Unrivaled Brands, Inc. Announces Chapter 11 Bankruptcy Following Latest Round of Lawsuits Filed by People’s California and “Activist Investor” Frank Kavanaugh
Blum Holdings, Inc. (OTCQB: BLMH) announced that its subsidiary, Unrivaled Brands, Inc., has filed for Chapter 11 bankruptcy following prolonged litigation with People’s California Despite reducing liabilities by $90.8 million over two years and undergoing corporate reorganization, ongoing lawsuits from People’s and its principals, including Frank Kavanaugh, have destabilized the company. The litigation history includes multiple denied court applications by People’s and a recent settlement of $9.0 million. The latest lawsuit, filed in July 2024, alleges breach of fiduciary duty and corporate waste against Unrivaled's new management.
Blum Holdings, Inc. (OTCQB: BLMH) ha annunciato che la sua consociata, Unrivaled Brands, Inc., ha presentato richiesta di fallimento ai sensi del Capitolo 11 dopo una lunga controversia legale con People's California. Nonostante abbia ridotto le passività di 90,8 milioni di dollari nel corso di due anni e abbia subito una riorganizzazione aziendale, le cause legali in corso da parte di People's e dei suoi dirigenti, incluso Frank Kavanaugh, hanno destabilizzato l'azienda. La storia di contenzioso include molteplici domande di udienza denegate da parte di People's e un recente accordo di 9,0 milioni di dollari. L'ultima causa, presentata a luglio 2024, accusa la nuova gestione di Unrivaled di violazione del dovere fiduciario e sperpero aziendale.
Blum Holdings, Inc. (OTCQB: BLMH) anunció que su subsidiaria, Unrivaled Brands, Inc., ha presentado una solicitud de quiebra bajo el Capítulo 11 tras un prolongado litigio con People's California. A pesar de haber reducido pasivos en 90.8 millones de dólares en dos años y de haber pasado por una reorganización corporativa, las demandas en curso de People's y sus directivos, incluido Frank Kavanaugh, han desestabilizado la empresa. La historia del litigio incluye múltiples solicitudes rechazadas por parte de People's y un reciente acuerdo de 9.0 millones de dólares. La última demanda, presentada en julio de 2024, alega incumplimiento del deber fiduciario y despilfarro corporativo contra la nueva dirección de Unrivaled.
블룸 홀딩스 주식회사 (OTCQB: BLMH)는 그 자회사인 언리바이드 브랜드스 주식회사가 피플스 캘리포니아와의 장기적인 소송 이후에 채무자 회생계획 제11조를 신청했다고 발표했습니다. 2년 동안 9,080만 달러의 부채를 줄이고 기업 재조정을 거쳤음에도 불구하고, 피플스와 그 주요 인물들, 특히 프랭크 카바노의 지속적인 소송이 회사를 불안정하게 만들었습니다. 이 소송 이력에는 피플스가 여러 번 법원 신청을 거부당한 것과 최근 900만 달러의 합의가 포함되어 있습니다. 2024년 7월에 제기된 최신 소송은 언리바이드의 새로운 경영진에 대해 신탁 의무 위반 및 기업 자원의 낭비를 주장하고 있습니다.
Blum Holdings, Inc. (OTCQB: BLMH) a annoncé que sa filiale, Unrivaled Brands, Inc., avait déposé une demande de faillite au titre du Chapitre 11 suite à un long litige avec People's California. En dépit d'une réduction des passifs de 90,8 millions de dollars sur deux ans et d'une réorganisation d'entreprise, les poursuites en cours de People's et de ses dirigeants, y compris Frank Kavanaugh, ont déstabilisé l'entreprise. L'historique judiciaire comprend plusieurs demandes de la cour rejetées par People's ainsi qu'un récent règlement de 9,0 millions de dollars. La dernière poursuite, déposée en juillet 2024, accuse la nouvelle direction de Unrivaled de violation de leur devoir fiduciaire et de gaspillage des ressources de l'entreprise.
