corporate presentation - zenabis...2021/01/04 · corporate presentation january 4, 2021 tsx: zena...
TRANSCRIPT
Corporate PresentationJanuary 4, 2021
TSX: ZENA
1
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
contained in this document (a) is provided as at the date hereof and is accurate only as of the date of this presentation or the date indicated and is subject to change without notice, (b) does not purport to contain all the
information that may be necessary or desirable to fully and accurately evaluate an investment in the Company, including important disclosures relating to the terms of an investment and risk factors associated with an
investment in the Company and (c) is not to be considered as a recommendation by the Company that any person make an investment in the Company.
This presentation, and the information contained herein, is not for release, distribution or publication into or in the United States or any other jurisdiction where applicable laws prohibit its release, distribution or publication.
This presentation (“Presentation”) is being issued by the Company for information purposes only. It is information in a summary form and does not purport to be complete. It is not intended to be relied upon as advice to
investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. Reliance on this Presentation for the purpose of engaging in any investment
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and must be read in conjunction with, the preliminary prospectus supplement dated September 18, 2020 (the “Prospectus Supplement”) to the Company’s final short form base shelf prospectus dated April 9, 2019 (the
“Shelf Prospectus”) and the Company’s annual information form dated March 30, 2020.
Certain information contained herein includes market and industry data that has been obtained from or is based upon estimates derived from third party sources, including industry publications, reports and websites. Third
party sources generally state that the information contained therein has been obtained from sources believed to be reliable, but there is no assurance or guarantee as to the accuracy or completeness of included data.
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the information contained herein has been prepared in good faith, except as otherwise provided for herein, neither the Company, its directors, officers, shareholders, agents, employees or advisors give, has given or has
authority to give, any representations or warranties (express or implied) as to, or in relation to, the accuracy, reliability or completeness of the information in this Presentation, or any revision thereof, or of any other written or
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access to any additional information or to update this Presentation or to correct any inaccuracies or omissions. Information contained in this Presentation is the property of the Company and it is made available strictly for the
purposes referred to above.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION: This document includes information, statements, beliefs and opinions which are forward-looking, and which reflect current estimates,
expectations and projections about future events, including, but not limited to the intended conversion, expansion and optimization of the Company’s facilities, the anticipated production capacity of the Company, the receipt
of required licenses to operate, our harvest forecast, and other statements that contain words such as "believe," "expect," "project," "should," "seek," "anticipate," "will," "intend," "positioned," "risk," "plan," "may," "estimate"
or, in each case, their negative and words of similar meaning. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially
from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. These
factors and risks include, but are not limited to, those described in the Shelf Prospectus and the Prospectus Supplement, copies of which are 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. Forward-looking information contained in this Presentation is based on our current estimates, expectations and projections, which we
believe are reasonable as of the current date. Such forward-looking information is provided for the purpose of providing information about management's current expectations and plans relating to the future. Investors are
cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions 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 the Company’s control. You should not place undue reliance on forward-looking statements, which are based on the
information available as of the date of this document and the Company disclaims any intention or obligation to update or revise any forward-looking information contained in this document, whether as a result of new
information, future events or otherwise, unless required by applicable law. The forward-looking information included in this Presentation is expressly qualified in its entirety by this cautionary statement.
Historical statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. In this regard, certain financial information
contained herein has been extracted from, or based upon, information available in the public domain and/or provided by the Company. In particular historical results of the Company should not be taken as a representation
that such trends will be replicated in the future. No statement in this document is intended to be nor may be construed as a profit forecast.
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accepts any liability or responsibility whatsoever in respect of any difference between the document distributed to you in electronic format and the hard copy version that is available to you.
2
CORPORATE HIGHLIGHTS
Three Sequential Quarters of Positive Adjusted EBITDA
Low Cash Costs of Cultivation Given Scale ($0.76/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
61% Quarter-over-Quarter Cannabis Net Revenue Growth in Q3 2020
Note: 1) Page 13 of Zenabis Q3 2020 MD&A dated November 13, 2020.
Total Debt Reduced by ~$76m (54%) in 2020
3
COMPANY SNAPSHOT
Zenabis Global Inc. is a significant Canadian cultivator
of medical and adult-use recreational cannabis. As of
December 2020, Zenabis divested its propagation
business to become a pure-play cannabis cultivator.
