Q2 2019 Quarter Report All figures in CDN$ unless otherwise noted - - PowerPoint PPT Presentation

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Q2 2019 Quarter Report All figures in CDN$ unless otherwise noted August 28, 2019 CNSX: SLNG | Frankfurt: 84S DISCLAIMER DISCLAIMERS This presentation of SLANG Worldwide Inc. (the Company or SLANG) is for information only

SLIDE 1

August 28, 2019 CNSX: SLNG | Frankfurt: 84S

Q2 2019 Quarter Report

All figures in CDN$ unless otherwise noted

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SLANG WORLDWIDE

DISCLAIMER DISCLAIMERS This presentation of SLANG Worldwide Inc. (the “Company” or “SLANG”) is for information only and shall not constitute an offer to buy, sell, issue or subscribe for, or the solicitation of an offer to buy, sell or issue, or subscribe for any securities in any jurisdiction in which such offer, solicitation or sale would be unlawful. The information contained herein is subject to change without notice and is based on publicly available information, internally developed data and other sources. Where any opinion or belief is expressed in this presentation, it is based on the assumptions and limitations mentioned herein and is an expression of present opinion or belief only. No warranties or representations can be made as to the origin, validity, accuracy, completeness, currency or reliability of the information. SLANG disclaims and excludes all liability (to the extent permitted by law), for losses, claims, damages, demands, costs and expenses of whatever nature arising in any way out of or in connection with the information in this presentation, its accuracy, completeness or by reason of reliance by any person on any of it. This presentation should not be construed as legal, financial or tax advice to any individual, as each individual’s circumstances are different. Readers should consult with their own professional advisors regarding their particular circumstances. The information contained in this presentation is not directed to persons or entities resident in the United States and does not constitute an offer or solicitation of an offer of securities in the United States or in any other jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it is unlawful to make such an offer or solicitation. FORWARD-LOOKING STATEMENTS Certain statements included herein, including those that express management’s expectations or estimates of the Company’s future performance, constitute “forward-looking statements” within the meaning of applicable securities laws. Any statements that are contained in this news release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are often identified by terms such as “may”, “will”, “should”, “expect”, “plan”, “anticipate”, “believe”, “intend”, “estimate”, “potential” or the negative of these terms or other similar

expressions. Forward-looking statements are based on certain assumptions regarding the Company’s expected growth, results of operations, performance, industry trends and growth opportunities. Forward-looking statements are necessarily based upon a number of estimates and

assumptions that, while considered reasonable by management at this time, are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies that could cause actual results to differ materially from those expressed or implied in such statements. Readers are cautioned not to put undue reliance on forward-looking statements. Applicable risks and uncertainties include, but are not limited to regulatory risks, changes in laws, resolutions and guidelines, market risks, concentration risks, operating history, competition, the possibility that the Company will be unable to successfully integrate businesses and the risks associated with international and foreign operations and the other risks identified under the headings “Risk Factors” in the Company’s final long form prospectus dated January 17, 2019, and “Risks and Uncertainties” in the Company’s management discussion and analysis for the year ended December 31, 2018 and three months ended March 31, 2019, each as filed on SEDAR at www.sedar.com. The forward-looking statements contained herein reflect the Company’s current views with respect to future events, and except as required by law, the Company does not intend, and undertakes no obligation, to update any forward-looking statements to reflect, in particular, new information or future events, or otherwise. FUTURE ORIENTED FINANCIAL INFORMATION To the extent any forward-looking information in this presentation constitutes “future-oriented financial information” or “financial outlooks” within the meaning of applicable Canadian securities laws, such information is being provided to demonstrate the anticipated market penetration and the reader is cautioned that this information may not be appropriate for any other purpose and the reader should not place undue reliance on such future-oriented financial information and financial outlooks. Future-oriented financial information and financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to the risks set out above under the heading “Forward-Looking Statements”. The Company’s actual financial position and results of operations may differ materially from management’s current expectations and, as a result, the Company’s revenue and expenses may differ materially from the revenue and expenses profiles provided in this presentation. Such information is presented for illustrative purposes only and may not be an indication of the Company’s actual financial position or results of

perations.

