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Medical Marijuana Update: Affinor and Abbatis going toe-to-toe?

Chris Parry Chris Parry, Stockhouse.com
11 Comments| August 11, 2014


A situation is unfolding between one-time buddies, now increasingly not, Affinor Growers (CSE:C.AFI, Stock Forum) and Abattis Bioceuticals (CSE:C.ATT, Stock Forum) and, while it may indicate some legal issues to come for both companies, it’s a stoush that will only be more entertaining if you’re watching it with popcorn.

So here’s what I know: Now-Affinor boss Nick Brusatore and long-Abattis boss Mike Withrow were going to take over the world, back in the day. Abattis invested in Brusatore’s Vertical Designs grow tech, getting themselves exclusive licensing, and Brusatore duly covered himself in stock as the two held hands and walked off into the sunset together.

Then Abattis blew confetti and streamers out it’s backside as it rocketed to glory, making Brusatore a wealthy man.

Then, cutting a long story brutally short, Brusatore dumped a ton of stock and walked away, joining Affinor.

And when I say ‘joining’ it, what I mean is he bought a ton of it, worked his way into Chairman of the Board role, and then over the last few weeks he brought (or bought) his original company, Vertical Designs, into the Affinor family.

Suffice to say, Brusatore owns a LOT of Affinor. He is Affinor. When he does his Tuesday live-stream videos, it’s the Brusatore show, not the Affinor show. He’s riding a wave of success, having parlayed Abattis stock into Affinor stock and Affinor stock into a Vertical Designs buyout.

And Affinor stock is doing okay – it’s definitely been higher, but it has found a base.

But the technology… oh lordy, there’s a war brewing on that front. And I’m not sure it isn’t almost entirely a war of ego.

Brusatore has most definitely optioned some of his VLD tech to Abattis. When he left that company, I asked him what would happen with that tech and he said, “When Affinor needs it, we’ll work out a deal. No problem. I love the Abattis guys.”

But as Affinor started lifting, that plan started to change. At a cocktail party for the company a few weeks back, Brusatore told me, “I don’t need it anymore. I just created a new technology. We’re fine.”

Which, and I say this making no judgement at all, is kinda what you'd say if you were misappropriating someone else's tech.

Well Abattis ain’t going down like that.

Last week they announced they’ve sub-licensed their vertical grow systems to Biocube, stating “Abattis is the worldwide exclusive licensee of VDL's vertical growing technology, including any future improvements or additional modifications, and is the only corporate entity authorized to use the vertical growing technology for plant products--including Cannabis--grown for use in the pharmaceutical, nutraceutical, cosmetic, and wellness markets.”

A few days later, they announced they’re using Kodiak Capital to finance $5m in expansion cash. A day later, they announced they’re sub-licensing the now-Biocube-owned tech to Terrasphere Vertical Farming, a company that used to do business with Brusatore.

That sound you’re hearing is Abattis issuing a resounding and loud FU to a former friend by genericising his technology by dishing it to anyone who wants it.

Brusatore, for his part, isn’t hiding from the fight, claiming that he gets to keep other VDL tech.



Where will this end up going forward?

Simpsons-I-can-t-believe-it-s-a-law-firm.jpg

UPDATE: Brusatore tweeted after I posted this article that there's no war and that he imagines Abattis feels the same way. He then deleted that tweet. Full disclosure: I'm in business with former Affinor COO Tegan Adams, so I don't feel like I would be in a place to make a judgement call on this situation as to who is right and who is wrong without presenting a perception of a conflict of interest. May everyone be happy and healthy and wealthy and wise.
 
Green and Hill Industries (OTO:GHIL, Stock Forum) was trade halted by the BCSC last week for the reason “has not filed the correct form,” specifically Audited Financials and an MD&A. Small catch: The company is listed on the OTC Pink Sheets, so trading continues unabated for everyone but non-residents of Canada.

Also, the OTC Pinks don’t require GHIL to file audited financials so… (shrug).

GHIL exec Patrick Smyth, who I have a love/hate relationship with, took to Twitter to slap his forehead about in frustration a bit.


