Cannabis U.S. Companies

[JohnCM]

MPX Bioceutical Corporation (MPXEF) CEO Scott Boyes on Q2 2018 Results - Earnings Call Transcript

Aug. 6, 2018 3:06 AM ET

EPS of $-0.01 Revenue of $7.98M (+ 82.2% Y/Y)
MPX Bioceutical Corporation (OTCQB:MPXEF) Q2 2018 Earnings Conference Call August 2, 2018 4:30 PM ET

Executives

Phil Carlson - Investor Relations

Scott Boyes - President and Chief Executive Officer

David McLaren - Chief Financial Officer

Beth Stavola - Chief Operating Officer

Analysts

Alan Brochstein - New Cannabis Ventures

Nick Warner - Canaccord

Russell Stanley - Echelon Wealth Partners

Operator

Good day, everyone and welcome to today’s MPX Bioceutical Fiscal Year 2018 Investor Call. Just as a reminder, today’s call is being recorded. At this time, I would like to turn the conference over to your host for today Mr. Phil Carlson. Please go ahead, sir.

Phil Carlson

Thank you. Good afternoon. And welcome to the MPX Bioceutical Corporation fiscal 2018 financial results conference call. A replay of this call will be archived on the investor relations section of the MPX website mpxbioceutical.com. Before we begin, please let me remind you that during the course of this conference call, MPX management may make forward-looking statements. These forward-looking statements are based on current expectations that are subject to a number of risk and uncertainties that may cause actual results to differ materially from expectation. For more information on the company’s risks and uncertainties related to these forward-looking statements please consult the companies’ MD&A and other regulatory filings available at www.cdar.com. Any forward-looking statements should be considered in light of these factors. Please also note as a safe harbor, any outlook we present it as of today the management does not undertake any obligation to revise any forward-looking statements in the future.

With me on the call today are Mr. Scott Boyes, President and CEO. Mr. David McLaren, Chief Financial Officer and Beth Stavola, Chief Operating Officer.

With that, I would now like to hand the call over to Scott. Scott, please go ahead.

Scott Boyes

Thank you, Phil and thank you every one who joined us on our call to discuss the results from our 2018 fiscal year. Probably against the advice of counsel and investor relations, I am going to go off script for a little bit and first I want to apologize to our shareholders and investors those that have supported the company and to our employees most of whom are also investors at our company that we relate with this filing. We communicated with our auditors and but together our team here has worked tremendously hard over the past four or five days to finish up what turns out to be a more complex audit they didn’t anticipated, multiple filings, multiple acquisitions, created pretty complex audit. All I can do, I take full responsibility for the delay as CEO. We are adding more internal resources and thank Kevin, our auditors brought in a fair number of external sources to help us get through this. And you certainly have my undertaking that this will never happen again. And now I will go back on script because the lawyers are ready to hit me across the head and so.

The past several months have brought the number of major developments that have grown our company including expanding our footprint in Massachusetts, Nevada, Arizona and most recently into Canada. As well we have completed three capital and convertible debt raises totaling in excess of $65 million. We have also renamed our company to MPX Bioceutical Corporation to more closely mirror the brand name of our established cannabis concentrate products and to further reflect our strategic vision to become a dominant player in the adult use and medical cannabis markets in both the United States and Canada. On today’s call I will discuss all of these events in little more detail and explain how they set us up for continued growth. Then David McLaren, our Chief Financial Officer will discuss the financial results.

First our operations in Arizona, in fiscal 2018, we continue the aggressive expansion of our footprint in the state which is one of the best regulated industry supported medical cannabis markets in the United States. In addition to a favorable licensing structure, the state of Arizona is one of the fastest growing populations in the country opening our dispensaries to an influx of potential new patients. Sales of over CAD21 million were generated by two of our Health for Life dispensaries both of which contributed revenues to the full fiscal year and from our wholesale operations as sales of our MPX brand and concentrates was ramped out throughout the year and also from one months of activity from our most recent Arizona acquisition.