Blum Holdings, Inc. (OTCQB: BLMH) gab bekannt, dass ihre Tochtergesellschaft, Unrivaled Brands, Inc., nach langwierigen Rechtsstreitigkeiten mit People’s California einen Antrag auf Insolvenz nach Kapitel 11 gestellt hat. Trotz der Reduzierung der Verbindlichkeiten um 90,8 Millionen US-Dollar über zwei Jahre und einer Unternehmensumstrukturierung haben laufende Klagen von People’s und deren Führungskräften, darunter Frank Kavanaugh, das Unternehmen destabilisiert. Die Geschichte der Rechtsstreitigkeiten umfasst mehrere abgelehnte Gerichtsanträge von People’s sowie eine kürzliche Einigung über 9,0 Millionen US-Dollar. Die letzte Klage, die im Juli 2024 eingereicht wurde, wirft der neuen Geschäftsführung von Unrivaled eine Verletzung der Treuepflicht und eine missbräuchliche Verwendung von Unternehmensressourcen vor.
- Reduced total liabilities by $90.8 million from December 2021 to September 2024.
- Filing for Chapter 11 bankruptcy due to ongoing litigation.
- Continued litigation from People’s California despite a $9.0 million settlement in July 2024.
- Total assets decreased significantly from $271.8 million in 2021 to $27.4 million in September 2024.
DOWNEY, Calif., Nov. 12, 2024 (GLOBE NEWSWIRE) -- Blum Holdings, Inc. (OTCQB: BLMH) (the “Company,” “Blüm Holdings,” “we” or “us”), a cannabis company with subsidiaries operating throughout California, announces the filing of a petition for Chapter 11 bankruptcy by its wholly owned subsidiary Unrivaled Brands, Inc. (“Unrivaled”). The filing comes following a history of “bitter activist litigation from People’s California LLC (“People’s”)”1 and its principals Frank Kavanaugh, Bernard Steimann, and Jay Yadon.”
The history of People’s litigation extends back over two years to July 2022 when People’s filed a breach of contract action followed by People’s first derivative suit in August 2022 against the then executives and board members of Unrivaled. Later in August 2022, Unrivaled’s Board engaged Adnant LLC, a consulting and accounting firm, and Sabas Carrillo was brought on as an interim CEO. In the two years since Adnant’s engagement and Sabas’s leadership, and despite implacable litigation by People’s, the Company’s management was still able to reduce total liabilities by a net of
| Pro Forma | |||||||||||||||
| December 31, | December 31, | December 31, | December 31, | September 30, | |||||||||||
| ($ in thousands) | 2020 (1) | 2021 (1) | 2022 (1) | 2023 (1) | 2024 (2) | ||||||||||
| Current Assets | $ | 37,606 | $ | 25,264 | $ | 4,575 | $ | 4,693 | $ | 2,352 | |||||
| Long-Term Assets | 62,688 | 246,560 | 35,933 | 27,378 | 25,020 | ||||||||||
| Total Assets | $ | 100,294 | $ | 271,824 | $ | 40,508 | $ | 32,071 | $ | 27,372 | |||||
| Current Liabilities | $ | 26,422 | $ | 87,708 | $ | 59,143 | $ | 62,548 | $ | 25,044 | |||||
| Long-Term Liabilities | 14,742 | 37,629 | 17,902 | 15,219 | 9,451 | ||||||||||
| Total Liabilities | $ | 41,164 | $ | 125,337 | $ | 77,045 | $ | 77,767 | $ | 34,495 | |||||
(1) Amounts as of each fiscal year-end are as reported in the Annual Report on Form 10-K filed with the SEC, which does not include the reclassification of all comparative prior periods for discontinued operations under U.S. generally accepted accounting principles.
(2) The unaudited pro forma information is presented as if the Chapter 11 petition had occurred on September 30, 2024 and has been prepared to illustrate the estimated effects of the Chapter 11 petition. Refer to the reconciliation of preliminary amounts as of September 30, 2024 below.
