GABY Announces Restructuring of its Debt

Rhea-AI Summary

GABY Inc. (CSE:GABY)(OTC:GABLF), a cannabis dispensary consolidator based in California, has announced a settlement agreement with Miramar Professional Services to restructure its debt. The agreement includes an amended and restated promissory note that reduces the outstanding principal by US$3 million and lowers the interest rate for the next two years, resulting in interest savings of US$2.3 million. The repayment schedule has been extended, with final payment due on April 30, 2029. GABY will also issue 1.5 million warrants to the vendors, exercisable over three years at various prices. This restructuring supports GABY's operational and financial stability as it continues to grow both organically and through acquisitions.

Positive

• Reduction of principal amount by US$3 million.
• Interest savings of US$2.3 million over two years.
• Extended repayment schedule enhances liquidity.

Negative

• None.

SAN DIEGO, CA / ACCESSWIRE / April 25, 2023 / GABY Inc. ("GABY" or the "Company") (CSE:GABY)(OTC:GABLF), a California consolidator of cannabis dispensaries and the parent company of San Diego's Mankind Dispensary ("Mankind"), announced today that it has entered into a settlement agreement (the "Settlement Agreement") with Miramar Professional Services ("Miramar"), the former shareholders of Miramar (collectively, the "Vendors") and the representative of the Vendors (the "Vendors' Representative"), pursuant to which, among other things, GABY has agreed to settle certain outstanding indemnity claims against the Vendors in exchange for the Vendors entering into an amended and restated promissory note (the "A&R Promissory Note"), which A&R Promissory Note amends and restates the promissory note (the "Original Promissory Note") issued to the Vendors by GABY pursuant to the share purchase agreement between GABY, Miramar, the Vendors and the Vendors' Representative, dated February 15, 2021 (the "Share Purchase Agreement"). The terms of the Original Promissory Note that were amended by the A&R Promissory Note include, but not are not limited to, a reduction in the principal amount of the Original Promissory Note and a reduction in the interest rate accruing on the principal amount of the A&R Promissory Note for the next two years. The principal repayment obligations under the Original Promissory Note are also extended pursuant to the A&R Promissory Note for one year with the final repayment of the principal amount of the A&R Promissory Note becoming due on April 30, 2029.

In turn, the Vendors have agreed to settle certain outstanding indemnity claims against GABY under the Share Purchase Agreement in exchange for, among other things, GABY providing certain operational and financial covenants in the A&R Promissory Note, all as more particularly set out in the Settlement Agreement.

The A&R Promissory Note, among other amendments, reduces the aggregate outstanding principal amount the Original Promissory Note by US$3,000,000. Pursuant to the terms of the A&R Promissory Note, GABY is obligated to repay the principal amount as follows: (i) US$2,000,000.00 is due and payable on April 30, 2024; (ii) US$5,000,000.00 is due and payable on April 30, 2026; (iii) US$5,000,000.00 is due and payable on April 30, 2028; and (iv) US$10,500,000.00 is due and payable on April 30, 2029 (the "Final Maturity Date"). Notwithstanding the foregoing, a more detailed payment schedule which provides for blended interest payments together with principal repayments is included as Schedule C to the A&R Promissory Note. Interest on the principal amount of the A&R Promissory Note is equal to: (A) 5% per annum until September 30, 2023; (B) 7.5% per annum for the period beginning on October 1, 2023 and ending on September 30, 2024; and (C) 10.0% per annum for the period beginning on October 2, 2024 and ending on the Final Maturity Date.

As previously announced at the annual and special meeting held on March 25, 2021, holders of GABY shares passed a special resolution approving the consolidation of GABY shares on the basis of 20 pre-consolidation GABY shares for 1 post consolidation GABY share (the "GABY Share Consolidation"). Pursuant to the Settlement Agreement, GABY has agreed, subject to applicable securities laws, the rules and policies of the Canadian Securities Exchange (the "CSE") and the receipt of any required regulatory approvals, including but not limited to the approvals of the CSE, to issue to the Vendors, on a pro rata basis, common share purchase warrants of GABY (the "Warrants"), which shall be exercisable to purchase common shares in the capital of GABY ("GABY Shares"), on a post-GABY Share Consolidation basis, as follows: (a) 500,000 Warrants at an exercise price of CAD$0.20 for a period of 36 months; (b) 500,000 Warrants at an exercise price of CAD $0.60 for a period of 36 months; and (c) 500,000 Warrants at an exercise price of CAD $1.00 for a period of 36 months.

"In addition to the US$3,000,000 reduction of principal, the terms of the Settlement Agreement provide an aggregate interest savings to GABY of US$2,300,000 over the next two years. We appreciate the willingness of the Vendors of the Mankind Dispensary to work with us to create a mutually-beneficial resolution in this restructuring", said Paul Stacey, Senior Vice-President and Chief Financial Officer of GABY.

