Ascend Wellness Recordsdata Lawsuit Towards MedMen For New York Deal

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Ascend Wellness Holdings, Inc. (CSE: AAWH.U) (OTCQX: AAWH) is ramping up its efforts to get MedMen (OTC: MMNFF) to finish the deal that the 2 corporations had organized on the subject of the New York properties. On Friday, Ascend filed a criticism within the Business Division of the Supreme Courtroom of the State of New York in New York County towards MedMen NY, Inc. and MM Enterprises USA, LLC wherein Ascend is attempting to get MedMen to undergo with the deal that MedMen is attempting to get out of.  As well as, AWH has made an utility for a preliminary injunction and non permanent restraining order to keep up the established order between the events and to forestall any actions by the MedMen events that might lead to extra encumbrances on the fairness or belongings of MedMen NY, Inc.

The Authentic Deal

The 2 corporations had agreed in February of 2021 Ascend would make investments $73 million to be able to obtain controlling curiosity in 86.7% of the corporate’s New York properties. As well as, Ascend had an choice to buy the remaining quantity sooner or later. MedMen was in fairly dangerous form on the finish of 2020. The corporate was closely in debt and its liabilities exceeded its belongings by 50%. MedMen continued to lose cash quarter after quarter and its operational prices exceeded 100% of its gross revenues making profitability an unlikely hope relatively than a actuality. Moreover, MedMen’s income was dropping and its losses elevated quarter over quarter. MedMen spent a lot of 2020 making an attempt to restructure, promote its belongings and renegotiate its many obligations. The corporate was additionally dealing with points with its founders and a lawsuit by the corporate’s former Chief Monetary Officer James Patterson, which MedMen gained.

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Ascend stepped in and gave MedMen some much-needed money, together with an upfront $4 million money infusion in December 2020 in reference to the execution of a letter of intent between the events and an additional $4.46 million to cowl MedMen’s working capital wants and Utica facility website enhancements and enlargement throughout 2021.

NY Approval

The deal although was contingent upon approval by the state of New York. MedMen submitted an utility to the New York regulators as of March 11, 2021, for approval of the

sale of MedMen NY to Ascend. That utility recited that MedMen wanted a right away money infusion from Ascend to proceed its operations. The method hit a snag when midway by way of 2021, the state transferred oversight of the hashish program from the Division of Well being to the newly created Workplace of Hashish Administration (OCM). Ascend claims that MedMen didn’t pursue the state’s approval inflicting Ascend to step in and push the method alongside. Lastly, the state gave its approval on December 16.

Nonetheless, the usage of the phrase “conditionally” within the approval prompted MedMen to assert that the approval wasn’t remaining and they also may terminate the deal. In response to the criticism, Ascend went again to the OCM and requested for clarification. The OCM said that its approval was the truth is remaining. Nonetheless, MedMen insisted it wasn’t and eventually on December 29, the OCM contacted MedMen to say it was certainly remaining.

The deal said that MedMen needed to shut inside 5 days of receiving approval from the state of New York. Nonetheless, MedMen insists it didn’t get approval by December 31 regardless that the emails exist that show it did. If that wasn’t dangerous sufficient, Ascend claims that  MedMen NY paid an improper $500,000 dividend to its father or mother firm, seemingly financed by advance {dollars} paid to MedMen by Ascend.

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Looming Debt

Ascend additionally said in its criticism that MedMen NY has roughly $100 million {dollars} of loans for which MedMen NY capital inventory has been pledged as collateral within the occasion of default. “These loans have been made to the MM Enterprises’ subsidiary, MM Can USA, Inc. by Hankey Capital, LLC. As soon as the unique deal closed, Ascend would challenge to MedMen NY  a promissory notice within the quantity of $28 million and that MedMen NY would subsequently assign the Closing Be aware to Hankey. Hankey would then launch MedMen NY from any legal responsibility with the mortgage.  The loans from Hankey are scheduled to return due on January 31, 2022, and February 1, 2022. “Within the occasion of default on the MM Can mortgage agreements, Hankey is permitted

to foreclose on the pledged MedMen NY possession curiosity and may promote the foreclosed upon curiosity at a public or non-public sale or retain the curiosity for its personal account. In such occasion, an

order particularly imposing MedMen NY’s obligation to shut the Transaction shall be meaningless.” MedMen agreed to the Hankey mortgage in 2018.

In different phrases, if MedMen defaults, then Hankey will get the inventory and Ascend is left empty-handed.

New MedMen

In November, Michael Serruya was named Chairman and Interim CEO, efficient instantly. Serruya succeeded outgoing Chairman and CEO Tom Lynch, who held the place since 2020 and oversaw the corporate’s operational turnaround. Serruya joined MedMen’s board in August 2021 as a part of a $100 million funding within the firm by Serruya Non-public Fairness to increase its operations in key markets and establish and speed up additional progress alternatives throughout the USA. Some sources have speculated that Serruya believes the corporate offered the MedMen NY properties at a reduction and that’s the reason they need to terminate the deal. Basically, the brand new administration believes it may get extra money for MedMen NY.

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