USE OF NON IFRS MEASURES This presentation refers to EBITDA, Adjusted EBITDA, Branded Unit volume and Branded Servings volume which are non-IFRS financial measures that the Company uses to assess its operating performance. EBITDA is defined as net earnings (loss) before net finance costs, income tax expense (benefit) and depreciation and amortization expense. Management defines Adjusted EBITDA as EBITDA adjusted for other non-cash items such as the impact of unrealized fair values, share based compensation expense, impairments, one-time gains and losses, and one-time revenues and

expenses. Branded Unit volume represents the number of branded SLANG products sold at retail to a consumer - each Branded Unit represents one finished good. Also included in Branded Units are certain products licensed to, or distributed by our brand licensees (the “SLANG Network”) for

which the Company provides marketing support and from the sale of which it derives income. Such licensed products account for a minimal portion of Branded Units’ volume. Branded Serving volume represents the number of times a consumer engages with, or experiences, one of our

products. A Branded Serving is a unit of measurement in milligrams (mg) of cannabinoid content delivered to a consumer. SLANG considers 5 mg to be a Branded Serving.

This data is furnished to provide additional information and is a non-IFRS measure and does not have any standardized meaning prescribed by IFRS. The Company uses these non-IFRS measures to provide shareholders and others with supplemental measures of its operating

performance. The Company also believes that securities analysts, investors and other interested parties, frequently use these non-IFRS measures in the evaluation of companies, many of which present similar metrics when reporting their results. As other companies may calculate these non-

IFRS measures differently than the Company, these metrics 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. PRO FORMA FIINANCIAL INFORMATION This presentation contains references to pro forma financial information, including pro forma revenues. Pro forma revenues include the revenue for the three month period ended June 30, 2019 for each of Arbor Pacific, Inc. (“Arbor”), LBA Global Corporation (“LBA”), NS Holdings Inc. (“NSH”) and Allied Concessions Group (“ACG”). The revenues of these acquisition targets cannot be consolidated, in the case of NSH and ACG, because such acquisitions are under option and, in the case of Arbor and LBA, because such acquisitions have not yet closed. Pro forma revenues do not include anticipated costs and expenses to generate such revenue. Completion of the proposed acquisitions of Arbor and LBA and the exercise of the Company’s option and subsequent acquisition of NSH and ACG is subject to, among other things, the negotiation and execution of definitive acquisition agreements and related documents and the satisfaction or waiver of any conditions precedent to the consummation of such acquisitions (including the receipt of any requisite regulatory and third-party approvals). The Company believes the pro forma results presented provide relevant and useful information for investors because they clarify the Company’s actual operating performance, make it easier to compare the Company’s results with those of other companies and allow investors to review performance in the same way as the Company’s management. Since these measures are not calculated in accordance with IFRS, they should not be considered in isolation of, or as a substitute for, our reported results as indicators of the Company’s performance, and they may not be comparable to similarly named measurements from other companies.

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SLANG WORLDWIDE

Q1 2019 HIGHLIGHTS 1) Please see “Use of Non-IFRS Measures”

Branded Units Sold

1.13M

Revenue

$7.2M

Gross Margin

45%

Q2 2019 HIGHLIGHTS

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SLANG WORLDWIDE

KEY MESSAGES

§ Momentum continues through Q2 2019 § Strong organic revenue growth and demand for SLANG’s portfolio of brands and products

§ 1.1M Branded Units Sold – Branded units sold represents the number of finished goods purchased by consumers and illustrates how customers are voting with their dollars. Branded unit volumes have increased 16% QoQ. § 74M Branded servings, avg of 800,000+ branded servings a day - Branded servings measures the amount of experiences consumers are having with our brands. Brand experiences lead to brand loyalty, which is core to creating sustained brand value. Branded servings are up 74% QoQ. § 2,600 retail stores selling branded products from Slang’s Portfolio – SLANG has one of the largest distribution footprints in the industry and will continue to leverage its extensive distribution network and corporate development activity to grow its business through the balance of 2019.

