MPX Enters Into Management & Purchase Option Agreements With LMS Wellness, Benefit LLC in Baltimore Maryland
TORONTO, Dec. 12, 2017 (GLOBE NEWSWIRE) — MPX Bioceutical Corporation (the “Company” or “MPX”) (CSE:MPX) (OTC:MPXEF) today announced that the Company, through its indirect wholly-owned subsidiary, S8 Management, LLC (“S8 Management”), is entering into a management agreement (the “Management Agreement”) with LMS Wellness, Benefit LLC (“LMS”) which will result in MPX building and managing a full service medical cannabis dispensary in the White Marsh suburb of Baltimore, Maryland. The Management Agreement provides for, amongst other things, that S8 Management will provide all management services typically required by a dispensary facility of similar type and size, including but not limited to, all staffing, materials, equipment, logistical support, accounting and other administrative functions, contractor selection, advisory services and any other requirements essential to the successful operation of LMS. MPX will support the dispensary through a US$5 million credit facility through S8 Management.
In addition to managing the facility, MPX, through its wholly-owned subsidiary, CGX Life Sciences, Inc. (“CGX”) has purchased an option to acquire a 91.27951% interest in LMS at an exercise price of US$1.00 for an option period of two (2) years. CGX may not exercise the option until ninety (90) days following the award by the Natalie M. LaPrade Maryland Medical Cannabis Commission (the “Commission”) of a license authorizing or permitting LMS to dispense medical cannabis in the State of Maryland in Senatorial District 8 (the “Final Dispensary License”) and the issuance to CGX of the 91.27951% membership interests of LMS is subject to the approval of the Commission. To acquire the option, CGX is paying LMS an option premium of US$1,233,808.68 and agreeing to pay certain expenses of LMS in the aggregate amount of US$118,826.99. The option premium will be used by LMS to redeem the issued and outstanding membership interests in LMS of all of the members of LMS other than William Huber (“Huber”). Additionally, MPX will assume existing debts of LMS in the amount of US$1,332,118.65.
Concurrently, CGX, is entering into an option agreement with Huber to acquire 100% of Huber’s membership interest in LMS for an exercise price of US$117,873.32 for an option period of two (2) years which brings the total potential cost of the transaction to US$2,802,627.64.
Once again, CGX may not exercise the option until ninety (90) days following the award by the Commission of the Final Dispensary License and the acquisition of Huber’s membership interest by CGX is subject to the approval of the Commission.
Expanding our presence into Maryland is another important milestone in our aggressive U.S. growth strategy. With only a very limited number of licenses permitted, the LMS transaction gives us an important first-mover advantage in a populous, affluent marketplace. The dispensary is largely complete and upon completion of Phase 2 licensing approval for LMS and final inspection of the dispensary, we expect the facility to open its doors and to commence selling cannabis-based medicines to Maryland patients early in calendar 2018.
W. Scott Boyes, Chairman, President and CEO
Total consideration for the transaction is CAD$3,581,690.20 (US$2,807,627.34) based on The Bank of Canada daily exchange rate on December 6, 2017 of 1.2757 United States dollars for each one (1) Canadian dollar, and was determined as a result of arm’s length negotiation between MPX, LMS and Huber. MPX performed due diligence customary with a transaction of this type, and in addition, the option agreements contain representations and warranties with respect to the capitalization, ownership and title of the membership interests of LMS.
LMS is the first step of a much larger footprint that MPX expects to make within the Maryland medical cannabis landscape. With a well-defined regulatory structure, a competitively attractive marketplace, a rapidly growing patient count invigorated by wide acceptance from the medical community and a population size comparable to that of Arizona, we see the market opportunity for medical cannabis in Maryland quickly rivaling the size and success of that in Arizona.
Beth Stavola, COO of MPX
Cannabis Market in Maryland
In 2012, a state law was enacted in Maryland to establish a state-regulated medical marijuana program. Legislation was signed in May of 2013 and the program became operational on December 1, 2017.
The legislation restricts cannabis distribution in Maryland to academic medical centers, which will monitor patients. By September 2016, Maryland state officials were considering more than 800 applications for prospective dispensaries. Under Maryland regulations, there is a cap of 102 dispensary licenses (only 10 of which are currently operating), limited to two per state Senate district. Further the Commission has only awarded 15 preliminary licenses to grow medical marijuana (out of a pool of almost 150 applicants) and a further 15 licenses to process medical marijuana into pills, oils and other medical products.
With over 8,500 patients currently certified for use of medical marijuana (over 12,000 signed up to become eligible) and over 550 medical practitioners registered to certify patients as eligible, the market in Maryland is expected to be worth US$221 million by 2021 (Source: New Frontier).
About MPX Bioceutical Corporation
MPX, an Ontario corporation, through its wholly owned subsidiaries in the U.S., provides substantial management, staffing, procurement, advisory, financial, real estate rental, logistics and administrative services to two medicinal cannabis enterprises in Arizona operating under the Health for Life (dispensaries) and the award-winning Melting Point Extracts (high-margin concentrates wholesale) brands. The successful Health for Life brand operates in the rapidly growing Phoenix Metropolitan Statistical Area.
The recently acquired GreenMart of Nevada NLV, LLC (“GreenMart”) is an award winning licensed cultivation, production and wholesale business, licensed for both the medical and “adult use” sectors in Las Vegas, Nevada, and is already selling wholesale into the Nevada medical cannabis market. GreenMart has also optioned suitable locations and intends to enter the higher-margin retail arena by applying for at least two dispensary licenses in the Las Vegas market which will operate under the “Health for Life” brand.
The Company owns assets in Massachusetts supporting cultivation, production and up to three dispensaries there, and with the closing of this most recent transaction, MPX has added the management of a full service dispensary in Maryland.
MPX continues to expand its U.S. footprint, and is in the process of acquiring management companies that provide operational and other services to two further dispensaries and one production license in Maryland. 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. In addition, the Company will continue its efforts to develop its legacy nutraceuticals business.