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HempFusion Wellness Announces Preliminary Annual and Q4 2021 Results

04 April 2022

HempFusion Wellness Inc. (TSX:CBD.U) (OTCQB:CBDHF) (FWB:8OO) (“HempFusion” or the “Company”), a leading health and wellness Company offering premium probiotic supplements and products containing CBD, announces its preliminary and unaudited Q4 and Annual 2021 results.

Fourth Quarter 2021 Business and Unaudited Financial Highlights:

  • Q4 2021 net revenue of $3.7 million increased approximately 66% over Q4 2020 pro-forma net revenue of $2.2 million and 19% versus Q3 2021.
  • Gross Profit was $1.6 million or 43% of net revenue in Q4 unchanged from the prior quarter, representing no decline even though rising production and material costs were experienced.
  • After quarter end, the Company implemented a strategic price increase that is expected to drive gross margins directionally towards its goal of 50% or greater for 2022.
  • Cost savings initiatives announced during the quarter helped reduce operating expenses by over $1.1 million.
  • The quarter included only a partial impact from recent cost savings initiatives, and the Company now expects its ongoing efficiency efforts will drive at least a $6 million reduction in operating expenses in 2022 versus prior expectations of $4 million.

2021 Preliminary and Unaudited Annual Results:

  • 2021 net revenue of $9.1 million increased 36% over the prior year. Including the impact of acquisitions, consolidated pro-forma net revenue for 2021 was $12.1 million.
  • Preliminary gross profit margin for 2021 more than doubled from 16% to 36%, mainly due to the addition of the higher margin acquisitions.
  • Prelim operating expenses for the year increased 12% on a pro-forma basis. Cost savings initiatives implemented late in Q4 resulted in a 15% OPEX reduction during the quarter with cost savings expected to carry into 2022 and beyond.

Other Key Highlights:

  • Due to Organic expansion and through the Acquisition, the Company and its family of brands can be found in more than 18,000 retail locations.
  • The Company’s brand Probulin Probiotics achieved MOH (Ministry of Health) Registration and assigned DDC’s (Dubai Drug Code) numbers authorizing four of its products to be sold as drugs in the UAE. This is a significant accomplishment, making these products eligible to be prescribed by physicians, dispensed by pharmacists, and paid for by health insurance.
  • On December 31, 2021, HempFusion’s exclusive and proprietary hemp-derived CBD extract achieved self-affirmed Generally Recognized as Safe (GRAS) status making the Company one of the select few that stand fully prepared to meet or exceed US & global compliance standards. The Company expects this status to drive significant incremental revenue growth at retail.
  • Probulin Probiotics finished 2021 as the fastest growing probiotic company in the top 12 brands according to SPINS data and has achieved this for approximately three years in a row.
  • Sagely Naturals maintained its #1 spot in Drug with over 25% market share and #1 in MULO (Multi Outlet) with an over 14% market share, according to SPINS IRI data.

Because the Company’s auditors experienced unavoidable capacity challenges with a reduction of available auditors and support manpower, along with the complexity of the audit given the consolidation of two acquisitions during the year that previously had not been audited, the filing of the Company’s audited financial statements and related management discussion and analysis, related CEO and CFO certifications and annual information form for the year ended December 31, 2021 have been delayed (collectively, the “Annual Financial Filings”). The Company anticipates that it will be able to file the Annual Financial Filings by or before April 29, 2022.

Due to the delay in the filing of the 2021 Annual Financial Filings, Pursuant to National Policy 12-203 Management Cease Trade Orders (“NP 12-203”) the Company has voluntarily applied to the applicable securities regulatory authorities and been approved for a management cease trade order related to the Company’s securities to be imposed against the Chief Executive Officer and Chief Financial Officer of the Company to trade securities of the Company (the “MCTO”). The MCTO will be in effect until the Annual Financial Filings are filed. All other securityholders will still be able to trade in the securities of the Company in accordance with applicable securities laws.

Until the Annual Financial Filings are filed and the MCTO has been revoked, the Company intends to continue to satisfy the provisions of the alternative information guidelines specified in NP 12-203 by issuing default status reports in the form of further press releases every two weeks.

About HempFusion Wellness Inc.

One of a select few hemp-derived CBD companies that are today fully prepared to meet or exceed expected global guidance, HempFusion Wellness Inc. is a leading health and wellness company whose family of premium consumer brands include HempFusion™, Sagely Naturals™, Apothecanna™, and Probulin Probiotics™, one of the fastest-growing probiotics companies in the United States according to SPINS reported data.

Among the handful of CBD companies who have achieved Self-Affirmed GRAS status, the HempFusion family of brands’ product portfolio comprises 112 SKUs including USDA Organic Certified Tinctures, proprietary FDA Drug Listed Over-The-Counter (OTC) Topicals, probiotic supplements and skin care products, a White Label division and more. With a strong focus on research and development, HempFusion Wellness has 43 products under development.

Available from more than 18,000 US retail locations across all 50 states, HempFusion Wellness products are also available in China, Mexico, Ireland, United Kingdom, United Arab Emirates, South Korea and Canada and may be purchased online from each brand’s website, The Probulin Store on Amazon.com, Alibaba’s Tmall.com, the world’s largest cross-border online marketplace, and a multitude of additional e-commerce sites.

For more information, visit www.hempfusion.com.

Follow HempFusion on Twitter, Facebook and Instagram.

Notes:
(1) Preliminary and unaudited financial results are subject to customary financial statement procedures by the Company and its auditors. Actual results could be affected by subsequent events or determinations. While the Company believes there is a reasonable basis for these preliminary financial results, the results involve known and unknown risks and uncertainties that may cause actual results to differ materially. These preliminary fiscal results represent forward-looking information. See "Forward-Looking Statements".

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 anticipated timing of filing the Annual Financial Filings, anticipated reduction in operating expenses in the Company’s fiscal 2022, the Company providing updates with respect to the Annual Financial Filings, statements in respect of the Company’s financial results for the three months ended March 31, 2021, and the filing of the financial statements and related management’s discussion and analysis in respect thereof and the Company’s other plans, focus and objectives.

Forward-looking statements are based on a number of assumptions including that the Company will be able to complete the Annual Financial Filings and file them with the securities regulatory authorities when anticipated. The forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company’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, that there may be continued delays with respect to preparation of and filing of the Annual Financial Filings, the duration of the MCTO, 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.

Financial Outlook

This press release contains a financial outlook within the meaning of applicable Canadian securities laws. The financial outlook has been prepared by management of the Company to provide an outlook for the Company's forecasted revenue for the three-month period ending March 31, 2021, and may not be appropriate for any other purpose. The financial outlook has been prepared based on a number of assumptions including the assumptions discussed under the heading "Forward-Looking Statements" above and assumptions with respect to market conditions, pricing, and demand. The actual results of the Company's operations for any period will likely vary from the amounts set forth in these projections and such variations may be material. The Company and its management have approved the financial outlook in this press release and believe that it has been prepared on a reasonable basis and such financial outlook is being provided for the purpose of providing further information about the Company's future business operations. However, because this information is highly subjective and subject to numerous risks, including the risks discussed under the heading "Forward-Looking Statements" above, it should not be relied on as necessarily indicative of future results.

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