Sunniva Archives - Green Market Report

Sunniva Inc.  (CSE:SNN) (OTC-PINK:SNNVF) announced that it has been discharged and released from its CCAA proceedings and Alvarez & Marsal Inc. is now discharged and released from its duties in relation to the Petitioners.  As of June 18, 2021, the company and its Canadian subsidiaries implemented the Amended and Consolidated Plan of Compromise and Arrangement that dated back to January 14, 2021, which included the issuance of an aggregate of 755,814,804 common shares of Sunniva.

All of the shares of Sunniva, including the Plan Shares, though are subject to the cease trade order issued on June 22, 2020, for failure to file certain financial documents. Sunniva said in a statement that work on the audits for the years 2019 and 2020 was ahead of the anticipated schedule. “A significant portion of the 2019 fieldwork and testing has been completed and a draft financial statement package is under internal review. Some work on the 2020 audit has been done in tandem with 2019 to gain efficiency. The Company anticipates completing both audits by the end of July.”

Sunniva’s wholly-owned subsidiary, CP Logistics is still in arbitration with the current owner and landlord of the California glasshouse, Bobs LLC, concerning CPL’s rights as a tenant under the October 20, 2017 lease. On April 2, 2021, CPL started the arbitration to get a judgment that the lease remains in full force and effect and was never terminated. Bobs filed a counterclaim seeking a declaration that the prior landlord validly terminated the lease. Both sides are seeking money damages under various theories. Sunniva said that the arbitration is being administered by JAMS Arbitration. The parties have selected a three-arbitrator Panel and are scheduled to conduct a Preliminary Conference Call with the Tribunal on July 2, 2021.

Trading of the Canadian shares will continue to be suspended until the Cease Trade Order has been fully revoked.

Sunniva’s History

The company had big plans for 2019 and its California operation. The company estimated that its 2019 revenue in California through CP Logistics would be $72–$78 million (USD $55–$60 million), with an estimated gross margin of 40-50%. Then Sunniva‘s net losses for 2018 rose to $29.0 million versus last year’s $17.5 as expenses ballooned due to the company’s US operations, which led to an increase in the number of employees.  The most significant increase in costs was related to personnel costs, rent, and insurance of US operations.

Sunniva’s CFO bailed out in November 2019 as the company began selling off assets. It was working with CannaPharmaRx regarding the sale of Sunniva Medical Inc. to CannaPharmaRx and believe that the deal would be completed. Next, the company’s President resigned and short interest rose as shareholders got very nervous over the C-suite jumping ship. The company also decided to focus its efforts on California, not Canada.

The company was named in a lawsuit, along with its wholly-owned subsidiary, 1167025 B.C. Ltd., co in connection with loans made by Matrix Venture Capital Management Inc. to Sunniva on August 28, 2019, and October 11, 2019, respectively, in the aggregate amount of $7 million. The remedies sought by the Plaintiff include a mortgage over Sunniva’s Okanagan Falls property to secure payments of the amounts of the Loans owed by Sunniva to Plaintiff. Sunniva, through its subsidiary 116, entered into a $3.4 million mortgage to finance the purchase of land for the greenhouse facility in Okanagan Falls, British Columbia.  The Company had repaid $400,000 as of September 30, 2019, but was in default on the remaining balance.

The company also ran into problems with its California real estate. Sunniva said that on November 25, 2019, it received a 30-day notice of termination and a notice of default from SPCL “for items related to payment of outstanding balances and failure to meet certain conditions of the Build to Suit Lease. “As a result of these notices, the timing of receipt of the Company’s certificate of occupancy for the Sunniva California Campus cannot be estimated at this time.”

Sunniva began 2020 closing Full-Scale Distributors, LLC. CP Logistics, which was supposed to deliver millions in revenue?  In 2019, Sunniva said that CP Logistics, LLC  had agreed to a reversal of transaction agreement with respect to the April 29, 2019 Membership Interest Purchase Agreement whereby CPL acquired an 80% membership interest in each of 420 Distribution, LLC and Coachella Distillation from Group Two Investments and assumed two subleases at the commercial property in Coachella, CA. CPL has ceased operations at the Distribution Facility and will relinquish the 80% membership interests acquired from each of 420 and Coachella and have the original purchase price returned.

Sunniva Inc.  (CSE: SNN) (OTCQB: SNNVF) has been named in a lawsuit, along with its wholly-owned subsidiary, 1167025 B.C. Ltd., co in connection with loans made by Matrix Venture Capital Management Inc.  to Sunniva on August 28, 2019 and October 11, 2019, respectively, in the aggregate amount of $7 million. The remedies sought by the Plaintiff include a mortgage over Sunniva’s Okanagan Falls property to secure payments of the amounts of the Loans owed by Sunniva to the Plaintiff.

Sunniva and 1167025 B.C. Ltd. said it intends to vigorously defend this action. “The allegations in the notice of claim contain factual inaccuracies and the Company believes the claim is without merit,” said Dr. Anthony Holler, CEO of Sunniva Inc.

1167025 B.C. Ltd. owns the Sunniva Canada Campus, which includes construction assets for a planned 759,000 square-foot greenhouse located on an approximately 114-acre property in Okanagan Falls, British Columbia.

According to the company’s November 26 finance statement, it said that in June 2018, Sunniva, through its subsidiary 116, entered into a $3.4 million mortgage to finance the purchase of land for the greenhouse facility in Okanagan Falls, British Columbia. “The mortgage is repayable on October 31, 2019 and has an interest rate of 5% per annum. This balance has been reclassified to Liabilities associated with assets held-for-sale (note 7). The Company has repaid $400,000 as at September 30, 2019 but is currently in default on the remaining balance. The Company has been in communication with the lender and does not anticipate any remedial action to be taken prior to closing the SMI Transaction.” (GMR added the italics.)

