FUM: Clearco's claim settles as secured before the plan vote

The device at the centre of this CCAA has no nicotine, no electronics, no vapour and no smoke. The proposal trustee's pre-filing report describes a refillable handheld flavoured air device that uses replaceable cores infused with essential oils; RDFN FUM Natural Products Ltd., founded in 2016 and based in Calgary, sells it to support habit replacement, including as a sensory alternative for people trying to reduce or quit smoking, per the First Report of the Proposal Trustee and Proposed Monitor, Feb. 26, 2026, paras. 17, 23. Its chief executive and co-founder, Braeden Pauls, swore in February that the company was the first to produce flavoured air products. The devices are made in China and Vietnam and warehoused mostly in Las Vegas; about 80% of sales are direct-to-consumer online orders, and 80% of FUM Canada's sales occur in the United States, per the First Affidavit of Braeden Pauls, Feb. 23, 2026, paras. 15–16, 21, 23–24.

In the company's account, the filing began with a lawsuit in the Southern District of Florida, where BFL Metal Products Co., Ltd., a Chinese company, sued FUM Canada alleging infringement of trademarks it held in relation to vaporizer devices. In late October 2025, after mediation, the parties settled without any admission of liability for US$2,500,000: US$1,400,000 in fourteen monthly payments of US$100,000 beginning November 1, 2025, and the balance as a 2.2% royalty on FUM Canada's international gross sales from February 2027 to November 2028. FUM paid in November and December and missed the payments due January 1 and February 1, 2026, and BFL's counsel wrote on January 26 that BFL might "seek injunctive relief to stop RDFN from sales of its products in the United States due to lack of payment." Mr. Pauls attributes the liquidity crisis to those payments, to American tariffs and to rising digital advertising costs, while swearing that the business had "an overall profitable year in 2025, albeit with less revenue than anticipated," per the First Affidavit of Braeden Pauls, Feb. 23, 2026, paras. 5, 24, 26–31.

FUM Canada and its Delaware subsidiary, RDFN FUM Natural Products Inc., filed notices of intention on February 4, 2026. On March 2 the Court of King's Bench of Alberta continued the proceedings under the CCAA with Alvarez & Marsal Canada Inc. as monitor, and the US Bankruptcy Court in Nevada has recognized them as a foreign main proceeding under Chapter 15, per the Fourth Report of the Monitor, Aug. 21, 2026, paras. 1, 4, 6. McCarthy Tétrault LLP was the companies' counsel at filing; by July, MLT Aikins LLP had been retained in its place, per the Third Report of the Monitor, July 21, 2026, para. 14(a).

The claim the monitor had disallowed

In its pre-filing report, the proposal trustee listed three secured creditors: Wayflyer and Clearco, each holding an interest in receivables, and WebBank, owed about $1.1 million against all personal property, per the First Report of the Proposal Trustee and Proposed Monitor, Feb. 26, 2026, para. 30. After the June 15 claims bar date, the monitor's Fourth Report counts two secured claims. One, from Wayflyer Financial DAC, was accepted at $551,724; the other was Clearco's. The report does not mention WebBank, per the Fourth Report of the Monitor, Aug. 21, 2026, paras. 25–27.

CFT Clear Finance Technology Corp. had advanced two facilities to the US subsidiary, secured by an interest in that company's future receivables; at filing Mr. Pauls put the debt at about US$740,000, owed by FUM US, per the First Affidavit of Braeden Pauls, Feb. 23, 2026, paras. 40(b), 41(b). On June 10 Clearco filed a secured claim against both companies, and five days later revised it into a property claim against receivables for US$679,038.40, or $929,467.78, under agreements dated November 26 and December 23, 2025. On July 3 the monitor disallowed the claim against FUM Canada in its entirety and, against FUM US, revised it from a property claim to an unsecured claim without changing the amount. Clearco submitted a notice of dispute on July 10 and applied on July 24 to set the disallowance aside. That application was set down for September 16, then adjourned sine die on August 17, per the Fourth Report of the Monitor, Aug. 21, 2026, paras. 17–19.

The monitor, notwithstanding its own notice, encouraged the two sides to negotiate, to avoid the cost, delay and uncertainty of the application "and to provide certainty with respect to the classification of creditors in advance of the proposed Creditors' Meeting." The agreement took effect on August 20. It makes Clearco's claim a secured claim against each of FUM Canada and FUM US for US$679,038.40 plus US$25,000 for reasonable legal fees, "for the purposes of the classification of creditors in respect of the Plan." The monitor supports the agreement, including its treatment of the claim as secured against both companies "and not a property claim against either of them," and calls it "a reasonable and pragmatic resolution" that avoids the costs and risks of litigation and lets the proceedings advance toward the plan without delay, per the Fourth Report of the Monitor, Aug. 21, 2026, paras. 20–22. Because the agreement is confidential, the monitor filed it, with its analysis and comments, as Confidential Appendix 1, which the applicants asked the court to seal along with the liquidation analysis; a creditor that reasonably believes itself affected may request a copy under a confidentiality agreement, per the Fourth Report of the Monitor, Aug. 21, 2026, paras. 23–24, 56–57.

On August 28 Justice C.D. Simard approved the agreement in its entirety (the order describes it as dated August 20, 2026, "as amended") and directed the FUM companies and Clearco to comply with it, per the Order (Settlement Approval), Aug. 28, 2026, recitals, para. 3. The monitor's liquidation analysis already places Clearco in the secured class, "consistent with the Claim Settlement Agreement," per the Fourth Report of the Monitor, Aug. 21, 2026, para. 49, note 1.

What the plan pays, and when

The same day, Justice Simard accepted the plan for filing and authorized the meeting, per the Creditors' Meeting Order, Aug. 28, 2026, paras. 3, 7, 11. The plan keeps FUM Canada operating and puts FUM US into a Chapter 7 bankruptcy in the United States, where claims against it will be dealt with outside the plan and without a vote on it. Funded from FUM's cash on hand, it pays the secured class a $1,100,000 cash fund within five business days of implementation, then monthly instalments. Unsecured creditors outside the convenience class share $30,000 a month for eleven months, to a maximum of $330,000, beginning 30 days after the last secured instalment. Unsecured claims of $2,500 or less are paid in full on the distribution date from a fund of up to $66,741, and a creditor with a larger claim may elect to take $2,500 in full satisfaction; convenience creditors are deemed to vote in favour, per the Creditors' Meeting Order, Aug. 28, 2026, Sched. "A" (Plan), ss. 1.1(bbbb), (mmm), (llll)–(oooo), 3.3, 4.1, 5.1–5.2, 5.5, 7.2.

The secured instalments changed after August 19. The plan exhibited to Mr. Pauls's fifth affidavit that day paid about $26,502 a month for six months, for total secured distributions of $1,259,013, per the Fifth Affidavit of Braeden Pauls, Aug. 19, 2026, Ex. "1" (Plan), s. 1.1(dddd)–(eeee). The plan attached to the Creditors' Meeting Order pays about $26,871 a month for seven months, for $1,288,100, and adds s. 7.7(d), under which Crown claims covered by s. 6(3) of the CCAA are paid in full within six months of sanction. The copy of that order on the record was reissued under a fiat dated August 31, directing the clerk to replace the order filed on August 28; the fiat does not say what changed, per the Creditors' Meeting Order, Aug. 28, 2026, p. 1; Sched. "A" (Plan), ss. 1.1(dddd)–(eeee), 7.7(d). The Fourth Report's figures are the August 19 ones.