Zenabis Rights Offering - October 24, 2019
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Zenabis Rights Offering
October 24, 2019
TSX: ZENA
TSX: ZENA
DISCLAIMER
This presentation contains certain “forward-looking statements” and “forward-looking information” as defined under applicable Canadian and U.S. securities laws (collectively, “forward-looking statements”). All statements,
other than statements of historical fact, are forward-looking statements. When used in this Circular, the words “estimate”, “project”, “believe”, “anticipate”, “intend”, “expect”, “plan”, “predict”, “may”, “should”, “will”, or the
negatives of these words or other variations thereof and comparable terminology are intended to identify forward-looking statements. The forward-looking statements pertain to, among other things: the timing of and other
procedural matters associated with the Rights Offering; the funds to be raised under the Rights Offering; estimated costs of the Rights Offering; the successful completion of the Rights Offering; the use of proceeds from the
Rights Offering; the Company’s estimate of how long the funds raised in the Rights Offering will last from the Expiry Time; the anticipated dilution of shareholders of the Company and liquidity and working capital of the
Company.
The forward-looking statements are based on a number of key expectations and assumptions made by management of the Company, including, but not limited to: the maximum number of Common Shares being issued
pursuant to the Rights Offering; the estimated cost of the Rights Offering; the estimated amount of funds raised under the Rights Offering; the operating expenses of the Company following the Expiry Time; the availability of
additional capital; the Company’s ability to continue as a going concern; and general economic and financial market conditions.
Although the Company believes that the expectations and assumptions on which the forward-looking statements are based are reasonable, undue reliance should not be placed on such forward-looking statements. The
forward-looking statements reflect the Company's current views with respect to future events based on currently available information and are inherently subject to risks and uncertainties. Many factors, both known and
unknown, could cause actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements
contained in this Circular, including, but not limited to: the maximum number of Common Shares being issued pursuant to the Rights Offering being lower than expected; the uncertainty associated with estimating actual
costs incurred in the Rights Offering; the actual amount of funds raised under the Rights Offering; the actual operating expenses of the Company for the 12-month period following the Expiry Time; delays in obtaining or
failure to obtain required approvals to complete the Rights Offering; the impact of issuance of additional Common Shares on the market price of the Common Shares; the condition of the global economy; and the Company's
access to funding and its ability to provide the capital required for product development, operations and marketing efforts, and working capital requirements.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, believed, estimated or expected. The Company
cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Although the Company has attempted to identify important factors that could cause actual
results to differ materially from forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated, described or intended. The Company disclaims any obligation subsequently to
revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect changes in assumptions or the occurrence of anticipated or unanticipated events, except as required by
law.
The Company qualifies all the forward-looking statements contained in this presentation by the foregoing cautionary statements.
TSX: ZENA
1
OVERVIEW
What is a rights offering?
A rights offering provides a right to existing shareholders to purchase additional new shares in a company in proportion to their existing
holdings. This allows the company to raise capital with existing shareholders in a manner that is not dilutive to shareholders, because all
shares receive equivalent rights.
As it is a distribution of a security (in this case a right) to all shareholders, it is fair and non-dilutive1, equivalent to the spin-out of
an existing asset.
How do I find out more about the Zenabis Rights Offering?
For more information on the Zenabis Rights Offering, please see slides 3-8. More information is also included in the Rights
Offering Circular filed on SEDAR, which will also be mailed to shareholders on November 6, 2019.
Zenabis’ investor relations team is also available via phone and e-mail:
E-mail: invest@zenabis.com
Phone: 1-855-936-2247
TSX: ZENA
2
Note: 1) A rights offering is not dilutive to a shareholder if they exercise all the rights granted to them.WHY A RIGHTS OFFERING?
Zenabis would like to buttress its cash position given cannabis market conditions within
Strengthen Canada.
Existing
Cash Given equity capital markets conditions pertaining to the Canadian cannabis
Position industry, Zenabis has identified a rights offering as the least-dilutive path to
securing additional liquidity without increasing debt outstanding.
Zenabis insiders have been receptive to the opportunity to support the business through
Significant further investment. Insiders have committed to $6.3m of the $20.8m to be raised in the
Insider Rights Offering (30% of gross proceeds).
Participation The commitment of insiders contributing their own capital is strong evidence of
insider belief in the business.
Zenabis always aims to raise capital in a manner that limits the dilution of existing
Fairest shareholders.
to So long as shareholders participate in the Rights Offering by exercising their
Participating rights, a Rights Offering is not dilutive to their basic ownership interest. If
Shareholders shareholders sell their right, they also receive market value for their right,
meaning they have received fair value for their securities.
