Culta Buys Dispensaries Despite Ongoing Nonpayment of Court Judgment

Culta owner owes ex-partner over $6 million.

Maryland-based cannabis company Culta is in the news for two reasons today: buying two dispensaries while not paying a court judgement or taxes.

Culta announced that it would buy two female-owned dispensaries, Growing Ventures (dba Greenhouse Wellness) and K&R Holdings (dba Kannavis) for an undisclosed amount. But, the company is also in trouble for not paying a court judgment with an ex-partner and for not paying taxes.

Acquisitions

Culta said in a statement that the acquisition of Greenhouse Wellness comes just one year after Culta partnered with its founders, Gina Dubbé and Leslie Apgar, M.D., to bring Blissiva products to more women across the state.

The company also stated that the acquisitions of Greenhouse Wellness and Kannavis would allow Culta to continue to ensure patient access to Culta’s top-shelf cannabis and its partner brands, such as Old PalRobhots, and Blissiva.

With adult-use legalization launching in its home state on July 1, refining the patient experience has never been more important to existing cannabis dispensaries in the state.

“During the process of bringing Blissiva to market with Culta earlier this year, we got to know Culta and were excited when they approached us and asked if we would want to join their family,” Dubbé said.

Culta said there are no plans to immediately relocate the dispensaries, and it intends to onboard and retain the staff. The official date of the acquisition is dependent on state approval of the transfer of ownership.

Court Drama

Last week, Law360 reported that Culta owner Mackie Barch was ordered to use his “best efforts” to sell shares of his Baltimore-based cannabis wholesale dispensary in order to settle the $6 million debt owed  to his co-owner plus $665,000 for federal and state taxes.

The original case started when Josh Bartch sued Barch and Trellis Holdings Maryland for allegedly refusing to return Bartch’s interest in the medical marijuana company, Doctor’s Orders Maryland. It was a complicated story where Josh Bartch found himself in trouble with a drug possession situation in Colorado. His shares were temporarily transferred to other parties, because this legal problem could affect a license application in Maryland.

In September 2022, a judge awarded Bartch $6.4 million in the ownership dispute.

Barch said he was working with Lineage Merchant Partners, an independent investment banking and advisory firm, to find investors or buyers for Culta in order to pay his ex-partner and claimed that Culta would hit the market in December, according to the court record. However, that never happened, and Bartch learned that Lineage had given up on trying to take Culta to market.

Culta claimed that Lineage said there was no market for Culta at that time due to the challenges with capital raising in the cannabis industry.

However, Bartch learned that Lineage’s opinion stated, “To be clear, cannabis deals can still get done today, but the valuations are highly punitive right now, especially for cash out equity raises like what we are contemplating for Trellis.” In other words, there is a market, but not at a desired price point.

The judge now said that Barch has just two weeks to cover Bartch’s attorney fees associated with the investigation of “evidence spoliation.”

Law360 reported, “While Barch’s opposition filing didn’t address the accusations of spoliation but instead asserted that the court doesn’t have the authority to mandate the sale of Culta because he and the company are Maryland residents. He also claimed that he didn’t actually have control of Culta in such a way that would allow him to sell shares. He said selling Culta would leave Trellis and himself in a ‘deeply distressing scenario.'”

“That is, the court would be compelling a debtor to take on new debt to pay off a judgment, the result of which would leave a debtor without the benefit of the underlying asset (now encumbered),” Barch’s filing said. “While a debtor may voluntarily opt to pursue such an avenue to satisfy a judgment, this would be a calculated decision to replace one creditor with another. However, there is simply no basis for the court to compel this sort of ‘monetization’ of an asset.”

 

Debra Borchardt

Debra Borchardt is the Co-Founder, and Executive Editor of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Master's degree in Business Journalism from New York University.


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