Delta 9 Announces Future Expansion Plans Including Increase of  Production Capacity to 60,000 Kilograms by 2022

Delta 9 Announces Future Expansion Plans Including Increase of Production Capacity to 60,000 Kilograms by 2022

WINNIPEG, MB (February 20, 2019) – DELTA 9 CANNABIS INC. (TSXV: NINE) (OTCQX:VRNDF) (“Delta 9” or the “Company”) is pleased to provide an update on its expansion plans. Highlights include that the Company intends to increase its annual cannabis production capacity to 60,000 kilograms per year by 2022 and the expansion of its retail store network to four stores
by the end of the second quarter of, 2019.

“Today we are pleased to provide our long-term vision to transform Delta 9’s Winnipeg based production facilities into one of the largest cannabis production, processing, extraction and distribution centers in Canada” said CEO, John Arbuthnot. “Our strategy is to grow our business through organic growth and replicate the proven grow pod technology that has provided our customers with consistent high-quality cannabis.”

Set forth below is a summary of the completed Phase 1 expansion of Delta 9’s Winnipeg production facility and the anticipated Phase 2 and Phase 3 expansions.

Phase 1 – Phase 1 expansion is complete and licensed by Health Canada
• Total production capacity is currently 154 grow pods offering 49,280 square feet of production space on two levels
• Projected total annual cannabis production capacity of 4,224 kilograms of dried cannabis

Phase 2 – 2019 expansion underway
• Total production capacity anticipated to increase by 454 grow pods
• As of February 20, 2019, 65 additional grow pods have been installed in the facility as a part of the Phase 2 expansion.
• Anticipated to provide an additional 145,280 square feet of production space on two levels
• Total annual cannabis production capacity is anticipated to increase to 16,768 kilograms
• Estimated capital costs of approximately $24,000,000, which will be funded from current cashflow

Phase 3 – 2020-2022 expansion plans
• Systematic roll out of 15 modular warehouse buildings covering 480,000 square feet of production space on two levels
• Total production capacity is anticipated to increase by 1,500 grow pods during this period
• Total annual cannabis production capacity is anticipated to increase to 60,000 kilograms of dried cannabis
• Construction of a 30,000 square foot in-house cannabis extraction facility
• Anticipated capital costs of approximately $115,000,000. Delta 9 is currently reviewing its strategic options for funding these expansion costs

The Winnipeg production facility uses proprietary grow pod technology to produce premium cannabis products. Delta 9 was the first company in Canada to develop and deploy stackable, self-contained grow pod technology. The major benefit of these self-contained units is that there is low risk of crop failure. Each grow pod is constructed from a repurposed 320 square foot steel shipping container and can produce approximately 32.5 kilograms of cannabis annually.

Management estimates that each grow pod can generate $320,000 in annual revenue from the sale of cannabis produced by each grow pod. “Delta 9 has over 70 strains of cannabis that require a production infrastructure that can grow a wide range of cannabis at scale simultaneously,” said CEO, John Arbuthnot. “Our goal is to continue to successfully execute our organic expansion strategy to meet consumer demand, grow the Company and benefit our shareholders.”

The Company has selected Bird Construction Company Limited (“Bird”) to oversee the design and construction of the Phase 3 expansion. Bird is a premier Canadian construction management firm responsible for a number of large scale pre-engineered industrial facilities in related industries, as well as other state of the art cannabis facilities.

Retail Network update

Delta 9, through its partially-owned subsidiary, Delta 9 Lifestyle Cannabis Clinic Inc., opened its first retail cannabis store in Winnipeg, Manitoba on October 17, 2018.

“We have now seen the benefits of our vertical integration strategy into cannabis retail. Our control of the supply chain has enabled us to meet overwhelming demand at our retail store,” said John Arbuthnot. “Not only have we been able to meet demand at our retail store on a daily basis, we have also honored our commitments for our existing supply agreements and we will begin to make shipments outside of Manitoba in the coming weeks.”

The Company is currently building three more retail outlets in Winnipeg, Thompson and Brandon, Manitoba, and has partnered with a Manitoba First Nation to open a fifth store. Additionally, the Company has prequalified for the Manitoba government’s request for proposals to build additional stores in smaller, rural communities.
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