TSX: ZENA
3ZENABIS RIGHTS OFFERING OVERVIEW
Zenabis Rights Offering Summary
Each Zenabis shareholder of record at 5:00pm on October 31, 2019 (the “Record Date”)1 will receive one
1 right (each a “Right”) for each Zenabis common share (“Common Share”) owned as of the Record Date1.
We understand from the TSX that, due to trading and settlement mechanics which are out of Zenabis’ control, the common shares of
Zenabis will begin trading without an entitlement to a right as of market open on Wednesday, October 30, and at the same time, the
rights will begin trading on the TSX. Shareholders are encouraged to contact their investment advisors with any questions they may
have about trading and settlement mechanics.
1.5 Rights entitle right holders to subscribe for one Zenabis Common Share at the price of $0.15 per
2
share (the “Subscription Price”) (the “Basic Subscription Privilege”).
1.5 Rights + $0.15 One Zenabis Common Share
Options Available to Shareholders (Resident in Canada)
Exercise Rights Do Nothing
Sell or Transfer Rights All unexercised Rights will expire at the
A Right holder may exercise all or part of
A Right holder may sell their Rights Expiry Time, after which time the Rights
their Rights before the Expiry Time to
through the TSX; Rights are fully will be void and of no value, and
subscribe for Common Shares at the
transferable into and within Canada. shareholders who exercised will have the
Subscription Price.
right to take-up these rights.
Each Right may be exercised beginning November 6, 2019 until 5:00pm EST on November 27, 2019 (the
3 “Expiry Time”)2. Shareholders are not obligated to exercise their Right(s).
Rights may be traded and transferred within Canada on the Toronto Stock Exchange (the “TSX”) until
4 12:00pm EST on November 27, 2019.
TSX: ZENA
4
Notes: 1) Due to trading and settlement mechanics, Zenabis common shares will begin trading “ex-rights” (without an entitlement to receive the rights) as of the beginning of trading on October 30, 2019. 2) Common shares issuable upon
the exercise of rights will be available for trading after the Expiry Time.COMPARABLE MULTIPLES AT RIGHTS OFFERING VALUATION1
Current Licensed Annual Production Capacity
Metrics CRON ACB VFF TGOD APHA FIRE OGI SNDL TRST VIVO ZENA
Enterprise Value2
1,532 5,292 579 253 1,603 322 704 525 219 50 1374
($m)
Current Capacity
40,150 175,300 37,500 17,500 115,000 33,580 76,000 60,000 50,000 12,000 57,000
(kg)
EV/Current Capacity
38.1 30.2 15.4 14.5 13.9 9.6 9.3 8.7 4.4 4.2 2.4
($m/tonne)
Last Three Months Production3
Metrics FLWR EMH TLRY APHA OGI HEXO SNDL WMD ZENA TRST
Enterprise Value2
312 152 2,417 1,603 704 762 525 159 1374 219
($m)
Last Three Months
460 228 11,474 10,581 6,052 9,804 9,551 3,617 5,239 9,500
Production (kg)
EV/Last Three Months
677.4 668.0 210.7 151.5 116.3 77.7 54.9 44.0 26.2 23.1
Production ($m/tonne)
TSX: ZENA
5
Notes: 1) All production metrics obtained as of October 16, 2019 and sources have been listed on slide 15. 2) Enterprise value as of October 24, 2019 and based on CapIQ figures. 3) Amount of cannabis produced on a dried flower equivalent basis as disclosed in the most
recent financial reports. 4) See slide 14 for calculation.ZENABIS RIGHTS OFFERING | (1/2)
How many Rights are being issued?
An aggregate of 208,629,937 Rights are being issued based on the 208,629,937 Common Shares currently outstanding
as at October 24, 2019. These Rights may be utilized to subscribe for 139,086,624 common shares at a price of $0.15
per common share.
Assuming all of the Rights are exercised and no other issuances of Common Shares occur before the Expiry Time,
Zenabis will have 347,716,561 Common Shares outstanding immediately after the Expiry Time, which represents a
67% increase in shares outstanding as a result of the offering.
