VIVO Cannabis(TM) Announces Second Quarter 2021 Results

  • Net revenue of $6.4 million - an increase of 16% over Q1 2021

  • Significant changes to the Board composition to lead to streamlined business strategy

Toronto, Ontario--(Newsfile Corp. - August 16, 2021) - VIVO Cannabis Inc. (TSX: VIVO) (OTCQX: VVCIF) ("VIVO" or the "Company") today released its second quarter 2021 financial and operating results.

Management Commentary

"At the start of the third quarter of 2021, significant changes were made to the Board which subsequently has approved management's redefinition of the Company's strategy to fully leverage the efforts and investments that VIVO has made in the medical channels. In so doing, we expect that shareholders and clients alike will be pleased as our business becomes more focused on service and profitability. We will release another statement soon to outline these changes in more detail," said Ray Laflamme, Chief Executive Officer of VIVO Cannabis. "We have been rewarded in this past quarter with increased Australian sales, successful topical cream and brick hash product launches, and our first import permit from the German authorities. I expect that the third quarter will continue to reward those shareholders that have stayed the course."

Financial Summary

Net revenue for Q2 2021 was $6.4 million, representing a 16% increase quarter-over-quarter as compared to Q1 2021.

Sales, general and administrative expenses were $4.3 million in Q2 2021, compared to $4.1 million in Q1 2021, an increase of 5% driven by legal expenses related to conducting the AGM.

The Company's adjusted EBITDA(1) was ($3.0) million for the quarter, compared to ($2.4) million in Q1 2021, the difference primarily driven by inventory write-downs taken in the quarter.

Cash and cash equivalents decreased from $16.9M in Q1 2021 to $15.7M in Q2 2021, driven by the Company's operating losses.

Key Performance Indicators

KPI (P&L amounts in millions)Q2 2021Quarter-over-Quarter ChangeQ1 2021
Net Revenue$6.4 16%$5.5
SG&A$4.3 +5%$4.1
Adjusted EBITDA (1)($3.0)-25%($2.4)
Cash and equivalents$15.7 -7%$16.9
Net flower price per gram$5.46 -13%$6.28

 

(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 three- and six-months ended June 30, 2021, available under the Company's profile at www.sedar.com.

Business Update

VIVO remains focused on executing against four strategic priorities. VIVO believes that focusing on these four priorities will generate long-term shareholder value and accelerate its path to profitability.

1. Enhance Supply and Production Capabilities

  • VIVO continues to integrate its Napanee, Ontario and Hope, British Columbia operations. This integration was initiated in October 2020 when the Company significantly streamlined its Napanee operations. The Company's Napanee operations now focus on solvent extraction, product formulation, and EU-GMP related processes.  The Company's Hope operations focus on indoor cannabis cultivation, packaging and solventless extraction and concentrate production.  

  • VIVO continues to expand its premium dry flower cultivar offering with the addition of two new Canna Farms™ listings in Prince Edward Island:  Pink Kush large format flower and multi-pack pre-rolls. VIVO anticipates these will be available for purchase by the end of Q3.

  • VIVO continues to expand its product portfolio in Quebec with the addition of three new Canna Farms™ listings:  CBD Critical Mass flower, CBD Canna Bliss flower and pre-rolls. VIVO anticipates these to be available for purchase in Q3. VIVO is focused on developing new cultivars and continues to invest in phenotyping to provide unique genetics to cannabis markets across its entire portfolio of brands. 

  • Although the airhouses at the Kimmetts Facility in Napanee suffered damage during a powerful winter storm in 2020, the Company has assessed the situation and has repaired and re-inflated one airhouse to be used in 2021. VIVO will use the 2021 growing season to determine the optimum protocol to harness the airhouses' ideal environment for the cultivation of premium flower. 

  • The Company's ethanol extraction suite at the Vanluven Facility  in Napanee, Ontario continues to produce high quality cannabis extracts and distillates for use in many of VIVO's products.  The Vanluven Facility's focus is on the processing and manufacturing of quality oils, distillates, concentrates and more advanced formulations of VIVO's current and anticipated portfolio of medical products, as well as edibles and topicals. VIVO has invested in automated packaging and labelling equipment which are expected to increase its finished goods throughput and lower manufacturing costs. 

