HempFusion Wellness Inc. (TSX:CBD.U) (OTC:CBDHF) — A Solid Investment in the Rapidly Growing CBD Market

Summary

Have you heard the buzz? HempFusion has unlocked the CBD businesses winning approach and just went public on the Toronto Stock Exchange (the most-senior exchange in Canada) under the ticker (CBD.U). Here is how HempFusion’s interrupting the CBD space and providing excellent shareholder value:

• CBD is a breakout product that will grow to a massive $16.8 billion industry by 2025, according to Brightfield.
• HempFusion is the leading health and wellness CBD company with a diverse product portfolio targeting various health needs.
• HempFusion distributes its family of brands, including HempFusion, Probulin Probiotics, Biome Research, and HF Labs, to approximately 4,000 retailers across all 50 states of the United States and select international locations.
• HempFusion’s focus on regulatory compliance gives it an edge over its competitors — HempFusion is a board member of the US Hemp Roundtable.
• The company has plans to expand its product portfolio with an additional 30 products.
• International expansion will allow HempFusion to take advantage of growing markets abroad.
• HempFusion’s management team is extremely well accomplished and inspires confidence in the company’s future.
• 1st CBD company to list on the Toronto Stock Exchange — the senior exchange in Canada.

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About HempFusion Wellness Inc.

An Introduction to Cannabidiol (CBD)

CBD is the second most ubiquitous active ingredient in cannabis. It is obtained directly from the hemp plant, a cousin of the marijuana plant. The only difference between hemp and marijuana is the THC (tetrahydrocannabinol) content, responsible for the “high” feeling you get from cannabis. Hemp refers to cannabis with 0.3 percent or less THC content, while cannabis with higher than 0.3 percent THC content is the drug marijuana. Since the THC content of hemp is low, it is not likely to get you “high” — unlike marijuana. Also, unlike marijuana, CBD is legally accessible in most of the United States and all of Canada, without a medical cannabis license. In the United States, for example, it can be purchased at health and wellness retailers such as CVS Health, Rite Aid, and Walgreens.

CBD has various medical uses. Studies have shown that it is effective in treating a variety of ailments.

• CBD is commonly used for anxiety and insomnia, helping patients fall asleep and stay asleep.
• CBD is effective in treating childhood epilepsy syndromes, reducing the number of seizures in patients, or getting rid of them entirely in some cases.
• CBD is used to treat pain and inflammation due to arthritis and high levels of activity.
• CBD is also an ingredient in various products used for skincare, cosmetics, and haircare

The CBD Market

The United States CBD market is set to grow exponentially in the near future. According to Brightfield Group, the US CBD market had $4.1 billion in sales in 2019 and is projected to reach $16.8 billion by 2025 despite challenges due to COVID-19.

The pandemic has caused many retailers to temporarily shut down which has had a negative impact on CBD sales in 2020. Nevertheless, 2020 sales are expected to be 11% higher than 2019. The shutdown of many smaller CBD brands has left more market share available for bigger brands to swallow. While the pandemic has had a negative impact on the CBD market, the results of the US presidential election had a positive one.

Currently, marijuana is criminalized at the federal level, but it is believed that Biden will change that during his administration. Investors are optimistic about the cannabis industry, as evident in the increase in cannabis stock prices after the election. ETFMG Alternative Harvest ETF (NYSEARCA:MJ), currently the most prominent cannabis exchange traded fund, is up over 25% since November. CBD has become a consumer trend as an increasing amount of social media influencers are promoting it. The rapid growth resulted in brands developing a variety of CBD products including gummies, pills, and beverages.

Similar to the United States CBD market, the European CBD market is also poised for rapid growth. The CBD market had an estimated $318 million in sales in 2018 and Brightfield Group expects that number to grow by 400% by 2023. The European CBD market is young compared to the United States market, which allows established brands to compete over market share. While marijuana is permitted only for medicinal use in Europe, hemp-based CBD is legal in much of the continent. The overall global health and wellness market is growing which helps the CBD market, and CBD’s share of the health and wellness market is increasing.

HempFusion Wellness Inc. — Advantages Over Competitors

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 retailers 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 46 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.

HempFusion has a number of key advantages over its competitors.

1. Focus on Regulatory Compliance

HempFusion has an aggressive approach to regulatory compliance. The company is ahead of the curve when it comes to certifications and memberships (detailed below). This allows HempFusion to sell its products at big-box retailers not available to other CBD companies. Big box retailers drive the most revenue but require the highest regulatory standards. It could take a new entrant to the CBD market up to 24 months and significant capital to get certified. This barrier to entry will widen HempFusion’s economic moat, reducing risk for investors. Additionally, HempFusion is on the board of the US Hemp Roundtable, a group of CBD companies promoting safe CBD and hemp products.

