Results Reflect Rapid Corporate Development and Significant Revenue Momentum

VANCOUVER, May 30, 2019 /CNW/ - Zenabis Global Inc. (TSX:ZENA) ("Zenabis" or the "Company") today announced its financial results for the first quarter ended March 31, 2019 and provided an update on operations. This is Zenabis' first quarterly financial report since the public listing of its shares in January of 2019.

"The public listing of our shares, and our recent graduation to the Toronto Stock Exchange, reflect the ambitions we have for our company, and are important milestones in the Zenabis growth story," said Andrew Grieve, Chief Executive Officer of Zenabis. "We have successfully undertaken a range of tangible corporate development initiatives in the past several months, including securing key supply and distribution arrangements and additional licenses and approvals; expanding our product offerings across Canada, developing relationships in Europe; and obtaining financing to support our rapid growth. We also commenced providing monthly reports on our operations and look forward to continuing to update our shareholders and the broader investment community on our progress."

"Since the legalization of cannabis in Canada last fall, it has become clear that the winners in this industry will be those who can produce reliable supply," continued Mr. Grieve. "Despite being a new entrant in the cannabis market, we demonstrated a clear ability to expand production and cultivation output during the first quarter of 2019. Our April 2019 output exceeded our design capacity by more than 31%, and our overall cultivation output was 63% greater than forecast. For the three harvests thus far in May, we have exceeded design capacity by 28%. With an additional harvest being accelerated from June into May, we anticipate further strong total cultivation performance in May relative to forecast. This outperformance demonstrates the capabilities of our experienced cultivation team, and the quality of our facilities across Canada."

"Our results demonstrate progress towards our goal of becoming one of the largest licensed producers of medical and adult-use recreational cannabis in Canada. Building on the proven agricultural heritage and cultivation excellence of our predecessor company, Bevo Agro Inc., we are investing in initiatives that will grow our production to meet demand across our key markets, enhance value for our shareholders, and deliver value to all of our stakeholders. Looking ahead, we expect further growth from our cannabis operations, continued expansion of our facilities, and significant increases in cannabis revenue," added Mr. Grieve.

Commenting on Zenabis' revenue growth expectations for the second quarter of 2019, Mr. Grieve said, "We currently anticipate revenue from the plant propagation business to be in a range of $16 to $18 million, and net revenue from the cannabis business to be in the range of $10 to $12 million. Net cannabis revenue is subject to the timing of shipments. This net cannabis revenue does not yet include any meaningful impact from the production of oil products, as the third-party supply chain for oil products (including post processing) adds a considerable amount of time from cultivation to realization of revenue. This time differential is expected to be significantly reduced upon completion of post-processing and additional extraction capacity at Zenabis Delta. Currently, a significant amount of existing cannabis inventory is allocated to the third-party oil processing supply chain."

First Quarter 2019 Highlights:

Completed a reverse takeover (the "RTO") of Bevo Agro Inc. by Sun Pharm Investments Ltd. to become Zenabis Global Inc. on January 8, 2019 , and began trading on the TSX Venture Exchange ("TSXV") under the symbol "ZENA" on January 10, 2019

, and began trading on the TSX Venture Exchange ("TSXV") under the symbol "ZENA" on Entered into supply arrangements with the provinces of Alberta , Manitoba , Quebec and Prince Edward Island , expanding Zenabis' supply arrangements to a total of eight provinces and one territory

, , and , expanding Zenabis' supply arrangements to a total of eight provinces and one territory Through its subsidiary, Bevo, completed the acquisition of Topgro Holdings Ltd., which includes 10.4 acres of greenhouse on 50 acres of land in Aldergrove, British Columbia

Added a new product line with the acquisition of 51% of Hilllsboro Corp Inc., a kombucha company with expertise in the creation of cultured tea beverages

Entered into supply agreement with Shoppers Drug Mart, one of Canada's most significant retailers

most significant retailers Received approval to cultivate and grow cannabis at its 255,000 square foot facility in Stellarton, Nova Scotia , with the initial licensed area adding design capacity of 800 kilograms of dried cannabis per year

