Zenabis Provides Operations Update and Highlights for October 2019

VANCOUVER, Dec. 4, 2019 /CNW/ - Zenabis Global Inc. (TSX:ZENA) ("Zenabis" or the "Company") is pleased to provide an update on its recent facility construction and licensing activities and recent cannabis production results.

Highlights:

• Cultivation output in October 2019 increased 71% over September yield, totaling 3,586 kg of dried cannabis. This was slightly lower than Zenabis' August revised forecast output of 3,758 kg.
• Production at Zenabis Atholville underperformed its revised design capacity by 0.4% (the Performance Ratio¹).
• Zenabis continues to focus on the completion of construction and licensing of Zenabis Langley. Zenabis' total annual cultivation design capacity is expected to increase to 143,200 kg of dried cannabis on full completion of construction of Zenabis Langley. Zenabis is awaiting Health Canada approval of the Part 2A license amendment, which will increase Zenabis' licensed annual production capacity by 69% (from 57,000 kg to 96,400 kg). Zenabis expects to submit the license amendment for Part 2B at Zenabis Langley (additional 14,800 kg of design capacity) as soon as possible following the receipt of the Part 2A amendment.

Andrew Grieve, Chief Executive Officer of Zenabis, stated, "October was another month of strong cannabis cultivation at Zenabis Atholville. With 22 harvests in the month of October, the facility is now essentially at steady-state operations from a cultivation standpoint. The 3,586 kg of dried cannabis yield is roughly in line with our revised forecast. Given 14 of 22 harvests in the month were the first harvests in rooms that were licensed in Q2 and Q3 2019, we are pleased with this outcome. In October, we also solved our previously noted packaging challenges, so packaging is no longer a bottleneck to providing product to our Provincial partners. At the same time, we continue to make significant progress on the construction of Zenabis Langley."

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To better reflect the actual performance of its facilities, the Company reports a Performance Ratio, calculated as follows: after each harvest, Zenabis calculates the dry weight cannabis output for each room (the "Total Output"), taking into account the amount of days in production through a combination of: (1) the amount of flower room days used (including turnaround time) for that room; and (2) the amount of flower-room equivalent days required from other flower rooms in support of that harvest (together the "Effective Flower Room Equivalent Days"). Zenabis then divides the Total Output by the Effective Flower Room Equivalent Days in order to produce the "Effective Yield Per Day" for each room, and then divides the Effective Yield Per Day by the Design Capacity Yield Per Day for each room in order to determine actual performance versus the Design Capacity Yield Per Day (this ratio being the "Performance Ratio"). Zenabis believes that the Performance Ratio will provide investors with the best measure of actual cultivation performance versus Zenabis' published design capacity. Zenabis intends to publish updated design capacities for each of its facilities when a facility has harvested from all its flower rooms (with the update at that time reflecting the most recent performance from each flower room) and again, if required due to significantly different results, when a facility achieves consistent monthly performance at a level that is different from its published Design Capacity.  Zenabis revised its Design Capacity at Zenabis Atholville upwards by 35% (equal to Zenabis Atholville's Performance Ratio for the three months ended June 30, 2019) from 34,300 kg per annum to 46,300 kg per annum. Zenabis no longer reports a Performance Ratio for Zenabis Atholville relative to original design capacity (the kg/day figure used to derive the 34,300 kg design capacity).

Cannabis Production Summary

In October 2019, Zenabis realized a total harvest weight of 3,586 kg of dried cannabis.

The amount harvested at Zenabis Atholville for the three months ending October 2019 exceeded the revised design capacity of the flower rooms by an average of 13.7%, compared to 25.7% in the three-month period ending September 2019. A month-to-month comparison of actual harvests compared with harvest forecast based on revised design capacity between January 2019 and October 2019 for Zenabis Atholville is provided in the table below.