In May of 2017, we relocated our Mesa North Health for Life dispensary to a new location within a more commercial type environment with substantially higher traffic and population densities. This facility in Mesa, Arizona was the first to utilize innovative new retail optimization parameters which are now an integral part of the blueprint for all future Health for Life dispensaries. The updated blueprint has already facilitated the development of a more comfortable, streamlined and familiar retail environment that more effectively connect the brand to the dispensary. Already in April of this year we have opened an additional dispensary in the Phoenix suburb of Apache Junction bringing our total number of retail outlets in the state which trades under our well established Health for Life brand to treat. Additionally, and subsequent to our fiscal yearend, we have relocated our processing and production of MPX concentrates to the new facility in North Mesa.

The new location has finalized its build out and will result in an annualized capacity increase of more than 800,000 grams of high grade concentrates further supporting our ability to meet the growing demand in the region. In March of this year, we acquired the holistic group of companies which operates a 15,000 square foot cultivation and production site in Central Phoenix as well as a full service dispensary located in the North Eastern part of the city. This acquisition also brought to MPX the Black Label and Timeless brands of concentrates both of which are sold to dozens of dispensaries in the state.

Finally and in partnership with our Israeli JV partner, Panaxia, we are nearing completion of our first GMP quality production laboratory in Phoenix that will allow us to introduce several SKUs of pharma grade cannabinoid-based medicines to the Arizona market all to be sold under our Salus BioPharma brand. We are pleased with the foundation we have built in Arizona and we are encouraged by the opportunity ahead of us to continue to grow our presence in the state. Success of our operations in Arizona has supported the foundation for our growth in our other emerging markets. Before I talk about these markets, I am sure you have some questions about the court decision in Arizona to convict Rodney Christopher Jones of possessing a jar containing 0.05 ounces of hashish. So I would like to say a few words about that briefly. The most recent court ruling is a direct conflict of the protection afforded by the Arizona Medical Marijuana Act which is intended to protect from prosecution, patients utilizing marijuana or cannabis for their medical needs. We believe the ruling will likely be met with an appeal or other legal action which will hopefully resolve once and for all an issue that has been subject of contention and conflicting court rulings for several years going back to at least 2012.

Entities such as the American Civil Liberties Union, the Arizona Dispensary Association and the Arizona Cannabis Bar Association are all working to protect patients from prosecution resulting from the use of medical cannabis and we stand in solidarity with them. Today, the Arizona Department of Health which oversees the Medical Marijuana program in the state has not announced any changes to the rules which govern the types of cannabis medicine sold by dispensaries and we have seen no reasonable decline in the sales of concentrates or cannabis infused products.

Let’s go onto Massachusetts. In June of last year we completed our first acquisition in Massachusetts which aside from being the first acquisition outside of Arizona will be our first entry into the adult use market certainly at the dispensary level. As part of the acquisition, we brought the majority of our IMC and Fall River developments both registered companies that are active in the cannabis space but do not directly cultivate, produce or sell cannabis. Both entities specialize on providing administrative, financial and material support to Cannatech Medicinals, which has a provisional license issued by the State of Massachusetts to directly cultivate, produce, own possess and sell cannabis and cannabis-infused products.

As part of the acquisition, we are building out facilities in Fall River Massachusetts which include a 40,000 square foot property on the outskirts of the city and which is owned and licensed for a cultivation facility as well as a 25,000 square foot dispensary located in City at the end of an off ramp on the very busy Interstate 95, a main route to and from Cape Cod tourist areas and the other large cities of the North East. The new cultivation and production facility is expected to increase MPX cultivation capacity by 2.25 million grams of flower as well as up to 500,000 grams of high quality margin concentrates annually. With our entry into Massachusetts, we have the change to introduce the MPX and Health for Life brands into the North-eastern US building upon the existing brand recognition that is central to our expansion strategy.

And I will move on to Nevada. In December of 2017, MPX closed an acquisition of GreenMart of Nevada, a license recreational and medical cannabis cultivation production and wholesale business operating in North Las Vegas. The business currently sells dry flower, edible and other high margin infused products to the medical and adult use markets in the Las Vegas area and encompasses a fully operational state-of-the-art license production facility. To address the higher margin edibles market, GreenMart had previously installed a professional grade custom kitchen operation enabling the facility to carry a more diverse high-end product. With the capacity to produce up to 1.6 million grams of dry flower and 85,000 grams of high margin concentrate, the facility provides enhanced operational capacity to meet the growing demands of the Las Vegas area. The GreenMart acquisition represents our first movement of the Nevada market which saw the legalization of adult used cannabis in July of last year. As expected of a world renowned tourist destination, Las Vegas welcomes 42 million visitors annually making tourism a key growth driver for our Nevada location an important market for our MPX branded line of concentrates. MPX concentrates are currently sold to over 35 dispensaries in the state.

