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Press release content from Globe Newswire. The AP news staff was not involved in its creation.

Item 9 Labs Corp Reports Financial Results and Operational Highlights for Fiscal Year End 2019; Record Revenue of $4.9 Million

February 6, 2020 GMT

PHOENIX, Feb. 06, 2020 (GLOBE NEWSWIRE) -- Item 9 Labs Corp. (OTC: INLB) (“Item 9 Labs” or the “Company”), a leader in comfortable cannabis health solutions for the modern consumer, reported operating results on for its fiscal year ended September 30, 2019.

Item 9 Labs Corp. continued its rapid revenue growth in fiscal year 2019. Operating efficiencies increased dramatically as seen in the margin improvements over fiscal year 2018. The expansion of the Arizona facility expected to fuel the continued revenue growth.

Fiscal year 2019 financial highlights:

-- Revenue more than tripled from $1.4 million in 2018 to $4.9 million in 2019 -- Gross margin increased to 48% or $2.37 million from 27% or $1 million. -- Pre-tax earnings of Item 9 Labs operating entities, excluding corporate and financing expenses, totaled $1,046,689 in 2019 compared to a net loss of $468,667 in 2018 -- Adjusted EBITDA of ($1.8 million) in 2019 compared to ($400k) in 2018

“Throughout this fiscal year ending September 30, 2019, we made great strides both operationally and financially. The cannabis sector has been fraught with turmoil and challenges in 2019 and despite this, Item 9 Labs experienced extraordinary growth, with revenues increasing more than 350% over fiscal 2018. Our expanded facilities in Arizona, and our upcoming operations in Nevada will fuel our continued revenue growth into fiscal 2020,” stated Andrew Bowden, CEO at Item 9 Labs.

“Our revenue increase was driven by the expansion of our product line into an additional 48 accounts in the Arizona market. In 2018 our products were in 32% of dispensaries in AZ. We finished 2019 with 74% penetration. We also added seven new product lines including the first of its kind, Cocktails disposable line and Quarter Jars featuring our top tier “award winning” flower,” stated Bryce Skalla, President and Co-Founder at Item 9 Labs. “Consumer focused innovations like these new product suites are what have cemented Item 9 Labs as the premier brand in the local market. We are committed to our customers and will continue to innovate and showcase our passion moving forward into 2020 with 40 new product SKUs scheduled to launch this year,” added Skalla.

Revenue

Revenues grew by more than $3.5 million in FY 2019 as we continued our sales growth strategy in Arizona, increasing our product offerings, operating capacity and geographical reach. We anticipate these trends will continue as our Arizona facility doubled in size in the latter part of the year (June 2019) though revenues weren’t impacted until September.

Gross Margin

Margins increased nearly $2 million in FY 2019 as our increased revenues allowed us to gain operating efficiencies at lower costs. As we continue to increase capacity and revenue, we should continue to see margins increase due to economies of scale and less frequent usage of sourced materials and supplies.

Adjusted EBITDA

Adjusted EBITDA decreased in FY 2019 due to higher Operating expenses as the Company increased staffing to prepare for current and future growth, increased expenses in sales and marketing, and incurred additional corporate overhead expenses related to becoming a fully-reporting Company with the SEC.

Operating Expenses

There was a large increase in operating expenses during 2019, compared to 2018. Of the $12.5 million in operating expenses, $7.9 million were non-cash or one-time charges. Recurring cash expenses expectedly increased $3.6 million as we prepare for growth and execute on growth strategies.

Fiscal 2019 Company Updates and Accomplishments

-- Added Key Management Positions – Chris Wolven, COO (January 2019), Kyle Jennings, VP of Marketing (March 2019), and Josh Buckheister, Creative Director (March 2019) -- Began construction of Cultivation and Processing facility in Nevada (April 2019) Increased Arizona market presence, increasing the number of dispensaries carrying our products from 32% to 74% -- 470% increase in social media and web impressions immediately following key cannabis events with 170,000 impressions, up from an average of 30,000 impressions. -- Strive Grand Forks North Dakota opened through strategic partnership (May 2019) -- Completed construction and received approval to operate on Arizona expansion, more than doubling cultivation space (June 2019) -- Filed Form 10 Registration Statement with the US Securities and Exchange Commission (filed June 2019, effective August 2019) in preparation for uplisting to the OTCQX -- Grand Opening of Corporate Office in downtown Phoenix (September 2019) -- Increased product offerings (Cocktails disposable vape pens, THCA Diamonds, Sugar Wax, etc.)

