Published in Economic Development
Head shop Purple East files for Chapter 11 bankruptcy COURTESY PHOTO

Head shop Purple East files for Chapter 11 bankruptcy

BY Monday, April 20, 2020 03:55pm

GRAND RAPIDS — Purple East Plus Inc., a lifestyle retailer of paraphernalia used for the consumption of cannabis and tobacco, filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Western District of Michigan.

The company, which bills itself as “the premier head shop and lifestyle store” in the Grand Rapids area, reported it had less than $50,000 in assets and liabilities in the range of $100,000 to $500,000, according to court filings.

In a sworn statement dated April 18, President Drew Phillippy said Purple East’s financial troubles stemmed from its unsuccessful expansion from one retail location to four stores in the Grand Rapids area, coupled with recent disruptions caused by the outbreak of COVID-19. 

In January, the company’s stores were temporarily closed because of a default judgment from a case stemming from Kentwood-based D.K. Weiss, Holt & Associates Certified Public Accountants PLLC. Purple East paid a portion of the debt to reopen but closed again on March 16 in compliance with the state’s stay-home order aimed at curbing the outbreak of coronavirus. 

Purple East, “like many other small businesses, was pushed to the brink of financial disaster by the COVID-19 pandemic,” Phillippy said in the court filing. 

The company has occupied a storefront in the Heartside neighborhood of downtown Grand Rapids since 1974. In 2018, Purple East “significantly increased” revenue when it opened a second location on Plainfield Ave. NE, according to a court document. That led the company in the following year to open two more locations, one in Comstock Park and the other in Kentwood. 

But with the rapid expansion, the company’s “operational expenses doubled while revenue remained relatively flat,” according to the court filing. 

Purple East reported more than $270,000 unsecured debts owed for property leases, utility payments, receivables, state and federal taxes and business loans.

The largest unsecured creditor is Brooklyn, N.Y.-based LG Funding with a claim of $48,000. Other unsecured claims include the Michigan Department of Treasury ($35,853), Wells Fargo ($34,000), and investment management firm River Capital Partners LLC ($25,950). Purple East also owes more than $36,000 to local property management companies. 

Through Chapter 11 bankruptcy, Phillippy hopes the company can consolidate the four locations back into one storefront and return to profitability, according to the sworn statement.

Phillippy claims that Purple East may even become more profitable in the wake of the pandemic because it stocks and sells “natural remedies” to the coronavirus, according to the court filing. 

The company is being represented by Chase Bylenga Hulst PLLC

Purple East’s attorney did not respond to MiBiz’s request for comment at the time this story was published.

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