MPX Reports Financial Results for Its Fiscal Second Quarter of 2019

Quarterly Revenues increased 233% to $14.7 Million

TORONTO, Nov. 29, 2018 (GLOBE NEWSWIRE) -- MPX Bioceutical Corporation (“MPX” or the “Company”) (CSE: MPX; OTC: MPXEF) today reports financial results for its fiscal second quarter for the three month period ended September 30, 2018 and provides a general business update. All figures are presented in Canadian dollars unless otherwise indicated.

Operational and Financial Highlights for the Fiscal Second Quarter of 2019

• Record quarterly revenues of $14.7 million for the fiscal second quarter of 2019, versus $4.4 million for the fiscal second quarter of 2018, up 233%.
• Entered into a binding share purchase agreement to acquire Spartan Wellness Corporation (“Spartan”), a Canadian veteran advisory group.
• Expanded Maryland footprint with the opening of its first managed Health for Life Dispensary located in downtown Bethesda.
• Adjusted EBITDA loss of $1.0 million, a 42% sequential improvement from fiscal Q1 2019.

Subsequent Events (October 2018)

• Announced arrangement agreement pursuant to which MPX will combine with iAnthus in an all-stock transaction with offered equity consideration to MPX shareholders valued at $835 million.
• Successfully upgraded U.S. share trading to the OTCQX® Best Market after meeting strict financial, disclosure and third party sponsorship requirements.
• Expanded Maryland footprint with the opening of the second and third managed Health for Life dispensaries in Baltimore and White Marsh.

“For the second quarter, we again experienced strong growth, with revenue increasing $10.3 million year over year, topping $14.7 million, driven by the strong performance of our Arizona operations and much improved production from our facility in Nevada,” said W. Scott Boyes, Chairman, President and CEO of MPX. “We continue to execute upon our aggressive expansion strategy, as demonstrated by the successful openings of the Health for Life dispensaries in Maryland managed by one of MPX’s subsidiaries. Additionally, we continue to lay the framework for growth in our international operations, with renovations underway at our Owen Sound factory in Canada. We are also working to expand our agreement with Panaxia, which we believe will strategically bolster our growth strategy. Looking ahead, we expect our expanded Maryland footprint to drive significant revenue growth, as well as our Arizona operations as we continue to ramp production of our wholesale products.”

Beth Stavola, COO of MPX, added, “Adding to our continued growth, we are excited about the prospect of merging with iAnthus for a deal that would further support our dramatic growth, allowing us to benefit from a larger platform that would extend the combined reach to ten states.”  

Business Overview for the Fiscal Second Quarter of 2019 and Recent Weeks

• Arizona: MPX continued to ramp up revenues from its Arizona operations, with sales increasing on both a year over year and sequential basis, driven by its four dispensaries and sales of its MPX-branded concentrates. MPX continues to increase production in Arizona. The anticipated addition of production and revenues from the Panaxia agreement to launch “pharma-grade” cannabis-based products in Arizona is expected to add to revenue growth in the state during the fiscal Q4 2019.
   
• California: In July 2018, the Company entered into an extraction agreement with Case Farms Collective, the largest cannabis processing facility in Southern California, marking MPX’s entry into the State of California. Case Farms will provide full scale cannabis processing services to MPX, with all concentrate products manufactured to MPX’s proprietary specifications and guidelines. MPX-branded cannabis concentrates will be sold through Case’s network of licensed dispensaries throughout California beginning in January 2019.
   
• Massachusetts: The Company owns the majority of Massachusetts-based cannabis management company IMT, LLC (“IMT”) and real estate holding company, Fall River Developments, LLC (“FRD”). MPX is currently building-out a 40,000 square feet cultivation and production facility and a dispensary in the community of Fall River. Both are expected to commence operations before the end of calendar Q1 2019.
   
• Maryland: August saw the opening of the first Health for Life branded dispensary. This was followed by the opening of two more Health for Life branded dispensaries subsequent to the quarter end, in October 2018, one in Baltimore and a second in White Marsh, Maryland. The Company, through its wholly-owned subsidiary, S8 Management, LCC, manages each of the Health for Life dispensaries as well as a production facility in the state which is already selling MPX concentrates to multiple Maryland dispensaries.
   
