Mednow Achieves Record Q3 2023 Financial Results with Quarterly Revenue of $12.8 Million; 13% Q/Q Revenue Growth and 105% Y/Y Revenue Growth; Continues to Focus on Core Virtual Pharmacy Growth and Cost Reductions

• Q3’23 revenue increased approximately 13% Q/Q quarter-over-quarter to $12.8 million, and approximately 105% year-over-year;
• Core Virtual Pharmacy patient count increased quarter over quarter, growing by more than 9% to ~8,000 in Q3’23 versus ~6,900 in Q2’23;
• New business partnerships signed, including Mednow’s partnership with Medcan

Mednow Inc. (“Mednow'' or the “Company”) (TSXV:MNOW) (OTCQX:MDNWF), Canada’s on-demand virtual pharmacy, is pleased to announce it has released its financial results for the period ending April 30, 2023 (“Q3 2023”). Mednow’s Financial Statements and Management, Discussion & Analysis are available on sedar.com and on the Company’s website, https://investors.mednow.ca. With a renewed focus on its core offerings of technology-enabled virtual pharmacy and virtual care experiences, Mednow is executing on its plan to modernize the $47 Billion pharmacy industry.(1) This update outlines the key areas of our strategic plan and showcases the early success of our disruptive virtual pharmacy experience.

Operational highlights focus on increased growth in core virtual pharmacy and virtual pharmacy services

• Virtual Pharmacy Growth: Strong base developed in the “build phase” and now ready to pursue large partnership launches;
  • Annualized monthly revenue for virtual care pharmacy and Medvisit grew in May 2023 to $4.7M on an annualized basis.
• User growth has been strong with Mednow app registrations at 17K and pharmacy patients of 8K as of May 2023 (up approximately 700% from 1K pharmacy patients in January 2022);
• Gross margin expansion roadmap includes a focus on higher margin: chronic conditions, virtual clinical services, non-prescription sales and regularly scheduled subscription drug sales, all coupled with high customer retention.

The pharmacy industry is ready for a change to digital pharmacy

• Pharmacy is a large “offline” industry
  1. $47 billion dollar Canadian pharmacy market(1), has a relatively small penetration rate online today based on management estimates;
  2. Canada has a favorable competitive environment for virtual pharmacy; and
  3. The U.S. already has large virtual pharmacy players (2)
• $4 billion in annual costs to the Canadian health care system from 5% of emergency room and physician visits due to drug non-adherence(3)
• 20% of family doctors are anticipated to retire in the next 5 years in Toronto(4)
• 6.5 million Canadians without a family doctor(5)
• 28% of Canadians believe health care is in crisis compared to 10% one decade earlier(6)
• 48% of Canadians are dissatisfied with health care system(7)

Business-to-Business focus

Driven by a convergence of factors, there has been an increase in demand for virtual pharmacy partnerships from payors and providers, including insurance companies, union groups, employers, and medical service providers. We believe escalating drug costs, which constitute the largest portion of health benefit expenditure (8), have prompted payors to seek cost-containment strategies and greater transparency. Mednow Pharmacy, with its partnerships and positive patient reviews, believes it is positioned to address these needs, considering its differentiated patient and technology experience.

In March 2022, Mednow released its new patient app into the market with a focus on business and doctor clients. In just over a year since its release, Mednow for Business has secured partnerships with groups that service over 500,000 lives, making Mednow the preferred virtual pharmacy for these individuals. With an average patient spend of over $1,000(9) per year, even a modest capture rate would represent significant strides for Mednow.

Although business-to-consumer marketing was part of Mednow’s expenses in 2022 while it was building its technology and establishing its brand, since late 2022 and for 2023 Mednow has solely been focused on patient growth from business-to-business partnership development.

Virtual pharmacy services for providers and patients

Medical clinics and providers are increasingly seeking ways to reduce administrative burdens associated with prescription management, including medication reconciliations and refill requests, while moving away from outdated communication methods such as faxes with pharmacies. Mednow's technology-enabled pharmacy focuses on addressing these challenges and aims to empower medical clinics to focus more on patient care.

Mednow aims to supplement the clinical support provided by prescribers to their patients. For example Mednow’s Virtual Diabetes Program in partnership with Dexcom, ensures that allied health care professionals’ diabetic patients have access to the best practices when it comes to medication adherence and disease state education.

Our recent partnership announcement with Medcan, one of Canada's largest private healthcare organizations, exemplifies the type of growth Mednow is prioritizing—innovative, digital-first, and interdisciplinary healthcare solutions.

Further, we believe that our services play a vital role in bridging the healthcare gap in Canada. As an example, pharmacist minor ailment prescribing is now permitted in provinces such as Ontario just this year. These services, delivered by Mednow's existing pharmacists and covered by the government, incur no costs for patients. Paid virtual pharmacist clinical services is a new concept and Mednow’s technology based pharmacy platform is well positioned to address the need for free virtual care for patients for our existing and growing patient base.

