Zenabis Provides Corporate Update

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VANCOUVER, BC, Sept. 15, 2020 /CNW/ – Zenabis Global Inc. (TSX: ZENA) (“ Zenabis” or the “Company“) today provided its monthly operational update for August, 2020.  

Highlights

  • Shai Altman assumed the role of Zenabis’ Chief Executive Officer on September 1, 2020. 
  • The Company shipped approximately 4,700 kg of cannabis in the first two months of the third quarter of 2020, an increase of approximately 20% over the entire second quarter of the year. 
  • Zenabis continues to expect that September international shipments of non-GMP cannabis to be 600 kg, subject to export permit receipt. Zenabis anticipates ongoing non-GMP shipments of 1,000 kg per month for October and remaining at this level for at least the remainder of the year. 
  • Zenabis Atholville remains in steady state production, with August harvest volumes 2.7% above 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. 
  • The Company completed its first export shipment to Australia in August. 
  • ZenPharm, the Company’s European Union-based joint venture in Malta, converted its binding term sheet with Farmako GmbH for the supply of dried flower into the European Union (“EU”) medical cannabis market into a definitive supply agreement.

Shai Altman, Chief Executive Officer of Zenabis, stated, “I am excited to have joined Zenabis in September and am very pleased with the Company’s performance for the month of August.  Zenabis’ performance continues to show positive progress including our first shipment to Australia which completed in August and our Malta joint venture, ZenPharm, signing an important supply agreement for the EU medical cannabis market this week.  The Company continues to be on track to meet or exceed its guidance for the third quarter of the year with revenue in the cannabis segment expected to exceed the second quarter by more than 50%.”

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Facilities Update

Zenabis Atholville

Cultivation

Zenabis Atholville remains in steady-state production from a cultivation standpoint, with August harvest volumes 2.7% above design capacity. There are no changes to Zenabis’ expectations with regards to the launch of additional cultivars from the Zenabis Atholville facility.

Extraction

The Company has expanded the hours of operation for extraction activities at Zenabis Atholville as a result of demand for the Company’s Cannabis 2.0 products, including its Namaste PAX Era and Re-Up 510 threaded vaporizer cartridges. In addition, the company has sourced distillate from third parties in order to meet this demand, as it continues to ramp up its internal capability. 

Zenabis Langley

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

Zenabis Stellarton is currently operating as the Company’s centre of excellence for Cannabis 2.0 products, including beverages, products derived from trichome extraction, edibles, and hashish products, which are expected to be commercialized in mid-Q4. The facility is also completing pre-roll production and distribution of Namaste and Re-Up pre-rolls.

Business Development Update

Cannabis 2.0 Update

ActivityFacilityApplicable Updates
PAXAtholvilleThe Company is working to rapidly increase distillate production in order to meet the current level of consumer demand. 
Additional Oil-derivative 
Concentrates
AtholvilleNo change from the July operational update. 
Trichome Concentrate 
Product Production
StellartonCommercial production of trichrome concentrate products (such as hash) has been delayed until mid-fourth quarter due to COVID-19 related travel restrictions into Nova Scotia.
HYTN BeveragesStellartonCommercial production has been delayed by the joint venture until mid-fourth quarter due to COVID-19-related issues.
Edible ProductionExternalFirst processing and testing of edible products has taken place. Commercial production of edibles is expected to commence this quarter with delays in production due to COVID-19 related manpower shortages at Zenabis’ manufacturing partner’s facility. The Company currently has listings for edible products (in all cases chocolates, gummies, or both) in eight provinces. 
510 VapesAtholvilleThe Company is working to rapidly increase distillate production in order to meet the current level of consumer demand. 

Recreational Cannabis 

Recreational cannabis shipments continued to increase month over month in August versus July as the Company realized the results of previously enacted price changes from Q2 and the positive response to new formats by retail consumers. The Company commenced its first shipments of Re-up 510 threaded vaporizer cartridges during Q2, which reached retail consumers in late July and early August. 

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 TypeNumber of contracts or counterparties, status and current 
or expected volume
Bulk – CanadaThree ongoing arrangements, are currently shipping; with aggregate volume of up to 250 kg per month.
Bulk – InternationalTwo ongoing arrangements with counterparties in Israel, with anticipated combined volume of greater than 1,000 kg per month, scheduled shipments are ongoing. Volumes achieving the level of 1,000 kg per month or greater are subject to export permit receipt.  
Packaged – InternationalThe Company’s first export license for shipments to Australia was received in July with the first shipment delivered in August. Volumes achieving the level of 90 kg per month or greater are subject to export permit receipt.  
Bulk – EU GMPOne executed contract for a minimum volume of 500 kg per year with shipments awaiting EU GMP certification of ZenPharm facility in Malta. The export permit for the first commercial shipment was submitted in July. 
Contract Cultivation – CanadaTwo executed contracts for a potential volume of 200 kg per month, with one scheduled harvest in December and one on hold. 
Prepaid Supply – CanadaTwo 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. 

Zenabis is currently in various stages of discussions with potential counterparties for additional agreements for bulk, contract cultivation and other commercial agreements.

ZenPharm

On September 14, 2020, ZenPharm converted its previously announced binding term sheet with Farmako GmbH into a definitive supply agreement for the supply of EU GMP-certified dried flower to the EU medical cannabis market. The supply agreement has a term of 36 months, with two automatic renewals, for 24 additional months in total.  As noted above, the agreement also contains a minimum purchase commitment of 500 kg of dried flower per year.

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.

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