Quarterly report pursuant to Section 13 or 15(d)

Subsequent Events

v3.21.2
Subsequent Events
 6 Months Ended
Jun. 30, 2021
Subsequent Events [Abstract]  
Subsequent Events [Text Block]
Note 13 - Subsequent Events
Legal Proceedings
Please refer to Note 10 for further discussion.
Event of Default and Financial Restructuring
The Company is
c
urrently in default of the obligations under the Company’s long-term debt as discussed in Note 1.
As part of the Restructuring Support Agreement with the Secured Lenders and a majority of the Unsecured Debentureholders, dated July 13, 2020, the Secured Lenders, the Unsecured Debentureholders and the Existing Shareholders of the Company are to be allocated and issued, approximately, the amounts of Restructured Senior Debt (as defined below), Interim Financing (as defined below), Junior
Non-Convertible
Unsecured Notes (as defined below) and percentage of the pro forma common equity, as presented in the following table:
 
(in ’000s of U.S. dollars)
   
Restructured
Senior Debt
1
     
Interim
Financing
2
     
8% Senior
Unsecured
Debentures
3
     
Pro Forma
Common Equity
4
  
Secured Lenders
    $  85,000      $  14,737      $ 5,000        48.625 % 
Unsecured Debentureholders
      —          —          15,000        48.625 % 
Existing Shareholders
      —          —          —          2.75 % 
    
 
 
     
 
 
     
 
 
     
 
 
  
Total
   
$
85,000
 
   
$
14,737
 
   
$
 20,000
 
   
 
100
% 
 
(1)
The principal balance of the Secured Notes will be reduced to $85.0 million, which will be increased by the amount of the Interim Financing, as set forth above, which has a first lien, senior secured position over all of the Company’s assets, is
non-convertible
and
non-callable
for three years and includes payment in kind at an interest rate of 8% per year and a maturity date which will be five years after the consummation of the Recapitalization Transaction (the “Restructured Senior Debt”).
 
(2)
The Secured Lenders provided $14.7 million of interim financing (“Interim Financing”) to ICM on substantially the same terms as the Restructured Senior Debt, net of a 5% original issue discount. The amounts of the Interim Financing along with any accrued interest thereon is expected to be converted into, and the original principal balance will be added to, the Restructured Senior Debt upon consummation of the Recapitalization Transaction.
(3)
The 8% Senior Unsecured Debentures include payment in kind at an interest rate of 8% per annum, a maturity date which will be five years after the consummation of the Recapitalization Transaction, are
non-callable
for three years and are subordinate to the Restructured Senior Debt but senior to the Company’s common shares.
(4)
Following consummation of the Recapitalization Transaction, a
to-be-determined
amount of equity will be made available for management, employee and director incentives, as determined by the New Board (as defined below). All of the Company’s existing warrants and options will be cancelled and the Company’s common shares may be consolidated pursuant to a consolidation ratio which has yet to be determined.
Upon consummation of the Recapitalization Transaction, a new board of directors (the “New Board”) will be composed of the following members: (i) three nominees will be designated by the Secured Lenders; (ii) three nominees will be designated by the Consenting Unsecured Lenders; and (iii) one nominee will be designated by the director nominees of the Secured Lenders and Consenting Unsecured Lenders to serve as a member of the Company’s New Board.
Pursuant to the terms of the proposed Recapitalization Transaction, the Collateral Agent, the Secured Lenders and the Consenting Unsecured Lenders agreed to forbear from further exercising any rights or remedies in connection with any events of default that now exist or may in the future arise under any of the purchase
a
greements with respect of the Secured Notes and all other agreements delivered in connection therewith, the purchase agreements with respect of the Unsecured Debentures and all other agreements delivered in connection therewith and any other agreement to which the Collateral Agent, Secured Lenders, or Consenting Unsecured Lenders are a party to (collectively, the “Defaults”) and shall take such steps as are necessary to stop any ongoing enforcement efforts in relation thereto. Upon consummation of the Recapitalization Transaction, the Collateral Agent, Secured Lenders and Consenting Unsecured Lenders are also expected to irrevocably waive all Defaults and take all steps required to withdraw, revoke and/or terminate any enforcement efforts in relation thereto.
Completion of the Recapitalization Transaction will be subject to receipt of the Requisite Approvals. If the Requisite Approvals are obtained, the Plan of Arrangement will bind all Secured Lenders, Unsecured Debentureholders and Existing Shareholders. The Plan of Arrangement was approved by the Court on October 5, 2020. On January 29, 2021, a notice of appeal with respect to the final approval for the Plan of Arrangement received by the Company on November 5, 2020 was dismissed by the British Columbia Court of Appeal. The Company is in progress of obtaining the remaining Requisite Approvals. Specifically, certain of the transactions contemplated by the Recapitalization Transaction have triggered the requirement for an approval by state-level regulators in certain U.S. states with jurisdiction over the licensed cannabis operations of entities owned, in whole or in part, or controlled, directly or indirectly, by the Company in such states. On February 23, 2021, the Nevada Cannabis Compliance Board approved the proposed change of ownership and control of the Company’s wholly-owned subsidiary, GMNV, contemplated by the Recapitalization Transaction. On June 17, 2021, the Massachusetts Cannabis Control Commission also approved the proposed change of ownership and control of the current licenses held by the Company’s wholly-owned subsidiaries, Mayflower and Cannatech, contemplated by the Recapitalization Transaction. Similar state-level approvals are being sought in Florida, Maryland, New York, New Jersey and Vermont. On June 15, 2021, the Company and the Lenders agreed to amend the date by which the Recapitalization Transaction pursuant to the Plan of Arrangement is required to be implemented by from June 30, 2021, to August 31, 2021.
For the three and six months ended June 30, 2021, restructuring costs of $1.0 million and $1.9 million, respectively (June 30, 2020 – $2.5 million and $2.5 million, respectively), were incurred with respect to the Recapitalization Transaction. To date, the Company has incurred $8.7 million in restructuring costs. Restructuring costs are recorded in the selling, general and administrative expenses on the unaudited interim condensed consolidated statements of operations.