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

Inner Spirit Holdings

Corporate Presentation

November 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 corporate retail model to the recreational cannabis industry. With 37 stores currently

• perating and a group of more than 100 franchise partners, select corporate

retail locations, and a proprietary brand portfolio under development, Inner Spirit is positioned as Canada's industry leader.

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Investment Highlights

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Canada's largest retailer in the recreational cannabis market by store count. The Canadian adult use market is currently worth up to $5.0B and is projected to grow to $7.0B by 2022. Low-cost and highly scalable franchising model to maximize ROI – more than 100 franchise locations either in operation or being developed in jurisdictions where permitted in Canada. Franchise system is being supported by corporate-owned stores in select markets. Strategic partnerships and collaborations with premium producers to create a fully integrated business model. Proven ability to license, open and

• perate cannabis store locations in

efficient manner. 37 stores located in AB, SK, BC. and ON with more than 40 projected by end of 2019. Proprietary house brands being developed to offer consumers premium product options and a market-leading retail experience. Highly experienced team and proven model with significant expertise in the cannabis, branding, consumer retail, real estate and franchising industries.

Meet the Team

Darren Bondar

President & CEO

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

∙ ∙ ∙

Chris Gulka

CFO

CPA and CFA with > 25 years business experience President of Working Capital Corporation since 1999 Founded Passport Energy Ltd., and was the CFO of Rochester Energy Corp.

∙ ∙ ∙

Cecil Horwitz

Business Development

Extensive experience in retail sales since 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

∙ ∙ ∙

Michael Ginevsky

Corporate Secretary

Corporate securities lawyer with experience in capital markets, corporate fjnance and M&A Since 2016, actively involved in advising businesses in the cannabis industry Law degree from the University

• f Alberta

∙ ∙ ∙

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 Manager

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

∙ ∙ ∙

Christine Smith

Marketing & Communications

10 years progressive marketing & sales experience with tier 1 global companies Signifjcant experience in brand execution with a track record of excellence in delivering results Bachelor of Management degree with a major in Marketing from the University of Lethbridge

∙ ∙ ∙

Board of Directors

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Darren Bondar

President & CEO

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

∙ ∙ ∙

Chris Gulka

CFO

CPA and CFA with > 25 years business experience President of Working Capital Corporation 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

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

• f Computer Engineering from

the UBC

∙ ∙ ∙

Larry Wosk

Director

15 years experience at the Sauder School of Business 25 years in senior management 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

∙ ∙ ∙

Corporate Highlights

Inner Spirit Holdings Ltd. is founded in Calgary, AB on March 16, 2017. ISH Formed Spiritleaf is first retail cannabis company granted membership in Canadian Franchise Association on June 16, 2017. CFA Membership Granted ISH awards its 100th franchise in February 2018 as it prepares for recreational cannabis legalization in Canada. Plans also established to operate complementary corporate stores in select locations. Franchise Concept Proven Inner Spirit is first cannabis retail and franchise company to complete an IPO and listing in Canada. IPO raises ~$3.75

• million. Common shares begin

trading on the CSE under the symbol “ISH” on August 1, 2018. Initial Public Ofgering Completed

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ISH unveils its Spiritleaf design

• n January 29, 2018.

Retail Store Concept Unveiled Spiritleaf opens corporate stores in 2019 in high-profile locations in Calgary, Edmonton, Canmore and Jasper to further build out its retail footprint as regulatory restrictions ease in Alberta. Corporate Stores Added to the Mix ISH completes a brokered

• ffering of secured convertible

debenture units for aggregate gross proceeds of ~$10 million

• n June 7, 2019. Key investment

support comes from strategic partners Auxly and Tilray. Financing Achieved With legalization on October 17, 2018, ISH opens Spiritleaf franchised stores in Alberta and Saskatchewan. Additional stores follow in 2019 with B.C. and Ontario markets added. Company’s first store in Ontario

• pens to fanfare on April 1, 2019

in Kingston. Stores Begin to Open ISH develops strategic partnerships, collaborations and investments with cannabis industry leaders such as Auxly Cannabis Group, HEXO Corp, Tilray and High Times magazine. Strategic Partnerships Delivered ISH continues to open stores in AB and B.C. and now has 37 stores operating across Canada. Legalization of edibles, extracts and topicals began October 17, 2019 as Cannabis 2.0 phase. Stores Opening at Rapid Clip

