HempFusion Reports Q1, 2021 Financial Results

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HempFusion Wellness Inc. (TSX:CBD.U) (OTCQX:CBDHF) (FWB:8OO) ("HempFusion" or the "Company"), an industry leader in full spectrum cannabidiol (CBD) hemp extract wellness products and probiotics, today reported financial results for the first quarter ended March 31, 2021. All dollars are stated in US Dollars.

Q1-2021 Financial Highlights

  • Consolidated revenue increased 7.6% to $983,496 from $913,646 in Q4-2020

  • DTC sales increased 59.3% to $244,255 from $153,305 in Q4-2020

  • B2B net revenue decreased 2.8% to $739,241 from 760,341 in Q4-2020

  • International sales increased to $75,994 from nil in Q4-2020

  • Gross profit of $280,205 or 28.5% of net revenue

  • Operating expenses were $6,306,703, an increase of 42.9% from $4,414,792 in Q1-2020, primarily attributed to IPO related expenses as well as marketing and digital related expenses

  • Strong cash position ending the quarter at $17,074,030

Q1-2021 Business Highlights

  • Completed a $17 million initial public offering (IPO) and commenced trading on the Toronto Stock Exchange (the "TSX"), becoming the first U.S.-based CBD and wellness products company to list directly on the TSX (senior board).

  • Became the No. 2 most recognized CBD brand in America according to Brightfield Group

  • As of the end of January 2021, NielsenIQ data rank HempFusion as the No. 1 in product sales and units sold in one of the largest food/drug/mass ("FDM") retailers

  • Successfully launched and continue to lead the category in the fifth-largest retailer in the FDM channel

  • E-Commerce success has shown a 62% increase in on-line traffic with a significant increase in conversion including a shift from 16.8% on-line sales in Q4-2020 as a percent of net revenue to 24.8% in Q1-2021

  • The Company launched the Probulin store on Amazon and early 2021 traction is encouraging. Consolidated net revenue for the three months ended March 31, 2021 increased 7.6% quarter-over-quarter to $983,496 versus $913,646 in Q4-2020. Direct to consumer ("DTC") e-commerce net revenue increased 59.3% reflecting increased marketing efforts, a targeted DTC team and targeted digital promotions.

  • Not only did sales increase for both Probulin and HempFusion but the traffic has increased by 62% in Q1 2021 versus Q4 2020 with a conversion rate increase for Probulin of 2.1% to 3.2% and current conversion rate for HempFusion of 3.4%. E-commerce accounted for 24.8% of net revenue in the first quarter of 2021 versus 16.8% for Q4, 2020. HempFusion's Probulin has seen 10% or greater month-over-month growth since launching on Amazon.

  • Officially launched Probulin on the world's largest e-commerce platform, Alibaba's Tmall Global, with HempFusion CBD following in a subsequent Q2 event

  • Submitted dossier to the United Kingdom's Regulatory Food Safety Agency

"With nearly all international business paused due to COVID throughout 2020 and Q1 2021, and with slower than expected reopenings, the Company still achieved an incremental QoQ growth of 7.6%. Now, with vaccine rollouts taking place across the country, we are encouraged with reopening rates and excited that our sales, which currently take place in approximately 75% brick-and-mortar businesses, are beginning to reopen," commented Jason Mitchell, N.D., HempFusion's Co-Founder and Chief Executive Officer.

"We remain committed to developing new revenue channels and have entered additional countries including China, Ireland, and the United Kingdom, and we are excited with subsequent quarterly events in which new purchase orders were received, showing early signs of the return of international business. These international POs have the potential to drive millions in revenue. We are working feverishly to accelerate sales through organic channels and the continued pursuit of M&A opportunities; early indications have Q2 shaping up to be our best quarter yet," continued Dr. Mitchell.

Statements of Loss and Comprehensive Loss

The Below is from the Unaudited Condensed Interim Financial Statements for the Three Months Ended March 31, 2021 and 2020; Please Refer to the Complete Report, Including the Notes, Other Statements and Other Contents Therein.