▪ Significant Canadian Licensed Producer with a licensed annual
production capacity of 111,200 kg
▪ Operates three state-of-the-art facilities dedicated to cannabis
cultivation and processing
Zenabis Atholville: One of the largest indoor facilities in
Canada with a licensed capacity of 46,300 kg
Zenabis Langley: Large scale closed greenhouse facility
with a licensed capacity of 64,100 kg
Zenabis Stellarton: Fulfillment, processing and cannabis
derivative products manufacturing centre
▪ European commercial processing and import/export joint
venture, ZenPharm, received its first commercial shipment
from Atholville in December of 2020, Zenabis’ first commercial
European Union export
TSX: ZENA
Cannabis Operations
2019-2020 2021+
Divested December 2020
In December 2020,
Zenabis divested its
wholly-owned
propagation subsidiary in
order to focus on the
core cannabis business,
reduce debt, and
increase available
liquidity.
4
2020 PROGRESS
▪ 2020 Actions: Zenabis reduced total debt by approximately $76m, or 54% (see slide 19)
▪ 2021 Impact: Zenabis’ cash interest payments have decreased significantly, improving financial
flexibility for 2021 and beyond
Debt Reduction
Cost Cutting
Operational
Achievements
Debt Extension
Product Launches
▪ 2020 Actions: Zenabis deferred principal payments for all remaining obligations until 2022 or later,
except for $11.7m of debt maturing in 2021 (see slide 19)
▪ 2021 Impact: Extensions will enable Zenabis to improve its cash position in the short-term and re-
invest cash flows into operating activities
▪ 2020 Actions: Zenabis underwent a significant operational rationalization in the first half of 2020,
resulting in positive Adjusted EBITDA for three consecutive quarters (see slide 17)
▪ 2021 Impact: Zenabis’ lowered cost base places it in a good position to continue to improve
profitability throughout 2021
▪ 2020 Actions: Zenabis substantially increased the volume of cannabis products shipped to customers
and diversified its revenue channels, resulting in large increases in cannabis revenue (see slide 17)
▪ 2021 Impact: Zenabis is well-positioned continue revenue growth in 2021 through existing and new
revenue channels
▪ 2020 Actions: Zenabis successfully launched its 510-thread vaporizer line and large-format flower
products; Zenabis also made progress in research and development processes for new products (see
slides 9 and 10)
▪ 2021 Impact: Zenabis will continue to optimize its product portfolio through new formats and product
lines
Zenabis made substantial operational and financial progress in 2020, positioning the company well for 2021
5
BEVO DIVESTITURE OVERVIEW
Rationale
▪ Commitment to Core Business. The disposition of the propagation business will enable Zenabis to focus on its core
business of producing and selling cannabis and value-add cannabis products
▪ Continuity of Zenabis Langley. Zenabis can continue to operate its cannabis facility in Langley, British Columbia; the
facility will continue to be owned by Bevo and leased to Zenabis
▪ Improved Financial Position. Zenabis will receive cash proceeds, rent concessions, and rebates, which will improve the
company’s liquidity position and overall financial capacity by $24.7m
▪ Significant Reduction in Debt Obligations. Zenabis reduced its total debt obligations by approximately $42.5m.
Combined with the partial repayment of the secured debentures (in connection with the sale of Zenabis Delta), total debt
outstanding has been reduced to approximately $65.1m (see slide 19), with an additional $10.0m made available to
repay other existing obligations
Consideration
▪ Total enterprise value of approximately $67.2m, consisting of:
$24.7m in cash and rental rebates; and
$42.5m in assumed debt
▪ This enterprise value implies an EV/EBITDA ratio of 9.5x
Transaction Overview
The divestiture of Bevo allows Zenabis to focus on its core
Cannabis business while significantly strengthening its balance sheet
12
3
6
OUR FACILITIES
Notes: 1) The greenhouse to the right of the Zenabis Langley photo is not part of Zenabis Langley. Only the greenhouse at the forefront of the image is the leased Zenabis Langley facility.
2. Zenabis Langley1
Langley, British Columbia
▪ 435,600 sq. ft. greenhouse
▪ Licensed capacity: 64,100 kg
▪ Licensed for cultivation and
processing
▪ Zenabis Langley is leased from
Bevo (see slide 5)
3. Zenabis StellartonStellarton, Nova Scotia
▪ 255,000 sq. ft. indoor facility
▪ Licensed capacity: 800 kg
▪ Licensed for cultivation and
processing.
