Breaking Exclusive: Humboldt Heritage Has Ceased Operations

It is the end of an era. Legendary California-based cannabis holding company Humboldt Heritage Inc., its subsidiaries, The Humboldt Sun Grower’s Guild (HSGG), and its flagship cannabis brands, True Humboldt and Region, have gone out of business. 

The cannabis growing, processing, and product manufacturing capabilities hailing from arguably the most coveted cannabis community in the world, Humboldt County, in the mystical Emerald Triangle comprising Mendocino, Humboldt, and Trinity counties, have ceased operations.

The nearly mythical cannabis-producing region of Humboldt is a veritable Shangri-La for quality flower due to its diverse microclimate, which offers near-perfect conditions for cultivation. 

However, despite favorable cultivation conditions, the company was destroyed by several mitigating factors, including market destabilization, over-taxation, over-regulation, product oversaturation, mismanagement, and corporate cannabis incursion.

The latter’s efforts to decrease the wholesale price of cannabis led to a race to the bottom and destabilized the market, bankrupting and nearly bankrupting hundreds of farmers, the backbone of the region’s industry. Approximately 700 cannabis farmers are still operating in the region according to Ross Gordon, Policy Director at Humboldt County Grower’s Alliance (HCGA).

The Humboldt Sun Grower’s Guild

HSGG was originally a collective of seven pioneering farmers, including Sequoyah Hudson of 8 Mile Family Farms, Zack Whyman of Rambling Rose Farm, Samantha Shull and Matt Nagle of Humboldt Edge Farm, and Stephen Dillon of Horse Mountain Farms, among others. The business was modeled after an agriculture cooperative when co-ops weren’t available to cannabis farmers. At the height of its operations, the Guild serviced at least 200 farms, according to a representative. The collective was ultimately whittled down to two original board members before its ultimate demise. 

Weeks ago, the company’s secured lien holder confiscated the bulk of the company’s tangible assets, and the remaining fixtures were sold, according to one of the original remaining board members.

Multiple Failed M&As

Humboldt Heritage has tried hard and fought to stay afloat after struggling for several years. Harboring a legacy-operator mentality of being suspicious and distrustful of outsiders, there was a controversial failed M&A attempt by Driven Deliveries (later Drvn by Stem), then owners of Ganjarunner and Mountain High in January of 2020, to acquire Humboldt Heritage Inc. and its subsidiaries, Humboldt Sun Growers Guild, and its in-house brands, True Humboldt and Region.

When that acquisition attempt fell through, it was quickly followed by a Letter of Intent (LOI) in March 2020 by High Times Holding Corp., the owners of High Times magazine, to acquire Humboldt Heritage Inc. and its subsidiaries.

High Times’s LOI was met with industry skepticism. Some industry insiders posited that in reality, High Times merely wanted to use the LOI announcement of Humboldt Heritage as a maneuver to help bolster their far-fetched attempts to list on the NYSE. Their LOI announcement came just before the culmination of High Times’s Regulation A+ campaign, which predictably later failed due to crowdsourcing investment of non-existent shares, and considerable debt, among other reasons. GCT reached out to Adam Levin, then High Times executive chairman, who declined to comment. 

After a second failed acquisition attempt and office politics between Humboldt Heritage’s then-CEO Barry Nachshon, who wanted the company to be acquired, and final CEO Sequoyah Hudson, one of the original HSGG founders, who didn’t, Nachshon stepped down. At press time, Nachshon couldn’t be reached for comment. 

With so much abject chicanery abounding in the cannabis industry, it was difficult for the Guild to decide who to trust. Ultimately, both companies that attempted to acquire it also went out of business prior to their M&A target’s demise.  

Meanwhile, corporate-backed region raiders such as Flow Cannabis Co. –often referred to by its flagship brand, Flow Kana– which locked local farmers into iron-clad exclusive contracts for lower rates than farmers would have liked for distribution, led the charge of taking advantage of the cautiously optimistic legacy-to-legal market. Ironically, a potential deal between Flow Kana and HSGG also fell through. (Flow Kana, called “weed middlemen,” was “mothballed” a year and a half ago, according to MJ Biz Daily.) 

