MPXOF - MPX International Announces Third Quarter 2020 Financial Results

(TheNewswire)

TORONTO, ONTARIO - TheNewswire- October 16, 2020 - MPX International Corporation (" MPXInternational ", " MPXI " or the" Corporation ") (CSE:MPXI )(CNSX:MPXI.CN) ( OTC:MPXOF)has reported its financial results for its third quarter, the threeand nine month period ended June 30, 2020. All figures are presentedin Canadian dollars unless otherwise indicated.

The Corporation is focused on developing and operatingassets across the global cannabis industry with an emphasis oncultivating, manufacturing and marketing products which includecannabinoids as their primary active ingredient.

Recent Highlights:

• - On August 5, 2020, the Corporation announced thelaunch of its Canadian recreational brand, Strain Rec (TM) by Canveda,with initial shipments sent to the Province of Saskatchewan. The firstshipment consisted purely of flower and was introduced to eight (8)Saskatchewan retailers in June 2020 through Canveda's permittedapproved distributor in Saskatchewan with a second shipment in July2020.

• - On October 1, 2020, the Corporation announced theentering into of an agreement dated August 7, 2020 between Canveda andAlberta Gaming, Liquor & Cannabis (" AGLC ") for thesupply of cannabis under the Strain Rec (TM) by Canveda brand.Initially, Canveda will supply several strains of unique, high qualityflower which will be sold by retail outlets in the Province ofAlberta, as well as through AlbertaCannabis.org. Additional productSKUs will follow as Canveda's product offering diversifies. Theagreement will continue until December 1, 2021, unless terminatedearlier and may be extended upon mutual agreement of the parties for amaximum of two (2) additional terms of up to 18 months each.

• - On August 12, 2020, Canveda Inc. (" Canveda "), awholly-owned subsidiary of the Corporation and a licence holder underthe Cannabis Act (Canada), entered into a purchase agreement for high qualitycannabis flower from Zenabis Global Inc. (" Zenabis "), alarge-scale Canadian producer with an estimated 96,400 kg of licensedcannabis cultivation space. This supply agreement (the" Zenabis-Canveda SupplyAgreement ") secures Canveda with 300 -1,000 kg of cannabis flower per calendar quarter.

• - On August 13, 2020, the Corporation announced thatCanveda entered into a production and distribution agreement withPanaxia Pharmaceutical Industries Israel Ltd. (" Panaxia "), thelargest manufacturer and distributor of medical cannabis products inIsrael, for the packaging and distribution of cannabis which will bemarketed and sold in Israel under Canveda's medical cannabis brand"Salus BioPharma". The initial order for 100 kg of cannabiswas secured by Canveda under the Zenabis-Canveda Supply Agreement andis being shipped from Zenabis to Panaxia as all required import andexport permits have been secured. Applicable permits for additionalcannabis 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., asubsidiary of Shoppers Drug Mart. The Services Agreement calls forSpartan to utilize its network of volunteers and professionals toperform clinical services for Shopper Drug Mart patients which willinclude prescribing cannabinoid combination and strength, deliverymethods and general education about cannabis use as well as conductingfollow-up medical appointments to monitor efficacy and patientwell-being.

• - On July 15, 2020, MCLN Inc. (formerly 2702148 Ontario Inc. dba Medical Cannabis Learning Network) (" MCLN "), awholly-owned subsidiary of the Corporation, entered a non-exclusive agreement with Miramedia Retail Inc. tocreate a new MCLN branded web-based portal, "MiraCBD"increasing the Medical Cannabis Learning Network's outreach into thenatural health food sector. MiraCBD provides retailers, natural healthpractitioners and consumers with access to the MCLN platform whichoperates as: (a) a private network educational platform, providinginformation about the use of medical cannabis; (b) a telemedicinemedium providing patient access to medical practitioners for adviceand cannabis prescriptions from Spartan; and (c) a sales platform forCanadian cannabis Licence Holders. MCLN earns educational andconsultation fees from Licence Holders subscribing to itsservices.

