There’s no war. That’s what Affinor Growers (CSE:C.AFI
, Stock Forum
) chairman Nick Brusatore said in a tweet that was shortly thereafter deleted, in response to my piece Monday about the rumble I think is coming between that company and Abattis Bioceuticals over Vertical Designs vertical growing IP.
Mike Withrow, head honcho at Abattis (CSE:C.ATT
, Stock Forum
), also says there’s no war.
“Although I kinda like the ring of ‘the resounding FU’ that was not really it,” he said in an email last night. “Purely a strategic move to set up our company for the next big value move.”
Okay, so we can haggle over definitions of what constitutes a war, but here’s what’s real:
“Abattis paid Vertical Designs 6 million shares at $0.10 for the exclusive worldwide rights to anything Vertical Designs develops, now and in the future
, for the use to grow plants to be used in pharmaceuticals, nutraceuticals, cosmetics and wellness
,” says Withrow.
That’s all well and good, but Affinor Growers recently agreed to acquire Vertical Designs
for $15 million in shares at $0.84 per share, to acquire “a unique, technological advantage into the multi-billion dollar agricultural markets.”
Which is something Abattis thought they already owned.
Or was it?
Interesting to note Abattis doesn’t mention the word ‘agricultural’ in their phrasing, and Affinor doesn’t mention anything but. To anyone wondering where the Venn diagrams cross, that's it, but one has to question if that's a line that almost has to be crossed eventually.
When I asked Brusatore about his needing to license VDL tech from Abattis a few weeks back, he said he’d developed a new technology so he didn’t have to worry about licensing anything anymore. All clear.
And Affinor has also made it very clear they will grow strawberries, not weed, ‘though we might grow weed later I dunno who can say maybe probably maybe (smile) (grin) (shrug)’…
Growing strawberries would be a fair use of the technology – as long as those strawberries are being sold as food. If they are used in the pharmaceutical, nutraceutical, cosmetics or wellness industries, then there’d be a problem.
Which, according to informal chats I’ve had with big brains on the Affinor advisory board, is definitely on the cards. Growing strawberries to extract nutrients for other nutriceutical products is a big part of why strawberries are worth growing at all in the current agricultural marketplace. Of course, being able to grow out of season will be nice, and being able to avoid pesticides and chemicals won’t hurt, and the Asian export market can be healthy if you can make those strawberries perfect, but it’s the nutriceutical end of things that has real profit potential.
So things are potentially sticky. But only potentially.
If we go deeper into the past, it gets a little stickier because there’s another company in the mix.
There wasn’t exactly a clean break between Brusatore and his earlier employers, Terrasphere, which is something that could rear its ugly head if/when Vertical Designs becomes a massively successful company using tech that Terrasphere thinks was developed on its dime.
Mea culpa time: My first article about the Abattis/Affinor situation
got a detail on the Terrasphere/Abattis deal wrong. Terrasphere last week licensed its own vertical grow tech to
Abattis, which Withrow says sees his company now control two of the higher profile growing technologies out there. In addition, “[we] have come up with our own Controlled Cultivation Environments,” he says.
Interesting thing to note: The Terrasphere licensing deal makes Abattis market neutral should there, at some point, be any sort of IP lawsuit between that Terrasphere and VDL. This could potentially be a really big deal. But only potentially.
Legal defenses aside, Abattis isn’t averse to the long play. It has a long line of investments in cutting edge weed plays, including Biocube and Experion Biotechnologies on the grow side, North American Bioextracts on the dry and extract side, iJuana Cannabis on the refining side, and Phytalab and BioCell Labs on the science end.
“We designed [the company’s Grow, Dry, Extract, Refine and Sciences] model on the early Microsoft Model which was to Target, Leverage, Link and Lock,” says Withrow. “We are using our model to stake a position in defensible areas of the industry that we can build on and convert over to as laws change in each jurisdiction. We have also left it open for the Abattis to be able to operate as in incubator for targeted technologies. We know there are many intelligent people out there that have clean hands and want to shift from grey to legit so we structured our subsidiaries to be able to accommodate this. You will see more on how we roll this strategy out in the coming three months.”
Let’s be clear, I love it when companies decide to draw blood and pound each other in the throat like Fight Club rookies under an Arkansas Denny’s, but I’m even happier to watch on as a company plays smart, rather than emotional.
Abattis is waking up and realising it needs to own the narrative again. It’s not enough to just have things going behind the scenes, you need to inspire confidence in shareholders and make moves in the short and long term.
Something’s coming from Abattis. They’re securing IP, building legal firewalls, integrating their investments and emerging from hibernation ready to move the juggernaut forward - after four months of slowly eroding stock prices and unexciting news – and it’s about time.
Remember when ATT was the big deal in the medical marijuana space, spiking up over $2.20 just four months back? Withrow today reminded me that, at the same time, Enertopia (CSE:C.TOP
, Stock Forum
) was considered the dream play in weed. Wow, how times have changed.
Abattis is a MUCH larger play in terms of assets now than it was in the $2.20 period, it’s much further along in its business model, and now you can pick it up for $0.40, with an almost criminally low market cap of $27m.
