Corporate Presentation - August 30, 2020 - Zenabis
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Corporate Presentation
August 30, 2020
TSX: ZENA
Disclaimers
IMPORTANT: YOU MUST READ THE FOLLOWING BEFORE CONTINUING. The information contained in this document has been prepared by Zenabis Global Inc. (“Zenabis” or the “Company”). The information
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1
CORPORATE HIGHLIGHTS
Two Sequential Quarters of Positive Adjusted EBITDA
Low Cash Costs of Cultivation Given Scale ($0.70/g)1
111,200 kg of Licensed Cultivation Capacity
Across Three Facilities
Highly Recognizable Brands
Ongoing Shipments to Nine Provinces,
Three Territories, and Three International Destinations
Propagation Business with ~$34m of Annual Revenue as of Q2 2020
Cannabis Shipments of >4,700 kg Through First Two Months
of Q3 2020, up 20% Over Q2 2020 Total Shipments
2
Note: 1) Page 13 of Zenabis Q2 2020 MD&A dated August 14, 2020.
COMPANY SNAPSHOT
Zenabis Global Inc. is a significant Canadian cultivator
of medical and adult-use recreational cannabis, and a
propagator and cultivator of floral and vegetable
TSX: ZENA products.
▪ Significant Canadian Licensed Producer with a licensed annual ▪ Founded in 1985
production capacity of 111,200 kg ▪ Wholly-owned subsidiary of Zenabis Global Inc.
▪ Operates three state-of-the-art facilities dedicated to cannabis ▪ Successful 30+ year growing history in British Columbia,
cultivation and processing Canada, specialized in the propagation of hundreds of unique
̶ Zenabis Atholville: One of the largest indoor facilities in non-cannabis crops at an industrial scale
Canada with a licensed capacity of 46,300 kg ▪ ~$34m of annual revenue as of Q2 2020
̶ Zenabis Langley: Large scale closed greenhouse facility ▪ Over 2,000,000 sq ft. of operating space at three facilities:
with a licensed capacity of 64,100 kg
̶ Zenabis Pitt Meadows
̶ Zenabis Stellarton: Fulfillment, processing and cannabis
derivative products manufacturing centre ̶ Zenabis Aldergrove
̶ Zenabis Langley
Combined Adjusted EBITDA of ~$5.4m across both segments for the first two quarters of 2020
3
Note: 1) FY means the fiscal year ended June 30 of Bevo Agro Inc.
OUR FACILITIES
Zenabis' unique mix of facilities combines indoor and closed-greenhouse cultivation at scale with dedicated processing,
fulfilment, and value-add manufacturing centres
2. Zenabis Langley1 3. Zenabis Stellarton
Langley, British Columbia Stellarton, Nova Scotia
1. Zenabis Atholville 4. Zenabis Delta
Atholville, New Brunswick Delta, British Columbia
▪ 2,100,000 sq. ft. greenhouse ▪ 255,000 sq. ft. indoor facility
▪ Licensed capacity: 64,100 kg ▪ Licensed capacity: 800 kg
▪ Licensed for cultivation and ▪ Licensed for cultivation and
processing processing.
▪ Also used for propagation and ▪ Received sales license in May
floral business 2020, which allows for the sale
▪ 380,000 sq. ft. indoor facility of dried/fresh cannabis and ▪ 25,000 sq. ft. indoor facility
▪ Licensed capacity: 46,300 kg other 2.0 products to authorized ▪ Licensed for cultivation,
▪ Licensed for cultivation, retailers processing, and sales
processing, and sales ▪ Currently for sale
▪ EU GMP approval as of May 2020
Zenabis Aldergrove Zenabis Pitt Meadows
Aldergrove, British Columbia Pitt Meadows, British Columbia
▪ 453,000 sq. ft. greenhouse ▪ 218,000 sq. ft. greenhouse
▪ Used for non-cannabis ▪ Used for non-cannabis
propagation business propagation business
▪ Licensed for industrial hemp 4 1 3 ▪ Licensed for industrial hemp
cultivation 2 cultivation
4
Notes: 1) The greenhouse to the right of the Zenabis Langley photo is not part of Zenabis Langley.
PRODUCTION FOOTPRINT
Zenabis Zenabis Zenabis Zenabis Zenabis Pitt Zenabis
Atholville Langley Stellarton Delta Meadows Aldergrove
Atholville, NB Langley, BC Stellarton, NS Delta, BC Pitt Meadows, BC Aldergrove, BC
Parcel Size 871,000 sq. ft. 4,279,000 sq. ft. 547,000 sq. ft. 51,000 sq. ft. 871,000 sq. ft. 2,180,000 sq. ft.
Total Facility Space 380,000 sq. ft. 2,100,000 sq. ft.1 255,000 sq. ft. 25,000 sq. ft. 218,000 sq. ft. 453,000 sq. ft.
