Herbl’s meteoric fall and ensuing receivership are nearing an end.
Two buyers placed winning auction bids totaling more than $1.4 million to acquire certain assets from the defunct California marijuana distributor, according to court documents and industry sources.
MJBizDaily also confirmed that a bundled package of unsettled Herbl legal disputes was acquired by Beverly Hills law firm Ervin Cohen & Jessup for an undisclosed amount.
California distribution giant Nabis confirmed last week that it acquired Blackbird, a Nevada distributor that entered receivership after Herbl’s collapse in June 2023.
Nabis acquired the company for $850,000, according to a listing update from WeCann, the Orange County, California-based firm handling Herbl’s asset sales on behalf of Kevin Singer, Herbl’s court-appointed receiver.
Blackbird was acquired by Herbl in mid-2021 for an undisclosed amount.
Herbl’s accounts-receivable claims, another asset listed under receivership, was sold for $600,000 to a private investor, according to court documents.
With these transactions finalized, Herbl’s lone asset in receivership is the company’s technology platform, which was designed to streamline cannabis-distribution processes.
“We are happy with the progress so far and hope to have this closed in a month or two,” WeCann said of the receivership proceedings in a statement emailed to MJBizDaily.
Nabis expands in Nevada
The purchase of Blackbird provides Nabis with wide coverage across Nevada as it works toward national expansion plans.
Blackbird is a fully operational company that serves about 25% of Nevada’s cannabis market, according to a news release.
The asset is profitable and free of liens and other financial obligations, according to WeCann’s marketing materials.
The purchase includes:
- Two distribution licenses.
- Proprietary software that allows brands and retailers to manage product listings, B2B processes and last-mile delivery operations, routing and scheduling.
- Furniture, fixtures, equipment and leases.
“Blackbird’s experienced team and respected company culture in Nevada is synergistic with ours,” Nabis said in a statement emailed to MJBizDaily.
“Together, we plan to offer our partners in Nevada an online wholesale marketplace with best-in-class fulfillment, payment processing, financing, data analytics and sales and marketing services.
“As we continue our national expansion, we plan to empower more brands and retailers to innovate, launch, and scale strategically.”
Blackbird’s $850,000 price tag might be another sign of the times, as it underscores the cannabis industry’s volatile economics and valuations.
The sale to Nabis is Blackbird’s fourth change in ownership in five years.
In early 2019, Tim Conder sold his Nevada delivery service to Tilt for $50 million.
In December 2020, the cannabis entrepreneur (now Tilt Holdings’ CEO) reacquired Blackbird from Tilt for approximately $15 million.
Conder sold the company again in mid-2021, for an undisclosed amount, to Herbl.
Endless cycle of debt?
Rumors of a buyer for Herbl’s accounts-receivable claims have been swirling in Southern California for weeks.
A public notice of the sale in Santa Barbara Superior Court was posted on Jan. 8.
According to court filings and WeCann marketing materials, the asset was originally tied to more than $7 million in collectible debt from hundreds of retailers and nearly 100 brands.
That estimate now is closer to $1 million “because Herbl owes significant sums to product manufacturers” from acquiring inventory on consignment, according to a recent court filing.
While unpaid invoices are an industry problem nationwide, it has festered for years in California, where brands, manufacturers and cultivators are required to sell marijuana products through licensed distributors, although distributors increasingly are channeling products through consignment.
Distributors collect payments from retailers and then remit payment for cannabis products back to the brands, minus a service fee.
“Unfortunately, in many cases, Herbl’s failure to recover from retailers meant that it was incapable of paying its own debts” (to brands), according to a 72-page motion confirming the asset sale.
Herbl’s outstanding debt is likely in excess of $10 million, according to court documents and industry sources.
The receivership team responsible for selling Herbl’s assets offered brands and manufactures an option to purchase accounts-receivable claims related to the sale of their own products and collect unpaid invoices themselves.
That proposal was widely rejected, according to court documents and WeCann executives.
One brand told MJBizDaily that it placed an auction bid, but the receivership failed to respond.
“I explained to these brands and manufacturers that, to the extent they did not purchase their own accounts receivable,” Singer stated in court documents, “it was quite possible they would not be paid anything as unsecured creditors.”
An initial bid of $900,000 for Herbl’s accounts-receivable claims was ultimately reduced to $600,000, according to WeCann.
Who’s in, who’s out?
The sale of Herbl’s accounts-receivable claims has fueled more controversy and contempt in the aftermath of the company’s failure.
Collections had been underway for months to recoup more than $1 million – primarily from retailers – before the asset sale.
Meanwhile, hundreds of marijuana brands, growers, distributors and service providers are still owed payment for their own outstanding invoices with Herbl, totaling millions more – and they are unlikely to see a penny.
Coastal Sun, a cannabis grower and brand based in Santa Cruz County, California, is owed more than $160,000 from Herbl, Chief Financial Officer Darren Story told MJBizDaily.
At one point, the sum was nearly $1 million.
“Herbl was selling our inventory and collecting money from retailers but stopped paying us for it,” Story said.
Coastal Sun cut ties with Herbl about a year ago, after the company abruptly extended credit terms and then missed three invoice payments, he said.
“Toward the end, the top brass at Herbl was egregiously skipping supplier payments just to keep their sinking ship afloat a couple days longer,” Story added.
“They kept employees in the dark and even told some vendors everything was fine until the very end.”
In receiverships, secured creditors such as banks and those with asset-based collateral are paid first, while unsecured creditors often go unpaid.
Court documents show Herbl owed 150-plus creditors when it went into receivership after defaulting on several loan agreements with its primary lender, East West Bank.
As late as September 2022, Herbl was facilitating $700 million in gross merchandise volume annually, delivering products to more than 1,000 retailers in California, according to MarketWatch.
Herbl creditors include well-known brands and industry service providers such as Ball Family Farms, multistate operator Curaleaf Holdings and data analytics company Headset.
In California, the world’s largest regulated marijuana market, the problem of unpaid invoices has raged for more than a year.
Multistate operator MedMen Enterprises’ downward spiral is the latest example of retailers not paying invoices to brands, distributors and former employees.
What’s left of Herbl?
Herbl’s receivership has one remaining asset for sale.
Its Athena software platform, originally valued at $500,000, is now listed for $75,000.
The asset, which was discounted by half last week, was custom built by Herbl and Blackbird to provide compliance, logistics and data-driven inventory management, according to marketing materials.
The receiver will not sell Herbl’s distribution license in Santa Ana, California, WeCann confirmed to MJBizDaily.
The license was originally listed for $100,000 before falling to $25,000, a price that still failed to attract bidders.
“The time savings and value of the license has diminished to the point we cannot justify selling it,” WeCann said via email.
The rise of receiverships
Given the widespread scale of defaults and debt in the cannabis industry – plus plant-touching companies’ ineligibility for bankruptcy – receiverships likely will become more frequent.
In December, Item 9 Labs Corp., the parent company of marijuana retail franchisor Unity Rd. and Arizona cultivator Item 9 Labs, retained Sharp Capital Advisors to help sell the business after entering receivership in July.
In October, Tropics LP acquired most of the assets of Michigan cannabis company Skymint, which entered receivership roughly a year ago after defaulting on a loan from Tropics.
Canadian holding company Chalice Brands, which operates Oregon’s third-largest retail chain, filed court documents in May to place five of its Oregon subsidiaries under receivership.
“They (receiverships) are going to become more common, as a lot of money has been invested in the industry, and the rate of failure even for well-monetized companies is very high,” WeCann told MJBizDaily.
Chris Casacchia can be reached at chris.casacchia@mjbizdaily.com.