GABY Forfeits The Shares It Holds In MPS In Exchange For Release Of $22.5M Debt

GABY Inc. GABLF GABY has determined that consistent with and as reported in its consolidated audited financial statements for the year ended December 31, 2022, the write down of its Type 10 retail license issued by the California Department of Cannabis Control to its wholly owned subsidiary, Miramar Professional Services (MPS) renders the value of such asset below the remaining debt of $22.5 million incurred to acquire it, making the continued operation of the retail business untenable.

Further, the company has defaulted on its obligations under the amended and restated promissory note for $22.5 million issued to or to the order of the holders dated April 24, 2023 and secured by a first priority security interest in the collateral which collateral includes all of the outstanding shares of the capital stock of MPS held by the company pursuant to that certain stock pledge agreement dated as of April 5, 2021.

All efforts to cure such default, including refinancing of the debt evidenced in the promissory note have proven unavailable. The company has delivered to the holders an executed consent to strict foreclosure and release agreement as contemplated in the promissory note and in cooperation with its secured creditors the parties have exercised the reversion remedy on the terms set out in the strict foreclosure and release agreement.

The reversion remedy provides that in consideration for the transfer of the collateral to the holders, the holders release the company from any further liability for the principal and accrued interest under the promissory note on the terms and conditions set forth in the foreclosure and release agreement. Further, pursuant to the reversion remedy, the GABY shares issued pursuant to Section 2.02(1)(c) of the share purchase agreement dated April 5, 2021, between the holders on the one hand and the company on the other, shall be returned to the company and surrendered by the holders to the company for cancellation.

The foreclosure and release agreement and the reversion remedy are effective as of July 15, 2023. Effective on the same date Ebon Johnson will resign from the board of directors of GABY.

The company will consider the feasibility of continuing to operate its CBD business under the Lulu's and 2Rise brands.

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