California-based Blüm Holdings Inc. (OTCQB: BLMH) reported a net loss of $3.3 million for its third quarter of the year, down year-over-year from the $23.8 million in net income the company reported for the same period in 2023.

A partial factor in Blüm’s troubles is the insolvency of its subsidiary, Unrivaled Brands, which filed a petition for Chapter 11 bankruptcy this week after “bitter activist litigation” forced its hand, according to a press release. The value of Unrivaled Brands stands at roughly $6 million, Blüm reported, but the subsidiary’s liabilities and debts are approximately $35 million. Unrivaled, which was formerly known as Terra Tech, rebranded about a year ago.

Blüm emphasized in its quarterly report that it “remains unaffected by this filing and will continue its operations as usual outside of the Chapter 11 proceedings.”

“As of the date of this filing, there is no order confirming a plan of reorganization, arrangement or liquidation that has been entered by a court or governmental authority,” Blüm stated in a release.

Despite that speed bump, Blüm has made significant strides in paying down debts and driving up revenue, though the net loss was a big change from the $23.4 million in net income it reported in the second quarter this year.

Quarterly revenue for Blüm reached $4.3 million, up 182% from $1.5 million for the same period last year and up 15% sequentially. That brought revenue for the calendar year to $9.9 million, up from $5.6 million year-over-year. Blüm said the growth was driven by “the consolidation of (three) Northern California stores and supported by growth in the Korova brand.”

Blüm also reported a 68% reduction in company debts, which fell to $9.2 million, since the start of 2024. The debt was partially taken care of by two rounds of layoffs during the quarter and “a targeted decrease in corporate overhead,” according to a release. The moves also helped cut expenses to $14.8 million from $30.3 million year-over-year.

In addition, Blüm said it initiated a new strategy to attract more shareholders and retail investors, and began “reinvigorating” its Korova brand, a key part of its Unrivaled portfolio.

Following the close of the quarter, on Nov. 5, Blüm sold two of its dispensaries in Oakland and San Leandro to VLPS LLC for “a combined $3.18 million through liability assumption.” The sale, Blüm said, would allow the company to “optimize its retail footprint and focus on high-performing locations.”

“The Northern California stores and the implementation of consistent operational practices have significantly strengthened our financial and operational foundation,” CFO Patty Chan said. “We are confident that these enhancements position us well for continued growth and profitability.”

As of Sept. 30, Blüm had $38.6 million in total assets, including $1 million in cash, against $66.1 million in total liabilities.

Earlier this year, Irwin Naturals Inc. (OTC: IWINF) appeared to wear out its welcome as a client of East West Bank (EWB). Now, the supplements company has filed for Chapter 11 bankruptcy.

Green Market Report reported in July that Irwin Naturals quit making payments on the $40 million loan provided by EWB. The bank responded by suing the company and accusing CEO Klee Irwin of self-dealing and diverting funds from the company.

To prevent further diversion of money and self-dealing, the bank said it would take steps to exercise its voting rights. On May 13, EWB said it removed Irwin from the board and appointed Michael Tucker as a board director. The bank said in its complaint that the Irwin borrowers owed $18,439,983.53, while Klee Irwin himself owed $7,635,447.

The bank had asked the court to appoint a receiver for the company and remove Klee Irwin from the company altogether.

Ch. 11 strategy

By May, Klee Irwin announced he would declare bankruptcy, which would also be another event of default under the loan agreement. And this latest filing appears to be him following through on that threat.

However, Adam Stein-Sapir, a bankruptcy expert with Pioneer Funding Group, said that by filing under Chapter 11 – as opposed to Chapter 7 – the company believes it has something to reorganize instead of just liquidating.

“As Irwin’s lender, EWB was also able to sweep all cash and generally prevent the business from continuing to operate,” Stein-Sapir said. “The bankruptcy filing can be seen as an action by Irwin to retain control of its operations and put a pause on the California state court proceedings. They’ll be in a position to regain use of their cash so long as they make certain payments to EWB.”

Stein-Sapir added, “Over the coming weeks and months, Irwin will either try to refinance EWB, come to new terms on repayment, or sell the company.”

Irwin himself signed the bankruptcy documents and provided a list of creditors that includes the legal firm Clark Hill, which is owed $41,639 and Canadian accounting firm MNP LLC, which is owed $124,457.92. Irwin Natural also owes money to the Canadian Securities Exchange; Sheri Orlowitz, chair of the board of the Council for Federal Cannabis Regulation Foundation; and cannabis advocate Rod Kight.

Stein-Sapir said additional creditors may be added to the list, as the bankruptcy form noted the company’s other subsidiaries DAI US Holdco Inc. and 5310 Holdings LLC. The company has 45 days to file a complete list.

Irwin hasn’t filed any financial statements in months. The company last told investors in March that it was closing its ketamine clinics and returning its focus to the supplements business. Orlowitz and Kight both resigned from the board, and CFO Sean Sand left the company.

While Irwin supplements are still on the market, investors will find that the investors tab on the company’s website no longer works. Irwin’s stock is also under a Cease Trade Order with the British Columbia Securities Commission and in default for failing to file financial statements.

Irwin Naturals lnc. 2024Chapter 11 Petition