries including Canna Cabana Inc., KushBar Inc., Grasscity.com, Smoker’s Corner Ltd., RGR Canada Inc. and Famous Brandz Inc. High Tide’s strategy as a parent company is to extend and strengthen its integrated value chain, while providing a complete customer experience and maximizing shareholder value. Key industry investors in High Tide include Aphria Inc. (TSX:APHA) (NYSE:APHA) and Aurora Cannabis Inc. (NYSE:ACB) (TSX:ACB).
With the deregulation of recreational cannabis for adult use across Canada, Canna Cabana Inc. and its 27 branded stores, is a sizeable retail business with a sophisticated yet playful customer experience. KushBar Inc. is a second retail cannabis business with 2 operating stores in Alberta, offering a modern experience aimed at the growing customer bases in Alberta and Ontario. Based in Amsterdam since 2000, Grasscity.com is the world’s preeminent and most searchable online retailer of smoking accessories and cannabis lifestyle products with approximately 5.8…