Zenabis Provides Corporate Update
Vancouver, British Columbia – July 28, 2020 – Zenabis Global Inc. (TSX:ZENA) (“Zenabis” or the “Company”) today provided a corporate update on its recent activities.
- The Company has entered into multiple international supply arrangements and expects to ship 550 kg of dried cannabis in July and August under these arrangements. Ongoing demand under these arrangements is expected to be 750 kg per month by the start of the fourth quarter of 2020.
- Zenabis Atholville remains in steady state production, with June harvest volumes within 1% of design capacity. Through a combination cultivation output from Zenabis Atholville and Zenabis Langley, Zenabis does not expect to require any further expansion of cultivation capacity at this time.
- First shipments of Re-Up 510-Threaded Vaporizer cartridges (“510 vapes”) occurred in July.
Kevin Coft, Interim Chief Executive Officer of Zenabis, stated, “Zenabis continues to make significant strides in controlling operational costs, increasing our SKU and product-line distribution across all provincial distributors, and expanding our international bulk sales channel. Zenabis has reduced prices of flower products across all provincial distributors to provide best-in-class, or close to best-in-class, pricing in all categories. The business continues to experience growth in shipments as a result of price, format, and cultivar variety in domestic flower, the addition of new products including 510 vapes, and international distribution expansion.”
Zenabis Atholville remains in steady-state production from a cultivation standpoint. While May cultivation output remained slightly below design capacity, June harvest volumes were within 1% of design capacity. Zenabis has commenced commercial rollout of three new cultivars in July, with an additional nine cultivars to commence distribution over the remainder of the third and fourth quarter. The Company anticipates that the continued addition of high THC cultivars, together with a more diverse range of SKUs, will continue to increase overall throughput of Zenabis flower and pre-roll products.
Zenabis Atholville is currently operating extraction activities for production in line with the below “Cannabis 2.0 Update” including PAX cartridges, oil-derivative concentrates, and 510 vapes.
Zenabis Langley cultivation remains in steady state for the summer months at this time. In conjunction with production from Zenabis Atholville, cultivation output remains sufficient to meet current market demand without further expansion of Zenabis Langley.
Zenabis Stellarton is currently operating as the Company’s center of excellence for Cannabis 2.0 products, including beverages, products derived from trichome extraction, edibles, and hashish products. The facility is also completing pre-roll production and distribution for Namaste and Re-Up pre-rolls.
Business Development Update
Cannabis 2.0 Update
|PAX||Atholville||Zenabis launched two new SKUs, including a balanced format, in June.|
|Additional Oil-derivative Concentrates||Atholville||The commercial production of additional oil-derivative concentrate products commenced in July.|
|Trichome Concentrate Product Production||Stellarton||The commercial production of hash products commenced in July. Zenabis anticipates achieving hash product listings in August, with distribution no later than September.|
|HYTN Beverages||Stellarton||Installation of the HYTN beverage line has taken place; however, commercialization has been delayed due to USA/Canada border crossing closures and quarantine issues for certain HYTN-related personnel as a result of the COVID-19 pandemic. Final commercialization is now expected in September as a result of such delays restricting the physical presence on-site of certain essential personnel.|
|Edible Production||External||First processing and testing of edible products has taken place. Commercial production is expected to commence this quarter.|
|510 Vapes||Atholville||The first shipments of 510 vapes took place in July. The current product line includes two high-THC products and one CBD product, with these products currently listed in five provinces, with listings in an additional three provinces anticipated by the end of August.|
Recreational cannabis shipments continue to increase month over month as the Company has continued to launch additional recreational cannabis SKUs and act as necessary to remain price competitive. In response to consumer demand, the Company has continued to increase listings of larger format offerings within its Re-Up brand. While the Company originally focused solely on strain-specific Re-Up listings, the Company has now secured listings with several provinces for non-strain specific Re-Up Indica and Re-Up Sativa 28 g formats.
The Company has also increased the availability of oil products, including soft gels and sprays, to meet growing consumer demand. The recent increase in extraction capacity at Zenabis Atholville has allowed the Company to expand availability of oil products, and expects increased availability in various provincial markets commencing in Q3 2020.
Supply Agreements, Contract Cultivation Agreements, International Agreements, and Bulk Market Cannabis Sales
The following is a summary of the status of the various relations by contract or relationship type:
|Contract or Arrangement Type||Number of contracts or counterparties, status and current or expected volume|
|Bulk – Current Pay – Canada||Two ongoing arrangements, with both currently shipping; volume of up to 200 kg per month.|
|Bulk – Current Pay – International||Two ongoing arrangements exist with counterparties in Israel, with anticipated combined volume of up to 750 kg per month, and scheduled shipments ongoing.|
|Packaged – Current Pay – International||One ongoing arrangement with a counterparty in Australia, with first shipments expected in August subject to export license receipt.|
|Bulk – Current Pay – EU GMP||One executed contract for a minimum volume of 500 kg per year with shipments awaiting EU GMP certification of ZenPharm facility in Malta.|
|Contract Cultivation – Canada||Two executed contracts for a potential volume of 200 kg per month, with one ongoing and one on hold.|
|Prepaid Supply – Canada||Two executed contracts with potential volume of more than 2,000 kg per month, with one operating in accordance with the contract, and one subject to dispute.|
The Company expects to complete its first two shipments to Australia in August, with this shipment being of packaged cannabis, rather than bulk cannabis.
Zenabis is currently in various stages of discussions with potential counterparties for additional agreements for bulk, contract cultivation and other commercial agreements.
There are have been no changes to the status of Zenabis’ ZenPharm joint venture since the most recent operational update.
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.
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: ongoing demand under these arrangements is expected to be 750 kg per month by the start of the fourth quarter of 2020; an additional nine cultivars to commence distribution over the remainder of the third and fourth quarter; the Company anticipates that the continued addition of high THC cultivars, together with a more diverse range of SKUs, will continue to increase overall throughput of Zenabis flower and pre-roll products; final commercialization is now expected in September as a result of such delays restricting the physical presence on-site of certain essential personnel; commercial production is expected to commence this quarter; the current product line includes two high-THC products and one CBD product, with these products currently listed in five provinces, with listings in an additional three provinces anticipated by the end of August; the recent increase in extraction capacity at Zenabis Atholville has allowed the Company to expand availability of oil products, and expects increased availability in various provincial markets commencing in Q3 2020; two ongoing arrangements exist with counterparties in Israel, with anticipated combined volume of up to 750 kg per month, with scheduled shipments ongoing; one ongoing arrangement with a counterparty in Australia, with first shipments expected in July or August subject to export license receipt; the Company expects to complete its first two shipments to Australia in either July or August, with this shipment being of packaged cannabis, rather than bulk cannabis; and the expected 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 as supplemented by a prospectus supplement dated June 19, 2020 and the annual information form dated March 30, 2020, copies of which are 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. Forward-looking statements or information involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements or information contained in this news release. 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.