Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //
HIGHLIGHTS
  1. Michael Mueller and Paul G. Smith have resigned from the board of Eureka 93, formerly called LiveWell Canada.
  2. The CBD-focused company lost its license to buy hemp directly from farmers in Montana after failing to pay for $8-million worth of hemp.
  3. Eureka terminated its partnerships with Canopy Growth and Canopy Rivers in May.

Two high-profile directors have resigned from the board of Eureka 93 Inc. as the CBD-focused company faces lawsuits, problems with licencing and questions about whether the business can continue as a going concern.

Eureka, which began trading on the Canadian Securities Exchange last month, is the result of a merger between Gatineau, Que-based LiveWell Canada Inc. and Vitality CBD Natural Health Products Inc., which owns hemp processing assets in Montana and New Mexico.

Despite backing from several Canadian business notables, Eureka’s operations on both sides of the border are generating little revenue, and the company is rapidly running out of money it needs to finance expansion. It is also having licencing difficulties in Canada and Montana.

Story continues below advertisement

On Monday, Eureka said that Michael Mueller and Paul G. Smith have resigned from the company’s board. Mr. Mueller is the chair of Laurentian Bank of Canada and former head of Global Investment Banking at TD Bank Financial Group; Mr. Smith is the CEO of Frontline Broadband Inc., and was chair of VIA Rail Canada’s board from 2010 to 2014. Their resignations come three weeks after Owen Kenney, another director, resigned from the board.

The company said in a news release that Mr. Mueller is stepping down for health reasons and Mr. Smith for personal reasons. Robin Crossman, CEO of Florida nutraceutical company Arisanna Group, has joined the board.

The company declined to further comment on the resignations.

Eureka has two main assets in Canada: Artiva, a large vegetable greenhouse near Ottawa, and Acenzia, a nutraceutical manufacturer in Tecumseh, Ont. Neither have been licensed by Health Canada for cannabis operations.

LiveWell had been working with Canopy Growth Corp. and Canopy Rivers Inc., two early investors in the company, to get these properties licensed. However, following LiveWell’s merger with Vitality to form Eureka, Canopy Growth and Canopy Rivers commenced legal proceedings against the company, claiming the firm had “breached a number of covenants in favour of Canopy Growth and Canopy Rivers.”

Eureka cut ties with Canopy Rivers and Canopy Growth in May, and is now handling the Health Canada licencing process on its own. The lawsuit was settled in July “for an immaterial amount,” according to filings from Eureka.

“There is no guarantee that Health Canada will approve the Artiva facility in a timely fashion, or at all. The delay or denial of such approvals would mean that the Corporation may not pursue the Hemp business in Canada,” the company said in recent filings.

Story continues below advertisement

Eureka is also being sued by a contractor for not paying for demolition services it received in 2018. The contractor claims $1.6-million in unpaid work, although Eureka says it only owes $854,000.

The company’s U.S. business is facing problems of its own. In February, ahead of the merger, Montana’s Department of Agriculture suspended Vitality’s commodity dealer license, which allows it to buy hemp directly from farmers, after a subsidiary failed to pay $8-million it owed to 21 farmers. The farmers are suing the company. It is still able to source hemp from third-party brokers.

“Payments have not been made [due] to lack of liquidity,” Eureka said in July. “We intend to fully settle these amounts due in the near term.”

The company has a second U.S. processing facility in New Mexico, although it is not yet in operation. Eureka says it needs to raise an additional $25-million to complete the conversion, and that “there is no assurance that the Corporation will successfully raise sufficient capital on reasonable terms or at all.”

In March, auditor MNP LLP warned that Vitality “has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern.”

Ahead of the merger between LiveWell and Vitality, independent members of LiveWell’s board, including Mr. Smith, asked a third-party adviser for a fairness opinion about the transaction. The adviser determined that it was “unable to provide a fairness opinion… primarily because of the significant uncertainty over production capacity and sales forecasts and the then unknown impact of the dispute with Montana farmers.”

Story continues below advertisement

LiveWell’s board went ahead with the merger anyway.

In Eureka’s annual information form filed in early August, the company acknowledged that LiveWell’s board had voted in favour of the merger to forestall a possible bankruptcy.

“In the judgment of the Livewell Board, there was a risk of bankruptcy or a requirement to sell LiveWell Canada at a price reflective of a distressed asset because the secured convertible notes issued during the first quarter of 2019 would become immediately due in the event that the Vitality Combination was not approved by LiveWell Canada’s shareholders,” Eureka said.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies