An anonymous director reports

CHALICE OBTAINS INITIAL ORDER UNDER COMPANIES' CREDITORS ARRANGEMENT ACT (CANADA) AND COMMENCES STATE RECEIVERSHIP UNDER OREGON STATE LAW

Chalice Brands Ltd. has obtained an order (the initial order) from the Ontario Superior Court of Justice (commercial list) granting protection under the Companies' Creditors Arrangement Act (Canada) (CCAA), as well as commenced a process in the circuit court of the state of Oregon for an order (the receivership order) granting the appointment of an Oregon state receiver over certain of Chalice's subsidiaries (the receivership entities and the process, the state receivership).

In accordance with the initial order, all creditors of Chalice, as well as creditors of all of the company's subsidiaries (such subsidiaries, the non-filing affiliates), will be stayed from enforcing their claims. The initial order provides for a stay of proceedings in favour of the company and the non-filing affiliates for an initial period of 10 days, subject to such extensions as the court may subsequently order, and the appointment of KSV Restructuring Inc. as monitor in the CCAA proceeding.

The receivership order, if granted, will approve the appointment of Kenneth Eiler as receiver over the businesses, assets and property of the receivership entities, and grant the receivership entities a broad stay of proceedings against them or their property. The intent of the state receivership proceeding is to, among other things, ensure that the parties are able to effect a co-ordinated restructuring effort and support the CCAA proceeding.

After reviewing a number of options, Chalice's board of directors determined that commencing the CCAA proceeding and state receivership proceedings is in the best interests of the company and its stakeholders. The stays of proceedings in the initial order and the receivership order, if granted, will provide Chalice with additional time to consider potential restructuring transactions, including a sale and investment solicitation process to explore potential strategic options and alternatives. Chalice intends to continue its work with the monitor, the receiver and its advisers in connection with its consideration of potential restructuring transactions. Chalice anticipates providing a further update once additional details regarding potential restructuring transactions are available, though it can offer no assurance that any potential restructuring transactions will be available on terms acceptable to Chalice and the courts, or at all. There can also be no assurance that any potential restructuring transactions will result in any transactions or the outcome of the proceedings will provide any residual value for the benefit of holders of the company's common shares.

The company hopes to exit CCAA protection well positioned to rebuild its stakeholders' trust and deliver high-quality, farm-to-table products to its customers. Despite the efforts by Chalice's management and board of directors to preserve the company's cash liquidity while seeking to restore the company to profitability, the company's future remains uncertain. Chalice continues to be delayed in the filing of its Dec. 31, 2021, audited annual financial statements, together with the company's quarterly interim financial statements thereon and all associated materials.

Trading in Chalice's common shares on the Canadian Securities Exchange has been subject to a cease trade order and halted since May, 2022, as a result of the company failing to file its audited annual financial statements for the year ended Dec. 31, 2021. The company expects that trading of the common shares will remain halted indefinitely.

A comeback hearing in respect of the relief granted pursuant to the initial order will be scheduled within 10 days. Interested parties that wish to bring a motion at the comeback hearing are required to provide notice to the affected parties prior to the comeback hearing, pursuant to the requirements set forth in the initial order.

For more information regarding the company's CCAA proceeding

A copy of the initial order and other information will be available on the monitor's website.

Additional enquiries for the monitor may be directed to:

KSV Restructuring Inc.

In its capacity as court-appointed monitor of Chalice Brands Ltd.

Telephone:  416-932-6207

E-mail:  NGoldstein@ksvadvisory.com

Contact:  Noah Goldstein, KSV