Med­i­cal pot pro­ducer go­ing pub­lic

Fed­er­ally ap­proved Man­i­toba cannabis grower headed for stock mar­ket

Winnipeg Free Press - - NEWS - SOLOMON IS­RAEL­rael@freep­

ELTA 9 Bio-Tech, one of only two Man­i­toba firms li­censed by the fed­eral gov­ern­ment to pro­duce cannabis for med­i­cal users, could make its de­but on the TSX Ven­ture Ex­change as soon as to­day. The list­ing has re­ceived con­di­tional ap­proval from the ex­change, said Delta 9 co-founder John Ar­buth­not, who is con­fi­dent his firm will be listed by the end of the week.

Twenty-seven-year-old Ar­buth­not, who co-founded Delta 9 Bio-Tech with his fa­ther, Bill Ar­buth­not, will be­come CEO of the pub­licly traded com­pany, which will be re­named Delta 9 Cannabis. Bill Ar­buth­not will be pres­i­dent and chair­man of the board.

Delta 9 Cannabis will is­sue eight mil­lion new shares at 65 cents a share to raise as much as $5.2 mil­lion, and is seek­ing more cap­i­tal to fi­nance fu­ture ex­pan­sion plans.

“Ul­ti­mately our goal is to raise between 25 and 30 mil­lion dol­lars in ad­di­tional cap­i­tal, through a mix of debt

Dand eq­uity, over the next num­ber of months,” John Ar­buth­not said on Mon­day. “And all of that will be de­ployed over the next few years in our Win­nipeg­based pro­duc­tion, dis­tri­bu­tion, and hope­fully ul­ti­mately re­tail op­er­a­tion.”

Ar­buth­not said he and his fa­ther will be the con­trol­ling share­hold­ers of the pub­licly-traded firm, hold­ing between 55 and 60 per cent of the shares. The deal is be­ing un­der­writ­ten by in­vest­ment bank Canac­cord Ge­nu­ity.

Cur­rently, 68 com­pa­nies are li­censed by Health Canada to pro­duce cannabis for med­i­cal users. Delta 9 was among the first crop of com­pa­nies to re­ceive a pro­duc­tion li­cence from Health Canada, in 2014.

The com­pany em­ploys about 55 peo­ple, pri­mar­ily at its pro­duc­tion fa­cil­ity in Win­nipeg.

More than 2,000 clients are reg­is­tered to pur­chase mail-or­der cannabis from Delta 9, Ar­buth­not said.

As of June 30, there were 201,398 med­i­cal cannabis clients reg­is­tered with Health Canada, in­clud­ing 3,598 in Man­i­toba. Some clients are reg­is­tered to pur­chase from more than one li­censed pro­ducer and reg­is­tered clients may sign up with any li­censed pro­ducer in any prov­ince.

Reg­is­ter­ing with Health Canada and sign­ing up to pur­chase cannabis from li­censed pro­duc­ers re­quires a re­cip­i­ent to get a med­i­cal doc­u­ment from a physi­cian.

In cities across Canada, a num­ber of spe­cial­ized med­i­cal clin­ics have sprouted up to con­nect po­ten­tial med­i­cal cannabis users with physi­cians who may be will­ing to rec­om­mend cannabis. Delta 9 has launched its own such clinic in Win­nipeg, the Delta 9 Life­style Cannabis Clinic at 478 River Ave.

Delta 9’s pro­duc­tion li­cence from Health Canada al­lows it to de­vote up to 80,000 square feet of space to grow­ing cannabis, said Ar­buth­not. Right now, the com­pany is us­ing roughly 14,000 square feet, leav­ing plenty of room to grow be­fore ad­di­tional li­cens­ing is re­quired.

Delta 9 cul­ti­vates its pun­gent crop in 28 spe­cially-mod­i­fied ship­ping con­tain­ers in­side its Win­nipeg fa­cil­ity. The ex­pected in­flux of cap­i­tal from the pub­lic of­fer­ing will al­low Delta 9 to add between 40 and 60 new ship­ping con­tainer grow rooms, Ar­buth­not said.

“What comes with that ex­pan­sion is more jobs be­ing cre­ated in the com­mu­nity here in Man­i­toba, in­creased pro­duc­tion ca­pac­ity al­low­ing us to con­tinue to bring on more and more reg­is­tered pa­tients both here in Man­i­toba and out­side, and hope­fully also the first steps in re­ally po­si­tion­ing our­selves to­wards tak­ing a hard look at the recre­ational mar­ket for next year.”

Fed­eral le­gal­iza­tion of cannabis for recre­ational use is ex­pected by July 1, 2018. Un­der the fed­eral gov­ern­ment’s pro­posed Cannabis Act, which is not yet law, only li­censed pro­duc­ers such as Delta 9 will be able to sup­ply cannabis to the le­gal mar­ket.

By 2020, Ar­buth­not said, Delta 9 plans to use its new cap­i­tal to in­crease pro­duc­tion dras­ti­cally — from about 1,000 kilo­grams a year to 17,000 ki­los a year.

Like other play­ers in Canada’s le­gal cannabis in­dus­try, Delta 9 is not yet prof­itable.

“I think most in­vestors who are look­ing in the space right now are look­ing past the short-term fi­nan­cial per­for­mance to­wards some other met­rics that are very im­por­tant for the space,” Ar­buth­not said, cit­ing his com­pany’s as-yet-un­used li­censed pro­duc­tion ca­pac­ity as a po­ten­tial sell­ing point.

“We would en­cour­age in­vestors to look for­ward at things like ca­pac­ity, as well as to look at some of the other points of our oper­a­tions, in­clud­ing that we are one of Health Canada’s old­est li­censed pro­duc­ers,” he said. “And with that comes sev­eral years, now, of ac­tual cul­ti­va­tion, pro­cess­ing, dis­tri­bu­tion, and sale ex­pe­ri­ence.”

Af­ter be­ing listed on the TSX Ven­ture Ex­change, Delta 9 Cannabis will trade un­der the stock sym­bol “NINE.”


Twenty-seven-year-old John Ar­buth­not (above), who co-founded Delta 9 Bio-Tech with his fa­ther, Bill Ar­buth­not, will be­come CEO of the pub­licly traded com­pany, which will be re­named Delta 9 Cannabis.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.