Now moving onto Maryland, Maryland has become a focal point of our expansion initiatives due to the unique opportunities presented by this relatively early state limited license medical cannabis market. With an estimated 36,000 patients currently certified for medical use and another 12,000 application in process according to report from the Maryland Medical Cannabis Commission, the market is poised for significant growth. In December of 2017, we entered to a management agreement with LMS Wellness which will enable MPX to enter the Baltimore, Maryland market through the management of our full service medical dispensary in the White Marsh of suburban Baltimore. We also entered into a management agreement with Rosebud Organics, which is authorized to purchase, process and sell medical cannabis products in Bethesda, Maryland and Budding Rose, Inc. which is authorized to operate a dispensary and sell medical cannabis products in the state. The production facility has just commenced operations and is expected to drive sales of our wholesale brand to patients across the state. In January of this year, we entered into a management agreement with GreenMart of Maryland which is authorized to operate a dispensary and sell medical cannabis products in a high traffic area of urban Baltimore situated off the North Point Road in the community of Colgate. Subsequent to the fiscal yearend license approval was received for the Maryland Medical Cannabis Commission for all three of these dispensaries and we expect to open them throughout the summary and autumn of 2018 under the Health for Life brand. It’s worth noting that we have an option to buy agreements for all three of these operations.

Finally, in June of this year, we completed the purchase of the Canadian licensed producer Canveda. It’s a 12,000 square foot facility in Peterborough, a couple of hours couple of North of Toronto that gives us a base to launch the MPX brand in the Canadian market and we expect it will facilitate the approval of an add-on license for our larger premises in Owen Sound lead to a license to produce oils and eventually MPX and Salus Biopharma products for the Canadian and possibly for export markets. Our expansion efforts drove the higher expenses seen in fiscal 2018 which I just want to touch on before David goes into more detail about our financial results. The U.S. and indeed a global cannabis industry is growing at an incredibly fast pace. Currently, multiple multi state companies like ours are competing for new licenses and or existing medical marijuana licenses across the country.

There is an ongoing land grab as each of us tries to expand our reach and establish a footprint to be able to attract future revenues and market share in multiple states. This pace of growth requires that we spend in advance to pursue state licenses, create management structure, acquire and build the bricks and mortar assets and ensure the financial capacity to exploit the rapid pace of new opportunities that come to us virtually everyday. These expenses include specialized personnel resources needed for successful license application, financial, legal and analytical teams for due diligence for potential acquisition, the hiring of construction managers to oversee the build out of new dispensaries, production and cultivation sites, the hiring and training of new staff and supervisors all in advance of site openings. Furthermore, we view Life consultants to find and secure real estate and target markets starts our A target markets which faced ever increasing restrictive zoning rules, lobbyist for advice and general government relations.

We strongly believe that these investments and infrastructure and human resources will support our strategy to penetrate new markets, bring our brands to a wider patient base, grow our footprint and generate future revenues and earnings. As I mentioned earlier, our Arizona assets are all cash flow positive. Our strategy is to continue to invest and replicating this Arizona business model in targeted sates across the US to grow market share and to achieve our goal of becoming one of the largest participants in the cannabis sector. During the fiscal year 2018, we made excellent progress laying the foundation for this growth and we consider fiscal 2018 to have been a breakthrough year for the company for this reason.

With that, I will turn the call over to David McLaren, our CFO to walk everyone through our financial results for the year.

