MPX International Announces Third Quarter 2020 Financial Results
TORONTO, ONTARIO – TheNewswire - October 16, 2020 – MPX International Corporation (“MPX International”, “MPXI” or the “Corporation”) (CSE:MPXI) (CNSX:MPXI.CN) (OTC:MPXOF) has reported its financial results for its third quarter, the three and nine month period ended June 30, 2020. All figures are presented in Canadian dollars unless otherwise indicated.
The Corporation is focused on developing and operating assets across the global cannabis industry with an emphasis on cultivating, manufacturing and marketing products which include cannabinoids as their primary active ingredient.
- On August 5, 2020, the Corporation announced the launch of its Canadian recreational brand, Strain Rec ™ by Canveda, with initial shipments sent to the Province of Saskatchewan. The first shipment consisted purely of flower and was introduced to eight (8) Saskatchewan retailers in June 2020 through Canveda’s permitted approved distributor in Saskatchewan with a second shipment in July 2020.
- On October 1, 2020, the Corporation announced the entering into of an agreement dated August 7, 2020 between Canveda and Alberta Gaming, Liquor & Cannabis (“AGLC”) for the supply of cannabis under the Strain Rec ™ by Canveda brand. Initially, Canveda will supply several strains of unique, high quality flower which will be sold by retail outlets in the Province of Alberta, as well as through AlbertaCannabis.org. Additional product SKUs will follow as Canveda’s product offering diversifies. The agreement will continue until December 1, 2021, unless terminated earlier and may be extended upon mutual agreement of the parties for a maximum of two (2) additional terms of up to 18 months each.
- On August 12, 2020, Canveda Inc. (“Canveda”), a wholly-owned subsidiary of the Corporation and a licence holder under the Cannabis Act (Canada), entered into a purchase agreement for high quality cannabis flower from Zenabis Global Inc. (“Zenabis”), a large-scale Canadian producer with an estimated 96,400 kg of licensed cannabis cultivation space. This supply agreement (the “Zenabis-Canveda Supply Agreement”) secures Canveda with 300 – 1,000 kg of cannabis flower per calendar quarter.
- On August 13, 2020, the Corporation announced that Canveda entered into a production and distribution agreement with Panaxia Pharmaceutical Industries Israel Ltd. (“Panaxia”), the largest manufacturer and distributor of medical cannabis products in Israel, for the packaging and distribution of cannabis which will be marketed and sold in Israel under Canveda’s medical cannabis brand “Salus BioPharma”. The initial order for 100 kg of cannabis was secured by Canveda under the Zenabis-Canveda Supply Agreement and is being shipped from Zenabis to Panaxia as all required import and export permits have been secured. Applicable permits for additional cannabis shipments to Israel are currently being applied for.
- On July 1, 2020, Spartan Wellness Corporation (“Spartan”), a wholly-owned subsidiary of the Corporation, entered into a services agreement (the “Services Agreement”) with Medical Cannabis by Shoppers Drug Mart Inc., a subsidiary of Shoppers Drug Mart. The Services Agreement calls for Spartan to utilize its network of volunteers and professionals to perform clinical services for Shopper Drug Mart patients which will include prescribing cannabinoid combination and strength, delivery methods and general education about cannabis use as well as conducting follow-up medical appointments to monitor efficacy and patient well-being.
- On July 15, 2020, MCLN Inc. (formerly 2702148 Ontario Inc. dba Medical Cannabis Learning Network) (“MCLN”), a wholly-owned subsidiary of the Corporation, entered a non-exclusive agreement with Miramedia Retail Inc. to create a new MCLN branded web-based portal, “MiraCBD” increasing the Medical Cannabis Learning Network’s outreach into the natural health food sector. MiraCBD provides retailers, natural health practitioners and consumers with access to the MCLN platform which operates as: (a) a private network educational platform, providing information about the use of medical cannabis; (b) a telemedicine medium providing patient access to medical practitioners for advice and cannabis prescriptions from Spartan; and (c) a sales platform for Canadian cannabis Licence Holders. MCLN earns educational and consultation fees from Licence Holders subscribing to its services.