Current Licensed Capacity 46,300 kg 64,100 kg 800 kg N/A N/A N/A
Expected Capacity under
46,300 kg 64,100 kg 800 kg N/A N/A N/A
Existing Capital Program
Design Capacity
(if facilities fully built out and 46,300 kg 96,100 kg 2 800 kg N/A N/A N/A
converted as planned)
Extraction Design Capacity3
(if facilities fully built out and 15,000 kg N/A N/A N/A N/A N/A
converted as planned)
Cultivation Cost $0.70/gram4 TBD5 Not relevant N/A N/A N/A
EU GMP Cannabis
Cannabis
Cannabis Cultivation7 + Propagation + Propagation +
Utilization Cultivation7 + Listed for Sale
Cultivation7 + Hemp + Floral + Hemp Floral + Hemp
Manufacturing8
Extraction Propagation
Cultivation Format
Indoor G H Indoor Indoor G H Outdoor G H Outdoor
Total Available Land Total Max Development Capacity
8.8m sq. ft. Indoor / GH / Total Current Licensed Capacity:
(2.4m sq. ft. available for hemp 111,200 kg
0.7m / 2.8m / 3.5m sq. ft. Total Potential: 143,200 kg
cultivation)
5
Notes: 1) Includes facility space under glass only; excludes additional warehouse space. 450,000 sq. ft. of Bevo’s existing greenhouses is expected to be initially converted to cannabis production space. The remainder is expected to continu e to be used for Bevo’s
propagation business, and may be converted into cannabis cultivation space on an as needed basis. 2) If all facilities are bu ilt out and converted as planned. Additional details on facility conversion, including additional assumptions are outlined in the Zenabis Global Inc. Final
Base Shelf Prospectus dated April 10, 2019 and filed on SEDAR. 3) Extraction estimates are annual, based on 20 days a month a nd based on kilograms of input material. 4) Year to date average cost per gram as of December 31, 2019. 5) Zenabis Langley is cu rrently in
ramp-up phase of production and further license amendments from Health Canada are pending. 6) Estimated cost per gram. 7) Includ es the packaging of cannabis product. 8) Manufacturing of value-add products.
BRANDS
Existing Brands
Type: Medical brand Type: Core recreational brand
Sales Channels: Online / Pharmacy Sales Channels: Online and retail
Current Products: Dried cannabis, Current Products: Dried cannabis,
gel capsules, and oil sprays pre-rolls, PAX vape cartrdiges, oil
sprays, and soft gels
Near-Term Products: Oils
Near-Term Products: Soft chews and
Future Products: Food products,
chocolates
hemp products
Type: Value recreational brand Type: Premium, craft recreational
Sales Channels: Online and retail brand
Current Products: Pre-rolls, dried Sales Channels: Online and retail
cannabis, and 510 vape cartridges Current Products: N/A
Near-Term Products: Hash Near-Term Products: Dried cannabis
Future Products: TBD
6
CANNABIS 2.0 PORTFOLIO
2.0 Products
Cannabis-infused Beverages1 ▪ Zenabis entered into a definitive agreement with HYTN Beverages Inc. to produce a line of cannabis-infused
beverages
▪ Initial products. 355 ml sparkling water with 10 mg of THC, with flavours to include Blood Orange, Lemongrass
Ginger, Rosewater Lemonade, and Watermelon Mint
▪ Shipments expected to commence in Q4 2020
▪ Currently listed in nine Provinces and one Territory
PAX Vaporizing Cartridges ▪ Zenabis has five types of PAX Era Pods
▪ Zenabis is one of five Licensed Producers to launch PAX Era Pods (vaporizing cartridges) for PAX Labs Inc.’s high-
tech oil vaporizers
̶ PAX Era Pods are dependable, leak-resistant and clog-free, and are designed for use in PAX Era vaporizer
devices
̶ PAX Era Pods are currently listed in eight Provinces
510 Vaporizing Cartridges ▪ In July 2020, Zenabis launched its new line of Re-Up 510-thread vaporizing cartridges
▪ Re-Up 510-thread cartridges are currently listed in five provinces, and listings are anticipated in three additional
provinces in September 2020
Soft Chews and Chocolates
▪ Zenabis is currently preparing to launch two edible product lines: soft chews and chocolates
▪ Initial products will included three types of soft chews and two types of chocolates; these products have been listed in
various provinces
▪ Sale of soft chews and chocolates is expected to commence in early Q4 2020
7
Note: 1) Final products may differ.
PRODUCT PORTFOLIO
Current Products
Dried Flower Pre-Rolls PAX Vaporizing Cartridges 510 Vaporizing Cartridges
Oils Tinctures and Sprays Softgel Capsules
Future Products for Near-Term Launch
Edibles Soft Chews Hash Kombucha Flavoured and Sparkling Water
8
DOMESTIC PARTNERSHIPS AND DISTRIBUTION CHANNELS
Zenabis has developed a diverse set of partnerships and relationships with provinces1, distributors, pharmacies and First Nations.