HempFusion’s list of certifications and memberships:

• USDA Organic — Certifies that a product is free from unauthorized pesticides and herbicides. Distinguishes HempFusion’s products by showing high quality and standards.
• US Hemp Roundtable Executive Board — This board educates elected officials and policymakers on CBD. This allows HempFusion to play a role in lobbying the government in favor of the CBD industry.
• Self GRAS Affirmation — Certifies that a product is safe for human consumption. Testing on a product could take up to two years to complete. HempFusion’s ingredient is being tested to be considered safe according to FDA guidelines for GRAS ingredients. Many participants in the CBD market have not started this process.
• Human Safety Study (Liver Toxicology 2020) — HempFusion is a participant in this liver and reproductive toxicology study. It will give the FDA more safety data.
• Novel Food Ingredient (EU) – This certifies any food consumed by humans in large supply. It is required for distribution in Europe. HempFusion is one of the few CBD companies to start the process of getting certified.
• DNA Verified Industrial Hemp — Certifies ingredients come from hemp and not marijuana by conducting a DNA study on the plant used. This is important to HempFusion as there is a possibility that the FDA will use DNA testing for setting rules and regulations. If that were the case, HempFusion would be ready with this certification.
• NOAEL (No Observed Adverse Effect Level) — Toxicology study certifying that a product is safe for consumption. HempFusion is one of the few CBD companies to have NOAEL.

2. Diverse Product Portfolio

HempFusion’s 4 brands have 46 products, as stated above. The diverse range of products means that the company will continue to profit if one product declines in popularity.

HempFusion’s list of certifications and memberships:

• HempFusion — HempFusion has products in various categories. The company has tinctures and capsules which are the most popular products on the CBD market, and topical products which are FDA drug listed. They offer OTC products for pain, Eczema, acne and beauty, and first aid. These product categories are projected to grow swiftly which will assist in propelling sales of CBD products offered by HempFusion.
• Probulin — Probulin offers daily care, women’s health, total care and children’s care products. Probulin’s retail relationships could help HempFusion enter retailers that do not currently have any CBD products.

3. Research and Development

In addition to the 46 products already in the market, HempFusion has another 30 in the pipeline including adding plant-based CBD organic gummies to its product portfolio. The company is a participant in the Liver Toxicology 2020 study, as mentioned above. The results of this study can be used to improve the safety of their products.

4. Distribution Channels

HempFusion’s products are sold in big box pharmacies, convenience stores, online, and through doctor practitioners. Their products are sold in all 50 states. HempFusion’s products are sold at many premier retailers. The list includes The Vitamin Shoppe, Amazon, Whole Foods, Thrive Market, Fresh Thyme, Sprouts, and many more. There is a possibility for Natural Channel retailers to carry FDA drug listed OTC topicals. This could add HempFusion’s products to over 8,000 additional stores.

HempFusion also recently relaunched its e-commerce platform which offers a subscription program to add recurring revenue. The e-commerce platform is being marketed through influencers, paid digital, paid social, and media outreach. Notable influencers include Travis Rice, a famous snowboarder, who is helping to bring CBD to the sports world. Conversion rates for their e-commerce platform have increased to 2%.

HF Labs and Biome Research brings CBD products to highly selective doctor practitioners. HF labs has 27,000 available doctors through 3 distributors and Biome Research has access to 70,000 licensed chiropractors.

HempFusion’s recently launched convenience channel will potentially bring their CBD products to many additional stores. With over 150,000 total stores available, there is much room for expansion in this channel.

5. Excellent Management Team

HempFusion’s management has a wide range of relevant professional experience. Their backgrounds include finance, legal, M&A, and public market experience. Jason Mitchell (CEO) and Jon Visser (CRO) along with other management team members have relationships that could add additional big-box retailers to HempFusion’s distribution channels.

Jason Mitchell (CEO) is an accomplished naturopathic doctor who has developed over 300 products and has over 20 years of experience in this field.

Jon Visser (CRO) has over 25 years of experience in dealing with retailers. He has worked with every large retailer over the course of his career and has a deep understanding of bringing new products to the market.

Ola Lessard (CMO) also has over 25 years of experience in the industry under her belt. She has developed retail relationships during her time at Barlean’s, a successful supplement brand. She is the president of the US Hemp Roundtable and has worked on brands that inspire consumer loyalty.

Nancy Angelini is a licensed practitioner, lecturer, and product manager. She plays an integral part in getting HempFusion’s products to doctor/practitioner networks in the US.

HempFusion has an excellent financial team. Dave Doherty and Daniel Brody have raised over $700 million for CBD companies and have worked on numerous IPO’s. They have established relationships with brokerage firms and exchanges.

Desmond Balakrishmnan serves as a director. His background in corporate finance, securities, and M&A is an asset to HempFusion. Bruce Valentine (CFO) has had previous C-level experience. He has over 20 years of experience and has a track record of growing companies he has worked with in the past. Gord Fox, another of HempFusion’s financial directors also has C level experience and has is a co-founder of White Cedar Pharmacy, a successful pharmacy business in Ontario.

