Choom Holdings Inc. and some of its subsidiaries have obtained creditor protection from the Supreme Court of British Columbia and interim financing from Aurora Cannabis Inc.
In court filings, the Vancouver-based cannabis retailer says it is sought protection under the Companies' Creditors Arrangement Act because emergency measures implemented by governments to quell COVID-19 have negatively impacted operations, sales, demand and its supply chain.
The company says it has experienced decreased sales over the last 10 months, but also struggled because the number of licensed cannabis stores have increased relative to 2020 and there has been an explosion of competitively priced pot shops in Alberta.
Choom says it has consolidated liabilities of more than $22.4 million and a working capital deficit of at least $4.1 million.
Edmonton pot company Aurora, which is a "significant" shareholder of Choom, will advance an interim financing loan of $800,000 to Choom, which will accrue interest at a rate of 12 per cent annually and mature at the latest, on Aug. 31.
Choom intends to use the cash and protection to start a restructuring that reduces overhead and closes some stores that are underperforming or cash flow negative.
Choom, which operates through a series of provincial corporations and owns subsidiary Phivida Holdings Inc., runs dozens of stores in Alberta, British Columbia and Ontario, including one it took over from Ontario cannabis licence lottery winner Lisa Bigioni for $2 million in cash and $2 million in common shares.