MediPharm Labs Corp.

Thank you, operator. Good morning everyone and welcome to VIVO's inaugural investor conference call.

VIVO is committed to increasing communication with our investors and we look forward to continuing these corporate updates on a quarterly basis. The word VIVO in Spanish and Italian means alive.

Our purpose as a company is to help people around the world experience being allied and improving their ability to grow and change. We will create long-term shareholder value by continually raising the bar with compliance, innovation, governance and operational excellence.

Our second quarter 2019 results met management's expectations and we were pleased that we were able to sustain our leadership pricing of approximately $7 per gram. I will start by summarizing our progress with our three business segments.

Then I will discuss the key milestones related to our four strategic priorities and close with highlights of some of our near-term business catalysts. The first business segments is our Premium Cannabis product segment, where we produce and sell cannabis and cannabis derived products for the medical and adult use markets.

Canna Farms was the first licensed producer in British Columbia. Inspired by the stunning mountain scenery in Hope, British Columbia, Canna Farms continues to be operated by the original visionary founders.

Its award-winning products are organically grown and use glacial fed groundwater, organic soils and artisan craftsmanship. We began construction at Canna Farms to add an incremental 2500 kilos of indoor cultivation capacity.

The expansion consists of 10,000 square feet of cultivation space with estimated capital cost of $3.5 million and is expected to bring our total internal and third-party cultivation capacity to approximately 20,000 kilograms by early next year. Canna Farms is also prepared to increase its footprint to provide flexibility to expand with the purchase of an additional 18 acres of land in the BC interior.

It is in the process of also testing automated packaging systems in order to reduce cycle times and lower production costs. The Canna Farms brand as well received and is supported by its customers and won the People's Choice Award for Best LP Customer Service at the O'Cannabiz Industry Gala in April 2019.

In addition to its production facility, Canna Farms also operates an online medical cannabis store, which was launched in the first quarter of this year. During the second quarter, we continued to expand our product offering with the addition of GTEC Holdings, sold under the brand GreenTec to the list of licensed holders selling product on this website.

Now let's turn to our ABcann facilities. Kimmett and Vanluven, both of which are in Napanee Ontario and have made tremendous strides.

In June the Kimmett facility advanced to the second phase of Health Canada's pre-licensing review and approval process. Subsequent to the quarter, the Kimmett facility was granted a cultivation license from Health Canada which increases VIVO's annualized cultivation capacity by 4000 kilograms bringing our total internal license capacity to over 12,000 kilograms.

We've begun planting at the Kimmett site and aim to realize our first harvest in the fourth quarter of this year. The Kimmett facility is being developed as a hybrid outdoor cultivation site and features four 1.5 acres seasonal airhouses.

Airhouses have been used in several U.S. states, but the Kimmett site is the only facility employing this innovative technology in Canada.

Our airhouses will produce high quality cannabis without the capital investment required to build traditional greenhouses or indoor cultivation facilities. The Kimmett facility is located on a VIVO owned 65 acre site, that has the potential to accommodate significant additional cultivation capability.

Our Vanluven facility reached a significant milestone subsequent to quarter-end, receiving approval from Health Canada to begin cannabis extraction operations, employing its supercritical CO2 extraction suite. We have also procured an ethanol extraction system that will bring VIVO's total extraction capability to 50,000 kilograms per year.

We use this capacity to produce high quality oils, distillates, concentrates, and more advanced formulations for our current and anticipated future portfolio of medical products, as well as edibles, beverages and topicals for the recreational market. Our second business segment is our Medical Cannabis Clinic segment where we operate education focused patient centric, cannabis discovery clinics, under the Harvest Medicine brand.

Harvest Medicine has five medical cannabis clinics in the provinces of Alberta, New Brunswick, Nova Scotia and Ontario and operates a telemedicine service called HMED Connect. Through these clinics and HMED Connect, Harvest Medicine has conducted over 50,000 patient visits, making it one of the top clinic networks in Canada.

Our third business segment is our corporate and international business. We increased our international operations through our wholly-owned subsidiaries, ABcann Germany, which is focused on the European market and Beacon Australia, which provides an entry point to the Asia Pacific market.

In May 2019, VIVO entered into a distribution agreement with Burleigh Heads one of Australia's leading medical cannabis distributors. The agreement is expected to increase the ability of Australian patients to access VIVO's high quality medical cannabis flower oil and other products via approved channels.

And we successfully shipped product to Australia from both our Canna Farms and Napanee facilities this year. In Germany we continue to lay the groundwork in order to begin selling cannabis in early 2020.

We expect our German business to begin operating under the Beacon Medical Brand in late 2019. We are also exploring other opportunities in select European markets where medical cannabis has been legalized, including the UK and Poland.

As we build our business to achieve profitable growth, we are focused on four strategic priorities. This sharp focus will ensure that we create lasting long-term shareholder value.

The strategic priorities are as follows: First, expanding capacity and increasing production capability. Which we have been able to do at all of our facilities this year.

We now have total internal license cultivation capacity of 12,000 kilograms, with agreements in place to supply approximately 5000 kilos per annum from third parties. Second, creating a broad and loyal distribution network which we've done through our medical cannabis platforms.

And on the recreational side, by partnering with well-established Canadian cannabis retailers, such as National Access Cannabis, Choom, Westleaf and the Friendly Stranger to help increase market access, and sales of our premium line of products. Third, innovation driven product development, where we conduct ongoing research to optimize our existing operations and develop new products, such as cannabis infused edibles and beverages.

