Halo Collective Reports Third Quarter 2022 Financial Results

TORONTO, Nov. 14, 2022 /CNW/ - Halo Collective Inc. ("Halo" or the "Company") (NEO: HALO) (OTCQB: HCANF) (Germany: A9KN) today announces its financial and operational results for the three and nine months ended September 30, 2022 ("Q3 2022").

Third Quarter 2022 Financial and Operational Highlights:

• Revenue in the three months ended September 30, 2022 was $5,541,144 net of inter-company eliminations, compared to $8,738,964 in the three months ended September 30, 2021, a 36.6% decrease. Revenue was affected by the decrease in pricing in the overall cannabis markets for both Oregon and California.
• Total sales in the three months ended were 1,974,509 grams (three months ended September 30, 2021: 3,835,969 grams), a 48.5% decrease. Flower sales decreased by 18.1% to 1,115,563 grams (three months ended September 30, 2021: 1,362,670 grams), sales of pre-rolls decreased by 82.8% to 120,553 grams (three months ended September 30, 2021: 701,074 grams), oils and extract sales decreased by 43.1% to 702,953 grams (three months ended September 30, 2021: 1,234,801 grams) and edibles sales decreased by 93.4% to 35,440 grams (three months ended September 30, 2021: 537,424 grams).
• Wholesale Revenue1: In the three months ended September 30, 2022, Oregon generated $3,079,248 in revenue (three months ended September 30, 2021$6,303,290), a 51.1% decrease. In the three months ended September 30, 2022, the California wholesale business generated $1,950,678 in revenue (three months ended September 30, 2021: $1,933,573), a 0.9% increase.
• Retail Revenue: Budega NOHO which started operations in March of 2022, added revenues of $259,359 in the three months ended September 30, 2022. Budega Westwood, which started operations in May 2022, added revenues of $251,859 in the three months ended September 30, 2022.
• The adjusted EBITDA, the loss or gain before interest, tax, depreciation & amortization and adjusted for non-cash items ("adjusted EBITDA2") was a loss of $1,244,363 (three months ended September 30, 2021; loss $4,504,831).
• As of September 30, 2022, the Company had unrestricted cash available in the amount of $1,711,855.

"In Q3 2022 we continued to improve operations. Despite downward pricing pressure, over-supply, and other challenging factors, Halo's financial metrics have improved. While revenue is down from Q3 2021, in California sales grew and Oregon is down due to a shift away from unattractive low-margin business segments such as consignment sales. Indeed both Halo's gross margin and total gross profit dollars increased despite lower revenue," commented Katie Field, Executive Chairman and Chief Executive Officer.

Ms. Field continued, "I look forward to continuing our hard work to improve Halo's performance. We have reduced our burn rate and still have further room to trim overheads. Oregon was down in Q3, but September was the best month in the time period, demonstrating an encouraging trajectory. In particular, units sold of Hush and Winberry cartridges grew 4.6% from July to September. In Oregon, we remain focused on maintaining price and increasing distribution in key product categories such as cartridges and indoor flower while using our inventory position to rekindle relationships with old customers. Furthermore, the sun-grown 2022 harvest is shaping up nicely and we expect prices to rebound slightly meaning sales should continue to pick up in Oregon through year end."

She concluded, "I am excited to continue our progress through the fourth quarter of 2022. We plan to launch an original indoor flower brand and new genetics at our Pistil Point facility in Oregon, re-enter the Northern California market with Hush cartridges and pre-rolls, open our third Los Angeles dispensary, and continue to streamline non-core assets and business segments. We plan to continue rebuilding distribution in Oregon with an attractive cartridge offering. I remain confident that Halo is on the right path in our markets."

Third Quarter 2022 Financial Results

Revenue

Revenue in the three months ended September 30, 2022 was $5,541,144 net of inter-company eliminations, compared to $8,738,964 in the three months ended September 30, 2021, a 36.6% decrease. Revenue was affected by decreased pricing in Oregon and California. Both Oregon and California markets have experienced an over-supply in cannabis flower, which has created downward pricing pressure. In addition, the Company has ceased the sales of wholesale flower, trim, and oil, whereas sales prior to second and third quarters in 2022, included the sales of these items.

Total sales in the three months ended September 30, 2022 were 1,974,509 grams (three months ended September 30, 2021: 3,835,969 grams), a 48.5% decrease. Flower sales decreased by 18.1% to 1,115,563 grams (three months ended September 30, 2021: 1,362,670 grams), sales of pre-rolls decreased by 82.8% to 120,553 grams (three months ended September 30, 2021: 701,074 grams), no trim and fresh frozen sales (three months ended September 30, 2021: Nil grams), oils and extract sales decreased by 43.1% to 702,953 grams (three months ended September 30, 2021: 1,234,801 grams) and edibles sales decreased by 93.4% to 35,440 grams (three months ended September 30, 2021: 537,424 grams).

