Zenabis Global Inc. provided its monthly operational update for July, 2020.
Highlights
- Zenabis Atholville remains in steady state production, with July cultivation output 5% greater than design capacity.
- The Company now expects that August international shipments of GPP cannabis to be greater than 1,000 kg, subject to export permit receipt. September GPP shipments are also expected to be greater than 1,000 kg, subject to export permit receipt. Zenabis anticipates ongoing GPP shipments of greater than 1,000 kg per month on an ongoing basis by the start of the fourth quarter of 2020.
- The Company received two export permits for shipments to Australia in July and expects to complete its first shipment in August.
Kevin Coft, Interim Chief Executive Officer of Zenabis, stated, “Zenabis Atholville continues to perform well with respect to cultivation output, with July harvests exceeding design capacity by 5%. International demand for cannabis is extremely strong, as is demand for price-competitive formats and brands within the Canadian recreational market.”
Facilities Update
Zenabis Atholville
Cultivation
Zenabis Atholville remains in steady-state production from a cultivation standpoint, with July cultivation output 5% greater than 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 is currently expanding 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 the interim, as extraction throughput increases at Zenabis Atholville, the Company has secured incremental supply of distillate from third parties. The Company anticipates no longer requiring third-party supply of distillate by the fourth quarter of 2020 and beyond.
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. The facility is also completing pre-roll production and distribution of Namaste and Re-Up pre-rolls.
Business Development Update
Cannabis 2.0 Update
|
Activity |
Facility |
Applicable Updates |
|
PAX |
Atholville |
The Company is currently working to rapidly increase distillate production in order to meet the current level of consumer demand. |
|
Additional Oil-derivative Concentrates |
Atholville |
No change from the June operational update. |
|
Trichome Concentrate Product Production |
Stellarton |
No change from the June operational update. |
|
HYTN Beverages |
Stellarton |
No change from the June operational update. |
|
Edible Production |
External |
First processing and testing of edible products has taken place. Commercial production is expected to commence this quarter. The Company currently has listings for edible products (in all cases chocolates, gummies, or both) in eight provinces. |
|
510 Vapes |
Atholville |
The first shipments of Re-Up 510 threaded vaporizer cartridges 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, and listings in an additional three provinces anticipated by the end of August. The Company is currently working to rapidly increase distillate production in order to meet the current level of consumer demand. In the interim, the Company has commenced purchases of distillate from third parties for the purpose of Re-Up 510 threaded vaporizer cartridges. |
Recreational Cannabis
Recreational cannabis shipments continued to increase month over month in July as the Company has launched additional recreational cannabis SKUs and previously enacted price changes and format additions reached retail consumers. The Company commenced its first shipments of non-strain specific Re-Up Indica and Re-Up Sativa 28 g formats in July. Olen Vanderleeden, Senior Vice President of Commercial Operations, commented, “July provincial volumes were the highest in the history of Zenabis, indicative of strong consumer demand for competitively priced, high-quality cannabis products.”
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 with counterparties in Israel, with anticipated combined volume of greater than 1,000 kg per month on an ongoing basis, and scheduled shipments ongoing. Achieving volumes of 1,000 kg per month or greater is subject to export permit receipt in any given month. |
|
Packaged – Current Pay – International |
One ongoing arrangement with a counterparty in Australia; Two export licenses for shipments to Australia received in July. First shipments are expected to occur in August subject to coordination of logistics in Australia given the impact of Australian COVID regulations on shipments. |
|
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. The export permit for the first commercial shipment was submitted in July. |
|
Joint Research – International |
One research agreement with a counterparty in the United States. The export permit for the first research shipment was received in July. |
|
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. |
All international shipments and arrangements, with the exception of those noted as being shipped as EU GMP, are shipped under good production practices (“GPP”).
Zenabis is currently in various stages of discussions with potential counterparties for additional agreements for bulk, contract cultivation and other commercial agreements.
ZenPharm
The Company currently expects the audit of ZenPharm to be completed by the Malta Medicines Authority in September.
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.
