Halo Labs Reports Record Q1 2019 Revenue of US $8.7MM: US Cannabis Extraction Specialist Revenue up ~190% from Q4 2018

Halo Labs Inc. (“Halo” or the “Company”) (NEO: HALO, OTCQX: AGEEF, Germany: A9KN) today announced its financial and operational results for the first quarter ended March 31, 2019. Entry into the California market fueled significant growth as revenues these three months were $8,718,503 representing a 302% year on year increase (three months to March 31, 2018: $2,168,976).

To continue delivering improving results, HALO’s primary business objectives this year include:

1. Finish California build out by launching 2^nd Cathedral City Location thus increasing overall capacity for the state and adding the ability to deliver directly to dispensaries.
2. Increase distribution of Gilt™ and Hush™ branded products into California dispensaries by selecting additional distribution partners for Central and Northern California.
3. Focus on manufacturing and selling higher margin products like Dab Tabs™ Dablets and edibles in California and Nevada.
4. Increase distribution in Nevada driven by additional sales force members. Improvement of Nevada margins though facility expansion to enable extraction of biomass to distillate.
5. Continue to increase margins in Oregon with launch of additional innovative products including premium clear concentrates. Continued margin improvement at core manufacturing facility in Oregon with introduction of a customized ERP system.
6. Continue international growth trajectory with launch of Lesotho facility.
7. Build Out of a Southern Oregon Hemp Processing Facility to manufacture bulk CBD distillates and isolates.

Q1 2019 Financial and Operational Highlights

• Revenues in the three months ending March 31, 2019 were $8,718,503 (three months to March 31, 2018: $2,168,976), a 302% year on year increase, explained by first time contributions from Coastal Harvest, LLC (“Coastal Harvest”) (California operations) and HLO Ventures (NV), LLC (“HLO”) (Nevada operations) and a 32.8% increase in revenues at ANM, Inc. (“ANM”) in Oregon.
• ANM revenues were US$2,879,769 in the three months ending March 31, 2019 in comparison with US$2,168,976 in 2018. HLO generated revenues of $514,365 and Coastal Harvest $5,324,369.
• Cost of goods sold were $6,273,930 (three months ending March 31, 2018: $2,183,569) following the increase in revenues and consequently an increase in the cost of goods sold. Gross margin was 28% before unrealized loss on growth of biological assets in the three months ending March 31, 2019 (three months ending March 31, 2018: -1%). ANM achieved a gross margin of 8.0%, Coastal Harvest achieved a gross margin of 39.7% and HLO achieved a gross margin of 3.9% in the three months ending March 31, 2019.
• Margins benefited from an efficiency drive that was implemented at the end of 2018. Labor included in the cost of goods sold represented 8.7% of revenues (three months ending March 31, 2018: 17.8%), a substantial improvement. Testing represented 1.5% of revenues (three months ending March 31, 2018: 8.2%), again a strong improvement.
• Coastal achieved EBITDA of US $1,865,542, offsetting the operating loss at ANM of US$(618,400) and US $(299,371) at HLO and US $18,511 expenses at Ireland (the second planned Cathedral City facility). The total contribution to EBITDA from operations was $929,260.
• The cash used for operations was US$2,057,852, and for capex was US$347,121.
• The Company raised bridge financing of US$1.7 million in the three months ending March 31, 2019, and cash at the end of March 31, 2019, was US$361,053.

Management Discussions

• Net revenues of $8,718,503 represent a 302% year on year increase compared to the same period ended in 2018 ($2,168,976), driven by Halo’s improving performance and expansion into the California and Nevada markets. Net revenues represent ~ 190% quarter on quarter increase. Each month in Q1 Halo delivered improving monthly growth.
• The increase in revenues is explained by a 280% increase in grams of oil sold and a 6% increase in average achieved price in comparison with the three months ending March 31, 2018. Oregon alone experienced an increase in grams sold (28%) and price increase (4%).
• The facility in Oregon produced 296,137 grams of oil. After commencing only in November 2018, the facility in California produced 296,283 grams of distillate and 268,709 grams of live resin this quarter. The facility in Nevada sold 17,681 grams of oil.
• Gross margin was temporarily deflated in Nevada Q1 due to high inventory costs of oil as a result of FIFO inventory accounting. Distillate is now being sourced for less and will by the end of Q2 result in normalized margins in Nevada and a further increase in gross margin.

Outlook

California continues to be the driving force behind Halo’s revenue growth. With the implementation of new, proprietary products (e.g. DabTab™ Dablets) as well as implementing existing contracts, the Company is now operating at an annualized production rate of approximately $25MM USD, which is in line with Halo’s previous guidance.

Halo expects to release updates on new distributor agreements to increase distribution of bulk and branded products further fueling success in the California market. Halo has already signed bulk supply agreements with Falcon and Ilanka Farms (formerly Cannus Partners).

