Inner Spirit Holdings Corporate Presentation February 2019 LEGAL - - PowerPoint PPT Presentation

Inner Spirit Holdings

Corporate Presentation

February 2019

CSE:ISH

LEGAL DISCLAIMER.

The information provided herein is not intended to provide fjnancial, tax, legal or accounting advice. This Corporate Presentation and the contents herein do not constitute or form part of any advertisement, any ofger to sell or any solicitation of an ofger to buy or subscribe for securities of Inner Spirit Holdings Ltd. (the “Company” of “Inner Spirit” or “ISH”) or represent an intention to induce any person to make an investment in the Company or to assist any person in the making of an investment decision. This Corporate Presentation and the contents herein shall not form the basis of or be relied on in connection with, or act as any inducement to enter into, any contract or commitment whatsoever. This Corporate Presentation includes statistical information that the Company has obtained from independent industry publications, government publications, market research reports and other published independent sources. Such publications and reports generally state that the information contained therein has been obtained from sources believed to be reliable. Although the Company believes these publications and reports to be reliable, it has not independently verifjed any of the data or other statistical information contained therein, nor has it ascertained or validated the underlying economic or other assumptions relied upon by these sources. The Company has no intention and undertakes no

• bligation to update or revise any such information or data, whether as a result of new information, future events or otherwise, except as, and to the extent required by applicable securities laws. Readers should also be advised that the

watch, sunglasses and related accessories business of the Company is carried out through its wholly-owned subsidiary, WATCH IT! Consolidated Ltd., and any reference herein to “WATCH IT!” is a reference to such subsidiary.

FORWARD LOOKING INFORMATION

This Corporate Presentation contains “forward-looking statements” and “forward-looking information” (collectively, “forward-looking information”) within the meaning of applicable securities legislation. Forward-looking information in this Corporate Presentation include, but are not limited to, statements or information with respect to: the Company’s intended strategy; the Company’s ability to execute its strategy and ensure success; the expected legalization of recreational cannabis; market expectations; intended products, delivery systems and partnerships; and other expectations, beliefs, plans, objectives, assumptions, intentions or statements about future events or performance. Actual results, performance or achievement could difger materially from that expressed in, or implied by, any forward-looking information in this Corporate Presentation, and, accordingly, readers of this Corporate Presentation should not place undue reliance on any such forward-looking information. Forward-looking information involves signifjcant risks, assumptions, uncertainties and other factors that may cause actual future results or anticipated events to difger materially from those expressed or implied in any forward-looking statements and accordingly, should not be read as guarantees of future performance or results. Forward-looking information involves numerous risks and uncertainties including, but not limited to, the ability of management to execute its business strategy, objectives and plans; that the Company will have suffjcient capital to fund its business plans; general economic and business conditions; changes to laws, regulations, rules, rulings, policies, procedures and other instruments applicable to the Company and its business; the risk of disruptions to the Company’s supply chain; risks associated with the Company’s reliance on key personnel; and changing consumer sentiments. Forward-looking information contained in this Corporate Presentation is based on the Company’s current estimates, expectations and projections, which the Company believes are reasonable as of the current date. The Company can give no assurance that these estimates, expectations and projections will prove to have been correct. Historical statements should not be taken as a representation that such trends will be replicated in the future. No statement in this Corporate Presentation is intended to be nor may be construed as a profjt forecast.

FUTURE-ORIENTED FINANCIAL INFORMATION

This Corporate Presentation also contains future-oriented fjnancial information and fjnancial outlook information (collectively, “FOFI”) including, but not limited to, prospective annual revenue, prospective net profjt, prospective system wide sales, and components thereof, all of which are subject to the same assumptions, risk factors, limitations, and qualifjcations as set forth in the above paragraphs. FOFI contained in this Corporate Presentation was made as of the date of this Corporate Presentation and was provided for the purpose of providing information about management’s current expectations and plans relating to the future, and for certain illustrative purposes. The Company disclaims any intention or obligation to update or revise any forward looking statements or FOFI contained in this Corporate Presentation, whether as a result of new information, future events or otherwise, unless required pursuant to applicable securities law. Readers are cautioned that the forward-looking information and FOFI contained in this Corporate Presentation should not be used for purposes other than for which it is disclosed herein. The forward-looking statements and FOFI contained in this Corporate Presentation are expressly qualifjed by this cautionary statement.