We also have definitive agreements with four Canadian and U.S. based product development partners with expertise in their respective fields of endeavor towards the goal of creating novel formulations and delivery formats.

An example is Pharma Science, a global pharmaceutical company based in Montreal, Quebec. Overall, our goal is to offer medical patients and healthcare professionals a broad range of innovative high-quality forms of cannabis.

And finally, through international market expansion. Whereas, I mentioned earlier, we are initially focused on Germany and Australia.

In addition to the many operational successes we've had so far this year, we have a number of positive investment catalysts that we are on track to achieve in the near term. Our Vanluven facility is nearing EU-GMP certification, which is the global gold standard in the cannabis industry and speaks to our commitment to maintaining a quality first culture at all of our facilities.

A quality and compliance focus is part of the VIVO DNA. We recently entered into a partnership with a former Belgian chocolatier, currently operating an award winning company called ChocolaTas to produce premium cannabis chocolates at the Canna Farms facility in British Columbia.

We expect to have product available as soon as practicable or practical following the opening of the edibles market later this year. We increased our internal cultivation capacity 12,000 kilos and expect to have approximately extraction capacity of 50,000 kilos of dry flower input by early 2020.

We've begun planting at the Kimmett facility. In the last two weeks alone, we planted over 20,000 clones in our seasonal airhouses and are on track to capture our first harvest in the fourth quarter of 2019.

And finally, we are targeting approval to sell VIVO product in Germany by early 2020, subject to receipt of all necessary regulatory approvals. We received our pharmaceutical wholesale license from the regulatory authorities in the state of Brandenburg, Germany, and expect our narcotic and import license approvals in early 2020, which will facilitate imports of VIVO products to the European market from other countries including Canada.

Before concluding this call, I would like to take a minute to address the recent challenging dynamics in the cannabis sector capital markets. Over the past few months our sector has experienced a significant downturn from a value perspective.

Unfortunately, VIVO has not been immune to these market forces. Our share price has declined considerably, something that has not been lost on our investors, management or our Board of Directors.

That said, we believe companies with a clear purpose, strong underlying business fundamentals and a disciplined focus on strategic priorities will be the ones that experience profitable growth in the long-term. VIVO has built a solid foundation of quality products, top talent, a healthy balance sheet and highly scalable capabilities.

We received two of the first 15 licenses from Health Canada in 2014 and have leveraged that experience toward a multifaceted global business with a great foundation and significant upside potential. In summary, we are pleased with our operating performance to-date.

At a net average selling price of $6.96 per gram, we maintained our industry leading pricing and we believe we've laid the groundwork for future revenue growth beginning in the second half of this year. We have a strong financial position and talented and passionate team to deliver on our strategic plans and continue to grow long-term shareholder value.

With that, I will now hand it over to the operator and then Mike and I are pleased to answer any questions.

Good morning guys, thanks for the call and a good quarter. Just wanted to get some color on changing your pricing from Q1 to Q2.

Was it the fact of entering new markets or your product mix or something kind of overall in the market?

Kim, thanks for the question, it's Barry. I believe that our pricing went from roughly $7.5 down to $7.

And it's really a function of product mix and also we sell our products in the recreational market to five different provinces, each of which have a different purchase price and a different agreement with us. So we think we still maintain top tier industry levels of pricing at/or roughly $7 per gram average for dry flower.

I think the $0.50 differential that you're referring to is probably related to mix and which provinces purchased more as compared to the previous quarter. But we're still very pleased with our pricing levels and our demand of our products.

Yeah, great. Okay, that's good color.

And then just kind of looking at your capacity changes, obviously you brought a lot on in Q2 and that went into the biological assets. Would you expect volumes to kind of roughly double based on the capacity in Q3?

Or is there a time lag in between ramp up?

Yeah, so the summary is, from an internal capacity point of view, we doubled our capacity. And we will see the results of that on our top line starting in the third quarter.

I think it's safe to say we will see a further jump from the third quarter to the fourth quarter related to additional harvests. The other increase to our capacity happened at Kimmett, as you know.

And that additional harvest will not happen until later this year and those sales will likely not translate into a material amount of sales in 2019. It will certainly help us gear up on some of our concentrated products and medical products.

And we're paving the way for significant new launches in 2020.

So basically, the Kimmett's harvest will go towards -- you'd basically extract it and put that into inventory and so you can launch your derivative products?

Yes, I would not expect that to have any material positive impact in the fourth quarter this year.

And then maybe just on the Kimmett -- how are the plants looking overall? Sounds like, you've planted quite a few.

Just need a bit more color on how operations are going there?

Yes, the team is super excited. They worked really hard over the last two weeks.

And reports from early this morning was that, the plants that we put in, the over 20,000 plants are looking great. We're very excited about the results so far.

And, we're all very excited to harvest it in the late fall.

Okay, great. Well I'll let someone else to ask some questions now.

Thanks, guys.

Thanks Kim. Appreciate it.

So thank you, operator. Thanks, everyone for participating.

As I mentioned at the beginning, this is our first VIVO conference call. Certainly, we're committed to enhancing investor communications.

You could look forward to future conference calls with us and appreciate your involvement today. So everyone have a great day.

Thank you.