Supply agreement Supply agreement
primarily for oil for medical cannabis
products
Yukon Liquor
Corporation
(“YLC”) Northwest Nunavut Liquor &
Territories Liquor Cannabis
Supply Arrangement
and Cannabis Commission
Commission (“NULC”)2
(“NTLCC”) Supply
Supply Arrangement Arrangement
Expect first
shipments
Songhees First
Nation
Société Oct 2020
Alberta Gaming, québécoise du
Investor Liquor & cannabis
Cannabis (“SQDC”) PEI Cannabis
BC Liquor (“AGLC”) Management
Supply Arrangement
Distribution Supply Agreement Manitoba Liquor Corporation
Branch and Lotteries Supply Arrangement
(“BCLDB”) Saskatchewan (“MBLL”)
Supply Arrangement Wholesale Supply Ontario Cannabis
Distributor Arrangement Retail Corporation Listuguj Mi’gmaq
Investment Supply (“OCS”) Government
Arrangement Supply Investor
Agreement Nova Scotia Liquor
Corporation
Alcohol New (“NSLC”)
Brunswick Liquor Supply Arrangement
(“ANBL”)
Supply Agreement Millbrook First
Nation
Opportunities NB Investor
Investor
9
Note: 1) Supply arrangements do not contain purchase commitments or otherwise obligate the purchaser to buy a minimum volume of products from Zenabis. 2) Zenabis is an approved wholesaler to Nunavut; however, Nunavut is
currently finalizing its retail licensing process and Zenabis expects to start selling to the province in October.GROWING INTERNATIONAL DISTRIBUTION
Germany Malta Israel Australia
Zenabis, through ZenPharm (see
Zenabis has received conditional Zenabis has two ongoing Zenabis has entered into a binding
Malta) has entered into a binding
approval to develop a production and arrangement with counterparties in three-year supply agreement with an
supply agreement to commence
processing facility in Malta, with Israel, with anticipated combined Australian pharmaceutical company
shipments to Germany through Malta
inspection scheduled for September volume of greater than 1,000kg per to provide medical cannabis for sale
in Q4 2020
2020, through its joint venture month on an ongoing basis, subject in Australia
ZenPharm to export permit receipt in any given
month
10ZENPHARM
Zenabis has obtained EU GMP approval from its Malta-based European partner, ZenPharm Limited. Through this joint venture, Zenabis can
now supply the European medical market. Zenabis anticipates that the ZenPharm facility in Malta will undergo its GMP and security
inspections in September 2020.
Europe
Zenabis receiving its EU GMP approval
is a significant milestone as it will
enable the company to supply bulk
dried medicinal cannabis flower to the
European market through ZenPharm
Atholville, New Brunswick, Canada Birzebbuga, Malta
Indoor Cultivation Facility Manufacturing Facility
11RECENT DEVELOPMENTS
Zenabis has significantly increased shipments domestically and internationally, diversified its product offerings, and delivered positive
Adjusted EBITDA throughout 2020.
Amendments to Senior Secured Debenture EU GMP Approval and Medicinal Cannabis to the Public Offering of Units
• Principal amount increased from $50.0m to Sales License Amendment German Market • Closed public offering of units
$60.75m • Received EU GMP • Assigned a binding term for total gross proceeds of
• Maturity extended from June 30th, 2020 to approval for the Atholville sheet with Farmako GmbH $23.6m at a price of $0.13/unit
March 31st, 2025 facility, with commercial to its subsidiary company, • Proceeds were used for
export to the EU ZenPharm repayment of debt, a senior debt
expected in Q3’20 • Expected to supply a extension fee, and general
minimum of 500 kg of EU working capital
GMP compliant bulk
cannabis per year for a term Q2’20 Financial Results
Corporate Restructuring Initiatives
• Consolidated net revenue of
• Reduction of overall workforce by of three years
• Shipments to Farmako $27.4m (+37.7% q-o-q)
22% and expected quarterly cash
expected to begin in Q3’20 • Second EBITDA positive
cost savings of ~$2.0m
quarter; Adjusted EBITDA of
• Delta facility put up for sale
$3.1m vs. $2.3m in the prev.