Technology investments and roadmap

Since the launch of our app in the spring of 2022, Mednow has introduced features such as Dependents and Single Sign-On, enhancing the pharmacy experience for our customers. Moving forward, we remain committed to investing in software development. Over the next 12 months, we plan on focusing on the expansion of our over-the-counter product offerings and providing white-labeled storefronts for other businesses to sell their products, with Mednow acting as a trusted fulfillment partner.

As part of our commitment to advanced technology, Mednow currently utilizes artificial intelligence (“AI”) in our fulfillment processes through PAC vision—a machine that employs photo analysis to identify pills in medication packages, helping prevent medication errors and increasing central fill efficiency. Looking ahead, we are exploring the use of AI, both internally developed and through strategic partnerships, in areas such as off-hours non-medical triaging, drug claims analysis, and medication adherence. The inclusion of AI in healthcare represents an exciting frontier, and Mednow's tech-enabled pharmacy platform positions us to efficiently adopt AI solutions.

Lastly, Mednow aims to expand its capabilities by enabling third-party pharmacies to serve as local last-mile fulfillment partners. With already 70+ partnerships in place, Mednow boasts a large pharmacy network to complement its online offering. Mednow believes that this digital-first and robust national fulfillment infrastructure will be competitive as more and more businesses look for virtual pharmacy partners.

Key Financials

• Revenue increased by 13% quarter-over-quarter, to $12,785,913 during the three month period ended April 30, 2023, driven primarily by sales from the Company's Pharmacy operating segment.
  • Pharmacies based in British Columbia, Manitoba, Ontario and Nova Scotia collectively generated revenue of $12,264,903, as compared to $5,712,574 in the prior year’s comparative period.
  • Revenue generated by doctor services was $469,536 as compared to $486,924 in the prior year’s comparative period.
• Gross margin for the quarter increased approximately 21% year-over-year to $1,484,859, as compared to $1,232,876 in the prior year’s comparative period.
• EBITDA for the period was a loss of $3,133,142, as compared to a loss of $5,056,149 in the prior year’s comparative period, representing an increase in EBITDA of $1,927,007 compared to the prior comparative period.
  • The change is primarily due to the increase in gross profit, resulting from higher revenues during the period, and a decrease in share-based compensation expenses, a decrease in marketing costs, and a decrease in headcount, partially offset against general and administrative expenses, which are corporate costs, such as technology.
  • EBITDA is a non-IFRS financial measure and has been adjusted for certain items. Refer to the disclosure under the heading “Definitions of Certain Non-IFRS Financial Measures” for more information on this non-IFRS financial measure.
• Adjusted EBITDA for the quarter was a loss of $2,881,447, as compared to a loss of $4,285,204 in the prior year comparative period, representing an increase in adjusted EBITDA of $1,403,757.
  • Adjusted EBITDA is a non-IFRS financial measure and has been adjusted for certain items. Refer to the disclosure under the heading “Definitions of Certain Non-IFRS Financial Measures” for more information on this non-IFRS financial measure. The composition of Adjusted EBITDA has changed from the comparative period to the current period discussed herein, as explained further under the heading “Definitions of Certain Non-IFRS Financial Measures - Reconciliation of Non-IFRS Financial Measures.”

Summary of Financial Results

Below is a summary of each operating segment's performance for the three-month period ended April 30, 2023 and 2022.

 

 

For the three months ended April 30,

 

 

 

2023

 

 

 

Pharmacies

 

Doctor

Services

 

Mednow Inc.

 

Total

 

Revenue

 

$ 12,264,903

 

$ 469,536

 

$ 51,474

 

$ 12,785,913

 

Cost of sales

 

10,938,695

 

351,976

 

10,383

 

11,301,054

 

General and administrative

 

2,335,953

 

194,215

 

1,910,094

 

4,440,262

 

Share based compensation

 

—

 

—

 

183,638

 

183,6387

 

Marketing and sales

 

—

 

867

 

4,327

 

5,914

 

Depreciation

 

335,403

 

6,496

 

306,607

 

648,506

 

Income tax expense

 

57,562

 

—

 

—

 

57,562

 

Other amounts in loss

 

97,154

 

590

 

76,409

 

174,153

 

Net loss

 

$ (1,499,864)

 

$ (84,608)

 

$ (2,439,984)

 

$ (4,024,456)

 

 

 

For the three months ended April 30,

 

 

2022

 

 

Pharmacies

 

Doctor

Services

 

Mednow Inc.

