Year Over Year Revenues Up 84%, Q2 net revenues up 25% sequentially over Q1 and Year Over Year Ecommerce Sales Up 268%

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 second quarter ended June 30, 2021. All dollars are stated in US Dollars.

“With year over year growth in net revenues of 84%, year over year direct to consumer ecommerce revenues up 268%, and our leading regulatory preparedness, HempFusion’s momentum shows it to be the right company, at the right time, to lead this new category into the future,” stated Dr. Jason Mitchell, HempFusion CEO. “Additionally, subsequent to the quarter end, the Company closed on two accretive acquisitions and highly respected CBD brands, adding significant new distribution points and products,” continued Mr. Mitchell.

Second Quarter 2021 Financial Highlights

• Revenue increased 25% to over $1.2 million for Q2 2021 compared to $983,496 in Q1 2021 and increased 84% compared to $670,728 in Q2 2020.
• Direct-to-consumer eCommerce sales increased 37% to $334,322 from $244,255 in Q1. Website based sales increased 54% and DTC including Amazon, Walmart and Tmall increased 23% sequentially in Q2.
• B2B net revenue increased 22% to $898,620 in Q2 2021 from $739,241 in Q1 2021 and a 55% increase year-on-year compared to $579,910 in Q2 2020.
• International sales began to return following Covid, increasing by 68% to $203,296 in Q2 2021 from $75,994 in Q1 2021.
• Launched private label division and were immediately awarded a 10-product private label contract with a top publiclytraded national grocery retailer. We believe this division could represent multi million dollars in revenue within the next few years for both CBD and non-CBD products.
• Gross profit was $232,417 or 19% of net revenue versus -19% in the prior year quarter, representing a 38% improvement reflective of more effective inventory management and improvements in managing production costs.
• Operating expenses were $6,568,503, an increase of 4% from $6,306,703 in Q1 2021, primarily attributed to acquisition related expenses as well as marketing and digital related expenses.
• Strong cash position ending the quarter at $11.4 million.

Second Quarter 2021 Business Highlights

• The Company launched its highly anticipated CBD Gummy line in early August 2021, utilizing HempFusion’s proprietary broad-spectrum hemp extract, never an isolate. The gummies feature natural functional ingredients and premium flavors, two popular consumer driven trends. According to Brightfield Group, the CBD gummy market is set to achieve $500 million in sales in 2021, up 44% from 2020, and is expected to reach $1.8 billion in 2026.
• In June 2021, HempFusion launched its new EU compliant Probulin in Boots Pharmacies in Ireland, establishing a foundation for further opportunities and expansion in retailers across Ireland, the United Kingdom and Europe. Boots Ireland is part of the Retail Pharmacy International Division of one of the world’s largest purchasers of prescription drugs and many other health and well-being products, with one of the largest retail footprints in the world.
• In early June 2021, HempFusion launched its sixth distribution channel, Private Label. The Company secured a 10 SKU private label deal with a leading national publicly traded grocery retailer. The initial order for approximately $250,000 was shipped in July 2021. The Company anticipates this particular account to generate north of $500,000 for 2021 and approximately $1 million or more in 2022.
• HempFusion’s ecommerce business is growing. New customer acquisition increased online by 69.7% over Q1, 2021, and not only did online increase for both Probulin and HempFusion, but traffic increased by 46.06% over Q1, 2021. Probulin’s average conversion rate has remained very strong and consistent at 3.21%, and HempFusion has demonstrated a dramatic increase now at 4.37%.
• In May 2021, HempFusion announced an exclusive partnership with two-time Olympic Gold Medalist and five-time World Champion, Kaillie Humphries. HempFusion CBD and Probulin Probiotics will be Kaillie’s exclusive sponsors in their respective categories through February’s Olympic Games in Beijing 2022 where she is the front-runner for gold for Team USA in both the Two-woman Bobsled and the newly introduced Women’s Monobob.
• Subsequent to the quarter end, HempFusion completed both of the previously announced acquisitions of Sagely Enterprises Inc. (Sagely Naturals) and APCNA Holdings LLC (Apothecanna). These acquisitions greatly expand the distribution footprint of the Company to over 15,000 locations providing the opportunity to expand with ingestible products. The complimentary product lines also provide the combined entity with a broader coverage of demographics.

Statements of Loss and Comprehensive Loss

The Below is from the Unaudited Condensed Interim Financial Statements for the Three and Six Months Ended June 30, 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 June 30, 2021 increased 84% year-over-year to $1,232,942 versus $670,728 in Q2-2020, and increased 25% over Q1-2021, and DTC e-commerce net sales year-over-year increased 268% reflecting increased marketing efforts, a targeted DTC team, and targeted digital promotions. New customer acquisition increased online by 69.7% over Q1, 2021, and not only did online increase for both Probulin and HempFusion, but traffic increased by 46.% over Q1, 2021. Probulin’s average conversion rate has remained very strong and consistent at 3.21%, and HempFusion has demonstrated a dramatic increase now at 4.37%.

Consolidated B2B net revenue increased 55% to $898,620 in Q2 2021 from $579,910in Q2-2020 and B2B net revenue increased by 22% to $898, 620 in Q2 2021 from $739,241 in Q1 2021. International sales began to return following Covid, increasing by 68% to $203,296 in Q2 2021 from $75,994 in Q1-2021. HempFusion maintains a leadership position in retailers across the United States, including the #1 in sales by dollar volume and unit sales in one of the top five largest FDM channel retailers.

Gross profit of $232,417 or 19% up from -19% in Q2 2020 of net revenue is primarily attributed to improvement in inventory and supply chain management. These efforts continue to make large improvements.

Operating expenses were $6,568,503, an increase of 95% from $3,373,791 in Q2-2020, primarily attributed to acquisition related expenses, 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 June 30, 2021 and 2020; Please Refer to the Complete Report, Including the Notes, Other Statements and Other Contents Therein.

The Company ended Q2-2021 with a strong cash position of $11,370,824. Incurring $2,894,723 in general and administrative expenses and $3,673,780 in sales and marketing expenses.

Management of the Company will host a conference call to discuss the Company’s second quarter 2021 results on Monday, August 16, 2021 at 8:30 a.m. (Eastern Time). To participate in the call, please dial 888-506-0062. For international callers, please dial 973-528-0011. Use Entry Code: 746381. To join the webcast, please visit https://www.webcaster4.com/Webcast/Page/2710/42495

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 over approximately 15,000 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, anticipated growth of the Company’s private label division, including private label orders from the noted leading national publicly traded grocery retailer, expansion opportunities for the Company’s ingestible products 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.

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