(This story has been updated with details about Gold Flora defaulting on lease agreements as well as more comments.)
Another one of California’s largest marijuana operators plans to liquidate assets after mounting financial losses and operational challenges.
Gold Flora Corp., one of the state’s largest cannabis retail chains, is entering receivership after defaulting on a $11.5 million loan.
The company said in a news release it is seeking court protection as a result of lawsuits related to its 2023 acquisition of TPCO Holdings, rising business expenses and high-yield debt.
“There’s a special level of M&A consolidation problems when you have a merger of equals,” Frank Colombo, managing director at Viridian Capital Advisors, a New York-based, cannabis-focused investment banking and data analytics firm, told MJBizDaily.
“It’s extremely difficult to merge two really big companies like these. Most M&A deals fail in the first place, but especially these mergers of equals.”
The deal for TPCO, which operated as The Parent Co., was positioned to streamline operations while generating annual savings of $20 million to $25 million, Gold Flora said at the time.
The deal also had high visibility because of The Parent Co’s affiliation with rap mogul “Jay-Z” Carter.
Default preceded receivership filing
Gold Flora’s receivership filing followed a default notice from J.J. Astor & Co. related to a senior secured promissory notes issued between August 2024 and December 2024.
The default increased the notes’ outstanding principal and interest to approximately $11.5 million.
“This was a difficult but correct decision to make for all stakeholders,” CEO and founder Laurie Holcomb said in a statement.
“While Gold Flora remains a leading operator and retailer in the cannabis market in California with over $100 million in annual revenues, the liabilities on our balance sheet, many of which are due to lawsuits we inherited with the TPCO business combination, forced us to file for a voluntary receivership that is necessary to achieve an orderly sale of the business.”
Gold Flora did not immediately respond MJBizDaily requests for comment.
Colombo said executives at Gold Flora and The Parent Co. hoped the merger would result in reduced operating costs but that challenges arose early.
“Trimming these expenses is harder than it looks,” Colombo said.
There were also signs of trouble leading up to the receivership filing, including Gold Flora burning through its cash balance thereby reducing its liquidity.
“They had negative cash flow from Day 1,” Colombo said. “The financial writing was on the wall.”
A day after Gold Flora announced its receivership plan, cannabis real estate investment trust Innovative Industrial Properties issued a news release alleging Gold Flora and its affiliates defaulted on three of the REIT’s property leases totaling $1.7 million, or 2.9% of the contracted rent obligations.
Innovative Industrial Properties said it planned to pursue action, which may include “eviction proceedings.”
What’s next for Gold Flora
The company said it expects to be placed into receivership in the Los Angeles Superior Court, Santa Monica Division, and Richard Ormond of Stone Capital Blossom to be appointed as receiver.
Ormond, a Los Angeles-based attorney with expertise in finance, banking and cannabis regulations, briefly served as chief restructuring officer for MedMen Enterprises after a management shake-up and the multistate operator entering bankruptcy proceedings in Canada about a year ago.
Gold Flora said it will continue operating as a going concern amid the asset sale, which includes 16 dispensaries, three cultivation facilities in Desert Hot Springs and two in San Jose totaling 107,000 square feet.
Its retail brands include:
- Airfield Supply Co.
- Caliva.
- Coastal.
- Calma.
- King’s Crew.
- Varda.
- Deli.
- Higher Level.
The vertically integrated company, based in Costa Mesa, also operates a manufacturing and extraction business in Desert Hot Springs as well as a distribution arm under Stately Distribution.
As a result of the receivership filing, Gold Flora expects its common stock (GRAM) and warrants will be suspended from trading and ultimately be delisted from the Cboe Canada exchange, where it had a $14 million market cap Monday.
Frank Segall of Philadelphia-based Blank Rome is serving as the Costa Mesa-based company’s legal counsel during proceedings.
MJBizDaily in November reported that financial recovery firm Global Assets Liens & Foreclosure filed an ex parte application for receivership in Santa Barbara Superior Court against Gold Flora, which owed more than $236,725 in unpaid invoices and incurred losses exceeding $37 million at the time.
Gold Flora’s demise follows the collapse of several of California’s largest cannabis companies, including Herbl, MedMen, High Times and StateHouse Holdings.
In receiverships, secured creditors such as banks and those with asset-based collateral are paid first, while unsecured creditors often go unpaid.
“California is a brutal market,” Colombo said.
“To be successful, you really need to have those costs trimmed.”
Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.
Omar Sacirbey contributed to this report.
Subscribe to the MJBiz Factbook
Exclusive industry data and analysis to help you make informed business decisions and avoid costly missteps. All the facts, none of the hype.
What you will get:
- Monthly and quarterly updates, with new data & insights
- Financial forecasts + capital investment trends
- State-by-state guide to regulations, taxes & market opportunities
- Annual survey of cannabis businesses
- Consumer insights
- And more!
