Zenabis Global now takes its place among cannabis leaders

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NEWS PROVIDED BY Zenabis Global Inc. 

Results Reflect Rapid Corporate Development and Significant Revenue Momentum

VANCOUVER, May 30, 2019 /CNW/ – Zenabis Global Inc. (TSX:ZENA(“Zenabis” or the “Company“) today announced its financial results for the first quarter ended March 31, 2019 and provided an update on operations. This is Zenabis’ first quarterly financial report since the public listing of its shares in January of 2019. 

“The public listing of our shares, and our recent graduation to the Toronto Stock Exchange, reflect the ambitions we have for our company, and are important milestones in the Zenabis growth story,” said Andrew Grieve, Chief Executive Officer of Zenabis. “We have successfully undertaken a range of tangible corporate development initiatives in the past several months, including securing key supply and distribution arrangements and additional licenses and approvals; expanding our product offerings across Canada, developing relationships in Europe; and obtaining financing to support our rapid growth. We also commenced providing monthly reports on our operations and look forward to continuing to update our shareholders and the broader investment community on our progress.”

“Since the legalization of cannabis in Canada last fall, it has become clear that the winners in this industry will be those who can produce reliable supply,” continued Mr. Grieve. “Despite being a new entrant in the cannabis market, we demonstrated a clear ability to expand production and cultivation output during the first quarter of 2019. Our April 2019output exceeded our design capacity by more than 31%, and our overall cultivation output was 63% greater than forecast. For the three harvests thus far in May, we have exceeded design capacity by 28%. With an additional harvest being accelerated from June into May, we anticipate further strong total cultivation performance in May relative to forecast. This outperformance demonstrates the capabilities of our experienced cultivation team, and the quality of our facilities across Canada.” 

“Our results demonstrate progress towards our goal of becoming one of the largest licensed producers of medical and adult-use recreational cannabis in Canada. Building on the proven agricultural heritage and cultivation excellence of our predecessor company, Bevo Agro Inc., we are investing in initiatives that will grow our production to meet demand across our key markets, enhance value for our shareholders, and deliver value to all of our stakeholders. Looking ahead, we expect further growth from our cannabis operations, continued expansion of our facilities, and significant increases in cannabis revenue,” added Mr. Grieve.

Commenting on Zenabis’ revenue growth expectations for the second quarter of 2019, Mr. Grieve said, “We currently anticipate revenue from the plant propagation business to be in a range of $16 to $18 million, and net revenue from the cannabis business to be in the range of $10 to $12 million. Net cannabis revenue is subject to the timing of shipments. This net cannabis revenue does not yet include any meaningful impact from the production of oil products, as the third-party supply chain for oil products (including post processing) adds a considerable amount of time from cultivation to realization of revenue. This time differential is expected to be significantly reduced upon completion of post-processing and additional extraction capacity at Zenabis Delta. Currently, a significant amount of existing cannabis inventory is allocated to the third-party oil processing supply chain.”

First Quarter 2019 Highlights:

  • Completed a reverse takeover (the “RTO”) of Bevo Agro Inc. by Sun Pharm Investments Ltd. to become Zenabis Global Inc. on January 8, 2019, and began trading on the TSX Venture Exchange (“TSXV”) under the symbol “ZENA” on January 10, 2019
  • Entered into supply arrangements with the provinces of Alberta, Manitoba, Quebec and Prince Edward Island, expanding Zenabis’ supply arrangements to a total of eight provinces and one territory 
  • Through its subsidiary, Bevo, completed the acquisition of Topgro Holdings Ltd., which includes 10.4 acres of greenhouse on 50 acres of land in Aldergrove, British Columbia
  • Added a new product line with the acquisition of 51% of Hilllsboro Corp Inc., a kombucha company with expertise in the creation of cultured tea beverages 
  • Entered into supply agreement with Shoppers Drug Mart, one of Canada’s most significant retailers 
  • Received approval to cultivate and grow cannabis at its 255,000 square foot facility in Stellarton, Nova Scotia, with the initial licensed area adding design capacity of 800 kilograms of dried cannabis per year 
  • Obtained a license to process and sell cannabis oil products in Canada, enabling Zenabis to sell cannabis oil produced at its Atholville, New Brunswick facility 
  • Achieved cultivation output of 1,472 kg, 11% greater than design capacity of 1,330 kg 
  • Achieved financial performance in line with ramp-up expectations, including: 
    • Total gross revenues of $12.3 million and net revenues of $11.6 million after excise taxes 
    • Gross margin before fair value adjustment of $3.9 million
    • Operating expenses of $18.8 million
    • Adjusted EBITDA1 of ($6.4 million) 
    • Net loss of $4.0 million