THIS CORPORATE PRESENTATION MAY NOT BE REPRODUCED, FURTHER DISTRIBUTED OR PUBLISHED IN WHOLE OR IN PART WITHOUT WRITTEN PERMISSION FROM THE COMPANY.

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The start of something incredible.

Inner Spirit Holdings Ltd. is applying a successful franchise and retail model to the recreational cannabis industry. With a group of over 100 franchise partners, corporate retail cannabis locations, and a proprietary brand portfolio under various stages of development, Inner Spirit Holdings is positioned to be an industry leader.

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Investment Highlights

Proprietary house brands to offer consumers a market-leading retail experience Highly experienced team with significant expertise in the cannabis, branding, consumer retail, real estate and franchising industries

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Leverage to Canadian legal recreational cannabis market. The Canadian adult use market is currently worth up to $5.0B and is expected to grow to $7.0B in FY22 1 Low-cost and highly scalable franchising model to maximise ROI – more than 100 corporate and franchise locations under development across Canada Strategic partnerships with premium producers creates a fully integrated business model

Meet the Team

Darren Bondar

President & CEO

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20 years experience in retail and franchise industries Previously founded WATCH IT! in 1999 Bachelor of Arts from Western Ontario University and MBA from University of Alberta

∙ ∙ ∙

Chris Gulka

CFO

CPA and CFA with > 26 years business experience President of Working Capital Corporate since 1999 Founded Passport Energy Ltd., and was the CFO of Rochester Energy Corp.

∙ ∙ ∙

Cecil Horwitz

Business Development

Extensive experience in retail sales since beginning of WATCH IT! in 1999 Founder and clinical director of Whole Family Health Cannabis advocate for both health and recreational use

∙ ∙ ∙

Jeremy Lee

Controller

Experience across fjnancial reporting, controlling and fjnance functions Previously at Big 4 accounting fjrms and in industry roles Chartered Accountant designation in 2000

∙ ∙ ∙

Robert Verbuck

Legal & Capital Markets

Corporate securities lawyer with 20 years experience Since 2014, actively involved in advising businesses in the cannabis industry Law degree from the University

• f Toronto

∙ ∙ ∙

Christine Kitz

Operations

Oversees business systems and

• perations at ISH

Previously held fjnancial, strategic and human resources positions within the retail sector

∙ ∙

Alisa Kuzmina

Creative Director

Overseas ISH’s commitment to creative excellence Signifjcant experience working within the retail and franchise industries Degree in Communications with a Major in Information Design

∙ ∙ ∙

Board of Directors

Darren Bondar

President & CEO

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20 years experience in retail and franchise industries Previously founded WATCH IT! in 1999 Bachelor of Arts from Western Ontario University and MBA from University of Alberta

∙ ∙ ∙

Chris Gulka

CFO

CPA and CFA with > 26 years business experience President of Working Capital Corporate since 1999 Founded Passport Energy Ltd., and was the CFO of Rochester Energy Corp.

∙ ∙ ∙

David Margolus

Director

Former Managing Partner of Witten LLP Served on boards of Edmonton Regional Airports Authority, Liquor Stores N.A. Ltd., PowerComm

• Inc. and The XS Cargo Income Fund

Bachelor of Arts and Law from the University of Alberta

∙ ∙ ∙

Jeff Tung

Director

CFO & COO of Auxly Cannabis Formerly co-founder of CPS Management Partners MBA from the Richard Ivey School of Business, Bachelor

• f Computer Engineering from

the UBC

∙ ∙ ∙

Larry Wosk

Director

15 years experience at the Sauder School of Business 27 years in sernior manageent positions President and CEO of companies across retail, real estate development, hospitality and consulting

