BARRIE, ON, April 3, 2023 /CNW/ – MediPharm Labs Corp. (TSX: LABS) (OTCQX: MEDIF) (FSE: MLZ) (“MediPharm”, or “MediPharm Labs”) and VIVO Cannabis Inc. (TSX: VIVO) (OTCQX: VVCIF) (“VIVO”) are pleased to announce the completion of the previously announced plan of arrangement under section 192 of the Canada Business Corporations Act (the “Arrangement”), pursuant to which MediPharm has acquired all of the issued and outstanding common shares of VIVO (the “VIVO Shares”) in an all-equity business combination transaction effective April 1, 2023 (the “Effective Time”). The Arrangement combines two highly complementary businesses, creating a unique and market differentiating international medical cannabis leader.

Key Transaction Highlights⁽¹⁾

• Leading Pharmaceutical Cannabis Company: The acquisition of VIVO will add: established Australian and German medical cannabis brand Beacon Medical; an industry-leading medical cannabis clinic business Harvest Medicine; and a longstanding Canadian medical sales platform Canna Farms Medical.
• Direct to Patient Sales:⁽¹⁾⁽³⁾ Canna Farms was the first Licensed Producer in British Columbia, and its medical sales channel, Canna Farms Medical, has supported over 60,000 patients since 2014.⁽⁶⁾ Following the Arrangement, it is anticipated that this platform will provide patients with a more diverse product portfolio that includes existing MediPharm products. Direct to patient sales generally result in a better gross margin with the ability to bypass provincial distributors. VIVO’s clinic business Harvest Medicine will allow real-time product feedback and clinical insights on MediPharm products.
• Diversified Revenue Profile with Strong Canadian Base: ⁽¹⁾⁽³⁾ The pro-forma combined company resulting from the Arrangement (the “Combined Company”) is expected to provide fulsome Canadian market coverage with cultivation and manufacturing expertise, and a full suite of dried flower & derivative products with both established medical and adult-use wellness distribution channels.
• Expanding International Medical Cannabis Opportunity:^(1)(2)(3)(4) The pro-forma Combined Company’s international distribution will cover European and Asia-Pacific markets through established, revenue-generating agreements. The VIVO Napanee Ontario facility is EU-GMP certified for cultivating and packaging flower and the MediPharm Barrie Ontario facility is GMP certified for non-flower alternative format medical products. With two distinct international platforms, the pro-forma Combined Company is expected to open many new product offerings for existing distribution channels and geographies. The pro-forma Combined Company would have annualized international revenue of over $20M, representing approximately 40% of total revenues.⁽⁵⁾
• Revenue and Cost Synergies Realizable in the Near-Term:^(1)(2)(3)(4) Using forecasts derived collaboratively by both management teams, along with revenue and cost synergy estimates, the pro-forma Combined Company aims to find positive EBITDA⁽⁶⁾ synergies to the magnitude of between $7M to $9M on an annualized basis, and could reach positive EBITDA and cash flow in the first half of 2024.
• Balance Sheet Strength:^(1)(2)(3)(4) Anticipated combined cash position of approximately $26 million (as reported December 31, 2022) and unencumbered ownership of all major assets. This strength is expected to provide confidence in the Combined Company’s balance sheet to execute on its strategic growth roadmap, despite the macro backdrop of capital markets that continue to soften.
• Ownership Ratio Finalized: The Combined Company is owned approximately 73.1% by former MediPharm shareholders and approximately 26.9% by former VIVO shareholders.

“We are very excited to be starting a new chapter in the evolution of MediPharm Labs. VIVO is a strong cultural fit, and a great strategic fit. Together the two organizations have a much clearer path to profitability. I want to welcome all the VIVO employees and thank the teams on both sides that worked over many months to help bring us together,” said David Pidduck, Chief Executive Officer of MediPharm.

“Our entire team has been working long and hard to achieve our goals of growth and profitability and this deal is a manifestation of that hard work. I cannot thank the team enough,” said Ray Laflamme, Chief Executive Officer of VIVO. “Canna Farms and VIVO have been huge parts of my life and our team’s lives for the past ten years. Personally, I am proud to be part of the cannabis industry, and I am proud that our company and our leadership are being recognized and validated by MediPharm’s desire to merge with us. We are very proud of VIVO and the amazing new company that we will create with MediPharm.”

As a result of the Arrangement, VIVO has become a wholly-owned subsidiary of MediPharm, and the VIVO Shares are anticipated to be de-listed from the Toronto Stock Exchange on or about April 4, 2023.