Consolidated net revenue for the three months ended March 31, 2021 increased 7.6% quarter-over-quarter to $983,496 versus $913,646 in Q4-2020, and DTC e-commerce net sales increased 59.3% reflecting increased marketing efforts, a targeted DTC team, and targeted digital promotions. Site traffic increased by 62%, and conversion rates increased to 1.9%. DTC accounted for 24.8% of total revenue in the first quarter of 2021 versus 16.8% for Q4-2020.

Consolidated B2B net revenue decreased 2.8% to $739,241 from $760,341 in Q4-2020 reflective of the above-referenced growth in DTC and a decrease in conventional grocery.

International sales increased to $75,994 from nil showing a return to normal from Q4-2020, and early indication of future international orders accelerating and producing incremental quarterly gains. HempFusion maintains a leadership position in retailers across the United States, including the #1 in sales by dollar volume and SKUs in one of the top five largest FDM channel retailers.

Gross profit of $280,205 or 28.5% of net revenue is primarily attributed to improvement in inventory and supply chain management.

Operating expenses were $6,306,703, an increase of 42.9% from $4,414,792 in Q4-2020, primarily attributed to IPO related expenses, including D&O insurance and listing fees, as well as marketing and digital expenses.

Balance Sheet | Cash Position

The Below is from the Unaudited Condensed Interim Financial Statements for the Three Months Ended March 31, 2021 and 2020; Please Refer to the Complete Report, Including the Notes, Other Statements and Other Contents Therein.

The Company ended Q1-2021 with a strong cash position of $17,074,030 ensuring the capital requirements of the Company are met, with ample room for strategic M&A. The Company incurred $2,655,134 in general and administrative expenses and $3,651,569 in sales and marketing expenses.

"In 2019, HempFusion (combined with Probulin on a pro forma basis with respect to 2019) achieved net revenue of $4,627,544, followed by $3,823,638 in 2020. The impact COVID has had on our business is clear. We have adapted. It’s important to note we have strategically bolstered the Company’s online presence with the help of new channels such as Amazon for Probulin and Alibaba’s Tmall for both brands. Our efforts have resulted in early traction and success, as we continue to strengthen our foothold in the direct-to-consumer CBD market. This quarter showed a strong DTC sales increase of 59.3%. We expect this trend to continue as DTC now accounts for 24.8% of total revenue in the first quarter of 2021 versus 16.8% for Q4-2020," commented Dr. Mitchell.

Conference Call

Management of the Company will host a conference call to discuss the Company's first quarter 2021 results at Monday, May 17, 2021 at 4:15 p.m., Eastern Time. To participate in the call, please dial 888-506-0062. For international callers, dial 973-528-0011. Use Participant Code: 795055. To join the webcast: https://www.webcaster4.com/Webcast/Page/2710/41342.

A replay will be available from the Investor Relations section of HempFusion’s website at HempFusion.com/corporate-information.

ABOUT HEMPFUSION

HempFusion is a leading health and wellness CBD Company utilizing the power of whole-food hemp nutrition. HempFusion distributes its family of brands, including HempFusion, Probulin Probiotics, Biome Research, and HF Labs, to approximately 4,000 retail locations across all 50 states of the United States and select international locations. Built on a foundation of regulatory compliance and human safety, HempFusion’s diverse product portfolio comprises 48 SKUs including tinctures, proprietary FDA Drug Listed Over-The-Counter (OTC) Topicals, Doctor/Practitioner Lines and more. With a strong focus on research and development, HempFusion has an additional 30 products under development. HempFusion is a board member of the US Hemp Roundtable, and HempFusion’s wholly-owned subsidiary, Probulin Probiotics, is one of the fastest-growing probiotics companies in the United States, according to SPINs reported data. HempFusion’s CBD products are based on a proprietary Whole Food Hemp Complex™ and are available in-store or by visiting HempFusion online at www.hempfusion.com or www.probulin.com.

Follow HempFusion on Twitter, Facebook and Instagram and Probulin on Twitter, Facebook and Instagram.