- On September 16, 2020, the Corporation increased the size of the non-brokered private placement offering (the “Offering”) of units (the “Units”) of the Corporation from $5,000,000 (US$3,700,000) to $6,800,000 (US$5,000,000). The Units are being issued at a price of $1,360 (US$1,000) per Unit with each Unit consisting of one 12% secured convertible debenture of the Corporation in the principal amount of $1,360 (US$1,000) and 7,000 common share purchase warrants.
- To date, the Corporation has issued a total of 4,494 Units for aggregate gross proceeds of $6,111,840 (US$4,494,000) from the closing of all three tranches of the non-brokered private placement offering broken down as follows: 1st Tranche on June 30, 2020 – 3,348 Units for aggregate gross proceeds of $4,553,280 (US$3,348,000); 2nd Tranche on July 31, 2020 – 346 Units for aggregate gross proceeds of $470,560 (US$346,000); and 3rd Tranche on September 17, 2020 – 800 Units for aggregate gross proceeds of $1,088,000 (US$800,000).
- On October 14, 2020, the Corporation announced that its wholly-owned subsidiary, MPXI Alberta Corporation (“MPXI Alberta”), entered into an asset purchase agreement (the “Asset Purchase Agreement”) dated July 31, 2020 pursuant to which MPXI Alberta acquired substantially all of the assets of Blaze 420 Today Inc. (“Blaze 420”), including the leasehold interests to three (3) locations across Alberta which each have received development permits to operate as retail cannabis stores (the “Assets”). The Assets acquired will enable MPXI to establish a cannabis retail platform in Alberta and open up to three (3) retail cannabis stores in the Edmonton, Alberta area, subject to the final approval from AGLC, upon meeting all licensing requirements. MPXI Alberta has obtained approval from the AGLC to operate as a licensed candidate.
The Corporation is focused on developing and operating assets across the global cannabis industry with an emphasis on cultivating, manufacturing and marketing products which include cannabinoids as their primary active ingredient.
In Canada, the Corporation continues to transition its principal business model away from cultivation to one of intermediation between buyers and sellers, accessing or facilitating the sale of cannabis products from licensed License Holder’s (“LH”) and arranging or facilitating sales to medical cannabis consumers domestically or, increasingly, to international buyers. This strategy reduces or eliminates the need for large capital investment, while generating fees and margins with equivalent net returns than are generally available from seed-to-sale operations. The Corporation is currently involved in late-stage negotiations to facilitate several export opportunities to Europe, Israel and Australia.
Domestically, utilizing the resources of Spartan and the Medical Cannabis Learning Network, MPXI is currently working together with several third-party License Holders to educate and market cannabinoid-based medicines to Canadian patients. Revenue is generated through transactional and/or hourly-based consulting fees from Licence Holders. The Spartan/MCLN platform acts as both a telemedicine medium providing patient access to medical practitioners for advice and cannabis prescriptions and as a sales platform for Canveda and anticipates adding other third-party Licence Holders in the coming months. The MCLN operates in much the same manner as Amazon or Shopify by providing on-line sales facilitation between medical cannabis users and Licence Holders.
While it will continue to operate the Canveda Facility, and in consideration of the domestic oversupply conditions, MPXI has shelved plans for any acquisition or expansion of additional cultivation in Canada. Specifically, it has discontinued planned development of the Owen Sound facility and will market its estimated 1,200 kg of annual production at Canveda through its Spartan and MCLN channels as well as to various provincial cannabis distribution agencies. In December 2019, the Corporation accelerated its option to acquire 100% of MCLN securing an exclusive, worldwide, perpetual, royalty free licence to the Medical Cannabis Learning Network. This private social network connects patients with credible information on the use of medical cannabis, offers the ability to conduct virtual consultations with qualified medical practitioners and acts as an order-entry tool for the purchase of medical cannabis products from Canveda. MPXI is anticipating the addition of other third-party Licence Holders to the platform over the next several months.
