HempFusion Corporate Media Kit

3 W W W . H E M P F U S I O N . C O M | H E M P F U S I O N ® P R E S E N T A T I O N The Company currently derives, and is expected to continue to derive, a portion of its revenues from the production and distribution of Hemp-based wellness products in certain states in the United States. All Hemp-based products produced and sold by the Company contain Hemp (as defined in the prospectus) in compliance with the Agricultural Improvement Act of 2018 (the “2018 Farm Bill”), as well as under the laws of the states in which the Company manufactures and sells such Hemp-based products. The 2018 Farm Bill became law on December 20, 2018. Prior to its enactment, all non-exempt cannabis parts grown in the United States were scheduled as a controlled substance under the Controlled Substances Act of 1970 (the “CSA”), and as a result, the cultivation of Hemp for any purpose in the United States without a Schedule I registration from the United States Drug Enforcement Administration (the “DEA”) was illegal, unless exempted by the section 7606 of the Agricultural Act of 2014 (the “2014 Farm Bill”). The passage of the 2018 Farm Bill materially changed federal laws governing Hemp by removing Hemp from the CSA and establishing a federal regulatory framework for domestic Hemp production. Specifically, the 2018 Farm Bill: (a) explicitly amended the CSA to exclude hemp, defined as the plant Cannabis sativa L., and any parts of the plant (including its cannabinoids, derivatives, and extracts) containing a delta-9 THC concentration of not more than 0.3% on a dry weight basis from the definition of marijuana; (b) allows the commercial production and sale of Hemp in interstate commerce; (c) establishes the United States Department of Agriculture (the “USDA”) as the primary federal agency regulating the cultivation of Hemp in the United States, while allowing states to adopt a state plan to regulate the same; and (d) affords Hemp farmers the opportunity to obtain crop insurance and research grants. The 2018 Farm Bill also creates a specific exemption from the CSA for THC found in hemp. By defining Hemp to include its "cannabinoids, derivatives, and extracts," popular Hemp products, such as CBD (as defined in the prospectus), are no longer subject to DEA control. Accordingly, the DEA no longer has regulatory authority to interfere with the interstate commerce of Hemp products, so long as the delta-9 THC level of such products does not exceed 0.3%. The 2018 Farm Bill amends the Agricultural Marketing Act of 1946 to categorize Hemp as an agricultural commodity under the regulatory purview of the USDA in coordination with state departments of agriculture. Although the USDA is the primary federal regulatory agency overseeing Hemp production in the United States, states, U.S. territories, and Native American tribes desiring to obtain (or retain) primary regulatory authority over Hemp activities within their borders are allowed to do so after submitting a plan for regulation to the USDA, and receiving approval from the USDA for the same. Pursuant to the 2018 Farm Bill, states, U.S. territories, and Tribal governments can adopt their own regulatory plans for Hemp production, even if more restrictive than federal regulations, so long as the plans meet minimum federal standards and are approved by the USDA. Hemp production in states and tribal territories that do not choose to submit their own plans (and that do not prohibit Hemp production) will be governed by USDA’s federal plan. On October 31, 2019, the USDA released the Interim Final Rule (“IFR”), which governs the domestic production of Hemp under the 2018 Farm Bill. The IFR also specifies the provisions that a state or tribal Hemp plan must contain to be in compliance with the 2018 Farm Bill. Since release of the IFR, the USDA has reviewed and approved Hemp production plans submitted by a number of state and tribal governments. Prior to enactment of the 2018 Farm Bill, the 2014 Farm Bill regulated the domestic production of Hemp at the federal level. The 2014 Farm Bill authorizes institutions of higher education and state departments of agriculture (and their contractual designees) to cultivate Hemp, notwithstanding the CSA or any other federal law, provided that certain conditions are met. The scope of the 2014 Farm Bill is limited to cultivation that is: (a) for research purposes (inclusive of market research, which multiple federal agencies have confirmed includes commercial sales with a research purpose); (b) part of an "agricultural pilot program" or other agricultural or academic research; and (c) permitted by state law. The majority of U.S. states have adopted pilot programs pursuant to the 2014 Farm Bill. The various state Hemp programs have different requirements regarding the registration of cultivators and processors, the involvement of institutions of higher education, and permissible commercialization. The 2014 Farm Bill does not provide a federal regulatory framework or require states to adopt and implement Hemp pilot programs. As a result, participating states take differing approaches with respect to the activities permitted under their respective pilot programs. Activities determined to be compliant with the 2014 Farm Bill are protected from federal interference by an appropriations rider (the "Appropriations Rider"), which the U.S. Congress has renewed on several occasions. The Appropriations Rider generally prohibits the federal government's use of funds in contravention of the 2014 Farm Bill and specifically prohibits such federal interference with regard to the "transportation, processing, sale, or use of…hemp, or seeds of such plant, that is grown or cultivated in accordance with the [2014 Farm Bill], within or outside the [s]tate in which the …hemp is grown or cultivated." Notwithstanding the passage of the 2018 Farm Bill and the publication of the IFR, the Hemp cultivation and research provisions contained in the 2014 Farm Bill remain in effect for the immediate future and are expected to be repealed on or about November 1, 2021. Because the 2018 Farm Bill permits states and Native American tribes to regulate Hemp and Hemp-derived products more restrictively than the 2018 Farm Bill, variances in these jurisdictions' laws and regulations on Hemp are likely to persist. Compliance with state law remains imperative under both the 2014 and 2018 Farm Bills. Although the DEA no longer regulates Hemp, marijuana continues to be classified as a Schedule I controlled substance under the CSA. As a result, CBD and other cannabinoids, if derived from marijuana as defined by the CSA, also remain Schedule I controlled substances under U.S. federal law. Though chemically and genetically distinct, Hemp and marijuana appear similar to the naked eye. Enforcement actively against illegal marijuana and marijuana-based products under current U.S. federal law may inadvertently result in enforcement actions taken against Hemp or Hemp-derived products. It is important to note that the 2018 Farm Bill preserves the authority and jurisdiction of the FDA, under the FDCA (as defined in the prospectus), to regulate the manufacture, marketing, and sale of food, drugs, dietary supplements and cosmetics, including products that contain Hemp extracts and derivatives, such as CBD. To date, the FDA has approved one drug (Epidiolex) containing CBD as an active ingredient, and has taken the position that CBD cannot be marketed as a dietary supplement or added to food because a product containing CBD was approved as a drug and substantial clinical trials studying CBD as a new drug were made public prior to the marketing of any food or dietary supplements containing CBD, and therefore dietary supplements or food are precluded from containing this ingredient (the Prior Drug Exclusion). Notably, the FDA does not impose the same restrictions on the use of CBD in cosmetic products, but has emphasized that CBD cosmetics must comply with all applicable adulteration and misbranding provisions of the FDCA. Shortly after the 2018 Farm Bill was signed into law, the FDA released a statement from former Commissioner Scott Gottlieb, which restated the FDA's current position that products containing CBD ingredients may not be sold as dietary supplements or added to food. Notably, on November 25, 2019, the FDA issued several warning letters to companies marketing and selling Hemp-derived CBD products deemed unapproved drugs. The letters reiterate the FDA’s position that CBD cannot be added to food and dietary supplements. Important to note is that these warning letters have been issued, for the most part, to companies making aggressive disease and/or health claims about their CBD products and the ability for those products to prevent, treat or cure diseases and conditions such as Alzheimer's, seizures and depression. Di sc l a imer