Revised Design Capacity Performance at Zenabis Atholville	Jan 2019	Feb 2019	Mar 2019	Apr 2019	May 2019	June 2019	July 2019	Aug 2019	Sept 2019	Oct 2019	Total
Actual Harvest Weight (kg)	474	480	518	809	908	756	1,238	1,912	2,089	3,586	12,770
Revised Design Capacity Harvest Weight (kg)^2	467	643	539	796	895	716	1,097	1,357	1,715	3,601	11,825
Difference (kg)	7	(163)	(21)	13	13	40	141	555	374	(15)	944
Difference (%) – Revised "Performance Ratio"	1.5%	(25.3%)	(3.9%)	1.6%	1.5%	5.6%	12.9%	40.9%	21.8%	(0.4) %	8.0%

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The Revised Design Capacity Harvest Weight was derived by converting the actual square footage of flower room space and the forecast canopy for each specific flower room into a kilograms per room per day figure based on Zenabis' historical yield data at the Zenabis Atholville facility based on the yield performance in the three months ending June 2019 for revised Design Capacity. The Revised Design Capacity Harvest Weight in the table above is the harvest weight that would have resulted if the Design Capacity Yield Per Day for a room was multiplied by the Effective Flower Room Equivalent Days, as defined under "Performance Ratio".

In October 2019, Zenabis completed 22 harvests at Zenabis Atholville. The average Performance Ratio for these harvests was 0.4% relative to revised design capacity. In October 2019, Zenabis had no harvests from Zenabis Stellarton or Zenabis Langley.

2019 Harvest Forecast – Zenabis Atholville, Zenabis Stellarton and Zenabis Langley Site A – Part 1

For its existing licensed facilities of Zenabis Atholville, Zenabis Stellarton and Zenabis Langley Site A – Part 1, Zenabis expects to produce approximately 11,657³ kg of dried cannabis from November 2019 through January 2020. Zenabis completed its first harvest from Zenabis Langley at the end of November. Contrary to past forecasts for November that included 1,650 kg from Zenabis Langley (representing achievement of 100% of the current Design Capacity), Zenabis' updated forecast harvest output from Zenabis Langley for November is approximately 20% of the current Design Capacity of Zenabis Langley.  Consistent with past experience, Zenabis remains confident that Zenabis Langley's Design Capacity will be achieved after ramp-up challenges have been addressed. The following table sets out Zenabis' estimated aggregate monthly harvests for Zenabis Atholville and Zenabis Stellarton and Zenabis Langley Site A – Part 1 for the remainder of 2019 and January 2020.

	July 2019	Aug 2019	Sept 2019	Oct 2019	Nov 2019	Dec 2019	Jan 2020	Total
Forecast (kg)^3	1,212	1,579	1,731	3,758	3,881	4,200	3,576	19,937
Actual (kg)	1,238	1,996	2,089	3,586				8,825

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This forward-looking estimate of future harvest results is based on the following material assumptions: (1) Zenabis Stellarton operates at the published design capacity on a room by room basis for the cultivation space that is licensed and in cultivation at the forward-looking periods noted; (2) Zenabis Atholville rooms operate based on the current flower schedule and continue to achieve revised Design Capacity; and (3) the first harvest from Zenabis Langley Site A – Part 1 in November 2019 is 20% of Design Capacity.

Zenabis intends to provide a monthly cultivation forecast for Zenabis Langley Site A – Part 2A, Zenabis Langley Site A – Part 2B and Zenabis Langley Site A – Part 2C upon receipt of all cultivation license amendments for these phases.

Construction and Facility Update

Zenabis Langley

The first phase of Zenabis Langley (Zenabis Langley Site A – Part 1) is licensed and operational. Zenabis has reached substantial completion on Site A – Part 2A. Zenabis has submitted a cultivation license amendment for Site A – Part 2A and expects to receive Health Canada approval of that amendment in December 2019.  Zenabis intends to submit a license amendment for Site A – Part 2B upon the receipt of the Site A – Part 2A license amendment (due to Health Canada regulations, Zenabis cannot submit an amendment while another amendment is outstanding). Zenabis remains focused on converting the remaining phase of Zenabis Langley (Zenabis Langley Site A – Part 2C).