Consistent with prior guidance, the Company launched and is on pace to introduce higher margin Oregon product offerings into the Nevada and California markets by the end of Q2 2019.

Edibles

Halo launched a line of cannabis edibles products in Oregon in November of 2018, featuring single piece chews and a syrup-based drink.

DabTabs™ Dablets

On February 26, 2019, Halo launched DabTabs™ Dablets in both Oregon and Nevada followed by California in late March 2019. DabTabs™ are proprietary ceramic discs that store a pre-measured single dose of either cannabis concentrate or oil. The DabTabs™ provide a cleaner, smoother, mess free way to consume full spectrum cannabis oils and concentrates that capture the full benefits of the cannabis plant. DabTabs™ were launched under Halo’s brand, Gilt™.

DabTabs GO™

On May 6, 2019, the Company announced the launch of the DabTabs Go™, the first and only ultra-portable vaporizer for DabTabs™ Dablets. DabTabs Go™ provides quick, consistent and controlled heating, assuring consumers a full-spectrum, vaporization experience with DabTabs Dablets. Halo expects the DabTabs Go™ to be available under the Company’s Gilt™ brand and available throughout California, Nevada and Oregon in July 2019.

Initiation of CBD Business

As the cannabis market throughout the United States continues to mature, Halo is establishing itself in complimentary markets directly related to the industry. On April 15, 2019, the Company announced its intent to secure a hemp processing facility to manufacture CBD isolates and distillates, capitalizing on the CBD market which according to the Brightfield Group is projected to grow at a CAGR of 147% and projected to reach US$22 billion by 2022. This processing facility is expected to be located in Southern Oregon in the Emerald Triangle. The facility is expected to be capable of processing approximately 10,000 kilograms of hemp per month, which is expected to result in a yield of between 700 – 900 kg of high-grade distillate or isolate.

Capital Markets Activities

Halo is now trading on multiple exchanges including a recent up listing to the OTCQX. Halo is part of the Horizon US Marijuana ETF (HMUS for Canada and HMUS.U for the United States).

Neo Exchange Inc. (“NEO”) Listing

On October 3, 2018, the Company commenced trading on the Aequitas Neo Exchange Inc., becoming a public company that is traded on the equities markets in Canada.

OTCQB Market Listing

On February 22, 2019, Halo commenced trading on the OTCQB Market under the ticker symbol “AGEEF”, opening the Company up to a broader investor base throughout North America.

QTCQX Market Listing

On April 30th, 2019, Halo up listed from the OTCQB Market to the OTCQX Market, the highest tier market that the OTC offers.

Conference Call

Investors can call in and Q&A with Kiranjit Sidhu the Chief Executive Officer and Katharyn Field the Chief Strategy Officer at 4pm EST on May 10, 2019:

Participant Toll Free Dial-In Number: (866) 211-3166
Participant International Dial-In Number: (647) 689-6581
Conference ID: 5929655

ABOUT HALO LABS

Halo is a cannabis extraction company that develops and manufactures quality cannabis oils and concentrates, which are the fastest growing segments in the cannabis industry. Halo has expertise in all major cannabis manufacturing processes, leveraging proprietary processes and products, and has produced over 3.5M grams of oils and concentrates since inception. 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 Nevada with our partner Just Quality. The Company has also begun operations in Lesotho Africa through a strategic partnership. With a consumer-centric focus, Halo will continue to market innovative branded and private label products across multiple product categories.

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, the Company’s primary business objectives for the upcoming year, the expectation to provide updates on new distributor agreements, expected increases to the Company’s margin and the timing thereof, the expectation that DabTabs Go™ will be available under the Company’s Gilt™ brand and available throughout California, Nevada and Oregon in July 2019, the projected growth rate of the CBD market, the expected size of the CBD market in 2022 and the location, completion and production of a hemp processing facility.

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, level of activity, performance or achievements of Halo 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.

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: unexpected delays or expenses in connection with Halo’s operations, adverse changes to the CBD market, adverse changes in applicable laws; changes in general economic, business and political conditions, including changes in the financial markets and the other risks disclosed in the most recent annual information form. 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.

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. Key assumptions used herein include, without limitation, that there will be no unexpected delays or costs in connection with the Company’s Cathedral City build out, the Company will be able to identify and negotiate agreements with suitable distribution partners, management’s expectations regarding sales of new products will be realized, the introduction o f a n ERP system and the securing of raw materials will deliver improved margins, a n increased sales force in Nevada will be able to increase distribution effectively, the Company will not encounter any unexpected costs or delays in the completion of a CBD manufacturing facility, the Company’s intended CBD manufacturing facility will be able to achieve production levels currently estimated by management and the Company will be able to identify a suitable location for a CBD manufacturing facility in the Emerald Triangle. 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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About Ryan Allway

Mr. Allway has over a decade of experience in the financial markets as both a private investor and financial journalist. He has been actively involved in the cannabis industry since its inception, covering public and private companies.