Zenabis Provides Operational Update for April 2019
Vancouver, British Columbia – May 21, 2019 – Zenabis Global Inc. (TSX:ZENA) (“Zenabis” or the “Company”) is pleased to provide an update on its recent cannabis production figures; anticipated future harvests; facility construction and licensing status; and medical program update.
- Cultivation output in April 2019 was 809 kg, which represents a 31.3% outperformance relative to design capacity, or a Performance Ratio of 31.3%;
- Together with accelerating one harvest versus forecast, cultivation output of 809 kg was 63% greater than forecast output of 495 kg;
- The Performance Ratio on a by-harvest basis varied from a low of (4.0%) to a high of 56.6%; and
- Construction and licensing continue to progress on track at Zenabis Atholville and Zenabis Langley, with annual design capacity forecast to increase to at least 131,300 kg in the third quarter of 2019.
Andrew Grieve, Chief Executive Officer of Zenabis, stated, “Cultivation output was very strong in the month of April. We continue to experience variance on a room-by-room basis based on a variety of cultivation approaches being tested. We expect this variance to continue through the month of May. Beyond the harvests in May, aside from variance resulting from ramp-up in rooms, we expect greater consistency in output as a result of a more consistent cultivation approach. In addition, licence amendments are being received in a timely manner, and our construction and licencing teams remain on time, or in some cases are ahead of the previously disclosed schedule.”
Cannabis Production Summary
In April 2019, Zenabis had its highest monthly harvest weight to date of 809 kg. Zenabis has consistently grown more than the previous month’s harvest weight from October 2018 to April of 2019.
The amount harvested for the three months ending April 30, 2019 exceeded the design capacity of the flower rooms by an average of 15%, compared to the three-month period from January 2019 through March 2019, during which the amount harvested exceeded the design capacity by 11%. A month-to-month comparison of actual harvests compared with harvest forecast based on design capacity between January 2019 and April 2019 is provided in the table below.
|Historical Harvests – Atholville||Jan
|Actual Harvest Weight||474 kg||480 kg||518 kg||809 kg||2,281 kg|
|Design Capacity Harvest Weight2||372 kg||495 kg||463 kg||616 kg||1,946 kg|
|Difference (kg)||102 kg||(15 kg)||55 kg||193 kg||335 kg|
|Difference (%) – “Performance Ratio”||27.4%||(3.0%)||11.9%||31.3%||17.2%|
In April 2019, Zenabis achieved four harvests at Zenabis Atholville, whereas the forecast included three harvests, with one harvest being accelerated versus schedule. The Performance Ratio of these harvests ranged from (4.0%) to 56.6%.
 To better reflect the actual performance of its facilities going forward, the Company reports a Performance Ratio, calculated as follows: after each harvest, Zenabis will calculate the dry weight cannabis output for each room (the “Total Output”), taking into account the amount of days in production through a combination of: (1) the amount of flower room days used (including turnaround time) for that room; and (2) the amount of flower-room equivalent days required from other flower rooms in support of that harvest (together the “Effective Flower Room Equivalent Days”). Zenabis will then divide the Total Output by the Effective Flower Room Equivalent Days in order to produce the “Effective Yield Per Day” for each room, and then divide the Effective Yield Per Day by the Design Capacity Yield Per Day for each room in order to determine actual performance versus the Design Capacity Yield Per Day (this ratio being the “Performance Ratio”). Zenabis believes that the Performance Ratio will provide investors with the best measure of actual cultivation performance versus Zenabis’ published design capacity.
 The Design Capacity Harvest Weight is based on the “design capacity” yield that Zenabis has disclosed to date. This figure was derived by converting the actual square footage of flower room space and the forecast canopy for each specific flower room into a kilograms per room per day figure (the “Design Capacity Yield Per Day”) is based on Zenabis’ historical yield data at the Zenabis Atholville facility through September 2018. The Design Capacity Harvest Weight in the table above is the harvest weight that would have resulted if the Design Capacity Yield Per Day for a room was multiplied by the Effective Flower Room Equivalent Days, as defined under “Performance Ratio.”