quarter
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20
Extension and Partial Conversion of Secured
First Production Run for PAX Labs Inc. Convertible Notes Appointment of Permanent Chief Executive
• One of five exclusive LPs selected to • Maturity extended from June 30th, 2020 to Officer
produce PAX Era pods March 31st, 2021 • Announced appointment of Shai Altman as
• Executed first production run of vape • Immediate conversion of 22.88% of the permanent Chief Executive Officer,
cartridges, with initial provincial outstanding notes at a price of $0.10232 effective September 1, 2020
shipment on Feb 5 • ~$2.6m reduction to the remaining principal • Mr. Altman has over 20 years of CPG
amount of the notes leadership experience and was previously
President of McCain Foods, Canada
Corporate Updates
Q1’20 Financial Results • Shipped more than 4,700kg in the first quarter of Q3 2020, up 20% over the Q2 2020 total
• Net cannabis revenues of $12.6m • Entered a one-year supply agreement with Canveda to provide 300-1,000kg of cannabis flower per quarter
(+18.5% q-o-q) • August and September international shipments of GPP cannabis are expected to be greater than 1,000kg
• First EBITDA positive quarter; subject to export permit receipt
Q1’20 adjusted EBITDA of $2.3m vs. • Completed first shipment of new Re-Up 510-thread vaporizer product line in July 2020
($10.4m) in the prev. quarter
• Commenced first shipments of non-strain specific Re-Up Indica and Re-Up sativa 28g formats in July 2020
• Received sales license amendment receipt for the Stellarton facility, which allows for the sale of dried/fresh
cannabis and other 2.0 products to authorized retailers
12MANAGEMENT
Shai Altman Leo Benne
Chief Executive Officer Chief Growing Officer
▪ Over 20 years of leadership in the consumer ▪ Formerly Vice President and Director of Bevo
packaged goods industry, with 11 years of ▪ Gained advanced knowledge of modern
focused experience in the Canadian market horticultural methods at Rijks Middelbare
▪ Formerly the President of McCain Foods, Tuinbouwschool in Holland
Canada, where he led the business through a ▪ Provided oversight and management at Bevo in
significant turnaround that reversed a decade of the propagation and floral business for nearly
topline sales declines 30 years
▪ Prior to McCain Foods, was the President of ▪ Experience in the application of computer
Wrigley Canada, where he led the business technology to the production of plants
through a growth phase that resulted in market
leadership
Eric Rasmussen Olen Vanderleeden
Chief Financial Officer Senior Vice President, Commercial
▪ Extensive senior management experience in
▪ Leads all commercial activities at Zenabis
publicly-listed companies, both in North
▪ 20 years of experience leading sales,
America and Europe
marketing, and operational functions
▪ Strong corporate and operations finance,
▪ Management, business development, and sales
internal audit, M&A, and strategic investment
background in multiple industries, including
experience over a 20-year leadership career
technology, software and CPG
within Shawcor
▪ Strategic consultant for Canadian large- and
mid-size clients, advising on corporate strategic
and financial planning, post-merger integration
13BOARD OF DIRECTORS
Daniel Burns Monty Sikka Andrew Grieve
Chair Co-Founder and Director Independent Director
▪ A lawyer, accountant and ▪ Co-founder of Zenabis ▪ Departing as of 17 September 2020
entrepreneur ▪ As President of the Monark Group,
▪ Experienced corporate director in the has grown the business into a multi-
financial services, insurance and million-dollar, multi-faceted
mining sectors corporation
▪ Has served as chair of a number of ▪ Has extensive experience in e-
significant organizations in Canada commerce, marketing and finance
and the United States as well as sectors
chaired the audit committees of
significant public and private
institutions
Natascha Kiernan Vincent Quan
Leo Benne Independent Director Independent Director
Chief Growing Officer and Director
▪ Experienced international finance ▪ Currently the Vice President of
▪ Formerly Vice President and Director and M&A attorney who has held Finance for the Richberry Group of
of Bevo senior positions at several prominent Companies, part of the executive
▪ Gained advanced knowledge of international law firms management team that oversees
modern horticultural methods at Rijks ▪ As counsel at Skadden, represented over 1,100 acres of Ocean Spray
Middelbare Tuinbouwschool in Fortune 500 companies, financial cranberry bogs
Holland institutions, and governments in ▪ Previously, he oversaw a team of
▪ Provided oversight and management complex corporate finance and M&A lending professionals in Farm
at Bevo in the propagation and floral transactions totaling >$100bn in Credit Canada and managed a
business for nearly 30 years value portfolio >$1bn
14SELECTED FINANCIAL INFORMATION
Selected Financial Metrics Q2 2020
Cash $6.7m1
Debt $123.8m 1
Market Capitalization $68.1m 2
Enterprise Value $185.2m 2
Financial Results Q2 2020
Gross Revenue3 $30.3m
Net Revenue3 $27.4m
Net Loss3,4 ($15.8m)
Adjusted EBITDA5 $3.1m
Balance Sheet
Total Assets6 $303.8m
Total Non-Current Liabilities $107.2m
Property, Plant and Equipment $194.1m
Shares and Ownership Summary Q2 2020
Common Shares Outstanding 619,511,5167
Fully-Diluted Shares Outstanding 953,582,9337
15
Notes: 1) Debt is based on the amounts listed on slide 28. Cash balance of $6.7m as outlined in the Zenabis Global Inc. Financial Statements as at June 30, 2020. 2) Market capitalization and enterprise value are calculated on a fully-diluted, in-the-money
basis as of June 30, 2020 as calculated on slide 27. 3) For the three months ended June 30, 2020. 4) Includes a $10.7m loss on modification and extinguishment of debt that is non-cash. 5) Calculation of adjusted EBITDA is shown on slide 30. 6) Tangible
assets of $303.8m as of June 30, 2020. 7) As at June 30, 2020.POST-OFFERING CAPITAL STRUCTURE
Zenabis used the proceeds of the equity offering to pay down $16.9m in debt across multiple tranches. Through this
deleveraging, Zenabis reduced its financial risk by decreasing near-term debt repayments and reducing its total interest
expense. Zenabis’ post-offering capital structure is outlined below.
