Halo Completes Signing of Definitive Agreement to Acquire Bophelo Bioscience

Halo Labs Inc. (“Halo” or the “Company”) (NEO:HALO, OTCQX:AGEEF, Germany:A9KN) is pleased to announce that it has signed a definitive acquisition agreement with respect to its proposed acquisition of Bophelo Bioscience & Wellness (Pty) Ltd (“Bophelo”) in exchange for 40,786,667 common shares of Halo (the “Transaction”).

Located in the Kingdom of Lesotho, Southern Africa, Bophelo has the country’s largest licensed land area for cultivation of medicinal grade cannabis products. Bophelo currently leases a 5-hectare fully licensed greenhouse canopy, and has conditional approval to expand to an additional 200 hectares of licensed outdoor canopy. Halo expects to start exporting cannabis grown at Bophelo in Q2 2020.

In total, once fully implemented, the 205-hectare Bophelo site is expected to be one of the largest cannabis cultivations in the world.

Acquisition Highlights

• Upon closing of the Transaction, Halo will have secured:
  • A fully licensed 5-hectare (12.4 acre) cultivation site, with an operating nursery and preparation underway for the construction of five 1-hectare state of the art forced air greenhouses
  • 200 hectares (494 acres) of conditionally approved outdoor canopy under a lease option for the mass cultivation of medicinal grade cannabis
  • Access to ample water, power and labor in a clean, dry and safe growing environment with an average of 200 days of sunlight a year
  • A fully licensed export business, with potential access to European, Israeli and Australian cannabis markets
• Phase 1 Growth Plan – Completion of licensed 5-hectare greenhouse cultivation site:
  • Local genetic strain bank undergoing continuous evolutionary improvement
  • First harvest of up to 1,000 cannabis plants expected in Q2 2020
  • Full production across the 5-hectares expected by Q2 2020
• Phase 2 Expansion Plan – Long-Term development of 200-hectare outdoor cultivation zone:
  • Land rights secured under a lease option
  • Conditional approval obtained for outdoor growing
• Bophelo project funding:
  • Ms. Louisa Mojela, Halo’s expected new Chairman and currently the Chairman of Bophelo, has funded US$1 million loan to initiate the Phase 1 Growth Plan
  • Further, Bophelo is in advanced discussions with several large commercial banks in South Africa to fund the Phase 1 Growth Plan
  • Conventional bank financing expected in Q1 2020
• Halo in negotiations with European, Australian and Israeli licensed cannabis companies for the import of medicinal cannabis
  • European Good Agricultural and Collecting Practice (“GACP”) consultant engaged to expedite certification process
  • Bophelo quality control site visits scheduled
  • Current cannabis estimated sales price across target export markets of US$4–US$8 a gram, versus expected production costs of less than US$0.50 per gram
  • Export sales under license expected to commence from Bophelo in Q2 2020

Commenting on the Transaction, Halo CEO and Co-Founder Kiran Sidhu said, “Our vision is to make Halo one of the world’s largest cultivators and exporters of legal cannabis. The acquisition of Bophelo will set us firmly on this path.

We are honored to have been welcomed into the Kingdom of Lesotho and look forward to creating considerable prosperity here for decades to come. Lesotho is rightly regarded as one of the leading jurisdictions globally for cannabis companies to operate in. The climate supports perfect growing conditions supporting as many as 3 harvests a year. The Lesotho government has been at the forefront of the international push for cannabis legalization. The Mafeteng region, where Bophelo is based, has in place all the necessary infrastructure and skilled agrarian labor to sustain large-scale agricultural activity.

Once we are able to develop Bophelo’s 205 hectares fully, our ambition is to transform Mafeteng into a global powerhouse of cannabis cultivation.”

About Bophelo
Bophelo Bioscience is based in the Kingdom of Lesotho, Southern Africa, in the Mafeteng Region. Bophelo is the holder of one of a limited number of operational licenses issued in Lesotho for the production and export of medicinal cannabis products. As the largest licensed landholder in Lesotho, Bophelo’s 9-year license allows it to cultivate, manufacture, import and export cannabis products.

