John SchroyerMarch 3, 2023
Court ruled that a worker's connection to a federally illegal industry makes him ineligible.
bankruptcy Archives - Green Market Report
John SchroyerMarch 3, 2023
Lydia KibetAugust 20, 2020
On Wednesday, 12 August 2020, Pharmagreen Biotech Inc. (OTC:PHBI) filed bankruptcy protection in the US Bankruptcy for the District of Nevada due to lender notes, condemning the COVID-19 pandemic for its massive disruption, which has affected its operations.
The recent outbreak of the novel coronavirus COVID-19, which was declared a pandemic by the World Health Organization, has led to adverse impacts not only on the cannabis industry but also on the global economy. The disruption of financial markets has created uncertainty regarding companies’ operations.
The Pharmagreen Biotech CEO, Peter Wojcik, believes that the company’s hurdles were linked to “toxic terms” in lender notes. While Pharmagreen was getting ready to deliver the highest quality starter plantlets to cannabis industries, lender notes were pulling them down.
According to Wojcik, the two months of closure in Europe delayed the company’s ETN process. As a result, the notes became overdue, and lenders demanded very high conversions that could eventually exhaust the company’s valuation.
Pharmagreen’s plan after filing a bankruptcy protection
“After taking much time to carefully analyze our strategic options, we have decided that a voluntary chapter 11 filing provides the best possible outcome for Pharmagreen,” Wojcik said.
But, Wojcik already had a plan to settle all the debts by engaging lenders so that the whole process is fair for both parties. This means the Pharmagreen would continue its operations in the ordinary course of business, and lenders receive their notes.
Additionally, Pharmagreen Biotech, Inc. plans to utilize the chapter 11 process to build and restructure a plan that will maintain the company’s operational momentum and emerge from chapter 11 with a practicable balance sheet.
About Pharmagreen Biotech Inc. (PHBI)
Pharmagreen Biotech Inc, a Nevada company, publicly traded (OTC PINKS: PHBI), is an affiliate of WFS Pharmagreen Inc. The renowned cannabis industry sprout supplier focuses on manufacturing and marketing cannabis products for both medical and recreational markets. The industry’s primary focus is providing Good Manufacturing Practices (GMP) for its Tissue Culture facilities, nurseries, and cold storage of plantlets.
The pandemic has caused massive disruption to the economy, and it nearly shuttered the hopes of Pharmagreen. However, the US Securities and Exchange Commission (SEC) filings unveil the company’s late quarterly filing due to unanticipated delays that could not be resolved and other fallouts.
As of 31 March 2020, Pharmagreen reported in its preceding 10-Q that it had not raked in any profits from operations for the past six months. The company had a working capital deficit of $1.4 million and an accumulated $4.9 million deficit. For the quarterly period ended 31 March, Pharmagreen incurred a net loss of $209,684 and spent $474,205 cash flows in operations.
The business operated as Air Transport Group Holdings Inc. before it announced in May 2018 that it had completed a share exchange consent with WFS Pharmagreen Inc., a private company in British Columbia. Air Transport Group Holdings Inc. was then changed to Pharmagreen Biotech Inc. to reflect the new direction and business of the company.
Debra BorchardtJuly 20, 2020
GenCanna, one of Kentucky’s largest hemp companies, filed for voluntary Chapter 11 reorganization with the U.S. Bankruptcy Court in the Eastern District of Kentucky earlier this year in February. One problem with GenCanna’s bankruptcy filing though was that MariMed (OTC:MRMD) was one of the largest shareholders in the company. It had a $34 million claim against the company sparking a battle over control of the company.
Last week, Law360 reported that MariMed lost a round over the efforts to gain control over the company. The website said that U.S. Bankruptcy Judge Gregory Schaaf of Kentucky found MariMed had acted improperly when it attempted to replace members of GenCanna’s board of directors and force out GenCanna’s president and chief executive officer.