The MCLN and its integration with the Spartan platform will play a significant role in our growth in Canada this coming year. Spartan is a leading medical cannabis clinic dedicated to assisting Veterans of the Canadian Forces, RCMP and first responders since 2017. Spartan has also expanded its services to helping Canadians seeking medical cannabis education, prescriptions, and advice on a wide selection of reputable Health Canada approved product offerings at its premier virtual clinic. Spartan prides itself on its 3 key measures for aligning clients with reputable suppliers: customer services, product availability, and product quality. Spartan attributes its continued growth to its 4 Pillars of Success: (1) Honesty; (2) Integrity; (3) Respect; and (4) Giving Back to the Community.
Over 40 countries, including 24 in Europe, have legalized cannabis in some form and medicinal use is by far the primary focus of legalization. Success in the medical cannabis marketplace is largely determined by the number of patients being served and the Medical Cannabis Learning Network is a leading edge “patient acquisition” technology which can be adapted for use in many countries.
MPXI continues to explore opportunities to enter the retail (dispensary) arena in Canada and Switzerland. The first “HolyWeed” branded location was launched in Geneva in January 2020 and has been consistently profitable, supported planned expansion of retail outlets in Zurich and elsewhere in Europe. The Corporation intends to continue the creation of a retail footprint for its products in Canada, Europe and elsewhere.
In Switzerland, a very successful harvest of high-CBD, organic “cannabis-light” biomass offers the Corporation the ability to process substantial amounts of CBD distillate, isolate and smokable product for sale into the global market throughout the coming months. MPXI has entered into leases for two facilities in the Geneva area and while delayed by the advent of the COVID-19 pandemic, both are being converted into extraction and processing facilities and initial production of high-quality CBD distillate commenced in September with capacity expected to continue to expand during the next few months.
With the ultimate goal of creating a global supply chain of low-cost biomass, efficiently-scaled production of GMP quality cannabinoid products for sale into high-value markets, the Corporation will also continue to develop its projects in Malta and South Africa. While again plagued with COVID-19 induced delays, the Corporation still expects each of these projects to commence operations during calendar Q2 of 2021.
In Australia, the opportunity to import products from Malta, Canada and South Africa has prompted the Corporation to change its focus from domestic production to developing an import and distribution capability and now plans to import and introduce the Salus branded products to the Australian market. MPXI’s Australian subsidiary is fully licensed for the import and distribution of cannabis. As a result, MPX Australia has discontinued its planned build-out of its cultivation facility in Tasmania.
Finally, the Corporation continues to investigate other international expansion opportunities that can provide lower-cost cultivation, new genetics, innovative production technologies and, most importantly, new markets for its products.
The business interruption created by the global shutdowns and travel restrictions has had a negative impact on the progress of the multiple domestic and international projects initiated by the Corporation in late 2019 and early 2020. Unlike most other cannabis ventures, virtually all of MPXI’s operations were still in the pre-revenue stage when the virus emerged. As a result, the Corporation embarked on plan of cost containment, including wage reductions, the cancellation of several consulting arrangements, the delay of construction of facilities in Switzerland and South Africa and the abandonment of selected infrastructure projects in Canada and Australia. MPXI will extend many of these cost-saving initiatives in the post-COVID-19 period.
The international cannabis industry is evolving rapidly. Regional reports prepared by the London-based cannabis research firm Prohibition Partners predicts that by 2028, the European market for cannabinoid-based products will reach €120 billion (US$135 billion), the Oceania region will approach US$8.7 billion and, by 2024 Southeast Asia will achieve sales of US$8.5 billion (not inclusive of the huge CBD market in China). These potential revenues more than double the projected North American market for the same period.
MPXI, with its access to best practises, product formulations, SKU variety and branding acquired from management’s previous U.S. involvement, its management experienced in both the U.S. and international cannabis and financial markets, its access to global capital and its early mover entry into multiple geographic regions, is extremely well positioned to benefit from this exponential growth in the international cannabis market.
