The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A pioneering Freeport-based stem cell therapy provider lost more than $30m over its lifetime prior to being placed in Supreme Court supervision, it can be revealed.

Cheryl Simms, the Kikivarakis & Co accountant now confirmed as the Okyanos Centre for Regenerative Medicine's' full liquidator, revealed in her first report that the company had lost some $30.172m - some $14.856m of which was incurred over the three years to end-2019.

These losses provide some insight into why LS Enterprises, Okyanos' main debt financier, may have been eager to petition for the company's court-supervised winding-up in the aftermath of Hurricane Dorian's devastation given that it was owed some $12.438m in outstanding principal and interest.

"From a review of the company's audited balance sheet as of December 31, 2017, and December 31, 2018, and its unaudited balance sheet as of December 31, 2019, the company has consistently made losses having accumulated $14.856m in total losses over those three years," Ms Simms wrote.

Tribune Business previously reported that Okyanos had just $5.667m worth of assets, including just $335,218 in cash, to cover $13.22m in liabilities, thereby creating a $7.553m solvency deficiency.

Ms Simms told the Supreme Court she had recovered $42,100 out of $75,140 owed to Okyanos in accounts receivables earlier this summer, and was also seeking to reclaim pre-paid expenses of $95,459 which had gone on work permits and inventory that were now no longer needed.

Other sources of recovery were $76,000 owed by an unnamed related party, plus a $36,312 VAT receivable due from the Government. Two potential buyers were already said to have emerged for Okyanos' high-end medical equipment, with a reconciliation of medical supplies inventory said to be worth $86,638 also underway.

Justice Indra Charles' August 31, 2020, decision explaining her rationale for granting the winding-up of a company that was seen as a key player in The Bahamas' efforts to kickstart medical tourism, said she queried whether Okyanos should remain in provisional liquidation to give it a chance to recover.

"The court inquired of [John] Delaney QC, appearing for the petitioner, whether 'soft touch' provisional liquidation might be an alternative to a full-blown liquidation leading to the ultimate dissolution of the company," Justice Charles recorded.

"‘Soft touch’ liquidation would leave provisional liquidation in place, thereby offering protection against individual creditor actions, and enabling breathing space for a restructuring of debts. And, assuming no wrongdoing by directors, the Board of Directors may remain in place with protocols between the provisional liquidator and the directors."

However, Mr Delaney said L. S. Enterprises, the company behind the winding-up petition, was a related party to Okyanos given that the two had common directors on their respective Boards. And, accepting that both Boards were in favour of liquidation, Justice Charles accepted that Okyanos was insolvent and had ceased trading.

Her judgment confirmed that L. S. Enterprises was owed more than $12m on some $15.9m that it had advanced to Okyanos via four separate lending facilities agreed between 2017 and 2019. The stem cell therapy provider's troubles, though, were ignited by Hurricane Dorian which allegedly caused more than $2m worth of damage at its First Commercial Centre offices.

"In the immediate aftermath of Hurricane Dorian, the company’s premises, operating facilities and equipment were not functioning nor functional," Justice Charles said. "The Company attempted to mitigate loss and damage by moving equipment and supplies to a climate controlled storage and preparing the company’s operating facilities for mold remediation but that was allegedly hampered by the landlord, whose servants and/or agents instructed the company’s personnel to cease and desist from such activities."

First Commercial Centre is headed by former Grand Bahama Port Authority chairman, Hannes Babak, with attorney Andre Feldman sitting on the Board. The landlord invoked arbitration proceedings after Okyanos gave notice it was terminating the lease, but any action was stayed by the provisional liquidation.

"Following Hurricane Dorian’s devastations, the company’s business ceased, and never resumed," Justice Charles added. "The company filed claims for damages with its insurance agents for losses arising out of the hurricane, but had not received the majority of such insurance proceeds."