Mr. John Arbuthnot reports

DELTA 9 UPDATE ON EXPANSION PLANS

Delta 9 Cannabis Inc. has released its production and extraction plans for 2019 as well as a status update regarding its current operational expansion. Specifically, Delta 9 wishes to announce: (i) that the phase 1 development of Delta 9's grow facility in Winnipeg, Man., will be completed ahead of schedule, and significantly below budget; (ii) Delta 9's plans for the phase 2 development of its Winnipeg grow facility; (iii) Delta 9's acquisition of land for its planned Delta 9 Cannabis Campus in Winnipeg; and (iv) the anticipated schedule for the opening of the Delta West extracted products and product development facility in Calgary, Alta.

Delta 9 grow facility -- phase 1

Delta 9 chief executive officer John Arbuthnot announced today that the planned phase 1 development at its grow facility in Winnipeg is expected to be completed on or before Nov. 7, 2018, at a total estimated cost of $4,312,000, which is approximately 30 per cent below its original budgeted estimate. The Delta 9 grow facility uses proprietary grow pods for producing cannabis. Each grow pod is constructed from a repurposed 320-square-foot steel shipping container and can produce approximately 32.5 kilograms of cannabis annually.

The phase 1 development of the Winnipeg grow facility covers approximately 40,000 square feet with grow pods stacked two high. The following grow pods will be located in this area of the facility:

• Utility/support: Twenty support pods with a total area of 6,400 square feet. These pods will be used for housing cannabis genetic products and vegetative plant growth, as well as facilities such as processing, packaging, labelling, two laboratories, a wash area and storage.
• Flowering pods: One-hundred thirty-four grow pods with a total area of 42,880 square feet. These grow pods will house flowering cannabis plants.

Once the phase 1 development of the Winnipeg grow facility is complete, there will be a total of 154 grow pods, offering 49,280 square feet of production space and estimated production capacity of 4,288 kilograms of cannabis annually. Delta 9 aims to certify the facility under the European Good Manufacturing Practices standard in order to be able to export cannabis products to the European Union.

"This project was not expected to be complete until the end of this year, but the Delta 9 grow pods we've designed have turned out to be even more efficient than we expected," said Mr. Arbuthnot. "We are now able to expand very quickly and at a very low capital cost as compared to our competitors in the industry. Each grow pod costs approximately $26,000 fully installed, and can produce approximately $325,000 per year in revenue, assuming a retail price of $10 per gram of cannabis."

Delta 9 grow facility -- phase 2

The area of Delta 9's grow facility in Winnipeg containing the phase 2 development is approximately 40,000 square feet in size and can also house two stories of grow pods. Delta 9 estimates that there will be a total of 154 grow pods contained in this area of the facility when it is completed. Delta 9 estimates that this area of the facility will be completed in the second quarter of 2019 at a cost of approximately $4,312,000. Once completed, this area of the facility is expected to produce up to an additional 4,288 kilograms of cannabis annually. The following grow pods will be located in this phase 2 area:

• Utility/support;
• Flowering pods.

The Delta West facility -- phase 1

Delta 9 and Westleaf Cannabis Inc. have formed a 50/50 joint venture partnership to build and operate a state-of-the-art cannabis extract, testing, and research and development laboratory to develop and manufacture diversified and derivative cannabis products, pending approval of such products by the federal government. The facility is located in Calgary, Alta., and has a total area of 60,700 square feet. The phase 1 development of this facility will occupy approximately 15,800 square feet.

The phase 1 development will include a research and development facility, a processing lab, a manufacturing plant, and an order fulfilment centre, all built to the EU GMP standard in order to access international export markets. The facility will be designed by a North American leader in the design and construction of super critical carbon dioxide extraction operations.

Numerous types of cannabis products have been created or are under development in this facility at this time in what the company projects will be one of the largest cannabis oil extraction and extract manufacturing facilities in Canada. The production licence application for the Delta West facility was submitted to Health Canada in August, 2018, and construction began in September, 2018. The company expects a cannabis processing licence will be awarded in the second quarter of 2019.

"Our goal is to become one of the world's foremost producers of innovative cannabis derivatives," said Scott Hurd, chief executive officer and president of Westleaf. "This project is designed to support cutting edge research and development, which will result in the production of high-quality products that serve an increasingly sophisticated clientele and produce higher margins than dried cannabis."

Delta West facility -- phase 2

The second phase of the development of the Delta West facility is designed to significantly increase the capacity of the facility and to produce a wide variety of new derivative product lines, including concentrates, vape cartridges, edibles and beverages once these types of products are permitted for production and sale under Canadian regulations. Phase 2 of the Delta West facility is estimated to have a total area of approximately 44,900 square feet.

Winnipeg expansion facilities

On Oct. 11, 2018, the company announced that it has closed its previously announced acquisition of the land and the 80,000-square-foot building containing the company's current cannabis production facility from 6599362 Canada Ltd. for $6.25-million. Management is currently planning multiple expansion facilities on the Winnipeg site which will utilize the Delta 9 grow pod system. Delta 9 is planning to expand its annual cannabis production capacity to 17,500 kilograms by the end of 2019. Further expansion is planned on a Delta 9 cannabis campus slated for construction on an adjoining parcel of industrial land.

Retail operations

Delta 9, through its subsidiary Delta 9 Lifestyle Cannabis Clinic Inc., has opened its first retail cannabis store in Winnipeg, Man. This store is expected to be part of a network of retail outlets under the Delta 9 cannabis store brand. The 3,200-square-foot cannabis superstore opened on Oct. 17, 2018, and logged more than 9,000 separate purchases of cannabis and accessories in the first six days of operations.

The company is currently building three more retail outlets in Winnipeg, Man., Thompson, Man., and Brandon, Man., and has partnered with a Manitoba first nation group to open a fifth store. Additionally, the company has prequalified for the Manitoba government's request for proposals to build additional micro stores in smaller, rural communities.

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 (Access to Cannabis for Medical Purposes Regulations) and operates an 80,000-square-foot production facility in Winnipeg, Man., Canada. Delta 9 also owns 50 per cent of the 70,000-square-foot Delta West facility in Alberta and co-owns the Delta 9 cannabis store retail operation.

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