Ms. Katie Field reports

HALO COLLECTIVE PROVIDES FOURTH QUARTER 2022, FIRST QUARTER 2023 FINANCIAL RESULTS

Halo Collective Inc. has released its financial results for the fourth quarter of 2022 and the first quarter of 2023. Dollar amounts are expressed in U.S. dollars.

Fourth quarter 2022 financial highlights:

• During the three months ended Dec. 31, 2022, the company reported revenues of $4,565,601, down from $8,365,976 in the three months ended Dec. 31, 2021. The decrease was primarily attributed to pricing challenges in the cannabis markets of both Oregon and California. These regions have witnessed an oversupply of cannabis flower, leading to downward pricing pressure on the company's products.
• Total sales volume for the three months ended Dec. 31, 2022, totalled 1,983,402 grams, marking a significant 84.7-per-cent decrease compared with 12,971,391 grams recorded in the same period of 2021.
• In regional breakdowns, Oregon generated $2,738,014 in revenue for the three months ended Dec. 31, 2022, a 45.6-per-cent decrease from the $5,033,523 revenue reported for the same period in 2021. The California wholesale business generated $1,233,924 in revenue during the same period, reflecting a 52.8-per-cent decrease from $2,616,292 in the three months ended Dec. 31, 2021.
• The company reported a gross profit of $45,236 for the three months ended Dec. 31, 2022, a significant improvement from the gross loss of $1,345,783 reported in the same period of 2021. The reported gross margin for this period was 1.0 per cent, compared with a gross margin of negative 16.1 per cent for the three months ended Dec. 31, 2021.
• The loss before interest, tax, depreciation and amortization, and adjusted for non-cash items (adjusted EBITDA), for the three months ended Dec. 31, 2022, amounted to a loss of $12,266,056, compared with a loss of $7,686,775 for the same period in 2021.
• Operating expenditures were $9,267,000, down from $10,928,194 for the three months ended Dec. 31, 2021.
• Halo also reported raising $1,477,828 in debt financing during the three months ended Dec. 31, 2022. After accounting for a reduction of $455,199 in lease obligations, the total capital raise amounted to $1,022,629, a decrease from $1,407,278 raised in the same period of 2021. The net cash outflow for the three months ended Dec. 31, 2022, was $767,513, a considerable improvement from a cash outflow of $6,679,557 in the same period of 2021.
• Revenues for the year ended Dec. 31, 2022, totalled $24,538,853, indicating a 32.0-per-cent decrease from the $36,179,930 reported for the year ended Dec. 31, 2021. Despite this decrease, the reported gross margin for the year ended Dec. 31, 2022, was 21.1 per cent, a significant improvement from the gross margin of 12.3 per cent recorded in the same period of the previous year.
• As of Dec. 31, 2022, Halo reported no unrestricted cash available. The company remains committed to its strategic direction and continuous efforts to adapt to market dynamics.

First quarter 2023 financial highlights:

• The company announced revenues of $4,620,253 for the quarter, reflecting a 38.9-per-cent decrease compared with the same period last year.
• The decline in revenues was primarily attributed to the challenging market conditions in both the Oregon and California cannabis markets. Oversupply of cannabis flower in these markets has led to a decrease in pricing, impacting overall revenues. In the three months ended March 31, 2023, total sales were 1,647,000 grams, a 31.6-per-cent decrease from the same period in 2022.
• Despite the revenue decrease, Halo reported a gross profit of $1,696,047 for the first quarter of 2023, marking a 36.0-per-cent increase compared with the same period last year. The reported gross margin was 36.7 per cent for the quarter, a significant improvement from the previous year's gross margin of 16.5 per cent.
• The company's adjusted EBITDA for the three months ended March 31, 2023, was income of $204,351, demonstrating a notable improvement from a loss of $3,904,287 in the same period in 2022. Operating expenditures were reduced by 42.7 per cent, totalling $6,084,429 for the quarter.
• Halo raised $1,864,861 in debt financing during the first quarter, contributing to a net cash inflow of $750,118. The company's total capital raise, a net reduction of $457,350 in lease obligations, amounted to $1,407,511.
• Management remains committed to strategic cost reduction measures to address the challenging market dynamics and drive operational efforts. The company's focus on optimizing its product portfolio and enhancing distribution channels positions Halo for future growth and improved financial performance.

"We recognize the challenges posed by evolving market dynamics and supply-demand imbalances in both the Oregon and California cannabis markets," commented Katie Field, executive chairman and chief executive officer.

"Despite these challenges, I am pleased to report that our efforts to optimize our operations and product mix have yielded positive results. We've achieved a substantial improvement in gross profit and margins from the previous year, and Halo's commitment to cost reduction initiatives has been instrumental in our performance. While the recent financial results showcase short-term challenges, we're pro-actively managing our resources and expenses to drive long-term growth."

Ms. Field concluded: "Looking ahead, we remain steadfast in our dedication to delivering value to our customers and shareholders. We will continue to implement strategic measures to navigate the evolving market dynamics and optimize our distribution channels. I am confident that our focus on operational efficiency and product excellence will drive improved financial performance in the quarters to come."

Future outlook

Halo's focused efforts on cultivating its North American assets, optimizing operations and managing costs, position the company for a resilient and prosperous future. As the cannabis industry continues to evolve, Halo remains dedicated to leveraging its strengths and seizing opportunities for sustainable growth.

About Halo Collective Inc.

Halo is focused on the U.S. west coast, where it has vertically integrated operations covering the entire value chain from seed to sale. Halo cultivates, extracts, manufactures and distributes quality cannabis flower, prerolls, vape carts, edibles and concentrates. Halo sells these products under a portfolio of brands, including Hush, Winberry Farms and its retail brand Budega, and licence agreements with FlowerShop*. In addition, Halo has opened two dispensaries in Los Angeles under the Budega brand in North Hollywood and Hollywood, with plans to open one more in Hollywood in 2023.

In the non-tetrahydrocannabinol sector, Halo is expanding into health and wellness categories, including cannabidiol and functional supplements such as nootropic nutraceuticals and non-psychotropic mushrooms. Halo, through a series of acquisitions, has product offerings in the form of beverages (H2C Beverages), dissolvable strips (Dissolve Medical), capsules (Hushrooms) and topical supplements (Hatshe) with proposed national distribution through a strategic agreement with SWAYEnergy Corp.

Halo has acquired and integrated a variety of companies, which were subsequently reorganized to create Akanda Corp., an international medical cannabis and wellness company, of which Halo is the largest shareholder. Halo has also acquired a range of software development assets, including CannPOS, Cannalift and 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 the distribution of the shares of Halo Tek to shareholders of record at a date to be determined.

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