Principal Outstanding at Debt Paid Down Principal Outstanding at June
Debt Interest Rate
June 10, 2020 In Offering 30, 2020
Bevo Term Debt
BMO Financing $44.6m - $43.3m Floating
Long-term Cannabis Debt (>2 years)
Secured Debentures $53.8m ($1.9m) $51.4m1 14.0%
RDC Mortgage $2.0m - $2.0m 6.0%
Near-term Debt (ONGOING CASH INTEREST PAYMENTS
The below table outlines Zenabis’ ongoing cash interest payments following the June 2020 debt prepayments.
Principal Outstanding at June 30,
Debt Interest Rate Quarterly Interest Payment
2020
Bevo Term Debt – Self Sustaining
BMO Financing $43.3m Floating $346k1
Cannabis Debt
Secured Debentures $51.4m 14.0% $1,800k
RDC Mortgage $2.0m 6.0% $30k
New Secured Debentures $7.5m 14.0% $261k
Unsecured Convertible Debentures $7.7m 6.0% $115k
Secured Convertible Note $2.5m 11.0% $68k
Unsecured Convertible Note2 $9.4m 6.0% $137k
Total (Cannabis Only) $27.1m $2.41m
Total $123.8m $2.76m
17
Notes: 1) The debt related to the propagation business is floating at a rate of prime + 0.75%. The calculated quarterly interest payment assumes the prime rate is equal to 2.45% 2) ~$9.1m of cash-pay interest; remainder payment-in-
kind.COMPARABLE PRODUCTION MULTIPLES – CANNABIS AND PROPAGATION1
Current Licensed Annual Production Capacity
Metrics CRON ACB VFF APHA TGOD VIVO OGI FIRE SNDL ZENA AH
Enterprise Value2 ($m) 1,109 1,947 465 1,626 181 80 416 182 185 185 186
Current Capacity (kg) 40,150 150,000 37,500 255,000 32,000 14,500 89,000 50,000 60,000 111,200 128,500
EV/Current Capacity ($m/tonne) 27.6 13.0 12.4 6.4 5.6 5.5 4.7 3.6 3.1 1.7 1.4
40.0
20.0
1.7
-
Last Three Months Production3
Metrics WEED TLRY FLWR EMH OGI ACB APHA SNDL HEXO ZENA
Enterprise Value2 ($m) 7,974 1,628 95 57 416 1,947 1,626 185 419 185
Last Three Months Production (kg)
22,990 6,781 490 422 6,830 36,207 52,243 6,012 19,130 12,640
EV/Last Three Months Production
($m/tonne) 346.8 240.1 193.1 134.4 60.8 53.8 31.1 30.8 21.9 14.7
400.0
300.0
200.0
100.0 14.7
-
Quarter End Net Revenue
Metrics CRON WEED TGOD ACB TLRY OGI HEXO FIRE APHA SNDL ZENA
Enterprise Value2 ($m) 1,109 7,974 181 1,947 1,628 416 419 182 1,626 185 185
Net Revenue ($m) 13.5 110.4 4.422 75.5 63.1 18.0 22.1 9.7 152.2 20.2 27.4
EV/Net Revenue ($m/$m) 82.3 72.2 40.9 25.8 25.8 23.1 19.0 18.7 10.7 9.2 6.8
100.0
50.0
6.8
-
18
Source: Capital IQ, press releases. Notes: 1) All financial metrics obtained as of August 14, 2020. Zenabis’ enterprise value is per the calculation on slide 27. 2) Enterprise value as of August 14, 2020. 3) Amount of cannabis produ ced on a dried flower equivalent basis as
disclosed in the most recent financial reports.COMPARABLE PRODUCTION MULTIPLES – CANNABIS ONLY1
Current Licensed Annual Production Capacity
Metrics CRON ACB VFF APHA TGOD VIVO OGI FIRE SNDL AH ZENA
Enterprise Value2 ($m) 1,109 1,947 465 1,626 181 80 416 182 185 186 110
Current Capacity (kg) 40,150 150,000 37,500 255,000 32,000 14,500 89,000 50,000 60,000 128,500 111,200
EV/Current Capacity ($m/tonne) 27.6 13.0 12.4 6.4 5.6 5.5 4.7 3.6 3.1 1.4 1.0
40.0
20.0
1.0
-
Last Three Months Production3
Metrics WEED TLRY FLWR EMH OGI ACB APHA SNDL HEXO ZENA
Enterprise Value2 ($m) 7,974 1,628 95 57 416 1,947 1,626 185 419 110
Last Three Months Production (kg)
22,990 6,781 490 422 6,830 36,207 52,243 6,012 19,130 12,640
EV/Last Three Months Production
($m/tonne) 346.8 240.1 193.1 134.4 60.8 53.8 31.1 30.8 21.9 8.7
400.0
300.0
200.0
100.0 8.7
-
Quarter End Net Revenue
Metrics CRON WEED TGOD ACB TLRY OGI HEXO FIRE APHA ZENA SNDL
Enterprise Value2 ($m) 1,109 7,974 181 1,947 1,628 416 419 182 1,626 110 185
Net Revenue ($m) 13.5 110.4 4.422 75.5 63.1 18.021 22.1 9.7 152.2 11.8 20.2
EV/Net Revenue ($m/$m) 82.3 72.2 40.9 25.8 25.8 23.1 19.0 18.7 10.7 9.3 9.2
100.0
50.0
9.3
-
19
Source: Capital IQ, press releases. Notes: 1) All financial metrics obtained as of August 14, 2020. Zenabis’ enterprise value is per the calculation on slide 27 and excludes the enterprise value of the propagation segment, which man agement assumes to be $75m. 2)
Enterprise value as of August 14, 2020. 3) Amount of cannabis produced on a dried flower equivalent basis as disclosed in the most recent financial reports.4) For Zenabis, this is the net revenue of solely the cannabis segment.TSX: ZENA Contact Us invest@zenabis.com www.zenabis.com
Appendix A – Facilities
ZENABIS ATHOLVILLE
