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Tuesday, November 29, 2022

Comeback Time for Green Growth Brands Inc (OTCMKTS: GGBXF)

Green Growth Brands Inc (OTCMKTS: GGBXF) took a hit the other day after the Company announced they have executed a “stalking horse” asset purchase agreement to sell their cannabidiol business (the “CBD Business”) to the BRN Group Inc. for an undisclosed amount.  It is anticipated that the Company will hold up to a 20% carried interest in the CBD Business following completion of the CBD Transaction.

The sale of the CBD business comes on the same day the Company reported its second quarter fiscal 2020 results; while revenues for the quarter were $21.1 million, a sequential increase of 66% over the prior quarter, the Company reported a whopping $34.8 million loss for the quarter. Also on Monday Green Growth confirmed it has cut a number of jobs ahead of its delaying second-quarter earnings call by two days.

Green Growth Brands Inc (CNSX: GGB) (OTCMKTS: GGBXF) bills itself as a Company that creates remarkable experiences in cannabis and CBD. Led by CEO Peter Horvath and a leadership team of consumer-focused retail experts, the company’s brands include CAMP, Seventh Sense Botanical Therapy, The+Source, Green Lily, and 8 Fold. The Company also has a licensing agreement with the Greg Norman™ Brand to develop a line of CBD-infused personal care products designed for active wellness. GGB is expanding its cannabis operations throughout the U.S., via dispensaries in Nevada, Massachusetts and Florida and the largest network of CBD shops in malls across the country and ShopSeventhSense.com.

Green Growth had nearly 200 kiosks at malls and stores-within-stores selling its brands of CBD beauty and personal care products last year, while introducing new marijuana brands at licensed dispensaries in Nevada.

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The sale of the CBD business is significant as it accounted for over 40% of CGB sales last year; ceoPeter Horvath commented: “While we are excited by the consumer demand signals we saw in the CBD Business during the quarter ending December 28, 2019, and we remain confident in its future potential, the CBD Business remains in its nascency” said Peter Horvath, Chief Executive Officer of GGB. “With high-potential in the future comes material overhead costs and other obligations in the near term.  These near-term overhead costs and other obligations, together with constraints on liquidity, have posed significant challenges that have hindered us from growing the CBD Business to its full-potential. At the same time, our MSO Segment continues to generate positive EBITDA despite constraints on our ability to fully execute our MSO business plan due, in part, to previously disclosed legal challenges in Nevada,” added Horvath. “In light of these factors, we have determined it necessary and appropriate to sell the CBD Business and focus on executing our MSO business plan.  The board has also formed a special committee to commence a strategic review, which will include consideration of other cost savings measures, designed to position the Company on a pathway to achieve financial stability and ultimately a platform through which we can achieve sustainable profitability and growth.  We are committed to significantly reducing our overall operating costs and extending our cash runway while better positioning the Company to refinance its debt and raise additional financing in the future.”

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Currently trading at a $45mm USD total market valuation Green Growth has fallen a long way since it was trading for over $5 USD per share back in January 2018. The recent sale of its cbd business to the BRN Group Inc. for an undisclosed amount did not sit will many many investors because the BRN Group itself was launched by the founders of Green Growth Brands Adam Arviv who serves as executive director of the BRN Group. CGB says it plans to use the proceeds of the sale to satisfy obligations of the Company and its subsidiaries and for general working capital purposes and to ensure that the Company continues as a going concern. Management stated they “”the initiatives announced today to sell the CBD segment, restructure debt and raise equity financing improves the financial infrastructure we need to scale our MSO segment. We believe focusing our expertise on the MSO segment will yield the highest long-term value for our shareholders and customers.”  We will be updating on Green Growth on a daily basis so make sure you are subscribed to microcapdaily.com so you know what is going on with Green Growth.

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Disclosure: we hold no position in Green Growth either long or short and we have not been compensated for this article.

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