Now, despite Sabas’s successes, nearly two years later, on July 26, 2024, People’s has brought almost exactly the same derivative claims again against an entirely new executive team and board members alleging the same breach of fiduciary duty, self-dealing, corporate waste, and unjust enrichment. The latest lawsuit comes after People’s has already received over
People’s pattern of litigation is marked by court loss after court loss though it has been successful in forcing out previous management and directors and destabilizing Unrivaled. The last two years of failed People’s litigation against Unrivaled includes:
1. Filing suit against Unrivaled and its subsidiaries for breach of contract in July 2022;
2. Filing the first derivative action against previous staff, management, and directors in August 2022;
3. The Court denying People’s ex parte application for a writ of attachment on an emergency basis in August 2022 (People’s later withdrew its application for a writ of attachment entirely);
4. The Court denying People’s ex parte application to appoint a receiver in August 2022;
5. The Court denying People’s application for an order appointing a receiver in September 2022 after full briefing;
6. The Court denying People’s ex parte application for a writ of possession in December 2022;
7. The Court denying People’s application for a writ of possession after full briefing in March 2023;
8. Settling with Unrivaled in March 2023 after Frank Kavanaugh, Jay Yadon, and Bernard Steimann were sued for fraud and negligent misrepresentation;
9. The Court granting People’s attorney’s motion to be relieved as counsel in January 2024;
10. People’s principal, Bernard Steimann, directing a contractor to steal “Blüm” signage, resulting in a lawsuit against Bernard Steimann and Troup Construction for civil theft and conversion in March 2024;
11. The Court granting Unrivaled a Temporary Restraining Order preventing People’s affiliate, New Patriot Holdings, from attempting to seize control of Blüm Santa Ana parking spaces in April 2024 (New Patriot demanded the matter be sent to arbitration, but then refused to pay the arbitrator’s fees);
12. Another Court granting Blüm Santa Ana an unlawful detainer (eviction) judgment and award of back rent in June 2024 based on People’s subsidiary, People’s Vape, failing to pay rent (People’s Vape attempted to obtain a restraining order from a third Court to prevent the unlawful detainer trial, which was denied);
13. The Court granting another Temporary Restraining Order against People’s barring it from foreclosing on a company asset in May 2024 (the Court extended that Temporary Restraining Order into a Preliminary Injunction in June 2024, and found that People’s attempt to sell the property after the Temporary Restraining Order had been entered was invalid); and
14. The Court denying People’s ex parte application requesting a multi-million-dollar judgment to be entered against Unrivaled on June 28, 2024.
However, the litigation does not end there, as People’s has filed additional lawsuits including:
15. Filing the second derivative action against current management and directors filed in July 2024;
16. Filing another motion claiming in part breach of the settlement agreement filed in October 2024;
17. Filing a defamation lawsuit related to a press release that referenced “’recently filed’ court documents that ‘contain explicit detail of Bernard Steimann’s alleged sexual molestation of a minor.’”2
People’s principal Francis (Frank) Kavanaugh, often acting through his company Fort Ashford Funds, is no stranger to derivative actions and activist investing. He was coined an “activist investor” by a news outlet in 2021 when “planning to wage a proxy battle against Friendly Hills Bancorp.”3 The battle resulted in a settlement pursuant to which the bank restructured their board of directors and Nathan Rogge was inserted as CEO in return for Kavanaugh withdrawing all actions against the company.4
In 2023, Kavanaugh called “for augmentation of independent board members at Medalist Diversified REIT, Inc.”5 in a public letter to shareholders before changes to the company’s leadership and board of directors resulting in Kavanaugh being inserted as Chair of the Board as well as Interim President and CEO. Medalist Diversified REIT, Inc. (“MDRR”) is described as “a Virginia-based real estate investment trust that specializes in acquiring, owning, and managing commercial real estate in the Southeast region of the U.S.”6
Kavanaugh’s activist investing in cannabis through People’s has so far proven less successful.
