VIVO Cannabis : Q2 2021 – Management Discussion & Analysis

VIVO CANNABIS INC.

Management's Discussion & Analysis

For the Three and Six Months Ended June 30, 2021

August 16, 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 three and six months ended June 30, 2021 and is prepared as of August 16, 2021. It is supplemental to, and should be read in conjunction with, the Company's interim consolidated financial statements and notes thereto for the three months ended June 30, 2021 and 2020. 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 in Canada to achieve positive operating cash flows. 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 and corporate functions. 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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Strategic Overview

VIVO remains focused on the production of high-quality, high margin premium products. 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 including cannabis oils. It continues to widen its customer and patient base by leveraging its adult-use market distribution channels and by broadening its medical market product offering and outreach.

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 high quality. The Company will continue to expand its portfolio of products and the jurisdictions outside of Canada in which it operates as laws in those jurisdictions allow, resources permit, and where market research indicates opportunities exist.

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

• 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.  

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• 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-packpre-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. 

The following table provides additional information with respect to the Company's production capacity at its facilities:

1. Estimated annual rated capacity is based on the Company's experience growing a variety of different cannabis strains at the Vanluven Facility and CF Facility. Material assumptions used to determine the estimated rated capacity include the yield per square foot of cultivation space per harvest; the number of harvests per year; and the maximum number of square feet of cultivation space available to cultivate plants. Depending on the relative market demand for cultivation and other production requirements, the Company has and will continue to allocate some of its cultivation space to non- cultivation activities.
2. The airhouses are expected to produce up to 4,000 kg annually when performing optimally. The total mass of the 2020 harvest fell short of this optimal production capacity. Causes of the shortfall include initiating cultivation too early, not providing enough spacing between the plants, and not being able to keep up with the trimming required to manage the plants' explosive growth.

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