Available Funds and Dilution
Assuming Insider Assuming 50% of Assuming 75% of Assuming 100% of
Commitments Only Offering Offering Offering
Amount to Be Raised By This Offering $6.3m $10.4m $15.6m $20.8m
Less: Estimated Offering Costs ($0.2m) ($0.2m) ($0.2m) ($0.2m)
Equals: Available Funds $6.1m $10.2m $15.4m $20.6m
Assuming Insider Assuming 50% of Assuming 75% of Assuming 100% of
Commitments Only Offering Offering Offering
New Common Shares to Be Issued 41,859,486 69,543,312 104,314,968 139,086,624
Percentage Increase in Shares Outstanding 20% 33% 50% 67%
Maximum Share Dilution1 17% 25% 33% 40%
TSX: ZENA
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Note: 1) If a shareholder elects not to exercise Rights, then a shareholder’s percentage ownership of Common Shares will be diluted by approximately the listed amounts based on the corresponding percentage of total rights issued
under the offering being exercised. For the avoidance of doubt, dilution would only impact non-participating shareholders.ZENABIS RIGHTS OFFERING | (2/2)
Are insiders participating?
To our knowledge, insiders (founders, management team and directors) have committed to exercise Rights to purchase
~$6.3m in shares in the Rights Offering; this is equivalent to ~30% of the shares on offer in the Rights Offering.
Insider Participation
Security Holder Position Indicative Participation
Andrew Grieve Chief Executive Officer and Director 100% of Basic Subscription Privilege; $100,000 standby commitment
Manoj (Monty) Sikka Chair and Co-Founder 76% of Basic Subscription Privilege
Leo Benne Chief Growing Officer and Director 100% of Basic Subscription Privilege
100% of Basic Subscription Privilege and
Adam Spears Director
750,000 additional Rights (outside of the Basic Subscription Privilege)1
Daniel Burns Director 1,000,000 Rights (outside of the Basic Subscription Privilege)1
Larry Van Wieren Director 2,000,000 Rights (outside of the Basic Subscription Privilege)1
Natascha Kiernan Director $20,000 standby commitment
Mike Smyth Chief Financial Officer 100% of Basic Subscription Privilege
Mark Catroppa Co-Founder 76% of Basic Subscription Privilege
Based on the above indicated intention of insiders to participate in the offering, at least ~30% of the rights issued under the
offering would be taken-up by insiders
How will the available funds be used?
The proceeds of the offering will be used for general working capital purposes of the company. Zenabis has determined
that it is in the best interest of its shareholders to secure additional surplus liquidity in the form of equity capital.
TSX: ZENA
7
Note: 1) Adam Spears, Daniel Burns and Larry Van Wireren intend to exercise Rights provided by Monty Sikka and Mark Catroppa that will not be exercised by either of Monty Sikka or Mark CatroppaADDITIONAL INFORMATION | (1/2)
How does a Rights holder exercise the Rights?
All registered holders of Common Shares on the Record Date will receive a Rights Certificate enclosed with the Notice
that will be mailed to holders on or about November 6, 2019. The holder of a Rights Certificate may subscribe for up to
all of Common Shares to which the Rights Certificate entitles such holder by completing and executing Form 1 on the
face of the Rights Certificate and delivering the Rights Certificate together with the aggregate Subscription Price for
such Common Shares to the office of Computershare Investor Services Inc. (the “Subscription Agent” retained by
Zenabis in connection with the Rights Offering) before the Expiry Time by courier to the following address:
8th Floor, 100 University Ave., Toronto, Ontario M5C 3H2, Canada, Attention: Corporate Actions
How does a Rights holder sell or transfer Rights?
The Rights will trade on the TSX under the symbol “ZENA.RT” until 12:00pm EST on November 27, 2019. Holders of
Rights Certificates not wishing to exercise their Rights may sell or transfer all or part of their Rights personally or
through their securities broker by completing and executing Form 3 on the face of the Rights Certificate and delivering
the Rights Certificate to a purchaser.
TSX: ZENA
8ADDITIONAL INFORMATION | (2/2)
What is the Additional Subscription Privilege and how is it exercised?
A holder of a Rights Certificate who subscribes for all of the Common Shares to which a Rights Certificate entitles such
holder may subscribe for Additional Common Shares at the Subscription Price by completing and executing Form 2 on
the face of the Rights Certificate together with the aggregate Subscription Price for each Additional Common Shares to
the Subscription Agent.
If there is an insufficient number of Common Shares available (the “Available Common Shares”) to satisfy the
aggregate subscriptions for Additional Common Shares, then the number of Available Common Shares allocated to a
subscriber will be the lesser of:
I. The number of Additional Common Shares that has been subscribed to; and
II. The proportional amount of Available Common Shares based on the fraction (a) / (b), where (a) is the number of
Common Shares subscribed for by such holder under the Basic Subscription Privilege and (b) is the aggregate
number of Common Shares subscribed for under the Basic Subscription Privilege by all participates that have
subscribed for Additional Common Shares.
