MPX Bioceutical Corporation reported its Full Year 2018 financial results.
Following the acquisition of its first two dispensaries in Arizona, which operate under the Health for Life brand along with a 12,000 square foot indoor cultivation and processing facility in a foundational 2017 fiscal year, the Company has continued its rapid growth and development highlighted by the following achievements:
Achievements and General Update
- Corporate Update: The Company changed its name to MPX Bioceutical Corporation and began trading on the Canadian Securities Exchange under the new name and symbol 'MPX' effective November 6, 2017.
- In May 2017, MPX closed one of its Mesa, Arizona locations and relocated it to a new 2,500 square foot flagship dispensary on a major thoroughfare in North Mesa. This was followed by the opening of a third dispensary in April 2018 in the Phoenix suburb of Apache Junction which also operates under the Health for Life brand.
- THC, the fourth Arizona dispensary managed by the Corporation was acquired in March 2018, is operated under The Holistic Center brand and is fully integrated with a 15,000 square foot indoor cultivation and production lab producing "Black Label" and "Timeless" brand concentrates.
- In addition, the Company also owns and operates an extraction and processing facility, which was relocated to its new North Mesa facility in Spring 2018. The new facility has additional capacity to support a quadrupling of production of the Company's MPX-branded concentrates.
- Maryland: In December 2017 and January 2018, MPX entered into management and 'option to buy' agreements with Budding Rose, Inc., LMS Wellness, Benefit LLC and GreenMart of Maryland, LLC, to operate three medical cannabis dispensaries, and with Rosebud Organics, Inc., which is a fully built out and licensed cultivation and production facility. Subsequent to the year end, during the summer of 2018, final licensing approval was secured from the Maryland Medical Cannabis Commission to operate three dispensaries under the Health for Life brand. The Company expects the dispensaries to open throughout the summer and autumn of 2018 with the production facility having just commenced operations.
- Massachusetts: In June 2017, the Company entered the Massachusetts market through the acquisition of 51% of Massachusetts-based cannabis management company IMT, LLC ("IMT") and real estate holding company, Fall River Developments, LLC ("FRD"). While not cultivating or selling cannabis products itself, IMT has a long-term management agreement to provide material support to Cannatech Medicinals Inc. ("CMI"), which is licensed to directly cultivate, produce, own, possess and sell cannabis and cannabis-infused products. The Company has commenced construction of the first of three planned dispensaries and a cultivation and processing facility, which is owned by FRD and will be operated by the Company. The Company expects to commence cultivation during the third quarter of calendar 2018 and that all three dispensaries will be fully operational during the fourth quarter.
- Nevada: MPX expanded into Nevada in December 2017 through its acquisition of GreenMart of Nevada NLV, LLC ("GreenMart NV"), a fully licensed cultivation, production and wholesale cannabis business, which was finalized in December 2017. Since then, it has ramped up production of its MPX-branded line of concentrates, which are now being sold in 39 dispensaries across Nevada.
- California: Subsequent to the year end, in July 2018, the Company entered into an extraction agreement with Case Farms Collective, the largest cannabis processing facility in Southern California. Case Farms will provide full-scale cannabis processing services to MPX, with all concentrate products manufactured to MPX's proprietary specifications and guidelines.
- Canada: Subsequent to the year end, in April 2018, MPX acquired 8423695 Canada Inc. operating as Canveda ("Canveda"), a licensed producer under Health Canada's Access to Cannabis for Medical Purposes Regulations. Canveda's fully built-out 12,000 square foot facility, located in Peterborough, Ontario, is ready to commence its first production run and is capable of producing 1,000-1,200 kilograms of high-quality cannabis flower annually. 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. Furthermore, the Company is working to expand its arrangement with Panaxia Pharmaceutical Industries Ltd. The Company plans to manufacture Panaxia's products to patients in Canada at its Owen Sound site and to market these products to patients in Canada and potentially for export under MPX's Salus Biopharma brand.
- Revenues increased 387% to $21.3 million for FY 2018, up from $4.4 million in FY 2017. Revenue was generated primarily by the Company's Arizona management operations including sales from the three dispensaries in Arizona as well as wholesale sales of and MPX branded concentrates to other licensed dispensaries operating within the State and one month of sales from the recent THC acquisition mentioned above.
- The GreenMart NV operations generated wholesale concentrate sales in the current period of $379,657.
- Gross profit for the fiscal year before adjustment for the unrealised gain in the fair value of biological assets was $7.1 million, which represents a gross margin of 33%, as compared to $92,000 and 2.1% in FY 2017.
- Gross profit after adjustment for the unrealised gain in the fair value of biological assets was $11.2 million, reflecting 52.4% gross margin, as compared to $1.0 million and 23.5% in FY 2017.
- Expenses for the fiscal year were $20.7 million, as compared to $5.8 million in FY 2017.
- The increase in operating expenses was attributable primarily to an increase in general and administrative expenses, which were $13.0 million, as compared to $3.2 million in FY 2017.
- This increase was largely driven by increased acquisition activity, capacity expansion, and additional support staffing and consulting services to facilitate the Company's growth.
- Adjusted EBITDA was negative $2.7 million, as compared to a negative $1.2 million for the fiscal year ended March 31, 2017.
- This was the result of additional costs incurred throughout the year, driven by costs largely related to continued capacity expansion.
Net Comprehensive Loss
- The Company recorded a net comprehensive loss of $18.8 million in the fiscal year, as compared to a net comprehensive loss of $4.7 million in FY 2017.
- The basic and diluted loss per MPX Share for the year ended March 31, 2018 totalled $0.07 versus $0.06 for the year ended March 31, 2017.
- Additional corporate expenses were related to the Company's expansion initiatives, including costs associated with acquisitions in Arizona, Maryland, Massachusetts, and Nevada, a strengthened corporate function, and other overheads related to ongoing expansion initiatives.
- Management anticipates that as additional assets become operational across the Company's portfolio, revenue growth will outpace the related increase in expenses.
Cash Balance and Liquidity
- As at March 31, 2018, the Company had cash and cash equivalents available of $8.5 million down from $21.5 million at the end of fiscal 2017.
- The decrease from the end of fiscal 2017 was mainly due to cash used in operations of $6.8 million, cash purchases of acquisitions and capital expenditures of $44.8 million, offset by cash inflows from net cash from financing activities primarily driven by private placement and convertible debt of $39.2, and loss on exchange on cash of $607,529.
The fiscal year 2018 was a breakthrough year for the Company. As a result of heavy investment in their long-term growth strategy, their operations now span multiple jurisdictions in the U.S. and Canada, and they have the capabilities to continue to execute on their aggressive expansion strategy to meet the demands of the evolving medicinal and adult-use cannabis market.