Vivo Cannabis Q3 Revenue Improves 19% YoY Driven By Increased International Sales

Vivo Cannabis Inc. VIVO VVCIF released Monday its third-quarter 2022 financial and operating results with revenue of CA$6.2 million ($4.67 million), in line with the same period of last year. Compared to the previous quarter, revenue improved by 19%, driven by increased sales in the company’s international operations.

Q3 Financial Summary

• Net loss amounted to CA$3.9 million, compared to a net loss of CA$1.1 million in the corresponding quarter of 2021, driven by changes in income tax of CA$2 million and CEWS payments received in 2021.
• Adjusted EBITDA was a loss of CA$2.0 million, compared to a loss of CA$2.3 million in the previous quarter.
• General and administrative expenses increased to CA$4.0 million for the three months ended September 30, 2022, compared to CA$3.2 million for the same period for 2021 and CA$4.3 million for Q2 2022. The reduced general and administrative expenses compared to 2021 reflect payments made to the company under the federal CEWS program.
• Sales and marketing expenses decreased to CA$100,000 for the three months ended September 30, 2022, compared to CA$300,000 for the same period in 2021.

Business Update

In Q3 2022, the company continued to sharpen the focus of its business activities on the medical market. In July, Vivo cannabis entered into a supply agreement with the High Hopes Foundation to provide safe and legal quality medical cannabis to patients in Vancouver's Downtown East Side (DTES) through the Overdose Prevention Society as part of a cannabis harm reduction program.

In January 2019, the parties entered into an arbitration process as detailed in its financial statements. After the quarter-end, the company and the claimant to the arbitration signed a full and final release of all obligations under the agreement and an order was signed dismissing the arbitration process. Vivo cannabis will recognize $8,800,000 of deferred revenue as earned through Other income in Q4 2022.

As part of its continued effort to ensure cost efficiencies, effective September 15, 2022, the company entered into a third supplement to the debenture indenture concerning the remaining balance outstanding for the February 2018 Debentures. The third supplement to the debenture indenture provides for:

• The extension of the maturity date from September 15, 2022, to September 15, 2024;
• An increase of the interest payable on the Debentures from 6.0% to 10.0%; and
• The prepayment of debentures in the aggregate principal amount of $3 million, on a pro rata basis, in $500,000 installments, with the first such payment to be made within 30 days after the date of the Supplemental Indenture (with the last such payment expected to occur on or about February 28, 2023).

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.

Total sales for international focused operations for the three months ended September 30, 2022, was CA$2.5 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.

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