Zenabis Provides Corporate Update

VANCOUVER, BC, June 16, 2020 /CNW/ – Zenabis Global Inc. (TSX: ZENA) (“Zenabis” or the “Company“) today provided a corporate update on its recent activities.

Highlights

  • Zenabis Atholville has commenced cultivation of thirteen new high THC cultivars with commercial roll out of three of the new cultivars expected to occur in July with the remaining ones to be rolled out over the remainder of the third and fourth quarters.
  • Zenabis Atholville has transferred two extraction lines from Zenabis Delta in order to meet demand for Cannabis 2.0 and other extraction products with the additional extraction capacity of approximately 2,000 kg of biomass per month to come online over the short to medium term as necessary to meet increasing demand.
  • Zenabis Langley achieved full harvests from all licensed growing rooms in April with continuing cultivation across all licensed areas.
  • Installation of the HYTN beverage line has taken place, and commercial production is expected to commence shortly. The Company has completed product development of 510 threaded vapes and expects to launch two high THC and one CBD product in July.
  • First processing and testing of edible products has been completed and commercial production is expected to begin in early July.
  • The Company has two ongoing or imminent international bulk supply arrangements, one already shipping, with combined volume of up to 750 kg per month, and two ongoing domestic supply arrangements with combined monthly volume of up to 200 kg.

Kevin Coft, Chief Executive Officer of Zenabis stated, “We are very pleased by the continuing progress of Zenabis, particularly as it relates to new products and the growth of our network of international supply arrangements. The first of the Company’s new high THC cultivars, which are rare in the Canadian marketplace, are expected to enter the market in July, with the remainder to be commercialized over the course of the third and fourth quarters of this year. We are particularly excited by our suite of new Cannabis 2.0 products which will be entering the market over the next few months. These include our new 510 thread line of vaporizers, edible products in July, and HYTN beverages shortly. On the international front, we continue to increase our export pipeline with two ongoing or imminent supply arrangements as well as our binding terms sheet with Farmako via our ZenPharm joint venture in Malta.”

Facilities Update

Zenabis Atholville

Cultivation

Zenabis Atholville remains in steady-state production from a cultivation standpoint, with April harvests below design capacity for the facility, but within expected variance. Zenabis Atholville has now commenced commercial cultivation of thirteen new cultivars that are either unique or with low availability in the Canadian recreational market in accordance with prior THC guidance. Zenabis anticipates commercial rollout of three of these new cultivars on a commencing in July, with the additional cultivars over the remainder of the third and fourth quarter. The Company anticipates that the listing and sale of additional cultivars with higher THC ranges, together with a more diverse range of SKUs, will better preserve average selling prices as prices fall across the industry.

Zenabis Atholville completed its first harvest under a contract cultivation agreement in April.

Extraction

Due to demand for extraction output for Cannabis 2.0 and other products, the Company has transferred two additional extraction machines from Zenabis Delta to Zenabis Atholville. These are in addition to the extraction machine currently in operation which is currently processing approximately 1,000 kg of biomass per month. The added capacity for extraction is expected to be necessary in the short to medium term to meet the demand for Cannabis 2.0 products such as PAX, oil, edibles and 510 vaporizers. These additional extraction machines are expected to enter production as demand increases and market conditions dictate.

Zenabis Atholville recently completed the formulation of additional oil products, which were launched in the medical market in May.

Zenabis Langley

Zenabis Langley achieved full harvests from all licensed rooms in April and cultivation in these rooms continues. Additionally, harvest yields have increased due to additional sunlight in accordance with expected seasonality of a closed greenhouse system. At this time, the Company considers current volumes produced in aggregate between Zenabis Langley and Zenabis Atholville to be sufficient to meet current market demand. Zenabis is able to complete and license additional production areas if market conditions dictate.

Zenabis Stellarton

As announced on June 5, 2020, Zenabis Stellarton received an amendment to its Health Canada license to allow it to sell dried cannabis, fresh cannabis, cannabis edibles, cannabis extracts and cannabis topical products to provincially and territorially authorized retailers. Additionally, the license amendment authorizes the sale of cannabis and cannabis products to holders of a license for sale of medical purposes. The receipt of this license amendment will enable to Company to now execute its strategy to utilize Zenabis Stellarton as the Company’s center of excellence for Cannabis 2.0 products, including beverages, products derived from trichome extraction, edibles, and hash or hash-based products. In addition, the Company intends to utilize Zenabis Stellarton going forward for Namaste and Re-Up flower and pre-roll recreational distribution.