A high rate of company turnover in Humboldt Heritage’s accounting department, including two CFOs in rapid succession who “inherited a mess,” compounded the situation. Try as they might, they couldn’t get caught up on outstanding invoices. 

The former CFO did what she could with the “proverbial shitshow she was handed“ and “tried to get caught up,” but was in the position for less than six months. The final CFO, Sequoyah Hudson, claims to have worked voluntarily for three years, which was a year longer than originally planned, and hadn’t been compensated by the board for over six months towards the end, but “tried to save people’s jobs,” and keep the company going.  

According to Hudson, eventually, the building they operated in was sold in an auction, but that wasn’t the final nail in the company’s coffin. The new owners of the building allowed the company to downsize into a smaller suite of rooms while generously allowing the company to pay what it could afford and keep operating until it eventually downsized to working out of a single room. 

Another partnership, a one-year commitment with Redwood Roots, “didn’t work either because the market crashed and bulk prices for cannabis dropped significantly,” said Hudson. “That partnership was dissolved after only eight months. The margins weren’t there for us to continue to receive their support. The market was so bad, we all needed to retreat to our respective corners and regroup.” 

Currently, with an eighth of an ounce of cannabis flower or “eighths” selling wholesale for as low as $4 by competing distributors, it’s no surprise that the company everyone assumed was grandfathered in went bust, while others are surprised that the struggling entity limped along for as long as it did. 

Still, many have expressed frustration at the company’s closure, citing the reality of economic hardships that cannabis farmers throughout the region are facing. 

While some vendors, including The Humboldt Seed Company, were paid up and had their unsold inventory returned, other vendors were paid in now-worthless shares. Some vendors were left high and dry with thousands of dollars in unpaid invoices. Ironically, some of those farmers were asked to invest in the company to keep it afloat. 

The Legacy to Legal Struggle

The operators who have turned from legacy to legal struggle to stay afloat. In contrast, those who operate in dual markets find clandestine legacy sales necessary to shore up and survive. The transition to legal operations has proved more challenging than expected and drained them of resources and, in some cases, their life savings. 

“The regulations are difficult to navigate, and the taxes are just too high,” said Lorelei Sandomeno, whose cannabis company Sunrise Mountain Farms was distributed by Humboldt Heritage prior to its dissolution. “It also didn’t help that as a brand, we were competing with True Humboldt, the in-house brand of our former distributor.” 

Sunrise Mountain switched to Nabis distributors, which also distributed HSGG’s catalog of brands to Southern California. Nabis, while distributing many competing brands, does not have the aforementioned conflict of interest of having a house brand. Cannabis regulations in California mandate that brands cannot sell business to consumers (BtoC) or business to business (BtoB) without a distributor. 

“Direct-to-consumer sales would be the best thing that could ever happen to small producers. Not having to go through multiple middlemen who oftentimes mismanage their clients, don’t have their client’s best interests in mind, and co-opt their marketing or worse, sit on their product until it expires is really detrimental to our business,” explains Sandomeno.  

“By law, once cannabis material expires after one year, it must be destroyed, but bubble hash stored by refrigeration can last much longer than that. Obviously, fresher is better, but older products are still viable, and could at least be donated to compassionate care programs rather than be destroyed,“ Sandomeno continued. 

Operating a cannabis farm in Humboldt is not for the faint of heart or the easily discouraged. Despite the closure of Humboldt Heritage and its subsidiaries, Humboldt’s farmers have hope. Bill AB 1111, which would allow small farmers to sell BtoC at cannabis events by 2026, is on Gov Newsom’s desk and needs to be signed or vetoed by the end of September. 

Meanwhile, despite the closure of Humboldt Heritage and its subsidiaries, defiant legacy-to-legal homesteaders in the Emerald Triangle continue to endure.