The Fight Begins
In any bankruptcy cases, debtors are first in line over equity holders. In the process of working through its bankruptcy, GenCanna made a deal to sell the bulk of its assets for $75 million. MariMed was against the deal and had its own plan to reorganize the company, but apparently couldn’t come up with the money needed for the plan. According to the Law360 reporting, the court records demonstrated that GenCanna went with the offer it had.
The court records said that MariMed’s president and chief executive officer Robert Fireman, who also sits on GenCanna’s board of directors, teamed up with another board member, Michael Falcone, to form a voting bloc controlling 52% of GenCanna’s parent company’s shares. The two apparently pulled GenCanna Chief Executive Officer Matty Mangone-Miranda, GenCanna President Steve Bevan, and one other member of the board of the parent company, and installed Fireman as chairman, according to court records.
The court filings stated that Fireman and Falcone appointed a new CEO of the parent company, and directed him to get the bankruptcy case dismissed. The new director of GenCanna USA’s board was told to develop a plan to liquidate the company within 30 days.
The ousted executives, Mangone-Miranda and Bevan asked Judge Schaaf to step in claiming MariMed’s actions violated board rules. The Judge agreed saying, “Using an equity position that has no chance of recovery to object to a settlement that is not even filed is an obvious attempt to exercise control over the case and enhance the creditor interests,” Judge Schaaf wrote. “Further, this also suggests clear abuse of the governance process that would warrant action in this court if an injunction was requested. For now, that analysis is not required.”
Basically, since the assets were sold, there is nothing left for the equity owners like MariMed. Since there’s nothing left for MariMed, they have no power to make these types of decisions at the company. GenCanna said it is in settlement negotiations with its senior secured lender and buyer to resolve claims from the committee of unsecured creditors. The settlement is expected to generate roughly $1 million, but the claims are much higher than that.
The assets were sold to New York-based MGG Investment Group, a private lender, and one of the company’s creditors.
GenCanna’s Pain Inflicted On MariMed
GenCanna’s bankruptcy filing also weighed on the shares of MariMed. In April, MariMed’s fourth-quarter 2019 financial results included a one-time charge of $30.2 million as a result of a write-off of its investment in GenCanna. CEO Jon Levine said, “Despite GenCanna’s Chapter 11 filing, we believe that it will emerge with a restructured capital and operational structure that will allow GenCanna to restore its position as a leader in the hemp industry. If this occurs, we believe there will be an opportunity for the value of the assets to be recaptured at a later date. We expect to continue our strong relationship with GenCanna and jointly pursue opportunities in the evolving hemp industry.”
MariMed’s shares have dropped from 40 cents in February before the GenCanna bankruptcy and were lately selling at 13 cents.
Debra BorchardtMay 20, 2020
Green Growth Brands Inc. (OTCQB: GGBXF) had earlier this week announced that it had defaulted on its debentures due this month, now it is headed to the Canadian equivalent of bankruptcy. Green Growth said that has filed for insolvency protection under the Companies’ Creditors Arrangement Act (Canada) and obtained an order from the Ontario Superior Court of Justice granting the Applicants protection under the CCAA. Ernst & Young Inc. has consented to act as the Court-appointed monitor.
Green Growth said that the Court has granted CCAA protection for an initial 10 day period, subject to extension thereafter as the Court deems appropriate, which expires on May 29, 2020. While under CCAA protection, creditors and others are stayed from enforcing any rights against Green Growth.
Green Growth said it had to file for insolvency due to maturing debt and the effects of COVID-19 on its one dispensary The+Source which is located in Las Vegas, Nevada. The lack of tourists has caused a severe drop in sales in many of the companies located there. The company also closed its CBD chain of stores called Seventh Sense, when the malls were closed Although Seventh Sense was losing money prior to the pandemic. “After careful consideration of all other available alternatives, GGB’s board of directors determined that it is in the best interests of the Company and all its stakeholders to seek protection under the CCAA.”
