Delta 9 Reports Record Revenue for Q2 2019

WINNIPEG, Aug. 27, 2019 /CNW/ - DELTA 9 CANNABIS INC. (TSXV: DN) (OTCQX: VRNDF) ("Delta 9" or the "Company"), is pleased to announce financial and operating results for the second quarter of 2019.

Financial Highlights for Q2, 2019

• Record operating revenues of $8.9 million for the second quarter of 2019, up 1,142%, from $715,746 for the same quarter last year.
• Sequential net revenues increased 58% for the second quarter of 2019 compared to $5,632,184 in Q1, 2019.
• Adjusted EBITDA¹ was $(663,705) up $1.3 million or 65% compared to $(1,978,778) in Q1, 2019.
• Gross profit² of $2.9 million for the second quarter of 2019, up 780%, from $335,226 for the same quarter last year.
• Gross profit margin was 33% for Q2, 2019.

"Management would highlight the improvement of $1.3 million in Adjusted EBITDA loss over the past two quarters as a positive indication of the performance of the Company's operating businesses in the wake of legalization of recreational use cannabis on October 17, 2018," said John Arbuthnot, CEO of Delta 9. "We believe our Q2 results demonstrate the continued strength of our business model as we pursue a path towards profitability and disciplined growth for this year."

Financial Highlights for the first half of 2019

• Record operating revenues of $14.5 million, up 1,286%, from $1.0 million for the same period last year.
• Gross profit2 of $4.8 million, up 973%, from $444164 for the same period last year.
• Gross profit margin was 33% for the first half of 2019.

"Delta 9 will continue to drive sustainable long-term shareholder value by leveraging its strong brand positioning in Western Canadian markets, expanding our various wholesale supply contracts and scaling up our cultivation operations said John Arbuthnot," CEO of Delta 9. "We are taking a responsible and compliant approach to growing our business to build an authentic Delta 9 brand as we pursue retail opportunities in the Western Canadian market place."

Operational Highlights

• On May 20, 2019, the Company received approval from Health Canada for an additional 48 of its proprietary "Grow Pods", bringing its total number of Grow Pods approved by Health Canada to 202.
• The additional 48 Grow Pods will increase production by 1,150 kilograms per year of dried cannabis flower production, bringing the Company's overall anticipated production capacity to 5,350 kilograms of dried cannabis flower per year.
• There are now a total of 297 Grow Pods within its Winnipeg production facility (the "Delta Facility").
• The Company is continuing with its planned Phase II expansion of the Delta Facility to increase cannabis production to 16,500 kilograms per year.

"The 297 Grow Pods that Delta 9 now has in in our production facility will bring our anticipated production capacity to 7,626 kilograms once all the pods are approved by Health Canada for production," said John Arbuthnot, CEO of Delta 9.

Selected Quarterly Information:

Consolidated Statement of Net Income	Q2 2019	Q2 2018
Revenue	$8,886,155	$715,746
Cost of Sales	5,936,975	380,520
Gross Profit Before Unrealized Gain from Changes In Biological Assets	2,949,180	335,226
Unrealized gain from changes in fair value of biological assets	4,378,353	328,214
Gross Profit	$3,535,546	$663,440
Expenses
General and Administrative	3,075,803	2,056,097
Sales and Marketing	1,324,537	265,332
Share based Compensation	244,848	521,598
Total Operating Expenses	$4,645,188	$2,843,027
Loss from Operations	$(1,109,642)	$(2,179,587)
Other Income/ Expenses
Finance Income (cost)	(217,975)	(7,172)
Rental and other income	11,744	3,750
Net Income	$1,315,873	$(2,183,009)
Other comprehensive Income
Fair value change in West leaf Investment	(9,240,000)	--
Net Income and Comprehensive Income	$(10,555,873)	$(2,183,009)
Earnings per Share (basic)	$(0.01)	$(0.03)
Weighted average number of shares outstanding	87,713,479	86,759,632

 

"Additionally, Delta 9 is looking forward to being up listed on the Toronto Stock Exchange," said John Arbuthnot, CEO of Delta 9. "This will be a major milestone for the evolution of our company and should enhance the financial opportunities for our shareholders."

Consolidated Statement of Net Loss	Q2 2019	Q1 2019	Q4 2018	Q3 2018
Revenue	$8,886,155	$5,632,184	$5,270,217	$1,251,213
Cost of Sales	$5,936,975	$3,815,930	$4,015,644	$938,733
Gross Profit Before Unrealized Gain from Changes In Biological Assets	$2,949,180	$1,816,254	$1,254,573	$312,480
Unrealized gain from changes in fair value of biological assets	$586,366	$2,406,735	$2,087,367	$1,218,257
Gross Profit (Loss)	$3,535,546	$4,222,989	$3,341,940	$1,530,737
Expenses
General and Administrative	$3,075,803	$3,451,900	$3,296,351	$2,790,227
Sales and Marketing	$1,324,537	$969,202	$1,389,241	$300,138
Share Based Compensation	$244,848	$748,067	$807,834	$671,606
Total Operating Expenses	$4,645,188	$5,169,169	$5,493,426	$3,761,971
Adjusted EBITDA (Loss)	$(663,705)	$(1,978,778)	$(2,815,412)	$(2,584,485)
Income (Loss) from Operations	$(1,109,642)	$(946,180)	$(2,151,486)	$(2,231,234)
Other Income/ Expenses	$(206,231)	$17,260,525	$69,033	$(164,075)
Net Income (Loss)	$(1,315,873)	$16,314,345	$(2,082,453)	$(2,395,309)
Basic and Diluted Earnings (Loss) Per Share	$(0.01)	$0.19	$(0.02)	$(0.03)