Zenabis Atholville is Zenabis’ largest indoor facility. This facility is expected to produce 46,300kg of dried cannabis equivalent per year
operating at a steady state.
Facility Details Description
Location Atholville, New Brunswick
Type and Size 380k sq. ft. indoor cannabis
Status Fully operational
Remaining Conversion Cost Nil1
Design Capacity 46,300kg2
Extraction Design Capacity 15,000kg3
Cultivation, processing, medical sales,
Current Licenses recreational sales, oil sales, domestic
and international bulk sales
Pending Licenses N/A
Capacity Milestones1 ▪ Current (full buildout) – 46,300kg
Summary
▪ One of the largest indoor growing facilities in Canada, Zenabis Atholville is
Zenabis’ flagship indoor facility
▪ Zenabis Atholville is currently operating at design capacity (46,300kg
capacity)
▪ Zenabis has worked closely with the Government of New Brunswick, which
invested $4.0m in Zenabis, to construct Zenabis Atholville
▪ Zenabis Atholville is a major employer in New Brunswick
‒ It currently employs approximately 362 workers
▪ In May 2020, Zenabis Atholville received its EU GMP approval
▪ Atholville’s current extraction machine has now reached steady-state
production and is processing approximately 1,000 kg of biomass per month.
Two additional extraction machines have been added to the facility
22
Notes: 1) Estimated expenditures as of December 31, 2019. 2) Subsequent to the upward revision by 35% from the 34,300kg design capacity originally disclosed as outlined in the Zenabis press release dated August 14, 2019. 3) Extraction estimates
are annual, based on 20 days a month and based on kilograms of input material.ZENABIS LANGLEY
Zenabis Langley is one of the largest greenhouses in Canada with advanced propagation technology. The facility is expected to produce
96,100kg1 of dried cannabis equivalent per year upon full buildout and operates at a steady state.
Facility Details Description
Location Langley, British Columbia
Type and Size 2.1m sq. ft.2 greenhouse cannabis
Partially operational/conversion ongoing
Status
(for the first 10 acres)
Remaining Conversion Cost $Nil (for current market demand)3
Design Capacity 96,100kg1
Extraction Design Capacity N/A
Cultivation, processing, domestic bulk
Current Licenses
sales
Pending Licenses N/A
▪ Currently Licensed – 64,100kg4
Capacity Milestones
▪ Full buildout – 96,100kg1
Summary
▪ Initial cannabis conversion activities have commenced for the first 10 acres
of greenhouse and is expected to be complete in 2020
‒ Construction and licensing of Part 1 and Part 2A and the first portion of
2B have been completed (64,100kg capacity), and construction of
rooms in Part 2B is substantially complete
▪ Zenabis Langley’s cannabis conversion is based on a closed greenhouse
design, where standard greenhouse venting does not occur
‒ Zenabis believes this will produce a higher quality, more consistent
crop; mitigate the impact on the surrounding community; and better
control pests and contaminants from entering the greenhouse
▪ The remaining 38 acres at Zenabis Langley may be converted to cannabis
cultivation on an as needed basis
‒ This portion of greenhouse will continue to be used for Zenabis’
propagation business until conversion commences
23
Notes: 1) The design capacity of the 450,000 sq. ft. to be initially converted is 96,100kg per annum. Additional details on facility conversion, including additional assumptions are outlined in the Zenabis Global Inc. Final Base Shelf Prospectus dated April
10, 2019 and filed on SEDAR. 2) 450,000 sq. ft. of Bevo’s existing greenhouses is expected to be initially converted to cannabis production space. The remainder is expected to continue to be used for Bevo’s propagation business, and may be converted
into cannabis cultivation space on an as needed basis. 3) Estimated expenditures as of September 30, 2019. 4) Actual Capacity versus design capacity or licensed capacity will be assessed following upcoming harvests. Due to seasonality, actual capacity
versus design capacity may differ. November harvest indicated significantly lower actual capacity.ZENABIS STELLARTON
Zenabis Stellarton is a licensed indoor facility located in Stellarton, Nova Scotia. The facility is intended to be utilized primarily as a
processing, packaging and fulfillment centre as well as a manufacturing facility for value-add products.
