Cellfor, a privately held company headquartered in Vancouver, Canada that supplies conifer varietal seedlings to the forest industry, got a court order granting it protection under the Companies’ Creditors Arrangement Act.
An order from Justice Harris of the Supreme Court of British Columbia grants a stay of proceedings against all actions and creditors until January 16, 2012, when a further hearing is scheduled to consider a possible extension of the stay. A stay prohibits creditors from taking collection activities against the debtors during the pendency of the case. In a US bankruptcy, once a debtor files a petition, creditors cannot collect on the debts, including the sending of letters, telephone calls, foreclosure proceedings, or prosecution of lawsuits. In the US, any creditor that continues with collection actions a debtor files a bankruptcy petition may be in violation of US federal law and may be subject to penalties.
In the Northern District of Georgia, Cellfor has been granted a temporary restraining order under the US Federal Bankruptcy Laws Chapter 15 by the United States Bankruptcy Court. There was a hearing scheduled on January 20, 2012, to determine the issue of recognition of the Canadian CCAA proceedings and to review a request by Cellfor for a permanent injunction.
Cellfor Inc. has main operations located in British Columbia. It is the sole shareholder and owner of Cellfor Corp., a US company registered in Delaware, headquartered in Georgia. The two companies do business collectively under the name Cellfor and have the same CFO and CEO.
Cellfor’s business involves research, development and commercial sale of technologies relating to cloning conifer seedlings for the forest industry. The company selects, produces and markets seedlings that provide improved growth rates, disease resistance, and wood quality.
Research, development work, and administration of the tissue culture phase of production, are done at laboratory and storage facilities near Victoria, BC. The production process is done through subcontracts with industry partners in Canada and the United States.
According to its filing with the BC Supreme Court, Cellfor is experiencing negative cash flow and its existing investors are unable to provide more funding. The company is insolvent because it cannot meet obligations when they are due and cash reserves are not enough to operate the business without court protection.
Cellfor states its financial difficulties relate to a continuing research and development activities, slow reduction in production costs, low sales volume growth, and a challenging economic climate.
Current assets are valued at about $12 million, with primary assets being intellectual property and a portfolio of seedling products preserved as tissue in cryopreservation facilities. Current liabilities are around $5.8 million, with an additional $5.9 million owed to secured convertible note and debt holders.
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