• - On September 16, 2020, the Corporation increased thesize of the non-brokered private placement offering (the" Offering ") of units (the " Units ") of theCorporation 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 eachUnit consisting of one 12% secured convertible debenture of theCorporation 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 4,494Units for aggregate gross proceeds of $6,111,840 (US$4,494,000) from theclosing of all three tranches of the non-brokered private placementoffering broken down as follows: 1 st Tranche onJune 30, 2020 - 3,348 Units for aggregate gross proceeds of $4,553,280 (US$3,348,000);2 nd Tranche on July 31, 2020 - 346 Units for aggregate gross proceeds of $470,560 (US$346,000); and3 rd Tranche on September 17, 2020 - 800 Units foraggregate gross proceeds of $1,088,000 (US$800,000).

• - On October 14, 2020, the Corporation announced thatits wholly-owned subsidiary, MPXI Alberta Corporation(" MPXIAlberta "), entered into an asset purchaseagreement (the " AssetPurchase Agreement ") dated July 31, 2020pursuant to which MPXI Alberta acquired substantially all of theassets of Blaze 420 Today Inc. (" Blaze 420 "),including the leasehold interests to three (3) locations acrossAlberta which each have received development permits to operate asretail cannabis stores (the " Assets "). T he Assets acquired willenable MPXI to establish a cannabis retail platform in Alberta andopen up to three (3) retail cannabis stores in the Edmonton, Albertaarea, subject to the final approval from AGLC, upon meeting all licensing requirements. MPXI Alberta has obtainedapproval from the AGLC to operate as a licensed candidate.

Outlook:

The Corporation isfocused on developing and operating assets across the global cannabisindustry with an emphasis on cultivating, manufacturing and marketingproducts which include cannabinoids as their primary activeingredient.

In Canada, the Corporation continues to transition itsprincipal business model away from cultivation to one ofintermediation between buyers and sellers, accessing or facilitatingthe sale of cannabis products from licensed License Holder's(" LH ") and arranging or facilitating sales to medicalcannabis consumers domestically or, increasingly, to internationalbuyers. This strategy reduces or eliminates the need for large capitalinvestment, while generating fees and margins with equivalent netreturns than are generally available from seed-to-sale operations. TheCorporation is currently involved in late-stage negotiations tofacilitate several export opportunities to Europe, Israel andAustralia.

Domestically, utilizing the resources of Spartan andthe Medical Cannabis Learning Network, MPXI is currently workingtogether with several third-party License Holders to educate andmarket cannabinoid-based medicines to Canadian patients. Revenue isgenerated through transactional and/or hourly-based consulting feesfrom Licence Holders. The Spartan/MCLN platform acts as both atelemedicine medium providing patient access to medical practitionersfor advice and cannabis prescriptions and as a sales platform forCanveda and anticipates adding other third-party Licence Holders inthe coming months. The MCLN operates in much the same manner as Amazonor Shopify by providing on-line sales facilitation between medicalcannabis users and Licence Holders.

While it will continueto operate the Canveda Facility, and in consideration of the domesticoversupply conditions, MPXI has shelved plans for any acquisition orexpansion of additional cultivation in Canada. Specifically, it hasdiscontinued planned development of the Owen Sound facility and willmarket its estimated 1,200 kg of annual production at Canveda throughits Spartan and MCLN channels as well as to various provincialcannabis distribution agencies. In December2019, the Corporation accelerated its option to acquire 100% of MCLN securing an exclusive, worldwide, perpetual,royalty free licence to the Medical Cannabis LearningNetwork . This private social network connectspatients with credible information on the use of medical cannabis,offers the ability to conduct virtual consultations with qualifiedmedical practitioners and acts as an order-entry tool for the purchaseof medical cannabis products from Canveda. MPXIis anticipating the addition of other third-party Licence Holders to the platform overthe next several months.