2019 Full Year Harvest Forecast – Zenabis Atholville and Zenabis Stellarton
For its existing licensed facilities of Zenabis Atholville and Zenabis Stellarton (and excluding Zenabis Delta), Zenabis expects to produce approximately 12,835 kg from May through December of 2019. The following table sets out Zenabis’ estimated monthly harvests for Zenabis Atholville and Zenabis Stellarton for the remainder of 2019, as well as the forecast provided previously for April of 2019 compared to the actual amount harvested in April 2019.
|Forecast3||495 kg||607 kg||668 kg||836 kg||781 kg||1,627 kg||2,263 kg||2,702 kg||3,351 kg||13,330 kg|
 This forward-looking estimate of future harvest results is based on the following material assumptions: (1) Both Zenabis Atholville and Zenabis Stellarton operate at their published design capacity on a room by room basis; (2) There is one month of delay beyond the current forecast date for cultivation commencement at each of the phases 2B and 2C at Atholville; and (3) For each of phases 2A, 2B and 2C at Atholville, three days of separation will occur between planting of each room at the point cultivation commences.
Upon receipt of its cultivation license at Zenabis Langley, Zenabis intends to provide a monthly cultivation forecast for Zenabis Langley.
The timeline from harvest to the point at which Zenabis completes a sale of that product ranges from a minimum of two weeks (in the case of a bulk sale to a licensed producer) to more than eight weeks (in the case of gelcaps which involve external extraction, processing, filling, packaging of and shipment). Zenabis recognizes the revenue from completion of such sales in accordance with IFRS.
Construction and Facility Update
Zenabis Atholville (Indoor)
The 380,000-square-foot Zenabis Atholville indoor facility is currently licensed to produce cannabis from 174,900 square feet with annual design capacity of 12,500 kg. Zenabis is in the process of constructing and licensing additional flower rooms and support space to expand cultivation capacity in two blocks divided into “Phase 2B” consisting of 76,700 square feet and “Phase 2C” consisting of 118,000 square feet. Specific updates are provided below:
- Phase 2B: Zenabis has submitted license amendments to Health Canada to commence production in its Phase 2B expansion project, which will expand the facility’s annual design capacity by 9,800 kg.
- Phase 2C: Room construction and lighting are complete for this phase. HVAC and electrical are nearly complete. Installation of benches and irrigation equipment are ongoing. Zenabis intends to submit its license amendment to Health Canada to commence production in Phase 2C in late May or early June of 2019, versus the prior timing of June or July of 2019 previously provided in the March operational update.
Zenabis Langley (Greenhouse)
Zenabis is currently converting 10 acres of the first greenhouse property (“Site A”) following the successful transfer of all floral and propagation business from Site A to Zenabis Aldergrove. Construction at Zenabis Langley is progressing well and is on time. Zenabis has completed the construction of all interior and exterior insulated wall panels, offices and staff support areas, and the majority of operational workspaces. The security and HVAC work are ongoing and completion for June is on schedule.
Site A is divided into six flower zones, which are similar to those in an indoor facility, but much larger in size. Construction of the flower rooms is expected to be completed between June and August, with the first phase of construction completed by the end of June, and construction substantially complete for all rooms by the end of July. Site A has an annual design capacity of 96,100 kg.
Zenabis is currently in the process of constructing an extraction, post-processing and analytical testing lab at Zenabis Delta. All components of this construction are scheduled to be completed in the third quarter of 2019.
Zenabis is currently in the process of various licensing submissions for Zenabis Langley, Zenabis Atholville, Zenabis Pitt Meadows and Zenabis Aldergrove as outlined in the table below:
|License Submission||Submission Date||Annual Design Capacity|
|Zenabis Langley Site A – Cultivation License||September 4, 2018
(Initial Submission Date)January 25, 2019
(Amendment Submission Date)Site evidence package –June 20194
|Zenabis Langley Site A – Industrial Hemp||February 9, 2019||N/A|
|Zenabis Pitt Meadows – Industrial Hemp||April 4, 2019||N/A|
|Zenabis Aldergrove – Industrial Hemp||April 4, 2019||N/A|
|Zenabis Atholville Phase 2B||Part 1 – April 9, 2019
Part 2 – May 17, 2019
|Zenabis Langley Site B – Industrial Hemp||April 10, 2019||N/A|
|Zenabis Atholville Phase 2C||May-June 20194||12,000kg|
4 Expected submission timeline.
Zenabis is currently using Zenabis Pitt Meadows, Zenabis Aldergrove and Zenabis Langley for the propagation and floral business. Zenabis intends to grow hemp on available land at the Zenabis Pitt Meadows and Zenabis Aldergrove facilities upon receipt of industrial hemp licenses from Health Canada. Zenabis intends to grow hemp on available land and in available greenhouse space at the Zenabis Langley facility upon receipt of an industrial hemp license from Health Canada.
