License issues cast doubt over Wayland Group’s (WAYL.C) Australian acquisition

The Wayland Group (WAYL.C), formerly known as Maricann, announced their entry onto the Australian cannabis scene on December 3, 2018 by agreeing to acquire 50.1% of privately held Tropicann for an initial sum of CAD $4.8 million and a further payment of CAD $24 million should certain milestones be met, including Tropicann obtaining a medicinal marijuana cultivation license.

Few details are available about Tropicann Pty Ltd, the Darwin-based privately held company which, according to ASIC company extract documents obtained by Equity Guru, was only registered on October 4, 2018. The same documents list Tropicann’s principal place of business as a unit in Darwin’s central business district.

Neither the Australian yellow or white pages have phone numbers listed for the business name. No active website is currently available. Nor can we find any social media presence.

Records indicate a Darwin-based IT services provider registered the domain name tropicann.com.au on October 31, 2018, on behalf of Tropicann.

Why has Wayland agreed to pony up $4.8 million for a company that appears to be little more than a shell?

Wayland’s stock is trading near 52-week lows.  The shareholders will rightly want to know if this is a savvy acquisition.

License grant not a given – here’s why

tropicann tweet
Source: twitter

The legal issue raised by Twitter user @rhyscohen wasn’t clear – so we reached out and asked for clarification, which he happily provided.

ODC-license-tweet

Does Rhys Cohen speak the truth?

We have no reason to doubt him as he is a cannabis industry expert who has been engaged by several domestic and international medicinal cannabis organisations and is now the Senior Project Officer at the University of Sydney’s Lambert Initiative for Cannabinoid Therapeutics.

source: giphy.com

This raises serious doubts as to whether the transaction can be completed as outlined by Wayland in the press release, and raises legitimate questions of what will happen if Tropicann fails to achieve the milestones set by Wayland as part of this agreement.

Here’s the kicker: The Office of Drug Control (ODC), responsible for doling out cannabis licenses in Australia require extensive background information on anyone applying for a license, including but not limited to, business associates of the applicant.

This, from their guideline titled “Fit and Proper Persons and Suitable Staff“.

Under the Act, ODC must refuse to grant a license if we are not satisfied on reasonable grounds that the applicant and the applicant’s relevant business associates are fit and proper persons

Wayland CEO Ben Ward has had a lot to deal with this year, including being investigated by the Ontario Securities Comission, and a recent article outlining CEO Ward’s wayward past.

Wayland’s involvement with Tropicann may prove a hindrance to obtaining the all-important license which is required before Tropicann receives the 2nd tranche of shares from Wayland.

How Kafkaesque!

Cloudy with a chance of cyclones. Or murder.

Australia’s Northern Territory (NT) presents undisclosed cannabis challenges which could also influence the ODC granting a cultivation license.

In a recent interview on NT Country Hour with Matt Brann, Wayland’s vice-president of communications, Graham Farrell has said “Wayland would look to grow the crop outdoors, and several parcels of land in the Top End had already been identified.”

While a trial crop has successfully been grown by the NT government in Katherine, consider the following:

  • Recent crime statistics published by the NT Police report commercial break-ins in Katherine as being up 128.1 percent YoY for the period ending 30/09/2018.
  • In October 2017 the ABC reported “Murder rates in NT towns of Katherine, Tennant Creek worse than US, Government figures show”
  • Wikipedia cites Darwin as having the highest per capita crime rates of any Australian city.

In the press release Wayland CEO Ben Ward says:

The Northern Territory is the ideal location for our new Asia Pacific hub. The location provides Wayland with ideal climate conditions

“Ideal climate conditions” suggest that Wayland has developed “cyclone-resistant” cannabis.

Cyclone Tracy devastated the city of Darwin in 1974.

Earlier this year, Mother Nature reminded Darwinites of her power when Severe Tropical Cyclone Marcus blew through town.

Luckily casualties were confined to a number of trees, cars and a McDonalds sign.

source: Twitter

Tropicann founders set to clean-up should deal proceed

Should the transaction proceed, the founders of Tropicann are set to reap a windfall in the short space of only two months.

After NT Chief Minister Michael Gunner posted news of the deal on his Facebook page, one savvy reply from Ted Whiteaker asked the question on everyone’s lips.

fb-tropicann-comment

So who are the lucky recipients of Wayland’s largesse?

According to the ASIC documents obtained by Equity Guru on December 6, 2018, the following persons are listed as directors of Tropicann:

  • John Pano Canaris
    John Canaris, the founder and managing director of Perth-based Leichardt Industrials is an experienced exploration geologist and resource industry executive. He has held previous roles with ASX listed Torrens Energy Limited and Lefroy Resources Limited. John Canaris is also listed as the company secretary for Tropicann.
  • Michael Frederick Canaris
    Michael Canaris is a Darwin-based property developer and currently a director of Jalouise Pty Ltd (ACN 060 559 328). A title search undertaken by Equity Guru on December 10, 2018 lists Jalouise as the current owner of Tropicann’s principal place of business.
  • Jeremy Samuel Edelman
    Jeremy Samuel Edelman is a Non-Executive Chairman of UK listed Reabold Resources Plc (RBD.LON). According to Bloomberg, Mr Edelman is also a board member of Ontario based Hampton Bay Capital Inc, a capital pool company which according to Stockwatch recently filed a preliminary prospectus to list the on the TSX-V. Bloomberg cites Mr Edelman as having an affiliation with LGC Capital (LG.V) and a news release pertaining to the RTO of Leni Gas Cuba Limited (a company founded by Edelmen) names him as a director of LGC back in July 2016.
  • Skevos Macarounas
    We believe Skevos Macarounas to be the Chief Information Officer at Power and Water Corporation, the Northern Territory’s provider of electricity, water and sewerage services.

Fully paid-up capital consists of 10,000 shares issued at a dollar each for a total of AUD 10,000.

Of those 10,000 shares, the four directors collectively hold a total of 4,990 – the other 5,010 shares (representing 50.1%) are held by different corporate entity: TERRITORY HEMP & CANNABIS PTY LTD.

Who are the officeholders of TERRITORY HEMP & CANNABIS PTY LTD?

When we dug deeper, here’s what we found:

TERRITORY HEMP & CANNABIS PTY LTD is a replication of the Tropicann shell, with the four directors named above together holding 100% of the ‘new’ company.

Can these four horsemen avoid a licensing apocalypse?

The Canaris family is somewhat of a dynasty in Darwin, dating back to 1913.

Edelman has serious chops in the capital markets sector, yet when he was invloved with LGC their focus was on Cuba and oil interests. It’s only since his departure that they have switched their sights exclusively on the Canadian cannabis sector.

Collectively the directors have considerable business acumen, but none of them have experience running a cannabis operation.

To paraphrase a popular NT tourism slogan, “We’ll never never know if they never never grow”

While data may be the new oil, clearly weed is the new gold, and these four are good at attracting other people’s money.

–// Craig Amos

(feature image courtesy of https://ntunofficial.com/)


FULL DISCLOSURE: Wayland Group is not an Equity Guru marketing client. Given their CEO recently accused us of blackmail and extortion, I doubt they ever will be. The author has never traded Maricann/Wayland securites long or short.

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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