PROMINENT CBD company CiiTECH has been sold to fellow UK-based cannabis company Tenacious Labs for £210,000.
In July 2021 CiiTECH raised £2.1m to fund its listing on the London Stock Exchange with a slated value of £17.5m.
However, after two loss-making years it fell into administration on October 22, 2022, and on February 16, this year, it was sold to Tenacious Halfway – a subsidiary of Tenacious Labs – for £210,000.
Administrators Leonard Curtis said it had received 46 expressions of interest in buying the assets of the business, which resulted in five offers with Tenacious making the highest bid.
Nick Morland, CEO and co-founder of Tenacious Labs, told Business of Cannabis: “CiiTECH was in the same situation as a couple of dozen good businesses. The irony is that they got hit the hardest as they were busy on the next step (an LSE listing).
“Who expected the outbreak of war in Europe? It just closed things down; there was no access to cash, inflation started going up…(but) the fundamentals of the business are right.
“We didn’t pick it up because it was cheap. We did it because It is a really good business and complementary to what we do.”
The administrators report shows that in 2019 CiiTECH posted profits of £455,000, it fell to a loss of £44,467 in 2020 and a further loss of £3.4m in 2021.
Secured creditors included HMRC, which received £120,562 from the administrators and IWOCA, which ran the UK Government’s Covid Business Interruption Loan Scheme, received £125,175.
Over two dozen investors had provided funds, through unsecured convertible loan notes, to support CiiTECH’s LSE listing at a time when the market was experiencing heightened activity from cannabis firms – all of these are now out of pocket.
CiiTECH was launched in 2017 going on to become one of the UK’s leading CBD companies with its brand Provacan.
Speaking to Business of Cannabis its CEO and founder Clifton Flack, said: “We were looking to IPO 18 months ago, that process was long, complex and drawn out, and we got to a point where we were weeks away from listing.
“By early 2022 the Ukrainian situation developed and we decided not to proceed… (And) we ended up being stuck with a huge amount of debt as a result of the IPO and while the business was profitable, carrying that weight around our shoulders was hindering everything. It was at this point that we chose to look for a partner.”
Sales of $1m in the coming year
Buy-to-build Tenacious Labs arrived on the CBD scene in April 2021, announcing its intent to grow through a string of acquisitions and a goal to be the ‘world’s leading consumer-centric cannabinoid group’.
The first purchase by the London-based company, headed by Mr Morland and chief commercial officer, Adrian Clarke, was Colorado company Press Pause.
It quickly followed this with the purchase of Colorado-based contract manufacturer SZM LLC, which supplies B2B customers across North America and in August last year it purchased Tennessee-based CBD pet business Rover’s Wellness.
Mr Morland believes it can generate sales of $1m from the CiiTECH business over the coming year.
He said: “CiiTECH and Provacan are great names. Its production is outsourced and it is in a good position to develop further economies of scale.
“We are looking at ways to develop and innovate with different delivery methods or ways to access markets and further sweat the assets.
“It will be business as normal for the next six months and then we will come up with a proper plan. We have things at Tenacious we could cross apply and vice versa.”
Mr Flack added: “The important thing was to keep the brands going, and that was something Tenacious brought to the table as a bare minimum.
“Nick and Adrian are seriously interesting guys and that translates into their long-term vision not just with CBD and THC, but hemp and the whole cannabis world. It’s good that our brands did not go to the wall and we have good people to work with going forward.”
Tenacious anticipates participating in one or two further acquisitions this year, although Mr Morland acknowledged that raising cash from third parties is tricky at the moment.
He said that while the froth had come off the CBD industry this presented opportunities for solid businesses and he anticipated being in the position to move quickly when the right opportunities arise.
The administrators report summed up the position of CiiTECH as: “Following the failed listing and Coronavirus pandemic the company had insufficient working capital to allow the directors to grow the business which subsequently led to insufficient turnover being generated to meet its on-going costs of trading and to settle its existing liabilities without further significant investment.
“The directors reached out to the company’s shareholders and CLN holders for further investment but were unsuccessful in their attempts.”