ShinyBud Broadens Retail Growth Strategy with Focus on Health and Wellness; Announces First Pharmacy Acquisition

Acquisition expected to be financed with senior debt

 (All amounts are in Canadian dollars unless otherwise stated)

TORONTO, May 16, 2022 /CNW/ - ShinyBud Corp. ("ShinyBud" or the "Company") (TSXV: SNYB) today announced it is broadening its retail growth strategy with a focus on health and wellness. As part of its strategy expansion, the Company announced that it has signed a binding letter of intent on May 13th, 2022 to acquire Cotton Mill Pharmacy ("Cotton Mill") for a total purchase price of $0.9 million (the "Purchase Price") at 4.6x EBITDA⁽¹⁾, subject to standard working capital adjustments at closing. In operation since 2015, Cotton Mill is a fully independent no banner pharmacy located in Cornwall, Ontario.

"The broadening of our strategy is how we will continue to differentiate our company from other cannabis retailers. This retail extension stems from a deep understanding of what our customers are looking for as it relates to their health and wellness needs," said Kevin Reed, Chairman and Chief Executive Officer. "We believe that the convergence of cannabis, health and wellness, pharmacies and medical care services is where the growth potential lies for ShinyBud, and that adding pharmacies to our corporate portfolio will bring benefits to both our customers and our shareholders. We plan on being an emerging leader in this sector."

Completion of the Cotton Mill acquisition is subject to satisfaction of a number of customary conditions to closing, including definitive documentation, closing of the Acquisition Loan (defined below), and regulatory approvals. This is an arm's length transaction.

Acquisition Financing

To finance the acquisition, the Company has received a term sheet for a $0.7 million secured acquisition 10-year term loan (the "Acquisition Loan") from Caisse Desjardins Ontario Credit Union Inc., on behalf of its participating caisses, at an interest rate of 5.5% using today's pricing to be adjusted to the prevailing equivalent rate at close. Closing of the Acquisition Loan is conditional upon confirmatory due diligence and definitive documentation.

A portion of the Purchase Price will also be paid through a one-year vendor take-back loan of $100,000 at an annual rate of 4.0% interest. The Company expects to pay the balance of the Purchase Price from cash on hand. There is no debt being acquired in the entity being purchased, only new debt of $700,000 being undertaken by the Company as part of the transaction financing.

"We are thrilled with the broadening of our retail strategy into health and wellness as it fits with our Company's ethos of improving people's lives. The Company intends to target for acquisition independent retail Canadian pharmacies that offer attractive standalone economics in underserviced markets with the intention of leveraging its retail operating expertise to optimize the business, and expand the pharmacy's service and retail offerings," stated Jude Pinto, Chief Financial Officer and Chief Information Officer. "Our strategy is to acquire retail pharmacies with strong existing financial performance primarily using senior debt, with a view to minimizing dilution and maximizing shareholder value."

Mr. Pinto added, "We believe that this approach, will mitigate the significant headwinds that have built up in the adult-use cannabis market over the last three months."

Management will host a live conference call, audio webcast, and question-and-answer session tomorrow, Tuesday, May 17^th at 8:30 a.m. ET to discuss the updated business strategy and related acquisition. Details to access the webcast and call are included at the end of this release.

Strategy Expansion

Going forward, the Company expects that acquiring retail pharmacies will become an integral part of the its growth plan and merger and acquisition focus. Management's store-level development plan will focus on improving the patient and customer experience, increasing revenue, and pursuing operating efficiencies to enhance margins and EBITDA⁽¹⁾. (See Table 1 in Appendix.)

ShinyBud's objective is to build a network of retail pharmacies under its mīhī Health & Wellness banner (pronounced "meehee", which means "for me" in Latin) with the goal of achieving operational scale.

Apart from its prospective acquisition of Cotton Mill, the Company is currently evaluating six additional pharmacy targets at various stages of due diligence.  Our due diligence review to date indicates that the acquisition candidates are currently generating an average annual EBITDA⁽¹⁾ of approximately $442,000 per pharmacy. (See Table 1 in Appendix.) Over the longer term, based on internal management assumptions regarding the composition of the pharmacy market, typical financial performance of independent retail pharmacies, capital markets conditions, and integration capability, the Company anticipates developing a portfolio of pharmacies at the following acquisition pace:

Fiscal Year	2022	2023	2024	2025
Cumulative Pharmacy Acquisitions^(2)	5 to 10	15 to 25	30 to 45	50 to 70

The Company plans to scale back the organic growth plans initially anticipated for expanding its retail cannabis footprint. Going forward, ShinyBud will focus on profitably operating its existing network of stores, and on expanding this portfolio through accretive tuck-in acquisitions and its capital-light franchise model.  The Company intends to update its year-end cannabis store targets with the release of its 2022 first quarter financial and operating results in late-June.

