Halo Labs Inc (NEO:HALO) (OTCMKTS:AGEEF) (FRA:A9KN) CEO Kiran Sidhu and CSO Katie Field join Midas Letter to discuss the different projects Halo are developing around the world. Halo Labs have agreed to purchase Lesotho-based medicinal cannabis producer Bophelo Bioscience & Wellness which would become the company’s gateway to the global cannabis market. Halo Labs will be enhancing its production capabilities in Northern California in the near future as the company are currently running at full capacity. The CEO and CSO also discuss the success of their white labeling business stream the value to share-holders with the downtown in the underlying cannabis sector.
James West: Kiran Sidhu, CEO of Halo Labs, and Katie Field, who’s the Chief Strategy Officer of Halo Labs, joins us now. Welcome, guys.
Katie Field: Thank you.
Kiran Sidhu: Thanks for having us.
James West: Kiran, can we start with an update on all of the different project that you’ve got going on around the world?
Kiran Sidhu: Okay. So the big focus right now is to close Bophelo in Lesotho, and there, we’re expecting a signing to occur within the next week to two weeks. So let’s say by the middle of October. And then, subject to exchange approval, and subject to central bank approval in Lesotho, we should be closed within four weeks after. But the project is still carrying on; plants are being, you know, as we said, now the plants have gone from babies to teenagers, and inevitably, they’ll be ready to go in the greenhouses. And Bophelo is actually being funded by Luisa, our chairman-to-be herself. So she’s writing the cheques right now to fund that, and we’re pretty confident that if, given if we get the offtakes there, that the entire project will have traditional bank financing, which is pretty unique, from a major South African bank we’re in discussions with. Because it doesn’t have the banking problems that you have in America in Lesotho, or in South Africa.
Secondly, you’ll be seeing some news coming out about enhancing our capabilities in Northern California. Our biggest issue right now is capacity. We’re running at full capacity, seven days a week in California, and right now, in harvest season, as we announced a record month in Oregon, which surprised us. And I think part of that had to do with the fact that people no longer want to buy vape cartridges and products in the black market, they want to go to licensed producers. We’re also running, now, seven days a week there.
We had a bumper harvest; we’re expecting somewhere between 15,000 to 20,000 pounds off of our six-acre site in Oregon. 7,000 we’re going to be bringing into flower, which we believe will give us, conservatively, incremental sales of 3.5 million we weren’t expecting. So yeah, so things have been really busy, and you’ll be seeing some announcements hopefully coming soon, you know, on some more positive events.
James West: Perfect. Okay, so I want to focus for a minute on the record sales in Oregon, because that represents a pretty serious Q on Q growth.
Kiran Sidhu: Right, right.
James West: And is that a trend we’re going to see continue, or is that just a specific one-off event as a result of the vape crisis?
Kiran Sidhu: We believe that the trend will continue, because now what we’re doing is also starting to sell our flower. After three years of growing, we’re starting to grow really, really nice flower, and so there’s been a demand for our flower, and I think as of today, out of 7,000 potential pounds, 2,000 have already been pre-sold with large deposits, which is helping our cash flow tremendously, as well.
Also, as you know, you know, everyone’s talking about this age of extinction, and how every company doesn’t have enough cash; what we’re finding is that, with the working capital line in place, as well as the incremental cash flow we’re seeing from Oregon, which has gone from cash flow negative to cash flow neutral to cash flow positive. Our cash flow is actually doing well, right?
We’re also looking to add to it in a way that is not dilutive to our shareholders. But so we’re actually building cash in this time where people are scared of, you know, losing cash, or some of them, quite frankly, are just trying to survive.
Todd Shapiro: How’s the white labeling business going?
Katie Field: Good, no, it’s going really well. I think that we’ve seen that a little bit more in California. We have some sales reps in Oregon ask us about it as well, but we have so much of our own brands to produce that we don’t do quite as much there. But it’s actually been a strategy that we’re looking at seriously, because most of our sales in California have been bulk, to date. So the question is, hey, what brands do customers want?