The MCLN and its integration with the Spartan platformwill play a significant role in our growth in Canada this coming year. Spartan is a leading medical cannabis clinicdedicated to assisting Veterans of the Canadian Forces, RCMP and firstresponders since 2017. Spartan has also expanded its services tohelping Canadians seeking medical cannabis education, prescriptions,and advice on a wide selection of reputable Health Canada approvedproduct offerings at its premier virtual clinic. Spartan prides itselfon its 3 key measures for aligning clients with reputable suppliers:customer service s , productavailability, and product quality. Spartan attributes its continuedgrowth 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, havelegalized cannabis in some form and medicinal use is by far the primary focus oflegalization. Success in the medical cannabis marketplace is largelydetermined by the number of patients being served and the MedicalCannabis Learning Network is a leading edge "patientacquisition" technology which can be adapted for use in manycountries.

MPXI continues to explore opportunities to enter theretail (dispensary) arena in Canada and Switzerland. The first"HolyWeed" branded location was launched in Geneva inJanuary 2020 and has been consistentlyprofitable, supported planned expansion of retail outlets in Zurichand elsewhere in Europe. The Corporation intends to continue thecreation of a retail footprint for its products in Canada, Europe andelsewhere.

In Switzerland, a very successful harvest of high-CBD,organic "cannabis-light" biomass offers the Corporation theability to process substantial amounts of CBD distillate, isolate andsmokable product for sale into the global market throughout the comingmonths. MPXI has entered into leases for two facilities in the Genevaarea and while delayed by the advent of the COVID-19 pandemic, bothare being converted into extraction and processing facilities andinitial production of high-quality CBD distillate commenced inSeptember with capacity expected to continue to expand during the nextfew months.

With the ultimate goal of creating a global supplychain of low-cost biomass, efficiently-scaled production of GMPquality cannabinoid products for sale into high-value markets, theCorporation will also continue to develop its projects in Malta andSouth Africa. While again plagued with COVID-19 induced delays, theCorporation still expects each of these projects to commenceoperations during calendar Q2 of 2021.

In Australia, the opportunity to import products fromMalta, Canada and South Africa has prompted the Corporation to changeits focus from domestic production to developing an import anddistribution capability and now plans to import and introduce theSalus branded products to the Australian market. MPXI's Australiansubsidiary is fully licensed for the import and distribution ofcannabis. As a result, MPX Australia has discontinued its plannedbuild-out of its cultivation facility in Tasmania.

Finally, the Corporation continues to investigate otherinternational expansion opportunities that can provide lower-costcultivation, new genetics, innovative production technologies and,most importantly, new markets for its products.

The business interruption created by the globalshutdowns and travel restrictions has had a negative impact on theprogress of the multiple domestic and international projects initiatedby the Corporation in late 2019 and early 2020. Unlike most othercannabis ventures, virtually all of MPXI's operations were still inthe pre-revenue stage when the virus emerged. As a result, theCorporation embarked on plan of cost containment, including wagereductions, the cancellation of several consulting arrangements, thedelay of construction of facilities in Switzerland and South Africaand the abandonment of selected infrastructure projects in Canada andAustralia . MPXI will extend many of thesecost-saving initiatives in the post-COVID-19 period.

The international cannabis industry is evolvingrapidly. Regional reports prepared by the London-based cannabisresearch firm Prohibition Partners predicts that by 2028, the Europeanmarket for cannabinoid-based products will reach EUR120 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 (notinclusive of the huge CBD market in China). These potential revenuesmore than double the projected North American market for the sameperiod.

MPXI, with its access to best practises, productformulations, SKU variety and branding acquired from management'sprevious U.S. involvement, its management experienced in both the U.S.and international cannabis and financial markets, its access to globalcapital and its early mover entry into multiple geographic regions, isextremely well positioned to benefit from this exponential growth inthe international cannabis market.

Financial Overview

The key financialmeasures indicated below were used by management in evaluating andassessing the performance of MPXI's business for the fiscal secondquarter of 2020. A more detailed discussion of these and othermetrics, as well as operational events, can be found in theCorporation's Financial Statements and Management Discussion &Analysis (" MD&A ") filed on www.sedar.com .