Strengthening Skillset in Pharmacy M&A and Operations

Andrew Hanna

Subject to completion of the Cotton Mill acquisition, Andrew Hanna, the lead pharmacist and co-owner of Cotton Mill, will join mīhī Health & Wellness as the Vice President of Pharmacy Operations & Compounding. Mr. Hanna is a compounding pharmacist and certified pain educator specializing in complex patient education and creating individualized pain management therapies. Mr. Hanna is one of a select few medical cannabis consultants in Ontario. He holds a Bachelor of Science from Laurentian University, Bachelor of Pharmacy from Misr University of Science and Technology, degree in pharmaceutical compounding from the University of Florida's College of Pharmacy, and a Bachelor of Science in Pharmacy from the University of Toronto. Mr. Hanna also sits on the Pharmacy Practice Committee for the Ontario Pharmacists Association and is registered with the Ontario College of Pharmacists.

VanThom Consulting

ShinyBud has retained VanThom Consulting to assist the Company in expanding the acquisition pipeline, provide operational and integration support⁽³⁾. The principals of VanThom, Paul Thomson, Tom VanNatter and Murray Church have more than 100 years of combined experience in retail pharmacy operation, acquisitions, business integration, value-add strategies and pharmaceutical partnerships for Canada's largest pharmacy retailers and pharmaceutical companies. Over the span of their careers, they have supported the acquisition of independent pharmacies worth an estimated combined value of approximately $450 million.

Conference Call and Webcast

A live conference call and audio webcast to discuss the updated business strategy and related acquisition will take place as follows:

Date & Time:	May 17, 2022 at 8:30 a.m. ET
Telephone:	Toll-free 1-833-950-0062
	Local or International 1-226-828-7575
	Please allow 10 minutes to be connected to the call.
Access Code:	858936
Webcast:	Accessible on ShinyBud's investor relations website at investors.shinybud.com or by clicking here.
Replay:	An archive of the webcast will be available for replay on ShinyBud's investor relations website at investors.shinybud.com.
Slides:	The slide presentation will be available for download at investors.shinybud.com.

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.

Endnotes                                                                                                              

(1)	EBITDA refers to earnings before interest, taxes, depreciation, and amortization. This is a non-IFRS financial measure, does not have a standard meaning under IFRS, and is therefore unlikely to be comparable to similar measures presented by other issuers. Non-IFRS measures provide investors with a supplemental measure of the Company's operating performance and therefore, highlight trends in Company's core business that may not otherwise be apparent when relying solely on IFRS measures. Management uses non-IFRS measures in measuring the financial performance of the Company.
(2)	Management assumptions based on pharmacy market composition, capital markets continued favorability towards pharmacies relative to cannabis, and reasonable pace for the integration of acquisitions.
(3)	The Company has agreed to pay VanThom Consulting Ltd. a fee of $36,000 for a range of consulting services including the following: deal sourcing, due diligence, valuation, strategy & research, operationalization, regulatory liaison, business integration, and supplier negotiation and benchmarking.

About ShinyBud 

ShinyBud Corp. is a multi-banner cannabis retailer with 41 corporate and licensed stores across Ontario, Canada's largest cannabis market, striving to provide a more diverse and accessible cannabis experience for adult consumers. On a mission to help people never settle, live fully, the Company recently broadened its retail growth strategy with health and wellness, and the planned acquisition of its first retail pharmacy. ShinyBud's board and management team have extensive retail operating experience, a key competitive differentiator in leading its expanded growth strategy and cannabis franchising program. ShinyBud trades on the TSX Venture Exchange (TSXV) under the ticker symbol SNYB. For more information, please visit investors.shinybud.com.

Cautionary Statement Regarding Forward-Looking Information

This news release contains "forward-looking information" within the meaning of Canadian securities legislation. Forward-looking information generally refers to information about an issuer's business, capital or operations that is prospective in nature or relates to future performance or outcomes, and includes future-oriented financial information about the issuer's prospective financial performance or financial position.  All information other than statements of current or historical fact constitute forward-looking information.