▪ Received sales license in May
2020, which allows for the sale
of dried/fresh cannabis and
other 2.0 products to authorized
retailers
▪ 380,000 sq. ft. indoor facility
▪ Licensed capacity: 46,300 kg
▪ Licensed for cultivation,
processing, and sales
▪ EU GMP approval received May
2020
1. Zenabis AtholvilleAtholville, New Brunswick
Zenabis' unique mix of facilities combines indoor and closed-greenhouse cultivation at scale with dedicated processing,
fulfilment, and value-add manufacturing centres
Zenabis AtholvilleAtholville, NB
Zenabis LangleyLangley, BC
Zenabis StellartonStellarton, NS
Parcel Size 871,000 sq. ft. N/A 547,000 sq. ft.
Total Facility Space 380,000 sq. ft. 435,600 sq. ft. (leased) 255,000 sq. ft.
Current Licensed Capacity 46,300 kg 64,100 kg 800 kg
Expected Capacity under
Existing Capital Program46,300 kg 64,100 kg 800 kg
Design Capacity(if facilities fully built out and converted)
46,300 kg 96,100 kg1 800 kg
Extraction Design Capacity2
(if facilities fully built out and converted
as planned)
45,000 kg N/A N/A
Cultivation Cost $0.76/gram3 TBD4 Not relevant
UtilizationEU GMP Cannabis Cultivation5 +
ExtractionCannabis Cultivation6 Cannabis Cultivation5 +
Manufacturing6
Cultivation Format
7
PRODUCTION FOOTPRINT
G HIndoor Indoor
Notes: 1) If all facilities are built out and converted. 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) Extraction estimates are annual,
based on 20 days a month, based on kilograms of input material, and include two additional extractors located in Atholville that have not yet commenced operations. 3) Average cost per gram as of Q3 2020. 4) Zenabis Langley production cost estimates subject to calculation
following full-year of operations given impact of seasonality. 5) Includes the packaging of cannabis product. 6) Manufacturing of value-add products.
8
RECREATIONAL BRANDS
Remember to Re-Üp
Re-up exists to democratize laughter. A brand that doesn’t
take itself too seriously and embraces the fun, lighthearted
side of cannabis. The perfect balance of price and quality that
puts a smile on the experienced cannabis user’s face.
Pricing Segment: Value
Available Formats: Flower, Pre-rolls, Vapes.
Nature’s Inspiration
Namaste exists to make it easy for people to return to their
true nature. Natural, approachable, simple and intelligently
designed cannabis products for the contemporary cannabis
user looking for life balance and well being
Pricing Segment: Core
Available/Planned Formats: Flower, Pre-rolls, Edibles,
Vapes, Oral Sprays.
9
CANNABIS 2.0 PORTFOLIO
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
2.0 Products
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 seven provinces
Gummies ▪ Commercial roll-out of edibles will commence with gummies
▪ The initial product line will include three types of gummies; these products have been listed in various provinces
▪ Sale of gummies is expected to commence in Q2 2021
10
PRODUCT PORTFOLIO
Current Products
Softgel CapsulesOils
Future Products Under Consideration for Near-Term Launch
Dried Flower
Tinctures and Sprays
Pre-Rolls
Edibles
PAX Vaporizing Cartridges
Gummies
510 Vaporizing Cartridges
Hash
11
DOMESTIC PARTNERSHIPS AND DISTRIBUTION CHANNELS
Zenabis has developed a diverse set of partnerships and relationships with provinces1, distributors, pharmacies and First Nations.
Supply Arrangement
BC Liquor
Distribution
Branch
(“BCLDB”)
Supply Agreement
Alberta Gaming,
Liquor &
Cannabis
(“AGLC”)
Supply
Arrangement
Saskatchewan
Wholesale
Distributor
Supply
Arrangement
Manitoba Liquor
and Lotteries
(“MBLL”)
Supply agreement
primarily for oil
Supply agreement
for medical cannabis
products
Supply Arrangement
Yukon Liquor
Corporation
(“YLC”)
Supply Arrangement
Société
québécoise du
cannabis
(“SQDC”)
Supply Agreement
Alcohol New
Brunswick Liquor
(“ANBL”)Supply Arrangement
Nova Scotia Liquor
Corporation
(“NSLC”)
Supply Arrangement
PEI Cannabis
Management
Corporation
Investment
Investor
InvestorOpportunities NB Investor
Investor
Songhees First
Nation
Listuguj Mi’gmaq
Government
Millbrook First
Nation
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 Q1 2021.