§ $7.2M Q2 2019 Revenue, Up 44% QoQ

§ Q2 revenue is primarily comprised of brand licensing activities and does not include economics generated by supply chain assets (manufacturing, wholesale, distribution) in the Slang Network that are held under option via the Organa Brands acquisition. § Integration of acquired assets underway, productivity and synergy capture expected throughout 2019.

§ Providing updated full-year guidance of $70M - $100M with consolidation of SLANG Worldwide Network assets & previously announced acquisitions

§ Revised full year guidance is a reflection of changing industry market conditions and management's strategic decision to focus on execution and brand leadership in core markets & reprioritizing select initiatives in emerging markets as part of the 2020

perating plan.

KEY MESSAGES

§ $22M Q2 2019 Pro Forma Revenue(1)

§ Pro Forma revenue includes the impact of previously announced proposed acquisitions and investments, including the exercise

f options to consolidate SLANG Network assets, including NS Holdings (NSH) & Allied Concessions Group (ACG), which will

unlock economics from manufacturing, wholesale and distribution activities in future reporting periods.

1) Please see “Use of Non-IFRS Measures”, “”Pro Forma Financial Information” and “Future Oriented Finance Information”

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SLANG WORLDWIDE

$5M (1)

Q1 ‘19

$7M

Q2 ‘19

REVENUE

(IN MILLIONS) QoQ growth

44% 44%

ADJUSTED GROSS PROFIT

(IN MILLIONS)

$2.2M

Q1 ‘19

$3.2M

Q2 ‘19

Q2 EARNINGS – FINANCIALS

45% 45%

QoQ growth

1) SLANG completed the acquisitions of National Concessions Group, Inc. (“Organa Brands IP Portfolio”) and NWT Holdings, LLC (“Firefly”) on January 22, 2019 (the “Acquisitions”). This amount includes operating revenue of Organa Brands IP Portfolio and Firefly from January 1, 2019. Revenue from January 1 to March 31, 2019, excluding revenues of Organa Brands IP Portfolio and Firefly prior to the acquisitions was $4 million. ±

SLIDE 6

SLANG WORLDWIDE

BRANDED UNIT SALES

1.13M

BRANDED UNITS SOLD IN Q2(1)

1) Please see “Use of Non-IFRS Measures”

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SLANG WORLDWIDE

BRANDED UNIT SALES

74M

Q2 BRANDED SERVINGS(1)

1) Please see “Use of Non-IFRS Measures”

SLIDE 8

SLANG WORLDWIDE

BRANDED UNITS SOLD

(IN MILLIONS) QoQ Growth

+1 +16%

BRAND KPI’S

Q2 EARNINGS – KPI OVERVIEW

BRANDED SERVINGS

(IN MILLIONS) QoQ Growth

+4 +45%

51M 74M

Q1 ’19 Q2 ’19

1) Please see “Use of Non-IFRS Measures”

0.98 M

Q1 ‘19

1.13M

Q2 ‘19

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SLANG WORLDWIDE

Multiple product SKUs regularly ranked among the highest- selling Washington

#5 Vape in Oregon #3 Pill in Colorado

Q2 BRAND LEADERSHIP HIGHLIGHTS

#1 Vape Colorado #1 Vape New Mexico #1 Vape Vermont #2 in Nevada #2 selling cannabis brand of all time

Q2 BRAND LEADERSHIP

#2 Gummy in Nevada #6 Gummy in California #6 Gummy in Colorado #2 Distillate in Arizona #2 Distillate in California #2 Distillate in Vermont #4 Distillate in Oregon

1) Please see ”Pro Forma Financial Information” Sources: Data reflects April 2019 – June 2019 retail sales sourced from BDS Analytics Inc. Product rankings in NM, NV,OR, VT and WA are sourced from proprietary POS sales data. Lifetime data reflects January 2014 - June 2019 retail sales sourced from BDS Analytics Inc

(1) (1)

