Canadian cannabis company Lotus Ventures Inc. (CSE: J) (OTC: LTTSF) announced earlier this week that the company owned by Albert Duwyn, the former director and chairman of the company obtained a judgment from the Supreme Court of British Columbia concerning its loan to the company of one million dollars plus interest. Lotus said it didn’t deny it owed the money and did not contest that in court, but attempts to find an acceptable settlement were unsuccessful.
Following that news, the company filed a Notice of Intention to Make a Proposal under the Bankruptcy and Insolvency Act and as a result, all proceedings against it are stayed.
In December, the company continued to press ahead despite the cash crunch. It noted that it continued to operate with limited working capital. In a statement, the company said, “To reduce the working capital deficit, the company has negotiated a reduction of approximately $628K of its debt by issuing 25,141,640 shares at $0.025 per share with warrants at $0.05 per share expiring December 5, 2028.” All amounts are in Canadian dollars.
The company last reported earnings at the beginning of November 2023 when it stated it was selling products in 300 stores and had revenue of C$1.6 million for the year ending August 31, 2023. However, it also reported a net loss of C$4.7 million for the year. At the end of August, the company only had C$44,742 cash on hand. The company also stated at that time that it had an operating deficit, from inception, of C$12.6 million and a working capital deficiency of approximately C$3 million.
Lotus also told investors that for the fiscal year of 2023, it incurred management consulting fees of $170,000 (2022 – $146,000), included in consulting fees for the period, to a private company controlled by the company’s President and CEO. The filing read, “As of August 31, 2023, $292,700 (August 31, 2022 – $143,468) was payable to this private company for the unpaid portion of these fees and miscellaneous expense reimbursements. During the twelve months that ended Aug 31, 2023, the company incurred salaries allocated to production costs of $220,000 (2022 – $264,636), to the company’s COO. As of August 31, 2023, $138,444 (August 31, 2022 – $101,000) was payable for the unpaid portion.”
Despite the cash crunch, Lotus noted that its gross margin for the year increased by C$466,564 due to increased sales price for retail sales during the current period. The company also completed the application process and was subsequently certified by the IQC to sell its flower into the Israeli medical market via wholesale partners.
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