HempFusion Reports Q2, 2021 Financial Results

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DENVER–(BUSINESS WIRE)–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%…

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