Hempfusion Wellness Inc.

Q3 2021 revenue was $3.1 million, up 155% from $1.2 million in Q3 2020. Gross profit was 43% of net revenue versus 33% a year ago, an improvement of 1,000 basis points. G&A expense was $3.6 million versus $5.4 million last year, sales and marketing expense increased by $2.3 million, and net loss was $5.8 million, or $0.04 per share, versus $16.7 million, or $0.17 per share, in the prior-year quarter. The company ended Q3 with $5.4 million in cash, no debt, and $3.2 million in working capital; cash used in operations was $4.8 million versus $7.0 million in Q3 2020. Management said October preliminary net revenue was just over $1.4 million and reiterated 2022 revenue guidance of $20 million to $25 million.

Jason Mitchell framed the quarter as evidence that the company’s five-channel strategy is working, highlighting the acquisitions of Sagely Naturals and Apothecanna, rapid retail door expansion, and a strong online channel. His tone was upbeat and optimistic, especially around the company’s regulatory positioning in CBD and its ability to launch ingestible products once the rules are clarified. He repeatedly argued that HempFusion is prepared to capitalize on a major industry shift and believes the company is positioned for meaningful growth in 2022 and beyond.

The financial discussion focused on improved margin profile and a better balance sheet. Management said gross margin reached 43% from 33% a year ago, with the improvement tied to higher-margin e-commerce sales, better inventory management, and lower production costs, and said future gross margin could exceed 50%. They also noted Q3 operating cash use of $4.8 million, including roughly $4 million of one-time acquisition payments, and ended with $5.4 million in cash, no debt, and $3.2 million in working capital, while saying cash burn should decline as integration efficiencies improve.

Analysts asked about stock volume, acquisition cost synergies, the size of the regulatory opportunity, confidence in a future NDIN filing, and the pace of the Dubai business. Management said recent trading volume likely reflected renewed cannabis-sector excitement and MSOS ownership, and said there is still “a tremendous amount of room” for cost reductions through integration. On regulation, Mitchell argued that if Congress changes CBD’s status, ingestible products could be sold across major channels and could be 5x to 10x the volume of topicals; he said HempFusion has been preparing for years, including toxicology and reproductive data, and believes the NDIN path could open once the IND preclusion issue changes. For Dubai, he said the market is still recovering from the pandemic but that Ministry of Health registration and future drug codes could make Probulin a multi-million-dollar opportunity.