Facility Details Description
Location Stellarton, Nova Scotia
Type and Size 255k sq. ft. indoor cannabis
Status Partially operational
Remaining Conversion Cost N/A
Design Capacity 800kg1
Extraction Design Capacity N/A
Cultivation, processing, medical sales,
Current Licenses recreational sales, oil sales, domestic
bulk sales
Pending Licenses N/A
Capacity Milestones1 ▪ Current – 800kg
Summary
▪ Zenabis Stellarton is Zenabis’ second largest indoor facility situated on a
547,000 sq. ft. parcel of land
▪ The first phase of construction at Zenabis Stellarton is complete and the
initial operational area was licensed in early March 2019
▪ The addition of sales activities to Stellarton’s license, which already
included cultivation and processing activities, will enable the Company to
now execute its strategy to optimize operations and improve service to our
provincial and territorial retail customers by making Zenabis Stellarton our
center of excellence for 2.0 products, Namaste and Re-Up pre-rolls and
retail and medical order fulfilment.
24
Note: 1) If all facilities are fully built out and converted as planned as outlined in the Zenabis MD&A for the three months ended September 30, 2019. Additional details on facility conversion, including additional assumptions are outlined in the Zenabis
Global Inc. Final Base Shelf Prospectus dated April 10, 2019 and filed on SEDAR.ZENABIS DELTA
Zenabis Delta is an indoor facility located in the Greater Vancouver Area. This facility is currently in the process of being sold.
Facility Details Description
Location Delta, British Columbia
Type and Size 25k sq. ft. Indoor cannabis
Status Listed for sale
Remaining Conversion Cost N/A
Design Capacity N/A
Extraction Design Capacity N/A
Cultivation, processing, medical sales,
Current Licenses
recreational sales
Pending Licenses Analytical testing
Summary
▪ Zenabis is currently in the process of selling its Delta facility
▪ The facility has a limited licensed capacity of 100 kilograms that was
deemed non-core
▪ Zenabis recently relocated two additional extraction machines from Zenabis
Delta to Zenabis Atholville
25Appendix B – Financial Information
CAPITALIZATION
The following outlines the capitalization of Zenabis.
Capitalization Enterprise Value
Fully Diluted Shares Outstanding1 Value Enterprise Value Calculation Value
Basic Shares Outstanding 619,511,526 Basic Shares Outstanding 619,511,526
Plus: Deferred Stock Units 2,725,000 Plus: ITM Options1 Nil
Plus: Restricted Stock Units 750,000 Plus: ITM Conversion Shares1 Nil
Plus: Options 11,637,,450 Equals: Fully-Diluted, ITM Shares Outstanding 619,511,526
Plus: Warrants 305,441,360 Times: Zenabis Share Price2 $0.11
Plus: Conversion Options at $1.17 2,104,966 Equals: Fully-Diluted Market Capitalization $68.1m
Plus: Conversion Options at $1.91 4,783,823 Add: Debt3 $123.8m
Plus: Conversion Options at $2.68 2,872,928 Less: Cash4 ($6.7m)
Plus: Conversion Options at 5-day volume weighted Equals: Enterprise Value $185.2m
3,755,880
trading price
Equals: Fully-Diluted Shares Outstanding 953,582,933
27
Notes: 1) As of June 30, 2020. 2) As of market close August 14, 2020. 3) Debt includes all non-convertible financing and out-of-the-money convertible financing based on the amounts listed on slide 28. 4) Cash balance of $6.7m as outlined in the Zenabis
Global Inc. Financial Statements as at June 30, 2020. The negative value indicates a subtracted value, rather than a negative cash balance.DEBT OUTSTANDING
Debt Summary
Principal Amount
Facility Description
June 30, 2020
▪ Unsecured convertible debentures with interest rate of 6.0%
Unsecured Convertible ▪ Convertible into Zenabis shares at $2.6087 per share
$7.7m
Debentures ▪ 825,000 warrants with exercise price of $2.68
▪ Matures on September 27, 2021
▪ $46.7m term credit facility, with interest payable quarterly at a rate of prime + applicable margin
BMO Financing $43.3m based on grid pricing;
▪ Matures on January 21, 2022