David McLaren

Thank you, Scott. I like to now go into detail about the 2018 fiscal year’s financial results. They are also found on the SEDAR filings which can be filed with the Canadian Securities and Administrators earlier this afternoon. Total revenues for the year increased almost five fold to $21.3 million up from $4.4 million in fiscal year 2017. This was primarily driven by the management operations in Arizona including sales from previous countries as well as the wholesale of MPX branded concentrates to other licenses countries within the state. We had a strong core Q4, sales of just under $8 million driven by existing Arizona operations and the recent Arizona acquisition in early March 2018. Before adjusting for unrealized gain on fair value of volatile assets, gross profit for the fiscal year was $7 million which represents a gross margin of 33%. As compared to $93,000 and a gross margin of 2.1% in fiscal 2017. After investing for biological assets, gross profit was $11.2 million reflecting a 52.4% gross margin compared to $1 million and 23.5% in fiscal 2017.

Operating expenses were $20.7 million compared to $5.8 million in fiscal 2017. This was primarily attributable to cost associated with full year of Arizona operations and as Scott mentioned, our continued growth and expansion efforts. The increase of [indiscernible] which increased by $9.8 million had a $2.4 million increase in compressional fees, many legal accounting and advisory services. $1.2 million increase in share base compensation and a $1.6 million increase in amortization, depreciation driven by capital expenditures and acquisition throughout the year. Net comprehensive loss in the fiscal year was $18.8 million compared to a net loss of $4.7 million in prior year period. The main impact over prior year was higher gross profit at $10 million offset by higher expenses of $15 million the change in fair value of derivative liabilities for a loss of $7.7 million. This is a non-cash item.

Averages of $11.6 million and transaction cost increased to thus $539,000. A foreign exchange loss of $1.7 million was offset a gain on income tax recovery due to the US lower tax rate effective January 1, 2018 of $3.4 million. Our adjusted EBITDA was a loss of $2.7 million as compared to a loss of $1.3 million for the fiscal year ended March 31, 2017. This was a result of additional cost incurred throughout the year related to continued expansion. From a financing perspective, during the fiscal year we raised USD25 million revolving credit facility earmarked for additional acquisitions with the initial drawdown of USD$11 million from revolving credit facility in October of 2017 for capital expenditures. In December of 2017, and January 2018, we continue the private placement offering that raised USD22.4 million.

As of March 31, 2018 the company had cash available of $8.5 million down from $21.5 million at the end of fiscal 2017. The proceeds from the private placements and financing throughout fiscal 2018 were reinvested in the company via acquisitions and capital build outs. Subsequent to fiscal yearend on May 25, 2018 the company raised USD$40 million through a secured convertible original issue discount loan. The proceeds are to be used to fund the expansion acquisitions going forward and the payment of a term loan of USD9.5 million that was due on June 30 and was paid on time. With that, I would like to turn the call to the operator for Q&A question.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] And our first question today will come from Alan Brochstein of New Cannabis Ventures. Please go ahead.

Alan Brochstein

Three quick questions or three questions and I will jump back in queue. First one is just on the gross margin in Q4 in the 22% range before the adjusted – can you explain was there anything short-term that impacted that?

Scott Boyes

Well, when we do an acquisition, Alan, we acquired the inventory of the target at full market value. So, when it sells through during the month and we had a pretty significant sell-through by the acquisition in March, we capture no retail margin in that whatsoever. It becomes part of the acquisition cost. So on approximately $1.5 million we get virtually no margin, so that’s one of the impacts.

Alan Brochstein

Okay and that was in MD&A actually. I just want to know if there is anything else. What is your target margin in Arizona?

Scott Boyes

Well we are looking for an EBITDA margin of 25% to 30%. We have seen some price compression over the past few months. There is several, the spends are already moved in from the country into the city and particularly on flower, there has been some price compression. There has also been a fair amount of flower available because of the copper state production, so that’s brought flower prices down a little bit. Concentrates though is a pretty less under margin, so. And most of those we are looking for a 50% growth.

Alan Brochstein

Got it. My second question is for Beth. And it’s just – can you give us an update Beth on three geographies I am interested in, Pennsylvania which you have spoken. Ohio, which I know we are waiting for and then four new which we are also hopeful. I know you announced can you just update us on that?

Beth Stavola

What was the last one, Alan? I apologize it went it….

Alan Brochstein

I just asked about California, we were waiting so long. I forgot, you already made an announcement. Just wonder if you could just shed a little bit more insight on those three geographies what you are going on there, Pennsylvania, Ohio and California.