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SLANG WORLDWIDE

2019

Q2 ’19 BUSINESS HIGHLIGHTS

JAN - MAR APR MAY JUN

§ April 16: Announced Arbor Pacific acquisition § May 2: Launched SLANG Health & Wellness division § May 2: Entered partnership with Green Lane § May 14: Announced LBA Global acquisition ( 1 ) § May 21: SLANG Investee, Agripharm Corp, secured outdoor cannabis license § May 23: Launched Firefly 2+ § June 26: Entered Oklahoma market with Elite Cultivation partnership § June 28: Accelerated Warrant Expiration Date – 98% of total warrants exercised

JUL - SEP

STRONG MOMENTUM IN 2019 1) Please see ”Explanatory Note Regarding Certain Proposed Transactions”

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SLANG WORLDWIDE

THE SLANG WORLDWIDE NETWORK

HOW WE MAKE MONEY

In Q2 our Company generated revenues and cash flows in two primary ways:

Collecting licensing fees and selling certain product components such as flavouring

concentrates/bases, packaging and hardware pieces

Selling certain non-plant touching products, such as our Firefly vaporizer

We generally sell these products to our brand licensees within The SLANG Network. The SLANG Network is a combination of licensed cannabis manufacturers, distributors and ecommerce distribution platforms that sell our branded products in 12 US states, and 5 continents and in over 2,600 stores. The SLANG Network provides a capital efficient and scalable platform through which SLANG drives brand value creation. Through this Network, we continue to expand our presence in both established and emerging cannabis markets around the world.

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SLANG WORLDWIDE

We are a global business that operates on a local scale, in every community where we do business. We are able to create global reach with local focus because of the strength of the SLANG Worldwide Network, which comprises our company and our Network partners worldwide. The SLANG Worldwide Network is not a single entity from a legal or managerial perspective, and the company does not own or control all of our Network partners. While many view our company simply as “SLANG”, our Network operates through multiple local channels. The primary way that our products reach the marketplace starts with SLANG, which manufactures and sells product formulation bases and packaging to Network

perations.

SLANG also owns the brands and is responsible for consumer brand marketing and sales

initiatives. Our Network partners manufacture, package, and distribute final branded products

to retail customers, who then sell our products to consumers. All Network partners work closely with retail customers to execute localized strategies developed in partnership with SLANG. Retail customers then sell our products to consumers at an avg rate of 1 Slang branded product sold every 7 seconds, and over 800,000 branded servings a day

THE SLANG WORLDWIDE NETWORK

THE SLANG NETWORK

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SLANG WORLDWIDE

HOW SLANG BRANDS GET TO MARKET

At the cannabis extraction and manufacturing stage of the SLANG Network, we have three types of business relationships: ▪ Regulated extractors/manufacturers in which we own a minority equity interest. ▪ Regulated extractors/manufacturers in which we have binding options to own equity. ▪ Regulated contract extractors/manufacturers which operate entirely at arm’s length. We authorize these extractors/manufacturers to produce and wholesale our branded goods to retailers. Manufacturers in which our Company has no ownership interest or a non-controlling ownership interest, represented the majority of worldwide branded unit volume of the Company in the quarter ended June 30, 2019. Generally, the Company’s

perations which license our brands, sell ingredients and components to third-party

manufacturers, generate higher gross margin, but lower net operating revenue, than our extracting/manufacturing operators, which generate higher net operating revenue, but lower gross profit margins.

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SLANG WORLDWIDE

Q1 FINANCIAL SNAP SHOT

Q2 FINANCIAL SNAPSHOT

1) Please see “Use of Non-IFRS Measures”

SLANG SELECT FINANCIALS

Q2 2019 (000’S) Q1 2019 (000’S) Q2’19 vs Q1’19 ($) (000’S)

Revenue $ 7,194 $ 4,006 $ 3,187 Cost of goods sold $ 3,927 $ 4,230 $ (304) Gross Profit $ 3,267 $ (224) $ 3,491 % Gross Margin 45%

51% Operating Expenses $ 12,859 $ 12,393 $ 466 EBITDA $ (4,288) $ (7,645) $ 3,357 Other Expenses1 $ (18,628) $ 8,718 $ (27,347) Net Income $ 14,340 $ (16,364) $ 30,704 Adjustments1 $ (15,973) $ 15,348 $ (31,320) Adjusted EBITDA $ (1,633) $ (1,016) $ (617)