Ontario Cannabis
Retail Corporation
(“OCS”)
Supply
Agreement
Northwest
Territories Liquor
and Cannabis
Commission
(“NTLCC”)
Supply Arrangement
Nunavut Liquor &
Cannabis
Commission
(“NULC”)2
Supply
Arrangement
12
GROWING INTERNATIONAL DISTRIBUTION
Germany
Zenabis, through ZenPharm (see
Malta) has entered into a binding
supply agreement to commence
shipments to Germany through Malta
upon receipt of ZenPharm’s final
license
Malta
Zenabis has received conditional
approval to develop a production and
processing facility in Malta through
its joint venture, ZenPharm.
Revenue is expected in Q1 2021
subject to ZenPharm’s receipt of its
final license
Israel
Zenabis ships cannabis to two
counterparties in Israel, with
anticipated combined volume of
greater than 1,000kg per month on
an ongoing basis, subject to export
permit receipt in any given month
Australia
Zenabis ships packaged, medical
cannabis under a binding three-year
supply agreement with an Australian
pharmaceutical company
13
ZENPHARM
Atholville, New Brunswick, Canada Birzebbuga, Malta
Indoor Cultivation Facility Manufacturing Facility
Europe
Zenabis’ EU GMP approval enables the
supply of bulk dried medicinal cannabis
flower to the European market through
ZenPharm
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 completed its first commercial sale to ZenPharm in December 2020.
Appointment of Permanent
Chief Executive Officer
• Announced appointment of
Shai Altman as permanent
Chief Executive Officer,
effective September 1, 2020
• Mr. Altman has over 20 years
of CPG leadership experience
and was previously President
of McCain Foods, Canada
September Public Offering of Units
• Announced closing of previously
announced overnight marketed
offering of units for aggregate gross
proceeds of~$7.6m at a price of
$0.085/unit
• Each unit contained one common
share and one common share
purchase warrant
Corporate Updates
• Granted GACP quality certification by the CUMCS, which is a requirement for
some export jurisdictions
• ZenPharm successfully completed its EU GMP audit and is expecting formal
EU GMP certification in early 2021
• Re Up 510-thread vaporizer line is listed in seven provinces
• Completed initial export shipment of packaged medicinal cannabis to Australia
in August with additional shipments ongoing
• Appointed Echelon Capital Markets as financial advisors with goal of obtaining
new financing to repay existing senior secured debentures
14
RECENT DEVELOPMENTS
Zenabis has significantly increased shipments domestically and internationally, diversified its product offerings, and delivered positive
Adjusted EBITDA throughout 2020.
EU GMP Approval and Term
Sheet for Medicinal Cannabis
to German Market
• Received EU GMP approval
for the Atholville facility
• Executed a binding term sheet
with Farmako GmbH to its
subsidiary company,
ZenPharm
• Expected to supply a
minimum of 500 kg of EU
GMP compliant bulk cannabis
per year for a term of three
years
Amendments to Senior Secured
Debenture
• Principal amount increased from
$50.0m to $60.75m
• Maturity extended from June 30th, 2020
to March 31st, 2025
May-20 Jun-20 Jul-20 Aug-20 Sept-20 Oct-20 Nov-20 Dec-20
June Public Offering of Units
• Closed public offering of units for total
gross proceeds of $23.6m at a price of
$0.13/unit
• Proceeds were used for repayment of
debt, a senior debt extension fee, and
general working capital
Conversion of Remainder of Secured Convertible
Notes
• Announced conversion of remaining convertible
notes (excluding one tranche) at a price of $0.04794
per common share
• The conversion agreement provides for the issuance
of 16,104,403 warrants at a price of $0.06768
Extension and Partial Conversion of Secured
Convertible Notes
• Maturity extended from June 30th, 2020 to
March 31st, 2021
• Immediate conversion of 22.88% of the
outstanding notes at a price of $0.10232
• ~$2.6m reduction to the remaining principal
amount of the notes
Sale of Delta Facility
• Completed sale of Delta facility for $6.65m on
December 30, 2020
Disposition of Bevo Farms Ltd.