VIVO shareholders are entitled to receive 0.2910 of a common share of MediPharm (each whole share, a “MediPharm Share”) in exchange for each VIVO Share held immediately prior to closing of the Arrangement (the “Exchange Ratio”). In aggregate, MediPharm issued approximately 107,930,964 MediPharm Shares pursuant to the Arrangement to former VIVO shareholders as consideration for their VIVO Shares. The Combined Company is owned approximately 73.1% by former MediPharm shareholders and approximately 26.9% by former VIVO shareholders.

In addition, upon closing of the Arrangement: (i) each of VIVO’s outstanding restricted share units was deemed to be vested and was settled and cancelled in exchange for a cash payment equal to $0.025 per RSU, less applicable amounts withheld; (ii) each of VIVO’s outstanding deferred share units was deemed to be vested and was settled and cancelled in exchange for a cash payment equal to $0.025 per DSU, less applicable amounts withheld; and (iii) all of VIVO’s outstanding stock options, whether vested or unvested, were cancelled effective as of Closing without any payment in respect thereof.

In order to receive MediPharm Shares in exchange for VIVO Shares, registered shareholders of VIVO must complete, sign, date and return the letter of transmittal that was mailed to each VIVO shareholder prior to closing. The letter of transmittal is also available under VIVO’s profile on SEDAR at www.sedar.com. For those shareholders of VIVO whose VIVO Shares are registered in the name of a broker, investment dealer, bank, trust company, trust or other intermediary or nominee, they should contact such nominee for assistance in depositing their VIVO Shares and should follow the instructions of such intermediary or nominee.

Warrants and Debentures

Warrants exercisable into VIVO Shares and debentures convertible into VIVO Shares (the “Debentures”), other than those exercised or converted prior to the Effective Time, will continue to remain outstanding as securities of MediPharm. Such warrants and Debentures will now entitle the holders thereof to receive, in lieu of the number of VIVO Shares to which such holder was entitled, the consideration payable in MediPharm Shares under the Arrangement that such holder would have been entitled to receive if, immediately prior to the Effective Time, such holder had been the registered holder of the number of VIVO Shares underlying the warrants and Debentures. All other terms governing the warrants and Debentures will be the same as the terms that were in effect immediately prior to the Effective Time, and shall be governed by the terms of the applicable indenture, as amended and supplemented.

Prior to the completion of the Arrangement, VIVO had one outstanding class of warrants to purchase VIVO Shares listed on the TSX under the trading symbol “VIVO.WT” (the “Listed VIVO Warrants”). The Listed VIVO Warrants will continue trading on the TSX under the symbol “LABS.WT.B”, with commencement of trading under this symbol expected to take place as of market open on April 5, 2023. MediPharm has entered into a supplemental indenture in respect of the Listed VIVO Warrants, a copy of which will be available on VIVO’s and MediPharm’s respective profiles on SEDAR at www.sedar.com.

MediPharm has also entered into a fourth supplemental debenture indenture (the “Supplemental Debenture Indenture”) dated as of April 1, 2023, relating to the Debentures, in connection with the completion of the Arrangement. The Supplemental Debenture Indenture provides for, among other things: (i) the assumption by MediPharm of the covenants and conditions associated with the terms of the Debentures; and (ii) amendments to the conversion price of the Debentures to account for the Exchange Ratio. In connection with the entering into of the Supplemental Debenture Indenture, MediPharm and VIVO have agreed to prepay on a pro rata basis to holders of the Debentures, an aggregate of $500,000 of the outstanding principal amount of the Debentures, less any tax required to be deducted and withheld by the Combined Company.

Full details of the Arrangement are set out in the joint management information circular of MediPharm and VIVO dated February 6, 2023 (the “Circular”), a copy of which can be found under MediPharm and VIVO’s profiles on SEDAR at www.sedar.com. A copy of the early warning report of MediPharm in connection with the acquisition of the VIVO Shares will be filed under VIVO’s profile on SEDAR and can be obtained by contacting MediPharm at the number shown below.

Advisors and Counsel

Hyperion Capital Inc. acted as financial advisor to MediPharm and provided a fairness opinion to MediPharm’s board of directors. Aird & Berlis LLP acted as legal counsel to MediPharm.

Stoic Advisory Inc. acted as financial advisor to VIVO. ATB Capital Markets Inc. acted as financial advisor for the restructuring of VIVO’s convertible debentures and provided a fairness opinion to VIVO’s board of directors. Bennett Jones LLP acted as legal counsel to VIVO.