Zenabis Global (TSX: ZENA) quietly filed their first quarter 2020 financial results late last night, reporting net revenues of $19.9 million for the period ended March 31, 2020, compared to $17.9 million for the previous quarter. Net loss for the period came in at $1.5 million, largely thanks to a large biological adjustment made by the firm.
Zenabis reported gross revenues of $22.4 million for the period before excise taxes, which netted revenues down to $19.9 million. Total cannabis revenues amounted to $12.6 million, a marked improvement from the previous quarters $10.6 million in cannabis revenues. Production costs associated with these sales amounted to $10.9 million, leaving $9.0 million in gross margin before biological adjustments.
Operating expenses during the quarter came in at $10.1 million, with the largest expense attributed to salaries and benefits at $4.2 million. Depreciation and amortization was the second largest expense, at $2.1 million, followed by general and administrative expenses at $1.5 million. Net loss for the quarter came in at $1.5 million, thanks in part to a $6.3 million interest expense.
While the income statement may have showed signs of hope for Zenabis, the balance sheet does the opposite. The three month period saw Zenabis’ cash position decline from $16.5 million to that of $8.3 million – leaving the firm with approximately one quarter’s worth of cash burn. Inventory increased from $39.3 million to that of $44.6 million. Total current assets improved from $90.0 million to $104.6 million.
The firms total current liabilities however is where the real concern lies. While current liabilities decreased marginally from $148.5 million to $148.1 million, this is really where any bright spot ends. The company currently has $27.2 million in accounts payable, which it currently has little means to cover. On top of that, is $59.0 million in loans and borrowings, $22.5 million in convertible debentures, and $38.8 million in customer deposits that Zenabis needs to manage.
In terms of the outstanding loans and borrowings, they dealt with a portion of this last month by pushing out $50 million in secured debt to 2025 through the issuance of 71.3 million common share purchase warrants, a tiered royalty structure on revenues, and and $3.8 million amendment fee. The company also saw $1.1 million in convertible debentures converted on May 4, however much concern remains – such as how the firm intends to pay its current payables that are piling up, with total 2020 commitments pegged at roughly $70 million.
Zenabis Global last traded at $0.075 on the TSX.
Information for this briefing was found via Sedar and Zenabis Global Inc. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive’s stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.