• Entered into a rental rebate,
liability contribution and share
purchase agreement with
Langley Propagation and
Floral Company Ltd.
• $42.5m in debt reduction, plus
deferred consideration of
$24.7m, including cash and
rental rebates
15
MANAGEMENT
Eric Rasmussen
Chief Financial Officer
Shai Altman
Chief Executive Officer
▪ Over 20 years of leadership in the consumer packaged
goods industry, with 11 years of focused experience in the
Canadian market
▪ Formerly the President of McCain Foods, Canada, where
he led the business through a significant turnaround that
reversed a decade of topline sales declines
▪ Prior to McCain Foods, was the President of Wrigley
Canada, where he led the business through a growth
phase that resulted in market leadership
▪ Extensive senior management experience in publicly-listed
companies, both in North America and Europe
▪ Strong corporate and operations finance, internal audit,
M&A, and strategic investment experience over a 20-year
leadership career within Shawcor
▪ Strategic consultant for Canadian large- and mid-size
clients, advising on corporate strategic and financial
planning, post-merger integration
Alan Mayo
Chief Quality & Compliance Officer
▪ Over 19 years of extensive experience in regulatory
compliance, with a focus on the application of quality
assurance in operations and logistics management in the
manufacturing and drug development sectors
▪ Previously, he has worked across global business units to
lead the comprehensive implementation of GMP processes
and policies, including his most recent role at
GlaxoSmithKline
Robert Maxwell
Vice President, Sales & Marketing
▪ 30-year career in the Canadian and international biotech,
medical device and consumer packaged goods sectors as
executive and entrepreneur
▪ Formerly the President and CEO of the Kolab Project, a
successful Health Canada licenced cultivator, processor
and cannabis brand
▪ Has conceived, launched and directed product
development and branded or private label initiatives for
retailers such as CVS Health, Walgreen’s, Target and
Shopper’s Drug Mart, in addition to health and beauty
brands Estee Lauder, Mary Kay and Charlotte Tilbury
Beauty
16
Daniel Burns
Chair
▪ A lawyer, accountant and
entrepreneur
▪ Experienced corporate director in the
financial services, insurance and
mining sectors
▪ Has served as chair of a number of
significant organizations in Canada
and the United States as well as
chaired the audit committees of
significant public and private
institutions
▪ Co-founder of Zenabis
▪ As President of the Monark Group,
has grown the business into a multi-
million-dollar, multi-faceted
corporation
▪ Has extensive experience in e-
commerce, marketing and finance
sectors
▪ Experienced international finance
and M&A attorney who has held
senior positions at several prominent
international law firms
▪ As counsel at Skadden, represented
Fortune 500 companies, financial
institutions, and governments in
complex corporate finance and M&A
transactions totaling >$100bn in
value
Natascha Kiernan
Independent Director
BOARD OF DIRECTORS
▪ Currently the Vice President of
Finance for the Richberry Group of
Companies, part of the executive
management team that oversees
over 1,100 acres of Ocean Spray
cranberry bogs
▪ Previously, he oversaw a team of
lending professionals in Farm
Credit Canada and managed a
portfolio >$1bn
Vincent Quan
Independent Director
▪ Over 20 years of leadership in the
consumer packaged goods
industry, with 11 years of focused
experience in the Canadian
market
▪ Formerly the President of McCain
Foods, Canada, where he led the
business through a significant
turnaround that reversed a
decade of topline sales declines
▪ Currently the Founder and
Managing Director at Shone
Capital Partners, a corporate
financial advisory firm that
provides advisory services to small
and medium-sized enterprises
▪ Previously, he was the CFO at The
Green Organic Dutchman Holdings
Ltd., a TSX-listed organic cannabis
company
Jim Shone
Independent Director
Monty Sikka
Co-Founder and Director
Shai Altman
Chief Executive Officer and Director
17
FINANCIAL PROGRESS
Zenabis has made significant financial progress over the past seven quarters. The operational rationalization in early 2020 has resulted in
three consecutive quarters of positive adjusted EBITDA and notable improvements in operating cash flow.
Note: 1) NWC refers to net working capital.