Beth Stavola

Sure. So Pennsylvania, we unfortunately were unsuccessful in receiving a grow process license yesterday. However, we are very optimistic about the five [indiscernible] application that we have in five out of the six regions in Pennsylvania from what I am hearing and you never know but we are looking at about two weeks out for those to be announced. Second is Ohio is everybody’s guess is as good as mine. I keep hearing that it is going to be next week, next week, next week. So we will wait and see. The last thing that I heard was about a week ago that it would be coming out in the next two weeks and then California, a market that we are really excited about. We are looking to start production there in about 60 days and we are expecting that that’s going to be a very strong market. Conservatively, we think we could be selling 20,000 cartridges within per month to start moving up to that 50,000 cartridges wholesale per month. So if you are looking at a $20 to $22 cartridge price and a wholesale market, you are looking at 400 to 440 a month and then at 50,000 cartridges at conservatively $20. That could be something close to $1 million.

Alan Brochstein

I just want to make sure we all understand as well. You don’t actually hold the California with you all the revenue or you booking – how exactly is the economic model working there.

Beth Stavola

It’s like a traditional contract manufacturing model where we will pay the contractor a price per unit.

Alan Brochstein

And you book all the revenue or is there a license holder that’s booking the revenue?

Beth Stavola

It’s my understanding that we will be booking the revenue and then be paying the contract manufacturer.

Alan Brochstein

Got it. Okay and then my last question is either for you Beth or for Scott. You guys have a lot of things that you are working and if you just look at the value chain from cultivate to testing to dispensing, you are focused on all of those and given what you just said about Pennsylvania, what is your philosophy on – do you want to be fully vertically integrated or do you want to be more focused on certain aspect?

Scott Boyes

Let me take that one. Go ahead. Yes, Beth, go ahead.

Beth Stavola

So I think that it is important to be fully vertically integrated. It allows to make sure that you have the capacity and the ability to sell through in the dispensaries and I believe that that we are pretty good at all three. So Scott, did you have anything to add to that?

Scott Boyes

Well it’s just yeah we live to be vertically integrated but the focus is not on massive cultivation nor will it ever be. I mean, it seems like in every jurisdiction we go into Canada, Arizona, California, there is just massive amounts of cultivation and flower becoming available and particularly the – grade of the flower that we use for concentrate production, so yes, we like to be vertically integrated to the extent that we want to be able to assure ourselves of supply of biomass. But the real focus is on creation of concentrates and on the retail sector on the dispensary sector.

Alan Brochstein

Okay, I will jump back in the queue. Thank you for explaining that.

Scott Boyes

Thanks Alan.

Operator

[Operator Instructions] Next from Canaccord, we will go to Nick Warner. Please go ahead.

Nick Warner

Hi guys, pretty impressive run rate on the revenue coming out of Arizona. I just wanted to ask a quick question on the general trough you saw, a bit of a spike in the quarter. Was this – if this is something that we can expect to see going forward if there is a big driver of causing it.

Scott Boyes

You mean a big spike in revenue, Nick?

Nick Warner

G&A, general and admin cost.

David McLaren

Well as I explained, we are spending money, we have two choices in this industry, we either stop spending money and harness the assets we developed or we keep on spending and growing and there is always this lead of expenditure in advance of being able to generate revenue and we – I tried to touch on that in some of my comments. So as long as we are growing, you will probably see for the foreseeable future particularly in the fast growth environment we are in now, you are always going to see a lead of expenses in advance of revenue growth. Then I would like to speak to think that there was a way around that, but if you look at everybody in the industry, you are seeing that same kind of trend. And I know this company is out there in the US that are potentially larger than we are right now that have massive amounts of people on staff and spending considerably more money than we are and to proportion to the revenue. We will continue to spend as long as we are spending that money on investment and growth of capacity, of people, of capability on a revenue generating activity, so.

Nick Warner

Perfect. Thank you for that one. My second question is related just back on the extracts, then. So you don’t really see any slowdown in terms of sales. It seems what others are doing or producers kind of slowing down on extracts that are producing shifting to the flower. What’s the general response like in the rest of the market?

Scott Boyes

We have not seen any appreciable decrease in our concentrate sales at any of our dispensaries. And we always had a little bit of slowdown in May, June, July and August when all the snowbirds head back up north. So there is some seasonality. But in terms of the ratio of concentrates to flower, we just haven’t seen any change. So in spite of the court ruling, I think that the trends throughout the state, is business as usual.