 
Theirs wasn’t the only regulator action this week; The US SEC announced criminal charges against a gang of stock promoters working out of Vancouver WA, Lincoln City, OR, and Bradenton FL, pumping and dumping on Hemp Inc (OTO:HEMP, Stock Forum) and Growlife (OTO:PHOT, Stock Forum).

Growlife had been suspended earlier this year by the SEC for "concerns regarding the accuracy and adequacy of information in the marketplace and potentially manipulative transactions in Growlife's common stock," along with companies like Cannabusiness Group Inc. (OTO: CBGI, Stock Forum), Colorado Springs-based Advanced Cannabis Solutions Inc. (OTO: CANN, Stock Forum), and Bedford, Texas-based Petrotech Oil and Gas. (OTO: PTOG, Stock Forum).

From the press release: According to the SEC’s complaint, GrowLife Inc. was part of a broader online promotion of several marijuana-related stocks in early 2014.  Mrowca specifically promoted GrowLife through his Money Runners Group website and predicted that the stock price would nearly double.  Mrowca, Galas, and Hawatmeh meanwhile engaged in manipulative trading designed to increase the price and volume of GrowLife stock, and they later sold their shares for illicit profits.

Similarly, the SEC alleges that Hawatmeh, Galas, and Mrowca bought and sold approximately 41.7 million shares of Hemp Inc. in January and February 2014 while the stock was actively promoted on the Internet.  For example, one Internet tout on February 6 claimed that Hemp could reach “a REAL Possible Gain of OVER 2900%.”  During the promotion, Hawatmeh, Mrowca, and Galas engaged in manipulative wash trades and matched orders to manipulate Hemp’s common stock before selling their shares for illegal gains. 

Ick.

Satori Resources (TSX:V.BUD, Stock Forum) stock went on a run since I wrote last week that I would be going to visit them and all their projects/potential projects/maybe kinda projects last Friday.$0.07 high last Friday, up from $0.045 the Friday before.

I’ll post what I saw on my Satori trip tomorrow. Would have posted today but there’s news to roll out first.
Talked to a TON of companies in the time I was out in Toronto, including many brokers, some new deals on the way, and some old hands.

Talked to John Fowler, ops king at Supreme Pharmaceuticals (CSE:C.SL, Stock Forum) once again, and boy howdy, do I like that guy a lot.

Supreme expects to roll through the final inspection once they’ve done their security upgrades without too much hassle. They’ll be paying for those upgrades with a small raise coming sometime soon. The ‘Wal-Mart of Weed’ pricing strategy continues unabated and unapologetically, and some of the issues I thought the company needed to work through, or presented risk, have been dealt with quickly (the recent consolidation being one I can talk about).

There are still question marks around distribution strategy, but I’ll have more info on that next week and John has made himself very available.

Frankly, if Fowler was listing himself on the CSE, I’d buy that stock. Dude’s smart.

Organigram (TSX:V.IX, Stock Forum) is making a big push in advance of their likely listing later in the month using the Inform Exploration vehicle. There are so many executives and board members and IR guys and janitors and passers by calling around offering interviews that it’s occasionally been a struggle not to double or triple book. I will be doing a deep dig on the company this week.

Note: So far, so good.

Big differentiators: They do the French thing, which no other LP does. French-speaking management, customer service, and their website, which gifts them the Quebec market from the outset. Their facility is out in the Maritimes, so they’ve got everything east of that also sewn up. Responsibly sized facility with room to grow, with a fully organic product. Whistler has organic strains, but Organigram is totes organic from the outset.

Institutional money is ALL over it. They needed to raise $3m, they quickly adjusted to $5m when they realised how much money was being thrown at them, and ended up with $6m by the end of their recent raise. But there are so many annoyed investors who were left out of that raise, I’d expect they’ll go for another inside two months of their listing.

Comps to Tweed are ridiculous – these guys are going to have far less overhead, they’ve got serious private enterprise-raised ops guys at the wheel, the only ‘what if’ that I’ve found to this point is what happens on the distribution end.

A quick run through numbers in my head says they need about 1000 customers on the regular to cover costs, when base weed prices start to push downward. Doable. More later. Watchlist it.