Financial Progress – Past Seven Quarters1
4.1
7.3 7.1
10.6
12.611.8
19.0
(6.4) (6.3)
(9.2)(10.4)
2.33.4 3.5
(12.7)
(7.0)
(12.4)
(15.9)
(2.1)
2.3
0.2
(20.0)
(15.0)
(10.0)
(5.0)
-
5.0
10.0
15.0
20.0
25.0
Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020
($m)
Cannabis Net Revenue Adjusted EBITDA Cash from Operations (before changes in NWC)
18
SELECTED FINANCIAL INFORMATION
Notes: 1) Debt is based on the amounts listed on slide 28. 2) Market capitalization and enterprise value are calculated as of December 31, 2020 as calculated on slide 29. 3) For the three months ended September 30, 2020. 4) Includes a $2.1m loss on
embedded derivative asset and a $3.4m loss on the revaluation of a royalty liability. Both are non-cash. 5) Calculation of adjusted EBITDA is shown on slide 30. 6) Tangible assets of $294.9m as of September 30, 2020. 7) As at September 30, 2020.
Selected Financial Metrics
Cash as of December 31 2020 $4.8m
Debt as of December 31 2020 $65.1m1
Market Capitalization $42.0m2
Enterprise Value $102.3m2
Financial Results Q3 2020
Gross Revenue3 $28.5m
Net Revenue3 $23.7m
Net Loss3,4 ($17.0m)
Adjusted EBITDA5 $3.5m
Balance Sheet
Total Assets6 $296.2m
Total Non-Current Liabilities $110.6m
Property, Plant and Equipment $191.7m
Shares and Ownership Summary Q3 2020
Common Shares Outstanding 729,839,2737
Fully-Diluted Shares Outstanding 1,178,637,8367
19
RECENT CAPITAL STRUCTURE CHANGES
Zenabis has implemented many deleveraging initiatives since June 2020, which have resulted in total debt reductions of $58.7m.
Notes: 1) The amendment fee on the secured debentures was re-allocated between tranches at the end of Q2 2020, resulting in an increase in principal outstanding on the secured debentures due in 2020 and a decrease in principal
outstanding on the secured debentures due in 2025 . 2) Zenabis’ market capitalization is calculated is as of December 31, as calculated on slide 29.
Debt
Principal
Outstanding at
June 30, 2020
Principal
Payments
Principal
Outstanding at
September 30,
2020
Principal
Payments /
Conversions
Debt Changes due
to Bevo
Divestiture
Principal
Outstanding at
January 4, 2021
Interest Rate
Bevo Term Debt
BMO Financing $43.3m ($0.8m) $42.5m - ($42.5m) - Floating
Long-term Cannabis Debt (>2 years to maturity)
Secured Debentures $51.4m1 - $51.4m1 - - $51.4m 14.0%
RDC Mortgage $2.0m - $2.0m - - $2.0m 6.0%
Near-term Cannabis Debt (<2 years to maturity)
New Secured
Debentures$7.5m1 - $7.5m1 ($7.5m) - - 14.0%
Unsecured Convertible
Debentures$7.7m ($3.9m) $3.8m - - $3.8m 6.0%
Secured Convertible
Note$2.5m - $2.5m ($2.3m) - $0.2m 11.0%
Unsecured Convertible
Note$9.4m - $9.4m ($1.7m) - $7.7m 6.0%
Total Near-Term Debt
(<2 years)$27.1m ($3.9m) $23.2m ($11.5m) - $11.7m
Total $123.8m ($4.7m) $119.1m ($11.5m) ($42.5m) $65.1m
Market Capitalization2 $42.0m $42.0m $42.0m
Debt to Market
Capitalization2.95x 2.84x 1.55x
20
ONGOING CASH INTEREST PAYMENTS
The below table outlines Zenabis’ ongoing cash interest payments as of January 4, 2021.
DebtPrincipal Outstanding at
January 4, 2021Interest Rate Quarterly Interest Payment
Secured Debentures $51.4m 14.0% $1.80m
RDC Mortgage $2.0m 6.0% $0.03m
Unsecured Convertible Debentures $3.8m 6.0% $0.06m
Secured Convertible Note $0.2m 11.0% $0.01m
Unsecured Convertible Note $7.7m 6.0% $0.12m
Total $65.1m $2.01m
21
COMPARABLE PRODUCTION AND REVENUE MULTIPLES1
Notes: 1) All financial metrics obtained as of January 3, 2021. Zenabis’ enterprise value is per the calculation on slide 29. 2) Enterprise value as of December 31, 2020. 3) Amount of cannabis produced on a dried flower equivalent basis as disclosed in the most recent
financial reports.