, with the initial licensed area adding design capacity of 800 kilograms of dried cannabis per year Obtained a license to process and sell cannabis oil products in Canada , enabling Zenabis to sell cannabis oil produced at its Atholville, New Brunswick facility

, enabling Zenabis to sell cannabis oil produced at its facility Achieved cultivation output of 1,472 kg, 11% greater than design capacity of 1,330 kg

Achieved financial performance in line with ramp-up expectations, including:

Total gross revenues of $12.3 million and net revenues of $11.6 million after excise taxes

and net revenues of after excise taxes

Gross margin before fair value adjustment of $3.9 million



Operating expenses of $18.8 million



Adjusted EBITDA 1 of ( $6.4 million )

of ( )

Net loss of $4.0 million

Recent Developments

Since the creation of Zenabis via the January 2019 RTO, more than doubled licensed production capacity from 6,000 kg to 13,400 kg as at May 30, 2019

RTO, more than doubled licensed production capacity from 6,000 kg to 13,400 kg as at Delivered 31% outperformance relative to cultivation design capacity in April, with cultivation output of 809 kg, 63% greater than our forecast of 495 kg

Received license approval for Phase 2A at the Atholville facility, adding 3,200 kg, or more than 30% to Zenabis' total cannabis cultivation capacity

facility, adding 3,200 kg, or more than 30% to Zenabis' total cannabis cultivation capacity Continued construction and licensing activity at both its Atholville and Langley facilities, with forecast annual production capacity of 131,300 kg by the end of the third quarter of 2019

and facilities, with forecast annual production capacity of 131,300 kg by the end of the third quarter of 2019 Expanded recreational cannabis product offerings to include pre-roll products under a new ultra-premium brand, Blazery, as well as pre-roll and oil products under its existing recreational brand, Namaste

Entered into a binding term sheet for a three-year supply arrangement with leading German pharmaceutical research company Farmako GmbH ("Farmako") for the supply of biosynthetically produced pure CBD isolate oil (99.9%) from Farmako to Zenabis for sale in Canada ; and the supply of European Union Good Manufacturing Practices certified cannabis cultivated in Zenabis' indoor facilities in Canada for sale by Farmako to the German medical market

; and the supply of European Union Good Manufacturing Practices certified cannabis cultivated in Zenabis' indoor facilities in for sale by Farmako to the German medical market Graduated to the Toronto Stock Exchange ("TSX") from the TSXV, effective on May 27, 2019 , with the Company's common shares and common share purchase warrants continuing to trade under the symbols "ZENA" and "ZENA.WT", respectively

Summary First Quarter 2019 Financial Results

All amounts, unless specified otherwise, are expressed in Canadian dollars and are presented in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting.

For the quarter ended March 31, 2019, Zenabis recorded net revenues of $11.6 million, which was comprised primarily of $4.1 million and $7.5 million in Cannabis and Propagation segments, respectively, less inter-segment revenue of $0.3 million. Comparatively, in the three months ended December 31, 2018, the Company recorded net Cannabis revenue of $3.4 million, and in the three months ended March 31, 2018, the Company had not yet begun cannabis sales.

Gross margin before fair value adjustment totaled $3.9 million during the three months ended March 31, 2019, and includes $2.1 million and $1.6 million in Cannabis and Propagation gross margin, respectively, before fair value adjustments (51% and 21% as percent of net revenue by segment, respectively). Comparatively, in the three months ended December 31, 2018, Zenabis recorded a Cannabis gross margin before fair value adjustment of $1.7 million (50% of net revenue).