 

The following chart provides a breakdown of the Company's revenue by segment:

Revenue from the Sale of Cannabis	Six-month period ending June 30, 2019	Six-month period ending June 30, 2018	Three-month period ending June 30, 2019	Three-month period ending March 31, 2019
Wholesale Cannabis Revenue	$5,853,288		$2,917,647	$2,935,641
Retail Cannabis Revenue	5,956,500		3,519,406	2,437,094
Medicinal Cannabis Revenue	183,976	445,176	87,416	96,560
Revenue from Other categories
Business to business activities	2,210,167	502,634	2,165,167	45,000
Merchandise and cannabis devices	339,235	22,985	184,164	155,071
Other	109,713	77,058	62,976	46,737
Sub total	$14,652,879	$1,047,853	$8,936,776	$5,716,103
(Less) Excise Taxes	134,540	0	50,621	83,919
Net Revenue	$14,518,339	$1,047,853	$8,886,155	$5,632,184

 

Discussion of Operations for Q2 versus Q1, 2019: 

Key Performance Indicators	For the three-month period ending March 31, 2019	For the three-month period ending June 30, 2019
Production/ Wholesale Unit
Total Grams Produced	418,901	675,233
Direct Production Cost Per Gram	$1.44	$1.05
Total Cost Per Gram	$1.60	$1.21
Total Grams Released for Sale	185,626	565,599
Total Grams Sold (Recreational Wholesale)	386,387	517,718
Total Grams Sold (Medical)	13,400	9,975
Avg Selling Price per Gram	$7.58	$5.63
Retail Unit
Total Grams Sold (Retail)	189,796	282,336
Avg Selling Price per Gram	$12.84	$12.42
Number of Transactions Processed	44,885	84,882
Avg Transaction Size	$58.27	$41.46
Unique Website Visitors (delta9.ca)	180,774	152,680

 

A comprehensive discussion of Delta 9's financial position and results of operations is provided in the Company's Management Discussion & Analysis for the second quarter and first half of 2019 filed on SEDAR and can be found at www.sedar.com.

Q2 Results 2019 Conference Call

Delta 9 has scheduled a conference call to discuss the results for second quarter of 2019. The conference call will be hosted August 28, 2019 at 9:00 a.m. Eastern Time by John Arbuthnot, Chief Executive Officer and Jim Lawson, Chief Financial Officer, followed by a question and answer period.

DATE:	August 28, 2019
TIME:	9:00 a.m. Eastern Time
DIAL IN #	1-888-886-7786
REPLAY:	1-877-674-6060 Available until 12:00 midnight Eastern Time, November 28, 2019
REPLAY PASSCODE:	528211 #

 

About Delta 9 Cannabis Inc.

Delta 9 Cannabis Inc. is a vertically integrated cannabis company focused on bringing the highest quality cannabis products to market. Delta 9's wholly-owned subsidiary, Delta 9 Bio-Tech Inc., is a licensed producer of medical and recreational cannabis and operates an 80,000 square foot production facility in Winnipeg, Manitoba, Canada. Delta 9 owns and operates a chain of retail stores under the Delta 9 Cannabis Store brand. Delta 9's shares trade on the TSX Venture Exchange under the symbol "DN" and on the OTCQX under the symbol VRNDF. For more information, please visit www.delta9.ca.

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) increases in Delta 9's cannabis production capacity; (ii) Delta 9's expansion plans; and (iii) Delta 9's graduation to the Toronto Stock Exchange. 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 all risk factors set forth in the annual information form of Delta 9 dated April 30, 2019 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.

________________________

1The Company's "Adjusted EBITDA" is a measure used by management that does not have any standardized meaning prescribed by International Financial Reporting Standards and may not be comparable to similar measures presented by other companies. Management defines the Adjusted EBITDA as the income (loss) from operations, as reported, before interest and tax, adjusted for removing share-based compensation expense, depreciation and amortization, and the fair value effects of accounting for biological assets and inventories. Management believes that Adjusted EBITDA, and the attribution of Adjusted EBITDA in the manner described above, provides meaningful and useful financial information as these measures demonstrate the performance of the Company's operating businesses.

2 The Company's "Gross Profit" Is calculated before adjustments for changes in Biological assets.

 

SOURCE Delta 9 Cannabis Inc.

Copyright 2019 Canada NewsWire