Wholesale Revenue: In the three months ended September 30, 2022, operations in Oregon generated $3,079,248 in revenue (three months ended September 30, 2021$6,303,290), a 51.1% decrease. In the three months ended September 30, 2022, the California wholesale business generated $1,950,678 in revenue (three months ended September 30, 2021: $1,933,573), a 0.9% increase.

Retail Revenue: Budega North Hollywood, which started operations in March of 2022, added revenues of $259,359 in the three months ended September 30, 2022. Budega Westwood, which started operations in May 2022, added revenues of $251,859 in the three months ended September 30, 2022. Kushbar has no revenue in the three months ended September 30, 2022, due to a dispossession. Kushbar was initially consolidated in July of 2021.

Gross Profit

In the three months ended September 30, 2022, the Company reported a gross profit of $1,700,862 with a margin of 30.7% (three months ended September 30, 2021: gross profit $1,639,196 with a margin of 18.8%).

Oregon:

In the three months ended September 30, 2022, the Company reported a gross profit from operations in Oregon of $822,925 (three months ended September 30, 2021: $1,136,583). In the three months ended September 30, 2022, the reported gross margin was 26.7% (three months ended September 30, 2021: 18.0%).

California:

In the three months ended September 30, 2022, the Company reported a gross profit from operations in California of $734,939 (three months ended September 30, 2021: gross profit $441,677). In the three months ended September 30, 2022, the reported gross margin was 37.7% (three months ended September 30, 2021: 22.8%).

Liquidity and Cash Balance

In the three months ended September 30, 2022, the Company raised $2,062,488 in debt financing, and repaid $1,778,075 from convertible debentures. Net of a reduction $454,501 in lease obligations, total capital raise was $170,088 (three months ended September 30, 2021: $11,338,222). Cash inflow was $142,235 in the three months ended September 30, 2022 (three months ended September 30, 2021: $2,034,615).

As of September 30, 2022, the Company had unrestricted cash available in the amount of $1,711,855.

Additional Information

Complete results are reported in the Company's consolidated financial statements for the three and nine months ended September 30, 2022, and associated management's discussion and analysis (the "Q3 2022 MD&A"), which are posted to on Halo's SEDAR profile at www.sedar.com.

About Halo Collective

Halo is focused on the United States 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, pre-rolls, vape carts, edibles, and concentrates. Halo sells these products under a portfolio of brands, including Hush™, Winberry Farms™, its retail brand Budega™, and license 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 2022.

In the non-THC sector, Halo is expanding into health and wellness categories, including CBD and functional supplements such as nootropic nutraceuticals and nonpsychotropic 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 via a strategic agreement with SWAY Energy Corporation.

Halo has successfully acquired and integrated a variety of companies which were subsequently reorganized to create Akanda Corp. (NASDAQ: AKAN), 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, 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 Inc. to shareholders on record at a date to be determined.

For further information regarding Halo, see Halo's disclosure documents on SEDAR at www.sedar.com

Connect with Halo Collective: Email | Website | LinkedIn | Twitter | Instagram

www.haloco.com/investors

Non-IFRS Financial Measures

Adjusted EBITDA is a non-IFRS financial measure that the Company uses to assess its operating performance and does not have any standardized meaning prescribed by IFRS. Management defines Adjusted EBITDA as earnings (loss) before interest, tax, depreciation, and amortization, as adjusted for non-cash items. Adjusted EBITDA is provided to assist management and investors in determining the Company's operating performance. The Company also believes that securities analysts, investors, and other interested parties frequently use Adjusted EBITDA in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate Adjusted EBITDA differently than the Company, Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. We caution readers that Adjusted EBITDA should not be substituted for determining net loss as an indicator of operating results, or as a substitute for cash flows from operating and investing activities. For a reconciliation of Adjusted EBITDA, please refer to "Reconciliation of Non-GAAP Financial Measures" in the Q3 2022 MD&A, which is available on the Company's SEDAR profile 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". Forward-looking information may relate to anticipated events or results including, but not limited to expectations regarding improved performance, management's plans regarding Pistil Point and the California market, plans regarding streamlining of business segments, management's plans regarding its portfolio of cannabis businesses and intention to expand into health and wellness, the proposed distribution agreement with SWAY Energy Corporation, the expected opening date of the Company's California dispensaries and the proposed spin-off by Halo Tek Inc.

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 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. 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. 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: inability of management to successfully integrate the operations of acquired businesses, changes in the consumer market for cannabis products, changes in the expected outcomes of the proposed changes to Halo's operations, delays in obtaining required licenses or approvals necessary for the build-out of Oregon operations, dispensaries or Canadian operations, the proposed spin-out with Halo Tek Inc., delays or unforeseen costs incurred in connection with construction, the ability of competitors to scale operations in Northern California, delays or unforeseen difficulties in connection with the cultivation and harvest of Halo's raw material, changes in general economic, business and political conditions, including changes in the financial markets; and the other risks disclosed in the Company's annual information form dated March 31, 2022 and other disclosure documents available on the Company's profile at www.sedar.com. 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.

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.

Non-Solicitation

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any of the securities described herein, nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.

SOURCE Halo Collective Inc.

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