Current Licensed Annual Production Capacity
Last Three Months Production3
Quarter End Net Revenue
Metrics
Enterprise Value2 ($m)
Current Capacity (kg)
EV/Current Capacity ($m/tonne)
Metrics
Enterprise Value2 ($m)
Last Three Months Production (kg)
EV/Last Three Months Production
($m/tonne)
Metrics
Enterprise Value2 ($m)
Net Revenue ($m)
EV/Net Revenue ($m/$m)
CRON VFF ACB SNDL APHA OGI TGOD VIVO FIRE AH ZENA
1,734 819 2,320 652 2,561 483 151 45 133 162 102
40,150 37,500 150,000 60,000 255,000 89,000 32,000 14,500 50,000 128,500 111,200
43.2 21.8 15.5 10.9 10.0 5.4 4.7 3.1 2.7 1.3 0.9
TLRY FLWR OGI HEXO EMH ZENA
2,103 160 483 480 64 102
8,903 1,305 11,737 17,462 2,459 12,083
236.2 122.3 41.1 27.5 25.9 8.5
CRON WEED SNDL ACB TLRY TGOD OGI APHA HEXO FIRE ZENA
1,734 11,565 652 2,320 2,103 151 483 2,561 480 133 101
14.8 135.3 12.9 67.8 63.0 4.9 20.4 145.7 29.4 11.9 19.0
117.1 85.5 50.7 34.2 33.4 30.9 23.7 17.6 16.3 11.2 5.3
0.9-
20.0
40.0
60.0
8.5
-
100.0
200.0
300.0
5.3-
100.0
200.0
Appendix A – Facilities
24
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 Nil
Design Capacity 46,300kg1
Extraction Design Capacity 45,000kg2
Current Licenses
Cultivation, processing, medical sales,
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
Notes: 1) As outlined in Zenabis’ Annual Information Form dated March 30, 2020. 3) Extraction estimates are annual, based on 20 days a month and based on kilograms of input material, including operations commencement of two extraction machines
onsite.
25
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 435,600 sq. ft. greenhouse cannabis
Status Partially operational/conversion ongoing
Remaining Conversion Cost $Nil (for current market demand)
Design Capacity 96,100kg1
Extraction Design Capacity N/A
Current LicensesCultivation, processing, domestic bulk
sales
Pending Licenses N/A
Capacity Milestones▪ Currently Licensed – 64,100kg3
▪ Full buildout – 96,100kg1
Summary
▪ Initial cannabis conversion activities have been completed for the first 10
acres of greenhouse
‒ Construction and licensing of Part 1 and Part 2A and the first portion of
2B have been completed (64,100kg capacity)
▪ 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
▪ As of January 2021, Zenabis Langley is leased from Bevo Farms
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 are outlined in Zenabis’ Annual Information Form dated March 30, 2020 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) 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.
26
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 Capacity1 800kg
Extraction Design Capacity N/A
Current Licenses
Cultivation, processing, medical sales,
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.
Note: 1) Additional details on the facility are outlined in the Zenabis’ Annual Information Form dated March 30, 2020 and filed on SEDAR.
Appendix B – Financial Information
28
DEBT OUTSTANDING
Facility Principal Amount
at January 4, 2021Description
Unsecured Convertible
Debentures$3.8m
▪ Unsecured convertible debentures with interest rate of 6.0%
▪ Convertible into Zenabis shares at $2.6087 per share
▪ 825,000 warrants with exercise price of $2.68
▪ Matures on September 27, 2021
RDC Mortgage $2.0m▪ $2.0m mortgage on Zenabis Atholville with interest rate of 6.0%
▪ Matures on August 31, 2027
Secured Debentures $51.4m
▪ 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)
▪ 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
Secured Convertible Note $0.2m
▪ 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)
▪ 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
▪ 16,104,403 warrants were issued at an exercise price of ~$0.068 upon conversion in October 2020
▪ Matures on March 31, 2021
Unsecured Convertible
Note$7.7m
▪ Subordinated financing with interest rate of 6.0%
▪ May be converted into Zenabis common shares at ~$1.9067 per share
▪ Matures on June 30, 2021
Total $65.1m
Debt Summary
29
CAPITALIZATION
The following outlines the capitalization of Zenabis.
