Delta 9 Receives Expansion Approval from Health Canada for 95 Additional Grow Areas, Provides Expansion Update

Published: December 5, 2019

Delta 9 Receives Expansion Approval from Health Canada for 95 Additional Grow Areas, Provides Expansion Update

Delta 9 Cannabis has received Health Canada approval to place 95 new Grow Pods from its Phase II expansion into production. Delta 9’s proprietary cannabis production methodology is based around a modular, scalable, and stackable production unit.

The Company is now working to place the 93 flowering Grow Pods and two support Grow Pods into production which will increase production capacity by 56% and bring the total number of Grow Pods approved by Health Canada and in production to 297. The Company anticipates that these additional Grow Pods will add an additional 2,975 kg/year in dried cannabis flower production, bringing Delta 9’s overall anticipated production capacity to 8,325 kg/year.

“This is the next step for Delta 9 in terms of Health Canada expansion approvals for our Phase II expansion. Our Grow Pod style of production allows us to produce a high quality and low-cost cannabis product,” said John Arbuthnot, CEO of Delta 9. “Additional supply capacity will allow us to pursue additional distribution agreements and further secure our place in the Canadian cannabis market.”

Phase II Expansion

The Company is working to expand its Health Canada licensed perimeter to include additional buildings on its licensed production facility in Winnipeg, Manitoba (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/year of dried cannabis flower material.

The Company also wishes to announce that it is has revised its previously released expansion plans for the remaining Phase II areas of the Delta Facility to include an additional 129 Grow Pods, comprised of approximately 114 flowering Grow Pods and 15 support Grow Pods. This is less than the 311 additional Grow Pods previously contemplated under the Phase II expansion plan which would have seen a maximum of 608 Grow Pods under license. Once fully built and licensed, the Company anticipates having up to 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.

“In light of the current cannabis market environment we are taking a more conservative approach to capital deployment,” said John Arbuthnot, CEO of Delta 9. “Our goal is to ensure that our current licensed production assets are operating at design capacity and we achieve efficient sell through rates while continuing with our organic expansion strategy.”

The Company anticipates that this further Phase II expansion will add an additional 3,650 kg/year in dried cannabis flower production, bringing the overall anticipated production capacity for the Delta Facility to 11,975 kg/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.

Phase III Expansion

The Company continues to plan for future development on its Winnipeg based site with its previously announced Phase III expansion. The long term plans for the site include a 15 MW hydro substation, 15 modular warehouses covering approximately 480,000 square feet of production space on two levels, 1,500 Grow Pods, and a total cannabis production capacity of up to 60,000 kg/year.

The Company will provide further updates on the Phase II and Phase III expansions as they become available.