A copy of the Settlement Agreement shall be filed on the Company's SEDAR profile at www.sedar.com.

ABOUT GABY

GABY Inc. is a California-focused retail consolidator and the owner of Mankind Dispensary, one of the oldest licensed dispensaries in California. Mankind Dispensary is a well-known and highly respected dispensary with deep roots in the California cannabis community operating in San Diego. GABY curates and sells a diverse portfolio of products, including its own proprietary brands, Kind Republic™, Dank Space™ and Lulu's™ through Mankind, a pioneer in the industry with a strong management team with experience in retail, consolidation, and cannabis. GABY is poised to grow both organically and through acquisitions.

GABY's common shares trade on the CSE under the symbol "GABY" and on the OTC under the symbol "GABLF". For more information on GABY, visit www.GABYInc.com or the Company's SEDAR profile at www.sedar.com.

For further inquiries, please contact:

General

Investor Relations at IR@GABYinc.com

Disclaimer and Forward-Looking Information

The CSE does not accept responsibility for the adequacy or accuracy of this release. Certain information set forth in this news release may contain forward-looking statements that involve substantial known and unknown risks and uncertainties, certain of which are beyond the control of the Company. Forward-looking statements are frequently characterized by words such as "plan", "continue", "expect", "project", "intend", "believe", "anticipate", "estimate", "may", "will", "potential", "proposed" and other similar words, or statements that certain events or conditions "may" or "will" occur. These statements are only predictions. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Forward-looking statements include, but are not limited to, the performance of covenants of GABY pursuant to the Settlement Agreement and the A&R Promissory Note, the anticipated completion of the GABY Share Consolidation, the issuance of the Warrants to the Vendors, and the filing of the Settlement Agreement on GABY's SEDAR profile. Although GABY believes that the expectations and assumptions on which such forward-looking statements and information are based are reasonable, undue reliance should not be placed on the forward-looking statements and information because GABY can give no assurance that they will prove to be correct. By its nature, such forward-looking information is subject to various risks and uncertainties, which could cause the actual results and expectations to differ materially from the anticipated results or expectations expressed. Without limitation, these risks and uncertainties include: risks associated with the cannabis industry in general; failure to benefit from partnerships or successfully integrate acquisitions; actions and initiatives of federal, state and provincial governments and changes to government policies and the execution and impact of these actions, initiatives and policies; the size of the medical-use and adult-use cannabis market; competition from other industry participants; adverse U.S., Canadian and global economic conditions; failure to comply with certain regulations; and departure of key management personnel or inability to attract and retain talent. GABY undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as required by law.

Each of Mankind and GABY Manufacturing, are subsidiaries of GABY and hold a cannabis license in the State of California. Readers are cautioned that unlike in Canada which has Federal 032320-F legislation uniformly governing the cultivation, distribution, sale and possession of medical cannabis under the Cannabis Act (Federal), in the United States ("U.S."), cannabis is largely regulated at the State level. Cannabis is legal in the State of California; however, cannabis remains illegal under U.S. federal laws. Notwithstanding the permissive regulatory environment of cannabis at the State level, cannabis continues to be categorized as a controlled substance under the Controlled Substances Act in the U.S. and as such, cannabis-related practices or activities, including without limitation, the manufacture, importation, possession, use or distribution of cannabis are illegal under U.S. federal law. To the knowledge of the Company, the businesses operated by each of GABY's subsidiaries are conducted in a manner consistent with the State law of California, as applicable, and are in compliance with regulatory and licensing requirements applicable in the State of California, respectively. However, readers should be aware that strict compliance with State laws with respect to cannabis will neither absolve GABY, or its subsidiary of liability under U.S. federal law, nor will it provide a defense to any federal proceeding in the U.S. which could be brought against any of GABY, or its subsidiary. Any such proceedings brought against GABY, or its subsidiary may materially adversely affect the Company's operations and financial performance generally in the U.S. market specifically.

SOURCE: GABY Inc.

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FAQ

What is the significance of GABLF's recent settlement agreement?

The settlement agreement allows GABY Inc. to restructure its debt, reducing principal by US$3 million and providing interest savings of US$2.3 million.

How does the new promissory note affect GABY's financial obligations?

The amended promissory note extends GABY's repayment schedule, with the final amount due on April 30, 2029, improving financial flexibility.

What new financial instruments are being issued to vendors under the settlement?

GABY will issue 1.5 million warrants to the vendors, with exercise prices set at CAD$0.20, CAD$0.60, and CAD$1.00, exercisable for 36 months.

What is the impact of the interest rate changes in GABLF's promissory note?

The interest rate on the new promissory note is reduced for the next two years, contributing to the overall interest savings of US$2.3 million.