Situated approximately 70 kilometres from the capital city of Maseru, Bophelo’s operating site is in an ideal location with ample labor, abundant free water, flat land, and low electricity costs. The favorable high altitude and low humidity climate provide clean, organic growing conditions in this pristine mountainous region. With over 200 days of annual sunshine, Bophelo can support as many as 3 full growing seasons a year.

Phase 1 Growth Plan – Completion of licensed 5-hectare greenhouse cultivation site
Halo has been active at Bophelo’s cultivation site since summer 2018. In this time the Company has overseen various infrastructure works including digging of irrigation channels, water supply improvement, power supply enlargement and land grading to allow future expansion.

Bophelo leases the 5-hectare licensed cultivation site from the Mophuti Matsoso Development Trust in the town of T’sakholo. Five 1-hectare state of the art forced air greenhouses will be built here over the coming months. Once complete these will be used to cultivate Bophelo’s first cannabis harvests.

In preparation for this, Halo has also established its proprietary genetic strain bank at Bophelo. Bophelo now has over 1,000 cannabis plants adapting to the local environment. With each harvest of new plants, Bophelo’s cannabis strains continue to strengthen and improve. Halo ultimately expects its Bophelo cannabis strains will be high in both CBD and THC content, providing considerable potential production cost efficiencies.

Halo expects Bophelo to achieve full production capacity at the licensed 5-hectare cultivation site by the middle of 2020.

Phase 2 Expansion Plan – Long-term development of the 200-hectare outdoor cultivation zone
Halo’s vision is to create one of the world’s largest, legal outdoor cannabis cultivation zones at Bophelo.

To achieve this, Bophelo has a lease option on a 200-hectare land package to the immediate north and east of the 5-hectare licensed cultivation site.

The Lesotho authorities have awarded a conditional license in support of this expansion plan. Halo expects to commence site preparation work to ramp up Phase 2 towards the end of Q2 2020, after Phase 1 has been fully implemented.

Board Appointment
As previously announced, upon completion of the Transaction, Halo expects to appoint Ms. Louisa Mojela to the board of directors as the Company’s new Chairman. Ms. Mojela is one of South Africa’s most influential and successful businesswomen. She is co-founder of Bophelo and is expected to become the first African woman to lead a publicly traded cannabis company.

Project Funding
On signing of the Agreement, Ms. Mojela has provided Bophelo with a secured term loan of US$1,000,000, to initiate the Phase 1 Growth Plan. The loan carries a simple monthly interest rate of 1.5%, with an 18-month term. The loan was funded in South African Rand. The prime lending rate in Lesotho is currently 12%.

To fund the remaining working capital requirements for delivery of Phase 1, Bophelo is in advanced discussions with several large commercial banks in South Africa concerning the provision of conventional lending facilities. Halo expects Bophelo to secure conventional bank funding in Q1 of 2020.

In addition, Halo can provide funding, as needed, given the Company’s current cash and working capital position.

Future exports of medicinal grade cannabis
With respect to its future sales pipeline, Halo is in negotiations with European, Australian and Israeli licensed cannabis companies for the future import of medicinal grade cannabis from Bophelo.

To ensure that cannabis grown at Bophelo meets all international statutory and regulatory requirements, Halo has engaged a European GACP consulting firm to secure the necessary certificates for future exports. As part of this process site visits have commenced at Bophelo to confirm construction of the greenhouses and the growing processes are in accordance with the appropriate international standards. Halo expects to announce award of the necessary certificates prior to the first cannabis harvest in April 2020.

Halo expects export sales to commence shortly after this, in Q2 2020. Based on current sales prices across its target export markets of US$4–$8 a gram, against expected production costs of less than US$0.50 a gram, the Company expects revenue generated from exports of Bophelo cultivated cannabis to become a significant contributor to its bottom line in 2020 and beyond.

About Lesotho
Lesotho was the first African country to legalize the cultivation and manufacturing of medicinal cannabis, becoming one of the most sought-after locations for cannabis operations in the world. The country has issued a limited number of licenses since legalization in 2016 and has been exporting cannabis since early 2018.