TSX: ZENA
9TSX: ZENA
Contact Us
invest@zenabis.com
zenabis.com
TSX: ZENAAppendix A – Rights Offering Example TSX: ZENA
RIGHTS OFFERING EXAMPLE
Rights Offering Details Impact of Rights Offering
▪ A company issues its existing shareholders one right for every share ▪ Assuming all of the issued rights are exercised, the company will sell
a shareholder owns; every two rights allows a shareholder to 100 new common shares to existing shareholders at $0.50 per share
purchase a new share at $0.50 per share for gross proceeds of $50
▪ As a result, a total of 200 rights are issued for the 200 shares ▪ Assuming all rights are exercised by existing shareholders, no
outstanding; these rights can be utilized to subscribe for 100 shares existing shareholders are diluted by the offering
▪ $0.50 per share is a discount to the prevailing market price of $1.00
Company Value Company Impact of Offering Value
Shares Outstanding 200 Shares Outstanding +100 300
Times: Share Price $1.00 Times: Share Price $0.50 $0.832
Equals: Equity Value $200 Equals: Equity Value +$50 $250
Shareholders Shares Owned Equity Value Ownership Shareholders Shares Owned Equity Value Ownership
Shareholder A 100 $100 50% Shareholder A 150 $125 50%
Shareholder B 60 $60 30% Shareholder B 90 $75 30%
Shareholder C 40 $40 20% Shareholder C 60 $50 20%
Total 200 $200 100% Total 300 $250 100%
TSX: ZENA
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Note: 1) Share price assuming that the sample company trades at its implied share price post-rights offering calculated as: equity value before rights offering ($200) plus additional equity raised ($50) divided by shares outstanding post-
rights offering (300).Appendix B – Other Information TSX: ZENA
CALCULATION OF RIGHTS OFFERING ENTERPRISE VALUE
Enterprise Value Calculation Value
Basic Shares Outstanding 208.6m
Plus: Rights Offering Shares Issuable 139.1m
Equals: Shares Outstanding Post-Rights Offering 347.7m
Times: Rights Offering Price $0.15
Equals: Equity Value at Rights Offering Price $52m
Add: Debt1 $142m
Less: Cash4 ($57m)
Equals: Enterprise Value $137m
TSX: ZENA
14
Notes: 1) Debt includes all non-convertible financing and out-of-the-money convertible financing. 2) Cash balance of $8.7m as outlined in the Zenabis Global Inc. Financial Statements as at June 30, 2019 has been adjusted to take into account the impact
of the $30.0m prepaid advance from Tilray on July 20, 2019, the $23.0m net proceeds received from R.C. Morris shortly after closing on August 21, 2019 and the net proceeds from the rights offering, assuming full takeup, less capex remaining as
disclosed in the Zenabis Global Inc. Management Discussion and Analysis for the three months ending June 30, 2019. The negative value indicates a subtracted value, rather than a negative cash balance.COMPARABLE METRICS SOURCES
▪ Canopy. Canopy MD&A dated February 14, 2018 and June 21, 2019.
▪ Aurora. Aurora 2019 annual report.
▪ Aphria. Aphria MD&A October 11, 2019.
▪ Tilray. Tilray MD&A dated August 13, 2019.
▪ Emerald. Emerald MD&A dated May 30, 2019.
▪ HEXO. Hexo MD&A dated October 26, 2018 and June 12, 2019.
▪ Cronos. Cronos MD&A dated August 13, 2018
▪ CannTrust. CannTrust MD&A dated May 13, 2019.
▪ WeedMD. WeedMD MD&A dated August 28, 2019.
▪ OrganiGram. OrganiGram MD&A dated July 12, 2019.
▪ Supreme. Supreme MD&A dated May 13, 2019 and September 2019 investor presentation.
▪ TGOD. TGOD MD&A for the period ending June 30, 2019.
▪ Village Farms. Village Farms July 2019 investor presentation (http://villagefarms.com/wp-content/uploads/2014/08/VFF-Investor-Presentation-
July-for-Web-Site-Jul-17.pdf); Village Farms MD&A dated August 12, 2019.
▪ Flowr. The Flowr Corporation MD&A dated August 14, 2019.
▪ Sundial. Sundial Growers Inc. prospectus dated July 31, 2019; Sundial Growers Inc. MD&A dated August 13, 2019.
▪ VIVO. VIVO MD&A dated August 28, 2019.
▪ WeedMD. WeedMD MD&A dated August 28, 2019
TSX: ZENA
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