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Revenue Increases 312% Over Previous Year as Delta 9 Releases Third Quarter Financial Results

WINNIPEG, Nov. 29, 2018 /CNW/ - DELTA 9 CANNABIS INC. (TSXV:NINE.V - News) ("Delta 9" or the "Company") today announced its financial and operational results for the third quarter of fiscal 2018, ended September 30, 2018.

Delta 9 Cannabis Inc. is a leading producer, distributor and retailer of legal cannabis for the medical and recreational markets, based in Winnipeg, Manitoba. (CNW Group/Delta 9 Cannabis Inc.)

Highlights for Q3, 2018

  • Strong cash position at September 30, 2018 of $23,211,764 up from $13,908,610 at June 30, 2018. The Company is also reporting working capital of $28,212,041 at September 30, 2018.

  • The Company closed a $16,250,000 strategic equity investment from Auxly Cannabis Group Inc. ("Auxly") and executed a long-term cannabis supply agreement with Auxly during the quarter.

  • Revenue from the sale of cannabis products and services for the three-month and nine-month periods ending September 30, 2018, was $1,251,213, and $2,229,066 respectively, versus revenues of $303,877 and $641,830, for the three-month and nine-month periods ending September 30, 2017. These increases are reflective of a percentage increase for the three-month and nine-month periods of 312% and 258% respectively, compared to the previous year.

  • Gross profit, after accounting for the unrealized gain from changes in the fair value of biological assets, for the three-month and nine-month periods ending September 30, 2018, was $1,530,737 and $2,396,872 respectively.

  • The Company secured retail licenses for its first two Delta 9 Cannabis Store locations in Manitoba on September 17, 2018. The Company plans to roll out a chain of Delta 9 branded retail stores over the coming months.

  • The Company signed a letter of intent with US biotech firm Nanosphere Health Sciences Inc. ("Nanosphere") which provides that Delta 9 and Nanosphere intend to negotiate and enter into an agreement pursuant to which Nanosphere will grant a master license for Nanosphere's patented delivery system for cannabis to the Company.

  • The Company is currently completing work necessary to acquire the European Union "Good Manufacturing Practices" (GMP) certification in order to initiate exports of medical cannabis to Germany.

  • The Company completed its first wholesale sale of recreational use cannabis during the period, supplying the Province of Manitoba in advance of the October 17, 2018 legalization of recreational cannabis. The Company plans to deliver a minimum of 2,300,000 grams in the Province of Manitoba over the first twelve months of legalization.

Update on Highlights which occurred Subsequent to the End of Q3, 2018:

  • On October 11, 2018, the Company completed the acquisition from 6599362 Manitoba Ltd. of the land and 80,000 square foot building containing the Company's current cannabis production facility for a purchase price of $6.25 million, plus applicable taxes. The Company also acquired 27 cannabis grow pods from 6599362 Manitoba Ltd. for a purchase price of $952,000, plus applicable taxes

  • On October 11, 2018, the Company closed a $12,000,000 loan and credit facility with the Canadian Western Bank.

  • From legalization of recreational cannabis on October 17, 2018 to November 28, 2018, Delta 9 has recorded more than $1,600,000 in revenue from wholesale recreational cannabis sales. It has also recorded more than $2,350,000 in revenue from its first Delta 9 Cannabis Store outlet as well as through online deliveries in the Province of Manitoba. To date the average price of cannabis sold by Delta 9 in retail stores and online is approximately $11.47 per gram, with an average cost to of $8.64 per gram.

Management Commentary

"Our Q3 reporting period was dominated by Delta 9's focus on preparing for the Canadian cannabis market in the post-legalization era," said CEO John Arbuthnot. "We have said before and believe even more strongly today that the real race for primacy in the Canadian cannabis market began on October 17, and our focus has been to position our Company for rapid growth within that recreational market. We feel that events have shown that our efforts were successful, as we have managed to avoid serious supply chain issues, kept our retail customers supplied continuously and had higher than expected wholesale and retail sales."

During the preparation for legalized recreational cannabis, the Company did not neglect its existing market in medical cannabis and services. In fact, that sector of the Company's business saw record growth over the quarter. Revenues soared by 312 per cent over the same period last year, while growth over the nine month period ending September 30, 2018 reached 258 per cent over the same period in 2017.

"Even while preparing for the retail market, Delta 9 has managed to expand its offerings in ways that are attractive to the consumer and the industry," Arbuthnot said. "This is reflected in the strong growth we are showing in all sectors of our business."

Arbuthnot also said the Company is positioning itself for continued growth in Canada and globally by transforming Delta 9 into a vertically and horizontally integrated cannabis company. The Company is opening retail cannabis outlets; building one of the largest extract labs in the world at its co-owned Delta West facility in Calgary; has established export partners in Germany and is completing the European Union "Good Manufacturing Practices" (GMP) certification in order to initiate exports of medical cannabis to Germany.

Subsequent to the end of the quarter, Delta 9 closed transactions to enable the Company to continue expanding its production facility in Winnipeg over the long term. On October 11, 2018 Delta 9 acquired the land building containing its current 80,000 square foot production facility, and also closed a $12 million loan and credit facility with the Canadian Western Bank. These agreements clear the path for continued expansion by the Company, including the creation of the Delta 9 Cannabis Campus, with room for up to 2 million square feet of additional production space.

"We are not just looking at the Canadian market, but at the global market," said Arbuthnot. "Canada is the first country in the G7 to legalize cannabis, but we believe more countries will legalize over the coming decade. Delta 9 must be ready to grow our exports and expand our production into these other countries."

Among the positive aspects of the growth in Q3 is that the Company was able to report gross profit of $1,211,821 for Q3 and $2,077,956 for the first nine months of the fiscal year.

"We have not only been able to foster growth in revenue and production, but we have also run one of the leanest companies in the Canadian cannabis industry," Arbuthnot said. "We believe it's not just about how much money you earn; it's about how much money you keep. Our focus has been to create a Company with a low cost of goods sold, some of the lowest capital expenditure costs in the business, and much lower than average operating costs. This will help us maximize profits for investors going forward."

About Delta 9 Cannabis Inc.
Delta 9 Cannabis was the fourth producer in Canada licensed to produce legal cannabis. Delta 9 now operates its wholly-owned subsidiary, Delta 9 Bio-Tech Inc., as a licensed producer of medical marijuana pursuant to the ACMPR and operates an 80,000 square foot production facility in Winnipeg, Manitoba, Canada. Delta 9 also owns 50 per cent of the 70,000 square foot Delta West facility in Alberta, and co-owns the Delta Nine Cannabis Store retail network. Delta 9's shares trade on the TSX Venture Exchange under the symbol "NINE" and on the OTC under the symbol VRNDF.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

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 expansion plans; and (ii) Delta 9's anticipated production of cannabis. 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 that Delta 9's currently contemplated expansion and development plans may cease or otherwise change, Delta 9's production of cannabis may be lower than expected, Delta 9 may not obtain the required approvals from Health Canada, demand for Delta 9's products may be lower than anticipated and all other risk factors set forth in the annual information form of Delta 9 dated May 31, 2018 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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