Halo Collective Inc (HCANF)

[junkHustler]

Halo Labs Reports Q2 2019 Financial Results

TORONTO

Halo Labs Inc. ("Halo" or the "Company") (NEO: HALO, OTCQX: AGEEF, Germany: A9KN) today announced its financial and operational results for the second quarter for the period ended June 30, 2019 (“Q2”). The California market continues to be a significant growth factor for Halo as revenues in Q2 totaled $9,552,012 representing a 356% increase over Q2 2018 (three-month period ended June 30, 2018: $2,093,468) and a 10% increase quarter over quarter in comparison to Q1 2019 (three-month period ended to March 31, 2019: $8,718,503).

Q2 2019 Financial and Operational Highlights

• Revenues for the six-month period ended June 30, 2019 were $18,270,515 (six-month period ended June 30, 2018: $4,262,444), a 329% increase year over year, explained by first-time contributions from Coastal Harvest LLC (“Coastal Harvest”) in California and HLO Ventures (NV), LLC (“HLO”) in Nevada, as well as an 11.8% increase in revenues at ANM Inc. (“ANM”) in Oregon;
• ANM revenues were $5,692,558 for the six-month period ended June 30, 2019 (six-month period ended June 30, 2018: $5,092,810); HLO generated revenues of $1,331,583; and Coastal Harvest $11,246,374, respectively;
• ANM achieved a gross margin of 11.8%, Coastal Harvest achieved a gross margin of 30.7%, and HLO achieved a gross margin of -1.8% in the six-month period ended June 30, 2019, respectively. The aggregate total gross margin was 20.2%;
• Coastal Harvest achieved EBITDA of $2,687,354, offsetting the operating losses at ANM of $(1,383,689) and at HLO of $(727,182), as well as the $33,378 of expenses at Ireland (the Company’s licensed expansion in Cathedral City). The total contribution to EBITDA from operations was $544,337;
• In the six-month period ended June 30, 2019, the facility in Coastal Harvest sold 742,906 grams of distillate and 320,314 grams of live resin. Distillate sold at an average price of $7.08 per gram and live resin at $11.29 per gram;
• In the six-month period ended June 30, 2019, the facility in Nevada sold 47,476 grams of distillate at an average price of $28.74 per gram;
• In the six-month period ended June 30, 2019, the use of cash for operations was $9,232,040, and for capital expenditures was $1,272,989, respectively; and,
• On April 4, 2019, the Company closed a financing whereby it issued convertible debenture units at a price of C$1,000 per unit. The Company raised gross proceeds of C$21,163,000 ($15,842,620), the net proceeds of C$18,188,293 ($13,618,485) under such offering. Cash at the end of June 30, 2019, was $7,548,321.

Management Discussions

• Revenues for the six-month period ended June 30, 2019 were $18,270,515 (six-month period ended June 30, 2018: $4,262,444), a 329% increase year over year, explained by contributions from Coastal Harvest in California and HLO in Nevada, as well as a 11.8% increase in revenues at ANM in Oregon. Net revenues represent ~ 10% increase quarter on quarter. Each month in Q2 Halo delivered improving monthly growth.
• The increase in revenues is a result of by a 262.1% increase in sales of grams of distillate, shatter, and live resin, and a 28.9% increase in overall average achieved price in comparison with the six-month period ended June 30, 2018. The price increase is predominantly due to higher prices realized in California and Nevada versus only Oregon last year. Excluding the contributions of the operations in HLO (Nevada) and Coastal Harvest (California), the increase in sales of grams of distillate and shatter was 30.1% with a 4.5% overall decline in the average achieved price across all products sold in Oregon;
• In the second quarter, sales of distillate, shatter, and live resin in the facility in Oregon increased by 31.9% to 326,428 grams, which more than offset the 6.3% average price decline to $8.08 in the same period. In the six-month period ended June 30, 2019, the facility in Oregon sold 622,565 grams of distillate and shatter, an increase of 30.1% in comparison with the six-month period ended June 30, 2018. The average achieved price of distillate and shatter sold was $8.18. Distillate sold at $14.46 per gram, a 1.9% increase in comparison with the six-month period ended June 30, 2018. Shatter sold at $4.74 per gram, a 25.3% decline in comparison with the six-month period ended June 30, 2018.
• The facility in Coastal Harvest sold 742,906 grams of distillate and 320,314 grams of live resin. Distillate sold at $7.08 and live resin sold at $11.29. The facility in Nevada sold 47,476 grams of oil at a price of $28.74;
• In Oregon in the three-month period ended June 30, 2019, grams sold of distillate for cartridges increased by 48.3% to 110,911 grams, and shatter sales increased by 25.6% to 215,517 grams for the quarter. Distillate sold for $14.78 per gram in the second quarter, a 3.1% decline year over year; shatter sold for $4.64 per gram, a 17.7% decline year over year;
• In Oregon during the same time-period, trim converted increased by 78.0% to 5,760,596 grams with a conversion yield of 7.6%. The average trim price, the Company’s most important raw material, declined by 21.2% to $66.15 per pound;
• In California in the three-month period ended June 30, 2019, the Company sold 446,623 grams of distillate at an average price of $6.62 per gram and 51,605 grams of live resin at an average price of $11.48 per gram; and
• The facility in Oregon produced 296,137 grams of oil. After only commencing in November 2018, the facility in California produced 296,283 grams of distillate and 268,709 grams of live resin this quarter.
• Issuance of Additional Common Shares


The Company intends to complete a debt settlement with one creditor (the “Debt Settlement”). Pursuant to the Debt Settlement, the Company intends to retire an aggregate of C$2,009,816 of indebtedness in exchange for the issuance of 5,911,222 common shares of the Company (the “Debt Settlement Shares”) at a price of C$0.34 per Debt Settlement Share. The indebtedness is held by arm’s length parties and will not result in the creation of a new insider or a new control person. The Debt Settlement Shares will be subject to a four-month and one day hold period, subject to approvals as may be applicable.

Common Share Compensation of Certain Employees & Independent Contractors.

Certain employees and independent contractors of the Company have agreed to accept common shares of the Company (“Compensation Shares”) in lieu of the cash compensation. The total aggregate amount of cash compensation to be satisfied is C$4,107,189, which will be satisfied through the issuance of 11,436,961 Compensation Shares at an average price of C$0.36 per Compensation Share.

In connection with the above transaction, certain “related parties,” for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”), are expected to receive Compensation Shares and the issuance thereto will be considered a “related party transaction” for the purposes of MI 61-101. The Company is relying on exemptions from the formal valuation and minority shareholder approval requirements available under MI 61-101. The Company is exempt from the formal valuation requirement in section 5.4 and the minority shareholder approval requirement in section 5.6 of MI 61-101 in reliance on sections 5.5(a) and 5.7(a), respectively, of MI 61-101 as the fair market value of the subject matter of, nor the fair market value of the consideration for, the transaction, insofar as it involves related parties, is not more than 25% of the Company’s market capitalization.

Conference Call

Investors can call in for Q&A with Kiran Sidhu, Chief Executive Officer, and Philip van den Berg, Chief Financial Officer, at 4:00 p.m. EST on August 14, 2019:

Participant Toll Free Dial-In Number: [phone]
Participant International Dial-In Number: [phone]
Conference ID: 8679348