Earlier this year, the Company publicly distanced itself from the People’s brand and products after child molestation allegations against Kavanaugh’s business partner and People’s Managing Member, Bernard Steimann, came to light. People’s is represented by Michael Caspino of ‘Price Caspino’ and Deron Colby of Janus Capital Law Group. Caspino has been noted as having “more than 20 years of experience representing Catholic dioceses … in hundreds of child sexual abuse cases.”7 Colby also serves as Counsel to MDRR, where Frank Kavanaugh serves as President and CEO.
“Kavanaugh’s history of destabilizing companies to seize control and extract assets is well-documented. Unrivaled paid deserving vendors to the best of its abilities while withstanding the barrage of litigation by People’s. Unrivaled saved jobs for two years and operated in communities where businesses deserve to keep their doors open. If you or your company have had a similar experience with Frank Kavanaugh, Fort Ashford Funds, or any of his other affiliates, please reach out,” said CEO Sabas Carrillo.
About Blüm Holdings
Blüm Holdings is a leader in the cannabis sector. Our commitment to quality, innovation, and customer service makes us a trusted name in the cannabis industry, dedicated to shaping its future. Blüm Holdings, through its subsidiaries, operates leading dispensaries throughout California as well as several leading company-owned brands including Korova, known for its high potency products across multiple product categories, including the legendary 1000 mg THC Black Bar.
For more info, please visit: https://blumholdings.com.
Contact:
Jason Assad
LR Advisors LLC.
info@blumholdings.com
678-570-6791
| September 30, 2024 | ||||||||||
| Less: Estimated | ||||||||||
| ($ in thousands) | Preliminary Consolidated | Pro Forma Adjustments | Pro Forma Consolidated | |||||||
| Current Assets | $ | 3,549 | $ | (1,197 | ) | $ | 2,352 | |||
| Long-Term Assets | 35,129 | (10,109 | ) | 25,020 | ||||||
| Total Assets | $ | 38,678 | $ | (11,306 | ) | $ | 27,372 | |||
| Current Liabilities | $ | 51,868 | $ | (26,824 | ) | $ | 25,044 | |||
| Long-Term Liabilities | 14,288 | (4,837 | ) | 9,451 | ||||||
| Total Liabilities | $ | 66,156 | $ | (31,661 | ) | $ | 34,495 | |||
The unaudited pro forma information is presented as if the petition had occurred on September 30, 2024 and has been prepared to illustrate the estimated effects of the petition. The consolidated assets and liabilities as of September 30, 2024 have been derived from the preliminary financial results of the Company. The estimated pro forma adjustments are based on available information and certain assumptions that management believes are reasonable and are expected to have a continuing impact on our results of operations. The unaudited pro forma information is not necessarily indicative of what the Company’s financial condition would have been for the period presented.
The preliminary financial results as of September 30, 2024 in this press release are estimates. They are unaudited and are subject to change upon completion of the Company’s financial statement closing procedures. These estimates should not be viewed as a substitute for our full interim or annual financial statements prepared in accordance with U.S. generally accepted accounting principles. Accordingly, you should not place undue reliance on this preliminary data. The preliminary financial data has been prepared by, and is the responsibility of, our management. GuzmanGray, our independent registered public accounting firm, has not audited, reviewed, compiled or performed any procedures with respect to the accompanying preliminary financial data. Accordingly, GuzmanGray does not express an opinion or any other form of assurance with respect thereto.
1 In re: Unrivaled Brands, Inc. and In re: Halladay Holding, LLC; Lead Case No.: 2:24-bk-19127-BB; Doc 10
2 People's California, LLC v. Carrillo, et al; Case No.: 30-2024-01419068-CU-CO-CJC
3 Activist investor calls for new leadership at California community bank | American Banker
4 Friendly Hills Bancorp Announces Settlement with Frank Kavanaugh - MarketScreener
5
6 https://medalistreit.com/about/
7 Archdiocese moves to dismiss 36 sex abuse cases | Guam News | postguam.com
FAQ
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