Elegance Brands announced it will exclusively license the intellectual property rights for its THC brands and provide support to Halo Collective on operations and manufacturing technology for the manufacture and sale of THC-infused beverage products.

Halo will receive a 2 percent royalty on all sales generated from these brands under the licensing agreement. In addition, Halo will acquire manufacturing equipment custom-built for THC beverage production and acquire a minority interest in Elegance. 

The licensing agreement allows Halo to exclusively license Elegance's THC-infused beverage product portfolio, including Arvo, Zen, Life Brew, High Life THC Cocktails, Island THC & Coconut Water, Stoney Island THC Cold Brew Coffee, 420 Friendly THC Lemonades, and California THC Bitters. 

The first product expected to launch under the partnership is Zen THC Social Tonics in a range of four flavors: Raspberry Hibiscus, Ginger Lime, Mango Habanero and Citrus Lavender. They are expected to enter distribution by the fourth quarter of 2021 in California and the first quarter of 2022 in Oregon.

Halo CEO Kiran Sidhu said the transaction will facilitate a long-term partnership between both companies. 

“Elegance is well versed in developing and marketing premium beverages and will utilize its experience to support Halo's efforts to bring THC beverages to market, aid in production, and enhance distribution,” Sidhu said. “Elegance Brands has created a unique and exciting portfolio of THC products, and with this transaction, we step into one of the fastest-growing segments of the functional beverage market. Beverages are a strategic addition to Halo's existing product offering, and through this innovative partnership, we will leverage Elegance's experience to bring THC beverages to retailers and consumers across the U.S. market. We believe that consumers are actively seeking innovative options for THC beverages, and this partnership aims to meet that demand. We look forward to being a shareholder of Elegance and participating in the value creation from its growing portfolio of premium brands.

Halo, through a wholly owned subsidiary, will acquire 100 percent of an Elegance subsidiary by way of a three cornered amalgamation, in exchange for that number of Halo common shares equal to the quotient of $7.3 million, divided by the greater of the volume weighted average closing price of the Halo Shares for the 20 trading days ending on the trading day immediately prior to the completion of the transaction, as traded on the NEO Exchange, or the minimum price permitted on the NEO Exchange. 

In addition to the rights under the licensing agreement and custom manufacturing equipment, Halo will receive 9,333,333 Class A Shares in the capital of Elegance, resulting in Halo owning approximately 6 percent of the Elegance Shares on a fully-diluted share basis (assuming all of Elegance's 91,400,000 Class B Shares convert into Class A Shares of Elegance), and warrants to acquire 5,000,000 Elegance Shares, with each warrant exercisable at a price of $0.75 per Elegance Share for a period of 18 months from closing of the transaction.

Completion of the transaction is subject to the satisfaction or waiver of customary closing conditions, including receipt of approval from the NEO Exchange. The Halo Shares to be issued upon closing of the transaction will be subject to certain sale restrictions.

"We are proud to be working with Halo and supporting their efforts to innovate the THC beverage market," said Raj Beri, founder, CEO and chairman of Elegance Brands. "Halo is a recognized and respected cannabis company with a global footprint. The growing interest in THC beverages represents opportunities for bringing new, creative products to consumers in an ever-growing space. The ability to partner with Halo is a tremendous opportunity for us, and we look forward to our combined success."

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