Total operating expenses for the quarter ended March 31, 2019 were $18.8 million, of which $4.9 were acquisition costs, which compares to $12.7 million in the three months ended December 31, 2018. Gain on the revaluation of derivative liability was $7.9 million in the 2019 first quarter compared to a loss of $13.1 million for Q4 2018, which was the result of fluctuations in the Company's share price. Share-based compensation was $2.1 million in Q1 2019 compared to $4.6 million in Q4 2018, due to various options that were vested on an accelerated basis in the previous quarter, which was not the case in the current quarter. Finance and investment income was $1.1 million in Q1 2019 compared to a loss of $1.9 million in Q4 2018 due to an increase in the market value of investments held by the Company. Offsetting these amounts were $4.9 million in first quarter 2019 acquisition costs related to the RTO and other business acquisition transactions, compared to $74,900 in Q4 2018; Q1 2019 interest expense of $4.6 million compared to $1.2 million in Q4 2018, which was due to the additional debt the Company issued or assumed in late Q4 2018 and in Q1 2019; and depreciation and amortization of $1.5 million in Q1 2019 compared to $0.3 million in Q4 2018, which was primarily the result of the various facilities being ready and available for use.

Adjusted EBITDA1 has continued to show a loss due to the operational costs incurred by Zenabis to build-out its operational capacity to achieve the planned production capacity of its various facilities. Adjusted EBITDA has not improved in comparison to the three months ending December 31, 2018 due to the increase in operating costs which are primarily due to the development and implementation of the resources and capacity needed by the Cannabis segment to support the facilities under construction that will be producing in 2019. The additional expenses are partially offset by the increase in sales and margins realized through the Company's Cannabis and Propagation segments. First quarter 2019 Adjusted EBITDA was ($6.4 million), compared to ($6.0 million) in Q4 2018.

The Company recorded a net loss for the three months ended March 31, 2019 of $4.0 million, or $0.02 loss per common share, compared to a net loss of $24.9 million, or $0.16 loss per common share, for the three months December 31, 2018.

Cash on hand increased to $25.6 million as at March 31, 2019 from $17.0 million at December 31, 2019. The increase in cash was mainly attributable to cash received from financing of $56.6 million, offset by cash used in operating activities of $17.6 million and investing activities of $30.3 million.

About Zenabis

Zenabis is a significant Canadian licensed cannabis 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. In addition to gaining technologically advanced knowledge of plant propagation, the recent addition of state-of-the-art greenhouses in Langley, Pitt Meadows and Aldergrove provides Zenabis with 3.5 million square feet of facility space that can, upon full conversion, be dedicated to cannabis production.

If all facility space at Zenabis Atholville, Zenabis Stellarton, Zenabis Delta and Zenabis Langley is fully converted and dedicated to production, Zenabis will own, and have access to 660,000 square feet of high quality indoor cannabis production space, as well as 2.1 million square feet of greenhouse cannabis production space at its Langley facility, with this production strategically positioned on Canada's coasts. Zenabis expects these facilities to have an annual design capacity of 131,300 kg of dried cannabis by the third quarter of 2019. These facilities, if fully built out and converted for cannabis production, would have an annual design capacity to yield approximately 479,300 kg of dried cannabis annually, for both national and international market distribution. An additional 700,000 square feet of greenhouse space will be used to continue the existing propagation business and produce industrial hemp, and can be converted to cannabis production at such a time that is beneficial to the strategic position of the Company. The Zenabis brand name is used in the cannabis medical market, while the Namaste and Blazery 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 recently licensed facility space and facility space under, or scheduled for, construction, the expected timing and completion of current and planned conversion, expansion and optimization of our facilities, the licensing of our facilities and projected timing thereof; the expected Q2 2019 revenue from the plant propagation business of $16 to $18 million, and expected Q2 2019 net revenue from the cannabis business of $10 to $12 million; the adequacy of our financial resources to achieve the conversion and expansion of our facilities; the timelines projected for our internal post-processing capacities; and the expected timing and 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.

