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Delta 9 Update on Production and Wholesale Activities

Delta 9 Update on Production and Wholesale Activities


WINNIPEG, MB – January 27, 2020 – DELTA 9 CANNABIS INC. (TSX:DN) (OTCQX: VRNDF) (“Delta 9” or the “Company”), is pleased to provide investors with an update on its cannabis production and wholesale selling activities. Over 2019, Delta 9 worked to increase its dried cannabis production capacity at its Winnipeg based facilities (the “Delta Facility”) and to add provincial listing and supply agreements to increase its distribution capacity.

Delta 9’s proprietary cannabis production methodology is based around a modular, scalable, and stackable production unit called the “Grow Pod”. Over the year, the Company received several licensing approvals from Health Canada, which increased the overall number of Grow Pods licensed as at December 31, 2019, to 297, an increase in licensed capacity of 93% from 154 as at December 31, 2018. The Company’s 297 Grow Pods currently licensed by Health Canada have an estimated annual production capacity of 8,325 kg of cannabis per year.

Summary of Highlights for the year ending December 31, 2019:

  • Total number of Grow Pods licensed by Health Canada increased to 297
  • Quarterly Production in grams increased to 1.3 Million grams in Q4, 2019
  • Quarterly Direct Production Cost per gram decreased to $0.91 in Q4, 2019
  • Quarterly Grams Released for sale increased to 718,353 in Q4, 2019

In 2019, the Company began to introduce key performance indicators (“KPIs”) as a part of its quarterly management discussion and analysis for its production and wholesale activities to provide investors with metrics to assess the performance of this business unit.

Below is a summary of select quarterly KPIs:

Key Performance Indicators For the three-month period ending March 31, 2019 For the three-month period ending June 30, 2019 For the three-month period ending Sept 30, 2019 For the three-month period ending Dec 31, 2019
Production/ Wholesale Unit
Total Grams Produced 418,901 675,233 871,517 1,305,806
Cash Production Cost Per Gram $1.44 $1.05 $1.08 $0.91
Total Cash Cost Per Gram $1.60 $1.21 $1.21 $1.04
Total Grams Released for Sale 185,626 565,599 519,596 718,353

 

We are very pleased at the progress of our production ramp up over this past year as we have consistently increased output capacity quarter over quarter,

said John Arbuthnot, CEO of Delta 9.

As we have scaled our production capacity and invested in automation of key processes, we have been able to realize significant efficiencies in our production cost per gram. We are now in an industry leading category with high quality and low-cost production capacity.

The Company began the year with a supply agreement in place with Manitoba Liquor and Lotteries for sales in Manitoba and has since received authorization for sales in the Provinces of Saskatchewan, Alberta, and British Columbia. The Company is currently in active negotiations with additional provincial regulators and wholesalers to secure additional distribution markets.

As we have added production capacity over the past year, we have continued to pursue additional provincial distribution agreements,

said John Arbuthnot.

We ultimately see ourselves as a national distributor of high-quality cannabis products across Canada.

Phase II Expansion

The Company is working to expand its Health Canada licensed perimeter to include additional buildings at the Delta Facility, which will bring the total licensed square footage to approximately 135,000 square feet, from 80,000 square feet currently licensed by Health Canada.

The Company is also now working to finalize its purpose-built cannabis processing center which will allow for fully automated bottling, packaging, capping, and labelling functions for its consumer-packaged dried cannabis products. The Company anticipates that once the processing center is licensed and operating at capacity it will allow for processing of up to 25,000 kg of dried cannabis flower material per year.

The next phase of the Company’s Phase II expansion is planned to include an additional 129 Grow Pods, comprised of approximately 114 flowering Grow Pods and 15 support Grow Pods. Once fully built and licensed, the Company anticipates having approximately 420 Grow Pods under license as a part of its Phase II expansion. The additional Grow Pods will be placed within existing warehouse space at the Delta Facility.

The Company anticipates that this Phase II expansion will add an additional 3,650 kg in dried cannabis flower production per year, bringing the overall anticipated production capacity for the Delta Facility to 11,975 kg of cannabis per year. The anticipated construction cost of the balance of the Phase II expansion is expected to be approximately $7,000,000 which the Company plans to fund with a mix of cash flows from operations and cash on hand.

The Company will provide further updates on its expansions plans as they become available.

 

For more information contact:

 

Investor & Media Contact:

Ian Chadsey VP Corporate Affairs

Mobile: 204-898-7722

E-mail: ian.chadsey@delta9.ca

 

About Delta 9 Cannabis Inc.

Delta 9 Cannabis Inc. is a vertically integrated cannabis company focused on bringing the highest quality cannabis products to market. Delta 9's wholly-owned subsidiary, Delta 9 Bio-Tech Inc., is a licensed producer of medical and recreational cannabis and operates an 80,000 square foot production facility in Winnipeg, Manitoba, Canada. Delta 9 owns and operates a chain of retail stores under the Delta 9 Cannabis Store brand. Delta 9's shares trade on the TSX under the symbol "DN" and on the OTCQX under the symbol "VRNDF". For more information, please visit www.delta9.ca.

Disclaimer for Forward-Looking Information

 Certain statements in this release are forward-looking statements, which reflect the expectations of management regarding the Company’s future business plans and other matters. Forward-looking statements consist of statements that are not purely historical, including any statements regarding beliefs, plans, expectations or intentions regarding the future.

 

Forward looking statements in this news release include statements relating to: (i) Delta 9’s anticipated production of cannabis; (ii) the successful negotiation and entering into of additional supply agreements with other Provinces; and (iii) Delta 9’s expansion plans. Such statements are subject to risks and uncertainties that may cause actual results, performance or developments to differ materially from those contained in the statements, including the Company’s actual cannabis production being different from its estimates as well as all risk factors set forth in the annual information form of Delta 9 dated April 30, 2019 which has been filed on SEDAR.

 

No assurance can be given that any of the events anticipated by the forward-looking statements will occur or, if they do occur, what benefits the Company will obtain from them. Readers are urged to consider these factors carefully in evaluating the forward-looking statements contained in this news release and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. These forward-looking statements are made as of the date hereof and the Company disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws.

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