SNNVF - Sunniva Says Audits Should Be Done By July
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.