VIVO Cannabis Announces Fourth Quarter 2022 Results

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  • Net revenue for Q4 2022 was $7.1 million, a 15% increase from prior quarter.

  • Net revenue for 2022 was $25.4 million, a 2% increase compared to 2021.

  • Net losses have decreased by 21.2 million in 2022, a 30% decrease from the prior year.

  • The Company signed a definitive agreement with MediPharm Labs Inc. whereby MediPharm has agreed to acquire VIVO Cannabis Inc. in an all-equity business combination transaction.

  • Shareholders of the Company held a special meeting during which the Arrangement Agreement between the Company and MediPharm was approved and the transaction is expected to close within weeks.

Toronto, Ontario–(Newsfile Corp. – March 28, 2023) – VIVO Cannabis Inc. (TSX: VIVO) (OTCQB: VVCIF) (“VIVO or the Company“) today released its fourth quarter 2022 financial and operating results.

Financial Summary

Net revenue for the fourth quarter of 2022 was $7.1 million, which was a 3% increase compared to the same period for 2021, and an increase of 15% compared to Q3 2022 sales. The increase in sales was driven by the continued growth in the Company’s sales in its Australian market. Annual revenue increased by 2% in 2022, as compared to 2021, from $25.0 million to $25.5 million.

The Company’s net loss decreased from $69.6 million in 2021 to $48.4 million in 2022. This increase was driven by the Company taking an impairment of $49.7 million on its intangible assets, including goodwill in 2022, along with a decrease in amortization and depreciation of $2.9 million, from $4.3 million in 2021 to $1.4 million in 2022, and earning other income of $9.5 million in 2022 versus $nil in 2021, which included the recognition of deferred revenues of $8.8 million. This was offset by decreases in deferred income tax recoveries of $6.21 million, from $19.6 million in 2021 to $13.46 million in 2022, impairment on property, plant, and equipment of $86.5 million in 2022 (2021 – $nil), and general and administrative expenses of $1.3 million, from $14.3 million in 2021 to $15.6 million in 2022.

The Company had a net income of $0.4 million for the three months ended December 31, 2022, compared to a net loss of $3.9 million for the three months ended September 30, 2022.

General and administrative expenses increased to $15.6 million for the year ended December 31, 2022, compared to $14.3 million for 2021. Sales and marketing expenses decreased to $0.4 million for the year ended December 31, 2022, compared to $0.7 million for 2021. Finance expenses increased to $1.4 million during the year ended December 31, 2022, compared to $1.0 million for the 2021 year.

Amortization expenses decreased to $1.4 million for the year ended December 31, 2022, compared to $4.3 million in 2021. Impairment in goodwill and in intangible assets decreased by $4.9 million and $44.7 million respectively for the year ended December 31, 2022, compared to $7.4 million and $64.1 million respectively recorded in the 2021. This was partially offset by decreases in deferred tax recovery of $7.3 million for the year ended December 31, 2022, compared to 2021.

Impairment on tangible capital assets increased by $6.5 million for the year ended December 31, 2022, compared to $nil in 2021.

The Company’s Adjusted EBITDA increased by $3.2 million during the year ended December 31, 2022, compared to the prior year driven by continued efforts to streamline operations and an enhanced focus on the domestic and international medical markets.

Key Performance Indicators

KPI (P&L amounts in millions) Q4 2022 Quarter-over-Quarter Change Q3 2022
Net Revenue $7.1 15% $6.2
SG&A $3.4 (17%) $4.1
Adjusted EBITDA (1) ($0.6) 70% ($2.0)
Cash and equivalents $2.5 (40%) $4.2

 

(1) Adjusted EBITDA is not a measure of financial performance under IFRS. For the Company’s definition of Adjusted EBITDA, see the Company’s management’s discussion and analysis for the quarter-ended December 31, 2022, available under the Company’s profile at www.sedar.com.

Proposed Arrangement

On December 21, 2022, the Company entered into a definitive arrangement agreement (the “Arrangement Agreement“) with MediPharm Labs Corp. (“MediPharm“) pursuant to which MediPharm agreed to acquire, by way of a proposed plan of arrangement under Section 192 of the Canada Business Corporations Act, all of the issued and outstanding Shares in an all-equity business combination transaction (the “Arrangement“).

