Ayurcann: licences to Emblem, debts to a shell, and one pool for creditors

Ayurcann made vapes, pre-rolls and extracts under the Fuego, Xplor and Happy & Stoned brands in a 13,585-square-foot licensed facility in Pickering, Ontario. Its co-founder and chief executive, Igal Sudman, swore in January that it sold about 146 SKUs through some 2,598 stores across Canada and employed 56 people, with 63 more contractors supplied by agencies. By his account the filing traces to December 5, 2025, when the Canada Revenue Agency replaced an informal plan under which Ayurcann paid about $165,000 a month toward its excise arrears with six monthly catch-up payments of $1,055,830.91, on top of roughly $1,930,075 a month in ongoing excise duty. About $2,582,868 was due on January 31, 2026, per the Affidavit of Igal Sudman sworn Jan. 29, 2026, paras. 8–9, 34, 75–76, 85. The company and its parent obtained an initial order under the CCAA on January 30, per the Fifth Report of the Monitor, Aug. 19, 2026, para. 1.1.

Seven months later the operating company belongs to Emblem Cannabis Corporation and is out of the proceeding. On August 26, 2026, Justice Cavanagh of the Ontario Superior Court of Justice (Commercial List) signed an order substantively consolidating the two companies still in it, Ayurcann Holdings Corp. and Ayurcann Holding Corp., authorizing the Monitor to pay their unsecured creditors pro rata from one pool and extending the stay to March 5, 2027, per the Order (Distribution and Stay Extension), Aug. 26, 2026, paras. 3, 5, 17.

An excise bill on a new schedule

The CRA was the company's largest creditor, per the Pre-Filing Report of the Proposed Monitor, Jan. 29, 2026, para. 5.8(iii). The affidavit put the arrears at approximately $10,556,517 on January 26, 2026, counting excise duty for December and January not yet due, with a further $648,406 in dispute over how products were classified between April 2022 and March 2025. Mr. Sudman swore that the company had kept to the old arrangement "and is not aware of any circumstances that caused the CRA to change this arrangement on the terms set out in the CRA Correspondence," per the Affidavit of Igal Sudman sworn Jan. 29, 2026, paras. 74, 76. The list of creditors totals $10,732,201, of which $9,539,045 is listed against the CRA and $281,621 against Health Canada, per the List of Creditors, Jan. 30, 2026, p. 1.

There was no general secured lender, only two Bank of Nova Scotia vehicle loans and Alterna Savings & Credit Union's registrations against the operating account. At December 31, 2025 the consolidated balance sheet showed assets of $11,041,501 and liabilities of $15,479,863. The affidavit describes a merger with Arogo Capital Acquisition Corp., entered into in June 2024 and terminated that November, and later debt raises that were "largely unsuccessful." Two shells, one of them Ayurcann Holding Corp., had been incorporated that June "to facilitate an unsuccessful business combination transaction," per the Affidavit of Igal Sudman sworn Jan. 29, 2026, paras. 14, 30, 65–71.

A floor from Auxly, and a bid at the minimum

Alvarez & Marsal, engaged as financial adviser on January 12, 2026, sent a small group of parties a term sheet for a combined stalking horse bid and DIP loan on January 21 and called for best and final offers on January 27; the applicants chose Auxly Cannabis Group Inc., described as arm's length. On February 8 Auxly signed a $4,640,000 bid, partly a credit bid of its DIP loan, for new shares of Ayurcann Inc. under a reverse vesting structure, along with a $2,000,000 DIP at 12% and a 2% commitment fee. Its protections were a $139,200 break fee and up to $125,000 in expenses, $264,200 in all, and a competing bid had to exceed the stalking horse and the protections by at least $100,000, per the Second Report of the Monitor, Feb. 11, 2026, paras. 4.3–4.7, 4.10, 5.3. Justice Kimmel approved the sale process on February 13, per the Sale Process Approval Order, Feb. 13, 2026, p. 1.

The Monitor contacted 82 parties. Ten signed non-disclosure agreements, four did substantial diligence, and by the March 31 deadline one qualified bid had come in, from Emblem, which revised it on April 4. On April 6 the Monitor told Auxly that Emblem's bid would lead an auction on April 10; on April 9 Auxly said it would not take part, and Auxly's bid became the back-up. Emblem's price was $5,004,200: Auxly's $4,640,000, plus $264,200, plus $100,000, the minimum the sale process allowed. The Monitor put the gain for creditors at $100,000 after the bid protections, per the Third Report of the Monitor, Apr. 24, 2026, paras. 4.2–4.9.

Both bids were built on a reverse vesting structure. It kept Ayurcann Inc.'s Health Canada and CRA licences and its supply agreements with governmental entities in place; in a conventional asset sale, the Monitor wrote, the licences would generally need to be transferred, re-issued or replaced, "resulting in added cost, delay, complexity, and material closing risk." Auxly would close its back-up bid only in that form, and, the Monitor noted, "Ayurcann cannot legally maintain ordinary course operations without the Licences." About 40 employees were to keep their jobs, per the Third Report of the Monitor, Apr. 24, 2026, paras. 5.5, 6.3(i)–(ii), (x). Justice Kimmel granted the Approval and Reverse Vesting Order on April 28. At closing the excluded assets, contracts and liabilities would vest in Ayurcann Holding Corp., added as an applicant as Residual Co.; the parent's shares in Ayurcann Inc. would be cancelled for no consideration; Auxly would be repaid its DIP and bid protections from the proceeds; and the CRA kept its rights of set-off, pre-filing against pre-filing and post-filing against post-filing, per the Approval and Reverse Vesting Order, Apr. 28, 2026, paras. 6, 21, 39.

Health Canada's review, and a new lender

Closing was due by May 15, the day Auxly's DIP matured. Health Canada's change-of-control assessment under the Cannabis Act was still pending, so both dates slipped to the end of May, and Auxly's back-up bid became non-binding on May 15. By June 1 Auxly had "expressed its preference for the Original DIP Facility to be repaid, rather than further extended," Justice Kimmel recorded. Emblem took over the loan with the limit raised to $3,000,000 and the right to credit-bid it at closing, the price rising dollar for dollar with advances beyond $2,000,000, so that "it is the Purchaser that bears the cost of the closing delay, rather than creditors." Health Canada confirmed its review was complete on May 29, per the Endorsement of Justice Kimmel, June 1, 2026, paras. 7–12, 15.

The deal closed on June 5, and Ayurcann Inc. left the proceeding. Under a transition services agreement signed the same day, Residual Co. provides Emblem with bank account and payroll services and the use of the facility it leases, Emblem paying the rent; on August 17 Emblem extended that arrangement to March 5, 2027, per the Fifth Report of the Monitor, Aug. 19, 2026, paras. 4.1–4.5.