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.
For the three
For the three
For the six
For the six
months ended
months ended
months ended
months ended
June 30,
June 30,
June 30,
June 30,
2021
2020
2021
2020
$
$
$
$
Revenue, net of
discounts
1,232,942
670,728
2,216,438
1,681,303
Cost of goods sold
1,000,525
800,294
1,919,413
1,724,482
Gross profit (loss)
232,417
(129,566
)
297,025
(43,179
)
Expenses
General and administrative Note
15
2,894,723
1,910,788
5,549,857
4,066,990
Sales and marketing
3,673,780
1,463,003
7,325,349
3,760,593
Total expenses
6,568,503
3,373,791
12,875,206
7,827,583
Net loss from
operations
(6,336,086
)
(3,503,357
)
(12,578,181
)
(7,870,762
)
Other (income)
expenses Other (income)
(10,610
)
(6,500
)
(113,075
)
(71,768
)
Interest expense
4,464
16,714
9,247
24,296
Change in fair value of derivative liabilities Note 11
—
100,279
—
35,892
Gain on derecognition of derivative liabilities
—
—
(70,809
)
—
Change in fair value of purchase consideration Note 4
203,710
77,280
167,368
254,555
Total other (income) expenses
197,564
187,773
(7,269
)
242,975
Net loss and
comprehensive loss
(6,533,650
)
(3,691,130
)
(12,570,912
)
(8,113,737
)
Loss per common share
- basic and diluted
(0.06
)
(0.04
)
(0.11
)
(0.08
)
Weighted average
number of common shares - basic and diluted
116,852,879
99,699,196
116,852,879
99,699,196
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.
June 30, December 31,
2021
2020
$ $ (Audited)
ASSETS
Current Cash
11,370,824
9,262,517
Trade receivables Note 5
467,657
457,058
Inventory Note 6
2,831,938
2,576,866
Prepayments Note 7
1,596,179
1,530,846
16,266,598
13,827,287
Property and equipment Note 8
295,229
303,162
Right-of-use-assets Note 9
196,100
225,589
Prepayments - non current Note 7
242,815
—
Total assets
17,000,742
14,356,038
LIABILITIES
Current Accounts payable and accrued
liabilities Note 10
1,583,636
2,324,534
Derivative liabilities Note 11
—
13,975,514
Lease obligations Note 9
63,144
60,279
Purchase consideration payable Note 4
1,534,467
1,367,099
3,181,247
17,727,426
Non-current Lease obligations Note 9
132,956
165,310
Total liabilities
3,314,203
17,892,736
SHAREHOLDERS' EQUITY (DEFICIT)
Share capital
Note 11
57,590,356
45,002,867
Warrant reserve Note 11
17,206,393
1,572,556
Contributed surplus Notes 11 and 12
5,378,700
3,805,877
Accumulated deficit
(66,488,910
)
(53,917,998
)
Total equity (deficit)
13,686,539
(3,536,698
)
Total liabilities and shareholders'
equity
17,000,742
14,356,038
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210816005192/en/
Jason Mitchell, N.D. Chief Executive Officer and Director Email:
ir@hempfusion.com Phone: 416-803-5638
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