A publicly traded Jacksonville-based liquor distribution company filed for Chapter 11 bankruptcy reorganization last month, saying that a lawsuit by a former officer and director caused a severe drop in its business.
North American Food & Beverage Co. Inc., which had been operating under the name Liquor Group Wholesale Inc., filed the Chapter 11 petition in U.S. Bankruptcy Court in Jacksonville on April 25, listing $1.6 million in assets and $5.2 million in liabilities.
Liquor Group Wholesale's stock still is listed on the OTC Bulletin Board under the ticker symbol "LIQR" and has been trading at a price of 10 cents.
The company filed an annual report for the fiscal year ended Aug. 31, 2012, that showed the company had a net profit of $1.1 million on revenue of $3.4 million in fiscal 2011, but revenue fell to $383,424 and the company had a net loss of $323,826 in fiscal 2012.
The report said Liquor Group Wholesale's major markets for distribution of alcoholic beverages are Florida and Michigan.
It also has "active sales efforts and/or licensed operations" in Alabama, Arkansas, California, Georgia, Iowa, Montana, North Carolina, South Carolina, Virginia, West Virginia, Oklahoma, Oregon, Texas and Washington.
Liquor Group Wholesale changed its name from North American Food & Beverage in 2008, and it changed the name back to North American just before filing for Chapter 11, said Jason Burgess, the company's bankruptcy attorney.
According to North American Food & Beverage's case management summary filed in bankruptcy court, the company had been profitable for several years before fiscal 2012.
"In 2011 a former officer/director filed a derivative suit against the company that crippled operations," the filing said.
"In the derivative suit the former officer either sued or threatened to sue everyone from the president all the way down to the sales force," it said.
"This caused employees and officers to vacate their positions to avoid the cost and stress associated with the derivative suit. Because of the loss in staff the company's profits drastically decreased and caused the Debtor to be unable to meet obligations as they came due," it said.
The bankruptcy court filing does not name the plaintiff but the lawsuit it refers to was filed in Duval County Circuit Court by Arnold Rosen of Boca Raton, a former board member of Liquor Group Wholesale.
Rosen has since died but his wife, Bonnie, is continuing as the plaintiff in the lawsuit, which still is open.
In addition to that legal issue, North American Food & Beverage President Chris Eiras was arrested in August 2012 and charged with 70 counts related to avoidance of excise taxes on alcoholic beverages.
Mitchell Stone, the attorney representing Eiras in the criminal case, said he has reviewed all the information related to the case and "I do not believe Mr. Eiras broke any laws."
Eiras pleaded not guilty to the charges in September. The case has not yet been scheduled for trial, Stone said.
The bankruptcy filing does not mention the criminal case against Eiras.
Burgess said he is hoping the company can complete the Chapter 11 process in six to nine months.
He said much of the company's debt involves alcoholic beverage products that have not been sold, and the status of those products needs to be resolved.
Burgess said North American Food & Beverage intends to continue as a publicly traded company after it emerges from bankruptcy.