Quarterly report pursuant to Section 13 or 15(d)

Related Party Transactions

v3.22.2.2
Related Party Transactions
6 Months Ended
Jun. 30, 2022
Related Party Transactions [Abstract]  
Related Party Transactions
Note 12 – Related Party Transactions
 
 
 
 
 
 
 
 
 
 
    
June 30,
2022
    
December 31,
2021
 
Financial Statement Line Item
                 
Current portion of long-term debt, net of issuance costs
(1)
     12,062        —    
Long-term debt, net of issuance costs
(1)
     106,360        —    
Accrued and other current liabilities
 
 
11,626
 
 
 
 
 
Other long-term assets
     —          4,552  
    
 
 
    
 
 
 
Total
  
$
130,048
 
  
$
4,552
 
    
 
 
    
 
 
 
 
(1)
Upon the closing of the Recapitalization Transaction, certain of the Company’s lenders held greater than 10.0% of the voting interests in the Company and therefore are classified as related parties. Refer to Note 5 for further discussion.
 
As part of the MPX Acquisition, the Company acquired a related party receivable of $0.7 million due from a company owned by a former director and officer of the Company, Elizabeth Stavola. The related party receivable was converted into a loan facility of up to $10.0 million, which accrued interest at the rate of 16.0%, compounded annually. Interest was due upon maturity of the loan on December 31, 2021. During the year ended December 31, 2021, the Company exercised its right to convert the principal balance of the loan and accrued interest into a 99.0% equity interest in MPX NJ and exercised its option to acquire the remaining 1.0% of MPX NJ, upon receipt of approval from the New Jersey Cannabis Regulatory Commission (the “CRC”). On January 7, 2022, the CRC approved the Company’s acquisition of 100% of the equity interests in MPX NJ. The Company recorded acquisition costs of $0.1 million and $0.3 million within selling, general and administrative expenses on the unaudited interim condensed consolidated statement of operations for the three and six months ended June 30, 2022, respectively (June 30, 2021 - $Nil and $Nil, respectively). As of June 30, 2022, the balance of such facility was $Nil (December 31, 2021 – $4.6 million), which included accrued interest of $Nil (December 31, 2021 - $0.9 million). The related party balances are presented in other long-term assets on the unaudited interim condensed consolidated balance sheets.
On June 30, 2017, the Company entered into a loan facility with a former director and officer of the Company, Hadley Ford (“Ford”). The total loan facility was up to C$0.5 million (equivalent to $0.4 million) and accrued interest at the rate of 2.5%. Interest was due upon maturity of the loan on June 30, 2021. As part of Ford’s termination agreement, the total loan facility was offset by compensation owed to Ford of $0.5 million during the first quarter of 2021. As of June 30, 2022, the outstanding balance of the facility including accrued interest was $Nil (December 31, 2021 – $Nil).
Effective as of May 6, 2022 (the “Resignation Date”), Randy Maslow, the Company’s Interim Chief Executive Officer and President and a member of the Board of Directors, resigned from his executive positions, including all positions with the Company’s subsidiaries and its affiliates, and from the Company’s Board of Directors and its committees. In connection with the resignation, Mr. Maslow and the Company executed a separation agreement (the “Separation Agreement”), pursuant to which, Mr. Maslow will receive certain compensation and benefits valued to substantially equal the value of entitlements he would have received under Section 4(g) of his
e
mployment
a
greement. Specifically, Mr. Maslow will receive total cash compensation in the amount of approximately $12.2 million (the “Separation Payment”), of which $5.1 million was paid out on May 6, 2022 (made up, in part of a portion of severance payment of approximately $4.8 million, and unpaid 2021 bonus of $300,000). The remainder of the Separation Payment was to be paid out in equal installments of approximately $0.9 million per month over the next eight months following the Resignation Date, which
was
accelerated upon the closing of the Recapitalization Transaction. As of June 30, 2022, the total remaining balance owed to Mr. Maslow was $5.3 million, which is presented in accrued and other liabilities on the unaudited interim condensed consolidated balance sheets. The total outstanding balance of the Separation Payment owed to Mr. Maslow was paid in full as of July 15, 2022.
Under the terms of the Separation Agreement, the Company will continue to pay the monthly premium for Mr. Maslow’s continued participation in the Company’s health and dental insurance benefits pursuant to COBRA for one year from the Resignation Date. Mr. Maslow’s compensation and benefits under the Separation Agreement included the extension of exercise period of options to acquire the Company’s common shares, until the earlier of (i) five years from the Resignation Date; (ii) the original expiration dates of the applicable option; or (iii) the closing of the Recapitalization Transaction. In accordance with the terms of the Separation Agreement,
Mr. Maslow’s options to acquire the Company’s common shares expired as of the Closing Date of the Recapitalization Transaction. Mr. Maslow will continue to serve in a consulting role for a period of six months following the Resignation Date (provided that such period may be extended by additional six months by the Company) at a base compensation
of $25,000 per month. During the three and six month ended June 30, 2022, the Company paid less than $0.1 million and $0.1 million, respectively, to Mr. Maslow in relation to consulting services provided (June 30, 2021 - $Nil and $Nil, respectively).
Pursuant to the terms of the Secured DPA, the Company has a related party payable of $6.3 million due to certain of the New Secured Lenders, including Gotham Green Fund 1, L.P., Gotham Green Fund 1 (Q), L.P., Gotham Green Fund II, L.P., Gotham Green Fund II (Q), L.P., Oasis Investment Master II Fund LTD., Senvest Global (KY), LP, and Senvest Master Fund, LP, for certain out-of-pocket costs, charges, fees, taxes and other expenses incurred by the New Secured Lenders in connection with the closing of the Recapitalization Transaction (the “Deferred Professional Fees”). These New Secured Lenders held greater than 10% of the outstanding common shares of the Company upon the closing of the Recapitalization Transaction and are therefore considered to be related parties. The Company shall have until December 31, 2022, to pay the Deferred Professional Fees ratably based on the amount of each New Secured Lender’s Deferred Professional Fees. The Deferred Professional Fees shall accrue simple interest at the rate of 12.0% from the Closing Date until December 31, 2022. Beginning with the first business day of the month following December 31, 2022, interest shall accrue on the Deferred Professional Fees at the rate of 20.0% calculated on a daily basis and is payable on the first business day of every month until the Deferred Professional Fees and accrued interest thereon is paid in full. As of June 30, 2022, the outstanding related party portion of the Deferred Professional Fees including accrued interest was $6.3 million (December 31, 2021 – $Nil). The related party balance is presented in accrued and other current liabilities on the unaudited interim condensed consolidated balance sheets.