Zenabis Announces Closing of Public Offering of Units
Vancouver, British Columbia – June 25, 2020 – Zenabis Global Inc. (TSX:ZENA) (“Zenabis” or the “Company”) is pleased to announce the closing of the previously announced overnight marketed offering of units of Zenabis (“Units”), including the exercise in full of the over-allotment option (together, the “Offering”). Pursuant to the Offering, the Company sold 181,290,456 Units at a price of $0.13 per Unit for aggregate gross proceeds of $23,567,760. Each Unit consisting of a common share of the Company (each, a “Common Share”) and one common share purchase warrant (each, a “Warrant”) to purchase a Common Share at a price of $0.16 for a period of 60 months following the closing date of the Offering. In the event that the closing price of the Common Shares on the Toronto Stock Exchange, or such other principal exchange on which the Common Shares are then trading, is greater than $0.32 per Common Share for a period of ten consecutive trading days at any time after the closing of the Offering, the Company may accelerate the expiry date of the Warrants by giving written notice to the holder thereof and in such case the Warrants will expire on the 15th day after the date on which such notice is given by the Company.
The Offering was made pursuant to an agency agreement dated June 19, 2020 (the “Agency Agreement”) between the Company and a syndicate of agents co-led by AltaCorp Capital Inc. and Eight Capital and including Canaccord Genuity Corp., Haywood Securities Inc. and PI Financial Corp. (collectively, the “Agents”). Pursuant to the Agency Agreement, the Company paid the Agents a cash commission equal to 6.0% of the gross proceeds of the Offering and issued the Agents 10,877,426 common share purchase warrants (each, a “Broker Warrant”), with each Broker Warrant entitling the Agents to purchase an additional Common Share at a price of $0.13 for a period of 12 months from the date hereof.
The Offering was made by way of a prospectus supplement dated June 19, 2020 to the Company’s short form base shelf prospectus dated April 9, 2019.
Zenabis intends to use the net proceeds of the Offering for general working capital and corporate purposes, the partial repayment of subordinated secured notes, the partial repayment of the Company’s unsecured convertible debentures, the partial repayment of its senior secured debt, and the payment of an extension fee on its $7,000,000 third tranche of senior secured debt. The Company prepaid debt in accordance with the below table:
|Debt||Opening Principal||Paydown Amount||Remaining Principal||Maturity Date|
|New Secured Debenture||$7.0m||–||$7.0m||December 31, 2020|
|Secured Convertible Note||$8.8m||($6.3m)||$2.5m||March 2021|
|Unsecured Convertible Debentures||$15.0m||($7.3m)||$7.7m||September 2021|
|Unsecured Convertible Note||$10.8m||($1.4m)||$9.4m||October 2020 / June 2022|
|BMO Financing||$44.6m||–||$44.6m||January 2022|
|Secured Debenture||$53.8m||($1.9m)||$51.9m||March 2025|
|RDC Mortgage||$2.0m||–||$2.0m||August 2027|
 Zenabis expects to pay off its $7,000,000 third tranche of senior secured debt in full from the proceeds of the sale of Zenabis Delta.
Zenabis expects to achieve positive Adjusted EBITDA less cash interest payments in the third quarter. In addition, as a result of the reduction in interest payments resulting from the Offering and extensive cost saving measures, Zenabis expects to cover all production, fixed and interest costs with revenue from the third quarter onwards for its cannabis business.
Kevin Coft, Zenabis’ Chief Executive Officer, commented, “Zenabis is extremely pleased to significantly deleverage its balance sheet through this successful, upsized equity offering. The Offering has allowed Zenabis to reduce its outstanding debt by $17 million. Furthermore, the Offering has improved the Company’s liquidity position, reduced its ongoing debt service costs, further reduced near-term debt maturities, and deferred its third tranche of senior debt to December 31st, 2020, which the Company expects to repay through the sale of Zenabis Delta. Zenabis is very pleased with the result of the Offering and the resulting, significantly improved financial position of the Company.”
Zenabis is a significant Canadian licensed 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; Aldergrove, Pitt Meadows and Langley, British Columbia; and Stellarton, Nova Scotia. Zenabis currently has 111,200 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.
Zenabis expects Zenabis Stellarton and Zenabis Langley facilities to join Zenabis Atholville in steady state production in 2020. 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. 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: statements with respect to the expected use of the net proceeds from the Offering, Zenabis’ expectation that it will achieve positive Adjusted EBITDA less cash interest payments in the third quarter and Zenabis’ expectation that as a result of the reduction in interest payments resulting from the Offering and extensive cost saving measures, Zenabis’ expectation that it will cover all production, fixed and interest costs with revenue from the third quarter onwards for its cannabis business and Zenabis expects to pay off its $7,000,000 third tranche of senior secured debt in full from the proceeds of the sale of Zenabis Delta. 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, 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.