Abacus Health Products Announces Acquisition of Harmony Hemp
February 11th, 2020
Abacus Health Products, Inc. (CSE: ABCS, OTCQX:ABAHF) (“Abacus” or the “Company”) is pleased to announce that it has acquired the principal assets of the companies owning the Harmony Hemp™ brand for an aggregate consideration of US$5.5 million, payable in cash and subordinate voting shares of Abacus over a 24 month period in accordance with the terms of the acquisition agreement entered into on February 10, 2020. Harmony Hemp is a leading brand in CBD-infused personal care products with national distribution to more than 4,000 locations in major grocery and drugstores.
Through this strategic acquisition Abacus will be expanding its retail footprint by approximately 50% to over 12,000 retail locations and have, to the best of management’s knowledge, the largest retail footprint of topical CBD and hemp-infused products in the United States. Additionally, Abacus’ offering will expand to include a range of beauty and bath products currently offered by Harmony Hemp.
Perry Antelman, CEO of Abacus, said: “This acquisition is highly synergistic and brings our national distribution to the next level. With this acquisition, Abacus is one of the largest, if not the largest, suppliers and distributors in the United States of topical products infused with CBD and hemp in the F/D/M industry. Harmony Hemp has long-standing relationships with quality retailers in the F/D/M channel and highly complementary products with Abacus. Our shared desire to bring innovative products to market makes this strategic combination a natural fit. We are excited to have them join our dynamic team.”
Harmony Hemp, established in 2017 and based in Salt Lake City, markets personal care product lines in OTC Topicals, Bath and Beauty. The assortment of over 25 unique products includes:
- Bath and Beauty: Hemp Bath™ – Bath bombs, lotions, bath salts, oils, and soaps.
- OTC Topicals: Flexible™ & Neurocomfort™ – joint relief sprays, pain relief gels, roll-ons and lotions with active pharmaceutical ingredients.
The product variety provides retail partners cross-category assortment to help drive additional consumers and generate incremental sales.
Courtney Roundy, Founder and President of Harmony, said: “We chose to partner with Abacus because of their dedication to science, research and product efficacy; the primary reason we entered the CBD industry in the first place. Abacus was one of the only companies in the country that knew how to launch CBD topicals within the confines of regulatory compliance. This alliance allows us to utilize innovative research to bring the most effective CBD-infused products to our retail partners and their customers.”
Harmony Hemp has a presence in over 4,000 retail locations across the United States, of which approximately 3,400 do not overlap with Abacus’ retail presence. Approximately 2/3 of Harmony Hemps’ sales in 2019 were derived from the personal care bath products, with the other 1/3 derived from topical analgesic products. Harmony Hemp generated approximately US$2.2 million in revenue in 2019 and Abacus expects that revenue from the Harmony Hemp brand will grow over the next 12-24 months, mainly driven by increased retail store adoption.
In addition to the acquisition of the assets of Harmony Hemp, its two founders, Courtney Roundy and Miki Stephens, will be joining Abacus’ senior management team and support the growth of the combined business. Courtney Roundy has over 35 years of experience and existing relationships with major retail chains and will work closely with Abacus’ existing Sales team to further secure Abacus’ dominant position within the food/drug/mass channel.
Abacus currently intends to maintain the Harmony Hemp brand and expects to have the opportunity to leverage relationships with retailers carrying Harmony Hemp products. All of Harmony Hemps’ products are manufactured by third-party contract manufacturers. All commercial activities related to Harmony are planned to be integrated into Abacus’ existing infrastructure.
The acquisition was made through a newly created, wholly owned subsidiary called “Abacus Wellness, Inc.” Pursuant to the agreement, Abacus will pay a total consideration of US$5.5 million to acquire the principal assets of Benefits US, LLC, a Colorado limited liability company, and Harmony Products, LLC a Utah limited liability company, partly in cash and partly in subordinate voting shares of Abacus. The consideration of US$5.5 million payable pursuant to and subject to the terms of the acquisition agreement for the acquired assets consists of (i) US$2,743,806 in cash and (ii) US$2,756,194 in subordinate voting shares of Abacus at a price equal to the 10-day volume weighted average trading price of the subordinate voting shares of Abacus (converted to U.S. dollars) for the period ended February 7, 2020, with payment of both the cash and share consideration to be made over a period of 24 months. The consideration of US$5.5 million includes the repayment of certain obligations and indebtedness. Abacus will not be assuming any third-party debt obligations as a result of the transaction. Pursuant to the agreement the cash portion of the consideration includes cash payments of approximately US$1.9 million, US$0.7 million and US$0.1 million to be made in 2020, 2021 and 2022, respectively.
This news release contains forward-looking statements or information (collectively, “forward-looking statements”) within the meaning of applicable securities legislation, including, without limitation, statements relating to the integration and future performance of the acquired Harmony assets, the execution of the Company’s growth strategy, further expansion of the stores in which products of Abacus and Harmony are available, and the future performance of Abacus. 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 the Company’s control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements, including assumptions regarding the Company’s ability to efficiently operate its business, market and economic conditions, business prospects or opportunities, future plans and strategies, anticipated events and trends, and regulatory changes that may affect the Company and its customers and industry.
There can be no assurance that actual results will not differ materially from those expressed or implied in forward-looking statements. Undue reliance should not be placed on forward-looking statements. Additional information about these risks, uncertainties and assumptions is contained under “Risk Factors and Uncertainties” in the Company’s annual information form dated April 12, 2019, which is available under the Company’s SEDAR profile at www.sedar.com. Each forward-looking statement speaks only as of the date hereof, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
About Abacus Health Products, Inc.
Abacus is engaged in the development and commercialization of over-the-counter (OTC) topical medications with active pharmaceutical ingredients. Abacus’ products contain organic and natural ingredients, including hemp extract or oil containing CBD from Cannabis Sativa L. plant. Abacus’ products are aimed at the rapidly growing markets for topical pain relief and therapeutic skincare and are based on proprietary patent-pending formulations to provide safe and effective relief. Abacus currently offers two lines of products: CBD CLINIC™, marketed to the professional practitioner market, and CBDMEDIC™, marketed to the consumer market. Abacus’ products are offered across the United States and are produced by a contract manufacturer in an FDA registered and audited manufacturing facility.
To learn more about Abacus, visit www.abacushp.com
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