And another one bites the dust. The Canadian cannabis industry continues to see public firms burn out amid a time when capital has all but stopped flowing to the sector. Eve & Co (TSXV: EVE) is the latest such firm to burn out, announcing this morning it has filed for creditor protection in Canada.
The company this morning indicated it will be filing an application for an order for creditor protection following the approval to do so by its board of directors. The application is expected to be formally filed today.
The filing for creditor protection follows a period in which the company has struggled to raise capital amid an entire lack of investor interest. Recently, the firm settled $0.7 million in debt owed to directors, officers, employees and debentureholders via the issuance of 5.2 million common shares, of which $0.2 million was owed to insiders.
Eve has also been drowning under its debt load, with a $1.0 million loan as well as $0.6 million in debentures due in December 2022, as well as an $18.7 million loan facility that has an 18 year term. The latter however required minimum debt service coverage ratios that have not been met since 2019, with the company unable to attain additional waivers on these requirements as of mid-2021, making the debt subject to default. That facility is secured by a mortgage on the firms cultivation facility in Strathroy, Ontario.
With an average cash burn at roughly $0.2 million per quarter as of September 30, and a cash position of $0.3 million as of the same date, the firm has effectively been running on fumes for months.
With the filing of creditor protection under the Companies Creditors Arrangement Act, the company is looking to receive a stay of proceedings against the company, while also approved a DIP loan and the appointment of BDO Canada as the monitor of the company. The company is effectively looking to undergo a sale and investment solicitation process to find a transaction that enables the firm to continue.
Deans Knight Capital has entered into a term sheet with Eve so as to provide a debtor in possession loan to the tune of $2.2 million.
Finally, the firm has seen the resignation of directors Ravi Sood and Jeanette VanderMarel from the company as of March 22 and March 23, as they look to avoid the CCAA filing being associated with them. VanderMarel had just joined the board of directors in November.
Eve & Co last traded at $0.10 on the TSX Venture and is now halted for trading.
Information for this briefing was found via Sedar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
