Zenabis Global Inc’s Tilray Agreement is a Testament

Zenabis Global Inc. (TSE:ZENA), one of the Canadian marijuana stocks, said it will supply $30 million in dried cannabis to Tilray Inc. (NASDAQ:TLRY)

SmallCapPower | July 8, 2019: Zenabis Global Inc. (TSX:ZENA), one of the Canadian cannabis stocks, announced on July 2, 2019, that it has entered into an agreement with High Park Holdings, a subsidiary of Tilray Inc. (NASDAQ:TLRY), in which High Park will advance C$30M to Zenabis in return for a supply of dried cannabis from Zenabis.

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Zenabis Global was formed in January 2019, after a reverse-takeover (RTO) of Bevo Agro Inc by Sun Pharm Investments Ltd took place. Zenabis is a licensed cannabis cultivator of medical and recreational cannabis, and a propagator and cultivator of floral and vegetable products. Zenabis owns four facilities intended for the cultivation of cannabis: Zenabis Atholville, Zenabis Stellarton, Zenabis Delta, and Zenabis Langley. The Company has a current capacity of 23,100 kg and a fully-funded capacity of 131,200 kg, with the option to expand to 478,000 kg.

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Tilray was founded in 2014, and quickly emerged as a leader in the global cannabis market. In April 2018, Tilray launched High Park Company, a business designed to cultivate, produce, sell, and distribute adult-use cannabis brands and products.

Under the supply agreement with Tilray, Zenabis is expected to deliver a monthly quantity of dried cannabis to High Park, commencing in October 2019. The price High Park agreed to pay is expected to vary based on product type and the format High Park chooses to order.

For Zenabis Global, the agreement helps to validate the quality of their products, while also providing them with a method of financing without diluting shareholder ownership. For reference, here is a current breakdown of the capital structure of Zenabis:

Zenabis Capital Structure

Source: Company Reports

Andrew Grieve, Chief Executive Officer of Zenabis Global, stated: “This arrangement significantly reduces the requirement for potential further draws on our $60M unsecured convertible debenture facility,” meaning that this agreement with Tilray will allow Zenabis to become less reliant on debt financing.

Other Recent Developments

On June 24, Zenabis Global provided an update on its recent cannabis production figures. These highlights featured a cultivation output in May 2019 of 908kg of dried cannabis, representing a 35.1% outperformance compared to planned  capacity. Zenabis Global also announced that on June 21, Health Canada approved the Phase 2B license amendment for Zenabis Atholville, expanding licensed annual cultivation capacity at the Company’s largest indoor facility from 9,800kg to 22,300kg of dried cannabis, and licensed space from 174,900 sq. ft to 251,600 sq. ft.

This follows an announcement from June 3, when Zenabis Global received an industrial hemp license from Health Canada, giving the Company the ability to cultivate hemp using the remaining land and in greenhouses off-cycle from other crops for its Zenabis Langley, Pitt Meadows, and Aldergrove facilities.

On May 30, Zenabis Global announced its financial results for the quarter ending on March 31, 2019. These results featured revenue of $11.6M, up 241% from the previous quarter, and a loss per share of $0.02, relative to a loss per share of $0.16 during the previous quarter.

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