HempFusion Closes Acquisition of Apothecanna

DENVER–(BUSINESS WIRE)–HempFusion Wellness Inc. (TSX:CBD.U) (OTCQX:CBDHF) (FWB:8OO) (“HempFusion” or the “Company”), a leading health and wellness Company offering premium probiotic supplements and products containing CBD, is pleased to announce that it has completed its previously announced acquisition of APCNA Holdings LLC (“Apothecanna”) (the “Transaction”).

Transaction Highlights:

• Apothecanna had revenue of over $3.8 million in 2020, which now triples HempFusion’s historical proforma revenue to ~$12 million with significant expansion planned for 2021 and beyond, making it immediately accretive to the Company.
• Immediate distribution to an additional 1,800 stores, including CVS, materially increasing HempFusion’s retail distribution footprint.
• In addition to FDM and e-commerce, the Transaction provides added distribution channels, increasing HempFusion’s 5 channel strategy to 6 channels and bolstering topical product distribution sales.
• Robust eCommerce platform drives over 17,000 average monthly sessions, and nearly $2.0 million in gross sales per year with 76% gross margin historically.
• Product efficiencies across topicals line while providing a near term opportunity for expansion into ingestible products supported by HempFusion’s proprietary formulations.
• HempFusion’s substantial investment into regulatory compliance will help solidify Apothecanna’s leadership position in the CBD industry.

“With the recent Sagely Naturals acquisition and now closing of the Apothecanna acquisition, HempFusion is in its strongest position to date. Not only have we significantly increased our distribution footprint and product offerings, based on a 2020 proforma revenue basis of all entities combined, the acquisitions bring our historical revenue to nearly $12 million USD,” commented Jason Mitchell, N.D., Chief Executive Officer of HempFusion. “We look forward to benefiting from the Sagely Naturals and Apothecanna distribution footprints and products, which have been known for their strong topical products, and exploring opportunities to introduce HempFusion’s premium CBD ingestibles throughout their existing distribution points,” continued Dr. Mitchell.

The Transaction was completed pursuant to the terms of the unit purchase agreement dated May 14, 2021, as amended (the “Purchase Agreement”) among HempFusion, Apothecanna, all holders of Apothecanna interests (the “Sellers”) and Jeff Henretig, as representative of the Sellers. Under the Purchase Agreement, HempFusion has acquired 100% of the interests in Apothecanna for initial consideration of US$15 million (the “Initial Consideration”), of which (i) $13,875,000 was satisfied by the issuance of 11,633,622 common shares of the Company (“HempFusion Shares”) issued at the deemed value of approximately US$1.19 per HempFusion Share, being the volume weighted average trading price (“VWAP”) of HempFusion Shares on the Toronto Stock Exchange (the “TSX”) for the 30 trading days immediately prior to the date of the Purchase Agreement, and (ii) US$1.125 million (943,267 HempFusion Shares) is subject to a holdback to be released on the 18-month anniversary of the closing date of the Transaction (the “Closing Date”), subject to certain post-closing adjustments and indemnification claims, if any. In addition, the Company will pay the Sellers up to an additional US$10,000,000 (“Milestone Amount”) in cash, HempFusion Shares or a combination of both (at the election of HempFusion), subject to Apothecanna achieving certain revenue targets (with a minimum revenue threshold of US$6 million) within 12 months of the Closing Date.

The number of HempFusion Shares to be issued under the Milestone Payment, if any, will be calculated based on a deemed price which is the greater of (i) the VWAP of HempFusion Shares on the TSX for the 30 trading days immediately prior to the 12-month anniversary of the Closing Date, or (ii) $1.00 per HempFusion Share.

All HempFusion Shares issued in connection with the Purchase Agreement will be subject to contractual resale restrictions to be released over a period of 12 months from the issuance date as follows: (i) 34% will be released on November 30, 2021 (being four months after issuance), (ii) 33% will be released on March 30, 2022 (being eight months after issuance) and (iii) the remaining balance of 33% will be released on July 30, 2022 (being twelve months after issuance).

Further, the Company announces that Ian deQueiroz has resigned as a director of the Company effective July 30, 2021. The board of directors of the Company expresses their appreciation to Mr. deQueiroz for his contribution to the Company as a director. Mr. deQueiroz will continue in his role as Chief of Brand Strategy and Partnerships of the Company. Mr. deQuerioz will continue to be subject to insider filing requirements.

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.

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.

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 Transaction and related distribution, revenue and expansion opportunities, product efficiencies, compliance solidification 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.