Abacus Health Products Reports First Quarter 2020 Financial Results

Abacus Health Products, Inc. (CSE: ABCS) (OTCQB: ABAHF) (“Abacus” or the “Company”) reported its financial results today for the first quarter ended March 31, 2020. All amounts are in U.S. dollars unless indicated otherwise.

Update on Proposed Acquisition of Abacus by Charlotte’s Web Holdings, Inc. (“Charlotte’s Web”)

Perry Antelman, CEO, stated, “We have been working diligently towards completing the proposed acquisition of Abacus by Charlotte’s Web, which we expect to be completed in the next several weeks subject to the satisfaction of all closing conditions. Two independent proxy advisory firms, Institutional Shareholder Services Inc. and Glass Lewis & Co., have each recommended that shareholders of Abacus vote FOR the proposed acquisition and we are grateful for the strong support shown by shareholders – of votes cast to-date over 99.9% have voted in favor of the Transaction. We encourage shareholders who have not yet voted to do so. We look forward to joining the Charlotte's Web platform and leveraging the combined company’s strength to deliver benefits for our collective stakeholders over the long-term.”

Q1 2020 Financial Highlights

• Revenue increased 6.5% YoY from $3.8 million to $4.1 million
• Gross profit decreased 14% YoY from $2.4 million to $2.1 million
• Gross margin reduced YoY to 51.3% from 63.3%
• CBD CLINIC^tm revenue decreased YoY from $3.6 million to $2.7 million
• CBDMEDIC^tm and Harmony Hemp revenue increased YoY from $0.3 million to $1.3 million¹

First Quarter and Recent Business Highlights

• On February 10, 2020, Abacus announced the acquisition of the principal assets of the companies owning the Harmony Hemp brand for an aggregate consideration of US$5.5 million, payable in cash and shares of Abacus. Harmony Hemp is a leading brand in CBD infused personal care products with national distribution to more than 4,000 locations in major grocery and drugstores. Through the acquisition, Abacus expanded its retail footprint by approximately 50% to over 12,000 retail locations and expanded its product offering to include a range of beauty and bath products.
• On March 22, 2020, Abacus entered into a definitive arrangement agreement pursuant to which Charlotte’s Web proposes to acquire all the issued and outstanding subordinate voting shares of Abacus (“Subordinate Voting Shares”) after conversion of all outstanding proportionate voting shares of Abacus into Subordinate Voting Shares. Under the terms of the agreement, Abacus shareholders will receive 0.85 of a common share of Charlotte’s Web for each Subordinate Voting Share held (the “Transaction”). The Transaction is subject to the approval of the Company’s shareholders, receipt of required regulatory and court approvals and other customary conditions of closing. The Transaction is expected to close in the second quarter of 2020. Additional details of the Transaction have been provided to Abacus shareholders in the management information circular of Abacus dated May 4, 2020, which has been mailed in connection with the special meeting of Abacus shareholders to be held on June 4, 2020 (the “Information Circular”).
• The Company received a purchase order for five of its CBDMEDIC^tm pain relief SKUs from a large variety chain for over 5,000 stores. The SKUs are packaged in a smaller sized format than what is offered in retail pharmacy and grocery chains and are being rolled out in the second quarter of 2020. Additionally, Abacus has recently been awarded a purchase order for six of its CBDMEDIC^tm SKUs and five of its Harmony Hemp SKUs by a large Florida-based grocery chain. The products will initially be introduced into 77 stores in the chain, representing less than 10% of the chain’s total stores and offering significant potential future growth within the chain. This marks a significant step for the Company into a state which has one of the largest senior populations in the US, a key demographic for the Company’s pain relief products.

• Launched a new CBD CLINIC^tm Massage Therapy Series, a line of eight new massage oils and creams. The CBD CLINIC^tm Massage Therapy Series has been developed specifically for massage therapists and other Complementary and Alternative Medicine (CAM) practitioners.

¹Includes revenue of $0.25 million for Harmony Hemp products which was recorded for the period Feb. 10, 2020 until March 31, 2020 following the acquisition of the principal assets of the companies owning the Harmony Hemp brand. No revenue was reported for Harmony Hemp products for Q1 2019. Additional revenue in Q1 2020 of $0.1 million was recorded for a legacy private label customer.