Under the terms of the Arrangement Agreement, holders of Shares will receive between 0.2110 and 0.4267 common share of MediPharm (each whole share, a “MediPharm Share“) for each Share held, subject to adjustment (the “Exchange Ratio“). The Exchange Ratio at closing will be determined by the amount of interim working capital of the Company (the “Interim Working Capital“), taking into account any funds advanced by MediPharm to the Company by way of a promissory note.

The Interim Working Capital will allow the Company to continue operations in the ordinary course throughout the proposed closing period. Holders of Shares will be entitled to receive such number of common shares of the combined company resulting from the Arrangement (the “Combined Company“) as is equivalent to up to 35% of the issued and outstanding common shares of the Combined Company, which may be reduced depending on the Interim Working Capital of VIVO prior to closing, to a minimum of 21% of the issued and outstanding common shares of the Combined Company. In connection with the Arrangement, effective as of March 21, 2023, the Company reduced the stated capital of the Shares to $1.00 in order to meet certain solvency requirements under the CBCA.

The Arrangement Agreement contains certain customary provisions, including covenants in respect of non-solicitation of alternative acquisition proposals for the Company and a termination fee of $1 million payable to either party in certain circumstances.

The Company intends to enter into a fourth supplemental indenture, effective as of the closing, with TSX Trust Company and MediPharm, pursuant to which the 2018 Debenture holders will agree to waive any change of control premium payment in connection with the Arrangement in consideration for an aggregate payment of $500,000 to be shared by the Company and MediPharm. Similarly, at the effective time, the Company, TSX Trust Company, and MediPharm, will enter into a supplemental warrant indenture pursuant to which MediPharm will assume all of the Company’s obligations under the warrant indenture between the Company and TSX Trust Company dated as of February 26, 2021.

The Arrangement and reduction of stated capital of the Company was approved at the special meeting of the VIVO shareholders on March 21, 2023, and the final order was granted on March 23, 2023. The Arrangement is expected to close in Q2 2023.

Additional details with respect to the Arrangement Agreement are available in the joint management information circular of the Company and MediPharm dated February 6, 2023, which is available under the Company’s SEDAR profile at www.sedar.com.

Business Update

The Company recorded revenue of $7.1 and $25.5 million in the three months and year ended December 31, 2022. Quarter-over-quarter growth was driven from strength in the international markets. All revenue earned in the year ending December 31, 2022 was derived from the sale of medical and adult-use cannabis products except $2.8 million derived from VIVO’s Harvest Medicine clinic operations.

In January 2019, the Company and Auxly entered into an arbitration process as detailed in its financial statements. In November 2022, the parties signed a full and final release and an order was signed dismissing the arbitration process on consent of the parties, at which time the liability for $8.8 million was recognised in Other income and the statement of loss and comprehensive loss.

Patient Care Expertise

The Company has provided educational consultants and medical cannabis care in over 200,000 patient interactions through its HMED (as defined below) clinics since 2017. Canna Farms’ best-in-class, award-winning, Patient Care Team has been providing patient services since 2014, and has first-hand expertise in product selection and patient support. With patient-centricity at its core, in 2022 HMED launched several new educational programs for both patients and healthcare professionals.

Quality Production

Canna Farms was established in 2013, as the first licensed producer in British Columbia, and since that time has established deep roots in the medical cannabis community. It operates an industry-leading online medical cannabis platform, (https://www.cannafarms.ca/product-medical) that combines the Company’s brands with products from third-party cultivators in one on-line medical store. There are currently over 10 brands and 100 curated products offered on the Canna Farms medical platform.

With all planned operating facility expansion projects completed, disciplined investments in product development, facility optimization and international market commercialization are expected to continue to facilitate future profitable growth.

International Markets

VIVO continues to pursue its international expansion strategy, leveraging its experience and leadership to enter new high-growth markets. The Company’s initial focus is on the German and Australian markets, which, combined, have a population of approximately 100 million people.

The Company has spent significant time and resources preparing for its entry into international markets, as well as developing innovative cannabis based medical products for those markets. Total sales for international focused operations for the year ended December 31, 2022, was $12.5 million. The contribution coming from the international segment is expected to grow as the benefits of the EU-GMP certification of the Company’s Vanluven facility in Napanee, Ontario begin to materialize in the form of European and Australian sales.