• Nevada: GreenMart NV’s fully-operational cultivation, production and kitchen facilities are operating at full capacity producing MPX-branded wholesale products for both the adult-use and medical markets in Nevada. The Company is committed to growing market share in Nevada by expanding GreenMart NV’s reach to include more consumers and patients. GreenMart NV has also applied for at least two dispensary licenses in the higher margin Las Vegas market which will operate under the “Health for Life” brand.
   
• Canada: MPX acquired the outstanding shares in the capital of Spartan, an organization whose mission is to help veterans suffering from various ailments, mostly psychological, to reduce or eliminate dependencies on opioids by directing them towards medical cannabis.
  
  Spartan will direct a percentage of its sales through Canveda Inc. (“Canveda”), a wholly-owned subsidiary of the Company and a licensed producer under Health Canada’s Access to Cannabis for Medical Purposes Regulations. Canveda continues to plant crops at its fully built-out 12,000 square foot facility, located in Peterborough, Ontario, with the first crop expected to be ready for sale during the fiscal third quarter of 2019.
  
  The Company also leases a property in Owen Sound, Ontario, for which an application to Health Canada has been made for a cannabis production and sales license. MPX has started work transforming part of the factory in Owen Sound into a state-of-the-art medical cannabis production facility.
  
  Furthermore, the Company is working to expand its arrangement with Panaxia. The Company plans to manufacture Panaxia’s products at its Owen Sound site and to market these products to patients in Canada, and potentially for export, under MPX’s Salus Biopharma brand.

Financial Overview

Below outlines the key financial metrics for MPX for its fiscal second quarter of 2019. A more detailed discussion of these and other metrics, as well as operational events, can be found in the Company’s Financial Statements, Management Discussion & Analysis (“MD&A”) filed on www.sedar.com.

Revenues

Revenues increased 233% to $14.7 million for the three months ended September 30, 2018, up from $4.4 million for the three months ended September 30, 2017. Revenue growth is primarily attributable to the Company’s Arizona management operations including sales from the four dispensaries in Arizona to patients holding medical marijuana cards issued by the State as well as wholesale sales of MPX branded concentrates to other licensed dispensaries within the state.

Gross Profit

Gross profit for the three months ending September 30, 2018, before adjustment for the unrealized gain in the fair value of biological assets, was $4.4 million or 30.1%, as compared to $1.9 million or 42.6% for the three months ended September 30, 2017. Gross profit after adjustment for the unrealized gain in the fair value of biological assets was $6.4 million, or 43.7% of sales, as compared to $2.9 million and 65.3% for the three months ended September 30, 2017. Lower margins reflect the impact from the recent Arizona acquisition, which included a portion of sales through a co-packed arrangement.

Expenses

Operating expenses for the three months ended September 30, 2018 were $12.1 million, as compared to $3.9 million for the three months ended September 30, 2017. The increase was primarily attributable to $7.4 million in general and administrative expenses, due largely to increases in salaries and benefits as the Company increased staffing in Maryland and Massachusetts, and consulting fees to third parties, office and general. Professional fees in the three months ended September 30, 2018 was $1.8 million, as compared to approximately $758,000 in the three months ended September 30, 2017. Share based compensation expenses were $2.3 million, as compared to approximately $182,000 in the year-ago period.

Other Income and Expenses

The Company recorded $11.5 million in Other Expenses for the three months ended September 30, 2018, as compared to approximately $466,000 in Other Expenses for the three months ended September 30, 2017. The increase in expenses includes accretion expenses of $1.4 million (non-cash), as compared to approximately $11,000 in the year-ago period, related to the convertible loan. The Company identified a write-down on inventory, recognizing an expense of approximately $528,000. Interest and financing costs were approximately $977,000 in the three months ended September 30, 2018, as compared to approximately $236,000 in the three months ended September 30, 2017, primarily related to the Hi-Med Facility and financing costs for the convertible loan. We also incurred expenses related to the change in fair value for the Hi-Med Facility and convertible loan for $9.2 million (these are non-cash adjustments) as compared to approximately $9,000 in the three months ended September 30, 2018.

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