A trial between two cannabis companies, one which recently filed for bankruptcy after acquiring the other, is set to begin on April 22.
In late 2023, Final Bell Holdings International, a hardware, packaging, and brand development company serving the cannabis industry, entered into an agreement to sell its Final Bell Canada operation to Canadian cannabis company BZAM.
Following that deal, BZAM then filed for CCAA protection in February, a move Final Bell says contradicts assurances BZAM had given the company prior to signing the agreement.
That deal saw BZAM acquiring Final Bell Canada by issuing $13.5 million in equity in BZAM and granting Final Bell $8 million in promissory notes. At the time, the deal was said to make BZAM the fifth-largest Canadian LP.
Final Bell reacted to BZAM’s announcement by saying it believes that the company’s initiation of CCAA Proceedings constituted an “improper use of creditor protection legislation to evade its creditors, defraud shareholders, and facilitate a related party going private transaction at an unjustified discounted value in order to circumvent a customary going private transaction requiring shareholder and creditor approval.”
On April 16, Final Bell’s written opening statement was shared online, detailing their side of the case, which will be heard in court. In that statement, the company contends that the representations BZAM made to Final Bell during the due diligence process were inaccurate.
This includes claims that BZAM had access to several million in financing from a creditor without reason to believe its main creditor would not continue to extend credit to BZAM. It also contends that BZAM under-reported the amount of money the company owed in back taxes by several million dollars.
BZAM disputes these characterizations for its part, saying it had no idea its credit would not be extended. It also contends that its tax liability did, in fact, increase by $2.7 million from December 5, 2023, to February 15, 2024 (from around $6.4 million to about $9 million), providing a 1,400-page response showing internal emails and their finances.
