8-K: Planet 13 Recovers $10.5 Million in Stolen Funds, Including Real Estate

Planet 13 announces the recovery of $10.5 million in misappropriated funds, including $5.5 million in cash and real estate valued at $5.0 million, while continuing its lawsuit against El Capitan Advisors.

Summary

• Planet 13 has recovered $2.1 million of funds previously held at BridgeBank, bringing the total recovery of funds held at Western Alliance Bank (WAB) to $5.5 million.
• The company will also obtain real estate valued at approximately $5.0 million based on recent comparable sales, which it intends to sell.
• In total, Planet 13 has recovered approximately $10.5 million, including the expected value from the sale of the real estate.
• This settlement does not conclude the company's lawsuit against El Capitan Advisors, Inc. and its founder, Andrew Nash, in which it is seeking approximately $10.3 million in additional compensatory damages and other relief.
• The funds managed by El Capitan were held at WAB and were subject to a $35.0 million default judgment against El Capitan obtained by Casa Verde Capital.
• Casa Verde levied that judgment, causing approximately $5.5 million of Planet 13's funds to be directed to the Orange County, California Sheriff's Office on September 21, 2023.
• Planet 13 secured a partial settlement with Casa Verde for the release of $3.4 million of the WAB Funds, which the company received on January 31, 2024.
• The company initiated litigation in January 2024 to obtain the return of approximately $15.3 million in additional funds misappropriated by El Capitan and Andrew Nash.
• On February 16, 2024, the Court appointed a special-purpose receiver to investigate the location and disposition of the stolen funds.
• On February 28, 2025, the company secured a settlement with Casa Verde for the remaining approximately $2.1 million of the WAB Funds.
• El Capitan and Andrew Nash have not responded to Planet 13's lawsuit, resulting in the entry of default against them.

Sentiment

Score: 7

Explanation: The sentiment is moderately positive due to the significant recovery of funds. However, the ongoing lawsuit and uncertainty regarding the remaining unrecovered funds temper the overall outlook.

Positives

• Planet 13 has successfully recovered $10.5 million of the misappropriated funds.
• The company has secured a settlement with Casa Verde for the remaining $2.1 million of the WAB Funds.
• Planet 13 will obtain real estate valued at approximately $5.0 million as part of the settlement.
• The company is actively pursuing legal action against El Capitan and Andrew Nash to recover the remaining funds.

Negatives

• Approximately $10.3 million remains unrecovered from El Capitan and Andrew Nash.
• El Capitan and Andrew Nash have not responded to Planet 13's lawsuit, making recovery uncertain.
• The company is unable to predict what action may be taken by law enforcement or other regulatory authorities.

Risks

• The company may not be able to recover the full $10.3 million sought from El Capitan and Andrew Nash.
• The value of the real estate obtained as part of the settlement may fluctuate.
• Ongoing legal proceedings could be costly and time-consuming.
• The company is limited in what information it can disclose due to the ongoing nature of the claims and actions taken by the defendants.

Future Outlook

Planet 13 will continue to vigorously pursue its rights to reclaim the funds that it entrusted to El Capitan and will continue to pursue recovery of its funds and additional compensation through all legally available means, including as appropriate, through cooperation with law enforcement and/or initiation of further litigation.

Management Comments

• The company will continue to vigorously pursue its rights to reclaim the funds that it entrusted to El Capitan.
• The company will continue to pursue recovery of its funds and additional compensation through all legally available means.

Industry Context

The case highlights the risks associated with cash management services in the cannabis industry, where companies often face challenges in accessing traditional banking services due to federal regulations. This situation underscores the importance of due diligence and robust oversight when engaging third-party financial advisors.

Comparison to Industry Standards

• It's difficult to directly compare this situation to industry standards as misappropriation of funds is not a typical business activity.
• However, the recovery efforts can be compared to other companies that have faced financial fraud or asset recovery situations.
• For example, companies like WorldCom and Enron faced significant asset recovery challenges after accounting scandals, and their recovery rates varied widely depending on the complexity of the fraud and the legal resources available.
• Planet 13's recovery of over 68% of the misappropriated funds to date is a positive sign, but the remaining $10.3 million may be more difficult to recover given El Capitan's lack of response to the lawsuit.

Legal Proceedings

• Ongoing lawsuit against El Capitan Advisors, Inc. and Andrew Nash seeking approximately US$10.3 million in additional compensatory damages and other relief.
• The company engaged legal counsel to conduct an internal investigation with respect to these matters.

Stakeholder Impact

• Shareholders will benefit from the recovery of funds, which strengthens the company's financial position.
• The recovery of funds may improve investor confidence in the company's management and oversight.

Next Steps

• Continue the lawsuit against El Capitan Advisors, Inc. and Andrew Nash.
• Pursue a default judgment against El Capitan and Andrew Nash.
• Cooperate with law enforcement and/or initiate further litigation as appropriate.
• Sell the real estate obtained as part of the settlement.

Key Dates