∙ ∙ ∙

Craig Steinberg

Director

Former partner at Miller Thomson LLP >10 years experience as a private mortgage banker and corporate counsel Law Society of Alberta, Canadian Bar Association and Real Estate Council of Alberta

∙ ∙ ∙

March 16, 2017

Corporate Highlights

Inner Spirit Holdings Ltd. was founded in Calgary, AB. ISH Formed June 16, 2017 Spiritleaf is first and only cannabis company granted entry into CFA. CFA Membership Granted January 8, 2018 ISH announces cross-investment and strategic alliance with Auxly (TSXV:XLY), which closes

• n February 6, 2018.

Auxly February 6, 2018 ISH grants its 100th franchise and completes its $4.5 million private placement equity fjnancing.* 100th Franchise and $4.5M Equity June 4, 2018 ISH announces its support of the Gord Downie & Chanie Wenjack Fund (DWF) via a five- year charitable commitment and the establishment of a DWF Legacy Room. This support is part of an ongoing agreement to collaborate with Newstrike Brands Ltd. & Up Cannabis. Inner Spirit Holdings Ltd. is Honored to Support the Gord Downie & Chanie Wenjack Fund July 31, 2018 ISH closes IPO on maximum gross proceeds of $3,750,000 and issued 25,000,000 Units. Its common shares began trading

• n August 1, 2018 on the CSE

under the symbol “ISH”. Inner Spirit Holdings Ltd. Closes IPO

* Includes Auxly’s $350,000 equity investment on January 8, 2018, Auxly’s additional $150,000 equity investment on February 6, 2018, and Grenville’s $1M equity investment on January 18, 2018. F E B R U A R Y 2 0 1 9 | 0 7

January 29, 2018 Spiritleaf unveils its concept retail store design. Retail Store Concept May 23, 2018 Newstrike Brands Ltd. (TSXV:HIP), formerly Newstrike Resources Ltd. announces cross-investment and strategic alliance with ISH. Newstrike November, 2018 ISH opens first 4 franchise locations in Brooks, Lethbridge,

• St. Albert & Moosejaw.

Franchise Store Openings December 3, 2018 ISH announces $4.5 million investment by Tilray, Inc. (NASDAQ: TLRY) and formation

• f strategic partnership.

Tilray

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Canada’s New Growth Industry

Current consumers are expected to buy nearly two-thirds of products from legal retailers Legalization expected to attract a more conservative experimenter – typically one who is aged 35-54, has a university education, and has family or other responsibilities After legalisation, current frequent cannabis consumers expect to buy products more often

∙ ∙ ∙

Current and likely consumers expect to purchase the majority of products at physical retail locations Consumers to demand high quality products at a range of competitive price points Privacy and security when purchasing are key considerations for consumers

∙ ∙ ∙

Shift Towards Legal Consumption

2

Demand For Retail Experience

3

Substantial Market Size

1

Population of Adult Consumers Annual Consumption Volume in Grams per Consumer Price per Gram

• f Marijuana

X X $5.0B in FY18 $7.0B in FY22

Estimated Total Adult Use Market Size

=

• 1. GT Research, “Canadian Legal Recreational Cannabis Market”, 2018
• 2. Deloitte, “A society in transition, an industry ready to bloom – 2018 cannabis report”

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The Inner Spirit Strategy

Build an iconic Canadian brand and a chain of recreational dispensaries across Canadian jurisdictions where private distribution of cannabis is legal. Sell select brands together with our proprietary licensed brands through

• ur own retail network and other

distribution channels. Utilize a low CAP X franchise and streaming strategy to maximize ROI and scalability.