Post-Fiscal 2019 Company Updates and Accomplishments

-- Appointed Andrew Bowden as CEO and Ron Miller as Board Chairman (November 2019) -- Expanded into National CBD & Hemp Consumer Goods Market in Joint Venture with Third Eye Investments

FY 2019 FY 2018 % Change Select Key Financial Metrics Revenues 4,933,960 1,401,858 252% Cost of sales 2,556,189 1,018,109 151% Gross margin 2,377,771 383,749 520% Operating expenses 12,518,810 1,037,567 1107% Net loss from continuing ops (10,141,039 ) (653,818 ) 1451% Other Income (Expense) 192,401 32,643 489% Net Loss (9,948,638 ) (621,175 ) 1502% Adjustments: Interest 271,342 (32,643 ) -931% Taxes - 88,826 -100% Depreciation 70,384 49,786 41% Amortization 605,750 - Loss on impairment 5,758,827 - Stock based compensation 1,067,617 103,774 929% Provision for bad debt (IP sale in 2018) 376,430 - ----------- - --------- - -------- Adjusted EBITDA (1,798,288 ) (411,432 ) 337% ----------- - --------- - -------- GM% 48% 27% 76% SG&A as a % of revenue 254% 74% 243% Adjusted EBITDA as a % of revenue -36% -29% 24%

For information visit Item9LabsCorp.com.

About Item 9 Labs Corp: Item 9 Labs Corp. (OTC: INLB) creates comfortable cannabis health solutions for the modern consumer. The Company is bringing best of industry practices to markets from coast to coast through cultivation and production, distinctive retail environments, licensing services, and diverse product suites catering to different medical cannabis demographics. Item 9 Labs Corp. is headquartered in Phoenix, Arizona, with medical cannabis operations in multiple U.S. markets. Item 9 Labs Corp.’s asset portfolio includes Dispensary Permits, Dispensary Templates, and Strive Life. These assets provide services specific to different stakeholder groups. Dispensary Permits is the Company’s consulting firm specializing in strategic license application and compliance. Dispensary Templates, a subdivision of the firm, is a technology platform with an extensive digital library of licensing and business planning resources. Strive Life is a turnkey dispensary model for the retail sector, elevating the patient experience with consistent and superior service, high-end design, and precision-tested products. It is currently being implemented in Arizona and North Dakota.

In addition, Item 9 Labs Corp. is advancing the industry with its dynamic product suites. The Company has created complementary brands Item 9 Labs and Strive Wellness to channel consumer diversity. Propriety delivery platforms include the Apollo Vape and Pod system, as well as a pioneering intra-nasal device. The Company has received multiple accolades for its medical-grade flower and concentrates.

Item 9 Labs Corp. intends to manage cultivation, processing, distribution, and dispensary operations in up to ten U.S. markets by the end of 2019. Current facilities include distribution and processing operations Strive Wellness of Ohio and Strive Wellness of Nevada, as well as dispensary Strive Life North Dakota.

For more information, visit Item 9 Labs Corp. at www.Item9labscorp.com.

Forward-Looking Statement: This press release contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties, including, but not limited to, risks and effects of legal and administrative proceedings and governmental regulation, especially in a foreign country, future financial and operational results, competition, general economic conditions, proposed transactions that are not legally binding obligations of the company and the ability to manage and continue growth. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this news release include the introduction of new technology, market conditions and those set forth in reports or documents we file from time to time with the SEC. We undertake no obligation to revise or update such statements to reflect current events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.Media Contact: Kyle JenningsItem 9 Labs Corp. Kyle@item9labs.com (518) 265-9217Investor Contact: Jeffrey Rassás Item 9 Labs Corp. Jeffrey@item9labs.com (480) 463-4246