Green Growth Brands Inc. (CSE: GGB) (OTCQB: GGBXF) CEO Peter Horvath is stepping down from this position and as a member of the Board of Directors effective on Thursday, March 19. The announcement was made after the market closed.
Mr. Horvath has served as CEO of Green Growth Brands since January 2019 and as a member of the Company’s Board of Directors since July 2018. Randy Whitaker, the Company’s current Chief Operating Officer will take over as interim Chief Executive Officer, effective immediately. Mr. Whitaker has served as the Company’s Chief Operating Officer since February 2019. The vacancy on the Company’s Board of Directors will be filled in due course.
Ms. Carli Posner the Chair of the Board of Directors said, “On behalf of the Board and everyone at GGB, I would like to offer my heartfelt thanks to Peter for his significant contribution and dedication to the Company and wish Peter the best for his future endeavors.”
Mr. Horvath responded, “I am humbled to have worked with such amazing professionals along this journey. Among those individuals is Randy Whitaker, whom I am pleased has been named as interim CEO. The Company will be in good hands with such a seasoned operator at the helm, and I have full confidence in Randy to lead the Company during this difficult time.”
Green Growth also stated that in response to the virus pandemic it has elected to temporarily close all of its mall-based cannabidiol kiosk shops in an effort order to protect its employees and customers from unnecessary exposure to the COVID-19 virus. “In connection with this action, the company will also suspend sales under its CBD e-commerce platform.” The company said it would continue to move forward with the previously announced sale of the CBD business to The BRN Group Inc. Green Growth did mention that it would continue to solicit and evaluate any potential superior offers under the go-shop rights afforded to the company as part of that announced transaction. Although with the shops closed and the e-commerce business shuttered, it is unlikely to find a better offer.
Green Growth said that its cannabis dispensaries, located in the Las Vegas, Nevada area, will remain open for business subject to additional pandemic-related directives from local authorities.
The End Of GGB?
Will GGB even survive this? The company noted that it owes $5 million to Moxie on or before February 5, 2020 (including a five-day cure period following January 31, 2020), and an additional $2 million is due in installments to ABG-Shark LLC related to the GMR Payment on or before March 31, 2020. GGB said it is working to negotiate a deferral of these obligations and has previously announced short-term financing from certain of its key stakeholders in connection therewith.
In addition to the Moxie and ABG-Shark payments, the company and its subsidiaries have material obligations that are due or that are coming due within the next 15 to 45 days.GGB has drawn all amounts available to it under the previously announced working capital backstop commitment provided by All Js Greenspace LLC and Chiron Ventures Inc. for purposes of funding the Company’s operations. “In addition, for purposes of funding the Company’s operations, All Js advanced approximately $1.5 million from its portion of the previously announced US$52.3 million debenture repayment backstop commitment. Notwithstanding this US$1.5 million advance from All Js, there is no guarantee that either of the Backstop Parties will permit additional funds to be drawn from the debenture repayment backstop commitment for purposes of funding the Company’s operations.”
Victoria’s Secret Revealed
The executives leading Green Growth Brands were mostly made up of former executives from Victoria’s Secret owned by L Brands, which has struggled after the lingerie failed to acknowledge a cultural departure from hyper-sexual images of women. The group mostly knew how to operate in volume sales with stores plastered all over malls. The plan was to create a chain of CBD stores not unlike Bath & Body Works also owned by L Brands.
The company paid Authentic Retail Concepts roughly $2 million in stock to help it foster a relationship with Simon Malls for the Seventh Sense CBD kiosks. The group planned to open over 100 stores in a year. In a sign of ‘jumping the shark’, there were deals signed to sell Seventh Sense CBD products in DSW Shoe Stores. Many of the ex-DSW executives had also joined with Green Growth Brands.
The sales never materialized quickly enough to cover the fast-tracked expansion and the losses mounted. This is the point at which the company decided to sell Seventh Sense and clean house. Many in the industry may recall Horvath’s brash remarks that the cannabis industry just didn’t understand retail and that experienced retailers were needed in the industry. No doubt many cannabis industry insiders are having the last laugh now.