Please view the following links for Zenabis’ operational update and corporate presentation: https://www.zenabis.com/docs/zenabis-operations.pdf
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Zenabis is a significant Canadian licensed cannabis cultivator of medical and recreational cannabis, and a propagator and cultivator of floral and vegetable products. Zenabis employs staff coast-to-coast, across facilities in Atholville, New Brunswick; Delta, Aldergrove, Pitt Meadows and Langley, British Columbia; and Stellarton, Nova Scotia. In addition to gaining technologically advanced knowledge of plant propagation, the recent addition of state-of-the-art greenhouses in Langley, Pitt Meadows and Aldergrove provides Zenabis with 3.5 million square feet of facility space that can, upon full conversion, be dedicated to cannabis production.
If all facility space at Zenabis Atholville, Zenabis Stellarton, Zenabis Delta and Zenabis Langley is fully converted and dedicated to production, Zenabis will own, and have access to, 660,000 square feet of high quality indoor cannabis production space, as well as 2.1 million square feet of greenhouse cannabis production space at its Langley facility, with this production strategically positioned on Canada’s coasts. Zenabis expects these facilities to have an annual design capacity of 131,300 kg of dried cannabis by the third quarter of 2019. These facilities, if fully built out and converted for cannabis production, would have an annual design capacity to yield approximately 478,900 kg of dried cannabis annually, for both national and international market distribution. An additional 700,000 square feet of greenhouse space will be used to continue the existing propagation business and produce industrial hemp, and can be converted to cannabis production at such a time that is beneficial to the strategic position of the Company. The Zenabis brand name is used in the cannabis medical market, while the Namaste and Blazery brand names are used in the cannabis adult-use recreational market, and the True Büch brand name is used for Zenabis’ kombucha products.
Forward Looking Information
This news release contains statements that may constitute “forward-looking information” within the meaning of applicable Canadian securities legislation. Forward-looking information may include, among others, statements regarding the future plans, costs, objectives or performance of Zenabis, or the assumptions underlying any of the foregoing. In this news release, words such as “may”, “would”, “could”, “will”, “likely”, “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate” and similar words and the negative form thereof are used to identify forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the projected kilogram yield of recently licensed facility space and facility space under, or scheduled for, construction, the expected timing and completion of current and planned conversion, expansion and optimization of our facilities, the licensing of our facilities and projected timing thereof; the adequacy of our financial resources to achieve the conversion and expansion of our facilities; the timelines projected for our internal post-processing capacities; and the expected timing and content of future operational updates. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at or by which, such future performance will be achieved. No assurance can be given that any events anticipated by the forward-looking information will transpire or occur. Forward-looking information is based on information available at the time and/or management’s good-faith belief with respect to future events and are subject to known or unknown risks, uncertainties, assumptions and other unpredictable factors, many of which are beyond Zenabis’ control. These risks, uncertainties and assumptions include, but are not limited to, those described in the shelf prospectus dated April 9, 2019, a copy of which is available on SEDAR at www.sedar.com and could cause actual events or results to differ materially from those projected in any forward-looking statements. Furthermore, any forward-looking information with respect to available space for cannabis production is subject to the qualification that management of Zenabis may decide not to use all available space for cannabis production, and the assumptions that any construction or conversion would not be cost prohibitive, required permits will be obtained and the labour, materials and equipment necessary to complete such construction or conversion will be available. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Zenabis does not intend, nor undertake any obligation, to update or revise any forward-looking information contained in this news release to reflect subsequent information, events or circumstances or otherwise, except if required by applicable laws.
For more information, visit: https://www.zenabis.com.
Chief Executive Officer