TORONTO — Halo Labs Inc.(“Halo” or the “Company”) (NEO: HALO) announces that it intends to issue common shares in the capital of the Company (“Common Shares”) in connection with a proposed acquisition to extend its 2nd Cathedral City facility by an additional 6,120 square feet, to complete a debt settlement arrangement, and to issue Common Shares to certain employees and independent contractors in lieu of cash consideration. The Company also wishes to announce a change of its auditor and clarify an earlier press release.

Cathedral City Acquisition

The Company has also entered into a membership interest contribution agreement dated February 7, 2019 (the “Effective Date”), by and among the Company and its subsidiaries and certain other parties (“Vendors”), whereby the company will acquire 100% of the issued and outstanding membership interests of Industrial Court (the “Acquisition”) from the Vendors in exchange for 6,831,365 Common Shares (the “Acquisition Shares”).

Industrial Court is a California limited liability company which holds a sublease (as subtenant) for a 6,120 square foot premises in Cathedral City, California (the “L13 Premises”), adjacent to the premises (the “L9 Premises”) currently subleased to an indirect wholly owned subsidiary of the Company purchased from the Vendors in September 2018. The Company intends to either obtain stand-alone city and state cannabis manufacturing and distribution licenses for the L13 Premises, or to expand the L9 Premises to include the L13 Premises. As part of the consideration for the issuance of the Acquisition Shares to the Vendors, the Vendors also caused the sub-landlord of the L9 Premises to eliminate the obligation of one of the Company’s indirect subsidiaries to pay production rent equal to USD$1.00 for each gram of CBD or THC crude, distillate or isolate produced at the L9 Premises. The Company believes that this favorable modification to an existing ýcontract will result in increased gross margins obtained by approximately $50,000 per week assuming the company produces 50,000 grams of distillate per week. The two premises combined total approximately 14,000 square feet and is expected to substantially increase the Company’s manufacturing and distribution capacity.

The Acquisition is expected to close on or about February 26, 2019, subject to the receipt of all required approvals, including the approval of the Exchange. The Acquisition Shares will be subject to a four-month hold period.

Debt Settlement

The Company intends to complete a debt settlement with 11 creditors (the “Debt Settlement”). Pursuant to the Debt Settlement, the Company intends to retire an aggregate of USD$792,287 of indebtedness in exchange for the issuance of 2,497,196 Common Shares (the “Debt Settlement Shares”) at a price of CDN$0.40 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 hold period.

Common Share Compensation of Certain Employees & Independent Contractors

Certain employees and independent contractors of the Company have agreed to provide the Company with a monthly option (the “Compensation Option”) for a period of four months (each month, an “Option Period”), whereby the Company can elect to satisfy a certain portion of such individual’s cash compensation through the issuance of Common Shares (the “Compensation Shares”). Pursuant to the Compensation Option, the Company will be permitted to elect each month whether such consideration will be payable in Compensation Shares or cash consideration. The total aggregate amount of cash compensation subject to such Compensation Option each month will be approximately USD$56,667.

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 transaction, insofar as it involves related parties, is not more than 25% of the Company’s market capitalization.

Common Share Compensation of Directors & Management

Each of the independent directors of the Company has agreed to accept Common Shares (“Director Compensation Shares”) in lieu of the cash consideration such directors are entitled to for acting in such capacity from the date of the closing of the Transaction (as defined below) to December 31, 2018. The total aggregate amount of cash compensation to be satisfied through the issuance of the Directors Compensation Shares is $50,041, which will be satisfied through the issuance of 125,101 Director Compensation Shares at a price of $0.40 per Director Compensation Share.

Certain employees and independent contractors of the Company have agreed to accept Common Shares (“Management Compensation Shares”) in lieu of the cash consideration such management are entitled to for acting in such capacity from the date of the closing of the Transaction (as defined below) to December 31, 2018. The total aggregate amount of cash compensation to be satisfied through the issuance of the Management Compensation Shares is $172,000, which will be satisfied through the issuance of 430,000 Management Compensation Shares at a price of $0.40 per Management Compensation Share.

In connection with the above transaction, certain “related parties”, for the purposes of MI 61-101, are expected to receive Director Compensation Shares and Management Compensation Shares 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 transaction, insofar as it involves related parties, is not more than 25% of the Company’s market capitalization.

Promissory Note Financing

Halo announces that it has increased its previously announced promissory note by an additional $800,000 and raised an aggregate total of $2,200,000 (the “Debt Financing”) through the issuance of unsecured promissory notes (each, a “Promissory Note”). Each Promissory Note bears interest at a rate of 15% per annum and matures on December 31, 2019. The Promissory Notes are not convertible into securities of the Company. The net proceeds from the Debt Financing will be used to fund the Company’s general working capital requirements.