Net Revenue

For the three months ended June30 , 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 June30 , 2020, MPXI reported net revenue of$2,335,542 (nine months ended June 30, 2019 - $1,143,518). Revenue was mainly driven bysales in Spartan, Canveda, and HolyWeed.

The increase net revenue for the nine months ended June30, 2020 is due to increased sales in Spartan, Canveda, andHolyWeed.

Gross Profit

Gross profit for the three months ended June 30 , 2020, before adjustment forthe unrealized gain in the fair value of biological assets was$506,558 which represents a gross margin of 52.9%. Gross profit afteradjustment for the unrealized gain in the fair value of biologicalassets was $1,296,241 calculated at 135.4% of sales. The unrealizedgain in fair value of biological assets relates to cannabis plants atthe Canveda Facility.

Gross profit for the three months ended June 30, 2019, before adjustment forthe unrealized gain in the fair value of biological assets was$406,979, which represents a gross margin of 60.3%. Gross profit afteradjustment for the unrealized gain in the fair value of biologicalassets was $1,684,065 calculated at 249.6% of sales. The unrealizedgain in fair value of biological assets relates to cannabis plants atthe Canveda Facility and in Switzerland.

Gross profit for the nine months ended June 30 , 2020, before adjustment forthe unrealized gain in the fair value of biological assets was$1,671,266 which represents a gross margin of 70.3%. Gross profitafter adjustment for the unrealized gain in the fair value ofbiological assets was $3,706,385 calculated at 156.0% of sales. Theunrealized gain in fair value of biological assets relates to cannabisplants at the Canveda Facility and in Switzerland.

Gross profit for the nine months ended June 30, 2019, before adjustment forthe unrealized gain in the fair value of biological assets was$850,132, which represents a gross margin of 74.3%. Gross profit afteradjustment for the unrealized gain in the fair value of biologicalassets was $2,477,122 calculated at 216.6% of sales. The unrealizedgain in fair value of biological assets relates to cannabis plants atthe Canveda Facility and in Switzerland.

Operating Expenses

General and AdministrativeExpenses

General and administrative expenses were $2,652,866 forthe three months ended June 30, 2020 as compared to $2,353,978 for thethree months ended June 30, 2019.

General and administrative expenses were $9,889,046 forthe nine months ended June 30, 2020 as compared to $5,085,336 for thenine months ended June 30, 2019.

Overall, the increase in general and administrative for the nine months ended June 30, 2020, ascompared to the nine months ended June 30, 2019, was primarily due toincreases in salaries and benefits, consulting fees and office andgeneral expenses relating to acquisitions during the period and theCorporation's continued growth.

Professional Fees

Professional fees were $285,244 for the three monthsended June 30, 2020 as compared to $680,464 for the three months endedJune 30, 2019.

Professional fees increased to $1,574,511 for the ninemonths ended June 30, 2020 as compared to $1,433,286 for the ninemonths ended June 30, 2019.

The increase in professional fees for the nine monthsended June 30, 2020 is due to the change in volume and complexity ofaccounting and legal services required by the Corporation driven byacquisitions and growth. These fees include expenses related to audit,advisory, legal work, government and investor relations, consultingand costs associated with the board of directors. This has been offsetby cost saving initiatives relating to COVID-19.

Incentive Stock Option Plan

As part of the Corporation's incentive stock optionplan, the Corporation recognized $21,002 of share-based compensationfor the three months ended June 30, 2020 as compared to $17,705 or thethree months ended June 30, 2019.

As part of the Corporation's incentive stock optionplan, the Corporation recognized $91,304 of share-based compensationfor the nine months ended June 30, 2020 as compared to $1,248,081 forthe nine months ended June 30, 2019.

The Corporation granted stock options to employees,consultants, directors and officers of the Corporation under theCorporation's stock option plan on February 26, 2019, May 29, 2019,September 19, 2019, and February 11, 2020.