6. Geographic Diversification

HempFusion has plans to enter markets abroad. They are working to get HempFusion and Probulin products sold in Europe, Middle East, South Korea, China, Mexico, and India. Entering these markets as a mature CBD company will potentially increase revenue significantly.

7. Strong Balance Sheet

The company has over $18 million in cash and no debt. This healthy capital structure acts as a buffer for sudden downturns and serves as substantial deployable dry powder if an investment opportunity should present itself.

Conclusion

For investors looking to take advantage of the rapidly growing CBD market, HempFusion is a company that stands out. Their strong regulatory compliance ensures that their products will continue to be available on retail shelves, while their plans for increased distributions in the convenience and natural channels as well as expansion into foreign markets presents massive growth potential for investors. For the reasons stated above, as well as having an excellent management team and substantial cash, HempFusion is a great investment for your portfolio with an underappreciated upside.[disclaimer_link] [company_profile_page_disclosure]

Disclaimer 

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6) This document contains forward-looking information and forward-looking statements, within the meaning of applicable Canadian securities legislation, (collectively, “forward-looking statements”), which reflect management’s expectations regarding Hempfusion Wellness Inc.’s future growth, future business plans and opportunities, expected activities, and other statements about future events, results or performance. Wherever possible, words such as “predicts”, “projects”, “targets”, “plans”, “expects”, “does not expect”, “budget”, “scheduled”, “estimates”, “forecasts”, “anticipate” or “does not anticipate”, “believe”, “intend” and similar expressions or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will” be taken, occur or be achieved, or the negative or grammatical variation thereof or other variations thereof, or comparable terminology have been used to identify forward-looking statements. 

These forward-looking statements include, among other things, statements relating to: 

(a) revenue generating potential with respect to Hempfusion Wellness Inc.’s industry; 

(b) market opportunity;

(c) Hempfusion Wellness Inc.’s business plans and strategies; 

(d) services that Hempfusion Wellness Inc. intends to offer; 

(e) Hempfusion Wellness Inc.’s milestone projections and targets;

(f) Hempfusion Wellness Inc.’s expectations regarding receipt of approval for regulatory applications; 

(g) Hempfusion Wellness Inc.’s intentions to expand into other jurisdictions including the timeline expectations relating to those expansion plans; and 

(h) Hempfusion Wellness Inc.’s expectations regarding its ability to deliver shareholder value. 

Forward-looking statements are not a guarantee of future performance and are based upon a number of estimates and assumptions of management in light of management’s experience and perception of trends, current conditions and expected developments, as well as other factors that management believes to be relevant and reasonable in the circumstances, as of the date of this document including, without limitation, assumptions about: 

(a) the ability to raise any necessary additional capital on reasonable terms to execute Hempfusion Wellness Inc.’s business plan;

(b) that general business and economic conditions will not change in a material adverse manner; 

(c) Hempfusion Wellness Inc.’s ability to procure equipment and operating supplies in sufficient quantities and on a timely basis; 

(d) Hempfusion Wellness Inc.’s ability to enter into contractual arrangements with additional Pharmacies; 

(e) the accuracy of budgeted costs and expenditures; 

(f) Hempfusion Wellness Inc.’s ability to attract and retain skilled personnel; 

(g) political and regulatory stability; 

(h) the receipt of governmental, regulatory and third-party approvals, licenses and permits on favorable terms; 

(i) changes in applicable legislation; 

(j) stability in financial and capital markets; and 

(k) expectations regarding the level of disruption as a result of CV-19. 

Such forward-looking information involves a variety of known and unknown risks, uncertainties and other factors which may cause the actual plans, intentions, activities, results, performance, or achievements of Hempfusion Wellness Inc. to be materially different from any future plans, intentions, activities, results, performance, or achievements expressed or implied by such forward-looking statements. Such risks include, without limitation: 

(a) Hempfusion Wellness Inc.’s operations could be adversely affected by possible future government legislation, policies and controls or by changes in applicable laws and regulations; 

(b) public health crises such as CV-19 may adversely impact Hempfusion Wellness Inc.’s business; 

(c) the volatility of global capital markets; 

(d) political instability and changes to the regulations governing Hempfusion Wellness Inc.’s business operations 

(e) Hempfusion Wellness Inc. may be unable to implement its growth strategy; and 

(f) increased competition. 

Except as required by law, Hempfusion Wellness Inc. undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future event or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. Neither does Hempfusion Wellness Inc. nor any of its representatives make any representation or warranty, express or implied, as to the accuracy, sufficiency, or completeness of the information in this document. Neither Hempfusion Wellness Inc. nor any of its representatives shall have any liability whatsoever, under contract, tort, trust or otherwise, to you or any person resulting from the use of the information in this document by you or any of your representatives or for omissions from the information in this document. 

7) Any graphs, tables or other information demonstrating the historical performance or current or historical attributes of Hempfusion Wellness Inc. or any other entity contained in this document are intended only to illustrate historical performance or current or historical attributes of Hempfusion Wellness Inc. or such entities and are not necessarily indicative of future performance of Hempfusion Wellness Inc. or such entities.

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