A summary of construction status by phase is provided below:

Phase	Design Capacity	Description
Part 1	9,900 kg	Licensed and operational
Part 2A	39,400 kg	Consists of 101,300 sq. ft. of flower room space (two flower rooms) Substantially complete License amendment submitted in September 2019
Part 2B	14,800 kg	Consists of 38,000 sq. ft. of flower room space (one flower room) Table installation, which is 50% complete, is the only remaining task before achieving substantial completion  Licensed amendment will be submitted upon receipt of 2A amendment
Part 2C	32,000 kg	Consists of 82,200 sq. ft. of flower room space (two flower rooms) and 122,300 sq. ft. of other operational spaces (includes drying rooms, packaging rooms, mother space and vegetation space) HVAC, flooring and shade screen installation is ongoing Security equipment and lighting installation is substantially complete

Zenabis Stellarton

In November 2019, Zenabis' pre-roll production capacity at Zenabis Stellarton reached peak daily output of 40,000 units. As a result, Zenabis has the ability to produce 1.2 million pre-rolls per month (up to 1,200 kg of 1g Re-Up pre-rolls)⁴. Zenabis has also submitted a sales license application for Zenabis Stellarton and expects to use this site as a fulfilment centre and packaging/processing facility upon receipt of this license.

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^4	Assuming operations for 30 days a month.

Zenabis Delta

Zenabis is currently in the process of constructing extraction and post-processing capacity, a product development lab, a formulation design lab, and a full ISO certified analytical testing lab at Zenabis Delta. This construction project is expected to be complete in the first half of 2020.

Licensing Update

Zenabis is currently in the process of various licensing applications for Zenabis Delta, Zenabis Langley, Zenabis Stellarton and the Zen Craft Grow program as outlined in the table below:

License Submission	Submission Month	Annual Design Capacity
Zenabis Delta – Analytical Testing	May 2019	N/A
Zen Craft Grow – Grower 1	July 2019	350 kg
Zenabis Langley Site A – Part 2A	September 2019	39,400 kg
Zenabis Stellarton – Sales License	October 2019	N/A
Zenabis Langley Site A – Part 2B	December 2019^5	14,800 kg
Zenabis Langley Site A – Part 2C	February 2020^5	32,000 kg

^5	Expected submission timeline subject to receipt of prior license or license amendment for each facility.

As operations ramp-up in multiple locations resulting in a significantly greater number of harvests per month, more time will be required to consolidate data and release publicly as part of our regular Operational Updates. Consequently, the Company expects to release its Operational Updates for a given month within 6 weeks following the end of such month.  

Please view the following link for Zenabis operational update presentation:

https://www.zenabis.com/docs/zenabis-operations.pdf

About Zenabis

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; Delta, Aldergrove, Pitt Meadows and Langley, British Columbia; and Stellarton, Nova Scotia. Zenabis currently has 57,000 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.

Zenabis expects its Zenabis Atholville, Zenabis Stellarton and Zenabis Langley facilities to have a licensed annual production capacity of 143,200 kg of dried cannabis by the second quarter of 2020. The Zenabis brand name is used in the cannabis medical market, the Namaste, Blazery, and Re-Up 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 projected kilogram yield of licensed facility space and facility space in the process of, or scheduled for, construction and/or licensing; our expectations for future harvests; the expected timing and completion of current and planned conversion, expansion and optimization of our facilities, including Zenabis Langley; our plans for Zenabis Delta; the expected submissions of license amendment applications and site evidence packages; the licensing of our facilities and projected timing thereof; our expectations for our extraction projects, equipment and capacity; our expectations for processing output; our expectations regarding our packaging equipment; the effect of hemp cultivation on our cannabis cultivation abilities; and the expected content of future operational updates. 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. 

SOURCE Zenabis Global Inc.

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