Selected Financial Data (Unaudited)

Financial Results2 Q1 | 2019 Q4 | 20183 % Change Q1 | 20184 % Change Gross revenue $ 12,283,493 $ 3,841,445 220 $ – N/A Net revenue

11,557,217

3,403,089 240

– N/A Gross margin before fair value















adjustment

3,876,874

1,710,273 127

– N/A Operating expenses

18,763,281

12,664,651 48

2,552,311 635 Operating loss 10,294,873

8,543,407 21

2,552,311 303 Other income (expenses)

4,447,081

(16,254,109) N/A

(43,576) N/A Net loss

4,005,815

24,884,485 (84)

2,595,887 54 Adjusted EBITDA1

(6,425,716)

(5,947,942) (8)

(2,067,396) (211) Loss per share, basic and diluted

(0.02)

(0.16) 88

(0.02) -- Balance Sheet















Total assets $ 309,204,757 $ 111,469,060 177 $ 66,610,776 364 Total non-current liabilities

78,981,478

2,119,158 3,627

12,830,628 516 Property, plant and equipment

165,116,799

67,855,776 143

44,247,850 273





(1) Adjusted EBITDA is not a recognized, defined, or standardized measure under IFRS and may not be compared to

similar measures presented by other issuers. Adjusted EBITDA is a metric used by management, calculated as net

income (loss) before interest expense; finance and investment income; gain (loss) on revaluation of derivative liability;

loss on sale of assets; income taxes; depreciation and amortization; share-based compensation; acquisition costs;

and the fair value adjustment to biological assets and inventory. Management believes adjusted EBITDA is a useful

financial metric to assess the Company's operating performance before the impact of non-cash items and acquisition

related activities. Adjusted EBITDA is reconciled and explained in the Management's Discussion & Analysis ("MD&A")

under "Non-GAAP Financial Measures)," a copy of which will be filed on SEDAR after financial markets close today.

The Adjusted EBITDA is reconciled in a table elsewhere in this press release. (2) Due to the accounting presentation resulting from the RTO, no comparable information is presented for the

Propagation business even though Bevo Farms has been operating since 1989. For prior period information please

refer to the financial statements previously filed by Bevo Agro Inc. on SEDAR. (3) Period includes Cannabis operations only. (4) Refer to the "Non-GAAP Financial Measures" section in the MD&A for reconciliation to the IFRS equivalent.

Adjusted EBITDA (Non-GAAP Measure) Reconcilliation5

































Q1 | 2019

Q4 | 2018

Q3 | 2018

Q2 | 2018 Net loss $ (4,005,815)

$ (24,884,485)

$ (2,141,616)

$ (2,899,772) Realized fair value amounts





















included in inventory sold

3,402,319



1,734,445



748,576



– Unrealized gain on changes in





















fair value of biological assets

(7,993,853)



(4,145,416)



(2,330,053)



(850,246) Depreciation and amortization

1,462,077



330,817



299,808



258,030 Share-based compensation

2,078,636



4,600,719



546,411



493,652 Acquisition costs

4,919,978



74,900



–



– Gain/loss on revaluation of





















embedded derivative liability

(7,891,451)



13,131,068



–



(78,009) Interest expense

4,553,288



1,193,367



69,617



228,531 Gain/loss on sale of assets

7,402



5,355



(2,850)



– Finance and investment income/





















expense

(1,116,320)



1,924,319



(277,565)



76,803 Income tax expense

61,477



86,969



–



– Deferred income tax recovery

(1,903,454)



–



–



–























Adjusted EBITDA $ (6,425,716)

$ (5,947,942)

$ (3,087,672)

$ (2,771,011)





(5) Adjusted EBITDA is net income (loss) before interest expense; finance and investment income; gain (loss) on

revaluation of derivative liability; loss on sale of assets; income taxes; depreciation and amortization; share-based

compensation; acquisition costs; and the fair value adjustment to biological assets and inventory.

SOURCE Zenabis Global Inc.

For further information: Media Relations: Email: [email protected], Phone: 1-844-523-8679; Investor Relations: E-mail: [email protected], Phone: 1-844-523-8679

Related Links

www.zenabis.com

