Shannon Illingworth is the founder and chief executive of AVT Inc., a Corona, Calif.-based maker of automated dispensing machines that manufactures the pot-vending units for Medbox. A former college offensive lineman who spent a season on the Los Angeles Rams in 1993-1994 and who now touts the lessons learned on the gridiron, Illingworth is perhaps more reticent to discuss his 1992 arrest for possession of methandrostenolone, a popular anabolic steroid. That turn of events forced him to spend a little time cooling his heels in prison.
Vincent Mehdizadeh bought 50 percent of the broken-down shell of MindfulEye Inc. from Illingworth in November 2011 and the other half in August 2012 (all for what Mehdizadeh referred to as “less than $1 million”) and renamed the company Medbox. Once holder of a large block of Medbox preferred stock, Illingsworth now owns only about 10,000 shares of common stock. (AVT billed Medbox about $500,000 last year for the sale of machines.)
Why the suddenly lower profile for Illingworth? “Shannon is a very aggressive businessman and our risk tolerance and instincts are different,” Mehdizadeh said.
Being aggressive gave Illingworth about 15 minutes of capital markets’ fame when, according to author Randall Lane, Illingworth gave former market pundit and New York Met Lenny Dykstra $250,000 in (undisclosed) AVT shares for pumping the stock in his then widely followed Street.com column. According to Lane, Dykstra was introduced to Illingworth via financial adviser Richard O’Connor, who was a co-defendant with Illingworth in a 2003 suit filed by investor Kurt Knecht over losses he sustained in Out-Takes, an old Stratton Oakmont deal. Apparently Knecht’s sore feelings quickly faded and by 2006 he was an investor in AVT.
Certainly Illingworth’s AVT is an odd sort of corporate duck: It makes a real product that has found willing buyers, but because of significant amounts of related-party transactions involving Illingworth’s father Jon, a consistent pattern of missed filing deadlines and the firing of its auditor, its shares have been on an uninterrupted slide south this year.
More recently, AVT disclosed that it had received more than $1 million in funding from private equity shop Ironridge, an investor with a profitable niche taking stakes in a host of struggling and profoundly troubled companies. AB Analytical Services analyst Alan Brochstein has argued that the investment is little more than standard death spiral financing whereby Ironridge purchases shares at a sharp discount and then becomes eligible to obtain as many shares as triple its initial stake should AVT fail to meet specific goals.