DigiPath, Inc. Announces Second Fiscal Quarter 2016 Results

LAS VEGAS, NV--(Marketwired - May 17, 2016) - DigiPath, Inc. (OTCBB: DIGP) and (OTCQB: DIGP), a growth oriented independent testing laboratory and media firm focused on the developing cannabis market, today announced financial and operating results for the three and six months ended March 31, 2016.

Second Fiscal Quarter 2016 Company Highlights

• Ended quarter with $141,116 of net sales through our state-of-the-art Nevada cannabis testing lab, a quarter over quarter growth rate of over 38% from the first quarter's net sales of $102,136
  
  
• Signed three new customers to exclusive laboratory testing contracts in addition to the four new customers that were signed to exclusive contracts during the first fiscal quarter and have several customers who use us regularly as well
  
  
• Decreased our net cash used in operating and investing activities in the aggregate by approximately $2.5 million, or 79%, from the comparative six months ended March 31, 2015
  
  
• Our Adjusted EBITDA for the quarter was $(257,767), compared to Adjusted EBITDA of $(366,570) for the first fiscal quarter, an improvement of approximately 30% on a quarter over quarter basis
  
  
• Our Adjusted EBITDA for the six months ended March 31, 2016 was $(624,337), compared to Adjusted EBITDA of $(1,514,342) for the comparative six months ended March 31, 2015, an improvement of approximately 59% on a year over year basis
  
  

Adjusted EBITDA

We define Adjusted EBITDA as net earnings (loss) before (i) other income (expense), (ii) interest income, (iii) interest expense, (iv) bad debts, (v) depreciation and amortization, (vi) impairment of development costs, (vii) non-cash expenses relating to share based payments recognized under ASC Topic 718, (viii) gain on early extinguishment of debt, and (ix) equity in losses of unconsolidated entity. We believe the use of this non-GAAP financial measure provides useful information to investors regarding our current financial performance; however, Adjusted EBITDA does not represent, and should not be considered an alternative to GAAP measurements. Specifically, we believe Adjusted EBITDA results provide useful information to both management and investors by excluding certain income and expenses that our management believes are not indicative of our core operating results, we believe that non-GAAP financial measures have limitations and do not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that Adjusted EBITDA should only be used to evaluate our results of operations in conjunction with the corresponding GAAP financial measures. A reconciliation of Adjusted EBITDA to net loss is included below:

DIGIPATH, INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED EBITDA TO NET LOSS
(Unaudited)
					For the Three Months Ended								For the Six Months Ended
					March 31,								March 31,
					2016				2015				2016				2015
Net loss					$	(446,197	)		$	(711,554	)		$	(2,179,058	)		$	(2,411,156	)
	Add back:
		Other income				(12,000	)			(12,000	)			(30,000	)			(12,000	)
		Interest income				(2,500	)			(125	)			(5,000	)			(200	)
		Interest expense				-				-				-				916
		Bad debts expense				13,250				4,193				303,021				5,799
		Depreciation and amortization				61,138				2,750				122,230				5,360
		Impairment of development costs				-				-				-				28,336
		Stock based compensation				74,111				23,063				183,921				868,603
		Gain on early extinguishment of debt				-				-				(12,133	)			-
		Equity in losses of unconsolidated entity				54,431				-				992,682				-
			Adjusted EBITDA		$	(257,767	)		$	(693,673	)		$	(624,337	)		$	(1,514,342	)

Management Comment

"Our second fiscal quarter demonstrated strong growth over our first fiscal quarter of 2016, which was our first real quarter of continuous operations for our cannabis testing lab in Las Vegas. While we are nowhere near full capacity, we are extremely pleased with our increasing revenues and implementation of our plan of operations. We have gained more market share than we had conservatively estimated by this time and are pleased to report that we have performed testing services for 16 of the potential 21 customers (several of whom have not harvested yet) that have been granted final certificates of operation from the State of Nevada. We further anticipate that the number of potential customers with State certificates will grow more than three-fold to over 60 by the end of May 2016. We have divested our non-producing assets and believe we are poised to aggressively expand our footprint as we demonstrate the success of our Las Vegas lab," explains DigiPath CEO Todd Denkin. "We have also partnered with 8 of the 11 dispensaries to provide our DigiPath Patient Handbooks to new customers."

About DigiPath, Inc. (OTCQB: DIGP)
DigiPath, Inc. supports the cannabis industry's best practices for reliable testing, education, and training, and brings unbiased cannabis news coverage to the nation. DigiPath's two business units are DigiPath Labs and TNM News Corp.

Information about Forward-Looking Statements
This press release contains "forward-looking statements" that include information relating to future events. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in, or suggested by, the forward-looking statements. Important factors that could cause these differences include, but are not limited to: the Company's need for additional funding, the demand for the Company's products, governmental regulation of the cannabis industry, the Company's ability to maintain customer and strategic business relationships, the impact of competitive products and pricing, growth in targeted markets, the adequacy of the Company's liquidity and financial strength to support its growth, and other risks that may be detailed from time-to-time in the Company's filings with the United States Securities and Exchange Commission. For a more detailed description of the risk factors and uncertainties affecting DigiPath, please refer to the Company's recent Securities and Exchange Commission filings, which are available at www.sec.gov. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.