VIVO Cannabis : Q4 2020 – Management Discussion & Analysis

VIVO CANNABIS INC.

Management's Discussion & Analysis

For the Year Ended December 31, 2020

March 31, 2021

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Introduction

This management's discussion and analysis ("MD&A") of the financial condition and results of operations of VIVO Cannabis Inc. (the "Company" or "VIVO") is for the year ended December 31, 2020 and is prepared as of March 30, 2021. It is supplemental to, and should be read in conjunction with, the Company's audited consolidated financial statements and notes thereto for the years ended December 31, 2020 and 2019. The Company's financial statements are prepared in accordance with International Financial Reporting Standards ("IFRS"). All monetary amounts herein are expressed in Canadian dollars unless otherwise specified.

This MD&A provides information that management of the Company believes is helpful to understand the results of operations and financial condition of the Company. The objective is to present readers with a view of the Company from management's perspective by interpreting the material trends and activities that have affected the operating results, liquidity and financial position of the Company.

This MD&A refers to certain non-IFRS financial measures. For further information, see the section entitled "Non-IFRS Financial Measures".

Additional information relating to the Company can be found under the Company's profile on the SEDAR website at www.sedar.com.

Company Overview

The Company operates two wholly owned licence holders ("Licence Holders") under the Cannabis Act (Canada) (the "Cannabis Act"), being ABcann Medicinals Inc. ("ABcann") and Canna Farms Limited ("Canna Farms"), both of which hold licences to produce and sell dried cannabis and cannabis oils, and to cultivate and produce cannabis products for direct sale to medical patients across Canada, as well as for retail adult-use sales. ABcann and Canna Farms are both wholly owned subsidiaries of the Company.

ABcann received its first licence to produce cannabis in 2014 and commenced production in 2015, with commercial sales commencing in 2016. ABcann currently operates two production facilities in Napanee, Ontario, being its original Vanluven facility (the "Vanluven Facility") and the Kimmetts Facility (the "Kimmetts Facility"). Canna Farms, which was the first licensed producer in British Columbia, has a solid track record of execution, which led to it being one of the first licensed producers to achieve positive operating cash flow. Canna Farms operates a production facility in Hope, British Columbia (the "CF Facility"), as well as an online medical cannabis platform.

The Company's business has three primary segments: (i) a premium cannabis product segment operated by Canna Farms and ABcann, through which the Company produces and sells cannabis and cannabis products for medical purposes and for the adult-use market; (ii) a medical cannabis clinic segment operated by the Company's wholly-owned subsidiary, Harvest Medicine Inc. ("Harvest Medicine"); and (iii) a corporate and international segment, which encompasses VIVO's product development and growth related activities together with international operations.

The common shares in the capital of the Company (each a "Shares") trade on the Toronto Stock Exchange (the "TSX") under the symbol "VIVO".

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Selected Annual Financial Information

The following table sets forth a comparison of revenues and earnings on an annual basis for each of the Company's three most recently completed years. The financial data for the 2020, 2019, and 2018 financial years was prepared in accordance with IFRS. The functional currency and the reporting currency of the Company is the Canadian dollar.

	Year Ended	Year Ended	Year Ended
(in millions, except per share	December 31,	December 31,	December 31,
amounts)	2020	2019	2018
	($)	($)	($)
Net revenue	32.8	24.8	9.7
Net loss	55.7	30.7	25.0
Net loss per share	0.18	0.10	0.11
Total assets	202.0	276.9	308.4
Working capital	24.4	60.9	87.1
Total non-current financial	5.7	30.4	29.2
liabilities
Cash dividends declared	Nil	Nil	Nil

In 2020, the Company incurred significant expenses in connection with the expansion of its facilities and the development of products for the launch of the Cannabis 2.0 market, particularly with respect to the commencement of production at the Kimmetts Facility and the launch of the Company's line of premium Fireside™ cannabis-infused chocolates.

The Company's revenue materially increased in 2020, primarily due to the revenue derived from the Canna Farms and Harvest Medicine businesses and the launch of the Cannabis 2.0 cannabis market, as 2020 represented a full year of such sales as compared to just the latter part of 2019. Revenue increased by 32% in 2020 as compared to 2019, from $24.8 million to $32.8 million.

The Company's net loss increased from $30.7 million in 2019 to $55.7 million in 2020, primarily due to an increase in impairment of goodwill of $33.5 million. This was offset by lower general and administrative costs of $2.2 million compared to 2019, along with a gain on other financial assets of $3.3 million in 2020, compared to a loss of $7.0 million in 2019.

Strategic Overview

VIVO remains focused on the production of high-quality, high margin premium products. VIVO has continued to position itself well to increase revenue in 2021 and future years. The Company has grown production capacity through the expansion of its facilities in Hope, British Columbia, and Napanee, Ontario and by entering into strategic supply agreements with qualified third-party cultivators. The Company has expanded product lines through the launch of its Cannabis 2.0 product lines, which include cannabis-infused chocolates, vapes, solventless concentrates such as kief, live rosin, bubble hash, brick hash, and solvent extracts such as shatter and wax. It continues to widen its

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customer and patient base by expanding its adult-use market distribution channels and by broadening its medical market product offering.

The Company continues to develop its cannabis production processes in ways that will allow them to be leveraged internationally. In March 2021, the Company received EU-GMP (European Union Good Manufacturing Practices) certification from Germany's Brandenburg health authority, the Landesamt für Arbeitsschutz, Verbraucherschutz und Gesundheit ("LAVG"). This certification will allow VIVO to begin selling medical grade product to international markets that require GMP certification. The Company believes that its approach to cultivation, in conjunction with its EU-GMP certified production processes, will result in cannabis of consistent quality. The Company will continue to expand its portfolio of products and the jurisdictions outside of Canada in which it operates as local laws allow, resources permit, and where market research indicates opportunities are available.

VIVO continues to focus on four key strategic priorities, which it believes will help grow long-term shareholder value:

1. Enhance Supply and Production Capabilities
2. Create a Broad and Loyal Customer Network
3. Build an Innovation-Driven Branded Organization
4. Accelerate International Medical Business Growth

The following summarizes recent activities undertaken by the Company in furtherance of the strategic objectives described above.

Enhance Supply and Production Capabilities

• In October 2020, the Company announced a streamlining of its operations in Napanee, Ontario. The streamlining initiatives were undertaken to align the activities of its Hope and
  Napanee based operations and are expected to shorten the Company's path to profitability and positive operating cash flow. The Company's Napanee operations will focus on the production of quality biomass and extraction, with additional activities added as required, as well as all GMP related processes. The Company's Hope operations will focus on indoor cannabis cultivation, packaging and solvent-less extracts and concentrates. The Company continues to integrate all Napanee and Hope related processes to achieve cost and efficiency synergies.
• In June 2020, The Company brought on-line a 10,000 square foot expansion at its CF Facility. The two-tier growth systems that were part of that expansion are providing much higher yields per square foot of cultivation space than traditional single tier systems. VIVO's capital expenditures for 2021 are expected to be minimal as no further capital-intensive expansions are planned at this time.

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