Nick Warner

Perfect. That’s wonderful. And my last question is for I have with regards to Q, in terms of Nevada itself that’s your second state that you guys have entered into. You guys see with retail licenses being potentially issued for recreational sales, Mark coming online and [indiscernible], do you guys see yourself interested in that opportunity or would you more be focused on opportunities in other states?

Scott Boyes

Let me let Beth answer that one.

Beth Stavola

So we have been working hard to the last year plus getting ready for this application process. Those applications have come out and may will be accepted by the state between September 7 and September 20. So, we are ready in the process and we have been of writing and getting prepared for that.

Nick Warner

Thank you. Those are all my questions. I appreciate the answers guys.

Scott Boyes

Thanks Nick.

Operator

We will move next to Russell Stanley of Echelon Wealth Partners. Your line is open.

Russell Stanley

First question, just to follow-up on Arizona, can you talk about how the Apache Junction operations performing, is it meeting your expectations thus far, understanding that it’s so early days?

Scott Boyes

It’s early days. It’s in a part of the city that is not well served by other dispensaries. But it’s also in a part of the city where the average capita income was a little lower. So we see the average expanding by each patient that walks in a little lower but we got great traffic. It’s doing really well and in fact some days it’s done better than our larger one. So far, yeah, I would say, we are happy.

Russell Stanley

That’s great color. Thanks on that. And on Massachusetts understanding the comments, in the MD&A around zoning approval, so just wanted to confirm, how are you doing on the three dispensary locations in terms of – how the agreements or work on those lines?

Scott Boyes

Okay. Well one of them is almost built. So obviously the zoning on that one is pretty clear. In fact, I think it’s got everything, but the signs to go on the door, and it’s ready to go. Beth, you want to talk about Attleborough and so forth.

Beth Stavola

Sure. Attleborough will be ready to go. The host agreement is finished and complete there. We’ve done all of our presentations in front of the City Council. That is currently in construction and I expect that to be open within the next 60 days. We do have several other locations that we are looking at. We are interested in a higher average median income for families – type of an area that’s somewhat closer to Boston. So we’ve got three or four areas that we are looking at right now and I would anticipate in the next 30 to 45 days that we will make a decision on which one of those we will go forward with.

Russell Stanley

Great. Thank you for that color and just one last question for now and I will get back in the queue. But on your relationship with the – the work you are doing with Panaxia. Understanding, I guess you are expecting some revenue to start falling from that, I think early fiscal 2019 which were I guess – but do you have an idea I guess as to how much contribution you would expect this line of business to make 2019 at this point?

David McLaren

I don’t want to put numbers out because we haven’t published anything and the lawyers standing here with two big forms on my head, so I have to be careful. But we have restarted testing marketing some of the products through one of the dispensaries, so for the receipt – the response has been pretty good. So far we have concentrated on not on any THC products but simply on CBD products. They are just ramping up manufacturing now. The only barometer I think, used, Russ, is, I mean, they are running at a $2 million run rate in New Mexico which has 2 million people. Arizona has a little better than 6 million people. So if we get the same kind of market response that they got in New Mexico, we are looking at a $5 million to $6 million run rate on Panaxia products. That’s kind of what we are hoping for. I think one of the better sense by the end of fiscal Q2 when we’ve got a full number of SKUs in all three dispensaries, we have also hired a registered nurse who has been in the cannabis sector involved in the cannabis sector for quite a while and she has started to run seminars with the medical community in the state. The first one of those I think is being held next week. That will start to get the doctors and the nurse practitioners in the market more familiar with the products and hopefully that will get us the boost we are looking for.

Russell Stanley

Excellent. It’s great, I appreciate the detail. I will get back in the queue.

Operator

[Operator Instructions] We will go back to Alan Brochstein of New Cannabis Ventures. Please go ahead.

Alan Brochstein

Yes, it’s been a while since you guys put out a press release on your revenue run rate and obviously you came in a little bit higher but it seems pretty close to that $5 million a month since March. Are you able to provide any sort of guidance either as a number or just to kind of layout how things will be added in over the next several quarters, you just talked about say let’s for instance new jurisdictions coming on will be my other area there.