California Notice of Default

Separately, in the company’s lastest MD&A dated November 26, Sunniva said that on November 25, 2019, it received a 30-day notice of termination and a notice of default from SPCL “for items related to payment of outstanding balances and failure to meet certain conditions of the Build to Suit Lease. In addition, the Company received a notice of default from a promissory note holder for not applying a certain portion of the note proceeds to agreed-upon outstanding amounts. The Company is currently consulting with its legal counsel and intends to defend its position. The ramifications of these notices are uncertain at this time. As a result of these notices, the timing of receipt of the Company’s certificate of occupancy for the Sunniva California Campus cannot be estimated at this time.”

Company Turmoil

The company is in a state of turmoil as the C-suite has emptied out in recent days. Just a couple of weeks ago, CFO Dave Lyle resigned for personal reasons and then David Weinmann was appointed interim CFO. In addition to that, Michael Barker who was on the board of directors also resigned.

One week later, President Kevin Wilkerson said he would resign. Wilkerson also resigned from his position as President and Chief Executive Officer of Sun CA Holdings effective December 2. The company said the resignation was for personal reasons and a replacement has not been named.

The stock fell another 13% to lately trade at 23 cents. The 52-week high was $4.30.

Sunniva Inc. (OTC: SNNVF) stock plunged over 40%  to lately trade at 45 cents after the company announced that President Kevin Wilkerson would resign. This comes just one week after the company’s Chief Financial Officer also resigned.

Wilkerson also resigned from his position as President and Chief Executive Officer of Sun CA Holdings effective December 2. The company said the resignation was for personal reasons and a replacement has not been named. It follows last week’s announcement that CFO Dave Lyle was resigning, also for personal reasons, and David Weinmann has been appointed interim CFO. In addition to that, Michael Barker who was on the board of directors also resigned.

It was reported that the short interest in the company stock jumped 388% in November, This despite a glowing video on Midas Letter a few weeks ago and news that the company closed on a private placement for $7.5 million.

On November 4, Sunniva said released word that it still planned to work with CannaPharmRx with respect to the sale of Sunniva Medical Inc., yet gave no information as to the need for making such a pronouncement.
In October, Sunniva said it was amending the terms of the performance warrants that had been issued in conjunction with the acquisition of LTYR Logistics. The original milestone had been the opening of a distribution center in Long Beach, CA. That was changed to the opening of a distribution business in Coachella, CA. That meant the warrants would convert to shares immediately and Wilkerson’s 239,491 warrant shares would become performance shares.

Last quarter the company reported revenue of C$5.3 million, but net losses of C$14.9 million.

In April, Sunniva said it planned to focus primarily on the ongoing development of our California assets and brands in California. In a statement, the company noted, “In Canada, we continue to expand our Natural Health Services operations with new leadership from Dr. Mark Kimmins. We have suspended operations on our Okanagan Falls property (the “Sunniva Canada Campus”) as we focus efforts on US operations, and we continue to review strategic initiatives in respect of our Canadian assets.”

Sunniva Inc. (CSE: SNN) (OTCQB: SNNVF) said it is still working with CannaPharmaRx regarding the sale of Sunniva Medical Inc. to CannaPharmaRx and believe that the deal will be completed.

In addition to that news, the company has lost its Chief Financial Officer. Dave Lyle, Chief Financial Officer has resigned as an officer, effective November 1^st, for personal reasons. In the interim, Sunniva’s Global Controller, David Weinmann, has been appointed as the temporary CFO. The company statement said that Mr. Weinmann has a Bachelor of Science in Accountancy from San Diego State University. Prior to joining Sunniva, he worked for Thermo Fisher Scientific, Inc., Accriva Diagnostics, and Ambit Biosciences.  He has spent the past few years consulting for companies within the start-up, transition, and transaction phase, this includes, ACEA Biosciences, Inc., Ametek, Inc., and Robo3D Limited.

“On behalf of the Board of Directors and our employees, I would like to thank Dave Lyle for his contributions to Sunniva,” said CEO Anthony Holler. “David Weinmann has been an integral part of the building of the Finance group California and overseeing the development and implementation of the financial planning and accounting functions as we transitioned to the Carlsbad office. With Mr. Weinmann’s outstanding leadership skills and his finance and accounting experience supported by the team Sunniva has built over the past six months we have every confidence in David’s ability to succeed in this role.”

2019 Struggles

In April, Sunniva said that construction of the phase one 325,000 square foot California Campus in Cathedral City has experienced delays and is now expected to be operational in late Q3 2019. Sunniva attributed the delay on additional leasehold improvements required to increase the efficiency of the greenhouse and slower than expected construction progress.

n a statement, the company noted, “In Canada, we continue to expand our Natural Health Services operations with new leadership from Dr. Mark Kimmins. We have suspended operations on our Okanagan Falls property (the “Sunniva Canada Campus”) as we focus efforts on US operations, and we continue to review strategic initiatives in respect of our Canadian assets.”

In September, Sunniva Inc. announced that it has entered into an agreement to sell its subsidiary Natural Health Services, Ltd.  (NHS) to The Clinic Network Canada, Inc. (TCNC) for C$9 million. Half of the purchase price will be paid in cash, while the other half will be paid through the issuance of 4.5 million shares of TCNC. The closing of the sale could not have come at a better time for Sunniva, as yesterday,  NHS was named in a class-action lawsuit in connection with a previously reported privacy breach of the Electronic Medical Record system used by NHS.