The key financial measures indicated below were used by management in evaluating and assessing the performance of MPXI’s business for the fiscal second quarter of 2020. A more detailed discussion of these and other metrics, as well as operational events, can be found in the Corporation’s Financial Statements and Management Discussion & Analysis (“MD&A”) filed on www.sedar.com.
For the three months ended June 30, 2020, MPXI reported net revenue of $920,717 (three months ended June 30, 2019 - $674,745). Revenue was mainly driven by sales in Spartan, Canveda, and HolyWorld SA (“HolyWeed”).
For the nine months ended June 30, 2020, MPXI reported net revenue of $2,335,542 (nine months ended June 30, 2019 - $1,143,518). Revenue was mainly driven by sales in Spartan, Canveda, and HolyWeed.
The increase net revenue for the nine months ended June 30, 2020 is due to increased sales in Spartan, Canveda, and HolyWeed.
Gross profit for the three months ended June 30, 2020, before adjustment for the unrealized gain in the fair value of biological assets was $506,558 which represents a gross margin of 52.9%. Gross profit after adjustment for the unrealized gain in the fair value of biological assets was $1,296,241 calculated at 135.4% of sales. The unrealized gain in fair value of biological assets relates to cannabis plants at the Canveda Facility.
Gross profit for the three months ended June 30, 2019, before adjustment for the unrealized gain in the fair value of biological assets was $406,979, which represents a gross margin of 60.3%. Gross profit after adjustment for the unrealized gain in the fair value of biological assets was $1,684,065 calculated at 249.6% of sales. The unrealized gain in fair value of biological assets relates to cannabis plants at the Canveda Facility and in Switzerland.
Gross profit for the nine months ended June 30, 2020, before adjustment for the unrealized gain in the fair value of biological assets was $1,671,266 which represents a gross margin of 70.3%. Gross profit after adjustment for the unrealized gain in the fair value of biological assets was $3,706,385 calculated at 156.0% of sales. The unrealized gain in fair value of biological assets relates to cannabis plants at the Canveda Facility and in Switzerland.
Gross profit for the nine months ended June 30, 2019, before adjustment for the unrealized gain in the fair value of biological assets was $850,132, which represents a gross margin of 74.3%. Gross profit after adjustment for the unrealized gain in the fair value of biological assets was $2,477,122 calculated at 216.6% of sales. The unrealized gain in fair value of biological assets relates to cannabis plants at the Canveda Facility and in Switzerland.
General and Administrative Expenses
General and administrative expenses were $2,652,866 for the three months ended June 30, 2020 as compared to $2,353,978 for the three months ended June 30, 2019.
General and administrative expenses were $9,889,046 for the nine months ended June 30, 2020 as compared to $5,085,336 for the nine months ended June 30, 2019.
Overall, the increase in general and administrative for the nine months ended June 30, 2020, as compared to the nine months ended June 30, 2019, was primarily due to increases in salaries and benefits, consulting fees and office and general expenses relating to acquisitions during the period and the Corporation’s continued growth.
Professional fees were $285,244 for the three months ended June 30, 2020 as compared to $680,464 for the three months ended June 30, 2019.
Professional fees increased to $1,574,511 for the nine months ended June 30, 2020 as compared to $1,433,286 for the nine months ended June 30, 2019.
The increase in professional fees for the nine months ended June 30, 2020 is due to the change in volume and complexity of accounting and legal services required by the Corporation driven by acquisitions and growth. These fees include expenses related to audit, advisory, legal work, government and investor relations, consulting and costs associated with the board of directors. This has been offset by cost saving initiatives relating to COVID-19.
Incentive Stock Option Plan
As part of the Corporation’s incentive stock option plan, the Corporation recognized $21,002 of share-based compensation for the three months ended June 30, 2020 as compared to $17,705 or the three months ended June 30, 2019.
As part of the Corporation’s incentive stock option plan, the Corporation recognized $91,304 of share-based compensation for the nine months ended June 30, 2020 as compared to $1,248,081 for the nine months ended June 30, 2019.
