California industry leader Flow Cannabis Co. ‘mothballed’ as it seeks to ‘survive’

After running out of cash, Flow Cannabis Co. eliminated all plant-touching activities and mothballed operations, according to company documents and a board member.

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The once-industry-leading but now-struggling company burned through more than $24 million in cash and reported sales of $11 million, according to investor updates from the board. 

The flagship brand of Flow Cannabis Co., Flow Kana, leased some facilities to other companies and is trying to sell off another real estate.

Kevin Albert said in an interview that the company could eventually be sold or merged. The company was once one of the largest employers in the county, with more than 300 workers and a legion of agricultural farmers growing craft marijuana on its behalf. Flow Cannabis laid off nearly all of its workforce as the company struggled with difficult state market conditions, high taxes, an illegal market, and product oversupply that ensured outdoor cannabis cultivation prices remained way below the cost of production. 

The company decided to cease all cannabis manufacturing activities and execute a final reduction in force due to adverse environmental issues that continued to produce significant losses to the failing business.

After letting its cultivation licenses lapse, the company leased out its processing and manufacturing facilities to other operators. The operations have been stopped. Albert said that they had cut the cash burn. Flow Cannabis secured a $3 million loan with a high-interest rate using the property as a security. The loan will be repaid once the property is sold. If you have federal legalization, 

Flow Cannabis could be a pharmaceutical company, according to Albert. Albert said they could return to business tomorrow. Stay alive until 25. It was a significant fall from grace. One of the highest-profile falls from grace for a semi-legal California cannabis business is what Flow Canna has experienced. The struggles of the marijuana industry are underscored by the company's plight.

Flow Cannabis was an early advocate for small farmers in the state of California. Flow Cannabis promised to connect craft producers who cannot sell directly to consumers in urban areas.

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Observers and former cannabis farmer partners said that the company offered farmers the opportunity to cut their expenses and expand their consumer market reach but failed to deliver

Observers and former growers said that the company's current situation follows a significant departure from that vision, which was to grow cannabis in-house. He said that they were doing it so that the dreams could have a way of surviving. While Flow Cannabis officials such as Dave Soko and investor documents said the company's attempt to grow its own cannabis at a 12-acre farm exceeded expectations, internal emails and former employees say it was mostly unsuccessful.

State regulatory and tax burdens, as well as federal prohibition, have forced companies to drastically revisit previously rosy sales forecasts, which were based on economic models imported from pre-legalization days. Gambling on a national market with legal interstate commerce has proven to be premature. Albert said that the company underestimated how long the federal government could ignore the will of the people.

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Issues with cannabis partners. 

Observers, including those who have done business with private equity cannabis fund firm Gotham Green Partners, which internal documents possibly, said the operators for entrepreneurs who are tempted to raise money for their companies in exchange for ceding equity

According to board documents and other materials reviewed by Stein appears to have lost control of the company in late 2021. Flow Cannabis' board was "rebooted" after it bought out an investor who wasn't interested in continuing with the company. 

Steinmetz wouldn't comment on the story. The managing partner of New York-based Gotham Green refused to speak to MJBizDaily.

The fortunes of Flow Cannabis reflect an industry-prevalent "loan-to-own" ethos in which some cannabis investment firms will offer capital only to later take over a struggling company. 

They come in and give you promises. They are getting ready to stab you in the kidneys, and they are sharpening up the toothbrush. Albert said they didn't have a right to take control of Flow Cannabis. He said the company was saved from total "liquidation" in late 2021. It was a broken promise. California's heirloom cannabis farmers have suffered a significant blow.

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The company sold enough Kana-branded jars of sun-grown flower to become California's top-selling flower brand. The farmers became the face of the brand, which preached a "small is beautiful" slogan even as it harbored ambitions to become "the world's largest cannabis supply chain."

According to interviews with five former farmer partners, Flow Cannabis was slow to compensate for the product and paid less than it promised.

Flow Cannabis, which has become an example of marijuana legalization's broken promises, has angered former farmer partners who feel betrayed by the company.

One former partner said that they were all hat, no cattle. The board member said that the Emerald Triangle farmers were unreliable business partners who would find better-paying deals than what Flow Cannabis could offer. Farmers could sell at higher prices than they could sell to Flow Kana in a hot market. 

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Flow Kana was trying to improve its outcome while the farmers were trying to improve theirs.

According to Genine Coleman, the executive director of the Origins Council, there is a feeling in the Emerald Triangle that the company's promise to provide small farmers an opportunity to capitalize on legalization went unfulfilled. Flow Cannabis' business model was based on one imported from commodity farmers who grow coffee or oranges and send the final steps of the supply chain to a large operator. 

Coleman said that the agricultural models were not suitable for cannabis.

Coleman said that the experience with Flow Kana was a powerful lesson for the Emerald Triangle.

A spending spree. The cannabis industry generated enthusiasm when publicly traded companies based in Canada were delivering great returns. The company raised $125 million in a Series B financing round that was believed to be the largest private raise in history. Flow Cannabis spent $3.5 million to purchase a former winery and transform it into a processing and manufacturing center. The 12-acre Solar Living Center in Hopland, California, was purchased to be used as a cannabis museum and dispensary.According to last summer's investor update, the company wanted to sell the Flow Ranch before the end of the year 2022.

The Flow Ranch was close to being sold before a buyer backed out and was still on the market for nearly three million dollars. Disasters.</p><p>Albert stated that Flow Cannabis chose to cultivate its own marijuana in 2021.

Most of the crop in Lake County was contaminated with mold due to heavy rains and a late harvest. There was a lot of shitty, brown weed from the farm, and I have pictures of it. Despite raising concerns over worker safety and product quality posed by widespread mold, which can be mitigated if cannabis is processed into oils or concentrates but still poses a hazard to workers, they were told to keep working.