 

Total

Revenue

 

$ 5,712,574

 

$ 486,924

 

$ 41,400

 

$ 6,240,898

Cost of sales

 

4,633,414

 

367,034

 

7,574

 

5,008,022

General and administrative

 

1,308,767

 

236,419

 

3,425,488

 

4,970,674

Share based compensation

 

—

 

—

 

612,713

 

612,713

Marketing and sales

 

867

 

1,362

 

891,916

 

894,145

Depreciation

 

261,765

 

7,293

 

305,128

 

574,186

Income tax expense

(recovery)

 

—

 

—

 

(134,353)

 

(134,353)

Other amounts in loss

 

—

 

—

 

(9,927)

 

(9,927)

Net loss

 

$ (492,239)

 

$ (125,184)

 

$ (5,057,139)

 

$ (5,674,562)

Source: Mednow’s MD&A as of April 30, 2023

RECONCILIATIONS OF NON-IFRS MEASURES

 

Three months ended April

30,

 

Nine months ended April 30,

 

2023

2022

 

2023

2022

Net loss and comprehensive loss for the

period

$ (4,024,456)

$

(5,674,562)

 

$

(12,859,224)

$

(16,187,042)

Interest expense

131,246

44,227

 

364,341

59,031

Interest expense on convertible

debenture

54,000

—

 

54,000

—

Depreciation and amortization

648,506

574,186

 

2,035,022

970,834

Current income tax expense

57,562

—

 

144,947

—

EBITDA1

$ (3,133,142)

$

(5,056,149)

 

$

(10,260,914)

$

(15,157,177)

Loss on investment in equity securities

—

28,392

 

—

117,558

Share-based compensation

183,638

612,713

 

862,754

3,178,535

Acquisition costs

—

129,840

 

11,400

217,492

Severance expenses

—

—

 

250,000

—

Accretion expense on convertible

debenture

57,113

—

 

57,113

—

Change in FV of derivative liability

10,944

—

 

10,944

—

Loss on disposal of assets and leases

—

—

 

183,399

—

Adjusted EBITDA1

$ (2,881,447)

$

(4,285,204)

 

$ (8,885,304)

$

(11,643,592)

1 EBITDA and Adjusted EBITDA are non-IFRS financial measures and have been discussed in the section Definitions of Non-IFRS Financial Measures.

DEFINITIONS OF CERTAIN NON-IFRS FINANCIAL MEASURES

This press release discloses certain non-IFRS financial measures which are defined below (including non-IFRS financial measures for prior year comparative periods). Non-IFRS financial measures are not standardized financial measures under IFRS. As such, these measures may not be comparable to similar financial measures that are disclosed by other companies. These measures include “EBITDA” and “Adjusted EBITDA”. These measures are provided as additional information that is disclosed to provide further insight into the Company's results of operations from management's perspective. These measures should not be reviewed and assessed as a substitute for financial information reported under IFRS. A reconciliation of the non-IFRS measures to the IFRS measure is in the section "Selected Financial Information".

EBITDA and Adjusted EBITDA

EBITDA represents net loss and comprehensive loss for the period before interest expense, income taxes, and depreciation and amortization expenses. Adjusted EBITDA represents net loss and comprehensive loss for the period before interest expense, income taxes, depreciation and amortization expenses, loss on investment in equity securities, share-based compensation expense, acquisition costs incurred, asset impairment charges, the fair value remeasurement of the note receivable from Doko and severance expenses. These adjustments to calculate the non-IFRS measures of EBITDA and Adjusted EBITDA are for items that are not necessarily reflective of the Company’s underlying operating performance. As there is no generally accepted or standard method of calculating EBITDA, these measures are not necessarily comparable to similarly titled measures reported by other issuers. EBITDA and Adjusted EBITDA are presented as management believes it is a useful indicator of the Company’s relative financial performance. These measures should not be considered by an investor as an alternative to net income or other IFRS financial measures as determined in accordance with IFRS.

The Company presents EBITDA and Adjusted EBITDA to indicate ongoing financial performance from period to period, including comparative prior year periods.

Reconciliation of Non-IFRS Financial Measures

The most directly comparable financial measure to EBITDA and Adjusted EBITDA that is disclosed in the Company’s financial statements is net loss and comprehensive loss. The following are reconciliations of net loss and comprehensive loss to EBITDA. The adjustments include:

1. The amortization and depreciation expenses of intangible assets, fixed assets, and the right-of-use assets of the Company.
2. The net interest expenses, which primarily includes interest expense on the Company's credit facility and interest expense and interest income recorded in accordance with IFRS 16.
3. The underlying income taxes recorded.

The following are reconciliations of EBITDA to Adjusted EBITDA. The adjustments include:

1. The loss on investment in equity securities in connection with the Company's investment in Life Support.
2. The share-based compensation expense recorded by the Company in connection with the stock option plan.
3. The acquisition costs incurred by the Company.
4. The asset impairment charges recorded by the Company as part of its annual impairment test of goodwill and intangible assets.
5. The fair value remeasurement of the promissory note with Doko.
6. The severance expenses incurred by the Company.

