Delta 9 Reports Year-end Financials for 2022

WINNIPEG, Manitoba, March 31, 2023 (GLOBE NEWSWIRE) — DELTA 9 CANNABIS INC. (TSX: DN) (OTCQX: DLTNF) (“Delta 9” or the “Company”) is pleased to announce financial and operating results for the three-month and full year ending December 31, 2022.

Financial Highlights for the Year Ending December 31, 2022

• Net revenues of $63.2 million in 2022, an increase of 2% compared to $62.3 million in 2021, including the following revenue segmentation highlights:
  • Retail revenues increased 26% to $52.2 million in 2022
  • Wholesale revenues decreased 35% to $12.1 million in 2022
  • Business to business revenues decreased 65% to $1.7 million in 2022
• Gross profit¹ of $12.9 million in 2022 compared to $18.3 million last year.
• Adjusted EBITDA² (loss) of $(5.2) million in 2022 compared to an Adjusted EBITDA² of $2.0 million last year.
• Loss from Operations of $(20.3) million in 2022 compared to Loss from Operations of $(7.6) million last year.

Financial Highlights for the Three-Month Period Ending December 31, 2022

• Quarterly net revenues of $17.6 million for the fourth quarter of 2022, an increase of 3% compared to $17.1 million for the same quarter last year.
  • Sequentially net revenues increased 12% for the fourth quarter of 2022 compared to $15.7 million in the third quarter of 2022.
• Gross profit¹ of $3.4 million for the fourth quarter of 2022 compared to $4.9 million for the same quarter last year.
  • Sequentially gross profit increased 76% in the fourth quarter of 2022 compared to $1.9 million in the third quarter of 2022.
• Sequentially Adjusted EBITDA² (loss) improved to $(1.5) million in the fourth quarter of 2022 compared to and Adjusted EBITDA² (loss) of $(1.7) million in the third quarter of 2022.

“We are pleased to report record fourth quarter and year end revenues for 2022 demonstrating the versatility of our business model with measurable improvements versus the third quarter of 2022,” said John Arbuthnot, CEO of Delta 9 Cannabis. “Challenges persist in the Canadian cannabis industry, which continues to struggle with intense competition resulting in margin compression and affecting overall growth. We remain confident that Delta 9 will be able to navigate the industry challenges and return the Company to growth and profitability in the coming quarters.”

4^th Quarter Operational and Subsequent Q1 2023 Highlights:

• Delta 9 installed a new fully-automated pre-roll machine that will produce up to 4 million pre-rolls per year compared to the 1 million produced in 2022 that generated $2.3 million. The new machine will significantly lower manufacturing costs and improve contribution margin for pre-roll sales. We appreciated the contribution from the Provincial Government that covered 25% of the cost of the machine.
• Delta 9 shipped bulk dried cannabis flower to a customer in Australia, marking the Company’s first export of dried cannabis flower material to an international market. The Company has also received seven additional export permits from Health Canada and intends to complete multiple shipments of dried cannabis flower and cannabis extracts to the Australian market in the first and second quarter of 2023. The shipments are anticipated to include approximately 100 Kg of dried cannabis flower material and 6 Kg of cannabis distillate. This shipment marks a significant milestone for Delta 9 as it enters the global cannabis market.  
• Delta 9 opened two more retail cannabis stores in Western Canada in Q1 2023 quarter that brings the total store count to 41. The companies retail strategy continues to find the best available real estate in high-traffic and high-population density areas. Delta 9’s retail network has expanded by 25 stores in the past twelve months and is expected to continue expansion of the retail portfolio across Canada in 2023.
• Delta 9 announced various cost cutting measures as a part of the Company’s 2023 strategic plan with the goal of producing positive cash flow from operations. The Company plans to streamline its cultivation operations and right-size capacity at its Winnipeg based cultivation facilities, as well as various other cost cutting measures including reducing public company and investor relations costs. The Board of Directors and executive have also agreed to reduce compensation as part of their commitment to achieving positive cash flows from operations in the current fiscal year. The cost savings are expected to reduce operating costs by $3 Million to $4 Million in 2023. As a part of the plan, cultivation capacity at the Company’s Winnipeg based cultivation facilities were cut by approximately 40%, which included a temporary layoff of approximately 40 staff.
• Delta 9 received a Cannabis Distributor License from the Liquor Gaming and Cannabis Authority of Manitoba, making the Company the first licensed distributor of cannabis products in the province. Under the License, Delta 9 is authorized to acquire, store, sell and deliver cannabis in accordance with The Liquor, Gaming and Cannabis Control Act. The Company’s distribution services will allow out-of-province suppliers to improve logistics efficiencies and reduce shipping costs into the Manitoba market and will provide Delta 9 with additional diversified revenue streams. Total retail cannabis sales in Manitoba for the twelve months ending August 30, 2022, exceeded $169 Million, according to data from Statistics Canada, with more than 150 licensed retail stores in operation as of September 30, 2022.
• Delta 9 announced that Mr. Stuart Starkey joined the Company’s board of directors following the previously announced resignation of Joanne Duhoux-Defehr as a director of the Company. Over the past 15 years, Mr. Starkey was an entrepreneur, para-athlete, and non-profit founder. As President of Two Small Men Canada, Mr. Starkey grew a national moving chain to achieve corporate and franchise revenues of $35 Million per year with over 400 employees. As Co-founder of Mighty Moving Mr. Starkey grew a cross-docking and logistics business to service dozens of large chain retailers, with offices across Alberta. He has since successfully exited both Two Small Men Canada and Mighty Moving. 
• Delta 9 established an at-the-market equity program (the “ATM Program”) that allows the Company to issue up to $5,000,000 of common shares in the capital of the Company from treasury to the public from time to time, at the Company’s discretion. Distributions of the Common Shares through the ATM Program will be made between the Company and Haywood Securities Inc.

Summary of Quarterly Results:

1. Gross Profit, before changes in the fair value of biological assets.
2. Adjusted EBITDA is a non-IFRS measure, and is calculated as earnings before interest, tax, depreciation and amortization, share-based compensation expense, fair value changes and other non-cash items.

A comprehensive discussion of Delta 9’s financial position and results of operations is provided in the Company’s Management Discussion & Analysis for the three-month and year ending period ending December 31, 2022 filed on SEDAR and can be found at www.sedar.com.

2022 Forth Quarter Results Conference Call

A conference call to discuss the above results is scheduled for April 3, 2023. The conference call will be hosted that day at 10:00 a.m. Eastern Time by John Arbuthnot, Chief Executive Officer, and Jim Lawson, Chief Financial Officer, followed by a question-and-answer period.

For more information contact:

Investor & Media Contact:
Ian Chadsey VP Corporate Affairs
Mobile: 204-898-7722
E-mail: ian.chadsey@delta9.ca

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. The company sells cannabis products through its wholesale and retail sales channels and sells its cannabis grow pods to other businesses. 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 Toronto Stock Exchange under the symbol “DN” and on the OTCQX under the symbol “DLTNF”. For more information, please visit www.delta9.ca.

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) the Company’s plans to establish cannabis distribution operations in Manitoba; and (ii) the Company’s plans to continue to expand its retail operations in Canada. 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 March 31, 2023 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.