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Zenabis arranges $10-million of non-dilutive financing in supply pact with Starseed Medicinal

Zenabis Global (TSX:ZENA) entered into an agreement whereby Starseed Medicinal would advance $10-million to Zenabis in September 2019 in return for dried cannabis flower and trim from Zenabis.

Under the accord, Zenabis will deliver a maximum monthly quantity of dried cannabis flower or trim to Starseed, beginning in October 2019. Zenabis expects the prepaid amount to be retired within 18-to-24 months.

Zenabis does not expect delivery commitments to Starseed, together with another prepaid supply agreement arranged with Tilray (NASDAQ:TLRY) to impact its ability to supply existing customers. The pricing under the supply agreement will vary depending on the product type and format Starseed elects to order.

In a statement, Andrew Grieve, CEO of Zenabis, said the company now has obtained $40-million in non-dilutive financing through pre-paid supply agreements, which “we estimate to be sufficient to achieve our planned 131,200 kg of cannabis cultivation capacity expected to occur in the current quarter.

As a result, he said Zenabis no longer intends to draw on an existing $60-million unsecured convertible debenture facility to fund an ongoing expansion or working capital.

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