▪ $2.0m mortgage on Zenabis Atholville with interest rate of 6.0%
RDC Mortgage $2.0m
▪ Matures on August 31, 2027
▪ Senior secured financing with interest at a rate 14.0%
▪ 2,593,283 warrants have been issued at an exercise price of $4.02 upon $20.8m being drawn
(50% warrant coverage)
▪ 6,009,615 warrants have been issued at an exercise price of $2.08 upon the amendment and
extension of the facility (50% warrant coverage)
Secured Debentures $51.4m
▪ 902,514 warrants were issued at an exercise price of $1.39 upon the amendment and advance of
the second $25.0m tranche (5% warrant coverage)
▪ 71,255,522 warrants were issued at an exercise price of $0.07017 upon the extension (10%
warrant coverage)
▪ Matures on March 31, 2025
▪ Senior secured financing with interest at a rate 14.0%
New Secured Debentures $7.5m
▪ Matures on December 31, 2020
▪ Subordinated financing with interest rate of 11.0%
▪ The remaining outstanding principal amount may be converted into Zenabis common shares at
$1.17 per share (7,490,798 additional Zenabis shares)
Secured Convertible Note $2.5m ▪ 20,129,338 warrants were issued at an exercise price of $0.20 upon the conversion on January 16
▪ 1,373,712 warrants have been issued at an exercise price of $1.82 upon the extension and
subordination of the notes
▪ Matures on March 31, 2021
▪ Subordinated financing with interest rate of 6.0%
Unsecured Convertible ▪ May be converted into Zenabis common shares at ~$1.9067 per share (6,248,203 additional
$9.4m
Note Zenabis shares)
▪ $9.1m matures on October 17, 2020, with the remainder maturing in June 2022
Total $123.8m
28Appendix C – Other Information
ADJUSTED EBITDA CALCULATION
The following outlines the calculation to arrive at adjusted EBITDA.
Adjusted EBITDA Calculation Q2 20201 Q1 20202 Q4 20193 Q3 20194
Net Loss (15,781,932) (7,702,835) (98,714,311) (5,831,279)
Plus: Realized Fair Value Amounts Included in Inventory Sold 19,252,057 12,923,860 18,014,038 6,760,956
Less: Unrealized Gain on Changes in Fair Value of Biological Assets (24,222,690) (19,219,636) (21,432,091) (19,712,364)
Plus: Depreciation and Amortization 1,490,680 2,050,093 2,090,304 2,726,639
Plus: Restructuring Cost 483,890 1,058,452 Nil Nil
Plus: Impairment of Inventory 508,759 Nil 874,734 Nil
Plus: Impairment of Property, Plant and Equipment Nil Nil 27,841,265 Nil
Plus: Impairment of Intangible Assets and Goodwill Nil Nil 61,480,249 Nil
Plus: Share-Based Compensation 1,012,898 341,858 5,995,345 2,004,544
Plus: Loss on Revaluation of Embedded Derivative Asset 94,256 Nil Nil Nil
Plus (Less): Loss (Gain) on Revaluation of Embedded Derivative Liability Nil Nil (22,993) (497,789)
Plus: Interest Expense 8,009,676 6,306,284 (335,248) 4,689,124
Plus: Other Expense 167,745 298,907 122,880 (61,994)
Plus (Less): Loss (Gain) on Sale of Assets (482,067) (9,185) (55,417) 21,675
Plus (Less): Finance and Investment Expense (Income) (7,095) (6,544) 316,621 173,986
Plus : Loss due to Event 20,167 25,567 982,560 1,186,692
Less: Insurance Proceeds (25,000) Nil (520,526) (492,995)
Plus: Loss on Deconsolidation of Subsidiary Nil 668,562 Nil Nil
Less: Government Subsidies (3,319,621) (713,373) Nil Nil
Plus: Loss on Early Conversion of Debt 4,331,680 5,624,803 Nil Nil
Plus (Less): Income Tax Expense (Recovery) 1,102,590 654,987 (126,856) 342,758
Plus: Loss on Modification and Extinguishment of Debt 10,653,156 Nil Nil Nil
Plus (Less): Deferred Income Tax Expense (Recovery) (214,083) 42,155 (6,944,120) (511,145)
Equals: Adjusted EBITDA 3,075,066 2,343,955 (10,433,566) (9,201,192)
▪ Management believes adjusted EBITDA is a useful metric to assess the company’s operating performance before the impact of non-cash items and acquisition related activities.
30
Notes: 1) For the three months ended June 30, 2020 2) For the three months ended March 31, 2020 3) For the three months ended December 31, 2019 2) For the three months ended September 30, 2019. 4) For the three months ended June 30, 2019.You can also read
