Sep 3, 2021

Article content The upshot is a deal that, if approved by a bankruptcy judge on Friday, would see Spartan survive as a standalone firm, free to market its portable COVID-19 testing technology known as the Cube. We apologize, but this video has failed to load. Try refreshing your browser, or Spartan creditors strike deal to keep biotech firm operating, if the court agrees Back to video Whether the federal government will continue to stand by its $149-million order for Spartan’s test kits is unknown. Spartan burst out of the gate 18 months ago, having adapted its Cube — which uses DNA technology to test for pathogens such as legionella — for the war against the novel coronavirus. An early version received Health Canada approval for sale. But this was rescinded when it turned out Spartan’s proprietary swabs were substandard. A re-engineering effort followed, along with a clinical trial. Health Canada gave its seal of approval last January. Advertisement Article content A second, unspecified technical glitch forced to Spartan to recall its product and file for creditor protection in April. Health Canada’s approval remains and there are hints the technical issue, seemingly minor, has finally been fixed. Casa-Dea, a family trust that extended Spartan a $7-million bridge loan last autumn, has been the main driver in trying to keep Spartan afloat. Darrell Edgett is the director of both Casa-Dea and 2856031 Ontario Inc., the numbered company created to hold Spartan’s assets and to employ remaining workers. Steve Edgett, his brother, is a senior Spartan executive. Under the terms of a deal reached late in August, Casa-Dea will acquire BDC’s $9-million claim. In turn, the numbered company will assume Casa-Dea’s $7-million loan as well as the BDC loan on which the $9-million claim is based. The legal fight had been waged over which of the two claims should assume priority. This solution gets around that problem. Advertisement Article content As part of the consideration for the deal, BDC will receive all shares currently held by Spartan in Lobo Genetics, a Toronto-based startup that uses the Cube to do genetic testing of cannabis users to assess their responses to the drug. It was started by Spartan co-founder John Lem (brother of Paul Lem, also a Spartan co-founder) and was acquired five weeks ago by Entheon, a Vancouver R&D firm. Entheon paid for Lobo Genetics by agreeing to issue five million shares, valued at 33 cents each, at the time of the deal. Court documents filed recently by Ernst & Young, the bankruptcy monitor, noted that Spartan’s stake in Lobo Genetics was just shy of 26 per cent. That would give the piece potentially being acquired by BDC a current value of less than half a million dollars. Advertisement Article content BDC Capital, which is in the business of investing in startups, clearly sees something it likes in Entheon, which is trying to commercialize therapeutic products for treating people with substance use disorders. The court filing Thursday by the monitor did not spell out what other considerations BDC would receive, or their value, for agreeing to dispose of its claim against Spartan. Assuming the bankruptcy judge approves the new arrangement Friday, Casa-Dea for its part will be able to get on with the job of trying to generate profits from a COVID-19 testing technology that still has a lot to prove. Share this article in your social network Share this Story: Spartan creditors strike deal to keep biotech firm operating, if the court agrees