Lesotho is regarded as Africa’s premier export gateway for cannabis. The country’s drug laws are aligned with all international standards and Lesotho has established duty free trade agreements with all of the major export markets.

Commenting further, Mr. Sidhu said, “For our international growth plans, there is no better place than Lesotho. This politically stable country has an established cannabis culture with low taxes and low employment costs. Thanks to the country’s existing trade deals and adherence to international standards, Lesotho will act as Halo’s gateway to the cannabis world.”

Transaction Overview
Pursuant to a purchase and sale agreement dated November 27, 2019 (the “Agreement”) among, inter alios, Halo, as purchaser, and, Boiketlo Biomed (Pty) Ltd. (“Boiketlo”), GMG Financial Services Ltd. (“GMG”) and certain third party lenders ( the “Third Party Lenders”), Halo has agreed to purchase, indirectly, 100% of the issued and outstanding shares in the capital of Bophelo (the “Bophelo Shares”) by way of: (i) the acquisition of 45% of the Bophelo Shares from Boiketlo; and (ii) the acquisition of 100% of the issued and outstanding shares in the capital of Middleton Gardens Ltd. (which holds 55% of the Bophelo Shares) from GMG.

Pursuant to the Agreement, Halo has also agreed to acquire, as receivables, certain debt claims owing by Bophelo to each of Boiketlo (the “Boiketlo Debt Claim”) and the Third Party Lenders (the “Third Party Debt Claims”).

As consideration for the acquisition of the Bophelo Shares, the Boiketlo Debt Claim and the Third Party Debt Claims, Halo has agreed to issue an aggregate of 43,712,667 common shares in the capital of Halo (the “Halo Purchase Shares”) as follows: first, by paying out such number of Halo Purchase Shares that is equal to the aggregate amount owing under each of the Boiketlo Debt Claim and the Third Party Debt Claims divided by the closing Halo share price (being the greater of: (i) the amount equal to the volume weighted average trading price of Halo common shares for the twenty (20) consecutive trading days immediately preceding the trading day prior to the closing of the Transaction; and (ii) the minimum price permitted pursuant to applicable securities laws and the requirements of the NEO Exchange Inc.) to Boiketlo and the 3rd Party Lenders, respectively; second, by paying out an aggregate of 2,039,333 Halo Purchase Shares to GMG; and third, by issuing 45% and 55% of the remaining Halo Purchase Shares to Boiketlo and GMG, respectively. Halo has also agreed to issue an additional 2,039,334 Halo common shares to GMG in connection with an arrangement fee.

Pursuant to the Agreement, the parties have agreed to provide customary representations and warranties and to perform customary actions during the period between signing and closing, including negotiating and executing an escrow agreement (under which the parties have agreed that 15% of the Halo Purchase Shares will be held in escrow for a specified period) and non-competition agreements with certain vendors.

The closing of the Transaction is subject to certain customary conditions, including the receipt of all necessary approvals, including local Lesotho regulatory approvals. The Transaction is expected to close in Q1 2020.

Concurrent with the execution of the Agreement, Bophelo entered into a loan agreement with Ms. Mojela, pursuant to which Ms. Mojela has provided Bophelo with a secured term loan of US$1,000,000.

About Halo
Halo is a global cannabis extraction company that develops and manufactures quality cannabis oils and concentrates, which are the fastest growing segments in the cannabis industry. Halo is a global leader in cannabis oil and concentrates, having produced over 4.5 million grams of oils and concentrates since inception. The Company has expertise across all major cannabis manufacturing processes, leveraging a variety of proprietary processes and products. 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 in Nevada with our partner Just Quality, LLC, and in Lesotho with the 205-hectare Bophelo cultivation zone.

With a consumer-centric focus, Halo will continue to market innovative, branded, and private label products across multiple product categories. Halo recently acquired Dispensary Track platform which will alleviate customer flow constraints experienced by dispensaries and enable direct consumer interaction.

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, statements regarding the Transaction including the terms and closing thereof, the development and licensing of Bophelo’s cultivation site and production capacity, the appointment of Ms. Mojela as Chairperson of the Company and the potential export of Bophelo cannabis.

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. 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.

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