VIVO anticipates capital expenditures in the second half of 2021 to be minimal, however, disciplined investments in product development, facility optimization and international market commercialization will be made so as to facilitate future profitable growth.

2. Create a Broad and Loyal Customer Network

VIVO has a strong portfolio of brands in both the medical and adult-use markets. Its Canna Farms™ brand is one of the leading brands in the industry, known for producing award-winning, BC indoor-grown, craft cannabis flower and newly launched solvent-less extracts and edibles.

  • VIVO is very proud that Canna Farms™ Pink Kush and Girl Scout Cookies flower and pre-rolls recently received the 'Craft Cannabis' designation by the Ontario Cannabis Store (OCS) as one of only 20 Licensed Producers in Canada.

  • In January 2021, VIVO entered the Quebec market with Canna Farms™ BC Kief as the province's first in the kief category. Quebec is the third largest market in Canada and the ninth province where VIVO products are available.  In May, VIVO obtained new listings with Société Québécoise du Cannabis (SQDC) for CBD Canna Bliss flower & pre-rolls and CBD Critical Mass flower and expects them to be available for purchase in Q3 2021. VIVO is proud to be one of a handful of participants permitted access to the Quebec market.

  • VIVO continues its supply and its clinic services agreement with Medical Cannabis by Shoppers™ and is proud to report that over the first half of 2021, Medical Cannabis by Shoppers™ continued to grow its selection of VIVO Cannabis products.  VIVO has now obtained new listings and orders from Shoppers Drug Mart for Beacon Medical™ topicals, Fireside™ chocolates, and Canna Farms™ brick hash and expects them to be available for purchase in Q3 2021.

  • VIVO launched an updated Canna Farms™ website in May 2021 with refreshed branding, improved user design and overall consumer experience. Updates to the Canna Farms™ Instagram channel, internal patient newsletters and trade materials were also implemented as part of the integrated marketing strategy.

  • Canna Farms 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. In this way patients can now access a broad selection of medical cannabis products from the largest medical cannabis suppliers in Canada. 

In VIVO's cannabis clinic segment, Harvest Medicine ("HMED") operates a portfolio of four education focused, patient-centric, cannabis discovery clinics, including a 3,500 square foot clinic located in Northland Village Mall in Calgary, Alberta, a 3,000 square foot clinic inside the St. Albert Centre in St. Albert, Alberta, and two additional clinics in the provinces of New Brunswick and Nova Scotia. HMED has conducted more than 150,000 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 the first half of 2021, Harvest Medicine began offering pharmacy consultations as an additional service offering for patients as part of their medical cannabis care.

As noted below under the heading "Current Outlook - COVID-19 Pandemic", the Company temporarily suspended in-clinic visits at its Harvest Medicine clinics but the Company's HMED Connect telemedicine platform is proving to be of increased service to the medical cannabis market as the general public has become increasingly conscious of social distancing and more patients are choosing to remain at home. HMED's telemedicine platform brings medical cannabis information and services to patients across Canada, allowing them to access the same patient-centric services they would receive in HMED clinics, on-line.

3. Build an Innovation-Driven Branded Organization

VIVO has a strong commitment to pursuing innovation throughout its value chain. The Company is also using its robust data insights as a foundation for the development of novel products with a strong competitive edge and high margins.

  • In Q2, VIVO launched Beacon Medical™ Extra Strength CBD|T Cream, an innovative, premium cannabis topical cream for Canadian medical patients. With 500 mg of cannabidiol (CBD) per 50-gram unit, in a proprietary formulation that includes carefully curated ingredients with anti-oxidant, anti-inflammatory, and analgesic properties, together with skin penetration enhancers, Beacon Medical™ Extra Strength CBD|T Cream is designed using "entourage" principles to achieve synergies of bioactive ingredients and provide optimal symptom relief for medical conditions.
  • VIVO continues to advance its product development with partner, Pharmascience Inc., a global pharmaceutical company based in Montreal, Quebec, for a unique line of specific medical cannabis formulations produced under pharmaceutical quality standards. VIVO believes that a significant catalyst to increased medical cannabis use is the introduction of new medical-grade, precise-dosed, stable formulations, which the partnership with Pharmascience is intended to target. Pharmascience recently received its highly anticipated Health Canada license to produce cannabis products; the first products from this partnership are expected to be introduced to the Canadian market by Q4 2021.  

