Eve & Co, a cannabis producer based in Strathroy, Ontario, received an order for creditor protection from the Ontario Superior Court of Justice.
According to a news release, the order includes, among other things:
- A stay of proceedings in favor of the Eve Group.
- Approval of a debtor-in-possession (DIP) loan from Deans Knight Capital Management.
- The appointment of BDO Canada Limited as monitor of the Eve Group (in such capacity, the “Monitor”).
Eve Group consists of Eve & Co, Natural MedCo and Eve & Co International Holdings.
“As a result of continuing liquidity challenges, the applicants are insolvent and cannot meet their liabilities as they become due,” according to the company’s application under the Companies Creditors Arrangement Act (CCAA).
The initial order allows the company to draw on the DIP loan of 1.2 million Canadian dollars ($960,000),
The money will be used for working capital until the next hearing, set for April 1.
At that hearing, Eve Group will seek approval of a sale and investment solicitation process.
Eve Group said its goal is to facilitate a transaction that sees the business emerge from CCAA protection as a going concern.
According to a news release, Eve Group “intends to operate in the ordinary course throughout the CCAA proceedings and while conducting the SISP.
“The Eve Group’s day-to-day obligations to employees and key suppliers of goods and services, from and after the filing date, will continue to be met.”
The company’s CCAA application cited a range of issues, including breached sales agreements that resulted in losses of millions of dollars in expected revenue and the resulting spoilage of unsold inventory.
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The application also cited:
- Investments in partnerships that did not come to fruition.
- A failed equity investment transaction.
- The COVID-19 pandemic.
The company also owes money to the Canada Revenue Agency, including:
- CA$195,418 for unremitted Employment Insurance and Canada Pension Plan deductions.
- CA$1,434,051 for excise tax remittances.
- CA$275,358 for unpaid Harmonized sales tax.
The company had said it was in default to its senior secured creditor, the Royal Bank of Canada.
However, Eve & Co entered into an agreement with the bank to ensure debt owed to the Royal Bank of Canada “is repaid in full from the proceeds of any sale process.”
A copy of the order is available here.