Scott Boyes

For the first quarter, the quarter ending June 30, we got a pretty good sense of what those numbers are and they are going to be pretty consistent with the last month of the last quarter. I would say we got little bit of softness in the desert states in the summertime. So – but I think the market will be very pleased with our Q1 numbers. As we roll into Q2, we will start to see some impact from the ability to upgrade our concentrate capacity in Arizona. We may start to see a little bit of revenue from Maryland maybe probably until our fiscal Q3 before we see much out of Massachusetts and we are also expecting a bit of a pickup in Nevada when we had some crop problems just before we completed the acquisition there and it’s now they have got their crops up and running. They got the kitchen up and running, they got the full production facility up and running. So I expect to see some more impact of sales from the Nevada market in Q2 and really ramped up in Q3. So you will see a continuous increase in revenues over the balance of our fiscal year.

Alan Brochstein

Great. And then questions, just kind of big picture and you’ve done a good job of updating us. So kind of how the landscape is changing. You mentioned earlier there is some well larger companies. So can you just kind of figure outlook on what you guys are going to be doing to grow in terms of either organically or making acquisitions going forward. Is your view changing? Are you looking at some smaller acquisition opportunities to keep up with the consolidation that’s going on?

Scott Boyes

I got to be a little bit careful here. But we have a continuous pipeline. I would guess that between Beth and I and Beth has spent a lot more time in the last little well on business development and less on operations. We probably got a pipeline of 10 to 12 that we are looking at seriously. As I think, I quoted a couple of times before, I see this as the year of continued acquisition and potentially some merger. We’ve already seen merger action in the Canadian market and we’ve seen some in the US. I think that will continue this year and we intend to play a part of that continued growth. That’s about is the base of this I can give you an answer both without stating….

Alan Brochstein

I will give it a shot. In the United States, is there a strategy geographically at all or by the type of entity you are looking for in terms of any more medical or more focused on the adult consumer market?

Scott Boyes

No. I mean, we are doing very well in the markets and I think we will continue to – of course we will be naïve not to suggest that jumping in to the adult – used markets are not as equally attractive. I mean, Massachusetts we jump into because it’s going to be an adult use market. We’ve seen New Jersey is potentially being an adult use market. And there are some of the bigger states that we continue to look for opportunities in as well. Obviously, the limited licensing states are where our focus is. We still have no interest in Oregon, Washington, Colorado. We will focus where we think we can get the biggest bang for our investment dollar. But adult used market, medical market. We are happy in both of them but particularly with Panaxia product, we think we are going to be able to establish little bit of a competitive advantage in some of the medical markets.

Alan Brochstein

Great, thanks a lot guys.

Scott Boyes

Thanks Alan.

Operator

And it appears that is all the time we do have for questions today. I would like to turn the conference back over to Mr. Scott Boyes for any additional or closing remarks.

Scott Boyes

One thing I will note, now that I got a chance of speaking of Alan, who has been on the call. He publishes a list under his cannabis capital of the revenues generated by each of the listed companies quarter-over-quarter. And for the quarter ending March 31, we’ve kind of hit the ranks of the top 5 in terms of revenue producers. So we are hoping in the next quarter will be even little bit higher up than that.

Anyway, I want to thank everyone who submitted questions. Before we close the call, I would like to reiterate our progress of the fiscal year. We’ve aggressively expanded our presence and ended the fiscal year with four dispensaries, two cultivation facilities and two production facilities in Arizona, three dispensaries and one production facility ready for operation in Maryland and cultivation of production facilities in Nevada producing both concentrates and cannabis infused edibles. We are in the process of building a cultivation of production facility as well as dispensary in Massachusetts with two more dispensaries on the horizon. We’ve continued to build and strengthened our Health for Life brand expanding its presence in line with our dispensary operations. And lastly, we continue to invest in operational expansion with a strategy that replicates our Arizona business model in targeted states across the United States, rapidly growing market share to achieve our goals towards becoming a leading commercial producer of medical cannabis and cannabis infused products in both Canada and the United States.

With that, I will turn the call back over to the operator.

Operator

Thank you. And ladies and gentlemen, that does conclude today’s conference. We thank you all for joining.