Dodd Heres, a County Durham-based cannabis firm, has been sold through a pre-pack administration due to financial difficulties.
Despite significant investments, the firm struggled with regulatory issues that impacted its operations and ability to sell products effectively.
Financial Struggles and Resolution
Dodd Heres, a County Durham firm known for its interest in the use of CBD for wellness products, faced considerable financial challenges. Despite significant investment from shareholders and government grants, amounting to approximately £1.45m, the company struggled to obtain a Food Standards Agency licence. This regulatory hurdle significantly impacted its ability to market its CBD-HQ products effectively, along with dealing with rent arrears and salary costs, leading to a debt of £1.7m.
The Acquisition Deal
The company was acquired by Tyneside-based State of Mind Food Supplements Ltd in a transaction valued at £50,000. This acquisition included not only the business and assets of Dodd Heres but also the intellectual property behind its ‘accelerated oxidisation process’, used in CBD-HQ production. However, the process leading to this was not straightforward, as highlighted by administrators who described the three offers received as “disappointing”.
Investment and Innovation Challenges
Dodd Heres, established in 2018, was awarded nearly £500,000 from Innovate UK in 2022 to further its research into CBD-HQ, a form of CBD thought to have better absorption properties in the human body. Despite this substantial backing, the inability to secure necessary licences was a major hindrance. The company ultimately turned to hemp products and attempted to sell CBD-HQ on a business-to-business basis. However, without adequate orders, this strategy fell short of ensuring profitability.
Administrative Intervention
FRP advisory was consulted four years ago as Dodd Heres sought to explore financial solutions. With cash flow issues persisting, they were forced to initiate a pre-pack administration to preserve the business as a going concern. This strategy aimed to manage liabilities and maintain the possibility for the company’s innovations to continue under new management, albeit with altered business goals.
Efforts in Capital Raising
The company’s efforts to manage its finances included director/shareholder loans and shareholder premium accounts. Government grants were applied for where feasible. Yet, these measures were not enough to overcome ongoing and overdue liabilities, which ultimately necessitated the acquisition transaction. The administrative process provided a structured pathway for the business to transition into new ownership.
Regulatory and Market Barriers
Securing a marketable product was hindered by the stringent requirements of the regulatory bodies, with the Food Standards Agency licence being particularly elusive. This lack of certification critically impaired the firm’s ability to capitalise on its CBD-HQ product line. Consequently, despite the innovative nature of the product, market barriers limited Dodd Heres’ success.
Looking Forward
With the acquisition by State of Mind Food Supplements Ltd, there is hope that the core innovations of Dodd Heres will be realised. The transition aims to leverage established processes and infuse fresh strategic direction and capital to navigate previous regulatory challenges more effectively. This acquisition reflects a commitment to the potential seen in Dodd Heres’ research and development efforts.
The acquisition by State of Mind Food Supplements Ltd offers an opportunity to harness Dodd Heres’ innovations.
This transition may provide the necessary foundation for navigating and overcoming previous challenges in the industry.
