Canadian cannabis company Beleave Inc. (OTC: BLEVF) is applying for creditor protection, which isn’t exactly bankruptcy, but instead is an attempt to avoid heading to bankruptcy. The companies included in the filing are Beleave Kannabis Corp., Seven Oaks Inc., 9334416 Canada Inc. O/A Medi-Green and My-Grow, Beleave Kannabis Abbotsford Inc., and Beleave Kannabis Chilliwack Inc. collectively known as the “Beleave Group“.
The company said it has received the approval of its directors to make an application for an order for creditor protection from the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act. The company said it will be making its application to Court for the Initial Order on June 5, 2020.
The Beleave Group said in a statement that it is seeking creditor protection under the CCAA in order to receive a stay of proceedings that will allow the Beleave Group to facilitate a going concern transaction with Hegedus Consulting Services Inc. or identify and conclude a transaction with a superior offer.
Troubles Began In 2019
In April, Beleave announced that Kevin Keagan resigned from his position as CEO, but remained on the Board of Directors. Bill Panagiotakoplous, COO was named acting CEO, while the Board began a search for Mr. Keagan’s successor.
This followed a move in December 2019 when Jeannette VanderMarel announced her departure as CEO after fewer than two months on the job. VanderMarel disclosed her resignation on social media, saying she “happily resigned as CEO of Beleave Kannabis” and that she was “moving on to things I believe in.”
In a November filing, Beleave disclosed that it faced a lawsuit from another cannabis company Auxly. Auxly alleged certain breaches of an agreement related to an Oct. 5, 2017, deal between the companies, when Beleave received CA$5 million in funding from Auxly, according to the filing.
“The company disputes Auxly’s allegations, both on their purported merits and on procedural grounds, and intends to vigorously defend itself in any proceedings,” read the statement.
Pursuant to the Proposed Transaction, the Beleave Group and the Purchaser have agreed to (i) a debtor-in-possession loan to fund the proposed CCAA proceedings; and (ii) an offer by the Purchaser to purchase substantially all of the assets of the Beleave Group pursuant to an asset purchase agreement that will be the “stalking-horse” in a sale process designed to solicit higher and better offers.
If the Initial Order is granted, it is expected that the Beleave Group’s day-to-day obligations to employees and key suppliers of goods and services, from and after the filing day, will continue to be met. While under CCAA protection, management of the company would remain responsible for the day-to-day operations of the company under the general oversight of the Monitor.