HempFusion Wellness Inc. (TSX:CBD.U) (US: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 it has entered into a
Purchase Agreement (as defined below) to acquire 100% interest in
APCNA Holdings LLC (“Apothecanna”). Established in 2009,
Apothecanna pioneered cannabis-powered body care and topicals, and
was the first topicals brand to expand nationally and obtain a
Federal Trademark. Focused on the premium recovery, pharmacy, and
spa segments, Apothecanna has established itself as an industry
leader in the development of innovative, all-natural CBD
products.
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the full release here:
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Apothecanna Products (Photo: Business
Wire)
Apothecanna is an established brand in the premium CBD topicals
space with significant distribution in the North American market,
most notably though CVS and 7th Sense. The company also has access
to the Canadian marketplace though a strategic business
relationship, giving it significant market share in the Canadian
topicals space (#1 topical in 2020 on the OCS).
A key advantage in the current business environment is a strong
ecommerce focus and Apothecanna embodies this with approximately
50% of revenues being generated from this channel. The focus on
this higher margin, Direct-to-Consumer business drives corporate
gross profit margins of approximately 70%.
Strategic Rationale
- Revenue of over $4 million in 2020 doubles HempFusion’s
historical revenue with significant expansion planned for 2021 and
beyond, making it immediately accretive to the Company at
closing.
- Immediate distribution to an additional 1,800 stores, including
CVS, materially increases HempFusion’s retail distribution
footprint.
- In addition to FDM and e-commerce, this 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 $2.0MM 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.
“We are incredibly excited to enter into this agreement with
Apothecanna, which, on closing, will have an immediate impact on
HempFusion’s revenue while significantly bolstering our
distribution and eCommerce platforms,” stated Jason Mitchell, N.D.,
HempFusion’s Co-Founder and Chief Executive Officer. “We look
forward to working to close the transaction as soon as possible,”
continued Dr. Mitchell.
“Quality, customer centricity, and innovation have always been
core pillars of Apothecanna’s strategy since our founding almost
twelve years ago,” said Jeff Henretig, President of Apothecanna.
“In HempFusion, we found a partner that has a similar and
complimentary focus, with the capabilities to bring Apothecanna
into more doors and homes across both the US and abroad. We look
forward to joining the HempFusion family and empowering even more
people to live healthier lives. We are deeply thankful to our
founding team for getting us to this stage.”
Terms of the Agreement
Pursuant to a unit purchase agreement dated May 14, 2021 (the
“Purchase Agreement”) among HempFusion, Apothecanna, all holders of
Apothecanna interests (the “Sellers”) and Jeff Henretig, as seller
representative, HempFusion will acquire 100% of the interests in
Apothecanna for initial consideration of US$15 million (the
“Initial Consideration”) payable in cash, common shares of the
Company (“HempFusion Shares”) or a combination of both (at the
election of the Company), with any HempFusion Shares so issued to
be valued at a deemed price per HempFusion Share of approximately
US$1.19, 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 (the “Transaction”). US$1.125 million of the Initial
Consideration is subject to a holdback to be released on the 18
month anniversary of the closing of the Transaction (“Closing”)
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
twelve months of Closing.
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 Closing, 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 Closing as follows: (i)
34% will be released on the four month anniversary of the Closing,
(ii) 33% will be released on the eight month anniversary of the
Closing and (iii) the remaining balance will be released on the 12
month anniversary of the Closing.
Completion of the Transaction is subject to a number of terms
and conditions as set forth in the Definitive Agreements, including
(among other things) the consent of all Apothecanna convertible
securityholders to convert their securities pre-Closing, the
receipt of certain regulatory and third-party approvals, the
approval of the TSX and certain other closing conditions customary
in transactions of this nature.
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.
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
closing of the Transaction and related distribution, revenue and
sales expansion opportunities 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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version on businesswire.com: https://www.businesswire.com/news/home/20210517005305/en/
Jason Mitchell, N.D. Chief Executive Officer and Director Email:
ir@hempfusion.com Phone: 416-803-5638
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