Cannabis 2.0 Update

ActivityFacilityAnticipated Transition or Establishment
PAXAtholvilleSuccessfully launched into the recreational market in May with three initial high-THC products. Two new products, including a balanced format, are launching in June.
Additional Oil-derivative ConcentratesAtholvilleThe commercial production of additional oil-derivative concentrate products is expected to commence in July.
Trichome Concentrate Product ProductionStellartonThe commercial production of trichrome concentrate products (such as hash) is expected to commence in July.
HYTN BeveragesStellartonInstallation of the HYTN beverage line has taken place, and commercial production is expected to commence shortly.
Edible ProductionStellartonFirst processing and testing of edible products has taken place. Commercial production is expected to commence in early July.
510 VapesAtholvilleProduction has commenced, and product launch is expected in mid to late July with two high THC products and one CBD product.

Business Development Update

Recreational Cannabis

Recreational sales continue to increase month over month with an assortment of increased SKUs of dried flower sold through the provincial channels per month. Strain-specific 28 g offerings under the Re-Up brand have now launched in a majority of markets. The Company continues to grow the number of listings in this category, with additional 28 g format products launching in July. Zenabis has adjusted pricing of its core Namaste-brand products as appropriate in order to ensure competitive pricing is maintained as market prices fall. Zenabis has also increased the number of products available in the Namaste brand with a number of recent new listings in the category. In addition, as noted under Zenabis Atholville, a number of additional cultivars under this brand are scheduled for launch from July onward.

ZenPharm

As previously announced on June 5, 2020, the Company assigned its binding term sheet with Farmako GmbH (“Farmako”) to its subsidiary ZenPharm for the supply of European Union Good Manufacturing Practices (“EU GMP”) certified medicinal cannabis and amended the terms of the terms sheet to provide for a minimum volume guarantee. Under this terms sheet, ZenPharm is expected to process a minimum of 500 kg per year of EU GMP compliant bulk cannabis following ZenPharm receiving EU GMP certification, which is expected to occur in Q3 2020. Shipments to Farmako from ZenPharm are expected to commence in Q3 2020, and ZenPharm anticipates supplying cannabis oils to Farmako beginning in 2021. ZenPharm will be supplied solely from Zenabis Atholville.

Current Next Steps

Date, or anticipated timingActivity
July 2020Anticipated completion of Malta Medicines Authority inspection of ZenPharm facility.
Q3 2020Anticipated first commercial shipments to ZenPharm for processing and shipment to end clients.

Supply Agreements, Contract Cultivation Agreements, and Bulk Market Cannabis Sales

Canadian bulk demand is relatively muted; however, international bulk demand is extremely strong. Zenabis has a range of international bulk contracts, agreements and ongoing relationships. 

The following is a summary of the status of the various relations by contract type:

Contract or Arrangement TypeNumber of contracts or counterparties, status and current or expected volume
Bulk – Current Pay – CanadaTwo ongoing arrangements, both currently shipping; volume of up to 200 kg per month.
Bulk – Current Pay – InternationalTwo ongoing or imminent arrangements, with one already shipping; anticipated combined volume of 750 kg per month.
Bulk – Current Pay – EU GMPOne executed contract; awaiting EU GMP certification of ZenPharm facility in Malta; minimum volume of 500 kg per year.
Contract Cultivation – CanadaTwo executed contracts, with one ongoing and one on hold; potential volume of 200 kg per month.
Prepaid Supply – CanadaTwo executed contracts with potential volume of more than 2,000 kg per month.

Zenabis is currently in various stages of discussions with potential counterparties for additional contracts or arrangements with the exception of the category Prepaid Supply – Canada.

About Zenabis

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 NamasteBlazery, 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: the Company’s organizational and strategic review and forecast of demand; the Company’s focus on aligning its resources to meet the needs of consumers; the expected timing and completion of current and planned conversion, expansion and optimization of our facilities, including Zenabis Langley; our plans for Zenabis Delta; the expected submissions of license amendment applications and site evidence packages; the licensing of our facilities and projected timing thereof; our expectations for our extraction projects, equipment and capacity; our expectations for processing output; our expectations regarding our packaging equipment; 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, 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. 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

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