The parent company of Shiny Bud, a cannabis retail chain in Ontario, announced it has filed a Notice of Intention to make a proposal pursuant to the provisions of the Bankruptcy and Insolvency Act.
The parent company, Shiny Health & Wellness Corp., emphasizes that it is not bankrupt. Instead, it says the primary purpose of the Notice of Intention (NOI) filing is to “create a stabilized environment for the Company and its financial advisors to run an orderly and flexible sale, investment and solicitation process (“SISP”) with the goal of identifying one or more interested parties that wish to acquire or make an investment in the Company’s business or all or some of its assets.”
Shiny Bud says it currently operates 20 locations in Ontario. On May 16th, the company announced it had temporarily closed five of its retail cannabis stores effective immediately. It had previously closed another three locations and opened one since October 31, 2023. Its website currently lists 36 locations. The AGCO lists 37 locations as authorized to open.
If the agreement is approved, Shiny Health believes it has enough resources to fund its operations during the SISP, and its stores will remain open for business during that time. This would be subject to any restructuring steps the company may take during this process.
It expects that its 20 licensee stores will not be impacted by the NOI and will be able to continue to use the Shiny Bud brand in accordance with the licence agreements.
Due to the NOI filings and other “financial resource constraints,” Shiny Health says it does not expect to file its annual financial statements and accompanying management’s discussion and analysis for the fiscal year ended January 31, 2024, by the prescribed deadline of May 30, 2024.
In addition to its retail cannabis stores, Shiny Health also owns one pharmacy in Ontario, initially intending to create a chain of pharmacies that would provide access to cannabis, as well. A recent report proposed allowing sales of medical cannabis through pharmacies in Canada.
As of October 31, 2023, Shiny Health had cash of $239,817, liabilities that exceeded current assets by $7.4 million, an accumulated deficit of $26.7 million, and a shareholders’ deficit of $5.1 million.
“The current negative working capital deficit indicates the existence of material uncertainties that may cast significant doubt on the company’s ability to continue as a going concern,” says its most recent report for 2023. “Management’s view is that the success of the Company is dependent upon its ability to generate sufficient positive cash flow from its total operations to cover all its costs, including overhead and public company costs and obtaining financing through a combination of equity and additional debt where possible for working capital, debt service and to sustain its operations until positive overall cash flow is achieved.”
For the three months ended October 31, 2023, Shiny Health had $4.3 million in revenue, with a loss of $752,594 and a net comprehensive loss of $5.9 million.
In the same period, it brought in $3.6 million in revenue from its retail cannabis operations, $220,849 from its “data program,” and $346,828 from its pharmacy. This represented about a 45% decline in revenue for its retail cannabis operations and data program from the same period in 2022.
For the nine months ended October 31, 2023, retail cannabis operations brought in $14.8 million, a 30% decline from the same period in 2022 and $852,450 from its data program, down 33% from the same period in 2022.
The company blames the decrease in cannabis sales and data program revenue on the market conditions in Ontario and the closure of some of its stores.