  • Canna Farms was BC's first licensed producer and proudly holds itself to the highest cultivation standards. In 2020, it was recognized by Brightfield Group as the brand with the 4th highest Brand Awareness.  

  • 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 novel products that meet patients' needs and give VIVO a competitive edge. 

4. Accelerate International Medical Business Growth

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 over 100 million people.

  • On July 29, 2021, The Company announced that its EU-GMP/GDP licensed subsidiary Beacon Medical Germany GmbH, has received its first import permit from Germany's BfArM, the Federal Institute for Drugs and Medical Devices (Bundesinstitut für Arzneimittel und Medizinprodukte), allowing the import of Canadian grown dried flower medical cannabis from the Company's ABcann Medicinal affiliate's GMP-certified Napanee, Ontario site, into Europe.

  • On March 11, 2021, VIVO's Vanluven facility in Napanee, Ontario received EU-GMP (European Union Good Manufacturing Practices) certification from Germany's Brandenburg health authority, the Landesamt für Arbeitsschutz, Verbraucherschutz und Gesundheit ("LAVG").  The certification took effect immediately and will enable VIVO, through its ABcann Medicinals subsidiary, to export product for sale into European and other markets requiring products to be manufactured under the rigorous EU-GMP standards.  ABcann has harvested and bottled its first lot of whole-flower under EU-GMP production conditions.

  • Australia's Therapeutics Goods Administrator (TGA) continues to report a record number of new patient approvals and the growth in the market has been matched by the growth in VIVO's Beacon Medical™ Australia business.  VIVO  currently sells 5 products under the Beacon Medical™ brand in Australia. 

COVID-19 Update

In 2020 and early 2021, the global economy, and society generally, was in a state of upheaval as a result of the COVID-19 pandemic.  This crisis continues to have an unprecedented impact on the markets, employees, customers, patients, and business partners. Although these impacts were severe, things appear to be improving, and VIVO continues to forge ahead developing its strategies and redefining its core values.

Harvest Medicine continues to limit in-clinic visits while expanding the use of its HMED Connect telemedicine platform for phone and video consultations.  Harvest Medicine continues to monitor and assess the reopening of its locations.

Despite the foregoing, VIVO continues to monitor COVID-19 developments and has implemented enhanced personal safety and sanitation measures at all its facilities. VIVO's production sites have continued operations throughout the pandemic. 

VIVO coordinated an internal vaccination clinic at its Hope facility for frontline essential workers and has conducted a series of internal mental health & wellness sessions to support employees with managing stress and building resilience during the pandemic.

Q2 2021 Results Video

An earnings overview video will be available on the VIVO Cannabis website (www.vivocannabis.com) on August 17, 2021.

About VIVO Cannabis™

VIVO Cannabis™ is recognized for trusted, premium cannabis products and services. It holds production and sales licences from Health Canada and operates world-class indoor and seasonal airhouse cultivation facilities. VIVO has a collection of premium brands, each targeting different customer segments, including Canna Farms™, Beacon Medical™, Fireside™, and Lumina™. Harvest Medicine™, VIVO's patient-centric, scalable network of medical cannabis clinics, has serviced over 150,000 patient visits. VIVO is pursuing several partnership and product development opportunities and is focusing its international efforts on Germany and Australia. For more information visit: www.vivocannabis.com

For further information:
VIVO Investor Relations
+1 416-848-9839
ir@vivocannabis.com

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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 Company's expected catalysts to deliver profitable growth, including entry into domestic and international markets and 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 its four strategic priorities 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; and the ability of the Company's growth initiatives to drive future profitable sales beyond 2021; and that the products generated from the Company's partnership with Pharmascience Inc. are intended to maximize therapeutic benefit to patients. 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 three- and six-months ended June 30, 2020, 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/93347

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