All J’s Greenspace Lending
All Js Greenspace seems to have a blank checkbook when it comes to Green Growth Brands, but it may end up owning the company since it probably won’t be able to pay back all the money that All Js has forwarded. It has agreed to fund the CCAA proceedings through a debtor-in-possession loan facility of up to US$1 million. An additional $US6.2 million will be made available for borrowing under the DIP Agreement following the Initial Period upon Court approval at a subsequent hearing that would (i) extend the stay period; (ii) increase the amount of the DIP Lender’s Charge (as defined below); (iii) approve a sale and investment solicitation process and (iv) approve a stalking-horse agreement among the company and All Js and Capital Transfer Agency in its capacity as the debenture holder trustee of the Company’s (A) US$45,500,000 aggregate principal amount of 15.00% secured convertible debentures that matured May 17, 2020, and (B) US$23,717,000 aggregate principal amount of 5.00% secured convertible debentures maturing in 2024 pursuant to which the Secured Credit Bidders would act as stalking-horse bidders under the SISP.
Selling Florida
The company’s Florida-based subsidiaries entities have entered into a forbearance agreement as of April 29, 2020, among the GGB Florida Subsidiaries. Green Ops has agreed not to start a foreclosure sale of the collateral under the Florida Security Agreement or accelerate amounts due under the related loan documents until June 15, 2020. In addition, Green Ops has agreed to advance US$500,000 to the GGB Florida Subsidiaries, representing the balance payable under a US$1 million principal amount 15% secured note dated April 29, 2020.
In consideration of the Forbearance Covenant, the Company and Florida Subsidiaries have agreed to conduct a sales process in respect of the business, assets, and undertaking of the Florida Subsidiaries with the intention of entering into a binding agreement of purchase and sale prior to the expiry of the Forbearance Period.
Slow Train Wreck
Green Growth brands built its reputation on the back of its retail executives. Its former CEO Peter Horvath is now the CEO at Hightimes Holding Corp. These 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.
Debra BorchardtOctober 29, 2019DionyMed Brands Inc. (CSE: DYME; OTCQB: DYMEF) is headed to bankruptcy. The cannabis company had been unable to meet the demands of its creditors and announced today it was unable to attract a viable transaction to restructure its debts. The company also said tried to seek a sale of its assets outside of a court process.
GLAS America (the company’s creditor) has therefore advised the company that it intends to proceed with the Receivership Application and DionyMed said it does not intend to oppose the appointment of a receiver. The company anticipates that FTI Consulting Canada Inc. will be appointed as a receiver at the hearing of the Receivership Petition or shortly thereafter.
DionyMed’s four directors Susan Watt, David Kerr, Brett Moyer and Stephen Dineley have advised the company that they intend to resign effective upon the appointment of the receiver.
It was previously announced that GLAS USA LLC and GLAS America LLC, under the company’s credit agreement dated January 16, 2019 provided the Company with notice of default under the Credit Agreement and demand for immediate payment of the amount of $24 million-plus any additional interest, fees and expenses and that GLAS America served the Company with a petition to the Supreme Court of British Columbia seeking the appointment of a receiver over all of the Company’s property and assets.
On September 23, Flow Capital began legal proceedings against Dionymed saying they were in default under the company’s royalty agreement. The claim is for the minimum sum of $2,698,116 which is made up of the investment balance, past due royalty payments and late payment fees. The company’s investment in DionyMed is $1,000,000 and there can be no assurance that the Company will recover any portion of its investment.
Just last month, Dionymed announced an additional investment from its senior secured investor of $3.2MM and a reorganization of the business to right-size the company. “This increases the credit facility with the senior lender to US$19.2 MM. The credit facility bears interest at LIBOR (at a floor of 2.5%) plus 12% plus an anniversary fee of 2.5%, maturing February 6, 2021. While the credit facility is currently in default, the senior lender has agreed to make additional advances to the Company.”
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