It’s been in my top five since I had a top five. It will remain there for a while, I think.
Affinor has slipped out of my top five over the last month, but remains an interesting jumble of crazy and exciting that could just as easily shoot the moon as slip underwater. There have been a lot of purchases in the last few months, and they haven’t exactly been cheap deals, so I wonder whether they haven’t over extended financially. When they release financials soon, that question may well disappear.
But it will leave a bigger question for me, which is can they tie all those pieces that they’ve bought together, elegantly and profitably?
If they can, it’s a hell of a play, and certainly the stock has been on a charge over the last week. In fact, over the last few hours, it jumped 20% from $0.53 to $0.62, on no news.
But I think the company needs to stop buying things for a while and lock it down. Keeping an open mind, but buying assets as your stock drops is a plan that often has a limited lifespan, especially if those assets lost a bundle of cash under previous ownership.
So, back to the rumble - is there actually a problem?
Right now: No. Other than a few deliberately worded and heavily lawyered press releases, nobody has any broken bones just yet. And for the sake of shareholders, let’s hope it can stay that way.
But in order for it to stay happy, either Affinor is going to need to be very careful how it uses VDL tech going forward, or the two companies are going to need to sit down and figure out what it will take to be friends again.
Because, realistically, every company in the weed space needs as many friends (and as few lawsuits) as it can get.
Hemp and flax fiber play CRAiLAR Technologies (TSX:V.CL
, Stock Forum
) released results showing a quarterly loss of $2m
. Putting this in perspective, this is the best quarter the company has had in the last six.
Of course, it continues to raise money every quarter to cover those losses, forming a sea of red on the income statement, but hey, $2m down is MUCH better than the $2.8m lost in net income last time out, and 3.4m, 5.8m, 3.1m and 3.2m the quarters before that.
Enertopia partner Lexaria (CSE:C.LXX
, Stock Forum
) closed first tranche financing of $187k today, of what they hope will ultimately be $900k raised. According to the company, “The Lexaria/Enertopia joint venture is for a building of approx 75,000 sq ft in total potential space available. Additional lease payments will be required after Dec 9, 2014.”
Chlormet Technologies (CSE:C.PUF
, Stock Forum
) saw a not so positive release put out about them yesterday, through Quote Media’s news wire, noting that their stock had hit a 52 week low.
So who sent this out? Why, the Quote Media robots did. Any time a company hits a 52-low, they send an alert out to notify investors and that will often make its way into the newsfeeds of the companies in question.
But it’s not a bad thing in this case because “LOOK, YOU BLIND PEOPLE, AT THAT CRAZY LOW $2.5M MARKET CAP! WHAT’S WRONG WITH YOU?”
They’ve got an LOI on a tier 3 Washington State grow license of between 10,000 and 30,000 sq. ft. Plus they’ve got a 100% interest in the AAA Heidelberg company applying for an MMPR. Admittedly – not a fan of grow plays, but $2.5m in value? That’s crazy nuts, especially since in June (before the WA state deal, during a change of business trade halt) they were trading at four times the current price.
Of course, if Chlormet doesn’t get an MMPR, they’re not worth much, but that’s why the Washington State deal is a nice little buffer. And if they DO get that MMPR, ten-bagger city.
Lots of questions from readers RE: Tweed’s (TSX:V.TWD
, Stock Forum
) second MMPR. What I’ll say is this: What’s not in that press release is what I find most interesting
. It’s just a little scant on detail and, considering the importance of the news, kinda short.
Is it a full blown MMPR, which would require a security vault on site (the Tweed greenhouse has no vault at all) among other things that take money and time to implement, or is it a hybrid kinda-MMPR which would allow a little weed to be grown and shipped to the chocolate factory and hey, we’ll talk about the other 300k sq. ft. down the road?
I suspect the latter. Tweed has said it plans to ‘wholesale’ its greenhouse product to itself, and it would make no sense to have such a big facility and grow so little weed on it (when the company has so much need for product) unless Health Canada limited the grow for security reasons. Pure speculation, however, and whatever the reasoning for the quick license, it’s definitely a win for an outfit that was overdue for one.
Satori Resources (TSX:V.BUD
, Stock Forum
) saw a sell-off today as someone dumped a large holding into the bid. Stock touched $0.07 early before tripping balls down to $0.05 and levelling off to $0.055 near the close with the vast majority of the selling came in large clumps with 1.3m in volume.
Worth considering: Satori got a private placement at $0.05 extended earlier in the week when the stock was bouncing between $0.06 and $0.07, so it makes sense that large holders might sell off so they can subscribe, and the seeming $0.055 base lends credence to that thinking. Expect no news until that financing closes tomorrow, but I know the company has been talking to small growing companies about deals research-based and otherwise.
That said, who hasn’t?
BIG PLAY ALERT: I've just seen the deck from a company based out of the US that is moving to an RTO with legs in some of my favourite plays in weed: Growing (feh), edibles (ooo) and tech (huzzah!). Revenue already in the door. Will talk more about it in later updates, but man do I wish I had a lazy $200k sitting around.