Cultivation, Processing, and Wholesale

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Cultivation, Processing, and Wholesale

Serving Canadians Coast to Coast

The Company’s principal cultivation, processing and wholesale operations are focused on its 80,000 square foot Winnipeg based facilities (the “Delta Facility”).

The Company's proprietary cannabis production methodology is based around a modular, scalable, and stackable production unit called a grow pod ("Grow Pod"). The Company builds its Grow Pods by retrofitting standard, once-used, 40 foot high-cube shipping containers into Grow Pods. The Grow Pods are built to comply with Health Canada security requirements and good production practices. The Grow Pods create optimal conditions for large scale production of cannabis. Grow Pods can also be stacked on top of each other to use the production space available to the Company most efficiently. The Company retrofits shipping containers into Grow Pods at the Delta Facility, employing the Company's own staff as well as independent contractors.

Management believes that Grow Pods provide numerous benefits versus traditional open warehouse or green house cannabis production operations, namely:

  • A higher level of control over the growing environment contributing to higher quality cannabis products;
  • The ability to customize the growing environment for each genetic strain of cannabis, maximizing the quality and output of these strains;
  • The Grow Pods are relatively inexpensive and provide an attractive return on invested capital;
  • The modular format minimizes the risk of contamination or spread of contamination from plant diseases or pests; and
  • The modular format minimizes the risk of materially significant crop loss.

The Company has 297 Grow Pods licensed by Health Canada with a projected annual cultivation capacity of 8,325 Kg of dried cannabis.

Portfolio of Cannabis Products

Sales by Product YTD 2019

75
15
10
  • Cannabis Flower
  • Cannabis Pre-Rolls
  • Oils and Extracts

Premium Dried Flower

  • 3.5g and 7g
  • Over 30 current SKUs

Pre-Rolls

  • 0.5g setting
  • 4 SKUs

Oils and Extracts

  • Ingestible Oils
  • Vape cartridges
  • Kief
  • Additional SKUs in development for 2020

Dried Cannabis Flower

The Company currently produces approximately 30 different genetic strains of cannabis, each with its own unique chemical cannabinoid content, terpene, and flavonoid profiles, and with another 40 strains being stored on site in a seed bank to provide for product options in the future. All cannabis production by the Company occurs at the Delta Facility. Management believes that the Company has one of the largest in-house stocks of unique genetic cannabis strains among cannabis producers in Canada. The Company currently produces, processes and dries these genetic cannabis strains into whole flower cannabis products. "Whole flower" cannabis refers to the unaltered flower of the female cannabis plant that appears in "bud" form. No undesirable components such as stalks, stems and leaves are included in whole flower cannabis. Whole flower dried cannabis currently accounts for approximately 70% of the Company's overall product offering.

Pre-Rolls

The Company released its first pre-rolled cannabis products to market in June 2019. These products consist of blended cannabis flower, rolled in a "joint", for sale in the recreational cannabis market. The Company has seen a significant consumer response to cannabis pre-rolls given the convenience of purchasing a "ready to consume" product format. The Company's pre-rolled products currently account for approximately 15% of its overall product offering.

Blended Cannabis Flower

The Company currently produces and sells a selection of blended cannabis products, which consists of several high-quality dried cannabis products blended together to produce a milled finished product. The products used for the blend are products which would not otherwise meet quality standards for whole flower dried cannabis and, as opposed to becoming a waste product, are turned into a cheaper blended material, which is used by the Company for pre-rolled joints. The Company's house blended products currently account for approximately 5% of its overall product offering.

Oils, Extracts, and Derivative Products

The Company, through its subsidiary Delta 9 Bio-Tech, is currently licensed by Health Canada to produce and sell cannabis oils, extracts, and derivative products. It is management's belief that these products will become an increasingly important component of the medical and recreational use cannabis markets in the future. The Company's oil products currently account for approximately 10% of its overall product offering.

The Company is currently working with Westleaf through its subsidiary Westleaf Labs LP to develop a line of vaporized cannabis oil products including a line of vaporizable oil cartridges and a line of disposable vape pens. The products, which will be branded as "Harmony", "Cruise", and "Blast", will contain distilled cannabis oil and cannabis terpenes, in varying concentrations of active cannabinoids. The Company plans to release the vape products in the recreational cannabis market in the second quarter of 2020.

Dried Sift Cannabis

The Company produces a line of dried sift cannabis products for the recreational cannabis market which involves sifting the Company's blended products and refining it, leaving more of the high potency resin glands, and less of the low potency plant material. The final product is a yellow/brownish powder and has a potency that is up to double that of the whole flower dried cannabis materials. The Company is currently developing its "Sapphire" line of dried sift cannabis products for the recreational cannabis market. The Company released this product in the market in the first quarter of 2020.

Cannabis 2.0

*Coming to stores soon

Wholesale Distribution

As the Company increases its cannabis production capacity, subject to the authorization, it plans to expand its distribution into additional provincial markets through supply listings or formal supply agreements in those markets.

The Company's distribution strategy will be to enter a target market and achieve market penetration, targeting material market share, as consumers adopt "Delta 9" branded products. In order to achieve growth in this market, management has entered into a number of significant supply agreements as described below;

  • Supply Agreement with Manitoba Liquor and Lotteries Corporation (MLLC) to supply consumer packaged Delta 9 products to retailers in the province of Manitoba
  • Supply Listing with Saskatchewan Liquor and Gaming Authority (SLGA) to supply consumer packaged Delta 9 products to retailers in the province of Saskatchewan
  • Supply Listing with the Province of Alberta to supply consumer packaged Delta 9 products to Alberta Gaming Liquor and Cannabis (AGLC)
  • Supply Listing with the Province of British Columbia to supply consumer packaged Delta 9 products to the British Columbia Liquor Distribution Branch (BCLDB)
  • Supply Agreement with the Auxly Cannabis Group to supply up to 5,000 Kg/ year of cannabis flower and cannabis trim materials. Delta 9 has agreed to work with Auxly to purchase consumer packaged cannabis 2.0 Products for sale in its retail stores
Production/Wholesale Unit KPIs Q1/2019 Q2/2019 Q3/2019 Q4/2019 Q1/2020
Total Grams Produced 418,901 675,233 871,516 1,305,806 1,198,983
Direct Production Cost Per Gram* $1.44 $1.05 $1.08 $.91 $.98
Total Cost Per Gram** $1.60 $1.21 $1.21 $1.04 $1.10
Total Grams Sold (Medical and Recreational) 399,787 527,693 548,981 416,729 591,080
Avg Selling Price per Gram $7.58 $5.63 $4.19 $3.59 $4.50

*Direct Production Cost per gram includes direct labour, nutrients, utilities, growing materials and supplies costs

**Total Cost per gram includes Direct Production Cost per gram plus processing labour, packaging, bottling, and labelling costs

Hi. Welcome to Delta 9 Cannabis

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