The composition of Adjusted EBITDA has changed from prior comparative periods disclosed herein. Information on the reason for the change is incorporated by reference to the Company’s Management Discussion and Analysis (“MD&A”) for the three month period ended October 31, 2022. The information can be found in the MD&A under the heading “Definition of Certain Non-IFRS Financial Measures - Reconciliation of Non-IFRS Financial Measures.” The Company’s MD&A is available on SEDAR at www.sedar.com under the Company’s profile.

The exclusion of certain items in calculating the non-IFRS measures does not imply that they are non-recurring, infrequent, unusual or not useful to investors.

1. IBISWorld, Pharmacies & Drug Stores in Canada, 2020; this figure represents the total amount spent on this industry in Canada in 2019
2. https://www.forhims.com/; https://www.capsule.com/; https://alto.com/
3. https://add.albertadoctors.org/issues/september-october-2018/sponsored-article-2/
4. https://www.cbc.ca/news/canada/toronto/family-doctors-quitting-toronto-survey-shows-1
5. https://healthydebate.ca/2023/03/topic/millions-adults-lack-canada-primary-care
6. https://policyoptions.irpp.org/magazines/may-2023/canadian-healthcare-system-crisis-survey/.
7. https://www.ctvnews.ca/health/less-than-half-of-canadians-are-satisfied-with-provincial- health-care-survey-1.6346995
8. https://innovativemedicines.ca/wp-content/uploads/2022/11/2022CostDriversReporFINwithLinks.pdf
9. CIHI National Health Expenditure, 2019

About Mednow Inc.

Mednow (TSXV: MNOW) (OTCQX:MDNWF) is a healthcare technology company offering virtual access with a high-standard of care. Designed with accessibility and quality of care in mind, Mednow provides virtual pharmacy and telemedicine services as well as doctor home visits through an interdisciplinary approach to healthcare that is focused on the patient experience. Mednow’s services include free at-home delivery of medications, doctor consultations, a user-friendly interface for easy upload, transfer, and refill of prescriptions, access to healthcare professionals through an intuitive chat experience and the specialized PillSmart™ system that packages prescriptions in easy-to-use daily dose packs, each labeled with the date and time of the next dose.

To learn more, follow Mednow on Facebook, Twitter, LinkedIn, and Instagram, or visit our website at www.mednow.ca/.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Cautionary Note Regarding Forward-Looking Statements:

This release includes certain statements and information that may constitute forward-looking information within the meaning of applicable Canadian securities laws. All statements in this news release, other than statements of historical facts, including statements regarding future estimates, plans, objectives, timing, assumptions or expectations of future performance, including without limitation, that Mednow expects operate in regions in Canada other than BC and ON by way of Preferred Pharmacy Partners and franchisees; that Mednow expects to collect technology fees from participating pharmacies in its preferred pharmacy network, MFB has a pipeline of groups which are expected to be launched in the coming months and that Mednow Pharmacists are expected to perform an in-home medication review and medication cabinet cleanup for eligible housebound patients under the Ontario Drug benefits program are forward-looking statement and contains forward-looking information.

Generally, forward-looking statements and information can be identified by the use of forward-looking terminology such as “intends” or “anticipates”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “should”, “would” or “occur”. Forward-looking statements are based on certain material assumptions and analysis made by the Company and the opinions and estimates of management as of the date of this press release,

including that Mednow will operate in regions in Canada other than BC and ON by way of Preferred Pharmacy Partners and franchisees; Mednow will collect technology fees from participating pharmacies in its preferred pharmacy network, MFB has a pipeline of groups which will be launched in the coming months and Mednow Pharmacists will perform an in-home medication review and medication cabinet cleanup for eligible housebound patients under the Ontario Drug Benefits Program.

These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements or forward-looking information. Important factors that may cause actual results to vary, include, without limitation that Mednow will not operate in regions in Canada other than BC and ON by ways of Preferred Pharmacy Partners and franchise or at all; Mednow will not be successful in collecting technology fees from participating pharmacies in its preferred pharmacy network, MFB’s pipeline of groups will not be successfully launched in the coming months or at all, Mednow Pharmacists will not perform an in-home medication review and medication cabinet cleanup under the Ontario Drug Benefits Program and the risk factors discussed or referred to in the Company’s disclosure documents under the Company’s profile at www.sedar.com

Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements and forward-looking information. Readers are cautioned that reliance on such information may not be appropriate for other purposes. The Company does not undertake to update any forward-looking statement, forward-looking information or financial out-look that are incorporated by reference herein, except in accordance with applicable securities laws.

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Investor Relations: Lorraine Cardenas [e-mail] 1.855.686.6300