The forward-looking information contained in this news release is based on the Company's assumptions, plans, intentions, expectations and beliefs about future conditions and courses of action, and includes, without limitation, statements pertaining to: completion of the proposed Cotton Mill acquisition; closing of the Acquisition Loan; ShinyBud's growth potential; future pharmacy acquisitions, whether of the six other targets currently under evaluation or otherwise; pro forma pharmacy performance targets; and potential expansion of the Company's existing network of cannabis retail stores.

Readers should not place undue reliance on forward-looking information, which is inherently uncertain and depends upon the accuracy of the assumptions, plans, intentions, expectations and beliefs reflected therein.  ShinyBud can give no assurance that the forward-looking information contained herein will prove to be correct or that the assumptions, plans, intentions, expectations and beliefs upon which they are based will occur or be realized.  The forward-looking information in this news release does not provide any assurance of future performance or outcomes.  Actual results and events will differ from those anticipated in the forward-looking information, and the differences may be significant and adverse to the Company.

The Company has made certain material assumptions to develop the forward-looking information in this news release, including but not limited to: general business, economic, competitive, political and social conditions affecting the retail cannabis and pharmacy markets; the effectiveness of ShinyBud's strategy; satisfaction of conditions to closing of the Cotton Mill acquisition and Acquisition Loan; receipt of all required regulatory approvals, including any required approvals of the TSX Venture Exchange; and the Company's ability to execute and achieve its business objectives, including improved operating efficiencies for any acquired retail pharmacies. The forward-looking information in this news release is also subject to various risk factors, including but not limited to: adverse market conditions; reliance on key and qualified personnel; regulatory and other risks associated with the cannabis and pharmacy industries in general, as well as those other risk factors discussed or referred to in disclosure documents filed by the Company with the securities regulatory authorities in certain provinces of Canada and available at www.sedar.com. The foregoing lists of material assumptions and risk factors is not exhaustive. Should any factor affect the Company in an unexpected manner, or should assumptions underlying the forward-looking information prove incorrect, the actual results or events may differ materially from the results or events predicted.

Any forward-looking information herein is expressly qualified in its entirety by this cautionary statement. Moreover, the Company does not assume responsibility for the accuracy or completeness of such forward-looking information. The forward-looking information included in this news release is made as of the date of this news release and the Company undertakes no obligation to publicly update or revise any forward-looking information, other than as required by applicable law.

APPENDIX

Table 1: Portfolio Model Assumptions

The following table sets out (i) average metrics per pharmacy store for the Cotton Mill pharmacy and six additional acquisition candidates currently under evaluation, based on the Company's due diligence review to date, and (ii) second year performance targets based on internal assumptions as to operating efficiencies that can be accomplished after one year.

	Average		Year-2 Pro Forma
	Per Pharmacy		Performance Targets
	Upon Acquisition^(1)		Per Pharmacy^(2)
Prescription (# units)	76,500		77,265
Rx Sales	2,524,500		2,627,010
Average Prescription Price	33		34
Front Shop Sales	75,000		150,000
Total Sales	$2,599,500		$2,777,010
Purchases	1,949,625		2,027,217
Rebates	(259,950)		(277,701)
Cost of Goods Sold:	$1,689,675		$1,749,516
Gross Profit	$909,825		$1,027,494
Operating Costs:
Salaries and Benefits	311,940		331,940
Other Store Operating	77,985		77,205
Total Operating Costs	$389,925		$409,145
Fixed Costs:
Rent, Facilities & Insurance	77,985		77,985
Total Fixed Costs	$77,985		$77,985
Total Expenses	$467,910		$487,130
EBITDA^(2)	$441,915		$540,364

Footnotes to Table Above:
(1)	Based on historical financial information reported by the Cotton Mill pharmacy and six other stores within the Company's current evaluation pipeline undergoing due diligence.
(2)	Using retail operating expertise, management believes average per store EBITDA at time of acquisition has the potential to increase by 200 to 300 basis points by month 13 of operations.
(3)	EBITDA refers to earnings before interest, taxes, depreciation, and amortization. This is a non-IFRS financial measure, does not have a standard meaning under IFRS, and is therefore unlikely to be comparable to similar measures presented by other issuers. Non-IFRS measures provide investors with a supplemental measure of the Company's operating performance and therefore, highlight trends in Company's core business that may not otherwise be apparent when relying solely on IFRS measures. Management uses non-IFRS measures in measuring the financial performance of the Company.

SOURCE ShinyBud Corp.

Kevin Reed, Chairman & CEO, P: [phone] | E: [email protected]; Caterina De Rosa, Senior Director, IR & Corporate Communications, P: [phone] | E: [email protected]