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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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 7^th 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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