G. Scott Paterson, a director of the Company, participated in the Promissory Note financing and was issued a Promissory Note in the principal amount of USD$100,000 and is considered to be a “related party” for the purposes of MI 61-101 and Mr. Paterson’s participation in the Debt Financing is considered to be a “related party transaction” for the purposes of MI 61-101.

Change of Auditor

The Company also announces that it has changed its auditor from UHY McGovern Hurley LLP (the “Former Auditor”) to Davidson & Company LLP (the “Successor Auditor”) effective February 6, 2019. At the request of the Company, the Former Auditor resigned as the auditor of the Company and the board of directors of the Company appointed the Successor Auditor as the Company’s auditor effective February 6, 2019, until the next Annual General Meeting of the Company.

The Former Auditor has not expressed any modified opinion in its audit reports for the Company’s two most recent financial years. To the knowledge of the Company, there are no “reportable events” (as the term is defined in National Instrument 51-102 –Continuous Disclosure Obligations (“NI 51-102”)) between the Company and the Former Auditor.

In accordance with NI 51-102, the notice of change of auditor, together with the required letters from the Former Auditor and the Successor Auditor, have been reviewed by the board of directors of the Company and filed on SEDAR.

Clarification of Previous News Release

The Company also wishes to correct an inadvertent error in its prior news release dated October 1, 2018. There was an administrative error made by a service provider in calculating the number of common share purchase warrants outstanding as of the closing of the transaction pursuant to which Halo acquired all of the issued and outstanding securities of ANM, Inc. (the “Transaction”). Specifically, the previous news release noted that 32,658,735 common share purchase warrants were issued following the conversion of the offered securities and completion of the Transaction. Additionally, the previous news release noted that, upon closing of the Transaction, Halo had an aggregate of 133,781,986 common share purchase warrants issued and outstanding with an average exercise price of $0.75 for an aggregate exercise price of approximately $101 million. Halo clarifies that 36,414,620 common share purchase warrants were issued following the conversion of the offered securities and completion of the Transaction. In addition, upon closing of the Transaction, Halo had an aggregate of 131,942,824 common share purchase warrants issued and outstanding with an average exercise price of $0.737 for an aggregate exercise price of approximately $97.2 million. As of the date hereof, Halo has 157,510,514 Common Shares issued and outstanding and the following securities outstanding that are convertible into Common Shares: (i) 130,752,245 common share purchase warrants, (ii) 2,651,207 agents’ compensation options (which are each convertible into one Common Share and one common share purchase warrant), and (iii) 12,268,848 options to purchase Common Shares.

ABOUT HALO

Halo is a cannabis extraction company that develops and manufactures quality cannabis oils and concentrates, which are the fastest growing segments in the cannabis industry. Halo has expertise in all major cannabis manufacturing processes, leveraging proprietary processes and products, and has produced over 3.0M grams of oils and concentrates since inception. The forward-thinking company is led by a strong management team with deep industry knowledge and blue-chip experience. The Company is currently operating in California, Nevada and Oregon as well as Lesotho Africa through a strategic partnership. With a consumer-centric focus, Halo will continue to market innovative branded and private label products across multiple product categories.

For further information regarding Halo, see Halo’s disclosure documents on SEDAR 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”. The forward-looking information and forward-looking statements contained herein may include, but is not limited to, information concerning the completion of the Debt Settlement, the issuance of the Debt Settlement Shares, the issuance of the Compensation Shares, the completion of the Acquisition, the issuance of the Acquisition Shares, the increased gross margins expected from the lease amendment, the intention of the Company to obtain city and state cannabis manufacturing and distribution licenses for the L13 Premises, the intention of the Company to expand the L9 Premises to include the L13 Premises and the expected increase to the Company’s manufacturing and distribution capacity.

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, level of activity, performance or achievements of Halo 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.

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: delays in obtaining the necessary approvals from the Exchange; delays in obtaining approvals from municipal and state regulators, adverse changes in applicable laws; changes in general economic, business and political conditions, including changes in the financial markets and the other risks disclosed in the most recent management information circular (including the documents incorporated by reference therein). 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.

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. Key assumptions used herein are that employees and independent contractors will enter into amended agreements reflecting the terms of the Compensation Options, the Debt Settlement and the Acquisition will be completed, including on the current terms and anticipated timing, that the Exchange will not withhold or delay the completion of the Debt Settlement, the Acquisition, the issuance of the Compensation Shares or the issuance of the Director Compensation Shares, that the Company will be able to obtaincity and state cannabis manufacturing and distribution licenses for the L13 Premises, that the Company will be able to expand the L9 Premises to include the L13 Premises and that the manufacturing and distribution capacity of the additional premises will meet the current expectations of management. 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.

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Contacts

Halo Labs

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info@halocanna.com