Franchising to maximize ROI

$25,000 upfront franchise fee 5% royalty on gross sales 1% of gross sales allocated to Spiritleaf’s advertising fund

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Over 110 franchise agreements executed and 75 locations secured across Canada

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Alberta

∙ 3 Spiritleaf store openings in November 2018

with 20 additional stores under construction

∙ 48/50 sites have been secured and have

received municipal permits Manitoba

∙ Prequalified for the next Manitoba lottery

for cannabis retail licenses Ontario

∙ Opened Ontario office, and secured prime

locations

∙ Granted first 20 franchises and secured

leases for up to 20 locations

∙ Contonuing due diligence on numerous

additional franchise applications

∙ Plans to pursue the maximum 75 stores

available to operators Saskatchewan

∙ Moose Jaw store opened on

November 19, 2018 British Columbia

∙ 6 Spiritleaf locations conditional on

municipal and provincial approvals

The Space

Open spaced opportunity to reimagine the typical retail environment of a dispensary.

The Retail Brand

Stores will offer an impressive selection of products, knowledgeable staff and a welcoming and comfortable environment.

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First Cannabis company to receive membership in the Canadian Franchise Association Best in class retail experience Over 100 franchise partnerships entered into with local entrepreneurs Corporate stores and joint ventures ISH utilising existing WATCH IT! infrastructure platform Current ISH team has significant retail and franchising experience at WATCH IT! WATCH IT! Has $10m+ existing system wide sales with 8 stores across Canada

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Retail & Franchise

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F L O W E R S / P R E - R O L L S / O I L S & E X T R A C T S

We Source, Create and Curate Quality Cannabis Brands

The Spirit Joint Disposable Vaporizer

nticipated to be one of the most discreet, disposable vaporizers

• n the recreational cannabis market. 150 pufgs of pure CO2

cannabis oil. No smell, no lighter, no charging, no prep, no hassle.

F E B R U A R Y 2 0 1 9 | 1 3

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Tilray announced its newly-formed partnership with Inner Spirit’s retail network

Tilray to subscribe for $4,500,000 of ISH shares, comprised of $2,250,000 in cash and $2,250,000 in Tilray common shares On December 10, 2018 ISH and Tilray completed the cash tranche at price of $0.1985 per ISH share. The second tranche is to be completed on June 20, 2019. ISH and Tilray have entered into a collaboration agreement which includes, among other things: (i) guidance for promoting High Park’s products, for each retail location of Spirit Leaf which, will represent 20% of the retail space at each Spirit Leaf location; and (ii) general terms for Tilray to support the charitable endeavours of ISH and Spirit Leaf.

About Tilray and High Park

Tilray is a global pioneer in cannabis research, cultivation, processing and distribution with operations in 12 countries spanning 5 continents High Park is a wholly owned subsidiary of Tilray, Inc. (NASDAQ: TLRY), and is led by a team with deep experience in cannabis and global consumer brands

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Key Terms

Strategic Partnership

TSX.V: XLY Collaboration on retail initiatives including product acquisition and in-store marketing and branding Auxly currently holds ~15% of the outstanding ISH common shares TSX.V: HIP Retail distribution of Up Cannabis products, and the creation of Up Cannabis-branded customer lounges in Spirit Leaf stores Newstrike holds ~9% of the outstanding ISH common shares ISH licensed to distribute and sell all High Times magazines in corporate & retails stores ISH holds 11,000 shares of class A common stock of High Times Holding Corp.

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Where we’ve come from, where we’re going.

Bringing 20 years of franchise, branding, retail, marketing & real estate experience to the recreational cannabis market

• Opportunity to participate in Canada’s emerging recreational

cannabis market

• Platform to invest in a proven revenue-generating business model

Experience comes with time. Success comes with passion.

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Trading commenced on August 1, 2018 (CSE:ISH)

Capital Structure (February 5, 2019)

Basic Shares Outstanding 193.3 million Recent Share Price (February 4, 2019) $0.23 Current Market Capitalization $44.4 million Warrants and Options Outstanding 47.6 million Weighted Average Strike Price $0.18

Top 5 shareholders own ~45% Capital light business model No debt on balance sheet

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Headquarters

#102, 5740 - 2nd Street SW Calgary, AB T2H 1Y6

Contact

invest@spiritleaf.ca 403-930-9300

www.innerspiritholdings.com