And we’re still in the process of, we already have some of our own distribution, both that we do, but also with Nabiss – that’s one of our distributors. The question is, what are the brands that consumers are going to want? And if we can white label them, we’re very efficient. We’ve been in this business, we’ve been extractors, since the very beginning in Oregon. But we actually can still make margin and be profitable doing white labelling.
So that is something that we’re doing, but of course we try to be selective about the brands we work with and make sure that it’s really a relationship that, you know, that’s going to be mutually beneficial. So, Cleaver, for example. Anyway…
James West: Do you use your white labelling strategy as a way to get your products into other states where you don’t necessarily produce cannabis?
Katie Field: We’re definitely open to that. That’s something that we do – so you mean in terms of, hey, go to a different state, I’ll take my brands and have them produce them for us?
James West: License your recipes. Yeah, exactly.
Katie Field: Sure. Yes, that is something that we’re doing, absolutely. I mean, we’ve looked at that a little bit more in terms of helping to implement Tabs in other markets, but our brands are open, as well. Kiran, I don’t know if you want to add to that? You’ve got anything to add to that?
Kiran Sidhu: We’re in discussions, and, you know, documents going back and forth with a couple of MSOs, because some of the products we make in our hypercompetitive states are different from what they do where they have limited license states. So yesterday, we were actually with a large MSO who told us that we sell high-grade shatter for, say, $6 a gram wholesale in Oregon, and he’s saying that, on a wholesale basis in one of his states, I don’t know if it was Massachusetts –
Katie Field: It could have been Massachusetts, Illinois, but one of the limited license, east coast, Midwest states –
Kiran Sidhu: It’s $30, and the quality isn’t even that great. So there are higher margins in these limited license states, which gives room for us to actually take profit and start joint venturing and bringing our brands, but more so our technology, to those states.
Katie Field: Our SOPs and how to tweak things, like making live resin better, making, like, live resin cartridges or shatter better, and more efficient.
Todd Shapiro: So these are alternative revenue sources that you foresee in the future?
Katie Field: Yes. Definitely.
Kiran Sidhu: Definitely. Definitely.
James West: Okay. The stock has been under a lot of pressure lately, and despite great liquidity, huge volumes, it continues to deteriorate in price. Do you have any insight on why that might be, and how it might change?
Kiran Sidhu: Well, just over the last week or two, our final lockup has come off. So about 22 million shares entered the market. But of those, I would say about 8 to 10 million are with insiders, so we have now had a liquidity flush of those sales, and when that’s happened in the past, we’ve seen a dip in the stock, but the stock has come back. But that’s the last lockup. Everything now out there, with the exception of what the insiders hold, which is approximately 20 percent, or 25 percent – somewhere between there – is now free trading.
In addition to that, we had a lot of warrants as a result of our RTO and as a result of our convertible. Of the, I believe, 150 million warrants we have outstanding, I would say that the majority of them, the vast majority of them, I think even closer to 90 or even 100 million, are now listed on the exchange. So they trade themselves, so they are not causing any sort of overhang on the stock. So the stock is, you know, in terms of positioning, as we get through this 10 million shares, I think the stock will consolidate and do well, as we continue to perform.
James West: Great.
Todd Shapiro: Are you in touch with the shareholders often? Do you like to, you know, put a face to, obviously, the name, and make sure that they’re comfortable in terms of the future plans?
Kiran Sidhu: Definitely. I would say that I – I mean, Katie’s team handles IR, but I probably engage with shareholders maybe three to four times a day, no matter how large or how small. And then I’d say once a month, we have a shareholder – like, we have one coming from Germany, I believe, today – to go visit our facility in Cathedral City. And so we actually, if they’re of age, we actually invite them in to come into our facilities. We had two shareholders, I think it was Tuesday, who wanted to see the farms come down in Oregon, so we invited them out to see the farms come down, you know. And obviously, they put on the Visitor badge, they can’t touch the stuff or anything like that, but people, you know, love to come to the facilities, and we invite them with open arms to even come and visit the facilities.
Todd Shapiro: Great to hear.
James West: All right. Well, you guys are doing a great job. Thank you very much for joining us today. We’ll come back to you soon.
Katie Field: Thanks for having us.
Todd Shapiro: Cheers.
Kiran Sidhu: Thanks for having us.
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