Zenabis Announces Amendments to Senior Secured Debenture and Positive Operational Updates
Vancouver, British Columbia – April 23, 2020 – Zenabis Global Inc. (TSX:ZENA) (“Zenabis” or the “Company”) is pleased to announce that it has signed a definitive agreement (the “Amended and Restated Debenture”) with a syndicate of lenders (collectively, the “Senior Lenders”) amending and restating its amended and restated secured debenture dated August 21, 2019 (the “Pre-Existing Debenture”) representing senior secured debt in the principal amount of $50,000,000 (the “Original Senior Debt”) to convert the Pre-Existing Debenture into an amortizing term loan to be repaid by March 31, 2025. The key terms of the Amended and Restated Debenture include:
- the deferral of the maturity date on the Original Senior Debt from June 30, 2020 to March 31, 2025 with the principal amount of the Original Senior Debt being repaid on the basis of straight-line amortization over 36 months beginning on April 1, 2022;
- the addition of $10,750,000 to the principal amount of the Original Senior Debt consisting of: (i) $7,000,000 in new senior secured debt financing advanced by the Senior Lenders to Zenabis (the “New Senior Debt”) less a structuring fee paid by Zenabis to the Senior Lenders equal to 5% of the New Senior Debt; and (ii) an amendment fee in the amount of $3,750,000;
- the New Senior Debt will bear interest at a rate of 14% per annum and will have a maturity date of July 20, 2020 (subject to renewal for an additional four-month period under certain circumstances). Zenabis’ intent is for the New Senior Debt to be repaid from the proceeds of the sale of Zenabis Delta;
- commencing on July 1, 2020, where sales from Zenabis’ wholly owned cannabis subsidiary’s medical, recreational and wholesale cannabis lines net of value added or sales taxes (“Net Cannabis Revenue”) per fiscal quarter thereafter exceed $20,000,000 (the “Minimum Quarterly Revenue”), Zenabis will pay the Senior Lenders a royalty on Net Cannabis Revenue on such excess amount for a total of 32 fiscal quarters pursuant to a declining royalty factor as follows: (i) 3.50% of Net Cannabis Revenue in excess of the Minimum Quarterly Revenue where Net Cannabis Revenue does not exceed $25,000,000 per fiscal quarter; (ii) 3.00% of Net Cannabis Revenue in excess of the Minimum Quarterly Revenue where Net Cannabis Revenue exceeds $25,000,000 but does not exceed $30,000,000 per fiscal quarter; (iii) 2.50% of Net Cannabis Revenue in excess of the Minimum Quarterly Revenue where Net Cannabis Revenue exceeds $30,000,000 but does not exceed $37,500,000 per fiscal quarter; and (iv) 2.00% of Net Cannabis Revenue in excess of the Minimum Quarterly Revenue where Net Cannabis Revenue exceeds $37,500,000 per fiscal quarter and the calculation of the royalty may be amended depending on Zenabis’ continued operational performance and ability to raise additional capital during the next six months; and
- the issuance of 71,255,522 Zenabis common share purchase warrants to the Senior Lenders (each, a “Warrant” and collectively, the “Warrants”), with each Warrant entitling its holder to purchase a Zenabis common share at a price of $0.07017 for a period of five years.
Kevin Coft, Chief Executive Officer of Zenabis, stated, “We are extremely pleased that we have successfully completed negotiations for the extension of our Senior Secured Debenture. This agreement has further strengthened our balance sheet and will help provide financial stability to ensure Zenabis’ continuing growth. We are delighted with the optimism of our financial partners; this agreement is evidence of a positive and stable future for our company.”
A representative of the Senior Lenders stated, “The Senior Lenders are pleased to support the Zenabis Group in its growth and product development by providing financing and time to complete execution of their plans.”
Positive Operational Updates
Zenabis is pleased to announce that, further to the previously announced receipt of its Health Canada export license to the EU, it has made its initial shipment of approximately 47 kg of pharmaceutical-grade cannabis to its EU partner located in Malta. This initial shipment will be used to obtain EU GMP certification for its partner’s production line. Once certified, Zenabis expects to commence bulk shipments of pharmaceutical-grade cannabis to its partners with volumes eventually expected to ramp up to approximately 400 kg per month.
Additionally, Zenabis is pleased to announce that, subject to the Company receiving the requisite export permits, it has scheduled for its previously announced shipment of approximately 300 kg of pharmaceutical-grade cannabis to a customer in Israel for April 2020.
Changes to the Board
Daniel Burns has been appointed Chair of Zenabis’ board of directors (the “Board”). Mr. Burns succeeds Monty Sikka, who had served as Chair of the Board since Zenabis’ going public transaction closed on January 8, 2019. Mr. Sikka will continue to provide Zenabis with his knowledge, expertise and guidance as a member of the Board.
Mr. Sikka stated that, “the time is right for Dan to assume Chairmanship of this company. This financing represents a major milestone in the growth of Zenabis and places it on a firm footing. With that in place I am confident that Dan will help ensure that Zenabis achieve it’s potential. With Dan in the chair, the company is in good hands.”
Mr. Burns remarked, “We are exceptionally grateful for the service of Monty, one of the Co-Founders of Zenabis, for his service as Chair of the Board. Monty has continued to contribute his service and expertise, as well as his capital to Zenabis through participation in our recent rights offering. I look forward to continuing to work with Monty on the Board.”
Mr. Coft stated, “On behalf of the Company and its employees, I would like to express our sincerest gratitude to Monty for his tireless efforts in support of the business. I am also looking forward to continuing to work with Mr. Burns in his new role as Chair as we transition to a permanent capital structure.”
In addition, Adam Spears and Larry Van Wieren have retired as members of the Board as the Company continues to streamline all components of operations and governance. Zenabis would like to thank Mr. Spears and Mr. Van Wieren for their service on the Board and their hard work during Zenabis’ first year as a publicly-traded, large-scale licensed cannabis cultivator.
Mr. Sikka added, “I am incredibly grateful to have worked with both Mr. Spears and Mr. Van Wieren on the Board of Zenabis. With the pace of activity during our ramp-up, their service and insight was incredibly helpful, and we are all thankful for the generosity they showed with their time. In particular, Mr. Van Wieren continued with the business from the Board of Bevo, and we thank him for his extended period of service.”
With these changes to the Board, only three of six current members of the Board receive compensation for their Board service.
As the COVID-19 situation continues to evolve, Zenabis’ top priority continues to be the health and well-being of our employees, uninterrupted services to our customers and partners, and finally, doing our part in preventing further spread of the virus. To date, we have no reported positive COVID-19 cases at any of our facilities or offices across Canada.
Zenabis will continue to monitor the situation and take all necessary steps to support our employees based on guidance from our local, provincial and federal authorities.
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. Zenabis currently has 96,400 kg of licensed cannabis cultivation space across four licensed facilities. Zenabis has 3.5 million square feet of total facility space dedicated to a mix of cannabis production and cultivation and its propagation and floral business.
The Zenabis brand name is used in the cannabis medical market, the Namaste, Blazery and Re-Up 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. This forward-looking information includes, among other statements, statements regarding Zenabis’ future growth, Zenabis’ ability to obtain EU GMP certification for its partner’s production line, Zenabis’ expectation to commence bulk shipments of pharmaceutical-grade cannabis to its partners with volumes eventually expected to ramp up to approximately 400 kg per month, Zenabis’ delivery of its previously announced shipment of approximately 300 kg of pharmaceutical-grade cannabis to a customer in Israel for April 2020, and 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. 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 annual information form dated March 30, 2020, 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.