Zenabis Global Inc. (TSX: ZENA) announced details of its cannabis derivative product strategy and execution, including entering into an agreement with a Canadian beverage manufacturer to produce a range of cannabis-infused beverages.
In December 2019, Zenabis signed a definitive agreement with HYTN Beverages Inc. (“HYTN“) to produce a range of cannabis-infused beverages at Zenabis Stellarton. The initial launch of cannabis-infused sparkling water beverages under the HYTN brand is listed with all Zenabis’ Provincial counterparties, with strong indicative demand. The first shipment of the initial four flavors of the cannabis-infused sparkling water beverages expected in Q2 2020.
“We are happy to announce a new addition to the Canadian cannabis 2.0 market. We are working with a partner that has experience successfully formulating new beverage options in the Canadian market. The combination of HYTN’s beverage manufacturing expertise with our high-quality cannabis extracts allows Zenabis to provide consumers with a new line of high-quality cannabis-infused beverages,” commented Kevin Coft, Chief Executive Officer of Zenabis. “Initial indicative demand from our provincial partners is strong and we hope to have these products into their supply chains in Q2 2020. This will make Zenabis one of the first licensed producers to bring cannabis-infused beverages to the Canadian market.”
Zenabis also stated that its Atholville’s extraction lab is currently operating at 400 kg of biomass per month, and is expected to reach a steady state of production in March 2020. The intent is to use cannabis extracts from Zenabis Atholville in Zenabis’s cannabis derivative products once extraction reaches a steady state.
In October, the company reported that it had experienced delays in the packaging ramp-up at both Zenabis Atholville and Zenabis Stellarton which resulted in Zenabis not being able to package and sell all of its cultivated product from August through September; and that Zenabis expected to spend the entirety of its remaining estimated capital expenditure budget Zenabis Langley (as forecast in Zenabis’ MD&A for the period ending June 30, 2019, at $13,700,000) upon completion of Part 2B; as a result, Zenabis expected capital expenditure amounts remaining to spend relating to Part 2C to be over budget (estimated to be $4,000,000).
HYTN is in the process of installing its own beverage production line in Zenabis Stellarton, with the commission expected to be completed by March 2020. Zenabis will supply the requisite cannabis extracts and provide coast to coast distribution with the company’s provincial counterparties. The intent is to launch a series of cannabis-infused sparkling water beverages under the HYTN brand with future beverage products planned to the extent that is justified by market conditions and demand.
The stock fell at that time and has never really recovered. In mid-October, the stock was trading at roughly fifty cents a share and it is now trading at roughly nine cents a share. At the time, there were accusations of Zenabis insiders shorting the stock while covering themselves with the rights offering. Stock jocks were specifically pointing to the Twitter account of @rubiconcapital for talking up Zenabis ahead of the offering that prices the rights at 15 cents.
Despite the rumors, Zenabis is moving forward and has executed its first production run of vape cartridges for the PAX Labs Inc. Era vaporizer device range. The initial run was immediately sold to three provincial partners. The first provincial shipments commenced on 5 February, 2020.