Clinical Care

The Company purchased its Harvest Medicine (“HMED“) operations in 2018 and since the acquisition has leveraged clinical insights from tens of thousands of HMED patients to conduct research on patient outcomes, to publish observational clinical studies, to educate and increase health care prescriber adoption, to improve market access, and to direct future product development within its medical channels. Harvest Medicine utilizes a virtual platform, “HMED Connect”, and has recently added pharmacy consultations as a service for patients as part of their medical cannabis care offering.

The HMED portfolio consists of three education-focused, patient-centric, cannabis discovery clinics, including two clinics located in Alberta and one clinic in Nova Scotia. HMED has conducted more than 200,000 registered patient visits through its clinics, clinic-in-clinic partnerships, and via its telemedicine platform, making it one of the top clinic networks in Canada. In September, HMED closed its brick-and-mortar clinic in Moncton, New Brunswick, and continues to service those patients through HMED Connect.

VIVO is committed to pursuing innovation throughout its value chain. The Company uses data insights gained from Harvest Medicine’s clinics and from Canna Farms’ medical cannabis platform as a foundation for the development of products and services that more effectively meet their patients’ needs.

The Harvest Medicine research team continues to evaluate real-world evidence patient outcomes across different medical conditions. In September, Harvest Medicine’s second observational research study on fibromyalgia was presented at the 80th International Pharmaceutical Federation (FIP) World Congress in Seville, Spain.

About VIVO Cannabis

VIVO Cannabis® is recognized for trusted, quality medical cannabis products and services. It holds production, sales and research licences from Health Canada and operates world-class indoor cultivation facilities. VIVO has a collection of brands, each targeting different customer segments, including Canna Farms™, Beacon Medical®, Fireside™, and Lumina™. Harvest Medicine™, VIVO’s patient-centric network of medical cannabis clinics, has serviced over 200,000 patient visits. VIVO focuses its international efforts on Germany and Australia. For more information visit: www.vivocannabis.com.

For further information:
VIVO Investor Relations
Michael Bumby, Chief Financial Officer
[email protected]

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Disclaimer for Forward-Looking Information

All dollar amounts in this news release are in Canadian dollars. Certain statements in this news release are forward-looking statements, which are statements that are not purely historical, including statements regarding the beliefs, plans, expectations or intentions of VIVO and its management regarding the future. Forward-looking statements in this news release include statements regarding: the arrangement agreement with MediPharm Labs Inc. may not be completed on the terms expected or at all; the Company’s expected catalysts to deliver profitable growth, including entry into domestic and international markets; the development and launch of innovative products and services and the financial impact thereof; the integration of its facilities; redefining the Company’s strategy; accelerating its path to profitability; the Company’s expectation that focusing on the medical cannabis segment will generate long-term shareholder value and accelerate the path to profitability; the factors that VIVO believes will drive significant growth in medical cannabis utilization; the ability of the Company’s growth initiatives to drive future profitable sales beyond 2022; and the Company’s ability to make payments under its outstanding 2018 Debentures as they become due. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the forward‐looking statements, including: that the medical cannabis market may not grow to the extent, within the time, or for the reasons expected by the Company; changes to the recreational market; that the COVID‐19 pandemic may last longer and have a more significant impact on the Company’s operations, the Canadian cannabis industry, or the global economy generally, than currently expected; that the Company faces competition against new market entrants and participants; that the Company may not be able to launch new products in the time expected or at all and that patients may not receive the expected benefits therefrom; that the Company may not be able to achieve competitive margins; that new products, if launched, may not be accepted by the market or may become subject to product liability claims; that the Company may not be able to obtain necessary licences; that demand for the Company’s products may not meet management’s expectations; that the Company may be unable to retain its key talent; that the Company may not be able to execute on its strategic partnerships; that the Company may not obtain any other necessary regulatory approvals as required from time to time; that the Company may be unable to protect its intellectual property; and other factors beyond the Company’s control. No assurance can be given that any of the events anticipated by the forward‐looking statements will occur or, if they do occur, what benefits the Company will obtain from them. Readers are urged to consider these factors carefully, and the more extensive risk factors included in the Company’s management’s discussion and analysis for the quarter-ended December 31, 2022, which is available on SEDAR, in evaluating the forward‐looking statements contained in this news release and are cautioned not to place undue reliance on such forward‐looking statements, which are qualified in their entirety by these cautionary statements. The forward‐looking statements in this news release are made as of the date hereof and the Company disclaims any intent or obligation to update publicly any such forward‐looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/160146

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