Contech Enterprises of Victoria is in bankruptcy after one of its major creditors blocked a proposal that would have dealt with its $14.5-million debt.
The future of the technology and manufacturing company is uncertain now that bankruptcy proceedings have started.
A meeting of Contech’s creditors is scheduled for March 26 in Vancouver.
The 28-year-old company sells animal repellent devices that use bursts of water or emit ultrasonic waves. Its diverse lineup of products also include pet supplements, tick-removal tools, insect traps and pheromone products aimed at increasing production in apiaries. A line of Christmas products and tree stands are made in the village of Perth-Andover, N.B.
Contech CEO Mark Grambart said in an interview Thursday he was working with the trustee to “stabilize operations and to figure out next steps. “Currently, employees are still here and I think the trustee will decide what will be the appropriate next steps for the company,” Grambart said.
Contech has 30 staff — 12 in Victoria, three in New Brunuswick and the remainder in Delta.
Grambart would not comment on earlier plans for new financing or on the status of a high-profile partnership with Simon Fraser University, where scientists are developing a bait and trap system for bedbugs.
Biologist Dr. Gerhard Gries said he does not know what the impact of the bankruptcy will have on the bedbug research.
Contech was bankrolled by the late inventor and gold miner Klaus Djukastein, who launched the company in 1987 with son Erik Djukastein and Brian Conrad.
University of Victoria mechanical engineering graduate Grambart was hired in 2005, replacing Erik Djukastein as chief executive.
Abbotsford-based BWF Holdings Ltd. holds 22 per cent ownership of Contech, followed by Vancouver-based B.C. Advantage Funds Ltd./Lions Liquidity Investment Fund I Ltd. Partnership, which have a 19 per cent stake.
Mark and Lisa Grambart have 12 per cent of the company, and other minority shareholders hold 47 per cent, according to a document from trustee Deloitte and Touche. Officials with BWF and B.C. Advantage Funds could not be reached Thursday.
As it grew, Contech acquired other firms and expanded its product line, at the same time accumulating debt, according to a Deloitte report to the B.C. Supreme Court.
Contech debts total $14.586 million, the report said. The value of assets, if sold through bankruptcy or liquidation, would be between $1.449 million and $2.369 million. Annual sales were $17 million in the fiscal year ending in August 2013, a document submitted to court states.
The creditor list includes individuals, private firms and public sector agencies. Some are based in B.C. while others are in the U.S., China, United Kingdom and Sweden.
In January, the court approved a proposal to resolve debts with secured creditors in exchange for company shares.
The proposal would have allowed the company carry on and given creditors a higher recovery than under bankruptcy and liquidation, the court said. The plan also included a formula to settle debts to unsecured creditors.
At the time, Grambart said he was optimistic the proposal would pave the way for needed financing to keep the company solvent.
But the proposal is now dead, following a successful appeal by a major creditor, Vegherb LLC.
Vegherb had manufactured raised garden beds and sandboxes made of composite materials. In 2013, it sold its assets and arranged a licence agreement letting Contech use its intellectual property. Under this deal, Contech would get title to the intellectual property once it paid Vegherb $4.4 million. About $1.5 million is outstanding. The proposal to creditors was “unfair,” because it would have lumped Vegherb into a class of creditors who would not be losing intellectual property under the settlement plan, the B.C. Court of Appeal ruled this month.
“Vegherb is actively seeking to get back into the business, which it operated before the sale, and is reviewing its options,” Greg Harney, Vegherb’s lawyer, said in a statement,
Grambart said multiple discussions took place with Vegherb, but they were unable to come to an agreement.