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SLANG WORLDWIDE

SIGNIFICANT UPSIDE POTENTIAL

DESCRIPTION AUTHORIZED CAPITAL OF THE COMPANY OUTSTANDING AS AT THE DATE OF THIS PRESENTATION Common Shares Unlimited 222,889,294 Restricted Voting Shares Unlimited 17,500,000 Warrants N/A 78,017,421(1) Call Options N/A 82,500,000(2) Convertible Promissory Note N/A 12,424,792(3) Stock options Up to 10% of the I/O Common Shares 11,225,888 Restricted Share Units 20,000,000(4) 2,300,000

SLANG BUSINESS STRUCTURE

SLANG CAPIT ALIZA TION

Notes: 1. Includes 49,023,521 warrants issuable to Canopy Growth Corp. as calculated and described in our Management Discussion and Analysis for the period ended June 30, 2019. 2. As part of the acquisition of NCG, the Company also acquired options to acquire a 100% interest in Allied Concessions Group, Inc. (“ACH”) and NS Holdings Inc. (“NSH”). To exercise the option in ACG the Company must issue an aggregate of 33,000,000 Common Shares or Restricted Voting Shares (or a combination thereof); to exercise the option in NSH the Company must issue an aggregate of 49,500,000 Common Shares or Restricted Voting Shares (or a combination thereof), the options to acquire either entity expire 36 months after the NCG acquisition, being January 22, 2022 (the “Call Options”). 3. Subject to conversion by The Purple Company Inc., the USD amount of the outstanding principal elected to be converted at time of conversion to determine the number of Common Shares to be issued. 4. The aggregate number of Common Shares available for issuance from treasury under the Restricted Share Units plan shall be 20,000,000 Common Shares, provided that the aggregate number of Common Shares available for issuance under the plan together with all other Common Share compensation plans such as the Stock Option plan, may not exceed 10% of the issued and outstanding Common Shares at any given time.

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SLANG WORLDWIDE

FULL YEAR GUIDANCE

Considerations:

Continued execution of growth strategy by extension of brands into core markets as well as expansion of

distribution capabilities to additional retail stores in core markets

The successful completion of previously announced acquisitions and exercise of SLANG Network options.
Expansion of product categories and launches of new products, including the launch of SLANG Health &

Wellness, Firefly 2+ and the Firefly Mini.

UPDA TED FULL YEAR 2019 GUIDANCE

$70-100M

Annualized Net Operating Revenue

50-60%

Gross Margin

1) Please see “Future Oriented Financial Information”

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SLANG WORLDWIDE

WE HA VE ONE OF THE MOST DIVERSE AND WIDEL Y DISTRIBUTED PORTFOLIOS OF BRANDS & PRODUCTS IN THE CANNABIS INDUSTRY

States in the US1

13 2,600+

Stores selling products

Products sold on average every 4 seconds across the US Continents where SLANG products are sold Flower Concentrates Edibles Beverages Vape Pens & Disposables Hardware

BUILDING FROM A STRONG FOUNDATION

CONSUMER CENTRIC PRODUCT PORTFOLIO BEST IN CLASS BRAND BUILDER WIDESPREAD DISTRIBUTION STRATEGIC PARTNERS

(1) (1)

1) Please see ”Pro Forma Financial Information”

SLIDE 18

SLANG WORLDWIDE

§ Portfolio of industry leading brands; operating in attractive growth categories § Capital-light organization with one of the most focused, scalable, capital efficient, and high-value strategies in the cannabis industry § One of the largest distribution footprints in US Cannabis; well distributed in key markets and driving penetration in new and emerging markets § Management team with proven track record in the cannabis industry

SIGNIFICANT UPSIDE POTENTIAL

WE ARE FOCUSED ON DELIVERING SHAREHOLDER V ALUE

SLANG BUSINESS STRUCTURE

SLIDE 19

For additional information please contact:

INVESTORS@SLANGWORLDWIDE.CO

Instagram: Twitter: @SLANGWORLDWIDE @SLANGWORLDWIDE