CRAiLaR Technologies: Ever get the feeling you’ve been cheated?

Over the last handful of years, when commentating on the marijuana/hemp sector, one company I never had any time for was CRaiLaR Technologies (OTC:CRLRQ).

Crailar Technology (TSX:V.CL), also rose, but I can’t imagine a good reason why unless cash burn is suddenly a metric people are prizing. That thing went up 19.6% on minimal volume.

Perhaps someone though they were buying V.SL and realized their typo too late. That’s how I bought a thousand dollars’ worth of Ginger Beef Corporation (TSX:V.GB) back in the day, which I’d do again before I’d buy Crailar.

The company, which sought to technologically mess with hemp and flax fiber to produce superior qualities to cotton, was a shit show from the outset, but one that people somehow, for some reason, kept pumping money into.

I noted how, every quarter, the company would lose $3.2 million and then go get financing of $3.2 million, and that this would repeat every quarter. There was no question about it – anyone could see right there in their newsflow that this was the situation, but they had a pilot program with Ikea, so misty clouds of unicorn farts seemed to obscure the vision of investors who kept thinking, ‘this quarter for sure!’

I was not convinced.

The company just closed a private placement five days ago for the same amount of money they lost this quarter, and they borrowed $3.2m from IKEA last quarter, and raised another $2m through a PP by way of Adidas, which insisted they raise another $3m this quarter, presumably to stay afloat… July 2013? Another $3.2m in financing. Which means, unless something crazy happens, they’ll need another PP next quarter, and another the next. How this stock keeps going up, I have no idea.

Eventually, the house of cards collapsed when the company admitted it owed so much money it had no chance of ever repaying not just all of it, but any of it.

So the company went into bankruptcy reorganization. Difference Capital was owed $5 million and, for some reason, more on top as it financed the company through the breakup process. So it swooped in and grabbed what was left, which wasn’t much. Some office furniture. Some textiles. Some IP.

Well, lo and behold, but CRAiLaR is back in a new form, albeit one that claims it has nothing to do with the old CRAiLaR.

CRAiLAR Fiber Technologies International Inc. (“CRAiLAR FTI”) is pleased to announce the acquisition of the intellectual property of Crailar Technologies Inc. and Crailar Fibre Technologies Inc., as well as completion of financing to fund immediate operational and product development efforts. The assets acquired include trademarks, trade secrets, IP and know-how related to bast fiber production from agronomics to finished products developed by Crailar Technologies Inc..

CRAiLAR FTI is comprised of the experienced leadership team of Noel Hall and Ken Hallat who will join the board of directors. In addition, CRAiLAR FTI has retained key management of Crailar Technologies Inc.

Good to know the old CRAiLaR crew is back together. But how much did it cost them to acquire that IP that they used, by my assessment, about $28 million of other people’s money to develop?

Well, Difference paid $10,000 for the CRAiLaR “Intellectual property, patents, trademarks and R&D, know how and any and all intellectual property rights arising from the CRAiLaR brand name.”

And for that, they also got the office equipment and inventory.

What’d they sell that to the new CRAiLaR for? They’re not saying. Private company and all that.

But during the court monitored breakup of the company, two entities showed interest in the IP, but neither of them wanted to spend more than Difference. So I’m guessing either Difference is behind the new CRAiLaR, or sold the IP to them for a bucket of balls.

This venture was horseshit from the start. I mean, check out this release from October of last year and you’ll see the hole that was dug to start this company got huge real quick, and nobody seemed too bothered about how it would be impossible to get out.

CRAiLAR also announced today that it is in default under the trust indentures (the “Indentures”) governing its 10.0% convertible debentures originally issued on September 20, 2012 (the “First Debentures”), 10% convertible debentures originally issued on February 25, 2013 (the “Second Debentures”) and 10% convertible debentures issued on July 26, 2013 and later amended and restated on December 23, 2013 (the “Third Debentures”, and collectively with the First Debentures and the Second Debentures, the “Debentures”) as a result of its failure to make the aggregate interest payments of $1,002,700 (the “Interest Payment”) on or before October 15, 2015 on the $18,516,000 aggregate principal amount of the Debentures.

This came a few days after the company announced it would ditch its’ Belgium-based production facility in favour of a new business model of licensing their tech to others. A month later, when nobody was interested in joining their latest financing raise, they sought bankruptcy protection.

The CRAiLaR strategy was always as follows: Raise money and spend it. When they couldn’t raise more money, the borrowed more money. And only when they couldn’t borrow or raise any more did the show stop. Cutting costs wasn’t an option. Licensing wasn’t explored until days before the axe fell. The company just blew through investor money because investors kept sending more.

So, CRAiLaR investors, how do you feel about that? You lost all your money, the company disappeared in an explosion of sudden debt, and the stuff that was valuable went to – ‘key management’ to start a new company using essentially the same name.
Oh yeah, that ‘new company’ with the old name? Their website wants nothing to do with any of you looking to recover your cash. In fact, the bottom of the site says:
CRAiLAR FTI is not affiliated with Crailar Technologies Inc. For more information on Crailar Technologies Inc. or any of it’s subsidiaries please click here.

Sorry guys. I tried to warn you.

–Chris Parry

Disclaimer: ALWAYS DO YOUR OWN RESEARCH and consult with a licensed investment professional before making an investment. This communication should not be used as a basis for making any investment.

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