Canada’s New Growth Industry

Current consumers are expected to buy nearly two-thirds of products from legal retailers Legalization has attracted a more conservative experimenter – typically one who is aged 35-54, has a university education, and has family or other responsibilities With legalization, current frequent cannabis consumers are able to buy products more often Edibles, extracts and topicals entering market in late 2019, will drive further demand

∙ ∙ ∙

Current and likely consumers are purchasing the majority of products at physical retail locations Consumers are demanding 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 Cannabis

X X $7.0B by 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 network of recreational cannabis stores across Canadian jurisdictions where private distribution of cannabis is legal Sell select brands together with our proprietary licensed brands through

• ur own retail store network and other

distribution channels Utilize a low Cap Ex 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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A National Retail Network

Spiritleaf is Canada's leading recreational cannabis brand by store count

ALBERTA

∙ Currently tied as market leader in retail stores with 31 locations open. ∙ Corporate stores in Calgary, Edmonton, Canmore & Jasper ∙ Additional licenses expected on regular basis with

• ver 40 expected to open through 2019

BRITISH COLUMBIA

∙ 4 stores currently open (Castlegar, Maple Ridge, Penticton and Vernon) ∙ 2 stores in final stages of licensing ∙ Expected to reach Province's 8 store maximum

ONTARIO

∙ Retail partner store open in Kingston ∙ Secured prime locations and leases throughout Province ∙ Multiple franchises ready for licensing to open ∙ Projecting to reach Province's 75 store maximum

SASKATCHEWAN

∙ Province moves to open licensing market in 2020 with Spiritleaf expected to expand retail presence ∙ Moose Jaw store open ∙ E-commerce sales platform being developed

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The Space

Open spaced opportunity to re-imagine the typical retail environment of a cannabis store

The Retail Brand

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

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Franchise Model

First Cannabis company to receive membership in the Canadian Franchise Association

Best in Class

Best in class retail experience with more than 100 franchise partnerships with local entrepreneurs

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R E TA I L P E R F O R M A N C E : S Y S T E M W I D E

Spiritleaf experiencing month over month growth in system-wide retail sales.

May Jun Jul Aug Sep Oct

4,500,000 4,000,000 3,500,000 3,000,000 2,500,000 2,00,000 1,500,000 1,000,000 500,000 1,500,521

System-Wide Retail Sales (Canadian Dollars)

1,602,510 2,228,264 3,034,706 3,772,194 4,421,439

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

Anticipated 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.

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Strategic Partnerships

TSX.V: XLY Collaboration on retail initiatives including product acquisition and in-store marketing and branding Auxly holds ~13% of the outstanding ISH common shares TSX: HEXO ISH licensed to distribute and sell all High Times magazines in Spiritleaf stores ISH holds 11,000 shares of class A common stock of High Times Holding Corp.

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Retail distribution of Up Cannabis products and the creation of Up Cannabis-branded customer lounges in select Spiritleaf stores HEXO holds ~8% of the outstanding ISH common shares NASDAQ: TLRY Partnered and invested in ISH Collaboration agreement with Spiritleaf stores for High Park products and they support our charitable endeavours Tilray holds ~9% of the outstanding ISH common shares

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

Opportunity to participate in Canada’s emerging recreational cannabis market through largest national retail brand Platform to invest in a proven revenue-generating business model with more than 100 franchise agreements with local entrepreneurs in place supported by corporate-owned stores in select high-traffjc markets Bringing 20 years of franchise, branding, retail, marketing & real estate experience and a proven model to the recreational cannabis retail market Aligned with key strategic partners to create a fully integrated business model

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Investment Opportunity

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

Capital Structure (Q4 2019)

Common Shares Options and Warrants Convertible Debentures Total Equity Shares (fully converted)

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Top 5 shareholders own ~40% Capital light business model Share Purchase Warrants (ISH.WT) and 12% Senior Secured Convertible Debentures (ISH.DB) listed May 24, 2019 206,236,295 69,341,977 40,000,000 315,578,272

Headquarters

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

Contact

Darren Bondar, President & CEO invest@spiritleaf.ca 403-930-9300

www.innerspiritholdings.com