Recent Developments

  • Since the creation of Zenabis via the January 2019 RTO, more than doubled licensed production capacity from 6,000 kg to 13,400 kg as at May 30, 2019
  • Delivered 31% outperformance relative to cultivation design capacity in April, with cultivation output of 809 kg, 63% greater than our forecast of 495 kg 
  • Received license approval for Phase 2A at the Atholville facility, adding 3,200 kg, or more than 30% to Zenabis’ total cannabis cultivation capacity 
  • Continued construction and licensing activity at both its Atholville and Langley facilities, with forecast annual production capacity of 131,300 kg by the end of the third quarter of 2019 
  • Expanded recreational cannabis product offerings to include pre-roll products under a new ultra-premium brand, Blazery, as well as pre-roll and oil products under its existing recreational brand, Namaste 
  • Entered into a binding term sheet for a three-year supply arrangement with leading German pharmaceutical research company Farmako GmbH (“Farmako”) for the supply of biosynthetically produced pure CBD isolate oil (99.9%) from Farmako to Zenabis for sale in Canada; and the supply of European Union Good Manufacturing Practices certified cannabis cultivated in Zenabis’ indoor facilities in Canada for sale by Farmako to the German medical market 
  • Graduated to the Toronto Stock Exchange (“TSX”) from the TSXV, effective on May 27, 2019, with the Company’s common shares and common share purchase warrants continuing to trade under the symbols “ZENA” and “ZENA.WT”, respectively

Summary First Quarter 2019 Financial Results

All amounts, unless specified otherwise, are expressed in Canadian dollars and are presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting.

For the quarter ended March 31, 2019, Zenabis recorded net revenues of $11.6 million, which was comprised primarily of $4.1 million and $7.5 million in Cannabis and Propagation segments, respectively, less inter-segment revenue of $0.3 million. Comparatively, in the three months ended December 31, 2018, the Company recorded net Cannabis revenue of $3.4 million, and in the three months ended March 31, 2018, the Company had not yet begun cannabis sales.

Gross margin before fair value adjustment totaled $3.9 million during the three months ended March 31, 2019, and includes $2.1 million and $1.6 million in Cannabis and Propagation gross margin, respectively, before fair value adjustments (51% and 21% as percent of net revenue by segment, respectively). Comparatively, in the three months ended December 31, 2018, Zenabis recorded a Cannabis gross margin before fair value adjustment of $1.7 million (50% of net revenue).

Total operating expenses for the quarter ended March 31, 2019 were $18.8 million, of which $4.9 were acquisition costs, which compares to $12.7 million in the three months ended December 31, 2018. Gain on the revaluation of derivative liability was $7.9 million in the 2019 first quarter compared to a loss of $13.1 million for Q4 2018, which was the result of fluctuations in the Company’s share price. Share-based compensation was $2.1 million in Q1 2019 compared to $4.6 million in Q4 2018, due to various options that were vested on an accelerated basis in the previous quarter, which was not the case in the current quarter. Finance and investment income was $1.1 million in Q1 2019 compared to a loss of $1.9 million in Q4 2018 due to an increase in the market value of investments held by the Company. Offsetting these amounts were $4.9 million in first quarter 2019 acquisition costs related to the RTO and other business acquisition transactions, compared to $74,900 in Q4 2018; Q1 2019 interest expense of $4.6 million compared to $1.2 million in Q4 2018, which was due to the additional debt the Company issued or assumed in late Q4 2018 and in Q1 2019; and depreciation and amortization of $1.5 million in Q1 2019 compared to $0.3 million in Q4 2018, which was primarily the result of the various facilities being ready and available for use.

Adjusted EBITDAhas continued to show a loss due to the operational costs incurred by Zenabis to build-out its operational capacity to achieve the planned production capacity of its various facilities. Adjusted EBITDA has not improved in comparison to the three months ending December 31, 2018 due to the increase in operating costs which are primarily due to the development and implementation of the resources and capacity needed by the Cannabis segment to support the facilities under construction that will be producing in 2019. The additional expenses are partially offset by the increase in sales and margins realized through the Company’s Cannabis and Propagation segments. First quarter 2019 Adjusted EBITDA was ($6.4 million), compared to ($6.0 million) in Q4 2018.

The Company recorded a net loss for the three months ended March 31, 2019 of $4.0 million, or $0.02 loss per common share, compared to a net loss of $24.9 million, or $0.16 loss per common share, for the three months December 31, 2018. 

Cash on hand increased to $25.6 million as at March 31, 2019 from $17.0 million at December 31, 2019. The increase in cash was mainly attributable to cash received from financing of $56.6 million, offset by cash used in operating activities of $17.6 million and investing activities of $30.3 million.

For more information, visit: https://www.zenabis.com.v

This article is written and published by The Cannabis Stock

Disclaimer : The Cannabis Stock wants to promote the cannabis market with the best publication on the market. The Cannabis Stock does not recommend selling or buying any of the company mentioned and is not responsible for any losses that may result.

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