SIMPLY SOLVENTLESS ANNOUNCES STRATEGIC ACQUISITION OF CANNABIS CULTIVATOR DELTA 9 BIO-TECH, ADDING APPROXIMATELY $12 MILLION ANNUAL REVENUE (25% INCREASE) AND $2.5 MILLION ANNUAL ADJUSTED EBITDA (23% INCREASE), FOR CONSIDERATION OF NIL NET OF EXPECTED WORKING CAPITAL RECEIVED, ANNOUNCES EXECUTIVE APPOINTMENTS, AND PROVIDES $0.40 WARRANTS UPDATE

Canada NewsWire

CALGARY, AB, Dec. 30, 2024

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CALGARY, AB, Dec. 30, 2024 /CNW/ - Simply Solventless Concentrates Ltd. (TSXV: HASH) ("SSC") is pleased to announce that it has entered into a share purchase agreement dated December 28, 2024 (the "SPA") with Delta 9 Cannabis Inc. ("Delta 9") in respect of the acquisition of all of the issued and outstanding shares of Delta 9 Bio-Tech Inc. ("Bio-Tech") for cash consideration of $nil net of approximately $3.0 million of expected net working capital received, or cash consideration of $3.0 million without deducting expected working capital received, payable in a series of payments of $0.75 million by January 2, 2025 and $2.25 million on the closing date, expected to be January 31, 2025 (the "Acquisition"). SSC also announces the appointment of Jeff Holmgren as Chief Financial Officer and the promotion of Murray Brown, SSC's current Vice President, Operations, to the position of Chief Operating Officer. Additionally, all of SSC's 8,700,000 common share purchase warrants exercisable at a price of $0.40 per share with an expiry date of December 23, 2024, have been exercised for proceeds of $3,480,000.

Vertically integrating upstream into cultivation is a core SSC strategic mandate due to a tightening supply demand dynamic pushing cannabis prices upward, SSC's increasing demand for dried flower due to the acquisition of leading preroll manufacturer ANC Inc., and the desire for SSC to participate in the dried flower product category which holds a 40% market share (according to Headset data). The acquisition of Bio-Tech provides SSC with a predictable volume of high-quality Good Agricultural Collection Practice ("GACP") certified internationally exportable flower, with low per gram cost of cultivation, for an attractive acquisition metric of only 0.0x adjusted EBITDA post integration, net of expected net working capital received. SSC assumes no debt or liabilities from the Acquisition, and with a large portion of the synergies being captured prior to closing, SSC believes that Bio-Tech will contribute meaningfully to further expanded revenue and adjusted EBITDA in Q1 2025.

SSC will provide Q1 2025 guidance in the weeks after closing of the Acquisition.

About Bio-Tech

Bio-Tech operates a 95,000 square foot GACP certified cannabis cultivation facility in Winnipeg, Manitoba (the "Facility"), with an annual cultivation capacity of approximately 9,000kg of dried cannabis flower and trim.

Bio-Tech currently services the recreational dried flower markets in Ontario, Alberta, Manitoba, Saskatchewan, British Columbia, and the Maritimes, and the business-to-business wholesale market in Canada and internationally.

The Acquisition

Pursuant to the order of the King's Bench of Alberta (the "Court") issued July 15, 2024 (as amended and restated from time to time), Delta 9 and Bio-Tech, among other entities, collectively, commenced proceedings under the Companies' Creditors Arrangement Act (the "CCAA"). On July 24, 2024, Bio-Tech entered a court granted sale and investment solicitation process for the business and/or assets of Bio-Tech.

SSC has entered into the SPA with Delta 9 in respect of the Acquisition, pursuant to which SSC will acquire all of the issued and outstanding shares of Bio-Tech for cash consideration of $nil net of approximately $3.0 million of expected net working capital received, or cash consideration of $3.0 million without deducting expected working capital received, payable in a series of payments of $0.75 million by January 2, 2025 and $2.25 million on the closing date, expected to be January 31, 2025. SSC will also enter into a lease in respect of the Bio-Tech facility, conditional upon closing of the Acquisition.

Valuation Metrics of Acquisition

   -- Adjusted EBITDA Multiple (Net of Expected Working Capital Received): 0.0x 
      estimated annual adjusted EBITDA ($0.0 million consideration net of 
      expected working capital received / $2.5 million estimated annual 
      adjusted EBITDA of Bio-Tech). Adjusted EBITDA is a non-IFRS measure. See 
      "Non-IFRS Financial Measures" below. 
 
