Vancouver, British Columbia – July 22, 2019 – Zenabis Global Inc. (TSX:ZENA) (“Zenabis” or the “Company”) today announced that it has entered into an agreement with Starseed Medicinal Inc. (“Starseed”) (the “Supply Agreement”), pursuant to which Starseed will advance $10 million to Zenabis (the “Prepaid Amount”) in September 2019 in return for Zenabis supplying dried cannabis flower and trim.
Under the terms of the Supply Agreement, Zenabis will deliver a maximum monthly quantity of dried cannabis flower or trim to Starseed, at Starseed’s option, commencing in October 2019. Zenabis expects the Prepaid Amount to be retired within 18 to 24 months. Zenabis does not expect delivery commitments to Starseed, together with the other prepaid supply agreement Zenabis announced on July 2, 2019, to impact its ability to supply existing customers. The pricing under the Supply Agreement will vary depending on the product type and format Starseed elects to order.
Andrew Grieve, Chief Executive Officer of Zenabis, said, “We are excited to supply Starseed and its unique sales channels with our high-quality dried cannabis and trim products. Zenabis has successfully obtained $40 million in non-dilutive financing through pre-paid supply agreements, which we estimate to be sufficient to achieve our planned 131,200 kg of cannabis cultivation capacity expected to occur this quarter and, as a result, we no longer intend to draw on the existing $60 million unsecured convertible debenture facility to fund such expansion or working capital. We look forward to delivering on our commitments to Starseed and to fulfilling the needs of all or counterparties and the communities in which we operate.”
Starseed is a Health Canada licensed producer of cannabis focused on developing unique products, services and distribution models in the Canadian medical and adult-use markets. Starseed is partnered with several large insurance payor groups to deliver an end-to-end service model and full range of reimbursable medical cannabis products on health benefit plans. The Company’s “Saturday” cannabis brand has a strong following for its premium pre-roll and extract products and is available in Ontario, Alberta, British Columbia and Saskatchewan. Starseed’s licensed facility in Bowmanville, Ontario specializes in processing and fulfilling all dry and oil cannabis products, oil extraction and new product development. All Starseed products are laboratory tested to ensure the safest, highest quality cannabis for patients, consumers and customers across the country.
Zenabis is a significant Canadian licensed cannabis 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; Delta, Aldergrove, Pitt Meadows and Langley, British Columbia; and Stellarton, Nova Scotia. In addition to gaining technologically advanced knowledge of plant propagation, the recent addition of state-of-the-art greenhouses in Langley, Pitt Meadows and Aldergrove provides Zenabis with 3.5 million square feet of facility space that can, if fully converted, be dedicated to cannabis production.
If all facility space at Zenabis Atholville, Zenabis Stellarton, Zenabis Delta and Zenabis Langley is fully converted and dedicated to production, Zenabis will own, and have access to 660,000 square feet of high quality indoor cannabis production space, as well as 2.1 million square feet of greenhouse cannabis production space at its Langley facility, with this production strategically positioned on Canada’s coasts. Zenabis expects these facilities to have an annual cultivation capacity of 131,200 kg of dried cannabis by the third quarter of 2019. These facilities, if fully built out and converted for cannabis production, would have an annual design capacity to yield approximately 478,800 kg of dried cannabis annually, for both national and international market distribution. An additional 700,000 square feet of greenhouse space will be used to continue the existing propagation business and produce industrial hemp, and can be converted to cannabis production at such a time that is beneficial to the strategic position of the Company. The Zenabis brand name is used in the cannabis medical market, while the Namaste and Blazery 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 expected prepayment amount payable to Zenabis pursuant to the Supply Agreement and the timing thereof; the expected timing and quantities of deliveries under the Supply Agreement; the intention not draw on the existing $60 million unsecured convertible debenture to fund the expansion to 131,200 kg of cannabis cultivation capacity or working capital; and the expected timing, completion and projected kilogram yields of current and planned conversion, expansion and optimization of our facilities. 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. 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.