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The Toronto company behind massive immersive exhibits of works by Vincent Van Gogh, Frida Kahlo and even Disney overspent on international growth after intense pandemic interest subsided, Delaware and Ontario court filings reveal, which left owners in a US$16.6-million dispute with a California partner and forcing it to file for creditor protection.

Justice Jessica Kimmel of the Ontario Superior Court accepted Lighthouse Immersive Inc. and its affiliate companies’ request last week for protection so that it could restructure its affiliate business and significantly shrink operations.

The company now expects to only operate shows in four or five cities by the end of September, down from its height of nearly 20. Lighthouse publicist Nick Harkin said in an e-mail that the restructuring “in no way impacts the operations in Canada and our presentation of ‘Immersive Disney Animation’ is proceeding as scheduled.”

Lighthouse was founded in 2019 by Corey Ross, Svetlana Dvoretsky and Slava Zheleznyakov, who hoped to bring art “to life” by projecting the works of acclaimed artists onto the walls, floors and columns of bespoke gallery spaces so that fans could appreciate their finer details. The company became an early-pandemic success story after reconfiguring its downtown Toronto Immersive Van Gogh exhibit as a drive-in experience amid COVID-19 lockdowns.

“Lighthouse sold out shows seven days a week and months in advance for almost an entire year,” the company wrote in a filing with a Delaware bankruptcy court. It claims to have sold more than seven million tickets to its events since inception.

The filings illustrate that Lighthouse’s expansion did not go smoothly. Despite operating “at a significant profit” in 2021, it swiftly expanded operations to about 20 venues globally in the absence of “having a solid, long-term chief financial officer or a substantial financial department to keep up with the rapid expansion of the business,” the company wrote.

As time passed and as COVID-19 restrictions began to loosen, Lighthouse said its audience began to drop off, blaming new immersive-art competitors and the reopening of other artistic venues including galleries, museums and theatres as eating into its success. “The form of art lost its novelty and patrons had other options,” the filing states.

By then, its U.S. affiliate had joined forces with a company called Impact Museums Inc. for a joint venture to help expand into cities such as Dallas, Atlanta and Los Angeles, where Impact is based.

As Lighthouse and its affiliates introduced shows – showcasing the art of Claude Monet, Gustav Klimt and more – its sales dropped to a 10th of the initial Van Gogh shows, prompting them to “introduce more shows at a rapid pace in 2022 resulting in escalating development costs and marketing costs.”

By the time a Lighthouse affiliate signed a landmark deal with Disney last fall to build immersive shows around its animated properties, “various issues arose” with the Toronto company’s partnership with Impact. The companies entered a settlement agreement that required payments to Impact, the filings say, which were first reported by Bloomberg.

At some point thereafter, Lighthouse’s U.S. affiliate missed a payment, at which point Impact locked Lighthouse out of several locations, forcing it to “refund approximately $1.5 million in tickets sales and cancel all ongoing ticket sales” in those locations.

Impact also sought US$16.6-million from Lighthouse and its affiliates in the connection with the settlement, which a Delaware judge was scheduled to hear on July 28. The creditor-protection claims were filed on July 27 and approved the next day.

They showed that as of May 31, Lighthouse’s U.S. affiliate had US$53.1-million in assets and US$100.2-million in liabilities. In the first five months of 2023, the affiliate reported a loss of US$20.6-million. The Companies’ Creditors Arrangement Act application was affirmed by a judge on July 28. Lighthouse hopes to “stabilize” and “right-size” its business, sell merchandise and equipment, and preserve its company value and employees’ jobs.

The Ontario court appointed B. Riley Farber Inc. as a monitor for the company’s operations and approved the company to access a line of credit of up to $1.1-million from a separate firm owned by Lighthouse’s three co-owners.

With research from Stephanie Chambers

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