Troubled Canadian cannabis company Nabis Holdings Inc. (CSE: NAB) (OTC: NABIF) announced that its Arizona subsidiary Nabis AZ, LLC failed to fund its deferred payment obligation in respect of an asset purchase agreement for Perpetual Healthcare Inc. which is the operator of the Emerald medical marijuana retail dispensary located in Arizona.   Nabis AZ was required to make payment to the vendors of approximately $8.1 million, including accrued interest, which was due on October 25, 2020. That payment wasn’t made because Nabis failed to secure alternative financing to fulfill the Deferred Obligation.

Following the lapse of a 10 business day cure period ending November 10, 2020, in addition to the acceleration of the approximately $8.1 million owing, the terms of the Deferred Obligation contemplate that (i) a specified representative of the vendor will be appointed to the board of directors of Perpetual, and (ii) an amended and restated operating agreement in respect of Nabis AZ will become effective, providing certain specified representatives of the vendor with an aggregate 75% membership interest in Nabis AZ with certain limited governance rights, whereby such persons will be entitled to a monthly pro rata preferred distribution in respect of their 75% aggregate membership interest until the Deferred Obligation is satisfied.

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A couple of weeks ago, Nabis said that it had begun civil proceedings in the Arizona Superior Court and the Ontario Superior Court of Justice against Mark Krytiuk, the company’s former Director, President, and Chief Operating Officer. Krytiuk resigned from his position as President and Chief Operations earlier in October. Nabis said that Krytiuk failed to transition control of the material assets of Nabis back to the company following his recent resignation. Nabis accused Krytiuk of not transferring the directorship of Perpetual and has not returned other property belonging to Nabis. “Until such time as a new director of Perpetual acceptable to Nabis is appointed, the company has no ability to influence the business and affairs of Perpetual.”

Also in October, Shay Shnet, who co-founded Nabis in 2018, resigned from his role as Chief Executive Officer. Shnet agreed to provide transition services to Nabis and remained on the board of directors. The Special Committee, comprised of Emmanuel Paul and James Tworek, has taken on a more active role in the management of the company. As Chair of the Board of Nabis, Paul will oversee the leadership of the company and continues to assess the company’s strategic alternatives.

Nabis had warned in September that things were going badly for the company. It said it would not make the August 31, 2020, principal payment and are in discussions with the mortgage holder to either extend the payment due date, failing which, default proceedings are expected to commence. On June 30, 2020, the company did not make the quarterly interest payment accrued on the convertible debentures as a result of a Force Majeure event as set out in the convertible debenture trust indenture. These factors indicate the existence of a material uncertainty that may cast significant doubt as to the Company’s ability to continue as a going concern. Management intends to finance operating costs over the next twelve months with cash on hand, through the private placement of common shares, issuance of loans, and convertible loans.