On Tweed (TSX:V.TWD, Stock Forum): The one strain that the company was offering a few weeks ago, which if I recall correctly was Argyle, a middle of the road THC/CBD blend with, let’s just say limited appeal if product reviews are to be believed, has reportedly been pulled and torched. There are currently three strains on offer that are all high THC and low (or no) CBD, ranging in price from $6 a gram to $12.

This is a good thing for Tweed. They need a LOT more product out the door, but a willingness to lose product that isn’t top flight is the clever way to handle things, even if it drags things out a little.

Every new listing on the way (Bedrocan, Mettrum, Organigram) is pointing to Tweed’s market cap and their own starting cap and saying “Eh? Eh? You know what we’re saying here, eh?”

Here’s how it’s going to go: All of those companies will run on listing. They WON’T get to Tweed’s valuation because, frankly, Tweed is overvalued.

Expect them all to hit around $60m-70m once the dust has settled, and maybe take a hit once financials are released and stock becomes free trading.

Tweed has first mover advantage but has made a meal of it. Now the company is going to need to represent as the big dogs join the fight.
 
UPDATE: Breaking after I'd written this update, Tweed's partner Park Lane Farms received a small MMPR approval for its greenhouse facility at Niagara-on-the-Lake, allowing it to grow on 10% of its 350,000 sq. ft. of space.

How did they get their MMPR approval so fast while so many others are waiting forever? That's for another update.

Finally, private patient referral service MedCannAccess opened its first clinic today.



THE MOVERS:
 
Arrowhead Gold Corp.   0.050 +0.010 +25.00% 32.13k
Next Gen Metals Inc.   0.100 +0.015 +17.65% 1,000
Lexaria Corp.   0.140 +0.015 +12.00% 1.2k
Papuan Precious Metals Corp.   0.060 +0.005 +9.09% 243k
West Point Resources Inc.   0.140 +0.010 +7.69% 224.5k
EASTON PHARMS INC   0.014 +0.001 +6.82% 3.09m
Tweed Marijuana Inc.   2.750 +0.170 +6.59% 224.24k
Affinor Growers Inc.   0.470 +0.025 +5.62% 353.48k
Growlife Inc   0.074 +0.002 +2.78% 2.68m
CREATIVE EDGE NTRTN INC   0.056 +0.001 +1.44% 7.6m
88 Capital Corp.   0.130 0.000 0.00% 0
Ansell Capital Corp.   0.050 0.000 0.00% 0
Enertopia Corp.   0.130 0.000 0.00% 160k
Global Hemp Group Inc   0.080 0.000 0.00% 46.1k
MODERN MOBILITY AIDS INC   0.070 0.000 0.00% 79k
Cinaport Acquisition Corp.   0.010 0.000 0.00% 0
Satori Resources Inc.   0.065 0.000 0.00% 996.71k
Seaway Energy Services Inc.   0.340 0.000 0.00% 0
Thelon Capital Ltd.   0.045 0.000 0.00% 0
GREEN AND HILL INDUS INC   0.245 0.000 0.00% 0
Terra Firma Resources Inc.   0.010 0.000 0.00% 0
Senator Minerals Inc.   0.090 0.000 0.00% 0
Supreme Pharmaceuticals Inc   0.310 0.000 0.00% 627.93k
Windfire Capital Corp.   0.165 0.000 0.00% 0
Prominex Resource Corp.   0.020 0.000 0.00% 0
Cavan Ventures Inc.   0.040 0.000 0.00% 65k
Maple Leaf Green World Inc.   0.065 0.000 0.00% 11.6k
Weststar Resources Corp.   0.040 0.000 0.00% 0
GeoNovus Minerals Corp.   0.050 0.000 0.00% 218k
Verde Science   0.014 0.000 0.00% 51.8k
Majescor Resources Inc.   0.060 0.000 0.00% 2.15k
Jourdan Resources Inc.   0.020 0.000 0.00% 127k
Pacific North West Capital...   0.050 0.000 0.00% 0
Spearmint Resources Inc.   0.035 0.000 0.00% 0
Green Swan Capital Corp.   0.085 0.000 0.00% 20k
Totally Hip Technologies Inc.   0.125 0.000 0.00% 0
AXE Exploration Inc.   0.025 0.000 0.00% 0
Victory Ventures Inc.   0.015 0.000 0.00% 292k
Anexco Resources Ltd.   H   0.230 0.000 0.00% 0
Naturally Splendid Enterpr...   0.285 -0.005 -1.72% 9.15k
Chlormet Technologies Inc   0.115 -0.005 -4.17% 7k
Crailar Technologies Inc.   0.440 -0.020 -4.35% 30.1k
Abattis Bioceuticals Corp.   0.455 -0.025 -5.21% 145.78k
Prescient Mining Corp   0.600 -0.040 -6.25% 113.5k
Calyx Bio-Ventures Inc.   0.070 -0.005 -6.67% 465.5k
PMX COMMUNITIES INC   0.013 -0.001 -7.14% 171.17k
Cannabis Technologies Inc   0.310 -0.035 -10.14% 316.5k
ROSTOCK VENTURES CORP   0.013 -0.002 -11.41% 12k
Alchemist Mining Inc.   0.050 -0.010 -16.67% 15.5k
Matica Enterprises Inc   0.090 -0.020 -18.18% 1.21m
Next Generation Management...   0.016 -0.004 -18.69% 1.34m
 