The Corporation granted stock options to employees, consultants, directors and officers of the Corporation under the Corporation’s stock option plan on February 26, 2019, May 29, 2019, September 19, 2019, and February 11, 2020.
Amortization and Depreciation Expenses
Amortization and depreciation expenses increased to $1,177,906 for the three months ended June 30, 2020 as compared to $356,228 for the three months ended June 30, 2019.
Amortization and depreciation expenses increased to $3,576,705 for the nine months ended June 30, 2020 as compared to $724,885 for the nine months ended June 30, 2019.
The increase in amortization and depreciation for the nine months ended June 30, 2020 as compared to the nine months ended June 30, 2019, relates primarily to the amortization of MCLN licence commencing in December 2019, and the additional amortization from the adoption of IFRS 16 during the nine months ended June 30, 2020.
Other income and expenses
Other expenses were $2,596,681 for the three months ended June 30, 2020 as compared to other income of $734,804 for the three months ended June 30, 2019.
Other expenses were $1,364,076 for the nine months ended June 30, 2020 as compared to other expenses of $43,530 for the nine months ended June 30, 2019.
The increase in other expenses for the nine months ended June 30, 2020 as compared to the nine months ended June 30, 2019, relates primarily to loss on disposal of assets, offset by the change in fair value of derivative liabilities.
Net Loss After Tax
Net loss after tax was $5,310,438 for the three months ended June 30, 2020 as compared to a loss of $1,263,442 for the three months ended June 30, 2019.
Net loss after tax was $12,294,672 for the nine months ended June 30, 2020 as compared to a loss of $6,343,210 for the nine months ended June 30, 2019.
Adjusted EBITDA was a loss of $2,702,796 for the three months ended June 30, 2020 as compared to a loss of $2,486,225 for the three months ended June 30, 2019.
Adjusted EBITDA was a loss of $10,720,224 for the nine months ended June 30, 2020 as compared to a loss of $5,599,729 for the nine months ended June 30, 2019.
About MPX International Corporation
MPX International Corporation is a multinational diversified cannabis company focused on developing and operating assets across the international cannabis industry with an emphasis on cultivating, manufacturing and marketing products which include cannabinoids as their primary active ingredient. With current operations spanning four continents in Canada, Switzerland, South Africa, Malta and Australia as well as evolving partnership and distribution opportunities in other jurisdictions, MPXI continues to position itself as an emergent global participant in the cannabis industry.
Cautionary Statement Regarding Forward-Looking Information
This news release includes certain “forward-looking statements” under applicable Canadian securities legislation that are not historical facts. Forward-looking statements involve risks, uncertainties, and other factors that could cause actual results, performance, prospects, and opportunities to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements in this news release include, but are not limited to, MPX International’s objectives and intentions. Forward-looking statements are necessarily based on a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties and other factors which may cause actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic and social uncertainties; litigation, legislative, environmental and other judicial, regulatory, political and competitive developments; delay or failure to receive board, shareholder or regulatory approvals; the Corporation’s ability to effectively deal with the restrictions, limitations and health issues presented by the COVID-19 pandemic; future cannabis pricing; cannabis cultivation yields; costs of inputs; its ability to market products successfully to its anticipated clients; reliance on key personnel and contracted relationships with third parties; the regulatory environment in Australia, Canada, Malta, South Africa, Switzerland and other international jurisdictions; the application of federal, state, provincial, county and municipal laws; and the impact of increasing competition; those additional risks set out in MPX International’s public documents filed on SEDAR at www.sedar.com, including its audited annual consolidated financial statements for the financial years ended September 30, 2019 and 2018, its unaudited interim condensed consolidated financial statements for the three and six months ended March 31, 2020 and the corresponding annual management’s discussion and analysis; and other matters discussed in this news release. Although MPX International believes that the assumptions and factors used in preparing the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this news release, and no assurance can be given that such events will occur in the disclosed time frames or at all. Except where required by law, MPX International disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
For further information, please contact:
MPX International Corporation
W. Scott Boyes, Chairman, President and CEO
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