Amortization and DepreciationExpenses

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 thenine months ended June 30, 2020 as compared tothe nine months ended June 30, 2019, relatesprimarily to the amortization of MCLN licencecommencing in December 2019, and the additional amortization from theadoption 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 ascompared to other income of $ 734,804 for thethree months ended June 30, 2019 .

Other expenses were $ 1,364,076 for the nine months ended June 30, 2020 ascompared to other expenses of $ 43,530 for thenine 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 bythe change in fair value of derivative liabilities.

Net Loss After Tax

Net loss after tax was $5,310,438 for the three monthsended June 30, 2020 as compared to a loss of $1,263,442 for the threemonths ended June 30, 2019.

Net loss after tax was $12,294,672 for the nine monthsended June 30, 2020 as compared to a loss of $6,343,210 for the ninemonths ended June 30, 2019.

Adjusted EBITDA

Adjusted EBITDA was a loss of $2,702,796 for the threemonths ended June 30, 2020 as compared to a loss of $2,486,225 for thethree months ended June 30, 2019.

Adjusted EBITDA was a loss of $10,720,224 for the ninemonths ended June 30, 2020 as compared to a loss of $5,599,729 for thenine months ended June 30, 2019.

About MPX InternationalCorporation

MPX International Corporation is a multinational diversified cannabis company focused on developing and operating assets across theinternational cannabis industry with an emphasis on cultivating,manufacturing and marketing products which include cannabinoids astheir primary active ingredient. With current operations spanning fourcontinents in Canada, Switzerland, South Africa, Malta and Australiaas well as evolving partnership and distribution opportunities inother jurisdictions, MPXI continues to position itself as an emergentglobal participant in the cannabis industry.

Cautionary Statement RegardingForward-Looking Information

This news release includescertain "forward-looking statements" under applicableCanadian securities legislation that are not historical facts.Forward-looking statements involve risks, uncertainties, and otherfactors that could cause actual results, performance, prospects, andopportunities to differ materially from those expressed or implied bysuch forward-looking statements. Forward-looking statements in thisnews release include, but are not limited to, MPX International'sobjectives and intentions. Forward-looking statements are necessarilybased on a number of estimates and assumptions that, while consideredreasonable, are subject to known and unknown risks, uncertainties andother factors which may cause actual results and future events todiffer materially from those expressed or implied by suchforward-looking statements. Such factors include, but are not limitedto: general business, economic and social uncertainties; litigation,legislative, environmental and other judicial, regulatory, politicaland competitive developments; delay or failure to receive board,shareholder or regulatory approvals; the Corporation's ability to effectively deal with therestrictions, limitations and health issues presented by the COVID-19pandemic; future cannabis pricing; cannabis cultivation yields; costsof inputs; its ability to market products successfully to itsanticipated clients; reliance on key personnel and contractedrelationships with third parties; the regulatory environment inAustralia, Canada, Malta, South Africa, Switzerland and otherinternational jurisdictions; the application of federal, state,provincial, county and municipal laws; and the impact of increasingcompetition; those additionalrisks set out in MPX International's public documents filed on SEDARat www.sedar.com , including its audited annualconsolidated financial statements for the financial years endedSeptember 30, 2019 and 2018, its unaudited interim condensed consolidatedfinancial statements for the three and six months ended March 31,2020 and the correspondingannual management's discussion and analysis; and other mattersdiscussed in this news release. Although MPX International believesthat the assumptions and factors used in preparing the forward-lookingstatements are reasonable, undue reliance should not be placed onthese statements, which only apply as of the date of this newsrelease, and no assurance can be given that such events will occur inthe disclosed time frames or at all. Except where required by law, MPXInternational disclaims any intention or obligation to update orrevise any forward-looking statement, whether as a result of newinformation, future events, or otherwise.

For further information, please contact:

MPX International Corporation

W. Scott Boyes, Chairman, President and CEO

T: +1-416-840-3725
info@mpxinternationalcorp.com

For additional information on MPXI visit our website www.mpxinternationalcorp.com or http://mpxi.tv .

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