WOONSOCKET, R.I. & TORONTO–(BUSINESS WIRE)–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.

“During the first quarter Abacus continued to grow the number of stores in which its products are available to consumers and it continues to have one of the largest footprints for topical products containing hemp-extract within the food, drug and mass (“F/D/M”) channel. We have also continued to build on the strength of CBD CLINIC^tm brand’s market leading position with health care practitioners while preparing to launch our ingestible product strategy, which we are particularly excited about,” said Perry Antelman, CEO.

Financial Review

All figures in US$	Three Months Ended March 31,		Chg.
	2020	2019
Revenue	$4,070,460	$3,822,207	6.5%
Gross profit	$2,089,984	$2,421,091	(13.7%)
Gross margin	51.3%	63.3%
Loss before other expenses and income taxes	$(4,272,110)	$(2,773,627)	54.0%
Net and comprehensive loss	$(2,349,350)	$(12,517,605)	(81.2%)
Earnings Per Share – Basic	$(0.11)	$(0.79)	86.1%
Earnings Per Share – Diluted	$(0.11)	$(0.79)	86.1%

First Quarter Financial Review

Revenue for the first quarter of 2020 of $4.1 million represents an increase of $0.3 million year-over-year (“YoY”), or 6.5%. Sales attributable to CBD CLINIC^tm were $2.7 million during the first quarter of 2020, representing approximately 66% of total sales. Abacus recognized $1.3 million of revenues for CBDMEDIC^tm and Harmony Hemp™ products in the first quarter of 2020 representing approximately 33% of total sales.

Gross profit for the first quarter of 2020 was $2.1 million representing a gross margin of 51.3%, a decrease from 63.3% for the YoY period. The gross margin decrease was due to higher cost of sales driven by packaging revision changes, additional freight incurred, retailer trade promotions, and one‐time introductory pricing incentives for a new major retail chain.

Net cash flows used for operating activities was $(3.9) million for the three months ended March 31, 2020, a decrease of $1.6 million compared to $(5.5) million the three months ended March 31, 2019. The decrease in cash used for operating activities was primarily due to relative changes in trade receivables and inventories offset by increases in operational costs and relative changes in trade payables.

COVID-19

During the first quarter of 2020, the global emergence of coronavirus (“COVID‐19”) occurred and has since become an ongoing pandemic, including in the United States. The long-term repercussions of COVID‐19 on the Company’s business is presently unknown. The Company continues to monitor the situation and take measures that it deems are in the best interests of its employees, customers, partners, suppliers, shareholders, and stakeholders. The Company’s employees are working well and effectively performing their responsibilities given the challenge of remote work. As a result of the pandemic, the Company began the process of evaluating and changing spending priorities as well as taking direct action to reduce operating expenses to conserve cash.

The Company’s management discussion and analysis for the quarter ended March 31, 2020 and the accompanying unaudited financial statements and notes are available under the Company’s profile on SEDAR at www.sedar.com and on its website at https://abacushp.com/investors/financial-information/.

The Company will not be hosting a conference call to discuss the results. The Company will hold its previously-announced special shareholders meeting (“Meeting”) on Thursday, June 4, 2020 at 10:00 a.m. (EDT) to consider and vote upon its proposed acquisition by Charlotte’s Web. Further details on the Meeting and the proposed transaction can be found in the Management Information Circular, available on Abacus’ website at www.abacushp.com and under its profile on SEDAR at www.sedar.com.

Forward-Looking Statements

This news release contains forward-looking statements or information (collectively, “forward-looking statements”) within the meaning of applicable securities legislation. 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 the Company’s control, that could cause actual results and events to differ materially from those that are disclosed in or implied by such forward-looking statements.

The forward-looking statements contained in this news release include, without limitation, statements relating to the expansion of the offering of the Company’s products, including in the market of CBD ingestible products, the execution of the Company’s growth strategy, the Transaction and the timing thereof, the Meeting and the timing thereof, the intended use by the Company of its cash on hand, the impact of COVID-19 on the Company’s business, and the future cash position and financial results of the Company. Forward-looking statements are based on management’s current expectations and are subject to a number of risks, uncertainties and assumptions, including assumptions regarding the Company’s ability to efficiently operate its business, market and economic conditions, business prospects or opportunities, future plans and strategies, anticipated events and trends, and regulatory changes that may affect the Company and its customers and industry. There can be no assurance that actual results will not differ materially from those expressed or implied in forward looking statements. Undue reliance should not be placed on forward-looking statements. Additional information about these risks, uncertainties and assumptions is contained under “Risk Factors and Uncertainties” in the Company’s annual information form dated April 29, 2020 and under “Risk Factors” in the Management Information Circular, which are available under the Company’s SEDAR profile at www.sedar.com. Each forward-looking statement speaks only as of the date hereof, and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

There can be no assurance that the Transaction will occur, or that it will occur on the terms and conditions contemplated in the Management Information Circular. The Transaction could be modified, restructured or terminated. The Transaction cannot close until the required shareholder, court and regulatory approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the Management Information Circular, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon.

About Abacus Health Products, Inc.

Abacus is primarily engaged in the development and commercialization of over-the-counter (OTC) topical medications with active pharmaceutical ingredients and which contain organic and natural ingredients, including a cannabinoid-rich hemp extract containing CBD from the Cannabis sativa L plant. Abacus’ products are aimed at the rapidly growing markets for topical pain relief and therapeutic skincare and are based on proprietary patent-pending technologies developed by Abacus. Abacus’ formulations combine advanced science with organic and natural ingredients to provide safe relief. Abacus currently offers three lines of products: CBD CLINIC™, marketed to the professional practitioner market, and CBDMEDIC™ and Harmony Hemp™, marketed to the consumer market. CBDMEDIC™ and CBD CLINIC™ products are produced by a contract manufacturer in an FDA registered and audited manufacturing facility.

To learn more about Abacus, visit www.abacushp.com.