   -- Adjusted EBITDA Multiple (Without Deducting Expected Net Working Capital 
      Received): 1.2x estimated annual adjusted EBITDA ($3.0 million 
      consideration / $2.5 million estimated annual adjusted EBITDA of 
      Bio-Tech). Adjusted EBITDA is a non-IFRS measure. See "Non-IFRS Financial 
      Measures" below. 

Closing of the Acquisition is subject to several conditions precedent, including but not limited to the approval of the TSXV, the completion of the reverse vesting order pursuant to the CCAA proceedings and a notification to Health Canada. There is no guarantee that the Acquisition will close on the terms set forth herein or at all.

Key Benefits and Synergies

Key benefits and synergies of the Acquisition are as follows:

   -- Low Cultivation Costs: Upon capture of synergies, it is expected that the 
      all-in cash cost to cultivate will be approximately $0.60-$0.70 per gram, 
      among the lowest for indoor cannabis in Canada. 
 
   -- No Liabilities: As Bio-Tech is being acquired through CCAA proceedings, 
      SSC will assume no liabilities upon closing of the Acquisition. 
 
   -- Tax Pools: Bio-Tech has approximately $60 million of accrued non-capital 
      loss tax pools which may be usable to SSC. Should these tax pools be 
      utilized, they are expected to reduce future tax payments by up to $12 
      million at an effective tax rate of 20%. 
 
   -- International Exposure: The Facility is GACP certified, allowing for the 
      export of dried flower to international markets, which currently attracts 
      higher selling prices. 
 
   -- Complimentary Products: SSC does not currently cultivate or sell dried 
      flower. The Acquisition will allow SSC to participate in the dried flower 
      product category, which is the largest cannabis product category in 
      Canada with a market share of approximately 40% (according to Headset 
      data). 
 
   -- Supply Chain: In the opinion of SSC, the supply demand dynamic is 
      balancing in the Canadian wholesale cannabis marketplace, making it more 
      difficult to procure the inputs that SSC requires. The Acquisition 
      secures a supply of high-quality flower and trim for use in SSC's 
      prerolls and in the manufacturing of concentrates and hash. 
 
   -- Prerolling: Bio-Tech sells regular and infused prerolls in numerous 
      markets. SSC's subsidiary ANC Inc. will bring this manufacturing in-house, 
      maximizing efficiency. 
 
   -- Vapes: Bio-Tech sells vape cartridges in numerous markets, and it 
      currently outsources all vape manufacturing. This manufacturing will come 
      in-house at SSC's Massive Hash Factory facility, reducing production 
      costs. 
 
   -- Inventory Velocity: Bio-Tech sells several products that SSC currently 
      manufactures, including hash, which will help maximize inventory 
      turnover. 
 
   -- Facility Cost Savings: SSC will be able to rationalize the activities 
      performed at its various facilities, reducing fixed operating costs by 
      approximately $750,000 annually once rationalized (prior to the estimated 
      post integration adjusted EBITDA figure of $2,500,000). 
 
   -- Cost Synergies: Administration, including but not limited to public 
      company costs, accounting, IT, governance, and HR will be shared, 
      reducing costs significantly. 
 
   -- Blended Excise Rate: Bio-Tech pays lower excise rates as a cultivator, 
      which will lower SSC's overall corporate blended excise tax rate. 

Bio-Tech Financial Figures and Preliminary Proforma

Bio-Tech financial figures and preliminary projected proforma are as follows:

   -- Bio-Tech Production: Bio-Tech is currently producing approximately 
      9,000kg per year of high-quality cannabis. It is believed that production 
      can be increased to 15,000-18,000kg per year with approximately $4.0 
      million of capital investment, which is not planned at this time. 
 
   -- Bio-Tech Revenue: Bio-Tech is expected to generate approximately $12.0 
      million of annualized gross revenue, which would represent an increase of 
      approximately 25% from current SSC levels. It is believed that the 
      current average selling price per gram of $1.11/g can be increased 
      through international export and through other initiatives. 
 
   -- Bio-Tech Adjusted EBITDA: After capturing synergies, Bio-Tech is expected 
      to generate approximately $2.5 million of annualized adjusted EBITDA 
      (prior to any facility rationalization as noted above), which would 
      represent an increase of approximately 23% from current SSC levels. 

Executive Appointments

SSC is pleased to announce that it has appointed Jeff Holmgren as its Chief Financial Officer, and that Murray Brown has been promoted to the position of Chief Operating Officer.

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