Mr. Raj Grover of High Tide reports
HALO AND HIGH TIDE ANNOUNCE AMENDED TERMS ON SALE OF KUSHBAR ASSETS TO HALO
Halo Labs Inc. and High Tide Inc. have entered into an amended and restated asset purchase agreement to amend the terms of the previously announced asset purchase agreement dated Feb. 14, 2020, wherein High Tide agreed to sell KushBar retail cannabis assets to a wholly owned subsidiary of Halo.
Under the amended agreement, High Tide will sell its three operating KushBar retail cannabis stores to Halo for $5.7-million, payable in the form of:
- A deposit of $3.5-million, which has already been paid to High Tide by way of the issuance of 13,461,538 Halo common shares to High Tide at a deemed price of 26 cents per common share;
- A convertible promissory note to be issued by Halo on closing in the principal amount of $1.8-million with a conversion rate of 16 cents per Halo common share;
- A convertible promissory note to be issued by Halo on the 12-month anniversary of closing in the principal amount of $400,000 with a conversion rate of 16 cents per Halo common share, provided that certain revenue thresholds are met. If the portfolio has produced aggregate revenue of less than the set threshold during the prior 12 months, then the principal amount of the earnout note will be reduced dollar for dollar.
Each of the Halo notes above are secured solely by the portfolio.
Upon closing, Halo will continue to engage High Tide to substantially oversee all aspects of its retail cannabis operations with respect to the portfolio and will pay High Tide continuing royalties for regulatory advisory services and retail management through blended monthly payments.
The parties entered into the amended agreement to better align the terms of the asset purchase agreement with broader market and economic factors, to reduce the amount of capital expenditures for both parties, and to provide Halo the opportunity to acquire operational cannabis retail stores. While the amended agreement provides for the sale of fewer assets, namely, the exclusion of cannabis retail stores in the midst of development and development permits, and a lower purchase price of $5.7-million compared with $12-million under the asset purchase agreement, the terms of the amended agreement are preferable to Halo because they are consistent with Halo's goal to obtain a strong foothold in the Canadian cannabis retail industry swiftly by acquiring cannabis retail stores that are already operational. The amended agreement is also preferable to High Tide because it can better focus its efforts on the development of its brand, Canna Cabana, it reduced the deemed price per Halo share from 26 cents to 16 cents and it results in High Tide being paid the consideration for the sale in cash versus Halo securities.
An important aspect of the amended agreement is the limited-recourse nature of the Halo notes. High Tide has agreed to limit the recourse upon any events of default, as set out under the Halo notes to the property and assets subject to the share pledge agreement and the guarantee and security agreement to be issued in connection with the amended agreement.
The parties are currently working together with a view to obtaining the necessary regulatory licences and approvals from Alberta Gaming, Liquor and Cannabis (AGLC) and expect the deal to close in the fourth quarter of 2020.
About Halo Labs Inc.
Halo is a leading, vertically integrated cannabis company that cultivates, extracts, manufactures and distributes quality cannabis flower, oils and concentrates, and has sold approximately six million grams of oils and concentrates since inception. Halo continues to scale efficiently, partnering with trustworthy leaders in the industry, which value its operational expertise in bringing top-tier products to market. Current growth includes expansion in key markets in the United States and Africa, with planned geographic expansion into United Kingdom and Canadian markets. With a consumer-centric focus, Halo markets value-driven, branded and private label products across multiple product categories.
Recently, the company acquired a dispensary permit in Los Angeles and a 30,000-square-foot cannabis processing and wholesale facility in Ukiah, Calif. The company plans to acquire three KushBar-branded dispensaries in Alberta, Canada, and Canmart Ltd., a company that holds wholesale distribution and special licences, allowing the import and distribution of cannabis-based products for medicinal use (CBPMs) in the United Kingdom.
Halo is led by a strong, diverse and innovative management team, with deep industry knowledge and blue-chip experience. The company is currently operating in the United States in California, Oregon and Nevada. Internationally, the company is currently cultivating cannabis at Bophelo Bioscience & Wellness Pty. Ltd. in Lesotho under a 200-hectare licence, and is planning importation and distribution of CBPMs into the United Kingdom through Canmart.
We seek Safe Harbor.
© 2021 Canjex Publishing Ltd. All rights reserved.