--Chris Parry
http://www.twitter.com/chrisparry


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Comments

NoB4ever
Stil dont have cIFN on your list of mmj stocks. They are halted now with big deal pending
2 stars
August 11, 2014
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spookyehud
Good article - re: Abattis & Affinor - reread the Terrasphere PR. Terrasphere licensed it's patents to Biocube. Which is a no less interesting story because Brusatore is an inventor on those patents as well. Perhaps Brusatore won't have quite as easy of a go at growing MJ using vertical growing technology as he thinks. Not sure how you can have a new technology for growing that wouldn't be an improvement on the old way that was licensed to Abattis? Might Brusatore's shady ...
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August 11, 2014
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molybucks
Chris, You flip flop so often I have to wonder who is picking up the latest lunch tab. Miss Adams leaves AFI for Sadstory and you switch opinions like a lap dog. If she comes to a sudden stop your going to get a sore neck..... I guess sensationalism sells eh!!! Cheesy work bro.....
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August 11, 2014
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G4General
Hey Chris, Any new deals for Satori Resources. what have you herd from the brokers? Since Satori resources BUD.V is a TSX venture exchange stock, there should be some institutional investors have your herd of any interest. The current market cap is tiny compared to others companies that are hoping to get a MMRP license. I think the auxiliary markets will outpace many LOW risk, HIGH REWARD.
2.5 stars
August 11, 2014
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StockGuru2k11
UMB going to be a huge MMJ runner. DO YOUR DD
2.5 stars
August 11, 2014
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Clemmie70
ohh Chris, you're quite the guy. First Satori is dubbed Sadstori and you enjoy making fun of the company and CEO. Next thing you're backing up the truck and insinuating it's a buy. You seemed to give kudos to AFI in the past and now you're projecting there is a pending legal issue down the road between them. Is that good journalism or just you stirring the pot to benefit your partner Ms Adams while she cozies up to the Sadstori trough? Sorry bro, tabloid writing at best. I gu...
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August 11, 2014
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clm128
Good read, thanks for that. im looking forward to what tommorow brings
1.5 stars
August 11, 2014
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Boug1234
All tweed is missing is to partner up with American company witch I'm sure that talks are in progress for the near future may we not forget that the goverment is making 510$ a pound minimum Good article Chris nice to hear what's going
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August 11, 2014
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Tweedlede
Very misleading article Mr. Parry. Your better then that. Not a mention about Tweeds second license being approved today? Still a sub 3.00 stock. Certainly not inflated. Plus Tweed has 6 strains out now. Your research is old. Your misleading your audience on Tweeds position.
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August 11, 2014
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cparry
Re; Tweed: Article written before the news broke. Suffice to say, I heard from several Toronto brokers last week that said it was going to happen and I said there's no way. Would be too obvious Tweed is being favoured. I guess I was wrong.
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August 11, 2014
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