FORWARD-LOOKING STATEMENTS

This news release contains forward-looking statements and forward-looking information within the meaning of Canadian securities legislation (collectively, "forward-looking statements") that relate to HempFusion’s current expectations and views of future events. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events or performance (often, but not always, through the use of words or phrases such as "will likely result," "are expected to," "expects," "will continue," "is anticipated," "anticipates," "believes," "estimated," "intends," "plans," "forecast," "projection," "strategy," "objective" and "outlook") are not historical facts and may be forward-looking statements and may involve estimates, assumptions and uncertainties which could cause actual results or outcomes to differ materially from those expressed in such forward-looking statements. No assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this news release should not be unduly relied upon. These statements speak only as of the date of this news release. In particular and without limitation, this news release contains forward-looking statements relating to the continued growth of the Company’s international business and revenue, the Company’s plans to accelerate sales, DTC sales expectations and the Company’s other plans, focus and objectives.

Forward-looking statements are based on a number of assumptions and are subject to a number of risks and uncertainties, many of which are beyond HempFusion’s control, which could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the impact and progression of the COVID-19 pandemic and other factors set forth under "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" in the annual information form of the Company dated March 31, 2021 and available under the Company’s profile on SEDAR at www.sedar.com. HempFusion undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. New factors emerge from time to time, and it is not possible for HempFusion to predict all of them or assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Any forward-looking statements contained in this news release are expressly qualified in their entirety by this cautionary statement.

Neither the TSX nor its Regulation Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this release.

HEMPFUSION WELLNESS INC
Unaudited Condensed Interim Consolidated Statements of Loss and Comprehensive Loss
(Express in US dollars)

For the three

For the three

months ended

months ended

March 31,

March 31,

2021

2020

$

$

Revenue, net of discounts

983,496

977,379

Cost of goods sold

703,291

944,756

Gross profit

280,205

32,623

Expenses

General and administrative

Note 14

2,655,134

2,176,528

Sales and marketing

3,651,569

2,238,264

Total expenses

6,306,703

4,414,792

Net loss from operations

(6,026,498

)

(4,382,169

)

Other (income) expenses

Other (income)

(102,465

)

(65,268

)

Interest expense

4,783

7,582

Change in fair value of derivative liabilities

Note 10

(64,387

)

Gain on derecognition of derivative liabilities

(70,809

)

Change in fair value of purchase consideration

Note 4

(36,342

)

177,275

Total other (income) expenses

(204,833

)

55,202

Income tax (recovery) expense

Net loss and comprehensive loss

(5,821,665

)

(4,437,371

)

Loss per common share - basic and diluted

(0.05

)

(0.04

)

Weighted average number of common shares - basic and diluted

116,351,760

99,699,196

HEMPFUSION WELLNESS INC.
Unaudited Condensed Interim Consolidated Statements of Financial Position
(Express in US dollars)

March 31,

December 31,

2021

2020

$

$ (Audited)

ASSETS

Current

Cash

17,074,030

9,262,517

Trade receivables

Note 5

341,026

457,058

Inventory

Note 6

2,931,910

2,576,866

Prepayments

Note 7

2,611,815

1,530,846

22,958,781

13,827,287

Property and equipment

Note 8

309,975

303,162

Right-of-use-assets

Note 9

211,003

225,589

Prepayments - non current

Note 7

259,997

Total assets

23,739,756

14,356,038

LIABILITIES

Current

Accounts payable and accrued liabilities

1,685,275

2,324,534

Derivative liabilities

Note 10

13,975,514

Lease obligations

Note 9

61,595

60,279

Purchase consideration payable

Note 4

1,330,757

1,367,099

3,077,627

17,727,426

Non-current

Lease obligations

Note 9

149,408

165,310

Total liabilities

3,227,035

17,892,736

SHAREHOLDERS' EQUITY

Share capital

Note 10

57,383,871

45,002,867

Warrant reserve

Note 10

17,412,878

1,572,556

Contributed surplus

Notes 10 and 11

5,455,635

3,805,877

Accumulated deficit

(59,739,663

)

(53,917,998

)

Total equity

20,512,721

(3,536,698

)

Total liabilities and shareholders' equity

23,739,756

14,356,038

View source version on businesswire.com: https://www.businesswire.com/news/home/20210517005906/en/

Contacts

Jason Mitchell, N.D.
Chief Executive Officer and Director
Email: ir@hempfusion.com
Phone: 416-803-5638

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