ZenaTech Inc T.ZENA

Turning point - Q2 let Zenabis survive, Q3 will be true test

[buddyboybruce]

So, why did Zenabis Global lose $15.7M in Q2 2020? Because of the following Press Release early in Q2: "Zenabis Announces Amendments to Senior Secured Debenture and Positive Operational Updates", April 23, 2020:

https://www.zenabis.com/zenabis-announces-amendments-to-senior-secured-debenture-and-positive-operational-updates/


Kevin Coft pushed back $50M Original Senior Debt from June 30, 2020 to March 31, 2025. If the syndicate of lenders (collectively, the “Senior Lenders”) did not budge, Zenabis would not be around today. Andrew Grieve orchestrated this sticky situation, and on August 21, 2019, Grieve announced the completion of $25.0m in new senior secured debt to enable Zenabis to complete the expansion of its facilities to achieve an annual design capacity of 143,200 kg of dried cannabis. Additionally, Grieve said (in August 2019) that this financing is sufficient for Zenabis to become cashflow positive without the need to raise incremental debt financing, raise convertible debt, or issue incremental equity capital. source: https://www.zenabis.com/zenabis-provides-operations-update-for-july-2019/

What does this mean? 

It means that Zenabis was wrong and miscalculated big time! But, it also means that Senior Lenders are more than happy to work with Zenabis. They understand the potential of Zenabis and are happy to give Zenabis more time with their $50M.

The $15.7M "loss" in Q2 2020 was due to the April 23, 2020 Amendments to Senior Secured Debt and is a one-time hit on Zenabis for Q2. Remember, Zenabis was $3.1M EBITDA postive in Q2. Grieve, one year ago, must have thought it would be about 10 times more, or $31M (otherwise he wouldn't agree to June 30, 2020 maturity stipulation). Also, it's worth pointing out, that Grieve, as CEO, was positioned to get a feeling of the potential of Zenabis - and Grieve, him as CEO being privy to all inside dealing within Zenabis and the Cannabis sector, thought the potential of Zenabis was enormous! 

Furthermore, what does this mean for you? This means that if you believe "the anticipated growth in net cannabis revenue of 44 per cent to 78 per cent in the third quarter of 2020 versus the second quarter of 2020, which is expected to result in consolidated adjusted EBITDA of $4-million to $6-million for the quarter," then, without the Senior Secured Debt Amendment hit of Q2, Zenabis will have Consolidated net profit for Q3 2020. 

Let me repeat, Zenabis will have Consolidated net profit for Q3 2020. I will leave it to you to guess what this will do to the ZENA share price (especially if they sell the Delta facility before Q3 ends on September 30, 2020, which I think they will because they did get offers already).