Fully Diluted Shares Outstanding Value
Basic Shares Outstanding1 799,983,791
Plus: Deferred Stock Units 1,125,000
Plus: Restricted Stock Units 19,803,018
Plus: Options 27,182,883
Plus: Warrants 400,887,574
Plus: Conversion Options at $1.17 3,287,179
Plus: Conversion Options at $1.91 4,783,823
Equals: Fully-Diluted Shares Outstanding 1,257,053,268
Capitalization Enterprise Value
Enterprise Value Calculation Value
Basic Shares Outstanding 799,983,791
Times: Zenabis Share Price2 $0.0525
Equals: Market Capitalization $42.0m
Add: Debt3 $65.1m
Less: Cash4 ($4.8m)
Equals: Enterprise Value $102.3m
Notes: 1) As of December 31, 2020. Does not include options that are in the money but have not yet vested. 2) As of market close December 31, 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 $4.8m as outlined in the Zenabis Global Inc. Financial Statements as at September 30, 2020. The negative value indicates a subtracted value, rather than a negative cash balance.
Notes: 1) For the three months ended September 30, 2020. 2) For the three months ended June 30, 2020 3) For the three months ended March 31, 2020 3) For the three months ended March 31, 2020. 4) For the three months ended December 31, 2019.
Adjusted EBITDA Calculation Q3 20201 Q2 20202 Q1 20203 Q4 20194
Net Loss (16,975,019) (15,781,932) (7,702,835) (98,714,311)
Plus: Realized Fair Value Amounts Included in Inventory Sold 19,114,863 19,252,057 12,923,860 18,014,038
Less: Unrealized Gain on Changes in Fair Value of Biological Assets (13,947,009) (24,222,690) (19,219,636) (21,432,091)
Plus: Depreciation and Amortization 911,015 1,490,680 2,050,093 2,090,304
Plus: Impairment of Assets Held for Sale 1,571,026 Nil Nil Nil
Plus: Restructuring Cost Nil 483,890 1,058,452 Nil
Plus: ZenPharm Pre-Commercialization Costs 306,118 362,188 Nil Nil
Plus: Impairment of Inventory 250,314 508,759 Nil 874,734
Plus: Write-off of Materials and Supplies Inventory 1,851,536 Nil Nil Nil
Plus: Impairment of Property, Plant and Equipment Nil Nil Nil 27,841,265
Plus: Impairment of Intangible Assets and Goodwill Nil Nil Nil 61,480,249
Plus: Share-Based Compensation 1,226,986 1,012,898 341,858 5,995,345
Plus: Loss on Revaluation of Embedded Derivative Asset 2,070,193 94,256 Nil Nil
Plus (Less): Loss (Gain) on Revaluation of Embedded Derivative Liability Nil Nil Nil (22,993)
Plus: Interest Expense 5,850,396 8,009,676 6,306,284 (335,248)
Plus: Other Expense (799,303) 167,745 298,907 122,880
Plus (Less): Loss (Gain) on Sale of Assets 504,658 (482,067) (9,185) (55,417)
Plus (Less): Finance and Investment Expense (Income) (9,695) (7,095) (6,544) 316,621
Plus : Loss due to Event 2,330 20,167 25,567 982,560
Less: Insurance Proceeds (445,268) (25,000) Nil (520,526)
Plus: Loss on Deconsolidation of Subsidiary Nil Nil 668,562 Nil
Less: Government Subsidies (1,963,465) (3,319,621) (713,373) Nil
Plus: Loss on Early Conversion of Debt Nil 4,331,680 5,624,803 Nil
Plus (Less): Income Tax Expense (Recovery) 359,642 1,102,590 654,987 (126,856)
Plus: Loss on Modification and Extinguishment of Debt Nil 10,653,156 Nil Nil
Plus: Loss on Remeasurement of Royalty Liability 3,440,868 Nil Nil Nil
Plus (Less): Deferred Income Tax Expense (Recovery) 103,391 (214,083) 42,155 (6,944,120)
Equals: Adjusted EBITDA 3,463,577 3,437,254 2,343,955 (10,433,566)
30
ADJUSTED EBITDA CALCULATION
The following outlines the calculation to arrive at adjusted EBITDA.
▪ 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.